PROVIDENT INVESTMENT COUNSEL
Annual Report October 31, 1998
PINNACLE FUNDS
GROWTH
MID CAP
SMALL COMPANY GROWTH
BALANCED
Provident Investment Counsel
Investing in growth since 1951
<PAGE>
CONTENTS
3 President's Letter
4 Our Philosophy
5 Performance Update/Portfolio Review
6 Interview with Management
9 Performance Comparison
THE FUNDS
12 Statements of Assets and Liabilities
13 Statements of Operations
14 Statements of Changes in Net Assets
16 Financial Highlights
18 Notes to Financial Statements
22 Independent Auditor's Report
THE PORTFOLIOS
23 Statements of Net Assets
49 Statements of Operations
50 Statements of Changes in Net Assets
52 Selected Ratio Data
56 Notes to Financial Statements
59 Independent Auditor's Report
Items of Interest
+ THE GROWTH STYLE OF INVESTMENT MANAGEMENT appears to have resumed a
leadership role. Over the past year, investors have returned their focus to
companies with the most visible prospects for growth, and Provident
portfolios have been rewarded.
+ 5 STAR RANKING--The Pinnacle Balanced Fund has been awarded Mutual Fund
Magazine's highest rating for risk-adjusted returns in the general equity
fund category.
+ TECHNOLOGY, RETAIL, AND HEALTH CARE STOCKS have led the Provident Funds'
performance during the past year.
NOTES
Mutual Funds Magazine's proprietary All-Star Ratings reflect historical
risk-adjusted performance for 4,620 equity funds through October 31, 1998 and
are subject to change. Overall ratings are calculated from the fund's total
return, with load adjustments, if applicable, relative to the volatility of its
price fluctuations, over a minimum of two years and maximum of ten years.
Separate All-Star Ratings are also calculated for 1-, 3-, 5- and 10-year
periods, as applicable. For all periods, the 20% of funds with the highest
risk-adjusted returns receive Five Stars, the next highest 20% receive Four
Stars, the next highest 20% receive Three Stars, etc.
2
<PAGE>
Dear Shareholder,
Overall we are very pleased with the results of the last year, especially
for shares in the Growth, Mid Cap, and Balanced Funds.
As you are well aware this past year has been a volatile one, especially
for shares of small companies. While we recognize that small company shares
experienced some turbulence during 1998, we are confident in the prospects for
small companies in the near future. We feel the fundamentals of our small
company holdings remain very compelling, and are well positioned for 1999.
The volatility in small company shares in particular is not unprecedented,
and has created some compelling valuations relative to other investment
categories. In fact, comparison of small stock price to earnings ratios (P/Es)
relative to the broad market P/Es as measured by the S&P 500 Index are near
levels not seen in 20 years. Investors have begun to recognize these compelling
valuations, and we are pleased with the positive returns in late October,
November, and December.
We believe shares of growth issues of all sizes are well positioned leading
into 1999 as investors continue to increase their focus on companies with the
most visible growth prospects for 1999. We are fully aware that volatility is a
normal and expected occurrence with bond and stock investing. During any period
of unusual volatility, our focus remains on identifying those companies with the
brightest prospects for future growth. This focus and our long-term view have
served us well over many years.
Please visit our web site for market updates and portfolio information at
www.provnet.com. We appreciate your continued confidence in Provident Investment
Counsel and look forward to helping you reach your investment goals.
Sincerely,
/s/ Douglass B. Allen
Douglass B. Allen
President, PIC Investment Trust
December 24, 1998
3
<PAGE>
OUR PHILOSOPHY
+ Focused, fundamental research, properly controlled, adds value.
+ Sustainable earnings growth is the most important contributor to long-term
stock appreciation.
+ Emphasis on strong financial characteristics ensures focus on growth and
quality.
+ Investment style consistency is critical to superior long-term investment
results.
Performance Update/Portfolio Review
Pinnacle Growth Fund
Average annualized total returns for the period ending 10/31/98:
1 Year 3 Year 5 year Since Inception 2/3/97
+12.62% N/A N/A +15.68%
Sector Weightings
Healthcare/Medical 30.2%
Technology 13.8
Retail 20.6
Financial 14.7
Cash Equivalents 9.6
Other 11.1
Top 10 Stock Holdings:
1. Warner Lambert 8.0%
2. Pfizer Inc. 6.1%
3. MCI Worldcom 5.8%
4. Microsoft 5.8%
5. Schering Plough 5.7%
6. Tyco International 4.9%
7. Safeway 3.8%
8. Federal Natl Mtg. 3.6%
9. Medtronic 3.6%
10. Elan 3.1%
4
<PAGE>
Pinnacle Small Company Growth Fund
Average annualized total returns for the period ending 10/31/98:
1 Year 3 Year 5 year Since Inception 2/3/97
-23.12% N/A N/A -11.97%
Sector Weightings
Healthcare/Medical 18.5%
Consumer Non-Durables 9.5
Industrials 13.8
Technology 32.1
Retail 10.2
Other 15.9
1. Dollar Tree Stores 4.3%
2. Apollo Group 2.6%
3. Nova Corp. 2.3%
4. CSG Systems International 2.2%
5. Fiserv 2.1%
6. Vitesse Semiconductor 1.6%
7. TMP Worldwide 1.6%
8. Renal Care Group 1.5%
9. 99 Cents Only Stores 1.4%
10. Orthodontic Centers of America 1.4%
Pinnacle Mid Cap Fund
Sector Weightings
Average annualized total returns for the period ending 10/31/98:
1 Year 3 Year 5 year Since Inception 12/31/97
N/A N/A N/A -.75%
Top 10 Stock Holdings:
Healthcare/Medical 23.5%
Consumer Non-Durables 7.8
Technology 20.3
Retail 21.4
Financial 15.2
Other 11.8
Top 10 Stock Holdings:
1. Sofamor/Danek 2.9%
2. Star Banc Corporation 2.7%
3. Elan PLC 2.6%
4. McKesson Corporation New 2.6%
5. MBNA Corporation 2.4%
6. Outdoor Systems Inc. 2.4%
7. Family Dollar Stores 2.4%
8. Watson Pharmaceutical 2.3%
9. Office Depot 2.4%
10. Sungard Data 2.3%
5
<PAGE>
Pinnacle Balanced Fund
Sector Weightings
Average annualized total returns for the period ending 10/31/98:
1 Year 3 Year 5 year Since Inception 6/11/92
+11.01% +14.81% +12.37% +12.28%
Healthcare/Medical 21.5%
Retail 14.8
Financial 11.3
Corporate Bonds 12.3
Government Bonds 18.3
Other 21.8
Top 10 Stock Holdings:
1. Warner Lambert 5.4%
2. Pfizer Inc. 4.6%
3. Microsoft 4.2%
4. MCI Worldcom 3.9%
5. Schering Plough 3.9%
6. Tyco International 3.6%
7. Federal Nat'l. Mortgage Assn. 2.8%
8. Medronic 2.7%
9. Safeway 2.2%
10. Elan 2.1%
Interview with Provident Managers
Q. IN RECENT YEARS INDEX FUNDS, SPECIFICALLY INDEX FUNDS MANAGED TO REPLICATE
THE S&P 500 INDEX, HAVE OUTPERFORMED ACTIVE MANAGERS. SO FAR IN 1998 PROVIDENT'S
GROWTH FUND HAS REVERSED THIS TREND. WHAT HAS HAPPENED?
A. We believe that the tides have changed and the focus has shifted back to
active management, to managers offering research-driven stock selection.
Financial markets always offer opportunity; let us not forget that money is made
by time spent in the market not by timing the market. It is now a challenge of
the research process to identify where opportunities exist. Specifically, if you
look at the S&P 500 Index, dominated by 20 holdings, it was up 160% for the five
years ending June 30th. These were clearly outstanding returns, but moving
forward the index looks vulnerable to us. Don't misunderstand, there are some
great companies in the index, companies that we own. Our
6
<PAGE>
Interview with Provident Managers, continued
point is that the "blanket" approach to owning it all may not be the right one;
selection should be the key to superior returns moving forward. The earnings
that drove the performance of the entire index have been deteriorating--not a
big surprise, as the revenue growth supporting the earnings were anemic at best.
The earnings gains by many of these companies in the index came as a result of
corporate restructuring, cost cutting, etc., and not from actual revenue growth.
Absent sustainable revenue growth, we believe the ability for a company to
deliver predictable and consistent earnings growth will be compromised.
Obviously the market agrees with this analysis, as it continues to reward those
companies with "quality" earnings and viciously goes after those companies whose
earnings are in question. Even through the darkest days of the past weeks when
markets trended downward, the companies that bounced back the fastest were the
ones that had the earnings.
What industry sectors performed positively
for the various funds' equity holdings?
Growth and Balanced
+ Healthcare
+ Retail
+ Technology
Mid Cap
+ Retail
+ Technology Services
+ Electronic Technology
Small Company
+ Retail
+ Commercial Services
+ Electronic Technology
Q. DESCRIBE THE RESEARCH PROCESS AS IT RELATES TO THE FUND'S EQUITY HOLDINGS.
WHAT IS IT ABOUT YOUR RESEARCH PROCESS THAT ALLOWS YOU TO FERRET OUT THESE
COMPANIES AND OUTPERFORM THE OVERALL MARKET?
A. We look for companies that have demonstrated an ability to grow both revenues
and earnings at significantly higher rates than the averages for the broad
market. In addition, we tend to gravitate towards companies that have a high
return on equity, pretax margins and reinvestment rates significantly higher
than the average company. We will normally meet personally with company
managements to understand other issues, such as the proprietary nature of their
products (i.e., do they control their own destiny), significant management
ownership of the stock, and strong plans, goals, and controls to ensure the past
rates of change will continue or increase in the future. To give you an idea of
how extensive our research process is for a firm our size, in 1998 alone we have
met with 447 analysts and 408 management teams. We have sixteen individuals who
are exclusively dedicated to the research process. All but one are generalists.
7
<PAGE>
Q. WHAT ARE SOME OF THE INVESTMENT THEMES THAT ARE AFFECTING THE FUND'S
HOLDINGS AND MAY CONTINUE TO DO SO IN THE NEAR FUTURE?
A. We see several broad themes that may affect our portfolio holdings positively
as follows:
+ The strength of the American consumer today is amazing with lower
inflation, interest rates and unemployment at generational lows. Many of
our retail holdings stand to benefit in this environment.
+ The "graying of America" and aging "baby boom" generation has increased
the demand significantly for healthcare. Our holdings in medical device
manufacturers and drug producers have solid growth prospects.
+ Productivity enhancement is vital for companies in an environment where
technology can increase efficiency and therefore profits. Holdings in high
quality technology firms and some outsourcing concerns have strong growth
prospects.
These are only a few of the broad themes that may drive the growth of the
economy in the near future. In addition to generally strong growth prospects, we
look for those companies that have high quality, shareholder-oriented management
which may lead to strong performance in any environment.
Q. WHAT IS THE OUTLOOK FOR THE FUNDS' PORTFOLIOS AND THE BROAD MARKET?
A. As we have discussed in prior communications, there is evidence now of the
potential for a general profits recession for many of the companies that make up
the S&P 500 Index, a broad measure of the overall markets. During the last few
years, the S&P 500 Index companies on average have been able to generate profit
growth above 15% with sales/revenue growth of only 4%. Revenue growth on average
continues at or below these levels in 1998 and projected 1999, and it appears to
be taking a toll on recent profit reports. We expect the Provident Funds'
portfolios to benefit due to our holdings' ability to generate consistent
visible earnings and revenue growth in the future.
8
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
PROVIDENT INVESTMENT COUNSEL PINNACLE BALANCED FUND AND
THE LIPPER BALANCED FUND INDEX.
Provident Investment Counsel
Pinnacle Balanced Fund Lipper Balanced Fund Index
---------------------- --------------------------
06/11/92 $10,000 $10,000
10/31/92 $10,197 $10,257
04/30/93 $10,184 $11,057
10/31/93 $11,023 $11,908
04/30/94 $10,383 $11,576
10/31/94 $10,938 $11,835
04/30/95 $11,024 $12,606
10/31/95 $13,054 $13,916
04/30/96 $13,544 $14,999
10/31/96 $14,615 $15,932
04/30/97 $15,456 $17,039
10/31/97 $17,795 $19,134
04/30/98 $20,302 $21,483
10/31/98 $20,960 $21,168
Past performance is not predictive of future performance.
The Fund's performance figures include the maximum applicable sales
charge of 5.75%.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
PROVIDENT INVESTMENT COUNSEL PINNACLE GROWTH FUND AND
THE S & P 500 INDEX.
Provident Investment Counsel
Pinnacle Growth Fund S & P 500 Index
-------------------- ---------------
02/03/97 $10,000 $10,000
04/30/97 $9,189 $10,232
10/31/97 $10,782 $11,784
04/30/98 $12,789 $14,436
10/31/98 $12,884 $14,375
Past performance is not predictive of future performance.
The Fund's performance figures include the maximum applicable sales
charge of 5.75%.
9
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
PROVIDENT INVESTMENT COUNSEL PINNACLE MID CAP FUND AND
THE RUSSELL MIDCAP INDEX.
Provident Investment Counsel
Pinnacle Mid Cap Fund Russell Mid Cap Index
--------------------- ---------------------
12/31/97 $10,000 $10,000
04/30/98 $11,262 $11,345
10/31/98 $ 9,924 $10,005
Past performance is not predictive of future performance.
