Annual Report October 31, 1998
PROVIDENT INVESTMENT COUNSEL
MUTUAL FUNDS
Growth Fund
Small Company Growth Fund
Provident Investment Counsel
Investing in growth since 1951
<PAGE>
3 President's Letter
4 Our Philosophy
5 Performance Update/Portfolio Review
6 Interview with Management
9 Performance Comparison
THE FUNDS'
10 Statements of Assets and Liabilities
11 Statements of Operations
12 Statements of Changes in Net Assets
14 Financial Highlights
16 Notes to Financial Statements
19 Independent Auditor's Report
THE PORTFOLIOS'
20 Statements of Net Assets
35 Statements of Operations
36 Statements of Changes in Net Assets
38 Selected Ratio Data
40 Notes to Financial Statements
43 Independent Auditor's Report
Items of Interest
+ The Growth style of investment management appears to have resumed a
leadership role. Over the past year, investors have returned their focus to
companies with the most visible prospects for growth, and Provident
portfolios have been rewarded.
+ Technology, retail, and health care stocks have led the Provident Funds'
performance during the past year.
2
<PAGE>
Dear Shareholder,
This past year has been a volatile one, especially for shares of small
companies. While we recognize that small company shares experienced some
turbulence during 1998, we are confident in the prospects for small companies in
the near future. We feel the fundamentals of our small company holdings remain
very compelling, and are well positioned for 1999.
The volatility in small company shares in particular is not unprecedented,
and has created some compelling valuations relative to other investment
categories. In fact, comparison of small stock price to earnings ratios (P/Es)
relative to the broad market P/Es as measured by the S&P 500 Index are near
levels not seen in 20 years. Investors have begun to recognize these compelling
valuations, and we are pleased with the positive returns in late October,
November, and December.
We are fully aware that volatility is a normal and expected occurrence with
bond and stock investing. During any period of unusual volatility, our focus
remains on identifying those companies with the brightest prospects for future
growth. This focus and our long-term view have served us well over many years.
Please visit our web site for market updates and portfolio information at
www.provnet.com. We appreciate your continued confidence in Provident Investment
Counsel and look forward to helping you reach your investment goals.
Sincerely,
/s/ Douglass B. Allen
Douglass B. Allen
President, PIC Investment Trust
December 24, 1998
3
<PAGE>
Our Philosophy
+ Focused, fundamental research, properly controlled, adds value.
+ Sustainable earnings growth is the most important contributor to long-term
stock appreciation.
+ Emphasis on strong financial characteristics ensures focus on growth and
quality.
+ Investment style consistency is critical to superior long-term investment
results.
4
<PAGE>
Performance Update/Portfolio Review
Growth Fund
Average annualized total returns for the period ending 10/31/98:
1 Year 3 Year 5 year Since Inception 6/11/92
------ ------ ------ -----------------------
+19.60% +19.92% +16.20% +15.12%
Sector Weightings
Healthcare/Medical 30.2%
Technology 13.8
Retail 20.6
Financial 14.7
Cash Equivalents 9.6
Other 13.3
Top 10 Stock Holdings:
1. Warner Lambert 8.0%
2. Pfizer Inc. 6.1%
3. MCI Worldcom 5.8%
4. Microsoft 5.8%
5. Schering Plough 5.7%
6. Tyco International 4.9%
7. Safeway 3.8%
8. Federal Natl Mtg. 3.6%
9. Medtronic 3.6%
10. Elan 3.1%
Small Company Growth Fund
Average annualized total returns for the period ending 10/31/98:
1 Year 3 Year 5 year Since Inception 6/28/96
------ ------ ------ -----------------------
-18.16% N/A N/A -8.55%
Sector Weightings
Healthcare/Medical 18.5%
Consumer Non-Durables 9.5
Industrials 13.8
Technology 32.1
Retail 10.2
Other 15.9
Top 10 Stock Holdings:
1. Dollar Tree Stores 4.3%
2. Apollo Group 2.6%
3. Nova Corp. 2.3%
4. CSG Systems International 2.2%
5. Fiserv 2.1%
6. Vitesse Semiconductor 1.6%
7. TMP Worldwide 1.6%
8. Renal Care Group 1.5%
9. 99 Cents Only Stores 1.4%
10. Orthodontic Centers of America 1.4%
5
<PAGE>
Interview with Provident Managers
What industry sectors performed positively
for the various funds' equity holdings?
GROWTH FUND
+ Healthcare
+ Retail
+ Technology
SMALL COMPANY
+ Retail
+ Commercial Services
+ Electronic Technology
Q IN RECENT YEARS INDEX FUNDS, SPECIFICALLY INDEX FUNDS MANAGED TO REPLICATE
THE S&P 500 INDEX, HAVE OUTPERFORMED ACTIVE MANAGERS. SO FAR IN 1998
PROVIDENT'S GROWTH FUND HAS REVERSED THIS TREND. WHAT HAS HAPPENED?
A We believe that the tides have changed and the focus has shifted back to
active management, to managers offering research-driven stock selection.
Financial markets always offer opportunity; let us not forget that money is
made by time spent in the market not by timing the market. It is now a
challenge of the research process to identify where opportunities exist.
Specifically, if you look at the S&P 500 Index, dominated by 20 holdings,
it was up 160% for the five years ending June 30th. These were clearly
outstanding returns, but moving forward the index looks vulnerable to us.
Don't misunderstand, there are some great companies in the index, companies
that we own. Our point is that the "blanket" approach to owning it all may
not be the right one; selection should be the key to superior returns
moving forward. The earnings that drove the performance of the entire index
have been deteriorating--not a big surprise, as the revenue growth
supporting the earnings were anemic at best. The earnings gains by many of
these companies in the index came as a result of corporate restructuring,
cost cutting, etc., and not from actual revenue growth. Absent sustainable
revenue growth, we believe the ability for a company to deliver predictable
and consistent earnings growth will be compromised. Obviously the market
agrees with this analysis, as it continues to reward those companies with
"quality" earnings and viciously goes after those companies whose earnings
are in question. Even through the darkest days of the past weeks when
markets trended downward, the companies that bounced back the fastest were
the ones that had the earnings.
6
<PAGE>
Q DESCRIBE THE RESEARCH PROCESS AS IT RELATES TO THE FUND'S EQUITY HOLDINGS.
WHAT IS IT ABOUT YOUR RESEARCH PROCESS THAT ALLOWS YOU TO FERRET OUT THESE
COMPANIES AND OUTPERFORM THE OVERALL MARKET?
A We look for companies that have demonstrated an ability to grow both
revenues and earnings at significantly higher rates than the averages for
the broad market. In addition, we tend to gravitate towards companies that
have a high return on equity, pretax margins and reinvestment rates
significantly higher than the average company. We will normally meet
personally with company managements to understand other issues, such as the
proprietary nature of their products (i.e., do they control their own
destiny), significant management ownership of the stock, and strong plans,
goals, and controls to ensure the past rates of change will continue or
increase in the future. To give you an idea of how extensive our research
process is for a firm our size, in 1998 alone we have met with 447 analysts
and 408 management teams. We have sixteen individuals who are exclusively
dedicated to the research process. All but one are generalists.
Q WHAT ARE SOME OF THE INVESTMENT THEMES THAT ARE AFFECTING THE FUND'S
HOLDINGS AND MAY CONTINUE TO DO SO IN THE NEAR FUTURE?
A We see several broad themes that may affect our portfolio holdings
positively as follows:
+ The strength of the American consumer today is amazing with lower
inflation, interest rates and unemployment at generational lows. Many
of our retail holdings stand to benefit in this environment.
7
<PAGE>
+ The "graying of America" and aging "baby boom" generation has
increased the demand significantly for healthcare. Our holdings in
medical device manufacturers and drug producers have solid growth
prospects.
+ Productivity enhancement is vital for companies in an environment
where technology can increase efficiency and therefore profits.
Holdings in high quality technology firms and some outsourcing
concerns have strong growth prospects.
These are only a few of the broad themes that may drive the growth of the
economy in the near future. In addition to generally strong growth prospects, we
look for those companies that have high quality, shareholder-oriented management
which may lead to strong performance in any environment.
Q WHAT IS THE OUTLOOK FOR THE FUNDS' PORTFOLIOS AND THE BROAD MARKET?
A As we have discussed in prior communications, there is evidence now of the
potential for a general profits recession for many of the companies that
make up the S&P 500 Index, a broad measure of the overall markets. During
the last few years, the S&P 500 Index companies on average have been able
to generate profit growth above 15% with sales/revenue growth of only 4%.
