As filed with the Securities and Exchange Commission on November 20, 2000.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-effective Amendment No. ____ Post-effective Amendment No. ____
(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: (800) 433-0051
Name and Address of Agent for Service:
HAROLD J. BAXTER
Pilgrim Baxter & Associates, Ltd.
825 Duportail Road
Wayne, Pennsylvania 19087
Copies to:
THOMAS H. DUNCAN, ESQUIRE JOHN M. ZERR, ESQUIRE
Ballard Spahr Andrews & Ingersoll, LLP Pilgrim Baxter & Associates, Ltd.
1225 17th Street 825 Duportail Road
Suite 2300 Wayne, Pennsylvania 19087
Denver, Colorado 80202
Approximate Date of Proposed Reorganization: As soon as practicable after
the Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on December 20, 2000
pursuant to Rule 488.
The title of the securities being registered is PBHG Class Shares of Global
Technology & Communications Fund. No filing fee is due in reliance on Section
24(f) of the Securities Act of 1933.
<PAGE>
THE PBHG FUNDS, INC.
P.O. Box 219534
Kansas City, Missouri 64121-9534
December _, 2000
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your approval
of a proposed combination of PBHG International Fund ("International Fund"), an
investment portfolio of The PBHG Funds, Inc. ("PBHG Funds"), with PBHG Global
Technology & Communications Fund ("GTC Fund"), which is also an investment
portfolio of PBHG Funds.
You have recently received a proxy statement and related proxy card on
proposals to approve a new investment advisory agreement and sub-advisory
agreement for International Fund, to approve changes to certain of its
investment policies and to approve the redomestication of PBHG Funds as a
Delaware business trust. The combination of International Fund with GTC Fund is
a separate proposal that requires your approval.
GTC Fund seeks long-term growth of capital as its investment objective.
International Fund seeks to provide investors with long-term capital
appreciation. GTC Fund seeks to meet its objective by investing at least 65% of
its total assets in common stocks of U.S. and non-U.S. companies located in at
least three different countries doing business in the technology and
communications sectors of the market. International Fund seeks to meet its
objective by investing at least 65% of its total assets in a broader range of
foreign equity securities in at least three countries other than the United
States. Pilgrim Baxter & Associates, Ltd. serves as the investment adviser to
both funds. Murray Johnstone International Limited is sub-advisor to the
International Fund.
International Fund, since its inception, has underperformed its benchmark,
the Morgan Stanley Capital International Europe, Australia and Far East Index.
The net assets of International Fund have decreased from approximately $21.3
million at March 31, 1997 to approximately $9.5 million at September 30, 2000.
Pilgrim Baxter has advised the Board of Directors that in its opinion,
International Fund will not be able to attract sufficient assets for continued
long-term viability. After considering various alternatives, the Board of
Directors concluded that combining International Fund with GTC Fund would serve
the best interests of International Fund and its shareholders. The accompanying
document describes the proposed transaction and compares the investment
policies, operating expenses and performance of the two funds for your
evaluation.
You are being asked to approve a Plan of Reorganization for International
Fund which provides for the reclassification and change of the outstanding
shares of International Fund into shares of GTC Fund based upon their respective
net asset values. After careful consideration, the Board of Directors recommends
that you vote FOR the proposal after carefully reviewing the enclosed materials.
Your vote is important. Please take a moment now to sign and return your
proxy card in the enclosed postage paid return envelope. This action is required
even if you have previously returned your proxy card relating to approval of the
new investment advisory agreement and sub-advisory agreement for International
Fund and the redomestication of PBHG Funds. If we do not hear from you after a
reasonable amount of time you may receive a telephone call from our proxy
solicitor, reminding you to
<PAGE>
vote your shares. You may also vote your shares on the web at www.proxyvote.com
by following the instructions that appear on the enclosed proxy insert, or by
calling the telephone number printed on your proxy card and following the
instructions provided.
Sincerely,
Harold J. Baxter
Chairman
2
<PAGE>
PBHG International Fund
a Portfolio of
The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, Missouri 64121-9534
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on January 25, 2001
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of PBHG
International Fund ("International Fund"), an investment portfolio of The PBHG
Funds, Inc. ("PBHG Funds"), will be held at the Peninsula Hotel, La Grande Salle
Room, 700 Fifth Avenue, New York, New York 10019, on January 25, 2001, at 10:00
a.m., local time, for the following purposes:
1. To approve a Plan of Reorganization (the "Plan of Reorganization") for
International Fund and the consummation of the transactions
contemplated therein. The Plan of Reorganization provides for the
reclassification and change of the issued and outstanding
International Fund shares into shares of PBHG Global Technology &
Communications Fund ("GTC Fund") of the same class (the
"Reorganization"). The value of each International Fund shareholder's
account with GTC Fund immediately after the Reorganization will be the
same as the value of such shareholder's account with International
Fund immediately prior to the Reorganization. The Reorganization has
been structured as a tax-free transaction. An amendment to the Charter
of PBHG Funds will be filed in connection with the Reorganization to
effect the reclassification of the International Fund shares.
2. To transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the
proxies or their substitutes.
Shareholders of record as of the close of business on November 17,
2000, are entitled to notice of, and to vote at, the Special Meeting or any
adjournment thereof.
You are invited to attend the Special Meeting, but if you cannot do so,
please complete and return in the enclosed envelope the accompanying proxy as
promptly as possible, which is being solicited by the management of PBHG Funds.
This is important for the purpose of ensuring a quorum at the Special Meeting.
You may also vote your shares by calling the telephone number on your proxy
card, or on the Internet at www.proxyvote.com. You may revoke your proxy at any
time before it is exercised by the subsequent execution and submission of a
revised proxy, by giving written notice of revocation to PBHG Funds at any time
before the proxy is exercised or by voting in person at the Special Meeting.
John M. Zerr
Secretary
December 6, 2000
<PAGE>
PBHG INTERNATIONAL FUND
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND
each a portfolio of
THE PBHG FUNDS, INC.
P.O. Box 219534
Kansas City, Missouri 64121-9534
Toll Free: (800) 433-0005
Combined Proxy Statement and Prospectus
Dated: December _, 2000
This document is being furnished to you in connection with the Special
Meeting of Shareholders of PBHG International Fund ("International Fund"), an
investment portfolio of The PBHG Funds, Inc. ("PBHG Funds"), to be held on
January 25, 2001 (the "Special Meeting"). At the Special Meeting you will be
asked to consider and approve a Plan of Reorganization (the "Plan of
Reorganization") for International Fund and the consummation of the transactions
described therein, as further described in this Combined Proxy Statement and
Prospectus (the "Reorganization"). The Board of Directors of PBHG Funds has
unanimously approved the Plan of Reorganization as being in the best interest of
International Fund shareholders.
You have already received a proxy statement and related proxy card on
proposals to approve a new investment advisory agreement and sub-advisory
agreement for International Fund, to approve changes to certain of its
investment policies and to approve the redomestication of PBHG Funds as a
Delaware business trust. The combination of International Fund with GTC Fund is
a separate proposal that requires your approval.
The Plan of Reorganization provides for the reclassification of the shares
of International Fund and the change of the outstanding shares of International
Fund into shares of PBHG Global Technology & Communications Fund ("GTC Fund")
based upon the net asset values of the two funds. All of the assets and
liabilities of International Fund will become assets and liabilities of GTC
Fund. The value of your account with GTC Fund immediately after the
Reorganization will be the same as the value of your account with International
Fund immediately before the Reorganization.
GTC Fund is an investment portfolio of PBHG Funds, an open-end, series
management investment company. The investment objective of International Fund is
to provide investors with long-term capital appreciation. The investment
objective of GTC Fund is to provide investors with long-term growth of capital.
GTC Fund seeks to obtain that objective by investing at least 65% of its total
assets in common stocks of U.S. and non-U.S. companies located in at
<PAGE>
least three different countries doing business in the technology and
communications sectors of the market. International Fund invests at least 65% of
its assets in a broader range of foreign equity securities of companies located
in at least three countries other than the United States. Pilgrim Baxter &
Associates, Ltd. ("Pilgrim Baxter") serves as the investment adviser to both
funds. Murray Johnstone International Limited is sub-advisor to the
International Fund. See "Comparison of Investment Objectives, Policies and
Restrictions."
This Combined Proxy Statement and prospectus ("Proxy Statement/Prospectus")
sets forth the information that you should know before voting on the Plan of
Reorganization. It should be read and retained for future reference.
The current prospectus for both International Fund and GTC Fund, dated July
31, 2000, as supplemented October 16, 2000, together with the related Statement
of Additional Information also dated July 31, 2000, are on file with the
Securities and Exchange Commission (the "SEC") and are incorporated into this
Proxy Statement/Prospectus by this reference. A copy of the current prospectus
of PBHG Funds is attached as Appendix II to this Proxy Statement/Prospectus.
These documents are also available without charge by writing to The PBHG Funds,
Inc., P.O. Box 219534, Kansas City, Missouri 64121-9534, or by calling (800)
433-0051. The SEC maintains a Web site at http://www.sec.gov that contains the
prospectus and statement of additional information described above, material
incorporated by reference, and other information about PBHG Funds. You can
obtain additional information about International Fund and GTC Fund on the Web
at http://www.pbhgfunds.com.
As with all other mutual fund securities, the SEC has not approved or
disapproved these securities or determined whether the information in this Proxy
Statement/Prospectus in adequate or accurate. Anyone who tells you otherwise is
committing a crime.
[End of Front Cover Page]
<PAGE>
[BACK COVER PAGE]
THE PBHG FUNDS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION.............................................................................2
SUMMARY .................................................................................3
Reorganization.......................................................................3
Background and Reasons for the Reorganization........................................3
Comparison of GTC Fund and International Fund........................................4
RISK FACTORS.............................................................................5
Comparative Risks....................................................................5
Risks Associated with GTC Fund.......................................................6
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS...........................7
Investment Objectives................................................................7
Investment Policies..................................................................7
Investment Restrictions..............................................................8
ADDITIONAL INFORMATION ABOUT THE PLAN OF REORGANIZATION.................................11
The Reorganization..................................................................11
Board Considerations................................................................11
Other Terms.........................................................................14
Federal Tax Consequences............................................................15
OPERATION OF GTC FUND FOLLOWING THE REORGANIZATION......................................17
General ............................................................................17
Change in Control of Pilgrim Baxter.................................................18
Redomestication of PBHG Funds as a Delaware Business Trust..........................19
RIGHTS OF SHAREHOLDERS..................................................................19
OWNERSHIP OF INTERNATIONAL FUND AND GTC FUND SHARES.....................................21
Significant Holders.................................................................21
Ownership of Directors and Officers.................................................22
CAPITALIZATION..........................................................................22
LEGAL MATTERS...........................................................................22
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION...........................22
ADDITIONAL INFORMATION ABOUT GTC FUND...................................................23
APPENDIX I ........................................................ Plan of Reorganization
APPENDIX II.............................................Prospectus of The PBHG Funds, Inc.
APPENDIX III.........................................Description of Investment Limitations
[End of Back Cover]
</TABLE>
i
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is furnished to you in connection with the
solicitation of proxies by PBHG Funds' Board of Directors for use at the Special
Meeting of Shareholders of International Fund to be held at the Peninsula Hotel,
La Grande Salle Room, 700 Fifth Avenue, New York, New York 10019, on January 25,
2001, at 10:00 a.m., local time. That meeting and any adjournments thereof are
referred to as the "Special Meeting".
We expect to solicit proxies principally by mail, but we may also solicit
proxies by telephone, facsimile, telegraph or personal interview. Our officers
will not receive any additional or special compensation for solicitation
activities. We may also engage a professional proxy solicitation firm to assist
in the solicitation of proxies. Pilgrim Baxter & Associates, Ltd. ("Pilgrim
Baxter"), the investment adviser for each fund, will reimburse International
Fund and GTC Fund for the costs and expenses they incur in connection with the
Reorganization. For International Fund, this will include expenses incurred in
preparing, printing and mailing proxy materials for the Special Meeting of
shareholders and proxy solicitation costs. Those costs are anticipated to be
$75,000.
All properly executed and unrevoked proxies received in time for the
Special Meeting will be voted in accordance with the instructions they contain.
If no instructions are given, shares represented by proxies will be voted FOR
the proposal to approve the Plan of Reorganization and in accordance with
management's recommendation on other matters. The presence in person or by proxy
of one-third of the outstanding shares of International Fund entitled to vote at
the Special Meeting will constitute a quorum ("Quorum"). Approval of the Plan of
Reorganization requires the affirmative vote of a majority of the total number
of shares of International Fund outstanding and entitled to vote at the Special
Meeting. Abstentions and broker non-votes will be counted as shares present at
the Special Meeting for quorum purposes but will be considered votes against
approval of the Reorganization at the Special Meeting. Broker non-votes arise
from a proxy returned by a broker holding shares for a customer which indicates
that the broker has not been authorized by the customer to vote on a proposal.
If you return a proxy, you may revoke it at any time prior to its exercise by
executing a superseding proxy or by submitting a notice of revocation to the
Secretary of PBHG Funds. In addition, although mere attendance at the Special
Meeting will not revoke a proxy, if you attend the Special Meeting, you may
withdraw your proxy and vote in person. Shareholders may also transact any other
business not currently contemplated that may properly come before the Special
Meeting in the discretion of the proxies or their substitutes.
Shareholders of record as of the close of business on November 17, 2000
(the "Record Date"), are entitled to vote at the Special Meeting. On the Record
Date, there were outstanding __________ PBHG Class shares of International Fund.
Each share is entitled to one vote for each full share held, and a fractional
vote for a fractional share held.
We intend to mail this Proxy Statement/Prospectus and the accompanying
proxy on or about December 20, 2000.
<PAGE>
SUMMARY
Reorganization
The Plan of Reorganization provides for the reclassification and change of
the issued and outstanding International Fund shares into GTC Fund shares (the
"Reorganization"). If shareholders of International Fund approve the Plan of
Reorganization and other closing conditions are satisfied, all of the assets and
liabilities of International Fund will become the assets and liabilities of GTC
Fund, and the issued and outstanding PBHG Class shares of International Fund
will be changed into PBHG Class shares of GTC Fund that have a net asset value
equal to the net value of the International Fund assets immediately prior to the
Reorganization. The value of each International Fund shareholder's account with
GTC Fund immediately after the Reorganization will be the same as the value of
such shareholder's account with International Fund immediately prior to the
Reorganization. A copy of the Plan of Reorganization is attached as Appendix I
to this Proxy Statement/Prospectus. See "Additional Information About the Plan
of Reorganization" below.
We will receive an opinion of Ballard Spahr Andrews & Ingersoll, LLP, to
the effect that the Reorganization will constitute a tax-free reorganization for
Federal income tax purposes. Thus, shareholders will not have to pay Federal
income taxes as a result of the Reorganization. See "Additional Information
About the Plan of Reorganization - Federal Tax Consequences" below.
GTC Fund is a non-diversified investment portfolio of PBHG Funds, an
open-end series management investment company registered under the Investment
Company Act of 1940 (the "1940 Act"). The principal offices of PBHG Funds are
located in Kansas City, Missouri (telephone: (800) 433-0051).
Background and Reasons for the Reorganization
The Board of Directors of PBHG Funds, including each of the independent
directors, has determined that the reorganization of International Fund into GTC
Fund is in the best interests of both funds and their shareholders and that the
interests of the shareholders of each fund will not be diluted as a result of
the Reorganization.
In making that determination, the Board of Directors considered the fact
that the total net assets of International Fund have decreased by more than 50%
since the fiscal year ended March 31, 1997. International Fund has consistently
underperformed its benchmark index. Pilgrim Baxter advised the Board of
Directors that it did not believe that International Fund could attract
sufficient assets within a reasonable period of time to remain viable as a
separate investment portfolio. After considering alternatives for the future of
International Fund, the Board of Directors concluded that International Fund
should be combined with GTC Fund.
3
<PAGE>
In evaluating the proposed Reorganization, the Board of Directors
considered a number of factors, including:
o The compatibility of the investment objectives and principal
investment strategies of the two funds.
o The performance track records of the two funds.
o The potential for greater operating efficiencies of the combined
funds.
o The tax-free nature of the Reorganization for income tax
purposes.
o The undertaking by Pilgrim Baxter to bear the expenses of the
Reorganization.
o The comparative expenses of the two funds.
For additional information concerning the deliberations of the Board of
Directors on the Plan of Reorganization see "Additional Information About the
Plan of Reorganization."
Comparison of GTC Fund and International Fund
Investment Objective and Policies
International Fund seeks to provide its investors with long-term capital
appreciation. GTC Fund seeks to provide investors with long-term growth of
capital. GTC Fund and International Fund follow different investment strategies
to achieve their similar investment objectives.
GTC Fund normally invests 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. These companies will be in at least three different countries,
one of which may be the U.S. GTC Fund is concentrated, which means that it
invests 25% or more of its total assets in one or more of the industries within
those sectors. GTC Fund generally invests in companies that may be responsible
for breakthrough products or technologies or may be positioned to take advantage
of cutting-edge developments.
International Fund generally invests at least 65% of its assets in foreign
equity securities of companies in at least three countries other than the United
States. Currently, International Fund principally focuses its investments in
those countries represented in the Morgan Stanley Capital International Europe,
Australia and Far East Index.
4
<PAGE>
Investment Advisory Services
Pilgrim Baxter serves as investment adviser to International Fund and GTC
Fund. Murray Johnstone International Limited, Glasgow, Scotland, is the
sub-adviser to International Fund. If the Reorganization is consummated, the
investments of International Fund will no longer be sub-advised by Murray
Johnstone.
Pilgrim Baxter is a wholly-owned subsidiary of United Asset Management
Corporation ("UAM"). Old Mutual plc, an English public limited company, recently
acquired all of the outstanding shares of UAM through a tender offer and short
form merger. Because this transaction resulted in a change in control of UAM,
and indirectly Pilgrim Baxter, it caused the automatic termination of the
investment advisory agreement between PBHG Funds and Pilgrim Baxter. The Board
of Directors has approved a new investment advisory agreement with Pilgrim
Baxter that contains provisions identical to those in the current investment
advisory agreement. The shareholders of GTC Fund are expected to approve the new
advisory agreement with Pilgrim Baxter at a separate meeting held on the same
date as the Special Meeting. See "Operation of GTC Fund Following the
Reorganization" for more information concerning the change in control of Pilgrim
Baxter.
Sales Charges
No sales charges are applicable to the Reorganization.
The PBHG Class shares of GTC Fund and International Fund are both sold
without an initial or other sales charge.
Distribution; Purchase, Exchange and Redemption
Shares of GTC Fund and International Fund are both distributed by SEI
Investments Distribution Co. Purchase and redemption procedures are the same for
GTC Fund and International Fund. Shares of GTC Fund and International Fund may
be exchanged for shares of other funds of The PBHG Funds, Inc.
Further Information
Additional information concerning GTC Fund is contained in this Proxy
Statement/Prospectus and in the current prospectus for PBHG Funds that is
attached hereto as Appendix II. Further information concerning International
Fund can also be found in the PBHG Funds prospectus. The cover page describes
how you may obtain further information.
RISK FACTORS
Comparative Risks
5
<PAGE>
International Fund seeks to provide investors with long-term capital
appreciation while GTC Fund seeks to provide investors with long-term growth of
capital. GTC Fund seeks to meet this objective by investing in equity securities
of foreign and domestic companies doing business in the technology and
communications sectors, while International Fund invests in a broader range of
securities of foreign issuers.
The greater asset diversification of International Fund could provide some
protection against the risk of loss in times of declining markets. GTC Fund is
not diversified and is concentrated, which means that it may invest a higher
percentage of its total assets in a limited number of stocks and in securities
issued by companies in the same industry. A down-turn in prospects of those
companies or industries could have a larger impact on the price of the GTC Fund
shares than if it were more diversified and invested in a wider range of
industries.
Risks Associated with GTC Fund
GTC 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 GTC Fund's net asset value and will cause its shares to
fluctuate in value more than it would in a diversified fund.
GTC Fund is concentrated which means, as 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 GTC Fund's net asset value and will cause its shares to
fluctuate more than if the fund did not concentrate its investments.
The value of an investment in GTC Fund will go up and down, which means you
could lose money.
The price of the securities in GTC 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.
Securities of technology and communications companies are strongly affected
by worldwide scientific and technological developments and governmental laws,
regulations and
6
<PAGE>
policies and, therefore, are generally more volatile than securities of
companies not dependent upon or associated with technology and communications
issues.
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 GTC Fund strives to achieve its goal, it cannot guarantee that the
goal will be achieved.
An investment in GTC Fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
Investment Objectives
The investment objective of GTC Fund is to provide investors with long-term
capital appreciation, while International Fund seeks to provide long-term
capital appreciation.
Investment Policies
A description of the investment policies of each of GTC Fund and
International Fund is provided below.
GTC Fund
Under normal market conditions, GTC 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, GTC 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.
GTC 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. GTC 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.
7
<PAGE>
Pilgrim Baxter uses its own fundamental research, computer models and
proprietary measures of growth and business momentum in managing GTC Fund.
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. Pilgrim Baxter may
sell a security held by GTC Fund for a variety of reasons, such as a
deterioration in fundamentals or to invest in a company with more attractive
growth prospects.
International Fund
Under normal market conditions, International 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, International 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 International 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. International Fund may sell a security
for a variety of reasons, such as to invest in another company or country
offering superior investment opportunities.
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 attempts to identify 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 is
believed to offer superior investment opportunities, the risk associated with a
particular currency becomes too great, or the security falls short of Murray
Johnstone's expectations.
Investment Restrictions
8
<PAGE>
Since International Fund and GTC Fund are each a separate series of PBHG
Funds, each fund is currently subject to the same investment restrictions, with
the following exceptions. International Fund may not invest more than 25% of its
total assets in securities of one or more issuers whose business activities are
in the same industry. Only 50% of the assets of GTC Funds are subject to that
limitation. Additionally, with respect to 75% of International Fund's net
assets, International Fund is restricted from investing in the securities of any
one issuer (other than the obligations of the U.S. government, its agencies,
authorities and instrumentalities) if immediately after such investment more
than 5% of the value of the fund's total assets, taken at market value, would be
invested in such issuer or more than 10% of such issuers outstanding voting
securities would be owned by the fund. This restriction does not apply to GTC
Fund.
The Board of Directors has approved changes to the fundamental and
non-fundamental investment limitations applicable to GTC Fund. Changes in
fundamental investment limitations must be approved by GTC Fund shareholders
before they become effective. A separate meeting of the shareholders of GTC Fund
has been called to consider the new fundamental investment limitations on the
same date as the Special Meeting.
The changes to the investment limitations of GTC Fund were proposed because
some are no longer necessary under applicable law and other are unnecessary or
unwarranted under current business or industry conditions. The new limitations
will provide greater flexibility in managing GTC Fund and will eliminate
difference in the phrasing of limitations for different investment portfolios of
PBHG Funds.
If approved, the new investment limitations would have the following effect
for GTC Fund:
o Money could be borrowed to the extent permitted under the 1940
Act, currently in an amount up to 33-1/3% of assets, rather than
subject to a 10% of assets limitation. The requirement that
borrowings in excess of 5% of assets be repaid before investments
are made would be eliminated.
o The fundamental limitation on making loans would be revised to
allow loans to the extent permitted by the 1940 Act.
o The fundamental limitation on investments in oil, gas and other
mineral exploration programs would be eliminated.
o The fundamental limitation on investing for purposes of
controlling an issuer would be eliminated.
o The fundamental limitation on short sales of securities would be
eliminated.
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o The non-fundamental policy on investments in restricted
securities would be revised to allow investment of 15% of the
GTC Fund's total assets in restricted securities, compared to
10% under current policies.
o Non-fundamental policies limiting investments in options and
futures contracts would be eliminated.
The proposed changes will not affect the investment objective of GTC Fund
or its principal investment strategies. Although the proposed investment
limitations would provide greater investment flexibility to respond to future
investment opportunities, the changes, individually and in the aggregate, are
not anticipated to result in a material change in the level of risk associated
with GTC Fund or the manner in which GTC Fund is currently managed.
A description of the new investment limitations for GTC Fund is attached as
Appendix III. If the new investment limitations are not approved, GTC Fund will
continue to operate under its current investment limitations.
10
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ADDITIONAL INFORMATION ABOUT THE PLAN OF REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Plan of Reorganization. The deliberations of the Board of
Directors concerning the Reorganization and significant provisions of the Plan
of Reorganization are summarized below. A copy of the Plan of Reorganization is
attached as Appendix I to this Proxy Statement/Prospectus.
The Reorganization
Pursuant to the Plan of Reorganization the issued and outstanding PBHG
Class shares of International Fund will be changed into PBHG Class shares of GTC
Fund having an aggregate net asset value equal to the net value of the assets of
the International Fund immediately prior to the Reorganization. The value of
each International Fund shareholder's account with GTC Fund immediately after
the Reorganization will be the same as the value of such shareholder's account
with International Fund immediately prior to the Reorganization. Shareholders
will not pay any sales charge in connection with the Reorganization.
The Reorganization will be consummated through filing Articles of Amendment
to the Charter of PBHG Funds in the form attached to the Plan of Reorganization.
All of the assets and liabilities of International Fund will become assets and
liabilities of GTC Fund. The outstanding shares of International Fund will be
deemed to have been redeemed upon issuance of GTC Fund shares to International
Fund shareholders. Then, all of the authorized but unissued shares of
International Fund will be reclassified as authorized shares of PBHG Funds
without any further designation or classification.
Each share of GTC Fund is entitled to one vote, to participate equally in
dividends and distributions declared by the Board of Directors with respect to a
class of shares of GTC Fund and, upon liquidation of GTC Fund, to participate
proportionately in its net assets allocable to a class after satisfaction of the
outstanding liabilities allocable to that class. Fractional shares of GTC Fund
have proportionately the same rights, including voting rights as are provided
for full shares.
Consummation of the Reorganization is expected to occur on January 25,
2001, at 5:00 p.m. Eastern Time on the basis of values calculated as of the
close of regular trading on the New York Stock Exchange on that day.
Board Considerations
The Board of Directors of PBHG Funds determined that the proposed
Reorganization of International Fund is in the best interests of the
shareholders of International Fund and GTC Fund, and recommended approval of the
Plan of Reorganization by International Fund
11
<PAGE>
shareholders at the Special Meeting. A summary of the information that was
presented to, and considered by, the Board of Directors in making their
determination is provided below.
At a meeting of the Board of Directors held on November 13, 2000, Pilgrim
Baxter proposed that the Board of Directors approve the proposed Reorganization
of International Fund. The Directors received from Pilgrim Baxter written
materials that described the structure and tax consequences of the proposed
Reorganization and contained information concerning International Fund and GTC
Fund, including comparative historical total return, fee and expense information
and a comparison of the investment policies of the two funds.
In considering the proposed Reorganization, the Board of Directors noted
that International Fund and GTC Fund have substantially the same investment
objective. GTC Fund seeks to meet that objective by investing in common stocks
of U.S. and non-U.S. companies doing business in the technology and
communications sectors of the market, while International Fund invests in a
broader range of foreign securities.
The Reorganization was proposed by Pilgrim Baxter because investors have
not viewed International Fund as an attractive investment alternative. The net
assets of International Fund decreased significantly from approximately $21
million at March 31, 1997 to approximately $8.7 million at October 31, 2000. GTC
Fund's total assets at October 31, 2000 were approximately $95.5 million. The
combined assets of the two funds should provide a more stable base for
management because daily purchases and redemptions of shares should have a less
significant impact on the size of the combined fund. The Reorganization could
also result in greater economies of scale for GTC Fund by lowering its ratio of
total operating expenses to total net assets.
The information presented to the Board of Directors by Pilgrim Baxter
demonstrated that International Fund has consistently underperformed its
benchmark index, the Morgan Stanley Capital International Europe, Australia and
Far East Index.
Average Annual Total Returns as of 9/30/00
Since Inception
Past 1 Year Past 5 Years (6/15/94)
----------- ------------ ---------
International Fund 0.83% 7.62% 5.42%
MSCI EAFE Index 3.16% 8.58% 7.79%*
* The since inception return was calculated from June 30, 1994
GTC Fund commenced operations on May 31, 2000. As of September 30, 2000, its
performance since inception is 13.10%. Although past performance is not a
guarantee of future results,
12
<PAGE>
International Fund's shareholders could benefit from GTC Fund's performance
after the Reorganization is completed.
The Board of Directors noted that the total operating expenses of
International Fund, expressed as a percentage of net assets, are approximately
the same as those of GTC Fund. Although the investment advisory fee paid by GTC
Fund is higher than the investment advisory fee paid by International Fund,
International Fund's other operating expenses are higher than those projected
for GTC Fund. A comparison of the operating expense of International Fund and
GTC Fund is provided below.
GTC Fund(1) International Fund(2)
-------- ------------------
Management Fees 1.50% 1.00%
12b-1 Fees none none
Other Expenses 0.50% 1.00%
Total Fund
Operating
Expenses(1) 2.00% 2.00%
(1) Other Expenses for GTC Fund are based upon estimated amounts the fund
expects to pay during its current fiscal year. Pilgrim Baxter has
contractually agreed to waive that portion, if any, of the annual
management fees payable by GTC Fund and to pay certain expenses of the GTC
Fund to the extent necessary to ensure that the total annual fund operating
expenses to not exceed 2.15%.
(2) The expenses for International Fund are based upon those incurred by the
fund during its fiscal year ended March 31, 2000. Pilgrim Baxter has
contractually agreed to waive that portion, if any, of the annual
management fee payable by International Fund and to pay certain expenses of
International Fund to the extent necessary to ensure that the total annual
fund operating expenses do not exceed 2.25%.
Pilgrim Baxter advised the Board of Directors that because of substandard
performance and declining net assets, it intended to terminate its subadvisory
contract with Murray Johnstone. The Board of Directors considered alternatives
for the future of International Fund, including engaging a new investment
subadviser, liquidating International Fund and combining International Fund with
another investment portfolio of PBHG Funds. Pilgrim Baxter advised the Board of
Directors that it did not believe International Fund would be able to attract
sufficient assets to remain viable even if another subadviser were engaged.
Liquidation of International Fund would result in shareholders potentially
having to recognize a gain for tax purposes, requiring them to pay additional
income taxes. After a review of the other investment portfolios of PBHG Funds,
the Board of Directors concluded that the investment policies of GTC Fund were
most compatible with those of International Fund.
The Board of Directors further noted that the value of each shareholder's
account with GTC Fund immediately after the Reorganization will be the same as
the value of that shareholder's account with International Fund immediately
prior to the Reorganization meaning
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<PAGE>
that there will be no dilution of the value of the shares of either fund. No
initial sales or other charges will be imposed on any of the shares of GTC Fund
acquired by the shareholders of International Fund in connection with the
Reorganization. The Board also noted that Pilgrim Baxter has agreed to reimburse
International Fund and GTC Fund for costs and expenses they incur in connection
with the Reorganization.
Finally, the Board of Directors reviewed the principal terms of the Plan of
Reorganization. The Board of Directors noted that International Fund would be
provided with an opinion of counsel that the Reorganization would be tax-free as
to International Fund and its shareholders.
At the meeting of the Board of Directors, based upon their evaluation of
the information presented to them, the Board of Directors determined that the
proposed Reorganization will not dilute the interests of International Fund or
GTC Fund shareholders and is in the best interest of shareholders of
International Fund and GTC Fund in light of the above-mentioned factors.
Therefore, the Board of Directors recommended the approval of the Plan of
Reorganization by the shareholders at a Special Meeting.
Other Terms
Completion of the Reorganization is subject to various conditions,
including the following:
o An amendment to the Charter of PBHG Funds shall have been filed with
the Maryland Department of Assessments and Taxation.
o All consents, approvals, permits and authorizations required to be
obtained from governmental authorities, including the SEC and state
securities commissions, to permit the parties to carry out the
transactions contemplated by the Plan of Reorganization shall have
been received.
o The Plan of Reorganization, the amendment to the Charter and related
corporate matters shall have been approved by the shareholders of
International Fund at the Special Meeting by the affirmative vote of a
majority of the total number of International Fund shares.
o The assets of International Fund to be acquired by GTC Fund shall
constitute at least 90% of the fair market value of the net assets and
at least 70% of the fair market value of the gross assets held by
International Fund immediately prior to the reclassification,
o The dividend or dividends as described in the Plan of Reorganization
shall have been declared,
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o PBHG Funds shall have received an opinion of Ballard Spahr Andrews &
Ingersoll, LLP ("BSA&I") to the effect that consummation of the
transactions contemplated by the Plan of Reorganization will
constitute a "reorganization" within the meanings of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and that
the shareholders of International Fund will recognize no gain or loss
to the extent that they receive shares of GTC Fund in exchange for
their shares of International Fund in accordance with the Plan of
Reorganization,
o PBHG Funds shall have received an opinion of BSA&I addressed to and in
form and substance satisfactory to PBHG Funds, to the effect that the
Plan of Reorganization has been duly authorized and approved by all
requisite action of PBHG Funds and the holders of the shares of
International Fund.
Federal Tax Consequences
The following is a general summary of the material Federal income tax
consequences of the Reorganization and is based upon the current provisions of
the Code, the existing Treasury regulations thereunder, current administrative
rulings of the Internal Revenue Service ("IRS") and judicial decisions, all of
which are subject to change. The principal Federal income tax consequences that
are expected to result from the Reorganization, under currently applicable law,
are as follows:
o The Reorganization will qualify as a "reorganization" within the
meaning of Section 368(a) of the Code;
o No gain or loss will be recognized by International Fund upon the
reclassification of its assets to GTC Fund;
o No gain or loss will be recognized by any shareholder of International
Fund upon the exchange of shares of International Fund solely for
shares of GTC Fund;
o The tax basis of the shares of GTC Fund to be received by a
shareholder of International Fund will be the same as the tax basis of
the shares of International Fund surrendered in exchange therefor;
o The holding period of the shares of GTC Fund to be received by a
shareholder of International Fund will include the holding period for
which such shareholder held the shares of International Fund exchanged
therefor, provided that such shares of International Fund are capital
assets in the hands of such shareholder as of the date the
Reorganization is consummated;
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<PAGE>
o No gain or loss will be recognized by GTC Fund upon the
reclassification of the assets of International Fund as part of the
assets of GTC Fund;
o The tax basis of the assets of International Fund in the hands of GTC
Fund will be the same as the tax basis of such assets in the hands of
International Fund immediately prior to the Reorganization; and
o The holding period of the assets of International Fund to be received
by GTC Fund will include the holding period of such assets in the
hands of International Fund immediately prior to the Reorganization.
As a condition to closing, BSA&I will render a favorable opinion to PBHG
Funds as to the foregoing Federal income tax consequences of the Reorganization,
which opinion will be conditioned upon the accuracy, as of the date of closing,
of certain representations made by PBHG Funds upon which BSA&I will rely in
rendering its opinion, which representations include, but are not limited to,
the following (taking into account for purposes thereof any events that are part
of the Plan of Reorganization, regardless of their date of occurrence):
o There is no plan or intention by the shareholders of International
Fund to redeem a number of shares of GTC Fund received in the
Reorganization that would reduce the International Fund shareholders'
ownership of GTC Fund shares to a number of shares having a value, as
of the date the Reorganization is consummated, of less than 50% of the
value of all of the formerly outstanding shares of International Fund
as of the date the Reorganization is consummated;
o Following the Reorganization, GTC Fund will continue the historic
business of International Fund (for this purpose "historic business"
shall mean the business most recently conducted by International Fund
which was not entered into in connection with the Reorganization) or
use a significant portion of International Fund's historic business
assets in its business;
o At the direction of International Fund, GTC Fund will issue directly
to each International Fund shareholder in the Reorganization shares of
GTC Fund having a net asset value equal to the net asset value of the
International Fund shares exchanged therefor; International Fund will
transfer all of its assets and liabilities to GTC Fund in the
Reorganization; and International Fund will terminate its existence as
an investment portfolio of PBHG Funds on, or as soon as practicable
after, the date the Reorganization is consummated.
o GTC Fund and certain persons related to GTC Fund have no plan or
intention to reacquire any of the shares of GTC Fund issued in the
Reorganization, except to the extent that GTC Fund is required by the
1940 Act to redeem any of its shares presented for redemption;
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<PAGE>
o GTC Fund does not plan or intend to sell or otherwise dispose of any
of the assets of International Fund acquired in the Reorganization,
except that GTC Fund may sell up to 66% of such assets in the ordinary
course of its business in a manner consistent with its investment
objectives and policies or in order to maintain its status as a
"regulated investment company" ("RIC") under the Code;
o GTC Fund, International Fund and the shareholders of International
Fund will pay their respective expenses, if any, incurred in
connection with the Reorganization in accordance with current IRS
guidelines except that Pilgrim Baxter may reimburse International Fund
for certain such expenses pursuant to its investment advisory
agreement with PBHG Funds;
o GTC Fund will acquire at least 90 percent of the fair market value of
the net assets, and at least 70 percent of the fair market value of
the gross assets, held by International Fund immediately before the
Reorganization, including for this purpose any amounts used by
International Fund to pay its reorganization expenses and all
redemptions and distributions made by International Fund after the
commencement of negotiations regarding the Reorganization (other than
redemptions pursuant to a demand of a shareholder in the ordinary
course of International Fund's business as an open-end diversified
management investment company under the 1940 Act and regular, normal
dividends not in excess of the requirements of Section 852 of the
Code); and
o GTC Fund and International Fund have each elected to be taxed as a RIC
under Section 851 of the Code and will each have qualified for the
special Federal tax treatment afforded RICs under the Code for all
taxable periods (including the last short taxable period of
International Fund ending on the date the Reorganization is
consummated and the taxable year of GTC Fund that includes the date
the Reorganization is consummated.
The description of the Federal income tax consequences of the
Reorganization provided above is made without regard to the particular facts and
circumstances of any shareholder of International Fund. International Fund
shareholders are urged to consult their own tax advisors as to the specific
consequences to them of the Reorganization, including the applicability and
effect of state, local, foreign and other tax laws.
OPERATION OF GTC FUND FOLLOWING THE REORGANIZATION
General
There are differences in the investment strategies of the funds. GTC Fund
will not revise its investment strategies to reflect those of International
Fund. Rather, Pilgrim Baxter believes that a substantial portion of the assets
of International Fund are consistent with the investment
17
<PAGE>
strategies of GTC Fund and can be transferred to and held by GTC Fund. If the
Reorganization is approved, International Fund will sell any assets that are
inconsistent with GTC Fund's investment strategies prior to the effective time
of the Reorganization, and the proceeds of such sales will be held in temporary
investments or reinvested in assets that are consistent with GTC Fund's
investment policies. The need for International Fund to dispose of assets prior
to the Reorganization may result in sales at disadvantageous times and could
result in International Fund realizing losses that would not otherwise have been
realized.
After the Reorganization, Pilgrim Baxter will continue to serve as
investment adviser to GTC Fund. Michael K. Ma is primarily responsible for the
day-to-day management of GTC Fund. Mr. Ma has managed GTC Fund since its
inception on May 31, 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 Manager and Research Assistant with United States
Trust Company of New York, first as a research assistant and then after 1994 as
a portfolio manager.
Change in Control of Pilgrim Baxter
On June 16, 2000, Old Mutual plc, an English public limited company, ("Old
Mutual"), OM Acquisition Corp. ("OMAC"), a Delaware corporation and a
wholly-owned subsidiary of Old Mutual, and United Asset Management Corporation
("UAM"), the parent company of Pilgrim Baxter entered into an Agreement and Plan
of Merger (the "Agreement") for Old Mutual to acquire UAM through a tender offer
and merger (the "Transaction"). Old Mutual completed its tender offer on
September 25, 2000, when it acquired over 90% of the outstanding common stock of
UAM. Old Mutual acquired the remaining stock of UAM in a short form merger
consummated on October 5, 2000.
Old Mutual is a United Kingdom-based financial services group with a
substantial life assurance business in South Africa and other southern African
countries and an integrated, international portfolio of activities in asset
management, banking and general insurance. UAM has approximately $188 billion in
assets under management in institutional and individual private accounts and
mutual funds. The acquisition of UAM will increase Old Mutual's assets under
management to approximately $275 billion.
Consummation of the Transaction resulted in a change in control of UAM, and
indirectly, of Pilgrim Baxter. This change in control constituted an
"assignment," as that term is defined in the 1940 Act, of all of the PBHG Funds'
current Investment Advisory Agreement. As required by the 1940 Act, PBHG Funds'
current Investment Advisory Agreement automatically terminated in the event of
its assignment. In anticipation of the Transaction, the Board has proposed
continuation of the advisory services under an Interim Investment Advisory
Agreement between PBHG Funds and Pilgrim Baxter, and longer term under a Long
Term Investment Advisory Agreement between PBHG Funds and Pilgrim Baxter. The
Long Term Investment
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Advisory Agreement has been submitted for approval by shareholders of GTC Fund
at a separate meeting to be held immediately prior to the Special Meeting.
Compensation earned by an investment adviser under an Interim Investment
Advisory Agreement is held in an interest-bearing escrow account pending
shareholder approval of a new investment advisory agreement for a period of up
to 150 days from the termination of the current investment advisory agreement.
If shareholders approve the Long Term Investment Advisory Agreement, the amount
held in the escrow account, plus interest, will be paid to Pilgrim Baxter. If
shareholders do not approve the proposed investment advisory agreement, Pilgrim
Baxter will be paid the lesser of the costs incurred in performing its services
under the interim agreement or the total amount in the escrow account, plus
interest earned. The Long Term Investment Advisory Agreement will be identical
in all material respects to the current investment advisory agreement. In
addition, GTC Fund's advisory fee rate will remain unchanged.
Redomestication of PBHG Funds as a Delaware Business Trust
The Board of Directors has approved a plan to reorganize PBHG Funds as a
Delaware business trust. You have already received a copy of a proxy statement
that describes the proposed move to Delaware, which is referred to as a
"redomestication."
The redomestication has been proposed to provide increased flexibility in
the business structure of PBHG Funds. PBHG Funds is currently organized as a
Maryland corporation, and is governed by the detailed requirements imposed by
Maryland corporate law and the terms of its Charter. Delaware's business trust
law contains provisions that are well suited to mutual funds and provides
greater flexibility for mutual fund operations.
The redomestication must be approved by PBHG Funds shareholders. You have
the opportunity to vote on the redomestication on a separate proxy ballot
previously mailed to you. The Reorganization of International Fund into GTC Fund
is a separate proposal that you are requested to vote on by completing and
mailing the proxy ballot enclosed with this Proxy Statement Prospectus. If the
redomestication is not approved, PBHG Funds will continue to operate as a
Maryland corporation. If approved by International Fund shareholders, the
Reorganization will be completed even though the redomestication is not
approved.
RIGHTS OF SHAREHOLDERS
International Fund and GTC Fund are each separate series of shares of the
capital stock of PBHG Funds, a Maryland corporation. Since both funds are part
of the same corporate entity there are no differences in shareholder's rights.
However, if the redomestication described above is approved, PBHG Funds
will operate as a Delaware business trust.
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Federal securities laws have much to say about the way that mutual funds
operate, but they do not cover every aspect of a fund's existence. State law and
PBHG Funds' governing documents fill in most of the gaps. The following
discussion compares the state law and documents currently governing PBHG Funds
with the state law and documents that will apply if it reorganizes as a Delaware
business trust. This discussion is not a comprehensive review of all technical
distinctions between the different legal structures. We simply want you to know
how a Delaware business trust compares in certain key areas to a Maryland
corporation -- PBHG Funds' present legal structure.
Shareholder liability. Shareholders of a fund organized as a Maryland
corporation or Delaware business trust generally have no personal liability for
the fund's obligations.
Director/Trustee liability and indemnification. With a Maryland
corporation, Directors cannot be held liable for their activities in that role
so long as they perform their duties in good faith, prudently, and in the fund's
best interests. The same is generally true for the Trustees of a Delaware
business trust, if so provided in the fund's governing documents. Under each
legal structure, the fund can indemnify its Directors/Trustees from claims and
expenses arising out of their service to the fund -- unless, that is, a
Director/Trustee has acted improperly in a particular matter.
Shareholder voting rights and meetings. Under a fund organized as a
Maryland corporation, shareholders' voting rights currently are based on the
number of shares that they own. As we explained below, as a Delaware business
trust, PBHG Funds would shift to a dollar-based voting rights system. As a
Maryland corporation, a fund generally must call a shareholder meeting if one is
requested in writing by investors entitled to cast 25% or more of the fund's
votes. As Delaware business trusts, the funds will adopt this same 25% standard.
Voting rights will be based on the dollar amount of your investment. After
the redomestication, the voting rights of PBHG Funds shareholders will become
"dollar-based" -- which is a different voting rights system than PBHG Funds uses
now. Currently, all PBHG Funds provide shareholders with one vote for each share
that they own. This share-based system treats shareholders equitably so long as
all of the shares of a particular fund have the same share price. However,
fairness tends to erode when PBHG Funds offers more than one series of shares or
more than one class of shares. The share prices of PBHG Funds' separate
investment portfolios inevitably diverge over time due to their different
investment programs. Similarly, the share prices of a fund's different share
classes will deviate over time because of their different expense structures. As
a result, when issues are voted at the fund level, the owners of lower-priced
shares have relatively greater voting clout than the owners of higher-priced
shares. The change to dollar-based voting will ensure that shareholders' voting
rights remain proportionate to their economic interests. Many PBHG Funds
currently offer only one portfolio or class of shares; however, dollar-based
voting rights would apply to any additional portfolios or share classes that
these funds might offer in the future.
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OWNERSHIP OF INTERNATIONAL FUND AND GTC FUND SHARES
Significant Holders
Listed below is the name, address and percent ownership of each person who
as of October 5, 2000, to the knowledge of PBHG Funds, owned beneficially 5% or
more of the outstanding shares of International Fund:
International Fund
Percent
Number of Shares Beneficial
Name and Address Owned Ownership
---------------- ----- ---------
Charles Schwab & Co., Inc. 86,977 10.74%
Reinvest Account
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Services Corp. 67,529 8.34%
For the Exclusive Benefit of Customers
1055 Franklin Ave., Suite 100
Garden City, New York 11530-2903
Listed below is the name, address and percent ownership of each person who
as of October 5, 2000 to the knowledge of PBHG Funds, owned beneficially 5% or
more of the outstanding shares of GTC Fund:
GTC Fund
Percent
Number of Shares Beneficial
Name and Address Owned Ownership
---------------- ----- ---------
National Financial Services Corp. 1,477,530 15.90%
For the Exclusive Benefit of Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
Charles Schwab & Co., Inc. 942,494 10.14%
Reinvest Account
101 Montgomery Street
San Francisco, CA 94104-4122
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Ownership of Directors and Officers
To the best of the knowledge of PBHG Funds, the beneficial ownership of
shares of International Fund or of GTC Fund by Directors and Officers of PBHG
Funds as a group constituted less than 1% of the outstanding shares of such fund
as of the date of this Proxy Statement/Prospectus.
CAPITALIZATION
The following tables set forth as of October 31, 2000, (i) the
capitalization of GTC Fund PBHG Class shares, (ii) the capitalization of
International Fund PBHG Class shares and the pro forma capitalization of GTC
Fund PBHG Class shares as adjusted to give effect to the transactions
contemplated by the Plan of Reorganization.
International GTC Fund
GTC Fund Shares Fund Shares Pro Forma
--------------- ----------- ---------
Net Assets $95,560,683 $8,796,484 $104,357,167
Shares Outstanding 9,458,285 805,911 10,329,221
Net Asset Value Per Shares 10.10 10.91 10.10
LEGAL MATTERS
Certain legal matters concerning PBHG Funds and its participation in the
Reorganization, the issuance of shares of GTC Fund in connection with the
Reorganization and the tax consequences of the Reorganization will be passed
upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st Floor,
Philadelphia, PA 19103-7599.
INFORMATION FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
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This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which PBHG Funds
has filed with the SEC pursuant to the requirements of the 1933 Act and the 1940
Act, to which reference is hereby made. The SEC file number for PBHG Funds'
registration statement containing the current prospectus and statement of
additional information relating to both International Fund and GTC Fund is
Registration No. 2-99810.
PBHG Funds is subject to the informational requirements of the 1940 Act and
in accordance therewith files reports and other information with the SEC.
Reports, proxy statements, registration statements and other information filed
by PBHG Funds (including the Registration Statement of PBHG Funds relating to
GTC Fund on Form N-14 of which this Proxy Statement/Prospectus is a part and
which is hereby incorporated by reference) may be inspected without charge and
copied at the public reference facilities maintained by the SEC at Room 1014,
Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the
following regional offices of the SEC: 7 World Trade Center, New York, New York
10048; and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies
of such material may also be obtained from the Public Reference Section of the
SEC at 450 Fifth Street, NW, Washington, DC 20549 at the prescribed rates. The
SEC maintains a Web site at http://www.sec.gov that contains information
regarding PBHG Funds and other registrants that file electronically with the
SEC.
ADDITIONAL INFORMATION ABOUT GTC FUND
For more information with respect to PBHG Funds and GTC Fund concerning the
following topics, please refer to the current prospectus of GTC Fund attached as
Appendix II as indicated: (i) see the discussion "Performance Information" and
"Fees and Expenses" and "Example" for further information regarding GTC Fund
performance and expenses; (ii) see the discussion "The Investment Adviser" for
further information regarding management of GTC Fund; and (iii) see the
discussion "Your Investment" for further information regarding share pricing,
purchase and redemption of shares, dividends and distribution arrangements for
the shares.
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APPENDIX I
PLAN OF REORGANIZATION
for
PBHG INTERNATIONAL FUND
an Investment Portfolio of
The PBHG Funds, Inc.
This Plan of Reorganization provides for the reorganization of PBHG
International Fund ("International Fund"), an investment portfolio of The PBHG
Funds, Inc. (the "Company"), into PBHG Global Technology & Communications Fund
(the "GTC Fund"), another investment portfolio of the Company.
WHEREAS, the Company is a Maryland corporation and a registered investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the International Fund and the GTC Fund are each investment
portfolios of the Company representing separate series of shares of the capital
stock of the Company;
WHEREAS, the International Fund is authorized to issue two classes of its
shares, Advisor Class shares and PBHG Class shares, but only PBHG Class shares
have been issued and are outstanding.
WHEREAS, the Board of Directors of the Company has determined that it would
be in the best interests of the International Fund and GTC Fund shareholders to
reorganize the International Fund by reclassifying the shares of the
International Fund as shares of the GTC Fund pursuant to an amendment to the
Charter of the Company, all in the manner described below.
NOW, THEREFORE, the International Fund shall be reorganized into the GTC
Fund on the following terms and conditions.
1. Plan of Reorganization.
(a) Reclassification of Shares. At the Effective Time described in Section
3 below, all of the issued and outstanding PBHG Class shares of the
International Fund shall be reclassified and changed into and become PBHG Class
shares of the GTC Fund based upon their respective net asset values, and
thereafter shall have the attributes of PBHG Class shares of the GTC Fund. The
issued and outstanding PBHG Class shares of International Fund shall be deemed
to have been redeemed upon their reclassification and change into PBHG Class
shares of GTC Fund.
<PAGE>
All authorized but unissued PBHG Class shares (including the previously
issued and outstanding shares which were changed into shares of GTC Fund), and
all of the Advisor Class shares, of the International Fund shall be reclassified
as authorized shares of the Company without further designation or
classification. The stock transfer books of the International Fund will be
permanently closed at the Effective Time and only requests for the redemption of
shares of the International Fund received in proper form prior to the close of
trading on the New York Stock Exchange on the date of the Effective Time shall
be accepted. Thereafter, redemption requests received by the International Fund
shall be deemed to be redemption requests for the GTC Fund shares into which
such International Fund shares were reclassified under this Plan of
Reorganization.
(b) Attribution of Assets and Liabilities. At the Effective Time described
in Section 3 below, the proportionate undivided interest in the net assets of
the International Fund attributable to its PBHG Class shares shall become a part
of the proportionate undivided interest in the net assets of the GTC Fund
attributable to its PBHG Class shares and the expenses, costs, charges and
reserves allocated to the PBHG Class shares of the International Fund
immediately prior to the Effective Time shall become expenses, costs, charges
and reserves of PBHG Class shares of the GTC Fund. The Company shall instruct
its custodian to reflect in the custodian's records for the GTC Fund the
attribution of the assets of the International Fund in the manner described
above.
(c) Shareholder Accounts. At the Effective Time described in Section 3
below each shareholder of record of PBHG Class shares of the International Fund
will receive that number of PBHG Class shares of the GTC Fund having an
aggregate net asset value equal to the aggregate net value of the assets of the
PBHG Class shares of the International Fund held by such shareholder immediately
prior to the Effective Time.
The Company will establish an open account on the records of the GTC Fund
in the name of each shareholder of the International Fund to which will be
credited the respective number of shares of the GTC Fund due such shareholder.
Fractional shares of the GTC Fund will be carried to the third decimal place.
Certificates representing shares of the GTC Fund will not be issued. The net
asset value of the shares of the International Fund and the net value of the
assets of the GTC Fund will be determined at the Effective Time in accordance
with the policies and procedures of the Company.
2. Amendment to Charter. The Company shall effect the reorganization of the
International Fund by amending its Charter to provide for the reclassification
of issued and outstanding PBHG Class shares of the International Fund as PBHG
Class shares of the GTC Fund, based upon their respective net asset values, to
provide for the reclassification of all authorized but unissued PBHG Class
shares and all Advisor Class shares of International Fund as authorized shares
of the Company without further designation, to provide for transfer of assets
and liabilities from the International Fund to the GTC Fund, and to provide for
the crediting of shares of the GTC Fund to the account of shareholders of the
International Fund, all in the manner provided in paragraph 1.
2
<PAGE>
3. Effective Time of the Reorganization. The reorganization of the
International Fund contemplated by this Plan of Reorganization shall occur on
January 25, 2001, at 5:00 p.m. Eastern Time, or such other date and time as the
officers of the Company shall determine (the "Effective Time").
4. Approval of Shareholders. A meeting of the holders of the International
Fund shares shall be duly called and constituted for the purpose of acting upon
this Plan of Reorganization and the transactions contemplated herein, including
approval of the amendment to the Charter of the Company described above.
Approval by such shareholders of this Plan of Reorganization shall authorize the
Company to take the actions required to effect the Plan of Reorganization.
5. Conditions Precedent. The Company will consummate the Plan of
Reorganization only after satisfaction of each of the following conditions:
(a) The amendment to the Charter of the Company described in paragraph
2 shall have been filed with the Maryland Department of Assessments and
Taxation specifying the Effective Time as the effective date thereof.
(b) All consents, approvals, permits and authorizations required to be
obtained from governmental authorities, including the Securities and
Exchange Commission and state securities commissions, to permit the parties
to carry out the transactions contemplated by this Plan of Reorganization
shall have been received.
(c) This Plan of Reorganization, the amendment to the Charter and
related corporate matters shall have been approved by the shareholders of
the International Fund at a special meeting by the affirmative vote of a
majority of the total number of votes entitled to be cast.
(d) The assets of the International Fund to be acquired by the GTC
Fund shall constitute at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held
by the International Fund immediately prior to the reclassification. For
purposes of this paragraph 5(d), any assets used by the International Fund
to pay the expenses it incurs in connection with this Plan of
Reorganization and to effect all shareholder redemptions and distributions
(other than regular, normal dividends and regular, normal redemptions
pursuant to the 1940 Act, and not in excess of the requirements of Section
852 of the Code, occurring in the ordinary course of the International
Fund's business as a series of an open-end management investment company)
after the commencement of negotiations regarding the Reorganization shall
be included as assets of the International Fund held immediately prior to
the reclassification.
(e) The dividend or dividends described in the last sentence of
paragraph 6(a) shall have been declared.
3
<PAGE>
(f) The Company shall have received an opinion of Ballard Spahr
Andrews & Ingersoll, LLP ("BSA&I") to the effect that consummation of the
transactions contemplated by this Plan of Reorganization will constitute a
"reorganization" within the meanings of Section 368(a) of the Internal
Revenue Code (the "Code"), and that the shareholders of the International
Fund will recognize no gain or loss to the extent that they receive shares
of the GTC Fund in exchange for their shares of the International Fund in
accordance with this Plan of Reorganization. In rendering such opinion,
BSA&I may request and rely upon representations contained in certificates
of officers of the Company and others, and the officers of the Company
shall use their best efforts to make available such truthful certificates.
(g) The Company shall have received an opinion of BSA&I, dated as of
the Effective Time, addressed to and in form and substance satisfactory to
the Company, to the effect that this Plan of Reorganization has been duly
authorized and approved by all requisite action of the Company and the
holders of the shares of the International Fund.
At any time prior to the Effective Time, any of the foregoing conditions
may be waived by the Company if, in the judgment of its Board of Directors, such
waiver will not have a material adverse effect on the benefits intended under
this Plan of Reorganization for the International Fund shareholders.
6. International Fund Tax Matters.
(a) The International Fund has elected to be a regulated investment
company under Subchapter M of the Code. The International Fund has
qualified as such for each taxable year since inception and that has ended
prior to the Effective Time and will have satisfied the requirements of
Part I of Subchapter M of the Code to maintain such qualification for the
period beginning on the first day of its current taxable year and ending at
the Effective Time. The International Fund has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M of
the Code did not apply to it. In order to (i) ensure continued
qualification of the International Fund as a "regulated investment company"
for tax purposes and (ii) eliminate any tax liability of the International
Fund arising by reason of undistributed investment company taxable income
or net capital gain, the International Fund will declare on or prior to the
Effective Time to the shareholders of the International Fund a dividend or
dividends that, together with all previous such dividends, shall have the
effect of distributing (A) all of the International Fund's investment
company taxable income (determined without regard to any deductions for
dividends paid) for the taxable year ended March 31, 2000 and for the short
taxable year beginning on April 1, 2000 and ending at the Effective Time
and (B) all of the International Fund's net capital gain recognized in its
taxable year ended March 31, 2000 and in such short taxable year (after
reduction for any capital loss carryover).
(b) The International Fund has timely filed all tax returns required
to be filed by it and all taxes with respect thereto have been paid. No
deficiencies for any taxes have been proposed, assessed or asserted in
writing by any taxing authority against the International Fund, and no
deficiency has been proposed, assessed or asserted, in writing, where such
deficiency
4
<PAGE>
would reasonably be expected, individually or in the aggregate, to have a
material adverse effect on the condition, financial or otherwise, property,
assets or prospects of the International Fund.
5
<PAGE>
(c) The fiscal year of the International Fund has not been changed for
tax purposes since the date on which it commenced operations.
7. The GTC Fund Tax Matters.
(a) The GTC Fund has elected to be treated as a regulated investment
company under Subchapter M of the Code. The GTC Fund has qualified as such
for each taxable year since inception that has ended prior to the Effective
Time and will satisfy the requirements of Part I of Subchapter M of the
Code to maintain such qualification for its current taxable year. The GTC
Fund has no earnings or profits accumulated in any taxable year in which
the provisions of Subchapter M of the Code did not apply to it.
(b) The GTC Fund has timely filed all returns required to be filed by
it and all taxes with respect thereto have been paid. No deficiencies for
any taxes have been proposed, assessed or asserted in writing by any taxing
authority against the GTC Fund, and no deficiency has been proposed,
assessed or asserted, in writing, where such deficiency would reasonably be
expected, individually or in the aggregate, to have a material adverse
effect on the condition, financial or otherwise, property, assets or
prospects of the GTC Fund.
(c) The fiscal year of the GTC Fund has not been changed for tax
purposes since the date on which it commenced operations.
8. Termination. The Company may terminate this Plan of Reorganization with
the approval of its Board of Directors at any time prior to the Effective Time,
notwithstanding approval thereof by the International Fund shareholders if, in
the judgment of the Board, proceeding with the Plan of Reorganization would be
inadvisable.
9. Further Assurances. The Company shall take such further action as may be
necessary or desirable and proper to consummate the transactions contemplated
hereby.
10. Expenses. The International Fund and the GTC Fund shall each bear any
expenses it incurs in connection with this Plan of Reorganization and the
transactions contemplated hereby.
This Plan of Reorganization was approved and adopted by the Board of
Directors of The Company on the 13th day of November, 2000.
6
<PAGE>
THE PBHG FUNDS, INC.
ARTICLES OF AMENDMENT
THE PBHG FUNDS, INC., a Maryland corporation registered as an open-end
investment company under the Investment Company Act of 1940, as amended,
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland (the "Department") that:
FIRST: The Board of Directors of the Corporation has duly advised and
adopted, and the shareholders of the PBHG International Fund ("International
Fund") have duly approved, a Plan of Reorganization for International Fund, an
investment portfolio of the Corporation, that provides for the filing of these
Articles of Amendment pursuant to which: (i) the issued and outstanding PBHG
Class shares of International Fund will be reclassified and changed into PBHG
Class shares of PBHG Global Technology & Communications Fund ("GTC Fund"),
another investment portfolio of the Corporation; and (ii) after such change, the
authorized PBHG Class shares of International Fund (including the previously
issued and outstanding shares which were changed into shares of GTC Fund) and
the authorized Advisor Class of shares of International Fund will be
reclassified as authorized shares of the Corporation without further designation
or classification, on the following terms:
(1) Reclassification and Change of Outstanding Shares. On the Effective
Date of these Articles of Amendment all of the issued and outstanding PBHG
Class shares of International Fund shall be changed into PBHG Class shares
of GTC Fund currently authorized based upon their respective net asset
values, and thereafter shall have the attributes of PBHG Class shares of
GTC Fund;
7
<PAGE>
(2) Reclassification International Fund Shares. On the Effective Date of
these Articles of Amendment all authorized but unissued shares of the
International Fund shall be reclassified as authorized shares of the Corporation
without further designation or classification;
(3) Attribution of Assets and Liabilities. On the Effective Date of these
Articles of Amendment the proportionate undivided interest in the net assets of
the International Fund attributable to its PBHG Class shares shall become a part
of the proportionate undivided interest in the net assets of the GTC Fund
attributable to its PBHG Class shares and the expenses, costs, charges and
reserves allocated to the PBHG Class shares of the International Fund
immediately prior to the Effective Date shall become expenses, costs, charges
and reserves of PBHG Class shares of the GTC Fund.
(4) Shareholder Accounts. On the Effective Date of these Articles of
Amendment each shareholder of record of PBHG Class shares of the International
Fund will receive that number of PBHG Class shares of the GTC Fund having an
aggregate net asset value equal to the aggregate net value of the assets of the
PBHG Class shares of the International Fund held by such shareholder immediately
prior to the Effective Date.
The charter of the Corporation is hereby amended as provided in this
Article
First.
SECOND: These Articles of Amendment are adopted under the authority
contained in Section 2-602(b)(3) and Section 2-602(b)(8) of the Maryland General
Corporation Law (the "MGCL"). The amendments to the Charter of the Corporation
set forth herein were duly
8
<PAGE>
advised and adopted by the Board of Directors of the Corporation, and duly
approved by the stockholders of the Corporation entitled to vote thereon, as
required by law.
THIRD: The amendments to the Charter set forth herein do not increase the
authorized stock of the Corporation.
FOURTH: The Effective Date of these Articles of Amendment shall be January
26, 2001, at 5:00 p.m. Eastern Time.
The undersigned President acknowledges these Articles of Amendment to be
the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles of Amendment with respect to authorization and approval are true in all
material respects and that this statement is made under the penalties for
perjury.
IN WITNESS WHEREOF, THE PBHG FUNDS, INC. has caused these Articles of
Amendment to be executed in its name and on its behalf by its President and
witnessed by its Secretary on December ___, 2000.
THE PBHG FUNDS, INC.
Witness:
--------------------------- ------------------------------
John M. Zerr Gary L. Pilgrim
Secretary President
9
<PAGE>
APPENDIX I
[PBHG LOGO OMITTED]
THE PBHG FUNDS, INC.
PROSPECTUS
July 31, 2000
(as Supplemented October 16, 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.
o PBHG Cash Reserves Fund is designed for conservative investors who want
to receive current income from their investments. This Fund may be suitable
for investors who require stability of principal or who are pursuing a
short-term investment goal, such as investing emergency reserves.
o Other PBHG Funds are generally designed for long-term investors, such as
those saving for retirement, or investors that want a fund that seeks to
outperform the market in which it invests over the long-term. These other
Funds may not be suitable for investors who require regular income or
stability of principal, or who are pursuing a short-term investment goal,
such as investing emergency reserves.
INVESTMENT ADVISER
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") is the investment adviser
for each Fund. Pilgrim Baxter has retained certain sub-advisers to assist in
managing the Funds. For information about the sub advisers, see page 61 of the
prospectus.
This Prospectus contains important information you should know before investing
in any Fund and as a shareholder in a Fund. This information is arranged into
different sections for easy reading and future reference. To obtain more
information about the Funds, please refer to the back cover of this Prospectus.
1
<PAGE>
[This page intentionally left blank]
2
<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 ....................... 27
PBHG Mid-Cap Value Fund ......................... 30
PBHG Small Cap Value Fund ....................... 33
PBHG Focused Value Fund ......................... 36
PBHG International Fund ......................... 38
PBHG Cash Reserves Fund ......................... 41
PBHG Technology & Communications Fund ........... 44
PBHG Strategic Small Company Fund ............... 48
PBHG Global Technology &
Communications Fund ........................ 51
MORE ABOUT THE FUNDS
--------------------------------------------------------------------------------
Risks & Returns ................................. 54
THE INVESTMENT ADVISER
& SUB-ADVISERS
--------------------------------------------------------------------------------
The Investment Adviser .......................... 60
Pilgrim Baxter & Associates, Ltd.
The Sub-Advisers ................................ 61
Pilgrim Baxter Value Investors, Inc.
("Value Investors")
Murray Johnstone International Limited
("Murray Johnstone")
Wellington Management Company, Ltd.
("Wellington Management")
YOUR INVESTMENT
--------------------------------------------------------------------------------
Pricing Fund Shares ............................. 65
Buying Shares ................................... 66
Selling Shares .................................. 67
General Policies ................................ 68
Distribution & Taxes ............................ 71
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Financial Highlights ............................ 72
3
<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 business momentum,
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.
[GRAPHIC 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 54.
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 OMITTED]
1990 -9.64%
1991 51.63%
1992 28.39%
1993 46.71%
1994 4.75%
1995 50.35%
1996 9.82%
1997 -3.35%
1998 0.59%
1999 92.45%
The Fund's year-to-date return as of 6/30/00 was 13.42%.
BEST QUARTER: Q4 1999 64.55%
WORST QUARTER: Q3 1990 -29.05%
--------------------------------------------------------------------------------
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%
Russell 2000 Growth Index 43.10% 18.99% 13.51%
Note: The inception date of the Growth Fund was December 19, 1985.
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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.38%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.23%
--------------------------------------------------------------------------------
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
PBHG Class $125 $390 $676 $1,489
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.
[GRAPHIC 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 54.
PBHG EMERGING GROWTH FUND 7
<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 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 OMITED]
1994 23.78%
1995 48.45%
1996 17.08%
1997 -3.67%
1998 3.00%
1999 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 May 31, 1993.
8 PBHG EMERGING GROWTH FUND
<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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.39%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.24%
--------------------------------------------------------------------------------
[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.
--------------------------------------------------------------------------------
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 business momentum, 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.
[GRAPHIC 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 54.
10 PBHG LARGE CAP 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 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 OMITTED]
1996 23.40%
1997 22.36%
1998 30.42%
1999 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>
[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
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.
--------------------------------------------------------------------------------
YOUR COST OVER
--------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$119 $372 $644 $1,420
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 business
momentum, 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.
[GRAPHIC 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 54.
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 OMITTED]
1996 27.99%
1997 6.84%
1998 19.02%
199 160.89%
The Fund's year-to-date return as of 6/30/00 was 28.33%.
BEST QUARTER: Q4 1999 130.62%
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>
[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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.33%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.18%
--------------------------------------------------------------------------------
[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.
--------------------------------------------------------------------------------
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 business momentum, 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.
[GRAPHIC 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 54.
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 OMITTED]
1996 32.80%
1997 -9.71%
1998 7.42%
1999 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>
[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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.48%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.33%*
--------------------------------------------------------------------------------
* 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.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
--------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$135 $421 $729 $1,601
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. 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.
[GRAPHIC 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 54.
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 OMITTED]
1997 16.07%
1998 13.05%
1999 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>
[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
SHAREHOLDER FEES NONE
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.32%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.32%*
--------------------------------------------------------------------------------
* 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.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
--------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$134 $418 $723 $1,590
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 business
momentum 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.
[GRAPHIC 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 54.
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 OMITTED]
1997 32.96%
1998 67.83%
1999 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
November 30, 1996.
PBHG LARGE CAP 20 FUND 23
<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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.38%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.23%*
--------------------------------------------------------------------------------
* 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.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
--------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$125 $390 $676 $1,489
24 PBHG LARGE CAP 20 FUND
<PAGE>
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.
[GRAPHIC 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 54.
PBHG NEW OPPORTUNITIES FUND 25
<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. The
expenses listed below are based on the Fund's last fiscal year ended March 31,
2000.
--------------------------------------------------------------------------------
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 0.34%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.34%*
--------------------------------------------------------------------------------
* 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.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$136 $425 $734 $1,613
26 PBHG NEW OPPORTUNITIES FUND
<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.
[GRAPHIC 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 54.
PBHG LARGE CAP VALUE FUND 27
<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 OMITTED]
1997 25.62%
1998 34.74%
1999 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%
28 PBHG LARGE CAP VALUE FUND
<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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.65%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.46%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.11%*
--------------------------------------------------------------------------------
* 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.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
--------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$113 $353 $612 $1,352
PBHG LARGE CAP VALUE FUND 29
<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.
[GRAPHIC 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
54.
30 PBHG MID-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 S&P Midcap 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 OMITTED]
1998 27.84%
1999 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%
PBHG MID-CAP VALUE FUND 31
<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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.59%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.44%*
--------------------------------------------------------------------------------
* 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.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
--------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$147 $456 $787 $1,724
32 PBHG MID-CAP VALUE FUND
<PAGE>
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.
[GRAPHIC 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 54.
PBHG SMALL CAP VALUE FUND 33
<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 OMITTED]
1998 1.13%
1999 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%
34 PBHG SMALL CAP VALUE FUND
<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
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 ENDING 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.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$153 $491 $853 $1,872
PBHG SMALL CAP VALUE FUND 35
<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 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 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.
[GRAPHIC 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 54.
36 PBHG FOCUSED VALUE 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. The
expenses listed below are based on the Fund's last fiscal year, ended March 31,
2000.
--------------------------------------------------------------------------------
FEES AND EXPENSES TABLE
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.70%
--------------------------------------------------------------------------------
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 ENDING 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 MARCH 31, 2000.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$153 $485 $840 $1,841
PBHG FOCUSED VALUE FUND 37
<PAGE>
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.
[GRAPHIC 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 54.
38 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 (MSCIEAFE). 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 OMITTED]
1995 2.05%
1996 12.66%
1997 3.48%
1998 12.74%
1999 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 (6/15/94)
--------------------------------------------------------------------------------
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 Index was calculated from June
30, 1994.
PBHG INTERNATIONAL FUND 39
<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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 1.00%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 2.00%*
--------------------------------------------------------------------------------
* 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.
[GRAPHIC OMITTED] EXAMPLE
This example is intended to help you compare the cost of inve sting in the Fund
to the cost of investing in other mutual funds. This example makes four
assumptions: 1) you invest $10,000 in the Fund for the time periods shown; 2)
you redeem all your shares at the end of those time periods; 3) you earn a 5%
return on your investment each year; and 4) the Fund's operating expenses remain
the same for the time periods shown. The example is hypothetical. Your actual
costs may be higher or lower.
--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$203 $627 $1,078 $2,327
40 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.
[GRAPHIC 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 54.
PBHG CASH RESERVES FUND 41
<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
[BAR CHART OMITTED]
1996 4.91%
1997 5.08%
1998 5.00%
1999 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.
42 PBHG CASH RESERVES FUND
<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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.30%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.39%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.69%
--------------------------------------------------------------------------------
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$70 $221 $384 $859
PBHG CASH RESERVES FUND 43
<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.
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.
[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 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.
44 PBHG TECHNOLOGY & COMMUNICATIONS FUND
<PAGE>
The value of your investment in the Fund will go up and down, which means you
could lose money.
The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.
Securities of technology and communications companies are strongly affected by
worldwide scientific and technological developments and governmental 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.
[GRAPHIC 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 54.
PBHG TECHNOLOGY & COMMUNICATIONS FUND 45
<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
[BAR CHART OMITTED]
1996 54.42%
1997 3.32%
1998 26.00%
1999 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.
46 PBHG TECHNOLOGY & COMMUNICATIONS FUND
<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
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.34%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.19%
--------------------------------------------------------------------------------
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$121 $378 $654 $1,443
PBHG TECHNOLOGY& COMMUNICATIONS FUND 47
<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 business momentum,
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 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 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.
[GRAPHIC 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 54.
48 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 OMITTED]
1997 25.67%
1998 2.13%
1999 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 49
<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
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 ENDING 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.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$153 $485 $840 $1,841
50 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.
[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.
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND 51
<PAGE>
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 than 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.
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.
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.
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.
[GRAPHIC OMITTED] For more information on the Fund's investment strategies and
the associated risks, please refer to the More About the Funds section beginning
on page 54.
52 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.
--------------------------------------------------------------------------------
FEES AND EXPENSES TABLE
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 1.50%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.50%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 2.00%*
--------------------------------------------------------------------------------
* 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.
[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.
--------------------------------------------------------------------------------
YOUR COST OVER
1 YEAR 3 YEARS
--------------------------------------------------------------------------------
$203 $627
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND 53
<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.
54
<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.
POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
Pilgrim Baxter, Value Investors and Murray Johnstone maintain a long-term
investment approach and focus on securities they believe can appreciate over an
extended time frame, regardless of interim fluctuations.
Under normal circumstances, each Fund (except the Cash Reserves Fund) intends to
remain fully invested, with at least 65% of its total assets in securities.
Pilgrim Baxter, Value Investors and Murray Johnstone focus their active
management on securities selection, the area they believe their commitment to
fundamental research can most enhance a Fund's performance.
POTENTIAL RETURNS
--------------------------------------------------------------------------------
Securities have generally outperformed more stable investments (such as bonds
and cash equivalents) over the long term.
--------------------------------------------------------------------------------
GROWTH SECURITIES
Securities that Pilgrim Baxter believes have 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 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 or the risk of a decline in its market price is too great or a
deterioration in business fundamentals occurs or is expected to occur.
55
<PAGE>
--------------------------------------------------------------------------------
VALUE SECURITIES
Securities that Value Investors believes are currently underpriced using certain
financial measurements, such as their price-to-earnings ratio, earnings power,
dividend income potential, and competitive advantages.
POTENTIAL RISKS
--------------------------------------------------------------------------------
See Securities.
Value companies may have experienced adverse business developments or may be
subject to special risks that have caused their securities to be out of favor.
The value securities in the Fund may never reach what Value Investors believes
are their full value and may even go down in price.
POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
See Securities.
In managing a Fund, Value Investors uses its own research, computer models and
measures of value.
Value Investors considers selling a security when it becomes overvalued relative
to the market, shows deteriorating fundamentals or falls short of Value
Investors' expectations.
POTENTIAL RETURNS
--------------------------------------------------------------------------------
See Securities.
Value securities may produce significant capital appreciation as the market
recognizes their full value.
--------------------------------------------------------------------------------
FOREIGN EQUITY SECURITIES
Securities of foreign issuers, including ADRs, 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 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.
56
<PAGE>
FOREIGN EQUITY SECURITIES CONTINUED.
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.
--------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS
High quality, short-term U.S. and foreign debt instruments denominated in U.S.
dollars, including bank obligations (such as CDs, time deposits, bankers'
acceptances, and banknotes) commercial paper, corporate obligations (including
asset backed securities) government obligations (such as U.S. Treasury, agency
or foreign government securities) short-term obligations issued by state and
local governments and repurchase agreements.
POTENTIAL RISKS
--------------------------------------------------------------------------------
Money market instrument prices fluctuate over time.
Money market instrument prices may fall as a result of factors that relate to
the issuer, such as a rating downgrade.
Money market instrument prices may fall because of changes in the financial
markets, such as interest rate changes.
The money market instruments in the Cash Reserve Fund may never reach what
Pilgrim Baxter and Wellington Management believe are their full income
potential.
POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
The Cash Reserves Fund follows strict SEC rules about credit risk, maturity and
diversification of its investments.
POTENTIAL RETURNS
--------------------------------------------------------------------------------
Money market instruments have greater short-term liquidity, capital preservation
and income potential than longer-term investments such as stocks.
57
<PAGE>
--------------------------------------------------------------------------------
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.
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.
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.
--------------------------------------------------------------------------------
TECHNOLOGY ORCOMMUNICATIONS 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.
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.
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.
58
<PAGE>
--------------------------------------------------------------------------------
OTC SECURITIES
Securities not listed and traded on an organized exchange, but bought and sold
through a computer network.
POTENTIAL RISKS
--------------------------------------------------------------------------------
OTC securities are not traded as often as securities listed on an exchange. So,
if the Fund were to sell an OTC security, it might have to offer the security at
a discount or sell it in smaller share lots over an extended period of time.
POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
Pilgrim Baxter, 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.
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.
--------------------------------------------------------------------------------
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.
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.
POTENTIAL RETURNS
--------------------------------------------------------------------------------
Illiquid securities may offer more attractive yields or potential growth than
comparable widely traded securities.
59
<PAGE>
THE INVESTMENT ADVISER & SUBADVISERS
[LOGO OMITTED] THE INVESTMENT ADVISER
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.
60
<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 $680 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 more than $6 billion for institutional clients worldwide.
The investment process of Murray Johnstone, like that of Pilgrim Baxter, is both
quantitative and fundamental. In seeking to identify attractive investment
opportunities for the International Fund, Murray Johnstone uses twenty factors,
like currency considerations, to score and rank a universe of countries and
geographic regions according to investment potential. Then, using its own
fundamental research, Murray Johnstone identifies individual companies with
superior growth records and expectations, sound balance sheets and high cash
flow generation. Each company's investment value is evaluated based on factors
like relative price performance, upward earnings estimate revisions, improving
balance sheets and strength of management. Murray Johnstone's decision to sell a
security depends on many factors. Generally speaking, however, Murray Johnstone
considers selling a security when another company or country offers superior
investment opportunities, the risk associated with a particular currency becomes
too great, or the security falls short of Murray Johnstone's expectations.
61
<PAGE>
Wellington Management Company, LLP, 75 State Street, Boston, MA is the
sub-adviser for the PBHG Cash Reserves Fund. Wellington Management and its
predecessor organizations have provided investment advisory services to
investment companies since 1928 and to investment counseling clients since 1960.
As of June 30, 2000, Wellington Management held discretionary management
authority with respect to more than $253 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 Fund.
62
<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/LARGE CAP 20 FUND/SELECT EQUITY FUND
Michael S. Sutton, CFA, has managed the Large Cap Growth and Large Cap 20 Funds
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/MID-CAP VALUE FUND/FOCUSED VALUE FUND
Jerome J. Heppelmann, CFA, has managed the Small Cap Value, Mid-Cap Value, and
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.
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.
63
<PAGE>
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/CORE GROWTH FUND
Jeffrey A. Wrona, CFA has managed the 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 & COMMUNICATIONS FUND
Michael K. Ma has managed the Fund since its inception on May 31, 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.
64
<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.
65
<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 Fund 1 $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
PLANS 2 (SIP)
1 THE LIMITED AND NEW OPPORTUNITIES FUNDS ARE CURRENTLY CLOSED
TO NEW INVESTORS.
2 PROVIDED A SIP IS ESTABLISHED, THE MINIMUM INITIAL INVESTMENT FOR EACH FUND
IS $500 ALONG WITH A MONTHLY SYSTEMATIC INVESTMENT OF $25 OR MORE.
CONCEPTS TO UNDERSTAND
--------------------------------------------------------------------------------
Traditional IRA: an individual retirement account. Your contributions may or may
not be deductible depending on your circumstances. Assets grow tax-deferred;
withdrawals and distributions are taxable in the year made.
Spousal IRA: an IRA funded by a working spouse in the name of a nonworking
spouse.
Roth IRA: an IRA with non-deductible contributions, and tax-free growth of
assets and distributions to pay retirement expenses, provided certain conditions
are met.
Education IRA: an IRA with nondeductible contributions, and tax-free growth of
assets and distributions, if used to pay certain educational expenses.
FOR MORE COMPLETE IRA INFORMATION, CONSULT A PBHG SHAREHOLDER SERVICES
REPRESENTATIVE OR A TAX ADVISOR.
66
<PAGE>
[LOGO 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:
o Redemptions in excess of $50,000
o Requests to send proceeds to a different address or payee
o Requests to send proceeds to an address that has been changed within the last
30 days
o Requests to wire proceeds to a different bank account
A SIGNATURE GUARANTEE
helps to protect you against fraud. You can obtain one from most banks or
securities dealers, but not from a notary public. For joint accounts, each
signature must be guaranteed. Please call us to ensure that your signature
guarantee is authentic.
67
<PAGE>
[LOGO OMITTED] GENERAL POLICIES
o Each Fund may reject or suspend acceptance of purchase orders.
o Each Fund reserves the right to make redemptions in securities rather than in
cash if the redemption amount exceeds $250,000 or 1% of the NAV of the Fund.
o Payment for telephone purchases must be received by the Fund's transfer agent
within seven days or you may be liable for any losses the Fund incurs as a
result of the cancellation of your purchase order.
o When placing a purchase, sale or exchange order through an authorized
representative, it is the representative's responsibility to promptly transmit
your order to the Fund's transfer agent so that you may receive that same
day's NAV.
o SEI Trust Company, the custodian for PBHG Traditional, Roth and Education IRA
accounts, currently charges a $10 annual custodial fee to Traditional and Roth
IRA accounts and a $7 annual custodial fee to Educational IRA accounts. This
fee will be automatically charged to your account if not received by the
announced due date, usually in mid-August.
o Because of the relatively high cost of maintaining smaller accounts, the Fund
charges an annual fee of $12 if your account balance drops below the minimum
investment amount because of redemptions. Minimum investment amounts are
identified in the table on page 66. For non-retirement accounts, the Fund, may
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.
Statements and Reports that PBHG sends to you include the following:
o Confirmation Statements, Quarterly Account Statements, Prospectuses and
Financial Reports.
To reduce expenses, only one copy of most financial reports and
prospectuses may be mailed to households, even if more than one person in the
household holds shares of a fund. Call PBHG at 1-800-433-0051 if you need
additional copies of financial reports or prospectuses. If you do not want the
mailing of these documents to be combined with those for other members of your
household, contact PBHG at 1-800-433-0051 or write to P.O. Box 219534, Kansas
City, MO 64121. Electronic copies of most financial reports and prospectuses are
available at PBHG's website (www.pbhgfunds.com).
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.
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TO OPEN AN ACCOUNT
-----IN WRITING-----------------------------------------------------------------
Complete the application.
Mail your completed application and a check to:
The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, Missouri 64121-9534
-----BY TELEPHONE---------------------------------------------------------------
Call us at 1-800-433-0051 to receive an account application and receive an
account number.
WIRE Have your bank send your investment to:
o United Missouri Bank of Kansas City, N.A.
o ABA# 10-10-00695
o Account # 98705-23469
o Fund Name
o Your name
o Your Social Security or tax ID number
o Your account number
Return the account application.
-----BY AUTOMATED CLEARING------------------------------------------------------
HOUSE (ACH)*
-----VIA THE INTERNET-----------------------------------------------------------
o Visit the PBHG Funds website at http://www.pbhgfunds.com.
o Enter the "open account" screen and follow the instructions for completing an
account application.
TO ADD TO AN ACCOUNT
--------------------------------------------------------------------------------
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:
o United Missouri Bank of Kansas City, N.A.
o ABA# 10-10-00695
o Account # 98705-23469
o Fund Name
o Your name
o Your Social Security or tax ID number
o Your account number
--------------------------------------------------------------------------------
o Complete the bank information section on the account application.
o Attach a voided check or deposit slip to the account application.
o The maximum purchase allowed through ACH is $100,000 and this option must be
established on your account 15 days prior to initiating a transaction.
--------------------------------------------------------------------------------
o Complete the bank information section on the account application.
o Enter the "Your Account" section of the website and follow the instructions
for purchasing shares.
69
<PAGE>
TO SELL SHARES
-----BY MAIL--------------------------------------------------------------------
Write a letter of instruction that includes:
o your name(s) and signature(s)
o your account number
o the fund name
o the dollar amount your wish to sell
o how and where to send the proceeds
If required, obtain a signature guarantee (see "Selling Shares")
Mail your request to:
The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, Missouri 64121-9534
-----SYSTEMATIC WITHDRAW PLAN---------------------------------------------------
Permits you to have payments of $50 or more mailed or automatically transferred
from your Fund accounts to your designated checking or savings account
o Complete the applicable section on the account application
Note: Must maintain a minimum account balance of $5,000 or more.
-----CHECK WRITING--------------------------------------------------------------
Check Writing is offered to shareholders of the Cash Reserves Fund. If you have
an account balance of $5,000 or more, you may establish this option on your
account. You may redeem shares by writing checks on your account for $250 or
more. To establish Check Writing on your account, call 1-800-433-0051 and
request a Signature Card.
-----BY TELEPHONE---------------------------------------------------------------
Sales orders may be placed by telephone provided this option was selected on
your account application. Please call 1-800-433-0051.
Note: sales from IRA accounts may not be made by telephone and must be made
in writing.
-----ACH------------------------------------------------------------------------
o Complete the bank information section on the account application.
o Attach a voided check or deposit slip to the account application.
Note: sale proceeds sent via ACH will not be posted to your bank account until
the second business day following the transaction.
-----WIRE-----------------------------------------------------------------------
Sale proceeds may be wired at your request. Be sure the Fund has your wire
instructions on file.
There is a $10 charge for each wire sent by the Fund.
70
<PAGE>
[LOGO 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%
71
<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.