The Fund's performance figures include the maximum applicable sales
charge of 5.75%.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
PROVIDENT INVESTMENT COUNSEL PINNACLE SMALL COMPANY GROWTH FUND
AND THE RUSSELL 2000 GROWTH INDEX.
Provident Investment Counsel
Small Company Growth Fund Russell 2000 Growth Index
------------------------- -------------------------
02/03/97 $10,000 $10,000
04/30/97 $ 7,747 $ 8,648
10/31/97 $ 9,820 $11,302
04/30/98 $10,801 $12,428
10/31/98 $ 8,011 $ 9,512
Past performance is not predictive of future performance.
The Fund's performance figures include the maximum applicable sales
charge of 5.75%.
10
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11
<PAGE>
PROVIDENT INVESTMENT COUNSEL STATEMENTS OF ASSETS AND LIABILITIES
PINNACLE FUNDS AS OF OCTOBER 31, 1998
<TABLE>
<CAPTION>
Small
Balanced Growth Mid Cap Company
ASSETS Fund Fund Fund Growth Fund
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment in Portfolios, at value $42,142,914 $3,721,572 $5,762,207 $2,707,895
Cash -- 56,066 -- 40,984
Receivables:
For investments sold in Portfolios 21,374 -- -- 4,525
Fund shares sold -- -- 102,400 3,974
Deferred organization costs -- -- 12,213 --
----------- ---------- ---------- ----------
Total assets 42,164,288 3,777,638 5,876,820 2,757,378
=========== ========== ========== ==========
LIABILITIES
Payables:
For investments purchased
in Portfolios -- -- 102,400 3,974
Fund shares repurchased 21,374 -- -- 4,525
Due to Provident Investment
Counsel, Inc. (Note 3) 34,455 23,052 16,511 18,102
Deferred Trustees'
Compensation (Note 3) 10,685 5,322 1,938 5,287
Accrued expenses 45,258 41,457 39,980 38,426
----------- ---------- ---------- ----------
Total liabilities 111,772 69,831 160,829 70,314
=========== ========== ========== ==========
NET ASSETS
Applicable to 2,481,663, 271,222,
542,702, and 315,984 shares of
beneficial interest outstanding,
respectively $42,052,516 $3,707,807 $5,715,991 $2,687,064
=========== ========== ========== ==========
NET ASSET VALUE
PER SHARE* $ 16.95 $ 13.67 $ 10.53 $ 8.50
----------- ---------- ---------- ----------
Maximum offering price per share
(Net Asset Value divided by 94.25%) 17.98 14.50 11.17 9.02
=========== ========== ========== ==========
SOURCE OF NET ASSETS
Paid-in capital $31,207,824 $3,148,678 $5,928,682 $3,293,450
Undistributed (accumulated) net
investment income (loss) 46,314 (5,948) (3,425) (5,636)
Undistributed (accumulated) net
realized gain (loss) on
investments 2,824,938 (64,136) (266,512) (749,784)
Net unrealized appreciation
of investments 7,973,440 629,213 57,246 149,034
=========== ========== ========== ==========
NET ASSETS $42,052,516 $3,707,807 $5,715,991 $2,687,064
----------- ---------- ---------- ----------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
PROVIDENT INVESTMENT COUNSEL STATEMENTS OF OPERATIONS
PINNACLE FUNDS AS OF OCTOBER 31, 1998
<TABLE>
<CAPTION>
Small
Balanced Growth Mid Cap Company
INVESTMENT INCOME Fund Fund Fund Growth Fund
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS)
FROM PORTFOLIOS $479,625 $(10,494) $(11,913) $ (20,939)
========== ======== ======== =========
EXPENSES:
Administration fees (Note 3) 93,800 21,340 19,899 21,176
Distribution fees (Note 4) 37,239 3,616 4,803
Transfer agent's fee 28,999 27,499 20,293 26,999
Audit fee 11,800 9,600 10,119 10,300
Legal fee 3,701 201 1,178
Custody and accounting services
fee 6,001 6,006 5,259 6,001
Reports to shareholders 9,001 5,376 6,001
Shareholder servicing 21,800 1,929 761 1,506
Registration fees 20,616 15,630 17,802 15,663
Trustees' fees 1,800 4,293 2,876 4,994
Amortization of organization
costs -- -- 1,389 --
Miscellaneous 5,001 6,647 5,181 4,981
---------- -------- -------- ---------
Total expenses 239,758 96,761 90,133 102,424
Less, reimbursement/waiver by
Provident Investment
Counsel, Inc. (Note 3) (141,255) (85,669) (84,384) (85,444)
---------- -------- -------- ---------
Net expenses 98,503 11,092 5,749 16,980
========== ======== ======== =========
NET INVESTMENT INCOME (LOSS) 381,122 (21,586) (17,662) (37,919)
========== ======= ======== =========
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss)
on investments 2,840,801 (52,313) (198,903) (692,290)
Change in net unrealized
appreciation of investments 3,069,593 552,893 57,246 94,294
---------- -------- -------- ---------
NET GAIN (LOSS) ON INVESTMENTS 5,910,394 500,580 (141,657) (597,996)
========== ======= ======== =========
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $6,291,516 $478,994 $(159,319) $(635,915)
---------- -------- --------- ---------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
PROVIDENT INVESTMENT COUNSEL STATEMENTS OF CHANGES IN NET ASSETS
PINNACLE FUNDS AS OF OCTOBER 31, 1998
INCREASE (DECREASE) IN NET ASSETS: Balanced Fund
- ---------------------------------------------------------------------------
Year Year
ended ended
FROM OPERATIONS: Oct. 31, 1998 Oct. 31, 1997
- ---------------------------------------------------------------------------
Net investment income (loss) $ 381,122 $ 281,671
Net realized gain (loss) on investments 2,840,801 2,294,629
Change in unrealized appreciation of
investments 3,069,593 2,395,328
----------- -----------
Net increase (decrease) in net assets
resulting from operations 6,291,516 4,971,628
=========== ===========
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (360,834) (266,681)
From net realized gains (2,299,644) (953,528)
----------- -----------
Total distributions to shareholders (2,660,478) (1,220,209)
=========== ===========
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Purchases of 254,988, 1,532,116, 101,572,
206,342, 878,218, 222,941 and 317,026
shares, respectively 4,137,359 21,373,253
Reinvestment of 178,506, 91,290, 0, 0,
0, 0 and 0 shares, respectively 2,658,417 1,218,899
Redemptions of 230,922, 269,095, 18,330,
18,362, 335,516, 202,491 and 21,492
shares, respectively (3,717,356) (3,868,717)
----------- -----------
Net increase in net assets resulting
from share transactions 3,078,420 18,723,435
=========== ===========
TOTAL INCREASE (DECREASE) IN NET ASSETS 6,709,458 22,474,854
=========== ===========
NET ASSETS:
Beginning of year 35,343,058 12,868,204
----------- -----------
End of year $42,052,516 $35,343,058
----------- -----------
See Notes to Financial Statements.
14
<PAGE>
Small Company
Growth Fund Mid Cap Fund Growth Fund
- ------------------------------------------------------------------------------
Year Feb. 3, 1997* Dec. 31, 1997* Year Feb. 3, 1997*
ended through through ended through
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1998 Oct. 31, 1998 Oct. 31, 1997
- ------------------------------------------------------------------------------
$ (21,586) $ (4,736) $ (17,662) $ (37,919) $ (8,545)
(52,313) (11,823) (198,903) (692,290) (57,494)
552,893 76,320 57,246 94,294 54,740
---------- ---------- ---------- ----------- ----------
478,994 59,761 (159,319) (11,299)
========== ========== ========== =========== ==========
-- -- -- -- --
-- -- -- -- --
---------- ---------- ---------- ----------- ----------
-- -- -- -- --
========== ========== ========== =========== ==========
1,325,178 2,304,894 9,346,293 2,252,112 3,331,267
-- -- -- -- --
(246,777) (214,243) 3,470,983) (2,009,167) (239,934)
---------- ---------- ---------- ----------- ----------
1,078,401 2,090,651 5,875,310 242,945 3,091,333
========== ========== ========== =========== ==========
1,557,395 2,150,412 5,715,991 (392,970) 3,080,034
========== ========== ========== =========== ==========
2,150,412 -- -- 3,080,034 --
---------- ---------- ---------- ----------- ----------
$2,150,412 $5,715,991 $2,687,064 $ 3,080,034
---------- ---------- ---------- -----------
15
<PAGE>
PROVIDENT INVESTMENT COUNSEL FINANCIAL HIGHLIGHTS
PINNACLE FUNDS
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------------
Balanced Fund
- --------------------------------------------------------------------------------------
Year Year Year Year Year
ended ended ended ended ended
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.51 $13.91 $13.24 $11.24 $11.48
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) 0.16 0.16 0.14 0.15 0.15
Net realized and unrealized
gain (loss) on investments 2.44 2.64 1.34 2.00 (0.24)
------ ------ ------ ------ ------
Total from investment operations 2.60 2.80 1.48 2.15 (0.09)
------ ------ ------ ------ ------
Less distributions to shareholders:
From net investment income (0.15) (0.16) (0.14) (0.15) (0.15)
From net realized gains (1.01) (1.04) (0.67) 0.00 0.00
Total distributions to shareholders (1.16) (1.20) (0.81) (0.15) (0.15)
Net asset value, end of period $16.95 $15.51 $13.91 $13.24 $11.24
====== ====== ====== ====== ======
Total return 17.85% 21.76% 11.96% 19.35% (0.78%)
====== ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (millions) $42.0 $35.3 $12.9 $12.5 $ 9.1
------ ------ ------ ------ ------
Ratios to average net assets:+
Expenses 1.05%** 1.05%** 1.05%** 1.05%** 1.05%**
Net investment income (loss) 0.97% 1.10% 1.05% 1.32% 1.37%
------ ------ ------ ------ ------
</TABLE>
* Commencement of operations.
+ Net of expense reimbursements.
** Includes the Fund's share of expenses allocated from PIC Balanced Portfolio.
If the fee waivers and expense reimbursements, with respect to the Fund and PIC
Balanced Portfolio, had not been made, the ratio of expenses to average net
assets would have been 1.41%, 1.43%, 1.72%, 2.32%, and 2.87%, respectively.
o Includes the Fund's share of expenses allocated from PIC Growth Portfolio. If
the fee waivers and expense reimbursements, with respect to the Fund and PIC
Growth Portfolio, had not been made, the ratio of expenses to average net assets
would have been 4.06% and 9.97%, respectively.
See Notes to Financial Statements.
16
<PAGE>
PROVIDENT INVESTMENT COUNSEL
PINNACLE FUNDS
Small Company
Growth Fund Mid Cap Fund Growth Fund
- -------------------------------------------------------------------------
Year 2/3/97* 12/31/97* Year 2/3/97*
ended through through ended through
10/31/98 10/31/97 10/31/98 10/31/98 10/31/97
- -------------------------------------------------------------------------
$11.44 $10.00 $ 10.00 $ 10.42 $ 10.00
------ ------ ------- ------- -------
(0.07) (0.03) (0.03) (0.12) (0.03)
2.30 1.47 0.56 (1.80) 0.45
------ ------ ------- ------- -------
2.23 1.44 0.53 (1.92) 0.42
------ ------ ------- ------- -------
0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
$13.67 $11.44 $ 10.53 $ 8.50 $ 10.42
====== ====== ======= ======= =======
19.49% 14.40%++ 5.30%++ (18.43%) 4.20%++
====== ====== ======= ======= =======
$ 3.7 $ 2.2 $ 5.7 $ 2.7 $ 3.1
------ ------ ------- ------- -------
1.35%o 1.35%o++ 1.04%^++ 1.55%# 1.55%#++
(0.68%) (0.62%)++ (0.43%)++ (1.23%) (1.14%)++
------ ------ ------- ------- -------
^Includes the Fund's share of expenses allocated from PIC Mid Cap Portfolio. If
the fee waivers and expense reimbursements, with respect to the Fund and PIC Mid
Cap Portfolio, had not been made, the ratio of expenses to average net assets
would have been 3.08%.
#Includes the Fund's share of expenses allocated from PIC Small Cap Portfolio.
If the fee waivers and expense reimbursements, with respect to the Fund and PIC
Small Cap Portfolio, had not been made, the ratio of expenses to average net
assets would have been 4.32% and 11.55%, respectively.
++Annualized.
++Not annualized.
17
<PAGE>
PROVIDENT INVESTMENT COUNSEL NOTES TO FINANCIAL STATEMENTS
PINNACLE FUNDS
- --------------------------------------------------------------------------------
1 - ORGANIZATION
- --------------------------------------------------------------------------------
PIC Investment Trust (the "Trust") was organized on December 11, 1991 as a
Delaware business trust, with an unlimited number of shares of beneficial
interest of $.01 par value, and is registered under the Investment Company Act
of 1940 (the "1940 Act") as an open-end, diversified management investment
company. The Trust currently offers seven separate series: Provident Investment
Counsel Pinnacle Balanced Fund, Provident Investment Counsel Growth Fund,
Provident Investment Counsel Pinnacle Growth Fund, Provident Investment Counsel
Small Company Growth Fund, Provident Investment Counsel Pinnacle Small Company
Growth Fund, Provident Investment Counsel Small Cap Growth Fund, and Provident
Investment Counsel Pinnacle Mid Cap Fund (each a "Fund" and collectively the
"Funds")(formerly PIC Pinnacle Balanced Fund, PIC Growth Fund, PIC Pinnacle
Growth Fund, PIC Small Company Growth Fund, PIC Pinnacle Small Company Growth
Fund and PIC Small Cap Growth Fund, respectively). The Funds invest
substantially all of their assets in the respective Portfolios, a separate
registered management investment company having the same investment objective as
the Funds. The financial statements of the Portfolios are included elsewhere in
this report and should be read in conjunction with the Funds' financial
statements. The financial statements of the Provident Investment Counsel Growth
Fund, Provident Investment Counsel Small Company Growth Fund, and Provident
Investment Counsel Small Cap Growth Fund are in separate reports.
