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. 22 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [_]
Amendment No. 25 [X]
PIC INVESTMENT TRUST
(Exact name of registrant as specified in charter)
300 North Lake Avenue
Pasadena, CA 91101-4106
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (including area code): (818) 449-8500
THAD M. BROWN
Provident Investment Counsel
300 North Lake Avenue
Pasadena, CA 91101-4106
(Name and address of agent for service of process)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 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 post-effective amendment.
<PAGE>
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
Funds' most recent financial reports, including performance information and
portfolio listing, or a copy of the Statement of Additional Information (SAI).
The SAI is dated __________, 1998, may be supplemented 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. The SEC maintains an internet site
(http://www.sec.gov) that contains the SAI, other material incorporated by
reference and other information about companies that file electronically with
the SEC.
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.
Each Fund, unlike many other mutual funds which directly acquire and manage
their own portfolios of securities, seeks to achieve its investment objective by
investing all of its assets in a PIC Portfolio. Investors should carefully
consider this investment approach. For additional information, see "Structure of
the Funds and the Portfolios" in this prospectus and "Investment Objectives and
Policies" in the SAI.
Like all mutual funds, these securities have not been approved or disapproved by
the SEC or any state securities commission nor has the SEC or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
PROVIDENT INVESTMENT COUNSEL
PINNACLE FUNDS
---------------------------
GROWTH FUND * BALANCED FUND* MID CAP FUND*
SMALL COMPANY GROWTH FUND
---------------------------
Prospectus
_________, 1998
Provident Investment Counsel
300 North Lake Avenue
Pasadena, CA 91101
1
<PAGE>
Contents
Key Facts __ The Funds at a Glance
__ Who May Want to Invest
__ Expenses
__ Structure of the Funds and the Portfolios
__ Financial Highlights
The Funds in Detail __ Charter
How the Fund is organized.
__ Information About the Funds' Investments
The Funds' overall approach to investing.
__ Securities and Investment Practices
More information about how the Funds invest.
__ Breakdown of Expenses
How operating costs are calculated and
what they include.
__ Performance
__ How Sales Charges are Calculated
Sales Charge Waivers
Sales Charge Reductions
Your Account __ Ways to Set Up Your Account
__ How to Buy Shares
__ How to Sell Shares
__ Investor Services
Services to help you manage your account.
__ Exchange Restrictions
Shareholder Account __ Dividends, Capital Gains and Taxes
Policies
__ Transaction Details
Share price calculations and the
timing of purchases and redemptions.
General Information __
2
<PAGE>
Key Facts
The Funds at a Glance
Management: Provident Investment Counsel ("PIC"), located in Pasadena,
California since 1951, is the Funds' Advisor. At __________, 1998, total assets
under PIC's management were over $__ billion.
Pinnacle Balanced Fund
Goal: Total return, that is, a combination of income and capital growth, while
preserving capital.
Strategy: Invests, through the PIC Balanced Portfolio, in a combination of high
quality growth stocks and fixed income senior securities.
Pinnacle Growth Fund
Goal: Long term growth of capital.
Strategy: Invests, through the PIC Growth Portfolio, in high quality growth
stocks.
Pinnacle Mid Cap Fund
Goal: Long term growth of capital.
Strategy: Invests, through the PIC Mid Cap Portfolio, mainly in equity
securities of companies with medium market capitalization.
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 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 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 of all sizes.
The Mid Cap Fund may be appropriate for investors who are willing to ride out
stock market fluctuations in pursuit of potentially above average long-term
returns. The Fund is designed for those who want to focus on medium
capitalization stocks in search of above average returns.
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.
3
<PAGE>
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. A medium
capitalization company is one with $500 million to $5 billion in market
capitalization. The securities of smaller, less well-known companies (including
medium capitalization companies) may be more volatile than those of larger
companies. Over time, however, small capitalization and medium capitalization
stocks have shown greater growth potential than those of larger capitalization
companies. Medium capitalization stocks tend to involve less risk than small cap
stocks.
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>
Pinnacle Pinnacle Pinnacle Pinnacle
Balanced Growth Mid Cap Small Company
Fund Fund Fund Growth Fund
Shareholder transaction expenses:
Maximum sales charge on purchases
<S> <C> <C> <C> <C>
(as a percentage of offering price) 5.75% 5.75% 5.75% 5.75%
Sales charge on reinvested dividends None None None None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) None None None None
Redemption fee1 None None None None
</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, and each Fund
also incurs other expenses for services such as administrative services,
maintaining shareholder records and furnishing shareholder statements and
financial reports. A Fund's expenses are factored into its share price or
dividends and are not charged directly to shareholder accounts.
On May 15, 1998, the Board of Trustees of PIC Investment Trust (the "Trust")
approved the addition of front-end sales charges to Pinnacle Balanced, Pinnacle
Growth and Pinnacle Small Company Growth Funds and on September 3, 1998, the
Board of the Trust approved the addition of a front-end sales charge to Pinnacle
Mid Cap Fund. The Board of Trustees also approved the implementation of a
Shareholder Services Plan (the "Services Plan") under which PIC will provide, or
arrange for others to provide, certain specified shareholder services. As
compensation for the provision of shareholder services, each Fund will pay PIC a
monthly fee at an annual rate of up to 0.15% of the Fund's average net assets.
PIC will pay certain banks, trust companies, broker-dealers, and other financial
intermediaries (each a "Participating Organization") out of the fees PIC
receives from the Funds under the Services Plan to the extent that the
Participating Organization performs shareholder servicing functions for Fund
shares owned by its customers. On September 30, 1998, shareholders of the
Pinnacle Mid Cap Fund approved the adoption of a distribution plan (the "Plan")
under Rule 12b-1 of the Investment Company Act of 1940 ("1940 Act"). Under the
Plan, the Fund may pay an amount up to 0.25% of its annual average net assets in
shareholder servicing fees to financial services firms that sell shares of the
Fund. For additional information, see "Distribution Plan" in the SAI.
The Funds' new fee structure, including the Services Plan fee, is made up of the
following components, each based on average annual net assets. PIC has agreed
not to increase its limit on the Funds' expense ratios to average net
4
<PAGE>
assets with the addition of the Services Plan fee. The expense limitation may be
terminated or revised at any time without notice.
PIC retains the ability to be repaid by a Fund if expenses subsequently fall
below the specified limit within the next three years.
The following are based on expenses actually incurred during the last fiscal
year, and are calculated as a percentage of average net assets. The following
table has been restated to reflect the effect of the new fees based on expenses
incurred during the Funds' last fiscal year.
<TABLE>
Pinnacle Pinnacle Pinnacle Pinnacle
Balanced Growth Mid Cap Small Company
Fund Fund Fund Growth Fund
<S> <C> <C> <C> <C>
Management fee (paid by the Portfolio) 0.60% 0.80% 0.70% 0.80%
Other expenses of the Portfolio, after reimbursement
by PIC 0.20% 0.20% 0,20% 0.20%
Total operating expenses of the Portfolio .80% 1.00% 0.90% 1.00%
Administrative fee paid by the Fund to
PIC2 0.00% 0.00% 0.00% 0.15%
Shareholder Services Plan fee2 0.00% 0.10% 0.15% 0.15%
12b-1 fee 0.25% 0.25% 0.25% 0.25%
Other expenses of the Fund, after reimbursement
by PIC2 0.00% 0.00% 0.09% 0.00%
Total Fund Operating Expenses2 1.05% 1.35% 1.39% 1.55%
</TABLE>
1 Shareholders who buy $1 million in shares without paying a sales charge will
be charged a 1% fee on redemptions made within one year of purchase.
2 PIC has agreed to reimburse each Fund and Portfolio for investment advisory
fees and other expenses so that their ratio of total operating expenses to
average net assets will not exceed the following levels: Pinnacle Balanced Fund
- - 1.05%; Pinnacle Growth Fund - 1.35%; Pinnacle Mid Cap Fund - 1.39%; Pinnacle
Small Company Growth Fund - 1.55%. Absent such reimbursement, the total fund
operating expenses is estimated to be 1.55%, 1.75%, 1.75% and 1.75%,
respectively.
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 Pinnacle Pinnacle Pinnacle
Balanced Growth Mid Cap Small Company
Fund Fund Fund Growth Fund
1 year $68 $70 $71 $72
3 years $89 $98 $99 $104
5 years $112 $127 N/A $137
10 year $178 $211 N/A $231
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.
