<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Chestnut Street Exchange Fund
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
<PAGE> 2
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 3
CHESTNUT STREET EXCHANGE FUND
400 BELLEVUE PARKWAY
SUITE 100
WILMINGTON, DELAWARE 19809
------------------------
NOTICE OF ANNUAL MEETING OF PARTNERS
------------------------
November 17, 1997
TO THE PARTNERS OF
CHESTNUT STREET EXCHANGE FUND:
The Annual Meeting of Partners of CHESTNUT STREET EXCHANGE FUND (the
"Fund") will be held on December 18, 1997 at 3:00 p.m. (Eastern time) in the
Fourth Floor Conference Room, Bellevue Park Corporate Center, 400 Bellevue
Parkway, Wilmington, Delaware for the following purposes:
(1) To approve or disapprove an Amended and Restated Certificate and
Agreement of Limited Partnership which would:
- Delete references to the Non-Managing General Partner and to
partnership tax status;
- Remove the list of investment limitations from the Partnership
Agreement (the limitations will remain applicable to the Fund
under the requirements of the Investment Company Act of 1940);
- Simplify the prescribed procedures for transferring shares;
- Remove provisions illustrating the anticipated timing and amount
of distributions to Partners and other outdated references to the
Fund's initial offering and capitalization; and
- Make certain other non-material changes;
(2) To elect five (5) Managing General Partners;
(3) To approve or disapprove a new Investment Advisory Agreement;
(4) To ratify the appointment by the Managing General Partners of
Coopers & Lybrand L.L.P. as the Fund's independent accountants for its
fiscal year ending December 31, 1997; and
(5) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The subjects referred to above are discussed in detail in the Proxy
Statement attached to this Notice. Each Partner is invited to attend the Annual
Meeting of Partners in person. Partners of record at the close of business on
November 3, 1997 have the right to vote at the meeting. If you cannot be present
at the meeting, we urge you to fill in, sign and promptly return the enclosed
proxy in order that the meeting can be held and a maximum number of shares may
be voted.
MORGAN R. JONES
Secretary
A POSTAGE PAID RETURN ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE IN RETURNING YOUR
PROXY CARD AS SOON AS POSSIBLE
<PAGE> 4
CHESTNUT STREET EXCHANGE FUND
400 BELLEVUE PARKWAY
SUITE 100
WILMINGTON, DELAWARE 19809
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Managing General Partners of Chestnut Street Exchange Fund (the
"Fund") for use at the Annual Meeting of Partners to be held in the Fourth Floor
Conference Room, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware on December 18, 1997 at 3:00 p.m. (Eastern time), and at
any adjournment thereof (the "Meeting").
Any person giving a proxy may revoke it at any time prior to its use.
Signed proxies received by the Fund in time for voting and not so revoked will
be voted in accordance with the directions specified therein. The Managing
General Partners recommend a vote FOR an Amended and Restated Certificate and
Agreement of Limited Partnership, FOR the election of Managing General Partners
as listed, FOR a new Investment Advisory Agreement, and FOR the ratification of
Coopers & Lybrand L.L.P. as the Fund's independent accountants. If no
specification is made, the proxy will be voted for the election of the Managing
General Partners and FOR the matters listed.
The Fund will bear all proxy solicitation costs. It is expected that the
solicitation of proxies will be primarily by mail. The Fund's officers and
transfer agent may also solicit proxies personally or by telephone or telefax.
Any Partner giving a proxy may revoke it at any time before it is exercised by
submitting to the Fund a written notice of revocation or a subsequently executed
proxy or by attending the Meeting and electing to vote in person.
Only Partners of record at the close of business on November 3, 1997 will
be entitled to vote at the Meeting. Excluding units of partnership interest of
the Fund owned of record by the Fund's Non-Managing General Partner, The
Sandridge Corporation (which are not entitled to vote), on that date there were
1,156,928.733 units of partnership interest ("Shares") outstanding and entitled
to be voted at the Meeting. Partners of record, other than the Non-Managing
General Partner, are entitled to one vote for each Share owned of record on the
record date. Shares owned of record by the Non-Managing General Partner will not
be counted for purposes of a quorum or any vote at the Meeting. This Proxy
Statement, the accompanying Notice of Annual Meeting of Partners, and the
enclosed proxy are being mailed on or about November 17, 1997 to Partners of
record on the record date.
THE FUND HAS PREVIOUSLY FURNISHED TO PARTNERS ITS ANNUAL REPORT, CONTAINING
AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, AND
ITS SEMI-ANNUAL REPORT, CONTAINING UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD
ENDED JUNE 30, 1997. REQUESTS FOR COPIES OF SUCH REPORTS, WHICH THE FUND WILL
FURNISH TO PARTNERS WITHOUT CHARGE, SHOULD BE DIRECTED TO THE FUND'S TRANSFER
AGENT, PFPC INC., P.O. BOX 8950, WILMINGTON DELAWARE 19889 OR TELEPHONE
TOLL-FREE (800) 852-4750. THE SEMI-ANNUAL AND ANNUAL REPORTS ARE NOT TO BE
REGARDED AS PROXY SOLICITING MATERIAL.
There are four separate subjects to be considered by the Partners at the
meeting: (1) the proposed Amended and Restated Certificate and Agreement of
Limited Partnership (see p. 2), (2) the election of five Managing General
Partners (see p. 4), (3) the proposed new Investment Advisory Agreement (see p.
7), and (4) the ratification of the selection of the independent auditors of the
Fund (see p. 13). Each of these matters is discussed below.
<PAGE> 5
1. AMENDMENTS TO THE FUND'S RESTATED CERTIFICATE AND AGREEMENT OF LIMITED
PARTNERSHIP
BACKGROUND
The Fund is a California Limited Partnership which is registered under the
Investment Company Act of 1940 (the "1940 Act") as an open-end, diversified
management investment company. The Fund was formed in 1976, and since that time
has been classified as a partnership for federal tax purposes. In 1976, the Fund
obtained a ruling from the Internal Revenue Service that it would be classified
as a partnership, subject to the condition that the Fund's General Partners
maintain at all times in the aggregate an interest of at least 1% in the Fund.
This condition was also incorporated into the Fund's Restated Certificate and
Agreement of Limited Partnership (the "Partnership Agreement").
To satisfy this condition, the Partnership Agreement provided for a
Non-Managing General Partner. In addition, the Fund's Investment Advisory
Agreement requires PNC Bank, N.A. ("PNC Bank") to provide the Fund with a
Non-Managing General Partner and to pay the compensation of the Non-Managing
General Partner. The Sandridge Corporation ("Sandridge") has served as the
Non-Managing General Partner since inception, and has held at least 1% of the
Fund's total shares outstanding throughout the period. To compensate the
Non-Managing General Partner for its services to the Fund and the risk
undertaken, PNC Bank agreed to pay Sandridge annually an amount equal to .10% of
the Fund's average net assets.
Effective on January 1, 1998 the need for a Non-Managing General Partner
will be eliminated, because the Fund will be treated as a corporation for
federal tax purposes. However, it will retain essentially the same pass-through
tax treatment by electing regulated investment company tax status.
CHANGES TO BE MADE IN THE CURRENT STRUCTURE
Federal tax legislation passed in 1987, which was directed at publicly
traded partnerships such as the Fund, allowed partnership tax treatment for the
Fund to continue only through 1997. While the Taxpayer Relief Act of 1997 made
some changes in the rules applicable to publicly traded partnerships, it would
not be beneficial for the Fund to elect to continue as a partnership after 1997.
As a result, effective January 1, 1998, the Fund will no longer be treated as a
partnership for tax purposes, and will instead elect to be taxed as a regulated
investment company. As noted in the Fund's letter to Partners dated February 14,
1997, this will mean that essentially the same pass-through tax treatment of the
Fund's income will continue. The Fund believes that there will be very little
change in the operation of the Fund when it operates as a regulated investment
company, and minor changes in the tax treatment of the Limited Partners. There
will be a change in the Fund's policy with respect to the distribution of net
capital gains that is intended to leave Partners in at least as favorable a tax
position as they were under the previous policy. Partners who would like a copy
of the letter to Partners outlining these changes should contact Edward J.
Roach, Treasurer, Chestnut Street Exchange Fund, 400 Bellevue Parkway, Suite
100, Wilmington, Delaware 19809.
Under the tax rules which will be in effect after January 1, 1998, it will
no longer be necessary for the Fund to have a Non-Managing General Partner for
tax purposes, and there is no requirement that there be such a position under
the California Revised Limited Partnership Act. The effect of the elimination of
the need for a Non-Managing General Partner, and consequently PNC Bank's
responsibility to provide a Non-Managing General Partner, is to reduce the
expenses of the advisers associated with the performance of their obligations
under the Investment Advisory Agreement with the Fund by .10% per annum. The
Managing General Partners are proposing to Partners at the meeting a new
advisory agreement that will reduce the adviser's fee by the amount of the
adviser's eliminated expense.
AMENDMENTS TO THE PARTNERSHIP AGREEMENT
In connection with the review of the Partnership Agreement for the purpose
of eliminating the references to the Non-Managing General Partner and to
partnership tax status, the Managing General Partners decided that it would be
desirable to submit to the Partners an Amended and Restated Partnership
Agreement that would make additional changes designed essentially to modernize
the Partnership Agreement and to eliminate
2
<PAGE> 6
matters that were applicable in 1976 but are no longer necessary. The proposed
changes are grouped into three separate topics. The Managing General Partners
recommend that the Amended and Restated Certificate and Agreement of Limited
Partnership in the form attached hereto as Exhibit A be approved. The proposed
changes are as follows:
(1) to delete references to the Non-Managing General Partner and to
partnership tax status;
(2) to remove the listing of investment limitations from the
Partnership Agreement (each will remain a fundamental policy under
the Fund's Registration Statement as a registered investment
company);
(3) to eliminate as no longer necessary (a) the cumbersome procedures
currently required for transferring shares in favor of simplified
transfer provisions, (b) illustrations that were appropriate in
1976 of the anticipated timing and amounts of distributions to
Partners (this change would leave intact the broad discretion of
the Managing General Partners to make distributions), and (c)
certain historic information relevant at the time of organization
of the Fund and irrelevant now, and to make other conforming
changes.
The Partnership Agreement attached to this Proxy Statement as Exhibit A
shows the additions and deletions that would be effected by the approval of this
Proposal No. 1.
DELETION OF REFERENCES TO THE NON-MANAGING GENERAL PARTNER AND TO PARTNERSHIP
TAX STATUS
In light of the change to the Fund's tax status and the removal of the need
to have a Non-Managing General Partner under federal tax law, the Managing
General Partners concluded that it would be appropriate to delete references to
the Fund's prior tax status and the requirement for a Non-Managing General
Partner from the Partnership Agreement, and to seek to terminate the
Non-Managing General Partner's services.
The elimination of the need for a Non-Managing General Partner from the
Partnership Agreement will enable the compensation arrangement between PNC Bank
and Sandridge to be terminated. The Non-Managing General Partner has agreed to
the termination of its status effective on the effective date of the proposed
amendment to the Partnership Agreement, and to the conversion of its shares into
limited partnership interests. As a limited partner, Sandridge would have the
right to vote, and all rights of any other limited partner. (Currently, the
Non-Managing General Partner's shares are non-voting and subject to certain
contractual rights which limit its ability to redeem shares.)
REMOVAL OF INVESTMENT LIMITATIONS FROM THE PARTNERSHIP AGREEMENT
The Managing General Partners also recommend approval of changes which
would remove Section 2.4 of the Partnership Agreement (which recites the Fund's
investment limitations). Such provisions are not required to be included in the
Partnership Agreement by California limited partnership or any other law, and
each of the policies is and will continue to be a "fundamental policy" of the
Fund under the 1940 Act. A fundamental policy can only be changed under the 1940
Act by the vote of a "majority" of the outstanding shares -- the same vote as is
required to amend this portion of the Partnership Agreement. ("Majority" for
this purpose has the definition set forth below under "Conclusion.") Thus the
removal of these provisions from the Partnership Agreement will not adversely
affect the rights of Partners. Any changes to the Fund's objectives, policies
and limitations are now, and will continue to be subject to, the same
requirements as are provided in the 1940 Act. The Managing General Partners
currently have no intention of changing any of the Fund's investment
limitations.
AMENDMENT TO THE PRESCRIBED PROCEDURES FOR TRANSFERRING SHARES, TO REMOVE
NOW-OBSOLETE ILLUSTRATIONS OF DISTRIBUTION POLICIES, STATEMENTS OF HISTORIC
INFORMATION NOT NOW RELEVANT, AND TO MAKE CONFORMING CHANGES FOR EACH OF THE
PROPOSALS THROUGHOUT THE PARTNERSHIP AGREEMENT
The Managing General Partners also have approved changes to the Partnership
Agreement which would remove the current cumbersome requirements that must be
met in order to transfer Shares. These procedures include a requirement that the
transferee provide the Fund with an affidavit regarding the transfer and an
3
<PAGE> 7
agreement to be bound by the Partnership Agreement. The current requirements had
their origins in the Fund's need to preserve its partnership tax status, and
after January 1, 1998, no such restrictions are required, and the Managing
General Partners do not believe there is any other reason to retain these limits
on free transferability of Shares. The proposed changes to the Partnership
Agreement will delete the procedure and provide that a transferee of Shares
shall become a Limited Partner and be bound by the Partnership Agreement upon
the recordation of his or her name in the records of the Fund.
Another change would remove obsolete illustrations of the Fund's
distribution policies. The Partnership Agreement gives the Managing General
Partners full discretion as to the timing and amount of distributions by the
Fund. Pursuant to this authority, distributions have been made to the Partners
since inception. The Partnership Agreement also includes an illustration of the
anticipated timing and amounts of distributions that were to be made. The
Managing General Partners believe that in 1976 this was an appropriate means of
advising prospective Partners as to the intended operation of the Fund, but that
it is no longer necessary to include this illustration in the Partnership
Agreement. Furthermore, the change to regulated investment company status and
the related change in distribution policy makes the illustration incorrect. The
illustration which is proposed to be removed in no way limits the discretion of
the Managing Partners to make distributions and to determine the timing thereof.
Additionally, the Partnership Agreement contains a number of references to
the offering of Shares which was completed in 1976. These references are now
obsolete, and the Managing General Partners have approved changes which would
remove these references. Finally, the amendments would make other, conforming
changes to make the Partnership Agreement consistent with the changes described
above.
CONCLUSION
The Managing General Partners have concluded that each of the proposed
amendments to the Partnership Agreement will benefit the Fund and its Partners.
Partners should review Exhibit A for a full understanding of the proposed
changes. If approved by the Partners at the Meeting, each of the approved
amendments will become effective on January 1, 1998. The Managing Partners
recommend a vote FOR these three Proposals.
