<PAGE> 1
[P-I-C PINNACLE LOGO] BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
ANNUAL REPORT
OCTOBER 31, 1997
<PAGE> 2
[P-I-C PINNACLE LOGO] MESSAGE TO SHAREHOLDERS
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
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 P-I-C Mutual Fund. In addition to the information in this Annual Report, we
will be sending the regular quarterly update along with your statement.
Thank you for your continued confidence in Provident Investment Counsel.
P-I-C PINNACLE BALANCED FUND
QUESTION: How did the P-I-C Pinnacle Balanced Fund perform relative to the
overall markets during the fiscal year ended October 31, 1997?
ANSWER: The Lipper Balanced Fund Index, a group of several hundred balanced
mutual funds, rose 20.10% for the fiscal year and 16.17% from January 1, 1997
through October 31, while the Fund's total returns were 21.76% and 20.02% in the
same periods.
QUESTION: What is the allocation between stocks and bonds currently and are
there any plans to make any changes?
ANSWER: The current allocation as of December 5th was 71.3% equities and 28.7%
bonds and cash equivalents. The current allocation reflects our generally
positive outlook for the domestic equity market and the U.S. economy. As always,
we believe over the long haul equities will outperform fixed-income securities
and thus the Fund will maintain a greater exposure to stocks over time.
QUESTION: How is the fixed income segment of the Fund structured and what is the
outlook for the bond market in the near future?
ANSWER: The fixed income portion of the Fund has a 70% weighting in U.S.
government securities and 30% in corporate issues. This structure has helped the
Fund's performance recently as global market concerns have increased demand for
U.S. securities. The duration of the bonds in the Fund is equal to that of the
Lehman Brothers Corporate/Government Bond Index.
The Federal Reserve appears to be faced with a dilemma. Under normal
circumstances, the continued strong domestic economic growth could have
2
<PAGE> 3
[P-I-C PINNACLE LOGO] MESSAGE TO SHAREHOLDERS
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
prompted additional preemptive tightening of monetary policy. However monetary
policy has been placed on "temporary hold" until the impact of the recent
turmoil in the Southeast Asian economies can be evaluated. We expect to maintain
our market neutral policy until we see signs of improvement in both the
corporate markets and the global economy.
P-I-C PINNACLE GROWTH FUND
QUESTION: How did the P-I-C Pinnacle Growth Fund perform relative to the overall
markets during the fiscal year ended October 31, 1997?
ANSWER: The Lipper Growth Fund Index rose 28.03% for the fiscal year and 21.46%
from January 1, through October 31, 1997 while the Fund's total returns were
26.31% and 24.16% in the same periods.
QUESTION: What are some of the sectors and holdings that have helped the Fund's
performance significantly during the year?
ANSWER: Once again the technology and communications sectors have been strong
throughout 1997 with market leaders such as Microsoft, Ericsson, Lucent
Technologies and Compaq Computer leading the way. Pharmaceutical company
holdings such as Pfizer, Warner Lambert and Eli Lilly have also posted
significant gains along with medical device companies Medtronic and recent
purchase Guidant. The financial services sector posted another strong year of
performance with the help of moderate inflation and a relatively stable interest
rate environment.
QUESTION: What is the outlook for the Fund and broad market in the months ahead?
ANSWER: Going forward, we expect market volatility to continue to be an issue as
investors calm their fears and return their focus back on the strong underlying
fundamentals of the US economy. We look for the leadership in the equity markets
to come from a broad market as the ability of the "nifty-fifty" multi-national
corporations to meet investor expectations may be somewhat restrained by their
large exposure to overseas economies and, specifically, the Asia-Pacific region.
Therefore, looking to 1998 we expect investors to selectively shift towards
those companies with the ability to sustain superior sales and earnings growth
despite international concerns.
3
<PAGE> 4
[P-I-C PINNACLE LOGO] MESSAGE TO SHAREHOLDERS
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
P-I-C PINNACLE SMALL COMPANY GROWTH FUND
QUESTION: How did the P-I-C Pinnacle Small Company Growth Fund perform relative
to the broad market during the fiscal year ended October 31, 1997?
ANSWER: The Lipper Small Company Fund Index rose 17.75% for the fiscal year and
15.14% from January 1, 1997 through October 31, while the Fund's total returns
were 4.56% and 4.03% in the same periods.
QUESTION: The past year has been the most volatile period to date for small
company growth stocks. What has caused this volatility?
ANSWER: As we have discussed in prior reports, the calendar year 1997 began with
investor concerns surrounding interest rates, a strong dollar and the
predictability of corporate earnings going forward. These concerns led investors
away from smaller capitalization stocks to larger, more liquid issues. After the
end of the first quarter investors were reassured by positive earnings reports
along with the realization that valuation levels of smaller issues relative to
large cap stocks, were at or near the troughs of 1990. These compelling
valuations and "reassuring" earnings reports caused an investor rotation back to
smaller issues. Looking forward, these positive fundamentals combined with
excellent valuations of small and mid-sized companies relative to large
companies bodes well for the Fund.
QUESTION: Why have we seen such a significant performance differential between
small cap value and small cap growth stocks over the last year?
ANSWER: Small company growth issues bore the brunt of the investor sentiment
during the first quarter of 1997. Many issues saw more than double digit
percentage declines without any change in company fundamentals. Small company
value issues were less affected in the first quarter and have also benefited by
a strong economy with relatively low interest rates. In general the high-growth,
high-multiple issues have not been rewarded this year. For example, the Fund has
been over-weighted in software vs. hardware technology companies. Investors have
favored the more highly-leveraged hardware companies as opposed to
higher-quality, high-growth software companies. In addition, with the concerns
and uncertainties that surround the Asian situation, investors have favored low
P/E, less-aggressive companies that have more of a value tilt.
4
<PAGE> 5
[P-I-C PINNACLE LOGO] MESSAGE TO SHAREHOLDERS
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
PIC BALANCED PORTFOLIO (equity portion) vs. S&P 500 INDEX*
<TABLE>
<CAPTION>
3 Year Earnings 3 Year Dividend
3 Year Sales Per Share Per Share Pretax Return on
Growth Growth Growth Margin Equity Reinvest. Rate
<S> <C> <C> <C> <C> <C> <C>
Superiority 4.1X 1.7X 2.8X 1.6X 1.4X 1.9X
Factor
PIC 24.8% 27.0% 16.2% 17.2% 25.0% 21.0%
S&P 500 Index 6.0% 15.5% 5.7% 10.7% 17.5% 10.8%
</TABLE>
*As of 10/31/97
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
P-I-C PINNACLE BALANCED FUND AND S & P 500 AND
LIPPER BALANCED FUND INDEXES.
<TABLE>
<CAPTION>
C Pinnacle Balanced Fund S&P 500 Balanced Fund
<C> <C> <C> <C>
06/30/92 10,000 10,000 10,000
10/31/92 10,820 10,300 10,257
04/30/93 10,785 11,000 11,057
10/31/93 11,697 11,900 11,908
04/30/94 10,996 11,600 11,576
10/31/94 11,606 12,400 11,835
04/30/95 11,697 13,600 12,606
10/31/95 13,851 15,600 13,916
04/30/96 14,371 17,800 14,999
10/31/96 15,507 19,400 15,932
04/30/97 16,400 22,216 17,039
10/31/97 18,882 26,687 19,134
</TABLE>
Average Annual Total Return
One Year Since Inception
21.76% 12.51%
Past performance is not predictive of future performance.
5
<PAGE> 6
[P-I-C PINNACLE LOGO] MESSAGE TO SHAREHOLDERS
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
PIC GROWTH EQUITY PORTFOLIO vs. S&P 500 INDEX*
<TABLE>
<CAPTION>
3 Year Earnings 3 Year Dividend
3 Year Sales Per Share Per Share Pretax Return on
Growth Growth Growth Margin Equity Reinvest. Rate
<S> <C> <C> <C> <C> <C> <C>
Superiority 4.1X 1.7X 2.8X 1.6X 1.4X 1.9X
Factor
PIC 24.8% 27.0% 16.2% 17.2% 25.0% 21.0%
S&P 500 Index 6.0% 15.5% 5.7% 10.7% 17.5% 10.8%
</TABLE>
*As of 10/31/97
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN P-I-C
PINNACLE GROWTH FUND AND THE S & P 500 INDEX.
<TABLE>
<CAPTION>
PIC Pinnacle Growth Fund S&P 500
<C> <C> <C>
07/31/92 10,000 10,000
10/31/92 10,810 10,300
04/30/93 10,340 11,000
10/31/93 11,590 11,900
04/30/94 10,930 11,600
10/31/94 11,680 12,400
04/30/95 11,680 13,600
10/31/95 14,210 15,600
04/30/96 14,830 17,800
10/31/96 16,190 19,400
04/30/97 17,429 22,216
10/31/97 20,449 26,687
</TABLE>
Average Annual Total Return
One Year Since Inception
26.31% 14.19%
Past performance is not predictive of future performance.
Performance results reflect the total returns of the P-I-C Growth Fund (included
in another report) managed by Provident Investment Counsel prior to the
effective date of the Fund's registration statements, which was 2/3/97. P-I-C
Growth Fund returns are restated to reflect all fees and expenses applicable to
the P-I-C Pinnacle Growth Fund.
