<PAGE> 1
As filed with the Securities and Exchange Commission on April 30, 1997.
File No. 811-2631
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT /X/
OF 1940
AMENDMENT No. 20
CHESTNUT STREET EXCHANGE FUND
-----------------------------
(Exact Name of Registrant as Specified in Charter)
400 Bellevue Parkway, Suite 100
Wilmington, Delaware 19809
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(Address of Principal Executive Offices)
Registrant's Telephone Number: (302) 792-2555
Edward J. Roach
400 Bellevue Parkway, Suite 100
Wilmington, Delaware 19809
--------------------------
(Name and Address of Agent for Service)
Copy to:
Vernon Stanton, Jr., Esq.
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
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CONTENTS OF FORM N-1A
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PART A. INFORMATION REQUIRED IN A PROSPECTUS 1
Item 1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 3. Condensed Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 4. General Description of Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 5. Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 5A. Management's Discussion of Fund Performance . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 7. Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 8. Redemption or Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 9. Pending Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART B. STATEMENT OF ADDITIONAL INFORMATION 14
Item 10. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 11. Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 12. General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 13. Investment Objective and Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 14. Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 15. Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 16. Investment Advisory and Other
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 17. Brokerage Allocation and Other
Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 18. Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 19. Purchase, Redemption, and Pricing of
Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 20. Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 21. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 22. Calculation of Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
PART C. OTHER INFORMATION C-1
Item 24. Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Item 25. Persons Controlled by or under Common Control with Registrant . . . . . . . . . . . . . . . . C-3
Item 26. Number of Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-3
Item 27. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-3
Item 28. Business and Other Connections of Investment Adviser . . . . . . . . . . . . . . . . . . . . . C-3
Item 29. Principal Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-9
Item 30. Location of Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-9
Item 31. Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-9
SIGNATURE C-10
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PART A. INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page
Inapplicable.
Item 2. Synopsis
Inapplicable.
Item 3. Condensed Financial Information
Inapplicable.
Item 4. General Description of Registrant
(i) Registrant is a limited partnership organized as
of March 23, 1976 under The Uniform Limited
Partnership Act of California. Registrant is an
open-end diversified management investment
company.
(ii) Registrant's investment objectives are to seek
long-term growth of capital and, secondarily,
current income. Registrant will invest in a
portfolio of common stocks and securities
convertible into common stocks of issuers included
in the "List of Representative Companies" on pages
10 to 12 of Post- Effective Amendment No. 1 to
Registrant's Registration Statement on Form S-5
filed under the Securities Act of 1933 on October
28, 1976, which is incorporated herein by
reference, and of other issuers of comparable
quality. Registrant may also invest in other
types of securities for temporary or defensive
purposes, including preferred stocks, investment
grade bonds and money market obligations such as
U.S. Government securities, certificates of
deposit and commercial paper.
Up to 10% of the value of Registrant's total
assets may be invested in securities which are
subject to legal or contractual restrictions on
resale and which Registrant reasonably believes
will be saleable after a two year holding period
pursuant to Rule 144 under the Securities Act of
1933.
The Registrant may write exchange-traded covered
call options on portfolio securities up to 25% of
the value of its assets and may loan portfolio
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securities as permitted under subpart (8) of this
Item 4(ii). The Registrant will not sell securities
covered by outstanding options and will endeavor to
liquidate its position as an option writer in a
closing purchase transaction rather than deliver
portfolio securities upon exercise of the option.
The extent to which the Registrant may be able to
write such options will depend in part on state
securities regulations as amended from time to
time.
The investment objectives stated above may be
changed by the Board of Managing General Partners
without the approval of a majority of Registrant's
outstanding voting securities.
Registrant's fundamental policies which may not be
changed without the approval of a majority of
Registrant's outstanding voting securities are as
follows:
(1) Registrant will not issue any senior
securities (as defined in the Investment
Company Act of 1940).
(2) Registrant will not purchase securities on
margin or sell any securities short.
Registrant will not purchase or write
puts, calls, straddles or spreads with
respect to any security except that (i)
Registrant may write call options on
securities constituting not more than 25%
of the value of its assets if the option
is listed on a national securities
exchange and, at all times while the
option is outstanding, Registrant owns the
securities against which the option is
written or owns securities convertible
into such securities, and (ii) Registrant
may purchase call options in closing
purchase transactions to liquidate its
position as an option writer.
(3) Registrant will not borrow money except
from banks in amounts which in the
aggregate do not exceed 10% of the value
of its assets at the time of borrowing.
This borrowing provision is not for
purposes of leverage but is intended to
facilitate the orderly sale of portfolio
securities to accommodate abnormally heavy
redemption requests, and to pay
subscription fees due with respect to
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the exchange without having to sell
portfolio securities. Securities may be
purchased for Registrant's portfolio while
borrowings are outstanding.
(4) Registrant will not act as an underwriter
(except as it may be deemed such in a sale
of restricted securities owned by it).
(5) It is not the policy of Registrant to
concentrate its investments in any
particular industry, but if it is deemed
advisable in light of Registrant's
investment objectives, up to 25% of the
value of its assets may be invested in any
one industry. Registrant will not be
required to reduce holdings in a
particular industry if, solely as a result
of price changes, the value of such
holdings exceeds 25% of the value of
Registrant's total assets.
(6) Registrant will not purchase or sell real
estate or real estate mortgage loans.
(7) Registrant will not purchase or sell
commodities or commodity contracts.
(8) Registrant will not make loans except by
(i) the purchase of debt securities in
accordance with its investment objectives
and (ii) the loaning of securities against
collateral consisting of cash or
securities issued or guaranteed by the
U.S. Government, its agencies or
instrumentalities, which is equal at all
times to at least 100% of the value of the
securities loaned. Registrant will lend
portfolio securities only when its
investment adviser believes that the net
return to Registrant in consideration of
the loan is reasonable, that any fee paid
for placing the loan is reasonable and
based solely upon services rendered, that
the loan is consistent with Registrant's
investment objectives, and that no
affiliate of Registrant or of its
investment adviser is involved in the
lending transaction or is receiving any
fees in connection therewith. Registrant
will not have the right to vote securities
loaned, but will have the right to
terminate such a loan at any time and
receive back equivalent securities and to
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receive amounts equivalent to all dividends
and interest paid on the securities loaned.
(9) Registrant will not:
(A) Mortgage, pledge or hypothecate
its assets except to secure
borrowings described in Item
4(ii)(3) and in amounts not
exceeding 10% of the value of its
assets.
(B) Invest more than 5% of its assets
at the time of purchase in the
securities of any one issuer
(exclusive of securities issued
or guaranteed by the U.S.
Government, its agencies or
instrumentalities).
(C) Purchase securities if such
purchase would result in its
owning more than 10% of the
outstanding voting securities of
any one issuer at the time of
purchase.
(D) Invest in securities of companies
which have a record, together
with their predecessors, of less
than five years of continuous
operation.