The approval of these amendments requires the affirmative vote of (a) a
majority of the Shares present in person or by proxy and entitled to vote at a
meeting at which a quorum is present, and (b) a "majority" of the outstanding
Shares, defined as the affirmative vote of the holders of the lesser of: (i) 67%
of the Shares of the Fund present in person or by proxy at the meeting and
entitled to vote if the holders of more than 50% of the outstanding Shares are
present in person or by proxy; or (ii) more than 50% of the outstanding Shares
of the Fund.
2. ELECTION OF MANAGING GENERAL PARTNERS
At the Meeting, Partners will elect five Managing General Partners. There
are currently four Managing General Partners, and the number will be increased
by one at the time of the Meeting. Each Managing General Partner so elected will
serve until the next annual meeting of Partners, or special meeting in lieu
thereof, and until the election and qualification of the Managing General
Partner's successor, or until the Partner's status as a Managing General Partner
is sooner terminated as provided in the Fund's Partnership Agreement. Normally,
there will be no annual meeting of Partners for the purpose of electing Managing
General Partners except as required by the 1940 Act.
The persons named as proxies in the accompanying proxy have been designated
by the Managing General Partners and intend to vote for the nominees named
below. All Shares represented by valid proxies will be voted in the election for
all of the nominees named below unless authority to vote for all of the nominees
or a particular nominee is withheld. Each nominee has consented to being named
in this Proxy Statement and to serve if selected. In the event any nominee
should withdraw from the election or otherwise be unable to serve, the named
proxies will vote for the election of such substitute nominee as the Managing
General Partners may recommend unless a decision is made to reduce the number of
Managing General Partners.
4
<PAGE> 8
The following table sets forth the nominees, their ages, principal
occupations for the past five or more years, and any other directorships they
hold in companies which are subject to the reporting requirements of the
Securities Exchange Act of 1934 or are registered as investment companies under
the 1940 Act.
<TABLE>
<CAPTION>
SHARES
GENERAL BENEFICIALLY
PARTNER OWNED AS OF
NAME AGE SINCE AUGUST 31, 1997 BUSINESS EXPERIENCE
- ------------------------------ --- ------- --------------- ------------------------------
<S> <C> <C> <C> <C>
Richard C. Caldwell*.......... 53 N/A 0 Executive Vice President, PNC
Bank; Director of various
affiliates and subsidiaries
of PNC Bank, including
Provident Institutional
Management Corporation
("PIMC").
Robert R. Fortune*............ 80 1976 4,337.584 Financial Consultant; Former
Chairman, President and
Chief Executive Officer,
Associated Electric & Gas
Insurance Services Limited
from 1984-1993; Member of
the Financial Executives
Institute and American
Institute of Certified
Public Accountants; Director
or Trustee of 4 other
investment companies advised
by PIMC.
G. Willing Pepper............. 89 1976 952.180** Retired, Chairman of the
Board, Specialty Composites
Corporation until May 1984;
Chairman of the Board, The
Institute for Cancer
Research until 1979;
Director, Philadelphia
National Bank until 1978;
President, Scott Paper
Company, 1971-1973; Director
or Trustee of 5 other
investment companies advised
by PIMC.
David R. Wilmerding, Jr. ..... 62 1976 1.933** Chairman, Gee Wilmerding &
Associates, Inc. (investment
advisers); Director, Beaver
Management Corporation;
Chairman of the Board,
Compass Capital Funds;
Director, Independence
Square Income Securities,
Inc.; Director, Mutual Fire
Marine & Inland Insurance
Co., Inc.; Director, US
Retirement Communities, Inc.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
SHARES
GENERAL BENEFICIALLY
PARTNER OWNED AS OF
NAME AGE SINCE AUGUST 31, 1997 BUSINESS EXPERIENCE
- ------------------------------ --- ------- --------------- ------------------------------
<S> <C> <C> <C> <C>
Langhorne B. Smith............ 61 1997 46,132.730*** President and Director, The
Sandridge Corporation
(private investment
company); Executive Vice
President and Director,
Claneil Enterprises, Inc.
(private investment
company).
</TABLE>
- ---------------
*Messrs. Caldwell (an officer of the advisers) and Fortune (President of the
Fund) are "interested persons" of the Fund as that term is defined in the
1940 Act.
** Shares are beneficially owned by virtue of sole voting and investment power.
*** Shares are beneficially owned by Sandridge. Mr. Smith has shared voting and
investment power.
Messrs. Fortune, Pepper and Wilmerding were most recently elected by the
Partners at the Annual Meeting of the Fund held on April 24, 1992. Mr. Smith has
served as a Managing General Partner since September 26, 1997 when he was
elected by the other Managing General Partners. R. Stewart Rauch, a Managing
General Partner of the Fund since 1980, resigned on February 27, 1997. Mr.
Rauch's resignation was not based upon any disagreement with the Fund's other
Managing General Partners or Fund management. Sandridge, the Non-Managing
General Partner of the Fund since its organization, is not standing for
re-election for the reason cited above under Proposal No. 1.
During 1996, no Managing General Partner or officer of the Fund was also a
director, officer, or employee of the Fund's advisers or any of their parents.
Drinker Biddle & Reath LLP, of which Morgan R. Jones, Secretary of the Fund, is
a partner, received fees during the year ended December 31, 1996 for services
rendered as the Fund's legal counsel. The Fund's Treasurer was paid $18,694
(including amounts contributed to the retirement plan described below) for his
services in 1996. The Fund has a retirement plan (the "Plan") for eligible
employees. For the last fiscal year, the Fund contributed a total of $2,207 to
the Plan, and, based upon prior practice, it may be anticipated that the Fund
will contribute to the plan during the current fiscal year an amount equal to
10% of the compensation of the Plan participants for the year. Such
contribution, based upon annual rates of compensation now in effect, would
approximate $2,323. Under the Plan, each participant is entitled to his vested
portion of the contributions made by the Fund based upon his compensation. As of
the record date, the Managing General Partners and officers of the Fund owned
beneficially less than 1% of the Fund's issued and outstanding Shares.
6
<PAGE> 10
The Fund pays each Managing General Partner $6,000 annually, and pays the
Chairman an additional $4,000 annually. The following table provides information
concerning the compensation of each of the Fund's Managing General Partners for
services rendered during the Fund's last fiscal year ended December 31, 1996:
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT COMPENSATION
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL FROM FUND AND
COMPENSATION AS PART OF FUND BENEFITS UPON FUND
NAME OF PERSON/POSITION FROM FUND EXPENSES RETIREMENT COMPLEX(1)
----------------------------- ------------ ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Robert R. Fortune............ $ 10,000 None None (4)(2) $67,100
President and Chairman of
the Managing General
Partners
G. Willing Pepper............ $ 6,000 None None (5)(2) $97,100
Managing General Partner
David R. Wilmerding, Jr. .... $ 6,000 None None (2)(2) $63,350
Managing General Partner
R. Stewart Rauch(3).......... $ 6,000 None None (1)(2) $12,000
Managing General Partner
</TABLE>
- ---------------
(1) A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and
investor services, or have a common investment adviser or have an investment
adviser that is an affiliated person of the investment adviser of any of the
other investment companies.
(2) Total number of such other investment companies within the Fund Complex of
which the Managing General Partners serves as director or trustee.
(3) Mr. Rauch resigned as a Managing General Partner of the Registrant on
February 27, 1997.
The Managing General Partners met four times during the last fiscal year.
All Managing General Partners attended at least 75% of the meetings. The Fund
does not have a standing audit, nominating or compensation committee.
3. APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
BACKGROUND
PNC Bank, N.A. ("PNC Bank") and Provident Institutional Management
Corporation ("PIMC") serve as the Fund's investment advisers pursuant to an
advisory agreement dated January 19, 1983 (the "Current Advisory Agreement"). At
the Meeting, Partners will be asked to approve a new Advisory Agreement dated
January 1, 1998 (the "New Advisory Agreement") among the Fund, PNC Bank and PIMC
providing, among other things, for reduced advisory fees. A copy of the New
Advisory Agreement is attached as Exhibit B.
The New Advisory Agreement is being submitted to the Partners in
anticipation of the approval at the meeting of the proposal to amend the
Partnership Agreement to eliminate the requirements for a Non-Managing General
Partner (Proposal 1). If that proposal is approved, the New Advisory Agreement
will be submitted to the Partners at the Meeting. The principal substantive
changes in the New Advisory Agreement are the removal of the requirement in the
Fund's Current Advisory Agreement that PNC Bank provide the Fund with a
Non-Managing General Partner at its expense, and to make a reduction in the
schedule of investment advisory fees.
At meetings of the Managing General Partners held on September 26, 1997 and
October 27, 1997, the Managing General Partners considered revisions to the
Current Advisory Agreement to coincide with the elimination of the Non-Managing
General Partner. At the meeting on October 27, 1997, the Managing General
Partners present at the meeting, including a majority of the Managing General
Partners who are not "interested persons" of the Fund or of PNC Bank and PIMC,
voted unanimously to approve the New
7
<PAGE> 11
Advisory Agreement. The Managing General Partners recommend that the Partners
approve the New Advisory Agreement. If approved by the Partners, the New
Advisory Agreement will take effect on January 1, 1998.
The Fund's Current Advisory Agreement was last approved by the Managing
General Partners on March 7, 1997, when the Managing General Partners, including
a majority of those Managing General Partners who are not "interested persons"
of the Fund, approved its continuation for a twelve month period commencing
March 31, 1998. The Current Advisory Agreement was last approved by the Partners
on April 24, 1992.
DESCRIPTION OF THE PROVISIONS OF THE CURRENT ADVISORY AGREEMENT WHICH WILL BE
CHANGED IN THE NEW ADVISORY AGREEMENT
The terms of the New Advisory Agreement are the same in all material
respects as the terms of the Current Advisory Agreement, except as follows:
1. ELIMINATION OF PROVISIONS RELATING TO THE NON-MANAGING GENERAL
PARTNER. Under the Current Advisory Agreement, PNC Bank has agreed to provide
the Fund with a Non-Managing General Partner who will own at all times at least
1% of the Fund's outstanding Shares. Pursuant to this undertaking, PNC Bank
entered into an agreement dated October 22, 1976 with The Sandridge Corporation,
under which Sandridge agreed to act as the Fund's Non-Managing General Partner,
and PNC Bank agreed to pay Sandridge a fee, computed daily and payable monthly,
at the annual rate of 1/10 of 1% of the Fund's net assets. The provision related
to PNC's obligation to provide a Non-Managing General Partner will be omitted
from the New Advisory Agreement, as there will no longer be a Non-Managing
General Partner if the Partners approve Proposal 1, discussed above.
2. CHANGE IN ADVISORY FEE. Under the Current Advisory Agreement, the Fund
pays PIMC a fee, computed daily and payable monthly, at the annual rate of 5/10
of 1% of the first $100,000,000 of the Fund's net assets, plus 4/10 of 1% of net
assets exceeding $100,000,000. During the Fund's fiscal year ended December 31,
1996, the Fund paid advisory fees aggregating $1,194,793.
Under the New Advisory Agreement, the advisory fee would be adjusted
downward by the amount of the fee to the Non-Managing General Partner that will
no longer be paid. Hence, the amount of the advisory fee retained by the
advisers will remain unchanged. The fee under the New Advisory Agreement will be
at the annual rate of 4/10 of 1% of the first $100,000,000 of the Fund's net
assets, plus 3/10 of 1% of the net assets in excess of $100,000,000. If the New
Advisory Agreement had been in effect in 1996, the advisory fee would have been
$921,094.
COMPARISON OF FEES
<TABLE>
<CAPTION>
CURRENT ADVISORY NEW ADVISORY
ASSETS AGREEMENT AGREEMENT
- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C>
0-$100 million.............. .5% of average net assets .4% of average net assets
annually annually
over $100 million........... .4% of average net assets .3% of average net assets
annually annually
</TABLE>
The New Advisory Agreement also eliminates the provision that provided for
the payment by PIMC of a portion of the fee to PNC Bank.
3. TERM. If approved by the Partners at this Meeting, the initial term of
the New Advisory Agreement will extend through March 31, 1999, and thereafter
shall continue in effect for successive one-year terms ending on March 31 of
each year. The term of the Current Advisory Agreement expires on March 31 of
each year.
8
<PAGE> 12
DESCRIPTION OF THE PROVISIONS OF THE CURRENT ADVISORY AGREEMENT AND THE NEW
ADVISORY AGREEMENT WHICH WILL REMAIN UNCHANGED
Except as described above, the terms and conditions of the New Advisory
Agreement are the same in all material respects as the Current Advisory
Agreement. A copy of the New Advisory Agreement is attached as Exhibit B. Set
forth below is a summary of the provisions that are the same in both agreements.
PIMC, subject to the supervision of the Fund's Managing General Partners,
manages the Fund's portfolio and is responsible for, makes decisions with
respect to and places orders for all purchases and sales of the Fund's portfolio
securities, and computes the Fund's net asset value and net income. PNC Bank
will (i) provide investment research and credit analysis concerning prospective
and existing Fund investments, (ii) make recommendations with respect to the
Fund's continuous investment program, (iii) make recommendations regarding the
amount of the Fund's assets to be invested or held uninvested in cash or cash
equivalents, (iv) supply PIMC with computer facilities and operating personnel,
(v) provide PIMC with such statistical services as PIMC may reasonably request,
and (vi) maintain or cause PIMC to maintain the Fund's financial accounts and
records.
In providing services, PNC Bank has agreed to use the same skill and care
it uses in providing services to fiduciary accounts for which it has investment
responsibilities. PNC Bank and PIMC may not invest their assets or the assets of
any fiduciary accounts under their management in Shares of the Fund, nor may
they make loans to the Fund, or to any person for the purpose of enabling such
person to purchase or carry Fund Shares. The agreements also provide that PNC
Bank and PIMC shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund except for a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of either of them in the performance of their duties or from reckless
disregard by them of their obligations and duties thereunder.
PNC Bank and PIMC have agreed to bear all expenses incurred by them in
connection with their activities other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund. In addition, PIMC and PNC
Bank are required to reimburse the Fund up to the amount of PIMC's yearly fee
for the amount by which the expenses borne by the Fund in any fiscal year exceed
the applicable expense limitations imposed by the securities regulations of any
state in which Shares of the Fund are registered or qualified for sale to the
public.
Continuance of each agreement for successive one-year terms must be
specifically approved at least annually (i) by the vote of a majority of the
Managing General Partners who are not parties to such advisory agreement or
"interested persons" (as that term is defined in the 1940 Act) of any such
party, and (ii) by a majority of Managing General Partners or by a vote of a
majority of the outstanding Shares of the Fund. Each agreement provides for
termination automatically upon assignment and each are terminable at any time
without penalty by the Managing General Partners or by a vote of a majority of
the Fund's outstanding Shares, on 60 days' written notice to the advisers or by
the advisers on 90 days' written notice to the Fund.
MANAGING GENERAL PARTNER'S CONSIDERATIONS AND RECOMMENDATION
The Managing General Partners met on September 26, 1997 and October 27,
1997 to consider the New Advisory Agreement. On October 27, 1997, the New
Advisory Agreement was approved by the Fund's Managing General Partners present
at the meeting, including a majority of the Fund's Managing General Partners who
are not "interested persons" of the Fund, PNC Bank or PIMC.