Revenue growth on average continues at or below these levels in 1998 and
projected 1999, and it appears to be taking a toll on recent profit
reports. We expect the Provident Funds' portfolios to benefit due to our
holdings' ability to generate consistent visible earnings AND revenue
growth in the future.
8
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
PROVIDENT INVESTMENT COUNSEL GROWTH FUND AND THE S & P 500 INDEX.
Provident Investment
Counsel Growth Fund S & P 500 Index
------------------- ---------------
07/31/92 $10,000 $10,000
10/31/92 $10,810 $10,300
04/30/93 $10,349 $11,000
10/31/93 $11,610 $11,900
04/30/94 $10,950 $11,600
10/31/94 $11,710 $12,400
04/30/95 $11,710 $13,600
10/31/95 $14,263 $15,600
04/30/96 $14,883 $17,800
10/31/96 $16,265 $19,400
04/30/97 $17,524 $22,216
10/31/97 $20,565 $26,687
04/30/98 $24,401 $31,345
10/31/98 $24,595 $31,213
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
PROVIDENT INVESTMENT COUNSEL SMALL COMPANY GROWTH FUND AND
THE RUSSELL 2000 GROWTH INDEX.
Provident Investment Counsel Russell 2000
Small Company Growth Fund Growth Index
------------------------- ------------
28-Aug-96 $10,000 $10,000
31-Oct-96 $ 9,480 $ 9,487
30-Apr-97 $ 7,820 $ 8,795
31-Oct-97 $ 9,910 $11,494
30-Apr-98 $10,910 $12,639
31-Oct-98 $ 8,110 $ 9,674
9
<PAGE>
PROVIDENT INVESTMENT COUNSEL STATEMENTS OF ASSET AND LIABILITIES
MUTUAL FUNDS AS OF OCTOBER 31, 1998
Growth Small Company
ASSETS Fund Growth Fund
- --------------------------------------------------------------------------------
Investment in Portfolios, at value $132,360,508 $29,759,564
Receivables:
Fund shares sold 26,418 3,000
Investments sold in Portfolios 52,594 35,118
From Provident Investment
Counsel, Inc. (Note 3) 108,059 12,109
Prepaid expenses 12,053 112
------------ -----------
Total assets 132,559,632 29,809,903
============ ===========
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Fund shares redeemed 52,594 35,118
For investments purchased in Portfolios 26,427 3,000
Deferred Trustees' compensation (Note 3) 10,147 7,674
Accrued expenses 62,795 26,561
------------ -----------
Total liabilities 151,963 72,353
============ ===========
NET ASSETS
- --------------------------------------------------------------------------------
Applicable to 7,459,510, and 3,668,675
shares of beneficial interest outstanding,
respectively $132,407,669 $29,737,550
============ ===========
NET ASSET VALUE PER SHARE $ 17.75 $ 8.11
============ ===========
SOURCE OF NET ASSETS
- --------------------------------------------------------------------------------
Paid-in capital $ 87,639,310 $32,517,303
Accumulated net investment loss (32,419) (11,537)
Accumulated net realized gain (loss)
on investments 9,487,106 (4,679,346)
Net unrealized appreciation on investments 35,313,672 1,911,130
------------ -----------
NET ASSETS $132,407,669 $29,737,550
------------ -----------
See Notes to Financial Statements.
10
<PAGE>
PROVIDENT INVESTMENT COUNSEL STATEMENTS OF OPERATIONS
MUTUAL FUNDS AS OF OCTOBER 31, 1998
Growth Small Company
INVESTMENT INCOME Fund Growth Fund
- --------------------------------------------------------------------------------
NET INVESTMENT LOSS FROM PORTFOLIOS $ (407,199) $ (238,565)
============ ===========
EXPENSES:
Administration fees (Note 3) 270,010 85,124
Trustees' fees 1,000 2,500
Audit fee 12,300 10,300
Legal fee 9,501 4,500
Transfer agent's fee 120,439 30,499
Custody and accounting services fee 6,001 6,001
Reports to shareholders 13,000 5,001
Registration fees 51,283 23,870
Miscellaneous 14,001 5,034
------------ -----------
Total expenses 497,535 172,829
Less, reimbursement/waiver by
Provident Investment Counsel, Inc.
(Note 3) (178,773) (15,053)
------------ -----------
Net expenses 318,762 157,776
============ ===========
NET INVESTMENT LOSS (725,961) (396,341)
============ ===========
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments 9,563,770 (2,219,078)
Unrealized appreciation (depreciation)
on investments 14,964,547 (4,097,915)
------------ -----------
NET GAIN (LOSS) ON INVESTMENTS 24,528,317 (6,316,993)
============ ===========
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ 23,802,356 ($6,713,334)
------------ -----------
See Notes to Financial Statements.
11
<PAGE>
PROVIDENT INVESTMENT COUNSEL STATEMENTS OF CHANGES IN NET ASSETS
MUTUAL FUNDS AS OF OCTOBER 31, 1998
INCREASE (DECREASE) IN NET ASSETS
- --------------------------------------------------------------------------------
FROM OPERATIONS:
- --------------------------------------------------------------------------------
Net investment loss
Net realized gain (loss) on investments
Unrealized appreciation (depreciation) on investments
Net increase (decrease) in net assets resulting from operations
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Purchases of 4,057,730, 939,090, 3,336,041 and 3,218,198 shares, respectively
Reinvestment of 916,270, 912,467, 0, and 0 shares, respectively
Redemptions of 1,924,166, 4,585,554, 2,795,508, and 636,830 shares, respectively
Net increase (decrease) in net assets resulting from share transactions
TOTAL INCREASE (DECREASE) IN NET ASSETS
NET ASSETS:
Beginning of year
End of year
See Notes to Financial Statements.
12
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PROVIDENT INVESTMENT COUNSEL
MUTUAL FUNDS
Growth Small Company
Fund Growth Fund
--------------------------------------------------------------
Year Year Year Year
ended ended ended ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1998 Oct. 31, 1997
--------------------------------------------------------------
$ (725,961) $ (391,124) $ (396,341) $ (216,349)
9,563,770 32,173,750 (2,219,078) (1,960,254)
14,964,547 (7,723,822) (4,097,915) 5,591,606
------------ ------------ ------------ -----------
23,802,356 24,058,804 (6,713,334) 3,415,003
============ ============ ============ ===========
(14,604,225) (13,410,970) -- --
============ ============ ============ ===========
63,028,132 15,132,320 31,788,999 28,742,445
13,890,657 13,369,645 -- --
(33,710,059) (75,233,871) (26,351,862) (6,327,278)
------------ ------------ ------------ -----------
43,208,730 (46,731,906) 5,437,137 22,415,167
============ ============ ============ ===========
52,406,861 (36,084,072) (1,276,197) 25,830,170
============ ============ ============ ===========
80,000,808 116,084,880 31,013,747 5,183,577
------------ ------------ ------------ -----------
$132,407,669 $ 80,000,808 $ 29,737,550 $31,013,747
------------ ------------ ------------ -----------
13
<PAGE>
PROVIDENT INVESTMENT COUNSEL FINANCIAL HIGHLIGHTS
MUTUAL FUNDS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH FUND
Year ended October 31,
----------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 18.14 $16.25 $ 14.25 $ 11.70 $ 11.60
------- ------ ------- ------- -------
Income from investment operations:
Net investment loss (0.06) (0.15) (0.06) (0.02) 0.00
Net realized and unrealized gain
on investments 3.04 3.98 2.06 2.57 0.10
------- ------ ------- ------- -------
Total from investment operations 2.98 3.83 2.00 2.55 0.10
Less distributions to shareholders:
From net realized gains (3.37) (1.94) 0.00 0.00 0.00
------- ------ ------- ------- -------
Net asset value, end of year $ 17.75 $18.14 $ 16.25 $ 14.25 $ 11.70
======= ====== ======= ======= =======
Total return 19.60% 26.44% 14.04% 21.79% 0.86%
======= ====== ======= ======= =======
Ratios/supplemental data:
Net assets, end of year (millions) $ 132.4 $ 80.0 $ 116.1 $ 131.1 $ 102.3
------- ------ ------- ------- -------
Ratios to average net assets:+
Expenses 1.25%* 1.25%* 1.25%* 1.25%* 1.25%*
Net investment loss (0.57%) (0.38%) (0.28%) (0.17%) N/A
------- ------ ------- ------- -------
</TABLE>
* Includes the Fund's share of expenses, net of expense reimbursements,
allocated from PIC Growth Portfolio. If the fee waivers and expense
reimbursements, with respect to the Fund and PIC Growth Portfolio, had not
been made, the ratio of expenses to average net assets would have been 1.39%,
1.35%, 1.30%, 1.30%, and 1.53%, respectively.
+ Net of expense reimbursements.
