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
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 21 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [_]
Amendment No. 24 [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)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[X] 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>
PROVIDENT INVESTMENT COUNSEL
[GRAPHIC OMITTED] GROWTH FUND
MID CAP FUND
SMALL COMPANY GROWTH FUND
Prospectus
, 1998
Provident Investment Counsel
300 North Lake Avenue
Pasadena, CA 91101
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
revised 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.
The Funds, unlike many other mutual funds which directly acquire and manage
their own portfolios of securities, seek to achieve their investment objectives
by investing all of their assets in a PIC Portfolio. Investors should carefully
consider this investment approach.
Like all mutual funds, these securities have not 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.
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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
Your Account Ways to Set Up Your Account
How to Buy Shares
How to Sell Shares
Investor Services to help you
manage your account.
Shareholder Dividends, Capital Gains
Account Policies and Taxes
Transaction Details Share price
calculations and the timing of purchases
and redemptions.
Exchange Restrictions
General Information
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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.
Growth Fund
Goal: Long term growth of capital.
Strategy: Invests, through the PIC Growth Portfolio, in high quality growth
stocks.
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 capitalizations.
Small Company Growth Fund
Goal: Long term growth of capital.
Strategy: Invests, through the PIC Small Cap Portfolio, mainly in equity
securities of small companies.
Who May Want to Invest
The Growth Fund may be appropriate for investors who seek potentially high long
term returns, but are willing to accept the risk of investing in growth stocks.
The Fund is designed for those seeking capital appreciation through a
diversified portfolio of equity securities of issuers 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.
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.
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Expenses
Shareholder Transaction Expenses are charges you pay when you buy, sell or hold
shares in a Fund.
Maximum sales charge None
Maximum sales charge on reinvested
dividends None
Deferred sales charge None
Redemption fee None
Exchange fee $ 5
Annual Operating Expenses are paid out of each Fund's and each Portfolio's
assets. The Growth and Small Company Growth Funds each indirectly pay an
investment advisory fee equal to .80% of the Fund's average net assets. The Mid
Cap Fund indirectly pays an investment advisory fee equal to .70% of the Fund's
average net assets. Each Fund also incurs other expenses for services such as
administrative services, maintaining shareholder records and furnishing
shareholder statements and financial reports. A Fund's expenses are factored
into its share price or dividends and are not charged directly to shareholder
accounts.
The following are based on expenses incurred during the most recent fiscal
year, and are calculated as a percentage of average net assets.
Growth Fund
Management fee (paid by the Portfolio) .80%
Other expenses of the Portfolio, after
reimbursement by PIC .20%
----
Total Operating Expenses of the Portfolio 1.00%
Administrative fee paid by the Fund to
PIC .20%
12b-1 fee None
Other expenses of the Fund, after
reimbursement by PIC .05%
----
Total Fund Operating Expenses 1.25%
====
PIC reimburses the Growth Fund for any expenses in excess of 1.25% of average
net assets. Without this reimbursement, Total Fund Operating Expenses would
have been 1.35% of average net assets for the fiscal year ended October 31,
1997.
Small Company Growth Fund
Management fee (paid by the Portfolio) .80%
Other expenses of the Portfolio .20%
----
Total Operating Expenses of the Portfolio 1.00%
Administrative fee paid by the Fund
to PIC .20%
12b-1 fee None
Other expenses of the Fund, after
reimbursement by PIC .25%
----
Total Fund Operating Expenses 1.45%
====
PIC reimburses the Small Company Growth Fund for any expenses in excess of
5
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1.45% of average net assets. Without this reimbursement, Total Fund Operating
Expenses would have been 1.61% for the fiscal year ended October 31, 1997.
The following are expenses expected to be incurred by the Mid Cap Fund and are
calculated as a percentage of average net assets.
Mid Cap Fund
Management fee (paid by the Portfolio) .70%
Other expenses of the Portfolio, after
reimbursement by PIC .20%
---
Total operating expenses
of the Portfolio .90%
Other expenses of the Fund, after
reimbursement by PIC .09%
---
Total Fund operating expenses .99%
===
PIC will reimburse the Mid Cap Fund for any expenses in excess of 0.99% of
average net assets. Without this reimbursement, Total Fund Operating Expenses
are estimated to be 1.50% of average net assets.
PIC retains the ability to be repaid by any Fund if expenses subsequently fall
below the specified limit within the next three years.
Examples: Let's say, hypothetically, that each Fund's annual return is 5% and
that its operating expenses are exactly as just described. For every $1,000 you
invest, here's how much you would pay in total expenses if you close your
account after the number of years indicated:
Growth Fund
After 1 year $ 13
After 3 years $ 40
After 5 years $ 69
After 10 years $151
Mid Cap Fund
After 1 year $ 9
After 3 years $ 29
Small Company Growth Fund
After 1 year $ 15
After 3 years $ 46
After 5 years $ 79
After 10 years $174
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.
Structure of the Funds and the Portfolios
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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 PIC Investment Trust (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 the Fund in another
pooled investment company or the retaining of an investment advisor to manage
the Fund's assets directly.
Whenever a Fund is requested to vote on matters pertaining to a Portfolio, the
Fund will hold a meeting of its shareholders, and the Fund's votes with respect
to the Portfolio will be cast in the same proportion as the shares of the Fund
for which voting instructions are received. For further information, see "The
Funds in Detail," "Information about the Fund's Investments" and "Securities
and Investment Practices."
Financial Highlights
The tables that follow are included in the Fund's Annual and Semi-Annual
Reports. The Funds' Annual Reports have been audited by McGladrey & Pullen, LLP,
Independent Certified Public Accountants. Their reports on the financial
statements and financial highlights are included in the Reports. 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. The Mid Cap Fund will commence
operations on , 1998; therefore no per share data has been provided for this
Fund.
<TABLE>
Provident Investment Counsel June 11,
Growth Fund Six months 1992*
ended Fiscal year ended October 31, through
April 30, -------------------------------------------------------- October 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994 1993 1992
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Net asset value, beginning of period $ 18.14 $ 16.25 $ 14.25 $ 11.70 $ 11.60 $ 10.81 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.07 (0.15) (0.02) (0.02) 0.00 0.00 0.01
Net realized and unrealized gain (loss)
on investments 2.77 3.98 2.02 2.57 0.10 0.80 0.80
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.84 3.83 2.00 2.55 0.10 0.80 0.81
Less distributions:
From net realized capital gains (3.37) (1.94) 0.00 0.00 0.00 0.00 0.00
7
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Return of capital 0.00 0.00 0.00 0.00 0.00 (0.01) 0.00
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Net asset value, end of period $ 17.61 $ 18.14 $ 16.25 $ 14.25 $ 11.70 $ 11.60 $ 10.81
- ----------------------------------------------------------------------------------------------------------------------------
Total return 18.65%+++ 26.44% 14.04% 21.79% 0.86% 7.40% 20.88%
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (millions) $ 136.4 $ 80.0 $ 116.1 $ 131.1 $ 102.3 $ 88.9 $ 5.7
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:+**
Expenses 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Net investment income -0.51% -0.38% -0.28% -0.17% -0.15% -0.11% 0.25%
Portfolio turnover rate ++ 42.39% 67.54% 64.09% 54.89% 68.26% 43.20% 7.42%
Average commission rate paid
by Portfolio $ 0.0416 $ 0.0440 -- -- -- -- --
* Commencement of operations
+ 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.
</TABLE>
<TABLE>
Provident Investment Counsel June 28,
Small Company Growth Fund Six months Year 1996*
ended ended through
April 30, October 31, October 31,
1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.91 $ 9.48 $ 10.00
- -------------------------------------------------------------------------
Income from investment operations:
Net investment income (0.04) (0.05) (0.03)
Net realized and unrealized gain (loss)
on investments 1.04 0.48 (0.49)
- -------------------------------------------------------------------------
Total from investment operations 1.00 0.43 (0.52)
Net asset value, end of period $ 10.91 $ 9.91 $ 9.48
- -------------------------------------------------------------------------
Total return 0.09%+++ 4.54% (5.20%)+++
=========================================================================
Ratios/supplemental data:
Net assets, end of period (millions) $ 42.0 $ 31.0 $ 5.2
- -------------------------------------------------------------------------
Ratios to average net assets:+**
Expenses 1.45% 1.45% 1.43%
Net investment income -1.14% -0.96% -0.91%
Portfolio turnover rate ++ 35.44% 151.52% 53.11%
Average commission rate paid
by Portfolio $ 0.0270 $ 0.0326 $ 0.0307
* Commencement of operations
+ Annualized.
** Includes the Fund's share of expenses allocated from PIC Small Cap Portfolio.
++ Portfolio turnover rate of PIC Small Cap Portfolio, in which all of the
Fund's assets are invested.
+++Not annualized
</TABLE>
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.
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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.
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 a
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.
PIC may use broker-dealers that sell shares of the Funds to carry out
transactions for the Portfolios, provided that the Portfolios receive brokerage
services and commission rates comparable to those of other broker-dealers.
PIC traces its origins to an investment partnership formed in 1951. It is now an
indirect, wholly-owned subsidiary of United Asset Management Corporation (UAM),
a publicly-owned corporation with headquarters located at One International
Place, Boston, MA 02110. UAM is principally engaged, through affiliated firms,
in providing institutional investment management services.