The proposed changes in the Partnership Agreement to eliminate the
references to the Non-Managing General Partner, approved at the meeting held on
September 26, 1997, made it appropriate to consider the terms and conditions of
the Current Advisory Agreement. The Managing General Partners concluded that
there would be no reason to continue PNC Bank's obligation to provide the Fund
with a Non-Managing General Partner. At the same time, it was noted that the
effect of the elimination of the responsibility of PNC Bank to provide a
Non-Managing General Partner was to reduce the expenses of the advisers under
the Current Advisory Agreement by the amount of the fee, .10% per annum of
average net assets.
9
<PAGE> 13
In the course of a discussion with the advisers of the impact of this
change, and other changes since the fee was established in 1976, on the
appropriate level of the advisory fee, it was noted that since the fee in the
Current Advisory Agreement had been established, the Fund's assets had grown
substantially. The Managing General Partners considered whether some adjustment
in the advisory fee for assets above specified levels would be appropriate to
reflect economies of scale. The Managing General Partners concluded after a
review of the information provided by the advisers that it was not appropriate
to provide at this time for a reduction in the fee level at higher asset levels.
After discussion with the advisers and a review of financial information
provided by the advisers, it was the consensus of the Managing General Partners
that the reduction in expenses of the advisers by reason of the elimination of
the fee paid to the Non-Managing General Partner should be matched by a
reduction in the advisory fee. Proposed changes were discussed with
representatives of the advisers, after which the Managing General Partners and
the representatives of the advisers reached an agreement to adjust the fee
schedule to the schedule included in the proposed New Advisory Agreement: 4/10
of 1% of the first $100,000,000 of net assets, plus 3/10 of 1% of net assets in
excess of $100,000,000.
The information set forth below illustrates the impact of the proposed
change on the Fund and on the advisers.
<TABLE>
<CAPTION>
1996
(PRO FORMA
1996 BASED ON NEW
(ACTUAL) ADVISORY AGREEMENT) % CHANGE
---------- ------------------- ---------
<S> <C> <C> <C>
Advisory Fees..................................... $1,194,792 $ 921,094 ($273,698)
Effective annual rate based on average net assets
in 1996......................................... .437% .337% .10%
Compensation to Non-Managing General Partner (.10%
of net assets paid by PNC Bank)................. $ 273,698 0
Net fees available to advisers after payment to
Non-Managing General Partner, but before
expenses........................................ $ 921,094 $ 921,094 0
</TABLE>
The foregoing chart illustrates that, at the asset level of the Fund in
1996, the actual fee paid by the Fund to the advisers would have been reduced
under the proposed scale of fees by approximately $273,698, or .10%. The
compensation of the advisers under the New Advisory Agreement would have been
the same as under the Current Advisory Agreement after taking into account
payments to the Non-Managing General Partner. The Managing General Partners
believe that this downward fee adjustment is an appropriate response to the
elimination of the advisers' obligations to supply and compensate a Non-Managing
General Partner.
With respect to the other terms and conditions of the contract, which are
the same in all material respects as those in the Current Advisory Agreement,
the Managing General Partners considered, among other things, the quality of the
investment advisory services that have been provided in the past by PNC Bank and
PIMC, and which are expected to continue to be provided after January 1, 1998 by
substantially the same personnel. They considered the Fund's performance in
relation to a selected group of other funds with similar investment objectives,
which comparison reflected very favorably on the advisers. They took into
account the services as transfer agent being provided to the Fund by an
affiliate of the advisers and the related fees which aggregated $15,228 in 1996.
The Managing General Partners also considered the nature, quality and extent of
administrative services (e.g., the computation of the Fund's net asset value and
net income) provided to the Fund. The Managing General Partners reviewed
information on the profitability of the Current Advisory Agreement to the
advisers, based on information provided by the advisers, which allocated costs
to the management of the Fund. The advisers advised the Managing General
Partners that they had provided the Managing General Partners with all the
information they believed was necessary to enable the Managing General Partners
to evaluate the terms of the proposed New Advisory Agreement.
After consideration of all this information and such other items as were
deemed appropriate, the Managing General Partners concluded that the New
Advisory Agreement contained terms, including the provisions for fees, that were
fair and reasonable to the Fund. A majority of the Managing General Partners
present at the meeting on October 27, 1997, including a majority of the Managing
General Partners who are
10
<PAGE> 14
not interested persons of the Fund or of PNC Bank and PIMC, unanimously approved
the New Advisory Agreement and recommend that the Partners vote FOR the New
Advisory Agreement.
If the New Advisory Agreement is not approved, the Managing General
Partners will take such actions as deemed appropriate to obtain investment
advice for the Fund. The affirmative vote of a "majority" of the outstanding
Shares is required to approve the New Advisory Agreement. For this purpose, a
majority is the affirmative vote of the holders of the lesser of: (i) 67% of the
Shares of the Fund present at the meeting if the holders of more than 50% of the
outstanding Shares are present in person or by proxy; or (ii) more than 50% of
the outstanding Shares of the Fund.
INFORMATION ABOUT PNC BANK AND PIMC
PIMC's offices are located at Bellevue Park Corporate Center, 400 Bellevue
Parkway, Wilmington, Delaware 19809. All of the capital stock of PIMC is owned
by PNC Asset Management Group, Inc. All of the capital stock of PNC Asset
Management Group, Inc., which has offices at 1600 Market Street, Philadelphia,
Pennsylvania 19103, is owned by PNC Bank. All of the capital stock of PNC Bank,
which has offices at 1600 Market Street, Philadelphia, Pennsylvania 19103, is
owned by PNC Bancorp, Inc., which has offices at 5th and Wood Streets,
Pittsburgh, Pennsylvania 15265. All of the capital stock of PNC Bancorp, Inc. is
owned by PNC Financial Corp, a publicly-held corporation with principal offices
in Pittsburgh, Pennsylvania.
The names, addresses and principal occupations of the principal executive
officer and each director of PIMC are as follows:
<TABLE>
<CAPTION>
POSITION WITH PIMC NAME AND ADDRESS PRINCIPAL OCCUPATIONS
- ---------------------------- ------------------------- -------------------------
<S> <C> <C>
Director J. Richard Carnall Executive Vice President,
400 Bellevue Parkway PNC Bank
Wilmington, DE 19809
Director Richard C. Caldwell Executive Vice President,
1600 Market Street PNC Bank
Philadelphia, PA 19103
Director Lawrence D. Fink Chairman and Chief
400 Bellevue Parkway Executive Officer
Wilmington, DE 19809 BlackRock Financial
Management, Inc.
Director Richard L. Smoot President, and Chief
400 Bellevue Parkway Executive Officer, PNC
Wilmington, DE 19809 Bank
Director and Chief Financial Nicholas M. Marsini, Jr. Senior Vice President PNC
Officer 400 Bellevue Parkway Bank
Wilmington, DE 19809
Chairman, Director and Chief Ralph L. Schlosstein President and Director,
Executive Officer 345 Park Avenue BlackRock Financial
New York, NY 10154 Management, Inc.
</TABLE>
The names, addresses and principal occupations of the chief executive
officer and each director of PNC Bank are as follows:
<TABLE>
<CAPTION>
POSITION WITH PNC BANK NAME PRINCIPAL OCCUPATION
- ---------------------------- ------------------------- -------------------------
<S> <C> <C>
Director B.R. Brown President and C.E.O. of
Consol, Inc.
Consol Plaza
Pittsburgh, PA 15241
Director Constance E. Clayton Associate Dean, School of
Health & Professor of
Pediatrics
Medical College of PA
Hahnemann University
430 East Sedgwick St.
Philadelphia, PA 19119
</TABLE>
11
<PAGE> 15
<TABLE>
<CAPTION>
POSITION WITH PNC BANK NAME PRINCIPAL OCCUPATION
- ---------------------------- ------------------------- -------------------------
<S> <C> <C>
Director Eberhard Faber IV Chairman and C.E.O.
E.F.L., Inc.
450 Hedge Road
P.O. Box 49
Bearcreek, PA 18602
Director Dr. Stuart Heydt President and C.E.O.
Geisinger Foundation
100 N. Academy Avenue
Danville, PA 17822
Director Edward P. Junker, III Vice Chairman
PNC Bank, N.A.
Ninth and State Streets
Erie, PA 16553
Director Thomas A. McConomy President, C.E.O. and
Chairman, Calgon Carbon
Corporation
413 Woodland Road
Sewickley, PA 15143
Director Thomas H. O'Brien Chairman
PNC Bank, National
Association
One PNC Plaza, 30th
Floor
Pittsburgh, PA 15265
Director Dr. J. Dennis O'Connor Provost, The Smithsonian
Institution
1000 Jefferson Drive,
S.W.
Room 230, MRC 009
Washington, DC 20560
Director Rocco A. Ortenzio Chairman and C.E.O.
Continental Medical
Systems, Inc.
P.O. Box 715
Mechanicsburg, PA 17055
Director Jane G. Pepper President
Pennsylvania
Horticultural Society
100 North 20th Street
Philadelphia, PA 19103
Director Robert C. Robb, Jr. President, Lewis, Eckert,
Robb & Company
425 One Plymouth
Meeting
Plymouth Meeting, PA
19462
Director and Principal James E. Rohr President and C.E.O.
Executive Officer PNC Bank, National
Association
One PNC Plaza, 30th
Floor
Pittsburgh, PA 15265
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
POSITION WITH PNC BANK NAME PRINCIPAL OCCUPATION
- ---------------------------- ------------------------- -------------------------
<S> <C> <C>
Director Daniel M. Rooney President, Pittsburgh
Steelers Football Club
of the National
Football League
300 Stadium Circle
Pittsburgh, PA 15212
Director Seth E. Schofield Chairman and C.E.O.
USAir, Inc.
2345 Crystal Drive
Arlington, VA 22227
</TABLE>
PNC Bank and PIMC also act as investment adviser and/or sub-adviser to
various other registered investment companies. The table below sets forth
certain information with respect to such investment portfolios which have
similar investment objectives to the Fund:
<TABLE>
<CAPTION>
ANNUAL RATE OF
INVESTMENT ADVISORY/
SUB-ADVISORY FEE
NET ASSETS AS AS A PERCENTAGE OF
NAME OF FUND OF AUGUST 31, 1997 NET ASSETS
------------------------------------------------- ------------------ --------------------
<S> <C> <C>
Compass Capital Select Equity Portfolio.......... $557,737,693 0.55%
Compass Capital Large Cap Growth Equity
Portfolio...................................... $752,077,928 0.55%
</TABLE>
SERVICES TO THE FUND BY RELATED PARTIES
PFPC Inc. ("PFPC"), an affiliate of PNC Bank and PIMC, acts as the Fund's
transfer and dividend disbursing agent under an agreement dated as of August 1,
1984 and amended as of July 31, 1986 (the "Transfer Agency Agreement"). As
compensation for services rendered pursuant to the Transfer Agency Agreement,
the Fund pays PFPC monthly fees equal to $12,500 per year and PFPC's
out-of-pocket expenses relating to such services. The Fund paid $15,228 in
transfer agent fees and expenses to PFPC during the fiscal year ended December
31, 1996.
4. RATIFICATION OR REJECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
A majority of the Managing General Partners who are not "interested
persons" of the Fund have selected Coopers & Lybrand L.L.P. as independent
accountants for the Fund for the fiscal year ending December 31, 1997. The
ratification of the selection of independent accountants is to be voted on at
the Meeting and it is intended that the persons named in the accompanying proxy
will vote for Coopers & Lybrand L.L.P. unless contrary instructions are given.
Coopers & Lybrand L.L.P. has been the Fund's auditor since the Fund's
organization and has informed the Fund that it has no direct or material
indirect financial interest in the Fund. A representative of Coopers & Lybrand
L.L.P. is expected to be present at the Meeting to make a statement if desired
and to be available to respond to appropriate questions.
5. OTHER MATTERS
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of Partners
arise, including any question as to an adjournment of the Meeting, the persons
named in the enclosed proxy will vote thereon according to their best judgment
in the interests of the Fund.
VOTES REQUIRED FOR APPROVAL OF MATTERS AT THE MEETING
A quorum for the transaction of business at the Meeting is constituted by
the presence in person or by proxy of holders of a majority of the outstanding
Shares of the Fund. Shares owned of record by the Non-Managing General Partner
will not be counted for the purposes of a quorum or any vote at the Meeting. If
a
13
<PAGE> 17
Proxy is properly executed and returned accompanied by instructions to withhold
authority, or is marked with an abstention, the Shares represented thereby will
be considered to be present at the Meeting for purposes of determining the
existence of a quorum for the transaction of business.
Approval of Proposal No. 1 requires the affirmative vote of (a) a majority
of the Shares present in person or by proxy and entitled to vote at a meeting at
which a quorum is present, and (b) a "majority" of the outstanding Shares
defined as the affirmative vote of the holders of the lesser of: (i) 67% of the
Shares of the Fund present in person or any proxy at the meeting and entitled to
vote if the holders of more than 50% of the outstanding Shares are present in
person or by proxy; or (ii) more than 50% of the outstanding Shares of the Fund.
Approval of Proposal 3 and Proposal 4 requires the approval of a "majority" of
the outstanding Shares, as so defined. In the election of Managing General
Partners, the nominees receiving the highest number of votes cast at a meeting
of Partners at which a quorum is present, up to the number of Managing General
Partners, will be elected; there is no cumulative voting in the election of
Managing General Partners.
Broker "non-votes" (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be deemed to be
present at a meeting for purposes of a quorum but otherwise as abstentions.
ADDITIONAL INFORMATION
MANAGEMENT
Officers of the Fund are elected and appointed by the Managing General
Partners and hold office until they resign or are removed. The following table
sets forth certain information about the Fund's executive officers, except Mr.
Fortune, the President of the Fund, about whom information is provided on page
5.
<TABLE>
<CAPTION>
POSITION
OFFICER WITH THE BUSINESS EXPERIENCE DURING
NAME AGE SINCE FUND PAST FIVE YEARS
- ------------------ --- ------- ---------- ----------------------------------------------------
<S> <C> <C> <C> <C>
Edward J. Roach... 73 1981 Treasurer Certified Public Accountant; Partner of the
accounting firm of Main Hurdman until 1981; Vice
Chairman of the Board, Fox Chase Cancer Center;
Trustee Emeritus, Pennsylvania School for the
Deaf; Trustee Emeritus, Immaculata College; Former
Director, Biotrol USA, Inc.; President, Vice
President and/or Treasurer of 7 other investment
companies advised by PIMC; Director, The Bradford
Funds, Inc.
Morgan R. Jones... 57 1976 Secretary Partner of the law firm of Drinker Biddle & Reath
LLP, Philadelphia, Pennsylvania.
</TABLE>
THE INVESTMENT ADVISERS
PNC Bank and PIMC serve as the Fund's advisers. PNC Bank is located at 1600
Market Street, Philadelphia, Pennsylvania 19103. PIMC is located at Bellevue
Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. The
Fund has no administrator or underwriter.