(E) Purchase or hold securities of
any company if, to its knowledge,
those General Partners of
Registrant and those directors
and officers above the level of
Senior Vice President of its
investment adviser beneficially
owning more than 1/2 of 1% of the
securities of that company,
together own beneficially more
than 5% of the securities of such
company taken at market value.
(F) Purchase the securities of other
investment companies except that
Registrant has accepted for
exchange shares of common stock
of Coca-Cola International
Corporation in accordance with
the limitations imposed by the
Investment Company Act of 1940.
(G) Purchase oil, gas or other
mineral leases or partnership
interests in oil,
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gas or other mineral exploration
programs.
(H) Knowingly purchase or otherwise
acquire any equity or debt
securities which are subject to
legal or contractual restrictions
on resale if, as a result
thereof, more than 10% of the
value of its assets would be
invested in such securities.
(I) Invest in companies for the
purpose of exercising control or
management.
Any investment policy or restriction in
these Items (1)-(9) which involves a
maximum percentage of securities or assets
shall not be considered to be violated
unless an excess over the percentage
occurs immediately after an acquisition of
securities or utilization of assets and
results therefrom.
Registrant's investment policies which are not
deemed fundamental and may be changed without
shareholder approval are as follows:
Registrant does not intend to engage in any
significant degree in short-term trading.
Portfolio turnover is not expected to exceed 15%,
although Registrant reserves the right to exceed
this turnover rate. The tax consequences of a
sale of portfolio securities will be considered
prior to a sale, but sales will be effected when
the investment adviser believes a sale would be in
the best interests of Registrant's shareholders
even though capital gains will be realized.
Registrant will not sell securities covered by
outstanding options and will endeavor to liquidate
its position as an option writer in a closing
purchase transaction rather than by delivering
portfolio securities upon exercise of the option.
* * *
Limited Partners generally are not personally
liable for liabilities of the Fund. However, if
the Fund were unable to pay its liabilities,
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<PAGE> 8
recipients of distributions from the Fund could be
liable to creditors of the Fund to the extent of
such distributions, plus interest.
A Limited Partner has no right to take any part in
the control of the Partnership business, and the
exercise of such control would subject a Limited
Partner to the personal liability of a General
Partner for obligations of the Fund. Although no
absolute assurance can be given due to the lack of
specific statutory authority and the fact that
there are no authoritative judicial decisions on
the matter, the Fund received an opinion from
California Counsel that the existence and exercise
by the Limited Partners of the voting rights
provided for in the Partnership Agreement do not
subject the Limited Partners to liability as
general partners under the California Act. It is
possible, however, that the existence or exercise
of such rights, might subject the Limited Partners
to such liability under the laws of another state.
In the event that a Limited Partner should be
found to be liable as a general partner, then, to
the extent the assets and insurance of the Fund
and of the General Partners were insufficient to
reimburse a Limited Partner, he would be required
to personally satisfy claims of creditors against
the Fund.
The net asset value of the Shares on redemption or
repurchase may be more or less than the initial
offering price of the Shares depending upon the
market value of the Fund's portfolio securities at
the time of redemption or repurchase.
Item 5. Management of the Fund
(a) The business and affairs of the Fund are managed
by its three Managing General Partners. Their
addresses and principal occupations for the past
five years are stated at Item 14.
(b)(i) Registrant's investment advisers are PNC Bank,
National Association ("PNC Bank") which has
banking offices at Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19101 and PNC
Institutional Management Corporation ("PIMC"),
located at 400 Bellevue Parkway, Wilmington,
Delaware 19809. PNC Bank and its predecessors
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<PAGE> 9
have been in the business of managing the investments
of fiduciary and other accounts in the Philadelphia
area since 1847. Investment advisory services are
provided to the Registrant by PNC Bank through its
Trust Division. PIMC was organized by PNC Bank in
June 1977 to perform investment advisory services for
Registrant and certain other regulated investment
companies advised by PNC Bank.
All of the capital stock of PIMC is owned by PNC
Bank. All of the capital stock of PNC Bank is owned
by PNC Bancorp, Inc. with principal offices in
Wilmington, Delaware. All of the capital stock of
PNC Bancorp, Inc. is owned by PNC Bank Corp., a
publicly held bank holding corporation with principal
offices in Pittsburgh, Pennsylvania.
(ii) The investment advisers, subject to the
authority of the Managing General
Partners, are responsible for the overall
management of the Fund's business affairs.
(iii) For the services provided by PNC Bank and
PIMC and the expenses assumed by them
under the Advisory Agreement, Registrant
has agreed to pay PIMC a fee, computed
daily and payable monthly, at the annual
rate of 1/2 of 1% of the first
$100,000,000 of the Registrant's net
assets, plus 4/10ths of 1% of the net
assets exceeding $100,000,000. In the
Advisory Agreement, PIMC has agreed to pay
PNC Bank a monthly fee equal to 75% of
each month's advisory fee paid by
Registrant to PIMC under the agreement,
adjusted quarterly to assure that PIMC has
income before taxes from all sources of at
least $22,500 during each quarter. The
fee paid by PIMC to PNC Bank does not
affect the amount of the advisory fee
payable by Registrant. For the fiscal
year ended December 31, 1996, the Fund
paid $1,194,793, or approximately .44% of
its average net assets, to PIMC.
(c) Since January 1996, Mary Elizabeth C. Pfeil and
Robert K. Urquhart have been primarily responsible for
the day-to-day management of the Fund's portfolio.
Prior to joining PNC Equity Advisors Company in 1993,
Ms. Pfeil was a member of the Equity Research Group of
PNC Asset Management Group (then named PNC Investment
Management and Research) where she covered the energy
and housing-related industries. From 1990 to 1992, she
was employed by Wellington Management Company as a
generalist equity researcher. Prior to 1990, Ms. Pfeil
worked first as a commercial lender and later as an
equity analyst for PNC Bank. She is a member of the
Financial Analysts of Philadelphia and is a Chartered
Financial Analyst.
Prior to joining PNC in 1995, Mr. Urquhart was the
Chief Investment Officer at Cole Financial Group and a
partner at RCM Capital Management. He was also
employed by J.P. Morgan Investments, Inc. and Sanford
C. Bernstein & Co. Inc.
(d) Inapplicable.
(e) The Fund's transfer agent and dividend disbursing
agent is PFPC Inc. ("PFPC"). Its principal business
address is 400 Bellevue Parkway, Wilmington, DE
19809.
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(f) For fiscal year ended December 31, 1996, the Fund's
expenses totalled $1,394,001, or approximately .51%
of its average net assets.
(g) Inapplicable.
Item 5A. Management's Discussion of Fund Performance
Inapplicable.
Item 6. Capital Stock and Other Securities
(a) Registrant has one class of partnership
interest, no par value ("Shares"). All Shares
are entitled to participate equally in
distributions declared by the Board of Managing
General Partners. Each full Share entitles the
record holder thereof, other than the
Non-Managing General Partner, to one full vote,
and each fractional Share to a fractional vote,
on all matters submitted to the shareholders.
