<PAGE> 1
As filed with the Securities and Exchange Commission on March 27, 1997
Registration No. 2-64358
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 22
on
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
-------------------------
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
(Exact Name of Registrant as Specified in Charter)
Bellevue Park Corporate Center EDWARD J. ROACH
400 Bellevue Parkway, Suite 100 Bellevue Park Corporate Center
Wilmington, Delaware 19809 400 Bellevue Parkway, Suite 100
(Address of Principal Executive Offices) Wilmington, Delaware 19809
Registrant's Telephone Number: (Name and Address of
(302) 792-2555 Agent for Service)
Copy to:
W. BRUCE McCONNEL, III
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on March 30, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 2
CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933(1)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registra-
Registered Registered(2) Unit(2) Price(3) tion Fee
- ---------- ----------- ----- ------ --------
<S> <C> <C> <C> <C>
Shares of
Beneficial Interest
in
Municipal Fund for
Temporary Investment $1,832,269,749 $4.31 $1,832,269,749 $0
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1.) Registrant has registered an indefinite number of shares of beneficial
interest in MuniFund, MuniCash and Intermediate Municipal Fund
Portfolios under the Securities Act of 1933 pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant's Rule 24f-2
Notice for its fiscal year ending November 30, 1996 for Registration
No. 2-64358 was filed on January 21, 1997.
(2.) Estimated solely for the purpose of calculating the registration fees
pursuant to Rule 24e-2 under the Investment Company Act of 1940 and
Rule 457(c) under the Securities Act of 1933, based on an offering
price of $4.31 with respect to its Portfolio shares in Municipal Fund
for Temporary Investment on March 24, 1997.
(3.) The maximum aggregate offering price for Registrant's Portfolio shares
with respect to its MuniFund, MuniCash and Intermediate Municipal Fund
Portfolios is calculated pursuant to Rule 24e-2 under the 1940 Act.
During the year ended November 30, 1996, Registrant redeemed a total of
5,351,938,462 MuniFund Portfolio Shares, 5,168,334,969 MuniCash
Portfolio Shares and 61,522 Intermediate Municipal Fund Portfolio
Shares, respectively. Of these redeemed shares, 4,118,073,183 MuniFund
Portfolio Shares, 4,569,991,891 MuniCash Portfolio Shares and 130
Intermediate Municipal Fund Portfolio Shares were used for reductions
pursuant to paragraph (c) of Rule 24f-2 in Registrant's Rule 24f-2
Notice dated January 21, 1997 for the year ended November 30, 1996, and
none of the redeemed shares were used for reductions pursuant to Rule
24e-2 in previous post-effective amendments filed during the fiscal
year ended November 30, 1996. As a result, 1,233,865,279 redeemed
MuniFund Portfolio Shares, 598,343,078 redeemed MuniCash Portfolio
Shares and 61,392 redeemed Intermediate Municipal Fund Portfolio Shares
are being used to reduce, pursuant to paragraph (a) of Rule 24e-2, the
number of shares for which the registration fee is payable with respect
to this Post-Effective Amendment.
<PAGE> 3
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
(MuniFund)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
- -------------- ------------------
<S> <C>
1. Cover Page............................. Cover Page
2. Synopsis............................... Background and Expense
Information
3. Condensed Financial
Information.......................... Financial Highlights;
Yields
4. General Description of
Registrant........................... Cover Page; Financial
Highlights; Investment
Objective and
Policies; Description
of Shares and
Miscellaneous
5. Management of the Fund................. Management of the
Fund; Dividends
6. Capital Stock and Other
Securities........................... Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered.............................. Management of the
Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase............... Purchase and
Redemption of Shares
9. Pending Legal Proceedings.............. Inapplicable
</TABLE>
<PAGE> 4
MuniFund
An Investment Portfolio Offered by
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
<TABLE>
<S> <C>
400 Bellevue Parkway For purchase and redemption orders only call:
Suite 100 800-441-7450 (in Delaware: 302-791-5350).
Wilmington, DE 19809 For yield information call: 800-821-6006
(MuniFund shares code: 50; MuniFund Dollar
shares code: 59).
For other information call: 800-821-7432.
</TABLE>
Municipal Fund for Temporary Investment (the "Company") is a no-load,
diversified, open-end investment company that currently offers shares in three
separate investment portfolios. The two classes of shares described in this
Prospectus represent interests in the MuniFund portfolio, a money market
portfolio (the "Fund"). The Fund's investment objective is to provide
institutions with as high a level of current interest income exempt from federal
income taxes as is consistent with of principal. The Fund invests substantially
all of its assets in short-term tax-exempt obligations issued by state and local
governments.
Fund shares may not be purchased by individuals directly but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to MuniFund Shares, investors may purchase MuniFund Dollar Shares
("Dollar Shares"), which accrue daily dividends in the same manner as MuniFund
Shares but bear all fees payable by the Fund to institutional investors for
certain services they provide to the beneficial owners of such Shares. (See
"Management of the Fund--Service Organizations.")
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED, OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES,
OR THE U.S. GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FUND
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL. THERE CAN BE NO ASSURANCE THAT
IT WILL BE ABLE TO MAINTAIN ITS NET ASSET VALUE
OF $1.00 PER SHARE.
------------------------
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's investment adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated March
30, 1997, has been filed with the Securities and Exchange Commission and is
available to investors without charge by calling the Fund at 800-821-7432. The
Statement of Additional Information, as amended from time to time, is
incorporated in its entirety by reference into this Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED, BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
March 30, 1997
<PAGE> 5
BACKGROUND AND EXPENSE INFORMATION
Two classes of Shares are offered by this Prospectus: MuniFund Shares and
Dollar Shares. Shares of each class represent equal, pro rata interests in the
Fund and accrue daily dividends in the same manner except that the Dollar Shares
bear fees payable by the Fund (at the rate of .25% per annum) to institutional
investors for services they provide to the beneficial owners of such shares.
(See "Management of the Fund--Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
MUNIFUND
MUNIFUND DOLLAR
ESTIMATED ANNUAL FUND OPERATING EXPENSES SHARES SHARES
- ----------------------------------------------------------- ------------- -------------
<S> <C> <C> <C> <C>
(as a percentage of average net assets)
Management Fees (net of waivers)...................... .10% .10%
Other Expenses........................................ .17% .42%
Administration Fees (net of waivers)............. .10% .10%
Shareholder Servicing Fees....................... 0% .25%
Miscellaneous.................................... .07% .07%
--- --- --- ---
Total Fund Operating Expenses
(net of waivers).................................... .27% .52%
=== ===
</TABLE>
- ------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------- ------- ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming: (1) a 5% annual return; and (2)
redemption at the end of each time period with respect
to the following shares:
MuniFund shares:................................... $ 3 $ 9 $15 $ 34
Dollar Shares:..................................... $ 5 $17 $29 $ 65
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. In addition, institutional investors may charge
fees for providing services in connection with their customers' investments in
Dollar Shares. (For more complete descriptions of the various costs and
expenses, see "Management of the Fund" in this Prospectus and the Statement of
Additional Information and the financial statements and related notes.) Absent
fee waivers and expense reimbursements for such period, the estimated "Total
Fund Operating Expenses" for MuniFund Shares and Dollar Shares for the fiscal
year ended November 30, 1996 would have been .42% and .67%, respectively, of the
average daily net assets of the MuniFund portfolio. The investment adviser and
administrators may from time to time waive the advisory and administration fees
otherwise payable to them or may reimburse the Fund for its operating expenses.
The foregoing table has not been audited by the Fund's independent accountants.
2
<PAGE> 6
FINANCIAL HIGHLIGHTS
The following financial highlights for MuniFund Shares and Dollar Shares
have been derived from the financial statements of the Fund for the fiscal year
ended November 30, 1996, and for each of the nine preceding fiscal years. The
financial highlights for the fiscal years set forth below have been audited by
KPMG Peat Marwick LLP, independent accountants whose report on the financial
statements and financial highlights (for the most recent five years) of the Fund
is incorporated by reference into the Statement of Additional Information. The
tables should be read in conjunction with the financial statements and related
notes incorporated by reference into the Statement of Additional Information.
Further information about the performance of the Fund is available in the annual
report to shareholders, which may be obtained without charge by calling
800-821-7432.
MUNIFUND SHARES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- --------- --------- --------- -------
Income from investment
operations:
Net investment income........... .0326 .0360 .0255 .0224 .0285 .0437 .0562
------- ------- ------- --------- --------- --------- -------
Less distributions:
Dividends to shareholders from
net investment income......... (.0326) (.0360) (.0255) (.0224) (.0285) (.0437) (.0562)
------- ------- ------- --------- --------- --------- -------
Net asset value, end of
period.......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ========= ========= ========= =======
Total return.................... 3.31% 3.66% 2.58% 2.27% 2.89% 4.46% 5.77%
Ratios/Supplemental data:
Net assets, end of period
(000s).......................... 530,204 720,318 687,895 1,019,749 1,006,324 1,060,468 988,069
Ratio of expenses to average
daily net assets(1)........... .27% .27% .26% .25% .30% .30% .30%
Ratio of net investment income
to average daily net assets... 3.26% 3.59% 2.53% 2.24% 2.86% 4.40% 5.62%
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------
1989 1988(2) 1987(2)
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of
period........................ $ 1.00 $ 1.00 $ 1.00
--------- --------- ---------
Income from investment
operations:
Net investment income........... .0602 .0494 .0431
--------- --------- ---------
Less distributions:
Dividends to shareholders from
net investment income......... (.0602) (.0494) (.0431)
--------- --------- ---------
Net asset value, end of
period.......................... $ 1.00 $ 1.00 $ 1.00
========= ========= =========
Total return.................... 6.19% 5.21% 4.50%
Ratios/Supplemental data:
Net assets, end of period
(000s).......................... 1,075,732 1,662,051 2,163,284
Ratio of expenses to average
daily net assets(1)........... .30% .29% .30%
Ratio of net investment income
to average daily net assets... 6.01% 4.91% 4.31%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been 0.42%, 0.41%, 0.41%,
0.41%, 0.41%, 0.41%, 0.42%, 0.40%, 0.38% and 0.36% for the years ended
November 30, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987,
respectively.
(2) Total return data has not been audited.
3
<PAGE> 7
MUNIFUND DOLLAR SHARES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
------- ------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income............... .0301 .0335 .0230 .0199 .0260 .0412 .0537
------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends to shareholders from net
investment income................. (.0301) (.0335) (.0230) (.0199) (.0260) (.0412) (.0537)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ======
Total return........................ 3.06% 3.41% 2.33% 2.02% 2.64% 4.21% 5.52%
Ratios/Supplemental data:
Net assets, end of period (000s).... 61,396 6,474 2,785 6,783 1,414 26,418 2,187
Ratio of expenses to average daily
net assets(1)..................... .52% .52% .51% .50% .55% .55% .55%
Ratio of net investment income to
average daily net assets.......... 3.01%(3) 3.34% 2.28% 1.99% 2.61% 4.15% 5.37%
<CAPTION>
1989 1988(2) 1987(2)
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of
period............................ $ 1.00 $ 1.00 $ 1.00
------ ------ ------
Income from investment operations:
Net investment income............... .0577 .0469 .0406
------ ------ ------
Less distributions:
Dividends to shareholders from net
investment income................. (.0577) (.0469) (.0406)
------ ------ ------
Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00
====== ====== ======
Total return........................ 5.94% 4.96% 4.25%
Ratios/Supplemental data:
Net assets, end of period (000s).... 10,680 18,243 21,333
Ratio of expenses to average daily
net assets(1)..................... .55% .54% .55%
Ratio of net investment income to
average daily net assets.......... 5.76% 4.66% 4.06%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been 0.67%, 0.66%, 0.66%,
0.66%, 0.66%, 0.66%, 0.67%, 0.65%, 0.63% and 0.61% for the years ended
November 30, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987,
respectively.
(2) Total return data has not been audited.
4
<PAGE> 8
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to provide investors with as high a
level of current interest income exempt from federal income tax as is consistent
with relative stability of principal. There can be no assurance that the Fund
will achieve its investment objective. The Fund is a money market fund that is
subject to the quality, diversification and other requirements of Rule 2a-7
under the Investment Company Act of 1940, as amended (the "1940 Act") and other
rules of the Securities and Exchange Commission (the "SEC").
In pursuing its investment objective, the Fund invests substantially all of
its assets in a diversified portfolio of short-term tax-exempt obligations
issued by or on behalf of states, territories, and possessions of the United
States, the District of Columbia, and their respective authorities, agencies,
instrumentalities, and political subdivisions and tax-exempt derivative
securities such as tender option bonds, participations, beneficial interests in
trusts and partnership interests (collectively, "Municipal Obligations"). The
Fund will not knowingly purchase securities the interest on which is subject to
federal income tax. (See, however, "Taxes" below concerning treatment of
exempt-interest dividends paid by the Fund for purposes of the federal
alternative minimum tax applicable to particular classes of investors.)
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance, and opinions relating
to the validity of and the tax-exempt status of payments received by the Fund
from tax-exempt derivative securities are rendered by counsel to the respective
sponsors of such securities. The Fund and its investment adviser will rely on
such opinions and will not review independently the underlying proceedings
relating to the issuance of Municipal Obligations, the creation of any
tax-exempt derivative securities, or the bases for such opinions.
The Fund will purchase only Municipal Obligations which are "First Tier
Eligible Securities" (as defined by the SEC) and which present minimal credit
risks as determined by the Fund's investment adviser pursuant to guidelines
approved by the Company's Board of Trustees. First Tier Eligible Securities
consist of the following types of securities: (i) securities that have short-
term debt ratings at the time of purchase in the highest rating category by at
least two unaffiliated nationally recognized statistical rating organizations
("Rating Agencies") (or one Rating Agency if the security was rated by only one
Rating Agency); (ii) securities that are issued by an issuer with such ratings;
or (iii) securities without such short-term ratings that have been determined to
be of comparable quality by the Fund's investment adviser pursuant to guidelines
approved by the Company's Board of Trustees. The Appendix to the Statement of
Additional Information includes a description of applicable ratings by Rating
Agencies.
Except during periods of unusual market conditions or during temporary
defensive periods, the Fund will invest substantially all, but in no event less
than 80%, of its total assets in Municipal Obligations with remaining maturities
of 397 days (thirteen months) or less as determined in accordance with the SEC
rules. The Fund may hold uninvested cash reserves pending investment, during
temporary defensive periods or if, in the opinion of the Fund's investment
adviser, suitable
5
<PAGE> 9
tax exempt obligations are unavailable. There is no percentage limitation on the
amount of assets which may be held uninvested. Uninvested cash reserves will not
earn income.
Except for the investment limitations enumerated below, the Fund's
investment objective and the policies described above are not fundamental and
may be changed by the Company's Board of Trustees without the affirmative vote
of the holders of a majority of the Fund's outstanding shares. If there is a
change in the investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current financial
position and needs. (A full list of the complete investment limitations that
cannot be changed without a vote of shareholders is contained in the Statement
of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase any securities other than Municipal Obligations and put
options with respect to such obligations.
2. Purchase the securities of any issuer if as a result more than 5%
of the value of the Fund's assets would be invested in the securities of
such issuer except that up to 25% of the value of the Fund's assets may be
invested without regard to this 5% limitation.
3. Borrow money except from banks for temporary purposes and then in
amounts not in excess of 10% of the value of the Fund's assets at the time
of such borrowing; or mortgage, pledge or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of the Fund's
assets at the time of such borrowing. (This borrowing provision is not for
investment leverage, but solely to facilitate management of the Fund's
portfolio by enabling the Fund to meet redemption requests where the
liquidation of portfolio securities is deemed to be disadvantageous or
inconvenient.)
4. Knowingly invest more than 10% of the value of the Fund's assets
in securities with legal or contractual restrictions on resale.
In addition, without the affirmative vote of the holders of a majority of
the Fund's outstanding shares, the Fund may not change its policy of investing
at least 80% of its total assets in obligations the interest on which is exempt
from federal income tax (except during periods of unusual market conditions or
during temporary defensive periods). Securities issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities (including securities backed by
the full faith and credit of the United States) are not deemed to be subject to
the second investment limitation above.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value of the
Fund's portfolio securities will not constitute a violation of such limitation.
TYPES OF MUNICIPAL OBLIGATIONS
The two principal classifications of Municipal Obligations which may be
held by the Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and
6
<PAGE> 10
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Revenue securities include private activity bonds which
are not payable from the unrestricted revenues of the issuer. Consequently, the
credit quality of private activity bonds is usually directly related to the
credit standing of the corporate user of the facility involved.
The Fund's portfolio may also include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which created
the issuer.
OTHER INVESTMENT PRACTICES
Municipal Obligations purchased by the Fund may include variable rate
demand notes. Such notes are frequently not rated by credit rating agencies, but
unrated notes purchased by the Fund will be determined by the Fund's investment
adviser to be of comparable quality at the time of purchase to rated instruments
purchasable by the Fund. Where necessary to ensure that a note is a First Tier
Eligible Security, the Fund will require that the issuer's obligation to pay the
principal of the note be backed by an unconditional bank letter or line of
credit, guarantee, or commitment to lend. While there may be no active secondary
market with respect to a particular variable rate demand note purchased by the
Fund, the Fund may, upon the notice specified in the note, demand payment of the
principal of the note at any time or during specified periods not exceeding
thirteen months depending upon the instrument involved, and may resell the note
at any time to a third party. The absence of such an active secondary market,
however, could make it difficult for the Fund to dispose of a variable rate
demand note if the issuer were to default on its payment obligation or during
periods that the Fund is not entitled to exercise its demand rights, and the
Fund could, for this or other reasons, suffer a loss to the extent of the
default. While, in general, the Fund will invest only in securities that mature
within thirteen months of purchase, the Fund may invest in variable rate demand
notes which have nominal maturities in excess of thirteen months, if such
instruments carry demand features that comply with conditions established by the
SEC.
The Fund may also purchase Municipal Obligations on a "when-issued" basis.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield. The Fund will generally not pay for
such securities or start earning interest on them until they are received.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of interest
rates. The Fund expects that commitments to purchase when-issued securities will
not exceed 25% of the value of its total assets absent unusual market
conditions. The Fund does not intend to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective.
In addition, the Fund may acquire "stand-by commitments" with respect to
Municipal Obligations held in its portfolio. Under a stand-by commitment, a
dealer would agree to purchase at the Fund's option specified Municipal
Obligations at a specified price. The Fund will acquire
7
<PAGE> 11
stand-by commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes.
Although the Fund may invest more than 25% of its net assets in (i)
Municipal Obligations whose issuers are in the same state, (ii) Municipal
Obligations the interest on which is paid solely from revenues of similar
projects, and (iii) private activity bonds, it does not presently intend to do
so on a regular basis. To the extent the Fund's assets are concentrated in
Municipal Obligations that are payable from the revenues of similar projects,
are issued by issuers located in the same state, or are concentrated in private
activity bonds, the Fund will be subject to the peculiar risks presented by the
laws and economic conditions relating to such states, projects, and bonds to a
greater extent than it would be if its assets were not so concentrated.
The Fund will not knowingly invest more than 10% of the value of its total
net assets in illiquid securities, including securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not deemed illiquid for
purposes of this limitation. The Fund's investment adviser will monitor the
liquidity of such restricted securities under the supervision of the Board of
Trustees. (See "Investment Objectives and Policies--Illiquid Securities" in the
Statement of Additional Information.)
The Fund may purchase securities which are not registered under the
Securities Act of 1933 (the "1933 Act") but which can be sold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act. Any such
security will not be considered illiquid so long as it is determined by the
Board of Trustees or the adviser, acting under guidelines approved and monitored
by the Board, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in a portfolio during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities.
The value of the Fund's portfolio securities can be expected to vary
inversely with changes in prevailing interest rates.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
acceptance of a purchase order by PFPC, the Fund's transfer agent. Purchase
orders for shares are accepted only on days on which both the New York Stock
Exchange and the Federal Reserve Bank of Philadelphia are open for business (a
"Business Day") and must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or through the Fund's
computer access program. Orders accepted before 12:00 noon, Eastern time, for
which payment has been received by PNC Bank, the Fund's custodian, will be
executed at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M.,
Eastern time (or orders accepted earlier in the same day for which payment has
not been received by 12:00 noon), will be executed at 4:00 P.M., Eastern time,
if payment has been received by PNC Bank by that time. Orders received at other
times, and orders for which payment has not been received by 4:00 P.M., Eastern
time, will not be accepted, and notice thereof will be given to the institution
placing the order.
8
<PAGE> 12
(Payment for orders which are not received or accepted will be returned after
prompt inquiry to the sending institution.) The Fund may in its discretion
reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for MuniFund and $5,000 for Dollar Shares, however,
broker-dealers and other institutional investors may set a higher minimum for
their customers. There is no minimum subsequent investment. The Fund, at its
discretion, may reduce the minimum initial investment for MuniFund Shares for
specific institutions whose aggregate relationship with the Provident
Institutional Funds is substantially equivalent to this $3 million minimum and
warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency, and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC's receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC before 12:00 noon, Eastern time, on a Business Day is normally made in
federal funds wired to the redeeming shareholder on the same day. Payment for
redemption orders which are received between 12:00 noon and 4:00 P.M., Eastern
time, or on a day when PNC Bank is closed, is normally wired in federal funds on
the next day following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's MuniFund
Shares account falls below an average of $100,000 in any particular calendar
month, the account may be charged an account maintenance fee with respect to
that month. In addition, the Fund may also redeem shares involuntarily or
suspend the right of redemption or under certain special circumstances described
in the Statement of Additional Information under "Additional Purchase and
Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both
9
<PAGE> 13
the Federal Reserve Bank of Philadelphia and the New York Stock Exchange are
open for business. Currently, one or both of these institutions are closed on
the customary national business holidays of New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence
Day, Labor Day, Columbus Day (observed), Veterans Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each class of the Fund is
calculated by adding the value of all securities and other assets belonging to
the Fund, subtracting liabilities attributable to each class, and dividing the
result by the total number of the Fund's outstanding shares of each class. In
computing net asset value, the Fund uses the amortized cost method of valuation
as described in the Statement of Additional Information under "Additional
Purchase and Redemption Information." The Fund's net asset value per share for
purposes of pricing purchase and redemption orders is determined independently
of the net asset values of the shares in the Company's other investment
portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customer accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC is one of the largest bank managers of mutual funds,
with assets currently under management in excess of $30 billion. PIMC was
organized in 1977 by PNC Bank to perform advisory services for investment
companies, and has its principal offices at 400 Bellevue Parkway, Wilmington,
Delaware 19809. PNC Bank serves as the Fund's sub-adviser. PNC Bank is one of
the largest bank managers of investments for individuals in the United States,
and together with its predecessors has been in the business of managing the
investments of fiduciary and other accounts since 1847. PNC Bank is a
wholly-owned, indirect subsidiary of PNC Bank Corp., and has its principal
offices at 1600 Market Street, Philadelphia, Pennsylvania 19103. In 1973,
Provident National Bank (a predecessor to PNC Bank) commenced advising the first
institutional money market mutual fund--a U.S. dollar-denominated constant net
asset value fund--offered in the United States. PIMC and PNC Bank also serve as
investment adviser and sub-adviser, respectively, to the Company's MuniCash and
Intermediate Municipal Fund portfolios.
PNC Bank Corp., a multi-bank holding company headquartered in Pittsburgh,
Pennsylvania, is one of the largest financial service organizations in the
United States, with banking subsidiaries in Pennsylvania, New Jersey, Delaware,
Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major businesses include
corporate banking, consumer banking, real estate banking, mortgage banking and
asset management.
10
<PAGE> 14
As investment adviser, PIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. PIMC also
maintains certain of the Fund's financial accounts and records and computes the
Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly, based on the Fund's average daily net assets. PIMC
and the administrators may from time to time reduce the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. Any fees waived or expenses reimbursed by PIMC and the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended November 30, 1996, the Fund paid investment advisory fees
aggregating .10% of the Fund's average daily net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the investment advisory fee paid by the Fund to PIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no
effect on the investment advisory fees payable by the Fund to PIMC. PNC Bank
also serves as the Fund's custodian. The services provided by PNC Bank and PIMC
and the fees payable by the Fund for these services are described further in the
Statement of Additional Information under "Management of the Fund."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve as
administrators. PFPC is an indirect, wholly-owned subsidiary of PNC Bank Corp. A
majority of the outstanding stock of PDI is owned by its officers. The
administrative services provided by the administrators, which are described more
fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Fund; accumulating information for and coordinating the preparation of
reports to the Fund's shareholders and the SEC; and maintaining the registration
or qualification of the Fund's shares for sale under state securities laws. PFPC
and PDI are each responsible for carrying out the duties undertaken pursuant to
the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee, computed daily and payable monthly, based on the Fund's
average net assets. (For information regarding the administrators' fee waivers
and expense reimbursements, see "Investment Adviser and Sub-Adviser" above.) The
Fund also reimburses each administrator for its reasonable out-of-pocket
expenses incurred in connection with the Fund's computer access program. For the
fiscal year ended November 30, 1996, the Fund paid administration fees
aggregating .10% of its average daily net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by
11
<PAGE> 15
PFPC and PDI and the fees payable by the Fund for these services are described
further in the Statement of Additional Information under "Management of the
Funds."
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administrators," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent. The distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for the continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
SERVICE ORGANIZATIONS
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to MuniFund Shares except that they bear the service fees described
below and enjoy certain exclusive voting rights on matters relating to these
fees. The Fund will enter into an agreement with each Service Organization which
purchases Dollar Shares requiring it to provide support services to its
customers who are the beneficial owners of such shares in consideration of the
Fund's payment of .25% (on an annualized basis) of the average daily net asset
value of the Dollar Shares held by the Service Organization for the benefit of
customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Funds--Service Organizations,"
include aggregating and processing purchase and redemption requests from
customers and placing net purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers; providing information
periodically to customers showing their positions in Dollar Shares; and
providing sub-accounting or the information necessary for subaccounting with
respect to Dollar Shares beneficially owned by customers. Under the terms of the
agreements, Service Organizations are required to provide to their customers a
schedule of any fees that they may charge to the customers in connection with
their investments in Dollar Shares. MuniFund Shares are sold to institutions
that have not entered into servicing agreements with the Fund in connection with
their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended November 30, 1996, the Fund's total
expenses for MuniFund Shares and Dollar Shares were .27% and .52% of the average
daily net assets. With regard to fees paid exclusively by Dollar Shares, see
"Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged
12
<PAGE> 16
continuously in the issuance of its shares, and prohibit banks generally from
issuing, underwriting, selling or distributing securities such as Fund shares.
Such banking laws and regulations do not prohibit such a holding company or
affiliate or banks generally from acting as investment adviser, transfer agent
or custodian to such an investment company, or from purchasing shares of such a
company for or upon the order of customers. PNC Bank, PIMC and PFPC, as well as
some Service Organizations, are subject to such banking laws and regulations,
but believe they may perform the services for the Fund contemplated by their
respective agreements, this Prospectus and the Statement of Additional
Information without violating applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to shareholders of record at the close of business on the day of
declaration. Shares begin accruing dividends on the day the purchase order for
the shares is executed and continue to accrue dividends through the day before
such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class. The Fund does not expect to
realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund but may differ in amount because of the difference in the expenses paid by
each class.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19899, and will become
effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
13
<PAGE> 17
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least the sum of 90% of its exempt-interest income net of
certain deductions and 90% of its investment company taxable income for such
year. Dividends derived from exempt-interest income may be treated by the Fund's
shareholders as items of interest excludable from their gross income under
Section 103(a) of the Code, unless under the circumstances applicable to the
particular shareholder the exclusion would be disallowed. (See the Statement of
Additional Information under "Additional Information Concerning Taxes.")
If the Fund should hold certain private activity bonds issued after August
7, 1986, shareholders must include, as an item of tax preference, the portion of
dividends paid by the Fund that is attributable to interest on such bonds in
their federal alternative minimum taxable income for purposes of determining
liability (if any) for the 26-28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of .12% on the excess of
the corporation's modified federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
To the extent, if any, dividends paid to shareholders are derived from
taxable income or from long-term or short-term capital gains, such dividends
will not be exempt from federal income tax, whether such dividends are paid in
the form of cash or additional shares, and may also be subject to state and
local taxes. Under state or local law, the Fund's distributions of net
investment income may be taxable to investors as dividend income even though a
substantial portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year provided that such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. No
attempt is made to present a detailed explanation of the federal, state or local
income tax treatment of the Fund or its shareholders, and this discussion is not
intended as a substitute for careful tax planning. Accordingly, potential
investors in the Fund should consult their tax advisors with specific reference
to their own tax situation.
YIELDS
From time to time, the "yields", "effective yields", and "tax-equivalent
yields" for MuniFund Shares and Dollar Shares may be quoted in advertisements or
in reports to shareholders. Yield quotations are computed separately for each
separate class or sub-class of shares. The "yield" for a particular class or
sub-class of Fund shares refers to the income generated by an investment in the
shares over a specified period (such as a seven-day period). This income is then
"annualized";
14
<PAGE> 18
that is, the amount of income generated by the investment during that period is
assumed to be generated for each such period over a 52-week or one-year period
and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
a particular class or sub-class is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment. The "tax-equivalent yield" demonstrates the
level of taxable yield necessary to produce an after-tax yield equivalent to the
Fund's tax-free yield for MuniFund Shares and Dollar Shares. It is calculated by
increasing the yield (calculated as above) by the amount necessary to reflect
the payment of federal taxes at a stated rate. The "tax-equivalent yield" will
always be higher than the "yield".
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to bond or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds, or to the average yields reported by the Bank
Rate Monitor from money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five standard metropolitan statistical areas.
For example, such data are reported in national financial publications such as
IBC/Donoghue's Money Fund Report(R), Ibbotson Associates of Chicago, The Wall
Street Journal and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for a particular class or sub-class of shares
represent the Fund's past performances, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment, and
operating expenses. Any fees charged by Service Organizations or other
institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; such fees, if
charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call (800)
821-6006 (MuniFund Shares code: 50; Dollar Shares code: 59) to obtain current
yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company was organized as a Maryland corporation in 1979 under the name
Municipal Fund for Temporary Investment, Inc. and was reorganized into a
Pennsylvania trust effective June 1, 1981. The Fund commenced operations on
February 4, 1980.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more classes of shares. Pursuant to such authority, the Board of Trustees has
authorized the issuance of six classes of shares designated as MuniFund,
MuniFund Dollar, MuniCash, MuniCash Dollar, Intermediate Municipal and
Intermediate Municipal Dollar. The Declaration of Trust further authorizes the
trustees to classify or reclassify any class of shares into one or more
sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO THE FUND,
INVESTORS WISHING TO OBTAIN
15
<PAGE> 19
SIMILAR INFORMATION REGARDING MUNICASH OR INTERMEDIATE MUNICIPAL FUND MAY OBTAIN
SEPARATE PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING 800-998-7633.
The Company does not intend to hold annual meetings of shareholders except
as required by the 1940 Act or other applicable law. The Company will call a
meeting of shareholders for the purpose of voting upon the question of removal
of a member of the Board of Trustees upon written request of shareholders owning
at least 10% of the outstanding shares of the Company entitled to vote.
Each Fund share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's MuniFund Shares and Dollar Shares will vote in the
aggregate and not by class on all matters, except where otherwise required by
law and except that only Dollar Shares will be entitled to vote on matters
submitted to a vote of shareholders pertaining to the Fund's arrangements with
Service Organizations. Further, shareholders of all of the Company's portfolios
will vote in the aggregate and not by portfolio except as otherwise required by
law or when the Board of Trustees determines that the matter to be voted upon
affects only the interests of the shareholders of a particular portfolio. (See
the Statement of Additional Information under "Additional Description Concerning
Fund Shares" for examples where the 1940 Act requires voting by portfolio
period.) Shareholders of the Company are entitled to one vote for each full
share held (irrespective of class or portfolio) and fractional votes for
fractional shares held. Voting rights are not cumulative and, accordingly, the
holders of more than 50% of the aggregate shares of the Company may elect all of
the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligation of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reasons of being or having been a shareholder and
not because of any acts or omissions or some other reason.
16
<PAGE> 20
[This page intentionally left blank.]
<PAGE> 21
[This page intentionally left blank.]
<PAGE> 22
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS; AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information.................. 2
Financial Highlights........... 3
Investment Objective and
Policies..................... 5
Purchase and Redemption of
Shares....................... 8
Management of the Fund......... 10
Dividends...................... 13
Taxes.......................... 13
Yields......................... 14
Description of Shares and
Miscellaneous................ 15
</TABLE>
- --------------------------------------------------------------------------------
MUNIFUND
AN INVESTMENT PORTFOLIO
OFFERED BY
MUNICIPAL FUND FOR
TEMPORARY INVESTMENT
[PROVIDENT INSTITUTIONAL FUNDS]
Prospectus
March 30, 1997
<PAGE> 23
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
(MuniFund Dollar Shares)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
- -------------- ------------------
<S> <C>
1. Cover Page............................. Cover Page
2. Synopsis............................... Background and Expense
Information
3. Condensed Financial
Information.......................... Financial Highlights;
Yields
4. General Description of
Registrant........................... Cover Page; Financial
Highlights; Investment
Objective and
Policies; Description
of Shares and
Miscellaneous
5. Management of the Fund................. Management of the
Fund; Dividends
6. Capital Stock and Other
Securities........................... Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered.............................. Management of the
Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase............... Purchase and
Redemption of Shares
9. Pending Legal Proceedings.............. Inapplicable
</TABLE>
<PAGE> 24
MuniFund
Dollar Shares
An Investment Portfolio Offered by
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
<TABLE>
<S> <C>
400 Bellevue Parkway For purchase and redemption orders only call:
Suite 100 800-441-7450 (in Delaware: 302-791-5350).
Wilmington, DE 19809 For yield information call: 800-821-6006
(Dollar Shares code: 59).
For other information call: 800-821-7432.
</TABLE>
Municipal Fund for Temporary Investment (the "Company") is a no-load,
diversified, open-end investment company that currently offers shares in three
separate investment portfolios. This Prospectus offers one class of shares
("Dollar Shares") in the MuniFund portfolio, a money market portfolio (the
"Fund"). The Fund's investment objective is to provide institutions with as high
a level of current interest income exempt from federal income taxes as is
consistent with relative stability of principal. The Fund invests substantially
all of its assets in short-term tax-exempt obligations issued by state and local
governments.
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED, OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR
THE U.S. GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE
CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO
MAINTAIN ITS NET ASSET VALUE OF $1.00 PER
SHARE.
------------------------
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's investment adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor. Dollar
Shares are sold exclusively to and must be purchased through Service
Organizations. Service Organizations provide various shareholder services to
their customers in connection with their investment in Dollar Shares. (See
"Management of the Fund--Service Organizations.")
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated March
30, 1997, has been filed with the Securities and Exchange Commission and is
available to investors without charge by calling the Fund at 800-821-7432. The
Statement of Additional Information, as amended from time to time, is
incorporated in its entirety by reference into this Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
March 30, 1997
<PAGE> 25
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by the Fund: MuniFund Shares and Dollar
Shares. Shares of each class represent equal, pro rata interests in the Fund and
accrue daily dividends in the same manner except that the Dollar Shares bear
fees payable by the Fund (at the rate of .25% per annum) to Service
Organizations for administrative support services they provide to the beneficial
owners of such Shares. (See "Management of the Fund--Service Organizations.")
EXPENSE SUMMARY--MUNIFUND DOLLAR
<TABLE>
<CAPTION>
DOLLAR
ESTIMATED ANNUAL FUND OPERATING EXPENSES SHARES
- ----------------------------------------------------------------------------- -------------
<S> <C> <C>
(as a percentage of average net assets)
Management Fees (net of waivers)........................................ .10%
Other Expenses.......................................................... .42%
Administration Fees (net of waivers)............................... .10%
Shareholder Servicing Fees......................................... .25%
Miscellaneous...................................................... .07%
--- ---
Total Fund Operating Expenses (net of waivers).......................... .52%
===
</TABLE>
- ------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming: (1) a 5% annual return; and (2) redemption at the
end of each time period with respect to Dollar Shares: $5 $17 $29 $ 65
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. In addition, Service Organizations may charge fees
for providing services in connection with their customers' investments in Dollar
Shares. (For more complete descriptions of the various costs and expenses, see
"Management of the Fund" in this Prospectus and the Statement of Additional
Information and the financial statements and related notes.) Absent fee waivers
and expense reimbursements for such period, the estimated "Total Fund Operating
Expenses" for Dollar Shares for the fiscal year ended November 30, 1996 would
have been .67% of the average daily net assets of the MuniFund portfolio. The
investment adviser and administrators may from time to time waive the advisory
and administration fees otherwise payable to them or may reimburse the Fund for
its operating expenses. The foregoing table has not been audited by the Fund's
independent accountants.
2
<PAGE> 26
FINANCIAL HIGHLIGHTS
The following financial highlights for MuniFund Shares and Dollar Shares
have been derived from the financial statements of the Fund for the fiscal year
ended November 30, 1996, and for each of the nine preceding fiscal years. The
financial highlights for the fiscal years set forth below have been audited by
KPMG Peat Marwick LLP, independent accountants whose report on the financial
statements and financial highlights (for the most recent five years) of the Fund
is incorporated by reference into the Statement of Additional Information. The
tables should be read in conjunction with the financial statements and related
notes incorporated by reference into the Statement of Additional Information.
Further information about the performance of the Fund is available in the annual
report to shareholders, which may be obtained without charge by calling
800-821-7432.
MUNIFUND SHARES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- --------- --------- --------- ------- ---------
Income from investment operations:
Net investment income.............. .0326 .0360 .0255 .0224 .0285 .0437 .0562 .0602
------- ------- ------- --------- --------- --------- ------- ---------
Less distributions:
Dividends to shareholders from net
investment income................ (.0326) (.0360) (.0255) (.0224) (.0285) (.0437) (.0562) (.0602)
------- ------- ------- --------- --------- --------- ------- ---------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ========= ========= ========= ======= =========
Total return....................... 3.31% 3.66% 2.58% 2.27% 2.89% 4.46% 5.77% 6.19%
Ratios/Supplemental data:
Net assets, end of period (000s)... 530,204 720,318 687,895 1,019,749 1,006,324 1,060,468 988,069 1,075,732
Ratio of expenses to average daily
net assets(1).................... .27% .27% .26% .25% .30% .30% .30% .30%
Ratio of net investment income to
average daily net assets......... 3.26% 3.59% 2.53% 2.24% 2.86% 4.40% 5.62% 6.01%
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------
1988(2) 1987(2)
---------- ----------
<S> <C> <C>
Net asset value, beginning of
period........................... $ 1.00 $ 1.00
--------- ---------
Income from investment operations:
Net investment income.............. .0494 .0431
--------- ---------
Less distributions:
Dividends to shareholders from net
investment income................ (.0494) (.0431)
--------- ---------
Net asset value, end of period..... $ 1.00 $ 1.00
========= =========
Total return....................... 5.21% 4.50%
Ratios/Supplemental data:
Net assets, end of period (000s)... 1,662,051 2,163,284
Ratio of expenses to average daily
net assets(1).................... .29% .30%
Ratio of net investment income to
average daily net assets......... 4.91% 4.31%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been 0.42%, 0.41%, 0.41%,
0.41%, 0.41%, 0.41%, 0.42%, 0.40%, 0.38% and 0.36% for the years ended
November 30, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987,
respectively.
