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File No. 811-6497
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 / /
AMENDMENT NO. 4 /x/
PIC BALANCED PORTFOLIO
(Exact name of registrant as specified in charter)
300 NORTH LAKE AVENUE
PASADENA, CA 91101-4106
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER (INCLUDING AREA CODE): (818) 449-8500
THAD M. BROWN
PROVIDENT INVESTMENT COUNSEL
300 NORTH LAKE AVENUE
PASADENA, CA 91101-4106
(Name and address of agent for service of process)
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PIC BALANCED PORTFOLIO
PART A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT
PIC Balanced Portfolio (the "Balanced Portfolio" or the "Portfolio")
is a diversified, management open-end investment company which was organized as
a trust under the laws of the State of New York on December 11, 1991.
The investment objective of the Balanced Fund is to provide high total
return while preserving capital. There is no assurance that the Balanced Fund
will achieve its objective.
In the opinion of Provident Investment Counsel, the Advisor to the
Balanced Portfolio, over time, stocks outperform bonds and investments that are
equivalent to cash; consequently the Balanced Portfolio will attempt to achieve
high total return through investments in equity securities, consisting of
common stocks and securities having the characteristics of common stocks, such
as convertible preferred stocks, convertible debt securities and warrants.
In selecting equity securities for the Portfolio, the Advisor will
select securities of companies of various sizes which are currently
experiencing an above-average rate of earnings growth. In addition, the
Advisor seeks companies that have a five-year average performance record of
sales, earnings, pretax margins, return on equity and reinvestment rate at an
aggregate average of 1.5 times the average performance of the Standard & Poor's
500 Index ("S&P 500") for the same period. The Portfolio attempts to invest in
a range of small, medium and large companies; the minimum market capitalization
of a portfolio security is expected to be $250 million, and the average market
capitalization is currently approximately $9 billion. Equity securities will
typically average less than a 1% dividend. Currently, approximately 70% of the
equity securities in which the Portfolio will invest are listed and traded on
the New York and American Stock Exchanges, and the remainder are traded on the
NASDAQ system or otherwise over the counter. The Advisor supports its
selection of individual securities through intensive research and uses
qualitative and quantitative disciplines to determine when securities should be
sold.
The Balanced Portfolio will invest no less than 25% of its assets in
fixed income securities, both to earn current income and to achieve gains from
an increase in the value of the fixed income securities. Fixed income
securities can appreciate in value as a result of a decrease in interest rates
as well as a perception by investors that the credit quality of the issuer has
improved. Conversely, an increase in interest rates or a deterioration in
credit quality can lead to a decline in the value of the fixed income security.
In determining whether or not the Balanced Portfolio should invest in a
particular debt security, the Advisor considers factors such as the price,
coupon and yield to maturity; the credit quality of the issuer; the issuer's
cash flow and the related coverage ratios; the property, if any, securing the
obligation; and the terms of the debt instrument, including subordination,
default, sinking fund and early redemption provisions. The Advisor will also
review the ratings, if any, assigned to the securities by Standard & Poor's
Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's") or other
recognized rating agencies.
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The Balanced Portfolio may invest up to 70% of its total assets in
debt securities, but it may not invest in debt securities that are not rated at
least BBB by S&P or Baa by Moody's, or if unrated by S&P and Moody's are of
comparable quality in the judgment of the Advisor. See the Appendix for a
description of S&P and Moody's ratings.
The Balanced Portfolio may also attempt to earn current income and
reduce the variability of the net asset value of its shares by investing a
portion of its assets in short-term investments. For more information about
short-term investments, see "General -- Short-Term Investments" below. The
Balanced Portfolio also may invest part of its assets temporarily in short-term
investments pending the investment of the proceeds of the sale of its shares or
of its portfolio securities.
The Balanced Portfolio may also invest up to 20% of its assets in
foreign securities, although there is no requirement that it do so. See
"General -- Foreign Securities" below.
GENERAL
SHORT-TERM INVESTMENTS. The short-term investments that may be
purchased by the Balanced Portfolio consist of high quality debt obligations
maturing in one year or less from the date of purchase, such as U.S. Government
securities, certificates of deposit, bankers' acceptances and commercial paper.
High quality means the obligations have been rated at least A-1 by S&P or
Prime-1 by Moody's, or have an outstanding issue of debt securities rated at
least A by S&P or Moody's, or are of comparable quality in the opinion of the
Advisor.
Short-term investments also include repurchase agreements. A
repurchase agreement is a transaction in which the Portfolio purchases a
security, and at the same time, the seller (normally a commercial bank or
broker-dealer) agrees to repurchase the same security (and/or a security
substituted for it under the repurchase agreement) at an agreed-upon price and
date in the future. The resale price is in excess of the purchase price in that
it reflects an agreed-upon market interest rate effective for the period of time
during which the Portfolio holds the securities. The majority of these
transactions run from day to day and not more than seven days from the original
purchase. The Portfolio's risk is limited to the ability of the seller to pay
the agreed-upon sum upon the delivery date; in the event of bankruptcy or other
default by the seller, there may be possible delays and expenses in liquidating
the instrument purchased, decline in its value and loss of interest. However,
the securities will be marked to market every business day so that the value is
at least equal to the amount due from the seller, including accrued interest.
The Advisor will also consider the creditworthiness of any bank or broker-dealer
involved in repurchase agreements.
U.S. GOVERNMENT SECURITIES. U.S. Government securities include direct
obligations issued by the United States Treasury, such as Treasury bills,
certificates of indebtedness, notes and bonds. U.S. Government agencies and
instrumentalities that issue or guarantee securities include, but are not
limited to, the Federal Home Loan Banks, the Federal National Mortgage
Association and the Student Loan Marketing Association.
Except for U.S. Treasury securities, obligations of U.S. Government
agencies and instrumentalities may or may not be supported by the full faith
and credit of the United States.
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Some, such as those of the Federal Home Loan Banks, are backed by the right of
the issuer to borrow from the Treasury; others by discretionary authority of
the U.S. Government to purchase the agencies' obligations; while still others,
such as the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. In the case of securities not backed by the
full faith and credit of the United States, the investor must look principally
to the agency or instrumentality issuing or guaranteeing the obligation for
ultimate repayment and may not be able to assert a claim against the United
States itself in the event the agency or instrumentality does not meet its
commitment.
Among the U.S. Government securities that the Balanced Portfolio may
purchase are "mortgage-backed securities" of the Government National Mortgage
Association ("Ginnie Mae"), the Federal Home Loan Mortgage Association
("Freddie Mac") and the Federal National Mortgage Association ("Fannie Mae").
These mortgage-backed securities include "pass-through" securities and
"participation certificates"; both are similar, representing pools of mortgages
that are assembled, with interests sold in the pool; the assembly is made by an
"issuer" which assembles the mortgages in the pool and passes through payments
of principal and interest for a fee payable to it. Payments of principal and
interest by individual mortgagors are "passed through" to the holders of the
interest in the pool, thus, the payments to holders include varying amounts of
principal and interest. Prepayment of the mortgages underlying these
securities may result in a Portfolio's inability to reinvest the principal at
comparable yields.
Another type of mortgage-backed security is the "collateralized
mortgage obligation", which is similar to a conventional bond (in that it makes
fixed interest payments and has an established maturity date) and is secured by
groups of individual mortgages. Timely payment of principal and interest on
Ginnie Mae pass-throughs is guaranteed by the full faith and credit of the
United States. Freddie Mac and Fannie Mae are both instrumentalities of the
U.S. Government, but their obligations are not backed by the full faith and
credit of the United States.
FOREIGN SECURITIES. The Balanced Portfolio has the right to invest up
to 20% of its total assets in foreign securities. The Portfolio will only
purchase foreign securities which are listed on a "national securities
exchange," as defined in the Investment Company Act of 1940 (the "1940 Act"),
or included in the NASDAQ National Market System or which are represented by
American Depositary Receipts listed on a national securities exchange or
included in the NASDAQ National Market System.
Interest or dividend payments on foreign securities may be subject to
foreign withholding taxes. There are also risks in investing in foreign
securities. The value of an investment may be affected indirectly by changes
in currency rates and in exchange control regulations. Foreign companies are
frequently not subject to the accounting and financial reporting standards
applicable to domestic companies, and there may be less information about
foreign issuers. In addition, investments in foreign countries are subject to
the possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect the value of
those investments.