The Partnership Agreement provides that the
Non-Managing General Partner shall take no part
in the management, conduct or operation of the
Fund's business and shall not have the right to
vote its Shares. Shareholders are not entitled
to cumulative voting in elections for General
Partners. Each Share has equal liquidation
rights. There are no pre-emptive rights or
conversion rights.
Registrant is a limited partnership formed under
The Uniform Limited Partnership Act of
California. Limited Partners generally are not
personally liable for liabilities of Registrant.
However, if Registrant were unable to pay its
liabilities, recipients of distributions from
Registrant could be liable to certain creditors
of Registrant to the extent of such
distributions, plus interest. Registrant
believes that, because of the nature of
Registrant's business, the assets and insurance
of Registrant and of the General Partners, and
Registrant's ability to contract with third
parties to prevent recourse by the party against
a Limited Partner, it is unlikely that Limited
Partners will receive distributions which have
to be returned or that they will be subject to
liability as General Partners. In the event
that a Limited
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Partner should be found to be liable as a General
Partner, then, to the extent the assets and
insurance of Registrant and of the General Partners
were insufficient to reimburse a Limited Partner,
he would be required to personally satisfy claims
of creditors against Registrant.
(b) Inapplicable.
(c) The rights of the holders of Shares may not be
modified otherwise than by the vote of a majority
of outstanding shares, but "outstanding shares"
for this purpose excludes those shares held by the
non- voting Non-Managing General Partner.
(d) Inapplicable.
(e) Shareholder inquiries should be made to the Fund,
400 Bellevue Parkway, Suite 100, Wilmington,
Delaware 19809, telephone (302) 792-2555.
(f) Registrant's Dividend/Distribution Policy Through
December 31, 1997:
Through December 31, 1997, the Registrant intends
to distribute from its net investment income such
amounts as the Managing General Partners determine
after the end of each of the first three quarters
of the year (currently such distributions are at
the rate of $.65 per share), and the remainder of
its net investment income at the end of the year.
During this period, the Registrant also intends,
consistent with its past practice, to distribute
approximately 30% of its net long-term capital
gains for the year.
Registrant's Dividend/Distribution Policy Beginning
on January 1, 1998:
Effective January 1, 1998, the Registrant will be
deemed a corporation, rather than a partnership,
for federal tax purposes. In connection with this
change in its federal tax status, the Registrant
will elect to be taxed as a regulated investment
company ("RIC"). To qualify as a RIC under the
Internal Revenue Code (the "Code"), the Registrant
will be required to meet certain income,
diversification and distribution requirements. For
example, to qualify as a RIC, the Registrant must
pay as dividends each year at least 90% of its
investment company income which includes, but is
not limited to, taxable interest, dividends and
short-term capital gains less expenses. Therefore,
the Registrant intends to continue its historic
policy of quarterly dividends with total
distributions for each year equal to 100% of its
net investment income. However, as a RIC, the
Registrant intends to retain all of its net
long-term capital gains.
See Item 6(g) for more information on the tax
consequences to Partners of an investment in the
Registrant.
All distributions by the Registrant, whether before
or after it elects to be taxed as a RIC, will be
made in cash except to those shareholders who elect
to receive distributions in additional Shares
computed at their net asset value as of the record
date for the distribution. In the discretion of the
Managing General Partners, the amount of income
distributions for the first three quarters may be
changed and may be made at other times. Investors
who elect to participate in the Registrant's
Systematic Withdrawal Plan will receive quarterly
in cash as a partial redemption of their Shares up
to 3/4 of 1% of the net asset value of their Shares
determined as of the last trading day of each
calendar quarter.
(g) Tax Consequences to Partners Invested in the
Registrant Through December 31, 1997:
The Registrant's classification as a partnership
for federal income tax
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<PAGE> 12
purposes is expected to continue through December
31, 1997. As a partnership, the Registrant
itself does not pay any federal income or capital
gains tax. Instead, each partner is required, in
determining his own federal income tax liability,
to take into account his allocable share of each
item of Registrant's income, gain, loss,
deduction and credit (whether or not distributed
to him) for the taxable year of the Registrant
ending within or with his taxable year.
While classified as a partnership for federal
income tax purposes, distributions by the
Registrant, whether received in additional shares
of partnership interest ("Shares") or cash,
generally will not be taxable to a partner.
Instead, as previously described, each partner
will take into account in determining his federal
income tax liability his allocable share of
Registrant's income, gain, loss, deduction and
credit. In the event that distributions to a
partner exceed his basis for his aggregate
partnership interest immediately prior to the
distribution, the partner would recognize a
capital gain in the amount of such excess. Such
event is unlikely since distributions normally
will be made from his allocable share of items of
net income and capital gains which had the
initial effect of increasing his aggregate basis.
A cash distribution will reduce the aggregate
basis for all of a partner's Shares (but not
below zero) by the amount of the distribution.
If the distribution is taken in the form of
additional Shares, a partner's aggregate basis,
as increased by his share of the income and gain,
will remain unchanged. It is not contemplated
that any distributions will be made in portfolio
securities.
Tax Consequences to Partners Invested in the
Registrant Beginning on January 1, 1998:
Under the publicly traded partnership Rules of
the Code, the Registrant will be treated as a
corporation for federal income tax purposes
beginning January 1, 1998. However, the
Registrant intends to qualify as a RIC under
the Code. The Code's RIC provisions provide
pass-through treatment of taxable income similar
to that provided under the Code's partnership
rules. Therefore, to the extent that the
Registrant's earnings are distributed to its
partners as required by the RIC provisions of the
Code, the Registrant itself will not be required
to pay federal income tax.
Distributions of net investment income by the
Registrant as a RIC will be treated as ordinary
income in determining a partner's gross income
for tax purposes, whether the partner receives
these dividends in cash or Shares. As stated in
Item 6(g), the Registrant intends to retain all
of its net realized long-term capital gains as a
RIC and pay the tax on the gain at the required
corporate rate. Each partner will be required to
report his allocable portion of the Registrant's
gain, but each partner will also receive a tax
credit for his allocable portion of the tax paid
by the Registrant. As a result, each partner
should receive a federal income tax benefit equal
to the difference between the corporate tax rate
and the individual tax rate on long-term capital
gains. In addition, any retained capital gains,
net of tax, would generally increase a partner's
investment (and tax basis) in the Registrant.
Registrant will inform each Partner as to the
amount and nature of such income or gains.
Each partner should consult with his tax adviser
with specific references to his own tax
situation.
See Item 20 for additional background information
on the Registrant's current and future federal
income tax status.
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Item 7. Purchase of Securities Being Offered
(a) Inapplicable.
(b) Inapplicable.
(c) Investors who have not exchanged restricted
securities for Shares or received certificates
for their Shares may, by notice in writing to
the transfer agent, elect to participate in the
Systematic Withdrawal Plan (the "Plan").
