P R O V I D E N T I N V E S T M E N T C O U N S E L
---------------
P I N N A C L E
F U N D S
---------------
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
Semi-Annual Report
April 30, 1998
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Message to Shareholders
P I N N A C L E F U N D S
- ----------------------------
================================================================================
Dear Shareholder,
The following are interviews with the members of the investment team at
Provident Investment Counsel. We hope this will provide you additional
information and insight to the investment management process and performance for
your Provident Investment Counsel Mutual Fund. In addition to the information in
this Semi-Annual Report, we will be sending the regular quarterly update along
with your statement.
Thank you for your continued confidence in Provident Investment Counsel.
Provident Investment Counsel Pinnacle Balanced Fund
Question: How did the Provident Investment Counsel Pinnacle Balanced Fund
perform relative to the overall market during the six months ended April 30,
1998?
Answer: The Lipper Balanced Fund Index rose 12.28% for the six months ended
April 30, 1998 and 8.65% from January 1, 1998 through April 30, while the Fund's
returns were 14.08% and 11.93% in the same periods.
Question: How has the fixed-income segment of Balanced Fund performed and what
is the outlook for this market in the months ahead?
Answer: We are pleased that the performance of the fixed-income segment of the
Fund is in line with the Lehman Government Corporate Bond Index, given the
volatility in the bond market during the last several months. Monetary policy
remains on hold as the Federal Reserve weighs the opposing forces of continued
strong domestic economic growth in a low inflationary environment, while Asian
countries struggle to solve their economic problems. We are not expecting any
major changes in interest rates unless some initial signs of inflationary
pressure become evident.
1
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Message to Shareholders
P I N N A C L E F U N D S
- ----------------------------
================================================================================
Provident Investment Counsel Pinnacle Growth Fund
Question: How did the Provident Investment Counsel Pinnacle Growth Fund perform
relative to the overall markets during the six months ended April 30, 1998?
Answer: The Lipper Growth Fund Index rose 18.15% for the six months ended April
30, 1998 and 13.58% from January 1, 1998 through April 30, while the Fund's
returns were 18.62% and 15.78% in the same periods.
Question: What are of some of the sectors and specific holdings that have driven
the Fund's performance over the last six months?
Answer: Holdings in the finance, technology services, retail and health
technology sectors have been the best performers recently. Specific holdings
that have performed well include Microsoft, Pfizer, Lilly, Lowes, Safeway, State
Street Bank and Paychex.
Question: Given the changing global economic picture, have there been any
changes in the overall makeup of the Fund?
Answer: Yes, 1998 has seen a slight shift in emphasis. Our research effort
remains focused on identifying great individual companies based on their own
merit. However, we have seen an increase in our holdings in financial stocks and
consumer-oriented stocks, including the drug companies and specialty retailing.
In recent months, we have reduced our holdings in the electronic technology
sector due to strong appreciation as well as inherent exposure to Asian markets.
We have also attempted to give the Fund a domestic bias, given the uncertain
environment in the Pacific rim and the spillover effect into other foreign stock
markets.
Question: What is the outlook for the Fund and broad market in the near future?
Answer: We continue to marvel at the strength and length of the economic
expansion. The equity gains have certainly been above average for the last
several years, including the stellar gains of the first four months of 1998. We
continue to hold more modest expectations for the broad market in the months
ahead. However, those individual companies that can demonstrate consistency and
quality with regard to revenue and earnings reports will continue to be
rewarded. The focus of our research effort for all the Provident
2
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Message to Shareholders
P I N N A C L E F U N D S
- ----------------------------
================================================================================
Investment Counsel Funds will remain on identifying the highest quality growth
stocks, with superior earnings and revenue trends.
Provident Investment Counsel Pinnacle Small Company Growth Fund
Question: How did the Provident Investment Counsel Pinnacle Small Company Growth
Fund perform relative to the overall market during the six months ended April
30, 1998?
Answer: The Lipper Small Cap Fund Index rose 10.21% for the six months ended
April 30, 1998 and 11.17% from January 1, 1998 through April 30, while the
Fund's returns were 9.98% and 15.99% in the same periods.
Question: What sectors of the market are driving the Fund's positive performance
year-to-date?
Answer: The sectors with the most positive performance in the latest period
include electronic technology, commercial services and health services. The
Fund's holdings in electronic technology have made the largest impact. We have
also focused our holdings in technology on those companies with the smallest
amount of exposure, if any, to the Asian economies. Our total technology
exposure, which includes electronic technology and technology services, relative
to the broad market remains at a moderate level of roughly 30% of the Fund's
assets.
Question: Why have shares of larger companies posted returns superior to those
of smaller companies in general over the last couple of years? Will this
continue to be the case?
Answer: At the beginning of 1998, we felt that the valuations of smaller
companies, especially growth-oriented small companies, were significantly more
attractive than their larger counterparts. That is based on their expected
earnings and revenue growth over the next year relative to their current stock
price. After the first four months of 1998, we have yet to see a performance
differential materialize. In general we believe those companies, large or small,
with the greatest visibility of both sales and earnings will be rewarded going
forward.
3
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Statements of Assets and Liabilities
P I N N A C L E F U N D S as of April 30, 1998
- ----------------------------
Small Company
Balanced Fund Growth Fund Growth Fund
================================================================================
ASSETS
- --------------------------------------------------------------------------------
Investment in Portfolios, at value $40,312,121 $3,514,782 $3,406,677
Receivables:
From Provident
Investment Counsel, Inc. (Note 3) 7,921 6,896 8,349
Prepaid expenses 12,187 31,302 20,086
- --------------------------------------------------------------------------------
Total assets 40,332,229 3,552,980 3,435,112
================================================================================
LIABILITIES
- --------------------------------------------------------------------------------
Payables:
Deferred Trustees' compensation (Note 3) 13,443 5,307 5,272
Accrued expenses 40,958 40,238 35,685
- --------------------------------------------------------------------------------
Total liabilities 54,401 45,545 40,957
================================================================================
NET ASSETS
- --------------------------------------------------------------------------------
Applicable to 2,444,066, 258,517 and
296,063 shares of beneficial interest
outstanding, respectively
(unlimited number of shares
authorized, $0.01 par value) $40,277,828 $3,507,435 $3,394,155
================================================================================
NET ASSET VALUE
PER SHARE $ 16.48 $ 13.57 $ 11.46
- --------------------------------------------------------------------------------
================================================================================
SOURCE OF NET ASSETS
- --------------------------------------------------------------------------------
Paid-in capital $30,587,408 $2,984,834 $3,104,316
Undistributed (accumulated)
net investment income (loss) 30,852 (12,329) (28,322)
Undistributed (accumulated) net
realized gain (loss) on investments 1,491,844 30,036 (194,727)
Net unrealized appreciation
on investments 8,167,724 504,894 512,888
================================================================================
Net Assets $40,277,828 $3,507,435 $3,394,155
- --------------------------------------------------------------------------------
Unaudited. See Notes to Financial Statements.
4
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Statements of Operations
P I N N A C L E F U N D S Six Months ended April 30, 1998
- ----------------------------
Small Company
Balanced Fund Growth Fund Growth Fund
================================================================================
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Net investment income (loss)
from Portfolios $ 229,041 $ (2,920) $ (11,107)
================================================================================
Expenses:
- --------------------------------------------------------------------------------
Administration fees (Note 3) 44,520 8,969 10,592
Distribution fees (Note 4) 38,580 3,817 4,306
Trustees' fees 3,968 3,964 3,964
Audit fee 5,108 5,108 5,108
Legal fee 596 596 595
Transfer agent's fee 11,405 14,876 14,876
Custody and accounting services fee 2,975 2,975 2,975
Report to shareholders 3,472 3,472 3,472
Registration fees 10,223 7,751 7,767
Miscellaneous 2,480 2,480 2,480
- --------------------------------------------------------------------------------
Total expenses 123,327 54,008 56,135
Less, reimbursement/waiver by Provident
Investment Counsel, Inc. (Note 3) (76,973) (49,335) (47,465)
- --------------------------------------------------------------------------------
Net expenses 46,354 4,673 8,670
================================================================================
Net investment income (loss) 182,687 (7,593) (19,777)
================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
- --------------------------------------------------------------------------------
Net realized gain (loss)
on investments 1,507,708 41,859 (137,233)
Change in net unrealized appreciation
on investments 3,263,877 428,574 458,148
- --------------------------------------------------------------------------------
Net gain on investments 4,771,585 470,433 320,915
================================================================================
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $4,954,272 $462,840 $301,138
- --------------------------------------------------------------------------------
Unaudited. See Notes to Financial Statements.