2 - SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with generally accepted
accounting principles.
A. INVESTMENT VALUATION. The Funds reflect their investments in the Portfolio
at their proportionate interest in the value of the Portfolio's net assets.
Valuation of securities by the Portfolio is discussed 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
18
<PAGE>
PROVIDENT INVESTMENT COUNSEL NOTES TO FINANCIAL STATEMENTS,
PINNACLE FUNDS CONTINUED
- --------------------------------------------------------------------------------
Funds and the other Holders of Interests in the Portfolio. Dividends, if
any, are paid annually to shareholders of the Funds and recorded on the
ex-dividend date.
C. FEDERAL INCOME TAXES. The Funds intend to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of their taxable income to their shareholders. Therefore,
no federal income tax provision is required.
D. ACCOUNTING ESTIMATES. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expenses during the period. Actual results could differ from
those estimates.
3 - TRANSACTIONS WITH AFFILIATES
- --------------------------------------------------------------------------------
The Trust, has entered into administration agreements with Provident
Investment Counsel, Inc. ("PIC") and Investment Company Administration LLC
("ICA"), pursuant to which agreements certain employees of these entities serve
as officers and/or trustees of the Trust and the Portfolio. PIC and ICA also
provide management services necessary for the operations of the Trust and the
Portfolio and furnish office facilities. PIC receives a fee for its services to
the Funds at the rate of 0.20% of the average daily net assets of the Funds.
PIC has voluntarily taken to limit the Funds' expenses, including those
expenses allocated from the Portfolios, to the following levels:
Pinnacle Balanced Fund 1.05%
Pinnacle Growth Fund 1.35%
Pinnacle Mid Cap Fund 1.39%
Pinnacle Small Company Growth Fund 1.55%
The percentages are based on the Funds' average daily net assets. Prior to
September 30, 1998, the expense limit for Pinnacle Mid Cap Fund was 0.99%. Fees
waived and expenses reimbursed by PIC for the year ended October 31, 1998, were
as follows:
19
<PAGE>
PROVIDENT INVESTMENT COUNSEL NOTES TO FINANCIAL STATEMENTS,
PINNACLE FUNDS CONTINUED
- --------------------------------------------------------------------------------
Waived Reimbursed
Fees Expenses
---- --------
Pinnacle Balanced Fund $78,802 $62,453
Pinnacle Growth Fund 6,338 79,331
Pinnacle Mid Cap Fund 8,219 76,165
Pinnacle Small Company Growth Fund 6,173 79,271
ICA 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. The Distributor is an affiliate of ICA. The
distributor received no commissions from sales or redemptions of fund shares
during the period ended October 31, 1998.
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 AND SHAREHOLDER SERVICES PLANS
- --------------------------------------------------------------------------------
The Trust, on behalf of the Pinnacle Balanced, Pinnacle Growth,
Pinnacle Mid Cap 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. The 12b-1 Plan provides that each Fund will pay a fee to PIC (as the
distribution coordinator) at an annual rate of up to 0.25% of each Fund's
average daily net assets as reimbursement for expenses incurred on distribution
related activities. With respect to the Pinnacle Balanced and Mid Cap Funds,
reimbursable amounts in excess of the maximum may be reimbursed in
20
<PAGE>
PROVIDENT INVESTMENT COUNSEL NOTES TO FINANCIAL STATEMENTS,
PINNACLE FUNDS CONTINUED
- --------------------------------------------------------------------------------
subsequent years, subject to the continuation of the Plan. There were no
unreimbursed expenses as of 10/31/98.
Pursuant to a Shareholder Services Plan, effective June 30, 1998
(except with respect to the Pinnacle Mid Cap Fund for which the effective date
was September 30, 1998), each Fund pays the Advisor a monthly fee at an annual
rate of 0.15% of each Fund's average daily net assets as compensation for the
provision of shareholder services.
5 - INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Additions and reductions in the investments in the respective Portfolios
for the year ended October 31, 1998, were as follows:
Additions Reductions
--------- ----------
Pinnacle Balanced Fund $4,234,921 $3,865,363
Pinnacle Growth Fund 1,325,178 246,777
Pinnacle Mid Cap Fund 9,425,366 3,509,589
Pinnacle Small Company Growth Fund 2,252,111 2,009,167
At October 31, 1998 the Funds had tax basis capital losses as shown below
which may be carried over to offset future capital gains.
Expirations
-----------
Pinnacle Balanced Fund -- --
Pinnacle Growth Fund $64,000 Oct. 31, 2005-2006
Pinnacle Mid Cap Fund 263,000 Oct. 31, 2006
Pinnacle Small Company Growth Fund 743,000 Oct. 31, 2005-2006
As of October 31, 1998 the Funds owned the following percentages of the
Portfolios listed below:
Pinnacle Balanced Fund 99.9% of PIC Balanced Portfolio
Pinnacle Growth Fund 2.7% of PIC Growth Portfolio
Pinnacle Mid Cap Fund 99.9% of PIC Mid Cap Portfolio
Pinnacle Small Company Growth Fund 1.5% of PIC Small Cap Portfolio
21
<PAGE>
PROVIDENT INVESTMENT COUNSEL INDEPENDENT AUDITOR'S REPORT
PINNACLE FUNDS
- --------------------------------------------------------------------------------
To the Board of Trustees of
PIC Investment Trust and the Shareholders of
Provident Investment Counsel Pinnacle Balanced Fund
Provident Investment Counsel Pinnacle Growth Fund
Provident Investment Counsel Pinnacle Mid Cap Fund
Provident Investment Counsel Pinnacle Small Company Growth Fund
We have audited the accompanying statements of assets and liabilities as of
October 31, 1998, and the related statements of operations, the statements of
changes in net assets and the financial highlights for each of the periods
indicated of Provident Investment Counsel Pinnacle Balanced Fund, Provident
Investment Counsel Pinnacle Growth Fund, Provident Investment Counsel Pinnacle
Mid Cap Fund and Provident Investment Counsel 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
Provident Investment Counsel Pinnacle Balanced Fund, Provident Investment
Counsel Pinnacle Growth Fund, Provident Investment Counsel Pinnacle Mid Cap Fund
and Provident Investment Counsel Pinnacle Small Company Growth Fund as of
October 31, 1998, 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 3, 1998
22
<PAGE>
PIC STATEMENT OF NET ASSETS
BALANCED AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES - 68.4% Shares Value Net Assets
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 2.1%
ELAN CORPORATION, PLC ADR* 12,500 $875,781 2.1%
- --------------------------------------------------------------------------------
BROADCASTING - 1.1%
- --------------------------------------------------------------------------------
CLEAR CHANNEL COMMUNICATIONS, INC.* 10,200 464,738 1.1%
- --------------------------------------------------------------------------------
BUILDING MATERIALS CHAINS - 2.4%
- --------------------------------------------------------------------------------
LOWE'S COMPANIES, INC. 19,300 650,169 1.6%
THE HOME DEPOT, INC. 8,000 348,000 0.8%
- --------------------------------------------------------------------------------
TOTAL BUILDING MATERIALS CHAINS 998,169 2.4%
- --------------------------------------------------------------------------------
CELLULAR TELEPHONE - 0.7%
- --------------------------------------------------------------------------------
AIRTOUCH COMMUNICATIONS, INC.* 5,300 296,800 0.7%
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 5.7%
- --------------------------------------------------------------------------------
BMC SOFTWARE, INC.* 6,200 297,988 0.7%
MICROSOFT CORPORATION* 16,636 1,761,337 4.2%
SAP AG-SPONSORED ADR 7,800 329,062 0.8%
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 2,388,387 5.7%
- --------------------------------------------------------------------------------
DEPARTMENT STORES - 2.1%
- --------------------------------------------------------------------------------
KOHL'S CORPORATION* 18,000 860,625 2.1%
- --------------------------------------------------------------------------------
DISCOUNT STORES - 2.9%
- --------------------------------------------------------------------------------
COSTCO COMPANIES, INC.* 10,900 618,575 1.4%
DOLLAR GENERAL CORPORATION 26,140 624,093 1.5%
- --------------------------------------------------------------------------------
TOTAL DISCOUNT STORES 1,242,668 2.9%
- --------------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES - 2.5%
- --------------------------------------------------------------------------------
PAYCHEX, INC. 16,612 826,447 2.0%
ROBERT HALF INTERNATIONAL INC. 5,300 212,663 0.5%
- --------------------------------------------------------------------------------
TOTAL DIVERSIFIED COMMERCIAL SERVICES 1,039,110 2.5%
See Notes to Financial Statements.
23
<PAGE>
PIC STATEMENT OF NET ASSETS
BALANCED AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURER - 3.6%
- --------------------------------------------------------------------------------
TYCO INTERNATIONAL LTD. 24,800 $1,536,050 3.6%
- --------------------------------------------------------------------------------
DRUG STORE CHAINS - 1.6%
- --------------------------------------------------------------------------------
CVS CORPORATION 14,600 667,038 1.6%
- --------------------------------------------------------------------------------
EDP SERVICES - 1.3%
- --------------------------------------------------------------------------------
AUTOMATIC DATA PROCESSING 4,000 311,250 0.7%
COMPUTER SCIENCES CORPORATION* 5,000 263,750 0.6%
- --------------------------------------------------------------------------------
TOTAL EDP SERVICES 575,000 1.3%
- --------------------------------------------------------------------------------
ELECTRONIC DATA PROCESSING - 0.9%
- --------------------------------------------------------------------------------
DELL COMPUTER CORPORATION* 5,700 374,062 0.9%
- --------------------------------------------------------------------------------
FINANCE COMPANIES - 6.1%
- --------------------------------------------------------------------------------
ASSOCIATES FIRST CAPITAL CORPORATION 4,200 296,100 0.7%
FANNIE MAE 16,560 1,172,655 2.8%
FREDDIE MAC 6,000 345,000 0.8%
MBNA CORPORATION 33,698 768,736 1.8%
- --------------------------------------------------------------------------------
TOTAL FINANCE COMPANIES 2,582,491 6.1%
- --------------------------------------------------------------------------------
FINANCIAL PUBLISHING/SERVICES - 1.1%
- --------------------------------------------------------------------------------
SUNGARD DATA SYSTEMS INC.* 14,200 479,250 1.1%
- --------------------------------------------------------------------------------
FOOD CHAINS - 3.7%
- --------------------------------------------------------------------------------
KROGER CO. 11,800 654,900 1.5%
SAFEWAY INC.* 19,000 908,438 2.2%
- ----------------------------------------------------------------------------
TOTAL FOOD CHAINS 1,563,338 3.7%
- ----------------------------------------------------------------------------
HOSPITAL/NURSING MANAGEMENT - 0.8%
- ----------------------------------------------------------------------------
HEALTH MANAGEMENT ASSOCIATES, INC.,
CLASS A* 19,250 342,891 0.8%
See Notes to Financial Statements.
24
<PAGE>
PIC STATEMENT OF NET ASSETS
BALANCED AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
MAJOR PHARMACEUTICALS - 15.0%
- --------------------------------------------------------------------------------
AMERICAN HOME PRODUCTS CORPORATION 9,200 $448,500 1.1%
PFIZER, INC. 18,000 1,931,625 4.6%
SCHERING-PLOUGH CORPORATION 16,000 1,646,000 3.9%
WARNER-LAMBERT COMPANY 28,900 2,265,038 5.4%
- --------------------------------------------------------------------------------
TOTAL MAJOR PHARMACEUTICALS 6,291,163 15.0%
- --------------------------------------------------------------------------------
MAJOR U.S. TELECOMMUNICATIONS - 3.9%
- --------------------------------------------------------------------------------
MCI WORLDCOM, INC.* 29,916 1,652,859 3.9%
- --------------------------------------------------------------------------------
MEDICAL ELECTRONICS - 2.7%
- --------------------------------------------------------------------------------
MEDTRONIC, INC. 17,500 1,137,500 2.7%
- --------------------------------------------------------------------------------
MEDICAL/DENTAL DISTRIBUTORS - 1.0%
- --------------------------------------------------------------------------------
CARDINAL HEALTH, INC. 4,200 397,162 1.0%
- --------------------------------------------------------------------------------
MISCELLANEOUS - 1.2%
- --------------------------------------------------------------------------------
AMERICA ONLINE, INC.* 4,000 508,250 1.2%
- --------------------------------------------------------------------------------
MULTI-LINE INSURANCE - 1.9%
- --------------------------------------------------------------------------------
AMERICAN INTERNATIONAL GROUP, INC. 9,214 785,494 1.9%
- --------------------------------------------------------------------------------
OTHER SPECIALTY STORES - 2.1%
- --------------------------------------------------------------------------------
BED BATH & BEYOND INC.* 16,300 449,269 1.1%
OFFICE DEPOT, INC.* 10,800 270,000 0.6%
STAPLES, INC.* 5,500 179,438 0.4%
- --------------------------------------------------------------------------------
TOTAL OTHER SPECIALTY STORES 898,707 2.1%
- --------------------------------------------------------------------------------
PACKAGE GOODS/COSMETICS - 0.9%
- --------------------------------------------------------------------------------
COLGATE-PALMOLIVE COMPANY 4,200 371,175 0.9%
See Notes to Financial Statements.