FOR A SHARE OUTSTANDING THROUGHOUT EACH FISCAL YEAR OR PERIOD ENDED MARCH 31:
<TABLE>
<CAPTION>
Net Realized and Net
Asset Net Unrealized Distributions Distributions Asset
Value Investment Gains or from Net from Value
Beginning Income (Losses) Investment Capital End
of Period (Loss) on Securities Income Gains of Period
-----------------------------------------------------------------------------------------
----------------
PBHG GROWTH FUND
----------------
<S> <C> <C> <C> <C> <C> <C>
PBHG CLASS
2000 2 $24.51 $(0.33) $36.14 -- $(1.59) $58.73
1999 2 28.23 (0.24) (3.48) -- -- 24.51
1998 21.06 (0.26) 7.43 -- -- 28.23
1997 25.30 (0.10) (4.14) -- -- 21.06
1996 16.70 (0.06) 8.66 -- -- 25.30
PBHG ADVISOR CLASS
2000 2 $24.35 $(0.42) $35.85 -- $(1.59) $58.19
1999 2 28.12 (0.30) (3.47) -- -- 24.35
1998 21.03 (0.15) 7.24 -- -- 28.12
1997 1 25.42 (0.06) (4.33) -- -- 21.03
-------------------------
PBHG EMERGING GROWTH FUND
-------------------------
PBHG CLASS
2000 2 $20.61 $(0.21) $20.76 -- $(1.16) $40.00
1999 2 25.83 (0.18) (4.96) -- (0.08) 20.61
1998 19.26 (0.24) 6.81 -- -- 25.83
1997 23.07 (0.11) (2.87) -- (0.83) 19.26
1996 16.10 (0.07) 8.03 -- (0.99) 23.07
--------------------------
PBHG LARGE CAP GROWTH FUND
--------------------------
PBHG CLASS
2000 2 $24.57 $(0.23) $21.32 -- $(7.29) $38.37
1999 2 22.69 (0.16) 3.53 -- (1.49) 24.57
1998 14.26 (0.19) 8.82 -- (0.20) 22.69
1997 14.53 (0.05) (0.21) -- (0.01) 14.26
1996 4 10.00 (0.03) 4.97 -- (0.41) 14.53
-----------------------
PBHG SELECT EQUITY FUND
-----------------------
PBHG CLASS
2000 2 $25.93 $(0.34) $58.71 -- $(6.49) $77.81
1999 2 24.15 (0.21) 1.99 -- -- 25.93
1998 15.91 (0.44) 8.68 -- -- 24.15
1997 17.27 (0.13) (1.03) -- (0.20) 15.91
1996 4 10.00 (0.05) 7.68 -- (0.36) 17.27
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
Ratio
Ratio of Net
of Net Ratio Investment
Net Investment of Expenses Income (Loss)
Assets Ratio Income to Average to Average
End of Expenses (Loss) Net Assets Net Assets Portfolio
Total of Period to Average to Average (Excluding (Excluding Turnover
Return (000) Net Assets Net Assets Waivers) Waivers) Rate
-------------------------------------------------------------------------------------------
----------------
PBHG GROWTH FUND
----------------
<S> <C> <C> <C> <C> <C> <C> <C>
PBHG CLASS
2000 2 148.57% $6,465,234 1.23% (0.90)% 1.23% (0.90)% 107.73%
1999 2 (13.18)% 3,228,740 1.32% (0.99)% 1.32% (0.99)% 80.51%
1998 34.05 % 5,338,380 1.26% (0.74)% 1.26% (0.74)% 94.21%
1997 (16.76)% 4,634,138 1.25% (0.69)% 1.25% (0.69)% 64.89%
1996 51.50 % 3,298,666 1.48% (0.79)% 1.48% (0.79)% 44.64%
PBHG ADVISOR CLASS
2000 2 147.98% $143,937 1.48% (1.15)% 1.48% (1.15)% 107.73%
1999 2 (13.41)% 66,235 1.57% (1.24)% 1.57% (1.24)% 80.51%
1998 33.71 % 89,227 1.51% (1.02)% 1.51% (1.02)% 94.21%
1997 1 (17.27)%+ 12,991 1.53%* (1.11)%* 1.53%* (1.11)%* 64.89%
-------------------------
PBHG EMERGING GROWTH FUND
-------------------------
PBHG CLASS
2000 2 101.33% $1,336,938 1.24% (0.76)% 1.24% (0.76)% 141.81%
1999 2 (19.91)% 736,008 1.34% (0.80)% 1.34% (0.80)% 101.53%
1998 34.11 % 1,404,157 1.27% (0.80)% 1.27% (0.80)% 95.21%
1997 (13.71)% 1,195,620 1.28% (0.36)% 1.28% (0.36)% 47.75%
1996 50.16 % 689,705 1.47% (0.42)% 1.47% (0.42)% 97.05%
--------------------------
PBHG LARGE CAP GROWTH FUND
--------------------------
PBHG CLASS
2000 2 98.60% $256,965 1.17% (0.79)% 1.17% (0.79)% 184.36%
1999 2 15.90% 144,089 1.25% (0.71)% 1.25% (0.71)% 46.16%
1998 60.80 % 145,662 1.22% (0.79)% 1.22% (0.79)% 46.56%
1997 (1.77)% 119,971 1.23% (0.47)% 1.23% (0.47)% 51.70%
1996 4 50.47 %* 53,759 1.50%* (0.66)%* 2.07%* (1.23)%* 116.75%
-----------------------
PBHG SELECT EQUITY FUND
-----------------------
PBHG CLASS
2000 2 240.82% $1,691,298 1.18% (0.68)% 1.18% (0.68)% 200.56%
1999 2 7.37% 235,904 1.34% (0.90)% 1.34% (0.90)% 56.59%
1998 51.79 % 336,076 1.35% (1.15)% 1.35% (1.15)% 72.16%
1997 (6.94)% 372,486 1.26% (0.76)% 1.26% (0.76)% 71.70%
1996 4 77.75 %* 202,796 1.50%* (0.74)%* 1.73%* (0.97)%* 206.22%
</TABLE>
--------------------------------------------------------------------------------
73
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Realized and Net
Asset Net Unrealized Distributions Distributions Asset
Value Investment Gains or from Net from Value
Beginning Income (Losses) Investment Capital End
of Period (Loss) on Securities Income Gains of Period
------------------------------------------------------------------------------------------
---------------------
PBHG CORE GROWTH FUND
---------------------
<S> <C> <C> <C> <C> <C> <C>
PBHG Class
2000 2 $14.06 $(0.20) $16.39 -- -- $30.25
1999 2 13.53 (0.14) 0.67 -- -- 14.06
1998 10.34 (0.33) 3.52 -- -- 13.53
1997 11.82 (0.09) (1.39) -- -- 10.34
1996 3 10.00 -- 1.82 -- -- 11.82
-----------------
PBHG LIMITED FUND
-----------------
PBHG CLASS
2000 2 $11.95 $(0.12) $15.20 -- $(3.92) $23.11
1999 2 14.08 (0.10) (1.45) -- (0.58) 11.95
1998 9.05 (0.10) 5.53 -- (0.40) 14.08
1997 6 10.00 0.02 (0.93) $(0.03) (0.01) 9.05
----------------------
PBHG LARGE CAP 20 FUND
----------------------
PBHG CLASS
2000 2 $24.10 $(0.25) $26.26 -- $(5.77) $44.34
1999 2 15.98 (0.12) 8.46 -- (0.22) 24.10
1998 9.25 (0.07) 6.80 -- -- 15.98
1997 7 10.00 (0.01) (0.73) $(0.01) -- 9.25
---------------------------
PBHG NEW OPPORTUNITIES FUND
---------------------------
PBHG CLASS
2000 2 $16.47 $(0.71) $85.60 -- $(3.17) $98.19
1999 10 13.52 (0.01) 2.96 -- -- 16.47
-------------------------
PBHG LARGE CAP VALUE FUND
-------------------------
PBHG CLASS
2000 $13.85 $0.12 $1.78 $(0.08) $(3.70) $11.97
1999 13.01 0.08 2.45 (0.10) (1.59) 13.85
1998 10.11 0.02 3.84 (0.06) (0.90) 13.01
1997 8 10.00 0.02 0.09 -- -- 10.11
-----------------------
PBHG MID-CAP VALUE FUND
-----------------------
PBHG CLASS
2000 2 $15.09 $(0.02) $5.03 -- $(6.28) $13.82
1999 15.30 -- 0.92 -- (1.13) 15.09
1998 9 10.00 (0.01) 6.00 -- (0.69) 15.30
-------------------------
PBHG SMALL CAP VALUE FUND
-------------------------
PBHG CLASS
2000 2 $11.38 $(0.08) $7.45 -- -- $18.75
1999 2 15.38 (0.09) (3.06) -- $(0.85) 11.38
1998 9 10.00 (0.03) 6.15 -- (0.74) 15.38
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
Ratio
Ratio of Net
of Net Ratio Investment
Net Investment of Expenses Income (Loss)
Assets Ratio Income to Average to Average
End of Expenses (Loss) Net Assets Net Assets Portfolio
Total of Period to Average to Average (Excluding (Excluding Turnover
Return (000) Net Assets Net Assets Waivers) Waivers) Rate
--------------------------------------------------------------------------------------------
---------------------
PBHG CORE GROWTH FUND
---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PBHG Class
2000 2 115.15% $166,099 1.33% (1.02)% 1.33% (1.02)% 312.32%
1999 2 3.92% 86,485 1.45% (1.16)% 1.45% (1.16)% 120.93%
1998 30.85 % 165,510 1.35% (1.07)% 1.35% (1.07)% 72.78%
1997 (12.52)% 283,995 1.36% (0.77)% 1.36% (0.77)% 46.75%
1996 3 18.20 %+ 31,092 1.50%* (0.18)%* 2.92%* (1.60)%* 17.00%
-----------------
PBHG LIMITED FUND
-----------------
PBHG CLASS
2000 2 137.27% $155,130 1.32% (0.76)% 1.32% (0.76)% 107.78%
1999 2 (11.01)% 108,011 1.40% (0.81)% 1.40% (0.81)% 111.07%
1998 60.78 % 178,168 1.40% (0.72)% 1.40% (0.72)% 81.36%
1997 6 (9.15)%+ 137,520 1.42%* 0.33%* 1.42%* 0.33%* 75.46%
----------------------
PBHG LARGE CAP 20 FUND
----------------------
PBHG CLASS
2000 2 117.88% $1,083,460 1.23% (0.82)% 1.23% (0.82)% 147.35%
1999 2 52.52% 603,077 1.27% (0.64)% 1.27% (0.64)% 76.41%
1998 72.76% 192,631 1.41% (0.79)% 1.41% (0.79)% 98.27%
1997 7 (7.40)%+ 69,819 1.50%* 0.17 %* 1.50%* 0.17 %* 43.98%
---------------------------
PBHG NEW OPPORTUNITIES FUND
---------------------------
PBHG CLASS
2000 2 529.94% $355,600 1.34% (1.15)% 1.34% (1.15)% 668.31%
1999 10 21.82%+ 16,742 1.50%* (0.80)%* 1.59%* (0.89)%* 109.43%
-------------------------
PBHG LARGE CAP VALUE FUND
-------------------------
PBHG CLASS
2000 14.25% $32,922 1.11% 0.71% 1.11% 0.71% 1018.03%
1999 20.29% 44,922 1.01% 0.59% 1.01% 0.59% 568.20%
1998 39.47% 76,476 1.17% 0.98% 1.17% 0.98% 403.59%
1997 8 1.10%+ 26,262 1.50%* 1.61%* 1.74%* 1.37%* 0.00%
-----------------------
PBHG MID-CAP VALUE FUND
-----------------------
PBHG CLASS
2000 2 42.21% $60,690 1.44% (0.15)% 1.44% (0.15)% 742.57%
1999 8.35% 56,981 1.33% 0.01% 1.33% 0.01% 732.73%
1998 9 61.06%+ 54,173 1.47%* (0.17)%* 1.47%* (0.17)%* 399.96%
-------------------------
PBHG SMALL CAP VALUE FUND
-------------------------
PBHG CLASS
2000 2 64.76% $92,634 1.50% (0.56)% 1.58% (0.64)% 352.85%
1999 2 (20.93)% 69,787 1.48% (0.71)% 1.48% (0.71)% 273.87%
1998 9 62.27%+ 125,834 1.49%* (0.52)%* 1.49%* (0.52)%* 263.04%
</TABLE>
75
<PAGE>
FINANCIAL HIGHLIGHTS (CONCLUDED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Realized and Net
Asset Net Unrealized Distributions Distributions Asset
Value Investment Gains or from Net from Value
Beginning Income (Losses) Investment Capital End
of Period (Loss) on Securities Income Gains of Period
------------------------------------------------------------------------------------------
-----------------------
PBHG FOCUSED VALUE FUND
-----------------------
<S> <C> <C> <C> <C> <C> <C>
PBHG CLASS
2000 2 $10.46 $(0.01) $8.93 -- $(0.87) $18.51
1999 10 10.32 -- 0.14 -- -- 10.46
-----------------------
PBHG INTERNATIONAL FUND
-----------------------
2000 2 $11.60 $(0.08) $2.30 -- $(0.88) $12.94
1999 11 12.04 (0.14) 0.29 $(0.17) (0.42) 11.60
1998 11.26 (0.03) 1.83 -- (1.02) 12.04
1997 10.55 -- 0.71 -- -- 11.26
1996 9.13 (0.04) 1.46 -- -- 10.55
-----------------------
PBHG CASH RESERVES FUND
-----------------------
PBHG CLASS
2000 $1.00 $0.05 -- $(0.05) -- $1.00
1999 1.00 0.05 -- (0.05) -- 1.00
1998 1.00 0.05 -- (0.05) -- 1.00
1997 1.00 0.05 -- (0.05) -- 1.00
1996 4 1.00 0.05 -- (0.05) -- 1.00
-------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
-------------------------------------
PBHG CLASS
2000 2 $27.59 $(0.54) $62.84 -- $(4.87) $85.02
1999 2 19.27 (0.19) 8.80 -- (0.29) 27.59
1998 14.63 (0.23) 5.72 -- (0.85) 19.27
1997 12.48 (0.05) 2.55 -- (0.35) 14.63
1996 5 10.00 (0.02) 2.50 -- -- 12.48
---------------------------------
PBHG STRATEGIC SMALL COMPANY FUND
---------------------------------
PBHG CLASS
2000 2 $10.54 $(0.13) $10.18 -- $(1.25) $19.34
1999 2 12.89 (0.11) (1.78) -- $(0.46) 10.54
1998 8.86 (0.11) 5.01 -- (0.87) 12.89
1997 8 10.00 -- (1.14) -- -- 8.86
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
Ratio
Ratio of Net
of Net Ratio Investment
Net Investment of Expenses Income (Loss)
Assets Ratio Income to Average to Average
End of Expenses (Loss) Net Assets Net Assets Portfolio
Total of Period to Average to Average (Excluding (Excluding Turnover
Return (000) Net Assets Net Assets Waivers) Waivers) Rate
--------------------------------------------------------------------------------------------
-----------------------
PBHG FOCUSED VALUE FUND
-----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PBHG CLASS
2000 2 89.17% $22,556 1.50% (0.10)% 1.55% (0.15)% 853.36%
1999 10 1.36%+ 3,658 1.50%* 0.09%* 2.67%* (1.08)%* 173.09%
-----------------------
PBHG INTERNATIONAL FUND
-----------------------
2000 2 19.29% $11,382 2.00% (0.62)% 2.00% (0.62)% 90.17%
1999 11 1.42% 12,220 1.97% (0.35)% 1.97% (0.35)% 59.74%
1998 17.46% 20,905 2.00% (0.13)% 2.00% (0.13)% 85.94%
1997 6.73% 21,265 2.22% (0.32)% 2.22% (0.32)% 74.82%
1996 15.55% 11,243 2.25% (0.22)% 3.03% (1.00)% 140.26%
-----------------------
PBHG CASH RESERVES FUND
-----------------------
PBHG CLASS
2000 4.81% $579,458 0.69% 4.78% 0.69% 4.78% n/a
1999 4.84% 144,239 0.70% 4.72% 0.70% 4.72% n/a
1998 5.13% 117,574 0.68% 5.00% 0.68% 5.00% n/a
1997 4.89% 341,576 0.68% 4.79% 0.68% 4.79% n/a
1996 4 5.24%* 99,001 0.70%* 5.05%* 0.88%* 4.87%* n/a
-------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
-------------------------------------
PBHG CLASS
2000 2 233.99% $3,843,946 1.19% (0.96)% 1.19% (0.96)% 362.38%
1999 2 45.33% 536,405 1.34% (0.96)% 1.34% (0.96)% 276.07%
1998 38.29% 495,697 1.30% (0.91)% 1.30% (0.91)% 259.89%
1997 19.59% 493,156 1.33% (0.59)% 1.33% (0.59)% 289.91%
1996 5 24.82%+ 61,772 1.50%* (0.50)%* 2.00%* (1.00)%* 125.99%
---------------------------------
PBHG STRATEGIC SMALL COMPANY FUND
---------------------------------
PBHG CLASS
2000 2 99.74% $75,225 1.50% (0.93)% 1.55% (0.98)% 240.55%
1999 2 (14.52)% 48,029 1.50% (0.97)% 1.54% (1.01)% 140.89%
1998 56.54 % 111,983 1.45% (0.92)% 1.45% (0.92)% 215.46%
1997 8 (11.40)%+ 61,382 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.
77
<PAGE>
FOR MORE INFORMATION
--------------------------------------------------------------------------------
[LOGO OMITTED]
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 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>
APPENDIX III
THE PBHG FUNDS, INC.
FUNDAMENTAL INVESTMENT LIMITATION CHART
PBHG Global Technology & communications Fund
The foregoing Fund may not:
<TABLE>
<CAPTION>
CURRENT PROPOSED RATIONALE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Make loans, except that each Fund, The Fund may not make personal * Must be fundamental
in accordance with that Fund's loans or loans of its assets to * Standardize PBHG Funds policy
investment objectives and policies, persons who control or are under * Broaden circumstances under which Fund
may (i) purchase or hold debt common control with the Fund, could make loans
instruments, and (ii) enter into except to the extent permitted by * Clarify debt instruments not considered
repurchase agreements. In addition, the 1940 Act, Laws, Interpretations loans
the PBHG Limited Fund, the PBHG and Exemptions. This restriction
Large Cap 20 Fund, the PBHG Large does not prevent the Fund from,
Cap Value Fund, the PBHG Mid-Cap among other things, purchasing debt
Value Fund, the PBHG Small Cap obligations, entering into
Value Fund, the PBHG International repurchase agreements, loaning its
Fund, PBHG Strategic Small Company assets to broker-dealers or
Fund and the PBHG Global Technology institutional investors or
& Communications Fund may each lend investing in loans, including
its Fund securities in an amount assignments and participation
not exceeding one-third the value interests.
of its total assets.
------------------------------------------------------------------------------------------------------------------------------------
2 Act as an underwriter of securities The Fund may not underwrite the * Must be fundamental
of other issuers except as it may securities of other issuers. This * Expand types of permissable transactions
be deemed an underwriter under the restriction does not prevent the * Standaradize PBHG Funds policy
1933 Act in connection with the Fund from engaging in transactions
purchase and sale of Fund involving the acquisition,
securities. disposition or resale of its Fund
securities, regardless of whether
the Fund may be considered to be an
underwriter under the Securities
Act of 1933.
------------------------------------------------------------------------------------------------------------------------------------
3 Purchase or sell commodities or The Fund may not purchase or sell * Must be fundamental
commodity contracts, except that a physical commodities unless * Standardize PBHG Funds policy
Fund, in accordance with its acquired as a result of ownership * Maximum investment flexibility
objectives and policies, may: (i) of securities or other instruments.
invest in readily marketable This restriction does not prevent
securities of issuers which invest the Fund from engaging in
or engage in such activities; and transactions involving futures
(ii) enter into futures contracts contracts and options thereon or
and options thereon. investing in securities that are
secured by physical commodities.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 5
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED RATIONALE
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<S> <C> <C>
4 Purchase or sell real estate or The Fund may not purchase or sell * Must be fundamental
real estate partnership interests, real estate unless acquired as a * Standardize PBHG Funds policy
except that this limitation shall result of ownership of securities * Ability to hold real estate
not prevent a Fund from investing or other instruments. This acquired as a result of other ownership
directly or indirectly in readily restriction does not prevent the
marketable securities of issuers Fund from investing in issuers that
which can invest in real estate, invest, deal or otherwise engage in
institutions that issue mortgages, transactions in real estate or
or real estate investment trusts interests therein, or investing in
that deal with real estate or securites that are secured by real
interests therein. estate or interests therein.
------------------------------------------------------------------------------------------------------------------------------------
5 Issue senior securities (as defined The Fund may not borrow money or * Must be fundamental
in the 1940 Act), except as issue senior securities, except as * Standardize PBHG Funds policy
permitted in connection with the permitted by the 1940 Act Laws, * Maximum flexibility under current and
Fund's policies on borrowing and Interpretations and Exemptions. future law
pledging, or as permitted by rule,
regulation or order of the SEC.
------------------------------------------------------------------------------------------------------------------------------------
6 Purchase more than 10% of the The Fund is a "diversified company" * Must be fundamental
voting securities of any one issuer as defined in the 1940 Act. This * Restated to give greater flexibility
or purchase securities of any one means that the Fund will not to respond to future law, regulations,
issuer if, at the time of purchase, purchase the securities of any interpretations, orders, exemptions
more than 5% of its total assets issuer if, as a result, the Fund or similar relief
will be invested in that issuer, would fail to be a diversified
except with respect to the Fund, up company within the meaning of the
to 25% of its assets may be 1940 Act Laws, Interpretations and
invested without regard to these Exemptions. This limitation does
limits. This limitation does not not apply to PBHG Large Cap 20
apply to PBHG Large Cap 20 Fund, Fund, PBHG Technology &
PBHG Technology & Communications Communications Fund, PBHG Global
Fund, PBHG Global Technology & Technology & Communications Fund or
Communications Fund or PBHG Cash PBHG Cash Reserves Fund. This
Reserves Fund. In addition, for restriction does not prevent the
purposes of this investment Fund from purchasing the securities
limitation, the term "issuer" does of other investment companies to
not include obligations issued or the extent permitted by 1940 Act
guaranteed by the U.S. Government, Laws, Interpretations and
its agencies or instrumentalities Exemptions.
and repurchase agreements
collaterlaized by such obligations.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 5
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED RATIONALE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7 Invest 25% or more of its total The Fund will not make investments * Must be fundamental
assets at the time of purchase in that will result in the * Standardize PBHG Funds policy
securities of one or more issuers concentration (as that term may be
(other than obligations issued or defined or interpreted by the 1940
guaranteed by the U.S. Government Act Laws, Interpretations and
or its agencies and Exemptions) of its investments in
instrumentalities and repurchase the securities of issuers primarily
agreements collateralized by such engaged in the same industry. This
obligations) whose principal restriction does not limit the
business activities are in the same Fund's investments in (i)
industry. For purposes of this obligations issued or guaranteed by
limitation, supranational the U.S. Government, its agencies
organizations are deemed to be or instrumentalities, (ii)
issuers conducting their principal tax-exempt obligations issued by
business activities in the same governments or policital
industry; state and municipal subdivisions of governments or
governments and their agencies and (iii) repurchase agreements
authorities are not deemed to be collateralized by such obligations
industries; utility companies will and does not limit PBHG Cash
be divided according to their Reserves Fund's investment in bank
services, for example, gas obligations. In complying with this
distribution, gas transmission, restriction, the Fund will not
electric and telephone will each be consider a bank-issued guaranty or
considered a separate industry; and financial guaranty insurance as a
financial service companies will be separate security. This limitation
classified according to the end does not apply to PBHG Technology &
users of their services (e.g. Communications Fund and PBHG Global
automobile finance, bank finance Technology & Communications Fund.
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.
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</TABLE>
Page 3 of 5
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED RATIONALE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
8 Borrow money except for temporary The Fund may not borrow money or * Must be fundamental
or emergency purposes and then only issue senior securities, except as * Standardize PBHG Funds policy
in an amount not exceeding 10% of permitted by the 1940 Act Laws, * Maximum flexibility under current and
the value of total assets (except Interpretations and Exemptions. future law
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 Fund securities to
accommodate substantial redemption
requests if they should occur and
is not for investment purposes. All
borrowings in excess of 5% of the
Fund's total assets will be repaid
before making additional
investments.
------------------------------------------------------------------------------------------------------------------------------------
9 Invest in companies for the purpose None * Not required
of exercising control.
------------------------------------------------------------------------------------------------------------------------------------
10 Pledge, mortgage or hypothecate None * Not required
assets, except: (i) to secure
temporary borrowings permitted by
each Fund'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, None * Not required
maintain a short position or
purchase securities on margin,
except that each Fund 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.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 4 of 5
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED RATIONALE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
12 Purchase securities of other The Fund may, notwithstanding any * Standardize PBHG Funds policy
investment companies except as other fundamental investment policy * Maximim investment flexibility
permitted by the 1940 Act and the or restriction, invest all of its
rules and regulations thereunder. assets in the securities of a
single open-end investment company
with substantially the same
investment objective, policies and
restrictions as the Fund.
------------------------------------------------------------------------------------------------------------------------------------
13 Invest in interests in oil, gas or None * Not required - NSMIA
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.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 5 of 5
<PAGE>
THE PBHG FUNDS, INC.
NON-FUNDAMENTAL INVESTMENT LIMITATION CHART
PBHG Global Technology & Communications Fund
The foregoing Fund may not:
<TABLE>
<CAPTION>
CURRENT PROPOSED RATIONALE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Invest in illiquid securities in an The PBHG Cash Reserves Fund may not * Clarify in plain English
amount exceeding, in the aggregate, invest more than 10% of its net
15% of its net assets (except not assets in illiquid securities. Each
exceeding 10% of the value of net other Fund may not invest more than
assets with respect to the PBHG 15% of its net assets in illiquid
Cash Reserves Fund). This securities. This limitation does
limitation does not include any not include any Rule 144A
Rule 144A restricted security that restricted security that has been
has been determined by, or pursuant determined by, or pursuant to
to procedures established by, the procedures established by, the
Board of Directors, based on Board of Directors, based on
trading markets for such security, trading markets for such security,
to be liquid. to be liquid.
------------------------------------------------------------------------------------------------------------------------------------
2 Purchase puts, calls, straddles, None * Standardize PBHG Funds policy
spreads, and any combination * Maximum investment flexibility
thereof, except to the extent
permitted by the 1940 Act or the
rules or regulations thereunder.
------------------------------------------------------------------------------------------------------------------------------------
3 None In complying with the fundamental * Create internal operating guidelines
restriction regarding issuer for corresponding fundamental
diversification, the Fund will not, investment limitation
with respect to 75% of its total
assets, purchase securities of any
issuer (other than securities
issued or guaranteed by the U.S.
Government or any of its agencies
or instrumentalities), if, as a
result, (i) more than 5% of the
Fund's total assets would be
invested in the securities of that
issuer, or (ii) the Fund would hold
more than 10% of the outstanding
voting securities of that issuer.
This limitation does not apply to
PBHG Large Cap 20 Fund, PBHG
Technology & Communications Fund,
PBHG Global Technology &
Communications Fund or PBHG Cash
Reserves Fund. The Fund may (i)
purchase securities of other
investment companies as permitted
by Section 12 (d)(1) of the 1940
Act and (ii) invest its assets in
securities of other money market
funds and lend money to other
investment companies and their
series portolios that have Pilgrim
Baxter or an affiliate of Pilgrim
Baxter as an investment advisor (a
"Pilgrim Baxter Advised Fund"),
subject to the terms and conditions
of any exemptive orders issued by
the SEC.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 of 4
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED RATIONALE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
4 None In complying with the fundamental * Create internal operating guidelines
restriction with regarding for corresponding fundamental
borrowing money and issuing senior investment limitation
securites, the Fund may not borrow
money in an amount not exceedinmg
33 1/3% of its total assets
(including the amount borrowed)
less liabilities (other than
borrowings). the Fund may borrow
from banks, broker-dealers or a
Pilgrim Baxter Advised Fund. The
Fund may not borrow for leveraging,
but may borrow for temporary or
emergency purposes, in anticipation
of or in response to adverse market
conditions, or for cash management
purposes.
------------------------------------------------------------------------------------------------------------------------------------
5 None In complying with the fundamental * Create internal operating guidelines
restriction regarding industry for corresponding fundamental
concentration, the Fund may invest investment limitation
up to 25% of its total assets in
the securities of issuers whose
principal business activities are
in the same industry. For purposes
of this limitation supranatural
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). This
limitation does not apply to PBHG
Technology & Communications Fund or
PBHG Global Technology &
Communications Fund.
------------------------------------------------------------------------------------------------------------------------------------
6 None In complying with the fundamental * Create internal operating guidelines
restriction with regard to making for corresponding fundamental
loans, the Fund may lend up to 33 investment limitation
1/3% of its total assets and may
lend money to another Pilgrim
Baxter Advised Fund, on such terms
and conditions as the SEC may
require in an exemptive order.
------------------------------------------------------------------------------------------------------------------------------------
7 Invest in restricted securities The Fund may not invest more than * Standardize PBHG Funds policy
except as follows: Emerging Growth, 15% of its total assets in
Large Cap Growth, Select Equity, restricted securities.
Core Growth, Limited, Large Cap 20,
International Cash Reserves,
Technology & Communications, Global
Technology & Communications Funds:
10% of total assets and Large Cap
Value, Mid-Cap Value, Small Cap
Value and Strategic Small Company
Funds: 15% of total assets.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2 of 4
<PAGE>
<TABLE>
<CAPTION>
CURRENT PROPOSED RATIONALE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
8 Invest in when-issued and None. * Standardize PBHG Funds policy
delayed-delivery securities. This * Maximum investment flexibility
limitation does not apply to Small
Cap Value, Mid Cap Value and Large
Cap Value Funds.
------------------------------------------------------------------------------------------------------------------------------------
9 Invest more than 10% of net assets None. * Maximum investment flexibility
in options.
------------------------------------------------------------------------------------------------------------------------------------
10 Invest in futures contracts, the None. * Maximum investment flexibility
total market value of which may not
exceed 50% (20% for the
International Fund) of the Fund's
net assets.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3 of 4
<PAGE>
PBHG INTERNATIONAL FUND
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND
each a series of shares of
THE PBHG FUNDS, INC.
P.O. Box 219534
Kansas City, Missouri 64121-9534
Toll Free: (800) 433-0005
STATEMENT OF ADDITIONAL INFORMATION
Special Meeting of Shareholders of PBHG International Fund
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement and Prospectus dated
December 6, 2000 of The PBHG Funds, Inc. (the "Fund") for use in connection
with the Special Meeting of Shareholders of PBHG International Fund
("International Fund") to be held on January 25, 2001 Copies of the Combined
Proxy Statement and Prospectus may be obtained at no charge by writing The Fund
at the address shown above or by calling 1-800-433-0005.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined Proxy
Statement and Prospectus.
A Statement of Additional Information for the Fund dated July 31, 2000 has
been filed with the Securities and Exchange Commission and is attached hereto as
Appendix I which is incorporated herein by this reference.
The date of this Statement of Additional Information is December 6, 2000.
TABLE OF CONTENTS
THE FUND .................................................................... 2
DESCRIPTION OF PERMITTED INVESTMENTS......................................... 2
DIRECTORS AND OFFICERS OF THE FUND........................................... 2
ADVISORY AND MANAGEMENT-RELATED SERVICES AGREEMENTS AND PLANS OF
DISTRIBUTION............................................................. 2
PORTFOLIO TRANSACTIONS....................................................... 2
DESCRIPTION OF SHARES........................................................ 2
DETERMINATION OF NET ASSET VALUE............................................. 2
TAXES ....................................................................... 2
PERFORMANCE ADVERTISING...................................................... 2
FINANCIAL INFORMATION........................................................ 3
Appendix I - The PBHG Funds, Inc. Statement of Additional Information dated
July 31, 2000
Appendix II - Annual Report of The PBHG Funds, Inc. Dated March 31, 2000
Appendix III - Semi- Annual Report of The PBHG Funds, Inc. Dated
September 30, 2000
<PAGE>
THE FUND
This Statement of Additional Information relates to The PBHG Funds, Inc. (the
"Fund"), PBHG International Fund ("International Fund") and PBHG Global
Technology & Communication Fund ("GTC Fund"). The Fund is registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"). International Fund and GTC Fund are each separate
series of shares of capital stock of the Fund. For further information
concerning the history of the Fund see the heading "The Fund" in the Statement
of Additional Information attached hereto as Appendix I.
DESCRIPTION OF PERMITTED INVESTMENTS
For a discussion of the fundamental and nonfundamental investment policies of
GTC Fund and International Fund adopted by the Fund's Board of Directors, see
heading "Description of Permitted Investments" and "Investment Limitations" in
the Fund's Statement of Additional Information attached hereto as Appendix I.
DIRECTORS AND OFFICERS OF THE FUND
For a disclosure of the names and a brief occupational biography of each of the
Fund's officers and directors, identifying those who are interested persons of
the Fund as well as stating their aggregate renumeration, see heading "Directors
and Officers of the Fund" in the Fund's Statement of Additional Information
attached hereto as Appendix I.
ADVISORY AND MANAGEMENT-RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION
For a discussion of the Fund's advisory and management-related services
agreements and plans of distribution, see headings "The Adviser," "The
Sub-Advisers," "The Distributor," "The Administrator and Sub-Administrator" and
"Other Service Providers" in the Fund's Statement of Additional Information
attached hereto as Appendix I.
PORTFOLIO TRANSACTIONS
For a discussion of the Fund's brokerage policy, see heading "Portfolio
Transactions" in the Fund's Statement of Additional Information attached hereto
as Appendix I.
DESCRIPTION OF SHARES
For a discussion of the Fund's authorized securities and the characteristics of
the Fund's shares of stock, and for a description of the purchase and redemption
procedures for the Fund's shares, see headings "Description of Shares" and
"Purchases and Redemptions of Shares" in the Fund's Statement of Additional
Information attached hereto as Appendix I.
DETERMINATION OF NET ASSET VALUE
For a discussion of the Fund's valuation and pricing procedures see heading
"Determination of Net Asset Value" in the Fund's Statement of Additional
Information attached hereto as Appendix I.
TAXES
For a discussion of any tax information relating to ownership of the Fund's
shares, see heading "Taxes" in the Fund's Statement of Additional Information
attached hereto as Appendix I.
PERFORMANCE ADVERTISING
For a description and quotation of certain performance data used by the Fund,
see heading "Performance Advertising" in the Fund's Statement of Additional
Information attached hereto as Appendix I.
FINANCIAL INFORMATION
S-2
<PAGE>
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, which is attatched
to this Statement of Additional Information as Appendix II . 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.The Unaudited Interim Financial Statements for the
Six Month Period Ended September 30, 2000, are set forth in the Fund's Semi -
Annual Report to shareholders which is attatched to this Statement of Additional
Information as Appendix III and is incorporated by reference herein.
<PAGE>
APPENDIX I
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......................................... 24
5% AND 25% SHAREHOLDERS.................................................... 26
THE ADVISER................................................................ 33
THE SUB-ADVISERS........................................................... 36
THE DISTRIBUTOR............................................................ 38
THE ADMINISTRATOR AND SUB-ADMINISTRATOR.................................... 39
OTHER SERVICE PROVIDERS.................................................... 41
PORTFOLIO TRANSACTIONS..................................................... 42
DESCRIPTION OF SHARES...................................................... 45
PURCHASES AND REDEMPTIONS OF SHARES........................................ 45
DETERMINATION OF NET ASSET VALUE........................................... 53
TAXES...................................................................... 55
PERFORMANCE ADVERTISING.................................................... 60
COMPUTATION OF YIELD ...................................................... 61
CALCULATION OF TOTAL RETURN................................................ 62
FINANCIAL STATEMENTS....................................................... 64
2
<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 Management" 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
3
<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
4
<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 addition, the total market value of each funds futures contracts may
not exceed 50% of the Fund's net assets (except not exceeding 20% with respect
to the PBHG International Fund). 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.
The International Fund generally will not hedge its currency exposure because
currency considerations are an integral part of Murray Johnstone's investment
process. However, the Fund may use forward currency contracts to hedge exchange
rates, a particular security or position.
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. Each Fund may not
invest more than 10% of its net assets in options (except the Cash Reserves
Fund, which may not invest in options).The 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,
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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 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
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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.
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
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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. 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
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or completely offset losses on the futures contracts. Further, the counterparty
to a futures contract could default.
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 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
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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
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
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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.
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.
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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 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
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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. 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
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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 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
14
<PAGE>
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 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,
15
<PAGE>
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 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.
16
<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.
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.
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
17
<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
18
<PAGE>
estate or interests therein.
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.
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
collateralized 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 futures contracts.
19
<PAGE>
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.
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.
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 that up to 25% of its
assets may be invested without regard to these limits.
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.
The foregoing percentages will apply at the time of each purchase of a security.
21
<PAGE>
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.
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
22
<PAGE>
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.
23
<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.
<TABLE>
<CAPTION>
==========================================================================================================
Position Held
Name , Address, and Age with the Fund Principal Occupation(s) During Past 5 Years
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
John R. Bartholdson, Director Chief Financial Officer and Director,
1255 Drummers Lane, Suite 200, the Triumph Group, Inc. (manufacturing)
Wayne, PA 19087 since 1992.
(55)
----------------------------------------------------------------------------------------------------------
Harold J. Baxter*, Chairman of the Chairman, Chief Executive Officer and
825 Duportail Road, Board and Director Director, the Adviser since 1982. Trustee,
Wayne, PA 19087, the Administrator since May 1996. Chairman,
(53) Chief Executive Officer and Director, Value
Investors, since June 1996. Trustee, PBHG
Fund Distributors since January 1998.
Director, UAM since 1996.
----------------------------------------------------------------------------------------------------------
Jettie M. Edwards, Director Consultant, Syrus Associates since 1986.
76 Seaview Drive, Trustee, Provident Investment Counsel Trust
Santa Barbara, California 93108, (investment company) since 1992. Trustee,
(53) EQ Advisors Trust (investment company) since
1997.
----------------------------------------------------------------------------------------------------------
Albert A. Miller, Director Principal and Treasurer, JK Equipment
7 Jennifer Drive, Exporters since 1995. Senior Vice President,
Holmdel, New Jersey 07733, Cherry & Webb, CWT Specialty Stores since
(65) 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, President President, Chief Investment Officer and
825 Duportail Road, Director, the Adviser since 1982. Trustee,
Wayne, PA 19087, the Administrator since May 1996. President
(59) and Director, Value Investors since June
1996.
==========================================================================================================
Lee T. Cummings Treasurer, Chief Director of Mutual Fund Operations, the
825 Duportail Road, Financial Adviser since 1996. Treasurer, the
Wayne, PA 19087 Officer, Administrator since May 1996. President, the
(36) Controller Distributor since December 1998. Investment
Accounting Officer, Delaware Group of Funds,
1994-1996. Vice President, Fund/Plan
Services, Inc., 1992-1994
----------------------------------------------------------------------------------------------------------
Matthew R. DiClemente Legal Assistant, the Adviser since 1998.Fund
825 Duportail Road, Assistant Accountant, the Adviser, 1996-1998. Fund
Wayne, PA 19087, Secretary Accountant, J.P. Morgan & Co., Inc.,
(30) 1993-1996.
----------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Position Held
Name , Address, and Age with the Fund Principal Occupation(s) During Past 5 Years
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
John M. Zerr Vice-President General Counsel and Secretary, the Adviser
825 Duportail Road, and Secretary since November 1996. General Counsel and
Wayne, PA 19087, Secretary, Value Investors since November
(37) 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 Spahr Andrews & Ingersoll
(law firm), 1987-1995.
----------------------------------------------------------------------------------------------------------
Meghan M. Mahon Vice-President Counsel, the Adviser since April 1998.
825 Duportail Road, and Assistant Assistant Vice President, Assistant Secretary
Wayne, PA 19087, Secretary and Counsel, Delaware Management Company Inc.
(32) 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 Vice President Vice President and Assistant Secretary of the
One Freedom Valley Road and Assistant Sub-Administrator and the Distributor since
Oaks, PA 19456 Secretary 1998. Associate, Paul Weiss, Rifkind, Wharton
(36) & Garrison, 1998. Associate, Baker &
McKenzie, 1995-1998. Associate, Battle Fowler
L.L.P., 1993-1995.
----------------------------------------------------------------------------------------------------------
Timothy D. Barto Vice President Vice President and Assistant Secretary of SEI
One Freedom Valley Road and Assistant Investments Co. and a Vice President and
Oaks, PA 19456 Secretary Assistant Secretary of SEI Investments Mutual
(32) Fund Services and SEI Investments
Distribution Co. since November 1999.
Associate at Dechert Price & Rhoads from 1997
to1999 and an Associate at Richter, Miller &
Finn from 1994 to 1997.
----------------------------------------------------------------------------------------------------------
</TABLE>
Each current Director of the Company received the following compensation during
the fiscal year ended March 31, 2000:
<TABLE>
<CAPTION>
======================================================================================================================
Pension or
Retirement Estimated Total
Aggregate Benefits Annual Compensation
Compensation Accrued as Part Benefits Upon from Company
Name of Person, from of Company Retirement and Company Complex
Position Company Expenses Paid to Directors
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John R. Bartholdson, $48,000 N/A N/A $78,000
Director for services on two
boards
----------------------------------------------------------------------------------------------------------------------
Harold J. Baxter, N/A N/A N/A N/A
Director*
----------------------------------------------------------------------------------------------------------------------
Jettie M. Edwards, $48,000 N/A N/A $78,000
Director for services on two
boards
----------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
Pension or
Retirement Estimated Total
Aggregate Benefits Annual Compensation
Compensation Accrued as Part Benefits Upon from Company
Name of Person, from of Company Retirement and Company Complex
Position Company Expenses Paid to Directors
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Albert A. Miller, $48,000 N/A N/A $78,00
Director 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 Plaza, Floor 2
New York, NY 10004-2413
26
<PAGE>
PBHG Cash Reserves Fund - PBHG Class
Donaldson Lufkin & Jenrette 7.44%
Transfer Department 5th Floor
P.O. Box 2052
Jersey 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 & Company 5.57%
088-22197-28
One Battery Park Plaza
New York, NY 10004-1405
Investec Ernst & Company 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
27
<PAGE>
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
28
<PAGE>
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%
29
<PAGE>
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
30
<PAGE>
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
31
<PAGE>
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%
32
<PAGE>
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 detail 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.
33
<PAGE>
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
34
<PAGE>
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:
<TABLE>
<CAPTION>
=============================================================================================================================
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.
35
<PAGE>
(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.
36
<PAGE>
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 receives 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
37
<PAGE>
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
38
<PAGE>
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, 1999 and 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,
39
<PAGE>
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:
<TABLE>
<CAPTION>
=============================================================================================================================
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>
40
<PAGE>
* 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
41
<PAGE>
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
42
<PAGE>
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:
<TABLE>
<CAPTION>
===============================================================================================
Total Amount of Brokerage
Portfolio 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>
43
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
Percent of Aggregate
Amount of
Transactions
Percent of Total Amount of Involving Payment of
Brokerage Commissions Paid Commissions to the
Portfolio to the Distributor 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 Opportunities(2) * 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 Value(1) 1% 0% 0% 66%
-----------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value(1) 1% 0% 0% 53%
-----------------------------------------------------------------------------------------------------------------
PBHG Focused Value(2) * 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.
44
<PAGE>
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
45
<PAGE>
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 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)
46
<PAGE>
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
47
<PAGE>
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.
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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
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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
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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 $2,000
per year of your earned income in any of the Portfolios. You may also invest up
to $2,000 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.
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(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 $500 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
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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.
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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.
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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.
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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
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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.
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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.
58
<PAGE>
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.
59
<PAGE>
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.
60
<PAGE>
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%.
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<PAGE>
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:
<TABLE>
<CAPTION>
===================================================================================================================
Aggregate
Average Annual Total Return Total Return
-----------------------------------------------------------------------------------
Since Since
Portfolio One Year Five Year Ten Year Inception Inception
-------------------------------------------------------------------------------------------------------------------
<S> <C> <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 Opportunities(13) 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>
62
<PAGE>
* 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
63
<PAGE>
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.
64
<PAGE>
APPENDIX II
THE PBHG FUNDS, INC.
--------------------
[PHOTO OMITTED]
[LOGO OMITTED] ANNUAL REPORT
MARCH 31, 2000
<PAGE>
THE PBHG FUNDS, INC.
PBHG GROWTH FUNDS
PBHG Growth Fund
PBHG Emerging Growth Fund
PBHG Large Cap Growth Fund
PBHG Select Equity Fund
PBHG Core Growth Fund
PBHG Limited Fund
PBHG Large Cap 20 Fund
PBHG New Opportunities Fund
PBHG VALUE FUNDS
PBHG Large Cap Value Fund
PBHG Mid-Cap Value Fund
PBHG Small Cap Value Fund
PBHG Focused Value Fund
PBHG SPECIALTY FUNDS
PBHG International Fund
PBHG Cash Reserves Fund
PBHG Technology & Communications Fund
PBHG Strategic Small Company Fund
1
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<PAGE>
THE PBHG FUNDS, INC.
TABLE OF CONTENTS
-----------------------------------------------
Message to Shareholders 3
PBHG Portfolio Managers 4
Management Discussion and Analysis 7
PBHG GROWTH FUNDS
-----------------------------------------------
PBHG Growth Fund 8
PBHG Emerging Growth Fund 10
PBHG Large Cap Growth Fund 12
PBHG Select Equity Fund 14
PBHG Core Growth Fund 16
PBHG Limited Fund 18
PBHG Large Cap 20 Fund 20
PBHG New Opportunities Fund 22
PBHG VALUE FUNDS
-----------------------------------------------
PBHG Large Cap Value Fund 24
PBHG Mid-Cap Value Fund 26
PBHG Small Cap Value Fund 28
PBHG Focused Value Fund 30
PBHG SPECIALTY FUNDS
-----------------------------------------------
PBHG International Fund 32
PBHG Cash Reserves Fund 34
PBHG Technology & Communications Fund 36
PBHG Strategic Small Company Fund 38
Report of Independent Accountants 40
Statements of Net Assets/Schedules
of Investments 41
Statements of Asset and Liabilities 82
Statements of Operations 84
Statements of Changes in Net Assets 86
Financial Highlights 91
Notes to Financial Statements 94
Notice to Shareholders 98
2
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<PAGE>
THE PBHG FUNDS, INC.
MESSAGE TO SHAREHOLDERS
DEAR FELLOW SHAREHOLDERS:
We are pleased to send you The PBHG Funds, Inc. Annual Report for the fiscal
year ended March 31, 2000. This year was one of great challenge and success for
everyone at PBHG -- from our portfolio managers to our shareholder services
representatives.
PERFORMANCE RESULTS
In a rapidly changing economic and market environment, we believe our
portfolio managers were very successful in identifying and investing in
companies with strong growth potential. For the fiscal year ended March 31,
2000, eleven of our fourteen domestic equity funds outperformed their respective
benchmark and their mutual fund peers as defined and measured by Lipper, Inc. We
encourage you to read the performance information for each of the PBHG Funds
contained in this report. However, it is important to understand that these
outstanding results were generated in an unusually strong market environment for
the type of securities in which we seek to invest and that they are unlikely to
be sustained. We believe that it is equally important for shareholders to be
sure of their personal investment and savings goals and make sure they have
chosen investments that will help them to meet those goals over the long term.
SHAREHOLDER SERVICES
Our extraordinary investment performance results created an extremely
challenging environment for our shareholder service center as the volume of
shareholder calls from both longtime shareholders and those new to PBHG
increased dramatically. While we were successful in anticipating the upward
trends in volumes and increasing staff to meet those trends, our increase was
not sufficient to maintain the standards that you and we expect from PBHG. While
there is no excuse for our service levels being diminished, it was impossible
for us to predict the more than 400% increase in call, transaction and e-mail
volumes that we experienced in the first quarter of 2000. We apologize for any
inconvenience that this situation may have caused you over the last few weeks,
but we are confident that we will once again be meeting your service level
expectations by the time you read this letter.
In addition to increasing our staff, we are in the process of adding
additional features and functionality to PBHG FundLink (our automated telephonic
shareholder service system) and our web site, www.pbhgfunds.com. These features
will make it easier than ever for you to obtain information about your account.
Enclosed with this report is a brochure describing the new functionality of PBHG
FundLink.
The newest version of PBHG FundLink, which is scheduled for release in early
June, will feature voice recognition technology. This means that you will be
able to verbally instruct the system to provide information or perform
transactions rather than pushing the buttons on your phone to navigate through
menu options. The "Your Account" section of our web site will include new
transaction capabilities and be upgraded to make navigation simpler. We are
extremely pleased to provide these services so that you can conduct many of your
routine transactions at a time most convenient for you.
NEW PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND
To expand and enhance the investment choices available to our investors, PBHG
has filed a registration statement with the Securities and Exchange Commission
for a new fund, the PBHG Global Technology & Communications Fund. This fund will
seek to provide investors with long-term growth of capital and invest in common
stocks and American Depositary Receipts of U.S. and non-U.S. companies doing
business in the technology and communications sectors of the world's markets.
This fund is an expansion of the technology sector expertise of Pilgrim Baxter &
Associates, Ltd. into the global equity markets. For more information on this
fund, please call 1-800-433-0051 and speak with a Shareholder Services
Representative.
As always, we thank you for your continued confidence in the PBHG Funds, and
we look forward to serving your investment needs for many years to come.
[PHOTO OMITTED]
Sincerely,
[SIGNATURE OMITTED]
Harold J. Baxter
CHAIRMAN
THE PBHG FUNDS, INC.
3
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<PAGE>
THE PBHG FUNDS, INC.
PBHG PORTFOLIO MANAGERS
Gary L. Pilgrim, CFA
[PHOTO OMITTED]
MANAGER
PBHG Growth Fund
PBHG New Opportunities Fund
--------------------------------------------------------------------------------
Gary L. Pilgrim is co-founder, Director, President and Chief Investment Officer
of Pilgrim Baxter & Associates, Ltd. He is also the President of The PBHG Funds,
Inc. Gary has managed the PBHG Growth Fund since its inception in 1985. In
addition, he is responsible for overseeing the investment management of Pilgrim
Baxter's institutional client portfolios, as well as the PBHG mutual funds
advised by Pilgrim Baxter. He is also responsible for overseeing the firm's
day-to-day securities trading and account control operations.
Throughout his 30-year career, Gary has specialized in growth stock
investing. He began his career at Philadelphia National Bank in the late 1960's,
starting as an equity analyst, later becoming Director of Research and then the
Chief Investment Officer of that bank's Trust Department. Gary holds a B.S.B.A
from the University of Tulsa and an M.B.A. from Drexel University. He is a
Chartered Financial Analyst and a member of the Financial Analysts of
Philadelphia, Inc.
Effective April 24, 2000, Gary Pilgrim also manages the PBHG New
Opportunities Fund.
Jeffrey A. Wrona, CFA
[PHOTO OMITTED]
MANAGER
BHG Technology & Communications Fund
PBHG Core Growth Fund
--------------------------------------------------------------------------------
Jeffrey A. Wrona is the manager of the PBHG Technology & Communications Fund and
PBHG Core Growth Fund. In addition, he manages small- and mid-cap growth
portfolios for clients of Pilgrim Baxter & Associates, Ltd. Prior to joining the
firm, Jeff was with Munder Capital Management, where he was a Senior Portfolio
Manager, as well as co-founder of Munder's mid-cap growth product and the Munder
NetNet Fund. His prior industry experience includes securities analysis at
Drexel Burnham Lambert. Jeff began his business career as a product design
engineer with Ford Motor Company. He holds a bachelor's degree in engineering
from the University of Michigan and an M.B.A. from the University of Michigan.
Jeff is a Chartered Financial Analyst.
Jerome J. Heppelmann, CF
[PHOTO OMITTED]
MANAGER
PBHG Strategic Small Company Fund
PBHG Small Cap Value Fund
PBHG Mid-Cap Value Fund
PBHG Focused Value Fund
CO-MANAGER
PBHG Strategic Small Company Fund
--------------------------------------------------------------------------------
Jerome J. Heppelmann concentrates on our small cap and mid-cap value funds. His
involvement in the management of these equity strategies began in 1997. He
continues to follow the disciplined value-oriented investment process that has
guided the PBHG Strategic Small Company, PBHG Small Cap Value, PBHG Mid-Cap
Value and PBHG Focused Value funds since their inception. Jerome has been with
Pilgrim Baxter & Associates since 1994 and has held a number of roles within the
firm prior to joining the value investment team. Prior to joining Pilgrim Baxter
& Associates, Jerome was a member of the Investment Advisory Group within SEI
Investments servicing investment management clients. Jerome holds a Chartered
Financial Analyst designation and is a member of the Financial Analysts of
Philadelphia, Inc. He holds a Bachelor of Business Administration with a
concentration in Finance from The University of Notre Dame.
4
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<PAGE>
THE PBHG FUNDS, INC.
PBHG PORTFOLIO MANAGERS
Michael S. Sutton, CFA
[PHOTO OMITTED]
MANAGER
PBHG Large Cap 20 Fund
PBHG Large Cap Growth Fund
PBHG Select Equity Fund
--------------------------------------------------------------------------------
Michael S. Sutton is responsible for managing the PBHG Large Cap 20 and PBHG
Large Cap Growth Funds . In addition, Michael manages large cap growth
portfolios and researches large cap growth stocks. Michael joined Pilgrim Baxter
& Associates from Loomis, Sayles & Co., where he worked as a portfolio manager
for seven years. There, he managed institutional mid and large cap growth
portfolios. His prior industry experience includes portfolio management at
Stein, Roe & Farnham. While there, he managed portfolios in a large cap growth
style. Michael received his BS in Finance, MBA and JD from Florida State
University and is a Chartered Financial Analyst and a Chartered Investment
Counselor.
Effective April 24, 2000, Michael Sutton also manages the PBHG Select
Equity Fund.
Erin A. Piner
[PHOTO OMITTED]
MANAGER
PBHG Limited Fund
PBHG Emerging Growth Fund
--------------------------------------------------------------------------------
Erin A. Piner manages the PBHG Limited Fund and the PBHG Emerging Growth Fund
and focuses her research on the smallest companies in the Pilgrim Baxter
universe. In addition, she manages micro-cap growth portfolios for clients of
Pilgrim Baxter & Associates, Ltd. Prior to joining the firm in 1995, Erin worked
in the private client groups of Kidder, Peabody & Co., Inc. and Paine Webber,
Inc. (subsequent to its merger with Kidder, Peabody). Erin holds a B.A. from the
College of the Holy Cross. She is currently a candidate in the Chartered
Financial Analyst program.
Raymond J. McCaffrey, CFA
[PHOTO OMITTED]
MANAGER
PBHG Large Cap Value Fund
--------------------------------------------------------------------------------
Raymond J. McCaffrey is a portfolio manager concentrating on our large cap value
discipline. Ray joined Pilgrim Baxter Value Investors in 1997 from Pitcairn
Trust Company, where he was Vice President, Technology Analyst & Portfolio
Manager responsible for the management of a concentrated equity portfolio and
for security analysis and research of the technology sector. His ten years of
investment experience also include investment analyst positions with Cypress
Capital Management, Independence Capital Management and Fidelity Bank. Ray is an
honors graduate of Villanova University with a BS in Economics and received his
MBA from Carnegie Mellon University with a concentration in Finance and
Investments. He is a Chartered Financial Analyst.
5
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG PORTFOLIO MANAGERS
James M. Smith, CFA
[PHOTO OMITTED]
CO-MANAGER
PBHG Strategic Small Company Fund
--------------------------------------------------------------------------------
James M. Smith is the manager of the Growth portion of the PBHG Strategic Small
Company Fund. In addition, he manages small-cap growth portfolios for clients of
Pilgrim Baxter & Associates, Ltd. Jim possesses over twenty-five years of
investment experience in equity portfolio management and research. Prior to
joining Pilgrim Baxter, he managed a small-cap growth equity mutual fund for
Selected Financial Services. His prior service also includes employment with
Sears Investment Management Company as a Vice President responsible for emerging
growth and venture capital portfolios. Jim is a graduate of Washington & Lee
University, where he was inducted into Phi Beta Kappa. He also holds an M.B.A.
from Northwestern University. Jim is a Chartered Financial Analyst.
Andrew Preston, MSI
[PHOTO OMITTED]
MANAGER
PBHG International Fund
--------------------------------------------------------------------------------
Andrew Preston is the manager of the PBHG International Fund. He served as the
Fund's co-manager from 1995 through 1998. In 1985, he joined Murray Johnstone
International Limited, a registered investment adviser located in Glasgow,
Scotland and the investment sub-advisor for the PBHG International Fund. Murray
Johnstone is a wholly-owned subsidiary of Murray Johnstone Holdings Limited,
which together have over $7 billion in assets under management for institutional
clients worldwide. Murray Johnstone Holdings Limited, with its predecessors, has
been in business since 1907.
Andrew currently serves as Portfolio Manager and Director (since 1993) of
Murray Johnstone International Limited. He has managed investments in the United
Kingdom, the United States, Japan and Southeast Asia. Andrew holds a B.A. from
the University of Melbourne, where he majored in Economics and Far Eastern
Languages (Chinese and Japanese) and Culture.
John C. Keogh
[PHOTO OMITTED]
MANAGER
PBHG Cash Reserves Fund
--------------------------------------------------------------------------------
John Keogh is a Senior Vice President and Partner at Wellington Management
Company, LLP, the investment sub-adviser for the PBHG Cash Reserves Fund.
Wellington is an investment management firm servicing public mutual funds,
employee benefit plans, endowments, foundations, and other institutions and
individuals. As of March 31, 2000, it had discretionary management authority
over $248 billion of assets. Wellington and its predecessor organizations have
provided investment advisory services to investment companies since 1933.
John is responsible for money market and other short duration portfolios at
Wellington, managing approximately $23 billion in this asset class. He is a
member of Wellington's Fixed Income Review Group and he chairs the firm's Short
Duration Bond Strategy Group, which develops guidelines for their portfolio
managers. John has the distinction of managing the first dollar-denominated
money market fund ever offered by a Japanese entity. Prior to joining Wellington
in 1983, he worked in the investment division of Connecticut National Bank. John
holds a B.A. in Economics from Tufts University.
6
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<PAGE>
THE PBHG FUNDS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OMITTED]
DEAR FELLOW SHAREHOLDERS:
Despite significant events that had the potential to cause the markets to
perform poorly, the fiscal year ended March 31, 2000 proved to be more rewarding
to our shareholders than any other in the almost 15 year history of The PBHG
Funds, Inc. Among these "market torpedo" was investor and media preoccupation
with the potential computer problems associated with the change over to the year
2000 or "Y2K Problem." Although this issue was a serious global concern, it was
addressed appropriately by all industries and had no major impact on the ability
of the world's computer systems to function properly. The Federal Reserve's
determination to raise interest rates to maintain steady growth without high
levels of inflation was certainly another significant market event. However, the
United States economy's robust growth, combined with low inflation, low
unemployment and rising corporate earnings, provided an ideal environment for
market advances.
While the market's advance during the fiscal year was led in large part by
technology, smaller capitalization stocks outperformed those of their larger
counterparts after two years of being almost completely ignored by investors.
The Russell 2000, a commonly used measure of the performance of small cap
stocks, returned 37.29% for the year ended March 31, 2000 while the S&P 500
returned 17.94% for the same period. Growth stocks outperformed value stocks
even more significantly with the Russell 2000 Growth Index returning 59.06% in
comparison to the Russell 2000 Value Index return of 13.24% for the year ended
March 31, 2000. No summary of market results for the year ended March 31, 2000
would be complete without mentioning the 86.08% return of the Nasdaq Composite
Index or the returns of more concentrated technology indexes like the Pacific
Stock Exchange High Technology Index-133.68% or the Soundview Technology
Index-170.09%.
The performance of the PBHG Funds for the fiscal year moved in step with these
major market averages. Although nearly all of our 14 domestic equity funds
significantly outperformed their respective benchmarks, our growth funds, which
are naturally drawn to the higher growth companies found in the technology
sector, outperformed our value funds. Our best performing growth funds were
those with the greatest exposure to the technology sector. The PBHG New
Opportunities Fund surged an unprecedented 529.94%, the PBHG Select Equity Fund
returned 240.82% and the PBHG Growth Fund advanced 148.57%. The technology
concentrated PBHG Technology & Communications Fund returned 233.99%. The returns
of the PBHG value funds were in direct correlation to their market
capitalization with the PBHG Small Cap Value Fund leading the group with a
64.76% return followed by the PBHG Mid-Cap Value Fund at 42.21% and the PBHG
Large Cap Value Fund at 14.25%. The more flexible and concentrated PBHG Focused
Value Fund returned 89.17%. While we are extremely proud of all the investment
results mentioned above, we would like to remind you that they were generated in
an unusually strong market environment and will likely not be sustainable.
The market returns of the past year should serve as another reminder that
investors should stay focused on building portfolios and investment programs
that provide diversification and are geared towards meeting their long-term
investment objectives. There were many reports of investors that positioned
their portfolios in cash because of the uncertainty regarding Y2K only to miss
the significant market appreciation that occurred in fourth quarter of 1999.
While a long-term outlook can be difficult to maintain in periods of short-term
market volatility, it has generally been rewarded. We truly believe that "time
in the market" is more important than "timing the market."
Sincerely,
[SIGNATURE OMITTED]
Gary L. Pilgrim
PRESIDENT AND CHIEF INVESTMENT OFFICER
PILGRIM BAXTER & ASSOCIATES, LTD.
7
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<PAGE>
THE PBHG FUNDS, INC.
PBHG GROWTH FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Small to medium-sized growth companies.
STRATEGY: The PBHG Growth Fund seeks capital appreciation by investing primarily
in common stocks of small- and medium-sized U.S. growth companies. These
companies, in the opinion of Pilgrim Baxter, have an outlook for strong growth
in earnings and the potential for significant capital appreciation. The Fund is
aggressive and should be considered a long-term investment. The Fund is
currently making the majority of purchase selections in companies with market
capitalizations in the $1 billion to $10 billion range.
PERFORMANCE
For the year ended March 31, 2000, the Fund's total return was 148.6% versus
the Russell 2000 Growth Index return of 59.1%, the 97.8% average return of all
funds classified as midcap growth by Lipper, Inc. and the Russell Mid-Cap Growth
Index return of 77.2%. In contrast to last year's returns, which were negative
in three of the four quarters, this fiscal year had positive returns in each
quarter, topped by the December quarter. This quarter's return of 64.6% was, by
a wide margin, the largest in the Fund's fifty-seven quarter history. The
environment for most of the year was one of leadership by technology companies
and smaller growth companies. For example, both the PSE Technology Index and the
Soundview Technology Index were up in excess of 130%. By comparison, value
driven and large cap indexes were much less productive as shown by the S&P's
return of 17.9% and the fact that the various Russell value indexes were
contained within a return range of 4% to 13%.
Using the Russell 2000 Growth Index as a reference, the highest returns
during the year came from the areas of business equipment & services and
technology, capital goods and healthcare while consumer durables, non-durables
and services, raw materials and financial services were relatively weak. The
Fund's major overweightings in technology and business equipment and services
delivered the majority of the outperformance. These two sectors together
accounted for about 80% of the portfolio holdings on average during the year. We
had little or no exposure to the weakest performing sectors. For example, we
were very underweighted in financial services which struggled with a less then
accommodating interest rate environment during much of the year. As is the norm
for us, the weightings outcomes were arrived at by anticipating and staying with
those companies showing exceptional earnings results. The year was marked by
relatively few fundamental disappointments and a long list of companies that
exceeded earnings expectations while growing their businesses at very high
rates. While results aren't complete for the last quarter of the fiscal year,
the first three quarters showed portfolio companies growing at rates in the
55-80% range in both sales and earnings. The portfolio companies also
experienced a sharply declining number of negative earnings surprises as the
year progressed. In the final analyses, we believe these great earnings outcomes
more than explain our relatively good investment returns.
PORTFOLIO HIGHLIGHTS
With a portfolio return of 148.6%, there were obviously many great
performing stocks in the portfolio during the year. Stocks the Fund held for the
full fiscal year that produced above average returns included Check Point
Software, Applied Micro Circuits, Micromuse and SDL Inc. New positions that
performed particularly well included Redback Networks, E.Piphany, Ditech
Communications and Copper Mountain Networks. Each of these companies not only
delivered solid fundamental results during the year, but were involved in
technology and/or the internet in some way. A sample of investment bloopers
would include US Liquids, Consolidated Graphics, Navigant Consulting, Lason and
Engineering Animation. The common theme, as always, was earnings targets were
missed, dramatically lowering expectations going forward. As shareholders are
aware, we seldom continue to hold companies that miss their numbers and all of
the above were sold.
As we are writing this review, the market and the technology sector are
coming under intense selling pressure. With the huge outperformance of the
Nasdaq over the last year, driven very much by technology, one could certainly
argue that a setback was overdue. As much as we hate to give back performance,
the only real defensive option for an investor like ourselves is a heavy cash
position. Our strategy, however, is to always own a portfolio of the most
rapidly growing, quality companies and to accept the volatility that comes with
these types of companies and stay fully invested. We have never claimed any
market timing expertise and we don't believe that it is possible to consistently
add value by jumping in and out of the market. Our focus will continue to be on
individual stock selection as we attempt to add value by owning great growth
companies. As we work our way through this period, remember that many investors
sell stocks simply because they are going down. It is our experience that this
type of environment produces great opportunity to acquire high growth rate,
smaller companies much more easily than under normal circumstances. That will be
our strategy in the weeks ahead.
We thank you for your investment in the Fund.
8
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
One Annualized Annualized Annualized Annualized
Year 3 Year 5 Year 10 Year Inception
Return Return Return Return to Date
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Growth Fund
-PBHG Class 2 148.57% 42.49% 29.54% 26.11% 23.23%
----------------------------------------------------------------------------------------
PBHG Growth Fund -
Advisor Class 3 147.98% 42.13% 29.31% 26.04% 23.15%
----------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG
GROWTH FUND, PBHG CLASS, VERSUS
THE RUSSELL 2000 GROWTH INDEX AND
THE LIPPER MID-CAP GROWTH FUNDS
AVERAGE
[LINE GRAPH OMITTED]
PBHG Growth Fund, Russell 2000 Lipper Mid-Cap Growth
PBHG Class Growth Index(4) Funds Average(5)
12/31/85 $10000 $10000 $10000
1/31/86 10250 10228 10239
2/28/86 11080 10983 11002
3/31/86 11510 11482 11619
4/30/86 11640 11763 11819
5/31/86 12580 12194 12503
6/30/86 12680 12233 12698
7/31/86 11700 10918 11508
8/31/86 12380 11153 11989
9/30/86 11240 10245 10930
10/31/86 12193 10766 11593
11/30/86 12676 10718 11714
12/31/86 12394 10358 11411
1/31/87 14728 11691 12966
2/28/87 16509 12823 14219
3/31/87 16871 13175 14406
4/30/87 16911 12767 14215
5/31/87 17046 12677 14385
6/30/87 16508 12991 14441
7/31/87 16604 13302 14910
8/31/87 17548 13687 15591
9/30/87 17524 13413 15323
10/31/87 12898 8994 11048
11/30/87 11840 8399 10298
12/31/87 13832 9273 11677
1/31/88 13566 9454 11703
2/29/88 14814 10334 12599
3/31/88 14660 10888 12816
4/30/88 15011 11151 13050
5/31/88 14576 10783 12792
6/30/88 15684 11579 13731
7/31/88 14969 11363 13282
8/31/88 14099 10950 12745
9/30/88 14744 11260 13242
10/31/88 14449 11073 13040
11/30/88 14119 10642 12723
12/31/88 14780 11162 13310
1/31/89 15792 11638 14124
2/28/89 15553 11667 14047
3/31/89 15244 11991 14441
4/30/89 16467 12588 15394
5/31/89 18020 13191 16285
6/30/89 17004 12767 15748
7/31/89 18401 13365 16874
8/31/89 19177 13749 17464
9/30/89 19896 13907 17662
10/31/89 18852 13146 16863
11/30/89 18698 13263 17121
12/31/89 19109 13413 17284
1/31/90 17501 12029 15761
2/28/90 18537 12485 16278
3/31/90 19377 13057 17006
4/30/90 18948 12669 16637
5/31/90 21627 13799 18439
6/30/90 21823 13881 18557
7/31/90 20716 13250 17900
8/31/90 17984 11332 15641
9/30/90 15483 10259 14308
10/31/90 14787 9683 13879
11/30/90 16614 10574 15129
12/31/90 17266 11078 15897
1/31/91 19518 12118 17389
2/28/91 20782 13510 18834
3/31/91 22659 14462 20053
4/30/91 22284 14290 19754
5/31/91 23271 14980 20846
6/30/91 20664 13961 19506
7/31/91 22323 14593 20879
8/31/91 23449 15238 21848
9/30/91 23074 15467 21887
10/31/91 23745 16126 22728
11/30/91 22724 15285 21880
12/31/91 26179 16748 24871
1/31/92 27174 18064 25543
2/29/92 27447 18257 25893
3/31/92 25782 17207 24487
4/30/92 24862 16208 23341
5/31/92 24688 16171 23415
6/30/92 23544 15140 22357
7/31/92 23420 15615 23191
8/31/92 22649 15014 22623
9/30/92 23644 15433 23200
10/31/92 25061 16068 24199
11/30/92 28298 17568 26089
12/31/92 33612 18050 26971
1/31/93 33003 18274 27465
2/28/93 30891 17281 26147
3/31/93 34668 17726 27208
4/30/93 33868 17164 26501
5/31/93 37613 18193 28221
6/30/93 39822 18236 28593
7/31/93 40302 18418 28793
8/31/93 43375 19300 30437
9/30/93 47344 19938 31679
10/31/93 48145 20514 32009
11/30/93 46320 19684 30869
12/31/93 49312 20461 32212
1/31/94 51258 21006 33049
2/28/94 51777 20913 32977
3/31/94 47592 19629 31011
4/30/94 47884 19659 30931
5/31/94 45192 19218 30328
6/30/94 41591 18397 28841
7/31/94 42888 18659 29502
8/31/94 47657 20028 31620
9/30/94 49052 20112 31804
10/31/94 50577 20326 32621
11/30/94 49571 19504 31417
12/31/94 51654 19964 32055
1/31/95 49122 19557 31699
2/28/95 51849 20461 33100
3/31/95 54219 21058 34305
4/30/95 53667 21375 34442
5/31/95 54089 21655 35080
6/30/95 59998 23147 37900
7/31/95 67238 24951 41326
8/31/95 67141 25258 41917
9/30/95 70712 25779 43263
10/31/95 72660 24510 42103
11/30/95 75550 25591 43737
12/31/95 77660 26158 43964
1/31/96 74186 25942 43815
2/29/96 79673 27125 45830
3/31/96 82140 27662 46761
4/30/96 89056 29786 50529
5/31/96 93114 31314 52621
6/30/96 89348 29278 50353
7/31/96 80128 25704 44971
8/31/96 84218 27606 47831
9/30/96 91621 29027 51265
10/31/96 85192 27776 49450
11/30/96 87465 28548 50593
12/31/96 85290 29105 50390
1/31/97 85225 29832 52038
2/28/97 76102 28031 48713
3/31/97 68375 26052 45293
4/30/97 68667 25751 45257
5/31/97 77141 29621 50810
6/30/97 80420 30626 53167
7/31/97 85972 32195 57330
8/31/97 84153 33161 57485
9/30/97 90192 35808 61866
10/31/97 85160 33656 58222
11/30/97 82465 32855 57226
12/31/97 82433 32874 57472
1/31/98 80290 32436 56604
2/28/98 87757 35299 61602
3/31/98 91653 36780 64701
4/30/98 92010 37006 65251
5/31/98 83569 34317 61467
6/30/98 88212 34668 64232
7/31/98 80095 31773 60526
8/31/98 60388 24439 47798
9/30/98 65063 26917 51311
10/31/98 66524 28320 53512
11/30/98 72530 30517 57996
12/31/98 82920 33279 65402
1/31/99 84705 34776 68228
2/28/99 76167 31595 63165
3/31/99 79576 32720 68067
4/30/99 76069 35610 70987
5/31/99 78764 35666 70795
6/30/99 88764 37545 76742
7/31/99 87530 36384 75913
8/31/99 89803 35023 75906
9/30/99 96978 35699 77598
10/31/99 105776 36614 84241
11/30/99 122561 40485 94459
12/31/99 159576 47621 112208
1/31/2000 159543 47177 110671
2/29/2000 216428 58154 137453
3/31/2000 197803 52041 131419
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Growth Fund-PBHG Class commenced operations on December 19, 1985.
3 The performance shown for the Advisor Class (formerly known as the Trust
Class) prior to its inception on August 16, 1996, is based on the
performance and expenses of the PBHG Class. Subsequent to August 16, 1996,
the performance is that of the Advisor Class and reflects the expenses
specific to the Advisor Class, which will cause its returns to be less than
those of the PBHG Class. The average annual total return of the Advisor
Class from its inception date to March 31, 2000 was 26.96%.
4 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
5 The Lipper Mid-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Mid-Cap Growth
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The average is not intended to imply the
Fund's past or future performance.
SECTOR WEIGHTINGS -- AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 12%
Health Care 7%
Industrial 12%
Services 3%
Technology 55%
Cash 11%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
InfoSpace 3.9%
SDL 3.7%
Gemstar International 3.4%
Flextronics International 2.9%
Peregrine Systems 2.9%
Micromuse 2.8%
Network Solutions 2.8%
Check Point Software 2.6%
Macrovision 2.3%
Research in Motion 2.2%
-------------------------------------------------------
% of Total Portfolio Investments 29.4%
9
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG EMERGING GROWTH FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Domestic emerging growth companies.
STRATEGY: The Fund's strategy is to invest in young, rapidly growing companies
with prospects for continued growth. The Fund will typically target the
following sectors: technology, healthcare, consumer, and service. The Fund will
remain diversified over a large number of securities.
PERFORMANCE
For the year ending March 31, 2000, the PBHG Emerging Growth Fund generated
a return of 101.33%, significantly outperforming its small-cap benchmark, the
Russell 2000 Growth Index, which finished the same period up 59.06%. After
underperforming the Russell 2000 Growth by 990 basis points in fiscal year 1999,
this past year's extraordinary relative outperformance clearly illustrates a
dramatic reversal of fortune for our rapidly growing, high-quality small company
holdings. This divergence in returns demonstrates that while market sentiment
can be erratic, our mission to stay consistently invested in the emerging growth
companies with strong earnings and revenue growth prospects regardless of
short-term swings in market valuation will reward our long-term investors over
time.
Addressing the Emerging Growth Fund's rather lackluster performance in the
last annual report, we wrote the following: "The last year has been another
difficult year for small-cap stocks. With the Dow hitting 10,000 and the
Internet craze creating billions of valuation each week, some may ask why we
remain so staunchly committed to small, rapidly growing companies. We remain
unfazed...we believe that the small-cap sector in general and the PBHG Emerging
Growth Fund in particular will provide the investor with the potential for
explosive returns." This assertion that our fundamentally strong, fast growing
small-cap holdings were perfectly positioned to benefit from a renewed focus on
earnings growth proved correct over the year that has followed. However, recent
and historical market volatility along with the extreme difficulty of accurately
forecasting changes in market sentiment have clearly reinforced our contention
that this aggressive growth Fund provides the best returns to disciplined
investors who maintain a long-term time horizon.
PORTFOLIO HIGHLIGHTS
With relative valuations hovering near all time lows against the backdrop of
strong growth and the wind of a more benevolent environment toward small-cap
stocks at their back, technology stocks provided the performance leadership for
the strong returns of the Emerging Growth Fund over the period ending March 31,
2000. Many of our long-term small-cap holdings that suffered through the abysmal
performance of fiscal year 1999 were well rewarded over the twelve months that
followed.
Among those positions held throughout the fiscal year that were significant
contributors to the Fund's performance were the following: Business Objects, a
provider of business intelligence software was up 570% in the period. Having
been inappropriately stigmatized as an old economy software company that would
die a painful Y2K related death, Business Objects responded with strong
fundamental performance that was rewarded over the last twelve months as
investors began to embrace the small Paris based company as an important
e-commerce enabling technology vendor. Having consistently outpaced the market's
expectations for earnings and revenue growth, Polycom, a manufacturer of
traditional audio and video conferencing products as well as integrated access
devices for new technology based service providers, posted a 322% return in the
period. Peregrine Systems, an enterprise software and service vendor that
enables the management of corporate infrastructure resources from procurement
throughout the entire lifecycle was up 299% in the period. Peregrine provides
another example of an old economy software company whose valuation improved
significantly as investors came to recognize it as a new economy infrastructure
necessity in the business to business Internet commerce arena. Forrester
Research, a provider of market data and insight to technology professionals
continued to benefit from the growth of our transforming digital economy,
posting a 257% return for the period. Advent Software, a maker of software for
the asset management industry was up 175% in the period. It is without accident
that each of these companies is profitable and has maintained a solid, scalable
business model. These profitable high growth companies continue to be the
mainstay of the investment process for the Emerging Growth Fund.
In addition to our long-term holdings, the Fund also had a number of new
positions contribute handsomely to the period's positive returns. Ditech
Communications, a provider of telecommunications equipment, which was originally
purchased in June 1999 as the company was approaching quarterly profitability;
Informatica, a provider of software for data analysis, initially purchased in
April 1999; and Micromuse, a provider of software for telecommunications
management, also purchased in April 1999 each delivered stellar returns to the
Fund. Similar to our aforementioned long-term holdings, we believe each of these
companies is profitable and growing rapidly.
While it is easy to find winners in a year such as the one that has just
passed, we had our fair share of losers in the Fund as well. The healthcare
sector experienced earnings disappointments followed by significant wealth
destruction as the nuclear winter of Y2K significantly affected many companies
in this sector. Healthcare was the only sector that delivered negative returns
in the portfolio, but certain individual companies across all industries such as
Laser Vision Centers, Dave & Busters, Axent Technologies and Consolidated
Graphics also detracted from the Fund's performance.
Looking forward, while many of us expect volatility to continue to be a
defining characteristic of the year ahead, we believe the strong revenue and
earnings growth offered by our portfolio of high-quality, small emerging growth
companies should continue to yield healthy returns over time. Although periods
of extreme market volatility have historically proven to be particularly
difficult for the small-cap asset class, we are optimistic that a renewed focus
on quality will be a key performance driver for the rapidly growing,
fundamentally robust small companies that have always been the hallmark of our
portfolio.
10
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
-------------------------------------------------------------------------------
One Annualized Annualized Annualized
Year 3 Year 5 Year Inception
Return Return Return to Date2
-------------------------------------------------------------------------------
PBHG Emerging Growth Fund 101.33% 29.32% 22.88% 26.34%
-------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG
GROWTH FUND, PBHG CLASS, VERSUS
THE RUSSELL 2000 GROWTH INDEX AND
THE LIPPER MID-CAP GROWTH FUNDS
AVERAGE
[LINE GRAPH OMITTED]
PBHG Emerging Russell 2000 Lipper Small Cap
Growth Fund Growth Index(3) Growth Funds Average(4)
6/30/93 $10000 $10000 $10000
7/31/93 10198 10100 10048
8/31/93 11304 10583 10595
9/30/93 12500 10933 11076
10/31/93 13063 11249 11225
11/30/93 12332 10794 10794
12/31/93 13100 11220 11309
1/31/94 13636 11519 11619
2/28/94 14075 11468 11621
3/31/94 13100 10764 10918
4/30/94 13261 10780 10916
5/31/94 12854 10539 10623
6/30/94 12008 10088 10084
7/31/94 12372 10232 10280
8/31/94 13689 10983 11022
9/30/94 14621 11029 11168
10/31/94 15628 11146 11426
11/30/94 15435 10695 11067
12/31/94 16216 10947 11350
1/31/95 15518 10724 11149
2/28/95 16130 11220 11627
3/31/95 17290 11548 12041
4/30/95 17666 11721 12164
5/31/95 17762 11875 12296
6/30/95 19384 12693 13231
7/31/95 21328 13682 14347
8/31/95 21575 13851 14543
9/30/95 22359 14136 15002
10/31/95 21682 13441 14579
11/30/95 22982 14033 15180
12/31/95 24072 14344 15435
1/31/96 23498 14226 15310
2/29/96 24838 14874 16149
3/31/96 25963 15169 16659
4/30/96 29722 16334 18365
5/31/96 31084 17171 19334
6/30/96 29159 16055 18368
7/31/96 25142 14095 16456
8/31/96 27122 15138 17622
9/30/96 29643 15918 18761
10/31/96 28068 15231 18093
11/30/96 28011 15655 18424
12/31/96 28184 15960 18597
1/31/97 28475 16359 19047
2/28/97 24311 15371 17758
3/31/97 22403 14286 16516
4/30/97 21345 14121 16265
5/31/97 25567 16243 18603
6/30/97 27033 16794 19680
7/31/97 27882 17655 20989
8/31/97 28184 18184 21341
9/30/97 30918 19636 23089
10/31/97 28347 18455 21918
11/30/97 27289 18016 21452
12/31/97 27149 18027 21559
1/31/98 26823 17787 21238
2/28/98 28766 19357 23028
3/31/98 30045 20169 24159
4/30/98 30255 20293 24410
5/31/98 27568 18818 22767
6/30/98 28417 19011 23364
7/31/98 26009 17423 21712
8/31/98 21147 13401 17016
9/30/98 23020 14760 18368
10/31/98 22740 15530 19217
11/30/98 24532 16735 20889
12/31/98 27964 18249 23166
1/31/99 28058 19070 23740
2/28/99 24800 17326 21615
3/31/99 24064 17943 22582
4/30/99 23481 19527 23519
5/31/99 24496 19558 23723
6/30/99 27252 20588 25885
7/31/99 26610 19952 25864
8/31/99 26353 19206 25584
9/30/99 28443 19576 26326
10/31/99 30335 20078 27843
11/30/99 33604 22201 31565
12/31/99 41484 26114 37534
1/31/2000 39861 25870 37122
2/29/2000 53014 31889 46773
3/31/2000 48448 28537 43742
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Emerging Growth Fund commenced operations on June 14, 1993.
3 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
4 The Lipper Small-Cap Growth Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Small-Cap
Growth category. These performance figures are based on the changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The average is not intended
to imply the Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 7%
Health Care 10%
Industrial 9%
Services 8%
Technology 58%
Cash 8%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Peregrine Systems 3.6%
Micromuse 2.7%
Business Objects ADR 2.7%
Advent Software 2.5%
TranSwitch 2.2%
Polycom 2.2%
Micrel 2.1%
Allscripts 2.1%
Ditech Communications 2.0%
Varian Semiconductor Equipment 2.0%
-------------------------------------------------------
% of Total Portfolio Investments 24.2%
11
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<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP GROWTH
PORTFOLIO PROFILE
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Companies, with above $1 billion of market capitalization that, in
Pilgrim Baxter's opinion, have an outlook for strong growth in earnings and
potential for capital appreciation.
STRATEGY: The Fund consists of larger companies with historical and estimated
future growth rates of over 20%. The Fund strives to layer additional strong
investment ideas on top of the 20 "best Large Cap ideas" found in the PBHG Large
Cap 20 Fund to provide a more diversified investment opportunity for
shareholders interested in the large company arena.
In the current environment -- where very large, multinational, economically
sensitive corporations are experiencing slowing growth rates -- this Fund
attempts to isolate and harness the power of consistent, high-growth, large
companies that are less affected by economic cycles.
PERFORMANCE
The PBHG Large Cap Growth Fund returned 98.6% for the fiscal year ended
March 31, 2000, compared to the 17.9% return of its benchmark, the S&P 500
Index. The out performance relative to the benchmark occurred in the last three
fiscal quarters. During this time, investors gravitated toward technology issues
whose revenue and earnings growth rates were accelerating. The underlying
strength of these companies' fundamentals increasingly began to overwhelm the
doomsayer's predictions for a Year 2000 catastrophe. In fact, the fourth quarter
of 1999 proved to be one of the best quarters for technology stocks ever.
An interesting phenomenon over the past year was the intensity of the
Initial Public Offering (IPO) market. Here, investors were especially eager to
snap up new issues as quickly as the investment bankers could get them ready for
institutional investor roadshows. An equally interesting phenomenon was that
investors became increasingly willing to pay up for Internet companies that had
no current earnings but were growing their revenues exponentially. These "New
Economy" companies received extraordinary valuations. As their valuations grew,
it increased the scrutiny of all technology companies' price appreciation. In
the meantime, "Old Economy" companies were being devalued by the stock market.
The divergence in these two segments reached a crescendo on March 10, 2000.
Since then, there has been a revision in New and Old Economy valuations. Many
New Economy issues indiscriminately lost 30% of their value by the close of the
first quarter of 2000.
Over the past year, the Fund nicely outperformed the market and our peer
group as our preference for high-growth companies was rewarded. The last two
quarters of the fiscal year provided most of our substantial relative
outperformance. For the fiscal year, we were fortunate enough to outperform 83%
of our peers, as the average return generated by the universe of multi-cap
growth mutual funds (as categorized by Lipper, Inc.) was 65.1% over the same
twelve-month period.
Like last year, investors continued to favor technology stocks above all
others. Determining factors seemed to be sustainable, above-average earnings and
revenue growth rates in an environment characterized by increased trading
liquidity. There is no question that our investment style was in favor over the
last twelve months. We continue to believe that high quality, well-managed,
non-cyclical growth companies with sustainable competitive advantages
consistently represent the most compelling investment opportunities.
We also experienced some disappointments during this fiscal year.
Deteriorating fundamentals prompted the sale of a number of holdings, most
before their share price deterioration and, unfortunately, a few after. While
negative surprises are a fact of life for investors, we believe minimizing them
creates superior returns over time. We plan to continue to work hard to
anticipate changes in our companies' business fundamentals.
PORTFOLIO HIGHLIGHTS
Relatively large positions in several of the market's top performers easily
compensated for the negative effects of our disappointing stocks. Fortunately,
several Fund holdings appreciated by more than 200% for the year.
Technology comprised the largest sector of the portfolio and led this year's
performance. One of our best performers was Qualcomm which benefited from its
proprietary CDMA technology in the explosively growing cellular phone market,
rising 365% from our purchase in June 1999. An important theme was our
investment in Internet Infrastructure companies, which included EMC Corp.,
Broadcom, SunMicrosystems and Cisco Systems. A particularly important segment of
the Internet infrastructure subsector was optical networking. Our company of
choice here was JDS Uniphase, which was also one of last year's best performing
issues appreciating 567% from our initial purchase in June of 1999. JDS Uniphase
is a provider of advanced fiberoptic components and modules. The Company's
components and modules are basic building blocks for fiberoptic networks and
perform both optical-only (passive) and optoelectronic (active) functions within
these networks. We continue to remain steadfast in our view that technology is
likely to remain the fastest growing sector of our economy with the best
business momentum.
Non-technology companies also contributed to our strong performance during
the year. In the consumer cyclical sector, better-than-expected earnings reports
drove the share prices of Home Depot, Kohl's, Walmart and Tiffany's. In the
healthcare sector, Genentech and MedImmune benefited from continued recognition
as two of the best-positioned biotechnology companies. In the services sector,
Gemstar International Group shares rose due to better-than-expected earnings and
the expanded recognition of the company's rapidly growing service. Gemstar
develops markets and licenses proprietary technologies designed to simplify and
enhance consumers' interaction with electronics products and other platforms
that deliver video, programming information and other data.
As we enter the new fiscal year, the equity markets are in a period of
transition. The euphoria of the prior two quarters has abated and the new mode
is one of caution. Clearly the Federal Reserve is no longer accommodating with
respect to interest rates. With valuations at historically high levels, we would
expect periods of extreme short-term volatility. But in our opinion odds are low
for a major sustained downdraft in equity markets in the presence of a vibrant
U.S. economy and exceptional fundamental business dynamics. At present, some of
the market's "arrogance" that it could continue climbing unabated has waned. In
one sense, we are relieved that the ominous correction everyone has been
anticipating for New Economy stocks has finally occurred. While we experienced
some discomfort as some of "our babies" were thrown out with the "bath-water,"
we are confident that over the intermediate term the market will separate our
"contenders" from the "pretenders". The pullback has also presented us with the
opportunity to commit new capital to our investments at lower prices, which we
believe will strengthen the Fund for the long-term.
12
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN
AS OF MARCH 31, 2000
--------------------------------------------------------------------------------
One Annualized Annualized
Year 3 Year Inception
Return Return to Date2
--------------------------------------------------------------------------------
PBHG Large Cap Growth Fund 98.60% 54.69% 40.59%
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG
GROWTH FUND, PBHG CLASS, VERSUS
THE RUSSELL 2000 GROWTH INDEX AND
THE LIPPER MID-CAP GROWTH FUNDS
AVERAGE
[LINE GRAPH OMITTED]
PBHG Large Cap Lipper Multi-Cap Growth
Growth Fund S&P 500 Index(3) Funds Average(4)
4/30/95 $10000 $10000 $10000
5/31/95 10070 10399 10228
6/30/95 10920 10640 10858
7/31/95 11740 10993 11588
8/31/95 12310 11020 11692
9/30/95 13160 11485 12028
10/31/95 13510 11444 11847
11/30/95 13720 11946 12280
12/31/95 13383 12176 12319
1/31/96 14146 12590 12481
2/29/96 14827 12707 12893
3/31/96 14992 12830 13040
4/30/96 15880 13019 13737
5/31/96 16509 13354 14206
6/30/96 16158 13405 13829
7/31/96 15023 12813 12755
8/31/96 15601 13083 13381
9/30/96 16870 13819 14320
10/31/96 16365 14200 14174
11/30/96 16994 15273 14885
12/31/96 16514 14970 14662
1/31/97 17247 15905 15400
2/28/97 16504 16030 14817
3/31/97 14727 15372 13954
4/30/97 15626 16289 14295
5/31/97 17330 17280 15582
6/30/97 18197 18054 16152
7/31/97 19860 19490 17621
8/31/97 18941 18399 17235
9/30/97 20139 19406 18334
10/31/97 19282 18759 17509
11/30/97 19365 19626 17583
12/31/97 20206 19963 17773
1/31/98 19893 20184 17764
2/28/98 22450 21639 19261
3/31/98 23681 22746 20192
4/30/98 23817 22974 20416
5/31/98 23160 22580 19585
6/30/98 24861 23496 20607
7/31/98 24621 23247 19987
8/31/98 19945 19890 16465
9/30/98 21458 21164 17751
10/31/98 21573 22886 18701
11/30/98 22993 24273 20094
12/31/98 26353 25672 22395
1/31/99 27213 26745 23629
2/28/99 25671 25914 22346
3/31/99 27447 26951 23735
4/30/99 27157 27995 24355
5/31/99 26029 27334 23939
6/30/99 27950 28851 25660
7/31/99 26933 27951 25144
8/31/99 27135 27811 25167
9/30/99 27593 27048 25149
10/31/99 30363 28760 26977
11/30/99 34284 29345 29362
12/31/99 44025 31073 34092
1/31/2000 44792 29512 33274
2/29/2000 56129 28953 38515
3/31/2000 54509 31786 38700
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Large Cap Growth Fund commenced operations on April 5, 1995.
3 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Lipper Multi-Cap Growth Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Multi-Cap
Growth category. These performance figures are based on the changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The average is not intended
to imply the Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 8%
Financial 3%
Health Care 8%
Industrial 10%
Services 3%
Technology 60%
Utilities 2%
Cash 6%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Broadcom 3.2%
Nortel Networks 2.9%
Cisco Systems 2.8%
InfoSpace 2.7%
Juniper Networks 2.4%
JDS Uniphase 2.3%
Gemstar International 2.2%
General Electric 2.1%
Siebel Systems 2.1%
Texas Instruments 2.1%
-------------------------------------------------------
% of Total Portfolio Investments 24.9%
13
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG SELECT EQUITY FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Normally no more than 30 common stocks of companies that, in Pilgrim
Baxter's opinion, have a strong earnings growth outlook and potential for
capital appreciation.
STRATEGY: This portfolio is designed to concentrate our investments in
approximately 30 companies that we believe represent the best growth companies
in the market at a given time, regardless of company size. We purchase only
those high growth, high quality companies where we have the greatest confidence
in the company's specific fundamental business characteristics.
PERFORMANCE
The PBHG Select Equity Fund returned 240.82% for the fiscal year ended March
31, 2000. This compares quite favorably to the 17.94% return of the S&P 500 and
the 65.13% return of the average mutual fund in Lipper's Multi-Cap Growth Fund
classification. The Fund's heavy weighting in the technology sector was a
contributing factor to outperforming the benchmark but stock selection within
that sector was the primary driver. Technology companies in general, and those
with high earnings and sales growth rates in particular, were in high demand by
investors for a large part of the year.
The Fund underperformed to the S&P 500 in the quarter ended June 30, 1999,
its first fiscal quarter. During that quarter, investors rotated out of
technology stocks and into industrial and consumer cyclical issues. This was
prompted by worries over the high valuations of Internet companies, which
broadened to the entire technology sector. During the first fiscal quarter, the
Fund returned 0.42% while the S&P 500 returned 7.05%.
The trend of favoring the low growth stocks of the industrial and consumer
cyclical sectors quickly faded in the Fund's second fiscal quarter. That quarter
was marked by a return of the market's attention to the technology sector. The
Fund was well positioned to benefit from that shift. During the second fiscal
quarter, the Fund returned 8.22% versus a decline in the S&P 500 of 6.25%.
Exposure to quality companies in the semiconductor, enterprise storage device
and software, and Internet sectors boosted performance over the benchmark
significantly.
The market leadership of the technology sector continued and picked up
strength in the Fund's third fiscal quarter. For the three months ended December
31, 1999, the Fund returned 130.62%, significantly outpacing the 14.88% return
of the S&P 500. This was caused by a seemingly insatiable demand for the
Internet and Internet-related companies that were top holdings of the Fund.
Twenty-one of the companies held by the Fund increased by over 100% during its
third fiscal quarter.
During the final fiscal quarter, the Fund also produced strong returns. For
the three months ended March 31, 2000, the Fund returned 35.98%, which compares
favorably to the 2.30% return of the S&P 500 over the same time period. The
companies in which the Fund invested continued to produce strong operating
results and business momentum, a combination that was rewarded. Despite the
strong performance of the quarter, the world's equity markets became
increasingly volatile and continued to be so after the Fund's fiscal year end in
response to the perception of rising inflation.
PORTFOLIO HIGHLIGHTS The majority of the Fund's holdings performed extremely
well during the fiscal year. In fact, the Fund had positions in over 31 stocks
that increased by more than 100%. Of these, 14 returned in excess of 250%.
Examples of our winners include: [Bullet] InfoSpace, an Internet content
provider, was up 596% from its purchase in June 1999 to fiscal year end
[Bullet] Broadvision, an Internet software company, gained 578% from March 31,
1999 through its sale in January 2000.
[Bullet] Audiocodes, which designs, develops and markets telecommunications
products, returned 488% from its purchase in May 1999 through fiscal year end.
[Bullet] Emulex, which designs, develops and supplies network products, was up
443% from its purchase in June 1999 through its sale in January 2000.
[Bullet] Broadcom, a provider of integrated silicon solutions that enable
broadband digital data transmissions of voice, data and video content, gained
413% from its purchase in June 1999 to fiscal year end.
Although the majority of the Fund's investments provided positive
contributions to performance during the fiscal year, we did experience some
disappointments. Examples include: New Era of Networks, Network Associates,
Advantage Learning Systems, Softnet Systems and Earthlink. Each of these
companies lost between 71% and 38% of their value during the fiscal year and was
eliminated from the portfolio. As is usually the case with our underperformers,
these companies posted operating results that disappointed investors.
Overall, we believe the PBHG Select Equity Fund provided extraordinary
investment performance results during the fiscal year ended March 31, 2000.
These results were generated in an environment that was extremely favorable to
technology stocks. We urge investors to maintain realistic expectations of
future performance and understand that these types of results are unlikely to be
sustained. In the last few months, the global equity markets have become
increasingly volatile given the large advances in equity valuations, the Federal
Reserve's dedication to increasing interest rates in order to control economic
growth and the nervous investment sentiment that these market conditions create.
We remain positive in our long-term outlook for the high quality, rapidly
growing companies in which the Fund invests and believe our strategy will
continue to be successful over the long haul. We thank your for your continued
confidence and investment in the Fund.
14
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
----------------------------------------------------------------------------
One Annualized Annualized
Year 3 Year Inception
Return Return to Date2
----------------------------------------------------------------------------
PBHG Select Equity Fund 240.82% 77.10% 55.98%
----------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE
PBHG SELECT EQUITY FUND,
VERSUS THE S&P 500 INDEX AND
THE LIPPER MULTI-CAP GROWTH
FUNDS AVERAGE
[LINE CHART OMITTED]
PBHG Select Lipper Multi-Cap Growth
Equity Fund S&P 500 Index(3) Funds Average(4)
4/30/95 $10000 $10000 $10000
5/31/95 10402 10399 10228
6/30/95 11685 10640 10858
7/31/95 13399 10993 11588
8/31/95 13947 11020 11692
9/30/95 14545 11485 12028
10/31/95 14985 11444 11847
11/30/95 15367 11946 12280
12/31/95 15510 12176 12319
1/31/96 15851 12590 12481
2/29/96 17025 12707 12893
3/31/96 17326 12830 13040
4/30/96 18811 13019 13737
5/31/96 20376 13354 14206
6/30/96 19603 13405 13829
7/31/96 17687 12813 12755
8/31/96 18861 13083 13381
9/30/96 21118 13819 14320
10/31/96 19904 14200 14174
11/30/96 20366 15273 14885
12/31/96 19852 14970 14662
1/31/97 20338 15905 15400
2/28/97 17947 16030 14817
3/31/97 16123 15372 13954
4/30/97 16579 16289 14295
5/31/97 18808 17280 15582
6/30/97 19568 18054 16152
7/31/97 21402 19490 17621
8/31/97 20338 18399 17235
9/30/97 22335 19406 18334
10/31/97 20794 18759 17509
11/30/97 20176 19626 17583
12/31/97 21210 19963 17773
1/31/98 20784 20184 17764
2/28/98 22902 21639 19261
3/31/98 24473 22746 20192
4/30/98 24422 22974 20416
5/31/98 22993 22580 19585
6/30/98 25922 23496 20607
7/31/98 23824 23247 19987
8/31/98 19193 19890 16465
9/30/98 21048 21164 17751
10/31/98 19781 22886 18701
11/30/98 21261 24273 20094
12/31/98 25243 25672 22395
1/31/99 25577 26745 23629
2/28/99 23257 25914 22346
3/31/99 26277 26951 23735
4/30/99 25365 27995 24355
5/31/99 24280 27334 23939
6/30/99 26388 28851 25660
7/31/99 25821 27951 25144
8/31/99 27736 27811 25167
9/30/99 28557 27048 25149
10/31/99 34303 28760 26977
11/30/99 43575 29345 29362
12/31/99 65858 31073 34092
1/31/2000 69092 29512 33274
2/29/2000 99040 28953 38515
3/31/2000 89556 31786 38700
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Select Equity Fund commenced operations on April 5, 1995.
3 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Lipper Multi-Cap Growth Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Multi-Cap
Growth category These performance figures are based on the changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The average is not intended
to imply the Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 6%
Technology 94%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Gemstar International 5.9%
Broadcom 5.8%
Juniper Networks 5.0%
InfoSpace 4.9%
SDL 4.8%
Exodus Communications 4.7%
Brocade Communications Systems 4.7%
America Online 4.5%
Cisco Systems 4.5%
Microsoft 4.4%
-------------------------------------------------------
% of Total Portfolio Investments 49.2%
15
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<PAGE>
THE PBHG FUNDS, INC.
PBHG CORE GROWTH FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: A diversified portfolio of equity securities that are believed to
have superior long-term growth prospects and the potential for long-term capital
appreciation. The Fund may invest in companies of any size.
STRATEGY: The Fund's strategy is to invest in companies of any size that are
exhibiting business momentum. As of the year ended March 31, 2000, the Fund's 83
holdings ranged from $901 million to $65 billion in market capitalization. The
average holding in the Fund had a market capitalization of $10 billion as of
year end. By comparison, the average holding at year-end last year had an
average market capitalization of $36 billion. Many of the large capitalization
stocks were sold throughout the year and replaced with, on average, more rapidly
growing companies in the small and medium capitalization area.
PERFORMANCE
The Core Growth Fund returned 115.2% compared with the 77.2% return of the
Russell Mid-Cap Growth Index for the year ended March 31, 2000. In addition, the
Fund significantly outpaced broader indices, such as the S&P 500, which was up
17.9% over the same period.
PORTFOLIO HIGHLIGHTS
Growth stocks significantly outperformed value stocks across all
capitalizations during the trailing 12 months. This is evidenced by the 77.2%
return of the Russell Mid Cap Growth Index vs. 4.2% for the Russell Mid Cap
Value Index. Technology stocks were, by far, the biggest contributor to overall
performance. Energy and Industrial stocks also participated in the rally.
