<PAGE>
ADVISOR'S FUND
================================================================================
SEMI-ANNUAL REPORT
January 31, 2000
Investment Advisor to
the Advisor's Fund
The Private Consulting Group
[PCG LOGO]
* PCG Growth Series
* SIM Conservative Growth Series
[SBG LOGO]
The Security Benefit
Group of Companies
<PAGE>
PCG GROWTH SERIES
MARCH 15, 2000
[PHOTOGRAPH OF TOD BILLINGS]
Tod Billings
Portfolio Manager
Despite rising interest rates, the U.S. economy continued to outpace
expectations during the final quarter of 1999, and major stock indices closed
out the year at record high levels. With unemployment at a 30-year low and
company pricing power highly restrained, consumers propelled the economy
forward. Rising interest rates kept financial stocks under pressure, but failed
to quench investor appetite for high P/E telecommunications and technology
stocks. Investor demand for these stocks drove the Nasdaq return up over 85%
breaking the Dow's all time one-year return of 81% set in 1915.
Although stock indices hit record levels, market breadth was narrow as more
issues lost ground than advanced. In fact, approximately 60% of the S&P 500 and
NYSE stocks were priced lower at the end of 1999 than they were at the beginning
of the year. Robert Farrell, Chief Market Strategist for Merrill Lynch recently
reported that of the stocks followed by Merrill, the stocks without earnings
were up 52% last year; stocks with earnings were down for the year. Amid this
environment, the PCG Growth series underperformed its primary benchmark, the S&P
500, for the period July 31, 1999 to January 31, 2000, finishing down 4.1%
versus a 5.6% return for the index.*
One example of the narrowness and fickleness of the market can be seen in the
performance of one of our core holdings, Freddie Mac. Earnings for the company
were up a very solid 27% for 1999, but the price of the stock declined 27%.
These examples unfortunately were far too common in what was the investing
environment of 1999. The increasing volatility of stock prices does not concern
us. In fact, we welcome it as we believe that greater volatility leads to more
efficient pricing, which spells investment opportunity.
During the second half of the year, some of the new equity positions we have
established are: Altera Corporation, a leading maker of high-density
programmable logic devices (PLDs) , standard integrated circuits that customers
program using software also provided by Altera. CTS Corporation, which is a
vital part of the component industry. It makes electronic components and
component assemblies for the automotive, computer, and communications
industries. Avery Dennison Corporation, a global leader in the making of
adhesive labels used on packaging, mailers, and other items. Some of the
companies which we sold our stake in were U.S. Bancorp, Keycorp, Merck &
Company, Inc., and Abbott Laboratories. The Fund remains heavily weighted in the
financial services industry; however, second half activity saw us increase our
exposure to the technology sector.
We employ an investment approach that seeks to own companies with consistent
operating histories that are trading below their intrinsic value. Core positions
are established and held until economic prospects of the companies change or
intrinsic value is reached. We have a commitment to a logical, thoughtful,
business-like approach to investing. Our investment philosophy follows a set of
principles that keeps in mind the concept of economic earnings power and cash
return on investment viewed from the perspective of a business owner.
We invest in a concentrated group of businesses that we believe have sound
long-term economic fundamentals and which are deemed to be undervalued at the
time of purchase. With a concentrated portfolio, we expect the Fund to be more
volatile than the market, especially during narrow market conditions.
We are grateful for your confidence and support, and are committed to doing our
very best for you. We believe that the year 2000, while it may be a bit rocky at
times should be rewarding to patient investors.
*Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of the Fund are available only through the purchase of
such products.
Tod Billings
Portfolio Manager
<PAGE>
PCG GROWTH SERIES
MARCH 15, 2000
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF JANUARY 31, 2000
Since Inception
---------------
PCG Growth Series -5.35% (4-15-99)
Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of Advisor's Fund are available only
through the purchase of such products. Fee waivers reduced expenses of the
Series and in the absence of such waivers, the performance quoted would be
reduced.
The performance data quoted above represents past performance. Past performance
is not predictive of future performance. 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.
- --------------------------------------------------------------------------------
<PAGE>
SIM CONSERVATIVE GROWTH SERIES
MARCH 15, 2000
[PHOTOGRAPH OF GARY MILLER]
Gary Miller
Chief Investment Officer
The SIM Conservative Growth portfolio posted modest positive returns during the
period July 31, 1999 through January 31, 2000. The 0.7%* gain for the portfolio
trailed the total return of the S&P 500 index of large company U.S. stocks, but
exceeded the total return of the Lehman Aggregate Bond Index, which continues to
perform poorly as higher interest rates push bond prices lower.