Participants in the Plan will receive quarterly
in cash as a partial redemption of their Shares
up to 3/4 of 1% of the net asset value of their
Shares as of the close of trading on the New
York Stock Exchange on the last trading day of
each calendar quarter. Registrant does not
intend to impose a charge upon investors for
participating in the Plan. Participants may
withdraw from the Plan at any time by written
notice to the transfer agent.
(d) Inapplicable.
(e) Inapplicable.
(f) Inapplicable.
Item 8. Redemption or Repurchase
(a) Shares may be redeemed at the option of the
investor at any time without charge at their net
asset value next computed after receipt by PFPC
of a written request for redemption setting
forth the name of the Registrant and the
investor's account number. The request must be
accompanied by certificates (if issued) or if
certificates have not been issued, by stock
powers. The certificate or stock powers must be
endorsed by the record owner(s) exactly as the
Shares are registered and the signature(s) must
be guaranteed by a commercial bank or trust
company or member of a registered national
securities exchange. The Registrant reserves
the right to require that additional documents
be furnished in the case of redemptions by other
than the registered owner of the Shares.
Except to the extent Shares are redeemed for
cash pursuant to the Systematic Withdrawal Plan,
Registrant intends to distribute upon redemption
-11-
<PAGE> 14
securities in kind valued at the same value used
for purposes of next determining Registrant's
net asset value after the receipt of the request
for redemption in proper form. Registrant may
in its discretion pay part or all of redemption
proceeds in cash.
The proceeds of redemption will be paid as soon
as possible but not later than seven days after
the request for redemption is received with the
required documentation. The Registrant may
suspend the right of redemption or delay payment
during any period when the New York Stock
Exchange is closed (other than customary weekend
and holiday closings); when trading on that
exchange is restricted or an emergency exists
which makes disposal or valuation of portfolio
securities impracticable; or during such other
period as the Securities and Exchange Commission
may by order permit.
The net asset value of the Shares on redemption
or repurchase may be more or less than the
initial offering price of the Shares depending
upon the market value of the Fund's portfolio
securities at the time of redemption or
repurchase.
(b) Inapplicable.
-12-
<PAGE> 15
(c) Inapplicable.
(d) Inapplicable.
Item 9. Pending Legal Proceedings
Inapplicable.
-13-
<PAGE> 16
PART B. STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page
Inapplicable.
<TABLE>
<CAPTION>
Item 11. Table of Contents Page No.
----------------- -------
<S> <C>
General Information and History . . . . . . . . . . . . . . . . . . . . . . . . . 14
Investment Objectives and Policies . . . . . . . . . . . . . . . . . . . . . . . . 14
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . . . . . . 18
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . . . . . . . . 20
Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . . . . . . 21
Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Calculation of Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . 24
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
Item 12. General Information and History
Inapplicable.
Item 13. Investment Objective and Policies
(a) See Item 4(ii).
(b) See Item 4(ii).
(c) See Item 4(ii).
(d) For the fiscal years ended December 31, 1996 and
1995, Registrant's portfolio turnover rates were
3.92% and 0%, respectively.
Item 14. Management of the Fund
(a) Managing General Partners and officers of the
Fund:
-14-
<PAGE> 17
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name and Address Age with Registrant and Current Affiliations
- ---------------- ---- --------------- ------------------------
<S> <C> <C> <C>
Robert R. Fortune 80 President and Financial Consultant; Former Chairman,
2920 Ritter Lane Chairman of the President and Chief Executive
Allentown, PA 18104 Managing General Officer, Associated Electric &
Partners Gas Insurance Services Limited from 1984 to 1993; Member
of the Financial Executives Institute and American
Institute of Certified Pubic Accountants; Director,
Trustee or Managing General Partner of 4 other
investment companies advised by PIMC; Director,
Prudential Utility Fund, Inc.
and Prudential Structured Maturity
Fund, Inc.
G. Willing Pepper 88 Managing Retired; Chairman of the Board,
128 Springton Lake Rd. General Specialty Composites Corporation
Media, PA 19063 Partner 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, Marmon Group, Inc. until
April 1986; Director, Trustee or Managing General
Partner of 5 other investment companies advised by
PIMC.
David R. Wilmerding, Jr. 60 Managing President, Gee Wilmerding
Gee Wilmerding & Associates General & Associates
Aldwyn Center Partner (investment advisers) since February 1989; Director,
Villanova, PA 19085 Beaver Management Corporation; Until September 1988,
President, Treasurer and Trustee, The Mutual Assurance
Company; Until September 1988, Chairman, President,
Treasurer and Director, The Green Tree Insurance Company
(a wholly-owned subsidiary of The Mutual Assurance
Company); Until September 1988, Director, Keystone State
Life Insurance Company; Director or Trustee
</TABLE>
-15-
<PAGE> 18
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name and Address Age with Registrant and Current Affiliations
- ---------------- ---- --------------- ------------------------
<S> <C> <C> <C>
of 2 other investment companies advised by PIMC.
Edward J. Roach 72 Treasurer Certified Public Accountant; Partner
400 Bellevue Parkway of the accounting firm of Main
Suite 100 Hurdman until 1981; Vice
Wilmington, DE 19809 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 Secretary Partner of the law firm of
PNB Building Drinker Biddle & Reath,
1345 Chestnut Street Philadelphia, Pennsylvania.
Philadelphia, PA 19107-3496
</TABLE>
(b) See item (a) above.
-16-
<PAGE> 19
(c) The Registrant pays Managing General Partners $6,000 annually,
and pays the Chairman an additional $4,000 annually. The
following table provides information concerning the
compensation of each of the Registrant's Managing General
Partners for services rendered during the Company's last
fiscal year ended December 31, 1996:
<TABLE>
<CAPTION>
Aggregate Pension or Retirement Estimated Annual Total Compensation
Name of Person/ Compensation Benefits Accrued as Benefits Upon from Registrant and
Position From Registrant Part of Fund Expenses Retirement Fund 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 $ 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 partner serves as
director, trustee or managing general
partner.
(3) Mr. Rauch resigned as a Managing General
Partner of the Registrant on February 27, 1997.
-17-
<PAGE> 20
Item 15. Control Persons and Principal Holders of Securities
(a) Inapplicable.
(b) Inapplicable.
(c) As of April 2, 1997, all officers and Managing General
Partners of Registrant as a group beneficially owned less
than 1% of the Registrant's outstanding equity
securities.
Item 16. Investment Advisory and Other Services
(a) All of the capital stock of PIMC is owned by PNC Bank. All
of the capital stock of PNC Bank is owned by PNC Bancorp,
Inc., with principal offices in Wilmington, Delaware. All
of the capital stock of PNC Bancorp, Inc. is owned by PNC
Bank Corp., a publicly held bank holding corporation with
principal offices in Pittsburgh, Pennsylvania. The
Registrant paid $878,636, $1,021,188 and $1,194,793 for
investment advisory services for the years ended December
31, 1994, 1995 and 1996, respectively. The method of
computing the advisory fee payable by the Registrant is
determined as in Item 5(b)(iii) above.