PARTNER PROPOSALS FOR NEXT MEETING
The Fund does not hold annual partner meetings. Any proposal by a partner
for consideration at a subsequent meeting of Partners should be sent in writing
to Edward J. Roach, Treasurer, Chestnut Street Exchange Fund, 400 Bellevue
Parkway, Suite 100, Wilmington, Delaware 19809
Dated: November 17, 1997
14
<PAGE> 18
EXHIBIT A
TABLE OF CONTENTS
TO
RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
OF
CHESTNUT STREET EXCHANGE FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
<TABLE>
<S> <C>
ARTICLE I - NAME AND STATUTORY OFFICE................................................................A-1
1.1 Name.....................................................................................A-1
1.2 Principal Place of Business..............................................................A-1
ARTICLE II - CHARACTER OF THE BUSINESS OF
THE FUND..............................................................................A-2
2.1 Purpose..................................................................................A-2
2.2 Investment Objectives....................................................................A-2
2.3 Operating Powers.........................................................................A-2
ARTICLE III - GENERAL PARTNERS........................................................................A-3
3.1 Identity of Managing General Partners....................................................A-3
3.2 Designation and Election of Successor
or Additional General Partners...........................................................A-3
3.3 Management and Control...................................................................A-4
3.4 Limitations on the Authority of the
General Partners.........................................................................A-6
3.5 Action by the General Partners...........................................................A-6
3.6 Reimbursement and Indemnification........................................................A-7
3.7 Limitation of Liability to
Shareholders.............................................................................A-8
3.8 Termination of Status and Interest of
General Partners.........................................................................A-8
3.9 Right of General Partners to Become
Limited Partners.........................................................................A-9
3.10 No Agency................................................................................A-9
3.11 Voting of Shares Owned by General
Partners.................................................................................A-9
ARTICLE IV - LIMITED PARTNERS.........................................................................A-9
4.1 Sales of Additional Shares; Admission
of Additional Limited Partners...........................................................A-9
4.2 Right to Assign Shares; Substituted
and Additional Limited Partners..........................................................A-9
4.3 No Power to Control Business.............................................................A-10
4.4 Limited Liability........................................................................A-10
4.5 Limited Partners Not Personally Liable...................................................A-11
4.6 Death of a Limited Partner...............................................................A-11
ARTICLE V - CAPITAL CONTRIBUTIONS: SALES OF
SHARES; ALLOCATIONS TO
SHARES.................................................................................A-11
5.1 Shares of Partnership Interest...........................................................A-11
5.2 Contributions by General Partners........................................................A-12
5.3 Contributions by the Limited
Partners.................................................................................A-12
5.4 Allocation of Fund Income, Gains,
Losses, Deductions and Credits
Among the Shares.........................................................................A-12
ARTICLE VI - DISTRIBUTIONS AND RETURNS OF
CONTRIBUTIONS.........................................................................A-12
6.1 In General...............................................................................A-12
6.2 Distributions with Respect to
Income and Net Realized Capital
Gains....................................................................................A-12
6.3 Distributions in Connection With
Redemption of Shares.....................................................................A-13
6.4 Distributions upon Winding Up of
the Fund.................................................................................A-14
6.5 Returns of Contributions.................................................................A-15
ARTICLE VII - PARTNERS' RIGHTS TO VOTE UPON MATTERS AFFECTING THE BASIC
STRUCTURE OF THE FUND:
EXERCISE OF VOTING RIGHTS.............................................................A-16
7.1 Voting Rights of Partners................................................................A-16
7.2 Meetings of the Partners.................................................................A-17
7.3 Quorum and Required Vote at
Meetings of the Partners.................................................................A-17
7.4 Action by Written Consent................................................................A-18
ARTICLE VIII - TERM AND DISSOLUTION OF THE
FUND.................................................................................A-18
8.1 Term.....................................................................................A-18
8.2 Events Causing Earlier Dissolution
of the Fund..............................................................................A-18
8.3 Right of General Partners to
Continue the Business of the Fund
in Certain Events........................................................................A-18
8.4 Right of the Partners to Provide
for Continuation of the Business of
the Fund in Certain Events...............................................................A-19
ARTICLE IX - FUND DOCUMENTATION; AMENDMENT OF
THE CERTIFICATE AND AGREEMENT;
POWER OF ATTORNEY.....................................................................A-19
9.1 Certificate and Agreement and Other
Documentation............................................................................A-19
9.2 Events Requiring Amendment of
Certificate and Agreement................................................................A-19
9.3 Partnership Authorization................................................................A-20
9.4 Power of Attorney by
Substituted or Additional
Limited Partners.........................................................................A-22
9.5 Amendments Requiring Signature by
Less than All Limited Partners...........................................................A-22
9.6 Amendments Requiring Signature by
All Partners.............................................................................A-22
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
ARTICLE X - BOOKS AND RECORDS: STATEMENTS AND
INCOME TAX INFORMATION..............................................................A-22
10.1 Fiscal Year..............................................................................A-22
10.2 Records and Accounting...................................................................A-23
10.3 Periodic Financial Statements............................................................A-23
10.4 Record Dates.............................................................................A-23
10.5 Income Tax Information...................................................................A-24
10.6 Statement Upon Winding Up of the
Fund.....................................................................................A-24
ARTICLE XI - GENERAL PROVISIONS.......................................................................A-24
11.1 Definitions..............................................................................A-24
11.2 Independent Activities...................................................................A-25
11.3 Custodian................................................................................A-25
11.4 Benefit..................................................................................A-25
11.5 Nonrecourse Creditors....................................................................A-26
11.6 Notices..................................................................................A-26
11.7 Captions.................................................................................A-26
11.8 Certificate and Agreement in
Counterparts.............................................................................A-26
11.9 Agent for Service of Process.............................................................A-27
11.10 Principles of Construction;
Severability.............................................................................A-27
11.11 California Law...........................................................................A-27
11.12 Integrated Agreement.....................................................................A-27
SCHEDULE "A": Names, Places of Residence, Number of
Shares of Partnership Interest, and
Contributions of the General Partners.
</TABLE>
<PAGE> 20
CHESTNUT STREET EXCHANGE FUND
(A California Limited Partnership)
RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
This RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP (the
"Certificate and Agreement") has been executed and delivered among the General
Partners and Limited Partners herein named, for the purpose of amending and
restating in full the Restated Certificate and Agreement of Limited Partnership
dated as of September 16, 1976, recorded on September 16, 1976, as Document
Number 8504, in the official records of the office of the County Recorder of Los
Angeles County, California, of Chestnut Street Exchange Fund (a California
Limited Partnership), a limited partnership formed pursuant to the Uniform
Limited Partnership Act as enacted by the State of California.
WHEREAS, the General Partners and Limited Partners herein named have
formed a Limited Partnership under the laws of the State of California which
will qualify as a diversified, open-end, management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, the General and Limited Partners desire to amend and restate the
Restated Certificate and Agreement of Limited Partnership previously recorded as
described above;
NOW, THEREFORE, THE GENERAL PARTNERS AND THE LIMITED PARTNERS HEREIN NAMED
HEREBY AMEND AND RESTATE THE RESTATED CERTIFICATE AND AGREEMENT OF LIMITED
PARTNERSHIP OF CHESTNUT STREET EXCHANGE FUND (A CALIFORNIA LIMITED PARTNERSHIP)
IN FULL AS FOLLOWS:
ARTICLE I
NAME AND STATUTORY OFFICE
1.1 NAME. This Partnership shall be known as and shall operate under the
firm name of "CHESTNUT STREET EXCHANGE FUND" (A California Limited Partnership).
1.2 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Partnership for purposes of Section 15614 of the Limited Partnership Act shall
be c/o Corporation Service Company, 2730 Gateway Oaks Drive, Suite 100,
Sacramento, California 95833. The Managing General Partners may from time to
time establish additional places of business of the Partnership in such other
A-1
<PAGE> 21
locations, within and without California, as they deem necessary or desirable
for the conduct of the Partnership's business.
ARTICLE II
CHARACTER OF THE BUSINESS OF THE FUND
2.1 PURPOSE. The purpose of the Fund is to create and operate an open-end,
diversified management investment company which will qualify under the 1940 Act.
2.2 INVESTMENT OBJECTIVES. The Fund's investment objectives are to seek
long-term growth of capital and, secondarily, current income. The Fund will
invest in a portfolio of common stocks and securities convertible into common
stocks, and may also invest in other types of securities for temporary or
defensive purposes including preferred stocks, investment grade bonds,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, certificates of deposit, commercial paper and other
"money-market" obligations. Up to 10% of the value of the Fund's total assets
may be invested in securities which are subject to legal or contractual
restrictions on resale (for example restrictions on resale without registration
under the Securities Act of 1933 (the "1933 Act")). The Fund may write
exchange-traded call options on portfolio securities and may loan portfolio
securities.
2.3 OPERATING POWERS. Subject to the Fund's Investment Objectives in
Section 2.2, the Fund shall have the power to: (a) to invest and trade in
capital stock, subscriptions, bonds, notes, debentures, trust receipts and other
securities of any corporation or entity; (b) to engage personnel and do such
other acts and incur such other expenses on behalf of the Fund as may be
necessary or advisable; (c) to engage attorneys, accountants or such other
persons as may be deemed necessary or advisable; (d) to receive, acquire, buy,
sell, exchange, trade, loan, borrow and otherwise deal in and with property; (e)
to open, conduct and close accounts with brokers and to pay the customary fees
and charges applicable to transactions in all such accounts; (f) to open,
maintain, and close bank accounts and to draw checks and other orders for the
payment of money; (g) to enter into, make and perform such contracts, agreements
and other undertakings, and to do such other acts, as may be deemed necessary or
advisable, including, without in any manner limiting the generality of the
foregoing, contracts, agreements, undertakings and transactions with any Partner
or with any other person, firm or corporation having any business, financial or
other relationship with any
A-2
<PAGE> 22
Partner; (h) to institute and prosecute litigation arising out of the regular
course of its affairs or in the enforcement of its obligations due it, including
all rights of appeal; (i) to compromise and settle any claims against the Fund
and to provide for indemnification by the Fund in the Fund's contracts and
agreements; (j) to defend any litigation, including all rights of appeal,
whether or not arising in the regular course of its affairs; (k) to appear
before any governmental board or agency or to otherwise participate in any
administrative review or appeal; (l) to employ one or more investment advisors
for the Fund to supervise the Fund's investments and to administer the affairs
of the Fund subject to the provisions of this Certificate and Agreement; (m) to
file and publish all such certificates, notices, statements or other instruments
required by law for the formation and operation of a limited partnership in any
jurisdictions where the Fund may elect to do business; (n) to exercise any and
all other powers which may be necessary to implement the purposes, policies and
powers of the Fund and not inconsistent therewith, including those granted to
limited partnerships under the California Revised Limited Partnership Act; and
(o) to exercise such other powers as the Managing General Partners reasonably
believe to be necessary to comply with the provisions of the 1940 Act.
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ARTICLE III
GENERAL PARTNERS
3.1 IDENTITY OF MANAGING GENERAL PARTNERS. The General Partners of the
Fund shall consist of the Managing General Partners (hereinafter referred to as
the "General Partners" or the "Managing General Partners"). Only individuals may
act as Managing General Partners, and all individual General Partners shall act
as Managing General Partners.
The names of the currently acting Managing General Partners, their places
of residence and the number of Shares owned by each of them are set forth in
Schedule "A" to this Certificate and Agreement and are incorporated herein by
this reference.
3.2 DESIGNATION AND ELECTION OF SUCCESSOR OR ADDITIONAL GENERAL PARTNERS.
The Managing General Partners shall determine from time to time the number of
persons who will be proposed for election as General Partners. At the annual
meeting of Partners, if held in a given year, or at any special meeting called
for the purpose of electing General Partners, the Partners shall elect the
General Partners. Each of the Managing General Partners shall serve until the
next annual or special meeting at which General Partners are elected and until
the election and qualification of the person's successor, or until the person's
status as such is sooner terminated as provided in Section 3.8 below. If at any
time the number of Managing Partners is reduced to less than three, the
remaining Managing General Partners shall, within 120 days, call a meeting of
Partners for the purpose of electing an additional Managing General Partners or
Managing General Partners so as to restore the number of Managing General
Partners to at least three.
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If at any time a vacancy occurs among the Managing General Partners, the
vacancy may be filled by the Managing General Partners subject to the
limitations set forth in Sections 16(a) and (b) of the 1940 Act.
Each General Partner, by becoming a General Partner, consents to the
admission as an added or substituted General Partner of any person elected by
the Partners in accordance with this Certificate and Agreement. Each Partner, by
becoming a Partner of the Fund, consents to and ratifies the actions of the
General Partners in determining the persons who will be proposed for election
and admission as additional or substituted General Partners, and the actions of
the Partners in electing an additional or substituted General Partner pursuant
to the procedure in Article VII of this Certificate and Agreement.
Any General Partner who is elected at a meeting of the Partners and who is
not then serving as a General Partner shall be admitted to the Partnership as a
General Partner effective as of the date of such election.
3.3 MANAGEMENT AND CONTROL. Subject to the provisions of this Certificate
and Agreement, the business of the Fund shall be managed solely by the Managing
General Partners, and they shall have complete and exclusive control over the
management, conduct and operation of the Fund's business. Except as otherwise
specifically provided in this Certificate and Agreement, the Managing General
Partners, acting pursuant to Section 3.5 hereof, shall have the right, power and
authority, on behalf of the Fund and in its name to exercise all of the rights,
powers and authority of a partner in a partnership without limited partners
under the California Uniform General Partnership Act. Without limiting the
foregoing, but subject to
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the right of the Partners to vote on certain matters affecting the basic
structure of the Fund in Article VII below, the Managing General Partners,
acting pursuant to Section 3.5 below, shall have the power and authority to: (a)
adopt, amend and repeal a Code of Regulations not inconsistent with this
Certificate and Agreement providing for the operation of the Fund; appoint one
of their number to be President, who shall preside at all meetings of Partners,
shall be responsible for the execution of policies established by the Managing
General Partners and may be the chief executive, financial and accounting
officer; (c) appoint from their own number, and terminate, any one or more
committees consisting of two or more managing General Partners, including
executive committee which may, when the Managing General Partners are not in
session, exercise one or all of the power and authority of the Managing General
Partners as the Managing General Partners may determine; (d) elect and appoint,
delegate authority to, remove and terminate such officers and agents (who need
not be Partners) as they consider appropriate; (e) subject always to the
continuing supervision of the Managing General Partners, contract with one or
more banks, trust companies, investment advisers or other persons for the
performance of such functions as they may determine, including, but not by way
of limitation, the investment and reinvestment of all or part of the Fund's
assets and effecting portfolio transactions, and any or all administrative
functions of the Fund; (f) at any time and from time to time, contract with any
corporation, trust, association or other person to act as exclusive or
nonexclusive distributor or Principal Underwriter for the Shares; (g) purchase
and pay for entirely out of Fund property insurance policies insuring the
Shareholders, General Partners, Limited Partners, officers, employees, agents,
investment advisers, principal underwriters, or independent contractors of the
Fund individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person as
Partner, officer, employee, agent, investment adviser, principal underwriter, or
independent contractor, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Fund would have the
power to indemnify such person against such liability; and (h) pay or cause to
be paid out of the principal or income of the Fund, or partly out of principal
and partly out of income, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Fund, or in connection with the
management thereof, including but not limited to, the General Partners'
compensation and such expenses and charges for the services of the Fund's
officers, employees, investment adviser or Manager, Principal Underwriter,
auditor, counsel, custodian, transfer agent, Shareholder servicing agent, and
such other agents or independent contractors and such other expenses and charges
as
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the Managing General Partners may deem necessary or advisable to incur.