(2) Total return data has not been audited.
3
<PAGE> 27
MUNIFUND DOLLAR SHARES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988(2) 1987(2)
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income........ .0301 .0335 .0230 .0199 .0260 .0412 .0537 .0577 .0469 .0406
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends to shareholders
from Net investment
income..................... (.0301) (.0335) (.0230) (.0199) (.0260) (.0412) (.0537) (.0577) (.0469) (.0406)
-------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return................. 3.06% 3.41% 2.33% 2.02% 2.64% 4.21% 5.52% 5.94% 4.96% 4.25%
Ratios/Supplemental data:
Net assets, end of period
(000s)..................... 61,396 6,474 2,785 6,783 1,414 26,418 2,187 10,680 18,243 21,333
Ratio of expenses to average
daily net assets(1)........ .52% .52% .51% .50% .55% .55% .55% .55% .54% .55%
Ratio of net investment
income to average daily net
assets..................... 3.01% 3.34% 2.28% 1.99% 2.61% 4.15% 5.37% 5.76% 4.66% 4.06%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been 0.67%, 0.66%, 0.66%,
0.66%, 0.66%, 0.66%, 0.67%, 0.65%, 0.63% and 0.61% for the years ended
November 30, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987,
respectively.
(2) Total return data has not been audited.
4
<PAGE> 28
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to provide investors with as high a
level of current interest income exempt from federal income tax as is consistent
with relative stability of principal. There can be no assurance that the Fund
will achieve its investment objective. The Fund is a money market fund that is
subject to the quality, diversification and other requirements of Rule 2a-7
under the Investment Company Act of 1940, as amended (the "1940 Act") and other
rules of the Securities and Exchange Commission (the "SEC").
In pursuing its investment objective, the Fund invests substantially all of
its assets in a diversified portfolio of short-term tax-exempt obligations
issued by or on behalf of states, territories, and possessions of the United
States, the District of Columbia, and their respective authorities, agencies,
instrumentalities, and political subdivisions and tax-exempt derivative
securities such as tender option bonds, participations, beneficial interests in
trusts and partnership interests (collectively, "Municipal Obligations"). The
Fund will not knowingly purchase securities the interest on which is subject to
federal income tax. (See, however, "Taxes" below concerning treatment of
exempt-interest dividends paid by the Fund for purposes of the federal
alternative minimum tax applicable to particular classes of investors.)
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance, and opinions relating
to the validity of and the tax-exempt status of payments received by the Funds
from tax-exempt derivative securities are rendered by counsel to the respective
sponsors of such securities. The Fund and its investment adviser will rely on
such opinions and will not review independently the underlying proceedings
relating to the issuance of Municipal Obligations, the creation of any
tax-exempt derivative securities, or the bases for such opinions.
The Fund will purchase only Municipal Obligations which are "First Tier
Eligible Securities" (as defined by the SEC) and which present minimal credit
risks as determined by the Fund's investment adviser pursuant to guidelines
approved by the Company's Board of Trustees. First Tier Eligible Securities
consist of the following types of securities: (i) securities that have short-
term debt ratings at the time of purchase in the highest rating category by at
least two unaffiliated nationally recognized statistical rating organizations
("Rating Agencies") (or one Rating Agency if the security was rated by only one
Rating Agency); (ii) securities that are issued by an issuer with such ratings;
or (iii) securities without such short-term ratings that have been determined to
be of comparable quality by the Fund's investment adviser pursuant to guidelines
approved by the Company's Board of Trustees. The Appendix to the Statement of
Additional Information includes a description of applicable ratings by Rating
Agencies.
Except during periods of unusual market conditions or during temporary
defensive periods, the Fund will invest substantially all, but in no event less
than 80%, of its total assets in Municipal Obligations with remaining maturities
of 397 days (thirteen months) or less as determined in accordance with the rules
of the SEC. The Fund may hold uninvested cash reserves pending investment,
during temporary defensive periods or if, in the opinion of the Fund's
investment adviser, suitable tax exempt obligations are unavailable. There is no
percentage limitation on the amount of assets which may be held uninvested.
Uninvested cash reserves will not earn income.
5
<PAGE> 29
Except for the investment limitations enumerated below, the Fund's
investment objective and the policies described above are not fundamental and
may be changed by the Company's Board of Trustees without the affirmative vote
of the holders of a majority of the Fund's outstanding shares. If there is a
change in the investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current financial
position and needs. (A full list of the complete investment limitations that
cannot be changed without a vote of shareholders is contained in the Statement
of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase any securities other than Municipal Obligations and put
options with respect to such obligations.
2. Purchase the securities of any issuer if as a result more than 5%
of the value of the Fund's assets would be invested in the securities of
such issuer except that up to 25% of the value of the Fund's assets may be
invested without regard to this 5% limitation.
3. Borrow money except from banks for temporary purposes and then in
amounts not in excess of 10% of the value of the Fund's assets at the time
of such borrowing; or mortgage, pledge or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of the Fund's
assets at the time of such borrowing. (This borrowing provision is not for
investment leverage, but solely to facilitate management of the Fund's
portfolio by enabling the Fund to meet redemption requests where the
liquidation of portfolio securities is deemed to be disadvantageous or
inconvenient.)
4. Knowingly invest more than 10% of the value of the Fund's assets in
securities with legal or contractual restrictions on resale.
In addition, without the affirmative vote of the holders of a majority of
the Fund's outstanding shares, the Fund may not change its policy of investing
at least 80% of its total assets in obligations the interest on which is exempt
from federal income tax (except during periods of unusual market conditions or
during temporary defensive periods). Securities issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities (including securities backed by
the full faith and credit of the United States) are not deemed to be subject to
the second investment limitation above.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value of the
Fund's portfolio securities will not constitute a violation of such limitation.
TYPES OF MUNICIPAL OBLIGATIONS
The two principal classifications of Municipal Obligations which may be
held by the Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and
6
<PAGE> 30
interest, Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Revenue securities include private activity bonds which
are not payable from the unrestricted revenues of the issuer. Consequently, the
credit quality of private activity bonds is usually directly related to the
credit standing of the corporate user of the facility involved.
The Fund's portfolio may also include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which created
the issuer.
OTHER INVESTMENT PRACTICES
Municipal Obligations purchased by the Fund may include variable rate
demand notes. Such notes are frequently not rated by credit rating agencies, but
unrated notes purchased by the Fund will be determined by the Fund's investment
adviser to be of comparable quality at the time of purchase to rated instruments
purchasable by the Fund. Where necessary to ensure that a note is a First Tier
Eligible Security, the Fund will require that the issuer's obligation to pay the
principal of the note be backed by an unconditional bank letter or line of
credit, guarantee, or commitment to lend. While there may be no active secondary
market with respect to a particular variable rate demand note purchased by the
Fund, the Fund may, upon the notice specified in the note, demand payment of the
principal of the note at any time or during specified periods not exceeding
thirteen months, depending upon the instrument involved, and may resell the note
at any time to a third party. The absence of such an active secondary market,
however, could make it difficult for the Fund to dispose of a variable rate
demand note if the issuer were to default on its payment obligation or during
periods that the Fund is not entitled to exercise its demand rights, and the
Fund could, for this or other reasons, suffer a loss to the extent of the
default. While, in general, the Fund will invest only in securities that mature
within thirteen months of purchase, the Fund may invest in variable rate demand
notes which have nominal maturities in excess of thirteen months, if such
instruments carry demand features that comply with conditions established by the
SEC.
The Fund may also purchase Municipal Obligations on a "when-issued" basis.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield. The Fund will generally not pay for
such securities or start earning interest on them until they are received.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of interest
rates. The Fund expects that commitments to purchase when-issued securities will
not exceed 25% of the value of its total assets absent unusual market
conditions. The Fund does not intend to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective.
In addition, the Fund may acquire "stand-by commitments" with respect to
Municipal Obligations held in its portfolio. Under a stand-by commitment, a
dealer would agree to purchase at the Fund's option specified Municipal
Obligations at a specified price. The Fund will acquire
7
<PAGE> 31
stand-by commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes.
Although the Fund may invest more than 25% of its net assets in (i)
Municipal Obligations whose issuers are in the same state, (ii) Municipal
Obligations the interest on which is paid solely from revenues of similar
projects, and (iii) private activity bonds, it does not presently intend to do
so on a regular basis. To the extent the Fund's assets are concentrated in
Municipal Obligations that are payable from the revenues of similar projects,
are issued by issuers located in the same state, or are concentrated in private
activity bonds, the Fund will be subject to the peculiar risks presented by the
laws and economic conditions relating to such states, projects, and bonds to a
greater extent than it would be if its assets were not so concentrated.
The Fund will not knowingly invest more than 10% of the value of its total
net assets in illiquid securities, including securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not deemed illiquid for
purposes of this limitation. The Fund's investment adviser will monitor the
liquidity of such restricted securities under the supervision of the Board of
Trustees. (See "Investment Objectives and Policies--Illiquid Securities" in the
Statement of Additional Information.)
The Fund may purchase securities which are not registered under the
Securities Act of 1933 (the "1933 Act") but which can be sold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act. Any such
security will not be considered illiquid so long as it is determined by the
Board of Trustees or the adviser, acting under guidelines approved and monitored
by the Board, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in a portfolio during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities.
The value of the Fund's portfolio securities can be expected to vary
inversely with changes in prevailing interest rates.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Dollar Shares are sold exclusively to institutional investors, such as
banks, savings and loan associations and other financial institutions, including
affiliates of PNC Bank Corp. ("Service Organizations"), acting on behalf of
themselves or their customers and customers of their affiliates ("customers").
The customers, which may include individuals, trusts, partnerships and
corporations, must maintain accounts (such as demand deposit, custody, trust or
escrow accounts) with the Service Organization. Service Organizations (or their
nominees) will normally be the holders of record of Dollar Shares, and will
reflect their customers' beneficial ownership of shares in the account
statements provided by them to their customers. The exercise of voting rights
and the delivery to customers of shareholder communications from the Fund will
be governed by the customers' account agreements with the Service Organizations.
Investors wishing to purchase Dollar Shares should contact their account
representatives.
Purchase orders must be transmitted by a Service Organization directly to
PFPC, the Fund's transfer agent. All such transactions are effected pursuant to
procedures established at the Service
8
<PAGE> 32
Organization in connection with a customer's account. Shares are sold at the net
asset value per share next determined after acceptance of a purchase order by
PFPC.
Purchase orders for shares are accepted by the Fund only on days on which
both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia
are open for business (a "Business Day") and must be transmitted to PFPC in
Wilmington, Delaware, by telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted before 12:00 noon,
Eastern time, for which payment has been received by PNC Bank, the Fund's
custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and
before 2:30 P.M., Eastern time (or orders accepted earlier in the same day for
which payment has not been received by 12:00 noon), will be executed at 4:00
P.M., Eastern time, if payment has been received by PNC Bank by that time.
Orders received at other times, and orders for which payment has not been
received by 4:00 P.M., Eastern time, will not be accepted, and notice thereof
will be given to the Service Organization placing the order. (Payment for orders
which are not received or accepted will be returned after prompt inquiry to the
sending institution.) The Fund may in its discretion reject any order for
shares.
Payment for Dollar Shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by a Service
Organization is $5,000; however, Service Organizations may set higher minimums
for their customers. There is no minimum subsequent investment.
Conflict of interest restrictions may apply to a Service Organization's
receipt of compensation paid by the Fund in connection with the investment of
fiduciary funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency, and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted by the Service Organization to PFPC
in Wilmington, Delaware in the manner described under "Purchase Procedures."
Shares are redeemed at the net asset value per share next determined after
PFPC's receipt of the redemption order. While the Fund intends to use its best
efforts to maintain its net asset value per share at $1.00, the proceeds paid to
a shareholder upon redemption may be more or less than the amount invested
depending upon a share's net asset value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC before 12:00 noon, Eastern time, on a Business Day is normally made in
federal funds wired to the redeeming shareholder on the same day. Payment for
redemption orders which are received between 12:00 noon and 4:00 P.M., Eastern
time, or on a day when PNC Bank is closed, is normally wired in federal funds on
the next day following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000
9
<PAGE> 33
or more, no such redemption shall take place. In addition, the Fund also may
redeem shares involuntarily or suspend the right of redemption or under certain
special circumstances described in the Statement of Additional Information under
"Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each Business Day on which both the Federal Reserve Bank of
Philadelphia and the New York Stock Exchange are open for business. Currently,
one or both of these institutions are closed on the customary national business
holidays of New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Columbus Day
(observed), Veterans Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each class of the Fund is calculated by adding the value of
all securities and other assets belonging to the Fund, subtracting liabilities
attributable to each class, and dividing the result by the total number of the
Fund's outstanding shares of each class. In computing net asset value, the Fund
uses the amortized cost method of valuation as described in the Statement of
Additional Information under "Additional Purchase and Redemption Information."
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined independently of the net asset values of the
shares in the Company's other investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Service
Organizations purchasing or holding Dollar Shares for their customer accounts
may charge customer fees for cash management and other services. In addition, if
a customer has agreed with a particular Service Organization to maintain a
minimum balance in its account with the Service Organization and the balance in
such account falls below that minimum, the customer may be obliged by the
Service Organization to redeem all or part of its shares in the Fund to the
extent necessary to maintain the required minimum balance in such account. A
customer should, therefore, consider the terms of its account with a Service
Organization before purchasing Dollar Shares. A Service Organization purchasing
or redeeming Fund shares on behalf of its customers is responsible for
transmitting orders to the Fund in accordance with its customer agreements, and
to provide customers with account statements with respect to share transactions
for their accounts.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC is one of the largest U.S. bank managers of mutual
funds, with assets currently under management in excess of $30 billion. PIMC was
organized in 1977 by PNC Bank to perform advisory services for investment
companies, and has its principal offices at 400 Bellevue Parkway, Wilmington,
Delaware 19809. PNC Bank serves as the Fund's sub-adviser. PNC Bank is one of
the
10
<PAGE> 34
largest bank managers of investments for individuals in the United States, and
together with its predecessors has been in the business of managing the
investments of fiduciary and other accounts since 1847. PNC Bank is a
wholly-owned, indirect subsidiary of PNC Bank Corp., and has its principal
offices at 1600 Market Street, Philadelphia, Pennsylvania 19103. In 1973,
Provident National Bank (a predecessor to PNC Bank) commenced advising the first
institutional money market mutual fund--a U.S. dollar-denominated constant net
asset value fund--offered in the United States. PIMC and PNC Bank also serve as
investment adviser and sub-adviser, respectively, to the Company's MuniCash and
Intermediate Municipal Fund portfolios.
PNC Bank Corp., a multi-bank holding company headquartered in Pittsburgh,
Pennsylvania, is one of the largest financial services organizations in the
United States, with banking subsidiaries in Pennsylvania, New Jersey, Delaware,
Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major businesses include
corporate banking, consumer banking, real estate banking, mortgage banking and
asset management.
As investment adviser, PIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. PIMC also
maintains certain of the Fund's financial accounts and records and computes the
Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly, based on the Fund's average daily net assets. PIMC
and the administrators may from time to time reduce the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. Any fees waived or expenses reimbursed by PIMC and the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended November 30, 1996, the Fund paid investment advisory fees
aggregating .10% of the Fund's average daily net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the investment advisory fee paid by the Fund to PIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no
effect on the investment advisory fees payable by the Fund to PIMC. PNC Bank
also serves as the Fund's custodian. The services provided by PNC Bank and PIMC
and the fees payable by the Fund for these services are described further in the
Statement of Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve as
administrators. PFPC is an indirect, wholly-owned subsidiary of PNC Bank Corp. A
majority of the outstanding stock of PDI is owned by its officers. The
administrative services provided by the administrators, which are described more
fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Fund; accumulating information for and coordinating the preparation of
reports to the
11
<PAGE> 35
Fund's shareholders and the SEC; and maintaining the registration or
qualification of the Fund's shares for sale under state securities laws. PFPC
and PDI are each responsible for carrying out the duties undertaken pursuant to
the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee, computed daily and payable monthly, based on the Fund's
average net assets. (For information regarding the administrators' fee waivers
and expense reimbursements, see "Investment Adviser and Sub-Adviser" above.) The
Fund also reimburses each administrator for its reasonable out-of-pocket
expenses incurred in connection with the Fund's computer access program. For the
fiscal year ended November 30, 1996, the Fund paid administrative fees
aggregating .10% of its average daily net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by PFPC and PDI and the fees payable by the
Fund for these services are described further in the Statement of Additional
Information under "Management of the Fund."
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administrators," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent. The distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for the continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
SERVICE ORGANIZATIONS
As stated above, Service Organizations may purchase Dollar Shares. Dollar
Shares are identical in all respects to MuniFund Shares except that they bear
the service fees described below and enjoy certain exclusive voting rights on
matters relating to these fees. The Fund will enter into an agreement with each
Service Organization which purchases Dollar Shares requiring it to provide
support services to its customers who are the beneficial owners of such shares
in consideration of the Fund's payment of .25% (on an annualized basis) of the
average daily net asset value of the Dollar Shares held by the Service
Organization for the benefit of customers. Such services, which are described
more fully in the Statement of Additional Information under "Management of the
Fund--Service Organizations," include aggregating and processing purchase and
redemption requests from customers and placing net purchase and redemption
orders with PFPC; processing dividend payments from the Fund on behalf of
customers; providing information periodically to customers showing their
positions in Dollar Shares; and providing sub-accounting or the information
necessary for sub-accounting with respect to Dollar Shares beneficially owned by
customers. Under the terms of the agreements, Service Organizations are required
to provide to their customers a schedule of any fees that they may charge to the
customers in connection with their investments in Dollar Shares.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the
12
<PAGE> 36
Fund bears the expenses incurred in its operations. For the fiscal year ended
November 30, 1996, the Fund's total expenses for Dollar Shares were .52% of the
average daily net assets. With regard to fees paid exclusively by Dollar Shares,
see "Service Organizations" above.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to shareholders of record at the close of business on the day of
declaration. Shares begin accruing dividends on the day the purchase order for
the shares is executed and continue to accrue dividends through the day before
such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class. The Fund does not expect to
realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund but may differ in amount because of the difference in the expenses paid by
each class.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19899, and will become
effective after its receipt by PFPC with respect to dividends paid.
13
<PAGE> 37
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least the sum of 90% of its exempt-interest income net of
certain deductions and 90% of its investment company taxable income for such
year. Dividends derived from exempt-interest income may be treated by the Fund's
shareholders as items of interest excludable from their gross income under
Section 103(a) of the Code, unless under the circumstances applicable to the
particular shareholder the exclusion would be disallowed. (See the Statement of
Additional Information under "Additional Information Concerning Taxes.")
If the Fund should hold certain private activity bonds issued after August
7, 1986, shareholders must include, as an item of tax preference, the portion of
dividends paid by the Fund that is attributable to interest on such bonds in
their federal alternative minimum taxable income for purposes of determining
liability (if any) for the 26-28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of .12% on the excess of
the corporation's modified federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
To the extent, if any, dividends paid to shareholders are derived from
taxable income or from long-term or short-term capital gains, such dividends
will not be exempt from federal income tax, whether such dividends are paid in
the form of cash or additional shares, and may also be subject to state and
local taxes. Under state or local law, the Fund's distributions of net
investment income may be taxable to investors as dividend income even though a
substantial portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year provided that such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. No
attempt is made to present a detailed explanation of the federal, state or local
income tax treatment of the Fund or its shareholders, and this discussion is not
intended as a substitute for careful tax planning.
14
<PAGE> 38
Accordingly, potential investors in the Fund should consult their tax advisors
with specific reference to their own tax situation.
YIELDS
From time to time, the "yields", "effective yields", and "tax-equivalent
yields" for MuniFund Shares and Dollar Shares may be quoted in advertisements or
in reports to shareholders. Yield quotations are computed separately for each
separate class or sub-class of shares. The "yield" for a particular class or
sub-class of Fund shares refers to the income generated by an investment in the
shares over a specified period (such as a seven-day period). This income is then
"annualized"; that is, the amount of income generated by the investment during
that period is assumed to be generated for each such period over a 52-week or
one-year period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in a particular class or sub-class is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. The "tax-equivalent yield"
demonstrates the level of taxable yield necessary to produce an after-tax yield
equivalent to the Fund's tax-free yield for MuniFund Shares and Dollar Shares.
It is calculated by increasing the yield (calculated as above) by the amount
necessary to reflect the payment of federal taxes at a stated rate. The
"tax-equivalent yield" will always be higher than the "yield".
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to bond or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds, or to the average yields reported by the Bank
Rate Monitor from money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five standard metropolitan statistical areas.
For example, such data are reported in national financial publications such as
IBC/Donoghue's Money Fund Report(R), Ibbotson Associates of Chicago, The Wall
Street Journal and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for a particular class or sub-class of shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment, and
operating expenses. Any fees charged by Service Organizations directly to their
customers in connection with investments in Dollar Shares are not reflected in
the Dollar Shares' yields; such fees, if charged, would reduce the actual return
received by customers on their investments. The methods used to compute the
Fund's yields are described in more detail in the Statement of Additional
Information. Investors may call (800) 821-6006 (Dollar Shares code: 59) to
obtain current yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company was organized as a Maryland corporation in 1979 under the name
Municipal Fund for Temporary Investment, Inc. and was reorganized into a
Pennsylvania trust effective June 1, 1981. The Company commenced operations of
the Fund on February 4, 1980.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or
15
<PAGE> 39
reclassify any unissued shares into one or more classes of shares. Pursuant to
such authority, the Board of Trustees has authorized the issuance of six classes
of shares designated as MuniFund, MuniFund Dollar, MuniCash, MuniCash Dollar,
Intermediate Municipal and Intermediate Municipal Dollar. The Declaration of
Trust further authorizes the trustees to classify or reclassify any class of
shares into one or more sub-classes.
THIS PROSPECTUS RELATES PRIMARILY TO THE DOLLAR SHARES OF THE FUND AND
DESCRIBES ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS, AND
OTHER MATTERS RELATING TO THE FUND. INVESTORS WISHING TO OBTAIN SIMILAR
INFORMATION REGARDING THE FUND'S OTHER CLASS OF SHARES, MUNICASH OR INTERMEDIATE
MUNICIPAL FUND MAY OBTAIN SEPARATE PROSPECTUSES BY CALLING 800-998-7633.
The Company does not intend to hold annual meetings of shareholders except
as required by the 1940 Act or other applicable law. The Company will call a
meeting of shareholders for the purpose of voting upon the question of removal
of a member of the Board of Trustees upon written request of shareholders owning
at least 10% of the outstanding shares of the Company entitled to vote.
Each Fund share represents an equal, proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's MuniFund Shares and Dollar Shares will vote in the
aggregate and not by class on all matters, except where otherwise required by
law and except that only Dollar Shares will be entitled to vote on matters
submitted to a vote of shareholders pertaining to the Fund's arrangements with
Service Organizations. Further, shareholders of all of the Company's portfolios
will vote in the aggregate and not by portfolio except as otherwise required by
law or when the Board of Trustees determines that the matter to be voted upon
affects only the interests of the shareholders of a particular portfolio. (See
the Statement of Additional Information under "Additional Description Concerning
Fund Shares" for examples where the 1940 Act requires voting by portfolio.)
Shareholders of the Company are entitled to one vote for each full share held
(irrespective of class or portfolio) and fractional votes for fractional shares
held. Voting rights are not cumulative and, accordingly, the holders of more
than 50% of the aggregate shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
16
<PAGE> 40
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 41
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 42
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS; AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information.................. 2
Financial Highlights........... 3
Investment Objective and
Policies..................... 5
Purchase and Redemption of
Shares....................... 8
Management of the Fund......... 10
Dividends...................... 13
Taxes.......................... 14
Yields......................... 15
Description of Shares and
Miscellaneous................ 15
</TABLE>
- --------------------------------------------------------------------------------
MUNIFUND
DOLLAR SHARES
AN INVESTMENT PORTFOLIO
OFFERED BY
MUNICIPAL FUND FOR
TEMPORARY INVESTMENT
[PROVIDENT INSTITUTIONAL FUNDS LOGO]
Prospectus
March 30, 1997
<PAGE> 43
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
(MuniCash)
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-1A Item Prospectus Caption
- -------------- ------------------
<S> <C>
1. Cover Page............................. Cover Page
2. Synopsis............................... Background and Expense
Information
3. Condensed Financial
Information.......................... Financial Highlights;
Yields
4. General Description of
Registrant........................... Cover Page; Financial
Highlights; Investment
Objective and
Policies; Description
of Shares and
Miscellaneous
5. Management of the Fund................. Management of the
Fund; Dividends
6. Capital Stock and Other
Securities........................... Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered.............................. Management of the
Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase............... Purchase and
Redemption of Shares
9. Pending Legal Proceedings.............. Inapplicable
</TABLE>
<PAGE> 44
MuniCash
An Investment Portfolio Offered by
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
<TABLE>
<S> <C>
400 Bellevue Parkway For purchase and redemption orders only call:
Suite 100 800-441-7450 (in Delaware: 302-791-5350).
Wilmington, DE 19809 For yield information call: 800-821-6006
(MuniCash shares code: 48; MuniCash Dollar
shares code: 54).
For other information call: 800-821-7432.
</TABLE>
Municipal Fund for Temporary Investment (the "Company") is a no-load,
diversified, open-end investment company that currently offers shares in three
separate investment portfolios. The two classes of shares described in this
Prospectus represent interests in the MuniCash portfolio, a money market
portfolio (the "Fund"). The Fund's investment objective is to provide
institutions with as high a level of current interest income exempt from federal
income taxes as is consistent with relative stability of principal. The Fund
invests substantially all of its assets in short-term tax-exempt obligations
issued by state and local governments.
Fund shares may not be purchased by individuals directly but institutional
investors may purchase shares for accounts maintained by individuals. In
addition to MuniCash Shares, investors may purchase MuniCash Dollar Shares
("Dollar Shares"), which accrue daily dividends in the same manner as MuniCash
Shares but bear all fees payable by the Fund to institutional investors for
certain services they provide to the beneficial owners of such Shares. (See
"Management of the Fund--Service Organizations.")
------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED,
ENDORSED, OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR
THE U.S. GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. AN INVESTMENT IN THE FUND INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THERE
CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO
MAINTAIN ITS NET ASSET VALUE OF $1.00 PER
SHARE.
------------------------
PNC Institutional Management Corporation ("PIMC") and PNC Bank, National
Association ("PNC Bank") serve as the Fund's investment adviser and sub-adviser,
respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve
as the Fund's administrators. PDI also serves as the Fund's distributor.
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated March
30, 1997, has been filed with the Securities and Exchange Commission and is
available to investors without charge by calling the Fund at 800-821-7432. The
Statement of Additional Information, as amended from time to time, is
incorporated in its entirety by reference into this Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED, BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
March 30, 1997
<PAGE> 45
BACKGROUND AND EXPENSE INFORMATION
Two classes of Shares are offered by this Prospectus: MuniCash Shares and
Dollar shares. Shares of each class represent equal, pro rata interests in the
Fund and accrue daily dividends in the same manner except that the Dollar Shares
bear fees payable by the Fund (at the rate of .25% per annum) to institutional
investors for services they provide to the beneficial owners of such Shares.
(See "Management of the Fund--Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
MUNICASH
MUNICASH DOLLAR
ESTIMATED ANNUAL FUND OPERATING EXPENSES SHARES SHARES
- ---------------------------------------------------------- ------------- -------------
<S> <C> <C> <C> <C>
(as a percentage of average net assets)
Management Fees (net of waivers)..................... .06% .06%
Other Expenses....................................... .12% .37%
Administration Fees (net of waivers)............ .06% .06%
Shareholder Servicing Fees...................... 0% .25%
Miscellaneous................................... .06% .06%
---- ---- ---- ----
Total Fund Operating Expenses (net of waivers)....... .18% .43%
==== ====
</TABLE>
- ------------
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming: (1) a 5% annual return; and (2)
redemption at the end of each time period with respect
to the following shares:
MuniCash Shares:..................................... $2 $ 6 $10 $ 23
Dollar Shares:....................................... $4 $14 $24 $ 54
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. In addition, institutional investors may charge
fees for providing services in connection with their customers' investments in
Dollar Shares. (For more complete descriptions of the various costs and
expenses, see "Management of the Fund" in this Prospectus and the Statement of
Additional Information and the financial statements and related notes.) Absent
fee waivers and expense reimbursements for such period, the estimated "Total
Fund Operating Expenses" for MuniCash Shares and Dollar Shares for the fiscal
year ended November 30, 1996 would have been .42% and .67%, respectively, of the
average daily net assets of the MuniCash portfolio. The investment adviser and
administrators may from time to time waive the advisory and administration fees
otherwise payable to them or may reimburse the Fund for its operating expenses.
The foregoing table has not been audited by the Fund's independent accountants.
2
<PAGE> 46
FINANCIAL HIGHLIGHTS
The following financial highlights for MuniCash Shares and Dollar Shares
have been derived from the financial statements of the Fund for the fiscal year
ended November 30, 1996, and for each of the nine preceding fiscal years. The
financial highlights for the fiscal years set forth below have been audited by
KPMG Peat Marwick LLP, independent accountants whose report on the financial
statements and financial highlights (for the most recent five years) of the Fund
is incorporated by reference into the Statement of Additional Information. The
tables should be read in conjunction with the financial statements and related
notes incorporated by reference into the Statement of Additional Information.
Further information about the performance of the Fund is available in the annual
report to shareholders, which may be obtained without charge by calling
800-821-7432.
MUNICASH SHARES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income.............. .0350 .0382 .0266 .0235 .0300 .0453 .0577
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends to shareholders from
net investment income............ (.0350) (.0382) (.0266) (.0235) (.0300) (.0453) (.0577)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========
Total return....................... 3.56% 3.89% 2.69% 2.38% 3.04% 4.62% 5.93%
Ratios/Supplemental data:
Net assets, end of period (000s)... 281,544 321,642 273,439 572,482 857,812 361,280 352,614
Ratio of expenses to average daily
net assets(1).................... .18% .18% .19% .20% .20% .20% .15%
Ratio of net investment income to
average daily net assets......... 3.50% 3.83% 2.59% 2.36% 2.90% 4.58% 5.76%
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------
1989 1988(2) 1987(2)
------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning
of period........................ $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Income from investment
operations:
Net investment income.............. .0613 .0506 .0436
------- ------- -------
Less distributions:
Dividends to shareholders from
net investment income............ (.0613) (.0506) (.0436)
------- ------- -------
Net asset value, end of period..... $ 1.00 $ 1.00 $ 1.00
======= ======= =======
Total return....................... 6.31% 5.18% 4.45%
Ratios/Supplemental data:
Net assets, end of period (000s)... 60,312 37,702 13,925
Ratio of expenses to average daily
net assets(1).................... .24% .24% .30%
Ratio of net investment income to
average daily net assets......... 6.10% 5.05% 4.36%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been 0.42%, 0.41%, 0.42%,
0.42%, 0.40%, 0.43%, 0.43%, 0.44%, 0.43% and 0.43% for the years ended
November 30, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987,
respectively.
(2) Total return data has not been audited.
3
<PAGE> 47
MUNICASH DOLLAR SHARES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income.................... .0325 .0357 .0241 .0210 .0275 .0428 .0552
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends to shareholders from net
investment income...................... (.0325) (.0357) (.0241) (.0210) (.0275) (.0428) (.0552)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========
Total return............................. 3.31% 3.64% 2.44% 2.13% 2.79% 4.37% 5.68%
Ratios/Supplemental data:
Net assets, end of period (000s)......... 101,528 101,424 99,688 95,225 81,669 49,582 52,213
Ratio of expenses to average daily net
assets(1).............................. .43% .43% .44% .45% .45% .45% .40%
Ratio of net investment income to average
daily net assets....................... 3.25% 3.58% 2.34% 2.11% 2.65% 4.33% 5.51%
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------
1989 1988(2) 1987(2)
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period..... $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
Income from investment operations:
Net investment income.................... .0588 .0483 .0414
-------- -------- --------
Less distributions:
Dividends to shareholders from net
investment income...................... (.0588) (.0483) (.0414)
-------- -------- --------
Net asset value, end of period........... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
Total return............................. 6.06% 4.93% 4.20%
Ratios/Supplemental data:
Net assets, end of period (000s)......... 40,102 52,773 61,842
Ratio of expenses to average daily net
assets(1).............................. .49% .47% .52%
Ratio of net investment income to average
daily net assets....................... 5.87% 4.82% 4.14%
</TABLE>
- ------------
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been 0.67%, 0.66%, 0.67%,
0.67%, 0.65%, 0.68%, 0.68%, 0.69%, 0.66% and 0.65%, for the years ended
November 30, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987,
respectively.
(2) Total return data has not been audited.
4
<PAGE> 48
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to provide investors with as high a
level of current interest income exempt from federal income tax as is consistent
with relative stability of principal. There can be no assurance that the Fund
will achieve its investment objective. The Fund is a money market fund that is
subject to the quality, diversification and other requirements of Rule 2a-7
under the Investment Company Act of 1940, as amended (the "1940 Act") and other
rules of the Securities and Exchange Commission (the "SEC").
In pursuing its investment objective, the Fund invests substantially all of
its assets in a diversified portfolio of short-term tax-exempt obligations
issued by or on behalf of states, territories, and possessions of the United
States, the District of Columbia, and their respective authorities, agencies,
instrumentalities, and political subdivisions and tax-exempt derivative
securities such as tender option bonds, participation, beneficial interests in
trusts and partnership interests (collectively, "Municipal Obligations"). The
Fund will not knowingly purchase securities the interest on which is subject to
regular federal income tax. (See, however, "Taxes" below concerning treatment of
exempt-interest dividends paid by the Fund for purposes of the federal
alternative minimum tax applicable to particular classes of investors.)
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance, and opinions relating
to the validity of and the tax-exempt status of payments received by the Funds
from tax-exempt derivative securities are rendered by counsel to the respective
sponsors of such securities. The Fund and its investment adviser will rely on
such opinions and will not review independently the underlying proceedings
relating to the issuance of Municipal Obligations, the creation of any
tax-exempt derivative securities, or the bases for such opinions.
The Fund will purchase only Municipal Obligations which are "Eligible
Securities" (as defined by the SEC) and which present minimal credit risks as
determined by the Fund's investment adviser pursuant to guidelines approved by
the Company's Board of Trustees. Eligible Securities consist of the following
types of securities: (i) securities that have short-term debt ratings at the
time of purchase in the two highest rating categories by at least two
unaffiliated nationally recognized statistical rating organizations ("Rating
Agencies") (or one Rating Agency if the security was rated by only one Rating
Agency); (ii) securities that are issued by an issuer with such ratings; or
(iii) securities without such short-term ratings that have been determined to be
of comparable quality by the Fund's investment adviser pursuant to guidelines
approved by the Company's Board of Trustees. The Appendix to the Statement of
Additional Information includes a description of applicable ratings by Rating
Agencies.
Except during periods of unusual market conditions or during temporary
defensive periods, the Fund will invest substantially all, but in no event less
than 80%, of its total assets in Municipal Obligations with remaining maturities
of 397 days (thirteen months) or less as determined in accordance with the rules
of the SEC. The Fund may hold uninvested cash reserves pending investment,
during temporary defensive periods or if, in the opinion of the Fund's
investment
5
<PAGE> 49
adviser, suitable tax-exempt obligations are unavailable. There is no percentage
limitation on the amount of assets which may be held uninvested. Uninvested cash
reserves will not earn income.
Except for the investment limitations enumerated below, the Fund's
investment objective and the policies described above are not fundamental and
may be changed by the Company's Board of Trustees without the affirmative vote
of the holders of a majority of the Fund's outstanding shares. If there is a
change in the investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current financial
position and needs. (A full list of the complete investment limitations that
cannot be changed without a vote of shareholders is contained in the Statement
of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase any securities other than obligations the interest on
which is exempt from federal income tax, which may have put options.
2. Purchase the securities of any issuer if as a result more than 5%
of the value of the Fund's assets would be invested in the securities of
such issuer except that up to 25% of the value of the Fund's assets may be
invested without regard to this 5% limitation.
3. Borrow money except from banks for temporary purposes and then in
amounts not in excess of 10% of the value of the Fund's assets at the time
of such borrowing; or mortgage, pledge or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of the Fund's
assets at the time of such borrowing. (This borrowing provision is not for
investment leverage, but solely to facilitate management of the Fund's
portfolio by enabling the Fund to meet redemption requests where the
liquidation of portfolio securities is deemed to be disadvantageous or
inconvenient.)
4. Knowingly invest more than 10% of the value of the Fund's assets
in securities with legal or contractual restrictions on resale.
In addition, without the affirmative vote of the holders of a majority of
the Fund's outstanding shares, the Fund may not change its policy of investing
at least 80% of its total assets in obligations the interest on which is exempt
from federal income tax (except during periods of unusual market conditions or
during temporary defensive periods). Securities issued or guaranteed by the U.S.
Government, its agencies, or instrumentalities (including securities backed by
the full faith and credit of the United States) are not deemed to be subject to
the second investment limitation above.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value of the
Fund's portfolio securities will not constitute a violation of such limitation.
TYPES OF MUNICIPAL OBLIGATIONS
The two principal classifications of Municipal Obligations which may be
held by the Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and
6
<PAGE> 50
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Revenue securities include private activity bonds which
are not payable from the unrestricted revenues of the issuer. Consequently, the
credit quality of private activity bonds is usually directly related to the
credit standing of the corporate user of the facility involved.
The Fund's portfolio may also include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which created
the issuer.