(b) Subject to the supervision of Registrant's Managing
General Partners, PIMC manages the Registrant's portfolio
and is responsible for, makes decisions with respect to,
and places orders for, all purchases and sales of the
Registrant's portfolio securities. PIMC is also required
to compute the Registrant's net asset value and net
income.
The Advisory Agreement also provides that, subject to the
supervision of the Registrant's Managing General Partners
and without additional charge to Registrant, PNC Bank
will, through its Trust Division and on behalf of
Registrant: (i) provide PIMC investment research and
credit analysis concerning prospective and existing
investments of the Registrant, (ii) make recommendations
to PIMC with respect to the Registrant's continuous
investment program, (iii) make recommendations to PIMC
regarding the amount of the Registrant's assets to be
invested or held uninvested in cash or cash equivalents,
(iv)
-18-
<PAGE> 21
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 Registrant's financial
accounts and records.
PNC Bank has agreed that unless and until two years'
prior notice has been given to Registrant and Registrant
has chosen a successor non-Managing General Partner, PNC
Bank will provide to Registrant a Non-Managing General
Partner, who (i) will own at all times at least 1% of the
Registrant's outstanding Shares, (ii) will continue to
stand for re-election as a Non-Managing General Partner,
and (iii) will not withdraw as Non- Managing General
Partner. PNC Bank has agreed to provide such a
Non-Managing General Partner as a result of the tax
ruling received by Registrant which conditions the
Registrant's classification as a partnership for federal
income tax purposes upon the Registrant's General
partners maintaining in the aggregate an interest of at
least 1% in each material item of the Registrant's
income, gain, loss, deduction and credit. Pursuant to an
agreement dated October 22, 1976 between PNC Bank and The
Sandridge Corporation ("Sandridge"), Sandridge has agreed
that unless and until two years' notice is given and
Registrant has chosen a successor Non-Managing General
Partner, it will act as the Registrant's Non-Managing
General Partner in the manner described above. In
consideration thereof, PNC Bank has agreed to pay
Sandridge during the period it acts as the Registrant's
Non-Managing General Partner a fee, computed daily and
payable monthly, at the annual rate of 1/10 of 1% of the
Registrant's net assets.
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 Registrant.
(c) Inapplicable.
(d) Inapplicable.
-19-
<PAGE> 22
(e) Inapplicable.
(f) Inapplicable.
(g) Inapplicable.
(h) The custodian of Registrant's portfolio securities is the
Wilmington Trust Company, located at Wilmington Trust
Center, Rodney Square North, Wilmington, Delaware 19890.
The custodian has agreed to provide certain services as
depository and custodian for the Registrant.
Registrant's independent accountants are Coopers &
Lybrand L.L.P., located at 2400 Eleven Penn Center,
Philadelphia, Pennsylvania 19103. The following is a
general description of the services performed by Coopers
& Lybrand L.L.P.: auditing and reporting upon financial
statements; reviewing semi-annual report; and reporting
on internal control structure for inclusion in Form
N-SAR.
(i) Inapplicable.
Item 17. Brokerage Allocation and Other Practices
(a) Registrant effects transactions in portfolio securities
through brokers and dealers. Registrant paid aggregate
brokerage commissions of $9,569, $0 and $19,505 for the
years ended December 31, 1994, 1995 and 1996,
respectively.
(b) Inapplicable.
(c) In placing orders with brokers and dealers for purchases
and sales of securities, PIMC attempts to obtain the best
net price and the most favorable execution of its orders.
In seeking best execution, PIMC uses its best judgment to
evaluate the terms of a transaction, giving consideration
to all relevant factors including the nature of the
transaction and of the markets for the security, the
financial condition and execution and settlement
capabilities of the broker-dealer, and the reasonableness
of any brokerage commission. Where the terms of a
transaction are comparable, PIMC may give consideration
to firms which supply investment research, statis-
-20-
<PAGE> 23
tical and other services to Registrant or to PNC Bank,
although there are no agreements to that effect with any
such firm. Research and statistical material furnished by
brokers without cost to PNC Bank and PIMC may tend to
benefit the Fund or other clients of PNC Bank and PIMC by
improving the quality of advice given.
(d) Inapplicable.
(e) Inapplicable.
Item 18. Capital Stock and Other Securities
(a) Inapplicable.
(b) Inapplicable.
Item 19. Purchase, Redemption, and Pricing of Securities
Being Offered
(a) Inapplicable.
(b) Net asset value per share for purposes of redemptions
Shares is determined by PIMC as of the close of business
on each day (other than a day during which no Shares are
tendered for redemption and no order to sell Shares is
received by the Registrant) in which there is a
sufficient degree of trading in the Registrant's
portfolio securities that the current net asset value of
the Registrant's Shares might be materially affected by
changes in the value of the portfolio securities. The
net asset value per share is computed by taking the total
value of all assets of Registrant less its liabilities
and dividing by the number of Shares outstanding.
Securities for which market quotations are readily
available are valued at their current market value in
the principal market in which such securities are
normally traded. These values are normally determined
by (i) the last sales price, if the principal
market is on the New York Stock Exchange or other
securities exchange (or the closing bid price, if there
has been no sales on such exchange on that day), or (ii)
the most recent
-21-
<PAGE> 24
bid price, if the principal market is other than an
exchange. Securities and other assets for which market
quotations are not readily available (including
restricted securities) are valued at their fair value as
determined in good faith under procedures established by
and under the general supervision of the Managing General
Partners. With respect to call options written on
portfolio securities, the amount of the premium received
is treated as an asset and amortized over the life of the
option, and the price of an option to purchase identical
securities upon the same terms and conditions is treated
as a liability marked to the market daily. The price of
options are normally determined by the last sales price
on the principal exchange on which such options are
normally traded (or the closing asked price if there has
been no sales on such exchange on that day).
(c) Inapplicable.
Item 20. Tax Status
In 1976, the Registrant received a ruling from the Internal Revenue
Service that for federal income tax purposes the Registrant will be
classified as a partnership and not as an association taxable as a
corporation. Such ruling is based upon the accuracy of certain
representations and the satisfaction of certain conditions throughout
the existence of the Registrant. If the Registrant fails (or is
unable) to comply with any required representations made by it in
obtaining the ruling or if any conditions of the ruling are not
satisfied, the ruling may become inapplicable retroactively to the
date of its issuance, and the Registrant may be treated as an
association for federal income tax purposes. If the Registrant were
treated as an association, it would be taxable as a corporation
paying corporate income tax on its income; its partners would be
treated as shareholders thereof; and distributions of income to
partners would be taxed to them as dividends.