5
<PAGE>
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 a 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 a Portfolio. Information concerning other holders
of interests in a Portfolio is available by calling (800) 618-7643.
The Trustees of the 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 a 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."
6
<PAGE>
Financial Highlights
The tables that follow are included in the Funds' Annual and Semi-Annual
Reports. The Funds' Annual Reports have 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 Funds' SAI. The financial data for the six-month
period ended April 30, 1998 has not been audited.
<TABLE>
Provident Investment Counsel June 11,
Pinnacle Balanced Fund Six months Fiscal year ended October 31, 1992*
ended ---------------------------------------------------- through
April 30, October 31,
1998 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.51 $ 13.91 $ 13.24 $ 11.24 $ 11.48 $ 10.82 $ 10.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.08 0.16 0.14 0.15 0.15 0.18 0.04
Net realized and unrealized gain
(loss)
on investments 1.98 2.64 1.34 2.00 (0.24) 0.69 0.78
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.06 2.80 1.48 2.15 (0.09) 0.87 0.82
Less distributions:
From net investment income (0.08) (0.16) (0.14) (0.15) (0.15) (0.21) 0.00
From net realized capital gains (1.01) (1.04) (0.67) 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 16.48 $ 15.51 $ 13.91 $ 13.24 $ 11.24 $ 11.48 $ 10.82
- ----------------------------------------------------------------------------------------------------------------------------
Total return 14.08%*** 21.76% 11.96% 19.35% -0.78% 8.10% 21.14%
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (millions) $ 40.3 $ 35.3 $ 12.9 $ 12.5 $ 9.1 $ 6.7 $ 1.2
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:+**
Expenses after exp. reimbursements 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05%
Expenses before exp. reimbursements 1.66% 1.43% 1.72% 2.32% 2.87% 7.44% 43.11%
Net investment income after exp.
reimbursements 0.99% 1.10% 1.05% 1.32% 1.37% 1.79% 2.60%
Portfolio turnover rate ++ 40.99% 104.50% 54.24% 106.50% 116.63% 92.65% 3.13%
</TABLE>
* Commencement of operations
+ 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.
*** Not annualized.
7
<PAGE>
Provident Investment Counsel Feb. 3,
Pinnacle Growth Fund Six months 1997*
ended through
April 30, October 31,
1998 1997
- -----------------------------------------------------------------
Net asset value, beginning of period $ 11.44 $ 10.00
- -----------------------------------------------------------------
Income from investment operations:
Net investment loss (0.05) (0.03)
Net realized and unrealized gain
on investments 2.18 1.47
- -----------------------------------------------------------------
Total from investment operations 2.13 1.44
Net asset value, end of period $ 13.57 $ 11.44
- -----------------------------------------------------------------
Total return 18.62%*** 14.40%***
=================================================================
Ratios/supplemental data:
Net assets, end of period (millions) $ 3.5 $ 2.2
- -----------------------------------------------------------------
Ratios to average net assets:+**
Expenses after exp. reimbursements 1.35% 1.35%
Expenses before exp. reimbursements 9.97% 5.08%
Net investment loss after exp.
reimbursements -0.57% -0.62%
Portfolio turnover rate ++ 42.39% 67.54%
+ 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.
*** Not annualized
8
<PAGE>
Provident Investment Counsel Feb. 3,
Pinnacle Small Company Six months 1997*
Growth Fund ended through
April 30, October 31,
1998 1997
- -----------------------------------------------------------------
Net asset value, beginning of period $ 10.42 $ 10.00
- -----------------------------------------------------------------
Income from investment operations:
Net investment loss (0.10) (0.03)
Net realized and unrealized gain
on investments 1.14 0.45
- -----------------------------------------------------------------
Total from investment operations 1.04 0.42
Net asset value, end of period $ 11.46 $ 10.42
- -----------------------------------------------------------------
Total return 9.98%*** 4.20%***
=================================================================
Ratios/supplemental data:
Net assets, end of period (millions) $ 3.4 $ 3.1
- -----------------------------------------------------------------
Ratios to average net assets:+**
Expenses after exp. reimbursements 1.55% 1.55%
Expenses before exp. reimbursements 11.55% 6.11%
Net investment loss after exp.
reimbursements -1.89% -1.14%
Portfolio turnover rate ++ 35.44% 151.52%
* Commencement of operations
+ Annualized.
** Includes the Funds 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.
*** Not annualized
Provident Investment Counsel
Pinnacle Mid Cap Fund Dec. 31, 1997*
through
April 30, 1998
- -------------------------------------------------------
Net asset value, beginning of period $ 10.00
- -------------------------------------------------------
Income from investment operations:
Net investment loss (0.01)
Net realized and unrealized gain
on investments 1.96
- -------------------------------------------------------
Total from investment operations 1.95
Net asset value, end of period $ 11.95
- -------------------------------------------------------
Total return 19.50%***
=======================================================
Ratios/supplemental data:
Net assets, end of period (millions) $ 4.6
- -------------------------------------------------------
Ratios to average net assets:+**
Expenses after exp. reimbursements 0.99%
Expenses before exp. reimbursements 6.32%
Net investment loss after exp.
reimbursements -0.38%
9
<PAGE>
Portfolio turnover rate ++ 55.12%
+ Annualized.
** Includes the Fund's share of expenses allocated from PIC Mid Cap Portfolio.
++ Portfolio turnover rate of PIC Mid Cap Portfolio, in which all of the Fund's
assets are invested.
***Not annualized
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 the 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 advisor to the PIC Portfolios, in which the respective Funds invest.
Its address is 300 North Lake Avenue, Pasadena, CA 91101. 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 limitation in short term
instruments for temporary, defensive purposes.
10
<PAGE>
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.
PIC's Historical Performance Data
The investment results presented below are not the results of the Funds. They
are for composites of all accounts managed by PIC with similar investment
objectives and strategies to the Funds. These composites are unaudited and are
not intended to predict or suggest the returns that might be expected for the
Funds or by an individual investing in the Funds. Figures reflect annualized
returns, except that second quarter and year-to-date figures represent actual
total returns over the period. Annualized total returns show that cumulative
total returns for a stated time period (i.e., 1, 3, 7 or 10 years) have been
averaged over the period. Investors should note that the Funds compute and
disclose average annual return using the standard formula set forth in SEC
rules, which differs in certain respects from the methodology used below to
calculate performance.
The accounts included in the composites are not mutual funds, and are not
subject to the same rules and regulations (for example, diversification and
liquidity requirements and restrictions on transactions with affiliates) as the
Funds, or to the same types of expenses that the Funds pay. These differences
might have affected the performance figures shown below.
The figures shown below represent the performance of the accounts included in
the composites. The figures are gross returns and do not include actual fees and
expenses paid by the accounts included in the composites. However, these fees
and expenses are generally lower than the fees and expenses paid by the Funds.
Higher fees and expenses would have resulted in lower composite performance
figures. The Russell Indices are not managed and do not pay any fees or
expenses.
Performance Ending June 30, 1998
<TABLE>
Second
Quarter Year
1998 to Date 1 Year 3 years 7 Years 10 Years
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
PIC Large Cap Growth Composite +7.2% +24.3% +33.8% +28.1% +20.3% +21.9%
Lipper Growth Fund Index(1) +2.8% +15.6% +28.3% +24.8% +18.2% +16.3%
Russell 1000 Growth Index(2) +4.5% +20.4% +31.4% +30.2% +19.9% +19.2%
PIC Mid Cap Growth Composite +4.3% +20.0% +31.4% +31.4% +18.8% +19.5%
Russell Midcap Growth Index(3) -0.1% +11.9% +24.0% +24.0% +17.5% +16.3%
PIC Small Cap Growth Composite -1.5% +13.1% +15.4% +20.8% +22.3% +22.4%
Russell 2000 Growth Index(4) -5.7% +5.5% +13.2% +14.4% +13.9% +11.6%
PIC Balanced Composite +5.9% +19.0% +27.8% +22.0% +17.0% +18.0%
Lipper Balanced Fund Index(1) +1.5% +9.5% +18.2% +17.8% +13.9% +13.0%
</TABLE>
(1)Lipper Analytical Services, Inc., together with its affiliated companies,
currently tracks performance of approximately 32,000 funds worldwide with assets
in excess of $6 trillion U.S. dollars. Lipper Analytical Services, Inc. provides
the performance data for the Lipper Growth Fund Index and the Lipper Balanced
Fund Index.