OTHER INVESTMENT PRACTICES
Municipal Obligations purchased by the Fund may include variable rate
demand notes. Such notes are frequently not rated by credit rating agencies, but
unrated notes purchased by the Fund will be determined by the Fund's investment
adviser to be of comparable quality at the time of purchase to rated instruments
purchasable by the Fund. Where necessary to ensure that a note is an Eligible
Security, the Fund will require that the issuer's obligation to pay the
principal of the note be backed by an unconditional bank letter or line of
credit, guarantee, or commitment to lend. While there may be no active secondary
market with respect to a particular variable rate demand note purchased by the
Fund, the Fund may, upon the notice specified in the note, demand payment of the
principal of the note at any time or during specified periods not exceeding
thirteen months, depending upon the instrument involved, and may resell the note
at any time to a third party. The absence of such an active secondary market,
however, could make it difficult for the Fund to dispose of a variable rate
demand note if the issuer were to default on its payment obligation or during
periods that the Fund is not entitled to exercise its demand rights, and the
Fund could, for this or other reasons, suffer a loss to the extent of the
default. While, in general, the Fund will invest only in securities that mature
within thirteen months of purchase, the Fund may invest in variable rate demand
notes which have nominal maturities in excess of thirteen months, if such
instruments carry demand features that comply with conditions established by the
SEC.
The Fund may also purchase Municipal Obligations on a "when-issued" basis.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield. The Fund will generally not pay for
such securities or start earning interest on them until they are received.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of interest
rates. The Fund expects that commitments to purchase when-issued securities will
not exceed 25% of the value of its total assets absent unusual market
conditions. The Fund does not intend to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective.
In addition, the Fund may acquire "stand-by commitments" with respect to
Municipal Obligations held in its portfolio. Under a stand-by commitment, a
dealer would agree to purchase at the Fund's option specified Municipal
Obligations at a specified price. The Fund will acquire
7
<PAGE> 51
stand-by commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes.
Although the Fund may invest more than 25% of its net assets in (i)
Municipal Obligations whose issuers are in the same state and (ii) Municipal
Obligations the interest on which is paid solely from revenues of similar
projects, it does not presently intend to do so on a regular basis. To the
extent the Fund's assets are concentrated in Municipal Obligations that are
payable from the revenues of similar projects or are issued by issuers located
in the same state, the Fund will be subject to the peculiar risks presented by
such projects and by the laws and economic conditions relating to such states to
a greater extent than it would be if its assets were not so concentrated. In
addition, the Fund may invest its net assets without limitation in private
activity bonds. While interest paid on private activity bonds will be exempt
from regular federal income tax, it may be treated as a specific tax preference
item under the federal alternative minimum tax. (See "Taxes".) Investors should
also be aware of the possibility of state and local alternative minimum income
tax or minimum income tax liability on interest from private activity bonds.
The Fund will not knowingly invest more than 10% of the value of its total
net assets in illiquid securities, including securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not deemed illiquid for
purposes of this limitation. The Fund's investment adviser will monitor the
liquidity of such restricted securities under the supervision of the Board of
Trustees. (See "Investment Objectives and Policies--Illiquid Securities" in the
Statement of Additional Information.)
The Fund may purchase securities which are not registered under the
Securities Act of 1933 (the "1933 Act") but which can be sold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act. Any such
security will not be considered illiquid so long as it is determined by the
Board of Trustees or the adviser, acting under guidelines approved and monitored
by the Board, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in a portfolio during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities.
The value of the Fund's portfolio securities can be expected to vary
inversely with changes in prevailing interest rates.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined after
acceptance of a purchase order by PFPC, the Fund's transfer agent. Purchase
orders for shares are accepted only on days on which both the New York Stock
Exchange and the Federal Reserve Bank of Philadelphia are open for business and
must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441-7450;
in Delaware: 302-791-5350) or through the Fund's computer access program. Orders
accepted before 12:00 noon, Eastern time, for which payment has been received by
PNC Bank, the Fund's custodian, will be executed at 12:00 noon. Orders accepted
after 12:00 noon and before 2:30 P.M., Eastern time (or orders accepted earlier
in the same day for which payment has not been received by 12:00 noon), will be
executed at 4:00 P.M., Eastern time, if
8
<PAGE> 52
payment has been received by PNC Bank by that time. Orders received at other
times, and orders for which payment has not been received by 4:00 P.M., Eastern
time, will not be accepted, and notice thereof will be given to the institution
placing the order. (Payment for orders which are not received or accepted will
be returned after prompt inquiry to the sending institution.) The Fund may in
its discretion reject any order for shares.
Payment for Fund shares may be made only in federal funds or other funds
immediately available to PNC Bank. The minimum initial investment by an
institution is $3 million for MuniCash Shares and $5,000 for Dollar Shares;
however, broker-dealers and other institutional investors may set a higher
minimum for their customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial investment for MuniCash
Shares for specific institutions whose aggregate relationship with the Provident
Institutional Funds is substantially equivalent to this $3 million minimum and
warrants this reduction.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency, and investment advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state securities
commissions, should consult their legal advisors before investing fiduciary
funds in Dollar Shares. (See also "Management of the Fund--Banking Laws.")
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware in
the manner described under "Purchase Procedures." Shares are redeemed at the net
asset value per share next determined after PFPC's receipt of the redemption
order. While the Fund intends to use its best efforts to maintain its net asset
value per share at $1.00, the proceeds paid to a shareholder upon redemption may
be more or less than the amount invested depending upon a share's net asset
value at the time of redemption.
Payment for redeemed shares for which a redemption order is received by
PFPC before 12:00 noon, Eastern time, on a Business Day is normally made in
federal funds wired to the redeeming shareholder on the same day. Payment for
redemption orders which are received between 12:00 noon and 4:00 P.M., Eastern
time, or on a day when PNC Bank is closed, is normally wired in federal funds on
the next day following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any account if the value
of the account is less than $1,000 after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the net asset value per
share next determined after the redemption order is entered. If during the
sixty-day period the shareholder increases the value of its account to $1,000 or
more, no such redemption shall take place. Moreover, if a shareholder's MuniCash
Shares account falls below an average of $100,000 in any particular calendar
month, the account may be charged an account maintenance fee with respect to
that month. In addition, the Fund may also redeem shares involuntarily or
suspend the right of redemption or under certain special circumstances described
in the Statement of Additional Information under "Additional Purchase and
Redemption Information."
9
<PAGE> 53
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PIMC as of 12:00 noon and 4:00 P.M., Eastern
time, on each day on which both the Federal Reserve Bank of Philadelphia and the
New York Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veterans
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each
class, and dividing the result by the total number of the Fund's outstanding
shares of each class. In computing net asset value, the Fund uses the amortized
cost method of valuation as described in the Statement of Additional Information
under "Additional Purchase and Redemption Information." The Fund's net asset
value per share for purposes of pricing purchase and redemption orders is
determined independently of the net asset values of the shares in the Company's
other investment portfolios.
Fund shares are sold and redeemed without charge by the Fund. Institutional
investors purchasing or holding Fund shares for their customers accounts may
charge customer fees for cash management and other services provided in
connection with their accounts. A customer should, therefore, consider the terms
of its account with an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its customers is responsible
for transmitting orders to the Fund in accordance with its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of the
Company's Board of Trustees.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect subsidiary of PNC Bank, serves as the Fund's
investment adviser. PIMC is one of the largest U.S. bank managers of mutual
funds with assets currently under management in excess of $30 billion. PIMC was
organized in 1977 by PNC Bank to perform advisory services for investment
companies, and has its principal offices at 400 Bellevue Parkway, Wilmington,
Delaware 19809. PNC Bank serves as the Fund's sub-adviser. PNC Bank is one of
the largest bank managers of investments for individuals in the United States,
and together with its predecessors has been in the business of managing the
investments of fiduciary and other accounts since 1847. PNC Bank is a wholly
owned, indirect subsidiary of PNC Bank Corp., and has its principal offices at
1600 Market Street, Philadelphia, Pennsylvania 19103. In 1973, Provident
National Bank (a predecessor to PNC Bank) commenced advising the first
institutional money market mutual fund--a U.S. dollar-denominated constant net
asset value fund--offered in the United States. PIMC and PNC Bank also serve as
investment adviser and sub-advisers, respectively to the Company's MuniFund and
Intermediate Municipal Fund portfolios.
10
<PAGE> 54
PNC Bank Corp., a multi-bank holding company headquartered in Pittsburgh,
Pennsylvania, is one of the largest financial service organizations in the
United States, with banking subsidiaries in Pennsylvania, New Jersey, Delaware,
Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major businesses include
corporate banking, consumer banking, real estate banking, mortgage banking and
asset management.
As investment adviser, PIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. PIMC also
maintains certain of the Fund's financial accounts and records and computes the
Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly, based on the Fund's average daily net assets. PIMC
and the administrators may from time to time reduce the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. Any fees waived or expenses reimbursed by PIMC and the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended November 30, 1996, the Fund paid investment advisory fees
aggregating .06% of the Fund's average daily net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the investment advisory fee paid by the Fund to PIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no
effect on the investment advisory fees payable by the Fund to PIMC. PNC Bank
serves as the Fund's custodian. The services provided by PNC Bank and PIMC and
the fees payable by the Fund for these services are described further in the
Statement of Additional Information under "Management of the Funds."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway, Wilmington,
Delaware 19809, and PDI, whose principal business address is Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve as
administrators. PFPC is an indirect, wholly-owned subsidiary of PNC Bank Corp. A
majority of the outstanding stock of PDI is owned by its officers. The
administrative services provided by the administrators, which are described more
fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Fund; accumulating information for and coordinating the preparation of
reports to the Fund's shareholders and the SEC; and maintaining the registration
or qualification of the Fund's shares for sale under state securities laws. PFPC
and PDI are each responsible for carrying out the duties undertaken pursuant to
the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled jointly
to receive a fee, computed daily and payable monthly, based on the Fund's
average net assets. (For information regarding the administrators' fee waivers
and expense reimbursements, see "Investment Adviser and Sub-Adviser" above.) The
Fund also reimburses each administrator for its reasonable out-of-pocket
expenses incurred in connection with the Fund's computer access program. For the
fiscal
11
<PAGE> 55
year ended November 30, 1996, the Fund paid administrative fees aggregating .06%
of its average daily net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by PFPC and PDI and the fees payable by the
Fund for these services are described further in the Statement of Additional
Information under "Management of the Fund."
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administrators," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent. The distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for the continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
SERVICE ORGANIZATIONS
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. Dollar Shares are identical in all
respects to MuniCash Shares except that they bear the service fees described
below and enjoy certain exclusive voting rights on matters relating to these
fees. The Fund will enter into an agreement with each Service Organization which
purchases Dollar Shares requiring it to provide support services to its
customers who are the beneficial owners of such shares in consideration of the
Fund's payment of .25% (on an annualized basis) of the average daily net asset
value of the Dollar Shares held by the Service Organization for the benefit of
customers. Such services, which are described more fully in the Statement of
Additional Information under "Management of the Funds--Service Organizations,"
include aggregating and processing purchase and redemption requests from
customers and placing net purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers; providing information
periodically to customers showing their positions in Dollar Shares; and
providing sub-accounting or the information necessary for subaccounting with
respect to Dollar Shares beneficially owned by customers. Under the terms of the
agreements, Service Organizations are required to provide to their customers a
schedule of any fees that they may charge to the customers in connection with
their investments in Dollar Shares. MuniCash Shares are sold to institutions
that have not entered into servicing agreements with the Fund in connection with
their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information, the
Fund's service contractors bear all expenses in connection with the performance
of their services. Similarly, the Fund bears the expenses incurred in its
operations. For the fiscal year ended November 30, 1996, the Fund's total
expenses for MuniCash Shares and Dollar Shares were .18% and .43% of the average
daily net assets. With regard to fees paid exclusively by Dollar Shares, see
"Service Organizations" above.
12
<PAGE> 56
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to shareholders of record at the close of business on the day of
declaration. Shares begin accruing dividends on the day the purchase order for
the shares is executed and continue to accrue dividends through the day before
such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class. The Fund does not expect to
realize net long-term capital gains.
Dividends are determined in the same manner for each class of shares of the
Fund but may differ in amount because of the difference in the expenses paid by
each class.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class of shares with respect
to which such dividends are declared at the net asset value of such shares on
the payment date. Reinvested dividends receive the same tax treatment as
dividends paid in cash. Such election, or any revocation thereof, must be made
in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19899, and will become
effective after its receipt by PFPC with respect to dividends paid.
PFPC, as transfer agent, will send each Fund shareholder or its authorized
representative an annual statement designating the amount, if any, of any
dividends and distributions made during each year and their federal tax
qualification.
13
<PAGE> 57
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a "regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least the sum of 90% of its exempt-interest income net of
certain deductions and 90% of its investment company taxable income for such
year. Dividends derived from exempt-interest income may be treated by the Fund's
shareholders as items of interest excludable from their gross income under
Section 103(a) of the Code, unless under the circumstances applicable to the
particular shareholder the exclusion would be disallowed. (See the Statement of
Additional Information under "Additional Information Concerning Taxes.")
If the Fund should hold certain private activity bonds issued after August
7, 1986, shareholders must include, as an item of tax preference, the portion of
dividends paid by the Fund that is attributable to interest on such bonds in
their federal alternative minimum taxable income for purposes of determining
liability (if any) for the 26-28% alternative minimum tax applicable to
individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of .12% on the excess of
the corporation's modified federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
To the extent, if any, dividends paid to shareholders are derived from
taxable income or from long-term or short-term capital gains, such dividends
will not be exempt from federal income tax, whether such dividends are paid in
the form of cash or additional shares, and may also be subject to state and
local taxes. Under state or local law, the Fund's distributions of net
investment income may be taxable to investors as dividend income even though a
substantial portion of such distributions may be derived from interest on
tax-exempt obligations which, if realized directly, would be exempt from such
income taxes.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by the shareholders and paid by the Fund on December 31 of such
year provided that such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the important
federal tax considerations generally affecting the Fund and its shareholders. No
attempt is made to present a detailed explanation of the federal, state or local
income tax treatment of the Fund or its shareholders, and this discussion is not
intended as a substitute for careful tax planning. Accordingly, potential
investors in the Fund should consult their tax advisors with specific reference
to their own tax situation.
14
<PAGE> 58
YIELDS
From time to time, the "yields", "effective yields" and "tax-equivalent
yields" for MuniCash Shares and Dollar Shares may be quoted in advertisements or
in reports to shareholders. Yield quotations are computed separately for each
separate class or sub-class of shares. The "yield" for a particular class or
sub-class of Fund shares refers to the income generated by an investment in the
shares over a specified period (such as a seven-day period). This income is then
"annualized"; that is, the amount of income generated by the investment during
that period is assumed to be generated for each such period over a 52-week or
one-year period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly but, when annualized, the income earned by an
investment in a particular class or sub-class is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. The "tax-equivalent yield"
demonstrates the level of taxable yield necessary to produce an after-tax yield
equivalent to the Fund's tax-free yield for MuniCash Shares and Dollar Shares.
It is calculated by increasing the yield (calculated as above) by the amount
necessary to reflect the payment of federal taxes at a stated rate. The
"tax-equivalent yield" will always be higher than the "yield".
The Fund's yields may be compared to those of other mutual funds with
similar objectives, to bond or other relevant indices, or to rankings prepared
by independent services or other financial or industry publications that monitor
the performance of mutual funds, or to the average yields reported by the Bank
Rate Monitor from money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five standard metropolitan statistical areas.
For example, such data are reported in national financial publications such as
IBC/Donoghue's Money Fund Report(R), Ibbotson Associates of Chicago, The Wall
Street Journal, and The New York Times, reports prepared by Lipper Analytical
Services, Inc., and publications of a local or regional nature.
The Fund's yield figures for a particular class or sub-class of shares
represent the Fund's past performance, will fluctuate, and should not be
considered as representative of future results. The yield of any investment is
generally a function of portfolio quality and maturity, type of investment, and
operating expenses. Any fees charged by Service Organizations or other
institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's yields; such fees, if
charged, would reduce the actual return received by customers on their
investments. The methods used to compute the Fund's yields are described in more
detail in the Statement of Additional Information. Investors may call (800)
821-6006 (MuniCash Shares code: 48; Dollar Shares code: 54) to obtain current
yield information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company was organized as a Maryland corporation in 1979 under the name
Municipal Fund for Temporary Investment, Inc. and was reorganized into a
Pennsylvania trust effective June 1, 1981. The Company commenced operations of
the Fund on February 23, 1984.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more classes of shares. Pursuant to such authority, the Board of Trustees has
authorized the issuance of six classes of shares designated as MuniCash,
15
<PAGE> 59
MuniCash Dollar, MuniFund, MuniFund Dollar, Intermediate Municipal and
Intermediate Municipal Dollar. The Declaration of Trust further authorizes the
trustees to classify or reclassify any class of shares into one or more
sub-classes.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE
AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO THE FUND.
INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING MUNIFUND OR
INTERMEDIATE MUNICIPAL FUND MAY OBTAIN SEPARATE PROSPECTUSES DESCRIBING THOSE
PORTFOLIOS BY CALLING 800-998-7633.
The Company does not intend to hold annual meetings of shareholders except
as required by the 1940 Act or other applicable law. The Company will call a
meeting of shareholders for the purpose of voting upon the question of removal
of a member of the Board of Trustees upon written request of shareholders owning
at least 10% of the outstanding shares of the Company entitled to vote.
Each Fund share represents an equal proportionate interest in the assets
belonging to the Fund. Each share is without par value and has no preemptive or
conversion rights. When issued for payment as described in this Prospectus,
shares will be fully paid and non-assessable.
Holders of the Company's MuniCash Shares and Dollar Shares will vote in the
aggregate and not by class on all matters, except where otherwise required by
law and except that only Dollar Shares will be entitled to vote on matters
submitted to a vote of shareholders pertaining to the Fund's arrangements with
Service Organizations. Further, shareholders of all of the Company's portfolios
will vote in the aggregate and not by portfolio except as otherwise required by
law or when the Board of Trustees determines that the matter to be voted upon
affects only the interests of the shareholders of a particular portfolio. (See
the Statement of Additional Information under "Additional Description Concerning
Fund Shares" for examples where the 1940 Act requires voting by portfolio.)
Shareholders of the Company are entitled to one vote for each full share held
(irrespective of class or portfolio) and fractional votes for fractional shares
held. Voting rights are not cumulative and, accordingly, the holders of more
than 50% of the aggregate shares of the Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
16
<PAGE> 60
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 61
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 62
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 63
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION
INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS
PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR
ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE
COMPANY OR BY THE DISTRIBUTOR
IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
---------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Background and Expense
Information.................. 2
Financial Highlights........... 3
Investment Objective and
Policies..................... 5
Purchase and Redemption of
Shares....................... 8
Management of the Fund......... 10
Dividends...................... 13
Taxes.......................... 14
Yields......................... 15
Description of Shares and
Miscellaneous................ 15
</TABLE>
- --------------------------------------------------------------------------------
MUNICASH
AN INVESTMENT PORTFOLIO
OFFERED BY
MUNICIPAL FUND FOR
TEMPORARY INVESTMENT
LOGO
Prospectus
March 30, 1997
<PAGE> 64
MUNIFUND AND MUNICASH
Investment Portfolios Offered By
Municipal Fund for Temporary Investment
Statement of Additional Information
March 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE COMPANY............................................................................................. 2
INVESTMENT OBJECTIVE AND POLICIES....................................................................... 2
MUNICIPAL OBLIGATIONS................................................................................... 9
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.......................................................... 12
MANAGEMENT OF THE FUNDS................................................................................. 14
ADDITIONAL INFORMATION CONCERNING TAXES................................................................. 24
DIVIDENDS............................................................................................... 27
ADDITIONAL YIELD INFORMATION............................................................................ 27
ADDITIONAL DESCRIPTION CONCERNING SHARES................................................................ 30
COUNSEL................................................................................................. 32
AUDITORS................................................................................................ 31
MISCELLANEOUS........................................................................................... 32
APPENDIX A.............................................................................................. A-1
</TABLE>
This Statement of Additional Information is meant to be read in
conjunction with the Prospectuses for the MuniFund and MuniCash portfolios, each
dated March 30, 1997, and is incorporated by reference in its entirety into each
Prospectus. Because this Statement of Additional Information is not itself a
prospectus, no investment in shares of the MuniFund or MuniCash portfolios
should be made solely upon information contained herein. Copies of a Prospectus
for MuniFund, or MuniCash may be obtained by calling 800-821-7432. Capitalized
terms used but not defined herein have the same meanings as in the Prospectuses.
<PAGE> 65
THE COMPANY
Municipal Fund for Temporary Investment (the "Company") is a no-load,
diversified, open-end investment company presently offering three separate
investment portfolios--MuniFund and MuniCash (individually, a "Fund";
collectively, the "Funds") and Intermediate Municipal Fund.
The investment objective and policies of MuniFund and MuniCash are
comparable, and securities held by each of these portfolios consist of
tax-exempt obligations (as defined in the prospectuses) and tax-exempt
derivatives such as tender option bonds, participations, beneficial interests in
trusts and partnership interests ("Municipal Obligations") having remaining
maturities of 13 months or less at the time of purchase. Although MuniFund and
MuniCash have the same investment adviser and have comparable investment
objectives, their yields will normally differ due to their differing cash flows
and their differing types of portfolio securities (for example, MuniFund invests
in securities rated in the highest category by Rating Agencies, and MuniCash may
invest in securities rated in the two highest categories by Rating Agencies).
THIS STATEMENT OF ADDITIONAL INFORMATION AND MUNIFUND'S AND MUNICASH'S
PROSPECTUSES RELATE PRIMARILY TO THE FUNDS AND DESCRIBE ONLY THE INVESTMENT
OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO
EACH FUND. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING
INTERMEDIATE MUNICIPAL FUND MAY OBTAIN A SEPARATE PROSPECTUS DESCRIBING THAT
PORTFOLIO BY CALLING 800-998-7633.
INVESTMENT OBJECTIVE AND POLICIES
As stated in the Funds' Prospectuses, the investment objective of each
Fund is to provide as high a level of current interest income exempt from
federal income tax as is consistent with relative stability of principal. The
following policies supplement the description of each Fund's investment
objective and policies as contained in the applicable Prospectuses.
PORTFOLIO TRANSACTIONS
Subject to the general control of the Company's Board of Trustees, PNC
Institutional Management Corporation ("PIMC"), each Fund's investment adviser,
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for a Fund. Purchases and sales of
portfolio securities are usually principal transactions without brokerage
commissions. In making portfolio investments, PIMC seeks to obtain the best net
price and the most favorable execution of orders. To the extent that the
execution and price
-2-
<PAGE> 66
offered by more than one dealer are comparable, PIMC may, in its discretion,
effect transactions in portfolio securities with dealers who provide the Company
with research advice or other services. Research advice and other services
furnished by brokers through whom the Funds effect securities transactions may
be used by PIMC in servicing accounts in addition to a Fund, and not all such
services will necessarily benefit a Fund.
Transactions in the over-the-counter market are generally principal
transactions with dealers, and the costs of such transactions involve dealer
spreads rather than brokerage commissions. With respect to over-the-counter
transactions, a Fund, where possible, will deal directly with the dealers who
make a market in the securities involved except in those circumstances where
better prices and execution are available elsewhere.
Investment decisions for each Fund are made independently from those
for another of the Company's portfolios or other investment company portfolios
or accounts managed by PIMC. Such other portfolios may invest in the same
securities as the Funds. When purchases or sales of the same security are made
at substantially the same time on behalf of such other portfolios, transactions
are averaged as to price, and available investments allocated as to amount, in a
manner which PIMC believes to be equitable to each portfolio, including either
Fund. In some instances, this investment procedure may adversely affect the
price paid or received by a Fund or the size of the position obtained for a
Fund. To the extent permitted by law, PIMC may aggregate the securities to be
sold or purchased for a Fund with those to be sold or purchased for such other
portfolios in order to obtain best execution.
The Funds will not execute portfolio transactions through or acquire
portfolio securities issued by PIMC, PNC Bank, National Association ("PNC
Bank"), PFPC Inc. ("PFPC") or Provident Distributors, Inc. ("PDI"), or any
affiliated person (as such term is defined in the Investment Company Act of 1940
(the "1940 Act") of any of them, except to the extent permitted by the
Securities and Exchange Commission ("the SEC"). In addition, the Funds will not
purchase Municipal Obligations during the existence of any underwriting or
selling group relating thereto of which PDI or PNC Bank or any affiliate thereof
is a member, except to the extent permitted by the SEC. Under certain
circumstances, a Fund may be at a disadvantage because of these limitations in
comparison with other investment company portfolios which have a similar
investment objective but are not subject to such limitations. Furthermore, with
respect to such transactions and securities, a Fund will not give preference to
Service Organizations with whom a Fund enters into agreements concerning the
provision of support services to customers who beneficially own MuniFund Dollar
shares or MuniCash
-3-
<PAGE> 67
Dollar shares (collectively, "Dollar shares"). (See the applicable Prospectus,
"Management of the Fund--Service Organizations.")
A Fund may participate, if and when practicable, in bidding for the
purchase of Municipal Obligations directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group. A
Fund will engage in this practice, however, only when PIMC, in its sole
discretion, believes such practice to be in a Fund's interest.
The Funds do not intend to seek profits through short-term trading.
Each Fund's annual portfolio turnover will be relatively high, but a Fund's
portfolio turnover is not expected to have a material effect on its net income.
Each Fund's portfolio turnover rate is expected to be zero for regulatory
reporting purposes.
ADDITIONAL INFORMATION ON INVESTMENT PRACTICES
VARIABLE AND FLOATING RATE INSTRUMENTS. Municipal Obligations purchased
by the Funds may include variable and floating rate instruments, which provide
for adjustments in the interest rate on certain reset dates or whenever a
specified interest rate index changes, respectively. Variable and floating rate
instruments are subject to the credit quality standards described in the
Prospectuses. In some cases the Funds may require that the obligation to pay the
principal of the instrument be backed by a letter or line of credit or
guarantee. Such instruments may carry stated maturities in excess of 397 days
(thirteen months) provided that the maturity-shortening provisions stated in
Rule 2a-7 are satisfied. Although a particular variable or floating rate demand
instrument may not be actively traded in a secondary market, in some cases, a
Fund may be entitled to principal on demand and may be able to resell such notes
in the dealer market.
Variable and floating rate demand instruments held by a Fund may have
maturities of more than thirteen months provided: (i) the Fund is entitled to
the payment of principal at any time, or during specified intervals not
exceeding thirteen months, upon giving the prescribed notice (which may not
exceed 30 days), and (ii) the rate of interest on such instruments is adjusted
at periodic intervals which may extend up to thirteen months (397 days).
Variable and floating rate notes that do not provide for payment within seven
days may be deemed illiquid and subject to the 10% limitation on such
investments.
In determining a Fund's average weighted portfolio maturity and whether
a variable or floating rate demand instrument has a remaining maturity of
thirteen months or less, each instrument will be deemed by a Fund to have a
maturity equal
-4-
<PAGE> 68
to the longer of the period remaining until its next interest rate adjustment or
the period remaining until the principal amount can be recovered through demand.
In determining whether an unrated variable or floating rate demand instrument is
of comparable quality at the time of purchase to "Eligible Securities" in which
a Fund may invest, each Fund's investment adviser will follow guidelines adopted
by the Company's Board of Trustees.
WHEN-ISSUED SECURITIES. As stated in the Funds' Prospectuses, a Fund
may purchase Municipal Obligations on a "when-issued" basis (i.e., for delivery
beyond the normal settlement date at a stated price and yield). When a Fund
agrees to purchase when-issued securities, the custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the custodian will set aside portfolio securities to satisfy
a purchase commitment, and in such a case that Fund may be required subsequently
to place additional assets in the separate account in order to ensure that the
value of the account remains equal to the amount of that Fund's commitment. It
may be expected that a Fund's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash. Because that Fund will set aside cash or liquid assets to
satisfy its purchase commitments in the manner described, such Fund's liquidity
and ability to manage its portfolio might be affected in the event its
commitments to purchase when-issued securities ever exceeded 25% of the value of
its assets. When a Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous. Neither Fund intends to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective. Each
Fund reserves the right to sell the securities before the settlement date if it
is deemed advisable.
STAND-BY COMMITMENTS. Each Fund may acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, a dealer would agree to purchase at a Fund's option specified
Municipal Obligations at their amortized cost value to the Fund plus accrued
interest, if any. (Stand-by commitments acquired by a Fund may also be referred
to as "put" options.) Stand-by commitments may be exercisable by a Fund at any
time before the maturity of the underlying Municipal Obligations and may be
sold, transferred, or assigned only with the instruments involved. A Fund's
right to exercise stand-by commitments will be unconditional and unqualified.
-5-
<PAGE> 69
The amount payable to a Fund upon its exercise of a stand-by commitment
will normally be (i) the Fund's acquisition cost of the Municipal Obligations
(excluding any accrued interest which the Fund paid on their acquisition), less
any amortized market premium or plus any amortized market or original issue
discount during the period the Fund owned the securities, plus (ii) all interest
accrued on the securities since the last interest payment date during that
period.
Each Fund expects that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held by a Fund will not exceed 1/2
of 1% of the value of that Fund's total assets calculated immediately after each
stand-by commitment is acquired.
Each Fund intends to enter into stand-by commitments only with dealers,
banks, and broker-dealers which, in the investment adviser's opinion, present
minimal credit risks. A Fund's reliance upon the credit of these dealers, banks,
and broker-dealers will be secured by the value of the underlying Municipal
Obligations that are subject to the commitment.
A Fund would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation or assumed maturity of the underlying Municipal Obligations, which
would continue to be valued in accordance with the amortized cost method.
Stand-by commitments acquired by a Fund would be valued at zero in determining
net asset value. Where the Fund paid any consideration directly or indirectly
for a stand-by commitment, its cost would be reflected as unrealized
depreciation for the period during which the commitment was held by that Fund.
ILLIQUID SECURITIES. A Fund may not invest more than 10% of its total
net assets in illiquid securities, including securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not considered illiquid for
purposes of this limitation. Each Fund's investment adviser will monitor on an
ongoing basis the liquidity of such restricted securities under the supervision
of the Board of Trustees.
-6-
<PAGE> 70
Rule 144A under the Securities Act allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional municipal
securities will expand further as a result of this regulation and the
development of automated systems for the trading, clearance, and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
system sponsored by the National Association of Securities Dealers.
Each Fund's investment adviser will monitor the liquidity of restricted
securities under the supervision of the Board of Trustees. In reaching liquidity
decisions, the investment adviser will consider, inter alia, the following
factors: (1) the unregistered nature of a Rule 144A security; (2) the frequency
of trades and quotes for the Rule 144A security; (3) the number of dealers
willing to purchase or sell the Rule 144A security and the number of other
potential purchasers; (4) dealer undertakings to make a market in the Rule 144A
security; (5) the trading markets for the Rule 144A security; and (6) the nature
of the Rule 144A security and the nature of marketplace trades (including, the
time needed to dispose of the Rule 144A security, methods of soliciting offers,
and mechanics of transfer).
The Appendix to this Statement of Additional Information contains a
description of the relevant rating symbols used by Rating Agencies for Municipal
Obligations that may be purchased by each Fund.
INVESTMENT LIMITATIONS
The Funds' Prospectuses summarize certain investment limitations that
may not be changed without the affirmative vote of the holders of a majority of
such Fund's outstanding shares (as defined below under "Miscellaneous"). Below
is a complete list of each Fund's investment limitations that may not be changed
without such a vote of shareholders.
A Fund may not:
1. With respect to MuniFund, purchase any securities other than
Municipal Obligations and put options with respect to such obligations; with
respect to MuniCash, purchase any securities other than obligations the interest
on which is exempt from federal income tax, and put options with respect to such
obligations.
-7-
<PAGE> 71
2. Purchase the securities of any issuer if as a result more than 5% of
the value of the Fund's assets would be invested in the securities of such
issuer except that up to 25% of the value of the Fund's assets may be invested
without regard to this 5% limitation.
3. Borrow money except from banks for temporary purposes and then in
amounts not in excess of 10% of the value of the Fund's assets at the time of
such borrowing; or mortgage, pledge or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's assets at the time
of such borrowing. (This borrowing provision is not for investment leverage, but
solely to facilitate management of the Fund's portfolio by enabling the Fund to
meet redemption requests where the liquidation of portfolio securities is deemed
to be disadvantageous or inconvenient.)
4. Knowingly invest more than 10% of the value of the Fund's assets in
securities with legal or contractual restrictions on resale.
5. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective, policies and
limitations.
6. Underwrite any issue of securities except to the extent that the
purchase of Municipal Obligations or other securities directly from the issuer
thereof in accordance with the Fund's investment objective, policies and
limitations may be deemed to be underwriting.
7. Purchase or sell real estate except that the Fund may invest in
Municipal Obligations secured by real estate or interests therein.
8. Purchase securities on margin, make short sales of securities or
maintain a short position.
9. Write or sell puts, calls, straddles, spreads or combinations
thereof.
10. Purchase or sell commodities or commodity contracts, or invest in
oil, gas or mineral exploration or development programs.
11. Invest in industrial revenue bonds where the payment of principal
and interest are the responsibility of a company (including its predecessors)
with less than 3 years of continuous operation.
-8-
<PAGE> 72
12. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition or reorganization.
In addition, without the affirmative vote of the holders of a majority
of a Fund's outstanding shares, such Fund may not change its policy of investing
at least 80% of its total assets in obligations the interest on which is exempt
from federal income tax (except during periods of unusual market conditions or
during temporary defensive periods). Securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities (including securities backed by
the full faith and credit of the United States) are not deemed to be subject to
the second investment limitation above. With respect to MuniCash, the percentage
restrictions on borrowing and collateralization contained in the third
investment limitation above are based on the Fund's total assets, and any
interest paid by the Fund on its borrowings pursuant to this investment
limitation would reduce the Fund's income. It is currently MuniCash's policy not
to purchase portfolio securities while borrowings in excess of 5% of the Fund's
net assets are outstanding. The policies and practices stated in this paragraph
may be changed without the affirmative vote of the holders of a majority of the
Fund's outstanding shares, but any such change may require the approval of the
SEC and would be disclosed in the Funds' prospectuses prior to being made.
The Fund will not invest more than 25% of its assets in private
activity bonds involving privately-operated facilities in the same industry.
This policy may be changed without the affirmative vote of the holders of a
majority of a Fund's outstanding shares.
In order to permit the sale of Fund shares in certain states, the Funds
may make commitments more restrictive than the investment policies and
limitations above. Should a Fund determine that any such commitment is no longer
in its best interests, it will revoke the commitment by terminating sales of its
shares in the state involved.
MUNICIPAL OBLIGATIONS
Municipal Obligations include debt obligations issued by governmental
entities to obtain funds for various public purposes, including the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to public
institutions and facilities. Private activity bonds that are or were issued by
or on behalf of public authorities to finance various privately-operated
facilities are included within the term Municipal Obligations if the interest
paid thereon is
-9-
<PAGE> 73
exempt from federal income tax. Opinions relating to the validity of Municipal
Obligations and to the exemption of interest thereon from federal income taxes
are rendered by counsel to the issuers or bond counsel to the respective issuing
authorities at the time of issuance. Neither the Funds nor their investment
adviser will review independently the underlying proceedings relating to the
issuance of Municipal Obligations or the bases for such opinions.
The Funds may hold tax-exempt derivatives which may be in the form of
tender option bonds, participations, beneficial interests in a trust,
partnership interests or other forms. A number of different structures have been
used. For example, interests in long-term fixed-rate Municipal Obligations, held
by a bank as trustee or custodian, are coupled with tender option, demand and
other features when the tax-exempt derivatives are created. Together, these
features entitle the holder of the interest to tender (or put) the underlying
Municipal Obligation to a third party at periodic intervals and to receive the
principal amount thereof. In some cases, Municipal Obligations are represented
by custodial receipts evidencing rights to receive specific future interest
payments, principal payments, or both, on the underlying municipal securities
held by the custodian. Under such arrangements, the holder of the custodial
receipt has the option to tender the underlying municipal securities at its face
value to the sponsor (usually a bank or broker dealer or other financial
institution), which is paid periodic fees equal to the difference between the
bond's fixed coupon rate and the rate that would cause the bond, coupled with
the tender option, to trade at par on the date of a rate adjustment. The Funds
may hold tax-exempt derivatives, such as participation interests and custodial
receipts, for Municipal Obligations which give the holder the right to receive
payment of principal subject to the conditions described above. The Internal
Revenue Service has not ruled on whether the interest received on tax-exempt
derivatives in the form of participation interests or custodial receipts is
tax-exempt, and accordingly, purchases of any such interests or receipts are
based on the opinion of counsel to the sponsors of such derivative securities.
Neither the Funds nor their investment adviser will review independently the
underlying proceedings related to the creation of any tax-exempt derivatives or
the bases for such opinions.
As described in the Funds' Prospectuses, the two principal
classifications of Municipal Obligations consist of "general obligation" and
"revenue" issues, and each Fund's portfolio may include "moral obligation"
issues, which are normally issued by special purpose authorities. There are, of
course, variations in the quality of Municipal Obligations both within a
particular classification and between classifications, and the yields on
Municipal Obligations depend upon a variety of factors, including general money
market conditions, the financial
-10-
<PAGE> 74
condition of the issuer, general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation, and the rating of
the issue. The ratings of Rating Agencies represent their opinions as to the
quality of Municipal Obligations. It should be recognized, however, that ratings
are general and are not absolute standards of quality, and Municipal Obligations
with the same maturity, interest rate, and rating may have different yields
while Municipal Obligations of the same maturity and interest rate with
different ratings may have the same yield. Subsequent to its purchase by a Fund,
an issue of Municipal Obligations may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Fund. A Fund's
investment adviser will consider such an event in determining whether the Fund
should continue to hold the obligation.
An issuer's obligations under its Municipal Obligations are subject to
the provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the federal Bankruptcy Code, and laws, if
any, which may be enacted by federal or state legislatures extending the time
for payment of principal or interest, or both, or imposing other constraints
upon enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Obligations may be
materially adversely affected by litigation or other conditions.
Among other instruments, each Fund may purchase short-term General
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue
Anticipation Notes, Tax-Exempt Commercial Paper, Construction Loan Notes, and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements, or other revenues. In addition, each Fund may invest in other types
of tax-exempt instruments such as municipal bonds, private activity bonds, and
pollution control bonds, provided they have remaining maturities of thirteen
months or less at the time of purchase.
The payment of principal and interest on most securities purchased by a
Fund will depend upon the ability of the issuers to meet their obligations. The
District of Columbia, each state, each of their political subdivisions,
agencies, instrumentalities, and authorities and each multi-state agency of
which a state is a member is a separate "issuer" as that term is used in this
Statement of Additional Information and the Funds' Prospectuses. The
non-governmental user of facilities financed by private activity bonds is also
considered to be an "issuer."
-11-
<PAGE> 75
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
IN GENERAL
Information on how to purchase and redeem each Fund's shares is
included in the applicable Prospectuses. The issuance of a Fund's shares is
recorded on a Fund's books, and share certificates are not issued unless
expressly requested in writing. Certificates are not issued for fractional
shares.