Information About the Funds' Investments
Because the investment characteristics of each Fund will correspond directly to
those of the Portfolio in which it invests, the following is a discussion of the
various investments of, and techniques employed by, the Portfolios.
Provident Investment Counsel Growth Fund
The Provident Investment Counsel 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
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on equity and reinvestment rate, all of which, in the aggregate, are 1.5 times
the average performance of the Standard & Poor's Index of 500 Common Stocks for
the same period. The Growth Portfolio will invest in a range of small, medium
and large companies; the minimum market capitalization of a portfolio security
is expected to be $250 million, and the average market capitalization is
currently approximately $15 billion. Equity securities in which the Growth
Portfolio invests typically average less than a 1% dividend. Currently,
approximately 70% of the equity securities in which the Growth Portfolio invests
are listed on the New York or American Stock Exchanges, and the remainder are
traded on the 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 Mid Cap Fund
The Provident Investment Counsel 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.
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 Small Company Growth Fund
The Provident Investment Counsel 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 Small Cap 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 or
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<PAGE>
medium 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.
Repurchase Agreements. In a repurchase agreement, a Portfolio buys a security at
one price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.
Exposure to Foreign Markets. A Portfolio may invest in foreign securities.
Restriction: A Portfolio may invest no more than 20% of its total assets in
foreign securities, and it will only purchase foreign securities or American
Depositary Receipts which are listed on a national securities exchange or
included in the NASDAQ 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
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<PAGE>
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.
Each Fund seeks 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.
The Growth and Small Cap Portfolios pay an investment advisory fee to PIC each
month for managing its investments at the annual rate of 0.80% of the
Portfolio's average net assets. The Mid Cap Portfolio will pay an investment
advisory fee to PIC each month for managing its investments at the annual rate
of 0.70% of the Portfolio's average net assets.
While the investment advisory fee is a significant component of a Portfolio's
(and thus a Fund's) annual operating costs, each Fund also pays other expenses.
The Funds pay a fee to PIC for certain administrative services PIC provides. 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 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.
PIC has agreed to reimburse each Fund for investment advisory fees and other
expenses if they exceed a certain percentage of the Fund's average net assets.
In the case of the Growth Fund, the limit is 1.25%, in the case of the Mid Cap
Fund, the limit is 0.99%, and in the case of the Small Company Growth Fund the
limit is 1.45%. PIC retains the ability to be repaid by a Fund if expenses
subsequently fall below the specified limit within the next three years. This
reimbursement arrangement, which may be terminated at any time without notice,
will decrease a Fund's expenses and boost its performance.
Performance
Mutual fund performance is commonly measured as total return. Total return is
the change in value of an investment over a given period, assuming reinvestment
of any dividends and capital gains. Total return reflects a Fund's performance
over a stated period of time. An average annual total return is a hypothetical
rate of return that, if achieved annually, would have produced the same total
return if performance had been constant over the entire period. Average annual
total return smooths out variations in performance; it is not the same as actual
year-by-year results.
Total return and average annual total return are based on past results and are
not a prediction of future performance. They do not include 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
12
<PAGE>
fully in the SAI).
Your Account
Ways to Set Up Your Account
Individual or Joint Tenant
For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
- - ------------------------------------------------------------------------------
Retirement
To shelter your retirement savings from taxes
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible. Retirement accounts require special applications.
* Individual Retirement Accounts (IRAs) allow anyone of legal age and under
70 1/2 with earned income to invest up to $2000 per tax year. Individuals
can also invest in a spouse's IRA if the spouse has earned income of less
than $250.
* Rollover IRAs retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
* Keogh or Corporate Profit Sharing and Money Purchase Pension Plans allow
self-employed individuals or small business owners (and their employees) to
make tax-deductible contributions for themselves and any eligible employees
up to $30,000 per year.
* Simplified Employee Pension Plans (SEP-IRAs) provide small business owners or
those with self-employed income (and their eligible employees) with many of
the same advantages as a Keogh, but with fewer administrative requirements.
* 403(b) Custodial Accounts are available to employees of most tax-exempt
institutions, including schools, hospitals and other charitable
organizations.
* 401(k) Programs allow employees of corporations of all sizes to contribute a
percentage of their wages on a tax-deferred basis. These accounts need to be
established by the trustee of the plan.
- - ------------------------------------------------------------------------------
Gifts or Transfers to Minor (UGMA, UTMA)
To invest for a child's education or other future needs
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying 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). -
- --------------------------------------------------------------------------------
Trust For money being invested by a trust
The trust must be established before an account can be opened.
- - ------------------------------------------------------------------------------
Business or Organization
For investment needs of corporations, associations, partnerships or other
groups
Does not require a special application.
How to Buy Shares
13
<PAGE>
Once each business day, each fund calculates its share price: The share price is
the Fund's net asset value (NAV). Shares are purchased at the next share price
calculated after your investment is received and accepted. Share price is
normally calculated at 4 p.m. Eastern time.
If you are investing through a tax-sheltered retirement plan, such as an IRA,
for the first time, you will need a special application. Retirement investing
also involves its own investment procedures. Call (800) 618-7643 for more
information and a retirement application.
If you buy shares by check and then sell those shares within two weeks, the
payment may be delayed for up to seven business days to ensure that your
purchase check has cleared.
If you are investing by wire, please be sure to call (800) 618-7643 before
sending each wire.
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.
First Fund Distributors, Inc., 4455 E. Camelback Road, Suite 261E, Phoenix AZ
85018, an affiliate of the administrator, is the Trust's principal underwriter.
Minimum Investments
To Open an Account $1 million
The Funds may, at their discretion, waive
the minimum investment for employees and
affiliates of PIC or any other person or
organization deemed appropriate.
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 Funds
c/o PFPC Inc.
P.O. Box 8943
Wilmington, DE 19899
By Overnight Delivery: Provident Investment Counsel 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 (Fund Name)
Shareholder Name
Shareholder Account Name
14
<PAGE>
How to Sell Shares
You can arrange to take money out of your account at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next
share price calculated after your order is received and accepted. Share price is
normally calculated at 4 p.m. Eastern time.
To sell shares in a non-retirement account, you may use any of the methods
described on these two pages.
If you are selling some but not all of your shares, leave at least $1,000 worth
of shares in the account to keep it open ($500 for retirement accounts).
Certain requests must include a signature guarantee. It is designed to protect
you and the Funds from fraud. Your request must be made in writing and include a
signature guarantee if any of the following situations apply:
* You wish to redeem more than $100,000 worth of shares,
* Your account registration has changed within the last 30 days,
* The check is being mailed to a different address from the one on your
account (record address), or
* The check is being made payable to someone other than the account owner.
You should be able to obtain a signature guarantee from a bank,
broker-dealer, credit union (if authorized under state law), securities
exchange or association, clearing agency or savings association. A notary
public cannot provide a signature guarantee.
Selling Shares in Writing
Write a "letter of instruction" with:
* Your name,
* Your Fund account number,
* The dollar amount or number of shares to be redeemed, and
* Any other applicable requirements listed in the table at right.
* Unless otherwise instructed, PIC will send a check to the record address.
15
<PAGE>
Mail your letter to:
Provident Investment Counsel Funds c/o
PFPC Inc.
P.O. Box 8943
Wilmington, DE 19899
Account Type Special Requirements
Phone All account types * Your telephone call must be received
(800) 618-7643 except retirement by 4 p.m. Eastern time to be redeemed on
that day.
- - ------------------------------------------------------------------------------
Mail or in Individual, Joint * The letter of instructions must be
Person Tenant, Sole Propri- signed by all persons required to sign
etorship, UGMA, UTMA 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 instructions.
Administrator,
Conservator, Guardian
- - ------------------------------------------------------------------------------
Wire All account types * You must sign up for the wire feature
except retirement 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.
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
16
<PAGE>
Exchange Privilege. You may sell your Fund shares and buy shares of other
Provident Investment Counsel Funds by telephone or in writing. Note that
exchanges into each Fund are limited to four per calendar year, and that they
may have tax consequences for you. PFPC charges a $5 fee for each exchange,
which is automatically deducted when the exchange is made. Also see "Exchange
Restrictions" on page __.
Systematic withdrawal plans let you set up periodic redemptions from your
account. These redemptions take place on the 25th day of each month or, if that
day is a weekend or holiday, on the prior business day.
Regular Investment Plans
One easy way to pursue your financial goals is to invest money regularly. PIC
offers convenient services that let you transfer money into your Fund account
automatically. Automatic investments are made on the 20th day of each month or,
if that day is a weekend or holiday, on the prior business day. While regular
investment plans do not guarantee a profit and will not protect you against loss
in a declining market, they can be an excellent way to invest for retirement, a
home, educational expenses, and other long term financial goals. Certain
restrictions apply for retirement accounts. Call (800) 618-7643 for more
information.
Shareholder Account Policies
Dividends, Capital Gains, and Taxes
The Funds distribute substantially all of their net income and capital gains, if
any, to shareholders each year in December.
Distribution Options
When you open an account, specify on your application how you want to receive
your distributions. If the option you prefer is not listed on the application,
call (800) 618-7643 for instructions. The Funds 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.