WHEN-ISSUED SECURITIES. The Balanced Portfolio may purchase
securities on a when-issued basis, for payment and delivery at a later date,
generally within one month. The price and
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yield are generally fixed on the date of commitment to purchase, and the value
of the security is thereafter reflected in the Balanced Portfolio's net asset
value. During the period between purchase and settlement, no payment is made
by the Balanced Portfolio and no interest accrues to the Balanced Portfolio.
At the time of settlement, the market value of the security may be more or less
than the purchase price. The Balanced Portfolio will limit its investments in
when-issued securities to less than 5% of its total assets. When the Balanced
Portfolio purchases securities on a when-issued basis, it maintains liquid
assets in a segregated account with its Custodian in an amount equal to the
purchase price as long as the obligation to purchase continues.
OPTIONS TRANSACTIONS. The Balanced Portfolio may write (sell) covered
call and cash secured put options, and it may purchase call and put options, on
debt securities. The Balanced Portfolio will write options on its portfolio
securities for the purpose of increasing its return or to protect the value of
its portfolio. If the price of the underlying security moves adversely to the
Portfolio's position, the option may be exercised, and the Portfolio will be
required to purchase or sell the underlying security at a disadvantageous
price, which may only be partially offset by the amount of the premium, if at
all. The Balanced Portfolio may also write straddles, which are combinations
of put and call options on the same security, and which may generate additional
premium income, but may also present increased risk. The Balanced Portfolio
may also purchase put or call options in anticipation of changes in interest
rates that would adversely affect the value of its portfolio securities or the
prices of securities the Portfolio wants to purchase at a later date. The
premium paid for a put or call option plus any transaction costs will reduce
the benefit, if any, realized by the Fund upon exercise or liquidation of the
option, and unless the price of the underlying security changes sufficiently,
the option may expire without value to the Portfolio.
FUTURES. The Balanced Portfolio may buy and sell stock index futures
contracts and the Portfolio also may buy and sell interest rate futures
contracts. The Portfolio will enter into these transactions in order to hedge
against changes in prices of the Portfolio's securities.
A stock index futures contract is an agreement pursuant to which one
party agrees to deliver to the other an amount of cash equal to a specific
dollar amount times the difference between the value of a specific stock index
at the close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is made. If the Advisor
expected general stock market prices to rise, it might purchase a stock index
futures contract as a hedge against an increase in prices of particular equity
securities it wanted ultimately to buy. If in fact the stock index did rise,
the price of the equity securities intended to be purchased might also
increase, but that increase would be offset in part by the increase in the
value of the Portfolio's futures contract resulting from the increase in the
index. On the other hand, if the Advisor expected general stock market prices
to decline, it might sell a futures contract on the index. If that index did
in fact decline, the value of some or all of the equity securities held by the
Portfolio might also be expected to decline, but that decrease would be offset
in part by the increase in the value of the futures contract.
An interest rate futures contract is a similar agreement, except that
it involves the delivery of the debt security underlying the agreement. In
general, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). If the Advisor expected long-term
interest rates to decline, it might enter into a futures contract for the
purchase of long-term debt
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securities so that it could gain market exposure that might offset anticipated
increases in the cost of debt securities it intends to purchase, while
continuing to hold higher-yielding short-term securities or waiting for the
long-term market to stabilize. If the Advisor expected a rise in long-term
interest rates, it might sell a futures contract on long-term debt securities
similar to those held by the Balanced Portfolio. If rates did in fact increase
and the value of the securities held by that Portfolio declined, the decrease
would be offset in part by the increase in value of the futures contract.
There is no assurance that it will be possible at any particular time
to close a futures position. In the event that the Portfolio could not close a
futures position and the value of the position declined, the Portfolio would be
required to continue to make daily cash payments of maintenance margin. There
can be no assurance that hedging transactions will be successful, as there may
be an imperfect correlation between movements in the prices of the futures
contracts and of the securities being hedged, or price distortions due to
market conditions in the futures markets. Successful use of futures contracts
is subject to the Advisor's ability to predict correctly movements in the
direction of interest rates, market prices and other factors affecting the
value of securities.
PORTFOLIO TURNOVER. The annual rate of portfolio turnover of the
Balanced Portfolio for the fiscal period ended October 31, 1995 was 106.50%,
but is expected to be less than 100% in the future. Under certain market
conditions, the Portfolio may experience a higher rate of portfolio turnover.
In general, the Advisor will not consider the rate of portfolio turnover to be
a limiting factor in determining when or whether to purchase or sell securities
in order to achieve the Portfolio's objective. High portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs, which are borne directly by the Portfolio, and may increase realized
capital gains which are taxable to Holders when distributed.
INVESTMENT RESTRICTIONS
The Portfolio has adopted certain investment restrictions, which are
described fully in the Statement of Additional Information. One of these
restrictions states that the Portfolio may borrow money only from banks for
temporary or emergency purposes in amounts not to exceed 10% of the Portfolio's
assets, and that additional investments may not be made while any such
borrowings are in excess of 5% of the Portfolio's assets. Like the investment
objective, these restrictions are fundamental and may be changed only by a
majority vote of the outstanding Interests of the Portfolio.
The Portfolio may, as a fundamental policy and within limits, engage
in short sales, but only those which are "against the box." Such short sales
are a method of locking in unrealized capital gains without current recognition
of such gains.
It is a position of the Securities and Exchange Commission (and an
operating although not a fundamental policy of the Portfolio) that open-end
investment companies such as the Portfolio should not make certain investments
if thereafter more than 15% of the value of its net assets would be so
invested. The investments included in this 15% limit are (i) those which are
restricted; i.e., those which cannot freely be sold for legal reasons (other
than those which meet the requirements of Securities Act Rule 144A); (ii) fixed
time deposits subject to withdrawal
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penalties (other than deposits with a term of less than seven days); (iii)
repurchase agreements having a maturity of more than seven days; and (iv)
investments for which market quotations are not readily available. The 15%
limitation does not include obligations which are payable at principal amount
plus accrued interest within seven days after purchase. The Portfolio has
undertaken to a state securities commission that it will not invest more than
5% of its total assets in restricted securities.
ITEM 5. MANAGEMENT OF THE FUND.
The Portfolio's Board of Trustees decides on matters of general policy
and reviews the activities of the Advisor and the Administrator. The
Portfolio's officers conduct and supervise the daily business operations of the
Portfolio.
THE ADVISOR
The Advisor to the Balanced Portfolio is Provident Investment Counsel,
Inc., 300 North Lake Avenue, Pasadena, California 91101-4106. Subject to the
direction and control of the Trustees of the Balanced Portfolio, the Advisor
formulates and implements an investment program for the Portfolio, including
determining which securities should be bought and sold. The Advisor also
provides certain of the officers of the Portfolio. For its services, The
Advisor receives a fee from the Portfolio, accrued daily and paid monthly, at
the annual rate of 0.60% of the average daily net assets of the Portfolio.
The Advisor is a corporation that traces its origins to an investment
partnership formed in 1951. On February 15, 1995, it became an indirect, wholly
owned subsidiary of United Asset Management ("UAM"), a publicly owned
corporation with headquarters located at One International Place, Boston, MA
02110. UAM is principally engaged, through affiliated firms, in providing
institutional investment management services. At December 31, 1995, total
assets under the Advisor's management were in excess of $17 billion.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, Investment Company
Administration Corporation (the "Administrator") supervises the overall
administration of the Portfolio, including, among other responsibilities, the
preparation and filing of all documents required for compliance by the
Portfolio with applicable laws and regulations, arranging for the maintenance
of books and records and the Portfolio, and supervision of other organizations
that provides services to the Portfolio. Certain officers of the Portfolio are
also provided by the Administrator. The Portfolio is responsible for paying
legal and auditing fees, the fees and expenses of its custodian, accounting
services and transfer agents, trustees' fees and registration fees, as well as
its other operating expenses. For the services it provides, the Administrator
receives a fee from the Portfolio at an annual rate of .10% of the average
daily net assets of the Portfolio; the fee is accrued daily and paid monthly.
TRANSFER AND DIVIDEND PAYING AGENT
The Portfolio does not have a transfer or dividend paying agent.
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ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
Holders of Interests in the Portfolio are entitled to one vote for
each full Interest held (and fractional votes for fractions of Interests) and
may vote in the election of Trustees and on other matters submitted to meetings
of Holders. It is not contemplated that regular annual meetings of Holders
will be held.
