<PAGE> 1
As filed with the Securities and
Exchange Commission on April 30, 1999.
File No. 811-2631
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
AMENDMENT No. 22
CHESTNUT STREET EXCHANGE FUND
(Exact Name of the Registrant as Specified in Charter)
400 Bellevue Parkway
Wilmington, Delaware 19809
(Address of Principal Executive Offices)
The Registrant's Telephone Number: (302) 792-2555
Edward J. Roach
400 Bellevue Parkway
Wilmington, Delaware 19809
(Name and Address of Agent for Service)
Copy to:
Vernon Stanton, Jr., Esq.
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
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TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
PART A. INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Front and Back Cover Pages..................................................................... 1
Item 2. Risk/Return Summary: Investments, Risks and Performance....................................... 1
Item 3. Risk/Return Summary: Fee Table................................................................ 1
Item 4. Investment Objectives, Principal Investment Strategies and Related Risks....................... 1
Item 5. Management's Discussion of Fund Performance.................................................... 2
Item 6. Management, Organization and Capital Structure................................................. 3
Item 7. Shareholder Information........................................................................ 4
Item 8. Distribution Arrangements...................................................................... 7
Item 9. Financial Highlights Information............................................................... 7
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page and Table of Contents............................................................... 8
Item 11. Fund History................................................................................... 8
Item 12. Description of the Fund and its Investments and Risks.......................................... 8
Item 13. Management of the Fund......................................................................... 12
Item 14. Control Persons and Principal Holders of Securities............................................ 14
Item 15. Investment Advisory and Other Services......................................................... 14
Item 16. Brokerage Allocation and Other Practices....................................................... 16
Item 17. Capital Stock and Other Securities............................................................. 17
Item 18. Purchase, Redemption, and Pricing of Shares.................................................... 17
Item 19. Taxation of the Fund........................................................................... 18
Item 20. Underwriters................................................................................... 18
Item 21. Calculation of Performance Data................................................................ 18
Item 22. Financial Statements........................................................................... 19
PART C. OTHER INFORMATION
Item 23. Exhibits....................................................................................... 20
Item 24. Persons Controlled by or Under Common Control with the Fund.................................... 21
Item 25. Indemnification................................................................................ 21
Item 26. Business and Other Connections of Investment Adviser........................................... 22
Item 27. Principal Underwriters......................................................................... 22
Item 28. Location of Accounts and Records............................................................... 22
Item 29. Management Services............................................................................ 23
Item 30. Undertakings................................................................................... 23
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PART A. INFORMATION REQUIRED IN A PROSPECTUS
ITEM 1. FRONT AND BACK COVER PAGES.
Inapplicable.
ITEM 2. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE.
Inapplicable.
ITEM 3. RISK/RETURN SUMMARY: FEE TABLE.
Inapplicable.
ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED
RISKS.
(a) The Fund's investment objectives are to seek long-term growth of
capital and, secondarily, current income. The investment objectives
stated above may be changed by the Board of Managing General Partners
without the approval of a majority of Fund's outstanding voting
securities.
(b) The Fund seeks to achieve its investment objectives by investing in a
diversified portfolio of common stocks and securities convertible into
common stocks of companies with large market capitalizations. The Fund
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. To the extent that the Fund is in a
temporary or defensive position, it may not be able to meet its
investment objectives. Generally, because many of the Fund's portfolio
securities have significant capital gains, the Fund does not sell its
portfolio securities; however, sales of portfolio securities may be
effected when the investment adviser believes a sale would be in the
best interests of the Fund's partners even though capital gains will be
realized. Portfolio securities are also disposed of in connection with
the redemption of shares in the Fund.
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 and which the Fund reasonably believes will be saleable after a
two year holding period pursuant to Rule 144 under the Securities Act
of 1933.
<PAGE> 4
The Fund may write exchange-traded covered call options on portfolio
securities up to 25% of the value of its assets and may loan portfolio
securities. The Fund 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 Fund
may be able to write such options will depend in part on state
securities regulations as amended from time to time.
(c) Limited Partners generally are not personally liable for liabilities of
the Fund. However, if the Fund were unable to pay its liabilities,
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 Fund's shares on redemption or repurchase
may be more or less than the purchase 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'S DISCUSSION OF FUND PERFORMANCE.
Inapplicable.
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ITEM 6. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE.
(a)(1) Under the Advisory Agreement the Fund's investment advisers
are PNC Bank, National Association ("PNC Bank"), which has
banking offices at 1600 Market Street, Philadelphia,
Pennsylvania 19103 and BlackRock Institutional Management
Corporation ("BIMC"), formerly PNC Institutional Management
Corporation, located at Bellevue Park Corporate Center, 400
Bellevue Parkway, Wilmington, Delaware 19809. BIMC is a
majority-owned, indirect subsidiary of PNC Bank. In June 1998,
PNC Bank and BIMC restructured their operations and BlackRock
Financial Management, Inc. ("BFM"), a majority-owned, indirect
subsidiary of PNC Bank, assumed the rights and obligations of
PNC Bank under the Advisory Agreement, and BFM effectively
became a party to the Advisory Agreement in substitution for
PNC Bank.
Subject to the supervision of the Fund's Managing General
Partners, BIMC 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.
BIMC is also required to compute the Fund's net asset value
and net income.
The Advisory Agreement also provides that, subject to the
supervision of the Fund's Managing General Partners and
without additional charge to the Fund, PNC Bank (now BFM
pursuant to the assumption of rights and obligations referred
to above), will on behalf of the Fund: (i) provide BIMC
investment research and credit analysis concerning prospective
and existing investments of the Fund, (ii) make
recommendations to BIMC with respect to the Fund's continuous
investment program, (iii) make recommendations to BIMC
regarding the amount of the Fund's assets to be invested or
held uninvested in cash or cash equivalents, (iv) supply BIMC
with computer facilities and operating personnel, (v) provide
BIMC with such statistical services as BIMC may reasonably
request, and (vi) maintain or cause BIMC to maintain the
Fund's financial accounts and records.
For the services provided by BIMC and BFM, and the expenses
assumed by them under the Advisory Agreement, the Fund has
agreed to pay a fee, computed daily and payable monthly, based
on the Fund's average net assets. For the fiscal year ended
December 31, 1998, the Fund paid an
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investment advisory fee aggregating .33% of its average daily
net assets.
(a)(2) Since January 1996, Mary Elizabeth C. Pfeil, C.F.A., has been
primarily responsible for the day-to-day management of the
Fund's portfolio. Ms. Pfeil is a Vice President and senior
research analyst on the domestic equity growth team at BFM.