5
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Statements of Changes in Net Assets
P I N N A C L E F U N D S
- ----------------------------
<TABLE>
<CAPTION>
Balanced Fund
==============================================================================================
INCREASE (DECREASE) IN NET ASSETS
- ----------------------------------------------------------------------------------------------
Six Months Year
ended ended
From operations: April 30, 1998 October 31, 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss) $ 182,687 $ 281,671
Net realized gain (loss) on investments 1,507,708 2,294,629
Change in net unrealized appreciation
on investments 3,263,877 2,395,328
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 4,954,272 4,971,628
==============================================================================================
Distributions to shareholders:
From net investment income (177,861) (266,681)
From net realized capital gains (2,299,645) (953,528)
- ----------------------------------------------------------------------------------------------
Total distributions to shareholders (2,477,506) (1,220,209)
==============================================================================================
Transactions in shares of beneficial interest:
Purchases of 114,354, 1,532,116, 73,118,
206,342, 119,627 and 317,026 shares,
respectively 1,783,923 21,373,253
Value of 167,698, 91,290, 0, 0, 0 and 0
shares issued in payment of dividends,
respectively 2,476,221 1,218,899
Redemptions of 117,077, 269,095, 2,581,
18,362, 119,098 and 21,492 shares,
respectively (1,802,140) (3,868,717)
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting
from share transactions 2,458,004 18,723,435
==============================================================================================
Total increase in net assets 4,934,770 22,474,854
==============================================================================================
NET ASSETS:
- ----------------------------------------------------------------------------------------------
Beginning of period 35,343,058 12,868,204
- ----------------------------------------------------------------------------------------------
End of period 40,277,828 35,343,058
- ----------------------------------------------------------------------------------------------
Undistributed (accumulated)
net investment income (loss) $ 30,852 $ 26,026
- ----------------------------------------------------------------------------------------------
</TABLE>
Unaudited. See Notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
Small Company
Growth Fund Growth Fund
================================================================================================================
INCREASE (DECREASE) IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------
Six Months February 3, 1997* Six Months February 3, 1997*
ended through ended through
From operations: April 30, 1998 October 31, 1997 April 30, 1998 October 31, 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income (loss) $ (7,593) $ (4,736) $ (19,777) $ (8,545)
Net realized gain (loss) on investments 41,859 (11,823) (137,233) (57,494)
Change in net unrealized appreciation
on investments 428,574 76,320 458,148 54,740
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 462,840 59,761 301,138 (11,299)
================================================================================================================
Distributions to shareholders:
From net investment income - - - -
From net realized capital gains - - - -
- ----------------------------------------------------------------------------------------------------------------
Total distributions to shareholders - - - -
================================================================================================================
Transactions in shares of beneficial interest:
Purchases of 114,354, 1,532,116, 73,118,
206,342, 119,627 and 317,026 shares,
respectively 925,992 2,304,894 1,245,178 3,331,267
Value of 167,698, 91,290, 0, 0, 0 and 0
shares issued in payment of dividends,
respectively - - - -
Redemptions of 117,077, 269,095, 2,581,
18,362, 119,098 and 21,492 shares,
respectively (31,809) (214,243) (1,232,195) (239,934)
- ----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from share transactions 894,183 2,090,651 12,983 3,091,333
================================================================================================================
Total increase in net assets 1,357,023 2,150,412 314,121 3,080,034
================================================================================================================
NET ASSETS:
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 2,150,412 - 3,080,034 -
- ----------------------------------------------------------------------------------------------------------------
End of period 3,507,435 2,150,412 3,394,155 3,080,034
- ----------------------------------------------------------------------------------------------------------------
Undistributed (accumulated)
net investment income (loss) $ (12,329) $ (4,736) $ (28,322) $ (8,545)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Financial Highlights
P I N N A C L E F U N D S
- ----------------------------
<TABLE>
<CAPTION>
For a share outstanding throughout each period
=====================================================================================================
Balanced Fund
- -----------------------------------------------------------------------------------------------------
Six Months Year Year Year
ended ended ended ended
April 30, 1998 Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $15.51 $ 13.91 $13.24 $11.24
- -----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .08 .16 .14 .15
Net realized and unrealized gain
(loss) on investments 1.98 2.64 1.34 2.00
- -----------------------------------------------------------------------------------------------------
Total from investment operations 2.06 2.80 1.48 2.15
- -----------------------------------------------------------------------------------------------------
Less distributions to shareholders:
From net investment income (.08) (.16) (.14) (.15)
From net realized capital gains (1.01) (1.04) (.67) .00
- -----------------------------------------------------------------------------------------------------
Total distributions to shareholders (1.09) (1.20) (.81) (.15)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $16.48 $ 15.51 $13.91 $13.24
=====================================================================================================
Total return 14.08%## 21.76% 11.96% 19.35%
=====================================================================================================
Ratios/supplemental data:
Net assets, end of period (millions) $40.3 $35.3 $12.9 $12.5
- -----------------------------------------------------------------------------------------------------
Ratios to average net assets:+
Expenses 1.05%++** 1.05%** 1.05%** 1.05%**
Net investment income (loss) 0.99%++ 1.10% 1.05% 1.32%
- -----------------------------------------------------------------------------------------------------
</TABLE>
*Commencement of operations.
+Net of expense reimbursements.
**Includes the Fund's share of expenses, net of fee waivers and expense
reimbursements, allocated from PIC Balanced Portfolio. If the fee waivers and
expense reimbursements, with respect to the Fund and PIC Balanced Portfolio, had
not been made, the ratio of expenses to average net assets would have been
1.66%, 1.43%, 1.72%, 2.32%, 2.87% and 7.44%, respectively.
++Annualized.
##Not annualized.
Unaudited. See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
Small Company
Balanced Fund Growth Fund Growth Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Year Year Six Months Feb. 3, 1997* Six Months Feb. 3, 1997*
ended ended ended through ended through
Oct. 31, 1994 Oct. 31, 1993 April 30, 1998 Oct. 31, 1997 April 30, 1998 Oct. 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.48 $10.82 $11.44 $10.00 $10.42 $10.00
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .15 .18 (.05) (.03) (.10) (.03)
Net realized and unrealized gain
(loss) on investments (.24) .69 2.18 1.47 1.14 .45
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (.09) .87 2.13 1.44 1.04 .42
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
From net investment income (.15) (.21) .00 .00 .00 .00
From net realized capital gains .00 .00 .00 .00 .00 .00
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (.15) (.21) .00 .00 .00 .00
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.24 $11.48 $13.57 $11.44 $11.46 $10.42
===================================================================================================================================
Total return (.78%) 8.10% 18.62%## 14.40%## 9.98%## 4.20%##
===================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (millions) $ 9.1 $ 6.7 $ 3.5 $ 2.2 $ 3.4 $ 3.1
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:+
Expenses 1.05%** 1.05%** 1.35%++o 1.35%++o 1.55%++# 1.55%++#
Net investment income (loss) 1.37% 1.79% (0.57%)++ (0.62%)++ (1.89%)++ (1.14%)++
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
o Includes the Fund's share of expenses allocated from PIC Growth Portfolio. If
the fee waivers and expense reimbursements, with respect to the Fund and PIC
Growth Portfolio, had not been made, the ratio of expenses to average net assets
would have been 5.08% and 9.97%, respectively.
#Includes the Fund's share of expenses allocated from PIC Small Cap Portfolio.
If the fee waivers and expense reimbursements, with respect to the Fund and PIC
Small Cap Portfolio, had not been made, the ratio of expenses to average net
assets would have been 6.11% and 11.55%, respectively.
9
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Notes to Financial Statements
P I N N A C L E F U N D S
- ----------------------------
================================================================================
1 - ORGANIZATION
- --------------------------------------------------------------------------------
PIC Investment Trust (the "Trust") was organized on December 11, 1991 as a
Delaware business trust, with an unlimited number of shares of beneficial
interest of $.01 par value, and is registered under the Investment Company Act
of 1940 (the "1940 Act") as an open-end, diversified management investment
company. The Trust currently offers eight separate series: Provident Investment
Counsel Pinnacle Balanced Fund, Provident Investment Counsel Growth Fund,
Provident Investment Counsel Pinnacle Growth Fund, Provident Investment Counsel
Small Company Growth Fund, Provident Investment Counsel Pinnacle Small Company
Growth Fund, Provident Investment Counsel Small Cap Growth Fund, Provident
Investment Counsel Mid Cap Fund and the Provident Investment Counsel Tax Managed
Growth Fund (each a "Fund" and collectively the "Funds"). The Funds invest
substantially all of their assets in the respective Portfolios, a separate
registered management investment company having the same investment objective as
the Funds. The financial statements of the Portfolios are included elsewhere in
this report and should be read in conjunction with the Funds' financial
statements. The financial statements of the Provident Investment Counsel Growth
Fund, Provident Investment Counsel Small Company Growth Fund, Provident
Investment Counsel Small Cap Growth Fund, Provident Investment Counsel Mid Cap
Fund and the Provident Investment Counsel Tax Managed Growth Fund are in
separate reports.
2 - SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with generally accepted
accounting principles.
A. Investment Valuation. The Funds reflect their investments in the Portfolio
at their proportionate interest in the value of the Portfolio's net
assets. Valuation of securities by the Portfolio is discussed in Note 2A
of the Portfolio's Notes to Financial Statements.
B. Investment Income and Dividends to Shareholders. The Funds earn income,
net of the expenses of the Portfolio, daily on their investments in the
Portfolio. All net investment income and realized and unrealized
10
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Notes to Financial Statements,
P I N N A C L E F U N D S continued
- ----------------------------
================================================================================
gains or losses on investments of the Portfolio are allocated pro-rata
among the Funds and the other Holders of Interests in the Portfolio.