See Notes to Financial Statements.
14
<PAGE>
PROVIDENT INVESTMENT COUNSEL FINANCIAL HIGHLIGHTS, CONTINUED
MUTUAL FUNDS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
Year Year June 28, 1996*
ended ended through
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1996
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.91 $ 9.48 $10.00
------- ------ ------
Income from investment operations:
Net investment loss (0.10) (0.05) (0.03)
Net realized and unrealized gain
(loss) on investments (1.70) 0.48 (0.49)
------- ------ ------
Total from investment operations (1.80) 0.43 (0.52)
------- ------ ------
Net asset value, end of period $ 8.11 $ 9.91 $ 9.48
======= ====== ======
Total return (18.16%) 4.54% (5.20%)++
======= ====== ======
Ratios/supplemental data:
Net assets, end of period (millions) $ 29.7 $ 31.0 $ 5.2
------ ------ ------
Ratios to average net assets:+
Expenses 1.45%# 1.45%# 1.43%#++
Net investment loss (1.13%) (0.96%) (0.91%)++
* Commencement of operations.
# Includes the Fund's share of expenses, net of expense reimbursements,
allocated from PIC Small Cap Portfolio. If the fee waivers and expense
reimbursements, with respect to the Fund and PIC Small Cap Portfolio, had not
been made, the ratio of expenses to average net assets would have been 1.49%,
1.61%, and 4.03%, respectively.
+ Net of expense reimbursements.
++ Not annualized.
++ Annualized.
See Notes to Financial Statements.
15
<PAGE>
PROVIDENT INVESTMENT COUNSEL NOTES TO FINANCIAL STATEMENTS
MUTUAL FUNDS
1 - ORGANIZATION
- --------------------------------------------------------------------------------
PIC Investment Trust (the "Trust") was organized on December 11, 1991 as a
Delaware business trust, with an unlimited number of shares of beneficial
interest of $.01 par value, and is registered under the Investment Company Act
of 1940 as an open-end, diversified management investment company. The Trust
currently offers seven separate series: Provident Investment Counsel Pinnacle
Balanced Fund, Provident Investment Counsel Growth Fund, Provident Investment
Counsel Pinnacle Growth Fund, Provident Investment Counsel Small Company Growth
Fund, Provident Investment Counsel Pinnacle Small Company Growth Fund, Provident
Investment Counsel Small Cap Growth Fund, and Provident Investment Counsel
Pinnacle Mid Cap Fund, (each a "Fund" and collectively the "Funds") formerly PIC
Pinnacle Balanced Fund, PIC Growth Fund, PIC Pinnacle Growth Fund, PIC Small
Company Growth Fund, PIC Pinnacle Small Company Growth Fund and PIC Small Cap
Growth Fund, respectively. The Funds invest substantially all of their assets in
the respective Portfolios, a separate registered management investment company
having the same investment objective as the Funds. The financial statements of
the Portfolios are included elsewhere in this report and should be read in
conjunction with the Funds' financial statements. The financial statements of
the Provident Investment Counsel Pinnacle Balanced Fund, Provident Investment
Counsel Pinnacle Growth Fund, Provident Investment Counsel Pinnacle Mid Cap
Fund, Provident Investment Counsel Pinnacle Small Company Growth Fund, and the
Provident Investment Counsel Small Cap Growth Fund are in separate reports.
2 - SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with generally accepted
accounting principles.
A. INVESTMENT VALUATION. The Funds reflect their investments in the Portfolio at
their proportionate interest in the value of the Portfolio's net assets.
Valuation of securities by the Portfolio is discussed at Note 2A of the
Portfolio's Notes to Financial Statements.
B. INVESTMENT INCOME AND DIVIDENDS TO SHAREHOLDERS. The Funds earn income, net
of the expenses of the Portfolio, daily on their investment in the Portfolio.
All net investment income and realized and unrealized gains or losses on
16
<PAGE>
PROVIDENT INVESTMENT COUNSEL NOTES TO FINANCIAL STATEMENTS
MUTUAL FUNDS CONTINUED
investments of the Portfolio are allocated pro rata among the Funds and the
other Holders of Interests in the Portfolio. Dividends, if any, are paid
annually to shareholders of the Funds and recorded on the ex-dividend date.
C. FEDERAL INCOME TAXES. The Funds intend to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of their taxable income to their shareholders. Therefore, no
federal income tax provision is required.
D. ACCOUNTING ESTIMATES. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
3 - TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
The Trust has entered into administration agreements with Provident
Investment Counsel, Inc. ("PIC") and Investment Company Administration LLC
("ICA"), pursuant to which agreements certain employees of these entities serve
as officers and/or trustees of the Trust and the Portfolio. PIC and ICA also
provide management services necessary for the operations of the Trust and the
Portfolio and furnish office facilities. PIC receives a fee for its services to
the Funds at the rate of 0.20% of the average daily net assets of the Funds
PIC has voluntarily taken to limit the Funds' expenses, including those
expenses allocated from the Portfolios, to the following levels:
Growth Fund 1.25%
Small Company Growth Fund 1.45%
The percentages are based on the Funds' average daily net assets. Fees
waived and expenses reimbursed by PIC for the year ended October 31, 1998, were
as follows:
Waived Reimbursed
Fees Expenses
---- --------
Growth Fund $178,773 --
Small Company Growth Fund 15,053 --
ICA receives an annual fee for its services of $15,000 from each of the
Funds.
17
<PAGE>
PROVIDENT INVESTMENT COUNSEL NOTES TO FINANCIAL STATEMENTS
MUTUAL FUNDS CONTINUED
First Fund Distributors, Inc. (the "Distributor"), a registered
broker-dealer, acts as the principal underwriter for the Trust in connection
with the offering of its shares, but receives no compensation for its services.
The Distributor is an affiliate of ICA.
On December 19, 1995, the Trust approved a Deferred Compensation Plan for
Trustees (the "Plan"). Trustees are entitled to receive $2,500 per quarter and
$500 per meeting attended, which is allocated among the Funds. Trustees can
elect to receive payment in cash or defer payments provided for in the Plan. If
a trustee elects to defer payment, the Plan provides for the creation of a
deferred payment account (phantom share account). This account accumulates the
deferred fees earned and the value of the account is adjusted at the end of each
quarter to reflect a value which would have been earned if the account had been
invested in designated investments. The Funds recognize as trustee expense
amounts accrued as meetings are attended plus the change in the value of the
phantom share account determined on a quarterly basis.
4 INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Additions and reductions in the investments in the respective Portfolios
for the year ended October 31, 1998 were as follows:
Additions Reductions
--------- ----------
Growth Fund $63,039,142 $34,791,149
Small Company Growth Fund 31,790,173 26,508,670
At October 31, 1998, Small Company Growth Fund had tax basis capital losses
of $4,600,000 which may be carried over to offset future capital gains. Such
losses expire October 31, 2004-2006.
As of October 31, 1998 the Funds owned the following percentages of the
Portfolios listed below:
Growth Fund 97.2% of PIC Growth Portfolio
Small Company Growth Fund 17.1% of PIC Small Cap Portfolio
18
<PAGE>
PROVIDENT INVESTMENT COUNSEL INDEPENDENT AUDITOR'S REPORT
MUTUAL FUNDS
To the Board of Trustees of
PIC Investment Trust
and the Shareholders of:
Provident Investment Counsel Growth Fund
Provident Investment Counsel Small Company Growth Fund
We have audited the accompanying statements of assets and liabilities as of
October 31, 1998, and the related statements of operations, the statements of
changes in net assets and the financial highlights for each of the periods
indicated of Provident Investment Counsel Growth Fund and Provident Investment
Counsel Small Company Growth Fund. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Provident Investment Counsel Growth Fund and Provident Investment Counsel Small
Company Growth Fund as of October 31, 1998, the results of their operations, the
changes in their net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles.