Ms. Pfeil has been employed by PNC Bank and its affiliates
since 1993. From 1990 to 1993, 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.
(a)(3) Inapplicable
(b) Inapplicable.
ITEM 7. SHAREHOLDER INFORMATION.
(a) Pricing of Fund Shares. The net asset value per share is determined by
BIMC as of the close of business on each day. The net asset value per
share is computed by taking the total value of all assets of the Fund
less its liabilities and dividing by the number of Fund 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 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
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<PAGE> 7
price if there has been no sales on such exchange on that day).
(b) Inapplicable.
(c) Redemption of Fund Shares. 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 Inc. ("PFPC"), the Fund's transfer
agent and dividend disbursing agent, of a written request for
redemption setting forth the name of the Fund 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 an "eligible guarantor institution" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934. The Fund 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, the Fund intends to distribute upon
redemption securities from its portfolio in-kind, valued at the same
value used for purposes of next determining the Fund's net asset value
after the receipt of the request for redemption in proper form. The
Fund may in its discretion pay part or all of redemption proceeds in
cash. When received by the shareholder, the value of the securities
from the portfolio may be greater or lesser than the value used in
pricing the redemption
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 Fund 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.
Investors may, by notice in writing to the transfer agent, elect to
participate in the Systematic Withdrawal Plan (the "Plan").
Participants in the Plan may elect to 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
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Stock Exchange on the last trading day of each calendar quarter. The
Fund 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.
The net asset value of the Fund's shares on redemption or repurchase
may be more or less than the purchase price of the shares depending
upon the market value of the Fund's portfolio securities at the time of
redemption or repurchase.
(d) Dividends and Distributions. Effective January 1, 1998, the Fund is
deemed a corporation, rather than a partnership, for federal tax
purposes. In connection with this change in its federal tax status, the
Fund has elected to be taxed as a regulated investment company (a
"RIC"). To qualify as a RIC under the Internal Revenue Code (the
"Code"), the Fund is required to meet certain income, diversification
and distribution requirements. For example, to qualify as a RIC, the
Fund 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. The Fund intends
to continue its historic policy of regular and quarterly dividends and
to pay an additional dividend at year end so that total distributions
for each year equal 100% of its net investment income. The Fund intends
to retain all of its net long-term capital gains.
(e) Tax Consequences. Under the publicly traded partnership rules of the
Code, the Fund is treated as a corporation for federal income tax
purposes as of January 1, 1998. However, the Fund 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 Fund's earnings
are distributed to its partners as required by the RIC provisions of
the Code, the Fund itself will not be required to pay federal income
tax.
Distributions of net investment income by the Fund 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. The Fund 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 Fund's gain, but each partner will also receive a tax
credit for his allocable portion of the tax paid by the Fund.
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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 Fund. The Fund will inform
each partner as to the amount and nature of such income or gains.
Formerly the Fund, when it was taxed as a partnership, distributed
approximately 30% of its net long-term capital gains to provide its
partners, who were deemed to have been distributed all of such gains,
with funds with which to pay the capital gains tax. The new policy is
designed to achieve substantially the same result.
Each partner should consult with his tax adviser with specific
references to his own tax situation.
(f) Inapplicable.
ITEM 8. DISTRIBUTION ARRANGEMENTS.
Inapplicable.
ITEM 9. FINANCIAL HIGHLIGHTS INFORMATION.
Inapplicable.
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PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE AND TABLE OF CONTENTS.
(a) This Statement of Additional Information for Chestnut Street Exchange
Fund (the "Fund") is not a prospectus and should be read in conjunction
with the Fund's Part A dated April 30, 1999. The financial statements
and notes thereto included in the Fund's Annual Report are incorporated
by reference into this Statement of Additional Information. Copies of
the Annual Report may be obtained, without charge by writing the Fund
at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington,
Delaware 19809 or by calling toll free at (800) 852-4750. Capitalized
terms used but not defined herein have the same meanings as in the Part
A. The date of this Statement of Additional Information is April 30,
1999.
(b) Table of Contents Page No.
Fund History................................................. 8
Description of the Fund and its Investments and Risks........ 8
Management of the Fund....................................... 12
Control Persons and Principal Holders of Securities.......... 14
Investment Advisory and Other Services....................... 14
Brokerage Allocation and Other Practices..................... 16
Capital Stock and Other Securities........................... 17
Purchase, Redemption and Pricing of Shares .................. 17
Taxation of the Fund......................................... 18
Underwriters................................................. 18
Calculation of Performance Data.............................. 18
Financial Statements......................................... 19
ITEM 11. FUND HISTORY.
The Fund is a limited partnership organized as of March 23, 1976 under
the Uniform Limited Partnership Act of California.
ITEM 12. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS.
(a) The Fund is a diversified open-end, management investment company.
(b) Inapplicable.
(c) Fund Policies.
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<PAGE> 11
The Fund's fundamental policies which may not be changed without the
approval of a majority of the Fund's outstanding voting securities are
as follows:
(1) The Fund will not issue any senior securities (as defined in
the Investment Company Act of 1940).
(2) The Fund will not purchase securities on margin or sell any
securities short. The Fund will not purchase or write puts,
calls, straddles or spreads with respect to any security
except that (i) the Fund 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, the Fund owns the
securities against which the option is written or owns
securities convertible into such securities, and (ii) the Fund
may purchase call options in closing purchase transactions to
liquidate its position as an option writer.
(3) The Fund 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 the exchange without having to sell portfolio
securities. Securities may be purchased for the Fund's
portfolio while borrowings are outstanding.
(4) The Fund 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 the Fund to concentrate its
investments in any particular industry, but if it is deemed
advisable in light of the Fund's investment objectives, up to
25% of the value of its assets may be invested in any one
industry. The Fund 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 the
Fund's total assets.
(6) The Fund will not purchase or sell real estate or real estate
mortgage loans.
(7) The Fund will not purchase or sell commodities or commodity
contracts.
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(8) The Fund 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. The Fund will lend portfolio securities
only when its investment adviser believes that the net return
to the Fund 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 the Fund's investment objectives, and that no affiliate
of the Fund or of its investment adviser is involved in the
lending transaction or is receiving any fees in connection
therewith. The Fund 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 receive
amounts equivalent to all dividends and interest paid on the
securities loaned.
(9) The Fund will not:
(A) Mortgage, pledge or hypothecate its assets except to
secure borrowings described in policy 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 the Fund 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
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<PAGE> 13
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 the Fund 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, 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 policies (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.
The Fund's investment policies which are not deemed
fundamental and may be changed without shareholder approval
are as follows:
The Fund does not intend to engage in any significant degree
in short-term trading. Portfolio turnover is not expected to
exceed 15%, although the Fund 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 the Fund's shareholders
even though capital gains will be realized.
