<PAGE> 1
FILE NO. 33-44579
811-6498
THIS AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED
BY THE BOARDS OF TRUSTEES OF THE REGISTRANT AND THE PORTFOLIOS
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ___
PRE-EFFECTIVE AMENDMENT NO. ___
POST-EFFECTIVE AMENDMENT NO. 12 _X_
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 ___
AMENDMENT NO. 15 _X_
PIC INVESTMENT TRUST
(Exact name of registrant as specified in charter)
300 NORTH LAKE AVENUE 91101-4106
PASADENA, CA (Zip Code)
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER (INCLUDING AREA CODE): (818) 449-8500
THAD M. BROWN
PROVIDENT INVESTMENT COUNSEL
300 NORTH LAKE AVENUE
PASADENA, CA 91101-4106
(Name and address of agent for service of process)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(i)
___ on (date) pursuant to paragraph (a)(i)
___ 75 days after filing pursuant to paragraph (a)(ii)
_X_ on January 6, 1997 pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box
___ this post-effective amendment designates a new effective date for a
previously filed posteffective amendment.
===============================================================================
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously elected to register an indefinite number of shares of beneficial
interest, $.001.
The Registrant filed its 24f-2 Notice on November 28, 1995.
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<PAGE> 2
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information, including how the Funds invest
and the services available to shareholders.
To learn more about each Fund and its investments, you can obtain a copy of
the Fund's most recent financial reports and portfolio listing, or a copy of
the Statement of Additional Information (SAI) dated January , 1997, as may
be amended from time to time. The SAI has been filed with the Securities and
Exchange Commission (SEC) and is incorporated herein by reference (legally
forms a part of this prospectus). For a free copy of either document, call
(800) 618-7643.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the U.S. Government, the
FDIC, the Federal Reserve Board, or any other U.S. Government agency, and are
subject to investment risk, including the possible loss of principal.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PIC PINNACLE
BALANCED FUND
GROWTH FUND
SMALL CAP FUND
PROSPECTUS
JANUARY , 1997
PROVIDENT INVESTMENT COUNSEL
300 NORTH LAKE AVENUE
PASADENA, CA 91101
<PAGE> 3
CONTENTS
<TABLE>
<S> <C> <C>
KEY FACTS 3 THE FUNDS AT A GLANCE
3 WHO MAY WANT TO INVEST
4 EXPENSES
6 STRUCTURE OF THE FUNDS AND
THE PORTFOLIOS
THE FUNDS IN DETAIL 7 CHARTER How the Fund is
organized.
7 INFORMATION ABOUT THE FUNDS'
INVESTMENTS The Funds' overall
approach to investing.
10 SECURITIES AND INVESTMENT
PRACTICES More information about
how the Fund invest.
11 BREAKDOWN OF EXPENSES How
operating costs are calculated
and what they include.
12 PERFORMANCE
YOUR ACCOUNT 15 WAYS TO SET UP YOUR ACCOUNT
16 HOW TO BUY SHARES
17 HOW TO SELL SHARES
19 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER ACCOUNT 20 DIVIDENDS, CAPITAL GAINS
POLICIES AND TAXES
21 TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
23 EXCHANGE RESTRICTIONS
GENERAL INFORMATION 24
</TABLE>
PROSPECTUS
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<PAGE> 4
KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Provident Investment Counsel (PIC), located in Pasadena, California
since 1951, is the Funds' Advisor. At December 31, 1996, total assets under
PIC's management were $ billion.
- --------------------------------------
GROWTH FUND
GOAL: Long term growth of capital.
STRATEGY: Invests, through the PIC Growth Portfolio, in high quality growth
stocks.
- --------------------------------------
BALANCED FUND
GOAL: Total return, that is, a combination of income and capital growth, while
preserving capital.
STRATEGY: Invests, through the PIC Balanced Portfolio, in a combination of high
quality growth stocks and fixed income senior securities
- --------------------------------------
SMALL CAP FUND
GOAL: Long term growth of capital.
STRATEGY: Invests, through the PIC Small Cap. Portfolio, mainly in equity
securities of small companies.
WHO MAY WANT TO INVEST
The Growth Fund may be appropriate for investors who seek potentially high long
term returns, but are willing to accept the risk of investing in growth stocks.
The Fund is designed for those seeking capital appreciation through a
diversified portfolio of equity securities of issuers all sizes.
The Balanced Fund may be appropriate for investors who want to share in
potentially high long term returns, but hope to see less fluctuation in the
value of their investment.
The Small Cap. Fund may be appropriate for investors who are willing to ride out
stock market fluctuations in pursuit of potentially above average long-term
returns. The Small Cap. Fund is designed for those who want to focus on stocks
of small capitalization companies in search of above average returns. A
company's market capitalization is the total market value of its outstanding
common stock. A small company is one with market capitalization or annual
revenues at the time of purchase of $250 million or less. The securities of
smaller, less well-known companies may be more volatile than those of larger
companies. Over time, however, small-capitalization stocks have shown greater
growth potential than those of larger-capitalization companies.
The value of each Fund's investments will vary from day to day, and generally
reflects market conditions, interest rates, and other company, political or
economic news. In the short term, stock prices can fluctuate dramatically in
response to these factors. When you sell your shares, they may be worth more or
less than what you paid for them. By itself, no fund constitutes a balanced
investment plan. There is no assurance that any Fund will meet its objective.
PROSPECTUS
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KEY FACTS - CONTINUED
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell or hold
shares in a fund.
<TABLE>
<S> <C>
Maximum sales charge None
Maximum sales charge on
reinvested dividends None
Deferred sales charge
on redemptions None
Exchange fee $5
</TABLE>
ANNUAL OPERATING EXPENSES are paid out of each Fund's and each Portfolio's
assets. The Growth and Small Cap Funds each indirectly pay an investment
advisory fee equal to .80% of the Fund's average net assets. The Balanced Fund
indirectly pays an investment advisory fee equal to .60% of that Fund's average
net assets. Each Fund also incurs other expenses for services such as
administrative services, maintaining shareholder records and furnishing
shareholder statements and financial reports. A Fund's expenses are factored
into its share price or dividends and are not charged directly to shareholder
accounts.
The following are projections based on estimated expenses, and are calculated as
a percentage of average net assets.
- --------------------------------------
BALANCED FUND
<TABLE>
<S> <C>
Management fee (paid by
the Portfolio) .60%
12b-1 fee .15%
Other expenses of the
Portfolio, after
reimbursement by PIC .20%
----
TOTAL OPERATING EXPENSES
OF THE PORTFOLIO .80%
Administrative fee paid
by the Fund
to PIC .20%
Other expenses of the
Fund,
after reimbursement by
PIC .05%
----
TOTAL FUND OPERATING
EXPENSES 1.20%
</TABLE>
PIC reimburses the Balanced Fund for any expenses in excess of 1.20% of average
net assets. Without this reimbursement, the total fund operating expenses would
be estimated to be 2.47% of average net assets.
- --------------------------------------
GROWTH FUND
<TABLE>
<S> <C>
Management fee (paid by
the Portfolio) .80%
12b-1 fee .15%
Other expenses of the
Portfolio, after
reimbursement by PIC .20%
----
TOTAL OPERATING EXPENSES
OF THE PORTFOLIO 1.00%
Administrative fee paid
by the Fund to PIC .20%
Other expenses of the
Fund,
after reimbursement by
PIC .05%
----
TOTAL FUND OPERATING
EXPENSES 1.40%
</TABLE>
PIC reimburses the Growth Fund for any expenses in excess of 1.40% of average
net assets. Without this reimbursement, the total fund operating expenses would
be estimated to be 1.45% of average net assets.
PROSPECTUS
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KEY FACTS - CONTINUED
- --------------------------------------
SMALL CAP FUND
<TABLE>
<S> <C>
Management fee (paid by
the Portfolio) .80%
12b-1 fee .15%
Other expenses of the
Portfolio .20%
----
TOTAL OPERATING EXPENSES
OF THE PORTFOLIO 1.15%
Administrative fee paid
by the Fund to PIC .20%
Other expenses of the
Fund .25%
----
TOTAL FUND OPERATING
EXPENSES 1.60%
</TABLE>
PIC reimburses the Small Cap Fund for any expenses in excess of 1.60% of average
net assets. Without this reimbursement, the total fund operating expenses would
be estimated to be % of average net assets.
EXAMPLES: Let's say, hypothetically, that each Fund's annual return is 5% and
that its operating expenses are exactly as just described. For every $1,000 you
invest, here's how much you would pay in total expenses if you close your
account after the number of years indicated:
- --------------------------------------
BALANCED FUND
<TABLE>
<S> <C>
After 1 year $ 12
After 3 years $ 38
</TABLE>
- --------------------------------------
GROWTH FUND
<TABLE>
<S> <C>
After 1 year $ 14
After 3 years $ 44
</TABLE>
- --------------------------------------
SMALL CAP FUND
<TABLE>
<S> <C>
After 1 year $ 16
After 3 years $ 50
</TABLE>
These examples illustrate the effect of expenses, but they are not meant to
suggest actual or expected costs or returns, all of which may vary. For a more
complete description of the various costs and expenses, see "Breakdown of
Expenses." The tables above summarize the expenses of both the Portfolios and
the Funds. The Trustees expect that the combined per share expenses of the Funds
and the Portfolios will be equal to, or may be less than, the expenses that
would be incurred by a Fund if it retained an investment manager and invested
directly in the types of securities held by a Portfolio.
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STRUCTURE OF THE FUNDS AND THE PORTFOLIOS
Unlike many other mutual funds which directly acquire and manage their own
portfolio securities, each Fund seeks to achieve its investment objective by
investing all of its assets in a PIC Portfolio. Each Portfolio is a separate
registered investment company with the same investment objective as the Fund.
Since a Fund will not invest in any securities other than shares of a Portfolio,
investors in the Fund will acquire only an indirect interest in the Portfolio.
Each Fund's and Portfolio's investment objective cannot be changed without
shareholder approval.
In addition to selling its shares to the Fund, a Portfolio may sell its shares
to other mutual funds or institutional investors. All investors in a Portfolio
invest on the same terms and conditions and pay a proportionate share of the
Portfolio's expenses. However, other investors in a Portfolio may sell their
shares to the public at prices different from those of a Fund as a result of the
imposition of sales charges or different operating expenses. You should be aware
that these differences may result in different returns from those of investors
in other entities investing in the Portfolio. Information concerning other
holders of interests in the Portfolio is available by calling (800) 618-7643.
The Trustees of PIC Investment Trust believe that this structure may enable a
Fund to benefit from certain economies of scale, based on the premise that
certain of the expenses of managing an investment portfolio are relatively fixed
and that a larger investment portfolio may therefore achieve a lower ratio of
operating expenses to net assets. Investing a Fund's assets in a Portfolio may
produce other benefits resulting from increased asset size, such as the ability
to participate in transactions in securities which may be offered in larger
denominations than could be purchased by the Fund alone. A Fund's investment in
a Portfolio may be withdrawn by the Trustees at any time if the Board determines
that it is in the best interests of a Fund to do so. If any such withdrawal were
made, the Trustees would consider what action might be taken, including the
investment of all of the assets of the Fund in another pooled investment company
or the retaining of an investment advisor to manage the Fund's assets directly.
Whenever a Fund is requested to vote on matters pertaining to a Portfolio, the
Fund will hold a meeting of its shareholders, and the Fund's votes with respect
to the Portfolio will be cast in the same proportion as the shares of the Fund
for which voting instructions are received. For further information, see "The
Funds in Detail," "Information about the Funds' Investments" and "Securities and
Investment Practices."
PROSPECTUS
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<PAGE> 8
THE FUNDS IN DETAIL
CHARTER
EACH FUND IS A MUTUAL FUND: an investment that pools shareholders' money and
invests it toward a specified goal. In technical terms, each Fund is a
diversified series of PIC Investment Trust, which is an open-end management
investment company, organized as a Delaware business trust on December 11, 1991.
THE FUNDS AND THE PORTFOLIOS ARE EACH GOVERNED BY A BOARD OF TRUSTEES,
responsible for protecting the interests of shareholders. The Trustees are
experienced executives who meet throughout the year to oversee the activities of
the Funds and the Portfolios, review contractual arrangements with companies
that provide services to the Funds and the Portfolios, and review performance.
