PIC INVESTMENT TRUST
497, 1999-03-09
Previous: GILEAD SCIENCES INC, 8-K, 1999-03-09
Next: PIC INVESTMENT TRUST, 497, 1999-03-09



                           PROVIDENT INVESTMENT COUNSEL
                           ----------------------------
                                  MUTUAL FUNDS
                           ----------------------------

                           GROWTH FUND I

                           SMALL COMPANY
                           GROWTH FUND I




                           PROSPECTUS
                           MARCH 1, 1999

The  Securities and Exchange  Commission  has not approved or disapproved  these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.

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.
<PAGE>
CONTENTS

KEY FACTS             3    The Funds at a Glance

                      3    The Principal Risks
                           of Investing in the Funds

                      4    Who May Want to Invest

                      4    Performance

                      6    Fees and Expenses

                      7    Structure of the Funds and
                           the Portfolios

THE FUNDS IN DETAIL   8    More Information About the
                           Funds' Investments, Strategies
                           and Risks

                      9    Management

YOUR ACCOUNT          10   Ways to Set Up Your Account

                      11   Calculation of Net Asset Value

                      11   How to Buy Shares

                      12   How to Sell Shares

                      13   Important Redemption Information

                      14   Investor Services

SHAREHOLDER ACCOUNT   15   Dividends, Capital Gains
POLICIES                   and Taxes

                      15   Distribution Options

                      15   Understanding Distributions

                      15   Transaction Details

                      17   Year 2000 Risk

                      18   Financial Highlights


PROSPECTUS                             2
<PAGE>
KEY FACTS

THE FUNDS AT A GLANCE

MANAGEMENT:  Provident Investment Counsel (PIC), located in Pasadena, California
since 1951,  is the Funds'  Advisor.  At December 31,  1998,  total assets under
PIC's management were over $20 billion.

STRUCTURE: Unlike  most  mutual  funds,  each  Fund's  investment  in  portfolio
securities  is  indirect.  A  Fund  first  invests  all  of  its assets in a PIC
Portfolio.   The  PIC  Portfolio,  in  turn,  acquires  and  manages  individual
securities.  Each Fund has the same investment objective as the PIC Portfolio in
which  is invests. Investors should carefully consider this investment approach.

GROWTH FUND I

GOAL: Long term growth of capital.

STRATEGY: Invests,  through  the  PIC  Growth  Portfolio, in high quality growth
stocks.  In  selecting investments, PIC does an analysis of individual companies
and   invests   in   those   companies   which  are  currently  experiencing  an
above-average rate of earnings growth.

SMALL COMPANY GROWTH FUND I

GOAL: Long term growth of capital.

STRATEGY:  Invests,  through  the PIC  Small  Cap  Portfolio,  mainly  in equity
securities of small-capitalization companies. In selecting investments, PIC does
an analysis of individual  companies  and invests in those  small-capitalization
companies which it believes have the best prospects for future growth.

THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS

MARKET  RISK: The  value  of  each Fund's investments will vary from day to day.
Value  generally  reflects  market conditions, interest rates and other company,
political  and  economic news. In the short term, stock prices can rise and fall
dramatically  in  response  to  these  factors. And stock prices may decline for
extended periods. When you sell your shares, you may lose money.

SMALL COMPANY RISK: The securities of small,  less  well-known  companies may be
more volatile than those of larger  companies.  Small companies may have limited
product  lines,  markets or  financial  resources  and their  management  may be
dependent on a limited number of key individuals.  Securities of these companies
may have limited market liquidity.

                                       3                              PROSPECTUS
<PAGE>
KEY FACTS - CONTINUED

FOREIGN  SECURITIES  RISK: Each  Fund  may  make  limited investments in foreign
companies  which  involves  greater risk than investments in domestic companies.
These  include  risks  relating  to  political and economic factors and currency
fluctuations.

By  itself,  neither  Fund  is a complete, balanced investment plan. And neither
Fund can guarantee that it will reach its goal.

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 greater risk involved in
investing  in  growth  stocks.  The Fund is designed for those investors seeking
capital  appreciation through a diversified portfolio of securities of companies
of all sizes.

The  Small  Company Growth Fund may be appropriate for investors who are willing
to  accept  higher  short-term  risk  in  pursuit  of  potentially above-average
long-term  returns.  The  Fund is designed for those investors who want to focus
on small-capitalization companies.

Investments  in  the  Funds  are  not  bank  deposits  and  are  not  insured or
guaranteed  by the Federal Deposit Insurance Corporation or any other government
agency.

PERFORMANCE

The following  performance  information indicates some of the risks of investing
in the Funds.  The bar charts show how the Funds' total returns have varied from
year to year. The tables show the Funds' average returns over time compared with
broad-based market indices.  This past performance will not necessarily continue
in the future.


PROSPECTUS                             4
<PAGE>
                                 GROWTH FUND I
                        CALENDAR YEAR TOTAL RETURNS (%)

             93        94        95        96        97        98
            ----      ----     -----     -----     -----     -----
            0.80     -2.55     23.53     20.69     27.35     39.10

During  the  period  shown in the bar chart, the Growth Fund's highest quarterly
return  was  23.51%  for  the  quarter  ended  December  31, 1998 and the lowest
quarterly return was -8.74% for the quarter ended September 30, 1998.

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

                                                    Since Inception
                             1 Year     5 Years     (July 31, 1992)
                            ---------   ---------   ---------------
         Growth Fund         39.10%      28.81%          17.82%
         S&P 500 Index*      28.72       24.09           21.09
- ----------
* The  S&P  500  Index  is  an  unmanaged  index generally representative of the
market for the stocks of large sized U.S. companies.

                          SMALL COMPANY GROWTH FUND I
                        CALENDAR YEAR TOTAL RETURNS (%)

                                 97       98
                               -----     ----
                               -1.36     5.43

During  the  period  shown  in  the  bar  chart, the Small Company Growth Fund's
highest  quarterly return was 24.97% for the quarter ended December 31, 1998 and
the  lowest  quarterly  return  was  -24.76% for the quarter ended September 30,
1998.

AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

                                                    Since Inception
                                         1 Year     (June 28, 1996)
                                         --------   ---------------
         Small Company Growth Fund        5.43%         (0.36)%
         Russell 2000- Growth Index*      1.23           5.23
- ----------
* The Russell  2000(R) Growth Index measures the  performance of those companies
in the  Russell  2000(R)  Index  with  higher  price-to-book  ratios  and  lower
forecasted  growth values.  The Russell  2000(R) Index is a recognized  index of
small-capitalization companies.

                                       5                              PROSPECTUS
<PAGE>
KEY FACTS - CONTINUED

FEES AND EXPENSES

This  table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.

SHAREHOLDER FEES
(fees paid directly from your investment)

Maximum sales charge on purchases (as a percentage of offering price)   None

Maximum deferred sales charge (as a percentage of purchase or sale
  price whichever is less)                                              None

Redemption fee                                                          None

Exchange Fee                                                            None

ANNUAL FUND OPERATING EXPENSES *
(expenses that are deducted from Fund and/or Portfolio assets)

                                                    Growth      Small Company
                                                     Fund        Growth Fund
                                                    ------      -------------
Management Fee (paid by the Portfolio)               0.80%           0.80%
Administration Fee to PIC (paid by the Fund)         0.20%           0.20%
Other Expenses (paid by both)                        0.41%           0.50%
                                                    -----           -----
Total Annual Fund Operating Expenses                 1.41%           1.50%
Expense Reimbursements**                            (0.16%)         (0.05%)
                                                    -----           -----
Net expenses                                         1.25%           1.45%
                                                    =====           =====
- ----------
* The table above and the Examples below reflect the expenses of the Funds and
the Portfolios.

