<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. 13 _X_
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 ___
AMENDMENT NO. 16 _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)
_X_ 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)
___ on (date) 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 December 27, 1996.
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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). The SAI is dated January 27,
1997, may be amended from time to time, 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.
LOGO
PROSPECTUS
JANUARY 27, 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
3 EXPENSES
5 STRUCTURE OF THE FUNDS AND
THE PORTFOLIOS
6 FINANCIAL HIGHLIGHTS
THE FUNDS IN DETAIL 8 CHARTER How the Fund is
organized.
9 INFORMATION ABOUT THE FUNDS'
INVESTMENTS The Funds' overall
approach to investing.
10 SECURITIES AND INVESTMENT
PRACTICES More information about
how the Fund invest.
12 BREAKDOWN OF EXPENSES How
operating costs are calculated
and what they include.
12 PERFORMANCE
YOUR ACCOUNT 13 WAYS TO SET UP YOUR ACCOUNT
14 HOW TO BUY SHARES
15 HOW TO SELL SHARES
17 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER ACCOUNT 18 DIVIDENDS, CAPITAL GAINS
POLICIES AND TAXES
19 TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
21 EXCHANGE RESTRICTIONS
GENERAL INFORMATION 22
</TABLE>
PROSPECTUS
2
<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 $19 billion.
- --------------------------------------
GROWTH FUND
GOAL: Long term growth of capital.
STRATEGY: Invests, through the PIC Growth Portfolio, in high quality growth
stocks.
- --------------------------------------
SMALL COMPANY GROWTH 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 Small Company Growth 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 Company Growth 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.
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 None
Redemption fee None
Exchange fee $5
</TABLE>
ANNUAL OPERATING EXPENSES are paid out of each Fund's and each Portfolio's
assets. The Funds each indirectly pay an investment advisory fee equal to .80%
of the Fund's average net assets. Each Fund also incurs other expenses for
services
PROSPECTUS
3
<PAGE> 5
KEY FACTS - CONTINUED
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.
- --------------------------------------
GROWTH FUND
<TABLE>
<S> <C>
Management fee (paid by
the Portfolio) .80%
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%
12b-1 fee None
Other expenses of the
Fund,
after reimbursement by
PIC .05%
----
Total Fund operating
expenses 1.25%
</TABLE>
PIC reimburses the Growth Fund for any expenses in excess of 1.25% of average
net assets. Without this reimbursement, the total Fund operating expenses would
be estimated to be 1.30% of average net assets.
- --------------------------------------
SMALL COMPANY GROWTH FUND
<TABLE>
<S> <C>
Management fee (paid by
the Portfolio) .80%
Other expenses of the
Portfolio .20%
----
Total operating expenses
of the Portfolio 1.00%
Administrative fee paid
by the Fund to PIC .20%
12b-1 fee None
Other expenses of the
Fund .25%
----
Total Fund operating
expenses 1.45%
</TABLE>
PIC reimburses the Small Company Growth Fund for any expenses in excess of 1.45%
of average net assets. Without this reimbursement, the total Fund operating
expenses would be estimated to be 4.03%.
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:
- --------------------------------------
GROWTH FUND
<TABLE>
<S> <C>
After 1 year $ 13
After 3 years $ 40
After 5 years $ 69
After 10 years $151
</TABLE>
- --------------------------------------
SMALL COMPANY GROWTH FUND
<TABLE>
<S> <C>
After 1 year $ 15
After 3 years $ 46
</TABLE>
These examples illustrates 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.
PROSPECTUS
4
<PAGE> 6
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 Fund's Investments" and "Securities and
Investment Practices."
PROSPECTUS
5
<PAGE> 7
FINANCIAL HIGHLIGHTS
The tables that follow are included in each Fund's Annual Report and have been
audited by McGladrey & Pullen, LLP, Independent Certified Public Accountants.
Their reports on the financial statements and financial highlights are included
in the Annual Reports. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the Funds' Statement of
Additional Information
- --------------------------------------------------------------------------------
PIC GROWTH FUND
Selected Per-Share Data and Ratios
<TABLE>
<CAPTION>
Years ended October 31 1996 1995 1994 1993 1992*
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 14.25 $ 11.70 $ 11.60 $10.81 $10.00
Income from Investment
Operations:
Net investment income (.06) (.02) .00 .00 .01
Net realized and unrealized
gain on investments 2.06 2.57 .10 .80 .80
Total from investment
operations 2.00 2.55 .10 .80 .81
Less return of capital
dividend .00 .00 .00 (.01) .00
Net asset value, end of
period $ 16.25 $ 14.25 $ 11.70 $11.60 $10.81
Total return 14.04% 21.79% .86% 7.40% 20.88%+
- ----------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000) omitted $ 116.1 $ 131.1 $ 102.3 $ 88.9 $ 5.7
Ratio of expenses to average
net assets 1.30% 1.30% 1.53% 1.54% 4.12%+
Ratio of expenses to average
net assets
after expense reductions** 1.25% 1.25% 1.25% 1.25% 1.25%+
Ratio of net investment
income (loss) to
average net assets (.28%) (.17%) (.15%) (.11%) .25%+
Portfolio turnover rate++ 64.09% 54.89% 68.26% 43.20% 7.42%
</TABLE>
* June 11, 1992 (commencement of operations) to October 31, 1992.
+ Annualized.
** Includes the Fund's share of expenses allocated from PIC Growth Portfolio.
++ Portfolio turnover rate of PIC Growth Portfolio, in which all of the Fund's
assets are invested.
PROSPECTUS
6
<PAGE> 8
- --------------------------------------------------------------------------------
PIC SMALL COMPANY GROWTH FUND
Selected Per-Share Data and Ratios
<TABLE>
<CAPTION>
Year ended October 31 1996
<S> <C> <C>
Net asset value, beginning of period $ 10.00
Income from Investment Operations:
Net investment (loss) (.03)
Net realized and unrealized (loss) on investments (.49)
Total from investment operations (.52)
Net asset value, end of period $ 9.48
Total return (5.20%)
- -------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000) omitted $ 5.2
Ratio of expenses to average net assets 4.03%+
Ratio of expenses to average net assets after expense
reductions** 1.43%+
Ratio of net investment income to average net assets (0.91%)+
Portfolio turnover rate++ 53.11%
</TABLE>
* June 28, 1996 (commencement of operations) to October 31, 1996.
+ Annualized.
** Includes the Fund's share of expenses allocated from PIC Small Cap.
Portfolio.
++ Portfolio turnover rate of PIC Small Cap. Portfolio, in which all of the
Fund's assets are invested.
PROSPECTUS
7
<PAGE> 9
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 Fund and the Portfolio, 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's research professionals meet personally with the majority
of the senior officers of the companies in the Portfolios to discuss their
abilities to generate strong revenue and earnings growth in the future.
PIC's investment professionals focus on individual companies rather than trying
to identify the best market sectors going forward. They seek out companies with
significant management ownership of stock, strong management goals, plans and
controls; leading proprietary positions in given market niches; and finally
companies that may currently be under-researched by Wall Street analysts.
The value of a 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.
Each 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 each Portfolio's assets according to its investment strategy. Each
Portfolio also reserves the right to invest without limita-
PROSPECTUS
8
<PAGE> 10
tion in short term instruments for temporary, defensive purposes.
PIC may use broker-dealers that sell shares of the 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, PIC will include equity securities of companies of various sizes
which are currently experiencing an above-average rate of earnings growth. PIC
uses "bottom-up" fundamental research to identify 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 $15 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.
PROSPECTUS
9
<PAGE> 11
THE FUNDS IN DETAIL - CONTINUED
- --------------------------------------
PIC SMALL COMPANY GROWTH FUND
THE PIC SMALL COMPANY GROWTH 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 Small Cap. Portfolio may also invest up to 20% of its assets in foreign
securities.
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.
PROSPECTUS
10
<PAGE> 12
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 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 Company Growth Fund each seek long term growth of
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
PROSPECTUS
11
<PAGE> 13
THE FUNDS IN DETAIL - CONTINUED
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 at the annual rate of 0.80% of the Portfolio's 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.
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 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 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 Growth Fund, this limit is 1.25%, and in the case of the
Small Company Growth Fund the limit is 1.45%. 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).
PROSPECTUS
12
<PAGE> 14
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
13
<PAGE> 15
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, an affiliate of the administrator, 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 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
14
<PAGE> 16
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 Funds
P.O. Box 8987
Wilmington, DE 19899
PROSPECTUS
15
<PAGE> 17
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
16
<PAGE> 18
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
17
<PAGE> 19
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 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 offers 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
L3 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
18
<PAGE> 20
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
19
<PAGE> 21
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
20
<PAGE> 22
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 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
21
<PAGE> 23
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' 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. As of December 31, 1996, the Growth Fund
was controlled by the Ernst & Young Defined Benefit Plan, and the Small Company
Growth Fund was controlled by Atlantic Trust Co. NA and Libco.
PROSPECTUS
22
<PAGE> 24
Please read this prospectus before investing, and keep it on file for future
reference. It contains important information, including how the Fund invests and
the services available to shareholders.
To learn more about the 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 27, 1997. 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.
[graphic]
PROSPECTUS
JANUARY 27, 1997
PROVIDENT INVESTMENT COUNSEL
300 NORTH LAKE AVENUE
PASADENA, CA 91101
1
<PAGE> 25
<TABLE>
<CAPTION>
CONTENTS
<S> <C> <C>
KEY FACTS 3 THE FUND AT A GLANCE
3 WHO MAY WANT TO INVEST
3 EXPENSES
5 STRUCTURE OF THE FUND AND
THE PORTFOLIO
6 FINANCIAL HIGHLIGHTS
THE FUND IN DETAIL 7 CHARTER How the Fund is organized.
7 INFORMATION ABOUT THE FUND'S
INVESTMENTS The Fund's overall
approach to investing.