The Managing General Partners shall devote themselves to the Fund's
business to the extent they may determine necessary for the efficient conduct
thereof, which need not, however, occupy their full time. General Partners may
also engage in other businesses, whether or not similar in nature to the
business of the Fund, subject to the limitations of the 1940 Act. Further,
subject to the limitations of the 1940 Act and the Partnership Act, the fact
that:
(i) any of the Partners or officers of the Fund is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, Principal Underwriter or distributor or agent of or for any
corporation, trust, association, or other person, or of or for any
parent or affiliate of any person which handles brokerage
transactions for the Fund or with which the Fund has or may
hereafter enter into an advisory or management contract, or
Principal Underwriter's or distributor's contract, or transfer,
Shareholder servicing or other contract, or that any such
organization, or any parent or affiliate thereof, is a Shareholder
or has an interest in the Fund, or that
(ii) any corporation, trust, association or other person which
handles brokerage transactions for the Fund or with which the Fund
has or may hereafter enter into an advisory or management contract
or Principal Underwriter's or distributor's contract, or transfer,
Shareholder servicing or other contract, also has an advisory or
management contract, or Principal Underwriter's or distributor's
contract, or transfer, Shareholder servicing or other contract with
one or more other corporations, trusts, associations, or other
persons, in which any of the Partners or officers of the Fund may
have an interest,
shall not preclude such contracts or dealings, or affect the validity of any
such contract or dealings or disqualify any Partner or officer of the Fund from
voting upon or executing the same or create any liability or accountability to
the Fund or its Shareholders with respect to such contract or dealings.
3.4 LIMITATIONS ON THE AUTHORITY OF THE GENERAL PARTNERS. The General
Partners shall have no authority without the vote or written consent of all of
the Limited Partners to: (a) do any act in contravention of this Certificate and
Agreement, as it may be amended, or which would make it impossible to carry on
the ordinary business of the Fund; (b) confess a judgment against the Fund; (c)
possess Fund property, or assign the Fund's rights in specific Fund property,
for other than a Fund purpose.
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In addition, certain actions of the Managing General Partners shall be
subject to a Majority Shareholder Vote as provided in paragraph 7.3 below.
3.5 ACTION BY THE GENERAL PARTNERS. Except as may otherwise be provided
herein or from time to time in the Code of Regulations, any action to be taken
by the Managing General Partners shall be taken: (a) by a majority of the
Managing General Partners present at a meeting of the Managing General Partners
at which at least 50% of the Managing General Partners are present, within or
without California, including any meeting held by means of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence at a meeting; or (b) by
unanimous written consent of the Managing General Partners acting without a
meeting, unless the 1940 Act or the Partnership Act requires that a particular
action be taken by a greater vote or only at a meeting in person of the Managing
General Partners. Each Managing General Partner shall have one vote. No single
Managing General Partner shall have authority to act on behalf of the
Partnership or to bind the Partnership except as specifically authorized in a
particular case by the Managing General Partners.
3.6 REIMBURSEMENT AND INDEMNIFICATION. The General Partners shall be
reimbursed for all reasonable out-of-pocket expenses incurred in performing
their duties hereunder. Each General Partner and officer of the Fund, each
corporate Non-Managing General Partner and officer and director thereof, and
each former General Partner who has not ceased to be liable as a General Partner
under the Partnership Act (herein collectively referred to as "Agent"), shall be
indemnified by the Fund, to the extent permitted by applicable law, against
judgments, fines, amounts paid in settlement, and expenses (including counsel
fees) reasonably incurred by such Agent by virtue of being threatened to be
made, being or having been a party to any civil, criminal, administrative or
investigative proceeding in which such Agent is involved or threatened to be
involved by reason of such person being an Agent, provided that the Agent acted
in good faith and in a manner the Agent reasonably believed to be within the
scope of such person's authority and for a purpose which such person reasonably
believed to be in the best interests of the Fund or the Limited Partners. To the
extent that an Agent has been successful on the merits or otherwise in defense
of any such proceeding or in defense of any claim or matter therein, such person
shall be deemed to have acted in good faith and in a manner such person
reasonably believed to be in the best interests of the Fund or the Limited
Partners. The determination under any other circumstances as to whether an Agent
acted in good faith and in a manner such person reasonably believed to be within
the scope of the person's authority and for a purpose
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which the person reasonably believed to be in the best interests of the Fund or
the Limited Partners shall be made, (i) by action of the Managing General
Partners who were not parties to such proceedings, or (ii) the court in which
such proceeding is or was pending upon application made by the Fund or the Agent
(whether or not such application is opposed by the Fund), or (iii) by
independent legal counsel (who may not be the regular counsel for the Fund) in a
written opinion. No Agent shall be indemnified against any liability to the Fund
or its Partners to which he would otherwise be subjected by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
The foregoing indemnification provisions shall not preclude any other
rights to which those persons indemnified hereunder may be entitled under any
applicable statute, agreement, vote of the General Partners or Limited Partners
or otherwise, nor shall the foregoing preclude the Fund from purchasing and
maintaining insurance on behalf of any Agent against liability which may be
asserted against or incurred by the Agent in such capacity, whether or not the
Fund would have the power to indemnify the Agent against such liability under
the provisions of this Section 3.6.
Expenses incurred in defending any proceeding may be advanced by the Fund
prior to final disposition of such proceeding upon receipt of an undertaking by
or on behalf of the Agent to repay such amount unless it shall be determined
ultimately that the Agent is entitled to be indemnified as authorized in this
Section 3.6.
3.7 LIMITATION OF LIABILITY TO SHAREHOLDERS. No General Partner shall have
any personal liability to any Shareholder for the repayment of the contributions
with respect to Shares held by him, or for the payment of the amount standing in
the individual accounts of the Limited Partners or any portion thereof; any such
amounts shall be paid solely from assets of the Fund, if any, sufficient
therefor, according to the terms of this Certificate and Agreement. nor, to the
extent permitted by the Partnership Act and the 1940 Act, shall the General
Partners be liable to any Shareholder for any neglect or wrongdoing of any
officer, agent, employee, investment adviser or principal underwriter of the
Fund, or by reason of any change in the general or state income tax laws, or in
interpretations thereof, as they apply to the Partnership and the Shareholders,
whether such change occurs through legislative, judicial or administrative
action, provided, that nothing herein shall protect a General Partner against
any liability to which he would otherwise be subject by reason of misfeasance,
bad faith, negligence, or reckless disregard of the duties involved in the
conduct of his office.
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3.8 TERMINATION OF STATUS AND INTEREST OF GENERAL PARTNERS.
(a) The status and interest of a person as a Managing General
Partner shall terminate and such person shall have no further right or power to
act as General Partner (except to execute any amendment to this Certificate and
Agreement to evidence his termination) effective when and if he: (1) dies; (2)
becomes insane; (3) is adjudicated a bankrupt; (4) voluntarily retires effective
upon not less than 180 days' written notice to the other General Partners or
election of his successor, whichever first occurs; (5) fails to be re-elected by
the Partners, as provided in Section 3.2 above; or (6) is removed by the
Partners, as provided in Section 7.1 below.
(b) Termination of a person's status as a General Partner
shall not affect his status, if any, as a Limited Partner. A General Partner
shall not be entitled to any special payment from the Partnership as a result of
termination of his status as General Partner. Upon termination of his status and
in interest as a General Partner, a General Partner may redeem his Shares in
accordance with Section 6.3 or retain such Shares as a Limited Partner.
3.9 RIGHT OF GENERAL PARTNERS TO BECOME LIMITED PARTNERS. A General
Partner may also become a Limited Partner and thereby become entitled to all of
the rights of a Limited Partner to the extent of the Limited Partnership
interest so acquired, and the consent of the Limited Partners thereto need not
be obtained. Such event shall not, however, affect such General Partner's
liability hereunder.
3.10 NO AGENCY. Nothing in this Certificate and Agreement shall be
construed as establishing any General Partner as an agent of any Limited
Partner, except to the extent provided in Sections 9.3 and 9.4 below.
3.11 VOTING OF SHARES OWNED BY GENERAL PARTNERS. In accordance with
Section 7.1, the Managing General Partners shall have the right to vote any
Shares which they own, whether as a General or as a Limited Partner. Each
General Partner shall own at least one Share.
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ARTICLE IV
LIMITED PARTNERS
4.1 SALES OF ADDITIONAL SHARES; ADMISSION OF ADDITIONAL LIMITED
PARTNERS. The Fund sold Shares through an initial public offering and admitted
such purchasers as additional Limited Partners in the Fund. In addition, without
the consent or approval of the Limited Partners, the Fund may issue additional
Shares from time to time in payment of the distributions to the Partners
contemplated by Article VI below or in connection with the admission of General
Partners pursuant to Section 3.2 above. The Fund shall not otherwise issue
additional Shares. Each purchaser of a Share from the Fund shall be bound by all
the terms and conditions of this Certificate and Agreement.
4.2 RIGHT TO ASSIGN SHARES; SUBSTITUTED AND ADDITIONAL LIMITED
PARTNERS. A Shareholder may assign the whole or any portion of his Shares by a
written instrument of assignment in form satisfactory to the Managing General
Partners.
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Each assignee of a Share shall be bound by all the terms and conditions of this
Certificate and Agreement including, without limitation, the allocation of
income, gains, losses, deductions and credits as provided in Section 5.4. Any
Shareholder who assigns Shares, and any assignee of such Shares who subsequently
assigns such Shares, by virtue of an assignment made in accordance with the
provisions hereof confers upon his assignee the right to be substituted as a
Limited Partner, and the assignee shall become a Limited Partner upon being
entered into the records of the Fund as a Limited Partner, by which act the
assignee shall be deemed to accept and adopt all of the terms and provisions of
the Certificate and Agreement, as the same may be amended.
4.3 NO POWER TO CONTROL BUSINESS. A Limited Partner shall have no right
to and shall take no part in the control of the Fund's business and shall have
no right or authority to act for or bind the Fund, but may exercise the rights
and powers of a Limited Partner under this Certificate and Agreement, including
without limitation, the voting rights and the giving of consents and approvals
provided for hereunder. The exercise of such rights and powers are deemed to be
matters affecting the basic structure of the Fund and not the control of its
business.
4.4 LIMITED LIABILITY. No Limited Partner shall be liable for any
debts, obligations or losses of the Fund, provided, however, that the
contributions of a Limited Partner shall be subject to the risks of the business
of the Fund and subject to the claims of the Fund's creditors and provided
further, that after any Limited Partner has received the return of any part of
his contribution, he will be liable to the Fund, only to the extent required by
the Partnership Act, for: (a) his proportionate share, not in excess of the
amount of such returned contributions plus interest thereon, of any sum
necessary to
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discharge any liabilities of the Fund to creditors who extended
credit or whose claims arose before such returns were made; (b) for his
proportionate share, not in excess of any amount of such sum wrongfully
distributed to him and necessary to discharge any liabilities of the Fund to any
creditors.
In the event a Limited Partner or former Limited Partner who received
the return of any part of his contribution is required pursuant to the foregoing
paragraph to discharge more than his proportionate share of a Fund liability
("Discharged Liability"), the Fund shall indemnify such person, to the extent of
its net assets, against the Discharged Liability. In the event the Fund's net
assets are insufficient to satisfy such person's right of reimbursement for the
Discharged Liability, the Fund shall use its best efforts to obtain for such
person an amount equal to the insufficiency arising in its net assets to
reimburse ("Insufficiency Reimbursement") such person for the Discharged
Liability from each of the other Limited Partners or former Limited Partners of
the Fund who received a return of contribution after the time the creditor whose
claim was discharged extended credit to the Fund. The Insufficiency
Reimbursement to be sought against each other Limited Partner or former Limited
Partner shall be limited to that amount obtained by multiplying the amount of
the Insufficiency Reimbursement by that percentage of the aggregate
contributions so returned to all Limited Partners which was received by the
particular Limited Partner or former Limited Partner from whom the Insufficiency
Reimbursement is sought. Each Limited Partner, to the extent of his
proportionate share of such a returned contribution as above determined, hereby
agrees to indemnify each other Limited Partner against such Insufficiency
Reimbursement.
In addition, the General Partners and the Fund (to the extent of its
net assets) hereby further indemnify any Limited Partner against any liability
of the Fund discharged by him pursuant to the final decision of any court of
competent jurisdiction that such Limited Partner was liable for such liability
solely by virtue of the grant or exercise of the voting rights as set forth in
Article VII (and not by virtue of any action or representation by such Limited
Partner).
Any such right of indemnification pursuant to either of the preceding
two paragraphs shall be conditioned upon the party so seeking indemnification
giving to the Fund prompt notice of, and the opportunity to defend, any claim
instituted or threatened against such person by a creditor of the Fund. Each
Limited Partner further agrees that any sum or property wrongfully distributed
to him shall be held by him as trustee for the Fund to be delivered to the Fund
upon its demand in order to satisfy the Insufficiency Reimbursement.
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4.5 LIMITED PARTNERS NOT PERSONALLY LIABLE. All persons extending
credit to, contracting with or having any claim against the Fund shall look only
to the assets of the Fund and of the General Partners for payment under such
credit, contract or claim, or only to the assets of the Fund if any such person
has so agreed, and except to the extent provided in Section 4.4 hereof, neither
the Limited Partners, nor any of the Fund's officers, employees or agents,
whether past, present or future, shall be personally liable therefor.
4.6 DEATH OF A LIMITED PARTNER. The death of a Limited Partner shall
not dissolve or terminate the Partnership. Upon the death of a Limited Partner
the personal representative of such deceased Limited Partner shall have all the
rights of a Limited Partner, to the extent of the deceased's interest in the
Fund, for the sole purpose of settling his estate, including the right to assign
his Shares and to designate his assignee a substituted Limited Partner, upon
compliance with the provisions of Section 4.2 above. The estate of a deceased
Limited Partner shall be liable for all such deceased Limited Partner's
liabilities as a Limited Partner.
