<PAGE> 1
As filed with the Securities and
Exchange Commission on April 28, 2000.
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. 23
CHESTNUT STREET EXCHANGE FUND
-----------------------------
(Exact Name of the Registrant as Specified in Charter)
400 Bellevue Parkway
Wilmington, Delaware 19809
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(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:
Michael P. Malloy, Esq.
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
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TABLE OF CONTENTS
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PAGE
PART A. INFORMATION REQUIRED IN A PROSPECTUS
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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................................................. 2
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........................................... 15
Item 15. Investment Advisory and Other Services........................................................ 15
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............................................................... 19
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.
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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.
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.
(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.
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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.
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 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
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<PAGE> 6
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, 1999, the Fund paid an investment advisory fee
aggregating .32% of its average daily net assets.
(a)(2) Mary Elizabeth C. Pfeil, CFA and Steven P. Ralston, CFA are the
persons primarily responsible for the day-to-day management of
the Fund's portfolio. Ms. Pfeil has managed the Fund's
portfolio since January 1996 and Mr. Ralston has co-managed the
Fund's portfolio since June 1999. Ms. Pfeil is an employee of
BIMC and 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. Mr. Ralston
is a Vice President and senior research analyst on the domestic
equity growth team at BFM. Mr. Ralston has been employed by BFM
and its affiliates since 1998. Prior to joining BFM, Mr.
Ralston was a portfolio manager with General Accident Insurance
from 1995 until 1998, and a director of research at First
National Bank of Maryland from 1983 until
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<PAGE> 7
1995. He 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 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
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<PAGE> 8
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 Stock Exchange on the last
trading day
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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. Since January 1, 1998, the Fund
has been deemed a corporation, rather than a partnership, for
federal tax purposes. In connection with this change in its
federal tax status, the Fund 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 taxable 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 company taxable
income (before the deduction of such dividends). 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 has been treated as a corporation for
federal income tax purposes since January 1, 1998. However,
the Fund has elected, and intends to continue 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.
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Distributions by the Fund as a RIC that are attributable to
ordinary income and short-term capital gains of the Fund 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 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. 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
taxable on 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 28,
2000. 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 28, 2000.
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(b) Table of Contents Page No.
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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.................................................................... 15
Investment Advisory and Other Services............................................. 15
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.................................................... 19
Financial Statements............................................................... 19
</TABLE>
ITEM 11. FUND HISTORY.
The Fund is a limited partnership organized as of March 23,
1976 under the Uniform Limited Partnership Act of California.
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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.
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).
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<PAGE> 13
(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.
(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
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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 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.
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<PAGE> 15
(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.
(d) Inapplicable.
(e) Portfolio Turnover. For the fiscal years ended December 31,
1999 and 1998, the Fund's portfolio turnover rates were 2.48%
and 0.76%, respectively.
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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 DURING PAST 5 YEARS
NAME AND ADDRESS AGE WITH THE FUND AND CURRENT AFFILIATIONS
- ---------------- --- ------------- ------------------------
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Richard C. Caldwell* 55 Managing Retired; Chairman,
3305 Flamingo Drive General Florida Advisory
Vero Beach, FL 32964 Partner Counsel; formerly,
President and Chief
Executive Officer, PNC
Bank FSB from May, 1998
until July, 1999;
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* 83 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; Director
of one other investment
company advised by
BIMC; former Director
or Trustee of 3 other
investment companies
advised by BIMC.
G. Willing Pepper* 91 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 of one other
investment company
advised by BIMC; former
Director or Trustee of
4 other investment
companies advised by
BIMC.
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS AGE THE FUND AND CURRENT AFFILIATIONS
- ---------------- --- -------- ------------------------
<S> <C> <C> <C>
Langhorne B. Smith 63 Managing President and Director, The Sandridge Corporation
Suite 400 General (private investment company); Executive Vice
Plymouth Meeting Partner President and Director, Claneil Enterprises, Inc.
Executive Campus (private investment company); Director of 1 other
630 Germantown Pike investment company advised by BIMC.
Plymouth Meeting, PA 19462
David R. Wilmerding, Jr. 64 Managing Chairman, Gee, Wilmerding & Associates (investment
Gee, Wilmerding & Associates General advisers) since February 1989; Director, Beaver
Aldwyn Center Partner Management Corporation; Director, Mutual Fire Marine &
Villanova, PA 19085 Inland Insurance Co., Inc; Director, US Retirement
Communities, Inc.; Director or Trustee of 2 other
investment companies advised by BIMC or its affiliates.
Edward J. Roach 75 Treasurer and Certified Public Accountant; Partner of the accounting
400 Bellevue Parkway Secretary firm of Main Hurdman until 1981; Vice Chairman of the
Wilmington, DE 19809 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.
</TABLE>
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* Messrs. Caldwell, Fortune and Pepper are "interested persons" of the
Fund as that term is defined in the 1940 Act.
(c) Inapplicable.
(d) The Fund pays each Managing General Partner at the rate of
$10,000 annually, and pays the Chairman an additional $8,000
annually. Prior to August 1, 1999, Mr. Caldwell, was an
employee of PNC Bank and its affiliates, and did not receive
fees as a Managing General Partner. Effective January 1, 2000,
Mr. Caldwell was compensated at the same level as the other
Managing General Partners. The following table provides
information concerning the compensation of each of the Fund's
Managing General Partners for
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<PAGE> 18
services rendered during the Fund's last fiscal year ended
December 31, 1999:
<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(1)(2)
Managing General Partner
Robert R. Fortune $18,000 None None $41,751(5)(2)
President and Chairman
of the Managing General
Partners
G. Willing Pepper $10,000 None None $23,582(6)(2)
Managing General Partner
Langhorne B. Smith $10,000 None None $16,000(2)(2)
Managing General Partner
David R. Wilmerding, Jr. $10,000 None None $99,200(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 any part of the fiscal year ended December 31,
1999.
The Fund has a retirement plan for eligible employees. For the fiscal
year ended December 31, 1999, the Fund contributed a total of $2,300 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
$2,400. 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.
(f) The Fund, BIMC and BFM have adopted codes of ethics under Rule
17j-1 of the 1940 Act that (i) establish procedures for
personnel with respect to personal
-16-
<PAGE> 19
investing; (ii) prohibit or restrict certain transactions that
may be deemed to create a conflict of interest between
personnel and the Fund; and (iii) permit personnel to invest
in securities that may be purchased or held by the Fund.
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
(a) As of April 11, 2000, no investor owned beneficially more than
25% of the Fund's outstanding equity securities.
(b) As of April 11, 2000, no investor owned beneficially more than
5% of the Fund's outstanding equity securities.
(c) As of April 11, 2000, 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, New York, New York
10154. BIMC and BFM are each an indirect, majority-owned
subsidiary of PNC Bank. PNC Bank, which has banking offices at
1600 Market Street, Philadelphia, Pennsylvania 19103, is a
wholly-owned subsidiary of The PNC Financial Services Group,
Inc., 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 $1,463,053, $1,230,253 and $1,363,401 for
investment advisory services for the years ended December 31,
1997, 1998 and 1999, respectively.
-17-
<PAGE> 20
(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.
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 $5,850, $0 and $14,670
-18-
<PAGE> 21
for the years ended December 31, 1997 1998 and 1999,
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.
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
-19-
<PAGE> 22
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.
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, except in certain
circumstances not relevant to the Fund, 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
-20-
<PAGE> 23
thereof). A transitional rule postponed the application of
section 7704 to a partnership that was a publicly traded
partnership on December 17, 1987 until its first taxable year
beginning after December 31, 1997 provided that the
partnership did 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 the Fund's deemed incorporation for federal
income tax purposes on January 1, 1998, the Fund 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
has had to, and will continue to 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.
Although the Fund was deemed a corporation for federal income
tax purposes as of January 1, 1998 and elected, and intends to
continue, 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.
ITEM 22. FINANCIAL STATEMENTS.
The audited financial statements, notes and related report of
PricewaterhouseCoopers LLP, independent accountants, contained in the
Annual Report to
-21-
<PAGE> 24
partners for the fiscal year ended December 31, 1999 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.
-22-
<PAGE> 25
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
No. 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 No. 19").
(b)(2) Amendment No. 1 to the Code of Regulations is incorporated
herein by reference to Exhibit No. 2(b) of Amendment No. 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 No. 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 No. 19.
(d)(1) Advisory Agreement dated January 1, 1998 is incorporated
herein by reference to Exhibit No. 5 of Amendment No. 21.
(d)(2) Assumption Agreement dated June 18, 1998 is incorporated
herein by reference to Exhibit (d)(2) of Amendment No. 22 to
the Fund's Registration Statement on Form N-1A (File No.
811-2631) as filed with the SEC on April 30, 1999 ("Amendment
No. 22").
(e) Inapplicable.
(f) Amended and Restated Fund Office Retirement profit-sharing
Plan and Trust Agreement dated
-23-
<PAGE> 26
January 1, 1998 is incorporated herein by reference to Exhibit
No. 7 of Amendment No. 21.
(g) Amended and Restated Custodian Agreement dated October 15,
1983 is incorporated herein by reference to Exhibit No. 8 of
Amendment No. 19.
(h)(1) Transfer Agency Agreement dated August 1, 1984 is incorporated
herein by reference to Exhibit (h)(1) of Amendment No. 22.
(h)(2) Amendment No. 1 dated July 31, 1986 to the Transfer Agency
Agreement is incorporated herein by reference to Exhibit
(h)(2) of Amendment No. 22 1999.
(i) Inapplicable.
(j) Consent of PricewaterhouseCoopers 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 No. 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 No. 19.
(m) Inapplicable.
(n) Inapplicable.
(o) Inapplicable.
(p)(1) Code of Ethics of the Fund.
(p)(2) Code of Ethics of BIMC and BFM.
-24-
<PAGE> 27
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 incorporated herein by reference to Exhibit (h)(1)
of Amendment No. 22.
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 No. 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 No.
19, each provide for the indemnification of the Fund's Managing General
Partners and officers.
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
-25-
<PAGE> 28
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, One Logan Square, 18th and Cherry
Streets, Philadelphia, Pennsylvania 19103-6996 (charter,
by-laws and minute books).
ITEM 29. MANAGEMENT SERVICES.
Inapplicable.
ITEM 30. UNDERTAKINGS.
Inapplicable.
-26-
<PAGE> 29
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Fund has duly caused this Amendment No. 23 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 28th day of April, 2000.
CHESTNUT STREET EXCHANGE FUND
By:/s/ Edward J. Roach
-------------------------
Edward J. Roach
Treasurer and Secretary
<PAGE> 30
EXHIBIT INDEX
EXHIBIT DESCRIPTION
(j) Consent of PricewaterhouseCoopers LLP.