9 SECURITIES AND INVESTMENT
PRACTICES More information about how
the Fund invest.
11 BREAKDOWN OF EXPENSES How
operating costs are calculated and
what they include.
11 PERFORMANCE
YOUR ACCOUNT 12 WAYS TO SET UP YOUR ACCOUNT
13 HOW TO BUY SHARES
14 HOW TO SELL SHARES
16 INVESTOR SERVICES Services to help
you manage your account.
SHAREHOLDER ACCOUNT 17 DIVIDENDS, CAPITAL GAINS
POLICIES AND TAXES
18 TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
20 EXCHANGE RESTRICTIONS
GENERAL INFORMATION 21
</TABLE>
PROSPECTUS 2
<PAGE> 26
KEY FACTS
THE FUND AT A GLANCE
MANAGEMENT: Provident Investment Counsel (PIC), located in Pasadena, California
since 1951, is the Fund's Advisor. At December 31, 1996, total assets under
PIC's management were $19 billion.
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
WHO MAY WANT TO INVEST
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 value of the 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.
EXPENSES
SHAREHOLDER TRANSACTION EXPENSES are charges you pay when you buy, sell or hold
shares in the Fund.
<TABLE>
<S> <C>
Maximum sales charge None
Maximum sales charge on
reinvested dividends None
Deferred sales charge None
Redemption fee None
Exchange fee $5
</TABLE>
ANNUAL OPERATING EXPENSES are paid out of the Fund's and the Portfolio's assets.
The Balanced Fund indirectly pays an investment advisory fee equal to .60% of
that Fund's average net assets. The Fund also incurs other expenses for services
such as administrative services, maintaining shareholder records and furnishing
shareholder statements and financial reports. The 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.
<TABLE>
<CAPTION>
<S> <C>
Management fee (paid by
the Portfolio) .60%
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%
12b-1 fee None
Other expenses of the Fund, after
reimbursement by PIC .05%
TOTAL FUND OPERATING EXPENSES 1.05%
</TABLE>
3 PROSPECTUS
<PAGE> 27
PIC reimburses the Balanced Fund for any expenses in excess of 1.05% of average
net assets. Without this reimbursement, the total fund operating expenses would
be estimated to be 1.72% of average net assets.
EXAMPLES: Let's say, hypothetically, that the 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>
<CAPTION>
<S> <C>
After 1 year $ 11
After 3 years $ 33
After 5 years $ 58
After 10 years $128
</TABLE>
This example illustrates the effect of expenses, but it is 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
table above summarizes the expenses of both the Portfolio and the Fund. The
Trustees expect that the combined per share expenses of the Fund and the
Portfolio will be equal to, or may be less than, the expenses that would be
incurred by the Fund if it retained an investment manager and invested directly
in the types of securities held by a Portfolio.
PROSPECTUS 4
<PAGE> 28
STRUCTURE OF THE FUND AND THE PORTFOLIO
Unlike many other mutual funds which directly acquire and manage their own
portfolio securities, the Fund seeks to achieve its investment objective by
investing all of its assets in the PIC Balanced Portfolio. The Portfolio is a
separate registered investment company with the same investment objective as the
Fund. Since the Fund will not invest in any securities other than shares of the
Portfolio, investors in the Fund will acquire only an indirect interest in the
Portfolio. The Fund's and Portfolio's investment objective cannot be changed
without shareholder approval.
In addition to selling its shares to the Fund, the Portfolio may sell its shares
to other mutual funds or institutional investors. All investors in the Portfolio
invest on the same terms and conditions and pay a proportionate share of the
Portfolio's expenses. However, other investors in the Portfolio may sell their
shares to the public at prices different from those of the 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 the
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 the Fund's assets in the 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. The Fund's
investment in the Portfolio may be withdrawn by the Trustees at any time if the
Board determines that it is in the best interests of the 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 the Fund is requested to vote on matters pertaining to the 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 Fund in Detail," "Information about the Fund's Investments" and
"Securities and Investment Practices."
5 PROSPECTUS
<PAGE> 29
FINANCIAL HIGHLIGHTS
The table that follows is included in the Fund's Annual Report and has been
audited by McGladrey & Pullen, LLP, Independent Certified Public Accountants.
Their report on the financial statements and financial highlights is included in
the Annual Report. The financial statements and financial highlights are
incorporated by reference into (are legally a part of) the Fund's Statement of
Additional Information.
- --------------------------------------------------------------------------------
PIC INSTITUTIONAL BALANCED FUND
- --------------------------------------------------------------------------------
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SELECTED PER-SHARE DATA AND RATIOS
YEARS ENDED OCTOBER 31, 1996 1995 1994 1993 1992*
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Net asset value, beginning of period $ 13.24 $ 11.24 $ 11.48 $10.82 $ 10.00
Income from investment operations:
Net investment income .14 .15 .15 .18 .04
Net realized and unrealized
gain (loss) on investments 1.34 2.00 (.24) .69 .78
Total from investment operations 1.48 2.15 (.09) .87 .82
Less:
Dividends from net investment
income (.14) (.15) (.15) (.21) .00
Dividends from net realized
gains (.67) .00 .00 .00 .00
Total dividends (.81) (.15) (.15) (.21) .00
Change in net asset value .67 2.00 (.24) .66 .82
Net asset value, end of period $ 13.91 $ 13.24 $ 11.24 $11.48 $ 10.82
Total return 11.96% 19.35% (.78%) 8.10% 21.14%++
Ratios and Supplemental Data:
Net assets, end of period (000) omitted $ 12.9 $ 12.5 $ 9.1 $ 6.7 $ 1.2
Ratio of expenses to average net assets 1.72% 2.32% 2.87% 7.44% 43.11%+
Ratio of expenses to average net assets
after expense reductions** 1.05% 1.05% 1.05% 1.05% 1.05%+
Ratio of net investment income (loss) to
average net assets 1.05% 1.32% 1.37% 1.79% 2.60%+
Portfolio turnover rate++ 54.24% 106.50% 116.63% 92.65% 3.13%
</TABLE>
*June 11, 1992 (commencement of operations) through October 31, 1992.
+Annualized.
**Includes the Fund's share of expenses allocated from PIC Balanced Portfolio.
++Portfolio turnover rate of PIC Balanced Portfolio, in which all of the
Fund's assets are invested.
PROSPECTUS 6
<PAGE> 30
THE FUND IN DETAIL
CHARTER
THE FUND IS A MUTUAL FUND: an investment that pools shareholders' money and
invests it toward a specified goal. In technical terms, the 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 FUND AND THE PORTFOLIO 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 Fund
and the Portfolio, review contractual arrangements with companies that provide
services to the Fund and the Portfolio, 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 FUND 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 Fund 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 BALANCED PORTFOLIO, in which the Fund invests. An
investment committee of PIC formulates and implements an investment program for
the Portfolio, including determining which securities should be bought and sold.
PIC may use broker-dealers that sell shares of the Fund to carry out
transactions for the Portfolio, provided that the Portfolio 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 FUND'S INVESTMENTS.
Because the investment characteristics of the 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 Portfolio.
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
7 PROSPECTUS
<PAGE> 31
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.
In selecting investments for the Balanced Portfolio, 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 Balanced 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 $15 billion. Equity securities in
which the Balanced Portfolio invests typically average less than a 1% dividend.
Currently, approximately 70% of the equity securities in which the Balanced
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. PIC's research professionals meet personally with the majority of the
senior officers of the companies in the Portfolio to discuss their abilities to
generate strong revenue and earnings growth in the future.
PIC's investment professionals focus on individual companies rather than trying
to identify the best market sectors going forward. They seek out companies with
significant management ownership of stock, strong management goals, plans and
controls, leading proprietary positions in given market niches, and finally
companies that may currently be under-researched by Wall Street analysts.
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
PROSPECTUS 8
<PAGE> 32
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 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.
SECURITIES AND INVESTMENT PRACTICES
The following pages contain more detailed information about the types of
instruments in which the Portfolio may invest, and strategies PIC may employ in
pursuit of the Portfolio's investment objectives. A summary of risks and
restrictions associated with these instrument types and investment practices is
included as well. A complete listing of the Fund's policies and limitations and
more detailed information about the 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 the Portfolio
achieve its goals. Current holdings and recent investment strategies are
described in the 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, the Portfolio may not own more
than 10% of the outstanding voting securities of a single issuer.
9 PROSPECTUS
<PAGE> 33
SHORT TERM INVESTMENTS are debt securities that mature within a year of the date
they are purchased by the Portfolio. Some specific examples of short term
investments are commercial paper, bankers' acceptances, certificates of deposit
and repurchase agreements.
Restriction: The 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, the 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. The Portfolio may invest in foreign securities.
Restriction: The 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. The 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. The Fund will 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
follow-
PROSPECTUS 10
<PAGE> 34
ing 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 Balanced Fund seeks total return while preserving capital. The 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. The Portfolio may not invest more than 25% of its
total assets in any one industry.
BREAKDOWN OF EXPENSES
Like all mutual funds, the Fund pays fees related to its daily operations.
Expenses paid out of the Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts.
The Portfolio pays an INVESTMENT ADVISORY FEE to PIC each month for managing its
investments at the annual rate of 0.60% of its average net assets. While the
investment advisory fee is a significant component of the Portfolio's (and thus
the Fund's) annual operating costs, the Fund also pays OTHER EXPENSES. The Fund
and the Portfolio each pay a monthly administration fee to Investment Company
Administration Corporation for managing some of their business affairs. The
Portfolio pays a fee at the annual rate of 0.10% of average net assets, and the
Fund pays an annual fee of $15,000. The Fund and the Portfolio 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 has agreed to
reimburse the Fund for investment advisory fees and other expenses if they
exceed 1.05%of the Fund's average net assets. PIC retains the ability to be
repaid by the 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 the 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 the 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. The Fund may sometimes show its performance compared
to certain performance rankings, averages or stock indices (described more fully
in the SAI).