Dividends, if any, are paid annually to shareholders of the Funds and
recorded on the ex-dividend date.
C. Federal Income Taxes. The Funds intend to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of their taxable income to their shareholders.
Therefore, no federal income tax provision is required.
D. Accounting Estimates. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expenses during the period. Actual results could differ from
those estimates.
3 - TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
The Trust, has entered into administration agreements with Provident
Investment Counsel, Inc. ("PIC") and Investment Company Administration
Corporation ("ICAC"), pursuant to which agreements certain employees of these
entities serve as officers and/or trustees of the Trust and the Portfolio. PIC
and ICAC also provide management services necessary for the operations of the
Trust and the Portfolio and furnish office facilities. PIC receives a fee for
its services to the Funds at the rate of 0.20% of the average daily net assets
of the Funds.
PIC has voluntarily taken to limit the Funds' expenses, including those
expenses allocated from the Portfolios, to the following levels:
Pinnacle Balanced Fund 1.05%
Pinnacle Growth Fund 1.35%
Pinnacle Small Company Growth Fund 1.55%
The percentages are based on the Funds' average net assets. Fees waived
and expenses reimbursed by PIC for the six months ended April 30, 1998, were as
follows:
11
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Notes to Financial Statements,
P I N N A C L E F U N D S continued
- ----------------------------
================================================================================
Waived Reimbursed
Fees Expenses
---- --------
Pinnacle Balanced Fund $37,083 $39,890
Pinnacle Growth Fund 1,530 47,805
Pinnacle Small Company Growth Fund 3,153 44,312
ICAC receives an annual fee for its services of $15,000 from each of the
Funds.
First Fund Distributors, Inc. (the "Distributor"), a registered
broker-dealer, acts as the principal underwriter for the Trust in connection
with the offering of its shares, but receives no compensation for its services.
The Distributor is an affiliate of the Administrator.
On December 19, 1995, the Trust approved a Deferred Compensation Plan for
Trustees (the "Plan"). Trustees are entitled to receive $2,500 per quarter and
$500 per meeting attended, which is allocated among the Funds. Trustees can
elect to receive payment in cash or defer payments provided for in the Plan. If
a trustee elects to defer payment, the Plan provides for the creation of a
deferred payment account (phantom share account). This account accumulates the
deferred fees earned and the value of the account is adjusted at the end of each
quarter to reflect a value which would have been earned if the account had been
invested in designated investments. The Funds recognize as trustee expense
amounts accrued as meetings are attended plus the change in the value of the
phantom share account determined on a quarterly basis.
4 - DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
The Trust, on behalf of the Pinnacle Growth and Pinnacle Small Company
Growth Funds, has approved a Distribution Plan (the "12b-1 Plan") in accordance
with Rule 12b-1 under the 1940 Act. On February 19, 1997, shareholders of the
Pinnacle Balanced Fund approved its adoption of the 12b-1 Plan. The 12b-1 Plan
provides that each Fund will pay a fee to PIC (as the distribution coordinator)
at an annual rate of up to 0.25% of each Fund's average daily net assets as
reimbursement for expenses incurred on distribution related activities.
12
<PAGE>
- ----------------------------
PROVIDENT INVESTMENT COUNSEL Notes to Financial Statements,
P I N N A C L E F U N D S continued
- ----------------------------
================================================================================
5 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Additions and reductions in the investments in the respective Portfolios
for the six months ended April 30, 1998, were as follows:
Additions Reductions
--------- ----------
Pinnacle Balanced Fund $1,816,441 $1,888,283
Pinnacle Growth Fund 925,992 31,810
Pinnacle Small Company Growth Fund 1,245,178 1,232,194
13
<PAGE>
P * I * C
- --------- Statement of Net Assets
BALANCED as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES - 72.3% Shares Value Net Assets
- --------------------------------------------------------------------------------
Banks - 2.3%
- --------------------------------------------------------------------------------
State Street Corp. 12,900 $ 922,350 2.3%
================================================================================
Beverage/Food - 0.5%
- --------------------------------------------------------------------------------
General Nutrition Companies, Inc. 5,600 200,900 0.5%
================================================================================
Building Products - 1.5%
- --------------------------------------------------------------------------------
Lowe's Companies, Inc. 8,800 615,450 1.5%
================================================================================
Business Information Services - 1.1%
- --------------------------------------------------------------------------------
Paychex, Inc. 8,275 449,436 1.1%
================================================================================
Computer Services - 2.3%
- --------------------------------------------------------------------------------
America Online, Inc. 4,800 384,000 1.0%
Sungard Data Systems, Inc. 14,400 513,000 1.3%
- --------------------------------------------------------------------------------
Total Computer Services 897,000 2.3%
================================================================================
Computer Software - 4.5%
- --------------------------------------------------------------------------------
Microsoft Corp. 20,336 1,832,782 4.5%
================================================================================
Cosmetics and Soaps - 2.3%
- --------------------------------------------------------------------------------
Colgate-Palmolive Company 3,700 331,844 0.8%
The Gillette Company 5,050 582,959 1.5%
- --------------------------------------------------------------------------------
Total Cosmetics and Soaps 914,803 2.3%
================================================================================
Credit and Finance - 5.3%
- --------------------------------------------------------------------------------
Associates First Capital Corp. 4,500 336,375 0.8%
Household International, Inc. 3,100 407,456 1.0%
MBNA Corp. 40,999 1,388,841 3.5%
- --------------------------------------------------------------------------------
Total Credit and Finance 2,132,672 5.3%
Unaudited. See Notes to Financial Statements.
14
<PAGE>
P * I * C
- --------- Statement of Net Assets
BALANCED as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Discount Chains - 4.1%
- --------------------------------------------------------------------------------
Costco Companies, Inc. 13,200 $ 737,550 1.8%
Dollar General Corp. 24,312 920,817 2.3%
- --------------------------------------------------------------------------------
Total Discount Chains 1,658,367 4.1%
================================================================================
Diversified Manufacturing - 2.5%
- --------------------------------------------------------------------------------
Tyco International, Ltd. 18,800 1,024,600 2.5%
================================================================================
Drugs - 13.5%
- --------------------------------------------------------------------------------
Elan Corp., PLC, ADR 12,800 795,200 2.0%
Lilly (Eli) & Co. 10,900 758,231 1.9%
Pfizer, Inc. 11,800 1,342,987 3.3%
Schering-Plough Corp. 11,300 905,412 2.2%
Warner-Lambert Co. 8,700 1,645,931 4.1%
- --------------------------------------------------------------------------------
Total Drugs 5,447,761 13.5%
================================================================================
Electrical Equipment/Periphery - 1.0%
- --------------------------------------------------------------------------------
Dell Computer Corp. 4,900 395,675 1.0%
================================================================================
Entertainment and Leisure - 1.1%
- --------------------------------------------------------------------------------
Chancellor Media Corp. 9,400 445,912 1.1%
================================================================================
Financial Services - 0.8%
- --------------------------------------------------------------------------------
First Data Corp. 9,500 321,813 0.8%
================================================================================
Health Maintenance Organizations - 0.8%
- --------------------------------------------------------------------------------
Health Management Associates, Inc.,
Class A 10,000 315,000 0.8%
================================================================================
Insurance - 3.4%
- --------------------------------------------------------------------------------
American International Group, Inc. 6,343 834,501 2.1%
MGIC Investment Corp. 8,500 535,500 1.3%
- --------------------------------------------------------------------------------
Total Insurance 1,370,001 3.4%
Unaudited. See Notes to Financial Statements.
15
<PAGE>
P * I * C
- --------- Statement of Net Assets
BALANCED as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Medical Instruments - 3.1%
- --------------------------------------------------------------------------------
Guidant Corp. 6,900 $ 461,438 1.2%
Medtronic, Inc. 14,700 773,588 1.9%
- --------------------------------------------------------------------------------
Total Medical Instruments 1,235,026 3.1%
================================================================================
Miscellaneous - 1.2%
- --------------------------------------------------------------------------------
AES Corp. 9,000 496,688 1.2%
================================================================================
Mortgage and Related Services - 1.9%
- --------------------------------------------------------------------------------
Federal National Mortgage
Association 13,060 781,968 1.9%
================================================================================
Networking - 0.9%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 4,800 351,600 0.9%
================================================================================
Office Equipment and Supplies - 1.3%
- --------------------------------------------------------------------------------
Office Depot, Inc. 15,600 516,750 1.3%
================================================================================
Oil Refining - 0.6%
- --------------------------------------------------------------------------------
Tosco Corp. 7,150 254,719 0.6%
================================================================================
Outpatient Home Care - 0.4%
- --------------------------------------------------------------------------------
Healthsouth Corp. 4,800 144,900 0.4%
================================================================================
Real Estate Investment Trust - 0.7%
- --------------------------------------------------------------------------------
Starwood Hotels & Resorts Trust 5,700 286,069 0.7%
================================================================================
Specialty Chains - 5.6%
- --------------------------------------------------------------------------------
Bed, Bath & Beyond, Inc. 7,000 344,750 1.0%
Cedant Corp. 24,502 612,550 1.5%
CVS Corp. 8,000 590,000 1.4%
Kohls Corp. 17,300 714,706 1.7%
- --------------------------------------------------------------------------------
Total Specialty Chains 2,262,006 5.6%
Unaudited. See Notes to Financial Statements.