(p)(1) Code of Ethics of the Fund.
(p)(2) Code of Ethics of BIMC and BFM.
<PAGE> 1
Exhibit (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 23 to the Registration Statement on Form N-1A (File No. 811-2631)
under the Investment Company Act of 1940, of our report dated January 28, 2000
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, 1999, and for the respective
period then ended. 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 27, 2000
<PAGE> 1
Exhibit (p)(1)
CHESTNUT STREET EXCHANGE FUND
(THE "COMPANY")
CODE OF ETHICS
I. LEGAL REQUIREMENT.
Rule 17j-1(b) under the Investment Company Act of 1940, as amended (the
"1940 Act"), makes it unlawful for any officer or Managing General Partner of
the Company in connection with the purchase or sale by such person of a security
"held or to be acquired" by the Company:
1. To employ any device, scheme or artifice to defraud
the Company;
2. To make to the Company any untrue statement of a
material fact or omit to state to the Company a
material fact necessary in order to make the
statements made, in light of the circumstances under
which they are made, not misleading;
3. To engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit
upon the Company; or
4. To engage in any manipulative practice with respect
to the Company's investment portfolio.
II. PURPOSE OF THE CODE OF ETHICS.
The Company expects that its officers and Managing General Partners
will conduct their personal investment activities in accordance with (1) the
duty at all times to place the interests of the Company's shareholders first,
(2) the requirement that all personal securities transactions be conducted
consistent with this Code of Ethics and in such a manner as to avoid any actual
or potential conflict of interest or any abuse of an individual's position of
trust and responsibility, and (3) the fundamental standard that investment
company personnel should not take inappropriate advantage of their positions.
In view of the foregoing, the provisions of Section 17(j) of the 1940
Act, the Securities and Exchange Commission's 1940 Act Release No. 23958
"Personal Investment Activities of Investment Company Personnel" (August 24,
1999), the "Report of the Advisory Group on Personal Investing" issued by the
Investment Company Institute on May 9, 1994 and the Securities and Exchange
Commission's September 1994 Report on "Personal Investment Activities of
Investment Company Personnel," the Company has determined to adopt this Code of
Ethics on behalf of the Company to specify a code of conduct for certain types
of personal securities transactions which might involve conflicts of interest or
an appearance of impropriety, and to establish reporting requirements and
enforcement procedures.
<PAGE> 2
III. DEFINITIONS.
A. An "Access Person" means: (1) each Managing General Partner or
officer of the Company; (2) each employee (if any) of the
Company (or of any company in a control relationship to the
Company) who in connection with his or her regular functions
or duties, makes, participates in, or obtains information
regarding the purchase or sale of a security by the Company or
whose functions relate to the making of any recommendations
with respect to such purchases or sales; and (3) any natural
person in a control relationship to the Company who obtains
information concerning recommendations made to the Company
with regard to the purchase or sale of a security.
For purposes of this Code of Ethics, an "Access Person" does
not include any person who is subject to the securities
transaction pre-clearance requirements and securities
transaction reporting requirements of the Code of Ethics
adopted by the Company's investment advisers in compliance
with Rule 17j-1 of the 1940 Act and Rule 204-2(a)(12) of the
Investment Advisers Act of 1940, as applicable.
B. "Restricted Director" or "Restricted Officer" means each
Managing General Partner or officer of the Company who is not
also a director, officer, partner, employee or controlling
person of the Company's investment advisers, custodian or
transfer agent.
C. An Access Person's "immediate family" includes a spouse, minor
children and adults living in the same household as the Access
Person.
D. A security is "held or to be acquired" if within the most
recent 15 days it (1) is or has been held by the Company, or
(2) is being or has been considered by the Company or its
investment advisers for purchase by the Company. A purchase or
sale includes the writing of an option to purchase or sell and
any security that is exchangeable for or convertible into, any
security that is held or to be acquired by the Company.
E. An "Initial Public Offering" means an offering of securities
registered under the Securities Act of 1933, the issuer of
which, immediately before the registration, was not subject to
the reporting requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934.
F. "Investment Personnel" of the Company means:
(i) Any employee of the Company (or of any company in
a control relationship to the Company) who, in connection with
his or her regular functions or duties, makes or participates
in making recommendations regarding the purchase or sale of
securities by the Company.
-2-
<PAGE> 3
(ii) Any natural person who controls the Company and
who obtains information concerning recommendations made to the
Company regarding the purchase or sale of securities by the
Company.
G. A "Limited Offering" means an offering that is exempt from
registration under the Securities Act of 1933 pursuant to
Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule
505, or Rule 506 under the Securities Act of 1933.
H. "Exempt Security" means:
1. Direct obligations of the Government of the United
States; banker's acceptances; bank certificates of
deposit; commercial paper; high quality short-term
debt instruments (any instrument having a maturity at
issuance of less than 366 days and that is rated in
one of the two highest rating categories by a
nationally recognized statistical rating
organization), including repurchase agreements; and
shares of registered open-end investment companies.
2. Securities purchased or sold in any account over
which the Access Person has no direct or indirect
influence or control.
3. Securities purchased or sold in a transaction which
is non-volitional on the part of either the Access
Person or the Company.
4. Securities acquired as a part of an automatic
dividend reinvestment plan.
5. Securities acquired upon the exercise of rights
issued by an issuer pro rata to all holders of a
class of its securities, to the extent such rights
were acquired from such issuer, and sales of such
rights so acquired.
6. Securities which the Company is not permitted to
purchase under the investment objective and policies
set forth in the Company's then current prospectus
under the Securities Act of 1933 or the Company's
registration statement on Form N-1A.
I. "De Minimis Security" means securities issued by any company
included in the Standard and Poor's 500 Stock Index and in an
amount less than $10,000.
IV. POLICIES OF THE COMPANY REGARDING PERSONAL SECURITIES TRANSACTIONS.
A. GENERAL POLICY.
No Access Person of the Company shall engage in any act,
practice or course of business that would violate the
provisions of Rule 17j-1(b) set forth above, or in connection
with any personal investment activity, engage in conduct
inconsistent with this Code of Ethics.
-3-
<PAGE> 4
B. SPECIFIC POLICIES.
1. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS BY
ACCESS PERSONS OTHER THAN RESTRICTED DIRECTORS AND
RESTRICTED OFFICERS.
a. No Access Person who is not a Restricted
Director or Restricted Officer may buy or
sell securities other than Exempt Securities
and De Minimis Securities for his or her
personal portfolio or the portfolio of a
member of his or her immediate family
without obtaining oral authorization from
the Compliance Officer of the Company's
investment advisers PRIOR to effecting such
security transaction.
A written authorization for such security
transaction will be provided by the
investment advisers' Compliance Officer to
the person receiving the authorization (if
granted) and to the person at PFPC Inc.
("PFPC") who has been designated to
administer the Company's Code (the "PFPC
Delegate") to memorialize the oral
authorization that was granted.
NOTE: If an Access Person has
questions as to whether purchasing
or selling a security for his or her
personal portfolio or the portfolio
of a member of his or her immediate
family requires prior oral
authorization, the Access Person
should consult the investment
advisers' Compliance Officer for
clearance or denial of clearance to
trade PRIOR to effecting any
securities transactions.
b. Pre-clearance approval under paragraph (a)
will expire at the close of business on the
trading day after the date on which oral
authorization is received, and the Access
Person is required to renew clearance for
the transaction if the trade is not
completed before the authority expires.
c. No clearance will be given to an Access
Person other than a Restricted Director or
Restricted Officer to purchase or sell any
security (1) on a day when any portfolio of
the Company has a pending "buy" or "sell"
order in that same security until that order
is executed or withdrawn or (2) when the
Compliance Officer has been advised by the
investment adviser that the same security is
being considered for purchase or sale by the
Company.
d. The pre-clearance requirement contained in
paragraph IV.B.1.a, above, shall apply to
all purchases of a beneficial interest in
any security through an Initial Public
Offering or a Limited Offering by any Access
Person who is also classified as Investment
Personnel.
-4-
<PAGE> 5
A record of any decision and the reason
supporting such decision to approve the
acquisition by Investment Personnel of
Initial Public Offerings or Limited
Offerings shall be made by the Compliance
Officer.
2. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTIONS BY
RESTRICTED DIRECTORS AND RESTRICTED OFFICERS.
The Company recognizes that a Restricted Director and
a Restricted Officer do not have on-going, day-to-day
involvement with the operations of the Company. In
addition, it has been the practice of the Company to
give information about securities purchased or sold
by the Company or considered for purchase or sale by
the Company to Restricted Directors and Restricted
Officers in materials circulated more than 15 days
after such securities are purchased or sold by the
Company or are considered for purchase or sale by the
Company. Accordingly, the Company believes that less
stringent controls are appropriate for Restricted
Directors and Restricted Officers, as follows:
a. The securities pre-clearance requirement
contained in paragraph IV.B.1.a. above shall
only apply to a Restricted Director or
Restricted Officer if he or she knew or, in
the ordinary course of fulfilling his or her
official duties as a Managing General
Partner or officer, should have known, that
during the fifteen day period before the
transaction in a security (other than an
Exempt Security or a De Minimis Security) or
at the time of the transaction that the
security purchased or sold by him or her
other than an Exempt Security or a De
Minimis Security was also purchased or sold
by the Company or considered for the
purchase or sale by the Company.
-5-
<PAGE> 6
b. If the pre-clearance provisions of the
preceding paragraph apply, no clearance will
be given to a Restricted Director or
Restricted Officer to purchase or sell any
security (1) on a day when the Company has a
pending "buy" or "sell" order in that same
security until that order is executed or
withdrawn or (2) when the Compliance Officer
has been advised by the investment advisers
that the same security is being considered
for purchase or sale by the Company.
V. PROCEDURES.
A. In order to provide the Company with information to enable it
to determine with reasonable assurance whether the provisions
of this Code are being observed by its Access Persons:
1. Each Access Person of the Company other than a
Managing General Partner who is not an "interested
person" of the Company (as defined in the 1940 Act)
will submit to the Company's PFPC Delegate an Initial
Holdings Report in the form attached hereto as
Exhibit A that lists all securities other than Exempt
Securities beneficially owned(1) by the Access
Person. This report must be submitted within ten days
of becoming an Access Person (or for persons already
designated as an Access Person, by no later than
September 1, 2000), and must include the title of
each security, the number of shares held, and the
principal amount of the security. The Report must
also include a list of any securities accounts
maintained with any broker, dealer or bank.