ARTICLE V
CAPITAL CONTRIBUTIONS: SALES OF SHARES; ALLOCATIONS TO SHARES
5.1 SHARES OF PARTNERSHIP INTEREST. The entire beneficial
interest of the Partners in the Fund and its assets shall be divided into equal
proportionate units of partnership interest, referred to herein as "Shares." The
Managing General Partners
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may from time to time divide or combine such units into a greater or less number
of Shares, provided that no such action shall in and of itself alter the
proportionate beneficial interest of the several Holders of Shares in the Fund
at the time. The Managing General Partners shall, by appointment of an agent for
the purpose or otherwise, at all times maintain a record of the outstanding
Shares and the Holders thereof from time to time.
5.2 CONTRIBUTIONS BY GENERAL PARTNERS. Each of the General Partners has
purchased the number of Shares set forth in Schedule "A" to this Certificate and
Agreement. Each Share purchased by a General Partner will be held in such
person's capacity as a General Partner and not as a Limited Partner.
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Except as provided in this Section, no General Partner has agreed to
make any contributions in addition to that required as a condition to admission
as a General Partner, or to lend additional funds to the Partnership.
5.3 CONTRIBUTIONS BY THE LIMITED PARTNERS.
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<PAGE> 36
(a) Except to the extent a Limited Partner hereafter elects to
participate in an income and/or capital gains reinvestment program which may be
offered by the Fund, no Limited Partner has agreed to make any additional
contributions to or to lend additional funds to the Fund, and no Limited Partner
shall be liable for any additional assessment therefor.
5.4 ALLOCATION OF FUND INCOME, GAINS, LOSSES, DEDUCTIONS AND CREDITS
AMONG THE SHARES. All items of Fund income, gain, loss, deduction and credit
during each taxable year of the Fund shall be computed for the Fund in
accordance with generally accepted accounting principles applicable to regulated
investment companies.
ARTICLE VI
DISTRIBUTIONS AND RETURNS OF CONTRIBUTIONS
6.1 IN GENERAL. Distributions of cash or other property may be made by
the Managing General Partners in accordance with this Article: (a) with respect
to net income and net realized capital gains of the Fund; (b) in connection with
redemption of Shares; and (c) upon dissolution of the Fund. However, all such
distributions shall be in proportion to the number of Shares held
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and without regard to the dollar amount of contributions received with respect
thereto.
6.2 DISTRIBUTIONS WITH RESPECT TO INCOME AND NET REALIZED CAPITAL
GAINS. The Managing General Partners shall determine the amounts with respect to
net investment income and net realized capital gains, if any, to be distributed
to the Shareholders and the times when such distributions shall be made. Except
as otherwise provided in this Certificate and Agreement, such amounts shall be
distributed equally among the Shares outstanding. For purposes of such
distributions, a person will be deemed to be a Shareholder if such person's
interest is recorded on the books of the Fund maintained for that purpose on the
record date determined for such distribution.
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6.3 DISTRIBUTIONS IN CONNECTION WITH REDEMPTION OF SHARES.
(a) Subject to the requirement stated in Section 3.11 that
each General Partner own at least one Share, and to the limitations of Sections
6.3(b) and (d) below, a Shareholder may elect to redeem any or all of the Shares
held by him of record at the Net Asset Value Per Share next computed after
receipt by the Fund (or by a person designated by the Fund for such purpose) of
a written request for redemption. The request must be accompanied by either the
certificates representing the Shares to be redeemed, if certificates have been
issued, or a stock power, duly endorsed by the record Holder(s) with
signature(s) guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934. Except as otherwise
provided in this Section 6.3(a) and except to the extent Shares are redeemed for
cash pursuant to a Systematic Withdrawal Plan described in Section 6.3(e) below,
payments upon redemption may be made in cash, in any portfolio securities or in
any combination thereof, in the sole discretion of the Managing General
Partners. Securities which are subject to a legal or contractual restriction on
their resale by the Fund ("restricted securities") will not be distributed in
redemption of Shares.
(b) The Managing General Partners may suspend redemptions and
defer payment of the redemption price during any period that the determination
of Net Asset Value Per Share is suspended pursuant to Section 11.1(g).
(c) No Holder shall be entitled to receive the return of any
part of the contribution with respect to his Shares unless all liabilities of
the Partnership, except liabilities to General Partners and to Limited Partners
on account of their
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contributions, have been paid or there remains property of the Fund sufficient
to pay them.
(d) Each Shareholder, by becoming a Shareholder: (i)
agrees that payment of the redemption price as determined hereunder with respect
to a Share owned by him as reflected in this Certificate and Agreement
constitutes full and complete discharge of any obligation of the Fund and the
General Partners with respect to his interest in the Fund represented by such
Share, including, without limitation, any right to the return of contribution
represented by such Share, and that, upon such redemption, he shall have no
further rights with respect to such share; (ii) agrees that the date upon which
Net Asset Value is computed for purposes of redeeming a Share shall constitute
the date specified in this Certificate and Agreement for the return of the
contribution with respect to such Shares for purposes of the Partnership Act;
and (iii) consents to the redemption of any Share in accordance with the
provisions of this Certificate and Agreement.
(e) The Managing General Partners may in their discretion
adopt a Systematic Withdrawal Plan (the "Plan") pursuant to which a Shareholder
electing to participate in the Plan will receive in cash as a partial redemption
of his Shares a stipulated percentage of the net asset value of such Shares as
of the close of trading on the New York Stock Exchange on such day or days as
the Managing General Partners may determine. The Managing General Partners may
in their sole discretion determine from time to time the percentage to be paid
to Plan participants, the amount of any fees or other service charges which may
be imposed upon participants, and such other matters as are necessary or
advisable in connection with the implementation and administration of the Plan.
6.4 DISTRIBUTIONS UPON WINDING UP OF THE FUND. Upon the dissolution of
the Fund pursuant to Section VIII, the Managing General Partners, or trustee, if
one is appointed, shall proceed to wind up the affairs for the Fund and to
liquidate its assets as promptly as is consistent with obtaining fair value. The
proceeds from such liquidation of the Fund assets shall be applied and
distributed in the following order of priority:
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(a) to the payment of debts and liabilities of the Fund (other
than any loans or advances which may have been made by any of the
Partners to the Fund) and the expenses of liquidation;
(b) to create any reserve which the Managing General Partners
or trustee may deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Fund. Such reserve shall
be paid over by the Managing General Partners or trustee to a bank or
trust company to act as escrow agent selected by the Managing General
Partners or trustee. Any such escrow agent shall hold such reserves for
payment of any of the aforementioned contingencies, and, at the
expiration of such period as the Managing General Partners or trustee
designate, shall distribute the balance thereafter remaining in the
manner hereinafter provided;
(c) to the repayment of any loans or advances that may have
been made by any of the Partners to the Fund, but if the amount
available for such repayment shall be insufficient, then pro rata on
account thereof; and
(d) the balance, if any, pro rata among the Shareholders in
proportion to the number of Shares held by them at the record date for
any such distribution.
When the Managing General Partners have complied with the foregoing
distribution plan (including payment over to the escrow agent), the Partners
shall execute, acknowledge, and cause to be filed a cancellation of this
Certificate and Agreement.
6.5 RETURNS OF CONTRIBUTION.
(a) Except upon dissolution of the Fund or the earlier
effective date of any redemption of the Shares of a Holder pursuant to Section
6.3 above (which shall be the date specified in this Certificate and Agreement
for return of contributions pursuant to the Partnership Act), no Partner has the
right to demand return of any part of his contribution. The Managing General
Partners may, however, from time to time, elect to make returns of contributions
to Shareholders, provided that: (i) all liabilities of the Fund to persons other
than shareholders have been paid or, in the good faith determination of the
Managing General Partners, there remains property of the Fund sufficient to pay
them; (ii) the consent, expressed or implied, of all of the Partners is
obtained; and (iii) the Managing General Partners cause this Certificate and
Agreement to be amended to reflect a reduction in contributions.
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For purposes of the foregoing provisions, the condition of
subpart (ii) shall have been satisfied if such return of contribution is
effected by a distribution made pro rata to all of the Shareholders based upon
the number of Shares held by each of them, or upon the redemption of Shares
pursuant to the authority of Section 6.3 above. Each Partner, by becoming such,
consents to any such distribution theretofore or thereafter duly authorized and
made in accordance with the foregoing provisions.
(b) In the event subparts (i) and (ii) of part (a) above are
satisfied, the Managing General Partners agree to cause an appropriate amendment
to this Certificate and Agreement to be promptly filed.
(c) In return for his contribution, subject to the provisions
of Section 6.3 above, a Shareholder may receive cash or other property at the
sole discretion of the Managing General Partners, but a Shareholder has no right
to demand return of his contribution other than in cash.
ARTICLE VII
PARTNERS' RIGHTS TO VOTE UPON MATTERS AFFECTING
THE BASIC STRUCTURE OF THE FUND: EXERCISE OF VOTING RIGHTS
7.1 VOTING RIGHTS OF PARTNERS. Subject to the provisions of Section 4.3
and 4.4 above, the Managing General and Limited Partners shall have in
proportion to the numbers of Shares held of record by them, voting, approval,
consent or similar rights with respect to the following matters affecting the
basic structure of the Partnership, which include the voting, approval, consent
or similar rights required under the 1940 Act for voting security holders:
(a) the right to remove General Partners and to elect General
Partners;
(b) the right to approve or disapprove of proposed changes in
the investment limitations and policies;
(c) the right to approve or disapprove of a proposed change in
the nature of the Fund's business so as to cease to be an investment
company;
(d) the right to approve or disapprove of any investment
advisory contract or the termination of such a
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contract entered into by the Managing General Partners pursuant to
Section 3.3(e) above;
(e) the right to ratify or reject the appointment of and to
terminate employment of the independent public accountants of the Fund
to the extent required by the 1940 Act or other applicable law;
(f) the right to approve or disapprove the sale of all or
substantially all of the assets of the Fund;
(g) the right to amend this Certificate and Agreement in any
other respect; provided, however, that no such amendment shall conflict
with the 1940 Act, so long as the Fund is registered thereunder, or
affect the liability of the General Partners without their consent nor
the limited liability of the Limited Partners as provided under Section
4.4 above and provided further that the foregoing shall not preclude
amendments to this Certificate and Agreement without the vote of the
Partners to the extent permitted in Article IX below; and
(h) The right to elect to wind up and dissolve the Fund.
Limited Partners shall not have the right to vote on any other matters.
7.2 MEETINGS OF THE PARTNERS. An annual meeting of the Partners for the
election of General Partners, the ratification or rejection of the appointment
of the independent public accountants of the Fund or other business is not
required to be held unless required by applicable law or otherwise determined by
the Managing General Partners. Any such meetings shall be held at the statutory
office of the Fund in California, or at such other place as may be designated in
the call thereof, which call shall be made by the Managing General Partners.
Special meetings may also be called by the Managing General Partners from time
to time for the purpose of taking action upon any matter requiring the vote or
authority of the Partners as herein provided.
7.3 QUORUM AND REQUIRED VOTE AT MEETINGS OF THE PARTNERS. Partners
holding a majority of the Shares entitled to vote present or represented by
proxy shall be a quorum for the transaction of business at a Partners' meeting,
but any lesser number shall be sufficient for adjournments.
Each Partner shall have one vote for each Share standing of record in
such Partner's name as of the record date set forth in the notice of meeting. A
majority of
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the Shares voted at a meeting at which a quorum is present shall constitute
action on the Partners, except:
(a) that in the election of General Partners, those candidates
receiving the highest number of votes cast at a meeting of Partners at
which a quorum is present, up to the number of General Partners to be
elected, shall be elected as General Partners of the Fund; there shall
be no cumulative voting in election of General Partners;
(b) that approval of matters referred to in (b), (c) and (d)
and the termination of the employment of independent public accountants
referred to in (e) of paragraph 7.1 above shall require a Majority
Shareholder Vote; and
(c) where a larger vote, if any, is otherwise required by
provision of this Certificate and Agreement.
Shares may be voted at a meeting of Partners in person or by proxy duly
executed by the Partner(s) holding the Shares of record on the record date for
such meeting fixed by the Managing General Partners as provided in Section 10.4.
All such proxies shall be filed with the Fund before or at the meeting. No such
proxy shall be valid after eleven months from the date of its execution. The law
of California pertaining to corporate proxies will govern all Partnership
proxies. Notwithstanding that a valid proxy is outstanding, powers of the proxy
holder will be suspended if the person executing the proxy is present at the
meeting and elects to vote in person.
7.4 ACTION BY WRITTEN CONSENT. Any action taken by Partners may be
taken without a meeting if all of the Partners entitled to vote on the matter
consent to the action in writing and such written consents are filed with the
records of the meetings of Partners. Such consent shall be treated for all
purposes as a vote taken at a meeting of Partners.
ARTICLE VIII
TERM AND DISSOLUTION OF THE FUND
8.1 TERM. The Term of this Partnership shall commence as of March 25,
1976, the date of the initial filing of this Certificate and Agreement with the
County Recorder in the County of Los Angeles, of the State of California, as
required by the Partnership Act, and shall continue in existence until December
31, 2071, on which date it shall commence dissolution, unless it is sooner
dissolved as hereinafter provided.
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8.2 EVENTS CAUSING EARLIER DISSOLUTION OF THE FUND. The Fund shall
commence dissolution, and the affairs of the Fund shall be wound up, prior to
the date specified above, upon the happening of any of the following events:
(a) the Fund disposes of all of its assets; or
(b) if a Managing General Partner has not filed an amendment
to this Certificate and Agreement evidencing his determination to
continue the business of the Partnership within One Hundred and Eighty
(180) days after the death, retirement or insanity of a General
Partner; or
(c) partners holding a majority of the Shares vote to dissolve
the Fund.
The Limited Partners shall have no right or power to cause the
termination or dissolution of the Partnership except as set forth in this
Certificate and Agreement. No Limited Partner shall have the right to bring an
action for partition against the Partnership.
8.3 RIGHT OF GENERAL PARTNERS TO CONTINUE THE BUSINESS OF THE FUND IN
CERTAIN EVENTS. The death, retirement or insanity of a General Partner shall not
dissolve the Partnership. In any such event the business of the Partnership
shall continue pending the election to continue the business of the Fund
contemplated in this Section or the exercise of the rights of the Partners
provided in Section 8.4 below.
After the death, retirement or insanity of a General Partner, any
remaining Managing General Partner shall have the right to elect to continue the
business of the Fund. If a remaining Managing General Partner so elects to
continue the Fund, within thirty (30) days after such event he shall execute and
cause to be filed an appropriate amendment to this Certificate and Agreement to
evidence such election. If no remaining Managing General Partner is willing to
continue the business of the Partnership, then prior to the expiration of such
thirty-day period, the remaining Managing General Partners shall (or, if there
is no Managing General Partner then acting, any Partner or Partners owning 10%
or more of the Shares then outstanding) shall, within one hundred and twenty
(120) days of such event, call a meeting of the Partners for the purpose of
exercising the rights provided in Section 8.4 below.