6
<PAGE> 7
[P-I-C PINNACLE LOGO] MESSAGE TO SHAREHOLDERS
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
PIC SMALL CAP PORTFOLIO vs. RUSSELL 2000 GROWTH*
<TABLE>
<CAPTION>
3 Year Earnings
3 Year Sales Per Share Pretax Return on
Growth Growth Margin Equity Reinvest. Rate
<S> <C> <C> <C> <C> <C>
Superiority 1.5X 1.4X 1.1X 1.1X 1.2X
Factor
PIC 41.1% 41.3% 16.8% 19.1% 19.3%
Russell 2000 Growth 28.2% 29.6% 15.0% 18.0% 16.7%
</TABLE>
*As of 10/31/97
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
P-I-C PINNACLE SMALL COMPANY GROWTH FUND AND
THE RUSSELL 2000 GROWTH INDEX.
<TABLE>
<CAPTION>
PIC Pinnacle Russell 2000
<C> <C> <C>
10/01/93 10,000 10,000
10/31/93 10,167 10,300
04/30/94 9,447 9,900
10/31/94 9,995 10,200
04/30/95 10,423 10,700
10/31/95 14,403 12,300
04/30/96 18,562 14,900
10/31/96 17,767 13,900
04/30/97 14,655 12,916
10/31/97 18,577 16,879
</TABLE>
Average Annual Total Return
One Year Since Inception
4.56% 16.35%
Past performance is not predictive of future performance.
Performance results reflect the total returns of the P-I-C Small Cap Growth Fund
(included in another report) managed by Provident Investment Counsel prior to
the effective date of the Fund's registration statements, which was 2/3/97.
P-I-C Small Cap Growth Fund returns are restated to reflect all fees and
expenses applicable to the P-I-C Pinnacle Small Company Growth Fund.
7
<PAGE> 8
[P-I-C PINNACLE LOGO] STATEMENTS OF ASSETS AND LIABILITIES
BALANCED FUND as of October 31, 1997
GROWTH FUND
SMALL COMPANY GROWTH FUND
<TABLE>
<CAPTION>
PINNACLE
PINNACLE PINNACLE SMALL COMPANY
BALANCED FUND GROWTH FUND GROWTH FUND
========================================================================================
<S> <C> <C> <C>
ASSETS
- ----------------------------------------------------------------------------------------
Investment in Portfolios, at value $35,383,337 $ 2,153,087 $ 3,083,885
Cash -- 36,917 26,312
Receivables:
Fund shares sold 28,168 8,770 2,969
Prepaid expenses 10,570 2,006 2,827
- ----------------------------------------------------------------------------------------
Total assets 35,422,075 2,200,780 3,115,993
========================================================================================
LIABILITIES
- ----------------------------------------------------------------------------------------
Payables:
For investments purchased in Portfolios 28,168 8,770 2,969
To Provident Investment Counsel, Inc. 12,081 18,900 11,935
Deferred Trustees' compensation (Note 3) 11,185 3,325 3,290
Accrued expenses 27,583 19,373 17,765
- ----------------------------------------------------------------------------------------
Total liabilities 79,017 50,368 35,959
========================================================================================
NET ASSETS
- ----------------------------------------------------------------------------------------
Applicable to 2,279,091, 187,980 and
295,534 shares of beneficial interest
outstanding, respectively $35,343,058 $ 2,150,412 $ 3,080,034
========================================================================================
NET ASSET VALUE
PER SHARE $ 15.51 $ 11.44 $ 10.42
- ----------------------------------------------------------------------------------------
========================================================================================
SOURCE OF NET ASSETS
- ----------------------------------------------------------------------------------------
Paid-in capital $28,129,404 $ 2,090,651 $ 3,091,333
Undistributed (accumulated)
net investment income (loss) 26,026 (4,736) (8,545)
Undistributed (accumulated) net
realized gain (loss) on investments 2,283,781 (11,823) (57,494)
Net unrealized appreciation
on investments 4,903,847 76,320 54,740
========================================================================================
NET ASSETS $35,343,058 $ 2,150,412 $ 3,080,034
- ----------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 9
[P-I-C PINNACLE LOGO] STATEMENTS OF OPERATIONS
BALANCED FUND Year ended October 31, 1997
GROWTH FUND
SMALL COMPANY GROWTH FUND
<TABLE>
<CAPTION>
PINNACLE
PINNACLE PINNACLE SMALL COMPANY
BALANCED FUND GROWTH FUND* GROWTH FUND*
===========================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME
- -------------------------------------------------------------------------------------------
Net investment income (loss)
from Portfolios $ 345,592 $ (2,062) $ (4,437)
===========================================================================================
Expenses:
- -------------------------------------------------------------------------------------------
Administration fees (Note 3) 67,139 12,329 13,293
Distribution fees (Note 4) 18,689 1,910 1,867
Trustees' fees 13,507 6,408 6,373
Audit fee 10,300 10,301 10,301
Legal fee 2,710 970 2,049
Transfer agent's fee 19,198 8,427 15,699
Custody and accounting services fee 6,000 4,500 4,500
Report to shareholders 8,902 4,699 4,699
Registration fees 5,000 15,000 15,000
Amortization of organization costs 4,538 -- --
Miscellaneous 5,001 4,000 5,000
- -------------------------------------------------------------------------------------------
Total expenses 160,984 68,544 78,781
Less, reimbursement/waiver by Provident
Investment Counsel, Inc. (Note 3) (97,063) (65,870) (74,673)
- -------------------------------------------------------------------------------------------
Net expenses 63,921 2,674 4,108
===========================================================================================
Net investment income (loss) 281,671 (4,736) (8,545)
===========================================================================================
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
- -------------------------------------------------------------------------------------------
Net realized gain (loss)
on investments 2,294,629 (11,823) (57,494)
Change in net unrealized appreciation
on investments 2,395,328 76,320 54,740
- -------------------------------------------------------------------------------------------
Net gain (loss) on investments 4,689,957 64,497 (2,754)
===========================================================================================
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ 4,971,628 $ 59,761 $ (11,299)
- -------------------------------------------------------------------------------------------
</TABLE>
*February 3, 1997 (commencement of operations) through October 31, 1997.
See Notes to Financial Statements.
9
<PAGE> 10
[P-I-C PINNACLE LOGO] STATEMENTS OF CHANGES IN NET ASSETS
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
<TABLE>
<CAPTION>
PINNACLE
BALANCED FUND
============================================================================
INCREASE (DECREASE) IN NET ASSETS
Year
ended
From operations: October 31, 1997
- ----------------------------------------------------------------------------
<S> <C>
Net investment income (loss) $ 281,671
Net realized gain (loss) on investments 2,294,629
Change in net unrealized appreciation on investments 2,395,328
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 4,971,628
============================================================================
Distributions to shareholders:
From net investment income (266,681)
From net realized capital gains (953,528)
- ----------------------------------------------------------------------------
Total distributions to shareholders (1,220,209)
============================================================================
Transactions in shares of beneficial interest:
Purchases of 1,532,116, 66,463, 206,342 and
317,026 shares, respectively 21,373,253
Value of 91,290, 58,018, 0 and 0 shares
issued in payment of dividends, respectively 1,218,899
Redemptions of 269,095, 147,233, 18,362 and
21,492 shares, respectively (3,868,717)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from share transactions 18,723,435
============================================================================
Total increase in net assets 22,474,854
============================================================================
NET ASSETS:
- ----------------------------------------------------------------------------
Beginning of period 12,868,204
- ----------------------------------------------------------------------------
End of period $ 35,343,058
- ----------------------------------------------------------------------------
</TABLE>
*Commencement of operations.
See Notes to Financial Statements.
10
<PAGE> 11
<TABLE>
<CAPTION>
PINNACLE
PINNACLE PINNACLE SMALL COMPANY
BALANCED FUND GROWTH FUND GROWTH FUND
==========================================================
Year February 3, 1997* February 3, 1997*
ended through through
October 31, 1996 October 31, 1997 October 31, 1997
- ----------------------------------------------------------
<S> <C> <C>
$ 130,014 $ (4,736) $ (8,545)
955,355 (11,823) (57,494)
375,579 76,320 54,740
- ----------------------------------------------------------
1,460,948 59,761 (11,299)
==========================================================
(130,077) -- --
(595,121) -- --
- ----------------------------------------------------------
(725,198) -- --
==========================================================
853,581 2,304,894 3,331,267
717,579 -- --
(1,983,749) (214,243) (239,934)
- ----------------------------------------------------------
(412,589) 2,090,651 3,091,333
==========================================================
323,161 2,150,412 3,080,034
==========================================================
- ----------------------------------------------------------
12,545,043 -- --
- ----------------------------------------------------------
$ 12,868,204 $ 2,150,412 $ 3,080,034
- ----------------------------------------------------------
</TABLE>
11
<PAGE> 12
[P-I-C PINNACLE LOGO] FINANCIAL HIGHLIGHTS
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
==================================================================================================
PINNACLE BALANCED FUND
- --------------------------------------------------------------------------------------------------
Year Year Year
ended ended ended
Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.91 $13.24 $11.24
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) .16 .14 .15
Net realized and unrealized gain
(loss) on investments 2.64 1.34 2.00
- --------------------------------------------------------------------------------------------------
Total from investment operations 2.80 1.48 2.15
- --------------------------------------------------------------------------------------------------
Less distributions to shareholders:
From net investment income (.16) (.14) (.15)
From net realized capital gains (1.04) (.67) .00
- --------------------------------------------------------------------------------------------------
Total distributions to shareholders (1.20) (.81) (.15)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $15.51 $13.91 $13.24
==================================================================================================
Total return 21.76% 11.96% 19.35%
==================================================================================================
Ratios/supplemental data:
Net assets, end of period (millions) $ 35.3 $ 12.9 $ 12.5
- --------------------------------------------------------------------------------------------------
Ratios to average net assets:##
Expenses 1.05%** 1.05%** 1.05%**
Net investment income (loss) 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 P-I-C Balanced Portfolio. If the fee waivers and
expense reimbursements, with respect to the Fund and P-I-C Balanced Portfolio,
had not been made, the ratio of expenses to average net assets would have been
1.43%, 1.72%, 2.32%, 2.87% and 7.44%, respectively.