The Declaration of Trust provides that the Holders have the right,
upon the declaration in writing or vote of the Holders of a majority of
Interests, to remove a Trustee. The Trustees will call a meeting of Holders to
vote on the removal of a Trustee upon the written request of the Holders of ten
per cent of its Interests. In addition, ten Holders holding the lesser of
$25,000 worth or one per cent of the Interests may advise the Trustees in
writing that they wish to communicate with other Holders for the purpose of
requesting a meeting to remove a Trustee. The Trustees will then, if requested
by the applicants, mail at the applicants' expense the applicants'
communication to all other Holders.
Holders of Interests have no preemptive or other right to subscribe
for additional securities. Interests are non- transferable.
Holders may be liable for obligations of the Portfolio, but the risk
of a Holder incurring financial loss on account of such liability is limited to
circumstances in which the Portfolio was unable to meet its obligations.
The Book Capital Account balances of Holders are determined at such
time or times, at such frequency and pursuant to such method as the Trustees
may from time to time determine. The power and duty to make such calculations
may be delegated by the Trustees to such person as the Trustees may determine.
It is expected that such calculations will be made on such days as necessary to
comply with Rule 22c-1 under the 1940 Act.
The Trustees shall, in compliance with applicable provisions of the
Internal Revenue Code (the "Code") or regulations thereunder, agree to (a) the
daily allocation of income or loss to each Holder, (b) the payment of
distributions to Holders and (c) upon liquidation of the Portfolio, the final
distribution of items of taxable income and expense. Any such agreement may be
amended from time to time to comply with the Code or regulations thereunder.
The Trustees may retain from net profits such amount as they may deem necessary
to pay the debts or expenses of the Portfolio or to meet obligations of the
Portfolio, or as they may deem desirable to use in the conduct of the affairs
of the Portfolio or to retain for future requirements or extension of the
business of the Portfolio.
As of February 28, 1996, the Registrant was controlled by the PIC
Institutional Balanced Fund, 300 North Lake Avenue, Pasadena, CA 91101, which
owned 99.9% of its outstanding Interests.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
Interests in the Portfolio are issued solely to institutional
investors, including regulated investment companies, group trusts governed by
Section 501(a) of the Code, common trust funds governed by Section 584 of the
Code and similar collective investment arrangements in transactions which do
not involve any "public offering" within the meaning of the Securities Act of
1933 (the "1933 Act"). This Registration Statement does not constitute an
offer to sell, or the
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solicitation of an offer to buy, any "security" within the meaning of the 1933
Act.
There is no sales charge on Interests in the Portfolio, and the
Portfolio does not use its assets for distribution pursuant to Rule 12b-1 under
the 1940 Act. There is no minimum investment in the Portfolio. The Portfolio
reserves the right to reject any investment.
The net asset value of the Portfolio is determined as of the close of
regular trading (currently 4:00 p.m., New York time) on each day that the New
York Stock Exchange is open for trading. The net asset value per Interest of
the Portfolio is the value of the Portfolio's assets, less its liabilities,
divided by the number of Interests outstanding.
The Portfolio values its investments on the basis of the market value
of the securities. Securities and other assets for which market prices are not
readily available are valued at fair value as determined in good faith by the
Board of Trustees of the Portfolio. The fair value of debt securities with
remaining maturities of 60 days or less is normally their amortized cost value,
unless conditions indicate otherwise. Cash and receivables will be valued at
their face amounts. Interest will be recorded as accrued and dividends will be
recorded on their ex-dividend date.
ITEM 8. REDEMPTION OR REPURCHASE
A Holder wishing to redeem Interests may do so at any time by writing
to the Fund in care of its Custodian at P.O. Box 8950, Wilmington DE 19899, or
by delivering instructions to the Custodian at 103 Bellevue Parkway,
Wilmington, Delaware 19809. The redemption request should identify the
Portfolio, specify the number of Interests to be redeemed and be signed by an
authorized person of the Holder. If the request is not properly executed, the
Interests specified will be redeemed at the net asset value next determined
after receipt of the request. Payment for Interests tendered will be made
within seven days after receipt by the Portfolio of instructions properly
executed. However, payment may be delayed under unusual circumstances, as
specified in the Investment Company Act of 1940 or as determined by the
Securities and Exchange Commission. Payment will be sent only to Holders at the
address of record.
REDEMPTION OF SMALL ACCOUNTS
In order to reduce the Portfolio's expenses, the Board of Trustees is
authorized to cause the redemption of all of the Interests of any Holder whose
account has declined to a net asset value of less than $500, as a result of a
transfer or redemption, at the net asset value determined as of the close of
business on the business day preceding the sending of proceeds of such
redemption. The Portfolio would give Holders whose Interests were being
redeemed 60 days' prior written notice in which to purchase sufficient
Interests to avoid such redemption.
ITEM 9. PENDING LEGAL PROCEEDINGS
Not applicable.
The date of this Part A is February 29, 1996.
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PART B.
PIC BALANCED PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE
This Statement of Additional Information of the PIC Balanced Portfolio
(the "Balanced Portfolio" or the "Portfolio") is not a prospectus, and it
should be read only in conjunction with Part A of this Registration Statement.
The date of this Statement of Additional Information is February 29, 1996.
ITEM 11. TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Item 12. General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Item 13. Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Item 14. Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4
Item 15. Control Persons and Principal Holders of Securities . . . . . . . . . . . . . . . . . . B-5
Item 16. Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . . . . . . . B-6
Item 17. Brokerage Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7
Item 18. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
Item 19. Purchase, Redemption and Pricing of Securities Being Offered . . . . . . . . . . . . . B-8
Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8
Item 22. Calculation of Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
</TABLE>
ITEM 12. GENERAL INFORMATION AND HISTORY
Not applicable.
ITEM 13. INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Balanced Portfolio is to provide
long-term growth of capital. There is no assurance that the Portfolio will
achieve its objective. The discussion below supplements information contained
in Part A as to investment policies of the Balanced Portfolio.
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following restrictions as fundamental
policies, which may not be changed without the favorable vote of the holders of
a "majority," as defined in the Investment Company Act of 1940 (the "1940
Act"), of the outstanding voting securities of the
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Portfolio. Under the 1940 Act, the "vote of the holders of a majority of the
outstanding voting securities" means the vote of the holders of the lesser of
(i) 67% of the Interests of the Portfolio represented at a meeting at which the
holders of more than 50% of its outstanding Interests are represented or (ii)
more than 50% of the outstanding Interests of the Portfolio.
The Portfolio may not:
1. Issue senior securities, borrow money or pledge its assets, except
that the Portfolio may borrow on an unsecured basis from banks for temporary or
emergency purposes or for the clearance of transactions in amounts not
exceeding 10% of its total assets (not including the amount borrowed), provided
that it will not make investments while borrowings in excess of 5% of the value
of its total assets are outstanding;
2. Make short sales of securities or maintain a short position,
except for short sales against the box;
3. Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of transactions;
4. Write put or call options, except it may write covered call and
cash secured put options on debt securities;
5. Act as underwriter (except to the extent the Portfolio may be
deemed to be an underwriter in connection with the sale of securities in its
investment portfolio);
6. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities);
7. Purchase or sell real estate or interests in real estate or real
estate limited partnerships (although the Portfolio may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate);
8. Purchase or sell commodities or commodity futures contracts,
except that the Portfolio may purchase and sell stock index futures and
interest rate futures contracts;
9. Buy oil and gas limited partnerships or oil, gas or mineral
leases;
10. Make loans (except for purchases of debt securities consistent
with the investment policies of the Portfolio and except for repurchase
agreements); or
11. Make investments for the purpose of exercising control or
management.
The Portfolio observes the following restrictions as a matter of
operating but not fundamental policy, pursuant to positions taken by federal
and state regulatory authorities:
The Portfolio may not:
1. Purchase any security if as a result the Portfolio would then hold
more than 10% of any class of securities of an issuer (taking all common stock
issues as a single class, all preferred stock issues as a single class, and all
debt issues as a single class);
2. Invest in securities of any issuer if, to the knowledge of the
Portfolio, any officer or
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Trustee of the Portfolio or any officer or Director of the Advisor owns more
than 1/2 of 1% of the outstanding securities of such issuer, and such officers,
Trustees and Directors who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of such issuer;
3. Invest more than 5% of the value of its net assets in warrants
(included in that amount, but not to exceed 2% of the value of the Portfolio's
net assets, may be warrants which are not listed on the New York or American
Stock Exchange).