The Fund 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.
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(d) Inapplicable.
(e) Portfolio Turnover. For the fiscal years ended December 31, 1998 and
1997, the Fund's portfolio turnover rates were .76% and 1.26%,
respectively.
ITEM 13. MANAGEMENT OF THE FUND.
(a) The business and affairs of the Fund are managed by its Managing
General Partners.
(b) The Managing General Partners and officers of the Fund, their
addresses, ages, principal occupations during the past five years and
other affiliations are:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS AGE WITH THE FUND AND CURRENT AFFILIATIONS
- ---------------- --- ------------- ------------------------
<S> <C> <C> <C>
Richard C. Caldwell* 54 Managing President and Chief Executive
3305 Flamingo Drive General Officer, PNC Bank FSB since May, 1998;
Vero Beach, FL 32964 Partner former Executive Vice President,
PNC Bank from July 1990 to
April 1998; former Director of various
affiliates and subsidiaries of PNC Bank,
including BIMC from September 1994
until February 1998; Director, JLC, Inc.
since February, 1996 (investment
holding company); Director, DR Inc. since
April 1994 (investment holding company).
Robert R. Fortune* 82 President and Financial Consultant; Former
2920 Ritter Lane Chairman of the Chairman, President and Chief
Allentown, PA 18104 Managing General Executive Officer, Associated
Partners Electric & Gas Insurance
Services Limited from 1984 to 1993;
Member of the Financial Executives
Institute and American Institute
of Certified Pubic Accountants;
former Director or Trustee of 4
other investment companies
advised by BIMC.
G. Willing Pepper 90 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; former
Director or Trustee of 5 other
investment companies advised by
BIMC.
Langhorne B. Smith 62 Managing President and Director, The
Suite 400 General Sandridge Corporation (private
Plymouth Meeting Partner investment company); Executive
Executive Campus Vice President and Director,
630 Germantown Pike Claneil Enterprises, Inc.
Plymouth Meeting, PA 19462 (private investment company);
Director or Trustee of 1
other investment company advised
by BIMC.
David R. Wilmerding, Jr. 63 Managing Chairman, Gee, Wilmerding &
Gee, Wilmerding & Associates General Associates (investment
Aldwyn Center Partner advisers) since February 1989;
Villanova, PA 19085 Director, Beaver Management Corporation;
Director, Mutual Fire Marine & Inland
Insurance Co., Inc; Director, US
Retirement Communities, Inc.; Director
or Trustee of 2 other investment
companies advised by BIMC.
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS AGE WITH THE FUND AND CURRENT AFFILIATIONS
- ---------------- --- ------------- ------------------------
<S> <C> <C> <C>
Edward J. Roach 74 Treasurer Certified Public Accountant; Partner
400 Bellevue Parkway of the accounting firm of Main
Wilmington, DE 19809 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 2 other investment
companies advised by BIMC; Director,
The Bradford Funds, Inc.; former
Treasurer and/or Vice President of 6
other investment companies advised
by BIMC until 1998.
Morgan R. Jones 59 Secretary Partner of the law firm of
PNB Building Drinker Biddle & Reath LLP,
1345 Chestnut Street Philadelphia, Pennsylvania.
Philadelphia, PA 19107-3496
</TABLE>
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* Messrs. Caldwell and Fortune are "interested persons" of the Fund as
that term is defined in the 1940 Act.
(c) Inapplicable.
(d) For the period January 1, 1998 through May 31, 1998, the Fund paid each
Managing General Partner, except for Mr. Caldwell, at the rate of
$6,000 annually, and paid the Chairman an additional $4,000 annually.
Effective June 1, 1998, the basis of the Managing General Partners'
compensation was amended so that the Fund pays each Managing General
Partner, except for Mr. Caldwell, at the rate of $10,000 annually, and
pays the Chairman an additional $8,000 annually. The adjustment to the
Managing General Partners' compensation was made on a pro-rata annual
basis. The Fund expects that the basis of such compensation for 1999
will that the Fund pays each Managing General Partner, except for Mr.
Caldwell, at the rate of $10,000 annually, and pays the Chairman an
additional $8,000 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, 1998:
<TABLE>
<CAPTION>
PENSION OR ESTIMATED TOTAL
AGGREGATE RETIREMENT BENEFITS ANNUAL COMPENSATION FROM
NAME OF PERSON/ COMPENSATION ACCRUED AS PART BENEFITS UPON THE FUND AND
POSITION FROM THE FUND OF FUND EXPENSES RETIREMENT FUND COMPLEX (1)
- --------------- ------------- ------------------- ------------- -------------------
<S> <C> <C> <C> <C>
Richard C. Caldwell $ 0 None None $ 0
Managing General Partner
Robert R. Fortune $16,000 None None $67,300(5) (2)
President and Chairman
of the Managing General
Partners
</TABLE>
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<TABLE>
<CAPTION>
PENSION OR ESTIMATED TOTAL
AGGREGATE RETIREMENT BENEFITS ANNUAL COMPENSATION FROM
NAME OF PERSON/ COMPENSATION ACCRUED AS PART BENEFITS UPON THE FUND AND
POSITION FROM THE FUND OF FUND EXPENSES RETIREMENT FUND COMPLEX (1)
- --------------- ------------- ------------------- ------------- -------------------
<S> <C> <C> <C> <C>
G. Willing Pepper $9,000 None None $94,300(6) (2)
Managing General Partner
Langhorne B. Smith $9,000 None None $15,000(2) (2)
Managing General Partner
David R. Wilmerding, Jr. $9,000 None None $77,675(3) (2)
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 investment companies within the Fund Complex of which
the Managing General Partners served as director, trustee or managing
general partner during the fiscal year ended December 31, 1998.
The Fund has a retirement plan for eligible employees. For the fiscal
year ended December 31, 1998, the Fund contributed a total of $2,026 to
the retirement plan, and, based upon prior practice, it may be
anticipated that the Fund will contribute to the retirement plan during
the current fiscal year an amount equal to 10% of the compensation of
retirement plan participants for the year. Such contribution, based
upon annual rates of compensation now in effect, would approximate
$2,300. Under the retirement plan, each participant is entitled to his
or her vested portion of the contributions made by the Fund based upon
his or her compensation.
(e) Inapplicable.
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
(a) As of April 30, 1999, no investor owned beneficially more than 5% of
the Fund's outstanding equity securities.
(b) As of April 30, 1999, no investor owned of record or beneficially more
than 5% of the Fund's outstanding equity securities.
