This Amendment to the Registration Statement has been signed by the Boards of
Trustees of the Registrant and the Portfolios
As Filed With the Securities and Exchange Commission on December 15, 1999
File No. 33-44579
811-6498
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 34 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 36 [X]
PIC INVESTMENT TRUST
(Exact name of registrant as specified in charter)
300 North Lake Avenue
Pasadena, CA 91101-4106
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (including area code): (626) 449-8500
WILLIAM T. WARNICK
Provident Investment Counsel
300 North Lake Avenue
Pasadena, CA 91101-4106
(Name and address of agent for service of process)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[X] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
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<PAGE>
PROVIDENT INVESTMENT COUNSEL FUNDS A, B AND C
BALANCED FUND
GROWTH FUND
MID CAP FUND
SMALL COMPANY GROWTH FUND
PROSPECTUS
FEBRUARY __, 2000
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
The Funds at a Glance
The Principal Goals and Strategies of the Funds
The Principal Risks of Investing in the Funds
Who May Want to Invest
Performance
Fees and Expenses
Structure of the Funds and the Portfolios
More Information About the Funds' Investments,
Strategies and Risks
Management
The Advisor's Historical Performance Data
Your Account
Ways to Set Up Your Account
Calculation of Net Asset Value
How to Buy Shares
How to Sell Shares
Important Redemption Information
Investor Services
Shareholder Account Policies
Dividends, Capital Gains and Taxes
Distribution Options
Understanding Distributions
Transaction Details
Year 2000 Risk
Financial Highlights
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KEY FACTS
THE FUNDS AT A GLANCE
MANAGEMENT: Provident Investment Counsel (PIC), located in Pasadena, California
since 1951, is the Funds' Advisor. At December 31, 1999, total assets under
PIC's management were over $__ 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 it invests. Investors should carefully consider this investment approach.
The Balanced Fund A, Balanced Fund B and Balanced Fund C (the "Balanced Funds")
have the same investment objective and invest in the PIC Balanced Portfolio. The
Growth Fund A, Growth Fund B and Growth Fund C (the "Growth Funds") have the
same investment objective and invest in the PIC Growth Portfolio. The Mid Cap
Fund A, Mid Cap Fund B and Mid Cap Fund C (the "Mid Cap Funds") have the same
investment objective and invest in PIC Mid Cap Portfolio. The Small Company
Growth Fund A, Small Company Growth Fund B and Small Company Growth Fund C (the
"Small Company Growth Funds") have the same investment objective and invest in
the PIC Small Cap Portfolio.
For reasons relating to costs or a change in investment goal, among others, each
Fund could switch to another pooled investment company or decide to manage its
assets itself. None of the Funds in the Prospectus is currently contemplating
such a move.
THE PRINCIPAL GOALS AND STRATEGIES OF THE FUNDS
BALANCED FUNDS
GOAL: Total return -- that is, a combination of income and capital growth, while
preserving capital.
STRATEGY: Invest, through the PIC Balanced Portfolio, in a combination of high
quality growth stocks and bonds. PIC considers companies with high rates of
growth in sales and earnings, strong financial characteristics, a propriety
product, industry leadership, significant management ownership and well thought
out management goals, plans and controls to be high quality. In selecting common
stocks, PIC does an analysis of individual companies and invests in companies of
any size which are currently experiencing a growth of earnings and revenue which
is above the average relative to its industry peers and the equity market in
general. The Balanced Portfolio will invest only in fixed-income securities that
have been rated investment grade by a nationally recognized statistical rating
agency, or are the unrated equivalent. In selecting fixed-income securities, PIC
examines the relationship between long-term and short-term interest rates,
taking into account historical relationships and the current economic
environment.
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GROWTH FUNDS
GOAL: Long term growth of capital.
STRATEGY: Invest, through the PIC Growth Portfolio, in high quality growth
stocks. PIC considers companies with high rates of growth in sales and earnings,
strong financial characteristics, a propriety product, industry leadership,
significant management ownership and well thought out management goals, plans
and controls to be high quality. In selecting common stocks, PIC does an
analysis of individual companies and invests in companies of any size which are
currently experiencing a growth of earnings and revenue which is above the
average relative to its industry peers and the equity market in general.
MID CAP FUNDS
GOAL: Long term growth of capital.
STRATEGY: Invest, through the PIC Mid Cap Portfolio, mainly in the common stock
of medium-sized companies. In selecting investments, PIC does an analysis of
individual companies and invests in those medium-capitalization companies which
it believes have the best prospects for future growth of earnings and revenue.
SMALL COMPANY GROWTH FUNDS
GOAL: Long term growth of capital.
STRATEGY: Invest, through the PIC Small Cap Portfolio, mainly in the common
stock 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 of
earnings and revenue.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
MARKET RISK: The value of each Fund's investments will vary from day to day. The
value of the securities in the Fund's investment generally reflects market
conditions, interest rates and other company, political and economic news. Stock
prices can rise and fall in response to these factors for short or extended
period of time. Therefore, when you sell your shares, you may receive more or
less money that you originally invested.
SMALL AND MEDIUM COMPANY RISK: Each Fund may invest in the securities of small
and medium-sized companies. However, the Mid Cap Funds primarily invest in the
securities of medium-sized companies and the Small Company Growth Funds
primarily invest in the securities of small-sized companies. The securities of
medium and small, less well-known companies may be more volatile than those of
larger companies. Such companies may have limited product lines, markets or
financial resources and their securities may have limited market liquidity.
These risks are greater for small-sized companies.
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BOND RISK: The Balanced Funds invest in bonds. A bond's market value is affected
significantly by changes in interest rates. Generally, when interest rates rise,
the bond's market value declines and when interest rates decline, its market
value rises. Generally, the longer a bond's maturity, the greater the risk and
the higher its yield. Conversely, the shorter a bond's maturity, the lower the
risk and the lower its yield. A bond's value can also be affected by changes in
the bond's credit quality rating or its issuer's financial condition.
By itself, no Fund is a complete, balanced investment plan. And no Fund can
guarantee that it will reach its goal.
WHO MAY WANT TO INVEST
The Balanced Funds may be appropriate for investors who seek potentially high
long-term returns, but hope to see less fluctuation in the value of their
investment.
The Growth Funds may be appropriate for investors who seek potentially high
long-term returns, but are willing to accept the greater risk of investing in
growth stocks. The Funds are designed for those investors seeking capital
appreciation through a diversified portfolio of securities of companies of all
sizes.
The Mid Cap Funds may be appropriate for investors who seek potentially high
long-term returns, but are willing to accept the greater risk of investing in
medium-capitalization companies. The Funds are designed for those investors who
want to focus on medium-capitalization companies.
The Small Company Growth Funds may be appropriate for investors who seek
potentially above-average long-term returns, but are willing to accept the
greater risk of investing in small- capitalization companies. The Funds are
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 A. 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 indexes. The bar charts do not reflect sales charges,
which would lower the returns shown. This past performance will not necessarily
continue in the future. Because the Funds B and Funds C have been in operation
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for less than a full calendar year, their total return bar chart and performance
table have not been included.
[The following is the bar chart]
BALANCED FUND A
Calendar Year Total Returns (%)
93 -
94 -
95 -
96 -
97 -
98 -
99 -
[End of bar chart]
Best quarter: up __%, __ quarter 199_
Worst quarter: down ____%, ___ quarter 199_
Average Annual Total Returns
as of December 31, 1999
Since Inception
1 Year 5 Years June 11, 1992
------ ------- -------------
Balanced Fund A ____% ____% ____%
S&P 500 Index* ____ ____ ____
Lehman Brothers Government/
Corporate Bond Index** ____ ____ ____
S&P 500 Index and
Lehman Brothers Government/
Corporate Bond Index*** ____ ____ ____
Lipper Balanced Fund Index**** ____ ____ ____
- ----------
* The S&P 500 Index is an unmanaged index generally representative of the
market for stocks of large-sized companies.
** The Lehman Brothers Government/Corporate Bond Index is an unmanaged
market-weighted index which is generally regarded as representative of
the market for domestic bonds.
*** These figures represent a blend of the performance of both the S&P 500
Index (60%) and the Lehman Brothers Government/Corporate Bond Index
(40%). This combined index reflects the asset allocation between equity
and fixed-income securities that PIC intends to maintain.
**** The Lipper Balanced Fund Index measures the performance of those mutual
funds that Lipper Analytical Services, Inc. has classified as "balanced."
Balanced funds maintain a portfolio of both stocks and bonds, typically
with a stock ratio of approximately 60% of assets and a bond ratio of of
approximately 40% of assets. The funds in this index have a similar
investment objective as the Balanced Funds.
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[The following is the bar chart]
GROWTH FUND A
Calendar Year Total Returns (%)
98 -
99 -
[End of bar chart]
Best quarter: up ____%, ___ quarter 199_
Worst quarter: down ___%, ___ quarter 199_
Average Annual Total Returns
as of December 31, 1999
Since Inception
1 Year February 3, 1997
------ ----------------
Growth Fund A ____% ____%
S&P 500 Index* ____ ____
- ----------
* The S&P 500 Index is an unmanaged index generally representative of the
market for the stocks of large-sized U.S. companies.
[The following is the bar chart]
MID CAP FUND A
Calendar Year Total Returns (%)
98 -
99 -
[End of bar chart]
Best quarter: up ____%, ___ quarter 199_
Worst quarter: down ____%, ____quarter 199_
Average Annual Total Returns
as of December 31, 1999
Since Inception
1 Year December 31, 1997
------ -----------------
Mid Cap Fund A ____% ____%
Russell Midcap Index* ____ ____
- ----------
* The Russell Midcap Index measures the performance of the 800 smallest
companies in the Russell 1000 Index. As of ______, 1999, the average market
capitalization of companies in the Russell 1000 Index was approximately
$___ billion.
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[The following is the bar chart]
SMALL COMPANY GROWTH FUND A
Calendar Year Total Returns (%)
98 -
99 -
[End of bar chart]
Best quarter: up ____%, ___ quarter 199_
Worst quarter: down ____%, ___ quarter 199_
Average Annual Total Returns
as of December 31, 1999
Since Inception
1 Year February 3, 1997
------ ----------------
Small Company Growth Fund A ____% ____%
Russell 2000 Growth Index* ____ ____
- ----------
* The Russell 2000 Growth Index measures the performance of those companies
in the Russell 2000 Index with higher price-to-book ratios and lower
forecasted growth values. The Russell 2000 Index is a recognized index of
small-capitalization companies.
FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUNDS.
Provident Provident Provident
Investment Investment Investment
Counsel Counsel Counsel
Funds A Funds B Funds C
------- ------- -------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed
on purchases (as a percentage of
offering price) 5.75% None None
Maximum deferred sales (load) charge
(as a percentage of purchase or sale
price whichever is less) None 5.00% 1.00%
Redemption fee None* None None
Exchange fee None None None
- ----------
* Shareholders who buy $1 million of Fund A shares without paying a sales
charge will be charged a 1% fee on redemptions made within one year of
purchase.