The Fund's technology weighting at year-end was 59.0%, well above what it
has been historically. The benchmark's weighting was also historically high at
54.9%. We continue to intentionally overweight this sector because we believe
the fundamental outlook for these companies is as good as it's ever been. The
Fund's technology holdings performed substantially better than those in the
benchmark, also contributing to the Fund's results. Other than technology, no
other sector matched the Fund's performance for the last 12 months. Your
Healthcare and Services holdings performed well relative to the benchmark, while
the Fund's holdings in the Consumer Cyclical and Financial sectors performed
poorly relative to those in the benchmark.
In our bottom-up approach to investing, we look for companies that appear to
have the potential for many quarters and, hopefully, years of exceptional
growth. The things we care most about in stock selection are high growth rates
in sales and incremental earnings, positive income statement surprises and
estimate revisions. We prefer companies that are in the early stages of
acceleration with an open-ended growth opportunity. We are relatively
indifferent to attempts at valuation analysis, believing that these high-growth
rate companies are typically cheap if they accomplish their high growth rates
for several years and expensive if they do not. We are very sensitive to changes
in business momentum. When we spot a positive inflection point, we attempt to
determine if there are high probabilities of sustained growth.
Our discipline never changes. Our portfolios will contain high quality
companies experiencing the best business momentum. At times the market will
place a premium on these characteristics and at other times, like the end of
1998 when investors craved stability and/or liquidity, the market will ignore
these characteristics. We do not attempt to time the market and do very little
sector strategizing. We attempt to manage risk by following our companies very
closely and by building or reducing positions when we believe that company
fundamentals are changing.
As of the time of this writing, rapidly growing companies and especially
technology stocks have experienced a significant correction both over the last
two weeks of the first quarter as well as the first few weeks of the second
quarter. We have no way of calling the bottom, but we strongly believe what we
have experienced to date is a "valuation correction" and in no way is reflective
of the business fundamentals for the companies in the portfolio. The March
quarter earning reports, now substantially through, have been terrific. We
remain positive on the technology sector long-term and now with stock prices
much lower, our conviction has risen commensurately.
16
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
---------------------------------------------------------------------------
One Annualized Annualized
Year 3 Year Inception
Return Return to Date2
---------------------------------------------------------------------------
PBHG Core Growth Fund 115.15% 43.02% 29.78%
---------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG CORE GROWTH FUND, VERSUS THE
RUSSELL MID CAP GROWTH INDEX AND THE LIPPER MULTI-CAP GROWTH FUNDS AVERAGE
[LINE CHART OMITTED]
PBHG Core Russell Mid-Cap Lipper Multi-Cap Growth
Growth Fund Growth Index(3) Funds Average(4)
12/31/95 $10000 $10000 $10000
1/31/96 10590 10177 10132
2/29/96 11450 10562 10466
3/31/96 11820 10645 10586
4/30/96 13310 11159 11151
5/31/96 14230 11387 11532
6/30/96 13800 11043 11226
7/31/96 12040 10186 10354
8/31/96 13000 10736 10862
9/30/96 14200 11418 11624
10/31/96 13410 11284 11506
11/30/96 13740 11949 12083
12/31/96 13280 11748 11902
1/31/97 13300 12268 12501
2/28/97 11690 11997 12028
3/31/97 10340 11319 11327
4/30/97 10200 11597 11604
5/31/97 11680 12636 12649
6/30/97 12230 12986 13112
7/31/97 12990 14228 14304
8/31/97 12480 14090 13990
9/30/97 12890 14803 14883
10/31/97 12280 14061 14213
11/30/97 11910 14209 14273
12/31/97 11990 14395 14427
1/31/98 11470 14136 14420
2/28/98 12830 15465 15636
3/31/98 13530 16113 16391
4/30/98 13620 16332 16573
5/31/98 12540 15660 15898
6/30/98 13560 16103 16728
7/31/98 12540 15413 16225
8/31/98 9680 12471 13366
9/30/98 10790 13415 14410
10/31/98 10520 14402 15181
11/30/98 11260 15374 16312
12/31/98 12880 16966 18179
1/31/99 13420 17475 19181
2/28/99 12670 16620 18139
3/31/99 14060 17546 19268
4/30/99 14160 18346 19770
5/31/99 13890 18110 19432
6/30/99 15530 19374 20830
7/31/99 15560 18757 20411
8/31/99 16300 18562 20429
9/30/99 16450 18404 20415
10/31/99 17990 19827 21899
11/30/99 20130 21881 23835
12/31/99 25450 25669 27675
1/31/2000 25140 25664 27011
2/29/2000 34490 31060 31265
3/31/2000 30250 31092 31415
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Core Growth Fund commenced operations on December 29, 1995.
3 The Russell Mid Cap Growth Index is an unmanaged index comprised of those
securities in the Russell 1000 Index with a higher price to book ratio and
higher forecasted growth values. The Index reflects the reinvestment of
income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing. The
Index is not intended to imply the Fund's past or future performance.
4 The Lipper Multi-Cap Growth Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Multi-Cap
Growth category. These performance figures are based on the changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The average is not intended
to imply the Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 8%
Energy 5%
Financial 2%
Health Care 10%
Industrial 8%
Services 5%
Technology 62%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Redback Networks 2.6%
Network Solutions 2.3%
Globespan 2.3%
Art Technology 2.3%
Mettler-Toledo International 2.2%
Cooper Cameron 2.1%
Bank One 2.1%
Allscripts 2.0%
Exodus Communications 2.0%
Ariba 2.0%
-------------------------------------------------------
% of Total Portfolio Investments 21.8%
17
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<PAGE>
THE PBHG FUNDS, INC.
PBHG LIMITED FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: A diversified portfolio of equity securities of companies that are
believed, by Pilgrim Baxter, to have superior long-term growth prospects and
potential for long-term capital appreciation.
STRATEGY: The Fund invests in companies under $250 million in market
capitalization or annual revenues. The Fund is currently closed to investment by
new shareholders in order to help protect achievement of its investment
objective.
PERFORMANCE
For the twelve months ending March 31, 2000, the PBHG Limited Fund returned
137.27% against the 59.06% return posted by the Russell 2000 Growth Index.
Performance over this period marked a significant reversal of fortune from the
negative returns posted by both the Fund and its benchmark Index, the Russell
2000 Growth, in the previous twelve-month period.
In each of the four quarters of this fiscal year, the Fund out-performed the
Russell 2000 Growth significantly. In the most recent quarter ending March 31,
2000, the Fund generated a return of 23.52% relative to 9.29% for the Russell
2000 Growth. In the quarter ending December 31, 1999 the Fund generated a return
of 49.84% relative to the 33.39% produced by the index. In the quarter ending
September 30, 1999 the Fund produced a positive return of 4.22% relative to the
loss of 4.91% delivered by the Russell 2000 Growth. Finally, for the quarter
ending June 30, 1999, the Fund produced a 23.01% return relative to the 14.75%
produced by the Russell 2000 Growth Index. With the wind of a more benevolent
environment toward small-cap stocks at its back, the PBHG Limited Fund was
redeemed from the bear market most small company investors experienced over the
year that ended in March 1999. Further supported by the markets renewed focus on
growth over liquidity, the high-quality, rapidly growing small company holdings
in our Fund succeeded in delivering the healthy returns that we had
long-awaited.
PORTFOLIO HIGHLIGHTS
Despite the widely held belief that small company investing was a dying fad,
the twelve-month period ending March 31, 2000 turned out to be a spectacular
year for small-cap growth stocks. Benefiting directly from the shift to an
Internet-enabled, digital economy, the rapidly growing small companies that are
delivering the products and services necessary to architect this change,
predominantly technology companies, fueled the asset class' outsized returns.
Our long-term holdings, many of which produced lackluster returns in the
previous period regardless of the continued strength of their revenue and
earnings growth, contributed greatly to the Fund's impressive fiscal year 2000
performance. Among these notable contributors were the following: Business
Objects, a provider of business intelligence software, up 570% in the period.
Micromuse, a provider of software solutions for the effective monitoring and
management of multiple elements underlying an enterprise's information
technology infrastructure, was up 504%. Clarify, which was acquired by Nortel
during the period for its front-office customer resource management software,
delivered a 380% return. Transwitch, a fabless semiconductor manufacturer
enabling broadband telecommunications applications, was up 378% for the period.
Polycom, a manufacturer of traditional audio and video conferencing products as
well as integrated access devices for new technology based service providers,
posted a 322% return for the period. Hall Kinion & Associates, an information
technology staffing company, was up 285%. It is worth noting that each of these
companies is profitable and has maintained a solid, scalable business model.
High-quality, rapidly growing, small companies such as these will continue to be
the mainstay of our Fund.
In addition to our long-term holdings, the Fund also had a
number of newly established positions contribute handsomely to the period's
positive returns, including its two best performing stocks. The first, Ditech
Communications, a provider of telecommunications equipment, purchased in July
1999 just as the company was approaching quarterly profitability, delivered an
892% return over the period. Since our initial purchase, the company has
generated greater than 100% revenue growth, handily exceeding expectations. The
second strong addition to the portfolio during the past year was Natural
Microsystems. This manufacturer of enabling technology for networking and
telecommunications equipment providers was purchased when the company exhibited
definitive signs of exiting a turnaround stage led by a new management team, a
strong new product cycle, and a highly profitable customer base. For the period
ending March 31, 2000, Natural Microsystems posted a 579% return.
While it is easy to find winners during a period where each sector in the
Fund posted a positive return, the portfolio still had its fair share of duds
over the last twelve months. J. Jill Group, New Era of Networks, Laser Vision
Centers, Engineering Animation and QuadraMed each delivered a somewhat violent
reminder that small growth companies can deliver negative earnings surprises and
volatile returns. Thankfully, our disciplined attention to the warning signs of
such trouble continues to help us avoid many of these potential disappointments.
Looking forward, while many of us expect volatility to continue to be a
defining characteristic of the year ahead, the strong revenue and earnings
growth offered by our portfolio of high-quality, small emerging growth companies
should continue to yield healthy returns over time. Although periods of extreme
market volatility have historically proven to be particularly difficult for the
small cap asset class, we are optimistic that a renewed focus on quality will be
a key performance driver for the rapidly growing, fundamentally robust small
companies that have always been the hallmark of our portfolio.
18
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
----------------------------------------------------------------------------
One Annualized Annualized
Year 3 Year Inception
Return Return to Date2
----------------------------------------------------------------------------
PBHG Limited Fund 137.27% 50.29% 34.93%
----------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG
LIMITED FUND, VERSUS THE
RUSSELL 2000 GROWTH INDEX AND
THE LIPPER SMALL-CAP GROWTH
FUNDS AVERAGE
[LINE CHART OMITTED]
PBHG Limited Russell 2000 Lipper Small-Cap Growth
Fund Growth Index(3) Funds Average(4)
6/30/96 $10000 $10000 $10000
7/31/96 9950 8779 8959
8/31/96 10320 9429 9594
9/30/96 11010 9914 10214
10/31/96 10570 9487 9850
11/30/96 10560 9751 10031
12/31/96 11082 9941 10125
1/31/97 11273 10189 10370
2/28/97 10048 9574 9668
3/31/97 9085 8898 8992
4/30/97 8984 8795 8855
5/31/97 10741 10117 10128
6/30/97 11454 10460 10714
7/31/97 12016 10996 11427
8/31/97 12257 11326 11619
9/30/97 13622 12230 12570
10/31/97 13070 11495 11933
11/30/97 12809 11221 11679
12/31/97 12864 11228 11737
1/31/98 12708 11078 11562
2/28/98 13756 12056 12537
3/31/98 14606 12562 13153
4/30/98 14720 12639 13290
5/31/98 13621 11721 12395
6/30/98 14057 11841 12720
7/31/98 13154 10852 11821
8/31/98 10509 8347 9264
9/30/98 11691 9193 10000
10/31/98 11681 9673 10462
11/30/98 12770 10423 11372
12/31/98 14542 11366 12612
1/31/99 15053 11878 12925
2/28/99 13422 10791 11768
3/31/99 12998 11176 12294
4/30/99 12965 12163 12804
5/31/99 13966 12182 12916
6/30/99 15989 12823 14092
7/31/99 15380 12427 14081
8/31/99 15358 11962 13929
9/30/99 16663 12193 14333
10/31/99 18077 12505 15159
11/30/99 20524 13828 17185
12/31/99 24968 16265 20435
1/31/2000 24821 16113 20210
2/29/2000 32988 19862 25465
3/31/2000 30840 17774 23815
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Limited Fund commenced operations on June 28, 1996.
3 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
4 The Lipper Small-Cap Growth Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Small-Cap
Growth category. These performance figures are based on the changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The average is not intended
to imply the Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 8%
Consumer Non-Cyclical 1%
Health Care 13%
Industrial 7%
Services 13%
Technology 44%
Cash 13%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Natural Microsystems 3.6%
Micromuse 3.5%
Varian Semiconductor Equipment 3.3%
Forrester Research 3.1%
Business Objects 3.0%
Advent Software 2.9%
Polycom 2.8%
TranSwitch 2.8%
Allscripts 2.8%
Actuate 2.8%
-------------------------------------------------------
% of Total Portfolio Investments 30.6%
19
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP 20 FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term growth of capital.
INVESTS IN: A limited number of larger capitalization companies (no more than
20) that have above-average potential for capital appreciation.
STRATEGY: The Fund is different from other PBHG Funds in two key ways: it
invests only in large capitalization companies (over $1 billion) and it
concentrates investments in just 20 stocks. This non-diversified Fund seeks
large capitalization stocks that present the best opportunities for meaningful
capital appreciation in the foreseeable future. Our strategy involves looking
beyond the financial data and analysts' reports to find some dynamic within a
company that may not be fully appreciated and that, when exploited, can lead to
positive earnings surprises and upward revisions of future growth expectations.
PERFORMANCE
The PBHG Large Cap 20 Fund returned 117.9% for the fiscal year ended March
31, 2000. This compares favorably to the return provided by our benchmark, the
S&P 500 Index at 17.9%. The out-performance relative to the benchmark occurred
in the last three fiscal quarters. During this time, investors gravitated toward
technology issues whose revenue and earnings growth rates were accelerating. The
underlying strength of these companies' fundamentals increasingly began to
overwhelm the doomsayer's predictions for a Year 2000 catastrophe. In fact, the
fourth quarter of 1999 proved to be one of the best quarters for technology
stocks ever.
An interesting phenomenon over the past year was the intensity of the
Initial Public Offering (IPO) market. Here, investors were especially eager to
snap up new issues as quickly as the investment bankers could get them ready for
institutional investor roadshows. An equally interesting phenomenon was that
investors became increasingly willing to pay up for Internet companies that had
no current earnings but were growing their revenues exponentially. These "New
Economy" companies received extraordinary valuations. As their valuations grew,
it increased the scrutiny of all technology companies' price appreciation. In
the meantime, "Old Economy" companies were being devalued by the stock market.
The divergence in these two segments reached a crescendo on March 10, 2000.
Since then, there has been a revision in New and Old Economy valuations. Many
New Economy issues indiscriminately lost 30% of their value into by close of the
first quarter of 2000.
Over the past year, the Fund nicely outperformed the market and our peer
group as our preference for high-growth companies was rewarded. The last two
quarters of the fiscal year provided most of our substantial relative
outperformance. For the fiscal year, we were fortunate enough to outperform 99%
of our peers, as the average return generated by the universe of large cap
growth mutual funds (as categorized by Lipper Analytical Services) was 38.1%
over the same twelve-month period.
Like last year, investors continued to favor technology stocks above all
others. Determining factors seemed to be sustainable, above-average earnings and
revenue growth rates in an environment characterized by increased trading
liquidity. There is no question that our investment style was in favor over the
last twelve months. We continue to believe that high quality, well-managed,
non-cyclical growth companies with sustainable competitive advantages
consistently represent the most compelling investment opportunities.
We also experienced some disappointments during this fiscal year.
Deteriorating fundamentals prompted the sale of a number of holdings, most
before their share price deterioration and, unfortunately, a few after. While
negative surprises are a fact of life for investors, we believe minimizing them
creates superior returns over time. We plan to continue to work hard to
anticipate changes in our companies' business fundamentals.
PORTFOLIO HIGHLIGHTS
The advantages of concentrated investing -- focusing on a limited number of
stocks possessing the greatest fundamental business momentum -- were borne out
in the results of the Large Cap 20 Fund during the last fiscal year. Despite a
few disappointments, we believe having several of the market's top performers
easily compensated for the negative effects of our less effective stocks.
Fortunately, several holdings appreciated by more than 200% for the year.
Technology comprised the largest sector of the portfolio and led this year's
performance. One of our best performers was Qualcomm which benefited from its
proprietary CDMA technology in the explosively growing cellular phone market,
rising 365% from our purchase in June 1999. An important theme was our
investment in Internet Infrastructure companies, which included EMC Corp.,
Broadcom, SunMicrosystems and Cisco Systems. A particularly important segment of
the Internet infrastructure subsector was optical networking. Our company of
choice here was JDS Uniphase, which was also one of last year's best performing
issues appreciating 567% from our initial purchase in June of 1999. JDS Uniphase
is a provider of advanced fiberoptic components and modules. The Company's
components and modules are basic building blocks for fiberoptic networks and
perform both optical-only (passive) and optoelectronic (active) functions within
these networks. We continue to remain steadfast in our view that technology is
likely to remain the fastest growing sector of our economy with the best
business momentum.
Non-technology companies also contributed to our strong performance during
the year. In the consumer cyclical sector, better-than-expected earnings reports
drove the share prices of Home Depot, Kohls, Walmart and Tiffany. In the
healthcare sector, Genentech benefited from continued recognition as one of the
premier biotechnology companies. In the services sector, Gemstar International
Group shares rose due to better-than-expected earnings and the expanded
recognition of the company's rapidly growing service. Gemstar develops markets
and licenses proprietary technologies designed to simplify and enhance
consumers' interaction with electronics products and other platforms that
deliver video, programming information and other data.
As we enter the new fiscal year, the equity markets are in a period of
transition. The euphoria of the prior two quarters has abated and the new mode
is one of caution. Clearly the Federal Reserve is no longer accommodating with
respect to interest rates. With valuations at historically high levels, we would
expect periods of extreme short-term volatility. But in our opinion, the odds
are low for a major sustained downdraft in equity markets in the presence of a
vibrant U.S. economy and exceptional fundamental business dynamics. At present,
some of the market's "arrogance" that it could continue climbing unabated has
waned. In one sense we are relieved that the ominous correction everyone has
been anticipating for New Economy stocks has finally occurred. While we
experienced some discomfort as some of "our babies" were thrown out with the
"bath-water," we are confident that over the intermediate term the market will
separate our "contenders" from the "pretenders". The pullback has also presented
us with the opportunity to commit new capital to our investments at lower
prices, which we believe will strengthen the Fund for the long-term.
20
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
---------------------------------------------------------------------------
One Annualized Annualized
Year 3 Year Inception
Return Return to Date2
---------------------------------------------------------------------------
PBHG Large Cap 20 Fund 117.88% 79.06% 64.99%
---------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE
PBHG LARGE CAP 20 FUND,
VERSUS THE S&P 500 INDEX AND
THE LIPPER LARGE-CAP GROWTH
FUNDS AVERAGE
[LINE CHART OMITTED]
PBHG Large Cap Lipper Large-Cap
20 Fund S&P 500 Index(3) Growth Funds Average(4)
11/30/96 $10,000 $10,000 $10,000
12/31/96 $9,841 $9,802 $9,747
1/31/97 $10,462 $10,414 $10,362
2/28/97 $10,001 $10,496 $10,163
3/31/97 $9,260 $10,065 $9,637
4/30/97 $9,881 $10,666 $10,148
5/31/97 $10,912 $11,315 $10,848
6/30/97 $11,523 $11,821 $11,298
7/31/97 $12,854 $12,761 $12,373
8/31/97 $12,234 $12,047 $11,793
9/30/97 $12,914 $12,706 $12,422
10/31/97 $12,424 $12,283 $11,977
11/30/97 $12,494 $12,851 $12,225
12/31/97 $13,084 $13,071 $12,336
1/31/98 $13,355 $13,216 $12,517
2/28/98 $15,097 $14,168 $13,522
3/31/98 $15,998 $14,893 $14,168
4/30/98 $16,278 $15,043 $14,391
5/31/98 $15,848 $14,785 $14,022
6/30/98 $17,589 $15,385 $14,892
7/31/98 $17,609 $15,221 $14,781
8/31/98 $14,516 $13,023 $12,327
9/30/98 $16,708 $13,858 $13,233
10/31/98 $17,069 $14,985 $14,084
11/30/98 $18,320 $15,893 $15,073
12/31/98 $21,960 $16,809 $16,719
1/31/99 $23,995 $17,512 $17,855
2/28/99 $22,294 $16,968 $17,105
3/31/99 $24,400 $17,647 $18,142
4/30/99 $23,337 $18,330 $18,186
5/31/99 $22,527 $17,897 $17,593
6/30/99 $24,178 $18,891 $18,873
7/31/99 $23,540 $18,301 $18,279
8/31/99 $24,512 $18,210 $18,582
9/30/99 $25,372 $17,711 $18,436
10/31/99 $28,136 $18,831 $19,757
11/30/99 $33,614 $19,214 $20,893
12/31/99 $44,567 $20,346 $23,432
1/31/00 $43,320 $19,324 $22,483
2/29/00 $51,964 $18,958 $24,181
3/31/00 $53,163 $20,813 $25,496
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Large Cap 20 Fund commenced operations on November 29, 1996.
3 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Lipper Large-Cap Growth Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Large-Cap
Growth category. These performance figures are based on the changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The average is not intended
to imply the Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 5%
Financial 4%
Health Care 7%
Industrial 8%
Technology 70%
Cash 6%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
JDS Uniphase 8.4%
Broadcom 7.7%
Nortel Networks 7.4%
Cisco Systems 6.6%
Gemstar International 5.3%
Texas Instruments 5.0%
Flextronics International 4.6%
Applied Materials 4.5%
Nokia ADR, Cl A 4.5%
EMC 4.4%
-------------------------------------------------------
% of Total Portfolio Investments 58.2%
21
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<PAGE>
THE PBHG FUNDS, INC.
PBHG NEW OPPORTUNITIES FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Equity securities of small and medium sized growth companies. The
Fund does not have a delineated predisposition to set sector or sub-sector
allocations.
STRATEGY: The PBHG New Opportunities Fund is a diversified portfolio intended to
deliver capital appreciation by identifying and investing in the fastest growing
stocks of small- and medium-sized growth companies. With generally similar
weightings among the holdings and no predetermined sector or sub-sector
allocation, the Fund is intended to own the highest quality, rapidly growing,
emerging small companies. When identifying and reviewing the names that make-up
the portfolio, the Fund incorporates Pilgrim Baxter's proprietary quantitative
model coupled with an extensive top-down and bottom-up growth-oriented
fundamental review. A majority of the Fund's purchases are in companies with
market capitalizations below $1 billion.
PERFORMANCE
The PBHG New Opportunities Fund returned 529.94% for the fiscal year ended
March 31, 2000. We are proud to tell you that this was the best performance of
any mutual fund for that one-year period according to Lipper. Inc. This
performance also compares very favorably to the 59.06% return of the Russell
2000 Growth Index and the 97.82% return of the average mutual fund in Lipper's
Mid-Cap Growth Fund Classification. The Fund was heavily weighted in the
technology sector for the majority of the year, which contributed to its
outstanding performance in comparison to its benchmark. Our stock selection
criteria, focusing on companies that are growing rapidly and sustainably, was
the primary driver of performance. In addition, the Fund was able to add
relative performance by trading advantageously in volatile markets with a
portion of its assets while maintaining its core long-term positions.
The Fund outperformed its benchmark considerably in each quarter of the
fiscal year. During the first fiscal quarter, the Fund performed well despite a
rotation by investors out of many technology stocks and into industrial and
consumer cyclical issues. This rotation was prompted by worries about the high
valuations of Internet companies, which broadened to much of the technology
sector. During the first fiscal quarter, the fund returned 47.30% while the
Russell 2000 Growth Index returned 14.75%.
During the second fiscal quarter, the Fund returned 13.44% versus a decline
in the Russell 2000 Growth Index of 4.91%. Unlike the prior quarter, when
investor's appetites for growth companies was strong, the second fiscal quarter
was a period of gains in a narrow segment of the technology sector. The Fund's
exposure to direct, infrastructure and bandwidth related Internet companies was
largely responsible for outperformance in the quarter.
The market leadership of the technology sector continued and picked up
strength in the Fund's third fiscal quarter. For the three months ended December
31, 1999, the Fund returned 164.80%, significantly outperforming the 33.39%
return of the Russell 2000 Growth Index. This was caused by a seemingly
insatiable demand for the Internet and Internet-related companies that were top
holdings of the Fund. In particular, the Fund was concentrated in the
business-to-business Internet stocks that were most sought after. Amazingly,
twenty-two of the companies held by the Fund increased by over 100% during the
fiscal quarter.
During the final fiscal quarter, the Fund also produced strong returns. For
the three months ended March 31, 2000, the Fund returned 42.37%, which compares
very favorably to the 9.29% return of the Russell 2000 Growth Index. The
companies in which the Fund invested continued to produce strong operating
results and to exhibit good business momentum, a combination that was rewarded.
Despite the strong performance of the quarter, the world's equity markets became
increasingly volatile and continued to be so after fiscal year end in response
to the perception of rising inflation.
PORTFOLIO HIGHLIGHTS
The majority of the Fund's holdings performed extremely well during the
fiscal year. In fact, the Fund had positions in over 60 stocks that increased by
more than 100%. Of these, 17 returned in excess of 500% and 3 returned greater
than 1,000%.
The Funds three best performing positions were companies that were purchased
at or shortly after their initial public offering and were held through the end
of the fiscal year. Ditech Communications, which designs, develops and markets
equipment used in building and expanding telecommunications and cable
communications networks returned 1,580% during the period. Brocade
Communications Systems advanced 1,137%. Brocade provides switching solutions for
storage area networks and allow companies to manage the growth of their data
storage and improve data transfer performance. The final greater-than-1,000%
percent performer during the period was Art Technology Group which provides an
integrated suite of Internet customer relationship management and electronic
commerce software applications.
Rounding out the Fund's top five performers were SDL, Inc. and I2
Technologies which were held during the entire fiscal year and returned 838% and
818%, respectively. SDL designs, manufactures and markets semiconductor lasers
and fiber optic related products. I2 Technologies is a business-to-business
supplier of e-commerce solutions.
Although the majority of the Fund's investments provided positive
contributions to performance during the fiscal year, we did experience some
disappointments. Examples include: New Era of Networks, FVC.com. Engineering
Animation, Biomatrix and Carematrix. Each of these companies lost between 71%
and 39% of their value during the fiscal year and was eliminated from the
portfolio. As is usually the case with our underperformers, these companies
posted operating results that disappointed investors.
Overall, we believe the PBHG New Opportunities Fund provided extraordinary
investment performance results during the fiscal year ended March 31, 2000.
These results were generated in an environment that was extremely favorable to
the technology stocks in which the fund was concentrated. We urge investors to
maintain realistic expectations of future performance and understand that these
types of results are unlikely to be sustained. In the last few months, global
equity markets have become increasingly volatile given the large advances in
equity valuations, the Federal Reserve's dedication to increasing interest rates
in order to preserve slow economic growth and the nervous investment sentiment
that these market conditions create. We remain positive in our long-term outlook
for the high quality rapidly growing companies in which the Fund invests and
believe our strategy will continue to be successful over the long haul. We thank
your for your continued confidence and investment in the Fund.
22
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
-------------------------------------------------------------------------
One Annualized
Year Inception
Return to Date2
-------------------------------------------------------------------------
PBHG New Opportunities Fund 529.94% 505.56%
-------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG NEW
OPPORTUNITIES FUND, VERSUS THE RUSSELL 2000 GROWTH INDEX
AND THE LIPPER MID CAP GROWTH FUNDS AVERAGE
[LINE CHART OMITTED]
PBHG NEW RUSSELL 2000 LIPPER MID-CAP GROWTH
OPPORTUNITIES GROWTH INDEX(3) FUNDS AVERAGE(4)
2/28/99 $10000 $10000 $10000
3/31/99 11714 10356 10763
4/30/99 12134 11271 11213
5/31/99 12795 11289 11131
6/30/99 17255 11883 12149
7/31/99 18770 11516 12021
8/31/99 19047 11085 12057
9/30/99 19573 11299 12358
10/31/99 24780 11588 13465
11/30/99 33314 12814 15191
12/31/99 51830 15072 18164
1/31/2000 54784 14932 18004
2/29/2000 82487 18406 22697
3/31/2000 73791 16471 21316
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG New Opportunities Fund commenced operations on February 12, 1999.
3 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
4 The Lipper Mid Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Mid-Cap Growth
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The average is not intended to imply the
Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 5%
Industrial 1%
Health Care 2%
Services 3%
Technology 89%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Broadcom 6.4%
Gemstar International 6.1%
Brocade Communications Systems 5.9%
SDL 5.4%
Juniper Networks 5.2%
Opitika Imaging Systems 5.0%
Exodus Communications 4.9%
InfoSpace 4.5%
Siebel Systems 4.4%
JDS Uniphase 4.3%
-------------------------------------------------------
% of Total Portfolio Investments 52.3%
23
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP VALUE FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term growth of capital and income.
INVESTS IN: A diversified portfolio of equity securities of large capitalization
companies.
STRATEGY: The Fund invests in companies with market capitalizations in excess of
$1 billion which in Value Investors' opinion, are undervalued or overlooked by
the market. In selecting investments for the Fund, Value Investors emphasizes
fundamental investment value and considers factors such as: the relationship of
a company's potential earning power to the current market price of its stock;
continuing dividend income and the potential for increased dividend growth; low
price/earnings ratio relative to either that company's historical results or the
current ratios for other similar companies; and potential for favorable business
developments.
PERFORMANCE
For the fiscal year ended March 31, 2000, the PBHG Large Cap Value Fund's
total return was 14.25% versus 17.94% for the S&P 500 Index, the Fund's
benchmark, and 6.33% for the Russell 1000 Value Index. We are disappointed that
we trailed the S&P 500 and are working hard to try beat this benchmark in 2000.
The years 1998 and 1999 were two of the worst years for value investing
since the early 1970's. In 1998, growth outperformed value by 20% and in 1999,
growth bested value again, this time by 15%.
January and February of this year were a repeat of 1998 and 1999, with the
Russell 1000 Growth Index outperforming the Russell 1000 Value Index by 10%. On
a three-month trailing basis (Dec-Feb), the Russell Growth bettered the Russell
Value by 20% basis points.
But value came roaring back in March, with the Russell Value Index gaining
12.2%, bettering the returns of the S&P 500 Index, the Russell 1000 Growth Index
and the Nasdaq Composite. We may look back on March 2000 as the month when value
investing emerged from its bear market. Bear markets typically end with one
final intense sell-off, in which all but the "true believers" capitulate and
sell their stocks. We believe this happened in the first two months of this
year, climaxing in early March, when investors sold their value stocks to buy
high-flying technology shares.
PORTFOLIO HIGHLIGHTS
The Federal Reserve is determined to keep inflation at bay, even if it means
causing the economy to slow. Recent consumer price index reports indicate that
inflation is beginning to accelerate in many areas of the economy. We expect the
Fed will continue to raise rates this year, which could put earnings at risk for
economically sensitive companies.
As "true believers" in value investing, there have been no major changes to
our investment strategy. We remain fully invested and are concentrating our
attention on identifying stocks that offer an attractive trade-off between
valuation, growth prospects and the business fundamentals of the enterprise. At
present, we believe telecommunications services, healthcare, and energy,
including natural gas and electric utilities are particularly attractive. We
believe these groups should be able to deliver earnings growth despite a hostile
Federal Reserve. Even with the recent correction, technology stocks sell at
valuations well in excess of their growth rates and only selected companies
offer good value at current levels.
24
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
----------------------------------------------------------------------------
One Annualized Annualized
Year 3 Year Inception
Return Return to Date2
----------------------------------------------------------------------------
PBHG Large Cap Value Fund 14.25% 24.22% 22.58%
----------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE
PBHG LARGE CAP VALUE FUND,
VERSUS THE S&P 500 INDEX
AND THE LIPPER MULTI-CAP
VALUE FUNDS AVERAGE
[LINE GRAPH OMITTED]
PBHG Large Cap S&P 500 Lipper Multi-Cap Value
Value Fund Index(3) Funds Average(4)
12/31/96 $10,000 $10,000 $10,000
1/31/97 $10,240 $10,624 $10,385
2/28/97 $10,430 $10,708 $10,468
3/31/97 $10,110 $10,269 $10,134
4/30/97 $10,380 $10,881 $10,418
5/31/97 $11,080 $11,543 $11,076
6/30/97 $11,560 $12,060 $11,478
7/31/97 $12,400 $13,019 $12,314
8/31/97 $12,000 $12,291 $12,014
9/30/97 $12,450 $12,963 $12,620
10/31/97 $12,110 $12,531 $12,143
11/30/97 $12,390 $13,110 $12,402
12/31/97 $12,562 $13,335 $12,592
1/31/98 $12,540 $13,483 $12,531
2/28/98 $13,407 $14,455 $13,383
3/31/98 $14,101 $15,194 $13,959
4/30/98 $14,198 $15,347 $14,013
5/31/98 $14,101 $15,084 $13,716
6/30/98 $14,339 $15,696 $13,742
7/31/98 $14,318 $15,529 $13,265
8/31/98 $12,312 $13,287 $11,311
9/30/98 $13,201 $14,138 $11,828
10/31/98 $14,578 $15,288 $12,746
11/30/98 $15,553 $16,214 $13,304
12/31/98 $16,925 $17,149 $13,701
1/31/99 $17,244 $17,866 $13,721
2/28/99 $16,509 $17,311 $13,310
3/31/99 $16,962 $18,003 $13,649
4/30/99 $17,415 $18,701 $14,717
5/31/99 $17,550 $18,259 $14,656
6/30/99 $18,701 $19,272 $15,128
7/31/99 $18,297 $18,671 $14,724
8/31/99 $17,991 $18,578 $14,241
9/30/99 $17,844 $18,069 $13,645
10/31/99 $18,787 $19,212 $14,087
11/30/99 $19,142 $19,602 $14,135
12/31/99 $18,796 $20,757 $14,532
1/31/00 $18,634 $19,714 $13,885
2/29/00 $17,372 $19,341 $13,303
3/31/00 $19,379 $21,233 $14,692
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Large Cap Value Fund commenced operations on December 31, 1996.
3 The S&P 500 Index is a capitalization weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Lipper Multi-Cap Value Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Multi-Cap Value
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The average is not intended to imply the
Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Basic Materials 3%
Consumer Cyclical 4%
Consumer Non-Cyclical 13%
Energy 9%
Financial 16%
Health Care 14%
Industrial 10%
Services 13%
Technology 13%
Cash 5%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Warner Lambert 4.0%
Citigroup 3.4%
GTE 3.0%
IBM 2.9%
Procter & Gamble 2.8%
Electronic Data Systems 2.5%
Computer Associates International 2.3%
First Data 2.3%
Comcast, Cl A 2.2%
Heinz (HJ) 2.1%
-------------------------------------------------------
% of Total Portfolio Investments 27.5%
25
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG MID-CAP VALUE FUND
PORTFOLIO PROFILE
OBJECTIVE: Above-average total return over a market cycle of three to five
years, consistent with reasonable risk.
INVESTS IN: Common stocks and other equity securities of companies with market
capitalizations in the range of companies represented by the Standard & Poor's
Mid Cap 400 Index ("S&P 400"), which are considered to be undervalued based on
certain proprietary measures of value.
STRATEGY: The Fund typically invests in equity securities of companies with
between $200 million and $5 billion in market capitalization. In selecting
investments for the Fund, Value Investors emphasizes fundamental investment
value and considers the following factors, among others, in identifying and
analyzing a security's fundamental value and capital appreciation potential: the
relationship of a company's potential earning power to the current price of its
stock; current dividend income and the potential for dividend growth; low
price/earnings ratio relative to either that company's historical results or the
current ratios for other similar companies; strong competitive advantages; and
potential for favorable business developments.
PERFORMANCE
For the quarter ended March 31, 2000, the PBHG Mid-Cap Value Fund's total
return was 12.72% versus 12.69% for the S&P 400 and 6.27% for the S&P Midcap
Barra Value Index ("S&P Barra Mid Value"). For the fiscal year, the Fund's total
return was 42.21% versus 38.08% for the S&P 400 and 18.28% for the S&P Barra Mid
Value. In a quarter and a year that was dominated by growth stocks, we were very
pleased with the Fund's returns. We hope we filled an important role in your
diversified portfolio and look forward to serving you again in fiscal year 2001.
As our process dictates, we continue to focus on companies whose
appreciation potential is commensurate with their near-term business dynamics
and long-term growth potential. In select cases, we feel that the market
provided us with the opportunity to own exceptional companies with great
management teams, strong operating histories and improving near-term and
long-term prospects. It was these companies that contributed to the bulk of your
out-performance vs. the S&P 400 and S&P Barra Mid Value benchmarks during the
past 12 months.
The Fund's most gratifying performance contribution came from its energy
companies. These companies possess the attributes that we seek in potential
portfolio additions: great near-term results, solid long-term growth prospects
and attractive valuations. Although the energy stocks in your Fund have done
well recently, we remain bullish as a result of the continually improving
near-term dynamics. Oil prices remain over $22/ barrel. Natural gas continues to
trade around the $2.75/ mcf level. Day rates are rising for the service
companies and rig counts are increasing commensurate with higher drilling
budgets.
PORTFOLIO HIGHLIGHTS
Technology was the best performing sector in most major indices over the
past 12 months. Regardless of your personal exposure to these stocks, it was
impossible not to notice the effect technology was having on popular culture.
Long a bellwether for technology, the Nasdaq joined the S&P 500 and the Dow
Jones Industrial Average as a core benchmark of performance seemingly overnight,
inasmuch as it became a gold standard of investing and drove the performance of
most major indices. It was also a major contributor to the Fund's performance
over the past 12 months. The Fund benefited from holdings in semiconductors and
semiconductor capital equipment, as these companies offered the best trade-off
between valuation, near-term business dynamics and long-term growth.
Energy also contributed positively to the Fund's positive performance during
the past 12 months. As oil rebounded off its low of $11/barrel in 1998, many of
the energy companies returned to profitability and started showing huge free
cash flow. Although we are bullish on energy, we prefer companies with natural
gas exposure versus oil, which we believe removes some of the commodity price
risk associated with OPEC. The supply and demand characteristics continue to
bode well for future stock price appreciation within this group.
Poor performing sectors over the past year included financials and consumer
staples. As investors attempted to raise cash for technology purchases, they
managed to sell many of the stocks in these groups down to levels they had not
seen in years.
LOOKING FORWARD
We expect continued volatility in the markets. Feeding the skeptics, we
expect continued rate hikes by the Federal Reserve, emerging signs of
inflationary prospects (consumer spending, low unemployment and higher energy
costs) and an increasingly leveraged and skittish individual investor.
Conversely, bulls will counter these issues by pointing to their expectations
for companies' strong earnings results over the next few weeks and the continued
strength of the U.S. economy. Regardless of future market action, we continue to
believe our process will deliver incremental returns and risk diversification
for our investors.
26
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
-----------------------------------------------------------------------
One Annualized
Year Inception
Return to Date2
-----------------------------------------------------------------------
PBHG Mid-Cap Value Fund 42.21% 36.51%
-----------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE PBHG MID-CAP VALUE FUND,
VERSUS THE S&P MID CAP 400 INDEX, S&P BARRA
MID-CAP VALUE INDEX AND THE LIPPER MID-CAP
VALUE FUNDS AVERAGE
[LINE CHART OMITTED]
<TABLE>
<CAPTION>
PBHG Mid-Cap S&P 400 Lipper Mid-Cap Value S&P Barra MidCap
Value Fund Mid-Cap Index(3) Funds Average(5) Value Index(4)
<S> <C> <C> <C> <C>
4/30/97 $10000 $10000 $10000 $10000
5/31/97 10740 10874 10834 10638
6/30/97 11410 11180 11257 10926
7/31/97 12890 12285 12024 11733
8/31/97 13240 12271 12066 11811
9/30/97 14300 12976 12784 12472
10/31/97 13760 12411 12367 12100
11/30/97 13870 12595 12432 12402
12/31/97 14148 13083 12677 13147
1/31/98 14138 12834 12532 12845
2/28/98 15443 13896 13448 13795
3/31/98 16106 14523 14070 14440
4/30/98 16422 14787 14210 14533
5/31/98 15717 14123 13643 13946
6/30/98 15896 14211 13560 13842
7/31/98 15580 13660 12760 13240
8/31/98 12769 11119 10526 11072
9/30/98 13906 12157 11043 11933
10/31/98 15358 13243 11766 12874
11/30/98 16538 13904 12209 13174
12/31/98 18087 15584 12765 13761
1/31/99 18122 14977 12521 13042
2/28/99 17023 14193 11928 12419
3/31/99 17451 14589 12223 12653
4/30/99 17764 15740 13253 13878
5/31/99 18666 15808 13459 14104
6/30/99 20042 16656 13926 14542
7/31/99 20215 16301 13638 14349
8/31/99 19487 15742 13061 13805
9/30/99 19174 15256 12697 13125
10/31/99 19313 16033 12859 13388
11/30/99 20007 16875 13178 13658
12/31/99 22017 17878 13939 14080
1/31/2000 20903 17374 13339 13472
2/29/2000 21622 18590 13609 12978
3/31/2000 24818 20146 14789 14964
</TABLE>
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Large Cap Value Fund commenced operations on December 31, 1996.
3 The S&P 500 Index is a capitalization weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Lipper Multi-Cap Value Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Multi-Cap Value
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The average is not intended to imply the
Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Basic Materials 2%
Consumer Cyclical 10%
Consumer Non-Cyclical 5%
Energy 22%
Financial 15%
Health Care 6%
Industrial 8%
Services 6%
Technology 7%
Utilities 8%
Cash 11%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Unitedglobalcom, Cl A 2.8%
Baker Hughes 2.3%
Fortune Brands 2.3%
Providian Financial 2.0%
Networks Associates 2.0%
Scripps (E.W.), Cl A 2.0%
Protective Life 2.0%
EOG Resources 1.9%
Weatherford International 1.9%
Constellation Energy Group 1.9%
-------------------------------------------------------
% of Total Portfolio Investments 21.2%
27
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG SMALL CAP VALUE FUND
PORTFOLIO PROFILE
OBJECTIVE: Above-average total return over a market cycle of three to five
years, consistent with reasonable risk.
INVESTS IN: A diversified portfolio of common stocks of small companies with
market capitalizations similar to companies represented by the Russell 2000
Index, that are considered to be relatively undervalued based on certain
proprietary measures of value.
STRATEGY: In selecting investments for the Fund, Value Investors emphasizes
fundamental investment value and considers the following factors, among others,
in identifying and analyzing a security's fundamental value and capital
appreciation potential: the relationship of a company's potential earning power
to the current price of its stock; current dividend income and the potential for
dividend growth; low price/earnings ratio relative to either that company's
historical results or the current ratios for other similar companies; strong
competitive advantages; and potential for favorable business developments.
PERFORMANCE
For the quarter ended March 31, 2000, the PBHG Small Cap Value Fund's total
return was 21.20% versus 7.08% and 3.82% for the Russell 2000 and Russell 2000
Value respectively. For the fiscal year, the Fund's total return was 64.76%
versus 37.29% for the Russell 2000 and 13.24% for the Russell 2000 Value. In a
quarter and a year that was dominated by growth stocks, we were very pleased
with the Fund's returns. We hope we filled an important role in your diversified
portfolio and look forward to serving you again in fiscal year 2001.
As our process dictates, we continue to focus on companies whose prices are
commensurate with their near-term business dynamics and long-term growth
potential. In select cases we feel that the market provided us with the
opportunity to own exceptional companies with great management teams, strong
operating histories and improving near-term and long-term prospects. It was
these companies that contributed to the bulk of your out-performance vs. the
Russell 2000 and Russell 2000 Value benchmarks during the past 12 months.
The most gratifying performance came from the Fund's energy companies. These
companies possess the attributes that we seek in potential portfolio additions:
great near-term results, solid long-term growth prospects and attractive
valuations. Although the energy stocks in your Fund have done well recently, we
remain bullish as a result of the continually improving near-term dynamics. Oil
prices remain over $22/ barrel. Natural gas continues to trade around the $2.75/
mcf level. Day rates are rising for the service companies and rig counts are
increasing commensurate with higher drilling budgets.
PORTFOLIO HIGHLIGHTS
As has been well reported, technology was the best performing sector in most
major indices over the past 12 months. Regardless of your personal exposure to
these stocks, it was impossible not to notice the effect technology was having
on popular culture. Almost overnight, technology bellwether the Nasdaq joined
the S&P 500 and the Dow Jones Industrial Average as a core benchmark of
performance. Concurrently, it became a gold standard of investing and drove the
performance of most major indices. It was also a major contributor to the Fund's
performance over the past 12 months. The Fund primarily benefited from holdings
in semiconductors and semiconductor capital equipment, as these companies
offered the best trade-off between valuation, near-term business dynamics and
long-term growth.
Energy also contributed to the Fund's positive performance during the past
12 months. As oil rebounded off its low of $11/barrel in 1998, many of the
energy companies returned to profitability and began exhibiting substantial free
cash flow. Although we are bullish on energy, we prefer companies with natural
gas exposure versus oil exposure, which we believe removes some of the commodity
price risk associated with OPEC. The supply and demand characteristics continue
to bode well for future stock price appreciation within this group in our
opinion.
Poor performing sectors over the past year included financials and consumer
staples. As investors attempted to raise cash for technology purchases, they
managed to sell many of the stocks in these groups down to levels they had not
seen in years.
LOOKING FORWARD
We expect continued volatility in the markets. Feeding the skeptics, we
expect continued rate hikes by the Federal Reserve, emerging signs of
inflationary prospects (consumer spending, low unemployment and higher energy
costs) and an increasingly leveraged and skittish individual investor.
Conversely, bulls will counter these issues by pointing to their expectations
for strong earnings results over the next few weeks and the continued strength
of the U.S. economy. Regardless of future market action, we continue to believe
our process will deliver incremental returns and risk diversification for our
investors.
28
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
---------------------------------------------------------------------------
One Annualized
Year Inception
Return to Date2
---------------------------------------------------------------------------
PBHG Small Cap Value Fund 64.76% 29.22%
---------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE PBHG SMALL CAP VALUE
FUND, VERSUS THE RUSSELL 2000 INDEX,
RUSSELL 2000 VALUE INDEX AND THE LIPPER
SMALL-CAP VALUE FUNDS AVERAGE
[LINE CHART OMITTED]
PBHG Small Cap Russell 2000 Lipper Small-Cap Russell 2000
Value Fund Index(3) Value Funds Average(5) Value Index(4)
4/30/97 $10000 $10000 $10000 $10000
5/31/97 10880 11113 10913 10796
6/30/97 11800 11589 11503 11342
7/31/97 13070 12128 12145 11819
8/31/97 13370 12405 12440 12006
9/30/97 14550 13313 13278 12805
10/31/97 14210 12729 12902 12456
11/30/97 14200 12646 12818 12593
12/31/97 14539 12868 12959 13020
1/31/98 14518 12665 12745 12785
2/28/98 15615 13601 13593 13558
3/31/98 16227 14162 14199 14107
4/30/98 16438 14240 14359 14177
5/31/98 15520 13473 13801 13675
6/30/98 15098 13501 13548 13598
7/31/98 14402 12409 12604 12533
8/31/98 11490 9999 10415 10570
9/30/98 11838 10782 10765 11167
10/31/98 12872 11221 11215 11499
11/30/98 13811 11809 11720 11810
12/31/98 14703 12540 12129 12180
1/31/99 14410 12707 11929 11904
2/28/99 13237 11678 11116 11091
3/31/99 12831 11860 10948 11000
4/30/99 13429 12923 11933 12004
5/31/99 14004 13111 12348 12373
6/30/99 14962 13704 12940 12821
7/31/99 15255 13328 12816 12516
8/31/99 15131 12835 12320 12059
9/30/99 15131 12838 12072 11818
10/31/99 14771 12890 11856 11581
11/30/99 15605 13659 12277 11641
12/31/99 17443 15205 12869 11999
1/31/2000 17217 14961 12468 11685
2/29/2000 19845 17432 12970 12399
3/31/2000 21141 16283 13584 12458
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Mid-Cap Value Fund commenced operations on April 30, 1997.
3 The S&P Mid Cap 400 Index is an unmanaged capitalization-weighted index
that measures the performance of the mid-range sector of the U.S. stock
market. The Index reflects the reinvestment of income dividends and capital
gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
4 The S&P Barra Mid Cap Value Index is an unmanaged capitalization weighted
index that consists of those securities in the S&P Mid Cap 400 Index with
lower price to book ratios. The index reflects the reinvestments of income
dividends and capital gains distributions, if any, but does not reflect
fees, brokerage commissions or other expenses of investing. The index is
not intended to imply the Fund's past or future performance.
5 The Lipper Mid-Cap Value Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Mid-Cap Value
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The average is not intended to imply the
Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Basic Materials 4%
Consumer Cyclical 11%
Energy 17%
Financial 18%
Health Care 7%
Industrial 10%
Services 1%
Technology 22%
Transportation 2%
Utilities 1%
Cash 7%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Santa Fe Synder 2.8%
EOG Resources 2.5%
Glenayre Technologies 2.1%
Affiliated Managers Group 1.9%
Sonic Foundry 1.9%
Harman International 1.8%
Alpharma, Cl A 1.8%
Kinder Morgan 1.7%
BancWest 1.7%
Aeroflex 1.7%
-------------------------------------------------------
% of Total Portfolio Investments 20.0%
29
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<PAGE>
THE PBHG FUNDS, INC.
PBHG FOCUSED VALUE FUND
PORTFOLIO PROFILE
OBJECTIVE: Above-average total return over a market cycle of three to five
years, consistent with reasonable risk, by investing in common stocks and other
equity securities of large, medium and small companies which are considered to
be relatively undervalued based on certain proprietary measures of value.
INVESTS IN: The Fund, a non-diversified portfolio, intends to invest a majority
of its assets in equity securities deemed to be undervalued. Use of our
disciplined approach may result in investment selections that are considerably
out of favor or contrary to the conventional investment consensus. The Fund may
invest in securities of companies that are considered financially sound based on
their operating history, but which may be experiencing temporary earnings
pressure due to adverse business conditions that may be company or industry
specific or due to unfavorable publicity.
STRATEGY: The Fund takes a unique approach to value investing. When screening
the universe of stocks, we discard the 25% of the universe which are the most
expensive stocks (as most value investors would), but we also disregard the 25%
of the universe that have the poorest business fundamentals, regardless of
valuation. Thus, while most value investors love the cheapest stocks, we will
only buy cheap stocks that have good profit prospects. Using this unique
approach, we always balance a potential investment's valuation against its
growth prospects.
Our goal is to produce market-beating returns by concentrating assets in the
most promising investment candidates we can identify. This concentrated approach
will likely produce investment returns that vary considerably from the S&P 500
Index. The impact of a change in value, positive or negative, of a single
holding may be magnified.
PERFORMANCE
For the quarter ended March 31, 2000, the PBHG Focused Value Fund's total
return was 29.53% versus 2.30% for the S&P 500 Index. For the fiscal year, the
Fund's total return was 89.17% versus 17.94% for the S&P 500. In a quarter and a
year that was dominated by growth stocks, we were very pleased with the Fund's
returns. We hope we filled an important role in your diversified portfolio and
look forward to serving you again in fiscal year 2001.
As our process dictates, we continue to focus on companies whose price
potential reflects their near-term business dynamics and long-term growth
potential. In select cases, we feel that the market provided us with the
opportunity to own exceptional companies with great management teams, strong
operating histories and improving near-term and long-term prospects. It was
these companies that contributed to the bulk of your out-performance versus the
S&P 500 benchmarks during the past 12 months.
The most gratifying performance contribution came from the Fund's energy
companies. These companies possess the attributes that we seek in potential
portfolio additions: great near-term results, solid long-term growth prospects
and attractive valuations. Although the energy stocks in your Fund have done
well recently, we remain bullish as a result of the continually improving
near-term business dynamics. Oil prices remain over $22/barrel. Natural gas
continues to trade around the $2.75/mcf level. Day rates are rising for the
service companies and rig counts are increasing commensurate with higher
drilling budgets.
PORTFOLIO HIGHLIGHTS
Technology was the best performing sector in most major indices over the
past 12 months. Regardless of your personal exposure to these stocks, it is
impossible not to notice the effect this area will have on popular culture.
Seemingly overnight, technology bellwether, the Nasdaq, joined the S&P 500 and
the Dow Jones Industrial Average as a core benchmark of broad market
performance. In the process, it became a gold standard of investing and drove
the performance of most major indices. All of this notwithstanding, technology
was a major contributor to the Fund's performance over the past 12 months. The
Fund primarily benefited from holdings in semiconductors and semiconductor
capital equipment, as these companies offered the best trade-off between
valuation, near-term business dynamics and long-term growth.
Energy also contributed to the Fund's positive performance during the past
12 months. As oil rebounded off its low of $11/barrel in 1998, many of the
energy companies returned to profitability and began exhibiting substantial free
cash flow. Although we are bullish on energy, we prefer companies with natural
gas exposure versus oil exposure. We believe that this removes some of the
commodity price risk associated with OPEC. In our opinion, the supply and demand
characteristics continue to bode well for future stock price appreciation within
this group.
Poor performing sectors over the past year included financials and consumer
staples. As investors attempted to raise cash for technology purchases, they
managed to sell many of the stocks in these groups down to price levels that had
not been seen in years.
LOOKING FORWARD
We expect continued volatility in the markets. Feeding the skeptics, we
expect further rate hikes by the Federal Reserve, emerging signs of inflationary
prospects (consumer spending, low unemployment and higher energy costs) and an
increasingly leveraged and skittish individual investor. Conversely, bulls will
counter the skeptics by pointing out their expectations for strong earnings
results over the next few weeks and the continued strength of the U.S. economy.
Regardless of future market action, we continue to believe our process will
deliver incremental returns and risk diversification for our investors.
30
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
------------------------------------------------------------------------
One Annualized
Year Inception
Return to Date2
------------------------------------------------------------------------
PBHG Focused Value Fund 89.17% 77.76%
------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE
PBHG FOCUSED VALUE FUND,
VERSUS THE S&P 500 INDEX
AND THE LIPPER MULTI-CAP
CORE FUNDS AVERAGE
[LINE CHART OMITTED]
PBHG Focused S&P 500 Lipper Multi-Cap Core
Value Fund Index(3) Funds Average(4)
2/28/99 $10000 $10000 $10000
3/99 10205 10400 10339
4/99 10127 10803 10801
5/99 10517 10548 10675
6/99 11395 11133 11231
7/99 11620 10786 10966
8/99 11639 10732 10761
9/99 11717 10438 10511
10/99 12068 11098 11003
11/99 12976 11324 11397
12/99 14903 11991 12277
1/00 16176 11388 11826
2/00 16854 11173 12176
3/00 19304 12266 12993
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Small Cap Value Fund commenced operations on April 30, 1997.
3 The Russell 2000 Index is an unmanaged index comprised of the 2,000
smallest securities in the Russell 3000 Index. The Index reflects the
reinvestment of income dividends and capital gains distributions, if any,
but does not reflect fees, brokerage commissions, or other expenses of
investing.
4 The Russell 2000 Value Index is an unmanaged index that measures the
performance of those securities in the Russell 2000 Index with lower price
to book ratios and lower forecasted growth values. The Index reflects the
reinvestment of income dividends and capital gain distributions, if any,
but does not reflect fees, brokerage commissions or other expenses of
investing. The Index is not intended to imply the Fund's past or future
performance.
5 The Lipper Small-Cap Value Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Small-Cap Value
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The average is not intended to imply the
Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 12%
Consumer Non-Cyclical 2%
Energy 8%
Financial 25%
Health Care 7%
Industrial 6%
Services 8%
Technology 10%
Utilities 4%
Cash 18%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Fleet Boston Financial 5.5%
Minnesota Mining & Manufacturing 5.5%
Federal Home Loan Mortgage 5.4%
Comcast, Cl A 5.1%
Baker Hughes 4.7%
Sonic Foundry 4.2%
Pharmacia & Upjohn 4.2%
General Motors 4.2%
Providian Financial 4.1%
Bank One 4.0%
-------------------------------------------------------
% of Total Portfolio Investments 46.8%
31
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<PAGE>
THE PBHG FUNDS, INC.
PBHG INTERNATIONAL FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Equity securities of non-U.S. companies.
STRATEGY: The Fund invests primarily in a diversified portfolio of equity
securities of non-U.S. issuers. Country selection is a significant part of the
investment process employed by Murray Johnstone International Limited, the
Fund's sub-adviser. Under normal market conditions, at least 65% of the Fund's
total assets will be invested in securities of issuers in at least three
countries other than the United States. The Fund may invest more than 25% of its
total assets in the securities of issuers whose principal activities are in
specific countries or geographic regions, including emerging markets. The term
"emerging markets" applies to any country which is generally considered to be an
emerging or developing country by the international financial community.
PERFORMANCE
The year to 31 March, 2000 divided starkly into two parts: markets surged in
the latter part of 1999 on a combination of enthusiasm for the "TMT" stocks -
technology, media and telecommunications, and the abundant liquidity provided by
central banks to ensure that Y2K did not lead to a shortfall in cash and panic
in financial markets. This euphoria spread from the US to Europe and the Far
East and led to dynamic returns for investors. In January 2000, we saw the first
signs that there was another side to the market and that valuations attached to
some "new economy" stocks might be over-optimistic. During the next three months
sentiment swung between support for new economy and "old economy" stocks, to the
extent that for the first quarter of 2000, the EAFE Index was almost unchanged.
Over the year, the MSCI EAFE Index returned 25.1% while the Fund returned 19.3%.
MARKET REVIEW
The European markets saw a solid year but returns were volatile through the
period. The portfolio return lagged the index due to the underperformance of the
financials and "value" stocks for much of the period. The portfolio was
beginning to close the performance gap in Europe towards the end of the year
when sentiment turned away from "TMT" stocks. During 1999 the Euro itself was
one of the key themes. Our view was that the weak Euro was a reflection of
weaker economic growth but that in time the cheaper currency would bring
benefits to the region in terms of more competitive exports and a more vibrant
manufacturing sector. These conditions are now in evidence; manufacturing is
leading the recovery and consumer confidence is improving. The European Central
Bank adjusted rates up modestly during the period but this was only a reflection
of the return to growth. At the same time, the single currency continued to
encourage a high level of merger activity leading to exceptional performances in
the case of certain stocks. The portfolio was invested in the mobile phone
group, Mannesmann, which was subject to a hostile bid from VodafoneAirtouch. The
market perception was that the two companies were a good fit and both stocks
appreciated strongly.
The solid performance of the Japanese market slowed late in the year but
stock selection continued to add value to returns. The economy showed pockets of
strength: profits were revised up and overtime was increasing. Consumer
confidence was improving and consumption was expected to pick up through 2000,
in spite of two weak quarters to end 1999. As in other markets, investor
optimism focused on technology stocks. The portfolio benefited from a full
exposure to the market and, in particular, to telecom stocks and other "net"
beneficiaries. The portfolio returned 80.7% for the period versus 45.5% for the
index.
Investments in the Singapore market fared relatively poorly during the
period. With Malaysia being readmitted to the major indices, investors increased
their exposure, diverting assets from Singapore to achieve their target
weighting. Hong Kong saw a strong market, returning 50.2%. The portfolio
outperformed with a return of 84.8%, as investors increased their investment in
Cheung Kong, the bell-weather stock for the market. The emerging markets
performed strongly in both the latter half of 1999 and the first quarter of
2000. In Latin America lower inflation allowed the governments to continue to
bring down interest rates, attracting buyers to equities. With the region up
52.7%, the portfolio underpeformed this figure but still returned a healthy
38.6%.
During the year our investment policy was to trim the UK, take some profits
from Japan and reinvest the proceeds in Europe. Our belief was that all the
elements were in place in Europe for a pick up in profits and equity markets
either late in 1999 or early in 2000. As it happened, this process commenced in
1999 but we believe it still has further to run. We have been focusing
investments on Germany but the sale of Mannesmann temporarily reduced exposure
to the market. This will be rebuilt. The reduction in the UK proved timely since
this was the worst performing market in Europe in the first three months of
2000.
MARKET OUTLOOK
The dynamic growth in the US economy was a fundamental driver of global
recovery in the late 1990s. However, it is clear that the US has been growing at
a rate in excess of the long-term sustainable rate of 4% (e.g., over 7.0% in the
4th quarter of 1999). We believe the Federal Reserve Board will move to slow
this pace by continuing to raise rates. The impact of this policy on other
economies and markets will vary from region to region. With the combination of
strong retail demand and house price inflation in the UK, the government will
continue to have a bias towards tightening. In Europe, growth appears to be much
more soundly based in 2000 than it was in 1999. Accordingly, there will be
pressures to follow the Fed lead but the pace of growth is much slower so there
will not be the need for substantial rises. The first green shoots of growth in
Japan are only now coming through. Although rates cannot fall in Japan, there
will be no pressure to hike rates for some time. The situation is similar in
China, which is only now recovering from a period of deflation. So, with the
exception of the US and UK there the year should be relatively free of new
interest rate "shocks", a situation which should allow markets to stabilize.
With global growth continuing to gather momentum and higher interest rates
largely confined to the US and UK, markets should recover their composure after
the recent correction. Growth in Europe is clearly on an upward trend while in
China which has been subdued in the current cycle, there are signs of a modest
pick up. These areas will see a continuation of low interest rates and easy
monetary policy, conditions which should favour growth, corporate profits and
equity market returns. It is also apparent that while many companies have seen
their stock price soar during 1999, many others have seen it plumb new lows so
opportunities for cheap investments do exist. That being said, we believe
technology will continue to be an important theme through 2000 but we will have
to be selective in making investments in companies which will be "winners" since
many of the new dot.coms may not be with us by the end of the year. Our focus
will therefore be on those companies which have real businesses with earnings
power. The key issue will be the valuation of stocks and investors will become
increasingly critical of new economy companies which cannot convince the markets
that their idea really will "fly".
32
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
-----------------------------------------------------------------------------
One Annualized Annualized Annualized
Year 3 Year 5 Year Inception
Return Return Return to Date2
-----------------------------------------------------------------------------
PBHG International Fund 19.29% 12.42% 11.87% 8.52%
-----------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF
A $10,000 INVESTMENT IN
THE PBHG INTERNATIONAL
FUND, VERSUS THE MSCI EAFE
INDEX AND THE LIPPER
INTERNATIONAL FUNDS
AVERAGE
[LINE GRAPH OMITTED]
PBHG International MSCI EAFE Lipper International
Fund Index(3) Funds Average(4)
6/30/94 $10000 $10000 $10000
7/31/94 10060 10097 10274
8/31/94 10241 10336 10572
9/30/94 10040 10011 10314
10/31/94 10070 10344 10515
11/30/94 9679 9847 10003
12/31/94 9829 9909 9911
1/31/95 9163 9528 9427
2/28/95 8992 9501 9444
3/31/95 9204 10094 9762
4/30/95 9486 10474 10077
5/31/95 9355 10349 10168
6/30/95 9506 10167 10172
7/31/95 9748 10800 10718
8/31/95 9536 10388 10514
9/30/95 9698 10591 10673
10/31/95 9436 10306 10466
11/30/95 9657 10593 10582
12/31/95 10030 11020 10895
1/31/96 10383 11065 11142
2/29/96 10424 11103 11192
3/31/96 10635 11338 11385
4/30/96 10958 11668 11745
5/31/96 10887 11453 11723
6/30/96 10928 11517 11801
7/31/96 10464 11181 11368
8/31/96 10605 11206 11501
9/30/96 10837 11504 11752
10/31/96 10807 11386 11682
11/30/96 11270 11840 12190
12/31/96 11301 11687 12237
1/31/97 11291 11278 12207
2/28/97 11341 11463 12376
3/31/97 11351 11504 12408
4/30/97 11401 11565 12442
5/31/97 12107 12318 13179
6/30/97 12762 12997 13794
7/31/97 13045 13208 14188
8/31/97 11936 12221 13164
9/30/97 12752 12906 13984
10/31/97 11694 11914 12920
11/30/97 11583 11792 12810
12/31/97 11694 11895 12916
1/31/98 12192 12439 13220
2/28/98 12901 13238 14094
3/31/98 13333 13645 14817
4/30/98 13355 13753 15017
5/31/98 13189 13686 15038
6/30/98 13023 13790 14922
7/31/98 13565 13930 15140
8/31/98 11749 12204 12987
9/30/98 11428 11830 12523
10/31/98 12347 13063 13454
11/30/98 13067 13732 14147
12/31/98 13183 14274 14584
1/31/99 13242 14232 14709
2/28/99 13020 13893 14323
3/31/99 13522 14472 14825
4/30/99 14023 15059 15512
5/31/99 13114 14283 14880
6/30/99 13638 14840 15659
7/31/99 13650 15281 16144
8/31/99 13778 15337 16267
9/30/99 13883 15491 16332
10/31/99 14151 16072 16959
11/30/99 15188 16630 18270
12/31/99 16678 18123 20466
1/31/2000 15332 16971 19318
2/29/2000 15594 17428 20492
3/31/2000 16129 18104 20650
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Focused Value Fund commenced operations on February 12, 1999.
3 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Multi-Cap Core Funds Average represents the average performance of all
mutual funds classified by Lipper, Inc. in the Multi-Cap Core category.
These performance figures are based on the changes in net asset value of
the funds in the category with all capital gains distributions and income
dividends reinvested. The average is not intended to imply the Fund's past
or future performance.
COUNTRY WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Argentina 2%
Belgium 1%
Australia 1%
Brazil 4%
Denmark 1%
Finland 3%
France 6%
Germany 11%
Hong Kong 1%
Hungary 1%
Ireland 1%
Italy 5%
Japan 27%
Mexico 5%
Netherlands 6%
New Zealand 1%
Singapore 2%
Spain 3%
Sweden 3%
Switzerland 3%
United Kingdom 13%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
Bayer 5.0%
Union Electrica Fenosa 2.6%
TDK 2.4%
Fomento Economico ADR 2.4%
Telenorte Lest Part ADR 2.4%
Nokia Oyj/Nok1v.He 2.3%
Telecom Italia 2.3%
Marschollek Lauten 2.2%
NTT 2.2%
SKF 2.1%
-------------------------------------------------------
% of Total Portfolio Investments 25.8%
33
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<PAGE>
THE PBHG FUNDS, INC.
PBHG CASH RESERVES FUND
PORTFOLIO PROFILE
OBJECTIVE: Preserve principal value & maintain a high degree of liquidity while
providing current income.
INVESTS IN: Money market securities.
STRATEGY: The Fund's strategy is to be fully invested in a diversified
portfolio of short-term, high-quality money market securities.
PERFORMANCE
For the twelve months ended March 31, 2000, the PBHG Cash Reserves Fund
returned 4.81% compared to 4.72% for the Lipper Money Market Funds Average.
MARKET HIGHLIGHTS
Buoyed by the strong employment environment, solid wage gains and growing
net worth created by positive equity returns, consumer spending remains the
strongest driver of the domestic economy. Historically, an advance in wage
pressures would have been expected with such a low level of unemployment, but
gains in productivity have continued to thwart this threat. However, with little
evidence of a slowdown coming in the US, and an improving global prognosis
following the dire straits of 1998, the Federal Reserve (the "Fed") raised the
Fed Funds rate five times over the last year, by a total of 125 basis points, in
a preemptive effort to slow the economy.
A unique concern for money market investors in the past year was the anxiety
in the short-term markets leading up to December 31, and the much anticipated
transition across year-end. By the early fall, many typical corporate borrowers
in the US short-term market began to extend the maturities of their borrowing in
preparation for higher short-term interest rates and to assure access to
financing across this critical year end date. At this time forward interest
rates implied a high level of uncertainty and offered high yield premiums to
attract lenders and investors, and fears rose in the market concerning the
potential for a liquidity crisis. The Fed took an active role in calming these
Y2K related fears as it implemented innovative financing programs for banks and
dealers. These added liquidity measures, when combined with larger than normal
cash balances held by investors, eventually provided so much liquidity that
overnight financing rates were as low as 1% by the end of December. This is a
good example of the system working to put safety before yield. In fact, yields
recovered to normal levels as soon as we entered 2000.
Spurred upward by the Fed's 125 basis point total rate rise, short-term
rates on March 31, 2000 were much higher than a year ago. The yield on the
three-month and one year Treasuries had risen by 142 and 163 basis points to
5.90% and 6.25%, respectively. The full yield curve inverted in the final
quarter of this reporting period as yields on longer-term issues actually
declined, supported by the Treasury's announced cutback in issuance, planned
buyback of outstanding debt and equity market volatility.
The strong economic growth evident at the end of 1999 and into the first
quarter of 2000 will keep the Federal Reserve in a tightening mode as we move
forward. As "old-economy versus new economy" debates continue on the appropriate
level for non-inflationary GDP growth, the Fed thinks the current rate of growth
is too fast. In our opinion, absent a significant jump in inflation, the Fed
will stick to a gradual approach of raising rates to slow this pace of growth.
PORTFOLIO HIGHLIGHTS
During 1999, we shortened the average maturity of the Fund in order to be
able to respond quickly in the rising rate environment. As Y2K fears heightened
during the fourth quarter of 1999, we felt it prudent to increase the level of
liquidity in the Fund. This higher level of liquidity did result in less yield
over the last couple of days of 1999, but in our opinion it ensured that
shareholders of the Fund were protected. With the threats of a Y2K meltdown now
behind us, we are now fully focused on the continuing willingness of the Fed to
raise rates. In this environment we feel the best strategy is to concentrate
investments in shorter maturity securities. We believe this stance will allow
the portfolio to "turn-over" quicker, hopefully replacing lower yielding
securities with higher yielding securities in the process. Additionally, we will
opportunistically invest in longer issues when the market fully prices in
additional rate hikes.
34
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<PAGE>
THE PBHG FUNDS, INC.
COMPARISON OF TOTAL RETURN, AS OF MARCH 31, 2000 FOR THE PBHG CASH RESERVES
FUND, VERSUS THE LIPPER MONEY MARKET FUNDS AVERAGE1
[BAR CHART OMITTED]
PBHG CASH RESERVES FUND
ONE YEAR 4.81%
LIPPER MONEY MARKET FUNDS AVERAGE(2)
ONE YEAR 4.72%
1 Performance is historical and not indicative of future results.
2 The Lipper Money Market Funds Average represents the average performance of
all mutual funds classified by Lipper, Inc. in the Money Market category.
These performance figures are based on the changes in net asset value of
the funds in the category with all capital gains distributions and income
dividends reinvested. The index is not intended to imply the Funds past or
future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Certificates of Deposit 2%
Government Bonds 1%
Commercial Paper 10%
Corporate Obligations 1%
Cash 86%
% OF TOTAL PORTFOLIO INVESTMENTS
35
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<PAGE>
THE PBHG FUNDS, INC.
PBHG TECHNOLOGY & COMMUNICATIONS FUND
PORTFOLIO PROFILE
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Companies whose products or services are based on or delivered with
technology. Also invests in companies that link businesses, consumers and other
entities through communications technology.
STRATEGY: The Fund's strategy is to invest in technology and related companies
that are exhibiting business momentum. As of the year ending March 31, 2000, the
Fund's 86 holdings ranged from $548 million to $84 billion in market
capitalization. At year end, the average holding in the Fund had a market
capitalization of $13 billion. In addition to the bottoms-up approach to
selecting individual companies, the Fund also focuses on specific sub-sector
weightings within the technology and telecommunications industries.
PERFORMANCE
The PBHG Technology and Communications Fund returned 234.0% compared with
the 133.7% return of the Pacific Stock Exchange (PSE) High Technology Index and
170.1% of the Soundview Technology Index for the year ended March 31, 2000. In
addition, the Fund significantly outpaced broader indices such as the S&P 500,
which was up 17.9% over the same time period.
PORTFOLIO HIGHLIGHTS
In our opinion, the 12 month period ending March 31, 2000 can only be
described as one of the most exhilarating and volatile periods for the
technology and telecommunications sector. Needless to say, technology investors
reaped the rewards of the accelerating growth and valuations in the sector. This
bifurcation between the "old economy" and "new economy" was never more apparent
than in the equity markets this past year. Our emphasis on the "new economy"
companies contributed to the strong results. In addition, we believe the Fund
was well positioned in the right sub-sectors of the technology and
communications universe throughout most of the past twelve months.
The Fund had significant weightings in the semiconductor, semiconductor
capital equipment, and Internet sub-sectors (particularly the portals and
business-to-consumer companies) at the start of the fiscal year. As we
approached the end of calendar year 2000, we shifted the focus of the Fund more
towards the telecommunications systems and component suppliers (both wireline
and wireless) as well as the business-to-business (B2B) applications and
software companies. This was at the expense of semiconductors and related
equipment. The year 2000 date changeover (Y2K) was one of the dominant issues
throughout the year, not only for the technology sector but nearly every aspect
of the global economy. The potential disruptions were well documented by the
press and by Wall Street prognosticators. The reality was that Y2K had minimal
negative impacts. There were companies that stockpiled inventory and others that
delayed purchases until after the New Year. However, the companies in the Fund
saw minimal, if any, impact to their operations. In fact, the majority of the
portfolio companies experienced improving business conditions or "business
momentum" through year-end.
One of our main themes throughout the past 12 months has been the evolution
of the global telecommunications network infrastructure. With the massive
build-outs of new age fiber networks, both on a domestic as well as global
scale, we believe the main beneficiaries of these network buildouts continue to
be the telecommunications systems and component vendors. In fact, business
momentum for these vendors improved throughout the year. This became evident as
the service providers began to "light up" the networks and expand the capacity
of the fiber to meet accelerating bandwidth demands. In addition, the need to
route greater amounts of data around the globe efficiently and thereby replace
the antiquated, voice centric circuit switch network drove the demand for next
generation products. We continue to believe the growth of the Internet and data
intensive applications continue to fuel demand for bandwidth both by businesses
and consumers. No matter how this bandwidth is delivered, (either via a wireline
connection through copper, fiber, or coaxial or wireless connection) the demand
for telecommunications equipment and components will further accelerate in our
opinion. Another area of focus for the Fund throughout the year was the broadly
defined Internet infrastructure group. These companies range from those that
provide data center space that house web sites to those that enable dynamic
wireless Internet capabilities to those that more efficiently deliver content to
the end user.
Early in 2000, we significantly reduced the Fund's exposure in the Internet
portal and business to consumer (B2C) companies. While we continue to be
long-term believers that the Internet will have a significant impact on the way
B2C commerce is conducted, many companies in this area have broken business
models and with the Christmas selling season behind us, their inherent
seasonality is now a negative. The entrance by the traditional bricks and mortar
retailing giants onto the e-commerce battlefield only heightens the concerns
regarding sustainable business models and eventual profitability. We believe
those companies that establish Internet brand recognition and create a business
model characterized by expanding margins will ultimately thrive.
As of the time of this writing, technology stocks have experienced a
significant correction both over the last two weeks of the first quarter as well
as the first few weeks of the second quarter. We have no way of calling the
bottom, but we strongly believe what we have experienced to date is a "valuation
correction" and in no way is reflective of the business fundamentals for the
companies in the portfolio. The March quarter earnings reports, although still
early in the reporting season, have been terrific and would expect that to
continue the next few weeks. We remain positive on the technology sector
long-term and now with stock prices much lower, our conviction has risen
commensurately.
36
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<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
-------------------------------------------------------------------------------
One Annualized Annualized
Year 3 Year Inception
Return Return to Date2
-------------------------------------------------------------------------------
PBHG Technology & Communications Fund 233.99% 88.64% 66.99%
-------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG TECHNOLOGY & COMMUNICATIONS FUND,
VERSUS THE SOUNDVIEW TECHNOLOGY INDEX AND THE
LIPPER SCIENCE & TECHNOLOGY FUNDS AVERAGE
[LINE CHART OMITTED]
PBHG Technology & Soundview Technology Lipper Science & Technology
Communication Fund Index(3) Funds Average(4)
9/30/95 $10000 $10000 $10000
10/31/95 10800 10368 9841
11/30/95 11720 11079 9965
12/31/95 11602 10533 9591
1/31/96 11462 10446 9574
2/29/96 12562 11128 10039
3/31/96 12482 10831 9767
4/30/96 14132 12557 10831
5/31/96 15303 13442 11248
6/30/96 14973 12235 10511
7/31/96 13712 11006 9512
8/31/96 14963 12002 10133
9/30/96 16643 13468 11270
10/31/96 16793 13286 11112
11/30/96 17663 14813 12042
12/31/96 17916 13842 11777
1/31/97 18539 15118 12522
2/28/97 16580 13942 11477
3/31/97 14927 12988 10636
4/30/97 15437 13353 10947
5/31/97 18100 15145 12435
6/30/97 18641 15181 12589
7/31/97 20865 17578 14207
8/31/97 20773 18116 14207
9/30/97 22416 18555 14924
10/31/97 19732 16406 13635
11/30/97 19151 16227 13517
12/31/97 18511 15133 13184
1/31/98 17697 15504 13520
2/28/98 19850 17507 15071
3/31/98 20643 17427 15508
4/30/98 21061 18623 16114
5/31/98 19047 16872 14962
6/30/98 20332 17789 16123
7/31/98 19186 17415 15865
8/31/98 16004 13427 12690
9/30/98 17997 15450 14377
10/31/98 18072 16976 15400
11/30/98 20322 18826 17480
12/31/98 23324 21537 20327
1/31/99 28435 24899 23553
2/28/99 25325 21781 21523
3/31/99 30000 23314 23965
4/30/99 31653 23997 24725
5/31/99 30120 24762 24376
6/30/99 34622 27911 27306
7/31/99 34067 27977 27006
8/31/99 36916 29675 28454
9/30/99 37916 30310 29464
10/31/99 45517 33603 32675
11/30/99 54107 39615 38449
12/31/99 80210 49489 48346
1/31/2000 82496 48149 47161
2/29/2000 117027 62909 59956
3/31/2000 100197 63040 57072
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Technology & Communications Fund commenced operations on September
29, 1995.
3 The Soundview Technology Index is an equal dollar weighted index designed
to measure the performance of the technology industry. It is comprised of
100 major technology companies chosen by Soundview Financial Group. The
Index reflects the reinvestment of income dividends and capital gain
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing. The Index is not intended to imply the Fund's
past or future performance.
4 The Lipper Science & Technology Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Science &
Technology category. These performance figures are based on the changes in
net asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The average is not intended
to imply the Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Consumer Cyclical 2%
Industrial 2%
Services 1%
Technology 95%
% OF TOTAL PORTFOLIO INVESTMENTS
TOP TEN HOLDINGS - MARCH 31, 2000
InfoSpace 6.2%
JDS Uniphase 4.0%
SDL 2.8%
Sycamore Networks 2.6%
Brocade Communications Systems 2.6%
Rare Medium Group 2.5%
Veritas Software 2.4%
Broadcom 2.4%
Juniper Networks 2.4%
Network Solutions 2.3%
-------------------------------------------------------
% of Total Portfolio Investments 30.3%
37
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG STRATEGIC SMALL COMPANY FUND
PORTFOLIO PROFILE
OBJECTIVE: Growth of capital.
INVESTS IN: Equity securities of small companies having a market capitalization
or annual revenues of up to $750 million.
STRATEGY: The Fund invests in companies poised for rapid and dynamic growth
("growth companies") and companies that are undervalued or overlooked by the
market ("value securities") in a proportion that depends on the Advisers' view
of current economic or market conditions and their long-term investment outlook.
PERFORMANCE
The PBHG Strategic Small Company Fund returned 99.74% for the fiscal year
ended March 31, 2000. The performance breakdown showed the growth portion of the
portfolio returning 149.48% and the value portion contributing 70.95%. This
performance compares favorably to the 37.29% and 59.06% returns of the Russell
2000 and the Russell 2000 Growth Indexes, respectively and the 96.44% and 17.32%
return of the average mutual fund in Lipper's Small Cap Growth and Small Cap
Value categories, respectively. As has historically been the case, the Fund was
heavily weighted in the technology sector for the majority of the year, which
contributed to its performance in comparison to its benchmarks.
The mandate of the Fund is to provide strong growth potential in an up
market cycle via the growth style employed by Pilgrim Baxter & Associates, while
moderating the risk of a down market with the value style utilized by Pilgrim
Baxter Value Investors, Inc. Since inception, the Fund has maintained a neutral
allocation (approximately 50/50) between the two styles, with adjustments for
market movements made with the flow of funds into and out of the Fund. At March
31, 2000 the split of assets was 56% growth and 44% value.
PORTFOLIO HIGHLIGHTS -- VALUE
As our process dictates, we continue to focus on companies whose prices are
commensurate with their near-term business dynamics and long-term growth
potential. In select cases we feel that the market provided us with the
opportunity to own exceptional companies with great management teams, strong
operating histories and improving near-term and long-term prospects. It was
these companies that contributed to the bulk of your out-performance vs. the
Russell 2000 and Russell 2000 Value benchmarks during the past 12 months.
The most gratifying performance came from the Fund's energy companies. These
companies possess the attributes that we seek in potential portfolio additions:
great near-term results, solid long-term growth prospects and attractive
valuations. Although the energy stocks in your Fund have done well recently, we
remain bullish as a result of the continually improving near-term dynamics. Oil
prices remain over $22/ barrel. Natural gas continues to trade around the $2.75/
mcf level. Day rates are rising for the service companies and rig counts are
increasing commensurate with higher drilling budgets.
As has been well reported, Technology was the best performing sector in most
major indices over the past 12 months. Regardless of your personal exposure to
these stocks, it was impossible not to notice the effect technology was having
on popular culture. Almost overnight, technology bellwether the NASDAQ joined
the S&P 500 and the Dow Jones Industrial Average as a core benchmark of
performance. Concurrently, it became a gold standard of investing and drove the
performance of most major indices. It was also a major contributor to the Fund's
performance over the past 12 months. The Fund primarily benefited from holdings
in semiconductors and semiconductor capital equipment, as these companies
offered the best trade-off between valuation, near-term business dynamics and
long-term growth.
Energy also contributed to the Fund's positive performance during the past
12 months. As oil rebounded off its low of $11/barrel in 1998, many of the
energy companies returned to profitability and began exhibiting substantial free
cash flow. Although we are bullish on energy, we prefer companies with natural
gas exposure versus oil exposure, which removes some of the commodity price risk
associated with OPEC. The supply and demand characteristics continue to bode
well for future stock price appreciation within this group.
Poor performing sectors over the past year include financials and consumer
staples. As investors attempted to raise cash for technology purchases, they
managed to sell many of the stocks in these groups down to levels they had not
seen in years.
PORTFOLIO HIGHLIGHTS -- GROWTH
The overwhelming majority of the growth portion if the Fund's holdings
performed extremely well during the fiscal year. In fact, the Fund had positions
in over 50 stocks that increased by more than 100%.
The Fund's five best performing positions were: Applied Micro Circuits Corp
(AMCC), JDS Uniphase (JDSU) QLogic (QLGC), Sandisk Corporation (SNDK) and
Broadvision Inc. (BVSN) which returned 1,304%, 737%, 707%, 595% and 577%,
respectively.
Although the majority of the Fund's investments provided positive
contributions to performance during the fiscal year, we did experience some
disappointments. Examples of these include: Bluestone Software Inc. (BLSW),
Biosite Diagnostics Inc. (BSTE), Carrier Access Group (CACS), Concentric Network
Corp. (CNCX), and Telebanc Financial Corp. (TBFC). Each of these companies lost
between 60% and 45% of their value during the fiscal year and was, with the
exception of Bluestone Software Inc., eliminated from the portfolio.
As is usually the case with our underperformers, these companies failed to
maintain earnings growth or posted operating results that disappointed
investors.
As is typical of our growth style of investing, we were overweighted in the
technology sector and exposure for the fiscal year averaged over 59%. While the
technology sector clearly dominated the returns of the portfolio, contributing
over 92% to the return of the growth portion of the Fund, other sectors also had
a positive impact. The industrial sector, with an average weight of 6.8%,
contributed over 7% to the total return. The healthcare and consumer cyclical
sectors each contributed over 5% to the return. The financial and energy
sectors, small though their weightings may have been, both had a negative impact
on the Fund, contributing -0.29% and -0.06%, respectively.
The PBHG Strategic Small Company Fund provided extraordinary investment
performance results during the fiscal year ended March 31, 2000. These results
were generated in an environment that was extremely favorable to the technology
stocks in which the fund was concentrated. We urge investors to maintain
realistic expectations of future performance and understand that these types of
results are unlikely to be sustained. In the last few months, global equity
markets have become increasingly volatile given the large advances in equity
valuations, the Federal Reserve's dedication to increasing interest rates in
order to preserve slow economic growth and the nervous investment sentiment that
these market conditions create. We remain positive in our long-term outlook for
the high quality rapidly growing companies in which the Fund invests and believe
our strategy will continue to be successful over the long haul.
38
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
INVESTMENT FOCUS STYLE / MARKET CAPITALIZATION
[CHART OMITTED]
AVERAGE ANNUAL TOTAL RETURN1
AS OF MARCH 31, 2000
------------------------------------------------------------------------------
One Annualized Annualized
Year 3 Year Inception
Return Return to Date2
------------------------------------------------------------------------------
PBHG Strategic Small Company Fund 99.74% 38.78% 30.39%
------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG
STRATEGIC SMALL COMPANY FUND, VERSUS THE RUSSELL 2000 INDEX AND THE
LIPPER SMALL-CAP GROWTH FUNDS AVERAGE
[LINE CHART OMITTED]
PBHG Strategic Small Russell 2000 Lipper Small-Cap Growth
Company Fund Index(3) Funds Average(4)
12/31/96 $10,000 $10,000 $10,000
1/31/97 $10,120 $10,200 $10,242
2/28/97 $9,350 $9,952 $9,549
3/31/97 $8,860 $9,483 $8,881
4/30/97 $8,750 $9,509 $8,746
5/31/97 $10,270 $10,567 $10,003
6/30/97 $11,130 $11,020 $10,582
7/31/97 $12,170 $11,533 $11,286
8/31/97 $12,410 $11,797 $11,475
9/30/97 $13,440 $12,660 $12,415
10/31/97 $12,820 $12,104 $11,786
11/30/97 $12,520 $12,026 $11,535
12/31/97 $12,567 $12,236 $11,593
1/31/98 $12,502 $12,043 $11,420
2/28/98 $13,439 $12,933 $12,382
3/31/98 $13,870 $13,467 $12,990
4/30/98 $13,999 $13,541 $13,126
5/31/98 $12,922 $12,812 $12,242
6/30/98 $13,073 $12,839 $12,563
7/31/98 $12,244 $11,800 $11,675
8/31/98 $9,466 $9,508 $9,149
9/30/98 $10,004 $10,252 $9,877
10/31/98 $10,381 $10,671 $10,333
11/30/98 $11,501 $11,230 $11,232
12/31/98 $12,835 $11,924 $12,456
1/31/99 $13,105 $12,083 $12,765
2/28/99 $11,957 $11,104 $11,623
3/31/99 $11,856 $11,278 $12,142
4/30/99 $12,092 $12,288 $12,646
5/31/99 $12,576 $12,468 $12,756
6/30/99 $13,937 $13,032 $13,918
7/31/99 $13,960 $12,674 $13,907
8/31/99 $14,083 $12,205 $13,757
9/30/99 $14,308 $12,208 $14,156
10/31/99 $14,815 $12,257 $14,972
11/30/99 $16,209 $12,989 $16,973
12/31/99 $19,482 $14,459 $20,183
1/31/00 $19,188 $14,227 $19,961
2/29/00 $24,796 $16,576 $25,151
3/31/00 $23,682 $15,484 $23,521
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Strategic Small Company Fund commenced operations on December 31,
1996.
3 The Russell 2000 Index is an unmanaged index comprised of the 2,000
smallest securities in the Russell 3000 Index. The Index reflects the
reinvestment of income dividends and capital gains distributions, if any,
but does not reflect fees, brokerage commissions, or other expenses of
investing. The Index is not intended to imply the Fund's past or future
performance.
4 The Lipper Small-Cap Growth Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Small-Cap
Growth category. These performance figures are based on the changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The average is not intended
to imply the Fund's past or future performance.