The majority of Trustees are not otherwise affiliated with PIC. Information
about the Trustees and officers is contained in the SAI.
THE FUNDS MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. These meetings may
be called to elect or remove Trustees, change fundamental policies, approve an
investment advisory contract, or for other purposes. Shareholders not attending
these meetings are encouraged to vote by proxy. The Funds will mail proxy
materials in advance, including a voting card and information about the
proposals to be voted on. The number of votes you are entitled to is based on
the number of shares you own.
PIC IS THE ADVISER TO THE PIC PORTFOLIOS, in which the respective Funds invest.
An investment committee of PIC formulates and implements an investment program
for each of the Portfolios, including determining which securities should be
bought and sold. PIC may use broker-dealers that sell shares of a Fund to carry
out transactions for the Portfolios, provided that the Portfolios receive
brokerage services and commission rates comparable to those of other
broker-dealers.
PIC traces its origins to an investment partnership formed in 1951. It is now an
indirect, wholly owned subsidiary of United Asset Management Corporation (UAM),
a publicly owned corporation with headquarters located at One International
Place, Boston, MA 02110. UAM is principally engaged, through affiliated firms,
in providing institutional investment management services.
INFORMATION ABOUT THE FUNDS' INVESTMENTS.
Because the investment characteristics of each Fund will correspond directly to
those of the Portfolio in which it invests, the following is a discussion of the
various investments of, and techniques employed by, the Portfolios.
- --------------------------------------
PIC GROWTH FUND
THE PIC GROWTH FUND SEEKS LONG TERM GROWTH OF CAPITAL by investing in the PIC
Growth Portfolio, which in turn invests primarily in equity securities. Under
normal circumstances, the Growth Portfolio will invest at least 80% of its
assets in such equity securities. In selecting investments for the Growth
Portfolio,
PROSPECTUS
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<PAGE> 9
THE FUNDS IN DETAIL - CONTINUED
PIC will include equity securities of companies of various sizes which are
currently experiencing an above-average rate of earnings growth. In addition,
PIC seeks companies which have a five-year average performance record of sales,
earnings, pretax margins, return on equity and reinvestment rate, all of which,
in the aggregate, are 1.5 times the average performance of the Standard & Poor's
Index of 500 Common Stocks for the same period. The Growth Portfolio will invest
in a range of small, medium and large companies; the minimum market
capitalization of a portfolio security is expected to be $250 million, and the
average market capitalization is currently approximately $9 billion. Equity
securities in which the Growth Portfolio invests typically average less than a
1% dividend. Currently, approximately 70% of the equity securities in which the
Growth Portfolio invests are listed on the New York or American Stock Exchanges,
and the remainder are traded on the National Association of Securities Dealers'
NASDAQ system or are otherwise traded over the counter. PIC supports its
selection of individual securities through intensive research and uses
qualitative and quantitative disciplines to determine when securities should be
sold.
In unusual circumstances, economic, monetary, technical and other factors may
cause PIC to assume a temporary, defensive position during which all or a
substantial portion of the Growth Portfolio's assets may be invested in short
term instruments. Under normal market conditions, it is expected that
investments in such short term instruments may range from zero (fully invested)
to 20% of the Portfolio's assets.
The Growth Portfolio may also invest up to 20% of its assets in foreign
securities.
- --------------------------------------
PIC BALANCED FUND
THE PIC BALANCED FUND SEEKS TO PROVIDE TOTAL RETURN -- that is, a combination of
income and capital growth, while preserving capital, by investing in the PIC
Balanced Portfolio. In PIC's opinion, over time, stocks outperform bonds and
investments that are equivalent to cash; consequently, the Balanced Portfolio
attempts to achieve total return through investments in equity securities. The
selection for the equity securities purchased for the Balanced Portfolio is
described above in more detail under the caption "PIC Growth Fund," The Balanced
Portfolio will also invest no less than 25% of its assets in fixed income senior
securities, both to earn current income and to achieve gains from an increase in
the value of the fixed income securities. In general, prices of fixed income
securities rise when interest rates fall, and vice versa. Fixed income
securities have varying degrees of quality and varying levels of sensitivity to
changes in interest rates. Longer term fixed income securities are generally
more sensitive to interest rate changes than short term fixed income securities.
The Balanced Portfolio may invest up to 70% of its total assets in fixed income
securities, but it may not invest in such securities unless they have been rated
at least BBB by Standard & Poor's Corporation (S&P) or Baa by Moody's Investors
Service, Inc. (Moody's), or if unrated by S&P and Moody's are of comparable
quality in PIC's opinion. Securities rated Baa by Moody's are regarded as medium
grade, but have speculative characteristics. If the
PROSPECTUS
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<PAGE> 10
rating of a security is reduced after it is purchased, the Balanced Portfolio
can continue to hold it, but PIC will consider the rating reduction in
determining whether or not the security should be sold. See the SAI for a
description of S&P and Moody's ratings.
The Balanced Portfolio may also attempt to earn current income and reduce the
variability of the net asset value of its shares by investing a portion of its
assets in short term investments. In unusual circumstances, economic, monetary,
technical and other factors may cause PIC to assume a temporary, defensive
position during which all or a substantial portion of the Balanced Portfolio's
assets may be invested in short term instruments. Under normal market
conditions, it is expected that investments in such short term instruments may
range from zero (fully invested) to 20% of the Portfolio's assets.
The Balanced Portfolio may also invest up to 20% of its assets in foreign
securities.
- --------------------------------------
PIC SMALL CAP FUND
THE PIC SMALL CAP FUND SEEKS LONG TERM GROWTH OF CAPITAL by investing in the PIC
Small Cap. Portfolio, which in turn invests primarily in equity securities of
small companies.
PIC will invest at least 65%, and normally at least 95%, of the Portfolio's
total assets in these securities. The Portfolio has flexibility, however, to
invest the balance in other market capitalizations and security types. Small
capitalization companies are those whose market capitalization or annual
revenues are $250 million or less at the time of the Portfolio's investment.
Companies whose capitalization or revenues increase beyond this range after
purchase continue to be considered small capitalization for the purposes of the
Portfolio's investment policy. Investing in small capitalization stocks may
involve greater risk than investing in large capitalization stocks, since they
can be subject to more abrupt or erratic movements in value.
The value of the Portfolio's domestic and foreign investments varies in response
to many factors. Stock values fluctuate in response to the activities of
individual companies and general market and economic conditions. Investments in
foreign securities may involve risks in addition to those of U.S. investments,
including increased political and economic risk, as well as exposure to currency
fluctuations.
As a mutual fund, the Portfolio seeks to spread investment risk by diversifying
its holdings among many companies and industries. Of course, when you sell your
shares of the Fund, they may be worth more or less than what you paid for them.
PIC normally invests the Portfolio's assets according to its investment
strategy. The Portfolio also reserves the right to invest without limitation in
short term instruments for temporary, defensive purposes.
The Small Cap. Portfolio may also invest up to 20% of its assets in foreign
securities.
PROSPECTUS
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<PAGE> 11
THE FUNDS IN DETAIL - CONTINUED
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about the types of
instruments in which the Portfolios may invest, and strategies PIC may employ in
pursuit of the Portfolios' investment objectives. A summary of risks and
restrictions associated with these instrument types and investment practices is
included as well. A complete listing of each Fund's policies and limitations and
more detailed information about each Portfolio's investments is contained in the
SAI. Policies and limitations are considered at the time of purchase; the sale
of instruments is not required in the event of a subsequent change in
circumstances.
PIC may not buy all of these instruments or use all of these techniques to the
full extent permitted unless it believes that doing so will help a Portfolio
achieve its goals. Current holdings and recent investment strategies are
described in each Fund's financial reports which are sent to shareholders twice
a year. For a free SAI or financial report, call (800) 618-7643.
EQUITY SECURITIES are common stocks and other kinds of securities that have the
characteristics of common stocks. These other securities include bonds,
debentures and preferred stocks which can be converted into common stocks. They
also include warrants and options to purchase common stocks.
Restriction: With respect to 75% of total assets, a Portfolio may not own more
than 10% of the outstanding voting securities of a single issuer.
SHORT TERM INVESTMENTS are debt securities that mature within a year of the date
they are purchased by a Portfolio. Some specific examples of short term
investments are commercial paper, bankers' acceptances, certificates of deposit
and repurchase agreements.
Restriction: A Portfolio will only purchase short term investments which are
"high quality." High quality means the investments have been rated A-1 by S&P or
Prime-1 by Moody's, or have an issue of debt securities outstanding rated at
least A by S&P or Moody's. The term also applies to short term investments that
PIC believes are comparable in quality to those with an A-1 or Prime-1 rating.
U.S. Government securities are always considered to be high quality.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Portfolio buys a security at
one price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
EXPOSURE TO FOREIGN MARKETS. A Portfolio may invest in foreign securities.
Restriction: A Portfolio may invest no more than 20% of its total assets in
foreign securities, and it will only purchase foreign securities or American
Depositary Receipts which are listed on a national securities exchange or
included in the NASDAQ National Market System.
OPTIONS AND FUTURES. A Portfolio has the right to use options and futures to
hedge its investments in securities, but PIC does not expect to use these
instruments during this fiscal year. A Fund will
PROSPECTUS
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<PAGE> 12
advise shareholders before any investment in options or futures commences. See
the SAI for details.
RISK FACTORS. Foreign securities and securities issued by U.S. entities with
substantial foreign operations may involve additional risks and considerations.
These include risks relating to political or economic conditions in foreign
countries, fluctuations in foreign currencies, withholding or other taxes,
operational risks, increased regulatory burdens and the potentially less
stringent investor protection and disclosure standards of foreign markets. All
of these factors can make foreign investments, especially those in developing
countries, more volatile.
Options and futures, which are sometimes called derivative securities, also
entail certain risks, which are described in detail in the SAI.
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
Some of the policies and restrictions discussed on this and the preceding pages
are fundamental; that is, subject to change only by shareholder approval. The
following paragraph states all those that are fundamental. All policies stated
throughout the prospectus, other than those identified in the following
paragraph, can be changed without shareholder approval.
The Growth Fund and the Small Cap. Fund each seek long term growth of capital.
The Balanced Fund seeks total return while preserving capital. Each Portfolio,
with respect to 75% of total assets, may not invest more than 5% of its total
assets in any one issuer and may not own more than 10% of the outstanding voting
securities of a single issuer. Each Portfolio may not invest more than 25% of
its total assets in any one industry.
BREAKDOWN OF EXPENSES
Like all mutual funds, each Fund pays fees related to its daily operations.
Expenses paid out of a Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts.
Each Portfolio pays an INVESTMENT ADVISORY FEE to PIC each month for managing
its investments. The Growth Portfolio and the Small Cap. Portfolio each pay PIC
a fee at the annual rate of 0.80% of the Portfolio's average net assets. The
Balanced Portfolio pays PIC a fee at the annual rate of 0.60% of its average net
assets.
While the investment advisory fee is a significant component of a Portfolio's
(and thus a Fund's) annual operating costs, each Fund also pays OTHER EXPENSES.
Each Fund pays an annual 0.15% 12B-1 FEE to PIC. ("12b-1" refers to the federal
securities regulation authorizing annual fees of this type.) PIC may use these
fees to pay compensation to financial services firms that sell shares of the
Funds, and these firms typically pass along a portion of this compensation to
your financial representative. The Funds and the Portfolios each pay a monthly
administration fee to Investment Company Administration Corporation for managing
some of their business affairs. The Portfolios pay a fee at
PROSPECTUS
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<PAGE> 13
THE FUNDS IN DETAIL - CONTINUED
the annual rate of 0.10% of average net assets, and each Fund pays an annual fee
of $15,000. The Funds and the Portfolios also pay other expenses, such as legal,
audit, custodian and transfer agency fees, as well as the compensation of
Trustees who are not affiliated with PIC.
PIC expects that each Portfolio's portfolio turnover rate will normally not
exceed 100%.
PIC has agreed to reimburse each Fund for investment advisory fees and other
expenses if they exceed a certain percentage of the Fund's average net assets.
In the case of the Balanced Fund, this limit is 1.20%, in the case of the Growth
Fund it is 1.40%, and in the case of the Small Cap Fund the limit is 1.60%. PIC
retains the ability to be repaid by a Fund if expenses subsequently fall below
the specified limit within the next three years. This reimbursement arrangement,
which may be terminated at any time without notice, will decrease a Fund's
expenses and boost its performance.