2. Each Access Person of the Company other than a
Managing General Partner who is not an "interested
person" of the Company (as defined in the 1940 Act)
will also submit to the Company's PFPC Delegate an
Annual Holdings Report attached hereto as Exhibit A
no later than thirty days after the end of the
calendar year. The Annual Holdings Report must
- --------
(1) You will be treated as the "beneficial owner" of a security under this
policy only if you have a direct or indirect pecuniary interest in the security.
(a) A direct pecuniary interest is the opportunity, directly or
indirectly, to profit, or to share the profit, from the
transaction.
(b) An indirect pecuniary interest is any nondirect financial
interest, but is specifically defined in the rules to include
securities held by members of your immediate family sharing
the same household; securities held by a partnership of which
you are a general partner; securities held by a trust of which
you are the settlor if you can revoke the trust without the
consent of another person, or a beneficiary if you have or
share investment control with the trustee; and equity
securities which may be acquired upon exercise of an option or
other right, or through conversion.
For interpretive guidance on this test, you should consult
counsel.
-6-
<PAGE> 7
list all securities other than Exempt Securities
beneficially owned by the Access Person, the title of
each security, the number of shares held, and the
principal amount of the security, as well as a list
of any securities accounts maintained with any
broker, dealer or bank.
3. Each Access Person of the Company other than a
Restricted Director or Officer shall direct his or
her broker to supply to the Company's PFPC Delegate,
on a timely basis, duplicate copies of confirmations
of all securities transactions in which the person
has, or by reason of such transaction acquires any
direct or indirect beneficial ownership and copies of
periodic statements for all securities accounts.
4. Each Access Person of the Company, other than a
Managing General Partner who is not an "interested
person" (as defined in the 1940 Act), shall submit
reports in the form attached hereto as Exhibit B to
the Company's PFPC Delegate, showing all transactions
in securities other than Exempt Securities in which
the person has, or by reason of such transaction
acquires, any direct or indirect beneficial
ownership, as well as all accounts established with
brokers, dealers or banks during the quarter in which
any securities were held for the direct or indirect
beneficial interest of the Access Person. (2) Such
reports shall be filed no later than 10 days after
the end of each calendar quarter. An Access Person of
the Company need not make a quarterly transaction
report under this paragraph if all of the information
required by this paragraph 4 is contained in the
brokerage confirmations or account statements
required to be submitted under paragraph 3.
5. Each Managing General Partner who is not an
"interested person" of the Company need not make an
initial or annual holdings report but shall submit
the same quarterly report as required under paragraph
4 to the Company's PFPC Delegate, but only for a
transaction in a security other than an Exempt
Security where he or she knew at the time of the
transaction or, in the ordinary course of fulfilling
his or her official duties as a Managing General
Partner, should have known that during the 15-day
period immediately preceding or after the date of the
transaction, such security is or was purchased or
sold, or considered for purchase or sale, by the
Company.
6. The Company's PFPC Delegate shall notify each Access
Person of the Company who may be subject to the
pre-clearance requirement or required to make reports
pursuant to this Code that such person is subject to
the pre-clearance or reporting requirements and shall
deliver a copy of this Code to each such person.
- ------------------
(2) See footnote 1 above.
-7-
<PAGE> 8
7. The Company's PFPC Delegate shall review the initial
holdings reports, annual holdings reports, and
quarterly transaction reports received, and as
appropriate compare the reports with the
pre-clearance authorization received, and report to
the Company's Managing General Partners:
a. with respect to any transaction that appears
to evidence a possible violation of this
Code; and
b. apparent violations of the reporting
requirement stated herein.
8. The Managing General Partners shall consider reports
made to it hereunder and shall determine whether the
policies established in Sections IV and V of this
Code of Ethics have been violated, and what
sanctions, if any, should be imposed on the violator,
including but not limited to a letter of censure,
suspension or termination of the employment of the
violator, or the unwinding of the transaction and the
disgorgement of any profits to the Company. The
Managing General Partners shall review the operation
of this Code of Ethics at least once a year.
9. The Company's investment advisers shall adopt,
maintain and enforce separate codes of ethics with
respect to their personnel in compliance with Rule
17j-1 and Rule 204-2(a)(12) of the Investment
Advisers Act of 1940, as applicable, and shall
forward to the Company's Treasurer and the Company's
counsel copies of such codes and all future
amendments and modifications thereto. The Managing
General Partners shall review and approve such codes
at least once a year. Furthermore, any material
changes to an investment advisers' code will be
approved by the Managing General Partners at the next
scheduled quarterly meeting and in no case more than
six months after such change.
10. At each quarterly Managing General Partners' meeting
the Company's Treasurer and investment advisers shall
provide a written report to the Company's Managing
General Partners stating:
a. any reported securities transaction that
occurred during the prior quarter that may
have been inconsistent with the provisions
of the codes of ethics adopted by the
Company's investment advisers; and
b. all disciplinary actions(3) taken in
response to such violations.
11. At least once a year, the Company's
investment advisers shall provide to the
Managing General Partners a written report
which contains: (a) a
- --------------------
(3) Disciplinary action includes but is not limited to any action that has a
material financial effect upon the employee, such as fining, suspending, or
demoting the employee, imposing a substantial fine or requiring the disgorgement
of profits.
-8-
<PAGE> 9
summary of existing procedures concerning personal
investing by advisory persons and any changes in the
procedures during the past year; (b) an evaluation of
current compliance procedures and a report on any
recommended changes in existing restrictions or
procedures based upon the Company's experience under
this Code of Ethics, industry practices, or
developments in applicable laws and regulations; (c)
a description of any issues arising under the code of
ethics or procedures since the last report, including
but not limited to, information about material
violations of the code or procedures and sanctions
imposed in response to material violations; and (d) a
certification that the procedures which have been
adopted are those reasonably necessary to prevent
Access Persons from violating the respective Codes of
Ethics.
12. This Code, the codes of the investment advisers, a
copy of each report by an Access Person, any record
of any violation of this Code and any action taken as
a result thereof, any written report hereunder by the
Company's PFPC Delegate, the Treasurer or investment
advisers, records of approvals relating to Initial
Public Offerings and Limited Offerings, lists of all
persons required to make reports and a list of all
persons responsible for reviewing such reports shall
be preserved with the Company's records for the
period required by Rule 17j-1.
VI. CERTIFICATION.
Each Access Person will be required to certify annually that he or she
has read and understood this Code of Ethics, and will abide by it. Each Access
Person will further certify that he or she has disclosed or reported all
personal securities transactions required to be disclosed or reported under the
Code of Ethics. A form of such certification is attached hereto as Exhibit B.
The Managing General Partners of Chestnut
Street Exchange Fund
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<PAGE> 10
EXHIBIT A
CHESTNUT STREET EXCHANGE FUND
HOLDINGS REPORT
For the Year/Period Ended _______________________
(month/day/year)
[ ] Check Here if this is an Initial Holdings Report
To: PFPC Inc. As delegate of the
above listed Fund
As of the calendar year/period referred to above, I have a
direct or indirect beneficial ownership interest in the securities listed below
which are required to be reported pursuant to the Code of Ethics of the Company:
<TABLE>
<CAPTION>
Title of Number Principal
Security of Shares Amount
<S> <C> <C>
</TABLE>
The name of any broker, dealer or bank with whom I maintain an
account in which my securities are held for my direct or indirect benefit are as
follows:
THIS REPORT (i) EXCLUDES TRANSACTIONS WITH RESPECT TO WHICH I
HAD NO DIRECT OR INDIRECT INFLUENCE OR CONTROL, (ii) EXCLUDES OTHER TRANSACTIONS
NOT REQUIRED TO BE REPORTED, AND (iii) IS NOT AN ADMISSION THAT I HAVE OR HAD
ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES LISTED ABOVE.
Date: Signature:
----------------------------- -----------------------------
Print Name:
----------------------------
<PAGE> 11
EXHIBIT B
CHESTNUT STREET EXCHANGE FUND
SECURITIES TRANSACTION REPORT
For the Calendar Quarter Ended _______________________
(month/day/year)
To: PFPC Inc. , as delegate of the
above listed Fund
During the quarter referred to above, the following
transactions were effected in securities of which I had, or by reason of such
transactions acquired, direct or indirect beneficial ownership, and which are
required to be reported pursuant to the Code of Ethics of the Company:
<TABLE>
<CAPTION>
Nature of Broker/Dealer
Interest Rate Transaction or Bank
Date of Number of Principal and Maturity (Purchase, Through Whom
Security Transaction Shares Amount Date (if applicable) Sale, Other) Price Effected
-------- ----------- ------ ------ -------------------- ------------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
During the quarter referred to above, I established the
following accounts in which securities were held during the quarter for my
direct or indirect benefit:
1. The name of the broker, dealer or bank with whom I
established the account:
2. The date the account was established:
THIS REPORT (i) EXCLUDES TRANSACTIONS WITH RESPECT TO WHICH I
HAD NO DIRECT OR INDIRECT INFLUENCE OR CONTROL, (ii) EXCLUDES OTHER TRANSACTIONS
NOT REQUIRED TO BE REPORTED, AND (iii) IS NOT AN ADMISSION THAT I HAVE OR HAD
ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES LISTED ABOVE.
Date: Signature:
----------------------------- -----------------------------
Print Name:
----------------------------
<PAGE> 12
EXHIBIT C
CHESTNUT STREET EXCHANGE FUND
ANNUAL CERTIFICATE
Pursuant to the requirements of the Code of Ethics of Chestnut
Street Exchange Fund, the undersigned hereby certifies as follows:
1. I have read the Company's Code of Ethics.
2. I understand the Code of Ethics and acknowledge that
I am subject to it.
3. Since the date of the last Annual Certificate (if
any) given pursuant to the Code of Ethics, I have
reported all personal securities transactions and
provided any securities holding reports required to
be reported under the requirements of the Code of
Ethics.
Date: -----------------------------------
Print Name
-----------------------------------
Signature
<PAGE> 1
Exhibit (p)(2)
EMPLOYEE INVESTMENT TRANSACTION POLICY
FOR
BLACKROCK, INC.