11
<PAGE>
(2)The Russell 1000 Growth Index measures the performance of those Russell 1000
companies with higher price-to-book ratios and higher forecasted growth values.
(3)The Russell Midcap Growth Index measures the performance of those Russell
Midcap companies with higher price-to- book ratios and higher forecasted growth
values. The stocks are also members of the Russell 1000 Value Index.
(4)The Russell 2000 Growth Index measures the performance of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth values.
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.
Provident Investment Counsel Pinnacle Balanced Fund
The Provident Investment Counsel Pinnacle Balanced Fund seeks to provide total
return -- that is, a combination of income and capital growth, while preserving
capital, by investing in the PIC Balanced Portfolio. In PIC's opinion, over
time, stocks outperform bonds and investments that are equivalent to cash;
consequently, the Balanced Portfolio attempts to achieve total return through
investments in equity securities.
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 500 Composite Stock Price
Index 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 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 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 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.
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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.
Provident Investment Counsel Pinnacle Growth Fund
Provident Investment Counsel 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 500
Composite Stock Price Index 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 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.
Provident Investment Counsel Pinnacle Mid Cap Fund
The Provident Investment Counsel Pinnacle Mid Cap Fund seeks long term growth of
capital by investing in the PIC Mid Cap Portfolio, which in turn invests
primarily in equity securities of companies with medium market capitalizations.
PIC will invest at least 65%, and normally at least 95%, of the Mid Cap
Portfolio's total assets in these securities. The Mid Cap Portfolio has
flexibility, however, to invest the balance in other market capitalizations and
security types.
Medium market capitalization companies are those whose market capitalization
falls within the range of $500 million to $5 billion at the time of the Mid Cap
Portfolio's investment. Companies whose capitalization falls outside this range
after purchase continue to be considered medium capitalization for the purposes
of the Mid Cap Portfolio's investment policy. Investing in medium 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. However,
they tend to involve less risk than stocks of small capitalization companies.
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The value of the Mid Cap 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.
Provident Investment Counsel Pinnacle Small Company
Growth Fund
The Provident Investment Counsel 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 the Funds' financial reports which are sent to shareholders twice a
year. For a free SAI or financial report, call (800) 618-7643.
Equity Securities are common stocks and other kinds of securities that have the
characteristics of common stocks. These other securities include bonds,
debentures and preferred stocks which can be converted into common stocks. They
also include warrants and options to purchase common stocks.
Restriction: With respect to 75% of total assets, a Portfolio may not own more
than 10% of the outstanding voting securities of a single issuer.
Short Term Investments are debt securities that mature within a year of the date
they are purchased by a Portfolio. Some specific examples of short term
investments are commercial paper, bankers' acceptances, certificates of deposit
and repurchase agreements.
Restriction: A Portfolio will only purchase short term investments which are
"high quality." High quality means the investments have been rated A-1 by
Standard & Poor's Ratings Group ("S&P") or Prime-1 by Moody's Investors Service,
Inc. ("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.
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Repurchase Agreement. 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
Depository Receipts which are listed on a national securities exchange or
included in the NASDAQ 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 Balanced Fund seeks total return while preserving capital. The Growth Fund,
the Mid Cap 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
invest more than 25% of its total assets in any one industry.
Breakdown of Expenses
Like all mutual funds, each Fund pays fees related to its daily operations.
Expenses paid out of a Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts.
Each Portfolio pays an investment advisory fee to PIC each month for managing
its investments. The Balanced Portfolio pays a fee at the annual rate of 0.60%
of its average net assets, the Growth and Small Cap Portfolios each pay a fee at
the annual rate of 0.80% of the Portfolio's average net assets and the Mid Cap
Portfolio pays a fee at the annual rate of 0.70% of its average net assets.
While the investment advisory fee is a significant component of a Portfolio's
(and thus a Fund's) annual operating costs, each Fund also pays other expenses.
Each Fund pays 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 (12b-1 fees). For additional information, see "Distribution Plan" in
the SAI. Each Fund pays PIC a monthly fee at an annual rate of 0.15% of its
average net assets for providing, or arranging for others to provide, certain
specified shareholder services (shareholder services fees). For additional
information, see "Shareholder Services Plan" in the SAI. The Funds and the
Portfolios each pay a monthly administration fee to Investment Company
Administration Corporation (the "Administrator") for managing some of their
business affairs. Each Portfolio pays an administration fee at the annual rate
of 0.10% of its average net assets subject to an annual minimum of $45,000, and
each Fund pays an annual administration fee of $15,000. The Funds and the
Portfolios also pay other expenses, such as legal, auditing, custodian and
transfer agency fees, as well as the compensation of Trustees who are not
affiliated with PIC.
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PIC has agreed to reimburse each Fund and Portfolio for investment advisory fees
and other expenses if they exceed a percentage of the Fund's average net assets.
In the case of the Pinnacle Balanced Fund, the limit is 1.05%; in the case of
the Pinnacle Growth Fund, the limit is 1.35%; in the case of the Pinnacle Mid
Cap Fund, the limit is 1.39%; and in the case of the Pinnacle Small Company
Growth Fund, the limit is 1.55%. This reimbursement arrangement, which may be
terminated at any time without notice, will decrease a Fund's expenses and boost
its performance. PIC retains the ability to be repaid by a Fund if expenses
subsequently fall below the specified limit within the next three years.
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 the 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).
How Sales Charges are Calculated
Sales charges are as follows:
Dealer Commission
As a % of As a % of your as a % of
Your investment offering price investment offering price
Up to $49,999 5.75% 6.10% 5.00%
$50,0900-$99,999 4.50% 4.71% 3.75%
$100,000-$249,999 3.50% 3.63% 2.75%
$250,000-$499,999 2.50% 2.56% 2.00%
$500,000-$999,999 2.00% 2.04% 1.60%
$1,000,000 and over None None 1.00%
Investments of $1 million or more have no sales charge. The Distributor pays a
commission of 1% to financial institutions that initiate purchases of $1 million
or more.
Sales Charge Waivers
Shares of the Funds may be sold at net asset value (free of any sales charge)
to: (1) current shareholders of the Funds as of June 30, 1998; (2) current or
retired directors, trustees, partners, officers and employees of the Trust, the
Distributor, PIC and affiliates, certain family members of the above persons,
and trusts or plans primarily for such persons; (3) current or retired
registered representatives of broker-dealers having sales agreements with the
Distributor or full-time employees and their spouses and minor children and
plans of such persons;
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(4) investors who exchange their shares from an unaffiliated investment company
which has a sales charge, so long as shares are purchased within 60 days of the
redemption; (5) trustees or other fiduciaries purchasing shares for certain
retirement plans of organizations with 50 or more eligible employees; (6)
investment advisers and financial planners who place trades for their own
accounts or the accounts of their clients either individually or through a
master account and who charge a management, consulting or other fee for their
services; (7) employee-sponsored benefit plans in connection with purchases of
shares of Funds made as a result of participant-directed exchanges between
options in such a plan; (8) "wrap accounts" for the benefit of clients of
broker-dealers, financial institutions or financial planners having sales or
service agreements with the Distributor or another broker-dealer or financial
institution with respect to sales of shares of the Funds; and (9) such other
persons as are determined by the Board of Trustees (or by the Distributor
pursuant to guidelines established by the Board) to have acquired shares under
circumstances not involving any sales expense to the Trust or the Distributor.
Sales Charge Reductions
There are several ways you can combine multiple purchases of shares of the
Pinnacle Funds to take advantage of the breakpoints in sales charge schedule.
These can be combined in any manner.
Accumulation Privilege - lets you add the value of shares of any of the Pinnacle
Funds you and your family already own to the amount of your next investment for
purposes of calculating the sales charge.
Letter of Intent - lets you purchase shares of any Pinnacle Funds over a
13-month period and receive the same sales charge as if all shares had been
purchased at once.
Combination Privilege - lets you combine shares of multiple Pinnacle Funds for
purposes of reducing the sales charge.
For more information, contact your financial representative or the Provident
Investment Counsel Pinnacle Funds. 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.
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* 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 a
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.
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) plus the sales charge. 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.
Provident Financial Processing Corp. (PFPC) is each Fund's Transfer Agent; its
address is 400 Bellevue Parkway, Wilmington, Delaware 19809, and its mailing
address is P.O. Box 8943, Wilmington, DE 19899.