25
<PAGE>
PIC STATEMENT OF NET ASSETS
BALANCED AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, continued Shares Value Net Assets
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 1.1%
- --------------------------------------------------------------------------------
LUCENT TECHNOLOGIES INC. 5,600 $ 449,050 1.1%
- --------------------------------------------------------------------------------
Total Equity Securities (Cost $21,108,795) 28,777,758 68.4%
- --------------------------------------------------------------------------------
FIXED INCOME SECURITIES - 30.8%
- --------------------------------------------------------------------------------
CORPORATE BONDS - 17.2% Principal Amount
- --------------------------------------------------------------------------------
ASSOCIATES CORPORATION OF NORTH AMERICA,
- --------------------------------------------------------------------------------
6.375%, 8/15/00 425,000 432,438 1.0%
BANCO LATINOAMERICANO DE EXPORTACIONES SA,
FLOATING RATE NOTES, 5.815%, 5/13/99 200,000 199,000 0.5%
CHRYSLER FINANCIAL CO. LLC,
10/19/00, 5.25% 300,000 300,375 0.7%
EMPIRE FUNDING HOME LOAN OWNER TRUST,
5.6537%, 5/25/08 230,809 229,944 0.5%
FANNIE MAE NOTES,6%, 5/15/08 1,910,000 2,025,170 4.8%
FIRST PLUS HOME LOAN TRUST,
ADJ RATE, 3/10/08 306,331 305,964 0.7%
FIRST PLUS HOME LOAN TRUST, ADJ RATE,
2/10/09 702,438 699,146 1.7%
FORD MOTOR CREDIT COMPANY,
7.25%, 5/15/99 275,000 278,136 0.7%
HANSON PLC, 7.375%, 1/15/03 375,000 402,656 0.9%
HERTZ CORPORATION, 6%, 1/15/03 100,000 99,125 0.2%
HOUSEHOLD BANK, F.S.B., 6.50%, 7/15/03 300,000 317,625 0.7%
HOUSEHOLD FINANCE CORPORATION,
5.875%, 9/25/04 100,000 100,750 0.2%
IMC HOME LOAN EQUITY LOAN TRUST,
5.6047%, 6/20/99 11,003 11,003 0.3%
MORGAN STANLEY, DEAN WITTER,
DISCOVER & CO., 6.09%, 3/9/01 450,000 457,875 1.1%
NORTHWEST AIRLINES CORPORATION,
7.67%, 1/2/15 390,415 424,299 1.0%
See Notes to Financial Statements.
26
<PAGE>
PIC STATEMENT OF NET ASSETS
BALANCED AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
FIXED INCOME Percentage of
SECURITIES, continued Amount Value Net Assets
- --------------------------------------------------------------------------------
CORPORATE BONDS, CONTINUED
- --------------------------------------------------------------------------------
NORWEST FINANCIAL, INC. SENIOR NOTES,
5.375%, 9/30/03 250,000 $252,188 0.5%
NORWEST FINANCIAL, INC., 6.75%, 6/1/05 300,000 320,250 0.8%
THE PROGRESSIVE CORPORATION,
10.125%, 12/15/00 350,000 383,250 0.9%
- --------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $7,145,198) 7,239,194 17.2%
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS - 13.6%
- --------------------------------------------------------------------------------
U.S. TREASURY BONDS,
7.25%, 5/15/16 350,000 425,943 1.0%
U.S. TREASURY BONDS,
7.25%, 8/15/22 500,000 623,005 1.5%
U.S. TREASURY BONDS,
5.25%, 11/15/28 800,000 825,208 1.9%
U.S. TREASURY NOTES,
5.5%, 3/31/00 20,000 20,316 0.1%
U.S. TREASURY NOTES,
6.625%, 7/31/01 1,625,000 1,721,260 4.1%
U.S. TREASURY NOTES,
5.25%, 8/15/03 425,000 443,574 1.0%
U.S. TREASURY NOTES,
5.75%, 8/15/03 145,000 153,739 0.4%
U.S. TREASURY NOTES,
5.875%, 2/15/04 35,000 37,459 0.1%
U.S. TREASURY NOTES,
7.875%, 11/15/04 1,250,000 1,468,614 3.5%
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $5,508,588) 5,719,118 13.6%
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
27
<PAGE>
PIC STATEMENT OF NET ASSETS
BALANCED AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
MONEY MARKET FUNDS - 2.8% Amount Value Net Assets
- --------------------------------------------------------------------------------
TEMPORARY INVESTMENT FUND INC.-TEMP FUND 618,495 $618,495 1.4%
TEMPORARY INVESTMENT FUND INC.-TEMP CASH 618,495 618,495 1.4%
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET FUNDS (COST $1,236,990) 1,236,990 2.8%
TOTAL INVESTMENTS (COST $34,999,571) 42,973,060 102.0%
- --------------------------------------------------------------------------------
OTHER ASSETS - 1.6%
- --------------------------------------------------------------------------------
RECEIVABLES:
INVESTMENT SECURITIES SOLD 455,388
DIVIDENDS AND INTEREST 237,247
OTHER ASSETS 1,207
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 693,842 1.6%
- --------------------------------------------------------------------------------
TOTAL ASSETS 43,666,902 103.6%
- --------------------------------------------------------------------------------
LIABILITIES - (3.6%)
- --------------------------------------------------------------------------------
PAYABLES:
INVESTMENT SECURITIES PURCHASED 1,449,716
SHARES OF BENEFICIAL INTEREST REDEEMED 21,374
TO ADVISOR (NOTE 3) 13,139
DEFERRED TRUSTEES' COMPENSATION (NOTE 3) 5,413
ACCRUED EXPENSES 34,119
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 1,523,761 (3.6%)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $42,143,141 100.0%
- --------------------------------------------------------------------------------
* Non-income producing security.
See Notes to Financial Statements.
28
<PAGE>
PIC STATEMENT OF NET ASSETS
GROWTH AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES - 92.6% Shares Value Net Assets
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 3.1%
- --------------------------------------------------------------------------------
ELAN CORPORATION, PLC ADR* 59,157 $4,144,687 3.1%
- --------------------------------------------------------------------------------
BROADCASTING - 1.5%
- --------------------------------------------------------------------------------
CLEAR CHANNEL COMMUNICATIONS, INC.* 43,900 2,000,194 1.5%
- --------------------------------------------------------------------------------
BUILDING MATERIALS CHAINS - 3.3%
- --------------------------------------------------------------------------------
LOWE'S COMPANIES, INC. 86,600 2,917,337 2.1%
THE HOME DEPOT, INC. 39,300 1,709,550 1.2%
- --------------------------------------------------------------------------------
TOTAL BUILDING MATERIALS CHAINS 4,626,887 3.3%
- --------------------------------------------------------------------------------
CELLULAR TELEPHONE - 1.0%
- --------------------------------------------------------------------------------
AIRTOUCH COMMUNICATIONS, INC.* 22,900 1,282,400 1.0%
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 6.7%
- --------------------------------------------------------------------------------
BMC SOFTWARE, INC.* 25,900 1,244,819 0.9%
MICROSOFT CORPORATION* 74,312 7,867,783 5.8%
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 9,112,602 6.7%
- --------------------------------------------------------------------------------
DEPARTMENT STORES - 2.7%
- --------------------------------------------------------------------------------
KOHL'S CORPORATION* 75,558 3,612,617 2.7%
- --------------------------------------------------------------------------------
DISCOUNT STORES - 4.2%
- --------------------------------------------------------------------------------
COSTCO COMPANIES, INC.* 46,000 2,610,500 1.9%
DOLLAR GENERAL CORPORATION 131,822 3,147,250 2.3%
- --------------------------------------------------------------------------------
TOTAL DISCOUNT STORES 5,757,750 4.2%
- --------------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES - 2.5%
- --------------------------------------------------------------------------------
PAYCHEX, INC. 69,826 3,473,844 2.5%
- --------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURE - 4.9%
- --------------------------------------------------------------------------------
TYCO INTERNATIONAL LTD. 106,580 6,601,299 4.9%
See Notes to Financial Statements.
29
<PAGE>
PIC STATEMENT OF NET ASSETS
GROWTH AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
DRUG STORE CHAINS - 2.4%
- --------------------------------------------------------------------------------
CVS CORPORATION 71,000 $ 3,243,813 2.4%
- --------------------------------------------------------------------------------
EDP SERVICES - 1.7%
- --------------------------------------------------------------------------------
AUTOMATIC DATA PROCESSING 17,000 1,322,813 0.9%
COMPUTER SCIENCES CORPORATION* 20,900 1,102,475 0.8%
- --------------------------------------------------------------------------------
TOTAL EDP SERVICES 2,425,288 1.7%
- --------------------------------------------------------------------------------
ELECTRONIC DATA PROCESSING - 1.2%
- --------------------------------------------------------------------------------
DELL COMPUTER CORPORATION* 23,700 1,555,312 1.2%
- --------------------------------------------------------------------------------
FINANCE COMPANIES - 7.6%
- --------------------------------------------------------------------------------
ASSOCIATES FIRST CAPITAL CORPORATION 20,530 1,447,365 1.1%
FANNIE MAE 69,719 4,936,977 3.6%
FREDDIE MAC 12,500 718,750 0.5%
MBNA CORPORATION 142,216 3,244,302 2.4%
- --------------------------------------------------------------------------------
TOTAL FINANCE COMPANIES 10,347,394 7.6%
- --------------------------------------------------------------------------------
FINANCIAL PUBLISHING/SERVICES - 1.7%
- --------------------------------------------------------------------------------
SUNGARD DATA SYSTEMS INC.* 68,800 2,322,000 1.7%
- --------------------------------------------------------------------------------
FOOD CHAINS - 5.9%
- --------------------------------------------------------------------------------
KROGER CO. 51,700 2,869,350 2.1%
SAFEWAY INC.* 108,950 5,209,172 3.8%
- --------------------------------------------------------------------------------
TOTAL FOOD CHAINS 8,078,522 5.9%
- --------------------------------------------------------------------------------
HOSPITAL/NURSING MANAGEMENT - 1.2%
- --------------------------------------------------------------------------------
HEALTH MANAGEMENT ASSOCIATES, INC.,
CLASS A* 89,550 1,595,109 1.2%
See Notes to Financial Statements.
30
<PAGE>
PIC STATEMENT OF NET ASSETS
GROWTH AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
MAJOR PHARMACEUTICALS - 21.2%
- --------------------------------------------------------------------------------
AMERICAN HOME PRODUCTS CORPORATION 40,400 $ 1,969,500 1.4%
PFIZER, INC. 76,684 8,229,152 6.1%
SCHERING-PLOUGH CORPORATION 75,900 7,808,212 5.7%
WARNER-LAMBERT COMPANY 138,800 10,878,450 8.0%
- --------------------------------------------------------------------------------
TOTAL MAJOR PHARMACEUTICALS 28,885,314 21.2%
- --------------------------------------------------------------------------------
MAJOR U.S. TELECOMMUNICATIONS - 5.8%
- --------------------------------------------------------------------------------
MCI WORLDCOM, INC.* 142,650 7,881,412 5.8%
- --------------------------------------------------------------------------------
MEDICAL ELECTRONICS - 3.6%
- --------------------------------------------------------------------------------
MEDTRONIC, INC. 74,904 4,868,760 3.6%
- --------------------------------------------------------------------------------
MEDICAL/DENTAL DISTRIBUTORS - 1.2%
- --------------------------------------------------------------------------------
CARDINAL HEALTH, INC. 17,700 1,673,756 1.2%
- --------------------------------------------------------------------------------
MISCELLANEOUS - 1.8%
- --------------------------------------------------------------------------------
AMERICA ONLINE, INC.* 19,800 2,515,838 1.8%
- --------------------------------------------------------------------------------
MULTI-LINE INSURANCE - 2.8%
- --------------------------------------------------------------------------------
AMERICAN INTERNATIONAL GROUP, INC. 44,952 3,832,158 2.8%
- --------------------------------------------------------------------------------
OTHER SPECIALTY STORES - 1.9%
- --------------------------------------------------------------------------------
BED BATH & BEYOND INC.* 77,600 2,138,850 1.5%
STAPLES, INC.* 16,800 548,100 0.4%
- --------------------------------------------------------------------------------
TOTAL OTHER SPECIALTY STORES 2,686,950 1.9%
- --------------------------------------------------------------------------------
PACKAGE GOODS/COSMETICS - 1.2%
- --------------------------------------------------------------------------------
COLGATE-PALMOLIVE COMPANY 18,300 1,617,262 1.2%
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 1.5%
- --------------------------------------------------------------------------------
LUCENT TECHNOLOGIES INC. 25,100 2,012,706 1.5%
- --------------------------------------------------------------------------------
TOTAL EQUITY SECURITIES (COST $90,210,913) 126,153,874 92.6%
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
31
<PAGE>
PIC STATEMENT OF NET ASSETS
GROWTH AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
SHORT-TERM INVESTMENTS - 7.4% Shares Value Net Assets
- --------------------------------------------------------------------------------
FORD MOTOR CREDIT COMPANY,
5.09151%, 11/20/98 $10,000,000 $ 10,000,000 7.4%
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $10,000,000) 10,000,000 7.4%
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS - 2.2%
- --------------------------------------------------------------------------------
TEMPORARY INVESTMENT FUND INC.-TEMP FUND 1,458,514 1,458,514 1.1%
TEMPORARY INVESTMENT FUND INC.-TEMP CASH 1,458,514 1,458,514 1.1%
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET FUNDS (COST $2,917,028) 2,917,028 2.2%
TOTAL INVESTMENTS (COST $103,127,941) 139,070,902 102.2%
- --------------------------------------------------------------------------------
OTHER ASSETS - 0.1%
- --------------------------------------------------------------------------------
RECEIVABLES:
DIVIDENDS AND INTEREST 74,350
SHARES OF BENEFICIAL INTEREST SOLD 26,419
OTHER ASSETS 23,317
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 124,086
- --------------------------------------------------------------------------------
TOTAL ASSETS 139,194,988 102.3%
- --------------------------------------------------------------------------------
LIABILITIES - (2.3%)
- --------------------------------------------------------------------------------
PAYABLES:
INVESTMENT SECURITIES PURCHASED 2,895,730
SHARES OF BENEFICIAL INTEREST REDEEMED 52,594
TO ADVISOR (NOTE 3) 88,709
DEFERRED TRUSTEES' COMPENSATION (NOTE 3) 22,897
ACCRUED EXPENSES 52,735
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 3,112,665 2.3%
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $136,082,323 100.0%
- --------------------------------------------------------------------------------
* Non-income producing security.