++Annualized.
See Notes to Financial Statements.
12
<PAGE> 13
<TABLE>
<CAPTION>
===============================================================================
PINNACLE
PINNACLE PINNACLE SMALL COMPANY
BALANCED FUND GROWTH FUND GROWTH FUND
- -------------------------------------------------------------------------------
Year Year February 3, 1997* February 3, 1997*
ended ended through through
Oct. 31, 1994 Oct. 31, 1993 Oct. 31, 1997 Oct. 31, 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
$11.48 $10.82 $10.00 $10.00
- -------------------------------------------------------------------------------
.15 .18 (.03) (.03)
(.24) .69 1.47 .45
- -------------------------------------------------------------------------------
(.09) .87 1.44 .42
- -------------------------------------------------------------------------------
(.15) (.21) .00
.00 .00 .00 .00
- -------------------------------------------------------------------------------
(.15) (.21) .00 .00
- -------------------------------------------------------------------------------
$11.24 $11.48 $11.44 $10.42
===============================================================================
(.78%) 8.10% 14.40%+ 4.20%+
===============================================================================
$ 9.1 $ 6.7 $ 2.2 $ 3.1
- -------------------------------------------------------------------------------
1.05%** 1.05%** 1.35%++o 1.55%++#
1.37% 1.79% (0.62%)++ (1.14%)++
- -------------------------------------------------------------------------------
</TABLE>
o Includes the Fund's share of expenses allocated from P-I-C Growth Portfolio.
If the fee waivers and expense reimbursements, with respect to the Fund and
P-I-C Growth Portfolio, had not been made, the ratio of expenses to average net
assets would have been 9.97%.
# Includes the Fund's share of expenses allocated from P-I-C Small Cap.
Portfolio. If the fee waivers and expense reimbursements, with respect to the
Fund and P-I-C Small Cap. Portfolio, had not been made, the ratio of expenses to
average net assets would have been 11.55%.
+ Not annualized.
13
<PAGE> 14
[P-I-C PINNACLE LOGO] NOTES TO FINANCIAL STATEMENTS
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
1 - ORGANIZATION
P-I-C 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 six separate series: P-I-C Pinnacle Balanced
Fund (formerly P-I-C Institutional Balanced Fund), P-I-C Growth Fund (formerly
P-I-C Institutional Growth Fund), P-I-C Pinnacle Growth Fund, P-I-C Small
Company Growth Fund (formerly P-I-C Institutional Small Cap. Fund), P-I-C
Pinnacle Small Company Growth Fund, and P-I-C Small Cap. 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 P-I-C Growth Fund, P-I-C Small Company Growth Fund
and P-I-C Small Cap. Growth Fund are in separate reports.
2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with generally accepted
accounting principles.
A. Investment Valuation. The Funds reflect their investments in the Portfolio
at their proportionate interest in the value of the Portfolio's net assets.
Valuation of securities by the Portfolio is discussed 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 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.
14
<PAGE> 15
[P-I-C PINNACLE LOGO] NOTES TO FINANCIAL STATEMENTS, CONTINUED
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
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.
P-I-C has voluntarily taken to limit the Funds' expenses, including those
expenses allocated from the Portfolios, to the following levels:
<TABLE>
<S> <C>
Pinnacle Balanced Fund 1.05%
Pinnacle Growth Fund 1.35%
Pinnacle Small Company Growth Fund 1.55%
</TABLE>
The percentages are based on the Funds' average net assets. Fees waived and
expenses reimbursed by PIC for the year ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
Waived Reimbursed
Fees Expenses
---- --------
<S> <C> <C>
Pinnacle Balanced Fund $51,137 $45,926
Pinnacle Growth Fund 1,029 64,841
Pinnacle Small Company Growth Fund 1,993 72,680
</TABLE>
15
<PAGE> 16
[P-I-C PINNACLE LOGO] NOTES TO FINANCIAL STATEMENTS, CONTINUED
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
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 the Distributor at an annual rate of
0.25% of each Fund's average daily net assets as reimbursement for expenses
incurred on distribution of Funds' shares.
5 - INVESTMENT TRANSACTIONS
Additions and reductions in the investments in the respective Portfolios
for the year ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
Additions Reductions
--------- ----------
<S> <C> <C>
Pinnacle Balanced Fund $21,447,800 $ 3,968,315
Pinnacle Growth Fund 2,304,895 214,243
Pinnacle Small Company Growth Fund 3,331,267 240,191
</TABLE>
16
<PAGE> 17
[P-I-C PINNACLE LOGO] NOTES TO FINANCIAL STATEMENTS, CONTINUED
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
For Federal income tax purposes, the Pinnacle Growth Fund has capital loss
carryforwards of $10,163 as of October 31, 1997 available to offset future
realized capital gains. To the extent that such carryforwards are used, no
capital gain distributions will be made. The carryforwards expire as follows:
October 31, 2005 - $10,163.
For Federal income tax purposes, the Pinnacle Small Company Growth Fund has
capital loss carryforwards of $55,777 as of October 31, 1997 available to offset
future realized capital gains. To the extent that such carryforwards are used,
no capital gain distributions will be made. The carryforwards expire as follows:
October 31, 2005 - $55,777.
6 - DIVIDEND DECLARATION
On December 1, 1997, the Board of Trustees of Pinnacle Balanced Fund
declared a dividend from net investment income of $0.046 per share, a dividend
of $0.013 per share from short-term capital gains and a dividend of $0.997 per
share from long-term capital gains payable on December 3, 1997 to shareholders
of record December 1, 1997 and ex-dividend as of December 2, 1997.
17
<PAGE> 18
[P-I-C PINNACLE LOGO] INDEPENDENT AUDITOR'S REPORT
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
To the Board of Trustees of
P-I-C Investment Trust
and the Shareholders of
P-I-C Pinnacle Balanced Fund
P-I-C Pinnacle Growth Fund
P-I-C Pinnacle Small Company Growth Fund
We have audited the accompanying statements of assets and liabilities as of
October 31, 1997, and the related statements of operations, the statements of
changes in net assets and the financial highlights for each of the periods
indicated of P-I-C Pinnacle Balanced Fund (formerly P-I-C Institutional Balanced
Fund), P-I-C Pinnacle Growth Fund and P-I-C Pinnacle Small Company Growth Fund.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of P-I-C
Pinnacle Balanced Fund, P-I-C Pinnacle Growth Fund and P-I-C Pinnacle Small
Company Growth Fund as of October 31, 1997, the results of their operations, the
changes in their net assets and their financial highlights for the periods
indicated, in conformity with generally accepted accounting principles.