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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: Provident Investment Counsel Pinnacle Funds
C/o PFPC Inc.
P.O. Box 8943
Wilmington, DE 19899
By Overnight Delivery: Provident Investment Counsel Pinnacle Funds
c/o PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
By Telephone: Call (800) 618-7643 and then wire
federal funds to:
PNC Bank
Philadelphia, PA
ABA# 031-0000-53
DDA# 86-0172-6604
For Credit to Provident Investment
Counsel Pinnacle (Fund Name)
Shareholder Name
Shareholder Account Name
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).
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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.
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Mail your letter to:
Provident Investment Counsel Pinnacle Funds c/o
PFPC, Inc.
P.O. Box 8943
Wilmington, DE 19899
How to Sell Shares:
Account Type Special Requirements
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 Individual, Joint * The letter of instructions must
Person Tenant, Sole Propri- be signed by all persons required to
etorship, UGMA, UTMA sign for transactions, exactly as
their names appear on the account.
Retirement Account * The account owner should 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 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 .
Administrator, instructions
Conservator, Guardian
- - ------------------------------------------------------------------------------
Wire All account types * You must sign up for the wire
except retirement feature before using it. 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.
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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
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 and conveniently. 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.
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.
Exchange Privilege. You may sell your Fund shares and buy shares of other
Pinnacle Funds by telephone or in writing.
Exchange Restrictions. 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.
* Exchanges into each Fund are limited to five per calendar year.
The Funds reserve the right to terminate or modify the exchange privilege in the
future.
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, Mid Cap and Small Company Growth Funds pay dividends, normally, in
December. Capital gains are also normally distributed in December.
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<PAGE>
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 your Fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. Income-Earned Option. Your capital gain distributions will be automatically
reinvested, but you will be sent a check for each dividend distribution.
3. Cash Option. You will be sent a check for your dividend and capital gain
distributions.
For retirement accounts, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash.
When a Fund deducts a distribution from its NAV, the reinvestment price is the
Fund's NAV at the close of business that day. Cash distribution checks will be
mailed within seven days.
Understanding Distributions
As a Fund shareholder, you are entitled to your share of a Fund's net income and
gains on its investments. Each Fund passes its earnings along to its investors
as distributions.
Each Fund earns dividends from stocks and interest from short term investments
held by the Portfolio in which it invests. These are passed along as dividend
distributions. Each Fund realizes capital gains whenever the Portfolio in which
it invests 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.
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 Pinnacle
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.
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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 plus the sales charge 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 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 confirmation 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 __.
Purchase orders may be refused if, in PIC's opinion, they would disrupt
management of a 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 plus the sales charge.
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.
24
<PAGE>
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 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.
25
<PAGE>
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 1940
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.
As of September 10, 1998, the Pinnacle Balanced Fund was controlled by Compass
Bank Trustee for Alfa Mutual Insurance Company and Wilmington Trust Co. Trustee
FBO Davies Medical P/P; the Pinnacle Growth Fund was controlled by Wilmington
Trust Co. FBO Mustang Employee 401K; and the Pinnacle Small Company Growth Fund
was controlled by Wilmington Trust Co. Trustee for Figgie Intl Inv Ret & P/S TR
Supp Svs & TR 401K Plan.
Year 2000 Risk. Like other business organizations around the world, the Funds
could be adversely affected if the computer systems used by PIC and other
service providers do not properly process and calculate information related to
dates beginning January 1, 2000. This is commonly known as the "Year 2000
Issue." PIC is taking steps that it believes are reasonably designed to address
the Year 2000 Issue with respect to its own computer systems, and it has
obtained assurances from the Funds' other service providers that they are taking
comparable steps. However, there can be no assurance that these actions will be
sufficient to avoid any adverse impact on the Funds.
26
<PAGE>
PIC INVESTMENT TRUST
Provident Investment Counsel Pinnacle Balanced Fund
Provident Investment Counsel Pinnacle Growth Fund
Provident Investment Counsel Pinnacle Mid Cap Fund
Provident Investment Counsel Pinnacle Small Company Growth Fund
Statement of Additional Information
Dated ___________, 1998
This Statement of Additional Information ("SAI") is not a prospectus, and it
should be read in conjunction with the applicable prospectus of the Provident
Investment Counsel Pinnacle Balanced Fund (formerly Provident Investment Counsel
Institutional Balanced Fund), Provident Investment Counsel Pinnacle Growth Fund,
Provident Investment Counsel Pinnacle Mid Cap Fund and Provident Investment
Counsel Pinnacle Small Company Growth Fund, series of PIC Investment Trust (the
"Trust"), which share a common prospectus. There are five other series of the
Trust: the Provident Investment Counsel Growth Fund, Provident Investment
Counsel Mid Cap Fund, Provident Investment Counsel Small Company Growth Fund,
Provident Investment Counsel Small Cap Growth Fund and Provident Investment
Counsel Tax Managed Growth Fund, which have separate SAIs. The Provident
Investment Counsel Pinnacle Balanced Fund (the "Balanced Fund") invests in the
PI C Balanced Portfolio; the Provident Investment Counsel Pinnacle Growth Fund
(the "Growth Fund") invests in the PIC Growth Portfolio; the Provident
Investment Counsel Pinnacle Mid Cap Fund (the "Mid Cap Fund") invests in the PIC
Mid Cap Portfolio; the Provident Investment Counsel Pinnacle Small Company
Growth Fund (the "Small Company Growth Fund") invests in the PIC Small Cap
Portfolio. (In this SAI, the Balanced Fund, the Growth Fund, the Mid Cap Fund
and the Small Company Growth Fund may be referred to as the "Funds", and the PIC
Balanced Portfolio, PIC Growth Portfolio, PIC Mid Cap 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.
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TABLE OF CONTENTS
Cross-reference to page in
the prospectus of the
Provident Investment
Counsel Pinnacle Funds:
--------------
Investment Objective and Policies B-
The Balanced Fund B-
The Growth Fund B-
The Mid Cap Fund
The Small Company Growth Fund B-
Investment Restrictions B-
Repurchase Agreements B-
Options Activities B-
Futures Contracts B-
Foreign Securities B-
Forward Foreign Currency
Exchange Contracts B-
Segregated Accounts B-
Debt Securities and Ratings B-
Management B-
Custodian and Auditors B-
Portfolio Transactions and Brokerage B-
Portfolio Turnover
Additional Purchase and
Redemption Information B-
Net Asset Value B-
Taxation B-
Dividends and Distributions B-
Performance Information B-
General Information B-
Financial Statements B-
Appendix B-
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Pinnacle Balanced Fund
The investment objective of the Pinnacle Balanced Fund is to provide high
total return while reducing risk. There is no assurance that the Pinnacle
Balanced Fund will achieve its objective. The Pinnacle 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 Pinnacle Balanced Fund. The discussion below supplements
information contained in the prospectus as to investment policies of the
Pinnacle Balanced Fund and the Balanced Portfolio. Because the investment
characteristics of the Pinnacle Balanced Fund will correspond directly to those
of the Balanced Portfolio, the discussion refers to those investments and
techniques employed by the Balanced Portfolio. . The Pinnacle Growth Fund
The investment objective of the Pinnacle Growth Fund is to provide
long-term growth of capital. There is no assurance that the Pinnacle Growth Fund
will achieve its objective. The Pinnacle 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
Pinnacle Growth Fund. The discussion below supplements information contained in
the prospectus as to investment policies of the Pinnacle Growth Fund and the
Growth Portfolio. Because the investment characteristics of the Pinnacle 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 Mid Cap Fund
The investment objective of the Pinnacle Mid Cap Fund is to provide
long-term growth of capital. There is no assurance that the Pinnacle Mid Cap
Fund will achieve its objective. The Pinnacle Mid Cap Fund will attempt to
achieve its objective by investing all of its assets in shares of the PIC Mid
Cap Portfolio (the "Mid Cap Portfolio"). The Mid Cap Portfolio is a diversified
open-end management investment company having the same investment objective as
the Pinnacle Mid Cap Fund. The discussion below supplements information
contained in the prospectus as to investment policies of the Pinnacle Mid Cap
Fund and the Mid Cap Portfolio. Because the investment characteristics of the
Pinnacle Mid Cap Fund will correspond directly to those of the Mid Cap
Portfolio, the discussion refers to those investments and techniques employed by
the Mid Cap Portfolio.
