File No. 811-8060
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6 [X]
PIC SMALL CAP PORTFOLIO
(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)
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PIC SMALL CAP PORTFOLIO
PART A.
ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED
RISKS.
The investment objective of the PIC Small Cap Portfolio (the "Portfolio")is
to provide long term growth. There is no assurance that the Portfolio will
achieve its objective.
The Portfolio will invest in equity securities, consisting of common stocks
and securities having the characteristics of common stocks, such as convertible
preferred stocks, convertible debt securities and warrants. The Portfolio will
invest at least 65% and under normal circumstances expects to invest at least
95% of its assets in such equity securities of small companies. In general, a
"small company" is one which has a market capitalization or annual revenues of
$50 million to $2 billion or less at the time of investment. In selecting
investments for the Portfolio, Provident Investment Counsel, the Advisor to the
Portfolio, will select equity securities of small companies which are currently
experiencing an above-average rate of earnings growth. To the extent that the
Portfolio does invest in small issuers, there is the risk that such securities
will be less marketable or may be subject to greater fluctuations in price than
the securities of larger issuers. Small companies often pay no dividends, and
income is not a primary goal of the Portfolio.
The Advisor supports its selection of individual securities through
intensive research and uses qualitative and quantitative disciplines to
determine when securities should be sold. In unusual circumstances, economic,
monetary, technical and other factors may cause the Advisor to assume a
temporary, defensive position during which all or a substantial portion of the
Portfolio's assets may be invested in short-term instruments. The Portfolio also
may invest part of its assets temporarily in short-term investments pending the
investment of the proceeds of the sale of its Interests or of its portfolio
securities.
FOREIGN SECURITIES. The Portfolio has the right to invest up to 20% of its
total assets in foreign securities. The Portfolio will only purchase foreign
securities which are listed on a national securities exchange or included in the
NASDAQ National Market System or which are represented by American Depositary
Receipts listed on a national securities exchange or included in the NASDAQ
National Market System.
Interest or dividend payments on foreign securities may be subject to
foreign withholding taxes. There are also risks in investing in foreign
securities. The value of an investment may be affected indirectly by changes in
currency rates and in exchange control regulations. Foreign companies are
frequently not subject to the accounting and financial reporting standards
applicable to domestic companies, and there may be less information about
foreign issuers. In addition, investments in foreign countries are subject to
the possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect the value of
those investments.
PORTFOLIO TURNOVER. Under certain market conditions, the Portfolio may
experience a high rate of portfolio turnover. In general, the Advisor will not
consider the rate of portfolio turnover to be a limiting factor in determining
when or whether to purchase or sell securities in order to achieve the
Portfolio's objective. High portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs, which are borne directly by
the Portfolio, and may increase realized capital gains which are taxable to
Holders when distributed.
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ITEM 6. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE.
THE ADVISOR
The Advisor to the Portfolio is Provident Investment Counsel, Inc., 300
North Lake Avenue, Pasadena, California 91101-4106. Subject to the direction and
control of the Trustees of the Portfolio, an investment committee of the Advisor
formulates and implements an investment program for the Portfolio, including
determining which securities should be bought and sold. The Advisor also
provides certain of the officers of the Portfolio. For its services, The Advisor
receives a fee from the Portfolio, accrued daily and paid monthly, at the annual
rate of 0.80% of the average daily net assets of the Portfolio.
The Advisor is a corporation that traces its origins to an investment
partnership formed in 1951. On February 15, 1995, it became an indirect, wholly
owned subsidiary of United Asset Management ("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.
ITEMS 7 AND 8. SHAREHOLDER INFORMATION; DISTRIBUTION ARRANGEMENTS.
Interests in the Portfolio are issued solely to institutional investors,
including regulated investment companies, group trusts governed by Section
501(a) of the Code, common trust funds governed by Section 584 of the Code and
similar collective investment arrangements in transactions which do not involve
any "public offering" within the meaning of the Securities Act of 1933 (the
"1933 Act"). This Registration Statement does not constitute an offer to sell,
or the solicitation of an offer to buy, any "security" within the meaning of the
1933 Act.
There is no sales charge on Interests in the Portfolio, and the Portfolio
does not use its assets for distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). There is no minimum investment
in the Portfolio. The Portfolio reserves the right to reject any investment.