McGladrey & Pullen, LLP
New York, New York
December 5, 1997
18
<PAGE> 19
P-I-C STATEMENT OF NET ASSETS
BALANCED as of October 31, 1997
PORTFOLIO
<TABLE>
<CAPTION>
====================================================================================
Percentage of
EQUITY SECURITIES - 69.9% Shares Value Net Assets
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
BANKS - 1.8%
- ------------------------------------------------------------------------------------
State Street Corp. 10,700 $ 596,525 1.7%
Synovus Financial Corp. 600 13,050 0.1%
- ------------------------------------------------------------------------------------
Total Banks 609,575 1.8%
====================================================================================
BEVERAGE/FOOD - 0.5%
- ------------------------------------------------------------------------------------
PepsiCo., Inc. 4,000 147,250 0.4%
Tricon Global Restaurants, Inc.* 400 12,125 0.1%
- ------------------------------------------------------------------------------------
Total Beverage/Food 159,375 0.5%
====================================================================================
BUSINESS INFORMATION SERVICES - 0.9%
- ------------------------------------------------------------------------------------
Paychex, Inc. 8,275 315,484 0.9%
====================================================================================
BUSINESS SERVICES - 0.5%
- ------------------------------------------------------------------------------------
Danka Business Systems, PLC,
Sponsored ADR 4,600 170,200 0.5%
====================================================================================
COMPUTER SERVICES - 0.5%
- ------------------------------------------------------------------------------------
Sungard Data Systems, Inc.* 7,200 170,100 0.5%
====================================================================================
COMPUTER SOFTWARE - 5.0%
- ------------------------------------------------------------------------------------
Microsoft Corp.* 13,568 1,763,840 5.0%
====================================================================================
COSMETICS - 1.5%
- ------------------------------------------------------------------------------------
The Gillette Company 6,050 538,828 1.5%
====================================================================================
CREDIT AND FINANCE - 5.2%
- ------------------------------------------------------------------------------------
Associates First Capital Corp. 6,300 400,837 1.1%
Household International, Inc. 4,300 486,975 1.4%
MBNA Corp. 35,899 944,592 2.7%
- ------------------------------------------------------------------------------------
Total Credit and Finance 1,832,404 5.2%
</TABLE>
19
<PAGE> 20
P-I-C STATEMENT OF NET ASSETS
BALANCED as of October 31, 1997
PORTFOLIO
<TABLE>
<CAPTION>
====================================================================================
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
DISCOUNTS - 2.8%
- ------------------------------------------------------------------------------------
Costco Companies, Inc.* 11,700 $ 450,450 1.2%
Dollar General Corp. 16,750 553,797 1.6%
- ------------------------------------------------------------------------------------
Total Discount 1,004,247 2.8%
====================================================================================
DIVERSIFIED MANUFACTURING - 1.9%
- ------------------------------------------------------------------------------------
Tyco International Ltd. 17,600 664,400 1.9%
====================================================================================
DRUGS - 12.4%
- ------------------------------------------------------------------------------------
Elan Corp., PLC ADR* 9,400 468,825 1.3%
Lilly (Eli) & Co. 23,600 1,578,250 4.5%
Pfizer, Inc. 12,800 905,600 2.6%
Warner-Lambert Co. 10,200 1,460,512 4.0%
- ------------------------------------------------------------------------------------
Total Drugs 4,413,187 12.4%
====================================================================================
ELECTRIC COMPONENTS/SEMICONDUCTORS - 2.0%
- ------------------------------------------------------------------------------------
Texas Instruments, Inc. 6,500 693,469 2.0%
====================================================================================
ELECTRICAL EQUIPMENT/PERIPHERY - 4.1%
- ------------------------------------------------------------------------------------
Compaq Computer, Inc. 15,350 978,563 2.7%
Dell Computer Corp.* 6,100 488,762 1.4%
- ------------------------------------------------------------------------------------
Total Electrical Equipment/Periphery 1,467,325 4.1%
====================================================================================
HEALTH MAINTENANCE ORGANIZATIONS - 0.6%
- ------------------------------------------------------------------------------------
Oxford Health Plans, Inc.* 7,600 196,175 0.6%
====================================================================================
INSURANCE - 2.9%
- ------------------------------------------------------------------------------------
American International Group, Inc. 6,343 647,382 1.8%
MGIC Investment Corp. 6,600 398,063 1.1%
- ------------------------------------------------------------------------------------
Total Insurance 1,045,445 2.9%
</TABLE>
20
<PAGE> 21
P-I-C STATEMENT OF NET ASSETS
BALANCED as of October 31, 1997
PORTFOLIO
<TABLE>
<CAPTION>
====================================================================================
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
MEDICAL INSTRUMENTS - 2.4%
Medtronic, Inc. 19,400 $ 843,900 2.4%
====================================================================================
MISCELLANEOUS - 1.0%
- ------------------------------------------------------------------------------------
AES Corp.* 9,200 364,550 1.0%
====================================================================================
MORTGAGE AND RELATED SERVICES - 2.4%
- ------------------------------------------------------------------------------------
Federal National Mortgage
Association 17,560 850,563 2.4%
====================================================================================
NETWORKING - 0.8%
- ------------------------------------------------------------------------------------
Cisco Systems, Inc.* 3,500 287,109 0.8%
====================================================================================
OFFSHORE DRILLING - 1.1%
- ------------------------------------------------------------------------------------
Global Marine, Inc.* 12,200 379,725 1.1%
====================================================================================
OIL FIELD SERVICES - 3.7%
- ------------------------------------------------------------------------------------
Schlumberger Ltd. 15,100 1,321,250 3.7%
====================================================================================
OIL REFINING - 0.7%
- ------------------------------------------------------------------------------------
Tosco Corp. 7,150 235,950 0.7%
====================================================================================
OUTPATIENT HOME CARE - 1.2%
- ------------------------------------------------------------------------------------
Healthsouth Corp.* 17,200 439,675 1.2%
====================================================================================
SPECIALTY CHAINS - 3.4%
- ------------------------------------------------------------------------------------
CVS Corp. 7,400 453,713 1.3%
Kohls Corp.* 8,650 580,631 1.6%
Walgreen Co. 6,600 185,625 0.5%
- ------------------------------------------------------------------------------------
Total Specialty Chains 1,219,969 3.4%
</TABLE>
21
<PAGE> 22
P-I-C STATEMENT OF NET ASSETS
BALANCED as of October 31, 1997
PORTFOLIO
<TABLE>
<CAPTION>
=============================================================================================
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPERMARKETS - 1.3%
- ---------------------------------------------------------------------------------------------
Safeway, Inc.* 8,000 $ 465,000 1.3%
=============================================================================================
TELECOMMUNICATIONS - 7.1%
- ---------------------------------------------------------------------------------------------
ADC Telecommunications, Inc.* 5,950 197,094 0.6%
L.M. Ericsson Telephone Co., ADR 22,650 1,002,263 2.8%
Lucent Technologies, Inc. 13,600 1,121,150 3.2%
Tellabs, Inc.* 3,300 178,200 0.5%
- ---------------------------------------------------------------------------------------------
Total Telecommunications 2,498,707 7.1%
=============================================================================================
TELEPHONE - 2.2%
- ---------------------------------------------------------------------------------------------
Worldcom, Inc.* 23,800 800,275 2.2%
=============================================================================================
Total Equity Securities (Cost $20,095,926) 24,750,727 69.9%
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================
FIXED INCOME SECURITIES - 26.7%
- ---------------------------------------------------------------------------------------------
CORPORATE BONDS - 8.0% Principal Amount
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Associates Corp. N.A.,
6.375%, 8/15/2000 $425,000 428,187 1.2%
Ford Motor Credit Corp.,
7.250%, 5/15/1999 275,000 280,844 0.8%
Hanson PLC,
7.375%, 1/15/2003 375,000 392,344 1.1%
Hertz Corp., 6.000%, 1/15/2003 100,000 98,625 0.3%
Household Bank, 6.500%, 7/15/2003 300,000 301,500 0.9%
International Lease Finance,
6.750%, 7/5/2000 375,000 381,094 1.1%
Lehman Brothers Holdings,
7.110%, 9/27/1999 400,000 407,500 1.2%
Norwest Financial, Inc.,
6.375%, 9/15/2002 500,000 505,000 1.4%
- ---------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $2,768,336) 2,795,094 8.0%
</TABLE>
22
<PAGE> 23
P-I-C STATEMENT OF NET ASSETS
BALANCED as of October 31, 1997
PORTFOLIO
<TABLE>
<CAPTION>
=============================================================================================
Principal Percentage of
FIXED INCOME SECURITIES, CONTINUED Amount Value Net Assets
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 18.7%
- ---------------------------------------------------------------------------------------------
U.S. Treasury Bond,
12.000%, 8/15/2013 $1,775,000 $2,598,689 7.3%
U.S. Treasury Bond,
7.875%, 2/15/2021 270,000 323,409 0.9%
U.S. Treasury Bond,
7.250%, 8/15/2022 375,000 422,407 1.2%
U.S. Treasury Note,
7.750%, 1/31/2000 750,000 782,025 2.2%
U.S. Treasury Note,
7.500%, 11/15/2001 175,000 185,750 0.5%
U.S. Treasury Note,
6.250%, 2/15/2003 775,000 790,585 2.2%
U.S. Treasury Note,
7.875%, 1/15/2004 1,400,000 1,559,796 4.4%
- ---------------------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(Cost $6,440,333) 6,662,661 18.7%
=============================================================================================
SHORT-TERM INVESTMENTS - 2.2%
- ---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 2.2%
- ---------------------------------------------------------------------------------------------
Lehman Brothers On-Line Repurchase
Agreement, 5.29%, dated 10/31/1997,
due 11/3/1997 (collateralized by $785,563
U.S. Treasury Note, 3.63%, due 7/15/2002)
(Cost $761,500) 761,500 761,500 2.2%
- ---------------------------------------------------------------------------------------------
Total Investments (Cost $30,066,095) 34,969,982 98.8%
</TABLE>
23
<PAGE> 24
P-I-C STATEMENT OF NET ASSETS
BALANCED as of October 31, 1997
PORTFOLIO
<TABLE>
<CAPTION>
================================================================================
Percentage of
OTHER ASSETS - 2.7% Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash $ 7
Receivables:
Dividends and interest 187,465
Investment securities sold 754,213
Shares of beneficial interest sold 28,168
Other assets 1,208
- --------------------------------------------------------------------------------
Total other assets 971,061 2.7%
================================================================================
LIABILITIES - (1.5%)
- --------------------------------------------------------------------------------
Payables:
Investment securities purchased 505,230
To Advisor (Note 3) 14,957
Deferred Trustees' compensation (Note 3) 4,776
Accrued expenses 32,552
- --------------------------------------------------------------------------------
Total liabilities 557,515 (1.5%)
================================================================================
TOTAL NET ASSETS - 100.0% $35,383,528 100.0%
- --------------------------------------------------------------------------------
*Non-income producing security.