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ANNUAL FUND OPERATING EXPENSES*
(expenses that are deducted from Fund assets)
Balanced Growth Mid Cap Small Company
Fund A Fund A Fund A Growth Fund A
------ ------ ------ -------------
Management Fee (paid by
the Portfolio) 0.60% 0.80% 0.70% 0.80%
Distribution and Service
(12b-1) Fees (paid by the Fund) 0.25% 0.25% 0.25% 0.25%
Other Expenses (paid by the
Fund and the Portfolio) 5 % % %
Administration Fee to PIC
(paid by the Fund) 0.20% 0.20% 0.20% 0.20%
Shareholder Services Fee
(paid by the Fund) 0.15% 0.15% 0.15% 0.15%
----- ----- ----- -----
Total Annual Fund
Operating Expenses % % % 3%
Expense Reimbursements *** ( %) ( %) ( %) ( %)
----- ----- ----- -----
Net Expenses 1.05% 1.35% 1.39% 1.55%
===== ===== ===== =====
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Balanced Growth Mid Cap Small Company
Fund B Fund B Fund B Growth Fund B
------ ------ ------ -------------
Management Fee (paid by
the Portfolio) 0.60% 0.80% 0.70% 0.80%
Distribution and Service
(12b-1) Fees (paid by the Fund) 1.00% 1.00% 1.00% 1.00%
Other Expenses (paid by the
Fund and the Portfolio) % % % %
Administration Fee to PIC
(paid by the Fund) 0.20% 0.20% 0.20% 0.20%
----- ----- ----- -----
Total Annual Fund
Operating Expenses % % % %
Expense Reimbursements *** ( %) ( %) ( %) ( %)
----- ----- ----- -----
Net Expenses 1.90% 2.10% 2.14% 2.30%
===== ===== ===== =====
Balanced Growth Mid Cap Small Company
Fund C Fund C Fund C Growth Fund C
------ ------ ------ -------------
Management Fee (paid by
the Portfolio) 0.60% 0.80% 0.70% 0.80%
Distribution and Service
(12b-1) Fees (paid by the Fund) 1.00% 1.00% 1.00% 1.00%
Other Expenses** (paid by the
Fund and the Portfolio) 0.29% 2.74% 1.86% 3.00%
Administration Fee to PIC
(paid by the Fund) 0.20% 0.20% 0.20% 0.20%
----- ----- ----- -----
Total Annual Fund
Operating Expenses 2.09% 4.74% 3.76% 5.00%
Expense Reimbursements *** (0.19%) (2.64%) (1.62%) (2.70%)
----- ----- ----- -----
Net Expenses 1.90% 2.10% 2.14% 2.30%
===== ===== ===== =====
- ----------
* The tables above and the Example below reflect the expenses of the Funds
and the Portfolios.
** Other Expenses are based on estimated amounts for the current fiscal year.
*** Pursuant to a contract with the Funds, PIC has agreed to reimburse each
Fund and Portfolio for investment advisory fees and other expenses for ten
years ending March 1, 2010. 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.
10
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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 if you redeemed your
shares at the end of the period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Balanced Fund A $ $ $ $
Balanced Fund B $ $ $ $
Balanced Fund C $ $ N/A N/A
Growth Fund A $ $ $ $
Growth Fund B $ $ $ $
Growth Fund C $ $ N/A N/A
Mid Cap Fund A $ $ $ $
Mid Cap Fund B $ $ $ $
Mid Cap Fund C $ $ N/A N/A
Small Company Growth Fund A $ $ $ $
Small Company Growth Fund B $ $ $ $
Small Company Growth Fund C $ $ N/A N/A
You would pay the following expenses if you did not redeem your shares:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Balanced Fund A $ $ $ $
Balanced Fund B $ $ $ $
Balanced Fund C $ $ N/A N/A
Growth Fund A $ $ $ $
Growth Fund B $ $ $ $
Growth Fund C $ $ N/A N/A
Mid Cap Fund A $ $ $ $
Mid Cap Fund B $ $ $ $
Mid Cap Fund C $ $ N/A N/A
Small Company Growth Fund A $ $ $ $
Small Company Growth Fund B $ $ $ $
Small Company Growth Fund C $ $ N/A N/A
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'
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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.
MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS, STRATEGIES AND RISKS
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.
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. This is often referred to as
a "bottom-up" approach to investing. PIC seeks companies that have displayed
exceptional profitability, market share, return on equity, reinvestment rates
and sales and dividend growth. Companies with significant management ownership
of stock, strong management goals, plans and controls; and leading proprietary
positions in given market niches are especially attractive. Finally, the
valuation of each company is assessed relative to its industry, earnings growth
and the market in general.
Each Portfolio invests to a limited degree in foreign securities. Foreign
investments involve additional risks including currency fluctuations, political
and economic instability, differences in financial reporting standards, and less
stringent regulation of securities markets.
In determining whether to sell a security, PIC considers the following: (a) a
fundamental change in the future outlook of the company; (b) the company's
performance compared to other companies in its peer group; and (c) whether the
security has reached its target price.
Each Portfolio seeks to spread investment risk by diversifying its holdings
among many companies and industries. PIC normally invests each Portfolio's
assets according to its investment strategy. However, each Portfolio may depart
from its principal investment strategies by making short-term investments in
high-quality 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, the Advisor will not consider the rate of portfolio
turnover to be a limiting factor in determining whether or 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.
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PROVIDENT INVESTMENT COUNSEL BALANCED FUNDS
The Balanced Funds seek total return while preserving capital by investing in
the PIC Balanced Portfolio. The Balanced Portfolio will attempt to achieve total
return through investments in equity and fixed-income securities. The
Portfolio's investments in equity securities will principally be in shares of
common stock.
In selecting investments for the Balanced Portfolio, PIC will include the common
stock of companies of various sizes which are currently experiencing a growth of
earnings and revenue which is above the average relative to its industry peers
and the equity market general. The Balanced Portfolio will invest in a range of
small, medium and large companies. The minimum market capitalization of a
portfolio security is expected to be $1 billion, and the average market
capitalization is currently approximately $__ billion. A company's market
capitalization is the total market value of its outstanding common stock. Equity
securities in which the Balanced Portfolio invests typically average less than a
1% dividend. Currently, approximately __% of the shares of common stock in which
the Balanced Portfolio invests are listed on the New York or American Stock
Exchanges, and the remainder are traded on the NASDAQ system or are otherwise
traded over-the-counter.
The Balanced Portfolio will also invest at least 25%, and may invest up to 70%,
of its total assets in fixed-income securities, both to earn current income and
to achieve gains from an increase in the value of the fixed-income securities.
The types of fixed-income securities in which the Balanced Portfolio will invest
include U.S. dollar denominated corporate debt securities and U.S. Government
securities. The Balanced Portfolio will invest only in fixed-income securities
that are rated investment grade by a nationally recognized statistical rating
agency, or are the unrated equivalent. Lower-rated securities have higher credit
risks.
Fixed-income securities have varying degrees of quality and varying levels of
sensitivity to changes in interest rates. Longer-term fixed-income securities
are generally more sensitive to interest rate changes than short-term
fixed-income securities. In general, prices of fixed-income securities rise when
interest rates fall, and vice versa.
In selecting fixed-income securities, PIC does not base its investment decisions
on forecasts of future interest rates or economic events. Rather, in selecting
fixed-income securities for the Balanced Portfolio, PIC examines the
relationship between long-term and short-term interest rates, taking into
account historical relationships and the current economic environment. PIC seeks
to identify sectors and individual securities within certain sectors, which it
has determined are undervalued. PIC's analysis takes into account historical
data and current market conditions.
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PROVIDENT INVESTMENT COUNSEL GROWTH FUNDS
The Growth Funds seek long term growth of capital by investing in the PIC Growth
Portfolio, which in turn invests primarily in shares of common stock. Under
normal circumstances, the Growth Portfolio will invest at least 80% of its
assets in shares of common stock. In selecting investments for the Growth
Portfolio, PIC will include companies of various sizes which are currently
experiencing a growth of earnings and revenue which is above the average
relative to its industry peers and the equity market in general. The minimum
market capitalization of a portfolio security is expected to be $1 billion, and
the average market capitalization is currently approximately $__ billion. Equity
securities in which the Growth Portfolio invests typically average less than a
1% dividend. Currently, approximately __% of the shares of common stock 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 MID CAP FUNDS
The Mid Cap Funds seek long term growth of capital by investing in the PIC Mid
Cap Portfolio, which in turn invests primarily in the common stock of
medium-sized companies.
PIC will invest at least 65%, and normally at least 95%, of the Mid Cap
Portfolio's total assets in these securities. The Mid Cap Portfolio has
flexibility, however, to invest the balance in other
market capitalizations and security types.
Medium-sized companies are those whose market capitalizations fall within the
range of $500 million to $5 billion. Investing in medium capitalization stocks
may involve greater risk than investing in large capitalization stocks, since
they can be subject to more abrupt or erratic movements in value. However, they
tend to involve less risk than stocks of small companies. Over the course of a
business cycle, medium capitalization stocks have shown greater growth potential
than those of large capitalization stocks.
PROVIDENT INVESTMENT COUNSEL SMALL COMPANY GROWTH FUNDS
The Small Company Growth Funds seek long term growth of capital by investing in
the PIC Small Cap Portfolio, which in turn invests primarily in the common stock
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
at the time of purchase are $1 billion 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 tend to be more volatile. Over the course of a business cycle,
however, small capitalization stocks have shown greater growth potential than
those of larger capitalization stocks.
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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 of the Portfolios,
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, the Balanced
Portfolio paid PIC __%; the Growth Portfolio paid ___%; the Mid Cap Portfolio
paid ___%; and the Small Cap Portfolio paid ___%.
THE ADVISOR'S HISTORICAL PERFORMANCE DATA
The investment results presented below are not the results of the Funds. They
are for composites of all accounts managed by PIC with substantially similar
investment objectives and strategies to the Funds.
The composite performance data was calculated in accordance with recommended
standards for the Association of Investment Management and Research (AIMR)
retroactively applied for all time periods. AIMR is a non-profit membership and
education organization with more than 60,000 members worldwide that, among other
things, has formulated a set for performance presentation standards for
investment advisers. These AIMR performance presentation standards are intended
to (i) promote full and fair presentations by investment advisers of their
performance results, and (ii) ensure uniformity in reporting so that performance
results of investments advisers are directly comparable.
All returns presented were calculated on a total return basis and include all
dividends and interest, accrued income and realized and unrealized gains and
losses. All returns do not reflect investment management fees and other
operating expenses paid by the accounts in the composites. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. Cash and equivalents are included in performance returns. The
composites' returns are calculated on a time- weighted basis.
These composites are unaudited and are not intended to predict or suggest the
returns that might be expected for the Funds. Figures reflect average annual
returns. Average annual total returns show that cumulative total returns for a
stated time period (i.e., 3, 7 or 10 years) have been averaged over the period.
You should note that the Funds will compute and disclose average annual return
using the standard formula set forth in SEC rules, which differs in certain
respects from the methodology used below to calculate PIC's performance. The SEC
total return calculation method calls for computation and disclosure of an
15
<PAGE>
average annual compounded rate of return for one, five and ten year periods or
shorter periods, from inception. The calculation provides a rate of return that
equates a hypothetical initial investment of $1,000 to an ending redeemable
value. The formula requires that returns to be shown for the Funds will be net
of advisory fees as well as any maximum applicable sales charges and all other
Fund operating expenses.
The accounts included in the composites are not mutual funds and are not subject
to the same rules and regulations imposed by the 1940 Act and the Internal
Revenue Code (for example, diversification and liquidity requirements and
restrictions on transactions with affiliates) as the Funds or to the same types
of expenses that the Funds pay. These differences might have adversely affected
the performance figures shown below. The Indices are not managed and do not pay
any fees or expenses.
PERFORMANCE ENDED DECEMBER 31, 1999
1 3 7 10
Year Years Years Years
---- ----- ----- -----
PIC Balanced Composite ____% ____% ____% ____%
S&P 500 Index(1) ____ ____ ____ ____
Lehman Brothers Government/
Corporate Bond Index(2) ____ ____ ____ ____
S&P 500 Index/Lehman Brothers
Government/Corporate Bond Index(3) ____ ____ ____ ____
Lipper Balanced Fund Index(4) ____ ____ ____ ____
PIC Large Cap Growth Composite ____ ____ ____ ____
S&P 500 Index (1) ____ ____ ____ ____
Lipper Growth Fund Index (5) ____ ____ ____ ____
PIC Mid Cap Growth Equity Composite ____ ____ ____ ____
Russell Midcap Growth Index (6) ____ ____ ____ ____
PIC Small Cap Growth
Comingled Fund ____ ____ ____ ____
Russell 2000 Growth Index (7) ____ ____ ____ ____
Lipper Small Cap Fund Index (8) ____ ____ ____ ____
- ----------
(1) The S&P 500 Index is an unmanaged index generally representative of the
market for stocks of large-sized companies.