The Pinnacle Small Company Growth Fund
The investment objective of the Pinnacle Small Company Growth Fund is to
provide capital appreciation. There is no assurance that Pinnacle Small Company
Growth Fund will achieve its objective. The Pinnacle Small Company Growth 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 Pinnacle Small Company Growth Fund. The
discussion below supplements information contained in the prospectus as to
investment policies of the Pinnacle Small Company Growth Fund and the Small Cap
Portfolio. Because the investment characteristics of the Pinnacle 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
B-3
<PAGE>
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. Except with
respect to borrowing, changes in values of assets of a particular Fund or
Portfolio will not cause a violation of the following investment restrictions so
long as percentage restrictions are observed by such Fund or Portfolio at the
time it purchases any security.
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 Balanced Portfolio may write
covered call and cash secured put options on debt securities, and the Small Cap
Portfolio may write covered call and cash secured put options and purchase call
and put options on stocks and stock indices;
5. Act as underwriter (except to the extent a Fund or Portfolio may be
deemed to be an underwriter in connection with the sale of securities in its
investment portfolio);
6. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities), except that any of the Funds may invest more than 25% of
their assets in shares of a Portfolio;
7. Purchase or sell real estate or interests in real estate or real estate
limited partnerships (although any Portfolio may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate);
8. Purchase or sell commodities or commodity futures contracts, except that
any Portfolio may purchase and sell stock index futures contracts and the
Balanced Portfolio may purchase and sell interest rate futures contracts;
9. Invest in oil and gas limited partnerships or oil, gas or mineral
leases;
10. Make loans (except for purchases of debt securities consistent with the
investment policies of the Funds and the Portfolios and except for repurchase
agreements); or
11. Make investments for the purpose of exercising control or management.
The Portfolios observe the following restrictions as a matter of operating
but not fundamental policy, pursuant to positions taken by federal and state
regulatory authorities:
No Portfolio may:
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<PAGE>
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 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; or
3. 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.
B-5
<PAGE>
Options Activities
The Balanced Portfolio may write (i.e., sell) call options ("calls") on
debt securities, and the Small Cap Portfolio may write call options on stocks
and stock indices, if the calls are "covered" throughout the life of the option.
A call is "covered" if the Portfolio owns the optioned securities. When the
Balanced or Small Cap 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 and Small Cap Portfolios 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 and Small Cap Portfolios also may write and purchase put
options ("puts"). When the Portfolio writes a put, it receives a premium and
gives the purchaser of the put the right to sell the underlying security to the
Portfolio at the exercise price at any time during the option period. When the
Portfolio purchases a put, it pays a premium in return for the right to sell the
underlying security at the exercise price at any time during the option period.
If any put is not exercised or sold, it will become worthless on its expiration
date.
A Portfolio's option positions may be closed out only on an exchange which
provides a secondary market for options of the same series, but there can be no
assurance that a liquid secondary market will exist at a given time for any
particular option.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation has the authority to
permit other, generally comparable securities to be delivered in fulfillment of
option exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
Futures Contracts
The Balanced Portfolio may buy and sell interest rate futures contracts,
and all 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.
B-6
<PAGE>
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 a 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 a Portfolio than if it had not entered into any
futures on stock indices.
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 Portfolios may invest in securities of foreign issuers in foreign
markets. In addition, the Portfolios may invest in American Depositary Receipts
("ADRs"), which are receipts, usually issued by a U.S. bank or trust company,
evidencing ownership of the underlying securities. Generally, ADRs are issued in
registered form, denominated in U.S. dollars, and are designed for use in the
U.S. 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 a 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 a
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 a 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 a 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
B-7
<PAGE>
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 a Portfolio will
be served.
At or before the maturity date of a forward contract that requires a
Portfolio to sell a currency, the Portfolio may either sell a security and use
the sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Portfolio will obtain, on the same maturity date,
the same amount of the currency that it is obligated to deliver. Similarly, a
Portfolio may close out a forward contract requiring it to purchase a specified
currency by entering into a second contract entitling it to sell the same amount
of the same currency on the maturity date of the first contract. The Portfolio
would realize a gain or loss as a result of entering into such an offsetting
forward contract under either circumstance to the extent the exchange rate
between the currencies involved moved between the execution dates of the first
and second contracts.
The cost to a 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 a 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 a Portfolio until released. In the case of a put that has been
written or a forward foreign currency contract that has been entered into,
liquid securities will be maintained in the segregated account in an amount
sufficient to meet a Portfolio's obligations pursuant to the put or forward
contract. In the case of a futures contract, liquid 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 Portfolios 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.
B-8
<PAGE>
The Trustees and officers of the Trust, their business addresses and
principal occupations during the past five years are:
Jettie M. Edwards (age 52), Trustee Consulting principal of
76 Seaview Drive Syrus Associates (consulting firm)
Santa Barbara, CA 93108
Bernard J. Johnson (age 74), Retired; formerly Chairman Emeritus
Trustee Emeritus of the Advisor
300 North Lake Avenue
Pasadena, CA 91101
Jeffrey D. Lovell (age 46), 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 48), President Managing Director and Secretary of
and Trustee* the Advisor; President and Trustee
300 North Lake Avenue of each of the Portfolios
Pasadena, CA 91101
Wayne H. Smith (age 57), Trustee Vice President and Treasurer of Avery
150 N. Orange Grove Blvd. Dennison Corporation (pressure
Pasadena, CA 91103 sensitive material and office
products manufacturer)
Thad M. Brown (age 48), Vice Senior Vice President and Chief
President, Secretary and Financial Officer of the Advisor
Treasurer
300 North Lake Avenue
Pasadena, CA 91101
The Trustees and officers of each of the Portfolios, their business address
and their occupations during the past five years are:
Richard N. Frank (age 75), Trustee Chief Executive Officer, Lawry's
234 E. Colorado Blvd. Restaurants, Inc.; formerly Chairman
Pasadena, CA 91101 of Lawry's Foods, Inc.
B-9
<PAGE>
Bernard J. Johnson (age 74), Retired; formerly Chairman Emeritus
Trustee Emeritus of the Advisor
300 North Lake Avenue
Pasadena, CA 91101
James Clayburn LaForce (age 69), Dean Emeritus, John E. Anderson
Trustee Graduate School of Management,
P.O. Box 1585 University of California, Los
Pauma Valley, CA 92061 Angeles. Director of The 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 48), President Managing Director and Secretary of
and Trustee* the Advisor
300 North Lake Avenue
Pasadena, CA 91101
Angelo R. Mozilo (age 59), Trustee Vice Chairman and Executive Vice
155 N. Lake Avenue President of Countrywide Credit
Pasadena, CA 91101 Industries (mortgage banking)
Thad M. Brown (age 48), Vice Senior Vice President and Chief
President, Secretary and Financial Officer of the Advisor
Treasurer
300 North Lake Avenue
Pasadena, CA 91101
- -----------------------------------
* denotes Trustees who are "interested persons" of the Trust or Portfolios under
the 1940 Act.
The following compensation was paid to each of the following Trustees. No
other compensation or retirement benefits were received by any Trustee or
officer from the Registrant or other registered investment company in the "Fund
Complex."
Deferred
Total Compensation
Name of Trustee Compensation Accrued
Jettie M. Edwards $12,000(1) -0-
Bernard J. Johnson 11,500(1) -0-
Jeffrey D. Lovell 11,500(1) 22,093
Wayne H. Smith 12,000(1) 23,719
Richard N. Frank 12,000(2) 23,604
James Clayburn LaForce 12,000(2) -0-
Angelo R. Mozilo 12,000(2) 24,153
(1) Compensation was paid by the Registrant
(2) Compensation was paid by three other registered investment companies in the
"Fund Complex."
The following persons, to the knowledge of the Trust, owned more than 5% of
the outstanding shares of the Balanced Fund as of September 10, 1998:
B-10
<PAGE>
Gilbert Papazian IRA - 6.05%
1445 S. Down Road
Hillsborough, CA 94163
Compass Bank Trustee - 36.42%
For Alfa Mutual Insurance Company
P. O. Box 11000
Montgomery, AL 36191
Rita Moya Trustee for -8.36%
National Health Foundation, Inc.