McGladrey & Pullen, LLP
New York, New York
December 3, 1998
19
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES - 92.6% Shares Value Net Assets
================================================================================
BIOTECHNOLOGY - 3.1%
- --------------------------------------------------------------------------------
ELAN CORPORATION, PLC ADR* 59,157 $4,144,687 3.1%
================================================================================
BROADCASTING - 1.5%
- --------------------------------------------------------------------------------
CLEAR CHANNEL COMMUNICATIONS, INC.* 43,900 2,000,194 1.5%
================================================================================
BUILDING MATERIALS CHAINS - 3.3%
- --------------------------------------------------------------------------------
LOWE'S COMPANIES, INC. 86,600 2,917,337 2.1%
THE HOME DEPOT, INC. 39,300 1,709,550 1.2%
- --------------------------------------------------------------------------------
TOTAL BUILDING MATERIALS CHAINS 4,626,887 3.3%
================================================================================
CELLULAR TELEPHONE - 1.0%
- --------------------------------------------------------------------------------
AIRTOUCH COMMUNICATIONS, INC.* 22,900 1,282,400 1.0%
================================================================================
COMPUTER SOFTWARE - 6.7%
- --------------------------------------------------------------------------------
BMC SOFTWARE, INC.* 25,900 1,244,819 0.9%
MICROSOFT CORPORATION* 74,312 7,867,783 5.8%
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 9,112,602 6.7%
================================================================================
DEPARTMENT STORES - 2.7%
- --------------------------------------------------------------------------------
KOHL'S CORPORATION* 75,558 3,612,617 2.7%
================================================================================
DISCOUNT STORES - 4.2%
- --------------------------------------------------------------------------------
COSTCO COMPANIES, INC.* 46,000 2,610,500 1.9%
DOLLAR GENERAL CORPORATION 131,822 3,147,250 2.3%
- --------------------------------------------------------------------------------
TOTAL DISCOUNT STORES 5,757,750 4.2%
================================================================================
DIVERSIFIED COMMERCIAL SERVICES - 2.5%
- --------------------------------------------------------------------------------
PAYCHEX, INC. 69,826 3,473,844 2.5%
================================================================================
DIVERSIFIED MANUFACTURER - 4.9%
- --------------------------------------------------------------------------------
TYCO INTERNATIONAL LTD. 106,580 6,601,299 4.9%
See Notes to Financial Statements.
20
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
DRUG STORE CHAINS - 2.4%
- --------------------------------------------------------------------------------
CVS CORPORATION 71,000 $ 3,243,813 2.4%
================================================================================
EDP SERVICES - 1.7%
- --------------------------------------------------------------------------------
AUTOMATIC DATA PROCESSING 17,000 1,322,813 0.9%
COMPUTER SCIENCES CORPORATION* 20,900 1,102,475 0.8%
- --------------------------------------------------------------------------------
TOTAL EDP SERVICES 2,425,288 1.7%
================================================================================
ELECTRONIC DATA PROCESSING - 1.2%
- --------------------------------------------------------------------------------
DELL COMPUTER CORPORATION* 23,700 1,555,312 1.2%
================================================================================
FINANCE COMPANIES - 7.6%
- --------------------------------------------------------------------------------
ASSOCIATES FIRST CAPITAL CORPORATION 20,530 1,447,365 1.1%
FANNIE MAE 69,719 4,936,977 3.6%
FREDDIE MAC 12,500 718,750 0.5%
MBNA CORPORATION 142,216 3,244,302 2.4%
- --------------------------------------------------------------------------------
TOTAL FINANCE COMPANIES 10,347,394 7.6%
================================================================================
FINANCIAL PUBLISHING/SERVICES - 1.7%
- --------------------------------------------------------------------------------
SUNGARD DATA SYSTEMS INC.* 68,800 2,322,000 1.7%
================================================================================
FOOD CHAINS - 5.9%
- --------------------------------------------------------------------------------
KROGER CO. 51,700 2,869,350 2.1%
SAFEWAY INC.* 108,950 5,209,172 3.8%
- --------------------------------------------------------------------------------
TOTAL FOOD CHAINS 8,078,522 5.9%
================================================================================
HOSPITAL/NURSING MANAGEMENT - 1.2%
- --------------------------------------------------------------------------------
HEALTH MANAGEMENT ASSOCIATES, INC.,
CLASS A* 89,550 1,595,109 1.2%
See Notes to Financial Statements.
21
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
MAJOR PHARMACEUTICALS - 21.2%
- --------------------------------------------------------------------------------
AMERICAN HOME PRODUCTS CORPORATION 40,400 $ 1,969,500 1.4%
PFIZER, INC. 76,684 8,229,152 6.1%
SCHERING-PLOUGH CORPORATION 75,900 7,808,212 5.7%
WARNER-LAMBERT COMPANY 138,800 10,878,450 8.0%
- --------------------------------------------------------------------------------
TOTAL MAJOR PHARMACEUTICALS 28,885,314 21.2%
================================================================================
MAJOR U.S. TELECOMMUNICATIONS - 5.8%
- --------------------------------------------------------------------------------
MCI WORLDCOM, INC.* 142,650 7,881,412 5.8%
================================================================================
MEDICAL ELECTRONICS - 3.6%
- --------------------------------------------------------------------------------
MEDTRONIC, INC. 74,904 4,868,760 3.6%
================================================================================
MEDICAL/DENTAL DISTRIBUTORS - 1.2%
- --------------------------------------------------------------------------------
CARDINAL HEALTH, INC. 17,700 1,673,756 1.2%
================================================================================
MISCELLANEOUS - 1.8%
- --------------------------------------------------------------------------------
AMERICA ONLINE, INC.* 19,800 2,515,838 1.8%
================================================================================
MULTILINE INSURANCE - 2.8%
- --------------------------------------------------------------------------------
AMERICAN INTERNATIONAL GROUP, INC. 44,952 3,832,158 2.8%
================================================================================
OTHER SPECIALTY STORES - 1.9%
- --------------------------------------------------------------------------------
BED BATH & BEYOND INC.* 77,600 2,138,850 1.5%
STAPLES, INC.* 16,800 548,100 0.4%
- --------------------------------------------------------------------------------
TOTAL OTHER SPECIALTY STORES 2,686,950 1.9%
================================================================================
PACKAGE GOODS/COSMETICS - 1.2%
- --------------------------------------------------------------------------------
COLGATE-PALMOLIVE COMPANY 18,300 1,617,262 1.2%
================================================================================
TELECOMMUNICATIONS EQUIPMENT - 1.5%
- --------------------------------------------------------------------------------
LUCENT TECHNOLOGIES INC. 25,100 2,012,706 1.5%
- --------------------------------------------------------------------------------
TOTAL EQUITY SECURITIES (COST $90,210,913) 126,153,874 92.6%
See Notes to Financial Statements.
22
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
SHORT-TERM INVESTMENTS - 7.4% Amount Value Net Assets
================================================================================
FORD MOTOR CREDIT COMPANY
- --------------------------------------------------------------------------------
5.09151%, 11/20/98 $10,000,000 $10,000,000 7.4%
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $10,000,000) 10,000,000 7.4%
================================================================================
MONEY MARKET FUNDS - 2.2% Shares Value
- --------------------------------------------------------------------------------
TEMPORARY INVESTMENT FUND INC.TEMP FUND 1,458,514 1,458,514 1.1%
TEMPORARY INVESTMENT FUND INC.TEMP CASH 1,458,514 1,458,514 1.1%
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET FUNDS (COST $2,917,028) 2,917,028 2.2%
TOTAL INVESTMENTS (COST $103,127,941) 139,070,902 102.2%
================================================================================
OTHER ASSETS - 0.1%
- --------------------------------------------------------------------------------
RECEIVABLES:
DIVIDENDS AND INTEREST 74,350
SHARES OF BENEFICIAL INTEREST SOLD 26,419
OTHER ASSETS 23,317
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 124,086
================================================================================
TOTAL ASSETS 139,194,988 102.3%
================================================================================
LIABILITIES - (2.3%)
- --------------------------------------------------------------------------------
PAYABLES:
INVESTMENT SECURITIES PURCHASED 2,895,730
SHARES OF BENEFICIAL INTEREST REDEEMED 52,594
TO ADVISOR (NOTE 3) 88,709
DEFERRED TRUSTEES' COMPENSATION (NOTE 3) 22,897
ACCRUED EXPENSES 52,735
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 3,112,665
================================================================================
TOTAL NET ASSETS - 100.0% $136,082,323 100.0%
* Non-income producing security.
See Notes to Financial Statements.