PERFORMANCE
Mutual fund performance is commonly measured as TOTAL RETURN. Total return is
the change in value of an investment over a given period, assuming reinvestment
of any dividends and capital gains. Total return reflects a Fund's performance
over a stated period of time. An AVERAGE ANNUAL TOTAL RETURN is a hypothetical
rate of return that, if achieved annually, would have produced the same total
return if performance had been constant over the entire period. Average annual
total return smooths out variations in performance; it is not the same as actual
year-by-year results.
Total return and average annual total return are based on past results and are
not a prediction of future performance. They do not include effect of income
taxes paid by shareholders. A Fund may sometimes show its performance compared
to certain performance rankings, averages or stock indices (described more fully
in the SAI).
PRIOR PERFORMANCE OF PIC
The following table sets forth PIC's composite performance data relating to the
historical performance of institutional private accounts managed by PIC, since
the date indicated, that have investment objectives, policies, strategies and
risks substantially similar to those of the Portfolios. The data is provided to
illustrate to past performance of PIC in managing substantially similar accounts
as measured against specified market indices and does not represent the
performance of any of the Portfolios. You should not consider this performance
data as an indication of future performance of any Portfolio or of PIC.
PIC's composite performance data shown below were calculated in accordance with
recommended standards of the Association for Investment Management and Research
(AIMR*), retroactively applied to all time periods. All returns presented were
calculated on a total return basis and include all dividends and interest,
accrued income
PROSPECTUS
12
<PAGE> 14
and realized and unrealized gains and losses. All returns reflect the deduction
of investment advisory fees, brokerage commission and execution costs paid by
PIC's institutional private accounts, without provision for federal or state
income taxes. Custodial fees, if any, were not included in the calculation.
PIC's composite includes all actual, fee-paying, discretionary institutional
private accounts managed by PIC that have investment objectives, policies,
strategies and risks substantially similar to those of the Portfolios.
Securities transactions are accounted for on the trade date and accrual
accounting is used. Cash and equivalents are included in performance returns.
The monthly returns of the PIC Composite combine the individual accounts'
returns (calculated on a time-weighted rate of return that is revalued whenever
cash flows exceed $500) by asset-weighting each individual account's asset value
as of the beginning of the month. Quarterly and yearly returns are calculated by
geometrically linking the monthly and quarterly returns, respectively. The
yearly returns are computed by geometrically linking the returns of each quarter
within the calendar year.
The institutional private accounts that are included in PIC's Composites are not
subject to the same types of expenses to which the Portfolios are subject nor to
the diversification requirements, specific tax restrictions and investment
limitations imposed on the Portfolios by the Investment Company Act or the
Internal Revenue Code. Consequently, the performance results for PIC's
Composites could have been adversely affected if the institutional private
accounts included in the Composites had been regulated as investment companies.
- ---------------
* AIMR is a non-profit membership and education organization with more than
60,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and fair
presentations by investment advisers of their performance results, and (ii)
ensure uniformity in reporting so that performance results of investment
advisers are directly comparable.
PROSPECTUS
13
<PAGE> 15
THE FUNDS IN DETAIL - CONTINUED
The investment results of the PIC Composites presented below are unaudited are
not intended to predict or suggest the returns that might by experienced by the
Portfolios or an individual investing in the Portfolios. Investors should also
be aware that the use of a methodology different from that used below to
calculate performance could result in different performance data.
<TABLE>
<CAPTION>
PIC Russell PIC S&P 500/ PIC Russell 2000
Growth 1000 Growth Balanced Lehman Small Cap Growth Stock
Year ended Composite Index(1) Composite Index(2) Composite Index(3)
<S> <C> <C> <C> <C> <C> <C>
1986 22.21% 15.36% 21.15% 15.60% N/A N/A
1987 4.99 5.31 5.32 2.30 5.43% -10.48%
1988 6.19 11.27 8.94 7.59 27.78 20.37
1989 46.85 35.92 35.92 14.24 49.95 20.17
1990 6.95 -0.26 7.09 8.28 0.81 -17.41
1991 66.94 41.16 49.87 16.13 78.74 51.19
1992 6.74 5.00 6.36 7.58 6.31 7.77
1993 3.47 2.90 5.95 11.03 23.34 13.36
1994 -0.84 2.66 -1.47 -3.51 -1.22 -2.43
1995 28.62 37.19 24.65 19.24 61.12 31.04
1996(4) 13.07 6.51 8.94 1.81 23.41 11.92
Last year(4)
Last 5 years(4)
Last 10 years(4) N/A N/A
Since inception(4)
</TABLE>
(1) The Russell 1000 Growth Stock Index contains those securities in the Russell
1000 Index with a greater-than-average growth orientation. Companies in the
Russell Growth Stock Index generally have higher price-to-book and
price-earnings ratios than the average for all companies in the 1000 Index.
The Russell 1000 Index is a widely regarded [description of Index here]..
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions or
other expenses of investing.
(2) The Index in this column has been calculated by a combination of the
Standard & Poor's Index of 500 Common Stocks, an unmanaged index containing
common stocks of 500 industrial, transportation, utility and financial
companies, regarded as generally representative of the U.S. stock market
(60% of the data in this column), and the Lehman Brothers
Government/Corporate Bond Index, an unmanaged market-weighted index
consisting of all public obligations of the U.S. Government, its agencies
and instrumentalities, and all corporate issuers of fixed rate,
non-convertible, investment grade U.S. dollar denominated bonds having
maturities of greater than one year, regarded as generally representative of
the market for domestic bonds (40% of the data in this column). The Index
reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions or
other expenses of investing.
(3) The Russell 2000 Growth Stock Index contains those securities in the Russell
2000 Index with a greater-than-average growth orientation. Companies in the
Russell Growth Stock Index generally have higher price-to-book and
price-earnings ratios than the average for all companies in the 2000 Index.
The Russell 2000 Index is a widely regarded small-cap index of the 2,000
smallest securities in the Russell 3000 Index, which comprises the 3,000
largest U.S. securities as determined by total market capitalization. The
Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions or
other expenses of investing.
(4) Through June 30, 1996.
PROSPECTUS
14
<PAGE> 16
YOUR ACCOUNT
- --------------------------------------------------------------------------------
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or more
owners (tenants).
- --------------------------------------------------------------------------------
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible. Retirement accounts require special applications and typically
have lower minimums.
- - INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age and under
70 1/2 with earned income to invest up to $2000 per tax year. Individuals can
also invest in a spouse's IRA if the spouse has earned income of less than $250.
- - ROLLOVER IRAS retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
- - KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS allow
self-employed individuals or small business owners (and their employees) to make
tax-deductible contributions for themselves and any eligible employees up to
$30,000 per year.
- - SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small business owners or
those with self-employed income (and their eligible employees) with many of the
same advantages as a Keogh, but with fewer administrative requirements.
- - 403(B) CUSTODIAL ACCOUNTS are available to employees of most tax-exempt
institutions, including schools, hospitals and other charitable organizations.
- - 401(K) PROGRAMS allow employees of corporations of all sizes to contribute a
percentage of their wages on a tax-deferred basis. These accounts need to be
established by the trustee of the plan.
- --------------------------------------------------------------------------------
GIFTS OR TRANSFERS TO MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
federal gift tax. Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA).
- --------------------------------------------------------------------------------
TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
- --------------------------------------------------------------------------------
BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS OR OTHER GROUPS
Does not require a special application.
PROSPECTUS
15
<PAGE> 17
YOUR ACCOUNT - CONTINUED
HOW TO BUY SHARES
ONCE EACH BUSINESS DAY, EACH FUND CALCULATES ITS SHARE PRICE: The share price is
the Fund's net asset value (NAV). Shares are purchased at the next share price
calculated after your investment is received and accepted. Share price is
normally calculated at 4 p.m. Eastern time.
IF YOU ARE INVESTING THROUGH A TAX-SHELTERED RETIREMENT PLAN, such as an IRA,
for the first time, you will need a special application. Retirement investing
also involves its own investment procedures. Call (800) 618-7643 for more
information and a retirement application.
If you buy shares by check and then sell those shares within two weeks, the
payment may be delayed for up to seven business days to ensure that your
purchase check has cleared.
If you are investing by wire, please be sure to call (800) 618-7643 before
sending each wire.
RODNEY SQUARE MANAGEMENT CORPORATION (RSMC) is each Fund's Transfer Agent; its
address is 1105 N. Market Street, 3rd floor, Wilmington, Delaware 19890, and its
mailing address is P.O. Box 8987, Wilmington, DE 19899.
FIRST FUND DISTRIBUTORS, INC., 4455 E. Camelback Road, Suite 261E, Phoenix AZ
85018, is the Trust's principal underwriter.
- --------------------------------------
MINIMUM INVESTMENTS
TO OPEN AN ACCOUNT $2,000
For retirement accounts $500
For automatic investment plans $250
TO ADD TO AN ACCOUNT $250
For retirement plans $250
Through automatic investment plans $100
MINIMUM BALANCE $1,000
For retirement accounts $500
FOR INFORMATION: (800) 618-7643
TO INVEST
BY MAIL: PIC Pinnacle Funds
P.O. Box 8987
Wilmington, DE 19899
BY WIRE: Call:
(800) 618-7643 to
set up an account and
arrange a wire
transfer
PROSPECTUS
16
<PAGE> 18
HOW TO SELL SHARES
You can arrange to take money out of your account at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next
share price calculated after your order is received and accepted. Share price is
normally calculated at 4 p.m. Eastern time.
TO SELL SHARES IN A NON-RETIREMENT ACCOUNT, you may use any of the methods
described on these two pages.
IF YOU ARE SELLING SOME BUT NOT ALL OF YOUR SHARES, leave at least $1,000 worth
of shares in the account to keep it open ($500 for retirement accounts).
CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. It is designed to protect
you and the Funds from fraud. Your request must be made in writing and include a
signature guarantee if any of the following situations apply:
- - You wish to redeem more than $100,000 worth of shares,
- - Your account registration has changed within the last 30 days,
- - The check is being mailed to a different address from the one on your account
(record address), or
- - The check is being made payable to someone other than the account owner.
You should be able to obtain a signature guarantee from a bank, broker-dealer,
credit union (if authorized under state law), securities exchange or
association, clearing agency or savings association. A notary public cannot
provide a signature guarantee.
SELLING SHARES IN WRITING
Write a "letter of instruction" with:
- - Your name,
- - Your Fund account number,
- - The dollar amount or number of shares to be redeemed, and
- - Any other applicable requirements listed in the table at right.
- - Unless otherwise instructed, PIC will send a check to the record address. Mail
your letter to:
PIC Pinnacle Funds
P.O. Box 8987
Wilmington, DE 19899
PROSPECTUS
17
<PAGE> 19
YOUR ACCOUNT - CONTINUED
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------
ACCOUNT TYPE SPECIAL REQUIREMENTS
PHONE All account - Your telephone call must be
(800) 618-7643 types except received by 4 p.m. Eastern
retirement time to be redeemed on that
day.
- --------------------------------------------------------------------
MAIL OR IN PERSON Individual, - The letter of instructions
Joint Tenant, must be signed by all persons
Sole required to sign for
Proprietorship, transactions, exactly as
UGMA, UTMA their names appear on the
account.
Retirement - The account owner should
Account complete a retirement
distribution form. Call
(800) 618-7643 to request
one.
Trust - The trustee must sign the
letter indicating capacity as
trustee. If the trustee's
name is not in the account
registration, provide a
copy of the trust document
certified within the last
60 days.
Business or - At least one person
Organization authorized by corporate
resolutions to act on the
account must sign the
letter.
- Include a corporate
resolution with corporate
seal or a signature
guarantee.
Executor, - Call (800) 618-7643 for
Administrator, instructions.
Conservator,
Guardian
- --------------------------------------------------------------------
WIRE All account - You must sign up for the
types except wire feature before using it.
retirement To verify that it is in
place, call (800) 618-7643.
Minimum wire: $5,000.
- Your wire redemption
request must be received by
the Fund before 4 p.m.
Eastern time for money to
be wired the next business
day.
</TABLE>
PROSPECTUS
18
<PAGE> 20
INVESTOR SERVICES
PIC provides a variety of services to help you manage your account.
INFORMATION SERVICES
PIC'S TELEPHONE REPRESENTATIVES can be reached at (800) 618-7643.