11 PROSPECTUS
<PAGE> 35
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).
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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.
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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).
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TRUST
FOR MONEY BEING INVESTED BY A TRUST
The trust must be established before an account can be opened.
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BUSINESS OR ORGANIZATION
FOR INVESTMENT NEEDS OF CORPORATIONS, ASSOCIATIONS, PARTNERSHIPS OR OTHER GROUPS
Does not require a special application.
PROSPECTUS 12
<PAGE> 36
HOW TO BUY SHARES
ONCE EACH BUSINESS DAY, THE 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 the 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
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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
</TABLE>
FOR INFORMATION: (800) 618-7643
TO INVEST
BY MAIL: PIC Funds
P.O. Box 8987
Wilmington, DE 19899
BY WIRE: Call:
(800) 618-7643 to set up
an account and arrange a
wire transfer
13 PROSPECTUS
<PAGE> 37
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 Fund 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 Funds
P.O. Box 8987
Wilmington, DE 19899
PROSPECTUS 14
<PAGE> 38
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ACCOUNT TYPE SPECIAL REQUIREMENTS
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PHONE All account types - Your telephone call must be
(800) 618-7643 except retirement received by 4 p.m. Eastern
time to be redeemed on that day.
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MAIL OR IN PERSON Individual, Joint - The letter of instructions must be
Tenant, Sole signed by all persons required to sign
Proprietorship, for transactions, exactly as
UGMA, UTMA their names appear on the
account.
Retirement - The account owner should complete
Account 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 authorized by
Organization 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 instructions.
Administrator,
Conservator,
Guardian
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WIRE All account - You must sign up for the wire feature
types except before using it. To verify that it is in
retirement 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.
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15 PROSPECTUS
<PAGE> 39
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 the 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 20.
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 16
<PAGE> 40
SHAREHOLDER ACCOUNT POLICIES
DIVIDENDS, CAPITAL GAINS, AND TAXES
The Fund distributes substantially all of their net income and capital gains, if
any, to shareholders each year, normally 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 Fund offers 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 the 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.
[PICTURE OF A ZERO] 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 the 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
17 PROSPECTUS
<PAGE> 41
and paid in January are taxable as if they were paid on December 31.
For federal tax purposes, the 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 the 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 the 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, the Fund may have to
limit its investment activity in some types of instruments.
TRANSACTION DETAILS
THE FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (NYSE) is
open. PIC calculates the Fund's NAV as of the close of business of the NYSE,
normally 4 p.m. Eastern time.
THE FUND'S NAV is the value of a single share. The NAV is computed by adding the
value of the 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).
The 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 the Fund to withhold 31% of your
taxable distributions and redemptions.
PROSPECTUS 18
<PAGE> 42
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 confirmation statements immediately after you
receive them. If you do not want the liability to redeem or exchange by
telephone, call PIC for instructions.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. The Fund also reserves the right to reject any specific purchase order,
including certain purchases by exchange. See "Exchange Restrictions" on page 20.
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.
- - The 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 THE 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 Fund is 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.
19 PROSPECTUS
<PAGE> 43
- - 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 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 the Fund for
shares of other PIC 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 the Fund, read its prospectus.
- - Exchanges may have tax consequences for you.
- - Because excessive trading can hurt fund performance and shareholders, the Fund
reserves the right to temporarily or permanently terminate the exchange
privilege of any investor who makes more than four exchanges out of the 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.
- - The Fund reserves the right to refuse exchange purchases by any person or
group if, in PIC's judgment, the 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 the Fund receives or
anticipates simultaneous orders affecting significant portions of the
Portfolio's assets. In particular, a pattern of exchanges that coincides with a
"market timing" strategy may be disruptive to the Portfolio.
PROSPECTUS 20
<PAGE> 44
Although the 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 Fund
reserves the right to terminate or modify the exchange privilege in the future.
GENERAL INFORMATION
The 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' expense the
applicants' communication to all other shareholders. Except for a change in the
name of the Trust, no amendment
21 PROSPECTUS
<PAGE> 45
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. As of January 5, 1997, the Fund was controlled by Fleet National
Bank, trustee for Davies Medical Pension Plan.
PROSPECTUS 22
<PAGE> 46
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). The SAI is dated January 31,
1997, may be amended from time to time, 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
GROWTH FUND
SMALL COMPANY GROWTH FUND
PROSPECTUS
JANUARY 31, 1997
PROVIDENT INVESTMENT COUNSEL
300 NORTH LAKE AVENUE
PASADENA, CA 91101
<PAGE> 47
CONTENTS
<TABLE>
<S> <C> <C>
KEY FACTS 3 THE FUNDS AT A GLANCE
3 WHO MAY WANT TO INVEST
3 EXPENSES
5 STRUCTURE OF THE FUNDS AND
THE PORTFOLIOS
THE FUNDS IN DETAIL 6 CHARTER How the Fund is
organized.
7 INFORMATION ABOUT THE FUNDS'
INVESTMENTS The Funds' overall
approach to investing.
8 SECURITIES AND INVESTMENT
PRACTICES More information about
how the Fund invest.
10 BREAKDOWN OF EXPENSES How
operating costs are calculated
and what they include.
10 PERFORMANCE
YOUR ACCOUNT 13 WAYS TO SET UP YOUR ACCOUNT
14 HOW TO BUY SHARES
15 HOW TO SELL SHARES
17 INVESTOR SERVICES Services to
help you manage your account.
SHAREHOLDER ACCOUNT 18 DIVIDENDS, CAPITAL GAINS
POLICIES AND TAXES
19 TRANSACTION DETAILS Share price
calculations and the timing of
purchases and redemptions.
21 EXCHANGE RESTRICTIONS
GENERAL INFORMATION 22
</TABLE>
PROSPECTUS
2
<PAGE> 48
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 $19 billion.
- --------------------------------------
PINNACLE GROWTH FUND
GOAL: Long term growth of capital.
STRATEGY: Invests, through the PIC Growth Portfolio, in high quality growth
stocks.
- --------------------------------------
PINNACLE SMALL COMPANY
GROWTH 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 Small Company Growth 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 Company Growth 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.
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 None
Redemption fee None
Exchange fee $5
</TABLE>
ANNUAL OPERATING EXPENSES are paid out of each Fund's and each Portfolio's
assets. The Funds each indirectly pay an investment advisory fee equal to .80%
of the Fund's average net assets. Each Fund also incurs other expenses for
services such as administrative services, maintaining shareholder records and
furnishing
PROSPECTUS
3
<PAGE> 49
KEY FACTS - CONTINUED
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.
- --------------------------------------
PINNACLE GROWTH FUND
<TABLE>
<S> <C>
Management fee (paid by
the Portfolio) .80%
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* .10%
12b-1 fee .25%
Other expenses of the
Fund* .00%
----
Total Fund operating
expenses 1.35%
</TABLE>
*PIC waives its fees and reimburses the Growth Fund for other expenses so that
total Fund operating expenses will not exceed 1.35% of average net assets.
Without this reimbursement, the total fund operating expenses would be estimated
to be 1.55% of average net assets.
- --------------------------------------
PINNACLE SMALL COMPANY
GROWTH FUND
<TABLE>
<S> <C>
Management fee (paid by
the Portfolio) .80%
Other expenses of the
Portfolio .20%
----
Total operating expenses
of the Portfolio 1.00%
Administrative fee paid
by the Fund to PIC .20%
12b-1 fee .25%
Other expenses of the
Fund* .10%
----
Total Fund operating
expenses 1.55%
</TABLE>
*PIC reimburses the Small Company Growth Fund for any expenses in excess of
1.55% of average net assets. Without this reimbursement, the total fund
operating expenses would be estimated to be 1.60% 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:
- --------------------------------------
PINNACLE GROWTH FUND
<TABLE>
<S> <C>
After 1 year $ 14
After 3 years $ 43
</TABLE>
- --------------------------------------
PINNACLE SMALL COMPANY
GROWTH FUND
<TABLE>
<S> <C>
After 1 year $ 16
After 3 years $ 49
</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.
PROSPECTUS
4
<PAGE> 50
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
5
<PAGE> 51
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's research professionals meet personally with the majority
of the senior officers of the companies in the Portfolios to discuss their
abilities to generate strong revenue and earnings growth in the future.
PIC's investment professionals focus on individual companies rather than trying
to identify the best market sectors going forward. They seek out companies with
significant management ownership of stock, strong management goals, plans and
controls; leading proprietary positions in given market niches; and finally
companies that may currently be under-researched by Wall Street analysts.
The value of a 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.
Each 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 each Portfolio's assets according to its investment strategy. Each
Portfolio also
PROSPECTUS
6
<PAGE> 52
reserves the right to invest without limitation in short term instruments for
temporary, defensive purposes.
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 PINNACLE GROWTH FUND
THE PIC PINNACLE 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, PIC will include equity securities of companies of various sizes
which are currently experiencing an above-average rate of earnings growth. PIC
uses "bottom-up" fundamental research to identify 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 $15 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.
PROSPECTUS
7
<PAGE> 53
THE FUNDS IN DETAIL - CONTINUED
The Growth Portfolio may also invest up to 20% of its assets in foreign
securities.
- --------------------------------------
PIC PINNACLE SMALL COMPANY
GROWTH FUND
THE PIC PINNACLE SMALL COMPANY GROWTH 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 Small Cap. Portfolio may also invest up to 20% of its assets in foreign
securities.
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.
PROSPECTUS
8
<PAGE> 54
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 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 Company Growth Fund each seek long term growth of
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
in-
PROSPECTUS
9
<PAGE> 55
THE FUNDS IN DETAIL - CONTINUED
vest 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 at the annual rate of 0.80% of the Portfolio's 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 shareholder servicing fees to financial services firms that sell
shares of the Funds, and these firms typically pass along a portion of these
fees to your financial representative for helping you with your investment in
the Fund. The maximum amount that a Fund may pay is .25% of its annual average
net assets. In addition to these payments, PIC also makes payments to financial
services firms at the rate of 0.50% of shareholder purchases between $1,000,000
and $3,000,000, and 0.25% of shareholder purchases of $3,000,000 or more. These
payments are made by PIC and are not an expense of the Funds or the Portfolios.