23
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES - 94.8% Shares Value Net Assets
================================================================================
ADVERTISING - 2.2%
- --------------------------------------------------------------------------------
LAMAR ADVERTISING COMPANY, CLASS A* 31,600 $ 986,513 0.6%
TMP WORLDWIDE INC.* 94,020 2,820,600 1.6%
- --------------------------------------------------------------------------------
TOTAL ADVERTISING 3,807,113 2.2%
================================================================================
AEROSPACE 0.5%
- --------------------------------------------------------------------------------
ORBITAL SCIENCES CORPORATION* 16,500 544,500 0.3%
TRISTAR AEROSPACE CO.* 25,000 256,250 0.2%
- --------------------------------------------------------------------------------
TOTAL AEROSPACE 800,750 0.5%
================================================================================
AIRLINES - 0.3%
- --------------------------------------------------------------------------------
RYANAIR HOLDINGS PLC ADR* 19,670 577,806 0.3%
================================================================================
ALCOHOLIC BEVERAGES - 0.6%
- --------------------------------------------------------------------------------
BERINGER WINE ESTATES HOLDINGS, INC.* 21,300 966,487 0.6%
================================================================================
APPAREL - 0.7%
- --------------------------------------------------------------------------------
NOVEL DENIM HOLDINGS LIMITED* 76,940 1,173,335 0.7%
================================================================================
AUTO PARTS: O.E.M. - 0.9%
- --------------------------------------------------------------------------------
GENTEX CORPORATION* 101,000 1,483,438 0.9%
================================================================================
AUTOMOTIVE AFTERMARKET - 0.4%
- --------------------------------------------------------------------------------
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.* 36,770 687,139 0.4%
================================================================================
BIOTECHNOLOGY - 1.5%
- --------------------------------------------------------------------------------
IDEXX LABORATORIES, INC.* 22,300 508,719 0.3%
INCYTE PHARMACEUTICALS, INC.* 14,600 445,300 0.3%
MEDIMMUNE, INC.* 24,500 1,647,625 0.9%
- --------------------------------------------------------------------------------
TOTAL BIOTECHNOLOGY 2,601,644 1.5%
See Notes to Financial Statements.
24
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
BROADCASTING - 1.0%
- --------------------------------------------------------------------------------
CITADEL COMMUNICATIONS CORPORATION* 25,200 $ 516,600 0.3%
HEFTEL BROADCAST* 30,300 1,246,088 0.7%
- --------------------------------------------------------------------------------
TOTAL BROADCASTING 1,762,688 1.0%
================================================================================
CLOTHING/SHOE/ACCESSORY STORES - 1.1%
- --------------------------------------------------------------------------------
ABERCROMBIE & FITCH CO.* 7,440 295,275 0.2%
JUST FOR FEET, INC.* 15,800 267,613 0.2%
PACIFIC SUNWEAR OF CALIFORNIA, INC.* 59,225 1,280,741 0.7%
- --------------------------------------------------------------------------------
TOTAL CLOTHING/SHOE/ACCESSORY STORES 1,843,629 1.1%
================================================================================
COMPUTER SOFTWARE - 11.1%
- --------------------------------------------------------------------------------
AVANT! CORPORATION* 10,000 170,625 0.1%
AXENT TECHNOLOGIES, INC.* 80,430 2,020,804 1.2%
BUSINESS OBJECTS S.A.ADR* 110,500 1,857,781 1.1%
CHECK POINT SOFTWARE TECHNOLOGIES LTD.* 74,700 1,699,425 1.0%
DOCUMENTUM, INC.* 14,700 499,800 0.3%
HNC SOFTWARE INC.* 37,560 1,262,955 0.7%
LEGATO SYSTEMS, INC.* 16,100 629,913 0.4%
MERCURY INTERACTIVE CORPORATION* 41,000 1,701,500 1.0%
NATIONAL INSTRUMENTS CORPORATION* 23,000 629,625 0.4%
NEW ERA OF NETWORKS, INC.* 5,000 233,473 0.1%
PEREGRINE SYSTEMS, INC.* 47,500 1,656,563 0.9%
RWD TECHNOLOGIES, INC.* 27,460 518,308 0.3%
SAVILLE SYSTEMS PLC ADR* 37,600 634,500 0.4%
SIEBEL SYSTEMS, INC.* 33,440 683,430 0.4%
SOFTWARE AG SYSTEMS, INC.* 64,970 974,550 0.6%
TRANSACTION SYSTEMS ARCHITECTS, INC.,
CLASS A* 41,310 1,491,032 0.8%
TSI INTERNATIONAL SOFTWARE LTD.* 12,300 385,913 0.2%
VERITAS SOFTWARE CORPORATION* 19,050 954,881 0.5%
WIND RIVER SYSTEMS, INC.* 27,870 1,221,054 0.7%
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 19,226,132 11.1%
See Notes to Financial Statements.
25
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
DISCOUNT STORES - 5.8%
- --------------------------------------------------------------------------------
DOLLAR TREE STORES, INC.* 195,580 $ 7,542,054 4.3%
FRED'S, INC. 15,900 207,694 0.1%
99 CENTS ONLY STORES* 52,000 2,405,000 1.4%
- --------------------------------------------------------------------------------
TOTAL DISCOUNT STORES 10,154,748 5.8%
================================================================================
DIVERSIFIED COMMERCIAL SERVICES - 11.1%
- --------------------------------------------------------------------------------
ABACUS DIRECT CORPORATION* 8,400 409,500 0.2%
IRON MOUNTAIN INCORPORATED* 25,350 774,759 0.5%
LASON, INC.* 40,680 2,227,230 1.3%
MODIS PROFESSIONAL SERVICES, INC.* 23,538 414,857 0.2%
NCO GROUP, INC.* 56,235 1,771,403 1.0%
NOVA CORPORATION* 138,736 4,006,002 2.3%
ON ASSIGNMENT, INC.* 40,500 1,377,000 0.8%
PERSONNEL GROUP OF AMERICA, INC.* 78,280 1,213,340 0.7%
ROMAC INTERNATIONAL, INC.* 65,190 1,140,825 0.7%
STAFFMARK, INC.* 34,310 602,569 0.3%
SYLVAN LEARNING SYSTEMS, INC.* 69,450 2,144,269 1.2%
THE PROFIT RECOVERY GROUP
INTERNATIONAL, INC.* 74,100 2,273,944 1.3%
WACKENHUT CORRECTIONS CORPORATION* 39,400 967,762 0.6%
- --------------------------------------------------------------------------------
TOTAL DIVERSIFIED COMMERCIAL SERVICES 19,323,460 11.1%
================================================================================
DIVERSIFIED ELECTRONIC PRODUCTS - 0.6%
- --------------------------------------------------------------------------------
NICE SYSTEMS LTD. ADR* 20,800 395,200 0.2%
UNIPHASE CORPORATION* 14,500 717,750 0.4%
- --------------------------------------------------------------------------------
TOTAL DIVERSIFIED ELECTRONIC PRODUCTS 1,112,950 0.6%
See Notes to Financial Statements.
26
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
EDP PERIPHERALS - 1.9%
- --------------------------------------------------------------------------------
ELECTRONICS FOR IMAGING, INC.* 89,700 $ 2,158,406 1.3%
NATIONAL COMPUTER SYSTEMS, INC. 8,300 232,400 0.1%
PINNACLE SYSTEMS, INC.* 15,000 510,000 0.3%
PREMISYS COMMUNICATIONS, INC.* 35,000 369,688 0.2%
- --------------------------------------------------------------------------------
TOTAL EDP PERIPHERALS 3,270,494 1.9%
================================================================================
EDP SERVICES - 7.2%
- --------------------------------------------------------------------------------
BEA SYSTEMS, INC.* 20,000 391,875 0.2%
CSG SYSTEMS INTERNATIONAL, INC.* 69,838 3,806,171 2.2%
ECSOFT GROUP PLC ADR* 6,000 132,000 0.1%
FISERV, INC.* 78,950 3,671,175 2.1%
FORRESTER RESEARCH, INC.* 28,420 916,545 0.5%
INTELLIGROUP, INC.* 30,150 520,088 0.3%
INTERNATIONAL NETWORK SERVICES* 17,950 762,875 0.4%
PEGASUS SYSTEMS, INC.* 60,300 1,047,713 0.6%
POLICY MANAGEMENT SYSTEMS CORPORATION* 18,600 845,138 0.5%
THE BISYS GROUP, INC.* 10,500 459,375 0.3%
- --------------------------------------------------------------------------------
TOTAL EDP SERVICES 12,552,955 7.2%
================================================================================
ELECTRONIC COMPONENTS - 1.0%
- --------------------------------------------------------------------------------
DSP COMMUNICATIONS, INC.* 48,000 471,000 0.3%
SANMINA CORPORATION* 28,400 1,164,400 0.7%
- --------------------------------------------------------------------------------
TOTAL ELECTRONIC COMPONENTS 1,635,400 1.0%
================================================================================
ENGINEERING AND CONSTRUCTION - 0.4%
- --------------------------------------------------------------------------------
DYCOM INDUSTRIES, INC.* 20,000 701,250 0.4%
================================================================================
ENVIRONMENTAL SERVICES - 1.6%
- --------------------------------------------------------------------------------
ALLIED WASTE INDUSTRIES, INC.* 31,774 687,113 0.4%
CASELLA WASTE SYSTEMS, INC., CLASS A* 45,370 1,338,415 0.8%
U S LIQUIDS INC.* 46,700 706,337 0.4%
- --------------------------------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES 2,731,865 1.6%
See Notes to Financial Statements.