(2) The Lehman Brothers Government/Corporate Bond Index is an unmanaged
market-weighted index which is generally regarded as representative of the
market for domestic bonds.
(3) These figures represent a blend of the performance of both the S&P 500
Index (60%) and the Lehman Brothers Government/Corporate Bond Index (40%).
This combined index mirrors the composition of the PIC Balanced Composite.
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<PAGE>
(4) The Lipper Balanced Fund Index measures the performance of those mutual
funds that Lipper Analytical Services, Inc. has classified as "balanced."
Balanced funds maintain a portfolio of both stocks and bonds, typically
with a stock ratio of approximately 60% of assets and a bond ratio of
approximately 40% of assets. The funds in this index have a similar
investment objective as the Balanced Funds.
(5) The Lipper Growth Fund Index is composed of the 30 largest funds that
normally invest in companies with long-term earnings expected to grow
significantly faster than the earnings of the stocks represented in the
major unmanaged indices. The funds in this index have a similar investment
objective as the Growth Funds.
(6) The Russell Midcap Growth Index measures the performance of those companies
in the Russell 1000 Growth Index with higher price-to-book ratios and
higher forecasted growth values. The Russell 1000 Growth Index is a
recognized index of larger capitalization companies.
(7) The Russell 2000 Growth Index measures the performance of those companies
in the Russell 2000 Index with higher price-to-book ratios and lower
forecasted growth values. The Russell 2000 Index is a recognized index of
small-capitalization companies.
(8) The Lipper Small Cap Fund Index is composed of the 30 largest funds that by
prospectus or portfolio practice invest primarily in companies with market
capitalizations of less than $1 billion at the time of purchase. The funds
in this index have a similar investment objective as the Small Company
Growth Funds.
YOUR ACCOUNT
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT TENANT
FOR YOUR GENERAL INVESTMENT NEEDS
Individual accounts are owned by one person. Joint accounts can have two or more
owners (tenants).
RETIREMENT
TO SHELTER YOUR RETIREMENT SAVINGS FROM TAXES
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible. Retirement accounts require special applications and typically
have lower minimums.
* INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow anyone of legal age and under
70 1/2 with earned income to invest up to $2000 per tax year. Individuals
can also invest in a spouse's IRA if the spouse has earned income of less
than $250.
* ROLLOVER IRAS retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
* KEOGH OR CORPORATE PROFIT SHARING AND MONEY PURCHASE PENSION PLANS allow
self-employed individuals or small business owners (and their employees) to
make tax-deductible contributions for themselves and any eligible employees
up to $30,000 per year.
* SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAS) provide small business owners
or those with self-employed income (and their eligible employees) with many
of the same advantages as a Keogh, but with fewer administrative
requirements.
* 403(b) CUSTODIAL ACCOUNTS are available to employees of most tax-exempt
institutions, including schools, hospitals and other charitable
organizations.
* 401(k) PROGRAMS allow employees of corporations of all sizes to contribute
a percentage of their wages on a tax-deferred basis. These accounts need to
be established by the trustee of the plan.
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<PAGE>
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.
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. The NAV for Fund A,
Fund B and Fund C shares will generally differ because they have different
expenses.
DECIDING WHICH FEE STRUCTURE IS BEST FOR YOU
As mentioned earlier, there are Funds A, Funds B and Funds C. While all the
Funds invest in the same PIC Portfolio (for example, Balanced Fund A, Balanced
Fund B and Balanced Fund C invest in the PIC Balanced Portfolio), each Fund has
separate sales charge and expense structures. Because of the different expense
structures, Fund A, Fund B and Fund C will have different NAVs and dividends.
The principal advantages of Fund A shares are the lower overall expenses, the
availability of quantity discounts on volume purchases and certain account
privileges that are available only on Fund A shares. The principal advantage of
Fund B and Fund C shares is that all of your money is put to work from the
outset. The difference between Fund B and Fund C depends on how long you
anticipate having your money invested. Generally, if you have a short investment
horizon, you might consider purchasing Fund C shares as opposed to Fund B
shares.
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<PAGE>
FUND A SHARES
Fund A shares are sold at the public offering price, which includes a front-end
sales charge. Shares are purchased at the next NAV calculated after your
investment is received by the Transfer Agent with complete information and
meeting all the requirements discussed in this Prospectus, including the shares
charge. The sales charge declines with the size of your purchase, as shown
below:
As a % of As a % of
Your investment offering price your investment
- --------------- -------------- ---------------
Up to $49,999 5.75% 6.10%
$50,000 to $99,999 4.50% 4.71%
$100,000 to $249,999 3.50% 3.63%
$250,000 to $499,999 2.50% 2.56%
$500,000 to $999,999 2.00% 2.04%
$1,000,000 and over None* None*
- ----------
* Shareholders who buy $1 million of Fund A shares without paying a sales
charge will be charged a 1% fee on redemptions made within one year of
purchase.
FUND A SALES CHARGE WAIVERS
Shares of Fund A may be sold at net asset value (free of any sales charge) to:
(1) shareholders investing $1 million or more; (2) current shareholders of the
Balanced, Growth and Small Company Growth Funds A as of June 30, 1998 and the
Mid Cap Fund A as of September 30, 1998; (3) current or retired directors,
trustees, partners, officers and employees of the Trust, the Distributor, PIC
and its affiliates, certain family members of the above persons, and trusts or
plans primarily for such persons; (4) current or retired registered
representatives of broker-dealers having sales agreements with the Distributor
or full-time employees and their spouses and minor children and plans of such
persons; (5) investors who redeem shares from an unaffiliated investment company
which has a sales charge and use the redemption proceeds to purchase Fund A
shares within 60 days of the redemption; (6) trustees or other fiduciaries
purchasing shares for certain retirement plans or organizations with 60 or more
eligible employees; (7) investment advisors and financial planners who place
trades for their own accounts or the accounts of their clients either
individually or through a master account and who charge a management, consulting
or other fee for their services; (8) employee-sponsored benefit plans in
connection with purchases of Fund A shares made as a result of
participant-directed exchanges between options in such a plan; (9) "wrap
accounts" for the benefit of clients of broker-dealers, financial institutions
or financial planners having sales or service agreements with the Distributor or
another broker-dealer or financial institution with respect to sales of Fund A
shares; and (10) such other persons as are determined by the Board of Trustees
(or by the Distributor pursuant to guidelines established by the Board) to have
acquired Fund A shares under circumstances not involving any sales expense to
the Trust or the Distributor.
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<PAGE>
FUND A SALES CHARGE REDUCTIONS
There are several ways you can combine multiples purchases of Fund A shares to
take advantage of the breakpoints in the sales charge schedule. These can be
combined in any manner.
ACCUMULATION PRIVILEGE - This lets you add the value of shares of any of the
Funds A you and your family already own to the amount of your next purchase of
Fund A shares for purposes of calculating the sales charge.
LETTER OF INTENT - This lets you purchase shares of a Fund A and any other Fund
A over a 13-month period and receive the same sales charge as if all the shares
had been purchased at one time.
COMBINATION PRIVILEGE - This lets you combine shares of one or more Funds A for
the purpose of reducing the sales charge on the purchase of Fund A shares.
FUND B AND FUND C SHARES
The price you will pay to buy Fund B or Fund C shares is based on the Fund's
NAV. Shares are purchased at the next NAV calculated after your investment is
received by the Transfer Agent with complete information and meeting all the
requirements discussed in this Prospectus.
You may be charged a contingent deferred sales charge ("CDSC") if you sell your
Fund B or Fund C shares within a certain time after you purchased them. There is
no CDSC imposed on shares which you acquire by reinvesting your dividends. The
CDSC is based on the original cost of your shares or the market value of them
when you sell, whichever is less. When you place an order to sell your shares,
we will first sell any shares in your account which are not subject to a CDSC.
Next we will sell shares subject to the lowest CDSC.
If you sell your Fund C shares within one full year of purchase, you may be
charged a 1.00% CDSC.
The CDSC for Fund B shares are as follows:
Years after Purchase CDSC
-------------------- ----
1 5.00%
2 4.00%
3 3.00%
4 3.00%
5 2.00%
6 1.00%
Within the 7th Year None
After seven years, your Fund B shares automatically will convert to a class of
shares with the same investment objective and policies as your Fund. For
example, if you own shares of Balanced Fund B, they will be converted to a new
class of Balanced Fund shares to be established. The new class of shares will
have lower distribution fees. This will mean that your Fund account will be
subject to lower overall charges. The conversion will be a non-taxable event for
you.
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<PAGE>
The CDSC for Fund B and Fund C shares may be reduced or waived under certain
circumstances and for certain groups. Call (800) 618-7643 for details.
DISTRIBUTION PLANS
The Trust has adopted plans pursuant to Rule 12b-1 that allows each Fund to pay
distribution fees for the sale and distribution of its shares. The plan with
respect to Fund A shares provides for the payment of a distribution fee at the
annual rate of 0.25% of each Fund's average daily net assets. The plans with
respect to Fund B and Fund C shares provides for the payment of a distribution
fee at the annual rate of 0.75% of each Fund's average daily net assets and a
service fee at the annual rate of 0.25% of each Fund's average daily net assets.
Because these fees are paid out of a Fund's assets, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
SHAREHOLDER SERVICES PLAN
In addition, the Trust, on behalf of each Fund A, has entered into a Shareholder
Services Plan with the Advisor. Under the Shareholder Services Plan, the Advisor
will provide, or arrange for others to provide, certain shareholder services to
shareholders of each Fund A. The Shareholder Services Plan provides for the
payment to the Advisor of a service fee at the annual rate of 0.15% of each Fund
A's average daily net assets.
HOW TO BUY SHARES
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 $2,000
For retirement accounts $ 500
For automatic investment plans $ 250
TO ADD TO AN ACCOUNT $ 250
For retirement plans $ 250
Through automatic investment plans $ 100
MINIMUM BALANCE $1,000
For retirement accounts $ 500
FOR INFORMATION: (800) 618-7643
TO INVEST
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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
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 by the Transfer Agent with complete
information and meeting all the requirements discussed in this Prospectus. You
may be charged a CDSC on the sale of your Fund B or Fund C shares.
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.
Shareholders redeeming their shares by mail should submit written instructions
with a guarantee of their signature(s) by an eligible institution acceptable to
the Funds' Transfer Agent, such as a domestic bank or trust company, broker,
dealer, clearing agency or savings association, who are participants in a
medallion program recognized by the Securities Transfer Association. The three
recognized medallion programs are Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange,
Inc. Medallion Signature Program (MSP). Signature guarantees that are not part
of these programs will not be accepted. A notary public cannot provide a
signature guarantee.
SELLING SHARE 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.
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<PAGE>
MAIL YOUR LETTER TO:
Provident Investment Counsel Funds
P.O. Box 8943
Wilmington, DE 19899
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 * The letter of instructions must be
PERSON Tenant, Sole Propri- signed by all persons required to
etorship, UGMA, UTMA sign for transactions, exactly as
their names appear on the account.
Retirement Account * The account owner should complete a
retirement distribution form. Call
(800) 618-7643 to request one.
Trust * The trustee must sign the letter
indicating capacity as trustee. If
the trustee's name is not in the
account registration, provide a copy
of the trust document certified
within the last 60 days.
Business or * At least one person authorized by
Organization corporate resolutions to act on the
account must sign the letter.
* Include a corporate resolution with
corporate seal or a signature
guarantee.
Executor, * Call (800) 618-7643 for instructions.
Administrator,
Conservator,
Guardian
WIRE All account types * You must sign up for the wire
except retirement feature before using it. To verify
that it is in place, call (800)
618-7643. Minimum 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.