16
<PAGE>
P * I * C
- --------- Statement of Net Assets
BALANCED as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Supermarkets - 1.8%
- --------------------------------------------------------------------------------
Safeway, Inc. 19,000 $ 726,750 1.8%
================================================================================
Telecommunications - 4.4%
- --------------------------------------------------------------------------------
Ericsson Telephone Company ADR 11,050 568,384 1.5%
Lucent Technologies, Inc. 8,000 609,000 1.5%
Nectel Communications, Inc., Class A 10,400 298,350 0.7%
Tellabs, Inc. 4,200 297,675 0.7%
- --------------------------------------------------------------------------------
Total Telecommunications 1,773,409 4.4%
================================================================================
Telephone - 2.3%
- --------------------------------------------------------------------------------
Worldcom, Inc. 21,716 929,038 2.3%
================================================================================
Wireless Services - 1.1%
- --------------------------------------------------------------------------------
Airtouch Communications, Inc. 8,000 425,000 1.1%
- --------------------------------------------------------------------------------
Total Equity Securities (Cost $21,169,114) 29,128,445 72.3%
================================================================================
FIXED INCOME SECURITIES - 24.1%
- --------------------------------------------------------------------------------
Corporate Bonds - 10.1% Principal Amount
- --------------------------------------------------------------------------------
Associates Corp. North America,
6.375%, 8/15/2000 $425,000 428,188 1.1%
Bear Stearns & Co.,
6.125%, 2/1/2003 425,000 419,688 1.0%
Ford Motor Credit Corp.,
7.250%, 5/15/1999 275,000 278,451 0.7%
GTE Corp., 6.840%, 4/15/2018 500,000 499,375 1.2%
Hanson PLC, 7.375%, 1/15/2003 375,000 391,406 1.0%
Hertz Corp., 6.000%, 1/15/2003 100,000 98,250 0.2%
Household Bank, 6.500%, 7/15/2003 300,000 302,625 0.8%
Lehman Brothers Holdings,
7.110%, 9/27/1999 400,000 405,392 1.0%
Unaudited. See Notes to Financial Statements.
17
<PAGE>
P * I * C
- --------- Statement of Net Assets
BALANCED as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
FIXED INCOME Principal Percentage of
SECURITIES, continued Amount Value Net Assets
- --------------------------------------------------------------------------------
Corporate Bonds, continued
- --------------------------------------------------------------------------------
Morgan Stanley Notes,
6.090%, 3/9/2001 $450,000 $ 450,000 1.1%
Norwest Airlines Corp.,
7.670%, 1/2/2015 390,415 412,797 1.1%
Progressive Corp.,
10.125%, 12/15/2000 350,000 381,063 0.9%
- --------------------------------------------------------------------------------
Total Corporate Bonds (Cost $4,064,027) 4,067,235 10.1%
================================================================================
U.S. Treasury Obligations - 14.0%
- --------------------------------------------------------------------------------
U.S. Treasury Bond,
12.000%, 8/15/2013 1,325,000 1,942,794 4.8%
U.S. Treasury Bond,
7.875%, 2/15/2021 170,000 208,071 0.5%
U.S. Treasury Bond,
7.250%, 8/15/2022 500,000 575,790 1.4%
U.S. Treasury Bond,
6.125%, 11/15/2027 100,000 102,417 0.3%
U.S. Treasury Note,
7.750%, 1/31/2000 600,000 621,342 1.5%
U.S. Treasury Note,
5.500%, 3/31/2000 400,000 399,476 1.0%
U.S. Treasury Note,
6.250%, 2/15/2003 375,000 384,127 1.0%
U.S. Treasury Note,
7.875%, 11/15/2004 1,250,000 1,394,462 3.5%
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $5,423,241) 5,628,479 14.0%
Unaudited. See Notes to Financial Statements.
18
<PAGE>
P * I * C
- --------- Statement of Net Assets
BALANCED as of April 30, 1998
- ---------
PORTFOLIO
- ---------
<TABLE>
<CAPTION>
=====================================================================================
Percentage of
SHORT-TERM INVESTMENTS - 0.9% Value Net Assets
- -------------------------------------------------------------------------------------
Repurchase Agreement - 0.9% Principal Amount
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lehman Brothers On-Line Repurchase
Agreement, 5.13%, dated 4/30/1998,
due 5/1/1998 (collateralized by $403,199
U.S. Treasury Note, 6.38%, due 8/15/2027)
(Cost $393,864) $393,864 $ 393,864 0.9%
- -------------------------------------------------------------------------------------
Total Investments (Cost $31,050,246) 39,218,023 97.3%
=====================================================================================
OTHER ASSETS - 2.8%
- -------------------------------------------------------------------------------------
Receivables:
Investment securities sold 1,136,726
Dividends and interest 9,505
Other assets 1,207
- -------------------------------------------------------------------------------------
Total other assets 1,147,438 2.8%
=====================================================================================
LIABILITIES - (0.1%)
- -------------------------------------------------------------------------------------
Payable:
To Advisor (Note 3) 14,216
Deferred Trustees' compensation (Note 3) 6,030
Accrued expenses 32,875
- -------------------------------------------------------------------------------------
Total liabilities 53,121 (0.1%)
=====================================================================================
TOTAL NET ASSETS - 100.0% $40,312,340 100.0%
- -------------------------------------------------------------------------------------
</TABLE>
Unaudited. See Notes to Financial Statements.
19
<PAGE>
P * I * C
- --------- Statement of Net Assets
GROWTH as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES - 97.7% Shares Value Net Assets
- --------------------------------------------------------------------------------
Banks - 3.1%
- --------------------------------------------------------------------------------
State Street Corp. 60,300 $ 4,311,450 3.1%
================================================================================
Beverage/Food - 0.7%
- --------------------------------------------------------------------------------
General Nutrition Company, Inc. 26,900 965,038 0.7%
================================================================================
Building Products - 2.0%
- --------------------------------------------------------------------------------
Lowe's Companies, Inc. 40,800 2,853,450 2.0%
================================================================================
Business Information Services - 1.6%
- --------------------------------------------------------------------------------
Paychex, Inc. 42,351 2,300,189 1.6%
================================================================================
Computer Services - 3.1%
- --------------------------------------------------------------------------------
American Online, Inc. 22,800 1,824,000 1.3%
Sungard Data Systems, Inc. 68,800 2,451,000 1.8%
- --------------------------------------------------------------------------------
Total Computer Services 4,275,000 3.1%
================================================================================
Computer Software - 6.1%
- --------------------------------------------------------------------------------
Microsoft Corp. 94,112 8,481,844 6.1%
================================================================================
Cosmetics and Soaps - 3.1%
- --------------------------------------------------------------------------------
Colgate-Palmolive Company 17,500 1,569,531 1.1%
Gillette Company 24,359 2,811,942 2.0%
- --------------------------------------------------------------------------------
Total Cosmetics and Soaps 4,381,473 3.1%
================================================================================
Credit and Finance - 6.8%
- --------------------------------------------------------------------------------
Associates First Capital Corp. 20,530 1,534,617 1.1%
Household International, Inc. 14,400 1,892,700 1.4%
MBNA Corp. 180,944 6,129,478 4.3%
- --------------------------------------------------------------------------------
Total Credit and Finance 9,556,795 6.8%
Unaudited. See Notes to Financial Statements.
20
<PAGE>
P * I * C
- --------- Statement of Net Assets
GROWTH as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Discount Chains - 5.5%
- --------------------------------------------------------------------------------
Costco Companies, Inc. 62,700 $ 3,503,362 2.5%
Dollar General Corp. 111,218 4,212,382 3.0%
- --------------------------------------------------------------------------------
Total Discount Chains 7,715,744 5.5%
================================================================================
Diversified - 3.4%
- --------------------------------------------------------------------------------
Tyco International, Ltd. 86,060 4,690,270 3.4%
================================================================================
Drugs - 18.6%
- --------------------------------------------------------------------------------
Elan Corp., PLC 59,157 3,675,129 2.6%
Lilly (Eli) & Co. 54,170 3,768,201 2.7%
Pfizer, Inc. 57,584 6,553,779 4.7%
Schering-Plough Corp. 52,500 4,206,562 3.0%
Warner-Lambert Co. 41,600 7,870,200 5.6%
- --------------------------------------------------------------------------------
Total Drugs 26,073,871 18.6%
================================================================================
Electrical Equipment/Periphery - 1.4%
- --------------------------------------------------------------------------------
Dell Computer Corp. 23,700 1,913,775 1.4%
================================================================================
Entertainment and Leisure - 1.4%
- --------------------------------------------------------------------------------
Chancellor Media Corp. 40,100 1,902,244 1.4%
================================================================================
Financial Services - 1.1%
- --------------------------------------------------------------------------------
First Data Corp. 45,300 1,534,537 1.1%
================================================================================
Health Maintenance Organizations - 1.1%
- --------------------------------------------------------------------------------
Health Management Associates, Inc.,
Class A 47,100 1,483,650 1.1%
================================================================================
Insurance - 4.6%
- --------------------------------------------------------------------------------
American International Group, Inc. 29,968 3,942,665 2.8%
MGIC Investment Corp. 38,738 2,440,494 1.8%
- --------------------------------------------------------------------------------
Total Insurance 6,383,159 4.6%
Unaudited. See Notes to Financial Statements.