AND
ITS AFFILIATED COMPANIES
Effective March 1, 2000
<PAGE> 2
EMPLOYEE INVESTMENT TRANSACTION POLICY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS..................................................................................... i
I. PREAMBLE..................................................................................... 1
A. General Principles.................................................................. 1
B. The General Scope Of The Policy's Application To Personal Investment Transactions... 3
C. The Organization Of This Policy..................................................... 3
D. Questions........................................................................... 4
II. PERSONAL INVESTMENT TRANSACTIONS............................................................. 4
A. In General.......................................................................... 4
B. Reporting Obligations............................................................... 4
1. Use Of Broker-Dealers And Futures Commission Merchants..................... 4
2. Initial Report............................................................. 4
3. New Accounts............................................................... 5
4. Timely Reporting Of Investment Transactions................................ 6
5. Related Accounts........................................................... 6
6. Exemptions From Reporting.................................................. 6
C. Prohibited Or Restricted Investment Transactions.................................... 7
1. Initial Public Offerings................................................... 7
2. Private Placements......................................................... 7
D. Investment Transactions Requiring Prior Notification................................ 7
1. Prior Notification Procedure............................................... 8
2. Exemptions From Prior Notification......................................... 8
(a) Transactions Exempt From Prior Notification....................... 9
(b) Securities Exempt From Prior Notification......................... 9
(c) Futures Contracts Exempt From Prior Notification.................. 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
E. Ban On Short-Term Trading Profits................................................... 10
F. Blackout Periods.................................................................... 10
1. Specific Blackout Periods.................................................. 10
2. Exemptions From Blackout Restrictions...................................... 11
III. INSIDE INFORMATION AND SERVICE AS A DIRECTOR............................................... 11
A. Inside Information.............................................................. 11
B. Service As A Director........................................................... 12
IV. EXEMPTIONS................................................................................... 12
V. COMPLIANCE................................................................................... 13
A. Certifications...................................................................... 13
1. Upon Receipt Of This Policy................................................ 13
2. Annual Certificate Of Compliance........................................... 13
B. Supervisory Procedures.............................................................. 14
1. The Compliance Committee................................................... 14
2. The Compliance Officer..................................................... 14
3. Post-Trade Monitoring And Investigations................................... 14
4. Remedial Actions........................................................... 15
5. Reports Of Violations Requiring Significant Remedial Action................ 15
6. Annual Reports............................................................. 15
VI. EFFECTIVE DATE............................................................................... 16
</TABLE>
APPENDICES
<TABLE>
<S> <C>
I. Definitions Of Capitalized Terms
II. Acknowledgment Of Receipt Of The Policy
III. Annual Certification Of Compliance With The Policy
IV. Initial Report Of Accounts
V. Request For Duplicate Broker Reports
VI. Investment Transaction Prior Notification Form
VII. Fully Discretionary Account Form
</TABLE>
-ii-
<PAGE> 4
EMPLOYEE INVESTMENT TRANSACTION POLICY
FOR BLACKROCK, INC. AND
ITS AFFILIATED COMPANIES
I. PREAMBLE
A. GENERAL PRINCIPLES
This Employee Investment Transaction Policy (the "Policy") is based on
the principle that you, as an officer, director or other Advisory Employee of an
Advisor affiliated with BlackRock, Inc. ("BlackRock"), owe a fiduciary duty of
undivided loyalty to the registered investment companies, institutional
investment clients, personal trusts and estates, guardianships, employee benefit
trusts, and other Advisory Clients which that Advisor serves.(1) Accordingly,
you must avoid transactions, activities, and relationships that might interfere
or appear to interfere with making decisions in the best interests of those
Advisory Clients.
At all times, you must observe the following GENERAL PRINCIPLES:
1. YOU MUST PLACE THE INTERESTS OF ADVISORY CLIENTS FIRST. As a
fiduciary you must scrupulously avoid serving your own
personal interests ahead of the interests of Advisory Clients.
You must adhere to this general fiduciary principle as well as
- ----------
(1) This Policy uses a number of CAPITALIZED TERMS, e.g., Advisor, Advisory
Client, Advisory Employee, Beneficial Ownership, Exempt Security, Fixed Income
Security, Fully Discretionary Account, Futures Contract, Immediate Family,
Investment Transaction, Personal Account, Portfolio Employee, Portfolio Manager,
Related Account, and Security. The first time a capitalized term is used, a
definition is stated in the text or in a footnote. The full definitions of these
capitalized terms are set forth in Appendix I. TO UNDERSTAND YOUR
RESPONSIBILITIES UNDER THE POLICY, IT IS IMPORTANT THAT YOU REVIEW AND
UNDERSTAND ALL OF THE DEFINITIONS OF CAPITALIZED TERMS IN APPENDIX I. As
indicated in Appendix I:
The term "ADVISOR" means any entity affiliated with BlackRock, whether
now in existence or formed after the date hereof, that is registered as
(i) an investment advisor under the Investment Advisers Act of 1940, as
amended, or (ii) a broker-dealer under the Securities Exchange Act of
1934, as amended, other than any such investment advisor or
broker-dealer that has adopted its own employee investment transaction
policy.
The term "ADVISORY CLIENT" means a registered investment company, an
institutional investment client, a personal trust or estate, a
guardianship, an employee benefit trust, or another client with which
the Advisor by which you are employed or with which you are associated
has an investment management, advisory or sub-advisory contract or
relationship.
The term "ADVISORY EMPLOYEE" means an officer, director, or employee of
an Advisor, or any other person identified as a "control person" on the
Form ADV or the Form BD filed by the Advisor with the U.S. Securities
and Exchange Commission, (1) who, in connection with his or her regular
functions or duties, generates, participates in, or obtains information
regarding that Advisor's purchase or sale of a Security by or on behalf
of an Advisory Client; (2) whose regular functions or duties relate to
the making of any recommendations with respect to such purchases or
sales; (3) who obtains information or exercises influence concerning
investment recommendations made to an Advisory Client of that Advisor;
or (4) who has line oversight or management responsibilities over
employees described in (1), (2) or (3), above.
<PAGE> 5
comply with the Policy's specific provisions. Technical
compliance with the Policy will not automatically insulate
from scrutiny any Investment Transaction(2) that indicates an
abuse of your fiduciary duties or that creates an appearance
of such abuse.
Your fiduciary obligation applies not only to your personal
Investment Transactions but also to actions taken on behalf of
Advisory Clients. In particular, you may not cause an Advisory
Client to take action, or not to take action, for your
personal benefit rather than for the benefit of the Advisory
Client. For example, you would violate this Policy if you
caused an Advisory Client to purchase a Security you owned for
the purpose of increasing the value of that Security. If you
are a Portfolio Employee, (3) you would also violate this
Policy if you made a personal investment in a Security that
might be an appropriate
- ----------
(2) For purposes of this Policy, the term "INVESTMENT TRANSACTION" means any
transaction in a Security or Futures Contract in which you have, or by reason of
the transaction will acquire, a Beneficial Ownership interest.
As a GENERAL MATTER, the term "SECURITY" means any stock, note, bond,
debenture or other evidence of indebtedness (including any loan participation or
assignment), limited partnership interest or investment contract OTHER THAN AN
EXEMPT SECURITY (as defined above). The term "Security" includes an OPTION on a
Security, an index of Securities, a currency or a basket of currencies,
including such an option traded on the Chicago Board of Options Exchange or on
the New York, American, Pacific or Philadelphia Stock Exchanges as well as such
an option traded in the over-the-counter market. The term "Security" does NOT
include a physical commodity or a Futures Contract.
The term "FUTURES CONTRACT" includes (a) a futures contract and an
option on a futures contract traded on a U.S. or foreign board of trade, such as
the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York
Mercantile Exchange, or the London International Financial Futures Exchange (a
"Publicly-Traded Futures Contract"), as well as (b) a forward contract, a
"swap", a "cap", a "collar", a "floor" and an over-the-counter option (other
than an option on a foreign currency, an option on a basket of currencies, an
option on a Security or an option on an index of Securities) (a "Privately-
Traded Futures Contract").
As a GENERAL MATTER, you are considered to have a "BENEFICIAL
OWNERSHIP" interest in a Security or Futures Contract if you have the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in that Security or Futures Contract. YOU ARE PRESUMED TO
HAVE A BENEFICIAL OWNERSHIP INTEREST IN ANY SECURITY OR FUTURES CONTRACT HELD,
INDIVIDUALLY OR JOINTLY, BY YOU AND/OR BY A MEMBER OF YOUR IMMEDIATE FAMILY (AS
DEFINED BELOW). In addition, unless specifically excepted by the Compliance
Officer based on a showing that your interest or control is sufficiently
attenuated to avoid the possibility of a conflict, you will be considered to
have a Beneficial Ownership interest in a Security held by: (1) a JOINT ACCOUNT
to which you are a party, (2) a PARTNERSHIP in which you are a general partner,
(3) a LIMITED LIABILITY COMPANY in which you are a manager-member, (4) a TRUST
in which you or a member of your Immediate Family has an interest or (5) an
INVESTMENT CLUB in which you are a member.
See Appendix I for more complete definitions of the terms "Beneficial
Ownership," "Futures Contract," and "Security."
(3) The term "PORTFOLIO EMPLOYEE" means a Portfolio Manager or an Advisory
Employee who provides information or advice to a Portfolio Manager, who helps
execute a Portfolio Manager's decisions, or who directly supervises a Portfolio
Manager. The term "PORTFOLIO MANAGER" means any employee of an Advisor who has
the authority, whether sole or shared or only from time to time, to make
investment decisions or to direct trades affecting an Advisory Client.
-2-
<PAGE> 6
investment for an Advisory Client without first considering
the Security as an investment for the Advisory Client.
2. YOU MUST CONDUCT ALL OF YOUR PERSONAL INVESTMENT TRANSACTIONS
IN FULL COMPLIANCE WITH THIS POLICY, THE PNC CODE OF ETHICS,
AND THE OTHER POLICIES OF PNC BANK CORP. ("PNC") (including
the policies that prohibit insider trading or that restrict
trading in PNC Securities). BlackRock encourages you and your
family to develop personal investment programs. However, those
investment programs must remain within boundaries reasonably
necessary to insure that appropriate safeguards exist to
protect the interests of our Advisory Clients and to avoid
even the APPEARANCE of unfairness or impropriety. Doubtful
situations should be resolved in favor of our Advisory Clients
and against your personal Investment Transactions.
3. YOU MUST NOT TAKE INAPPROPRIATE ADVANTAGE OF YOUR POSITION.
The receipt of investment opportunities, perquisites, gifts or
gratuities from persons seeking to do business, directly or
indirectly, with BlackRock, an affiliate, or an Advisory
Client could call into question the independence of your
business judgment. Doubtful situations should be resolved
against your personal interests.
B. THE GENERAL SCOPE OF THE POLICY'S APPLICATION TO PERSONAL
INVESTMENT TRANSACTIONS
Rule 17j-1 under the Investment Company Act of 1940, as amended,
requires REPORTING of all personal Investment Transactions in Securities (other
than certain "Exempt Securities") by Advisory Employees, whether or not they are
Securities that might be purchased or sold by or on behalf of an Advisory
Client. This Policy implements that reporting requirement.