(c) As of April 30, 1999, all officers and Managing General Partners of the
Fund as a group beneficially owned less than 1% of the Fund's
outstanding equity securities.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES.
(a) BIMC's offices are located at Bellevue Park Corporate Center, 400
Bellevue Parkway, Wilmington, Delaware 19809. BFM's offices are located
at 345 Park Avenue,
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<PAGE> 17
New York, New York 10154. All of the capital stock of BIMC and BFM is
owned by BlackRock Advisors, Inc. (formerly, PNC Asset Management
Group, Inc.). All of the capital stock of BlackRock Advisors, Inc.,
which has offices at 345 Park Avenue, New York, New York 10154, is
owned by BlackRock, Inc. A majority of the capital stock of BlackRock,
Inc., which has offices at 345 Park Avenue, New York, New York 10154 is
owned by PNC Asset Management, Inc. PNC Asset Management, Inc. is under
the control of PNC Bank. All of the capital stock of PNC Bank, which
has banking 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 Bank Corp., a publicly-held
corporation with principal offices in Pittsburgh, Pennsylvania.
For the services provided by BFM and BIMC and the expenses assumed by
them under the Advisory Agreement, the Fund has agreed to pay BIMC a
fee, computed daily and payable monthly, at the annual rate of 4/10ths
of 1% of the first $100,000,000 of the Fund's net assets, plus 3/10ths
of 1% of the net assets exceeding $100,000,000.
The Fund paid $1,194,793, $1,463,053 and $1,230,253 for investment
advisory services for the years ended December 31, 1996, 1997 and 1998,
respectively.
(b) Inapplicable.
(c) BFM and BIMC 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.
(d) Inapplicable.
(e) Inapplicable.
(f) Inapplicable.
(g) Inapplicable.
(h) Other Service Providers.
The custodian of the Fund's portfolio securities is the Wilmington
Trust Company, located at Wilmington Trust Center, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890. The custodian has
agreed to provide certain services as depository and custodian for the
Fund.
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<PAGE> 18
The Fund's transfer agent and dividend disbursing agent is PFPC,
located at Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809. PFPC is an affiliate of PNC Bank. For its
services, the Fund pays PFPC monthly fees equal to $12,500 per year
plus out-of-pocket expenses.
The Fund's independent accountants are PricewaterhouseCoopers LLP,
located at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103.
The following is a general description of the services performed by
PricewaterhouseCoopers LLP: auditing and reporting upon financial
statements; reviewing semi-annual report; and reporting on internal
control structure for inclusion in Form N-SAR.
ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES.
(a) The Fund effects transactions in portfolio securities through brokers
and dealers. The Fund paid aggregate brokerage commissions of $19,505,
$5,850 and $0 for the years ended December 31, 1996, 1997 and 1998,
respectively.
(b) Inapplicable.
(c) In placing orders with brokers and dealers for purchases and sales of
securities, BIMC attempts to obtain the best net price and the most
favorable execution of its orders. In seeking best execution, BIMC 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, BIMC may give
consideration to firms which supply investment research, statistical
and other services to the Fund or to BFM, although there are no
agreements to that effect with any such firm. Research and statistical
material furnished by brokers without cost to BFM and BIMC may tend to
benefit the Fund or other clients of BFM and BIMC by improving the
quality of advice given.
(d) Inapplicable.
(e) Inapplicable.
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<PAGE> 19
ITEM 17. CAPITAL STOCK AND OTHER SECURITIES.
(a) The Fund has one class of partnership interest, no par value (the
"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 to one full vote, and
each fractional Share to a fractional vote, on all matters submitted to
the shareholders. Partners are not entitled to cumulative voting in
elections for the Managing General Partners. Each Share has equal
liquidation rights. There are no pre-emptive rights or conversion
rights.
The Fund is a limited partnership formed under The Uniform Limited
Partnership Act of California. Limited Partners generally are not
personally liable for liabilities of the Fund. However, if the Fund
were unable to pay its liabilities, recipients of distributions from
the Fund could be liable to certain creditors of the Fund to the extent
of such distributions, plus interest. The Fund believes that, because
of the nature of the Fund's business, the assets and insurance of the
Fund and of the General Partners, and the Fund'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 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 rights of
the holders of Shares may not be modified otherwise than by the vote of
a majority of outstanding shares.
(b) Inapplicable.
ITEM 18. PURCHASE, REDEMPTION, AND PRICING OF SHARES.
(a) Inapplicable.
(b) Inapplicable.
(c) See Item 7(a).
(d) Inapplicable.
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<PAGE> 20
ITEM 19. TAXATION OF THE FUND.
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 tradable on a secondary
market (or the substantial equivalent thereof). A transitional rule
postponed the application of section 7704 to a partnership which was a
publicly traded partnership on 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 Fund
was within the definition of a publicly traded partnership and was
eligible for the transitional rule.
In connection with its deemed incorporation for federal income tax
purposes on January 1, 1998, the Fund has elected to be taxed federally
as a RIC. This election permits the Fund to receive pass through tax
treatment similar to that of a regular partnership. In order to qualify
as a RIC, the Fund will have to comply with certain income,
diversification and distribution requirements set forth in Subchapter M
of the Code. If the Fund elected not 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 Fund's earnings
and profits; unless the Fund elected pursuant to section 7704(g) of the
Code to retain partnership status and become subject to the applicable
partnership-level tax.
Although the Fund is deemed a corporation for federal income tax
purposes as of January 1, 1998 and intends to qualify as a RIC
thereafter, the Fund expects that it will continue to be organized for
all other purposes as a California Limited Partnership.
ITEM 20. UNDERWRITERS.
Inapplicable.
ITEM 21. CALCULATION OF PERFORMANCE DATA.
Inapplicable.
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<PAGE> 21
ITEM 22. FINANCIAL STATEMENTS.
The audited financial statements, notes and related report of
PricewaterhouseCoopers LLP, independent accountants, contained in the
Annual Report to partners for the fiscal year ended December 31, 1998
are incorporated herein by reference. No other parts of the Fund's
Annual Report are incorporated herein by reference. The financial
statements and notes thereto included in the Fund's Annual Report have
been incorporated herein in reliance upon the report of
PricewaterhouseCoopers LLP given on the authority of said firm as
experts in accounting and auditing. A copy of the Fund's Annual Report
may be obtained by writing to the Fund or by calling (302) 792-2555.
-19-
<PAGE> 22
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Amended and Restated Certificate and Agreement of Limited Partnership
is incorporated herein by reference to Exhibit No. 1 of Amendment No.
21 to the Fund's Registration Statement on Form N-1A (File No.