** Pursuant to a contract with the Funds,  PIC has agreed to reimburse each Fund
and Portfolio  for  investment  advisory fees and other  expenses for a ten-year
period  ending March 1, 2009.  PIC reserves the right to be  reimbursed  for any
waiver of its fees or  expenses  paid on behalf  of the Funds if,  within  three
subsequent years, a Fund's expenses are less than the limit agreed to by PIC.

PROSPECTUS                             6
<PAGE>
EXAMPLES: These  examples  will  help  you  compare the cost of investing in the
Funds  with the cost of investing in other mutual funds. These examples are only
illustrations,  and  your  actual  costs  may  be  higher  or  lower. Let's say,
hypothetically,  that  each  Fund's  annual  return is 5% and that its operating
expenses  remain  the  same.  For  every $10,000 you invest, here's how much you
would pay in total expenses for the time periods shown:

                                  Growth          Small Company
                                   Fund            Growth Fund
                                  ------          -------------
          After 1 year            $  127             $  148
          After 3 years              397                459
          After 5 years              686                792
          After 10 years           1,511              1,735

STRUCTURE OF THE FUNDS AND THE PORTFOLIOS

Each  Fund seeks its goal by investing all of its assets in a PIC Portfolio. The
PIC  Portfolio  then  invests  directly  in  securities. Each PIC Portfolio is a
mutual fund with the same investment goal as the Fund investing in it.

A Portfolio may sell its shares to other funds and institutions as well as to a
Fund.  All  who invest in a Portfolio do so on the same terms and conditions and
pay  a  proportionate  share  of  the Portfolio's expenses. However, these other
funds  may  sell  their shares to the public at prices different from the Funds'
prices.  This would be due to different sales charges or operating expenses, and
it   might  result  in  different  investment  returns  to  these  other  funds'
shareholders.

                                       7                              PROSPECTUS
<PAGE>
THE FUNDS IN DETAIL

As described  earlier,  each Fund invests all of its assets in a PIC  Portfolio.
This section gives more information about how the PIC Portfolios 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  supports its selection of individual securities through
intensive   research  and  uses  qualitative  and  quantitative  disciplines  to
determine  when  securities  should  be  sold. PIC's research professionals meet
personally  with  the  majority  of  the senior officers of the companies in the
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 each Portfolio's investments will vary from day to day in response
to  many  factors.  Value  generally reflects market conditions, interest rates,
and  other company, political and economic news. In the short term, stock prices
can  rise  and  fall dramatically in response to these factors. And stock prices
may decline for extended periods.

Each Portfolio  seeks to spread  investment  risk by  diversifying  its holdings
among many companies and industries.  PIC normally invests a Portfolio's  assets
according to its investment  strategy.  However,  each Portfolio may depart from
its principal  investment  strategies by making  short-term  investments in cash
equivalents for temporary,  defensive purposes. At those times, a Fund would not
be seeking its investment objective.

It is not anticipated that the annual portfolio  turnover rate of the Portfolios
will exceed 100%. However,  PIC will not consider the rate of portfolio turnover
to be a limiting factor in determining whether to purchase or sell securities in
order to achieve a Fund's investment  objective.  A high portfolio turnover rate
(100% or more) has the potential to result in the realization  and  distribution
to shareholders of higher capital gains.  This may mean that you would be likely
to have a higher tax  liability.  A high  portfolio  turnover rate also leads to
higher transactions costs, which could negatively affect a Fund's performance.

MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS, STRATEGIES AND RISKS

PROVIDENT INVESTMENT COUNSEL

GROWTH FUND I

The  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 equity securities. In selecting investments for the Growth


PROSPECTUS                             8
<PAGE>
Portfolio,  PIC  will  include  equity  securities of companies of various sizes
which  are  currently experiencing an above-average rate of earnings growth. The
minimum  market  capitalization  of  a  portfolio  security is expected to be $1
billion,  and  the  average market capitalization is currently approximately $30
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.

PROVIDENT INVESTMENT COUNSEL

SMALL COMPANY GROWTH FUND I

The  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 companies are those whose market capitalization or annual revenues
are $250 million or less.

Investing   in  small  capitalization  stocks  may  involve  greater  risk  than
investing  in  large  or medium capitalization stocks, since they can be subject
to  more  abrupt or erratic movements in value. Small companies may have limited
product  lines,  markets  or  financial  resources  and  their management may be
dependent  on a limited number of key individuals. Securities of these companies
may  have  limited  market liquidity and their prices may be more volatile. Over
time,  however,  small capitalization stocks have shown greater growth potential
than those of large capitalization stocks.

MANAGEMENT

PIC is the advisor to the PIC Portfolios,  in which the respective Funds invest.
PIC's  address  is 300 North Lake  Avenue,  Pasadena,  CA 91101.  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.  An investment committee of PIC
formulates and implements an investment  program for each  Portfolio,  including
determining which securities should be bought and sold.

Each  Portfolio  pays  an  investment  advisory  fee  to  PIC  for  managing the
Portfolio's  investments.  Last  year,  as  a  percentage  of  net  assets, each
Portfolio paid 0.80%.

                                       9                              PROSPECTUS
<PAGE>
YOUR ACCOUNT

WAYS TO SET UP YOUR ACCOUNT

INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS

Individual  accounts  are  owned  by  one person. Joint accounts can have two or
more owners (tenants).

RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES

Retirement  plans  allow  individuals  to  shelter investment income and capital
gains  from  current  taxes. In addition, contributions to these accounts may be
tax  deductible.  Retirement accounts require special applications and typically
have lower minimums.

*    INDIVIDUAL  RETIREMENT  ACCOUNTS (IRAs) allow anyone of legal age and under
     701|M/2 with earned income to invest up to $2000 per tax year.  Individuals
     can also invest in a spouse's  IRA if the spouse has earned  income of less
     than $250.

*    ROLLOVER IRAs retain special tax advantages for certain  distributions from
     employer-sponsored retirement plans.

*    KEOGH OR CORPORATE  PROFIT SHARING AND MONEY  PURCHASE  PENSION PLANS allow
     self-employed individuals or small business owners (and their employees) to
     make tax-deductible contributions for themselves and any eligible employees
     up to $30,000 per year.

*    SIMPLIFIED  EMPLOYEE PENSION PLANS (SEP-IRAs) provide small business owners
     or those with self-employed income (and their eligible employees) with many
     of  the  same  advantages  as  a  Keogh,  but  with  fewer   administrative
     requirements.

*    403(b)  CUSTODIAL  ACCOUNTS are  available to employees of most  tax-exempt
     institutions,   including   schools,   hospitals   and   other   charitable
     organizations.

*    401(k)  PROGRAMS allow employees of corporations of all sizes to contribute
     a percentage of their wages on a tax-deferred basis. These accounts need to
     be established by the trustee of the plan.

GIFTS OR TRANSFERS TO MINOR (UGMA, UTMA)
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS

These  custodial  accounts provide a way to give money to a child and obtain tax
benefits.  An  individual can give up to $10,000 a year per child without paying
federal  gift  tax.  Depending on state laws, you can set up a custodial account
under  the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA).

TRUST
FOR MONEY BEING INVESTED BY A TRUST

The trust must be established before an account can be opened.

BUSINESS OR ORGANIZATION

For  investment  needs  of  corporations,  associations,  partnerships  or other
groups

Does not require a special application.