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8.4 RIGHT OF THE PARTNERS TO PROVIDE FOR CONTINUATION OF THE BUSINESS
OF THE FUND IN CERTAIN EVENTS. In the event that: (a) at any time the status and
interest of all Managing General Partners has terminated by virtue of any of the
events or circumstances specified in Section 3.8 of this Certificate and
Agreement; or (b) the Managing General Partner(s) remaining after the death,
retirement or insanity of a General Partner do not elect to continue the Fund
(which failure to elect to continue the Fund shall constitute an election to
retire pursuant to Section 3.8(a)(4) above), then, to the extent permitted by
the Partnership Act, the Partners shall have the right to elect a successor
Managing General Partner or Partners who shall have the authority to elect to
continue the business of the Fund under its present name. Any such successor
Managing General Partner shall have all of the rights and powers, and be subject
to all of the duties and obligations of a Managing General Partner provided in
this Certificate and Agreement.
ARTICLE IX
FUND DOCUMENTATION; AMENDMENT OF THE
CERTIFICATE AND AGREEMENT; POWER OF ATTORNEY
9.1 CERTIFICATE AND AGREEMENT AND OTHER DOCUMENTATION. This Certificate
and Agreement shall constitute a Certificate of Limited Partnership within the
meaning of the Partnership Act, and the Managing General Partners shall promptly
cause it to be filed and recorded in accordance with the Partnership Act in the
County of the location of the Fund's statutory office, and to the extent
required by local law, in the appropriate place in each state in which the Fund
may hereafter establish a place of business.
9.2 EVENTS REQUIRING AMENDMENT OF CERTIFICATE AND AGREEMENT. This
Certificate and Agreement shall be promptly amended, as hereafter provided, upon
the occurrence of any of the following events: (a) there is a change in the name
of the Fund; (b) there is a change in the street address of the principal
executive office; (c) there is a change in the address of a General Partner or a
change in the address of the agent for service of process, unless a corporate
agent is designated, or appointment of a new agent for service of process; (d) a
person is admitted as a General Partner; (e) a General Partner retires, dies or
becomes insane, and the business is continued as permitted by Article VIII; (f)
there is a false or erroneous statement in this Certificate and Agreement; (g)
the Partners desire to make a
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change in any other statement in this Certificate and Agreement in order that it
shall accurately represent the agreement among them; or (h) there is a change in
the right to vote upon any of the matters described in Article VII.
9.3 PARTNERSHIP AUTHORIZATION. Each of the Limited Partners hereby
makes, constitutes and appoints the Managing General Partners of the Partnership
or any of them and each person who shall hereafter become a Managing General
Partner, with full power of substitution, the true and lawful attorney of, and
in the name, place and stead of such Limited Partner, with the power from time
to time to execute, acknowledge, make, swear to, verify, deliver, record, filed
and/or publish: (a) this Certificate and Agreement of Limited Partnership under
the laws of the State of California or any other jurisdiction, any amendment to
any such Certificate and Agreement of Limited Partnership (including, but not
limited to, amendments reflecting the withdrawal of any General Partner or the
return, in whole or in part, of the contribution of any Partner) or any other
document required from time to time to admit such Limited Partner, to effect his
substitution as a Limited Partner or to effect the substitution of the Limited
Partner's assignee as a Limited Partner as to any or all shares of limited
partnership interest assigned to such assignee; (b) any amendments to this
Certificate and Agreement or any other document required to reflect any action
of the Partners provided for in this Certificate and Agreement whether or not
such Limited Partner voted in favor of or otherwise consented to such action;
and (c) any other instrument, certificate or document as may be required by any
regulatory agency, the laws of the United States, any state or any other
jurisdiction in which the Fund is doing or intends to do business or which the
Managing General Partners deem advisable to file or record, provided such
instrument, certificate or document is in accordance with the terms of this
Certificate and Agreement as then in effect.
Each of the General Partners hereby makes, continues and appoints the
Managing General Partners and any one of them and each person who shall
hereafter become a Managing General Partner, and additionally appoints the
transfer agent and any successor transfer agent employed by the Fund, with full
power of substitution, the true and lawful attorney of, and in the name, place
and stead of such General Partner, with the powers from time to time to execute,
acknowledge, make, swear to, verify, deliver, record, file and/or publish the
documents specified or
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contemplated by subparts (a), (b) and (c) of the preceding paragraph.
Each of the Limited Partners is aware that the terms of the Certificate
and Agreement permit certain amendments of the Certificate and Agreement to be
effected and certain other actions to be taken or omitted by or with respect to
the Partnership, in each case with the approval of less than all the Limited
Partners, provided that a specified percentage of Partners shall have voted in
favor of or otherwise consented to such action. Such actions include, without
limitation, admission of new General Partners duly elected at meetings of the
Partners. If, as and when (i) an amendment of the Certificate and Agreement is
proposed or an action is proposed to be taken or omitted by or with respect to
the Partnership which requires, under the terms of the Certificate and
Agreement, the approval of a specified percentage in interest (but less than
all) of the Partners, (ii) Partners holding the percentage of Partnership
interests in the Partnership specified in the Certificate and Agreement as being
required for such amendment or action have approved such amendment or action in
the manner contemplated by the Certificate and Agreement; and (iii) a Limited
Partner has failed or refused to approve such amendment or action (hereinafter
referred to as a non-consenting Limited Partner), each non-consenting Limited
Partner agrees that each special attorney specified above, with full power of
substitution, is hereby authorized and empowered to execute, acknowledge, make,
swear to, verify, delivery, record, file and/or publish, for and on behalf of
such non-consenting Limited Partner, and in his name, place and stead, any and
all instruments and documents which may be necessary or appropriate to permit
such amendment to be lawfully made or action lawfully taken or omitted. Each
consenting and non-consenting Limited Partner is fully aware that he and each
other Limited Partner have executed this special power of attorney, and that
each Limited Partner will rely on the effectiveness of such powers with a view
to the orderly administration of the Partnership's affairs.
The foregoing grant of authority (i) is a special power-of-attorney
coupled with an interest in favor of the Managing General Partners now and
hereafter acting and as such shall be irrevocable and shall survive the death or
insanity (or, in the case of a Limited Partner that is a corporation,
association, partnership, joint venture or trust, the merger, dissolution or
other termination of the existence) of such Limited Partner, (ii) may be
exercised for each Limited Partner by a facsimile signature of any Managing
General Partner or by listing all of the Limited Partners executing any
instrument with a single signature of any Managing General Partner acting as
attorney-in-fact for all of them, (iii) shall survive the assignment by such
Limited Partner of the whole or any portion of his interest,
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and (iv) shall survive the redemption by the Limited Partner of the whole or any
portion of his interest as provided in section 6.3 hereof, provided that where
all of such Limited Partner's interest is so redeemed, the power of attorney
shall survive such redemption for the sole purpose of enabling a Managing
General Partner to execute, acknowledge and file any instrument necessary to
effect the deletion of such person as a Limited Partner.
9.4 POWER OF ATTORNEY BY SUBSTITUTED OR ADDITIONAL LIMITED PARTNERS. As
a condition to effectiveness of any assignment of Shares and to becoming a
Limited Partner, each original purchaser or assignee of Shares shall execute and
deliver to the Managing General Partners one or more Partnership Authorizations,
including a power-of-attorney in form acceptable to the Managing General
Partners and in content substantially in accordance with the foregoing
provisions of Section 9.3, which shall similarly be irrevocable during the
period specified above.
9.5 AMENDMENTS REQUIRING SIGNATURE BY LESS THAN ALL LIMITED PARTNERS.
Anything herein to the contrary notwithstanding, any amendment to this
Certificate and Agreement substituting or adding a Partner may be signed by any
Managing General Partner and by the person to be substituted or added as a
Partner. The execution of any such amendment on behalf of a Limited Partner or
any proposed substituted or added Limited Partner may be effected by his
attorney-in-fact. An amendment reflecting the death, retirement or insanity of a
General Partner and the election of a Managing General Partner to continue the
business of the Fund pursuant to Article VIII above, need only be signed by any
General Partner.
9.6 AMENDMENTS REQUIRING SIGNATURE BY ALL PARTNERS. Any amendment to
this Certificate and Agreement other than amendments described in Section 9.5
shall be signed by or on behalf of all Partners. The execution of any such
amendment on behalf of a General or Limited Partner may be effected by his
attorney-in-fact pursuant to Section 9.3 and 9.4.
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ARTICLE X
BOOK AND RECORDS, STATEMENTS
AND INCOME TAX INFORMATION
10.1 FISCAL YEAR. The fiscal year of the Fund shall be the calendar
year for financial reporting and for federal income tax purposes.
10.2 RECORDS AND ACCOUNTING. At all times during the continuance of the
Fund, books of account and records, which shall be adequate and appropriate for
the Fund business, shall be kept on a basis consistent with the accounting
methods followed by the Fund for federal income tax purposes and, where deemed
appropriate, in accordance with generally accepted accounting principles and
procedures applied in a consistent manner. Such books and records shall include
such separate and additional accounts for each Partner and such records of each
other Shareholder as shall be necessary to reflect accurately the rights and
interest of its respective Shareholders and shall specifically reflect the name
and address of each Shareholder and number of Shares held by him for the purpose
of determining recipients of distributions and notices. Such books of account, a
copy of this Certificate and Agreement and all amendments hereto, the Code of
Regulations, all documents relating to the ownership and condition of title of
Fund properties, and copies of all Fund tax returns shall be maintained by the
Fund at all times during its operations, and each Partner shall have access to
them and the right, at such Partner's expense, to inspect and copy them at all
reasonable times upon reasonable notice to the Fund. In addition, each Partner
shall have the right to receive by mail, upon written request to the
Partnership, a copy of a list of the names and addresses of the Limited Partners
and the number of Shares held by each of them, against reimbursement of the cost
of duplicating and mailing the same.
10.3 PERIODIC FINANCIAL STATEMENTS. The Fund shall cause certified
annual and uncertified semiannual financial statements of the operations of the
Fund to be prepared and forwarded to the Partners. The annual statements shall
include a statement of assets and liabilities, statements of operations and
changes in net assets, and such supporting statements or schedules as required
by law or by the Managing General Partners.
10.4 RECORD DATES. For the purpose of determining the Partners who are
entitled to notice of, and to vote or act at any Meeting of Partners or any
adjournment thereof, or the Shareholders who are entitled to receive payment of
any dividend or of any other distribution, the Managing General Partners may
from time to time, in advance, fix a time, which shall be not more than 50 days
nor less than 10 days before the date of any
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Meeting of Partners or the date for the payment of any dividend or of any other
distribution, as the record date for determining the Partners having the right
to notice of and to vote at such meeting and any adjournment thereof or
Shareholders having the right to receive such dividend or distribution, and in
such case only Partners or Shareholders of record, as appropriate, on such
record date shall have such right, notwithstanding any transfer of shares on the
books of the Fund after the record date; or without fixing such record date, the
Managing General Partners may, for any of such purposes, close the register or
transfer books for all or any part of such period.
10.5 INCOME TAX INFORMATION. The Fund shall provide to each
Shareholder on a timely basis annually information with respect to federal
taxable income and gain.
10.6 STATEMENT UPON WINDING UP OF THE FUND. As soon as possible after
completion of the winding up of the Fund pursuant to Section 6.4 above, each
Shareholder shall be furnished with a statement prepared by the Fund's
accountants which shall set forth the assets and liabilities of the Fund as at
the date of complete winding up.
ARTICLE XI
GENERAL PROVISIONS
11.1 DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person," "Principal Underwriter" shall have the respective
meanings given such terms in Sections 2(a)(3), 2(a)(4), 2(a)(7),
2(a)(19), and 2(a)(29) respectively of the 1940 Act; "Majority
Shareholder Vote" shall mean "vote of a majority of outstanding voting
securities" as defined in Section 2(a)(42) of the 1940 Act;
(b) "Certificate and Agreement" shall mean this Certificate
and Agreement of Limited Partnership, as amended or restated from time
to time;
(c) "Code of Regulations" shall mean the "Code of Regulations"
of the Fund as amended from time to time;
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(d) "General Partners" refers to the Managing General Partners
named herein and any person who shall hereafter become a General
Partner. "Managing General Partner" refers to the individuals
designated as such in Section 3.1 and identified, from time to time, in
Schedule "A" to this Certificate and Agreement;
(e) The pronouns "he," "his," "him," "it" or "who," with
"Limited Partner" or "General Partner" as the antecedent shall be
deemed to refer also to a Limited Partner or General Partner who is a
woman, a partnership, a joint venture, an association, a corporation or
a trust;
(f) "Limited Partners" shall mean the original Limited Partner
and all other persons who shall hereafter be admitted to the Fund as
additional Limited Partners or substituted Limited Partners, except
those persons who (i) have redeemed all Shares of the Fund owned by
them, or (ii) have been replaced by a substituted Limited Partner to
the extent of their entire Limited Partnership Interest;
(g) "Net Asset Value Per Share." The Net Asset Value Per Share
of the Fund shall be determined as of the close of trading on the New
York Stock Exchange on each day on which the Exchange is open for
trading (and at such other times as the Fund may determine). The Net
Asset Value Per Share shall be computed by taking the total value of
all assets of the Fund, less its liabilities and dividing by the number
of Shares outstanding. Securities for which market quotations are
readily available shall be valued at their current market values in the
principal markets in which such securities are normally traded.
Securities and other assets for which market quotations are not readily
available (including restricted securities) shall be valued at their
fair value as determined in good faith under procedures established by
and under the general supervision of the Managing General Partners.
The Partnership may suspend the determination of the Net Asset
Value Per Share in the event the New York Stock Exchange is closed for
other than customary weekends or holidays, or during periods when
trading on the Exchange is restricted or an emergency exists which
makes disposition or valuation of portfolio securities impractical, or
during any other period permitted by order of the Commission.
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(h) The "1940 Act" refers to the Investment Company Act of
1940, as amended, and the Rules and Regulations thereunder, all as
amended from time to time; the "1933 Act" refers to the Securities Act
of 1933, as amended, and the Rules and Regulations thereunder, all as
amended from time to time;
(i) "Partners" shall mean collectively the General Partners
and the Limited Partners. Reference to a "Partner" shall mean any one
of the Partners.
(j) "Partnership" or the "Fund" refers to this Limited
Partnership formed under the law of the State of California and
established by this Certificate and Agreement, as amended from time to
time.
(k) The "Partnership Act" refers to The California Revised
Limited Partnership Act as enacted by the State of California and
hereafter amended, set forth presently at Sections 15611 and following,
of the Corporations Code of the State of California;
(l) "Person" means an individual, partnership, joint venture,
association, corporation or trust;
(m) "Shareholder" or "Holder" means a holder of Shares,
whether a General Partner, Limited Partner or assignee of any of them,
but only to the extent such person's interest is recorded on the books
of the Fund maintained for such purpose either by the Fund or by its
appointed transfer or similar agent.
(n) "Shares" shall mean the equal proportionate units into
which the Partnership Interests of the Fund shall be divided from time
to time as provided in Section 5.1 of this Certificate and Agreement.
11.2 INDEPENDENT ACTIVITIES. Each Partner reserves the right to
conduct activities similar to those conducted by the Fund, including buying or
selling securities for his own account or for others.