The net asset value of the Portfolio is determined as of the close of
regular trading (currently 4:00 p.m., New York time) on each day that the New
York Stock Exchange is open for trading. The net asset value per Interest of the
Portfolio is the value of the Portfolio's assets, less its liabilities, divided
by the number of Interests outstanding.
The Portfolio values its investments on the basis of the market value of
the securities. Securities and other assets for which market prices are not
readily available are valued at fair value as determined in good faith by the
Board of Trustees of the Portfolio. The fair value of debt securities with
remaining maturities of 60 days or less is normally their amortized cost value,
unless conditions indicate otherwise. Cash and receivables will be valued at
their face amounts. Interest will be recorded as accrued and dividends will be
recorded on their ex-dividend date.
A Holder wishing to redeem Interests may do so at any time by writing to
the Portfolio in care of its Custodian at P.O. Box 8943, Wilmington DE 19899, or
by delivering instructions to the Custodian at 400 Bellevue Parkway, Wilmington,
Delaware 19809. The redemption request should identify the Portfolio, specify
the number of Interests to be redeemed and be signed by an authorized person of
the Holder. If the request is not properly executed, the Interests specified
will be redeemed at the net asset value next determined after receipt of the
request. Payment for Interests tendered will be made within seven days after
receipt by the Portfolio of instructions properly executed. However, payment may
be delayed under unusual circumstances, as specified in the Investment Company
Act of 1940 or as determined by the Securities and Exchange Commission. Payment
will be sent only to Holders at the address of record.
REDEMPTION OF SMALL ACCOUNTS
In order to reduce the Portfolio's expenses, the Board of Trustees is
authorized to cause the redemption of all of the Interests of any Holder whose
account has declined to a net asset value of less than $500, as a result of a
transfer or redemption, at the net asset value determined as of the close of
business on the business day preceding the sending of proceeds of such
redemption. The Portfolio would give Holders whose Interests were being redeemed
60 days' prior written notice in which to purchase sufficient Interests to avoid
such redemption.
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PART B.
PIC SMALL CAP PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE AND TABLE OF CONTENTS
This Statement of Additional Information of the PIC Small Cap Portfolio
(the "Portfolio") is not a prospectus, and it should be read only in conjunction
with Part A of this Registration Statement. The date of this Statement of
Additional Information is August 28, 2000.
Item 10. Cover Page and Table of Contents............................ B-1
Item 11. Portfolio History........................................... B-1
Item 12. Description of the Portfolio and its Investments
and Risks................................................. B-1
Item 13. Management of the Portfolio................................. B-5
Item 14. Control Persons and Principal Holders of Securities......... B-7
Item 15. Investment Advisory and Other Services...................... B-7
Item 16. Brokerage Allocation and Other Practices.................... B-7
Item 17. Capital Stock and Other Securities.......................... B-8
Item 18. Purchase, Redemption and Pricing of Shares.................. B-9
Item 19. Taxation of the Portfolio .................................. B-9
Item 20. Underwriters................................................ B-9
Item 21. Calculation of Performance Data............................. B-9
Appendix............................................................. B-10
Item 22. Financial Statements........................................ B-10
ITEM 11. PORTFOLIO HISTORY
The Portfolio was organized as a trust under the laws of the State of New
York on March 22, 1993.
ITEM 12. DESCRIPTION OF THE PORTFOLIO AND ITS INVESTMENTS AND RISKS.
The Portfolio is an open-end, management, diversified investment company.
The Portfolio's short-term investments must be of high quality. High
quality means the obligations have been rated at least A-1 by S&P or Prime-1 by
Moody's, or have an outstanding issue of debt securities rated at least A by S&P
or Moody's, or are of comparable quality in the opinion of the Advisor.