PROSPECTUS                            10
<PAGE>
CALCULATION OF NET ASSET VALUE

Once  each  business day, each Fund calculates its net asset value (NAV). NAV is
calculated  at  the  close  of  regular  trading  on the New York Stock Exchange
(NYSE),  which  is  normally 4 p.m., Eastern time. NAV will not be calculated on
days that the NYSE is closed for trading.

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.

HOW TO BUY SHARES

The  price  you  will  pay to buy Fund shares is based on the Fund's NAV. Shares
are  purchased  at the next NAV calculated after your investment is received and
accepted.

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.

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

For retirement accounts                       $ 250

TO ADD TO AN ACCOUNT                          $ 250

For retirement plans                          $ 250

Through automatic investment plans            $ 100

MINIMUM BALANCE                              $1,000

For retirement accounts                       $ 500

FOR INFORMATION:                     (800) 618-7643

TO INVEST

BY MAIL:
Provident Investment Counsel Funds
P.O. Box 8943
Wilmington, DE 19899

BY WIRE:
Call: (800) 618-7643
to set up an account and
arrange a wire transfer

BY OVERNIGHT DELIVERY:
Provident Investment Counsel Funds
400 Bellevue Parkway
Wilmington, DE 19809

                                       11                             PROSPECTUS
<PAGE>
YOUR ACCOUNT - CONTINUED

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
NAV calculated after your order is received and accepted.

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, you must 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  under  "Important  Redemption
     Information."

*    Unless otherwise  instructed,  PIC will send a check to the record address.
     Mail your  letter to:

     Provident Investment Counsel Funds
     P.O. Box 8943
     Wilmington, DE 19899

PROSPECTUS                            12
<PAGE>
IMPORTANT REDEMPTION INFORMATION

                 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 (maximum check request
                                         $100,000).

MAIL OR IN       Individual, Joint     * This  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
                                         redemption 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.

                                       13                             PROSPECTUS
<PAGE>
YOUR ACCOUNT - CONTINUED

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)

*    Annual and semi-annual shareholder reports (every six months)

TRANSACTION SERVICES

EXCHANGE  PRIVILEGE. You  may  sell  your  Provident  Investment  Counsel Fund I
shares  and  buy  shares  of  any  other  Provident Investment Counsel Fund I by
telephone  or  in  writing.  You may not exchange your Fund shares for shares of
Provident  Investment  Counsel Small Cap Growth Fund I. Note that exchanges into
each  Fund  are  limited  to  four per calendar year, and that they may have tax
consequences for you. Also see "Shareholder Account Policies."

SYSTEMATIC  WITHDRAWAL  PLANS let  you  set  up  periodic  redemptions from your
account.  These redemptions take place on the 25th day of each month or, if that
day is a weekend or holiday, on the prior business day.

REGULAR INVESTMENT PLANS

One  easy  way  to pursue your financial goals is to invest money regularly. PIC
offers  convenient  services  that let you transfer money into your Fund account
automatically.  Automatic investments are made on the 20th day of each month or,
if  that  day  is a weekend or holiday, on the prior business day. While regular
investment  plans  do  not  guarantee  a profit and will not protect you against
loss  in  a  declining  market,  they  can  be  an  excellent  way to invest for
retirement,  a  home, educational expenses, and other long term financial goals.
Certain  restrictions  apply  for  retirement  accounts. Call (800) 618-7643 for
more information.

PROSPECTUS                            14
<PAGE>
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  the  Fund.  If you do not
indicate a choice on your application, you will be assigned this option.

2.  INCOME-EARNED  OPTION. Your capital gain distributions will be automatically
reinvested, but you will be sent a check for each dividend distribution.

3.  CASH  OPTION. You  will  be  sent a check for your dividend and capital gain
distributions.

For  retirement  accounts,  all distributions are automatically reinvested. When
you are over 591|M/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.

[X]  UNDERSTANDING DISTRIBUTIONS

As a Fund  shareholder,  you are entitled to your share of the Fund's net income
and gains on its investments.  The Fund passes its net income along to investors
as  distributions  which  are  taxed  as  dividends;   long  term  capital  gain
distributions  are taxed as long term capital  gains  regardless of how long you
have held  your  Fund  shares.  Every  January,  PIC will send you and the IRS a
statement showing the taxable distributions.

TAXES  ON TRANSACTIONS. Your redemptions -- including exchanges to another Funds
I -- 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 or
exchange 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 sale 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.

TRANSACTION DETAILS

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

                                       15                             PROSPECTUS

<PAGE>
SHAREHOLDER ACCOUNT POLICIES - CONTINUED

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  Privilege."  Purchase
orders may be refused if, in PIC's opinion, they would disrupt management of the
Fund.

Please note this about purchases:

*    All of your  purchases  must be made in U.S.  dollars,  and checks  must be
     drawn on U.S. banks.

*    PIC does not accept cash or third party checks.

*    When  making a purchase  with more than one  check,  each check must have a
     value of at least $50.

*    Each Fund reserves the right to limit the number of checks processed at one
     time.

*    If your check does not clear,  your purchase will be canceled and you could
     be  liable  for any  losses  or fees the  Fund or its  transfer  agent  has
     incurred.

TO  AVOID THE COLLECTION PERIOD associated with check purchases, consider buying
shares  by  bank  wire,  U.S.  Postal  money order, U.S. Treasury check, Federal
Reserve  check,  or direct deposit instead. You may buy shares of a Fund or sell
them  through a broker, who may charge you a fee for this service. If you invest
through  a  broker  or  other  institution,  read  its program materials for any
additional service features or fees that may apply.

CERTAIN  FINANCIAL INSTITUTIONS that have entered into sales agreements with PIC
may  enter  confirmed  purchase  orders  on  behalf  of customers by phone, with
payment  to  follow  no  later  than  the  time when the Funds are priced on the
following  business  day. If payment is not received by that time, the financial
institution could be held liable for resulting fees or losses.

Please note this about redemptions:

*    Normally,  redemption  proceeds  will be mailed to you on the next business
     day, but if making  immediate  payment could adversely  affect the Fund, it
     may take up to seven days to pay you.

*    Redemptions may be suspended or payment dates  postponed  beyond seven days
     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

PROSPECTUS                            16
<PAGE>
     $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.

Please note this about exchanges

As a  shareholder,  you have the privilege of  exchanging  shares of a Provident
Investment  Counsel Fund I for shares of any other Provident  Investment Counsel
Fund I,  other  than  Provident  Investment  Counsel  Small Cap  Growth  Fund I.
However, you should note the following:

*    The Fund you are exchanging into must be registered for sale in your state.

*    You may only  exchange  between  accounts  that are  registered in the same
     name, address, and taxpayer identification number.

*    Before exchanging into a Fund, read its prospectus.

*    Exchanges may have tax consequences for you.

*    You may exchange Provident  Investment Counsel Fund I shares only for other
     Provident Investment Counsel Fund I shares, other than Provident Investment
     Counsel Small Cap Growth Fund I.

*    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.

*    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.

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."  This  situation  may negatively affect the companies in which the
Portfolios  invest  and  by extension the value of the Funds' shares. 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.

                                      17                              PROSPECTUS
<PAGE>
SHAREHOLDER ACCOUNT POLICIES - CONTINUED

FINANCIAL HIGHLIGHTS

These  tables  show  the  Funds'  financial  performance for up to the past five
years.  "Total  return"  shows  how  much  your  investment in a Fund would have
increased  or  decreased  during  each  period,  assuming you had reinvested all
dividends  and  distributions.  This information has been audited by McGladrey &
Pullen,  LLP,  Independent  Certified  Public Accountants. Their reports and the
Funds' financial statements are included in the Annual Reports.