The regulations of the Comptroller of the Currency provide that funds
held in a fiduciary capacity by a national bank approved by the Comptroller to
exercise fiduciary powers must be invested in accordance with the instrument
establishing the fiduciary relationship and local law. The Company believes that
the purchase of MuniFund or MuniCash shares by such national banks acting on
behalf of their fiduciary accounts is not contrary to applicable regulations if
consistent with the particular account and proper under the law governing the
administration of the account.
Prior to effecting a redemption of shares represented by certificates,
PFPC, the Company's transfer agent, must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank, a member of a major stock exchange or
other eligible guarantor institution, unless other arrangements satisfactory to
a Fund have previously been made. A Fund may require any additional information
reasonably necessary to evidence that a redemption has been duly authorized.
Under the 1940 Act, a Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the New
York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (A Fund may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.) In addition, a Fund may redeem
shares involuntarily in certain other instances if the Board of Trustees
determines that failure to redeem may have material adverse consequences to that
Fund's shareholders in general. If the Board of Trustees determines that
conditions exist which make payment of redemption proceeds wholly in cash unwise
or undesirable, a Fund may make payment wholly or partly in securities or other
property. (See "Net Asset Value" below for an example of when such form of
payment might be appropriate.)
-12-
<PAGE> 76
Any institution purchasing shares on behalf of separate accounts will
be required to hold the shares in a single nominee name (a "Master Account").
Institutions investing in more than one of the Company's portfolios or series of
shares must maintain a separate Master Account for each portfolio or series of
shares. Institutions may also arrange with PFPC for certain sub-accounting
services (such as purchase, redemption, and dividend recordkeeping).
Sub-accounts may be established by name or number either when the Master Account
is opened or later.
NET ASSET VALUE
As stated in each Fund's Prospectus, net asset value per share of each
class of shares in a particular Fund is calculated by adding the value of all of
the portfolio securities and other assets belonging to a Fund that are
attributable to a class, subtracting the Fund's liabilities attributable to the
class, and dividing the result by the number of the outstanding shares in the
class. "Assets belonging to" a Fund consist of the consideration received upon
the issuance of Fund shares together with all income, earnings, profits, and
proceeds derived from the investment thereof, including any proceeds from the
sale, exchange, or liquidation of such investments, any funds or payments
derived from any reinvestment of such proceeds, and a portion of any general
assets of the Company not belonging to a particular portfolio. Assets belonging
to a Fund are allocated among the classes of shares in the Fund in proportion to
the shares outstanding in each class, and are charged with the direct
liabilities of that Fund and with a share of the general liabilities of the
Company allocated on a daily basis in proportion to the relative net assets of
the Fund and the Company's other portfolios, and expenses of a class are
charged to that class. Determinations made in good faith and in accordance with
generally accepted accounting principles by the Company's Board of Trustees as
to the allocation of any assets or liabilities with respect to a Fund are
conclusive.
As stated in the Funds' Prospectuses, in computing the net asset value
of its shares for purposes of sales and redemptions, each Fund uses the
amortized cost method of valuation. Under this method, a Fund values each of its
portfolio securities at cost on the date of purchase and thereafter assumes a
constant proportionate amortization of any discount or premium until maturity of
the security. As a result, the value of a portfolio security for purposes of
determining net asset value normally does not change in response to fluctuating
interest rates. While the amortized cost method provides certainty in portfolio
valuation, it may result in valuations for the Funds' securities which are
higher or lower than the market value of such securities.
-13-
<PAGE> 77
In connection with its use of amortized cost valuation, each Fund
limits the dollar-weighted average maturity of its portfolio to not more than 90
days and does not purchase any instrument with a remaining maturity of more than
13 months (397 days)(with certain exceptions). The Company's Board of Trustees
has also established, pursuant to rules promulgated by the SEC, procedures that
are intended to stabilize each Fund's net asset value per share for purposes of
sales and redemptions at $l.00. Such procedures include the determination at
such intervals as the Board deems appropriate, of the extent, if any, to which a
Fund's net asset value per share calculated by using available market quotations
deviates from $1.00 per share. In the event such deviation exceeds 1/2 of 1%
with respect to either Fund, the Board will promptly consider what action, if
any, should be initiated. If the Board believes that the amount of any deviation
from a Fund's $1.00 amortized cost price per share may result in material
dilution or other unfair results to investors or existing shareholders, it will
take such steps as it considers appropriate to eliminate or reduce to the extent
reasonably practicable any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the Fund's
average portfolio maturity, redeeming shares in kind, reducing or withholding
dividends, or utilizing a net asset value per share determined by using
available market quotations.
MANAGEMENT OF THE FUNDS
TRUSTEES AND OFFICERS
The Company's trustees and executive officers, their addresses, ages,
principal occupations during the past five years, and other affiliations are
provided below. In addition to the information set forth below, the trustees
serve in the following capacities:
Each trustee of the Company serves as a director of Temporary
Investment Fund, Inc. ("Temp") and as a trustee of Trust for Federal Securities
("Fed"). In addition, Messrs. Fortune and Pepper are directors of Independence
Square Income Securities, Inc. ("ISIS") and Managing General Partners of
Chestnut Street Exchange Fund ("Chestnut"); Messrs. Pepper and Johnson are
directors of Municipal Fund for California Investors, Inc. ("Cal Muni"); Mr.
Johnson is a director of Municipal Fund for New York Investors, Inc. ("New York
Muni") and a director of the International Dollar Reserve Fund ("IDR").
Each of the Company's officers, with the exception of Mr. Jones, holds
like offices with Temp and Fed. In addition, Mr. Jones is Secretary of Chestnut,
Cal Muni and New York Muni. Mr. Roach is Treasurer of Chestnut, President and
Treasurer of
-14-
<PAGE> 78
The RBB Fund, Inc. and New York Muni, and Vice President and
Treasurer of ISIS and Cal Muni; Mr. Pepper is President and
Chairman of the Board of Cal Muni; Mr. Fortune is President and
Chairman of the Boards of Chestnut and ISIS.
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name and Address the Company Other Affiliations
<S> <C> <C>
G. NICHOLAS BECKWITH, III Trustee President and Chief Executive Officer,
Beckwith Machinery Company Beckwith Machinery Company; Chairman of the
Post Office Box 8718 Board of Trustees, Shadyside Hospital; Vice
Pittsburgh, PA 15221 Chairman of the Board of Trustees, Shadyside
Age 52 Academy; Trustee, Claude Washington Benedum
Foundation; Trustee, Chatham College.
PHILIP E. COLDWELL(2,3,4) Trustee Economic Consultant; Chairman, Coldwell
Coldwell Financial Financial Consultants; Member of the Board
Consultants of Governors of the Federal Reserve System,
3330 Southwestern Blvd. 1974 to 1980; President, Federal Reserve
Dallas, TX 75225 Bank of Dallas, 1968 to 1974; Director,
Age: 74 Maxus Energy Corporation (energy products)
1989 to 1993; Director, Diamond Shamrock
Corp. (energy and chemical products) until
1987.
ROBERT R. FORTUNE(2,3,4) Trustee Financial Consultant; Former Chairman,
2920 Ritter Lane President and Chief Executive Officer of
Allentown, PA 18104 Associated Electric & Gas Insurance Services
Age: 80 Limited 1984 to 1993; Member of the
Financial Executives Institute and American
Institute of Certified Public Accountants;
Director, Prudential Utility Fund, Inc., and
Prudential Structured Maturity Fund, Inc.
JERROLD B. HARRIS Trustee President and Chief
706 Haldane Drive Executive Officer, VWR
Kennett Square, PA 19348 Corporation 1990 to
Age 54 present.
RODNEY D. JOHNSON(3,4) Trustee President, Fairmount Capital
Fairmount Capital Advisors, Inc. (financial
Advisors, Inc. advising) since 1987;
1435 Walnut Street Vice President for Financial
Drexel Building Affairs and Treasurer, Temple
Philadelphia, PA 19102 University, 1983 to 1987; Member,
Age: 55 Board of Education, School
District of Philadelphia, 1983 to
1988.
</TABLE>
-15-
<PAGE> 79
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name and Address the Company Other Affiliations
- ---------------- ------------- -----------------------
<S> <C> <C>
G. WILLING PEPPER(1,2) Chairman of Retired; Chairman of the
128 Springton Lake Road the Board, Board, The Institute
Media, PA 19063 President, for Cancer Research until 1979;
Age: 88 and Trustee Director, Philadelphia National
Bank until 1978; President, Scott
Paper Company, 1971 to 1973;
Chairman of the Board, Specialty
Composites Corp. until May 1984.
EDWARD J. ROACH Vice President Certified Public Accountant;
Bellevue Park and Treasurer Vice Chairman of the Board,
Corporate Center Fox Chase Cancer Center;
400 Bellevue Parkway Trustee Emeritus, Pennsylvania
Suite 100 School for the Deaf; Trustee,
Wilmington, DE 19809 Emeritus Immaculata College;
Age: 72 Director, The Bradford Funds,
Inc.
MORGAN R. JONES Secretary Partner of the law firm of
1345 Chestnut Street Drinker Biddle & Reath,
PNB Building Philadelphia, Pennsylvania.
Philadelphia, PA 19107-3496
Age: 57
</TABLE>
(1) This trustee is considered by the Company to be an "interested person"
of the Company as defined in the 1940 Act.
(2) Executive Committee Member.
(3) Audit Committee Member.
(4) Nominating Committee Member.
During intervals between meetings of the Board, the Executive Committee
may exercise the authority of the Board of Trustees in the management of the
Company's business to the extent permitted by law.
EACH OF THE INVESTMENT COMPANIES NAMED ABOVE RECEIVES VARIOUS ADVISORY
AND OTHER SERVICES FROM PIMC AND PNC BANK. OF THE ABOVE-MENTIONED FUNDS, PDI
PROVIDES DISTRIBUTION SERVICES TO TEMP, FED, CAL MUNI, NEW YORK MUNI AND IDR. OF
THE ABOVE-MENTIONED FUNDS, THE ADMINISTRATORS PROVIDE ADMINISTRATION SERVICES TO
TEMP, FED, CAL MUNI AND NEW YORK MUNI.
For the fiscal year ended November 30, 1996, the Company paid a total
of $97,810 to its officers and trustees in all capacities, of which $61,690 was
allocated to MuniFund and $35,520 was allocated to MuniCash. In addition, the
Company contributed $2,928 for its last fiscal year to its retirement plan for
employees (who included Mr. Roach), of which $1,847 was allocated to MuniFund
and $1,063 was allocated to MuniCash. Drinker Biddle & Reath, of which Mr. Jones
is a partner, receives legal fees as counsel to the Company. No employee of PDI,
PIMC, PFPC or PNC Bank acts as an officer or trustee of the Company. The
trustees and officers of the Company as a group beneficially own less than 1% of
the shares of each of the Company's portfolios.
-16-
<PAGE> 80
By virtue of the responsibilities assumed by PDI, PFPC, PIMC, and PNC
Bank under their respective agreements with the Company, the Company itself
requires only one part-time employee in addition to its officers.
The table below sets forth the compensation actually received from the
Fund Complex of which the Company is a part by the trustees for the fiscal year
ended November 30, 1996:
<TABLE>
<CAPTION>
Total
Compensation
from Registrant
and Fund
Aggregate Complex(1)
Compensation Paid to
Name of Person, Position from Registrant Trustees
------------------------ --------------- --------
<S> <C> <C>
G. Nicholas Beckwith, III(5), Trustee $ 9,450 (3)(2) $ 30,975
Philip E. Coldwell, Trustee 14,400 (4)(2) 46,200
Robert R. Fortune, Trustee 14,400 (6)(2) 67,100
Jerrold B. Harris(5), Trustee 10,350 (3)(2) 33,675
Rodney D. Johnson, Trustee 14,400 (6)(2) 59,100
G. Willing Pepper, Trustee and 23,400 (7)(2) 97,100
Chairman
David R. Wilmerding, Jr.(3), Trustee 0 (6)(2) 12,000
Anthony M. Santomero(4), Trustee 0 (6)(2) 12,000
</TABLE>
- -------------------------
(1.) A Fund Complex means two or more investment companies that hold
themselves out to investors as related companies for purposes of
investment and investor services, or have a common investment adviser
or have an investment adviser that is an affiliated person of the
investment adviser of any of the other investment companies.
(2.) Total number of such other investment companies trustee serves on
within the Fund Complex during the fiscal year ended November 30, 1996.
(3.) Mr. Wilmerding resigned as trustee of the Company on January 4, 1996.
(4.) Mr. Santomero resigned as trustee of the Company on January 4, 1996.
(5.) Messrs. Beckwith and Harris were elected to the Board of Trustees of
the Company on March 22, 1996.
-17-
<PAGE> 81
INVESTMENT ADVISER AND SUB-ADVISER
The advisory and sub-advisory services provided by PIMC and
PNC Bank are described in the Funds' Prospectuses. With respect to MuniFund and
MuniCash, for the advisory services provided and expenses assumed by it, PIMC is
entitled to receive fees, computed daily and payable monthly, at the following
annual rates:
<TABLE>
<CAPTION>
Annual Fee A Fund's Average Net Assets
---------- ---------------------------
<S> <C>
.175%.................................. of the first $1 billion
.150%.................................. of the next $1 billion
.125%.................................. of the next $1 billion
.100%.................................. of the next $1 billion
.095%.................................. of the next $1 billion
.090%.................................. of the next $1 billion
.085%.................................. of the next $1 billion
.080%.................................. of amounts in excess of $7 billion.
</TABLE>
PIMC and PNC Bank also serve as adviser and sub-adviser, respectively, for the
Company's Intermediate Municipal Fund portfolio.
PIMC and the administrators have agreed that if, in any
fiscal year, the expenses borne by a Fund exceed the applicable expense
limitations imposed by the securities regulations of any state in which shares
of that Fund are registered or qualified for sale to the public, they will each
reimburse that Fund for a portion of any such excess expense in an amount equal
to the portion that the administration fees otherwise payable by the Fund to the
administrators bear to the total amount of the investment advisory and
administration fees otherwise payable to the Fund.
For the fiscal years ended November 30, 1994, 1995 and 1996, MuniFund
paid fees for advisory services aggregating $866,146, $800,406 and $752,680,
respectively. For the same periods, PIMC waived payment of additional advisory
fees totalling $658,668, $540,756 and $545,635, respectively, although the
expense limitations then in effect were not exceeded. For the fiscal years ended
November 30, 1994, 1995 and 1996, MuniCash paid fees for advisory services
aggregating $267,690, $231,399 and $238,520, respectively. For the same periods,
PIMC waived payment of additional advisory fees totalling $477,176, $424,828 and
$488,851, respectively,
-18-
<PAGE> 82
although the expense limitations then in effect were not exceeded.
BANKING LAWS
Certain banking laws and regulations with respect to investment
companies are discussed in each Fund's Prospectus. PIMC, PNC Bank and PFPC
believe that they may perform the services for the Funds contemplated by their
respective agreements, Prospectuses and this Statement of Additional Information
without violation of applicable banking laws or regulations. It should be noted,
however, that future changes in legal requirements relating to the permissible
activities of banks and their affiliates, as well as further interpretations of
present requirements, could prevent PIMC and PFPC from continuing to perform
such services for the Funds and PNC Bank from continuing to perform such
services for PIMC and the Funds. If PIMC, PFPC, or PNC Bank were prohibited from
continuing to perform such services, it is expected that the Company's Board of
Trustees would recommend that the Funds enter into new agreements with other
qualified firms. Any new advisory agreement would be subject to shareholder
approval as required by the 1940 Act.
In addition, state securities laws on this issue may differ from the
interpretations of federal laws expressed herein and bank and financial
institutions may be required to register as dealers pursuant to state law.
ADMINISTRATORS
As the Funds' administrators, PFPC and PDI have agreed to provide the
following services: (i) assist generally in supervising a Fund's operations,
including providing a Wilmington, Delaware order-taking facility with toll-free
IN-WATS telephone lines, providing for the preparing, supervising, and mailing
of purchase and redemption order confirmations to shareholders of record,
providing and supervising the operation of an automated data processing system
to process purchase and redemption orders, maintaining a back-up procedure to
reconstruct lost purchase and redemption data, providing information concerning
each Fund to its shareholders of record, handling shareholder problems,
providing (through PDI) the services of employees to preserve and strengthen
shareholder relations and monitoring the arrangements pertaining to a Fund's
agreements with Service Organizations; (ii) assure that persons are available to
receive and transmit purchase and redemption orders; (iii) participate in the
periodic updating of the Funds' Prospectuses; (iv) assist in maintaining the
Funds' Wilmington, Delaware office; (v) perform administrative services in
connection with the Funds' computer access program maintained to facilitate
shareholder access to a Fund; (vi) accumulate information for and coordinate the
preparation of reports to a
-19-
<PAGE> 83
Fund's shareholders and the SEC; (vii) provide the services of certain
persons who may be elected as trustees or appointed as officers of the Company
by the Board of Trustees; and, (viii) review and provide advice with respect to
all sales literature of the Funds; and (ix) assist in the monitoring of
regulatory and legislative development which may affect the Company, participate
in counseling and assisting the Company in relation to routine regulatory
examinations and investigations, and work with the Company's counsel in
connection with regulatory matters and litigation.
For their administrative services, the administrators are entitled
jointly to receive fees from the MuniFund and MuniCash portfolios, respectively,
computed daily and payable monthly, determined on the same basis as PIMC's
advisory fee set forth above. As stated in their Prospectuses, each
administrator is also reimbursed for its reasonable out-of-pocket expenses
incurred by it in connection with the Funds' computer access program. For
information regarding the administrator's obligation to reimburse a Fund in the
event its expenses exceed certain prescribed limits, see "Investment Adviser and
Sub-Adviser" above.
For the fiscal year ended November 30, 1996, the Company paid fees (net
of waivers) for administration services aggregating $752,680 with respect to
MuniFund and $238,520 with respect to MuniCash. For the same fiscal year, PFPC
and PDI voluntarily waiver administration fees aggregating $545,635 with respect
to MuniFund and $488,851 with respect to MuniCash.
For the fiscal year ended November 30, 1995, the Company paid fees (net
of waivers) for administration services aggregating $800,406 with respect to
MuniFund and $231,399 with respect to MuniCash. For the same fiscal year, PFPC
and PDI voluntarily waived administration fees aggregating $540,756 with respect
to MuniFund and $424,828 with respect to MuniCash. For the fiscal year ended,
November 30, 1994, MuniFund and MuniCash paid administration fees totalling
$866,146 and $267,690, respectively. For the same period, administration fees of
$658,668 with respect to MuniFund and $477,176 with respect to MuniCash were
voluntarily waived.
PFPC, a wholly owned, indirect subsidiary of PNC Bank Corp. provides
administrative services to certain investment companies which are distributed by
PDI. PFPC and PDI also serve as administrators of the Company's Intermediate
Municipal Fund Portfolio.
-20-
<PAGE> 84
DISTRIBUTOR
PDI acts as the distributor of the Funds' shares. The Funds' shares are
sold on a continuous basis by the distributor as agent, although it is not
obliged to sell any particular amount of shares. The distributor pays the cost
of printing and distributing prospectuses to persons who are not shareholders of
the Funds (excluding preparation and printing expenses necessary for the
continued registration of the Funds' shares). The distributor shall prepare or
review, provide advice with respect to and file with the federal and state
agencies or other organization as required by federal, state, or other
applicable laws and regulations, all sales literature (advertising brochures and
shareholder communications) for each of the Funds and any class or subclass
thereof. No compensation is payable by the Funds to the distributor for its
distribution services. PDI is a Delaware corporation, with its principal place
of business located at Four Falls Corporate Center, 6th Floor, West
Conshohocken, Pennsylvania 19428.
CUSTODIAN AND TRANSFER AGENT
Pursuant to a Custodian Agreement, PNC Bank serves as the Funds'
custodian, holding a Fund's portfolio securities, cash, and other property.
Under the Agreement, PNC Bank has agreed to provide the following services: (i)
maintain a separate account or accounts in the name of a Fund; (ii) hold and
disburse portfolio securities on account of a Fund; (iii) collect and make
disbursements of money on behalf of a Fund; (iv) collect and receive all income
and other payments and distributions on account of a Fund's portfolio
securities; and, (v) make periodic reports to the Board of Trustees concerning a
Fund's operations. PNC Bank also serves as custodian for the Company's
Intermediate Municipal Fund portfolio.
PFPC also serves as transfer agent, registrar, and dividend disbursing
agent to each Fund pursuant to a Transfer Agency Agreement. Under the Agreement,
PFPC has agreed to provide the following services: (i) maintain a separate
account or accounts in the name of the Funds; (ii) issue, transfer, and redeem
Fund shares of the Funds; (iii) transmit all communications by the Fund to its
shareholders of record, including reports to its shareholders, dividend and
distribution notices, and proxy material for its meetings of shareholders; (iv)
respond to correspondence by shareholders, security brokers, and others relating
to its duties; (v) maintain shareholder accounts and sub-accounts; (vi) provide
installation and other services in connection with the Funds' computer access
program maintained to facilitate shareholder access to a Fund; (vii) send each
shareholder of record a monthly statement showing the total number of shares
owned as of the last business day of the month (as well as the dividends paid
during the current month and
-21-
<PAGE> 85
year); and, (viii) provide each shareholder of record with a daily transaction
report for each day on which a transaction occurs in the shareholder's Master
Account with a Fund. Further, an institution establishing sub-accounts with PFPC
is provided with a daily transaction report for each day on which a transaction
occurs in a sub-account and, as of the last calendar day of each month, a report
which sets forth the share balances for the sub-accounts at the beginning and
end of the month and income paid or reinvested during the month. Finally, PFPC
provides each shareholder of record with copies of all information which is
required to be filed with the Internal Revenue Service and other appropriate
taxing authorities. PFPC also serves as transfer agent for the Company's
Intermediate Municipal Fund portfolio.
PNC Bank is also authorized to select one or more banks or trust
companies to serve as sub-custodian on behalf of a Fund, provided that PNC Bank
shall remain responsible for the performance of all of its duties under the
Custodian Agreement and shall hold each Fund harmless from the acts and
omissions of any bank or trust company serving as sub-custodian chosen by PNC
Bank.
Pursuant to the Custodian Agreement, each Fund pays PNC Bank an annual
fee, calculated daily on the average daily gross assets and paid monthly, at the
rate of $.25 for each $1000 of the first $250 million, $.20 for each $1000 on
the next $250 million, $.15 for each $1000 on the next $500 million, $.09 for
each $1000 on the next $2 billion, and $.08 for each $1000 on amounts over $3
billion, plus $15.00 for each purchase, sale, or delivery of fixed income
securities (other than "Money Market" obligations) and $40 for each interest
collection or claim item. For transfer agency and dividend disbursing services,
each Fund pays to PFPC fees at the annual rate of $12.00 per account and
sub-account maintained by PFPC plus $1.00 for each purchase or redemption
transaction by an account (other than a purchase transaction made in connection
with the automatic reinvestment of dividends). Payments to PFPC for
sub-accounting services provided by others are limited to the amount which PFPC
pays to others for such services. In addition, each Fund reimburses PNC Bank and
PFPC for out-of-pocket expenses related to such services. PNC Bank's principal
business address is 1600 Market Street, Philadelphia, Pennsylvania 19103.
SERVICE ORGANIZATIONS
As stated in the Funds' Prospectuses, each Fund will enter into an
agreement with each Service Organization which purchases Dollar shares requiring
it to provide support services to its customers who beneficially own Dollar
shares in consideration of the Fund's payment of .25% (on an annualized basis)
of the average daily net asset value of that Fund's Dollar shares held by the
Service Organization for the benefit of
-22-
<PAGE> 86
customers. Such services include: (i) aggregating and processing purchase and
redemption requests from customers and placing net purchase and redemption
orders with PFPC; (ii) providing customers with a service that invests the
assets of their accounts in a Fund's Dollar shares; (iii) processing dividend
payments from a Fund on behalf of customers; (iv) providing information
periodically to customers showing their positions in a Fund's Dollar shares; (v)
arranging for bank wires; (vi) responding to customer inquiries relating to the
services performed by the Service Organization; (vii) providing sub-accounting
with respect to Dollar shares beneficially owned by customers or the information
necessary for sub-accounting; (viii) forwarding shareholder communications from
the Funds (such as proxies, shareholder reports, annual and semi-annual
financial statements, and dividend, distribution and tax notices) to customers,
if required by law; and, (ix) other similar services if requested by the Funds.
For the fiscal year ended November 30, 1996, the Company paid $379,951 in
servicing fees for the Portfolios. $130,964 was paid by MuniFund, 1.5% of which
was paid to affiliates of the Company's adviser. $248,904 was paid by MuniCash,
10.4% of which was paid to an affiliate of the Company's adviser.
Each Fund's agreements with Service Organizations are governed by a
Shareholder Services Plan (the "Plan") that has been adopted by the Company's
Board of Trustees pursuant to an exemptive order granted by the SEC in
connection with the offering of a Fund's Dollar shares. Pursuant to the Plan,
the Board of Trustees reviews, at least quarterly, a written report of the
amounts expended under each Fund's agreements with Service Organizations and the
purposes for which the expenditures were made. In addition, a Fund's
arrangements with Service Organizations must be approved annually by a majority
of the Company's trustees, including a majority of the trustees who are not
"interested persons" of the Company as defined in the 1940 Act and have no
direct or indirect financial interest in such arrangements (the "Disinterested
Trustees").
The Board of Trustees has approved each Fund's arrangements with
Service Organizations based on information provided by the Company's service
contractors that there is a reasonable likelihood that the arrangements will
benefit such Fund and its shareholders by affording the Fund greater flexibility
in connection with the servicing of the accounts of the beneficial owners of its
shares in an efficient manner. Any material amendment to a Fund's arrangements
with Service Organizations must be approved by a majority of the Company's Board
of Trustees (including a majority of the Disinterested Trustees). So long as a
Fund's arrangements with Service Organizations are in effect, the selection and
nomination of the members of the Company's Board of Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Company
-23-
<PAGE> 87
will be committed to the discretion of such non-interested trustees.
EXPENSES
Each Fund's expenses include taxes, interest, fees, and salaries of the
Company's trustees and officers who are not directors, officers, or employees of
the Funds' service contractors, SEC fees, state securities registration fees,
rating agency fees, costs of preparing and printing prospectuses for regulatory
purposes and for distribution to shareholders, advisory and administration fees,
charges of the custodian and of the transfer and dividend disbursing agent,
Service Organization fees, certain insurance premiums, outside auditing and
legal expenses, costs of the Funds' computer access program, costs of
shareholder reports and shareholder meetings, and any extraordinary expenses.
The Funds also pay for brokerage fees and commissions (if any) in connection
with the purchase and sale of portfolio securities.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting a Fund and its shareholders that are not described in the
Funds' Prospectuses. No attempt is made to present a detailed explanation of the
tax treatment of a Fund or its shareholders or possible legislative changes, and
the discussion here and in the applicable Prospectuses is not intended as a
substitute for careful tax planning. Investors should consult their tax advisors
with specific reference to their own tax situation.
As stated in each Prospectus, each Fund of the Company is treated as a
separate corporate entity under the Internal Revenue Code of 1986, as amended
(the "Code") and intends to qualify each year as a regulated investment company
under the Code. In order to so qualify for a taxable year, a Fund must satisfy
the distribution requirement described in the Prospectuses, derive at least 90%
of its gross income for the year from certain qualifying sources, comply with
certain diversification requirements, and derive less than 30% of its gross
income for the year from the sale or other disposition of securities and certain
other investments held for less than three months. Interest (including original
issue discount and accrued market discount) received by a Fund at maturity or
disposition of a security held for less than three months will not be treated as
gross income derived from the sale or other disposition of such security within
the meaning of the 30% requirement. However, any other income which is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
-24-
<PAGE> 88
As described above and in the Funds' Prospectuses, each Fund is
designed to provide institutions with current tax-exempt interest income.
Neither Fund is intended to constitute a balanced investment program nor is
designed for investors seeking capital appreciation or maximum tax-exempt income
irrespective of fluctuations in principal. Shares of a Fund would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and individual
retirement accounts because such plans and accounts are generally tax-exempt
and, therefore, not only would not gain any additional benefit from a Fund's
dividends being tax-exempt but also such dividends would be taxable when
distributed to the beneficiary. In addition, a Fund may not be an appropriate
investment for entities which are "substantial users" of facilities financed by
private activity bonds or "related persons" thereof. "Substantial user" is
defined under U.S. Treasury Regulations to include a non-exempt person who
regularly uses a part of such facilities in his or her trade or business and
whose gross revenues derived with respect to the facilities financed by the
issuance of bonds are more than 5% of the total revenues derived by all users of
such facilities, or who occupies more than 5% of the usable area of such
facilities or for whom such facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons" include certain
related natural persons, affiliated corporations, a partnership and its
partners, and an S Corporation and its shareholders.
In order for a Fund to pay exempt-interest dividends for any taxable
year, at the close of each quarter of its taxable year at least 50% of the
aggregate value of that Fund's assets must consist of exempt-interest
obligations. After the close of its taxable year, each Fund will notify its
shareholders of the portion of the dividends paid by that Fund which constitutes
an exempt-interest dividend with respect to such taxable year. However, the
aggregate amount of dividends so designated by a Fund cannot exceed the excess
of the amount of interest exempt from tax under Section 103 of the Code received
by that Fund for the taxable year over any amounts disallowed as deductions
under Sections 265 and 171(a)(2) of the Code. The percentage of total dividends
paid by a Fund with respect to any taxable year which qualifies as federal tax
exempt-interest dividends will be the same for all shareholders of such Fund
receiving dividends for such year.
Interest on indebtedness incurred by a shareholder to purchase or carry
a Fund's shares generally is not deductible for federal income tax purposes if
that Fund distributes exempt-interest dividends during the shareholder's
taxable year.
While each Fund does not expect to realize long-term capital gains, any
net realized long-term capital gains will be
-25-
<PAGE> 89
distributed at least annually. A Fund will generally have no tax liability with
respect to such gains, and the distributions will be taxable to a Fund's
shareholders as long-term capital gains, regardless of how long a shareholder
has held a Fund's shares. Such distributions will be designated as a capital
gain dividend in a written notice mailed by a Fund to its shareholders not later
than 60 days after the close of the Fund's taxable year.
Similarly, while each Fund does not expect to earn any investment
company taxable income, taxable income earned by a Fund will be distributed to
its shareholders. In general, a Fund's investment company taxable income will be
its taxable income (for example, any short-term capital gains) subject to
certain adjustments and excluding the excess of any net long-term capital gain
for the taxable year over the net short-term capital loss, if any, for such
year. Each Fund will be taxed on any undistributed investment company taxable
income of that Fund. To the extent such income is distributed by a Fund (whether
in cash or additional shares), it will be taxable to such Fund's shareholders as
ordinary income.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail currently to distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income (excess
of capital gains over capital losses). Each Fund intends to make sufficient
distributions or deemed distributions of any ordinary taxable income and any
capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
If for any taxable year a Fund does not qualify for tax treatment as a
regulated investment company, all of that Fund's taxable income will be subject
to tax at regular corporate rates without any deduction for distributions to
Fund shareholders. In such event, dividend distributions to shareholders would
be taxable to shareholders to the extent of that Fund's earnings and profits and
would be eligible for the dividends received deduction for corporations.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or 31% of gross proceeds realized
upon sale paid to its shareholders which have failed to provide a correct tax
identification number in the manner required, which is subject to withholding by
the Internal Revenue Service for failure properly to include on its return
payments of taxable interest or dividends, or which has failed to certify to the
Fund that it is not subject to backup withholding when required to do so or that
it is an "exempt recipient."
Although each Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes,
depending upon the extent of its
-26-
<PAGE> 90
activities in states and localities in which its offices are maintained, in
which its agents or independent contractors are located or in which they are
otherwise deemed to be conducting business, a Fund may be subject to the tax
laws of such states or localities.
The foregoing discussion is based on federal tax laws and regulations
which are in effect on the date of this Statement of Additional Information,
such laws and regulations may be changed by legislative or administrative
action.
DIVIDENDS
GENERAL
Each Fund's net investment income for dividend purposes consists of (i)
interest accrued and discount earned on that Fund's assets, (ii) less
amortization of market premium on such assets, accrued expenses directly
attributable to that Fund, and the general expenses (e.g. legal, accounting and
trustees' fees) of the Company prorated to such Fund on the basis of its
relative net assets. The amortization of market discount on a Fund's assets is
not included in the calculation of net income. Realized and unrealized gains and
losses on portfolio securities are reflected in net asset value. In addition, a
Fund's Dollar shares bear exclusively the expense of fees paid to Service
Organizations. (See "Management of the Funds--Service Organizations.")
As stated, the Company uses its best efforts to maintain the net asset
value per share of each Fund at $1.00. As a result of a significant expense or
realized or unrealized loss incurred by either Fund, it is possible that the
Fund's net asset value per share may fall below $1.00.
ADDITIONAL YIELD INFORMATION
The "yields", "effective yields" and "tax-equivalent yields" are
calculated separately for MuniFund and MuniFund Dollar shares and for MuniCash
and MuniCash Dollar shares. The seven-day yield for each series of shares in a
Fund is calculated by determining the net change in the value of a hypothetical
pre-existing account in a Fund which has a balance of one share of the series
involved at the beginning of the period, dividing the net change by the value of
the account at the beginning of the period to obtain the base period return, and
multiplying the base period return by 365/7. The net change in the value of an
account in a Fund includes the value of additional shares purchased with
dividends from the original share and dividends declared on the original share
and any such additional shares,
-27-
<PAGE> 91
net of all fees charged to all shareholder accounts in proportion to the length
of the base period and the Fund's average account size, but does not include
gains and losses or unrealized appreciation and depreciation. In addition, the
effective yield quotations may be computed on a compounded basis (calculated as
described above) by adding 1 to the base period return for the series involved,
raising that sum to a power equal to 365/7, and subtracting 1 from the result. A
tax-equivalent yield for each series of a Fund's shares is computed by dividing
the portion of the yield (calculated as above) that is exempt from federal
income tax by one minus a stated federal income tax rate and adding that figure
to that portion, if any, of the yield that is not exempt from federal income
tax. Similarly, based on the calculations described above, 30-day (or one-month)
yields, effective yields and tax-equivalent yields may also be calculated.
For the seven-day period ended November 30, 1996, the yield, effective
yield, and tax-equivalent yield for MuniFund shares were 3.31%, 3.36%, and
4.60%, respectively; the yield, effective yield, and tax-equivalent yield on
MuniFund Dollar shares were 3.06%, 3.11%, and 4.25%, respectively. During this
seven-day period, MuniFund's investment adviser and administrator voluntarily
waived a portion of the advisory and administration fees payable by the Fund.
Without these waivers, for the same period the yield and effective yield on
MuniFund shares would have been 3.16% and 3.21%, respectively; the yield and
effective yield on MuniFund Dollar shares would have been 2.91% and 2.95%,
respectively.
For the same periods, the yield, effective yield, and tax-equivalent
yield for MuniCash shares were 3.52%, 3.58% and 4.89%, respectively; the yield,
effective yield, and tax-equivalent yield for MuniCash Dollar shares were
3.27%, 3.32% and 4.54%, respectively. During this seven-day period, MuniCash's
investment adviser and administrator voluntarily waived a portion of the
advisory and administration fees payable by the Fund. Without these waivers, for
the same period the yield and effective yield on MuniCash shares would have been
3.28% and 3.33%, respectively; the yield and effective yield on MuniCash Dollar
shares would have been 3.03% and 3.08%, respectively.
YIELDS WILL FLUCTUATE, AND ANY QUOTATION OF YIELD SHOULD NOT BE
CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE FUND. Since yields
fluctuate, yield data for any of the Funds cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that
performance and yield are generally functions of kind and quality of the
investments held
-28-
<PAGE> 92
in a portfolio, portfolio maturity, operating expenses, and market conditions.
Any fees charged by banks with respect to customer accounts in investing in
shares of a Fund will not be included in yield calculations; such fees, if
charged, would reduce the actual yield from that quoted.
The Funds may also from time to time include in advertisements, sales
literature, communications to shareholders and other materials ("Materials"),
discussions or illustrations of the effects of compounding. "Compounding" refers
to the fact that, if dividends or other distributions on an investment are
reinvested by being paid in additional Portfolio shares, any future income or
capital appreciation of a Fund would increase the value, not only of the
original investment, but also of the additional shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the Funds may also include in Materials discussions and/or
illustrations of the potential investment goals of a prospective investor
(including materials that describe general principles of investing,
questionnaires designed to help create a personal financial profile, worksheets
used to project savings needs based on certain assumptions and action plans
offering investment alternatives), investment management strategies, techniques,
policies or investment suitability of a Fund, economic conditions, the
relationship between sectors of the economy and the economy as a whole, various
securities markets, the effects of inflation and historical performance of
various asset classes, including but not limited to, stocks, bonds and Treasury
securities, and hypothetical investment returns based on certain assumptions.
From time to time, Materials may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund), as well as the views of the advisers as to current market, economic,
trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Fund. In addition, selected indices may be used to illustrate
historical performance of select asset classes. The Funds may also include in
Materials charts, graphs or drawings which compare the investment objective,
return potential, relative stability and/or growth possibilities of the Funds
and/or other mutual funds, or illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to, stocks,
bonds, Treasury securities and shares of a Fund and/or other mutual funds.
Materials may include a discussion of certain attributes or benefits to be
derived by an investment in a Fund and/or other mutual funds (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic accounting rebalancing and the advantages and
disadvantages of investing in tax-deferred and taxable
-29-
<PAGE> 93
investments), shareholder profiles and hypothetical investor scenarios, timely
information on financial management, designations assigned a Fund by various
rating or ranking organizations, Fund identifiers (such as CUSIP numbers or
NASDAQ symbols), tax and retirement planning and investment alternatives to
certificates of deposit and other financial instruments. Such Materials may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.
Materials may include lists of representative clients of the Funds'
investment adviser, may include discussions of other products or services, may
contain information regarding average weighted maturity or other maturity
characteristics, and may contain information regarding the background,
expertise, etc. of the investment adviser or of a Fund's portfolio manager.
From time to time in advertisements, sales literature and
communications to shareholders, the Funds may compare their total returns to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, such
data is found in IBC/Donoghue's Money Fund Report and reports prepared by Lipper
Analytical Services, Inc. Total return is the change in value of an investment
in a Fund over a particular period, assuming that all distributions have been
reinvested. Such rankings represent the Funds' past performance and should not
be considered as representative of future results.
The following information has been provided by the Funds' distributor:
In managing each Fund's portfolio, the investment adviser utilizes a
"pure and simple" approach, which may include disciplined research,
stringent credit standards and careful management of maturities.