THE ECONOMY
The U.S. economy raced ahead the last half of 1999. Gross Domestic Product (GDP)
growth of 5.7% (at an annual rate) and 6.9% in the third and fourth quarters was
much higher than the Federal Reserve Board's 2.5% to 3% comfort level. The
unemployment rate fell from 4.3% to 4.0% during this period, reaching its lowest
level in 30 years. Inflation, as measured by the Consumer Price Index, rose to
2.7% for the 12 months ended in January from only 2.1% six months earlier.
Internationally, growth and inflation are picking up around the world. In the
European Community, the Gross Domestic Product rose at an annual rate of 3.9%
during the third quarter, and picked up more steam heading into the end of the
year. Inflation is rising in Europe, as well, with inflation running at a 1.7%
rate in 1999 after a subdued 0.9% reading six months earlier. The Japanese
economy continues to sputter but appears to be gradually improving. Although GDP
fell in the third quarter, the economy did appear to be strengthening into the
end of the year.
Strong economies, lead by the U.S., and rising inflation continue to trouble the
Federal Reserve Board, which raised short-term interest rates three more times
during the period. That's a total of four increases since last summer, and it
looks like there are more increases to come.
EQUITY MARKETS
Equity markets were extremely volatile during the period, with concerns about
Y2k problems, Federal Reserve Board tightening, and high overall equity
valuations pulling most stocks down, while the excitement of the internet and
numerous other technological advances dramatically pushed some technology stocks
up over 100%. The S&P 500 returned 5.6% during the period, but more stocks
declined than rose. This made it a quite difficult period for conservative
investors, as large value stocks, the bastion of balanced funds, fell over 5%,
while small growth stocks, lead by the technology sector, rose nearly 30%.
International markets outperformed U.S. stocks during the period as the Morgan
Stanley Capital Europe, Australia, Far East (EAFE) index returned 11%. Japanese
stocks once again outperformed European stocks. Emerging markets stocks
continued their recovery from 1998's near collapse and rose 25% during the past
six months.
The SIM Conservative Growth portfolio's allocation was conservative throughout
the period, which dampened returns somewhat, but also dampened greatly the
day-to-day volatility. We held this conservative allocation because we believed
that many of the world's equity markets were fully or over-valued, the Federal
Reserve Board was tightening credit by raising short-term interest rates, and we
were concerned that market volatility would be extreme due to Y2k-related
issues. We held a near minimum equity allocation throughout the period, broken
down into about 20% large company U.S. stock funds, 5% small company U.S. stock
funds, and 5% in diversified international stock funds. Big gains in Japan
brought that market to a level where we believe an overweight position in Japan
is no longer warranted. We therefore gradually eliminated our position in the T
Rowe Price Japan fund during the period. In September we purchased a fund that
specializes in Real Estate Investment Trusts (REITs) as REIT prices dropped to
the point where yields now exceed 8%.
FIXED INCOME
On the fixed income side, interest rates rose throughout the period as the
Federal Reserve Board raised short-term interest rates three times. Three-month
T-bill yields rose a full 1% during the past six months and intermediate
Government bond yields rose 0.80%, but long-term Government bond yields only
rose 0.1% to 6.3%, causing a dramatic flattening of the yield curve. We started
the period with a high allocation to short-term bond funds, but as yields rose,
our allocation to longer-term funds increased. This moderately helped
performance during the period. In January we added an allocation to
inflation-indexed bonds. Inflation-indexed bonds are a relatively new asset type
for U.S. investors which we are very excited about. Unlike most bonds, which can
be ravaged by higher inflation, inflation-indexed bonds pay a yield over
inflation; if inflation goes up, the yield goes up. Of course, during periods of
declining inflation these bonds will not perform as well as normal bonds. But
just in case we do see inflation start to rise (the "just-in-cases" are why we
diversify our assets) these bonds will help the portfolio maintain its value.
<PAGE>
SIM CONSERVATIVE GROWTH SERIES
MARCH 15, 2000
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF JANUARY 31, 2000
Since Inception
---------------
SIM Conservative Growth Series 1.90% (4-15-99)
Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of a Series of Advisor's Fund are available only
through the purchase of such products. Fee waivers reduced expenses of the
Series and in the absence of such waivers, the performance quoted would be
reduced.