[GRAPHIC OMITTED] Understanding
Distributions
As a Fund shareholder, you are entitled to your share of the Fund's net
income and gains on its investments. A Fund passes its earnings along to
its investors as distributions.
A Fund earns dividends from stocks and interest from short term investments
held by a Portfolio. These are passed along as dividend distributions. A
Fund realizes capital gains whenever a Portfolio sells securities for a
higher price than it paid for them. These are passed along as capital gain
distributions.
Taxes
As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account, you should
17
<PAGE>
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 Provident
Investment Counsel Funds--are subject to capital gains tax. A capital gain or
loss is the difference between the cost of your shares and the price you receive
when you sell them.
Whenever you sell shares of a Fund, PIC will send you a confirmation statement
showing how many shares you sold and at what price. You will also receive a
consolidated transaction statement every January. However, it is up to you or
your tax preparer to determine whether the sales resulted in a capital gain and,
if so, the amount of the tax to be paid. Be sure to keep your regular account
statements; the information they contain will be essential in calculating the
amount of your capital gains.
"Buying a dividend." If you buy shares just before a Fund deducts a
distribution from its NAV, you will pay the full price for the shares and then
receive a portion of the price back in the form of a taxable distribution.
There are tax requirements that all funds must follow in order to avoid federal
taxation. In its effort to adhere to these requirements, a Fund may have to
limit its investment activity in some types of instruments.
Transaction Details
Each Fund is open for business each day the New York Stock Exchange (NYSE) is
open. PIC calculates each Fund's NAV as of the close of business of the NYSE,
normally 4 p.m. Eastern time.
Each Fund's NAV is the value of a single share. The NAV is computed by adding
the value of a Fund's share of investments held by the Portfolio in which it
invests, cash, and other assets, subtracting its liabilities and then dividing
the result by the number of shares outstanding. The NAV is also the redemption
price (price to sell one share).
Each Fund's assets are valued primarily on the basis of market quotations. If
quotations are not readily available, assets are valued by a method that the
Board of Trustees believes accurately reflects fair value.
When you sign your account application, you will be asked to certify that your
Social Security or taxpayer identification number is correct and that you are
not subject to 31% withholding for failing to report income to the IRS. If you
violate IRS regulations, the IRS can require a Fund to withhold 31% of your
taxable distributions and redemptions.
You may initiate many transactions by telephone. PIC may only be liable for
losses resulting from unauthorized transactions if it does not follow reasonable
procedures designed to verify the identity of the caller. PIC will request
personalized security codes or other information, and may also record calls. You
should verify the accuracy of your 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
18
<PAGE>
___. Purchase orders may be refused if, in PIC's opinion, they would disrupt
management of the Fund.
When you place an order to buy shares, your order will be processed at the next
NAV calculated after your order is received and accepted. Note the following:
* All of your purchases must be made in U.S. dollars, and checks must be drawn
on U.S. banks.
* PIC does not accept cash or third party checks.
* When making a purchase with more than one check, each check must have a value
of at least $50.
* Each Fund reserves the right to limit the number of checks processed at one
time.
* If your check does not clear, your purchase will be canceled and you could be
liable for any losses or fees a Fund or its transfer agent has incurred.
To avoid the collection period associated with check purchases, consider buying
shares by bank wire, U.S. Postal money order, U.S. Treasury check, Federal
Reserve check, or direct deposit instead.
You may buy shares of a Fund or sell them through a broker, who may charge you
a fee for this service. If you invest through a broker or other institution,
read its program materials for any additional service features or fees that may
apply.
Certain financial institutions that have entered into sales agreements with PIC
may enter confirmed purchase orders on behalf of customers by phone, with
payment to follow no later than the time when the Funds are priced on the
following business day. If payment is not received by that time, the financial
institution could be held liable for resulting fees or losses.
When you place an order to sell shares, your shares will be sold at the next
NAV calculated after your request is received and accepted. Note the following:
* Normally, redemption proceeds will be mailed to you on the next business day,
but if making immediate payment could adversely affect a 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 than $1,000. It is expected that accounts will be
valued on the second Friday in November of each year. Accounts opened after
September 30 will not be subject to the fee for that year. The fee, which is
payable to the transfer agent, is designed to offset in part the relatively
higher cost of servicing smaller accounts.
* PIC also reserves the right to redeem the shares and close your account if it
has been reduced to a value of less than $1,000 as a result of a redemption or
transfer. PIC will give you 30 days' prior notice of its intention to close your
account.
Exchange Restrictions
As a shareholder, you have the privilege of exchanging shares of a Fund for
shares of other Provident Investment Counsel Funds. However, you should note the
following:
* The Fund you are exchanging into must be registered for sale in your state.
* You may only exchange between accounts that are registered in the same name,
address, and taxpayer identification number.
19
<PAGE>
* Before exchanging into a Fund, read its prospectus.
* Exchanges may have tax consequences for you.
* Because excessive trading can hurt Fund performance and shareholders, each
Fund reserves the right to temporarily or permanently terminate the exchange
privilege of any investor who makes more than four exchanges out of a Fund per
calendar year. Accounts under common ownership or control, including accounts
with the same taxpayer identification number, will be counted together for the
purposes of the four exchange limit.
* The exchange limit may be modified for accounts in certain institutional
retirement plans to conform to plan exchange limits and Department of Labor
regulations. See your plan materials for further information.
* Each Fund reserves the right to refuse exchange purchases by any person or
group if, in PIC's judgment, a Portfolio would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
* Your exchanges may be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of a Portfolio's assets. In
particular, a pattern of exchanges that coincides with a "market timing"
strategy may be disruptive to a Portfolio.
Although each Fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time. The
Funds reserve the right to terminate or modify the exchange privilege in the
future.
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
Investment Company Act of 1940 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
20
<PAGE>
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 2, 1998, the Growth Fund was controlled by Vanguard Fiduciary
Trust Co., Trustee for the benefit of the Memorial Health Services Plan.
Year 2000 Risk. Like other business organizations around the world, the Funds
could be adversely affected if the computer systems used by their investment
advisor 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." The Funds' advisor 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.
21
<PAGE>
PIC INVESTMENT TRUST
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 prospectus of the Provident Investment
Counsel Growth Fund, Provident Investment Counsel Mid Cap Fund and Provident
Investment Counsel 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 Pinnacle Balanced Fund, Provident
Investment Counsel Pinnacle Growth Fund, Provident Investment Counsel Pinnacle
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 Growth Fund (the "Growth Fund") invests
in the PIC Growth Portfolio; the Provident Investment Counsel Mid Cap Fund (the
"Mid Cap Fund") invests in the PIC Mid Cap Portfolio and the Provident
Investment Counsel Small Company Growth Fund (the "Small Company Growth Fund")
invests in the PIC Small Cap Portfolio. (In this SAI, the Growth Fund, the Mid
Cap Fund and the Small Company Growth Fund may be referred to as the "Funds",
and the 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.
TABLE OF CONTENTS
Cross-reference to page in
in the prospectus of the Provident
Investment Counsel
Funds
Investment Objective and Policies B-
The Growth Fund ............... B-
The Mid Cap Fund............... B-
The Small Company 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................... B-
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-
B-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Growth Fund
The investment objective of the Growth Fund is to provide long-term growth
of capital. There is no assurance that the Growth Fund will achieve its
objective. The Growth Fund will attempt to achieve its objective by investing
all of its assets in shares of the PIC Growth Portfolio. The Growth Portfolio is
a diversified open-end management investment company having the same investment
objective as the Growth Fund. The discussion below supplements information
contained in the prospectus as to investment policies of the Growth Fund and the
Growth Portfolio. Because the investment characteristics of the Growth Fund will
correspond directly to those of the Growth Portfolio, the discussion refers to
those investments and techniques employed by the Growth Portfolio.
The Mid Cap Fund
The investment objective of the Mid Cap Fund is to provide long-term growth
of capital. There is no assurance that the Mid Cap Fund will achieve its
objective. The 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
is a diversified open-end management investment company having the same
investment objective as the Mid Cap Fund. The discussion below supplements
information contained in the prospectus as to investment policies of the Mid Cap
Fund and the Mid Cap Portfolio. Because the investment characteristics of the
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 Small Company Growth Fund
The investment objective of the Small Company Growth Fund is to provide
capital appreciation. There is no assurance that Fund will achieve its
objective. The 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 is a diversified open-end management investment company
having the same investment objective as the Small Company Growth Fund. The
discussion below supplements information contained in the prospectus as to
investment policies of the Small Company Growth Fund and the Small Cap
Portfolio. Because the investment characteristics of the Small Company Growth
Fund will correspond directly to those of the Small Cap Portfolio, the
discussion refers to those investments and techniques employed by the Small Cap
Portfolio.