STATEMENTS AND REPORTS that PIC sends to you include the following:
- - Confirmation statements (after every transaction that affects your account
balance or your account registration)
- - Financial reports (every six months)
TRANSACTION SERVICES
EXCHANGE PRIVILEGE. You may sell your Fund shares and buy shares of other PIC
Funds by telephone or in writing. Note that exchanges into each Fund are limited
to four per calendar year, and that they may have tax consequences for you. RSMC
charges a $5 fee for each exchange, which is automatically deducted when the
exchange is made. Also see "Exchange Restrictions" on page 23.
SYSTEMATIC WITHDRAWAL PLANS let you set up periodic redemptions from your
account. These redemptions take place on the 25th day of each month or, if that
day is a weekend or holiday, on the prior business day.
- --------------------------------------
REGULAR INVESTMENT PLANS
One easy way to pursue your financial goals is to invest money regularly. PIC
offers convenient services that let you transfer money into your Fund account
automatically. Automatic investments are made on the 20th day of each month or,
if that day is a weekend or holiday, on the prior business day. While regular
investment plans do not guarantee a profit and will not protect you against loss
in a declining market, they can be an excellent way to invest for retirement, a
home, educational expenses, and other long term financial goals. Certain
restrictions apply for retirement accounts. Call (800) 618-7643 for more
information.
PROSPECTUS
19
<PAGE> 21
SHAREHOLDER ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS,
AND TAXES
The Funds distribute substantially all of their net income and capital gains, if
any, to shareholders each year. The Balanced Fund pays quarterly dividends, and
the Growth and Small Cap Funds pay dividends, normally, in December. Capital
gains are also normally distributed in December.
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. If the option you prefer is not listed on the application,
call (800) 618-7643 for instructions. The Funds offer three options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the Fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be automatically
reinvested, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
FOR RETIREMENT ACCOUNTS, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash.
When a Fund deducts a distribution from its NAV, the reinvestment price is the
Fund's NAV at the close of business that day. Cash distribution checks will be
mailed within seven days.
UNDERSTANDING
DISTRIBUTIONS
As a Fund shareholder, you are entitled to your share of the Fund's net
income and gains on its investments. The Fund passes its earnings along to
its investors as DISTRIBUTIONS.
The Fund earns dividends from stocks and interest from short term
investments held by the Portfolio. These are passed along as DIVIDEND
DISTRIBUTIONS. The Fund realizes capital gains whenever the Portfolio sells
securities for a higher price than it paid for them. These are passed along
as CAPITAL GAIN DISTRIBUTIONS.
TAXES
As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account, you should
be aware of these tax implications.
TAXES ON DISTRIBUTIONS. Distributions are subject to federal income tax, and may
also be subject to state or local taxes. If you live outside the United States,
your distributions could also be taxed by the country in which you reside. Your
distributions are taxable when they are paid, whether you take them in cash or
reinvest them. However, distributions declared in December and paid in January
are taxable as if they were paid on December 31.
PROSPECTUS
20
<PAGE> 22
For federal tax purposes, each Fund's income and short term capital gain
distributions are taxed as dividends; long term capital gain distributions are
taxed as long term capital gains. Every January, PIC will send you and the IRS a
statement showing the taxable distributions.
TAXES ON TRANSACTIONS. Your redemptions--including exchanges to other PIC
Funds--are subject to capital gains tax. A capital gain or loss is the
difference between the cost of your shares and the price you receive when you
sell them.
Whenever you sell shares of a Fund, PIC will send you a confirmation statement
showing how many shares you sold and at what price. You will also receive a
consolidated transaction statement every January. However, it is up to you or
your tax preparer to determine whether the sales resulted in a capital gain and,
if so, the amount of the tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in calculating the
amount of your capital gains.
"BUYING A DIVIDEND." If you buy shares just before a Fund deducts a distribution
from its NAV, you will pay the full price for the shares and then receive a
portion of the price back in the form of a taxable distribution.
There are tax requirements that all funds must follow in order to avoid federal
taxation. In its effort to adhere to these requirements, a Fund may have to
limit its investment activity in some types of instruments.
TRANSACTION DETAILS
EACH FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE) is
open. PIC calculates each Fund's NAV as of the close of business of the NYSE,
normally 4 p.m. Eastern time.
EACH FUND'S NAV is the value of a single share. The NAV is computed by adding
the value of a Fund's share of investments held by the Portfolio, cash, and
other assets, subtracting its liabilities and then dividing the result by the
number of shares outstanding. The NAV is also the redemption price (price to
sell one share).
Each Fund's assets are valued primarily on the basis of market quotations. If
quotations are not readily available, assets are valued by a method that the
Board of Trustees believes accurately reflects fair value.
WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you will be asked to certify that your
Social Security or taxpayer identification number is correct and that you are
not subject to 31% withholding for failing to report income to the IRS. If you
violate IRS regulations, the IRS can require a Fund to withhold 31% of your
taxable distributions and redemptions.
YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. PIC may only be liable for
losses resulting from unauthorized transactions if it does not follow reasonable
procedures designed to verify the identity of the caller. PIC will request
personalized security codes or other information, and may also record calls. You
should verify the accuracy of your confir-
PROSPECTUS
21
<PAGE> 23
SHAREHOLDER ACCOUNT POLICIES - CONTINUED
mation statements immediately after you receive them. If you do not want the
liability to redeem or exchange by telephone, call PIC for instructions.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. Each Fund also reserves the right to reject any specific purchase order,
including certain purchases by exchange. See "Exchange Restrictions" on page 18.
Purchase orders may be refused if, in PIC's opinion, they would disrupt
management of the Fund.
WHEN YOU PLACE AN ORDER TO BUY SHARES, your order will be processed at the next
NAV calculated after your order is received and accepted. Note the following:
- - All of your purchases must be made in U.S. dollars, and checks must be drawn
on U.S. banks.
- - PIC does not accept cash or third party checks.
- - When making a purchase with more than one check, each check must have a value
of at least $50.
- - Each Fund reserves the right to limit the number of checks processed at one
time.
- - If your check does not clear, your purchase will be canceled and you could be
liable for any losses or fees the Fund or its transfer agent has incurred.
TO AVOID THE COLLECTION PERIOD associated with check purchases, consider buying
shares by bank wire, U.S. Postal money order, U.S. Treasury check, Federal
Reserve check, or direct deposit instead.
YOU MAY BUY SHARES OF A FUND OR SELL THEM THROUGH A BROKER, who may charge you a
fee for this service. If you invest through a broker or other institution, read
its program materials for any additional service features or fees that may
apply.
CERTAIN FINANCIAL INSTITUTIONS that have entered into sales agreements with PIC
may enter confirmed purchase orders on behalf of customers by phone, with
payment to follow no later than the time when the Funds are priced on the
following business day. If payment is not received by that time, the financial
institution could be held liable for resulting fees or losses.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the next NAV
calculated after your request is received and accepted. Note the following:
- - Normally, redemption proceeds will be mailed to you on the next business day,
but if making immediate payment could adversely affect the Fund, it may take up
to seven days to pay you.
- - Redemptions may be suspended or payment dates postponed when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
- - PIC reserves the right to deduct an annual maintenance fee of $12.00 from
accounts with a value of less that $1,000. It is expected that accounts will be
valued on the second Friday in November of each year. Accounts opened after
September 30 will not be subject to the fee for that year. The fee, which is
payable to the transfer agent, is designed to offset in part the
PROSPECTUS
22
<PAGE> 24
relatively higher cost of servicing smaller accounts.
- - PIC also reserves the right to redeem the shares and close your account if it
has been reduced to a value of less than $1,000 as a result of a redemption or
transfer, PIC will give you 30 days prior notice of its intention to close your
account.
EXCHANGE RESTRICTIONS
As a shareholder, you have the privilege of exchanging shares of a Fund for
shares of other PIC Pinnacle Funds. However, you should note the following:
- - The Fund you are exchanging into must be registered for sale in your state.
- - You may only exchange between accounts that are registered in the same name,
address, and taxpayer identification number.
- - Before exchanging into a Fund, read its prospectus.
- - Exchanges may have tax consequences for you.
- - Because excessive trading can hurt Fund performance and shareholders, each
Fund reserves the right to temporarily or permanently terminate the exchange
privilege of any investor who makes more than four exchanges out of a Fund per
calendar year. Accounts under common ownership or control, including accounts
with the same taxpayer identification number, will be counted together for the
purposes of the four exchange limit.
- - The exchange limit may be modified for accounts in certain institutional
retirement plans to conform to plan exchange limits and Department of Labor
regulations. See your plan materials for further information.
- - Each Fund reserves the right to refuse exchange purchases by any person or
group if, in PIC's judgment, a Portfolio would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
- - Your exchanges may be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of a Portfolio's assets. In
particular, a pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to a Portfolio.
Although each Fund will attempt to give you prior notice whenever it is
reasonably able to do so, if may impose these restrictions at any time. The
Funds reserve the right to terminate or modify the exchange privilege in the
future.
PROSPECTUS
23
<PAGE> 25
GENERAL INFORMATION
Each Fund is one of a series of shares, each having separate assets and
liabilities, of the Trust. The Board of Trustees may at its own discretion,
create additional series of shares. The Declaration of Trust contains an express
disclaimer of shareholder liability for its acts or obligations and provides for
indemnification and reimbursement of expenses out of the Trust's property for
any shareholder held personally liable for its obligations.
The Declaration of Trust further provides the Trustees will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
Shareholders are entitled to one vote for each full share held (and fractional
votes for fractional shares) and may vote in the election of Trustees and on
other matters submitted to meetings of shareholders. It is not contemplated that
regular annual meetings of shareholders will be held. Rule 18f-2 under the Act
provides that matters submitted to shareholders be approved by a majority of the
outstanding securities of each series, unless it is clear that the interests of
each series in the matter are identical or the matter does not affect a series.
However, the rule exempts the selection of accountants and the election of
Trustees from the separate voting requirements. Income, direct liabilities and
direct operating expenses of each series will be allocated directly to each
series, and general liabilities and expenses of the Trust will be allocated
among the series in proportion to the total net assets of each series by the
Board of Trustees.
The Declaration of Trust provides that the shareholders have the right, upon the
declaration in writing or vote of more than two-thirds of its outstanding
shares, to remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record holders
of ten per cent of its shares. In addition, ten shareholders holding the lesser
of $25,000 worth or one per cent of the shares may advise the Trustees in
writing that they wish to communicate with other shareholders for the purpose of
requesting a meeting to remove a Trustee. The Trustees will then, if requested
by the applicants, mail at the applicants' expense the applicants' communication
to all other shareholders. Except for a change in the name of the Trust, no
amendment may be made to the Declaration of Trust without the affirmative vote
of the holders of more than 50% of its outstanding shares. The holders of shares
have no pre-emptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth above. The Trust may be terminated upon the
sale of its assets to another issuer, if such sale is approved by the vote of
the holders of more than 50% of its outstanding shares, or upon liquidation and
distribution of its assets, if approved by the vote of the holders of more than
50% of its outstanding shares. If not so terminated, the Trust will continue
indefinitely.