</TABLE>
See Notes to Financial Statements.
24
<PAGE> 25
P-I-C
GROWTH STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
================================================================================
Percentage of
EQUITY SECURITIES - 94.4% Shares Value Net Assets
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
BANKS - 2.4%
- --------------------------------------------------------------------------------
State Street Corp. 33,900 $1,889,925 2.3%
Synovus Financial Corp. 2,784 60,552 0.1%
- --------------------------------------------------------------------------------
Total Banks 1,950,477 2.4%
================================================================================
BEVERAGE/FOOD - 0.7%
- --------------------------------------------------------------------------------
PepsiCo., Inc. 13,500 496,969 0.6%
Tricon Global Restaurants, Inc.* 1,350 40,922 0.1%
- --------------------------------------------------------------------------------
Total Beverage/Food 537,891 0.7%
================================================================================
BUSINESS INFORMATION SERVICES - 1.2%
- --------------------------------------------------------------------------------
Paychex, Inc. 26,089 994,643 1.2%
================================================================================
BUSINESS SERVICES - 0.7%
- --------------------------------------------------------------------------------
Danka Business Systems PLC, ADR 15,679 580,123 0.7%
================================================================================
COMPUTER SERVICES - 0.7%
- --------------------------------------------------------------------------------
Sungard Data Systems, Inc.* 23,300 550,462 0.7%
================================================================================
COMPUTER SOFTWARE - 6.8%
- --------------------------------------------------------------------------------
Microsoft Corp.* 43,156 5,610,280 6.8%
================================================================================
COSMETICS AND SOAPS - 2.1%
- --------------------------------------------------------------------------------
The Gillette Company 19,259 1,715,255 2.1%
================================================================================
CREDIT AND FINANCE - 7.1%
- --------------------------------------------------------------------------------
Associates First Capital Corp. 20,030 1,274,409 1.6%
Household International, Inc. 13,700 1,551,525 1.9%
MBNA Corporation 111,382 2,930,739 3.6%
- --------------------------------------------------------------------------------
Total Credit and Finance 5,756,673 7.1%
</TABLE>
25
<PAGE> 26
P - I - C
GROWTH STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
====================================================================================================
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DISCOUNT - 3.9%
- ----------------------------------------------------------------------------------------------------
Costco Companies, Inc.* 37,100 $1,428,350 1.8%
Dollar General Corp. 52,750 1,744,047 2.1%
- ----------------------------------------------------------------------------------------------------
Total Discount 3,172,397 3.9%
====================================================================================================
DIVERSIFIED - 2.6%
- ----------------------------------------------------------------------------------------------------
Tyco International Ltd. 55,760 2,104,940 2.6%
====================================================================================================
DRUGS - 16.8%
- ----------------------------------------------------------------------------------------------------
Elan Corp., PLC ADR* 29,657 1,479,143 1.8%
Lilly (Eli) & Co. 74,870 5,006,931 6.1%
Pfizer, Inc. 38,684 2,736,893 3.3%
Warner-Lambert Co. 32,300 4,624,956 5.6%
- ----------------------------------------------------------------------------------------------------
Total Drugs 13,847,923 16.8%
====================================================================================================
ELECTRICAL COMPONENTS/SEMICONDUCTORS - 2.6%
- ----------------------------------------------------------------------------------------------------
Texas Instruments, Inc. 20,400 2,176,425 2.6%
====================================================================================================
ELECTRICAL EQUIPMENT/PERIPHERY - 5.5%
- ----------------------------------------------------------------------------------------------------
Compaq Computer, Inc. 47,000 2,996,250 3.6%
Dell Computer Corp.* 19,400 1,554,425 1.9%
- ----------------------------------------------------------------------------------------------------
Total Electrical Equipment/Periphery 4,550,675 5.5%
====================================================================================================
HEALTH MAINTENANCE ORGANIZATIONS - 0.8%
- ----------------------------------------------------------------------------------------------------
Oxford Health Plans, Inc.* 23,942 618,003 0.8%
====================================================================================================
INSURANCE - 4.0%
- ----------------------------------------------------------------------------------------------------
American International Group, Inc. 20,018 2,043,087 2.5%
MGIC Investment Corp. 20,938 1,262,823 1.5%
- ----------------------------------------------------------------------------------------------------
Total Insurance 3,305,910 4.0%
</TABLE>
26
<PAGE> 27
P - I - C
GROWTH STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
===========================================================================================
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MEDICAL INSTRUMENTS - 3.3%
- -------------------------------------------------------------------------------------------
Medtronic, Inc. 61,704 $2,684,125 3.3%
===========================================================================================
MISCELLANEOUS - 1.4%
- -------------------------------------------------------------------------------------------
AES Corp.* 29,250 1,159,031 1.4%
===========================================================================================
MORTGAGE AND RELATED SERVICES - 3.2%
- -------------------------------------------------------------------------------------------
Federal National Mortgage
Association 54,819 2,655,295 3.2%
===========================================================================================
NETWORKING - 1.1%
- -------------------------------------------------------------------------------------------
Cisco Systems, Inc.* 11,000 902,344 1.1%
===========================================================================================
OFFSHORE DRILLING - 1.3%
- -------------------------------------------------------------------------------------------
Global Marine, Inc.* 34,200 1,064,475 1.3%
===========================================================================================
OIL FIELD SERVICES - 5.1%
- -------------------------------------------------------------------------------------------
Schlumberger Ltd. 47,900 4,191,250 5.1%
===========================================================================================
OIL REFINING - 0.9%
Tosco Corp. 23,575 777,975 0.9%
===========================================================================================
OUTPATIENT - HOME CARE - 1.7%
- -------------------------------------------------------------------------------------------
Healthsouth Corp.* 55,730 1,424,598 1.7%
===========================================================================================
SPECIALTY - 4.4%
- -------------------------------------------------------------------------------------------
CVS Corp. 23,000 1,410,188 1.7%
Kohls Corp.* 27,479 1,844,528 2.2%
Walgreen Co. 13,600 382,500 0.5%
- -------------------------------------------------------------------------------------------
Total Specialty 3,637,216 4.4%
</TABLE>
27
<PAGE> 28
P - I - C
GROWTH STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
========================================================================================================
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPERMARKETS - 1.8%
- --------------------------------------------------------------------------------------------------------
Safeway, Inc.* 25,975 $1,509,797 1.8%
========================================================================================================
TELECOMMUNICATIONS - 9.2%
- --------------------------------------------------------------------------------------------------------
ADC Telecommunications, Inc.* 18,982 628,779 0.7%
Ericsson,(L.M.) Telephone Co., ADR 66,040 2,922,270 3.6%
Lucent Technologies, Inc. 41,950 3,458,253 4.2%
Tellabs, Inc.* 10,400 561,600 0.7%
- --------------------------------------------------------------------------------------------------------
Total Telecommunications 7,570,902 9.2%
========================================================================================================
TELEPHONE - 3.1%
- --------------------------------------------------------------------------------------------------------
Worldcom, Inc.* 74,850 2,516,830 3.1%
- --------------------------------------------------------------------------------------------------------
Total Equity Securities (Cost $57,140,416) 77,565,915 94.4%
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================
SHORT-TERM INVESTMENTS - 4.7%
- ----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 4.7% Principal Amount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lehman Brothers On-Line Repurchase
Agreement, 5.29%, dated 10/31/1997,
due 11/3/1997 (collateralized by
$3,953,818 U.S. Treasury Note, 3.63%,
due 7/15/2002) (Cost $3,831,800) $ 3,831,800 3,831,800 4.7%
- ----------------------------------------------------------------------------------------------
Total Investments (Cost $60,972,216) 81,397,715 99.1%
</TABLE>
28
<PAGE> 29
P - I - C
SMALLCAP. STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
====================================================================================
Percentage of
Value Net Assets
<S> <C> <C>
OTHER ASSETS - 1.1%
- ------------------------------------------------------------------------------------
Cash $ 15,337
Receivables:
Investment securities sold 742,997
Shares of beneficial interest sold 61,591
Dividends and interest 27,637
Other assets 23,317
- ------------------------------------------------------------------------------------
Total other assets 870,879 1.1%
====================================================================================
LIABILITIES - (0.2%)
- ------------------------------------------------------------------------------------
Payables:
Shares of beneficial interest redeemed 553
To Advisor (Note 3) 54,526
Deferred Trustees' compensation (Note 3) 21,512
Accrued expenses 47,323
- ------------------------------------------------------------------------------------
Total liabilities 123,914 (0.2%)
====================================================================================
TOTAL NET ASSETS - 100.0% $82,144,680 100.0%
- ------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
See Notes to Financial Statements.