See Notes to Financial Statements.
32
<PAGE>
PIC STATEMENT OF NET ASSETS
MID CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES - 92.7% Shares Value Net Assets
- --------------------------------------------------------------------------------
ADVERTISING - 3.3%
- --------------------------------------------------------------------------------
OUTDOOR SYSTEMS, INC.* 6,225 $137,339 2.4%
YOUNG & RUBICAM INC.* 2,000 52,250 0.9%
- --------------------------------------------------------------------------------
TOTAL ADVERTISING 189,589 3.3%
- --------------------------------------------------------------------------------
APPAREL - 1.9%
- --------------------------------------------------------------------------------
JONES APPAREL GROUP, INC.* 6,500 112,125 1.9%
- --------------------------------------------------------------------------------
CONSUMER ELECTRONICS/APPLIANCES - 1.4%
- --------------------------------------------------------------------------------
MAYTAG CORPORATION 1,600 79,100 1.4%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 2.6%
- --------------------------------------------------------------------------------
ELAN CORPORATION, PLC ADR* 2,150 150,634 2.6%
- --------------------------------------------------------------------------------
BOOKS/MAGAZINES - 0.7%
- --------------------------------------------------------------------------------
THE PETERSEN COMPANIES, INC.* 1,525 40,508 0.7%
- --------------------------------------------------------------------------------
BROADCASTING - 3.7%
- --------------------------------------------------------------------------------
CLEAR CHANNEL COMMUNICATIONS, INC.* 2,800 127,575 2.2%
UNIVISION COMMUNICATIONS INC.* 2,925 86,288 1.5%
- --------------------------------------------------------------------------------
TOTAL BROADCASTING 213,863 3.7%
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.5%
- --------------------------------------------------------------------------------
INTUIT INC.* 1,725 87,113 1.5%
- --------------------------------------------------------------------------------
DEPARTMENT STORES - 0.8%
- --------------------------------------------------------------------------------
SAKS INCORPORATED* 1,875 42,656 0.8%
- --------------------------------------------------------------------------------
DISCOUNT STORES - 5.1%
- --------------------------------------------------------------------------------
DOLLAR GENERAL CORPORATION 2,506 59,831 1.0%
DOLLAR TREE STORES, INC.* 2,500 96,406 1.7%
FAMILY DOLLAR STORES, INC. 7,575 137,297 2.4%
- --------------------------------------------------------------------------------
TOTAL DISCOUNT STORES 293,534 5.1%
See Notes to Financial Statements.
33
<PAGE>
PIC STATEMENT OF NET ASSETS
MID CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES - 6.0%
- --------------------------------------------------------------------------------
AMDOCS LIMITED* 4,725 $ 61,425 1.1%
CONCORD EFS, INC.* 3,000 85,500 1.5%
PAYCHEX, INC. 2,100 104,475 1.8%
ROBERT HALF INTERNATIONAL INC. 2,325 93,291 1.6%
- --------------------------------------------------------------------------------
TOTAL DIVERSIFIED COMMERCIAL SERVICES 344,691 6.0%
- --------------------------------------------------------------------------------
DIVERSIFIED ELECTRONIC PRODUCTS - 2.3%
- --------------------------------------------------------------------------------
SCI SYSTEMS, INC.* 3,325 131,338 2.3%
- --------------------------------------------------------------------------------
DRUG STORE CHAINS - 2.8%
- --------------------------------------------------------------------------------
DUANE READE INC.* 1,375 53,109 0.9%
RITE AID CORPORATION 2,750 109,141 1.9%
- --------------------------------------------------------------------------------
TOTAL DRUG STORE CHAINS 162,250 2.8%
- --------------------------------------------------------------------------------
EDP SERVICES - 7.6%
- --------------------------------------------------------------------------------
ACXIOM CORPORATION* 3,425 86,053 1.5%
CERIDIAN CORP.* 1,800 103,275 1.8%
DST SYSTEMS, INC.* 2,525 126,250 2.2%
FISERV, INC.* 2,675 124,388 2.1%
- --------------------------------------------------------------------------------
TOTAL EDP SERVICES 439,966 7.6%
- --------------------------------------------------------------------------------
ELECTRONIC DISTRIBUTORS - 1.1%
- --------------------------------------------------------------------------------
TECH DATA CORPORATION* 1,650 64,969 1.1%
- --------------------------------------------------------------------------------
FINANCE COMPANIES - 5.8%
- --------------------------------------------------------------------------------
CAPITAL ONE FINANCIAL 825 83,472 1.5%
HELLER FINANCIAL, INC. 1,675 40,200 0.7%
MBNA CORPORATION 6,050 138,016 2.4%
METRIS COMPANIES INC. 2,150 70,681 1.2%
- --------------------------------------------------------------------------------
TOTAL FINANCE COMPANIES 332,369 5.8%
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
34
<PAGE>
PIC STATEMENT OF NET ASSETS
MID CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
FINANCIAL PUBLISHING/SERVICES - 2.3%
- --------------------------------------------------------------------------------
SUNGARD DATA SYSTEMS INC.* 3,900 $131,625 2.3%
- --------------------------------------------------------------------------------
GENERIC DRUGS - 2.3%
- --------------------------------------------------------------------------------
WATSON PHARMACEUTICALS, INC.* 2,400 133,500 2.3%
- --------------------------------------------------------------------------------
HOSPITAL/NURSING MANAGEMENT - 1.7%
- --------------------------------------------------------------------------------
HEALTH MANAGEMENT ASSOCIATES, INC., CLASS A* 5,450 97,078 1.7%
- --------------------------------------------------------------------------------
INDUSTRIAL SERVICES - 2.6%
- --------------------------------------------------------------------------------
ALLIED WASTE INDUSTRIES, INC.* 2,375 51,359 0.8%
REPUBLIC SERVICES, INC.* 4,650 101,719 1.8%
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL SERVICES 153,078 2.6%
- --------------------------------------------------------------------------------
LIFE INSURANCE - 1.4%
- --------------------------------------------------------------------------------
REINSURANCE GROUP OF AMERICA, INCORPORATED 1,475 81,309 1.4%
- --------------------------------------------------------------------------------
MAJOR BANKS - 0.3%
- --------------------------------------------------------------------------------
FIRSTAR CORPORATION 300 17,025 0.3%
- --------------------------------------------------------------------------------
MEDICAL DRUGS - 0.7%
- --------------------------------------------------------------------------------
FOREST LABS, INC.* 1,000 41,672 0.7%
- --------------------------------------------------------------------------------
MEDICAL SPECIALTIES - 4.5%
- --------------------------------------------------------------------------------
ALZA CORPORATION* 1,950 93,356 1.6%
SOFAMOR DANEK GROUP, INC.* 1,625 165,141 2.9%
- --------------------------------------------------------------------------------
TOTAL MEDICAL SPECIALTIES 258,497 4.5%
- --------------------------------------------------------------------------------
MEDICAL/DENTAL DISTRIBUTORS - 7.1%
- --------------------------------------------------------------------------------
CARDINAL HEALTH, INC. 1,200 113,475 1.9%
HENRY SCHEIN, INC.* 1,650 63,834 1.1%
MCKESSON CORPORATION 1,950 150,150 2.6%
PSS WORLD MEDICAL, INC.* 3,825 84,628 1.5%
- --------------------------------------------------------------------------------
TOTAL MEDICAL/DENTAL DISTRIBUTORS 412,087 7.1%
See Notes to Financial Statements.
35
<PAGE>
PIC STATEMENT OF NET ASSETS
MID CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
MID-SIZED BANKS - 2.7%
- --------------------------------------------------------------------------------
STAR BANC CORPORATION 2,050 $155,031 2.7%
- --------------------------------------------------------------------------------
MISCELLANEOUS - 1.0%
- --------------------------------------------------------------------------------
LYCOS, INC.:* 1,375 55,859 1.0%
- --------------------------------------------------------------------------------
OFFICE EQUIPMENT/SUPPLIES - 1.4%
- --------------------------------------------------------------------------------
LEXMARK INTERNATIONAL GROUP, INC.* 1,175 82,177 1.4%
- --------------------------------------------------------------------------------
OTHER PHARMACEUTICALS - 0.6%
- --------------------------------------------------------------------------------
ALLERGAN, INC. 500 31,219 0.6%
- --------------------------------------------------------------------------------
OTHER SPECIALTY STORES - 5.7%
- --------------------------------------------------------------------------------
BED BATH & BEYOND INC.* 4,400 121,275 2.1%
LINENS `N THINGS, INC.* 2,425 75,023 1.3%
OFFICE DEPOT, INC.* 5,325 133,125 2.3%
- --------------------------------------------------------------------------------
TOTAL OTHER SPECIALTY STORES 329,423 5.7%
- --------------------------------------------------------------------------------
PRECISION INSTRUMENTS - 2.2%
- --------------------------------------------------------------------------------
WATERS CORPORATION* 1,700 124,950 2.2%
- --------------------------------------------------------------------------------
RESTAURANTS - 3.7%
- --------------------------------------------------------------------------------
RUBY TUESDAY, INC. 6,575 110,953 1.9%
STARBUCKS CORPORATION* 950 41,206 0.7%
THE CHEESECAKE FACTORY INCORPORATED* 3,175 60,722 1.1%
- --------------------------------------------------------------------------------
TOTAL RESTAURANTS 212,881 3.7%
- --------------------------------------------------------------------------------
SERVICES TO THE HEALTH INDUSTRY - 4.4%
- --------------------------------------------------------------------------------
COVANCE INC.* 1,000 27,875 0.4%
HBO & COMPANY 1,675 43,969 0.8%
OMNICARE, INC. 2,475 85,542 1.5%
QUINTILES TRANSNATIONAL CORP.* 2,175 98,419 1.7%
- --------------------------------------------------------------------------------
TOTAL SERVICES TO THE HEALTH INDUSTRY 255,805 4.4%
See Notes to Financial Statements.
36
<PAGE>
PIC STATEMENT OF NET ASSETS
MID CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
SMALLER BANKS - 1.5%
- --------------------------------------------------------------------------------
ZIONS BANCORPORATION 1,650 $ 87,553 1.5%
- --------------------------------------------------------------------------------
TOTAL EQUITY SECURITIES (COST $5,288,197) 5,345,474 92.7%
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS - 7.2%
- --------------------------------------------------------------------------------
TEMPORARY INVESTMENT FUND INC.-TEMP FUND 205,686 205,686 3.6%
TEMPORARY INVESTMENT FUND INC.-TEMP CASH 205,686 205,686 3.6%
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET FUNDS (COST $411,372) 411,372 7.2%
TOTAL INVESTMENTS (COST $5,699,569) 5,756,846 99.9%
- --------------------------------------------------------------------------------
OTHER ASSETS - 4.6%
- --------------------------------------------------------------------------------
RECEIVABLES:
INVESTMENT SECURITIES SOLD 150,441
SHARES OF BENEFICIAL INTEREST SOLD 102,400
DIVIDENDS AND INTEREST 2,907
FROM ADVISOR 7,877
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 263,625 4.6%
- --------------------------------------------------------------------------------
TOTAL ASSETS 6,020,471 104.5%
- --------------------------------------------------------------------------------
LIABILITIES - (4.5%)
- --------------------------------------------------------------------------------
PAYABLES:
INVESTMENT SECURITIES PURCHASED 227,955
DEFERRED TRUSTEES' COMPENSATION (NOTE 3) 1,487
ACCRUED EXPENSES 27,751
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 257,193 (4.5%)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $5,763,278 100.0%
- --------------------------------------------------------------------------------
* Non-income producing security.
See Notes to Financial Statements.