Investment Restrictions
The Trust (on behalf of the Funds) and the Portfolios have adopted the
following restrictions as fundamental policies, which may not be changed without
the favorable vote of the holders of a "majority," as defined in the Investment
Company Act of 1940 (the "1940 Act"), of the outstanding voting securities of a
Fund or a Portfolio. Under the 1940 Act, the "vote of the holders of a majority
of the outstanding voting securities" means the vote of the holders of the
lesser of (i) 67% of the shares of a Fund or a Portfolio represented at a
meeting at which the holders of more than 50% of its outstanding shares are
represented or (ii) more than 50% of the outstanding shares of a Fund or a
Portfolio. 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
B-2
<PAGE>
temporary or emergency purposes or for the clearance of transactions in amounts
not exceeding 10% of its total assets (not including the amount borrowed),
provided that it will not make investments while borrowings in excess of 5% of
the value of its total assets are outstanding;
2. Make short sales of securities or maintain a short position, except for
short sales against the box;
3. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of transactions;
4. Write put or call options, except that the Small Cap Portfolio may write
covered call and cash secured put options and purchase call and put options on
stocks and stock indices;
5. Act as underwriter (except to the extent a Fund or Portfolio may be
deemed to be an underwriter in connection with the sale of securities in its
investment portfolio);
6. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities), except that any of the Funds may invest more than 25% of
their assets in shares of a Portfolio;
7. Purchase or sell real estate or interests in real estate or real estate
limited partnerships (although any Portfolio may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate);
8. Purchase or sell commodities or commodity futures contracts, except that
any Portfolio may purchase and sell stock index futures contracts;
9. Invest in oil and gas limited partnerships or oil, gas or mineral
leases;
10. Make loans (except for purchases of debt securities consistent with the
investment policies of the Funds and the Portfolios and except for repurchase
agreements); or
11. Make investments for the purpose of exercising control or management.
The Portfolios observe the following restrictions as a matter of operating
but not fundamental policy, pursuant to positions taken by federal and state
regulatory authorities:
No Portfolio may:
1. Purchase any security if as a result the Portfolio would then hold more
than 10% of any class of voting securities of an issuer (taking all common stock
issues as a single class, all preferred stock issues as a single class, and all
debt issues as a single class);
2. Invest 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
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agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased security. The purchaser maintains
custody of the underlying securities prior to their repurchase; thus the
obligation of the bank or dealer to pay the repurchase price on the date agreed
to is, in effect, secured by such underlying securities. If the value of such
securities is less than the repurchase price, the other party to the agreement
will provide additional collateral so that at all times the collateral is at
least equal to the repurchase price.
Although repurchase agreements carry certain risks not associated with
direct investments in securities, the Funds and the Portfolios intend to enter
into repurchase agreements only with banks and dealers believed by the Advisor
to present minimum credit risks in accordance with guidelines established by the
Boards of Trustees. The Advisor will review and monitor the creditworthiness of
such institutions under the Boards' general supervision. To the extent that the
proceeds from any sale of collateral upon a default in the obligation to
repurchase were less than the repurchase price, the purchaser would suffer a
loss. If the other party to the repurchase agreement petitions for bankruptcy or
otherwise becomes subject to bankruptcy or other liquidation proceedings, there
might be restrictions on the purchaser's ability to sell the collateral and the
purchaser could suffer a loss. However, with respect to financial institutions
whose bankruptcy or liquidation proceedings are subject to the U.S. Bankruptcy
Code, the Funds and the Portfolios intend to comply with provisions under such
Code that would allow them immediately to resell the collateral.
Options Activities
The Small Cap Portfolio may write call options on stocks and stock indices,
if the calls are "covered" throughout the life of the option. A call is
"covered" if the Portfolio owns the optioned securities. When the Small Cap
Portfolio writes a call, it receives a premium and gives the purchaser the right
to buy the underlying security at any time during the call period at a fixed
exercise price regardless of market price changes during the call period. If the
call is exercised, the Portfolio will forgo any gain from an increase in the
market price of the underlying security over the exercise price.
The Small Cap Portfolio may purchase a call on securities to effect a
"closing purchase transaction," which is the purchase of a call covering the
same underlying security and having the same exercise price and expiration date
as a call previously written by the Portfolio on which it wishes to terminate
its obligation. If the Portfolio is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the call
previously written by the Portfolio expires (or until the call is exercised and
the Portfolio delivers the underlying security).
The Small Cap Portfolio also may write and purchase put options ("puts").
When the Portfolio writes a put, it receives a premium and gives the purchaser
of the put the right to sell the underlying security to the Portfolio at the
exercise price at any time during the option period. When the Portfolio
purchases a put, it pays a premium in return for the right to sell the
underlying security at the exercise price at any time during the option period.
If any put is not exercised or sold, it will become worthless on its expiration
date.
The Portfolio's option positions may be closed out only on an exchange
which provides a secondary market for options of the same series, but there can
be no assurance that a liquid secondary market will exist at a given time for
any particular option.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation has the authority to
permit other, generally comparable securities to be delivered in fulfillment of
option exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
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Futures Contracts
The Portfolios may buy and sell stock index futures contracts. A futures
contract is an agreement between two parties to buy and sell a security or an
index for a set price on a future date. Futures contracts are traded on
designated "contract markets" which, through their clearing corporations,
guarantee performance of the contracts.
Entering into a futures contract for the sale of securities has an effect
similar to the actual sale of securities, although sale of the futures contract
might be accomplished more easily and quickly. Entering into futures contracts
for the purchase of securities has an effect similar to the actual purchase of
the underlying securities, but permits the continued holding of securities other
than the underlying securities.
A stock index futures contract may be used as a hedge by any of the
Portfolios with regard to market risk as distinguished from risk relating to a
specific security. A stock index futures contract does not require the physical
delivery of securities, but merely provides for profits and losses resulting
from changes in the market value of the contract to be credited or debited at
the close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash settlement occurs.
Changes in the market value of a particular stock index futures contract
reflects changes in the specified index of equity securities on which the future
is based.
There are several risks in connection with the use of futures contracts. In
the event of an imperfect correlation between the futures contract and the
portfolio position which is intended to be protected, the desired protection may
not be obtained and the Portfolio may be exposed to risk of loss. Further,
unanticipated changes in interest rates or stock price movements may result in a
poorer overall performance for the Portfolio than if it had not entered into any
futures on stock indexes.
In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
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 the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when it
anticipates the receipt in a foreign currency of dividend or interest payments
on a security that it holds, the Portfolio may desire to "lock in" the U.S.
dollar price of the security or the U.S. dollar equivalent of the payment,
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by entering into a forward contract for the purchase or sale, for a fixed amount
of U.S. dollars or foreign currency, of the amount of foreign currency involved
in the underlying transaction. The Portfolio will thereby be able to protect
itself against a possible loss resulting from an adverse change in the
relationship between the currency exchange rates during the period between the
date on which the security is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Portfolio to purchase additional foreign currency on the spot (i.e., cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Portfolio is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency the Portfolio is
obligated to deliver. The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Portfolio to sustain losses on these contracts and transaction costs. The
Portfolios may enter into forward contracts or maintain a net exposure to such
contracts only if (1) the consummation of the contracts would not obligate the
Portfolio to deliver an amount of foreign currency in excess of the value of the
Portfolio's securities or other assets denominated in that currency or (2) the
Portfolio maintains a segregated account as described below. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the longer term investment decisions made with regard to
overall diversification strategies. However, the Advisor believes it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of the Portfolio will be served.
At or before the maturity date of a forward contract that requires a
Portfolio to sell a currency, the Portfolio may either sell a security and use
the sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Portfolio will obtain, on the same maturity date,
the same amount of the currency that it is obligated to deliver. Similarly, a
Portfolio may close out a forward contract requiring it to purchase a specified
currency by entering into a second contract entitling it to sell the same amount
of the same currency on the maturity date of the first contract. The Portfolio
would realize a gain or loss as a result of entering into such an offsetting
forward contract under either circumstance to the extent the exchange rate
between the currencies involved moved between the execution dates of the first
and second contracts.
The cost to the Portfolio of engaging in forward contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are usually
entered into on a principal basis, no fees or commissions are involved. The use
of forward contracts does not eliminate fluctuations in the prices of the
underlying securities the Portfolio owns or intends to acquire, but it does fix
a rate of exchange in advance. In addition, although forward contracts limit the
risk of loss due to a decline in the value of the hedged currencies, at the same
time they limit any potential gain that might result should the value of the
currencies increase.
Segregated Accounts
When a Portfolio writes an option, sells a futures contract or enters into
a forward foreign currency exchange contract, it will establish a segregated
account with its custodian bank, or a securities depository acting for it, to
hold assets of the Portfolio in order to insure that the Portfolio will be able
to meet its obligations. In the case of a call that has been written, the
securities covering the option will be maintained in the segregated
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account and cannot be sold by the Portfolio until released. In the case of a put
that has been written or a forward foreign currency contract that has been
entered into, liquid securities will be maintained in the segregated account in
an amount sufficient to meet the Portfolio's obligations pursuant to the put or
forward contract. In the case of a futures contract, 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.
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
Trustee Emeritus 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
150 N. Orange Grove Blvd. Avery Dennison Corporation
Pasadena, CA 91101 (pressure 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
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Pasadena, CA 91101 of Lawry's Foods, Inc.