SECTOR WEIGHTINGS - AT MARCH 31, 2000
[PIE CHART OMITTED]
Basic Materials 2%
Consumer Cyclical 10%
Energy 7%
Financial 9%
Health Care 6%
Industrial 10%
Services 5%
Technology 46%
Transportation 1%
Cash 4%
TOP TEN HOLDINGS - MARCH 31, 2000
Sandisk 1.7%
Applied Micro Circuits 1.5%
TranSwitch 1.2%
Advanced Digital Information 1.1%
EOG Resources 1.1%
Exchange Applications 1.1%
Polycom 1.1%
Business Objects ADR 1.0%
Tweeter Home Entertainment Group 1.0%
Manhattan Associates 11.7%
-------------------------------------------------------
% of Total Portfolio Investments 10.8%
39
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE PBHG FUNDS, INC.:
In our opinion, the accompanying statements of net assets for the PBHG Growth
Fund, PBHG Emerging Growth Fund, PBHG Large Cap Growth Fund, PBHG Select Equity
Fund, PBHG Limited Fund, PBHG Large Cap 20 Fund, PBHG New Opportunities Fund and
PBHG Cash Reserves Fund, and the statements of assets and liabilities, including
the schedules of investments, for the PBHG Core Growth Fund, PBHG Large Cap
Value Fund, PBHG Mid-Cap Value Fund, PBHG Small Cap Value Fund, PBHG Focused
Value Fund, PBHG International Fund, PBHG Technology & Communications Fund and
PBHG Strategic Small Company Fund (constituting The PBHG Funds, Inc. hereafter
referred to as the "Fund"), and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the funds, constituting the
"Fund", at March 31, 2000, the results of each of their operations for the year
then ended, the changes in each of their net assets for each of the two years
(or periods) in the period then ended, and the financial highlights for each of
the periods presented commencing April 1, 1996, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at March 31,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above. The financial highlights for the Fund for
the fiscal periods presented prior to the year ended March 31, 1997 were audited
by other independent accountants, whose report dated April 29, 1996 expressed an
unqualified opinion on those financial highlights.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
May 12, 2000
40
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG GROWTH FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 89.6%
CONSUMER CYCLICAL -- 12.4%
AUDIO/VIDEO PRODUCTS -- 5.0%
Gemstar International* 2,518,100 $ 216,557
Polycom* 1,437,200 113,808
-----------
330,365
--------------------------------------------------------------------------------
MOTION PICTURES & SERVICES -- 3.2%
Macrovision* 1,721,500 148,264
Zomax*+ 1,076,500 64,859
-----------
213,123
--------------------------------------------------------------------------------
RADIO -- 1.1%
Hispanic Broadcasting* 652,700 73,918
-----------
73,918
--------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 0.9%
CDW Computer Centers* 720,900 60,871
-----------
60,871
--------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 0.6%
Dollar Tree Stores* 804,300 41,924
-----------
41,924
--------------------------------------------------------------------------------
RETAIL-JEWELRY -- 0.6%
Tiffany & Company 442,900 37,038
-----------
37,038
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 1.0%
Starbucks* 1,454,600 65,184
-----------
65,184
-----------
TOTAL CONSUMER CYCLICAL (COST $403,052) 822,423
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 6.8%
MEDICAL INFORMATION SYSTEMS -- 0.7%
Allscripts* 807,800 48,569
-----------
48,569
--------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 0.6%
Techne* 546,800 37,729
-----------
37,729
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 1.4%
Minimed* 716,500 92,787
-----------
92,787
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 0.8%
Incyte Pharmaceuticals* 285,900 24,998
Invitrogen* 510,000 29,612
-----------
54,610
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.0%
Celgene* 510,200 50,797
Jones Pharmaceuticals 866,950 26,334
King Pharmaceuticals* 1,060,550 33,407
Pharmacopeia* 405,800 19,884
-----------
130,422
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
PHARMACY SERVICES -- 0.7%
Express Scripts, Cl A* 1,147,000 $ 48,174
-----------
48,174
--------------------------------------------------------------------------------
RESPIRATORY PRODUCTS -- 0.6%
Resmed* 549,600 39,228
-----------
39,228
-----------
TOTAL HEALTH CARE (COST $331,144) 451,519
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 12.0%
BUILDING & CONSTRUCTION-MISCELLANEOUS -- 0.8%
Dycom Industries* 1,028,200 50,125
-----------
50,125
--------------------------------------------------------------------------------
CAPACITORS -- 0.9%
Kemet* 903,300 57,134
-----------
57,134
--------------------------------------------------------------------------------
CIRCUIT BOARDS -- 0.6%
Jabil Circuit* 952,000 41,174
-----------
41,174
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 3.9%
Flextronics International* 2,669,800 188,054
Gentex* 1,946,900 72,157
-----------
260,211
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.8%
Credence Systems* 443,300 55,468
-----------
55,468
--------------------------------------------------------------------------------
INDUSTRIAL AUTOMATION/ROBOTICS -- 1.2%
Cognex* 769,800 44,408
PRI Automation* 520,800 31,834
-----------
76,242
--------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 2.0%
Microchip Technology* 1,986,450 130,609
-----------
130,609
--------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 0.6%
Cymer* 760,800 38,040
-----------
38,040
--------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 0.8%
Asyst Technologies* 855,200 50,029
-----------
50,029
--------------------------------------------------------------------------------
MACHINERY-PUMPS -- 0.4%
Helix Technology 422,200 25,358
-----------
25,358
-----------
TOTAL INDUSTRIAL (COST $432,109) 784,390
-----------
--------------------------------------------------------------------------------
41
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG GROWTH FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
SERVICES -- 2.9%
ADVERTISING SALES -- 0.9%
Lamar Advertising* 1,291,400 $ 58,759
-----------
58,759
--------------------------------------------------------------------------------
ADVERTISING SERVICES -- 0.6%
Getty Images* 1,136,500 40,843
-----------
40,843
--------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.8%
Wireless Facilities* 506,600 53,320
-----------
53,320
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.6%
QRS* 512,400 38,558
-----------
38,558
-----------
TOTAL SERVICES (COST $151,066) 191,480
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 55.5%
APPLICATIONS SOFTWARE -- 5.4%
Citrix Systems* 1,248,200 82,693
Intertrust Technologies* 95,500 4,059
Peregrine Systems* 2,739,400 183,711
Pinnacle Systems* 1,130,000 37,572
Quest Software* 448,200 50,535
-----------
358,570
--------------------------------------------------------------------------------
CELLULAR TELECOMMUNICATION -- 0.5%
Triton PCS Holdings* 619,400 37,009
-----------
37,009
--------------------------------------------------------------------------------
CIRCUITS -- 1.6%
Micrel* 1,118,600 107,386
-----------
107,386
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 2.1%
Research In Motion* 1,329,100 141,549
-----------
141,549
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 2.8%
Checkpoint Software* 980,000 167,641
RSA Security* 360,200 18,663
-----------
186,304
--------------------------------------------------------------------------------
COMPUTER GRAPHICS -- 0.6%
Nvidia* 464,800 39,268
-----------
39,268
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 1.1%
Redback Networks* 247,500 74,235
-----------
74,235
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
DECISION SUPPORT SOFTWARE -- 0.2%
Advent Software* 316,300 $ 14,510
-----------
14,510
--------------------------------------------------------------------------------
EDUCATIONAL SOFTWARE -- 1.5%
Smartforce ADR* 2,108,200 96,714
-----------
96,714
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 10.3%
Applied Micro Circuits* 683,600 102,583
Cree* 322,800 36,436
Lattice Semiconductor* 662,200 44,823
Qlogic* 999,200 135,391
SDL* 1,113,000 236,930
Semtech* 757,200 48,508
TranSwitch* 756,950 72,762
-----------
677,433
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 5.5%
Aspect Development* 676,400 43,543
BEA Systems* 829,000 60,828
Informatica* 831,600 63,877
Microstrategy+ 1,624,100 141,398
TSI International Software Limited* 671,500 55,776
-----------
365,422
--------------------------------------------------------------------------------
FIBER OPTICS -- 1.3%
Harmonic* 718,700 59,832
MRV Communications* 297,900 27,295
-----------
87,127
--------------------------------------------------------------------------------
INTERNET CONTENT -- 8.0%
Backweb Technologies* 666,700 22,918
Critical Path* 427,000 36,295
Go2Net* 524,900 42,287
Infospace* 1,718,160 249,885
Network Solutions* 1,157,400 177,896
-----------
529,281
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 3.6%
Allaire* 458,200 34,651
Art Technology* 1,077,600 70,785
E.Piphany* 300,100 40,082
Software.com* 362,800 46,756
Vignette* 295,900 47,418
-----------
239,692
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 2.7%
Micromuse* 1,293,000 179,485
-----------
179,485
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 0.6%
Extreme Networks* 454,400 35,898
-----------
35,898
--------------------------------------------------------------------------------
42
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<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG GROWTH FUND
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 2.1%
Gilat Satellite*+ 1,149,900 $ 134,826
-----------
134,826
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 4.2%
Advanced Fibre* 910,700 57,090
Audiocodes Limited* 756,000 75,883
Ditech Communications* 930,600 98,702
Terayon Communication* 206,300 42,291
-----------
273,966
-----------
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 1.4%
Copper Mountain Networks* 600,400 49,195
Inet Technologies* 799,000 42,297
-----------
91,492
TOTAL TECHNOLOGY (COST $1,535,756) 3,670,167
-----------
TOTAL COMMON STOCK (COST $2,853,127) 5,919,979
-----------
--------------------------------------------------------------------------------
WARRANTS -- 0.0%
HEALTH CARE -- 0.0%
MEDICAL INFORMATION SYSTEMS
PER-SE Technologies 2,579 0
-----------
TOTAL HEALTH CARE (COST $0) 0
-----------
TOTAL WARRANTS (COST $0) 0
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 10.8%
Barclays
6.08%, dated 03/31/00, matures 04/03/00,
repurchase price $86,873,057 (collateralized by
U.S. Government Agency Instruments:
total market value $88,568,127) (A) $86,829 86,829
Greenwich Capital
6.08%, dated 03/31/00, matures 04/03/00,
repurchase price $60,342,313 (collateralized by
U.S. Government Agency Instruments:
total market value $61,520,106) (A) 60,312 60,312
J.P. Morgan
6.08%, dated 03/31/00, matures 04/03/00,
repurchase price $53,835,718 (collateralized by
U.S. Government Agency Instruments:
total market value $54,888,976) (A) 53,812 53,812
Prudential
6.08%, dated 03/31/00, matures 04/03/00,
repurchase price $133,253,908 (collateralized by
U.S. Government Agency Instruments:
total market value $135,850,704) (A) 133,187 133,187
Morgan Stanley
6.08%, dated 03/31/00, matures 04/03/00,
repurchase price $241,246,358 (collateralized by
U.S. Government Agency Instruments:
total market value $245,952,356) (A) 241,124 241,124
Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- CONTINUED
J.P. Morgan
6.08%, dated 03/31/00, matures 04/03/00,
repurchase price $140,046,032 (collateralized by
U.S. Government Agency Instruments:
total market value $142,774,613) (A) $139,975 $ 139,975
-----------
TOTAL REPURCHASE AGREEMENTS (COST $715,239) 715,239
-----------
TOTAL INVESTMENTS-- 100.4% (COST $3,568,366) 6,635,218
-----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.4)%
TOTAL OTHER ASSETS AND LIABILITIES, NET (26,047)
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 400 million
shares -- $0.001 par value) based on 110,081,226
outstanding shares of common stock 3,135,109
Fund Shares of Advisor Class (authorized 200 million
shares -- $0.001 par value) based on 2,473,523
outstanding shares of common stock 73,080
Accumulated net realized gain on investments 334,130
Net unrealized appreciation on investments 3,066,852
-----------
TOTAL NET ASSETS-- 100.0% $6,609,171
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- PBHG CLASS $58.73
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- ADVISOR CLASS $58.19
-----------
-----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
+ Considered an affiliated company as the Fund owns more than 5% of the
outstanding voting securities of such company. The total market of investments
in affiliated companies as of March 31, 2000 was $341,083,106.
The accompanying notes are an integral part of the financial statements.
43
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<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG EMERGING GROWTH FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 89.7%
CONSUMER CYCLICAL -- 7.0%
AUDIO/VIDEO PRODUCTS -- 2.1%
Polycom* 360,200 $ 28,523
-----------
28,523
--------------------------------------------------------------------------------
RADIO -- 0.6%
Citadel Communications* 190,900 8,054
-----------
8,054
--------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 2.0%
Charlotte Russe Holding* 308,000 5,275
Hot Topic* 337,800 11,823
Pacific Sunwear of California* 244,000 9,394
-----------
26,492
--------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 0.8%
Insight Enterprises* 300,000 10,931
-----------
10,931
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 0.8%
Tweeter Home Entertainment Group* 234,600 10,381
-----------
10,381
--------------------------------------------------------------------------------
RETAIL-VARIETY STORE -- 0.7%
99 Cents Only Stores* 242,200 9,506
-----------
9,506
-----------
TOTAL CONSUMER CYCLICAL (COST $49,917) 93,887
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 10.1%
HEALTH CARE COST CONTAINMENT -- 0.5%
Hooper Holmes 185,600 6,368
-----------
6,368
--------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 2.7%
Allscripts* 454,800 27,345
Dendrite International* 401,900 8,415
-----------
35,760
--------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 0.2%
Techne* 37,700 2,601
-----------
2,601
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 2.2%
Minimed* 182,300 23,608
Zoll Medical Group* 110,800 5,679
-----------
29,287
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.7%
Medicis Pharmaceutical, Cl A* 313,450 12,538
Pharmacopeia* 468,600 22,961
-----------
35,499
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
RESPIRATORY PRODUCTS -- 1.8%
Resmed* 347,900 $ 24,831
-----------
24,831
-----------
TOTAL HEALTH CARE (COST $105,678) 134,346
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 8.9%
BUILDING & CONSTRUCTION-MISCELLANEOUS -- 0.5%
Dycom Industries* 150,000 7,313
-----------
7,313
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS -- 0.3%
GSI Lumonics* 249,600 4,274
-----------
4,274
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 2.8%
Credence Systems* 168,300 21,059
Molecular Devices* 131,100 10,062
Zygo* 119,300 5,756
-----------
36,877
--------------------------------------------------------------------------------
INDUSTRIAL AUTOMATION/ROBOTICS -- 1.1%
PRI Automation* 250,100 15,287
-----------
15,287
--------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 0.6%
Varian* 207,100 7,948
-----------
7,948
--------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 2.3%
Cymer* 233,500 11,675
Electro Scientific Industries* 334,600 19,407
-----------
31,082
--------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 1.3%
Advanced Energy Industries* 330,300 16,845
-----------
16,845
-----------
TOTAL INDUSTRIAL (COST $91,424) 119,626
-----------
--------------------------------------------------------------------------------
SERVICES -- 7.3%
ADVERTISING SERVICES -- 1.5%
Getty Images* 556,100 19,985
-----------
19,985
--------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.5%
Jupiter Communications* 294,500 6,773
-----------
6,773
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 2.1%
Answerthink Consulting Group* 300,600 7,346
Factset Research Systems 429,100 11,613
QRS* 127,800 9,617
-----------
28,576
--------------------------------------------------------------------------------
44
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG EMERGING GROWTH FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
CONSULTING SERVICES -- 2.7%
Diamond Technology Partners, Cl A* 360,550 $ 23,706
Forrester Research* 237,900 12,906
-----------
36,612
--------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT -- 0.5%
Albany Molecular Research* 104,000 6,071
-----------
6,071
-----------
TOTAL SERVICES (COST $70,272) 98,017
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 56.4%
APPLICATIONS SOFTWARE -- 6.8%
Actuate* 399,000 21,471
Peregrine Systems* 691,200 46,354
Pinnacle Systems* 200,000 6,650
Quest Software* 80,200 9,042
Rational Software* 96,900 7,413
-----------
90,930
--------------------------------------------------------------------------------
CIRCUITS -- 2.6%
Micrel* 289,600 27,802
Sipex* 197,800 6,985
-----------
34,787
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 0.1%
Apropos Technology* 44,000 1,628
-----------
1,628
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 0.9%
ISS Group* 102,200 11,906
-----------
11,906
--------------------------------------------------------------------------------
COMPUTER GRAPHICS -- 1.5%
Nvidia* 231,200 19,533
-----------
19,533
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 1.0%
Mercury Computer Systems* 85,000 4,154
Radiant Systems* 53,900 3,389
Systems & Computer Technology* 230,100 5,379
-----------
12,922
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.5%
M-Systems Flash Disk Pioneers* 121,600 6,445
-----------
6,445
--------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 1.4%
In Focus Systems* 515,800 18,472
-----------
18,472
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 1.4%
Documentum* 241,900 18,868
-----------
18,868
--------------------------------------------------------------------------------
DECISION SUPPORT SOFTWARE -- 2.6%
Advent Software* 716,500 32,869
Blaze Software* 38,000 1,083
-----------
33,952
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 10.5%
ATMI* 317,600 $ 15,165
Cree* 176,700 19,945
Electroglas* 417,100 14,286
Qlogic* 80,000 10,840
Quantum Effect Devices* 141,300 11,251
TranSwitch* 301,275 28,960
Triquint Semiconductor* 193,100 14,193
Varian Semiconductor Equipment* 410,000 26,086
-----------
140,726
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE SERVICE -- 5.0%
Business Objects ADR* 345,600 34,387
Informatica* 235,800 18,112
TSI International Software Limited* 170,600 14,170
-----------
66,669
--------------------------------------------------------------------------------
FIBER OPTICS -- 1.9%
Harmonic* 179,400 14,935
MRV Communications* 120,100 11,004
-----------
25,939
--------------------------------------------------------------------------------
INTERNET CONTENT -- 1.0%
Digital Think* 47,500 1,871
Rare Medium Group* 255,200 11,261
-----------
13,132
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 4.4%
Allaire* 111,600 8,440
Appnet* 268,200 12,605
Art Technology* 259,800 17,066
Eprise* 76,500 1,205
Integrated Information Systems* 285,000 6,212
Intraware* 168,300 6,953
Macromedia* 71,400 6,448
-----------
58,929
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 2.6%
Micromuse* 252,800 35,092
-----------
35,092
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 0.6%
Emulex* 70,700 7,715
-----------
7,715
--------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 0.8%
Celeritek* 170,000 10,753
-----------
10,753
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 0.7%
Cysive* 146,100 10,008
-----------
10,008
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 6.9%
Anaren Microwave* 40,700 3,902
Audiocodes Limited* 250,400 25,134
Ditech Communications* 249,800 26,494
Natural Microsystems* 277,500 23,796
Tut Systems* 222,700 13,265
-----------
92,591
--------------------------------------------------------------------------------
45
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG EMERGING GROWTH FUND
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 0.8%
Inet Technologies* 23,000 $ 1,218
Latitude Communications* 346,600 9,098
-----------
10,316
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 2.4%
Netro* 129,000 8,387
Powerwave Technologies* 191,000 23,875
-----------
32,262
-----------
TOTAL TECHNOLOGY (COST $370,711) 753,575
-----------
TOTAL COMMON STOCK (COST $688,002) 1,199,451
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 7.6%
J.P. Morgan
6.08%, dated 03/31/00, matures 04/03/00,
repurchase price $44,915,323 (collateralized
by U.S. Government Agency Instruments:
total market value $45,790,429) (A $44,893 44,893
J.P. Morgan
6.08%, dated 03/31/00, matures 04/03/00,
repurchase price $13,566,061 (collateralized
by U.S. Government Agency Instruments:
total market value $13,830,751) (A) 13,559 13,559
Morgan Stanley
6.08%, dated 03/31/00, matures 04/03/00,
repurchase price $42,572,463 (collateralized
by U.S. Government Agency Instruments:
total market value $43,839,635) (A) 42,551 42,551
-----------
TOTAL REPURCHASE AGREEMENTS (COST $101,003) 101,003
-----------
TOTAL INVESTMENTS-- 97.3% (COST $789,005) 1,300,454
-----------
--------------------------------------------------------------------------------
Market
Description Value (000)
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 2.7%
TOTAL OTHER ASSETS AND LIABILITIES, NET $ 36,484
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of Pbhg Class (authorized 400 million
shares -- $0.001 par value) based on
33,422,042 outstanding shares of common stock 796,743
Accumulated net realized gain on investments 28,746
Net unrealized appreciation on investments 511,449
-----------
TOTAL NET ASSETS-- 100.0% $1,336,938
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $40.00
-----------
-----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED]
46
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG LARGE CAP GROWTH FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 92.4%
CONSUMER CYCLICAL -- 8.1%
AUDIO/VIDEO PRODUCTS -- 3.2%
Gemstar International* 65,600 $ 5,642
Polycom* 31,500 2,494
-----------
8,136
--------------------------------------------------------------------------------
E-COMMERCE -- 0.4%
Homegrocer.com* 100,200 1,040
-----------
1,040
--------------------------------------------------------------------------------
RADIO -- 0.6%
Hispanic Broadcasting* 14,300 1,619
-----------
1,619
--------------------------------------------------------------------------------
RETAIL-BEDDING -- 0.6%
Bed Bath & Beyond* 41,400 1,630
-----------
1,630
--------------------------------------------------------------------------------
RETAIL-BUILDING PRODUCTS -- 1.3%
Home Depot 50,150 3,235
-----------
3,235
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 0.6%
Best Buy* 17,600 1,514
-----------
1,514
--------------------------------------------------------------------------------
RETAIL-JEWELRY -- 0.6%
Tiffany & Company 19,700 1,647
-----------
1,647
--------------------------------------------------------------------------------
RETAIL-REGIONAL DEPARTMENT STORE -- 0.8%
Kohl's* 19,500 1,999
-----------
1,999
-----------
TOTAL CONSUMER CYCLICAL (COST $12,151) 20,820
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 3.1%
DIVERSIFIED FINANCIAL SERVICES -- 0.6%
Citigroup 27,600 1,637
-----------
1,637
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 2.5%
Goldman Sachs 34,500 3,627
Schwab, Charles 48,200 2,738
-----------
6,365
-----------
TOTAL FINANCIAL (COST $7,108) 8,002
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 8.2%
MEDICAL INFORMATION SYSTEMS -- 0.8%
IMS Health 121,300 2,055
-----------
2,055
--------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 1.1%
Guidant* 45,700 2,688
-----------
2,688
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENENICS -- 3.2%
Amgen* 65,100 $ 3,995
Genentech* 27,000 4,104
-----------
8,099
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.3%
Medimmune* 17,200 2,995
Shire Pharmaceuticals ADR* 54,097 2,772
-----------
5,767
--------------------------------------------------------------------------------
THERAPEUTICS -- 0.8%
Gilead Sciences* 30,700 1,946
-----------
1,946
-----------
TOTAL HEALTHCARE (COST $15,659) 20,555
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 10.1%
DIVERSIFIED MANUFACTURING OPERATIONS-- 4.1%
General Electric 34,800 5,400
Tyco International Limited 105,100 5,242
-----------
10,642
--------------------------------------------------------------------------------
DIVERSIFIED OPERATIONS -- 1.5%
Onex^ 111,500 3,917
-----------
3,917
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 2.5%
Celestica* 31,000 1,645
DII Group* 11,100 1,255
Flextronics International* 50,000 3,522
-----------
6,422
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 2.0%
Agilent Technologies* 49,900 5,190
-----------
5,190
-----------
TOTAL INDUSTRIAL (COST $17,929) 26,171
-----------
--------------------------------------------------------------------------------
SERVICES -- 2.9%
ADVERTISING AGENCIES -- 0.7%
Omnicom Group 20,300 1,897
-----------
1,897
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.7%
Digitas* 78,200 1,916
-----------
1,916
--------------------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 1.5%
AT&T 70,500 3,966
-----------
3,966
-----------
TOTAL SERVICES (COST $7,649) 7,779
-----------
--------------------------------------------------------------------------------
47
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG LARGE CAP GROWTH FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
TECHNOLOGY -- 58.3%
APPLICATIONS SOFTWARE -- 4.7%
Citrix Systems* 18,400 $ 1,219
Microsoft* 46,800 4,972
Rational Software* 7,700 589
Siebel Systems* 45,300 5,411
-----------
12,191
--------------------------------------------------------------------------------
CIRCUITS -- 1.0%
Linear Technology 44,600 2,453
-----------
2,453
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 0.7%
Research in Motion* 16,300 1,736
-----------
1,736
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 0.5%
Entrust Technologies* 13,900 1,183
-----------
1,183
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 1.0%
Brocade Communications Systems* 14,000 2,510
-----------
2,510
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 3.1%
EMC* 31,700 3,963
Veritas Software* 30,400 3,982
-----------
7,945
--------------------------------------------------------------------------------
COMPUTERS-MICRO -- 1.5%
Sun Microsystems* 40,100 3,757
-----------
3,757
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTOR-- 13.2%
Applied Materials* 50,400 4,750
Broadcom* 33,500 8,136
Fairchild Semiconductor
International, Cl A* 38,400 1,402
Intel 18,100 2,388
Kla-Tencor* 31,800 2,679
Novellus Systems* 32,200 1,807
SDL* 12,600 2,682
Texas Instruments 33,400 5,344
Xilinx* 56,900 4,712
-----------
33,900
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE SERVICES -- 1.4%
BEA Systems* 32,400 2,377
Microstrategy* 14,200 1,236
-----------
3,613
--------------------------------------------------------------------------------
FIBER OPTICS -- 6.0%
Corning 21,400 4,152
E-Tek Dynamics* 7,400 1,741
JDS Uniphase* 47,400 5,715
Sycamore Networks* 30,100 3,883
-----------
15,491
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
INTERNET CONTENT -- 3.9%
Infospace* 47,600 $ 6,923
Network Solutions* 20,000 3,074
-----------
9,997
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 2.9%
Ariba* 15,600 3,270
Exodus Communications* 22,000 3,091
Tibco Software* 13,900 1,133
-----------
7,494
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 7.8%
Cisco Systems* 92,900 7,182
Foundry Networks* 36,200 5,204
Juniper Networks* 23,100 6,088
Network Appliance* 20,200 1,672
-----------
20,146
--------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 1.5%
Lexmark International Group* 37,300 3,944
-----------
3,944
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 6.9%
Comverse Technology* 14,300 2,703
Nokia ADR, Cl A 19,800 4,301
Nortel Networks^ 57,500 7,245
Qualcomm* 23,800 3,554
-----------
17,803
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 2.2%
Motorola 22,800 3,246
Nextel Partners, Cl A* 82,300 2,387
-----------
5,633
-----------
TOTAL TECHNOLOGY (COST $77,523) 149,796
-----------
--------------------------------------------------------------------------------
UTILITIES -- 1.7%
INDEPENDENT POWER PRODUCER -- 1.7%
Calpine* 46,100 4,333
-----------
4,333
-----------
TOTAL UTILITIES (COST $2,748) 4,333
-----------
TOTAL COMMON STOCK (COST $140,767) 237,456
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 5.8%
J.P. Morgan
6.10%, dated 03/31/00, matures 04/03/00,
repurchase price $14,820,167 (collateralized
by U.S. Government Agency Instruments:
total market value $15,112,437) (A) $14,812 14,812
-----------
TOTAL REPURCHASE AGREEMENT (COST $14,812) 14,812
-----------
TOTAL INVESTMENTS-- 98.2% (COST $155,579) 252,268
-----------
--------------------------------------------------------------------------------
48
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG LARGE CAP GROWTH FUND
Market
Description Value (000)
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 1.8%
TOTAL OTHER ASSETS AND LIABILITIES, NET $ 4,697
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 6,697,027
outstanding shares of common stock 138,533
Accumulated net realized gain on investments 21,743
Net unrealized appreciation on investments 96,689
-----------
TOTAL NET ASSETS-- 100.0% $256,965
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $38.37
-----------
-----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
^ The fund held Canadian securities as of March 31, 2000. The total market value
of investments is $11,161,995 and represented 4.3% of the fund.
The accompanying notes are an integral part of the financial statements.
49
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG SELECT EQUITY FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 105.0%
CONSUMER CYCLICAL -- 5.8%
AUDIO/VIDEO PRODUCTS -- 5.8%
Gemstar International* 1,145,300 $ 98,496
-----------
98,496
-----------
TOTAL CONSUMER (COST $77,573) 98,496
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 0.1%
MEDICAL PRODUCTS -- 0.1%
Luminex* 34,600 748
-----------
748
-----------
TOTAL HEALTH CARE (COST $599) 748
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 99.1%
APPLICATIONS SOFTWARE -- 12.7%
Intertrust Technologies* 510,900 21,713
Microsoft* 692,600 73,589
Quest Software* 501,200 56,510
Siebel Systems* 531,000 63,421
-----------
215,233
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 2.8%
Research in Motion* 444,473 47,336
-----------
47,336
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.4%
Verisign* 162,300 24,264
-----------
24,264
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 8.7%
Brocade Communications Systems* 440,000 78,898
Redback Networks* 225,900 67,756
-----------
146,654
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 4.0%
Veritas Software* 516,625 67,678
-----------
67,678
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 10.5%
Broadcom* 399,500 97,029
SDL* 378,800 80,637
-----------
177,666
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICE -- 5.3%
I2 Technologies* 339,000 41,400
Microstrategy* 551,900 48,050
-----------
89,450
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
FIBER OPTICS -- 10.0%
E-Tek Dynamics* 142,300 $ 33,476
Harmonic* 299,800 24,958
JDS Uniphase* 556,300 67,069
MRV Communications* 472,000 43,247
-----------
168,750
--------------------------------------------------------------------------------
INTERNET CONTENT -- 11.9%
Doubleclick* 425,600 39,847
Infospace* 559,400 81,358
Network Solutions* 306,400 47,095
Rare Medium Group* 752,200 33,191
-----------
201,491
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 20.1%
America Online* 1,115,000 74,984
Ariba* 269,400 56,473
Art Technology* 840,800 55,230
E.Piphany* 239,500 31,988
Exodus Communications* 563,200 79,130
Valueclick* 46,000 963
Vignette* 257,800 41,312
-----------
340,080
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 9.3%
Cisco Systems* 967,500 74,800
Juniper Networks* 315,600 83,180
-----------
157,980
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 2.4%
Audiocodes Limited* 403,600 40,511
-----------
40,511
-----------
TOTAL TECHNOLOGY (COST $1,345,381) 1,677,093
-----------
TOTAL COMMON STOCK (COST $1,423,553) 1,776,337
-----------
TOTAL INVESTMENTS-- 105.0% (COST $1,423,553) 1,776,337
-----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (5.0)%
Bank Overdraft (54,180)
Line of Credit Borrowing (32,500)
Other Assets and Liabilities, Net 1,641
-----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (85,039)
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value)based on 21,736,955
outstanding shares of common stock 1,298,649
Accumulated net realized gain on investments 9,865
Net unrealized appreciation on investments 352,784
-----------
TOTAL NET ASSETS-- 100.0% $1,691,298
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $77.81
-----------
-----------
* Non-income producing security
The accompanying notes are an integral part of the financial statements.
50
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG CORE GROWTH FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 104.9%
CONSUMER CYCLICAL -- 8.2%
AUDIO/VIDEO PRODUCTS -- 2.2%
Gemstar International* 24,500 $ 2,107
Polycom* 19,800 1,568
-----------
3,675
--------------------------------------------------------------------------------
RESORTS/THEME PARKS -- 0.6%
Premier Parks* 45,700 960
-----------
960
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 1.1%
Tandy 34,400 1,746
-----------
1,746
--------------------------------------------------------------------------------
RETAIL-JEWELRY -- 3.4%
Tiffany & Company 32,200 2,693
Zale* 64,200 3,029
-----------
5,722
--------------------------------------------------------------------------------
TELEVISION -- 0.9%
Univision Communication* 12,700 1,435
-----------
1,435
-----------
TOTAL CONSUMER CYCLICAL (COST $12,189) 13,538
-----------
--------------------------------------------------------------------------------
ENERGY -- 5.3%
OIL FIELD MACHINERY & EQUIPMENT -- 2.1%
Cooper Cameron* 52,700 3,524
-----------
3,524
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 3.2%
Ensco International 91,400 3,302
Santa Fe International 53,100 1,965
-----------
5,267
TOTAL ENERGY (COST $6,330) 8,791
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 2.1%
SUPER-REGIONAL BANKS-US -- 2.1%
Bank One 100,500 3,455
-----------
3,455
-----------
TOTAL FINANCIALS (COST $3,181) 3,455
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 10.7%
DIAGNOSTIC EQUIPMENT -- 1.1%
Cytyc* 41,700 2,012
-----------
2,012
--------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 2.1%
Allscripts* 56,700 3,409
-----------
3,409
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.6%
Incyte Pharmaceuticals* 30,300 2,649
-----------
2,649
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 5.9%
Celgene* 20,200 $ 2,011
Medicis Pharmaceutical, Cl A* 43,900 1,756
Medimmune* 16,700 2,908
Teva Pharmaceutical ADR 82,100 3,064
-----------
9,739
-----------
TOTAL HEALTH CARE (COST $15,283) 17,809
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 8.7%
CAPACITORS -- 1.1%
Kemet* 27,700 1,752
-----------
1,752
--------------------------------------------------------------------------------
CIRCUIT BOARDS -- 0.2%
Viasystems Group* 24,600 381
-----------
381
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 2.0%
Celestica* 22,800 1,210
Flextronics International* 30,600 2,155
-----------
3,365
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 2.3%
Credence Systems* 17,500 2,190
Veeco Instruments* 21,400 1,583
-----------
3,773
--------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 3.1%
Mettler-Toledo International* 90,500 3,705
Microchip Technology* 22,400 1,473
-----------
5,178
-----------
TOTAL INDUSTRIAL (COST $12,110) 14,449
-----------
--------------------------------------------------------------------------------
SERVICES -- 5.5%
ADVERTISING AGENCIES -- 1.1%
Omnicom Group 19,700 1,841
-----------
1,841
--------------------------------------------------------------------------------
ADVERTISING SERVICES -- 1.4%
Getty Images* 65,700 2,361
-----------
2,361
--------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 1.9%
Convergys* 83,000 3,206
-----------
3,206
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 1.1%
Marchfirst* 49,385 1,762
-----------
1,762
-----------
TOTAL SERVICES (COST $8,762) 9,170
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 64.4%
APPLICATIONS SOFTWARE -- 3.3%
Citrix Systems* 22,300 1,477
New Era of Networks* 24,600 966
Peregrine Systems* 24,500 1,643
Quest Software* 11,900 1,342
-----------
5,428
--------------------------------------------------------------------------------
51
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG CORE GROWTH FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.5%
Checkpoint Software* 4,400 $ 753
Verisign* 11,200 1,674
-----------
2,427
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 4.5%
Brocade Communications Systems* 16,400 2,941
Redback Networks* 14,900 4,469
-----------
7,410
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.8%
Sandisk* 22,500 2,756
Veritas Software* 13,925 1,824
-----------
4,580
--------------------------------------------------------------------------------
EDUCATIONAL SOFTWARE -- 1.1%
Smartforce ADR* 41,200 1,890
-----------
1,890
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 12.6%
Amkor Technology* 15,800 838
Atmel* 38,000 1,962
ATMI* 33,800 1,614
Cypress Semiconductor* 47,900 2,362
Globespan* 37,600 3,833
LSI Logic* 43,000 3,123
Qlogic* 14,000 1,897
Triquint Semiconductor* 35,100 2,580
Xilinx* 33,800 2,799
-----------
21,008
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICE -- 2.2%
BEA Systems* 21,500 1,577
Microstrategy* 24,000 2,089
-----------
3,666
--------------------------------------------------------------------------------
FIBER OPTICS -- 5.9%
Ciena* 17,500 2,207
JDS Uniphase* 14,000 1,688
MRV Communications* 36,300 3,326
Sycamore Networks* 19,400 2,503
-----------
9,724
--------------------------------------------------------------------------------
INTERNET CONTENT -- 6.7%
China.com, Cl A* 17,100 1,385
Infospace* 22,800 3,316
Network Solutions* 25,300 3,889
Rare Medium Group* 59,200 2,612
-----------
11,202
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 11.9%
Active Software* 11,900 757
Akamai Technologies* 3,900 627
Ariba* 16,100 3,375
Art Technology* 58,000 3,810
Clarent* 27,700 2,498
Commerce One* 9,900 1,478
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 11.9% -- CONTINUED
Exodus Communications* 24,100 $ 3,386
Interwoven* 9,200 1,010
U.S. Internetworking* 25,050 971
Valueclick* 4,800 100
Vignette* 11,400 1,827
-----------
19,839
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 1.4%
Micromuse* 16,200 2,249
-----------
2,249
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 5.3%
Emulex* 13,700 1,495
Extreme Networks* 28,500 2,252
Foundry Networks* 15,800 2,271
Juniper Networks* 10,500 2,767
-----------
8,785
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 0.5%
Broadbase Software* 11,400 909
-----------
909
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 3.0%
Advanced Fibre* 29,000 1,818
Ditech Communications* 21,900 2,323
Natural Microsystems* 10,100 866
-----------
5,007
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 1.7%
Netro* 27,000 1,755
Powerwave Technologies* 8,800 1,100
-----------
2,855
-----------
TOTAL TECHNOLOGY (COST $75,990) 106,979
-----------
TOTAL COMMON STOCK (COST $133,845) 174,191
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.0%
Morgan Stanley
5.75%, dated 03/31/00, matures 04/03/00,
repurchase price $90,074 (collateralized
by U.S. Government Agency Instruments:
total market value $91,831) (A) $90 90
-----------
TOTAL REPURCHASE AGREEMENT (COST $90) 90
-----------
TOTAL INVESTMENTS-- 104.9% (COST $133,935) 174,281
-----------
Percentages are based on Net Assets of $166,098,930.
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
52
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG LIMITED FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 92.8%
BASIC MATERIALS -- 1.1%
ADVANCED MATERIALS/PRODUCTS -- 1.1%
Surmodics* 64,700 $ 1,779
-----------
1,779
-----------
TOTAL BASIC MATERIALS (COST $1,028) 1,779
-----------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 8.7%
AUDIO/VIDEO PRODUCTS -- 2.8%
Polycom* 55,500 4,395
-----------
4,395
--------------------------------------------------------------------------------
RADIO -- 0.4%
Citadel Communications* 13,300 561
-----------
561
--------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 1.2%
Charlotte Russe Holding* 108,800 1,863
-----------
1,863
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 1.8%
Tweeter Home Entertainment Group* 62,300 2,757
-----------
2,757
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 2.5%
Buca* 141,200 1,818
Rare Hospitality International* 107,000 2,080
-----------
3,898
-----------
TOTAL CONSUMER CYCLICAL (COST $8,221) 13,474
-----------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 0.6%
FOOD-RETAIL -- 0.6%
Wild Oates Markets* 43,750 897
-----------
897
-----------
TOTAL CONSUMER NON-CYCLICAL (COST $765) 897
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 13.8%
HEALTH CARE COST CONTAINMENT -- 1.6%
Hooper Holmes 74,200 2,546
-----------
2,546
--------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 2.8%
Allscripts* 72,000 4,329
-----------
4,329
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 0.5%
Zoll Medical Group* 16,400 840
-----------
840
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 4.7%
Cima Labs* 96,200 $ 1,653
Medicis Pharmaceutical, Cl A* 51,425 2,057
Pharmacopeia* 71,500 3,504
-----------
7,214
--------------------------------------------------------------------------------
PATIENT MONITORING EQUIPMENT -- 0.3%
Aspect Medical Systems* 11,800 423
-----------
423
--------------------------------------------------------------------------------
PHARMACY SERVICES -- 1.6%
Accredo Health* 74,250 2,460
-----------
2,460
--------------------------------------------------------------------------------
RESPIRATORY PRODUCTS -- 2.3%
Resmed* 50,600 3,612
-----------
3,612
-----------
TOTAL HEALTH CARE (COST $9,856) 21,424
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 6.9%
ELECTRONIC MEASUREMENT INSTRUMENTS-- 2.3%
Cohu 52,100 2,171
Molecular Devices* 18,000 1,382
-----------
3,553
--------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 4.6%
Applied Science & Technology* 26,400 799
Asyst Technologies* 56,300 3,293
Gasonics International* 78,000 3,093
-----------
7,185
-----------
TOTAL INDUSTRIAL (COST $5,535) 10,738
-----------
--------------------------------------------------------------------------------
SERVICES -- 13.6%
COMMERCIAL SERVICES -- 0.5%
Jupiter Communications* 34,900 803
-----------
803
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 6.1%
Factset Research Systems 68,900 1,865
Netegrity* 26,500 1,815
PSW Technologies* 106,900 4,249
QRS* 21,100 1,588
-----------
9,517
--------------------------------------------------------------------------------
CONSULTING SERVICES -- 5.4%
Diamond Technology Partners* 52,650 3,462
Forrester Research* 89,100 4,833
-----------
8,295
--------------------------------------------------------------------------------
53
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG LIMITED FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
HUMAN RESOURCES -- 1.6%
Hall Kinion & Associates* 105,000 $ 2,527
-----------
2,527
-----------
TOTAL SERVICES (COST $10,988) 21,142
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 48.1%
APPLICATIONS SOFTWARE -- 3.7%
Actuate* 80,000 4,305
Symix Systems* 70,600 1,412
-----------
5,717
--------------------------------------------------------------------------------
CIRCUITS -- 1.7%
Pericom Semiconductors* 71,700 2,559
-----------
2,559
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 0.1%
Apropos Technology* 5,500 204
-----------
204
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.9%
Netsolve* 44,600 1,438
-----------
1,438
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.6%
M-Systems Flash Disk Pioneers* 16,100 853
-----------
853
--------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 2.3%
In Focus Systems* 100,500 3,599
-----------
3,599
--------------------------------------------------------------------------------
DECISION SUPPORT SOFTWARE -- 2.9%
Advent Software* 97,300 4,464
-----------
4,464
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 8.4%
Electroglas* 61,800 2,117
Parlex* 46,200 1,409
TranSwitch* 45,525 4,376
Varian Semiconductor Equipment* 80,900 5,147
-----------
13,049
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICE -- 6.3%
Business Objects ADR* 46,000 4,577
Informatica* 39,100 3,003
TSI International Software Limited* 27,300 2,268
-----------
9,848
--------------------------------------------------------------------------------
FIBER OPTICS -- 1.6%
MRV Communications* 26,700 2,446
-----------
2,446
--------------------------------------------------------------------------------
INTERNET CONTENT -- 1.7%
Rare Medium Group* 60,300 2,661
-----------
2,661
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 1.1%
Appnet* 35,700 $ 1,678
-----------
1,678
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 3.5%
Micromuse* 39,200 5,441
-----------
5,441
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 1.6%
Broadbase Software* 12,200 973
Cysive* 22,000 1,507
-----------
2,480
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 9.8%
Anaren Microwave* 31,700 3,039
Davox* 25,900 693
Ditech Communications* 35,100 3,723
Natural Microsystems* 64,500 5,531
Tut Systems* 36,800 2,192
-----------
15,178
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 1.9%
Latitude Communication* 95,200 2,499
RMH Teleservices* 45,300 442
-----------
2,941
TOTAL TECHNOLOGY (COST $31,905) 74,556
-----------
TOTAL COMMON STOCK (COST $68,298) 144,010
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 13.5%
J.P. Morgan
6.10%, dated 03/31/00, matures 04/03/00,
repurchase price $21,000,049 (collateralized
by U.S. Government Agency Instruments:
total market value $21,409,959) (A) $20,989 20,989
-----------
TOTAL REPURCHASE AGREEMENT (COST $20,989) 20,989
-----------
TOTAL INVESTMENTS-- 106.3% (COST $89,287) 164,999
-----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (6.3)%
Payable for Investment Securities Purchased (12,296)
Other Assets and Liabilities, Net 2,427
-----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (9,869)
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value)
based on 6,712,547 outstanding shares
of common stock 57,696
Accumulated net investment loss (3)
Accumulated net realized gain on investments 21,725
Net unrealized appreciation on investments 75,712
-----------
TOTAL NET ASSETS-- 100.0% $155,130
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $23.11
-----------
-----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
54
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG LARGE CAP 20 FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 92.0%
CONSUMER CYCLICAL -- 5.2%
AUDIO/VIDEO PRODUCTS -- 5.2%
Gemstar International* 654,300 $ 56,270
-----------
56,270
-----------
TOTAL CONSUMER CYCLICAL (COST $19,217) 56,270
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 3.6%
DIVERSIFIED FINANCIAL SERVICES -- 3.6%
Citigroup 651,600 38,648
-----------
38,648
-----------
TOTAL FINANCIAL (COST $37,386) 38,648
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 6.4%
MEDICAL INSTRUMENTS -- 3.0%
Guidant* 554,700 32,623
-----------
32,623
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 3.4%
Genentech* 241,000 36,632
-----------
36,632
-----------
TOTAL HEALTH CARE (COST $54,660) 69,255
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 8.3%
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 4.6%
Flextronics International* 700,300 49,327
-----------
49,327
--------------------------------------------------------------------------------
ELECTRONIC MEASUREMENT INSTRUMENTS-- 3.7%
Agilent Technologies* 385,200 40,061
-----------
40,061
-----------
TOTAL INDUSTRIAL (COST $56,063) 89,388
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 68.5%
APPLICATIONS SOFTWARE -- 3.4%
Siebel Systems* 306,300 36,584
-----------
36,584
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 8.3%
EMC* 370,600 46,325
Veritas Software* 331,800 43,466
-----------
89,791
--------------------------------------------------------------------------------
COMPUTERS-MICRO -- 4.1%
Sun Microsystems* 479,600 44,940
-----------
44,940
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 16.9%
Applied Materials* 509,100 47,983
Broadcom* 336,700 81,776
Texas Instruments 332,000 53,120
-----------
182,879
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
FIBER OPTICS -- 8.2%
JDS Uniphase* 740,600 $ 89,289
-----------
89,289
--------------------------------------------------------------------------------
INTERNET CONTENT -- 2.3%
Network Solutions* 161,800 24,869
-----------
24,869
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 13.7%
Cisco Systems* 910,100 70,362
Foundry Networks* 307,700 44,232
Juniper Networks* 128,900 33,973
-----------
148,567
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 11.6%
Nokia ADR, Cl A 215,100 46,730
Nortel Networks^ 629,190 79,278
-----------
126,008
-----------
TOTAL TECHNOLOGY (COST $389,594) 742,927
-----------
TOTAL COMMON STOCK (COST $556,920) 996,488
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 5.8%
Morgan Stanley
6.10%, dated 03/31/00, matures 04/03/00,
repurchase price $8,641,889 (collateralized
by U.S. Government Agency Instruments:
total market value $8,822,864) (A) $ 8,637 8,637
J.P. Morgan
6.10%, dated 03/31/00, matures 04/03/00,
repurchase price $54,645,935 (collateralized
by U.S. Government Agency Instruments:
total market value $55,710,949) (A) 54,618 54,618
-----------
TOTAL REPURCHASE AGREEMENTS (COST $63,255) 63,255
-----------
TOTAL INVESTMENTS-- 97.8% (COST $620,175) 1,059,743
-----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 2.2%
TOTAL OTHER ASSETS AND LIABILITIES, NET 23,717
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value)
based on 24,437,315 outstanding shares
of common stock 554,374
Undistributed net investment loss (4)
Accumulated net realized gain on investments 89,522
Net unrealized appreciation on investments 439,568
-----------
TOTAL NET ASSETS-- 100.0% $1,083,460
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $44.34
-----------
-----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
^ The fund held Canadian securities as of March 31, 2000. The total market value
of investments is $79,277,940 and represented 7.3% of the fund.
The accompanying notes are an integral part of the financial statements.
55
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG NEW OPPORTUNITIES FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 112.6%
CONSUMER CYCLICAL -- 6.2%
AUDIO/VIDEO PRODUCTS -- 6.2%
Gemstar International* 255,200 $ 21,947
-----------
21,947
-----------
TOTAL CONSUMER CYCLICAL (COST $14,069) 21,947
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 2.4%
BLOOD COLLECTION BANKING -- 0.1%
Cryo-Cell International* 39,180 316
-----------
316
--------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 2.3%
Allscripts* 135,900 8,171
-----------
8,171
-----------
TOTAL HEALTH CARE (COST $8,040) 8,487
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 1.1%
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 1.1%
EPCOS Ag ADR* 30,800 4,035
-----------
4,035
-----------
TOTAL INDUSTRIAL (COST $4,687) 4,035
-----------
--------------------------------------------------------------------------------
SERVICES -- 3.2%
COMPUTER SERVICES -- 3.2%
Mcafee.com* 221,100 11,428
-----------
11,428
-----------
TOTAL SERVICES (COST $11,671) 11,428
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 99.7%
APPLICATIONS SOFTWARE -- 10.0%
Intertrust Technologies* 220,700 9,380
Quest Software* 91,900 10,362
Siebel Systems* 132,200 15,789
-----------
35,531
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 2.8%
Research in Motion* 94,100 10,022
-----------
10,022
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.0%
Verisign* 23,200 3,468
-----------
3,468
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 9.6%
Brocade Communications Systems* 118,600 21,267
Redback Networks* 42,900 12,867
-----------
34,134
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 5.1%
Optika Imaging Systems+ 647,000 $ 18,116
-----------
18,116
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 15.8%
Broadcom* 95,400 23,170
Globespan* 70,700 7,207
Quantum Effect Devices* 83,000 6,609
SDL* 90,700 19,308
-----------
56,294
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 4.8%
I2 Technologies* 61,600 7,523
Microstrategy* 107,700 9,377
-----------
16,900
--------------------------------------------------------------------------------
FIBER OPTICS -- 10.4%
Avanex* 30,300 4,598
E-Tek Dynamics* 18,000 4,234
JDS Uniphase* 129,600 15,625
MRV Communications* 137,700 12,617
-----------
37,074
--------------------------------------------------------------------------------
INTERNET CONTENT -- 10.7%
Infospace.com* 111,400 16,202
Network Solutions* 72,800 11,189
Rare Medium Group* 240,700 10,621
-----------
38,012
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 16.8%
Ariba* 54,800 11,487
Art Technology* 123,000 8,080
E.Piphany* 52,000 6,945
Exodus Communications* 125,300 17,605
Loudeye Technologies* 106,000 3,697
Valueclick* 10,200 213
Vignette* 72,900 11,682
-----------
59,709
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 1.9%
Universal Access* 205,155 6,873
-----------
6,873
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 5.3%
Juniper Networks* 71,400 18,818
-----------
18,818
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 5.0%
Audiocodes Limited* 96,100 9,646
Ditech Communications* 76,800 8,146
-----------
17,792
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 0.5%
Telocity* 150,900 1,867
-----------
1,867
TOTAL TECHNOLOGY (COST $232,427) 354,610
-----------
TOTAL COMMON STOCK (COST $270,894) 400,507
-----------
--------------------------------------------------------------------------------
56
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<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG NEW OPPORTUNITIES FUND
Face Market
Description Amount (00) Value (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.1%
J.P. Morgan
6.10%, dated 03/31/00, matures 04/03/00,
repurchase price $135,880 (collateralized
by U.S. Government Agency Instruments:
total market value $138,528) (A) $136 $ 136
-----------
TOTAL REPURCHASE AGREEMENT (COST $136) 136
-----------
TOTAL INVESTMENTS-- 112.7% (COST $271,030) 400,643
-----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (12.7%)
Bank Overdraft (18,000)
Line of Credit Borrowing (27,400)
Other Assets and Liabilities, Net 357
-----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (45,043)
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value)
based on 3,621,719 outstanding shares
of common stock 185,627
Accumulated net realized gain on investments 40,376
Net unrealized appreciation on investments 129,597
-----------
TOTAL NET ASSETS-- 100.0% $355,600
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $98.19
-----------
-----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
+ Considered an affiliated company as the fund owns more than 5% of the
outstanding voting securities of such company. The total market value of
investments in affiliated companies as of March 31, 2000 was $18,116,000.
The accompanying notes are an integral part of the financial statements.
57
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG LARGE CAP VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 96.8%
BASIC MATERIALS -- 2.6%
CHEMICALS-DIVERSIFIED -- 0.8%
Dupont E.I. De Nemours 5,400 $ 285
-----------
285
--------------------------------------------------------------------------------
CHEMICALS-SPECIALTY -- 1.0%
Praxair 7,800 325
-----------
325
--------------------------------------------------------------------------------
METAL-ALUMINUM -- 0.8%
Alcoa 4,100 288
-----------
288
-----------
TOTAL BASIC MATERIALS (COST $865) 898
-----------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 4.4%
AUTO-CARS/LIGHT TRUCKS -- 0.9%
Ford Motor Company 6,100 280
-----------
280
--------------------------------------------------------------------------------
CABLE TV -- 2.1%
Comcast, Cl A* 16,100 698
-----------
698
--------------------------------------------------------------------------------
MULTIMEDIA -- 0.9%
McGraw Hill 6,700 305
-----------
305
--------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 0.5%
Intimate Brands 3,800 156
-----------
156
-----------
TOTAL CONSUMER CYCLICAL (COST $1,355) 1,439
-----------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 13.4%
CONSUMER PRODUCTS-MISCELLANEOUS -- 0.9%
Fortune Brands 12,100 302
-----------
302
--------------------------------------------------------------------------------
COSMETICS & TOILETRIES -- 3.8%
Avon Products 11,200 325
Procter & Gamble 16,200 911
-----------
1,236
--------------------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 6.1%
Conagra 17,800 323
General Mills 9,400 340
Heinz (H J) 19,700 687
Kellogg 13,100 336
Ralston-Purina Group 11,700 320
-----------
2,006
--------------------------------------------------------------------------------
FOOD-RETAIL -- 0.7%
Kroger* 13,300 234
-----------
234
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
TOBACCO -- 1.9%
UST 39,400 $ 616
-----------
616
-----------
TOTAL CONSUMER NON-CYCLICAL (COST $4,244) 4,394
-----------
--------------------------------------------------------------------------------
ENERGY -- 9.1%
OIL COMPANIES-EXPLORATION & PRODUCTION-- 3.6%
EOG Resources 6,000 127
Kerr Mcgee 11,200 647
Santa Fe Snyder* 42,300 407
-----------
1,181
--------------------------------------------------------------------------------
OIL COMPANIES-INTEGRATED -- 4.3%
Conoco, Cl A 13,900 342
Exxon Mobil 8,300 646
Royal Dutch Petroleum 7,600 437
-----------
1,425
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 0.7%
Santa Fe International 5,800 215
-----------
215
--------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 0.5%
Tidewater 5,300 169
-----------
169
-----------
TOTAL ENERGY (COST $2,725) 2,990
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 15.7%
COMMERCIAL BANKS-SOUTHERN US -- 1.0%
Hibernia, Cl A 31,100 327
-----------
327
--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 3.4%
Citigroup 18,600 1,103
-----------
1,103
--------------------------------------------------------------------------------
FINANCE-CREDIT CARDS -- 0.6%
Providian Financial 2,300 199
-----------
199
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 1.4%
Bear Stearns 7,000 319
Merrill Lynch 1,500 157
-----------
476
--------------------------------------------------------------------------------
FINANCE-MORTAGE LOAN/BANKER -- 3.2%
Federal National Mortgage 10,400 587
Federal Home Loan Mortgage 10,400 460
-----------
1,047
--------------------------------------------------------------------------------
FINANCIAL GUARANTEE INSURANCE -- 1.0%
MGIC Investment 7,600 332
-----------
332
--------------------------------------------------------------------------------
58
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG LARGE CAP VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISORY SERVICES -- 1.0%
John Nuveen, Cl A 8,600 $ 329
-----------
329
--------------------------------------------------------------------------------
MONEY CENTER BANKS -- 0.9%
J.P. Morgan 2,300 303
-----------
303
--------------------------------------------------------------------------------
S&L/THRIFTS-WESTERN US -- 0.5%
Washington Mutual 5,700 151
-----------
151
--------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 2.7%
Mellon Financial 8,900 263
Wells Fargo 15,200 622
-----------
885
-----------
TOTAL FINANCIAL (COST $4,839) 5,152
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 13.8%
DISPOSABLE MEDICAL PRODUCTS -- 0.8%
Bard (C.R.) 7,200 279
-----------
279
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 1.5%
Johnson & Johnson 6,800 476
-----------
476
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 6.2%
American Home Products 11,200 601
Merck 2,600 162
Warner Lambert 13,200 1,287
-----------
2,050
--------------------------------------------------------------------------------
MEDICAL-HMO -- 3.4%
Pacificare Health Systems* 6,800 339
United Healthcare 7,800 465
Wellpoint Health Networks* 4,600 321
-----------
1,125
--------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTOR-- 0.9%
Cardinal Health 6,500 298
-----------
298
--------------------------------------------------------------------------------
OPTICAL SUPPLIES -- 1.0%
Bausch & Lomb 6,000 313
-----------
313
-----------
TOTAL HEALTH CARE (COST $4,261) 4,541
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 10.1%
AEROSPACE/DEFENSE -- 1.4%
Boeing 7,600 288
Northrop 3,000 159
-----------
447
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
AEROSPACE/DEFENSE-EQUIPMENT -- 2.0%
General Dynamics 6,700 $ 333
Goodrich (B.F.) 11,600 333
-----------
666
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS-- 2.5%
Cooper Industries 9,500 333
Honeywell International 9,100 479
-----------
812
--------------------------------------------------------------------------------
ELECTRIC PRODUCTS-MISCELLANEOUS -- 1.1%
Emerson Electric 7,000 370
-----------
370
--------------------------------------------------------------------------------
INDUSTRIAL AUTOMATION/ROBOTICS -- 1.2%
Rockwell International 9,600 401
-----------
401
--------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 0.9%
Parker Hannifin 7,600 314
-----------
314
--------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 1.0%
Ingersoll Rand 7,300 323
-----------
323
-----------
TOTAL INDUSTRIAL (COST $3,083) 3,333
-----------
--------------------------------------------------------------------------------
SERVICES -- 13.6%
COMPUTER SERVICES -- 6.6%
Ceridian* 24,900 478
Computer Sciences* 5,500 435
Electronic Data Systems 12,800 822
Unisys* 16,900 431
-----------
2,166
--------------------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 6.2%
AT&T 10,600 596
GTE 13,500 959
SBC Communications 11,700 491
-----------
2,046
--------------------------------------------------------------------------------
TELEPHONE-LOCAL -- 0.8%
BellSouth 5,700 268
-----------
268
-----------
TOTAL SERVICES (COST $4,413) 4,480
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 13.6%
COMPUTERS-MICRO -- 2.8%
IBM 7,900 932
-----------
932
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 2.2%
First Data 16,500 730
-----------
730
--------------------------------------------------------------------------------
59
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG LARGE CAP VALUE FUND
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 3.7%
Computer Associates International 12,400 $ 734
Compuware* 23,000 485
-----------
1,219
--------------------------------------------------------------------------------
OFFICE AUTOMATION & EQUIPMENT -- 1.7%
Pitney Bowes 12,700 568
-----------
568
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 3.2%
Lucent Technologies 7,000 425
Tellabs* 9,800 617
-----------
1,042
-----------
TOTAL TECHNOLOGY (COST $4,426) 4,491
-----------
--------------------------------------------------------------------------------
UTILITIES -- 0.5%
ELECTRIC-INTEGRATED -- 0.5%
PECO Energy 4,300 159
-----------
159
-----------
TOTAL UTILITIES (COST $168) 159
-----------
TOTAL COMMON STOCK (COST $30,379) 31,877
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.9%
JP Morgan
6.10%, dated 03/31/00, matures
04/03/00, repurchase price $1,612,809
(collateralized by U.S. Government
Agency Instruments: total market value
$1,644,230) (A) $1,612 1,612
-----------
TOTAL REPURCHASE AGREEMENT (COST $1,612) 1,612
-----------
TOTAL INVESTMENTS-- 101.7% (COST $31,991) $33,489
-----------
-----------
Percentages are based on Net Assets of $32,922,297.
* Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
60
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG MID-CAP VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 95.7%
BASIC MATERIALS -- 2.6%
CHEMICALS-SPECIALTY -- 2.3%
CK Witco 43,700 $ 445
Cytec Industries* 30,300 928
-----------
1,373
--------------------------------------------------------------------------------
FERTILIZERS -- 0.3%
IMC Global 14,300 210
-----------
210
-----------
TOTAL BASIC MATERIALS (COST $1,378) 1,583
-----------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 10.3%
APPAREL MANUFACTURERS -- 0.1%
Tommy Hilfiger* 3,700 54
-----------
54
--------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 0.9%
Delphi Automotive Systems 33,100 530
-----------
530
--------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAMMING -- 2.7%
Unitedglobalcom, Cl A* 21,800 1,636
-----------
1,636
--------------------------------------------------------------------------------
CASINO HOTELS -- 0.7%
Harrah's Entertainment* 24,100 447
-----------
447
--------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 0.7%
Tech Data* 13,200 434
-----------
434
--------------------------------------------------------------------------------
HOTELS & MOTELS -- 1.7%
Starwood Hotels & Resorts 40,100 1,053
-----------
1,053
--------------------------------------------------------------------------------
MULTIMEDIA -- 1.9%
Scripps (E.W.), Cl A 24,000 1,164
-----------
1,164
--------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 0.7%
Tribune Company 10,900 399
-----------
399
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 0.9%
Wendys International 26,900 543
-----------
543
-----------
TOTAL CONSUMER CYCLICAL (COST $6,093) 6,260
-----------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 5.3%
BEVERAGES-WINE/SPIRITS -- 0.7%
Diageo PLC ADR 14,300 431
-----------
431
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
CONSUMER PRODUCTS-MISCELLANEOUS -- 2.2%
Fortune Brands 54,400 $ 1,360
-----------
1,360
--------------------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 2.4%
Aurora Foods* 4,000 12
Conagra 49,300 893
Sara Lee 29,600 533
-----------
1,438
-----------
CONSUMER NON-CYCLICAL (COST $3,243) 3,229
-----------
--------------------------------------------------------------------------------
ENERGY -- 24.0%
OIL COMPANIES-EXPLORATION & PRODUCTION-- 10.9%
Apache 16,400 816
Burlington Resources 12,800 474
Devon Energy 17,200 835
EOG Resources 53,700 1,138
Forest Oil* 62,600 665
Louis Dreyfus Natural Gas* 21,800 741
Santa Fe Snyder* 109,900 1,058
Union Pacific Resources 30,000 435
Vastar Resources 6,400 476
-----------
6,638
--------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 3.5%
Cooper Cameron* 14,300 956
Weatherford International* 19,300 1,137
-----------
2,093
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 3.0%
Ensco International 11,900 430
Global Marine* 11,100 282
Nabors Industries* 15,400 598
Noble Drilling* 12,800 530
-----------
1,840
--------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 4.3%
Baker Hughes 45,500 1,376
BJ Services* 5,900 436
Hanover Compressor* 14,400 819
-----------
2,631
--------------------------------------------------------------------------------
PIPELINES -- 2.3%
Columbia Energy Group 8,200 486
Kinder Morgan 26,300 907
-----------
1,393
-----------
TOTAL ENERGY (COST $12,489) 14,595
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 16.1%
COMMERCIAL BANKS-EASTERN US -- 0.6%
Mercantile 11,900 364
-----------
364
--------------------------------------------------------------------------------
61
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG MID-CAP VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMERCIAL BANKS-SOUTHERN US -- 1.3%
Southtrust 31,500 $ 801
-----------
801
--------------------------------------------------------------------------------
FINANCE-CREDIT CARD -- 3.5%
Capital One Financial 19,800 949
Providian Financial 13,500 1,170
-----------
2,119
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 3.1%
E*Trade Group* 28,900 871
Paine Webber Group 23,000 1,012
-----------
1,883
--------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISOR SERVICE -- 0.8%
Waddell & Reed Financial, Cl A 11,700 495
-----------
495
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 2.6%
Jefferson Pilot 6,400 426
Protective Life 36,100 1,146
-----------
1,572
--------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE -- 1.1%
XL Capital Limited, Cl A 11,900 659
-----------
659
--------------------------------------------------------------------------------
S & L THRIFTS-CENTRAL US -- 1.4%
Charter One Financial 39,400 827
-----------
827
--------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 1.7%
Comerica 4,200 176
First Union 22,400 834
-----------
1,010
-----------
TOTAL FINANCIAL (COST $8,789) 9,730
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 6.9%
DISPOSABLE MEDICAL PRODUCTS -- 1.0%
Bard (C.R.) 15,700 607
-----------
607
--------------------------------------------------------------------------------
DRUG DELIVERY SYSTEMS -- 1.4%
Alza* 22,500 845
-----------
845
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.3%
Aclara Biosciences* 20,200 797
-----------
797
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 1.1%
Forest Labs* 3,400 287
Medimmune* 2,300 400
-----------
687
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 2.1%
Mylan Labs 29,000 $ 798
Watson Pharmaceutical* 11,100 441
-----------
1,239
-----------
TOTAL HEALTH CARE (COST $3,352) 4,175
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 8.3%
AEROSPACE/DEFENSE -- 0.9%
Litton Industries* 12,800 566
-----------
566
--------------------------------------------------------------------------------
AEROSPACE/DEFENSE-EQUIPMENT -- 0.4%
Orbital Sciences* 13,700 206
-----------
206
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS-- 4.0%
Eaton 12,800 998
ITT Industries 19,200 596
Textron 13,700 834
-----------
2,428
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 0.9%
Vishay Intertechnology* 9,500 529
-----------
529
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 0.6%
Torchmark 14,000 324
-----------
324
--------------------------------------------------------------------------------
METAL PROCESSORS & FABRICATORS -- 0.3%
Worthington Industries 16,500 204
-----------
204
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 1.2%
Pentair 19,200 712
-----------
712
-----------
TOTAL INDUSTRIAL (COST $4,627) 4,969
-----------
--------------------------------------------------------------------------------
SERVICES -- 6.8%
COMMERCIAL SERVICES-FINANCE -- 2.5%
Block (H&R) 25,000 1,119
Concord EFS* 18,100 415
-----------
1,534
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 2.2%
DST Systems* 5,900 383
Safeguard Scientifics* 13,300 935
-----------
1,318
--------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT -- 1.1%
Hertz, Cl A 19,700 671
-----------
671
--------------------------------------------------------------------------------
62
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG MID-CAP VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
TELEPHONE-LOCAL -- 1.0%
Alltel 10,100 $ 637
-----------
637
-----------
TOTAL SERVICES (COST $3,738) 4,160
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 7.3%
CELLULAR TELECOMMUNICATIONS -- 0.2%
Alamosa PCS Holdings* 3,700 139
-----------
139
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 0.6%
Acxiom* 10,300 342
-----------
342
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 2.0%
Advanced Micro Devices* 13,000 742
Cypress Semiconductor* 7,900 390
Silicon Image* 1,300 93
-----------
1,225
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 0.3%
Symantec* 2,600 195
-----------
195
--------------------------------------------------------------------------------
INTERNET CONTENT -- 0.3%
S1* 2,000 171
-----------
171
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 1.9%
Networks Associates* 36,100 1,164
-----------
1,164
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 1.8%
Tellabs* 13,700 863
Westell Technologies* 7,300 233
-----------
1,096
-----------
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 0.2%
ICG Communications* 2,900 105
-----------
105
TOTAL TECHNOLOGY (COST $3,665) 4,437
-----------
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
UTILITIES -- 8.1%
ELECTRIC-INTEGRATED -- 7.2%
Conectiv 19,200 $ 336
Constellation Energy Group 35,300 1,125
DQE 16,100 733
DTE Energy 37,300 1,082
Duke Energy 7,300 383
Minnesota Power 42,700 710
-----------
4,369
--------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.9%
MCN Energy Group 10,500 262
UGI 14,200 307
-----------
569
-----------
TOTAL UTILITIES (COST $4,838) 4,938
-----------
TOTAL COMMON STOCK (COST $52,212) 58,076
-----------
--------------------------------------------------------------------------------
RIGHTS
TECHNOLOGY -- 0.0%
INTERNET SOFTWARE -- 0.0%
Opus 360 260 0
-----------
TECHNOLOGY (COST $0) 0
-----------
TOTAL RIGHTS (COST $0) 0
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 11.5%
Morgan Stanley
6.03% dated 03/31/00, matures
04/03/00, repurchase price $6,998,389
(collateralized by U.S. Government
Agency Instruments: total market
value $7,266,358) (A) $6,995 6,995
-----------
TOTAL REPURCHASE AGREEMENT (COST $6,995) 6,995
-----------
TOTAL INVESTMENTS-- 107.2% (COST $59,207) $ 65,071
-----------
-----------
Percentages are based on Net Assets of $60,690,123.
* Non-Income Producing Security
(A) - Tri-Party Repurchase Agreement
ADR - American Depository Receipt
Cl - Class
The accompanying notes are an integral part of the financial statements.
63
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG SMALL CAP VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 92.1%
BASIC MATERIALS -- 3.7%
CHEMICALS-SPECIALTY -- 2.9%
CK Witco 124,000 $ 1,263
Cytec Industries* 47,000 1,439
-----------
2,702
--------------------------------------------------------------------------------
FERTILIZERS -- 0.5%
IMC Global 33,500 492
-----------
492
--------------------------------------------------------------------------------
STEEL-PRODUCERS -- 0.3%
LTV 86,000 306
-----------
306
-----------
TOTAL BASIC MATERIALS (COST $3,234) 3,500
-----------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 10.8%
AUDIO/VIDEO PRODUCTS -- 1.8%
Harman International 27,100 1,626
-----------
1,626
--------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 1.0%
Delco Remy International* 125,600 934
-----------
934
--------------------------------------------------------------------------------
CASINO HOTELS -- 0.7%
Harrah's Entertainment* 36,200 672
-----------
672
--------------------------------------------------------------------------------
HOME FURNISHINGS -- 2.2%
Ethan Allen Interiors 25,700 643
Furniture Brands International* 75,600 1,422
-----------
2,065
--------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 1.1%
Journal Register* 15,500 229
Pulitzer 19,900 813
-----------
1,042
--------------------------------------------------------------------------------
RETAIL-CATALOG SHOPPING -- 0.5%
MSC Industrial Direct* 27,800 500
-----------
500
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 0.8%
Tweeter Home Entertainment Group* 16,500 730
-----------
730
--------------------------------------------------------------------------------
RETAIL-JEWELRY -- 0.4%
Friedman's, Cl A 55,500 342
-----------
342
--------------------------------------------------------------------------------
RETAIL-MAIL ORDER -- 0.3%
Wilmar Industries* 14,600 249
-----------
249
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 1.0%
Wendys International 45,000 $ 909
-----------
909
--------------------------------------------------------------------------------
TELEVISION -- 0.9%
Pegasus Communications* 5,600 788
-----------
788
--------------------------------------------------------------------------------
TRAVEL SERVICES -- 0.1%
Hotel Reservations Network* 6,600 117
-----------
117
-----------
TOTAL CONSUMER CYCLICAL (COST $9,401) 9,974
-----------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 0.3%
FOOD-MISCELLANEOUS/DIVERSIFIED -- 0.3%
Aurora Foods* 99,900 300
-----------
300
-----------
TOTAL CONSUMER NON-CYCLICAL (COST $768) 300
-----------
--------------------------------------------------------------------------------
ENERGY -- 16.7%
OIL COMPANIES-EXPLORATION & PRODUCTION-- 11.7%
Barrett Resources* 7,300 218
Devon Energy 16,000 777
EOG Resources 105,300 2,231
Forest Oil* 121,400 1,290
Louis Dreyfus Natural Gas* 32,200 1,095
Newfield Exploration* 8,400 296
Noble Affiliates 32,800 1,076
Santa Fe Snyder* 265,400 2,554
Unit* 8,800 97
Vintage Petroleum 57,900 1,165
-----------
10,799
--------------------------------------------------------------------------------
OIL REFINING & MARKETING -- 0.7%
Valero Energy 22,000 674
-----------
674
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 2.6%
Key Energy Services* 118,900 1,382
Patterson Energy* 21,700 689
Pride International* 15,800 361
-----------
2,432
--------------------------------------------------------------------------------
PIPELINES -- 1.7%
Kinder Morgan 45,100 1,556
-----------
1,556
-----------
TOTAL ENERGY (COST $12,690) 15,461
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 18.6%
COMMERCIAL BANKS-CENTRAL US -- 0.5%
Firstmerit 22,700 418
-----------
418
--------------------------------------------------------------------------------
64
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG SMALL CAP VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMERICAL BANKS-EASTERN US -- 1.1%
Commercial Bank of New York 19,800 $ 189
Mercantile 26,300 804
-----------
993
--------------------------------------------------------------------------------
COMMERICAL BANKS-SOUTHERN US -- 1.4%
Southtrust 49,400 1,257
-----------
1,257
--------------------------------------------------------------------------------
COMMERICAL BANKS-WESTERN US -- 3.4%
BancWest 77,000 1,521
City National 32,400 1,091
Silicon Valley Bancshares* 7,600 546
-----------
3,158
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 2.2%
Morgan Keegan 50,600 886
Raymond James Financial 45,700 948
Wit Capital Group* 10,400 178
-----------
2,012
--------------------------------------------------------------------------------
FINANCIAL GUARANTEE INSURANCE -- 0.8%
Financial Security Assurance 10,700 786
-----------
786
--------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISORY SERVICES-- 2.8%
Affiliated Managers Group* 36,300 1,724
Federated Investors 9,400 257
Waddell & Reed Financial, ClA 15,000 635
-----------
2,616
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 2.9%
Money Group 38,000 1,228
Protective Life 35,300 1,121
Torchmark 15,800 365
-----------
2,714
--------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE -- 0.7%
Fidelity National Financial 16,800 232
First American Financial 32,500 461
-----------
693
--------------------------------------------------------------------------------
REITS-SHOPPING CENTERS -- 0.6%
JP Realty 32,800 584
-----------
584
--------------------------------------------------------------------------------
S & L/THRIFTS-CENTRAL US -- 1.4%
Charter One Financial Inc 61,100 1,283
-----------
1,283
--------------------------------------------------------------------------------
S & L/THRIFTS-WESTERN US -- 0.4%
ITLA Capital* 31,200 398
-----------
398
--------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 0.4%
Comerica 9,200 385
-----------
385
-----------
TOTAL FINANCIAL (COST $15,695) 17,297
-----------
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
HEALTH CARE -- 7.1%
DIAGNOSTIC KITS -- 0.0%
Biosite Diagnostics* 1,900 $ 46
-----------
46
--------------------------------------------------------------------------------
DISPOSABLE MEDICAL PRODUCTS -- 0.0%
ICU Medical* 1,400 25
-----------
25
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 0.7%
PSS World Medical* 98,700 669
-----------
669
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.4%
Aclara Biosciences* 30,100 1,187
Regeneron Pharmaceuticals* 2,600 77
-----------
1,264
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 1.1%
Cima Labs* 6,200 107
Dura Pharmaceuticals* 26,900 331
Intrabiotics Pharmaceuticals* 38,500 577
-----------
1,015
--------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 1.7%
Alpharma, Cl A 42,900 1,577
-----------
1,577
--------------------------------------------------------------------------------
MEDICAL-HOSPITALS -- 0.1%
Triad Hospitals* 3,900 65
-----------
65
--------------------------------------------------------------------------------
MEDICAL-OUTPATIENT/HOME MEDICAL -- 0.3%
Lincare Holding* 7,400 210
-----------
210
--------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTOR-- 0.3%
Syncor* 8,600 284
-----------
284
--------------------------------------------------------------------------------
THERAPEUTICS -- 1.5%
CV Therapeutics* 8,600 432
Titan Pharmaceuticals* 5,300 165
Tularik* 5,300 164
United Therapeutics* 8,200 637
-----------
1,398
-----------
TOTAL HEALTH CARE (COST $4,757) 6,553
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 9.6%
AEROSPACE/DEFENSE -- 0.4%
Teledyne Technologies* 21,400 372
-----------
372
--------------------------------------------------------------------------------
AEROSPACE/DEFENSE-EQUIPMENT -- 0.9%
Orbital Sciences* 54,600 819
-----------
819
--------------------------------------------------------------------------------
65
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG SMALL CAP VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
BUILDING PRODUCTS-CEMENT/AGGREGATE-- 0.6%
Lafarge 23,800 $ 565
-----------
565
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS-- 1.0%
ITT Industries 30,000 932
-----------
932
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 1.1%
Kent Electronics* 7,600 222
Vishay Intertechnology* 14,000 779
-----------
1,001
--------------------------------------------------------------------------------
ELECTRONIC CONNECTORS -- 0.4%
Amphenol* 3,500 358
-----------
358
--------------------------------------------------------------------------------
ELECTRONICS-MILITARY -- 1.6%
Aeroflex* 30,400 1,505
-----------
1,505
--------------------------------------------------------------------------------
HAZARDOUS WASTE DISPOSAL -- 0.4%
Stericycle* 12,700 317
-----------
317
--------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 1.0%
Speedfam-Ipec* 47,200 938
-----------
938
--------------------------------------------------------------------------------
METAL PROCESSORS & FABRICATORS -- 0.3%
Wolverine Tube* 18,200 233
-----------
233
--------------------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 0.2%
Republic Services* 19,200 210
-----------
210
--------------------------------------------------------------------------------
STEEL PIPE & TUBE -- 1.0%
NS Group* 55,600 907
-----------
907
--------------------------------------------------------------------------------
TRUCKING & LEASING -- 0.3%
Ryder System 13,100 297
-----------
297
--------------------------------------------------------------------------------
WIRE & CABLE PRODUCTS -- 0.4%
Cable Design Technologies* 11,600 394
-----------
394
-----------
TOTAL INDUSTRIAL (COST $6,316) 8,848
-----------
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
SERVICES -- 0.9%
COMPUTER SERVICES -- 0.3%
Manhattan Associates* 8,300 $ 284
-----------
284
--------------------------------------------------------------------------------
SCHOOLS -- 0.6%
Edison Schools* 28,800 565
-----------
565
-----------
TOTAL SERVICES (COST $603) 849
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 22.0%
APPLICATIONS SOFTWARE -- 1.9%
Sonic Foundry* 17,600 1,716
-----------
1,716
--------------------------------------------------------------------------------
CELLULAR TELECOMMUNICATIONS -- 0.2%
Alamosa PCS Holdings* 5,400 204
-----------
204
--------------------------------------------------------------------------------
CIRCUITS -- 1.4%
Integrated Device Technology* 32,900 1,304
-----------
1,304
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 1.8%
Avid Technology* 83,900 1,500
General Magic* 16,500 147
-----------
1,647
--------------------------------------------------------------------------------
COMPUTER AIDED DESIGN -- 0.2%
Ansoft* 17,400 216
-----------
216
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 0.4%
Axent Technologies* 19,200 361
-----------
361
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.2%
Systems & Computer Technology* 8,600 201
-----------
201
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 1.1%
Overland Data* 62,200 875
Western Digital* 24,900 185
-----------
1,060
--------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 0.6%
S3* 24,100 506
-----------
506
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 2.7%
Acxiom* 17,200 572
Excelon* 51,500 579
Informix* 78,200 1,325
-----------
2,476
--------------------------------------------------------------------------------
66
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG SMALL CAP VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 4.0%
Cirrus Logic* 18,200 $ 332
Cypress Semiconductor* 6,800 335
Electroglas* 8,600 295
Genus* 77,600 1,077
MEMC Electronic Materials* 40,200 809
Silicon Image* 3,000 215
Zoran* 10,700 602
-----------
3,665
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 0.9%
Informatica* 6,300 484
Symantec* 4,400 330
-----------
814
--------------------------------------------------------------------------------
INTERNET CONTENT -- 0.4%
Launch Media* 5,900 92
S1* 3,698 317
-----------
409
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 0.7%
Ravisent Technologies* 45,300 629
-----------
629
--------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 1.0%
Splash Technologies* 74,200 928
-----------
928
--------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 0.3%
American Mobile Satellite* 3,400 82
Globecomm Systems* 7,400 197
-----------
279
--------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 0.9%
Pairgain Technologies* 20,100 375
Westell Technologies* 15,400 491
-----------
866
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 0.2%
ICG Communications* 5,900 213
-----------
213
--------------------------------------------------------------------------------
TRANSPORT-TRUCK -- 0.6%
US Xpress Enterprises* 65,600 578
-----------
578
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 2.5%
Glenayre Technologies* 104,900 1,842
Metro One Telecommunications* 17,800 238
Spectrian* 10,600 239
-----------
2,319
-----------
TOTAL TECHNOLOGY (COST $15,706) 20,391
-----------
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
TRANSPORTATION -- 1.5%
AIRLINES -- 0.6%
Midway Airlines* 108,350 $ 542
-----------
542
--------------------------------------------------------------------------------
TRANSPORTATION-AIR FREIGHT -- 0.5%
Airborne Freight 21,200 509
-----------
509
--------------------------------------------------------------------------------
TRANSPORTATION-TRUCK -- 0.4%
Hunt (J.B.) Transportation Services 25,400 348
-----------
348
-----------
TOTAL TRANSPORTATION (COST $2,345) 1,399
-----------
--------------------------------------------------------------------------------
UTILITIES -- 0.9%
ELECTRIC-INTEGRATED -- 0.4%
Idacorp 9,700 337
-----------
337
--------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.5%
UGI 21,400 463
-----------
463
-----------
TOTAL UTILITIES (COST $730) 800
-----------
TOTAL COMMON STOCK (COST $72,245) 85,372
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.2%
Morgan Stanley
6.03% dated 03/31/00, matures
04/03/00, repurchase price $6,644,001
(collateralized by U.S. Government
Agency Instruments: total market
value $6,786,772) (A) $6,641 6,641
-----------
TOTAL REPURCHASE AGREEMENT (COST $6,641) 6,641
-----------
TOTAL INVESTMENTS-- 99.3% (COST $78,886) $ 92,013
-----------
-----------
Percentages are based on Net Assets of $92,634,193.
* Non-Income Producing Security
(A) - Tri-Party Repurchase Agreement
Cl - Class
The accompanying notes are an integral part of the financial statements.
67
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG FOCUSED VALUE FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 92.0%
CONSUMER CYCLICAL -- 13.4%
AUTO-CARS/LIGHT TRUCKS -- 4.0%
General Motors 10,900 $ 903
-----------
903
--------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAM -- 2.5%
Unitedglobalcom, Cl A* 7,700 578
-----------
578
--------------------------------------------------------------------------------
CABLE TV -- 4.9%
Comcast, Cl A* 25,400 1,102
-----------
1,102
--------------------------------------------------------------------------------
RETAIL-MAIL ORDER -- 2.0%
Williams-Sonoma* 14,300 443
-----------
443
-----------
TOTAL CONSUMER CYCLICAL (COST $2,712) 3,026
-----------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 2.6%
FOOD-RETAIL -- 2.6%
Kroger* 32,800 576
-----------
576
-----------
TOTAL CONSUMER NON-CYCLICAL (COST $567) 576
-----------
--------------------------------------------------------------------------------
ENERGY -- 8.8%
OIL COMPANY-EXPLORATION & PRODUCTION-- 2.9%
EOG Resources 18,300 388
Santa Fe Snyder* 28,400 273
-----------
661
--------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 1.4%
Weatherford International* 5,400 318
-----------
318
-----------
--------------------------------------------------------------------------------
OIL FIELD SERVICES -- 4.5%
Baker Hughes 33,300 1,007
-----------
1,007
-----------
TOTAL ENERGY (COST $1,812) 1,986
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 28.0%
FINANCE-CREDIT CARD -- 6.8%
Capital One Financial 13,800 662
Providian Financial 10,100 875
-----------
1,537
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 2.2%
E*Trade Group* 16,300 491
-----------
491
--------------------------------------------------------------------------------
FINANCE MORTGAGE LOAN/BANKER -- 5.2%
Federal Home Loan Mortgage 26,300 1,162
-----------
1,162
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
MONEY CENTER BANKS -- 2.6%
J.P. Morgan 4,400 $ 580
-----------
580
--------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 11.2%
Bank One 25,000 859
Fleet Boston Financial 32,700 1,194
Wells Fargo 11,800 483
-----------
2,536
-----------
TOTAL FINANCIAL (COST $5,789) 6,306
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 8.3%
MEDICAL-BIOMEDICAL/GENETIC -- 1.3%
Aclara Biosciences* 7,200 284
-----------
284
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 6.7%
Forest Labs* 1,800 152
Intrabiotics Pharmaceuticals* 7,800 117
Merck 5,400 335
Pharmacia & Upjohn 15,200 901
-----------
1,505
--------------------------------------------------------------------------------
THERAPEUTICS -- 0.3%
United Therapeutics* 1,000 78
-----------
78
-----------
TOTAL HEALTH CARE (COST $1,492) 1,867
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 7.0%
BUILDING & CONSTRUCTION-MISCELLANEOUS -- 1.7%
Willbros Group* 54,700 390
-----------
390
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS-- 5.3%
Minnesota Mining & Manufacturing 13,400 1,187
-----------
1,187
-----------
TOTAL INDUSTRIAL (COST $1,592) 1,577
-----------
--------------------------------------------------------------------------------
SERVICES -- 9.0%
COMMERCIAL SERVICE-FINANCE -- 1.4%
Block (H&R) 7,100 318
-----------
318
--------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 1.2%
Giga Information Group* 25,000 275
-----------
275
--------------------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 3.5%
AT&T 14,200 799
-----------
799
--------------------------------------------------------------------------------
68
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG FOCUSED VALUE FUND
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
TELEPHONE-LOCAL -- 2.9%
Alltel 10,200 $ 643
-----------
643
-----------
TOTAL SERVICES (COST $2,022) 2,035
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 10.8%
APPLICATIONS SOFTWARE -- 4.1%
Sonic Foundry* 9,400 916
-----------
916
--------------------------------------------------------------------------------
COMPUTERS-MICROPROCESSING -- 3.8%
Dell Computer* 15,900 857
-----------
857
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 2.2%
Silicon Image* 5,400 387
Zoran* 1,900 107
-----------
494
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 0.5%
Ravisent Technologies* 8,600 119
-----------
119
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.2%
Metro One Telecommunications* 3,800 51
-----------
51
-----------
TOTAL TECHNOLOGY (COST $1,426) 2,437
-----------
--------------------------------------------------------------------------------
UTILITIES -- 4.1%
ELECTRIC-INTEGRATED -- 4.1%
Duke Energy 15,100 793
Minnesota Power 8,600 143
-----------
936
TOTAL UTILITIES (COST $913) 936
-----------
TOTAL COMMON STOCK (COST $18,325) 20,746
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 20.2%
Morgan Stanley
5.80% dated 03/31/00, matures
04/03/00, repurchase price $4,558,980
(collateralized by U.S. Government
Agency Instruments: total market
value $4,647,932) (A) $4,557 4,557
-----------
TOTAL REPURCHASE AGREEMENT (COST $4,557) 4,557
-----------
TOTAL INVESTMENTS-- 112.2% (COST $22,882) $ 25,303
-----------
-----------
Percentages are based on Net Assets of $22,556,416.
* Non-Income Producing Security
(A) - Tri-Party Repurchase Agreement
Cl - Class
The accompanying notes are an integral part of the financial statements.
69
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG INTERNATIONAL FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 92.1%
ARGENTINA -- 1.9%
Banco Frances Rio* 9,000 $ 213
-----------
213
--------------------------------------------------------------------------------
AUSTRALIA -- 0.8%
National Australia Bank* 7,000 90
-----------
90
--------------------------------------------------------------------------------
BELGIUM -- 0.8%
Fortis* 3,521 90
-----------
90
--------------------------------------------------------------------------------
BRAZIL -- 3.9%
Companhia Paranaese* 21,000 179
Telenorte Leste Part ADR* 10,000 266
-----------
445
--------------------------------------------------------------------------------
DENMARK -- 0.7%
Novo-Nordisk* 632 85
-----------
85
--------------------------------------------------------------------------------
FINLAND -- 2.3%
Nokia Oyj/Nok1v.He 1,248 264
-----------
264
--------------------------------------------------------------------------------
FRANCE -- 5.8%
Banque National Paris* 2,209 174
France Telecom* 959 165
Total Fina Elf* 920 138
Vivendi* 1,571 181
-----------
658
--------------------------------------------------------------------------------
GERMANY -- 8.3%
Bayer* 12,585 564
Dresdner Bank* 3,927 159
Epcos Ag* 901 119
Siemens* 720 104
-----------
946
--------------------------------------------------------------------------------
HONG KONG -- 1.1%
Hutchison Whampoa 7,000 126
-----------
126
--------------------------------------------------------------------------------
HUNGARY -- 1.2%
Magyar Tavk ADR* 3,000 132
-----------
132
--------------------------------------------------------------------------------
IRELAND -- 0.7%
Allied Irish Bank* 7,909 76
-----------
76
--------------------------------------------------------------------------------
ITALY -- 4.3%
Eni* 46,811 234
Telecom Italia* 17,303 258
-----------
492
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
JAPAN -- 25.9%
Fuji Machine* 3,000 $ 223
Fuji Photo Film* 4,000 176
Kurita Water* 9,000 174
Matsushita Communications* 1,000 184
Mitsui* 27,000 218
Nippon Comsys* 8,000 149
NTT* 6 246
Olympus Optical* 9,000 139
Omron* 5,000 142
Rohm Company Limited* 600 208
Secom* 2,000 171
Sharp* 8,000 171
Sumitomo Bank* 12,000 179
TDK* 2,000 272
Uni Charm* 2,000 131
Yamanouchi Pharmaceutical* 3,000 164
-----------
2,947
--------------------------------------------------------------------------------
MEXICO -- 4.9%
Formento Economico ADR* 6,000 270
Panamerican Beverages* 10,000 176
Tubos Acero Mexico ADR* 7,000 115
-----------
561
--------------------------------------------------------------------------------
NETHERLANDS -- 5.7%
Aegon* 1,890 151
Elsevier* 12,937 131
Equant ADR* 1,369 117
Philips Electronics 495 83
Unilever Cert* 3,397 167
-----------
649
--------------------------------------------------------------------------------
NEW ZEALAND -- 0.9%
Carter Holt Harvey 48,000 41
Telecom Corp Of N.Z.* 12,500 57
-----------
98
--------------------------------------------------------------------------------
SINGAPORE -- 2.0%
City Developments* 30,000 136
Singapore Press Holdings* 5,500 88
-----------
224
--------------------------------------------------------------------------------
SPAIN - 2.6%
Union Electrica Fenosa* 14,490 297
-----------
297
--------------------------------------------------------------------------------
SWEDEN -- 3.0%
Ericsson* 1,186 104
SKF* 10,701 237
-----------
341
--------------------------------------------------------------------------------
SWITZERLAND -- 3.2%
Roche Holdings - Genus* 14 152
Zurich Allied 423 213
-----------
365
--------------------------------------------------------------------------------
70
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG INTERNATIONAL FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
UNITED KINGDOM -- 12.1%
Abbey National* 4,100 $ 54
Autonomy* 300 51
Bank Of Scotland* 8,100 92
Barclays 3,300 87
BP Amoco* 14,100 129
British Aerospace* 15,400 87
British Telecom 7,400 138
Energis* 1,000 47
Freeserve Wi* 3,700 29
Laporte - Redeemable `B'* 110,400 2
Laporte* 6,900 53
Logica* 1,500 50
Man (Ed&F) Group* 7,600 64
Norwich Union* 11,700 78
Peninsular & Oriental* 5,200 54
Rio Tinto* 4,300 72
Sage Group* 3,700 41
Smithkline Beecham* 8,000 105
Vodafone Airtouch* 26,700 148
-----------
1,381
-----------
TOTAL COMMON STOCK (COST $8,456) 10,480
-----------
--------------------------------------------------------------------------------
PREFERRED STOCK -- 2.5%
GERMANY -- 2.2%
Marschollek Lauten* 425 252
-----------
252
--------------------------------------------------------------------------------
AUSTRALIA -- 0.3%
Newscorp* 3,000 36
-----------
36
-----------
TOTAL PREFERRED STOCK (COST $82) 288
-----------
TOTAL INVESTMENTS-- 94.6% (COST $8,538) $ 10,768
-----------
-----------
Percentages indicated are based on net assets of $11,381,963.
* Non-income producing security
ADR -- American Depository Receipt
The accompanying notes are an integral part of the financial statements.
71
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG CASH RESERVES FUND
Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
BANK NOTES -- 0.2%
US Bank Note
5.92%, 10/02/00 $ 1,000 $ 1,000
TOTAL BANK NOTES (COST $1,000) 1,000
-----------
--------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 2.3%
Bank Scotland
5.76%, 07/03/00 2,000 2,000
Barclays Bank N.Y.
6.68%, 02/20/01 1,500 1,500
Desdner Bank
6.71%, 02/26/01 1,500 1,499
Deutsche Bank
6.55%, 01/22/01 1,500 1,499
Royal Bank Of Canada
5.70%, 07/03/00 2,000 2,000
Suntrust Atlanta
5.90%, 04/10/00 3,000 3,000
Svenska Handelsbanken N.Y.
6.75%, 03/16/01 2,000 1,999
TOTAL CERTIFICATES OF DEPOSIT (COST $13,497) 13,497
-----------
--------------------------------------------------------------------------------
COMMERCIAL PAPER -- 9.6%
Aesop Funding
5.95%, 05/05/00 3,000 2,983
Archer-Daniels Midland
6.03%, 05/19/00 3,500 3,472
Associates Corporation of North America
5.81% 04/04/00 3,000 2,999
Bear Stearns
6.06%, 05/17/00 3,500 3,473
Centric Capital
6.06%, 04/10/00 3,000 2,995
Coca-Cola Enterprises
5.85%, 04/17/00 3,000 2,992
Enterprise Funding
5.92%, 04/04/00 3,000 2,998
Eureka Securities
6.06%, 05/19/00 3,000 2,976
Falcon Asset Securities
5.95%, 05/23/00 3,670 3,638
General Motors Acceptance
6.05%, 05/09/00 3,500 3,478
Goldman Sachs Group
6.04%, 05/17/00 3,000 2,977
Kitty Hawk Funding
5.85%, 04/03/00 3,000 2,999
Park Avenue Receivable
5.95%, 04/11/00 3,000 2,995
PPG Industries
5.88%, 04/06/00 3,000 2,998
Preferred Receivable Funding
6.06%, 05/10/00 3,000 2,980
Riverwoods Funding
6.05%, 05/17/00 3,000 2,977
United Technologies
6.05%, 04/28/00 3,000 2,986
Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
COMMERCIAL PAPER -- CONTINUED
Variable Funding Capital
5.92%, 05/22/00 $ 3,000 $ 2,975
TOTAL COMMERCIAL PAPER (COST $55,891) 55,891
-----------
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 0.5%
IBM
5.95%, 08/17/00 3,000 2,999
-----------
TOTAL CORPORATE OBLIGATIONS (COST $2,999) 2,999
-----------
--------------------------------------------------------------------------------
GOVERNMENT BOND -- 0.9%
Federal Home Loan Bank (FNLB)
6.52%, 03/28/01 5,000 4,997
-----------
TOTAL GOVERNMENT BOND (COST $4,997) 4,997
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 86.6%
ABN AMRO
6.18%, dated 03/31/00, matures 04/03/00,
repurchase price $30,015,450 (collateralized
by U.S. Government Obligations: total
market value $30,600,000) (A) 30,000 30,000
Deutsche Bank Securities
6.25%, dated 03/31/00, matures 04/03/00,
repurchase price $140,072,917 (collateralized
by U.S. Government Obligations: total
market value $142,800,258) (A) 140,000 140,000
Goldman Sachs
6.22%, dated 03/31/00, matures 04/03/00,
repurchase price $35,018,142 (collateralized
by U.S. Government Obligations: total
market value $35,700,001) (A) 35,000 35,000
Paribas
6.18%, dated 03/31/00, matures 04/03/00,
repurchase price $40,020,600 (collateralized
by U.S. Government Obligations: total
market value $40,800,817) (A) 40,000 40,000
Warburg Dillon Reed, LLC
6.22%, dated 03/31/00, matures 04/03/00,
repurchase price $93,248,309 (collateralized
by U.S. Government Obligations: total
market value $95,066,929) (A) 93,200 93,200
JP Morgan Securities
6.18%, dated 03/31/00, matures 04/03/00,
repurchase price $140,072,100 (collateralized
by U.S. Government Obligations: total
market value $142,800,001) (A) 140,000 140,000
Paribas
6.20%, dated 03/31/00, matures 04/03/00,
repurchase price $23,731,255 (collateralized
by U.S. Government Obligations: total
market value $23,856,000) 23,719 23,719
-----------
TOTAL REPURCHASE AGREEMENTS (COST $501,919) 501,919
-----------
TOTAL INVESTMENTS-- 100.1% (COST $580,303) 580,303
-----------
--------------------------------------------------------------------------------
72
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<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG CASH RESERVES FUND
Market
Description Value (000)
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.1%)
Other Assets and Liabilities, Net $ (845)
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 1 billion,
800 million shares -- $0.001
par value) based on 579,457,052
outstanding shares of common stock 579,458
Undistributed net investment income 6
Accumulated net realized loss on investments (6)
-----------
TOTAL NET ASSETS-- 100.0% $579,458
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $1.00
-----------
-----------
(A) -- Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
73
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG TECHNOLOGY & COMMUNICATIONS FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 94.9%
CONSUMER CYCLICAL -- 2.3%
AUDIO/VIDEO PRODUCTS -- 1.5%
Gemstar International* 335,300 $ 28,836
Polycom* 359,600 28,476
-----------
57,312
--------------------------------------------------------------------------------
CABLE TV -- 0.2%
Mediacom Communication* 550,300 7,670
-----------
7,670
--------------------------------------------------------------------------------
E-COMMERCE -- 0.6%
Purchasepro.com* 318,800 23,113
-----------
23,113
-----------
TOTAL CONSUMER CYCLICAL (COST $122,167) 88,095
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 1.7%
CIRCUIT BOARDS -- 0.2%
Viasystems Group* 570,700 8,846
-----------
8,846
--------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 1.0%
Microchip Technology* 567,700 37,326
-----------
37,326
--------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 0.5%
FSI International* 513,300 10,523
Gasonics International* 195,400 7,749
-----------
18,272
-----------
TOTAL INDUSTRIAL (COST $64,590) 64,444
-----------
--------------------------------------------------------------------------------
SERVICES -- 0.7%
ADVERTISING SERVICES -- 0.7%
Getty Images* 709,400 25,494
-----------
25,494
-----------
TOTAL SERVICES (COST $33,380) 25,494
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 90.2%
APPLICATIONS SOFTWARE -- 2.7%
Citrix Systems* 777,800 51,529
Intertrust Technologies* 51,900 2,206
J.D. Edwards & Company* 239,700 7,805
New Era of Networks* 321,000 12,599
Quest Software* 281,600 31,750
-----------
105,889
--------------------------------------------------------------------------------
CIRCUITS -- 0.3%
Integrated Device Technology* 259,900 10,299
-----------
10,299
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.4%
Entrust Technologies* 194,300 $ 16,531
Verisign* 248,200 37,106
-----------
53,637
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 5.0%
ASM Lithography Holding* 128,100 14,315
Brocade Communications Systems* 532,400 95,466
Redback Networks* 274,800 82,423
-----------
192,204
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 4.3%
Sandisk* 601,700 73,708
Veritas Software* 698,050 91,445
-----------
165,153
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 19.5%
Amkor Technology* 311,900 16,550
Applied Materials* 448,200 42,243
Applied Micro Circuits* 559,200 83,915
Atmel* 619,400 31,977
Broadcom* 369,400 89,718
Cypress Semiconductor* 911,800 44,963
Globespan* 736,100 75,036
Lam Research* 791,700 35,676
Lattice Semiconductor* 399,800 27,061
LSI Logic* 581,400 42,224
Metalink Limited* 41,500 1,593
Micron Technology 230,900 29,093
SDL* 496,800 105,756
Silicon Image* 260,100 18,630
TranSwitch* 434,100 41,728
Triquint Semiconductor* 488,200 35,883
Xilinx* 346,800 28,719
-----------
750,765
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 4.0%
Aspect Development* 280,200 18,038
BEA Systems* 707,800 51,935
I2 Technologies* 210,200 25,671
Informatica* 87,900 6,752
Microstrategy* 597,700 52,037
-----------
154,433
--------------------------------------------------------------------------------
FIBER OPTICS -- 13.0%
Avanex* 325,700 49,425
Ciena* 302,600 38,165
E-Tek Dynamics* 230,900 54,319
JDS Uniphase* 1,226,100 147,822
Metromedia Fiber Network* 600,800 58,127
MRV Communications* 576,500 52,822
Sycamore Networks* 764,500 98,620
-----------
499,300
--------------------------------------------------------------------------------
74
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG TECHNOLOGY & COMMUNICATIONS FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
INTERNET CONTENT -- 12.4%
China.Com, Cl A* 385,700 $ 31,242
Go2Net* 386,500 31,137
Infospace* 1,605,000 233,427
Network Solutions* 570,000 87,611
Rare Medium Group* 2,112,300 93,205
-----------
476,622
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 13.7%
Active Software* 164,400 10,457
Agile Software* 849,800 53,112
Akamai Technologies* 151,000 24,283
Alteon Websystems* 34,200 2,804
Ariba* 190,000 39,829
Art Technology* 644,600 42,342
Clarent* 778,900 70,247
Commerce One* 547,400 81,699
E.Piphany* 89,600 11,967
Exodus Communications* 357,800 50,271
Interwoven* 122,700 13,466
Tibco Software* 219,100 17,857
U.S. Internetworking* 176,325 6,833
Vignette* 480,600 77,016
Vitria Technology* 238,900 24,084
-----------
526,267
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 6.7%
Emulex* 183,300 20,003
Extreme Networks* 932,900 73,699
Foundry Networks* 406,100 58,377
Juniper Networks* 334,500 88,162
Network Appliance* 233,400 19,314
-----------
259,555
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 0.1%
Mercury Interactive* 36,600 2,901
-----------
2,901
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 5.7%
ADC Telecommunications* 580,700 31,285
Advanced Fibre* 1,228,600 77,018
Ditech Communications* 584,000 61,941
Next Level Communications* 151,100 16,432
Qualcomm* 70,100 10,467
Tekelec* 545,700 20,259
-----------
217,402
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 0.1%
Telocity* 257,000 $ 3,180
-----------
3,180
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 1.3%
Netro* 278,900 18,133
RF Micro Devices* 244,500 32,855
-----------
50,988
-----------
TOTAL TECHNOLOGY (COST $2,718,883) 3,468,595
-----------
TOTAL COMMON STOCK (COST $2,939,020) 3,646,628
-----------
TOTAL INVESTMENTS-- 94.9% (COST $2,939,020) $3,646,628
-----------
--------------------------------------------------------------------------------
Percentages are based on Net Assets of $3,843,946,370.