The performance data quoted above represents past performance. Past performance
is not predictive of future performance. 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.
- --------------------------------------------------------------------------------
FUTURE PROSPECTS
We expect the Federal Reserve Board to continue raising short-term interest
rates; this will continue to weigh on markets. However, the declines in markets
around the world in early 2000 have improved valuations and the impact of Y2k is
gradually fading. We therefore expect to be increasing our allocation to stocks
around the world accordingly over the next few months. Of particular interest to
us are the very beaten-down value stocks in the U.S. which are now below levels
of nearly two years ago. Someday soon we believe investors will notice these
stocks that are trading at historically low relative price-earnings ratios and
begin to bid up their prices. We hope to take advantage of this when they do.
*Performance figures do not reflect fees and expenses associated with an
investment in variable insurance products offered by Security Benefit Life
Insurance Company. Shares of the Fund are available only through the purchase
of such products.
<PAGE>
SCHEDULE OF INVESTMENTS
JANUARY 31, 2000 (UNAUDITED)
PCG GROWTH SERIES
NUMBER
COMMON STOCKS OF SHARES MARKET VALUE
--------- ------------
AEROSPACE/DEFENSE - 2.5%
Boeing Company ....................................... 1,000 $ 44,312
BANKS - MAJOR REGIONAL - 4.5%
Wells Fargo Company .................................. 2,000 80,000
COMMUNICATION EQUIPMENT - 4.2%
Tellabs, Inc.* ....................................... 1,400 75,600
COMPUTER SOFTWARE/SERVICES - 3.4%
Electronics for Imaging, Inc.* ....................... 1,300 60,938
ELECTRICAL EQUIPMENT - 9.5%
American Power Conversion Corporation* ............... 4,000 110,375
Black Box Corporation* ............................... 1,000 59,125
---------
169,500
ELECTRONICS - DEFENSE - 3.1%
CTS Corporation ...................................... 800 56,150
ELECTRONICS - SEMICONDUCTORS - 4.0%
Altera Corporation* .................................. 1,100 72,325
FINANCIAL - DIVERSE - 21.7%
American Express Company ............................. 700 115,368
Berkshire Hathaway, Inc.* (Cl. A) .................... 1 51,200
Berkshire Hathaway, Inc.* (Cl. B) .................... 22 36,212
Fannie Mae ........................................... 1,400 83,913
Freddie Mac .......................................... 2,000 100,375
---------
387,068
HEALTH CARE - DIVERSE - 4.4%
Johnson & Johnson .................................... 900 77,456
HEALTH CARE - PHARMACEUTICALS - MAJOR - 4.5%
Pfizer, Inc. ......................................... 2,200 80,025
MANUFACTURING - SPECIALIZED - 2.7%
Avery Dennison Corporation ........................... 700 47,425
MANUFACTURING - DIVERSIFIED - 7.0%
Honeywell International, Inc. ........................ 1,500 72,000
Myers Industries, Inc. ............................... 4,000 53,000
---------
125,000
PHOTOGRAPHY/IMAGING - 1.8%
Analytical Surveys, Inc.* ............................ 3,700 31,450
RETAIL - GENERAL MERCHANDISE - 6.0%
Costco Wholesale Corporation* ........................ 2,200 107,663
SERVICES - ADVERTISING/MARKETING - 5.8%
Omnicom Group, Inc. .................................. 1,100 103,056
SERVICES - COMMERCIAL & CONSUMER - 3.8%
High Speed Access Corporation* ....................... 1,000 18,188
Labor Ready, Inc.* ................................... 6,000 49,875
---------
68,063
TEXTILES - APPAREL - 3.5%
Jones Apparel Group, Inc.* ........................... 2,800 61,600
---------
Total common stocks - 92.4% .......................... 1,647,631
GOVERNMENT SECURITIES
U.S. GOVERNMENT SECURITIES - 7.1%
U.S. Treasury Strip, 0.0% - 2009 ..................... 230,000 125,784
---------
Total government securities - 7.1% ................... 125,784
---------
Total investments - 99.5% ............................ 1,773,415
Cash and other assets, less liabilities - 0.5% ....... 8,710
---------
Total net assets - 100.0% ............................ $1,782,125
=========
See accompanying notes.