INVESTMENT RESTRICTIONS
The Portfolio has adopted the following restrictions as fundamental
policies, which may not be changed without the favorable vote of the holders of
a "majority," as defined in the Investment Company Act of 1940 (the "1940 Act"),
of the outstanding voting securities of the 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 Interests of the
Portfolio represented at a meeting at which the holders of more than 50% of its
outstanding Interests are represented or (ii) more than 50% of the outstanding
Interests of the Portfolio.
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The Portfolio may not:
1. Issue senior securities, borrow money or pledge its assets, except that
the Portfolio may borrow on an unsecured basis from banks for temporary or
emergency purposes or for the clearance of transactions in amounts not exceeding
10% of its total assets (not including the amount borrowed), provided that it
will not make investments while borrowings in excess of 5% of the value of its
total assets are outstanding;
2. Make short sales of securities or maintain a short position;
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 it may write covered cash and
cash secured put options and purchase call and put options on stocks and stock
indices;
5. Act as underwriter (except to the extent the 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);
7. Purchase or sell real estate or interests in real estate or real estate
limited partnerships (although the Portfolio may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate);
8. Purchase or sell commodities or commodity futures contracts, except that
the Portfolio may purchase and sell stock index futures contracts;
9. Buy 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 Portfolio and except for repurchase agreements); or
11. Make investments for the purpose of exercising control or management.
The Portfolio observes the following restrictions as a matter of operating
but not fundamental policy, pursuant to positions taken by federal and state
regulatory authorities:
The Portfolio may not:
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 law.
2. Invest more than 15% of its net assets in illiquid securities. The
investments included in this 15% limit are (i) those which are restricted; i.e.,
those which cannot freely be sold for legal reasons (other than those which meet
the requirements of Securities Act Rule 144A); (ii) fixed time deposits subject
to withdrawal penalties (other than deposits with a term of less than seven
days); (iii) repurchase agreements having a maturity of more than seven days;
and (iv) investments for which market quotations are not readily available. The
15% limitation does not include obligations which are payable at principal
amount plus accrued interest within seven days after purchase.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which 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
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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 Portfolio intends 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 Board of
Trustees. The Advisor will review and monitor the creditworthiness of such
institutions under the Board's 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 Portfolio intends to comply with provisions under that Code that would
allow them immediately to resell the collateral.
U.S. GOVERNMENT SECURITIES
U.S. Government securities include direct obligations issued by the United
States Treasury, such as Treasury bills, certificates of indebtedness, notes and
bonds. U.S. Government agencies and instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Home Loan Banks, the
Federal National Mortgage Association and the Student Loan Marketing
Association.
Except for U.S. Treasury securities, obligations of U.S. Government
agencies and instrumentalities may or may not be supported by the full faith and
credit of the United States. Some, such as those of the Federal Home Loan Banks,
are backed by the right of the issuer to borrow from the Treasury; others by
discretionary authority of the U.S. Government to purchase the agencies'
obligations; while still others, such as the Student Loan Marketing Association,
are supported only by the credit of the instrumentality. In the case of
securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States itself in the event the agency or
instrumentality does not meet its commitment.
Among the U.S. Government securities that the Portfolio may purchase are
"mortgage-backed securities" of the Government National Mortgage Association
("Ginnie Mae"), the Federal Home Loan Mortgage Association ("Freddie Mac") and
the Federal National Mortgage Association ("Fannie Mae"). These mortgage- backed
securities include "pass-through" securities and "participation certificates";
both are similar, representing pools of mortgages that are assembled, with
interests sold in the pool; the assembly is made by an "issuer" which assembles
the mortgages in the pool and passes through payments of principal and interest
for a fee payable to it. Payments of principal and interest by individual
mortgagors are "passed through" to the holders of the interest in the pool,
thus, the payments to holders include varying amounts of principal and interest.
Prepayment of the mortgages underlying these securities may result in a
Portfolio's inability to reinvest the principal at comparable yields.
Another type of mortgage-backed security is the "collateralized mortgage
obligation", which is similar to a conventional bond (in that it makes fixed
interest payments and has an established maturity date) and is secured by groups
of individual mortgages. Timely payment of principal and interest on Ginnie Mae
pass-throughs is guaranteed by the full faith and credit of the United States.