21
<PAGE>
P * I * C
- --------- Statement of Net Assets
GROWTH as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Medical Instruments - 4.1%
- --------------------------------------------------------------------------------
Guidant Corp. 32,100 $ 2,146,687 1.5%
Medtronic, Inc. 69,004 3,631,335 2.6%
- --------------------------------------------------------------------------------
Total Medical Instruments 5,778,022 4.1%
================================================================================
Miscellaneous - 1.7%
- --------------------------------------------------------------------------------
AES Corp. 42,950 2,370,303 1.7%
================================================================================
Mortgage and Related Services - 2.6%
- --------------------------------------------------------------------------------
Federal National Mortgage Association 60,319 3,611,600 2.6%
================================================================================
Networking - 1.1%
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 21,650 1,585,863 1.1%
================================================================================
Office Equipment/Supplies - 1.8%
- --------------------------------------------------------------------------------
Office Depot, Inc. 76,600 2,537,375 1.8%
================================================================================
Oil Refining - 0.8%
- --------------------------------------------------------------------------------
Tosco Corp. 31,875 1,135,547 0.8%
================================================================================
Real Estate Investment Trust - 1.0%
- --------------------------------------------------------------------------------
Starwood Hotels & Resorts Trust 28,000 1,405,250 1.0%
================================================================================
Specialty Chains - 7.7%
- --------------------------------------------------------------------------------
Bed, Bath & Beyond, Inc. 34,200 1,684,350 1.2%
Cendant Corp. 114,418 2,860,450 2.0%
CVS Corp. 35,500 2,618,125 1.9%
Kohls Corp. 88,158 3,642,027 2.6%
- --------------------------------------------------------------------------------
Total Specialty Chains 10,804,952 7.7%
Unaudited. See Notes to Financial Statements.
22
<PAGE>
P * I * C
- --------- Statement of Net Assets
GROWTH as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Supermarkets - 2.5%
- --------------------------------------------------------------------------------
Safeway, Inc. 90,750 $ 3,471,188 2.5%
================================================================================
Telecommunications - 5.%
- --------------------------------------------------------------------------------
Ericsson,(L.M.) Telephone Co., ADR 52,440 2,697,383 1.9%
Lucent Technologies, Inc. 39,500 3,006,938 2.1%
Nextel Communications, Inc., Class A 49,900 1,431,506 1.0%
Tellabs, Inc. 16,600 1,176,525 0.8%
- --------------------------------------------------------------------------------
Total Telecommunications 8,312,352 5.8%
================================================================================
Telephone - 3.5%
- --------------------------------------------------------------------------------
Worldcom, Inc. 113,150 4,840,698 3.5%
================================================================================
Wireless Services - 1.5%
- --------------------------------------------------------------------------------
Airtouch Communications, Inc. 39,500 2,098,438 1.5%
- --------------------------------------------------------------------------------
Total Equity Securities (Cost $101,159,957) 136,774,077 97.7%
================================================================================
OTHER ASSETS - 2.6%
- --------------------------------------------------------------------------------
Receivables:
Investment securities sold 3,591,938
Dividends and interest 43,849
Other assets 23,317
- --------------------------------------------------------------------------------
Total other assets 3,659,104 2.6%
================================================================================
LIABILITIES - (0.3%)
- --------------------------------------------------------------------------------
Payables:
To custodian bank 308,222
To Advisor (Note 3) 92,429
Deferred Trustees' compensation (Note 3) 27,158
Accrued expenses 161,170
- --------------------------------------------------------------------------------
Total liabilities 475,037 (0.3%)
================================================================================
TOTAL NET ASSETS - 100.0% $139,958,144 100.0%
- --------------------------------------------------------------------------------
Unaudited. See Notes to Financial Statements.
23
<PAGE>
P * I * C
- --------- Statement of Net Assets
SMALL CAP as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES - 98.5% Shares Value Net Assets
- --------------------------------------------------------------------------------
Air Freight .. 0.6%
- --------------------------------------------------------------------------------
Eagle USA Airfreight, Inc. 36,370 $ 1,195,664 0.6%
================================================================================
Airlines .. 0.5%
- --------------------------------------------------------------------------------
Ryanair Holdings PLC 25,470 977,411 0.5%
================================================================================
Apparel and Shoes .. 2.2%
- --------------------------------------------------------------------------------
Abercrombie & Fitch Co. - Class A 12,940 575,830 0.3%
Ashworth, Inc. 51,000 854,250 0.4%
Coldwater Creek, Inc. 24,400 481,900 0.3%
Gadzooks, Inc. 50,000 1,312,500 0.6%
Pacific Sunwear of California 28,750 1,268,594 0.6%
- --------------------------------------------------------------------------------
Total Apparel and Shoes 4,493,074 2.2%
================================================================================
Auto Parts .. 1.2%
- --------------------------------------------------------------------------------
Gentex Corp. 50,500 1,704,375 0.8%
Keystone Automotive Industries, Inc. 28,170 727,138 0.4%
- --------------------------------------------------------------------------------
Total Auto Parts 2,431,513 1.2%
================================================================================
Banks .. 0.9%
- --------------------------------------------------------------------------------
Hamilton Bancorp., Inc. 54,730 1,833,455 0.9%
================================================================================
Beverage/Food .. 0.3%
- --------------------------------------------------------------------------------
American Italian Pasta Co. 21,920 679,520 0.3%
================================================================================
Biotechnology .. 0.7%
- --------------------------------------------------------------------------------
Incyte Pharmaceuticals, Inc. 32,800 1,476,000 0.7%
================================================================================
Builder .. 0.8%
- --------------------------------------------------------------------------------
Palm Harbor Homes, Inc. 36,838 1,634,686 0.8%
================================================================================
Business Information Services .. 0.9%
- --------------------------------------------------------------------------------
Gartner Group, Inc. 55,480 1,837,775 0.9%
Unaudited. See Notes to Financial Statements.
24
<PAGE>
P * I * C
- --------- Statement of Net Assets
SMALL CAP as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Business Services .. 11.4%
- --------------------------------------------------------------------------------
Abacus Direct Corp. 7,700 $ 437,937 0.2%
ABR Information Services, Inc. 27,110 784,496 0.4%
Accustaff, Inc. 99,538 3,570,926 1.8%
Casella Waste Systems, Inc. 34,970 1,088,441 0.5%
Forrester Research, Inc. 25,320 949,500 0.5%
Iron Mountain, Inc. 16,900 709,800 0.3%
Lason Holdings, Inc. 33,980 1,325,220 0.6%
Metzler Group, Inc. 14,700 508,987 0.2%
NCO Grupo, Inc. 44,535 1,110,592 0.5%
Pentacon, Inc. 17,200 227,900 0.1%
Personnel Group of America, Inc. 108,680 2,160,015 1.1%
Romac International, Inc. 94,490 2,503,985 1.2%
Staffmark, Inc. 54,310 2,308,175 1.2%
Superior Consultant Holdings Corp. 23,540 907,761 0.4%
The Profit Recovery Group
International, Inc. 39,600 1,029,600 0.5%
TMP Worldwide, Inc. 65,620 1,738,930 0.9%
United Rentals, Inc. 35,700 1,229,419 0.6%
Wackenhut Corrections Corp. 28,200 736,725 0.4%
- --------------------------------------------------------------------------------
Total Business Services 23,328,409 11.4%
================================================================================
Computer Services .. 9.5%
- --------------------------------------------------------------------------------
Cambridge Technology Partners, Inc. 22,330 1,166,742 0.6%
Cerner Corp. 88,390 2,635,127 1.3%
CSG Systems International, Inc. 61,038 2,777,229 1.3%
Daou Systems, Inc. 75,770 1,363,860 0.7%
Envoy Corp. 39,610 1,668,571 0.8%
Fiserv, Inc. 42,900 2,804,587 1.4%
Harbinger Corp. 17,400 632,925 0.3%
Intelligroup, Inc.* 23,850 488,925 0.2%
International Network Services 20,500 689,312 0.3%
Lycos, Inc. 15,100 933,369 0.5%
Pegasus Systems, Inc. 17,800 476,150 0.2%
Unaudited. See Notes to Financial Statements.