The ruling that the Registrant will be treated as a partnership for
federal income tax purposes is conditioned upon the General Partners
maintaining in the aggregate an interest of at least 1% in each
material item of partnership income, gain, loss,
-22-
<PAGE> 25
deduction and credit. The General Partners met this requirement initially
by investing in the aggregate as General Partners not less than 1% of the
Fund's total capital outstanding. Substantially all of such investment
has been made by The Sandridge Corporation, the Non-Managing General
Partner. To ensure continued satisfaction of this requirement, the
Registrant's investment adviser, PNC Bank, has agreed that unless and
until two years' prior notice has been given to the Registrant and the
Registrant has chosen a successor Non-Managing General Partner, it will
provide the Registrant a Non-Managing General Partner who (i) will own at
least 1% of the Registrant's outstanding Shares, (ii) will continue to
stand for re-election as the Non- Managing General Partner, and (iii) will
not withdraw as the Non-Managing General Partner. No additional Shares of
the Registrant may be issued, except in payment of distributions to
holders of Shares and in connection with the admission of additional
general partners.
Furthermore, for the Registrant to be treated as a partnership for federal
income tax purposes, the Internal Revenue Service requires that its
General Partners have and maintain substantial net worth (in excess of
their partnership interests) which can be reached by creditors of the
Registrant. The meaning of "substantial" in these circumstances has not
been defined by Internal Revenue Service tax rulings. While there is no
assurance that the Registrant will be able to do so, it will attempt to
have at all times General Partners who meet such net worth requirements.
The Revenue Act of 1987 added section 7704 to the Code. Section 7704, which
is also known as the publicly traded partnership rules, provides that a
publicly traded partnership is to be treated as a corporation for federal
tax purposes. A publicly traded partnership is defined to include any
partnership whose interests are (1) traded on an established securities
market, or (2) readily tradeable on a secondary market (or the substantial
equivalent thereof). A transitional rule postpones the application of
section 7704 to a partnership which was a publicly traded partnership on
-23-
<PAGE> 26
December 17, 1987 until its first taxable year beginning after
December 31, 1997 provided that the partnership does not add a
substantial new line of business. The Registrant is within the
definition of a publicly traded partnership and is eligible for the
transitional rule.
In connection with its deemed incorporation for federal income tax
purposes on January 1, 1998, the Registrant will elect to be taxed
federally as a RIC. This election would permit the Registrant to
receive pass through tax treatment similar to that of a regular
partnership. In order to qualify as a RIC, the Registrant will have
to comply with certain income, diversification and distribution
requirements set forth in Subchapter M of the Code. If the Registrant
did not elect to be a RIC or failed to meet the RIC requirements of
Subchapter M of the Code, it would be taxed as a regular corporation
and any distributions to its partners would be taxed as ordinary
dividend income to the extent of the Registrant's earnings and
profits. See Item 6 for information about the taxation of
Registrant's income and capital gains after January 1, 1998.
Although the Registrant will be deemed a corporation for federal
income tax purposes on January 1, 1998 and intends to qualify as a RIC
thereafter, the Registrant expects that it will continue to be
organized for all other purposes as a California Limited Partnership.
Item 21. Underwriters
(a) Inapplicable.
(b) Inapplicable.
(c) Inapplicable.
Item 22. Calculation of Performance Data
(a) Inapplicable.
(b) Inapplicable.
Item 23. Financial Statements
The audited financial statements and related report of Coopers &
Lybrand, L.L.P., independent accountants, contained in the annual report to
partners for the fiscal year ended December 31, 1996 (the "1996 Annual Report")
as filed with the Securities and Exchange Commission on February 25, 1997 are
incorporated herein by reference. No other parts of the 1996 Annual Report are
incorporated herein by reference. The financial statements included in the 1996
Annual Report have been incorporated herein in reliance upon the report of
Coopers & Lybrand, L.L.P. given on the authority of said firm as expert in
accounting and auditing. A copy of the 1996 Annual Report may be obtained by
writing to the Registrant or by calling (302) 792-2555.
-24-
<PAGE> 27
PART C. OTHER INFORMATION
Item A. Financial Statements and Exhibits
B. Financial Statements:
1. Part A:
None.
2. Part B:
The Registrant's December 13, 1996 Annual Report has been
filed with the Securities and Exchange Commission and the
financial statements included therein are incorporated
herein by reference. See Exhibit 24 below.
C. Exhibits:
1. (a) Restated Certificate and Agreement of Limited
Partnership dated October 22, 1976 filed as Exhibit
1(a) to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A on
April 26, 1996 ("PEA No. 19") is incorporated herein
by reference.
(b) Amendment to Registrant's Restated Certificate and
Agreement of Limited Partnership filed as Exhibit
1(b) to PEA No. 19 is incorporated herein by
reference.
(c) Certificate of Limited Partnership filed November 14,
1984, and Amendment to Restated Certificate and
Agreement of Limited Partnership dated November 12,
1984 filed as Exhibit 1(c) to PEA No. 19 are
incorporated herein by reference.
(d) Amendment to Restated Certificate of Limited
Partnership dated January 4, 1988 is filed as Exhibit
1(d) to PEA No. 19 are incorporated herein by
reference.
(e) Amendment to Restated Certificate of Limited
Partnership dated September 14, 1987 filed as Exhibit
1(e) to PEA No. 19 is incorporated herein by
reference.
(f) Amendment to Restated Certificate of Limited
Partnership dated October 12, 1978 filed as Exhibit
1(f) to PEA No. 19 is incorporated herein by
reference.
(g) Amendment to Restated Certificate of Limited
Partnership dated October 26, 1977 filed as Exhibit
1(g) to PEA No. 19 is incorporated herein by
reference.
(h) Amendment to Restated Certificate of Limited
Partnership dated April 24, 1992 filed as Exhibit 1(h)
to PEA No. 19 is incorporated herein by reference.
2. (a) Code of Regulations of Registrant filed as
Exhibit 2(a) to PEA No. 19 is incorporated herein by
reference.
(b) Amendment No. 1 to Registrant's Code of Regulations
adopted December 16, 1982 filed as Exhibit 2(b) is
incorporated herein by reference.
3. Inapplicable.
C-1
<PAGE> 28
4. Specimen certificate for units of partnership interest in
Registrant is incorporated herein by reference to Exhibit
No. (4)(a)(1) of Amendment No. 2 to Registrant's
Registration Statement on Form S-5, filed on September 16,
1976.
5. Advisory Agreement dated January 19, 1983 filed as Exhibit 5
to PEA No. 19 is incorporated herein by reference.
6. Inapplicable.
7. Fund Office Retirement Profit-Sharing Plan and Adoption
Agreement filed as Exhibit 7 to PEA No. 19 is incorporated
herein by reference.
8. Amended and Restated Custodian Agreement dated October 15,
1983 filed as Exhibit 8 to PEA No. 19 is incorporated herein
by reference.
9. Inapplicable.
10. Inapplicable.
11. Consent of Independent Accountants.
12. Inapplicable.
13. (a) Agreement dated September 15, 1976 relating to Initial
Capitalization filed as Exhibit 13(a) to PEA No. 19 is
incorporated herein by reference.