PROSPECTUS
24
<PAGE> 26
PIC INVESTMENT TRUST
Statement of Additional Information
Dated , 1996
This Statement of Additional Information is not a prospectus, and it should be
read in conjunction with the applicable prospectus of the PIC Pinnacle Growth
Fund, PIC Pinnacle Balanced Fund and PIC Pinnacle Small Cap Fund series of PIC
Investment Trust (the "Trust"), which share a common prospectus. There are five
other series of the Trust: the PIC Institutional Growth Fund, PIC Institutional
Balanced Fund, PIC Institutional Small Cap Fund, PIC Small Cap. Growth Fund, and
PIC MidCap Fund, which have a separate Statement of Additional Information. The
PIC Pinnacle Growth Fund (the "Growth Fund") invests in the PIC Growth
Portfolio; the PIC Pinnacle Balanced Fund (the "Balanced Fund") invests in the
PIC Balanced Portfolio; the PIC Pinnacle Small Cap Fund (the "Small Cap Fund")
invests in the PIC Small Cap. Portfolio. (In this Statement of Additional
Information, the Growth Fund, the Balanced Fund and the Small Cap Fund may be
referred to as the "Funds", and the PIC Growth Portfolio, PIC Balanced Portfolio
and PIC Small Cap. Portfolio may be referred to as the "Portfolios.") Provident
Investment Counsel (the "Advisor") is the Advisor to the Portfolios. A copy of
the applicable prospectus may be obtained from the Trust at 300 North Lake
Avenue, Pasadena, CA 91101-4106, telephone (818) 449-8500.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross-reference to page in
in the prospectus of the PIC
Pinnacle Funds:
---------------
<S> <C> <C>
Investment Objective and Policies......... B-2 7
The Growth Fund .................... B-2 7
The Balanced Fund................... B-2 18
The Small Cap Fund.................. B-2 9
Investment Restrictions............. B-2 11
Repurchase Agreements............... B-3 10
Options Activities.................. B-4 10
Futures Contracts................... B-4 10
Foreign Securities.................. B-5 10
Forward Foreign Currency
Exchange Contracts.............. B-5
Segregated Accounts................. B-6
Debt Securities and
Ratings......................... B-7 10
Management................................ B-7 7, 11
Portfolio Transactions and
Brokerage........................... B-10 7
Net Asset Value........................... B-11 21
Taxation.................................. B-11 20
Dividends and Distributions............... B-11 20
Performance Information................... B-12 12
General Information....................... B-13 24
Appendix.................................. B-14
</TABLE>
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<PAGE> 27
INVESTMENT OBJECTIVES AND POLICIES
THE GROWTH FUND
The investment objective of the Growth Fund is to provide long-term growth
of capital. There is no assurance that the Growth Fund will achieve its
objective. The Growth Fund will attempt to achieve its objective by investing
all of its assets in shares of the PIC Growth Portfolio (the "Growth
Portfolio"). The Growth Portfolio is a diversified open-end management
investment company having the same investment objective as the Growth Fund. The
discussion below supplements information contained in the prospectus as to
investment policies of the Growth Fund and the Growth Portfolio. Because the
investment characteristics of the Growth Fund will correspond directly to those
of the Growth Portfolio, the discussion refers to those investments and
techniques employed by the Growth Portfolio.
THE BALANCED FUND
The investment objective of the Balanced Fund is to provide high total
return while reducing risk. There is no assurance that the Balanced Fund will
achieve its objective. The Balanced Fund will attempt to achieve its objective
by investing all of its assets in shares of the PIC Balanced Portfolio (the
"Balanced Portfolio"). The Balanced Portfolio is a diversified open-end
management investment company having the same investment objective as the
Balanced Fund. The discussion below supplements information contained in the
prospectus as to investment policies of the Balanced Fund and the Balanced
Portfolio. Because the investment characteristics of the Balanced Fund will
correspond directly to those of the Balanced Portfolio, the discussion refers to
those investments and techniques employed by the Balanced Portfolio.
THE SMALL CAP. FUND
The investment objective of the Small Cap Fund is to provide capital
appreciation. There is no assurance that Fund will achieve its objective. The
Fund will attempt to achieve its objective by investing all of its assets in
shares of the PIC Small Cap. Portfolio (the "Small Cap. Portfolio"). The Small
Cap. Portfolio is a diversified open-end management investment company having
the same investment objective as the Small Cap Fund. The discussion below
supplements information contained in the prospectus as to investment policies of
the Small Cap Fund and the Small Cap. Portfolio. Because the investment
characteristics of the Small Cap Fund will correspond directly to those of the
Small Cap. Portfolio, the discussion refers to those investments and techniques
employed by the Small Cap. Portfolio.
INVESTMENT RESTRICTIONS
The Trust (on behalf of the Funds) and the Portfolios have adopted the
following restrictions as fundamental policies, which may not be changed without
the favorable vote of the holders of a "majority," as defined in the Investment
Company Act of 1940 (the "1940 Act"), of the outstanding voting securities of a
Fund or a Portfolio. Under the 1940 Act, the "vote of the holders of a majority
of the outstanding voting securities" means the vote of the holders of the
lesser of (i) 67% of the shares of a Fund or a Portfolio represented at a
meeting at which the holders of more than 50% of its outstanding shares are
represented or (ii) more than 50% of the outstanding shares of a Fund or a
Portfolio.
As a matter of fundamental policy, the Portfolios are diversified; i.e.,
as to 75% of the value of a Portfolio's total assets, no more than 5% of the
value of its total assets may be invested in the securities of any one issuer
(other than U.S. Government securities). The Funds invest all of their assets in
shares of the Portfolios. Each Fund's and each Portfolio's investment objective
is fundamental.
In addition, no Fund or Portfolio may:
1. Issue senior securities, borrow money or pledge its assets, except that
a Fund or a Portfolio may borrow on an unsecured basis from banks for temporary
or emergency purposes or for the clearance of transactions in amounts not
exceeding 10% of its total assets (not including the amount borrowed), provided
that it will not make investments while borrowings in excess of 5% of the value
of its total assets are outstanding;
2. Make short sales of securities or maintain a short position, except for
short sales against the box;
B-2
<PAGE> 28
3. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of transactions;
4. Write put or call options, except that the Balanced Portfolio may write
covered call and cash secured put options on debt securities, and the Small Cap.
Portfolio may write covered call and cash secured put options and purchase call
and put options on stocks and stock indices;
5. Act as underwriter (except to the extent a Fund or Portfolio may be
deemed to be an underwriter in connection with the sale of securities in its
investment portfolio);
6. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities), except that any of the Funds may invest more than 25% of
their assets in shares of a Portfolio;
7. Purchase or sell real estate or interests in real estate or real estate
limited partnerships (although any Portfolio may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate);
8. Purchase or sell commodities or commodity futures contracts, except
that any Portfolio may purchase and sell stock index futures contracts and the
Balanced Portfolio may purchase and sell interest rate futures contracts;
9. Invest in oil and gas limited partnerships or oil, gas or mineral
leases;
10. Make loans (except for purchases of debt securities consistent with
the investment policies of the Funds and the Portfolios and except for
repurchase agreements); or
11. Make investments for the purpose of exercising control or management.
The Portfolios observe the following restrictions as a matter of operating
but not fundamental policy, pursuant to positions taken by federal and state
regulatory authorities:
No Portfolio may:
1. Purchase any security if as a result the Portfolio would then hold more
than 10% of any class of voting securities of an issuer (taking all common stock
issues as a single class, all preferred stock issues as a single class, and all
debt issues as a single class);
2. Invest in securities of any issuer if, to the knowledge of the
Portfolio, any officer or Trustee of the Portfolio or any officer or Director of
the Advisor owns more than 1/2 of 1% of the outstanding securities of such
issuer, and such officers, Trustees and Directors who own more than 1/2 of 1%
own in the aggregate more than 5% of the outstanding securities of such issuer;
3. Invest more than 5% of the value of its net assets in warrants
(included in that amount, but not to exceed 2% of the value of the Portfolio's
net assets, may be warrants which are not listed on the New York or American
Stock Exchange).
4. Invest in any security if as a result the Portfolio would have more
than 5% of its total assets invested in securities of companies which together
with any predecessor have been in continuous operation for fewer than three
years.
5. Invest more than 10% of its assets in the securities of other
investment companies or purchase more than 3% of any other investment company's
voting securities or make any other investment in other investment companies
except as permitted by federal and state law.
6. Invest more than 5% of its assets in securities which are restricted as
to disposition or otherwise are illiquid or have no readily available market
(except for securities issued under Rule 144A which are determined by the Board
of Trustees to be liquid).
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a Fund or a Portfolio
purchases a security from a bank or recognized securities dealer and
simultaneously commits to resell that security to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased security. The purchaser maintains
custody of the underlying securities prior to their repurchase; thus the
obligation of the bank or dealer to pay the repurchase price on the date agreed
to is, in effect, secured by such underlying securities. If the value of such
securities is less than the repurchase price, the other party to the agreement
will provide additional collateral so that at all times the collateral is at
least equal to the repurchase price.
B-3
<PAGE> 29
Although repurchase agreements carry certain risks not associated with
direct investments in securities, the Funds and the Portfolios intend to enter
into repurchase agreements only with banks and dealers believed by the Advisor
to present minimum credit risks in accordance with guidelines established by the
Boards of Trustees. The Advisor will review and monitor the creditworthiness of
such institutions under the Boards' general supervision. To the extent that the
proceeds from any sale of collateral upon a default in the obligation to
repurchase were less than the repurchase price, the purchaser would suffer a
loss. If the other party to the repurchase agreement petitions for bankruptcy or
otherwise becomes subject to bankruptcy or other liquidation proceedings, there
might be restrictions on the purchaser's ability to sell the collateral and the
purchaser could suffer a loss. However, with respect to financial institutions
whose bankruptcy or liquidation proceedings are subject to the U.S. Bankruptcy
Code, the Funds and the Portfolios intend to comply with provisions under such
Code that would allow them immediately to resell the collateral.
OPTIONS ACTIVITIES
The Balanced Portfolio may write (i.e., sell) call options ("calls") on
debt securities, and the Small Cap. Portfolio may write call options on stocks
and stock indices, if the calls are "covered" throughout the life of the option.
A call is "covered" if the Portfolio owns the optioned securities. When the
Balanced or Small Cap. writes a call, it receives a premium and gives the
purchaser the right to buy the underlying security at any time during the call
period at a fixed exercise price regardless of market price changes during the
call period. If the call is exercised, the Portfolio will forgo any gain from an
increase in the market price of the underlying security over the exercise price.
The Balanced Portfolio and the Small Cap. Portfolio may purchase a call on
securities to effect a "closing purchase transaction," which is the purchase of
a call covering the same underlying security and having the same exercise price
and expiration date as a call previously written by the Portfolio on which it
wishes to terminate its obligation. If the Portfolio is unable to effect a
closing purchase transaction, it will not be able to sell the underlying
security until the call previously written by the Portfolio expires (or until
the call is exercised and the Portfolio delivers the underlying security).
The Balanced Portfolio and the Small Cap. Portfolio also may write and
purchase put options ("puts"). When the Portfolio writes a put, it receives a
premium and gives the purchaser of the put the right to sell the underlying
security to the Portfolio at the exercise price at any time during the option
period. When the Portfolio purchases a put, it pays a premium in return for the
right to sell the underlying security at the exercise price at any time during
the option period. If any put is not exercised or sold, it will become worthless
on its expiration date.
A Portfolio's option positions may be closed out only on an exchange which
provides a secondary market for options of the same series, but there can be no
assurance that a liquid secondary market will exist at a given time for any
particular option.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation has the authority to
permit other, generally comparable securities to be delivered in fulfillment of
option exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
FUTURES CONTRACTS
The Balanced Portfolio may buy and sell interest rate futures contracts,
and all Portfolios may buy and sell stock index futures contracts. A futures
contract is an agreement between two parties to buy and sell a security or an
index for a set price on a future date. Futures contracts are traded on
designated "contract markets" which, through their clearing corporations,
guarantee performance of the contracts.
Generally, if market interest rates increase, the value of outstanding
debt securities declines (and vice versa). Entering into a futures contract for
the sale of securities has an effect similar to the actual sale
B-4
<PAGE> 30
of securities, although sale of the futures contract might be accomplished more
easily and quickly. For example, if the Balanced Portfolio held long-term U.S.
Government securities and the Advisor anticipated a rise in long-term interest
rates, the Balanced Portfolio could, in lieu of disposing of its portfolio
securities, enter into futures contracts for the sale of similar long-term
securities. If rates increased and the value of the Balanced Portfolio's
portfolio securities declined, the value of the Portfolio's futures contracts
would increase, thereby protecting the Portfolio by preventing net asset value
from declining as much as it otherwise would have. Entering into futures
contracts for the purchase of securities has an effect similar to the actual
purchase of the underlying securities, but permits the continued holding of
securities other than the underlying securities. For example, if the Advisor
expected long-term interest rates to decline, the Balanced Portfolio might enter
into futures contracts for the purchase of long-term securities so that it could
gain rapid market exposure that might offset anticipated increases in the cost
of securities it intended to purchase while continuing to hold higher-yield
short-term securities or waiting for the long-term market to stabilize.
A stock index futures contract may be used as a hedge by any of the
Portfolios with regard to market risk as distinguished from risk relating to a
specific security. A stock index futures contract does not require the physical
delivery of securities, but merely provides for profits and losses resulting
from changes in the market value of the contract to be credited or debited at
the close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash settlement occurs.