Freddie Mac and Fannie Mae are both instrumentalities of the U.S. Government,
but their obligations are not backed by the full faith and credit of the United
States.
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WHEN-ISSUED SECURITIES
The Portfolio may purchase securities on a when-issued basis, for payment
and delivery at a later date, generally within one month. The price and yield
are generally fixed on the date of commitment to purchase, and the value of the
security is thereafter reflected in the Portfolio's net asset value. During the
period between purchase and settlement, no payment is made by the Portfolio and
no interest accrues to the Portfolio. At the time of settlement, the market
value of the security may be more or less than the purchase price. The Portfolio
will limit its investments in when-issued securities to less than 5% of its
total assets. When the Portfolio purchases securities on a when-issued basis, it
maintains liquid assets in a segregated account with its Custodian in an amount
equal to the purchase price as long as the obligation to purchase continues.
OPTIONS ACTIVITIES
The 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 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 Portfolio may purchase a call on securities to effect a "closing
purchase transaction," which is the purchase of a call covering the same
underlying security and having the same exercise price and expiration date as a
call previously written by the Portfolio on which it wishes to terminate its
obligation. If the Portfolio is unable to effect a closing purchase transaction,
it will not be able to sell the underlying security until the call previously
written by the Portfolio expires (or until the call is exercised and the
Portfolio delivers the underlying security).
The Portfolio also may write and purchase put options ("puts"). When the
Portfolio writes a put, it receives a premium and gives the purchaser of the put
the right to sell the underlying security to the Portfolio at the exercise price
at any time during the option period. When the Portfolio purchases a put, it
pays a premium in return for the right to sell the underlying security at the
exercise price at any time during the option period. If any put is not exercised
or sold, it will become worthless on its expiration date. When the Portfolio
writes a put, it will maintain at all times during the option period, in a
segregated account, cash or U.S. Government securities equal in value to the
exercise price of the put.
The Portfolio's option positions may be closed out only on an exchange
which provides a secondary market for options of the same series, but there can
be no assurance that a liquid secondary market will exist at a given time for
any particular option.
The Portfolio's custodian, or a securities depository acting for it,
generally acts as escrow agent as to the securities on which the Portfolio has
written puts or calls, or as to other securities acceptable for such escrow so
that no margin deposit is required of the Portfolio. Until the underlying
securities are released from escrow, they cannot be sold by the Portfolio.
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
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alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
FUTURES CONTRACTS
The Portfolio may buy and sell stock index futures contracts. Futures
contracts are traded on designated "contract markets" which, through their
clearing corporations, guarantee performance of the contracts.
A stock index futures contract is an agreement pursuant to which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is made. 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. If the Advisor expected
general stock market prices to rise, it might purchase a stock index futures
contract as a hedge against an increase in prices of particular equity
securities it wanted ultimately to buy. If in fact the stock index did rise, the
price of the equity securities intended to be purchased might also increase, but
that increase would be offset in part by the increase in the value of the
Portfolio's futures contract resulting from the increase in the index. On the
other hand, if the Advisor expected general stock market prices to decline, it
might sell a futures contract on the index. If that index did in fact decline,
the value of some or all of the equity securities held by the Portfolio might
also be expected to decline, but that decrease would be offset in part by the
increase in the value of the futures contract.
There are several risks in connection with the use of futures contracts. In
the event of an imperfect correlation between the futures contract and the
portfolio position which is intended to be protected, the desired protection may
not be obtained and the Portfolio may be exposed to risk of loss. Further,
unanticipated changes in interest rates or stock price movements may result in a
poorer overall performance for the Portfolio than if it had not entered into any
futures on debt securities or stock indexes.
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. In the
event that the Portfolio could not close a futures position and the value of the
position declined, the Portfolio would be required to continue to make daily
cash payments of maintenance margin.
ITEM 13. MANAGEMENT OF THE PORTFOLIO
The Portfolio's Board of Trustees decides on matters of general policy and
reviews the activities of the Advisor and the Administrator. The Portfolio's
officers conduct and supervise the daily business operations of the Portfolio.