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 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 has agreed to reimburse each Fund and Portfolio 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 Pinnacle Growth Fund, this limit is 1.35%, and in the
case of the Pinnacle Small Company Growth Fund the limit is 1.55%. 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).
PROSPECTUS
10
<PAGE> 56
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 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
11
<PAGE> 57
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 Russell 2000
Growth 1000 Growth Small Cap Growth Stock
Year ended December 31, Composite Index(1) Composite Index(2)
<S> <C> <C> <C> <C>
1987 4.14% 5.31% 4.21% -10.48%
1988 5.35 11.27 26.46 20.37
1989 45.78 35.92 48.65 20.17
1990 6.10 -0.26 -0.18 -17.41
1991 65.91 41.16 77.06 51.19
1992 6.01 5.00 5.24 7.77
1993 2.82 2.90 22.10 13.36
1994 -1.41 2.66 -2.17 -2.43
1995 27.85 37.19 60.13 31.04
1996 21.48 23.12 17.86 11.26
Last 5 years 10.79 13.38 18.85 11.69
Last 10 years 16.74 15.43 23.44 10.88
</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 large cap (market oriented)
index of the 1,000 largest 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.
(2) 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.
PROSPECTUS
12
<PAGE> 58
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
13
<PAGE> 59
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
14
<PAGE> 60
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
15
<PAGE> 61
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
16
<PAGE> 62
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 any other
PIC Fund that you would be eligible to purchase directly, 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
17
<PAGE> 63
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
L3 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
18
<PAGE> 64
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
19
<PAGE> 65
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
20
<PAGE> 66
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
21
<PAGE> 67
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
22
<PAGE> 68
PIC INVESTMENT TRUST
Statement of Additional Information
Dated January 27, 1997
This Statement of Additional Information is not a prospectus, and it should be
read in conjunction with the applicable prospectus of the PIC Growth Fund and
PIC Small Company Growth Fund series of PIC Investment Trust (the "Trust"),
which share a common prospectus. There are four other series of the Trust: the
PIC Balanced Fund, PIC Pinnacle Growth Fund, PIC Pinnacle Small Company Growth
Fund and PIC Small Cap. Growth Fund, which have separate Statements of
Additional Information. The PIC Growth Fund (the "Growth Fund") invests in the
PIC Growth Portfolio; the PIC Small Company Growth Fund (the "Small Company
Growth Fund") invests in the PIC Small Cap. Portfolio. (In this Statement of
Additional Information, the Growth Fund and the Small Company Growth Fund may be
referred to as the "Funds", and the PIC Growth 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
the prospectus of the PIC
Funds:
---------------
<S> <C> <C>
Investment Objective and Policies......... B-2 7
The Growth Fund .................... B-2 7
The Small Company Growth Fund....... B-2 8
Investment Restrictions............. B-2 9
Repurchase Agreements............... B-3 9
Options Activities.................. B-3 9
Futures Contracts................... B-4 9
Foreign Securities.................. B-5 9
Forward Foreign Currency
Exchange Contracts.............. B-5
Segregated Accounts............. B-6
Debt Securities and
Ratings......................... B-6 9
Management................................ B-6 6, 10
Portfolio Transactions and
Brokerage........................... B-9 6
Net Asset Value........................... B-9 19
Taxation.................................. B-10 18
Dividends and Distributions............... B-10 18
Performance Information................... B-10 10
General Information....................... B-11 22
Appendix.................................. B-12
</TABLE>
B-1
<PAGE> 69
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 SMALL COMPANY GROWTH FUND
The investment objective of the Small Company Growth 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
is a diversified open-end management investment company having the same
investment objective as the Small Company Growth Fund. The discussion below
supplements information contained in the prospectus as to investment policies of
the Small Company Growth Fund and the Small Cap. Portfolio. Because the
investment characteristics of the Small Company Growth 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;
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 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;
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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;
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 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.
4. 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.
5. Invest more than 15% 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.
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 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 Small Cap.
Portfolio writes a call, it receives a premium and gives the purchaser the right
to buy
B-3
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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 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 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 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.
Entering into a futures contract for the sale of securities has an
effect similar to the actual sale of securities, although sale of the futures
contract might be accomplished more easily and quickly. 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.
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 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.
B-4
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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 Small Cap. Portfolios may invest in securities of
foreign issuers in foreign markets. In addition, both 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 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.
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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. 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 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>
<CAPTION>
<S> <C>
Jettie M. Edwards (age 50), Trustee Consulting principal of
76 Seaview Drive Syrus Associates (consulting firm)
Santa Barbara, CA 93108
Bernard J. Johnson (age 72), Trustee Retired; formerly Chairman Emeritus of the Advisor
300 North Lake Avenue
Pasadena, CA 91101
Jeffrey D. Lovell (age 44), Trustee Managing Director, President and co-founder
11150 Santa Monica Blvd., Ste 1650 of Putnam, Lovell & Thornton, Inc.
Los Angeles, CA 90025 (investment bankers)
Jeffrey J. Miller (age 46), President Managing Director and Secretary of the Advisor;
and Trustee* President and Trustee of each of the Portfolios
300 North Lake Avenue
Pasadena, CA 91101
</TABLE>
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<PAGE> 74
<TABLE>
<CAPTION>
<S> <C>
Wayne H. Smith (age 55), Trustee Vice President and Treasurer of Avery Dennison
150 N. Orange Grove Blvd. Corporation (pressure sensitive material and
Pasadena, CA 91103 office products manufacturer)
Thad M. Brown (age 46), Vice Senior Vice President and Chief Financial Officer
President, Secretary and of the Advisor
Treasurer of the Trust
300 North Lake Avenue
Pasadena, CA 91101
</TABLE>
The Trustees and officers of each of the Portfolios, their business
address and their occupations during the past five years are:
<TABLE>
<CAPTION>
<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.
Bernard J. Johnson (age 72), Retired; formerly Chairman Emeritus of the Advisor
Trustee Emeritus
300 North Lake Avenue
Pasadena, CA 91101
James Clayburn LaForce (age 68), Dean Emeritus, John E. Anderson Graduate School of
Trustee Management, University of California, Los Angeles.
P.O. Box 1585 Director of The BlackRock Funds. Trustee of Payden & Rygel
Pauma Valley, CA 92061 Investment Trust. Director of the Timken Co., Rockwell
International, Eli Lilly, Jacobs Engineering Group and Imperial
Credit Industries.
Jeffrey J. Miller (age 46), President Managing Director and Secretary of the Advisor
and Trustee*
300 North Lake Avenue
Pasadena, CA 91101
Angelo R. Mozilo (age 58), Trustee Vice Chairman and Executive Vice President
155 N. Lake Avenue of Countrywide Credit Industries (mortgage
Pasadena, CA 91101 banking)
Thad M. Brown (age 46), Vice Senior Vice President and Chief Financial Officer
President, Secretary and of the Advisor
Treasurer of the Trust
300 North Lake Avenue
Pasadena, CA 91101
</TABLE>
- ---------------------------------
* denotes Trustees who are "interested persons" of the Trust or Portfolios under
the 1940 Act.
The following compensation was paid during the fiscal year ended
October 31, 1996 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>
Deferred
Total Compensation
Name of Trustee Compensation Accrued
--------------- ------------ -------------
<S> <C> <C>
Jettie M. Edwards $12,000(1) -0-
Bernard J. Johnson 12,000(1) -0-
Jeffrey D. Lovell 3,000(1) 8,845
Wayne H. Smith 3,000(1) 8,845
Richard N. Frank 3,000(2) 8,331
James Clayburn LaForce 12,000(2) -0-
Angelo R. Mozilo 3,000(2) 8,810
</TABLE>
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<PAGE> 75
(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 separate 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 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, 1996, 1995, and 1994,
the Advisor earned fees pursuant to the Advisory Agreements as follows: from the
Growth Portfolio, $949,431, $1,536,297 and $1,277,324, respectively; from the
Small Cap. Portfolio, $1,395,748, $771,499 and $640,123, respectively. However,
the Advisor has agreed to limit the aggregate expenses of the Growth and Small
Cap. Portfolios to 1.00% of average net assets. As a result, the Advisor paid
expenses of the Growth Portfolio that exceeded these expense limits in the
amounts for $64,401, $21,828 and $12,479 during the fiscal years ended October
31, 1996, 1995 and 1994, respectively. The Advisor paid expenses of the Small
Cap. Portfolio that exceeded these expense limits in the amounts of $26,098,
$66,713 and $83,418 during the fiscal years ended October 31, 1996, 1995 and
1994, respectively.
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).
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<PAGE> 76
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, 1996, 1995 and 1994, the Advisor earned fees
pursuant to the Administration Agreements as follows: from the Growth Fund
(formerly the Institutional Growth Fund), $55,034, $219,070 and $171,287,
respectively. During the fiscal year ended October 31, 1996, it received $3,105
from the Small Company Growth Fund (formerly the Institutional Small Cap. Growth
Fund); that Fund was not in existence in prior years. However, the Advisor has
agreed to limit the aggregate expenses of the Growth Fund to 1.25% of average
net assets and the expenses of the Small Company Growth Fund to 1.45%. As a
result, the Advisor paid expenses of the Growth Fund that exceeded these expense
limits in the amounts of $55,034, $56,326 and $119,273 during the fiscal years
ended October 31, 1996, 1995 and 1994, respectively. The Advisor waived its
entire fee from the Small Company Growth Fund reimbursed the Fund for expenses
that exceeded the expense limit in the amounts of $38,198 during the fiscal year
ended October 31, 1996.