Changes in the market value of a particular stock index futures contract
reflects changes in the specified index of equity securities on which the future
is based.
There are several risks in connection with the use of futures contracts.
In the event of an imperfect correlation between the futures contract and the
portfolio position which is intended to be protected, the desired protection may
not be obtained and the Portfolio may be exposed to risk of loss. Further,
unanticipated changes in interest rates or stock price movements may result in a
poorer overall performance for the Portfolio than if it had not entered into any
futures on debt securities or stock indexes.
In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
There is no assurance that a liquid secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time.
FOREIGN SECURITIES
The Growth and Balanced Portfolios may invest in securities of foreign
issuers in foreign markets as stated in their prospectuses. In addition, all of
the Portfolios may invest in American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") or other securities convertible into securities of
issuers based in foreign countries. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts, usually issued by a U.S. bank or trust company,
evidencing ownership of the underlying securities; EDRs are European receipts
evidencing a similar arrangement. Generally, ADRs are issued in registered form,
denominated in U.S. dollars, and are designed for use in the U.S. securities
markets; EDRs are issued in bearer form, denominated in other currencies, and
are designed for use in European securities markets. A depositary may issue
unsponsored ADRs without the consent of the foreign issuer of securities, in
which case the holder of the ADR may incur higher costs and receive less
information about the foreign issuer than the holder of a sponsored ADR.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Portfolios may enter into forward contracts with respect to specific
transactions. For example, when the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign
B-5
<PAGE> 31
currency, or when it anticipates the receipt in a foreign currency of dividend
or interest payments on a security that it holds, the Portfolio may desire to
"lock in" the U.S. dollar price of the security or the U.S. dollar equivalent of
the payment, by entering into a forward contract for the purchase or sale, for a
fixed amount of U.S. dollars or foreign currency, of the amount of foreign
currency involved in the underlying transaction. The Portfolio will thereby be
able to protect itself against a possible loss resulting from an adverse change
in the relationship between the currency exchange rates during the period
between the date on which the security is purchased or sold, or on which the
payment is declared, and the date on which such payments are made or received.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Portfolio to purchase additional foreign currency on the spot (i.e., cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Portfolio is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Portfolio is
obligated to deliver. The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Portfolio to sustain losses on these contracts and transaction costs. The
Portfolios may enter into forward contracts or maintain a net exposure to such
contracts only if (1) the consummation of the contracts would not obligate the
Portfolio to deliver an amount of foreign currency in excess of the value of the
Portfolio's securities or other assets denominated in that currency or (2) the
Portfolio maintains a segregated account as described below. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the longer term investment decisions made with regard to
overall diversification strategies. However, the Advisor believes it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of the Portfolio will be served.
At or before the maturity date of a forward contract that requires a
Portfolio to sell a currency, the Portfolio may either sell a security and use
the sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Portfolio will obtain, on the same maturity date,
the same amount of the currency that it is obligated to deliver. Similarly, a
Portfolio may close out a forward contract requiring it to purchase a specified
currency by entering into a second contract entitling it to sell the same amount
of the same currency on the maturity date of the first contract. The Portfolio
would realize a gain or loss as a result of entering into such an offsetting
forward contract under either circumstance to the extent the exchange rate
between the currencies involved moved between the execution dates of the first
and second contracts.
The cost to the Portfolio of engaging in forward contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are usually
entered into on a principal basis, no fees or commissions are involved. The use
of forward contracts does not eliminate fluctuations in the prices of the
underlying securities the Portfolio owns or intends to acquire, but it does fix
a rate of exchange in advance. In addition, although forward contracts limit the
risk of loss due to a decline in the value of the hedged currencies, at the same
time they limit any potential gain that might result should the value of the
currencies increase.
SEGREGATED ACCOUNTS
When a Portfolio writes an option, sells a futures contract or enters into
a forward foreign currency exchange contract, it will establish a segregated
account with its custodian bank, or a securities depository acting for it, to
hold assets of the Portfolio in order to insure that the Portfolio will be able
to meet its obligations. In the case of a call that has been written, the
securities covering the option will be maintained in the segregated account and
cannot be sold by the Portfolio until released. In the case of a put that has
been written or a forward foreign currency contract that has been entered into,
cash, U.S. Government securities or other liquid high-quality debt securities
will be maintained in the segregated account in an amount sufficient to meet the
Portfolio's obligations pursuant to the put or forward contract.
B-6
<PAGE> 32
In the case of a futures contract, cash, U.S. Government securities or other
liquid high-quality debt securities will be maintained in the segregated account
equal in value to the current value of the underlying contract, less the margin
deposits. The margin deposits are also held, in cash or U.S. Government
securities, in the segregated account.
DEBT SECURITIES AND RATINGS
Ratings of debt securities represent the rating agencies' opinions
regarding their quality, are not a guarantee of quality and may be reduced after
a Portfolio has acquired the security. The Advisor will consider whether the
Portfolio should continue to hold the security but is not required to dispose of
it. Credit ratings attempt to evaluate the safety of principal and interest
payments and do not evaluate the risks of fluctuations in market value. Also,
rating agencies may fail to make timely changes in credit ratings in response to
subsequent events, so that an issuer's current financial conditions may be
better or worse than the rating indicates.
MANAGEMENT
The overall management of the business and affairs of the Trust is vested
with its Board of Trustees. The Board approves all significant agreements
between the Trust and persons or companies furnishing services to it, including
the agreements with the Advisor, Administrator, Custodian and Transfer Agent.
Likewise, the Growth Portfolio, the Balanced Portfolio and the Small Cap.
Portfolio each have a Board of Trustees which have comparable responsibilities,
including approving agreements with the Advisor. The day to day operations of
the Trust and the Portfolios are delegated to their officers, subject to their
investment objectives and policies and to general supervision by their Boards of
Trustees.
The Trustees and officers of the Trust, their business addresses and
principal occupations during the past five years are:
<TABLE>
<S> <C>
Jettie M. Edwards (age 51), Trustee Consulting principal of
1525 Willina Lane Syrus Associates (consulting firm)
Santa Barbara, CA 93108
Bernard J. Johnson (age 71), Trustee Retired; formerly Chairman Emeritus of
300 North Lake Avenue the Advisor
Pasadena, CA 91101
Jeffrey D. Lovell (age 43), Trustee Principal, President and co-founder
1150 Santa Monica Blvd., Ste 1650 of Putnam, Lovell & Thornton, Inc.
Los Angeles, CA 90025 (investment bankers)
Jeffrey J. Miller (age 45), President Managing Director and Secretary of the
and Trustee* Advisor; President and Trustee of each
300 North Lake Avenue of the Portfolios
Pasadena, CA 91101
Wayne H. Smith (age 54), Trustee Vice President and Treasurer of Avery
150 N. Orange Grove Blvd. Dennison Corporation (office products
Pasadena, CA 91103 manufacturer)
Thad M. Brown (age 45), Vice Senior Vice President and Chief
President, Secretary and Financial Officer of the Advisor
Treasurer of the Trust
300 North Lake Avenue
Pasadena, CA 91101
</TABLE>
The Trustees and officers of each of the Portfolios, their business
address and their occupations during the past five years are:
<TABLE>
<S> <C>
Richard N. Frank (age 73), Trustee Chief Executive Officer, Lawry's
234 E. Colorado Blvd. Restaurants, Inc.; formerly Chairman
Pasadena, CA 91101 of Lawry's Foods, Inc.
</TABLE>
B-7
<PAGE> 33
<TABLE>
<S> <C>
Bernard J. Johnson (age 71), Retired; formerly Chairman Emeritus of
Trustee Emeritus the Advisor
300 North Lake Avenue
Pasadena, CA 91101
James Clayburn LaForce (age 67), Dean Emeritus, John E. Anderson Graduate
Trustee School of Management, University of
P.O. Box 1585 California, Los Angeles. Director of The
Pauma Valley, CA 92061 BlackRock Funds. Trustee of Payden &
Rygel Investment Trust. Director of the
Timken Co., Rockwell International, Eli
Lilly, Jacobs Engineering Group and
Imperial Credit Industries.
Jeffrey J. Miller (age 45), President Managing Director and Secretary of the
and Trustee* Advisor
300 North Lake Avenue
Pasadena, CA 91101
Angelo R. Mozilo (age 57), Trustee Vice Chairman and Executive Vice
155 N. Lake Avenue President of Countrywide Credit
Pasadena, CA 91101 Industries (mortgage banking)
Thad M. Brown (age 45), Vice Senior Vice President and Chief
President, Secretary and Financial Officer of the Advisor
Treasurer of the Trust
300 North Lake Avenue
Pasadena, CA 91101
</TABLE>
- ---------------------------------
* denotes Trustees who are "interested persons" of the Trust or Portfolios under
the 1940 Act.
The following compensation was paid to each of the following Trustees.
No other compensation or retirement benefits were received by any Trustee or
officer from the Registrant or other registered investment company in the "Fund
Complex."
<TABLE>
<CAPTION>
Name of Trustee Total Compensation
--------------- ------------------
<S> <C>
Jettie M. Edwards $12,000(1)
Bernard J. Johnson 12,000(1)
Jeffrey D. Lovell 12,000(1)
Wayne H. Smith 12,000(1)
Richard N. Frank 11,000(2)
Bernard J. Johnson 9,000(2)
James Clayburn LaForce 12,000(2)
Angelo R. Mozilo 12,000(2)
</TABLE>
(1) Compensation was paid by the Registrant
(2) Compensation was paid by three other registered investment
companies in the "Fund Complex."
THE ADVISOR
The Trust does not have an investment advisor, although the Advisor
performs certain administrative services for it, including providing certain
officers and office space.
The following information is provided about the Advisor and the
Portfolios. Subject to the supervision of the Boards of Trustees of the
Portfolios, investment management and services will be provided to the
Portfolios by the Advisor, pursuant to four Investment Advisory Agreements (the
"Advisory Agreements"). Under the Advisory Agreements, the Advisor will provide
a continuous investment program for the Portfolios and make decisions and place
orders to buy, sell or hold particular securities. In addition to the fees
payable to the Advisor and the Administrator, the Portfolios and the Trust are
responsible for
B-8
<PAGE> 34
their operating expenses, including: (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) compensation and expenses of
Trustees other than those affiliated with the Advisor or the Administrator; (v)
legal and audit expenses; (vi) fees and expenses of the custodian, shareholder
service and transfer agents; (vii) fees and expenses for registration or
qualification of the Trust and its shares under federal or state securities
laws; (viii) expenses of preparing, printing and mailing reports and notices and
proxy material to shareholders; (ix) other expenses incidental to holding any
shareholder meetings; (x) dues or assessments of or contributions to the
Investment Company Institute or any successor; (xi) such non-recurring expenses
as may arise, including litigation affecting the Trust or the Portfolios and the
legal obligations with respect to which the Trust or the Portfolios may have to
indemnify their officers and Trustees; and (xii) amortization of organization
costs.
The Advisor is an indirect, wholly owned subsidiary of United Asset
Management Corporation ("UAM"), a New York Stock Exchange listed holding company
principally engaged, through affiliated firms, in providing institutional
investment management services. On February 15, 1995, UAM acquired the assets of
the Advisor's predecessor, which had the same name as the Advisor; on that date
the Advisor entered into new Advisory Agreements having the same terms as the
previous Advisory Agreements with the Portfolios. The term "Advisor" also refers
to the Advisor's predecessor.
During the three fiscal years ended October 31, 1995, 1994, and 1993,
the Advisor earned fees pursuant to the Advisory Agreements as follows: from the
Balanced Portfolio, $77,098, $49,498 and $21,579, respectively; from the Growth
Portfolio, $1,536,297, $1,277,324 and $787,380, respectively; from the Small
Cap. Portfolio, $771,499, $640,123 and $56,885, respectively. However, the
Advisor has agreed to limit the aggregate expenses of the Balanced Portfolio to
0.80% of average net assets, and the expenses of the Growth and Small Cap.
Portfolios to 1.00% of average net assets. As a result, the Advisor paid
expenses of the Balanced Portfolio that exceeded these expense limits in the
amounts for $100,695, $95,785 and $169,875 during the fiscal years ended October
31, 1995, 1994 and 1993, respectively. The Advisor paid expenses of the Growth
Portfolio that exceeded these expense limits in the amounts for $21,828, $12,479
and $86,475 during the fiscal years ended October 31, 1995, 1994 and 1993,
respectively. The Advisor paid expenses of the Small Cap. Portfolio that
exceeded these expense limits in the amounts of $66,713, $83,418 and $7,765
during the fiscal years ended October 31, 1995, 1994 and 1993, respectively.