Bernard J. Johnson (age 74), Retired; formerly Chairman
Trustee Emeritus 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. Dirrector 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
Compensation
Name of Trustee Total 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) 23,713
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 Growth Fund as of September 2, 1998:
Vanguard Fidicuary Trust Co. Trustee - 30.50%
FBO Memorial Health Services Plan 91582
DTD 12/31/97
Attn: Specialized Services
P. O. Box 2600 VM 421
Valley Forge, PA 19482
Milbank Tweed Hadley & McCloy - 6.96%
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Prtners Retirement Plan
3 Chase Metrotech Center 5th Floor
Brooklyn, NY 11245
The following persons, to the knowledge of the Trust, owned more than 5% of
the outstanding shares of the Small Company Growth Fund as of September 2, 1998:
Wilmington Trust Trustee - 13.45%
for A/C 42517-5
FBO Integrated Device Technology 401K
DTD 9/1/97
c/o Mutual Funds
1100 N. Market Street
Wilmington, DE 19890
Pell Rudman Trust Co. NA - 13.89%
Nominee Account
Attn: Mutual Funds
100 Federal Street 37th Floor
Boston, MA 02110
UMBSC & Co. - 8.89%
FBO Interstate Brands Corp.
Moderate Growth Acct.
A/C 340419142
P. O. Box 419260
Kansas City, MO 64141-6260
Charles Schwab & Co., Inc. - 12.00%
Special Custody Account for Ben of Cust
Reinvestment Account
101 Montgomery Street
San Francisco, CA 94104-4122
UMBSC & Co. - 14.54%
FBO Interstate Brands Corp.
Aggressive Growth Account
A/C 340419159
P. O. Box 419260
Kansas City, MO 64141-6260
Strafe & Co. - 10.31%
FAO 7008374600
PO Box 160
Westerville, OH 43086-0160
Charles Schwab & Co., Inc. - 13.42%
Special Custody Acct for Ben of Cust
Cash Account
101 Montgomery Street
San Francisco, CA 19104-4122
As of September 2, 1998, shares of Growth and Small Company Growth 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
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and place orders to buy, sell or hold particular securities. In addition to the
fees payable to the Advisor and the Administrator, the Portfolios and the Trust
are responsible for their operating expenses, including: (i) interest and taxes;
(ii) brokerage commissions; (iii) insurance premiums; (iv) compensation and
expenses of Trustees other than those affiliated with the Advisor or the
Administrator; (v) legal and audit expenses; (vi) fees and expenses of the
custodian, shareholder service and transfer agents; (vii) fees and expenses for
registration or qualification of the Trust and its shares under federal or state
securities laws; (viii) expenses of preparing, printing and mailing reports and
notices and proxy material to shareholders; (ix) other expenses incidental to
holding any shareholder meetings; (x) dues or assessments of or contributions to
the Investment Company Institute or any successor; (xi) such non-recurring
expenses as may arise, including litigation affecting the Trust or the
Portfolios and the legal obligations with respect to which the Trust or the
Portfolios may have to indemnify their officers and Trustees; and (xii)
amortization of organization costs.
The Advisor is an indirect, wholly-owned subsidiary of United Asset
Management Corporation ("UAM"), a New York Stock Exchange listed holding company
principally engaged, through affiliated firms, in providing institutional
investment management services. On February 15, 1995, UAM acquired the assets of
the Advisor's predecessor, which had the same name as the Advisor; on that date
the Advisor entered into new Advisory Agreements having the same terms as the
previous Advisory Agreements with the Portfolios. The term "Advisor" also refers
to the Advisor's predecessor.
For its services, the Advisor receives a fee from the Growth and Small Cap
Portfolios at an annual rate of 0.80% of their average net assets; and will
receive a fee from the Mid Cap Portfolio at an annual rate of 0.70% of its
average net assets. During the three fiscal years ended October 31, 1997, 1996,
and 1995, the Advisor earned fees pursuant to the Advisory Agreements as
follows: 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 Growth and Small Cap Portfolios to 1.00% of average net assets.
As a result, the Advisor waived all or a portion of its fee and/or reimbursed
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 waived all or a portion of
its fee and/or reimbursed 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. The Mid Cap
Portfolio was not in existence prior to 1998.
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
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of 0.20% of the average net assets of each series of the Trust. During the three
fiscal years ended October 31, 1997, 1996 and 1995, the Advisor earned fees
pursuant to the Administration Agreements from the Growth Fund (formerly the
Institutional Growth Fund) of $207,782, $236,786 and $219,070, respectively.
During the fiscal years ended October 31, 1997 and 1996, the Advisor earned fees
of $45,245 and $3,105, respectively, from the Small Company Growth Fund
(formerly the PIC Institutional Small Cap Growth Fund). (The Fund was not in
existence in prior years.) However, the Advisor has agreed to limit the
aggregate expenses of the Growth Fund to 1.25% of average net assets and the
expenses of the Small Company Growth Fund to 1.45%. As a result, the Advisor
waived all or a portion of its fee and/or reimbursed expenses of the Growth Fund
that exceeded these expense limits in the amounts of $110,144, $55,034 and
$56,326 during the fiscal years ended October 31, 1997, 1996 and 1995,
respectively. In addition, the Advisor waived all or a portion of its fee and/or
reimbursed expenses of the Small Company Growth Fund that exceeded these expense
limits in the amounts of $35,623 and $38,198 for the fiscal years ended October
31, 1997 and 1996, respectively.
The Advisor reserves the right to be reimbursed for any waiver of its fee
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 three years ended October 31, 1997, 1996 and 1995, the
Growth Fund paid the Administrator fees in the amount of $15,000. During the
fiscal year ended October 31, 1997 and 1996, the Small Company Growth Fund paid
the Administrator fees in the amount of $15,000 and $4,999, respectively.
During the fiscal years ended October 31, 1997, 1996 and 1995, the Growth
Portfolio paid the Administrator fees in the amounts 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 amounts of
$190,721, $174,469 and $96,687, respectively.
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, 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
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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 PIC Growth Portfolio were $148,938 and
$243,060, respectively. During the fiscal year ended October 31, 1997, the PIC
Growth Portfolio paid $110,376 in brokerage commission. 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 year ended
October 31, 1996 and 1995, the amount of brokerage commissions paid by the PIC
Small Cap Portfolio were $115,709 and $59,282, respectively. During the fiscal
year ended October 31, 1997, the PIC 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.
PORTFOLIO TURNOVER
Although the Portfolios 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." The 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 fiscal
year ended October 31, 1997 as opposed to 53.11% for the period June 28, 1996,
the date the Small Company Growth Fund commenced operations, through October 31,
1996. The Advisor expects that the Mid Cap Portfolio's portfolio turnover rate
will 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.
If the Boards of Trustees should determine that it would be detrimental to
the best interests of the remaining shareholders of a Fund to make payment
wholly or partly in cash, the Fund may pay redemption proceeds in whole or in
part by a distribution in kind of securities from the portfolio of the
Portfolios, in compliance with the Trust's election to be governed by Rule 18f-1
under the 1940 Act. Pursuant to Rule 18f-1, the
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Portfolio is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Portfolio during any 90-day period
for any one shareholder. If shares are redeemed in kind, the redeeming
shareholder will likely incur brokerage costs in converting the assets into
cash.
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
The Funds will each be taxed as separate entities under the Internal
Revenue Code of 1986 (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 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
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<PAGE>
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 Taypayer Relief Act of 1997, different maximum tax rates apply to
an individual's net capital gain depending on the individual's holding period
and marginal rate of federal income tax - generally, 28% for gain recognized on
capital assets held for more than one year but not more than 18 months and 20%
(10% for taxpayers in the 15% marginal tax bracket) for gain recognized on
capital assets held for more than 18 months. Pursuant to an Internal Revenue
Service notice, each Fund may divide each net capital gain distribution into a
28% rate gain distribution and a 20% rate gain distribution (in accordance with
the Fund's holding periods for the securities it sold that generated the
distributed gain) and its shareholders must treat those portions accordingly.
Each Fund is required to withhold 31% of all dividends, capital gain
distributions and repurchase proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Each Fund also is required to withhold 31% of
all dividends and capital gain distributions paid to such shareholders who
otherwise are subject to backup withholding.
PERFORMANCE INFORMATION
Total Return
Average annual total return quotations used in a Fund's advertising and
promotional materials are calculated according to the following formula:
P(1 + T)n = ERV
where P equals a hypothetical initial payment of $1000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1000 payment made at the
beginning of the period.
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication. Average annual
total return, or "T" in the above formula, is computed by finding the average
annual compounded rates of return over the period that would equate the initial
amount invested to the ending redeemable value. Average annual total return
assumes the reinvestment of all dividends and distributions.
Yield
Annualized yield quotations used in a Fund's advertising and promotional
materials are calculated by dividing the Fund's interest income for a specified
thirty-day period, net of expenses, by the average number of shares outstanding
during the period, and expressing the result as an annualized percentage
(assuming semi-annual compounding) of the net asset value per share at the end
of the period. Yield quotations are calculated according to the following
formula:
YIELD = 2 [(a-b + 1){6} - 1]
---
cd
where a equals dividends and interest earned during the period; b equals
expenses accrued for the period, net of reimbursements; c equals the average
daily number of shares outstanding during the period that are entitled to
receive dividends and d equals the maximum offering price per share on the last
day of the period.