23
<PAGE>
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 Fund A shares and buy shares of other
Funds A, sell your Fund B shares and buy shares of other Funds B or sell your
Fund C shares and buy shares of other Funds C by telephone or in writing. Note
that exchanges into each Fund are limited to four per calendar year, and that
they may have tax consequences for you. 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. This service is
available to Fund A account holders only.
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.
REINVESTMENT AFTER REDEMPTION
If you redeem shares in your Fund A account, you can reinvest within 90 days
from the date of redemption all or any part of the proceeds in shares of the
same Fund or any other Fund A, at net asset value, on the date the Transfer
Agent receives your purchase request. To take advantage of this option, send
your reinvestment check along with a written request to the Transfer agent with
ninety days from the date of your redemption. Include your account number and a
statement that you are taking advantage of the "Reinvestment Privilege." If your
reinvestment is into a new account, it must meet the minimum investment and
other requirements of the fund into which the reinvestment is being made.
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.
24
<PAGE>
DISTRIBUTION OPTIONS
When you open an account, specify on your application how you want to receive
your distributions. If the option you prefer is not listed on the application,
call (800) 618-7643 for instructions. The Funds offer three options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the Fund. If you do not
indicate a choice on your application, you will be assigned this option.
2. INCOME-EARNED OPTION. Your capital gain distributions will be automatically
reinvested, but you will be sent a check for each dividend distribution.
3. CASH OPTION. You will be sent a check for your dividend and capital gain
distributions.
For retirement accounts, all distributions are automatically reinvested. When
you are over 59 1/2 years old, you can receive distributions in cash.
When a Fund deducts a distribution from its NAV, the reinvestment price is the
Fund's NAV at the close of business that day. Cash distribution checks will be
mailed within seven days.
UNDERSTANDING DISTRIBUTIONS
As a Fund shareholder, you are entitled to your share of the Fund's net income
and gains on its investments. The Fund passes its 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--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 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.
25
<PAGE>
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.
26
<PAGE>
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 $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. You will not be charged a CDSC for a low
balance redemption from a Fund B or a Fund C.
Please note this about exchanges
As a shareholder, you have the privilege of exchanging shares of Fund A for
shares of other Funds A, shares of Fund B for shares of other Funds B and shares
of Fund C for shares of other Funds C. 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 are considered a sale and purchase of Fund shares for tax
purposes and may result in a capital gain or loss.
* You may exchange Fund A shares only for other Fund A shares.
* You may exchange Fund B shares only for other Fund B shares.
* You may exchange Fund C shares only for other Fund C shares.
* 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.
27
<PAGE>
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.
FINANCIAL HIGHLIGHTS
These tables show the financial performance for Funds A and Funds B for up to
the periods shown. The Funds C are new series of the Trust for which financial
highlights are not available. Certain information reflects financial results for
a single Fund share. "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
_____________________, Independent Certified Public Accountants. Their reports
and the Funds' financial statements are included in the Annual Reports.
28
<PAGE>
PROVIDENT INVESTMENT COUNSEL FUNDS A, B AND C
BALANCE FUND
GROWTH FUND
MID CAP FUND
SMALL COMPANY GROWTH FUND
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 A and B
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' reports and 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' reports and 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 the Commission at 1-202-942-8090. Reports and other information about
the Funds are available:
Free of charge from the Commission's EDGAR database on the Commission's Internet
website at http://www.sec.gov
For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549- 0102 or by electronic request at the following e-mail
address: [email protected].
(The Funds' SEC Investment Company Act
File No. is 811-06498)
<PAGE>
PIC INVESTMENT TRUST
Statement of Additional Information
Dated February __, 2000
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 Balanced Fund A, Provident Investment Counsel Growth Fund A, Provident
Investment Counsel Mid Cap Fund A, Provident Investment Counsel Small Company
Growth Fund A, Provident Investment Counsel Balanced Fund B, Provident
Investment Counsel Growth Fund B, Provident Investment Counsel Mid Cap Fund B,
Provident Investment Counsel Small Company Growth Fund B, Provident Investment
Counsel Balanced Fund C, Provident Investment Counsel Growth Fund C, Provident
Investment Counsel Mid Cap Fund C, and Provident Investment Counsel Small
Company Growth Fund C, series of PIC Investment Trust (the "Trust"), which share
a common prospectus. There are three other series of the Trust: Provident
Investment Counsel Growth Fund I, Provident Investment Counsel Small Company
Growth Fund I and Provident Investment Counsel Small Cap Growth Fund I. The
Provident Investment Counsel Balanced Fund A, the Provident Investment Counsel
Balanced Fund B and the Provident Investment Counsel Balanced Fund C (the
"Balanced Funds") invest in the PIC Balanced Portfolio; the Provident Investment
Counsel Growth Fund A, the Provident Investment Counsel Growth Fund B and the
Provident Investment Counsel Growth Fund C (the "Growth Funds") invest in the
PIC Growth Portfolio; the Provident Investment Counsel Mid Cap Fund A, the
Provident Investment Counsel Mid Cap Fund B and the Provident Investment Counsel
Mid Cap Fund C (the "Mid Cap Funds") invest in the PIC Mid Cap Portfolio; the
Provident Investment Counsel Small Company Growth Fund A, the Provident
Investment Counsel Small Company Growth Fund B and the Provident Investment
Counsel Small Company Growth Fund C (the "Small Company Growth Funds") invest in
the PIC Small Cap Portfolio. (In this SAI, the Balanced Funds, the Growth Funds,
the Mid Cap Funds and the Small Company Growth Funds may be referred to as the
"Funds," and the PIC Balanced Portfolio, PIC Growth Portfolio, PIC Mid Cap
Portfolio and PIC Small Cap Portfolio may be referred to as the "Portfolios.")
Provident Investment Counsel (the "Advisor") is the Advisor to the Portfolios. A
copy of the Funds' 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-20
Portfolio Transactions and Brokerage ..................................... B-20
Portfolio Turnover ....................................................... B-21
Additional Purchase and Redemption Information ........................... B-22
Net Asset Value .......................................................... B-22
Taxation ................................................................. B-23
Dividends and Distributions .............................................. B-23
Performance Information .................................................. B-24
General Information ...................................................... B-26
Financial Statements ..................................................... B-27
Appendix ................................................................. B-28
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 a Fund will not
invest in any securities other than shares of a Portfolio, investors in the Fund
will acquire only an indirect interest in the Portfolio. Each Fund's and
Portfolio's investment objective cannot be changed without shareholder approval.
In addition to selling its shares to a Fund, a Portfolio may sell its
shares to other mutual funds or institutional investors. All investors in a
Portfolio invest on the same terms and conditions and pay a proportionate share
of the Portfolio's expenses. However, other investors in a Portfolio may sell
their shares to the public at prices different from those of a Fund as a result
of the imposition of sales charges or different operating expenses. You should
be aware that these differences may result in different returns from those of
investors in other entities investing in a Portfolio. Information concerning
other holders of interests in a Portfolio is available by calling (800)
618-7643.
The Trustees of the Trust believe that this structure may enable a Fund to
benefit from certain economies of scale, based on the premise that certain of
the expenses of managing an investment portfolio are relatively fixed and that a
larger investment portfolio may therefore achieve a lower ratio of operating
expenses to net assets. Investing a Fund's assets in a Portfolio may produce
other benefits resulting from increased asset size, such as the ability to
participate in transactions in securities which may be offered in larger
denominations than could be purchased by the Fund alone. A Fund's investment in
a Portfolio may be withdrawn by the Trustees at any time if the Board determines
that it is in the best interests of a Fund to do so. If any such withdrawal were
made, the Trustees would consider what action might be taken, including the
investment of all of the assets of a Fund in another pooled investment company
or the retaining of an investment advisor to manage the Fund's assets directly.
Whenever a Fund is requested to vote on matters pertaining to a Portfolio,
the Fund will hold a meeting of its shareholders, and the Fund's votes with
respect to the Portfolio will be cast in the same proportion as the shares of
the Fund for which voting instructions are received.
THE BALANCED FUNDS
The investment objective of the Balanced Funds is to provide high total
return while reducing risk. The Balanced Funds may also attempt to earn current
income and reduce the variability of the net asset value of their shares by
investing a portion of their assets in short-term investments. Normally, these
investments will range from 0 to 20% of their assets. There is no assurance that
the Balanced Funds will achieve their objective. The Balanced Funds will attempt
to achieve their objective by investing all of their assets in shares of the PIC
Balanced Portfolio (the "Balanced Portfolio"). The Balanced Portfolio is a
diversified open-end management investment company having the same investment
B-2
<PAGE>
objective as the Balanced Funds. The discussion below supplements information
contained in the prospectus as to investment policies of the Balanced Funds and
the Balanced Portfolio. Because the investment characteristics of the Balanced
Funds will correspond directly to those of the Balanced Portfolio, the
discussion refers to those investments and techniques employed by the Balanced
Portfolio.
THE GROWTH FUNDS
The investment objective of the Growth Funds is to provide long-term growth
of capital. There is no assurance that the Growth Funds will achieve their
objective. The Growth Funds will attempt to achieve their objective by investing
all of their 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 Funds. The
discussion below supplements information contained in the prospectus as to
investment policies of the Growth Funds and the Growth Portfolio. Because the
investment characteristics of the Growth Funds will correspond directly to those
of the Growth Portfolio, the discussion refers to those investments and
techniques employed by the Growth Portfolio.
THE MID CAP FUNDS
The investment objective of the Mid Cap Funds is to provide long-term
growth of capital. There is no assurance that the Mid Cap Funds will achieve
their objective. The Mid Cap Funds will attempt to achieve their objective by
investing all of their assets in shares of the PIC Mid Cap Portfolio (the "Mid
Cap Portfolio"). The Mid Cap Portfolio is a diversified open-end management
investment company having the same investment objective as the Mid Cap Funds.
The discussion below supplements information contained in the prospectus as to
investment policies of the Mid Cap Funds and the Mid Cap Portfolio. Because the
investment characteristics of the Mid Cap Funds will correspond directly to
those of the Mid Cap Portfolio, the discussion refers to those investments and
techniques employed by the Mid Cap Portfolio.
THE SMALL COMPANY GROWTH FUNDS
The investment objective of the Small Company Growth Funds is to provide
capital appreciation. There is no assurance that the Small Company Growth Funds
will achieve their objective. The Small Company Growth Funds will attempt to
achieve their objective by investing all of their 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 Funds. The discussion below supplements
information contained in the prospectus as to investment policies of the Small
Company Growth Funds and the Small Cap Portfolio. Because the investment
characteristics of the Small Company Growth Funds will correspond directly to
those of the Small Cap Portfolio, the discussion refers to those investments and
techniques employed by the Small Cap Portfolio.
B-3
<PAGE>
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, no Fund or Portfolio may:
1. Issue senior securities, borrow money or pledge its assets, except that
a Fund or a Portfolio may borrow on an unsecured basis from banks for temporary
or emergency purposes or for the clearance of transactions in amounts not
exceeding 10% of its total assets (not including the amount borrowed), provided
that it will not make investments while borrowings in excess of 5% of the value
of its total assets are outstanding;
2. Make short sales of securities or maintain a short position;
3. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of transactions;
4. Write put or call options, except that the Balanced Portfolio may write
covered call and cash secured put options on debt securities, and the Small Cap
Portfolio may write covered call and cash secured put options and purchase call
and put options on stocks and stock indices;
5. Act as underwriter (except to the extent a Fund or Portfolio may be
deemed to be an underwriter in connection with the sale of securities in its
investment portfolio);
6. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities), except that any of the Funds may invest more than 25% of
their assets in shares of a Portfolio;
7. Purchase or sell real estate or interests in real estate or real estate
limited partnerships (although any Portfolio may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate);
B-4
<PAGE>
8. Purchase or sell commodities or commodity futures contracts, except that
any Portfolio may purchase and sell stock index futures contracts and the
Balanced Portfolio may purchase and sell interest rate futures contracts;
9. Invest in oil and gas limited partnerships or oil, gas or mineral
leases;
10. Make loans (except for purchases of debt securities consistent with the
investment policies of the Funds and the Portfolios and except for repurchase
agreements); or
11. Make investments for the purpose of exercising control or management.
The Portfolios observe the following restrictions as a matter of operating
but not fundamental policy.