The Trustees and officers of the Portfolio, their business addresses and
principal occupations during the past five years are:
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<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address and Age With the Trust During Past 5 Years
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<S> <C> <C>
Douglass B. Allen* (age 37) Trustee and Vice President of the Advisor
300 North Lake Avenue President
Pasadena, CA 91101
Jettie M. Edwards (age 53) Trustee Consulting principal of Syrus Associates
76 Seaview Drive (consulting firm)
Santa Barbara, CA 93108
Richard N. Frank (age 76) Trustee Chairman of Lawry's Foods, Inc.
234 E. Colorado Blvd.
Pasadena, CA 91101
James Clayburn LaForce (age 76) Trustee Dean Emeritus, John E. Anderson Graduate
P.O. Box 1585 School of Management, University of
Pauma Valley, CA 92061 California, Los Angeles. Director of The
BlackRock Funds. Trustee of Payden & Rygel
Investment Trust. Director of the Timken Co.,
Rockwell International, Eli Lily, Jacobs
Engineering Group and Imperial Credit
Industries.
Angelo R. Mozilo (age 60) Trustee Vice Chairman and Executive Vice President of
155 N. Lake Avenue Countrywide Credit Industries (mortgage
Pasadena, CA 91101 banking)
Wayne H. Smith (age 58) Trustee Vice President and Treasurer of Avery Dennison
150 N. Orange Grove Blvd Corporation (pressure sensitive material and
Pasadena, CA 91103 office products manufacturer)
Thomas J. Condon*(age 61) Trustee Managing Director of the Advisor
300 North Lake Avenue
Pasadena, CA 91101
Aaron W.L. Eubanks, Sr.* (age 37) Vice President Senior Vice President of the Advisor
300 North Lake Avenue and Secretary
Pasadena, CA 91101
William T. Warnick* (age 31) Vice President Vice President of the Advisor
300 North Lake Avenue and Treasurer
Pasadena, CA 91101
</TABLE>
* denotes Trustees who are "interested persons" of Portfolio under the 1940 Act.
The following compensation was paid to each of the following Trustees. No
other compensation or retirement benefits were received by any Trustee or
officer from the Registrant or other registered investment company in the "Fund
Complex."
Total
Compensation
Deferred From Trust
Cash Compensation Compensation and Portfolio
Name of Trustee From Registrant From Registrant Fund Complex*
--------------- --------------- --------------- -------------
Jetti M. Edwards -0- -0- $10,000
Wayne H. Smith -0- $ 405 16,658
James Clayburn La Force $4,200 -0- 14,500
Richard N. Frank -0- 4,200 12,658
Angelo R. Mozilo -0- 4,200 13,158
* The "Fund Complex" consists of the PIC Balanced Portfolio, the PIC Growth
Portfolio, the PIC MidCap Portfolio, the PIC Small Cap Portfolio and PIC
Investment Trust.
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ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
At August 4, 2000, the Portfolio was controlled by PIC Small Cap Growth
Fund I, 300 North Lake Avenue, Pasadena, CA 91101, a series of a Delaware
business trust which owned 81.05% of its outstanding Interests. Interests held
by officers and Trustees, as a group, amounted to less than 1%.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES
Subject to the supervision of the Board of Trustees of the Portfolio,
investment management and services are provided to the Portfolio by the Advisor,
pursuant to an Investment Advisory Agreement (the "Advisory Agreement").