ADDITIONAL DESCRIPTION CONCERNING SHARES
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. Upon
the written request of shareholders owning at least twenty percent of the
Company shares, the Company will call for a meeting of shareholders to consider
the removal of one or more trustees and other certain matters. To the extent
required by law, the Company will assist in shareholder communication in such
matters.
As stated in the Funds' Prospectuses, holders of shares in a Fund will
vote in the aggregate and not by class or series on all matters, except where
otherwise required by law and except
-30-
<PAGE> 94
that only a Fund's Dollar shares will be entitled to vote on matters submitted
to a vote of shareholders pertaining to that Fund's arrangements with Service
Organizations. (See "Management of the Funds -- Service Organizations.")
Further, shareholders of all of the Company's portfolios will vote in the
aggregate and not by portfolio except as otherwise required by law or when the
Board of Trustees determines that the matter to be voted upon affects only the
interests of the shareholders of a particular portfolio. Rule 18f-2 under the
1940 Act provides that any matter required to be submitted by the provisions of
such Act or applicable state law, or otherwise, to the holders of the
outstanding securities of an investment company such as the Company shall not be
deemed to have been effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each portfolio affected by the matter.
Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a
matter unless it is clear that the interests of each portfolio in the matter are
identical or that the matter does not affect any interest of the portfolio.
Under the Rule, the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to a portfolio only if approved by the holders of a majority of the outstanding
voting securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent certified public accountants, the
approval of principal underwriting contracts, and the election of trustees are
not subject to the separate voting requirements and may be effectively acted
upon by shareholders of the investment company voting without regard to
portfolio.
COUNSEL
Drinker Biddle & Reath, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107-3496, of which Morgan R.
Jones, Secretary of the Company, is a partner, serves as counsel of the Company
and will pass upon the legality of the shares offered hereby.
AUDITORS
The audited Financial Statements and the financial highlights of the
Company, which are incorporated by reference into this Statement of Additional
Information, have been audited by KPMG Peat Marwick LLP, independent certified
public accountants. KPMG Peat Marwick LLP has offices at 1600 Market Street,
Philadelphia, Pennsylvania 19103.
-31-
<PAGE> 95
MISCELLANEOUS
SHAREHOLDER VOTE
As used in this Statement of Additional Information and the Funds'
Prospectuses, a "majority of the outstanding shares" of a Fund or of any other
portfolio means with respect to the approval of an investment advisory
agreement, a distribution plan or a change in a fundamental investment policy,
the vote of the lesser of (1) 67% of that Fund's shares (irrespective of class
or series) or of the portfolio represented at a meeting at which the holders of
more than 50% of the outstanding shares of that Fund or such portfolio are
present in person or by proxy, or (2) more than 50% of the outstanding shares of
a Fund (irrespective of class or series) or of the portfolio.
CERTAIN RECORD HOLDERS
On March 5, 1997, the name, address, and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of MuniFund portfolio were as follows:
<TABLE>
<CAPTION>
Client Percentage
- ------ ----------
<S> <C>
Chemical Bank 18.51%
Administrative Services (IFG)
AIS Section 31-270, 33rd Floor
1211 Avenue Of The Americas
New York, NY 10036
Wells Fargo Bank 08.21%
26610 West Agoura Road
Calabasas, CA 91302
Bankers Trust Company 06.00%
Sunshine State Government Commission
Dade County FL/Ins Reserve
4 Albany Street, 4th Floor
New York, NY 10006
</TABLE>
On March 5, 1997, the name, address and percentage of ownership of each
institutional investor that owned of record 5% or more of the outstanding shares
of the Company's MuniCash portfolio were as follows:
-32-
<PAGE> 96
<TABLE>
<CAPTION>
Client Percentage
- ------ ----------
<S> <C>
Laird Norton Trust Company (8697) 06.73%
Norton Building, 16th Floor
801 2nd Avenue
Seattle, WA 98104
Intrust Bank NA 07.22%
Transco & Company
PO Box 1
Wichita, KS 67201
BHC Securities (15301) 08.42%
2005 Market Street
One Commerce Square, 11th Floor
Philadelphia, PA 19103
Keystone Health Plan East Inc. 17.31%
1901 Market Street
Philadelphia, PA 19101
BHC Securities (11082) 11.40%
2005 Market Street
One Commerce Square, 11th Floor
Philadelphia, PA 19103
Laird Norton Trust Company (13082) 06.34%
Norton Building, 16th Floor
801 2nd Avenue
Seattle, WA 98104
</TABLE>
SHAREHOLDER AND TRUSTEE LIABILITY
The Company is organized as a trust under the laws of the Commonwealth
of Pennsylvania. Shareholders of such a trust may, under certain circumstances,
be held personally liable (as if they were partners) for the obligations of the
trust. The Declaration of Trust of the Company provides that shareholders shall
not be subject to any personal liability for the acts or obligations of the
Company and that every note, bond, contract, order, or other undertaking made by
the Company shall contain a provision to the effect that the shareholders are
not personally liable thereunder. The Declaration of Trust provides for
indemnification out of the trust property of any shareholder held personally
liable solely by reason of being or having been a shareholder and not because of
any acts or omissions or some other reason. The Declaration of Trust also
provides that the Company shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Company and
satisfy any judgment thereon. Thus, the risk of a shareholder's incurring
financial loss beyond the amount invested on
-33-
<PAGE> 97
account of shareholder liability is limited to circumstances in which the
Company itself would be unable to meet its obligations.
The Company's Declaration of Trust provides further that no trustee of
the Company shall be personally liable for or on account of any contract, debt,
tort, claim, damage, judgment, or decree arising out of or connected with the
administration or preservation of the trust estate or the conduct of any
business of the Company, nor shall any trustee be personally liable to any
person for any action or failure to act except by reason of bad faith, willful
misfeasance, gross negligence in the performance of any duties, or by reason of
reckless disregard for the obligations and duties as trustee. It also provides
that all persons having any claim against the trustees or the Company shall look
solely to the trust property for payment. With the exceptions stated, the
Declaration of Trust provides that the trustee is entitled to be indemnified
against all liabilities and expenses reasonably incurred in connection with the
defense or disposition of any proceeding in which the trustee may be involved or
may be threatened with by reason of being or having been a trustee, and that the
trustees have the power, but not the duty, to indemnify officers and employees
of the Company unless such persons would not be entitled to indemnification had
he or she been a trustee.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders for the fiscal year ended
November 30, 1996 has been filed with the Securities and Exchange Commission.
The financial statements included in the Annual Report (the "Financial
Statements") for the fiscal year ended November 30, 1996 have been audited by
the Company's independent accountants, KPMG Peat Marwick LLP, whose report
thereon also appears in such Annual Report and is incorporated herein by
reference. The Financial Statements and the Financial Highlights in such Annual
Report in each Prospectus have been included herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
-34-
<PAGE> 98
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory. However,
the relative degree of safety is not as high as for issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment. It is,
however, somewhat more vulnerable to the adverse effects of changes in
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are considered to
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-
A-1
<PAGE> 99
term promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
A-2
<PAGE> 100
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:
"F-1+" - Securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
"F-1" - Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a commercial
bank.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which are issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and
A-3
<PAGE> 101
broker-dealers. The following summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
rating category and indicates a very high degree of likelihood that principal
and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment grade
category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded as
non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short-term debt ratings:
"A1+" - Obligations which posses a particularly strong credit feature
are supported by the highest capacity for timely repayment.
"A1" - Obligations are supported by the highest capacity for timely
repayment.
"A2" - Obligations are supported by a satisfactory capacity for timely
repayment.
"A3" - Obligations are supported by a satisfactory capacity for timely
repayment.
"B" - Obligations for which there is an uncertainty as to the capacity
to ensure timely repayment.
"C" - Obligations FOR which THERE IS a high risk of default or which
are currently in default.
A-4
<PAGE> 102
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay interest
and repay principal. Whereas such issues normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
A-5
<PAGE> 103
"CCC" - Debt has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no interest is
being paid.
"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities. The absence of an "r" symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and
A-6
<PAGE> 104
principal is secure. While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in
default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
(P)... - When applied to forward delivery bonds, indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes
A-7
<PAGE> 105
occur in the legal documents or the underlying credit quality of the bonds.
Note: Those bonds in the AA, A, BAA, BA and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, AA1, A1, BA1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt rated "DD" is
a defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
A-8
<PAGE> 106
"AA" - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "BBB" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA assesses the investment quality of unsecured debt with an original
maturity of more than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal
A-9
<PAGE> 107
and interest is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of these
ratings where it is considered that speculative characteristics are present.
"BB" represents the lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of speculation and
indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to denote
relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
A-10
<PAGE> 108
"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include
a plus or minus sign designation which indicates where within the respective
category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high quality,
with margins of protection ample although not so large as in the preceding
group.
A-11
<PAGE> 109
"MIG-3"/"VMIG-3" - Loans bearing this designation are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of adequate
quality, carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
"SG" - Loans bearing this designation are of speculative quality and
lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
A-12
<PAGE> 110
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
(Intermediate Municipal Fund)
Cross Reference Sheet
Form N-1A Item Prospectus Caption
1. Cover Page.............................. Cover Page
2. Synopsis................................ Background and Expense
Information
3. Condensed Financial
Information........................... Financial Highlights;
Yields
4. General Description of
Registrant............................ Cover Page; Financial
Highlights; Investment
Objective and
Policies; Description
of Shares and
Miscellaneous
5. Management of the Fund.................. Management of the
Fund; Dividends
6. Capital Stock and Other
Securities............................ Cover Page; Financial
Highlights; Dividends;
Taxes; Description of
Shares and
Miscellaneous
7. Purchase of Securities Being
Offered............................... Management of the
Fund; Purchase and
Redemption of Shares
8. Redemption or Repurchase................ Purchase and
Redemption of Shares
9. Pending Legal Proceedings............... Inapplicable
<PAGE> 111
INTERMEDIATE MUNICIPAL FUND
An Investment Portfolio Offered by
Municipal Fund for Temporary Investment
400 Bellevue Parkway For purchase and redemption orders only
Suite 100 call: 800-441-7450 (in Delaware:
Wilmington, DE 19809 302-791-6350). For yield information call:
800-821-6006 (Intermediate Municipal Fund
shares code: 51; Intermediate Municipal Fund
Dollar shares code: 49).
For other information call: 800-821-7432.
Municipal Fund for Temporary Investment (the "Company") is a no-load,
diversified, open-end investment company that currently offers shares in three
separate investment portfolios. The two classes of shares described in this
Prospectus represent interests in the Intermediate Municipal Fund portfolio (the
"Fund"). The Fund's investment objective is to seek a high level of current
interest income which is exempt from federal income taxes, consistent with
prudent investment risk. The Fund invests substantially all of its assets in
tax-exempt obligations having remaining maturities of ten years or less.
Fund shares may not be purchased by individuals directly but
institutional investors may purchase shares for accounts maintained by
individuals. In addition to Intermediate Municipal Fund Shares, investors may
purchase Intermediate Municipal Fund Dollar Shares ("Dollar Shares"), which
accrue daily dividends in the same manner as Intermediate Municipal Fund shares
but bear all fees payable by the Fund to institutional investors for certain
services they provide to the beneficial owners of such Shares. (See "Management
of the Fund - Service Organizations.")
------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED, ENDORSED,
OR OTHERWISE SUPPORTED BY PNC BANK CORP. OR ITS AFFILIATES, OR THE U.S.
GOVERNMENT, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN
THE FUND INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
------------------------------
PNC Institutional Management Corporation ("PIMC") and PNC Bank,
National Association ("PNC Bank") serve as the Fund's investment adviser and
sub-adviser, respectively. PFPC Inc. ("PFPC") and Provident Distributors, Inc.
("PDI") serve as the Fund's administrators. PDI also serves as the Fund's
distributor.
This Prospectus briefly sets forth certain information about the Fund
that investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information currently dated March
30, 1997, has been filed with the Securities and Exchange Commission and is
available to investors without charge by calling the Fund at 800-821-7432. The
Statement of Additional Information, as amended from time to time, is
incorporated in its entirety by reference into this Prospectus.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
March 30, 1997
<PAGE> 112
BACKGROUND AND EXPENSE INFORMATION
Two classes of shares are offered by this Prospectus: Intermediate
Municipal Fund Shares and Dollar Shares. Shares of each class represent equal,
pro rata interests in the Intermediate Municipal Fund portfolio and accrue daily
dividends in the same manner except that the Dollar Shares bear fees payable by
the Fund (at the rate of .25% per annum) to institutional investors for services
they provide to the beneficial owners of such Shares. (See "Management of the
Fund - Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
INTERMEDIATE
INTERMEDIATE MUNICIPAL
MUNICIPAL DOLLAR
ESTIMATED ANNUAL FUND OPERATING EXPENSES SHARES SHARES
- ---------------------------------------- ------------ ------------
<S> <C> <C>
(as a percentage of average net assets)
Management Fees (net of waivers) ........... .06% .06%
Other Expenses ............................. .34% .59%
Administration Fees (net of waivers) ... .06% .06%
Shareholder Servicing Fees ............. 0% .25%
Miscellaneous .......................... .28% .28%
------ --- ------ ---
Total Fund Operating Expenses (net of waivers) .40% .65%
=== ===
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming: (1) a 5%
annual return; and (2) redemption at the end of each time period with respect
to the following shares:
Intermediate Municipal Fund Shares: $ 4 $13 $22 $51
Dollar Shares: $ 7 $21 $36 $81
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATE OF RETURN. ACTUAL EXPENSES AND RATE OF RETURN MAY BE GREATER
OR LESSER THAN THOSE SHOWN.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. In addition, institutional investors may charge
fees for providing services in connection with their customers' investments in
Dollar Shares. (For more complete descriptions of the various costs and
expenses, see "Management of the Fund" in this Prospectus and the Statement of
Additional Information and the financial statements and related notes.) Absent
fee waivers and expense reimbursements for such period, the estimated "Total
Fund Operating Expenses" for Intermediate Municipal Fund Shares and Dollar
Shares for the fiscal year ended November 30, 1996 would be .67% and .92%,
respectively, of the average daily net assets of the Fund. The investment
adviser and administrators may from time to time waive the advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. The foregoing table has not been audited by the Fund's
independent accountants.
-2-
<PAGE> 113
FINANCIAL HIGHLIGHTS
The following financial highlights for Intermediate Municipal Fund
Shares and Dollar Shares have been derived from the financial statements of the
Fund for the fiscal year ended November 30, 1996, and for each of the nine
preceding fiscal years. The financial highlights for the fiscal years set forth
below have been audited by KPMG Peat Marwick LLP, independent accountants whose
report in the financial statements and financial highlights (for the most recent
five years) of the Fund is incorporated by reference into the Statement of
Additional Information. The tables should be read in conjunction with the
financial statements and related notes incorporated by reference into the
Statement of Additional Information. Further information about the performance
of the Fund is available in the annual report to shareholders, which may be
obtained without charge by calling 800-821-7432.
INTERMEDIATE MUNICIPAL FUND SHARES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
Year Ended November 30,
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 11.11 $ 10.39 $ 11.18 $ 10.88 $ 10.54 $ 10.26
------------ ------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income ............ .4998 .5256 .5053 .5315 .5609 .6093
Net realized and unrealized
gain (loss) on investments ..... (.0300) .7200 (.7900) .3000 .3400 .2800
------------ ------------ ------------ ------------ ------------ ------------
Total from investment operations . .4698 1.2456 (.2847) .8315 .9009 .8893
------------ ------------ ------------ ------------ ------------ ------------
Less distributions:
Dividends to shareholders from
net investment income .......... (.4998) (.5256) (.5053) (.5315) (.5609) (.6093)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period ..... $ 11.08 $ 11.11 $ 10.39 $ 11.18 $ 10.88 $ 10.54
============ ============ ============ ============ ============ ============
Total return ..................... 4.37% 12.22% (2.63)% 7.76% 8.74% 8.89%
Ratios/Supplemental data:
Net assets, end of period (000s) . $ 5,579 $ 6,228 16,507 22,350 29,911 33,479
Ratio of expenses, to average
daily net assets ............... .40% .40% .40% .40% .40% .40%
Ratio of net investment income
to average daily net assets .... 4.56% 4.87% 4.64% 4.79% 5.20% 5.87%
Portfolio turnover rate .......... 73% 47% 40% 50% 64% 79%
<CAPTION>
1990 1989 1988(2) 1987(2)
---- ---- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $ 10.15 $ 10.04 $ 10.00 $ 10.44
------------ ------------ ------------ ------------
Income from investment operations:
Net investment income ............ .6262 .6021 .5729 .5757
Net realized and unrealized
gain (loss) on investments ..... .1100 .1100 .0400 (.4400)
------------ ------------ ------------ ------------
Total from investment operations . .7362 .7121 .6129 .1357
------------ ------------ ------------ ------------
Less distributions:
Dividends to shareholders from
net investment income .......... (.6262) (.6021) (.5729) (.5757)
------------ ------------ ------------ ------------
Net asset value, end of period ..... $ 10.26 $ 10.15 $ 10.04 $ 10.00
============ ============ ============ ============
Total return ..................... 7.53% 7.31% 6.22% 1.33%
Ratios/Supplemental data:
Net assets, end of period (000s) . 35,728 43,568 52,908 78,372
Ratio of expenses, to average
daily net assets ............... .40% .40% .40% .38%
Ratio of net investment income
to average daily net assets .... 6.19% 5.99% 5.64% 5.64%
Portfolio turnover rate .......... 78% 66% 24% 43%
</TABLE>
- --------------
(1) Without the waiver of advisory and administrative fees, the ratios of
expenses to average daily net assets would have been 0.67%, 0.60%,
0.53%, 0.51%, 0.50%, 0.50%, 0.52%, 0.51%, 0.51% and 0.48% for the years
ended November 30, 1996, 1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988
and 1987, respectively.
(2) Total return data has not been audited.
-3-
<PAGE> 114
INTERMEDIATE MUNICIPAL FUND DOLLAR SHARES
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period)
Year Ended November 30,
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991(3)
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $ 11.11 $ 10.39 $ 11.18 $ 10.88 $ 10.54 $ 10.26
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income ................... .4723 .4985 .4782 .5037 .5339 .2881
Net realized and unrealized
gain (loss) on investments ............ (.0300) .7200 (.7900) .3000 .3400 .2800
------- ------- ------- ------- ------- -------
Total from investment operations ........ .4423 1.2185 (.3118) .8037 .8739 .5681
------- ------- ------- ------- ------- -------
Less distributions:
Dividends to shareholders from
net investment income ................. (.4723) (.4985) (.4782) (.5037) (.5339) (.2881)
------- ------- ------- ------- ------- -------
Net asset value, end of period .......... $ 11.08 $ 11.11 $ 10.39 $ 11.18 $ 10.88 $ 10.54
======= ======= ======= ======= ======= =======
Total return ............................ 4.12% 11.97% (2.88)% 7.51% 8.49% 8.64%
Ratios/Supplemental data:
Net assets, end of period (000s) ........ 34 33 29 30 27 26
Ratio of expenses to average
daily net assets(2) ................... .65% .65% .65% .65% .65% .65%(1)
Ratio of net investment income to average
daily net assets ...................... 4.31% 4.62% 4.39% 4.54% 4.95% 5.62%(1)
Portfolio turnover rate ................. 73% 47% 40% 50% 64% 79%(1)
<CAPTION>
1990(3) 1989(3) 1988(4) 1987(4)
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...... $ 10.15 $ 10.04 $ 10.00 $ 10.44
------- ------- ------- -------
Income from investment operations:
Net investment income ................... .2065 .2048 .5475 .5502
Net realized and unrealized
gain (loss) on investments ............ .1100 .1100 .0400 (.4400)
------- ------- ------- -------
Total from investment operations ........ .3165 .3148 .5875 .1102
------- ------- ------- -------
Less distributions:
Dividends to shareholders from
net investment income ................. (.2065) (.2048) (.5475) (.5502)
------- ------- ------- -------
Net asset value, end of period .......... $ 10.26 $ 10.15 $ 10.04 $ 10.00
======= ======= ======= =======
Total return ............................ 7.28% 7.06% 5.97% 1.08%
Ratios/Supplemental data:
Net assets, end of period (000s) ........ 6 0 0 2
Ratio of expenses to average
daily net assets(2) .................... .65%(1) .65%(1) .65% .63%
Ratio of net investment income to average
daily net assets ....................... 5.94%(1) 5.74%(1) 5.39% 5.39%
Portfolio turnover rate ................. 78%(1) 66%(1) 24% 43%
</TABLE>
- -----------------------
(1) Annualized.
(2) Without the waiver of advisory and administrative fees, the ratios of
expenses to average daily net assets would have been 0.92%, 0.85%,
0.78%, 0.76%, 0.75%, 0.75% (annualized), 0.77% (annualized), 0.76%
(annualized), 0.76% and 0.73% for the years ended November 30, 1996,
1995, 1994, 1993, 1992, 1991, 1990, 1989, 1988 and 1987, respectively.
(3) No Dollar Shares were outstanding during the period April 11, 1989
to August 1, 1990 and the period January 7, 1991 to July 9, 1991.
(4) Total return data has not been audited.
-4-
<PAGE> 115
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund's investment objective is to seek a high level of current
interest income which is exempt from federal income taxes, consistent with
prudent investment risk. There can be no assurance that the Fund will achieve
its investment objective.
In pursuing its investment objective, the Fund invests substantially
all of its assets in a diversified portfolio of obligations with remaining
maturities of ten years or less issued by or on behalf of states, territories,
and possessions of the United States, the District of Columbia, and their
respective authorities, agencies, instrumentalities, and political subdivisions
and tax-exempt derivative securities such as tender option bonds,
participations, beneficial interests in trusts and partnership interests
(collectively, "Municipal Obligations"), which meet the Fund's quality
requirements set forth below. The Fund will not knowingly purchase securities
the interest on which is subject to such tax. (See, however, "Taxes" below
concerning treatment of exempt-interest dividends paid by the Fund for purposes
of the federal alternative minimum tax applicable to particular classes of
investors.) The average weighted maturity of the Fund will be between three and
ten years, except during temporary defensive periods or during unusual market
conditions. The Fund's net asset value per share will fluctuate as the value of
its portfolio changes in response to changing market rates of interest and other
factors.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance, and opinions relating
to the validity of and the tax-exempt status of payments received by the Funds
from tax-exempt derivative securities are rendered by counsel to the respective
sponsors of such securities. The Fund and its investment adviser will rely on
such opinions and will not review independently the underlying proceedings
relating to the issuance of Municipal Obligations, the creation of any
tax-exempt derivative securities, or the bases for such opinions.
The Fund invests in long-term Municipal Obligations which are rated at
the time of purchase within the three highest rating categories assigned by an
unaffiliated nationally recognized statistical rating organization ("Rating
Agency"). The Fund may also invest in short-term Municipal Obligations such as
municipal notes, tax-exempt commercial paper and variable rate demand
obligations which are rated at the time of purchase in the highest rating
category assigned by a Rating Agency. Municipal Obligations unrated at the time
of purchase will be determined to be of comparable quality by the Fund's
investment adviser pursuant to guidelines approved by the Board of Trustees. The
Appendix to the Statement of Additional Information includes a description of
applicable ratings by Rating Agencies.
Except during periods of unusual market conditions or during temporary
defensive periods, the Fund will invest substantially all, but in no event less
than 80%, of its total assets in Municipal Obligations with remaining maturities
of ten years or less. The Fund may hold uninvested cash reserves pending
investment, during temporary defensive periods or if, in the opinion of the
Fund's investment adviser, suitable tax-exempt obligations are unavailable.
There is no percentage limitation on the amount of assets which may be held
uninvested. Uninvested cash reserves will not earn income.
Except for the investment limitations enumerated below, the Fund's
investment objective and the policies described above are not fundamental and
may be changed by the Company's Board of Trustees without the affirmative vote
of the holders of a majority of the Fund's outstanding shares. If there is a
-5-
<PAGE> 116
change in the investment objective, shareholders should consider whether the
Fund remains an appropriate investment in light of their then current financial
position and needs. (A full list of the complete investment limitations that
cannot be changed without a vote of shareholders is contained in the Statement
of Additional Information under "Investment Objectives and Policies.")
The Fund may not:
1. Purchase any securities other than Municipal Obligations
and put options with respect to such obligations.
2. Purchase the securities of any issuer if as a result more
than 5% of the value of the Fund's assets would be invested in the
securities of such issuer, except that up to 25% of the value of the
Fund's assets may be invested without regard to this 5% limitation.
3. Borrow money except from banks for temporary purposes and
then in amounts not in excess of 10% of the value of the Fund's assets
at the time of such borrowing; or mortgage, pledge or hypothecate any
assets except in connection with any such borrowing and in amounts not
in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's assets at the time of such borrowing. The Fund will
not purchase portfolio securities while any borrowing is outstanding.
4. Purchase securities, except securities issued by any state,
territory or possession of the United States, the District of Columbia
or their political subdivisions, agencies, instrumentalities or
authorities, if as a result 25% or more of the value of the Fund's
assets would be invested in securities of issuers conducting their
principal business activities in the same industry.
5. Knowingly invest more than 10% of the value of the Fund's
assets in securities with legal or contractual restrictions on resale.
In addition, without the affirmative vote of the holders of a majority
of the Fund's outstanding shares, the Fund may not change its policy of
investing at least 80% of its total assets in obligations the interest on which
is exempt from federal income tax (except during periods of unusual market
conditions or during temporary defensive periods). Securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities (including
securities backed by the full faith and credit of the United States) are not
deemed to be subject to the second investment limitation above. As of the date
of this Prospectus, the put options referred to above refer only to stand-by
commitments as discussed below.
If a percentage limitation is satisfied at the time of investment, a
later increase or decrease in such percentage resulting from a change in value
of the Fund's portfolio securities will not constitute a violation of such
limitation.
TYPES OF MUNICIPAL OBLIGATIONS
The two principal classifications of Municipal Obligations which may be
held by the Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit, and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Revenue securities include private activity bonds which
are not payable from the unrestricted revenues of the
-6-
<PAGE> 117
issuer. Consequently, the credit quality of private activity bonds is usually
directly related to the credit standing of the corporate user of the facility
involved.
The Fund's portfolio may also include "moral obligation" bonds, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
OTHER INVESTMENT PRACTICES
Municipal Obligations purchased by the Fund may include variable rate
demand notes. Such notes frequently are not rated by credit rating agencies but
unrated notes purchased by the Fund will be determined by the Fund's investment
adviser to be of comparable quality at the time of purchase to rated instruments
purchasable by the Fund. Where necessary to ensure that a note is of the
"highest quality," the Fund will require that the issuer's obligation to pay the
principal of the note be backed by an unconditional bank letter or line of
credit, guarantee, or commitment to lend. While there may be no active secondary
market with respect to a particular variable rate demand note purchased by the
Fund, the Fund may, upon notice, demand payment of principal at any time or
during specified periods not exceeding one year, depending upon the instrument
involved, and may resell the note at any time to a third party. The absence of
such an active secondary market, however, could make it difficult for the Fund
to dispose of a variable rate demand note if the issuer were to default on its
payment obligation or during periods that the Fund is not entitled to exercise
its demand rights, and the Fund could, for this or other reasons, suffer a loss
to the extent of the default.
The Fund may purchase Municipal Obligations on a "when-issued" basis.
When-issued securities are securities purchased for delivery beyond the normal
settlement date at a stated price and yield. The Fund will generally not pay for
such securities or start earning interest on them until they are received.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in value based upon changes in the general level of interest
rates. The Fund expects that commitments to purchase when-issued securities will
not exceed 25% of the value of its total assets absent unusual market
conditions. The Fund does not intend to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective.
In addition, the Fund may acquire "stand-by commitments" with respect
to Municipal Obligations held in its portfolio. Under a stand-by commitment, a
dealer would agree to purchase at the Fund's option specified Municipal
Obligations at a specified price. The Fund will acquire stand-by commitments
solely to facilitate portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes. Stand-by commitments acquired by the
Fund may also be referred to as "put" options.
Although the Fund may invest more than 25% of its net assets in (i)
Municipal Obligations whose issuers are in the same state, (ii) Municipal
Obligations the interest on which is paid solely from revenues of similar
projects, and (iii) private activity bonds, it does not presently intend to do
so on a regular basis. To the extent the Fund's assets are concentrated in
Municipal Obligations that are payable from the revenues of similar projects,
are issued by issuers located in the same state, or are concentrated in private
activity bonds, the Fund will be subject to the peculiar risks presented by the
laws and economic conditions relating to such states, projects, and bonds to a
greater extent than it would be if its assets were not so concentrated.
-7-
<PAGE> 118
The Fund will not knowingly invest more than 10% of the value of its
total net assets in illiquid securities, including securities that are illiquid
by virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not deemed illiquid for
purposes of this limitation. The Fund's investment adviser will monitor the
liquidity of such restricted securities under the supervision of the Board of
Trustees. (See "Investment Objectives and Policies-Illiquid Securities" in the
Statement of Additional Information.)
The Fund may purchase securities which are not registered under the
Securities Act of 1933 (the "1933 Act") but which can be sold to qualified
institutional buyers in accordance with Rule 144A under the 1933 Act. Any such
security will not be considered illiquid so long as it is determined by the
Board of Trustees or the adviser, acting under guidelines approved and monitored
by the Board, that an adequate trading market exists for that security. This
investment practice could have the effect of increasing the level of illiquidity
in a portfolio during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities.
PURCHASE AND REDEMPTION OF SHARES
PURCHASE PROCEDURES
Fund shares are sold at the net asset value per share next determined
after acceptance of a purchase order by PFPC, the Fund's transfer agent.
Purchase orders for shares are accepted until 4:00 P.M., Eastern time, only on
days on which both the New York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day") and must be transmitted to
PFPC in Wilmington, Delaware by telephone (800-441-7450; in Delaware: 302-
791-5350); or through the Fund's computer access program. Purchase orders
accepted before 4:00 P.M., Eastern time, will be executed the following Business
Day if payment has been received by 4:00 P.M., Eastern time, on that day. Orders
for which payment has not been received by 4:00 P.M., Eastern time on the next
Business Day following receipt of the order will not be accepted, and notice
thereof will be given to the institution placing the order. (Payment for orders
which are not received or accepted will be returned after prompt inquiry to the
sending institution.) The Fund may in its discretion reject any order for
shares.
Payment for Fund shares may be made only in federal funds or other
funds immediately available to PNC Bank, the Fund's custodian. The minimum
initial investment by an institution is $3 million for Intermediate Municipal
Fund Shares and $5,000 for Dollar Shares, however, broker-dealers and other
institutional investors may set a higher minimum for their customers. There is
no minimum subsequent investment. The Fund, at its discretion, may reduce the
minimum initial investment for Intermediate Municipal Fund Shares for specific
institutions whose aggregate relationship with the Provident Institutional
Fund's is substantially equivalent to this $3 million minimum and warrants this
reduction.
Conflict of interest restrictions may apply to an institution's receipt
of compensation paid by the Fund in connection with the investment of fiduciary
funds in Dollar Shares. (See also "Management of the Fund - Service
Organizations.") Institutions, including banks regulated by the Comptroller of
the Currency, and investment advisers and other money managers subject to the
jurisdiction of the Securities and Exchange Commission ("SEC"), the Department
of Labor or state securities commissions, should consult their legal advisors
before investing fiduciary funds in Dollar Shares. (See also "Management of the
Fund - Banking Laws.")
-8-
<PAGE> 119
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC in Wilmington, Delaware
in the manner described under "Purchase Procedures." Redemption orders will be
priced at the net asset value per share determined as of 4:00 P.M., Eastern
time, on the day the order is received and will be executed on the following
Business Day. The proceeds paid to a shareholder upon redemption may be more or
less than the amount invested depending upon a share's net asset value at the
time of redemption.
Payment for redeemed shares is normally made in federal funds wired to
the redeeming shareholder on the next Business Day (the "execution date")
following receipt of the order. If a redemption order is placed on a day when
PNC Bank is closed, payment would normally be made on the second Business Day
following receipt of the order. The Fund reserves the right to wire redemption
proceeds within 7 days after receiving the redemption order if, in the judgment
of the Fund's investment adviser, an earlier payment could adversely affect the
Fund.
The Fund shall have the right to redeem shares in any account at its
net asset value if the value of the account is less than $1,000 (for reasons
other than a decline in net asset value of Fund shares) after sixty-days' prior
written notice to the shareholder. Any such redemption shall be effected at the
net asset value per share next determined after the redemption order is entered.
If during the sixty-day period the shareholder increases the value of its
account to $1,000 or more, no such redemption shall take place. Moreover, if a
shareholder's Intermediate Municipal Fund Shares account falls below an average
of $100,000 in any particular calendar month, the account may be charged an
account maintenance fee with respect to that month. In addition, the Fund may
also redeem shares involuntarily or suspend the right of redemption or under
certain special circumstances described in the Statement of Additional
Information under "Additional Purchase and Redemption Information."
OTHER MATTERS
The Fund's net asset value per share for purposes of pricing purchase
and redemption orders is determined by PIMC as of 4:00 P.M., Eastern time, on
each day on which both the Federal Reserve Bank of Philadelphia and the New York
Stock Exchange are open for business. Currently, one or both of these
institutions are closed on the customary national business holidays of New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Columbus Day (observed), Veterans
Day, Thanksgiving Day and Christmas Day. The net asset value per share of each
class of the Fund is calculated by adding the value of all securities and other
assets belonging to the Fund, subtracting liabilities attributable to each class
and dividing the result by the total number of the Fund's outstanding shares of
each class. The Fund's net asset value per share for purposes of pricing
purchase and redemption orders is determined independently of the net asset
values of the shares in the Company's other investment portfolios.
The net asset value of the Fund's shares will fluctuate as the value of
its portfolio changes in response to changing market rates of interest and other
factors. The value of the Fund's portfolio securities can be expected to vary
inversely with changes in prevailing interest rates. Municipal Obligations with
longer maturities tend to produce higher yields and are generally subject to
potentially greater capital appreciation and depreciation than obligations with
shorter maturities and lower yields. Thus, investing in Municipal Obligations
with longer maturities will cause greater fluctuations in the Fund's net asset
value than investing in obligations with shorter maturities.
-9-
<PAGE> 120
Portfolio securities for which market quotations are readily available
(other than debt securities with remaining maturities of 60 days or less) are
valued at the mean between the most recent quoted bid and asked prices provided
by investment dealers. Other securities and assets for which market quotations
are not readily available are valued at their fair value in the best judgment of
PIMC under procedures established by, and under the supervision of, the
Company's Board of Trustees. Market or fair value may be determined by a matrix
pricing system which is used to determine the value of Municipal Obligations
based on factors such as yield, prices, maturities, call features, and ratings
on comparable securities.
Debt securities with remaining maturities of 60 days or less are valued
on an amortized cost basis (unless the Board determines that such basis does not
represent fair value at the time). Under this method, such securities are valued
initially at cost on the date of purchase or, in the case of securities
purchased with more than 60 days to maturity, are valued at their market or fair
value each day until the 61st day prior to maturity. Thereafter, absent unusual
circumstances, the Fund assumes a constant proportionate amortization of any
discount or premium until maturity of the security.
Fund shares are sold and redeemed without charge by the Fund.
Institutional investors purchasing or holding Fund shares for their customers
accounts may charge customer fees for cash management and other services
provided in connection with their accounts. A customer should, therefore,
consider the terms of its account with an institution before purchasing Fund
shares. An institution purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the Fund in accordance with
its customer agreements.
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The business and affairs of the Fund are managed under the direction of
the Company's Board of Trustees.
INVESTMENT ADVISER AND SUB-ADVISER
PIMC, a wholly-owned, indirect subsidiary of PNC Bank, serves as the
Fund's investment adviser. PIMC is one of the largest U.S. bank managers of
mutual funds, with assets currently under management in excess of $30 billion.
PIMC was organized in 1977 by PNC Bank to perform advisory services for
investment companies, and has its principal offices at 400 Bellevue Parkway,
Wilmington, Delaware 19809. PNC Bank serves as the Fund's sub-adviser. PNC Bank
is one of the largest bank managers of investments for individuals in the United
States, and together with its predecessors has been in the business of managing
the investments of fiduciary and other accounts since 1847. PNC Bank is a
wholly-owned, indirect subsidiary of PNC Bank Corp., and has its principal
offices at 1600 Market Street, Philadelphia, Pennsylvania 19103. In 1973,
Provident National Bank (a predecessor to PNC Bank) commenced advising the first
institutional money market mutual fund -- a U.S. dollar-denominated constant net
asset value fund -- offered in the United States. PIMC and PNC Bank also serve
as investment adviser and sub-adviser, respectively to the Company's MuniFund
and MuniCash portfolios.
The Intermediate Municipal Fund's portfolio manager, Kevin Klingert, is
the person primarily responsible for the day-to-day management of the Fund's
investments. Mr. Klingert has been with PIMC and has been the Fund's manager
since January 6, 1997. Since 1991 he has been a portfolio manager at
Blackrock Financial Management, Inc. ("BlackRock"). Prior to joining
-10-
<PAGE> 121
BlackRock, Mr. Klingert was an Assistant Vice President of Merrill, Lynch,
Pierce, Fenner & Smith.
PNC Bank Corp., a multi-bank holding company headquartered in
Pittsburgh, Pennsylvania, is one of the largest financial service organizations
in the United States, with banking subsidiaries in Pennsylvania, New Jersey,
Delaware, Ohio, Kentucky, Indiana, Massachusetts and Florida. Its major
businesses include corporate banking, consumer banking, real estate banking,
mortgage banking and asset management.
As investment adviser, PIMC manages the Fund's portfolio and is
responsible for all purchases and sales of the Fund's portfolio securities. PIMC
also maintains certain of the Fund's financial accounts and records and computes
the Fund's net asset value and net income. For the investment advisory services
provided and expenses assumed by it, PIMC is entitled to receive a fee, computed
daily and payable monthly, based on the Fund's average daily net assets. PIMC
and the administrator may from time to time reduce the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for its
operating expenses. Any fees waived or expenses reimbursed by PIMC and the
administrators with respect to a particular fiscal year are not recoverable. For
the fiscal year ended November 30, 1996, the Fund paid investment advisory fees
aggregating .06% of the Fund's average daily net assets.
As sub-adviser, PNC Bank provides research, credit analysis and
recommendations with respect to the Fund's investments, and supplies PIMC with
certain computer facilities, personnel and other services. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the investment advisory fee paid by the Fund to PIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by PIMC to PNC Bank have no
effect on the investment advisory fees payable by the Fund to PIMC. PNC Bank
also serves as the Fund's custodian. The services provided by PNC Bank and PIMC
and the fees payable by the Fund for these services are described further in the
Statement of Additional Information under "Management of the Fund."