Except as noted below, in determining net investment income earned during
the period ("a" in the above formula), a Fund calculates interest earned on each
debt obligation held by it during the period by (1) computing the obligation's
yield to maturity, based on the market value of the obligation (including actual
accrued interest) on the last business day of the period or,
B-14
<PAGE>
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 and semi-annual reports to shareholders for the Funds (except
the Mid Cap Fund which has not commenced operations as of the date of this SAI)
for the fiscal year ended October 31, 1997 and the six-month period ended April
30, 1998, respectively, are separate documents supplied with this SAI and the
financial statements, accompanying notes and report of independent accountants
appearing therein are incorporated by reference into this SAI.
APPENDIX
Description of Ratings
B-15
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Moody's Investors Service, Inc.: Corporate Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa---Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
Moody's applies numerical modifiers "1", "2" and "3" to both the Aaa and Aa
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
period of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Standard & Poor's 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 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
B-16
<PAGE>
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-17
<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
(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.
Item 24. Persons Controlled by or under Common Control with Registrant.
As of September 2, 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
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:
C-1
<PAGE>
(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.
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.
C-2
<PAGE>
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
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.
C-3
<PAGE>
(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 Treasurer
2025 E. Financial Way
Glendora, CA 91741
Steven J. Paggioli Vice President and Assistant Secretary
479 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
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
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assist in communications with other shareholders.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement on Form N-1A of PIC Investment Trust to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Pasadena
and State of California on the day of September, 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 September , 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 day of September, 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 September , 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 day of September, 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 September , 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 day of September, 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 September , 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 day of September, 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 September , 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.B7 Custodian Agreement
99.B10 Consent of Accountants
27.2 FDS-Growth Fund
27.5 FDS-Small Company Growth Fund
CUSTODIAN SERVICES AGREEMENT TERMS AND CONDITIONS
This Agreement is made as of December 31, 1997 by and between PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC Bank"), and PIC
MIDCAP PORTFOLIO, a Delaware business trust (the "Fund").
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund wishes to
retain PNC Bank to provide custodian services, and PNC Bank wishes to furnish
custodian services, either directly or though an affiliate or affiliates, as
more fully described herein.
In consideration of the promises and mutual covenants herein contained, the
parties agree as follows:
1. Definitions.
(a) "Authorized Person". The term "Authorized Person" shall mean any
officer of the Fund and any other person, who is duly authorized by the Fund's
Governing Board, to give Oral and Written Instructions on behalf of the Fund.
Such persons are listed in the Certificate attached hereto as the Authorized
Persons Appendix as such appendix may be amended in writing by the Fund's
Governing Board from time to time.
(b) "Book-Entry System". The term "Book-Entry System" means Federal Reserve
Treasury book-entry system for United States and federal agency securities, its
successor or
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successors, and its nominee or nominees and any book-entry system maintained by
an exchange registered with the SEC under the 1934 Act.
(c) "CFTC". The term "CFTC" shall mean the Commodities Futures Trading
Commission.
(d) "Governing Board". The term "Governing Board" shall mean the Fund's
Board of Directors if the Fund is a corporation or the Fund's Board of Trustees
if the Fund is a trust, or, where duly authorized, a competent committee
thereof.
(e) "Oral Instructions". The term "Oral Instructions" shall mean oral
instructions received by PNC Bank from an Authorized Person or from a person
reasonably believed by PNC Bank to be an Authorized Person.
(f) "PNC Bank". The term "PNC Bank" shall mean PNC Bank, National
Association or a subsidiary or affiliate of PNC Bank, National Association.
(g) "SEC". The term "SEC" shall mean the Securities and Exchange
Commission.
(h) "Securities and Commodities Laws". The term shall mean the "1933 Act",
the Securities Act of 1933, as amended, the "1934 Act", the Securities Exchange
Act of 1934, as amended, the "1940 Act", and the "CEA", the Commodities Exchange
Act, as amended.
2
<PAGE>
(i) "Shares". The term "Shares" shall mean the shares of stock of any
series or class of the Fund, or, where appropriate, units of beneficial interest
in a trust where the Fund is organized as a Trust.
(j) "Property". The term "Property" shall mean: (i) any and all securities
and other investment items which the Fund may from time to time deposit, or
cause to be deposited, with Provident or which PNC Bank may from time to time
hold for the Fund;
(ii) All income in respect of any of such securities or other
investment items;
(iii)all proceeds of the sale of any of such securities or investment
items; and
(iv) all proceeds of the sale of securities issued by the Fund, which
are received by PNC Bank from time to time, from or on behalf of
the Fund.
(k) "Written Instructions". The term "Written Instructions" shall mean
written instructions signed by one Authorized Person and received by PNC Bank.
The instructions may be delivered by hand, mail, tested telegram, cable, telex
or facsimile sending device.
2. Appointment. The Fund hereby appoints PNC Bank to provide custodian
services, and PNC Bank accepts such appointment and agrees to furnish such
services.
3
<PAGE>
3. Delivery of Documents. The Fund has provided or, where applicable, will
provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Governing Board, approving the appointment of PNC Bank or
its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or agreements;
(e) a copy of the Fund's administration agreements if PFPC is not
providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect of
the Fund; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4. Compliance with Government Rules and Regulations. PNC Bank undertakes to
comply with all applicable requirements of the 1933 Act, the 1934 Act, the 1940
Act, and the CEA, and any laws, rules and regulations of state and federal
governmental authorities having jurisdiction with respect to all duties to be
performed by PNC Bank hereunder. Except as specifically set forth herein, PNC
Bank assumes no responsibility for such compliance by the Fund.
5. Instructions. Unless otherwise provided in this Agreement, PNC Bank
shall act only upon Oral and Written Instructions. PNC Bank shall be entitled to
rely upon any Oral
4
<PAGE>
and Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PNC Bank to be an Authorized Person) pursuant to this
Agreement. PNC Bank may assume that any Oral or Written Instructions received
hereunder are not in any way inconsistent with the provisions of organizational
documents of the Fund or of any vote, resolution or proceeding of the Fund's
Governing Board or of the Fund's shareholders.
The Fund agrees to forward to PNC Bank Written Instructions confirming Oral
Instructions so that PNC Bank receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact that
such confirming Written Instructions are not received by PNC Bank shall in no
way invalidate the transactions or enforceability of the transactions authorized
by the Oral Instructions.
The Fund further agrees that PNC Bank shall incur no liability to the Fund
in acting upon Oral or Written Instructions provided such instructions
reasonably appear to have been received from an Authorized Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PNC Bank is in doubt as to any action it should
or should not take, PNC Bank may request directions or advice, including Oral or
Written Instructions, from the Fund.
5
<PAGE>
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any questions of
law pertaining to any action it should or should not take, PNC Bank may request
advice at its own cost from such counsel of its own choosing (who may be counsel
for the Fund, the Fund's advisor or PNC Bank, at the option of PNC Bank).
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral or Written Instructions PNC Bank receives from the Fund, and the
advice it receives from counsel, PNC Bank shall be entitled to rely upon and
follow the advice of counsel.
(d) Protection of PNC Bank. PNC Bank shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which PNC Bank
believes, in good faith, to be consistent with those directions, advice or Oral
or Written Instructions.
Nothing in this paragraph shall be construed so as to impose an obligation
upon PNC Bank (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PNC Bank's properly taking or not taking
such action.
7. Records. The books and records pertaining to the Fund,
6
<PAGE>
which are in the possession of PNC Bank, shall be the property of the Fund. Such
books and records shall be prepared and maintained as required by the 1940 Act
and other applicable securities laws, rules and regulations. The Fund, or the
Fund's authorized representatives, shall have access to such books and records
at all times during PNC Bank's normal business hours. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided by
PNC Bank to the Fund or to an authorized representative of the Fund, at the
Fund's expense.
8. Confidentiality. PNC Bank agrees to keep confidential all records of the
Fund and information relative to the Fund and its Shareholders (past, present
and potential), unless the release of such records or information is otherwise
consented to, in writing, by the Fund. The Fund further agrees that, should PNC
Bank be required to provide such information or records to duly constituted
authorities (who may institute civil or criminal contempt proceedings for
failure to comply), PNC Bank shall not be required to seek the Fund's consent
prior to disclosing such information; provided that PNC Bank gives the Fund
prior written notice of the provision of such information and records.
9. Cooperation with Accountants. PNC Bank shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to ensure that the necessary
information is made
7
<PAGE>
available to such accountants for the expression of their opinion, as required
by the Fund.
10. Disaster Recovery. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provision for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but shall have no liability with respect thereto.
11. Compensation. As compensation for custody services rendered by PNC Bank
during the term of this Agreement, the Fund will pay to PNC Bank a fee or fees
as may be agreed to in writing from time to time by the Fund and PNC Bank.
12. Indemnification. The Fund agrees to indemnify and hold harmless PNC
Bank and its nominees from all taxes, charges, expenses, assessment, claims and
liabilities (including, without limitation, liabilities arising under the 1933
Act, the 1934 Act, the 1940 Act, the CEA, and any state and foreign securities
and blue sky laws, and amendments thereto, and expenses, including (without
limitation) attorneys' fees and disbursements, arising directly or indirectly
from any action which PNC Bank takes or does not take (i) at the request or on
the direction of or in reliance on the advice of the Fund or (ii) upon Oral or
Written
8
<PAGE>
Instructions. Neither PNC Bank, nor any of its nominees, shall be indemnified
against any liability to the Fund or to its shareholders (or any expenses
incident to such liability) arising out of PNC Bank's or its nominees' own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under this Agreement or PNC Bank's own negligent failure to
perform its duties under this Agreement.