11.3 CUSTODIAN. All assets of the Partnership shall be held by a
Custodian as required by the 1940 Act, and may be registered in the name of the
Partnership or such custodian or a nominee thereof.
11.4 BENEFIT. Except as herein otherwise provided to the contrary, this
Certificate and Agreement shall be binding upon and inure to the benefit of the
parties signatory hereto,
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and their respective heirs, executors, guardians, representatives, successors
and assigns.
11.5 NONRECOURSE CREDITORS. No creditor making a nonrecourse loan to
the Partnership shall, by reason thereof, acquire any direct or indirect
interest in the profits, capital or property of the Partnership other than as a
secured creditor.
11.6 NOTICES. All notices required or permitted to be given under this
Certificate and Agreement shall be in writing and shall be given to the parties
at the addresses set forth in Schedule "A" to this Certificate and Agreement and
to the Fund at its statutory office in California, or at such other address as
any of the parties may hereafter specify in writing to the Fund.
11.7 CAPTIONS. Paragraph titles or captions contained in this
Certificate and Agreement are inserted only as a matter of convenience and for
reference and in on way define, limit, extend or describe the scope of this
Certificate and Agreement or the intent of any provision hereof.
11.8 CERTIFICATE AND AGREEMENT IN COUNTERPARTS. This Certificate and
Agreement may be executed in several counterparts, and as so executed, shall
constitute one Certificate and Agreement, binding on all of the parties hereto,
notwithstanding that all of the parties are not signatory to the original or the
same counterpart.
11.9 AGENT FOR SERVICE OF PROCESS. The Managing General Partners shall
take whatever action is necessary to designate an agent at the Fund's office in
California upon whom service of process upon the Fund may lawfully be made.
11.10 PRINCIPLES OF CONSTRUCTION; SEVERABILITY. This Certificate and
Agreement shall be construed to the maximum extent possible to comply with all
of the terms and conditions of
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the 1940 Act and the Partnership Act. If, nevertheless, it shall be determined
by a court of competent jurisdiction that any provision or wording of this
Certificate and Agreement shall be invalid or unenforceable under the 1940 Act,
the Partnership Act or other applicable law, such invalidity or unenforceability
shall not invalidate the Certificate and Agreement. In that case, the
Certificate and Agreement shall be construed so as to limit any term or
provision so as to make it enforceable or valid within the requirements of such
law, and in the event such term or provision cannot be so limited, this
Certificate and Agreement shall be construed to omit such invalid or
unenforceable provision.
11.11 CALIFORNIA LAW. This Certificate and Agreement is made in the
State of California, and it is created under and is to be governed by and
construed and administered according to the laws of said state.
11.12 INTEGRATED AGREEMENT. This Certificate and Agreement constitutes
the entire understanding and agreement among the parties hereto with respect to
the subject matter hereof, and there are no agreements, understandings,
restrictions, representations or warranties among the parties other than those
set forth herein.
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SCHEDULE "A"
NAMES, PLACES OF RESIDENCE, NUMBER OF SHARES
OF PARTNERSHIP INTEREST, AND CONTRIBUTIONS
OF THE
GENERAL PARTNERS
MANAGING GENERAL PARTNERS
<TABLE>
<CAPTION>
Shares of
Names and Address Partnership Interest
<S> <C>
G. Willing Pepper
128 Springton Lake Road
Media, Pennsylvania
Robert R. Fortune
2920 Ritter Lane
Allentown, Pennsylvania 18104
David R. Wilmerding, Jr.
Gee, Wilmerding & Associates,
Inc.
Villanova, PA 19085-1445
Richard C. Caldwell
PNC Bank, N.A.
1600 Market Street
29th Floor
Philadelphia, PA 19103
Langhorne B. Smith
Claniel Enterprises, Inc.
Suite 400
630 West Germantown Pike
Plymouth Meeting, PA 19462
</TABLE>
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EXHIBIT B
ADVISORY AGREEMENT
AGREEMENT, dated January 1, 1998 between CHESTNUT STREET EXCHANGE FUND, a
California Limited Partnership ("Fund"), and PNC BANK, N.A., a national banking
association ("PNC"), and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION
("PIMC"), a Delaware corporation registered as an investment adviser under the
Investment Advisers Act of 1940 and wholly-owned by PNC.
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain PNC and PIMC to render investment
advisory and administrative services to the Fund, and PNC and PIMC are willing
to render such services;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DELIVERY OF DOCUMENTS. The Fund has previously furnished PNC with
copies properly certified or authenticated of each of the following:
(a) The Fund's Restated Certificate and Agreement of Limited
Partnership dated August 16, 1976 and recorded in California on August 16,
1976 and all subsequent restatements and amendments thereto. Such Restated
Certificates and Agreement of Limited Partnership, as presently in effect
and as it may hereinafter from time to time be restated or further amended,
is hereinafter referred to as the "Certificate of Limited Partnership";
(b) The Fund's Code of Regulations, as amended, (such Code, as
presently in effect and as it may hereinafter from time to time be amended,
is hereinafter referred to as the "Code");
(c) Resolutions of the Managing General Partners of the Fund
authorizing the appointment of the Advisers and approving this Agreement;
and
(d) An Order of the Securities and Exchange Commission, dated November
9, 1976, exempting the Fund from certain provisions of Sections 2(a)(3),
2(a)(19), 18(f) and 22(e) of the Investment Company Act of 1940, and
exempting the Non-Managing General Partner of the Fund from certain
provisions of Section 17(a) of the Act.
The Fund agrees to furnish PIMC from time to time with copies, properly
certified or authenticated, of any amendments or supplements to the foregoing.
2. APPOINTMENT. The Fund hereby appoints PNC and PIMC to act an
investment advisers to the Fund for the period and on the terms set forth in
this Agreement. The PNC and PIMC are sometimes hereinafter referred to
collectively as "the Advisers." The Advisers accept such appointment and agree
that the services herein set forth shall be rendered for the compensation herein
provided.
3. SERVICES RENDERED BY PNC. Subject to the supervision of the Managing
General Partners of the Fund, PNC, through its Trust Division and on behalf of
the Fund, will provide PIMC investment research and credit analysis concerning
prospective and existing Fund investments, make recommendations to PIMC with
respect to the Fund's continuous investment program, recommend to PIMC the
portion of the Fund's assets to be invested or held uninvested in cash or cash
equivalents, supply PIMC computer facilities and operating personnel, and
provide certain statistical services as PIMC may from time to time reasonably
request. PNC will provide the services rendered by it hereunder in accordance
with the Fund's investment objectives, policies and restrictions as stated in
the Prospectus and as they may hereafter be amended. PNC further agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has
investment responsibilities;
<PAGE> 57
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (hereinafter called the "Rules"), and
will in addition conduct its activities under this Agreement in accordance
with the regulations of the Board of Governors of the Federal Reserve
System pertaining to the investment advisory activities of bank holding
companies to the same extent as if such regulations were by their terms
applicable to its activities hereunder;
(c) will not invest its assets or assets of any fiduciary account
managed by it in Shares of the Fund, make loans for purposes of purchasing
or carrying such Shares or make loans to the Fund;
(d) will maintain or cause PIMC to maintain all books and records with
respect to the Fund's securities transactions and shall keep or shall cause
PIMC to keep the Fund's books of account;
(e) will render to the Fund's Managing General Partners such periodic
and special reports as the Board may request;
(f) will maintain its policy and practice of conducting its Trust
Division independently of its Commercial Division. In making investment
recommendations for the Fund, Trust Division personnel will not inquire or
take into consideration whether the issuer of securities proposed for
purchase or sale for the Fund's account are customers of the Commercial
Division. In dealing with commercial customers, the Commercial Division
will not inquire or take into consideration whether securities of those
customers are held by the Fund; and
4. SERVICES PROVIDED BY PIMC. Subject to the supervision of the Managing
General Partners of the Fund, PIMC will provide a continuous investment program
for the Fund's portfolio, including investment research and management with
respect to all securities and investments and cash and cash equivalents in the
portfolio. PIMC will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund, and what portion of
its assets will be invested or held uninvested in cash or cash equivalents. PIMC
will provide the services rendered by it hereunder in accordance with the Fund's
investment objectives, policies and restrictions as stated in the Prospectus and
as they may hereafter be amended. PIMC further agrees that it:
(a) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, PIMC will attempt to obtain the
best net price and the most favorable execution of its orders. Consistent
with this obligation, with the execution and price offered by two or more
brokers or dealers are comparable, PIMC may, in its discretion, purchase
and sell portfolio securities to and from brokers and dealers who provide
the Fund with research advice and other services. In no instance will
portfolio securities be purchased from or sold to PNC, PIMC or any
affiliated person thereof;
(b) will conform with all applicable Rules, and will in addition
conduct its activities under this Agreement in accordance with the
regulations of the Board of Governors of the Federal Reserve System
pertaining to the investment advisory activities of bank holding companies
to the same extent as if such regulations were by their terms applicable to
the activities of PIMC;
(c) will not invest its assets or the assets of any accounts advised
by it in Shares of the Fund, make loans for the purpose of purchasing or
carrying Shares, or make loans to the Fund; and
(d) will compute the net asset value and the net income of the Fund on
each business day as described in the Prospectus or as more frequently
requested by the Fund.
5. SERVICES NOT EXCLUSIVE. The investment advisory services rendered by
PNC and PIMC hereunder are not to be deemed exclusive, and PNC and PIMC shall be
free to render similar services to others so long as their services under this
Agreement are not impaired thereby.
6. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
of the Rules, the Advisers hereby agree that all records which they maintain for
the Fund are property of the Fund and further agree to surrender promptly to the
Fund any of such records upon the Fund's request. The Advisers further agree to
2
<PAGE> 58
preserve for the periods prescribed by Rule 31a-2 the records required to be
maintained by Rule 31a-1 of the Rules.
7. EXPENSES. During the term of this agreement, the Advisers will pay all
expenses incurred by them in connection with their activities under this
Agreement other than the cost of (including brokerage commissions, if any)
securities purchased for the Fund.
In addition, if the expenses borne by the Fund in any fiscal year exceed
the applicable expense limitations imposed by the securities regulations of any
state in which the Shares are registered or qualified for sale to the public,
the Advisers shall reimburse the Fund for any excess up to the amount of the
fees payable to PIMC during such fiscal year pursuant to paragraph 8 hereof.
8. COMPENSATION. For the services provided hereunder by PNC and PIMC and
the expenses assumed pursuant to this Agreement, the Fund will pay PIMC, and PNC
and PIMC will accept as full compensation therefor, a fee computed daily and
paid monthly at the annual rate of 4/10 of 1% of the first $100,000,000 of the
Fund's net assets, plus 3/10 of 1% of net assets exceeding $100,000,000.
9. LIMITATION OF LIABILITY OF THE ADVISORS. The Advisers shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence by either of them in performance of their duties or
from reckless disregard by either of them of their obligations and duties under
this Agreement.
10. DURATION AND TERMINATION. This Agreement shall become effective on
January 1, 1998 or the date upon which it is approved by a majority of the
outstanding voting securities of the Fund at a meeting of Partners, whichever is
later. Unless sooner terminated as provided herein, this Agreement shall
continue until March 31, 1999. Thereafter, if not terminated, this Agreement
shall continue for successive annual periods ending on March 31, provided, such
continuance for successive annual periods is specifically approved at least
annually (a) by the vote of a majority of those members of the Board of Managing
General Partners of the Fund who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Board of Managing General Partners of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, provided however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Managing General Partners of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, on 60 days' written notice to the Advisers, or the Advisers at any time,
without payment of any penalty, on 90 days' written notice to the Fund. This
Agreement will terminate automatically in the event of its assignment. (As used
in this Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meaning as such terms
have in the Investment Company Act of 1940.)
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by vote of the holders of a majority of the Fund's
outstanding voting securities.
12. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
13. NO PERSONAL LIABILITY. The persons executing this Agreement on behalf
of the Fund have executed the Agreement as Managing General Partners or officers
of the Fund and not individually. The obligations of the Fund hereunder and any
liabilities or claims in connection therewith are not binding upon
3
<PAGE> 59
any of the Limited Partners of the Fund individually, but are binding only upon
the assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C>
Attest: PNC BANK, N.A.
By:
- --------------------------------------------- ---------------------------------------------
[corporate seal]
PROVIDENT INSTITUTIONAL
Attest: MANAGEMENT CORPORATION
By:
- --------------------------------------------- ---------------------------------------------
[corporate seal]
Attest: CHESTNUT STREET EXCHANGE FUND
By:
- --------------------------------------------- ---------------------------------------------
</TABLE>
4
<PAGE> 60
PROXY CARD
CHESTNUT STREET EXCHANGE FUND
THIS PROXY IS SOLICITED BY THE MANAGING GENERAL PARTNERS OF CHESTNUT STREET
EXCHANGE FUND (THE "FUND") FOR USE AT THE ANNUAL MEETING OF PARTNERS TO BE HELD
ON DECEMBER 18, 1997 AT 3:00 P.M. (EASTERN TIME) IN THE FOURTH FLOOR CONFERENCE
ROOM, BELLEVUE PARK CORPORATE CENTER, 400 BELLEVUE PARKWAY, WILMINGTON,
DELAWARE.
The undersigned hereby appoints Edward J. Roach and Vernon Stanton, Jr.,
and each of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Annual Meeting, and all adjournments thereof, all
units of partnership interest held of record by the undersigned on the record
date for the Meeting, upon the following matters, and upon any other matter
which may properly come before the Meeting, at their discretion.
1. Proposal to approve an Amended and Restated Certificate and Agreement
of Limited Partnership.
_______FOR _______AGAINST _______ABSTAIN
2. Election of General Partners: Richard C. Caldwell
Robert R. Fortune
G. Willing Pepper
David R. Wilmerding, Jr.
Langhorne B. Smith
_______FOR all nominees listed above (except as marked to the
contrary)
_______WITHHOLD AUTHORITY to vote for all nominees listed above
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THE NAME ON THE LINE PROVIDED BELOW.)
____________________________________________
<PAGE> 61
3. Proposal to approve a New Investment Advisory Agreement.
___ FOR ___ AGAINST ____ABSTAIN
4. Proposal to ratify the selection of Coopers & Lybrand L.L.P. as
independent auditors for the Fund for its fiscal year ending December
31, 1997.
___ FOR ___ AGAINST ____ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
Every properly signed proxy will be voted in the manner specified hereon
and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE FOR THE ELECTION OF GENERAL PARTNERS AND FOR PROPOSALS 1, 3, 4 AND 5 ABOVE.
PLEASE SIGN, DATE AND RETURN PROMPTLY. RECEIPT
OF NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
IS HEREBY ACKNOWLEDGED.
______________________________________________
Sign here exactly as name(s) appear(s) on left
Date: ________________________________________
IMPORTANT -- Joint owners must EACH sign. When
signing as attorney, trustee, executor,
administrator, guardian, or corporate officer,
please give your FULL title.