However, since a primary purpose of the Policy is to avoid conflicts of
interest arising from personal Investment Transactions in Securities and other
instruments that are held or might be acquired on behalf of Advisory Clients,
this Policy only places RESTRICTIONS on personal Investment Transactions in such
investments. This Policy also requires reporting and restricts personal
Investment Transactions in certain Futures Contracts which, although they are
not Securities, are instruments that Advisors buy and sell for Advisory Clients.
Although this Policy applies to all officers, directors and other
Advisory Employees of BlackRock, the Policy recognizes that Portfolio Managers,
and the other Portfolio Employees who provide them with advice and who execute
their decisions, occupy more sensitive positions than other Advisory Employees,
and that it is appropriate to subject their personal Investment Transactions to
greater restrictions.
C. THE ORGANIZATION OF THIS POLICY
The remainder of this Policy is divided into four main topics. Section
II concerns PERSONAL INVESTMENT TRANSACTIONS. Section III describes restrictions
that apply to Advisory Employees who receive INSIDE INFORMATION or seek to serve
on a BOARD OF DIRECTORS OR SIMILAR GOVERNING BODY. Section IV outlines the
procedure for seeking case-by-case EXEMPTIONS from the Policy's requirements.
Section V summarizes the methods for ensuring COMPLIANCE under this Policy. In
addition, the following APPENDICES are also a part of this Policy:
I. Definitions Of Capitalized Terms
II. Acknowledgment Of Receipt Of The Policy
-3-
<PAGE> 7
III. Annual Certification Of Compliance With The Policy
IV. Initial Report Of Accounts
V. Request For Duplicate Broker Reports
VI. Investment Transaction Prior Notification Form
VII. Fully Discretionary Account Form
D. QUESTIONS
Questions regarding this Policy should be addressed to the Compliance
Officer. If you have any question regarding the interpretation of this Policy or
its application to a potential Investment Transaction, you should consult the
Compliance Officer BEFORE you execute that transaction.
II. PERSONAL INVESTMENT TRANSACTIONS
A. IN GENERAL
Subject to the limited exceptions described below, you are required to
REPORT all Investment Transactions in Securities and Futures Contracts made by
you, a member of your Immediate Family, a trust or an investment club in which
you have an interest, or on behalf of any account in which you have an interest
or which you direct.(4) In addition, you must provide PRIOR NOTIFICATION of
certain Investment Transactions in Securities and Futures Contracts that an
Advisor holds or may acquire on behalf of an Advisory Client. (The exercise of
an option is an Investment Transaction for purposes of these requirements.) The
details of these reporting and prior notification requirements are described
below.
B. REPORTING OBLIGATIONS
1. USE OF BROKER-DEALERS AND FUTURES COMMISSION
MERCHANTS
YOU MUST USE A REGISTERED BROKER-DEALER OR FUTURES COMMISSION MERCHANT
to engage in any purchase or sale of a publicly traded Security or Futures
Contract. This requirement also applies to any purchase or sale of a Security or
Futures Contract in which you have, or by reason of the Investment Transaction
will acquire, a Beneficial Ownership interest. Thus, as a general matter, any
Securities or Futures Contract transactions by members of your Immediate Family
will need to be made through a registered broker-dealer or futures commission
merchant.
2. INITIAL REPORT
Within 10 days of commencing employment or within 10 days of any event
that causes you to become subject to this Policy, you must supply to the
Compliance Officer copies of the most recent statements for each and every
Personal Account and Related Account that holds or is
- ----------
(4) The term "IMMEDIATE FAMILY" means any of the following persons who RESIDE IN
YOUR HOUSEHOLD OR WHO DEPEND ON YOU FOR BASIC LIVING SUPPORT: your spouse, any
child, stepchild, grandchild, parent, stepparent, grandparent, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including any adoptive relationships.
-4-
<PAGE> 8
likely to hold a Security or Futures Contract in which you have a Beneficial
Ownership interest, as well as copies of confirmations for any and all
transactions subsequent to the effective dates of those statements.(5) These
documents should be supplied to the Compliance Officer by attaching them to the
form attached hereto as Appendix IV.
On that same form you should supply the name of any registered
broker-dealer and/or futures commission merchant and the number for any Personal
Account and Related Account that holds or is likely to hold a Security or
Futures Contract in which you have a Beneficial Ownership interest for which you
CANNOT supply the most recent account statement. You must also certify, where
indicated on the form, that the contents of the form and the documents attached
thereto disclose all such Personal Accounts and Related Accounts.
In addition, you must also supply, where indicated on the form, the
following information for each Security or Futures Contract in which you have a
Beneficial Ownership interest, to the extent that this information is not
available from the statements attached to the form:
1. A description of the Security or Futures Contract,
including its name or title;
2. The quantity (e.g., in terms of numbers of shares,
units or contracts) and value (in dollars) of the
Security or Futures Contract; and
3. The custodian of the Security or Futures Contract.
3. NEW ACCOUNTS
Upon the opening of a new Personal Account or a Related Account that
holds or is likely to hold a Security or a Futures Contract in which you
- ----------
(5) The term "PERSONAL ACCOUNT" means the following accounts that hold or are
likely to hold a Security or Futures Contract in which you have a Beneficial
Ownership interest:
- any account in your individual name;
- any joint or tenant-in-common account in which you have an
interest or are a participant;
- any account for which you act as trustee, executor, or
custodian; and
- any account over which you have investment discretion or have
the power (whether or not exercised) to direct the acquisition
or disposition of Securities or Futures Contracts (other than
an Advisory Client's account that you manage or over which you
have investment discretion), including the accounts of any
individual or entity that is managed or controlled directly or
indirectly by or through you, such as the account of an
investment club to which you belong. There is a presumption
that you can control accounts held by members of your
Immediate Family sharing the same household. This presumption
may be rebutted only by convincing evidence.
The term "RELATED ACCOUNT" means any account, other than a Personal
Account, that holds a Security or Futures Contract in which you have a direct or
indirect Beneficial Ownership interest (other than an account over which you
have no investment discretion and cannot otherwise exercise control) and any
account (other than an Advisory Client's account) of any individual or entity to
whom you give advice or make recommendations with regard to the acquisition or
disposition of Securities or Futures Contracts (whether or not such advice is
acted upon).
-5-
<PAGE> 9
have a Beneficial Ownership interest, you must give written notice to the
Compliance Officer of the name of the registered broker-dealer or futures
commission merchant for that account, the identifying number for that Personal
Account or Related Account and the date that the account was established.
4. TIMELY REPORTING OF INVESTMENT TRANSACTIONS
You must cause each broker-dealer or futures commission merchant that
maintains a Personal Account or a Related Account that holds a Security or a
Futures Contract in which you have a Beneficial Ownership interest to provide to
the Compliance Officer, on a timely basis, duplicate copies of confirmations of
all transactions in that account and of periodic statements for that account
("Duplicate Broker Reports"). A form for that purpose is attached hereto as
Appendix V.
In addition, you must report to the Compliance Officer, on a timely basis, any
transaction in a Security or Futures Contract in which you have or acquired a
Beneficial Ownership interest that was made without the use of a registered
broker-dealer or futures commission merchant.
5. RELATED ACCOUNTS
The reporting obligations described above also apply to any Related
Account (as defined in Appendix I) and to any Investment Transaction in a
Related Account.
It is important that you recognize that the definitions of "Personal
Account," "Related Account" and "Beneficial Ownership" in Appendix I probably
will require you to provide, or to arrange for the broker-dealer or futures
commission merchant to furnish, copies of reports for any account used by or for
a member of your Immediate Family or a trust in which you or a member of your
Immediate Family has an interest, as well as for any other accounts in which you
may have the opportunity, directly or indirectly, to profit or share in the
profit derived from any Investment Transaction in that account, including the
account of any investment club to which you belong.
6. EXEMPTIONS FROM REPORTING
You need not report Investment Transactions in any account, including a
Fully Discretionary Account,(6) over which neither you nor an Immediate Family
Member has or had any direct or indirect influence or control. For example,
Investment Transactions in the account of your spouse in an employee benefit
plan would not have to be reported if neither you nor your spouse has any
influence or control over those Investment Transactions.
You also need not report Investment Transactions in Exempt Securities
nor need you furnish, or require a broker-dealer or futures commission merchant
to furnish, copies of
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(6) The term "FULLY DISCRETIONARY ACCOUNT" means a Personal Account or Related
Account managed or held by a broker-dealer, futures commission merchant,
investment advisor or trustee as to which neither you nor an Immediate Family
Member: (a) exercises any investment discretion; (b) suggests or receives notice
of transactions prior to their execution; and (c) you do not otherwise has any
direct or indirect influence or control. In addition, to qualify as a Fully
Discretionary Account, the individual broker, registered representative or
merchant responsible for that account must not be responsible for nor receive
advance notice of any purchase or sale of a Security or Futures Contract on
behalf of an Advisory Client. To qualify an account as a Fully Discretionary
Account, the Compliance Officer must receive and approve a written notice, in
the form attached hereto as Appendix VIII, that the account meets the foregoing
qualifications as a Fully Discretionary Account.
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confirmations or periodic statements for accounts that hold ONLY Exempt
Securities.(7) This includes accounts that only hold U.S. Government securities,
money market interests, or shares in registered open-end investment companies
(i.e., mutual funds). This exemption from reporting will end immediately,
however, at such time as there is an Investment Transaction in that account in a
Security that is not an Exempt Security.
C. PROHIBITED OR RESTRICTED INVESTMENT TRANSACTIONS
1. INITIAL PUBLIC OFFERINGS
As an Advisory Employee, you may not acquire Beneficial Ownership of
any Security in an initial public offering, except that, with the approval of
the Compliance Committee and the General Counsel of BlackRock, you may acquire
Beneficial Ownership of a Security in an initial public offering directed or
sponsored by BlackRock. For purposes of this Policy, an initial public offering
shall not include the purchase of a Security in an initial public offering by
(i) a savings bank to its depositors, (ii) a mutual insurance company to its
policyholders, (iii) an issuer of debt securities (other than debt securities
convertible into common or preferred stock) or (iv) with respect to an Advisory
Employee employed by BlackRock International, Ltd. a building society to its
depositors.
2. PRIVATE PLACEMENTS
If you are a Portfolio Employee, you may not acquire Beneficial
Ownership of any Security in a private placement, or subsequently sell that
interest, unless you have received the prior written approval of the Compliance
Officer and of any supervisor designated by the Compliance Officer. Approval
will not be given unless a determination is made that the investment opportunity
should not be reserved for one or more Advisory Clients, and that the
opportunity to invest has not been offered to you by virtue of your position
with an Advisor.