ADMINISTRATORS
PFPC, whose principal business address is 400 Bellevue Parkway,
Wilmington, Delaware 19809, and PDI, whose principal business address is Four
Falls Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428, serve
as administrators. PFPC is an indirect, wholly-owned subsidiary of PNC Bank
Corp. A majority of the outstanding stock of PDI is owned by its officers. The
administrative services provided by the administrators, which are described more
fully in the Statement of Additional Information, include providing and
supervising the operation of an automated data processing system to process
purchase and redemption orders; assisting in maintaining the Fund's Wilmington,
Delaware office; performing administrative services in connection with the
Fund's computer access program maintained to facilitate shareholder access to
the Fund; accumulating information for and coordinating the preparation of
reports to the Fund's shareholders and the SEC; and maintaining the registration
or qualification of the Fund's shares for sale under state securities laws. PFPC
and PDI are each responsible for carrying out the duties undertaken pursuant to
the Administration Agreement with the Fund.
For their administrative services, the administrators are entitled
jointly to receive a fee, computed daily and payable monthly, based on the
Fund's average net assets. (For information regarding the administrators' fee
waivers and expense reimbursements, see "Investment Adviser and Sub-Adviser"
above.) The Fund also reimburses each administrator for its reasonable
out-of-pocket expenses incurred in connection with the Fund's computer access
-11-
<PAGE> 122
program. For the fiscal year ended November 30, 1996, the Fund paid
administration fees aggregating .06% of its average daily net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address as transfer agent is P.O. Box 8950, Wilmington, Delaware
19885-9628. The services provided by PFPC and PDI and the fees payable by the
Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
DISTRIBUTOR
PDI, whose principal business address is set forth above under
"Administration," also serves as distributor of the Fund's shares. Fund shares
are sold on a continuous basis by the distributor as agent. The distributor pays
the cost of printing and distributing prospectuses to persons who are not
shareholders of the Fund (excluding preparation and printing expenses necessary
for the continued registration of the Fund's shares) and of printing and
distributing all sales literature. No compensation is payable by the Fund to the
distributor for its distribution services.
SERVICE ORGANIZATIONS
Institutional investors, such as banks, savings and loan associations
and other financial institutions, including affiliates of PNC Bank Corp.
("Service Organizations"), may purchase Dollar Shares. Dollar Shares are
identical in all respects to Intermediate Municipal Fund Shares except that they
bear the service fees described below and enjoy certain exclusive voting rights
on matters relating to these fees. The Fund will enter into an agreement with
each Service Organization which purchases Dollar Shares requiring it to provide
support services to its customers who are the beneficial owners of Dollar Shares
in consideration of the Fund's payment of .25% (on an annualized basis) of the
average daily net asset value of the Dollar Shares held by the Service
Organization for the benefit of customers. Such services, which are described
more fully in the Statement of Additional Information under "Management of the
Funds - Service Organizations," include aggregating and processing purchase and
redemption requests from customers and placing net purchase and redemption
orders with PFPC; processing dividend payments from the Fund on behalf of
customers; providing information periodically to customers showing their
positions in Dollar Shares; and providing sub-accounting or the information
necessary for sub-accounting with respect to Dollar Shares beneficially owned by
customers. Under the terms of the agreements, Service Organizations are required
to provide to their customers a schedule of any fees that they may charge to the
customers in connection with their investments in Dollar Shares. Intermediate
Municipal Fund Shares are sold to institutions that have not entered into
servicing agreements with the Fund in connection with their investments.
EXPENSES
Except as noted above and in the Statement of Additional Information,
the Fund's service contractors bear all expenses in connection with the
performance of their services. Similarly, the Fund bears the expenses incurred
in its operations. The Fund also pays for brokerage fees and commissions (if
any) in connection with the purchase and sale of portfolio securities. For the
fiscal year ended November 30, 1996, the Fund's total expenses for Intermediate
Municipal Fund Shares and Dollar Shares were .40% and .65% of the average daily
net assets. With regard to fees paid exclusively by Dollar Shares, see "Service
Organizations" above.
-12-
<PAGE> 123
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company or from purchasing shares of such a company for or upon the order of
customers. PNC Bank, PIMC and PFPC, as well as some Service Organizations, are
subject to such banking laws and regulations, but believe they may perform the
services for the Fund contemplated by their respective agreements, this
Prospectus and the Statement of Additional Information without violating
applicable banking laws or regulations.
Should future legislative, judicial or administrative action prohibit
or restrict the activities of bank Service Organizations in connection with the
provision of support services to their customers, the Fund might be required to
alter or discontinue its arrangements with Service Organizations and change its
method of operations with respect to Dollar Shares. It is not anticipated,
however, that any change in the Fund's method of operations would affect its net
asset value per share or result in a financial loss to any customer.
DIVIDENDS
Shareholders of the Fund are entitled to dividends and distributions
arising only from the net investment income and capital gains, if any, earned on
investments held by the Fund. The Fund's net investment income is declared daily
as a dividend to shareholders of record at the close of business on the day of
declaration. Shares begin accruing dividends on the day the purchase order for
the shares is executed and continue to accrue dividends through the day before
such shares are redeemed. Dividends are paid monthly by check, or by wire
transfer if requested in writing by the shareholder, within five business days
after the end of the month or within five business days after a redemption of
all of a shareholder's shares of a particular class.
Dividends are determined in the same manner for each class of shares of
the Fund but may differ in amount because of the difference in the expenses paid
by each class.
Institutional shareholders may elect to have their dividends reinvested
in additional full and fractional shares of the same class of shares with
respect to which such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the same tax treatment
as dividends paid in cash. Such election, or any revocation thereof, must be
made in writing to PFPC at P.O. Box 8950, Wilmington, Delaware 19899-9628, and
will become effective after its receipt by PFPC with respect to dividends paid.
The Fund expects to distribute at least once each year any net realized
short and long-term capital gains. PFPC, as transfer agent, will send each Fund
shareholder or its authorized representative an annual statement designating the
amount, if any, of any dividends and distributions made during each year and
their federal tax qualification.
-13-
<PAGE> 124
TAXES
The Fund qualified in its last taxable year and intends to qualify in
future years as a regulated investment company" under the Internal Revenue Code
of 1986, as amended (the "Code"). A regulated investment company is generally
exempt from federal income tax on amounts distributed to its shareholders.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders at least the sum of 90% of its exempt-interest income net of
certain deductions and 90% of its investment company taxable income for such
year. Dividends derived from exempt-interest income may be treated by the Fund's
shareholders as items of interest excludable from their gross income under
Section 103(a) of the Code, unless under the circumstances applicable to the
particular shareholder the exclusion would be disallowed. (See the Statement of
Additional Information under "Additional Information Concerning Taxes.")
If the Fund should hold certain private activity bonds issued after
August 7, 1986, shareholders must include, as an item of tax preference, the
portion of dividends paid by the Fund that is attributable to interest on such
bonds in their federal alternative minimum taxable income for purposes of
determining liability (if any) for the 26-28% alternative minimum tax applicable
to individuals and the 20% alternative minimum tax and the environmental tax
applicable to corporations. Corporate shareholders must also take all
exempt-interest dividends into account in determining certain adjustments for
federal alternative minimum and environmental tax purposes. The environmental
tax applicable to corporations is imposed at the rate of .12% on the excess of
the corporation's modified federal alternative minimum taxable income over
$2,000,000. Shareholders receiving Social Security benefits should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
To the extent, if any, dividends paid to shareholders are derived from
taxable income or from long-term or short-term capital gains, such dividends
will not be exempt from federal income tax, whether such dividends are paid in
the form of cash or additional shares, and may also be subject to state and
local taxes. In addition, any capital gain distributions that are paid shortly
after a purchase of shares by a shareholder prior to the record date will have
the effect of reducing the per share net asset value of his or her shares by the
amount of the distributions. All or a portion of such payment, although in
effect a return of capital, may be subject to tax. Under state or local law, the
Fund's distributions of net investment income may be taxable to investors as
dividend income even though a substantial portion of such distributions may be
derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes.
Dividends declared in October, November or December of any year payable
to shareholders of record on a specified date in such months will be deemed to
have been received by the shareholders and paid by the Fund on December 31 of
such year provided that such dividends are actually paid during January of the
following year.
The foregoing discussion is only a brief summary of some of the
important federal tax considerations generally affecting the Fund and its
shareholders. No attempt is made to present a detailed explanation of the
federal, state or local income tax treatment of the Fund or its shareholders,
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential investors in the Fund should consult their tax advisors
with specific reference to their own tax situation.
-14-
<PAGE> 125
PERFORMANCE CALCULATIONS
From time to time, performance information such as total return and
yield data for the Fund may be quoted in advertisements or in communications to
shareholders. Performance quotations are computed separately for each separate
class or sub-class of shares. The Fund's total return may be calculated on an
average annual total return basis and may also be calculated on an aggregate
total return basis, for various periods. Average annual total return reflects
the average annual percentage change in value of an investment in a series of
Fund shares over the particular measuring period. Aggregate total return
reflects the total percentage change in value over the measuring period. Both
methods of calculating total return assume that dividends and capital gain
distributions made by the Fund during the period are reinvested.
The yield of a class of Fund shares is computed based on its net income
during a 30-day (or one-month) period (the particular period will be identified
in connection with a given yield quotation). More specifically, the Fund's yield
is computed by dividing its net income per share during a 30-day (or one-month)
period by the net asset value per share on the last day of the period and
annualizing the result on a semiannual basis. The Fund's "tax-equivalent" yield
may also be quoted from time to time, which shows the level of taxable yield
needed to produce an after-tax equivalent to the Fund's tax-free yield. This is
done by increasing the Fund's yield (calculated as above) by the amount
necessary to reflect the pay of federal income tax at a stated tax rate.
The Fund's total return and yield information may be compared to those
of other mutual funds with similar investment objectives and to bond and other
relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the total return and yield of the Fund's shares may be compared to
data prepared by Lipper Analytical Services, Inc. Total return and yield data as
reported in national financial publications such as The Wall Street Journal and
The New York Times, or in publications of a local or regional nature may also be
used in comparing the performance of the Fund.
Performance quotations of the Fund represent the Fund's past
performance, will fluctuate, and should not be considered as representative of
future results. The investment return and principal value of an investment in
the Fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Changes in the Fund's net asset
value will affect its yield for any period, and such changes should be
considered together with the Fund's yield in ascertaining the Fund's total
return to shareholders for the period. Since holders of Dollar Shares bear all
service fees for support services provided by Service Organizations pursuant to
servicing agreements, the net yield on such shares can be expected at any given
time to be approximately .25% lower than the net yield on Intermediate Municipal
Fund shares. Any fees charged by Service Organizations or other institutional
investors directly to their customer accounts in connection with investments in
shares of the Fund will not be included in the Fund's calculations of yield and
total return. The methods used to compute the Fund's performance quotations are
described in more detail in the Statement of Additional Information. Investors
may call (800) 821-6006 (Intermediate Municipal Fund Shares code: 51; Dollar
Shares code: 49) to obtain current performance information.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company was organized as a Maryland corporation in 1979 under the
name Municipal Fund for Temporary Investment, Inc. and was reorganized into a
-15-
<PAGE> 126
Pennsylvania trust effective June 1, 1981. The Fund commenced operations on
December 2, 1982.
The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more classes of shares. Pursuant to such authority, the Board of Trustees has
authorized the issuance of six classes of shares designated as Intermediate
Municipal Fund, Intermediate Municipal Fund Dollar, MuniFund, MuniFund Dollar,
MuniCash and MuniCash Dollar. The Declaration of Trust further authorizes the
trustees to classify or reclassify any class of shares into one or more
subclasses.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION
INCORPORATED HEREIN RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE
INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS
RELATING TO THE FUND. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING
MUNIFUND OR MUNICASH MAY OBTAIN SEPARATE PROSPECTUSES DESCRIBING THOSE
PORTFOLIOS BY CALLING 800-998-7633.
The Company does not intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The Company will
call a meeting of shareholders for the purpose of voting upon the question of
removal of a member of the Board of Trustees upon written request of
shareholders owning at least 10% of the outstanding shares of the Company
entitled to vote.
Each Fund share represents an equal proportionate interest in the
assets belonging to the Fund. Each share is without par value and has no
preemptive or conversion rights. When issued for payment as described in this
Prospectus, shares will be fully paid and non-assessable.
Holders of the Company's Intermediate Municipal Fund Shares and Dollar
Shares will vote in the aggregate and not by class on all matters, except where
otherwise required by law and except that only Dollar Shares will be entitled to
vote on matters submitted to a vote of shareholders pertaining to the Fund's
arrangements with Service Organizations. Further, shareholders of all of the
Company's portfolios will vote in the aggregate and not by portfolio except as
otherwise required by law or when the Board of Trustees determines that the
matter to be voted upon affects only the interests of the shareholders of a
particular portfolio. (See the Statement of Additional Information under
"Additional Description Concerning Fund Shares" for examples where the 1940 Act
requires voting by portfolio.) Shareholders of the Company are entitled to one
vote for each full share held (irrespective of class or portfolio) and
fractional votes for fractional shares held. Voting rights are not cumulative
and, accordingly, the holders of more than 50% of the aggregate shares of the
Company may elect all of the trustees.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Purchase and Redemption of Shares."
As stated above, the Company is organized as a trust under the laws of
the Commonwealth of Pennsylvania. Shareholders of such a trust may, under
certain circumstances, be held personally liable (as if they were partners) for
the obligations of the trust. The Company's Declaration of Trust provides for
indemnification out of the trust property of any shareholder of the Fund held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason.
-16-
<PAGE> 127
No person has been authorized to give any information or to make any
representations not contained in this Prospectus or in the Fund's Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus; and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or its distributor. This Prospectus does not constitute an offering by the
Company or by the distributor in any jurisdiction in which such offering may not
lawfully be made.
--------------------
TABLE OF CONTENTS
PAGE
BACKGROUND AND EXPENSE INFORMATION......................................... 2
FINANCIAL HIGHLIGHTS....................................................... 3
INVESTMENT OBJECTIVE AND POLICIES.......................................... 5
PURCHASE AND REDEMPTION OF SHARES.......................................... 8
MANAGEMENT OF THE FUND..................................................... 10
DIVIDENDS.................................................................. 13
TAXES...................................................................... 14
PERFORMANCE CALCULATIONS................................................... 15
DESCRIPTION OF SHARES AND
MISCELLANEOUS.......................................................... 15
INTERMEDIATE
MUNICIPAL
FUND
An Investment Portfolio
Offered by
Municipal Fund for
Temporary Investment
PROVIDENT
-------------
INSTITUTIONAL
FUNDS
Prospectus
March 30, 1997
<PAGE> 128
INTERMEDIATE MUNICIPAL FUND
Investment Portfolio Offered By
Municipal Fund for Temporary Investment
Statement of Additional Information
March 30, 1997
TABLE OF CONTENTS
Page
THE COMPANY................................................................ 2
INVESTMENT OBJECTIVES AND POLICIES......................................... 2
MUNICIPAL OBLIGATIONS...................................................... 9
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................. 11
MANAGEMENT OF THE FUND..................................................... 13
ADDITIONAL INFORMATION CONCERNING TAXES.................................... 23
DIVIDENDS.................................................................. 26
ADDITIONAL INFORMATION ON PERFORMANCE CALCULATIONS......................... 27
ADDITIONAL DESCRIPTION CONCERNING SHARES................................... 32
COUNSEL.................................................................... 32
AUDITORS................................................................... 33
MISCELLANEOUS.............................................................. 33
APPENDIX A.................................................................A-1
This Statement of Additional Information is meant to be read
in conjunction with the Prospectus for the Intermediate Municipal Fund
portfolio, dated March 30, 1997, and is incorporated by reference in its
entirety into that Prospectus. Because this Statement of Additional Information
is not itself a prospectus, no investment in shares of Intermediate Municipal
Fund should be made solely upon the information contained herein. Copies of the
Prospectus for Intermediate Municipal Fund may be obtained by calling
800-821-7432. Capitalized terms used but not defined herein have the same
meanings as in the Prospectus.
<PAGE> 129
THE COMPANY
Municipal Fund for Temporary Investment (the "Company") is a
no-load, diversified, open-end investment company presently offering three
separate investment portfolios--Intermediate Municipal Fund, (the "Fund"), and
MuniFund and MuniCash.
Substantially all of the assets of Intermediate Municipal Fund
are invested in tax-exempt obligations (as defined in the prospectus) and
tax-exempt derivatives such as tender option bonds, participations, beneficial
interests in trusts and partnership interests ("Municipal Obligations") having
remaining maturities of ten years or less at the time of purchase.
THIS STATEMENT OF ADDITIONAL INFORMATION AND THE FUND'S
PROSPECTUS RELATE PRIMARILY TO THE FUND AND DESCRIBE ONLY THE INVESTMENT
OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS RELATING TO
THIS FUND. INVESTORS WISHING TO OBTAIN SIMILAR INFORMATION REGARDING MUNIFUND OR
MUNICASH MAY OBTAIN SEPARATE PROSPECTUSES DESCRIBING THOSE PORTFOLIOS BY CALLING
800-998-7633.
INVESTMENT OBJECTIVES AND POLICIES
As stated in the Fund's Prospectus, the investment objective
of the Fund is to seek a high level of current interest income which is exempt
from federal income tax consistent with prudent investment risk. The following
policies supplement the description of the Fund's investment objectives and
policies as contained in the prospectus.
PORTFOLIO TRANSACTIONS
Subject to the general control of the Company's Board of
Trustees, PNC Institutional Management Corporation ("PIMC"), the Fund's
investment adviser, is responsible for, makes decisions with respect to, and
places orders for all purchases and sales of portfolio securities for the Fund.
Purchases and sales of portfolio securities are usually principal transactions
without brokerage commissions. In making portfolio investments, PIMC seeks to
obtain the best net price and the most favorable execution of orders. To the
extent that the execution and price offered by more than one dealer are
comparable, PIMC may, in its discretion, effect transactions in portfolio
securities with dealers who provide the Company with research advice or other
services. Research advice and other services furnished by brokers through whom
the Fund effects securities transactions may be used by PIMC in servicing
accounts in addition to the Fund, and not all such services will necessarily
benefit the Fund.
-2-
<PAGE> 130
Transactions in the over-the-counter market are generally
principal transactions with dealers, and the costs of such transactions involve
dealer spreads rather than brokerage commissions. With respect to
over-the-counter transactions, a Fund, where possible, will deal directly with
the dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere.
Investment decisions for the Fund are made independently from
those for another of the Company's portfolios or other investment company
portfolios or accounts managed by PIMC. Such other portfolios may invest in the
same securities as the Fund. When purchases or sales of the same security are
made at substantially the same time on behalf of such other portfolios,
transactions are averaged as to price, and available investments allocated as to
amount, in a manner which PIMC believes to be equitable to each portfolio,
including the Fund. In some instances, this investment procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtained for the Fund. To the extent permitted by law, PIMC may aggregate the
securities to be sold or purchased for the Fund with those to be sold or
purchased for such other portfolios in order to obtain best execution.
The Fund will not execute portfolio transactions through or
acquire portfolio securities issued by PIMC, PNC Bank, National Association
("PNC Bank"), Provident Distributors, Inc. ("PDI"), PFPC Inc. ("PFPC"), or any
affiliated person (as such term is defined in the Investment Company Act of 1940
(the "1940 Act") of any of them, except to the extent permitted by the
Securities and Exchange Commission ("the SEC"). In addition, the Fund will not
purchase Municipal Obligations during the existence of any underwriting or
selling group relating thereto of which PDI or PNC Bank or any affiliate thereof
is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Fund may be at a disadvantage because of these limitations in
comparison with other investment company portfolios which have a similar
investment objective but are not subject to such limitations. Furthermore, with
respect to such transaction and securities, the Fund will not give preference to
Service Organizations with whom the Fund enters into agreements concerning the
provision of support services to customers who beneficially own Intermediate
Municipal Dollar shares ("Dollar shares"). (See the Prospectus, "Management of
the Fund--Service Organizations.")
The Fund may participate, if and when practicable, in bidding
for the purchase of Municipal Obligations directly from an issuer in order to
take advantage of the lower purchase price available to members of a bidding
group. The Fund will engage in
-3-
<PAGE> 131
this practice, however, only when PIMC, in its sole discretion, believes such
practice to be in the Fund's interest.
The Fund does not intend to seek profits through short-term
trading. The portfolio turnover rate for the Fund for the years ended November
30, 1996, 1995 and 1994 were 73%, 47% and 40%, respectively. The annual
portfolio turnover rates for the Fund is not normally expected to exceed 100%. A
higher portfolio turnover rate would result in correspondingly higher
transaction costs, which would be borne by the Fund and ultimately by its
shareholders.
ADDITIONAL INFORMATION ON INVESTMENT PRACTICES.
VARIABLE AND FLOATING RATE INSTRUMENTS. Municipal Obligations
purchased by the Fund may include variable and floating rate instruments, which
provide for adjustments in the interest rate on certain reset dates or whenever
a specified interest rate index changes, respectively. Variable and floating
rate instruments are subject to the credit quality standards described in the
Prospectus. In some cases the Fund may require that the obligation to pay the
principal of the instrument be backed by a letter or line of credit or
guarantee. Although a particular variable or floating rate demand instrument may
not be actively traded in a secondary market, in some cases, the Fund may be
entitled to principal on demand and may be able to resell such notes in the
dealer market.
Variable and floating rate demand instruments held by the Fund
may have maturities which exceed the maximum remaining maturity defined for the
Fund purchasing such securities, provided: (i) the Fund is entitled to the
payment of principal, at any time or during specified intervals within a
prescribed period after such Fund's demand for payment, and (ii) the rate of
interest on such instruments is adjusted at periodic intervals according to the
terms of the instrument.
In determining the Fund's average weighted portfolio maturity
and whether a variable or floating rate demand instrument has a remaining
maturity equal or less than the maximum remaining maturity as defined for the
Fund, each instrument will be deemed by the Fund to have a maturity equal to the
longer of the period remaining until its next interest rate adjustment or the
period remaining until the principal amount can be recovered through demand.
Variable and floating rate notes that do not provide for
payment within seven days may be deemed illiquid and subject to the 10%
limitation on such investments.
WHEN-ISSUED SECURITIES. As stated in the Fund's
Prospectus, the Fund may purchase Municipal Obligations on a
-4-
<PAGE> 132
"when-issued" basis (i.e., for delivery beyond the normal settlement date at a
stated price and yield). When the Fund agrees to purchase when-issued
securities, the custodian will set aside cash or liquid portfolio securities
equal to the amount of the commitment in a separate account. Normally, the
custodian will set aside portfolio securities to satisfy a purchase commitment,
and in such a case the Fund may be required subsequently to place additional
assets in the separate account in order to ensure that the value of the account
remains equal to the amount of the Fund's commitment. It may be expected that
the Fund's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. Because the Fund will set aside cash or liquid assets to satisfy its
purchase commitments in the manner described, the Fund's liquidity and ability
to manage its portfolio might be affected in the event its commitments to
purchase when-issued securities ever exceeded 25% of the value of its assets.
When the Fund engages in when-issued transactions, it relies on the seller to
consummate the trade. Failure of the seller to do so may result in the Fund
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous. The Fund does not intend to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective. The
Fund reserves the right to sell the securities before the settlement date if it
is deemed advisable.
STAND-BY COMMITMENTS. The Fund may acquire "stand-by
commitments" with respect to Municipal Obligations held in its portfolio. Under
a stand-by commitment, a dealer would agree to purchase at the Fund's option
specified Municipal Obligations at a specified price. (Stand-by commitments
acquired by the Fund may also be referred to as "put" options.) Stand-by
commitments may be exercisable by the Fund at any time before the maturity of
the underlying Municipal Obligations and may be sold, transferred, or assigned
only with the instruments involved. The Fund's right to exercise stand-by
commitments will be unconditional and unqualified.
The amount payable to the Fund upon its exercise of a stand-by
commitment will normally be (i) the Fund's acquisition cost of the Municipal
Obligations (excluding any accrued interest which the Fund paid on their
acquisition), less any amortized market premium or plus any amortized market or
original issue discount during the period the Fund owned the securities, plus
(ii) all interest accrued on the securities since the last interest payment date
during that period.
The Fund expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Fund may pay for a stand-by commitment either
separately in cash
-5-
<PAGE> 133
or by paying a higher price for portfolio securities which are acquired subject
to the commitment (thus reducing the yield to maturity otherwise available for
the same securities). The total amount paid in either manner for outstanding
stand-by commitments held by the Fund will not exceed 1/2 of 1% of the value of
the Fund's total assets calculated immediately after each stand-by commitment is
acquired.
The Fund intends to enter into stand-by commitments only with
dealers, banks, and broker-dealers which, in the investment adviser's opinion,
present minimal credit risks. A Fund's reliance upon the credit of these
dealers, banks, and broker-dealers will be secured by the value of the
underlying Municipal Obligations that are subject to the commitment.
The Fund would acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The acquisition of a stand-by commitment would
not affect the valuation or assumed maturity of the underlying Municipal
Obligations. Stand-by commitments acquired by the Fund would be valued at zero
in determining net asset value. Where the Fund paid any consideration directly
or indirectly for a stand-by commitment, its cost would be reflected as
unrealized depreciation for the period during which the commitment was held by
the Fund.
ILLIQUID SECURITIES. The Fund may not invest more than 10% of
its total net assets in illiquid securities, including securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale. Securities that have legal or contractual
restrictions on resale but have a readily available market are not considered
illiquid for purposes of this limitation. The Fund's investment adviser will
monitor on an ongoing basis the liquidity of such restricted securities under
the supervision of the Board of Trustees.
Rule 144A under the Securities Act allows for a broader
institutional trading market for securities otherwise subject to restriction on
resale to the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act for resales of certain
securities to qualified institutional buyers. The investment adviser anticipates
that the market for certain restricted securities such as institutional
municipal securities will expand further as a result of this regulation and the
development of automated systems for the trading, clearance, and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers.
-6-
<PAGE> 134
The Fund's investment adviser will monitor the liquidity of
restricted securities under the supervision of the Board of Trustees. In
reaching liquidity decisions, the investment adviser will consider, inter alia,
the following factors: (1) the unregistered nature of a Rule 144A security; (2)
the frequency of trades and quotes for the Rule 144A security; (3) the number of
dealers willing to purchase or sell the Rule 144A security and the number of
other potential purchasers; (4) dealer undertakings to make a market in the Rule
144A security; (5) the trading markets for the Rule 144A security; and (6) the
nature of the Rule 144A security and the nature of marketplace trades
(including, the time needed to dispose of the Rule 144A security, methods of
soliciting offers, and mechanics of transfer).
The Appendix to this Statement of Additional Information
contains a description of the relevant rating symbols used by Rating Agencies
for Municipal Obligations that may be purchased by the Fund.
INVESTMENT LIMITATIONS
The Fund's Prospectus summarizes certain investment
limitations that may not be changed without the affirmative vote of the holders
of a majority of the Fund's outstanding shares (as defined below under
"Miscellaneous"). Below is a complete list of the Fund's investment limitations
that may not be changed without such a vote of shareholders.
The Fund may not:
1. Purchase any securities other than Municipal Obligations
and put options with respect to such obligations.
2. Purchase the securities of any issuer if as a result more
than 5% of the value of the Fund's assets would be invested in the securities of
such issuer, except that up to 25% of the value of the Fund's assets may be
invested without regard to this 5% limitation.
3. Borrow money except from banks for temporary purposes and
then in amounts not in excess of 10% of the value of the Fund's assets at the
time of such borrowing; or mortgage, pledge or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's assets at the time
of such borrowing. The Fund will not purchase portfolio securities while any
borrowings are outstanding.
4. Knowingly invest more than 10% of the value of the Fund's
assets in securities with legal or contractual restrictions on resale.
-7-
<PAGE> 135
5. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective, policies and
limitations.
6. Underwrite any issue of securities except to the extent
that the purchase of Municipal Obligations or other securities directly from the
issuer thereof in accordance with the Fund's investment objective, policies and
limitations may be deemed to be underwriting.
7. Purchase or sell real estate except that the Fund may
invest in Municipal Obligations secured by real estate or interests therein.
8. Purchase securities on margin, make short sales of
securities or maintain a short position.
9. Write or sell puts, calls, straddles, spreads or
combinations thereof.
10. Purchase or sell commodities or commodity contracts, or
invest in oil, gas or mineral exploration or development programs.
11. Invest in industrial revenue bonds where the payment of
principal and interest are the responsibility of a company (including its
predecessors) with less than 3 years of continuous operation.
12. Purchase securities of other investment companies except
in connection with a merger, consolidation, acquisition or reorganization.
13. Purchase securities, except securities issued by any
state, territory or possession of the United States, the District of Columbia or
their political subdivisions, agencies, instrumentalities or authorities, if as
a result 25% or more of the value of the Fund's assets would be invested in
securities of issuers conducting their principal business activities in the same
industry. In the case of an industrial development bond, if that bond is backed
only by the assets and revenues of the non-governmental user, such
non-governmental user would be deemed to be the sole issuer. However, a
guarantee of such a security would be considered a separate security issued by
the guarantor.
In addition, without the affirmative vote of the holders of a
majority of the Fund's outstanding shares, the Fund may not change its policy of
investing at least 80% of its total assets in obligations the interest on which
is exempt from federal income tax (except during temporary defensive periods).
Securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities (including securities backed by
-8-
<PAGE> 136
the full faith and credit of the United States) are not deemed to be subject to
the second investment limitation above.
In order to permit the sale of Fund shares in certain states,
the Fund may make commitments more restrictive than the investment policies and
limitations above. Should the Fund determine that any such commitment is no
longer in its best interests, it will revoke the commitment by terminating sales
of its shares in the state involved.
MUNICIPAL OBLIGATIONS
Municipal Obligations include debt obligations issued by
governmental entities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses, and the extension of
loans to public institutions and facilities. Private activity bonds that are or
were issued by or on behalf of public authorities to finance various
privately-operated facilities are included within the term Municipal Obligations
if the interest paid thereon is exempt from federal income tax. Opinions
relating to the validity of Municipal Obligations and to the exemption of
interest thereon from federal income taxes are rendered by counsel to the
issuers or bond counsel to the respective issuing authorities at the time of
issuance. Neither the Fund nor its investment adviser will review the
proceedings relating to the issuance of Municipal Obligations or the bases for
such opinions.
The Fund may hold tax-exempt derivatives which may be in the
form of tender option bonds, participations, beneficial interests in a trust,
partnership interests or other forms. A number of different structures have been
used. For example, interests in long-term fixed-rate Municipal Obligations, held
by a bank as trustee or custodian, are coupled with tender option, demand and
other features when the tax-exempt derivatives are created. Together, these
features entitle the holder of the interest to tender (or put) the underlying
Municipal Obligation to a third party at periodic intervals and to receive the
principal amount thereof. In some cases, Municipal Obligations are represented
by custodial receipts evidencing rights to receive specific future interest
payments, principal payments, or both, on the underlying municipal securities
held by the custodian. Under such arrangements, the holder of the custodial
receipt has the option to tender the underlying municipal securities at its face
value to the sponsor (usually a bank or broker dealer or other financial
institution), which is paid periodic fees equal to the difference between the
bond's fixed coupon rate and the rate that would cause the bond, coupled with
the tender option, to trade at par on the date of a rate adjustment. The Fund
may hold tax-exempt derivatives, such as
-9-
<PAGE> 137
participation interests and custodial receipts, for Municipal Obligations which
give the holder the right to receive payment of principal subject to the
conditions described above. The Internal Revenue Service has not ruled on
whether the interest received on tax-exempt derivatives in the form of
participation interests or custodial receipts is tax-exempt, and accordingly,
purchases of any such interests or receipts are based on the opinion of counsel
to the sponsors of such derivative securities. Neither the Fund nor its
investment adviser will review independently the underlying proceedings related
to the creation of any tax-exempt derivatives or the bases for such opinion.
As described in the Fund's Prospectus, the two principal
classifications of Municipal Obligations consist of "general obligation" and
"revenue" issues, and the Fund's portfolio may include "moral obligation"
issues, which are normally issued by special purpose authorities. There are, of
course, variations in the quality of Municipal Obligations both within a
particular classification and between classifications, and the yields on
Municipal Obligations depend upon a variety of factors, including general money
market conditions, the financial condition of the issuer, general conditions of
the municipal bond market, the size of a particular offering, the maturity of
the obligation, and the rating of the issue. The ratings of Rating Agencies
represent their opinions as to the quality of Municipal Obligations. It should
be recognized, however, that ratings are general and are not absolute standards
of quality, and Municipal Obligations with the same maturity, interest rate, and
rating may have different yields while Municipal Obligations of the same
maturity and interest rate with different ratings may have the same yield.
Subsequent to its purchase by the Fund, an issue of Municipal Obligations may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. The Fund's investment adviser will consider such an
event in determining whether the Fund should continue to hold the obligation.
An issuer's obligations under its Municipal Obligations are
subject to the provisions of bankruptcy, insolvency, and other laws affecting
the rights and remedies of creditors, such as the federal Bankruptcy Code, and
laws, if any, which may be enacted by federal or state legislatures extending
the time for payment of principal or interest, or both, or imposing other
constraints upon enforcement of such obligations or upon the ability of
municipalities to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest on and principal of its Municipal
Obligations may be materially adversely affected by litigation or other
conditions.
Among other instruments, the Fund may purchase short- term
General Obligation Notes, Tax Anticipation Notes, Bond
-10-
<PAGE> 138
Anticipation Notes, Revenue Anticipation Notes, Tax-Exempt Commercial Paper,
Construction Loan Notes, and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax funds,
the proceeds of bond placements, or other revenues. In addition, the Fund may
invest in other types of tax-exempt instruments such as municipal bonds, private
activity bonds, and pollution control bonds, provided they have remaining
maturities equal or less than the maximum remaining maturity defined for the
Fund (if any) in its Prospectus at the time of purchase.
The payment of principal and interest on most securities
purchased by the Fund will depend upon the ability of the issuers to meet their
obligations. The District of Columbia, each state, each of their political
subdivisions, agencies, instrumentalities, and authorities and each multi-state
agency of which a state is a member is a separate "issuer" as that term is used
in this Statement of Additional Information and the Fund's Prospectus. The
non-governmental user of facilities financed by private activity bonds is also
considered to be an "issuer."
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
IN GENERAL
Information on how to purchase and redeem the Fund's shares is
included in the Prospectus. The issuance of the Fund's shares is recorded on the
Fund's books, and share certificates are not issued unless expressly requested
in writing. Certificates are not issued for fractional shares.
The regulations of the Comptroller of the Currency provide
that funds held in a fiduciary capacity by a national bank approved by the
Comptroller to exercise fiduciary powers must be invested in accordance with the
instrument establishing the fiduciary relationship and local law. The Company
believes that the purchase of the Fund's shares by such national banks acting on
behalf of their fiduciary accounts is not contrary to applicable regulations if
consistent with the particular account and proper under the law governing the
administration of the account.
Prior to effecting a redemption of shares represented by
certificates, PFPC, the Company's transfer agent, must have received such
certificates at its principal office. All such certificates must be endorsed by
the redeeming shareholder or accompanied by a signed stock power, in each
instance with the signature guaranteed by a commercial bank, a member of a major
stock exchange or other eligible guarantor institution, unless other
arrangements satisfactory to the Fund have previously been
-11-
<PAGE> 139
made. The Fund may require any additional information reasonably necessary to
evidence that a redemption has been duly authorized.
Under the 1940 Act, the Fund may suspend the right of
redemption or postpone the date of payment upon redemption for any period during
which the New York Stock Exchange is closed, other than customary weekend and
holiday closings, or during which trading on said Exchange is restricted, or
during which (as determined by the SEC by rule or regulation) an emergency
exists as a result of which disposal or valuation of portfolio securities is not
reasonably practicable, or for such other periods as the SEC may permit. (The
Fund may also suspend or postpone the recordation of the transfer of its shares
upon the occurrence of any of the foregoing conditions.) In addition, the Fund
may redeem shares involuntarily in certain other instances if the Board of
Trustees determines that failure to redeem may have material adverse
consequences to the Fund's shareholders in general. If the Board of Trustees
determines that conditions exist which make payment of redemption proceeds
wholly in cash unwise or undesirable, the Fund may make payment wholly or partly
in securities or other property. See "Net Asset Value" below for an example when
such form of payment might be appropriate.
Any institution purchasing shares on behalf of separate
accounts will be required to hold the shares in a single nominee name (a "Master
Account"). Institutions investing in more than one of the Company's portfolios
or series of shares must maintain a separate Master Account for each portfolio
or series of shares. Institutions may also arrange with PFPC for certain sub-
accounting services (such as purchase, redemption and dividend recordkeeping).
Sub-accounts may be established by name or number either when the Master Account
is opened or later.
NET ASSET VALUE
As stated in the Fund's Prospectus, net asset value per share
of each class of shares in a particular Fund is calculated by adding the value
of all of the portfolio securities and other assets belonging to a Fund that are
attributable to a class, subtracting the Fund's liabilities attributable to the
class, and dividing the result by the number of outstanding shares in the class.
"Assets belonging to" the Fund consist of the consideration received upon the
issuance of Fund shares together with all income, earnings, profits, and
proceeds derived from the investment thereof, including any proceeds from the
sale, exchange, or liquidation of such investments, any funds or payments
derived from any reinvestment of such proceeds, and a portion of any general
assets of the Company not belonging to a particular portfolio. Assets belonging
to the Fund are allocated among the classes of shares in the Fund in proportion
to the shares outstanding in each class, and are charged with the direct
-12-
<PAGE> 140
liabilities of the Fund and with a share of the general liabilities of the
Company allocated on a daily basis in proportion to the relative net assets of
the Fund and the Company's other portfolios, and expenses of a class are
charged to that class. Determinations made in good faith and in accordance with
generally accepted accounting principles by the Company's Board of Trustees as
to the allocation of any assets or liabilities with respect to the Fund are
conclusive.
PIMC may use a pricing service to value certain portfolio
securities where the prices provided are believed to reflect the fair market
value of such securities. In valuing the Fund's securities, the pricing service
would normally take into consideration such factors as yield, risk, quality,
maturity, type of issue, trading characteristics, special circumstances, and
other factors it deems relevant in determining valuations for normal
institutionalized trading units of debt securities and would not rely
exclusively on quoted prices. The methods used by the pricing service and the
valuations so established will be reviewed by PIMC under the general supervision
of the Company's Board of Trustees. Several pricing services are available, and
one or more of which may be used by PIMC at its own expense from time to time.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Company's trustees and executive officers, their
addresses, ages, principal occupations during the past five years, and other
affiliations are provided below. In addition to the information set forth below,
the trustees serve in the following capacities:
Each trustee of the Company serves as a director of Temporary
Investment Fund, Inc. ("Temp") and as a trustee of Trust for Federal Securities
("Fed"). In addition, Messrs. Fortune and Pepper are directors of Independence
Square Income Securities, Inc. ("ISIS") and Managing General Partners of
Chestnut Street Exchange Fund ("Chestnut"); Messrs. Pepper and Johnson are
directors of Municipal Fund for California Investors, Inc. ("Cal Muni"); Mr.