* Non-income producing security
Cl -- Class
The accompanying notes are an integral part of the financial statements.
75
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<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 95.9%
BASIC MATERIALS -- 1.8%
CHEMICALS-PLASTICS -- 0.1%
Hanna 3,500 $ 40
-----------
40
--------------------------------------------------------------------------------
CHEMICALS-SPECIALTY -- 1.3%
CK Witco 49,800 507
Cytec Industries* 14,100 432
W.R. Grace* 3,000 38
-----------
977
--------------------------------------------------------------------------------
FERTILIZERS -- 0.2%
IMC Global 10,700 157
-----------
157
--------------------------------------------------------------------------------
METAL-ALUMINUM -- 0.1%
Commonwealth Industries 7,300 66
-----------
66
--------------------------------------------------------------------------------
STEEL-PRODUCERS -- 0.1%
LTV 31,800 113
-----------
113
-----------
TOTAL BASIC MATERIALS (COST $1,326) 1,353
-----------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 10.0%
APPAREL MANUFACTURERS -- 0.0%
I.C. Isaacs & Company* 10,000 27
-----------
27
--------------------------------------------------------------------------------
ATHLETIC EQUIPMENT -- 0.5%
Direct Focus* 12,500 348
-----------
348
--------------------------------------------------------------------------------
AUDIO/VIDEO PRODUCTS -- 1.6%
Harman International 6,700 402
Polycom* 10,000 792
-----------
1,194
--------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 0.7%
Delco Remy International* 73,800 549
-----------
549
--------------------------------------------------------------------------------
BUILDING-MOBIL HOME/MANUFACTURED HOUSING -- 0.1%
Coachmen Industries 3,900 54
-----------
54
--------------------------------------------------------------------------------
CASINO HOTELS -- 0.3%
Harrah's Entertainment* 13,500 251
-----------
251
--------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 0.5%
Scansource* 10,000 355
-----------
355
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
HOME FURNISHINGS -- 0.9%
Ethan Allen Interiors 8,700 $ 218
Furniture Brands International* 25,700 483
-----------
701
--------------------------------------------------------------------------------
MOTION PICTURES & SERVICES -- 0.4%
Zomax* 5,000 301
-----------
301
--------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 0.5%
Journal Register* 5,200 77
Pulitzer 7,200 294
-----------
371
--------------------------------------------------------------------------------
RADIO -- 0.4%
Citadel Communications* 7,500 316
-----------
316
--------------------------------------------------------------------------------
RETAIL-CATALOG SHOPPING -- 0.2%
MSC Industrial Direct* 10,000 180
-----------
180
--------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 1.0%
Insight Enterprises* 12,500 455
PC Connection* 9,600 271
-----------
726
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 1.0%
Tweeter Home Entertainment Group* 16,200 717
-----------
717
--------------------------------------------------------------------------------
RETAIL-JEWELRY -- 0.2%
Friedman's, Cl A 22,300 137
-----------
137
--------------------------------------------------------------------------------
RETAIL-MAIL ORDER -- 0.1%
Wilmar Industries* 6,100 104
-----------
104
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 0.9%
P.F Changs China Bistro* 10,800 358
Wendys International 15,900 321
-----------
679
--------------------------------------------------------------------------------
STORAGE/WAREHOUSING -- 0.2%
Mobile Mini* 7,900 154
-----------
154
--------------------------------------------------------------------------------
TELEVISION -- 0.4%
Paxson Communications* 14,600 113
Pegasus Communications* 1,100 155
-----------
268
--------------------------------------------------------------------------------
TRAVEL SERVICES -- 0.1%
Hotel Reservations Network* 2,500 44
-----------
44
-----------
TOTAL CONSUMER CYCLICAL (COST $5,656) 7,476
-----------
--------------------------------------------------------------------------------
76
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 0.1%
FOOD-MISCELLANEOUS/DIVERSIFIED -- 0.1%
Aurora Foods* 35,100 $ 105
-----------
105
-----------
TOTAL CONSUMER NON-CYCLICAL (COST $311) 105
-----------
--------------------------------------------------------------------------------
ENERGY -- 7.2%
OIL & GAS DRILLING -- 1.2%
Key Energy Services* 44,200 514
Patterson Energy* 7,500 238
Pride International* 5,400 123
-----------
875
--------------------------------------------------------------------------------
OIL COMPANIES-EXPLORATION & PRODUCTION-- 5.0%
Barrett Resources* 2,600 78
Devon Energy 9,800 476
EOG Resources 39,500 837
Forest Oil* 42,900 456
Louis Dreyfus Natural Gas* 9,600 326
Newfield Exploration* 3,700 130
Noble Affiliates 11,900 390
Santa Fe Snyder* 69,600 670
Unit* 3,200 35
Vintage Petroleum 18,000 362
-----------
3,760
--------------------------------------------------------------------------------
OIL REFINING & MARKETING -- 0.3%
Valero Energy 8,100 248
-----------
248
--------------------------------------------------------------------------------
PIPELINES -- 0.7%
Kinder Morgan 16,000 552
-----------
552
-----------
TOTAL ENERGY (COST $4,243) 5,435
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 8.8%
COMMERCIAL BANKS-CENTRAL US -- 0.2%
Firstmerit 7,500 138
-----------
138
--------------------------------------------------------------------------------
COMMERCIAL BANKS-EASTERN US -- 0.5%
Commercial Bank of New York 13,500 129
Mercantile 8,800 269
-----------
398
--------------------------------------------------------------------------------
COMMERCIAL BANKS-SOUTHERN US -- 0.7%
Hibernia, Cl A 5,200 55
Southtrust 17,700 450
-----------
505
--------------------------------------------------------------------------------
COMMERCIAL BANKS-WESTERN US -- 1.5%
BancWest 28,700 567
City National 11,074 373
Silicon Valley Bancshares* 2,700 194
-----------
1,134
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 1.0%
Morgan Keegan 18,100 $ 317
Raymond James Financial 17,200 357
Wit Capital Group* 4,000 69
-----------
743
--------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISORY SERVICES-- 1.4%
Affiliated Managers Group* 13,300 632
Federated Investors 3,600 98
Waddell & Reed Financial, Cl A 6,900 292
-----------
1,022
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 1.1%
Money Group 13,700 443
Protective Life 13,400 425
-----------
868
--------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE -- 0.3%
Fidelity National Financial 6,300 87
First American Financial 11,500 163
-----------
250
--------------------------------------------------------------------------------
REITS-APARTMENTS -- 0.0%
Pennsylvania Real Estate Investment Trust1,900 31
-----------
31
--------------------------------------------------------------------------------
REITS-REGIONAL MALLS -- 0.2%
CBL & Associates Properties 7,800 159
-----------
159
--------------------------------------------------------------------------------
REITS-SHOPPING CENTERS -- 0.3%
JP Realty 11,400 203
-----------
203
--------------------------------------------------------------------------------
S&L/THRIFTS-CENTRAL US -- 0.7%
Bank United, Cl A 2,200 69
Charter One Financial 20,900 439
-----------
508
--------------------------------------------------------------------------------
S&L/THRIFTS-EASTERN US -- 0.5%
Roslyn Bancorp 15,700 280
Woronoco Bancorp 7,000 67
-----------
347
--------------------------------------------------------------------------------
S&L/THRIFTS-WESTERN US -- 0.2%
ITLA Capital* 12,700 162
-----------
162
--------------------------------------------------------------------------------
SUPER-REGIONAL BANKS US -- 0.2%
Comerica 3,100 130
-----------
130
-----------
TOTAL FINANCIAL (COST $6,056) 6,598
-----------
--------------------------------------------------------------------------------
77
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
HEALTH CARE -- 6.3%
DIAGNOSTIC KITS -- 0.0%
Biosite Diagnostics* 800 $ 19
-----------
19
--------------------------------------------------------------------------------
DISPOSABLE MEDICAL PRODUCTS -- 0.0%
ICU Medical* 400 7
-----------
7
--------------------------------------------------------------------------------
DRUG DELIVERY SYSTEMS -- 0.2%
Noven Pharmacuticals* 12,500 137
-----------
137
--------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 0.5%
Allscripts* 5,000 301
Dendrite International* 5,000 105
-----------
406
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 0.9%
PSS World Medical* 32,400 220
Zoll Medical Group* 8,200 420
-----------
640
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 0.7%
Aclara Biosciences* 11,400 450
Regeneron Pharmaceuticals* 1,100 32
-----------
482
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.2%
Celgene* 4,500 448
Chirex* 5,700 110
Cima Labs* 17,300 297
Dura Pharmaceuticals* 10,600 130
Intrabiotics Pharmaceuticals* 15,600 234
King Pharmaceuticals* 6,850 216
Pharmacopeia* 5,000 245
-----------
1,680
--------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 0.8%
Alpharma, Cl A 16,100 592
-----------
592
--------------------------------------------------------------------------------
MEDICAL-HOSPITALS -- 0.0%
Triad Hospitals* 1,500 25
-----------
25
--------------------------------------------------------------------------------
MEDICAL-OUTPATIENT/HOME MEDICAL -- 0.1%
Lincare Holding* 2,800 79
-----------
79
--------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION-- 0.2%
Syncor* 3,700 122
-----------
122
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
THERAPEUTICS -- 0.7%
CV Therapeutics* 3,500 $ 176
Titan Pharmaceuticals* 2,000 62
Tularik* 1,800 56
United Therapeutics* 2,900 225
-----------
519
-----------
TOTAL HEALTH CARE (COST $3,190) 4,708
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 9.6%
AEROSPACE/DEFENSE -- 0.2%
Teledyne Technologies* 8,000 139
-----------
139
--------------------------------------------------------------------------------
AEROSPACE/DEFENSE-EQUIPMENT -- 0.4%
Orbital Sciences* 19,900 299
-----------
299
--------------------------------------------------------------------------------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS -- 0.1%
Dal-Tile International* 8,300 66
-----------
66
--------------------------------------------------------------------------------
BUILDING PRODUCTS-CEMENT/AGGREGATE-- 0.3%
Lafarge 8,100 192
-----------
192
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS-- 0.4%
ITT Industries 10,600 329
-----------
329
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 0.5%
Kent Electronics* 2,900 85
Vishay Intertechnology* 5,500 306
-----------
391
--------------------------------------------------------------------------------
ELECTRONIC CONNECTORS -- 0.2%
Amphenol* 1,400 143
-----------
143
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.9%
Molecular Devices* 6,200 476
Robotic Vision Systems* 12,500 200
-----------
676
--------------------------------------------------------------------------------
ELECTRONICS-MILITARY -- 0.8%
Aeroflex* 11,400 564
-----------
564
--------------------------------------------------------------------------------
HAZARDOUS WASTE DISPOSAL -- 0.1%
Stericycle* 3,800 95
-----------
95
--------------------------------------------------------------------------------
INDUSTRIAL AUDIO & VIDEO PRODUCTS -- 0.4%
California Amplifier* 8,500 263
-----------
263
--------------------------------------------------------------------------------
78
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 0.9%
Photon Dynamics* 10,000 $ 690
-----------
690
--------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 0.8%
FEI* 15,000 446
Varian* 5,000 192
-----------
638
--------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 0.6%
Cyberoptics* 5,000 212
Cymer* 4,200 210
-----------
422
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 0.2%
Torchmark 5,500 127
-----------
127
--------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 0.9%
Semitool* 20,000 364
Speedfam-Ipec* 16,800 334
-----------
698
--------------------------------------------------------------------------------
MACHINERY-PUMPS -- 0.7%
Helix Technology 8,500 511
-----------
511
--------------------------------------------------------------------------------
METAL PROCESSORS & FABRICATORS -- 0.1%
Wolverine Tube* 6,500 83
-----------
83
--------------------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 0.1%
Republic Services* 7,800 85
-----------
85
--------------------------------------------------------------------------------
POWER CONVERSION/SUPPLY EQUIPMENT -- 0.3%
Power-One* 4,000 242
-----------
242
--------------------------------------------------------------------------------
STEEL PIPE & TUBE -- 0.4%
NS Group* 19,900 325
-----------
325
--------------------------------------------------------------------------------
TRUCKING & LEASING -- 0.1%
Ryder Systems 4,500 102
-----------
102
--------------------------------------------------------------------------------
WIRE & CABLE PRODUCTS -- 0.2%
Cable Design Technologies* 4,000 136
-----------
136
-----------
TOTAL INDUSTRIAL (COST $4,965) 7,216
-----------
--------------------------------------------------------------------------------
SERVICES -- 4.4%
COMMERCIAL SERVICES -- 0.1%
AC Nielson* 4,200 95
-----------
95
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 1.8%
Breakaway Solutions* 10,000 $ 455
Factset Research Systems 8,000 217
Manhattan Associates* 20,600 706
-----------
1,378
--------------------------------------------------------------------------------
CONSULTING SERVICES -- 1.4%
Corporate Executive Board* 7,500 381
Forrester Research* 8,500 461
Professional Detailing* 7,600 190
-----------
1,032
--------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT -- 0.3%
United Rentals* 11,300 195
-----------
195
--------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT -- 0.6%
Albany Molecular Research* 7,500 438
-----------
438
--------------------------------------------------------------------------------
SCHOOLS -- 0.2%
Edison Schools* 10,200 200
-----------
200
-----------
TOTAL SERVICES (COST $2,636) 3,338
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 46.1%
APPLICATIONS SOFTWARE -- 3.8%
Actuate* 10,200 549
Exchange Applications* 15,000 794
Quest Software* 3,500 395
Sonic Foundry* 6,600 643
Web Trends* 7,200 518
-----------
2,899
--------------------------------------------------------------------------------
CELLULAR TELECOMMUNICATIONS -- 0.1%
Alamosa PCS Holdings* 2,100 79
-----------
79
--------------------------------------------------------------------------------
CIRCUITS -- 0.7%
Integrated Device Technology* 12,400 491
-----------
491
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 1.8%
Avid Technology* 31,500 563
General Magic* 7,600 68
Puma Technology* 8,500 430
Razorfish* 10,000 275
-----------
1,336
--------------------------------------------------------------------------------
COMPUTER AIDED DESIGN -- 0.1%
Ansoft* 6,300 78
-----------
78
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 0.6%
Axent Technologies* 7,300 137
RSA Security* 6,000 311
-----------
448
--------------------------------------------------------------------------------
79
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 1.1%
Blue Wave Systems* 5,000 $ 80
Mercury Computer Systems* 14,000 684
Systems & Computer Technology* 3,800 89
-----------
853
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 4.8%
Advanced Digital Information* 25,000 856
M-Systems Flash Disk Pioneers* 7,500 398
Overland Data* 22,000 309
Sandisk* 10,200 1,250
Silicon Storage Technology* 9,500 702
Western Digital* 9,000 67
-----------
3,582
--------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 1.0%
Cybex* 15,000 564
S3* 8,300 174
-----------
738
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 1.8%
Acxiom* 7,500 249
Documentum* 5,700 445
Excelon* 16,300 183
Informix* 29,100 493
-----------
1,370
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 12.3%
Act Manufacturing* 5,300 296
Alpha Industries* 2,500 238
Applied Micro Circuits* 7,500 1,125
Cirrus Logic* 6,700 122
Cree* 3,500 395
Cypress Semiconductor* 8,800 434
Elantec Semiconductor* 7,500 552
Electroglas* 3,400 116
Exar* 6,000 429
Genus* 29,300 407
Ibis Technology* 2,500 225
Integrated Silicon Solutions* 13,100 384
LTX* 10,000 452
PLX Technology* 12,500 465
Qlogic* 5,000 678
Quantum Effect Devices* 2,500 199
Silicon Image* 1,200 86
Telcom Semiconductor* 7,500 227
Three-Five Systems* 10,000 600
TranSwitch* 9,000 865
Triquint Semiconductor* 9,000 662
Xicor* 7,500 106
Zoran* 3,900 220
-----------
9,283
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 2.4%
Business Objects ADR* 7,500 $ 746
Informatica* 7,600 584
Manugistics* 6,100 311
Symantec* 1,700 128
-----------
1,769
--------------------------------------------------------------------------------
FIBER OPTICS -- 1.4%
Harmonic* 3,700 308
JDS Uniphase* 2,500 301
MRV Communications* 5,000 458
-----------
1,067
--------------------------------------------------------------------------------
INTERNET CONTENT -- 0.7%
Launch Media* 2,200 34
Lifeminders.com* 5,000 339
S1* 1,220 105
-----------
478
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 3.7%
Bluestone Software* 1,200 40
Clickaction* 7,500 372
Fire Pond* 7,500 307
Intraware* 3,900 161
Macromedia* 5,700 515
Netopia* 4,500 324
Proxicom* 9,400 417
Ravisent Technologies* 16,200 225
U.S. Internetworking* 9,000 349
Verio* 1,400 63
-----------
2,773
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 1.3%
Apex* 5,000 186
Extreme Networks* 6,100 482
Visual Networks* 5,000 284
-----------
952
--------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 0.3%
Splash Technologies* 20,400 255
-----------
255
--------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 0.5%
Adaptive Broadband* 5,000 268
American Mobile Satellite* 1,400 34
Globecomm Systems* 2,200 59
-----------
361
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 0.4%
Cysive* 4,200 288
-----------
288
--------------------------------------------------------------------------------
80
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 4.4%
Anaren Microwave* 5,000 $ 479
Audiocodes Limited* 3,000 301
Digital Lightwave* 7,700 480
MCK Communications* 7,500 359
Natural Microsystems* 7,500 643
Pairgain Technologies* 6,800 127
Tekelec* 13,400 498
TUT Systems* 5,000 298
Westell Technologies* 5,000 159
-----------
3,344
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 0.1%
ICG Communications* 2,200 79
-----------
79
--------------------------------------------------------------------------------
WEB HOSTING/PUBLISHING -- 0.5%
Verity* 10,000 408
-----------
408
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 2.3%
Glenayre Technologies* 37,000 650
Metro One Telecommunications* 6,400 85
Proxim* 4,300 515
RF Micro Devices* 3,100 416
Spectrian* 3,600 81
-----------
1,747
-----------
TOTAL TECHNOLOGY (COST $20,216) 34,678
-----------
--------------------------------------------------------------------------------
TRANSPORTATION -- 1.2%
AIRLINES -- 0.2%
Midway Airlines* 37,700 189
-----------
189
--------------------------------------------------------------------------------
TRANSPORTATION-AIR FREIGHT -- 0.3%
Airborne Freight 8,000 192
-----------
192
--------------------------------------------------------------------------------
TRANSPORTATION-TRUCK -- 0.7%
Hunt (J.B.) Transportation Services 10,800 148
US Xpress Enterprises* 24,000 211
Yellow* 8,100 149
-----------
508
-----------
TOTAL TRANSPORTATION (COST $1,158) 889
-----------
--------------------------------------------------------------------------------
UTILITIES -- 0.4%
ELECTRIC-INTEGRATED -- 0.1%
Idacorp 2,700 94
Madison Gas & Electric 400 7
-----------
101
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.2%
UGI 6,800 $ 147
-----------
147
--------------------------------------------------------------------------------
WATER -- 0.1%
Philadelphia Suburban 4,900 89
-----------
89
-----------
TOTAL UTILITIES (COST $338) 337
-----------
TOTAL COMMON STOCK (COST $50,095) 72,133
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.1%
J.P. Morgan
6.10%, dated 03/31/00, matures 04/03/00,
repurchase price $3,122,418 (collateralized
by U.S. Government Obligations: total
market value $3,184,928) (A) $3,121 3,121
-----------
TOTAL REPURCHASE AGREEMENT (COST $3,121) 3,121
-----------
TOTAL INVESTMENTS-- 100.0% (COST $53,216) $75,254
-----------
-----------
Percentages are based on Net Assets of $75,225,094.
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
81
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES (000)
--------------------------------------------------------------------------------
March 31, 2000
<TABLE>
<CAPTION>
---------- ------------ -----------
PBHG PBHG PBHG
CORE LARGE CAP MID-CAP
GROWTH VALUE VALUE
FUND FUND FUND
---------- ------------- -----------
<S> <C> <C> <C>
ASSETS:
Investment securities (Cost $133,845, $30,379, $52,212, $72,245,
$18,325, $8,538, $2,939,020 and $50,095 respectively) at market value $174,191 $31,877 $58,076
Repurchase Agreements (Cost $90, $1,612, $6,995, $6,641, $4,557
and $3,121 respectively) at market value 90 1,612 6,995
Cash -- -- --
Dividends and interest receivable 93 16 43
Receivable for capital shares sold 2,374 818 1,956
Receivable for investment securities sold 14,163 4,818 3,825
Other assets 26 5 5
-------- ------- -------
Total assets 190,937 39,146 70,900
-------- ------- -------
LIABILITIES:
Payable for investment securities purchased 6,536 5,488 10,157
Payable for capital shares purchased 5,175 216 24
Bank Overdraft 800 -- --
Line of credit borrowing 12,100 500 --
Accrued expenses 227 20 29
-------- ------- -------
Total liabilities 24,838 6,224 10,210
-------- ------- -------
NET ASSETS:
Portfolio shares (authorized 200 million shares for each of the PBHG Core
Growth, PBHG Large Cap Value, PBHG Mid-Cap Value, PBHG Small Cap Value,
PBHG Focused Value, PBHG International, PBHG Technology & Communications
and PBHG Strategic Small Company Funds -- $0.001 par value) based on
5,490,314, 2,751,257, 4,392,625, 4,940,457, 1,218,299, 879,650,
45,211,418 and 3,889,929 outstanding shares of common stock 116,637 31,493 55,510
Accumulated net investment income (loss) 6 (4) 1
Accumulated net realized gain (loss) on investments 9,110 (65) (685)
Net unrealized appreciation on investments and
foreign currency translation 40,346 1,498 5,864
-------- ------- -------
NET ASSETS $166,099 $32,922 $60,690
-------- ------- -------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $30.25 $11.97 $13.82
-------- ------- -------
-------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
----------- ----------- --------------
PBHG PBHG
SMALL CAP FOCUSED PBHG
VALUE VALUE INTERNATIONAL
FUND FUND FUND
----------- ----------- --------------
<S> <C> <C> <C>
ASSETS:
Investment securities (Cost $133,845, $30,379, $52,212, $72,245,
$18,325, $8,538, $2,939,020 and $50,095 respectively) at market value $85,372 $20,746 $10,768
Repurchase Agreements (Cost $90, $1,612, $6,995, $6,641, $4,557
and $3,121 respectively) at market value 6,641 4,557 --
Cash -- -- 659
Dividends and interest receivable 10 13 20
Receivable for capital shares sold 3,791 1,250 66
Receivable for investment securities sold 7,807 1,440 16
Other assets 7 9 1
-------- -------- --------
Total assets 103,628 28,015 11,530
-------- -------- --------
LIABILITIES:
Payable for investment securities purchased 10,821 5,137 31
Payable for capital shares purchased 73 296 91
Bank Overdraft -- -- --
Line of credit borrowing -- -- --
Accrued expenses 100 26 26
-------- -------- --------
Total liabilities 10,994 5,459 148
-------- -------- --------
NET ASSETS:
Portfolio shares (authorized 200 million shares for each of the PBHG Core
Growth, PBHG Large Cap Value, PBHG Mid-Cap Value, PBHG Small Cap Value,
PBHG Focused Value, PBHG International, PBHG Technology & Communications
and PBHG Strategic Small Company Funds -- $0.001 par value) based on
5,490,314, 2,751,257, 4,392,625, 4,940,457, 1,218,299, 879,650,
45,211,418 and 3,889,929 outstanding shares of common stock 78,024 18,983 8,025
Accumulated net investment income (loss) (5) -- (40)
Accumulated net realized gain (loss) on investments 1,488 1,152 1,167
Net unrealized appreciation on investments and
foreign currency translation 13,127 2,421 2,230
-------- -------- --------
NET ASSETS $92,634 $22,556 $11,382
-------- -------- --------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $18.75 $18.51 $12.94
-------- -------- --------
-------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
---------------- --------------
PBHG PBHG
TECHNOLOGY & STRATEGIC
COMMUNICATIONS MALL COMPANY
FUND FUND
---------------- -------------
<S> <C> <C>
ASSETS:
Investment securities (Cost $133,845, $30,379, $52,212, $72,245,
$18,325, $8,538, $2,939,020 and $50,095 respectively) at market value $3,646,628 $72,133
Repurchase Agreements (Cost $90, $1,612, $6,995, $6,641, $4,557
and $3,121 respectively) at market value -- 3,121
Cash -- --
Dividends and interest receivable 1,241 7
Receivable for capital shares sold 144,526 115
Receivable for investment securities sold 590,796 3,944
Other assets 62 6
---------- -------
Total assets 4,383,253 79,326
---------- -------
LIABILITIES:
Payable for investment securities purchased 310,192 3,922
Payable for capital shares purchased 36,268 69
Bank Overdraft 72,636 --
Line of credit borrowing 116,000 --
Accrued expenses 4,211 110
---------- -------
Total liabilities 539,307 4,101
---------- -------
NET ASSETS:
Portfolio shares (authorized 200 million shares for each of the PBHG Core
Growth, PBHG Large Cap Value, PBHG Mid-Cap Value, PBHG Small Cap Value,
PBHG Focused Value, PBHG International, PBHG Technology & Communications
and PBHG Strategic Small Company Funds -- $0.001 par value) based on
5,490,314, 2,751,257, 4,392,625, 4,940,457, 1,218,299, 879,650,
45,211,418 and 3,889,929 outstanding shares of common stock 2,951,217 44,362
Accumulated net investment income (loss) -- 2
Accumulated net realized gain (loss) on investments 185,121 8,823
Net unrealized appreciation on investments and
foreign currency translation 707,608 22,038
---------- -------
NET ASSETS $3,843,946 $75,225
---------- -------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $85.02 $19.34
---------- -------
---------- -------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED]
82 & 83
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF OPERATIONS (000)
--------------------------------------------------------------------------------
For the Year Ended March 31, 2000
<TABLE>
<CAPTION>
--------- ---------- ----------- -------------- ------------ --------- ----------
PBHG PBHG PBHG
PBHG EMERGING LARGE CAP PBHG PBHG PBHG LARGE CAP
GROWTH GROWTH GROWTH SELECT EQUITY CORE GROWTH LIMITED 20
FUND FUND FUND FUND FUND FUND FUND
--------- ---------- ----------- -------------- ------------- --------- -----------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ 253 $ 73 $ 252 $ 39 $ 95 $ 14 $ 463
Interest 12,173 4,054 333 2,499 248 617 2,117
Less: Foreign Taxes Withheld -- -- (3) -- (1) -- (27)
---------- -------- -------- -------- ------- ------- --------
Total Investment Income 12,426 4,127 582 2,538 342 631 2,553
---------- -------- -------- -------- ------- ------- --------
EXPENSES:
Investment Advisory Fees 32,748 7,263 1,148 4,326 941 1,143 5,274
Administrative Fees 5,779 1,282 230 763 166 171 931
Transfer Agent Fees 7,691 1,779 313 754 267 133 1,038
Registration and Filing Fees (168) (14) 23 6 16 8 104
Printing Fees 323 69 26 79 11 7 117
Professional Fees (13) (12) 10 6 (3) -- 46
Custodian Fees 17 12 8 6 8 10 19
Insurance 72 16 2 3 2 2 4
Directors' Fees 119 23 6 7 4 3 23
Miscellaneous Fees 175 82 16 29 15 17 56
Line of Credit Commitment Fees 270 55 11 9 6 6 33
Interest Expense 195 19 1 10 36 -- 1
Distribution Fees 1 228 -- -- -- -- -- --
---------- -------- -------- -------- ------- ------- --------
TOTAL EXPENSES 47,436 10,574 1,794 5,998 1,469 1,500 7,646
---------- -------- -------- -------- ------- ------- --------
Waiver of Investment Advisory Fees -- -- -- -- -- -- --
---------- -------- -------- -------- ------- ------- --------
Net Expenses 47,436 10,574 1,794 5,998 1,469 1,500 7,646
---------- -------- -------- -------- ------- ------- --------
NET INVESTMENT INCOME (LOSS) (35,010) (6,447) (1,212) (3,460) (1,127) (869) (5,093)
---------- -------- -------- -------- ------- ------- --------
Net Realized Gain (Loss) from
Security Transactions 1,444,408 253,905 73,256 243,578 68,016 48,591 272,534
Net Realized Loss on Foreign
Currency Transactions -- -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments 2,040,376 356,132 36,253 255,606 16,011 51,160 242,817
---------- -------- -------- -------- ------- ------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS 3,484,784 610,037 109,509 499,184 84,027 99,751 515,351
---------- -------- -------- -------- ------- ------- --------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $3,449,774 $603,590 $108,297 $495,724 $82,900 $98,882 $510,258
---------- -------- -------- -------- ------- ------- --------
---------- -------- -------- -------- ------- ------- --------
</TABLE>
<TABLE>
<CAPTION>
-------------- ----------- --------- ------------- --------- --------------
PBHG PBHG PBHG PBHG PBHG
NEW LARGE CAP MID-CAP SMALL CAP FOCUSED PBHG
OPPORTUNITIES VALUE VALUE VALUE VALUE INTERNATIONAL
FUND FUND FUND FUND FUND FUND
--------------- --------- ---------- ------------ -------- -------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C>
Dividends $ -- $ 597 $ 451 $ 489 $ 56 $ 155
Interest 272 91 100 173 24 17
Less: Foreign Taxes Withheld -- (3) -- -- -- (11)
-------- ------ ------- ------- ------ ------
Total Investment Income 272 685 551 662 80 161
-------- ------ ------- ------- ------ ------
EXPENSES:
Investment Advisory Fees 1,419 245 364 703 49 117
Administrative Fees 213 57 64 105 9 17
Transfer Agent Fees 103 85 109 208 15 61
Registration and Filing Fees 7 16 19 33 4 3
Printing Fees 38 (1) 10 9 2 1
Professional Fees 9 (5) 3 2 1 --
Custodian Fees 26 13 16 17 8 18
Insurance -- 1 1 1 -- --
Directors' Fees 4 (2) 1 3 -- --
Miscellaneous Fees 8 3 14 18 -- 16
Line of Credit Commitment Fees 6 2 4 4 -- --
Interest Expense 69 5 11 7 -- --
Distribution Fees 1 -- -- -- -- -- --
-------- ------ ------- ------- ------ ------
TOTAL EXPENSES 1,902 419 616 1,110 88 233
-------- ------ ------- ------- ------ ------
Waiver of Investment Advisory Fees -- -- -- (58) (3) --
-------- ------ ------- ------- ------ ------
Net Expenses 1,902 419 616 1,052 85 233
-------- ------ ------- ------- ------ ------
NET INVESTMENT INCOME (LOSS) (1,630) 266 (65) (390) (5) (72)
-------- ------ ------- ------- ------ ------
Net Realized Gain (Loss) from
Security Transactions 124,962 5,419 10,140 13,720 2,109 3,924
Net Realized Loss on Foreign
Currency Transactions -- -- -- -- -- (38)
Net Change in Unrealized Appreciation
(Depreciation) on Investments 126,277 (715) 4,710 20,816 2,437 (1,438)
-------- ------ ------- ------- ------ ------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS 251,239 4,704 14,850 34,536 4,546 2,448
-------- ------ ------- ------- ------ ------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $249,609 $4,970 $14,785 $34,146 $4,541 $2,376
-------- ------ ------- ------- ------ ------
-------- ------ ------- ------- ------ ------
</TABLE>
<TABLE>
<CAPTION>
---------- -------------- --------------
PBHG PBHG PBHG
CASH TECHNOLOGY & STRATEGIC
RESERVES COMMUNICATIONS SMALL
FUND FUND COMPANY FUND
--------- -------------- --------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ -- $ 262 $ 202
Interest 10,656 3,166 105
Less: Foreign Taxes Withheld -- (28) --
------ ---------- -------
Total Investment Income 10,656 3,400 307
------ ---------- -------
EXPENSES:
Investment Advisory Fees 583 12,141 537
Administrative Fees 293 2,143 81
Transfer Agent Fees 247 1,899 122
Registration and Filing Fees 32 5 25
Printing Fees 50 327 10
Professional Fees 19 73 3
Custodian Fees 20 33 24
Insurance 2 5 1
Directors' Fees 7 43 3
Miscellaneous Fees 88 80 18
Line of Credit Commitment Fees -- 26 4
Interest Expense -- 267 1
Distribution Fees 1 -- -- --
------ ---------- -------
TOTAL EXPENSES 1,341 17,042 829
------ ---------- -------
Waiver of Investment Advisory Fee -- -- (25)
------ ---------- -------
Net Expenses 1,341 17,042 804
------ ---------- -------
NET INVESTMENT INCOME (LOSS) 9,315 (13,642) (497)
------ ---------- -------
Net Realized Gain (Loss) from
Security Transactions (12) 931,007 20,058
Net Realized Loss on Foreign
Currency Transactions -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments -- 545,653 17,961
------ ---------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS (12) 1,476,660 38,019
------ ---------- -------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $9,303 $1,463,018 $37,522
------ ---------- -------
------ ---------- -------
</TABLE>
1. All distribution fees are incurred in the Advisor Class.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED]
84 & 85
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (000)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------- --------------------------- ------------------------------
PBHG PBHG PBHG
GROWTH EMERGING GROWTH LARGE CAP GROWTH
FUND FUND FUND
------------------------ --------------------------- -------------------------------
4/1/99 4/1/98 4/1/99 4/1/98 4/1/99 4/1/98
to to to to to to
3/31/00 3/31/99 3/31/00 3/31/99 3/31/00 3/31/99
----------- ------------ ----------- -------------- -------------- ----------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Loss $ (35,010) $ (40,167) $ (6,447) $ (8,193) $ (1,212) $ (1,004)
Net Realized Gain (Loss) from
Security Transactions 1,444,408 (123,200) 253,905 (34,951) 73,256 11,109
Net Change in Unrealized Appreciation
(Depreciation) on Investments 2,040,376 (524,058) 356,132 (189,387) 36,253 9,077
--------- --------- --------- --------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,449,774 (687,425) 603,590 (232,531) 108,297 19,182
--------- --------- --------- --------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- -- -- --
Net Realized Gains from Security
Transactions (146,848) -- (31,621) (3,473) (38,911) (9,078)
--------- --------- --------- --------- ------- -------
Total Distributions (146,848) -- (31,621) (3,473) (38,911) (9,078)
--------- --------- --------- --------- ------- -------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 8,396,419 2,989,888 4,764,340 2,067,441 161,752 130,237
Shares Issued upon Reinvestment of
Distributions 140,393 -- 30,659 3,287 36,766 8,663
Shares Redeemed (8,520,260) (4,423,533) (4,766,038) (2,502,873) (155,028) (150,577)
--------- --------- --------- --------- ------- -------
Total PBHG Class Transactions 16,552 (1,433,645) 28,961 (432,145) 43,490 (11,677)
--------- --------- --------- --------- ------- -------
Advisor Class
Shares Issued 30,264 21,461 -- -- -- --
Shares Issued upon Reinvestment of
Distributions 3,951 -- -- -- -- --
Shares Redeemed (39,497) (33,023) -- -- -- --
--------- --------- --------- --------- ------- -------
Total Advisor Class Transactions (5,282) (11,562) -- -- -- --
--------- --------- --------- --------- ------- -------
Increase (Decrease) in Net Assets
Derived from Capital Share
Transactions 11,270 (1,445,207) 28,961 (432,145) 43,490 (11,677)
--------- --------- --------- --------- ------- -------
Total Increase (Decrease) in
Net Assets 3,314,196 (2,132,632) 600,930 (668,149) 112,876 (1,573)
--------- --------- --------- --------- ------- -------
NET ASSETS:
Beginning of Period 3,294,975 5,427,607 736,008 1,404,157 144,089 145,662
--------- --------- --------- --------- ------- -------
End of Period $6,609,171 $3,294,975 $1,336,938 $736,008 $256,965 $144,089
--------- --------- --------- --------- ------- -------
--------- --------- --------- --------- ------- -------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 207,463 126,179 166,771 93,873 4,845 5,693
Shares Issued upon Reinvestment of
Distributions 3,293 -- 987 155 1,370 409
Shares Redeemed (232,422) (183,539) (170,053) (112,679) (5,381) (6,659)
--------- --------- --------- --------- ------- -------
Total PBHG Class Share Transactions (21,666) (57,360) (2,295) (18,651) 834 (557)
--------- --------- --------- --------- ------- -------
Advisor Class
Shares Issued 693 902 -- -- -- --
Shares Issued upon Reinvestment of
Distributions 94 -- -- -- -- --
Shares Redeemed (1,033) (1,354) -- -- -- --
--------- --------- --------- --------- ------- -------
Total Advisor Class Share Transactions (246) (452) -- -- -- --
--------- --------- --------- --------- ------- -------
Net Increase (Decrease) in Shares
Outstanding (21,912) (57,812) (2,295) (18,651) 834 (557)
--------- --------- --------- --------- ------- -------
--------- --------- --------- --------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
--------------------------- ------------------------------ ----------------------------
PBHG PBHG PBHG
SELECT EQUITY CORE GROWTH LIMITED
FUND FUND FUND
--------------------------- ------------------------------ -----------------------------
4/1/99 4/1/98 4/1/99 4/1/98 4/1/99 4/1/98
to to to to to to
3/31/00 3/31/99 3/31/00 3/31/99 3/31/00 3/31/99
------------ -------------- --------------- -------------- ------------ -------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Loss $ (3,460) $ (2,540) $ (1,127) $ (1,331) $ (869) $ (1,131)
Net Realized Gain (Loss) from
Security Transactions 243,578 45,647 68,016 16,034 48,591 9,385
Net Change in Unrealized Appreciation
(Depreciation) on Investments 255,606 (31,961) 16,011 (15,463) 51,160 (27,057)
--------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations 495,724 11,146 82,900 (760) 98,882 (18,803)
--------- ------- ------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- -- -- --
Net Realized Gains from Security
Transactions (56,886) -- -- -- (22,649) (5,915)
--------- ------- ------- ------- ------- -------
Total Distributions (56,886) -- -- -- (22,649) (5,915)
--------- ------- ------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 2,772,860 193,042 303,542 203,788 20,694 9,499
Shares Issued upon Reinvestment of
Distributions 55,117 -- -- -- 21,960 5,730
Shares Redeemed (1,811,421) (304,360) (306,828) (282,053) (71,768) (60,668)
--------- ------- ------- ------- ------- -------
Total PBHG Class Transactions 1,016,556 (111,318) (3,286) (78,265) (29,114) (45,439)
--------- ------- ------- ------- ------- -------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of
Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
--------- ------- ------- ------- ------- -------
Total Advisor Class Transactions -- -- -- -- -- --
--------- ------- ------- ------- ------- -------
Increase (Decrease) in Net Assets
Derived from Capital Share
Transactions 1,016,556 (111,318) (3,286) (78,265) (29,114) (45,439)
--------- ------- ------- ------- ------- -------
Total Increase (Decrease) in
Net Assets 1,455,394 (100,172) 79,614 (79,025) 47,119 (70,157)
--------- ------- ------- ------- ------- -------
NET ASSETS:
Beginning of Period 235,904 336,076 86,485 165,510 108,011 178,168
--------- ------- ------- ------- ------- -------
End of Period $1,691,298 $235,904 $166,099 $ 86,485 $155,130 $108,011
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 41,645 8,480 14,737 16,673 1,126 777
Shares Issued upon Reinvestment of
Distributions 1,153 -- -- -- 1,270 484
Shares Redeemed (30,157) (13,299) (15,398) (22,754) (4,722) (4,876)
-------- ------- ------- ------- ------- -------
Total PBHG Class Share Transactions 12,641 (4,819) (661) (6,081) (2,326) (3,615)
-------- ------- ------- ------- ------- -------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of
Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- ------- ------- ------- ------- -------
Total Advisor Class Share Transactions -- -- -- -- -- --
-------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Shares
Outstanding 12,641 (4,819) (661) (6,081) (2,326) (3,615)
--------- ------- ------- ------- ------- -------
--------- ------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------
PBHG
LARGE CAP 20
FUND
-----------------------------
4/1/99 4/1/98
to to
3/31/00 3/31/99
------------ ----------------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net Investment Loss $ (5,093) $ (2,501)
Net Realized Gain (Loss) from
Security Transactions 272,534 32,587
Net Change in Unrealized Appreciation
(Depreciation) on Investments 242,817 149,316
---------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations 510,258 179,402
---------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- --
Net Realized Gains from Security
Transactions (104,393) (5,087)
---------- --------
Total Distributions (104,393) (5,087)
---------- --------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 768,942 747,561
Shares Issued upon Reinvestment of
Distributions 100,719 4,843
Shares Redeemed (795,143) (516,273)
---------- --------
Total PBHG Class Transactions 74,518 236,131
---------- --------
Advisor Class
Shares Issued -- --
Shares Issued upon Reinvestment of
Distributions -- --
Shares Redeemed -- --
---------- --------
Total Advisor Class Transactions -- --
---------- --------
Increase (Decrease) in Net Assets
Derived from Capital Share
Transactions 74,518 236,131
---------- --------
Total Increase (Decrease) in
Net Assets 480,383 410,446
---------- --------
NET ASSETS:
Beginning of Period 603,077 192,631
---------- --------
End of Period $1,083,460 $603,077
---------- --------
---------- --------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 22,265 40,903
Shares Issued upon Reinvestment of
Distributions 3,214 254
Shares Redeemed (26,069) (28,184)
---------- --------
Total PBHG Class Share Transactions (590) 12,973
---------- --------
Advisor Class
Shares Issued -- --
Shares Issued upon Reinvestment of
Distributions -- --
Shares Redeemed -- --
---------- --------
Total Advisor Class Share Transactions -- --
---------- --------
Net Increase (Decrease) in Shares
Outstanding (590) 12,973
---------- --------
---------- --------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED]
86 & 87
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (000) -- Continued
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------- --------------------- --------------------------
PBHG PBHG PBHG
NEW OPPORTUNITIES LARGE CAP VALUE MID-CAP VALUE
FUND FUND FUND
---------------------- --------------------- --------------------------
4/1/99 2/12/99(3) 4/1/99 4/1/98 4/1/99 4/1/98
to to to to to to
3/31/00 3/31/99 3/31/00 3/31/99 3/31/00 3/31/99
---------- ---------- --------- -------- ---------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ (1,630) $ (12) $ 266 $ 405 $ (65) $ 4
Net Realized Gain (Loss) from Security
Transactions 124,962 566 5,419 17,489 10,140 11,898
Net Realized Gain (Loss) on Foreign Currency
Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions 126,277 2,061 (715) (2,893) 4,710 (2,155)
------- ------- ------- ------- ------- ------
Net Increase (Decrease) in Net Assets
Resulting from Operations 249,609 2,615 4,970 15,001 14,785 9,747
------- ------- ------- ------- ------- ------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- (192) (579) (4) --
Distributions in excess of net
investment income -- -- -- -- -- --
Net Realized Gains from Security Transactions (11,102) -- (8,414) (9,589) (11,964) (3,487)
------- ------- ------- ------- ------- ------
Total Distributions (11,102) -- (8,606) (10,168) (11,968) (3,487)
------- ------- ------- ------- ------- ------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 423,099 4,982 30,431 38,949 62,855 130,518
Shares Transfered 1 -- 9,767 -- -- -- --
Shares Issued upon Reinvestment of
Distributions 10,730 -- 8,390 9,896 11,660 3,287
Shares Redeemed 2 (333,478) (622) (47,185) (85,232) (73,623) (137,257)
------- ------- ------- ------- ------- ------
Total PBHG Class Transactions 100,351 14,127 (8,364) (36,387) 892 (3,452)
------- ------- ------- ------- ------- ------
Increase (Decrease) in Net Assets Derived
from Capital Share Transactions 100,351 14,127 (8,364) (36,387) 892 (3,452)
------- ------- ------- ------- ------- ------
Total Increase (Decrease) in Net Assets 338,858 16,742 (12,000) (31,554) 3,709 2,808
------- ------- ------- ------- ------- ------
NET ASSETS:
Beginning of Period 16,742 -- 44,922 76,476 56,981 54,173
------- ------- ------- ------- ------- ------
End of Period $355,600 $16,742 $32,922 $44,922 $60,690 $56,981
------- ------- ------- ------- ------- ------
------- ------- ------- ------- ------- ------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 7,591 336 2,408 2,866 4,370 9,105
Shares Transfered 1 -- 723 -- -- -- --
Shares Issued upon Reinvestment of
Distributions 192 -- 715 762 1,026 286
Shares Redeemed 2 (5,178) (42) (3,616) (6,262) (4,780) (9,156)
------- ------- ------- ------- ------- ------
Total PBHG Class Share Transactions 2,605 1,017 (493) (2,634) 616 235
------- ------- ------- ------- ------- ------
Net Increase (Decrease) in Shares Outstanding 2,605 1,017 (493) (2,634) 616 235
------- ------- ------- ------- ------- ------
------- ------- ------- ------- ------- ------
</TABLE>
<TABLE>
<CAPTION>
--------------------------- ----------------------- -------------------------
PBHG PBHG PBHG
SMALL CAP VALUE FOCUSED VALUE INTERNATIONAL
FUND FUND FUND
--------------------------- ----------------------- -------------------------
4/1/99 4/1/98 4/1/99 2/12/99(3) 4/1/99 4/1/98
to to to to to to
3/31/00 3/31/99 3/31/00 3/31/99 3/31/00 3/31/99
----------- ------------ --------- ---------- ---------- ----------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ (390) $ (727) $ (5) $ -- $ (72) $ 5
Net Realized Gain (Loss) from Security
Transactions 13,720 (8,356) 2,109 93 3,924 624
Net Realized Gain (Loss) on Foreign Currency
Transactions -- -- -- -- (38) (61)
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions 20,816 (14,071) 2,437 (55) (1,438) (15)
------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations 34,146 (23,154) 4,541 38 2,376 553
------- ------- ------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- -- -- (5)
Distributions in excess of net
investment income -- -- -- -- -- (201)
Net Realized Gains from Security Transactions -- (6,608) (305) -- (781) (498)
------- ------- ------- ------- ------- -------
Total Distributions -- (6,608) (305) -- (781) (704)
------- ------- ------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 105,635 122,004 20,548 3,079 38,500 54,185
Shares Transfered 1 -- -- -- 1,294 -- --
Shares Issued upon Reinvestment of
Distributions -- 5,980 304 -- 749 687
Shares Redeemed 2 (116,934) (154,269) (6,190) (753) (41,682) (63,406)
------- ------- ------- ------- ------- -------
Total PBHG Class Transactions (11,299) (26,285) 14,662 3,620 (2,433) (8,534)
------- ------- ------- ------- ------- -------
Increase (Decrease) in Net Assets Derived
from Capital Share Transactions (11,299) (26,285) 14,662 3,620 (2,433) (8,534)
------- ------- ------- ------- ------- -------
Total Increase (Decrease) in Net Assets 22,847 (56,047) 18,898 3,658 (838) (8,685)
------- ------- ------- ------- ------- -------
NET ASSETS:
Beginning of Period 69,787 125,834 3,658 -- 12,220 20,905
------- ------- ------- ------- ------- --------
End of Period $92,634 $ 69,787 $22,556 $ 3,658 $ 11,382 $ 12,220
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 7,348 9,257 1,289 297 3,260 4,707
Shares Transfered 1 -- -- -- 126 -- --
Shares Issued upon Reinvestment of
Distributions -- 486 24 -- 59 61
Shares Redeemed 2 (8,540) (11,790) (445) (73) (3,493) (5,450)
------- ------- ------- ------- ------- -------
Total PBHG Class Share Transactions (1,192) (2,047) 868 350 (174) (682)
------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Shares Outstanding (1,192) (2,047) 868 350 (174) (682)
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
--------------------------
PBHG
CASH RESERVES
FUND
-------------------------
4/1/99 4/1/98
to to
3/31/00 3/31/99
---------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net Investment Income (Loss) $ 9,315 $ 6,191
Net Realized Gain (Loss) from Security
Transactions (12) 6
Net Realized Gain (Loss) on Foreign Currency
Transactions -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions -- --
----------- ----------
Net Increase (Decrease) in Net Assets
Resulting from Operations 9,303 6,197
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income (9,312) (6,192)
Distributions in excess of net
investment income -- --
Net Realized Gains from Security Transactions -- --
----------- ----------
Total Distributions (9,312) (6,192)
----------- ----------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 12,080,349 3,499,237
Shares Transfered 1 -- --
Shares Issued upon Reinvestment of
Distributions 6,503 4,628
Shares Redeemed 2 (11,651,624) (3,477,205)
----------- ----------
Total PBHG Class Transactions 435,228 26,660
----------- ----------
Increase (Decrease) in Net Assets Derived
from Capital Share Transactions 435,228 26,660
----------- ----------
Total Increase (Decrease) in Net Assets 435,219 26,665
----------- ----------
NET ASSETS:
Beginning of Period 144,239 117,574
----------- ----------
End of Period $ 579,458 $144,239
----------- ----------
----------- ----------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 12,080,349 3,499,237
Shares Transfered 1 -- --
Shares Issued upon Reinvestment of
Distributions 6,503 4,628
Shares Redeemed 2 (11,651,624) (3,477,205)
----------- ----------
Total PBHG Class Share Transactions 435,228 26,660
----------- ----------
Net Increase (Decrease) in Shares Outstanding 435,228 26,660
----------- ----------
----------- ----------
<FN>
1. Net asset value of shares issued in connection with the transfer of the PBHG
Advisor Funds, Inc. Reference note 6 to Financial Statements.
2. Included in capital shares redeemed for the PBHG Large Cap Value Fund was an
in-kind redemption on January 4, 1999 of 3,232,902 shares and $44,452,402.
3. The PBHG New Opportunities and PBHG Focused Value Funds commenced operations
on February 12, 1999.
</FN>
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED]
88 & 89
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (000) -- Concluded
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------- -----------------------------
PBHG TECHNOLOGY & PBHG STRATEGIC
COMMUNICATIONS SMALL COMPANY
FUND FUND
-------------------------------- -----------------------------
4/1/99 4/1/98 4/1/99 4/1/98
to to to to
3/31/00 3/31/99 3/31/00 3/31/99
---------------- ------------- ----------- -------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net Investment Loss $ (13,642) $ (3,886) $ (497) $ (705)
Net Realized Gain from Security Transactions 931,007 119,887 20,058 2,035
Net Change in Unrealized Appreciation (Depreciation) on
Investments and Foreign Currency Transactions 545,653 34,248 17,961 (14,689)
--------- --------- ------- -------
Net Increase (Decrease) in Net Assets Resulting
from Operations 1,463,018 150,249 37,522 (13,359)
--------- --------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- --
Net Realized Gains from Security Transactions (117,239) (5,296) (4,358) (2,717)
--------- --------- ------- -------
Total Distributions (117,239) (5,296) (4,358) (2,717)
--------- --------- ------- -------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 7,338,547 1,546,866 65,830 43,247
Shares Issued upon Reinvestment of Distributions 112,647 4,857 4,220 2,579
Shares Redeemed (5,489,432) (1,655,968) (76,018) (93,704)
--------- --------- ------- --------
Total PBHG Class Transactions 1,961,762 (104,245) (5,968) (47,878)
--------- --------- ------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions 1,961,762 (104,245) (5,968) (47,878)
--------- --------- ------- --------
Total Increase (Decrease) in Net Assets 3,307,541 40,708 27,196 (63,954)
--------- --------- ------- --------
NET ASSETS:
Beginning of Period 536,405 495,697 48,029 111,983
--------- --------- ------- --------
End of Period $3,843,946 $536,405 $75,225 $48,029
--------- --------- ------- --------
--------- --------- ------- --------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 129,967 75,144 4,970 3,991
Shares Issued upon Reinvestment of Distributions 1,941 249 300 249
Shares Redeemed (106,139) (81,676) (5,936) (8,374)
--------- --------- ------- --------
Total PBHG Class Share Transactions 25,769 (6,283) (666) (4,134)
--------- --------- ------- --------
Net Increase (Decrease) in Shares Outstanding 25,769 (6,283) (666) (4,134)
--------- --------- ------- --------
--------- --------- ------- --------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 90
<PAGE>
THE PBHG FUNDS, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
For the Period Ended March 31, 2000
<TABLE>
<CAPTION>
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 1 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 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>
The accompanying notes are an integral part of the financial statements.
91 [LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
FINANCIAL HIGHLIGHTS -- CONCLUDED
--------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
For the Period Ended March 31, 2000
<TABLE>
<CAPTION>
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>
The accompanying notes are an integral part of the financial statements.
92 [LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
<TABLE>
<CAPTION>
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.
The accompanying notes are an integral part of the financial statements.
93
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
As of March 31, 2000
1. ORGANIZATION
The PBHG Funds, Inc. (the "Fund"), a Maryland corporation, is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company with sixteen series: the PBHG Growth Fund (the "Growth
Fund"), the PBHG Emerging Growth Fund (the "Emerging Growth Fund"), the PBHG
Large Cap Growth Fund (the "Large Cap Growth Fund"), the PBHG Select Equity Fund
(the "Select Equity Fund"), the PBHG Core Growth Fund (the "Core Growth Fund"),
the PBHG Limited Fund (the "Limited Fund"), the PBHG Large Cap 20 Fund (the
"Large Cap 20 Fund"), the PBHG New Opportunities Fund (the "New Opportunities
Fund"), the PBHG Large Cap Value Fund (the "Large Cap Value Fund"), the PBHG
Mid-Cap Value Fund (the "Mid-Cap Value Fund"), the PBHG Small Cap Value Fund
(the "Small Cap Value Fund"), the PBHG Focused Value Fund (the "Focused Value
Fund"), the PBHG International Fund (the "International Fund"), the PBHG
Technology & Communications Fund (the "Technology & Communications Fund"), and
the PBHG Strategic Small Company Fund (the "Strategic Small Company Fund"),
(collectively referred to as the "Equity Portfolios"), and the PBHG Cash
Reserves Fund (the "Cash Reserves Fund") (each a "Portfolio" and, collectively,
the "Portfolios"). Each Portfolio is classified as a diversified management
investment company, with the exception of the Large Cap 20, the Focused Value
and the Technology & Communications Funds which are classified as
non-diversified management investment companies. Each Portfolio's prospectus
provides a description of it's investment objectives, policies and investment
strategies. The Fund is registered to offer two classes of shares, PBHG Class
and Advisor Class, formerly known as the "Trust Class." Currently, the Advisor
Class of shares is only offered by the Growth Fund. The assets of each Portfolio
are segregated, and a shareholder's interest is limited to the Portfolio in
which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Portfolios.
SECURITY VALUATION -- Investment securities of the Equity Portfolios that are
listed on a securities exchange and for which market quotations are available
are valued at the last quoted sales price on each business day (normally 4:00 pm
Eastern time). If there is no such reported sale, these securities and unlisted
securities for which market quotations are readily available, are valued at the
last bid price. However, debt securities (other than short-term obligations),
including listed issues, are valued on the basis of valuations furnished by a
pricing service which utilizes electronic data processing techniques to
determine valuations for normal institutional size trading units of debt
securities, without exclusive reliance upon exchange or over-the-counter prices.
Short-term investments may be valued at amortized cost which approximates market
value. Foreign securities are valued based upon quotations from the primary
market in which they are traded, and are translated from the local currency into
U.S. dollars using current exchange rates. In addition, if quotations are not
readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets may be valued by another
method that the Board of Directors believes accurately reflects fair value. The
values of investment securities held by the Cash Reserves Fund are stated at
amortized cost, which approximates market value. Under this valuation method,
acquisition discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Dividend income and distributions to shareholders are recognized on the
ex-dividend date; interest income is recognized on the accrual basis. Costs used
in determining realized capital gains and losses on the sale of investment
securities are those of the specific securities sold adjusted for the accretion
and amortization of acquisition discounts and premiums during the respective
holding periods.
DIVIDENDS -- Dividends from net investment income for the Equity Portfolios are
declared annually, if available. Dividends from net investment income for the
Cash Reserves Fund are declared daily and paid monthly. Distributions of net
realized capital gains, for each Portfolio, are generally made to shareholders
annually, if available.
Dividends from net investment income and distributions from net realized capital
gains are determined in accordance with U.S. Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. To the extent these differences are permanent, they are
charged or credited to paid-in-capital or accumulated net realized gain, as
appropriate, in the period that the differences arise. Accordingly, the
following permanent differences as of March 31, 2000, attributable to certain
net operating losses which for tax purposes, are not available to offset future
income or have been used to offset net short-term capital gains, and the
utilization of earnings and profits distributed to shareholders on redemption of
shares as a part of the dividends paid deduction for income tax purposes, have
been reclassified to the following accounts:
ACCUMULATED NET UNDISTRIBUTED NET
PAID-IN-CAPITAL REALIZED GAIN INVESTMENT INCOME
(000) (000) (000)
--------------- --------------- ------------------
Growth Fund $632,959 $(667,969) $35,010
Emerging Growth Fund 150,279 (156,726) 6,447
Large Cap Growth Fund 19,966 (21,178) 1,212
Select Equity Fund 174,473 (177,933) 3,460
Core Growth Fund 18,845 (19,975) 1,130
Limited Fund 11,306 (12,175) 869
Large Cap 20 Fund 103,605 (108,696) 5,091
New Opportunities Fund 72,343 (73,973) 1,630
Large Cap Value Fund 5,143 (4,993) (150)
Mid-Cap Value Fund 10,619 (10,683) 64
Small Cap Value Fund 3,324 (3,669) 345
Focused Value Fund 734 (739) 5
International Fund 1,895 (1,960) 65
Cash Reserves Fund -- -- --
Technology &
Communications Fund 704,923 (718,565) 13,642
Strategic Small Company Fund 8,204 (8,684) 480
These reclassifications have no effect on net assets or net asset value per
share.
FEDERAL INCOME TAXES -- It is each Portfolio's intention to qualify or continue
to qualify as a regulated investment company for Federal income tax purposes and
to distribute all of its taxable income and net capital gains. Accordingly, no
provision has been made for Federal income taxes.
NET ASSET VALUE PER SHARE -- The net asset value per share is calculated each
business day by dividing the total value of each Portfolio's assets, less
liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by a third party custodian bank until the respective
agreements mature. Provisions of the repurchase agreements and procedures
adopted by the Fund's Board of Directors require that the market value of the
collateral including accrued interest thereon, is sufficient in the event of
default by the counterparty. If the counterparty defaults and the value of the
collateral declines, or if the counterparty enters into insolvency proceedings,
realization of the collateral by a Portfolio may be delayed or limited.
[LOGO OMITTED]
94
<PAGE>
THE PBHG FUNDS, INC.
FOREIGN CURRENCY TRANSLATION -- The books and records of the International Fund
are maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following basis:
(I) market value of investment securities, other assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at the
relevant rates of exchange prevailing on the respective dates of such
transactions.
The International Fund does not isolate that portion of gains and losses on
investment securities that is due to changes in the foreign exchange rates from
that which is due to changes in market prices of such securities.
The International Fund reports gains and losses on foreign currency related
transactions as components of realized gains for financial reporting purposes,
whereas such components are treated as ordinary income or loss for Federal
income tax purposes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
International Fund may enter into forward foreign currency exchange contracts.
Foreign currency exchange contracts are recorded at market value. Certain risks
may arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts. Realized gains or losses
arising from such transactions are included in net realized gain (loss) from
foreign currency transactions. At March 31, 2000 the International Fund had
forward foreign currency contracts outstanding as follows:
CONTRACTS UNREALIZED
TO (DELIVER)/ IN SETTLEMENT APPRECIATION
RECEIVE EXCHANGE FOR DATE (DEPRECIATION)
------------ ------------ ---------- ------------
DKK (4,621) (581) 04/03/00 ($12)
GBP (1,978) 19,108 04/04/00 $30
DKK = DANISH KRONER, GBP = BRITISH POUND
OTHER -- Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses are prorated to the
Portfolios on the basis of relative net assets. Class specific expenses, such as
12b-1 service fees, are borne by that class. Income, other expenses and realized
and unrealized gains and losses of a Portfolio are allocated to the respective
class on the basis of the relative net assets each day.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -- The preparation
of financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
3. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
The Fund and the Adviser are parties to an Investment Advisory Agreement (the
"Advisory Agreement"). Under the terms of the Advisory Agreement, the Adviser is
paid a monthly fee at an annual rate of 0.85% of the average daily net assets of
the Growth, Emerging Growth, Select Equity, Core Growth, Large Cap 20, Mid-Cap
Value, Focused Value and Technology & Communications Funds, 0.75% of the average
daily net assets of the Large Cap Growth Fund, 0.65% of the Large Cap Value
Fund, 1.00% of the average daily net assets of the Limited, New Opportunities,
Small Cap Value, International and Strategic Small Company Funds, and 0.30% of
the average daily net assets of the Cash Reserves Fund.
In the interest of limiting expenses of the Portfolios, the Adviser has entered
into expense limitation agreements with the Fund ("Expense Limitation
Agreements"), with respect to the Core Growth, Limited, Large Cap 20, New
Opportunities, Large Cap Value, Mid-Cap Value, Small Cap Value, Focused Value
and Strategic Small Company Funds, pursuant to which the Adviser has agreed to
waive or limit its fees and to assume other expenses of these Portfolios to the
extent necessary to limit the total annual expenses (expressed as a percentage
of the Portfolios' average daily net assets) to 1.50% and to not more than 2.25%
of the average daily net assets of the International Fund. Reimbursement by the
Portfolios of the advisory fees waived or limited and other expenses paid by the
Adviser pursuant to the Expense Limitation Agreements during any of the previous
two fiscal years may be made at a later date when the Portfolios have reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual expense rate of each Portfolio to exceed 1.50% for the Core Growth,
Limited, Large Cap 20, New Opportunities, Large Cap Value, Mid-Cap Value, Small
Cap Value, Focused Value and Strategic Small Company Funds and 2.25% for the
International Fund. Consequently, no reimbursement by a Portfolio will be made
unless: (i) the Portfolio's assets exceed $75 million; (ii) the Portfolio's
total annual expense ratio is less than 1.50% for the Core Growth, Limited,
Large Cap 20, New Opportunities, Large Cap Value, Mid-Cap Value, Small Cap
Value, Focused Value and Strategic Small Company Funds and 2.25% for the
International Fund, and (iii) the payment of such reimbursement was approved by
the Board of Directors on a quarterly basis. At March 31, 2000, the amount of
advisory fee waiver and reimbursement of third party expenses by the Adviser
subject to possible reimbursement were as follows:
Small Cap Value Fund $57,833
Strategic Small Company Fund $52,037
Focused Value Fund $ 5,317
New Opportunities Fund $ 1,340
Pilgrim Baxter Value Investors, Inc. (formerly Newbold's Asset Management,
Inc.), a wholly-owned subsidiary of the Adviser serves as the sub-adviser to the
Large Cap Value Fund, Mid-Cap Value Fund, Small Cap Value Fund, Focused Value
Fund and the Strategic Small Company Fund. For its services provided pursuant to
its Investment Sub-Advisory Agreement with the Adviser and the Fund, Pilgrim
Baxter Value Investors receives a fee from the Adviser at an annual rate of
0.40%, 0.50%, 0.65%, 0.40% and 0.30%, respectively, of the average daily net
assets of the Large Cap Value Fund, Mid-Cap Value Fund, Small Cap Value Fund,
Focused Value Fund and the Strategic Small Company Fund. Pilgrim Baxter Value
Investors receives no fees directly from the Large Cap Value Fund, Mid-Cap Value
Fund, Small Cap Value Fund, Focused Value Fund or the Strategic Small Company
Fund.
Murray Johnstone International, Ltd. ("Murray Johnstone") serves as the
sub-adviser to the International Fund. For its services provided pursuant to its
Investment Sub-Advisory Agreement with the Adviser and the Fund, Murray
Johnstone receives a fee from the Adviser at an annual rate of 0.50% of the
International Fund's average daily net assets. Murray Johnstone receives no fees
directly from the International Fund.
Wellington Management Company, LLP ("WMC") serves as the sub-adviser to the Cash
Reserves Fund. For its services provided pursuant to the Investment Sub-Advisory
Agreement with the Adviser and the Fund, WMC is entitled to receive a fee from
the Adviser, computed daily and paid monthly, at an annual rate equal to 0.075%
of the Cash Reserves Fund's average daily net assets up to and including $500
million and 0.020% of the Cash Reserves Fund's average daily net assets over
$500 million, but subject to a minimum annual fee of $50,000. WMC may, from time
to time, waive all or a portion of its fee from the Adviser. WMC receives no
fees directly from the Cash Reserves Fund.
95
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<PAGE>
THE PBHG FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONCLUDED
--------------------------------------------------------------------------------
As of March 31, 2000
PBHG Fund Services (the "Administrator"), a wholly-owned subsidiary of the
Adviser, provides the Fund with administrative services, including regulatory
reporting and all necessary office space, equipment, personnel and facilities.
For these administrative services, the Administrator receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.15% of the average
daily net assets of each Portfolio.
SEI Investments Management Corporation, a wholly-owned subsidiary of SEI
Investments Company, is the owner of all beneficial interest in SEI Mutual Funds
Services (the "Sub-Administrator"). The Sub-Administrator is an affiliate of the
Fund's distributor and assists the Administrator in providing administrative
services to the Fund. For acting in this capacity, the Administrator pays the
Sub-Administrator a fee at the annual rate of 0.04% of the average daily assets
of each portfolio with respect to the first $2.5 billion of the total average
daily net assets of (i) the Fund, and (ii) PBHG Insurance Series Fund, Inc.,
another fund family managed by the Adviser (collectively known as the "PBHG Fund
Family"), 0.025% of the next $7.5 billion of the average daily assets of each
portfolio in the PBHG Fund Family, and 0.02% of the average daily net assets of
each portfolio in the PBHG Fund Family in excess of $10 billion.
The Adviser has entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Portfolio. Listed below are the
amounts SEI Investments earned for its services from each Portfolio for the year
ended March 31, 2000, and are reflected as a reduction of interest income.
Growth Fund $113,877
Emerging Growth Fund 38,328
Large Cap Growth Fund 3,174
Select Equity Fund 23,035
Core Growth Fund 2,359
Limited Fund 5,926
Large Cap 20 Fund 20,174
New Opportunities Fund 2,596
Large Cap Value Fund 891
Mid-Cap Value Fund 1,007
Small Cap Value Fund 1,639
Focused Fund 233
Technology & Communications Fund 29,680
Strategic Small Company Fund 1,023
The Fund and SEI Investments Distribution Co. (the "Distributor") are parties to
a Distribution Agreement. The Distributor receives no fees for its distribution
services. The Fund has adopted a Service Plan (the "Plan") on behalf of the
Advisor Class shares pursuant to Rule 12b-1 under the Investment Company Act of
1940. The Plan provides for the payment by the Fund of up to 0.25% of the
average daily net assets of the Advisor Class shares for certain distribution
and shareholder services. Currently only the Growth Fund has Advisor Class
shareholders.
DST Systems, Inc. serves as the transfer agent and dividend disbursing agent of
the Fund. From time to time, the Fund may pay amounts to third parties that
provide sub-transfer agency and other administrative services relating to the
Fund to persons who beneficially own interests in the Fund. First Union National
Bank, serves as the custodian for each of the Portfolios except the
International Fund. The Northern Trust Company serves as the custodian for the
International Fund.
The Fund has entered into a shareholder servicing agreement with PBHG Fund
Services to provide shareholder support and other shareholder account-related
services. PBHG Fund Services has, in turn, contracted with UAM Shareholder
Service Center, Inc. ("UAMSSC") to assist in the provision of those services.
UAMSSC receives no fees directly from the Portfolios.
SHAREHOLDER SERVICE FEES (INCLUDING OUT OF POCKET EXPENSES) PAID TO PBHG FUND
SERVICES FOR THE FISCAL YEAR ENDED MARCH 31, 2000 WERE:
AMOUNT
(000)
--------------
Growth Fund $1,397
Emerging Growth Fund 456
Large Cap Growth Fund 116
Select Equity Fund 224
Core Growth Fund 113
Limited Fund 64
Large Cap 20 Fund 321
New Opportunities Fund 36
Large Cap Value Fund 52
Mid-Cap Value Fund 36
Small Cap Value Fund 34
Focused Value Fund 7
International Fund 24
Cash Reserves Fund 104
Technology & Communications Fund 520
Strategic Small Company Fund 43
Officers and directors of the Fund who are or were officers of the Adviser,
Administrator, Sub-Administrator and the Distributor received no compensation
from the Fund.
4. INVESTMENT TRANSACTIONS
The cost of securities purchased and the proceeds from securities sold, other
than short-term investments, for the Equity Portfolios for the fiscal year ended
March 31, 2000 were as follows:
PURCHASES SALES
(000) (000)
-------------- --------------
Growth Fund $3,915,198 $4,745,240
Emerging Growth Fund 1,097,303 1,191,454
Large Cap Growth Fund 271,747 281,337
Select Equity Fund 2,048,024 984,522
Core Growth Fund 331,653 327,225
Limited Fund 111,210 162,297
Large Cap 20 Fund 863,347 957,953
New Opportunities Fund 1,071,669 938,969
Large Cap Value Fund 361,723 376,582
Mid-Cap Value Fund 313,777 322,832
Small Cap Value Fund 237,647 254,801
Focused Value Fund 64,436 51,820
International Fund 2,461 6,245
Technology & Communications
Fund 6,658,980 4,984,267
Strategic Small Company Fund 124,200 137,039
[LOGO OMITTED]
96
<PAGE>
THE PBHG FUNDS, INC.
The tax aggregate gross unrealized appreciation and depreciation of securities
held by the Portfolios at March 31, 2000 are as follows:
NET
UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION DEPRECIATION (DEPRECIATION)
(000) (000) (000)
------------- ------------ -------------
Growth Fund $3,202,026 $135,174 $3,066,852
Emerging Growth Fund 547,662 36,213 511,449
Large Cap Growth Fund 100,481 3,792 96,689
Select Equity Fund 481,292 128,507 352,785
Core Growth Fund 51,896 11,550 40,346
Limited Fund 77,526 1,815 75,711
Large Cap 20 Fund 451,184 11,616 439,568
New Opportunities Fund 150,107 20,494 129,613
Large Cap Value Fund 2,019 521 1,498
Mid-Cap Value Fund 6,926 1,062 5,864
Small Cap Value Fund 16,904 3,777 13,127
Focused Value Fund 2,709 288 2,421
International Fund 2,524 294 2,230
Technology &
Communications Fund 1,036,171 328,563 707,608
Strategic Small
Company Fund 25,434 3,396 22,038
The difference between book and tax cost basis at March 31, 2000 was immaterial.
The Cash Reserves Fund had a capital loss carryforward of $11,635 expiring in
2008 at March 31, 2000, that can be used to offset future capital gains. During
fiscal year end of March 31, 2000 the PBHG Growth Fund, the PBHG Emerging Growth
Fund, the PBHG Select Equity Fund and the PBHG Small Cap Value Fund utilized
capital loss carryforwards of $279,086,766, $31,196,165, $38,691,458 and
$8,064,419 respectively, to offset capital gains.
5. CONCENTRATIONS
The Cash Reserves Fund invests primarily in a portfolio of money market
instruments maturing in 397 days or less whose ratings are within one of the two
highest ratings categories assigned by a nationally recognized statistical
rating agency, or, if not rated, are believed to be of comparable quality. The
ability of the issuers of the securities held by the Portfolio to meet their
obligations may be affected by economic developments in a specific industry,
state or region.
The International Fund invests in securities of foreign issuers in various
countries. These investments may involve certain considerations and risks not
typically associated with investments in the United States, as a result of,
among other factors, the possibility of future political and economic
developments and the level of governmental supervision and regulation of
securities markets in the respective countries.
Certain funds invest a high percentage of their assets in specific sectors of
the market, especially technology, in order to achieve a greater investment
return. As a result, the economic, political and regulatory developments in a
particular sector of the market, positive or negative, have a greater impact on
the fund's net asset value and will cause its shares to fluctuate more than if
the fund did not concentrate its investments in a particular section. In
addition, the Technology & Communications Fund is concentrated which means it
will invest 25% or more of its net assets in specifications within the
technology and communication sectors of the market in order to achieve a
potentially greater investment return.
6. ACQUISITION
On February 12, 1999 the net assets of the PBHG Advisor Core Value Fund and the
PBHG Advisor New Opportunities Fund, both series of the PBHG Advisor Funds, Inc.
were acquired by the PBHG Focused Value Fund and the PBHG New Opportunities Fund
respectively, pursuant to an agreement and plan of reorganization dated February
12, 1999. The transaction was structured to qualify as a tax-free reorganization
under the Internal Revenue Code. Prior to reorganization the PBHG Advisor Core
Value and PBHG Advisor New Opportunities had net assets of $1,294,123 and
$9,766,893, respectively, shares outstanding of 125,435 and 722,618
respectively, and NAV's of $10.32 and $13.52, respectively. The PBHG Focused
Value and the PBHG New Opportunities Funds were deemed to be the accounting
survivors of the tax-free reorganizations, accordingly each Portfolio's
performance history for financial reporting and advertising purposes began on
February 12, 1999.
7. LINE OF CREDIT
Except for the PBHG Cash Reserves Fund, each Portfolio may borrow, an amount up
to its prospectus defined limitations, from a $250 million committed line of
credit available to (i) the Funds and (ii) PBHG Insurance Series Fund, Inc.
Borrowings from the line of credit will bear interest at the Federal Funds Rate
plus 0.50%. As of March 31, 2000, the Select Equity Fund, the Core Growth Fund,
the New Opportunities Fund, the Large Cap Value Fund, and the Technology &
Communications Fund had outstanding borrowings of $32,500,000, $12,100,000,
$27,400,000, $500,000 and $116,000,000, respectively. Listed below are the Funds
which had outstanding balances during the fiscal year ended March 31, 2000.
DAILY
WEIGHTED
MAXIMUM AVERAGE AVERAGE
AMOUNT OUTSTANDING INTEREST
BORROWED BALANCE RATE
---------- ----------- --------
Growth Fund 121,600,000 3,272,951 5.75%
Emerging Fund 23,200,000 212,842 5.78%
Large Cap Growth Fund 3,100,000 17,213 5.71%
Select Equity Fund 32,500,000 180,874 5.91%
Core Growth Fund 12,100,000 578,518 5.86%
Large Cap 20 Fund 4,200,000 14,754 5.28%
New Opportunities Fund 47,400,000 1,033,880 6.06%
Large Cap Value Fund 5,400,000 74,317 5.78%
Mid Cap Value Fund 7,600,000 184,153 5.83%
Small Cap Value Fund 3,300,000 87,279 5.56%
Technology &
Communications Fund 116,000,000 4,472,131 5.79%
Strategic Small Company
Fund 1,000,000 16,940 5.42%
97
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
NOTICE TO SHAREHOLDERS (unaudited)
--------------------------------------------------------------------------------
For shareholders that do not have a March 31, 2000 tax year end, this notice is
for informational purposes only. For shareholders with a March 31, 2000 tax year
end, please consult your tax advisor as to the pertinance of this notice. For
the fiscal year ended March 31, 2000, each portfolio is designating the
following items with regard to distributions paid during the year. These
designations include the impact from utilizing earnings and profits distributed
to shareholders on redemption of shares which will be part of the dividends paid
deduction for each fund.
<TABLE>
<CAPTION>
Long Term
(20% Rate) Ordinary Foreign
Capital Gain Income Tax-Exempt Total Qualifying Tax
Fund Distribution Distributions Interest Distributions Dividends (1) Credit (2)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Emerging Growth Fund ............... 64.77% 35.23% 0.00% 100.0% 0.07% 0.00%
Cash Reserves Fund ................. 0.00% 100.00% 0.00% 100.0% 0.00% 0.00%
Growth Fund ........................ 88.25% 11.75% 0.00% 100.0% 0.14% 0.00%
Select Equity Fund ................. 39.22% 60.78% 0.00% 100.0% 0.02% 0.00%
Large Cap Growth Fund .............. 81.67% 18.33% 0.00% 100.0% 0.77% 0.00%
Technology & Communications Fund ... 6.86% 93.14% 0.00% 100.0% 0.02% 0.00%
Core Growth Fund ................... 35.76% 64.24% 0.00% 100.0% 0.48% 0.00%
Limited Fund ....................... 54.75% 45.25% 0.00% 100.0% 0.05% 0.00%
Large Cap 20 Fund .................. 72.18% 27.82% 0.00% 100.0% 0.35% 0.00%
Strategic Small Company Fund ....... 47.87% 52.13% 0.00% 100.0% 1.65% 0.00%
Large Cap Value Fund ............... 3.62% 96.38% 0.00% 100.0% 6.25% 0.00%
Mid-Cap Value Fund ................. 0.11% 99.89% 0.00% 100.0% 1.61% 0.00%
Small Cap Value Fund ............... 0.00% 100.00% 0.00% 100.0% 7.10% 0.00%
Focused Value Fund ................. 0.00% 100.00% 0.00% 100.0% 1.41% 0.00%
New Opportunities Fund ............. 0.15% 99.85% 0.00% 100.0% 0.00% 0.00%
International Fund ................. 82.40% 17.60% 0.00% 100.0% 0.00% 0.00%
</TABLE>
================================================================================
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction and is reflected as a percentage of "Ordinary
Income Distributions".
(2) The foreign tax credit represents dividends which qualify for the foreign
tax credit and is reflected as a percentage of "Ordinary Income Distributions".
SHAREHOLDERS MEETINGS
A special meeting of the shareholders of the PBHG Technology & Communications
Fund (the "Portfolio"), a series of the PBHG Funds, Inc. (the "Fund") was held
on November 2, 1999 to vote on the following matters:
1. To amend the fundamental investment restrictions of the Portfolio to
change the Portfolio's sub-classification under the Investment Company Act of
1940, as amended (the "1940 Act"), from a diversified investment company to a
non-diversified investment company ("Proposal 1"). With respect to Proposal 1,
of the number of shares voted, 89.46% voted for the proposal, 7.11% voted
against the proposal and 3.43% abstained.
2. To amend the fundamental investment restrictions of the Portfolio to
permit the Portfolio to concentrate its investments in an industry or group of
industries in the technology & communications sectors of the market ("Proposal
2"). With respect to Proposal 2, of the number of shares voted, 90.90% voted for
the proposal, 6.00% voted against the proposal, and 3.10% abstained.
98
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
[This page is left intentionally left blank.]
99
[LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
[This page is left intentionally left blank.]
100
[LOGO OMITTED]
<PAGE>
The PBHG Funds, Inc.
[LOGO OMITTED]
P.O. Box 219534
Kansas City, MO 64121-9534
Investment Adviser:
Pilgrim Baxter & Associates, Ltd.
Distributor:
SEI Investments Distribution Co.
To open an account, receive account information,
or request literature please call 1-800-433-0051
www.pbhgfunds.com
PBHG-Annual Report-4/2000
APPENDIX III
Semi-Annual Report September 30, 2000
[FRONT COVER GRAPHIC ART OMITTED]
[PBHG FUNDS LOGO OMITTED]
<PAGE>
[BLANK PAGE]
<PAGE>
THE PBHG FUNDS, INC.
Ticker Symbol
-----------------
PBHG GROWTH FUNDS
PBHG Growth Fund - PBHG Class PBHGX
PBHG Growth Fund - Advisor Class PBGWX
PBHG Emerging Growth Fund PBEGX
PBHG Large Cap Growth Fund PBHLX
PBHG Select Equity Fund PBHEX
PBHG Core Growth Fund PBCRX
PBHG Limited Fund PBLDX
PBHG Large Cap 20 Fund PLCPX
PBHG New Opportunities Fund PBNOX
PBHG VALUE FUNDS
PBHG Large Cap Value Fund PLCVX
PBHG Mid-Cap Value Fund PBMCX
PBHG Small Cap Value Fund PBSVX
PBHG Focused Value Fund PBFVX
PBHG SPECIALTY FUNDS
PBHG International Fund PBHIX
PBHG Cash Reserves Fund PBCXX
PBHG Technology &
Communications Fund PBTCX
PBHG Strategic Small Company Fund PSSCX
PBHG Global Technology &
Communications Fund PBGTX
[LOGO omitted] 1
<PAGE>
THE PBHG FUNDS, INC.
TABLE OF CONTENTS
---------------------------------------------------------------
Message to Shareholders 3
PBHG GROWTH FUNDS
---------------------------------------------------------------
PBHG Growth Fund 4
PBHG Emerging Growth Fund 8
PBHG Large Cap Growth Fund 12
PBHG Select Equity Fund 16
PBHG Core Growth Fund 19
PBHG Limited Fund 22
PBHG Large Cap 20 Fund 25
PBHG New Opportunities Fund 27
PBHG VALUE FUNDS
---------------------------------------------------------------
PBHG Large Cap Value Fund 30
PBHG Mid-Cap Value Fund 33
PBHG Small Cap Value Fund 38
PBHG Focused Value Fund 44
PBHG SPECIALTY FUNDS
---------------------------------------------------------------
PBHG International Fund 47
PBHG Cash Reserves Fund 50
PBHG Technology &
Communications Fund 52
PBHG Strategic Small
Company Fund 55
PBHG Global Technology &
Communications Fund 62
Statements of Assets and Liabilities 65
Statements of Operations 66
Statements of Changes in Net Assets 68
Financial Highlights 73
Notes to Financial Statements 76
[logo omitted] 2
<PAGE>
THE PBHG FUNDS, INC.
MESSAGE TO SHAREHOLDERS
DEAR FELLOW SHAREHOLDERS:
Investors continued to be rocked by severe turbulence in the U.S. equity
markets during the six-months ended September 30. Strong forces, both positive
and negative, kept the market vacillating throughout the period. During April
and May, we experienced a "correction". Although the market's decline helped to
wring out speculative excesses in the valuations of some companies, the outsized
market volatility that characterized the so-called "tech wreck" proved
treacherous for many individual investors. Economic data released in June
suggested that the Federal Reserve's program of six rate increases had
accomplished what was intended -- providing a soft landing for the economy in
which growth was slowed enough to keep inflation in check. As a result, most
growth equity indexes soared that month, regaining some of the altitude lost
during the previous two. Conversely, July's negative returns were impacted by
reports that second quarter economic growth had not, in fact, been as slow as
hoped. That information ignited fears that the Fed might raise rates again. Also
in July, a negative earnings warning from Nokia sent the tech sector into a
tailspin. Negative sentiment took a rest in August, and the market responded
with a relatively smooth ascent. But in September, market participants found
themselves back on the all-too-familiar, bumpy flight, influenced this time by
investor concerns over factors including high energy prices, the weak euro and
short-term earnings.
In short, volatility was at the helm for the last six months. Yet, somehow,
the results of the indexes fail to fully capture the seat-gripping experience
investors endured. The Nasdaq Composite Index fell 19.68% for the six-month
period ended September 30, 2000, finishing the period down 9.74% for the
year-to-date. The S&P 500 Index slid 3.60%, ending the period with a
year-to-date return of -1.39%. A wide disparity existed between growth and value
investing styles for the last six months, with the Russell 2000 Growth and Value
Indexes returning -11.05% and +9.43%, respectively.
We are happy to report that the majority of PBHG Funds beat the returns of
their benchmarks for the six-month period ended September 30, 2000. While heavy
weighting in technology subjected many of the growth funds to a high level of
volatility, that same overweighting and favorable stock selection within the
technology sector has benefited returns for the year-to-date and trailing
12-month periods. Our disciplined approach to growth investing met with success
across the market-cap spectrum during the period. PBHG Large Cap Growth and
Large Cap 20 returned +4.35% and -2.35%, respectively, versus -3.60% for their
benchmark, the S&P 500. PBHG Core Growth delivered a return of +4.83%, versus
-5.07% for the Russell MidCap Growth Index. PBHG Growth Fund, PBHG Class and
Emerging Growth Fund, although down 7.85% and 2.92%, respectively, for the
period still compared favorably to the -11.05% return of the Russell 2000 Growth
Index. Performance has also been favorable for our value mutual funds. PBHG
Small Cap Value returned +10.51%, versus -2.72% for the Russell 2000 Index. PBHG
Mid-Cap Value gained +9.41%, compared with a gain of 8.45% for the S&P Mid Cap
400 Index. PBHG Large Cap Value grew an impressive 11.03%, against a decline of
3.60% for its benchmark, the S&P 500 Index.
While we don't attempt to predict the direction of the economy or markets, we
continue to believe the backdrop of the U.S. economy and equity market remains
favorable. We are also confident that technological innovations will continue to
enhance productivity and foster economic growth over the long-term. We remain
focused on our bottom-up research and disciplined growth and value investment
processes, looking to invest in the most attractive companies that we find in
the investment universe for each of the funds. Regardless of the turbulence we
may experience along the way, we are confident in our approach. We continuously
strive to maintain steady hands in an environment of exaggerated volatility and
to deliver the long-term results our shareholders expect.
We thank you for your continuing confidence in the PBHG Funds.
Sincerely,
/s/ HAROLD J. BAXTER [PHOTO OMITTED] /s/ GARY L. PILGRIM [PHOTO OMITTED]
Harold J. Baxter Gary L. Pilgrim
CHAIRMAN PRESIDENT
THE PBHG FUNDS, INC. THE PBHG FUNDS, INC.
[LOGO OMITTED] 3
<PAGE>
THE PBHG FUNDS, INC.