If you have acquired Beneficial Ownership of Securities in a private
placement, you must disclose that investment to your supervisor when you play a
part in any consideration of any investment by an Advisory Client in the issuer
of the Securities, and any decision to make such an investment must be
independently reviewed by a Portfolio Manager who does not have a Beneficial
Ownership interest in any Securities of the issuer.
D. INVESTMENT TRANSACTIONS REQUIRING PRIOR NOTIFICATION
You must give prior notification to the Compliance Officer of ANY
Investment Transaction in Securities or Futures Contracts in a Personal Account
or Related Account, or in
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(7) The term "EXEMPT SECURITY" means any Security (as defined in Appendix I) not
included within the definition of Security in SEC Rule 17j-1(e)(5) under the
Investment Company Act of 1940, as amended, including:
1. A direct obligation of the Government of the United States;
2. Shares of registered open-end investment companies (i.e., mutual
funds); and
3. High quality short-term debt instruments, including, but not
limited to, bankers' acceptances, bank certificates of
deposit, commercial paper and repurchase agreements.
See Appendix I for a more complete definition of "Exempt Security."
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which you otherwise have or will acquire a Beneficial Ownership interest, UNLESS
that Investment Transaction, Security or Futures Contract falls into one of the
following categories that are identified as "exempt from prior notification."
The purpose of prior notification is to permit the Compliance Officer and the
Compliance Committee to take reasonable steps to investigate whether that
Investment Transaction is in accordance with this Policy. Satisfaction of the
prior notification requirement does not, however, constitute approval or
authorization of any Investment Transaction for which you have given prior
notification. As a result, the primary responsibility for compliance with this
Policy rests with you.
1. PRIOR NOTIFICATION PROCEDURE
Prior notification must be given by completing and submitting to the
Compliance Officer a copy of the prior notification form attached hereto as
Appendix VII. No Investment Transaction requiring prior notification may be
executed prior to notice by the Compliance Officer that the prior notification
process has been completed. The time and date of that notice will be reflected
on the prior notification form. Unless otherwise specified, an Investment
Transaction requiring prior notification must be placed and executed by the end
of trading in New York City or, in the case of Advisory Employees employed by
BlackRock International, Ltd., by the end of trading in the United Kingdom on
the day of notice from the Compliance Officer that the prior notification
process has been completed. If a proposed Investment Transaction is not executed
(with the exception of a limit order) within the time specified, you must repeat
the prior notification process before executing the transaction. A notice from a
Compliance Officer that the prior notification process has been completed is no
longer effective if you discover, prior to executing your Investment
Transaction, that the information on your prior notification form is no longer
accurate, or if the Compliance Officer revokes his or her notice for any other
reason.
The Compliance Officer may undertake such investigation as he or she
considers necessary to investigate whether an Investment Transaction for which
prior notification has been sought complies with the terms of this Policy and is
consistent with the general principles described at the beginning of this
Policy.
As part of that investigation, the Compliance Officer or a designee of
the Compliance Officer will determine whether there is a pending buy or sell
order in the same equity Security or Futures Contract, or a Related Security, on
behalf of an Advisory Client.(8) If such an order exists, the Compliance Officer
will not provide notice that the prior notification process has been completed
UNTIL the Advisory Client's order is executed or withdrawn.
2. EXEMPTIONS FROM PRIOR NOTIFICATION
Prior notification will not be required for the following Investment
Transactions, Securities and Futures Contracts. They are exempt only from the
Policy's prior notification requirement, and, unless otherwise indicated, remain
subject to the Policy's other requirements, including its reporting
requirements.
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(8) The term "RELATED SECURITY" means, as to any Security, any instrument
related in value to that Security, including, but not limited to, any option or
warrant to purchase or sell that Security, and any Security convertible into or
exchangeable for that Security.
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(a) TRANSACTIONS EXEMPT FROM PRIOR NOTIFICATION
Prior notification is not required for any of the following Investment
Transactions:
1. Any Investment Transaction in a Fully Discretionary Account
that has been approved as such by the Compliance Officer.
2. Purchases of Securities under dividend reinvestment plans.
3. Purchases of Securities by an exercise of rights issued to the
holders of a class of Securities pro rata, to the extent those
rights are issued with respect to Securities of which you have
Beneficial Ownership.
4. Acquisitions or dispositions of Securities as the result of a
stock dividend, stock split, reverse stock split, merger,
consolidation, spin-off or other similar corporate
distribution or reorganization applicable to all holders of a
class of Securities of which you have Beneficial Ownership.
5. Purchases of common stock of PNC Bank Corp. under the Employee
Stock Purchase Plan.
6. With respect to Advisory Employees who are employed by
BlackRock International, Inc., automatic investments by direct
debit into a personal equity plan (PEP), or similar type of
plan in Exempt Securities if the pre-notification process was
completed for the first such investment.
7. Investment Transactions made by a person who serves on the
Board of Directors of an Advisor and is not involved with the
Advisory operations of such Advisor nor engages in the type of
activities described under (1) (2) or (3) under the term
Advisory Employee as defined in Appendix I.
(b) SECURITIES EXEMPT FROM PRIOR NOTIFICATION
Prior notification is not required for an Investment Transaction in an
Exempt Security, as defined in Appendix I, e.g., U.S. Government securities,
shares in registered open-end investment companies (i.e., mutual funds) and
"high quality short-term debt instruments" (as defined in Appendix I).
(c) FUTURES CONTRACTS EXEMPT FROM PRIOR
NOTIFICATION
Prior notification is not required for an Investment Transaction in the
following Futures Contracts:
1. Currency futures.
2. U.S. Treasury futures.
3. Eurodollar futures.
4. Physical commodity futures (e.g., contracts for future
delivery of grain, livestock, fiber or metals).
5. Futures contracts to acquire Fixed Income Securities issued by
a U.S. Government agency, a foreign government, or an
international or supranational agency.
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6. Futures contracts on the Standard and Poor's 500 (S&P 500) or
the Dow Jones Industrial Average stock indexes.
7. For Advisory Employees who are employed by BlackRock
International, Ltd., futures contracts on the Financial Times
Stock Exchange 100 (FTSE) Index.
E. BAN ON SHORT-TERM TRADING PROFITS
You may not profit from the purchase and sale, or the sale and
purchase, within 60 calendar days, of the same Securities and/or Related
Security. Any such short-term trade must be reversed or unwound, or if that is
not practical, the profits must be disgorged and distributed in a manner
determined by the Compliance Committee.
This short-term trading ban does NOT apply to Investment Transactions
in Exempt Securities (as defined in Appendix I) or in Futures Contracts. This
ban also does NOT apply to a purchase or sale in connection with a Transaction
Exempt From Prior Notification (as described above in Section II.D.2.(a)), a
transaction in a Fully Discretionary Account or a transaction exempt from the
"blackout" periods pursuant to Section II.F.2 below.
You are considered to profit from a short-term trade if Securities of
which you have Beneficial Ownership (including Securities held by Immediate
Family members) are sold for more than their purchase price, even though the
Securities purchased and the Securities sold are held of record or beneficially
by different persons or entities.
F. BLACKOUT PERIODS
Your ability to engage in certain Investment Transactions may be
prohibited or restricted during the "blackout" periods described below:
1. SPECIFIC BLACKOUT PERIODS
a. You may not purchase or sell a Security, a
Related Security, or Futures Contract at a
time when you intend or know of another's
intention to purchase or sell that same
Security, a Related Security, or Futures
Contract, on behalf of an Advisory Client of
ANY Advisor (the "Specific Knowledge
Blackout Period").
b. In addition, if you are a PORTFOLIO
EMPLOYEE, you may not purchase or sell a
Security, a Related Security or a Futures
Contract which you are actively considering
or which you have actively considered and
rejected for purchase or sale for an
Advisory Client within the previous 15
CALENDAR DAYS (the "15-Day Blackout Period")
unless the Compliance Officer, after
consultation with your supervisor, has
approved your Investment Transaction.(9)
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(9) SEC Rule 17j-1 places restrictions on the purchase or sale of any "security
held or to be acquired" by a registered investment company. Rule 17j-1(e)(6)
defines a "security held or to be acquired" by a registered investment company
as including any security which, within the most recent 15 days, "is being or
has been considered by such company or its investment adviser for purchase by
such company."
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<PAGE> 14
c. Finally, if you are a PORTFOLIO MANAGER, you
may not purchase or sell a Security, a
Related Security, or Futures Contract within
7 CALENDAR DAYS before or after a
transaction in that Security, a Related
Security, or Futures Contract, by an
Advisory Client for which you are
responsible (the "7-Day Blackout Period").
For Portfolio Employees or Portfolio Managers, the Compliance Officer
will not give such notice until any applicable 15-Day Blackout Period or 7-Day
Blackout Period has expired or any required approvals or exemptions have been
obtained. An Investment Transaction that violates one of these Blackout
restrictions must be reversed or unwound, or if that is not practical, the
profits must be disgorged and distributed in a manner determined by the
Compliance Committee.
2. EXEMPTIONS FROM BLACKOUT RESTRICTIONS
The foregoing blackout period restrictions do NOT apply to Investment
Transactions in:
a. Exempt Securities, as defined in Appendix I.
b. Securities of a company listed on the Standard & Poor's 100 (S
& P 100) Index.
c. A Futures Contract Exempt From Prior Notification under this
Policy (as described above).
d. A Fully Discretionary Account.
e. With respect to Advisory Employees who are employed by
BlackRock International, Ltd., securities of a company listed
on the Financial Times Stock Exchange 100 (FTSE 100).
III. INSIDE INFORMATION AND SERVICE AS A DIRECTOR
A. INSIDE INFORMATION
As an employee of a subsidiary of PNC, you must comply with the PNC
Insider Trading Policy. A copy of that policy is included in Section E of the
PNC Code of Ethics. In addition, as an Advisory Employee, you must notify the
General Counsel of BlackRock if you receive or expect to receive material
non-public information about an entity that issues securities. The General
Counsel will determine the restrictions, if any, that will apply to your
communications and activities while in possession of that information. In
general, those restrictions will include:
1. An undertaking not to trade, either on your own
behalf or on behalf of an Advisory Client, in the
securities of the entity about which you have
material non-public information.
2. An undertaking not to disclose material non-public
information to other Advisory Employees.
3. An undertaking not to participate in discussions
with or decisions by other Advisory Employees
relating to the entity about which you have material
non-public information.
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The General Counsel, in cooperation with the Compliance Officer, will maintain a
"restricted list" of entities about which Advisory Employees may have material
non-public information. This "restricted list" will be available to the
Compliance Officer when he or she conducts investigations or reviews related to
the Prior Notification Procedure described previously in Section II(D)(1) or the
Post-Trade Monitoring process described below in Section V(B)(3).