<PAGE>
SCHEDULE OF INVESTMENTS
JANUARY 31, 2000 (UNAUDITED)
SIM CONSERVATIVE GROWTH SERIES
NUMBER
MUTUAL FUNDS OF SHARES MARKET VALUE
--------- ------------
Columbia Real Estate Equity Fund ..................... 1,290 $ 18,874
Dodge & Cox Income Fund .............................. 33,244 377,987
Montag and Caldwell Growth Fund ...................... 589 19,294
Nations International Value Fund ..................... 1,666 29,508
Oppenheimer Main Street Growth and Income Fund ....... 1,867 74,925
PIMCO Low Duration Fund .............................. 10,302 100,754
PIMCO Real Return Bond Fund .......................... 7,518 72,551
T. Rowe Price Equity-Income Fund ..................... 3,287 77,464
T. Rowe Price Small Capitalization Stock Fund ........ 680 15,001
-------
Total investments - 98.9% ............................ 786,358
Cash and other assets, less liabilities - 1.1% ....... 8,751
-------
Total net assets - 100.0% ............................ $795,109
=======
The identified cost of investments owned at January 31, 2000, was the same for
federal income tax and financial statement purposes.
*Non-income producing security.
See accompanying notes.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
PCG SIM
GROWTH CONSERVATIVE
SERIES GROWTH SERIES
------ -------------
ASSETS
Investments, at value (identified cost:
$1,819,122 and $806,803, respectively) ....... $1,773,415 $786,358
Cash ........................................... 138,518 8,979
Receivables:
Interest ..................................... 550 225
Dividends .................................... 406 ---
Private Consulting Group, Inc. ............... 634 1,919
Prepaid expenses ............................... 1,030 173
--------- -------
Total assets ............................... 1,914,553 797,654
--------- -------
LIABILITIES
Payable for:
Securities purchased ......................... $ 122,188 $ ---
Fund shares redeemed ......................... 94 42
Management fees .............................. 1,160 510
Custodian fees ............................... 500 165
Transfer and administration fees ............. 94 54
Professional fees ............................ 2,138 1,274
Miscellaneous ................................ 6,254 500
--------- -------
Total liabilities .......................... 132,428 2,545
--------- -------
NET ASSETS ..................................... $1,782,125 $795,109
========= =======
NET ASSETS CONSIST OF:
Paid in capital ................................ $1,881,942 $787,600
Accumulated undistributed net
investment income (loss) ..................... (8,671) 7,330
Accumulated undistributed net realized
gain (loss) on sale of investments ........... (45,439) 20,624
Net unrealized depreciation
in value of investments ...................... (45,707) (20,445)
--------- -------
Total net assets ........................... $1,782,125 $795,109
========= =======
Capital shares outstanding ..................... 188,132 77,993
Net asset value per share (net assets
divided by shares outstanding) ............... $9.47 $10.19
========= =======
See accompanying notes.
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
PCG SIM
GROWTH CONSERVATIVE
SERIES GROWTH SERIES
------ -------------
INVESTMENT INCOME:
Dividends ...................................... $ 6,049 $ 1,535
Interest ....................................... 7,876 11,870
------- -------
Total investment income ...................... 13,925 13,405
EXPENSES:
Management fees ................................ 6,735 2,189
Custodian fees ................................. 652 764
Transfer/maintenance fees ...................... 100 99
Administration fees ............................ 7,944 7,672
Directors' fees ................................ 32 ---
Professional fees .............................. 6,336 4,069
Reports to shareholders ........................ 57 57
Registration fees .............................. 67 67
Service Plan Fees .............................. 4,490 1,460
Other expenses ................................. 112 ---
------- -------
Total expenses ............................... 26,525 16,377
Less reimbursement of expenses ................. (3,929) (9,008)
------- -------
Net expenses ................................... 22,596 7,369
------- -------
Net investment income (loss) ................. (8,671) 6,036
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) from
investment transactions ........................ (41,940) 10,744
Capital gain distributions from
other investment companies ..................... --- 6,357
------- -------
Net realized gain (loss) ..................... (41,940) 17,101
Net change in unrealized depreciation
during the period on investments ............... (8,499) (22,209)
------- -------
Net realized and unrealized loss ............... (50,439) (5,108)
------- -------
Net increase (decrease) in net assets
resulting from operations .................. $(59,110) $928
======= =======
See accompanying notes.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
PCG SIM
GROWTH CONSERVATIVE
SERIES GROWTH SERIES