29
<PAGE> 30
P - I - C
SMALLCAP. STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
==============================================================================================
Percentage of
EQUITY SECURITIES - 98.5% Shares Value Net Assets
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AIR FREIGHT .. 0.8%
- ----------------------------------------------------------------------------------------------
Eagle USA Airfreight, Inc.* 34,900 $1,055,725 0.8%
==============================================================================================
AIRLINES .. 0.3%
- ----------------------------------------------------------------------------------------------
Ryanair Holdings PLC* 18,800 470,000 0.3%
==============================================================================================
APPAREL AND SHOES .. 1.7%
- ----------------------------------------------------------------------------------------------
Abercrombie & Fitch Co.* 32,400 842,400 0.6%
Coldwater Creek, Inc.* 24,500 710,500 0.5%
Pacific Sunwear of California* 30,850 852,231 0.6%
- ----------------------------------------------------------------------------------------------
Total Apparel and Shoes 2,405,131 1.7%
==============================================================================================
AUTO PARTS .. 1.2%
- ----------------------------------------------------------------------------------------------
Gentex Corp.* 48,900 1,198,050 0.9%
Keystone Automotive Industries, Inc.* 22,000 486,750 0.3%
- ----------------------------------------------------------------------------------------------
Total Auto Parts 1,684,800 1.2%
==============================================================================================
BANKS .. 0.9%
- ----------------------------------------------------------------------------------------------
Hamilton Bancorp., Inc.* 39,900 1,216,950 0.9%
==============================================================================================
BEVERAGE/FOOD .. 0.3%
- ----------------------------------------------------------------------------------------------
Fine Host Corp.* 14,500 406,000 0.3%
==============================================================================================
BIOTECHNOLOGY .. 0.6%
- ----------------------------------------------------------------------------------------------
Incyte Pharmaceuticals, Inc.* 9,600 772,800 0.6%
==============================================================================================
BUILDER .. 0.5%
- ----------------------------------------------------------------------------------------------
Palm Harbor Homes, Inc.* 25,443 680,600 0.5%
==============================================================================================
BUSINESS INFORMATION SERVICES .. 1.0%
- ----------------------------------------------------------------------------------------------
Gartner Group, Inc.* 39,200 1,107,400 0.8%
Intelliquest Information Group, Inc.* 15,900 270,300 0.2%
- ----------------------------------------------------------------------------------------------
Total Business Information Services 1,377,700 1.0%
</TABLE>
30
<PAGE> 31
P - I - C
SMALLCAP. STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BUSINESS SERVICES .. 8.3%
- ------------------------------------------------------------------------------------------
ABR Information Services, Inc.* 10,000 $ 235,000 0.2%
Accustaff Inc.* 91,268 2,606,842 1.9%
Casella Waste Systems, Inc. - Class A* 15,100 334,087 0.2%
Corrections Corp.* 32,600 994,300 0.7%
Elbit Vision Systems, Inc.* 26,600 329,175 0.2%
Forrester Research, Inc.* 19,400 500,762 0.4%
Lason Holdings, Inc.* 25,400 655,637 0.5%
MedQuist, Inc.* 23,300 567,937 0.4%
NCO Grupo, Inc.* 20,100 723,600 0.5%
Personnel Group of America, Inc.* 39,800 1,380,562 1.0%
Romac International, Inc.* 61,700 1,234,000 0.9%
Staffmark, Inc.* 27,800 861,800 0.6%
Superior Consultant Holdings Corp.* 7,500 232,500 0.2%
TMP Worldwide, Inc.* 45,900 975,375 0.6%
- ------------------------------------------------------------------------------------------
Total Business Services 11,631,577 8.3%
==========================================================================================
COMPUTER SERVICES .. 8.4%
- ------------------------------------------------------------------------------------------
Cambridge Technology Partners, Inc.* 26,900 981,850 0.7%
Cerner Corp.* 45,900 1,113,075 0.8%
CSG Systems International, Inc.* 31,700 1,242,244 0.9%
Daou Systems, Inc.* 42,900 1,131,487 0.8%
Envoy Corp.* 26,800 750,400 0.5%
Fiserv, Inc.* 54,300 2,429,925 1.7%
Intelligroup, Inc.* 27,100 501,350 0.4%
Lycos, Inc.* 25,800 674,025 0.5%
Premiere Technologies, Inc.* 46,400 1,577,600 1.1%
RWD Technologies, Inc.* 19,800 445,500 0.3%
Security Dynamics Technologies, Inc.* 12,100 409,887 0.3%
Technology Solutions, Inc.* 12,600 396,900 0.4%
- ------------------------------------------------------------------------------------------
Total Computer Services 11,654,243 8.4%
</TABLE>
31
<PAGE> 32
P - I - C
SMALLCAP. STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMPUTER SOFTWARE .. 11.0%
- ------------------------------------------------------------------------------------------
Access Health Market* 46,200 $1,605,450 1.1%
Axent Technologies, Inc.* 46,100 1,077,587 0.8%
CBT Group, PLC-ADR* 9,200 706,100 0.5%
Electronics For Imaging, Inc.* 68,100 3,183,675 2.2%
HNC Software, Inc.* 36,800 1,361,600 1.0%
JDA Software Group, Inc.* 52,600 1,643,750 1.2%
Pegasystems, Inc.* 38,100 695,325 0.5%
Siebel Systems, Inc.* 26,000 1,049,750 0.8%
Simulated Sciences, Inc.* 22,900 417,925 0.3%
Transaction Systems Architects, Inc.,
Class A* 59,700 2,335,762 1.6%
Wind River Systems, Inc.* 21,550 826,981 0.6%
Xionics Document Technologies, Inc.* 32,300 492,575 0.4%
- ------------------------------------------------------------------------------------------
Total Computer Software 15,396,480 11.0%
==========================================================================================
COSMETICS AND SOAPS .. 1.1%
- ------------------------------------------------------------------------------------------
Rexall Sundown* 68,400 1,496,250 1.1%
==========================================================================================
CREDIT AND FINANCE .. 1.4%
- ------------------------------------------------------------------------------------------
Sirrom Capital Corp. 39,500 1,989,812 1.4%
==========================================================================================
DISCOUNT CHAINS .. 3.8%
- ------------------------------------------------------------------------------------------
Dollar Tree Stores, Inc.* 132,200 5,354,100 3.8%
==========================================================================================
DRUGS .. 5.0%
- ------------------------------------------------------------------------------------------
Arqule, Inc.* 26,500 569,750 0.4%
Atrix Laboratories, Inc.* 28,100 530,387 0.4%
Dura Pharmaceuticals, Inc.* 45,400 2,196,225 1.6%
Jones Medical Industries, Inc. 38,875 1,171,109 0.8%
Kos Pharmaceuticals, Inc.* 32,000 1,144,000 0.8%
Medicis Pharmaceutical Corp., Class A* 27,600 1,328,250 1.0%
- ------------------------------------------------------------------------------------------
Total Drugs 6,939,721 5.0%
</TABLE>
32
<PAGE> 33
P - I - C
SMALLCAP. STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EDUCATIONAL PROGRAMS .. 4.4%
- ---------------------------------------------------------------------------------------------
Apollo Group, Inc., Class A* 53,394 $2,255,896 1.6%
Edutrek International, Inc., Class A* 5,000 122,500 0.1%
Learning Tree International, Inc.* 26,300 913,925 0.7%
Sylvan Learning Systems, Inc.* 66,100 2,784,462 2.0%
- ---------------------------------------------------------------------------------------------
Total Educational Programs 6,076,783 4.4%
=============================================================================================
ELECTRONICS .. 1.6%
- ---------------------------------------------------------------------------------------------
Anicom, Inc.* 34,300 531,650 0.4%
DBT Online, Inc.* 21,800 600,863 0.4%
Littlefuse, Inc.* 23,900 731,938 0.5%
Power-One, Inc.* 22,800 424,650 0.3%
- ---------------------------------------------------------------------------------------------
Total Electronics 2,289,101 1.6%
=============================================================================================
ELECTRICAL COMPONENTS/SEMICONDUCTOR .. 4.2%
- ---------------------------------------------------------------------------------------------
Anadigics, Inc.* 35,100 1,298,700 0.9%
Etec Systems, Inc.* 11,900 531,038 0.4%
Helix Technology Corp. 6,500 292,500 0.2%
Sawtek, Inc.* 30,200 1,026,800 0.7%
Unitrode Corp.* 16,300 437,044 0.3%
Vitesse Semiconductor Corp.* 56,350 2,444,181 1.7%
- ---------------------------------------------------------------------------------------------
Total Electrical Components/
Semiconductor 6,030,263 4.2%
=============================================================================================
ELECTRICAL EQUIPMENT/PERIPHERY .. 1.5%
- ---------------------------------------------------------------------------------------------
Computer Products, Inc.* 19,700 536,825 0.4%
Level One Communications, Inc.* 13,250 596,250 0.4%
PMC-Sierra, Inc.* 22,700 598,713 0.4%
Semtech Corp.* 8,600 400,438 0.3%
- ---------------------------------------------------------------------------------------------
Total Electrical Equipment/Periphery 2,132,226 1.5%
</TABLE>
33
<PAGE> 34
P - I - C
SMALLCAP. STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ELECTRICAL PRODUCTS .. 0.4%
- ------------------------------------------------------------------------------------------