THE ADMINISTRATOR
During each of the fiscal years ended October 31, 1996, 1995 and 1993,
the Growth Fund paid the Administrator fees in the amount of $15,000. During
the fiscal year ended October 31, 1996, the Small Company Growth Fund paid the
Administrator fees in the amount of $4,999.
During the fiscal years ended October 31, 1996, 1995 and 1994, the
Growth Portfolio paid the Administrator fees in the amount of $118,678, $192,037
and $158,138, respectively. During the fiscal years ended October 31, 1996, 1995
and 1994, the Small Cap. Portfolio paid the Administrator fees in the amount of
$174,469, $96,687 and $80,015, respectively.
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, 1996, 1995 and 1994, the amount of brokerage
commissions paid by the PIC Growth Portfolio were $148,938, $243,060 and
$277,095, respectively; and by the PIC Small Cap. Portfolio, $115,709, $59,282
and $75,749, 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, 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.
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
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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.
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)(n) = 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
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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)(6) - 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.
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
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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.
The following persons, to the knowledge of the Trust, owned more than
5% of the outstanding shares of the Growth Fund as of December 31, 1996:
Ernst & Young Defined Benefit Retirement Plan
c/o U.S. Trust Co. of NY
770 Broadway
New York, NY 10003 -- 31.37%
Drury College
900 N. Benton
Springfield, MO 65802 -- 6.11%
The following persons, to the knowledge of the Trust, owned more than
5% of the outstanding shares of the Small Company Growth Fund as of December
31, 1996:
Atlantic Trust Co. NA Nominee
Attn: Mutual Funds
100 Federal Street, 37th Floor
Boston, MA 02110 -- 30.17%
Libco, a Partnership
PO Box 25848
Oklahoma City, OK 73125-26.68%
Charles Schwab & Co., Inc.
Special Custody Acct for the benefit of Customers
Cash Account
101 Montgomery Street
San Francisco, CA 94104-4122 -- 17.79%
Thomas J. Shea Trustee
For Galusha Higgins and Galusha PSP
P.O. Box 1699
Helena, MT 59624 -- 12.18%
Shares of any of the Funds owned by the Trustees and officers as a
group were less than 1%.
FINANCIAL STATEMENTS
The annual reports to shareholders for the Funds for the fiscal year
ended October 31, 1996 are separate documents supplied with this Statement of
Additional Information and the financial statements, accompanying notes and
report of independent accountants appearing therein are incorporated by
reference into this Statement of Additional Information.
Shares of any of the Funds owned by the Trustees and officers as a
group were less than 1%.
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.
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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.
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.
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PIC INVESTMENT TRUST
Statement of Additional Information
Dated January 27, 1997
This Statement of Additional Information is not a prospectus, and it should be
read in conjunction with the applicable prospectus of the PIC Balanced Fund
series of PIC Investment Trust (the "Trust"). There are four other series of
the Trust: the PIC Growth Fund, the PIC Small Company Growth Fund, PIC Pinnacle
Growth Fund, PIC Pinnacle Small Company Growth Fund and PIC Small Cap. Growth
Fund, which have separate Statements of Additional Information.) The PIC
Balanced Fund (the "Balanced Fund") invests in the PIC Balanced Portfolio. (In
this Statement of Additional Information, the Balanced Fund may be referred to
as the "Fund", and the PIC Balanced Portfolio may be referred to as the
"Portfolio"). Provident Investment Counsel (the "Advisor") is the Advisor to
the Portfolio. 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
Cross-reference to page in
in the prospectus of the PIC Fund
Investment Objective and Policies...... B-2 9
The Growth Fund................ B-2 9
The Small Company Growth Fund.. B-2 11
Investment Restrictions........ B-2 13
Repurchase Agreements.......... B-3 12
Options Activities............. B-3 12
Futures Contracts.............. B-4 12
Foreign Securities............. B-5 12
Forward Foreign Currency
Exchange Contracts......... B-5
Segregated Accounts....... B-6
Debt Securities and Ratings... B-6 12
Management..............................B-6 9, 13
Portfolio Transactions and Brokerage... B-9 9
Net Asset Value........................ B-9 21
Taxation.............................. B-10 20
Dividends and Distributions........... B-10 20
Performance Information............... B-10 14
General Information................... B-11 24
Appendix.............................. B-12
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INVESTMENT OBJECTIVES AND POLICIES
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.
INVESTMENT RESTRICTIONS
The Trust (on behalf of the Fund) and the Portfolio 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 the Fund or 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 the Fund or the 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 the Fund or the Portfolio.
As a matter of fundamental policy, the Portfolio is diversified; i.e.,
as to 75% of the value of the 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 Fund invests all of its assets in
shares of the Portfolio. 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 the Fund or the Portfolio may borrow on an unsecured basis from banks
for temporary or emergency purposes or for the clearance of transactions in
amounts not exceeding 10% of its total assets (not including the amount
borrowed), provided that it will not make investments while borrowings in
excess of 5% of the value of its total assets are outstanding:
2. Make short sales of securities or maintain a short position, except
for short sales against the box;
3. Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of transactions;
4. Write put or call options;
5. Act as underwriter (except to the extent the 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 it 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 the Fund may invest more than 25% of its
assets in shares of the Portfolio;
7. Purchase or sell real estate or interests in real estate or real
estate limited partnerships (although the Portfolio may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate);
8. Purchase or sell commodities or commodity futures contracts, except
that the Portfolio may purchase and sell stock index futures 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 Fund and the Portfolio and except for
repurchase agreements); or
11. Make investments for the purpose of exercising control or
management.
The Portfolio observes the following restrictions as a matter of
operating but not fundamental
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policy, pursuant to positions taken by federal and state regulatory authorities:
The Portfolio may not:
1. Purchase any security if as a result the Portfolio would then hold
more than 10% of any class of 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, and 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 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.
4. 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.
5. Invest more than 15% 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 the Fund or the
Portfolio purchases a security from a bank or recognized securities dealer and
simultaneously commits to resell that security to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased security. The purchaser maintains
custody of the underlying securities prior to their repurchase; thus the
obligation of the bank or dealer to pay the repurchase price on the date agreed
to is, in effect, secured by such underlying securities. If the value of such
securities is less than the repurchase price, the other party to the agreement
will provide additional collateral so that at all times the collateral is at
least equal to the repurchase price.
Although repurchase agreements carry certain risks not associated with
direct investments in securities, the Fund and the Portfolio 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 Fund and the Portfolio 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, 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 Portfolio 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 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 also may write and purchase put options
("puts"). When the Portfolio
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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.
The 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 futures contracts and
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 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.
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<PAGE> 85
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.
Entering into a futures contract for the sale of securities has an
effect similar to the actual sale of securities, although sale of the futures
contract might be accomplished more easily and quickly. 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.
A stock index futures contract may be used as a hedge by any of the
Portfolio with regard to market risk as distinguished from risk relating to a
specific security. A stock index futures contract does not require the physical
delivery of securities, but merely provides for profits and losses resulting
from changes in the market value of the contract to be credited or debited at
the close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash settlement occurs.
Changes in the market value of a particular stock index futures contract
reflects changes in the specified index of equity securities on which the
future is based.
There are several risks in connection with the use of futures
contracts. In the event of an imperfect correlation between the futures
contract and the portfolio position which is intended to be protected, the
desired protection may not be obtained and the Portfolio may be exposed to risk
of loss. Further, unanticipated changes in interest rates or stock price
movements may result in a poorer overall performance for the Portfolio than if
it had not entered into any futures on 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 Balanced Portfolio may invest in securities of foreign issuers in
foreign markets. In addition, the Portfolio 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 Portfolio 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 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
B-5
<PAGE> 86
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 Portfolio 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
parties 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 the
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 is obligated to deliver.
Similarly, the 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 the 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. 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.
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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 the 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 ratings 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 Balanced Portfolio has a Board of Trustees which
have comparable responsibilities, including approving Agreement with the
Advisor. The day to day operations of the Trust and the Portfolio 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:
Jettie M. Edwards (age 50), Trustee Consulting principal of
76 Seaview Drive Syrus Associates (consulting firm)
Santa Barbara, CA 93108
Bernard J. Johnson (age 72), Trustee Retired; formerly Chairman
300 North Lake Avenue Emeritus of the Advisor
Pasadena, CA 91101
Jeffrey D. Lovell (age 44), Trustee Managing Director, President and
11150 Santa Monica Blvd., Ste 1650 co-founder of Putnam, Lovell &
Los Angeles, CA 90025 Thornton, Inc. (investment
bankers)
Jeffrey J. Miller (age 46), President Managing Director and Secretary of
and Trustee* the Advisor; President and Trustee
300 North Lake Avenue of the Portfolio
Pasadena, CA 91101
Wayne H. Smith (age 55), Trustee Vice President and Treasurer of
150 N. Orange Grove Blvd. Avery Dennison Corporation
Pasadena, CA 91103 (pressure sensitive material and
office products manufacturer)
Thad M. Brown (age 46), 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
The Trustees and officers of the Portfolio, their business address and
their occupations during the past five years are:
Richard N. Frank (age 73), Trustee Chief Executive Officer, Lawry's
234 E. Colorado Blvd. Restaurants, Inc.; formerly
Pasadena, CA 91101 Chairman of Lawry's Foods, Inc.
Bernard J. Johnson (age 72), Retired; formerly Chairman
Trustee Emeritus Emeritus of the Advisor
300 North Lake Avenue
Pasadena, CA 91101
B-7
<PAGE> 88
James Clayburn LaForce (age 68) 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 46), Managing Director and Secretary of
President and Trustee* the Advisor
300 North Lake Avenue
Pasadena, CA 91101
Angelo R. Mozilo (age 58), Vice Chairman and Executive Vice
Trustee President of Countrywide Credit
155 N. Lake Avenue Industries (mortgage banking)
Pasadena, CA 91101
Thad M. Brown (age 46), 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
- ---------------------
* denotes Trustees who are "interested persons" of the Trust or Portfolio under
the 1940 Act.