No 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).
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 Ratings Group ("S&P") or Prime-1 by Moody's Investors Service,
Inc. ("Moody's"), or have an issue of debt securities outstanding rated at least
A by S&P or Moody's. The term also applies to short-term investments that PIC
believes are comparable in quality to those with an A-1 or Prime-1 rating. U.S.
Government securities are always considered to be high quality.
B-5
<PAGE>
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a Fund or a Portfolio
purchases a security from a bank or recognized securities dealer and
simultaneously commits to resell that security to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased security. The purchaser maintains
custody of the underlying securities prior to their repurchase; thus the
obligation of the bank or dealer to pay the repurchase price on the date agreed
to is, in effect, secured by such underlying securities. If the value of such
securities is less than the repurchase price, the other party to the agreement
will provide additional collateral so that at all times the collateral is at
least equal to the repurchase price.
Although repurchase agreements carry certain risks not associated with
direct investments in securities, the Funds and the Portfolios intend to enter
into repurchase agreements only with banks and dealers believed by the Advisor
to present minimum credit risks in accordance with guidelines established by the
Boards of Trustees. The Advisor will review and monitor the creditworthiness of
such institutions under the Boards' general supervision. To the extent that the
proceeds from any sale of collateral upon a default in the obligation to
repurchase were less than the repurchase price, the purchaser would suffer a
loss. If the other party to the repurchase agreement petitions for bankruptcy or
otherwise becomes subject to bankruptcy or other liquidation proceedings, there
might be restrictions on the purchaser's ability to sell the collateral and the
purchaser could suffer a loss. However, with respect to financial institutions
whose bankruptcy or liquidation proceedings are subject to the U.S. Bankruptcy
Code, the Funds and the Portfolios intend to comply with provisions under such
Code that would allow them immediately to resell the collateral.
OPTIONS ACTIVITIES
The Balanced Portfolio may write (i.e., sell) call options ("calls") on
debt securities, and the Small Cap Portfolio may write call options on stocks
and stock indices, if the calls are "covered" throughout the life of the option.
A call is "covered" if the Portfolio owns the optioned securities. When the
Balanced or Small Cap Portfolio writes a call, it receives a premium and gives
the purchaser the right to buy the underlying security at any time during the
call period at a fixed exercise price regardless of market price changes during
the call period. If the call is exercised, the Portfolio will forgo any gain
from an increase in the market price of the underlying security over the
exercise price.
The Balanced and Small Cap Portfolios may purchase a call on securities to
effect a "closing purchase transaction," which is the purchase of a call
covering the same underlying security and having the same exercise price and
expiration date as a call previously written by the Portfolio on which it wishes
to terminate its obligation. If the Portfolio is unable to effect a closing
purchase transaction, it will not be able to sell the underlying security until
the call previously written by the Portfolio expires (or until the call is
exercised and the Portfolio delivers the underlying security).
The Balanced and Small Cap Portfolios also may write and purchase put
options ("puts").
B-6
<PAGE>
When the Portfolio writes a put, it receives a premium and gives the purchaser
of the put the right to sell the underlying security to the Portfolio at the
exercise price at any time during the option period. When the Portfolio
purchases a put, it pays a premium in return for the right to sell the
underlying security at the exercise price at any time during the option period.
If any put is not exercised or sold, it will become worthless on its expiration
date.
A Portfolio's option positions may be closed out only on an exchange which
provides a secondary market for options of the same series, but there can be no
assurance that a liquid secondary market will exist at a given time for any
particular option.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation has the authority to
permit other, generally comparable securities to be delivered in fulfillment of
option exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
FUTURES CONTRACTS
The Balanced Portfolio may buy and sell interest rate futures contracts,
and all the Portfolios may buy and sell stock index futures contracts. A futures
contract is an agreement between two parties to buy and sell a security or an
index for a set price on a future date. Futures contracts are traded on
designated "contract markets" which, through their clearing corporations,
guarantee performance of the contracts.
Entering into a futures contract for the sale of securities has an effect
similar to the actual sale of securities, although sale of the futures contract
might be accomplished more easily and quickly. Entering into futures contracts
for the purchase of securities has an effect similar to the actual purchase of
the underlying securities, but permits the continued holding of securities other
than the underlying securities.
A stock index futures contract may be used as a hedge by any of the
Portfolios with regard to market risk as distinguished from risk relating to a
specific security. A stock index futures contract does not require the physical
delivery of securities, but merely provides for profits and losses resulting
from changes in the market value of the contract to be credited or debited at
the close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash settlement occurs.
Changes in the market value of a particular stock index futures contract
reflects changes in the specified index of equity securities on which the future
is based.
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
B-7
<PAGE>
poorer overall performance for a Portfolio than if it had not entered into any
futures on stock indices.
In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
There is no assurance that a liquid secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time.
FOREIGN SECURITIES
The Portfolios may invest in securities of foreign issuers in foreign
markets. In addition, the Portfolios may invest in American Depositary Receipts
("ADRs"), which are receipts, usually issued by a U.S. bank or trust company,
evidencing ownership of the underlying securities. Generally, ADRs are issued in
registered form, denominated in U.S. dollars, and are designed for use in the
U.S. securities markets. A depositary may issue unsponsored ADRs without the
consent of the foreign issuer of securities, in which case the holder of the ADR
may incur higher costs and receive less information about the foreign issuer
than the holder of a sponsored ADR. A Portfolio may invest no more than 20% of
its total assets in foreign securities, and it will only purchase foreign
securities or ADRs 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 able to protect itself
B-8
<PAGE>
against a possible loss resulting from an adverse change in the relationship
between the currency exchange rates during the period between the date on which
the security is purchased or sold, or on which the payment is declared, and the
date on which such payments are made or received.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for a
Portfolio to purchase additional foreign currency on the spot (i.e., cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Portfolio is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
its market value exceeds the amount of foreign currency a Portfolio is obligated
to deliver. The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing a Portfolio to sustain
losses on these contracts and transaction costs. The Portfolios may enter into
forward contracts or maintain a net exposure to such contracts only if (1) the
consummation of the contracts would not obligate the Portfolio to deliver an
amount of foreign currency in excess of the value of the Portfolio's securities
or other assets 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.
B-9
<PAGE>
SEGREGATED ACCOUNTS
When a Portfolio writes an option, sells a futures contract or enters into
a forward foreign currency exchange contract, it will establish a segregated
account with its custodian bank, or a securities depository acting for it, to
hold assets of the Portfolio in order to insure that the Portfolio will be able
to meet its obligations. In the case of a call that has been written, the
securities covering the option will be maintained in the segregated account and
cannot be sold by a Portfolio until released. In the case of a put that has been
written or a forward foreign currency contract that has been entered into,
liquid securities will be maintained in the segregated account in an amount
sufficient to meet a Portfolio's obligations pursuant to the put or forward
contract. In the case of a futures contract, liquid securities will be
maintained in the segregated account equal in value to the current value of the
underlying contract, less the margin deposits. The margin deposits are also
held, in cash or U.S. Government securities, in the segregated account.
DEBT SECURITIES AND RATINGS
Ratings of debt securities represent the rating agencies' opinions
regarding their quality, are not a guarantee of quality and may be reduced after
a Portfolio has acquired the security. The Advisor will consider whether the
Portfolio should continue to hold the security but is not required to dispose of
it. Credit ratings attempt to evaluate the safety of principal and interest
payments and do not evaluate the risks of fluctuations in market value. Also,
rating agencies may fail to make timely changes in credit ratings in response to
subsequent events, so that an issuer's current financial 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.
B-10
<PAGE>
The following table lists the Trustees and officers of the Trust, their
business addresses and principal occupations during the past five years. Unless
otherwise noted, each individual has held the position listed for more than five
years.
<TABLE>
<CAPTION>
Name, Address Position(s) Held Principal Occupation(s)
and Age With the Trust During Past 5 Years
- ------------- -------------- -------------------
<S> <C> <C>
Jettie M. Edwards (age 52) Trustee Consulting principal of Syrus Associates
76 Seaview Drive (consulting firm)
Santa Barbara, CA 93108
Jeffrey D. Lovell (age 46) Trustee Managing Director, President and co-founder
11150 Santa Monica Blvd. of Putnam, Lovell & Thornton, Inc.
Ste 1650 (investment bankers)
Los Angeles, CA 90025
Jeffrey J. Miller (age 48) Trustee* Managing Director and Secretary of the Advisor
300 North Lake Avenue
Pasadena, CA 91101
Wayne H. Smith (age 57) Trustee Vice President and Treasurer of Avery Dennison
150 N. Orange Grove Blvd. Corporation (pressure sensitive material and
Pasadena, CA 91103 office products manufacturer)
Douglass B. Allen (age 37) President* Vice President of the Advisor; Director of the
300 North Lake Avenue Sycamores (non-profit children=s treatment
Pasadena, CA 91101 agency) since September 1998
Thad M. Brown (age 48) Vice President, Senior Vice President and Chief Financial
300 North Lake Avenue Secretary and Officer of the Advisor
Pasadena, CA 91101 Treasurer*
</TABLE>
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<PAGE>
The following table lists the Trustees and officers of the Portfolios,
their business addresses and principal occupations during the past five years.
Unless otherwise noted, each individual has held the position listed for more
than five years.
<TABLE>
<CAPTION>
Name, Address Position(s) Held Principal Occupation(s)
and Age With the Portfolios During Past 5 Years
- ------- ------------------- -------------------
<S> <C> <C>
Richard N. Frank (age 75) Trustee Chief Executive Officer, Lawry's Restaurants, Inc.;
234 E. Colorado Blvd. formerly Chairman of Lawry's Foods, Inc.
Pasadena, CA 91101
James Clayburn LaForce (age70) Trustee Dean Emeritus, John E. Anderson Graduate School of
P.O. Box 1585 Management, University of California, Los Angeles.
Pauma Valley, CA 92061 Director of The BlackRock Funds. Trustee of Payden &
Rygel Investment Trust. Director of the Timken Co.,
Rockwell International, Eli Lilly, Jacobs Engineering
Group and Imperial Credit Industries.
Jeffrey J. Miller (age 48) Trustee* Managing Director and Secretary of the Advisor
300 North Lake Avenue
Pasadena, CA 91101
Angelo R. Mozilo (age 59) Trustee Vice Chairman and Executive Vice President of
155 N. Lake Avenue Countrywide Credit Industries (mortgage banking)
Pasadena, CA 91101
Douglass B. Allen (age 37) President* Vice President of the Advisor; Director of the Sycamores
300 North Lake Avenue (non-profit children's treatment agency) since September
Pasadena, CA 91101 1998
Thad M. Brown (age 48) Vice President, Senior Vice President and Chief Financial Officer
300 North Lake Avenue Secretary and of the Advisor
Pasadena, CA 91101 Treasurer*
</TABLE>
- ----------
* denotes Trustees who are "interested persons" of the Trust or Portfolios
under the 1940 Act.