25
<PAGE>
P * I * C
- --------- Statement of Net Assets
SMALL CAP as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Computer Services, continued
- --------------------------------------------------------------------------------
Premiere Technologies, Inc. 89,800 $ 2,862,375 1.4%
QuadraMed Corp. 11,000 313,500 0.2%
RWD Technologies, Inc. 26,460 668,115 0.3%
- --------------------------------------------------------------------------------
Total Computer Services 19,480,787 9.5%
================================================================================
Computer Software .. 11.5%
- --------------------------------------------------------------------------------
Access Health Market 67,840 2,289,600 1.1%
AXENT Technologies, Inc. 70,930 1,861,912 0.9%
Business Objects S.A. 27,500 519,062 0.3%
CBT Group, PLC 21,280 1,082,620 0.5%
Filenet Corp. 22,600 1,231,700 0.6%
HNC Software, Inc. 40,160 1,566,240 0.8%
I2 Technologies, Inc. 12,500 834,375 0.4%
JDA Software Group, Inc. 53,620 2,711,161 1.3%
Medical Manager Corp. 10,000 295,625 0.1%
Mercury Interactive 26,400 1,069,200 0.5%
National Instruments Corp. 20,700 734,850 0.4%
PC Connection, Inc. 19,900 431,581 0.2%
Peregrine Systems, Inc. 35,200 849,200 0.4%
Platinum Software Corp. 37,300 834,587 0.4%
Siebel Systems, Inc. 50,740 1,312,897 0.6%
Software AG Systems, Inc. 56,370 1,395,157 0.7%
Transaction Systems Architects, Inc. 65,510 2,751,420 1.3%
VERITAS Software Corp. 10,700 585,825 0.3%
Walker Interactive Systems, Inc. 29,900 547,544 0.3%
Wind River Systems, Inc. 23,370 809,186 0.4%
- --------------------------------------------------------------------------------
Total Computer Software 23,713,742 11.5%
================================================================================
Cosmetics and Soaps .. 1.5%
- --------------------------------------------------------------------------------
Rexall Sundown, Inc. 69,720 2,226,682 1.1%
Twinlab Corp. 19,600 769,300 0.4%
- --------------------------------------------------------------------------------
Total Cosmetics and Soap 2,995,982 1.5%
Unaudited. See Notes to Financial Statements.
26
<PAGE>
P * I * C
- --------- Statement of Net Assets
SMALL CAP as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Credit and Finance .. 2.0%
- --------------------------------------------------------------------------------
Healthcare Financial Partners, Inc. 7,900 $ 397,962 0.2%
Sirrom Capital Corp. 93,320 2,787,935 1.4%
United Panam Financial Corp. 23,300 308,725 0.2%
Waddell & Reed Financial, Inc. 20,500 507,375 0.2%
- --------------------------------------------------------------------------------
Total Credit and Finance 4,001,997 2.0%
================================================================================
Discount Chains .. 3.3%
- --------------------------------------------------------------------------------
Dollar Tree Stores, Inc. 113,920 6,180,160 3.0%
Fred's, Inc. - Class A 21,500 537,500 0.3%
- --------------------------------------------------------------------------------
Total Discount Chains 6,717,660 3.3%
================================================================================
Drugs .. 3.1%
- --------------------------------------------------------------------------------
Arqule, Inc. 35,990 623,077 0.3%
Atrix Laboratories, Inc. 49,440 902,280 0.4%
Jones Medical Industries, Inc. 50,825 1,499,337 0.7%
Medicis Pharmaceutical Corp. 47,400 2,026,350 1.1%
Pharmacyclics, Inc. 25,000 678,125 0.3%
Shire Pharmaceuticals Group 28,300 636,750 0.3%
- --------------------------------------------------------------------------------
Total Drugs 6,365,919 3.1%
================================================================================
Educational Programs .. 3.8%
- --------------------------------------------------------------------------------
Apollo Group, Inc. 125,061 4,283,339 2.1%
Sylvan Learning Systems, Inc. 70,700 3,490,812 1.7%
- --------------------------------------------------------------------------------
Total Educational Programs 7,774,151 3.8%
================================================================================
Electronics .. 0.8%
- --------------------------------------------------------------------------------
Anicom, Inc. 37,890 592,031 0.3%
DBT Online, Inc. 22,950 608,175 0.3%
Power-One, Inc. 39,180 492,199 0.2%
- --------------------------------------------------------------------------------
Total Electronics 1,692,405 0.8%
Unaudited. See Notes to Financial Statements.
27
<PAGE>
P * I * C
- --------- Statement of Net Assets
SMALL CAP as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Electrical Components/Semiconductor .. 3.7%
- --------------------------------------------------------------------------------
Etec Systems, Inc. 26,020 $ 1,476,635 0.7%
Micrel, Inc. 11,100 435,675 0.2%
Photronics Labs, Inc. 48,400 1,784,750 0.9%
PRI Automation, Inc. 23,400 625,950 0.3%
Uniphase Corp. 14,000 759,500 0.4%
Vitesse Semiconductor Corp. 43,240 2,494,407 1.2%
- --------------------------------------------------------------------------------
Total Electrical Components/
Semiconductor 7,576,917 3.7%
================================================================================
Electrical Equipment/Periphery .. 1.2%
- --------------------------------------------------------------------------------
ATMI, Inc. 6,300 175,613 0.1%
Level One Communications, Inc. 33,265 1,035,373 0.5%
PMC-Sierra, Inc. 14,930 679,315 0.3%
Semtech Corp. 21,820 520,953 0.3%
- --------------------------------------------------------------------------------
Total Electrical Equipment/Periphery 2,411,254 1.2%
================================================================================
Electrical Products .. 0.4%
- --------------------------------------------------------------------------------
Advanced Lighting Technologies, Inc. 31,200 865,800 0.4%
================================================================================
Entertainment and Leisure ..2.3%
- --------------------------------------------------------------------------------
Fairfield Communities, Inc. 170,520 3,985,905 2.0%
Suburban Lodges of America 41,200 762,200 0.3%
- --------------------------------------------------------------------------------
Total Entertainment and Leisure 4,748,105 2.3%
================================================================================
Financial Services .. 3.2%
- --------------------------------------------------------------------------------
Financial Federal Corp. 18,500 427,813 0.2%
First Sierra Financial, Inc. 40,000 1,010,000 0.5%
PMT Services, Inc. 173,810 3,389,295 1.7%
Pre-Paid Legal Services, Inc. 45,730 1,729,166 0.8%
- --------------------------------------------------------------------------------
Total Financial Services 6,556,274 3.2%
Unaudited. See Notes to Financial Statements.
28
<PAGE>
P * I * C
- --------- Statement of Net Assets
SMALL CAP as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Food and Restaurants .. 1.0%
- --------------------------------------------------------------------------------
Dave & Buster's, Inc. 41,280 $ 1,078,440 0.5%
Landry's Seafood Restaurants, Inc. 32,900 937,650 0.5%
- --------------------------------------------------------------------------------
Total Food and Restaurants 2,016,090 1.0%
================================================================================
Hospitals .. 1.8%
- --------------------------------------------------------------------------------
Alternative Living Services, Inc. 31,400 1,099,000 0.6%
Assisted Living Concepts, Inc. 47,690 876,304 0.4%
CareMatrix Corp. 25,800 699,825 0.3%
Province Healthcare Co. 14,700 406,088 0.2%
Sunrise Assisted Living 12,900 578,081 0.3%
- --------------------------------------------------------------------------------
Total Hospitals 3,659,298 1.8%
================================================================================
Insurance .. 1.2%
- --------------------------------------------------------------------------------
Annuity and Life Re, Ltd. 27,800 663,725 0.4%
Enhance Financial Services Group, Inc. 24,580 1,686,803 0.8%
- --------------------------------------------------------------------------------
Total Insurance 2,350,528 1.2%
================================================================================
Medical/Dental Products ..1.2%
- --------------------------------------------------------------------------------
Henry Schein, Inc. 26,970 1,051,830 0.6%
Heska Corp. 37,500 487,500 0.2%
Ocular Sciences, Inc. 24,780 693,840 0.3%
Perclose, Inc. 5,500 167,063 0.1%
- --------------------------------------------------------------------------------
Total Medical/Dental Products 2,400,233 1.2%
================================================================================
Medical/Dental Services .. 10.0%
- --------------------------------------------------------------------------------
Boron Lepore & Associates 24,610 922,875 0.5%
Centennial Healthcare Corp. 51,490 1,222,888 0.6%
Coast Dental Services, Inc. 30,910 718,658 0.4%
Concentra Managed Care, Inc. 111,620 3,474,173 1.6%
Minimed, Inc. 9,540 477,000 0.2%
Omnicare, Inc. 44,170 1,512,823 0.7%
Orthodontic Centers of America, Inc. 103,640 2,215,305 1.1%
Unaudited. See Notes to Financial Statements.