Advanced Lighting Technologies, Inc.* 24,500 $ 493,063 0.4%
==========================================================================================
ENTERTAINMENT AND LEISURE ..2.8%
- ------------------------------------------------------------------------------------------
Fairfield Communities, Inc.* 62,400 2,741,700 2.0%
Suburban Lodges of America* 45,800 1,133,550 0.8%
- ------------------------------------------------------------------------------------------
Total Entertainment and Leisure 3,875,250 2.8%
==========================================================================================
FINANCIAL SERVICES .. 3.2%
- ------------------------------------------------------------------------------------------
BA Merchant Services, Inc.* 30,400 454,100 0.3%
Concord EFS, Inc.* 33,200 985,625 0.7%
PMT Services, Inc.* 129,000 2,080,125 1.5%
Pre-Paid Legal Services, Inc.* 34,400 1,040,600 0.7%
- ------------------------------------------------------------------------------------------
Total Financial Services 4,560,450 3.2%
==========================================================================================
FOOD AND RESTAURANTS .. 0.4%
- ------------------------------------------------------------------------------------------
Dave & Buster's, Inc.* 22,000 577,500 0.4%
==========================================================================================
HOSPITALS .. 0.3%
- ------------------------------------------------------------------------------------------
Assisted Living Concepts, Inc.* 21,100 432,550 0.3%
==========================================================================================
INSURANCE .. 1.3%
- ------------------------------------------------------------------------------------------
Enhance Financial Services Group, Inc. 13,600 718,250 0.5%
HCC Insurance Holdings, Inc. 47,650 1,113,819 0.8%
- ------------------------------------------------------------------------------------------
Total Insurance 1,832,069 1.3%
</TABLE>
34
<PAGE> 35
P - I - C
SMALLCAP. STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
MEDICAL/DENTAL PRODUCTS .. 2.1%
- ----------------------------------------------------------------------------------------
Henry Schein, Inc.* 20,800 $ 683,800 0.5%
Medimmune, Inc.* 4,100 163,488 0.1%
Ocular Sciences, Inc.* 21,000 462,000 0.3%
Safeskin Corp.* 37,700 1,710,638 1.2%
- ----------------------------------------------------------------------------------------
Total Medical/Dental Products 3,019,926 2.1%
========================================================================================
MEDICAL/DENTAL SERVICES .. 9.8%
- ----------------------------------------------------------------------------------------
Boron Lepore & Associates* 21,400 521,625 0.4%
Centennial Healthcare Corp.* 24,800 514,600 0.4%
Coast Dental Services, Inc.* 14,500 382,438 0.3%
Concentra Managed Care, Inc.* 62,300 2,032,538 1.5%
Minimed, Inc.* 12,900 503,100 0.4%
National Research Corp.* 8,400 170,100 0.1%
Omnicare, Inc. 42,500 1,182,031 0.6%
Orthodontic Centers of America, Inc.* 77,000 1,333,063 1.0%
Paraxel International Corp.* 44,800 1,618,400 1.2%
Quintiles Transnational Corp.* 38,000 2,755,000 2.0%
Renal Care Group, Inc.* 42,450 1,422,075 1.0%
Total Renal Care Holdings, Inc.* 39,333 1,211,948 0.9%
- ----------------------------------------------------------------------------------------
Total Medical/Dental Services 13,646,918 9.8%
========================================================================================
MORTGAGE AND RELATED SERVICES .. 0.4%
- ----------------------------------------------------------------------------------------
ContiFinancial Corp.* 18,500 526,094 0.4%
========================================================================================
OIL FIELD SERVICES .. 4.0%
- ----------------------------------------------------------------------------------------
Atwood Oceanics, Inc.* 6,000 664,500 0.5%
Global Industries, Ltd.* 68,200 1,372,525 1.0%
Parker Drilling Co.* 141,900 2,101,894 1.5%
Patterson Energy, Inc.* 25,800 1,444,800 1.0%
- ----------------------------------------------------------------------------------------
Total Oil Field Services 5,583,719 4.0%
</TABLE>
35
<PAGE> 36
P - I - C
SMALLCAP. STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oil and Gas, U.S. Exploration/Production .. 0.5%
- ---------------------------------------------------------------------------------------------------
UTI Energy Corp.* 15,700 700,613 0.5%
===================================================================================================
Pollution Control .. 2.0%
- ---------------------------------------------------------------------------------------------------
American Disposal Services, Inc.* 20,300 715,575 0.5%
Newpark Resources, Inc.* 51,100 2,120,650 1.5%
- ---------------------------------------------------------------------------------------------------
Total Pollution Control 2,836,225 2.0%
===================================================================================================
Real Estate Investment Trust .. 0.8%
- ---------------------------------------------------------------------------------------------------
Imperial Credit Commercial Mortgage
Investment Corp.* 25,100 $ 414,150 0.3%
Lasalle Partners, Inc.* 17,900 654,469 0.5%
- ---------------------------------------------------------------------------------------------------
Total Real Estate Investment Trust 1,068,619 0.8%
===================================================================================================
Specialty Chains .. 3.9%
- ---------------------------------------------------------------------------------------------------
CDW Computers Centers, Inc.* 12,100 750,200 0.5%
Fastenal Co. 39,200 1,920,800 1.4%
Guitar Center, Inc.* 44,500 967,875 0.7%
Hibbett Sporting Goods, Inc.* 39,900 1,107,225 0.8%
Starbucks Corp.* 22,800 752,400 0.5%
- ---------------------------------------------------------------------------------------------------
Total Specialty Chains 5,498,500 3.9%
===================================================================================================
Telecommunications .. 6.7%
- ---------------------------------------------------------------------------------------------------
Advanced Fibre Communications* 46,700 1,357,219 1.0%
Davox Corp.* 41,100 1,469,325 1.1%
MRV Communications, Inc.* 62,600 1,831,050 1.3%
P-Com, Inc.* 68,300 1,374,538 1.0%
REMEC, Inc.* 52,650 1,335,994 1.0%
Tel-Save Holdings, Inc.* 83,000 1,784,500 1.3%
- ---------------------------------------------------------------------------------------------------
Total Telecommunications 9,152,626 6.7%
</TABLE>
36
<PAGE> 37
P - I - C
SMALLCAP. STATEMENT OF NET ASSETS
PORTFOLIO as of October 31, 1997
<TABLE>
<CAPTION>
EQUITY SECURITIES, CONTINUED Shares Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telephone .. 0.5%
- ---------------------------------------------------------------------------------------------------------
McLeod USA, Inc.* 18,100 671,963 0.5%
=========================================================================================================
Textiles and Shoes .. 1.4%
- ---------------------------------------------------------------------------------------------------------
Novel Denim Holdings Ltd.* 37,600 761,400 0.5%
St. John Knits, Inc. 32,300 1,298,056 0.9%
- ---------------------------------------------------------------------------------------------------------
Total Textiles and Shoes 2,059,456 1.4%
- ---------------------------------------------------------------------------------------------------------
Total Equity Securities (Cost $127,484,556) 137,595,803 98.5%
=========================================================================================================
SHORT-TERM INVESTMENTS - 1.2%
Repurchase Agreement .. 1.2% Principal Amount
Lehman Brothers On-Line Repurchase
Agreement, 5.29%, dated 10/31/1997,
due 11/3/1997 (collateralized by $1,749,490
U.S. Treasury Note, 3.63%, due 7/15/2002)
(Cost $1,695,900) $1,695,900 $ 1,695,900 1.2%
Total Investments
(Cost $129,180,456) 139,291,703 99.7%
</TABLE>
37
<PAGE> 38
P-I-C STATEMENT OF NET ASSETS
SMALL CAP as of October 31, 1997
PORTFOLIO
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Percentage of
OTHER ASSETS - 1.3% Value Net Assets
===================================================================================
<S> <C> <C>
Cash $ 90
Receivables:
Investment securities sold 1,649,007
Shares of beneficial interest sold 70,242
Dividends and interest 21,402
Prepaid insurance 3,261
Deferred organization costs 10,000
Other assets 13,254
- -----------------------------------------------------------------------------------
Total other assets 1,767,256 1.3%
===================================================================================
LIABILITIES - (1.0%)
- -----------------------------------------------------------------------------------
Payables:
Investment securities purchased 1,246,031
To Advisor (Note 3) 81,739
Deferred Trustees' compensation (Note 3) 21,526
Accrued expenses 53,866
- -----------------------------------------------------------------------------------
Total liabilities 1,403,162 (1.0%)
===================================================================================
TOTAL NET ASSETS - 100.0% $139,655,797 100.0%
- -----------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
See Notes to Financial Statements.
38
<PAGE> 39
P-I-C STATEMENTS OF OPERATIONS
BALANCED Year ended October 31, 1997
GROWTH
SMALL CAP
PORTFOLIOS
================================================================================
<TABLE>
<CAPTION>
BALANCED GROWTH SMALL CAP.