The following compensation was paid to each of the following Trustees.
No other compensation or retirement benefits were received by any Trustee or
officer from the Registrant or other registered investment company in the
"Fund Complex."
<TABLE>
<CAPTION>
Deferred
Total Compensation
Name of Trustee Compensation Accrued
--------------- ------------ ------------
<S> <C> <C>
Jettie M. Edwards $12,000(1) -0-
Bernard J. Johnson 12,000(1) -0-
Jeffrey D. Lovell 12,000(1) 8,845
Wayne H. Smith 12,000(1) 8,845
Richard N. Frank 11,000(2) 8,331
James Clayburn LaForce 12,000(2) -0-
Angelo R. Mozilo 12,000(2) 8,810
</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
Portfolio. Subject to the supervision of the Boards of Trustees of the
Portfolio, investment management and services will be provided to the Portfolio
by the Advisor, pursuant to separate Investment Advisory Agreement (the
"Advisory Agreement"). Under the Advisory Agreement, the Advisor will provide a
continuous investment program for the Portfolio 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 portfolio and the Trust are
responsible for 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
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<PAGE> 89
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 Portfolio and the legal obligations with respect to
which the Trust or the Portfolio 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 a new Advisory Agreement
having the same terms as the previous Advisory Agreement with the Portfolio.
The term "Advisor" also refers to the Advisor's predecessor.
During the three fiscal years ended October 31, 1996, 1995, and 1994,
the Advisor earned fees pursuant to the Advisory Agreement from the Balanced
Portfolio in the amounts of $74,462, $77,098 and $49,498, respectively;
however, the Advisor has agreed to limit the aggregate expenses of the
Portfolio to .80% of average net assets. As a result, the Advisor paid expenses
of the Balanced Portfolio that exceeded these expense limits in the amounts of
$111,580, $100,695 and $95,785 during the fiscal years ended October 31, 1996,
1995 and 1994, respectively.
Under the Advisory Agreement, the Advisor will not be liable to the
Portfolio for any error of judgment by the Advisor or any loss sustained by the
Portfolio except in the case of a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages will
be limited as provided in the 1940 Act) or of willful misfeasance, bad faith,
gross negligence or reckless disregard of duty.
The Advisory Agreement 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 Agreement is terminable by vote of the Board of Trustees
or by the holders of a majority of the outstanding voting securities of the
Portfolio at any time without penalty, on 60 days written notice to the
Advisor. The Advisory Agreement also may be terminated by the Advisor on 60
days written notice to the Portfolio. The Advisory Agreement terminates
automatically upon its assignment (as defined in the 1940 Act).
The Advisory also provided certain administrative services to the Trust
pursuant to an Administration Agreement, 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, 1996, 1995 and 1994, the Advisor earned
fees pursuant to the Administration Agreement from the Balanced Fund (formerly
the Institutional Balanced Fund) in the amounts of $24,822, $25,721 and
$16,534, respectively. However, the Advisor has agreed to limit the aggregate
expense of the Balanced fund to 1.05% of average net assets. As a result, the
Advisor paid expenses of the Balanced Fund that exceeded these expense limits
in the amounts of $83,307, $63,727 and $54,837 during the fiscal years ended
October 31, 1996, 1995 and 1994, respectively.
The Administrator
During each of the fiscal years ended October 31, 1996, 1995 and 1993,
the Fund paid the Administrator fees in the amount of $15,000.
During the fiscal years ended October 31, 1996, 1995 and 1994, the
Portfolio paid the Administrator fees in the amount of $12,410, $12,850 and
$7,400, respectively.
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<PAGE> 90
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisory Agreement state that in connection with its duties to
arrange for the purchase and the sale of securities held by the Portfolio by
placing purchase and sale orders for the Portfolio, the Advisor shall select
such broker-dealers ("brokers") as shall, in its judgment, achieve the policy
of "best execution," i.e., prompt and efficient execution at the most favorable
securities price. In making such selection, the Advisor is authorized in the
Advisory Agreement to consider the reliability, integrity and financial
condition of the broker. The Advisor also is authorized by the Advisory
Agreement to consider whether the broker provides research or statistical
information to the Portfolio and/or other accounts of the Advisor.
The Advisory Agreement states that the commissions paid to brokers may
be higher than another broker would have charged if a good faith determination
is made by the Advisor that the commission is reasonable in relation to the
services provided, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities as to the accounts as to which it exercises
investment discretion and that the Advisor shall use its judgment in
determining that the amount of commissions paid are reasonable in relation to
the value of brokerage and research services provided and need not place or
attempt to place a specific dollar value on such services or on the portion of
commission rates reflecting such services. The Advisory Agreement provides that
to demonstrate that such determinations were in good faith, and to show the
overall reasonableness of commissions paid, the Advisor shall be prepared to
show that commissions paid (i) were for purposes contemplated by the Advisory
Agreement; (ii) were for products or services which provide lawful and
appropriate assistance to its decision-making process; and (iii) were within a
reasonable range as compared to the rates charged by brokers to other
institutional investors as such rates may become known from available
information. During the fiscal years ended October 31, 1996, 1995 and 1994, the
amount of brokerage commissions paid by the PIC Balanced Portfolio were $8,805,
$19,998 and $8,895, 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, economic or institutional areas and
information assisting the Portfolio in the valuation of the Portfolio's
investments. The research which the Advisor receives for the Portfolio's
brokerage commissions, whether or not useful to the Portfolio, may be useful to
it in managing the accounts of its other advisory clients. Similarly, the
research received for the commissions of such accounts may be useful to the
Portfolio.
NET ASSET VALUE
The net asset value of the Portfolio's 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 Fund will be taxed as a separate entity 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 Fund qualifies, the Fund (but not its shareholders) will be relieved
of federal income tax on that part of its 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 Fund must distribute
annually to shareholders at least 90% of its investment company taxable income
and must meet several additional requirements. Among these requirements are the
following: (1) at least 90% of the 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 the 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 the Fund's
taxable year, at least 50% of the value of its total assets must be represented
B-10
<PAGE> 91
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 the 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.
The 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.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the 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 the 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 the 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 the Fund during the following January.
Accordingly, such dividends will be taxed to shareholders for the year in which
the record date falls.
The 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. The 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 the Fund's advertising
and promotional materials are calculated according to the following formula:
P(1 plus T)(n) equals 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 the Fund's advertising and
promotional materials are calculated by dividing the Fund's interest income for
a specific 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 equals 2[a minus b plus 1)(6) minus 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.
B-11
<PAGE> 92
Except as noted below, in determining net investment income earned
during the period ("a" in the above formula), the 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 the Fund, net investment income is then determined by
totalling all such interest earned.
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 the 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 the Fund will fluctuate, and an investor's redemption proceeds
may be more or less than the original investment amount. In advertising and
promotional materials the Fund may compare its performance with data published
by Lipper Analytical Services, Inc. ("Lipper") or CDA Investment Technologies,
Inc. ("CDA"). The 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 the 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 the 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 Fund's 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 Fund's tax returns.
The following persons, to the knowledge of the Trust, owned more than
5% of the outstanding shares of the Fund as of December 31, 1996:
Gilbert Papazian IRA
1445 S. Down Road
Hillsborough, CA 94163 -- 7.91%
Oregon School of Arts & Crafts Foundation
8245 S.W. Barnes Road
B-12
<PAGE> 93
Portland, OR 97225 -- 5.91%
Sanwa Bank Ttee Trust
FBO Beth Whipple
P O Box 60078
Los Angeles, CA 90060 -- 5.18%
Rita Moya Trustee for
National Health Foundation, Inc.
201 N. Figueroa
Los Angeles, CA 90012 -- 13.53%
Fleet National Bank Trustee
for Davies Medical Pension Plan
PO Box 92800
Rochester, NY 14692 -- 42.63%
Shares of the Fund owned by the Trustees and officers as a group were
less than 1%.
FINANCIAL STATEMENTS
The annual reports to shareholders for the Fund for the fiscal year ended
October 31, 1996 are separate documents supplied with this Statement of
Additional Information and the financial statements, accompanying notes and
report of independent accountants appearing therein are incorporated by
reference into this Statement of Additional Information.
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
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<PAGE> 94
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.
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 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.
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<PAGE> 95
PIC INVESTMENT TRUST
Statement of Additional Information
Dated January 31, 1997
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 and PIC Pinnacle Small Company Growth Fund series of PIC Investment Trust
(the "Trust"), which share a common prospectus. There are four other series of
the Trust: the PIC Growth Fund, PIC Balanced Fund, PIC Small Company Growth Fund
and PIC Small Cap. Growth Fund, which have separate Statements of Additional
Information. The PIC Pinnacle Growth Fund (the "Growth Fund") invests in the PIC
Growth Portfolio; the PIC Pinnacle Small Company Growth Fund (the "Small Company
Growth Fund") invests in the PIC Small Cap. Portfolio. (In this Statement of
Additional Information, the Growth Fund and the Small Company Growth Fund may be
referred to as the "Funds", and the PIC Growth 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
the prospectus of the PIC
Pinnacle Funds:
---------------
<S> <C> <C>
Investment Objective and Policies......... B-2 7
The Pinnacle Growth Fund ........... B-2 7
The Pinnacle Small Company
Growth Fund..................... B-2 8
Investment Restrictions............. B-2 9
Repurchase Agreements............... B-3 9
Options Activities.................. B-3 9
Futures Contracts................... B-4 9
Foreign Securities.................. B-5 9
Forward Foreign Currency
Exchange Contracts.............. B-5
Segregated Accounts............. B-6
Debt Securities and
Ratings......................... B-6 9
Management................................ B-6 6, 10
Portfolio Transactions and
Brokerage........................... B-9 6
Net Asset Value........................... B-9 19
Taxation.................................. B-10 18
Dividends and Distributions............... B-10 18
Performance Information................... B-10 10
General Information....................... B-11 22
Appendix.................................. B-12
</TABLE>
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<PAGE> 96
INVESTMENT OBJECTIVES AND POLICIES
THE PINNACLE GROWTH FUND
The investment objective of the Pinnacle Growth Fund (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 PINNACLE SMALL COMPANY GROWTH FUND
The investment objective of the Pinnacle Small Company Growth Fund (the
"Small Company Growth 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 Company Growth Fund. The discussion below supplements
information contained in the prospectus as to investment policies of the Small
Company Growth Fund and the Small Cap. Portfolio. Because the investment
characteristics of the Small Company Growth 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;
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 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;
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<PAGE> 97
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;
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 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.