29
<PAGE>
P * I * C
- --------- Statement of Net Assets
SMALL CAP as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Medical/Dental Services, continued
- --------------------------------------------------------------------------------
Paraxel International Corp. 76,610 $ 2,566,435 1.3%
Quintiles Transnational Corp. 61,540 3,046,230 1.5%
Renal Care Group, Inc. 56,630 2,166,098 1.1%
Total Renal Care Holdings, Inc. 61,263 2,029,337 1.0%
- --------------------------------------------------------------------------------
Total Medical/Dental Services 20,351,822 10.0%
================================================================================
Medical Instruments .. 1.2%
- --------------------------------------------------------------------------------
ESC Medical Systems, Ltd. 22,600 734,500 0.4%
IDEXX Corp. 31,200 690,300 0.3%
Laser Vision Centers, Inc. 34,300 460,906 0.2%
VISX, Inc. 13,200 582,450 0.3%
- --------------------------------------------------------------------------------
Total Medical Instruments 2,468,156 1.2%
================================================================================
Mortgage and Related Services .. 0.4%
- --------------------------------------------------------------------------------
Franchise Mortgage Acceptance Co. 30,360 728,640 0.4%
================================================================================
Networking .. 0.2%
- --------------------------------------------------------------------------------
Objective Systems Integrators, Inc. 29,000 322,625 0.2%
================================================================================
Oil Field Services .. 3.0%
- --------------------------------------------------------------------------------
Atwood Oceanics, Inc. 24,440 1,336,563 0.7%
Bayard Drilling Technologies, Inc. 61,430 852,341 0.4%
Global Industries, Ltd. 87,220 1,978,804 1.0%
Marine Drilling Co., Inc. 20,500 498,406 0.2%
Parker Drilling Co. 137,170 1,405,993 0.7%
- --------------------------------------------------------------------------------
Total Oil Field Services 6,072,107 3.0%
================================================================================
Pollution Control .. 2.2%
- --------------------------------------------------------------------------------
American Disposal Services, Inc. 26,060 1,044,843 0.6%
Newpark Resources, Inc. 139,410 3,354,553 1.6%
- --------------------------------------------------------------------------------
Total Pollution Control 4,399,396 2.2%
Unaudited. See Notes to Financial Statements.
30
<PAGE>
P * I * C
- --------- Statement of Net Assets
SMALL CAP as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
Publishing/Advertising .. 0.5%
- --------------------------------------------------------------------------------
Consolidated Graphics, Inc. 17,400 $ 1,003,763 0.5%
================================================================================
Real Estate Investment Trust .. 0.4%
- --------------------------------------------------------------------------------
Lasalle Partners, Inc. 23,480 807,125 0.4%
================================================================================
Specialty Chains .. 2.8%
- --------------------------------------------------------------------------------
Black Box Corp. 15,900 528,675 0.3%
Central Garden & Pet Co. 18,020 617,185 0.3%
Guitar Center, Inc. 66,780 1,903,230 0.8%
Hibbett Sporting Goods, Inc. 45,980 1,540,330 0.8%
Starbucks Corp. 25,180 1,211,788 0.6%
- --------------------------------------------------------------------------------
Total Specialty Chains 5,801,208 2.8%
================================================================================
Telecommunications .. 5.6%
- --------------------------------------------------------------------------------
Advanced Fibre Communications 63,290 2,681,914 1.3%
Applied Micro Circuits Corp. 15,200 419,900 0.2%
Clearnet Communications 33,900 472,481 0.2%
Davox Corp. 31,050 694,744 0.3%
Metromedia Fiber Network, Inc. 20,600 636,025 0.3%
MRV Communications, Inc. 110,200 2,961,625 1.5%
P-Com, Inc. 99,350 1,955,953 1.0%
REMEC, Inc. 47,070 1,170,866 0.6%
Tel-Save Holdings, Inc. 15,190 346,522 0.2%
- --------------------------------------------------------------------------------
Total Telecommunications 11,340,030 5.6%
================================================================================
Telephone .. 0.5%
- --------------------------------------------------------------------------------
McLeod USA, Inc. 24,400 1,122,400 0.5%
================================================================================
Textiles and Shoes .. 0.7%
- --------------------------------------------------------------------------------
Novel Denim Holdings, Ltd. 55,240 1,394,810 0.7%
- --------------------------------------------------------------------------------
Total Equity Securities (Cost $168,752,660) 201,026,731 98.5%
Unaudited. See Notes to Financial Statements.
31
<PAGE>
P * I * C
- --------- Statement of Net Assets
SMALL CAP as of April 30, 1998
- ---------
PORTFOLIO
- ---------
================================================================================
Percentage of
SHORT-TERM INVESTMENTS - 0.8% Value Net Assets
- --------------------------------------------------------------------------------
Repurchase Agreement .. 0.8% Principal Amount
- --------------------------------------------------------------------------------
Lehman Brothers On-Line Repurchase
Agreement, 5.13%, dated 4/30/1998,
due 5/1/1998 (collateralized by $1,717,002
U.S. Treasury Note, 6.38%, due 8/15/2027)
(Cost $1,677,252) $1,677,252 $ 1,677,252 0.8%
- --------------------------------------------------------------------------------
Total Investments
(Cost $170,429,912) 202,703,983 99.3%
================================================================================
OTHER ASSETS - 0.9%
- --------------------------------------------------------------------------------
Receivables:
Investment securities sold 1,664,414
Shares of beneficial interest sold 180,577
Dividends and interest 2,954
Prepaid insurance 7,212
Deferred organization costs, net 5,041
Other assets 13,254
- --------------------------------------------------------------------------------
Total other assets 1,873,452 0.9%
================================================================================
LIABILITIES - (0.2%)
- --------------------------------------------------------------------------------
Payables:
Investment securities purchased 224,725
To Advisor (Note 3) 132,154
Deferred compensation plan (Note 3) 25,821
Accrued expenses 70,750
- --------------------------------------------------------------------------------
Total liabilities 453,450 (0.2%)
================================================================================
TOTAL NET ASSETS - 100.0% $204,123,985 100.0%
- --------------------------------------------------------------------------------
Unaudited. See Notes to Financial Statements.
32
<PAGE>
P * I * C
- ---------
BALANCED Statement of Operations
- --------- Six Month ended April 30, 1998
GROWTH
- ---------
SMALL CAP
- ---------
PORTFOLIO Balanced Growth Small Cap
- --------- Portfolio Portfolio Portfolio
================================================================================
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Income:
- --------------------------------------------------------------------------------
Dividends $ 75,430 $ 329,874 $ 60,911
Interest 302,056 146,051 197,020
Other 21 3,224 3,877
- --------------------------------------------------------------------------------
Total income 377,507 479,149 261,808
================================================================================
Expenses:
- --------------------------------------------------------------------------------
Investment advisory fee (Note 3) 111,348 480,143 704,407
Administration fee (Note 3) 18,558 60,018 88,051
Accounting services fee 32,400 34,909 40,092
Custodian fee 10,265 16,299 37,175
Audit fee 6,000 12,547 9,076
Legal fees 1,984 1,984 3,514
Trustees' fees 1,884 7,513 8,480
Amortization of organization costs -- 967 4,959
Miscellaneous 1,289 2,827 4,604
- --------------------------------------------------------------------------------
Total expenses 183,728 617,207 900,358
Less, waiver by Advisor (Note 3) (35,264) (17,028) (19,849)
- --------------------------------------------------------------------------------
Net expenses 148,464 600,179 880,509
================================================================================
Net investment income (loss) 229,043 (121,030) (618,701)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- --------------------------------------------------------------------------------
Net realized gain (loss)
on investments 1,507,721 8,217,486 (1,685,774)
Change in net unrealized
appreciation on investments 3,263,890 15,188,621 22,162,824
- --------------------------------------------------------------------------------
Net gain on investments 4,771,611 23,406,107 20,477,050
================================================================================
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $ 5,000,654 $ 23,285,077 $ 19,858,349
- --------------------------------------------------------------------------------
Unaudited. See Notes to Financial Statements.
33
<PAGE>
P * I * C
- --------- Statements of Changes in Net Assets
BALANCED
- ---------
GROWTH
- ---------
SMALL CAP
- ---------
PORTFOLIO Balanced
- --------- Portfolio
================================================================================
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
Six Months Year
ended ended
From operations: April 30, 1998 Oct. 31, 1997
- --------------------------------------------------------------------------------
Net investment income (loss) $ 229,043 $ 345,595
Net realized gain (loss) on investments 1,507,721 2,294,652
Change in net unrealized
appreciation on investments 3,263,890 2,395,337
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 5,000,654 5,035,584
================================================================================
Transactions in interests:
Contributions by Holders 1,816,441 21,447,800
Withdrawals by Holders (1,888,283) (3,968,315)
- --------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
transactions in interests (71,842) 17,479,485
================================================================================
Total increase (decrease) in net assets 4,928,812 22,515,069
================================================================================
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 35,383,528 12,868,459
- --------------------------------------------------------------------------------
End of period $ 40,312,340 $ 35,383,528
- --------------------------------------------------------------------------------
Unaudited. See Notes to Financial Statements.