(The MidCap Portfolio was not in existence prior to the current fiscal year.)
Under the Advisory Agreements, the Advisor will not be liable to the
Portfolios for any error of judgment by the Advisor or any loss sustained by the
Portfolios except in the case of a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages will be
limited as provided in the 1940 Act) or of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
The Advisory Agreements will remain in effect for two years from their
execution. Thereafter, if not terminated, each Advisory Agreement will continue
automatically for successive annual periods, provided that such continuance is
specifically approved at least annually (i) by a majority vote of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio.
The Advisory Agreements are terminable by vote of the Board of Trustees
or by the holders of a majority of the outstanding voting securities of the
Portfolios at any time without penalty, on 60 days written notice to the
Advisor. The Advisory Agreements also may be terminated by the Advisor on 60
days written notice to the Portfolios. The Advisory Agreements terminate
automatically upon their assignment (as defined in the 1940 Act).
The Advisor also provided certain administrative services to the Trust
pursuant to Administration Agreements, including assisting shareholders of the
Trust, furnishing office space and permitting certain employees to serve as
officers and Trustees of the Trust. For its services, it earns a fee at the rate
of 0.20% of the average net assets of each series of the Trust. During the three
fiscal years ended October 31, 1995, 1994 and 1993, the Advisor earned fees
pursuant to the Administration Agreements as follows: from the Institutional
Balanced Fund, $25,721, $16,534 and $7,273, respectively; from the Institutional
Growth Fund, $219,070, $171,287 and $76,714, respectively; and from the Small
Cap. Growth Fund to $192,850, $160,108 and $14,194, respectively. However, the
Advisor has agreed to limit the aggregate expenses of
B-9
<PAGE> 35
the Institutional Balanced Fund to 1.05% of average net assets, the expenses of
the Institutional Growth Fund to 1.25% of average net assets, the expenses of
the Small Cap. Growth Fund to 1.00%, the expenses of the Institutional Small Cap
Fund to 1.45%, and the expenses of the MidCap Fund to 1.35%. As a result, the
Advisor paid expenses of the Balanced Fund that exceeded these expense limits in
the amounts of $63,727, $54,837 and $91,735 during the fiscal years ended
October 31, 1995, 1994 and 1993, respectively. The Advisor paid expenses of the
Growth Fund that exceeded these expense limits in the amounts of $56,326,
$119,273 and $100,455 during the fiscal years ended October 31, 1995, 1994 and
1993, respectively. The Advisor paid expenses of the Small Cap. Growth Fund that
exceeded these expense limits in the amounts of $260,150, $296,973 and $21,194
during the fiscal years ended October 31, 1995, 1994 and 1993, respectively. The
Institutional Small Cap Fund and the MidCap Fund were not in existence during
the fiscal year ended October 31, 1995 or prior to that.
DISTRIBUTION PLAN
The Trust has adopted, on behalf of the PIC Pinnacle Growth, Balanced
and Small Cap Funds, a Distribution Plan pursuant to Rule 12b-1 under the 1940
Act. The Distribution Plan provides for compensation to the Advisor and the
Distributor for expenses incurred in marketing shares of the Funds, including
advertising, printing and compensation to securities dealers or other industry
professionals. No payments have yet been made under the Plan.
THE ADMINISTRATOR
During each of the fiscal years ended October 31, 1995, 1994 and 1993,
the Balanced Fund and the Growth Fund each paid the Administrator fees in the
amount of $15,000. During each of the fiscal years ended October 31, 1995 and
1994, the Small Cap. Growth Fund paid the Administrator fees in the amount of of
$10,000.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisory Agreements state that in connection with its duties to
arrange for the purchase and the sale of securities held by the Portfolios by
placing purchase and sale orders for the Portfolios, the Advisor shall select
such broker-dealers ("brokers") as shall, in its judgment, achieve the policy of
"best execution," i.e., prompt and efficient execution at the most favorable
securities price. In making such selection, the Advisor is authorized in the
Advisory Agreements to consider the reliability, integrity and financial
condition of the broker. The Advisor also is authorized by the Advisory
Agreements to consider whether the broker provides research or statistical
information to the Portfolios and/or other accounts of the Advisor.
The Advisory Agreements state that the commissions paid to brokers may
be higher than another broker would have charged if a good faith determination
is made by the Advisor that the commission is reasonable in relation to the
services provided, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities as to the accounts as to which it exercises
investment discretion and that the Advisor shall use its judgment in determining
that the amount of commissions paid are reasonable in relation to the value of
brokerage and research services provided and need not place or attempt to place
a specific dollar value on such services or on the portion of commission rates
reflecting such services. The Advisory Agreements provide that to demonstrate
that such determinations were in good faith, and to show the overall
reasonableness of commissions paid, the Advisor shall be prepared to show that
commissions paid (i) were for purposes contemplated by the Advisory Agreements;
(ii) were for products or services which provide lawful and appropriate
assistance to its decision-making process; and (iii) were within a reasonable
range as compared to the rates charged by brokers to other institutional
investors as such rates may become known from available information. During the
fiscal years ended October 31, 1995, 1994 and 1993, the amount of brokerage
commissions paid by the PIC Balanced Portfolio were $19,998, $11,505 and $3,607,
respectively; by the PIC Growth Portfolio, $243,060, $277,095 and $147,728,
respectively; by the PIC Small Cap. Portfolio, $59,282, $75,749 and $7,573,
respectively.
The research services discussed above may be in written form or through
direct contact with individuals and may include information as to particular
companies and securities as well as market,
B-10
<PAGE> 36
economic or institutional areas and information assisting the Portfolios in the
valuation of the Portfolios' investments. The research which the Advisor
receives for the Portfolios' brokerage commissions, whether or not useful to the
Portfolios, may be useful to it in managing the accounts of its other advisory
clients. Similarly, the research received for the commissions of such accounts
may be useful to the Portfolios.
The debt securities which will be a major component of the Balanced
Portfolio's portfolio are generally traded on a "net" basis with dealers acting
as principal for their own accounts without a stated commission although the
price of the security usually includes a profit to the dealer. Money market
instruments usually trade on a "net" basis as well. On occasion, certain money
market instruments may be purchased by the Portfolios directly from an issuer in
which case no commissions or discounts are paid. In underwritten offerings,
securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.
NET ASSET VALUE
The net asset value of the Portfolios' shares will fluctuate and is
determined as of the close of trading on the New York Stock Exchange (currently
4:00 p.m. Eastern time) each business day. The Exchange annually announces the
days on which it will not be open for trading. The most recent announcement
indicates that it will not be open on the following days: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. However, the Exchange may close on days not
included in that announcement.
The net asset value per share is computed by dividing the value of the
securities held by each Portfolio plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of Interests in the Portfolio
outstanding at such time.
TAXATION
The Funds will each be taxed as separate entities under the Internal
Revenue Code, and each intends to elect to qualify for treatment as a regulated
investment company ("RIC") under Subchapter M of the Code. In each taxable year
that the Funds qualify, the Funds (but not their shareholders) will be relieved
of federal income tax on that part of their investment company taxable income
(consisting generally of interest and dividend income, net short term capital
gain and net realized gains from currency transactions) and net capital gain
that is distributed to shareholders.
In order to qualify for treatment as a RIC, the Funds must distribute
annually to shareholders at least 90% of their investment company taxable income
and must meet several additional requirements. Among these requirements are the
following: (1) at least 90% of each Fund's gross income each taxable year must
be derived from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income derived with respect to its business of investing in
securities or currencies; (2) less than 30% of each Fund's gross income each
taxable year may be derived from the sale or other disposition of securities
held for less than three months; (3) at the close of each quarter of each Fund's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. Government securities, securities of other RICs and
other securities, limited in respect of any one issuer, to an amount that does
not exceed 5% of the value of the Fund and that does not represent more than 10%
of the outstanding voting securities of such issuer; and (4) at the close of
each quarter of each Fund's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than U.S. Government securities or
the securities of other RICs) of any one issuer.
Each Fund will be subject to a nondeductible 4% excise tax to the
extent it fails to distribute by the end of any calendar year substantially all
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
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<PAGE> 37
DIVIDENDS AND DISTRIBUTIONS
Dividends from a Fund's investment company taxable income (whether paid
in cash or invested in additional shares) will be taxable to shareholders as
ordinary income to the extent of the Fund's earnings and profits. Distributions
of a Fund's net capital gain (whether paid in cash or invested in additional
shares) will be taxable to shareholders as long-term capital gain, regardless of
how long they have held their Fund shares.
Dividends declared by a Fund in October, November or December of any
year and payable to shareholders of record on a date in one of such months will
be deemed to have been paid by the Fund and received by the shareholders on the
record date if the dividends are paid by a Fund during the following January.
Accordingly, such dividends will be taxed to shareholders for the year in which
the record date falls.
Each Fund is required to withhold 31% of all dividends, capital gain
distributions and repurchase proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Each Fund also is required to withhold 31% of
all dividends and capital gain distributions paid to such shareholders who
otherwise are subject to backup withholding.
PERFORMANCE INFORMATION
TOTAL RETURN
Average annual total return quotations used in a Fund's advertising and
promotional materials are calculated according to the following formula:
P(1 + T)(to the nth power) = ERV
where P equals a hypothetical initial payment of $1000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1000 payment made at the
beginning of the period.
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication. Average
annual total return, or "T" in the above formula, is computed by finding the
average annual compounded rates of return over the period that would equate the
initial amount invested to the ending redeemable value. Average annual total
return assumes the reinvestment of all dividends and distributions.
YIELD
Annualized yield quotations used in a Fund's advertising and
promotional materials are calculated by dividing the Fund's interest income for
a specified thirty-day period, net of expenses, by the average number of shares
outstanding during the period, and expressing the result as an annualized
percentage (assuming semi-annual compounding) of the net asset value per share
at the end of the period. Yield quotations are calculated according to the
following formula:
YIELD = 2 [(a-b + 1)(to the 6th power) - 1]
---
cd
where a equals dividends and interest earned during the period; b equals
expenses accrued for the period, net of reimbursements; c equals the average
daily number of shares outstanding during the period that are entitled to
receive dividends and d equals the maximum offering price per share on the last
day of the period.
Except as noted below, in determining net investment income earned
during the period ("a" in the above formula), a Fund calculates interest earned
on each debt obligation held by it during the period by (1) computing the
obligation's yield to maturity, based on the market value of the obligation
(including actual accrued interest) on the last business day of the period or,
if the obligation was purchased during the period, the purchase price plus
accrued interest; (2) dividing the yield to maturity by 360 and multiplying the
resulting quotient by the market value of the obligation (including actual
accrued interest). Once interest earned is calculated in this fashion for each
debt obligation held by a Fund, net investment income is then determined by
totalling all such interest earned.
B-12
<PAGE> 38
For purposes of these calculations, the maturity of an obligation with
one or more call provisions is assumed to be the next date on which the
obligation reasonably can be expected to be called or, if none, the maturity
date.
OTHER INFORMATION
Performance data of a Fund quoted in advertising and other promotional
materials represents past performance and is not intended to predict or indicate
future results. The return and principal value of an investment in a Fund will
fluctuate, and an investor's redemption proceeds may be more or less than the
original investment amount. In advertising and promotional materials a Fund may
compare its performance with data published by Lipper Analytical Services, Inc.
("Lipper") or CDA Investment Technologies, Inc. ("CDA"). A Fund also may refer
in such materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper or CDA.
Advertising and promotional materials also may refer to discussions of a Fund
and comparative mutual fund data and ratings reported in independent periodicals
including, but not limited to, The Wall Street Journal, Money Magazine, Forbes,
Business Week, Financial World and Barron's.
GENERAL INFORMATION
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest and to divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest in a Fund. Each share represents
an interest in a Fund proportionately equal to the interest of each other share.
Upon the Trust's liquidation, all shareholders would share pro rata in the net
assets of the Fund in question available for distribution to shareholders. If
they deem it advisable and in the best interest of shareholders, the Board of
Trustees may create additional series of shares which differ from each other
only as to dividends. The Board of Trustees has created seven series of shares,
and may create additional series in the future, which have separate assets and
liabilities. Income and operating expenses not specifically attributable to a
particular Fund are allocated fairly among the Funds by the Trustees, generally
on the basis of the relative net assets of each Fund.