------ -------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) ................. $ (8,671) $ 6,036
Net realized gain (loss) from
investment transactions .................... (41,940) 10,744
Capital gain distributions from
other investment companies ................. --- 6,357
Net change in unrealized depreciation
during the period on investments ........... (8,499) (22,209)
--------- -------
Net increase (decrease) in net
assets resulting from operations ......... (59,110) 928
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................ --- ---
Net realized gains ........................... --- ---
--------- -------
Total distributions to shareholders ........ --- ---
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS ... 164,753 414,501
--------- -------
Total increase in net assets ............. 105,643 415,429
NET ASSETS:
Beginning of period .......................... 1,676,482 379,680
--------- -------
End of period ................................ $1,782,125 $795,109
========= =======
Accumulated undistributed net investment
income (loss) at end of period ............. $ (8,671) $ 7,330
========= =======
See accompanying notes.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JULY 31, 1999
PCG SIM
GROWTH CONSERVATIVE
SERIES* GROWTH SERIES*
------- --------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) ................ $ (1,367) $ 1,294
Net realized gain (loss) from
investment transactions ................... (3,499) 3,302
Capital gain distributions from
other investment companies ................ --- 221
Net change in unrealized appreciation
(depreciation) during the period
on investments ............................ (37,208) 1,764
------- -------
Net increase (decrease) in net assets
resulting from operations ............... (42,074) 6,581
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ....................... --- ---
Net realized gains .......................... --- ---
--------- -------
Total distributions to shareholders ....... --- ---
NET INCREASE FROM CAPITAL SHARE TRANSACTIONS .. 1,718,556 373,099
--------- -------
Total increase in net assets ............ 1,676,482 379,680
NET ASSETS:
Beginning of period ......................... --- ---
--------- -------
End of period ............................... $1,676,482 $379,680
========= =======
Undistributed net investment income at
end of period ............................. $--- $1,294
========= =======
*Period April 15, 1999 (inception) through July 31, 1999.
<PAGE>
FINANCIAL HIGHLIGHTS
JANUARY 31, 2000
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH
PERIOD.
FISCAL PERIOD ENDED JULY 31
-------------------------------
2000(c)(d)(e) 1999(b)(c)(d)
------------- -------------
PCG GROWTH SERIES
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............. $ 9.87 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ........................... (0.05) (0.01)
Net Gain (Loss) on Investments
(Realized and Unrealized) ..................... (0.35) (0.12)
----- -----
Total from Investment Operations ................ (0.40) (0.13)
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .......... --- ---
Distributions (from Capital Gains) .............. --- ---
----- -----
Total Distributions ........................... --- ---
----- -----
NET ASSET VALUE END OF PERIOD ................... $ 9.47 $ 9.87
===== =====
TOTAL RETURN(a) ................................. (4.05)% (1.30)%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............ $1,782 $1,676
Ratio of Expenses to Average Net Assets ......... 2.50% 2.50%
Ratio of Net Income (Loss) to Average Net Assets (0.95)% (0.34)%
Portfolio Turnover Rate ......................... 72% 26%
<PAGE>
FINANCIAL HIGHLIGHTS
JANUARY 31, 2000
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH
PERIOD.
FISCAL PERIOD ENDED JULY 31
-------------------------------
2000(c)(d)(e) 1999(b)(c)(d)
------------- -------------
SIM CONSERVATIVE GROWTH SERIES
PER SHARE DATA
NET ASSET VALUE BEGINNING OF PERIOD ............. $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income ........................... 0.10 0.04
Net Gain (Loss) on Investments
(Realized and Unrealized) ..................... (0.03) 0.08
----- -----
Total from Investment Operations ................ 0.07 0.12
LESS DISTRIBUTIONS
Dividends (from Net Investment Income) .......... --- ---
Distributions (from Capital Gains) .............. --- ---
----- -----
Total Distributions ........................... --- ---
----- -----
NET ASSET VALUE END OF PERIOD ................... $10.19 $10.12
===== =====
TOTAL RETURN(a) ................................. 0.69% 1.20%
RATIOS/SUPPLEMENTAL DATA
Net Assets End of Period (thousands) ............ $795 $380
Ratio of Expenses to Average Net Assets ......... 2.50% 2.50%
Ratio of Net Income to Average Net Assets ....... 2.09% 1.42%
Portfolio Turnover Rate ......................... 25% 44%
(a) Total return does not take into account any of the expenses associated with
an investment in variable insurance products offered by Security Benefit
Life Insurance Company. Shares of a series of Advisor's Fund are available
only through the purchase of such products.