201 N. Figueroa
Los Angeles, CA 90012
Wilmington Trust Co TTEE - 30.09%
FBO Davies Medical
1100 North Market Street
Wilmington, DE 19890-0001
The following persons, to the knowledge of the Trust, owned more than 5% of
the outstanding shares of the Pinnacle Growth Fund as of September 10, 1998:
Wilmington Trust Co. - 80.10%
FBO Mustang Emplye 401K
A/C 43007-5
1100 N. Market Street
Wilmington, DE 19890-0001
Wilmington Trust Co TTEE - 19.86%
FBO Catholic Healthcare W MMP
PO Box 8971
Wilmington, DE 19899-8971
The following persons, to the knowledge of the Trust, owned more than 5% of
the outstanding shares of the Pinnacle Mid Cap Fund as of September 10, 1998:
Larry D. Tashjian and Karen D. Tashjian Trstes - 11.90%
for Tashjian Family Trust
612 Bershire Avenue
La Canada, CA 91011
George E. Handtmann III Truste - 11.90%
for Handtmann Family Trust
333 Lambert Road
Carpinteria, CA 93013
Jeffrey J. Miller and Paula J. Miller Trstes - 11.90%
for Miller Family Trust
1252 El Vaso St.
La Canada, CA 91011
Robert M. Kommerstad and Lila M. Kommerstad Trste - 11.90%
for Kommerstad Family Trust
618 Deodar Lane
B-11
<PAGE>
Bradbury, CA 91010
Bernard Johnson Trste - 11.90%
for the Johnson Family Trust
2100 Glenview Terrace
Altadena, CA 91001
Thomas J and Julie H Condon Trste - 11.90%
for the Condon Family Trust
850 Holladay Rd.
San Marinco, CA 91108
The following persons, to the knowledge of the Trust, owned more than 5% of
the outstanding shares of the Pinnacle Small Company Growth Fund as of September
10, 1998:
Wilmington Trust Co. Trustee - 51,75%
For Figgie Int'l Inv Retirement & Profit Sharing Trust
SUPP SVS & TR 401K Plan
A/C 42171-6
c/o Mutual Funds
1100 N.. Market Street
Wilmington, DE 19890-0001
Wilmington Trust Co. Trustee - 12.69%
For Figgie Int'l Inv Retirement & Profit Sharing Trust
SUPP RET SVS & TR 401K Plan
ALF A/C 42174-0
c/o Mutual Funds
1100 N. Market Street
Wilmington, DE 19890-0001
Merril Lynch Trust Co. Trustee - 12.26%
FBO Qualified Retirement Plans
265 Davidson Avenue
Somerset, NJ 08873
IITC & Co. - 6.28%
507 Canyon Blvd.
Boulder, CO 80503
As of September 10, 1998, shares of the Funds owned by the Trustees and
officers as a group were less than 1%.
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
B-12
<PAGE>
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.
For its services, the Advisor receives a fee from the Balanced Portfolio at
an annual rate of 0.60% of its average net assets, 0.80% of the Growth
Portfolio's average net assets and 0.80% of the Small Cap Portfolio's average
net assets. The Advisor will receive a fee of 0.70% from the Mid Cap Portfolio's
average net assets. During the fiscal years ended October 31, 1997, 1996, and
1995, the Advisor earned fees pursuant to the Advisory Agreements as follows:
from the Balanced Portfolio, $153,518, $74,462 and $77,098, respectively; from
the Growth Portfolio, $838,058, $949,431 and $1,536,297, respectively; and from
the Small Cap Portfolio, $1,525,768, $1,395,748 and $771,499, respectively.
However, the Advisor has agreed to limit the aggregate expenses of the Balanced
Portfolio to 0.80% of average net assets, and 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 Balanced Portfolio that exceeded these expense
limits in the amounts of $91,689, $111,580 and $100,695 during the fiscal years
ended October 31, 1997, 1996 and 1995, respectively. The Advisor paid expenses
of the Growth Portfolio that exceeded these expense limits in the amounts of
$48,003, $64,401 and $21,828 during the fiscal years ended October 31, 1997,
1996 and 1995, respectively. The Advisor paid expenses of the Small Cap
Portfolio that exceeded these expense limits in the amounts of $24,879, $26,098
and $66,713 during the fiscal years ended October 31, 1997, 1996 and 1995,
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).
The Advisor also provides 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
fiscal years ended October 31, 1997, 1996 and 1995, the Adviser earned fees from
the Pinnacle Balanced Fund of $52,139, $24,822 and $25,721, respectively. For
the
B-13
fiscal year ended October 31, 1997, the Advisor earned fees of $1,029 from the
Pinnacle Growth Fund and $1,993 from the Pinnacle Small Company Growth Fund.
Prior to 1997, the Pinnacle Growth Fund and Pinnacle Small Company Growth Fund
were not in existence. However, the Advisor agreed to limit the aggregate
expenses of the Pinnacle Balanced Fund, Pinnacle Growth Fund and Pinnacle Small
Company Growth Fund to 1.05%, 1.35% and 1.55%, respectively, of each Fund's
average net assets. As a result, for the fiscal year ended October 31, 1997, the
Advisor waived fees and reimbursed expenses of the Funds as follows:
Waived Reimbursed
Fees Expenses
Balanced Fund $51,137 $45,926
Growth Fund $1,029 $64,841
Small Company Growth Fund $1,993 $72,680
The Advisor reserves the right to be reimbursed for any waiver of its fees
or expenses paid on behalf of the Funds if, within three subsequent years, a
Fund's expenses are less than the limit agreed to by the Advisor.
The Administrator
During each of the fiscal years ended October 31, 1997, 1996 and 1995, the
Pinnacle Balanced Fund paid the Administrator fees in the amount of $15,000.
During the fiscal year ended October 31, 1997, the Pinnacle Growth and Pinnacle
Small Company Growth Funds each paid the Administrator fees in the amount of
$11,300. The Pinnacle Growth Fund and Pinnacle Small Company Growth Fund were
not in operation prior to 1997.
During the fiscal years ended October 31, 1997, 1996 and 1995, the Balanced
Portfolio paid the Administrator fees in the amount of $25,586, $12,410 and
$12,850, respectively. During the fiscal years ended October 31, 1997, 1996 and
1995, the Growth Portfolio paid the Administrator fees in the amount of
$103,757, $118,678 and $192,037, respectively. During the fiscal years ended
October 31, 1997, 1996 and 1995, the Small Cap Portfolio paid the Administrator
fees in the amount of $190,721, $174,469 and $96,687, respectively.
Distribution Plan
The Trustees and/or shareholders of the Trust have adopted, on behalf of
each Fund, a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the
1940 Act. The Plan provides that each Fund will pay a fee to the Distributor at
an annual rate of 0.25% of its average daily net assets for expenses incurred in
marketing its shares, including advertising, printing and compensation to
securities dealers or other industry professionals.
For the fiscal year ended October 31, 1997, the Balanced Fund, Growth Fund
and Small Company Growth Fund paid the Distributor $18,689, $1,910 and $1,867,
respectively, in fees pursuant to the Plan.. All such 12b-1 fees paid to the
Distributor were paid as compensation to dealers.
Shareholder Services Plan
On May 15, 1998, the Board of Trustees approved the implementation of a
Shareholder Services Plan (the "Services Plan") under which the Advisor will
provide, or arrange for others to provide, certain specified shareholder
services. As compensation for the provision of shareholder services, each Fund
will pay the Advisor a monthly fee at an annual rate of up to 0.15% of the
Fund's average daily net assets. The Advisor will pay certain banks, trust
companies, broker-dealers and other financial intermediaries (each, a
"Participating Organization") out of the fees the Advisor receives from the
Funds under the Services Plan to the extent that the Participating Organization
performs shareholder servicing functions for Fund shares owned by its customers.
CUSTODIAN AND AUDITORS
The Trust's custodian, Provident National Bank, 200 Stevens Drive, Lester,
PA 19113 is responsible for holding the Funds' assets, and Provident Financial
Processing Corporation, 400 Bellevue Parkway, Wilmington,
B-14
<PAGE>
DE 19809, acts as the Trust's transfer 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.