811-2631) as filed with the Securities and Exchange Commission (the
"SEC") on April 22, 1998 ("Amendment #21").
(b)(1) Code of Regulations is incorporated herein by reference to
Exhibit No. 2(a) of Amendment No. 19 to the Fund's
Registration Statement on Form N-1A (File No. 811-2631) as
filed with the SEC on April 26, 1996 ("Amendment #19").
(b)(2) Amendment No. 1 to the Code of Regulations is incorporated
herein by reference to Exhibit No. 2(b) of Amendment #19.
(c) See Articles IV, V, VI, VII and VIII of the Amended and Restated
Certificate and Agreement of Limited Partnership, which is incorporated
herein by reference to Exhibit No. 1 of Amendment #21, and Articles II,
V and VI of the Code of Regulations, which is incorporated herein by
reference to Exhibit No. 2(a) of Amendment #19.
(d)(1) Advisory Agreement dated January 1, 1998 is incorporated
herein by reference to Exhibit No. 5 of Amendment #21.
(d)(2) Assumption Agreement dated June 18, 1998.
(e) Inapplicable.
(f) Amended and Restated Fund Office Retirement Profit-Sharing Plan and
Trust Agreement dated January 1, 1998 is incorporated herein by
reference to Exhibit No. 7 of Amendment #21.
(g) Amended and Restated Custodian Agreement dated October 15, 1983 is
incorporated herein by reference to Exhibit No. 8 of Amendment #19.
(h)(1) Transfer Agency Agreement dated August 1, 1984.
(h)(2) Amendment No. 1 dated July 31, 1986 to the Transfer Agency
Agreement.
(i) Inapplicable.
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<PAGE> 23
(j) Consent of Pricewaterhouse Coopers LLP.
(k) Inapplicable.
(l)(1) Agreement dated September 15, 1976 relating to Initial
Capitalization is incorporated herein by reference to Exhibit
No. 13(a) of Amendment #19.
(l)(2) Amendment No. 1 to Agreement dated September 15, 1976 relating
to Initial Capitalization is incorporated herein by reference
to Exhibit No. 13(b) of Amendment #19.
(m) Inapplicable.
(n) Financial Data Schedule.
(o) Inapplicable.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
Inapplicable.
ITEM 25. INDEMNIFICATION.
Indemnification of the Fund's Transfer Agent against certain stated
liabilities is provided for in Section 16 of the Transfer Agency
Agreement, which is filed herewith as Exhibit h(1).
The Fund has obtained from a major insurance carrier a director's and
officers' liability policy covering certain types of errors and
omissions.
Section 3.6 of Article III of the Fund's Amended and Restated
Certificate and Agreement of Limited Partnership, which is incorporated
herein by reference to Exhibit No. 1 of Amendment #21, and Section 3.13
of Article III of the Fund's Code of Regulations, which is incorporated
herein by reference to Exhibit No. 2(a) of Amendment #19, each provide
for the indemnification of the Fund's Managing General Partners and
officers.
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<PAGE> 24
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(a) The information required by this Item 26 with respect to each director,
officer and partner of BIMC is incorporated by reference to Schedules A
and D of Form ADV filed by BIMC with the SEC pursuant to the Investment
Advisers Act of 1940 (SEC File No. 801-13304).
(b) Pursuant to an Assumption Agreement between the Fund, BIMC, PNC Bank
and BFM, BFM has assumed PNC Bank's rights and obligation related to
the management of the investments of the Fund, and became a party to
the Advisory Agreement in substitution for PNC Bank. The information
required by this Item 26 with respect to each director, officer and
partner of BFM is incorporated by reference to Schedules A and D of
Form ADV filed by BFM with the SEC pursuant to the Investment Advisers
Act of 1940 (SEC File No. 801-48433).
ITEM 27. PRINCIPAL UNDERWRITERS.
Inapplicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
(1) BlackRock Institutional Management Corporation, Bellevue Park Corporate
Center, 400 Bellevue Parkway, Wilmington, Delaware 19809 (records)
relating to its function as co-investment adviser).
(2) BlackRock Financial Management, Inc., 345 Park Avenue, New York,
New York 101054 (records relating to its function as co-investment
adviser).
(3) PFPC Inc., Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809 (records relating to its functions as
transfer agent and dividend disbursing agent).
(4) Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890 (records relating to its function
as custodian).
(5) Drinker Biddle & Reath LLP, Philadelphia National Bank Building,
1345 Chestnut Street, Philadelphia, Pennsylvania 19107 (charter,
by-laws and minute books).
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<PAGE> 25
ITEM 29. MANAGEMENT SERVICES.
Inapplicable.
ITEM 30. UNDERTAKINGS.
Inapplicable.
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<PAGE> 26
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Fund has duly caused this Amendment No. 22 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 26th day of April, 1999.
CHESTNUT STREET EXCHANGE FUND
By: /s/ Edward J. Roach
__________________________
Edward J. Roach
Treasurer
<PAGE> 27
EXHIBIT INDEX
EXHIBIT DESCRIPTION
(d)(2) Assumption Agreement.
(h)(1) Transfer Agency Agreement dated August 1, 1984.
(h)(2) Amendment No. 1 dated July 31, 1986 to the Transfer Agency
Agreement.
(j) Consent of Pricewaterhouse Coopers LLP.
(n) Financial Data Schedule.
<PAGE> 1
Exhibit (d)(2)
AGREEMENT
AGREEMENT made as of June 18, 1998 among PNC Bank, N.A., a national
banking association ("PNC Bank"), BlackRock Institutional Management
Corporation, a Delaware corporation ("BIMC"), BlackRock Financial Management,
Inc., a Delaware corporation ("BFM") and Chestnut Street Exchange Fund (the
"Fund").
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940;
WHEREAS, PNC Bank and BIMC are co-investment advisers pursuant to an
Advisory Agreement dated January 1, 1998 among PNC Bank, BIMC and the Fund
("Advisory Agreement");
WHEREAS, PNC Bank, as well as BIMC and BFM, each a majority-owned,
indirect subsidiary of PNC Bank, are restructuring their operations;
WHEREAS, PNC Bank, BIMC and BFM desire to have BFM assume the rights
and obligations of PNC Bank under the Advisory Agreement;
NOW THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:
1. PNC Bank, BIMC and BFM represent and warrant to the Fund that the
changes provided for in this Agreement do not constitute a change of control or
an "assignment" of the Advisory Agreement within the meaning of Section 2a(9) of
the Investment Company Act of 1940, in that the portfolio manager and advisory
personnel, and the ultimate control of the services to be rendered to the Fund
will remain unchanged after this Agreement is effective.