4. Invest in any security if as a result the Portfolio would have
more than 5% of its total assets invested in securities of companies which
together with any predecessor have been in continuous operation for fewer than
three years.
5. Invest more than 10% of its assets in the securities of other
investment companies or purchase more than 3% of any other investment company's
voting securities or make any other investment in other investment companies
except as permitted by federal and state law.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a Portfolio purchases
a security from a bank or recognized securities dealer and simultaneously
commits to resell that security to the bank or dealer at an agreed-upon date
and price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased security. The purchaser maintains custody of the
underlying securities prior to their repurchase; thus the obligation of the
bank or dealer to pay the repurchase price on the date agreed to is, in effect,
secured by such underlying securities. If the value of such securities is less
than the repurchase price, the other party to the agreement will provide
additional collateral so that at all times the collateral is at least equal to
the repurchase price.
Although repurchase agreements carry certain risks not associated with
direct investments in securities, the Portfolio intends to enter into
repurchase agreements only with banks and dealers believed by the Advisor to
present minimum credit risks in accordance with guidelines established by the
Board of Trustees. The Advisor will review and monitor the creditworthiness of
such institutions under the Board's general supervision. To the extent that
the proceeds from any sale of collateral upon a default in the obligation to
repurchase were less than the repurchase price, the purchaser would suffer a
loss. If the other party to the repurchase agreement petitions for bankruptcy
or otherwise becomes subject to bankruptcy or other liquidation proceedings,
there might be restrictions on the purchaser's ability to sell the collateral
and the purchaser could suffer a loss. However, with respect to financial
institutions whose bankruptcy or liquidation proceedings are subject to the
U.S. Bankruptcy Code, the Portfolio intends to comply with provisions under
that Code that would allow them immediately to resell the collateral.
FUTURES CONTRACTS
The Balanced Portfolio may buy and sell interest rate futures
contracts and may buy and sell stock index futures contracts. A futures
contract is an agreement between two parties to buy and sell a security or an
index for a set price on a future date. Futures contracts are traded on
designated "contract markets" which, through their clearing corporations,
guarantee performance of the contracts.
B-3
<PAGE> 13
Generally, if market interest rates increase, the value of outstanding
debt securities declines (and vice versa). Entering into a futures contract
for the sale of securities has an effect similar to the actual sale of
securities, although sale of the futures contract might be accomplished more
easily and quickly. For example, if the Balanced Portfolio held long-term U.S.
Government securities and the Advisor anticipated a rise in long-term interest
rates, the Balanced Portfolio could, in lieu of disposing of its portfolio
securities, enter into futures contracts for the sale of similar long-term
securities. If rates increased and the value of the Balanced Portfolio's
portfolio securities declined, the value of the Portfolio's futures contracts
would increase, thereby protecting the Portfolio by preventing net asset value
from declining as much as it otherwise would have. Entering into futures
contracts for the purchase of securities has an effect similar to the actual
purchase of the underlying securities, but permits the continued holding of
securities other than the underlying securities. For example, if the Advisor
expected long-term interest rates to decline, the Balanced Portfolio might
enter into futures contracts for the purchase of long- term securities so that
it could gain rapid market exposure that might offset anticipated increases in
the cost of securities it intended to purchase while continuing to hold
higher-yield short-term securities or waiting for the long-term market to
stabilize.
A stock index futures contract may be used as a hedge by the Balanced
Portfolio with regard to market risk as distinguished from risk relating to a
specific security. A stock index futures contract does not require the
physical delivery of securities, but merely provides for profits and losses
resulting from changes in the market value of the contract to be credited or
debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date, a final cash
settlement occurs. Changes in the market value of a particular stock index
futures contract reflects changes in the specified index of equity securities
on which the future is based.
There are several risks in connection with the use of futures
contracts. In the event of an imperfect correlation between the futures
contract and the portfolio position which is intended to be protected, the
desired protection may not be obtained and the Portfolio may be exposed to risk
of loss. Further, unanticipated changes in interest rates or stock price
movements may result in a poorer overall performance for the Portfolio than if
it had not entered into any futures on debt securities or stock indexes.
In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
ITEM 14. MANAGEMENT OF THE FUND
The Trustees and officers of the Portfolio, their business addresses
and principal occupations during the past five years are:
B-4
<PAGE> 14
<TABLE>
<S> <C>
Richard N. Frank (age 73), Trustee Chief Executive Officer, Lawry's
234 E. Colorado Boulevard Restaurants, Inc.; formerly Chairman
Pasadena, CA 91101 of Lawry's Foods, Inc.
Bernard J. Johnson (age 71), Retired; formerly Chairman Emeritus of the Advisor
Trustee Emeritus
300 North Lake Avenue
Pasadena, CA 91101
James Clayburn LaForce (age 67), Dean Emeritus, John E. Anderson Graduate School of
Trustee Management, University of California, Los Angeles.
P.O. Box 1585 Director of The BlackRock Funds. Trustee of Payden & Pauma
Valley, CA 92061 Rygel Investment Trust. Director of the Timken Co.,
Rockwell International, Eli Lilly,
Jacobs Engineering Group and Imperial Credit Industries.
Jeffrey J. Miller (age 45), President Managing Director and Secretary of the Advisor
and Trustee*
300 North Lake Avenue
Pasadena, CA 91101
Angelo R. Mozilo (age 57), Trustee Vice Chairman and Executive Vice President
155 N. Lake Avenue of Countrywide Credit Industries (mortgage
Pasadena, CA 91101 banking)
Thad M. Brown (age 45), Vice Senior Vice President and Chief Financial Officer
President, Secretary and of the Advisor
Treasurer of the Trust
300 North Lake Avenue
Pasadena, CA 91101
</TABLE>
- ---------------------------------------
* denotes Trustees who are "interested persons" of Portfolio under the 1940
Act.
The following compensation was paid to each of the following Trustees.
No other compensation or retirement benefits were received by any Trustee or
officer from the Registrant or other registered investment company in the
"Fund Complex."
<TABLE>
<CAPTION>
Compensation Total Compensation
Name of Trustee From Registrant From Fund Complex
- --------------- --------------- ------------------
<S> <C> <C>
Richard N. Frank $1,100 $11,000
Bernard J. Johnson 900 21,000
James Clayburn La Force 1,200 12,000
Angelo R. Mozilo 1,200 12,000
</TABLE>
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
At February 28, 1996, the Portfolio was controlled by PIC Balanced
Fund, 300 North Lake Avenue, Pasadena, CA 91101, a series of a Delaware
business trust which owned 99.99% of its outstanding Interests. Interests held
by officers and Trustees, as a group, amounted to less than 1%.
B-5
<PAGE> 15
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
Subject to the supervision of the Board of Trustees of the Portfolio,
investment management and services are provided to the Portfolio by the
Advisor, pursuant to an Investment Advisory Agreement (the "Advisory
Agreement").
Under the Advisory Agreement, the Advisor provides a continuous
investment program for the Portfolio and makes decisions and places orders to
buy, sell or hold particular securities. In conjunction with Investment
Company Administration Corporation (the "Administrator"), the Advisor also
supervises all matters relating to the operation of the Portfolio and obtains
for it officers, clerical staff, office space, equipment and services. As
compensation for its services, the Advisor receives a monthly fee at an annual
rate of 0.60 of 1% of the Portfolio's average net assets. In addition to the
fees payable to the Advisor and the Administrator, the Portfolio is responsible
for its operating expenses, including: (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of
Trustees other than those affiliated with the Advisor or the Administrator; (v)
legal and audit expenses; (vi) fees and expenses of the custodian and transfer
agent; (vii) fees and expenses for registration or qualification of the
Portfolio and its Interests under federal or state securities laws; (viii)
expenses of preparing, printing and mailing reports and notices and proxy
material to Holders; (ix) other expenses incidental to holding any meetings of
Holders; (x) dues or assessments of or contributions to the Investment Company
Institute or any successor; (xi) such non-recurring expenses as may arise,
including litigation affecting the Portfolio and the legal obligations with
respect to which the Portfolio may have to indemnify its officers and Trustees;
and (xii) amortization of organization costs. The total advisory fee for the
fiscal years ended October 31, 1995, 1994 and 1993 were $77,098, $49,498 and
$21,579, respectively; however, the Advisor waived its entire fee, and
reimbursed the Portfolio for expenses in excess of .80% of average net assets,
in the amount of $23,597, $46,287 and $169,875, respectively.