B-12
<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 $ $ $ $ $
Bernard J. Johnson $ $ $ $ $
Jeffrey D. Lovell $ $ $ $ $
Wayne H. Smith $ $ $ $ $
Richard N. Frank $ $ $ $ $
James Clayburn LaForce $ $ $ $ $
Angelo R. Mozilo $ $ $ $ $
</TABLE>
The following persons, to the knowledge of the Trust, owned more than 5% of
the outstanding shares of the Balanced Fund A as of December 2, 1999:
Gilbert Papazian - 9.43%
Hillsborough, CA 94010
Gilbert Papazian and
Margaret Papagian, Trustees - 5.25%
Hillsborough, CA 94010
Sanwa Bank California, Trustee - 5.51%
Los Angeles, CA 90060
Straffe & Co. FBO - 9.42%
Safelite Glass
Westerville, OH 43086
UMBSC & Co, Trustee - 48.91%
Kansas City, MO 64141
B-13
<PAGE>
The following persons, to the knowledge of the Trust, owned more than 5% of
the outstanding shares of the Growth Fund A as of December 2, 1999:
Wilmington Trust Co. FBO
Mustang Employee 401K - 62.76%
Wilmington, DE 19899
Wilmington Trust Co, Trustee FBO
Catholic Health Care - 11.91%
Wilmington, DE 19899
William A Eddy and
Joan D. Eddy, Trustees - 15.42%
Long Beach, CA 90815
The following persons, to the knowledge of the Trust, owned more than 5% of
the outstanding shares of the Mid Cap Fund A as of December 2, 1999:
Larry D. Tashjian and
Karen D. Tashjian, Trustees - 10.35%
La Canada, CA 91011
George E. Handtmann III, Trustee - 11.47%
Carpinteria, CA 93013
Jeffrey J. Miller and
Paula J. Miller, Trustees - 6.20%
La Canada, CA 91011
Robert M. Kommerstad and
Lila M. Kommerstad, Trustees - 6.20%
Bradbury, CA 91010
Bernard J. Johnson, Trustee - 6.20%
Altadena, CA 91001
Thomas J and Julie H. Condon, Trustees - 9.43%
San Marina, CA 91108
Thomas M. Mitchell and
Jerrine E. Mitchell, Trustees - 6.27%
San Gabriel, CA 91775
Merrill Lynch - 12.71%
Jacksonville, FL 32246
Donald H. Neu - 5.52%
San Marino, CA 91108
B-14
<PAGE>
The following persons, to the knowledge of the Trust, owned more than 5% of
the outstanding shares of the Small Company Growth Fund A as of December 2,
1999:
Merrill Lynch, for benefit of
Building One Fund Admin Team A - 73.82%
Jacksonville, FL 32246
IITC - 6.60%
Boulder, CO 80503
To the knowledge of the Trust, as of December 2, 1999, Merrill Lynch, for
sole benefit of its customers, Jacksonville, FL 32246 owned 90.15% of the
outstanding shares of the Balanced Fund B.
To the knowledge of the Trust, as of December 2, 1999, Merrill Lynch, for
sole benefit of its customers, Jacksonville, FL 32246 owned 99.43% of the
outstanding shares of the Mid Cap Fund B.
To the knowledge of the Trust, as of December 2, 1999, Merrill Lynch, for
sole benefit of its customers, Jacksonville, FL 32246 owned 99.16% of the
outstanding shares of the Small Company Growth Fund B.
As of December 2, 1999, shares of the Funds owned by the Trustee 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
B-15
<PAGE>
holding any shareholder meetings; (x) dues or assessments of or contributions to
the Investment Company Institute or any successor; (xi) such non-recurring
expenses as may arise, including litigation affecting the Trust or the
Portfolios and the legal obligations with respect to which the Trust or the
Portfolios may have to indemnify their officers and Trustees; and (xii)
amortization of organization costs.
The Advisor is an indirect, wholly owned subsidiary of United Asset
Management Corporation ("UAM"), a New York Stock Exchange listed holding company
principally engaged, through affiliated firms, in providing institutional
investment management services. On February 15, 1995, UAM acquired the assets of
the Advisor's predecessor, which had the same name as the Advisor; on that date
the Advisor entered into new Advisory Agreements having the same terms as the
previous Advisory Agreements with the Portfolios. The term "Advisor" also refers
to the Advisor's predecessor.
For its services, the Advisor receives a fee from the Balanced Portfolio at
an annual rate of 0.60% of its average net assets, 0.80% of the Growth
Portfolio's average net assets, 0.80% of the Small Cap Portfolio's average net
assets and 0.70% of the Mid Cap Portfolio's average net assets. During the
fiscal years ended October 31, 1999, 1998 and 1997, the Advisor earned fees
pursuant to the Advisory Agreements as follows: from the Balanced Portfolio,
$_______, $236,672 and $153,518, respectively; from the Growth Portfolio,
$________, $1,045,893 and $838,058, respectively; and from the Small Cap
Portfolio, $_______, $1,418,731 and $1,525,768, respectively. During the fiscal
year ended October 31, 1999 and for the period December 31, 1997 through October
31, 1998, the Advisor earned fees pursuant to the Advisory Agreement from the
Mid Cap Portfolio as follows: $_______ and $29,031, respectively. However, the
Advisor has agreed to limit the aggregate expenses of the Balanced Portfolio to
0.80% of average net assets, the aggregate expenses of the Mid Cap Portfolio to
0.90% of average net assets, and the aggregate expenses of the Growth and Small
Cap Portfolios to 1.00% of average net assets . As a result, the Advisor paid
expenses of the Balanced Portfolio that exceeded these expense limits in the
amounts of $_____, $71,076 and $91,689 during the fiscal years ended October 31,
1999, 1998 and 1997, respectively. The Advisor paid expenses of the Growth
Portfolio that exceeded these expense limits in the amounts of $______, $22,176
and $48,003 during the fiscal years ended October 31, 1999, 1998 and 1997,
respectively. The Advisor paid expenses of the Small Cap Portfolio that exceeded
these expense limits in the amounts of $_____, $24,020 and $24,879 during the
fiscal years ended October 31, 1999, 1998 and 1997, respectively. The Advisor
paid expenses of the Mid Cap Portfolio that exceeded these expense limits in the
amount of $____ for the fiscal year ended October 31, 1999 and waived advisory
fees in the amount of $85,951 for the period December 31, 1997 through October
31, 1998.
Under the Advisory Agreements, the Advisor will not be liable to the
Portfolios for any error of judgment by the Advisor or any loss sustained by the
Portfolios except in the case of a breach of fiduciary duty with respect to the
receipt of compensation for services (in which case any award of damages will be
limited as provided in the 1940 Act) or of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
B-16
<PAGE>
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, 1999, 1998 and 1997, the Advisor
earned fees from the Balanced Fund A of $______, $78,802 and $52,139,
respectively; from the Growth Fund A of $_______, $6,338 and $1,029,
respectively; from the Small Company Growth Fund A of $6,173 and $1,993,
respectively. For fiscal year ended October 31, 1999 and for the period December
31, 1997 through October 31, 1998, the Adviser earned fees from the Mid Cap Fund
A of $_____ and $8,219, respectively. The Advisor has agreed to limit the
aggregate expenses of the Balanced Fund A, Growth Fund A, Mid Cap Fund A and
Small Company Growth Fund A to 1.05%, 1.35%, 1.39% and 1.55%, respectively, of
each Fund's average daily net assets. As a result, for the fiscal year ended
October 31, 1999, the Advisor waived fees and reimbursed expenses of the Funds
as follows:
Waived Reimbursed
Fees Expenses
---- --------
Balanced Fund A $ $
Growth Fund A
Mid Cap Fund A
Small Company Growth Fund A
B-17
<PAGE>
During the period March 31, 1999 Through October 31, 1999, the Advisor
earned fees from the Balanced Fund B, Growth Fund B, Small Company Growth Fund B
and Mid Cap Fund B in the amounts of $______, $_______, $______ and $_____,
respectively. The Advisor has agreed to limit the aggregate expenses of the
Balanced Fund B, Growth Fund B, Mid Cap Fund B and Small Company Growth Fund B
to 1.90%, 2.10%, 2.14% and 2.30%, respectively, of each Fund's average daily net
assets. As a result, for the period March 31, 1999 through October 31, 1999, the
Advisor waived fees and reimbursed expenses of the Funds as follows:
Waived Reimbursed
Fees Expenses
---- --------
Balanced Fund B $ $
Growth Fund B
Mid Cap Fund B
Small Company Growth Fund B
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 Fund pays an annual fee of $15,000. Each Portfolio pays an annual
administration fee of 0.10% of its average net assets. Each Portfolio, other
than the Balanced Portfolio, is subject to an annual minimum administration fee
of $45,000. For the fiscal year ended October 31, 1999, the Balanced Portfolio,
Growth Portfolio, Mid Cap Portfolio and Small Cap Portfolio paid $_____, $_____,
$_____ and $-----, respectively, in administration fees. For the fiscal year
ended October 31, 1998, the Balanced Portfolio, Growth Portfolio, Mid Cap
Portfolio and Small Cap Portfolio paid $39,445, $130,737, $37,835 and $177,341,
respectively, in administration fees.
THE DISTRIBUTOR
First Fund Distributors, Inc., 4455 E. Camelback Road, Suite 261E, Phoenix
AZ 85018, is the Trust's principal underwriter.
DISTRIBUTION PLANS
The Trustees and/or shareholders of the Trust have adopted, on behalf of
each Fund A, a Distribution Plan (the "A Plan") pursuant to Rule 12b-1 under the
1940 Act. The A Plan provides that each Fund A will pay a 12b-1 fee to the
Distributor at an annual rate of 0.25% of its average daily net assets for
expenses incurred in marketing its shares, including advertising, printing and
compensation to securities dealers or other industry professionals.
B-18
<PAGE>
The Trustees of the Trust have adopted, on behalf of each Fund B, a
Distribution Plan (the "B Plan") pursuant to Rule 12b-1 under the 1940 Act. The
B Plan provides for the payment of a distribution fee at the annual rate of
0.75% of each Fund B's average daily net assets for expenses incurred in
marketing its shares and a service fee at the annual rate of 0.25% of each Fund
B's average daily net assets.
The Trustees of the Trust have adopted, on behalf of each Fund C, a
Distribution Plan (the "C Plan") pursuant to Rule 12b-1 under the 1940 Act. The
C Plan provides for the payment of a distribution fee at the annual rate of
0.75% of each Fund C's average daily net assets for expenses incurred in
marketing its shares and a service fee at the annual rate of 0.25% of each Fund
C's average daily net assets.
For the fiscal year ended October 31, 1999, the Balanced Fund A, Growth
Fund A, Mid Cap Fund A and Small Company Growth Fund A paid the Distributor fees
of $______, $------, $______ and $______, respectively, all of which were paid
as compensation to broker-dealers.
For the period March 31, 1999 through October 31, 1999, the Balanced Fund
B, Growth Fund B, Mid Cap Fund B and Small Company Growth Fund B paid the
Distributor fees of $_______, $______, $_______ and $________, respectively, all
of which were paid compensation to broker-dealers.
SHAREHOLDER SERVICES PLAN
On May 15, 1998, the Board of Trustees approved the implementation of a
Shareholder Services Plan (the "Services Plan") under which the Advisor will
provide, or arrange for others to provide, certain specified shareholder
services. As compensation for the provision of shareholder services, each Fund A
will pay the Advisor a monthly fee at an annual rate of up to 0.15% of the
Fund's average daily net assets. The Advisor will pay certain banks, trust
companies, broker-dealers and other financial intermediaries (each, a
"Participating Organization") out of the fees the Advisor receives from the
Funds under the Services Plan to the extent that the Participating Organization
performs shareholder servicing functions for Fund A shares owned by its
customers.
DEALER COMMISSIONS
The Distributor pays a portion of the sales charges imposed on purchases of
the Fund A shares to retail dealers, as follows:
Dealer Commission
as a % of
Your investment offering price
--------------- --------------
Up to $49,000 5.00%
$50,000-$99,999 3.75
$100,000-$249,999 2.75
$250,000-$499,999 2.00
$500,000-$999,999 1.60
$1,000,000 and over *
- ----------
* The Distributor pays a commission of up to 1.00% to financial institutions
that initiate purchases of $1 million or more.