2. BFM hereby assumes the rights and obligations of PNC Bank under the
Advisory Agreement, including all of the rights and obligations related to the
management of the investments of the Fund, and becomes a party to the Advisory
Agreement in substitution for PNC Bank.
3. PNC Bank acknowledges that any compensation by BIMC to it provided
in Section 8 of the Advisory Agreement shall terminate as the date hereof, and
the advisory fee paid by the Fund pursuant to Section 8 shall be paid to BIMC
for the services of BIMC and BFM;
4. By reason of the assumption of all of its rights and obligations
hereunder by BFM, PNC Bank shall cease to be a party to the Advisory Agreement
effective on the date hereof.
<PAGE> 2
5. BFM shall indemnify, defend and hold PNC Bank harmless from and
against any loss, damages or expense (including legal fees and expenses),
relating to the performance or nonperformance by BFM of the obligations of PNC
Bank under the Advisory Agreement that are being assumed by BFM pursuant to this
Assumption Agreement, that pertain to the period beginning with the date of this
Assumption Agreement.
6. PNC Bank shall indemnify, defend and hold BFM harmless from and
against any loss, damages, expense or interest (including legal fees and
expenses) relating to the performance or nonperformance by PNC Bank of the
obligations of PNC Bank contained in the Advisory Agreement that pertain to the
period ending on the date immediately preceding the date of this Assumption
Agreement.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have caused this instrument to be executed by their officers designated
below as of the day and year first above written.
BLACKROCK INSTITUTIONAL MANAGEMENT
CORPORATION
By: ______________________________
(Authorized Officer)
PNC BANK, N.A.
By: ______________________________
(Authorized Officer)
BLACKROCK FINANCIAL MANAGEMENT, INC.
By: ______________________________
(Authorized Officer)
CHESTNUT STREET EXCHANGE FUND
By:______________________________
(Authorized Officer)
<PAGE> 1
Exhibit (h)(1)
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of August 1, 1984, by and between CHESTNUT STREET
EXCHANGE FUND, a California Limited Partnership (the "Fund"), and PROVIDENT
FINANCIAL PROCESSING CORPORATION, a Delaware corporation ("PFPC"), which is an
indirect, wholly-owned subsidiary of PNC Financial Corp.
R E C I T A L
WHEREAS, the Fund desires to retain PFPC to serve as the Fund's
transfer agent and dividend disbursing agent, and PFPC is willing to furnish
such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PFPC to serve as transfer
agent and dividend disbursing agent for the Fund with respect to the units of
limited partnership interest of the Fund ("Shares"), for the period and on the
terms set forth in this Agreement. PFPC accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as provided
in Paragraph 15 of this Agreement.
2. Delivery of Documents. The Fund has furnished PFPC with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Managing General Partners
authorizing the appointment of PFPC as transfer agent and dividend disbursing
agent for the Fund and approving this Agreement;
<PAGE> 2
(b) Appendix A identifying and containing the signatures of
the Fund's officers and/or other persons authorized to sign Written
Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Restated Certificate and Agreement of Limited
Partnership recorded with the office of the County Recorder of Los Angeles
County, California and all restatements and amendments thereto (such Restated
Certificate and Agreement of Limited Partnership, as presently in effect and as
it may hereinafter be restated or amended, is herein called the "Certificate");
and
(d) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments and supplements thereto are herein called
the "Prospectus").
The Fund will furnish PFPC from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any person duly authorized to give Oral and Written
Instructions on behalf of the Fund and listed on the Certificate annexed hereto
as Appendix A or any amendment thereto as may be received by PFPC from time to
time.
(b) "Oral Instructions". As used in this Agreement, the term
"Oral Instructions" means verbal instructions actually received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person. The Fund agrees to deliver to PFPC, at the time and in the
manner specified in Paragraph 4(b) of this Agreement, Written Instructions
confirming Oral Instructions.
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<PAGE> 3
(c) "Written Instructions". As used in this Agreement, the
term "Written Instructions" means written instructions delivered by mail, tested
telegram, cable, telex or facsimile sending device, and received by PFPC and
signed by an Authorized Person unless otherwise required by a resolution of the
Managing General Partners furnished to Provident pursuant to Section 2 hereof.
4. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement, PFPC shall
act only upon Oral or Written Instructions. PFPC may assume that any Oral or
Written Instructions received hereunder are not in any way inconsistent with any
provisions of the Fund's Agreement of Limited Partnership or any resolution of
the Managing General Partners.
(b) PFPC shall be entitled to rely upon any Oral Instructions
and any Written Instructions actually received by PFPC pursuant to this
Agreement. The Fund agrees to forward to PFPC Written Instructions confirming
Oral Instructions in such manner that the Written Instructions are received by
PFPC, whether by hand delivery, telex, facsimile sending device or otherwise, by
the close of business of the same day that such Oral Instructions are given to
PFPC. The Fund agrees that the fact that such confirming Written Instructions
are not received by PFPC shall in no way affect the validity of the transactions
or enforceability of the transactions authorized by the Fund by giving Oral
Instructions. The Fund agrees that PFPC shall incur no liability to the Fund in
acting upon Oral Instructions given to PFPC hereunder concerning such
transactions provided such instructions reasonably appear to have been received
from an Authorized Person.
5. Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, PFPC is authorized to take the following actions:
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<PAGE> 4
(a) Issuance of Shares. PFPC shall issue and credit the
account of an investor with Fund Shares in the manner described in the
Prospectus.
(b) Redemptions. Upon receipt of a redemption order, PFPC
shall redeem Fund Shares in the manner described in the Prospectus.
6. Dividends and Distributions. The Fund shall furnish PFPC with
appropriate evidence of action by the Fund's Managing General Partners
authorizing the declaration of dividends and distributions as described in the
Prospectus. After deducting any amount required to be withheld by any applicable
tax laws, rules and regulations or other applicable laws, rules and regulations,
PFPC shall, as agent for each Shareholder and in accordance with the provisions
of the Fund's Prospectus, pay dividends in cash, or, if requested in proper form
by a Shareholder, invest dividends in Shares, in the manner described in the
Prospectus.
PFPC shall prepare, file with the Internal Revenue Service, and address
and mail to Shareholders such returns and information relating to dividends and
distributions paid by the Fund as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations, or such substitute form of
notice as may from time to time be permitted or required by the Internal Revenue
Service. On behalf of the Fund, PFPC shall pay on a timely basis to the
appropriate Federal authorities any taxes required by applicable Federal tax
laws to be withheld on dividends and distributions paid by the Fund.