Under the Advisory Agreement, the Advisor will not be liable to the
Portfolio for any error of judgment by the Advisor or any loss sustained by the
Portfolio except in the case of a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages will
be limited as provided in the 1940 Act) or of willful misfeasance, bad faith,
gross negligence or reckless disregard of duty.
The Advisory Agreement was approved by the Board of Trustees and by a
majority of the Trustees who neither are interested persons of the Portfolio
nor have any direct or indirect financial interest in the Advisory Agreement or
any agreement related thereto ("Independent Trustees") on December 9, 1994.
The Advisory Agreement will remain in effect for two years from its execution.
Thereafter, if not terminated, the Advisory Agreement will continue
automatically for successive annual periods, provided that such continuance is
specifically approved at least annually (i) by a majority vote of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
The Advisory Agreement is terminable by vote of the Board of Trustees
or by the holders of
B-6
<PAGE> 16
a majority of the outstanding voting securities of the Portfolio at any time
without penalty, on 60 days' written notice to the Advisor. The Advisory
Agreement also may be terminated by the Advisor on 60 days written notice to
the Portfolio. The Advisory Agreement terminates automatically upon its
assignment (as defined in the 1940 Act).
Pursuant to its Administration Agreement, the Portfolio paid the
Administrator fees of $12,850, $7,400 and $45,000 during the fiscal years
ended October 31, 1995, 1994 and 1993, respectively.
The Registrant's custodian is PNC Bank, 17th and Market Streets,
Philadelphia, PA 19101, which holds its assets. The Registrant's auditors are
McGladrey & Pullen, LLP, 555 Fifh Avenue, New York, NY 10017-2416, which audits
the Registrant's financial statements and prepares its tax returns.
ITEM 17. BROKERAGE ALLOCATION
The Advisory Agreement states that in connection with its duties to
arrange for the purchase and the sale of securities held in the portfolio of
the Portfolio by placing purchase and sale orders for the Portfolio, the
Advisor shall select such broker-dealers ("brokers") as shall, in its judgment,
achieve the policy of "best execution," i.e., prompt and efficient execution at
the most favorable securities price. In making such selection, the Advisor is
authorized in the Advisory Agreement to consider the reliability, integrity and
financial condition of the broker. The Advisor also is authorized by the
Advisory Agreement to consider whether the broker provides research or
statistical information to the Portfolio and/or other accounts of the Advisor.
The Advisory Agreement states that the commissions paid to brokers may
be higher than another broker would have charged if a good faith determination
is made by the Advisor that the commission is reasonable in relation to the
services provided, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities as to the accounts as to which it exercises
investment discretion and that the Advisor shall use its judgment in
determining that the amount of commissions paid are reasonable in relation to
the value of brokerage and research services provided and need not place or
attempt to place a specific dollar value on such services or on the portion of
commission rates reflecting such services. The Advisory Agreement provides
that to demonstrate that such determinations were in good faith, and to show
the overall reasonableness of commissions paid, the Advisor shall be prepared
to show that commissions paid (i) were for purposes contemplated by the
Advisory Agreement; (ii) were for products or services which provide lawful and
appropriate assistance to its decision-making process; and (iii) were within a
reasonable range as compared to the rates charged by brokers to other
institutional investors as such rates may become known from available
information.
The research services discussed above may be in written form or
through direct contact with individuals and may include information as to
particular companies and securities as well as market, economic or
institutional areas and information assisting the Portfolio in the valuation of
the Portfolio's investments. The research which the Advisor receives for the
Portfolio's brokerage
B-7
<PAGE> 17
commissions, whether or not useful to the Portfolio, may be useful to it in
managing the accounts of its other advisory clients. Similarly, the research
received for the commissions of such accounts may be useful to the Portfolio.
The debt securities which will be a major component of the Balanced
Portfolio's portfolio are generally traded on a "net" basis with dealers acting
as principal for their own accounts without a stated commission although the
price of the security usually includes a profit to the dealer. Money market
instruments usually trade on a "net" basis as well. On occasion, certain money
market instruments may be purchased by the Portfolio directly from an issuer in
which case no commissions or discounts are paid. In underwritten offerings,
securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.
The aggregate brokerage commissions paid by the Portfolio during the
fiscal years ended October 31, 1995, 1994 and 1993 were $19,998, $11,505 and
$3,607.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES
See Part A.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
The net asset value of the Portfolio's Interests will fluctuate and is
determined as of the close of regular trading on the New York Stock Exchange
(currently 4:00 p.m. Eastern time) each business day. The Exchange annually
announces the days on which it will not be open for trading. The most recent
announcement indicates that it will not be open on the following days: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. However, the Exchange may close on
days not included in that announcement.
The net asset value per Interest is computed by dividing the value of
the securities held by the Portfolio plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of Interests in the Portfolio
outstanding at such time.
ITEM 20. TAX STATUS
The Portfolio does not expect to be subject to any income taxes.
However, each investor in the Portfolio will be taxable on its share of the
Portfolio's ordinary income and capital gain.
ITEM 21. UNDERWRITERS
Not applicable.
B-8
<PAGE> 18
ITEM 22. CALCULATION OF PERFORMANCE DATA
Not applicable
APPENDIX
DESCRIPTION OF RATINGS
MOODY'S INVESTORS SERVICE, INC.: CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality
and carry the smallest degree of investment risk. Interest payments are
protected by a large or by an exceptionally stable margin, and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa---Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
Moody's applies numerical modifiers "1", "2" and "3" to both the Aaa
and Aa rating classifications. The modifier "1" indicates that the security
ranks in the higher end of its generic rating category; the modifier "2"
indicates a mid-range ranking; and the modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
A--Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
STANDARD & POOR'S CORPORATION: CORPORATE BOND RATINGS
AAA--This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are assessments of the issuer's
ability to repay punctually promissory obligations. Moody's employs the
following three designations, all judged to be investment grade, to indicate
the relative repayment capacity of rated issuers: Prime 1--highest
B-9
<PAGE> 19
quality; Prime 2--higher quality; Prime 3--high quality.
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment. Ratings are graded into four categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers "1", "2" and "3" to indicate the relative degree of safety.
The designation A-1 indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. A "+" designation is applied to
those issues rated "A-1" which possess extremely strong safety characteristics.
Capacity for timely payment on issues with the designation "A-2" is strong.
However, the relative degree of safety is not as high as for issues designated
A-1. Issues carrying the designation "A-3" have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the adverse
effect of changes in circumstances than obligations carrying the higher
designations.
ITEM 23. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PIC BALANCED PORTFOLIO
Statement of Net Assets as of October 31, 1995 Percentage of
EQUITY SECURITIES - 73.4% Shares Value Net Assets
Aerospace - 0.4%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boeing Company 700 $ 45,938 0.4%
Boeing Company manufactures commercial and military aircraft.
- ------------------------------------------------------------------------------------------------------------------------------------
Auto Parts - 0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Autozone, Inc.* 3,800 94,050 0.7%
Autozone is a leading specialty retailer of automotive parts and
accessories, focusing on Do-It-Yourself consumers.
- ------------------------------------------------------------------------------------------------------------------------------------
Business and Financial Services - 5.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Danka Business System PLC, Sponsored ADR 2,500 83,750 0.7%
Danka Business System
is a leading independent retail and wholesale distributor of photocopiers, fax
equipment and related service and parts, with 193 retail branches in the United
States and 9 branches in Canada and the United Kingdom.
First Data Corporation 9,366 619,337 4.9%
First Data Corporation provides high quality, high volume
information processing and related services.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Business and Financial Services 703,087
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Services - 3.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Automatic Data Processing, Inc. 850 60,775 0.5%
Automatic Data Processing provides computerized transaction processing, data
communications, information recordkeeping and payroll
services.
Ceridian Corporation 1,400 60,900 0.5%
Ceridian Corporation is an information services company providing payroll and
human resource services to large corporations. Their
Arbitron division is the dominant provider of radio rating services and CDI
provides electronic solutions to defense markets.
Computer Sciences Corporation* 1,900 127,063 1.0%
Computer Sciences Corporation is a large independent provider of information
technology consulting.