Johnson is a director of Municipal Fund for New York Investors, Inc. ("New York
Muni") and a director of the International Dollar Reserve Fund ("IDR").
Each of the Company's officers, with the exception of Mr.
Jones, holds like offices with Temp and Fed. In addition, Mr. Jones is Secretary
of Chestnut, Cal Muni, and New York Muni. Mr. Roach is Treasurer of Chestnut,
President and
-13-
<PAGE> 141
Treasurer of The RBB Fund, Inc. and New York Muni, and Vice President and
Treasurer of ISIS and Cal Muni; Mr. Pepper is President and Chairman of the
Board of Cal Muni and Mr. Fortune is President and Chairman of the Boards of
Chestnut and ISIS.
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name and Address the Company Other Affiliations
<S> <C> <C>
G. NICHOLAS BECKWITH, III Trustee President and Chief
Beckwith Machinery Company Executive Officer,
Post Office Box 8718 Beckwith Machinery
Pittsburgh, PA 15221 Company; Chairman of the
Age 52 Board of Trustees,
Shadyside Hospital; Vice
Chairman of the Board of
Trustees, Shadyside
Academy; Trustee, Claude
Washington Benedum
Foundation; Trustee,
Chatham College.
PHILIP E. COLDWELL(2,3,4) Trustee Economic Consultant;
Coldwell Financial Chairman, Coldwell
Consultants Financial Consultants,
3330 Southwestern Blvd. Member of the Board of
Dallas, TX 75225 Governors of the Federal
Age: 74 Reserve System, 1974 to
1980; President, Federal
Reserve Bank of Dallas,
1968 to 1974; Director,
Maxus Energy Corporation
(energy products) 1989 to
1993; Director, Diamond
Shamrock Corp. (energy and
chemical products) until
1987.
ROBERT R. FORTUNE(2,3,4) Trustee Financial Consultant;
2920 Ritter Lane Chairman, President and
Allentown, PA 18104 Chief Executive Officer of
Age: 80 Associated Electric & Gas
Insurance Services Limited
1984 to 1993; Member of
the Financial Executives
Institute and American
Institute of Certified
Public Accountants;
Director, Prudential
Utility Fund, Inc., and
Prudential Structured
Maturity Fund, Inc.
</TABLE>
-14-
<PAGE> 142
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name and Address the Company Other Affiliations
- ---------------- ----------- ------------------
<S> <C> <C>
JERROLD B. HARRIS Trustee President and Chief
706 Haldane Drive Executive Officer, VWR
Kennett Square, PA 19348 Corporation 1990 to
Age 54 present.
RODNEY D. JOHNSON(3,4) Trustee President, Fairmount
Fairmount Capital Capital Advisors, Inc.
Advisors, Inc. (financial advising)
1435 Walnut Street since 1987; Treasurer
Drexel Building, North Philadelphia Health
3rd Floor System (formerly Girard
Philadelphia, PA 19102 Medical Center), 1988 to
Age: 55 1992, Vice President for
Financial Affairs and
Treasurer, Temple
University, 1983 to 1987;
Member, Board of
Education, School District
of Philadelphia, 1983 to
1988.
G. WILLING PEPPER(1,2) Chairman of Retired; Chairman of the
128 Springton Lake Road the Board, Board, The Institute
Media, PA 19063 President and for Cancer Research until
Age: 88 Trustee 1979; Director,
Philadelphia National Bank
until 1978; President,
Scott Paper Company, 1971
to 1973; Chairman of the
Board, Specialty Composites
Corp. until May 1984.
</TABLE>
-15-
<PAGE> 143
<TABLE>
<CAPTION>
Principal Occupations
Position with During Past 5 Years and
Name and Address the Company Other Affiliations
- ---------------- ----------- ------------------
<S> <C> <C>
EDWARD J. ROACH Vice President Certified Public
400 Bellevue Parkway and Treasurer Accountant; Vice
Suite 100 Chairman of the Board,
Wilmington, DE 19809 Fox Chase Cancer Center;
Age: 72 Trustee Emeritus,
Pennsylvania School for the
Deaf; Trustee Emeritus
Immaculata College;
Director, The Bradford
Funds, Inc.
MORGAN R. JONES Secretary Partner of the law firm of
PNB Building Drinker Biddle & Reath,
1345 Chestnut Street Philadelphia,
Philadelphia, PA 19107-3496 Pennsylvania.
Age: 57
</TABLE>
1 This trustee is considered by the Company to be an "interested person"
of the Company as defined in the 1940 Act.
2 Executive Committee Member.
3 Audit Committee Member.
4 Nominating Committee Member.
During intervals between meetings of the Board, the Executive
Committee may exercise the authority of the Board of Trustees in the management
of the Company's business to the extent permitted by law.
Each of the investment companies named above receives various
advisory and other services from PIMC and PNC Bank. Of the above-mentioned
funds, PDI provides distribution services to Temp, Muni, Cal Muni, New York Muni
and IDR. Of the above-mentioned funds, the administrators provide administration
services to Temp, Muni, Cal Muni and New York Muni.
For the Company's fiscal year ended November 30, 1996, the
Company paid a total of $97,810 to its officers and trustees in all capacities,
of which $600 was allocated to the Fund. In addition, the Company contributed
$2,928 during its last fiscal year to its retirement plan for employees (who
included Mr. Roach), of which $18 was allocated to the Fund. Drinker Biddle &
Reath, of which Mr. Jones is a partner, receives legal fees as counsel to the
Company. No employee of PDI, PFPC, PIMC, or PNC Bank receives any compensation
from the Company for acting as an officer or trustee of the Company. The
trustees and
-16-
<PAGE> 144
officers of the Company as a group beneficially own less than 1% of the shares
of each of the Company's portfolios.
By virtue of the responsibilities assumed by PDI, PFPC, PIMC,
and PNC Bank under their respective agreements with the Company, the Company
itself requires only one part-time employee in addition to its officers.
The table below sets forth the compensation actually received
from the Fund Complex of which the Company is a part by the trustees for the
fiscal year ended November 30, 1996:
<TABLE>
<CAPTION>
Total
Compensation
from Registrant
and Fund
Aggregate Complex1
Compensation Paid to
Name of Person, Position from Registrant Trustees
<S> <C> <C>
2
G. Nicholas Beckwith, III(5), Trustee $ 9,450 (3) $ 30,975
2
Philip E. Coldwell, Trustee 14,400 (4) 46,200
2
Robert R. Fortune, Trustee 14,400 (6) 67,100
2
Jerrold B. Harris(5), Trustee 10,350 (3) 33,675
2
Rodney D. Johnson, Trustee 14,400 (6) 59,100
2
G. Willing Pepper, Trustee and 23,400 (7) 97,100
Chairman
2
David R. Wilmerding, Jr.(3), Trustee 0 (6) 12,000
2
Anthony M. Santomero(4), Trustee 0 (6) 12,000
</TABLE>
- ------------------------
1. A Fund Complex means two or more investment companies that hold
themselves out to investors as related companies for purposes of
investment and investor services, or have a common investment adviser
or have an investment adviser that is an affiliated person of the
investment adviser of any of the other investment companies.
2. Total number of such other investment companies trustee serves on
within the Fund Complex during the fiscal year ended November 30, 1996.
3. Mr. Wilmerding resigned as trustee of the Company on January 4, 1996.
4. Mr. Santomero resigned as trustee of the Company on January 4, 1996.
5. Messrs. Beckwith and Harris were elected to the Board of Trustees of
the Company on March 22, 1996.
-17-
<PAGE> 145
INVESTMENT ADVISER AND SUB-ADVISER
The advisory and sub-advisory services provided by PIMC and
PNC Bank are described in the Fund's Prospectus. For the advisory services
provided and expenses assumed by it, PIMC is entitled to receive fees, computed
daily and payable monthly, at the annual rate of .20% of the Fund's average net
assets. PIMC and PNC Bank also serve as adviser and sub-adviser, respectively,
for the Company's MuniFund and MuniCash portfolios.
PIMC, and the administrators have each agreed to reduce their
fees to the extent necessary to ensure that the Fund's operating expenses
(excluding interest, taxes, brokerage fees, fees paid to Service Organizations
pursuant to Servicing Agreements, and extraordinary expenses) do not exceed .40%
of the average net assets for the Portfolio. PIMC and the administrators have
also agreed that if, in any fiscal year, the expenses borne by the Fund exceed
the applicable expense limitations imposed by the securities regulations of any
state in which shares of the Fund are registered or qualified for sale to the
public, they will each reimburse the Fund for a portion of any such excess
expense in an amount equal to the portion that the administration fees otherwise
payable by the Fund to the administrators bear to the total amount of the
investment advisory and administration fees otherwise payable to the Fund.
For the fiscal years ended November 30, 1994, 1995 and 1996,
the Fund paid fees for advisory services aggregating $27,271, $9,476, and
$3,804, respectively. For the same years, PIMC waived payment of additional
advisory fees totalling $12,584, $9,766 and $8,013, respectively. PIMC and PNC
Bank also serve as adviser and sub-adviser, respectively, to the Company's
MuniFund and MuniCash portfolios.
BANKING LAWS
Certain banking laws and regulations with respect to
investment companies are discussed in the Fund's Prospectus. PIMC, PNC Bank and
PFPC believe that they may perform the services for the Fund contemplated by
respective agreements, the Prospectus, and this Statement of Additional
Information without violation of applicable banking laws or regulations. It
should be noted, however, that future changes in legal requirements relating to
the permissible activities of banks and their affiliates, as well as further
interpretations of present requirements, could prevent PIMC and PFPC from
continuing to perform such services for the Fund and PNC Bank from continuing to
perform such services for PIMC and the Fund. If PIMC, PFPC, or PNC Bank were
prohibited from continuing to perform such services, it is expected that the
Company's Board of Trustees would recommend that the Fund enter into new
agreements with
-18-
<PAGE> 146
other qualified firms. Any new advisory agreement would be subject to
shareholder approval as required by the 1940 Act.
In addition, state securities laws on this issue may differ
from the interpretations of federal laws expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
ADMINISTRATORS
As the Fund's administrators, PFPC and PDI have agreed to
provide the following services: (i) assist generally in supervising the Fund's
operations, including providing a Wilmington, Delaware order-taking facility
with toll-free IN-WATS telephone lines, providing for the preparing,
supervising, and mailing of purchase and redemption order confirmations to
shareholders of record, providing and supervising the operation of an automated
data processing system to process purchase and redemption orders, maintaining a
back-up procedure to reconstruct lost purchase and redemption data, providing
information concerning the Fund to its shareholders of record, handling
shareholder problems, providing (through PDI) the services of employees to
preserve and strengthen shareholder relations and monitoring the arrangements
pertaining to the Fund's agreements with Service Organizations; (ii) assure that
persons are available to receive and transmit purchase and redemption orders;
(iii) participate in the periodic updating of the Fund's Prospectus; (iv) assist
in maintaining the Fund's Wilmington, Delaware office; (v) perform
administrative services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund; (vi) accumulate
information for and coordinate the preparation of reports to the Fund's
shareholders and the SEC; (vii) provide the services of certain persons who may
be elected as trustees or appointed as officers of the Company by the Board of
Trustees; (viii) maintain the registration or qualification of the Fund's shares
for sale under state securities laws; (ix) review and provide advice with
respect to all sales literature of the Fund; and (x) assist in the monitoring of
regulatory and legislative developments which may affect the Company,
participate in counseling and assisting the Company in relation to routine
regulatory examinations and investigations, and work with the Company's counsel
in connection with regulatory matters and litigation.
For their administrative services, the administrators are
entitled jointly to receive a fee, computed daily and payable monthly,
determined on the same basis as PIMC's advisory fee set forth above. The Fund
also reimburses each administrator for its reasonable out-of-pocket expenses
incurred in connection with the Fund's computer access program. For information
regarding the administrators' obligation to reimburse the Fund in the event
-19-
<PAGE> 147
its expenses exceed certain prescribed limits, see "Investment
Adviser and Sub-Adviser" above.
For the fiscal year ended November 30, 1996, the Company paid
fees (net of waivers) for administration services aggregating $3,804 with
respect to the Fund. For the same fiscal year, PFPC and PDI voluntarily waived
administration fees aggregating $8,013 with respect to the Fund.
For the fiscal year ended November 30, 1995, the Company paid
fees (net of waivers) for administration services aggregating $9,476 with
respect to the Fund. For the same fiscal year, PFPC and PDI voluntarily waived
administration fees aggregating $9,766 with respect to the Fund. For the fiscal
year ended, November 30, 1994, the Fund paid administration fees aggregating
$27,271. For the same year, the administrator waived fees totalling $12,584.
PFPC, a wholly owned, indirect subsidiary of PNC Bank Corp.,
provides administrative services to certain investment companies which are
distributed by PDI. PFPC and PDI also serve as the administrators of the
Company's MuniFund and MuniCash portfolios.
DISTRIBUTOR
PDI acts as the distributor of the Fund's shares. The Fund's
shares are sold on a continuous basis by PDI, the distributor, as agent,
although it is not obliged to sell any particular amount of shares. The
distributor pays the cost of printing and distributing prospectuses to persons
who are not shareholders of the Fund (excluding preparation and printing
expenses necessary for the continued registration of Fund shares). The
distributor shall prepare or review, provide advice with respect to, and file
with the federal and state agencies or other organization as required by
federal, state, or other applicable laws and regulations, all sales literature
(advertisements, brochures and shareholder communications) for the Fund and any
class or subclass thereof. No compensation is payable by the Fund to the
distributor for its distribution services. PDI also serves as the distributor
for the Company's MuniFund and MuniCash portfolios. PDI is a Delaware
corporation, with its principal place of business located at Four Falls
Corporpate Center, 6th Floor, West Conshohocken, Pennsylvania 19428.
CUSTODIAN AND TRANSFER AGENT
Pursuant to a Custodian Agreement, PNC Bank serves as the
Fund's custodian. Under the Agreement, PNC Bank has agreed to provide the
following services: (i) maintain a separate account or accounts in the name of
the Fund; (ii) hold and
-20-
<PAGE> 148
disburse portfolio securities on account of the Fund; (iii) collect and make
disbursements of money on behalf of the Fund; (iv) collect and receive all
income and other payments and distributions on account of the Fund's portfolio
securities; and, (v) make periodic reports to the Board of Trustees concerning
the Fund's operations. PNC Bank also serves as custodian for the Company's
MuniFund and MuniCash portfolios.
PFPC also serves as transfer agent, registrar, and dividend
disbursing agent to the Fund pursuant to a Transfer Agency Agreement. Under the
Agreement, PFPC has agreed to provide the following services: (i) maintain a
separate account or accounts in the name of the Fund; (ii) issue, transfer, and
redeem Fund shares; (iii) transmit all communications by the Fund to its
shareholders of record, including reports to shareholders, dividend and
distribution notices, and proxy material for its meetings of shareholders; (iv)
respond to correspondence by shareholders, security brokers, and others relating
to its duties; (v) maintain shareholder accounts and sub-accounts; (vi) provide
installation and other services in connection with the Fund's computer access
program maintained to facilitate shareholder access to the Fund; (vii) send each
shareholder of record a monthly statement showing the total number of shares
owned as of the last business day of the month (as well as the dividends paid
during the current month and year); and, (viii) provide each shareholder of
record with a daily transaction report for each day on which a transaction
occurs in the shareholder's Master Account with the Fund. Further, an
institution establishing sub-accounts with PFPC is provided with a daily
transaction report for each day on which a transaction occurs in a sub-account
and, as of the last calendar day of each month, a report which sets forth the
share balances for the sub- accounts at the beginning and end of the month and
income paid or reinvested during the month. Finally, PFPC provides each
shareholder of record with copies of all information which is required to be
filed with the Internal Revenue Service and other appropriate taxing
authorities. PFPC also serves as transfer agent for the Company's MuniFund and
MuniCash portfolios.
PNC Bank is also authorized to select one or more banks or
trust companies to serve as sub-custodian on behalf of the Fund, provided that
PNC Bank shall remain responsible for the performance of all of its duties under
the Custodian Agreement and shall hold the Fund harmless from the acts and
omissions of any bank or trust company serving as sub-custodian chosen by PNC
Bank.
Under the Transfer Agency Agreement, the Fund pays PNC Bank an
annual fee, calculated daily on the average daily gross assets and paid monthly,
at the rate of $.25 for each $1000 of the first $250 million, $.20 for each
$1000 on the next $250 million, $.15 for each $1000 on the next $500 million,
$.09 for each $1000 on the next $2 billion, and $.08 for each $1000 on
-21-
<PAGE> 149
amounts over $3 billion, plus $15.00 for each purchase, sale, or delivery of
fixed income securities (other than "Money Market" obligations) and $40 for each
interest collection or claim item. For transfer agency and dividend disbursing
services, the Fund pays fees to PFPC at the annual rate of $12.00 per account
and sub-account maintained by PFPC plus $1.00 for each purchase or redemption
transaction by an account (other than a purchase transaction made in connection
with the automatic reinvestment of dividends). Payments to PFPC for
sub-accounting services provided by others are limited to the amounts which PFPC
pays to others for such services. In addition, the Fund reimburses PNC Bank and
PFPC for out-of-pocket expenses related to such services. PNC Bank's principal
business address is 1600 Market Street, Philadelphia, Pennsylvania 19103.
SERVICE ORGANIZATIONS
As stated in the Fund's Prospectus, the Fund will enter into
an agreement with each Service Organization which purchases Dollar shares
requiring it to provide support services to its customers who beneficially own
Dollar shares in consideration of the Fund's payment of .25% (on an annualized
basis) of the average daily net asset value of the Dollar shares held by the
Service Organization for the benefit of customers. Such services include: (i)
aggregating and processing purchase and redemption requests from customers and
placing net purchase and redemption orders with PFPC; (ii) providing customers
with a service that invests the assets of their accounts in Dollar shares; (iii)
processing dividend payments from the Fund on behalf of customers; (iv)
providing information periodically to customers showing their positions in
Dollar shares; (v) arranging for bank wires; (vi) responding to customer
inquiries relating to the services performed by the Service Organization; (vii)
providing sub-accounting with respect to the Fund's Dollar shares beneficially
owned by customers or the information necessary for sub-accounting; (viii)
forwarding shareholder communications from the Fund (such as proxies,
shareholder reports, annual and semi-annual financial statements, and dividend,
distribution, and tax notices) to customers, if required by law; and, (ix) other
similar services if requested by the Fund. During the fiscal year ended November
30, 1996, the Company paid servicing fees of $379,951 of which the Fund paid $83
(0% was paid to an affiliate of the Company's Adviser).
The Fund's agreements with Service Organizations are governed
by a Shareholder Services Plan (the "Plan") that has been adopted by the
Company's Board of Trustees pursuant to an exemptive order granted by the SEC in
connection with the creation of the Dollar shares. Pursuant to each Plan, the
Board of Trustees reviews, at least quarterly, a written report of the amounts
expended under the Fund's agreements with Service Organizations and the purposes
for which the expenditures were
-22-
<PAGE> 150
made. In addition, the Fund's arrangements with Service Organizations must be
approved annually by a majority of the Company's trustees, including a majority
of the trustees who are not "interested persons" of the Company as defined in
the 1940 Act and have no direct or indirect financial interest in such
arrangements (the "Disinterested Trustees").
The Board of Trustees has approved the Fund's arrangements
with Service Organizations based on information provided by the Fund's service
contractors that there is a reasonable likelihood that the arrangements will
benefit the Fund and their shareholders by affording the Fund greater
flexibility in connection with the servicing of the accounts of the beneficial
owners of their shares in an efficient manner. Any material amendment to the
Fund's arrangements with Service Organizations must be approved by a majority of
the Company's Board of Trustees (including a majority of the Disinterested
Trustees). So long as the Fund's arrangements with Service Organizations are in
effect, the selection and nomination of the members of the Company's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Company will be committed to the discretion of such non-interested trustees.
EXPENSES
The Fund's expenses include taxes, interest, fees, and
salaries of the Company's trustees and officers, SEC fees, state securities
registration fees, rating agency fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to shareholders,
advisory and administration fees, charges of the custodian, transfer agent and
dividend disbursing agent, Service Organization fees, certain insurance
premiums, outside auditing and legal expenses, costs of the Fund's computer
access program, costs of shareholder reports and shareholder meetings, and any
extraordinary expenses. The Fund also pays for brokerage fees and commissions
(if any) in connection with the purchase and sale of portfolio securities.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Fund's Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Fund or its shareholders or possible legislative changes,
and the discussion here and in the Fund's Prospectus is not intended as a
substitute for careful tax planning. Investors should consult their tax advisors
with specific reference to their own tax situation.
-23-
<PAGE> 151
As stated in the Prospectus, the Fund is treated as a separate
corporate entity under the Internal Revenue Code of 1986, as amended (the
"Code") and intends to qualify as a regulated investment company under the Code.
In order to so qualify for a taxable year, the Fund must satisfy the
distribution requirement described in the Prospectus, derive at least 90% of its
gross income for the year from certain qualifying sources, comply with certain
diversification requirements and derive less than 30% of its gross income for
the year from the sale or other disposition of securities and certain other
investments held for less than three months. Interest (including original issue
discount and accrued market discount) received by the Fund at maturity or
disposition of a security held for less than three months will not be treated as
gross income derived from the sale or other disposition of such security within
the meaning of the 30% requirement. However, any other income which is
attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
As described above and in the Fund's Prospectus, the Fund is
designed to provide institutions with current tax-exempt interest income. The
Fund is not intended to constitute a balanced investment program nor is it
designed for investors seeking capital appreciation or maximum tax-exempt income
irrespective of fluctuations in principal. Shares of the Fund would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and individual
retirement accounts because such plans and accounts are generally tax-exempt
and, therefore, not only would not gain any additional benefit from the Fund's
dividends being tax-exempt but also such dividends would be taxable when
distributed to the beneficiary. In addition, the Fund may not be an appropriate
investment for entities which are "substantial users" of facilities financed by
private activity bonds or "related persons" thereof. "Substantial user" is
defined under U.S. Treasury Regulations to include a non-exempt person who
regularly uses a part of such facilities in his or her trade or business and
whose gross revenues derived with respect to the facilities financed by the
issuance of bonds are more than 5% of the total revenues derived by all users of
such facilities, or who occupies more than 5% of the usable area of such
facilities or for whom such facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons" include certain
related natural persons, affiliated corporations, a partnership and its
partners, and an S Corporation and its shareholders.
In order for the Fund to pay exempt-interest dividends for any
taxable year, at the close of each quarter of its taxable year at least 50% of
the aggregate value of the Fund's assets must consist of exempt-interest
obligations. After the close of
-24-
<PAGE> 152
its taxable year, the Fund will notify its shareholders of the portion of the
dividends paid by the Fund which constitutes an exempt-interest dividend with
respect to such taxable year. However, the aggregate amount of dividends so
designated by the Fund cannot exceed the excess of the amount of interest exempt
from tax under Section 103 of the Code received by the Fund for the taxable year
over any amounts disallowed as deductions under Sections 265 and 171(a)(2) of
the Code. The percentage of total dividends paid by the Fund with respect to any
taxable year which qualifies as federal tax-exempt-interest dividends will be
the same for all shareholders of the Fund receiving dividends for such year.
Interest on indebtedness incurred by a shareholder to purchase
or carry the Fund's shares generally is not deductible for federal income tax
purposes if the Fund distributes exempt-interest dividends during the
shareholder's taxable year.
Any net realized long-term capital gains will be distributed
at least annually. The Fund will generally have no tax liability with respect to
such gains, and the distributions will be taxable to the Fund's shareholders as
long-term capital gains, regardless of how long a shareholder has held the
Fund's shares. Such distributions will be designated as a capital gain dividend
in a written notice mailed by the Fund to shareholders not later than 60 days
after the close of the Fund's taxable year.
While the Fund does not expect to earn any investment company
taxable income, any taxable income earned by the Fund will be distributed to its
shareholders. In general, the Fund's investment company taxable income will be
its taxable income (for example, any short-term capital gains) subject to
certain adjustments and excluding the excess of any net long-term capital gain
for the taxable year over the net short-term capital loss, if any, for such
year. The Fund will be taxed on any of its undistributed investment company
taxable income. To the extent such income is distributed by the Fund (whether in
cash or additional shares), it will be taxable to the Fund's shareholders as
ordinary income.
A 4% nondeductible excise tax is imposed on regulated
investment companies that fail currently to distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). The Fund intends to make
sufficient distributions or deemed distributions of any ordinary taxable income
and any capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
If for any taxable year the Fund does not qualify for
tax treatment as a regulated investment company, all of the
-25-
<PAGE> 153
Fund's taxable income will be subject to tax at regular corporate rates without
any deduction for distributions to Fund shareholders. In such event, dividend
distributions to shareholders would be taxable to shareholders to the extent of
the Fund's earnings and profits and would be eligible for the dividends received
deduction allowed to corporations.
The Fund will be required in certain cases to withhold and
remit to the U.S. Treasury 31% of taxable dividends or gross proceeds realized
upon sale paid to shareholders which have failed to provide a correct tax
identification number in the manner required, which is subject to withholding by
the Internal Revenue Service for failure properly to include on their return
payments of taxable interest or dividends, or which has failed to certify to the
Fund that it is not subject to backup withholding when required to do so or that
it is an "exempt recipient."
Although the Fund expects to qualify as a "regulated
investment company" and to be relieved of all or substantially all federal
income taxes, depending upon the extent of its activities in states and
localities in which offices are maintained, in which agents or independent
contractors are located or in which they are otherwise deemed to be conducting
business, the Fund may be subject to the tax laws of such states or localities.
The foregoing discussion is based on federal tax laws and
regulations which are in effect on the date of this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.
DIVIDENDS
GENERAL
The Fund's net investment income for dividend purposes
consists of (i) interest accrued and discount earned on the Fund's assets, (ii)
less amortization of market premium on such assets, accrued expenses directly
attributable to the Fund, and the general expenses (e.g. legal, accounting and
trustees' fees) of the Company prorated to the Fund on the basis of its relative
net assets. The amortization of market discount on the Fund's assets is not
included in the calculation of net income. Realized and unrealized gains and
losses on portfolio securities are reflected in net asset value. In addition,
the Fund's Dollar shares bear exclusively the expense of fees paid to Service
Organizations. (See "Management of the Fund--Service Organizations.")
-26-
<PAGE> 154
ADDITIONAL INFORMATION ON PERFORMANCE CALCULATIONS
From time to time, the yields and total return of the Fund may
be quoted in advertisements, shareholder reports, or other communications to
shareholders. Yields and total returns are calculated separately for
Intermediate Municipal Fund and Intermediate Municipal Fund Dollar shares.
YIELD CALCULATIONS. The yield for a series of shares in the
Fund is calculated by dividing the net investment income per share (as described
below) earned by the Fund during a 30-day (or one-month) period by the net asset
value per share on the last day of the period and annualizing the result on a
semi-annual basis by adding one to the quotient, raising the sum to the power of
six, subtracting one from the result, and then doubling the difference. The
Fund's net investment income per share earned during the period is based on the
average daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:
a-b
Yield = 2 [(----- + 1)6 - 1]
cd
Where: a = dividends and interest earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends.
d = net asset value per share on the last
day of the period.
Except as noted below, for the purpose of determining net
investment income earned during the period (variable "a" in the formula),
interest earned on debt obligations held by the Fund is calculated by computing
the yield to maturity of each obligation held by the Fund based on the market
value of the obligation (including actual accrued interest) at the close of
business on the last business day of each month, or, with respect to obligations
purchased during the month, the purchase price (plus actual accrued interest)
and dividing the result by 360 and multiplying the quotient by the market value
of the obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent
-27-
<PAGE> 155
month that the obligation is held by the Fund. For purposes of this calculation,
it is assumed that each month contains 30 days. The maturity of an obligation
with a call provision is the next call date on which the obligation reasonably
may be expected to be called or, if none, the maturity date.
Interest earned on tax-exempt obligations that are issued
without original issue discount and have a current market discount is calculated
by using the coupon rate of interest instead of the yield to maturity. In the
case of tax-exempt obligations that are issued with original issue discount but
which have discounts based on current market value that exceed the
then-remaining portion of the original issue discount (market discount), the
yield to maturity is the imputed rate based on the original issue discount
calculation. On the other hand, in the case of tax-exempt obligations that are
issued with original issue discount but which have discounts based on current
market value that are less than the then-remaining portion of the original issue
discount (market premium), the yield to maturity is based on the market value.
Undeclared earned income will be subtracted from the net asset
value per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the base period, has not been
declared as a dividend, but is reasonably expected to be and is declared as a
dividend shortly thereafter.
Based on the foregoing calculations, the yield for the month
of November 1996 was 4.17% for the Fund's shares and 3.92% for the Fund's Dollar
Shares and the "tax-equivalent" yield was 5.79% for the Fund's shares and 5.44%
for the Fund's Dollar Shares. The "tax-equivalent" yield is computed by: (a)
dividing the portion of the yield (calculated as above) that is exempt from
Federal income tax by one minus a stated Federal income tax rate; and adding
that figure to that portion, if any, of the yield that is not exempt from
Federal income tax. During the periods cited above, all of the Fund's yield was
exempt from Federal income tax, and the Federal income tax rate used in
calculating the "tax-equivalent" yield was 28%.
TOTAL RETURN CALCULATIONS. The average annual total return for
the Fund's series of shares is calculated by determining the average annual
compounded rates of return during specified periods that equate the initial
amount invested to the ending redeemable value of such investment. This is done
by dividing the ending redeemable value of a hypothetical $1,000 initial payment
by $1,000 and raising the quotient to a power
-28-
<PAGE> 156
equal to one divided by the number of years (or fractional portion thereof)
covered by the computation and subtracting one from the result. This calculation
can be expressed as follows:
ERV
T = [(-----)1/n - 1]
P
Where: T = average annual total return.
ERV = ending redeemable value at the end
of the period covered by the
computation of a hypothetical $1,000
payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation,
expressed in terms of years.
The aggregate total returns are computed by determining the
aggregate compounded rates of return during specified periods that likewise
equate the initial amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return is as follows:
ERV
Aggregate Total Return = [(-----) - 1]
P
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period. The ending redeemable
value (variable "ERV" in each formula) is determined by assuming complete
redemption of the hypothetical investment and deduction of all nonrecurring
charges at the end of the period covered by the computations.
YIELDS AND PERFORMANCE RESULTS WILL FLUCTUATE, AND ANY
QUOTATION OF YIELD OR PERFORMANCE DATA SHOULD NOT BE CONSIDERED REPRESENTATIVE
OF THE FUTURE PERFORMANCE OF THE FUND. Since yields and performance data will
fluctuate, such data for the Fund cannot necessarily be used to compare an
investment in the Fund's shares with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
and performance data are generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses net of
fee waivers and expense reimbursements, if any, and market conditions. Any fees
charged by banks with respect to customer
-29-
<PAGE> 157
accounts in investing in shares of the Fund will not be included in yield
calculations, such fees, if charged, would reduce the actual yield from that
quoted.
Based on the foregoing calculations, the average annual total
returns for the Fund's shares for the one-year period ended November 30, 1996,
for the five-year period ended November 30, 1996, and for the period December 2,
1982 to November 30, 1996 were 4.37%, 5.97% and 6.42%, respectively. The
aggregate total returns for the Fund's shares for the same three periods were
4.37%, 33.65% and 139.17%, respectively. For the Fund's Dollar Shares the
average annual total return for the one year period ended November 30, 1996, for
the five-year period ended November 30, 1996 and for the period March 6, 1986
to November 30, 1995 were 4.12%, 5.72% and 6.17%, respectively. No Intermediate
Municipal Dollar shares were outstanding for the period from April 11, 1989 to
August 1, 1990 and the period from January 7, 1991 to July 9, 1991.
The Funds may also from time to time include in advertisements, sales
literature, communications to shareholders and other materials ("Materials"),
discussions or illustrations of the effects of compounding. "Compounding" refers
to the fact that, if dividends or other distributions on an investment are
reinvested by being paid in additional Portfolio shares, any future income or
capital appreciation of a Fund would increase the value, not only of the
original investment, but also of the additional shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the Funds may also include in Materials discussions and/or
illustrations of the potential investment goals of a prospective investor
(including materials that describe general principles of investing,
questionnaires designed to help create a personal financial profile, worksheets
used to project savings needs based on certain assumptions and action plans
offering investment alternatives), investment management strategies, techniques,
policies or investment suitability of a Fund, economic conditions, the
relationship between sectors of the economy and the economy as a whole, various
securities markets, the effects of inflation and historical performance of
various asset classes, including but not limited to, stocks, bonds and Treasury
securities, and hypothetical investment returns based on certain assumptions.
From time to time, Materials may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund), as well as the views of the advisers as to current market, economic,
trade and interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters believed to be of
relevance to a Fund. In addition, selected indices may be used to illustrate
historical performance
-30-
<PAGE> 158
of select asset classes. The Funds may also include in Materials charts, graphs
or drawings which compare the investment objective, return potential, relative
stability and/or growth possibilities of the Funds and/or other mutual funds, or
illustrate the potential risks and rewards of investment in various investment
vehicles, including but not limited to, stocks, bonds, Treasury securities and
shares of a Fund and/or other mutual funds. Materials may include a discussion
of certain attributes or benefits to be derived by an investment in a Fund
and/or other mutual funds (such as value investing, market timing, dollar cost
averaging, asset allocation, constant ratio transfer, automatic accounting
rebalancing and the advantages and disadvantages of investing in tax-deferred
and taxable investments), shareholder profiles and hypothetical investor
scenarios, timely information on financial management, designations assigned a
Fund by various rating or ranking organizations, Fund identifiers (such as CUSIP
numbers or NASDAQ symbols), tax and retirement planning and investment
alternatives to certificates of deposit and other financial instruments. Such
Materials may include symbols, headlines or other material which highlight or
summarize the information discussed in more detail therein.
Materials may include lists of representative clients of the
Funds' investment adviser, may include discussions of other products or
services, may contain information regarding average weighted maturity or other
maturity characteristics, and may contain information regarding the background,
expertise, etc. of the investment adviser or of a Fund's portfolio manager.
From time to time in advertisements, sales literature and
communications to shareholders, the Funds may compare their total returns to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, such
data is found in IBC/Donoghue's Money Fund Report and reports prepared by Lipper
Analytical Services, Inc. Total return is the change in value of an investment
in a Fund over a particular period, assuming that all distributions have been
reinvested. Such rankings represent the Funds' past performance and should not
be considered as representative of future results.
The following information has been provided by the Funds'
distributor:
In managing each Fund's portfolio, the investment adviser
utilizes a "pure and simple" approach, which may include
disciplined research, stringent credit standards and careful
management of maturities.
-31-
<PAGE> 159
ADDITIONAL DESCRIPTION CONCERNING SHARES
The Company does not presently intend to hold annual meetings
of shareholders except as required by the 1940 Act or other applicable law. Upon
the written request of shareholders owning at least twenty percent of the
Company's shares, the Company will call for a meeting of shareholders to
consider the removal of one or more trustees and other certain matters. To the
extent required by law, the Company will assist in shareholder communication in
such matters.
As stated in the Fund's Prospectus, holders of shares in the
Fund will vote in the aggregate and not by class or series on all matters,
except where otherwise required by law and except that only the Fund's Dollar
shares will be entitled to vote on matters submitted to a vote of shareholders
pertaining to the Fund's arrangements with Service Organizations. (See
"Management of the Fund -- Service Organizations.") Further, shareholders of all
of the Company's portfolios will vote in the aggregate and not by portfolio
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted by the provisions of such Act or applicable
state law, or otherwise, to the holders of the outstanding securities of an
investment company such as the Company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by the matter. Rule 18f-2 further
provides that a portfolio shall be deemed to be affected by a matter unless it
is clear that the interests of each portfolio in the matter are identical or
that the matter does not affect any interest of the portfolio. Under the Rule
the approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a portfolio
only if approved by the holders of a majority of the outstanding voting
securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent certified public accountants, the
approval of principal underwriting contracts and the election of trustees are
not subject to the separate voting requirements and may be effectively acted
upon by shareholders of the investment company voting without regard to
portfolio.
COUNSEL
Drinker Biddle & Reath, Philadelphia National Bank Building,
1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, of which Morgan R.
Jones, Secretary of the Company, is a partner, serves as counsel to the Company
and will pass upon the legality of the shares offered hereby.
-32-
<PAGE> 160
AUDITORS
The audited Financial Statements and the financial highlights
of the Company, which are incorporated by reference into this Statement of
Additional Information, have been audited by KPMG Peat Marwick LLP. KPMG Peat
Marwick LLP has offices at 1600 Market Street, Philadelphia, Pennsylvania 19103.
MISCELLANEOUS
SHAREHOLDER VOTE
As used in this Statement of Additional Information and the
Fund's Prospectus, a "majority of the outstanding shares" of the Fund or of any
other portfolio means with respect to the approval of an investment advisory
agreement, a distribution plan or a change in a fundamental investment policy,
the vote of the lesser of (1) 67% of the Fund's shares (irrespective of Class or
series) or of the portfolio represented at a meeting at which the holders of
more than 50% of the outstanding shares of the Fund or such portfolio are
present in person or by proxy, or (2) more than 50% of the outstanding shares of
the Fund (irrespective of Class or series) or of the portfolio.
CERTAIN RECORD HOLDERS
On March 5, 1997, the name, address, and percentage of
ownership of each institutional investor that owned of record 5% or more of the
outstanding shares of the Fund were as follows:
<TABLE>
<CAPTION>
Client Percentage
<S> <C>
Barnett Bank Trust Company NA 20.72%
P.O. Box 40200
Jacksonville, FL 32231
American National Bank 18.49%
OPUS & CO.
Dept. 77-3272
Chicago, IL 60678
Wells Fargo Bank, NA 6.74%
VIRG & CO.
P.O. Box 9800 MAC 9139-027
Calabasas, CA 91302
First Of America Trust Co. 41.48%
P.O. Box 4042
Kalamazoo, MI 49007
</TABLE>
-33-
<PAGE> 161
SHAREHOLDER AND TRUSTEE LIABILITY
The Company is organized as a trust under the laws of the
Commonwealth of Pennsylvania. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Declaration of Trust of the Company provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Company and that every note, bond, contract, order, or other
undertaking made by the Company shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of any shareholder held
personally liable solely by reason of being or having been a shareholder and not
because of any acts or omissions or some other reason. The Declaration of Trust
also provides that the Company shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Company and
satisfy any judgment thereon. Thus, the risk of a shareholder's incurring
financial loss beyond the amount invested on account of shareholder liability is
limited to circumstances in which the Company itself would be unable to meet its
obligations.