7. Communications with Shareholders.
(a) Communications to Shareholders. PFPC will address and mail
all communications by the Fund to its Shareholders, including reports to
Shareholders, confirmations of purchases and redemptions of Fund Shares,
dividend and distribution notices
-4-
<PAGE> 5
and proxy material for its annual meetings of partners. PFPC will receive and
tabulate the proxy cards for the annual meetings of the Fund's partners.
(b) Correspondence. PFPC will answer such correspondence from
Shareholders, securities brokers and others relating to its duties hereunder and
such other correspondence as may from time to time be mutually agreed upon
between PFPC and the Fund.
8. Records. PFPC shall maintain records of the accounts for each
Shareholder showing the following information:
(i) name, address and United States Tax
Identification or Social Security number;
(ii) number of Shares held and number of Shares for
which certificates, if any, have been issued, including
certificate numbers and denominations;
(iii) historical information regarding the account of
each Shareholder, including dividends and distributions paid
and the date and price for all transactions on a Shareholder's
account;
(iv) any stop or restraining order placed against a
Shareholder's account;
(v) any correspondence relating to the current
maintenance of a Shareholder's account;
(vi) information with respect to withholdings; and
(vii) any information required in order for PFPC to
perform any calculations contemplated or required by this
Agreement.
The books and records pertaining to the Fund which are in the
possession of PFPC shall be the property of the Fund. Such books and records
shall be prepared and
-5-
<PAGE> 6
maintained as required by the 1940 Act and other applicable securities laws and
rules and regulations. The Fund, or the Fund's authorized representatives, shall
have access to such books and records at all times during PFPC's normal business
hours. Upon the reasonable request of the Fund, copies of any such books and
records shall be provided by PFPC to the Fund or the Fund's authorized
representative at the Fund's expense.
9. Reports. PFPC shall furnish the Fund with the following reports:
(a) such periodic and special reports as the Fund may
reasonably request; and
(b) such other information, including Shareholder lists and
statistical information concerning accounts as may be agreed upon from time to
time between the Fund and PFPC.
In addition, PFPC shall prepare and submit for recording, in accordance
with the requirements of any applicable jurisdiction, amendments to the Fund's
Certificate as shall be required from time to time.
10. Cooperation With Accountants. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
unqualified opinion, including but not limited to the opinion included in the
Fund's annual report on Form N-lR or such substitute report as may be in effect
from time to time.
11. Confidentiality. PFPC agrees on behalf of itself and its employees
to treat confidentially all records and other information relative to the Fund
and its prior, present or potential Shareholders except, after prior
notification to and approval in writing by the Fund,
-6-
<PAGE> 7
which approval shall not be unreasonably withheld and may not be withheld where
PFPC may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Fund.
12. Equipment Failures. In the event of equipment failures beyond
PFPC's control, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall have no liability
with respect thereto. The foregoing obligation shall not extend to computer
terminals located outside of premises maintained by PFPC. PFPC shall enter into
and shall maintain in effect with appropriate parties one or more agreements
making reasonable provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
13. Right to Receive Advice.
(a) Advice of Fund. If PFPC shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall receive, from the Fund
directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
question of law involved in any action to be taken or omitted by PFPC, it may
request advice at its own cost from counsel of its own choosing (who may be
counsel for the Fund or PFPC, at the option of PFPC).
(c) Conflicting Advice. In case of conflict between
directions, advice or Oral or Written Instructions received by PFPC pursuant to
subparagraph (a) of this paragraph and advice received by PFPC pursuant to
subparagraph (b) of this paragraph, PFPC shall be entitled to rely on and follow
the advice received pursuant to the latter provision alone.
-7-
<PAGE> 8
(d) Protection of PFPC. PFPC shall be protected in any action
or inaction which it takes in reliance on any directions, advice or Oral or
Written Instructions received pursuant to subparagraphs (a) or (b) of this
paragraph which PFPC, after receipt of any such directions, advice or Oral or
Written Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be. However,
nothing in this paragraph shall be construed as imposing upon PFPC any
obligation (i) to seek such directions, advice or Oral or Written Instructions,
or (ii) to act in accordance with such directions, advice or Oral or Written
Instructions when received, unless, under the terms of another provision of this
Agreement, the same is a condition to PFPC's properly taking or omitting to take
such action. Nothing in this subsection shall excuse PFPC when an action or
omission on the part of PFPC constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by PFPC of any duties, obligations or
responsibilities not expressly provided for in this Agreement or PFPC's
negligent failure to perform its duties expressly provided for in this
Agreement.
14. Compliance with Governmental Rules and Regulations. The Fund
assumes full responsibility for insuring that the contents of each prospectus of
the Fund complies with all applicable requirements of the Securities Act of 1933
(the "1933 Act"), the Investment Company Act of 1940 (the "1940 Act") and any
laws, rules and regulations of governmental authorities having jurisdiction.
15. Compensation. As compensation for the services rendered by PFPC
from the date of this Agreement to July 31, 1986, the Fund will pay to PFPC
monthly, fees equal to $12,500 per year and PFPC's out-of-pocket expenses
relating to such services, including, but not limited to, expenses of postage,
telephone, TWX rental and line charges, communications forms,
-8-
<PAGE> 9
proxy forms and Shareholder consultation expenses. In addition, the Fund shall
pay PFPC $2,500 representing payments made by PFPC for tax accounting services
from the period January 1, 1984 through July 31, 1984. The compensation to be
paid to PFPC after July 31, 1986 shall be agreed upon by the parties hereto and
included as an amendment hereto.
16. Indemnification. The Fund agrees to indemnify and hold harmless
PFPC and its nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the 1933
Act, the Securities Exchange Act of 1934, the 1940 Act, and any state and
foreign securities and blue sky laws, all as or to be amended from time to time)
and expenses, including (without limitation) attorneys' fees and disbursements,
arising directly or indirectly from any action or thing which PFPC takes or does
or omits to take or do (i) at the request or on the direction of or in reliance
on the advice of the Fund or (ii) upon Oral or Written Instructions, provided,
that neither PFPC nor any of its nominees shall be indemnified against any
liability to the Fund or to its Shareholders (or any expenses incident to such
liability) arising out of (x) PFPC's or such nominee's own willful misfeasance,
bad faith or gross negligence or reckless disregard of its duties in connection
with the performance of any duties, obligations or responsibilities not
expressly provided for in this Agreement or (y) PFPC's or such nominee's own
negligent failure to perform its duties expressly provided for in this Agreement
or otherwise agreed to by PFPC in writing.
17. Responsibility of PFPC. PFPC shall be under no duty to take any
action on behalf of the Fund except as specifically set forth herein or as may
be specifically agreed to by PFPC in writing. In the performance of its duties
hereunder, PFPC shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits to ensure the
accuracy and completeness of all services performed under this Agreement.