Under the Advisory Agreement, the Advisor provides a continuous investment
program for the Portfolio and makes decisions and places orders to buy, sell or
hold particular securities. In conjunction with Investment Company
Administration Corporation (the "Administrator"), the Advisor also supervises
all matters relating to the operation of the Portfolio and obtains for it
officers, clerical staff, office space, equipment and services. As compensation
for its services, the Advisor receives a monthly fee at an annual rate of 0.80
of 1% of the Portfolio's average net assets. In addition to the fees payable to
the Advisor and the Administrator, the Portfolio is responsible for its
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 and transfer
agent; (vii) fees and expenses for registration or qualification of the
Portfolio and its Interests under federal or state securities laws; (viii)
expenses of preparing, printing and mailing reports and notices and proxy
material to Holders; (ix) other expenses incidental to holding any meetings of
Holders; (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 Portfolio and the legal obligations with
respect to which the Portfolio may have to indemnify its officers and Trustees;
and (xii) amortization of organization costs. The total advisory fee for the
fiscal year ended October 31, 1999 was $1,793,492, but the Advisor waived $3,878
of the total fee because total expenses of the Portfolio exceed 1.0% of the
Portfolio's average net assets. The total advisory fee for the fiscal year ended
October 31, 1998 was $1,418,731; however, the Advisor waived $24,020 of its
total fee. The total advisory fee for the fiscal year ended October 31, 1997 was
$1,525,768; however, the Advisor waived $24,879 of its total fee; the minimum
amount paid annually is $45,000.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, Investment Company Administration,
L.L.C. (the "Administrator") supervises the overall administration of the
Portfolio, including, among other responsibilities, the preparation and filing
of all documents required for compliance by the Portfolio with applicable laws
and regulations, arranging for the maintenance of books and records and the
Portfolio, and supervision of other organizations that provides services to the
Portfolio. Certain officers of the Portfolio are also provided by the
Administrator. The Portfolio is responsible for paying legal and auditing fees,
the fees and expenses of its custodian, accounting services and transfer agents,
trustees' fees and registration fees, as well as its other operating expenses.
For the services it provides, the Administrator receives a fee from the
Portfolio at an annual rate of 0.10% of the average daily net assets of the
Portfolio; the fee is accrued daily and paid monthly.
THE CUSTODIAN AND AUDITORS
The Registrant's custodian is Provident National Bank, 200 Stevens Drive,
Lester, PA 19113, which holds its assets. The Registrant's auditors are
PricewaterhouseCoopers, LLP, 1177 Aveune of the Americas, New York, NY 10036,
which audits the Registrant's financial statements and prepares its tax returns.
ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Advisory Agreement states that in connection with its duties to arrange
for the purchase and the sale of securities held in the portfolio of the
Portfolio by placing purchase and sale orders for the Portfolio, the Advisor
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shall select such broker-dealers ("brokers") as shall, in its judgment, achieve
the policy of "best execution," I.E., prompt and efficient execution at the most
favorable securities price. In making such selection, the Advisor is authorized
in the Advisory Agreement to consider the reliability, integrity and financial
condition of the broker. The Advisor also is authorized by the Advisory
Agreement to consider whether the broker provides research or statistical
information to the Portfolio and/or other accounts of the Advisor.
The Advisory Agreement states that the commissions paid to brokers may be
higher than another broker would have charged if a good faith determination is
made by the Advisor that the commission is reasonable in relation to the
services provided, viewed in terms of either that particular transaction or the
Advisor's overall responsibilities as to the accounts as to which it exercises
investment discretion and that the Advisor shall use its judgment in determining
that the amount of commissions paid are reasonable in relation to the value of
brokerage and research services provided and need not place or attempt to place
a specific dollar value on such services or on the portion of commission rates
reflecting such services. The Advisory Agreement provides that to demonstrate
that such determinations were in good faith, and to show the overall
reasonableness of commissions paid, the Advisor shall be prepared to show that
commissions paid (i) were for purposes contemplated by the Advisory Agreement;
(ii) were for products or services which provide lawful and appropriate
assistance to its decision-making process; and (iii) were within a reasonable
range as compared to the rates charged by brokers to other institutional
investors as such rates may become known from available information.
The research services discussed above may be in written form or through
direct contact with individuals and may include information as to particular
companies and securities as well as market, economic or institutional areas and
information assisting the Portfolio in the valuation of the Portfolio's
investments. The research which the Advisor receives for the Portfolio's
brokerage commissions, whether or not useful to the Portfolio, may be useful to
it in managing the accounts of its other advisory clients. Similarly, the
research received for the commissions of such accounts may be useful to the
Portfolio.
The aggregate brokerage commissions paid by the Portfolio during the fiscal
year ended October 31, 1999, were $341,189 of which $25,493 was paid to brokers
who furnished research services. Commissions paid during the fiscal years ended
October 31, 1998 and 1997 were $208,083 and $218,087, respectively.