The Company's Declaration of Trust provides further that no
trustee of the Company shall be personally liable for or on account of any
contract, debt, tort, claim, damage, judgment, or decree arising out of or
connected with the administration or preservation of the trust estate or the
conduct of any business of the Company, nor shall any trustee be personally
liable to any person for any action or failure to act except by reason of bad
faith, willful misfeasance, gross negligence in performing duties, or by reason
of reckless disregard of the obligations and duties as trustee. It also provides
that all persons having any claim against the trustees or the Company shall look
solely to the trust property for payment. With the exceptions stated, the
Declaration of Trust provides that a trustee is entitled to be indemnified
against all liabilities and expenses reasonably incurred in connection with the
defense or disposition of any proceeding in which the trustee may be involved or
may be threatened with by reason of being or having been a trustee, and that the
trustees have the power, but not the duty, to indemnify officers and employees
of the Company unless such persons would not be entitled to indemnification if
they were in the position of trustee.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders for the fiscal
year ended November 30, 1996 has been filed with the Securities and Exchange
Commission. The financial statements included in
-34-
<PAGE> 162
the Annual Report for the fiscal year ended November 30, 1996 (the "Financial
Statements") have been audited by the Company's independent accountants, KPMG
Peat Marwick LLP, whose report thereon also appears in such Annual Report and is
incorporated herein by reference. The Financial Statements in the Annual Report
and the Financial Highlights have been incorporated in each Prospectus herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
-35-
<PAGE> 163
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. The following summarizes the rating categories used by
Standard and Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1."
"A-3" - Issue has an adequate capacity for timely payment. It
is, however, somewhat more vulnerable to the adverse effects of changes in
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial charges and high internal cash
generation; and well established access to a range of financial markets and
assured sources of alternate liquidity.
A-1
<PAGE> 164
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other
protection factors qualify issue as investment grade. Risk
A-2
<PAGE> 165
factors are larger and subject to more variation. Nevertheless, timely payment
is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years.
The following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of
an untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one
A-3
<PAGE> 166
year or less which are issued by United States commercial banks, thrifts and
non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of likelihood that
principal and interest will be paid on a timely basis.
"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher ratings,
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations which posses a particularly strong credit
feature are supported by the highest capacity for timely repayment.
"A1" - Obligations are supported by the highest
capacity for timely repayment.
"A2" - Obligations are supported by a satisfactory
capacity for timely repayment.
"A3" - Obligations are supported by a satisfactory
capacity for timely repayment.
"B" - Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
"C" - Obligations for which there is a high risk of default or
which are currently in default.
A-4
<PAGE> 167
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's
for corporate and municipal debt:
"AAA" - This designation represents the highest rating
assigned by Standard & Poor's to a debt obligation and indicates an extremely
strong capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues only in small
degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
A-5
<PAGE> 168
"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high volatility
or high variability in expected returns due to non-credit risks. Examples of
such obligations are: securities whose principal or interest return is indexed
to equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities. The absence of an "r" symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
A-6
<PAGE> 169
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in
default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
(P)... - When applied to forward delivery bonds, indicates
that the rating is provisional pending delivery of the bonds. The rating may be
revised prior to delivery if changes occur in the legal documents or the
underlying credit quality of the bonds.
A-7
<PAGE> 170
Note: Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated by
the symbols, Aa1, A1, Ba1 and B1.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when due.
Debt rated "B" possesses the risk that obligations will not be met when due.
Debt rated "CCC" is well below investment grade and has considerable uncertainty
as to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by
Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA"
A-8
<PAGE> 171
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "BBB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standing within these major
rating categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very significantly.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
A-9
<PAGE> 172
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment risk than
for obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of
A-10
<PAGE> 173
principal and interest. "BB" indicates the lowest degree of speculation and "CC"
the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's Ratings Group for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those issues determined
to possess overwhelming safety characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade ("MIG") and variable
rate demand obligations are designated Variable Moody's Investment Grade
("VMIG"). Such ratings recognize the differences between short-term credit risk
and long-term risk. The following summarizes the ratings by Moody's Investors
Service, Inc. for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the
best quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high
quality, with margins of protection ample although not so large as in the
preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Liquidity and cash flow protection
may be narrow and market access for refinancing is likely to be less well
established.
A-11
<PAGE> 174
"MIG-4"/"VMIG-4" - Loans bearing this designation are of
adequate quality, carrying specific risk but having protection commonly regarded
as required of an investment security and not distinctly or predominantly
speculative.
"SG" - Loans bearing this designation are of speculative
quality and lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-12
<PAGE> 175
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Part A hereof:
Financial Highlights for:
- MuniFund Shares
- MuniFund Dollar Shares
- MuniCash Shares
- MuniCash Dollar Shares
- Intermediate Municipal Fund Shares
- Intermediate Municipal Fund Dollar Shares
(2) Incorporated by reference in Part B hereof:
- The audited financial statements and related
notes thereto as well as the auditor's report
thereon for each of the MuniFund Portfolio,
MuniCash Portfolio and Intermediate Municipal
Fund Portfolio for the fiscal year ended
November 30, 1996 are incorporated herein by
reference to the Annual Report to Shareholders
as filed with Securities and Exchange Commis-
sion on January 28, 1997 pursuant to Rule 30b2-
1 of the Investment Company Act of 1940 (the
"1940 Act").
(b) Exhibits:
(1) Declaration of Trust dated March 30, 1981 is
incorporated herein by reference to Exhibit (1) of
Post-Effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A, filed on
April 16, 1981.
(2) Amended and Restated Code of Regulations dated as of
August 13, 1993 is incorporated herein by reference
to Exhibit (2) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A,
filed on March 23, 1994.
(3) None.
(4)(a) Specimen copy of share certificate for MuniFund units
of beneficial interest in MuniFund is incorporated
herein by reference to Exhibit (4)
<PAGE> 176
of Post-Effective Amendment No. 6 to Registrant's
Registration Statement on Form N-1A, filed on January 27,
1983.
(b) Specimen copy of share certificate for MuniCash units of
beneficial interest in MuniCash is incorporated herein by
reference to Exhibit (4)(c) of Post-Effective Amendment No.
4 to Registrant's Registration Statement on Form N-1A,
filed on January 31, 1986.
(c) Specimen copy of share certificate for Dollar units of
beneficial interest in MuniFund is incorporated herein by
reference to Exhibit (4)(d) of Post-Effective Amendment No.
9 to Registrant's Registration Statement on Form N-1A,
filed on January 31, 1986.
(d) Specimen copy of share certificate for Dollar units of
beneficial interest in MuniCash is incorporated herein by
reference to Exhibit (4)(f) of Post-Effective Amendment No.
4 to Registrant's Registration Statement on Form N-1A,
filed on January 31, 1986.
(e) Specimen copy of share certificate for Intermediate
Municipal units of beneficial interest in Intermediate
Municipal Fund is incorporated herein by reference to
Exhibit (4)(g) of Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A, filed on
February 22, 1989.
(f) Specimen copy of share certificate for Dollar units of
beneficial interest in Intermediate Municipal Fund is
incorporated herein by reference to Exhibit (4)(h) of
Post-Effective Amendment No. 12 to Registrant's
Registration Statement on Form N-1A, filed on February 22,
1989.
(5)(a) Investment Advisory Agreement between Registrant and
Provident Institutional Management Corporation dated March
11, 1987 relating to Registrant's MuniFund, Intermediate
Municipal Fund and MuniCash portfolios is incorporated
herein by reference to Exhibit (5)(a) of Post-Effective
Amendment No. 11 to Registrant's Registration Statement on
Form N-1A, filed on March 30, 1988.
-2-
<PAGE> 177
(b) Sub-Advisory Agreement between PNC Institutional
Management Corporation and PNC Bank, N.A. dated March 11,
1987 relating to Registrant's MuniFund, MuniCash and
Intermediate Municipal Fund portfolios is incorporated
herein by reference to Exhibit (5)(c) of Post-Effective
Amendment No. 11 to Registrant's Registration Statement on
Form N-1A, filed on March 30, 1988.
(6) Distribution Agreement between Registrant and Provident
Distributors, Inc. dated as of January 31, 1994 relating to
Registrant's MuniFund, MuniCash and Intermediate Municipal
Fund portfolios is incorporated herein by reference to Exhibit
(6) of Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A, filed on March 23, 1994.
(7) Municipal Fund for Temporary Investment Fund Office Retirement
Profit-Sharing Plan and Trust Agreement as approved Fall of
1990 is incorporated herein by reference to Exhibit (7) of
Post-Effective Amendment No. 49 to Temporary Investment Fund,
Inc.'s Registration Statement on Form N-1A, filed on December
12, 1990.
(8)(a) Custodian Agreement between Registrant and PNC Bank,
National Association dated June 1, 1989 is incorporated
herein by reference to Exhibit (8)(a) of Post-Effective
Amendment No. 14 to Registrant's Registration Statement on
Form N-1A, filed on February 27, 1990.
(b) Custodian Fee Agreement between Registrant and PNC Bank,
National Association dated June 1, 1989 is incorporated
herein by reference to Exhibit (8)(b) of Post-Effective
Amendment No. 14 to Registrant's Registration Statement on
Form N-1A, filed on February 27, 1990.
(9)(a) Administration Agreement dated as of January 18, 1993
between Registrant and Provident Distributors, Inc. and
PFPC Inc. is incorporated herein by reference to Exhibit
9(b) of Post-Effective Amendment No. 18 to Registrant's
Registration Statement on Form N-1A, filed on January 15,
1993.
(b) Transfer Agency Agreement between Registrant and PFPC Inc.
dated June 1, 1989 is incorporated herein by reference to
Exhibit (9)(d) of
-3-
<PAGE> 178
Post-Effective Amendment No. 14 to Registrant's
Registration Statement on Form N-1A, filed on
February 27, 1990.
(c) Transfer Agency Fee Agreement between Registrant and PFPC
Inc. dated June 1, 1989 is incorporated herein by reference
to Exhibit (9)(e) of Post-Effective Amendment No. 14 to
Registrant's Registration Statement on Form N-1A, filed on
February 27, 1990.
(d) Sub-Transfer Agency Agreement between PNC Bank, National
Association and The Northern Trust Company dated November
18, 1987 is incorporated herein by reference to Exhibit
(8)(g) of Post-Effective Amendment No. 11 to Registrant's
Registration Statement on Form N-1A, filed on March 30,
1988.
(10) Opinion and Consent of Counsel.
(11) Consent of KPMG Peat Marwick LLP.
(12) None.
(13) None.
(14) None.
(15) None.
(16) Schedules of Performance Computations are incorporated
herein by reference to Exhibit (16) of Post-Effective
Amendment No. 15 to Registrant's Registration Statement
(No. 2-64358) relating to its MuniFund portfolio, Exhibit
(16) of Post-Effective Amendment No. 9 to Registrant's
Registration Statement (No. 2-87284) relating to its
MuniCash portfolio and Exhibit (16) of Post-Effective
Amendment No. 11 to Registrant's Registration Statement
(No. 2-77274) relating to its Intermediate Municipal Fund
portfolio, all filed on March 7, 1991.
(17) Financial Data Schedules for the fiscal year ended
November 30, 1996.
(18) None.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
-4-
<PAGE> 179
Registrant is controlled by its Board of Trustees. Each of Registrant's
trustees serves on the board of directors/trustees of certain other registered
investment companies. (See "Management of the Fund -- Trustees and Officers" in
Part B hereof.)
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following information is as of March 5, 1997:
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
- -------------- --------------
<S> <C>
MuniFund Shares................................................................. 122
MuniFund Dollar Shares.......................................................... 25
MuniCash Shares................................................................. 71
MuniCash Dollar Shares.......................................................... 9
Intermediate Municipal Fund Shares.............................................. 11
Intermediate Municipal Fund
Dollar Shares.................................................................. 1
</TABLE>
ITEM 27. INDEMNIFICATION
Indemnification of Registrant's Principal Underwriter, Custodian and
Transfer Agent against certain stated liabilities is provided for in Section 6
of the Distribution Agreement, incorporated herein by reference as Exhibit (6),
and in Section 22 of the Custodian Agreement and in Section 17 of the Transfer
Agency Agreement, incorporated herein by reference as Exhibits (8)(a) and
(9)(d), respectively. Registrant has obtained from a major insurance carrier a
directors' and officers' liability policy covering certain types of errors and
omissions. In addition, Section 2 of Article X of Registrant's Declaration of
Trust dated March 30, 1981, incorporated herein by reference as Exhibit (1),
provides as follows:
10.2 Indemnification of Trustees, Representatives and Employees.
The Trust shall indemnify each of its Trustees against all
liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and
penalties, and as counsel fees) reasonably incurred by him
in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, in
which he may be involved or with which he may be threatened,
while as a Trustee or thereafter, by reason of his being or
having been such a Trustee except with respect to any matter
as to which he shall have been adjudicated to have acted in
bad faith, willful misfeasance, gross negligence or
-5-
<PAGE> 180
reckless disregard of his duties; provided, however, that as
to any matter disposed of by a compromise payment by such
person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have
received a written opinion from independent legal counsel
approved by the Trustees to the effect that if either the
matter of willful misfeasance, gross negligence or reckless
disregard of duty, or the matter of bad faith had been
adjudicated, it would in his opinion have been adjudicated
in favor of such person. The rights accruing to any person
under these provisions shall not exclude any other right to
which he may be lawfully entitled; provided that no person
may satisfy any right of indemnity or reimbursement except
out of the property of the Trust. The Trustees may make
advance payments in connection with the indemnification
under this Section 10.2, provided that the indemnified
person shall have given a written undertaking to reimburse
the Trust in the event it is subsequently determined that he
is not entitled to such indemnification.
The Trustees shall have the power, but not the duty, in their sole
discretion, to indemnify representatives and employees of the Trust to the same
extent that Trustees are entitled to indemnification hereunder.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
PIMC performs investment advisory services for Registrant and certain
other investment companies.
-6-
<PAGE> 181
(a) To Registrant's knowledge, none of the directors or officers of
PIMC or PNC Bank, except those set forth below, is, or has been at any time
during Registrant's past two fiscal years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
directors and officers and certain executives of PIMC and PNC Bank also hold
various positions with, and engage in business for, PNC Bank Corp, which owns
all the outstanding stock of PIMC and PNC Bank, or other subsidiaries of PNC
Bank Corp. Set forth below are the names and principal businesses of the
directors and certain executives of PIMC and PNC Bank who are engaged in any
other business, profession, vocation or employment of a substantial nature.
(b) The information required by this Item 28 with respect to each
director, officer and partner of PIMC is incorporated by reference to Schedules
A and D of Form ADV and Schedules A and D filed by PIMC with the Securities and
Exchange Commission pursuant to the Investment Advisers Act of 1940 (SEC File
No. 801-13304).
(c) Set forth below are the names and principal businesses of the
directors and certain executives of PNC Bank who are engaged in any other
business, profession, vocation or employment of a substantial nature.
PNC BANK, NATIONAL ASSOCIATION
DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH TYPE
PNC BANK NAME OTHER BUSINESS CONNECTIONS OF BUSINESS
- -------- ---- -------------------------- -----------
<S> <C> <C> <C>
Director B.R. Brown Chairman and C.E.O. Coal
Consol Inc.
Consol Plaza
Pittsburgh, PA 15241
Director Constance E. Clayton Associate Dean, School of Medical
Health & Professor of Pediatrics
Medical College of PA,
Hahnemann University
430 E. Sedgwick Street
Philadelphia, PA 19119
Director Eberhard Faber, IV Chairman and C.E.O. Manufacturing
E.F.L., Inc.
</TABLE>
-7-
<PAGE> 182
<TABLE>
<CAPTION>
POSITION WITH TYPE
PNC BANK NAME OTHER BUSINESS CONNECTIONS OF BUSINESS
- -------- ---- -------------------------- -----------
<S> <C> <C> <C>
450 Hedge Road
P.O. Box 49
Bearcreek, PA 18602
Director Dr. Stuart Heydt President and C.E.O. Medical
Geisinger Foundation
100 N. Academy Avenue
Danville, PA 17822
Director Edward P. Junker, III Vice Chairman Banking
PNC Bank, N.A.
Ninth and State Streets
Erie, PA 16553
Director Thomas A. McConomy President, C.E.O. and Manufacturing
Chairman, Calgon Carbon
Corporation
413 Woodland Road
Sewickley, PA 15143
Director Thomas H. O'Brien Chairman Banking
PNC Bank, National Association
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Dr. J. Dennis O'Connor Provost, The Smithsonian Education
Institution
1000 Jefferson Drive, S.W.
Room 230, MRC 009
Washington, D.C. 20560
Director Rocco A. Ortenzio Chairman and C.E.O. Medical
Continental Medical Systems, Inc.
P.O. Box 715
Mechanicsburg, PA 17055
Director Jane G. Pepper President Horticulture
Pennsylvania Horticulture Society
325 Walnut Street
Philadelphia, PA 19106
Director Robert C. Robb, Jr. President, Lewis, Eckert, Robb Financial and
& Company Management
425 One Plymouth Meeting Consultants
Plymouth Meeting, PA 19462
Director James E. Rohr President and C.E.O. Bank Holding
PNC Bank, National Association Company
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Daniel M. Rooney President, Pittsburgh Steelers Football
Football Club of the National
Football League
300 Stadium Circle
</TABLE>
-8-
<PAGE> 183
<TABLE>
<CAPTION>
POSITION WITH TYPE
PNC BANK NAME OTHER BUSINESS CONNECTIONS OF BUSINESS
- -------- ---- -------------------------- -----------
<S> <C> <C> <C>
Pittsburgh, PA 15212
Director Seth E. Schofield Chairman and C.E.O. Airline
USAir, Inc.
2345 Crystal Drive
Arlington, VA 22227
</TABLE>
-9-
<PAGE> 184
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
<TABLE>
<CAPTION>
Name Position with PNC Bank
---- ----------------------
<S> <C>
John E. Alden Senior Vice President
James C. Altman Senior Vice President
Lila M. Bachelier Senior Vice President
R. Perrin Baker Chief Market Counsel, Northwest PA
James R. Bartholomew Senior Vice President
Peter R. Begg Senior Vice President
Donald G. Berdine Senior Vice President
Ben Berzin, Jr. Senior Vice President
James H. Best Senior Vice President
Eva T. Blum Senior Vice President
Susan B. Bohn Senior Vice President
George Brikis Executive Vice President
Michael Brundage Senior Vice President
Anthony J. Cacciatore Senior Vice President
Richard C. Caldwell Executive Vice President
John F. Calligan Senior Vice President
Craig T. Campbell Senior Vice President
J. Richard Carnall Executive Vice President
Edward V. Caruso Executive Vice President
Peter K. Classen President & C.E.O., PNC Bank, Northeast PA
Andra D. Cochran Senior Vice President
Sharon Coghlan Coordinating Market Chief Counsel,
Philadelphia
James P. Conley Senior Vice President
C. David Cook Senior Vice President
Alfred F. Cordasco Supervising Counsel, Pittsburgh, PA
Robert Crouse Senior Vice President
</TABLE>
-10-
<PAGE> 185
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
<TABLE>
<CAPTION>
Name Position with PNC Bank
---- ----------------------
<S> <C>
Peter M. Crowley Senior Vice President
Keith P. Crytzer Senior Vice President
John J. Daggett Senior Vice President
Anuj Dhanda Senior Vice President
Victor M. DiBattista Chief Regional Counsel
Frank H. Dilenschneider Senior Vice President
Thomas C. Dilworth Senior Vice President
Alfred J. DiMatteis Senior Vice President
James Dionise Senior Vice President and C.F.O.
Peter J. Donchak Senior Vice President
Patrick S. Doran Vice President, Head of Consumer Lending
Robert D. Edwards Senior Vice President
David J. Egan Senior Vice President
J. Lynn Evans Senior Vice President & Controller
William E. Fallon Senior Vice President
James M. Ferguson, III Senior Vice President
Charles J. Ferrero Senior Vice President
Frederick C. Frank, III Executive Vice President
William J. Friel Executive Vice President
John F. Fulgoney Coordinating Market Chief Counsel, Northeast PA
Brian K. Garlock Senior Vice President
George D. Gonczar Senior Vice President
Richard C. Grace Senior Vice President
James S. Graham Senior Vice President
Michael J. Hannon Senior Vice President
Stephen G. Hardy Senior Vice President
Michael J. Harrington Senior Vice President
</TABLE>
-11-
<PAGE> 186
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
<TABLE>
<CAPTION>
Name Position with PNC Bank
---- ----------------------
<S> <C>
Marva H. Harris Senior Vice President
Maurice H. Hartigan, II Executive Vice President
G. Thomas Hewes Senior Vice President
Sylvan M. Holzer Senior Vice President
Bruce C. Iacobucci Senior Vice President
John M. Infield Senior Vice President
Philip C. Jackson Senior Vice President
William J. Johns Controller
William R. Johnson Audit Director
Edward P. Junker, III Vice Chairman
Robert D. Kane Senior Vice President
Michael D. Kelsey Chief Compliance Counsel
Jack Kelly Senior Vice President
Geoffrey R. Kimmel Senior Vice President
Randall C. King Senior Vice President
Christopher M. Knoll Senior Vice President
Richard C. Krauss Senior Vice President
Frank R. Krepp Senior Vice President & Chief Credit Policy
Officer
Kenneth P. Leckey Senior Vice President & Cashier
Marilyn R. Levins Senior Vice President
Carl J. Lisman Executive Vice President
George Lula Senior Vice President
Jane E. Madio Senior Vice President
Nicholas M. Marsini, Jr. Senior Vice President
John A Martin Senior Vice President
</TABLE>
-12-
<PAGE> 187
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
<TABLE>
<CAPTION>
Name Position with PNC Bank
---- ----------------------
<S> <C>
David O. Matthews Senior Vice President
Walter B. McClellan Senior Vice President
James F. McGowan Senior Vice President
Charlotte B. McLaughlin Senior Vice President
James C. Mendelson Senior Vice President
James W. Meighen Senior Vice President
Scott C. Meves Senior Vice President
Ralph S. Michael, III Executive Vice President
J. William Mills Senior Vice President
Barbara A. Misner Senior Vice President
Marlene D. Mosco Senior Vice President
Scott Moss Senior Vice President
Peter F. Moylan Senior Vice President
Michael B. Nelson Executive Vice President
Thomas J. Nist Senior Vice President
Thomas H. O'Brien Chairman
James F. O'Day Senior Vice President
Cynthia G. Osofsky Senior Vice President
Thomas E. Paisley, III Senior Vice President
Barbara Z. Parker Executive Vice President
George R. Partridge Senior Vice President
Daniel J. Panlick Senior Vice President
David M. Payne Senior Vice President
Charles C. Pearson, Jr. President and CEO, PNC Bank, Central PA
Helen P. Pudlin Senior Vice President
Edward V. Randall, Jr. President and CEO, PNC Bank, Pittsburgh
Richard C. Rhoades Senior Vice President
Bryan W. Ridley Senior Vice President
</TABLE>
-13-
<PAGE> 188
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
<TABLE>
<CAPTION>
Name Position with PNC Bank
---- ----------------------
<S> <C>
Arthur F. Rodman Senior Vice President
James E. Rohr President and Chief Executive Officer
Gary Royer Senior Vice President
Robert T. Saltarelli Senior Vice President
Robert V. Sammartino Senior Vice President
William Sayre, Jr. Senior Vice President
Alfred J. Schiavetti Senior Vice President
David W. Schoffstall Executive Vice President
Seymour Schwartzberg Senior Vice President
Timothy G. Shack Senior Vice President
Douglas E. Shaffer Senior Vice President
Alfred A. Silva Senior Vice President
George R. Simon Senior Vice President
Richard L. Smoot President and CEO of PNC Bank, Philadelphia
Timothy N. Smyth Senior Vice President
Kenneth S. Spatz Senior Vice President
Darcel H. Steber Senior Vice President
William F. Strome Senior Vice President and Secretary
Robert L. Tassome Senior Vice President
Jane B. Tompkins Senior Vice President
Robert B. Trempe Senior Vice President
Kevin M. Tucker Senior Vice President
Alan P. Vail Senior Vice President
Frank T. VanGrofski Executive Vice President
Ronald H. Vicari Senior Vice President
William A. Wagner Senior Vice President
Patrick M. Wallace Senior Vice President
</TABLE>
-14-
<PAGE> 189
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
<TABLE>
<CAPTION>
Name Position with PNC Bank
---- ----------------------
<S> <C>
Annette M. Ward-Kredel Senior Vice President
Robert S. Wrath Senior Vice President
Arlene M. Yocum Senior Vice President
Carole Yon Senior Vice President
George L. Ziminski, Jr. Senior Vice President
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) Provident Distributors, Inc. currently acts as distributor for, in
addition to the Company, Temporary Investment Fund, Inc., Trust for Federal
Securities, Municipal Fund for California Investors and Municipal Fund for New
York Investors.
(b) The information required by this Item 29 with respect to each
director, officer or partner of Provident Distributors, Inc. is incorporated by
reference to Schedule A of Form BD filed by Provident Distributors, Inc. with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934 (SEC File No. 8-46564).
(c) The following represents all commissions and other compensation
received by each principal underwriter who is not an affiliated person of the
registrant:
<TABLE>
<CAPTION>
Name of Net underwriting Compensation
principal discounts and redemption and Brokerage Other
underwriter commissions repurchase commission compensation
----------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Provident
Distributors, Inc. $0 $0 $0 $0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(1) PNC Bank, National Association, 1600 Market Street,
Philadelphia, Pennsylvania 19103 (records relating to
its functions as sub-adviser).
(2) PNC Bank, National Association, 200 Stevens Drive,
Suite 440, Lester, Pennsylvania 19113 (records
relating to its functions as custodian).
(3) Provident Distributors, Inc., Four Falls Corporate
Center, 6th Floor, West Conshohocken,
-15-
<PAGE> 190
Pennsylvania 19428 (records relating to its functions
as distributor).
(4) PNC Institutional Management Corporation, 400
Bellevue Parkway, Wilmington, Delaware 19809 (records
relating to its functions as investment adviser).
(5) PFPC, Inc., 400 Bellevue Parkway, Wilmington,
Delaware 19809 (records relating to its functions as
administrator, transfer agent and dividend disbursing
agent).
(6) Drinker Biddle & Reath, Philadelphia National Bank
Building, 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107 (Registrant's Declaration of
Trust, Code of Regulations and Minute Books).
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to furnish its Annual Report to
Shareholders upon request and without charge to any person to whom a prospectus
is delivered.
-16-
<PAGE> 191
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 22 to
its Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 22 to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Wilmington, and State of Delaware, on March 27,
1997.
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
/s/ Edward J. Roach
------------------------------
Edward J. Roach
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 22 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
*G. Nicholas Beckwith, III Trustee March 27, 1997
- --------------------------
G. Nicholas Beckwith, III
* Philip E. Coldwell Trustee March 27, 1997
- --------------------------
Philip E. Coldwell
* Robert R. Fortune Trustee March 27, 1997
- --------------------------
Robert R. Fortune
*Jerrold B. Harris Trustee March 27, 1997
- --------------------------
Jerrold B. Harris
* Rodney D. Johnson Trustee March 27, 1997
- --------------------------
Rodney D. Johnson
/s/ G. Willing Pepper Chairman of March 27, 1997
- -------------------------- the Board and
G. Willing Pepper President
/s/ Edward J. Roach Vice President March 27, 1997
- -------------------------- and Treasurer
Edward J. Roach (Principal Financial
and Accounting Officer)
*By: /s/ Edward J. Roach
- --------------------------
Edward J. Roach
Attorney-in-Fact
</TABLE>
<PAGE> 192
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of MUNICIPAL FUND FOR
TEMPORARY INVESTMENT (Registration No. 2-64358) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on March 7, 1997.
/s/ G. Nicholas Beckwith, III
-----------------------------
G. Nicholas Beckwith, III
<PAGE> 193
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of MUNICIPAL FUND FOR
TEMPORARY INVESTMENT (Registration No. 2-64358) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on March 7, 1997.*
/s/ Philip E. Coldwell
----------------------
Philip E. Coldwell
* With the understanding that all amendments will be sent to
me in advance.
<PAGE> 194
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of MUNICIPAL FUND FOR
TEMPORARY INVESTMENT (Registration No. 2-64358) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on March 7, 1997.
/s/ Jerrold B. Harris
---------------------
Jerrold B. Harris
<PAGE> 195
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of MUNICIPAL FUND FOR
TEMPORARY INVESTMENT (Registration No. 2-64358) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on March 7, 1997.
/s/ Rodney D. Johnson
---------------------
Rodney D. Johnson
<PAGE> 196
MUNICIPAL FUND FOR TEMPORARY INVESTMENT
POWER OF ATTORNEY
I hereby appoint G. Willing Pepper or Edward J. Roach attorney for me,
with full power of substitution, and in my name and on my behalf as a director
to sign any Registration Statement or Amendment thereto of MUNICIPAL FUND FOR
TEMPORARY INVESTMENT (Registration No. 2-64358) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on March 7, 1997.
/s/ Robert R. Fortune
---------------------
Robert R. Fortune
<PAGE> 197
EXHIBIT INDEX
EXHIBIT NO. Description Page No.
- ----------- ----------- --------
(10) Opinion and Consent of Counsel
(11) Consent of KPMG Peat Marwick LLP
(17) Financial Data Schedules
<PAGE> 1
March 27, 1997
Municipal Fund for Temporary Investment
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, DE 19809
Re: Municipal Fund for Temporary Investment/Post-
Effective Amendment No. 22 to Registration Statement
on Form N-1A (Registration No. 2-64358)
----------------------------------------------------
Gentlemen:
We have acted as counsel for Municipal Fund for Temporary Investment, a
Pennsylvania common law trust (the "Fund"), and have been informed by the Fund
of the registration of 1,832,269,749 shares of beneficial interest of the Fund
("Shares"), pursuant to Post-Effective Amendment No. 22 to the Fund's
Registration Statement under the Securities Act of 1933. The registration of
such Shares has been made in reliance upon Rule 24e-2 under the Investment
Company Act of 1940. The Fund is an open-end investment company authorized to
issue an unlimited number of Shares, without par value, at all times during the
fiscal year ended November 30, 1996 and remains so classified as of the date of
this opinion. We have reviewed the Fund's Declaration of Trust, its Code of
Regulations, resolutions adopted by its Board of Trustees and shareholders and
such other legal and factual matters as we have deemed appropriate.
On the basis of the foregoing, we are of the opinion that the foregoing
Shares of the Fund, when issued for payment as described in the Fund's
Prospectuses, will be validly issued, fully paid and non-assessable by the Fund.
We express no opinion concerning the laws of any jurisdiction other
than the Commonwealth of Pennsylvania and the federal law of the United States
of America.
Under Pennsylvania law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust dis-
<PAGE> 2
Municipal Fund for Temporary Investment
March 27, 1997
Page 2
claims shareholder liability for acts or obligations of the Fund and requires
that notice of such disclaimer be given in any written agreement, undertaking
or obligation made or issued on behalf of the Fund. The Declaration of Trust
provides for indemnification out of the assets of the Fund for all loss and
expense of any shareholder held personally liable solely by reason of his or
her being or having been a shareholder. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to Post-Effective Amendment No. 22 of the
Fund's Registration Statement.
Very truly yours,
/s/ DRINKER BIDDLE & REATH
DRINKER BIDDLE & REATH
<PAGE> 1
EXHIBIT 11
INDEPENDENT AUDITOR'S CONSENT
To the Trustees
Municipal Fund for Temporary Investment:
We consent to the use of our report dated January 10, 1996 incorporated by
reference herein and to the references to our firm under the heading "Financial
Highlights" in the Prospectuses and under the headings "Auditors" and "Financial
Statements" in the Statements of Additional Information in the Registration
Statement.
/s/ KPMG Peat Marwick LLP
Philadelphia, PA
March 20, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000311241
<NAME> MUNICIPAL FUND FOR TEMPORARY INVESTMENT
<SERIES>
<NUMBER> 011
<NAME> MUNI FUND - FUND CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 590858141
<INVESTMENTS-AT-VALUE> 590858141
<RECEIVABLES> 3132873
<ASSETS-OTHER> (602329)
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 593388685
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1788670
<TOTAL-LIABILITIES> 1788670
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 591670101
<SHARES-COMMON-STOCK> 591670101
<SHARES-COMMON-PRIOR> 671507009
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (70086)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 591600015
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26168665
<OTHER-INCOME> 0
<EXPENSES-NET> 2139273
<NET-INVESTMENT-INCOME> 24029392
<REALIZED-GAINS-CURRENT> 57554
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 24086946
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 24029392
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5212511683
<NUMBER-OF-SHARES-REDEEMED> 5351938462
<SHARES-REINVESTED> 4177069
<NET-CHANGE-IN-ASSETS> (135249710)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1298315
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3230542
<AVERAGE-NET-ASSETS> 689663894
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .033
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .033
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000311241
<NAME> MUNICIPAL FUND FOR TEMPORARY INVESTMENT
<SERIES>
<NUMBER> 012
<NAME> MUNI FUND - DOLLAR CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 590858141
<INVESTMENTS-AT-VALUE> 590858141
<RECEIVABLES> 3132873
<ASSETS-OTHER> (602329)
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 593388685
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1788670
<TOTAL-LIABILITIES> 1788670
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 591670101
<SHARES-COMMON-STOCK> 591670101
<SHARES-COMMON-PRIOR> 671507009
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (70086)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 591600015
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26168665
<OTHER-INCOME> 0
<EXPENSES-NET> 2139273
<NET-INVESTMENT-INCOME> 24029392
<REALIZED-GAINS-CURRENT> 57554
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 24086946
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 24029392
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5212511683
<NUMBER-OF-SHARES-REDEEMED> 5351938462
<SHARES-REINVESTED> 4177069
<NET-CHANGE-IN-ASSETS> (135249710)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1298315
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3230542
<AVERAGE-NET-ASSETS> 52384978
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000311241
<NAME> MUNICIPAL FUND FOR TEMPORARY INVESTMENT
<SERIES>
<NUMBER> 021
<NAME> MUNI CASH - FUND CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 381867286
<INVESTMENTS-AT-VALUE> 381867286
<RECEIVABLES> 2531311
<ASSETS-OTHER> (18431)
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 384380166
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1308665
<TOTAL-LIABILITIES> 1308665
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 383238184
<SHARES-COMMON-PRIOR> 574573812
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (166683)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 383071501
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15290786
<OTHER-INCOME> 0
<EXPENSES-NET> 998027
<NET-INVESTMENT-INCOME> 14292759
<REALIZED-GAINS-CURRENT> 4477
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 14297236
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14292759
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5121589834
<NUMBER-OF-SHARES-REDEEMED> 5168334969
<SHARES-REINVESTED> 6746509
<NET-CHANGE-IN-ASSETS> (39998626)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 727371
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1975728
<AVERAGE-NET-ASSETS> 315587641
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .035
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .035
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000311241
<NAME> MUNICIPAL FUND FOR TEMPORARY INVESTMENT
<SERIES>
<NUMBER> 022
<NAME> MUNI CASH - DOLLAR SHARES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 381867286
<INVESTMENTS-AT-VALUE> 381867286
<RECEIVABLES> 2531311
<ASSETS-OTHER> (18431)
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 384380166
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1308665
<TOTAL-LIABILITIES> 1308665
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 383238184
<SHARES-COMMON-PRIOR> 574573812
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (166683)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 383071501
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15290785
<OTHER-INCOME> 0
<EXPENSES-NET> 998027
<NET-INVESTMENT-INCOME> 14292759
<REALIZED-GAINS-CURRENT> 4477
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 14297236
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14292759
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5121589834
<NUMBER-OF-SHARES-REDEEMED> 5168334969
<SHARES-REINVESTED> 6746509
<NET-CHANGE-IN-ASSETS> (39998626)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 727371
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1975728
<AVERAGE-NET-ASSETS> 99549595
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .033
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .033
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000311241
<NAME> MUNICIPAL FUND FOR TEMPORARY INVESTMENT
<SERIES>
<NUMBER> 031
<NAME> INTERMEDIATE MUNICIPAL FUND - FUND CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 5432562
<INVESTMENTS-AT-VALUE> 5517338
<RECEIVABLES> 115351
<ASSETS-OTHER> 3056
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5635745
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22670
<TOTAL-LIABILITIES> 22670
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5940389
<SHARES-COMMON-STOCK> 506636
<SHARES-COMMON-PRIOR> 533279
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (412090)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 84776
<NET-ASSETS> 5613075
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 293039
<OTHER-INCOME> 0
<EXPENSES-NET> (23775)
<NET-INVESTMENT-INCOME> 269264
<REALIZED-GAINS-CURRENT> 146164
<APPREC-INCREASE-CURRENT> (169366)
<NET-CHANGE-FROM-OPS> 246062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 269264
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 47907
<NUMBER-OF-SHARES-REDEEMED> 674266
<SHARES-REINVESTED> 1433
<NET-CHANGE-IN-ASSETS> (624926)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11817
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39800
<AVERAGE-NET-ASSETS> 5875200
<PER-SHARE-NAV-BEGIN> 11.11
<PER-SHARE-NII> .5
<PER-SHARE-GAIN-APPREC> (.03)
<PER-SHARE-DIVIDEND> .5
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.08
<EXPENSE-RATIO> .4
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000311241
<NAME> MUNICIPAL FUND FOR TEMPORARY INVESTMENT
<SERIES>
<NUMBER> 032
<NAME> INTERMEDIATE FUND - DOLLAR CLASS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 5432562
<INVESTMENTS-AT-VALUE> 5517338
<RECEIVABLES> 115351
<ASSETS-OTHER> 3056
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5635745
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 22670
<TOTAL-LIABILITIES> 22670
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5940389
<SHARES-COMMON-STOCK> 506636
<SHARES-COMMON-PRIOR> 533279
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (412090)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 84776
<NET-ASSETS> 5613075
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 293039
<OTHER-INCOME> 0
<EXPENSES-NET> (23775)
<NET-INVESTMENT-INCOME> 269264
<REALIZED-GAINS-CURRENT> 146164
<APPREC-INCREASE-CURRENT> (169366)
<NET-CHANGE-FROM-OPS> 246062
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 269264
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 47907
<NUMBER-OF-SHARES-REDEEMED> 674266
<SHARES-REINVESTED> 1433
<NET-CHANGE-IN-ASSETS> (624926)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11817
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 39800
<AVERAGE-NET-ASSETS> 33243
<PER-SHARE-NAV-BEGIN> 11.11
<PER-SHARE-NII> .472
<PER-SHARE-GAIN-APPREC> (.03)
<PER-SHARE-DIVIDEND> .472
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.08
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