PORTFOLIO PORTFOLIO PORTFOLIO
==================================================================================
<S> <C> <C> <C>
INVESTMENT INCOME
- ----------------------------------------------------------------------------------
Income:
- ----------------------------------------------------------------------------------
Dividends $ 116,007 $ 644,385 $ 115,763
Interest 434,279 269,728 856,522
- ----------------------------------------------------------------------------------
Total income 550,286 914,113 972,285
===================================================================================
Expenses:
- ----------------------------------------------------------------------------------
Investment advisory fee (Note 3) 153,518 838,058 1,525,768
Administration fee 25,586 103,757 190,721
Accounting services fee 65,907 66,987 88,237
Custodian fee 22,822 32,876 65,049
Audit fee 12,301 24,302 16,301
Trustees' fees 3,506 17,502 17,810
Legal fees 4,000 5,001 7,500
Amortization of organization costs 4,538 5,010 10,001
Miscellaneous 4,202 2,083 10,702
- ----------------------------------------------------------------------------------
Total expenses 296,380 1,095,576 1,932,089
Less, waiver by Advisor (Note 3) (91,689) (48,003) (24,879)
- ----------------------------------------------------------------------------------
Net expenses 204,691 1,047,573 1,907,210
==================================================================================
Net investment income (loss) 345,595 (133,460) (934,925)
==================================================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ----------------------------------------------------------------------------------
Net realized gain on investments 2,294,652 32,161,956 72,084,822
Change in net unrealized
appreciation on investments 2,395,337 (7,683,870) (62,640,291)
- ----------------------------------------------------------------------------------
Net gain on investments 4,689,989 24,478,086 9,444,531
==================================================================================
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $5,035,584 $24,344,626 $8,509,606
- ----------------------------------------------------------------------------------
</TABLE>
39
See Notes to Financial Statements.
<PAGE> 40
P-I-C STATEMENTS OF CHANGES IN NET ASSETS
BALANCED
GROWTH
SMALL CAP.
PORTFOLIOS
<TABLE>
<CAPTION>
BALANCED
PORTFOLIO
================================================================================
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
Year Year
ended ended
From operations: Oct. 31, 1997 Oct. 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss) $ 345,595 $ 161,045
Net realized gain on investments 2,294,652 955,369
Change in net unrealized
appreciation on investments 2,395,337 375,580
- --------------------------------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations 5,035,584 1,491,994
================================================================================
Transactions in interests:
Contributions by Holders 21,447,800 904,221
Withdrawals by Holders (3,968,315) (2,068,351)
- --------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
transactions in interests 17,479,485 (1,164,130)
================================================================================
Total increase (decrease) in net assets 22,515,069 327,864
================================================================================
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of year 12,868,459 12,540,595
- --------------------------------------------------------------------------------
End of year $35,383,528 $12,868,459
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
40
<PAGE> 41
<TABLE>
<CAPTION>
GROWTH SMALL CAP.
PORTFOLIO PORTFOLIO
================================================================================
- --------------------------------------------------------------------------------
Year Year Year Year
ended ended ended ended
Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1997 Oct. 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
$ (133,460) $ (34,806) $ (934,925) $ (1,037,169)
32,161,956 17,614,277 72,084,822 14,963,528
(7,683,870) (28,383,014) (62,640,291) 18,982,622
- --------------------------------------------------------------------------------
24,344,626 (10,803,543) 8,509,606 32,908,981
================================================================================
17,478,857 19,462,190 164,160,467 57,035,094
(75,778,332) (122,401,366) (234,314,952) (18,975,416)
- --------------------------------------------------------------------------------
(58,299,475) (102,939,176) (70,154,485) 38,059,678
================================================================================
(33,954,849) (113,742,719) (61,644,879) 70,968,659
================================================================================
- --------------------------------------------------------------------------------
116,099,529 229,842,248 201,300,676 130,332,017
- --------------------------------------------------------------------------------
$82,144,680 $116,099,529 $139,655,797 $201,300,676
- --------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 42
P-I-C SELECTED RATIO DATA
BALANCED
GROWTH
SMALL CAP.
PORTFOLIOS
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
===============================================================================================================
Year Year Year Year Year
ended ended ended ended ended
Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average net assets:++
Operating expenses 0.80% 0.80% 0.80% 0.80% 0.80%
Net investment income 1.35% 1.30% 1.57% 1.63% 2.05%
Portfolio turnover rate 104.50% 54.24% 106.50% 116.63% 92.65%
Average commission rate
paid per share** $0.0376 $0.0406 - - -
</TABLE>
++Net of expense reimbursements equivalent to 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.
See Notes to Financial Statements.
42
<PAGE> 43
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
===============================================================================================================
Year Year Year Year Year
ended ended ended ended ended
Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average net assets:#
Operating expenses 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment (loss) income (0.13%) (0.04%) 0.08% 0.10% 0.17%
Portfolio turnover rate 67.54% 64.09% 54.89% 68.26% 43.20%
Average commission rate
paid per share** $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 0.05%, 0.04%, 0.01%, 0.01% and
0.09% of average net assets, respectively.
43
<PAGE> 44
P-I-C SELECTED RATIO DATA, CONTINUED
BALANCED
GROWTH
SMALL CAP.
PORTFOLIOS
<TABLE>
<CAPTION>
SMALL CAP. PORTFOLIO
==================================================================================================================
Year Year Year Year Sept. 30, 1993*
ended ended ended ended through
Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995 Oct. 31, 1994 Oct. 31, 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average net assets:#
Operating expenses 1.00% 1.00% 1.00% 1.00% 1.00%+
Net investment income (.49%) (.59%) (.51%) (.49%) (.79%)+
Portfolio turnover rate 151.52% 53.11% 45.45% 63.89% 6.06%
Average commission rate
paid per share** $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 0.01%, 0.01%, 0.07%, 0.10% and
0.11% of average net assets, respectively.
See Notes to Financial Statements.
44
<PAGE> 45
P-I-C NOTES TO FINANCIAL STATEMENTS
BALANCED
GROWTH
SMALL CAP.
PORTFOLIOS
================================================================================
1 - ORGANIZATION
- --------------------------------------------------------------------------------
P-I-C Balanced and Growth Portfolios were organized on December 11, 1991 and
P-I-C 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
45
<PAGE> 46
P-I-C NOTES TO FINANCIAL STATEMENTS,
BALANCED CONTINUED
GROWTH
SMALL CAP.
PORTFOLIOS
================================================================================
an identified cost basis. Interest is recorded as accrued, and dividend
income is recorded on the ex-dividend date.
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 fiscal year ended October 31, 1997 were as
follows:
<TABLE>
<CAPTION>
Waived Fees
-----------
<S> <C>
Balanced Portfolio $91,689
Growth Portfolio 48,003
Small Cap. Portfolio 24,879
</TABLE>
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 year ended
October 31, 1997 are stated on the respective Portfolios' Statement of
Operations.
46
<PAGE> 47
P-I-C NOTES TO FINANCIAL STATEMENTS,
BALANCED CONTINUED
GROWTH
SMALL CAP.
PORTFOLIOS
================================================================================
On December 19, 1995, each Portfolio approved a Deferred Compensation Plan
for Trustees (the "Plan"). Trustees are entitled to receive $2,500 per quarter
and $500 per meeting attended, which is allocated among the Portfolios. Trustees
can elect to receive payment in cash or defer payments provided for in the Plan.
If a trustee elects to defer payment, the Plan provides for the creation of a
deferred payment account (phantom share account). This account accumulates the
deferred fees earned and the value of the account is adjusted at the end of each
quarter to reflect a value which would have been earned if the account had been
invested in designated investments. The Portfolios recognize as trustee expense
amounts accrued as meetings are attended plus the change in the value of the
phantom share account determined on a quarterly basis.
4 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
The aggregate purchases and sales of investment securities, other than
short-term obligations, for the year ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
<S> <C> <C>
Balanced Portfolio $ 42,426,585 $ 25,220,041
Growth Portfolio 67,938,440 125,999,278
Small Cap. Portfolio 263,751,802 319,270,773
</TABLE>
The aggregate unrealized appreciation and depreciation of investment
securities at October 31, 1997, based on costs for Federal income tax purposes,
were as follows:
<TABLE>
<CAPTION>
Tax Gross Gross
Costs of Unrealized Unrealized
Investments Appreciation Depreciation
----------- ------------ ------------
<S> <C> <C> <C>
Balanced Portfolio $ 30,078,098 $ 5,365,081 $ (473,197)
Growth Portfolio 61,038,401 21,634,685 (1,275,371)
Small Cap. Portfolio 129,258,249 13,637,236 (3,603,782)
</TABLE>
47
<PAGE> 48
P-I-C INDEPENDENT AUDITOR'S REPORT
BALANCED
GROWTH
SMALL CAP.
PORTFOLIOS
================================================================================
To the Board of Trustees of
and the holders of Interests in,
P-I-C Balanced Portfolio
P-I-C Growth Portfolio
P-I-C Small Cap. Portfolio
We have audited the accompanying statements of net assets of P-I-C Balanced
Portfolio, P-I-C Growth Portfolio and P-I-C Small Cap. Portfolio as of October
31, 1997, the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and selected ratio data for each of the periods indicated. These financial
statements and selected ratio data are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and selected ratio data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1997 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of P-I-C Balanced Portfolio, P-I-C
Growth Portfolio and P-I-C Small Cap. Portfolio as of October 31, 1997, the
results of their operations, the changes in their net assets and the selected
ratio data for the periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
December 5, 1997
48
<PAGE> 49
[P-I-C TRUSTEES AND OFFICERS
PINNACLE
LOGO]
BALANCED FUND
GROWTH FUND
SMALL COMPANY GROWTH FUND
================================================================================
TRUSTEES AND OFFICERS - P-I-C INVESTMENT TRUST
- --------------------------------------------------------------------------------
Jeffrey J. Miller, Trustee and President
Jettie M. Edwards, Trustee
Bernard J. Johnson, Trustee
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 P-I-C Pinnacle
Funds and should not be used as sales literature unless preceded or accompanied
by a current prospectus.