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 and 1995, the amount of brokerage
commissions paid by the Balanced Portfolio were $8,805 and $19,998,
respectively. During the fiscal year ended October 31, 1997, the Balanced
Portfolio paid $24,471 in brokerage commissions. Of that amount, $579 was paid
in brokerage commissions to brokers who furnished research services on portfolio
transactions in the amount of $_____. During the fiscal years ended October 31,
1996 and 1995, the amount of brokerage commissions paid by the Growth Portfolio
were $148,938 and $243,060, respectively. During the fiscal year ended October
31, 1997, the Growth Portfolio paid $110,376 in brokerage commissions. Of that
amount, $5,776 was paid in brokerage commissions to brokers who furnished
research services on portfolio transactions in the amount of $_____. During the
fiscal years ended October 31, 1996 and 1995, the amount of brokerage
commissions paid by the Small Cap Portfolio were $115,709 and $59,282,
respectively. During the fiscal year ended October 31, 1997, the Small Cap
Portfolio paid $218,087 in brokerage commissions. Of that amount, $7,674 was
paid in brokerage commissions to brokers who furnished research services on
portfolio transactions in the amount of $_____.
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.
The debt securities which will be a major component of the Balanced
Portfolio's portfolio are generally traded on a "net" basis with dealers acting
as principal for their own accounts without a stated commission although the
price of the security usually includes a profit to the dealer. Money market
instruments usually trade on a "net" basis as well. On occasion, certain money
market instruments may be purchased by the Portfolios directly from an issuer in
which case no commissions or discounts are paid. In underwritten offerings,
securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.
B-15
<PAGE>
PORTFOLIO TURNOVER
Although the Funds generally will not invest for short-term trading
purposes, portfolio securities may be sold without regard to the length of them
they have been held when, in the opinion of the Advisor, investment
considerations warrant such action. Portfolio turnover rate is calculated by
dividing (1) the lesser of purchases or sales of portfolio securities for the
fiscal year by (2) the monthly average of the value of portfolio securities
owned during the fiscal year. A 100% turnover rate would occur if all the
securities in a Portfolio's portfolio, with the exception of securities whose
maturities at the time of acquisition were one year or less, were sold and
either repurchased or replaced within one year. A high rate of portfolio
turnover (100% or more) generally leads to transaction costs and may result in a
greater number of taxable transactions. See "Portfolio Transactions and
Brokerage." Growth Portfolio's portfolio turnover rate for the fiscal years
ended October 31, 1996 and 1997 was 64.09% and 67.45%, respectively. The Small
Cap Portfolio paid an unusually large redemption request which resulted in the
Small Cap Portfolio having a portfolio turnover rate of 151.52% for the period
February 3, 1997, the date the Small Company Growth Fund commenced operations,
through October 31, 1997. As a result of some volatility in the fixed income
markets and an improving environment in the equity markets during the past year,
the Balanced Portfolio repositioned its portfolio to hold a larger percentage of
equity securities. This resulted in the Balanced Portfolio having a portfolio
turnover rate of 104.50% for the fiscal year ended October 31, 1997 as opposed
to 54.24% for the fiscal year ended October 31, 1996. For the fiscal year ended
October 31, 1997, the portfolio turnover rate for the fixed-income portion and
the equity portion of the Balanced Portfolio was ___% and ___%, respectively.
The Advisor expects that the Mid Cap Portfolio's portfolio turnover rate
normally not exceed 100%.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Reference is made to "Ways to Set Up Your Account - How to Buy Shares - How
To Sell Shares" in the prospectus for additional information about purchase and
redemption of shares. You may purchase and redeem shares of each Fund on each
day on which the New York Stock Exchange ("Exchange") is open for trading. 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, Martin Luther King Jr. 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.
Reductions in the sales charge are available. For more information, see
"Sales Charge Waivers" and "Sales Charge Reductions" in the Prospectus.
Shareholders who buy $1 million in shares without paying a sales charge will be
charged a 1% fee on redemptions made within one year of purchase.
NET ASSET VALUE
The net asset value of the Portfolios' shares will fluctuate and is
determined as of the close of trading on the Exchange (generally 4:00 p.m.
Eastern time) each business day. Each Portfolio's net asset value is calculated
separately.
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.
Equity securities listed on a national securities exchange or traded on the
NASDAQ system are valued on their last sale price. Other equity securities and
debt securities for which market quotations are readily available are valued at
the mean between their bid and asked price, except that debt securities maturing
within 60 days are valued on an amortized cost basis. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Trustees.
TAXATION
B-16
<PAGE>
The Funds will each be taxed as separate entities under the Internal
Revenue Code (the "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) 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 (3) 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 long-term 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.
Under the IRS Restructuring and Reform Act of 1998adopted by Congress in
June 1998 the taxation of capital gains was modified so as to shorten, by six
months the holding period requirement for the 20% maximum rate treatment
(eliminating the "more than 18 month" holding period for gains from the sale of
securities.
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
B-17
<PAGE>
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.
Average annual total return computed at the public offering price for the
periods ended April 30, 1998 are set forth in the tables below.
One Year Five Years Life of Fund*
Balanced Fund 23.80% 13.49% 12.78%
Growth Fund 31.18% N/A 22.03%
Mid Cap Fund** N/A N/A N/A
Small Cap Growth Fund 31.40% N/A 6.43%
Average annual total return may also be based on investment at reduced
sales charge levels or at net asset value. Any quotation of return not
reflecting the maximum sales charge will be greater than if the maximum sales
charge were used. Average annual total return computed at net asset value for
the periods ended April 30, 1998 are set forth in the tables below:
One Year Five Years Life of Fund*
Balanced Fund 31.35% 14.84% 13.92%
Growth Fund 39.18% N/A 28.03%
Mid Cap Fund N/A N/A 19.50%
Small Cap Growth Fund 39.42% N/A 11.66%
_________________
*The commencement dates for the Funds are as follows: Balanced Fund - June 11,
1992; Growth Fund - February 3, 1997; Mid Cap Fund - December 31, 1997; and
Small Company Growth Fund - February 3, 1997.
**Shares of the Mid Cap Fund were sold without a sales charge until the
effective date of this Prospectus and this SAI.
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.
B-18
<PAGE>
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 totaling 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 nine 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.
FINANCIAL STATEMENTS
The annual report to shareholders for the Balanced, Growth and Small
Company Growth Funds for the fiscal year ended October 31, 1997 and the
semi-annual report to shareholders for all the Funds for the six-month period
ended April 30, 1998 are separate documents supplied with this SAI, and the
financial statements,
B-19
<PAGE>
accompanying notes and report of independent accountants appearing therein are
incorporated by reference into this SAI.
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
iss ues.
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 Ratings Group: Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
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
B-20
<PAGE>
indicate the relative repayment capacity of rated issuers: Prime 1--highest
quality; Prime 2--higher quality; Prime 3--high quality.
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment. Ratings are graded into four categories, ranging
from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers "1", "2" and "3" to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A-1" which possess extremely strong safety characteristics. Capacity for
timely payment on issues with the designation "A-2" is strong. However, the
relative degree of safety is not as high as for issues designated A-1. Issues
carrying the designation "A-3" have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher designations.
B-21
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits.
(1) Declaration of Trust(1)
(2) By-Laws(1)
(3) Not applicable
(4) Management Agreement(3)
(5) Distribution Agreement(1)
(6) Not applicable
(7) Custodian Agreement(4)
(8) (i) Administration Agreement with Investment Company
Administration Corporation(1)
(ii) Administration Agreement with Provident
Investment Counsel(1)
(9) Opinion and consent of counsel(1)
(10) Consent of McGladrey & Pullen
(11) Not applicable
(12) Investment letter(1)
(13) Distribution Plan pursuant to Rule 12b-1(2)
(14) Financial Data Schedules (filed as Exhibit 27 for
electronic filing purposes)
(15) Not applicable
1 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.
2 Previously filed with Post-effective Amendment No. 13 to the Registration
Statement on Form N-1A of PIC Investment Trust, File No 33-44579, on January 27,
1997 and incorporated herein by reference.
3 Previously filed with Post-effective Amendment No. 18 to the Registration
Statement on Form N-1A of PIC Investment Trust, File No 33-44579, on December
12, 1997 and incorporated herein by reference.
4 Previously filed with Post-effective Amendment No. 21 to the Registration
Statement on Form N-1A of PIC Investment Trust, File No. 33-44579, on September
29, 1998 and incorporated herein by reference.
Item 24. Persons Controlled by or under Common Control with Registrant.
As of September 24, 1998, Registrant owned 99.9% of the outstanding
Interests in PIC Growth Portfolio, PIC Balanced Portfolio, PIC Mid Cap 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 25. Indemnification.
Article VI of Registrant's By-Laws states as follows:
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
<PAGE>
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 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.