(b) PCG Growth Series and SIM Conservative Growth Series were initially offered
on April 15, 1999, with net asset values of $10.00 per share. Percentage
amounts for the period have been annualized, except for total return.
(c) Fund expenses for PCG Growth Series and SIM Conservative Growth Series were
reduced by The Private Consulting Group, Inc., the Investment Manager,
during the period. Expense ratios absent such reimbursement would have been
as follows:
1999 2000
---- ----
PCG Growth Series 3.06% 2.94%
SIM Conservative Growth Series 7.83% 5.58%
(d) Net investment income per share has been calculated using the weighted
monthly average number of capital shares outstanding.
(e) Unaudited figures for the six months ended January 31, 2000. Percentage
amounts for the period, except total return, have been annualized.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company of the series type. The
Fund offers four Series: PCG Growth Series, PCG Aggressive Growth Series, SIM
Growth Series and the SIM Conservative Growth Series. Each series, in effect,
represents a separate fund. The Fund is required to account for the assets of
each series separately and to allocate general liabilities of the Fund to each
series based on the net asset value of each series. As of January 31, 2000, PCG
Growth and SIM Conservative Growth Series are the only Series which have
commenced operations. Shares of the Fund will be sold only to separate accounts
of Security Benefit Life Insurance Company. The following is a summary of the
significant accounting policies followed by the Fund in the preparation of its
financial statements.
A. SECURITIES VALUATION - Valuations of the Fund's securities are supplied by
pricing services approved by the Board of Directors. Securities listed or traded
on a recognized securities exchange are valued on the basis of the last sales
price. If there are no sales on a particular day, then the securities are valued
at the last bid price. If a security is traded on multiple exchanges, its value
will be based on the price from the principal exchange where it is traded. All
other securities for which market quotations are available are valued on the
basis of the current bid price. If there is no bid price or if the bid price is
deemed to be unsatisfactory by the Board of Directors or by the Fund's
investment manager, then the securities are valued in good faith by such method
as the Board of Directors determines will reflect the fair value. The Fund
generally will value short-term debt securities at prices based on market
quotations for such securities or securities of similar type, yield, quality and
duration, except those securities purchased with 60 days or less to maturity are
valued on the basis of amortized cost which approximates market value. Shares of
open-end, management investment companies (mutual funds) in which the Series
invest are valued at their respective net asset values. Such mutual funds value
securities in their portfolios for which market quotations are readily available
at their current market value (generally the last reported sale price) and all
other securities and assets at a fair value pursuant to methods established in
good faith by the Board or Board of Directors of the underlying mutual fund.
Money market funds in which the Series also invest generally value securities in
their portfolios on an amortized cost basis, which approximates market.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME - Security transactions are
accounted for on the trade date. Realized gains and losses are reported on the
identified cost basis. Distributions of short-term and long-term capital gains
made by mutual funds in which a Series invests are recorded as realized gains.
For tax purposes, the short-term portion of such distributions is treated as
dividend income. Dividend income is recorded on the ex-dividend date. Interest
income is recognized on the accrual basis. Premium and discounts on debt
securities are not amortized.
C. DISTRIBUTIONS TO SHAREHOLDERS - Distributions to shareholders are recorded
on the ex-dividend date. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes.
D. TAXES - The Fund complied with the requirements of the Internal Revenue
Code applicable to regulated investment companies and intends to distribute all
of its taxable net income and realized gains sufficient to relieve it from all,
or substantially all, federal income, excise and state income taxes. Therefore,
no provision for federal or state income tax is required.
E. USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees are payable to The Private Consulting Group, Inc. (PCG), the
Investment Manager, under an investment advisory contract at an annual rate of
.75% of the average daily net assets of each Series, computed on a daily basis.
In addition, PCG may receive payments (up to a maximum of 1 percent of the
public offering price) on purchases by the Series of shares issued by mutual
funds which have a distribution and/or service plan.