PBHG GROWTH FUND (UNAUDITED)
PBHG GROWTH FUND PBHGX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
Large
------------------------
Medium MARKET CAPITALIZATION
---------------------X--
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
One Annualized Annualized Annualized Annualized
6 Year 3 Year 5 Year 10 Year Inception
Months2 Return Return Return Return to Date
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PBHG Growth Fund -
PBHG Class 3 (7.85)% 87.96% 26.43% 20.85% 27.96% 21.68%
-----------------------------------------------------------------------------------------------
PBHG Growth Fund -
Advisor Class 4 (7.94)% 87.55% 26.12% 20.61% 27.84% 21.60%
-----------------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG GROWTH FUND,
PBHG CLASS, VERSUS THE RUSSELL 2000 GROWTH INDEX
AND THE LIPPER MID-CAP GROWTH FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINTS FOLLOWS:
PBHG Growth Fund, Russell 2000 Lipper Mid-Cap Growth
PBHG Class Growth Index 5 Funds Average 6
12/31/85 10,000 10,000 10,000
1/31/86 10,250 10,228 10,284
2/28/86 11,080 10,983 11,064
3/31/86 11,510 11,482 11,509
4/30/86 11,640 11,763 11,577
5/31/86 12,580 12,194 12,140
6/30/86 12,680 12,233 12,232
7/31/86 11,700 10,918 11,180
8/31/86 12,380 11,153 11,587
9/30/86 11,240 10,245 10,736
10/31/86 12,193 10,766 11,289
11/30/86 12,676 10,718 11,476
12/31/86 12,394 10,358 11,192
1/31/87 14,728 11,691 12,462
2/28/87 16,509 12,823 13,569
3/31/87 16,871 13,175 13,706
4/30/87 16,911 12,767 13,506
5/31/87 17,046 12,677 13,597
6/30/87 16,508 12,991 13,726
7/31/87 16,604 13,302 14,205
8/31/87 17,548 13,687 14,775
9/30/87 17,524 13,413 14,538
10/31/87 12,898 8,994 10,582
11/30/87 11,840 8,399 9,909
12/31/87 13,832 9,273 11,117
1/31/88 13,566 9,454 11,222
2/29/88 14,814 10,334 12,015
3/31/88 14,660 10,888 12,193
4/30/88 15,011 11,151 12,470
5/31/88 14,576 10,783 12,318
6/30/88 15,684 11,579 13,209
7/31/88 14,969 11,363 12,817
8/31/88 14,099 10,950 12,462
9/30/88 14,744 11,260 12,933
10/31/88 14,449 11,073 12,743
11/30/88 14,119 10,642 12,442
12/31/88 14,780 11,162 13,000
1/31/89 15,792 11,638 13,839
2/28/89 15,553 11,667 13,780
3/31/89 15,244 11,991 14,136
4/30/89 16,467 12,588 15,047
5/31/89 18,020 13,191 15,897
6/30/89 17,004 12,767 15,406
7/31/89 18,401 13,365 16,488
8/31/89 19,177 13,749 17,058
9/30/89 19,896 13,907 17,273
10/31/89 18,852 13,146 16,544
11/30/89 18,698 13,263 16,710
12/31/89 19,109 13,413 16,908
1/31/90 17,501 12,029 15,446
2/28/90 18,537 12,485 15,934
3/31/90 19,377 13,057 16,680
4/30/90 18,948 12,669 16,381
5/31/90 21,627 13,799 18,142
6/30/90 21,823 13,881 18,280
7/31/90 20,716 13,250 17,638
8/31/90 17,984 11,332 15,531
9/30/90 15,483 10,259 14,324
10/31/90 14,787 9,683 13,927
11/30/90 16,614 10,574 15,187
12/31/90 17,266 11,078 15,985
1/31/91 19,518 12,118 17,420
2/28/91 20,782 13,510 18,803
3/31/91 22,659 14,462 20,026
4/30/91 22,284 14,290 19,711
5/31/91 23,271 14,980 20,726
6/30/91 20,664 13,961 19,398
7/31/91 22,323 14,593 20,775
8/31/91 23,449 15,238 21,801
9/30/91 23,074 15,467 21,856
10/31/91 23,745 16,126 22,638
11/30/91 22,724 15,285 21,715
12/31/91 26,179 16,748 24,766
1/31/92 27,174 18,064 25,521
2/29/92 27,447 18,257 25,853
3/31/92 25,782 17,207 24,477
4/30/92 24,862 16,208 23,315
5/31/92 24,688 16,171 23,347
6/30/92 23,544 15,140 22,369
7/31/92 23,420 15,615 23,132
8/31/92 22,649 15,014 22,591
9/30/92 23,644 15,433 23,194
10/31/92 25,061 16,068 24,196
11/30/92 28,298 17,568 26,112
12/31/92 33,612 18,050 27,000
1/31/93 33,003 18,274 27,451
2/28/93 30,891 17,281 26,114
3/31/93 34,668 17,726 27,205
4/30/93 33,868 17,164 26,520
5/31/93 37,613 18,193 28,344
6/30/93 39,822 18,236 28,676
7/31/93 40,302 18,418 28,845
8/31/93 43,375 19,300 30,616
9/30/93 47,344 19,938 31,963
10/31/93 48,145 20,514 32,309
11/30/93 46,320 19,684 31,071
12/31/93 49,312 20,461 32,500
1/31/94 51,258 21,006 33,404
2/28/94 51,777 20,913 33,237
3/31/94 47,592 19,629 31,253
4/30/94 47,884 19,659 31,250
5/31/94 45,192 19,218 30,675
6/30/94 41,591 18,397 29,141
7/31/94 42,888 18,659 29,785
8/31/94 47,657 20,028 32,028
9/30/94 49,052 20,112 32,220
10/31/94 50,577 20,326 33,051
11/30/94 49,571 19,504 31,888
12/31/94 51,654 19,964 32,618
1/31/95 49,122 19,557 32,236
2/28/95 51,849 20,461 33,726
3/31/95 54,219 21,058 35,078
4/30/95 53,667 21,375 35,257
5/31/95 54,089 21,655 35,937
6/30/95 59,998 23,147 38,791
7/31/95 67,238 24,951 42,263
8/31/95 67,141 25,258 42,905
9/30/95 70,712 25,779 44,278
10/31/95 72,660 24,510 43,016
11/30/95 75,550 25,591 44,883
12/31/95 77,660 26,158 45,215
1/31/96 74,186 25,942 45,093
2/29/96 79,673 27,125 47,239
3/31/96 82,140 27,662 48,368
4/30/96 89,056 29,786 52,707
5/31/96 93,114 31,314 55,137
6/30/96 89,348 29,278 52,573
7/31/96 80,128 25,704 47,026
8/31/96 84,218 27,606 50,182
9/30/96 91,621 29,027 53,790
10/31/96 85,192 27,776 51,633
11/30/96 87,465 28,548 52,686
12/31/96 85,290 29,105 52,665
1/31/97 85,225 29,832 54,240
2/28/97 76,102 28,031 50,584
3/31/97 68,375 26,052 47,043
4/30/97 68,667 25,751 46,874
5/31/97 77,141 29,621 52,761
6/30/97 80,420 30,626 55,362
7/31/97 85,972 32,195 59,487
8/31/97 84,153 33,161 59,874
9/30/97 90,192 35,808 64,532
10/31/97 85,160 33,656 60,731
11/30/97 82,465 32,855 59,401
12/31/97 82,433 32,874 59,787
1/31/98 80,290 32,436 58,872
2/28/98 87,757 35,299 63,941
3/31/98 91,653 36,780 67,049
4/30/98 92,010 37,006 67,538
5/31/98 83,569 34,317 63,216
6/30/98 88,212 34,668 65,991
7/31/98 80,095 31,773 61,833
8/31/98 60,388 24,439 48,613
9/30/98 65,063 26,917 52,337
10/31/98 66,524 28,320 54,551
11/30/98 72,530 30,517 59,390
12/31/98 82,920 33,279 66,903
1/31/99 84,705 34,776 69,545
2/28/99 76,167 31,595 64,135
3/31/99 79,576 32,720 68,842
4/30/99 76,102 35,610 71,713
5/31/99 78,764 35,666 71,512
6/30/99 88,764 37,545 78,184
7/31/99 87,530 36,384 77,551
8/31/99 89,803 35,023 77,551
9/30/99 96,978 35,699 79,738
10/31/99 105,776 36,614 86,850
11/30/99 122,561 40,485 97,794
12/31/99 159,576 47,621 116,276
1/31/00 159,543 47,177 114,683
2/29/00 216,428 58,154 143,848
3/31/00 197,803 52,041 135,619
4/30/00 166,851 46,786 121,312
5/31/00 151,392 42,689 110,624
6/30/00 180,997 48,204 126,786
7/31/00 168,367 44,073 120,320
8/31/00 198,511 48,709 135,529
9/30/00 182,277 46,289 130,365
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month returns have not been annualized.
3 The PBHG Growth Fund-PBHG Class commenced operations on December 19, 1985.
4 The performance shown for the Advisor Class (formerly known as the Trust
Class) prior to its inception on August 16, 1996, is based on the performance
and expenses of the PBHG Class. Subsequent to August 16, 1996, the performance
is that of the Advisor Class and reflects the expenses specific to the Advisor
Class, which will cause its returns to be less than those of the PBHG Class.
The average annual total return of the Advisor Class from its inception date
to September 30, 2000 was 23.95%.
5 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
6 The Lipper Mid-Cap Growth Funds Average represents the average performance of
all mutual funds classified by Lipper, Inc. in the Mid-Cap Growth category.
These performance figures are based on the changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested. The Average is not intended to imply the Fund's past or
future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
Consumer Cyclical 16%
Health Care 12%
Industrial 8%
Services 4%
Technology 49%
Cash 11%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Micromuse 3.3%
Polycom 3.2%
Gemstar-TV Guide International 3.1%
Flextronics International 2.8%
Micrel 2.6%
Minimed 2.6%
Transwitch 2.5%
King Pharmaceuticals 2.3%
Extreme Networks 2.3%
Art Technology 2.3%
------------------------------------------------------
% of Total Portfolio Investments 27.0%
[LOGO OMITTED] 4
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of September 30, 2000 (UNAUDITED)
PBHG GROWTH FUND PBHGX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 94.2%
CONSUMER CYCLICAL -- 17.4%
AUDIO/VIDEO PRODUCTS -- 3.4%
Polycom* 2,986,400 $ 199,995
-----------
199,995
--------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 0.8%
Fastenal 846,000 48,751
-----------
48,751
--------------------------------------------------------------------------------
E-COMMERCE -- 0.4%
Purchasepro.com* 240,000 21,090
-----------
21,090
--------------------------------------------------------------------------------
MOTION PICTURES & SERVICES -- 2.4%
Macrovision* 1,733,800 140,438
Zomax* 422,600 2,958
-----------
143,396
--------------------------------------------------------------------------------
MULTIMEDIA -- 3.3%
Gemstar-TV Guide International* 2,251,100 196,268
-----------
196,268
--------------------------------------------------------------------------------
RADIO -- 0.7%
Hispanic Broadcasting* 1,601,700 44,647
-----------
44,647
--------------------------------------------------------------------------------
RETAIL-BEDDING -- 0.2%
Bed Bath & Beyond* 574,500 14,012
-----------
14,012
--------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 2.3%
CDW Computer Centers* 1,955,800 134,950
-----------
134,950
--------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 1.4%
Dollar Tree Stores* 2,067,450 83,861
-----------
83,861
--------------------------------------------------------------------------------
RETAIL-JEWELRY -- 1.5%
Tiffany & Company 2,354,800 90,807
-----------
90,807
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 1.0%
Starbucks* 1,564,600 62,682
-----------
62,682
-----------
OTAL CONSUMER CYCLICAL (COST $566,726) 1,040,459
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 12.6%
MEDICAL INFORMATION SYSTEMS -- 0.2%
Allscripts* 800,100 11,301
-----------
11,301
--------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 1.7%
Techne* 913,300 102,290
-----------
102,290
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 2.8%
Minimed* 1,861,500 $ 166,372
-----------
166,372
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 2.2%
Incyte Pharmaceuticals* 1,669,800 68,670
Invitrogen* 874,500 62,199
-----------
130,869
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 4.3%
Celgene* 1,860,900 110,724
King Pharmaceuticals* 4,338,193 145,058
-----------
255,782
--------------------------------------------------------------------------------
PHARMACY SERVICES -- 1.4%
Express Scripts, Cl A*+ 1,196,500 86,447
-----------
86,447
-----------
TOTAL HEALTH CARE (COST $466,295) 753,061
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 8.9%
BUILDING & CONSTRUCTION-MISCELLANEOUS -- 1.2%
Dycom Industries* 1,738,700 72,373
-----------
72,373
--------------------------------------------------------------------------------
CIRCUIT BOARDS -- 1.8%
Jabil Circuit* 1,896,300 107,615
-----------
107,615
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 3.9%
Flextronics International* 2,128,700 174,819
Gentex* 2,361,900 59,048
-----------
233,867
--------------------------------------------------------------------------------
INDUSTRIAL AUTOMATION/ROBOTICS -- 0.6%
Cognex* 864,500 34,094
-----------
34,094
--------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 0.9%
PerkinElmer 507,100 52,929
-----------
52,929
--------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 0.5%
Cymer* 942,600 28,926
-----------
28,926
-----------
TOTAL INDUSTRIAL (COST $332,948) 529,804
-----------
--------------------------------------------------------------------------------
SERVICES -- 3.9%
ADVERTISING SALES -- 1.1%
Lamar Advertising* 1,774,400 67,205
-----------
67,205
--------------------------------------------------------------------------------
ADVERTISING SERVICES -- 0.8%
Getty Images* 1,624,600 49,449
-----------
49,449
--------------------------------------------------------------------------------
[LOGO OMITTED] 5
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG GROWTH FUND PBHGX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 1.2%
Wireless Facilities* 1,274,100 $ 73,500
------------
73,500
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.8%
MarchFIRST* 2,970,500 46,600
------------
46,600
-----------
TOTAL SERVICES (COST $249,600) 236,754
------------
--------------------------------------------------------------------------------
TECHNOLOGY -- 51.4%
APPLICATIONS SOFTWARE -- 3.5%
Peregrine Systems* 4,135,900 78,324
Quest Software* 1,320,800 82,034
VA Linux Systems* 995,500 46,042
------------
206,400
--------------------------------------------------------------------------------
CELLULAR TELECOMMUNICATION -- 0.4%
Triton PCS Holdings* 865,500 23,801
------------
23,801
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 0.2%
RSA Security* 221,200 9,539
------------
9,539
--------------------------------------------------------------------------------
COMPUTER GRAPHICS -- 1.8%
Nvidia* 1,317,900 107,903
------------
107,903
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.5%
Silicon Storage Technology* 1,033,200 28,090
------------
28,090
--------------------------------------------------------------------------------
DECISION SUPPORT SOFTWARE -- 1.0%
Advent Software* 828,200 57,870
------------
57,870
--------------------------------------------------------------------------------
EDUCATIONAL SOFTWARE -- 2.0%
Smartforce ADR* 2,520,300 119,399
------------
119,399
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 12.0%
Actel* 874,500 31,427
Cree* 517,800 60,194
Dallas Semiconductor 1,229,200 40,410
Lattice Semiconductor* 1,035,200 55,642
Microchip Technology* 3,672,675 121,428
Qlogic* 1,189,200 104,650
Semtech* 2,214,400 95,496
Transwitch* 2,461,900 156,946
Virata* 816,800 54,011
------------
720,204
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 2.0%
Informatica* 1,280,600 119,416
------------
119,416
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
INTERNET CONTENT -- 2.1%
Go2Net* 1,447,500 $ 78,549
Infospace* 1,490,600 45,091
------------
123,640
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 9.0%
Agile Software* 402,000 36,155
Art Technology* 1,497,600 141,898
E.Piphany* 499,500 38,493
Interwoven* 1,043,500 117,981
Real Network* 1,034,500 41,121
Software.com* 680,200 123,414
Vignette* 1,303,700 38,948
------------
538,010
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 3.4%
Micromuse* 1,026,000 206,162
------------
206,162
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 4.1%
Cobalt Networks* 888,000 51,393
Extreme Networks* 1,257,400 143,972
JNI* 570,200 50,748
------------
246,113
--------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 0.6%
Gilat Satellite* 494,400 38,007
------------
38,007
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 3.9%
Cypress Semiconductor* 1,533,500 63,736
Micrel* 2,491,700 166,944
------------
230,680
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT -- 0.9%
Credence Systems* 791,579 23,748
Helix Technology 479,100 14,313
Varian Semiconductor Equipment* 467,500 17,502
------------
55,563
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 3.3%
Advanced Fibre* 1,351,500 51,187
Audiocodes Limited*+ 976,500 83,125
Ditech Communications* 1,035,600 42,459
Terayon Communication* 695,100 23,590
------------
200,361
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER OPTICS -- 0.2%
Newport 76,500 12,184
------------
12,184
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 0.5%
Inet Technologies* 1,047,500 30,639
------------
30,639
--------------------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $2,077,447) 3,073,981
------------
TOTAL COMMON STOCK (COST $3,693,016) 5,634,059
------------
--------------------------------------------------------------------------------
[LOGO OMITTED] 6
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-------------------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG GROWTH FUND PBHGX
Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 11.2%
Barclays
6.55%, dated 09/29/00, matures 10/02/00,
repurchase price $113,514,061 (collateralized
by U.S. Government Agency Instruments:
total market value $115,721,662)(A) $113,452 $ 113,452
Deutsche
6.55%, dated 09/29/00, matures 10/02/00,
repurchase price $154,582,924 (collateralized
by U.S. Government Agency Instruments:
total market value $157,588,980) (A) 154,499 154,499
Greenwich Capital
6.55%, dated 09/29/00, matures 10/02/00,
repurchase price $42,716,596 (collateralized
by U.S. Government Agency Instruments:
total market value $43,549,463) (A) 42,693 42,693
J.P. Morgan
6.55%, dated 09/29/00, matures 10/02/00,
repurchase price $133,117,606 (collateralized
by U.S. Government Agency Instruments:
total market value $135,706,118) (A) 133,045 133,045
J.P. Morgan
6.55%, dated 09/29/00, matures 10/02/00,
repurchase price $63,076,676 (collateralized
by U.S. Government Agency Instruments:
total market value $64,303,111) (A) 63,042 63,042
Morgan Stanley
6.55%, dated 09/29/00, matures 10/02/00,
repurchase price $82,678,749 (collateralized
by U.S. Government Agency Instruments:
total market value $85,212,715) (A) 82,634 82,634
Prudential
6.55%, dated 09/29/00, matures 10/02/00,
repurchase price $82,540,628 (collateralized
by U.S. Government Agency Instruments:
total market value $84,145,579) (A) 82,496 82,496
------------
TOTAL REPURCHASE AGREEMENTS (COST $671,861) 671,861
------------
TOTAL INVESTMENTS-- 105.4% (COST $4,364,877) 6,305,920
------------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (5.4)%
Payable for Capital Shares Redeemed (395,368)
Other Assets and Liabilities, Net 69,305
------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (326,063)
------------
--------------------------------------------------------------------------------
Market
Description Value (000)
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 400 million
shares -- $0.001 par value) based on 108,069,119
outstanding shares of common stock $2,987,961
Fund Shares of Advisor Class (authorized 200 million
shares -- $0.001 par value)
based on 2,446,819 outstanding shares of common stock 70,713
Accumulated net investment loss (19,449)
Accumulated net realized gain on investments 999,589
Net unrealized appreciation on investments 1,941,043
------------
TOTAL NET ASSETS -- 100.0% $5,979,857
------------
------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- PBHG CLASS $54.12
------------
------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- ADVISOR CLASS $53.57
------------
------------
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
+Considered an affiliated company as the Fund owns more than 5% of the
outstanding voting securities of such company. The total market value of
investments in affiliated companies as of September 30, 2000 was $169,571,688.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 7
<PAGE>
THE PBHG FUNDS, INC.
PBHG EMERGING GROWTH FUND (UNAUDITED)
PBHG EMERGING GROWTH FUND PBEGX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
X Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
One Annualized Annualized Annualized
6 Year 3 Year 5 Year Inception
Months2 Return Return Return to Date 3
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Emerging Growth Fund (2.92)% 65.35% 15.01% 16.03% 23.82%
-------------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG EMERGING GROWTH
FUND, VERSUS THE RUSSELL 2000 GROWTH INDEX
AND THE LIPPER SMALL-CAP GROWTH FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINTS FOLLOWS:
PBHG Emerging Russell 2000 Lipper Small-Cap Growth
Growth Fund Growth Index 4 Funds Average 5
6/30/93 10,000 10,000 10,000
7/31/93 10,198 10,100 10,055
8/31/93 11,304 10,583 10,596
9/30/93 12,500 10,933 11,053
10/31/93 13,063 11,249 11,194
11/30/93 12,332 10,794 10,784
12/31/93 13,100 11,220 11,293
1/31/94 13,636 11,519 11,614
2/28/94 14,075 11,468 11,619
3/31/94 13,100 10,764 10,948
4/30/94 13,261 10,780 10,924
5/31/94 12,854 10,539 10,647
6/30/94 12,008 10,088 10,106
7/31/94 12,372 10,232 10,283
8/31/94 13,689 10,983 11,023
9/30/94 14,621 11,029 11,158
10/31/94 15,628 11,146 11,419
11/30/94 15,435 10,695 11,031
12/31/94 16,216 10,947 11,261
1/31/95 15,518 10,724 11,085
2/28/95 16,130 11,220 11,570
3/31/95 17,290 11,548 11,960
4/30/95 17,666 11,721 12,070
5/31/95 17,762 11,875 12,217
6/30/95 19,384 12,693 13,124
7/31/95 21,328 13,682 14,267
8/31/95 21,575 13,851 14,451
9/30/95 22,359 14,136 14,880
10/31/95 21,682 13,441 14,450
11/30/95 22,982 14,033 15,061
12/31/95 24,072 14,344 15,332
1/31/96 23,498 14,226 15,160
2/29/96 24,838 14,874 15,999
3/31/96 25,963 15,169 16,469
4/30/96 29,722 16,334 18,106
5/31/96 31,084 17,171 19,078
6/30/96 29,159 16,055 18,121
7/31/96 25,142 14,095 16,234
8/31/96 27,122 15,138 17,368
9/30/96 29,643 15,918 18,434
10/31/96 28,068 15,231 17,809
11/30/96 28,011 15,655 18,140
12/31/96 28,184 15,960 18,356
1/31/97 28,475 16,359 18,804
2/28/97 24,311 15,371 17,612
3/31/97 22,403 14,286 16,400
4/30/97 21,345 14,121 16,148
5/31/97 25,567 16,243 18,445
6/30/97 27,033 16,794 19,524
7/31/97 27,882 17,655 20,815
8/31/97 28,184 18,184 21,252
9/30/97 30,918 19,636 22,978
10/31/97 28,347 18,455 21,838
11/30/97 27,289 18,016 21,395
12/31/97 27,149 18,027 21,461
1/31/98 26,823 17,787 21,167
2/28/98 28,766 19,357 22,985
3/31/98 30,045 20,169 24,144
4/30/98 30,255 20,293 24,392
5/31/98 27,568 18,818 22,751
6/30/98 28,417 19,011 23,244
7/31/98 26,009 17,423 21,627
8/31/98 21,147 13,401 16,953
9/30/98 23,020 14,760 18,272
10/31/98 22,740 15,530 19,135
11/30/98 24,532 16,735 20,774
12/31/98 27,964 18,249 22,964
1/31/99 28,058 19,070 23,455
2/28/99 24,800 17,326 21,333
3/31/99 24,064 17,943 22,239
4/30/99 23,481 19,527 23,189
5/31/99 24,496 19,558 23,453
6/30/99 27,252 20,588 25,536
7/31/99 26,610 19,952 25,521
8/31/99 26,353 19,206 25,184
9/30/99 28,443 19,576 25,889
10/31/99 30,335 20,078 27,282
11/30/99 33,604 22,201 30,853
12/31/99 41,484 26,114 36,619
1/31/00 39,861 25,870 36,213
2/29/00 53,014 31,889 45,422
3/31/00 48,448 28,537 42,874
4/30/00 42,392 25,656 38,063
5/31/00 37,244 23,409 34,877
6/30/00 46,958 26,433 40,838
7/31/00 42,731 24,168 38,192
8/31/00 49,756 26,710 42,691
9/30/00 47,031 25,383 41,000
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Emerging Growth Fund commenced operations on June 14, 1993.
4 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
5 The Lipper Small-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Small-Cap Growth
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The Average is not intended to imply the Fund's
past or future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Consumer Cyclical 7%
Health Care 9%
Industrial 6%
Services 8%
Technology 56%
Cash 14%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Micromuse 3.6%
Polycom 3.6%
Advent Software 2.9%
Transwitch 2.8%
MMC Networks 2.7%
Business Objects ADR 2.6%
Natural Microsystems 2.5%
Diamond Technology Partners, Cl A 2.2%
Actuate 2.2%
InFocus 2.1%
------------------------------------------------------
% of Total Portfolio Investments 27.2%
[LOGO OMITTED] 8
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG EMERGING GROWTH FUND PBEGX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 93.3%
CONSUMER CYCLICAL -- 8.1%
AUDIO/VIDEO PRODUCTS -- 3.9%
Polycom* 713,000 $ 47,749
------------
47,749
--------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 0.7%
Charlotte Russe Holding* 304,800 4,039
Hot Topic* 145,300 4,359
------------
8,398
--------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 1.2%
Insight Enterprises* 528,450 14,400
------------
14,400
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 0.7%
Tweeter Home Entertainment Group* 230,200 8,359
------------
8,359
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 0.6%
California Pizza Kitchen* 263,700 7,384
------------
7,384
--------------------------------------------------------------------------------
RETAIL-VARIETY STORE -- 1.0%
99 Cents Only Stores* 247,700 12,431
------------
12,431
------------
TOTAL CONSUMER CYCLICAL (COST $46,141) 98,721
------------
--------------------------------------------------------------------------------
HEALTH CARE -- 9.7%
MEDICAL INFORMATION SYSTEMS -- 1.3%
Allscripts* 275,500 3,891
Dendrite International* 447,800 12,007
------------
15,898
--------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 0.9%
Techne* 97,000 10,864
------------
10,864
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 1.8%
Minimed* 243,200 21,736
------------
21,736
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.4%
Myriad Genetics* 192,000 16,584
------------
16,584
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.6%
Medicis Pharmaceutical, Cl A* 320,550 19,714
Priority Healthcare, Cl B* 150,000 11,437
------------
31,151
--------------------------------------------------------------------------------
PHARMACY SERVICES -- 0.8%
Accredo Health* 200,000 9,775
------------
9,775
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
RESPIRATORY PRODUCTS -- 0.9%
Resmed* 367,900 $ 11,497
------------
11,497
------------
TOTAL HEALTH CARE (COST $75,008) 117,505
------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 6.4%
BUILDING & CONSTRUCTION-MISCELLANEOUS -- 1.0%
Dycom Industries* 296,000 12,321
------------
12,321
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS -- 0.5%
GSI Lumonics* 352,100 5,810
------------
5,810
--------------------------------------------------------------------------------
ELECTRONIC CONNECTORS -- 0.6%
Merix* 103,300 6,695
------------
6,695
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 1.2%
Molecular Devices* 151,300 14,865
------------
14,865
--------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 0.3%
Photon Dynamics* 105,600 3,986
------------
3,986
--------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 0.5%
Varian* 136,400 5,874
------------
5,874
--------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENts -- 1.4%
Cymer* 122,500 3,759
Electro Scientific Industries* 391,100 13,737
------------
17,496
--------------------------------------------------------------------------------
POWER CONVERSION/SUPPLY EQUIPMENT -- 0.9%
Advanced Energy Industries* 326,900 10,788
------------
10,788
------------
TOTAL INDUSTRIAL (COST $77,130) 77,835
------------
--------------------------------------------------------------------------------
SERVICES -- 8.4%
ADVERTISING SERVICES -- 1.4%
Getty Images* 550,400 16,753
------------
16,753
--------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.5%
Plexus* 94,200 6,641
------------
6,641
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 1.4%
Factset Research Systems 438,900 16,503
------------
16,503
--------------------------------------------------------------------------------
[LOGO OMITTED] 9
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG EMERGING GROWTH FUND PBEGX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
CONSULTING SERVICES -- 3.8%
Diamond Technology Partners, Cl A* 393,650 $ 29,228
Forrester Research* 274,900 17,525
----------
46,753
--------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT -- 1.3%
Albany Molecular Research* 278,200 15,631
----------
15,631
----------
TOTAL SERVICES (COST $53,706) 102,281
----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 60.7%
APPLICATIONS SOFTWARE -- 6.8%
Actuate* 839,300 28,995
Genomica* 51,200 995
Peregrine Systems* 706,700 13,383
Quest Software* 405,300 25,173
Resonate* 163,100 6,443
Silverstream Software* 248,100 7,474
----------
82,463
--------------------------------------------------------------------------------
COMPUTER GRAPHICS -- 2.0%
Nvidia* 297,800 24,382
----------
24,382
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.1%
NetScout Systems* 75,800 1,800
----------
1,800
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.5%
M-Systems Flash Disk Pioneers* 104,400 3,987
Simple Technology* 259,100 2,510
----------
6,497
--------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 2.3%
InFocus* 527,400 27,952
----------
27,952
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 0.8%
Documentum* 113,800 9,239
----------
9,239
--------------------------------------------------------------------------------
DECISION SUPPORT SOFTWARE -- 4.2%
Advent Software* 546,900 38,215
Netiq* 196,000 12,875
----------
51,090
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 7.1%
Actel* 235,000 8,445
Cree* 166,300 19,332
Integrated Silicon Solution* 444,000 6,299
Omnivision Technologies* 197,700 7,154
Silicon Image* 295,800 7,340
Transwitch* 573,450 36,558
----------
85,128
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE SERVICE -- 5.3%
Avantgo* 111,400 $ 2,228
Business Objects ADR* 304,700 34,450
Informatica* 291,100 27,145
----------
63,823
--------------------------------------------------------------------------------
INTERNET CONTENT -- 0.9%
Digital Think* 67,000 2,822
Jupiter Media Metrix* 212,435 3,386
Mainspring* 102,500 762
Vastera* 197,500 4,345
----------
11,315
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 5.3%
Agile Software* 200,000 17,988
Art Technology* 143,200 13,568
Clarent* 109,500 4,312
Commerce One* 212,320 16,667
Integrated Information Systems* 265,700 1,262
Matrixone* 48,500 1,940
Niku* 227,700 5,550
Tumbleweed* 65,000 3,315
----------
64,602
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 3.9%
Micromuse* 238,500 47,924
----------
47,924
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 2.9%
MMC Networks* 279,600 35,369
----------
35,369
--------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 0.7%
Celeritek* 241,400 9,098
----------
9,098
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 4.0%
Micrel* 312,100 20,911
O2Micro International* 259,100 4,458
Sipex* 292,500 12,303
Triquint Semiconductor* 300,000 10,931
----------
48,603
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT -- 2.4%
Credence Systems* 244,200 7,326
Dupont Photomasks* 41,700 2,450
LTX* 156,800 2,969
Rudolph Technologies* 28,500 953
Varian Semiconductor Equipment* 419,200 15,694
----------
29,392
--------------------------------------------------------------------------------
[LOGO OMITTED] 10
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG EMERGING GROWTH FUND PBEGX
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 9.2%
Anaren Microwave* 62,400 $ 8,463
Audiocodes Limited* 256,000 21,792
Digital Lightwave* 125,000 9,078
Ditech Communications* 171,300 7,023
MCK Communications* 515,700 11,668
Natural Microsystems* 607,200 32,665
Tut Systems* 227,600 19,645
----------
110,334
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER OPTICS -- 0.7%
MRV Communications* 183,200 8,301
----------
8,301
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 0.1%
Latitude Communications* 160,600 1,245
----------
1,245
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 1.5%
Netro* 131,900 7,815
Powerwave Technologies* 286,800 10,890
----------
18,705
----------
TOTAL TECHNOLOGY (COST $394,843) 737,262
----------
TOTAL COMMON STOCK (COST $646,828) 1,133,604
----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 15.0%
J.P. Morgan
6.58%, dated 09/29/00, matures 10/02/00,
repurchase price $89,614,915 (collateralized
by U.S. Government Agency Instruments:
total market value $91,357,531) (A) $89,566 89,566
Morgan Stanley
6.58%, dated 09/29/00, matures 10/02/00,
repurchase price $37,041,919 (collateralized
by U.S. Government Agency Instruments:
total market value $37,786,089) (A) 37,022 37,022
Prudential
6.58%, dated 09/29/00, matures 10/02/00,
repurchase price $56,478,259 (collateralized
by U.S. Government Agency Instruments:
total market value $57,579,682) (A) 56,447 56,447
----------
TOTAL REPURCHASE AGREEMENTS (COST $183,035) 183,035
----------
TOTAL INVESTMENTS-- 108.3% (COST $829,863) 1,316,639
----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (8.3)%
Payable for Capital Shares Redeemed (120,106)
Other Assets and Liabilities, Net 19,048
----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (101,058)
----------
--------------------------------------------------------------------------------
Market
Description Value (000)
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 400 million
shares -- $0.001 par value)
based on 31,306,269
outstanding shares of common stock $ 710,213
Accumulated net investment loss (3,740)
Accumulated net realized gain on investments 22,332
Net unrealized appreciation on investments 486,776
----------
TOTAL NET ASSETS-- 100.0% $1,215,581
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $38.83
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 11
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP GROWTH FUND (UNAUDITED)
PBHG LARGE CAP GROWTH FUND PBHLX
Value Blend Growth
------------------------
X Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
One Annualized Annualized Annualized
6 Year 3 Year 5 Year Inception
Months 2 Return Return Return to Date 3
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Large Cap
Growth Fund 4.35% 106.15% 41.35% 34.01% 37.35%
----------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG LARGE CAP GROWTH FUND, VERSUS THE
S&P 500 INDEX AND THE LIPPER MULTI-CAP GROWTH FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINT FOLLOWS:
PBHG Large Cap Lipper Multi-Cap Growth
Growth Fund S&P 500 Index 4 Funds Average 5
4/30/95 10,000 10,000 10,000
5/31/95 10,070 10,399 10,211
6/30/95 10,920 10,640 10,872
7/31/95 11,740 10,993 11,619
8/31/95 12,310 11,020 11,743
9/30/95 13,160 11,485 12,079
10/31/95 13,510 11,444 11,878
11/30/95 13,720 11,946 12,307
12/31/95 13,383 12,176 12,354
1/31/96 14,146 12,590 12,492
2/29/96 14,827 12,707 12,921
3/31/96 14,992 12,830 13,096
4/30/96 15,880 13,019 13,814
5/31/96 16,509 13,354 14,282
6/30/96 16,158 13,405 13,875
7/31/96 15,023 12,813 12,769
8/31/96 15,601 13,083 13,401
9/30/96 16,870 13,819 14,332
10/31/96 16,365 14,200 14,174
11/30/96 16,994 15,273 14,851
12/31/96 16,514 14,970 14,643
1/31/97 17,247 15,905 15,333
2/28/97 16,504 16,030 14,703
3/31/97 14,727 15,372 13,834
4/30/97 15,626 16,289 14,122
5/31/97 17,330 17,280 15,465
6/30/97 18,197 18,054 16,035
7/31/97 19,860 19,490 17,456
8/31/97 18,941 18,399 17,135
9/30/97 20,139 19,406 18,240
10/31/97 19,282 18,759 17,399
11/30/97 19,365 19,626 17,427
12/31/97 20,206 19,963 17,591
1/31/98 19,893 20,184 17,524
2/28/98 22,450 21,639 18,989
3/31/98 23,681 22,746 19,916
4/30/98 23,817 22,974 20,123
5/31/98 23,160 22,580 19,254
6/30/98 24,861 23,496 20,197
7/31/98 24,621 23,247 19,502
8/31/98 19,945 19,890 16,013
9/30/98 21,458 21,164 17,229
10/31/98 21,573 22,886 18,154
11/30/98 22,993 24,273 19,501
12/31/98 26,353 25,672 21,718
1/31/99 27,213 26,745 22,889
2/28/99 25,671 25,914 21,591
3/31/99 27,447 26,951 23,007
4/30/99 27,157 27,995 23,686
5/31/99 26,029 27,334 23,324
6/30/99 27,950 28,851 25,026
7/31/99 26,933 27,951 24,551
8/31/99 27,135 27,811 24,620
9/30/99 27,593 27,048 24,696
10/31/99 30,363 28,760 26,597
11/30/99 34,284 29,345 29,119
12/31/99 44,025 31,073 34,049
1/31/00 44,792 29,512 33,344
2/29/00 56,129 28,953 39,102
3/31/00 54,509 31,786 38,969
4/30/00 48,628 30,829 35,622
5/31/00 44,409 30,197 33,182
6/30/00 52,833 30,941 36,663
7/31/00 52,876 30,458 35,570
8/31/00 59,709 32,349 39,511
9/30/00 56,882 30,642 37,646
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Large Cap Growth Fund commenced operations on April 5, 1995.
4 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The index
is designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. The Index is unmanaged and reflects the reinvestment of income
dividends and capital gains distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
5 The Lipper Multi-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Multi-Cap Growth
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The Average is not intended to imply the Fund's
past or future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Consumer Cyclical 10%
Consumer Non-Cyclical 2%
Financial 9%
Health Care 10%
Industrial 11%
Services 2%
Technology 42%
Utilities 3%
Cash 11%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Citigroup 2.5%
Polycom 2.5%
Tyco International 2.4%
Siebel Systems 2.4%
Verisign 2.4%
Nortel Networks 2.3%
Pfizer 2.3%
General Electric 2.2%
Corning 2.2%
Network Appliance 2.2%
------------------------------------------------------
% of Total Portfolio Investments 23.4%
[LOGO OMITTED] 12
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG LARGE CAP GROWTH FUND PBHLX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 89.3%
CONSUMER CYCLICAL -- 10.3%
AUDIO/VIDEO PRODUCTS -- 2.5%
Polycom* 185,300 $ 12,408
------------
12,408
--------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAMMING -- 0.6%
AT&T-- Liberty Media, Cl A* 176,200 3,172
------------
3,172
--------------------------------------------------------------------------------
MULTIMEDIA -- 2.4%
Entravision Communication* 71,700 1,246
Gemstar-TV Guide International* 122,600 10,689
------------
11,935
--------------------------------------------------------------------------------
RETAIL-BEDDING -- 1.3%
Bed Bath & Beyond* 267,100 6,515
------------
6,515
--------------------------------------------------------------------------------
RETAIL-BUILDING PRODUCTS -- 0.8%
Home Depot 78,650 4,173
------------
4,173
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 0.8%
Best Buy* 63,500 4,040
------------
4,040
--------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 0.4%
Wal-Mart Stores 40,000 1,925
------------
1,925
--------------------------------------------------------------------------------
RETAIL-JEWELRY -- 0.3%
Tiffany & Company 39,400 1,519
------------
1,519
--------------------------------------------------------------------------------
RETAIL-REGIONAL DEPARTMENT STORE -- 0.6%
Kohl's* 51,200 2,954
------------
2,954
--------------------------------------------------------------------------------
TELEVISION -- 0.6%
Univision Communications* 83,000 3,102
------------
3,102
------------
TOTAL CONSUMER CYCLICAL (COST $41,951) 51,743
------------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 1.7%
FOOD-RETAIL -- 1.7%
Safeway* 181,800 8,488
------------
8,488
------------
TOTAL CONSUMER NON-CYCLICAL (COST $9,260) 8,488
------------
--------------------------------------------------------------------------------
FINANCIAL -- 8.7%
COMMERCIAL BANKS-WESTERN US -- 0.9%
Zions 92,400 4,726
------------
4,726
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.5%
Citigroup 231,866 $ 12,535
------------
12,535
--------------------------------------------------------------------------------
FINANCE-CONSUMER LOANS -- 1.6%
Household International 146,000 8,267
------------
8,267
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 1.0%
Goldman Sachs 45,000 5,127
------------
5,127
--------------------------------------------------------------------------------
INTERNET BROKER -- 1.5%
Schwab, Charles 216,200 7,675
------------
7,675
--------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 1.2%
Wells Fargo 132,000 6,064
------------
6,064
------------
TOTAL FINANCIAL (COST $41,055) 44,394
------------
--------------------------------------------------------------------------------
HEALTH CARE -- 9.9%
DRUG DELIVERY SYSTEMS -- 1.1%
Alza* 62,600 5,415
------------
5,415
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 0.9%
Serono Sa ADR* 155,900 4,716
------------
4,716
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.1%
Genentech* 31,100 5,775
------------
5,775
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 5.8%
Biovail* 48,900 3,982
Forest Labs* 58,800 6,744
Medimmune* 56,200 4,341
Pfizer 253,600 11,396
Shire Pharmaceuticals ADR* 49,397 2,550
------------
29,013
--------------------------------------------------------------------------------
THERAPEUTICS -- 1.0%
Gilead Sciences* 44,600 4,892
------------
4,892
------------
TOTAL HEALTH CARE (COST $37,025) 49,811
------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 11.0%
CIRCUIT BOARDS -- 0.4%
Jabil Circuit* 46,300 2,627
------------
2,627
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS -- 4.7%
General Electric 196,300 11,324
Tyco International 234,000 12,139
------------
23,463
--------------------------------------------------------------------------------
[LOGO OMITTED] 13
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG LARGE CAP GROWTH FUND PBHLX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 2.2%
Celestica* 55,100 $ 3,816
Flextronics International* 85,971 7,060
----------
10,876
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 1.3%
Tektronix 82,500 6,337
----------
6,337
--------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 1.9%
Pe Corp-Pe Biosystems Group 83,200 9,693
----------
9,693
--------------------------------------------------------------------------------
POWER CONVERSION/SUPPLY EQUIPMENT -- 0.5%
Capstone Turbine* 38,700 2,680
----------
2,680
----------
TOTAL INDUSTRIAL (COST $41,857) 55,676
----------
--------------------------------------------------------------------------------
SERVICES -- 2.0%
COMPUTER SERVICES -- 1.3%
DST Systems* 54,900 6,451
----------
6,451
--------------------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 0.7%
Telefonos De Mexico ADR 67,000 3,564
----------
3,564
----------
TOTAL SERVICES (COST $8,098) 10,015
----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 42.0%
APPLICATIONS SOFTWARE -- 2.9%
Rational Software* 36,400 2,525
Siebel Systems* 108,000 12,022
----------
14,547
--------------------------------------------------------------------------------
COMPUTERS -- 2.2%
Sun Microsystems 93,900 10,963
----------
10,963
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.8%
Brocade Communications Systems* 17,600 4,154
----------
4,154
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 3.5%
EMC* 95,000 9,417
Veritas Software* 58,300 8,278
----------
17,695
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 2.6%
Automatic Data Processing 131,400 8,787
Fiserv* 75,100 4,497
----------
13,284
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTOR - 2.2%
Broadcom* 22,400 5,460
PMC-Sierra* 26,900 5,790
----------
11,250
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 2.5%
BEA Systems* 12,500 $ 973
I2 Technologies* 26,800 5,013
Oracle* 82,400 6,489
----------
12,475
--------------------------------------------------------------------------------
INTERNET CONTENT -- 1.0%
Infospace* 166,000 5,022
----------
5,022
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 4.6%
Alteon Websystems* 31,800 3,446
Ariba* 54,100 7,751
Verisign* 58,800 11,911
----------
23,108
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 5.8%
Cisco Systems* 143,400 7,923
Juniper Networks* 46,200 10,114
Network Appliance* 86,200 10,980
----------
29,017
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 2.5%
Globespan* 60,500 7,381
Integrated Circuit Systems* 126,600 2,342
Linear Technology 44,600 2,888
----------
12,611
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT -- 2.3%
Applied Materials* 106,900 6,341
KLA-Tencor* 125,600 5,173
----------
11,514
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 2.3%
Nortel Networks^ 196,900 11,728
----------
11,728
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER OPTICS -- 6.3%
Corning 37,100 11,018
JDS Uniphase* 62,580 5,926
SDL* 24,800 7,671
Sycamore Networks* 65,700 7,096
----------
31,711
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.5%
Nextel Partners, Cl A* 82,300 2,397
----------
2,397
----------
TOTAL TECHNOLOGY (COST $154,135) 211,476
----------
--------------------------------------------------------------------------------
UTILITIES -- 3.7%
ELECTRIC-GENERATION -- 1.1%
AES* 82,500 5,651
----------
5,651
--------------------------------------------------------------------------------
[LOGO OMITTED] 14
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG LARGE CAP GROWTH FUND PBHLX
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCER -- 2.6%
Calpine* 86,000 $ 8,976
Southern Energy* 124,800 3,916
----------
12,892
----------
TOTAL UTILITIES (COST $8,713) 18,543
----------
TOTAL COMMON STOCK (COST $342,094) 450,146
----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 11.1%
J.P. Morgan
6.57%, dated 09/29/00, matures 10/02/00,
repurchase price $23,472,451 (collateralized
by U.S. Government Agency Instruments:
total market value $23,928,799) (A) $23,460 23,460
Prudential
6.57%, dated 09/29/00, matures 10/02/00,
repurchase price $32,532,310 (collateralized
by U.S. Government Agency Instruments:
total market value $33,165,602) (A) 32,515 32,515
----------
TOTAL REPURCHASE AGREEMENTS (COST $55,975) 55,975
----------
TOTAL INVESTMENTS-- 100.4% (COST $398,069) 506,121
----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.4)%
TOTAL OTHER ASSETS AND LIABILITIES, NET (2,258)
----------
--------------------------------------------------------------------------------
Market
Description Value (000)
--------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 12,585,406
outstanding shares of common stock $ 371,498
Accumulated net investment loss (311)
Accumulated net realized gain on investments 24,624
Net unrealized appreciation on investments 108,052
----------
TOTAL NET ASSETS-- 100.0% $ 503,863
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $40.04
==========
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
^The fund held Canadian securities as of September 30, 2000. The total market
value of investments is $11,727,856 and represented 2.3% of the fund.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 15
<PAGE>
THE PBHG FUNDS, INC.
PBHG SELECT EQUITY FUND (UNAUDITED)
PBHG SELECT EQUITY FUND PBHEX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
Large
------------------------
X Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
One Annualized Annualized Annualized
6 Year 3 Year 5 Year Inception
Months 2 Return Return Return to Date 3
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Select Equity
Fund (2.40)% 206.07% 57.59% 43.14% 49.11%
------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG SELECT EQUITY FUND, VERSUS THE
S&P 500 INDEX AND THE LIPPER MULTI-CAP GROWTH FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINT FOLLOWS:
PBHG Select S&P 500 Lipper Multi-Cap Growth
Equity Fund Index 4 Funds Average 5
4/30/95 10,000 10,000 10,000
5/31/95 10,402 10,399 10,211
6/30/95 11,685 10,640 10,872
7/31/95 13,399 10,993 11,619
8/31/95 13,947 11,020 11,743
9/30/95 14,545 11,485 12,079
10/31/95 14,985 11,444 11,878
11/30/95 15,367 11,946 12,307
12/31/95 15,510 12,176 12,354
1/31/96 15,851 12,590 12,492
2/29/96 17,025 12,707 12,921
3/31/96 17,326 12,830 13,096
4/30/96 18,811 13,019 13,814
5/31/96 20,376 13,354 14,282
6/30/96 19,603 13,405 13,875
7/31/96 17,687 12,813 12,769
8/31/96 18,861 13,083 13,401
9/30/96 21,118 13,819 14,332
10/31/96 19,904 14,200 14,174
11/30/96 20,366 15,273 14,851
12/31/96 19,852 14,970 14,643
1/31/97 20,338 15,905 15,333
2/28/97 17,947 16,030 14,703
3/31/97 16,123 15,372 13,834
4/30/97 16,579 16,289 14,122
5/31/97 18,808 17,280 15,465
6/30/97 19,568 18,054 16,035
7/31/97 21,402 19,490 17,456
8/31/97 20,338 18,399 17,135
9/30/97 22,335 19,406 18,240
10/31/97 20,794 18,759 17,399
11/30/97 20,176 19,626 17,427
12/31/97 21,210 19,963 17,591
1/31/98 20,784 20,184 17,524
2/28/98 22,902 21,639 18,989
3/31/98 24,473 22,746 19,916
4/30/98 24,422 22,974 20,123
5/31/98 22,993 22,580 19,254
6/30/98 25,922 23,496 20,197
7/31/98 23,824 23,247 19,502
8/31/98 19,193 19,890 16,013
9/30/98 21,048 21,164 17,229
10/31/98 19,781 22,886 18,154
11/30/98 21,261 24,273 19,501
12/31/98 25,243 25,672 21,718
1/31/99 25,577 26,745 22,889
2/28/99 23,257 25,914 21,591
3/31/99 26,277 26,951 23,007
4/30/99 25,365 27,995 23,686
5/31/99 24,280 27,334 23,324
6/30/99 26,388 28,851 25,026
7/31/99 25,821 27,951 24,551
8/31/99 27,736 27,811 24,620
9/30/99 28,557 27,048 24,696
10/31/99 34,303 28,760 26,597
11/30/99 43,575 29,345 29,119
12/31/99 65,858 31,073 34,049
1/31/00 69,092 29,512 33,344
2/29/00 99,040 28,953 39,102
3/31/00 89,556 31,786 38,969
4/30/00 69,748 30,829 35,622
5/31/00 61,737 30,197 33,182
6/30/00 84,515 30,941 36,663
7/31/00 81,856 30,458 35,570
8/31/00 95,518 32,349 39,511
9/30/00 87,404 30,642 37,646
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Select Equity Fund commenced operations on April 5, 1995.
4 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. The Index is unmanaged and reflects the reinvestment of income
dividends and capital gains distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing. The Index is not intended
to imply the Fund's past or future performance.
5 The Lipper Multi-Cap Growth Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Multi-Cap
Growth category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The Average is not intended to imply the Fund's
past or future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Consumer Cyclical 6%
Health Care 2%
Industrial 3%
Technology 78%
Cash 11%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Juniper Networks 6.4%
Siebel Systems 5.8%
Brocade Communications Systems 4.4%
Gemstar-TV Guide International 4.2%
Art Technology 4.0%
JDS Uniphase 3.9%
Network Appliance 3.9%
Broadcom 3.7%
SDL 3.7%
Verisign 3.6%
------------------------------------------------------
% of Total Portfolio Investments 43.6%
[LOGO OMITTED] 16
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG SELECT EQUITY FUND PBHEX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 91.0%
CONSUMER CYCLICAL -- 6.3%
MULTIMEDIA -- 4.4%
Gemstar-TV Guide International* 1,022,300 $ 89,132
------------
89,132
--------------------------------------------------------------------------------
TELEVISION -- 1.9%
Univision Communications* 1,059,200 39,587
------------
39,587
------------
TOTAL CONSUMER CYCLICAL (COST $120,877) 128,719
------------
--------------------------------------------------------------------------------
HEALTH CARE -- 2.1%
MEDICAL-BIOMEDICAL/GENETIC -- 2.1%
Immunex* 995,000 43,283
------------
43,283
------------
TOTAL HEALTH CARE (COST $48,534) 43,283
------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 2.5%
CIRCUIT BOARDS -- 2.5%
Jabil Circuit* 922,000 52,324
------------
52,324
------------
TOTAL INDUSTRIAL (COST $42,790) 52,324
------------
--------------------------------------------------------------------------------
TECHNOLOGY -- 80.1%
APPLICATIONS SOFTWARE -- 8.2%
Quest Software* 753,700 46,812
Siebel Systems* 1,098,400 122,265
------------
169,077
--------------------------------------------------------------------------------
COMPUTERS -- 1.0%
Sun Microsystems* 175,900 20,536
------------
20,536
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 6.0%
Brocade Communications Systems* 391,700 92,441
Redback Networks* 189,400 31,062
------------
123,503
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.9%
Veritas Software* 421,925 59,913
------------
59,913
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 6.8%
Broadcom* 321,700 78,415
PMC-Sierra* 285,400 61,432
------------
139,847
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 6.4%
I2 Technologies* 392,500 73,422
Oracle* 738,000 58,118
------------
131,540
--------------------------------------------------------------------------------
INTERNET CONTENT -- 1.8%
Infospace* 1,215,400 36,766
------------
36,766
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 16.1%
Alteon Websystems* 445,400 $ 48,277
Ariba* 514,400 73,696
Art Technology* 883,300 83,692
E.Piphany* 358,100 27,596
Verisign* 375,775 76,118
Vignette* 664,100 19,840
------------
329,219
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 13.1%
Foundry Networks* 785,600 52,586
Juniper Networks* 619,100 135,544
Network Appliance* 644,400 82,081
------------
270,211
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT -- 2.1%
KLA-Tencor* 1,049,700 43,235
------------
43,235
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 4.8%
Audiocodes Limited* 325,200 27,683
Nortel Networks^ 1,197,500 71,326
------------
99,009
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER OPTICS -- 10.9%
JDS Uniphase* 871,800 82,548
SDL* 252,800 78,194
Sycamore Networks* 579,200 62,554
------------
223,296
------------
TOTAL TECHNOLOGY (COST $1,183,439) 1,646,152
------------
TOTAL COMMON STOCK (COST $1,395,640) 1,870,478
------------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 11.3%
Morgan Stanley
6.57%, dated 09/29/00, matures 10/02/00,
repurchase price $85,337,712
(collateralized by U.S. Government
Agency Instruments: total market value
$88,656,785) (A) $85,291 85,291
J.P. Morgan
6.57%, dated 09/29/00, matures 10/02/00,
repurchase price $60,751,617
(collateralized by U.S. Government
Agency Instruments: total market value
$61,933,549) (A) 60,718 60,718
Prudential
6.57%, dated 09/29/00, matures 10/02/00,
repurchase price $86,619,809
(collateralized by U.S. Government
Agency Instruments: total market value
$88,304,474) (A) 86,572 86,572
------------
TOTAL REPURCHASE AGREEMENTS (COST $232,581) 232,581
------------
TOTAL INVESTMENTS-- 102.3% (COST $1,628,221) 2,103,059
------------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (2.3)%
TOTAL OTHER ASSETS AND LIABILITIES, NET (47,196)
------------
--------------------------------------------------------------------------------
[LOGO OMITTED] 17
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG SELECT EQUITY FUND PBHEX
Market
Description Value (000)
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 27,072,836
outstanding shares of common stock $1,748,844
Accumulated net investment loss (4,940)
Accumulated net realized loss on investments (162,879)
Net unrealized appreciation on investments 474,838
------------
TOTAL NET ASSETS-- 100.0% $2,055,863
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $75.94
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
^ The fund held Canadian securities as of September 30, 2000. The total market
value of investments is $71,326,094 and represented 3.5% of the fund.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 18
<PAGE>
THE PBHG FUNDS, INC.
PBHG CORE GROWTH FUND (UNAUDITED)
PBHG CORE GROWTH FUND PBCRX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
Large
------------------------
X Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
One Annualized Annualized
6 Year 3 Year Inception
Months 2 Return Return to Date 3
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Core Growth Fund 4.83% 92.77% 34.99% 27.53%
------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG CORE GROWTH FUND, VERSUS THE
RUSSELL MID CAP GROWTH INDEX AND THE LIPPER MULTI-CAP GROWTH FUNDS AVERAGE
[LINE CHART OMITTED]
PLOT POINT FOLLOWS:
PBHG Core Russell Mid Cap Lipper Multi-Cap
Growth Fund Growth Index 4 Growth Funds Average 5
12/31/95 10,000 10,000 10,000
1/31/96 10,590 10,177 10,112
2/29/96 11,450 10,562 10,459
3/31/96 11,820 10,645 10,601
4/30/96 13,310 11,159 11,182
5/31/96 14,230 11,387 11,561
6/30/96 13,800 11,043 11,232
7/31/96 12,040 10,186 10,336
8/31/96 13,000 10,736 10,848
9/30/96 14,200 11,418 11,601
10/31/96 13,410 11,284 11,473
11/30/96 13,740 11,949 12,022
12/31/96 13,280 11,748 11,853
1/31/97 13,300 12,268 12,412
2/28/97 11,690 11,997 11,902
3/31/97 10,340 11,319 11,198
4/30/97 10,200 11,597 11,431
5/31/97 11,680 12,636 12,518
6/30/97 12,230 12,986 12,980
7/31/97 12,990 14,228 14,130
8/31/97 12,480 14,090 13,870
9/30/97 12,890 14,803 14,765
10/31/97 12,280 14,061 14,084
11/30/97 11,910 14,209 14,107
12/31/97 11,990 14,395 14,239
1/31/98 11,470 14,136 14,185
2/28/98 12,830 15,465 15,371
3/31/98 13,530 16,113 16,121
4/30/98 13,620 16,332 16,289
5/31/98 12,540 15,660 15,585
6/30/98 13,560 16,103 16,349
7/31/98 12,540 15,413 15,787
8/31/98 9,680 12,471 12,962
9/30/98 10,790 13,415 13,946
10/31/98 10,520 14,402 14,695
11/30/98 11,260 15,374 15,785
12/31/98 12,880 16,966 17,580
1/31/99 13,420 17,475 18,528
2/28/99 12,670 16,620 17,477
3/31/99 14,060 17,546 18,624
4/30/99 14,160 18,346 19,173
5/31/99 13,890 18,110 18,880
6/30/99 15,530 19,374 20,258
7/31/99 15,560 18,757 19,873
8/31/99 16,300 18,562 19,929
9/30/99 16,450 18,404 19,991
10/31/99 17,990 19,827 21,530
11/30/99 20,130 21,881 23,571
12/31/99 25,450 25,669 27,561
1/31/00 25,140 25,664 26,991
2/29/00 34,490 31,060 31,652
3/31/00 30,250 31,092 31,545
4/30/00 25,710 28,074 28,835
5/31/00 23,230 26,027 26,860
6/30/00 29,900 28,789 29,677
7/31/00 27,850 26,966 28,793
8/31/00 33,470 31,033 31,983
9/30/00 31,710 29,516 30,474
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Core Growth Fund commenced operations on December 29, 1995.
4 The Russell Mid Cap Growth Index is an unmanaged index comprised of those
securities in the Russell 1000 Index with a higher price to book ratio and
higher forecasted growth values. The Index reflects the reinvestment of income
dividends and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
5 The Lipper Multi-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Multi-Cap Growth
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The Average is not intended to imply the Fund's
past or future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Consumer Cyclical 3%
Energy 8%
Financial 2%
Health Care 11%
Industrial 4%
Services 3%
Technology 61%
Cash 8%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Verisign 3.1%
Teva Pharmaceutical ADR 3.0%
Redback Networks 2.8%
Extreme Networks 2.8%
Globespan 2.7%
MMC Networks 2.5%
Newport 2.5%
Brocade Communications Systems 2.5%
BEA Systems 2.5%
Ariba 2.3%
------------------------------------------------------
% of Total Portfolio Investments 26.7%
[LOGO OMITTED] 19
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG CORE GROWTH FUND PBCRX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 93.6%
CONSUMER CYCLICAL -- 3.2%
AUDIO/VIDEO PRODUCTS -- 1.3%
Polycom* 36,800 $ 2,464
-------------
2,464
--------------------------------------------------------------------------------
RETAIL-JEWELRY -- 1.9%
Tiffany & Company 42,100 1,624
Zale* 62,200 2,018
-------------
3,642
-------------
TOTAL CONSUMER CYCLICAL (COST $5,721) 6,106
-------------
--------------------------------------------------------------------------------
ENERGY -- 7.9%
OIL COMPANIES-EXPLORATION & PRODUCTION -- 1.1%
EOG Resources 55,800 2,169
-------------
2,169
--------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 1.2%
Cooper Cameron* 30,700 2,262
-------------
2,262
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 4.6%
Diamond Offshore Drilling 42,900 1,760
Ensco International 92,900 3,553
Global Marine* 36,400 1,124
Santa Fe International 52,000 2,343
-------------
8,780
--------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 1.0%
BJ Services* 29,600 1,809
-------------
1,809
-------------
TOTAL ENERGY (COST $11,875) 15,020
-------------
--------------------------------------------------------------------------------
FINANCIAL -- 1.5%
INVESTMENT MANAGEMENT/ADVISOR SERVICES -- 1.5%
T. Rowe Price & Associates 61,700 2,896
-------------
2,896
-------------
TOTAL FINANCIAL (COST $2,913) 2,896
-------------
--------------------------------------------------------------------------------
HEALTH CARE -- 11.6%
DRUG DELIVERY SYSTEMS -- 1.8%
ANDRX* 36,400 3,399
-------------
3,399
--------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 1.0%
Biomet 27,300 956
Techne* 8,300 930
-------------
1,886
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS -- 1.0%
Incyte Pharmaceuticals* 20,500 843
Inhale Therapeutic Systems* 19,700 1,110
-------------
1,953
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 7.8%
Celgene* 67,100 $ 3,993
Medicis Pharmaceuticals, Cl A* 42,900 2,638
Medimmune* 31,900 2,464
Teva Pharmaceutical ADR 80,000 5,855
-------------
14,950
-------------
TOTAL HEALTH CARE (COST $13,902) 22,188
-------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 4.4%
CAPACITORS -- 0.8%
Kemet* 54,200 1,498
-------------
1,498
--------------------------------------------------------------------------------
ELECTRIC PRODUCTS-MISCELLANEOUS -- 1.0%
APW Limited 40,000 1,950
-------------
1,950
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 0.7%
Celestica* 19,700 1,364
-------------
1,364
--------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 1.9%
Mettler-Toledo International* 84,300 3,709
-------------
3,709
-------------
TOTAL INDUSTRIAL (COST $7,115) 8,521
-------------
--------------------------------------------------------------------------------
SERVICES -- 2.6%
ADVERTISING SALES -- 0.3%
Lamar Advertising* 16,300 617
-------------
617
--------------------------------------------------------------------------------
ADVERTISING SERVICES -- 1.0%
Getty Images* 64,900 1,976
-------------
1,976
--------------------------------------------------------------------------------
HUMAN RESOURCES -- 1.3%
Robert Half International* 68,300 2,369
-------------
2,369
-------------
TOTAL SERVICES (COST $5,718) 4,962
-------------
--------------------------------------------------------------------------------
TECHNOLOGY -- 62.4%
APPLICATIONS SOFTWARE -- 0.8%
Quest Software* 23,900 1,484
-------------
1,484
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.6%
Checkpoint Software* 19,000 2,993
-------------
2,993
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 5.4%
Brocade Communications Systems* 20,600 4,861
Redback Networks* 33,400 5,478
-------------
10,339
--------------------------------------------------------------------------------
[LOGO OMITTED] 20
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG CORE GROWTH FUND PBCRX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.8%
Sandisk* 21,600 $ 1,442
-------------
1,442
--------------------------------------------------------------------------------
EDUCATIONAL SOFTWARE -- 0.7%
Smartforce ADR* 25,800 1,222
-------------
1,222
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 4.5%
Applied Micro Circuits* 19,000 3,934
Microchip Technology* 33,000 1,091
Virata* 53,900 3,564
-------------
8,589
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICE -- 2.5%
BEA Systems* 61,800 4,813
-------------
4,813
--------------------------------------------------------------------------------
INTERNET CONTENT -- 1.4%
Infospace* 75,500 2,284
Rare Medium Group* 53,600 399
-------------
2,683
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 12.4%
Ariba* 31,100 4,455
Art Technology* 37,900 3,591
At Road* 89,600 644
Commerce One* 31,500 2,473
Niku* 81,600 1,989
Support.com* 5,500 168
Verisign* 29,625 6,001
Vitria Technology* 94,000 4,383
-------------
23,704
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 1.5%
Micromuse* 14,600 2,934
-------------
2,934
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 8.4%
Extreme Networks* 47,500 5,440
Inrange Technologies* 3,000 159
Juniper Networks* 19,400 4,247
MMC Networks* 39,100 4,946
Turnstone Systems* 25,800 1,196
-------------
15,988
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 4.9%
Analog Devices* 20,100 1,660
Globespan* 42,900 5,234
Triquint Semiconductor* 68,700 2,503
-------------
9,397
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT -- 1.1%
ATMI* 33,000 771
Credence Systems* 45,500 1,365
-------------
2,136
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 1.4%
Mercury Interactive* 17,100 $ 2,680
-------------
2,680
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 3.8%
Advanced Fibre* 38,900 1,473
Audiocodes Limited* 18,100 1,541
Ditech Communications* 24,700 1,013
Natural Microsystems* 19,700 1,060
Sonus Networks* 10,800 1,365
Tekelec* 23,900 785
-------------
7,237
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER OPTICS -- 10.2%
Avanex* 13,700 1,475
C-Cor.net 26,200 401
Finisar* 38,300 1,853
MRV Communications* 72,500 3,285
New Focus* 15,200 1,202
Newport 30,700 4,889
SDL* 13,300 4,114
Sycamore Networks* 21,200 2,290
-------------
19,509
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 1.0%
Ceragon Networks Limited* 2,600 70
Netro* 29,200 1,730
Triton Network Systems* 6,500 85
-------------
1,885
-------------
TOTAL TECHNOLOGY (COST $84,233) 119,035
-------------
TOTAL COMMON STOCK (COST $131,477) 178,728
-------------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 8.5%
Morgan Stanley
6.60%, dated 09/29/00, matures 10/02/00,
repurchase price $16,332,011 (collateralized
by U.S. Government Agency Instruments:
total market value $16,649,494) (A) $16,323 16,323
-------------
TOTAL REPURCHASE AGREEMENT (COST $16,323) 16,323
-------------
TOTAL INVESTMENTS-- 102.1% (COST $147,800) 195,051
-------------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (2.1)%
TOTAL OTHER ASSETS AND LIABILITIES, NET (4,071)
-------------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value)
based on 6,022,243 outstanding shares of common
stock 133,392
Accumulated net investment loss (663)
Accumulated net realized gain on investments 11,000
Net unrealized appreciation on investments 47,251
-------------
TOTAL NET ASSETS-- 100.0% $ 190,980
=============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $31.71
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 21
<PAGE>
THE PBHG FUNDS, INC.
PBHG LIMITED FUND (UNAUDITED)
PBHG LIMITED FUND PBLDX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
X Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
One Annualized Annualized
6 Year 3 Year Inception
Months 2 Return Return to Date 3
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Limited Fund 0.82% 86.60% 31.67% 30.51%
------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG LIMITED FUND, VERSUS THE
RUSSELL 2000 GROWTH INDEX AND THE LIPPER SMALL-CAP GROWTH FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINT FOLLOWS:
Russell 2000 Lipper Small-Cap Growth
PBHG Limited Fund Growth Index 4 Funds Average 5
6/30/96 10,000 10,000 10,000
7/31/96 9,950 8,779 8,959
8/31/96 10,320 9,429 9,584
9/30/96 11,010 9,914 10,173
10/31/96 10,570 9,487 9,828
11/30/96 10,560 9,751 10,011
12/31/96 11,082 9,941 10,130
1/31/97 11,273 10,189 10,377
2/28/97 10,048 9,574 9,719
3/31/97 9,085 8,898 9,050
4/30/97 8,984 8,795 8,911
5/31/97 10,741 10,117 10,179
6/30/97 11,454 10,460 10,775
7/31/97 12,016 10,996 11,487
8/31/97 12,257 11,326 11,728
9/30/97 13,622 12,230 12,680
10/31/97 13,070 11,495 12,051
11/30/97 12,809 11,221 11,807
12/31/97 12,864 11,228 11,843
1/31/98 12,708 11,078 11,681
2/28/98 13,756 12,056 12,685
3/31/98 14,606 12,562 13,324
4/30/98 14,720 12,639 13,461
5/31/98 13,621 11,721 12,555
6/30/98 14,057 11,841 12,828
7/31/98 13,154 10,852 11,935
8/31/98 10,509 8,347 9,356
9/30/98 11,691 9,193 10,084
10/31/98 11,681 9,673 10,559
11/30/98 12,770 10,423 11,464
12/31/98 14,542 11,366 12,673
1/31/99 15,053 11,878 12,944
2/28/99 13,422 10,791 11,773
3/31/99 12,998 11,176 12,273
4/30/99 12,965 12,163 12,797
5/31/99 13,966 12,182 12,943
6/30/99 15,989 12,823 14,092
7/31/99 15,380 12,427 14,084
8/31/99 15,358 11,962 13,898
9/30/99 16,663 12,193 14,287
10/31/99 18,077 12,505 15,056
11/30/99 20,524 13,828 17,026
12/31/99 24,968 16,265 20,209
1/31/00 24,821 16,113 19,984
2/29/00 32,988 19,862 25,066
3/31/00 30,840 17,774 23,660
4/30/00 26,583 15,980 21,005
5/31/00 23,407 14,581 19,247
6/30/00 29,946 16,464 22,537
7/31/00 27,677 15,053 21,076
8/31/00 30,787 16,636 23,559
9/30/00 31,093 15,810 22,626
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Limited Fund commenced operations on June 28, 1996.
4 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
5 The Lipper Small-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Small-Cap Growth
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The Average is not intended to imply the Fund's
past or future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Basic Materials 3%
Consumer Cyclical 12%
Health Care 8%
Industrial 4%
Services 14%
Technology 49%
Cash 10%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Actuate 4.1%
Micromuse 3.8%
Polycom 3.8%
Pericom Semiconductors 3.7%
InFocus 3.6%
Anaren Microwave 3.2%
Advent Software 3.1%
Informatica 3.0%
Forrester Research 3.0%
Transwitch 2.9%
------------------------------------------------------
% of Total Portfolio Investments 34.2%
[LOGO OMITTED] 22
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG LIMITED FUND PBLDX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 88.7%
BASIC MATERIALS -- 2.5%
Advanced Materials/Products -- 2.5%
Surmodics* 67,300 $ 3,685
-------------
3,685
-------------
TOTAL BASIC MATERIALS (COST $1,081) 3,685
-------------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 11.7%
AUDIO/VIDEO PRODUCTS -- 3.7%
Polycom* 79,800 5,344
-------------
5,344
--------------------------------------------------------------------------------
FOOTWEAR & RELATED APPAREL -- 0.4%
Skechers Foot Wear* 38,600 584
-------------
584
--------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 1.0%
Charlotte Russe Holdings* 103,800 1,375
-------------
1,375
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 2.2%
Tweeter Home Entertainment Group* 24,700 897
Ultimate Electronics* 55,400 2,278
-------------
3,175
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 4.4%
Buca* 166,700 1,771
California Pizza Kitchen* 44,800 1,254
Rare Hospitality International* 166,950 3,402
-------------
6,427
-------------
TOTAL CONSUMER CYCLICAL (COST $9,475) 16,905
-------------
--------------------------------------------------------------------------------
HEALTH CARE -- 7.8%
MEDICAL-DRUGS -- 5.0%
Cima Labs* 73,000 3,800
Medicis Pharmaceutical, Cl A* 56,925 3,501
-------------
7,301
--------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 0.3%
Allscripts* 31,000 438
-------------
438
--------------------------------------------------------------------------------
PHARMACY SERVICES -- 1.5%
Accredo Health* 45,050 2,202
-------------
2,202
--------------------------------------------------------------------------------
RESPIRATORY PRODUCTS -- 1.0%
Resmed* 44,500 1,391
-------------
1,391
-------------
TOTAL HEALTH CARE (COST $4,901) 11,332
-------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 4.0%
ELECTRONIC CONNECTORS -- 2.3%
Merix* 50,900 3,299
-------------
3,299
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 1.4%
Molecular Devices* 21,200 $ 2,083
-------------
2,083
--------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 0.3%
Photon Dynamics* 12,300 464
-------------
464
-------------
TOTAL INDUSTRIAL (COST $3,922) 5,846
-------------
--------------------------------------------------------------------------------
SERVICES -- 14.0%
COMPUTER SERVICES -- 5.4%
Factset Research Systems 76,200 2,865
Manhattan Associates* 29,100 1,782
Netegrity* 45,150 3,161
-------------
7,808
--------------------------------------------------------------------------------
CONSULTING SERVICES -- 5.7%
Diamond Technology Partners* 53,250 3,954
Forrester Research* 66,700 4,252
-------------
8,206
--------------------------------------------------------------------------------
HUMAN RESOURCES -- 2.3%
Hall Kinion & Associates* 116,600 3,316
-------------
3,316
--------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT -- 0.6%
Albany Molecular Research* 15,000 843
-------------
843
-------------
TOTAL SERVICES (COST $7,801) 20,173
-------------
--------------------------------------------------------------------------------
TECHNOLOGY -- 48.7%
APPLICATIONS SOFTWARE -- 4.9%
Actuate* 167,000 5,769
Exchange Applications* 11,500 52
Genomica* 4,900 95
Great Plains Software* 13,900 391
Silverstream Software* 27,200 819
-------------
7,126
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 1.0%
Witness Systems* 84,000 1,517
-------------
1,517
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.5%
NetScout Systems* 31,100 739
-------------
739
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.6%
M-Systems Flash Disk Pioneers* 16,000 611
Simple Technology* 29,500 286
-------------
897
--------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 3.6%
InFocus* 97,500 5,168
-------------
5,168
--------------------------------------------------------------------------------
[LOGO OMITTED] 23
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG LIMITED FUND PBLDX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
DECISION SUPPORT SOFTWARE -- 4.0%
Advent Software* 63,300 $ 4,423
Interactive Intelligence* 1,700 67
Netiq* 20,200 1,327
-------------
5,817
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 3.3%
Integrated Silicon Solution* 48,100 682
Transwitch* 64,850 4,134
-------------
4,816
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICE -- 5.7%
Avantgo* 12,500 250
Business Objects ADR* 33,300 3,765
Informatica* 46,100 4,299
-------------
8,314
--------------------------------------------------------------------------------
INTERNET CONTENT -- 0.4%
Jupiter Media Metrix* 24,810 395
Mainspring* 15,900 118
-------------
513
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 2.5%
C-Bridge Net Solutions* 29,200 547
Commerce One* 33,680 2,644
Integrated Information Systems 47,900 228
Intraware* 18,600 139
-------------
3,558
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 3.8%
Micromuse* 27,100 5,445
-------------
5,445
--------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 0.8%
Celeritek* 29,500 1,112
-------------
1,112
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 4.9%
O2Micro International* 26,400 454
Pericom Semiconductors* 140,200 5,266
Sipex* 32,900 1,384
-------------
7,104
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT -- 1.9%
August Technology* 24,800 329
LTX* 17,600 333
Rudolph Technologies* 3,100 104
Varian Semiconductor Equipment* 54,700 2,048
-------------
2,814
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 0.7%
Broadbase Software* 75,200 1,020
-------------
1,020
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 9.4%
Anaren Microwave* 33,900 $ 4,598
Ditech Communications* 20,100 824
MCK Communications* 52,400 1,186
Natural Microsystems* 68,500 3,685
Tut Systems* 38,300 3,306
-------------
13,599
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER OPTICS -- 0.7%
MRV Communications* 22,300 1,010
-------------
1,010
-------------
TOTAL TECHNOLOGY (COST $29,243) 70,569
-------------
TOTAL COMMON STOCK (COST $56,423) 128,510
-------------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 9.6%
J.P. Morgan
6.60%, dated 09/29/00, matures 10/02/00,
repurchase price $1,663,582
(collateralized by U.S. Government
Agency Instruments: total market value
$1,696,241) (A) $1,663 1,663
J.P. Morgan
6.60%, dated 09/29/00, matures 10/02/00,
repurchase price $12,225,526
(collateralized by U.S. Government Agency
Instruments: total market value
$12,463,182) (A) 12,219 12,219
-------------
TOTAL REPURCHASE AGREEMENTS (COST $13,882) 13,882
-------------
TOTAL INVESTMENTS -- 98.3% (COST $70,305) 142,392
-------------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 1.7%
TOTAL OTHER ASSETS AND LIABILITIES, NET 2,512
-------------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 6,219,043
outstanding shares of common stock 47,211
Accumulated net investment loss (368)
Accumulated net realized gain on investments 25,974
Net unrealized appreciation on investments 72,087
-------------
TOTAL NET ASSETS-- 100.0% $ 144,904
=============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $23.30
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 24
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP 20 FUND (UNAUDITED)
PBHG LARGE CAP 20 FUND PLCPX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
X Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
One Annualized Annualized
6 Year 3 Year Inception
Months 2 Return Return to Date 3
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Large Cap 20 Fund (2.35)% 104.62% 59.01% 53.59%
------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG LARGE CAP 20 FUND, VERSUS THE
S&P 500 INDEX AND THE LIPPER LARGE-CAP GROWTH FUNDS AVERAGE
[LINE CHART OMITTED]
PLOT POINT FOLLOWS:
PBHG Large Cap Lipper Large-Cap Growth
20 Fund S&P 500 Index 4 Funds Average 5
11/30/96 10,000 10,000 10,000
12/31/96 9,841 9,802 9,748
1/31/97 10,462 10,414 10,367
2/28/97 10,001 10,496 10,161
3/31/97 9,260 10,065 9,632
4/30/97 9,881 10,666 10,136
5/31/97 10,912 11,315 10,834
6/30/97 11,523 11,821 11,288
7/31/97 12,854 12,761 12,367
8/31/97 12,234 12,047 11,789
9/30/97 12,914 12,706 12,423
10/31/97 12,424 12,283 11,978
11/30/97 12,494 12,851 12,222
12/31/97 13,084 13,071 12,333
1/31/98 13,355 13,216 12,520
2/28/98 15,097 14,168 13,532
3/31/98 15,998 14,893 14,177
4/30/98 16,278 15,043 14,401
5/31/98 15,848 14,785 14,028
6/30/98 17,589 15,385 14,915
7/31/98 17,609 15,221 14,809
8/31/98 14,516 13,023 12,354
9/30/98 16,708 13,858 13,280
10/31/98 17,069 14,985 14,121
11/30/98 18,320 15,893 15,121
12/31/98 21,960 16,809 16,801
1/31/99 23,995 17,512 17,958
2/28/99 22,294 16,968 17,195
3/31/99 24,400 17,647 18,247
4/30/99 23,337 18,330 18,289
5/31/99 22,527 17,897 17,684
6/30/99 24,178 18,891 18,975
7/31/99 23,540 18,301 18,419
8/31/99 24,512 18,210 18,465
9/30/99 25,372 17,711 18,325
10/31/99 28,136 18,831 19,631
11/30/99 33,614 19,214 20,789
12/31/99 44,567 20,346 23,423
1/31/00 43,320 19,324 22,482
2/29/00 51,964 18,958 24,233
3/31/00 53,163 20,813 25,433
4/30/00 47,264 20,186 23,818
5/31/00 41,293 19,772 22,362
6/30/00 49,926 20,259 24,129
7/31/00 49,542 19,943 23,627
8/31/00 56,665 21,181 25,796
9/30/00 51,916 20,063 24,021
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Large Cap 20 Fund commenced operations on November 29, 1996.
4 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The index
is designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. The Index is unmanaged and reflects the reinvestment of income
dividends and capital gains distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
5 The Lipper Large-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Large-Cap Growth
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The Average is not intended to imply the Fund's
past or future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Consumer Cyclical 4%
Financial 6%
Industrial 10%
Technology 68%
Cash 12%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Juniper Networks 8.3%
EMC 7.3%
Nortel Networks 6.7%
Citigroup 6.3%
Flextronics International 5.7%
Siebel Systems 5.3%
Sun Microsystems 5.2%
Cisco Systems 4.8%
Broadcom 4.6%
Gemstar-TV Guide International 4.2%
------------------------------------------------------
% of Total Portfolio Investments 58.4%
[LOGO OMITTED] 25
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG LARGE CAP 20 FUND PLCPX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 90.5%
CONSUMER CYCLICAL -- 4.3%
MULTIMEDIA -- 4.3%
Gemstar-TV Guide International* 571,700 $ 49,845
------------
49,845
------------
TOTAL CONSUMER CYCLICAL (COST $21,498) 49,845
------------
--------------------------------------------------------------------------------
FINANCIAL -- 6.5%
DIVERSIFIED FINANCIAL SERVICES -- 6.5%
Citigroup 1,390,500 75,174
------------
75,174
------------
TOTAL FINANCIAL (COST $65,729) 75,174
------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 9.7%
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 5.9%
Flextronics International* 827,900 67,991
------------
67,991
--------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 3.8%
Pe Corp-Pe Biosystems Group 380,600 44,340
------------
44,340
------------
TOTAL INDUSTRIAL (COST $84,393) 112,331
------------
--------------------------------------------------------------------------------
TECHNOLOGY -- 70.0%
APPLICATIONS SOFTWARE -- 5.4%
Siebel Systems* 564,400 62,825
------------
62,825
--------------------------------------------------------------------------------
COMPUTERS -- 5.3%
Sun Microsystems* 526,900 61,516
------------
61,516
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 11.6%
EMC* 881,400 87,369
Veritas Software* 325,600 46,235
------------
133,604
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 8.7%
Broadcom* 226,000 55,087
PMC-Sierra* 210,200 45,246
------------
100,333
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 5.1%
I2 Technologies* 62,200 11,635
Oracle* 601,000 47,329
------------
58,964
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 13.5%
Cisco Systems* 1,029,400 56,874
Juniper Networks* 449,800 98,478
------------
155,352
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT -- 2.7%
Applied Materials* 523,400 $ 31,044
------------
31,044
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 7.1%
Cosine Communications* 47,500 2,640
Nortel Networks^ 1,338,180 79,705
------------
82,345
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER-OPTICS -- 10.6%
Corning 155,200 46,094
JDS Uniphase* 475,000 44,977
SDL* 100,500 31,086
------------
122,157
------------
TOTAL TECHNOLOGY (COST $513,098) 808,140
------------
TOTAL COMMON STOCK (COST $684,718) 1,045,490
------------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 12.6%
J.P. Morgan
6.58%, dated 09/29/00, matures 10/02/00,
repurchase price $62,631,094
(collateralized by U.S. Government
Agency Instruments: total market value
$63,849,657) (A) $62,597 62,597
Morgan Stanley
6.58%, dated 09/29/00, matures 10/02/00,
repurchase price $39,326,654
(collateralized by U.S. Government Agency
Instruments: total market value
$40,106,481) (A) 39,305 39,305
Prudential
6.58%, dated 09/29/00, matures 10/02/00,
repurchase price $43,689,949
(collateralized by U.S. Government Agency
Instruments: total market value
$44,540,109) (A) 43,666 43,666
------------
TOTAL REPURCHASE AGREEMENTS (COST $145,568) 145,568
------------
TOTAL INVESTMENTS -- 103.1% (COST $830,286) 1,191,058
------------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (3.1)%
TOTAL OTHER ASSETS AND LIABILITIES, NET (35,494)
------------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200
million shares -- $0.001 par value)
based on 26,690,094 outstanding shares
of common stock 671,346
Accumulated net investment loss (2,613)
Accumulated net realized gain on investments 126,059
Net unrealized appreciation on investments 360,772
------------
TOTAL NET ASSETS-- 100.0% $1,155,564
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $43.30
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
^ The fund held Canadian securities as of September 30, 2000. The total market
value of investments is $79,705,346 and represented 6.9% of the fund.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 26
<PAGE>
The PBHG FUNDS, INC.
PBHG NEW OPPORTUNITIES FUND (UNAUDITED)
PBHG NEW OPPORTUNITIES FUND PBNOX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
X Small
------------------------
AVERAGE ANNUAL TOTAL RETURN1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
One Annualized
6 Year Inception
Months 2 Return to Date 3
----------------------------------------------------------------------------------
<S> <C> <C> <C>
PBHG New Opportunities Fund (19.29)% 204.27% 205.49%
----------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG NEW OPPORTUNITIES FUND, VERSUS THE
RUSSELL 2000 GROWTH INDEX AND THE LIPPER MULTI-CAP GROWTH FUNDS AVERAGE
[LINE CHART OMITTED]
PLOT POINT FOLLOWS:
PBHG Russell 2000 Lipper Multi-Cap Growth
New Opportunities Fund Growth Index 4 Funds Average 5
2/28/99 10,000 10,000 10,000
3/31/99 11,714 10,356 10,656
4/30/99 12,134 11,271 10,970
5/31/99 12,795 11,289 10,803
6/30/99 17,255 11,883 11,591
7/31/99 18,770 11,516 11,371
8/31/99 19,047 11,085 11,403
9/30/99 19,573 11,299 11,438
10/31/99 24,780 11,588 12,319
11/30/99 33,314 12,814 13,487
12/31/99 51,830 15,072 15,770
1/31/00 54,784 14,932 15,443
2/29/00 82,487 18,406 18,111
3/31/00 73,791 16,471 18,049
4/30/00 53,461 14,808 16,499
5/31/00 50,447 13,511 15,368
6/30/00 67,177 15,257 16,981
7/31/00 53,694 13,949 16,475
8/31/00 60,488 15,417 18,300
9/30/00 59,556 14,651 17,436
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG New Opportunities Fund commenced operations on February 12, 1999.
4 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
5 The Lipper Multi-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Multi-Cap Growth
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The Average is not intended to imply the Fund's
past or future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Consumer Cyclical 7%
Health Care 19%
Industrial 4%
Services 8%
Technology 58%
Cash 4%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
JNI 6.9%
Albany Molecular Research 6.7%
Pericom Semiconductors 5.1%
Noven Pharmaceuticals 4.9%
Anaren Microwave 4.7%
Serena Software 4.6%
Elantec Semiconductor 4.6%
MapInfo 4.3%
Priority Healthcare, Cl B 4.2%
Dendrite International 4.0%
------------------------------------------------------
% of Total Portfolio Investments 50.0%
[LOGO OMITTED] 27
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG NEW OPPORTUNITIES FUND PBNOX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 92.8%
CONSUMER CYCLICAL -- 6.4%
RETAIL-COMPUTER EQUIPMENT -- 3.7%
PC Connection* 98,000 $ 5,586
-------------
5,586
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 2.7%
California Pizza Kitchen* 59,700 1,672
P.F Chang's China Bistro* 70,000 2,419
-------------
4,091
-------------
TOTAL CONSUMER CYCLICAL (COST $6,703) 9,677
-------------
--------------------------------------------------------------------------------
HEALTH CARE -- 18.3%
DIAGNOSTIC KITS -- 2.7%
Biosite Diagnostics* 103,000 4,107
-------------
4,107
--------------------------------------------------------------------------------
DRUG DELIVERY SYSTEMS -- 4.7%
Noven Pharmaceuticals* 166,000 7,097
-------------
7,097
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 4.1%
Priority Healthcare, Cl B* 80,500 6,138
-------------
6,138
--------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 3.9%
Dendrite International* 217,000 5,818
-------------
5,818
--------------------------------------------------------------------------------
MEDICAL LABS & TESTING SERVICES -- 2.9%
Impath* 70,000 4,418
-------------
4,418
-------------
TOTAL HEALTH CARE (COST $19,048) 27,578
-------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 3.8%
POWER CONVERSION/SUPPLY EQUIPMENT -- 3.8%
C & D Technologies 102,000 5,789
-------------
5,789
-------------
TOTAL INDUSTRIAL (COST $3,735) 5,789
-------------
--------------------------------------------------------------------------------
SERVICES -- 7.6%
CONSULTING SERVICES -- 1.2%
Corporate Executive Board* 44,000 1,771
-------------
1,771
--------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT -- 6.4%
Albany Molecular Research* 172,000 9,664
-------------
9,664
-------------
TOTAL SERVICES (COST $5,854) 11,435
-------------
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
TECHNOLOGY -- 56.7%
APPLICATIONS SOFTWARE -- 14.1%
Exchange Applications* 38,900 $ 176
MapInfo* 201,000 6,294
Pinnacle Systems* 214,000 2,408
Serena Software* 146,000 6,725
WebTrends* 147,000 5,494
-------------
21,097
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.2%
Internet Security Systems* 24,000 1,803
-------------
1,803
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 3.4%
Henry (Jack) & Associates 117,500 5,097
-------------
5,097
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 2.6%
Actel* 110,400 3,968
-------------
3,968
--------------------------------------------------------------------------------
INTERNET CONTENT -- 0.8%
Jupiter Media Matrix* 77,469 1,234
-------------
1,234
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 1.6%
Intranet Solutions* 47,000 2,350
-------------
2,350
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 6.7%
JNI* 112,500 10,012
-------------
10,012
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 9.4%
Elantec Semiconductor* 67,000 6,675
Pericom Semiconductors* 199,000 7,475
-------------
14,150
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 13.1%
Anaren Microwave* 50,000 6,781
Audiocodes Limited* 49,100 4,180
Aware* 111,000 4,274
Tut Systems* 52,000 4,488
-------------
19,723
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 3.8%
Proxim* 128,000 5,696
-------------
5,696
-------------
TOTAL TECHNOLOGY (COST $61,910) 85,130
-------------
TOTAL COMMON STOCK (COST $97,250) 139,609
-------------
--------------------------------------------------------------------------------
[LOGO OMITTED] 28
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG NEW OPPORTUNITIES FUND PBNOX
Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.7%
J.P. Morgan
6.60%, dated 09/29/00, matures 10/02/00,
repurchase price $5,637,016 (collateralized
by U.S. Government Agency Instruments:
total market value $5,746,596) (A) $5,634 $ 5,634
-------------
TOTAL REPURCHASE AGREEMENT (COST $5,634) 5,634
-------------
TOTAL INVESTMENTS-- 96.5% (COST $102,884) 145,243
-------------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 3.5%
TOTAL OTHER ASSETS AND LIABILITIES, NET 5,199
-------------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 1,898,524
outstanding shares of common stock 62,231
Accumulated net investment loss (614)
Accumulated net realized gain on investments 46,466
Net unrealized appreciation on investments 42,359
----------
TOTAL NET ASSETS-- 100.0% $ 150,442
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $79.24
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 29
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP VALUE FUND (UNAUDITED)
PBHG LARGE CAP VALUE FUND PLCVX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
X Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
One Annualized Annualized
6 Year 3 Year Inception
Months 2 Return Return to Date 3
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Large Cap Value Fund 11.03% 20.58% 20.00% 22.67%
------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG LARGE CAP VALUE FUND, VERSUS THE
S&P 500 INDEX AND THE LIPPER LARGE-CAP VALUE FUNDS AVERAGE
[LINE CHART OMITTED]
PLOT FOLLOWS:
PBHG Large Cap Lipper Large-Cap Value
Value Fund S&P 500 Index 4 Funds Average 5
12/31/96 10,000 10,000 10,000
1/31/97 10,240 10,624 10,381
2/28/97 10,430 10,708 10,468
3/31/97 10,110 10,269 10,132
4/30/97 10,380 10,881 10,426
5/31/97 11,080 11,543 11,084
6/30/97 11,560 12,060 11,480
7/31/97 12,400 13,019 12,320
8/31/97 12,000 12,291 12,027
9/30/97 12,450 12,963 12,633
10/31/97 12,110 12,531 12,152
11/30/97 12,390 13,110 12,421
12/31/97 12,562 13,335 12,613
1/31/98 12,540 13,483 12,553
2/28/98 13,407 14,455 13,414
3/31/98 14,101 15,194 13,993
4/30/98 14,198 15,347 14,053
5/31/98 14,101 15,084 13,748
6/30/98 14,339 15,696 13,781
7/31/98 14,318 15,529 13,322
8/31/98 12,312 13,287 11,346
9/30/98 13,201 14,138 11,863
10/31/98 14,578 15,288 12,787
11/30/98 15,553 16,214 13,353
12/31/98 16,925 17,149 13,758
1/31/99 17,244 17,866 13,791
2/28/99 16,509 17,311 13,395
3/31/99 16,962 18,003 13,765
4/30/99 17,415 18,701 14,829
5/31/99 17,550 18,259 14,769
6/30/99 18,701 19,272 15,245
7/31/99 18,297 18,671 14,850
8/31/99 17,991 18,578 14,367
9/30/99 17,844 18,069 13,773
10/31/99 18,787 19,212 14,212
11/30/99 19,142 19,602 14,276
12/31/99 18,796 20,757 14,697
1/31/00 18,634 19,714 14,030
2/29/00 17,372 19,341 13,463
3/31/00 19,379 21,233 14,878
4/30/00 19,962 20,594 14,814
5/31/00 20,723 20,172 14,940
6/30/00 20,270 20,669 14,659
7/31/00 19,460 20,346 14,721
8/31/00 20,771 21,610 15,686
9/30/00 21,516 20,469 15,473
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Large Cap Value Fund commenced operations on December 31, 1996.
4 The S&P 500 Index is a capitalization weighted index of 500 stocks. The index
is designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. The Index is unmanaged and reflects the reinvestment of income
dividends and capital gains distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
5 The Lipper Large-Cap Value Funds Average represents the average performance of
all mutual funds classified by Lipper, Inc. in the Large-Cap Value category.
These performance figures are based on the changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested. The Average is not intended to imply the Fund's past or
future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Basic Materials 2%
Consumer Cyclical 3%
Consumer Non-Cyclical 16%
Energy 6%
Financial 20%
Health Care 11%
Industrial 6%
Services 6%
Technology 12%
Utilities 1%
Cash 17%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
General Electric 4.1%
Burlington Resources 3.8%
Citigroup 3.5%
Heinz (H.J.) 3.5%
Pitney Bowes 3.4%
Sara Lee 3.0%
Microsoft 2.8%
Bank of America 2.8%
IMS Health 2.7%
Schering-Plough 2.6%
------------------------------------------------------
% of Total Portfolio Investments 32.2%
[LOGO OMITTED] 30
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG LARGE CAP VALUE FUND PLCVX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 94.3%
BASIC MATERIALS -- 1.9%
CHEMICALS-DIVERSIFIED -- 1.9%
Dow Chemical 51,100 $ 1,274
-------------
1,274
-------------
TOTAL BASIC MATERIALS (COST $1,230) 1,274
-------------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 3.7%
CABLE TV -- 1.1%
Comcast Special, Cl A* 17,000 696
-------------
696
--------------------------------------------------------------------------------
MULTIMEDIA -- 1.8%
Gannett 21,800 1,155
-------------
1,155
--------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 0.8%
Knight-Ridder 10,000 508
-------------
508
-------------
TOTAL CONSUMER CYCLICAL (COST $2,264) 2,359
-------------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 18.5%
COSMETICS & TOILETRIES -- 1.2%
Avon Products 19,500 797
-------------
797
--------------------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 13.5%
Campbell Soup 23,500 608
Conagra Foods 78,000 1,565
Heinz (H.J.) 69,300 2,569
Kellogg 77,700 1,879
Sara Lee 108,900 2,212
-------------
8,833
--------------------------------------------------------------------------------
FOOD-RETAIL -- 3.8%
Albertson's 39,000 819
Kroger* 72,900 1,645
-------------
2,464
-------------
TOTAL CONSUMER NON-CYCLICAL (COST $11,684) 12,094
-------------
--------------------------------------------------------------------------------
ENERGY -- 7.0%
OIL COMPANIES-EXPLORATION & PRODUCTION -- 4.3%
Burlington Resources 76,600 2,820
-------------
2,820
--------------------------------------------------------------------------------
OIL COMPANIES-INTEGRATED -- 2.7%
Exxon Mobil 12,000 1,069
USX-Marathon Group 24,300 690
-------------
1,759
-------------
TOTAL ENERGY (COST $4,367) 4,579
-------------
--------------------------------------------------------------------------------
FINANCIAL -- 23.0%
DIVERSIFIED FINANCIAL SERVICES -- 4.0%
Citigroup 48,333 2,613
-------------
2,613
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
FINANCE-CONSUMER LOANS -- 2.1%
USA Education 29,000 $ 1,397
-------------
1,397
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 2.4%
Morgan J.P. 9,700 1,585
-------------
1,585
--------------------------------------------------------------------------------
FINANCE-MORTGAGE LOAN/BANKER -- 5.6%
Countrywide Credit 35,700 1,347
Federal National Mortgage 21,300 1,152
Federal Home Loan Mortgage 16,000 1,144
-------------
3,643
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 2.3%
Aetna 25,500 1,481
-------------
1,481
--------------------------------------------------------------------------------
MONEY CENTER BANKS -- 3.2%
Bank of America 39,600 2,074
-------------
2,074
--------------------------------------------------------------------------------
MULTI-LINE INSURANCE -- 2.1%
Allstate 40,000 1,390
-------------
1,390
--------------------------------------------------------------------------------
S & L THRIFTS-WESTERN US -- 1.3%
Washington Mutual 21,700 864
-------------
864
-------------
TOTAL FINANCIAL (COST $14,270) 15,047
-------------
--------------------------------------------------------------------------------
HEALTH CARE -- 11.9%
MEDICAL-DRUGS -- 5.9%
Merck 25,100 1,869
Schering-Plough 42,200 1,962
-------------
3,831
--------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 3.1%
IMS Health 98,000 2,033
-------------
2,033
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 2.9%
Becton Dickinson 72,500 1,917
-------------
1,917
-------------
TOTAL HEALTH CARE (COST $7,108) 7,781
-------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 7.0%
DIVERSIFIED MANUFACTURING OPERATIONS -- 4.6%
General Electric 52,400 3,023
-------------
3,023
--------------------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 2.4%
Waste Management 90,000 1,569
-------------
1,569
-------------
TOTAL INDUSTRIAL (COST $4,718) 4,592
-------------
--------------------------------------------------------------------------------
[LOGO OMITTED] 31
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
--------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG LARGE CAP VALUE FUND PLCVX
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
SERVICES -- 6.7%
COMPUTER SERVICES -- 1.9%
Electronic Data Systems 30,000 $ 1,245
-------------
1,245
--------------------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 4.8%
AT&T 42,300 1,242
Sprint 23,800 698
Worldcom* 40,000 1,215
-------------
3,155
-------------
TOTAL SERVICES (COST $4,233) 4,400
-------------
--------------------------------------------------------------------------------
TECHNOLOGY -- 13.8%
APPLICATIONS SOFTWARE -- 3.2%
Microsoft* 35,000 2,111
-------------
2,111
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 2.8%
First Data 47,900 1,871
-------------
1,871
--------------------------------------------------------------------------------
OFFICE AUTOMATION & EQUIPMENT -- 3.9%
Pitney Bowes 64,900 2,560
-------------
2,560
--------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 2.0%
Lexmark International* 34,700 1,301
-------------
1,301
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 1.9%
Verizon Communications 25,000 1,211
-------------
1,211
-------------
TOTAL TECHNOLOGY (COST $8,725) 9,054
-------------
--------------------------------------------------------------------------------
UTILITIES -- 0.8%
INDEPENDENT POWER PRODUCER -- 0.8%
Southern Energy* 15,900 499
-------------
499
-------------
TOTAL UTILITIES (COST $350) 499
-------------
TOTAL COMMON STOCK (COST $58,949) 61,679
-------------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 19.2%
J.P. Morgan
6.60%, dated 09/29/00, matures 10/02/00,
repurchase price $12,558,741
(collateralized by U.S. Government Agency
Instruments: total market value
$12,803,439) (A) $12,552 12,552
-------------
TOTAL REPURCHASE AGREEMENT (COST $12,552) 12,552
-------------
TOTAL INVESTMENTS-- 113.5% (COST $71,501) $74,231
=============
Percentages Are Based On Net Assets of $65,405,816
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 32
<PAGE>
THE PBHG FUNDS, INC.