34
<PAGE>
Growth Small Cap
Portfolio Portfolio
================================================================================
- --------------------------------------------------------------------------------
Six Months Year Six Months Year
ended ended ended ended
April 30, 1998 Oct. 31, 1998 April 30, 1998 Oct. 31, 1997
- --------------------------------------------------------------------------------
$ (121,030) $ (133,460) $ (618,701) $ (934,925)
8,217,486 32,161,956 (1,685,774) 72,084,822
15,188,621 (7,683,870) 22,162,824 (62,640,291)
- --------------------------------------------------------------------------------
23,285,077 24,344,626 19,858,349 8,509,606
================================================================================
50,871,856 17,478,857 73,223,086 164,160,467
(16,343,469) (75,778,332) (28,613,247) (234,314,952)
- --------------------------------------------------------------------------------
34,528,387 (58,299,475) 44,609,839 (70,154,485)
================================================================================
57,813,464 (33,954,849) 64,468,188 (61,644,879)
================================================================================
- --------------------------------------------------------------------------------
82,144,680 116,099,529 139,655,797 201,300,676
- --------------------------------------------------------------------------------
$ 139,958,144 $ 82,144,680 $ 204,123,985 $ 139,655,797
- --------------------------------------------------------------------------------
35
<PAGE>
P * I * C
- --------- Selected Ratio Data
BALANCED
- ---------
GROWTH
- ---------
SMALL CAP
- ---------
PORTFOLIO
- --------- Balanced Portfolio
<TABLE>
<CAPTION>
==========================================================================================================================
Six Months Year Year Year Year Year
ended ended ended ended ended ended
April 30, 1998 Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average net assets:++
Operating expenses 0.80%+ 0.80% 0.80% 0.80% 0.80% 0.80%
Net investment income 1.23%+ 1.35% 1.30% 1.57% 1.63% 2.05%
Portfolio turnover rate 40.99% 104.50% 54.24% 106.50% 116.63% 92.65%
Average commisson rate
paid per share** $ 0.0421 $ 0.0376 $ 0.0406 -- -- --
</TABLE>
++Net of expense reimbursements equivalent to 0.19%, 0.36%, 0.90%, 0.78%, 1.16%
and 4.68% of average net assets, respectively.
**For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate paid per share for security trades on
which commissions are charged.
+Annualized.
Unaudited. See Notes to Financial Statements.
36
<PAGE>
Growth Portfolio
<TABLE>
<CAPTION>
==========================================================================================================================
Six Months Year Year Year Year Year
ended ended ended ended ended ended
April 30, 1998 Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average net assets:#
Operating expenses 1.00%+ 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment (loss) income (0.20%)+ (0.13%) (0.04%) 0.08% 0.10% 0.17%
Portfolio turnover rate 42.39% 67.54% 64.09% 54.89% 68.26% 43.20%
Average commission rate
paid per share** $0.0423 $0.0416 $0.0440 -- -- --
</TABLE>
**For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate paid per share for security trades on
which commissions are charged.
#Net of expense reimbursements equivalent to 0.03%, 0.05%, 0.04%, 0.01%, 0.01%
and 0.09% of average net assets, respectively.
+Annualized.
Unaudited. See Notes to Financial Statements.
37
<PAGE>
P * I * C
- --------- Selected Ratio Data, Continued
BALANCED
- ---------
GROWTH
- ---------
SMALL CAP
- ---------
PORTFOLIO
- --------- Small Cap Portfolio
<TABLE>
<CAPTION>
==========================================================================================================================
Six Months Year Year Year Year Sept. 30, 1993*
ended ended ended ended ended through
April 30, 1998 Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average net assets:#
Operating expenses 1.00%+ 1.00% 1.00% 1.00% 1.00% 1.00%+
Net investment income (0.62%)+ (.49%) (.59%) (.51%) (.49%) (.79%)+
Portfolio turnover rate 35.44% 151.52% 53.11% 45.45% 63.89% 6.06%
Average commisson rate
paid per share** $0.0270 $0.0326 $0.0307 -- -- --
</TABLE>
*Commencement of operations.
+Annualized.
**For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate paid per share for security trades on
which commissions are charged.
#Net of expense reimbursements equivalent to 0.02%, 0.01%, 0.01%, 0.07%, 0.10%
and 0.11% of average net assets, respectively.
Unaudited. See Notes to Financial Statements.
38
<PAGE>
P * I * C
- --------- Notes to Financial Statements
BALANCED
- ---------
GROWTH
- ---------
SMALL CAP
- ---------
PORTFOLIO
- ---------
================================================================================
1 - ORGANIZATION
- --------------------------------------------------------------------------------
Provident Investment Counsel Balanced and Growth Portfolios were organized
on December 11, 1991 and Provident Investment Counsel Small Cap Portfolio was
organized on March 22, 1993 as separate trusts under the laws of the State of
New York (each a "Portfolio" and collectively the "Portfolios"). The beneficial
interests in each Portfolio are divided into an unlimited number of
non-transferable interests, par value $.01 each. The Portfolios are registered
under the Investment Company Act of 1940 as open-end, diversified management
investment companies.
2 - SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies consistently
followed by the Portfolios. These policies are in conformity with generally
accepted accounting principles.
A. Valuation of Securities. Equity securities listed on a national securities
exchange or traded on the NASDAQ system are valued at their last sale
price. Other equity securities and debt securities for which market
quotations are readily available are valued at the mean between their bid
and asked price, except that debt securities maturing within 60 days are
valued on an amortized cost basis. Securities for which market quotations
are not readily available are valued at fair value as determined in good
faith by the Board of Trustees.
B. Federal Income Taxes. Each Portfolio intends to comply with the
requirements of the Internal Revenue Code applicable to it. Therefore, no
federal income tax provision is required.
C. Deferred Organization Costs. Organization costs of the Portfolios 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 a 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.
39
<PAGE>
P * I * C
- --------- Notes to Financial Statements,
BALANCED continued
- ---------
GROWTH
- ---------
SMALL CAP
- ---------
PORTFOLIO
- ---------
================================================================================
E. Accounting Estimates. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expenses during the period. Actual results could differ from
those estimates.
3 - TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
Each 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 Portfolios. PIC and ICAC also provide management services necessary for
the operations of the Portfolios and furnish office facilities.
PIC receives from Balanced Portfolio an investment advisory fee at the
annual rate of 0.60% of its average net assets, 0.80% from the Small Cap.
Portfolio and 0.80% from the Growth Portfolio. In addition, PIC has voluntarily
taken to limit the expenses of the Balanced Portfolio to 0.80% of its average
net assets, 1.00% for the Small Cap Portfolio and 1.00% for the Growth
Portfolio.
Fees waived by PIC for the six months ended April 30, 1998 were as
follows:
Waived Fees
-----------
Balanced Portfolio $35,264
Growth Portfolio 17,028
Small Cap Portfolio 19,849
ICAC receives for its services a fee at the annual rate of 0.10% of the
average net assets of the Portfolios. Fees paid to ICAC for the six months ended
April 30, 1998 are stated on the respective Portfolios' Statement of Operations.
On December 19, 1995, each Portfolio approved a Deferred Compensation Plan
for Trustees (the "Plan"). Trustees are entitled to receive $2,500 per quarter
and $500 per meeting attended, which is allocated among the Portfolios. Trustees
can elect to receive payment in cash or defer payments
40
<PAGE>
P * I * C
- --------- Notes to Financial Statements,
BALANCED continued
- ---------
GROWTH
- ---------
SMALL CAP
- ---------
PORTFOLIO
- ---------
================================================================================
provided for in the Plan. If a trustee elects to defer payment, the Plan
provides for the creation of a deferred payment account (phantom share account).
This account accumulates the deferred fees earned and the value of the account
is adjusted at the end of each quarter to reflect a value which would have been
earned if the account had been invested in designated investments. The
Portfolios recognize as trustee expense amounts accrued as meetings are attended
plus the change in the value of the phantom share account determined on a
quarterly basis.
4 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the six months ended April 30, 1998 were as follows:
Purchases Sales
--------- -----
Balanced Porfolio $ 14,984,054 $15,091,445
Growth Portfolio 84,369,454 48,567,705
Small Cap Portfolio 103,982,901 61,029,023
The aggregate unrealized appreciation and depreciation of investment
securities at April 30, 1998, based on costs for Federal income tax purposes,
were as follows:
Tax Gross Gross
Costs of Unrealized Unrealized
Investments Appreciation Depreciation
----------- ------------ ------------
Balanced Portfolio $ 31,050,246 $ 8,510,356 $ (342,579)
Growth Portfolio 101,159,957 37,194,627 (1,580,507)
Small Cap Portfolio 170,429,912 36,081,515 (3,807,444)
41
<PAGE>
- ----------------------------
Provident Investment Counsel Trustees and Officers
Pinnacle Funds
- ----------------------------
================================================================================
TRUSTEES AND OFFICERS - P*I*C INVESTMENT TRUST
- --------------------------------------------------------------------------------
Jeffrey J. Miller, Trustee and President
Jettie M. Edwards, Trustee
Bernard J. Johnson, Trustee Emeritus
Jeffrey D. Lovell, Trustee
Wayne H. Smith, Trustee
Thad M. Brown, Vice President, Secretary and Treasurer
TRUSTEES AND OFFICERS - P*I*C PORTFOLIOS
- --------------------------------------------------------------------------------
Jeffrey J. Miller, Trustee and President
Richard N. Frank, Trustee
James Clayburn LaForce, Trustee
Angelo R. Mozilo, Trustee
Bernard J. Johnson, Trustee Emeritus
Thad M. Brown, Vice President, Secretary and Treasurer
LEGAL COUNSEL - P*I*C INVESTMENT TRUST
- --------------------------------------------------------------------------------
Shereff, Friedman, Hoffman & Goodman
LEGAL COUNSEL - P*I*C PORTFOLIOS
- --------------------------------------------------------------------------------
Paul, Hastings, Janofsky & Walker, LLP
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
McGladrey & Pullen, LLP
This report is intended for the information of shareholders of Provident
Investment Counsel Pinnacle Funds and should not be used as sales literature
unless preceded or accompanied by a current prospectus.