4. 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.
5. Invest more than 15% 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.
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 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 Small Cap.
Portfolio writes a call, it receives a premium and gives the purchaser the right
to buy
B-3
<PAGE> 98
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 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 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 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.
Entering into a futures contract for the sale of securities has an
effect similar to the actual sale of securities, although sale of the futures
contract might be accomplished more easily and quickly. 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.
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 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.
B-4
<PAGE> 99
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 Small Cap. Portfolios may invest in securities of
foreign issuers in foreign markets. In addition, both 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 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.
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<PAGE> 100
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. 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 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>
<CAPTION>
<S> <C>
Jettie M. Edwards (age 50), Trustee Consulting principal of
76 Seaview Drive Syrus Associates (consulting firm)
Santa Barbara, CA 93108
Bernard J. Johnson (age 72), Trustee Retired; formerly Chairman Emeritus of the Advisor
300 North Lake Avenue
Pasadena, CA 91101
Jeffrey D. Lovell (age 44), Trustee Managing Director, President and co-founder
11150 Santa Monica Blvd., Ste 1650 of Putnam, Lovell & Thornton, Inc.
Los Angeles, CA 90025 (investment bankers)
Jeffrey J. Miller (age 46), President Managing Director and Secretary of the Advisor;
and Trustee* President and Trustee of each of the Portfolios
300 North Lake Avenue
Pasadena, CA 91101
</TABLE>
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<PAGE> 101
<TABLE>
<CAPTION>
<S> <C>
Wayne H. Smith (age 55), Trustee Vice President and Treasurer of Avery Dennison
150 N. Orange Grove Blvd. Corporation (pressure sensitive material and
Pasadena, CA 91103 office products manufacturer)
Thad M. Brown (age 46), Vice Senior Vice President and Chief Financial Officer
President, Secretary and of the Advisor
Treasurer of the Trust
300 North Lake Avenue
Pasadena, CA 91101
</TABLE>
The Trustees and officers of each of the Portfolios, their business
address and their occupations during the past five years are:
<TABLE>
<CAPTION>
<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.
Bernard J. Johnson (age 72), Retired; formerly Chairman Emeritus of the Advisor
Trustee Emeritus
300 North Lake Avenue
Pasadena, CA 91101
James Clayburn LaForce (age 68), Dean Emeritus, John E. Anderson Graduate School of
Trustee Management, University of California, Los Angeles.
P.O. Box 1585 Director of The BlackRock Funds. Trustee of Payden & Rygel
Pauma Valley, CA 92061 Investment Trust. Director of the Timken Co., Rockwell
International, Eli Lilly, Jacobs Engineering Group and Imperial
Credit Industries.
Jeffrey J. Miller (age 46), President Managing Director and Secretary of the Advisor
and Trustee*
300 North Lake Avenue
Pasadena, CA 91101
Angelo R. Mozilo (age 58), Trustee Vice Chairman and Executive Vice President
155 N. Lake Avenue of Countrywide Credit Industries (mortgage
Pasadena, CA 91101 banking)
Thad M. Brown (age 46), Vice Senior Vice President and Chief Financial Officer
President, Secretary and of the Advisor
Treasurer of the Trust
300 North Lake Avenue
Pasadena, CA 91101
</TABLE>
- ---------------------------------
* denotes Trustees who are "interested persons" of the Trust or Portfolios under
the 1940 Act.
The following compensation was paid during the fiscal year ended
October 31, 1996 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>
Deferred
Total Compensation
Name of Trustee Compensation Accrued
--------------- ------------ -------------
<S> <C> <C>
Jettie M. Edwards $12,000(1) -0-
Bernard J. Johnson 12,000(1) -0-
Jeffrey D. Lovell 3,000(1) 8,845
Wayne H. Smith 3,000(1) 8,845
Richard N. Frank 3,000(2) 8,331
James Clayburn LaForce 12,000(2) -0-
Angelo R. Mozilo 3,000(2) 8,810
</TABLE>
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<PAGE> 102
(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 separate 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 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, 1996, 1995, and 1994,
the Advisor earned fees pursuant to the Advisory Agreements as follows: from the
Growth Portfolio, $949,431, $1,536,297 and $1,277,324, respectively; from the
Small Cap. Portfolio, $1,395,748, $771,499 and $640,123, respectively. However,
the Advisor has agreed to limit the aggregate expenses of the Growth and Small
Cap. Portfolios to 1.00% of average net assets. As a result, the Advisor paid
expenses of the Growth Portfolio that exceeded these expense limits in the
amounts for $64,401, $21,828 and $12,479 during the fiscal years ended October
31, 1996, 1995 and 1994, respectively. The Advisor paid expenses of the Small
Cap. Portfolio that exceeded these expense limits in the amounts of $26,098,
$66,713 and $83,418 during the fiscal years ended October 31, 1996, 1995 and
1994, respectively.
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).
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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. However, the
Advisor has agreed to limit the aggregate expenses of the Growth Fund to 1.35%
of average net assets and the expenses of the Small Company Growth Fund to
1.55%. The Advisor reserves the right to be reimbursed for any waiver of its
fees or expenses paid on behalf of the Funds if, in subsequent years, a Fund's
expenses are less than the limit agreed to by the Advisor.
DISTRIBUTION PLAN
The Trust has adopted, on behalf of the PIC Pinnacle Growth and Small
Company Growth 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 the fiscal years ended October 31, 1996, 1995 and 1994, the
Growth Portfolio paid the Administrator fees in the amount of $118,678, $192,037
and $158,138, respectively. During the fiscal years ended October 31, 1996, 1995
and 1994, the Small Cap. Portfolio paid the Administrator fees in the amount of
$174,469, $96,687 and $80,015, respectively.
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, 1996, 1995 and 1994, the amount of brokerage
commissions paid by the PIC Growth Portfolio were $148,938, $243,060 and
$277,095, respectively; and by the PIC Small Cap. Portfolio, $115,709, $59,282
and $75,749, 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, 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.
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
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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.
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)(n) = 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
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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)(6) - 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.
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
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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.
Shares of any of the Funds owned by the Trustees and officers as a
group were less than 1%.
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.
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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.
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.
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PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
The following financial statements are included in the Prospectus of
the PIC Growth and Small Company Growth Funds included in this Post-Effective
Amendment:
PIC Growth Fund --
Financial Highlights
PIC Small Company Growth Fund --
Financial Highlights
The following financial statement is included in the Prospectus of the
PIC Balanced Fund included in this Post-Effective Amendment:
PIC Balanced Fund --
Financial Highlights
The following financial statements are incorporated into Part B of this
Post-Effective Amendment by reference to the Annual Report to Shareholders for
the fiscal year ended October 31, 1996:
PIC Balanced Fund --
Statement of Assets and Liabilities, October 31, 1996
Statement of Operations, Year Ended October 31, 1996
Statement of Changes in Net Assets
PIC Balanced Portfolio --
Statement of Net Assets, October 31, 1996
Statement of Operations, Year Ended October 31, 1996
Statement of Changes in Net Assets
PIC Growth Fund --
Statement of Assets and Liabilities, October 31, 1996
Statement of Operations, Year Ended October 31, 1996
Statement of Changes in Net Assets
PIC Growth Portfolio --
Statement of Net Assets, October 31, 1996
Statement of Operations, Year Ended October 31, 1996
Statement of Changes in Net Assets
PIC Small Company Growth Fund --
Statement of Assets and Liabilities, October 31, 1996
Statement of Operations, Year Ended October 31, 1996
Statement of Changes in Net Assets
PIC Small Cap. Portfolio --
Statement of Net Assets, October 31, 1996
Statement of Operations, Year Ended October 31, 1996
Statement of Changes in Net Assets
Notes to Financial Statements
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Independent Auditor's Report
(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
(12) Not applicable
(13) Investment letter(3)
(14) Individual Retirement Account forms(2)
(15) Distribution Plan pursuant to Rule 12b-1
(16) Not applicable
(17) Financial Data Schedules
(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 December 31, 1996, the PIC Growth Fund had 318 shareholders; the
PIC Balanced Fund had 78 shareholders; the PIC Small Company Growth Fund had 81
shareholders; and the PIC Small Cap. Growth Fund had three shareholders.
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
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
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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 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
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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
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
C-4
<PAGE> 112
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:
Berger/BIAM International Fund
Guinness Flight Investment Funds, Inc.
Jurika & Voyles Mutual Funds
Hotchkis and Wiley Funds
Kayne Anderson Mutual Funds
Masters' Select Investment Fund
PIC Investment Trust
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
RNC Liquid Assets Fund, Inc.
O'Shaughnessy Funds, Inc.
(b) The following information is furnished with respect to the officers
and directors of First Fund Distributors, Inc.:
<TABLE>
<CAPTION>
Position and Officers Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ------------------ --------------------- ------------
<S> <C> <C>
Robert H. Wadsworth President and Treasurer Assistant Secretary
4455 E. Camelback Road
Suite 261E
Phoenix, AZ 85018
Eric M. Banhazl Vice President Assistant Treasurer
2025 E. Financial Way
Glendora, CA 91741
Steven J. Paggioli Vice President & Secretary Assistant Secretary
479 West 22nd Street
New York, New York 10011
</TABLE>
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
C-5
<PAGE> 113
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.