13. Responsibility of PNC Bank. PNC Bank shall be under no duty to take any
action on behalf of the Fund except as specifically set forth herein or as may
be specifically agreed to by PNC Bank, in writing. PNC Bank shall be obligated
to exercise care and diligence in the performance of its duties hereunder, to
act in good faith and to use its best efforts, within reasonable limits, in
performing Services provided for under this Agreement. PNC Bank shall be
responsible for its own or its nominees' own willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties and obligations under this
Agreement or PNC Bank's own grossly negligent failure to perform its duties
under this Agreement.
Without limiting the generality of the foregoing or of any other provision
of this Agreement, PNC Bank, in connection with its duties under this Agreement,
shall not be under any duty or obligation to inquire into and shall not be
liable for (a) the validity or invalidity or authority or lack thereof of any
Oral
9
<PAGE>
or Written Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, and which PNC Bank reasonably
believes to be genuine; or (b) delays or errors or loss of data occurring by
reason of circumstances beyond PNC Bank's control, including acts of civil or
military authority, national emergencies, fire, flood or catastrophe, acts of
God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
Notwithstanding anything in this Agreement to the contrary, PNC Bank shall
have no liability to the Fund for any consequential, special or indirect losses
or damages which the Fund may incur or suffer by or as a consequence of PNC
Bank's performance of the services provided hereunder, whether or not the
likelihood of such losses or damages was known by PNC Bank.
14. Description of Services.
(a) Delivery of the Property. The Fund will deliver or arrange for delivery
to PNC Bank, all the property it owns, including cash received as a result of
the distribution of its Shares, during the period that is set forth in this
Agreement. PNC Bank will not be responsible for such property until actual
receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon Written
Instructions, shall open and maintain separate account(s) in the Fund's name
using all cash received
10
<PAGE>
from or for the account of the Fund, subject to the terms of this Agreement. In
addition, upon Written Instructions, PNC Bank shall open separate custodial
accounts for each separate series, portfolio or class of the Fund and shall hold
in such account(s) all cash received from or for the accounts of the Fund
specifically designated to each separate series, portfolio or class. PNC Bank
shall make cash payments from or for the account of the Fund only for:
(i) purchases of securities in the name of the Fund or PNC Bank or
PNC Bank's nominee as provided in sub-paragraph j and for which
PNC Bank has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund delivered to PNC
Bank;
(iii)payment of, subject to Written Instructions, interest, taxes,
administration, accounting, distribution, advisory, management
fees or similar expenses which are to be borne by the Fund;
(iv) payment to, subject to receipt of Written Instructions, the
Fund's transfer agent, as agent for the shareholders, an amount
equal to the amount of dividends and distributions stated in the
Written Instructions to be distributed in cash by the transfer
agent to shareholders, or, in lieu of paying the Fund's transfer
agent, PNC Bank may arrange for the direct payment of cash
dividends and distributions to shareholders in accordance with
procedures mutually agreed upon from time to time by and among
the Fund, PNC Bank and the Fund's
11
<PAGE>
transfer agent.
(v) payments, upon receipt Written Instructions, in connection with
the conversion, exchange or surrender of securities owned or
subscribed to by the Fund and held by or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with respect to
securities sold short;
(vii)payments made to a sub-custodian pursuant to provisions in
sub-paragraph c of this Paragraph 14; and
(viii) payments, upon Written Instructions made for other proper Fund
purposes.
PNC Bank is hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received as custodian for the account of
the Fund.
(c) Receipt of Securities.
(i) PNC Bank shall hold all securities received by it for the account
of the Fund in a separate account that physically segregates such
securities from those of any other persons, firms or
corporations. All such securities shall be held or disposed of
only upon Written Instructions of the Fund pursuant to the terms
of this Agreement. PNC Bank shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any such
securities or investment, except upon the express terms of this
Agreement and upon Written Instructions, accompanied by a
certified resolution of the Fund's Governing Board, authorizing
the transaction. In no case may any member of the Fund's Board of
Directors/Trustees, or any officer,
12
<PAGE>
employee or agent of the Fund withdraw any securities.
At PNC Bank's own expense and for its own convenience, PNC Bank
may enter into sub- custodian agreements with other United States
banks or trust companies to perform duties described in this
sub-paragraph c. Such bank or trust company shall have an
aggregate capital, surplus and undivided profits, according to
its last published report, of at least one million dollars
($1,000,000), if it is a subsidiary or affiliate of PNC Bank, or
at least twenty million dollars ($20,000,000) if such bank or
trust company is not a subsidiary or affiliate of PNC Bank. In
addition, such bank or trust company must be qualified to act as
custodian and agree to comply with the relevant provisions of the
1940 Act and other applicable rules and regulations. Any such
arrangement will not be entered into without prior written notice
to the Fund.
PNC Bank shall remain responsible for the performance of all of
its duties as described in this Agreement and shall hold the Fund
and the Money Market Series harmless from its own acts or
omissions, under the standards of care provided for herein, or
the acts and omissions of any sub-custodian chosen by PNC Bank
under the terms of this sub-paragraph c. (d) Transactions
Requiring Instructions. Upon receipt of Oral or Written
Instructions and not otherwise, PNC Bank, directly or through the
use of the Book-Entry System, shall:
(i) deliver any securities held for the Fund against the receipt of
payment for the sale of such securities;
(ii) execute and deliver to such persons as may be designated in such
Oral or Written Instructions, proxies, consents, authorizations,
and any other instruments whereby the authority of the
13
<PAGE>
Fund as owner of any securities may be exercised;
(iii)deliver any securities to the issuer thereof, or its agent, when
such securities are called, redeemed, retired or otherwise become
payable; provided that, in any such case, the cash or other
consideration is to be delivered to PNC Bank;
(iv) deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, tender offer, merger,
consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;
(v) deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection
with the reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, and
receive and hold under the terms of this Agreement such
certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(vi) make such transfer or exchanges of the assets of the Fund and
take such other steps as shall be stated in said Oral or Written
Instructions to be for the purpose of effectuating a duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
(vii)release securities belonging to the Fund to any bank or trust
company for the purpose of a pledge or hypothecation to secure
any loan incurred by the Fund; provided, however, that securities
shall be released only upon payment to PNC Bank of the monies
borrowed, except that in cases where additional
14
<PAGE>
collateral is required to secure a borrowing already made subject
to proper prior authorization, further securities may be released
for that purpose; and repay such loan upon redelivery to it of
the securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the loan;
(viii) release and deliver securities owned by the Fund in connection
with any repurchase agreement entered into on behalf of the Fund,
but only on receipt of payment therefor; and pay out moneys of
the Fund in connection with such repurchase agreements, but only
upon the delivery of the securities;
(ix) release and deliver or exchange securities owned by the Fund in
connection with any conversion of such securities, pursuant to
their terms, into other securities;
(x) release and deliver securities owned by the fund for the purpose
of redeeming in kind shares of the Fund upon delivery thereof to
PNC Bank; and
(xi) release and deliver or exchange securities owned by the Fund for
other corporate purposes.
PNC Bank must also receive a certified resolution describing the
nature of the corporate purpose and the name and address of the
person(s) to whom delivery shall be made when such action is
pursuant to sub-paragraph d.
(e) Use of Book-Entry System. The Fund shall deliver to PNC Bank certified
resolutions of the Fund's Governing Board approving, authorizing and instructing
PNC Bank on a continuous and on-going basis, to deposit in the Book-Entry System
all
15
<PAGE>
securities belonging to the Fund eligible for deposit therein and to utilize the
Book-Entry System to the extent possible in connection with settlements of
purchases and sales of securities by the Fund, and deliveries and returns of
securities loaned, subject to repurchase agreements or used as collateral in
connection with borrowings. PNC Bank shall continue to perform such duties until
it receives Written or Oral Instructions authorizing contrary actions(s). To
administer the Book-Entry System properly, the following provisions shall apply:
(i) With respect to securities of the Fund which are maintained in
the Book-Entry system, established pursuant to this sub-paragraph
e hereof, the records of PNC Bank shall identify by Book-Entry or
otherwise those securities belonging to the Fund. PNC Bank shall
furnish the Fund a detailed statement of the Property held for
the Fund under this Agreement at least monthly and from time to
time and upon written request.
(ii) Securities and any cash of the Fund deposited in the Book-Entry
System will at all times be segregated from any assets and cash
controlled by PNC Bank in other than a fiduciary or custodian
capacity but may be commingled with other assets held in such
capacities. PNC Bank and its sub-custodian, if any, will pay out
money only upon receipt of securities and will deliver securities
only upon the receipt of money.
(iii)All books and records maintained by PNC Bank which relate to the
Fund's participation in the Book-Entry System will at all times
during PNC Bank's
16
<PAGE>
regular business hours be open to the inspection of the Fund's
duly authorized employees or agents, and the Fund will be
furnished with all information in respect of the services
rendered to it as it may require.
(iv) PNC Bank will provide the Fund with copies of any report obtained
by PNC Bank on the system of internal accounting control of the
Book-Entry System promptly after receipt of such a report by PNC
Bank.
PNC Bank will also provide the Fund with such reports on its own system of
internal control as the Fund may reasonably request from time to time.