PROVIDENT INVESTMENT COUNSEL GROWTH FUND I

                                          Fiscal year ended October 31,
                                  ---------------------------------------------
                                   1998     1997      1996     1995      1994
                                   ----     ----      ----     ----      ----
Net asset value,
  beginning of period             $18.14   $16.25    $14.25    $11.70    $11.60

Income from investment
  operations:
  Net investment income            (0.06)   (0.15)    (0.06)    (0.02)     0.00
  Net realized and unrealized
    gain (loss) on investments      3.04     3.98      2.06      2.57      0.10
Total from investment
  operations                        2.98     3.83      2.00      2.55      0.10

Less distributions:
  From net realized gains          (3.37)   (1.94)     0.00      0.00      0.00
Total distributions                (3.37)   (1.94)     0.00      0.00      0.00

Net asset value, end of
  period                          $17.75   $18.14    $16.25    $14.25    $11.70

TOTAL RETURN                       19.60%   26.44%    14.04%    21.79%     0.86%
                                  ======   ======    ======    ======    ======
Ratios/supplemental data:
Net assets, end of period
  (millions)                      $132.4   $ 80.0    $116.1    $131.1    $102.3

Ratios to average net assets:*
Expenses                            1.25%    1.25%     1.25%     1.25%     1.25%
Net investment income              -0.57%   -0.38%    -0.28%    -0.17%      N/A

Portfolio turnover rate++          81.06%   67.54%     64.09%   54.89%    68.26%

*    Includes the Fund's share of expenses allocated from PIC Growth Portfolio

++   Portfolio turnover rate of PIC Growth Portfolio, in which all of the Fund's
     assets are invested.

PROSPECTUS                            18
<PAGE>
PROVIDENT INVESTMENT COUNSEL SMALL COMPANY GROWTH FUND I

                                                                   June 28,
                                         Year          Year          1996*
                                         Ended         ended        through
                                      October 31,   October 31,   October 31,
                                         1998          1997          1996
                                      -----------   -----------   -----------
Net asset value, beginning
 of period                              $  9.91      $   9.48      $ 10.00

Income from investment operations:
 Net investment income                    (0.10)        (0.05)       (0.03)
 Net realized and unrealized gain
  (loss) on investments                   (1.70)         0.48        (0.49)
Total from investment operations          (1.80)         0.43        (0.52)
Net asset value, end of period          $  8.11      $   9.91      $  9.48

TOTAL RETURN                             (18.16%)        4.54%       (5.20%)+++
                                         ======          ====        =====

Ratios/supplemental data:
Net assets, end of period (millions)    $ 29.7       $  31.0       $  5.2

Ratios to average net assets:**
Expenses                                  1.49%         1.45%        1.43%+
Net investment income                    -1.13%        -0.96%       -0.91%+
Portfolio turnover rate++                81.75%       151.52%       53.11%

*    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

                                       19                             PROSPECTUS
<PAGE>
                         PROVIDENT INVESTMENT COUNSEL

                                 GROWTH FUND I
                          SMALL COMPANY GROWTH FUND I


For  investors  who  want  more  information  about  the  Funds,  the  following
documents are available free upon request:

ANNUAL/SEMI-ANNUAL  REPORTS: Additional information about the Funds' investments
is  available  in  the Funds' annual and semi-annual reports to shareholders. In
each  Fund's  annual report, you will find a discussion of the market conditions
and  investment  strategies  that  significantly affected the Fund's performance
during its last fiscal year.

STATEMENT  OF  ADDITIONAL  INFORMATION  (SAI):  The  SAI  provides more detailed
information  about  the  Funds  and  is  incorporated  by  reference  into  this
Prospectus.

You  can  get  free  copies  of  the  Funds'  shareholder reports and their SAI,
request  other  information  and  discuss  your  questions  about  the  Funds by
contacting the Funds at:

                         Provident Investment Counsel
                                 P.O. Box 8943
                             Wilmington, DE 19899
                           Telephone: 1-800-618-7643

You  can  review  and  copy information including the Funds' shareholder reports
and  their  SAI  at  the  Public  Reference  Room of the Securities and Exchange
Commission  in  Washington,  D.C. You can obtain information on the operation of
the  Public  Reference  Room  by  calling 1-800-SEC-0330. You can get text-only
copies:

For  a  fee,  by  writing  to  the  Public  Reference  Room  of  the Commission,
Washington, DC 20549- 6009 or by calling 1-800-SEC-0330.

Free of charge from the Commission's Internet website at http://www.sec.gov



                                                        (Investment Company Act
                                                            File No. 811-6498)

PROSPECTUS                            20
<PAGE>
                              PIC INVESTMENT TRUST

                       Statement of Additional Information
                               Dated March 1, 1999

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 I and Provident Investment Counsel Small Company Growth Fund
I, series of PIC Investment Trust (the "Trust").  There are nine other series of
the Trust: the Provident  Investment Counsel Pinnacle Balanced Fund A, Provident
Investment Counsel Pinnacle Growth Fund A, Provident Investment Counsel Pinnacle
Mid Cap Fund A, Provident  Investment Counsel Pinnacle Small Company Growth Fund
A, Provident  Investment Counsel Pinnacle Balanced Fund B, Provident  Investment
Counsel  Pinnacle Growth Fund B, Provident  Investment  Counsel Pinnacle Mid Cap
Fund B, Provident  Investment  Counsel  Pinnacle Small Company Growth Fund B and
Provident  Investment Counsel Small Cap Growth Fund I. The Provident  Investment
Counsel Growth Fund I (the "Growth  Fund")  invests in the PIC Growth  Portfolio
and the Provident  Investment  Counsel  Small Company  Growth Fund I (the "Small
Company Growth  Fund")invests in the PIC Small Cap Portfolio.  (In this SAI, the
Growth Fund and the Small Company Growth Fund may be referred to as the "Funds",
and the PIC Growth  Portfolio  and PIC Small Cap Portfolio may be referred to as
the "Portfolios.")  Provident  Investment Counsel (the "Advisor") is the Advisor
to the  Portfolios.  A copy of the  prospectus may be obtained from the Trust at
300 North Lake Avenue, Pasadena, CA 91101-4106, telephone (818) 449-8500.

                                TABLE OF CONTENTS

Investment Objectives and Policies                                     B- 2
Management                                                             B-10
Custodian and Auditors                                                 B-15
Portfolio Transactions and Brokerage                                   B-16
Portfolio Turnover                                                     B-17
Additional Purchase and Redemption Information                         B-17
Net Asset Value                                                        B-17
Taxation                                                               B-18
Dividends and Distributions                                            B-18
Performance Information                                                B-19
General Information                                                    B-21
Financial Statements                                                   B-22
Appendix                                                               B-22

                                       B-1
<PAGE>
                       INVESTMENT OBJECTIVES AND POLICIES

INTRODUCTION

         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 neither
Fund will invest in any securities  other than shares of a Portfolio,  investors
in the Fund will acquire only an indirect interest in the Portfolio. Each Fund's
and  Portfolio's  investment  objective  cannot be changed  without  shareholder
approval.