C-6
<PAGE> 114
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 24th day of January, 1997.
PIC INVESTMENT TRUST
By /s/ 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 January 24, 1997.
<TABLE>
<S> <C>
/s/ Jeffrey J. Miller* President and Trustee
- -----------------------------
Jeffrey J. Miller
/s/ Jettie M. Edwards* Trustee
- -----------------------------
Jettie M. Edwards
/s/ Bernard J. Johnson* Trustee
- -----------------------------
Bernard J. Johnson
/s/ Jeffrey D. Lovell* Trustee
- -----------------------------
Jeffrey D. Lovell
/s/ Wayne H. Smith* Trustee
- -----------------------------
Wayne H. Smith
/s/ Thad M. Brown* Treasurer and Principal
- ----------------------------- Financial and Accounting
Thad M. Brown Officer
* /s/ Robert H. Wadsworth
------------------------
By: Robert H. Wadsworth
Attorney-in-fact
</TABLE>
C-7
<PAGE> 115
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 24th day of January, 1997.
PIC GROWTH PORTFOLIO
By /s/ 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 January 24, 1997.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Jeffrey J. Miller* President and Trustee
- ----------------------------- of PIC Growth Portfolio
Jeffrey J. Miller
/s/ Richard N. Frank* Trustee of PIC Growth Portfolio
- -----------------------------
Richard N. Frank
/s/ James Clayburn LaForce* Trustee of PIC Growth Portfolio
- -----------------------------
James Clayburn LaForce
/s/ Angelo R. Mozilo* Trustee of PIC Growth Portfolio
- -----------------------------
Angelo R. Mozilo
/s/ Thad M. Brown* Treasurer and Principal Financial
- ----------------------------- and Accounting Officer of PIC Growth
Thad M. Brown Portfolio
* /s/ Robert H. Wadsworth
---------------------------
By: Robert H. Wadsworth
Attorney-in-fact
</TABLE>
C-8
<PAGE> 116
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 24th day of January, 1997.
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 January 24, 1997.
Signature Title
Jeffrey J. Miller* President and Trustee
- ----------------------------------- of PIC Balanced Portfolio
Jeffrey J. Miller
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 Officer of PIC
Thad M. Brown Balanced Portfolio
* Robert H. Wadsworth
- -----------------------------------
by: Robert H. Wadsworth
Attorney-in-fact
<PAGE> 117
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 24th day of January, 1997.
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 January 24, 1997.
Signature Title
Jeffrey J. Miller* President and Trustee
- -------------------------- of PIC Small Cap. Portfolio
Jeffrey J. Miller
Richard N. Frank* Trustee of PIC 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 Officer of PIC Small Cap. Portfolio
Thad M. Brown*
* Robert H. Wadsworth
----------------------
By: Robert H. Wadsworth
Attorney-in-fact
C-10
<PAGE> 1
Exhibit 99.B11
[McGLADREY & PULLEN, LLP LOGO]
McGLADREY & PULLEN, LLP
-----------------------
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our reports dated November 27, 1996 on the
financial statement of PIC Growth Fund (formerly PIC Institutional Growth
Fund), PIC Small Company Growth Fund (formerly PIC Institutional Small Cap
Fund) and PIC Balanced Fund (formerly PIC Institutional Balanced Fund), series
of PIC Investment Trust; and to our reports on the financial statements of PIC
Growth Portfolio, PIC Balanced Portfolio and PIC Small Cap Portfolio referred
to therein respectively, and which are incorporated by reference in
Post-Effective Amendment No. 13 to the Registration Statement as filed with the
Securities and Exchange Commission.
We also consent to the reference to our Firm in each Prospectus under the
caption "Financial Highlights" as well as the reference to our Firm in the
Statement of Additional Information of PIC Pinnacle Growth Fund and PIC
Pinnacle Small Company Growth Fund, series of PIC Investment Trust, under the
caption "General Information".
/s/ McGladrey & Pullen, LLP
New York, New York
January 23, 1997
<PAGE> 1
EXHIBIT 99.B15
PIC INVESTMENT TRUST
DISTRIBUTION PLAN PURSUANT TO RULE 12b-1
This Plan (the "Plan") dated the ____ day of ________, 199_, is the
written plan contemplated by Rule 12b-1 (the "Rule") under the Investment
Company Act of 1940 (the "Act") of PIC Pinnacle Growth Fund and PIC Pinnacle
Small Company Growth Fund (the "Funds"), each a series of PIC Investment Trust
(the "Trust").
W H E R E A S:
The Trust is registered as an open-end investment company under the
Act, currently consists of six series (PIC Growth Fund, PIC Balanced Fund, PIC
Small Company Growth Fund, PIC Pinnacle Growth Fund, PIC Pinnacle Small Company
Growth Fund and PIC Small Cap. Growth Fund), and the Board of Trustees may
establish additional series in the future.
The Trust intends to distribute the shares of the Funds and desires to
adopt a Plan pursuant to Rule 12b-1 under the Act, and the Trustees have
determined, the exercise of their reasonable business judgment and in light
of their fiduciary duty, that there is a reasonable likelihood that this Plan
will benefit the Trust and its shareholders.
The Trust employs First Fund Distributors, Inc. (the "Distributor") as
the principal underwriter of its shares pursuant to a Distribution Agreement
dated June 11, 1992.
NOW, THEREFORE, in consideration of the foregoing, the Trust hereby
adopts this Plan on behalf of the Fund in accordance with Rule 12b-1 under the
Act on the following terms and conditions:
1. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Qualified Recipient" shall mean any broker-dealer or other
"person" (as that term is defined in the Act) which (i) has entered into
a written agreement (a "related agreement") that complies with the Rule
with the Trust's Distributor and (ii) has rendered distribution
assistance (whether direct, administrative or both) in the distribution
of the Fund's shares.
(b) "Qualified Holdings" shall mean all shares of the Funds
beneficially owned by (i) a Qualified Recipient, (ii) the customers
(brokerage or other) of a Qualified Recipient,
1
<PAGE> 2
(iii) the clients (investment advisory or other) of a Qualified
Recipient, (iv) the accounts as to which a Qualified Recipient has a
fiduciary or custodial relationship, and (v) the members of a Qualified
Recipient, if such Qualified Recipient is an association or union;
provided that the Qualified Recipient shall have been instrumental in
the purchase of such Fund by, or shall have provided administrative
assistance to, such customers, clients, accounts or members in relation
thereto. The Distributor may make final and binding decisions as to all
matters relating to Qualified Holdings and Qualified Recipients,
including but not limited to (i) the identity of Qualified Recipients;
(ii) whether or not any shares of the Funds are to be considered as
Qualified Holdings of any particular Qualified Recipient; and (iii) what
shares of the Funds, if any, are to be attributed to a particular
Qualified Recipient, to a different Qualified Recipient or to no
Qualified Recipient.
(c) "Qualified Trustees" shall mean the Trustees of the Trust who
are not interested persons, as defined in the Act, of the Trust and who
have no direct or indirect financial interest in the operation of this
Plan or any agreement related to this Plan. While this Plan is in
effect, the selection and nomination of Qualified Trustees shall be
committed to the discretion of the Trustees who are not interested
persons of the Trust. Nothing herein shall prevent the involvement of
others in such selection and nomination if the final decision on any
such selection and nomination is approved by a majority of such
disinterested Trustees.
(d) "Permitted Payments" shall mean payment by the Distributor
to Qualified Recipients as permitted by this Plan.
2. Payments Authorized. The Distributor is authorized, pursuant to this
Plan, to make Permitted Payments to any Qualified Recipient under a related
agreement on either or both of the following bases:
(a) as reimbursement for direct expenses incurred in the course
of distributing shares of the Funds or providing administrative
assistance to the Funds or their shareholders, including, but not
limited to, advertising, printing and mailing promotional material,
telephone calls and lines, computer terminals, and personnel; and/or
(b) at a rate specified in the related agreement with
2
<PAGE> 3
the Qualified Recipient in question based on the average value of the
Qualified Holdings of such Qualified Recipient.
3. Expenses Authorized. The Distributor is authorized, pursuant to
this Plan, to purchase advertising of shares of the Funds, to pay for sales
literature and other promotional material, and to make payments to sales
personnel affiliated with it. Any such advertising and sales material may
include references to other open-end investment companies or other investments
and any salesmen so paid are not required to devote their time solely to the
sale of shares of the Funds.
4. Compensation of Distributor. The Trust shall pay to the
Distributor a fee to cover its expenses for distribution of the shares of the
Funds at an annual rate of 0.25 of 1% of the average daily net assets of the
Funds. Payment of this fee shall be subject to any limitations set forth in
applicable regulations of the National Association of Securities Dealers, Inc.
5. Reports. While this Plan is in effect, the Distributor shall
report in writing at least quarterly to the Trust's Board of Trustees, and the
Board shall review, the amounts expended under the Plan and the purposes for
which such expenditures were made.
6. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved (i) by a vote of the Board of Trustees of the Trust and of the
Qualified Trustees, cast in person at a meeting called for the purpose of voting
on this Plan; and (ii) by a vote of holders of at least a "majority" (as defined
in the Act) of the outstanding voting securities of the Fund. This Plan shall
become effective on the date set forth above and, unless terminated as
hereinafter provided, shall continue in effect until December 31, 1997, and from
year to year thereafter only so long as such continuance is specifically
approved at least annually by the Trust's Board of Trustees and its Qualified
Trustees cast in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time by a vote of a majority of
the Qualified Trustees or by the vote of the holders of a "majority" (as defined
in the Act) of the outstanding voting securities of the Fund. This Plan may not
be amended to increase materially the amount of payments to be made without
shareholder approval, as set forth in (ii) above, and all amendments must be
approved in the manner set forth under (i) above.
3
<TABLE> <S> <C>
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