27
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
FINANCE COMPANIES - 0.9%
- --------------------------------------------------------------------------------
HEALTHCARE FINANCIAL PARTNERS, INC.* 43,900 $1,344,437 0.8%
METRIS COMPANIES INC. 5,200 170,950 0.1%
- --------------------------------------------------------------------------------
TOTAL FINANCE COMPANIES 1,515,387 0.9%
================================================================================
GENERIC DRUGS - 0.2%
- --------------------------------------------------------------------------------
ALPHARMA INC., CLASS A 13,000 359,937 0.2%
================================================================================
HOMEBUILDING - 1.5%
- --------------------------------------------------------------------------------
FAIRFIELD COMMUNITIES, INC.* 145,020 1,423,009 0.8%
PALM HARBOR HOMES, INC.* 46,048 1,162,712 0.7%
- --------------------------------------------------------------------------------
TOTAL HOMEBUILDING 2,585,721 1.5%
================================================================================
HOSPITAL/NURSING MANAGEMENT - 0.6%
- --------------------------------------------------------------------------------
PROVINCE HEALTHCARE COMPANY* 37,500 979,687 0.6%
================================================================================
INSURANCE BROKERS/SERVICES - 0.9%
- --------------------------------------------------------------------------------
CLARK/BARDES HOLDINGS, INC.* 30,500 305,000 0.2%
MUTUAL RISK MANAGEMENT LTD. 34,900 1,180,056 0.7%
- --------------------------------------------------------------------------------
TOTAL INSURANCE BROKERS/SERVICES 1,485,056 0.9%
================================================================================
LIFE INSURANCE - 0.1%
- --------------------------------------------------------------------------------
ANNUITY AND LIFE Re (HOLDINGS), LTD. 8,000 187,000 0.1%
================================================================================
MAJOR PHARMACEUTICALS - 0.6%
- --------------------------------------------------------------------------------
SHIRE PHARMACEUTICALS GROUP plc* 46,300 1,007,025 0.6%
================================================================================
MEDICAL ELECTRONICS - 0.5%
- --------------------------------------------------------------------------------
ADAC LABORATORIES 5,000 148,125 0.1%
VISX, INCORPORATED* 13,000 651,625 0.4%
- --------------------------------------------------------------------------------
TOTAL MEDICAL ELECTRONICS 799,750 0.5%
See Notes to Financial Statements.
28
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
MEDICAL SPECIALTIES - 2.0%
- --------------------------------------------------------------------------------
ATRIX LABORATORIES, INC.* 56,440 $ 571,455 0.3%
KV PHARMACEUTICAL COMPANY, CLASS A* 15,500 350,688 0.2%
MINIMED INC.* 6,540 362,970 0.2%
OCULAR SCIENCES, INC.* 26,480 665,310 0.4%
RESMED INC.* 4,000 204,000 0.1%
SAFESKIN CORPORATION* 43,800 969,075 0.6%
XOMED SURGICAL PRODUCTS, INC.* 7,700 346,019 0.2%
- --------------------------------------------------------------------------------
TOTAL MEDICAL SPECIALTIES 3,469,517 2.0%
================================================================================
MEDICAL/DENTAL DISTRIBUTORS - 1.0%
- --------------------------------------------------------------------------------
HENRY SCHEIN, INC.* 47,070 1,821,021 1.0%
================================================================================
MEDICAL/NURSING SERVICES - 4.6%
- --------------------------------------------------------------------------------
AMSURG CORP., CLASS A* 55,400 367,025 0.2%
LASER VISION CENTERS, INC.* 43,900 471,925 0.2%
ORTHODONTIC CENTERS OF AMERICA, INC.* 126,940 2,403,926 1.4%
RENAL CARE GROUP, INC.* 89,445 2,605,086 1.5%
TOTAL RENAL CARE HOLDINGS, INC.* 90,463 2,216,343 1.3%
- --------------------------------------------------------------------------------
TOTAL MEDICAL/NURSING SERVICES 8,064,305 4.6%
================================================================================
MISCELLANEOUS ELECTRONIC TECHNOLOGY - 0.9%
- --------------------------------------------------------------------------------
APPLIED MICRO CIRCUITS CORPORATION* 37,800 907,200 0.5%
DSET CORPORATION* 20,000 250,000 0.2%
TRANSWITCH CORPORATION* 16,200 394,875 0.2%
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS ELECTRONIC TECHNOLOGY 1,552,075 0.9%
================================================================================
MISCELLANEOUS HEALTH SERVICES - 2.8%
- --------------------------------------------------------------------------------
ALTERNATIVE LIVING SERVICES, INC.* 68,600 1,792,175 1.0%
ASSISTED LIVING CONCEPTS, INC.* 45,390 612,765 0.3%
CAREMATRIX CORPORATION* 68,750 1,692,969 1.0%
SUNRISE ASSISTED LIVING, INC.* 19,900 856,944 0.5%
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS HEALTH SERVICES 4,954,853 2.8%
See Notes to Financial Statements.
29
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
MISCELLANEOUS TECHNOLOGY SERVICES - 1.3%
EARTHLINK NETWORK, INC.* 15,800 $ 608,300 0.4%
EBAY INC.* 2,300 191,187 0.1%
LYCOS, INC.* 24,900 1,011,562 0.6%
VERIO INC.* 26,400 366,300 0.2%
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS TECHNOLOGY SERVICES 2,177,349 1.3%
================================================================================
MOVIES/ENTERTAINMENT - 0.4%
- --------------------------------------------------------------------------------
INTERNATIONAL SPEEDWAY CORPORATION,
CLASS A 24,900 768,787 0.4%
================================================================================
OILFIELD SERVICES/EQUIPMENT - 0.2%
- --------------------------------------------------------------------------------
FRIEDE GOLDMAN INTERNATIONAL INC.* 20,000 335,000 0.2%
================================================================================
OTHER CONSUMER SERVICES - 2.9%
- --------------------------------------------------------------------------------
APOLLO GROUP, INC., CLASS A* 141,161 4,534,797 2.6%
STEINER LEISURE LIMITED* 21,300 519,187 0.3%
- --------------------------------------------------------------------------------
TOTAL OTHER CONSUMER SERVICES 5,053,984 2.9%
================================================================================
OTHER PHARMACEUTICALS - 1.1%
- --------------------------------------------------------------------------------
MEDICIS PHARMACEUTICAL CORPORATION,
CLASS A* 39,400 1,974,925 1.1%
================================================================================
OTHER SPECIALTY STORES - 2.6%
- --------------------------------------------------------------------------------
CENTRAL GARDEN & PET COMPANY, CLASS A* 50,820 1,003,695 0.6%
GUITAR CENTER, INC.* 76,280 1,306,295 0.8%
O'REILLY AUTOMOTIVE, INC.* 20,900 817,712 0.4%
HIBBET SPORT GOODS INC.* 49,780 1,347,171 0.8%
- --------------------------------------------------------------------------------
TOTAL OTHER SPECIALTY STORES 4,474,873 2.6%
================================================================================
OTHER TELEPHONE/COMMUNICATIONS - 0.8%
- --------------------------------------------------------------------------------
MCLEODUSA INCORPORATED, CLASS A* 31,300 1,144,406 0.7%
PACIFIC GATEWAY EXCHANGE, INC.* 9,000 259,875 0.1%
- --------------------------------------------------------------------------------
TOTAL OTHER TELEPHONE/COMMUNICATIONS 1,404,281 0.8%
See Notes to Financial Statements.