B. SERVICE AS A DIRECTOR
You may not serve on the board of directors or other governing board of
any entity unless you have received the prior written approval of the General
Counsel of PNC, to the extent such approval is required under the terms of the
PNC Code of Ethics, and the General Counsel of BlackRock. If permitted to serve
on a governing board, an Advisory Employee will be isolated from those Advisory
Employees who make investment decisions regarding the securities of that entity,
through a "Chinese wall" or other procedures determined by the General Counsel
of BlackRock. In general, the "Chinese wall" or other procedures will include:
1. An undertaking not to trade or to cause a trade on
behalf of an Advisory Client in the securities of
the entity on whose board you serve.
2. An undertaking not to disclose material non-public
information about that entity to other Advisory
Employees.
3. An undertaking not to participate in discussions
with or decisions by other Advisory Employees
relating to the entity on whose board you serve.
Any entity on whose board an Advisory Employee serves will be included on the
"restricted list" referenced in subsection A, above.
IV. EXEMPTIONS
The Compliance Committee, in its discretion, may grant case-by-case
exceptions to any of the foregoing requirements, restrictions or prohibitions,
except that the Compliance Committee may not exempt any Investment Transaction
in a Security (other than an Exempt Security) or a Futures Contract from the
Policy's reporting requirements. Exemptions from the Policy's prior notification
requirements and from the Policy's restrictions on acquisitions in initial
public offerings, short-term trading and trading during blackout periods will
require a determination by the Compliance Committee that the exempted
transaction does not involve a realistic possibility of violating the general
principles described at the beginning of this Policy. An application for a
case-by-case exemption, in accordance with this paragraph, should be made IN
WRITING to the Compliance Officer, who will promptly forward that written
request to the members of the Compliance Committee.
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V. COMPLIANCE
A. CERTIFICATIONS
1. UPON RECEIPT OF THIS POLICY
Upon commencement of your employment or the effective date of this
Policy, whichever occurs later, you will be required to acknowledge receipt of
your copy of this Policy by completing and returning to the Compliance Officer a
copy of the form attached hereto as Appendix II. By that acknowledgment, you
will also agree:
1. To read the Policy, to make a reasonable effort to
understand its provisions, and to ask the Compliance
Officer questions about those provisions you find
confusing or difficult to understand.
2. To comply with the Policy, including its general
principles, its reporting requirements, its
prohibitions, its prior notification requirements,
its short-term trading and blackout restrictions.
3. To advise the members of your Immediate Family about
the existence of the Policy, its applicability to
their personal Investment Transactions, and your
responsibility to assure that their personal
Investment Transactions comply with the Policy.
4. To cooperate fully with any investigation or inquiry
by or on behalf of the Compliance Officer or the
Compliance Committee to determine your compliance
with the provisions of the Policy.
In addition, your acknowledgment will recognize that any failure to comply with
the Policy and to honor the commitments made by your acknowledgment may result
in disciplinary action, including dismissal.
2. ANNUAL CERTIFICATE OF COMPLIANCE
You are required to certify on an annual basis, on a copy of the form
attached hereto as Appendix III, that you have complied with each provision of
your initial acknowledgment (see above). In particular, your annual
certification will require that you certify that you have read and that you
understand the Policy, that you recognize that you are subject to its
provisions, that you complied with the requirements of the Policy during the
year just ended, and that you have disclosed, reported, or caused to be reported
all Investment Transactions required to be disclosed or reported pursuant to the
requirements of the Policy and that you have disclosed, reported or caused to be
reported all Personal Accounts and Related Accounts that hold or are likely to
hold a Security or Futures Contract in which you have a Beneficial Ownership
interest. In addition, you will be required to confirm the accuracy of the
record of information on file with the Advisor with respect to such Personal
Accounts and Related Accounts.
B. SUPERVISORY PROCEDURES
1. THE COMPLIANCE COMMITTEE
The Policy will be implemented, monitored and reviewed by the
Compliance Committee. The initial members of the Compliance Committee will be
appointed by the management committee of BlackRock. The Compliance Committee, by
a simple majority of its members,
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may appoint new members of the Committee, may replace existing members of the
Committee, and may fill vacancies on the Committee. Among other
responsibilities, the Compliance Committee will consider requests for
case-by-case exemptions (described above) and will conduct investigations
(described below) of any actual or suspected violations of the Policy. The
Compliance Committee will determine what remedial actions, if any, should be
taken by an Advisor in response to a violation of the Policy. The Compliance
Committee will also provide reports (described below) regarding significant
violations of the Policy and the procedures to implement the Policy. The
Compliance Committee may recommend changes to those procedures or to the Policy
to the management of the Advisors. Finally, the Compliance Committee will
designate one person to act as Compliance Officer for all Advisors.
2. THE COMPLIANCE OFFICER
The Compliance Officer designated by the Compliance Committee will be
responsible for the day-to-day administration of the Policy for all Advisors,
subject to the direction and control of the Compliance Committee. Based on
information supplied by the management of each Advisor, the Compliance Officer
will forward a copy of the Policy to each Advisory Employee subject to the
Policy and will notify each such person of his or her designation as an Advisory
Employee, Portfolio Employee or Portfolio Manager. The Compliance Officer will
also be responsible for administration of the reporting and prior notification
functions described in the Policy, and will maintain the reports required by
those functions. In addition, the Compliance Officer will attempt to answer any
questions from an Advisory Employee regarding the interpretation or
administration of the Policy. When necessary or desirable, the Compliance
Officer will consult with the Compliance Committee about such questions. The
Compliance Officer may designate one or more Assistant Compliance Officers to
whom the Compliance Officer may delegate any of the duties described in this
paragraph or in the succeeding paragraph, and who shall be empowered to act on
the Compliance Officer's behalf when the Compliance Officer is absent or
unavailable.
3. POST-TRADE MONITORING AND INVESTIGATIONS
The Compliance Officer will review the Duplicate Broker Reports and
other information supplied for each Advisory Employee so that the Compliance
Officer can detect and prevent potential violations of the Policy. This
information may also be disclosed to the Advisor's auditors, attorneys and
regulators. If, based on his or her review of information supplied for an
Advisory Employee, or based on other information, the Compliance Officer
suspects that the Policy may have been violated, the Compliance Officer will
perform such investigations and make such inquiries as he or she considers
necessary. You should expect that, as a matter of course, the Compliance Officer
will make inquiries regarding any personal Investment Transaction in a Security
or Futures Contract that occurs on the same day as a transaction in the same
Security or Futures Contract on behalf of an Advisory Client. If the Compliance
Officer reaches a preliminary conclusion that an Advisory Employee may have
violated this Policy, the Compliance Officer will report that preliminary
conclusion in a timely manner to the Compliance Committee and will furnish to
the Committee all information that relates to the Compliance Officer's
preliminary conclusion. The Compliance Officer may also report his or her
preliminary conclusion and the information relating to that preliminary
conclusion to the Advisor's auditors, attorneys and regulators.
Promptly after receiving the Compliance Officer's report of a possible
violation of the Policy, the Compliance Committee, with the aid and assistance
of the Compliance Officer, will conduct an appropriate investigation to
determine whether the Policy has been violated and will determine what remedial
action should be taken by the Advisor in response to any such violation(s). For
purposes of these determinations, a majority of the Compliance Committee will
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constitute a quorum and action taken by a simple majority of that quorum will
constitute action by the Committee.
4. REMEDIAL ACTIONS
The remedial actions that may be recommended by the Compliance
Committee may include, but are not limited to, disgorgement of profits,
imposition of a fine, censure, demotion, suspension or dismissal. As part of any
sanction, e.g., for violation of the Policy's restrictions on short-term trading
or trading during blackout periods, you may be required to reverse or unwind a
transaction and to forfeit any profit or to absorb any loss from the
transaction. If an Investment Transaction may not be reversed or unwound, you
may be required to disgorge any profits associated with the transaction, which
profits will be distributed in a manner prescribed by the Compliance Committee
in the exercise of its discretion. Profits derived from Investment Transactions
in violation of this Policy may not be offset by any losses from Investment
Transactions in violation of this Policy. Finally, evidence suggesting
violations of criminal laws will be reported to the appropriate authorities, as
required by applicable law.
In determining what, if any, remedial action is appropriate in response
to a violation of the Policy, the Compliance Committee will consider, among
other factors, the gravity of your violation, the frequency of your violations,
whether any violation caused harm or the potential of harm to any Advisory
Client, whether you knew or should have known that your Investment Transaction
violated the Policy, whether you engaged in an Investment Transaction with a
view to making a profit on the anticipated market action of a transaction by an
Advisory Client, your efforts to cooperate with the Compliance Officer's
investigation, and your efforts to correct any conduct that led to a violation.
In rare instances, the Compliance Committee may find that, for equitable
reasons, no remedial action should be taken.
5. REPORTS OF VIOLATIONS REQUIRING SIGNIFICANT REMEDIAL
ACTION
In a timely manner, and not less frequently than annually, the
Compliance Committee will report to the management committee of BlackRock, and
to the directors or trustees of each investment company that is an Advisory
Client, any known Policy violation requiring significant remedial action (as
defined below) and the disposition of that violation. For this purpose, a
significant remedial action means any action that has a significant financial
effect on the violator. Evidence suggesting violations of criminal laws will be
reported to the appropriate authorities, as required by applicable law.
6. ANNUAL REPORTS
The Compliance Committee will furnish an annual report to the
management committee of BlackRock, and to the directors or trustees of each
investment company that is an Advisory Client, that, at a minimum, will:
1. Summarize existing procedures and restrictions concerning
personal investing by Advisory Employees and any changes in
those procedures and restrictions that were made during the
previous year;
2. Summarize any violations of the Policy that resulted in
significant remedial action during the previous year; and
3. Describe any changes in existing procedures or restrictions
that the Compliance Committee recommends based upon its
experience under the Policy, evolving industry practices, or
developments in applicable laws or regulations.
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VI. EFFECTIVE DATE
The provisions of this Policy will take effect on October 1, 1998.
Amendments to this Policy will take effect at the time such amendments are
promulgated and distributed to the Advisory Employees governed by this Policy.
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APPENDIX I
DEFINITIONS OF CAPITALIZED TERMS
The following definitions apply to the capitalized terms used in the
Policy:
ADVISOR
The term "Advisor" means any entity affiliated with BlackRock, whether
now in existence or formed after the date hereof, that is registered as (i) an
investment advisor under the Investment Advisers Act of 1940, as amended, or
(ii) a broker-dealer under the Securities Exchange Act of 1934, as amended,
other than any such investment advisor or broker-dealer that has adopted its own
employee investment transaction policy.