3Com Corporation 3,400 159,800 1.3%
3Com Corporation is a leading networking products vendor with 50% of sales in
systems (hubs, routers and switches) and 50% in network
adapter cards.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Computer Services 408,538
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Software - 8.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Associates International, Inc. 3,850 211,750 1.7%
Computer Associates manufactures software that enables computers to run more
efficiently. The company develops, markets and services
over 300 products for a wide range of mainframes, mini-computers and
micro-computers.
Informix Corporation 5,100 148,538 1.2%
Informix is a leading provider of relational database management software,
including application development tools and graphical- and
character-based productivity software, for use on most significant desktop
platforms.
Microsoft Corporation* 4,534 453,400 3.6%
Microsoft developes and markets systems and applications software for business,
and home use.
Oracle Systems Corporation* 5,000 218,125 1.7%
Oracle Systems is the world's largest maker of database management systems
(DBMS), software that allows users to create, retrieve,
and manipulate data in computer-based files. Main products support ORACLE, a
relational DBMS, which allows people to manipulate data by using an industry
standard language SQL.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Computer Software 1,031,813
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIC BALANCED PORTFOLIO
Statement of Net Assets as of October 31, 1995
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
Cosmetics and Soap - 1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
The Gillette Company 3,100 $ 149,962 1.2% Gillette produces and manufactures
razors and razor blades, cosmetics, stationery products, small appliances and
oral care products.
- ------------------------------------------------------------------------------------------------------------------------------------
Credit and Finance - 4.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First USA, Inc. 3,800 174,800 1.4%
First USA is one of the largest issuers of credit cards and processors of
credit card transactions for merchants with a total of
nearly $13 billion in loans outstanding.
MBNA Corporation 8,840 325,975 2.6%
MBNA is the fourth largest credit card issuer and processor in the United States.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Credit and Finance 500,775
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified - 1.6%
- ------------------------------------------------------------------------------------------------------------------------------------
American Standard Company, Inc.* 3,000 80,250 0.6%
American Standard Company is a global manufacturer of brand name products such
as air conditioning, plumbing and braking and control
systems.
Tyco International Ltd. 2,000 121,500 1.0%
Tyco International is a diversified manufacturing company. Tyco produces
fire protection systems, pipes, fittings, and other flow
control equipment.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Diversified 201,750
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Components/Semiconductors - 6.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Analog Devices, Inc. 3,100 111,987 0.9%
Analog Devices designs, manufactures and sells high performance linear and
mixed signal integrated circuits used in analog and
digital signal processing applications.
Applied Materials, Inc. 3,380 169,423 1.4%
Applied Materials develops, manufactures, sells and services semiconductor
wafer fabrication equipment to the semiconductor wafer
industry.
Intel Corporation 5,900 412,263 3.3%
Intel is the world's leading manufacturer of microprocessors, memory chips,
controllers and peripherals.
LSI Logic Corporation 1,900 89,538 0.7%
LSI Logic Corporation manufactures application-specified integrated circuits and
provides related design and technology services.
SGS-Thomson Microelectronics N.V.* 1,500 67,875 0.5%
SGS Thomson Microelect designs, develops, manufactures and markets a broad range
of semiconductor integrated circuits and discrete devices used in a wide variety
of microelectronic applications.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Electric Components/Semiconductors 851,086
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIC BALANCED PORTFOLIO
Statement of Net Assets as of October 31, 1995
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
Electronics - 4.9%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cirrus Logic Corporation 1,300 $ 54,762 0.4%
Cirrus Logic is a semiconductor company focused primarily on the markets for
graphics chips, wireless communications and mass storage.
Motorola, Inc. 3,200 210,000 1.7%
Motorola manufactures cellular telephone, paging and specialized mobile
radio equipment. Motorola is also a major supplier of
semiconductors, circuits, controls and related data communications equipment.
Texas Instruments, Inc. 4,100 279,825 2.2%
Texas Instruments manufactures semiconductor integrated circuits and
sub-assemblies, defense electronics and digital products.
Xilinx, Inc. 1,600 73,600 0.6%
Xilinx is the world's largest supplier of programmable logic divices.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Electronics 618,187
- ------------------------------------------------------------------------------------------------------------------------------------
Entertainment - 3.1%
- ------------------------------------------------------------------------------------------------------------------------------------
British Sky Broadcasting Group PLC, Sponsored ADR 3,500 125,125 1.0%
British Sky Broadcasting is the leading pay television broadcasting service in
the United Kingdom with over 4.2 million subscribers.
Capital Cities/ABC, Inc. 1,100 130,487 1.0%
Capital Cities conducts business through five operating groups: ABC
HFS, Inc. 2,200 134,750 1.1%
HFS is the world's largest hotel franchiser with four nationally recognized
brand names, including Days Inn, Ramada, Howard Johnson and Super 8.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Entertainment 390,362
- ------------------------------------------------------------------------------------------------------------------------------------
Food and Restaurants - 0.6%
- ------------------------------------------------------------------------------------------------------------------------------------
McDonalds Corp. 1,700 69,700 0.6%
McDonalds Corporation operates 3,856 fast-food restaurants and franchises 9,237
restaurants in 65 countries.
- ------------------------------------------------------------------------------------------------------------------------------------
Funeral Services - 1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Loewen Group, Inc. 3,700 148,173 1.2%
Loewen Group is the second largest funeral service corporation in North America.
- ------------------------------------------------------------------------------------------------------------------------------------
Health Industry Services - 1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Healthsouth Corporation 2,400 62,700 0.5%
Healthsouth is the nation's largest provider of outpatient and
rehabilitative health care services. Healthsouth provides these
services through outpatient and inpatient rehabilitation facilities, outpatient
surgery centers and medical centers.
St. Jude Medical, Inc. 1,700 90,525 0.7%
St. Jude Medical manufactures and market biomedical devices for cardiovascular
and vascular applications.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Health Industry Services 153,225
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIC BALANCED PORTFOLIO
Statement of Net Assets as of October 31, 1995
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
Health Maintenance Organizations - 1.9%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oxford Health Plans, Inc. 1,300 $ 101,725 0.8%
Oxford Health Plans provides managed healthcare products to the greater New
York metro area: HMO, Point of Service, and third party
administration of self-funded plans.
United HealthCare Corporation 2,560 136,000 1.1% United Healthcare owns manages
health maintenance organizations in 23 states and offers reinsurance coverage to
HMO's and others.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Health Maintenance Organizations 237,725
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance - 1.6%
- ------------------------------------------------------------------------------------------------------------------------------------
MGIC Investment Corp. 2,600 147,875 1.1%
MGIC provides private mortgage insurance coverage to thrifts, mortgage
bankers and brokers, commercial banks and other lending
institutions.
PMI Group, Inc. 1,200 57,600 0.5%
PMI provides private mortgage insurance coverage to thrifts, mortgage bankers
and brokers, commercial banks, and lending institutions.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Insurance 205,475
- ------------------------------------------------------------------------------------------------------------------------------------
Mainframes - 2.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Hewlett Packard Company 3,200 296,400 2.4%
Hewlett-Packard manufactures computers, calculators, electronic test and
measurement analysis instruments.
- ------------------------------------------------------------------------------------------------------------------------------------
Medical Electronics - 2.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Medtronic, Inc. 4,600 265,650 2.1%
Medtronic manufactures pacemakers, heart valves, neurological stimulation
devices, therapeutic catheters and blood oxygenators. MDT
markets its products through hospitals, doctors, and other medical institutions
throughout the world.
- ------------------------------------------------------------------------------------------------------------------------------------
Medical Services - 0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Cardinal Health, Inc. 1,800 92,475 0.7%
Cardinal Health Incorporated is a leading wholesale drug distributor in the
United States.
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage and Related Services - 2.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation 1,000 69,250 0.6%
Federal Home Loan Mortgage buys and holds mortgages from lenders through the
United States and sells guaranteed mortgage-backed securities. Federal National
Mortgage Association 2,790 292,601 2.3% Federal National Mortgage provides
supplemental assistance to the secondary market in guaranteed and insured home
mortgages.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Mortgage and Related Services 361,851
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIC BALANCED PORTFOLIO
Statement of Net Assets as of October 31, 1995
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
Natural Gas Products and Pipelines - 1.1%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enron Corp. 3,840 $ 132,000 1.1%
Enron is an integrated natural gas company engaged in the gathering,
transportation and wholesale marketing of natural gas throughout
the United States and internationally.