37
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES - 94.8% Shares Value Net Assets
- --------------------------------------------------------------------------------
ADVERTISING - 2.2%
- --------------------------------------------------------------------------------
LAMAR ADVERTISING COMPANY, CLASS A* 31,600 $986,513 0.6%
TMP WORLDWIDE INC.* 94,020 2,820,600 1.6%
- --------------------------------------------------------------------------------
TOTAL ADVERTISING 3,807,113 2.2%
- --------------------------------------------------------------------------------
AEROSPACE - 0.5%
- --------------------------------------------------------------------------------
ORBITAL SCIENCES CORPORATION* 16,500 544,500 0.3%
TRISTAR AEROSPACE CO.* 25,000 256,250 0.2%
- --------------------------------------------------------------------------------
TOTAL AEROSPACE 800,750 0.5%
- --------------------------------------------------------------------------------
AIRLINES - 0.3%
- --------------------------------------------------------------------------------
RYANAIR HOLDINGS PLC ADR* 19,670 577,806 0.3%
- --------------------------------------------------------------------------------
ALCOHOLIC BEVERAGES - 0.6%
- --------------------------------------------------------------------------------
BERINGER WINE ESTATES HOLDINGS, INC.* 21,300 966,487 0.6%
- --------------------------------------------------------------------------------
APPAREL - 0.7%
- --------------------------------------------------------------------------------
NOVEL DENIM HOLDINGS LIMITED* 76,940 1,173,335 0.7%
- --------------------------------------------------------------------------------
AUTO PARTS: O.E.M. - 0.9%
- --------------------------------------------------------------------------------
GENTEX CORPORATION* 101,000 1,483,438 0.9%
- --------------------------------------------------------------------------------
AUTOMOTIVE AFTERMARKET - 0.4%
- --------------------------------------------------------------------------------
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.* 36,770 687,139 0.4%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY - 1.5%
- --------------------------------------------------------------------------------
IDEXX LABORATORIES, INC.* 22,300 508,719 0.3%
INCYTE PHARMACEUTICALS, INC.* 14,600 445,300 0.3%
MEDIMMUNE, INC.* 24,500 1,647,625 0.9%
- --------------------------------------------------------------------------------
TOTAL BIOTECHNOLOGY 2,601,644 1.5%
See Notes to Financial Statements.
38
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
BROADCASTING - 1.0%
- --------------------------------------------------------------------------------
CITADEL COMMUNICATIONS CORPORATION* 25,200 $ 516,600 0.3%
HEFTEL BROADCAST* 30,300 1,246,088 0.7%
- --------------------------------------------------------------------------------
TOTAL BROADCASTING 1,762,688 1.0%
- --------------------------------------------------------------------------------
CLOTHING/SHOE/ACCESSORY STORES - 1.1%
- --------------------------------------------------------------------------------
ABERCROMBIE & FITCH CO.* 7,440 295,275 0.2%
JUST FOR FEET, INC.* 15,800 267,613 0.2%
PACIFIC SUNWEAR OF CALIFORNIA, INC.* 59,225 1,280,741 0.7%
- --------------------------------------------------------------------------------
TOTAL CLOTHING/SHOE/ACCESSORY STORES 1,843,629 1.1%
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE - 11.1%
- --------------------------------------------------------------------------------
AVANT! CORPORATION* 10,000 170,625 0.1%
AXENT TECHNOLOGIES, INC.* 80,430 2,020,804 1.2%
BUSINESS OBJECTS S.A. ADR* 110,500 1,857,781 1.1%
CHECK POINT SOFTWARE TECHNOLOGIES LTD. * 74,700 1,699,425 1.0%
DOCUMENTUM, INC.* 14,700 499,800 0.3%
HNC SOFTWARE INC.* 37,560 1,262,955 0.7%
LEGATO SYSTEMS, INC.* 16,100 629,913 0.4%
MERCURY INTERACTIVE CORPORATION* 41,000 1,701,500 1.0%
NATIONAL INSTRUMENTS CORPORATION* 23,000 629,625 0.4%
NEW ERA OF NETWORKS, INC.* 5,000 233,473 0.1%
PEREGRINE SYSTEMS, INC.* 47,500 1,656,563 0.9%
RWD TECHNOLOGIES, INC.* 27,460 518,308 0.3%
SAVILLE SYSTEMS PLC ADR* 37,600 634,500 0.4%
SIEBEL SYSTEMS, INC.* 33,440 683,430 0.4%
SOFTWARE AG SYSTEMS, INC.* 64,970 974,550 0.6%
TRANSACTION SYSTEMS ARCHITECTS, INC., CLASS A* 41,310 1,491,032 0.8%
TSI INTERNATIONAL SOFTWARE LTD.* 12,300 385,913 0.2%
VERITAS SOFTWARE CORPORATION* 19,050 954,881 0.5%
WIND RIVER SYSTEMS, INC.* 27,870 1,221,054 0.7%
- --------------------------------------------------------------------------------
TOTAL COMPUTER SOFTWARE 19,226,132 11.1%
See Notes to Financial Statements.
39
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
DISCOUNT STORES - 5.8%
- --------------------------------------------------------------------------------
DOLLAR TREE STORES, INC.* 195,580 $ 7,542,054 4.3%
FRED'S, INC. 15,900 207,694 0.1%
99 CENTS ONLY STORES* 52,000 2,405,000 1.4%
- --------------------------------------------------------------------------------
TOTAL DISCOUNT STORES 10,154,748 5.8%
- --------------------------------------------------------------------------------
DIVERSIFIED COMMERCIAL SERVICES - 11.1%
- --------------------------------------------------------------------------------
ABACUS DIRECT CORPORATION* 8,400 409,500 0.2%
IRON MOUNTAIN INCORPORATED* 25,350 774,759 0.5%
LASON, INC.* 40,680 2,227,230 1.3%
MODIS PROFESSIONAL SERVICES, INC.* 23,538 414,857 0.2%
NCO GROUP, INC.* 56,235 1,771,403 1.0%
NOVA CORPORATION* 138,736 4,006,002 2.3%
ON ASSIGNMENT, INC.* 40,500 1,377,000 0.8%
PERSONNEL GROUP OF AMERICA, INC.* 78,280 1,213,340 0.7%
ROMAC INTERNATIONAL, INC.* 65,190 1,140,825 0.7%
STAFFMARK, INC.* 34,310 602,569 0.3%
SYLVAN LEARNING SYSTEMS, INC.* 69,450 2,144,269 1.2%
THE PROFIT RECOVERY GROUP
INTERNATIONAL, INC.* 74,100 2,273,944 1.3%
WACKENHUT CORRECTIONS CORPORATION* 39,400 967,762 0.6%
- --------------------------------------------------------------------------------
TOTAL DIVERSIFIED COMMERCIAL SERVICES 19,323,460 11.1%
- --------------------------------------------------------------------------------
DIVERSIFIED ELECTRONIC PRODUCTS - 0.6%
- --------------------------------------------------------------------------------
NICE SYSTEMS LTD. ADR* 20,800 395,200 0.2%
UNIPHASE CORPORATION* 14,500 717,750 0.4%
- --------------------------------------------------------------------------------
TOTAL DIVERSIFIED ELECTRONIC PRODUCTS 1,112,950 0.6%
See Notes to Financial Statements.
40
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
EDP PERIPHERALS - 1.9%
- --------------------------------------------------------------------------------
ELECTRONICS FOR IMAGING, INC.* 89,700 $ 2,158,406 1.3%
NATIONAL COMPUTER SYSTEMS, INC. 8,300 232,400 0.1%
PINNACLE SYSTEMS, INC.* 15,000 510,000 0.3%
PREMISYS COMMUNICATIONS, INC.* 35,000 369,688 0.2%
- --------------------------------------------------------------------------------
TOTAL EDP PERIPHERALS 3,270,494 1.9%
- --------------------------------------------------------------------------------
EDP SERVICES - 7.2%
- --------------------------------------------------------------------------------
BEA SYSTEMS, INC.* 20,000 391,875 0.2%
CSG SYSTEMS INTERNATIONAL, INC.* 69,838 3,806,171 2.2%
ECSOFT GROUP PLC ADR* 6,000 132,000 0.1%
FISERV, INC.* 78,950 3,671,175 2.1%
FORRESTER RESEARCH, INC.* 28,420 916,545 0.5%
INTELLIGROUP, INC.* 30,150 520,088 0.3%
INTERNATIONAL NETWORK SERVICES* 17,950 762,875 0.4%
PEGASUS SYSTEMS, INC.* 60,300 1,047,713 0.6%
POLICY MANAGEMENT SYSTEMS CORPORATION* 18,600 845,138 0.5%
THE BISYS GROUP, INC.* 10,500 459,375 0.3%
- --------------------------------------------------------------------------------
TOTAL EDP SERVICES 12,552,955 7.2%
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 1.0%
- --------------------------------------------------------------------------------
DSP COMMUNICATIONS, INC.* 48,000 471,000 0.3%
SANMINA CORPORATION* 28,400 1,164,400 0.7%
- --------------------------------------------------------------------------------
TOTAL ELECTRONIC COMPONENTS 1,635,400 1.0%
- --------------------------------------------------------------------------------
ENGINEERING AND CONSTRUCTION - 0.4%
- --------------------------------------------------------------------------------
DYCOM INDUSTRIES, INC.* 20,000 701,250 0.4%
- --------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES - 1.6%
- --------------------------------------------------------------------------------
ALLIED WASTE INDUSTRIES, INC.* 31,774 687,113 0.4%
CASELLA WASTE SYSTEMS, INC., CLASS A* 45,370 1,338,415 0.8%
U S LIQUIDS INC.* 46,700 706,337 0.4%
- --------------------------------------------------------------------------------
TOTAL ENVIRONMENTAL SERVICES 2,731,865 1.6%
See Notes to Financial Statements.
41
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
FINANCE COMPANIES - 0.9%
- --------------------------------------------------------------------------------
HEALTHCARE FINANCIAL PARTNERS, INC.* 43,900 $1,344,437 0.8%
METRIS COMPANIES INC. 5,200 170,950 0.1%
- --------------------------------------------------------------------------------
TOTAL FINANCE COMPANIES 1,515,387 0.9%
- --------------------------------------------------------------------------------
GENERIC DRUGS - 0.2%
- --------------------------------------------------------------------------------
ALPHARMA INC., CLASS A 13,000 359,937 0.2%
- --------------------------------------------------------------------------------
HOMEBUILDING - 1.5%
- --------------------------------------------------------------------------------
FAIRFIELD COMMUNITIES, INC.* 145,020 1,423,009 0.8%
PALM HARBOR HOMES, INC.* 46,048 1,162,712 0.7%
- --------------------------------------------------------------------------------
TOTAL HOMEBUILDING 2,585,721 1.5%
- --------------------------------------------------------------------------------
HOSPITAL/NURSING MANAGEMENT - 0.6%
- --------------------------------------------------------------------------------
PROVINCE HEALTHCARE COMPANY* 37,500 979,687 0.6%
- --------------------------------------------------------------------------------
INSURANCE BROKERS/SERVICES - 0.9%
- --------------------------------------------------------------------------------
CLARK/BARDES HOLDINGS, INC.* 30,500 305,000 0.2%
MUTUAL RISK MANAGEMENT LTD. 34,900 1,180,056 0.7%
- --------------------------------------------------------------------------------
TOTAL INSURANCE BROKERS/SERVICES 1,485,056 0.9%
- --------------------------------------------------------------------------------
LIFE INSURANCE - 0.1%
- --------------------------------------------------------------------------------
ANNUITY AND LIFE RE (HOLDINGS), LTD. 8,000 187,000 0.1%
- --------------------------------------------------------------------------------
MAJOR PHARMACEUTICALS - 0.6%
- --------------------------------------------------------------------------------
SHIRE PHARMACEUTICALS GROUP PLC* 46,300 1,007,025 0.6%
- --------------------------------------------------------------------------------
MEDICAL ELECTRONICS - 0.5%
- --------------------------------------------------------------------------------
ADAC LABORATORIES 5,000 148,125 0.1%
VISX, INCORPORATED* 13,000 651,625 0.4%
- --------------------------------------------------------------------------------
TOTAL MEDICAL ELECTRONICS 799,750 0.5%
See Notes to Financial Statements.