(f) Registration of Securities. All Securities held for the Fund which are
issued or issuable only in bearer form, except such securities held in the
Book-Entry System, shall be held by PNC Bank in bearer form; all other
securities held for the Fund may be registered in the name of the Fund; PNC
Bank; the Book-Entry System; a sub-custodian; or any duly appointed nominee(s)
of the Fund, PNC Bank, Book-Entry system or sub-custodian. The Fund reserves the
right to instruct PNC Bank as to the method of registration and safekeeping of
the securities of the Fund. The Fund agrees to furnish to PNC Bank appropriate
instruments to enable PNC Bank to hold or deliver in proper form for transfer,
or to register its registered nominee or in the name of the Book-Entry System,
any securities which it may hold for the account of the Fund and which may from
time to
17
<PAGE>
time be registered in the name of the Fund. PNC Bank shall hold all such
securities which are not held in the Book-Entry System in a separate account for
the Fund in the name of the Fund physically segregated at all times from those
of any other person or persons.
(g) Voting and Other Action. Neither PNC Bank nor its nominee shall vote
any of the securities held pursuant to this Agreement by or for the account of
the Fund, except in accordance with Written Instructions. PNC Bank, directly or
through the use of the Book-Entry System, shall execute in blank and promptly
deliver all notice, proxies, and proxy soliciting materials to the registered
holder of such securities. If the registered holder is not the Fund then Written
or Oral Instructions must designate the person(s) who owns such securities.
(h) Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, PNC Bank is authorized to take the following actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of the Fund, all income,
dividends, distributions, coupons, option premiums, other
payments and similar items, included or to be included in
the Property, and, in addition, promptly advise the Fund of
such receipt and credit such income, as collected, to the
Fund's custodian account;
18
<PAGE>
(B) endorse and deposit for collection, in the name of the Fund,
checks, drafts, or other orders for the payment of money;
(C) receive and hold for the account of the Fund all securities
received as a distribution on the Fund's portfolio
securities as a result of a stock dividend, share split-up
or reorganization, recapitalization, readjustment or other
rearrangement or distribution of rights or similar
securities issued with respect to any portfolio securities
belonging to the Fund held by PNC Bank hereunder;
(D) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed, or
retired, or otherwise become payable on the date such
securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such income
and other payments and the endorsement for collection of
checks, drafts, and other negotiable instruments.
(ii) Miscellaneous Transactions.
(A) PNC Bank is authorized to deliver or cause to be delivered
Property against payment or other consideration or written
receipt therefor in the following cases:
(1) for examination by a broker or dealer selling for the
account of the Fund in accordance with street delivery
custom;
19
<PAGE>
(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
(3) for transfer of securities into the name of the Fund or
PNC Bank or nominee of either, or for exchange of
securities for a different number of bonds,
certificates, or other evidence, representing the same
aggregate face amount or number of units bearing the
same interest rate, maturity date and call provisions,
if any; provided that, in any such case, the new
securities are to be delivered to PNC Bank.
(B) Unless and until PNC Bank receives Oral or Written
Instructions to the contrary, PNC Bank shall:
(1) pay all income items held by it which call for payment
upon presentation and hold the cash received by it upon
such payment for the account of the Fund;
(2) collect interest and cash dividends received, with
notice to the Fund, to the account of the Fund;
(3) hold for the account of the Fund all stock dividends,
rights and similar securities issued with respect to
any securities held by us; and
(4) execute as agent on behalf of the Fund all necessary
ownership certificates required by the Internal Revenue
Code or the Income
20
<PAGE>
Tax Regulations of the United States Treasury
Department or under the laws of any State now or
hereafter in effect, inserting the Fund's name on such
certificate as the owner of the securities covered
thereby, to the extent it may lawfully do so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written or Oral Instructions
establish and maintain a segregated accounts(s) on its
records for and on behalf of the Fund. Such account(s) may
be used to transfer cash and securities, including
securities in the Book-Entry System:
(A) for the purposes of compliance by the Fund with the
procedures required by a securities or option exchange,
providing such procedures comply with the 1940 Act and
any releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies;
and
(B) Upon receipt of Written Instructions, for other proper
corporate purposes.
(ii) PNC Bank shall arrange for the establishment of IRA custodian
accounts for such shareholders holding shares through IRA
accounts, in accordance with the Prospectus, the Internal Revenue
Code (including regulations), and with such other procedures as
are mutually agreed upon from time to time by and among the Fund,
PNC Bank and the Fund's transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased securities
upon receipt of Oral or Written Instructions from the fund or its investment
advisor(s) that specify:
21
<PAGE>
(i) the name of the issuer and the title of the securities, including
CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase; and
(vi) the name of the person from whom or the broker through whom the
purchase was made. PNC Bank shall upon receipt of securities
purchased by or for the Fund pay out of the moneys held for the
account of the Fund the total amount payable to the person from
whom or the broker through whom the purchase was made, provided
that the same conforms to the total amount payable as set forth
in such Oral or Written Instructions.
(k) Sales of Securities. PNC Bank shall sell securities upon receipt of
Oral Instructions from the Fund that specify:
(i) the name of the issuer and the title of the security, including
CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and accrued
interest, if any;
(iii) the date of trade, settlement and sale;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to whom the
sale was made;
22
<PAGE>
and
(vii)the location to which the security must be delivered and delivery
deadline, if any.
PNC Bank shall deliver the securities upon receipt of the total amount
payable to the Fund upon such sale, provided that the total amount payable is
the same as was set forth in the Oral or Written Instructions. Subject to the
foregoing, PNC Bank may accept payment in such form as shall be satisfactory to
it, and may deliver securities and arrange for payment in accordance with the
customs prevailing among dealers in securities.
(l) Reports.
(i) PNC Bank shall furnish the Fund the following reports:
(A) such periodic and special reports as the Fund may reasonably
request;
(B) a monthly statement summarizing all transactions and entries
for the account of the Fund, listing the portfolio
securities belonging to the fund with the adjusted average
cost of each issue and the market value at the end of such
month, and stating the cash account of the Fund including
disbursement;
(C) the reports to be furnished to the Fund pursuant to Rule
17f-4; and
(D) such other information as may be agreed upon from time to
time between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any proxy statement,
proxy
23
<PAGE>
material, notice of a call or conversion or similar communication
received by it as custodian of the Property. PNC Bank shall be
under no other obligation to inform the Fund as to such actions
or events.
(m) Collections. All collections of monies or other property in respect, or
which are to become part, of the Property (but not the safekeeping thereof upon
receipt by PNC Bank) shall be at the sole risk of the Fund. If payment is not
received by PNC Bank within a reasonable time after proper demands have been
made, PNC Bank shall notify the Fund in writing, including copies of all demand
letters, any written responses, memoranda of all oral responses and to
telephonic demands thereto, and await instructions from the Fund. PNC Bank shall
not be obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. PNC Bank shall also notify the Fund as soon as
reasonably practicable whenever income due on securities is not collected in due
course.
15. Duration and Termination. This Agreement shall continue until
terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or other
property), PNC Bank shall not deliver cash, securities or other property of the
Fund to the Fund. It may deliver them to a
24
<PAGE>
bank or trust company of PNC Bank's, having an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than
twenty million dollars ($20,000,000), as a custodian for the Fund to be held
under terms similar to those of this Agreement. PNC Bank shall not be required
to make any such delivery or payment until full payment shall have been made to
PNC Bank of all of its fees, compensation, costs and expenses. PNC Bank shall
have a security interest in and shall have a right of setoff against Property in
the Fund's possession as security for the payment of such fees, compensation,
costs and expenses.
16. Notices. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at PNC
Bank's address, Airport Business Center, International Court 2, 200 Stevens
Drive, Philadelphia, Pennsylvania 19113, marked for the attention of the
Custodian Services Department (or its successor) (b) if to the Fund, at the
address of the Fund; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. If notice is sent by confirming telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given immediately. If
notice is sent by first-class mail,
25
<PAGE>
it shall be deemed to have been given five days after it has been mailed. If
notice is sent by messenger, it shall be deemed to have been given on the day it
is delivered.
17. Amendments. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. Delegation. PNC Bank may assign its rights and delegate its duties
hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PNC Bank gives the
Fund thirty (30) days prior written notice; (ii) the delegate agrees with PNC
Bank to comply with all relevant provisions of the 1940 Act; and (iii) PNC Bank
and such delegate promptly provide such information as the Fund may request, and
respond to such questions as the Fund may ask, relative to the delegation,
including (without limitation) the capabilities of the delegate.
19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. 21. Miscellaneous. This Agreement embodies the entire
26
<PAGE>
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one more separate documents their agreement, if
any, with respect to delegated and/or Oral Instructions.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement shall be deemed to be a
contract made in Pennsylvania and governed by Pennsylvania law. If any provision
of this Agreement shall be held or made invalid by a court decision, statute,
rule or otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PNC BANK, NATIONAL ASSOCIATION
By:
Title:
PIC MIDCAP PORTFOLIO
27
<PAGE>
By:
Title:
28
<PAGE>
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. 21 to the Trust's Registration
Statement.
Provident Investment Counsel Growth Fund
Provident Investment Counsel 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 9, 1998
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