- ------------------------------------------------------------------------------------------------------------------------------------
Networking - 3.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Cabletron Systems, Inc.* 2,300 180,838 1.4%
Cabletron manufactures local area network products and provides design and
support services for local area network systems.
Cisco Systems* 3,000 232,500 1.9%
Cisco Systems is the leading supplier of multimedia and multinetworking
products including routers, bridges, terminal servers and
network management products.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Networking 413,338
- ------------------------------------------------------------------------------------------------------------------------------------
Office Equipment/Supplies - 1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Office Depot, Inc.* 5,147 147,333 1.2% Office Depot operates the largest chain
of office product warehouse stores with locations throughout the United States.
- ------------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 4.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Amgen, Inc. 1,500 72,000 0.6%
Amgen develops, manufactures and markets drugs based on advanced cellular
and molecular biology. The company's two principal drugs
are Epogen, which promotes the production of white blood cells, and Nuepogen,
which stimulates the production of certain white blood
cells.
Merck & Company, Inc. 2,000 115,000 0.9%
Merck is the world's largest pharmaceutical company and the largest U.S.
pharmacy benefits management company.
Pfizer, Inc. 5,600 321,300 2.6%
Pfizer is a major producer of pharmaceuticals, hospital products, animal
health lines, consumer products and specialty chemicals and
minerals.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Pharmaceuticals 508,300
- ------------------------------------------------------------------------------------------------------------------------------------
Specialty Chains - 0.7%
- ------------------------------------------------------------------------------------------------------------------------------------
CUC International, Inc. 2,500 86,563 0.7%
CUC, a consumer services company, provides over 29 million members with access
to discount prices, product comparison information,
and convenient purchasing for home shopping, travel, insurance, auto and dining
services.
- ------------------------------------------------------------------------------------------------------------------------------------
Telephone Communications - 8.2%
- ------------------------------------------------------------------------------------------------------------------------------------
ADC Telecommunications, Inc. 1,300 52,000 0.4%
ADC Telecommunications is a leading telecommunications equipment supplier
which focuses on broadband connectivity, broadband
transmission and wide area networking products.
Andrew Corporation 2,300 97,175 0.8%
Andrew Corporation is an international supplier of communications equipment and
services to commercial and government markets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIC BALANCED PORTFOLIO
Statement of Net Assets as of October 31, 1995
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
Telephone Communications, continued
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ericsson, (L.M.) Telephone Co., ADR 14,800 $ 316,119 2.5%
Ericsson is one of the world's leading telecommunications equipment suppliers
and the preeminent supplier in the cellular equipment
market.
Frontier Corporation 2,700 72,900 0.6%
Frontier Corporation is a telecommunications services provider with 70% of
revenues in long distance (mostly small and mid sized
commercial accounts) and 30% in local and cellular in 22 markets including
Rochester. Frontier merged with ALC Communications on
August 16, 1995, creating the fifth largest long distance carrier after AT&T,
MCI Communications, Sprint and WorldCom.
Glenayre Technologies, Inc. 1,800 115,650 0.9%
Glenayre Technologies is a leading worldwide manufacturer of
infrastructure equipment for paging and other wireless
telecommunications markets.
Nokia Corporation Sponsored ADR 4,100 228,575 1.8%
Nokia Corporation supplies advanced telecommunications infrastructure
systems and equipment for use in mixed and mobile phone
networks. Nokia is also a leading supplier of color televisions, computer
monitors and car speakers.
U.S. Robotics, Inc. 1,600 148,000 1.2%
U.S. Robotics is the dominant provider of communications access products
including high speed modems and LAN/WAN hubs for dial up
connectivity.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Telephone Communications 1,030,419
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Fritz Companies, Inc.* 1,800 63,000 0.5%
Fritz Companies provides global integrated logistics information services
and outsourcing to companies involved in the worldwide
movement of goods.
- ------------------------------------------------------------------------------------------------------------------------------------
Total Equity Securities (Cost $7,152,054) 9,207,175 73.4%
- ------------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES - 3.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Bonds - 3.6%
- ------------------------------------------------------------------------------------------------------------------------------------
American Express Credit Corporation, 8.750%, 6/15/1996 $ 100,000 101,635 0.8%
Ford Motor Credit Corporation, 7.250%, 5/15/1999 175,000 180,906 1.4%
International Lease Finance, 6.125%, 11/1/1999 175,000 174,563 1.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $458,085) 457,104 3.6%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 19.3%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 10.375%, 11/15/2012 375,000 504,116 4.0%
U.S. Treasury Bonds, 9.875%, 11/15/2015 325,000 451,974 3.6%
U.S. Treasury Notes, 4.375%, 11/15/1996 160,000 158,091 1.3%
U.S. Treasury Notes, 6.750%, 5/31/1997 150,000 152,500 1.2%
U.S. Treasury Notes, 6.875%, 7/31/1999 425,000 440,725 3.5%
U.S. Treasury Notes, 6.250%, 2/15/2003 700,000 712,607 5.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Total U.S. Treasury Obligations (Cost $2,341,183) 2,420,013 19.3%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIC BALANCED PORTFOLIO
Statement of Net Assets as of October 31, 1995
Principal Percentage of
Repurchase Agreements - 3.8% Amount Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lehman Government Securities, Inc., 5.410%, due 11/1/1995
(Collateralized by $491,413 U.S. Treasury Note, 7.50%,
due 1/31/97) (Cost $477,100) $ 477,100 $ 477,100 3.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments (Cost $10,428,422) 12,561,392 100.1%
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS - 0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Cash 67
Receivables:
Dividends and interest 71,497
For securities sold 9,934
Prepaid expense 131
Deferred organization costs 14,537
Other assets 1,207
- ------------------------------------------------------------------------------------------------------------------------------------
Total Other Assets 97,373 0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES - (0.9%)
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 96,955
Accrued expenses 21,215
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 118,170 (0.9%)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $12,540,595 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*Non-income producing security.
</FN>
</TABLE>
The above descriptions of portfolio companies are furnished by management
solely for the general information of investors. See Notes to Financial
Statements.
<PAGE>
<TABLE>
<CAPTION>
PIC BALANCED PORTFOLIO
Statement of Operations Year ended October 31, 1995
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
Income:
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Dividends $ 68,280
Interest 236,599
- ------------------------------------------------------------------------------------------------------------------------------------
Total income 304,879
====================================================================================================================================
Expenses:
- ------------------------------------------------------------------------------------------------------------------------------------
Investment advisory fee (Note 3) 77,098
Administration fee 12,850
Accounting services fee 64,800
Custodian fee 20,655
Auditing fee 10,001
Legal fees 1,250
Trustees' fees 3,800
Amortization of organization costs 10,001
Miscellaneous 3,037
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 203,492
Less, reimbursement/waiver by Advisor (Note 3) (100,695)
- ------------------------------------------------------------------------------------------------------------------------------------
Net expenses 102,797
====================================================================================================================================
Net investment income 202,082
====================================================================================================================================
NET REALIZED & UNREALIZED GAIN ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain from security transactions 1,041,070
Change in net unrealized appreciation of investments 1,491,367
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain on investments 2,532,437
====================================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,734,519
- ------------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PIC BALANCED PORTFOLIO
Statement of Changes in Net Assets
INCREASE IN NET ASSETS:
- ------------------------------------------------------------------------------------------------------------------------------------
Year Year
ended ended
From operations: October 31, 1995 October 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 202,082 $ 134,310
Net realized gain (loss) on investments 1,041,070 (414,393)
Change in unrealized appreciation of investments 1,491,367 284,049
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,734,519 3,966
====================================================================================================================================
Transactions in interests:
Contributions by Holders 7,579,804 3,694,264
Withdrawals by Holders (6,913,353) (1,264,936)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from transactions in interests 666,451 2,429,328
====================================================================================================================================
Total increase in net assets 3,400,970 2,433,294
====================================================================================================================================
NET ASSETS:
- ------------------------------------------------------------------------------------------------------------------------------------
Beginning of year 9,139,625 6,706,331
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $12,540,595 $ 9,139,625
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
PIC BALANCED PORTFOLIO
Notes to Financial Statements
1 - ORGANIZATION
- --------------------------------------------------------------------------------
PIC Balanced Portfolio (the "Portfolio") was organized on December 11,
1991 as a trust under the laws of the State of New York. The beneficial
interests in the Portfolio are divided into an unlimited number of
non-transferable Interests, par value $.01 each. The Portfolio is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company.