ITEM 17. CAPITAL STOCK AND OTHER SECURITIES
Holders of Interests in the Portfolio are entitled to one vote for each
full Interest held (and fractional votes for fractions of Interests) and may
vote in the election of Trustees and on other matters submitted to meetings of
Holders. It is not contemplated that regular annual meetings of Holders will be
held.
The Declaration of Trust provides that the Holders have the right, upon the
declaration in writing or vote of the Holders of a majority of Interests, to
remove a Trustee. The Trustees will call a meeting of Holders to vote on the
removal of a Trustee upon the written request of the Holders of ten per cent of
its Interests. In addition, ten Holders holding the lesser of $25,000 worth or
one per cent of the Interests may advise the Trustees in writing that they wish
to communicate with other Holders 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 Holders.
Holders of Interests have no preemptive or other right to subscribe for
additional securities. Interests are non-transferable.
Holders may be liable for obligations of the Portfolio, but the risk of a
Holder incurring financial loss on account of such liability is limited to
circumstances in which the Portfolio was unable to meet its obligations.
The Book Capital Account balances of Holders are determined at such time or
times, at such frequency and pursuant to such method as the Trustees may from
time to time determine. The power and duty to make such calculations may be
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delegated by the Trustees to such person as the Trustees may determine. It is
expected that such calculations will be made on such days as necessary to comply
with Rule 22c-1 under the 1940 Act.
The Trustees shall, in compliance with applicable provisions of the
Internal Revenue Code (the "Code") or regulations thereunder, agree to (a) the
daily allocation of income or loss to each Holder, (b) the payment of
distributions to Holders and (c) upon liquidation of the Portfolio, the final
distribution of items of taxable income and expense. Any such agreement may be
amended from time to time to comply with the Code or regulations thereunder. The
Trustees may retain from net profits such amount as they may deem necessary to
pay the debts or expenses of the Portfolio or to meet obligations of the
Portfolio, or as they may deem desirable to use in the conduct of the affairs of
the Portfolio or to retain for future requirements or extension of the business
of the Portfolio.
ITEM 18. PURCHASE, REDEMPTION AND PRICING OF SHARES
The net asset value of the Portfolio's Interests will fluctuate and is
determined as of the close of regular trading on the New York Stock Exchange
(currently 4:00 p.m. Eastern time) each business day. The Exchange annually
announces the days on which it will not be open for trading. The most recent
announcement indicates that it will not be open on the following days: New
Year's Day, 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 net asset value per Interest is computed by dividing the value of the
securities held by the 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.
ITEM 19. TAXATION OF THE PORTFOLIO
The Portfolio does not expect to be subject to any income taxes. However,
each investor in the Portfolio will be taxable on its share of the Portfolio's
ordinary income and capital gain.
ITEM 20. UNDERWRITERS
Not applicable.
ITEM 21. CALCULATION OF PERFORMANCE DATA
Not applicable
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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.
STANDARD & POOR'S CORPORATION: CORPORATE BOND RATINGS
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are assessments of the issuer's ability to
repay punctually promissory obligations. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers: Prime 1--highest quality; Prime 2--higher
quality; Prime 3--high quality.
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment. Ratings are graded into four categories, ranging
from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers "1", "2" and "3" to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A-1" which possess extremely strong safety characteristics. Capacity for
timely payment on issues with the designation "A-2" is strong. However, the
relative degree of safety is not as high as for issues designated A-1. Issues
carrying the designation "A-3" have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher designations.
ITEM 22. FINANCIAL STATEMENTS
The Financial Statements of Registrant are included in the Annual Report to
Shareholders of Provident Investment Counsel Small Company Growth Funds A and B
for the fiscal year ended October 31, 1999 and incorporated by reference herein.