PBHG MID-CAP VALUE FUND (UNAUDITED)
PBHG MID-CAP VALUE FUND PBMCX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
Large
------------------------
X Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
One Annualized Annualized
6 Year 3 Year Inception
Months 2 Return Return to Date 3
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Mid-Cap Value Fund 9.41% 41.61% 23.83% 33.90%
-----------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG MID-CAP VALUE
FUND, VERSUS THE S&P MID CAP 400 INDEX,
S&P BARRA MID CAP VALUE INDEX AND THE LIPPER MID-CAP VALUE FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINT FOLLOWS:
S&P Barra Lipper
PBHG Mid-Cap S&P Mid-Cap 400 Mid Cap Mid-Cap Value
Value Fund Index 4 Value Index 5 Funds Average 6
4/30/97 10,000 10,000 10,000 10,000
5/31/97 10,740 10,874 10,838 10,638
6/30/97 11,410 11,180 11,276 10,926
7/31/97 12,890 12,285 12,045 11,733
8/31/97 13,240 12,271 12,097 11,811
9/30/97 14,300 12,976 12,812 12,472
10/31/97 13,760 12,411 12,398 12,100
11/30/97 13,870 12,595 12,451 12,402
12/31/97 14,148 13,083 12,694 13,147
1/31/98 14,138 12,834 12,558 12,845
2/28/98 15,443 13,896 13,489 13,795
3/31/98 16,106 14,523 14,106 14,440
4/30/98 16,422 14,787 14,271 14,533
5/31/98 15,717 14,123 13,703 13,946
6/30/98 15,896 14,211 13,603 13,842
7/31/98 15,580 13,660 12,812 13,240
8/31/98 12,769 11,119 10,570 11,072
9/30/98 13,906 12,157 11,131 11,933
10/31/98 15,358 13,243 11,887 12,874
11/30/98 16,538 13,904 12,337 13,174
12/31/98 18,087 15,584 12,917 13,761
1/31/99 18,122 14,977 12,761 13,042
2/28/99 17,023 14,193 12,165 12,419
3/31/99 17,451 14,589 12,505 12,653
4/30/99 17,764 15,740 13,568 13,878
5/31/99 18,666 15,808 13,776 14,104
6/30/99 20,042 16,656 14,297 14,542
7/31/99 20,215 16,301 14,016 14,349
8/31/99 19,487 15,742 13,471 13,805
9/30/99 19,174 15,256 13,122 13,125
10/31/99 19,313 16,033 13,318 13,388
11/30/99 20,007 16,875 13,717 13,658
12/31/99 22,017 17,878 14,536 14,080
1/31/00 20,903 17,374 13,905 13,472
2/29/00 21,622 18,590 14,157 12,978
3/31/00 24,818 20,146 15,436 14,964
4/30/00 24,639 19,443 15,161 14,827
5/31/00 25,788 19,200 15,146 15,255
6/30/00 25,698 19,482 15,224 14,566
7/31/00 25,321 19,790 15,264 15,143
8/31/00 27,943 21,999 16,375 16,226
9/30/00 27,153 21,849 16,252 16,466
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Mid-Cap Value Fund commenced operations on April 30, 1997.
4 The S&P Mid Cap 400 Index is an unmanaged capitalization-weighted index that
measures the performance of the mid-range sector of the U.S. stock market. The
Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing. The Index is not intended to imply the Fund's
past or future performance.
5 The S&P Barra Mid Cap Value Index is an unmanaged capitalization weighted
index that consists of those securities in the S&P Mid Cap 400 Index with
lower price to book ratios. The index reflects the reinvestments of income
dividends and capital gains distributions, if any, but does not reflect fees,
brokerage commissions or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
6 The Lipper Mid-Cap Value Funds Average represents the average performance of
all mutual funds classified by Lipper, Inc. in the Mid-Cap Value category.
These performance figures are based on the changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested. The Average is not intended to imply the Fund's past or
future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Basic Materials 3%
Consumer Cyclical 16%
Consumer Non-Cyclical 1%
Energy 16%
Financial 15%
Health Care 8%
Industrial 7%
Services 6%
Technology 13%
Utilities 6%
Cash 9%
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Adelphia Communications, Cl A 2.0%
Devon Energy 2.0%
Inco Limited 1.7%
DTE Energy 1.6%
Cablevision Systems, Cl A 1.6%
XL Capital Limited, Cl A 1.5%
Quantum - DLT & Storage 1.5%
Parametric 1.4%
TRW 1.4%
Harrah's Entertainment 1.4%
------------------------------------------------------
% of Total Portfolio Investments 16.1%
[LOGO OMITTED] 33
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG MID-CAP VALUE FUND PBMCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 91.7%
BASIC MATERIALS -- 2.9%
CHEMICALS-SPECIALTY -- 1.2%
Crompton 124,500 $ 980
Cytec Industries* 11,600 388
-----------
1,368
--------------------------------------------------------------------------------
METAL-DIVERSIFIED -- 1.7%
Inco Limited 124,500 2,008
-----------
2,008
-----------
TOTAL BASIC MATERIALS (COST $3,652) 3,376
-----------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 16.2%
APPLIANCES -- 0.9%
Maytag 35,100 1,090
-----------
1,090
--------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 2.2%
Lear* 21,500 442
TRW 40,600 1,649
Visteon 34,100 516
-----------
2,607
--------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAMMING -- 1.0%
Clear Channel Communication* 14,300 808
Unitedglobalcom, Cl A* 13,700 411
-----------
1,219
--------------------------------------------------------------------------------
CABLE TV -- 3.7%
Adelphia Communications, Cl A* 86,800 2,393
Cablevision Systems, Cl A* 28,100 1,863
-----------
4,256
--------------------------------------------------------------------------------
CASINO HOTELS -- 1.4%
Harrah's Entertainment* 59,700 1,642
-----------
1,642
--------------------------------------------------------------------------------
HOTELS & MOTELS -- 0.8%
Starwood Hotels & Resorts Worldwide 29,300 916
-----------
916
--------------------------------------------------------------------------------
MULTIMEDIA -- 2.1%
Gannett 17,600 933
Scripps (E.W.), Cl A 25,600 1,382
-----------
2,315
--------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 0.4%
Intimate Brands 24,400 456
-----------
456
--------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 0.7%
Family Dollar Stores 45,000 866
-----------
866
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
RETAIL-DRUG STORE -- 0.6%
Longs Drug Stores 39,300 $ 752
-----------
752
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 0.8%
Wendy's International 49,700 997
-----------
997
--------------------------------------------------------------------------------
TELEVISION -- 1.0%
Pegasus Communications* 25,500 1,232
-----------
1,232
--------------------------------------------------------------------------------
TRAVEL SERVICES -- 0.6%
Sabre Holdings, Cl A* 25,100 726
-----------
726
-----------
TOTAL CONSUMER CYCLICAL (COST $19,335) 19,074
-----------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 1.2%
CONSUMER PRODUCTS-MISCELLANEOUS -- 1.2%
Fortune Brands 51,600 1,367
-----------
1,367
-----------
TOTAL CONSUMER NON-CYCLICAL (COST $1,261) 1,367
-----------
--------------------------------------------------------------------------------
ENERGY -- 16.3%
OIL COMPANIES-EXPLORATION & PRODUCTION -- 7.5%
Anadarko Petroleum 14,611 971
Devon Energy 39,292 2,364
EOG Resources 37,000 1,438
Forest Oil* 59,100 957
Louis Dreyfus Natural Gas* 27,000 1,070
Ocean Energy* 49,000 756
Triton Energy Limited, Cl A* 29,800 1,162
-----------
8,718
--------------------------------------------------------------------------------
OIL COMPANIES-INTEGRATED -- 0.7%
Unocal 24,800 879
-----------
879
--------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 1.1%
Cooper Cameron* 3,200 236
Grant Prideco* 46,100 1,011
-----------
1,247
--------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 2.9%
BJ Services* 24,300 1,485
Hanover Compressor* 23,100 761
Tidewater 26,800 1,219
-----------
3,465
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 2.7%
Ensco International 20,100 769
Global Marine* 25,600 790
Nabors Industries* 21,300 1,116
Noble Drilling* 10,400 523
-----------
3,198
--------------------------------------------------------------------------------
[LOGO OMITTED] 34
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG MID-CAP VALUE FUND PBMCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
PIPELINES -- 1.4%
Columbia Energy Group 7,200 $ 511
Kinder Morgan 28,800 1,179
-----------
1,690
-----------
TOTAL ENERGY (COST $15,349) 19,197
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 14.8%
COMMERCIAL BANKS-EASTERN US -- 0.7%
Mercantile 23,100 838
-----------
838
--------------------------------------------------------------------------------
COMMERCIAL BANKS-SOUTHERN US -- 0.6%
Southtrust 23,600 742
-----------
742
--------------------------------------------------------------------------------
FINANCE-COMMERCIAL -- 0.6%
CIT Group 42,800 749
-----------
749
--------------------------------------------------------------------------------
FINANCE-CONSUMER LOANS -- 0.6%
Household International 11,900 674
-----------
674
--------------------------------------------------------------------------------
FINANCIAL GUARANTEE INSURANCE -- 0.6%
The PMI Group 11,200 759
-----------
759
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 3.5%
Jefferson Pilot 11,100 753
John Hancock Financial* 52,900 1,422
Torchmark 30,100 837
Unumprovident 37,600 1,025
-----------
4,037
--------------------------------------------------------------------------------
MULTI-LINE INSURANCE -- 0.7%
Allmerica Financial 12,500 799
-----------
799
--------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE -- 1.5%
XL Capital Limited, Cl A 24,500 1,801
-----------
1,801
--------------------------------------------------------------------------------
REITS-DIVERSIFIED -- 0.7%
Pinnacle Holdings* 31,600 841
-----------
841
--------------------------------------------------------------------------------
S & L/THRIFTS-CENTRAL US -- 1.2%
Charter One Financial 56,495 1,377
-----------
1,377
--------------------------------------------------------------------------------
S & L/THRIFTS-EASTERN US -- 0.5%
Dime Bancorp 25,100 541
-----------
541
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
S & L/THRIFTS-WESTERN US -- 2.3%
Golden State Bancorp* 57,000 $ 1,347
Golden West Financial 14,900 799
Washington Mutual 12,500 498
-----------
2,644
--------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 1.3%
Comerica 27,000 1,578
-----------
1,578
-----------
TOTAL FINANCIAL (COST $15,810) 17,380
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 7.7%
DISPOSABLE MEDICAL PRODUCTS -- 0.3%
Bard (C.R.) 9,500 401
-----------
401
--------------------------------------------------------------------------------
HEALTH CARE COST CONTAINMENT -- 0.7%
McKesson HBOC 26,800 819
-----------
819
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.4%
Aclara Biosciences* 5,900 180
Incyte Genomics* 30,000 1,234
Inhale Therapeutic Systems* 4,900 276
-----------
1,690
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 0.2%
Cephalon* 4,300 209
-----------
209
--------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 2.5%
Mylan Labs 49,700 1,339
Watson Pharmaceutical* 24,500 1,589
-----------
2,928
--------------------------------------------------------------------------------
MEDICAL-HMO -- 0.7%
Trigon Healthcare* 14,600 767
-----------
767
--------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 0.4%
Boston Scientific* 27,200 447
-----------
447
--------------------------------------------------------------------------------
MEDICAL LASER SYSTEMS -- 0.5%
Visx* 20,800 560
-----------
560
--------------------------------------------------------------------------------
PHARMACY SERVICES -- 1.0%
Omnicare 74,600 1,203
-----------
1,203
-----------
TOTAL HEALTH CARE (COST $8,067) 9,024
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 6.8%
AEROSPACE/DEFENSE -- 0.7%
Litton Industries* 17,900 800
-----------
800
--------------------------------------------------------------------------------
[LOGO OMITTED] 35
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
------------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG MID-CAP VALUE FUND PBMCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
BUILDING PRODUCTS-CEMENT/AGGREGATE-- 0.8%
Martin Marietta Materials 24,800 $ 950
-----------
950
--------------------------------------------------------------------------------
CIRCUIT BOARDS -- 0.5%
Jabil Circuit* 11,000 624
-----------
624
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS -- 2.7%
Eaton 14,700 906
ITT Industries 45,500 1,476
Textron 16,500 761
-----------
3,143
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 0.6%
Vishay Intertechnology* 21,500 661
-----------
661
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.7%
Tektronix 11,200 860
------------
860
--------------------------------------------------------------------------------
IDENTIFICATION SYSTEM/DEVICES -- 0.8%
Symbol Technologies 27,000 970
-----------
970
-----------
TOTAL INDUSTRIAL (COST $8,098) 8,008
-----------
--------------------------------------------------------------------------------
SERVICES -- 5.7%
COMMERCIAL SERVICES -- 1.2%
Quintiles Transnational* 85,900 1,369
-----------
1,369
--------------------------------------------------------------------------------
COMMERCIAL SERVICES-FINANCE -- 3.0%
Block (H&R) 40,700 1,508
Concord EFS* 39,900 1,417
Equifax 21,400 577
-----------
3,502
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.5%
Unisys* 54,800 617
-----------
617
--------------------------------------------------------------------------------
CONSULTING SERVICES -- 1.0%
Comdisco 64,000 1,220
-----------
1,220
-----------
TOTAL SERVICES (COST $6,422) 6,708
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 13.8%
APPLICATIONS SOFTWARE -- 3.0%
Citrix Systems* 16,400 329
Intuit* 26,300 1,499
Parametric* 154,400 1,689
-----------
3,517
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMPUTERS -- 0.1%
Micron Electronics* 15,100 $ 136
-----------
136
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.0%
Quantum-DLT & Storage* 118,800 1,789
Sandisk* 8,800 587
-----------
2,376
--------------------------------------------------------------------------------
DECISION SUPPORT SOFTWARE -- 1.2%
Wind River Systems* 30,300 1,453
-----------
1,453
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 1.0%
Advanced Micro Devices* 47,400 1,120
-----------
1,120
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 1.1%
Networks Associates* 54,900 1,242
-----------
1,242
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 0.2%
Cabletron Systems* 9,900 291
-----------
291
--------------------------------------------------------------------------------
OFFICE AUTOMATION & EQUIPMENT -- 1.0%
Pitney Bowes 28,500 1,124
-----------
1,124
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 1.3%
Atmel* 62,000 942
Cypress Semiconductor* 13,500 561
-----------
1,503
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 1.1%
Harris 47,100 1,339
-----------
1,339
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 1.4%
Broadwing 38,900 994
RCN* 29,600 614
-----------
1,608
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.4%
Western Multiplex* 29,800 479
-----------
479
-----------
TOTAL TECHNOLOGY (COST $16,040) 16,188
-----------
--------------------------------------------------------------------------------
TRANSPORTATION -- 0.3%
TRANSPORTATION-TRUCK -- 0.3%
Swift Transportation* 25,400 332
-----------
332
-----------
TOTAL TRANSPORTATION (COST $422) 332
-----------
--------------------------------------------------------------------------------
[LOGO OMITTED] 36
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG MID-CAP VALUE FUND PBMCX
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
UTILITIES -- 6.0%
ELECTRIC-INTEGRATED -- 5.4%
Allete 48,200 $ 1,067
CMS Energy 12,600 339
Conectiv 41,300 738
Constellation Energy Group 31,900 1,587
DQE 20,600 827
DTE Energy 49,300 1,886
-----------
6,444
--------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.6%
UGI 27,600 669
-----------
669
--------------------------------------------------------------------------------
TOTAL UTILITIES (COST $5,911) 7,113
-----------
TOTAL COMMON STOCK (COST $100,367) 107,767
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 8.8%
Morgan Stanley
6.58%, dated 09/29/00, matures 10/02/00,
repurchase price $10,405,708
(collateralized by U.S. Government
Agency Instruments: total market
value $10,663,748) (A) $10,400 10,400
-----------
TOTAL REPURCHASE AGREEMENT (COST $10,400) 10,400
-----------
TOTAL INVESTMENTS -- 100.5% (COST $110,767) 118,167
-----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.5)%
TOTAL OTHER ASSETS AND LIABILITIES, NET (600)
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200
million shares -- $0.001 par value)
based on 7,775,724 outstanding shares
of common stock 108,325
Undistributed net investment income 163
Accumulated net realized gain on investments 1,679
Net unrealized appreciation on investments 7,400
-----------
TOTAL NET ASSETS -- 100.0% $ 117,567
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $15.12
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 37
<PAGE>
THE PBHG FUNDS, INC.
PBHG SMALL CAP VALUE FUND (UNAUDITED)
PBHG SMALL CAP VALUE FUND PBSVX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
X Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
One Annualized Annualized
6 Year 3 Year Inception
Months 2 Return Return to Date 3
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Small Cap Value Fund 10.51% 54.40% 17.10% 28.14%
-----------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG SMALL CAP
VALUE FUND, VERSUS THE RUSSELL 2000 INDEX,
RUSSELL 2000 VALUE INDEX AND THE LIPPER SMALL-CAP VALUE FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINT FOLLOWS:
Lipper Small-Cap
PBHG Small Cap Russell Russell 2000 Value Funds
Value Fund 2000 Index 4 Value Index 5 Average 6
4/30/97 10,000 10,000 10,000 10,000
5/31/97 10,880 11,113 10,796 10,929
6/30/97 11,800 11,589 11,342 11,521
7/31/97 13,070 12,128 11,819 12,175
8/31/97 13,370 12,405 12,006 12,477
9/30/97 14,550 13,313 12,805 13,322
10/31/97 14,210 12,729 12,456 12,943
11/30/97 14,200 12,646 12,593 12,857
12/31/97 14,539 12,868 13,020 12,992
1/31/98 14,518 12,665 12,785 12,777
2/28/98 15,615 13,601 13,558 13,615
3/31/98 16,227 14,162 14,107 14,215
4/30/98 16,438 14,240 14,177 14,363
5/31/98 15,520 13,473 13,675 13,784
6/30/98 15,098 13,501 13,598 13,521
7/31/98 14,402 12,409 12,533 12,573
8/31/98 11,490 9,999 10,570 10,378
9/30/98 11,838 10,782 11,167 10,728
10/31/98 12,872 11,221 11,499 11,153
11/30/98 13,811 11,809 11,810 11,652
12/31/98 14,703 12,540 12,180 12,051
1/31/99 14,410 12,707 11,904 11,837
2/28/99 13,237 11,678 11,091 11,032
3/31/99 12,831 11,860 11,000 10,871
4/30/99 13,429 12,923 12,004 11,861
5/31/99 14,004 13,111 12,373 12,273
6/30/99 14,962 13,704 12,821 12,844
7/31/99 15,255 13,328 12,516 12,721
8/31/99 15,131 12,835 12,059 12,214
9/30/99 15,131 12,838 11,818 11,946
10/31/99 14,771 12,890 11,581 11,716
11/30/99 15,605 13,659 11,641 12,115
12/31/99 17,443 15,205 11,999 12,676
1/31/00 17,217 14,961 11,685 12,265
2/29/00 19,845 17,432 12,399 12,697
3/31/00 21,141 16,283 12,458 13,343
4/30/00 20,149 15,303 12,531 13,270
5/31/00 20,431 14,411 12,340 13,101
6/30/00 22,348 15,667 12,701 13,523
7/31/00 21,649 15,163 13,124 13,604
8/31/00 23,734 16,320 13,711 14,532
9/30/00 23,362 15,840 13,633 14,405
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Small Cap Value Fund commenced operations on April 30, 1997.
4 The Russell 2000 Index is an unmanaged index comprised of the 2,000 smallest
securities in the Russell 3000 Index. The Index reflects the reinvestment of
income dividends and capital gains distributions, if any, but does not reflect
fees, brokerage commissions, or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
5 The Russell 2000 Value Index is an unmanaged index that measures the
performance of those securities in the Russell 2000 Index with lower price to
book ratios and lower forecasted growth values. The Index reflects the
reinvestment of income dividends and capital gain distributions, if any, but
does not reflect fees, brokerage commissions or other expenses of investing.
The Index is not intended to imply the Fund's past or future performance.
6 The Lipper Small-Cap Value Funds Average represents the average performance of
all mutual funds classified by Lipper, Inc. in the Small-Cap Value category.
These performance figures are based on the changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested. The Average is not intended to imply the Fund's past or
future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Basic Materials 3%
Consumer Cyclical 13%
Energy 12%
Financial 14%
Health Care 14%
Industrial 10%
Services 3%
Technology 16%
Transportation 3%
Utilities 3%
Cash 9%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
North American Scientific 2.0%
Harman International 2.0%
CTS 1.8%
S3 1.7%
Teledyne Technologies 1.6%
Fair Issac & Company 1.6%
Hooper Holmes 1.5%
Acneilson 1.5%
Telecom Semiconductor 1.5%
Excelon 1.4%
------------------------------------------------------
% of Total Portfolio Investments 16.6%
[LOGO OMITTED] 38
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG SMALL CAP VALUE FUND PBSVX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 90.5%
BASIC MATERIALS -- 2.7%
CHEMICALS-DIVERSIFIED -- 0.4%
Solutia 65,300 $ 743
-----------
743
--------------------------------------------------------------------------------
CHEMICALS-PLASTICS -- 0.4%
Polyone* 102,800 752
-----------
752
--------------------------------------------------------------------------------
CHEMICALS-SPECIALTY -- 1.9%
Crompton 233,700 1,841
Cytec* 58,000 1,939
W.R. Grace* 43,100 296
-----------
4,076
--------------------------------------------------------------------------------
OTHER-NON-FERROUS -- 0.0%
USEC 10,200 43
-----------
43
-----------
TOTAL BASIC MATERIALS (COST $6,227) 5,614
-----------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 12.7%
AUDIO/VIDEO PRODUCTS -- 2.0%
Harman International 105,400 4,121
-----------
4,121
--------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 0.9%
Delco Remy International* 117,500 896
Visteon 60,000 908
-----------
1,804
--------------------------------------------------------------------------------
BUILDING-RESIDENTIAL/COMMERCIAL -- 0.3%
Centex 19,500 626
-----------
626
--------------------------------------------------------------------------------
CABLE TV -- 0.5%
Insight Communications* 61,400 975
-----------
975
--------------------------------------------------------------------------------
CASINO HOTELS -- 0.9%
Harrah's Entertainment* 72,500 1,994
-----------
1,994
--------------------------------------------------------------------------------
CASINO SERVICES -- 0.3%
International Game Technology 18,400 619
-----------
619
--------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 1.1%
Bell Microproducts* 71,900 2,247
-----------
2,247
--------------------------------------------------------------------------------
HOME FURNISHINGS -- 0.8%
Furniture Brands International* 104,000 1,729
-----------
1,729
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 0.9%
Journal Register* 27,200 $ 452
Pulitzer 34,900 1,499
-----------
1,951
--------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 0.9%
Ann Taylor Stores* 44,000 1,691
Children's Place Stores* 11,200 288
-----------
1,979
--------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 0.3%
Electronics Boutique Holdings* 25,500 548
-----------
548
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 1.5%
Tweeter Home Entertainment Group* 14,000 508
Ultimate Electronics* 66,700 2,743
-----------
3,251
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 1.6%
Papa John's International* 64,100 1,607
Wendy's International 88,300 1,772
-----------
3,379
--------------------------------------------------------------------------------
TELEVISION -- 0.7%
Pegasus Communications* 29,600 1,430
-----------
1,430
-----------
TOTAL CONSUMER CYCLICAL (COST $22,766) 26,653
-----------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 0.3%
CONSUMER PRODUCTS-MISCELLANEOUS -- 0.3%
Playtex Products* 54,100 639
-----------
639
-----------
TOTAL CONSUMER NON-CYCLICAL (COST $618) 639
------------
--------------------------------------------------------------------------------
ENERGY -- 12.3%
OIL COMPANIES-EXPLORATION & PRODUCTION -- 6.7%
Barrett Resources* 34,600 1,308
Comstock Resources* 50,300 572
Devon Energy 10,548 634
EOG Resources 14,500 564
Forest Oil* 115,800 1,875
Louis Dreyfus Natural Gas* 62,300 2,469
Newfield Exploration* 15,500 724
Noble Affiliates 57,400 2,131
Ocean Energy* 88,900 1,372
Unit* 68,900 1,016
Vintage Petroleum 70,300 1,599
-----------
14,264
--------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 1.4%
Friede Goldman Halter* 222,900 1,574
Hanover Compressor* 41,000 1,350
-----------
2,924
--------------------------------------------------------------------------------
[LOGO OMITTED] 39
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
--------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG SMALL CAP VALUE FUND PBSVX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
OIL REFINING & MARKETING -- 1.3%
Tesoro Petroleum* 145,600 $ 1,447
Valero Energy 34,800 1,225
-----------
2,672
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 2.1%
Atwood Oceanic* 35,400 1,476
Key Energy Services* 103,900 1,020
Patterson Energy* 16,200 557
Precision Drilling* 3,600 128
Pride International* 43,200 1,145
-----------
4,326
--------------------------------------------------------------------------------
PIPELINES -- 0.8%
Kinder Morgan 39,900 1,633
-----------
1,633
-----------
TOTAL ENERGY (COST $20,831) 25,819
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 14.2%
COMMERCIAL BANKS-EASTERN US -- 0.7%
Banknorth Group 20,800 372
Commercial Bank of New York 8,400 113
Mercantile 25,700 933
-----------
1,418
--------------------------------------------------------------------------------
COMMERCIAL BANKS-WESTERN US -- 1.9%
Bancwest 132,400 2,574
City National 39,000 1,506
-----------
4,080
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKEr -- 0.3%
Morgan Keegan 36,100 632
-----------
632
--------------------------------------------------------------------------------
FINANCE-MORTGAGE LOAN/BANKER -- 0.2%
Doral Financial 28,600 463
-----------
463
--------------------------------------------------------------------------------
INTERNET BROKER -- 0.3%
WIT Soundview Group* 73,100 658
-----------
658
--------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISORY SERVICES -- 1.5%
Affiliated Managers Group* 46,200 2,631
Waddell & Reed Financial, Cl A 21,000 651
-----------
3,282
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 1.8%
Liberty Financial 36,100 848
Mony Group 48,400 1,930
Torchmark 34,300 954
-----------
3,732
--------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE -- 1.4%
Fidelity National Financial 69,400 1,718
First American Financial 31,100 649
Trenwick Group 25,700 488
-----------
2,855
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT/SERVICES -- 0.3%
Trammell Crow* 43,500 $ 653
-----------
653
--------------------------------------------------------------------------------
REINSURANCE -- 0.6%
Annuity & Life 55,100 1,329
-----------
1,329
--------------------------------------------------------------------------------
REITS-OFFICE PROPERTY -- 0.4%
Mack Cali Realty 29,300 826
-----------
826
--------------------------------------------------------------------------------
REITS-SHOPPING CENTERS -- 0.5%
JP Realty 56,200 1,015
-----------
1,015
--------------------------------------------------------------------------------
S&L/THRIFTS-CENTRAL US -- 1.1%
Bank United, Cl A 20,800 1,054
Commercial Federal 34,900 667
First Federal Bancshares* 45,400 582
-----------
2,303
--------------------------------------------------------------------------------
S&L/THRIFTS-EASTERN US -- 2.0%
Berkshire Hills Bancorp* 120,300 1,729
Dime Bancorp 111,400 2,402
-----------
4,131
--------------------------------------------------------------------------------
S&L/THRIFTS-WESTERN US -- 1.2%
Golden State Bancorp* 93,400 2,206
Washington Federal 16,300 371
-----------
2,577
-----------
TOTAL FINANCIAL (COST $26,208) 29,954
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 13.8%
DISPOSABLE MEDICAL PRODUCTS -- 0.4%
Bard (C.R.) 18,900 799
-----------
799
--------------------------------------------------------------------------------
HEALTH CARE COST CONTAINMENT -- 1.4%
Hooper Holmes 341,800 3,251
-----------
3,251
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.0%
Aclara Biosciences* 10,700 325
Arena Pharmaceuticals* 12,300 529
Cell Genesys* 21,500 645
Inhale Therapeutic Systems* 9,400 530
-----------
2,029
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.5%
Cephalon* 19,400 941
Dura Pharmaceuticals* 60,700 2,147
Galen Holdings ADR* 11,688 532
Medicis Pharmaceuticals, Cl A* 10,800 664
Pain Therapeutics* 20,500 406
Pharmacopeia* 20,700 528
-----------
5,218
--------------------------------------------------------------------------------
[LOGO OMITTED] 40
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG SMALL CAP VALUE FUND PBSVX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 0.4%
Alpharma 13,200 $ 807
-----------
807
--------------------------------------------------------------------------------
MEDICAL-HMO -- 0.7%
Trigon Healthcare* 26,700 1,403
-----------
1,403
--------------------------------------------------------------------------------
MEDICAL-HOSPITALS -- 0.1%
Triad Hospitals* 9,500 279
-----------
279
--------------------------------------------------------------------------------
MEDICAL-NURSING HOMES -- 0.7%
Beverly Enterprises* 258,800 1,537
-----------
1,537
--------------------------------------------------------------------------------
MEDICAL-OUTPATIENT/HOME MEDICAL -- 0.3%
Lincare Holdings* 23,000 660
-----------
660
--------------------------------------------------------------------------------
MEDICAL LABS & TESTING SERVICES -- 0.2%
Covance* 41,900 343
-----------
343
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 3.4%
Haemonetics* 103,500 2,639
North American Scientific* 132,200 4,197
Vital Signs 9,000 239
-----------
7,075
--------------------------------------------------------------------------------
OPTICAL SUPPLIES -- 0.4%
Staar Surgical* 52,000 900
-----------
900
--------------------------------------------------------------------------------
PHARMACY SERVICES -- 1.1%
Omnicare 144,300 2,327
-----------
2,327
--------------------------------------------------------------------------------
THERAPEUTICS -- 1.2%
Inspire Pharmaceuticals* 43,400 1,302
Tularik* 23,200 765
United Therapeutics* 4,200 367
-----------
2,434
-----------
TOTAL HEALTH CARE (COST $23,506) 29,062
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 9.6%
AEROSPACE/DEFENSE -- 1.6%
Teledyne Technologies* 115,100 3,352
-----------
3,352
--------------------------------------------------------------------------------
BUILDING PRODUCTS-CEMENT/AGGREGATE -- 0.3%
Texas Industries 20,900 666
-----------
666
--------------------------------------------------------------------------------
CERAMIC PRODUCTS -- 0.9%
Coorstek* 52,200 1,997
-----------
1,997
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
CIRCUIT BOARDS -- 1.0%
Manufacturers Services* 151,200 $ 1,796
SMTC* 11,200 241
-----------
2,037
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS -- 0.9%
ITT Industries 56,500 1,833
-----------
1,833
--------------------------------------------------------------------------------
ElECTRONIC COMPONENTS-MISCELLANEOUS -- 3.2%
Act Manufacturing* 9,100 480
CTS 76,100 3,853
Kent Electronics* 98,600 2,354
-----------
6,687
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.2%
Trimble Navigation Limited* 23,300 521
-----------
521
--------------------------------------------------------------------------------
HAZARDOUS WASTE DISPOSAL -- 0.3%
Stericycle* 22,000 539
-----------
539
--------------------------------------------------------------------------------
METAL PROCESSORS & FABRICATORS -- 0.3%
Wolverine Tube* 45,500 677
-----------
677
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 0.7%
Aptargroup* 58,200 1,393
-----------
1,393
--------------------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 0.1%
Waste Connections* 5,100 131
-----------
131
--------------------------------------------------------------------------------
POWER CONVERSION/SUPPLY EQUIPMENT -- 0.1%
Applied Science & Technology* 21,200 313
-----------
313
-----------
TOTAL INDUSTRIAL (COST $19,491) 20,146
-----------
--------------------------------------------------------------------------------
SERVICES-- 2.8%
COMMERCIAL SERVICES -- 1.5%
Acnielson* 134,700 3,207
-----------
3,207
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.5%
Tanning Technology* 74,400 1,022
-----------
1,022
--------------------------------------------------------------------------------
CONSULTING SERVICES -- 0.4%
Comdisco 40,700 776
-----------
776
--------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT -- 0.4%
Pharmaceutical Product Development* 35,200 935
-----------
935
-----------
TOTAL SERVICES (COST $6,523) 5,940
-----------
--------------------------------------------------------------------------------
[LOGO OMITTED] 41
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG SMALL CAP VALUE FUND PBSVX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
TECHNOLOGY -- 16.5%
APPLICATIONS SOFTWARE -- 0.6%
Parametric Technology* 76,800 $ 840
Sonic Foundry* 43,300 384
-----------
1,224
--------------------------------------------------------------------------------
CELLULAR TELECOMMUNICATIONS -- 0.1%
Alamosa PCS Holdings* 11,600 188
-----------
188
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 0.3%
Avid Technology* 44,700 626
-----------
626
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 0.7%
Axent Technologies* 73,000 1,574
-----------
1,574
--------------------------------------------------------------------------------
COMPUTERS -- 0.1%
Micron Electronics* 30,200 272
-----------
272
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.6%
Sandisk* 7,000 467
Simple Technology* 41,700 404
Storage Technology* 30,000 407
-----------
1,278
--------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 2.3%
Avocent* 15,136 834
Mobility Electronics* 39,800 363
S3* 348,400 3,593
-----------
4,790
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 3.2%
Acxiom* 14,300 454
Excelon* 239,100 2,959
Fair Isaac & Company 77,500 3,308
-----------
6,721
--------------------------------------------------------------------------------
DECISION SUPPORT SOFTWARE -- 0.1%
Accrue Software* 24,500 292
-----------
292
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 0.9%
Hi / Fn* 19,400 1,322
Zoran* 11,000 536
-----------
1,858
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 0.4%
Hyperion Solutions* 32,400 838
-----------
838
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 0.2%
Ravisent Technologies* 117,700 331
-----------
331
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 0.9%
Adaptec* 43,500 $ 870
MMC Networks* 8,000 1,012
-----------
1,882
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 1.5%
Telcom Semiconductor* 210,900 3,137
-----------
3,137
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT -- 0.5%
Genus* 59,900 228
Photronics* 37,400 816
-----------
1,044
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 0.5%
Cysive* 146,500 980
-----------
980
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 0.8%
Commscope* 50,000 1,225
MCK Communications* 23,700 536
-----------
1,761
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER OPTICS -- 0.1%
Exfo Electro-Optical Engineering* 6,800 296
-----------
296
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 1.9%
Adelphia Business Solutions* 38,900 460
Latitude Communications* 75,700 587
RCN* 52,400 1,087
Savvis Communications* 208,400 1,876
-----------
4,010
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.8%
Carrier Access* 27,300 541
Glenayre Technologies* 29,400 320
Western Multiplex* 49,600 797
-----------
1,658
-----------
TOTAL TECHNOLOGY (COST $35,710) 34,760
-----------
--------------------------------------------------------------------------------
TRANSPORTATION -- 2.9%
AIRLINES -- 0.3%
Midway Airlines* 130,350 692
-----------
692
--------------------------------------------------------------------------------
TRANSPORTATION-AIR FREIGHT -- 0.6%
EGL* 43,100 1,304
-----------
1,304
--------------------------------------------------------------------------------
[LOGO OMITTED] 42
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG SMALL CAP VALUE FUND PBSVX
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
TRANSPORTATION-TRUCK -- 2.0%
American Freightways* 12,500 $ 198
Covenant Transportation* 80,100 746
Hunt (J.B.) Transportation Services 52,700 672
Landstar Systems* 17,600 785
Swift Transportation* 45,300 592
US Xpress Enterprises* 89,500 565
Usfreightways 26,100 592
-----------
4,150
-----------
TOTAL TRANSPORTATION (COST $7,416) 6,146
-----------
--------------------------------------------------------------------------------
UTILITIES -- 2.7%
ELECTRIC-INTEGRATED -- 1.7%
CMS Energy 27,400 738
Idacorp 18,700 865
Western Resources 90,700 1,961
-----------
3,564
--------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 1.0%
Atmos Energy 29,900 617
Semco Energy 28,800 443
UGI 46,800 1,135
-----------
2,195
-----------
TOTAL UTILITIES (COST $5,079) 5,759
-----------
TOTAL COMMON STOCK ($174,375) 190,492
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 9.6%
Morgan Stanley
6.58%, dated 09/29/00, matures 10/02/00,
repurchase price $20,105,278 (collateralized
by U.S. Government Agency Instruments:
total market value $20,610,050) (A) $20,094 20,094
-----------
TOTAL REPURCHASE AGREEMENT (COST $20,094) 20,094
-----------
TOTAL INVESTMENTS-- 100.1% (COST $194,469) 210,586
-----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.1)%
TOTAL OTHER ASSETS AND LIABILITIES, NET (126)
-----------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200
million shares -- $0.001 par value)
based on 10,159,372 outstanding shares
of common stock $ 184,868
Accumulated net investment loss (98)
Accumulated net realized gain on investments 9,573
Net unrealized appreciation on investments 16,117
-----------
TOTAL NET ASSETS -- 100.0% $ 210,460
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $20.72
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 43
<PAGE>
THE PBHG FUNDS, INC.
PBHG FOCUSED VALUE FUND (UNAUDITED)
PBHG FOCUSED VALUE FUND PBFVX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
X Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
One Annualized
6 Year Inception
Months 2 Return to Date 3
----------------------------------------------------------------------------------
<S> <C> <C> <C>
PBHG Focused Value Fund (2.59)% 60.48% 46.60%
----------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG FOCUSED VALUE FUND, VERSUS THE
S&P 500 INDEX AND THE LIPPER MULTI-CAP CORE FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINT FOLLOWS:
Lipper
PBHG Focused Multi-Cap Core
Value Fund S&P 500 Index4 Funds Average5
2/28/99 10,000 10,000 10,000
3/31/99 10,205 10,400 10,333
4/30/99 10,127 10,803 10,795
5/31/99 10,517 10,548 10,662
6/30/99 11,395 11,133 11,225
7/31/99 11,620 10,786 10,966
8/31/99 11,639 10,732 10,771
9/30/99 11,717 10,438 10,525
10/31/99 12,068 11,098 11,026
11/30/99 12,976 11,324 11,421
12/31/99 14,903 11,991 12,286
1/31/00 16,176 11,388 11,854
2/29/00 16,854 11,173 12,193
3/31/00 19,304 12,266 13,029
4/30/00 17,500 11,897 12,581
5/31/00 17,636 11,653 12,253
6/30/00 17,949 11,940 12,665
7/31/00 17,584 11,753 12,464
8/31/00 18,783 12,483 13,408
9/30/00 18,804 11,824 12,856
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Focused Value Fund commenced operations on February 12, 1999.
4 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The index
is designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. The Index is unmanaged and reflects the reinvestment of income
dividends and capital gains distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
5 The Multi-Cap Core Funds Average represents the average performance of all
mutual funds classified by Lipper, Inc. in the Multi-Cap Core category. These
performance figures are based on the changes in net asset value of the funds
in the category with all capital gains distributions and income dividends
reinvested. The Average is not intended to imply the Fund's past or future
performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Basic Materials 5%
Consumer Cyclical 13%
Consumer Non-Cyclical 3%
Energy 5%
Financial 19%
Health Care 11%
Services 8%
Technology 22%
Utilities 3%
Cash 11%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Comcast Special, Cl A 5.0%
Bristol-Myers Squibb 5.0%
Palm 5.0%
Federal Home Loan Mortgage 4.8%
Fleet Boston Financial 4.2%
Compaq Computers 3.8%
John Hancock Financial 3.7%
Microsoft 3.7%
Quintiles Transnational 3.5%
Comdisco 3.4%
------------------------------------------------------
% of Total Portfolio Investments 42.1%
[LOGO OMITTED] 44
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG FOCUSED VALUE FUND PBFVX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 94.2%
BASIC MATERIALS -- 5.4%
CHEMICALS-DIVERSIFIED -- 3.4%
Dow Chemical 60,000 $ 1,496
-----------
1,496
--------------------------------------------------------------------------------
PAPER & RELATED PRODUCTS -- 2.0%
International Paper 30,000 861
-----------
861
-----------
TOTAL BASIC MATERIALS (COST $2,325) 2,357
-----------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 13.3%
APPLIANCES -- 1.9%
Maytag 26,100 811
-----------
811
--------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAM -- 2.6%
AT&T-Liberty Media, Cl A* 41,800 752
Unitedglobalcom, Cl A* 12,300 369
-----------
1,121
--------------------------------------------------------------------------------
CABLE TV -- 5.3%
Comcast Special, Cl A* 56,200 2,301
------------
2,301
--------------------------------------------------------------------------------
MULTIMEDIA -- 3.5%
Gannett 28,400 1,505
-----------
1,505
-----------
TOTAL CONSUMER CYCLICAL (COST $6,256) 5,738
-----------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 3.2%
FOOD-RETAIL -- 3.2%
Kroger* 61,100 1,379
-----------
1,379
-----------
TOTAL CONSUMER NON-CYCLICAL (COST $1,252) 1,379
-----------
--------------------------------------------------------------------------------
ENERGY -- 5.6%
OIL COMPANY-EXPLORATION & PRODUCTION -- 1.7%
EOG Resources 19,300 750
-----------
750
--------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.9%
Grant Prideco* 18,700 410
-----------
410
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 3.0%
Global Marine* 41,800 1,291
-----------
1,291
-----------
TOTAL ENERGY (COST $1,932) 2,451
-----------
--------------------------------------------------------------------------------
FINANCIAL -- 20.2%
FINANCE-MORTGAGE LOAN/BANKER -- 5.1%
Federal Home Loan Mortgage 41,000 2,217
-----------
2,217
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 3.8%
John Hancock Financial* 63,000 $ 1,693
-----------
1,693
--------------------------------------------------------------------------------
MONEY CENTER BANKS -- 1.6%
Chase Manhattan 15,000 693
-----------
693
--------------------------------------------------------------------------------
MULTI-LINE INSURANCE -- 1.8%
Allstate 22,000 764
-----------
764
--------------------------------------------------------------------------------
S&L/THRIFTS-WESTERN US -- 3.5%
Washington Mutual 38,000 1,513
-----------
1,513
--------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 4.4%
Fleet Boston Financial 49,100 1,915
-----------
1,915
-----------
TOTAL FINANCIAL (COST $7,367) 8,795
-----------
--------------------------------------------------------------------------------
HEALTH CARE -- 11.9%
MEDICAL PRODUCTS -- 3.1%
North American Scientific* 42,500 1,349
-----------
1,349
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 8.8%
Abbott Labs 32,000 1,522
Bristol-Myers Squibb 40,000 2,285
-----------
3,807
-----------
TOTAL HEALTH CARE (COST $4,647) 5,156
-----------
--------------------------------------------------------------------------------
SERVICES -- 8.4%
COMMERCIAL SERVICE-FINANCE -- 1.2%
Block (H&R) 13,700 508
-----------
508
--------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 3.6%
Quintiles Transnational* 100,300 1,599
-----------
1,599
--------------------------------------------------------------------------------
CONSULTING SERVICES -- 3.6%
Comdisco 81,700 1,557
-----------
1,557
-----------
TOTAL SERVICES (COST $3,968) 3,664
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 22.8%
APPLICATIONS SOFTWARE -- 6.6%
Microsoft* 28,000 1,689
Parametric Technology* 110,400 1,207
-----------
2,896
--------------------------------------------------------------------------------
COMPUTERS -- 4.1%
Compaq Computers 63,800 1,760
-----------
1,760
--------------------------------------------------------------------------------
[LOGO OMITTED] 45
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG FOCUSED VALUE FUND PBFVX
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.2%
Simple Technology* 8,400 $ 81
-----------
81
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 0.6%
Excelon* 20,000 248
-----------
248
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 1.2%
Internap Network Services* 15,000 485
Ravisent Technologies* 20,000 56
-----------
541
--------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 1.3%
General Motors, Cl H 15,000 558
-----------
558
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 0.5%
Cypress Semiconductor* 5,200 216
-----------
216
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 3.1%
McLeodUSA* 93,000 1,331
-----------
1,331
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 5.2%
Palm* 43,000 2,276
-----------
2,276
-----------
TOTAL TECHNOLOGY (COST $10,003) 9,907
-----------
--------------------------------------------------------------------------------
UTILITIES -- 3.4%
ELECTRIC-INTEGRATED -- 2.6%
Southern 35,000 1,135
-----------
1,135
--------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCER -- 0.8%
Southern Energy* 11,000 345
-----------
345
-----------
TOTAL UTILITIES (COST $1,103) 1,480
-----------
TOTAL COMMON STOCK (COST $38,853) 40,927
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 11.1%
J.P. Morgan
6.60%, dated 09/29/00, matures 10/02/00,
repurchase price $4,833,264
(collateralized by U.S. Government
Agency Instruments: total market value
$4,927,220) (A) $4,830 4,830
-----------
TOTAL REPURCHASE AGREEMENT (COST $4,830) 4,830
-----------
TOTAL INVESTMENTS-- 105.3% (COST $43,683) 45,757
-----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (5.3)%
Payable for Investment Securities Purchased (3,589)
Other Assets and Liabilities, Net 1,266
-----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (2,323)
-----------
--------------------------------------------------------------------------------
Market
Description Value (000)
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200
million shares -- $0.001 par value)
based on 2,409,473 outstanding shares
of common stock $ 40,305
Undistributed net investment income 41
Accumulated net realized gain on investments 1,014
Net unrealized appreciation on investments 2,074
-----------
TOTAL NET ASSETS-- 100.0% $ 43,434
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $18.03
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 46
<PAGE>
THE PBHG FUNDS, INC.
PBHG INTERNATIONAL FUND (UNAUDITED)
PBHG INTERNATIONAL FUND PBHIX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
X Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
One Annualized Annualized Annualized
6 Year 3 Year 5 Year Inception
Months 2 Return Return Return to Date 3
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG International Fund (13.21)% 0.83% 3.16% 7.62% 5.42%
---------------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG INTERNATIONAL FUND, VERSUS THE
MSCI EAFE INDEX AND THE LIPPER INTERNATIONAL FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINT FOLLOWS:
PBHG International MSCI Lipper International
Fund EAFE Index 4 Funds Average 5
6/30/94 10,000 10,000 10,000
7/31/94 10,060 10,097 10,276
8/31/94 10,241 10,336 10,573
9/30/94 10,040 10,011 10,316
10/31/94 10,070 10,344 10,518
11/30/94 9,679 9,847 10,011
12/31/94 9,829 9,909 9,917
1/31/95 9,163 9,528 9,439
2/28/95 8,992 9,501 9,455
3/31/95 9,204 10,094 9,768
4/30/95 9,486 10,474 10,088
5/31/95 9,355 10,349 10,176
6/30/95 9,506 10,167 10,178
7/31/95 9,748 10,800 10,726
8/31/95 9,536 10,388 10,520
9/30/95 9,698 10,591 10,679
10/31/95 9,436 10,306 10,470
11/30/95 9,657 10,593 10,590
12/31/95 10,030 11,020 10,906
1/31/96 10,383 11,065 11,152
2/29/96 10,424 11,103 11,201
3/31/96 10,635 11,338 11,393
4/30/96 10,958 11,668 11,754
5/31/96 10,887 11,453 11,730
6/30/96 10,928 11,517 11,810
7/31/96 10,464 11,181 11,378
8/31/96 10,605 11,206 11,509
9/30/96 10,837 11,504 11,760
10/31/96 10,807 11,386 11,691
11/30/96 11,270 11,840 12,202
12/31/96 11,301 11,687 12,252
1/31/97 11,291 11,278 12,220
2/28/97 11,341 11,463 12,388
3/31/97 11,351 11,504 12,423
4/30/97 11,401 11,565 12,457
5/31/97 12,107 12,318 13,196
6/30/97 12,762 12,997 13,814
7/31/97 13,045 13,208 14,207
8/31/97 11,936 12,221 13,184
9/30/97 12,752 12,906 14,007
10/31/97 11,694 11,914 12,941
11/30/97 11,583 11,792 12,832
12/31/97 11,694 11,895 12,939
1/31/98 12,192 12,439 13,248
2/28/98 12,901 13,238 14,127
3/31/98 13,333 13,645 14,853
4/30/98 13,355 13,753 15,052
5/31/98 13,189 13,686 15,070
6/30/98 13,023 13,790 14,952
7/31/98 13,565 13,930 15,172
8/31/98 11,749 12,204 13,015
9/30/98 11,428 11,830 12,550
10/31/98 12,347 13,063 13,487
11/30/98 13,067 13,732 14,186
12/31/98 13,183 14,274 14,623
1/31/99 13,242 14,232 14,747
2/28/99 13,020 13,893 14,361
3/31/99 13,522 14,472 14,864
4/30/99 14,023 15,059 15,549
5/31/99 13,114 14,283 14,914
6/30/99 13,638 14,840 15,694
7/31/99 13,650 15,281 16,179
8/31/99 13,778 15,337 16,302
9/30/99 13,883 15,491 16,369
10/31/99 14,151 16,072 17,003
11/30/99 15,188 16,630 18,329
12/31/99 16,678 18,123 20,541
1/31/00 15,332 16,971 19,391
2/29/00 15,594 17,428 20,626
3/31/00 16,129 18,104 20,758
4/30/00 15,244 17,151 19,456
5/31/00 14,634 16,732 18,828
6/30/00 14,920 17,386 19,662
7/31/00 14,459 16,657 18,964
8/31/00 14,808 16,802 19,277
9/30/00 13,998 15,984 18,180
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG International Fund commenced operations on June 15, 1994.
4 The MSCI EAFE Index is the Morgan Stanley Capital International Index for
Europe, Australia and the Far East developed markets. It includes 60% of the
largest publicly traded companies in those regions by market capitalization
and is sector weighted. The index reflects the reinvestment of income
dividends and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
5 The Lipper International Funds Average represents the average performance of
all mutual funds classified by Lipper, Inc. in the International category.
These performance figures are based on the changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested. The Average is not intended to imply the Fund's past or
future performance.
COUNTRY WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINTS FOLLOWS:
Argentina 2%
Australia 2%
Belgium 1%
Brazil 5%
Denmark 2%
Finland 2%
France 8%
Germany 8%
Hong Kong 2%
Hungary 1%
Ireland 2%
Italy 5%
Japan 26%
Mexico 1%
Netherlands 9%
Singapore 1%
Spain 4%
Sweden 3%
Switzerland 3%
United Kingdom 13%
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Telenorte Leste Part ADR 3.0%
Banco Frances ADR 2.2%
Copel Paranaese Energy ADR 2.2%
Telecom Italia 2.1%
Siemens 2.1%
Dresdner Bank AG 2.0%
Mitsui 2.0%
Kurita Water 1.9%
Unilever Cert 1.9%
Vivendi 1.9%
Marschollek Lauten 1.9%
------------------------------------------------------
% of Total Portfolio Investments 23.2%
[LOGO OMITTED] 47
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG INTERNATIONAL FUND PBHIX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 90.0%
ARGENTINA -- 2.0%
Banco Frances ADR* 9,000 $ 187
-----------
187
--------------------------------------------------------------------------------
AUSTRALIA -- 0.7%
National Australia Bank* 5,000 69
-----------
69
--------------------------------------------------------------------------------
BELGIUM -- 1.2%
Fortis B* 3,521 108
-----------
108
--------------------------------------------------------------------------------
BRAZIL -- 4.7%
Copel Paranaese Energy ADR* 21,000 186
Telenorte Leste Part ADR* 11,170 255
-----------
441
--------------------------------------------------------------------------------
DENMARK -- 1.6%
Carlsberg* 2,044 85
Novo-Nordisk* 313 69
-----------
154
--------------------------------------------------------------------------------
FINLAND -- 2.2%
Nokia Oyj 3,590 145
Sonera 2,298 58
-----------
203
--------------------------------------------------------------------------------
FRANCE -- 6.9%
Alcatel 1,135 73
BNP Paribas 1,506 133
Cap Gemini* 729 137
Total Fina* 920 135
Vivendi* 2,204 164
-----------
642
--------------------------------------------------------------------------------
GERMANY -- 5.7%
Bayer* 2,979 110
Dresdner Bank AG* 3,927 171
Epcos AG* 901 73
Siemens* 1,379 177
-----------
531
--------------------------------------------------------------------------------
HONG KONG -- 1.9%
Cheung Kong* 7,000 85
Sun Hung Kai Properties* 10,000 94
-----------
179
--------------------------------------------------------------------------------
HUNGARY -- 0.8%
Matav* 3,000 71
-----------
71
--------------------------------------------------------------------------------
IRELAND -- 1.7%
Allied Irish Bank* 14,586 157
-----------
157
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
ITALY -- 4.6%
ENI* 18,786 $ 99
RAS* 10,821 142
Telecom Italia* 17,303 184
-----------
425
--------------------------------------------------------------------------------
JAPAN -- 24.0%
Fuji Machine Manufacturing* 3,000 107
Fuji Photo Film* 4,000 134
Kurita Water* 9,000 166
Matsushita Communications* 1,000 135
Minebea* 13,000 152
Mitsui* 27,000 169
Murata Manufacturing* 1,000 138
Nomura Securities 7,000 152
NTT Docomo* 5 143
Omron* 5,000 132
Rohm* 400 110
Secom* 2,000 161
Shin-Etsu Chemical* 3,000 126
Sumitomo Bank* 12,000 152
Uni Charm* 2,000 107
Yamanouchi Pharmaceutical* 3,000 144
-----------
2,228
--------------------------------------------------------------------------------
MEXICO -- 1.3%
Tubos Acero Mexico ADR* 7,000 117
-----------
117
--------------------------------------------------------------------------------
NETHERLANDS -- 7.4%
Aegon* 3,285 124
Elsevier* 12,937 145
Equant ADR* 1,369 50
Philips Electronics 2,689 116
Unilever Cert* 3,397 165
Vedior* 6,068 88
-----------
688
--------------------------------------------------------------------------------
NEW ZEALAND -- 0.7%
Telecom Corp of N.Z.* 25,100 62
-----------
62
--------------------------------------------------------------------------------
SINGAPORE -- 1.2%
Overseas Chinese Bank* 7,000 45
Singapore Press Holdings* 4,900 73
-----------
118
--------------------------------------------------------------------------------
SPAIN -- 3.8%
Gas Natural SDG* 5,255 88
Telefonica 7,701 153
Union Electrica Fenosa* 6,078 109
-----------
350
--------------------------------------------------------------------------------
SWEDEN -- 3.2%
Ericsson Ser B* 10,267 156
SKF Ser B* 10,701 139
-----------
295
--------------------------------------------------------------------------------
[LOGO OMITTED] 48
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG INTERNATIONAL FUND PBHIX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
SWITZERLAND -- 2.6%
Novartis* 33 $ 51
Roche* 9 79
Zurich Allied 237 110
-----------
240
--------------------------------------------------------------------------------
UNITED KINGDOM -- 11.8%
Abbey National* 4,100 55
Airtours 14,000 45
Autonomy* 800 45
Barclays 1,500 42
Bass* 6,500 64
Bp Amoco* 12,100 108
British Telecom 7,400 78
Granada Media* 6,000 40
Great Universal Stores* 7,300 46
Invensys 15,700 34
Laporte New B* 62,100 1
Man Group* 7,600 58
Peninsular & Oriental* 7,000 62
Rio Tinto* 4,300 62
Royal Bank of Scotland* 5,200 110
Smithkline Beecham* 4,700 64
Telwest Communications* 12,400 24
Vodafone Group* 41,900 156
-----------
1,094
-----------
TOTAL COMMON STOCK (COST $8,167) 8,359
-----------
--------------------------------------------------------------------------------
PREFERRED STOCK -- 2.5%
AUSTRALIA -- 0.8%
News Corporation* 6,000 72
-----------
72
--------------------------------------------------------------------------------
GERMANY -- 1.7%
Marschollek Lauten* 1,092 163
-----------
163
-----------
TOTAL PREFERRED STOCK (COST $98) 235
-----------
TOTAL INVESTMENTS-- 92.5% (COST $8,265) $ 8,594
===========
Percentages are based on net assets of $9,292,542.
* Non-Income Producing Security
ADR -- American Depository Receipt
Ser -- Series
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 49
<PAGE>
THE PBHG FUNDS, INC.
PBHG CASH RESERVES FUND (UNAUDITED)
PBHG CASH RESERVES FUND PBCXX
COMPARISON OF TOTAL RETURN, AS OF SEPTEMBER 30, 2000
FOR THE PBHG CASH RESERVES FUND,
VERSUS THE LIPPER MONEY MARKET FUNDS AVERAGE 1
[BAR GRAPH OMITTED]
PLOT POINTS FOLLOWS:
PBHG CASH RESERVES FUND LIPPER MONEY MARKET FUNDS AVERAGE 2
ONE YEAR ONE YEAR
5.63% 5.43%
1 Performance is historical and not indicative of future results.
2 The Lipper Money Market Funds Average represents the average performance of
all mutual funds classified by Lipper, Inc. in the Money Market category.
These performance figures are based on the changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested. The Index is not intended to imply the Funds past or
future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Certificates of Deposit 7%
Commercial Paper 50%
Corporate Obligations 1%
Government Bond 2%
Cash 40%
% of Total Portfolio Investments
[LOGO OMITTED] 50
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG CASH RESERVES FUND PBCXX
Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
BANK NOTES -- 0.4%
US Bank Note
5.92%, 10/02/00 $1,000 $ 1,000
-----------
TOTAL BANK NOTES (COST $1,000) 1,000
-----------
--------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT -- 6.4%
American Express
6.54%, 10/18/00 5,400 5,400
Barclays Bank N.Y.
6.68%, 2/20/01 1,500 1,500
Citibank New York
7.41%, 5/30/01 1,500 1,500
Deutsche Bank
6.55%, 1/22/01 1,500 1,500
Dresdner Bank
6.71%, 2/26/01 1,500 1,500
Hypovereinsbank
7.25%, 5/14/01 2,375 2,372
Svenska Handelsbanken N.Y.
6.75%, 3/16/01 2,000 2,000
-----------
TOTAL CERTIFICATES OF DEPOSIT (COST $15,772) 15,772
-----------
--------------------------------------------------------------------------------
COMMERCIAL PAPER -- 50.6%
Alcoa
6.48%, 10/20/00 6,000 5,979
Associates Corporation of North America
6.48%, 10/27/00 6,000 5,972
Bear Stearns
6.50%, 10/27/00 6,500 6,469
Ciesco
6.50%, 10/18/00 6,000 5,982
Clipper Receivable
6.80%, 10/2/00 2,500 2,500
Corporate Asset Funding
6.51%, 10/6/00 6,000 5,994
Fleet Funding
6.51%, 10/13/00 6,000 5,987
Ford Motor Credit
6.51%, 10/5/00 2,500 2,498
General Motors Acceptance
6.50%, 10/20/00 6,000 5,979
Goldman Sachs Group
6.49%, 10/16/00 6,000 5,984
Greyhawk Funding
6.50%, 11/17/00 7,000 6,940
Illinois Tool Works
6.49%, 10/31/00 6,000 5,968
International Lease Finance
6.46%, 2/23/01 6,000 5,844
Merck & Company
6.47%, 10/25/00 6,000 5,974
Minnesota Mining & Manufacturing
6.50%, 10/13/00 4,000 3,991
Morgan Stanley Dean Witter
6.47%, 11/30/00 7,000 6,925
National Rural Utilities
6.44%, 4/12/01 5,000 4,827
Park Avenue Receivable
6.52%, 10/24/00 6,000 5,975
Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
COMMERCIAL PAPER -- CONTINUED
Prudential Funding
6.50%, 10/19/00 $ 5,000 $ 4,984
Washington Post
6.47%, 10/20/00 6,000 5,980
Windmill Funding
6.50%, 10/4/00 5,500 5,497
Woolwich
6.49%, 11/22/00 6,000 5,944
Yale University
6.52%, 10/5/00 2,000 1,999
-----------
TOTAL COMMERCIAL PAPER (COST $124,192) 124,192
-----------
--------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 0.8%
General Electric Capital
7.38%, 5/23/01 2,000 2,000
-----------
TOTAL CORPORATE OBLIGATIONS (COST $2,000) 2,000
-----------
--------------------------------------------------------------------------------
GOVERNMENT BOND -- 2.0%
Federal Home Loan Bank
6.52%, 3/28/01 5,000 4,999
-----------
TOTAL GOVERNMENT BOND (COST $4,999) 4,999
-----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 40.2%
Lehman
6.63%, dated 09/29/00, matures 10/02/00,
repurchase price $38,020,995
(collateralized U.S. Government
Obligations: total market
value $38,757,467) (A) 38,000 38,000
Paribas
6.65%, dated 09/29/00, matures 10/02/00,
repurchase price $5,703,159
(collateralized U.S. Government
Obligations: total market
value $5,814,252) (A) 5,700 5,700
UBS Warburg, LLC
6.68%, dated 09/29/00, matures 10/02/00,
repurchase price $55,030,617
(collateralized U.S. Government
Obligations: total market
value $56,103,424) (A) 55,000 55,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST $98,700) 98,700
-----------
TOTAL INVESTMENTS-- 100.4% (COST $246,663) 246,663
-----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.4)%
TOTAL OTHER ASSETS AND LIABILITIES, NET (1,070)
-----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200
million shares -- $0.001 par value)
based on 245,592,997 outstanding
shares of common stock 245,595
Undistributed net investment income 4
Accumulated net realized loss on investments (6)
-----------
TOTAL NET ASSETS-- 100.0% $ 245,593
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $1.00
=====
(A) -- Tri-Party Repurchase Agreement
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 51
<PAGE>
THE PBHG FUNDS, INC.
PBHG TECHNOLOGY & COMMUNICATIONS FUND (UNAUDITED)
PBHG TECHNOLOGY & COMMUNICATIONS FUND PBTCX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
X Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
One Annualized Annualized Annualized
6 Year 3 Year 5 Year Inception
Months 2 Return Return Return to Date 3
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Technology &
Communications Fund (8.09)% 142.87% 60.16% 55.90% 55.97%
----------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG TECHNOLOGY & COMMUNICATIONS FUND, VERSUS THE
SOUNDVIEW TECHNOLOGY INDEX AND THE LIPPER SCIENCE & TECHNOLOGY FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINT FOLLOWS:
Lipper Science &
PBHG Technology & Soundview Technology Funds
Communications Fund Technology Index 4 Average 5
9/30/95 10,000 10,000 10,000
10/31/95 10,800 10,368 9,834
11/30/95 11,720 11,079 9,952
12/31/95 11,602 10,533 9,571
1/31/96 11,462 10,446 9,553
2/29/96 12,562 11,128 10,024
3/31/96 12,482 10,831 9,745
4/30/96 14,132 12,557 10,820
5/31/96 15,303 13,442 11,240
6/30/96 14,973 12,235 10,498
7/31/96 13,712 11,006 9,496
8/31/96 14,963 12,002 10,120
9/30/96 16,643 13,468 11,270
10/31/96 16,793 13,286 11,125
11/30/96 17,663 14,813 12,065
12/31/96 17,916 13,842 11,800
1/31/97 18,539 15,118 12,557
2/28/97 16,580 13,942 11,502
3/31/97 14,927 12,988 10,653
4/30/97 15,437 13,353 10,970
5/31/97 18,100 15,145 12,466
6/30/97 18,641 15,181 12,614
7/31/97 20,865 17,578 14,249
8/31/97 20,773 18,116 14,252
9/30/97 22,416 18,555 14,969
10/31/97 19,732 16,406 13,659
11/30/97 19,151 16,227 13,536
12/31/97 18,511 15,133 13,185
1/31/98 17,697 15,504 13,522
2/28/98 19,850 17,507 15,071
3/31/98 20,643 17,427 15,501
4/30/98 21,061 18,623 16,116
5/31/98 19,047 16,872 14,961
6/30/98 20,332 17,789 16,121
7/31/98 19,186 17,415 15,862
8/31/98 16,004 13,427 12,693
9/30/98 17,997 15,450 14,393
10/31/98 18,072 16,976 15,424
11/30/98 20,322 18,826 17,509
12/31/98 23,324 21,537 20,360
1/31/99 28,435 24,899 23,599
2/28/99 25,325 21,781 21,551
3/31/99 30,000 23,314 23,995
4/30/99 31,653 23,997 24,755
5/31/99 30,120 24,762 24,411
6/30/99 34,622 27,911 27,345
7/31/99 34,067 27,977 27,025
8/31/99 36,916 29,675 28,477
9/30/99 37,916 30,310 29,471
10/31/99 45,517 33,603 32,677
11/30/99 54,107 39,615 38,386
12/31/99 80,210 49,489 48,320
1/31/00 82,496 48,149 47,276
2/29/00 117,027 62,909 60,192
3/31/00 100,197 63,040 57,393
4/30/00 81,848 58,385 50,075
5/31/00 68,637 51,722 43,771
6/30/00 93,468 58,092 51,374
7/31/00 85,195 53,928 48,759
8/31/00 99,596 63,182 56,385
9/30/00 92,089 55,657 50,780
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Technology & Communications Fund commenced operations on September
29, 1995.
4 The Soundview Technology Index is an equal dollar weighted index designed to
measure the performance of the technology industry. It is comprised of 100
major technology companies chosen by Soundview Financial Group. The Index
reflects the reinvestment of income dividends and capital gain distributions,
if any, but does not reflect fees, brokerage commissions, or other expenses of
investing. The Index is not intended to imply the Fund's past or future
performance.
5 The Lipper Science & Technology Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Science &
Technology category. These performance figures are based on the changes in net
asset value of the funds in the category with all capital gains distributions
and income dividends reinvested. The Average is not intended to imply the
Fund's past or future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Consumer Cyclical 1%
Technology 86%
Cash 13%
% of Total Portfolio Investments
Top Ten Holdings - September 30, 2000
Palm 5.1%
Verisign 4.9%
Infospace 4.8%
Redback Networks 4.6%
Ariba 4.6%
Globespan 4.0%
Extreme Networks 3.4%
Sycamore Networks 3.3%
I2 Technologies 3.2%
Applied Micro Circuits 3.1%
------------------------------------------------------
% of Total Portfolio Investments 41.0%
[LOGO OMITTED] 52
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG TECHNOLOGY & COMMUNICATIONS FUND PBTCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 97.3%
CONSUMER CYCLICAL -- 1.4%
AUDIO/VIDEO PRODUCTS -- 1.4%
Polycom* 719,200 $ 48,164
-----------
48,164
-----------
TOTAL CONSUMER CYCLICAL (COST $39,040) 48,164
-----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 0.3%
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 0.3%
Celestica* 140,100 9,702
-----------
9,702
-----------
TOTAL INDUSTRIAL (COST $8,070) 9,702
-----------
--------------------------------------------------------------------------------
SERVICES -- 0.3%
ADVERTISING SERVICES -- 0.3%
Getty Images* 365,100 11,113
-----------
11,113
-----------
TOTAL SERVICES (COST $15,935) 11,113
-----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 95.3%
APPLICATIONS SOFTWARE -- 2.1%
Quest Software* 618,400 38,408
Siebel Systems* 293,900 32,715
-----------
71,123
--------------------------------------------------------------------------------
COMPUTERS -- 1.8%
Sun Microsystems* 509,000 59,426
-----------
59,426
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 7.5%
Brocade Communications Systems* 335,900 79,273
Redback Networks* 1,046,300 171,593
-----------
250,866
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.6%
Sandisk* 599,500 40,017
Storage Networks* 131,800 13,468
Veritas Software* 247,200 35,102
-----------
88,587
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 9.8%
Applied Micro Circuits* 551,200 114,133
Broadcom* 255,600 62,302
Intersil Holding* 320,000 15,960
Micron Technology 1,413,700 65,030
Transwitch* 427,100 27,228
Virata* 687,500 45,461
-----------
330,114
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 5.4%
Autonomy ADR* 556,400 30,602
BEA Systems* 417,800 32,537
I2 Technologies* 639,510 119,628
-----------
182,767
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
INTERNET CONTENT -- 5.8%
Infospace* 5,934,400 $ 179,515
Rare Medium Group* 1,863,100 13,857
-----------
193,372
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 20.9%
Agile Software* 357,600 32,162
Ariba* 1,194,900 171,188
Art Technology* 597,700 56,632
Commerce One* 1,404,500 110,253
Internap Network Services* 843,200 27,246
Interwoven* 214,900 24,297
Verisign* 895,032 181,300
Vitria Technology 2,107,200 98,248
-----------
701,326
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 1.8%
Micromuse 298,300 59,940
-----------
59,940
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 5.9%
Extreme Networks* 1,101,000 126,065
Inrange Technologies* 53,700 2,846
Juniper Networks* 164,700 36,059
Network Appliance* 255,600 32,557
-----------
197,527
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 5.4%
Globespan* 1,222,400 149,133
Triquint Semiconductor* 911,000 33,194
-----------
182,327
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 0.9%
Mercury Interactive* 184,000 28,842
------------
28,842
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 5.2%
Advanced Fibre* 1,059,900 40,144
Cosine Communications* 314,200 17,458
Ditech Communications* 546,300 22,398
Next Level Communications* 448,400 29,650
Nortel Networks^ 854,600 50,902
Tekelec* 481,900 15,843
-----------
176,395
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER OPTICS -- 14.5%
Avanex* 437,500 47,113
Ciena* 669,700 82,248
Corning 106,600 31,660
Metromedia Fiber Network* 769,100 18,699
MRV Communications* 2,064,400 93,543
SDL* 289,200 89,453
Sycamore Networks* 1,158,539 125,122
-----------
487,838
--------------------------------------------------------------------------------
[LOGO OMITTED] 53
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG TECHNOLOGY & COMMUNICATIONS FUND PBTCX
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 5.7%
Palm* 3,590,300 $ 190,061
----------
190,061
----------
TOTAL TECHNOLOGY (COST $2,687,025) 3,200,511
----------
TOTAL COMMON STOCK (COST $2,750,070) 3,269,490
----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 13.8%
Greenwich Capital
6.56%, dated 09/29/00, matures 10/02/00,
repurchase price $77,344,565
(collateralized by U.S. Government
Agency Instruments: total market
value $78,850,079) (A) $77,302 77,302
J.P. Morgan
6.56%, dated 09/29/00, matures 10/02/00,
repurchase price $69,292,554
(collateralized by U.S. Government
Agency Instruments: total market
value $70,639,789) (A) 69,255 69,255
J.P. Morgan
6.56%, dated 09/29/00, matures 10/02/00,
repurchase price $155,099,288
(collateralized by U.S. Government
Agency Instruments: total market
value $158,115,282) (A) 155,015 155,015
Morgan Stanley
6.56%, dated 09/29/00, matures 10/02/00,
repurchase price $164,426,362
(collateralized by U.S. Government
Agency Instruments: total market
value $168,269,031) (A) 164,336 164,336
----------
TOTAL REPURCHASE AGREEMENTS (COST $465,908) 465,908
----------
TOTAL INVESTMENTS-- 111.1% (COST $3,215,978) 3,735,398
----------
-------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (11.1)%
Payable for Investment Securities Purchased (231,760)
Payable for Capital Shares Redeemed (226,663)
OTHER ASSETS AND LIABILITIES, NET 84,215
----------
Total Other Assets and Liabilities, Net (374,208)
--------------------------------------------------------------------------------
Market
Description Value (000)
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 43,018,594
outstanding shares of common stock $2,781,435
Accumulated net investment loss (15,712)
Accumulated net realized gain on investments 76,047
Net unrealized appreciation on investments 519,420
----------
TOTAL NET ASSETS-- 100.0% $3,361,190
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $78.13
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
^ The fund held Canadian Securities as of September 30, 2000. The total market
value of investments is $50,902,113 and represented 1.5% of the fund.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 54
<PAGE>
THE PBHG FUNDS, INC.
PBHG STRATEGIC SMALL COMPANY FUND (UNAUDITED)
PBHG STRATEGIC SMALL COMPANY FUND PSSCX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
X Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
One Annualized Annualized
6 Year 3 Year Inception
Months 2 Return Return to Date 3
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Strategic Small
Company Fund 9.82% 81.77% 24.62% 29.03%
------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
PBHG STRATEGIC SMALL COMPANY FUND, VERSUS THE
RUSSELL 2000 INDEX AND THE LIPPER SMALL-CAP GROWTH FUNDS AVERAGE
[LINE GRAPH OMITTED]
PLOT POINT FOLLOWS:
PBHG Strategic Lipper Small-Cap Growth
Small Company Fund Russell 2000 Index4 Funds Average5
12/31/96 10,000 10,000 10,000
1/31/97 10,120 10,200 10,244
2/28/97 9,350 9,952 9,595
3/31/97 8,860 9,483 8,934
4/30/97 8,750 9,509 8,797
5/31/97 10,270 10,567 10,049
6/30/97 11,130 11,020 10,636
7/31/97 12,170 11,533 11,340
8/31/97 12,410 11,797 11,578
9/30/97 13,440 12,660 12,518
10/31/97 12,820 12,104 11,897
11/30/97 12,520 12,026 11,655
12/31/97 12,567 12,236 11,692
1/31/98 12,502 12,043 11,531
2/28/98 13,439 12,933 12,522
3/31/98 13,870 13,467 13,153
4/30/98 13,999 13,541 13,288
5/31/98 12,922 12,812 12,394
6/30/98 13,073 12,839 12,663
7/31/98 12,244 11,800 11,782
8/31/98 9,466 9,508 9,236
9/30/98 10,004 10,252 9,954
10/31/98 10,381 10,671 10,424
11/30/98 11,501 11,230 11,317
12/31/98 12,835 11,924 12,510
1/31/99 13,105 12,083 12,778
2/28/99 11,957 11,104 11,622
3/31/99 11,856 11,278 12,116
4/30/99 12,092 12,288 12,633
5/31/99 12,576 12,468 12,777
6/30/99 13,937 13,032 13,911
7/31/99 13,960 12,674 13,903
8/31/99 14,083 12,205 13,720
9/30/99 14,308 12,208 14,104
10/31/99 14,815 12,257 14,863
11/30/99 16,209 12,989 16,808
12/31/99 19,482 14,459 19,949
1/31/00 19,188 14,227 19,728
2/29/00 24,796 16,576 24,745
3/31/00 23,682 15,484 23,357
4/30/00 21,514 14,552 20,736
5/31/00 20,559 13,704 19,000
6/30/00 24,625 14,898 22,248
7/31/00 22,898 14,419 20,806
8/31/00 26,265 15,519 23,257
9/30/00 26,008 15,063 22,336
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Strategic Small Company Fund commenced operations on December 31,
1996.
4 The Russell 2000 Index is an unmanaged index comprised of the 2,000 smallest
securities in the Russell 3000 Index. The Index reflects the reinvestment of
income dividends and capital gains distributions, if any, but does not reflect
fees, brokerage commissions, or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
5 The Lipper Small-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Small-Cap Growth
category. These performance figures are based on the changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested. The Average is not intended to imply the Fund's
past or future performance.
SECTOR WEIGHTINGS - AT SEPTEMBER 30, 2000
[PIE CHART OMITTED]
PLOT POINT FOLLOWS:
Basic Materials 1%
Consumer Cyclical 13%
Energy 6%
Financial 8%
Health Care 12%
Industrial 10%
Services 5%
Technology 36%
Transportation 1%
Utilities 1%
Cash 7%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Extreme Networks 1.7%
Newport 1.5%
Elantec Semiconductor 1.4%
Avocent 1.4%
Manhattan Associates 1.3%
Transwitch 1.3%
Manugistics 1.1%
Power-One 1.1%
Anaren Microwave 1.1%
Impath 1.0%
------------------------------------------------------
% of Total Portfolio Investments 12.9%
[LOGO OMITTED] 55
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG STRATEGIC SMALL COMPANY FUND PSSCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 92.5%
BASIC MATERIALS -- 1.3%
CHEMICALS-DIVERSIFIED -- 0.1%
Solutia 13,800 $ 157
----------
157
--------------------------------------------------------------------------------
CHEMICALS-PLASTICS -- 0.1%
Polyone* 21,700 159
----------
159
--------------------------------------------------------------------------------
CHEMICALS-SPECIALTY -- 1.0%
Crompton 53,200 419
Cytec Industries* 13,800 461
W.R. Grace* 11,500 79
----------
959
--------------------------------------------------------------------------------
METAL-ALUMINUM -- 0.1%
Commonwealth Industries 9,500 53
----------
53
--------------------------------------------------------------------------------
OTHER-NON-FERROUS -- 0.0%
USEC 2,100 9
----------
9
----------
TOTAL BASIC MATERIALS (COST $1,550) 1,337
----------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 12.3%
ATHLETIC EQUIPMENT -- 0.8%
Direct Focus* 20,100 799
----------
799
--------------------------------------------------------------------------------
AUDIO/VIDEO PRODUCTS -- 1.8%
Harman International 22,400 875
Polycom* 15,000 1,005
----------
1,880
--------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 0.4%
Delco Remy International* 27,500 210
Visteon 12,000 181
----------
391
--------------------------------------------------------------------------------
BUILDING-MOBILE HOME/MANUFACTURED HOUSING -- 0.1%
Coachmen Industries 11,000 115
----------
115
--------------------------------------------------------------------------------
BUILDING-RESIDENTIAL/COMMERCIAL -- 0.1%
Centex 4,000 129
----------
129
--------------------------------------------------------------------------------
CABLE TV -- 0.2%
Insight Communications* 13,200 210
----------
210
--------------------------------------------------------------------------------
CASINO HOTELS -- 0.4%
Harrah's Entertainment* 15,700 432
----------
432
--------------------------------------------------------------------------------
Description Shares Value (000)
--------------------------------------------------------------------------------
CASINO SERVICES -- 0.1%
International Game Technology 3,900 $ 131
----------
131
--------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 0.4%
Bell Microproducts* 13,100 409
----------
409
--------------------------------------------------------------------------------
E-COMMERCE -- 1.0%
1-800 Contacts* 20,000 960
----------
960
--------------------------------------------------------------------------------
FOOTWEAR & RELATED APPAREL -- 0.4%
Skechers Foot Wear* 25,000 378
----------
378
--------------------------------------------------------------------------------
HOME FURNISHINGS -- 0.4%
Furniture Brands International* 22,700 377
----------
377
--------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 0.4%
Journal Register* 6,300 105
Pulitzer 6,100 262
----------
367
--------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 1.0%
Ann Taylor Stores* 7,300 280
Children's Place Stores* 2,700 70
Christopher & Banks* 17,250 671
----------
1,021
--------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 1.4%
Insight Enterprises* 20,100 548
PC Connection* 15,300 872
----------
1,420
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 1.1%
Tweeter Home Entertainment Group* 14,300 519
Ultimate Electronics* 14,100 580
----------
1,099
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 1.6%
Krispy Kreme Doughnuts* 6,400 535
P.F Chang's China Bistro* 11,600 401
Papa John's International* 13,000 326
Wendy's International 19,000 381
----------
1,643
--------------------------------------------------------------------------------
TELEVISION -- 0.7%
Paxson Communications* 23,700 273
Pegasus Communications* 8,700 420
----------
693
----------
TOTAL CONSUMER CYCLICAL (COST $7,934) 12,454
--------------------------------------------------------------------------------
[LOGO OMITTED] 56
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG STRATEGIC SMALL COMPANY FUND PSSCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 0.2%
CONSUMER PRODUCTS-MISCELLANEOUS -- 0.2%
Playtex Products* 12,900 $ 152
----------
152
----------
TOTAL CONSUMER NON-CYCLICAL (COST $144) 152
----------
--------------------------------------------------------------------------------
ENERGY -- 5.5%
OIL COMPANIES-EXPLORATION & PRODUCTION -- 3.1%
Barrett Resources* 7,500 283
Comstock Resources* 12,100 138
Devon Energy 2,230 134
EOG Resources 3,000 117
Forest Oil* 24,900 403
Louis Dreyfus Natural Gas* 13,400 531
Newfield Exploration* 3,700 173
Noble Affiliates 12,000 446
Ocean Energy* 19,100 295
Unit* 14,800 218
Vintage Petroleum 14,700 334
----------
3,072
--------------------------------------------------------------------------------
OIL REFINING & MARKETING -- 0.6%
Tesoro Petroleum* 29,000 288
Valero Energy 7,000 246
----------
534
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 0.9%
Atwood Oceanic* 7,500 313
Key Energy Services* 22,400 220
Patterson Energy* 3,500 120
Precision Drilling* 700 25
Pride International* 10,000 265
----------
943
--------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 0.6%
Friede Goldman Halter* 47,400 335
Hanover Compressor* 8,600 283
----------
618
--------------------------------------------------------------------------------
PIPELINES -- 0.3%
Kinder Morgan 8,200 336
----------
336
----------
TOTAL ENERGY (COST $4,060) 5,503
----------
--------------------------------------------------------------------------------
FINANCIAL -- 7.4%
COMMERCIAL BANKS-EASTERN US -- 0.5%
Banknorth Group 4,400 79
Commercial Bank of New York 6,600 89
Mercantile 6,000 218
----------
386
--------------------------------------------------------------------------------
COMMERCIAL BANKS-WESTERN US -- 0.9%
Bancwest 28,500 554
City National 9,474 366
----------
920
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 0.1%
Morgan Keegan 7,900 $ 138
----------
138
--------------------------------------------------------------------------------
FINANCE-MORTGAGE LOAN/BANKER -- 0.1%
Doral Financial 5,900 96
----------
96
--------------------------------------------------------------------------------
INTERNET BROKER -- 0.2%
WIT Soundview Group* 17,600 158
----------
158
--------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISORY SERVICES -- 0.7%
Affiliated Managers Group* 10,200 581
Waddell & Reed Financial, Cl A 5,250 163
----------
744
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 0.8%
Liberty Financial 8,400 197
Mony Group 11,200 447
Torchmark 7,400 206
----------
850
--------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE -- 0.6%
Fidelity National Financial 14,600 361
First American Financial 8,100 169
Trenwick Group Limited 5,700 108
----------
638
--------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT/SERVICES -- 0.1%
Trammell Crow* 9,200 138
----------
138
--------------------------------------------------------------------------------
REINSURANCE -- 0.3%
Annuity & Life 11,000 265
----------
265
--------------------------------------------------------------------------------
REITS-APARTMENTS -- 0.0%
Pennsylvania Real Estate
Investment Trust 2,400 42
----------
42
--------------------------------------------------------------------------------
REITS-OFFICE PROPERTY -- 0.2%
Mack Cali Realty 7,000 197
----------
197
--------------------------------------------------------------------------------
REITS-REGIONAL MALLS -- 0.1%
CBL & Associates Properties 4,900 123
----------
123
--------------------------------------------------------------------------------
REITS-SHOPPING CENTERS -- 0.3%
JP Realty 14,700 266
----------
266
--------------------------------------------------------------------------------
S&L/THRIFTS-CENTRAL US -- 0.5%
Bank United, Cl A 4,400 222
Charter One Financial 5,565 136
Commercial Federal 7,400 142
----------
500
--------------------------------------------------------------------------------
[LOGO OMITTED] 57
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG STRATEGIC SMALL COMPANY FUND PSSCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
S&L/THRIFTS-EASTERN US -- 1.5%
Berkshire Hills Bancorp* 25,600 $ 368
Dime Bancorp 26,600 574
Roslyn Bancorp 20,300 454
Woronoco Bancorp 9,000 114
----------
1,510
--------------------------------------------------------------------------------
S&L/THRIFTS-WESTERN US -- 0.5%
Golden State Bancorp* 18,600 440
Washington Federal 3,800 86
----------
526
----------
TOTAL FINANCIAL (COST $6,236) 7,497
----------
--------------------------------------------------------------------------------
HEALTH CARE -- 11.9%
DIAGNOSTIC KITS -- 0.4%
Biosite Diagnostics* 10,000 399
----------
399
--------------------------------------------------------------------------------
DISPOSABLE MEDICAL PRODUCTS -- 0.2%
Bard (C.R.) 4,500 190
----------
190
--------------------------------------------------------------------------------
DRUG DELIVERY SYSTEMS -- 0.2%
Noven Pharmaceuticals* 5,200 222
----------
222
--------------------------------------------------------------------------------
HEALTH CARE COST CONTAINMENT -- 0.7%
Hooper Holmes 72,500 689
----------
689
--------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 0.4%
Techne* 4,000 448
----------
448
--------------------------------------------------------------------------------
MEDICAL LABS & TESTING SERVICES -- 1.5%
Covance* 8,600 70
Dianon Systems* 10,000 399
Impath* 16,500 1,042
----------
1,511
--------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 2.0%
Haemonetics* 28,700 732
North American Scientific* 27,800 883
Vital Signs 1,400 37
Zoll Medical Group* 8,100 395
----------
2,047
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.5%
Aclara Biosciences* 2,600 79
Arena Pharmaceuticals* 2,600 112
Cell Genesys* 4,600 138
Inhale Therapeutic Systems* 1,900 107
Myriad Genetics* 10,000 864
Sangamo Biosciences* 5,000 194
----------
1,494
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.5%
Celgene* 9,600 $ 571
Cephalon* 1,700 83
Cima Labs* 17,500 911
Dura Pharmaceuticals* 13,000 460
Galen Holdings ADR* 3,000 137
Medicis Pharmaceuticals, Cl A* 2,200 135
Pain Therapeutics* 4,200 83
Pharmacopeia* 4,400 112
----------
2,492
--------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 0.2%
Alpharma 2,800 171
----------
171
--------------------------------------------------------------------------------
MEDICAL-HMO -- 0.3%
Trigon Healthcare* 5,500 289
----------
289
--------------------------------------------------------------------------------
MEDICAL-HOSPITALS -- 0.4%
Province Healthcare* 7,500 300
Triad Hospitals* 2,000 58
----------
358
--------------------------------------------------------------------------------
MEDICAL-NURSING HOMES -- 0.3%
Beverly Enterprises* 53,400 317
----------
317
--------------------------------------------------------------------------------
MEDICAL-OUTPATIENT/HOME MEDICAL -- 0.1%
Lincare Holdings* 4,900 141
----------
141
--------------------------------------------------------------------------------
OPTICAL SUPPLIES -- 0.2%
Staar Surgical* 11,100 192
----------
192
--------------------------------------------------------------------------------
PHARMACY SERVICES -- 0.5%
Omnicare 30,400 490
----------
490
--------------------------------------------------------------------------------
THERAPEUTICS -- 0.5%
Inspire Pharmaceuticals* 10,200 306
Tularik* 5,400 178
United Therapeutics* 800 70
----------
554
----------
TOTAL HEALTH CARE (COST $8,188) 12,004
----------
--------------------------------------------------------------------------------
INDUSTRIAL -- 10.1%
AEROSPACE/DEFENSE -- 0.8%
Teledyne Technologies* 24,800 722
----------
722
--------------------------------------------------------------------------------
BUILDING PRODUCTS-CEMENT/AGGREGATE -- 0.2%
Texas Industries 4,900 156
----------
156
--------------------------------------------------------------------------------
[LOGO OMITTED] 58
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG STRATEGIC SMALL COMPANY FUND PSSCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS -- 0.1%
Dal-Tile International* 4,500 $ 56
----------
56
--------------------------------------------------------------------------------
CERAMIC PRODUCTS -- 0.4%
Coorstek* 11,600 444
----------
444
--------------------------------------------------------------------------------
CIRCUIT BOARDS -- 0.3%
Manufacturers Services Limited* 24,300 289
SMTC* 2,300 49
----------
338
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS -- 0.3%
ITT Industries 10,200 331
----------
331
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 1.8%
Act Manufacturing* 11,000 580
CTS 16,000 810
Kent Electronics* 17,700 423
----------
1,813
--------------------------------------------------------------------------------
ELECTRONIC CONNECTORS -- 0.7%
Merix* 11,250 729
----------
729
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 1.4%
Keithley Instruments 6,500 455
Measurement Specialties* 7,500 362
Molecular Devices* 5,000 491
Trimble Navigation Limited* 5,000 112
----------
1,420
--------------------------------------------------------------------------------
ELECTRONIC PARTS DISTRIBUTION -- 0.5%
Nu Horizons Electronics* 17,500 487
----------
487
--------------------------------------------------------------------------------
HAZARDOUS WASTE DISPOSAL -- 0.1%
Stericycle* 4,700 115
----------
115
--------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 0.6%
BEI Technologies 5,000 209
Photon Dynamics* 10,600 400
----------
609
--------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 0.5%
FEI* 13,200 286
Varian* 5,300 229
----------
515
--------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 0.4%
Cyberoptics* 12,500 229
Excel Technology* 5,000 160
----------
389
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
METAL PROCESSORS & FABRICATORS -- 0.1%
Wolverine Tube* 9,900 $ 147
----------
147
--------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 0.3%
Aptargroup 12,400 297
----------
297
--------------------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 0.0%
Waste Connections* 1,100 28
----------
28
--------------------------------------------------------------------------------
POWER CONVERSION/SUPPLY EQUIPMENT -- 1.6%
Applied Science & Technology* 4,700 69
C & D Technologies 7,500 426
Power-One* 18,100 1,095
----------
1,590
----------
TOTAL INDUSTRIAL (COST $8,099) 10,186
----------
--------------------------------------------------------------------------------
SERVICES -- 5.3%
COMMERCIAL SERVICES -- 0.7%
Acnielson* 26,400 629
----------
629
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 1.5%
Manhattan Associates* 21,500 1,317
Tanning Technology* 16,100 221
----------
1,538
--------------------------------------------------------------------------------
CONSULTING SERVICES -- 1.9%
Comdisco 8,600 164
Corporate Executive Board* 17,000 684
Forrester Research* 9,100 580
Professional Detailing* 9,300 530
----------
1,958
--------------------------------------------------------------------------------
HUMAN RESOURCES -- 0.1%
Hall Kinion & Associates* 5,000 142
----------
142
--------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT -- 1.1%
Albany Molecular Research* 16,200 911
Pharmaceutical Product Development* 7,200 191
----------
1,102
----------
TOTAL SERVICES (COST $3,403) 5,369
----------
--------------------------------------------------------------------------------
TECHNOLOGY -- 35.8%
APPLICATIONS SOFTWARE -- 3.1%
Actuate* 20,000 690
Caminus* 17,500 696
Genomica* 2,200 43
Parametric Technology* 17,800 195
Quest Software* 11,500 714
Serena Software* 10,000 461
Sonic Foundry* 10,000 89
WebTrends* 7,500 280
----------
3,168
--------------------------------------------------------------------------------
[LOGO OMITTED] 59
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG STRATEGIC SMALL COMPANY FUND PSSCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
CELLULAR TELECOMMUNICATIONS -- 0.0%
Alamosa PCS Holdings* 1,400 $ 23
----------
23
--------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 0.1%
Avid Technology* 9,600 134
----------
134
--------------------------------------------------------------------------------
COMPUTER AIDED DESIGN -- 0.6%
Aspen Technology* 12,900 582
----------
582
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 0.4%
Axent Technologies* 17,900 386
----------
386
--------------------------------------------------------------------------------
COMPUTERS -- 0.1%
Micron Electronics* 6,400 58
----------
58
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.4%
Catapult Communications* 20,000 373
----------
373
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.3%
M-Systems Flash Disk Pioneers* 15,000 572
Sandisk* 12,400 828
Silicon Storage Technology* 26,700 726
Simple Technology* 9,000 87
Storage Technology Group* 6,400 87
----------
2,300
--------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 2.3%
Avocent* 24,721 1,363
Mobility Electronics* 8,600 78
S3* 80,800 833
----------
2,274
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 1.6%
Acxiom* 3,200 102
Documentum* 2,500 203
Excelon* 50,600 626
Fair Isaac & Company 16,700 713
----------
1,644
--------------------------------------------------------------------------------
DECISION SUPPORT SOFTWARE -- 0.6%
Netiq* 8,500 558
----------
558
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 5.0%
Actel* 9,600 344
Alpha* 11,500 392
Cree* 3,800 442
Hi / Fn* 4,100 279
Integrated Silicon Solutions* 19,800 281
Microsemi* 12,500 477
Oak Technology* 20,000 548
Omnivision Technologies* 10,000 362
Silicon Image* 18,500 459
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- CONTINUED
Transwitch* 20,000 $ 1,275
Zoran* 3,000 146
----------
5,005
--------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 2.5%
Business Objects ADR* 7,000 791
Hyperion Solutions* 6,900 179
Informatica* 5,000 466
Manugistics* 11,200 1,099
----------
2,535
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 0.8%
Clarent* 7,500 295
Fire Pond* 18,400 267
Proxicom* 8,900 174
Ravisent Technologies* 14,300 40
----------
776
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 0.3%
OTG Software* 7,500 307
----------
307
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 2.7%
Adaptec* 6,300 126
Extreme Networks* 15,000 1,718
JNI* 10,000 890
----------
2,734
--------------------------------------------------------------------------------
SEMICONDUCTOR COMPONENTS-INTEGRATED CIRCUITS -- 3.9%
Elantec Semiconductor* 14,500 1,444
Exar* 7,100 859
Sipex* 10,900 458
Telcom Semiconductor* 38,900 579
Triquint Semiconductor* 17,500 638
----------
3,978
--------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT -- 0.2%
Genus* 13,800 52
Photronics* 8,100 177
----------
229
--------------------------------------------------------------------------------
SOFTWARE TOOLS -- 0.2%
Cysive* 28,800 193
----------
193
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 5.0%
Anaren Microwave* 8,000 1,084
Audiocodes Limited* 3,200 272
Commscope* 7,700 189
Digital Lightwave* 8,300 603
MCK Communications* 5,000 113
Natural Microsystems* 16,000 861
Stanford Microdevices* 10,200 546
Tollgrade Communications* 5,000 694
Tut Systems* 8,100 699
----------
5,061
--------------------------------------------------------------------------------
[LOGO OMITTED] 60
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG STRATEGIC SMALL COMPANY FUND PSSCX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-FIBER OPTICS -- 1.6%
Exfo Electro-Optical Engineering* 1,500 $ 65
Newport 9,500 1,513
----------
1,578
--------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES -- 0.8%
Adelphia Business Solutions* 8,400 99
Latitude Communications* 15,700 122
RCN* 11,100 230
Savvis Communications* 43,200 389
----------
840
--------------------------------------------------------------------------------
WEB HOSTING/PUBLISHING -- 0.6%
Verity* 17,500 625
----------
625
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.7%
Glenayre Technologies* 6,800 74
Proxim* 10,600 472
Western Multiplex* 11,200 180
----------
726
----------
TOTAL TECHNOLOGY (COST $24,553) 36,087
----------
--------------------------------------------------------------------------------
TRANSPORTATION -- 1.3%
AIRLINES -- 0.2%
Midway Airlines* 36,800 196
----------
196
--------------------------------------------------------------------------------
TRANSPORTATION-AIR FREIGHT -- 0.2%
EGL* 7,200 218
----------
218
--------------------------------------------------------------------------------
TRANSPORTATION-TRUCK -- 0.9%
American Freightways* 2,600 40
Covenant Transportation* 17,800 166
Hunt (J.B.) Transportation Services 11,100 142
Landstar Systems* 3,700 165
Swift Transportation* 9,600 125
Us Xpress Enterprises* 26,500 167
USfreightways* 5,800 132
----------
937
----------
TOTAL TRANSPORTATION (COST $1,745) 1,351
----------
--------------------------------------------------------------------------------
UTILITIES -- 1.4%
ELECTRIC-INTEGRATED -- 0.8%
CMS Energy 5,800 156
Idacorp 4,000 186
Madison Gas & Electric 500 11
Western Resources 19,700 426
----------
779
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.5%
Atmos Energy 6,300 $ 130
Semco Energy 6,100 94
UGI 10,000 242
----------
466
--------------------------------------------------------------------------------
WATER -- 0.1%
Philadelphia Suburban 6,300 146
----------
146
----------
TOTAL UTILITIES (COST $1,200) 1,391
----------
TOTAL COMMON STOCK (COST $67,112) 93,331
----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.4%
J.P. Morgan
6.60%, dated 09/29/00, matures 10/02/00,
repurchase price $6,497,005
(collateralized by U.S. Government
Agency Instruments: total market
value $6,624,107) (A) $6,493 6,493
----------
TOTAL REPURCHASE AGREEMENT (COST $6,493) 6,493
----------
TOTAL INVESTMENTS-- 98.9% (COST $73,605) 99,824
----------
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 1.1%
TOTAL OTHER ASSETS AND LIABILITIES, NET 1,064
----------
--------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 4,749,380
outstanding shares of common stock 62,755
Accumulated net investment loss (298)
Accumulated net realized gain on investments 12,212
Net unrealized appreciation on investments 26,219
----------
TOTAL NET ASSETS -- 100.0% $ 100,888
==========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $21.24
======
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 61
<PAGE>
THE PBHG FUNDS, INC.