(b) Amendment No. 1 to Agreement dated September 15, 1976
relating to Initial Capitalization filed as Exhibit
13(b) to PEA No. 19 is incorporated herein by
reference.
14. Inapplicable.
15. Inapplicable.
16. Inapplicable.
17. Financial Data Schedule of the Registrant as Exhibit 27.
18. Inapplicable.
24. Annual Report for Registrant (No. 811-2631) dated December
31, 1996 is incorporated herein by reference to the
Registrant's filing including such Annual Report and filed
on February 25, 1997 (Accession No. 0000 893220-000421).
C-2
<PAGE> 29
Item 25. Persons Controlled by or under Common Control with Registrant
Inapplicable.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
(1) (2)
Title of Number of Record Holders
Class as of March 31, 1997
<S> <C>
Shares of partnership
interest (no par value) 328
</TABLE>
Item 27. Indemnification
The answer to Item 19 of Amendment No. 2 to Registrant's
Registration Statement on Form N-8B-1 filed on September 16, 1976
is incorporated herein by reference.
Item 28. Business and Other Connections of Investment Adviser
(a) The information required by this Item 28 with respect to
each director, officer and partner of PIMC is incorporated by reference to
Schedule A of Form ADV and Schedule A and D filed by PIMC with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934 (the
"1934 Act") (SEC File No. 801-13304).
(b) To Registrant's knowledge, none of the directors or
principal officers of PNC Bank, N.A., except those set forth below, is, or has
been at any time during Registrant's past two fiscal years, engaged in any other
business, profession, vocation or employment of a substantial nature. Set forth
below are the names and principal businesses of the directors and principal
officers of PNC Bank, N.A. who are engaged in any other business, profession,
vocation or employment of a substantial nature.
(c) Set forth below are the names and principal businesses of
the directors and certain executives of PNC Bank who are engaged in any other
business, profession, vocation or employment of a substantial nature.
C-3
<PAGE> 30
PNC BANK, NATIONAL ASSOCIATION
DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH TYPE
PNC BANK NAME OTHER BUSINESS CONNECTIONS OF BUSINESS
- -------- ---- -------------------------- -----------
<S> <C> <C> <C>
Director B.R. Brown President and C.E.O. of Coal
Consol Inc.
Consol Plaza
Pittsburgh, PA 15241
Director Constance E. Clayton Associate Dean, School of Public Medical
Health & Professor of Pediatrics
Medical College of PA,
Hahnemann University
430 E. Sedgwick Street
Philadelphia, PA 19119
Director Eberhard Faber IV Chairman and C.E.O. Manufacturing
E.F.L., Inc.
450 Hedge Road
P.O. Box 49
Bear Creek, PA 18602
Director Dr. Stuart Heydt President and C.E.O. Medical
Geisinger Foundation
100 N. Academy Avenue
Danville, PA 17822
Director Edward P. Junker, III Vice Chairman Banking
PNC Bank, N.A.
Ninth and State Streets
Erie, PA 16553
Director Thomas A. McConomy President, C.E.O. and Manufacturing
Chairman, Calgon Carbon
Corporation
413 Woodland Road
Sewickley, PA 15143
Director Thomas H. O'Brien Chairman Banking
PNC Bank, National Association
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
</TABLE>
C-4
<PAGE> 31
<TABLE>
<CAPTION>
POSITION WITH TYPE
PNC BANK NAME OTHER BUSINESS CONNECTIONS OF BUSINESS
- -------- ---- -------------------------- -----------
<S> <C> <C> <C>
Director Dr. J. Dennis O'Connor Provost, The Smithsonian Education
Institution
1000 Jefferson Drive, S.W.
Room 230, MRC 009
Washington, D.C. 20560
Director Rocco A. Ortenzio Chairman and C.E.O. Medical
Continental Medical Systems, Inc.
P.O. Box 715
Mechanicsburg, PA 17055
Director Jane G. Pepper President Horticulture
Pennsylvania Horticultural Society
325 Walnut Street
Philadelphia, PA 19106
Director Robert C. Robb, Jr. President, Lewis, Eckert, Robb Financial and
& Company Management
425 One Plymouth Meeting Consultants
Plymouth Meeting, PA 19462
Director James E. Rohr President and C.E.O. Bank Holding
PNC Bank, National Association Company
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Daniel M. Rooney President, Pittsburgh Steelers Football
Football Club of the National
Football League
300 Stadium Circle
Pittsburgh, PA 15212
Director Seth E. Schofield Chairman, President and C.E.O. Airline
USAir Group, Inc. and USAir,
Inc.
2345 Crystal Drive
Arlington, VA 22227
</TABLE>
C-5
<PAGE> 32
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
John E. Alden Senior Vice President
James C. Altman Senior Vice President
Lila M. Bachelier Senior Vice President
R. Perrin Baker Chief Market Counsel, Northwest PA
James R. Bartholomew Senior Vice President
Peter R. Begg Senior Vice President
Donald G. Berdine Senior Vice President
Ben Berzin, Jr. Senior Vice President
James H. Best Senior Vice President
Eva T. Blum Senior Vice President
Susan B. Bohn Senior Vice President
George Brikis Executive Vice President
Michael Brundage Senior Vice President
Anthony J. Cacciatore Senior Vice President
Richard C. Caldwell Executive Vice President
Craig T. Campbell Senior Vice President
J. Richard Carnall Executive Vice President
Edward V. Caruso Executive Vice President
Peter K. Classen President & C.E.O., PNC Bank, Northeast PA
Andra D. Cochran Senior Vice President
Sharon Coghlan Coordinating Market Chief Counsel,
Philadelphia
John F. Calligan Senior Vice President
James P. Conley Senior Vice President
C. David Cook Senior Vice President
Alfred F. Cordasco Supervising Counsel, Pittsburgh, PA
Robert Crouse Senior Vice President
Peter M. Crowley Senior Vice President
Keith P. Crytzer Senior Vice President
John J. Daggett Senior Vice President
Anuj Dhanda Senior Vice President
Victor M. DiBattista Chief Regional Counsel
Thomas C. Dilworth Senior Vice President
Alfred J. DiMatters Senior Vice President
James Dionise Senior Vice President and C.F.O.