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PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Declaration of Trust(1)
(b) Not applicable
(c) Not applicable
(d) Management Agreement(1)
(e) Not applicable
(f) Not applicable
(g) Custodian Agreement(2)
(h) Administration Agreement(1)
(i) Not applicable
(j) Consent of independent accountants - filed herewith
(k) Not applicable
(l) Investment letter(1)
(m) Not applicable
(n) Not applicable
(o) Not applicable
(1) Previously filed with Amendment No. 3 to the Registration Statement on
Form N-1A of PIC Small Cap. Portfolio, File No. 811-8060, on March 3, 1997 and
incorporated herein by reference.
(2) To be filed by Amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Article V of Registrant's Declaration of Trust, states as follows:
1. DEFINITIONS. As used in this Article, the following terms shall have the
meanings set forth below:
(a) the term "indemnitee" shall mean any present or former Trustee,
officer or employee of the Trust, any present or former Trustee or officer
of another trust or corporation whose securities are or were owned by the
Trust or of which the Trust is or was a creditor and who served or serves
in such capacity at the request of the Trust, any present or former
investment adviser, sub-adviser or principal underwriter of the Trust and
the heirs, executors, administrators, successors and assigns of any of the
foregoing; however, whenever conduct by an indemnitee is referred to, the
conduct shall be that of the original indemnitee rather than that of the
heir, executor, administrator, successor or assignee;
(b) the term "covered proceeding" shall mean any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which an indemnitee is or was a party
or is threatened to be made a party by reason of the fact or facts under
which he or it is an indemnitee as defined above;
(c) the term "disabling conduct" shall mean willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office in question;
(d) the term "covered expenses" shall mean expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by an indemnitee in connection with a covered
proceeding; and
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(e) the term "adjudication of liability" shall mean, as to any covered
proceeding and as to any indemnitee, an adverse determination as to the
indemnitee whether by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent.
2. INDEMNIFICATION. The Trust shall indemnify any indemnitee for covered
expenses in any covered proceeding, whether or not there is an adjudication of
liability as to such indemnitee, to the maximum extent permitted by law.
However, the Trust shall not indemnify any indemnitee for any covered expenses
in any covered proceeding if there has been an adjudication of liability against
such indemnitee expressly based on a finding of disabling conduct. Nothing in
this Declaration of Trust shall protect a Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee hereunder.
3. ADVANCE OF EXPENSES. Covered expenses incurred by an indemnitee in
connection with a covered proceeding shall be advanced by the Trust to an
indemnitee prior to the final disposition of a covered proceeding upon the
request of the indemnitee for such advance and the undertaking by or on behalf
of the indemnitee to repay the advance unless it is ultimately determined that
the indemnitee is entitled to indemnification thereunder, but only if one or
more of the following is the case: (i) the indemnitee shall provide a security
for such undertaking; (ii) the Trust shall be insured against losses arising out
of any lawful advances; or (iii) there shall have been a determination, based on
a review of the readily available facts (as opposed to a full trial-type
inquiry) that there is a reason to believe that the indemnitee ultimately will
be found entitled to indemnification by either independent legal counsel in a
written opinion or by the vote of a majority of a quorum of trustees who are
neither "interested persons" as defined in the 1940 Act nor parties to the
covered proceeding. Nothing herein shall be deemed to affect the right of the
Trust and/or any indemnitee to acquire and pay for any insurance covering any or
all indemnitees to the extent permitted by the 1940 Act or to affect any other
indemnification rights to which any indemnitee may be entitled to the
extentpermitted by the 1940 Act.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Provident Investment Counsel, Inc. is the investment advisor of the
Registrant. For information as to the business, profession, vocation or
employment of a substantial nature of Provident Investment Counsel, Inc.,
reference is made to the Form ADV filed under the Investment Advisers Act of
1940 by Provident Investment Counsel, Inc.
ITEM 27. PRINCIPAL UNDERWRITERS.
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's Administrator, and all other records will be maintained by
the Custodian.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940 the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pasadena and
State of California on the 31st day of August, 2000.
PIC SMALL CAP. PORTFOLIO
By /s/ Robert H. Wadsworth
-------------------------------------
Robert H. Wadsworth
Assistant Secretary
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EXHIBIT INDEX
ITEM NO. DESCRIPTION
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99.(j) Consent of Independent Accountants