30
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
PRINTING/FORMS - 1.1%
- --------------------------------------------------------------------------------
CONSOLIDATED GRAPHICS, INC.* 40,100 $1,902,244 1.1%
================================================================================
REAL ESTATE - 0.4%
- --------------------------------------------------------------------------------
LASALLE PARTNERS INCORPORATED* 26,680 780,390 0.4%
================================================================================
RENTAL/LEASING COMPANIES - 1.4%
- --------------------------------------------------------------------------------
FINANCIAL FEDERAL CORPORATION* 27,500 641,094 0.3%
RENTAL SERVICE CORPORATION* 3,000 65,250 0.1%
UNITED RENTALS, INC.* 67,100 1,803,312 1.0%
- --------------------------------------------------------------------------------
TOTAL RENTAL/LEASING COMPANIES 2,509,656 1.4%
================================================================================
RESTAURANTS - 0.7%
- --------------------------------------------------------------------------------
DAVE & BUSTER'S, INC.* 38,780 727,125 0.4%
STARBUCKS CORPORATION* 12,480 541,320 0.3%
- --------------------------------------------------------------------------------
TOTAL RESTAURANTS 1,268,445 0.7%
================================================================================
SEMICONDUCTORS - 3.5%
- --------------------------------------------------------------------------------
LEVEL ONE COMMUNICATIONS, INCORPORATED* 25,565 672,679 0.4%
MIPS TECHNOLOGIES, INC.* 48,200 1,114,625 0.6%
PMCSIERRA, INC.* 33,230 1,491,196 0.9%
VITESSE SEMICONDUCTOR CORPORATION* 88,480 2,853,480 1.6%
- --------------------------------------------------------------------------------
TOTAL SEMICONDUCTORS 6,131,980 3.5%
================================================================================
SERVICES TO THE HEALTH INDUSTRY - 8.6%
- --------------------------------------------------------------------------------
ACCESS HEALTH, INC.* 65,640 2,354,835 1.4%
CERNER CORPORATION* 106,690 2,387,189 1.4%
COVANCE INC.* 19,000 529,625 0.3%
MEDICAL MANAGER CORPORATION* 52,000 1,293,500 0.7%
MEDQUIST INC.* 30,400 818,900 0.5%
OMNICARE, INC.* 44,470 1,536,994 0.9%
PAREXEL INTERNATIONAL CORPORATION* 23,110 509,864 0.3%
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.* 22,400 604,800 0.3%
PROFESSIONAL DETAILING, INC.* 16,000 374,000 0.2%
See Notes to Financial Statements.
31
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
================================================================================
SERVICES TO THE HEALTH INDUSTRY, CONTINUED
- --------------------------------------------------------------------------------
QUADRAMED CORPORATION* 58,000 $1,189,000 0.7%
QUINTILES TRANSNATIONAL CORP.* 51,440 2,327,660 1.3%
SABRATEK CORPORATION* 9,000 270,000 0.2%
SUPERIOR CONSULTANT HOLDINGS CORPORATION* 18,340 678,580 0.4%
- --------------------------------------------------------------------------------
TOTAL SERVICES TO THE HEALTH INDUSTRY 14,874,947 8.6%
================================================================================
SMALLER BANKS - 1.0%
- --------------------------------------------------------------------------------
HAMILTON BANCORP INC.* 62,930 1,730,575 1.0%
================================================================================
SPECIALTY FOODS/CANDY - 0.4%
- --------------------------------------------------------------------------------
REXALL SUNDOWN, INC.* 42,470 761,806 0.4%
================================================================================
SPECIALTY INSURERS - 0.5%
- --------------------------------------------------------------------------------
CMAC INVESTMENT CORPORATION 11,800 494,125 0.3%
ENHANCE FINANCIAL SERVICES GROUP INC. 12,560 308,505 0.2%
- --------------------------------------------------------------------------------
TOTAL SPECIALTY INSURERS 802,630 0.5%
================================================================================
TELECOMMUNICATIONS EQUIPMENT - 0.6%
- --------------------------------------------------------------------------------
ASPECT TELECOMMUNICATIONS CORPORATION* 36,700 555,087 0.3%
GILAT SATELLITE NETWORKS, LTD.* 11,100 516,150 0.3%
- --------------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS EQUIPMENT 1,071,237 0.6%
================================================================================
TRUCKING - 0.4%
- --------------------------------------------------------------------------------
UNITED ROAD SERVICES, INC.* 39,400 630,400 0.4%
================================================================================
WHOLESALE DISTRIBUTORS 0.4%
- --------------------------------------------------------------------------------
PENTACON, INC.* 17,200 88,150 0.1%
SCHOOL SPECIALTY, INC.* 38,900 612,675 0.3%
- --------------------------------------------------------------------------------
TOTAL WHOLESALE DISTRIBUTORS 700,825 0.4%
- --------------------------------------------------------------------------------
TOTAL EQUITY SECURITIES (COST $154,720,740) 164,548,951 94.8%
================================================================================
See Notes to Financial Statements.
32
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
SHORT-TERM INVESTMENTS - 8.6% Principal Value Net Assets
================================================================================
FORD MOTOR CREDIT COMPANY,
5.09151%, 11/20/98 $9,000,000 $9,000,000 5.2%
GENERAL MOTORS ACCEPTANCE CORPORATION,
5.162%, 11/12/98 6,000,000 6,000,000 3.4%
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $15,000,000) 15,000,000 8.6%
================================================================================
MONEY MARKET FUNDS - 0.2% Shares
- --------------------------------------------------------------------------------
TEMPORARY INVESTMENT FUND INC.TEMP FUND 197,644 197,644 0.1%
TEMPORARY INVESTMENT FUND INC.TEMP CASH 197,644 197,644 0.1%
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET FUNDS (COST $395,288) 395,288 0.2%
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $170,116,028) 179,944,239 103.6%
================================================================================
OTHER ASSETS - 1.3%
- --------------------------------------------------------------------------------
RECEIVABLES:
INVESTMENT SECURITIES SOLD 2,141,155
SHARES OF BENEFICIAL INTEREST SOLD 116,169
INTEREST 41,852
PREPAID INSURANCE 4,187
OTHER ASSETS 13,254
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 2,316,617
================================================================================
TOTAL ASSETS $182,260,856 104.9%
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
33
<PAGE>
PIC STATEMENTS OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
Percentage of
EQUITY SECURITIES, CONTINUED Value Net Assets
================================================================================
LIABILITIES - (4.9%)
- --------------------------------------------------------------------------------
PAYABLES:
INVESTMENT SECURITIES PURCHASED $8,379,119
SHARES OF BENEFICIAL INTEREST REDEEMED 40,845
TO ADVISOR (NOTE 3) 107,018
DEFERRED TRUSTEES' COMPENSATION (NOTE 3) 22,560
ACCRUED EXPENSES 57,675
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 8,607,217
================================================================================
TOTAL NET ASSETS - 100.0% $173,653,639 100.0%
- --------------------------------------------------------------------------------
* Non-income producing security
See Notes to Financial Statements.
34
<PAGE>
PIC STATEMENTS OF OPERATIONS
GROWTH YEAR ENDED OCTOBER 31, 1998
SMALL CAP
PORTFOLIO
Growth Small Cap
Portfolio Portfolio
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
INCOME:
Dividends $ 583,933 $ 96,942
Interest 305,739 478,730
------------ ------------
Total income 889,672 575,672
============ ============
EXPENSES:
Investment advisory fee (Note 3) 1,045,893 1,418,731
Administration fee (Note 3) 130,737 177,341
Accounting services fee 72,371 77,268
Custodian fee 33,938 61,054
Audit fee 25,302 18,502
Trustees' fees 7,100 5,100
Insurance 3,700 5,812
Miscellaneous 3,000 10,829
Amortization of organization costs -- 10,001
Legal fees 7,500 12,795
------------ ------------
Total expenses 1,329,541 1,797,433
Less, reimbursement/waiver
by Advisor (Note 3) (22,176) (24,020)
------------ ------------
Net expenses 1,307,365 1,773,413
============ ============
NET INVESTMENT LOSS (417,693) (1,197,741)
============ ============
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
------------
Net realized gain (loss)
on investments 9,511,479 (30,872,647)
Change in net unrealized appreciation
(depreciation) of investments 15,517,462 (283,036)
------------ ------------
NET GAIN (LOSS) ON INVESTMENTS 25,028,941 (31,155,683)
============ ============
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS $ 24,611,248 ($32,353,424)
------------ ------------
35
<PAGE>
PIC STATEMENTS OF CHANGES IN NET ASSETS
GROWTH AS OF OCTOBER 31, 1998
SMALL CAP
PORTFOLIO
INCREASE (DECREASE) IN NET ASSETS
- --------------------------------------------------------------------------------
FROM OPERATIONS:
- --------------------------------------------------------------------------------
Net investment loss
Net realized gain (loss) on investments
Change in net unrealized appreciation (depreciation) of investments
Net increase (decrease) in net assets resulting from operations
TRANSACTIONS IN INTERESTS:
Contributions by Holders
Withdrawals by Holders
Net increase (decrease) in net assets from transactions in interests
TOTAL INCREASE (DECREASE) IN NET ASSETS
NET ASSETS
Beginning of year
End of year
36
<PAGE>
PIC
GROWTH
SMALL CAP
PORTFOLIO
Growth Portfolio Small Cap Portfolio
--------------------------------------------------------------
Year Year Year Year
ended ended ended ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1998 Oct. 31, 1997
--------------------------------------------------------------
$ (417,693) $ (133,460) $ (1,197,741) $ (934,925)
9,511,479 32,161,956 (30,872,647) 72,084,822
15,517,462 (7,683,870) (283,036) (62,640,291)
------------ ------------ ------------ -------------
24,611,248 24,344,626 (32,353,424) 8,509,606
============ ============ ============ =============
64,364,321 17,478,857 123,809,971 164,160,467
(35,037,926) (75,778,332) (57,458,705) (234,314,952)
------------ ------------ ------------ -------------
29,326,395 (58,299,475) 66,351,266 (70,154,485)
============ ============ ============ =============
53,937,643 (33,954,849) 33,997,842 (61,644,879)
============ ============ ============ =============
82,144,680 116,099,529 139,655,797 201,300,676
------------ ------------ ------------ -------------
$136,082,323 $ 82,144,680 $173,653,639 $ 139,655,797
------------ ------------ ------------ -------------
37
<PAGE>
PIC
GROWTH SELECTED RATIO DATA
SMALL CAP
PORTFOLIO
GROWTH PORTFOLIO
----------------
Year ended October 31,
--------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Ratios to average net assets:
Operating expenses 1.00%# 1.00%# 1.00%# 1.00%# 1.00%#
Net investment income (loss) (0.32%) (0.13%) (0.04%) 0.08% 0.10%
Portfolio turnover rate 81.06% 67.54% 64.09% 54.89% 68.26%
# Net of expense reimbursements equivalent to 0.02%, 0.05%, 0.04%, 0.01%, and
0.01% of average net assets, respectively.