The Fund has adopted a Services Plan and related agreement for each Series of
the Fund. The plan provides for each Series to pay an amount not to exceed, on
an annual basis, .50% of the average daily net asset value of the shares of each
Series of the Fund attributable to variable insurance contracts, or with respect
to shares held by certain qualified retirement plans for which an authorized
firm provides services.
For the period ended January 31, 2000, PCG agreed to limit the total expenses
of PCG Growth Series and SIM Conservative Growth Series to an annual rate of
2.5% of the average daily net asset value of each respective Series.
For the period ended January 31, 2000, PCG also received $3,133 of brokerage
commissions for the execution of purchases and sales of portfolio securities on
behalf of the Series.
The Fund has entered into contracts with Security Management Company, LLC
(SMC) for transfer agent services and certain other administrative services
which SMC provides to the Fund. As the transfer agent SMC is paid an annual
fixed charge per account and shareholder and dividend transaction fees.
As the administrative agent for the Fund, SMC performs administrative
functions, such as regulatory filings, bookkeeping, accounting and pricing
functions for the Fund. For this service SMC receives, an annual accounting fee
of the greater of $15,000 or 0.03% of the average daily net asset value of the
Series and an annual administration fee of 0.045% of the daily net asset value
of the Series calculated daily and payable monthly.
Certain officers and directors of the Fund are also officers and/or directors
of SMC.
3. UNREALIZED APPRECIATION/(DEPRECIATION) OF INVESTMENT SECURITIES
The gross amounts of unrealized appreciation (depreciation), for federal
income tax purposes, as of January 31, 2000, were as follows:
PCG SIM
GROWTH CONSERVATIVE
SERIES GROWTH SERIES
- -----------------------------------------------------------------------------
Gross unrealized appreciation ................ $ 152,714 $ 6,103
Gross unrealized depreciation ................ (198,421) (26,548)
-------- -------
Net unrealized appreciation/(depreciation) ... $ (45,707) $(20,445)
======== =======
4. INVESTMENT TRANSACTIONS
Investment transactions for the period ended January 31, 2000, (excluding
overnight investments and short-term debt securities) were as follows:
PCG SIM
GROWTH CONSERVATIVE
SERIES GROWTH SERIES
- ---------------------------------------------------------------------------
Purchases .................................... $989,046 $495,025
Proceeds from sales .......................... 602,016 65,197
5. CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue unlimited number of shares in an unlimited
number of classes. Transactions in the capital shares of the Fund were as
follows:
PCG GROWTH SERIES
AUGUST 1, 1999 TO APRIL 15, 1999*
JANUARY 31, 2000 TO JULY 31, 1999
--------------------- ------------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
Shares sold ............... 24,536 $225,741 214,470 $2,182,407
Shares reinvested ......... --- --- --- ---
Shares redeemed ........... (6,331) (60,988) (44,543) (463,851)
------ ------- ------- ---------
Net increase .............. 18,205 $164,753 169,927 $1,718,556
====== ======= ======= =========
SIM CONSERVATIVE GROWTH SERIES
AUGUST 1, 1999 TO APRIL 15, 1999*
JANUARY 31, 2000 TO JULY 31, 1999
--------------------- -----------------------
Shares Dollars Shares Dollars
------ ------- ------ -------
Shares sold ................ 41,838 $428,412 52,045 $ 520,974
Shares reinvested .......... --- --- --- ---
Shares redeemed ............ (1,379) (13,911) (14,511) (147,875)
------ ------- ------- --------
Net increase ............... 40,459 $414,501 37,534 $ 373,099
====== ======= ======= ========
*Date of inception
<PAGE>
ADVISOR'S FUND OFFICERS AND DIRECTORS
DIRECTORS
- ---------
Donald A. Chubb, Jr.
John D. Cleland
Penny A. Lumpkin
Mark L. Morris, Jr., D.V.M.
James R. Schmank
OFFICERS
- --------
John D. Cleland, President
James R. Schmank, Vice President
Richard K Ryan, Vice President
Amy J. Lee, Secretary
Brenda M. Harwood, Treasurer
Christopher D. Swickard, Assistant Secretary
This report is submitted for the general information of the shareholders of the
Funds. The report is not authorized for distribution to prospective investors in
the Funds unless preceded or accompanied by an effective prospectus which
contains details concerning the sales charges and other pertinent information.