B-19
<PAGE>
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, _____________, assist in the
preparation of certain reports to the Securities and Exchange Commission and the
Funds' tax returns.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisory Agreements state that in connection with its duties to arrange
for the purchase and the sale of securities held by the Portfolios by placing
purchase and sale orders for the Portfolios, the Advisor shall select such
broker-dealers ("brokers") as shall, in its judgment, achieve the policy of
"best execution," i.e., prompt and efficient execution at the most favorable
securities price. In making such selection, the Advisor is authorized in the
Advisory Agreements to consider the reliability, integrity and financial
condition of the broker. The Advisor also is authorized by the Advisory
Agreements to consider whether the broker provides research or statistical
information to the Portfolios and/or other accounts of the Advisor. The 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 year ended October 31, 1999, the Balanced Portfolio paid $_____ in
brokerage commissions, of which $____ was paid to brokers who furnished research
services. During the fiscal year ended October 31, 1998, the Balanced Portfolio
paid $34,286 in brokerage commissions, of which $319 was paid to brokers who
furnished research services. During the fiscal year ended October 31, 1999, the
Growth Portfolio paid $_____ in brokerage commissions, of which $_____ was paid
to brokers who furnished research services. During the fiscal year ended October
31, 1998, the Growth Portfolio paid $165,841 in brokerage commissions, of which
$2,255 was paid to brokers who furnished research services. During the fiscal
B-20
<PAGE>
year ended December 31, 1999, the Small Cap Portfolio paid $_______ in brokerage
commissions, of which $_____ was paid to brokers who furnished research
services. During the fiscal year ended December 31, 1998, the Small Cap
Portfolio paid $208,083 in brokerage commissions, of which $10,766 was paid to
brokers who furnished research services. During the fiscal year ended December
31, 1999, the Mid Cap Portfolio paid $______ in brokerage commissions, of which
$______ was paid to brokers who furnished research services. During the period
December 31, 1997 through October 31, 1998, the Mid Cap Portfolio paid $15,377
in brokerage commissions, of which $921 was paid to brokers who furnished
research services. During the fiscal year ended October 31, 1997, the Balanced
Portfolio, Growth Portfolio and Small Cap Portfolio paid brokerage commissions
in the amounts of $24,471, $110, 376 and $218,0897, respectively.
The research services discussed above may be in written form or through
direct contact with individuals and may include information as to particular
companies and securities as well as market, economic or institutional areas and
information assisting the Portfolios in the valuation of the Portfolios'
investments. The research which the Advisor receives for the Portfolios'
brokerage commissions, whether or not useful to the Portfolios, may be useful to
it in managing the accounts of its other advisory clients. Similarly, the
research received for the commissions of such accounts may be useful to the
Portfolios.
The debt securities which will be a major component of the Balanced
Portfolio's portfolio are generally traded on a "net" basis with dealers acting
as principal for their own accounts without a stated commission although the
price of the security usually includes a profit to the dealer. Money market
instruments usually trade on a "net" basis as well. On occasion, certain money
market instruments may be purchased by the Portfolios directly from an issuer in
which case no commissions or discounts are paid. In underwritten offerings,
securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.
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, 1999 and 1998 was ____% and 81.06%, respectively. Balanced
Portfolio's portfolio turnover rate for the fiscal years ended October 31, 1999
and 1998 was __% and 111.47%, respectively. Small Cap Portfolio's portfolio
B-21
<PAGE>
turnover rate for the fiscal years ended October 31, 1999 and 1998 was ____% and
81.75%, respectively. Mid Cap Portfolio's portfolio turnover rate for the fiscal
year ended December 31, 1999 and for the period December 31, 1997 through
October 31, 1998 was ____% and 166.89%, 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.
The contingent deferred sales charge imposed on Fund B and Fund C shares
does not apply to (a) any redemption pursuant to a tax-free return of an excess
contribution to an individual retirement account or other qualified retirement
plan if the Fund is notified at the time of such request; (b) any redemption of
a lump-sum or other distribution from qualified retirement plans or accounts
provided the shareholder has attained the minimum age of 70 1/2 years and has
held the Fund shares for a minimum period of three years; (c) any redemption by
advisory accounts managed by the Advisor or its affiliates; (d) any redemption
made by employees, officers or directors of the Advisor or its affiliates; (e)
any redemption by a tax-exempt employee benefit plan if continuation of the
investment would be improper under applicable laws or regulations; and (f) any
redemption or transfer of ownership of shares following the death or disability,
as defined in Section 72(m)(7) of the Internal Revenue Code (the "Code"), of a
shareholder if the Fund is provided with proof of death or disability and with
all documents required by the Transfer Agent within one year after the death or
disability.
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
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.
B-22
<PAGE>
TAXATION
The Funds will each be taxed as separate entities under the Code and each
intends to elect to qualify for treatment as a regulated investment company
("RIC") under Subchapter M of the Code. In each taxable year that the Funds
qualify, the Funds (but not their shareholders) will be relieved of federal
income tax on that part of their investment company taxable income (consisting
generally of interest and dividend income, net short-term capital gain and net
realized gains from currency transactions) and net capital gain that is
distributed to shareholders.
In order to qualify for treatment as a RIC, the Funds must distribute
annually to shareholders at least 90% of their investment company taxable income
and must meet several additional requirements. Among these requirements are the
following: (1) at least 90% of each Fund's gross income each taxable year must
be derived from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income derived with respect to its business of investing in
securities or currencies; (2) at the close of each quarter of each Fund's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. Government securities, securities of other RICs and
other securities, limited in respect of any one issuer, to an amount that does
not exceed 5% of the value of the Fund and that does not represent more than 10%
of the outstanding voting securities of such issuer; and (3) at the close of
each quarter of each Fund's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than U.S. Government securities or
the securities of other RICs) of any one issuer.
Each Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
DIVIDENDS AND DISTRIBUTIONS
Dividends from a Fund's investment company taxable income (whether paid in
cash or invested in additional shares) will be taxable to shareholders as
ordinary income to the extent of the Fund's earnings and profits. Distributions
of a Fund's net capital gain (whether paid in cash or invested in additional
shares) will be taxable to shareholders as long-term capital gain, regardless of
how long they have held their Fund shares.
Dividends declared by a Fund in October, November or December of any year
and payable to shareholders of record on a date in one of such months will 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.
B-23
<PAGE>
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:
n
P(1 + T) = ERV
where P equals a hypothetical initial payment of $1000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1000 payment made at the
beginning of the period.
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication. Average annual
total return, or "T" in the above formula, is computed by finding the average
annual compounded rates of return over the period that would equate the initial
amount invested to the ending redeemable value. Average annual total return
assumes the reinvestment of all dividends and distributions.
The Funds' return computed at the public offering price (using the maximum
sales charge for Fund A shares and the applicable CDSC for Fund B shares) for
the periods ended October 31, 1999 are set forth below:
AVERAGE ANNUAL TOTAL RETURN
One Year Five Years Life of Fund*
-------- ---------- -------------
Balanced Fund A ____% ____% _____%
Growth Fund A ____% N/A _____%
Mid Cap Fund A ____% N/A _____%
Small Company Growth Fund A ____% N/A _____%
- ----------
* The inception dates for the Funds are as follows: Balanced Fund A - June
10, 1992 ; Growth Fund A - February 3, 1997; Mid Cap Fund A - December 31,
1997; and Small Company Growth Fund A - February 3, 1997.
B-24
<PAGE>
ANNUAL TOTAL RETURN
Life of Fund*
-------------
Balanced Fund B ____%
Growth Fund B ____%
Mid Cap Fund B ____%
Small Company Growth Fund B ____%
- ----------
* The inception dates for the Funds B are March 31, 1999.
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.
B-25
<PAGE>
OTHER INFORMATION
Performance data of a Fund quoted in advertising and other promotional
materials represents past performance and is not intended to predict or indicate
future results. The return and principal value of an investment in a Fund will
fluctuate, and an investor's redemption proceeds may be more or less than the
original investment amount. In advertising and promotional materials a Fund may
compare its performance with data published by Lipper Analytical Services, Inc.
("Lipper") or CDA Investment Technologies, Inc. ("CDA"). A Fund also may refer
in such materials to mutual fund performance rankings and other data, such as
comparative asset, expense and fee levels, published by Lipper or CDA.
Advertising and promotional materials also may refer to discussions of a Fund
and comparative mutual fund data and ratings reported in independent periodicals
including, but not limited to, The Wall Street Journal, Money Magazine, Forbes,
Business Week, Financial World and Barron's.
GENERAL INFORMATION
Each Fund is a diversified series of the 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.
Prior to October 31, 1999, the Provident Investment Counsel Funds A were
called Provident Investment Counsel Pinnacle Balanced Fund, Provident Investment
Counsel Pinnacle Growth Fund, Provident Investment Counsel Pinnacle Mid Cap Fund
and Provident Investment Counsel Pinnacle Small Company Growth Fund.
Each Fund is one of a series of shares, each having separate assets and
liabilities, of the Trust. The Board of Trustees may at its own discretion,
create additional series of shares. The Declaration of Trust contains an express
disclaimer of shareholder liability for its acts or obligations and provides for
indemnification and reimbursement of expenses out of the Trust's property for
any shareholder held personally liable for its obligations.
The Declaration of Trust further provides the Trustees will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
B-26
<PAGE>
Shareholders are entitled to one vote for each full share held (and
fractional votes for fractional shares) and may vote in the election of Trustees
and on other matters submitted to meetings of shareholders. It is not
contemplated that regular annual meetings of shareholders will be held. Rule
18f-2 under the 1940 Act provides that matters submitted to shareholders be
approved by a majority of the outstanding securities of each series, unless it
is clear that the interests of each series in the matter are identical or the
matter does not affect a series. However, the rule exempts the selection of
accountants and the election of Trustees from the separate voting requirements.
Income, direct liabilities and direct operating expenses of each series will be
allocated directly to each series, and general liabilities and expenses of the
Trust will be allocated among the series in proportion to the total net assets
of each series by the Board of Trustees.
The Declaration of Trust provides that the shareholders have the right,
upon the declaration in writing or vote of more than two-thirds of its
outstanding shares, to remove a Trustee. The Trustees will call a meeting of
shareholders to vote on the removal of a Trustee upon the written request of the
record holders of ten per cent of its shares. In addition, ten shareholders
holding the lesser of $25,000 worth or one per cent of the shares may advise the
Trustees in writing that they wish to communicate with other shareholders for
the purpose of requesting a meeting to remove a Trustee. The Trustees will then,
if requested by the applicants, mail at the applicants' expense the applicants'
communication to all other shareholders. Except for a change in the name of the
Trust, no amendment may be made to the Declaration of Trust without the
affirmative vote of the holders of more than 50% of its outstanding shares. The
holders of shares have no pre-emptive or conversion rights. Shares when issued
are fully paid and non-assessable, except as set forth above. The Trust may be
terminated upon the sale of its assets to another issuer, if such sale is
approved by the vote of the holders of more than 50% of its outstanding shares,
or upon liquidation and distribution of its assets, if approved by the vote of
the holders of more than 50% of its outstanding shares. If not so terminated,
the Trust will continue indefinitely.
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 A and Funds B for the
fiscal year ended October 31, 1999 is a separate document 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-27
<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.
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.
B-28
<PAGE>
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-29
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(1) Declaration of Trust(1)
(2) By-Laws(1)
(3) Not applicable
(4) Management Agreement(3)
(5) Amended and Restated Distribution Agreement(5)
(6) Not applicable
(7) Custodian Agreement(4)
(8) (i) Administration Agreement with Investment Company Administration
Corporation(1)
(ii) Administration Agreement with Provident Investment Counsel(1)
(iii) Amendment to Administration Agreement with Investment Company
Administration, LLC(5)
(iv) Amendment to Administration Agreement with Provident Investment
Counsel(5)
(v) Shareholder Servicing Agreement(5)
(vi) Contractual Waiver/Reimbursement Agreement(5)
(9) Opinion and consent of counsel(1)
(10) Not applicable
(11) Not applicable
(12) Investment letter(1)
(13) (i) Distribution Plan pursuant to Rule 12b-1 Funds A(2)
(ii) Distribution Plan pursuant to Rule 12b-1-Funds B(5)
(iii) Distribution Plan pursuant to Rule 12b-1 Funds C(6)
(14) Not applicable
(15) Not applicable
- ----------
(1) Previously filed with Post-effective Amendment No. 10 to the Registration
Statement on Form N-1A of PIC Investment Trust, File No 33-44579, on April
4, 1996 and incorporated herein by reference.