38
<PAGE>
PIC
GROWTH SELECTED RATIO DATA
SMALL CAP
PORTFOLIO
GROWTH PORTFOLIO
----------------
Year ended October 31,
--------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Ratios to average net assets:
Operating expenses 1.00%# 1.00%# 1.00%# 1.00%# 1.00%#
Net investment income (loss) (0.68%) (0.49%) (.59%) (.51%) (.49%)
Portfolio turnover rate 81.75% 151.52% 53.11% 45.45% 63.89%
# Net of expenses reimbursements equivalent to 0.01%, 0.01%, 0.01%, 0.07%, and
0.10% of average net assets, respectively.
39
<PAGE>
PIC
GROWTH NOTES TO FINANCIAL STATEMENTS
SMALL CAP
PORTFOLIO
1 - ORGANIZATION
- --------------------------------------------------------------------------------
PIC Growth Portfolio was organized on December 11, 1991 and PIC Small Cap
Portfolio was organized on March 22, 1993 as separate trusts under the laws of
the State of New York (each a "Portfolio" and collectively the "Portfolios").
The beneficial interests in each Portfolio are divided into an unlimited number
of non-transferable interests, par value $.01 each. The Portfolios are
registered under the Investment Company Act of 1940 as open-end, diversified
management investment companies.
2 - SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies consistently
followed by the Portfolios. These policies are in conformity with generally
accepted accounting principles.
A. VALUATION OF SECURITIES. Equity securities listed on a national securities
exchange or traded on the NASDAQ system are valued at their last sale price.
Other equity securities and debt securities for which market quotations are
readily available are valued at the mean between their bid and asked price,
except that debt securities maturing within 60 days are valued on an
amortized cost basis. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board
of Trustees.
B. FEDERAL INCOME TAXES. Each Portfolio intends to comply with the requirements
of the Internal Revenue Code applicable to it. Therefore, no federal income
tax provision is required.
C. OTHER. Securities transactions are recorded on the trade date basis. Realized
gains and losses from securities transactions are reported on an identified
cost basis. Interest is recorded as accrued, and dividend income is recorded
on the ex-dividend date.
D. ACCOUNTING ESTIMATES. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
40
<PAGE>
PIC
GROWTH NOTES TO FINANCIAL STATEMENTS,
SMALL CAP CONTINUED
PORTFOLIO
3 - TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
Each Portfolio has entered into an investment advisory agreement with
Provident Investment Counsel, Inc. ("PIC") and an administration agreement with
Investment Company Administration LLC ("ICA"), pursuant to which agreements
certain employees of these entities serve as officers and/or trustees of the
Portfolios. PIC and ICA also provide management services necessary for the
operations of the Portfolios and furnish office facilities. PIC receives from
each of Growth and Small Cap Portfolios an investment advisory fee at the annual
rate of 0.80% of its average daily net assets. In addition, PIC has voluntarily
taken to limit the expenses of the Growth and Small Cap Portfolios to 1.00% of
its average net assets. Fees waived by PIC for the year ended October 31, 1998
were as follows:
Waived Fees
-----------
Growth Portfolio $22,176
Small Cap Portfolio 24,020
ICA receives for its services a fee at the annual rate of 0.10% of the
average daily net assets of the Portfolios. Fees paid to ICA for the year ended
October 31, 1998 are stated on the respective Portfolios' Statement of
Operations.
On December 19, 1995, each Portfolio approved a Deferred Compensation Plan
for Trustees (the "Plan"). Trustees are entitled to receive $2,500 per quarter
and $500 per meeting attended, which is allocated among the Portfolios. Trustees
can elect to receive payment in cash or defer payments provided for in the Plan.
If a Trustee elects to defer payment, the Plan provides for the creation of a
deferred payment account (phantom share account). This account accumulates the
deferred fees earned and the value of the account is adjusted at the end of each
quarter to reflect a value which would have been earned if the account had been
invested in designated investments. The Portfolios recognize as trustee expense
amounts accrued as meetings are attended plus the change in the value of the
phantom share account determined on a quarterly basis.
4 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
The aggregate cost of purchases and the proceeds from sales of investment
securities, other than short-term obligations, for the year ended October 31,
1998, were as follows:
41
<PAGE>
PIC
GROWTH NOTES TO FINANCIAL STATEMENTS,
SMALL CAP CONTINUED
PORTFOLIO
Purchases Sales
--------- -----
Growth Portfolio $123,276,494 $ 99,664,277
Small Cap Portfolio 195,915,640 137,768,188
The aggregate unrealized appreciation and depreciation of investment
securities at October 31 1998, based on costs for federal income tax purposes,
were as follows:
Tax Gross Gross
Costs of Unrealized Unrealized
Investments Appreciation Depreciation
----------- ------------ ------------
Growth Portfolio $103,147,556 $37,030,161 $ (1,106,815)
Small Cap Portfolio 170,578,021 19,963,778 (10,597,560)
42
<PAGE>
PIC
GROWTH INDEPENDENT AUDITOR'S REPORT
SMALL CAP
PORTFOLIO
- --------------------------------------------------------------------------------
To the Board of Trustees of
and the holders of Interests in,
PIC Growth Portfolio
PIC Small Cap Portfolio
We have audited the accompanying statements of net assets of PIC Growth
Portfolio and PIC Small Cap Portfolio as of October 31, 1998, the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended and selected ratio
data for each of the periods indicated. These financial statements and selected
ratio data are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
selected ratio data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. Our procedures included
confirmation of securities owned as of October 31, 1998 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PIC Growth Portfolio and PIC
Small Cap Portfolio as of October 31, 1998, the results of their operations, the
changes in their net assets and these selected ratio data for the periods
indicated, in conformity with generally accepted accounting principles.
McGladrey & Pullen, LLP
New York, New York
December 3, 1998
43
<PAGE>
PROVIDENT INVESTMENT TRUSTEES AND OFFICERS
COUNSEL MUTUAL FUNDS
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS - PIC INVESTMENT TRUST
- --------------------------------------------------------------------------------
JEFFREY J. MILLER, Trustee
JETTIE M. EDWARDS, Trustee
BERNARD J. JOHNSON, Trustee Emeritus
JEFFREY D. LOVELL, Trustee
WAYNE H. SMITH, Trustee
DOUGLASS B. ALLEN, President
THAD M. BROWN, Vice President, Secretary and Treasurer
TRUSTEES AND OFFICERS - PIC PORTFOLIOS
- --------------------------------------------------------------------------------
JEFFREY J. MILLER, Trustee
RICHARD N. FRANK, Trustee
JAMES CLAYBURN LAFORCE, Trustee
ANGELO R. MOZILO, Trustee
BERNARD J. JOHNSON, Trustee Emeritus
DOUGLASS B. ALLEN, President
THAD M. BROWN, Vice President, Secretary and Treasurer
LEGAL COUNSEL - PIC INVESTMENT TRUST
- --------------------------------------------------------------------------------
SWIDLER, BERLIN, SHEREFF, FRIEDMAN, LLP
LEGAL COUNSEL - PIC PORTFOLIOS
- --------------------------------------------------------------------------------
PAUL, HASTINGS, JANOFSKY & WALKER, LLP
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
MCGLADREY & PULLEN, LLP
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
This report is intended for the information of shareholders of Provident
Investment Counsel Mutual Funds and should not be used as sales literature
unless preceded or accompanied by a current prospectus.
44