         In addition to selling its shares to a Fund,  a Portfolio  may sell its
shares to other  mutual funds or  institutional  investors.  All  investors in a
Portfolio invest on the same terms and conditions and pay a proportionate  share
of the Portfolio's  expenses.  However,  other investors in a Portfolio may sell
their shares to the public at prices  different from those of a Fund as a result
of the imposition of sales charges or different operating  expenses.  You should
be aware that these  differences  may result in different  returns from those of
investors in other  entities  investing in a Portfolio.  Information  concerning
other  holders of  interests  in a  Portfolio  is  available  by  calling  (800)
618-7643.

         The Trustees of the Trust believe that this structure may enable a Fund
to benefit from certain economies of scale, based on the premise that certain of
the expenses of managing an investment portfolio are relatively fixed and that a
larger  investment  portfolio may  therefore  achieve a lower ratio of operating
expenses to net assets.  Investing  a Fund's  assets in a Portfolio  may produce
other  benefits  resulting  from  increased  asset size,  such as the ability to
participate  in  transactions  in  securities  which  may be  offered  in larger
denominations  than could be purchased by the Fund alone. A Fund's investment in
a Portfolio may be withdrawn by the Trustees at any time if the Board determines
that it is in the best interests of a Fund to do so. If any such withdrawal were
made,  the Trustees  would  consider  what action might be taken,  including the
investment of all of the assets of a Fund in another pooled  investment  company
or the retaining of an investment advisor to manage the Fund's assets directly.

         Whenever  a Fund  is  requested  to  vote on  matters  pertaining  to a
Portfolio,  the Fund will hold a meeting  of its  shareholders,  and the  Fund's
votes with respect to the Portfolio  will be cast in the same  proportion as the
shares of the Fund for which voting instructions are received.

THE GROWTH FUND

         The  investment  objective  of the Growth Fund is to provide  long-term
growth of capital.  There is no assurance  that the Growth Fund will achieve its
objective.  The Growth Fund will  attempt to achieve its  objective by investing
all  of  its  assets  in  shares  of  the  PIC  Growth  Portfolio  (the  "Growth
Portfolio").   The  Growth  Portfolio  is  a  diversified   open-end  management
investment company having the same investment  objective as the Growth Fund. The
discussion  below  supplements  information  contained in the  prospectus  as to
investment  policies  of the Growth Fund and the Growth  Portfolio.  Because the
investment  characteristics of the Growth Fund will correspond directly to those
of the  Growth  Portfolio,  the  discussion  refers  to  those  investments  and
techniques employed by the Growth Portfolio.

                                       B-2
<PAGE>
THE SMALL COMPANY GROWTH FUND

         The investment objective of the Small Company Growth Fund is to provide
capital appreciation.  There is no assurance that Small Company Growth 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").  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 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  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, neither Fund or Portfolio may:

         1. Issue senior securities,  borrow money or pledge its assets,  except
that a Fund or a  Portfolio  may  borrow on an  unsecured  basis  from banks for
temporary or emergency  purposes or for the clearance of transactions in amounts
not  exceeding  10% of its total  assets (not  including  the amount  borrowed),
provided that it will not make  investments  while borrowings in excess of 5% of
the value of its total assets are outstanding;

                                       B-3
<PAGE>
         2. Make short sales of securities or maintain a short position;

         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 either 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  either  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 either 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.

         Neither Portfolio may:

         1.  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

         2.  Invest  more  than 15% of its net  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).


                                       B-4
<PAGE>
SECURITIES AND INVESTMENT PRACTICES

         The  discussion  below   supplements   information   contained  in  the
prospectus as to investment  policies of the Portfolios.  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.

EQUITY SECURITIES

         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.

SHORT-TERM INVESTMENTS

         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. A Portfolio will only purchase short-term investments
which  are "high  quality,"  meaning  the  investments  have  been  rated A-1 by
Standard & Poor's Rating 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

         Repurchase  agreements are  transactions in which a Fund or a Portfolio
purchases  a  security  from  a  bank  or  recognized   securities   dealer  and
simultaneously  commits  to  resell  that  security  to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity  of the  purchased  security.  The  purchaser  maintains
custody  of the  underlying  securities  prior  to  their  repurchase;  thus the
obligation of the bank or dealer to pay the repurchase  price on the date agreed
to is, in effect,  secured by such underlying  securities.  If the value of such
securities is less than the repurchase  price,  the other party to the agreement
will provide  additional  collateral  so that at all times the  collateral is at
least equal to the repurchase price.

         Although repurchase  agreements carry certain risks not associated with
direct  investments in securities,  the Funds and the Portfolios intend to enter
into repurchase  agreements only with banks and dealers  believed by the Advisor
to present minimum credit risks in accordance with guidelines established by the
Boards of Trustees.  The Advisor will review and monitor the creditworthiness of
such institutions under the Boards' general supervision.  To the extent that the
proceeds  from  any sale of  collateral  upon a  default  in the  obligation  to
repurchase  were less than the repurchase  price,  the purchaser  would suffer a
loss. If the other party to the repurchase agreement petitions for bankruptcy or
otherwise becomes subject to bankruptcy or other liquidation proceedings,  there
might be

                                       B-5
<PAGE>
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 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 Small Cap 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.

                                       B-6
<PAGE>
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 a Portfolio  may be exposed to risk of loss.
Further,  unanticipated  changes in interest rates or stock price  movements may
result  in a  poorer  overall  performance  for a  Portfolio  than if it had not
entered into any futures on stock indices.

         In addition,  the market prices of futures contracts may be affected by
certain  factors.  First,  all participants in the futures market are subject to
margin  deposit and  maintenance  requirements.  Rather than meeting  additional
margin  deposit  requirements,  investors  may close futures  contracts  through
offsetting  transactions which could distort the normal relationship between the
securities and futures markets.  Second,  from the point of view of speculators,
the deposit  requirements  in the futures  market are less  onerous  than margin
requirements in the securities  market.  Therefore,  increased  participation by
speculators in the futures market may also cause temporary price distortions.

         Finally,  positions in futures  contracts  may be closed out only on an
exchange or board of trade which  provides a secondary  market for such futures.
There is no assurance that a liquid  secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time.

FOREIGN SECURITIES

         The Portfolios  may invest in 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

                                       B-7
<PAGE>
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.  Neither  Portfolio may invest 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.

         Foreign   securities  and  securities  issued  by  U.S.  entities  with
substantial  foreign operations may involve additional risks and considerations.
These  include  risks  relating to political or economic  conditions  in foreign
countries,  fluctuations  in foreign  currencies,  withholding  or other  taxes,
operational  risks,  increased  regulatory  burdens  and  the  potentially  less
stringent investor protection and disclosure  standards of foreign markets.  All
of these factors can make foreign  investments,  especially  those in developing
countries, more volatile.

Forward Foreign Currency Exchange Contracts

         The  Portfolios  may enter  into  forward  contracts  with  respect  to
specific transactions.  For example, when a Portfolio enters into a contract for
the purchase or sale of a security denominated in a foreign currency, or when it
anticipates the receipt in a foreign  currency of dividend or interest  payments
on a  security  that it holds,  the  Portfolio  may desire to "lock in" the U.S.
dollar price of the security or the U.S.  dollar  equivalent of the payment,  by
entering into a forward contract for the purchase or sale, for a fixed amount of
U.S. dollars or foreign currency,  of the amount of foreign currency involved in
the  underlying  transaction.  The Portfolio  will thereby be to protect  itself
against a possible loss  resulting  from an adverse  change in the  relationship
between the currency  exchange rates during the period between the date on which
the security is purchased or sold, or on which the payment is declared,  and the
date on which such payments are made or received.