42
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
MEDICAL SPECIALTIES - 2.0%
- --------------------------------------------------------------------------------
ATRIX LABORATORIES, INC.* 56,440 $571,455 0.3%
K-V PHARMACEUTICAL COMPANY, CLASS A* 15,500 350,688 0.2%
MINIMED INC.* 6,540 362,970 0.2%
OCULAR SCIENCES, INC.* 26,480 665,310 0.4%
RESMED INC.* 4,000 204,000 0.1%
SAFESKIN CORPORATION* 43,800 969,075 0.6%
XOMED SURGICAL PRODUCTS, INC.* 7,700 346,019 0.2%
- --------------------------------------------------------------------------------
TOTAL MEDICAL SPECIALTIES 3,469,517 2.0%
- --------------------------------------------------------------------------------
MEDICAL/DENTAL DISTRIBUTORS - 1.0%
- --------------------------------------------------------------------------------
HENRY SCHEIN, INC.* 47,070 1,821,021 1.0%
- --------------------------------------------------------------------------------
MEDICAL/NURSING SERVICES - 4.6%
- --------------------------------------------------------------------------------
AMSURG CORP., CLASS A* 55,400 367,025 0.2%
LASER VISION CENTERS, INC.* 43,900 471,925 0.2%
ORTHODONTIC CENTERS OF AMERICA, INC.* 126,940 2,403,926 1.4%
RENAL CARE GROUP, INC.* 89,445 2,605,086 1.5%
TOTAL RENAL CARE HOLDINGS, INC.* 90,463 2,216,343 1.3%
- --------------------------------------------------------------------------------
TOTAL MEDICAL/NURSING SERVICES 8,064,305 4.6%
- --------------------------------------------------------------------------------
MISCELLANEOUS ELECTRONIC TECHNOLOGY - 0.9%
- --------------------------------------------------------------------------------
APPLIED MICRO CIRCUITS CORPORATION* 37,800 907,200 0.5%
DSET CORPORATION* 20,000 250,000 0.2%
TRANSWITCH CORPORATION* 16,200 394,875 0.2%
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS ELECTRONIC TECHNOLOGY 1,552,075 0.9%
- --------------------------------------------------------------------------------
MISCELLANEOUS HEALTH SERVICES - 2.8%
- --------------------------------------------------------------------------------
ALTERNATIVE LIVING SERVICES, INC.* 68,600 1,792,175 1.0%
ASSISTED LIVING CONCEPTS, INC.* 45,390 612,765 0.3%
CAREMATRIX CORPORATION* 68,750 1,692,969 1.0%
SUNRISE ASSISTED LIVING, INC.* 19,900 856,944 0.5%
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS HEALTH SERVICES 4,954,853 2.8%
See Notes to Financial Statements.
43
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
MISCELLANEOUS TECHNOLOGY SERVICES - 1.3%
- --------------------------------------------------------------------------------
EARTHLINK NETWORK, INC.* 15,800 $608,300 0.4%
EBAY INC.* 2,300 191,187 0.1%
LYCOS, INC.* 24,900 1,011,562 0.6%
VERIO INC.* 26,400 366,300 0.2%
- --------------------------------------------------------------------------------
TOTAL MISCELLANEOUS TECHNOLOGY SERVICES 2,177,349 1.3%
- --------------------------------------------------------------------------------
MOVIES/ENTERTAINMENT - 0.4%
- --------------------------------------------------------------------------------
INTERNATIONAL SPEEDWAY CORPORATION, CLASS A 24,900 768,787 0.4%
- --------------------------------------------------------------------------------
OILFIELD SERVICES/EQUIPMENT - 0.2%
- --------------------------------------------------------------------------------
FRIEDE GOLDMAN INTERNATIONAL INC.* 20,000 335,000 0.2%
- --------------------------------------------------------------------------------
OTHER CONSUMER SERVICES - 2.9%
- --------------------------------------------------------------------------------
APOLLO GROUP, INC., CLASS A* 141,161 4,534,797 2.6%
STEINER LEISURE LIMITED* 21,300 519,187 0.3%
- --------------------------------------------------------------------------------
TOTAL OTHER CONSUMER SERVICES 5,053,984 2.9%
- --------------------------------------------------------------------------------
OTHER PHARMACEUTICALS - 1.1%
- --------------------------------------------------------------------------------
MEDICIS PHARMACEUTICAL CORPORATION, 39,400 1,974,925 1.1%
CLASS A*
- --------------------------------------------------------------------------------
OTHER SPECIALTY STORES - 2.6%
- --------------------------------------------------------------------------------
CENTRAL GARDEN & PET COMPANY, CLASS A* 50,820 1,003,695 0.6%
GUITAR CENTER, INC.* 76,280 1,306,295 0.8%
O'REILLY AUTOMOTIVE, INC.* 20,900 817,712 0.4%
HIBBET SPORT GOODS INC.* 49,780 1,347,171 0.8%
- --------------------------------------------------------------------------------
TOTAL OTHER SPECIALTY STORES 4,474,873 2.6%
- --------------------------------------------------------------------------------
OTHER TELEPHONE/COMMUNICATIONS - 0.8%
- --------------------------------------------------------------------------------
MCLEODUSA INCORPORATED, CLASS A* 31,300 1,144,406 0.7%
PACIFIC GATEWAY EXCHANGE, INC.* 9,000 259,875 0.1%
- --------------------------------------------------------------------------------
TOTAL OTHER TELEPHONE/COMMUNICATIONS 1,404,281 0.8%
See Notes to Financial Statements.
44
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
PRINTING/FORMS - 1.1%
- --------------------------------------------------------------------------------
CONSOLIDATED GRAPHICS, INC.* 40,100 $1,902,244 1.1%
- --------------------------------------------------------------------------------
REAL ESTATE - 0.4%
- --------------------------------------------------------------------------------
LASALLE PARTNERS INCORPORATED* 26,680 780,390 0.4%
- --------------------------------------------------------------------------------
RENTAL/LEASING COMPANIES - 1.4%
- --------------------------------------------------------------------------------
FINANCIAL FEDERAL CORPORATION* 27,500 641,094 0.3%
RENTAL SERVICE CORPORATION* 3,000 65,250 0.1%
UNITED RENTALS, INC.* 67,100 1,803,312 1.0%
- --------------------------------------------------------------------------------
TOTAL RENTAL/LEASING COMPANIES 2,509,656 1.4%
- --------------------------------------------------------------------------------
RESTAURANTS - 0.7%
- --------------------------------------------------------------------------------
DAVE & BUSTER'S, INC.* 38,780 727,125 0.4%
STARBUCKS CORPORATION* 12,480 541,320 0.3%
- --------------------------------------------------------------------------------
TOTAL RESTAURANTS 1,268,445 0.7%
- --------------------------------------------------------------------------------
SEMICONDUCTORS - 3.5%
- --------------------------------------------------------------------------------
LEVEL ONE COMMUNICATIONS, INCORPORATED* 25,565 672,679 0.4%
MIPS TECHNOLOGIES, INC.* 48,200 1,114,625 0.6%
PMC-SIERRA, INC.* 33,230 1,491,196 0.9%
VITESSE SEMICONDUCTOR CORPORATION* 88,480 2,853,480 1.6%
- --------------------------------------------------------------------------------
TOTAL SEMICONDUCTORS 6,131,980 3.5%
- --------------------------------------------------------------------------------
SERVICES TO THE HEALTH INDUSTRY - 8.6%
- --------------------------------------------------------------------------------
ACCESS HEALTH, INC.* 65,640 2,354,835 1.4%
CERNER CORPORATION* 106,690 2,387,189 1.4%
COVANCE INC.* 19,000 529,625 0.3%
MEDICAL MANAGER CORPORATION* 52,000 1,293,500 0.7%
MEDQUIST INC.* 30,400 818,900 0.5%
OMNICARE, INC.* 44,470 1,536,994 0.9%
PAREXEL INTERNATIONAL CORPORATION* 23,110 509,864 0.3%
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.* 22,400 604,800 0.3%
PROFESSIONAL DETAILING, INC.* 16,000 374,000 0.2%
See Notes to Financial Statements.
45
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
EQUITY SECURITIES, CONTINUED Shares Value Net Assets
- --------------------------------------------------------------------------------
SERVICES TO THE HEALTH INDUSTRY, CONTINUED
- --------------------------------------------------------------------------------
QUADRAMED CORPORATION* 58,000 $ 1,189,000 0.7%
QUINTILES TRANSNATIONAL CORP.* 51,440 2,327,660 1.3%
SABRATEK CORPORATION* 9,000 270,000 0.2%
SUPERIOR CONSULTANT HOLDINGS CORPORATION* 18,340 678,580 0.4%
- --------------------------------------------------------------------------------
TOTAL SERVICES TO THE HEALTH INDUSTRY 14,874,947 8.6%
- --------------------------------------------------------------------------------
SMALLER BANKS - 1.0%
- --------------------------------------------------------------------------------
HAMILTON BANCORP INC.* 62,930 1,730,575 1.0%
- --------------------------------------------------------------------------------
SPECIALTY FOODS/CANDY - 0.4%
- --------------------------------------------------------------------------------
REXALL SUNDOWN, INC.* 42,470 761,806 0.4%
- --------------------------------------------------------------------------------
SPECIALTY INSURERS - 0.5%
- --------------------------------------------------------------------------------
CMAC INVESTMENT CORPORATION 11,800 494,125 0.3%
ENHANCE FINANCIAL SERVICES GROUP INC. 12,560 308,505 0.2%
- --------------------------------------------------------------------------------
TOTAL SPECIALTY INSURERS 802,630 0.5%
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 0.6%
- --------------------------------------------------------------------------------
ASPECT TELECOMMUNICATIONS CORPORATION* 36,700 555,087 0.3%
GILAT SATELLITE NETWORKS, LTD.* 11,100 516,150 0.3%
- --------------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS EQUIPMENT 1,071,237 0.6%
- --------------------------------------------------------------------------------
TRUCKING - 0.4%
- --------------------------------------------------------------------------------
UNITED ROAD SERVICES, INC.* 39,400 630,400 0.4%
- --------------------------------------------------------------------------------
WHOLESALE DISTRIBUTORS - 0.4%
- --------------------------------------------------------------------------------
PENTACON, INC.* 17,200 88,150 0.1%
SCHOOL SPECIALTY, INC.* 38,900 612,675 0.3%
- --------------------------------------------------------------------------------
TOTAL WHOLESALE DISTRIBUTORS 700,825 0.4%
TOTAL EQUITY SECURITIES (COST $154,720,740) 164,548,951 94.8%
See Notes to Financial Statements.
46
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
FIXED INCOME SECURITIES - 8.6% Shares Value Net Assets
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 8.6%
- --------------------------------------------------------------------------------
FORD MOTOR CREDIT COMPANY,
5.09151%, 11/20/98 $9,000,000 $ 9,000,000 5.2%
GENERAL MOTORS ACCEPTANCE CORPORATION,
5.162%, 11/12/98 6,000,000 6,000,000 3.4%
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $15,000,000) 15,000,000 8.6%
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS - 0.2%
- --------------------------------------------------------------------------------
TEMPORARY INVESTMENT FUND INC.-TEMP FUND 197,644 197,644 0.1%
TEMPORARY INVESTMENT FUND INC.-TEMP CASH 197,644 197,644 0.1%
- --------------------------------------------------------------------------------
TOTAL MONEY MARKET FUNDS (COST $395,288) 395,288 0.2%
TOTAL INVESTMENTS (COST $170,116,028) 179,944,239 103.6%
- --------------------------------------------------------------------------------
OTHER ASSETS - 1.3%
- --------------------------------------------------------------------------------
RECEIVABLES:
INVESTMENT SECURITIES SOLD 2,141,155
SHARES OF BENEFICIAL INTEREST SOLD 116,169
INTEREST 41,852
PREPAID INSURANCE 4,187
OTHER ASSETS 13,254
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS 2,316,617 1.3%
- --------------------------------------------------------------------------------
TOTAL ASSETS $182,260,856 104.9%
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
47
<PAGE>
PIC STATEMENT OF NET ASSETS
SMALL CAP AS OF OCTOBER 31, 1998
PORTFOLIO
- --------------------------------------------------------------------------------
Percentage of
LIABILITIES - (4.9%) Value Net Assets
- --------------------------------------------------------------------------------
PAYABLES:
INVESTMENT SECURITIES PURCHASED 8,379,119
SHARES OF BENEFICIAL INTEREST REDEEMED 40,845
TO ADVISOR (NOTE 3) 107,018
DEFERRED TRUSTEES' COMPENSATION (NOTE 3) 22,560
ACCRUED EXPENSES 57,675
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 8,607,217 4.9%
- --------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $173,653,639 100.0%
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
48
<PAGE>
<TABLE>
<CAPTION>
PIC STATEMENT OF OPERATIONS
BALANCED YEAR ENDED OCTOBER 31, 1998
GROWTH
MID CAP
SMALL CAP Balanced Growth Mid Cap Small Cap
PORTFOLIOS Portfolio Portfolio Portfolio* Portfolio
- -----------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------
INCOME:
<S> <C> <C> <C> <C>
Dividends $ 130,325 $ 583,933 $ 8,859 $ 96,942
Interest 664,866 305,739 16,550 478,730
---------- ----------- --------- ------------
Total income 795,191 889,672 25,409 575,672
========== =========== ========= ============
EXPENSES:
Investment advisory fee
(Note 3) 236,672 1,045,893 29,031 1,418,731
Administration fee
(Note 3) 39,445 130,737 37,835 177,341
Accounting services fee 62,300 72,371 19,530 77,268
Custodian fee 23,322 33,938 13,618 61,054
Audit fee 14,100 25,302 14,011 18,502
Trustees' fees 3,700 7,100 2,481 5,100
Insurance 1,599 3,700 1,323 5,812
Amortization of
organization costs -- -- -- 10,001
Legal fees 500 7,500 1,810 12,795
Miscellaneous 5,000 3,000 3,637 10,829
---------- ----------- --------- ------------
Total expenses 386,638 1,329,541 123,276 1,797,433
Less, reimbursement/waiver
by Advisor (Note 3) (71,076) (22,176) (85,951) (24,020)
---------- ----------- --------- ------------
Net expenses 315,562 1,307,365 37,325 1,773,413
========== =========== ========= ============
NET INVESTMENT INCOME (LOSS) 479,629 (417,693) (11,916) (1,197,741)
========== =========== ========= ============
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss)
on investments 2,840,824 9,511,479 (198,860) (30,872,647)
Change in net unrealized
appreciation (depreciation)
of investments 3,069,602 15,517,462 57,277 (283,036)
---------- ----------- --------- ------------
NET GAIN (LOSS) ON INVESTMENTS 5,910,426 25,028,941 (141,583) (31,155,683)
========== =========== ========= ============
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $6,390,055 $24,611,248 ($153,499) ($32,353,424)
---------- ----------- --------- ------------
</TABLE>
* Period from December 31, 1997 (commencement of operations) to
October 31, 1998.