-9-
<PAGE> 10
PFPC shall be responsible for its own negligent failure to perform its duties
under this Agreement, but to the extent that duties, obligations and
responsibilities are not expressly set forth in this Agreement, PFPC shall not
be liable for any act or omission which does not constitute willful misfeasance,
bad faith or gross negligence on the part of PFPC or reckless disregard of such
duties, obligations and responsibilities. Without limiting the generality of the
foregoing or of any other provision of this Agreement, PFPC in connection with
its duties under this Agreement shall not be under any duty or obligation to
inquire into and shall not be liable for or in respect of (a) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of this
Agreement, if any, and which PFPC reasonably believes to be genuine, or (b)
delays or errors or loss of data occurring by reason of circumstances beyond
PFPC's control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdown (except as provided
in Paragraph 12 hereof), flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
18. Fund 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 any of the
Limited Partners of the Fund individually, but are binding only upon the assets
and property of the Fund.
19. Duration and Termination. This Agreement shall continue until
termination by the Fund on sixty (60) days' written notice or by PFPC on ninety
(90) days' written notice.
-10-
<PAGE> 11
20. Notices. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to PFPC at
PFPC's address, P.O. Box 8950, Wilmington, Delaware 19899; (b) if to the Fund,
at the address of the Fund; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. If the location of the sender of a Notice and the address of the
addressee thereof are, at the time of sending, more than 100 miles apart, the
Notice may be sent by first-class mail, in which case it shall be deemed to have
been given five days after it is sent, or if sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately, and, if the location of the sender of a Notice and the address of
the addressee thereof are, at the time of sending, not more than 100 miles
apart, the Notice may be sent by first-class mail, in which case it shall be
deemed to have been given three days after it is sent, or if sent by messenger,
it shall be deemed to have been given on the day it is delivered, or if sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately. All postage, cable, telegram, telex and
facsimile sending device charges arising from the sending of a Notice hereunder
shall be paid by the sender.
21. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
22. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
-11-
<PAGE> 12
23. Assignment. This Agreement may not be assigned by PFPC without the
Fund's consent. PFPC may sub-contract to qualified entities certain of its
duties hereunder, provided, however, that PFPC shall remain responsible for the
performance of all of its duties hereunder notwithstanding any such
sub-contracting arrangement.
24. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to Oral Instructions. 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. This
Agreement shall be deemed to be a contract made in Delaware and governed by
Delaware law. 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 and shall inure
to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
CHESTNUT STREET EXCHANGE FUND
Attest: /s/ Morgan R. Jones By /s/ Edward J. Roach
--------------------------
[SEAL] PROVIDENT FINANCIAL PROCESSING
CORPORATION
Attest: /s/ John D. Silcox, Jr. By /s/ John W. McLaughlin
--------------------------
<PAGE> 1
Exhibit (h)(2)
AMENDMENT NO. 1 TO TRANSFER AGENCY AGREEMENT
This Agreement, dated as of the 31st day of July, 1986, is made between
Chestnut Street Exchange Fund (the "Fund"), a California limited partnership,
and Provident Financial Processing Corporation ("PFPC"), a Delaware corporation.
WITNESSETH:
WHEREAS, PFPC and the Fund wish to amend the Transfer Agency Agreement
between them made as of August 1, 1984 (the "Transfer Agency Agreement"); and
WHEREAS, the Fund's Managing General Partners have approved the
amendment effected by this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in the Transfer Agency Agreement, and intending to be legally bound
hereby, the Fund and PFPC hereby agree that Paragraph 15 of the Transfer Agency
Agreement shall be amended and restated to read in full as follows:
15. Compensation. As compensation for the services rendered by
PFPC from the date of this Agreement, the Fund will pay to PFPC monthly
fees equal to $12,500 per year and PFPC's out-of-pocket expenses
relating to such services, including, but not limited to, expenses for
postage, Federal Express, telephone, TWX rental and line charges,
communications forms, proxy forms and Shareholder consultation
expenses.
IN WITNESS WHEREOF, the Fund and PFPC have caused this Agreement to be
executed by duly authorized officers of each, as of the date first above
written.
CHESTNUT STREET EXCHANGE FUND
Attest: /s/ Morgan R. Jones By: /s/ Edward J. Roach
----------------------- -----------------------
Title: Vice President: Title: Vice President
--------------- --------------
Assistant Secretary
PROVIDENT FINANCIAL
PROCESSING CORPORATION
Attest: /s/ By: /s/ Robert J. Perlswig
----------------------- -----------------------
Title: Vice President: Title: Vice President
--------------- --------------
Assistant Secretary
<PAGE> 1
Exhibit (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 22 to the Registration Statement on Form N-1A (File No. 811-2631)
under the Investment Company Act of 1940, of our report dated January 29, 1999
on our audit of the financial statements and financial highlights of Chestnut
Street Exchange Fund, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1998, which is incorporated by
reference in the Post-Effective Amendment to the Registration Statement. 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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 29, 1999
<PAGE> 1
[ARTICLE] 6
[CIK] 0000019780
[NAME] CHESTNUT STREET EXCHANGE FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 59818164
[INVESTMENTS-AT-VALUE] 411589571
[RECEIVABLES] 530742
[ASSETS-OTHER] 33042
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 412153355
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3134490
[TOTAL-LIABILITIES] 3134490
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 85545567
[SHARES-COMMON-STOCK] 1176990
[SHARES-COMMON-PRIOR] 1199810
[ACCUMULATED-NII-CURRENT] 5721
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3474553
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 351771407
[NET-ASSETS] 409018865
[DIVIDEND-INCOME] 5557888
[INTEREST-INCOME] 303071
[OTHER-INCOME] 0
[EXPENSES-NET] (1420401)
[NET-INVESTMENT-INCOME] 4440558
[REALIZED-GAINS-CURRENT] 3474553
[APPREC-INCREASE-CURRENT] 57201296
[NET-CHANGE-FROM-OPS] 69182109
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (4453148)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] (24026)
[SHARES-REINVESTED] 1206
[NET-CHANGE-IN-ASSETS] 57436453
[ACCUMULATED-NII-PRIOR] 18312
[ACCUMULATED-GAINS-PRIOR] 443823
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1230253
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1420401
[AVERAGE-NET-ASSETS] 376750899
[PER-SHARE-NAV-BEGIN] 293.03
[PER-SHARE-NII] 3.76
[PER-SHARE-GAIN-APPREC] 54.49
[PER-SHARE-DIVIDEND] (3.77)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 347.51
[EXPENSE-RATIO] .004
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