Patrick S. Doran Senior Vice President, Head of Consumer
Lending
Robert D. Edwards Senior Vice President
C-6
<PAGE> 33
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
David J. Egan Senior Vice President
J. Lynn Evans Senior Vice President & Controller
William E. Fallon Senior Vice President
James M. Ferguson, III Senior Vice President
Frederick C. Frank, III Executive Vice President
William J. Friel Executive Vice President
John F. Fulgoney Coordinating Market Chief Counsel, Northeast
PA
Brian K. Garlock Senior Vice President
George D. Gonczar Senior Vice President
Richard C. Grace Senior Vice President
James S. Graham Senior Vice President
Michael J. Hannon Senior Vice President
Stephen G. Hardy Senior Vice President
Michael J. Harrington Senior Vice President
Marva H. Harris Senior Vice President
Maurice H. Hartigan, II Executive Vice President
G. Thomas Hewes Senior Vice President
Sylvan M. Holzer Executive Vice President
Bruce C. Iacobucci Senior Vice President
John M. Infield Senior Vice President
Philip C. Jackson Senior Vice President
William J. Johns Controller
William R. Johnson Audit Director
Edward P. Junker, III Vice Chairman
Robert D. Kane Senior Vice President
Michael D. Kelsey Chief Compliance Counsel
Jack Kelly Senior Vice President
Geoffrey R. Kimmel Senior Vice President
Randall C. King Senior Vice President
Christopher M. Knoll Senior Vice President
Richard C. Krauss Senior Vice President
Frank R. Krepp Senior Vice President & Chief Credit Policy
Officer
Kenneth P. Leckey Senior Vice President & Cashier
Marilyn R. Levins Senior Vice President
Carl J. Lisman Executive Vice President
C-7
<PAGE> 34
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
George Lula Senior Vice President
Jane E. Madio Senior Vice President
Nicholas M. Marsini, Jr. Senior Vice President
John A. Martin Senior Vice President
David O. Matthews Senior Vice President
Walter B. McClellan Senior Vice President
James F. McGowan Senior Vice President
Charlotte B. McLaughlin Senior Vice President
James C. Mendelson Senior Vice President
Scott C. Meves Senior Vice President
Ralph S. Michael, III Executive Vice President
J. William Mills Senior Vice President
Barbara A. Misner Senior Vice President
Marlene D. Mosco Senior Vice President
Scott Moss Senior Vice President
Peter F. Moylan Senior Vice President
Michael B. Nelson Executive Vice President
Thomas J. Nist Senior Vice President
Thomas H. O'Brien Chairman
James F. O'Day Senior Vice President
Cynthia G. Osofsky Senior Vice President
Thomas E. Paisley, III Senior Vice President
Barbara Z. Parker Executive Vice President
George R. Partridge Senior Vice President
Daniel J. Panlick Senior Vice President
David M. Payne Senior Vice President
Charles C. Pearson, Jr. President and CEO, PNC Bank, Central PA
Edward V. Randall, Jr. President and CEO, PNC Bank, Pittsburgh
Richard C. Rhoades Senior Vice President
Arthur F. Rodman, III Senior Vice President
Bryan W. Ridley Senior Vice President
James E. Rohr President and Chief Executive Officer
Gary Royer Senior Vice President
Robert T. Saltarelli Senior Vice President
Robert V. Sammartino Senior Vice President
William Sayre, Jr. Senior Vice President
Alfred J. Schiaretti Senior Vice President
David W. Schoffstall Executive Vice President
Timothy G. Shack Senior Vice President
Douglas E. Shaffer Senior Vice President
Alfred A. Silva Senior Vice President
George R. Simon Senior Vice President
Richard L. Smoot President and CEO of PNC Bank, Philadelphia
C-8
<PAGE> 35
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Seymour Schwartzberg Senior Vice President
Timothy N. Smyth Senior Vice President
Kenneth S. Spatz Senior Vice President
Darcel H. Steber Senior Vice President
Robert L. Tassome Senior Vice President and Secretary
Jane B. Tompkins Senior Vice President
Robert B. Trempe Senior Vice President
Kevin M. Tucker Senior Vice President
Alan P. Vail Senior Vice President
Frank T. VanGrofski Executive Vice President
Ronald H. Vicari Senior Vice President
William A. Wagner Senior Vice President
Patrick M. Wallace Senior Vice President
Annette M. Ward-Kredel Senior Vice President
Robert S. Wrath Senior Vice President
Arlene M. Yocum Senior Vice President
Carole Yon Senior Vice President
George L. Ziminski, Jr. Senior Vice President
Item 29. PRINCIPAL UNDERWRITERS
Inapplicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Books or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules (17 CFR 270.31a-1 to
31a-3) promulgated thereunder, are maintained by PIMC at 400 Bellevue Parkway,
Suite 100, Wilmington, Delaware 19809 except for the Certificate and Agreement
of Limited Partnership and Code of Regulations which are maintained by the
Secretary of the Registrant at Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107-3496.
Item 31. MANAGEMENT SERVICES
None.
C-9
<PAGE> 36
SIGNATURE
Pursuant to the requirements of the Investment Company Act of
1940, the Registrant has duly caused this Amendment No. 20 to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wilmington, and State of Delaware, on the 30th day of
April, 1997.
CHESTNUT STREET EXCHANGE FUND
By /s/ Edward J. Roach
--------------------------
Edward J. Roach
Treasurer
C-10
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- ------- ------ -----------
<S> <C> <C>
(11) Consent of Independent Accountants.
(27) Financial Data Schedule of the Registrant.
</TABLE>
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 20 to the Registration Statement on Form N-1A (File No. 811-2631)
of our report dated February 7, 1997 on our audit of the financial statements
and financial highlights of Chestnut Street Exchange Fund in the Statement of
Additional Information. We also consent to the reference to our Firm under the
headings "Investment Advisory and Other Services," and "Financial Statements" in
the Statement of Additional Information.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000019780
<NAME> CHESTNUT STREET EXCHANGE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 54,695,960
<INVESTMENTS-AT-VALUE> 298,857,468
<RECEIVABLES> 564,004
<ASSETS-OTHER> 9,050,581
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 308,472,053
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,276,714
<TOTAL-LIABILITIES> 5,276,714
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,027,163
<SHARES-COMMON-STOCK> 1,248,165
<SHARES-COMMON-PRIOR> 1,297,199
<ACCUMULATED-NII-CURRENT> 6,668
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 244,161,508
<NET-ASSETS> 303,195,339
<DIVIDEND-INCOME> 5,205,309
<INTEREST-INCOME> 413,460
<OTHER-INCOME> 0
<EXPENSES-NET> 1,394,001
<NET-INVESTMENT-INCOME> 4,224,768
<REALIZED-GAINS-CURRENT> 19,516,479
<APPREC-INCREASE-CURRENT> 45,050,792
<NET-CHANGE-FROM-OPS> 68,792,039
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,229,985
<DISTRIBUTIONS-OF-GAINS> 3,158,084
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 10,530,804
<SHARES-REINVESTED> 326,922
<NET-CHANGE-IN-ASSETS> 51,200,088
<ACCUMULATED-NII-PRIOR> 11,885
<ACCUMULATED-GAINS-PRIOR> 199,110,716
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,194,793
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,394,001
<AVERAGE-NET-ASSETS> 273,410,672
<PER-SHARE-NAV-BEGIN> 194.26
<PER-SHARE-NII> 3.36
<PER-SHARE-GAIN-APPREC> 51.18
<PER-SHARE-DIVIDEND> 3.36
<PER-SHARE-DISTRIBUTIONS> 2.53
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 242.91
<EXPENSE-RATIO> .51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