Rule 18f-2 under the 1940 Act provides that as to any investment
company which has two or more series outstanding and as to any matter required
to be submitted to shareholder vote, such matter is not deemed to have been
effectively acted upon unless approved by the holders of a "majority" (as
defined in the Rule) of the voting securities of each series affected by the
matter. Such separate voting requirements do not apply to the election of
Trustees or the ratification of the selection of accountants. The Rule contains
special provisions for cases in which an advisory contract is approved by one or
more, but not all, series. A change in investment policy may go into effect as
to one or more series whose holders so approve the change even though the
required vote is not obtained as to the holders of other affected series.
The Trust's custodian, Provident National Bank, is responsible for
holding the Funds' assets, and Provident Financial Processing Corporation acts
as the Trust's accounting services agent. The Trust's independent accountants,
McGladrey & Pullen, LLP, 555 Fifth Avenue, New York, NY 10017, assist in the
preparation of certain reports to the Securities and Exchange Commission and the
Funds' tax returns.
[Information as to 5% holders to be filed by amendment.]
Shares of any of the Funds owned by the Trustees and officers as a
group were less than 1%.
B-13
<PAGE> 39
APPENDIX
DESCRIPTION OF RATINGS
MOODY'S INVESTORS SERVICE, INC.: CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa---Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
Moody's applies numerical modifiers "1", "2" and "3" to both the Aaa
and Aa rating classifications. The modifier "1" indicates that the security
ranks in the higher end of its generic rating category; the modifier "2"
indicates a mid-range ranking; and the modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great period of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
STANDARD & POOR'S CORPORATION: CORPORATE BOND RATINGS
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
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<PAGE> 40
COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are assessments of the issuer's
ability to repay punctually promissory obligations. Moody's employs the
following three designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers: Prime 1--highest quality; Prime
2--higher quality; Prime 3--high quality.
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment. Ratings are graded into four categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers "1", "2" and "3" to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A-1" which possess extremely strong safety characteristics. Capacity for
timely payment on issues with the designation "A-2"
is strong. However, the relative degree of safety is not as high as for issues
designated A-1. Issues carrying the designation "A-3" have a satisfactory
capacity for timely payment. They are, however, somewhat more vulnerable to the
adverse effect of changes in circumstances than obligations carrying the higher
designations.
B-15
<PAGE> 41
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
To be filed by amendment.
(b) Exhibits:
(1) Declaration of Trust(3)
(2) By-Laws(3)
(3) Not applicable
(4) Specimen stock certificate(3)
(5) Not applicable
(6) Distribution Agreement(3)
(7) Not applicable
(8) Custodian Agreement(1)
(9) (i) Administration Agreement with Investment Company
Administration Corporation(3)
(ii) Administration Agreement with Provident
Investment Counsel(3)
(10) Opinion and consent of counsel(3)
(11) Consent of McGladrey & Pullen(4)
(12) Not applicable
(13) Investment letter(3)
(14) Individual Retirement Account forms(2)
(15) Not applicable
(16) Not applicable
(1) Previously filed with Pre-effective Amendment No. 1 to the
Registration Statement on Form N-1A of PIC Investment Trust, File No 33-44579,
on April 16, 1992 and incorporated herein by reference.
(2) Previously filed with Post-effective Amendment No. 1 to the
Registration Statement on Form N-1A of PIC Investment Trust, File No 33-44579,
on April 7, 1993 and incorporated herein by reference.
(3) Previously filed with Post-effective Amendment No. 10 to the
Registration Statement on Form N-1A of PIC Investment Trust, File No 33-44579,
on April 4, 1996 and incorporated herein by reference.
(4) To be filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
As of September 30, 1996, Registrant owned 99.9% of the outstanding
Interests in PIC Growth Portfolio, PIC Balanced Portfolio and PIC Small Cap.
Portfolio, all of which are trusts organized under the laws of the State of New
York and registered management investment companies.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of September 30, 1996, the PIC Institutional Growth Fund had 318
shareholders; the PIC Institutional Balanced Fund had 78 shareholders; the PIC
Institutional Small Cap Fund had 56 shareholders; and the PIC Small Cap. Growth
Fund had 3 shareholders.
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<PAGE> 42
ITEM 27. INDEMNIFICATION.
Article VI of Registrant's By-Laws states as follows:
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed:
(a) in the case of conduct in his official capacity as a Trustee
of the Trust, that his conduct was in the Trust's best
interests, and
(b) in all other cases, that his conduct was at least not opposed
to the Trust's best interests, and
(c) in the case of a criminal proceeding, that he had no
reasonable cause to believe the conduct of that person was
unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of this Trust to procure a
judgment in its favor by reason of the fact that that person is or was an agent
of this Trust, against expenses actually and reasonably incurred by that person
in connection with the defense or settlement of that action if that person acted
in good faith, in a manner that person believed to be in the best interests of
this Trust and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification
C-2
<PAGE> 43
for any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis that
personal benefit was improperly received by him, whether or
not the benefit resulted from an action taken in the person's
official capacity; or
(b) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the
performance of that person's duty to this Trust, unless and
only to the extent that the court in which that action was
brought shall determine upon application that in view of all
the circumstances of the case, that person was not liable by
reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine; or
(c) of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval,
or of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval, unless the required approval set forth in Section 6
of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party Trustees, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not
parties to the proceeding and are not interested persons of
the Trust (as defined in the Investment Company Act of 1940);
or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
C-3
<PAGE> 44
proceeding may be advanced by this Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i) security for the undertaking; or (ii) the
existence of insurance protecting the Trust against losses arising by reason of
any lawful advances; or (iii) a determination by a majority of a quorum of
Trustees who are not parties to the proceeding and are not interested persons of
the Trust, or by an independent legal counsel in a written opinion, based on a
review of readily available facts that there is reason to believe that the agent
ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must be made in the manner
specified in Section 6 of this Article for determining that the indemnification
is permissible.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6 in any circumstances
where it appears:
(a) that it would be inconsistent with a provision of the
Agreement and Declaration of Trust of the Trust, a resolution
of the shareholders, or an agreement in effect at the time of
accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other
amounts were paid which prohibits or otherwise limits
indemnification; or
(b) that it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Agreement and Declaration of Trust of the
Trust.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not applicable.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The Registrant's principal underwriter also acts as principal
underwriter for the following investment companies:
Guiness Flight Investment Funds, Inc.
Jurika & Voyles Mutual Funds
Hotchkis and Wiley Funds
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
C-4
<PAGE> 45
O'Shaugnessy Funds, Inc.
RNC Liquid Assets Fund, Inc.
(b) The following information is furnished with respect to the officers
and directors of First Fund Distributors, Inc.:
<TABLE>
<CAPTION>
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ---------------- ----------- ----------
<S> <C> <C>
Robert H. Wadsworth President Assistant
4455 E. Camelback Road and Treasurer Secretary
Suite 261E
Phoenix, AZ 85018
Eric M. Banhazl Vice President Assistant
2025 E. Financial Way Treasurer
Glendora, CA 91741
Steven J. Paggioli Vice President & Assistant
479 West 22nd Street Secretary Secretary
New York, New York 10011
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of Registrant and
Registrant's custodian, as follows: the documents required to be maintained by
paragraphs (4), (5), (6), (7), (10) and (11) of Rule 31a-1(b) will be maintained
by the Registrant, and all other records will be maintained by the Custodian.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
The Registrant undertakes, if requested to do so by the holders of at
least 10% of the Trust's outstanding shares, to call a meeting of shareholders
for the purposes of voting upon the question of removal of a director and will
assist in communications with other shareholders.
The Registrant undertakes to file a post-effective amendment,
containing financial statements which do not have to be audited, within four to
six months of the effective date of this post-effective amendment.
C-5
<PAGE> 46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement on Form N-1A of PIC Investment Trust to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Pasadena
and State of California on the 10th day of October, 1996.
PIC INVESTMENT TRUST
By Jeffrey J. Miller*
-----------------------
Jeffrey J. Miller
President
This Amendment to the Registration Statement on Form N-1A of PIC
Investment Trust has been signed below by the following persons in the
capacities indicated on October 10, 1996.
<TABLE>
<S> <C>
Jeffrey J. Miller*
- ------------------------------------ President and
Jeffrey J. Miller Trustee
Jettie M. Edwards* Trustee
- ------------------------------------
Jettie M. Edwards
Bernard J. Johnson*
- ------------------------------------ Trustee
Bernard J. Johnson
Jeffrey D. Lovell*
- ------------------------------------ Trustee
Jeffrey D. Lovell
Wayne H. Smith*
- ------------------------------------ Trustee
Wayne H. Smith
Thad M. Brown*
- ------------------------------------ Treasurer and Principal
Thad M. Brown Financial and Accounting
Officer
</TABLE>
* Robert H. Wadsworth
-------------------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE> 47
SIGNATURES
PIC Growth Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of PIC Investment Trust to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Pasadena and State of
California on the 4th day of October, 1996.
PIC GROWTH PORTFOLIO
By Jeffrey J. Miller*
-----------------------
Jeffrey J. Miller
President
This Amendment to the Registration Statement on Form N-1A of PIC
Investment Trust has been signed below by the following persons in the
capacities indicated on October 10, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
Jeffrey J. Miller*
- ---------------------------- President and Trustee
Jeffrey J. Miller of PIC Growth Portfolio
Richard N. Frank*
- ---------------------------- Trustee of PIC Growth Portfolio
Richard N. Frank
James Clayburn LaForce*
- ---------------------------- Trustee of PIC Growth Portfolio
James Clayburn LaForce
Angelo R. Mozilo*
- ---------------------------- Trustee of PIC Growth Portfolio
Angelo R. Mozilo
Thad M. Brown*
- ---------------------------- Treasurer and Principal Financial and Accounting
Thad M. Brown Officer of PIC Growth Portfolio
</TABLE>
* Robert H. Wadsworth
-----------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE> 48
SIGNATURES
PIC Balanced Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of PIC Investment Trust to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Pasadena and
State of California on the 10th day of October, 1996.
PIC BALANCED PORTFOLIO
By Jeffrey J. Miller*
--------------------
Jeffrey J. Miller
President
This Amendment to the Registration Statement on Form N-1A of PIC
Investment Trust has been signed below by the following persons in the
capacities indicated on October 10, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
Jeffrey J. Miller*
- ----------------------------- President and Trustee
Jeffrey J. Miller of PIC Balanced Portfolio
Richard N. Frank* Trustee of PIC Balanced Portfolio
- -----------------------------
Richard N. Frank
James Clayburn LaForce*
- ----------------------------- Trustee of PIC Balanced Portfolio
James Clayburn LaForce
Angelo R. Mozilo*
- ----------------------------- Trustee of PIC Balanced Portfolio
Angelo R. Mozilo
Thad M. Brown*
- ----------------------------- Treasurer and Principal Financial and Accounting
Thad M. Brown Officer of PIC Balanced Portfolio
</TABLE>
* Robert H. Wadsworth
-------------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE> 49
SIGNATURES
PIC Small Cap. Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of PIC Investment Trust to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Pasadena and
State of California on the 10th day of October, 1996.
PIC SMALL CAP. PORTFOLIO
By Jeffrey J. Miller*
----------------------
Jeffrey J. Miller
President
This Amendment to the Registration Statement on Form N-1A of PIC
Investment Trust has been signed below by the following persons in the
capacities indicated on October 10, 1996.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
Jeffrey J. Miller*
- ------------------------------ President and Trustee
Jeffrey J. Miller of PIC Small Cap. Portfolio
Richard N. Frank* Trustee of PIC Small Cap. Portfolio
- ------------------------------
Richard N. Frank
James Clayburn LaForce*
- ------------------------------ Trustee of PIC Small Cap. Portfolio
James Clayburn LaForce
Angelo R. Mozilo*
- ------------------------------ Trustee of PIC Small Cap. Portfolio
Angelo R. Mozilo
Thad M. Brown*
- ------------------------------ Treasurer and Principal Financial and Accounting
Thad M. Brown Officer of PIC Small Cap. Portfolio
</TABLE>
* Robert H. Wadsworth
-------------------
By: Robert H. Wadsworth
Attorney-in-fact