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND (UNAUDITED)
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND PBGTX
INVESTMENT FOCUS
STYLE
Value Blend Growth
------------------------
X Large
------------------------
Medium MARKET CAPITALIZATION
------------------------
Small
------------------------
AVERAGE ANNUAL TOTAL RETURN 1
AS OF SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
Cumulative
Inception to Date 2
--------------------------------------------------------------------------------
PBHG Global Technology &
Communications Fund 13.10%
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG GLOBAL
TECHNOLOGY & COMMUNICATIONS FUND, VERSUS THE
SOUNDVIEW TECHNOLOGY INDEX AND THE LIPPER SCIENCE & TECHNOLOGY FUNDS AVERAGE
PBHG
Global MSCI Soundview Lipper
Technology & World Free Technology Science & Technology
Communications Fund Index 3 Index 4 Funds Average 5
5/31/00 10,000 10,000 10,000 10,000
6/30/00 11,820 10,335 10,612 11,737
7/31/00 11,570 10,043 9,386 11,140
8/31/00 12,750 10,369 9,763 12,882
9/30/00 11,310 9,816 9,404 11,601
1 Performance is historical and not indicative of future results. The investment
return and principal value of an investment will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The PBHG Global Technology & Communications Fund commenced operations on May
31, 2000.
3 The MSCI World Free Index is the Morgan Stanley Capital International Index
that reflects the performance of both the developed and the emerging equity
markets of the world. The Index excludes the performance impact of companies
that are restricted with respect to foreign investors. The Index reflects the
reinvestment of income dividends and capital gain distributions, if any, but
does not reflect fees, brokerage commissions, or other expenses of investing.
The Index is not intended to imply the Fund's past or future performance.
4 The Soundview Technology Index is an equal dollar weighted index designed to
measure the performance of the technology industry. It is comprised of 100
major technology companies chosen by Soundview Financial Group. The Index
reflects the reinvestment of income dividends and capital gain distributions,
if any, but does not reflect fees, brokerage commissions, or other expenses of
investing. The Index is not intended to imply the Fund's past or future
performance.
5 The Lipper Science & Technology Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Science &
Technology category. These performance figures are based on the changes in net
asset value of the funds in the category with all capital gains distributions
and income dividends reinvested. The Average is not intended to imply the
Fund's past or future performance.
COUNTRY WEIGHTINGS - AT SEPTEMBER 30, 2000
Canada 6%
Finland 1%
France 3%
Germany 1%
Hong Kong 5%
Japan 7%
South Korea 1%
Spain 1%
United Kingdom 3%
United States 67%
Cash 5%
% of Total Portfolio Investments
TOP TEN HOLDINGS - SEPTEMBER 30, 2000
Palm 6.1%
Nortel Networks 4.8%
Furukawa Electric 4.3%
Ciena 3.5%
Sycamore Networks 3.5%
Network Appliance 3.4%
China Unicom ADR 3.4%
Sun Microsystems 3.1%
Infospace 3.0%
Corning 2.9%
------------------------------------------------------
% of Total Portfolio Investments 38.0%
[LOGO OMITTED] 62
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND PBGTX
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 93.6%
CANADA -- 6.4%
Celestica* 17,900 $ 1,240
GT Group Telecommunications* 36,700 484
Nortel Networks* 83,300 4,962
----------
6,686
--------------------------------------------------------------------------------
FINLAND -- 1.2%
Nokia ADR* 31,600 1,258
----------
1,258
--------------------------------------------------------------------------------
FRANCE -- 2.6%
Alcatel Alsthom ADR* 44,400 2,792
----------
2,792
--------------------------------------------------------------------------------
GERMANY -- 1.5%
Infineon Technologies ADR* 32,300 1,534
----------
1,534
--------------------------------------------------------------------------------
HONG KONG -- 4.5%
China Mobile ADR* 39,300 1,275
China Unicom ADR* 160,300 3,496
----------
4,771
--------------------------------------------------------------------------------
IRELAND -- 0.4%
Trintech Group ADR* 18,900 380
----------
380
--------------------------------------------------------------------------------
JAPAN -- 6.8%
Crosswave Communications ADR* 160,000 1,640
Furukawa Electric* 160,000 4,420
NTT ADR* 3,900 559
Softbank* 5,700 533
----------
7,152
--------------------------------------------------------------------------------
SOUTH KOREA -- 0.5%
Korea Telecom ADR* 17,300 582
----------
582
--------------------------------------------------------------------------------
SPAIN -- 0.8%
Telefonica Sa* 14,400 856
----------
856
--------------------------------------------------------------------------------
UNITED KINGDOM -- 2.9%
Autonomy ADR* 19,000 1,045
Colt Telecom ADR* 3,000 331
Marconi ADR* 37,450 1,025
Vodafone Airtouch ADR* 16,600 614
----------
3,015
--------------------------------------------------------------------------------
UNITED STATES -- 66.0%
Adobe Systems* 14,100 2,189
Affymetrix* 12,000 599
America Online* 19,800 1,064
Applied Micro Circuits* 11,500 2,381
Ariba* 16,900 2,421
Art Technology* 26,200 2,483
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
UNITED STATES -- CONTINUED
Avanex* 4,600 $ 495
Ciena* 29,800 3,660
Comcast, Cl A* 31,200 1,277
Corning* 10,100 3,000
EMC* 21,600 2,141
Globespan* 21,100 2,574
Globix* 57,200 1,334
Informatica* 25,000 2,331
Infospace* 104,000 3,146
Intersil Holding* 50,000 2,494
JDS Uniphase* 18,640 1,765
Juniper Networks* 11,600 2,540
McLeodUSA* 95,100 1,361
MRV Communications* 15,400 698
Network Appliance* 27,900 3,554
Next Level Communications* 12,600 833
NTL* 17,500 810
Palm* 118,600 6,278
PMC-Sierra* 5,400 1,162
SDL* 6,300 1,949
Storage Networks* 11,400 1,165
Sun Microsystems* 27,500 3,211
Sycamore Networks* 33,500 3,618
Veritas Software* 15,600 2,215
Vitria Technology* 48,500 2,261
Yahoo* 10,000 910
----------
69,503
----------
TOTAL COMMON STOCK (COST $100,196) 98,529
----------
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.7%
UBS Warburg, LLC
6.60%, dated 09/29/00, matures 10/02/00,
repurchase price $4,912,041
(collateralized by U.S. Government
Agency Instruments: total market
value $5,009,659) (A) $4,909 4,909
----------
TOTAL REPURCHASE AGREEMENT (COST $4,909) 4,909
----------
TOTAL INVESTMENTS-- 98.3% (COST $105,105) $ 103,438
==========
Percentages are based on Net Assets of $105,271,520.
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 63
<PAGE>
This page is left intentionally blank.
[LOGO OMITTED] 64
<PAGE>
<TABLE>
<CAPTION>
THE PBHG FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES (000)
------------------------------------------
SEPTEMBER 30, 2000 (UNAUDITED)
--------- ------------- -----------------
PBHG PBHG
LARGE CAP PBHG GLOBAL TECHNOLOGY
VALUE INTERNATIONAL & COMMUNICATIONS
FUND FUND FUND
--------- ------------- -----------------
ASSETS:
<S> <C> <C> <C>
Investment securities (Cost $58,949, $8,265, and $100,196,
respectively) at market value $61,679 $8,594 $ 98,529
Repurchase Agreements (Cost $12,552 and $4,909, respectively)
at market value 12,552 -- 4,909
Cash 315 478 3,626
Foreign currency (Cost $11) -- 11 --
Dividends and interest receivable 120 14 24
Receivable for capital shares sold 300 70 187
Receivable for investment securities sold 12,572 147 5,936
------- ------ --------
Total assets 87,538 9,314 113,211
------- ------ --------
LIABILITIES:
Payable for investment securities purchased 22,082 -- 7,738
Payable for capital shares redeemed -- -- 2
Accrued expenses 50 21 199
------- ------ --------
Total liabilities 22,132 21 7,939
------- ------ --------
NET ASSETS:
Fund shares of PBHG Class (authorized 200 million shares for
each of the PBHG Large Cap Value Fund, PBHG International
Fund, and PBHG Global Technology & Communications Fund -- $0.001
par value) based on 4,920,429, 827,706 and 9,309,224 outstanding
shares of common stock 59,040 7,393 107,249
Undistributed net investment income/accumulated net investment loss 295 (65) (413)
Accumulated net realized gain on investments 3,341 1,636 103
Net unrealized appreciation (depreciation) on investments 2,730 329 (1,667)
------- ------ --------
NET ASSETS $65,406 $9,293 $105,272
------- ------ --------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $13.29 $11.23 $11.31
======= ====== ========
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 65
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF OPERATIONS (000)
------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
--------- --------- --------- --------- --------- ------- ----------
PBHG PBHG PBHG PBHG PBHG
PBHG EMERGING LARGE CAP SELECT CORE PBHG LARGE CAP
GROWTH GROWTH GROWTH EQUITY GROWTH LIMITED 20
FUND FUND FUND FUND FUND FUND FUND 2
--------- --------- --------- --------- --------- ------- ----------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ 383 $ 29 $ 223 $ 21 $ 32 $ 6 $ 375
Interest 16,440 3,868 1,285 5,261 361 504 3,068
Less: Foreign Taxes Withheld -- -- -- (3) (2) -- (7)
----------- -------- ------- -------- ------ ------ --------
Total Investment Income 16,823 3,897 1,508 5,279 391 510 3,436
----------- -------- ------- -------- ------ ------ --------
EXPENSES:
Investment Advisory Fees 24,800 5,179 1,182 6,935 698 676 4,325
Administrative Fees 4,377 914 236 1,224 123 101 763
Transfer Agent Fees 5,480 1,266 276 1,370 178 68 752
Registration and Filing Fees 170 26 60 228 10 3 31
Printing Fees 725 139 38 229 19 14 101
Professional Fees 122 27 6 31 4 3 22
Custodian Fees 100 19 6 23 7 3 14
Directors' Fees 36 8 2 9 1 1 6
Miscellaneous Fees 191 30 8 40 (1) 3 12
Line of Credit 110 29 5 21 3 3 19
Interest Expense -- -- -- 109 18 -- --
Distribution Fees 1 161 -- -- -- -- -- --
----------- -------- ------- -------- ------ ------ --------
TOTAL EXPENSES 36,272 7,637 1,819 10,219 1,060 875 6,045
----------- -------- ------- -------- ------ ------ --------
Waiver of Investment Advisory Fees -- -- -- -- -- -- --
----------- -------- ------- -------- ------ ------ --------
Advisory Fee Recaptured -- -- -- -- -- -- --
----------- -------- ------- -------- ------ ------ --------
Net Expenses 36,272 7,637 1,819 10,219 1,060 875 6,045
----------- -------- ------- -------- ------ ------ --------
NET INVESTMENT INCOME (LOSS) (19,449) (3,740) (311) (4,940) (669) (365) (2,609)
----------- -------- ------- -------- ------ ------ --------
Net Realized Gain (Loss) from
Security Transactions 665,459 (6,414) 2,881 (202,744) 1,890 4,249 36,537
Net Realized Gain (Loss) on Foreign
Currency Transactions -- -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments (1,125,809) (24,673) 11,363 122,054 6,905 (3,625) (78,796
----------- -------- ------- -------- ------ ------ --------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS (460,350) (31,087) 14,244 (80,690) 8,795 624 (42,259)
----------- -------- ------- -------- ------ ------ --------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ($479,799) ($34,827) $13,933 ($85,630) $8,126 $259 ($44,868)
----------- -------- ------- -------- ------ ------ --------
----------- -------- ------- -------- ------ ------ --------
<FN>
1. All distribution fees are incurred in the Advisor Class. Currently, only the PBHG Growth Fund offers Advisor Class Shares.
2. The PBHG Global Technology & Communications Fund commenced operations on May 31, 2000.
</FN>
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
THE PBHG FUNDS, INC.
------------- ---------- ---------- --------- ---------- ------------- --------
PBHG PBHG PBHG PBHG PBHG PBHG
NEW LARGE CAP MID-CAP SMALL CAP FOCUSED PBHG CASH
OPPORTUNITIES VALUE VALUE VALUE VALUE INTERNATIONAL RESERVES
FUND FUND FUND FUND FUND FUND FUND
------------- ---------- ---------- --------- ---------- ------------- --------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends $ 10 $ 412 $ 414 $ 322 $ 180 $ 114 --
Interest 619 185 261 551 100 -- $16,063
Less: Foreign Taxes Withheld -- -- -- -- -- (14) --
-------- ------ ------ ------- ---- ------ -------
Total Investment Income 629 597 675 873 280 100 16,063
-------- ------ ------ ------- ---- ------ -------
EXPENSES:
Investment Advisory Fees 973 172 331 644 154 51 751
Administrative Fees 146 40 59 97 27 8 374
Transfer Agent Fees 77 54 72 144 33 22 131
Registration and Filing Fees (22) 13 15 31 14 6 8
Printing Fees 19 5 7 13 4 1 53
Professional Fees 5 1 2 2 1 -- 10
Custodian Fees 10 7 8 12 4 13 17
Directors' Fees 1 -- -- 1 -- -- 3
Miscellaneous Fees 2 2 4 5 1 1 --
Line of Credit (2) 1 2 2 1 -- --
Interest Expense 33 3 13 -- -- -- --
Distribution Fees 1 -- -- -- -- -- -- --
-------- ------ ------ ------- ---- ------ -------
TOTAL EXPENSES 1,242 298 513 951 239 102 1,347
-------- ------ ------ ------- ---- ------ -------
Waiver of Investment Advisory
Fees -- -- -- -- -- -- --
-------- ------ ------ ------- ---- ------ -------
Advisory Fee Recaptured 1 -- -- 15 -- -- --
-------- ------ ------ ------- ---- ------ -------
Net Expenses 1,243 298 513 966 239 102 1,347
-------- ------ ------ ------- ---- ------ -------
NET INVESTMENT INCOME (LOSS) (614) 299 162 (93) 41 (2) 14,716
-------- ------ ------ ------- ---- ------ -------
Net Realized Gain (Loss) from
Security Transactions 6,090 3,406 2,364 8,085 (138) 469 --
Net Realized Gain (Loss) on
Foreign Currency Transactions -- -- -- -- -- (23) --
Net Change in Unrealized
Appreciation (Depreciation)
on Investments (87,238) 1,232 1,536 2,990 (347) (1,901) --
-------- ------ ------ ------- ---- ------ -------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS (81,148) 4,638 3,900 11,075 (485) (1,455) --
-------- ------ ------ ------- ---- ------ -------
INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ($81,762) $4,937 $4,062 $10,982 ($444) ($1,457) $14,716
-------- ------ ------ ------- ---- ------ -------
-------- ------ ------ ------- ---- ------ -------
</TABLE>
<TABLE>
<CAPTION>
-------------- ------------ -----------------
PBHG PBHG PBHG
TECHNOLOGY & STRATEGIC GLOBAL TECHNOLOGY
COMMUNICATIONS SMALL & COMMUNICATIONS
FUND COMPANY FUND FUND 2
-------------- ------------ -----------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ 38 $ 123 $ 184
Interest 4,274 186 --
Less: Foreign Taxes Withheld (2) -- --
-------- ------ ------
Total Investment Income 4,310 309 184
-------- ------ ------
EXPENSES:
Investment Advisory Fees 13,867 405 436
Administrative Fees 2,447 61 44
Transfer Agent Fees 2,662 77 70
Registration and Filing Fees 125 15 12
Printing Fees 351 9 7
Professional Fees 70 2 1
Custodian Fees 47 11 25
Directors' Fees 20 1 --
Miscellaneous Fees 51 6 9
Line of Credit 52 2 1
Interest Expense 330 -- --
Distribution Fees 1 -- -- --
-------- ------ ------
TOTAL EXPENSES 20,022 589 605
-------- ------ ------
Waiver of Investment Advisory
Fees -- -- (8)
-------- ------ ------
Advisory Fee Recaptured -- 20 --
-------- ------ ------
Net Expenses 20,022 609 597
-------- ------ ------
NET INVESTMENT INCOME (LOSS) (15,712) (300) (413)
-------- ------ ------
Net Realized Gain (Loss) from
Security Transactions (109,074) 3,389 103
Net Realized Gain (Loss) on
Foreign Currency Transactions -- -- --
Net Change in Unrealized
Appreciation (Depreciation)
on Investments (188,188) 4,181 (1,667)
-------- ------ ------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS (297,262) 7,570 (1,564)
-------- ------ ------
INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS ($312,974) $7,270 ($1,977)
-------- ------ ------
-------- ------ ------
<FN>
1. All distribution fees are incurred in the Advisor Class. Currently, only the
PBHG Growth Fund offers Advisor Class Shares.
2. The PBHG Global Technology & Communications Fund commenced operations on May
31, 2000.
</FN>
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
[LOGO OMITTED] 66 & 67
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (000)
-----------------------------------------
FOR THE SIX MONTH PERIOD
ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND
THE PERIOD ENDING MARCH 31, 2000
<TABLE>
<CAPTION>
------------------------- --------------------------- ---------------------------
PBHG PBHG PBHG
GROWTH EMERGING GROWTH LARGE CAP GROWTH
FUND FUND FUND
------------------------- --------------------------- ---------------------------
4/1/00 4/1/99 4/1/00 4/1/99 4/1/00 4/1/99
to to to to to to
9/30/00 3/31/00 9/30/00 3/31/00 9/30/00 3/31/00
---------- ---------- ----------- ----------- ---------- ----------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Loss $ (19,449) $ (35,010) $ (3,740) $ (6,447) $ (311) $ (1,212)
Net Realized Gain (Loss)
from Security Transactions 665,459 1,444,408 (6,414) 253,905 2,881 73,256
Net Realized Gain (Loss) on
Foreign Currency Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and
Foreign Currency Transactions (1,125,809) 2,040,376 (24,673) 356,132 11,363 36,253
---------- ---------- ---------- ---------- ---------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations (479,799) 3,449,774 (34,827) 603,590 13,933 108,297
---------- ---------- ---------- ---------- ---------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- -- -- --
Net Realized Gains from Security
Transactions -- (146,848) -- (31,621) -- (38,911)
---------- ---------- ---------- ---------- ---------- --------
Total Distributions -- (146,848) -- (31,621) -- (38,911)
---------- ---------- ---------- ---------- ---------- --------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 10,803,349 8,396,419 2,822,167 4,764,340 376,993 161,752
Shares Issued upon Reinvestment of
Distributions -- 140,393 -- 30,659 -- 36,766
Shares Redeemed (10,950,497) (8,520,260) (2,908,697) (4,766,038) (144,028) (155,028)
---------- ---------- ---------- ---------- ---------- --------
Total PBHG Class Transactions (147,148) 16,552 (86,530) 28,961 232,965 43,490
---------- ---------- ---------- ---------- ---------- --------
Shares Issued 27,178 30,264 -- -- -- --
Shares Issued upon Reinvestment of
Distributions -- 3,951 -- -- -- --
---------- ---------- ---------- ---------- ---------- --------
Shares Redeemed (29,545) (39,497) -- -- -- --
---------- ---------- ---------- ---------- ---------- --------
Total Advisor Class Transactions (2,367) (5,282) -- -- -- --
---------- ---------- ---------- ---------- ---------- --------
Increase (Decrease) in Net Assets
Derived from Capital Share
Transactions (149,515) 11,270 (86,530) 28,961 232,965 43,490
---------- ---------- ---------- ---------- ---------- --------
Total Increase (Decrease) in
Net Assets (629,314) 3,314,196 (121,357) 600,930 246,898 112,876
---------- ---------- ---------- ---------- ---------- --------
NET ASSETS:
Beginning of Period 6,609,171 3,294,975 1,336,938 736,008 256,965 144,089
---------- ---------- ---------- ---------- ---------- --------
End of Period $5,979,857 $6,609,171 $1,215,581 $1,336,938 $ 503,863 $256,965
========== ========== ========== ========== ========== ========
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 211,486 207,463 78,868 166,771 9,940 4,845
Shares Issued upon Reinvestment
of Distributions -- 3,293 -- 987 -- 1,370
Shares Redeemed (213,498) (232,422) (80,984) (170,053) (4,052) (5,381)
---------- ---------- ---------- ---------- --------- --------
Total PBHG Class Share Transactions (2,012) (21,666) (2,116) (2,295) 5,888 834
---------- ---------- ---------- ---------- --------- --------
Advisor Class
Shares Issued 535 693 -- -- -- --
Shares Issued upon Reinvestment of
Distributions -- 94 -- -- -- --
Shares Redeemed (562) (1,033) -- -- -- --
---------- ---------- ---------- ---------- --------- --------
Total Advisor Class Share Transactions (27) (246) -- -- -- --
---------- ---------- ---------- ---------- --------- --------
Net Increase (Decrease) in Shares
Outstanding (2,039) (21,912) (2,116) (2,295) 5,888 834
========== ========== ========== ========== ========== ========
Amounts designated as "--" are either $0 or have been rounded to $0.
</TABLE>
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 68
<PAGE>
<TABLE>
<CAPTION>
THE PBHG FUNDS, INC.
------------------------- --------------------------- ------------------------- ------------------------
PBHG PBHG PBHG PBHG
SELECT EQUITY CORE GROWTH LIMITED LARGE CAP 20
FUND FUND FUND FUND
------------------------- --------------------------- ------------------------- ------------------------
4/1/00 4/1/99 4/1/00 4/1/99 4/1/00 4/1/99 4/1/00 4/1/99
to to to to to to to to
9/30/00 3/31/00 9/30/00 3/31/00 9/30/00 3/31/00 9/30/00 3/31/00
--------- ----------- ---------- --------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (4,940) $ (3,460) $ (669) $ (1,127) $ (365) $ (869) $ (2,609) $ (5,093)
(202,744) 243,578 1,890 68,016 4,249 48,591 36,537 272,534
-- -- -- -- -- 51,160 -- --
122,054 255,606 6,905 16,011 (3,625) -- (78,796) 242,817
---------- ---------- ---------- -------- -------- -------- ---------- ----------
(85,630) 495,724 8,126 82,900 259 98,882 (44,868) 510,258
---------- ---------- ---------- -------- -------- -------- ---------- ----------
-- -- -- -- -- -- -- --
-- (56,886) -- -- -- (22,649) -- (104,393)
---------- ---------- ---------- -------- -------- -------- ---------- ----------
-- (56,886) -- -- -- (22,649) -- (104,393)
---------- ---------- ---------- -------- -------- -------- ---------- ----------
3,533,634 2,772,860 194,048 303,542 4,067 20,694 681,809 768,942
-- 55,117 -- -- -- 21,960 -- 100,719
(3,083,439) (1,811,421) (177,293) (306,828) (14,552) (71,768) (564,837) (795,143)
---------- ---------- ---------- -------- -------- -------- ---------- ----------
450,195 1,016,556 16,755 (3,286) (10,485) (29,114) 116,972 74,518
---------- ---------- ---------- -------- -------- -------- ---------- ----------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
---------- ---------- ---------- -------- -------- -------- ---------- ----------
-- -- -- -- -- -- -- --
---------- ---------- ---------- -------- -------- -------- ---------- ----------
-- -- -- -- -- -- -- --
---------- ---------- ---------- -------- -------- -------- ---------- ----------
450,195 1,016,556 16,755 (3,286) (10,485) (29,114) 116,972 74,518
---------- ---------- ---------- -------- -------- -------- ---------- ----------
364,565 1,455,394 24,881 79,614 (10,226) 47,119 72,104 480,383
---------- ---------- ---------- -------- -------- -------- ---------- ----------
1,691,298 235,904 166,099 86,485 155,130 108,011 1,083,460 603,077
---------- ---------- ---------- -------- -------- -------- ---------- ----------
$2,055,863 $1,691,298 $ 190,980 $166,099 $144,904 $155,130 $1,155,564 $1,083,460
========== ========== ========== ======== ======== ======== ========== ==========
50,957 41,645 6,901 14,737 194 1,126 16,680 22,265
-- 1,153 -- -- -- 1,270 -- 3,214
(45,621) (30,157) (6,369) (15,398) (688) (4,722) (14,427) (26,069)
---------- ---------- ---------- -------- -------- -------- ---------- ----------
5,336 12,641 532 (661) (494) (2,326) 2,253 (590)
---------- ---------- ---------- -------- -------- -------- ---------- ----------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
---------- ---------- ---------- -------- -------- -------- ---------- ----------
-- -- -- -- -- -- -- --
---------- ---------- ---------- -------- -------- -------- ---------- ----------
5,336 12,641 532 (661) (494) (2,326) 2,253 (590)
========== ========== ========== ======== ======== ======== ========== ==========
</TABLE>
[LOGO OMITTED] 69
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (000) -- C0NTINUED
------------------------------------------------------
<TABLE>
<CAPTION>
----------------------- ---------------------- ---------------------
PBHG PBHG PBHG
NEW OPPORTUNITIES LARGE CAP VALUE MID-CAP VALUE
FUND FUND FUND
----------------------- ---------------------- ---------------------
4/1/00 4/1/99 4/1/00 4/1/99 4/1/00 4/1/99
to to to to to to
9/30/00 3/31/00 9/30/00 3/31/00 9/30/00 3/31/00
-------- --------- --------- ------- --------- ---------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ (614) $ (1,630) $ 299 $ 266 $ 162 $ (65)
Net Realized Gain (Loss) from Security
Transactions 6,090 124,962 3,406 5,419 2,364 10,140
Net Realized Gain (Loss) on Foreign Currency
Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (87,238) 126,277 1,232 (715) 1,536 4,710
-------- -------- -------- --------- -------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations (81,762) 249,609 4,937 4,970 4,062 14,785
-------- -------- -------- --------- -------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- (192) -- (4)
Net Realized Gains from Security
Transactions -- (11,102) -- (8,414) -- (11,964)
-------- -------- -------- --------- -------- ---------
Total Distributions -- (11,102) -- (8,606) -- (11,968)
-------- -------- -------- --------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 107,033 423,099 98,517 30,431 155,635 62,855
Shares Issued upon Reinvestment of
Distributions -- 10,730 -- 8,390 -- 11,660
Shares Redeemed (230,429) (333,478) (70,970) (47,185) (102,820) (73,623)
-------- -------- -------- --------- -------- ---------
Total PBHG Class Transactions (123,396) 100,351 27,547 (8,364) 52,815 892
-------- -------- -------- --------- -------- ---------
Increase (Decrease) in Net Assets Derived
from Capital Share Transactions (123,396) 100,351 27,547 (8,364) 52,815 892
-------- -------- -------- --------- -------- ---------
Total Increase (Decrease) in Net Assets (205,158) 338,858 32,484 (12,000) 56,877 3,709
-------- -------- -------- --------- -------- ---------
NET ASSETS:
Beginning of Period 355,600 16,742 32,922 44,922 60,690 56,981
-------- -------- -------- --------- -------- ---------
End of Period $150,442 $355,600 $ 65,406 $ 32,922 $117,567 $ 60,690
======== ======== ======== ========= ======== =========
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 1,383 7,591 7,866 2,408 10,688 4,370
Shares Issued upon Reinvestment of
Distributions -- 192 -- 715 -- 1,026
Shares Redeemed (3,106) (5,178) (5,697) (3,616) (7,305) (4,780)
-------- -------- -------- --------- -------- ---------
Total PBHG Class Share Transactions (1,723) 2,605 2,169 (493) 3,383 616
-------- -------- -------- --------- -------- ---------
Net Increase (Decrease) in Shares Outstanding (1,723) 2,605 2,169 (493) 3,383 616
======== ======== ======== ========= ======== =========
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 70
<PAGE>
<TABLE>
<CAPTION>
THE PBHG FUNDS, INC.
---------------------- ---------------------- --------------------- ---------------------------
PBHG PBHG PBHG PBHG
SMALL CAP VALUE FOCUSED VALUE INTERNATIONAL CASH RESERVES
FUND FUND FUND FUND
---------------------- ---------------------- --------------------- ---------------------------
4/1/00 4/1/99 4/1/00 4/1/99 4/1/00 4/1/99 4/1/00 4/1/99
to to to to to to to to
9/30/00 3/31/00 9/30/00 3/31/00 9/30/00 3/31/00 9/30/00 3/31/00
--------- --------- -------- -------- -------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (93) $ (390) $ 41 $ (5) $ (2) $ (72) $ 14,716 $ 9,315
8,085 13,720 (138) 2,109 469 3,924 -- (12)
-- -- -- -- (23) (38) -- --
2,990 20,816 (347) 2,437 (1,901) (1,438) -- --
-------- --------- ------- ------- ------- --------- ----------- -----------
10,982 34,146 (444) 4,541 (1,457) 2,376 14,716 9,303
-------- --------- ------- ------- ------- --------- ----------- ------------
-- -- -- -- -- -- (14,718) (9,312)
-- -- -- (305) -- (781) -- --
-------- --------- ------- ------- ------- --------- ----------- ------------
-- -- -- (305) -- (781) (14,718) (9,312)
-------- --------- ------- ------- ------- --------- ----------- ------------
187,600 105,635 53,947 20,548 6,386 38,500 17,564,490 12,080,349
-- -- -- 304 -- 749 10,293 6,503
(80,756) (116,934) (32,625) (6,190) (7,018) (41,682) (17,908,646) (11,651,624)
-------- --------- ------- ------- ------- --------- ----------- ------------
106,844 (11,299) 21,322 14,662 (632) (2,433) (333,863) 435,228
-------- --------- ------- ------- ------- --------- ----------- ------------
106,844 (11,299) 21,322 14,662 (632) (2,433) (333,863) 435,228
-------- --------- ------- ------- ------- --------- ----------- ------------
117,826 22,847 20,878 18,898 (2,089) (838) (333,865) 435,219
-------- --------- ------- ------- ------- --------- ----------- ------------
92,634 69,787 22,556 3,658 11,382 12,220 579,458 144,239
-------- --------- ------- ------- ------- --------- ----------- ------------
$210,460 $ 92,634 $43,434 $22,556 $ 9,293 $ 11,382 $ 245,593 $ 579,458
======== ========= ======= ======= ======= ========= =========== ============
9,502 7,348 3,077 1,289 540 3,260 17,564,490 12,080,349
-- -- -- 24 -- 59 10,293 6,503
(4,283) (8,540) (1,886) (445) (592) (3,493) (17,908,646) (11,651,624)
-------- --------- ------- ------- ------- --------- ----------- ------------
5,219 (1,192) 1,191 868 (52) (174) (333,863) 435,228
-------- --------- ------- ------- ------- --------- ----------- ------------
5,219 (1,192) 1,191 868 (52) (174) (333,863) 435,228
======== ========= ======= ======= ======= ========= =========== ============
</TABLE>
[LOGO OMITTED] 71
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (000) -- CONCLUDED
-------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------- ------------------------ -------------------
PBHG TECHNOLOGY & PBHG STRATEGIC PBHG GLOBAL
COMMUNICATIONS SMALL COMPANY & TECHNOLOGY
FUND FUND COMMUNICATIONS FUND
-------------------------- ------------------------ -------------------
4/1/00 4/1/99 4/1/00 4/1/99 5/31/00 1
to to to to to
9/30/00 3/31/00 9/30/00 3/31/00 9/30/00
---------- ---------- --------- --------- ---------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net Investment Loss $ (15,712) $ (13,642) $ (300) $ (497) $ (413)
Net Realized Gain (Loss) from Security
Transactions (109,074) 931,007 3,389 20,058 103
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (188,188) 545,653 4,181 17,961 (1,667)
---------- ---------- -------- --------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations (312,974) 1,463,018 7,270 37,522 (1,977)
---------- ---------- -------- --------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- -- --
Net Realized Gains from Security Transactions -- (117,239) -- (4,358) --
---------- ---------- -------- --------- --------
Total Distributions -- (117,239) -- (4,358) --
---------- ---------- -------- --------- --------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 7,081,301 7,338,547 61,875 65,830 151,463
Shares Issued upon Reinvestment of
Distributions -- 112,647 -- 4,220 --
Shares Redeemed (7,251,083) (5,489,432) (43,482) (76,018) (44,214)
---------- ---------- -------- --------- --------
Total PBHG Class Transactions (169,782) 1,961,762 18,393 (5,968) 107,249
---------- ---------- -------- --------- --------
Increase (Decrease) in Net Assets Derived
from Capital Share Transactions (169,782) 1,961,762 18,393 (5,968) 107,249
---------- ---------- -------- --------- --------
Total Increase (Decrease) in Net Assets (482,756) 3,307,541 25,663 27,196 105,272
---------- ---------- -------- --------- --------
NET ASSETS:
Beginning of Period 3,843,946 536,405 75,225 48,029 --
---------- ---------- -------- --------- --------
End of Period $3,361,190 $3,843,946 $100,888 $ 75,225 $105,272
========== ========== ======== ========= ========
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 98,608 129,967 3,125 4,970 13,064
Shares Issued upon Reinvestment of
Distributions -- 1,941 -- 300 --
Shares Redeemed (100,800) (106,139) (2,266) (5,936) (3,755)
---------- ---------- -------- --------- --------
Total PBHG Class Share Transactions (2,192) 25,769 859 (666) 9,309
---------- ---------- -------- --------- --------
Net Increase (Decrease) in Shares Outstanding (2,192) 25,769 859 (666) 9,309
========== ========== ======== ========= ========
<FN>
1. The PBHG Global Technology & Communications Fund commenced operations on May 31, 2000.
</FN>
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 72
<PAGE>
<TABLE>
<CAPTION>
THE PBHG FUNDS, INC.
FINANCIAL HIGHLIGHTS
-----------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIOD ENDED SEPTEMBER 30, 2000 (UNAUDITED)
NET REALIZED AND NET
ASSET NET UNREALIZED DISTRIBUTIONS DISTRIBUTIONS ASSET
VALUE INVESTMENT GAINS OR FROM NET FROM VALUE
BEGINNING INCOME (LOSSES) INVESTMENT CAPITAL END TOTAL
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN
------------------------------------------------------------------------------------------------------------------------------------
----------------
PBHG GROWTH FUND
----------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000** 2 $58.73 $(0.17) $(4.44) -- -- $54.12 (7.85)%+
2000 2 24.51 (0.33) 36.14 -- $(1.59) 58.73 148.57%
1999 2 28.23 (0.24) (3.48) -- -- 24.51 (13.18)%
1998 21.06 (0.26) 7.43 -- -- 28.23 34.05 %
1997 25.30 (0.10) (4.14) -- -- 21.06 (16.76)%
1996 16.70 (0.06) 8.66 -- -- 25.30 51.50 %
PBHG ADVISOR CLASS
2000** 2 $58.19 $(0.23) $ (4.39) -- -- $53.57 (7.94)%+
2000 2 24.35 (0.42) 35.85 -- $(1.59) 58.19 147.98%
1999 2 28.12 (0.30) (3.47) -- -- 24.35 (13.41)%
1998 21.03 (0.15) 7.24 -- -- 28.12 33.71 %
1997 1 25.42 (0.06) (4.33) -- -- 21.03 (17.27)%+
-------------------------
PBHG EMERGING GROWTH FUND
-------------------------
PBHG Class
2000** 2 $40.00 $(0.11) $ (1.06) -- -- $38.83 (2.92)%+
2000 2 20.61 (0.21) 20.76 -- $(1.16) 40.00 101.33%
1999 2 25.83 (0.18) (4.96) -- (0.08) 20.61 (19.91)%
1998 19.26 (0.24) 6.81 -- -- 25.83 34.11 %
1997 23.07 (0.11) (2.87) -- (0.83) 19.26 (13.71)%
1996 16.10 (0.07) 8.03 -- (0.99) 23.07 50.16 %
--------------------------
PBHG LARGE CAP GROWTH FUND
--------------------------
PBHG Class
2000** 2 $38.37 $(0.04) $ 1.71 -- -- $40.04 4.35%+
2000 2 24.57 (0.23) 21.32 -- $(7.29) 38.37 98.60%
1999 2 22.69 (0.16) 3.53 -- (1.49) 24.57 15.90%
1998 14.26 (0.19) 8.82 -- (0.20) 22.69 60.80 %
1997 14.53 (0.05) (0.21) -- (0.01) 14.26 (1.77)%
1996 4 10.00 (0.03) 4.97 -- (0.41) 14.53 50.47 %+
-----------------------
PBHG SELECT EQUITY FUND
-----------------------
PBHG Class
2000** 2 $77.81 $(0.21) $ (1.66) -- -- $75.94 (2.40)%+
2000 2 25.93 (0.34) 58.71 -- $(6.49) 77.81 240.82%
1999 2 24.15 (0.21) 1.99 -- -- 25.93 7.37%
1998 15.91 (0.44) 8.68 -- -- 24.15 51.79 %
1997 17.27 (0.13) (1.03) -- (0.20) 15.91 (6.94)%
1996 4 10.00 (0.05) 7.68 -- (0.36) 17.27 77.75 %+
---------------------
PBHG CORE GROWTH FUND
---------------------
PBHG CLASS
2000** 2 $30.25 $(0.12) $ 1.58 -- -- $31.71 4.83%+
2000 2 14.06 (0.20) 16.39 -- -- 30.25 115.15%
1999 2 13.53 (0.14) 0.67 -- -- 14.06 3.92%
1998 10.34 (0.33) 3.52 -- -- 13.53 30.85 %
1997 11.82 (0.09) (1.39) -- -- 10.34 (12.52)%
1996 3 10.00 -- 1.82 -- -- 11.82 18.20 %+
</TABLE>
<TABLE>
<CAPTION>
RATIO
RATIO OF NET
OF NET RATIO INVESTMENT
NET INVESTMENT OF EXPENSES INCOME (LOSS)
ASSETS RATIO INCOME TO AVERAGE TO AVERAGE
END OF EXPENSES (LOSS) NET ASSETS NET ASSETS PORTFOLIO
OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
(000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
-----------------------------------------------------------------------------------------------------------------------------------
----------------
PBHG GROWTH FUND
----------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000** 2 $5,848,783 1.24%* (0.67)%* 1.24%* (0.67)%* 44.99%+
2000 2 6,465,234 1.23% (0.90)% 1.23% (0.90)% 107.73%
1999 2 3,228,740 1.32% (0.99)% 1.32% (0.99)% 80.51%
1998 5,338,380 1.26% (0.74)% 1.26% (0.74)% 94.21%
1997 4,634,138 1.25% (0.69)% 1.25% (0.69)% 64.89%
1996 3,298,666 1.48% (0.79)% 1.48% (0.79)% 44.64%
PBHG ADVISOR CLASS
2000** 2 $ 131,074 1.49%* (0.92)%* 1.49%* (0.92)%* 44.99%+
2000 2 143,937 1.48% (1.15)% 1.48% (1.15)% 107.73%
1999 2 66,235 1.57% (1.24)% 1.57% (1.24)% 80.51%
1998 89,227 1.51% (1.02)% 1.51% (1.02)% 94.21%
1997 1 12,991 1.53%* (1.11)%* 1.53%* (1.11)%* 64.89%+
-------------------------
PBHG EMERGING GROWTH FUND
-------------------------
PBHG Class
2000** 2 $1,215,581 1.25%* (0.61)%* 1.25%* (0.61)%* 28.95%+
2000 2 1,336,938 1.24% (0.76)% 1.24% (0.76)% 141.81%
1999 2 736,008 1.34% (0.80)% 1.34% (0.80)% 101.53%
1998 1,404,157 1.27% (0.80)% 1.27% (0.80)% 95.21%
1997 1,195,620 1.28% (0.36)% 1.28% (0.36)% 47.75%
1996 689,705 1.47% (0.42)% 1.47% (0.42)% 97.05%
--------------------------
PBHG LARGE CAP GROWTH FUND
--------------------------
PBHG Class
2000** 2 $ 503,863 1.15%* (0.20)%* 1.15%* (0.20)%* 49.95%+
2000 2 256,965 1.17% (0.79)% 1.17% (0.79)% 184.36%
1999 2 144,089 1.25% (0.71)% 1.25% (0.71)% 46.16%
1998 145,662 1.22% (0.79)% 1.22% (0.79)% 46.56%
1997 119,971 1.23% (0.47)% 1.23% (0.47)% 51.70%
1996 4 53,759 1.50%* (0.66)%* 2.07%* (1.23)%* 116.75%+
-----------------------
PBHG SELECT EQUITY FUND
-----------------------
PBHG Class
2000** 2 $2,055,863 1.25%* (0.61)%* 1.25%* (0.61)%* 53.48%+
2000 2 1,691,298 1.18% (0.68)% 1.18% (0.68)% 200.56%
1999 2 235,904 1.34% (0.90)% 1.34% (0.90)% 56.59%
1998 336,076 1.35% (1.15)% 1.35% (1.15)% 72.16%
1997 372,486 1.26% (0.76)% 1.26% (0.76)% 71.70%
1996 4 202,796 1.50%* (0.74)%* 1.73%* (0.97)%* 206.22%+
---------------------
PBHG CORE GROWTH FUND
---------------------
PBHG CLASS
2000** 2 $ 190,980 1.29%* (0.82)%* 1.29%* (0.82)%* 63.64%+
2000 2 166,099 1.33% (1.02)% 1.33% (1.02)% 312.32%
1999 2 86,485 1.45% (1.16)% 1.45% (1.16)% 120.93%
1998 165,510 1.35% (1.07)% 1.35% (1.07)% 72.78%
1997 283,995 1.36% (0.77)% 1.36% (0.77)% 46.75%
1996 3 31,092 1.50%* (0.18)%* 2.92%* (1.60)%* 17.00%+
</TABLE>
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 73
<PAGE>
THE PBHG FUNDS, INC.
FINANCIAL HIGHLIGHTS -- CONCLUDED
--------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE PERIOD ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
NET REALIZED AND NET
ASSET NET UNREALIZED DISTRIBUTIONS DISTRIBUTIONS ASSET
VALUE INVESTMENT GAINS OR FROM NET FROM VALUE
BEGINNING INCOME (LOSSES) INVESTMENT CAPITAL END
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD
------------------------------------------------------------------------------------------------------------------------------------
-----------------
PBHG LIMITED FUND
-----------------
<S> <C> <C> <C> <C> <C> <C>
PBHG CLASS
2000** 2 $23.11 $(0.06) $ 0.25 -- -- $23.30
2000 2 11.95 (0.12) 15.20 -- $(3.92) 23.11
1999 2 14.08 (0.10) (1.45) -- (0.58) 11.95
1998 9.05 (0.10) 5.53 -- (0.40) 14.08
1997 6 10.00 0.02 (0.93) $(0.03) (0.01) 9.05
----------------------
PBHG LARGE CAP 20 FUND
----------------------
PBHG CLASS
2000** 2 $44.34 $(0.11) $ (0.93) -- -- $43.30
2000 2 24.10 (0.25) 26.26 -- $(5.77) 44.34
1999 2 15.98 (0.12) 8.46 -- (0.22) 24.10
1998 9.25 (0.07) 6.80 -- -- 15.98
1997 7 10.00 (0.01) (0.73) $(0.01) -- 9.25
---------------------------
PBHG NEW OPPORTUNITIES FUND
---------------------------
PBHG CLASS
2000** 2 $98.19 $(0.24) $(18.71) -- -- $79.24
2000 2 16.47 (0.71) 85.60 -- $(3.17) 98.19
1999 10 13.52 (0.01) 2.96 -- -- 16.47
-------------------------
PBHG LARGE CAP VALUE FUND
-------------------------
PBHG CLASS
2000** 2 $11.97 $0.07 $ 1.25 -- -- $13.29
2000 13.85 0.12 1.78 $(0.08) $(3.70) 11.97
1999 13.01 0.08 2.45 (0.10) (1.59) 13.85
1998 10.11 0.02 3.84 (0.06) (0.90) 13.01
1997 8 10.00 0.02 0.09 -- -- 10.11
-----------------------
PBHG MID-CAP VALUE FUND
-----------------------
PBHG CLASS
2000** 2 $13.82 $ 0.03 $ 1.27 -- -- $15.12
2000 2 15.09 (0.02) 5.03 -- $(6.28) 13.82
1999 15.30 -- 0.92 -- (1.13) 15.09
1998 9 10.00 (0.01) 6.00 -- (0.69) 15.30
-------------------------
PBHG SMALL CAP VALUE FUND
-------------------------
PBHG CLASS
2000** 2 $18.75 $(0.01) $ 1.98 -- -- $20.72
2000 2 11.38 (0.08) 7.45 -- -- 18.75
1999 2 15.38 (0.09) (3.06) -- $(0.85) 11.38
1998 9 10.00 (0.03) 6.15 -- (0.74) 15.38
-----------------------
PBHG FOCUSED VALUE FUND
-----------------------
PBHG CLASS
2000** 2 $18.51 $ 0.02 $(0.50) -- -- $18.03
2000 2 10.46 (0.01) 8.93 -- $(0.87) 18.51
1999 10 10.32 -- 0.14 -- -- 10.46
</TABLE>
<TABLE>
<CAPTION>
RATIO
RATIO OF NET
OF NET RATIO INVESTMENT
NET INVESTMENT OF EXPENSES INCOME (LOSS)
ASSETS RATIO INCOME TO AVERAGE TO AVERAGE
END OF EXPENSES (LOSS) NET ASSETS NET ASSETS PORTFOLIO
TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
-----------------------------------------------------------------------------------------------------------------------------------
-----------------
PBHG LIMITED FUND
-----------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000** 2 0.82%+ $ 144,904 1.29%* (0.54)%* 1.29%* (0.54)%* 28.62%+
2000 2 137.27% 155,130 1.32% (0.76)% 1.32% (0.76)% 107.78%
1999 2 (11.01)% 108,011 1.40% (0.81)% 1.40% (0.81)% 111.07%
1998 60.78 % 178,168 1.40% (0.72)% 1.40% (0.72)% 81.36%
1997 6 (9.15)%+ 137,520 1.42%* 0.33%* 1.42%* 0.33%* 75.46%+
----------------------
PBHG LARGE CAP 20 FUND
----------------------
PBHG CLASS
2000** 2 (2.35)%+ $1,155,564 1.19%* (0.51)%* 1.19%* (0.51)%* 54.42%+
2000 2 117.88% 1,083,460 1.23% (0.82)% 1.23% (0.82)% 147.35%
1999 2 52.52% 603,077 1.27% (0.64)% 1.27% (0.64)% 76.41%
1998 72.76% 192,631 1.41% (0.79)% 1.41% (0.79)% 98.27%
1997 7 (7.40)%+ 69,819 1.50%* 0.17 %* 1.50%* 0.17 %* 43.98%+
---------------------------
PBHG NEW OPPORTUNITIES FUND
---------------------------
PBHG CLASS
2000** 2 (19.29)%+ $ 150,442 1.28%* (0.63)%* 1.28%* (0.63)%* 137.57%+
2000 2 529.94% 355,600 1.34% (1.15)% 1.34% (1.15)% 668.31%
1999 10 21.82%+ 16,742 1.50%* (0.80)%* 1.59%* (0.89)%* 109.43%+
-------------------------
PBHG LARGE CAP VALUE FUND
-------------------------
PBHG CLASS
2000** 2 11.03%+ $ 65,406 1.13%* 1.13%* 1.13%* 1.13%* 608.70%+
2000 14.25% 32,922 1.11% 0.71% 1.11% 0.71% 1018.03%
1999 20.29% 44,922 1.01% 0.59% 1.01% 0.59% 568.20%
1998 39.47% 76,476 1.17% 0.98% 1.17% 0.98% 403.59%
1997 8 1.10%+ 26,262 1.50%* 1.61%* 1.74%* 1.37%* 0.00%+
-----------------------
PBHG MID-CAP VALUE FUND
-----------------------
PBHG CLASS
2000** 2 9.41%+ $ 117,567 1.32%* 0.42%* 1.32%* 0.42%* 119.37%+
2000 2 42.21% 60,690 1.44% (0.15)% 1.44% (0.15)% 742.57%
1999 8.35% 56,981 1.33% 0.01% 1.33% 0.01% 732.73%
1998 9 61.06%+ 54,173 1.47%* (0.17)%* 1.47%* (0.17)%* 399.96%+
-------------------------
PBHG SMALL CAP VALUE FUND
-------------------------
PBHG CLASS
2000** 2 10.51%+ $ 210,460 1.50%* (0.14)%* 1.50%* (0.14)%* 110.71%+
2000 2 64.76% 92,634 1.50% (0.56)% 1.58% (0.64)% 352.85%
1999 2 (20.93)% 69,787 1.48% (0.71)% 1.48% (0.71)% 273.87%
1998 9 62.27%+ 125,834 1.49%* (0.52)%* 1.49%* (0.52)%* 263.04%+
-----------------------
PBHG FOCUSED VALUE FUND
-----------------------
PBHG CLASS
2000** 2 (2.59)%+ $ 43,434 1.32%* 0.23%* 1.32%* 0.23%* 172.51%+
2000 2 89.17% 22,556 1.50% (0.10)% 1.55% (0.15)% 853.36%
1999 10 1.36%+ 3,658 1.50%* 0.09%* 2.67%* (1.08)%* 173.09%+
</TABLE>
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 74
<PAGE>
THE PBHG FUNDS, INC.
<TABLE>
<CAPTION>
NET REALIZED AND NET
ASSET NET UNREALIZED DISTRIBUTIONS DISTRIBUTIONS ASSET
VALUE INVESTMENT GAINS OR FROM NET FROM VALUE
BEGINNING INCOME (LOSSES) INVESTMENT CAPITAL END
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD
------------------------------------------------------------------------------------------------------------------------------------
-----------------------
PBHG INTERNATIONAL FUND
-----------------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C>
2000** 2 $12.94 -- $(1.71) -- -- $11.23
2000 2 11.60 $(0.08) 2.30 -- $(0.88) 12.94
1999 11 12.04 (0.14) 0.29 $(0.17) (0.42) 11.60
1998 11.26 (0.03) 1.83 -- (1.02) 12.04
1997 10.55 -- 0.71 -- -- 11.26
1996 9.13 (0.04) 1.46 -- -- 10.55
-----------------------
PBHG CASH RESERVES FUND
-----------------------
PBHG CLASS
2000** 2 $ 1.00 $0.03 -- $(0.03) -- $1.00
2000 1.00 0.05 -- (0.05) -- 1.00
1999 1.00 0.05 -- (0.05) -- 1.00
1998 1.00 0.05 -- (0.05) -- 1.00
1997 1.00 0.05 -- (0.05) -- 1.00
1996 4 1.00 0.05 -- (0.05) -- 1.00
-------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
-------------------------------------
PBHG CLASS
2000** 2 $85.02 $(0.35) $ (6.54) -- -- $78.13
2000 2 27.59 (0.54) 62.84 -- $(4.87) 85.02
1999 2 19.27 (0.19) 8.80 -- (0.29) 27.59
1998 14.63 (0.23) 5.72 -- (0.85) 19.27
1997 12.48 (0.05) 2.55 -- (0.35) 14.63
1996 5 10.00 (0.02) 2.50 -- -- 12.48
---------------------------------
PBHG STRATEGIC SMALL COMPANY FUND
---------------------------------
PBHG CLASS
2000** 2 $19.34 $(0.07) $ 1.97 -- -- $21.24
2000 2 10.54 (0.13) 10.18 -- $(1.25) 19.34
1999 2 12.89 (0.11) (1.78) -- (0.46) 10.54
1998 8.86 (0.11) 5.01 -- (0.87) 12.89
1997 8 10.00 -- (1.14) -- -- 8.86
--------------------------------------------
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND
--------------------------------------------
PBHG CLASS
2000** 2, 12 $10.00 $(0.06) $ 1.37 -- -- $11.31
</TABLE>
<TABLE>
<CAPTION>
RATIO
RATIO OF NET
OF NET RATIO INVESTMENT
NET NET INVESTMENT OF EXPENSES INCOME (LOSS)
ASSETS RATIO INCOME TO AVERAGE TO AVERAGE
END OF EXPENSES (LOSS) NET ASSETS NET ASSETS PORTFOLIO
TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------
PBHG INTERNATIONAL FUND
-----------------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000** 2 (13.21)%+ $ 9,293 2.00%* (0.03)%* 2.00%* (0.03)%* 34.19%+
2000 2 19.29% 11,382 2.00% (0.62)% 2.00% (0.62)% 90.17%
1999 11 1.42% 12,220 1.97% (0.35)% 1.97% (0.35)% 59.74%
1998 17.46% 20,905 2.00% (0.13)% 2.00% (0.13)% 85.94%
1997 6.73% 21,265 2.22% (0.32)% 2.22% (0.32)% 74.82%
1996 15.55% 11,243 2.25% (0.22)% 3.03% (1.00)% 140.26%
-----------------------
PBHG CASH RESERVES FUND
-----------------------
PBHG CLASS
2000** 2 6.03%* $ 245,593 0.54%* 5.90%* 0.54%* 5.90%* N/A
2000 4.81% 579,458 0.69% 4.78% 0.69% 4.78% N/A
1999 4.84% 144,239 0.70% 4.72% 0.70% 4.72% N/A
1998 5.13% 117,574 0.68% 5.00% 0.68% 5.00% N/A
1997 4.89% 341,576 0.68% 4.79% 0.68% 4.79% N/A
1996 4 5.24%* 99,001 0.70%* 5.05%* 0.88%* 4.87%* N/A
-------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
-------------------------------------
PBHG CLASS
2000** 2 (8.09)%+ $3,361,190 1.23%* (0.96)%* 1.23%* (0.96)%* 119.09%+
2000 2 233.99% 3,843,946 1.19% (0.96)% 1.19% (0.96)% 362.38%
1999 2 45.33% 536,405 1.34% (0.96)% 1.34% (0.96)% 276.07%
1998 38.29% 495,697 1.30% (0.91)% 1.30% (0.91)% 259.89%
1997 19.59% 493,156 1.33% (0.59)% 1.33% (0.59)% 289.91%
1996 5 24.82%+ 61,772 1.50%* (0.50)%* 2.00%* (1.00)%* 125.99%+
---------------------------------
PBHG STRATEGIC SMALL COMPANY FUND
---------------------------------
PBHG CLASS
2000** 2 9.82%+ $ 100,888 1.50%* (0.74)%* 1.50%* (0.74)%* 83.70%+
2000 2 99.74% 75,225 1.50% (0.93)% 1.55% (0.98)% 240.55%
1999 2 (14.52)% 48,029 1.50% (0.97)% 1.54% (1.01)% 140.89%
1998 56.54 % 111,983 1.45% (0.92)% 1.45% (0.92)% 215.46%
1997 8 (11.40)%+ 61,382 1.50%* 0.18%* 1.50%* 0.18%* 88.88%+
--------------------------------------------
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND
--------------------------------------------
PBHG CLASS
2000** 2, 12 13.10%+ $ 105,272 2.05%* (1.42)%* 2.08%* (1.45)%* 100.51%+
<FN>
* Annualized
** For the six month period ended September 30, 2000.
+ 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.
12 The PBHG Global Technology & Communications Fund commenced operations on May 31, 2000.
</FN>
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[LOGO OMITTED] 75
<PAGE>
THE PBHG FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
1. ORGANIZATION
The PBHG Funds, Inc. (the "Fund"), a Maryland corporation, is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company with seventeen series: the PBHG Growth Fund (the "Growth
Fund"), the PBHG Emerging Growth Fund (the "Emerging Growth Fund"), the PBHG
Large Cap Growth Fund (the "Large Cap Growth Fund"), the PBHG Select Equity Fund
(the "Select Equity Fund"), the PBHG Core Growth Fund (the "Core Growth Fund"),
the PBHG Limited Fund (the "Limited Fund"), the PBHG Large Cap 20 Fund (the
"Large Cap 20 Fund"), the PBHG New Opportunities Fund (the "New Opportunities
Fund"), the PBHG Large Cap Value Fund (the "Large Cap Value Fund"), the PBHG
Mid-Cap Value Fund (the "Mid-Cap Value Fund"), the PBHG Small Cap Value Fund
(the "Small Cap Value Fund"), the PBHG Focused Value Fund (the "Focused Value
Fund"), the PBHG International Fund (the "International Fund"), the PBHG
Technology & Communications Fund (the "Technology & Communications Fund"), the
PBHG Strategic Small Company Fund (the "Strategic Small Company Fund") and the
PBHG Global Technology & Communications Fund (the "Global Technology &
Communications Fund"), (collectively referred to as the "Equity Portfolios"),
and the PBHG Cash Reserves Fund (the "Cash Reserves Fund") (each a "Portfolio"
and, collectively, the "Portfolios"). Each Portfolio is classified as a
diversified management investment company, with the exception of the Large Cap
20, the Focused Value, the Technology & Communications, and the Global
Technology & Communications Funds which are classified as non-diversified
management investment companies. Each Portfolio's prospectus provides a
description of its investment objectives, policies and investment strategies.
The Fund is registered to offer two classes of shares, PBHG Class and Advisor
Class, formerly known as the "Trust Class." Currently, the Advisor Class of
shares is only offered by the Growth Fund. The assets of each Portfolio are
segregated, and a shareholder's interest is limited to the Portfolio in which
shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Portfolios.
SECURITY VALUATION -- Investment securities of the Equity Portfolios that are
listed on a securities exchange and for which market quotations are available
are valued at the last quoted sales price on each business day (normally 4:00
p.m. Eastern time). If there is no such reported sale, these securities and
unlisted securities for which market quotations are readily available, are
valued at the last bid price. However, debt securities (other than short-term
obligations), including listed issues, are valued on the basis of valuations
furnished by a pricing service which utilizes electronic data processing
techniques to determine valuations for normal institutional size trading units
of debt securities, without exclusive reliance upon exchange or over-the-counter
prices. Short-term investments may be valued at amortized cost which
approximates market value. Foreign securities are valued based upon quotations
from the primary market in which they are traded, and are translated from the
local currency into U.S. dollars using current exchange rates. In addition, if
quotations are not readily available, or if the values have been materially
affected by events occurring after the closing of a foreign market, assets may
be valued by another method that the Board of Directors believes accurately
reflects fair value. The values of investment securities held by the Cash
Reserves Fund are stated at amortized cost, which approximates market value.
Under this valuation method, acquisition discounts and premiums are accreted and
amortized ratably to maturity and are included in interest income.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Dividend income and distributions to shareholders are recognized on the
ex-dividend date; interest income is recognized on the accrual basis. Costs used
in determining realized capital gains and losses on the sale of investment
securities are those of the specific securities sold adjusted for the accretion
and amortization of acquisition discounts and premiums during the respective
holding periods.
DIVIDENDS -- Dividends from net investment income for the Equity Portfolios are
declared annually, if available. Dividends from net investment income for the
Cash Reserves Fund are declared daily and paid monthly. Distributions of net
realized capital gains, for each Portfolio, are generally made to shareholders
annually, if available.
Dividends from net investment income and distributions from net realized capital
gains are determined in accordance with U.S. Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. To the extent these differences are permanent, they are
charged or credited to paid-in-capital or accumulated net realized gain, as
appropriate, in the period that the differences arise. Accordingly, the
following permanent differences as of March 31, 2000, attributable to certain
net operating losses which for tax purposes, are not available to offset future
income or have been used to offset net short-term capital gains, and the
utilization of earnings and profits distributed to shareholders on redemption of
shares as a part of the dividends paid deduction for income tax purposes, have
been reclassified to the following accounts:
ACCUMULATED NET UNDISTRIBUTED NET
PAID-IN-CAPITAL REALIZED GAIN INVESTMENT INCOME
(000) (000) (000)
--------------- --------------- -----------------
Growth Fund $632,959 $(667,969) $35,010
Emerging Growth Fund 150,279 (156,726) 6,447
Large Cap Growth Fund 19,966 (21,178) 1,212
Select Equity Fund 174,473 (177,933) 3,460
Core Growth Fund 18,845 (19,975) 1,130
Limited Fund 11,306 (12,175) 869
Large Cap 20 Fund 103,605 (108,696) 5,091
New Opportunities Fund 72,343 (73,973) 1,630
Large Cap Value Fund 5,143 (4,993) (150)
Mid-Cap Value Fund 10,619 (10,683) 64
Small Cap Value Fund 3,324 (3,669) 345
Focused Value Fund 734 (739) 5
International Fund 1,895 (1,960) 65
Cash Reserves Fund -- -- --
Technology &
Communications Fund 704,923 (718,565) 13,642
Strategic Small Company Fund 8,204 (8,684) 480
The Global Technology & Communications Fund had not yet commenced operations on
March 31, 2000.
These reclassifications have no effect on net assets or net asset value per
share.
FEDERAL INCOME TAXES -- It is each Portfolio's intention to qualify or continue
to qualify as a regulated investment company for Federal income tax purposes and
to distribute all of its taxable income and net capital gains. Accordingly, no
provision has been made for Federal income taxes.
The Funds may be subject to taxes imposed by countries in which they invest with
respect to their investments in issuers existing or operating in such countries.
Such taxes are generally based on income earned. The Funds accrue such taxes
when the related income is earned.
NET ASSET VALUE PER SHARE -- The net asset value per share is calculated each
business day by dividing the total value of each Portfolio's assets, less
liabilities, by the number of shares outstanding.
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<PAGE>
THE PBHG FUNDS, INC.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by a third party custodian bank until the respective
agreements mature. Provisions of the repurchase agreements and procedures
adopted by the Fund's Board of Directors require that the market value of the
collateral including accrued interest thereon, is sufficient in the event of
default by the counterparty. If the counterparty defaults and the value of the
collateral declines, or if the counterparty enters into insolvency proceedings,
realization of the collateral by a Portfolio may be delayed or limited.
FOREIGN CURRENCY TRANSLATION -- The books and records of the International and
Global Technology & Communications Funds are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis:
(I) market value of investment securities, other assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at the
relevant rates of exchange prevailing on the respective dates of such
transactions.
The International and Global Technology & Communications Funds do not isolate
that portion of gains and losses on investment securities that is due to changes
in the foreign exchange rates from that which is due to changes in market prices
of such securities.
The International and Global Technology & Communications Funds report gains and
losses on foreign currency related transactions as components of realized gains
for financial reporting purposes, whereas such components are treated as
ordinary income or loss for Federal income tax purposes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
International and Global Technology & Communications Funds may enter into
forward foreign currency exchange contracts. Foreign currency exchange contracts
are recorded at market value. Certain risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts. Realized gains or losses arising from such transactions are
included in net realized gain (loss) from foreign currency transactions. At
September 30, 2000, there were no forward foreign currency contracts outstanding
for the International and Global Technology & Communications Funds.
OTHER -- Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses are prorated to the
Portfolios on the basis of relative net assets. Class specific expenses, such as
12b-1 service fees, are borne by that class. Income, other expenses and realized
and unrealized gains and losses of a Portfolio are allocated to the respective
class on the basis of the relative net assets each day.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -- The preparation
of financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
3. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES AND
OTHER TRANSACTIONS WITH AFFILIATES
The Fund and Pilgrim Baxter & Associates, Ltd. (the "Adviser") are parties to an
Investment Advisory Agreement (the "Advisory Agreement"). Under the terms of the
Advisory Agreement, the Adviser is paid a monthly fee at an annual rate of 0.85%
of the average daily net assets of the Growth, Emerging Growth, Select Equity,
Core Growth, Large Cap 20, Mid-Cap Value, Focused Value and Technology &
Communications Funds, 0.75% of the average daily net assets of the Large Cap
Growth Fund, 0.65% of the Large Cap Value Fund, 1.00% of the average daily net
assets of the Limited, New Opportunities, Small Cap Value, International and
Strategic Small Company Funds, 1.50% of the average daily net assets of the
Global Technology & Communications Fund, and 0.30% of the average daily net
assets of the Cash Reserves Fund.
In the interest of limiting expenses of the Portfolios, the Adviser has entered
into expense limitation agreements with the Fund ("Expense Limitation
Agreements"), with respect to the Core Growth, Limited, Large Cap 20, New
Opportunities, Large Cap Value, Mid-Cap Value, Small Cap Value, Focused Value,
Strategic Small Company and Global Technology & Communications Funds, pursuant
to which the Adviser has agreed to waive or limit its fees and to assume other
expenses of these Portfolios to the extent necessary to limit the total annual
expenses (expressed as a percentage of the Portfolios' average daily net assets)
to 1.50%, to not more than 2.25% of the average daily net assets of the
International Fund and to not more than 2.15% of the average daily net assets of
the Global Technology & Communications Fund. Reimbursement by the Portfolios of
the advisory fees waived or limited and other expenses paid by the Adviser
pursuant to the Expense Limitation Agreements during any of the previous two
fiscal years may be made at a later date when the Portfolios have reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual expense rate of each Portfolio to exceed 1.50% for the Core Growth,
Limited, Large Cap 20, New Opportunities, Large Cap Value, Mid-Cap Value, Small
Cap Value, Focused Value and Strategic Small Company Funds, 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% for the Core Growth, Limited, Large Cap 20, New
Opportunities, Large Cap Value, Mid-Cap Value, Small Cap Value, Focused Value
and Strategic Small Company Funds, 2.25% for the International Fund and 2.15%
for the Global Technology and Communications Fund, and (iii) the payment of such
reimbursement was approved by the Board of Directors on a quarterly basis. At
September 30, 2000, the amount of advisory fee waiver and reimbursement of third
party expenses by the Adviser subject to possible reimbursement were as follows:
Small Cap Value Fund $42,611
Strategic Small Company Fund $32,160
Focused Value Fund $ 5,317
Global Technology & Communications Fund $ 8,328
Pilgrim Baxter Value Investors, Inc. (formerly Newbold's Asset Management,
Inc.), a wholly-owned subsidiary of the Adviser serves as the sub-adviser to the
Large Cap Value Fund, Mid-Cap Value Fund, Small Cap Value Fund, Focused Value
Fund and the Strategic Small Company Fund. For its services provided pursuant to
its Investment Sub-Advisory Agreement with the Adviser and the Fund, Pilgrim
Baxter Value Investors receives a fee from the Adviser at an annual rate of
0.40%, 0.50%, 0.65%, 0.40% and 0.30%, respectively, of the average daily net
assets of the Large Cap Value Fund, Mid-Cap Value Fund, Small Cap Value Fund,
Focused Value Fund and the Strategic Small Company Fund. Pilgrim Baxter Value
Investors receives no fees directly from the Large Cap Value Fund, Mid-Cap Value
Fund, Small Cap Value Fund, Focused Value Fund or the Strategic Small Company
Fund.
Murray Johnstone International, Ltd. ("Murray Johnstone") serves as the
sub-adviser to the International Fund. For its services provided pursuant to its
Investment Sub-Advisory Agreement with the Adviser and the Fund, Murray
Johnstone receives a fee from the Adviser at an annual rate of 0.50% of the
International Fund's average daily net assets. Murray Johnstone receives no fees
directly from the International Fund.
[LOGO OMITTED] 77
<PAGE>
THE PBHG FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- CONCLUDED
------------------------------------------
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
Wellington Management Company, LLP ("WMC") serves as the sub-adviser to the Cash
Reserves Fund. For its services provided pursuant to the Investment Sub-Advisory
Agreement with the Adviser and the Fund, WMC is entitled to receive a fee from
the Adviser, computed daily and paid monthly, at an annual rate equal to 0.075%
of the Cash Reserves Fund's average daily net assets up to and including $500
million and 0.020% of the Cash Reserves Fund's average daily net assets over
$500 million, but subject to a minimum annual fee of $50,000. WMC may, from time
to time, waive all or a portion of its fee from the Adviser. WMC receives no
fees directly from the Cash Reserves Fund.
PBHG Fund Services (the "Administrator"), a wholly-owned subsidiary of the
Adviser, provides the Fund with administrative services, including regulatory
reporting and all necessary office space, equipment, personnel and facilities.
For these administrative services, the Administrator receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.15% of the average
daily net assets of each Portfolio.
SEI Investments Management Corporation, a wholly-owned subsidiary of SEI
Investments Company, is the owner of all beneficial interest in SEI Mutual Funds
Services (the "Sub-Administrator"). The Sub-Administrator is an affiliate of the
Fund's distributor and assists the Administrator in providing administrative
services to the Fund. For acting in this capacity, the Administrator pays the
Sub-Administrator a fee at the annual rate of 0.04% of the average daily assets
of each portfolio with respect to the first $2.5 billion of the total average
daily net assets of (i) the Fund, and (ii) PBHG Insurance Series Fund, Inc.,
another fund family managed by the Adviser (collectively known as the "PBHG Fund
Family"), 0.025% of the next $7.5 billion of the average daily assets of each
portfolio in the PBHG Fund Family, and 0.02% of the average daily net assets of
each portfolio in the PBHG Fund Family in excess of $10 billion.
The Adviser has entered into an agreement with SEI Investments to act
as an agent in placing repurchase agreements for the Portfolio. Listed below are
the amounts SEI Investments earned for its services from each Portfolio for the
period ended September 30, 2000, and are reflected as a reduction of interest
income.
Growth Fund $134,283
Emerging Growth Fund 30,916
Large Cap Growth Fund 10,409
Select Equity Fund 41,917
Core Growth Fund 3,716
Limited Fund 3,988
Large Cap 20 Fund 24,297
New Opportunities Fund 5,117
Large Cap Value Fund 1,414
Mid-Cap Value Fund 1,966
Small Cap Value Fund 4,316
Focused Value Fund 781
Technology & Communications Fund 32,865
Strategic Small Company Fund 1,457
Global Technology & Communications Fund 980
The Fund and SEI Investments Distribution Co. (the "Distributor") are parties to
a Distribution Agreement. The Distributor receives no fees for its distribution
services. The Fund has adopted a Service Plan (the "Plan") on behalf of the
Advisor Class shares pursuant to Rule 12b-1 under the Investment Company Act of
1940. The Plan provides for the payment by the Fund of up to 0.25% of the
average daily net assets of the Advisor Class shares for certain distribution
and shareholder services. Currently only the Growth Fund has Advisor Class
shareholders.
DST Systems, Inc. serves as the transfer agent and dividend disbursing agent of
the Fund. From time to time, the Fund may pay amounts to third parties that
provide sub-transfer agency and other administrative services relating to the
Fund to persons who beneficially own interests in the Fund. First Union National
Bank, serves as the custodian for each of the Portfolios except the
International and the Global Technology & Communications Funds. The Northern
Trust Company serves as the custodian for the International and Global
Technology & Communications Funds.
The Fund has entered into a shareholder servicing agreement with PBHG Fund
Services to provide shareholder support and other shareholder account-related
services. PBHG Fund Services has, in turn, contracted with UAM Shareholder
Service Center, Inc. ("UAMSSC") to assist in the provision of those services.
UAMSSC receives no fees directly from the Portfolios.
SHAREHOLDER SERVICE FEES (INCLUDING OUT OF POCKET EXPENSES) PAID TO PBHG FUND
SERVICES FOR THE PERIOD ENDED SEPTEMBER 30, 2000 WERE:
AMOUNT
----------
Growth Fund $816,617
Emerging Growth Fund 239,172
Large Cap Growth Fund 75,554
Select Equity Fund 297,616
Core Growth Fund 65,000
Limited Fund 33,798
Large Cap 20 Fund 212,024
New Opportunities Fund 32,862
Large Cap Value Fund 18,381
Mid-Cap Value Fund 20,243
Small Cap Value Fund 19,658
Focused Value Fund 10,604
International Fund 12,199
Cash Reserves Fund 78,386
Technology & Communications Fund 609,345
Strategic Small Company Fund 24,572
Global Technology &
Communications Fund 24,468
On April 4, 2000, the Board of Directors approved an agreement between the Fund
and PBHG Fund Services to provide shareholder related web development and
maintenance services. For its services, PBHG Fund Services will receive an
annual fee of $720,000, which will be allocated to each fund quarterly based on
average net assets. The fee is reviewed biannually by the Board of Directors.
Officers and directors of the Fund who are or were officers of the Adviser,
Administrator, Sub-Administrator and the Distributor received no compensation
from the Fund.
4. INVESTMENT TRANSACTIONS
The cost of securities purchased and the proceeds from securities sold, other
than short-term investments, for the Equity Portfolios for the period ended
September 30, 2000 were as follows:
PURCHASES SALES
(000) (000)
---------- ----------
Growth Fund $2,614,647 $2,439,829
Emerging Growth Fund 321,918 356,026
Large Cap Growth Fund 343,626 145,178
Select Equity Fund 1,001,872 826,916
Core Growth Fund 100,202 104,440
Limited Fund 35,150 51,273
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<PAGE>
THE PBHG FUNDS, INC.
PURCHASES SALES
(000) (000)
----------- ------------
Large Cap 20 Fund $ 602,903 $ 511,642
New Opportunities Fund 268,139 447,889
Large Cap Value Fund 310,090 284,926
Mid-Cap Value Fund 132,662 86,871
Small Cap Value Fund 225 131,227
Focused Value Fund 77,009 56,343
International Fund 3,359 4,098
Technology & Communications Fund 3,848,110 3,927,347
Strategic Small Company Fund 78,617 64,987
Global Technology & Communications Fund 195,377 95,284
The aggregate gross unrealized appreciation and depreciation of securities held
by the Portfolios at September 30, 2000 are as follows:
NET
UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION DEPRECIATION (DEPRECIATION)
(000) (000) (000)
------------ ------------ --------------
Growth Fund $2,302,048 $(361,005) $1,941,043
Emerging Growth Fund 547,192 (60,416) 486,776
Large Cap Growth Fund 124,114 (16,062) 108,052
Select Equity Fund 632,383 (157,545) 474,838
Core Growth Fund 60,742 (13,491) 47,251
Limited Fund 75,711 (3,624) 72,087
Large Cap 20 Fund 384,213 (23,441) 360,772
New Opportunities Fund 44,355 (1,996) 42,359
Large Cap Value Fund 3,358 (628) 2,730
Mid-Cap Value Fund 12,490 (5,090) 7,400
Small Cap Value Fund 27,828 (11,711) 16,117
Focused Value Fund 4,180 (2,106) 2,074
International Fund 1,264 (935) 329
Technology &
Communications Fund 895,166 (375,746) 519,420
Strategic Small
Company Fund 31,182 (4,963) 26,219
Global Technology &
Communications Fund 6,494 (8,161) (1,667)
The difference between book and tax cost basis at September 30, 2000 was
immaterial. The Cash Reserves Fund had a capital loss carryforward of $11,635
expiring in 2008 at March 31, 2000, that can be used to offset future capital
gains.
5. CONCENTRATIONS
The Cash Reserves Fund invests primarily in a portfolio of money market
instruments maturing in 397 days or less whose ratings are within one of the two
highest ratings categories assigned by a nationally recognized statistical
rating agency, or, if not rated, are believed to be of comparable quality. The
ability of the issuers of the securities held by the Portfolio to meet their
obligations may be affected by economic developments in a specific industry,
state or region.
The International and Global Technology & Communications Funds invest in
securities of foreign issuers in various countries. These investments may
involve certain considerations and risks not typically associated with
investments in the United States, as a result of, among other factors, the
possibility of future political and economic developments and the level of
governmental supervision and regulation of securities markets in the respective
countries.
Certain funds invest a high percentage of their assets in specific sectors of
the market, especially technology, in order to achieve a potentially greater
investment return. As a result, the economic, political and regulatory
developments in a particular sector of the market, positive or negative, have a
greater impact on the fund's net asset value and will cause its shares to
fluctuate more than if the fund did not concentrate its investments in a
particular section. In addition, the Technology & Communications and the Global
Technology & Communications Funds are concentrated which means they will invest
25% or more of their net assets in specific industries within the technology and
communication sectors of the market in order to achieve a potentially greater
investment return.
6. LINE OF CREDIT
Except for the PBHG Cash Reserves Fund, each Portfolio may borrow, an amount up
to its prospectus defined limitations, from a $500 million committed line of
credit available to (i) the Funds and (ii) PBHG Insurance Series Fund, Inc.
Borrowings from the line of credit will bear interest at the Federal Funds Rate
plus 0.50%. As of September 30, 2000, there were no outstanding borrowings.
Listed below are the Funds which had outstanding balances during the period
ended September 30, 2000.
DAILY
WEIGHTED
MAXIMUM AVERAGE AVERAGE
AMOUNT OUTSTANDING INTEREST
BORROWED BALANCE RATE
---------- ----------- --------
Select Equity Fund 158,700,000 1,853,005 6.61%
Core Growth Fund 12,500,000 592,896 6.60%
New Opportunities Fund 53,100,000 1,154,645 6.65%
Large Cap Value Fund 3,100,000 92,896 6.49%
Mid Cap Value Fund 15,300,000 405,464 6.47%
Small Cap Value Fund 1,500,000 12,022 6.41%
Focused Value Fund 500,000 2,732 6.37%
Technology &
Communications Fund 119,500,000 8,321,858 6.73%
7. OTHER
On September 26, 2000, Old Mutual plc acquired United Asset Management
Corporation through a tender offer and merger. As a result, Old Mutual became
the ultimate parent company of Pilgrim Baxter & Associates, Ltd., Pilgrim Baxter
Value Investors, Inc. and Murray Johnstone. This change in control constituted
an assignment of the Advisory Agreements and Investment Sub-Advisory Agreements
and resulted in their termination for the purposes of the Investment Company Act
of 1940 ("1940 Act"). Investment advisory and sub-advisory services are
currently being provided pursuant to Interim Advisory and Interim Sub-Advisory
Agreements adopted in accordance with Rule 15a-4 under the 1940 Act. Fees
payable pursuant to these interim agreements are being escrowed in accordance
with that rule. In accordance with the 1940 Act, the Fund's Board of Directors
will be asked to approve new investment advisory and sub-advisor agreements with
Pilgrim Baxter & Associated, Ltd. and each current sub-advisor and to approve
submitting these agreements to shareholders for their approval. The new
agreements will be identical to the current agreements in all material respects
except for their effective and termination dates and the elimination of a state
expense limitation provision. The new agreements will have no effect on the
contractual advisory fee rates payable by the Portfolios. No changes are
currently planned which would affect services being provided to the Portfolios.
On October 11, 2000, Aberdeen Asset Management plc agreed to buy Murray
Johnstone's immediate parent company, Murray Johnstone Holdings Ltd., from Old
Mutual.
[LOGO OMITTED] 79
<PAGE>
The PBHG Funds, Inc.
[This page is intentionally left blank.]
[LOGO OMITTED] 80
<PAGE>
[BANK PAGE]
<PAGE>
[PBHG FUNDS LOGO OMITTED]
P.O. Box 219534
Kansas City, MO 64121-9534
Investment Adviser:
Pilgrim Baxter & Associates, Ltd.
Distributor:
SEI Investments Distribution Co.
1-800-433- WWW.PBHGFUNDS.COM
<PAGE>
PART C: OTHER INFORMATION
Item 15. 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 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
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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 16. EXHIBITS:
1. (a) Articles of Restatement of the Articles of Incorporation of
the Registrant filed October 21, 1998. Incorporated herein by
reference to Post-Effective Amendment No. 35 to Registrants
Registration Statement on Form N-1A ("PEA No.
35").
(b) Articles Supplementary of the Registrant filed November 12, 1998.
Incorporated herein by reference to PEA No. 35.
(c) 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 ("PEA No. 36").
(d) Articles of Amendment filed April 4, 2000. Incorporated herein
by reference to Post-Effective Amendment No. 38 to Registrants
Registration Statement on Form N-1A ("PEA No. 38").
2. 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 ("PEA No. 34").
3. Voting Trusts - None.
4. A copy of the form of the Plan of Reorganization for
International Fund is attached as Appendix I to the Combined
Proxy Statement and Prospectus contained in this Registration
Statement and is incorporated by reference herein.
5. Articles of Incorporation filed as Exhibit 1.
6. (a) 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 &
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Associates, Ltd. Incorporated herein by reference to
Post-Effective Amendment No. 30 to Registrant's Registration
Statement on Form N-1A ("PEA No. 30").
(b) Form of Amendment to Investment Advisory Agreement between
Pilgrim Baxter & Associates, Ltd. and the Registrant.
Incorporated herein by reference to PEA No. 35.
(c) 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.
(d) 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.
(e) 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 ("PEA No. 23").
(f) Form of Investment Sub-Advisory Agreement between the
Registrant, Pilgrim Baxter & Associates, Ltd. and Pilgrim Baxter
Value Investors, Inc. Incorporated herein by reference to PEA
No. 35.
(g) 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.
(h) 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
(i) 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.
(j) 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.
(k) 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.
(l) 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.
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(m) 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 Registrants Registration
Statement on Form N-1A ("PEA No. 38").
7. (a) 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.
(b) Form of Amendment to Distribution Agreement between the
Registrant and SEI Financial Services Company. Incorporated
herein by reference to PEA No. 35.
(c) Schedule A dated December 3, 1998 to Distribution Agreement
dated April 1, 1997 by and between the Registrant and SEI
Financial Services Company. Incorporated herein by reference to
PEA No. 36.
(d) Schedule A dated January 25, 1999 to Distribution Agreement
dated April 1, 1997 by and between the Registrant and SEI
Financial Services Company. Incorporated herein by reference to
PEA No. 36.
(e) 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
Post-Effective Amendment No. 38 to Registrants Registration
Statement on Form N-1A ("PEA No. 38").
(f) Form of Selling Group Agreement. Incorporated herein by
reference to Post-Effective Amendment No. 10 to Registrant's
Registration Statement on Form N-1A ("PEA No. 10").
8. Bonus, profit sharing, pension contracts - None.
9. (a) Custodian Agreement between the Registrant and The Northern
Trust Company, on behalf of the International Fund. Incorporated
herein by reference to PEA No. 30.
(b) First Amendment to Custody Agreement between the Registrant and
The Northern Trust Company dated June 4, 1998 on behalf of the
International Fund. Incorporated herein by reference to PEA No.
35.
(c) 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.
(d) Form of Amendment to the Custodian Agreement between the
Registrant and First Union National Bank, successor by merger to
CoreStates Bank, N.A. Incorporated herein by reference to PEA
No. 35.
(e) Schedule A dated December 3, 1998 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.
(f) 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.
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10. 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.
11. Opinion and consent of Ballard Spahr Andrews & Ingersoll, LLP,
as to the legality of the securities being registered is being
filed herewith electronically.
12. Opinion and consent of Ballard Spahr Andrews & Ingersoll, LLP,
supporting the tax matters and consequences to shareholders
discussed in the Combined Proxy Statement and Prospectus will be
filed in a Post-Effective Amendment.
13. (a) 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.
(b) Form of Amendment to the Administrative Services Agreement
between the Registrant and PBHG Fund Services. Incorporated
herein by reference to PEA No. 35.
(c) Schedule A dated December 3, 1998 to Administrative Services
Agreement dated July 1, 1996 by and between the Registrant and
PBHG Fund Services. Incorporated herein by reference to PEA No.
36.
(d) Schedule A dated January 25, 1999 to Administrative Services
Agreement dated July 1, 1996 by and between the Registrant and
PBHG Fund Services. Incorporated herein by reference to PEA No.
36.
(e) 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
Post-Effective Amendment No. 38 to Registrants Registration
Statement on Form N-1A ("PEA No. 38").
(f) 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.
(g) 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.
(h) Form of Amendment to the Sub-Administrative Services Agreement
between the Registrant, PBHG Fund Services and SEI Fund
Resources. Incorporated herein by reference to PEA No. 35.
(i) Schedule A dated December 3, 1998 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. 36.
(j) Schedule A dated January 25, 1999 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. 36.
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(k) 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 Post-Effective Amendment No. 38 to Registrants
Registration Statement on Form N-1A ("PEA No. 38").
(l) Schedule A dated December 3, 1998 to Agency Agreement dated
January 1, 1998 by and between the Registrant and DST Systems,
Inc. Incorporated herein by reference to PEA No. 36.
(m) Schedule A dated January 25, 1999 to Agency Agreement dated
January 1, 1998 by and between the Registrant and DST Systems,
Inc. Incorporated herein by reference to PEA No. 36.
(n) 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 Post-Effective Amendment No.
38 to Registrants Registration Statement on Form N-1A ("PEA No.
38").
(o) 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 ("PEA No. 25").
(p) 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.
(q) 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 ("PEA No. 27).
(r) 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.
(s) 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.
(t) 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.
(u) 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.
(v) 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.
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(w) 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.
(x) Form of Expense Limitation Agreement between the Registrant and
Pilgrim Baxter & Associates, Ltd. on behalf of each Portfolio
listed on Schedule A. Incorporated herein by reference to PEA
No. 35.
(y) 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.
(z) 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.
(aa) 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.
(bb) Shareholder Services Agreement between the Registrant and PBHG
Fund Services dated January 1, 1998. Incorporated herein by
reference to PEA No. 35.
(cc) Schedule A dated December 3, 1998 to Shareholder Services
Agreement dated January 1, 1998 by and between the Registrant
and PBHG Fund Services. Incorporated herein by reference to PEA
No. 36.
(dd) Schedule A dated January 25, 1999 to Shareholder Services
Agreement dated January 1, 1998 by and between the Registrant
and PBHG Fund Services. Incorporated herein by reference to PEA
No. 36.
(ee) 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.
(ff) Southwestern Life Insurance Company Defined Benefit Pension Plan
and Trust. Incorporated herein by reference to Pre-Effective
Amendment No. 1 to Registrant's Registration Statement on Form
N-1A ("PEA No. 1").
(gg) Adoption Agreement for Southwestern Life Insurance Company
Standardized Integrated Defined Benefit Pension Plan and Trust
(with Pairing Provisions). Incorporated herein by reference to
PEA No. 1.
(hh) Adoption Agreement for Southwestern Life Insurance Company
Standardized Non-Integrated Defined Benefit Pension Plan and
Trust (with Pairing Provisions). Incorporated herein by
reference to PEA No. 1.
(ii) Adoption Agreement for Southwestern Life Insurance Company
Non-Standardized Integrated Defined Benefit Pension Plan and
Trust. Incorporated herein by reference to PEA No. 1.
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(jj) Adoption Agreement for Southwestern Life Insurance Company
Non-Standardized Non-Integrated Defined Benefit Pension Plan and
Trust. Incorporated herein by reference to PEA No. 1.
(kk) Southwestern Life Insurance Company Combination Profit
Sharing-Money Purchase Plan and Trust. Incorporated by reference
to PEA No. 1.
(ll) Adoption Agreement for Southwestern Life Insurance Company
Standardized Money Purchase Plan and Trust (with Pairing
Provisions). Incorporated herein by reference to PEA No. 1.
(mm) Adoption Agreement for Southwestern Life Insurance Company
Standardized Profit Sharing Plan and Trust (with Pairing
Provisions). Incorporated herein by reference to PEA No. 1.
(nn) Adoption Agreement for Southwestern Life Insurance Company
Non-Standardized Money Purchase Plan and Trust. Incorporated
herein by reference to PEA No. 1.
(oo) Adoption Agreement for Southwestern Life Insurance Company
Non-Standardized Profit Sharing Plan and Trust. Incorporated
herein by reference to PEA No. 1.
(pp) Form 5305, Simplified Employee Pension-Individual Retirement
Accounts Contribution Agreement. Incorporated herein by
reference to PEA No. 1.
(qq) Form 5305-A, Individual Retirement Custodial Account.
Incorporated herein by reference to PEA No. 1.
(rr) Southwestern Life Insurance Company Tax Deferred Annuity Program
Custodial Agreement. Incorporated herein by reference to PEA No.
1.
(ss) Amendment to Application for Investment Plans under a 403(b)(7)
Plan. Incorporated herein by reference to Post-Effective
Amendment No. 19 to Registrant's Registration Statement on Form
N-1A.
(tt) Schedule for computation of Performance Quotation provided in
the Registration Statement. Incorporated herein by reference to
PEA No. 30.
14. Consent of Independent Accountants (to be filed in subsequent
amendment).
15. Financial statements omitted pursuant to Item 14(a)(1) - None.
16. Power of Attorney. Incorporated herein by Reference to PEA No.
34.
17. (a) Form of Proxy (filed herewith).
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Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR
230.145c], the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
(3) An opinion of counsel supporting the tax matters and consequences to
shareholders discussed in the prospectus will be filed in a Post-Effective
Amendment to this Registration Statement.
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SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has been
signed on behalf of the Registrant by the undersigned, thereunto duly
authorized, in the City of Wayne, and Commonwealth of Pennsylvania on the 17th
day of November, 2000.
THE PBHG FUNDS, INC.
Registrant
By: /S/ HAROLD J. BAXTER
Harold J. Baxter
Chairman and Director
As required by the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/ HAROLD J. BAXTER Chairman and Director NOVEMBER 17, 2000
-------------------------- -----------------
Harold J. Baxter
* Director NOVEMBER 17, 2000
-------------------------- -----------------
John R. Bartholdson
* Director NOVEMBER 17, 2000
-------------------------- -----------------
Jettie M. Edwards
* Director NOVEMBER 17, 2000
-------------------------- -----------------
Albert A. Miller
/S/ GARY L. PILGRIM President NOVEMBER 17, 2000
-------------------------- -----------------
Gary L. Pilgrim
/S/ MEGHAN M. MAHON Vice President & NOVEMBER 17, 2000
-------------------------- Assistant Secretary -----------------
Meghan M. Mahon
/S/ LEE T. CUMMINGS Treasurer, Chief Financial NOVEMBER 17, 2000
-------------------------- Officer and Controller -----------------
Lee T. Cummings
</TABLE>
* By: /S/ JOHN M. ZERR__
John M. Zerr
Attorney-in-Fact
<PAGE>
THE PBHG FUNDS, INC.
Registration Statement on Form N-14
Exhibit Index
EXHIBIT NO. ITEM
11 Opinion of counsel regarding legality of
securities being registered
14 Consent of PricewaterhouseCoopers
(to be filed in subsequent amendment)
17(a) Form of Proxy