         The precise  matching of the forward  contract amounts and the value of
the securities  involved will not generally be possible because the future value
of such securities in foreign  currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures.  Accordingly, it may be necessary for a
Portfolio  to purchase  additional  foreign  currency  on the spot (i.e.,  cash)
market  (and bear the  expense  of such  purchase)  if the  market  value of the
security is less than the amount of foreign  currency the Portfolio is obligated
to deliver and if a decision is made to sell the security  and make  delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency a Portfolio is obligated
to deliver.  The projection of short-term currency market movements is extremely
difficult,  and the  successful  execution of a short-term  hedging  strategy is
highly uncertain.  Forward contracts involve the risk that anticipated  currency
movements  will not be  accurately  predicted,  causing a  Portfolio  to sustain
losses on these contracts and transaction  costs.  The Portfolios may enter into
forward  contracts or maintain a net exposure to such  contracts only if (1) the
consummation  of the  contracts  would not obligate the  Portfolio to deliver an

                                       B-8
<PAGE>
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 a
Portfolio will be served.

         At or before the maturity  date of a forward  contract  that requires a
Portfolio to sell a currency,  the  Portfolio may either sell a security and use
the sale  proceeds to make  delivery of the  currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Portfolio will obtain, on the same maturity date,
the same amount of the currency  that it is obligated to deliver.  Similarly,  a
Portfolio may close out a forward contract  requiring it to purchase a specified
currency by entering into a second contract entitling it to sell the same amount
of the same currency on the maturity date of the first  contract.  The Portfolio
would  realize a gain or loss as a result of  entering  into such an  offsetting
forward  contract  under either  circumstance  to the extent the  exchange  rate
between the currencies  involved moved between the execution  dates of the first
and second contracts.

         The cost to a Portfolio  of engaging in forward  contracts  varies with
factors such as the currencies  involved,  the length of the contract period and
the market  conditions then  prevailing.  Because forward  contracts are usually
entered into on a principal basis, no fees or commissions are involved.  The use
of  forward  contracts  does not  eliminate  fluctuations  in the  prices of the
underlying  securities a Portfolio owns or intends to acquire, but it does fix a
rate of exchange in advance.  In addition,  although forward contracts limit the
risk of loss due to a decline in the value of the hedged currencies, at the same
time they limit any  potential  gain that might  result  should the value of the
currencies increase.

SEGREGATED ACCOUNTS

         When a Portfolio  writes an option,  sells a futures contract or enters
into  a  forward  foreign  currency  exchange  contract,  it  will  establish  a
segregated  account with its custodian bank, or a securities  depository  acting
for it, to hold assets of the  Portfolio  in order to insure that the  Portfolio
will be able to meet  its  obligations.  In the  case of a call  that  has  been
written, the securities covering the option will be maintained in the segregated
account and cannot be sold by a Portfolio until  released.  In the case of a put
that has been  written  or a forward  foreign  currency  contract  that has been
entered into, liquid securities will be maintained in the segregated  account in
an amount  sufficient to meet a Portfolio's  obligations  pursuant to the put or
forward contract.  In the case of a futures contract,  liquid securities will be
maintained in the segregated  account equal in value to the current value of the
underlying  contract,  less the margin  deposits.  The margin  deposits are also
held, in cash or U.S. Government securities, in the segregated account.


                                       B-9
<PAGE>
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 condition 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),           Consulting principal of
Trustee                               Syrus Associates (consulting firm)
76 Seaview Drive
Santa Barbara, CA 93108

Jeffrey D. Lovell (age 46),           Managing Director, President and
Trustee                               co-founder of Putnam, Lovell &
11150 Santa Monica Blvd., Ste 1650    Thornton, Inc. (investment bankers)
Los Angeles, CA 90025

Jeffrey J. Miller (age 48),           Managing Director and Secretary of
President and Trustee*                the Advisor; President and Trustee
300 North Lake Avenue                 of each of the Portfolios
Pasadena, CA 91101

Wayne H. Smith (age 57),              Vice President and Treasurer of Avery
Trustee                               Dennison Corporation (pressure sensitive
150 N. Orange Grove Blvd.             material and office products manufacturer)
Pasadena, CA 91103

                                      B-10
<PAGE>
Thad M. Brown (age 48),               Senior Vice President and Chief Financial
Vice President, Secretary             Officer of the Advisor
and Treasurer of the Trust
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),            Chief Executive Officer, Lawry's
Trustee                               Restaurants, Inc.; formerly Chairman
234 E. Colorado Blvd.                 of Lawry's Foods, Inc.
Pasadena, CA 91101

James Clayburn LaForce (age70),       Dean Emeritus, John E. Anderson Graduate
Trustee                               School of Management, University of
P.O. Box 1585                         California, Los Angeles. Director of The
Pauma Valley, CA 92061                BlackRock Funds. Trustee of Payden & Rygel
                                      Investment Trust. Director of the Timken
                                      Co., Rockwell International, Eli Lilly,
                                      Jacobs Engineering Group and Imperial
                                      Credit Industries.

Jeffrey J. Miller (age 48),           Managing Director and Secretary of the
President and Trustee*                Advisor
300 North Lake Avenue
Pasadena, CA 91101

Angelo R. Mozilo (age 59),            Vice Chairman and Executive Vice President
Trustee                               of Countrywide Credit Industries (mortgage
155 N. Lake Avenue                    banking)
Pasadena, CA 91101

Thad M. Brown (age 48),               Senior Vice President and Chief Financial
Vice President, Secretary             Officer of the Advisor
and Treasurer of the Trust
300 North Lake Avenue
Pasadena, CA 91101
- ----------
* Denotes Trustees who are "interested persons" of the Trust or Portfolios under
the 1940 Act.

                                      B-11
<PAGE>
         The following  compensation was paid to each of the following Trustees.
No other  compensation  or  retirement  benefits were received by any Trustee or
officer from the Registrant or other registered  investment company in the "Fund
Complex."
<TABLE>
<CAPTION>
                                                              Deferred          Deferred           Total
                                                            Compensation      Compensation     Compensation
                           Aggregate       Aggregate      Accrued as Part   Accrued as Part   From Trust and
                         Compensation     Compensation        of Trust       of Portfolios    Portfolios paid
     Name of Trustee      from Trust    from Portfolios       Expenses          Expenses         to Trustee
- ----------------------   ------------   ---------------   ---------------   ---------------   ---------------
<S>                         <C>             <C>               <C>               <C>              <C>
Jettie M. Edwards           $13,000         $     0           $    0            $    0           $13,000
Bernard J. Johnson          $     0         $     0           $    0            $    0           $     0
Jeffrey D. Lovell           $     0         $     0           $3,232            $    0           $ 3,232
Wayne H. Smith              $     0         $     0           $3,232            $    0           $ 3,232
Richard N. Frank            $     0         $     0           $    0            $3,191           $ 3,191
James Clayburn LaForce      $     0         $12,000           $    0            $    0           $12,000
Angelo R. Mozilo            $     0         $     0           $    0            $3,190           $ 3,190
</TABLE>
         The following  persons,  to the knowledge of the Trust, owned more than
5% of the outstanding shares of the Growth Fund as of February 9, 1999:

Harris Trust and Savings Bank, Trustee - 5.09%
Chicago, IL 60603

Milbank Tweed Hadley & McCloy
 Partners Retirement Plan - 7.3%
Brooklyn, NY 11245

Vanguard Fiduciary Trust Co., Trustee - 31.66%
Valley Forge, PA 19482

         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 February 9,
1999:

Strage & Co. - 14.70%
Westerville, OH 43086

Charles Schwab & Co., Inc.
 Special Custody Acct. - 13.63%
San Francisco, CA 94102

George E. Handtmann III and
 Janet L. Handtmann, Trustees - 5.73%
Carpenteria, CA 930133

                                      B-12
<PAGE>
UMBSC & Co. FBO
 Interstate Brands Corp
 Aggressive Growth Acct. - 20.22%
Kansas City, MO 64141

UMBSC & Co.
 FBO Interstate Brands Unit
 Elect-Mod Grt - 12.08%
Kansas City, MO 64141

Atlantic Trust Company,
 Nominee Account - 19.04%
Boston, MA 12210

         As of February 9, 1999,  shares of the Funds owned by the  Trustees and
officers as a group were less than 1%.