ADVISORY CLIENT
The term "Advisory Client" means a registered investment company, an
institutional investment client, a personal trust or estate, a guardianship, an
employee benefit trust, or another client with which the Advisor by which you
are employed or with which you are associated has an investment management,
advisory or sub-advisory contract or relationship.
ADVISORY EMPLOYEE
The term "Advisory Employee" means an officer, director, or employee of
an Advisor, or any other person identified as a "control person" on the Form ADV
or the Form BD filed by the Advisor with the U.S. Securities and Exchange
Commission, (1) who, in connection with his or her regular functions or duties,
generates, participates in, or obtains information regarding that Advisor's
purchase or sale of a Security by or on behalf of an Advisory Client; (2) whose
regular functions or duties relate to the making of any recommendations with
respect to such purchases or sales; or (3) who obtains information or exercises
influence concerning investment recommendations made to an Advisory Client of
that Advisor or who has line oversight or management responsibilities over
employees who obtain such information or who exercise such influence.
BENEFICIAL OWNERSHIP
As a GENERAL MATTER, you are considered to have a "Beneficial
Ownership" interest in a Security or Futures Contract if you have the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in that Security. YOU ARE PRESUMED TO HAVE A BENEFICIAL
OWNERSHIP INTEREST IN ANY SECURITY OR FUTURES CONTRACT HELD, INDIVIDUALLY OR
JOINTLY, BY YOU AND/OR BY A MEMBER OF YOUR IMMEDIATE FAMILY (AS DEFINED BELOW).
In addition, unless specifically excepted by the Compliance Officer based on a
showing that your interest or control is sufficiently attenuated to avoid the
possibility of a conflict, you will be considered to have a Beneficial Ownership
interest in a Security or Futures Contract held by: (1) a JOINT ACCOUNT to which
you are a party, (2) a PARTNERSHIP in which you are a general partner, (3) a
LIMITED LIABILITY COMPANY in which you are a manager-member, or (4) a TRUST in
which you or a member of your Immediate Family has a vested interest. Although
you may have a Beneficial Ownership interest in a Security or Futures Contract
held in a Fully Discretionary Account (as defined below), the application of
this Policy to such a Security or Futures Contract may be modified by the
special exemptions provided for Fully Discretionary Accounts.
As a TECHNICAL MATTER, the term "Beneficial Ownership" for purposes of
this Policy will be interpreted in the same manner as it would be under SEC Rule
16a-1(a)(2) in determining
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whether a person has beneficial ownership of a security for purposes of Section
16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder.
BLACKROCK
The term "BlackRock" means BlackRock, Inc.
COMPLIANCE COMMITTEE
The term "Compliance Committee" means the committee of persons who have
responsibility for implementing, monitoring and reviewing the Policy, in
accordance with Section V(B)(1) of the Policy.
COMPLIANCE OFFICER
The term "Compliance Officer" means the person designated by the
Compliance Committee as responsible for the day-to-day administration of the
Policy in accordance with Section V(B)(2) of the Policy.
DUPLICATE BROKER REPORTS
The term "Duplicate Broker Reports" means duplicate copies of
confirmations of transactions in your Personal or Related Accounts and of
periodic statements for those accounts.
EXEMPT SECURITY
The term "Exempt Security" means any Security (as defined below) not
included within the definition of Security in SEC Rule 17j-1(e)(5) under the
Investment Company Act of 1940, as amended, including:
1. A direct obligation of the Government of the United
States;
2. Shares of registered open-end investment companies;
and
3. High quality short-term debt instruments, including,
but not limited to, bankers' acceptances, bank
certificates of deposit, commercial paper and
repurchase agreements. For these purposes, a "high
quality short-term debt instrument" means any
instrument having a maturity at issuance of less than
366 days and which is rated in one of the highest two
rating categories by a Nationally Recognized
Statistical Rating Organization, or which is unrated
but is of comparable quality.
4. For Advisory Employees employed by BlackRock
International, Ltd., shares of authorized unit
trusts, open-ended investment companies (OEIC's) and
direct obligations of the Government of the United
Kingdom.
FIXED INCOME SECURITIES
For purposes of this Policy, the term "Fixed Income Securities" means
fixed income Securities issued by agencies or instrumentalities of, or
unconditionally guaranteed by, the Government of the United States, corporate
debt Securities, mortgage-backed and other asset-backed Securities, fixed income
Securities issued by state or local governments or the political subdivisions
thereof, structured notes and loan participations, foreign government debt
Securities, and debt Securities of international agencies or supranational
agencies. For purposes
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of this Policy, the term "Fixed Income Securities" will not be interpreted to
include U.S. Government Securities or any other Exempt Security (as defined
above).
FULLY DISCRETIONARY ACCOUNT
The term "Fully Discretionary Account" means a Personal Account or
Related Account (as defined below) managed or held by a broker-dealer, futures
commission merchant, investment advisor or trustee as to which neither you nor
an Immediate Family Member (as defined below): (a) exercises any investment
discretion; (b) suggests or receives notice of transactions prior to their
execution; and (c) otherwise has any direct or indirect influence or control. In
addition, to qualify as a Fully Discretionary Account, the individual broker,
registered representative or merchant responsible for that account must not be
responsible for nor receive advance notice of any purchase or sale of a Security
or Futures Contract on behalf of an Advisory Client. To qualify an account as a
Fully Discretionary Account, the Compliance Officer must receive and approve a
written notice, in the form attached hereto as Appendix VIII, that the account
meets the foregoing qualifications as a Fully Discretionary Account.
FUTURES CONTRACT
The term "Futures Contract" includes (a) a futures contract and an
option on a futures contract traded on a U.S. or foreign board of trade, such as
the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York
Mercantile Exchange, or the London International Financial Futures Exchange (a
"Publicly-Traded Futures Contract"), as well as (b) a forward contract, a
"swap", a "cap", a "collar", a "floor" and an over-the-counter option (other
than an option on a foreign currency, an option on a basket of currencies, an
option on a Security or an option on an index of Securities, which fall within
the definition of "Security") (a "Privately-Traded Futures Contract"). You
should consult with the Compliance Officer if you have any doubt about whether a
particular Investment Transaction you contemplate involves a Futures Contract.
For purposes of this definition, a Publicly-Traded Futures Contract is defined
by its expiration month, i.e., a Publicly-Traded Futures Contract on a U.S.
Treasury Bond that expires in June is treated as a separate Publicly-Traded
Futures Contract, when compared to a Publicly-Traded Futures Contract on a U.S.
Treasury Bond that expires in July.
IMMEDIATE FAMILY
The term "Immediate Family" means any of the following persons who
RESIDE IN YOUR HOUSEHOLD OR WHO DEPEND ON YOU FOR BASIC LIVING SUPPORT: your
spouse, any child, stepchild, grandchild, parent, stepparent, grandparent,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including any adoptive relationships.
INVESTMENT TRANSACTION
For purposes of this Policy, the term "Investment Transaction" means
any transaction in a Security or Futures Contract in which you have, or by
reason of the transaction will acquire, a Beneficial Ownership interest. The
exercise of an option to acquire a Security or Futures Contract is an Investment
Transaction in that Security or Futures Contract.
PERSONAL ACCOUNT
The term "Personal Account" means the following accounts that hold or
are likely to hold a Security or Futures Contract in which you have a Beneficial
Ownership interest:
- any account in your individual name;
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- any joint or tenant-in-common account in which you have an
interest or are a participant;
- any account for which you act as trustee, executor, or
custodian; and
- any account over which you have investment discretion or have
the power (whether or not exercised) to direct the acquisition
or disposition of Securities or Futures Contracts (other than
an Advisory Client's account that you manage or over which you
have investment discretion), including the accounts of any
individual or entity that is managed or controlled directly or
indirectly by or through you. There is a presumption that you
can control accounts held by members of your Immediate Family
sharing the same household. This presumption may be rebutted
only by convincing evidence.
POLICY
The term "Policy" means this Employee Investment Transaction Policy.
PORTFOLIO EMPLOYEE
The term "Portfolio Employee" means a Portfolio Manager or an Advisory
Employee who provides information or advice to a Portfolio Manager, who helps
execute a Portfolio Manager's decisions, or who directly supervises a Portfolio
Manager.
PORTFOLIO MANAGER
The term "Portfolio Manager" means any employee of an Advisor who has
the authority, whether sole or shared or only from time to time, to make
investment decisions or to direct trades affecting an Advisory Client.
RELATED ACCOUNT
The term "Related Account" means any account, other than a Personal
Account, that holds a Security or Futures Contract in which you have a direct or
indirect Beneficial Ownership interest (other than an account over which you
have no investment discretion and cannot otherwise exercise control) and any
account (other than an Advisory Client's account) of any individual or entity to
whom you give advice or make recommendations with regard to the acquisition or
disposition of Securities or Futures Contracts (whether or not such advice is
acted upon).
RELATED SECURITY
The term "Related Security" means, as to any Security, any instrument
related in value to that Security, including, but not limited to, any option or
warrant to purchase or sell that Security, and any Security convertible into or
exchangeable for that Security. For example, the purchase and exercise of an
option to acquire a Security is subject to the same restrictions that would
apply to the purchase of the Security itself.
SECURITY
As a GENERAL MATTER, the term "Security" means any stock, note, bond,
debenture or other evidence of indebtedness (including any loan participation or
assignment), limited partnership interest, or investment contract, OTHER THAN AN
EXEMPT SECURITY (as defined above). The term "Security" includes an OPTION on a
Security, an index of Securities, a currency or a basket of
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currencies, including such an option traded on the Chicago Board of Options
Exchange or on the New York, American, Pacific or Philadelphia Stock Exchanges
as well as such an option traded in the over-the-counter market. The term
"Security" does NOT include a physical commodity or a Futures Contract. The term
"Security" may include an interest in a limited liability company (LLC) or in a
private investment fund.
As a TECHNICAL MATTER, the term "Security" has the meaning set forth in
Section 2(a)(36) of the Investment Company Act of 1940, which defines a Security
to mean:
Any note, stock, treasury stock, bond debenture, evidence of
indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, preorganization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral rights, any
put, call, straddle, option, or privilege on any security (including a
certificate of deposit) or on any group or index of securities
(including any interest therein or based on the value thereof), or any
put, call, straddle, option, or privilege entered into on a national
securities exchange relating to foreign currency, or, in general, any
interest or instrument commonly known as a "security", or any
certificate of interest or instrument commonly known as a "security",
or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, warrant or right to
subscribe to or purchase any of the foregoing,
EXCEPT THAT the term "Security" does not include any Security that is an Exempt
Security (as defined above), a Futures Contract (as defined above), or a
physical commodity (such as foreign exchange or a precious metal).
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