<PAGE>
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 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
<PAGE>
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 26. Business and Other Connections of Investment Adviser.
Not applicable.
Item 27. Principal Underwriters.
(a) The Registrant's principal underwriter also acts as principal
underwriter for the following investment companies:
Advisors Series Trust
Guinness Flight Investment Funds, Inc.
Fremont Mutual Funds, Inc.
Fleming Capital Mutual Fund Group, Inc.
The Purmisa Fund
Professionally Managed Portfolios
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
UBS Private Investor Funds
(b) The following information is furnished with respect to the officers and
directors of First Fund Distributors, Inc.:
Name and Principal Position and Offices with Position and Offices
Business Address Principal Underwriter with Registrant
- ---------------------- ------------------------- --------------------
Robert H. Wadsworth President and Treasurer Assistant Secretary
4455 E. Camelback Road
Suite 261
Phoenix, AZ 85018
Eric M. Banhazl Vice President Assistant Secretary
2025 E. Financial Way
Glendora, CA 91741
Steven J. Paggioli Vice President and Assistant Secretary
470 West 22nd Street Secretary
New York, NY 10011
(c) Not applicable.
Item 28. 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
<PAGE>
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 29. Management Services.
Not applicable.
Item 30. 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.
<PAGE>
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 1st day of October, 1998.
PIC INVESTMENT TRUST
By Jeffrey J. Miller*
------------------
Jeffrey J. Miller
President
This Amendment to the Registration Statement on Form N-1A of PIC Investment
Trust has been signed below by the following persons in the capacities indicated
on October 1, 1998.
Jeffrey J. Miller* President and
- - -------------------------- Trustee
Jeffrey J. Miller
Jettie M. Edwards* Trustee
- - --------------------------
Jettie M. Edwards
Bernard J. Johnson* Trustee
- - --------------------------
Bernard J. Johnson
Jeffrey D. Lovell* Trustee
- - --------------------------
Jeffrey D. Lovell
Wayne H. Smith* Trustee
- - --------------------------
Wayne H. Smith
Thad M. Brown * Treasurer and Principal
- - -------------------------- Financial and Accounting
Thad M. Brown Officer
* Robert H. Wadsworth
---------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
SIGNATURES
PIC Mid 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 1st day of October, 1998.
PIC MID CAP PORTFOLIO
By Jeffrey J. Miller*
------------------
Jeffrey J. Miller
President
This Amendment to the Registration Statement on Form N-1A of PIC Investment
Trust has been signed below by the following persons in the capacities indicated
on October 1, 1998.
Jeffrey J. Miller* President and Trustee
- - -------------------------- Of PIC Mid Cap Portfolio
Jeffrey J. Miller
Richard N. Frank* Trustee of PIC Mid Cap Portfolio
- - --------------------------
Richard N. Frank
James Clayburn LaForce* Trustee of PIC Mid Cap Portfolio
- - --------------------------
James Clayburn LaForc
Angelo R. Mozilo* Trustee of Pic Mid Cap Portfolio
- - --------------------------
Angelo R. Mozilo
Thad M. Brown* Treasurer and Principal Financial and
- - -------------------------- Accounting Officer of PIC Mid Cap
Thad M. Brown Portfolio
* Robert H. Wadsworth
---------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
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 1st day of October, 1998.
PIC BALANCED PORTFOLIO
By Jeffrey J. Miller*
------------------
Jeffrey J. Miller
President
This Amendment to the Registration Statement on Form N-1A of PIC Investment
Trust has been signed below by the following persons in the capacities indicated
on October 1, 1998.
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 LaForc
Angelo R. Mozilo* Trustee of Pic Balanced Portfolio
- - --------------------------
Angelo R. Mozilo
Thad M. Brown* Treasurer and Principal Financial and
- - -------------------------- Accounting Officer of PIC Balanced
Thad M. Brown Portfolio
* Robert H. Wadsworth
---------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
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 1st day of October, 1998.
PIC SMALL CAP PORTFOLIO
By Jeffrey J. Miller*
------------------
Jeffrey J. Miller
President
This Amendment to the Registration Statement on Form N-1A of PIC Investment
Trust has been signed below by the following persons in the capacities indicated
on October 1, 1998.
Jeffrey J. Miller* President and Trustee
- - -------------------------- Of PIC Small Cap Portfolio
Jeffrey J. Miller
Richard N. Frank* Trustee of PIC Small Cap Portfolio
- - --------------------------
Richard N. Frank
James Clayburn LaForce* Trustee of PIC Small Cap Portfolio
- - --------------------------
James Clayburn LaForc
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
Thad M. Brown Portfolio
* Robert H. Wadsworth
---------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
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 1st day of October, 1998.
PIC GROWTH PORTFOLIO
By Jeffrey J. Miller*
------------------
Jeffrey J. Miller
President
This Amendment to the Registration Statement on Form N-1A of PIC
Investment Trust has been signed below by the following persons in the
capacities indicated on October 1, 1998.
Jeffrey J. Miller* President and Trustee
- - -------------------------- Of PIC Growth Portfolio
Jeffrey J. Miller
Richard N. Frank* Trustee of PIC Growth Portfolio
- - --------------------------
Richard N. Frank
James Clayburn LaForce* Trustee of PIC Growth Portfolio
- - --------------------------
James Clayburn LaForc
Angelo R. Mozilo* Trustee of PIC Growth Portfolio
- - --------------------------
Angelo R. Mozilo
Thad M. Brown* Treasurer and Principal Financial and
- - -------------------------- Accounting Officer of PIC Growth
Thad M. Brown Portfolio
* Robert H. Wadsworth
---------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
99.B10 Consent of Accountants
27.1 FDS-Balanced Fund
27.3 FDS-Growth Fund
27.6 FDS-Small Company Growth Fund
27.7 FDS-Mid Cap Fund
McGladrey & Pullen, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our reports dated December 5, 1997 on the
financial statements of the following funds referred to therein, both of which
are series of PIC Investment Trust; which financial statements are incorporated
by reference in Post-Effective Amendment No. 22 to the Trust's Registration
Statement.
Pinnacle Balanced Fund
Pinnacle Growth Fund
Pinnacle Mid Cap Fund
Pinnacle Small Company Growth Fund
We also consent to the reference to our Firm in the Prospectus under the caption
"Financial Highlights" and in the Statement of Additional Information under the
caption "Custodian and Auditors".
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
September 29, 1998
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<NAME> PIC INVESTMENT TRUST
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<NAME> PROVIDENT INVESTMENT COUNSEL PINNACLE BALANCED FUND
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> NOV-1-1997
<PERIOD-END> APR-30-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 31,050,246
<INVESTMENTS-AT-VALUE> 40,312,121
<RECEIVABLES> 7,921
<ASSETS-OTHER> 12,187
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 40,332,229
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 9,695,714
<OTHER-ITEMS-LIABILITIES> 54,401
<TOTAL-LIABILITIES> 54,401
<SENIOR-EQUITY> 30,222,543
<PAID-IN-CAPITAL-COMMON> 30,587,408
<SHARES-COMMON-STOCK> 2,444,066
<SHARES-COMMON-PRIOR> 2,279,091
<ACCUMULATED-NII-CURRENT> 30,852
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,491,844
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,167,724
<NET-ASSETS> 40,277,828
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 229,041
<EXPENSES-NET> 46,354
<NET-INVESTMENT-INCOME> 182,687
<REALIZED-GAINS-CURRENT> 1,507,708
<APPREC-INCREASE-CURRENT> 3,263,877
<NET-CHANGE-FROM-OPS> 4,954,272
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 177,861
<DISTRIBUTIONS-OF-GAINS> 2,299,645
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 114,354
<NUMBER-OF-SHARES-REDEEMED> 117,077
<SHARES-REINVESTED> 167,698
<NET-CHANGE-IN-ASSETS> 2,458,004
<ACCUMULATED-NII-PRIOR> 26,026
<ACCUMULATED-GAINS-PRIOR> 2,283,781
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 123,327
<AVERAGE-NET-ASSETS> 37,390,607
<PER-SHARE-NAV-BEGIN> 15.51
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 1.98
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 1.01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.48
<EXPENSE-RATIO> 1.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<TABLE> <S> <C>
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<CIK> 000882129
<NAME> PIC INVESTMENT TRUST
<SERIES>
<NUMBER> 3
<NAME> PROVIDENT INVESTMENT COUNSEL PINNACLE GROWTH FUND
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