THE ADVISOR

         The Trust does not have an  investment  advisor,  although  the Advisor
performs certain  administrative  services for it, including  providing  certain
officers and office space.

         The  following  information  is  provided  about  the  Advisor  and the
Portfolios.  Subject  to  the  supervision  of the  Boards  of  Trustees  of the
Portfolios,   investment  management  and  services  will  be  provided  to  the
Portfolios by the Advisor,  pursuant to separate  Investment Advisory Agreements
(the "Advisory  Agreements").  Under the Advisory  Agreements,  the Advisor will
provide a continuous  investment  program for the  Portfolios and make decisions
and place orders to buy, sell or hold particular securities.  In addition to the
fees payable to the Advisor and the Administrator,  the Portfolios and the Trust
are responsible for their operating 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

                                      B-13
<PAGE>
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  daily net assets.
During the fiscal years ended  October 31,  1998,  1997,  and 1996,  the Advisor
earned fees  pursuant to the  Advisory  Agreements  as follows:  from the Growth
Portfolio,  $1,045,893, $838,058 and $949,431,  respectively; and from the Small
Cap Portfolio, $1,418,731, $1,525,768 and $1,395,748, respectively. However, the
Advisor has agreed to limit the  aggregate  expenses of the Growth and Small Cap
Portfolios  to 1.00% of  average  net  assets.  As a result,  the  Advisor  paid
expenses of the Growth  Portfolio  that  exceeded  these  expense  limits in the
amounts of $22,176,  $48,003 and $64,401  during the fiscal years ended  October
31, 1998,  1997 and 1996,  respectively.  The Advisor paid expenses of the Small
Cap  Portfolio  that exceeded  these  expense  limits in the amounts of $24,920,
$24,879 and $26,098  during the fiscal years ended  October 31,  1998,  1997 and
1996, respectively.

         Under the  Advisory  Agreements,  the Advisor will not be liable to the
Portfolios for any error of judgment by the Advisor or any loss sustained by the
Portfolios  except in the case of a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages will be
limited as provided in the 1940 Act) or of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.

         The Advisory  Agreements will remain in effect for two years from their
execution.  Thereafter, if not terminated, each Advisory Agreement will continue
automatically for successive  annual periods,  provided that such continuance is
specifically  approved  at  least  annually  (i)  by  a  majority  vote  of  the
Independent  Trustees  cast in person at a meeting  called  for the  purpose  of
voting  on such  approval,  and (ii) by the  Board of  Trustees  or by vote of a
majority of the outstanding voting securities of the Portfolio.

         The Advisory Agreements are terminable by vote of the Board of Trustees
or by the  holders of a majority of the  outstanding  voting  securities  of the
Portfolios  at any  time  without  penalty,  on 60 days  written  notice  to the
Advisor.  The Advisory  Agreements  also may be  terminated by the Advisor on 60
days  written  notice  to the  Portfolios.  The  Advisory  Agreements  terminate
automatically upon their assignment (as defined in the 1940 Act).

         The Advisor also provides certain administrative  services to the Trust
pursuant to Administration  Agreements,  including assisting shareholders of the
Trust,  furnishing  office space and  permitting  certain  employees to serve as
officers and Trustees of the Trust. For its services, it earns a fee at the rate
of 0.20% of the  average  net  assets of each  series of the  Trust.  During the
fiscal years ended  October 31,  1998,  1997 and 1996,  the Advisor  earned fees
pursuant to the  Administration  Agreements  from the Growth Fund  (formerly the
Institutional  Growth Fund) of $255,010,  $207,782 and  $236,786,  respectively.

                                      B-14
<PAGE>
         During the fiscal  years ended  October 31,  1998,  1997 and 1996,  the
Advisor earned fees of $70,124, $45,245 and $3,105,  respectively from the Small
Company Growth Fund (formerly PIC Institutional Small Cap Growth Fund). However,
the  Advisor  has agreed to limit the  aggregate  expenses of the Growth Fund to
1.25% of its  average  daily net assets and the  expenses  of the Small  Company
Growth Fund to 1.45% of its average daily net assets.  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 $178,773,  $110,144 and
$55,034  during the fiscal  years ended  October  31,  1998,  1997 and 1996.  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  $15,053,  $35,623  and  $38,198  during the fiscal  years ended
October 31, 1998, 1997 and 1996.

         The Advisor  reserves the right to be reimbursed  for any waiver of its
fees or expenses paid on behalf of the Funds if, within three subsequent  years,
a Fund's expenses are less than the limit agreed to by the Advisor.

THE ADMINISTRATOR

         The Funds and the Portfolios each pay a monthly  administration  fee to
Investment  Company  Administration,  LLC for  managing  some of their  business
affairs.  Each  Portfolio  pays an  annual  administration  fee of  0.10% of its
average net assets,  subject to an annual minimum of $45,000.  Each Fund pays an
annual fee of $15,000.

         During each of the three years ended  October 31, 1998,  1997 and 1996,
the Growth Fund paid the Administrator fees in the amount of $15,000. During the
fiscal years ended October 31, 1998, 1997 and 1996 the Small Company Growth Fund
paid the  Administrator  fees in the  amounts of  $15,000,  $15,000  and $4,999,
respectively.

         During the fiscal  years ended  October 31,  1998,  1997 and 1996,  the
Growth  Portfolio  paid  the  Administrator  fees in the  amounts  of  $130,737,
$103,757 and $118,678,  respectively.  During the fiscal years ended October 31,
1998, 1997 and 1996, the Small Company Growth  Portfolio paid the  Administrator
fees in the amounts of $177,341, $190,721 and $174,469, respectively.

                             CUSTODIAN AND AUDITORS

         The Trust's  custodian,  Provident  National  Bank,  200 Stevens Drive,
Lester,  PA 19113 is  responsible  for  holding  the  Funds'  assets.  Provident
Financial Processing Corporation,  400 Bellevue Parkway,  Wilmington,  DE 19809,
acts as each  Fund's  transfer  agent;  its  mailing  address is P.O.  Box 8943,
Wilmington,  DE 19899. 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.

                                      B-15
<PAGE>
                      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 Advisor
may select  brokers who sell shares of the  Portfolios or the Funds which invest
in the Portfolios.