(2) Previously filed with Post-effective Amendment No. 13 to the Registration
Statement on Form N-1A of PIC Investment Trust, File No 33-44579, on
January 27, 1997 and incorporated herein by reference.
(3) Previously filed with Post-effective Amendment No. 18 to the Registration
Statement on Form N-1A of PIC Investment Trust, File No 33-44579, on
December 12, 1997 and incorporated herein by reference.
(4) Previously filed with Post-effective Amendment No. 21 to the Registration
Statement on Form N-1A of PIC Investment Trust, File No. 33-44579, on
September 29, 1998 and incorporated herein by reference.
(5) Previously filed with Post-effective Amendment No. 32 to the Registration
Statement on Form N-1A of PIC Investment Trust, File No. 33-44579, on April
6, 1998 and incorporated herein by reference.
(6) To be filed by amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
As of December15, 1999, Registrant owned 99.9% of the outstanding Interests
in PIC Growth Portfolio, PIC Balanced Portfolio, PIC Mid Cap Portfolio and PIC
Small Cap Portfolio, all of which are trusts organized under the laws of the
State of New York and registered management investment companies.
<PAGE>
ITEM 25. INDEMNIFICATION.
Article VI of Registrant's By-Laws states as follows:
SECTION 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
SECTION 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed:
(a) in the case of conduct in his official capacity as a Trustee of the
Trust, that his conduct was in the Trust's best interests, and
(b) in all other cases, that his conduct was at least not opposed to the
Trust's best interests, and
(c) in the case of a criminal proceeding, that he had no reasonable cause
to believe the conduct of that person was unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
SECTION 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of this Trust to procure a judgment in
its favor by reason of the fact that that person is or was an agent of this
Trust, against expenses actually and reasonably incurred by that person in
connection with the defense or settlement of that action if that person acted in
good faith, in a manner that person believed to be in the best interests of this
Trust and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
<PAGE>
SECTION 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to
the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue, or matter as to which that person shall
have been liable on the basis that personal benefit was improperly received by
him, whether or not the benefit resulted from an action taken in the person's
official capacity; or
(b) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable in the performance of that person's duty to this
Trust, unless and only to the extent that the court in which that action was
brought shall determine upon application that in view of all the circumstances
of the case, that person was not liable by reason of the disabling conduct set
forth in the preceding paragraph and is fairly and reasonably entitled to
indemnity for the expenses which the court shall determine; or
(c) of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses incurred in
defending a threatened or pending action which is settled or otherwise disposed
of without court approval, unless the required approval set forth in Section 6
of this Article is obtained.
SECTION 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of this
Trust has been successful on the merits in defense of any proceeding referred to
in Sections 2 or 3 of this Article or in defense of any claim, issue or matter
therein, before the court or other body before whom the proceeding was brought,
the agent shall be indemnified against expenses actually and reasonably incurred
by the agent in connection therewith, provided that the Board of Trustees,
including a majority who are disinterested, non-party Trustees, also determines
that based upon a review of the facts, the agent was not of the disabling
conduct referred to in Section 4 of this Article.
SECTION 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not parties
to the proceeding and are not interested persons of the Trust (as defined in the
Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
<PAGE>
SECTION 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i) security for the undertaking; or (ii) the
existence of insurance protecting the Trust against losses arising by reason of
any lawful advances; or (iii) a determination by a majority of a quorum of
Trustees who are not parties to the proceeding and are not interested persons of
the Trust, or by an independent legal counsel in a written opinion, based on a
review of readily available facts that there is reason to believe that the agent
ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must be made in the manner
specified in Section 6 of this Article for determining that the indemnification
is permissible.
SECTION 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
SECTION 9. LIMITATIONS. No indemnification or advance shall be made under
this Article, except as provided in Sections 5 or 6 in any circumstances where
it appears:
(a) that it would be inconsistent with a provision of the Agreement and
Declaration of Trust of the Trust, a resolution of the shareholders, or an
agreement in effect at the time of accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or other amounts
were paid which prohibits or otherwise limits indemnification; or
(b) that it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
SECTION 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Agreement and Declaration of Trust of the
Trust.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not applicable.
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) The Registrant's principal underwriter also acts as principal
underwriter for the following investment companies:
Advisors Series Trust Guinness Flight Investment Funds, Inc Fremont
Mutual Funds, Inc, Jurika & Voyles Fund Group Kayne Anderson Mutual
Funds Masters' Select Investment Trust O'Shaughnessy Funds, Inc. The
Purisima Funds Professionally Managed Portfolios Rainier Investment
Management Mutual Funds RNC Mutual Fund Group, Inc. Brandes Investment
Trust Allegiance Investment Trust The Dessauer Global Equity Fund Puget
Sound Alternative Investment Trust UBS Private Investor Funds Trust for
Investment Management
(b) The following information is furnished with respect to the officers and
directors of First Fund Distributors, Inc.:
Name and Principal Position and Offices with Position and Offices
Business Address Principal Underwriter With Registrant
- ---------------- --------------------- ---------------
Robert H. Wadsworth President and Treasurer Assistant Secretary
4455 E. Camelback Road
Suite E261
Phoenix, AZ 85018
Eric M. Banhazl Vice President Assistant Treasurer
2025 E. Financial Way
Glendora, CA 91741
Steven J. Paggioli Vice President and Assistant Secretary
915 Broadway Secretary
New York, NY 10010
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of Registrant and
Registrant's custodian, as follows: the documents required to be maintained by
paragraphs (4), (5), (6), (7), (10) and (11) of Rule 31a-1(b) will be maintained
by the Registrant, and all other records will be maintained by the Custodian.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
The Registrant undertakes, if requested to do so by the holders of at least
10% of the Trust's outstanding shares, to call a meeting of shareholders for the
purposes of voting upon the question of removal of a director and will assist in
communications with other shareholders.
<PAGE>
SIGNATURES
PIC Growth Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of PIC Investment Trust to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Pasadena and State of
California on the 13th day of December, 1999.
PIC GROWTH PORTFOLIO
By Douglass B. Allen*
------------------
Douglass B. Allen
President
This Amendment to the Registration Statement on Form N-1A of PIC Investment
Trust has been signed below by the following persons in the capacities indicated
on December 13, 1999.
Douglass B. Allen* President of PIC Growth Portfolio
- ----------------------------
Douglass B. Allen
Jeffrey J. Miller* Trustee of PIC Growth Portfolio
- ----------------------------
Jeffrey J. Miller
Richard N. Frank* Trustee of PIC Growth Portfolio
- ----------------------------
Richard N. Frank
James Clayburn LaForce* Trustee of PIC Growth Portfolio
- ----------------------------
James Clayburn LaForce
Angelo R. Mozilo* Trustee of PIC Growth Portfolio
- ----------------------------
Angelo R. Mozilo
Thad M. Brown* Treasurer and Principal Financial and
- ---------------------------- Accounting Officer of PIC Growth
Thad M. Brown Portfolio
* Robert H. Wadsworth
---------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement on Form N-1A of PIC Investment Trust to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Pasadena
and State of California on the 13th day of December, 1999.
PIC INVESTMENT TRUST
By Douglass B. Allen*
------------------
Douglass B. Allen
President
This Amendment to the Registration Statement on Form N-1A of PIC Investment
Trust has been signed below by the following persons in the capacities indicated
on December 13, 1999.
Douglass B. Allen* President
- ----------------------------
Douglas B. Allen
Jeffrey J. Miller* Trustee
- ----------------------------
Jeffrey J. Miller
Jettie M. Edwards* Trustee
- ----------------------------
Jettie M. Edwards
Bernard J. Johnson* Trustee
- ----------------------------
Bernard J. Johnson
Jeffrey D. Lovell* Trustee
- ----------------------------
Jeffrey D. Lovell
Wayne H. Smith* Trustee
- ----------------------------
Wayne H. Smith
Thad M. Brown * Treasurer and Principal
- ---------------------------- Financial and Accounting
Thad M. Brown Officer
* Robert H. Wadsworth
---------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
SIGNATURES
PIC Mid Cap Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of PIC Investment Trust to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Pasadena and State of
California on the 13th day of December, 1999.
PIC MID CAP PORTFOLIO
By Douglass B. Allen*
------------------
Douglass B. Allen
President
This Amendment to the Registration Statement on Form N-1A of PIC Investment
Trust has been signed below by the following persons in the capacities indicated
on December 13, 1999.
Douglass B. Allen* President of PIC
- ---------------------------- Mid Cap Portfolio
Douglass B. Allen
Jeffrey J. Miller* Trustee of
- ---------------------------- PIC Mid Cap Portfolio
Jeffrey J. Miller
Richard N. Frank* Trustee of PIC Mid Cap Portfolio
- ----------------------------
Richard N. Frank
James Clayburn LaForce* Trustee of PIC Mid Cap Portfolio
- ----------------------------
James Clayburn LaForce
Angelo R. Mozilo* Trustee of Pic Mid Cap Portfolio
- ----------------------------
Angelo R. Mozilo
Thad M. Brown* Treasurer and Principal Financial and
- ---------------------------- Accounting Officer of PIC Mid Cap
Thad M. Brown Portfolio
* Robert H. Wadsworth
---------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
SIGNATURES
PIC Balanced Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of PIC Investment Trust to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Pasadena and State of
California on the 13th day of December, 1999.
PIC BALANCED PORTFOLIO
By Douglass B. Allen*
------------------
Douglass B. Allen
President
This Amendment to the Registration Statement on Form N-1A of PIC Investment
Trust has been signed below by the following persons in the capacities indicated
on December 13, 1999.
Douglass B. Allen* President of PIC Balanced Portfolio
- ----------------------------
Douglass B. Allen
Jeffrey J. Miller* Trustee of PIC Balanced Portfolio
- ----------------------------
Jeffrey J. Miller
Richard N. Frank* Trustee of PIC Balanced Portfolio
- ----------------------------
Richard N. Frank
James Clayburn LaForce* Trustee of PIC Balanced Portfolio
- ----------------------------
James Clayburn LaForce
Angelo R. Mozilo* Trustee of Pic Balanced Portfolio
- ----------------------------
Angelo R. Mozilo
Thad M. Brown* Treasurer and Principal Financial and
- ------------ Accounting Officer of PIC Balanced
Thad M. Brown Portfolio
* Robert H. Wadsworth
---------------------
By: Robert H. Wadsworth
Attorney-in-fact
<PAGE>
SIGNATURES
PIC Small Cap Portfolio has duly caused this Amendment to the Registration
Statement on Form N-1A of PIC Investment Trust to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Pasadena and State of
California on the 13th day of December, 1999.
PIC SMALL CAP PORTFOLIO
By Douglass B. Allen*
------------------
Douglass B. Allen
President
This Amendment to the Registration Statement on Form N-1A of PIC Investment
Trust has been signed below by the following persons in the capacities indicated
on December 13, 1999.
Douglass B. Allen* President of PIC Small Cap Portfolio
- ----------------------------
Douglass B. Allen
Jeffrey J. Miller* Trustee of PIC Small Cap Portfolio
- ----------------------------
Jeffrey J. Miller
Richard N. Frank* Trustee of PIC Small Cap Portfolio
- ----------------------------
Richard N. Frank
James Clayburn LaForce* Trustee of PIC Small Cap Portfolio
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James Clayburn LaForce
Angelo R. Mozilo* Trustee of PIC Small Cap Portfolio
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Angelo R. Mozilo
Thad M. Brown* Treasurer and Principal Financial and
- ---------------------------- Accounting Officer of PIC Small Cap
Thad M. Brown Portfolio
* Robert H. Wadsworth
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By: Robert H. Wadsworth
Attorney-in-fact