See Notes to Financial Statements.
49
<PAGE>
PIC STATEMENT OF OPERATIONS
BALANCED YEAR ENDED OCTOBER 31, 1998
GROWTH
MID CAP
SMALL CAP Balanced
PORTFOLIOS Portfolio
- ---------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
Year Year
ended ended
FROM OPERATIONS: Oct. 31, 1998 Oct. 31, 1997
- ---------------------------------------------------------------------------
Net investment income (loss) $ 479,629 $ 345,595
Net realized gain (loss) on investments 2,840,824 2,294,652
Change in net unrealized appreciation
(depreciation) of investments 3,069,602 2,395,337
----------- -----------
Net increase (decrease) in net assets
resulting from operations 6,390,055 5,035,584
=========== ===========
TRANSACTIONS IN INTERESTS:
Contributions by Holders 4,234,921 21,447,800
Withdrawals by Holders (3,865,363) (3,968,315)
----------- -----------
Net increase (decrease)
in net assets from
transactions in interests 369,558 17,479,485
TOTAL INCREASE (DECREASE) IN NET ASSETS 6,759,613 22,515,069
=========== ===========
NET ASSETS:
Beginning of period 35,383,528 12,868,459
----------- -----------
End of period $42,143,141 $35,383,528
----------- -----------
* commencement of operations.
See Notes to Financial Statements.
50
<PAGE>
PIC
BALANCED
GROWTH
MID CAP
SMALL CAP
PORTFOLIOS
- --------------------------------------------------------------------------------
Growth Mid Cap Small Cap
Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------
Year Year Dec. 31, 1997* Year Year
ended ended through ended ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1998 Oct. 31, 1998 Oct. 31, 1997
- --------------------------------------------------------------------------------
$ (417,693) $ (133,460) $ (11,916) $ (1,197,741) $ (934,925)
9,511,479 32,161,956 (198,860 (30,872,647) 72,084,822
15,517,462 (7,683,870) 57,277 (283,036) (62,640,291)
- ------------ ------------ ----------- ------------ -------------
24,611,248 24,344,626 (153,499) (32,353,424) 8,509,606
============ ============ =========== ============ =============
64,364,321 17,478,857 9,426,366 123,809,971 164,160,467
(35,037,926) (75,778,332) (3,509,589) (57,458,705) (234,314,952)
- ------------ ------------ ----------- ------------ -------------
29,326,395 (58,299,475) 5,916,777 66,351,266 (70,154,485)
============ ============ =========== ============ =============
53,937,643 (33,954,849) 5,763,278 33,997,842 (61,644,879)
============ ============ =========== ============ =============
82,144,680 116,099,529 -- 139,655,797 201,300,676
- ------------ ------------ ----------- ------------ -------------
$136,082,323 $ 82,144,680 $ 5,763,278 $173,653,639 $ 139,655,797
- ------------ ------------ ----------- ------------ -------------
51
<PAGE>
PIC SELECTED RATIO DATA
BALANCED
GROWTH
MID CAP
SMALL CAP
PORTFOLIOS Balanced Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year Year Year Year
ended ended ended ended ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995 Oct. 31, 1994
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
<S> <C> <C> <C> <C> <C>
Operating expenses 0.80%++ 0.80%++ 0.80%++ 0.80%++ 0.80%++
Net investment income 1.22% 1.35% 1.30% 1.57% 1.63%
Portfolio turnover rate 111.47% 104.50% 54.24% 106.50% 116.63%
</TABLE>
++ Net of expense reimbursements equivalent to 0.18%, 0.36%, 0.90%, 0.78%, and
1.16% of average net assets, respectively.
See Notes to Financial Statements.
52
<PAGE>
PIC SELECTED RATIO DATA, CONTINUED
BALANCED
GROWTH
MID CAP
SMALL CAP
PORTFOLIOS Growth Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year Year Year Year
ended ended ended ended ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995 Oct. 31, 1994
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
<S> <C> <C> <C> <C> <C>
Operating expenses 1.00%# 1.00%# 1.00%# 1.00%# 1.00%#
Net investment income (loss) (0.32%) (0.13%) (0.04%) 0.08% 0.10%
Portfolio turnover rate 81.06% 67.54% 64.09% 54.89% 68.26%
</TABLE>
# Net of expense reimbursements equivalent to 0.02%, 0.05%, 0.04%, 0.01%, and
0.01% of average net assets, respectively.
See Notes to Financial Statements.
53
<PAGE>
PIC SELECTED RATIO DATA, CONTINUED
BALANCED
GROWTH
MID CAP
SMALL CAP
PORTFOLIOS Mid Cap Portfolio
- --------------------------------------------------------------------------------
Dec. 31, 1997*
through
Oct. 31, 1998
- --------------------------------------------------------------------------------
Ratios to average net assets:
Operating expenses 0.90%+^
Net investment loss (0.29%)+
Portfolio turnover rate 166.89%
* Commencement of operations.
+ Annualized.
^ Net of expense reimbursements equivalent to 2.07% of average net assets.
See Notes to Financial Statements.
54
<PAGE>
PIC SELECTED RATIO DATA, CONTINUED
BALANCED
GROWTH
MID CAP
SMALL CAP
PORTFOLIOS Small Cap Portfolio
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year Year Year Year
ended ended ended ended ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1996 Oct. 31, 1995 Oct. 31, 1994
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
<S> <C> <C> <C> <C> <C>
Operating expenses 1.00%# 1.00%# 1.00%# 1.00%# 1.00%#
Net investment loss (0.68%) (.49%) (.59%) (.51%) (.49%)
Portfolio turnover rate 81.75% 151.52% 53.11% 45.45% 63.89%
</TABLE>
# Net of expense reimbursements equivalent to 0.01%, 0.01%, 0.01%, 0.07%, and
0.10% of average net assets, respectively.
See Notes to Financial Statements.
55
<PAGE>
PIC NOTES TO FINANCIAL STATEMENTS
BALANCED
GROWTH
MID CAP
SMALL CAP
PORTFOLIOS
- --------------------------------------------------------------------------------
1 - ORGANIZATION
- --------------------------------------------------------------------------------
PIC Balanced and Growth Portfolios were organized on December 11, 1991 ,
the PIC Mid Cap Portfolio was organized on December 31, 1997, and PIC Small Cap
Portfolio was organized on March 22, 1993 as separate trusts under the laws of
the State of New York (each a "Portfolio" and collectively the "Portfolios").
The beneficial interests in each Portfolio are divided into an unlimited number
of non-transferable interests, par value $.01 each. The Portfolios are
registered under the Investment Company Act of 1940 as open-end, diversified
management investment companies.
2 - SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The following is a summary of significant accounting policies consistently
followed by the Portfolios. These policies are in conformity with generally
accepted accounting principles.
A. VALUATION OF SECURITIES. Equity securities listed on a national securities
exchange or traded on the NASDAQ system are valued at their last sale
price. Other equity securities and debt securities for which market
quotations are readily available are valued at the mean between their bid
and asked price, except that debt securities maturing within 60 days are
valued on an amortized cost basis. Securities for which market quotations
are not readily available are valued at fair value as determined in good
faith by the Board of Trustees.
B. FEDERAL INCOME TAXES. Each Portfolio intends to comply with the
requirements of the Internal Revenue Code applicable to it. Therefore, no
federal income tax provision is required.
C. DEFERRED ORGANIZATION COSTS. Organization costs of the Portfolios are being
amortized on a straight-line basis over a period of sixty months. During
the amortization period, the proceeds of any redemption of the original
Interests in a Portfolio by any Holder thereof will be reduced by a
pro-rata portion of any then unamortized organization costs based on the
ratio of Interests redeemed to the total initial Interests outstanding
prior to the redemption.
D. OTHER. Securities transactions are recorded on the trade date basis.
Realized gains and losses from securities transactions are reported on an
56
<PAGE>
PIC NOTES TO FINANCIAL STATEMENTS,
BALANCED CONTINUED
GROWTH
MID CAP
SMALL CAP
PORTFOLIOS
- --------------------------------------------------------------------------------
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 LLC ("ICA"), pursuant to which agreements
certain employees of these entities serve as officers and/or trustees of the
Portfolios. PIC and ICA also provide management services necessary for the
operations of the Portfolios and furnish office facilities.
PIC receives from Balanced Portfolio an investment advisory fee at the
annual rate of 0.60% of its average daily net assets, 0.80% from the Growth
Portfolio, 0.70% from the Mid Cap Portfolio, and 0.80% from the Small Cap
Portfolio. In addition, PIC has voluntarily taken to limit the expenses of the
Balanced Portfolio to 0.80% of its average daily net assets, 1.00% for the
Growth Portfolio, 0.90% for the Mid Cap Portfolio, and 1.00% for the Small Cap
Portfolio.
Fees waived by PIC for the year ended October 31, 1998 were as follows:
Waived Reimbursed
Fees Expenses
---- --------
Balanced Portfolio $71,076 $ 0
Growth Portfolio 22,176 0
Mid Cap Portfolio 29,031 56,920
Small Cap Portfolio 24,020 0
ICA receives for its services a fee at the annual rate of 0.10% of the
average daily net assets of each Portfolio subject to an annual minimum of
$45,000 (except for Balanced Portfolio, which has no minimum). Fees paid to ICA
for the year ended October 31, 1998 are stated on the respective Portfolios'
Statement of Operations.
57
<PAGE>
PIC NOTES TO FINANCIAL STATEMENTS,
BALANCED CONTINUED
GROWTH
MID CAP
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, 1998 were as follows:
Purchases Sales
--------- -----
Balanced Porfolio $ 32,848,714 $29,580,698
Growth Portfolio 123,276,494 99,664,277
Mid Cap Portfolio 12,717,460 7,230,404
Small Cap Portfolio 195,915,640 137,768,188
The Balanced Portfolio purchased $11,757,821 and sold $13,095,993 of U.S.
Government securities. There were no purchases or sales of U.S. Government
securities by the Growth, Mid Cap, and Small Cap Portfolios.
Included in proceeds of sales of the Mid Cap Portfolio is $1,549,653
representing the value of securities disposed of in payment of an in-kind
withdrawal by Holders of Interests resulting in a realized gain of $67,609.
The aggregate unrealized appreciation and depreciation of investment
securities at October 31, 1998, based on cost for Federal income tax purposes,
were as follows:
Tax Gross Gross
Cost of Unrealized Unrealized
Investments Appreciation Depreciation
----------- ------------ ------------
Balanced Portfolio $ 35,018,620 $ 8,439,978 $ (485,538)
Growth Portfolio 103,147,556 37,030,161 (1,106,815)
Mid Cap Portfolio 5,703,110 327,207 (273,471)
Small Cap Portfolio 170,578,021 19,963,778 (10,597,560)
58
<PAGE>
PIC INDEPENDENT AUDITOR'S REPORT
BALANCED
GROWTH
MID CAP
SMALL CAP
PORTFOLIOS
- --------------------------------------------------------------------------------
To the Board of Trustees of
and the holders of Interests in,
PIC Balanced Portfolio
PIC Growth Portfolio
PIC Mid Cap Portfolio
PIC Small Cap Portfolio
We have audited the accompanying statements of net assets of PIC Balanced
Portfolio, PIC Growth Portfolio, PIC Mid Cap Portfolio, and PIC Small Cap
Portfolio as of October 31, 1998, and the related statements of operations, the
statements of changes in net assets, and selected ratio data for each of the
periods indicated. These financial statements and selected ratio data are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and selected ratio data based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 1998 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PIC Balanced Portfolio, PIC
Growth Portfolio, PIC Mid Cap Portfolio, and PIC Small Cap Portfolio as of
October 31, 1998, 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 3, 1998
59
<PAGE>
PROVIDENT INVESTMENT COUNSEL TRUSTEES AND OFFICERS
PINNACLE FUNDS
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS - PIC INVESTMENT TRUST
- --------------------------------------------------------------------------------
JEFFREY J. MILLER, Trustee
JETTIE M. EDWARDS, Trustee
BERNARD J. JOHNSON, Trustee Emeritus
JEFFREY D. LOVELL, Trustee
WAYNE H. SMITH, Trustee
DOUGLASS B. ALLEN, President
THAD M. BROWN, Vice President, Secretary and Treasurer
TRUSTEES AND OFFICERS - PIC PORTFOLIOS
- --------------------------------------------------------------------------------
JEFFREY J. MILLER, Trustee
RICHARD N. FRANK, Trustee
JAMES CLAYBURN LAFORCE, Trustee
ANGELO R. MOZILO, Trustee
BERNARD J. JOHNSON, Trustee Emeritus
DOUGLASS B. ALLEN, President
THAD M. BROWN, Vice President, Secretary and Treasurer
LEGAL COUNSEL - PIC INVESTMENT TRUST
- --------------------------------------------------------------------------------
SWIDLER, BERLIN, SHEREFF, FRIEDMAN, LLP
LEGAL COUNSEL - PIC PORTFOLIOS
- --------------------------------------------------------------------------------
PAUL, HASTINGS, JANOFSKY & WALKER, LLP
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
MCGLADREY & PULLEN, LLP
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
60