2 - SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies consistently
followed by the Portfolio. 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. The Portfolio intends to comply with the
requirements of the Internal Revenue Code applicable to it. Therefore, no
federal income tax provision is required.
C. Deferred Organization Expense. Organization costs of the Portfolio are
being amortized on a straight line basis over a period of sixty months. During
the amortization period the proceeds of any redemption of the original Interests
in the Portfolio by any Holder thereof will be reduced by a pro rata portion of
any then unamortized organization costs based on the ratio of Interests redeemed
to the total initial Interests outstanding prior to the redemption.
D. 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.
3 - TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
The Portfolio has entered into an investment advisory agreement with
Provident Investment Counsel, Inc. ("PIC") and an administration agreement with
Investment Company Administration Corporation ("ICAC"), pursuant to which
agreements certain employees of these entities serve as officers and/or trustees
of the Portfolio. PIC and ICAC also provide management services necessary for
the operations of the Portfolio and furnish office facilities.
PIC receives a fee for its services to the Portfolio at the rate of 0.60%
of the average daily net assets of the Portfolio, but waived its fee of $77,098
for the year ended October 31, 1995. PIC has voluntarily agreed to limit the
total expenses of the Portfolio to an annual rate of 0.80% of the Portfolio's
average net assets. For the year ended October 31, 1995, PIC reimbursed expenses
of the Portfolio amounting to $23,597. ICAC receives an annual fee for its
services at the rate of .10% of average daily net assets of the Portfolio. Fees
paid to ICAC pursuant to the agreement totalled $12,850 for the year ended
October 31, 1995.
<PAGE>
PIC BALANCED PORTFOLIO
Notes to Financial Statements
4 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
During the year ended October 31, 1995, purchases and sales of investment
securities, other than short-term obligations, were $13,869,913 and $13,057,536,
respectively. The cost of securities for federal income tax purposes was
$10,437,500. The aggregate gross unrealized appreciation and depreciation of
portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $2,178,310
Unrealized depreciation (54,418)
-------
Net unrealized appreciation $2,123,892
==========
</TABLE>
<TABLE>
<CAPTION>
5 - SELECTED RATIO DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Year Year Year
ended ended ended
October 31, 1995 October 31, 1994 October 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:++
<S> <C> <C> <C>
Operating expenses 0.80% 0.80% 0.80%
Net investment income 1.57% 1.63% 2.05%
Portfolio turnover rate 106.50% 116.63% 92.65%
<FN>
++Net of expense reimbursements equivalent to 0.78%, 1.16% and 4.68% of average
net assets, respectively.
</FN>
</TABLE>
<PAGE>
PIC BALANCED PORTFOLIO
Independent Auditor's Report
To the Board of Trustees of,
and the holders of Interests in,
PIC Balanced Portfolio
We have audited the accompanying statement of assets of PIC Balanced
Portfolio as of October 31, 1995, the related statement of operations for the
year then ended and the statement of changes in net assets for each of the two
years in the period then ended. These financial statements are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1995 by correspondence with
the custodian. 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 Balanced Portfolio as
of October 31, 1995, the results of its operations and the changes in its net
assets for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
November 22, 1995
B-10
<PAGE> 20
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The following financial statements are included in Part B:
Statement of Net Assets as of October 31, 1995
Statement of Operations, Year ended October 31, 1995
Statement of Changes in Net Assets, Years ended
October 31, 1995 and October 31, 1994
Notes to Financial Statements, October 31, 1995
Independent Auditor's Report
(b) Exhibits:
(1) Declaration of Trust(1)
(2) Not applicable
(3) Not applicable
(4) Not applicable
(5) Management Agreement(2)
(6) Not applicable
(7) Not applicable
(8) Custodian Agreement(2)
(9) Administration Agreement(2)
(10) Not applicable
(11) Consent of McGladrey & Pullen, LLP
(12) Not applicable
(13) Investment letter(2)
(14) Not applicable
(15) Not applicable
(16) Not applicable
(1) Previously filed with the Registration Statement on Form N-1A of
PIC Balanced Portfolio, File No. 811-6497, on December 16, 1991 and incorporated
herein by reference.
(2) Previously filed with Amendment No. 1 to the Registration Statement
on Form N-1A of PIC Balanced Portfolio, File No. 811-6497, on April 1, 1993 and
incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of February 28, 1996, there were two record Holders of Interests in
the Registrant.
C-1
<PAGE> 21
ITEM 27. INDEMNIFICATION.
Article V of Registrant's Declaration of Trust, states as follows:
1. Definitions. As used in this Article, the following terms
shall have the meanings set forth below:
(a) the term "indemnitee" shall mean any present or
former Trustee, officer or employee of the Trust, any present or former
Trustee or officer of another trust or corporation whose securities are
or were owned by the Trust or of which the Trust is or was a creditor
and who served or serves in such capacity at the request of the Trust,
any present or former investment adviser, sub-adviser or principal
underwriter of the Trust and the heirs, executors, administrators,
successors and assigns of any of the foregoing; however, whenever
conduct by an indemnitee is referred to, the conduct shall be that of
the original indemnitee rather than that of the heir, executor,
administrator, successor or assignee;
(b) the term "covered proceeding" shall mean any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, to which an
indemnitee is or was a party or is threatened to be made a party by
reason of the fact or facts under which he or it is an indemnitee as
defined above;
(c) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office in question;
(d) the term "covered expenses" shall mean expenses
(including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by an indemnitee in
connection with a covered proceeding; and
(e) the term "adjudication of liability" shall mean,
as to any covered proceeding and as to any indemnitee, an adverse
determination as to the indemnitee whether by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its
equivalent.
2. Indemnification. The Trust shall indemnify any indemnitee
for covered expenses in any covered proceeding, whether or not there is an
adjudication of liability as to such indemnitee, to the maximum extent permitted
by law. However, the Trust shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an adjudication of
liability against such indemnitee expressly based on a finding of disabling
conduct. Nothing in this Declaration of Trust shall protect a Trustee against
any liability to which such Trustee would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee hereunder.
C-2
<PAGE> 22
3. Advance of Expenses. Covered expenses incurred by an
indemnitee in connection with a covered proceeding shall be advanced by the
Trust to an indemnitee prior to the final disposition of a covered proceeding
upon the request of the indemnitee for such advance and the undertaking by or on
behalf of the indemnitee to repay the advance unless it is ultimately determined
that the indemnitee is entitled to indemnification thereunder, but only if one
or more of the following is the case: (i) the indemnitee shall provide a
security for such undertaking; (ii) the Trust shall be insured against losses
arising out of any lawful advances; or (iii) there shall have been a
determination, based on a review of the readily available facts (as opposed to a
full trial-type inquiry) that there is a reason to believe that the indemnitee
ultimately will be found entitled to indemnification by either independent legal
counsel in a written opinion or by the vote of a majority of a quorum of
trustees who are neither "interested persons" as defined in the 1940 Act nor
parties to the covered proceeding. Nothing herein shall be deemed to affect the
right of the Trust and/or any indemnitee to acquire and pay for any insurance
covering any or all indemnitees to the extent permitted by the 1940 Act or to
affect any other indemnification rights to which any indemnitee may be entitled
to the extent permitted by the 1940 Act.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Provident Investment Counsel, Inc. is the investment advisor of the
Registrant. For information as to the business, profession, vocation or
employment of a substantial nature of Provident Investment Counsel, Inc.,
reference is made to the Form ADV filed under the Investment Advisers Act of
1940 by Provident Investment Counsel, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of Registrant and
Registrant's custodian, as follows: the documents required to be maintained by
paragraphs (4), (5), (6), (7), (10) and (11) of Rule 31a-1(b) will be maintained
by the Registrant's Administrator, and all other records will be maintained by
the Custodian.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
C-3
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940 the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pasadena and
State of California on the 28th day of February, 1996.
PIC BALANCED PORTFOLIO
By /s/ Robert H. Wadsworth
--------------------------------
Robert H. Wadsworth
Assistant Secretary
C-4
<PAGE> 1
[LETTERHEAD OF McGLADREY & PULLEN, LLP]
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated November 22, 1995 on the
financial statements of PIC Balanced Portfolio referred to therein in this
Post-Effective Amendment No. 4 to the Registration Statement on Form N-1A of
PIC Balanced Portfolio as filed with the Securities and Exchange Commission.
McGladrey & Pullen, LLP
New York, New York
February 29, 1996