         The Advisory  Agreements state that the commissions paid to brokers may
be higher than another  broker would have charged if a good faith  determination
is made by the Advisor  that the  commission  is  reasonable  in relation to the
services provided,  viewed in terms of either that particular transaction or the
Advisor's overall  responsibilities  as to the accounts as to which it exercises
investment discretion and that the Advisor shall use its judgment in determining
that the amount of  commissions  paid are reasonable in relation to the value of
brokerage and research  services provided and need not place or attempt to place
a specific  dollar value on such services or on the portion of commission  rates
reflecting such services.  The Advisory  Agreements  provide that to demonstrate
that  such   determinations  were  in  good  faith,  and  to  show  the  overall
reasonableness  of commissions  paid, the Advisor shall be prepared to show that
commissions paid (i) were for purposes  contemplated by the Advisory Agreements;
(ii)  were for  products  or  services  which  provide  lawful  and  appropriate
assistance to its  decision-making  process;  and (iii) were within a reasonable
range as  compared  to the  rates  charged  by  brokers  to other  institutional
investors as such rates may become known from available information.  During the
fiscal  years  ended  October  31,  1997  and  1996,  the  amount  of  brokerage
commissions   paid  by  the  Growth   Portfolio   were  $110,376  and  $148,938,
respectively.  During the fiscal  years ended  October  31,  1997 and 1996,  the
amount of brokerage  commissions  paid by the Small Cap Portfolio  were $218,087
and $115,709,  respectively.  During the fiscal year ended October 31, 1998, the
Growth Portfolio paid $165,841 in brokerage commissions.  Of that amount, $1,050
was paid in brokerage  commissions to brokers who furnished  research  services.
During the fiscal year ended  October 31,  1998,  the Small Cap  Portfolio  paid
$208,083 in brokerage commissions.  Of that amount, $9,449 was paid in brokerage
commissions to brokers who furnished research services.

         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 may be useful to the Portfolios.

                                      B-16
<PAGE>
         The debt securities are generally  traded on a "net" basis with dealers
acting as principal for their own accounts without a stated commission  although
the price of the security usually includes a profit to the dealer.  Money market
instruments  usually trade on a "net" basis as well. On occasion,  certain money
market instruments may be purchased by the Portfolios directly from an issuer in
which case no  commissions  or discounts  are paid. In  underwritten  offerings,
securities  are  purchased  at  a  fixed  price  which  includes  an  amount  of
compensation  to the  underwriter,  generally  referred to as the  underwriter's
concession or discount.

                               PORTFOLIO TURNOVER

         Although the Funds  generally  will not invest for  short-term  trading
purposes,  portfolio securities may be sold without regard to the length of time
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 higher  transaction  costs and may
result in a greater number of taxable transactions.  See "Portfolio Transactions
and Brokerage." Growth Portfolio's  portfolio turnover rate for the fiscal years
ended October 31, 1998 and 1997 was 81.06% and 67.54%,  respectively.  Small Cap
Portfolio's portfolio turnover rate for the fiscal years ended October 321, 1998
and 1997 was 81.75% and 151.52%, respectively.

                 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.

                                 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  (normally  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

                                      B-17
<PAGE>
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 (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 one 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.

                                      B-18
<PAGE>
                           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 to
the extent of the Fund's  earnings  and profits.  Distributions  of a Fund's net
capital gain  (whether  paid in cash or invested in  additional  shares) will be
taxable to shareholders as long-term  capital gain,  regardless of how long they
have held their Fund shares.

         Dividends  declared by a Fund in  October,  November or December of any
year and payable to  shareholders of record on a date in one of such months will
be deemed to have been paid by the Fund and received by the  shareholders on the
record date if the dividends  are paid by a Fund during the  following  January.
Accordingly,  such dividends will be taxed to shareholders for the year in which
the record date falls.

         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.

                                      B-19
<PAGE>
         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,
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

                                      B-20
<PAGE>
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

         Each  Fund is a  diversified  trust,  which is an  open-end  investment
management company, organized as a Delaware business trust on December 11, 1991.
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  twelve 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.

         Each Fund is one of a series of shares, each having separate assets and
liabilities,  of the  Trust.  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.

         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

                                      B-21
<PAGE>
Trustees in writing that they wish to communicate  with other  shareholders  for
the purpose of requesting a meeting to remove a Trustee. The Trustees will then,
if requested by the applicants,  mail at the applicants' expense the applicants'
communication to all other shareholders.  Except for a change in the name of the
Trust,  no  amendment  may be made  to the  Declaration  of  Trust  without  the
affirmative vote of the holders of more than 50% of its outstanding  shares. The
holders of shares have no pre-emptive or conversion  rights.  Shares when issued
are fully paid and  non-assessable,  except as set forth above. The Trust may be
terminated  upon the sale of its  assets  to  another  issuer,  if such  sale is
approved by the vote of the holders of more than 50% of its outstanding  shares,
or upon liquidation and  distribution of its assets,  if approved by the vote of
the holders of more than 50% of its shares. If not so terminated, the Trust will
continue indefinitely.

         Rule  18f-2  under  the 1940  Act  provides  that as to any  investment
company which has two or more series  outstanding  and as to any matter required
to be  submitted  to  shareholder  vote,  such matter is not deemed to have been
effectively  acted upon  unless  approved  by the  holders of a  "majority"  (as
defined in the Rule) of the voting  securities  of each  series  affected by the
matter.  Such  separate  voting  requirements  do not apply to the  election  of
Trustees or the ratification of the selection of accountants.  The Rule contains
special provisions for cases in which an advisory contract is approved by one or
more, but not all, series.  A change in investment  policy may go into effect as
to one or more  series  whose  holders so approve  the  change  even  though the
required vote is not obtained as to the holders of other affected series.

                              FINANCIAL STATEMENTS

         The annual  report to  shareholders  for the Funds for the fiscal  year
ended  October 31, 1998 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.

                                      B-22
<PAGE>
                                    APPENDIX
                             DESCRIPTION OF RATINGS

MOODY'S INVESTORS SERVICE, INC.: CORPORATE BOND RATINGS

         Aaa--Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various  protective  elements  are  likely to  change,  such  changes  as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.

         Aa--Bonds  which are rated Aa are  judged to be of high  quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds.  They are rated lower than the best bonds  because  margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements  may be of greater  amplitude  or there may be other  elements  present
which make the long-term risks appear somewhat larger than in Aaa securities.

         Moody's  applies  numerical  modifiers "1", "2" and "3" to both the Aaa
and Aa rating  classifications.  The  modifier "1"  indicates  that the security
ranks in the  higher  end of its  generic  rating  category;  the  modifier  "2"
indicates a mid-range  ranking;  and the modifier "3"  indicates  that the issue
ranks in the lower end of its generic rating category.

         A--Bonds which are rated A possess many favorable investment attributes
and are to be  considered  as upper medium  grade  obligations.  Factors  giving
security to principal and interest are  considered  adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.

         Baa--Bonds   which  are  rated  Baa  are  considered  as  medium  grade
obligations,  i.e.,  they are  neither  highly  protected  nor  poorly  secured.
Interest  payments and principal  security  appear  adequate for the present but
certain  protective  elements  may  be  lacking  or  may  be  characteristically
unreliable over any great period of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Standard & Poor's Ratings Group: Corporate Bond Ratings

         AAA--This is the highest  rating  assigned by S&P 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.

                                      B-23
<PAGE>
         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.

         An  S&P  commercial  paper  rating  is  a  current  assessment  of  the
likelihood of timely payment.  Ratings are graded into four categories,  ranging
from "A" for the highest quality obligations to "D" for the lowest.

         Issues  assigned  the  highest  rating,  A, are  regarded as having the
greatest  capacity for timely  payment.  Issues in this category are  delineated
with the numbers "1", "2" and "3" to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety  regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A-1" which possess extremely strong safety characteristics.  Capacity for
timely  payment on issues with the  designation  "A-2" is strong.  However,  the
relative  degree of safety is not as high as for issues  designated  A-1. Issues
carrying the designation "A-3" have a satisfactory  capacity for timely payment.
They are, however,  somewhat more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher designations.

                                      B-24


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission