<PAGE> 1
As filed with the Securities and Exchange Commission on May 28, 1998
Registration Nos. 2-79510 and 811-3574
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ x ]
POST-EFFECTIVE AMENDMENT NO. 19 [ x ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ x ]
AMENDMENT NO. 20 [ x ]
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
(California Money Fund Portfolio)
(Exact Name of Registrant As Specified In Charter)
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, Delaware 19809
(Address of Principal Executive Offices)
Registrant's Telephone Number: (302) 792-2555
THOMAS H. NEVIN
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, Delaware 19809
(Name and Address of Agent for Service)
Copies to:
W. BRUCE MCCONNEL, III
Drinker Biddle & Reath LLP
1345 Chestnut Street, Suite 1100
Philadelphia, Pennsylvania 19107
It is proposed that this filing will become effective (check appropriate
box)
[ ] immediately upon filing pursuant to paragraph (b)
[x] on May 31, 1998 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.
Title of Securities being Registered - Shares of Common Stock
-------------------------
<PAGE> 2
CALIFORNIA MONEY FUND
An Investment Portfolio Offered by
Municipal Fund for California Investors, Inc.
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
4. General Description of Registrant ..................... Financial Highlights;
Investment Objective
and Policies
5. Management of the Fund ................................ Management of the Fund
6. Capital Stock and Other Securities .................... Cover Page;
Financial Highlights;
Dividends; Taxes;
Description of Shares
and Miscellaneous; Yield
7. Purchase of Securities Being Offered .................. Management of the Fund;
Purchase of Shares;
Redemption of Shares
8. Redemption or Repurchase .............................. Redemption of Shares
9. Legal Proceedings ..................................... Inapplicable
</TABLE>
<PAGE> 3
California Money Fund
An Investment Portfolio Offered by
Municipal Fund for California Investors, Inc.
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders call: 800-441-7450
400 Bellevue Parkway (in Delaware: 302-791-5350). For current yield
Suite 100 information call: 800-821-6006. (Code: California
Wilmington, Delaware 19809 Money-52; California Money Dollar-57; California
Money Plus-58). For other information call:
800-821-7432 or visit our website at www.pif.com.
</TABLE>
Municipal Fund for California Investors, Inc. (the "Company") is a no-load,
open-end investment company currently offering shares in the California Money
Fund (the "Fund"). The Fund is a non-diversified investment company that is
designed primarily to provide California institutional investors and their
customers with as high a level of current interest income that is exempt from
Federal income tax and, to the extent possible, from California state personal
income tax as is consistent with the preservation of capital and relative
stability of principal. Portfolio securities held by the Fund will generally
have remaining maturities of 13 months or less and will be determined by the
investment adviser to have minimal credit risk.
PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve as the
Fund's administrators. PDI also serves as the Fund's distributor. BlackRock
Institutional Management Corporation ("BIMC"), formerly PNC Institutional
Management Corporation ("PIMC"), serves as the Fund's investment adviser. Shares
may not be purchased by individuals directly but, as indicated above,
institutional investors, such as banks and broker-dealers, may purchase shares
for accounts maintained by individuals.
THE FUND MAY INVEST A SIGNIFICANT PERCENTAGE OF ITS ASSETS IN A SINGLE
ISSUER, AND THEREFORE INVESTMENT IN THE FUND MAY BE RISKIER THAN AN INVESTMENT
IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, OR
ENDORSED BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES OF THE
FUND ARE NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE
SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY INVESTMENTS IN SHARES OF
THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
AMOUNT INVESTED. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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, has been filed with
the Securities and Exchange Commission ("SEC"). The current Statement of
Additional Information is available to investors without charge by calling the
Fund at 800-821-7432. The Prospectus and Statement of Additional Information are
also available for reference, along with other related materials, on the SEC
Internet Web Site (http://www.sec.gov). The Statement of Additional Information,
as amended from time to time, is incorporated by reference in its entirety 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.
------------------------
May 31, 1998
<PAGE> 4
BACKGROUND AND EXPENSE INFORMATION
The Company was organized as a Maryland corporation on September 20, 1982
and currently offers three separate classes of shares in the Fund--California
Money ("Money"), California Money Dollar ("Dollar") and California Money Plus
("Plus"). The public offering of Money shares commenced on February 28, 1983,
the public offering of Plus shares commenced on September 30, 1985 and the
public offering of Dollar shares commenced on January 9, 1991. Shares of each
class represent equal pro rata interests in a single portfolio of high quality,
short-term, tax-exempt obligations maintained by the Fund (see "Investment
Objective and Policies"), except that Dollar and Plus shares bear service fees
payable by the Fund (at the rate of .25% per annum) to institutional investors
("Service Organizations") for distribution and/or support services they provide
to the beneficial owners of such shares. (See "Management of the Fund--Service
Organizations.") Because of the service fees borne by the Dollar and Plus
shares, the net yield on such shares can be expected, at any given time, to be
approximately .25% lower than the net yield on Money shares.
EXPENSE SUMMARY
<TABLE>
<CAPTION>
MONEY DOLLAR PLUS
SHARES SHARES SHARES
----------- ----------- -----------
(ESTIMATED)
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (net of waivers).......................... .07% .07% .07%
12b-1 Fees................................................ -- -- .25%
Other Expenses............................................ .13% .38% .13%
Administration Fees (net of waivers).................... .07% .07% .07%
Non-12b-1 Fees.......................................... -- .25% --
Other................................................... .06% .06% .06%
==== ==== ====
Total Fund Operating Expenses (net of waivers)............ .20% .45% .45%
</TABLE>
- ---------------
EXAMPLE
<TABLE>
<CAPTION>
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 hypothetical 5% annual return
and (2) redemption at the end of each time period with
respect to the following shares:
Money Shares.......................................... $2 $ 6 $11 $26
Dollar Shares......................................... $5 $14 $25 $57
Plus Shares (estimated)............................... $5 $14 $25 $57
</TABLE>
The foregoing Expense Summary and Example are intended to assist investors
in understanding the various costs and expenses that an investor in the Fund
will bear directly or indirectly. In addition, institutional investors may
charge their customers fees for providing services in connection with
investments in the Fund's Dollar and Plus shares. (For more complete
descriptions of the various costs and expenses, see "Management of the Fund" in
the Prospectus and "Management of the Company" in the Statement of Additional
Information and the Financial Statements and related notes incorporated by
reference into the Statement of Additional Information.) Absent fee waivers for
the year ended January 31, 1998, "Total Fund Operating Expenses" for the Fund's
Money, Dollar and Plus shares would have been .46%, .71% and .71% (estimated),
respectively, of the Fund's average daily net assets. During the year ended
January 31, 1998, no Plus shares had been sold. The investment adviser and
administrators may from time to time waive the advisory and administration fees
otherwise payable to them and may reimburse the Fund for its operating expenses.
The Fund has received a No-Action Letter from the SEC that will permit the Fund
to receive credits from its custodian, an affiliate of the Fund's investment
adviser, for certain cash balances held by the custodian. If implemented, such
credits may reduce custodian fees payable by the Fund but may not reduce the
Fund's total operating expense ratio. The foregoing table has not been audited
by the Fund's independent accountants.
THE EXAMPLE SHOWN ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN AND
OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE> 5
FINANCIAL HIGHLIGHTS
The tables of "Financial Highlights" below are derived from the Fund's
financial statements incorporated by reference into the Statement of Additional
Information, and set forth certain information concerning the historic
investment results for Money, Dollar and Plus shares. The financial highlights
for the fiscal years ended January 31, 1998, 1997, 1996, 1995 and 1994 have been
audited by Coopers & Lybrand L.L.P., the Fund's independent accountants whose
report thereon is incorporated by reference into the Statement of Additional
Information along with the financial statements. This information should be read
in conjunction with the financial statements and notes incorporated by reference
into the Statement of Additional Information. The Fund's financial statements
and more information about the performance of the Fund is also contained in the
Annual Report to Shareholders, which may be obtained without charge by calling
800-821-7432.
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout each period)
<TABLE>
<CAPTION>
MONEY SHARES
--------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income.......................... 0.0334 0.0316 0.0356 0.0281 0.0223 0.0251 0.0375
-------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to Shareholders From Net Investment
Income....................................... (0.0334) (0.0316) (0.0356) (0.0281) (0.0223) (0.0251) (0.0375)
-------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Year.................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ======== ========
Total Return.................................... 3.39% 3.21% 3.62% 2.84% 2.25% 2.54% 3.82%
Ratios/Supplemental Data:
Net Assets, End of Year $(000)................. $460,339 $326,521 $389,883 $385,824 $356,501 $359,193 $490,141
Ratio of Expenses to Average Net Assets(1)..... .20% .20% .20% .20% .20% .30% .30%
Ratio of Net Investment Income to Average Net
Assets....................................... 3.34% 3.15% 3.55% 2.79% 2.23% 2.52% 3.75%
<CAPTION>
MONEY SHARES
----------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
01/31/91 01/31/90 01/31/89
-------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year.............. $1.00 $1.00 $1.00
-------- ---------- ----------
Income from Investment Operations:
Net Investment Income.......................... 0.0509 0.0578 0.0500
-------- ---------- ----------
Less Distributions:
Dividends to Shareholders From Net Investment
Income....................................... (0.0509) (0.0578) (0.0500)
-------- ---------- ----------
Net Asset Value, End of Year.................... $1.00 $1.00 $1.00
======== ========== ==========
Total Return.................................... 5.21% 5.93% 5.12%
Ratios/Supplemental Data:
Net Assets, End of Year $(000)................. $629,001 $1,046,590 $1,105,956
Ratio of Expenses to Average Net Assets(1)..... .29% .30% .30%
Ratio of Net Investment Income to Average Net
Assets....................................... 5.10% 5.78% 5.01%
</TABLE>
- ---------------
(1) Annualized operating expense ratios before waivers of Investment Adviser and
Administrator fees for Money shares for the years ended January 31, 1998,
1997, 1996, 1995, 1994, 1993, 1992, 1991, 1990 and 1989 were .46%, .48%,
.48%, .48%, .49%, .48%, .48%, .46%, .47% and .47%, respectively.
3
<PAGE> 6
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout each period)
<TABLE>
<CAPTION>
DOLLAR SHARES
----------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR 01/09/91(1)
ENDED ENDED ENDED ENDED ENDED ENDED ENDED TO
01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92 01/31/91
-------- -------- -------- -------- -------- -------- -------- -----------
<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.............. 0.0309 0.0291 0.0331 0.0256 0.0198 0.0226 0.0350 0.0024
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to Shareholders from Net
Investment Income.................. (0.0309) (0.0291) (0.0331) (0.0256) (0.0198) (0.0226) (0.350) (0.0024)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Period......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ======== ======== ========
Total Return........................... 3.14% 2.96% 3.37% 2.59% 2.00% 2.29% 3.57% 3.87%(2)
Ratios/Supplemental Data:
Net Assets, End of Period $(000)..... $130,547 $126,321 $31,163 $11,026 $19,098 $11,750 $ 6,599 $ 1,126
Ratio of Expenses to Average Net
Assets(3).......................... .45% .45% .45% .45% .45% .55% .55% .54%(2)
Ratio of Net investment Income to
Average Net Assets................. 3.09% 2.90% 3.30% 2.54% 1.98% 2.27% 3.50% 3.85%(2)
</TABLE>
- ---------------
(1) Commencement of operations.
(2) Annualized.
(3) Annualized operating expense ratios before waivers of investment Adviser and
Administrator fees for Dollar shares for the years ended January 31, 1998,
1997, 1996, 1995, 1994, 1993 and 1992 were .71%, .73%, .73%, .73%, .74%,
.73% and .73%, respectively, and for the period ended January 31, 1991 was
.71%.
<TABLE>
<CAPTION>
PLUS SHARES
-------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
01/31/98(1) 01/31/97(1) 01/31/96(1) 01/31/95(1) 01/31/94(1) 01/31/93(1) 01/31/92 01/31/91
----------- ----------- ----------- ----------- ----------- ----------- -------- --------
<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............... -- -- -- -- -- 0.0191 0.0350 0.0484
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income.... -- -- -- -- (--) (0.0191) (0.0350) (0.0484)
-------- -------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of
Year................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ======== ======== ========
Total Return............. -- -- -- -- -- 1.93% 3.57% 4.96%
Ratios/Supplemental Data:
Net Assets, End of Year
$(000)............... -- -- -- -- -- -- $ 27,656 $ 19,872
Ratio of Expenses to
Average Net
Assets(2)............ -- -- -- -- -- .55% .55% .54%
Ratio of Net Investment
Income to Average Net
Assets............... -- -- -- -- -- 2.27% 3.50% 4.85%
<CAPTION>
PLUS SHARES
-------------------
YEAR YEAR
ENDED ENDED
01/31/90 01/31/89
-------- --------
<S> <C> <C>
Net Asset Value,
Beginning of Period.... $1.00 $1.00
-------- --------
Income from Investment
Operations:
Net Investment
Income............... 0.0553 0.0475
-------- --------
Less Distributions:
Dividends to
Shareholders from Net
Investment Income.... (0.0553) (0.0475)
-------- --------
Net Asset Value, End of
Year................... $1.00 $1.00
======== ========
Total Return............. 5.68% 4.87%
Ratios/Supplemental Data:
Net Assets, End of Year
$(000)............... $ 26,769 $ 15,961
Ratio of Expenses to
Average Net
Assets(2)............ .55% .55%
Ratio of Net Investment
Income to Average Net
Assets............... 5.53% 4.76%
</TABLE>
- ---------------
(1) Only 100 Plus shares were outstanding during the period from December 1,
1992 to July 12, 1995. Since July 31, 1995, no Plus shares were outstanding.
(2) Annualized operating expense ratios before waivers of Investment Adviser and
Administrator fees for Plus shares for the years ended January 31, 1993,
1992, 1991, 1990, 1989 and 1988 were .64%, .73%, .71%, .72%, .72%., and .73%
respectively.
4
<PAGE> 7
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund is a no-load, open-end, non-diversified investment company which
has an investment objective to provide investors with as high a level of current
interest income that is exempt from Federal income tax and, to the extent
possible, from California state personal income tax as is consistent with the
preservation of capital and relative stability of principal. There can be, of
course, no assurance that the Fund will achieve its investment objective. The
Fund has a distribution plan applicable to one class of its shares and a service
plan applicable to another class of its shares. See "Service Organizations."
Substantially all of the Fund's assets are invested in debt obligations
issued by or on behalf of the State of California and other states, territories
and possessions of the United States, the District of Columbia and their
respective authorities, agencies, instrumentalities and political subdivisions
and tax-exempt derivatives such as tender option bonds, participations,
beneficial interests in trusts and partnership interests ("Municipal
Obligations"). Dividends paid by the Fund that are derived from interest on
bonds that is exempt from taxation under the Constitution or statutes of
California ("California Municipal Obligations") are exempt from regular Federal
income tax and California state personal income tax. California Municipal
Obligations include municipal securities issued by the State of California and
its political sub-divisions, as well as certain other governmental issuers such
as the Commonwealth of Puerto Rico. Dividends derived from interest on municipal
obligations other than California Municipal Obligations are exempt from regular
Federal income tax but may be subject to California state personal 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.) The Fund expects that, except during
temporary defensive periods or when acceptable securities are unavailable for
investment by the Fund, the Fund's assets will be invested primarily in
California Municipal Obligations. At least 50% of the Fund's assets must be
invested in obligations which, when held by an individual, the interest
therefrom is exempt from
California personal income taxation (i.e., California Municipal Obligations and
certain U.S. Government
obligations) at the close of each quarter of its taxable year so as to permit
the Fund to pay dividends that are exempt from California state personal income
tax. Dividends, regardless of their source, may be subject to local taxes.
The Fund will not knowingly purchase securities the interest on which is
subject to regular Federal income tax; however, 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. Uninvested cash reserves will not earn income.
The Fund invests in Municipal Obligations that are determined by the Fund's
investment adviser to present minimal credit risks pursuant to guidelines
approved by the Company's Board of Directors pursuant to Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"). Pursuant to these
guidelines, the Fund is authorized to purchase instruments that are considered
"Eligible Securities" under that Rule. Eligible Securities consist, generally,
of the following types of securities: (i) instruments rated at the time of
purchase in one of the top two rating categories by at least two unaffiliated
nationally recognized statistical rating organizations ("Rating Agencies"), (ii)
instruments rated at the time of purchase in one of the top two rating
categories by one such Rating Agency (if only one such organization rates the
instrument), (iii) instruments issued by issuers (or, in certain cases
guaranteed by persons) with short-term debt having such ratings, (iv)
instruments
5
<PAGE> 8
without such ratings that have been determined by the investment adviser,
pursuant to procedures approved by the Board of Directors, to be of comparable
quality, (v) certain money market fund shares and (vi) U.S. Government
securities. The Appendix to the Statement of Additional Information includes a
description of applicable NRSRO ratings.
The Fund intends to use its best efforts to maintain its net asset value at
$1.00 per share, and computes its net asset value using the amortized cost
method. In connection with its use of this valuation method, the Fund limits the
dollar-weighted average maturity of its portfolio to not more than 90 days and
the remaining maturity of each portfolio security to not more than 13 months
(with certain exceptions).
The Fund's investment objective and the policies described herein may be
changed by its Board of Directors without the affirmative vote of the holders of
a majority of the Fund's outstanding shares, except that the Fund may not change
the following investment limitations without such a vote of shareholders. Other
investment limitations that cannot be changed without a vote of shareholders are
contained in the Statement of Additional Information under "Investment
Objectives and Policies."
THE FUND MAY NOT:
1. Invest less than 80% of its assets in securities the interest on
which is exempt from Federal income taxes, except during defensive periods.
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 (a) up to 50% of the value of the Fund's assets
may be invested without regard to this 5% limitation; provided that no more
than 25% of the value of the Fund's assets are invested in the securities
of any one issuer and (b) this 5% limitation does not apply to securities
issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities. For purposes of this limitation, a security is
considered to be issued by the governmental entity (or entities) whose
assets and revenues back the security, or, with respect to a private
activity bond that is backed only by the assets and revenues of a non-
governmental user, by such non-governmental user. In certain circumstances,
the guarantor of a guaranteed security may also be considered to be an
issuer in connection with such guarantee.
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
intended for investment leverage, but solely to facilitate management of
the Fund's portfolio by enabling the Fund to meet redemption requests when
the liquidation of portfolio securities is deemed to be disadvantageous or
inconvenient, and hence the Fund may not purchase any portfolio securities
while its borrowings are outstanding.)
4. Invest more than 10% of the value of the Fund's total assets in
illiquid securities (including illiquid variable rate demand notes) which
may be illiquid due to legal or contractual restrictions on resale or the
absence of readily available market quotations.
5. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of purchase to be invested in
the securities of issuers conducting their principal business activities in
the same industry; provided that this limitation shall not apply to
Municipal
6
<PAGE> 9
Obligations or governmental guarantees of Municipal Obligations; and
provided, further, that for the purpose of this limitation only, industrial
development bonds that are considered to be issued by non-governmental
users (see the second investment limitation above) shall not be deemed to
be Municipal Obligations.
Additionally, pursuant to SEC Rule 2a-7 under the 1940 Act, with respect to
75% of the Fund's total assets, the Fund may not invest more than 5% of its
assets, measured at the time of the purchase, in the securities of any one
issuer other than U.S. Government securities, repurchase agreements
collateralized by such securities and securities subject to certain guarantees.
The Fund's compliance with the diversification requirements of SEC Rule 2a-7
will be deemed compliance with the diversification restrictions under the 1940
Act.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from Federal income tax (and, with respect to
California Municipal Obligations, to the exemption of interest thereon from
California state personal 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 derivatives are rendered by counsel to the respective sponsors of
such derivatives. Neither the Fund nor its investment adviser will review the
proceedings relating to the issuance of Municipal Obligations, the creation of
any tax-exempt derivatives, or the bases for such opinions.
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 may include private activity bonds.
Such bonds may be issued by or on behalf of public authorities to finance
various privately operated facilities, and are not payable from the unrestricted
revenues of the issuer. As a result, the credit quality of private activity
bonds is frequently related directly to the credit standing of private
corporations or other entities.
The Fund's portfolio may also include "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities 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 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 above. 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. Adverse developments affecting the banking industry
generally or a particular bank or financial institution that has provided its
credit or guarantee with respect to a Municipal Obligation held by the Fund,
including a change in the credit quality of any such bank or financial
institution, could result in a loss to the Fund
7
<PAGE> 10
and adversely affect the value of its shares. Such instruments may carry stated
maturities in excess of 397 days 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, the Fund may be entitled to principal on demand and may
be able to resell such instruments in the dealer market.
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, and that a commitment by the Fund to purchase when-issued securities
will not exceed 45 days. 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 agrees to purchase at the Fund's option specified Municipal Obligations
at a price equal to their amortized cost value plus accrued interest. The Fund
will acquire stand-by commitments solely to facilitate portfolio liquidity and
does not intend to exercise its rights thereunder for trading purposes.
RISK FACTORS
THE FUND IS CONCENTRATED IN SECURITIES ISSUED BY THE STATE OF CALIFORNIA OR
ENTITIES WITHIN THE STATE OF CALIFORNIA AND THEREFORE, INVESTMENT IN THE FUND
MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
The Fund may invest more than 25% of its assets in Municipal Obligations
the interest on which is paid solely from revenues on similar projects if such
investment is deemed necessary or appropriate by the Fund's investment adviser.
To the extent that the Fund's assets are invested in Municipal Obligations
payable from revenues on similar projects, the Fund will be subject to the
particular risks presented by the laws and economic conditions related to such
projects to a greater extent than it would be if the Fund's assets were not so
invested.
The Fund's ability to achieve its investment objective is dependent upon
various factors, including the ability of the issuers of California Municipal
Obligations to timely meet their continuing payment obligations with respect to
the municipal obligations. Any reductions in the creditworthiness of issuers of
California Municipal Obligations could adversely affect the market values and
marketability of California Municipal Obligations, and, consequently, the net
asset value of the Fund's portfolio.
General obligation bonds of the State of California are currently rated A+
and A1, respectively, by Standard & Poor's Ratings Services and Moody's
Investors Service, Inc.
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives could result
in certain adverse consequences affecting California Municipal Obligations.
Significant financial and other considerations relating to the Fund's
investments in California Municipal Obligations are summarized in the Statement
of Additional Information.
The services provided to the Fund by BIMC and others depend in large part
on the smooth functioning of their computer systems. Many computer software
systems in use today cannot recognize
8
<PAGE> 11
the year 2000, but revert to 1900 or some other date, due to the manner in which
dates were encoded or calculated. The capability of these systems to recognize
the year 2000 could have a negative impact on BIMC's provision of investment
advisory services, including the handling of securities trades and pricing. Both
BIMC and PFPC have advised the Fund that they have been reviewing all of their
computer systems, are actively working on necessary changes to those systems to
prepare for the year 2000 and expect that given the extensive testing which they
are undertaking, their systems will be year 2000 compliant before such date.
There can, however, be no assurance that BIMC or any other service provider will
be successful in achieving year 2000 compliance, or that interaction with other
non-complying computer systems will not impair services to the Fund at that
time.
PURCHASE OF SHARES
The Fund's shares are sold to institutional investors 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 will be accepted by the Fund only on a day 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 by telephone at 800-441-7450 (in Delaware call 302-791-5350) or through
the Fund's computer access program. Orders accepted by PFPC by Noon, Eastern
time (9:00 A.M., Pacific time) will be executed the same day if PNC Bank, the
Fund's Custodian, has received payment by 4:00 P.M., Eastern time (1:00 P.M.,
Pacific time) that day. Orders received at other times, and orders for which
payment has not been received by 4:00 P.M. Eastern time (1:00 P.M., Pacific
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 by PNC Bank to the sending institution.
Payment for shares may be made only in Federal Funds or other funds
immediately available to PNC Bank. The minimum initial investment is $5,000;
however, broker-dealers and other institutional investors may set a higher
minimum for their customers. There is no minimum subsequent investment. The Fund
may in its discretion reject any purchase order for shares.
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 or Plus shares. 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, the
Department of Labor or state securities commissions, should consult legal
counsel before investing in Dollar or Plus shares. (See also "Management of the
Fund--Banking Laws.")
REDEMPTION OF SHARES
REDEMPTION PROCEDURES
Redemption orders must be transmitted to PFPC by telephone in the manner
described under "Purchase of Shares." Shares are redeemed at the net asset value
per share next determined after receipt of the redemption order by PFPC. While
the Fund intends to use its best efforts to maintain its net asset value per
share of each of its series at $1.00, the proceeds paid upon redemption may be
more or less than the amount invested depending upon a share's net asset value
at the time of redemption.
9
<PAGE> 12
Payment for redeemed shares for which a redemption order is accepted by
PFPC prior to Noon, Eastern time (9:00 A.M., Pacific time) on a Business Day is
normally made in Federal Funds wired to the redeeming shareholder on the same
Business Day. Payment for redeemed shares for which a redemption order is
accepted by PFPC after Noon, Eastern time (9:00 A.M., Pacific time) on such a
Business Day or on a day that PNC Bank is closed is normally made in Federal
Funds wired to the redeeming shareholder on the next Business Day that PNC Bank
is open. The Fund reserves the right to wire redemption proceeds within 7 days
after accepting the redemption order if, in the judgment of the Fund's
administrator, an earlier payment could adversely affect the Fund.
The Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
The Fund reserves the right to redeem the shares of the Fund owned by a
shareholder at their net asset value if the value of such shares is less than
$500. Any such shareholder will be notified in writing that its shares have a
value of less than $500 and will be allowed 60 days to make an additional
investment before the redemption is processed by the Fund. The Fund may also
redeem shares involuntarily (and restrict the transfer of its shares) 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 BIMC as of Noon and 4:00 P.M., Eastern time
(9:00 A.M. and 1:00 P.M., Pacific time) on each Business Day (excluding those
holidays on which either the New York Stock Exchange or the Federal Reserve Bank
of Philadelphia is closed). Currently, the holidays which the New York Stock
Exchange or the Federal Reserve Bank of Philadelphia observe are New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each of the Fund's classes is
the same and is calculated by adding the value of all of the Fund's portfolio
securities and other assets, subtracting liabilities and dividing the results by
the number of the Fund's outstanding shares (irrespective of class). Portfolio
securities are valued on the basis of amortized cost. Under this method, the
Fund values a portfolio security at cost on the date of purchase and thereafter
assumes a constant amortization of any discount or premium until maturity of the
security. As a result, the value of the security for purposes of determining net
asset value normally does not change in response to fluctuating interest rates.
While the amortized cost method seems to provide certainty in portfolio
valuation, it may result in periods during which values, as determined by
amortized cost, are higher or lower than the amount the Fund would receive if it
sold the securities.
Shares of the Fund are sold and redeemed without charge by the Fund,
although Service Organizations (see below) and other institutional investors
purchasing or holding Fund shares for their customers' accounts may charge
customers for cash management and other services provided in connection with
their accounts including, for example, account maintenance fees, compensating
balance requirements or fees based upon account transactions, assets or income.
Such charges will reduce the yield of the Fund to such customers. A customer
should therefore read this Prospectus in light of the terms governing its
account with a Service Organization (or other 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 agreements with its customers.
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<PAGE> 13
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The business and affairs of the Fund are managed under the direction of the
Company's Board of Directors. The directors of the Company are as follows:
G. Willing Pepper, Chairman of the Board and President of the Company,
is a former President of Scott Paper Company.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
William R. Howell is a former Vice Chairman, Union Bank, Los Angeles.
Rudolph A. Peterson is Honorary Director and former President and
Chief Executive Officer of BankAmerica Corporation.
Anthony M. Santomero is the Richard K. Mellon Professor of Finance at
The Wharton School, University of Pennsylvania.
INVESTMENT ADVISER
BIMC, a wholly-owned subsidiary of PNC Bank, serves as the Fund's
investment adviser. BIMC is one of the largest bank managers of mutual funds,
with assets currently under management in excess of $39 billion. BIMC 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 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 in the
Philadelphia area 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 (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. PNC Bank also serves as the Fund's custodian.
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, BIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. BIMC 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, BIMC is entitled to receive a fee, computed
daily and payable monthly based on the Fund's average net assets. BIMC 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. For the fiscal year ended January 31, 1998, the Fund paid
advisory fees to BIMC (after fee waivers) of .07% of the Fund's average daily
net assets.
PNC Bank was formerly sub-adviser to the Fund and provided research, credit
analysis and recommendations with respect to the Fund's investments and supplied
certain computer facilities, personnel and other services. The facilities,
personnel, services and related expenses have been
11
<PAGE> 14
transferred to BIMC and in return, BIMC's obligation to pay a portion of the
sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services,
PNC Bank was entitled to receive from BIMC an amount equal to 75% of the
investment advisory fee paid by the Fund to BIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no
effect on the investment advisory fees payable by the Fund to BIMC. The services
provided by BIMC and the fees payable by the Fund for these services are
described further in the Statement of Additional Information under "Management
of the Company."
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
co-administrators. PFPC is an indirect wholly-owned subsidiary of PNC Bank Corp.
All of the outstanding stock of PDI is owned by PDI's chief executive officer.
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. (For information regarding
the administrators' waivers, 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 January 31, 1998, the Fund paid PFPC and PDI administrative
fees (after fee waivers) aggregating .07% of its average daily net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address 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 Company."
DISTRIBUTOR
PDI 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 or Plus shares
offered by the Fund. Dollar shares are sold to institutions other than
broker/dealers, and Plus shares are sold to broker/
dealers, which, in each case, enter into servicing agreements with the Fund
requiring them to provide
12
<PAGE> 15
support services to their customers who are the beneficial owners of such shares
in consideration for .25% (on an annualized basis) of the average daily net
asset value of the Dollar or Plus shares held by the Service Organizations for
the benefit of their customers. Such services, which are described more fully in
the Statement of Additional Information under "Management of the
Company--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 or Plus shares; and providing sub-accounting not provided by
the transfer agent with respect to shares beneficially owned by customers or the
information necessary for sub-accounting. In addition, broker/dealers purchasing
Plus shares may be requested to provide from time to time assistance (such as
the forwarding of sales literature and advertising to their customers) in
connection with the distribution of Plus shares. 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 their customers relating to the
investment of their customers' assets in Dollar or Plus shares. Money shares
offered by the Fund may be purchased by any type of institutional investor
(including banks and broker/dealers) which does not wish to enter into such
servicing agreements with the Fund in connection with its 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 ratios of the Fund's expenses to its average daily net assets
for the fiscal year ended January 31, 1998 for the Fund's Money, Dollar and Plus
shares were .20%, .45% and .45% (estimated).
BANKING LAWS
Banking laws and regulations currently 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, BIMC and PFPC, as well as certain 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 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. 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.
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<PAGE> 16
DIVIDENDS
The Fund distributes substantially all of its net investment income and
capital gain, if any to shareholders each year. Dividends for each class are
equal to the net income available for the particular class involved and are
determined in the same manner across classes. Net income available for dividends
on the Dollar shares is after deduction of all expenses related to the class,
including fees paid to Service Organizations for their services with respect to
Dollar shares, and for the Plus shares, is after deduction of all expenses
related to the class, including fees paid to Service Organizations with respect
to Plus shares. (See "Management of the Fund--Service Organizations.") Shares of
each class begin accruing dividends on the day the purchase order for the shares
is executed and continue to accrue dividends through, and including, the day
before the redemption order for the shares is executed. Dividends are paid
monthly by check, or by wire transfer if requested in writing by the
shareholder, within 5 business days after the end of the month or within 5
business days of the redemption of all of a shareholder's shares of a particular
class. The Fund does not expect to realize net long-term capital gains.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class with respect to which
dividends are declared valued at their net asset value 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, and
will become effective with respect to dividends paid after its receipt by PFPC.
TAXES
It is intended that the Fund will separately qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification generally relieves the Fund of liability for Federal
income and California franchise and income taxes to the extent the Fund's
earnings are distributed in accordance with the Code.
The Fund's policy is to pay its shareholders with respect to each taxable
year dividends equal to at least the sum of 90% of its exempt-interest income
(net of certain deductions) and 90% of its investment company taxable income (if
any) for such year. Dividends derived from exempt-interest income (known as
"exempt-interest dividends") 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
exclusion would be disallowed. (See 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 applicable to corporations.
Corporate shareholders also must take all exempt-interest dividends into account
in determining certain adjustments for alternative minimum tax purposes.
Shareholders receiving Social Security benefits or Railroad Retirement Act
benefits should note that all exempt-interest dividends will be taken into
account in determining the taxability of such benefits.
Dividends that are paid by the Fund to non-corporate shareholders and are
derived from interest on California Municipal Obligations or certain U.S.
Government obligations are also exempt from
14
<PAGE> 17
California state personal income tax. However, dividends paid to corporate
shareholders subject to California state franchise tax or California state
corporate income tax will be taxed as ordinary income to such shareholders,
notwithstanding that all or a portion of such dividends is exempt from
California state personal income tax. Moreover, to the extent that the Fund's
dividends are derived from interest on debt obligations other than California
Municipal Obligations or certain U.S. Government obligations such dividends will
be subject to California state personal income tax, even though such dividends
may be exempt for Federal income tax purposes.
Exempt-interest dividends derived from U.S. Government obligations
generally will be exempt from state and local tax as well. However, except as
noted with respect to California state personal income tax, in some situations
distributions of net investment income may be taxable to investors under state
or local law as dividend income even though all or a portion of such
distributions may be derived from interest on tax-exempt obligations which, if
realized directly, would be exempt from such income taxes. To the extent, if
any, that dividends paid to shareholders are derived from taxable interest or
from long-term or short-term capital gains, such dividends will not be exempt
from Federal income tax or California state personal income tax.
Fund shareholders will be advised at least annually as to the Federal and
California state personal income tax consequences of distributions made each
year.
The foregoing is only a brief summary of some of the important 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 advisers with specific reference to their own
tax situations.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company's Charter authorizes the Board of Directors to issue up to
three billion full and fractional shares of capital stock, $.001 par value per
share, and to classify or reclassify any unissued shares of the Fund into one or
more classes or series by setting or changing in any one or more respects their
respective preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption. Pursuant to such authority, the Board of Directors has classified
2.3 billion of its shares as California Money shares (Class A Common Stock), 300
million of its shares as California Money Dollar shares (Class A Common
Stock-Special Series 1) and 300 million of its shares as California Money Plus
shares (Class A Common Stock-Special Series 2).
THIS PROSPECTUS RELATES PRIMARILY TO THE FUND AND DESCRIBES ONLY THE
INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS
RELATING TO THE FUND.
Each Money, Dollar and Plus share represents an equal proportionate
interest in the assets of the Fund. Fund shares have no pre-emptive rights and
only such conversion and exchange rights as the Board may grant in its
discretion. When issued for payment as described in this Prospectus, the Fund's
shares will be fully paid and non-assessable. Further, shareholders of each
class are entitled to one vote for each full share held and proportionate
fractional votes for fractional shares held, and will vote in the aggregate and
not by class, 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
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<PAGE> 18
arrangements with Service Organizations with respect to Dollar shares, and Plus
shares will enjoy similar voting rights on matters pertaining to the Fund's
arrangements with Service Organizations with respect to Plus shares. (See
"Management of the Fund--Service Organizations.") Shares of the Company have
non-cumulative voting rights and, accordingly, the holders of more than 50% of
the Company's outstanding shares (irrespective of class or series) may elect all
of the directors.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Redemption of Shares."
PERFORMANCE
From time to time the Fund may advertise the "total return", "yields,"
"effective yields" and "tax-equivalent yields" of its Money, Dollar and Plus
shares. Performance quotations are computed separately for each separate class
of shares. Performance figures are based on historical earnings and are not
intended to indicate future performance. The "yield" for each class of Fund
shares refers to the income generated by an investment in the shares of such
class over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week 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 class of Fund shares is assumed to be reinvested in
shares of that class. The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment. The
"tax-equivalent yield" shows the level of taxable yield necessary to produce an
after-tax yield equivalent to the Fund's tax-free yield. It is calculated by
increasing the Fund's yield (calculated as above) by the amount necessary to
reflect the payment of Federal and California income taxes at a stated tax rate.
The "tax-equivalent yield" will always be higher than the "yield."
The performance of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses. The performance
of Money, as well as Dollar and Plus, shares will fluctuate and is not
necessarily representative of future results. Any fees charged by broker-
dealers, banks or others directly to their customers in connection with
investments in the Fund are not reflected in the performance of the Fund's
shares, and such fees, if charged, will reduce the actual return received by
customers on their investments. Investors may call 800-821-6006 to obtain the
current yields on each series of the Fund's shares.
16
<PAGE> 19
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR 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 FUND OR ITS
DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN
OFFERING BY THE FUND OR BY
THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE
MADE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Background and Expense
Information.................. 2
Financial Highlights........... 3
Investment Objective and
Policies..................... 5
Purchase of Shares............. 9
Redemption of Shares........... 9
Management of the Fund......... 11
Dividends...................... 14
Taxes.......................... 14
Description of Shares and
Miscellaneous................ 15
Performance.................... 16
</TABLE>
CALIFORNIA
MONEY FUND
AN INVESTMENT PORTFOLIO
OFFERED BY
MUNICIPAL FUND FOR
CALIFORNIA INVESTORS, INC.
LOGO
Prospectus
May 31, 1998
<PAGE> 20
CALIFORNIA MONEY FUND
(Dollar Shares)
An Investment Portfolio Offered by
Municipal Fund for California Investors, Inc.
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
4. General Description of Registrant ..................... Financial Highlights;
Investment Objective
and Policies
5. Management of the Fund ................................ Management of the Fund
6. Capital Stock and Other Securities .................... Cover Page;
Financial Highlights;
Dividends; Taxes;
Description of Shares
and Miscellaneous; Yield
7. Purchase of Securities Being Offered .................. Management of the Fund;
Purchase of Shares;
Redemption of Shares
8. Redemption or Repurchase .............................. Redemption of Shares
9. Legal Proceedings ..................................... Inapplicable
</TABLE>
<PAGE> 21
California Money Fund
(Dollar Shares)
An Investment Portfolio Offered by
Municipal Fund for California Investors, Inc.
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders call:
400 Bellevue Parkway Morgan Guaranty Trust Company of New York
Suite 100 at (800) 521-5411.
Wilmington, Delaware 19809
</TABLE>
Municipal Fund for California Investors, Inc. (the "Company") is a no-load,
open-end investment company currently offering shares in the California Money
Fund (the "Fund"). This Prospectus offers one class of shares ("Dollar Shares")
in the Fund. The Fund is a non-diversified investment company that is designed
primarily to provide California institutional investors and their customers with
as high a level of current interest income that is exempt from Federal income
tax and, to the extent possible, from California state personal income tax as is
consistent with the preservation of capital and relative stability of principal.
Portfolio securities held by the Fund will generally have remaining maturities
of 13 months or less and will be determined by the investment adviser to have
minimal credit risk.
PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve as the
Fund's administrators. PDI also serves as the Fund's distributor. BlackRock
Institutional Management Corporation ("BIMC"), formerly PNC Institutional
Management Corporation ("PIMC"), serves as the Fund's investment adviser. Morgan
Guaranty Trust Company of New York will act as the Service Organization on
behalf of its customers and customers of its affiliates with respect to all
shares offered by this Prospectus. 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.
THE FUND MAY INVEST A SIGNIFICANT PERCENTAGE OF ITS ASSETS IN A SINGLE
ISSUER, AND THEREFORE INVESTMENT IN THE FUND MAY BE RISKIER THAN AN INVESTMENT
IN OTHER TYPES OF MONEY MARKET FUNDS.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED, OR
ENDORSED BY ANY BANK INCLUDING MORGAN GUARANTY TRUST COMPANY OF NEW YORK, PNC
BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES OF THE FUND ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENTS IN SHARES OF THE
FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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 has been filed with the
Securities and Exchange Commission ("SEC"). The current Statement of Additional
Information is available to investors without charge by calling the Fund at
800-821-7432. The Prospectus and Statement of Additional Information are also
available for reference, along with other related materials, on the SEC Internet
Web Site (http://www.sec.gov). The Statement of Additional Information, as
amended from time to time, is incorporated by reference in its entirety 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.
------------------------
May 31, 1998
<PAGE> 22
BACKGROUND AND EXPENSE INFORMATION
The Company was organized as a Maryland corporation on September 20, 1982
and currently offers three separate classes of shares in the Fund--California
Money ("Money"), California Money Dollar ("Dollar") and California Money Plus
("Plus"). The public offering of Money shares commenced on February 28, 1983,
the public offering of Plus shares commenced on September 30, 1985 and the
public offering of Dollar Shares commenced on January 9, 1991. Shares of each
class represent equal pro rata interests in a single portfolio of high quality,
short-term, tax-exempt obligations maintained by the Fund (see "Investment
Objective and Policies"), except that Dollar Shares bear the additional expense
of service fees payable by the Fund (at the rate of .25% per annum) to Service
Organizations for support services they provide to the beneficial owners of such
shares and Plus shares bear the additional expense of service fees payable by
the Fund (at the rate of .25% per annum) to certain organizations that provide
services to the beneficial owners of such shares. (See "Management of the
Fund--Service Organizations.")
EXPENSE SUMMARY
<TABLE>
<CAPTION>
DOLLAR
SHARES
-----------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (net of waivers).......................... .07%
Other Expenses............................................ .38%
Administration Fees (net of waivers).................... .07%
Non-12b-1 Fees.......................................... .25%
Other................................................... .06%
====
Total Fund Operating Expenses (net of waivers)............ .45%
</TABLE>
- ---------------
EXAMPLE
<TABLE>
<S> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (1) a hypothetical 5% annual return
and (2) redemption at the end of each time period with
respect to the Dollar Shares:
1 Year................................................. $ 5
3 Years................................................ $14
5 Years................................................ $25
10 Years................................................ $57
</TABLE>
The foregoing Expense Summary and Example are intended to assist investors
in understanding the various costs and expenses that an investor in the Fund
will bear directly or indirectly. In addition, institutional investors may
charge their customers fees for providing services in connection with
investments in the Fund's Dollar and Plus shares. (For more complete
descriptions of the various costs and expenses, see "Management of the Fund" in
the Prospectus and "Management of the Company" in the Statement of Additional
Information and the Financial Statements and related notes incorporated by
reference into the Statement of Additional Information.) Absent fee waivers for
the year ended January 31, 1998. "Total Fund Operating Expenses" for the Fund's
Dollar Shares were .71% of the Fund's average daily net assets. The investment
adviser and administrators may from time to time waive the advisory and
administration fees otherwise payable to them and may reimburse the Fund for its
operating expenses. The Fund has received a No-Action letter from the SEC that
will permit the Fund to receive credits from its custodian, an affiliate of the
Fund's investment adviser, for certain cash balances held by the custodian. If
implemented, such credits may reduce custodian fees payable by the Fund but may
not reduce the Fund's total operating expense ratio. The foregoing table has not
been audited by the Fund's independent accountants.
THE EXAMPLE SHOWN ON THIS PAGE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL INVESTMENT RETURN
AND OPERATING EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE> 23
FINANCIAL HIGHLIGHTS
The tables of "Financial Highlights" below are derived from the Fund's
financial statements incorporated by reference into the Statement of Additional
Information and set forth certain information concerning the historic investment
results for Money, Dollar and Plus shares. The financial highlights for the
fiscal years ended January 31, 1998, 1997, 1996, 1995 and 1994 have been audited
by Coopers & Lybrand L.L.P., the Fund's independent accountants whose report
thereon is incorporated by reference into the Statement of Additional
Information along with the financial statements. This information should be read
in conjunction with the financial statements and notes incorporated by reference
into the Statement of Additional Information. The Fund's financial statements
and more information about the performance of the Fund is also contained in the
Annual Report to Shareholders, which may be obtained without charge by calling
800-521-5411.
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout each period)
<TABLE>
<CAPTION>
MONEY SHARES
--------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year.............. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net Investment Income........................ 0.0334 0.0316 0.0356 0.0281 0.0223 0.0251 0.0375
-------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to Shareholders From Net Investment
Income....................................... (0.0334) (0.0316) (0.0356) (0.0281) (0.0223) (0.0251) (0.0375)
-------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Year.................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ======== ========
Total Return.................................... 3.39% 3.21% 3.62% 2.84% 2.25% 2.54% 3.82%
Ratios/Supplemental Data:
Net Assets, End of Year $(000)................. $460,339 $326,521 $389,883 $385,824 $356,501 $359,193 $490,141
Ratio of Expenses to Average Net Assets(1)..... .20% .20% .20% .20% .20% .30% .30%
Ratio of Net Investment Income to Average Net
Assets....................................... 3.34% 3.15% 3.55% 2.79% 2.23% 2.52% 3.75%
<CAPTION>
MONEY SHARES
----------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
01/31/91 01/31/90 01/31/89
-------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year.............. $1.00 $1.00 $1.00
-------- ---------- ----------
Income from Investment Operations:
Net Investment Income........................ 0.0509 0.0578 0.0500
-------- ---------- ----------
Less Distributions:
Dividends to Shareholders From Net Investment
Income....................................... (0.0509) (0.0578) (0.0500)
-------- ---------- ----------
Net Asset Value, End of Year.................... $1.00 $1.00 $1.00
======== ========== ==========
Total Return.................................... 5.21% 5.93% 5.12%
Ratios/Supplemental Data:
Net Assets, End of Year $(000)................. $629,001 $1,046,590 $1,105,956
Ratio of Expenses to Average Net Assets(1)..... .29% .30% .30%
Ratio of Net Investment Income to Average Net
Assets....................................... 5.10% 5.78% 5.01%
</TABLE>
- ---------------
(1) Annualized operating expense ratios before waivers of Investment Adviser and
Administrator fees for Money shares for the years ended January 31, 1998,
1997, 1996, 1995, 1994, 1993, 1992, 1991, 1990 and 1989 were .46%, .48%,
.48%, .48%, .49%, .48%, .48%, .46%, .47% and .47%, respectively.
3
<PAGE> 24
<TABLE>
<CAPTION>
DOLLAR SHARES
--------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR 1/9/91(1)
ENDED ENDED ENDED ENDED ENDED ENDED ENDED TO
01/31/98 01/31/97 01/31/96 01/31/95 01/31/94 01/31/93 01/31/92 1/31/91
-------- -------- -------- -------- -------- -------- -------- ---------
<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................ 0.0309 0.0291 0.0331 0.0256 0.0198 0.0226 0.0350 0.0024
------- ------- ------- ------- ------- ------- ------ -------
Less Distributions:
Dividends to Shareholders from Net
Investment Income.................... (0.0309) (0.0291) (0.0331) (0.0256) (0.0198) (0.0226) (0.350) (0.0024)
------- ------- ------- ------- ------- ------- ------ -------
Net Asset Value, End of Period........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= ====== =======
Total Return............................. 3.14% 2.96% 3.37% 2.59% 2.00% 2.29% 3.57% 3.87%(2)
Ratios/Supplemental Data:
Net Assets, End of Period $(000)....... $130,547 $126,321 $31,163 $11,026 $19,098 $11,750 $6,599 $1,126
Ratio of Expenses to Average Net
Assets(3)............................ .45% .45% .45% .45% .45% .55% .55% .54%(2)
Ratio of Net investment Income to
Average Net Assets................... 3.09% 2.90% 3.30% 2.54% 1.98% 2.27% 3.50% 3.85%(2)
</TABLE>
- ---------------
(1) Commencement of operations.
(2) Annualized.
(3) Annualized operating expense ratios before waivers of investment Adviser and
Administrator fees for Dollar Shares for the years ended January 31, 1998,
1997, 1996, 1995, 1994, 1993 and 1992 were .71%, .73%, .73%, .73%, .74%,
.73% and .73%, respectively, and for the period ended January 31, 1991 was
.71%.
<TABLE>
<CAPTION>
PLUS SHARES
--------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
01/31/98(1) 01/31/97(1) 01/31/96(1) 01/31/95(1) 01/31/94(1) 01/31/93(1) 01/31/92
----------- ----------- ----------- ----------- ----------- ----------- --------
<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.... -- -- -- -- -- 0.0191 0.0350
------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income................. -- -- -- -- (--) (0.0191) (0.0350)
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
Year..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= ======= =======
Total Return............... -- -- -- -- -- 1.93% 3.57%
Ratios/Supplemental Data:
Net Assets, End of Year
$(000)................. -- -- -- -- -- -- $27,656
Ratio of Expenses to
Average Net
Assets(2).............. -- -- -- -- -- .55% .55%
Ratio of Net Investment
Income to Average Net
Assets................. -- -- -- -- -- 2.27% 3.50%
<CAPTION>
PLUS SHARES
------------------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
01/31/91 01/31/90 01/31/89
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning
of Period................ $1.00 $1.00 $1.00
------- ------- -------
Income from Investment
Operations:
Net Investment Income.... 0.0484 0.0553 0.0475
------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income................. (0.0484) (0.0553) (0.0475)
------- ------- -------
Net Asset Value, End of
Year..................... $1.00 $1.00 $1.00
======= ======= =======
Total Return............... 4.96% 5.68% 4.87%
Ratios/Supplemental Data:
Net Assets, End of Year
$(000)................. $19,872 $26,769 $15,961
Ratio of Expenses to
Average Net
Assets(2).............. .54% .55% .55%
Ratio of Net Investment
Income to Average Net
Assets................. 4.85% 5.53% 4.76%
</TABLE>
- ---------------
(1 )Only 100 Plus shares were outstanding during the period from December 1,
1992 to July 12, 1995. Since July 31, 1995, no Plus shares were outstanding.
(2 )Annualized operating expense ratios before waivers of Investment Adviser and
Administrator fees for Plus shares for the years ended January 31, 1993,
1992, 1991, 1990, 1989 and 1988 were .64%, .73%, .71%, .72%, .72%., and
.73%, respectively.
4
<PAGE> 25
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The Fund is a no-load, open-end, non-diversified investment company which
has an investment objective to provide investors with as high a level of current
interest income that is exempt from Federal income tax and, to the extent
possible, from California state personal income tax as is consistent with the
preservation of capital and relative stability of principal. There can be, of
course, no assurance that the Fund will achieve its investment objective. The
Fund has a service plan applicable to the Dollar Shares. See "Service
Organizations."
Substantially all of the Fund's assets are invested in debt obligations
issued by or on behalf of the State of California and other states, territories
and possessions of the United States, the District of Columbia and their
respective authorities, agencies, instrumentalities and political sub-divisions
and tax-exempt derivatives such as tender option bonds, participations,
beneficial interests in trusts and partnership interests ("Municipal
Obligations"). Dividends paid by the Fund that are derived from interest on
bonds that is exempt from taxation under the Constitution or statutes of
California ("California Municipal Obligations") are exempt from regular Federal
income tax and California state personal income tax. California Municipal
Obligations include municipal securities issued by the State of California and
its political sub-divisions, as well as certain other governmental issuers such
as the Commonwealth of Puerto Rico. Dividends derived from interest on municipal
obligations other than California Municipal Obligations are exempt from regular
Federal income tax but may be subject to California state personal 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.) The Fund expects that, except during
temporary defensive periods or when acceptable securities are unavailable for
investment by the Fund, the Fund's assets will be invested primarily in
California Municipal Obligations. At least 50% of the Fund's assets must be
invested in obligations which, when held by an individual, the interest
therefrom is exempt from California personal income taxation (i.e., California
Municipal Obligations and certain U.S. Government obligations) at the close of
each quarter of its taxable year so as to permit the Fund to pay dividends that
are exempt from California state personal income tax. Dividends, regardless of
their source, may be subject to local taxes.
The Fund will not knowingly purchase securities the interest on which is
subject to regular Federal income tax; however, 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. Uninvested cash reserves will not earn income.
The Fund invests in Municipal Obligations that are determined by the Fund's
investment adviser to present minimal credit risks pursuant to guidelines
approved by the Company's Board of Directors pursuant to Rule 2a-7 under the
Investment Company Act of 1940, as amended (the "1940 Act"). Pursuant to these
guidelines, the Fund is authorized to purchase instruments that are considered
"Eligible Securities" under that Rule. Eligible Securities consist, generally,
of the following types of securities (i) instruments rated at the time of
purchase in one of the top two rating categories by at least two unaffiliated
nationally recognized statistical rating organizations ("Rating Agencies"), (ii)
instruments rated at the time of purchase in one of the top two rating
categories by one such Rating Agency (if only one such organization rates the
instrument), (iii) instruments issued by issuers (or, in certain cases
guaranteed by persons) with short-term debt having such ratings, (iv)
instruments without such ratings that have been determined by the investment
adviser, pursuant to procedures
5
<PAGE> 26
approved by the Board of Directors, to be of comparable quality, (v) certain
money market fund shares, and (vi) U.S. Government securities. The Appendix to
the Statement of Additional Information includes a description of applicable
NRSRO ratings.
The Fund intends to use its best efforts to maintain its net asset value at
$1.00 per share, and computes its net asset value using the amortized cost
method. In connection with its use of this valuation method, the Fund limits the
dollar-weighted average maturity of its portfolio to not more than 90 days and
the remaining maturity of each portfolio security to not more than 13 months
(with certain exceptions).
The Fund's investment objective and the policies described herein may be
changed by its Board of Directors without the affirmative vote of the holders of
a majority of the Fund's outstanding shares, except that the Fund may not change
the following investment limitations without such a vote of shareholders. Other
investment limitations that cannot be changed without a vote of shareholders are
contained in the Statement of Additional Information under "Investment
Objectives and Policies."
THE FUND MAY NOT:
1. Invest less than 80% of its assets in securities the interest on
which is exempt from Federal income taxes, except during defensive periods.
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 (a) up to 50% of the value of the Fund's assets
may be invested without regard to this 5% limitation; provided that no more
than 25% of the value of the Fund's assets are invested in the securities
of any one issuer and (b) this 5% limitation does not apply to securities
issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities. For purposes of this limitation, a security is
considered to be issued by the governmental entity (or entities) whose
assets and revenues back the security, or, with respect to a private
activity bond that is backed only by the assets and revenues of a non-
governmental user, by such non-governmental user. In certain circumstances,
the guarantor of a guaranteed security may also be considered to be an
issuer in connection with such guarantee.
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
intended for investment leverage, but solely to facilitate management of
the Fund's portfolio by enabling the Fund to meet redemption requests when
the liquidation of portfolio securities is deemed to be disadvantageous or
inconvenient, and hence the Fund may not purchase any portfolio securities
while its borrowings are outstanding.)
4. Invest more than 10% of the value of the Fund's total assets in
illiquid securities (including illiquid variable rate demand notes) which
may be illiquid due to legal or contractual restrictions on resale or the
absence of readily available market quotations.
5. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of purchase to be invested in
the securities of issuers conducting their principal business activities in
the same industry; provided that this limitation shall not apply to
Municipal Obligations or governmental guarantees of Municipal Obligations;
and provided, further, that for
6
<PAGE> 27
the purpose of this limitation only, industrial development bonds that are
considered to be issued by non-governmental users (see the second
investment limitation above) shall not be deemed to be Municipal
Obligations.
Additionally, pursuant to SEC Rule 2a-7 under the 1940 Act, with respect to
75% of the Fund's total assets, the Fund may not invest more than 5% of its
assets, measured at the time of purchase, in the securities of any one issuer
other than U.S. Government securities, repurchase agreements collateralized by
such securities and securities subject to certain guarantees. The Fund's
compliance with the diversification requirements of SEC Rule 2a-7 will be deemed
compliance with the diversification restrictions under the 1940 Act.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from Federal income tax (and, with respect to
California Municipal Obligations, to the exemption of interest thereon from
California state personal 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 derivatives are rendered by counsel to the respective sponsors of
such derivatives. Neither the Fund nor its investment adviser will review the
proceedings relating to the issuance of Municipal Obligations, the creation of
any tax-exempt derivatives, or the bases for such opinions.
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 may include private activity bonds.
Such bonds may be issued by or on behalf of public authorities to finance
various privately operated facilities, and are not payable from the unrestricted
revenues of the issuer. As a result, the credit quality of private activity
bonds is frequently related directly to the credit standing of private
corporations or other entities.
The Fund's portfolio may also include "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities 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 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 above. 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. Adverse developments affecting the banking industry
generally or a particular bank or financial institution that has provided its
credit or guarantee with respect to a Municipal Obligation held by the Fund,
including a change in the credit quality of any such bank or financial
institution, could result in a loss to the Fund and adversely affect the value
of its shares. Such instruments may carry stated maturities in excess of
7
<PAGE> 28
397 days 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, the Fund may be
entitled to principal on demand and may be able to resell such instruments in
the dealer market.
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, and that a commitment by the Fund to purchase when-issued securities
will not exceed 45 days. 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 agrees to purchase at the Fund's option specified Municipal Obligations
at a price equal to their amortized cost value plus accrued interest. The Fund
will acquire stand-by commitments solely to facilitate portfolio liquidity and
does not intend to exercise its rights thereunder for trading purposes.
RISK FACTORS
THE FUND IS CONCENTRATED IN SECURITIES ISSUED BY THE STATE OF CALIFORNIA OR
ENTITIES WITHIN THE STATE OF CALIFORNIA AND THEREFORE, INVESTMENT IN THE FUND
MAY BE RISKIER THAN AN INVESTMENT IN OTHER TYPES OF MONEY MARKET FUNDS.
The Fund may invest more than 25% of its assets in Municipal Obligations
the interest on which is paid solely from revenues on similar projects if such
investment is deemed necessary or appropriate by the Fund's investment adviser.
To the extent that the Fund's assets are invested in Municipal Obligations
payable from revenues on similar projects, the Fund will be subject to the
particular risks presented by the laws and economic conditions related to such
projects to a greater extent than it would be if the Fund's assets were not so
invested.
The Fund's ability to achieve its investment objective is dependent upon
various factors, including the ability of the issuers of California Municipal
Obligations to timely meet their continuing payment obligations with respect to
the municipal obligations. Any reductions in the creditworthiness of issuers of
California Municipal Obligations could adversely affect the market values and
marketability of California Municipal Obligations, and consequently, the net
asset value of the Fund's portfolio.
On July 15, 1994 and July 6, 1994, respectively, Standard & Poor's Ratings
Services and Moody's Investors Service, Inc., citing the State of California's
deteriorating financial position, lowered their ratings of the State's general
obligation bonds from A+ and Aa, respectively, to A and A1, respectively. On
July 30, 1996, Standard & Poor's Ratings Services upgraded California's general
obligation bonds to A+.
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives could result
in certain adverse consequences affecting California Municipal Obligations.
Significant financial and other considerations relating to the Fund's
investments in California Municipal Obligations are summarized in the Statement
of Additional Information.
8
<PAGE> 29
The services provided to the Fund by BIMC and others depend in large part
on the smooth functioning of their computer systems. Many computer software
systems in use today cannot recognize the year 2000, but revert to 1900 or some
other date, due to the manner in which dates were encoded or calculated. The
capability of these systems to recognize the year 2000 could have a negative
impact on BIMC's provision of investment advisory services, including the
handling of securities trades and pricing. Both BIMC and PFPC have advised the
Fund that they have been reviewing all of their computer systems, are actively
working on necessary changes to those systems to prepare for the year 2000 and
expect that given the extensive testing which they are undertaking, their
systems will be year 2000 compliant before such date. There can, however, be no
assurance that BIMC or any other service provider will be successful in
achieving year 2000 compliance, or that interaction with other non-complying
computer systems will not impair services to the Fund at that time.
PURCHASE OF SHARES
Dollar Shares are sold to Service Organizations acting on behalf of their
customers. Morgan Guaranty Trust Company of New York ("Morgan") will act as
Service Organization for its customers and customers of its affiliates with
respect to all shares offered by this Prospectus. Purchase orders are
transmitted by Morgan directly to PFPC, the Fund's transfer agent. All such
transactions are effected through a customer's account through procedures
established in connection with the requirements of the 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 will be accepted by the Fund only on a day 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
by Morgan to PFPC by telephone. Orders accepted by PFPC by Noon, Eastern time
(9:00 A.M., Pacific time) will be executed the same day if PNC Bank, the Fund's
Custodian, has received payment by 4:00 P.M., Eastern time (1:00 P.M., Pacific
time) that day. Orders received at other times, and orders for which payment has
not been received by 4:00 P.M., Eastern time (1:00 P.M., Pacific 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 by PNC Bank to the sending institution.
Payment for shares may be made only in Federal Funds or other funds
immediately available to PNC Bank. The minimum initial investment is $5,000 and
there is no minimum subsequent investment; however, Service Organizations such
as Morgan may set a higher minimum initial investment and minimum subsequent
investment for their customers. The Fund may in its discretion reject any
purchase order for shares.
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. 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, the
Department of Labor or state securities commissions, should consult legal
counsel before investing in Dollar Shares. (See also "Management of the
Fund--Banking Laws.")
9
<PAGE> 30
REDEMPTION OF SHARES
REDEMPTION PROCEDURES
Redemption orders must be given by shareholders to Morgan and transmitted
by Morgan to PFPC by telephone in the manner described under "Purchase of
Shares." Shares are redeemed at the net asset value per share next determined
after receipt of the redemption order by PFPC. While the Fund intends to use its
best efforts to maintain its net asset value per share of each of its series at
$1.00, the proceeds paid 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 accepted by
PFPC prior to Noon, Eastern time (9:00 A.M., Pacific time) on a Business Day is
normally made in Federal Funds wired to the redeeming shareholder on the same
Business Day. Payment for redeemed shares for which a redemption order is
accepted by PFPC after Noon, Eastern time (9:00 A.M., Pacific time) on such a
Business Day or on a day that PNC is closed is normally made in Federal Funds
wired to the redeeming shareholder on the next Business Day that PNC Bank is
open. The Fund reserves the right to wire redemption proceeds within 7 days
after accepting the redemption order if, in the judgment of the Fund's
administrator, an earlier payment could adversely affect the Fund.
The Fund may suspend the right of redemption or postpone the date of
payment upon redemption (as well as suspend or postpone the recordation of the
transfer of its shares) for such periods as are permitted under the 1940 Act.
The Fund reserves the right to redeem the shares of the Fund owned by a
shareholder at their net asset value if the value of such shares is less than
$500. Any such shareholder will be notified in writing that its shares have a
value of less than $500 and will be allowed 60 days to make an additional
investment before the redemption is processed by the Fund. Service Organizations
such as Morgan may require that customers maintain share accounts with minimum
balances in excess of $500. The Fund may also redeem shares involuntarily (and
restrict the transfer of its shares) 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 BIMC as of Noon and 4:00 P.M., Eastern time
(9:00 A.M. and 1:00 P.M., Pacific time) on each Business Day (excluding those
holidays on which either the New York Stock Exchange or the Federal Reserve Bank
of Philadelphia is closed). Currently, the holidays which the New York Stock
Exchange or the Federal Reserve Bank of Philadelphia observe are New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day. The net asset value per share of each of the Fund's classes is
the same and is calculated by adding the value of all of the Fund's portfolio
securities and other assets, subtracting liabilities and dividing the results by
the number of the Fund's outstanding shares (irrespective of class). Portfolio
securities are valued on the basis of amortized cost. Under this method, the
Fund values a portfolio security at cost on the date of purchase and thereafter
assumes a constant amortization of any discount or premium until maturity of the
security. As a result, the value of the security for purposes of determining net
asset value normally does not change in response to fluctuating interest rates.
While the amortized cost method seems to provide certainty in portfolio
valuation, it may result in periods during which values, as determined by
amortized cost, are higher or lower than the amount the Fund would receive if it
sold the securities.
10
<PAGE> 31
Shares of the Fund are sold and redeemed without charge by the Fund,
although Service Organizations (see below) purchasing or holding Fund shares for
their customers' accounts may charge customers for cash management and other
services provided in connection with their accounts including, for example,
account maintenance fees, compensating balance requirements or fees based upon
account transactions, assets or income. Such charges will reduce the yield of
the Fund to such customers. A customer should therefore read this Prospectus in
light of the terms governing its account with a Service Organization 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 agreements with its customers.
11
<PAGE> 32
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The business and affairs of the Fund are managed under the direction of the
Company's Board of Directors. The directors of the Company are as follows:
G. Willing Pepper, Chairman of the Board and President of the Company,
is a former President of Scott Paper Company.
Rodney D. Johnson is President of Fairmount Capital Advisors, Inc.
William R. Howell is a former Vice Chairman, Union Bank, Los Angeles.
Rudolph A. Peterson is Honorary Director and former President and
Chief Executive Officer of BankAmerica Corporation.
Anthony M. Santomero is the Richard K. Mellon Professor of Finance at
The Wharton School, University of Pennsylvania.
INVESTMENT ADVISER
BIMC, a wholly-owned subsidiary of PNC Bank, serves as the Fund's
investment adviser. BIMC is one of the largest bank managers of mutual funds,
with assets currently under management in excess of $39 billion. BIMC 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 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 in the
Philadelphia area 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 (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. PNC Bank also serves as the Fund's custodian.
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, BIMC manages the Fund's portfolio and is responsible
for all purchases and sales of the Fund's portfolio securities. BIMC 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, BIMC is entitled to receive a fee, computed
daily and payable monthly based on the Fund's average net assets. BIMC 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. For the fiscal year ended January 31, 1998, the Fund paid
advisory fees to BIMC (after fee waivers) of .07% of the Fund's average daily
net assets.
PNC Bank was formerly sub-adviser to the Fund and provided research, credit
analysis and recommendations with respect to the Fund's investments and supplied
certain computer facilities, personnel and other services. The facilities,
personnel, services and related expenses have been
12
<PAGE> 33
transferred to BIMC and in return, BIMC's obligation to pay a portion of the
sub-advisory fee to PNC Bank has been terminated. For its sub-advisory services,
PNC Bank is entitled to receive from BIMC an amount equal to 75% of the
investment advisory fee paid by the Fund to BIMC (subject to adjustment in
certain circumstances). The sub-advisory fees paid by BIMC to PNC Bank had no
effect on the investment advisory fees payable by the Fund to BIMC. The services
provided by BIMC and the fees payable by the Fund for these services are
described further in the Statement of Additional Information under "Management
of the Company."
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
co-administrators. PFPC is an indirect wholly-owned subsidiary of PNC Bank Corp.
All of the outstanding stock of PDI is owned by PDI's chief executive officer.
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. (For information regarding
the administrators' waivers, 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 January 31, 1998, the Fund paid PFPC and PDI
administrative fees (after fee waivers) aggregating .07% of its average daily
net assets.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent. PFPC's address 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 Company."
DISTRIBUTOR
PDI 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.
13
<PAGE> 34
SERVICE ORGANIZATIONS
As stated above, Service Organizations may purchase Dollar Shares offered
by the Fund. Morgan Guaranty Trust Company of New York, 522 Fifth Avenue, New
York, New York 10036, will act as the Service Organization for the Dollar Shares
offered by this Prospectus.
Dollar Shares are sold to institutions other than broker/dealers which
enter into servicing agreements with the Fund requiring them to provide support
services to their customers who are the beneficial owners of such shares in
consideration for .25% (on an annualized basis) of the average daily net asset
value of the Dollar Shares held by the Service Organizations for the benefit of
their customers. Such services, which are described more fully in the Statement
of Additional Information under "Management of the Company--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 not provided by the transfer agent
with respect to shares beneficially owned by customers or the information
necessary for sub-accounting. 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 their customers relating to the investment of their
customers' assets 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 Fund bears the expenses incurred in its
operations. The ratio of the Fund's expenses to its average daily net assets for
its Dollar Shares for the fiscal year ended January 31, 1998 was .45%.
BANKING LAWS
Banking laws and regulations currently 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
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, BIMC and PFPC, as well as certain 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 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. 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.
14
<PAGE> 35
DIVIDENDS
The Fund distributes substanially all of its net investment income and
capital gains, if any, to shareholders each year. Dividends for each class are
equal to the net income available for the particular class involved and are
determined in the same manner across classes. Net income available for
dividends on the Dollar Shares is after deduction of all expenses related to
the class, including fees paid to Service Organizations for their services with
respect to Dollar Shares. (See "Management of the Fund--Service
Organizations.") Shares of each class begin accruing dividends on the day the
purchase order for the shares is executed and continue to accrue dividends
through, and including, the day before the redemption order for the shares is
executed.
Dividends are paid monthly by check, or by wire transfer if requested in
writing by the shareholder, within 5 business days after the end of the month or
within 5 business days of the redemption of all of a shareholder's shares of a
particular class. The Fund does not expect to realize net long-term capital
gains.
Institutional shareholders may elect to have their dividends reinvested in
additional full and fractional shares of the same class with respect to which
dividends are declared valued at their net asset value 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, and
will become effective with respect to dividends paid after its receipt by PFPC.
TAXES
It is intended that the Fund will separately qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification generally relieves the Fund of liability for Federal
income and California franchise and income taxes to the extent the Fund's
earnings are distributed in accordance with the Code.
The Fund's policy is to pay its shareholders with respect to each taxable
year dividends equal to at least the sum of 90% of its exempt interest income
(net of certain deductions) and 90% of its investment company taxable income (if
any) for such year. Dividends derived from exempt-interest income (known as
"exempt-interest dividends") 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
exclusion would be disallowed. (See 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 applicable to corporations.
Corporate shareholders also must take all exempt-interest dividends into account
in determining certain adjustments for alternative minimum tax purposes.
Shareholders receiving Social Security benefits or Railroad Retirement Act
benefits should note that all exempt-interest dividends will be taken into
account in determining the taxability of such benefits.
Dividends that are paid by the Fund to non-corporate shareholders and are
derived from interest on California Municipal Obligations or certain U.S.
Government obligations are also exempt from
15
<PAGE> 36
California state personal income tax. However, dividends paid to corporate
shareholders subject to California state franchise tax or California state
corporate income tax will be taxed as ordinary income to such shareholders,
notwithstanding that all or a portion of such dividends is exempt from
California state personal income tax. Moreover, to the extent that the Fund's
dividends are derived from interest on debt obligations other than California
Municipal Obligations or certain U.S. Government obligations, such dividends
will be subject to California state personal income tax, even though such
dividends may be exempt for Federal income tax purposes.
Exempt-interest dividends derived from U.S. Government obligations
generally will be exempt from state and local tax as well. However, except as
noted with respect to California state personal income tax, in some situations
distributions of net investment income may be taxable to investors under state
or local law as dividend income even though all or a portion of such
distributions may be derived from interest on tax-exempt obligations which, if
realized directly, would be exempt from such income taxes. To the extent, if
any, that dividends paid to shareholders are derived from taxable interest or
from long-term or short-term capital gains, such dividends will not be exempt
from Federal income tax or California state personal income tax.
Fund shareholders will be advised at least annually as to the Federal and
California state personal income tax consequences of distributions made each
year.
The foregoing is only a brief summary of some of the important 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 advisers with specific reference to their own
tax situations.
DESCRIPTION OF SHARES AND MISCELLANEOUS
The Company's Charter authorizes the Board of Directors to issue up to
three billion full and fractional shares of capital stock, $.001 par value per
share, and to classify or reclassify any unissued shares of the Fund into one or
more classes or series by setting or changing in any one or more respects their
respective preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption. Pursuant to such authority, the Board of Directors has classified
2.3 billion of its shares as California Money shares (Class A Common Stock), 300
million of its shares as California Money Dollar Shares (Class A Common
Stock-Special Series 1) and 300 million of its shares as California Money Plus
shares (Class A Common Stock-Special Series 2).
This Prospectus relates primarily to the Dollar Shares of the Fund. For
information regarding the Money Shares and Plus Shares of the Fund, you may call
Provident Institutional Funds at (800) 441-7450. Each Money, Dollar and Plus
share represents an equal proportionate interest in the assets of the Fund. Fund
shares have no pre-emptive rights and only such conversion and exchange rights
as the Board may grant in its discretion. When issued for payment as described
in this Prospectus, the Fund's shares will be fully paid and non-assessable.
Further, shareholders of each class are entitled to one vote for each full share
held and proportionate fractional votes for fractional shares held, and will
vote in the aggregate and not by class, 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 with respect to Dollar Shares, and Plus shares will enjoy similar
voting rights on matters pertaining to the Fund's arrangements with
16
<PAGE> 37
certain organizations providing services with respect to Plus shares. (See
"Management of the Fund--Service Organizations.") Shares of the Company have
non-cumulative voting rights and, accordingly, the holders of more than 50% of
the Company's outstanding shares (irrespective of class or series) may elect all
of the directors.
For information concerning the redemption of Fund shares and possible
restrictions on their transferability, see "Redemption of Shares."
PERFORMANCE
From time to time the Fund may advertise the "total return," "yields,"
"effective yields" and "tax-equivalent yields" of its Money Dollar and Plus
shares. Performance quotations are computed separately for each separate class
of shares. Performance figures are based on historical earnings and are not
intended to indicate future performance. The "yield" for Dollar Shares refers to
the income generated by an investment in the shares of such class over a
seven-day period (which period will be stated in the advertisement). This income
is then "annualized." That is, the amount of income generated by the investment
during that week is assumed to be generated each week over a 52-week 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 Dollar
Shares is assumed to be reinvested in Dollar Shares. The "effective yield" will
be slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. The "tax-equivalent yield" shows the level of taxable
yield necessary to produce an after-tax yield equivalent to the Fund's tax-free
yield. It is calculated by increasing the Fund's yield (calculated as above) by
the amount necessary to reflect the payment of Federal and California income
taxes at a stated tax rate. The "tax-equivalent yield" will always be higher
than the "yield."
The performance of any investment is generally a function of portfolio
quality and maturity, type of investment and operating expenses. The performance
of Dollar, as well as Money and Plus shares will fluctuate and is not
necessarily representative of future results. Any fees charged by broker-
dealers, banks or others directly to their customers in connection with
investments in the Fund are not reflected in the performance of the Fund's
shares, and such fees, if charged, will reduce the actual return received by
customers on their investments. Investors may call 800-821-6006 to obtain the
current yields on each series of the Fund's shares.
17
<PAGE> 38
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS,
OR 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 FUND OR ITS
DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN
OFFERING BY THE FUND 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 of Shares............. 9
Redemption of Shares........... 10
Management of the Fund......... 12
Dividends...................... 15
Taxes.......................... 15
Description of Shares and
Miscellaneous................ 16
Performance.................... 17
</TABLE>
THE PIERPONT
CALIFORNIA
MONEY ACCOUNT
IN THE CALIFORNIA
MONEY FUND
(DOLLAR SHARES)
LOGO
Prospectus
May 31, 1998
<PAGE> 39
CALIFORNIA MONEY FUND
Investment Portfolio Offered By
Municipal Fund for California Investors, Inc.
Statement of Additional Information
May 31, 1998
Table of Contents
Page
THE COMPANY.............................................................. 1
INVESTMENT OBJECTIVE AND POLICIES........................................ 1
MUNICIPAL OBLIGATIONS.................................................... 6
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION........................... 25
MANAGEMENT OF THE COMPANY................................................ 28
ADDITIONAL INFORMATION CONCERNING TAXES.................................. 36
DIVIDENDS................................................................ 41
COUNSEL.................................................................. 44
INDEPENDENT ACCOUNTANTS.................................................. 45
MISCELLANEOUS............................................................ 45
FINANCIAL STATEMENTS..................................................... 46
APPENDIX................................................................. A-1
This Statement of Additional Information is meant to be read in
conjunction with the Prospectus for California Money Fund dated May 31, 1998,
and is incorporated by reference in its entirety into this Prospectus. Because
this Statement of Additional Information is not itself a prospectus, no
investment in shares of California Money Fund should be made solely upon the
information contained herein. A copy of the Prospectus for California Money 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> 40
THE COMPANY
Municipal Fund for California Investors, Inc. (the "Company") is a
no-load, non-diversified, open-end investment company presently offering the
investment portfolio California Money Fund ("California Money" or the "Fund").
California Money is a money market fund. Substantially all of California Money's
assets are invested in obligations which have remaining maturities of 13 months
or less at the time of purchase. The Fund will not knowingly purchase securities
the interest on which is subject to regular federal income tax; however, the
Fund may hold uninvested cash reserves pending investment during temporary
defensive periods if in the opinion of the Fund's investment adviser, suitable
tax-exempt obligations are unavailable.
INVESTMENT OBJECTIVE AND POLICIES
As stated in California Money's Prospectus, the investment objective of
California Money is to provide investors with as high a level of current
interest income that is exempt from federal income tax and, to the extent
possible, from California state personal income tax as is consistent with the
preservation of capital and relative stability of principal. The following
policies supplement the description of California Money's investment objective
and policy in its Prospectus.
Additional Information on Investment Practices.
Variable and Floating Rate Demand Instruments. Variable and floating
rate demand instruments held by California Money may have maturities of more
than 13 months, provided: (i) California Money is entitled to the payment of
approximate amortized cost plus accrued interest at any time or during specified
intervals not exceeding 13 months, subject to notice of no more than 30 days,
and (ii) the rate of interest on such instruments is adjusted (based upon a
pre-selected market sensitive index such as the prime rate of a major commercial
bank) at periodic intervals not exceeding 13 months. In determining California
Money's average weighted portfolio maturity and whether a variable or floating
rate demand instrument has a remaining maturity of 13 months or less, the
maturity of each instrument will be computed in accordance with guidelines
established by the Securities and Exchange Commission (the "SEC").
In determining whether an unrated variable rate demand instrument is of
comparable quality at the time of purchase to instruments with minimal credit
risk, the Fund's investment adviser will consider the earning power, cash flow
and other liquidity ratios of the issuer of the instrument and will continuously
monitor its financial condition. In addition, the
<PAGE> 41
Fund sometimes requires that the issuer's obligation to pay the principal of the
instrument be backed by an unconditional bank letter or line of credit,
guarantee or commitment to lend.
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.
California Money 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 a long-term fixed-rate Municipal Obligation,
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 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 independently review the
underlying proceedings related to the creation of any tax-exempt derivatives or
the bases for such opinions.
When-Issued Securities. As stated in the Fund's Prospectus, the 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 the Fund
agrees to purchase when-issued securities, its 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
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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 commitment 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.
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 agrees to purchase at a Fund's option specified Municipal
Obligations at its amortized cost value to such Fund plus accrued interest, if
any. (Stand-by commitments acquired by a Fund may also be referred to as a "put"
option.) Stand-by commitments may be sold, transferred or assigned by a Fund
only with the underlying instruments.
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 Funds 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 is not expected to
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. In evaluating the creditworthiness of the issuer of a
stand-by commitment, the investment adviser will review periodically the
issuer's assets, liabilities, contingent claims and other relevant financial
information.
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 will be valued at
zero in determining net asset value. Where the Fund paid any consideration
directly or
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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.
Portfolio Transactions.
Subject to the general control of the Company's Board of Directors,
BlackRock Institutional Management Corporation ("BIMC"), formerly PNC
Institutional Management Corporation, 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. The cost of securities purchased from the underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down. In
transactions with dealers, BIMC 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, BIMC may, in its discretion,
effect transactions in portfolio securities with dealers who provide the Company
with research advice or other services such as information relating to the price
of portfolio securities.
Investment decisions for the Fund are made independently from those for
other investment company portfolios advised by BIMC. Such other investment
company 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 investment company portfolios, transactions are averaged as to
price, and available investments allocated as to amount, in a manner which BIMC
believes to be equitable to each investment company 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, BIMC may aggregate the securities to be
sold or purchased for the Fund with those to be sold or purchased for such other
investment companies in order to obtain best execution.
Portfolio securities will not be purchased from or sold to BIMC, PNC
Bank, National Association ("PNC Bank"), PFPC Inc. ("PFPC"), Provident
Distributors, Inc. ("PDI"), or any affiliated person of any of them (as such
term is defined in the Investment Company Act of 1940, as amended (the "1940
Act")), except to the extent permitted by the SEC. In addition, the Fund will
not purchase Municipal Obligations during the existence of any underwriting or
selling group relating thereto of which PNC Bank 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
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portfolios which have a similar investment objective but are not subject to such
limitations. Furthermore, with respect to such transactions, securities and
deposits, 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 shares of California Money Dollar ("Dollar
shares") or California Money Plus ("Plus 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 this practice, however, only when BIMC, in its sole
discretion, believes such practice to be otherwise in the Fund's interests.
The Fund does not intend to seek profits through short-term trading.
BIMC may, however, dispose of any portfolios' security prior to its maturity if
it believes such disposition is advisable. The Fund's annual portfolio turnover
rate is not expected to have a material effect on its net income.
Other Investment Limitations.
The Prospectus for the Fund sets forth certain investment limitations
that may not be changed with respect to California Money without the affirmative
vote of the holders of a majority of the Fund's outstanding shares (as defined
below under "Additional Information - Miscellaneous"). Similarly, the following
additional investment limitations may not be changed without such a vote of
shareholders.
The Fund may not:
1. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective, policies and
limitations.
2. Underwrite any issue of securities except to the extent that the
purchase of Municipal Obligations directly from the issuer thereof in accordance
with the Fund's investment objective, policies and limitations may be deemed to
be underwriting.
3. Purchase or sell real estate except that the Fund may invest in
Municipal Obligations secured by real estate or interests therein.
4. Purchase securities on margin, make short sales of securities or
maintain a short position.
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5. Write or sell puts, calls, straddles, spreads or combinations
thereof.
6. Purchase or sell commodities or commodity con- tracts, or invest in
oil, gas or mineral exploration or development programs.
7. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition or reorganization.
MUNICIPAL OBLIGATIONS
In General.
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 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 to
shareholders is (subject to the federal alternative minimum tax) exempt from
regular federal income tax.
Before purchasing a tax-exempt derivative for the Fund, BIMC is
required by the Fund's procedures to conclude that the tax-exempt security and
the supporting short-term obligation involve minimal credit risks and are
Eligible Securities under the Fund's Rule 2a-7 procedures. In evaluating the
creditworthiness of the entity obligated to purchase the tax-exempt security,
BIMC will review periodically the entity's relevant financial information.
Currently, the Directors have authorized the purchase of tax-exempt derivatives
by the Fund so long as after any purchase not more than 15% of the Fund's assets
are invested in such securities.
As described in the Prospectus for the Fund, 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
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obligation and the rating of the issue. The ratings of Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Services ("S&P"), Fitch
IBCA Investors Service, L.P. ("Fitch") and Duff & Phelps ("Duff") represent
their opinions as to the quality of Municipal Obligations. It should be
emphasized, 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 their purchase by the Fund, issues of Municipal Obligations may
cease to be rated or their ratings 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 types of Municipal Obligations, the 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 instruments 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, including general obligation and private
activity bonds, provided they have remaining maturities of 13 months or less.
Special Considerations Relating to California Municipal Obligations.
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based on information available as
of the date of this Prospectus from official statements and prospectuses
relating to securities offerings of the State of California and various local
agencies in California. While the Sponsors have not independently verified such
information, they have no reason to believe that such information is not correct
in all material respects.
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ECONOMIC FACTORS
FISCAL YEARS PRIOR TO 1995-96. Pressures on the State's budget in the
late 1980's and early 1990's were caused by a combination of external economic
conditions and growth of the largest General Fund Programs - K-14 education,
health, welfare and corrections -- at rates faster than the revenue base. These
pressures could continue as the State's overall population and school age
population continue to grow, and as the State's corrections program responds to
a "Three Strikes" law enacted in 1994, which requires mandatory life prison
terms for certain third-time felony offenders. In addition, the State's health
and welfare programs are in a transition period as a result of recent federal
and State welfare reform initiatives.
As a result of these factors and others, and especially because a
severe recession between 1990-94 reduced revenues and increased expenditures for
social welfare programs, from the late 1980's until 1992-93, the State had
periods of significant budget imbalance. During this period, expenditures
exceeded revenues in four out of six years, and the State accumulated and
sustained a budget deficit in its budget reserve, the Special Fund for Economic
Uncertainties ("SFEU") approaching $2.8 billion at its peak on June 30, 1993.
BETWEEN THE 1991-92 AND 1994-95 FISCAL YEARS, each budget required
multibillion dollar actions to bring projected revenues and expenditures into
balance, including significant cuts in health and welfare program expenditures;
transfers of program responsibilities and funding from the State to local
governments; transfers of about $3.6 billion in annual local property tax
revenues from other local governments to local school districts, thereby
reducing State funding for schools under Proposition 98; and revenue increases
(particularly in the 1991-92 Fiscal Year budget), most of which were for a short
duration.
Despite these budget actions, as noted, the effects of the recession
led to large, unanticipated deficits in the SFEU, as compared to projected
positive balances. By the 1993-94 Fiscal Year, the accumulated deficit was so
large that it was impractical to budget to retire such deficits in one year, so
a two-year program was implemented, using the issuance of revenue anticipation
warrants to carry a portion of the deficit over the end of the fiscal year. When
the economy failed to recover sufficiently in 1993-94, a second two-year plan
was implemented in 1994-95, again using cross-fiscal year revenue anticipation
warrants to partly finance the deficit into the 1995-96 fiscal year.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to
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local school districts "borrowed" from future fiscal years and hence not shown
in the annual budget, was to significantly reduce the State's cash resources
available to pay its ongoing obligations. When the Legislature and the Governor
failed to adopt a budget for the 1992-93 Fiscal Year by July 1, 1992, which
would have allowed the State to carry out its normal annual cash flow borrowing
to replenish cash reserves, the State Controller issued registered warrants to
pay a variety of obligations representing prior years' or continuing
appropriations, and mandates from court orders. Available funds were used to
make constitutionally-mandated payments, such as debt service on bonds and
warrants. Between July 1 and September 4, 1992, when the budget was adopted, the
State Controller issued a total of approximately $3.8 billion of registered
warrants.
For several fiscal years during the recession, the State was forced to
rely on external debt markets to meet its cash needs, as a succession of notes
and revenue anticipation warrants were issued in the period from June 1992 to
July 1994, often needed to pay previously maturing notes or warrants. These
borrowings were used also in part to spread out the repayment of the accumulated
budget deficit over the end of a fiscal year, as noted earlier. The last and
largest of these borrowings was $4.0 billion of revenue anticipation warrants
which were issued in July, 1994 and matured on April 25, 1996.
1995-96 AND 1996-97 FISCAL YEARS
With the end of the recession, and a growing economy beginning in 1994,
the State's financial condition improved markedly in the last two fiscal years,
with a combination of better than expected revenues, slowdown in growth of
social welfare programs, and continued spending restraint based on the actions
taken in earlier years. The last of the recession-induced budget deficits was
repaid, allowing the SFEU to post a positive cash balance for only the second
time in the 1990's, totaling $281 million as of June 30, 1997. The State's cash
position also returned to health, as cash flow borrowing was limited to $3
billion in 1996-97, and no deficit has occurred over the end of these last two
fiscal years.
In each of these two fiscal years, the State budget contained the
following major features:
1. Expenditures for K-14 schools grew significantly, as new revenues
were directed to school spending under Proposition 98. This new money allowed
several new education initiatives to be funded, and raised K-12 per-pupil
spending to around $4,900 by Fiscal Year 1996-97. See "STATE FINANCES
Proposition 98" above.
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2. The budgets restrained health and welfare spending levels, holding
to reduced benefit levels enacted in earlier years, and attempted to reduce
General Fund spending by calling for greater support from the federal
government. The State also attempted to shift to the federal government a larger
share of the cost of incarceration and social services for illegal aliens. Some
of these efforts were successful, and federal welfare reform also helped, but as
a whole the federal support never reached the levels anticipated when the
budgets were enacted. These funding shortfalls were, however, filled by the
strong revenue collections, which exceeded expectations.
3. General Fund support for the University of California and the
California State University system grew by an average of 5.2 percent and 3.3
percent per year, respectively, and there were no increases in student fees.
4. General Fund support for the Department of Corrections grew as
needed to meet increased prison population. No new prisons were approved for
construction, however.
5. There were no tax increases, and starting January 1, 1997, there was
a 5 percent cut in corporate taxes. The suspension of the Renter's Tax Credit,
first taken as a cost-saving measure during the recession, was continued.
As noted, the economy grew strongly during these fiscal years, and as a
result, the General Fund took in substantially greater tax revenues (about $2.2
billion in 1995-96 and $1.6 billion in 1996-97) than were initially planned when
the budgets were enacted. These additional funds were largely directed to school
spending as mandated by Proposition 98, and to make up shortfalls from reduced
federal health and welfare aid. As a result, there was no dramatic increase in
budget reserves, although the accumulated budget deficit from the recession
years was finally eliminated in the past fiscal year.
1997-98 FISCAL YEAR
BACKGROUND
On January 9, 1997, the Governor released his proposed budget for the
1997-98 Fiscal Year (the "Proposed Budget"). The Proposed Budget estimated
General Fund revenues and transfers of about $50.7 billion and proposed
expenditures of $50.3 billion, resulting in an anticipated budget reserve in the
SFEU of about $550 million. The Proposed Budget included provisions for a
further 10% cut in Bank and Corporation Taxes, which ultimately was not enacted
by the Legislature.
At the time of the Department of Finance May Revision, released on May
14, 1997, the Department of Finance increased its
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revenue estimate for the upcoming fiscal year by $1.3 billion, in response to
the continued strong growth in the State's economy. Budget negotiations
continued into the summer, with major issues to be resolved including final
agreement on State welfare reform, an increase in State employee salaries and
consideration of the tax cut proposed by the Governor.
In May, 1997, action was taken by the California Supreme Court in an
ongoing lawsuit, PERS v. Wilson, below, which made final a judgment against the
State requiring an immediate payment from the General Fund to the Public
Employees Retirement Fund ("PERF") to make up certain deferrals in annual
retirement fund contributions which had been legislated in earlier years for
budget savings, and which the courts found to be unconstitutional. On July 30,
1997, following a direction from the Governor, the Controller transferred $1.235
billion from the General Fund to the PERF in satisfaction of the judgment,
representing the principal amount of the improperly deferred payments from
1995-96 and 1996-97. In late 1997, the plaintiffs filed a claim with the State
Board of Control for payment of interest under the Court rulings in an amount of
$308 million. The Department of Finance has recommended approval of this claim.
If approved by the Board of Control, the claim would become part of an annual
claims bill in the 1998-99 Budget.
FISCAL YEAR 1997-98 BUDGET ACT
Following the transfer of funds to the PERF, final agreement was
reached within a few weeks on the welfare package and the remainder of the
budget. The Legislature passed the Budget Bill on August 11, 1997, along with
numerous related bills to implement its provisions. Agreement was not finally
reached at that time on one aspect of the budget plan, concerning the Governor's
proposal for a comprehensive educational testing program.
On August 18, 1997, the Governor signed the Budget Act, but vetoed
about $314 million of specific spending items, primarily in health and welfare
and education areas from both the General Fund and Special Funds. Approximately
$200 million of this amount was restored in subsequent legislation passed before
the end of the Legislative Session.
The Budget Act anticipated General Fund revenues and transfers of $52.5
billion (a 6.8 percent increase over the final 1996-97 amount), and expenditures
of $52.8 billion (an 8.0 percent increase from the 1996-97 levels). The Budget
Act also included Special Fund expenditures of $14.4 billion (as against
estimated Special Fund revenues of $14.0 billion), and $2.1 billion of
expenditures from various Bond Funds. Subsequent to the Budget Act enactment,
the State undertook its normal cash
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flow borrowing program by issuing $3.0 billion of Notes which mature June 30,
1998.
The following were major features of the 1997-98 Budget Act:
1. For the second year in a row, the Budget contained a large increase
in funding for K-14 education under Proposition 98, reflecting strong revenues
which have exceeded initial budgeted amounts. Part of the nearly $1.75 billion
in increased spending was allocated to prior fiscal years. Funds were provided
to fully pay for the cost-of-living-increase component of Proposition 98, and to
extend the class size reduction and reading initiatives. See "STATE FINANCES -
Proposition 98" above.
2. The Budget Act reflected the $1.228 billion pension case judgment
payment, and brings funding of the State's pension contribution back to the
quarterly basis which existed prior to the deferral actions which were
invalidated by the courts.
3. Continuing the third year of a four-year "compact" which the
Administration had made with higher education units, funding from the General
Fund for the University of California and the California State University system
was increased by approximately 6 percent ($121 million and $107 million,
respectively). There was no increase in student fees.
4. Because of the effect of the pension payment, most other State
programs were continued at 1996-97 levels, adjusted for caseload changes.
5. Health and welfare costs were contained, continuing generally the
grant levels from prior years, as part of the initial implementation of the new
CalWORKs program.
6. Unlike prior years, this Budget Act did not depend on uncertain
federal budget actions. About $300 million in general funds, already included in
the federal FY 1997 and 1998 budgets, were included in the Budget Act, to offset
incarceration costs for illegal aliens.
7. The Budget Act contained no tax increases, and no tax reductions.
The Renters Tax Credit was suspended for another year, saving approximately $500
million. The Legislature has not made any decision on conformity of State tax
laws to the recent federal tax reduction bill; a comprehensive review of this
subject is expected to take place next year.
At the end of the Legislative Session on September 13, 1997, the
Legislature passed and the Governor later signed
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several bills encompassing a coordinated package of fiscal reforms, mostly to
take effect after the 1997-98 Fiscal Year. Included in the package are a variety
of phased-in tax cuts, conformity with certain provisions of the federal tax
reform law passed earlier in the year, and reform of funding for county trial
courts, with the State to assume greater financial responsibility. The
Department of Finance estimates that the major impact of these fiscal reforms
will occur in Fiscal Year 1998-99 and subsequent years.
The Department of Finance released updated estimates for the 1997-98
Fiscal year on January 9, 1998 as part of the Governor's 1998-99 Fiscal Year
Budget Proposal. Total revenues and transfers are projected at $52.9 billion, up
approximately $360 million from the Budget Act projection. Expenditures for the
fiscal year are expected to rise approximately $200 million above the original
Budget Act, to $53.0 billion. The balance in the budget reserve, the SFEU, is
projected to be $329 million at June 30, 1998, compared to $461 million at June
30, 1997.
PROPOSED 1998-99 FISCAL YEAR BUDGET
On January 9, 1998, the Governor released his Budget Proposal for the
1998-99 Fiscal Year (the "Governor's Budget"). The Governor's Budget projects
total General Fund revenues and transfers of $55.4 billion, a $2.5 billion
increase (4.7 percent) over revised 1997-98 revenues. This revenue increase
takes into account reduced revenues of approximately $600 million from the 1997
tax cut package, but also assumes approximately $500 million additional revenues
primarily associated with capital gains realizations. The Governor's Budget
notes, however, that capital gains activity and the resultant revenues derived
from it are very hard to predict.
Total General Fund expenditures for 1998-99 are recommended at $55.4
billion, an increase of $2.4 billion (4.5 percent) above the revised 1997-98
level. The Governor's Budget includes funds to pay the interest claim relating
to the court decision on pension fund payments PERS v. Wilson (SEE "1997-98
Fiscal Year" above). The Governor's Budget projects that the State will carry
out its normal intra-year cash flow external borrowing in 1998-99, in an
estimated amount of $3.0 billion. The Governor's Budget projects that the budget
reserve, the SFEU, will be $296 million at June 30, 1999, slightly lower than
the projected level at June 30, 1998 PERS liability.
The Governor's Budget projects Special Fund revenues of $14.7 billion,
and Special Fund expenditures of $15.2 billion, in the 1998-99 Fiscal Year. A
total of $3.2 billion of bond fund expenditures are also proposed.
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OTHER MATTERS. On December 6, 1994, Orange County, California and its
Investment Pool (the "Pool") filed for bankruptcy under Chapter 9 of the United
States Bankruptcy Code. The subsequent restructuring led to the sale of
substantially all of the Pool's portfolio and resulted in losses estimated to be
approximately $1.7 billion (or approximately 22% of amounts deposited by the
Pool investors). Approximately 187 California public entities -- substantially
all of which are public agencies within the county -- had various bonds, notes
or other forms of indebtedness outstanding. In some instances the proceeds of
such indebtedness were invested in the Pool.
In April, 1996, the County emerged from bankruptcy after closing on a
$900 million recovery bond transaction. At that time, the County and its
financial advisors stated that the County had emerged from the bankruptcy
without any structural fiscal problems and assured that the County would not
slip back into bankruptcy. However, for many of the cities, schools and special
districts that lost money in the County portfolio, repayment remains contingent
on the outcome of litigation which is pending against investment firms and other
finance professionals. Thus, it is impossible to determine the ultimate impact
of the bankruptcy and its aftermath on these various agencies and their claims.
In May 1996, a taxpayer action was filed against the City of San Diego
("San Diego") and the San Diego Convention Center Expansion Authority (the
"Authority") challenging the validity of a lease revenue financing involving a
lease (the "San Diego Lease") having features similar to the leases commonly
used in California lease-based financings such as certificates of participation
(the "Rider Case"). The Rider Case plaintiffs alleged that voter approval is
required for the San Diego Lease (a) since the lease constituted indebtedness
prohibited by Article XVI, Section 18 of the California Constitution without a
two-thirds vote of the electorate, and (b) since San Diego was prohibited under
its charter from issuing bonds without a two-thirds vote of the electorate, and
the power of the Authority, a joint powers' authority, one of the members of
which is San Diego, to issue bonds is no greater than the power of San Diego. in
response to San Diego's motion for summary judgment, the trial Court rejected
the plaintiffs' arguments and ruled that the San Diego Lease was
constitutionally valid and that the Authority's related lease revenue bonds did
not require voter approval. The plaintiffs appealed the matter to the Court of
Appeals for the Fourth District, which affirmed the validity of the San Diego
Lease and of the lease revenue bond financing arrangements. The plaintiffs then
filed a petition for review with the California State Supreme Court, and, on
April 2, 1997, the Court granted the plaintiff's petition for review. A decision
from the Supreme Court is expected to be decided within the 1998 term.
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CONSTITUTIONAL, LEGISLATIVE AND OTHER FACTORS.
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives could produce
the adverse effects described below, among others.
REVENUE DISTRIBUTION. Certain Debt Obligations in the Portfolio may be
obligations of issuers which rely in whole or in part on California State
revenues for payment of these obligations. Property tax revenues and a portion
of the State's general fund surplus are distributed to counties, cities and
their various taxing entities and the State assumes certain obligations
theretofore paid out of local funds. Whether and to what extent a portion of the
State's general fund will be distributed in the future to counties, cities and
their various entities is unclear.
HEALTH CARE LEGISLATION. Certain Debt Obligations in the Portfolio may
be obligations which are payable solely from the revenues of health care
institutions. Certain provisions under California law may adversely affect these
revenues and, consequently, payment on those Debt Obligations.
The federally sponsored Medicaid program for health care services to
eligible welfare beneficiaries in California is known as the Medi-Cal program.
Historically, the Medi-Cal program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any
hospital wanting to participate in the Medi-Cal program, provided such hospital
met applicable requirements for participation. California law now provides that
the State of California shall selectively contract with hospitals to provide
acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently
apply only to acute inpatient services. Generally, such selective contracting is
made on a flat per diem payment basis for all services to Medi-Cal
beneficiaries, and generally such payment has not increased in relation to
inflation, costs or other factors. Other reductions or limitations may be
imposed on payment for services rendered to Medi-Cal beneficiaries in the
future.
Under this approach, in most geographical areas of California, only
those hospitals which enter into a Medi-Cal contract with the State of
California will be paid for non-emergency acute inpatient services rendered to
Medi-Cal beneficiaries. The State may also terminate these contracts without
notice under certain circumstances and is obligated to make contractual payments
only to the extent the California legislature appropriates adequate funding
therefor.
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California enacted legislation in 1982 that authorizes private health
plans and insurers to contract directly with hospitals for services to
beneficiaries on negotiated terms. Some insurers have introduced plans known as
"preferred provider organizations" ("PPOs"), which offer financial incentives
for subscribers who use only the hospitals which contract with the plan. Under
an exclusive provider plan, which includes most health maintenance organizations
("HMOs"), private payors limit coverage to those services provided by selected
hospitals. Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly from
projections. Often, HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the respective HMO or PPO. It
is expected that failure to execute and maintain such PPO and HMO contracts
would reduce a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but may result in
reduced payment and lower net income to the contracting hospitals.
These Debt Obligations may also be insured by the State of California
pursuant to an insurance program implemented by the Office of Statewide Health
Planning and Development for health facility construction loans. If a default
occurs on insured Debt Obligations, the State Treasurer will issue debentures
payable out of a reserve fund established under the insurance program or will
pay principal and interest on an unaccelerated basis from unappropriated State
funds. At the request of the Office of Statewide Health Planning and
Development, Arthur D. Little, Inc. prepared a study in December 1983, to
evaluate the adequacy of the reserve fund established under the insurance
program and based on certain formulations and assumptions found the reserve fund
substantially underfunded. In September of 1986, Arthur D. Little, Inc. prepared
an update of the study and concluded that an additional 10% reserve be
established for "multi-level" facilities. For the balance of the reserve fund,
the update recommended maintaining the current reserve calculation method. In
March of 1990, Arthur D. Little, Inc. prepared a further review of the study and
recommended that separate reserves continue to be established for "multi-level"
facilities at a reserve level consistent with those that would be required by an
insurance company.
MORTGAGES AND DEEDS. Certain Debt Obligations in the Portfolio may be
obligations which are secured in whole or in part by a mortgage or deed of trust
on real property. California has five principal statutory provisions which limit
the remedies of a creditor secured by a mortgage or deed of trust. Two statutes
limit the creditor's right to obtain a deficiency judgment, one limitation being
based on the method of foreclosure and the other on the type of debt secured.
Under the former, a
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deficiency judgment is barred when the foreclosure is accomplished by means of a
nonjudicial trustee's sale. Under the latter, a deficiency judgment is barred
when the foreclosed mortgage or deed of trust secures certain purchase money
obligations. Another California statute, commonly known as the "one form of
action" rule, requires creditors secured by real property to exhaust their real
property security by foreclosure before bringing a personal action against the
debtor. The fourth statutory provision limits any deficiency judgment obtained
by a creditor secured by real property following a judicial sale of such
property to the excess of the outstanding debt over the fair value of the
property at the time of the sale, thus preventing the creditor from obtaining a
large deficiency judgment against the debtor as the result of low bids at a
judicial sale. The fifth statutory provision gives the debtor the right to
redeem the real property from any judicial foreclosure sale as to which a
deficiency judgment may be ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to
California real property, the creditor's nonjudicial foreclosure rights under
the power of sale contained in the mortgage or deed of trust are subject to the
constraints imposed by California law upon transfers of title to real property
by private power of sale. During the three-month period beginning with the
filing of a formal notice of default, the debtor is entitled to reinstate the
mortgage by making any overdue payments. Under standard loan servicing
procedures, the filing of the formal notice of default does not occur unless at
least three full monthly payments have become due and remain unpaid. The power
of sale is exercised by posting and publishing a notice of sale for at least 20
days after expiration of the three-month reinstatement period. The debtor may
reinstate the mortgage, in the manner described above, up to five business days
prior to the scheduled sale date. Therefore, the effective minimum period for
foreclosing on a mortgage could be in excess of seven months after the initial
default. Such time delays in collections could disrupt the flow of revenues
available to an issuer for the payment of debt service on the outstanding
obligations if such defaults occur with respect to a substantial number of
mortgages or deeds of trust securing an issuer's obligations.
In addition, a court could find that there is sufficient involvement of
the issuer in the nonjudicial sale of property securing a mortgage for such
private sale to constitute "state action," and could hold that the
private-right-of-sale proceedings violate the due process requirements of the
Federal or State Constitutions, consequently preventing an issuer from using the
nonjudicial foreclosure remedy described above.
Certain Debt Obligations in the Portfolio may be obligations which
finance the acquisition of single family home mortgages for low and moderate
income mortgagors. These
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obligations may be payable solely from revenues derived from the home mortgages,
and are subject to California's statutory limitations described above applicable
to obligations secured by real property. Under California antideficiency
legislation, there is no personal recourse against a mortgagor of a single
family residence purchased with the loan secured by the mortgage, regardless of
whether the creditor chooses judicial or nonjudicial foreclosure.
Under California law, mortgage loans secured by single-family
owner-occupied dwellings may be prepaid at any time. Prepayment charges on such
mortgage loans may be imposed only with respect to voluntary prepayments made
during the first five years during the term of the mortgage loan, and then only
if the borrower prepays an amount in excess of 20% of the original principal
amount of the mortgage loan in a 12-month period; a prepayment charge cannot in
any event exceed six months' advance interest on the amount prepaid during the
12-month period in excess of 20% of the original principal amount of the loan.
This limitation could affect the flow of revenues available to an issuer for
debt service on the outstanding debt obligations which financed such home
mortgages.
PROPOSITION 13. Certain of the Debt Obligations may be obligations of
issuers who rely in whole or in part on ad valorem real property taxes as a
source of revenue. On June 6, 1978, California voters approved an amendment to
the California Constitution known as Proposition 13, which added Article XIIIA
to the California Constitution. The effect of Article XIIIA was to limit ad
valorem taxes on real property and to restrict the ability of taxing entities to
increase real property tax revenues.
Section 1 of Article XIIIA, as amended, limits the maximum ad valorem
tax on real property to 1% of full cash value to be collected by the counties
and apportioned according to law. The 1% limitation does not apply to ad valorem
taxes or special assessments to pay the interest and redemption charges on any
bonded indebtedness for the acquisition or improvement of real property approved
by two-thirds of the votes cast by the voters voting on the proposition. Section
2 of Article XIIIA defines "full cash value" to mean "the County Assessor's
valuation of real property as shown on the 1975/76 tax bill under 'full cash
value' or, thereafter, the appraised value of real property when purchased,
newly constructed, or a change in ownership has occurred after the 1975
assessment." The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by damage, destruction or other factors.
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Legislation enacted by the California Legislature to implement Article
XIIIA provides that notwithstanding any other law, local agencies may not levy
any ad valorem property tax except to pay debt service on indebtedness approved
by the voters prior to July 1, 1978, and that each county will levy the maximum
tax permitted by Article XIIIA.
PROPOSITION 9. On November 6, 1979, an initiative known as "Proposition
9" or the "Gann Initiative" was approved by the California voters, which added
Article XIIIB to the California Constitution. Under Article XIIIB, State and
local governmental entities have an annual "appropriations limit" and are not
allowed to spend certain moneys called "appropriations subject to limitation" in
an amount higher than the "appropriations limit." Article XIIIB does not affect
the appropriation of moneys which are excluded from the definition of
"appropriations subject to limitation," including debt service on indebtedness
existing or authorized as of January 1, 1979, or bonded indebtedness
subsequently approved by the voters. In general terms, the "appropriations
limit" is required to be based on certain 1978/79 expenditures, and is to be
adjusted annually to reflect changes in consumer prices, population, and certain
services provided by these entities. Article XIIIB also provides that if these
entities' revenues in any year exceed the amounts permitted to be spent, the
excess is to be returned by revising tax rates or fee schedules over the
subsequent two years.
PROPOSITION 98. On November 8, 1988, voters of the State approved
Proposition 98, a combined initiative constitutional amendment and statute
called the "Classroom Instructional Improvement and Accountability Act."
Proposition 98 changed State funding of public education below the university
level and the operation of the State Appropriations Limit, primarily by
guaranteeing K-14 schools a minimum share of General Fund revenues. Under
Proposition 98 (modified by Proposition 111 as discussed below), K-14 schools
are guaranteed the greater of (a) in general, a fixed percent of General Fund
revenues ("Test 1"), (b) the amount appropriated to K-14 schools in the prior
year, adjusted for changes in the cost of living (measured as in Article XIII B
by reference to State per capita personal income) and enrollment ("Test 2"), or
(c) a third test, which would replace Test 2 in any year when the percentage
growth in per capita General Fund revenues from the prior year plus one half of
one percent is less than the percentage growth in State per capita personal
income ("Test 3"). Under Test 3, schools would receive the amount appropriated
in the prior year adjusted for changes in enrollment and per capita General Fund
revenues, plus an additional small adjustment factor. If Test 3 is used in any
year, the difference between Test 3 and Test 2 would become a "credit" to
schools which would be the basis of payments in future years when per capita
General Fund revenue growth exceeds per capita personal income growth.
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Proposition 98 permits the Legislature -- by two-thirds vote of both
houses, with the Governor's concurrence -- to suspend the K-14 schools' minimum
funding formula for a one-year period. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools.
During the recession years of the early 1990s, General Fund revenues
for several years were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the minimum
percentage provided in the law. The Legislature responded to these developments
by designating the "extra" Proposition 98 payments in one year as a "loan" from
future years' Proposition 98 entitlements, and also intended that the "extra"
payments would not be included in the Proposition 98 "base" for calculating
future years' entitlements. In 1992, a lawsuit was filed, California Teachers'
Association v. Gould, which challenged the validity of these off-budget loans.
During the course of this litigation, a trial court determined that almost $2
billion in "loans" which had been provided to school districts during the
recession violated the constitutional protection of support for public
education. A settlement was reached on April 12, 1996 which ensures that future
school funding will not be in jeopardy over repayment of these so-called loans.
PROPOSITION 111. On June 30, 1989, the California Legislature enacted
Senate Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding provisions of
Proposition 98. Senate Constitutional Amendment 1 -- on the June 5, 1990 ballot
as Proposition 111 -- was approved by the voters and took effect on July 1,
1990. Among a number of important provisions, Proposition 111 recalculated
spending limits for the State and for local governments, allowed greater annual
increases in the limits, allowed the averaging of two years' tax revenues before
requiring action regarding excess tax revenues, reduced the amount of the
funding guarantee in recession years for school districts and community college
districts (but with a floor of 40.9 percent of State general fund tax revenues),
removed the provision of Proposition 98 which included excess moneys transferred
to school districts and community college districts in the base calculation for
the next year, limited the amount of State tax revenue over the limit which
would be transferred to school districts and community college districts, and
exempted increased gasoline taxes and truck weight fees from the State
appropriations limit. Additionally, Proposition 111 exempted from the State
appropriations limit funding for capital outlays.
PROPOSITION 62. On November 4, 1986, California voters approved an
initiative statute known as Proposition 62. This initiative provided the
following:
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1. Requires that any tax for general governmental purposes imposed by
local governments be approved by resolution or ordinance adopted by a
two-thirds vote of the governmental entity's legislative body and by a
majority vote of the electorate of the governmental entity;
2. Requires that any special tax (defined as taxes levied for other
than general governmental purposes) imposed by a local governmental entity
be approved by a two-thirds vote of the voters within that jurisdiction;
3. Restricts the use of revenues from a special tax to the purposes or
for the service for which the special tax was imposed;
4. Prohibits the imposition of ad valorem taxes on real property by
local governmental entities except as permitted by Article XIIIA;
5. Prohibits the imposition of transaction taxes and sales taxes on the
sale of real property by local governments;
6. Requires that any tax imposed by a local government on or after
August 1, 1985 be ratified by a majority vote of the electorate within two
years of the adoption of the initiative;
7. Requires that, in the event a local government fails to comply with
the provisions of this measure, a reduction in the amount of property tax
revenue allocated to such local government occurs in an amount equal to the
revenues received by such entity attributable to the tax levied in violation
of the initiative; and
8. Permits these provisions to be amended exclusively by the voters of
the State of California.
In September 1988, the California Court of Appeal in City of
Westminster v. County of Orange, 204 Cal.App. 3d 623, 215 Cal.Rptr. 511
(Cal.Ct.App. 1988), held that Proposition 62 is unconstitutional to the extent
that it requires a general tax by a general law city, enacted on or after August
1, 1985 and prior to the effective date of Proposition 62, to be subject to
approval by a majority of voters. The Court held that the California
Constitution prohibits the imposition of a requirement that local tax measures
be submitted to the electorate by either referendum or initiative. It is
impossible to predict the impact of this decision on charter cities, on special
taxes or on new taxes imposed after the effective date of Proposition 62. The
California Court of Appeal in City of Woodlake v. Logan, (1991) 230 Cal.App.3d
1058, subsequently held that Proposition 62's
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popular vote requirements for future local taxes also provided for an
unconstitutional referenda. The California Supreme Court declined to review both
the City of Westminster and the City of Woodlake decisions.
In Santa Clara Local Transportation Authority v. Guardino, (Sept. 28,
1995) 11 Cal.4th 220, reh'g denied, modified (Dec. 14, 1995) 12 Cal.4th 344e,
the California Supreme Court upheld the constitutionality of Proposition 62's
popular vote requirements for future taxes, and specifically disapproved of the
City of Woodlake decision as erroneous. The Court did not determine the
correctness of the City of Westminster decision, because that case appeared
distinguishable, was not relied on by the parties in Guardino, and involved
taxes not likely to still be at issue. It is impossible to predict the impact of
the Supreme Court's decision on charter cities or on taxes imposed in reliance
on the City of Woodlake case.
Senate Bill 1590 (O'Connell), introduced February 16, 1996, would make
the Guardino decision inapplicable to any tax first imposed or increased by an
ordinance or resolution adopted before December 14, 1995. The California State
Senate passed the Bill on May 16, 1996 and it is currently pending in the
California State Assembly. It is not clear whether the Bill, if enacted, would
be constitutional as a non-voted amendment to Proposition 62 or as a non-voted
change to Proposition 62's operative date.
PROPOSITION 218. On November 5, 1996,the voters of the State approved
Proposition 218, a constitutional initiative, entitled the "Right to Vote on
Taxes Act" ("Proposition 218"). Proposition 218 adds Articles XIII C and XIII D
to the California Constitution and contains a number of interrelated provisions
affecting the ability of local governments to levy and collect both existing and
future taxes, assessments, fees and charges. Proposition 218 became effective on
November 6, 1996. The Sponsors are unable to predict whether and to what extent
Proposition 218 may be held to be constitutional or how its terms will be
interpreted and applied by the courts. However, if upheld, Proposition 218 could
substantially restrict certain local governments' ability to raise future
revenues and could subject certain existing sources of revenue to reduction or
repeal, and increase local government costs to hold elections, calculate fees
and assessments, notify the public and defend local government fees and
assessments in court.
Article XIII C of Proposition 218 requires majority voter approval for
the imposition, extension or increase of general taxes and two-thirds voter
approval for the imposition, extension or increase of special taxes, including
special taxes deposited into a local government's general fund. Proposition 218
also provides that any general tax imposed, extended or
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increased without voter approval by any local government on or after January 1,
1995 and prior to November 6, 1996 shall continue to be imposed only if approved
by a majority vote in an election held within two years of November 6, 1996.
Article XIII C of Proposition 218 also expressly extends the initiative
power to give voters the power to reduce or repeal local taxes, assessments,
fees and charges, regardless of the date such taxes, assessments, fees or
charges were imposed. This extension of the initiative power to some extent
constitutionalizes the March 6, 1995 State Supreme Court decision in Rossi v.
Brown, which upheld an initiative that repealed a local tax and held that the
State constitution does not preclude the repeal, including the prospective
repeal, of a tax ordinance by an initiative, as contrasted with the State
constitutional prohibition on referendum powers regarding statutes and
ordinances which impose a tax. Generally, the initiative process enables
California voters to enact legislation upon obtaining requisite voter approval
at a general election. Proposition 218 extends the authority stated in Rossi v.
Brown by expanding the initiative power to include reducing or repealing
assessments, fees and charges, which had previously been considered
administrative rather than legislative matters and therefore beyond the
initiative power.
The initiative power granted under Article XIII C of Proposition 218,
by its terms, applies to all local taxes, assessments, fees and charges and is
not limited to local taxes, assessments, fees and charges that are property
related.
Article XIII D of Proposition 218 adds several new requirements making
it generally more difficult for local agencies to levy and maintain
"assessments" for municipal services and programs. "Assessment" is defined to
mean any levy or charge upon real property for a special benefit conferred upon
the real property.
Article XIII D of Proposition 218 also adds several provisions
affecting "fees" and "charges" which are defined as "any levy other than an ad
valorem tax, a special tax, or an assessment, imposed by a local government upon
a parcel or upon a person as an incident of property ownership, including a user
fee or charge for a property related service." All new and, after June 30, 1997,
existing property related fees and charges must conform to requirements
prohibiting, among other things, fees and charges which (i) generate revenues
exceeding the funds required to provide the property related service, (ii) are
used for any purpose other than those for which the fees and charges are
imposed, (iii) are for a service not actually used by, or immediately available
to, the owner of the property in question, or (iv) are used for general
governmental services, including police, fire or library services, where the
service is available
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to the public at large in substantially the same manner as it is to property
owners. Further, before any property related fee or charge may be imposed or
increased, written notice must be given to the record owner of each parcel of
land affected by such fee or charges. The local government must then hold a
hearing upon the proposed imposition or increase of such property based fee, and
if written protests against the proposal are presented by a majority of the
owners of the identified parcels, the local government may not impose or
increase the fee or charge. Moreover, except for fees or charges for sewer,
water and refuse collection services, no property related fee or charge may be
imposed or increased without majority approval by the property owners subject to
the fee or charge or, at the option of the local agency, two-thirds voter
approval by the electorate residing in the affected area.
PROPOSITION 87. On November 8, 1988, California voters approved
Proposition 87. Proposition 87 amended Article XVI, Section 16, of the
California Constitution by authorizing the California Legislature to prohibit
redevelopment agencies from receiving any of the property tax revenue raised by
increased property tax rates levied to repay bonded indebtedness of local
governments which is approved by voters on or after January 1, 1989.
Other Considerations.
From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Obligations. For example, under the Tax Reform Act of
1986, enacted in October 1986, interest on certain private activity bonds must
be included in an investor's alternative minimum taxable income, and corporate
investors must include all tax-exempt interest in the calculation of adjusted
current earnings for purposes of determining the corporation's alternative
minimum tax liability. (See the Fund's Prospectus, "Taxes.") The Company cannot
predict what legislation or regulations, if any, may be proposed in Congress or
promulgated by the Department of Treasury as regards the federal income tax
exemption of interest on such obligations or the impact of such legislative and
regulatory activity on such exemption. Additionally, with respect to Municipal
Obligations issued by the State of California and political subdivisions
thereof, the Company cannot predict what legislation, if any, may be proposed in
the California legislature as regards the California state personal income tax
status of interest on such obligations, or which proposals, if any, might be
enacted. Such proposals, while pending or if enacted, might materially adversely
affect the availability of California Municipal Obligations, in particular, and
Municipal Obligations generally, for investment by the Fund and the liquidity
and value of the Fund's portfolio. In such an
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event, the Company would re-evaluate the investment objectives and policies of
the Fund and consider changes in its structure or possible dissolution.
Moreover, if the Company's Board of Directors, after consultation with
the Fund's investment adviser, should for any reason determine that it is
impracticable to invest at least 50% of California Money's assets in California
Municipal Obligations at the close of each quarter of the Company's taxable year
(and thereby to qualify the Fund to pay dividends that are exempt from
California state personal income tax), the Board would consider changing the
Fund's investment objectives and policies (and recommending to shareholders a
change in the Fund's names), or possibly dissolving the Fund.
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 value of the Fund's portfolio securities can be expected to vary inversely
with changes in prevailing interest rates.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
In General.
Information on how to purchase and redeem shares of California Money,
and how such shares are priced, is included in its Prospectus. The issuance of
shares is recorded on the books of the Fund, 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 California Money 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. With respect to Dollar and Plus shares, 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
and Plus shares. 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, are urged to consult their legal advisers before investing
fiduciary funds in Dollar and Plus shares.
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Prior to effecting a redemption of shares represented by certificates,
PFPC 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 the signature guaranteed.
A signature guarantee may be obtained from a domestic bank or trust
company, broker, dealer, clearing agency or savings association who are
participants in a medallion program recognized by the Securities Transfer
Association. The three recognized medallion programs are Securities Transfer
Agents Medallion Program (STAMP), Stock Exchange Medallion Signature Program
(MSP) and the New York Stock Exchange, Inc.
Medallion Securities Program. Signature guarantees that are not part of
these programs will not be accepted. 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, if, in the opinion of the Board of Directors of the
Company, ownership of shares has or may become concentrated to an extent which
would cause the Fund to be deemed a personal holding company, the Company may
compel the redemption of, reject any order for or refuse to give effect on the
books of the Fund to the transfer of the Fund's shares in an effort to prevent
that consequence. The Fund may also redeem shares involuntarily if such
redemption appears appropriate in light of the Fund's responsibilities under the
1940 Act or otherwise . If the Company's Board of Directors 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. In certain instances, the Fund may redeem shares pro rata from
each shareholder of record without payment of monetary consideration. See
"Portfolio Valuation --California Money" below.
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 Fund's classes of shares must
maintain a separate
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Master Account for each portfolio and class of shares. Institutions may arrange
with PFPC for certain sub-accounting services (such as purchase, redemption and
dividend recordkeeping) paid for by the Company, if PFPC is provided with the
information necessary for sub-accounting. Sub-accounts may be established by
name or number.
The customary national business holidays which the Federal Reserve Bank
of Philadelphia and the New York Stock Exchange observe are New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day and the preceding Friday or
subsequent Monday when one of these holidays falls on a Saturday or Sunday,
respectively. The Federal Reserve Bank of Philadelphia is also closed on
Veterans' Day and Columbus Day.
Net Asset Value.
As stated in the Prospectus for California Money, the net asset value
per share for California Money is calculated by adding the value of all of the
Fund's portfolio securities and other assets belonging to the Fund, subtracting
the liabilities charged to the Fund including dividends that have been declared
but not paid, and dividing the result by the number of the Fund shares
outstanding (irrespective of class). The value of the assets of California Money
is calculated using the amortized cost method pursuant to procedures adopted by
the Board of Directors under Rule 2a-7. "Assets belonging to" the Fund consist
of the consideration received upon the issuance of the Fund's shares together
with all income, earnings, profits and proceeds derived from the investment
thereof, including any proceeds from the sale of such investments, any funds or
payments derived from any re-investment of such proceeds. Assets belonging to
the Fund are charged with the direct liabilities of the Fund.
Portfolio Valuation.
California Money's portfolio securities are valued on the basis of
amortized cost. In connection with its use of amortized cost valuation,
California Money 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 (with certain exceptions). The Company's Board
of Directors has also established procedures that are intended to stabilize the
net asset value per share of each of California Money's classes of shares for
purposes of sales and redemptions at $1.00. Such procedures include the
determination, at such intervals as the Board deems appropriate, of the extent,
if any, to which California Money'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%, the Board will promptly consider what action,
if any, should be
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initiated. If the Board believes that the amount of any deviation from
California Money'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 California
Money's average portfolio maturity; withholding or reducing dividends; redeeming
shares in kind; reducing the number of California Money's outstanding shares
without monetary consideration; or utilizing a net asset value per share
determined by using available market quotations.
MANAGEMENT OF THE COMPANY
Board of Directors.
The Company's directors and executive officers, their addresses,
principal occupations during the past 5 years and other affiliations are as
follows:
<TABLE>
<CAPTION>
Principal Occupations
during last 5 years
Name and Address Position and Other Affiliations(4)
<S> <C> <C>
G. Willing Pepper 1,2 Chairman of Retired; Chairman of the Board,
128 Springton Lake Rd. the Board The Institute of Cancer Re-
Media, PA 19063 and President search until 1979; Director,
Age 90 Philadelphia National Bank until
1978; President, Scott Paper
Company, 1971 to 1973; Chairman
of the Board, Specialty
Composites Corp. until May,
1984.
Rodney D. Johnson 2 Director President, Fairmount Capital
Fairmount Capital Advisors, Inc. (financial
Advisors, Inc. advising), since 1987.
1435 Walnut Street
Drexel Building
Philadelphia, PA 19102
Age 56
William R. Howell 3 Director Retired; Vice Chairman,
73-350 Calliandra Street Union Bank, Los Angeles,
Palm Desert, CA 92260 until September, 1982; Director,
Age 76 Current Income Shares, Inc.
Rudolph A. Peterson Honorary Director, President and
555 California Street Chief Executive
11th Floor-Unit 3001B Officer(Retired),BankAmerica
San Francisco, CA 94104 Corporation and Bank of
Age 93 America, NT & SA.
</TABLE>
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<PAGE> 68
<TABLE>
<CAPTION>
Principal Occupations
during last 5 years
Name and Address Position and Other Affiliations(4)
<S> <C> <C>
Anthony M. Santomero 3 Director Richard K. Mellon
310 Keithwood Road Professor of Finance, since
Wynnewood, PA 19096 April 1984 and Dean's Advisory
Age 52 Council Member since July 1984,
The Wharton School, University of
Pennsylvania; Director, Wharton
Financial Institutions Center, since
July 1995; Associate Editor, Journal of
Banking and Finance, since June
1978; Associate Editor, Journal of
Economics and Business, since October
1979; Associate Editor, Journal of Money, Credit
and Banking, since January 1989;
Editorial Advisory Board, Open
Economics Review, since November 1990;
Director, The Zweig Fund and The Zweig
Total Return Fund.
Thomas H. Nevin(4) President and Chief Investment
Bellevue Park Officer, BIMC.
Corporate Center
Wilmington, DE 19809
Age: 50
Lisa M. Buono(4) Treasurer Vice President,
Bellevue Park Corporate Center Provident Advisors, Inc. since
400 Bellevue Parkway 1997; prior hereto, Director
Wilmington, DE 19809 of Finance and Compliance, PDI
Age: 33 (1993-1996); Field Supervisor,
National Association of
Securities Dealers, Inc.
(1987-1993).
</TABLE>
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<PAGE> 69
<TABLE>
<CAPTION>
Principal Occupations
during last 5 years
Name and Address Position and Other Affiliations(4)
<S> <C> <C>
W. Bruce McConnel, III(4) Secretary Partner of the law firm of
PNB Building Drinker Biddle & Reath, LLP.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Age 55
</TABLE>
1 This director may be deemed to be an "interested person" of the Company
as defined in the 1940 Act.
2 Executive Committee Member.
3 Audit Committee Member.
4 Additional affiliations with investment companies advised by BIMC or
PNC Bank are set forth below.
During intervals between meetings of the Board, the Executive Committee
may exercise the authority of the Board of Directors in the management of the
business of the Company to the extent permitted by law.
Messrs. Pepper and Johnson serve as trustees of Municipal Fund for
Temporary Investment ("MuniFund") and Trust for Federal Securities ("FedFund")
and as directors of Temporary Investment Fund, Inc. ("TempFund") . Mr.
Santomero serves as a trustee of BlackRock Funds ("BlackRock"). In addition,
Mr. Pepper serves as a director of Independence Square Income Securities, Inc.
("ISIS") and Managing General Partner of Chestnut Street Exchange Fund
("Chestnut"); and Messrs. Johnson and Santomero are directors of Municipal Fund
for New York Investors, Inc. ("New York Money"). Each of the investment
companies named above receives various advisory or other services from BIMC or
PNC Bank.
Mr. Pepper is Chairman of the Board. Mr. Nevin is President and Ms.
Buono is Treasurer. In addition, Mr. Nevin is President of Muni Fund, Fed Fund,
Temp Fund and New York Money. Ms. Buono is Treasurer of Muni Fund, Fed Fund,
Temp Fund and New York Muni. Mr. McConnel is Secretary of Muni Fund, Fed Fund,
Temp Fund and New York Muni. Mr. Johnson is a director of International Dollar
Reserve Fund. Of the above-mentioned funds, PDI provides distribution services
and PFPC and PDI provide administration services to TempFund, FedFund, MuniFund
and New York Money.
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<PAGE> 70
Each director who is not affiliated with PNC Bank, BIMC, PFPC or PDI
receives $5,000 annually from the Company for his services as a director plus
$250 for each Board meeting attended, $250 for each Committee meeting attended
and is reimbursed for reasonable out-of-pocket expenses incurred in attending
meetings. The Chairman of the Board is entitled to receive an additional $5,000
per annum for services in such capacity.
For the fiscal year ended January 31, 1997, the Company paid or accrued
for the account of its directors and officers a total of $54,053 (exclusive of
expense reimbursements) for services in all capacities. In addition, the Company
contributed $1,018 for its last fiscal year to its retirement plan for employees
(who included Mr. Roach). No employee of PDI, BIMC, PFPC or PNC Bank receives
any compensation from the Company for acting as an officer or director of the
Company. The directors and officers of the Company own less than 1% of the
Company's shares.
By virtue of the responsibilities assumed by PDI, BIMC, PNC Bank and
PFPC under their respective agreements with the Company, the Company itself
requires no employees. Drinker Biddle & Reath LLP, of which Mr. McConnel is a
partner, receives legal fees as counsel to the Company.
The table below sets forth information about the fees received by the
Company's directors in the most recently completed fiscal year.
<TABLE>
<CAPTION>
Total
Compensation
from Company
Aggregate and Fund
Name of Person Compensation Complex 1 Paid
Position from Company to Directors
<S> <C> <C>
William R. Howell 6,250 6,250
Director
Rodney D. Johnson 6,250 (6)2 56,500
Director
G. Willing Pepper 11,250 (6)2 82,250
Director, Chairman
and President
Total
</TABLE>
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<PAGE> 71
<TABLE>
<CAPTION>
Total
Compensation
from Company
Aggregate and Fund
Name of Person Compensation Complex 1 Paid
Position from Company to Directors
<S> <C> <C>
Rudolph A. Peterson 6,250 6,250
Director
Anthony M. Santomero 6,250 (3)2 12,500
Director
36,250 163,750
</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 director serves on
within the fund complex.
Adviser and Administrators.
The advisory and administrative services provided and the expenses
assumed by BIMC and the administrators, as well as the fees payable to each of
them, are described in the Prospectus. In March 1998, BIMC assumed the
responsibilities of PNC Bank, as sub-adviser, to provide research, credit
analysis and recommendations with respect to the Fund's investments and supply
certain computer facilities, personnel and other services. The personnel and
facilities related to these services have been transferred to BIMC and BIMC's
obligation to pay to PNC Bank a portion of this advisory fee has been
terminated. The sub-advisory agreement with PNC Bank technically remains in
effect.
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<PAGE> 72
The sub-advisory fee paid by BIMC to PNC Bank had no effect on the investment
advisory fees payable by the Fund to BIMC.
For California Money Fund's fiscal years ended January 31, 1998, 1997
and 1996 PIMC received fees for advisory services (net of waivers) in the
amounts of $374,215, $268,716 and $254,168. For the same periods, PFPC and PDI
received fees for administration services (net of waivers) of $374,215, $268,716
and $254,168 in the aggregate. For California Money Fund's fiscal years ended
January 31, 1998, 1997 and 1996, PIMC waived advisory fees of $729,108, $621,301
and $594,290 and PFPC and PDI waived administration fees of $729,108, $621,301
and $594,290 in the aggregate.
Banking Laws.
Certain banking laws and regulations with respect to investment
companies are discussed in the Fund's Prospectus. BIMC, PFPC and PNC Bank
believe that BIMC may perform the advisory services for the Fund contemplated by
the Company's Advisory Agreement, the Fund's Prospectus and this Statement of
Additional Information, that PFPC may perform the transfer agency services for
the Fund contemplated by the Company's Transfer Agency Agreement, the Fund's
Prospectus and this Statement of Additional Information, and that PNC Bank may
perform the custodial services for the Fund contemplated by the Company's
Custodian Agreement, the Fund's Prospectus and this Statement of Additional
Information, and the sub-advisory services for the Fund contemplated by the
Company's Sub-Advisory Agreement, the Fund's Prospectus and this Statement of
Additional Information, without violation of the Glass-Steagall Act or
applicable banking laws or regulations. It should be noted, however, that
changes in legal requirements relating to the permissible activities of banks
and their affiliates, as well as further interpretations of present and future
requirements, could prevent BIMC, PNC Bank and PFPC from continuing to perform
such services for the Fund. If BIMC, PFPC or PNC Bank were prohibited from
continuing to perform such services, it is expected that the Board of Directors
would recommend that the Company enter into new agreements with other qualified
firms. Any new advisory agreement would be subject to shareholder approval.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
Custodian and Transfer Agent.
As custodian of the Fund's assets, PNC Bank (i) maintains a separate
account or accounts in the name of the Fund, (ii) holds and disburses portfolio
securities on account of the
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<PAGE> 73
Fund, (iii) makes receipts and disbursements of money on behalf of the Fund,
(iv) collects and receives all income and other payments and distributions on
account of the Fund's portfolio securities, (v) responds to correspondence from
security brokers and others relating to its duties and (vi) makes periodic
reports to the Company's Board of Directors concerning the Fund's operations.
PNC Bank is authorized to select one or more banks or trust companies to serve
as sub-custodian on behalf of the Fund, provided that PNC Bank remains
responsible for the performance of all its duties under its Custodian Agreement
with the Fund and holds the Fund harmless from the acts and omissions of any
sub-custodian chosen by PNC Bank. The Fund pays PNC Bank a fee for its custodial
services equal to $.25 per annum for each $1,000 of that Fund's average gross
assets.
As the Fund's transfer and dividend disbursing agent, PFPC (i) issues
and redeems shares of the Fund, (ii) addresses and mails all communications by
the Fund to its shareholders, including reports to shareholders, dividend and
distribution notices and proxy material for its meetings of shareholders, (iii)
responds to correspondence by shareholders and others relating to its duties,
(iv) maintains shareholder accounts and sub-accounts, (v) provides installation
and other services in connection with the Fund's computer access program
maintained to facilitate shareholder access to the Fund, and (vi) makes periodic
reports to the Board of Directors concerning the Fund's operations. PFPC may, on
30 days' notice to the Company, assign its duties thereunder to any other
affiliate of PNC Bank Corp. For its transfer agency, dividend disbursing and
sub-accounting services, the Fund pays PFPC $12.00 per account and sub-account
per annum 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).
PFPC sends 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 provides each
shareholder of record with a daily transaction report for each day on which a
transaction occurs in the shareholder's Master Account of 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 balance for the sub-account at the beginning and end of the month and
income paid or reinvested during the month.
Service Organizations.
As stated in the Fund's Prospectus, the Fund enters into agreements
with institutional investors ("Service Organizations") requiring them to provide
support services to
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<PAGE> 74
their customers who beneficially own Dollar or Plus shares. In consideration of
such services, California Money pays Service Organizations .25% (on an
annualized basis) of the average daily net asset value of the California Money
Dollar or California Money Plus shares held by the Service Organizations for the
benefit of their customers. Such services include: (i) aggregating and
processing purchase and redemption requests from customers and placing net
purchase and redemption orders with the transfer agent; (ii) providing customers
with a service that invests the assets of their accounts in Dollar or Plus
shares; (iii) processing dividend payments from the Fund on behalf of customers;
(iv) providing information periodically to customers showing their positions in
Dollar and Plus shares; (v) arranging for bank wires; (vi) responding to
customer inquiries relating to the services performed by the Service
Organizations; (vii) providing sub-accounting with respect to Dollar and Plus
shares beneficially owned by customers or the information necessary for
sub-accounting; (viii) forwarding shareholder communications from the Company
(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 Company. In
addition, broker/dealers purchasing Plus shares may be requested to provide from
time to time assistance (such as the forwarding of sales literature and
advertising to customers) in connection with the distribution of Plus shares.
For the fiscal years ended January 31, 1998, 1997, 1996, 1995 and 1994,
California Money paid a total of $308,298, $187,911, $59,647, $43,771 and
$31,773, respectively, to Service Organizations with respect to California Money
Dollar shares, of which $428, $2,115, $2,244, $1,646 and $1,195, respectively,
was paid to an affiliate. California Money made no payments to Service
Organizations with respect to California Money Plus shares during the fiscal
years ended January 31, 1997, 1996 and 1995 because no such shares had been
sold.
The Fund's agreements with Service Organizations are governed by Plans
(called "Non-12b-1 Shareholder Services Plan" and "12b-1 Services Plan" for the
Dollar shares and Plus shares, respectively), which have been adopted by the
Board of Directors pursuant to applicable rules and regulations of the SEC and
an exemptive order granted by the SEC in connection with the creation of the
Dollar and Plus shares. Pursuant to each Plan, the Board of Directors 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 made. In addition, the Fund's arrangements with Service
Organizations must be approved annually by a majority of the Fund's directors,
including a majority of the directors who are not "interested persons" of the
Fund as defined in the 1940 Act and have no direct or indirect financial
interest in such arrangements (the "Disinterested Directors").
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<PAGE> 75
The Board of Directors has approved the Fund's arrangements with
Service Organizations based on information provided to the Board that there is a
reasonable likelihood that the arrangements will benefit the 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 the Fund's arrangements with Service
Organizations must be made in a manner approved by a majority of the Board of
Directors (including a majority of the Disinterested Directors), and any
amendment to increase materially the costs under the 12b-1 Services Plan adopted
by the Board with respect to Plus shares must be approved by the holders of a
majority of the outstanding Plus shares. (It should be noted that while the
annual service fee with respect to Plus shares is currently set at .25%, the
plan adopted by the Board of Directors permits the Board to increase this fee to
.40% without shareholder approval.) So long as the Fund's arrangements with
Service Organizations are in effect, the selection and nomination of the members
of the Board of Directors who are not "interested persons" (as defined in the
1940 Act) of the Company will be committed to the discretion of such
noninterested directors.
Expenses.
The Fund's expenses include taxes, interest, fees and salaries of its
directors and officers, SEC fees, state securities qualification 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, costs
of the Fund's computer access program, certain insurance premiums, outside
auditing and legal expenses, cost of independent pricing service, 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 of portfolio securities.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional federal, state and local
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, 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 advisers with specific
reference to their own tax situations.
General.
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<PAGE> 76
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company. As described above and in the Fund's Prospectus,
the Fund is designed to provide California institutional investors and their
customers with current tax-exempt interest income. The Fund is not intended to
constitute a balanced investment program and is not 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 Internal Revenue Code, H.R. 10 plans and individual
retirement accounts since such plans and accounts are generally tax-exempt and,
therefore, would not only not gain any additional benefit from the Fund's
dividends being tax-exempt, but such dividends would be ultimately taxable to
the beneficiaries when distributed to them. 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
(i) who regularly uses a part of such facilities in his trade or business and
(ii) 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, 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.
The percentage of total dividends paid by the Fund with respect to any
taxable year which qualify as federal exempt-interest dividends will be the same
for all shareholders receiving dividends for such year. In order for the Fund to
pay exempt-interest dividends for any taxable year, at the close of each fiscal
quarter at least 50% of the aggregate value of the Fund's portfolio must consist
of exempt-interest obligations. In addition, the Fund must distribute with
respect to each taxable year an amount that is at least equal to the sum of 90%
of the exempt-interest income net of certain deductions and 90% of the
investment company taxable income for the taxable year. Not later than 60 days
after the close of its taxable year, the Fund will notify each shareholder of
the portion of the dividends paid by the Fund to the shareholder with respect to
such taxable year which constitutes an exempt-interest dividend. The aggregate
amount of dividends so designated cannot, however, exceed the excess of the
amount of interest exempt from tax under Section 103 of the Code received by the
Fund during the taxable year over any amounts disallowed as deductions under
Sections 265 and 171(a)(2) of the Code.
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<PAGE> 77
Interest on indebtedness incurred by a shareholder to purchase or carry
the Fund's shares generally is not deductible for federal income tax purposes.
While the Fund does not expect to earn any investment company taxable
income, any taxable income earned by the Fund will be distributed to
shareholders. In general, the Fund's investment company taxable income will be
its taxable income, 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. Such distributions would be taxable to
shareholders as ordinary income (whether made in cash or additional shares).
Similarly, while the Fund does not expect to realize long-term capital
gains, any net realized long-term capital gains would be distributed at least
annually. The Fund would generally have no tax liability with respect to such
gains, and the distributions (whether paid in cash or additional shares) would
be taxable to shareholders as long-term capital gain, regardless of how long a
shareholder has held shares of the Fund. Such distributions, if any, will be
designated as capital gain dividends in a written notice mailed by the Fund to
shareholders not later than 60 days after the close of the Fund's taxable year.
Taxable distributions generally are included in a shareholder's gross
income for the taxable year in which they are received. Dividends declared in
October, November or December of any year and made payable to the Fund's
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, if such dividends are actually paid during January of the following year.
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute currently 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 its ordinary taxable income and any
capital gain net income with respect to each calendar year to avoid liability
for this excise tax.
Although the Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all liability for federal
income taxes, it may be subject to the tax laws of certain states or localities,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located or in which it is deemed to be conducting business.
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<PAGE> 78
If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of its
taxable income would be subject to federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions (including amounts derived from interest on Municipal
Obligations) would be taxable to shareholders to the extent of the Fund's
current or accumulated earnings and profits and would be eligible for the
dividends received deduction allowed to corporations under the Code.
To the extent that the Fund's dividends distributed to shareholders are
derived from interest income exempt from federal income tax and are properly
designated as "exempt-interest dividends" by the Fund, they will be excludable
from a shareholder's gross income for federal income tax purposes. Under the
Code, shareholders that receive exempt-interest dividends may be required to
treat as taxable income a portion of certain otherwise nontaxable social
security and railroad retirement benefit payments.
California.
Assuming the Fund qualifies as a "regulated investment company," it
will be relieved of California franchise and income taxes to the extent it
distributes its exempt-interest income, investment company taxable income and
any excess of net long-term capital gain over net short-term capital loss. It is
anticipated that the Fund will be relieved of all or substantially all of
California franchise and income taxes by making such distributions.
If, at the close of each quarter of its taxable year, at least 50% of
the value of the total assets of a regulated investment company, or series
thereof, consists of obligations which when held by an individual, the interest
therefrom is exempt from California personal income taxation ("California
Tax-Exempt Obligations") then the regulated investment company, or series of
that company, will be qualified to pay dividends exempt from California state
personal income tax to its non-corporate shareholders (hereinafter referred to
as "California exempt-interest dividends"). Series of a regulated investment
company is defined as a segregated portfolio of assets, the beneficial interest
in which is owned by the holders of an exclusive class or series of stock of the
company. California Tax-Exempt Obligations are limited to California Municipal
Obligations and certain U.S. Government obligations and U.S. Possession
obligations, the interest on which is exempt from state income taxation as
provided by federal law. The Fund intends to qualify under the above 50% by
value requirement so that it can pay California exempt-interest dividends. If
the Fund fails to so
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<PAGE> 79
qualify, no part of its dividends will be exempt from California state personal
income tax.
Not later than 60 days after the close of its taxable year, the Fund
will notify each shareholder of the portion of the dividends paid by the Fund to
the shareholder with respect to such taxable year which is exempt from
California state personal income tax. The total amount of California
exempt-interest dividends paid by the Fund to its shareholders with respect to
any taxable year cannot exceed the excess of the amount of interest received by
the Fund during such year on California Tax-Exempt Obligations over any amounts
that, if the Fund were treated as an individual, would be considered expenses
related to tax exempt income and would thus not be deductible under federal
income or California state personal income tax law. The percentage of total
dividends paid by the Fund with respect to any taxable year which qualifies as
California exempt-interest dividends will be the same for all shareholders
receiving dividends from the Fund with respect to such year.
In cases where shareholders are "substantial users" or "related
persons" with respect to California Municipal Obligations held by the Fund, such
shareholders should consult their tax advisers to determine whether California
exempt-interest dividends paid by the Fund with respect to such obligations
retain their California state personal income tax exclusion. In this connection
rules similar to those regarding the possible unavailability of federal
exempt-interest dividend treatment to "substantial users" are applicable for
California state tax purposes. See "Additional Information Concerning Taxes -
General" above.
To the extent any dividends paid to shareholders are derived from
long-term and short-term capital gains, such dividends will not constitute
California exempt-interest dividends. Rules similar to those regarding the
treatment of such dividends for federal income tax purposes are also applicable
for California state personal income tax purposes. See "Additional Information
Concerning Taxes - General." Moreover, interest on indebtedness incurred by a
shareholder to purchase or carry shares of the Fund is not deductible for
California state personal income tax purposes if the Fund distributes California
exempt-interest dividends to the shareholder during his or her taxable year.
The foregoing is only a summary of some of the important California
state personal income tax considerations generally affecting the Fund and its
shareholders. No attempt is made to present a detailed explanation of the
California state personal income tax treatment of the Fund or its shareholders,
and this discussion is not intended as a substitute for careful planning.
Further, it should be noted that the portion of the
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<PAGE> 80
Fund's dividends constituting California exempt-interest dividends is excludable
from income for California state personal income tax purposes only. Any
dividends paid to shareholders of the Fund subject to California state franchise
tax or California state corporate income tax will be taxed as ordinary dividends
to such shareholders, notwithstanding that all or a portion of such dividends is
exempt from California state personal income tax. Accordingly, potential
investors in the Fund, including, in particular, corporate investors which may
be subject to either California franchise tax or California corporate income
tax, should consult their tax advisers with respect to the application of such
taxes to the receipt of the Fund's dividends and as to their own California
state tax situation, in general.
DIVIDENDS
General.
Net income for dividend purposes for the Fund consists of (i) interest
accrued and original issue discount earned on the Fund's assets for the
applicable dividend period, less (ii) amortization of market premium on such
assets and accrued expenses. Net income for the Fund's three classes of shares
is determined in the same manner except that Dollar and Plus shares bear the
fees payable to Service Organizations for the services to the beneficial owners
of such shares. (See the Fund's Prospectus under "Dividends.") Realized and
unrealized gains and losses on portfolio securities are reflected in net asset
value.
Should the Fund incur or anticipate any unusual or unexpected
significant expense or loss which would affect disproportionately the income of
the Fund for a particular period, the Board of Directors would at that time
consider whether to adhere to the present dividend policy with respect to the
Fund or to revise it in order to mitigate to the extent possible the
disproportionate effect of such expense or loss on the income of the Fund. Such
expense or loss may result in the shareholder's receiving no dividends for the
period during which it held shares of the Fund and in it receiving upon
redemption a price per share lower than that which it paid.
Performance Information.
The "total returns," "yields," "effective yields" and "tax-equivalent
yields" for each of California Money's three classes of shares as described in
the Prospectus are calculated according to formulas prescribed by the SEC. The
standardized seven-day yield for each of California Money's three classes of
shares is computed separately for each class by determining the net change in
the value of a hypothetical pre-existing account in California Money having a
balance of one share of the class
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<PAGE> 81
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 California Money 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, net of all fees charged to all shareholder
accounts in proportion to the length of the base period and California Money's
average account size, but does not include gains and losses or unrealized
appreciation and depreciation. The "effective yield" of any class of shares is
calculated by compounding the unannualized base period return for the class
involved (calculated as above) by adding one to the base period return for the
class, raising that sum to a power equal to 365/7, and subtracting one from the
result. The "tax-equivalent" yield of any class of shares is computed by: (a)
dividing the portion of the yield for the class involved (calculated as above)
that is exempt from both federal and California State income taxes by one minus
a stated combined Federal and California State income tax rate; (b) dividing the
portion of the yield for the class involved (calculated as above) that is exempt
from federal income tax only by one minus a stated federal income tax rate; and
(c) adding the figures resulting from (a) and (b) above to that portion, if any,
of the yield for the class involved that is not exempt from federal income tax.
For the seven-day period ended January 31, 1998, the yields on Money
and Dollar shares were 3.15% and 2.90%, respectively, the compounded effective
yields on Money and Dollar shares were 3.20% and 2.94%, respectively, and the
tax-equivalent yields on Money and Dollar shares were 5.13% and 4.73%
respectively. These tax-equivalent yields assume a federal income tax rate of
31.0% and a California income tax rate of 11.05%. Because actual income rates
may vary considerably from those assumptions, each investor should consider
their own tax rate in evaluating yields.
From time to time, in advertisements or in reports to shareholders, the
return and yields of the Fund may be quoted and compared to those of other
mutual funds with similar investment objectives and to stock or other relevant
indices. For example, the yield of the Fund may be compared to IBC Money Fund
Average, which is an average compiled by IBC Money Fund Report, a widely
recognized independent publication that monitors the performance of money
market funds, or to the data prepared by Lipper Analytical Services, Inc.
("Lipper"), a widely-recognized independent service that monitors the
performance of mutual funds.
PERFORMANCE WILL FLUCTUATE, AND ANY QUOTATION OF PERFORMANCE SHOULD NOT
BE CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE FUND. Since
performance fluctuates, performance data for any of the classes of the Fund
cannot
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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 is generally a function of kind
and quality of the investments held 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 performance calculations; such fees, if charged, would reduce the
actual performance from that quoted.
The Fund 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 Fund 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 and political 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 Fund
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
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<PAGE> 83
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 Fund's
investment adviser, may include discussions of other products or services (of
the Fund's investment adviser and its affiliates), 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 the Fund's portfolio manager.
From time to time in advertisements, sales literature and
communications to shareholders, the Fund may compare its total return 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 Money Fund Average 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 FUND'S 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.
COUNSEL
Drinker Biddle & Reath LLP, 1345 Chestnut Street, Suite 1100,
Philadelphia, Pennsylvania 19107, of which Mr. McConnel, Secretary of the
Company, is a partner, will pass upon certain legal matters for the Company as
its counsel. O'Melveny & Myers,
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<PAGE> 84
LLP, 400 South Hope Street, Los Angeles, California 90071, act as special
California counsel for the Company and have reviewed the portions of this
Statement of Additional Information and the Fund's Prospectus concerning
California taxes and the description of the special considerations relating to
California Municipal Obligations.
INDEPENDENT ACCOUNTANTS
The financial statements of the Company incorporated by reference in
this Statement of Additional Information and the information included in the
Financial Highlights tables which appear in the Fund's Prospectus have been
audited by Coopers & Lybrand L.L.P., independent accountants, whose report
thereon is incorporated by reference herein, and have been included in the
Fund's Prospectus in reliance upon the report of said firm of independent
accountants given upon their authority as experts in accounting and auditing.
Coopers & Lybrand L.L.P. has offices at 2400 Eleven Penn Center, Philadelphia,
Pennsylvania 19103.
MISCELLANEOUS
The Company was organized as a Maryland corporation on September 20,
1982 under the name of California Municipal Fund for Temporary Investment, Inc.
On February 10, 1983, the Company changed its name to Municipal Fund for
California Investors, Inc.
As used in this Statement of Additional Information and the Fund's
Prospectus, a "majority of the outstanding shares" of the Company or the Fund
means, with respect to the approval of an investment advisory agreement, a
distribution plan or a change in an investment objective or fundamental
investment policy, the lesser of (1) 67% of the Company's or the Fund's shares,
irrespective of class, represented at a meeting at which the holders of more
than 50% of the outstanding shares of the Company or the Fund are present in
person or by proxy, or (2) more than 50% of the Company's or a Fund's
outstanding shares, irrespective of class.
As stated in the Prospectus for California Money, holders of the Fund's
Money, Dollar and Plus shares will vote in the aggregate and not by class on all
matters, except where otherwise required by law, except that only Dollar shares
will be entitled to vote on matters submitted to a vote of shareholders
pertaining to such Fund's arrangements with Service Organizations with respect
to Dollar shares and only Plus shares will be entitled to vote on matters
submitted to a vote of shareholders pertaining to such Fund's arrangements with
Service Organizations
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with respect to Plus shares. (See the Fund's Prospectus "Management of the Fund
- - Service Organizations.")
As of May 19, 1998, the name, address and percentage of ownership of each
institutional investor that owned of record 5% or more of the outstanding shares
of California Money were as follows: City National Bank, 400 North Roxbury
Drive, 7th Floor, Beverly Hills, California 90210, 11.23%; GSS as Agent, The
Chase Manhattan Bank, N.A., 4 New York Plaza, 9th Floor, New York, New York
10004, 18.01%; and Morgan Guaranty Trust Company of New York, 500 Stanton
Christiana Road, Newark, Delaware 19703, 16.28%. Bank of America National
Trust Savings Association is a subsidiary of BankAmerica Corporation and is a
corporation organized and existing under the laws of the United States as a
national banking association. The Company does not know whether the entities
named above are the beneficial owners of the shares held by them.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The law
under certain circumstances provides shareholders with the right to call for a
meeting of shareholders to consider the removal of one or more directors. To the
extent required by law, the Company will assist in shareholder communication in
such matters.
Notwithstanding any provision of Maryland law requiring a greater vote
of the Company's shares in connection with any corporate action, unless
otherwise provided by law or by the Company's Charter, the Company may take or
authorize such action upon the favorable vote of the holders of more than 50% of
the Company's outstanding shares voting without regard to class. (See, however,
the Fund's Prospectus under "Description of Shares" regarding certain special
voting rights of Dollar and Plus shares on matters pertaining to the Fund's
arrangements with Service Organizations.)
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders for the fiscal year ended
January 31, 1998 has been filed with the Securities and Exchange Commission. The
financial statements in such Annual Report (the "Financial Statements") are
incorporated into this Statement of Additional Information by reference. The
Financial Statements included in the Annual Report for the fiscal year ended
January 31, 1998 have been audited by the Company's independent accountants,
Coopers & Lybrand L.L.P., whose report thereon also appears in such Annual
Report and is incorporated herein by reference. The Financial Statements in such
Annual Report have been incorporated herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
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APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment is strong. Within this
category, certain obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
rated "A-1". However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are
dependent on favorable business, financial, and economic conditions for the
obligor to meet its financial obligation.
"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The "D" rating will also be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually senior debt obligations
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not having an original maturity in excess of one year, unless explicitly noted.
The following summarizes the rating categories used by Moody's for commercial
paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings 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" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt 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, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do 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 the 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.
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"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 issues as investment grade. Risk 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 insure 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 IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This designation
indicates the strongest capacity for timely payment of financial commitments and
may have an added "+" to denote any exceptionally strong credit feature.
"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of securities rated
"F1".
"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
"D" - Securities are in actual or imminent payment default.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of
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debt instruments with original maturities of one year or less. The following
summarizes the ratings used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment 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 Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson BankWatch's lowest rating
category and indicates that the obligation is regarded as non-investment grade
and therefore speculative.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened
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capacity of the obligor to meet its financial commitment on the obligation.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded as having significant
speculative characteristics. "BB" indicates the least degree of speculation and
"C" the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
"BB" - Debt is less vulnerable to non-payment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
"B" - Debt is more vulnerable to non-payment than obligations rated
"BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic conditions
will likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
"CCC" - Debt is currently vulnerable to non-payment, and is dependent
upon favorable business, financial and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
non-payment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. This rating is
used when payments on an obligation 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 or the taking of similar action if payments on
an obligation 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
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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 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 are considered as 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 speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of 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.
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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.
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, Baa1, 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 ratings used by Fitch IBCA for corporate
and municipal bonds:
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"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of investment risk
and are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is very unlikely to be adversely
affected by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of investment risk and
indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of investment risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to adverse changes in circumstances or in
economic conditions than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
investment risk. The capacity for timely payment of financial commitments is
adequate, but adverse changes in circumstances and in economic conditions are
more likely to impair this category.
"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC", "CC," "C" - Bonds have high default risk. Capacity for meeting
financial commitments is reliant upon sustained, favorable business or economic
developments. "CC" ratings indicate that default of some kind appears probable,
and "C" ratings signal imminent default.
"DDD," "DD," and "D" - Bonds are in default. Securities are not meeting
obligations and are extremely speculative. "DDD" designates the highest
potential for recovery on these securities, and "D" represents the lowest
potential for recovery.
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To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these 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 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.
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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 Services for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit a strong capacity
to pay principal and interest. Those issues determined to possess very strong
characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
"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" - This designation denotes 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" - This designation denotes high quality, with margins
of protection ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes 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" - This designation denotes adequate quality, carrying
specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.
"SG" - This designation denotes speculative quality and lack of margins
of protection.
A-10
<PAGE> 96
Fitch IBCA and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
A-11
<PAGE> 97
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Financial Statements:
(1) Included in Part A of the Registration Statement:
Financial Highlights for California Money Fund (Money
Shares) for the fiscal years ended January 31, 1998,
1997, 1996, 1995, 1994, 1993, 1992, 1991, 1990 and
1989; for California Money Fund (Dollar Shares) for
the fiscal years ended January 31, 1998, 1997, 1996,
1995, 1994, 1993, 1992 and for the period from
January 9, 1991 (commencement of operations) through
January 31, 1991; for California Money Fund (Plus
Shares) for the fiscal years ended January 31, 1998,
1997, 1996, 1995, 1994, 1993, 1992, 1991, 1990 and
1989.
(2) Included in Part B of the Registration Statement:
The financial statements contained in Registrant's
January 31, 1998 Annual Report to Shareholders, a
copy of which has been filed with the Commission, are
incorporated herein by reference, with respect to the
California Money Fund, to the Registrant's File No.
2-79510 filed on April 1, 1998.
(b) Exhibits:
(1) (a) Articles of Incorporation dated September 20, 1982.
(b) Articles Supplementary to Registrant's Articles of
Incorporation dated November 24, 1982.
(c) Articles of Amendment to Registrant's Articles of
Incorporation dated February 10, 1983.
(d) Articles Supplementary to Registrant's Articles of
Incorporation dated August 31, 1985.
<PAGE> 98
(e) Articles Supplementary to Registrant's Articles of
Incorporation dated July 26, 1988.
(f) Articles of Amendment to Registrant's Articles of
Incorporation dated October 20, 1988.
(2) (a) Composite By-laws.
(3) None.
(4) (a) Articles IV, VI, VII, VIII and X of Registrant's
Articles of Incorporation dated November 24, 1982 are
incorporated be reference to Exhibit 1(a) of
Registrant's Registration Statement on Form N-1A.
(b) Articles I, II, IV and VI of Registrant's By-Laws
are incorporated herein by reference to Exhibit 2(a)
of Registrant's Registration Statement on Form N-1A.
(5) (a) Amended and Restated Investment Advisory Agreement
dated July 28, 1988 between Registrant and Provident
Institutional Management Corporation.
(b) Amended and Restated Sub-Advisory Agreement dated
July 28, 1988 between Provident Institutional
Management Corporation and Provident National Bank.
(c) Assumption Agreement dated February 28, 1998 between
PNC Bank, N.A. and BlackRock Institutional Management
Corporation.
(6) Distribution Agreement dated January 31, 1994 between
Registrant and Provident
C-2
<PAGE> 99
Distributors, Inc.
(7) Amended and Restated Custodian Agreement dated July
28, 1988 between Registrant and Provident National
Bank.
(8) (a) Administration Agreement dated January 18, 1993
between Registrant and Provident Distributors, Inc.
(formerly MFD Group, Inc.) and Provident Financial
Processing Corporation.
(b) Amended and Restated Transfer Agency Agreement dated
July 28, 1988 between Registrant and Provident
Financial Processing Corporation.
(9) None.
(10) Opinion of Counsel and Consent of Drinker,
Biddle & Reath, LLP.
(11) (a) Consent of Coopers & Lybrand L.L.P.
(b) Consent of O'Melveny & Myers.
(12) None.
(13) None.
(14) (a) Amended and Restated 12b-1 Services Plan dated May
31, 1998.
(b) Amended and Restated Non-12b-1 Plan dated May 31,
1998.
C-3
<PAGE> 100
(15) Schedule for Computation of Performance Quotations
for the California Money Fund.
(27) (a) Financial Data Schedule as of January 31, 1998 for
the California Money Fund (Money Class).
(b) Financial Data Schedule as of January 31, 1998 for
the California Money Fund (Dollar Class).
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant is controlled by its Board of Directors.
Item 26. Number of Holders of Securities
The following information is as of May 19, 1998.
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Class A Common Stock 59
Class A Common Stock -
Special Series 1 4
Class A Common Stock -
Special Series 2 0
</TABLE>
Item 27. Indemnification
Article VII, Section 3 of the Registrant's Articles of Incorporation
and Article VI, Section 2 of Registrant's By-Laws, included herewith, require
the indemnification of Registrant's directors and officers to the full extent
permissible under the General Laws of the State of Maryland and the Investment
Company Act of 1940. Indemnification of Registrant's principal underwriter,
custodian and transfer agent against certain losses is provided for,
respectively, in Section 6.b. of the Distribution Agreement, incorporated herein
by reference as Exhibit (6), Section 22 of the Custodian Agreement, incorporated
herein by reference as Exhibit (8), and Section 15 of the Transfer Agency
Agreement, incorporated herein by reference as Exhibit (9)(b). The Fund has
obtained from a major insurance carrier a directors and officers' liability
policy covering certain types of errors and omissions.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors,
C-4
<PAGE> 101
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 director, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, 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
BIMC performs investment advisory and other services for Registrant
and certain other investment companies and other accounts. PNC Bank and its
predecessors have been in the business of managing the investments of fiduciary
and other accounts in the Philadelphia area since 1847. In addition to its trust
business, PNC Bank provides commercial banking services.
The information required by this Item 28 with respect to each
director and officer of BIMC is incorporated by reference to Schedules A and D
of Form ADV filed by BIMC with the SEC pursuant to the Investment Advisors Act
of 1940 (File No. 801- 13304). To the knowledge of Registrant, none of the
directors or officers of 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 of PNC Bank also hold various
positions with, and engage in business for, PNC Bank Corp, which indirectly owns
all the outstanding stock of PNC Bank, or other subsidiaries of PNC Bank Corp.
Set forth below are the names and principal businesses of the directors and
certain of the senior executive officers of PNC Bank who are engaged in any
other business, profession, vocation or employment of a substantial nature.
C-5
<PAGE> 102
PNC BANK, NATIONAL ASSOCIATION
DIRECTORS
<TABLE>
<CAPTION>
Position with Other Business Type of
PNC Bank Name Connections Business
-------- ---- ----------- --------
<S> <C> <C> <C>
Director B.R. Brown President and C.E.O. of Coal
Consol, Inc.
Consol Plaza
Pittsburgh, PA 15241
Director Constance E. Clayton Associate Dean, School of Medical
Public Health and Professor of
Pediatrics Medical College of
PA, Hahnemann University
430 E. Sedgwick Street
Philadelphia, PA 19119
Director Eberhard Faber, IV Chairman and C.E.O. Manufacturing
E.F.L., Inc.
450 Hedge Road
P.O. Box 49
Bear Creek, PA 18602
Director Dr. Stuart Heydt President and C.E.O. Medical
Geisinger Foundation
100 N. Academy Avenue
Danville, PA 17822
Director Edward P. Junker, III Vice Chairman Banking
PNC Bank, N.A.
Ninth and State Streets
Erie, PA 16553
Director Thomas A. McConomy President, C.E.O. and Manufacturing
Chairman, Calgon Carbon
Corporation
P.O. Box 717
Pittsburgh, PA 15230-0717
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
</TABLE>
C-6
<PAGE> 103
<TABLE>
<CAPTION>
Position with Other Business Type of
PNC Bank Name Connections Business
-------- ---- ----------- --------
<S> <C> <C> <C>
Director Jane G. Pepper President Horticulture
Pennsylvania Horticultural
Society
325 Walnut Street
Philadelphia, PA 19106
Director Robert C. Robb, Jr. Partner, Lewis, Eckert, Financial and
Robb & Company Management
425 One Plymouth Meeting Consultants
Plymouth Meeting, PA 19462
Director James E. Rohr President and C.E.O. Bank Holding
PNC Bank, N.A. Company
One PNC Plaza, 30th Floor
Pittsburgh, PA 15265
Director Daniel M. Rooney President, Pittsburgh Steelers Football
Football Club of the National
Football League
300 Stadium Circle
Pittsburgh, PA 15212
Director Seth E. Schofield Chairman and C.E.O. Airline
USAir, Inc.
2345 Crystal Drive
Arlington, VA 22227
</TABLE>
C-7
<PAGE> 104
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
John E. Alden Senior Vice President
James C. Altman Senior Vice President
Lila M. Bachelier Senior Vice President
R. Perrin Baker Chief Market Counsel, Northwest PA
James R. Bartholomew Senior Vice President
Peter R. Begg Senior Vice President
Donald G. Berdine Senior Vice President
Ben Berzin, Jr. Senior Vice President
James H. Best Senior Vice President
Eva T. Blum Senior Vice President
Susan B. Bohn Senior Vice President
Michael S. Borocz Senior Vice President
George Brikis Executive Vice President
Michael Brundage Senior Vice President
Anthony J. Cacciatore Senior Vice President
Richard C. Caldwell Executive Vice President
Craig T. Campbell Senior Vice President
J. Richard Carnall Executive Vice President
Edward V. Caruso Executive Vice President
Peter K. Classen President & C.E.O., PNC Bank, Northeast PA
Andra D. Cochran Senior Vice President
Sharon Coghlan Coordinating Market Chief Counsel, Philadelphia
James P. Conley Senior Vice President/Credit Policy
C. David Cook Senior Vice President
Alfred F. Cordasco Supervising Counsel, Pittsburgh, PA
Robert Crouse Senior Vice President
Peter M. Crowley Senior Vice President
Keith P. Crytzer Senior Vice President
C-8
<PAGE> 105
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
John J. Daggett Senior Vice President
Peter J. Donchak 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.
Patrick S. Doran Senior 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
Marva H. Harris Senior Vice President
Maurice H. Hartigan, II Executive Vice President
G. Thomas Hewes Senior Vice President
Sylvan M. Holzer Executive Vice President
C-9
<PAGE> 106
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
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
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
C-10
<PAGE> 107
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Ralph S. Michael 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
Arthur F. Rodman, III Senior Vice President
Richard C. Rhoades Senior Vice President
Bryan W. Ridley Senior Vice President
James E. Rohr President and Chief Executive Officer
Gary Royer Senior Vice President
Robert T. Saltarelli Senior Vice President
Robert V. Sammartino Senior Vice President
William Sayre, Jr. Senior Vice President
Alfred J. Schiavetti Senior Vice President
David W. Schoffstall Executive Vice President
C-11
<PAGE> 108
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
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
Robert L. Tassone 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
Annette M. Ward-Kredel Senior Vice President
Robert S. Wrath Senior Vice President
Arlene M. Yocum Senior Vice President
Carole Yon Senior Vice President
George L. Ziminski, Jr. Senior Vice President
Item 29. Principal Underwriter
(a) Provident Distributors, Inc. currently acts as distributor for,
in addition to the Company, Trust for Federal Securities, Municipal Fund for
Temporary Investment, Temporary Investment Fund, Inc. and Municipal Fund for New
York Investors, Inc.
C-12
<PAGE> 109
(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).
Item 30. Location of Accounts and Records
(1) PNC Bank, National Association, 1600 Market Street, 28th
Floor, Philadelphia, Pennsylvania 19103 (records
relating to its functions as sub-investment adviser).
(2) PNC Bank, National Association, 200 Stevens Drive,
Lester, Pennsylvania 19113 (records relating to its
functions as custodian).
(3) Provident Distributors, Inc., Four Falls Corporate
Center, 6th Floor, West Conshohocken, Pennsylvania 19428
(records relating to its functions as distributor).
(4) BlackRock Institutional Management Corporation, 400
Bellevue Parkway, 4th Floor, Wilmington, Delaware 19809
(records relating to its functions as investment
adviser).
(5) PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware
19809 and Provident Distributors, Inc., Four Falls
Corporate Center, West Conshohocken, Pennsylvania 19428
(records relating to their functions as administrators).
(6) PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware
19809 (records relating to its functions as transfer
agent and dividend disbursing agent).
(7) Drinker Biddle & Reath LLP, 1100 Philadelphia National
Bank Building, 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107 (Registrant's Articles of
Incorporation, By-Laws and Minute Books).
C-13
<PAGE> 110
Item 31. Management Services
None.
Item 32. Undertakings
Registrant hereby undertakes to provide its Annual Report upon
request without change to any recipient of a Prospectus for the
California Money Fund.
C-14
<PAGE> 111
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 the
requirements for effectiveness of this Post-Effective Amendment No. 19 to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 19 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 May 28, 1998.
MUNICIPAL FUND FOR
CALIFORNIA INVESTORS, INC.
* G. Willing Pepper
----------------------------
Chairman of the Board
(Signature and Title)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 19 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. Willing Pepper Chairman of May 28, 1998
- ------------------------- the Board
G. Willing Pepper and President
* William R. Howell Director May 28, 1998
- -------------------------
William R. Howell
* Rudolph A. Peterson Director May 28, 1998
- -------------------------
Rudolph A. Peterson
* Anthony M. Santomero Director May 28, 1998
- -------------------------
Anthony M. Santomero
* Rodney D. Johnson Director May 28, 1998
- -------------------------
Rodney D. Johnson
/s/ Thomas H. Nevin President May 28, 1998
- -------------------------
Thomas H. Nevin
/s/ Lisa M. Buono Treasurer May 28, 1998
- -------------------------
Lisa M. Buono
</TABLE>
*By: /s/ W. Bruce McConnel, III
-------------------------------
W. Bruce McConnel, III
Attorney-in-fact
<PAGE> 112
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
POWER OF ATTORNEY
I hereby appoint W. Bruce McConnel, III or Vernon Stanton, Jr.
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 CALIFORNIA INVESTORS, INC. (Registration No. 2-79510) 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 May 18, 1998.
/s/ G. Willing Pepper
--------------------------------
G. Willing Pepper
<PAGE> 113
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
POWER OF ATTORNEY
I hereby appoint W. Bruce McConnel, III or Vernon Stanton, Jr. 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 CALIFORNIA INVESTORS, INC. (Registration No. 2-79510) 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 May 18, 1998.
/s/ Rodney D. Johnson
--------------------------------
Rodney D. Johnson
<PAGE> 114
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
POWER OF ATTORNEY
I hereby appoint W. Bruce McConnel, III or Vernon Stanton, Jr.
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 CALIFORNIA INVESTORS, INC. (Registration No. 2-79510) 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 May 18, 1998.
/s/ William R. Howell
--------------------------------
William R. Howell
<PAGE> 115
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
POWER OF ATTORNEY
I hereby appoint W. Bruce McConnel, III or Vernon Stanton, Jr.
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 CALIFORNIA INVESTORS, INC. (Registration No. 2-79510) 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 May 18, 1998.
/s/ Rudolph A. Peterson
--------------------------------
Rudolph A. Peterson
<PAGE> 116
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
POWER OF ATTORNEY
I hereby appoint W. Bruce McConnel, III or Vernon Stanton, Jr.
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 CALIFORNIA INVESTORS, INC. (Registration No. 2-79510) 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 May 26, 1998.
/s/ Anthony M. Santomero
--------------------------------
Anthony M. Santomero
<PAGE> 1
EXHIBIT 1a
MARYLAND
STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION
THE ARTICLES OF INCORPORATION
OF
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC.
HAVE BEEN RECEIVED AND APPROVED BY THE STATE DEPARTMENT
OF ASSESSMENTS AND TAXATION THIS 20TH DAY OF September, 1982 at
11:37 A.M. AND WILL BE RECORDED.
BY: /s/ Paul B. Anderson
301 West Preston Street, Baltimore, Maryland 21201
Phone: 383-3720
<PAGE> 2
STATE OF MARYLAND
NO. 2283
STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION
301 West Preston Street, Baltimore, Maryland 21201
THIS IS TO CERTIFY THAT the within instrument is a true copy of the
ARTICLES OF INCORPORATION
OF
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC.
as approved and received for record by the State Department of
Assessments and Taxation of Maryland, September 20, 1982 at 11:37
o'clock A.M.
AS WITNESS my hand and official seal of the
said Department at Baltimore this
twenty-second day of September, 1982.
/s/ Paul B. Anderson
Paul B. Anderson
Charter Specialist
<PAGE> 3
ARTICLES OF INCORPORATION
OF
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC.
* * * * *
ARTICLE I
THE UNDERSIGNED, Jeffrey A. Dalke, whose post office address is 1100
Philadelphia National Bank Building, Philadelphia, Pennsylvania 19107, being at
least eighteen years of age, does hereby act as an incorporator, under and by
virtue of the General Laws of the State of Maryland authorizing the formation of
corporations and with the intention of forming a corporation.
ARTICLE II
The name of the Corporation is:
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC.
ARTICLE III
The purpose for which the Corporation is formed is to act as management
investment company under the Investment Company Act of 1940.
ARTICLE IV
The Corporation is expressly empowered as follows:
1) To hold, invest and reinvest its assets in securities and
other investments or to hold part or all of its assets in cash.
2) To issue and sell shares of its capital stock in such
amounts and on such terms and conditions and for such purposes and for such
amount or kind of consideration as may now or hereafter be permitted by law.
3) To redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner and
to
<PAGE> 4
the extent now or hereafter permitted by law and by the Charter of the
Corporation.
4) To enter into a written contract or contracts with any
person or persons providing for a delegation of the management of all or part of
the Corporation's securities portfolio(s) and also for the delegation of the
performance of various administrative or corporate functions, subject to the
direction of the Board of Directors. Any such contract or contracts may be made
with any person even though such person may be an officer, other employee,
director or stockholder of this Corporation or a corporation, partnership, trust
or association in which any such officer, other employee, director or
stockholder may be interested.
5) To enter into a written contract or contracts appointing
one or more distributors or agents of both for the sale of the shares of the
Corporation on such terms and conditions as the Board of Directors of this
Corporation may deem reasonable and proper, and to allow such person or persons
a commission on the sale of such shares. Any such contract or contracts may be
made with any person even though such person may be an officer, other employee,
director or stockholder of this Corporation or a corporation, partnership, trust
or association in which any such officer, other employee, director or
stockholder may be interested.
6) To enter into a written contract or contracts employing
such custodian or custodians for the safekeeping of the property of the
Corporation and of its shares, such dividend disbursing agent or agents, and
such transfer agent or agents and registrar or registrars for its shares, on
such terms and conditions as the Board of Directors of the Corporation may deem
reasonable and proper for the conduct of the affairs of the Corporation, and to
pay the fees and disbursements of such custodians, dividend disbursing agents,
transfer agents, and registrars out of the income and/or any other property of
the Corporation. Notwithstanding any other provision of these Articles of
Incorporation or the By-Laws of the Corporation, the Board of Directors may
cause any or all of the property of the Corporation to be transferred to, or to
be acquired and held in the name of, any custodian so appointed or any nominee
or nominees of the Corporation or nominee or nominees of such custodian
satisfactory to the Board of Directors.
7) To employ the same person in any multiple capacity under
Sections (4), (5) and (6) of this Article IV who may receive compensation from
the Corporation in as many capacities in which such person shall serve the
Corporation.
8) To do any and all such further acts or things and to
exercise any and all such further powers or rights as may
<PAGE> 5
be necessary, incidental, relative, conducive, appropriate or desirable for the
accomplishment, carrying out or attainment of the purposes stated in Article III
hereof.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
General Laws of the State of Maryland now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE V
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in this State is The Corporation Trust Incorporated, a corporation
of this State, and the post office address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.
ARTICLE VI
1) The total number of shares of capital stock which the
Corporation shall have authority to issue is Two Billion (2,000,000,000) shares,
of the par value of one Mill ($0.001) per share and of the aggregate par value
of Two Million Dollars ($2,000,000).
2) Any fractional share shall carry proportionately all the
rights of a whole share, excepting any right to receive a certificate evidencing
such fractional share, but including, without limitation, the right to vote and
the right to receive dividends.
3) All persons who shall acquire stock in the Corporation
shall acquire the same subject to the provisions of the Charter and the By-laws
of the Corporation.
4) Except to the extent otherwise provided by applicable law,
the Board of Directors shall have authority by resolution to classify and
reclassify any authorized but unissued shares of capital stock from time to time
by setting or changing in any one or more respects the preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of the capital stock. The
power of the Board of Directors to classify or reclassify any of the shares of
capital stock shall include, without limitation, authority to classify or
reclassify any such stock into a class or classes of capital stock and to divide
and
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<PAGE> 6
classify shares of any class into one or more series of such class.
5) Subject to the power of the Board of Directors to classify
and reclassify any authorized but unissued shares of capital stock pursuant to
Section 4 of this Article VI, shares of capital stock of the Corporation shall
have the following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption:
(A) Assets Belonging to a Class. All consideration received by
the Corporation for the issue or sale of stock of any class of capital stock,
together with all income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, and any general assets of the Corporation not belonging to any
particular class which the Board of Directors may, in its sole discretion,
allocate to a class, shall irrevocably belong to the class of shares of capital
stock with respect to which such assets, payments or funds were received or
allocated for all purposes, subject only to the rights of creditors, and shall
be so handled upon the books of account of the Corporation. Such assets,
income, earnings, profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form, are herein referred to as
"assets belonging to" such class.
(B) Liabilities Belonging to a Class. The assets
belonging to any class of capital stock shall be charged with the liabilities
in respect to such class, and shall also be charged with such class's share of
the general liabilities of the Corporation, in proportion to the asset value of
the respective classes of capital stock determined as hereinafter provided. The
liabilities so allocated to a class are herein referred to as "liabilities
belonging to" such class.
(C) Dividends and Distributions. Shares of each class of
capital stock shall be entitled to such dividends and distributions, in stock
or in cash or both, as may be declared from time to time by the Board of
Directors, acting in its sole discretion, with respect to such class; provided,
however, that dividends and distributions on shares of a class of capital stock
shall be paid only out of the lawfully available "assets belonging to such
class" as such phrase is defined in Section 5(A) of this Article VI.
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<PAGE> 7
(D) Liquidating Dividends and Distributions. In the event of
the liquidation or dissolution of the Corporation, stockholders of each class
of capital stock shall be entitled to receive, as a class, out of the assets of
the Corporation available for distribution to stockholders, but other than
general assets not belonging to any particular class of stock, the assets
belonging to such class; and the assets so distributable to the stockholders of
any class of capital stock shall be distributed among such stockholders in
proportion to the number of shares of such class held by them and recorded on
the books of the Corporation. In the event that there are any general assets
not belonging to any particular class of stock and available for distribution,
such distribution shall be made to the holders of stock of all classes of
capital stock in proportion to the asset value of the respective classes of
capital stock determined as hereinafter provided.
(E) Voting. Each stockholder of each class of capital stock
shall be entitled to one vote for each share of capital stock, irrespective of
the class, then standing in his name on the books of the Corporation, and on
any matter submitted to a vote of stockholders, all shares of capital stock
then issued and outstanding and entitled to vote shall be voted in the
aggregate and not by class except that: (i) when expressly required by law,
shares of capital stock shall be voted by individual class and (ii) only shares
of capital stock of the respective class or classes affected by a matter shall
be entitled to vote on such matter.
(F) Redemption. To the extent the Corporation has funds or
other property legally available therefor, each holder of shares of capital
stock of the Corporation shall be entitled to require the Corporation to redeem
all or any part of the shares of capital stock of the Corporation standing in
the name of such holder on the books of the Corporation, and all shares of
capital stock issued by the Corporation shall be subject to redemption by the
Corporation, at the redemption price of such shares as in effect from time to
time and in the manner determined by the By-Laws or the Board of Directors of
the Corporation in accordance with the provisions hereof, subject to the right
of the Board of Directors of the Corporation to suspend the right of redemption
of shares of capital stock of the Corporation or postpone the date of payment
of such redemption price in accordance with provisions of applicable law.
Without limiting the generality of the foregoing, the Corporation shall, to the
extent permitted by applicable law, have the right at any time to redeem the
shares owned by any holder of capital stock of the
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<PAGE> 8
Corporation (i) if such redemption is, in the opinion of the Board of Directors
of the Corporation, desirable in order to prevent the Corporation from being
deemed a "personal holding company" within the meaning of the Internal Revenue
Code of 1954, as amended, (ii) if the value of such shares in the account
maintained by the Corporation or its transfer agent for any class of capital
stock is less than $500.00 (Five Hundred Dollars); provided, however, that each
stockholder shall be notified that the value of his account is less than
$500.00 and allowed sixty (60) days to make additional purchases of shares
before such redemption is processed by the Corporation, or (iii) if the net
income with respect to any particular class of capital stock should be negative
or it should otherwise be appropriate to carry out the Corporation's
responsibilities under the Investment Company Act of 1940, as amended, in each
case subject to such further terms and conditions as the Board of Directors of
the Corporation may from time to time adopt. The redemption price of shares of
any class of capital stock of the Corporation shall, except as otherwise
provided in this Section 5(F), be the net asset value thereof as determined by
the Board of Directors of the Corporation from time to time in accordance with
the provisions of applicable law, less such redemption fee or other charge, if
any, as may be fixed by resolution of the Board of Directors of the
Corporation. Payment of the redemption price shall be made in cash by the
Corporation at such time and in such manner as may be determined from time to
time by the Board of Directors of the Corporation unless, in the opinion of the
Board of Directors, which shall be conclusive, conditions exist which make
payment wholly in cash unwise or undesirable; in such event the Corporation may
make payment wholly or partly by securities or other property included in the
assets belonging or allocable to the class of the shares redemption of which is
being sought, the value of which shall be determined as provided herein. When
the net income with respect to any particular class of capital stock is
negative or whenever deemed appropriate by the Board of Directors in order to
carry out the Corporation's responsibilities under the Investment Company Act
of 1940, as amended, the Corporation may, without payment of monetary
compensation but in consideration of the interest of the Corporation and the
stockholders in maintaining a constant net asset value per share of such class,
redeem pro rata from each stockholder of record on such day, such number of
full and fractional shares of the Corporation's capital stock of such class, as
may be necessary to reduce the aggregate number of outstanding shares in order
to permit the net asset value thereof to remain constant.
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<PAGE> 9
(G) Conversion. Each holder of any class of capital stock of
the Corporation, who surrenders his share certificate in good delivery form to
the Corporation or, if the shares in question are not represented by
certificates, who delivers to the Corporation a written request in good order
signed by the stockholder, shall, to the extent permitted by the By-Laws or by
resolution of the Board of Directors, be entitled to convert the shares in
question on the basis hereinafter set forth, into shares of stock of any other
class of the Corporation. The Corporation shall determine the net asset value,
as provided herein, of the shares to be converted and may deduct therefrom a
conversion cost, in an amount determined within the discretion of the Board of
Directors. Within five (5) business days after such surrender and payment of
any conversion cost, the Corporation shall issue to the stockholder such number
of shares of stock of the class desired as, taken at the net asset value
thereof determined as provided herein in the same manner and at the same time
as that of the shares surrendered, shall equal the net asset value of the
shares surrendered, less any conversion cost as aforesaid. Any amount
representing a fraction of a share may be paid in cash at the option of the
Corporation. Any conversion cost may be paid and/or assigned by the Corporation
to the underwriter and/or to any other agency, as it may elect.
(H) Restrictions on Transferability. If, in the opinion of the
Board of Directors of the Corporation, concentration in the ownership of shares
of capital stock might cause the Corporation to be deemed a personal holding
company within the meaning of the Internal Revenue Code, as now or hereafter in
force, the Corporation may at any time and from time to time refuse to give
effect on the books of the Corporation to any transfer or transfers of any
share or shares of capital stock in an effort to prevent such personal holding
company status.
ARTICLE VII
(1) The number of directors of the Corporation shall be four
(4), which number may be increased or decreased pursuant to the By-laws of the
Corporation but shall never be less than three (3). The names of the directors
who shall act until the first annual meeting of stockholders or until their
successors are duly elected and qualify are:
Jeffrey B. Lane
G. Willing Pepper
Russell W. Richie
Henry M. Watts, Jr.
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<PAGE> 10
(2) No holder of stock of the Corporation shall, as such
holder, have any right to purchase or subscribe for any shares of the capital
stock of the Corporation or any other security of the Corporation which it may
issue or sell (whether out of the number of shares authorized by the Charter, or
out of any shares of the capital stock of the Corporation acquired by it after
the issue thereof, or otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
(3) Each director and each officer of the Corporation shall be
indemnified by the Corporation to the full extent permitted by the General Laws
of the State of Maryland and the Investment Company Act of 1940, now or
hereafter in force, including advance of related expenses.
ARTICLE VIII
Any determination made in good faith and, so far as accounting matters
are involved, in accordance with generally accepted accounting principles by or
pursuant to the direction of the Board of Directors, as to the amount and value
of assets, obligations or liabilities of the Corporation, as to the amount of
net income of the Corporation from dividends and interest for any period or
amounts at any time legally available for the payment of dividends, as to the
amount of any reserves or charges set up and the propriety thereof, as to the
time of or purpose for creating reserves or as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the value of any security owned by the Corporation, as to the
allocation of any assets or liabilities to a class or classes of capital stock,
as to the times at which shares of any class of capital stock shall be deemed to
be outstanding or no longer outstanding, or as to any other matters relating to
the issuance, sale, redemption or other acquisition or disposition of securities
or shares of capital stock of the Corporation, and any reasonable determination
made in good faith by the Board of Directors as to whether any transaction
constitutes a purchase of securities on "margin," a sale of securities "short,"
or an underwriting of the sale of, or a participation in any underwriting or
selling group in connection with the public distribution of, any securities,
shall be final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of the
capital stock of the Corporation are issued and sold on the condition and
understanding, evidenced by the purchase of shares of capital stock or
acceptance of share certificates, that any and all such determinations shall be
binding as aforesaid. No provision of the Charter of the Corporation shall be
effective to (i) require a waiver of
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<PAGE> 11
compliance with any provision of the Securities Act of 1933, as amended, or the
Investment Company Act of 1940, as amended, or of any valid rule, regulation or
order of the Securities and Exchange Commission thereunder or (ii) protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE IX
The duration of the Corporation shall be perpetual.
ARTICLE X
(1) The Corporation reserves the right from time to time to
make any amendments to its Charter which may now or hereafter be authorized by
law, including any amendments changing the terms or contract rights, as
expressly set forth in its Charter, of any of its outstanding stock by
classification, reclassification or otherwise, but no such amendment which
changes such terms or contract rights of any of its outstanding stock shall be
valid unless such amendment shall have been authorized by not less than a
majority of the aggregate number of the votes entitled to be cast thereon by a
vote at a meeting.
1) Notwithstanding any provision of the General Laws of the
State of Maryland requiring any action to be taken or authorized by the
affirmative vote of the holders of a designated proportion of the votes of all
classes or of any class of stock of the Corporation, such action shall be
effective and valid if taken or authorized by the affirmative vote of the
holders of a majority of the total number of shares outstanding and entitled to
vote thereon, except as otherwise provided herein.
(2) So long as permitted by Maryland law, the books of the
Corporation may be kept outside of the State of Maryland at such place or places
as may be designated from time to time by the Board of Directors or in the
By-Laws of the Corporation.
(3) In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Maryland, the Board of Directors is
expressly authorized:
(A) To make, alter or repeal the By-Laws of the Corporation,
except where such power is reserved by the ByLaws to the stockholders, and
except as otherwise required by the Investment Company Act of 1940, as amended.
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<PAGE> 12
(B) From time to time to determine whether and to what extent
and at what times and places and under what conditions and regulations the
books and accounts of the Corporation, or any of them other than the stock
ledger, shall be open to the inspection of the stockholders, and no stockholder
shall have any right to inspect any account or book or document of the
Corporation, except as conferred by law or authorized by resolution of the
Board of Directors or of the stockholders.
(C) Without the assent or vote of the stockholders, to
authorize the issuance from time to time of shares of the stock of any class of
the Corporation, whether now or hereafter authorized, and securities
convertible into shares of its stock of any class or classes, whether now or
hereafter authorized, for such consideration as the Board of Directors may deem
advisable.
(D) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation, secured and unsecured, as
the Board of Directors may determine, and to authorize and cause to be executed
mortgages and liens upon the property of the Corporation, real or personal.
(E) Notwithstanding anything in these Articles of
Incorporation to the contrary, to establish in its absolute discretion the
basis or method for determining the value of the assets belonging to any class,
the value of the liabilities belonging to any class, the allocation of any
assets or liabilities to any class, the times at which shares of any class
shall be deemed to be outstanding or no longer outstanding and the net asset
value of each share of any class of capital stock of the Corporation for
purposes of sales, redemptions, repurchases of shares or otherwise.
(F) To determine in accordance with generally accepted
accounting principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine what accounting
periods shall be used by the Corporation for any purpose, whether annual or any
other period, including daily; to set apart out of any funds of the Corporation
such reserves for such purposes as it shall determine and to abolish the same;
to declare and pay any dividends and distributions in cash, securities or other
property from surplus or any funds legally available therefor, at such
intervals (which may be as frequently as daily) or on such other periodic
basis, as it shall determine; to declare such dividends or distributions by
means of a formula or other method of determination, at meetings held less
frequently than the frequency of the effectiveness of such declarations; to
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<PAGE> 13
establish payment dates for dividends or any other distributions on any basis,
including dates occurring less frequently than the effectiveness of
declarations thereof; and to provide for the payment of declared dividends on a
date earlier or later than the specified payment date in the case of
stockholders of the Corporation redeeming their entire ownership of shares of
any class of the Corporation.
(G) In addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of Directors is
authorized to exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, subject, nevertheless, to the
provisions of Maryland law, these Articles of Incorporation and the By-Laws of
the Corporation.
IN WITNESS WHEREOF, the undersigned incorporator of CALIFORNIA
MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC. hereby executes the foregoing
Articles of Incorporation and acknowledges the same to be his act.
Dated the 20th day of September, 1982.
/s/ Jeffrey A. Dalke
Jeffrey A. Dalke
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<PAGE> 14
STATE OF MARYLAND
STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION
301 West Preston Street, Baltimore, Maryland 21201
THIS IS TO CERTIFY THAT the within instrument is a true copy
of the ARTICLES OF SUPPLEMENTARY OF CALIFORNIA MUNICIPAL FUND FOR TEMPORARY
INVESTMENT, INC. as approved and received for record by the State Department of
Assessments and Taxation of Maryland, December 2, 1982 at 11:32 o'clock A.M.
AS WITNESS my hand and official seal of the said Department at
Baltimore this eight day of December, 1982.
DEAN W. KITCHEN, CORPORATE ADMINISTRATOR
<PAGE> 15
Maryland State Department of Assessments and Taxation
THE ARTICLES OF SUPPLEMENTARY OF CALIFORNIA MUNICIPAL FUND FOR
TEMPORARY INVESTMENT, INC. HAVE BEEN RECEIVED AND APPROVED BY THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION THIS 2nd DAY OF December, 1982 at 11:32
A.M. AND WILL BE RECORDED.
BY:
<PAGE> 1
EXHIBIT 1b
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC.
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC., a
Maryland corporation having its principal office in the City of Baltimore,
Maryland (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to Section 2-208 of the Maryland General
Corporation Law, the Board of Directors of the Corporation has classified all of
the Two Billion (2,000,000,000) authorized, unissued and unclassified shares of
capital stock of the Corporation (par value One Mill ($.001) per share) as Class
A Common Stock pursuant to the following resolutions adopted by the directors of
the Corporation by written unanimous consent dated September 21, 1982:
RESOLVED, that pursuant to Article VI of the Articles
of Incorporation of the Corporation, all of the Two Billion
(2,000,000,000) authorized, unissued and unclassified shares
of capital stock of the Corporation (of the par value of One
Mill ($.001) per share and of the aggregate par value of Two
Million Dollars ($2,000,000)) be, and hereby are, classified
and designated as Class A Common Stock;
FURTHER RESOLVED, that each share of Class A Common
Stock shall have all of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of
redemption
<PAGE> 2
that are set forth in the Articles of Incorporation of the
Corporation with respect to its shares of capital stock.
SECOND: The shares of Class A Common Stock of the Corporation
classified pursuant to the resolutions set forth in Article FIRST of these
Articles Supplementary have been classified by the Corporation's Board of
Directors under the authority contained in the charter of the Corporation.
IN WITNESS WHEREOF, CALIFORNIA MUNICIPAL FUND FOR TEMPORARY
INVESTMENT, INC., has caused these presents to be signed in it's name and on its
behalf by its President and its corporate seal to be hereunto affixed and
attested by its Secretary on this 24th day of November, 1982.
CALIFORNIA MUNICIPAL FUND FOR
TEMPORARY INVESTMENT, INC.
By: /s/ G. Willing Pepper
G. Willing Pepper, President
[SEAL]
Attest:
/s/ Morgan R. Jones
Morgan R. Jones, Secretary
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<PAGE> 3
CERTIFICATE
THE UNDERSIGNED, President of CALIFORNIA MUNICIPAL FUND FOR
TEMPORARY INVESTMENT, INC., who executed on behalf of said Corporation the
attached Articles Supplementary to Articles of Incorporation of said
Corporation, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the attached Articles Supplementary
to be the corporate act of said Corporation, and certifies that to the best of
his knowledge, information and belief the matters and facts set forth in the
attached Articles Supplementary with respect to authorization and approval are
true in all material respects, under the penalties for perjury.
/s/ G. Willing Pepper
Dated: November 24, 1982 G. Willing Pepper, President
<PAGE> 1
EXHIBIT 1c
STATE OF MARYLAND
NO. 7620
STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION
301 West Preston Street, Baltimore, Maryland 21201
THIS IS TO CERTIFY THAT the within instrument is a true copy of the
ARTICLES OF AMENDMENT
OF
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC.
Changing its name to
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
as approved and received for record by the State Department of Assessments and
Taxation of Maryland, February 10, 1983 at 3:23 o'clock P.M.
AS WITNESS my hand and official seal of the said
Department at Baltimore this fifteenth day of
February, 1983.
/s/ Paul B. Anderson
PAUL B. ANDERSON,
CHARTER SPECIALIST
<PAGE> 2
MARYLAND
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
Gene L. Burner, Director 01211
TO WHOM IT MAY CONCERN:
This is to advise you that your Articles of Amendment for CALIFORNIA
MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC., changing its name to MUNICIPAL
FUND FOR CALIFORNIA INVESTORS, INC. received and approved for record on February
10, 1983 at 3:23 P.M.
The official acknowledgement will be forthcoming from this Department.
Very truly yours,
/s/ Paul B. Anderson
Paul B. Anderson
Charter Specialist
$26.00 FEE PAID
301 West Preston Street, Baltimore, Maryland 21201/Phone: 301-383-2560
<PAGE> 3
MARYLAND
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
THE ARTICLES OF AMENDMENT
OF
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC.
Changing its name to
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
HAVE BEEN RECEIVED AND APPROVED BY THE STATE DEPARTMENT OF
ASSESSMENTS AND TAXATION THIS 10th DAY OF February, 1983 at 3:23
P.M. AND WILL BE RECORDED.
BY: /s/ Paul B. Anderson
301 West Preston Street, Baltimore, Maryland 21201/Phone: 383-3720
<PAGE> 4
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
CALIFORNIA MUNICIPAL FUND
FOR TEMPORARY INVESTMENT, INC.
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC., a
Maryland Corporation, having its principal office in the City of Baltimore,
Maryland (hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation of the
Corporation are hereby amended as follows:
By striking out Article II of the Articles of
Incorporation in its entirety and inserting in lieu thereof the following:
"The name of the Corporation is:
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC."
SECOND: The foregoing amendment to the Articles of
Incorporation has been duly approved by a majority of the entire Board of
Directors of the Corporation and no stock entitled to be voted on the matter was
outstanding or subscribed for at the time of approval.
IN WITNESS WHEREOF, CALIFORNIA MUNICIPAL FUND FOR
TEMPORARY INVESTMENT, INC. has caused these presents to be signed
<PAGE> 5
in its name and on its behalf by its President and its corporate seal to be
hereunto affixed and attested by its Secretary on this 10th day of February,
1983.
CALIFORNIA MUNICIPAL FUND FOR
TEMPORARY INVESTMENT, INC.
By: /s/ Edward J. Roach
Edward J. Roach
Vice President
SEAL
ATTEST:
/s/ Morgan R. Jones
Morgan R. Jones, Secretary
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<PAGE> 6
CERTIFICATE
THE UNDERSIGNED, Vice President of CALIFORNIA MUNICIPAL FUND FOR
TEMPORARY INVESTMENT, INC., who executed on behalf of said Corporation the
foregoing Articles of Amendment, of which this certificate is made a part,
hereby acknowledges, in the name and on behalf of said Corporation, the
foregoing Articles of Amendment to be the corporate act of said Corporation and
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to authorization and approval
are true in all material respects, under the penalties of perjury.
/s/ Edward J. Roach
Edward J. Roach
Vice President
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<PAGE> 1
EXHIBIT 1d
ARTICLES SUPPLEMENTARY
OF
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC., a Maryland
corporation having its principal office in the City of Baltimore, Maryland
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: Pursuant to Section 2-208 of the Maryland General
Corporation Law, the Board of Directors of the Corporation has reclassified
Three Hundred Million (300,000,000) shares of authorized and unissued Class A
Common Stock of the Corporation (par value One Mill ($.001) per share) as Class
A Common Stock - Special Series 1 (par value One Mill ($.001) per share)
pursuant to the following resolutions adopted at a regular meeting of the Board
of Directors of the Corporation held on May 28, 1985:
RESOLVED, that pursuant to Article VI of the Articles of
Incorporation of the Corporation Three Hundred Million (300,000,000)
authorized and unissued shares of Class A Common Stock of the
Corporation (of the par value of One Mill ($.001) per share and of the
aggregate par value of Three Hundred Thousand Dollars ($300,000)) be,
and hereby are, divided into and classified as a separate series of
said Class to be known as Class A Common Stock - Special Series 1;
FURTHER RESOLVED, that all consideration received by the
Corporation for the issue or sale of shares of Class A Common Stock -
Special Series 1 shall be invested and reinvested with the
consideration received by the Corporation for the issue and sale of all
other shares now or hereafter designated as Class A Common Stock
(irrespective of whether said shares have been designated as
<PAGE> 2
Special Series of said Class and, if so designated as a Special Series,
irrespective of the particular Series designations), together with all
income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, any funds or
payments derived from any reinvestment of such proceeds in whatever
form the same may be, and any general assets of the Corporation
allocated to the shares of Class A Common Stock - Special Series 1 or
such other shares by the Board of Directors in accordance with the
Charter of the Corporation, and each share of Class A Common Stock -
Special Series 1 shall share equally with each such other share in such
consideration and other assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment of
such proceeds in whatever form;
FURTHER RESOLVED, that each share of Class A Common Stock -
Special Series 1 shall be charged equally with each other share now or
hereafter designated as Class A Common Stock (irrespective of whether
said share has been designated as part of a Special Series of said
Class and, if so designated as a part of a Special Series, irrespective
of the particular Series designation) with the expenses and liabilities
of the Corporation in respect of shares of Class A Common Stock -
Special Series 1 or such other shares and in respect of any general
expenses and liabilities of the Corporation allocated to shares of
Class A Common Stock Special Series 1 or such other shares in
accordance with the Charter of the Corporation, except that:
(a) shares of Class A Common Stock - Special Series 1
shall bear the expenses and liabilities of payments to institutions
under any agreements entered into by or on behalf of the Corporation
which provide for services by the institutions to their customers who
beneficially own such shares but do not provide for services to any
beneficial owners of shares of capital stock of the Corporation other
than shares of Class A Common Stock - Special Series 1; and
(b) shares of Class A Common Stock - Special Series 1
shall not bear the expenses and liabilities of payments to institutions
under any agreements entered into by or on behalf of the Corporation
which provide for services by the institutions to their customers who
beneficially own shares of capital stock of the Corporation other than
shares of Class A Common Stock - Special Series 1 but do not provide
for services to any beneficial owners of shares of Class A Common Stock
- Special Series 1;
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<PAGE> 3
FURTHER RESOLVED, that each share of Class A Common Stock -
Special Series 1 shall otherwise have the same preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as
each other share now or hereafter designated as Class A Common Stock
(irrespective of whether said share has been designated as part of a
Special Series of said Class and, if so designated as part of a Special
Series, irrespective of the particular Series designation), except
that:
(a) on any matter that pertains to the agreements or
expenses and liabilities described in clause (a) of the immediately
preceding resolution (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses or liabilities) and
is submitted to a vote of shareholders of the Corporation, only shares
of Class A Common Stock - Special Series 1 shall be entitled to vote,
except that: (i) if said matter affects shares of capital stock of the
Corporation other than shares of Class A Common Stock - Special Series
1, such other affected shares of capital stock shall also be entitled
to vote, and in such case shares of Class A Common Stock - Special
Series 1 shall be voted in the aggregate together with such other
affected shares and not by class or series except where otherwise
required by law or permitted by the Board of Directors of the
Corporation; and (ii) if said matter does not affect shares of Class A
Common Stock - Special Series 1, said shares shall not be entitled to
vote (except where otherwise required by law or permitted by the Board
of Directors) even though the matter is submitted to a vote of the
holders of shares of capital stock of the Corporation other than shares
of Class A Common Stock - Special Series 1; and
(b) on any matter that pertains to the agreements or
expenses and liabilities described in clause (b) of the immediately
preceding resolution (or any plan or other document adopted by the
Corporation relating to said agreements, expenses or liabilities) and
is submitted to a vote of shareholders of the Corporation, shares of
Class A Common Stock - Special Series 1 shall not be entitled to vote,
except where otherwise required by law or permitted by the Board of
Directors of the Corporation, and except that if said matter affects
shares of Class A Common Stock Special Series 1 such shares shall be
entitled to vote, and in such case shares of Class A Common Stock -
Special Series 1 shall be voted in the aggregate together with all
other shares of capital stock of the Corporation voting on the matter
and not by class or series except where otherwise required by law or
permitted by the Board of Directors.
-3-
<PAGE> 4
SECOND: Pursuant to Section 2-208 of the Maryland General
Corporation Law, the Board of Directors of the Corporation has reclassified an
additional Three Hundred Million (300,000,000) shares of authorized and unissued
Class A Common Stock of the Corporation (par value One Mill ($.001) per share)
as Class A Common Stock-Special Series 2 (par value One Mill ($.001) per share)
pursuant to the following resolutions adopted at a regular meeting of the Board
of Directors of the Corporation held on May 28, 1985:
RESOLVED, that pursuant to Article VI of the Articles of
Incorporation of the Corporation Three Hundred Million (300,000,000)
authorized and unissued shares of Class A Common Stock of the
Corporation (of the par value of One Mill ($.001) per share and of the
aggregate par value of Three Hundred Thousand Dollars ($300,000)) be,
and hereby are, divided into and classified as a separate series of
said Class to be known as Class A Common Stock - Special Series 2;
FURTHER RESOLVED, that all consideration received by the
Corporation for the issue or sale of shares of Class A Common Stock -
Special Series 2 shall be invested and reinvested with the
consideration received by the Corporation for the issue and sale of all
other shares now or hereafter designated as Class A Common Stock
(irrespective of whether said shares have been designated as Special
Series of said Class and, if so designated as a Special Series,
irrespective of the particular Series designations), together with all
income, earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, any funds or
payments derived from any reinvestment of such proceeds in whatever
form the same may be, and any general assets of the Corporation
allocated to the shares of Class A Common Stock - Special Series 2 or
such other shares by the Board of Directors in accordance with the
Charter of the Corporation, and each share of Class A Common Stock -
Special Series 2 shall share equally with each such other share in such
consideration and other assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets derived from any reinvestment of
such proceeds in whatever form;
-4-
<PAGE> 5
FURTHER RESOLVED, that each share of Class A Common Stock -
Special Series 2 shall be charged equally with each other share now or
hereafter designated as Class A Common Stock (irrespective of whether
said share has been designated as part of a Special Series of said
Class and, if so designated as a part of a Special Series, irrespective
of the particular Series designation) with the expenses and liabilities
of the Corporation in respect of shares of Class A Common Stock -
Special Series 2 or such other shares and in respect of any general
expenses and liabilities of the Corporation allocated to shares of
Class A Common Stock Special Series 2 or such other shares in
accordance with the Charter of the Corporation, except that:
(a) shares of Class A Common Stock - Special Series 2
shall bear the expenses and liabilities of payments to institutions
under any agreements entered into by or on behalf of the Corporation
which provide for services by the institutions to their customers who
beneficially own such shares but do not provide for services to any
beneficial owners of shares of capital stock of the Corporation other
than shares of Class A Common Stock - Special Series 2; and
(b) shares of Class A Common Stock - Special Series 2
shall not bear the expenses and liabilities of payments to institutions
under any agreements entered into by or on behalf of the Corporation
which provide for services by the institutions to their customers who
beneficially own shares of capital stock of the Corporation other than
shares of Class A Common Stock - Special Series 2 but do not provide
for services to any beneficial owners of shares of Class A Common Stock
- Special Series 2;
FURTHER RESOLVED, that each share of Class A Common Stock -
Special Series 2 shall otherwise have the same preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as
each other share now or hereafter designated as Class A Common Stock
(irrespective of whether said share has been designated as part of a
Special Series of said Class and, if so designated as part of a Special
Series, irrespective of the particular Series designation), except
that:
(a) on any matter that pertains to the agreements or
expenses and liabilities described in clause (a) of the immediately
preceding resolution (or to any plan or other document adopted by the
Corporation relating to said agreements, expenses or liabilities) and
is submitted to a vote of shareholders of the Corporation, only shares
of Class A Common Stock - Special Series 2 shall be entitled to vote,
except that: (i) if said matter affects shares of
-5-
<PAGE> 6
capital stock of the Corporation other than shares of Class A Common
Stock - Special Series 2, such other affected shares of capital stock
shall also be entitled to vote, and in such case shares of Class A
Common Stock - Special Series 2 shall be voted in the aggregate
together with such other affected shares and not by class or series
except where otherwise required by law or permitted by the Board of
Directors of the Corporation; and (ii) if said matter does not affect
shares of Class A Common Stock - Special Series 2, said shares shall
not be entitled to vote (except where otherwise required by law or
permitted by the Board of Directors) even though the matter is
submitted to a vote of the holders of shares of capital stock of the
Corporation other than shares of Class A Common Stock - Special Series
2; and
(b) on any matter that pertains to the agreements or
expenses and liabilities described in clause (b) of the immediately
preceding resolution (or any plan or other document adopted by the
Corporation relating to said agreements, expenses or liabilities) and
is submitted to a vote of shareholders of the Corporation, shares of
Class A Common Stock - Special Series 2 shall not be entitled to vote,
except where otherwise required by law or permitted by the Board of
Directors of the Corporation, and except that if said matter affects
shares of Class A Common Stock Special Series 2 such shares shall be
entitled to vote, and in such case shares of Class A Common Stock -
Special Series 2 shall be voted in the aggregate together with all
other shares of capital stock of the Corporation voting on the matter
and not by class or series except where otherwise required by law or
permitted by the Board of Directors.
THIRD: The shares of Common Stock of the Corporation
reclassified pursuant to the resolutions set forth in Article FIRST and Article
SECOND of these Articles Supplementary have been reclassified by the
Corporation's Board of Directors under the authority contained in the Charter of
the Corporation.
IN WITNESS WHEREOF, MUNICIPAL FUND FOR CALIFORNIA INVESTORS,
INC., has caused these presents to be signed in its name and on its behalf by
its Vice President and its corporate
-6-
<PAGE> 7
seal to be hereunto affixed and attested by its Secretary on this
31st day of August, 1985.
MUNICIPAL FUND FOR
CALIFORNIA INVESTORS, INC.
[SEAL] By: /s/ Edward J. Roach
Edward J. Roach
Vice President
Attest
/s/ Morgan R. Jones
Morgan R. Jones, Secretary
-7-
<PAGE> 8
CERTIFICATE
THE UNDERSIGNED, Vice President of MUNICIPAL FUND FOR
CALIFORNIA INVESTORS, INC., who executed on behalf of said Corporation the
attached Articles Supplementary of said Corporation, of which this certificate
is made a part, hereby acknowledges, in the name and on behalf of said
Corporation, the attached Articles Supplementary to be the corporate act of said
Corporation, and certifies that to the best of his knowledge, information and
belief the matters and facts set forth in the attached Articles Supplementary
with respect to authorization and approval are true in all material respects,
under the penalties for perjury.
/s/ Edward J. Roach
Edward J. Roach
Dated: August 31,1985 Vice President
-8-
<PAGE> 1
EXHIBIT 1e
ARTICLES SUPPLEMENTARY
OF
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC., a Maryland
corporation having its principal office in the City of Baltimore, Maryland and
registered as an open-end investment company under the Investment Company Act of
1940, as amended (hereinafter called the "Corporation"), hereby certifies to the
State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to Section 2-105(c) of the Maryland General
Corporation Law, the Board of Directors of the Corporation has increased the
total number of authorized shares of capital stock of the Corporation from Two
Billion (2,000,000,000) shares, of the par value of One Mill ($.001), to Three
Billion (3,000,000,000) shares, of the par value of One Mill ($.001), and has
classified Nine Hundred Million (900,000,000) of such newly authorized, unissued
and unclassified shares as Class A Common Stock and One Hundred Million
(100,000,000) of such shares as Class B Common Stock, all pursuant to the
following resolutions adopted at a regular meeting of the Board of Directors of
the Corporation held on June 21, 1988.
RESOLVED, that pursuant to Article VI of the Articles
of Incorporation of the Corporation ("Articles of
Incorporation"), the total number of authorized shares of
capital stock of the Corporation be increased to Three Billion
(3,000,000,000) shares, of the par value of One Mill ($.001),
per share, and of the aggregate par value of Three Million
Dollars ($3,000,000);
<PAGE> 2
FURTHER RESOLVED, that Nine Hundred Million
(900,000,000) of the Corporation's newly authorized, unissued
and unclassified shares of capital stock, of the par value of
One Mill ($.001) per share and of the aggregate par value of
Nine Hundred Thousand ($900,000) be, and hereby are,
classified and designated as Class A Common Stock, for a total
of 2.3 Billion (2,300,000,000) shares of Class A Common Stock
with an aggregate par value of 2.3 Million Dollars
($2,300,000);
FURTHER RESOLVED, that One Hundred Million
(100,000,000) of the Corporation's newly authorized, unissued
and unclassified shares of capital stock, of the par value of
One Mill ($.001) per share and of the aggregate par value of
One Hundred Thousand Dollars ($100,000) be, and hereby are,
classified and designated as Class B Common Stock, for a total
of One Hundred Million (100,000,000) shares of Class B Common
Stock;
FURTHER RESOLVED, that each share of Class A Common
Stock and Class B Common Stock shall have all of the
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption that are set forth in the
Articles of Incorporation of the Corporation with respect to
its shares of capital stock.
SECOND: Pursuant to Section 2-208 of the Maryland General
Corporation Law, the Board of Directors of the Corporation has reclassified Ten
Million (10,000,000) shares of the Corporation's newly authorized and unissued
Class B Common Stock, of the par value of One Mill ($.001) per share, as Class B
Common Stock - Special Series 1, of the par value of One Mill ($.001) per share,
pursuant to the following resolutions adopted at a regular meeting of the Board
of Directors of the Corporation held on June 21, 1988:
RESOLVED, that pursuant to Article VI of the Articles
of Incorporation of the Corporation Ten Million (10,000,000)
newly authorized and unissued shares of Class B Common Stock
of the Corporation, of
-2-
<PAGE> 3
the par value of one Mill ($.001) per share and of the
aggregate par value of Ten Thousand Dollars ($10,000) be, and
hereby are, divided into and classified as a separate series
of said Class to be known as Class B Common Stock - Special
Series 1 for a total of Ten Million (10,000,000) shares of
such stock;
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class B
Common Stock - Special Series 1 shall be invested and
reinvested with the consideration received by the Corporation
for the issue and sale of all other shares now or hereafter
designated as Class B Common Stock (irrespective of whether
said shares have been designated as a Special Series of said
Class and, if so designated as a Special Series, irrespective
of the particular Series designation), together with all
income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation
thereof, any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, and any
general assets of the Corporation allocated to the shares of
Class B Common Stock - Special Series 1 or such other shares
by the Board of Directors in accordance with the Articles of
Incorporation, and each share of Class B Common Stock-Special
Series 1 shall share equally with each such other share in
such consideration and other assets, income, earnings, profits
and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, and any assets derived
from any reinvestment of such proceeds in whatever form;
FURTHER RESOLVED, that each such share of Class B
Common Stock - Special Series 1 shall be charged equally with
each other share now or hereafter designated as Class B Common
Stock (irrespective of whether said share has been designated
a part of a Special Series of said Class and, if so designated
as a part of a Special Series, irrespective of the particular
Series designation) with the expenses and liabilities of the
Corporation in respect of shares of Class B Common Stock -
Special Series 1 or such other shares and in respect of any
general expenses and liabilities of the Corporation allocated
to shares of Class B Common Stock - Special Series 1 or such
other shares in accordance with the Articles of Incorporation,
except that:
(a) shares of Class B Common Stock - Special
Series 1 shall bear the expenses and liabilities of
payments to institutions under any agreements
-3-
<PAGE> 4
entered into by or on behalf of the Corporation which
provide for services by the institutions to their
customers who beneficially own such shares but do not
provide for services to any beneficial owners of
shares of capital stock of the Corporation other than
shares of Class B Common Stock, Special Series 1; and
(b) shares of Class B Common Stock - Special
Series 1 shall not bear the expenses and liabilities
of payments to institutions under any agreements
entered into by or on behalf of the Corporation which
provide for services by the institutions to their
customers who beneficially own shares of capital
stock of the Corporation other than shares of Class B
Common Stock-Special Series 1 but do not provide for
services to any beneficial owners of shares of Class
B Common Stock - Special Series 1;
FURTHER RESOLVED, that each share of Class B Common
Stock - Special Series 1 shall otherwise have the same
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption as each other share now or
hereafter designated as Class B Common Stock (irrespective of
whether said share has been designated as part of a Special
Series of said Class and, if so designated as part of a
Special Series, irrespective of the particular Series
designation), except that:
(a) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (a) of the immediately preceding resolution
(or to any plan or other document adopted by the
Corporation relating to said agreements, expenses or
liabilities) and is submitted to a vote of
shareholders of the Corporation, only shares of Class
B Common Stock-Special Series 1 shall be entitled to
vote, except that: (1) if said matter affects shares
of capital stock of the Corporation other than shares
of Class B Common Stock - Special Series 1, such
other affected shares of capital stock shall also be
entitled to vote, and in such case shares of Class B
Common Stock - Special Series 1 shall be voted in the
aggregate together with such other affected shares
and not by class or series except where otherwise
required by law or permitted by the Board of
Directors of the Corporation; and (ii) if said matter
does not affect shares of
-4-
<PAGE> 5
Class B Common Stock - Special Series 1, said shares
shall not be entitled to vote (except where otherwise
required by law or permitted by the Board of
Directors) even though the matter is submitted to a
vote of the holders of shares of capital stock of the
Corporation other than shares of Class B Common Stock
- Special Series 1; and
(b) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (b) of the immediately preceding resolution
(or any plan or other document adopted by the
Corporation relating to said agreements, expenses or
liabilities) and is submitted to a vote of
shareholders of the Corporation, shares of Class B
Common Stock - Special Series 1 shall not be entitled
to vote, except where otherwise required by law or
permitted by the Board of Directors of the
Corporation, and except that if said matter effects
shares of Class B Common Stock - Special Series 1
such shares shall be entitled to vote, and in such
case shares of Class B Common Stock - Special Series
1 shall be voted in the aggregate together with all
other shares of capital stock of the Corporation
voting on the matter and not by class or series
except where otherwise required by law or permitted
by the Board of Directors.
THIRD: Pursuant to Section 2-208 of the Maryland General
Corporation Law, the Board of Directors of the Corporation has reclassified Ten
Million (10,000,000) shares of the Corporation's newly authorized and unissued
Class B Common Stock, of the par value of One Mill ($.001) per share, as Class B
Common Stock - Special Series 2, of the par value of One Mill ($.001) per share,
pursuant to the following resolutions adopted at a regular meeting of the Board
of Directors of the Corporation held on June 21, 1988:
RESOLVED, that pursuant to Article VI of the Articles
of Incorporation of the Corporation Ten Million (10,000,000)
newly authorized and unissued shares of Class B Common Stock,
of the par value of One Mill ($.001) per share and of the
aggregate par value
-5-
<PAGE> 6
of 10 Thousand Dollars ($10,000) be, and hereby are, divided
into and classified as a separate series of said Class to be
known as Class B Common Stock-Special Series 2 for a total of
Ten Million (10,000,000) shares of such stock;
FURTHER RESOLVED, that all consideration received by
the Corporation for the issue or sale of shares of Class B
Common Stock - Special Series 2 shall be invested and
reinvested with the consideration received by the Corporation
for the issue and sale of all other shares now or hereafter
designated as Class B Common Stock (irrespective of whether
said shares have been designated as a Special Series of said
Class and, if so designated as a Special Series, irrespective
of the particular Series designation), together with all
income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation
thereof, any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, and any
general assets of the Corporation allocated to the shares of
Class B Common Stock - Special Series 2 or such other shares
by the Board of Directors in accordance with the Articles of
Incorporation, and each share of Class B Common Stock-Special
Series 2 shall share equally with each such other share in
such consideration and other assets, income, earnings, profits
and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, and any assets derived
from any reinvestment of such proceeds in whatever form;
FURTHER RESOLVED, that each share of Class B Common
Stock - Special Series 2 shall be charged equally with each
other share now or hereafter designated as Class B Common
Stock (irrespective of whether said share has been designated
as part of a Special Series of said Class and, if so
designated a part of a Special Series, irrespective of the
particular Series designation) with the expenses and
liabilities of the Corporation in respect of shares of Class B
Common Stock - Special Series 2 or such other shares and in
respect of any general expenses and liabilities of the
Corporation allocated to shares of Class B Common Stock -
Special Series 2 or such other shares in accordance with the
Articles of Incorporation, except that:
(a) shares of Class B Common Stock - Special
Series 2 shall bear the expenses and liabilities of
payments to institutions under any agreements entered
into by or on behalf of the Corporation
-6-
<PAGE> 7
which provide for services by the institutions to
their customers who beneficially own such shares but
do not provide for services to any beneficial owners
of shares of capital stock of the Corporation other
than shares of Class B Common Stock - Special Series
2; and
(b) shares of Class B Common Stock - Special
Series 2 shall not bear the expenses and liabilities
of payments to institutions under any agreements
entered into by or on behalf of the Corporation which
provide for services by the institutions to their
customers who beneficially own shares of capital
stock of the Corporation other than shares of Class B
Common Stock-Special Series 2 but do not provide for
services to any beneficial owners of shares of Class
B Common Stock - Special Series 2;
FURTHER RESOLVED, that each share of Class B Common Stock -
Special Series 2 shall otherwise have the same preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption as
each other share now or hereafter designated as Class B Common Stock
(irrespective of whether said share has been designated as part of a
Special Series of said Class and, if so designated as part of a Special
Series, irrespective of the particular Series designation), except
that:
(a) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (a) of the immediately preceding resolution
(or to any plan or other document adopted by the
Corporation relating to said agreements, expenses or
liabilities) and is submitted to a vote of
shareholders of the Corporation, only shares of Class
B Common Stock-Special Series 2 shall be entitled to
vote, except that: (i) if said matter affects shares
of capital stock of the Corporation other than shares
of Class B Common Stock - Special Series 2, such
other affected shares of capital stock shall also be
entitled to vote, and in such case shares of Class B
Common Stock - Special Series 2 shall be voted in the
aggregate together with such other affected shares
and not by class or series except where otherwise
required by law or permitted by the Board of
Directors of the Corporation; and (ii) if said matter
does not affect shares of Class A Common Stock -
Special Series 2, said shares shall not be entitled
to vote (except where
-7-
<PAGE> 8
otherwise required by law or permitted by the Board
of Directors) even though the matter is submitted to
a vote of the holders of shares of capital stock of
the Corporation other than shares of Class B Common
Stock - Special Series 2; and
(b) on any matter that pertains to the
agreements or expenses and liabilities described in
clause (b) of the immediately preceding resolution
(or any plan or other document adopted by the
Corporation relating to said agreements, expenses or
liabilities) and is submitted to a vote of
shareholders of the Corporation, shares of Class B
Common Stock - Special Series 2 shall not be entitled
to vote, except where otherwise required by law or
permitted by the Board of Directors of the
Corporation, and except that if said matter affects
shares of Class B Common Stock - Special Series 2
such shares shall be entitled to vote, and in such
case shares of Class B Common Stock - Special Series
2 shall be voted in the aggregate together with all
other shares of capital stock of the Corporation
voting on the matter and not by class or series
except where otherwise required by law or permitted
by the Board of Directors.
FOURTH: The shares of Common Stock of the Corporation
classified and reclassified pursuant to the resolutions set forth herein have
been classified and reclassified by the Board of Directors under the authority
contained in the Corporation's Articles of Incorporation.
-8-
<PAGE> 9
IN WITNESS WHEREOF, MUNICIPAL FUND FOR CALIFORNIA INVESTORS,
INC., has caused these presents to be signed in its name and on its behalf by
its Vice President and its corporate seal to be hereunto affixed and attested by
its Secretary on this 26th day, of July, 1988.
[CORPORATE SEAL] MUNICIPAL FUND FOR
CALIFORNIA INVESTORS, INC.
By: /s/ Edward J. Roach
Edward J. Roach
Vice President
Attest:
/s/ Morgan R. Jones
Morgan R. Jones, Secretary
-9-
<PAGE> 10
CERTIFICATE
THE UNDERSIGNED, Vice President of MUNICIPAL FUND FOR
CALIFORNIA INVESTORS, INC., who executed on behalf of said Corporation the
attached Articles Supplementary of said Corporation of which this certificate is
made a part, hereby acknowledges, in the name and on behalf of said Corporation,
the attached Articles Supplementary to be the corporate act of said Corporation,
and certifies that to the best of his knowledge, information and belief the
matters and facts set forth in the attached Articles Supplementary with respect
to authorization and approval are true in all material respects, under the
penalties for perjury.
/s/ Edward J. Roach
Edward J. Roach
Vice President
Dated: July 26, 1988
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<PAGE> 1
EXHIBIT 1f
ARTICLES OF AMENDMENT
OF
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
Municipal Fund for California Investors, Inc., a Maryland
Corporation, having its principal office in the City of Baltimore, Maryland
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation are hereby amended, as
advised by the Board of Directors on June 21, 1988 and as approved by the
shareholders of the Company on July 28, 1988, by amending and restating in its
entirety paragraph (3) of Article VII to read as follows:
(3)(A) To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the Corporation
shall have any liability to the Corporation or its stockholders for
damages. This limitation on liability applies to events occurring at
the time a person serves as a director or officer of the Corporation
whether or not such person is a director or officer at the time of any
proceeding in which liability is asserted.
(B) The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by the
Maryland General Corporation Law. The Corporation shall indemnify and
advance expenses to its officers to the same extent as its directors
and to such further extent as is consistent with law. The Board of
Directors may by By-Law, resolution or agreement make further provision
for indemnification of directors, officers, employees and agents to the
fullest extent permitted by the Maryland General Corporation Law.
(C) No provision of this Article shall be effective
to protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security
holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
(D) References to the Maryland General Corporation
Law in this Article are to the law as from time
<PAGE> 2
to time amended. No further amendment to the Articles of Incorporation
of the Corporation shall affect any right of any person under this
Article based on any event, omission or proceeding prior to such
amendment.
IN WITNESS WHEREOF, Municipal Fund for California Investors,
Inc. has caused these presents to be signed in its name and on its behalf by its
President and its corporate seal to be hereunto affixed and attested by its
Secretary on this 20th day of October, 1988.
MUNICIPAL FUND FOR CALIFORNIA
INVESTORS, INC.
[SEAL]
By: /s/ G. Willing Pepper
G. Willing Pepper
President
ATTEST:
/s/ Morgan R. Jones
Morgan R. Jones
Secretary
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CERTIFICATE
THE UNDERSIGNED, President of Municipal Fund for California
Investors, Inc., who executed on behalf of said Corporation the foregoing
Articles of Amendment, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the foregoing
Articles of Amendment to be the corporate act of said Corporation and further
certifies that, to the best of his knowledge, information and belief, the
matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
/s/ G. Willing Pepper
G. Willing Pepper
President
Dated: 10/20/88
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Exhibit 2a
CALIFORNIA MUNICIPAL FUND FOR TEMPORARY INVESTMENT, INC.
COMPOSITE BY-LAWS
ARTICLE I
STOCKHOLDERS
SECTION 1. No Annual Meeting Required. No annual meeting of
stockholders of the Corporation shall be held unless required by applicable law
or otherwise determined by the Board of Directors.
SECTION 2. Special Meetings. Special meetings of the
stockholders for any purpose or purposes, unless otherwise prescribed by statute
or by the Charter, may be held at any place, within or without the State of
Maryland, and may be called at any time by the Board of Directors or by the
President, and shall be called by the President or Secretary at the request in
writing of a majority of the Board or at the request in writing of stockholders
entitled to cast at least twenty-five (25) percent of all the votes entitled to
be cast at such meeting. Such request shall state the purpose or purposes of the
proposed meeting and the matters proposed to be acted on at it; provided,
however, that unless requested by stockholders entitled to cast a majority of
all the votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of the stockholders held during the preceding twelve
(12) months.
SECTION 3. Notice of Meetings and Shareholder List. Written or
printed notice of the purpose or purposes and of the time and place of every
meeting of the stockholders shall be given by the Secretary of the Corporation
to each stockholder of record entitled to vote at the meeting and each other
stockholder entitled to notice of the meeting, by placing such notice in the
mail at least ten (10) days, but not more than ninety (90) days, and in any
event within the period prescribed by law, prior to the date named for the
meeting addressed to each stockholder at his address appearing on the books of
the Corporation or supplied by him to the Corporation for the purpose of notice.
The notice of every meeting of stockholders may be accompanied by a form of
proxy approved by the Board of Directors in favor of such actions or persons as
the Board of Directors may select.
At least five (5) days prior to each meeting of stockholders,
the officer or agent having charge of the share
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transfer books of the Corporation shall make a complete list of stockholders
entitled to vote at such meeting, in alphabetical order with the address of and
the number of shares held by each stockholder.
SECTION 4. Record Date. The Board of Directors may fix a date
not more than ninety (90) days preceding the date of any meeting of
stockholders, or the date fixed for the payment of any dividend, or the date of
the allotment of rights or the date when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of
stockholders entitled to notice of, or to vote at, any such meeting (or any
adjournment thereof) or entitled to receive payment of any dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may
be. In such case, only stockholders of record at the close of business on the
date so fixed shall be entitled to vote, to receive notice, or receive dividends
or rights, or to exercise rights, notwithstanding any subsequent transfer on the
books of the Corporation. The Board of Directors shall not close the books of
the Corporation against transfers of shares during the whole or any part of such
period. In the case of a meeting of stockholders, the record date shall be fixed
not less than ten (10) days prior to the date of the meeting.
SECTION 5. Quorum and Shareholder Action. Except as otherwise
provided by statute or by the Charter, the presence in person or by proxy of
stockholders of all the Corporation entitled to cast at least a majority of all
the votes to be cast at the meeting shall constitute a quorum and a majority of
all the votes cast at a meeting at which a quorum is present shall be sufficient
to approve any matter which properly comes before the meeting. In the absence of
a quorum, the stockholders present in person or by proxy, by majority vote and
without notice other than by announcement, may adjourn the meeting from time to
time as provided in Section 7 of this Article I until a quorum shall attend. The
stockholders present at any duly organized meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum.
SECTION 6. Organization. At every meeting of the stockholders,
the Chairman of the Board, if one has been selected and is present or, if not,
the President, or in the absence of the Chairman of the Board and the President,
a Vice President, or in the absence of the Chairman of the Board, the President
and all the Vice Presidents, a chairman chosen by the stockholders, shall act as
chairman; and the Secretary, or in his absence, an Assistant Secretary, or in
the absence of the Secretary and all the Assistant Secretaries, a person
appointed by the chairman, shall act as secretary.
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SECTION 7. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which such adjournment is taken, and at any such adjourned meeting at
which a quorum shall be present any action may be taken that could have been
taken at the meeting originally called; provided, that the meeting may not be
adjourned to a date more than the number of days after the original record date
for the meeting permitted by law, and if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Election and Powers. The number of directors shall
be fixed from time to time by resolution of the Board of Directors adopted by a
majority of the directors then in office; provided, however, that the number of
directors shall in no event be less than three (3) nor more than fifteen (15).
The business, affairs and property of the Corporation shall be managed by the
Board of Directors, which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute, the Charter or these
By-Laws required to be exercised or done by the stockholders. Subject to the
provisions of Article I, Section 1, the members of the Board of Directors shall
be elected by the stockholders at their annual meeting and each director shall
hold office until the annual meeting next after his election and until his
successor shall have been duly elected and qualified, until he shall have
resigned, or until he shall have been removed as provided in Section 10 of this
Article II.
SECTION 2. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice on such dates as the Board may from time to
time determine.
SECTION 3. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, President
or by a majority of the directors either in writing or by vote at a meeting.
SECTION 4. Notice of Special Meetings. Notice of the place,
day and hour of every special meeting shall be delivered personally to each
director or mailed, telegraphed or cabled to his address on the books of the
Corporation at least one (1) day before the meeting. It shall not be requisite
to the validity of any meeting of the Board of Directors that notice thereof
shall have been given to any director who is present thereat, or, if absent,
waives notice thereof in writing filed with the records of the meeting either
before or after the holding thereof.
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SECTION 5. Place of Meetings. The Board of Directors may hold
its regular and special meetings at such place or places within or without the
State of Maryland as the Board may from time to time determine.
SECTION 6. Quorum and Board Action. Except as otherwise
provided by statute or by the Charter: (a) one-third (1/3) of the entire Board
of Directors, but in no case less than two (2) directors, shall be necessary to
constitute a quorum for the transaction of business at each meeting of the
Board; (b) the action of a majority of the directors present at a meeting at
which a quorum is present shall be the action of the Board; and (c) if at any
meeting there be less than a quorum present, a majority of those directors
present may adjourn the meeting from time to time, but not for a period greater
than thirty (30) days at any one time, without notice other than by announcement
at the meeting until a quorum shall attend. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally scheduled.
SECTION 7. Chairman. The Board of Directors may at any time
appoint one of its members as Chairman of the Board, who shall serve at the
pleasure of the Board and who shall perform and execute such duties and powers
as may be conferred upon or assigned to him by the Board or these By-Laws, but
who shall not by reason of performing and executing these duties and powers be
deemed an officer or employee of the Corporation.
SECTION 8. Organization. At every meeting of the Board of
Directors, the Chairman of the Board, if one has been selected and is present,
and, if not, the President, or in the absence of the Chairman of the Board and
the President, a Vice President, or in the absence of the Chairman of the Board,
the President and all the Vice Presidents, a chairman chosen by a majority of
the directors present, shall preside; and the Secretary, or in his absence, an
Assistant Secretary, or in his absence of the Secretary and all the Assistant
Secretaries, a person appointed by the chairman, shall act as secretary.
SECTION 9. Vacancies. Any vacancy on the Board of Directors
occurring by reason of any increase in the number of directors may be filled by
a majority of the entire Board of Directors. Any vacancy on the Board of
Directors occurring for any other cause may be filled by a majority of the
remaining members of the Board of Directors, whether or not these members
constitute a quorum under Section 6 of this Article II. Any director so chosen
to fill a vacancy shall hold office until the next annual meeting of
stockholders and until his successor shall have been duly elected and qualified.
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SECTION 10. Removal. At any meeting of the stockholders called
for that purpose, the stockholders of the Corporation may remove from office any
director, with or without cause, by the affirmative vote of a majority of the
votes entitled to be cast for the election of directors, and another director
may be elected in the place of the director so removed to serve for the
remainder of the term of the removed director.
SECTION 11. Resignations. Any director may resign at any time
by giving written notice to the Board of Directors, the President or the
Secretary. Any such resignation shall take effect at the time of the receipt of
such notice or at any later time specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 12. Committees. The Board of Directors may appoint
from among its members an executive and other committees of the Board composed
of two (2) or more directors. To the extent permitted by law, the Board of
Directors may delegate to any such committee or committees any of the powers of
the Board of Directors in the management of the business, affairs and property
of the Corporation and may authorize the seal of the Corporation to be affixed
to all papers which may require it. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required. The
members of a committee present at any meeting, whether or not they constitute a
quorum, may appoint a director to act in the place of an absent member.
SECTION 13. Telephone Conference. Members of the Board of
Directors or any committee thereof may participate in a meeting of the Board or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time and participation by such means shall constitute
presence in person at the meeting.
SECTION 14. Compensation of Directors. Any director, whether
or not he is a salaried officer, employee or agent of the Corporation, may be
compensated for his services as director or as a member of a committee, or as
Chairman of the Board or chairman of a committee, and in addition may be
reimbursed for transportation and other expenses, all in such manner and amounts
as the directors may from time to time determine.
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ARTICLE III
OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a
President, a Secretary and a Treasurer, and may include one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers,
and such other officers as the Board of Directors may from time to time
determine. Any officer may hold more than one office in the Corporation, except
that an officer may not serve concurrently as both the President and a Vice
President.
SECTION 2. Election and Term of Office. The officers of the
Corporation shall be elected by the Board of Directors and, subject to earlier
termination of office, each officer shall hold office for one year and until his
successor shall have been elected and qualified.
SECTION 3. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President, or the
Secretary of the Corporation. Any such resignation shall take effect at the date
of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 4. Removal. If the Board of Directors in its
judgment finds that the best interests of the Corporation will be
served, the Board may remove any officer of the Corporation at
any time.
SECTION 5. President. The President shall be the chief
executive officer of the Corporation and shall have general supervision over the
business and operations of the Corporation, subject, however, to the control of
the Board of Directors. He, or such persons as he shall designate, shall sign,
execute, acknowledge, verify, deliver and accept, in the name of the
Corporation, deeds, mortgages, bonds, contracts and other instruments authorized
by the Board of Directors, except in the case where the signing, execution,
acknowledgement, verification, delivery or acceptance thereof shall be delegated
by the Board to some other officer or agent of the Corporation; and, in general,
he shall have general executive powers as well as other powers and duties as
from time to time may be conferred upon or assigned to him by the Board.
SECTION 6. The Vice Presidents. In the absence or disability
of the President, or when so directed by the President, any Vice President
designated by the Board of Directors may perform any or all of the duties of the
President, and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President; provided, however, that no Vice
President shall act as a member of or as chairman of any committee of which the
President is a member or chairman by
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designation of ex-officio, except when designated by the Board. Each Vice
President shall perform such other duties as from time to time may be conferred
upon or assigned to him by the Board or the President.
SECTION 7. The Secretary. The Secretary shall record all the
votes of the stockholders and of the directors and the minutes of the meetings
of the stockholders and of the Board of Directors in a book or books to be kept
for that purpose; he shall see that notices of meetings of the stockholders and
the Board of Directors are given and that all records and reports are properly
kept and filed by the Corporation as required by law; he shall be the custodian
of the seal of the Corporation and shall see that it is affixed to all documents
to be executed on behalf of the Corporation under its seal, provided that in
lieu of affixing the corporate seal to any document, it shall be sufficient to
meet the requirements of any law, rule or regulation relating to a corporate
seal to affix the word ("SEAL") adjacent to the signature of the authorized
officer of the Corporation; and, in general, he shall perform all duties
incident to the office of Secretary, and such other duties as from time to time
may be conferred upon or assigned to him by the Board or the President.
SECTION 8. Assistant Secretaries. In the absence or disability
of the Secretary, or when so directed by the Secretary, any Assistant Secretary
may perform any or all of the duties of the Secretary, and, when so acting,
shall have all the powers of, and be subject to all restrictions upon, the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be conferred upon, or assigned to him by the Board of Directors, the
President or the Secretary.
SECTION 9. The Treasurer. Subject to the provisions of any
contract which may be entered into with any custodian pursuant to authority
granted by the Board of Directors, the Treasurer shall have charge of all
receipts and disbursements of the Corporation and shall have or provide for the
custody of its funds and securities; he shall have full authority to receive and
give receipts for all money due and payable to the Corporation, and to endorse
checks, drafts and warrants, in its name and on its behalf, and to give full
discharge for the same; he shall deposit all funds of the Corporation, except
such as may be required for current use, in such banks or other places of
deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as from time to time may be conferred upon or assigned to him
by the Board or the President.
SECTION 10. Assistant Treasurers. Each Assistant Treasurer
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors or the President.
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SECTION 11. Compensation of Officers. The compensation of all
officers shall be fixed from time to time by the Board of Directors, or any
committee or officer authorized by the Board so to do. No officer shall be
precluded from receiving such compensation by reason of the fact that he is also
a director of the Corporation.
ARTICLE IV
STOCK
SECTION 1. Certificates. Each stockholder shall be entitled
upon written request to a stock certificate or certificates, representing and
certifying the number and kind of full shares held by him, signed by the
President, a Vice President or the Chairman of the Board and countersigned by
the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer,
which signatures may be either manual or facsimile signatures, and sealed with
the seal of the Corporation, which seal may be either facsimile or any other
form of seal. Stock certificates shall be in such form, not inconsistent with
law or with the Charter, as shall be approved by the Board of Directors.
SECTION 2. Transfer of Shares. Transfers of shares shall be
made on the books of the Corporation at the direction of the person named on the
Corporation's books or named in the certificate or certificates for such shares
(if issued), or by his attorney lawfully constituted in writing, upon surrender
of such certificate or certificates (if issued) properly endorsed, together with
a proper request for redemption, to the Corporation's Transfer Agent, with such
evidence of the authenticity of such transfer, authorization and such other
matters as the Corporation or its agents may reasonably require, and subject to
such other reasonable terms and conditions as may be required by the Corporation
or its agents; or, if the Board of Directors shall by resolution so provide,
transfer of shares may be made in any other manner provided by law.
SECTION 3. Transfer Agents and Registrars. The Corporation may
have one or more Transfer Agents and one or more Registrars of its stock, whose
respective duties the Board of Directors may, from time to time, define. No
certificate of stock shall he valid until countersigned by a Transfer Agent, if
the Corporation shall have a Transfer Agent, or until registered by a Registrar,
if the Corporation shall have a Registrar. The duties of Transfer Agent and
Registrar may be combined.
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SECTION 4. Mutilated, Lost, Stolen or Destroyed Certificates.
The Board of Directors, by standing resolution or by resolutions with respect to
particular cases, may authorize the issuance of a new stock certificate in lieu
of any stock certificate lost, stolen, destroyed or mutilated, upon such terms
and conditions as the Board may direct. The Board may in its discretion refuse
to issue such a new certificate, unless ordered to do so by a court of competent
jurisdiction.
SECTION 5. Stock Ledgers. The Corporation shall not be
required to keep original or duplicate stock ledgers at its principal office in
the City of Baltimore, Maryland, but stock ledgers shall be kept at the
respective offices of the Transfer Agents of the Corporation's capital stock.
ARTICLE V
SEAL
The seal of the Corporation shall be in such form as the Board
of Directors shall prescribe.
ARTICLE VI
SUNDRY PROVISIONS
SECTION 1. Amendments.
(a) By Stockholders. By-Laws may be adopted, altered,
amended or repealed in the manner provided in Section 5 of Article I hereof at
any annual or special meeting of the stockholders.
(b) By Directors. By-Laws may be adopted, altered,
amended or repealed in the manner provided in Section 6 of Article II hereof by
the Board of Directors at any regular or special meeting of the Board.
SECTION 2. Indemnification of Directors and Officers.
(a) Indemnification. The Corporation shall indemnify
its directors to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The Corporation shall
indemnify its officers to the same extent as its directors and to such further
extent as is consistent with law. The Corporation shall indemnify its directors
and officers who while serving as directors or officers also serve at the
request of the Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan to the fullest extent consistent with
law. This Section shall not protect any such person against any liability to the
Corporation or any stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
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(b) Advances. Any current or former director or
officer of the Corporation claiming indemnification within the scope of this
Section 2 shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with proceedings to which he
is a party in the manner and to the full extent permissible under the General
Laws of the State of Maryland, the Securities Act of 1933 and the Investment
Company Act of 1940, as such statutes are now or hereafter in force.
(c) Procedure. On the request of any current or
former director or officer requesting indemnification or an advance under this
Section 2, the Board of Directors shall determine, or cause to be determined, in
a manner consistent with the General Laws of the State of Maryland, the
Securities Act of 1933 and the Investment Company Act of 1940, as such statutes
are now or hereafter in force, whether the standards required by this Section 2
have been met.
(d) Other Rights. The indemnification provided by
this Section 2 shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
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Exhibit 5a
AMENDED AND RESTATED ADVISORY AGREEMENT
AGREEMENT made as of July 28, 1988 between MUNICIPAL FUND FOR
CALIFORNIA INVESTORS, INC., a Maryland corporation (the "Fund"), and PROVIDENT
INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (the "Investment
Adviser"), registered as an investment adviser under the Investment Advisers Act
of 1940 and wholly-owned by Provident National Bank ("Provident").
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940;
WHEREAS, the Fund entered into an amended advisory agreement
made as of August 7, 1987 (the "Advisory Agreement") between the Fund and the
Investment Adviser for certain investment advisory and administrative services
to the Fund, which at such time offered shares in only one portfolio: the Fund's
California Money Fund Portfolio (the "Cal Money Portfolio");
WHEREAS, the Fund, as of the date hereof, now offers shares in
two portfolios: the Cal Money Portfolio, and the Fund's California Intermediate
Municipal Fund Portfolio (the "Cal Intermuni Portfolio") (the Cal Money
Portfolio and the Cal Intermuni Portfolio collectively referred to herein as the
"Portfolios" and each as a "Portfolio"); and
WHEREAS, the Fund desires to amend and restate in full the
Advisory Agreement to retain the Investment Adviser to render investment
advisory and administrative services to both the Cal Money Portfolio and the Cal
Intermuni Portfolio, and the Investment Adviser is willing to so render such
services;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto that the Advisory Agreement
is hereby amended and restated in full as follows:
1. Appointment. The Fund hereby appoints the Investment
Adviser to act as investment adviser to each of the Portfolios for the period
and on the terms set forth in this Agreement. The Investment Adviser accepts
such appointment and agrees to render the services herein set forth for the
compensation herein provided.
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2. Delivery of Documents. The Fund has furnished the
Investment Adviser copies property certified or authenticated of each of the
following:
a. Articles of Incorporation of the Fund (such Articles
of Incorporation, as presently in effect and as they shall from time to time be
amended or supplemented, herein called the "Articles of Incorporation");
b. Articles Supplementary as filed with the Maryland
State Department of Assessments and Taxation on November 24, 1982;
c. By-Laws of the Fund (such By-Laws, as presently in
effect and as they shall from time to time be amended, herein called the
"By-Laws");
d. Resolutions of the Board of Directors of the Fund
authorizing the appointment of the Investment Adviser and the execution and
delivery of this Agreement;
e. Registration Statement under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended, on Form
N-1 (No. 2-79510) relating to each class of common stock of the Fund
(collectively, the "Shares"), and all amendments thereto;
f. Notification of Registration of the Fund under the
Investment Company Act of 1940, as amended, on Form N-BA as filed with the
Securities and Exchange Commission on September 24, 1982. and all amendments
thereto; and
g. Each Prospectus relating to either Portfolio of the
Fund in effect under the Securities Act of 1933 (such prospectuses and
supplements thereto. as presently in effect and as from time to time amended and
supplemented, herein called collectively, the "Prospectuses").
The Fund will furnish the Investment Adviser from time to time
with copies of all amendments of or supplements to the foregoing, if any.
3. Management. Subject to the supervision of the Board of
Directors of the Fund, the Investment Adviser will provide a continuous
investment program for the each of the Portfolios, including investment research
and management with respect to all securities, investments, cash and cash
equivalents in each Portfolio. The Investment Adviser will determine from time
to time what securities and other investments will be purchased, retained or
sold by each Portfolio. The Investment Adviser will provide the services
rendered by it hereunder in
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accordance with each Portfolio's investment objective and policies as stated in
the Prospectuses. The Investment Adviser further agrees that it:
a. will conform with all applicable Rules and
Regulations of the Securities and Exchange Commission (herein called the
"Rules"), and will in addition conduct its activities under this Agreement in
accordance with regulations of the Board of Governors of the Federal Reserve
System pertaining to the investment advisory activities of bank holding
companies to the same extent as if such regulations were by their terms
applicable to the activities of the Investment Adviser;
b. will not invest its assets or the assets of any
accounts advised by it or by Provident in Shares, make loans for the purpose of
purchasing or carrying Shares, or make loans to the Portfolios;
c. will place orders pursuant to its investment
determinations for each Portfolio either directly with the issuer or with any
broker or dealer. In placing orders with brokers and dealers, the Investment
Adviser will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when the execution and
price offered by two or more brokers or dealers are comparable, the Investment
Adviser may, in its discretion, purchase and sell portfolio securities to and
from brokers and dealers who provide the Fund with research advice and other
services. In no instance will portfolio securities be purchased from or sold to
the Fund's principal underwriter, the Investment Advisor or any affiliated
person thereof, except to the extent permitted by the Securities and Exchange
Commission;
d. will, together with Provident, maintain all books and
records with respect to each Portfolio's securities transactions, keep each
Portfolio's books of account and will render to the Fund's Board of Directors
such periodic and special reports as the Board may request;
e. will compute the net asset value and the net income
for each Portfolio on each business day as described in the Prospectuses or as
more frequently requested by the Fund; and
f. will treat confidentially and as proprietary
information of the Fund all records and other information relative to the Fund
and prior, present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Fund which approval shall not be unreasonably withheld and may not be
withheld where the Investment Adviser may
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be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Fund.
4. Services Not Exclusive. The investment management services
rendered by the Investment Adviser hereunder are not to be deemed exclusive, and
the Investment Adviser shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
5. Sub-Advisory Agreement. Notwithstanding anything herein to
the contrary, this Agreement shall not be effective until the Investment Adviser
and Provident deliver to the Fund a duly executed copy of the Sub-Advisory
Agreement in substantially the form attached as Exhibit A hereto (the
"Sub-Advisory Agreement") pursuant to which Provident will provide the
Investment Adviser with certain investment advisory services on behalf of each
Portfolio. The Investment Adviser agrees to give the Fund prompt written notice
of any termination of or notice to terminate the Sub-Advisory Agreement by any
person other than the Fund.
6. Books and Records. In compliance with the requirements of
Rule 31a-3 of the Rules, the Investment Adviser hereby agrees that all records
which it maintains for each Portfolio are the property of the Fund and further
agrees to surrender promptly to the Fund any of such records upon the Fund's
request. The Investment Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 the records required to be maintained by Rule 31a-l of
the Rules.
7. Expenses. During the term of this Agreement, the Investment
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of (including brokerage commissions, if
any) securities purchased for each Portfolio.
In addition. if the expenses borne by a Portfolio in any
fiscal year exceed the applicable expense limitations imposed by the securities
regulations of any state in which the Shares are registered or qualified for
sale to the public, the Investment Adviser shall reimburse the Portfolio for
one-half of any excess up to the amount of the fees payable to it during such
fiscal year pursuant to paragraph B hereof; provided, however, that
notwithstanding the foregoing, the Investment Adviser shall reimburse the
Portfolio for one-half of such excess expenses regardless of the amount of fees
paid to it during such fiscal year to the extent that the securities regulations
of any state in which the Shares are registered or qualified for sale so
require.
4
<PAGE> 5
8. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement, the Fund will pay the Investment Adviser and
the Investment Adviser will accept as full compensation therefor a fee, computed
daily and payable monthly, at an annual rate of .20% of the Portfolio's average
net assets.
9. Limitation of Liability of the Investment Adviser. Neither
Provident nor the Investment Adviser shall be liable for any error of judgment
or mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligation and duties under this Agreement.
Notwithstanding the foregoing, the Investment Adviser shall be liable to the
Fund for the acts and omissions of Provident to the extent that Provident is
liable to the Investment Adviser for such acts or omissions under the
Sub-Advisory Agreement between the Investment Adviser and Provident.
10. Duration and Termination. This Agreement, unless sooner
terminated as provided herein, shall continue until May 31, 1989. Thereafter, if
not terminated, this Agreement shall continue with respect to a Portfolio for
successive periods of 12 months each, provided such continuance is specifically
approved at least annually (a) by the vote of;a majority of those members of the
Board of Directors of the Fund who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Board of Directors of the
Fund or by vote of a majority of the outstanding voting securities of the
Portfolio; provided, however. that this Agreement may be terminated with respect
to a Portfolio by the Fund at any time, without the payment of any penalty, by
the Board of Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Portfolio on 60 days' written notice to the Investment
Adviser, or by the Investment Adviser at any time, without payment of any
penalty, on 90 days' written notice to the Fund. This Agreement will immediately
terminate in the event of its assignment and upon any termination of the
Sub-Advisory Agreement. (As used in this Agreement the terms "majority of the
outstanding voting securities," "interested person" and assignment shall have
the same meanings as such terms have in the Investment Company Act of 1940.)
11. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party
5
<PAGE> 6
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
vote of a majority of the Portfolio's outstanding voting securities.
12. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
IN WITNESS WHEREOF. the parties hereto have caused this
instrument to be executed by their officers designated below to of the day and
year first above written.
MUNICIPAL FUND FOR CALIFORNIA
INVESTORS, INC.
Attest: (a Maryland corporation)
/s/ Morgan R. Jones By:/s/ G. Willing Pepper
- ------------------------------- -----------------------------
[seal]
PROVIDENT INSTITUTIONAL
MANAGEMENT CORPORATION
Attest:
/s/ Signature illegible By:/s/ Thomas H. Nevin
- ------------------------------- -----------------------------
[Corporate Seal]
6
<PAGE> 1
Exhibit 5b
AMENDED AND RESTATED
SUB-ADVISORY AGREEMENT
AGREEMENT dated July 28, 1988, between PROVIDENT NATIONAL
BANK, a national banking association (herein called "Provident"), and PROVIDENT
INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation registered as an
investment adviser under the Investment Advisers Act of 1940 and wholly-owned by
Provident (herein called "PIMC").
WHEREAS, PIMC is the investment adviser to Municipal Fund for
California Investors, Inc. (the "Fund"), an open-end, diversified, management
investment company registered under the Investment Company Act of 1940;
WHEREAS, PIMC entered into a sub-advisory agreement made as of
February 28, 1983 (the "Sub-Advisory Agreement") between PIMC and Provident for
certain investment research, administrative, and statistical services in
connection with PIMC's advisory activities on behalf of the Fund, which at such
time offered shares in only one portfolio; the Fund's California Money Fund
portfolio (the "Cal Money Portfolio");
WHEREAS, the Fund, as of the date hereof, now offers shares in
two portfolios: the Cal Money Portfolio and the Fund's California Intermediate
Municipal Fund portfolio (the "Cal Intermuni Portfolio") (the Cal Money
Portfolio and the Cal Intermuni Portfolio collectively refereed to herein as the
"Portfolios" and each as a "Portfolio");
WHEREAS, PIMC wishes to amend and restate in full the
Sub-Advisory Agreement to retain Provident to provide it with investment
research, administrative, and statistical services in connection with PIMC's
advisory activities on behalf of both the Cal Money Portfolio and the Cal
Intermuni Portfolio; and
WHEREAS, Provident is willing to provide such services to PIMC
upon the conditions and for the compensation set forth below,
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto that the
"Sub-Advisory Agreement" is hereby amended and restated in full as follows:
1. Appointment. PIMC hereby appoints Provident its sub-adviser
as required by the Advisory Agreement between PIMC and the Fund dated as of July
28, 1988 (such Agreement or the most recent successor advisory agreement between
such parties is referred to herein as the "Advisory Agreement"). Provident
<PAGE> 2
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of the
Board of Directors of the Fund, Provident, through its Trust Division and on
behalf of each Portfolio of the Fund, will provide each Portfolio investment
research and credit analysis concerning prospective and existing Portfolio
investments, make recommendations with respect to each Portfolio's continuous
investment program, supply PIMC computer facilities and operating personnel, and
provide such statistical services as PIMC may from time to time reasonably
request. Provident will provide the services rendered by it hereunder in
accordance with each Portfolio's investment objective, policies and restrictions
as stated in the Portfolio's prospectus, as presently in effect and Provident
further agrees that it:
(a) will use the same skill and care in providing
such services as it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) will conform with all applicable Rules and
Regulations of the Securities and Exchange Commission (hereinafter called the
"Rules"), and will in addition conduct its activities under this Agreement in
accordance with the regulations of the Board of Governors of the Federal Reserve
System pertaining to the investment advisory activities of bank holding
companies to the same extent as if such regulations were by their terms
applicable to its activities hereunder;
(c) will not invest its assets or assets of any
fiduciary account managed by it in shares of a Portfolio, make loans for
purposes of purchasing or carrying such shares, or make loans to a Portfolio;
(d) will maintain or cause PIMC to maintain books
and records with respect to each Portfolio's securities transactions;
(e) will render to the Fund's Board of Directors
such periodic and special reports as the Board may request; and
(f) will maintain its policy and practice of
conducting its Trust Division independently of its commercial Division. In
making investment recommendations for each Portfolio, Trust Division personnel
will not inquire or take into consideration whether the issuer of securities
proposed for purchase or sale for the Portfolio's account are customers of the
Commercial Division. In dealing with commercial customers, the Commercial
Division will not inquire or take into consideration whether securities of those
customers are held by the Portfolio.
<PAGE> 3
3. Services Not Exclusive. Provident's services hereunder are
not deemed to be exclusive, and Provident shall be free to render similar
services to others so long as its services under this Agreement are not impaired
thereby.
4. Books and Records. In compliance with the requirements of
Rule 31a-3 of the Rules, Provident hereby agrees that all records which it
maintains for each Portfolio are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's request.
Provident further agrees to preserve, or cause PIMC to preserve, for the periods
prescribed by Rule 31-2, the records required to be maintained by Rule 31-1 of
the Rules.
5. Expenses. During the term of this Agreement. Provident will
pay all expenses incurred by it in connection with its activities under this
Agreement.
6. Compensation. For the services which Provident will render
to PIMC under this Agreement, PIMC will pay to Provident a monthly fee equal to
75% of each month's advisory fee received by PIMC from the Fund with respect to
each Portfolio pursuant to the Advisory Agreement between PIMC and the Fund.
Notwithstanding the foregoing, the fee payable to Provident shall be adjusted
each quarter as necessary to assure that, with respect to each Portfolio, PIMC
has income from all sources before application of federal, State, or other
income taxes of at least $22,500 during each quarter. The sub-advisory fee shall
be paid by PIMC to Provident at least quarterly.
7. Limitation on Liability. Provident will not be liable for
any error of judgment or mistake of law or for any loss suffered by PIMC or by
the Fund in connection with the matters to which this Agreement relates, except
a loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations or duties under this Agreement.
8. Duration and Termination. This Agreement, unless sooner
terminated as provided herein, shall continue with respect to a Portfolio until
May 31, 1989. Thereafter, if not terminated, this Agreement shall continue with
respect to a Portfolio for successive period of 12 months each, provided, such
continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Board of Directors of the Fund who are not
parties to this Agreement or interest persons of the Fund or any such party,
cast in person at a meeting called for the propose of voting on such approval,
and (b) by the Board of Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Portfolio,
<PAGE> 4
on 60 days' written notice to PIMC, and will be terminated upon any termination
of the Advisory Agreement between the Fund and PIMC. This Agreement will also
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings as such terms
have in the Investment Company Act of 1940.)
9. Amendment of this Agreement. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. No amendment of this
Agreement shall be effective with respect to a Portfolio until approved by vote
of the holders of a majority of the Portfolio's outstanding voting securities.
10. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of the day and
year first above written.
PROVIDENT NATIONAL BANK
Attest:
/s/ Signature illegible By: /s/ Signature illegible
- --------------------------------- --------------------------------
(Corporate Seal)
PROVIDENT INSTITUTION
MANAGEMENT CORPORATION
Attest:
/s/ Signature illegible By: /s/ Thomas H. Nevin
- --------------------------------- --------------------------------
(Corporate Seal)
<PAGE> 1
EXHIBIT 5c
ASSUMPTION
AGREEMENT made as of February 28, 1998 between PNC Bank, N.A., a
national banking association ("PNC Bank"), and PNC Institutional Management
Corporation, a Delaware corporation ("PIMC").
WHEREAS, Municipal Fund for California Investors, Inc. (the
"Company") is registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, PIMC is investment adviser pursuant to an Advisory Agreement
dated July 28, 1988 between PIMC and the Company and PNC Bank is sub-adviser to
the Company pursuant to a Sub-Advisory Agreement dated July 28, 1988 between
PIMC and PNC Bank;
WHEREAS, PNC Bank is transferring to PIMC the personnel engaged in,
and the computer and other facilities used in performing, PNC Bank's
obligations under Section 2 of the Sub-Advisory Agreement;
WHEREAS, PIMC and PNC Bank desire to have PIMC assume the obligations
of PNC Bank under the Sub-Advisory Agreement and to eliminate PIMC's obligation
to pay for such sub-advisory services;
NOW THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. PIMC hereby assumes all obligations of PNC Bank under Section 2
of the Sub-Advisory Agreement, and PNC Bank acknowledges that compensation by
PIMC to it provided in Section 6 of the Sub-Advisory Agreement shall terminate
as the date hereof.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
hereto have caused this instrument to be executed by their officers designated
below as of the day and year first above written.
PNC INSTITUTIONAL MANAGEMENT
CORPORATION
By: /s/ Thomas H. Nevin
-------------------------
(Authorized Officer)
PNC BANK, N.A.
By: /s/ Paul B. Anderson
-------------------------
(Authorized Officer)
<PAGE> 1
Exhibit 6
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
DISTRIBUTION AGREEMENT
Agreement dated as of January 31, 1994 between Municipal Fund
for California Investors, Inc., a Maryland corporation, (the "Company"), and
Provident Distributors, Inc., a Delaware corporation (the "Distributor").
WHEREAS, the Company is an open-end, diversified management
investment company and is so registered under the Investment Company Act of
1940, as amended (the 1940 Act); and
WHEREAS, the company desires to retain the Distributor as its
distributor to provide for the sale and distribution of each class or subclass
of shares of each of the Company's investment portfolios (individually a "Fund,"
collectively, the "Funds") as listed on Appendix A (as such Appendix may, from
time to time, be supplemented (or amended), and the Distributor is willing to
render such services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth and intending to be legally bound, the parties hereto agree
as follows:
1. APPOINTMENT OF DISTRIBUTOR. The Company hereby appoints the
Distributor as distributor of each class or subclass of shares in each of the
Company's Funds on the terms and for the period set forth in this Agreement. The
Distributor hereby accepts such appointment and agrees to render the services
and duties set forth in Section 3 below. In the event that the Company
establishes additional classes or investment portfolios other than the Funds
listed on Appendix A with respect to which it desires to retain the Distributor
to act as distributor hereunder, the Company shall notify the Distributor,
whereupon such Appendix A shall be supplemented (or amended) and such portfolio
shall become a Fund hereunder and shall be subject to the provisions of this
Agreement to the same extent as the Funds (except to the extent that said
provisions may be modified in writing by the Company and Distributor at the
time).
2. DELIVERY OF DOCUMENTS. The Company has furnished the
Distributor with copies, properly certified or authenticated, of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
a. The Company's Articles of Incorporation, filed with
the Secretary of State of Maryland on September 20, 1982, as amended (the
"Charter"),
<PAGE> 2
b. The Company's By-Laws, as amended and supplemented
("By-Laws")
c. Resolutions of the Company's of Directors authorizing
the execution and delivery Agreement;
d. The Company's most recent amendment to its
Registration Statement under the Securities Act of filed 1933, as amended (the
"1933 Act"), and the 1940 Act on Form N-1A as filed with the Securities and
Exchange Commission (the "Commission") on May 28, 1993, relating to its Funds
(the Registration Statement as presently in effect and as amended or
supplemented from time to time, is herein called the "Registration Statement");
e. The Company's most recent Prospectuses and Statement
of Additional Information and all amendments and supplements thereto ( such
Prospectuses and Statement of Additional Information and supplements thereto, as
presently in effect and as from time to time amended and supplemented, are
herein called the "Prospectuses");
f. The Company's amended and restated 12b-1 Services
Plan and related amended and restated form of Broker/ Dealer Servicing
Agreement.
3. SERVICES AND DUTIES. The Distributor enters into the
following covenants with respect to its services and duties:
a. The Distributor agrees to sell, as agent, from time
to time during the term of this Agreement, shares upon the terms and at the
current offering price as described in the Prospectuses. The Distributor will
act only in its own behalf as principal in making agreements with selected
dealers. No broker-dealer or other person which enters into a selling or
servicing agreement with the Distributor shall be authorized to act as agent for
the Company or its Funds in connection with the offering or sale of shares to
the public or otherwise. The Distributor shall use its best efforts to sell
shares of each class or subclass of each of the Funds but shall not be obligated
to sell any certain number of shares.
b. 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 each of the Funds and any class or subclass thereof.
c. In performing all of its services and duties as
Distributor, the Distributor will act in conformity with the
2
<PAGE> 3
Charter, By-Laws, Prospectuses and resolutions and other instructions of the
Company's Board of Directors and will comply with the requirements of the 1933
Act, the Securities Exchange Act of 1934, the 1940 Act and all other applicable
federal or state law.
d. The Distributor will bear the cost of (i) printing
and distributing any Prospectus (including any supplement thereto) to persons
who are not shareholders, and (ii) preparing, printing and distributing any
literature, advertisement or materials which is primarily intended to result in
the sale of shares; provided, however, that the Distributor shall not be
obligated to bear the expenses incurred by the Company in connection with the
preparation and printing of any amendment to any Registration Statement or
Prospectus necessary for the continued effective registration of the shares
under the 1933 Act and state securities laws and the distribution of any such
document to existing shareholders of the Company's Fund.
e. The Company shall have the right to suspend the sale
of shares at any time in response to condition in the securities markets or
otherwise, and to suspend the redemption of shares of any Fund at any time
permitted by the 1940 Act or the rules and regulations of the Commission
("Rules").
f. The Company reserves the right to reject any order
for shares but will not do so arbitrarily or without reasonable cause.
4. LIMITATIONS OF LIABILITY. The Distributor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Company in connection with the matters to which this Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement.
5. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Distributor
agrees on behalf of itself and its employees to treat confidentially and as
proprietary information of the Company all records and other information
relative to the Company and its Funds and prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be withheld where the Distributor
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Company.
3
<PAGE> 4
6. INDEMNIFICATION.
a. The Company represents and warrants to the
Distributor that the Registration Statement contains, and that the Prospectuses
at all times will contain, all statements required by the 1933 Act and the Rules
of the Commission, will in all material respects conform to the applicable
requirements of the 1933 Act and the Rules and will not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation or warranty in this Section 6 shall apply to statements or
omissions made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Distributor or either of the
Company's co-administrators expressly for use in the Registration Statement or
Prospectuses.
b. The Company on behalf of each Fund agrees that each
Fund will indemnify, defend and hold harmless the Distributor, its several
officers, and directors, and any person who controls the Distributor within the
meaning of Section 15 of the 1933 Act, from and against any losses, claims,
damages or liabilities, joint or several, to which the Distributor, its several
officers, and directors, and any person who controls the Distributor within the
meaning of Section 15 of the 1933 Act, may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectuses or in any application or other document
executed by or on behalf of the Company with respect to such Fund or are based
upon information furnished by;or on behalf of the Company with respect to such
Fund filed in any state in order to qualify the shares under the securities or
blue sky laws thereof ("Blue Sky application") or arise out of, or are based
upon, the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Distributor, its several officers, and directors, and any
person who controls the Distributor within the meaning of Section 15 of the 1933
Act, for any legal or other expenses reasonably incurred by the Distributor, its
several officers, and directors, and any person who controls the Distributor
within the meaning of Section 15 of the 1933 Act, in investigating, defending or
preparing to defend any such action, proceeding or claim; provided, however,
that the Company shall not be liable in any case to the extent that such loss,
claim, damage arises out of, or is based upon, any untrue statement, alleged
untrue statement, or omission or alleged omission made in the Registration
Statement, the Prospectus or any Blue Sky
4
<PAGE> 5
application with respect to such Fund in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Distributor
or either of the Company's co-administrators specifically for inclusion therein
or arising out of the failure of the Distributor to deliver a current
Prospectus.
c. The Company on behalf of each Fund shall not
indemnify any person pursuant to this Section 6 unless the court or other body
before which the proceeding was brought has as not rendered a final decision on
the merits that such person was not liable by reason of his or her willful
misfeasance, bad faith or gross negligence in the performance of his or her
duties, or his or her reckless disregard of any obligations and duties, under
this Agreement ("disabling conduct") or, in the absence of such a decision, a
reasonable determination (based upon a review of the facts) that such person was
not liable by reason of disabling conduct has been made by the vote of a
majority of a quorum of the directors of the Company who are neither "interested
parties" (as defined in the 1940 Act) nor parties to the proceeding, or by an
independent legal counsel in a written opinion.
d. The Distributor will indemnify and hold harmless the
Company and each of its Funds and its several officers and directors, and any
person who controls the Company within the meaning of Section 15 of the 1933
Act, from and against any losses, claims, damages or liabilities, joint or
several, to which any of them may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus or any Blue Sky application, or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, which statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company or any of
its several officers and directors by or on behalf of the Distributor or either
of the Company's co-administrators specifically for inclusion therein, and will
reimburse the Company and its several officers, directors and such controlling
persons for any legal or other expenses reasonably incurred by any of them in
investigating, defending or preparing to defend any such action, proceeding or
claim.
e. The obligations of each Fund under this Section 6
shall be the several (and not the joint or joint and several) obligation of each
Fund.
5
<PAGE> 6
7. DURATION AND TERMINATION. This Agreement shall of the date
first written become effective upon its execution as of the date first written
above and, unless sooner terminated as provided herein, shall continue until May
31, 1995. Thereafter, if not terminated, this Agreement shall continue
automatically for successive terms of one year at least annually (a) by a vote
of a majority of those members of not parties to this the Company's Board of
Directors who are not parties to this Agreement or "interested persons" of any
such party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Company's Board of Directors or by vote of a "majority
of the outstanding voting securities" of the Company; provided, however, that
this Agreement may be terminated by the Company at any time, without the payment
of any penalty, by vote of a majority of the entire Board of Directors or by a
vote of a "majority of the outstanding voting securities" of the Company on
60-days' written notice to the Distributor, or by the Distributor at any time,
without the payment of any penalty, on 90-days' written notice to the Company.
This Agreement will automatically and immediately terminate in the event of its
"assignment" (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and assignment shall have the same
meanings as such terms have in the 1940 Act.)
8. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which an enforcement of the
change, waiver, discharge or termination is sought.
9. NOTICES. Notices of any kind to be given to the Company
hereunder by the Distributor shall be in writing and shall be duly given if
mailed or delivered to the Company at Corporate center, Suite 152, 103 Bellevue
Parkway, Bellevue Park, Wilmington, Delaware 19809, Attention: Mr. Edward J.
Roach, Treasurer, with a copy to Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia Pennsylvania 19107-3496 Attention: Morgan R.
Jones, Secretary, or at such other address or to such individual as shall be so
specified by the Company to the Distributor. Notices of any kind to be given to
the Distributor hereunder by the Company shall be in writing and shall be duly
given if mailed or delivered to Provident Radnor, Distributors, Inc., 259
Radnor-Chester Road, Suite 120, Attention: Monroe J. Haegele or at such other
Pennsylvania 19087, individual as shall be so specified by address or to such
other the Distributor to the Company.
10. MISCELLANEOUS. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise
6
<PAGE> 7
affect their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors.
11. COUNTERPARTS. This Agreement may be executed in counterparts,
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
MUNICIPAL FUND FOR CALIFORNIA
INVESTORS, INC.
By /s/ G. Willing Pepper
-----------------------------------
President
PROVIDENT DISTRIBUTORS, INC.
By /s/ Nancy A. Wolfe
-----------------------------------
Title
7
<PAGE> 8
APPENDIX A
to the
DISTRIBUTION AGREEMENT
between
Municipal Fund for California Investors, Inc.
and
Provident Distributors, Inc.
California Money Fund (Class A Common Stock, Class A Common Stock Special Series
I and Class A Common Stock - Special Series 2)
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Exhibit 7
AMENDED AND RESTATED CUSTODIAN AGREEMENT
THIS AGREEMENT is made this 28th day of July, 1988 by and between
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC., a Maryland corporation (the
"Fund"), and PROVIDENT NATIONAL BANK, a national banking association
("Provident").
WITNESSETH:
WHEREAS, the Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, the Fund entered into a custodian agreement made February 14,
1983 (the "Custodian Agreement") by and between the Fund and Provident for
certain custodial services for the Fund, which at such time offered shares in
only one portfolio: the Fund's California Money Fund portfolio (the "Cal Money
Portfolio");
WHEREAS, the Fund, as of the date hereof, now offers shares in two
portfolios: the Cal Money Portfolio and the Fund's California Intermediate
Municipal Bond portfolio (the "Cal Intermuni Portfolio") (the Cal Money
Portfolio and the Cal Intermuni Portfolio collectively referred to herein as the
"Portfolios" and each as a "Portfolio");
WHEREAS, the Fund offers three separate series of Class A Common Stock,
$.001 par value per share, and three separate
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series of Class B Common Stock, $.001 par value per share (such shares and all
shares of every class or series hereafter created by the Fund called "Shares",
and such classes or series of Shares and any class or series of Shares hereafter
created by the Fund herein called "Classes");
WHEREAS, the Fund desires to amend and restate in full the Custodian
Agreement to retain Provident to serve as the Fund's custodian with respect to
both the Cal Money Portfolio and the Cal Intermuni Portfolio and Provident is
willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto that the Custodian
Agreement is hereby amended and restated in full as follows:
1. Appointment. The Fund hereby appoints Provident to act as
custodian of the portfolio securities, cash and other property of the Fund for
the period and on the terms set forth in this Agreement. Provident accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Paragraph 21 of this Agreement. Provident agrees
to comply with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder.
2. Delivery of Documents. The Fund has furnished Provident with
copies properly certified or authenticated of each of the following:
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(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of Provident as custodian of the portfolio securities, cash and
other property of the Fund and approving this Agreement;
(b) Incumbency and signature certificates identifying and
containing the signatures of the Fund's officers and/or other persons authorized
to sign Written Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Articles of Incorporation filed with the Department
of Assessments and Taxation of the State of Maryland on September 20, 1982 and
all amendments thereto (such Articles of Incorporation, as currently in effect
and as they shall from time to time be amended, are herein called the
"Charter");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws,
as currently in effect and as they shall from time to time be amended, are
herein called the "By-Laws");
(e) Resolutions of the Fund's Board of Directors appointing
Provident Institutional Management Corporation ("PIMC") as the Fund's investment
adviser and resolutions of the Fund's Board of Directors and Shareholders
approving a proposed Advisory Agreement between PIMC and the Fund (the "Advisory
Agreement");
(f) Resolutions of the Fund's Board of Directors appointing
Provident National Bank ("Provident") as the Fund's sub-investment adviser and
resolutions of the Fund's Board of
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Directors and Shareholders approving a proposed Sub-Advisory Agreement between
PIMC and Provident (the "Sub-Advisory Agreement");
(g) Resolutions of the Fund's Board of Directors appointing
Shearson/American Express Inc. ("Shearson") as the Fund's distributor and
approving a proposed Distribution Agreement between Shearson and the Fund (the
"Distribution Agreement");
(h) Resolutions of the Fund's Board of Directors appointing the
Boston Company Advisors, Inc. ("Boston Advisors") as the Fund's administrator
and approving a proposed Administration Agreement between Boston Advisors and
the Fund (the "Administration Agreement");
(i) Resolutions of the Fund's Board of Directors appointing
Provident Financial Processing Corporation ("PFPC") as the Fund's transfer agent
and approving a proposed Transfer Agency Agreement between the Fund and PFPC
(the "Transfer Agency Agreement");
(j) The Advisory Agreement, the Sub-Advisory Agreement, the
Distribution Agreement, the Administration Agreement, and the Transfer Agency
Agreement;
(k) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A with the Securities and Exchange
Commission ("SEC") on September 24, 1982;
(l) The Fund's Registration Statement on Form N-1 under the 1940
Act and the Securities Act of 1933, as amended
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(the "1933 Act"), as filed with the SEC on September 24, 1982 (File No. 2-78510)
relating to the Shares, and all amendments thereto; and
(m) The Fund's most recent prospectus relating to each Portfolio
of the Fund (such prospectuses as presently in effect and all amendments and
supplements thereto are herein called collectively the "Prospectuses", and each
a "Prospectus").
The Fund will furnish Provident from time to time with copies of all
amendments of or supplements to the foregoing, if any.
3. Definitions
(a) "Authorized Persons". As used in this Agreement, the term
"Authorized Person" means the Fund's President, Treasurer, and any other person,
whether or not any such person is an officer or employee of the Fund, duly
authorized by the Board of Directors of the Fund to give Oral and Written
Instructions on behalf of the Fund and listed on the Certificate annexed hereto
as Appendix A or such other Certificate listing persons duly authorized to give
Oral and Written Instructions on behalf of the Fund an may be received by
Provident from time to time.
(b) "Oral Instructions". As used in this Agreement, the term "Oral
Instructions" means verbal instructions actually received by Provident from an
Authorized Person or from a person reasonably believed by Provident to be an
Authorized Person. The Fund agrees to deliver to Provident, at the time and
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in the manner specified in Paragraph 7(b) of this Agreement, Written
Instructions confirming Oral Instructions.
(c) "Property". The term "Property", as used in this Agreement,
means:
(i) any and all securities and other property which the
Fund may from time to time deposit, or cause to be deposited, with
Provident or which Provident may from time to time hold for the Fund;
(ii) all income in respect of any of such securities or
other property;
(iii) all proceeds of the sale of any of such securities or
other property; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by Provident from time to time from or on
behalf of the Fund.
(d) "Written Instructions". An used in this Agreement, the term
"Written Instructions" means written instructions delivered by mail, tested
telegram, cable, telex or facsimile sending device, and received by Provident,
signed by two Authorized Persons.
(e) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve/Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing
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agency registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934.
4. Delivery and Registration of the Property. The Fund will deliver
or cause to be delivered to Provident all securities and all moneys owned by it,
including cash received for the issuance of its Shares, at any time during the
period of this Agreement. Provident will not be responsible for such securities
and such moneys until actually received by it. All securities delivered to
Provident (other than in bearer form) shall be registered in the name of the
Fund or in the name of a nominee of the Fund or in the name of Provident or any
nominee of Provident, which nominee shall be assigned exclusively to the Fund
(with or without indication of fiduciary status), or in the name of any
sub-custodian or any nominee of any such subcustodian appointed pursuant to
Paragraph 6 hereof, or shall be properly endorsed and in form for transfer
satisfactory to Provident.
5. Receipt and Disbursement of Money.
(a) Provident shall open and maintain a separate custodial account
or accounts in the name of each Portfolio of the Fund, subject only to draft or
order by Provident acting pursuant to the terms of this Agreement, and shall
hold in such account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of the Fund. Provident shall make
payments of cash to, or for the account of, each Portfolio of the Fund from such
cash only (i) for the purchase of securities for the Fund's Portfolios as
provided in Paragraph 11
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hereof; (ii) for the redemption of Shares as provided in subparagraph (b) of
Paragraph 8 hereof; (iii) upon receipt of Written Instructions, for the payment
of interest, dividends, taxes, or custodial, transfer agency, administration,
distribution or advisory fees or expenses which are to be borne by the Fund
under the terms of this Agreement, the Transfer Agency Agreement, the Advisory
Agreement, the Sub-Advisory Agreement, the Administration Agreement and the
Distribution Agreement; (iv) upon receipt of Written Instructions, for payments
in connection with the conversion, exchange or surrender of securities owned or
subscribed to by the Fund and held by or to be delivered to Provident; (v) to a
subcustodian pursuant to Paragraph 6 hereof; or (vi) upon receipt of Written
Instructions, for other proper Fund purposes.
(b) Provident is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as custodian
for the account of each Portfolio of the Fund.
6. Receipt of Securities.
(a) Except as provided in sub-Paragraph (c) below, Provident shall
hold and physically segregate in a separate account identifiable at all times
from those of any other persons, firms, or corporations, all securities and
non-cash property received by it for the account of each Portfolio of the Fund.
All such securities and non-cash property are to be held or disposed of by
Provident for the Fund pursuant to the
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terms of this Agreement. In the absence of Written Instructions accompanied by a
certified resolution of the Fund's Board of Directors authorizing the specific
transaction, Provident shall have no power or authority to withdraw, deliver,
assign, hypothecate, pledge or otherwise dispose of any such securities and
investments except in accordance with the express terms provided for in this
Agreement. In no case may any director, officer, employee or agent of the Fund
withdraw any securities. In connection with its duties under this Paragraph 6,
Provident may at its own expense, enter into subcustodian agreements with other
banks or trust companies for the receipt of certain securities and cash to be
held by Provident for the account of the Fund pursuant to this Agreement;
provided that each such bank or trust company has an aggregate capital, surplus
and undivided profits, as shown by its last published report, of not less than
five hundred thousand dollars ($500,000) and that such bank or trust company
agrees with Provident to comply with all relevant provisions of the 1940 Act and
applicable rules and regulations thereunder. Provident shall remain responsible
for the performance of all of its duties under this Agreement and shall hold the
Fund harmless from the acts and omissions of any bank or trust company that it
might choose pursuant to this Paragraph 6.
(b) Promptly after the close of business each day, Provident shall
furnish the Fund with confirmation and a summary of all transfers to or from the
account of each Portfolio of the Fund during said day. Where securities are
transferred to
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an account of a Portfolio of the Fund established pursuant to sub-Paragraph (c)
hereof, Provident shall also by book-entry or otherwise identify as belonging to
the Fund the quantity of securities in a fungible bulk of securities registered
in the name of Provident (or its nominee) or shown in Provident's account on the
books of the Book-Entry System. At least monthly and from time to time,
Provident shall furnish the Fund with a detailed statement of the Property held
for each Portfolio of the Fund under this Agreement.
(c) The Fund shall deliver to Provident a certified resolution of
the Board of Directors of the Fund approving, authorizing and instructing
Provident on a continuous and on-going basis, until instructed to the contrary
by Oral or Written Instructions actually received by Provident, to deposit in
the Book-Entry System all securities of each Portfolio of the Fund eligible for
deposit therein and to utilize the Book-Entry System to the extent possible in
connection with settlements of purchases and sales of securities by each
Portfolio of the Fund, and deliveries and returns of securities collateral in
connection with borrowings. Without limiting the generality of such use, it is
agreed that the following provisions shall apply thereto:
(i) Securities and any cash of each Portfolio of the Fund
deposited in the Book-Entry System will at all times be segregated from
any assets and cash controlled by Provident in other than a fiduciary
or custodian capacity but may be commingled with other assets
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held in such capacities. Provident will pay out money only upon receipt
of securities and will deliver securities only upon the receipt of
money.
(ii) All books and records maintained by Provident which
relates to the Fund's participation in the Book-Entry System will at
all times during Provident's regular business hours be open to the
inspection of the Fund's duly authorized employees or agents, and the
Fund will be furnished with all information in respect of the services
rendered to it as it may require.
(iii) Provident will provide the Fund with copies of any
report obtained by Provident on the system of internal accounting
control of the Book-Entry System promptly after receipt of such a
report by Provident. Provident will also provide the Fund with such
reports on its own system of internal control as the Fund may
reasonably request from time to time.
7. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement, Provident shall
act only upon Oral and Written Instructions. Although Provident may take
cognizance of the provisions of the Charter and By-Laws of the Fund, Provident
may assume that any Oral or Written Instructions received hereunder are not in
any way inconsistent with any provisions of such Charter or By-Laws or any vote,
resolution or proceeding of the Shareholders, or of the Board of Directors, or
of any committee thereof.
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(b) Provident shall be entitled to rely upon any Oral Instructions
and any agrees to forward to Provident Written Instructions confirming Oral
Instructions in such manner that the Written Instructions are received by
Provident, whether by hand delivery, telex, facsimile sending device or
otherwise, by the close of business of the same day that such Oral Instructions
are given to Provident. The Fund agrees that the fact that such confirming
Written Instructions are not received by Provident shall in no way affect the
validity of the transactions or enforceability of the transactions authorized by
the Fund by giving Oral Instructions. The Fund agrees that Provident shall incur
no liability to the Fund in acting upon Oral Instructions given to Provident
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from an Authorized Person.
8. Transactions Not Requiring Instructions. Provident is authorized
to take the following action without Oral or Written Instructions:
(a) Deposits of Proceeds of Issuance of Shares. Provident shall
collect and receive for the account of each Portfolio of the Fund all payments
received in payment for Shares issued by the Fund.
(b) Redemptions. Upon receipt of notice by the Fund's transfer
agent stating that such transfer agent is required to redeem Shares and
specifying the number and Class of Shares which such transfer agent is required
to redeem and the
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date and time the request or requests for redemption were received by the Fund's
distributor, Provident shall either (i) pay to such transfer agent, for
distribution to the redeeming Shareholder, the amount payable to such
Shareholder upon the redemption of such Shares as determined in the manner
described in the then current Prospectus relating to such Shares, or (ii)
arrange for the direct payment of such redemption proceeds by Provident to the
redeeming Shareholder in accordance with such procedures and controls as are
mutually agreed upon from time to time by and among Provident, the Fund and the
Fund's transfer agent.
(c) Collection of Income and Other Payments. Provident shall:
(i) collect and receive for the account of each Portfolio
of the Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and similar
items, included or to be included in the Property, and promptly advise
the Fund of such receipt and shall credit such income, as collected, to
the Portfolio's custodian account;
(ii) endorse and deposit for collection, in the name of the
Fund, or if with respect to a Portfolio, in the name of the Portfolio,
checks, drafts, or other orders for the payment of money on the same
day as received;
(iii) receive and hold for the account of each Portfolio of
the Fund all securities received as a
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distribution on the portfolio securities of the Portfolio as a result
of a stock dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement or distribution
of rights or similar securities issued with respect to any portfolio
securities of the Portfolio held by Provident hereunder;
(iv) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed, or retired, or
otherwise become payable on the date such securities become payable;
and
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income, payments and
other Property and the endorsement for collection of checks, drafts,
and other negotiable instruments.
(d) Miscellaneous Transactions. Provident is authorized to
deliver or cause to be delivered Property against payment or other consideration
or written receipt therefor in the following cases:
(i) for examination by a broker selling for the account of
a Portfolio in accordance with street delivery custom;
(ii) for the exchange of interim receipts or temporary
securities for definitive securities; and
(iii) for transfer of securities into the name of the
Portfolio or Provident or a nominee of either,
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or for exchange of securities for a different number of bonds,
certificates, or other evidence, representing the same aggregate face
amount or number of units bearing the same interest rate, maturity date
and call provisions, if any;
provided that, in any such case, the new securities are to be delivered to
Provident.
9. Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, Provident shall:
(a) execute and deliver to such persons as may be designated in
such Oral or Written Instructions, proxies, consents, authorizations, and any
other instruments whereby the authority of the Fund as owner of any securities
may be exercised;
(b) deliver any securities held for a Portfolio of the Fund in
exchange for other securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, or the exercise of any
conversion privilege;
(c) deliver any securities held for a Portfolio of the Fund to any
protective committee, reorganization committee or other person in connection
with the liquidation, reorganization, refinancing, merger, consolidation,
recapitalization or sale of assets of any corporation, and
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receive and hold under the terms of this Agreement such certificates of deposit,
interim receipts or other instruments or documents as may be issued to it to
evidence such delivery;
(d) make such transfers or exchanges of the assets of a Portfolio
of the Fund and take such other steps as shall be stated in said Oral or Written
Instructions to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation, recapitalization or sale of
assets of the Portfolio of the Fund; and
(e) release securities belonging to a Portfolio of the Fund to any
bank or trust company for the purpose of pledge or hypothecation to secure any
loan incurred by the Portfolio of the Fund; provided, however, that securities
shall be released only upon payment to Provident of the monies borrowed, except
that in cases where additional collateral is required to secure a borrowing
already made, subject to proper prior authorization, further securities may be
released for that purpose; and pay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon surrender of the note or
notes evidencing the loan.
10. Dividends and Distributions. The Fund shall furnish Provident with
appropriate evidence of action by the Fund's Board of Directors declaring and
authorizing the payment of any dividends and distributions to the Fund's
Shareholders. Upon receipt by Provident of Written Instructions with respect to
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dividends and distributions declared by the Fund's Board of Directors and
payable to the Fund's Shareholders, and in conformance with procedures mutually
agreed upon by Provident, the Fund, and the Fund's transfer agent, Provident
shall pay to the Fund's transfer agent, as agent for the Shareholders, an amount
equal to the amount indicated in said Written Instructions as payable by the
Fund to the Shareholders for distribution in cash by the transfer agent to the
Shareholders or for reinvestment by the transfer agent, with respect to those
Shareholders who have elected in proper manner to reinvest their dividends, in
additional Shares. In lieu of paying the Fund's transfer agent cash dividends
and distributions, Provident may arrange for the direct payment of cash
dividends and distributions to Shareholders by Provident in accordance with such
procedures and controls as are mutually agreed upon from time to time by and
among the Fund, Provident and the Fund's transfer agent.
11. Purchases of Securities. Promptly after each decision by PIMC to
purchase securities for a Portfolio of the Fund, the Fund, through PIMC, shall
deliver to Provident Oral Instructions specifying with respect to such purchase:
(a) the name of the issuer and the title of the securities; (b) the number of
shares or the principal amount purchased and accrued interest, if any; (c) the
date of purchase and settlement; (d) the purchase price per unit; (e) the total
amount payable upon such purchase; (f) the name of the person from whom or the
broker
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through whom the purchase was made; and (g) the Portfolio of the Fund to which
such purchase applies. Provident shall, upon receipt of securities purchased by
or for the Fund, pay out of the moneys held for the account of the Fund the
total amount payable to the person from whom or the broker through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Oral Instructions.
12. Sales of Securities. Promptly after each decision by PIMC to sell
securities for a Portfolio of the Fund, the Fund, through PIMC, shall deliver to
Provident Oral Instructions, specifying with respect to each such sale: (a) the
name of the issuer and the title of the security; (b) the number of shares or
principal amount sold, and accrued interest, if any; (c) the date of sale; (d)
the sale price per unit; (e) the total amount payable to the Fund upon such
sale; (f) the name of broker through whom or the person to whom the sale was
made; and (g) the Portfolio of the Fund to which such sale applies. Provident
shall deliver the securities upon receipt of the total amount payable to the
Fund upon such sale, provided that the same conforms to the total amount payable
as set forth in such Oral Instructions. Subject to the foregoing, Provident may
accept payment in such form as shall be satisfactory to it, and may deliver
securities and arrange for payment in accordance with the customs prevailing
among dealers in securities.
13. Correspondence. Provident shall answer correspondence from
securities brokers and others relating to its
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duties hereunder and such other correspondence as may from time to time be
mutually agreed upon between Provident and the Fund.
14. Records. Provident shall keep and maintain the financial books and
records of account for each Portfolio of the Fund. The books and records
pertaining to each Portfolio of the Fund which are in the possession of
Provident shall be the property of the Fund. Such books and records shall be
prepared and maintained as required by the 1940 Act and other applicable
securities laws and rules and regulations. The Fund, or the Fund's authorized
representatives, shall have access to such books and records at all times during
Provident's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by Provident to the Fund
or the Fund's authorized representative at the Fund's expense.
15. Reports. Provident shall furnish to the Fund the following
reports:
(a) such periodic and special reports as the Fund may reasonably
request;
(b) a monthly statement summarizing all transactions and entries
for the account of each Portfolio of the Fund;
(c) a monthly report of portfolio securities belonging to each
Portfolio of the Fund showing the adjusted average cost of each issue and the
market value at the end of each month;
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(d) a monthly report of the cash account of each Portfolio of the
Fund showing disbursements; and
(e) such other information as may be agreed upon from time to time
between the Fund and Provident.
16. Cooperation with Accountants. Provident shall cooperate with the
Fund's independent certified public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement to assure that
the necessary information is made available to such accountants for the
expression of their unqualified opinion, including but not limited to the
opinion included in the Fund's annual report on Form N-1R.
17. Confidentiality. Provident agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the Fund
all records and other information relative to the Fund and its prior, present or
potential Shareholders and relative to Shearson and its prior, present or
potential customers, and not to use such records and information for any purpose
other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Fund, which approval
shall not unreasonably be withheld and may not be withheld where Provident may
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge this information by duly constituted authorities, or when
so requested by the Fund.
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18. Equipment Failures. In the event of equipment failures beyond
Provident's control, Provident shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall have no liability
with respect thereto. Provident shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available.
19. Right to Receive Advice.
(a) Advice of Fund. If Provident shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall receive, from the
Fund directions or advice, including Oral or Written Instructions where
appropriate.
(b) Advice of Counsel. If Provident shall be in doubt as to any
question of law involved in any action to be taken or omitted by Provident, it
may request advice at its own cost from counsel of its own choosing (who may be
counsel for PIMC, PFPC, Shearson, Boston Advisors, the Fund, or Provident, at
the option of Provident).
(c) Conflicting Advice. In case of conflict between directions or
advice (including Oral or Written Instructions) received by Provident pursuant
to subparagraph (a) of this paragraph and advice received by Provident pursuant
to subparagraph (b) of this paragraph, Provident shall be entitled to rely on
and follow the advice received pursuant to the latter provision alone.
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(d) Protection of Provident. Provident shall be protected in any
action or inaction which it takes in reliance on any directions or advice
(including Oral or Written Instructions) received pursuant to subparagraphs (a)
or (b) of this paragraph which Provident, after receipt of such directions or
advice, reasonably and in good faith believes to be consistent with such
directions or advice, as the case may be. However, nothing in this paragraph
shall be construed as imposing upon Provident any obligation (i) to seek such
directions or advice (including Oral or Written Instructions), or (ii) to act in
accordance with such directions or advice when received, unless, under the terms
of another provision of this Agreement, the same is a condition to Provident's
properly taking or omitting to take such action. Nothing in this subsection
shall excuse Provident when an action or omission on the part of Provident
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by Provident of its duties under this Agreement.
20. Compliance with Governmental Rules and Regulations. The Fund
assumes full responsibility for insuring that the contents of each prospectus of
the Fund complies with all applicable requirements of the 1933 Act, the 1940
Act, and any laws, rules and regulations of governmental authorities having
jurisdiction.
21. Compensation. As compensation for the services rendered by
Provident during the term of this Agreement, the Fund will pay to Provident,
with respect to each Portfolio of the
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Fund, monthly fees equal to $.25 per year for each $1,000 of the Portfolio's
average gross assets for such year (based on the average of the assets included
in the net asset value of the Portfolio on each day in such month that such
value is calculated).
22. Indemnification. The Fund, as sole owner of the Property, agrees
to indemnify and hold harmless Provident and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the 1983 Act, the Securities Exchange Act
of 1984, the 1940 Act, and any state and foreign securities and blue sky laws,
all as or to be amended from time to time) and expenses, including (without
limitation) attorneys' fees and disbursements, arising directly or indirectly
(a) from the fact that securities included in the Property are registered in the
name of any such nominee or (b) without limiting the generality of the foregoing
clause (a) from any action or thing which Provident takes or does or omits to
take or do (i) at the request or on the direction of or in reliance on the
advice of the Fund or (ii) upon Oral or Written Instructions, provided, that
neither Provident nor any of its nominees shall be indemnified against any
liability to the Fund or to its Shareholders (or any expenses incident to such
liability) arising out of (x) Provident's or such nominee's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties
under this Agreement or (y) Provident's own negligent failure to perform its
duties under this Agreement.
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In the event of any advance of cash for any purpose made by Provident resulting
from orders or Oral or Written Instructions of the Fund, or in the event that
Provident or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct, any Property
at any time held for the account of the Fund shall be security therefor.
23. Responsibility of Provident. Provident shall be under no duty to
take any action on behalf of the Fund except as specifically set forth herein or
as may be specifically agreed to by Provident in writing. In the performance of
its duties hereunder, Provident shall be obligated to exercise care and
diligence and to act in good faith and to use its best efforts within reasonable
limits to insure the accuracy of all services performed under this Agreement,
but Provident shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of
Provident or reckless disregard by Provident of its duties under this Agreement,
provided that Provident shall be responsible for its own negligent failure to
perform its duties under this Agreement. Without limiting the generality of the
foregoing or of any other provision of this Agreement, Provident in connection
with its duties under this Agreement shall not be under any duty or obligation
to inquire into and shall not be liable for or in
-24-
<PAGE> 25
respect of (a) the validity or invalidity or authority or lack thereof of any
Oral or Written Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, if any, and which Provident
reasonably believes to be genuine; (b) the validity or invalidity of the
issuance of any securities included or to be included in the Property, the
legality or illegality of the purchase of such securities, or the propriety or
impropriety of the amount paid therefor; (c) the legality or illegality of the
sale (or exchange) of any Property or the propriety or impropriety of the amount
for which such Property is sold (or exchanged); or (d) delays or errors or loss
of data occurring by reason of circumstances beyond Provident's control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown except as provided in paragraph 18
hereof, flood or catastrophe, acts of God, insurrection, war, riots or failure
of the mails, transportation, communication or power supply, nor shall Provident
be under any duty or obligation to ascertain whether any Property at any time
delivered to or held by Provident may properly be held by or for the Fund.
24. Collections. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by Provident) shall be at the sole risk of the Fund. In any
case in which Provident does not receive any payment due the Fund within a
reasonable time after Provident has made proper demands for the same, it
-25-
<PAGE> 26
shall so notify the Fund in writing, including copies of all demand letters, any
written responses thereto, and memoranda of all oral responses thereto and to
telephonic demands, and await instructions from the Fund. Provident shall not be
obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. Provident shall also notify the Fund as soon as
reasonably practicable whenever income due on securities is not collected in due
course.
25. Duration and Termination. This Agreement shall continue until
termination by the Fund or Provident on sixty (60) days' written notice. Upon
any termination of this Agreement, pending appointment of a successor to
Provident or vote of the Shareholders of each Portfolio to dissolve or to
function without a custodian of its cash, securities or other property,
Provident shall not deliver cash, securities or other property of the Fund to
the Fund, but may deliver them to a bank or trust company of its own selection,
having an aggregate capital, surplus and undivided profits, as shown by its last
published report of not lose than twenty million dollars ($20,000,000) as a
custodian for each Portfolio of the Fund to be held under terms similar to those
of this Agreement; provided, however, that Provident shall not be required to
make any such delivery or payment until full payment shall have been made by the
Fund of all liabilities constituting a charge on or against the properties of
the Portfolios of the Fund then held by Provident or on or against Provident and
until full payment shall have been made to
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<PAGE> 27
Provident of all of its fees, compensation, costs and expenses, subject to the
provisions of Paragraph 21 of this Agreement.
26. Notices. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to
Provident at Provident's address, 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103, marked for the attention of the Custodian Services
Department (or its successor); (b) if to the Fund, at the address of the Fund;
or (c) if to neither of the foregoing, at such other address as shall have been
notified to the sender of any such Notice or other communication. If the
location of the sender of a Notice and the address of the addressee thereof are,
at the time of sending, more than 100 miles apart, the Notice may be sent by
first-class mail, in which case it shall be deemed to have been given three days
after it is sent, or if sent by confirming telegram, cable, telex or facsimile
sending advice, it shall be deemed to have been given immediately, and, if the
location of the sender of a Notice and the address of the addressee thereof are,
at the time of sending, not more than 100 miles apart, the Notice may be sent by
first-class mail, in which case it shall be deemed to have been given two days
after it is sent, or if sent by messenger, it shall be deemed to have been given
on the day it is delivered, or if sent by confirming telegram, cable, telex or
facsimile sending device, it shall be
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<PAGE> 28
deemed to have been given immediately. All postage, cable, telegram, telex and
facsimile sending device charges arising from the sending of a Notice hereunder
shall be paid by the sender.
27. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
28. Amendments. This Agreement or any part hereof may be changed or
waived only an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
29. Delegation. On thirty (30) days' prior written notice to the Fund,
Provident may assign its rights and delegate its duties hereunder to any
wholly-owned subsidiary of it or PNC Financial Corp., provided that Provident
may delegate its duties only to a bank having the qualifications provided in
section 17(f) of the 1940 Act, and further provided that Provident and its
delegate shall promptly provide such information as the Fund may request and
respond to such questions as the Fund may ask relative to the delegation,
including (without limitation) the capabilities of the delegate.
30. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement, if
any, with respect to delegated and/or Oral or Written Instructions.
-28-
<PAGE> 29
The captions in this Agreement are included for convenience of reference only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement shall be deemed to be a contract
made in Pennsylvania and governed by Pennsylvania law. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding and shall inure to the benefit of the parties hereto
and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their officers designated below on the day and year first
above written.
[SEAL] MUNICIPAL FUND FOR CALIFORNIA
INVESTORS, INC.
Attest:/s/ Signature illegible By:/s/ Signature illegible
----------------------- ----------------------------
[SEAL] PROVIDENT NATIONAL BANK
Attest:/s/ Signature illegible By:/s/ Signature illegible
----------------------- ----------------------------
-29-
<PAGE> 1
Exhibit 8a
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
ADMINISTRATION AGREEMENT
AGREEMENT dated as of January 18, 1993 between MUNICIPAL FUND FOR
CALIFORNIA INVESTORS, INC., a Maryland corporation (the "Company"), PROVIDENT
FINANCIAL PROCESSING CORPORATION, a Delaware corporation, and MFD Group, Inc.
("MFD"), a Delaware corporation (collectively, the "Administrators").
WHEREAS, the Company is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company desires to retain the Administrators to provide,
as co-administrators, certain administration services for each class and
subclass of the Company's investment portfolios (individually, a "Fund,"
collectively, the "Funds") as listed on Appendix A (as such Appendix may, from
time to time, be supplemented (or amended)) and the Administrators are willing
to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and intending to be legally bound, it is agreed between the
parties hereto as follows:
1. APPOINTMENT OF ADMINISTRATORS. The Company hereby appoints each of
the Administrators jointly to provide administration services to each class and
subclass of shares in each of the Company's Funds on the terms and for the
period set forth in this Agreement. The Administrators accept such appointment
and agree to perform the services and duties set forth in Section 3 below in
return for the compensation provided in Section 5 below. In the event that the
Company establishes additional classes or investment portfolios other than the
Funds listed on Appendix A with respect to which it desires to retain the
Administrators to act as co-administrators hereunder, the Company shall notify
the Administrators, whereupon such Appendix A shall be supplemented (or amended)
and such portfolio shall become a Fund hereunder and shall be subject to the
provisions of this Agreement to the same extent as the Funds (except to the
extent that said provisions, including the compensation payable on behalf of
such new Fund, may be modified in writing by the Company and Administrators at
the time).
2. DELIVERY OF DOCUMENTS. The Company has furnished each of the
Administrators with copies, properly certified or authenticated, of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
<PAGE> 2
a. The Company's Articles of Incorporation, filed with the
Secretary of State of Maryland on September 20, 1982, as amended (the
"Charter");
b. The Company's By-Laws, as amended and supplemented
("By-Laws");
c. Resolutions of the Company's Board of Directors authorizing
the execution and delivery of this Agreement;
d. The Company's most recent amendment to its Registration
Statement under the Securities Act of 1933, as amended, and under the 1940 Act
on Form N-1A as filed with the Securities and Exchange Commission (the
"Commission") on May 28, 1992 relating to its Funds (the Registration Statement,
as presently in effect and as amended or supplemented from time to time, is
herein called the "Registration Statement");
e. The Company's most recent Prospectuses and Statement of
Additional Information and all amendments and supplements thereto (such
Prospectuses and Statement of Additional Information and supplements thereto, as
presently in effect and as from time to time amended and supplemented, are
herein called the "Prospectuses"): and
f. The Company's amended and restated Non-12b-1 Shareholder
Services Plan, adopted June 21, 1988 and related amended and restated Servicing
Agreement amended and restated 12b-1 Services Plan adopted May 28, 1985 and
related amended and restated form of Broker/Dealer Servicing Agreement.
3. SERVICES AND DUTIES. The Administrators enter into the following
covenants jointly and severally with respect to their services and duties:
a. Subject to the supervision and control of the Company's Board
of Directors, the Administrators shall assist in supervising all aspects of the
Funds' operations, other than those investment advisory and accounting functions
which are to be performed by the Company's investment adviser pursuant to the
Advisory Agreement and those advisory and other services to be performed by any
sub-adviser or the custodian pursuant to the Company's Sub-Advisory Agreement
and Custodian Agreement, as amended from time to time, services to be performed
by the distributor pursuant to the Company's Distribution Agreement and the
transfer agent pursuant to the Company's Transfer Agency Agreement, as amended
from time to time. In this regard, the Administrators' responsibilities include:
(1) Providing personnel and supervising a facility in
Wilmington, Delaware (or in such other location as
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<PAGE> 3
the Company shall reasonably request) to receive purchase and redemption orders
via the Company's toll-free in-WATS telephone lines and transmitting such
requests to the Company's transfer agent as promptly as practicable;
(2) Providing for the preparing, supervising and mailing of
confirmations for all purchase and redemption orders to shareholders of record;
(3) Providing and supervising the operation of an automated
data processing system to process purchase and redemption orders (the
Administrators assume responsibility for the accuracy of the data transmitted
for processing or storage);
(4) Maintaining a procedure external to the transfer agent's
system to reconstruct lost purchase and redemption data;
(5) Providing daily information and distributing written
communications concerning the Funds to their shareholders of record; handling
shareholder problems and calls; distributing weekly dividend letters and monthly
listings of each money market Fund's portfolio securities to all its
shareholders of record; and, at a shareholder's request, dividend letters and
monthly listings of each non-money market Fund's portfolio securities;
(6) Supervising the services of individuals ("shareholder
representatives") provided by MFD whose principal responsibility and function
shall be to preserve and strengthen the Company's relationships with its
shareholders;
(7) Administering all activities concerning the
installation, maintenance, monitoring and inventory control of micro-computer
equipment that may be leased (on lease terms authorized by the Company) by the
Administrators and placed in the offices of certain shareholders of the Company
to facilitate shareholder access to the Company and related shareholder services
(herein called the "Computer Access Program"). The Administrators shall provide
the directors of the Company with such reports, statistics and other information
as they may from time to time reasonably request in order to evaluate the
Computer Access Program administered by the Administrators pursuant to this
Section 3(a)(7) and the Administrators' determination as to the costs which are
reimbursable by each of the Funds under Section 4. If this Agreement is not
renewed or is terminated, or if the Computer Access Program is discontinued, for
any reason, the Company shall have the option to assume lessee's rights and
obligations under its leases for the micro-computer equipment and under any
related maintenance, insurance or other agreements; and
-3-
<PAGE> 4
(8) Monitoring the Company's arrangements with respect to
services provided by certain institutional shareholders ("Service
Organizations") under its Shareholder Services Plan, including monitoring and
reviewing the services rendered by Service Organizations to their customers who
beneficially own shares, pursuant to agreements between the Company and such
Service Organizations ("Servicing Agreements"); reviewing the qualifications of
Service Organizations wishing to enter into Servicing Agreements with the
Company; assisting in the execution and delivery of Servicing Agreements;
reporting to the Company's Board of Directors with respect to the amounts paid
or payable by the Company from time to time under the Servicing Agreements and
the nature of the services provided by Service Organizations; and maintaining
appropriate records in connection with such duties.
b. The Administrators shall prepare or review, and provide
advice with respect to, all sales literature (advertisements, brochures and
shareholder communications) for each of the Funds and any class or subclass
thereof.
c. The Administrators shall participate to the extent requested
by the Company and its counsel in the periodic updating of the Company's
Registration Statement; compile data and accumulate information for and
coordinate with the Company's Treasurer the preparation of reports to
shareholders of record and the Commission (e.g., Annual and Semi-Annual Reports
on Form N-SAR), it being understood that the preparation and filing of timely
Notices pursuant to Rule 24f-2 shall be performed by the Company's Treasurer
with the assistance and advice of the Company's counsel; and file with the
Commission and other federal and state agency, subject to the approval of the
Company's Treasurer, reports and documents including, without limitation, Annual
and Semi-Annual Reports on Form N-SAR and federal and state tax returns and
required tax filings other than those required to be filed by the Company's
custodian or transfer agent.
d. For so long as the Company maintains an office in Wilmington,
Delaware, the Administrators shall pay the Company on the first day of each
month during such period an amount not to exceed $1,500 (or such lesser amount
as is appropriate in the event that the combined annual expenses of the Company,
Trust for Federal Securities, Municipal Fund for New York Investors, Inc.,
Municipal Fund for Temporary Investment, Portfolios for Diversified Investment,
Temporary Investment Fund, Inc. and The PNC(R) Fund (collectively, herein called
the "Companies") in maintaining their offices in Wilmington, Delaware total less
than $18,000 divided by the number of Companies which have maintained an office
in Wilmington, Delaware during the previous month).
-4-
<PAGE> 5
e. The Administrators, after consultation with the distributor and
counsel for the Company, shall determine the jurisdictions in which the
Company's shares shall be registered or qualified for sale. The Administrators
shall be responsible for maintaining the registration or qualification of shares
for sale under the securities laws of any state and for preparing compliance
filings pursuant to state securities laws with the advice of the Company's
counsel. Payment of share registration fees and any fees for qualifying or
continuing the qualification of the Company or any Fund as a dealer or broker
shall be made by the Company or Fund involved.
f. Monitor, and assist in developing compliance procedures for
each of the classes of the Company's Funds, which will include without
limitation, procedures to monitor compliance with each Fund's investment
objective, policies and limitations, tax matters, and applicable laws and
regulations.
g. The Administrators shall assist in monitoring of regulatory and
legislative developments which may affect the Company; assist in counseling the
Company with respect to regulatory examinations or investigations of the
Company; and work with the Company's counsel in connection with regulatory
matters or litigation.
h. In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Administrators agree that all records which they maintain for the
Company are the property of the Company and further agree to surrender promptly
to the Company any of such records upon the Company's request. The
Administrators further agree to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under said Act.
i. If the expenses borne by any Fund in any fiscal year exceed the
applicable expense limitations imposed by the securities regulations of any
state in which the Fund's shares are registered or qualified for sale to the
public, the Administrators jointly and severally agree to reimburse such 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 by the Fund. The expense reimbursement obligation of the Administrators
is limited to the amount of their fees hereunder for such fiscal year, provided,
however, that notwithstanding the foregoing, the Administrators shall reimburse
such Fund for a portion of any such excess expenses in an amount equal to the
proportion that the fees otherwise payable to the Administrators bear to the
total amount of investment advisory and administration fees otherwise payable by
the Fund regardless of the amount of fees paid to the Administrators during such
fiscal
-5-
<PAGE> 6
year to the extent that the securities regulations of any state having
jurisdiction over the Fund so require. Such expense reimbursement, if any, will
be estimated, reconciled and paid on a monthly basis.
j. In performing all of their services and duties as
co-administrators, the Administrators will act in conformity with the Charter,
By-Laws, Prospectuses and resolutions and other instructions of the Company's
Board of Directors and will comply with the requirements of the 1940 Act and
other applicable federal or state law.
4. EXPENSES ASSUMED AS ADMINISTRATORS. The Administrators will bear
all expenses incurred by them in performing their services and duties as
co-administrators, except as otherwise expressly provided herein. Other expenses
to be incurred in the operation of the Funds, including taxes, interest,
brokerage fees and commissions, if any, salaries and fees of officers and
directors who are not officers, directors, shareholders or employees of the
Administrators, or the Company's investment adviser or distributor for the
Funds, Commission fees and state Blue Sky qualification fees, advisory and
administration fees, charges of custodians, transfer and dividend disbursing
agents' fees, certain insurance premiums, outside auditing and legal expenses,
costs of maintaining corporate existence, typesetting and printing of
prospectuses for regulatory purposes and for distribution to current
shareholders of the Funds, costs of shareholders' reports and corporate meetings
and any extraordinary expenses, will be borne by the Company, provided, however,
that the Company will not bear, directly or indirectly, the cost of any activity
which is primarily intended to result in the sale of shares of the Funds.
Notwithstanding the above, the Company shall assume the Administrators' rights
and liabilities and obligations, as lessee, under the leases for the
micro-computer equipment referred to in Section 3(a)(7) from the date of the
termination (or any expiration without renewal) of this Agreement, or the
discontinuance of the Computer Access Program, until the conclusion of the first
year of each lease.
-6-
<PAGE> 7
5. COMPENSATION. For the services provided and the expenses assumed
as Administrators pursuant to Section 4 above, the Company will:
a. (1) pay the Administrators jointly a fee at an annual rate of
.20 of 1% of the Company's average daily net assets. Net asset value shall be
computed at least once a day. The fee for the period from the day of the month
this Agreement is entered into until the end of that month shall be pro-rated
according to the proportion which such period bears to the full the end of any
month, the fee for such part of a month shall be pro-rated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement.
b. The Company will also reimburse the Administrators monthly for
their reasonable out-of-pocket expenses incurred in leasing, installing,
maintaining and monitoring the micro-computer equipment and administering the
Computer Access Program pursuant to the provisions of Section 3(a)(7) above,
provided that the Administrators will not be reimbursed for any costs: (i) which
exceed the current budget for the Computer Access Program approved by the
Company's Board of Directors; (ii) which directly or indirectly finance any
activity primarily intended to result in the sale of shares; or (iii) which the
Administrators have not reasonably determined are in the best interests of the
Company and its shareholders.
c. For the purpose of determining fees payable to the
Administrators, the value of each Fund's net assets shall be computed as
required by its Prospectuses, generally accepted accounting principles and
resolutions of the Company's Board of Directors. The fee attributable to each
Fund shall be the several (and not joint or joint and several) obligation of
each such Fund.
d. The Administrators will from time to time employ or associate
with themselves such person or persons as they may believe to be fitted to
assist them in the performance of this Agreement. Such person or persons may be
officers and employees who are employed by both the Company and either of the
Administrators. The compensation of such person or persons shall be paid by the
Administrators, and no obligation shall be incurred on behalf of the Company in
such respect.
6. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Administrators agree
on behalf of themselves and their employees to treat confidentially and as
proprietary information of the Company all records and other information
relative to the Company and its Funds and prior, present or potential
shareholders, and
-7-
<PAGE> 8
not to use such records and information for any purpose other than performance
of their responsibilities and duties hereunder, except after prior notification
to and approval in writing by the Company, which approval shall not be
unreasonably withheld and may not be withheld where the Administrators may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Company.
7. LIMITATIONS OF LIABILITY. Neither Administrator shall be liable
for any error of judgment or mistake of law or for any loss suffered by the
Company in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Any person, even though also an
officer, director, employee or agent of either of the Administrators, who may be
or become an officer, employee or agent of the Company, shall be deemed, when
rendering services to the Company or acting on any business of the Company
(other than services or business in connection with the Administrators' duties
as co-administrator hereunder) to be rendering such services to or acting solely
for the Company and not as an officer, director, employee or agent or one under
the control or direction of the Administrators even though paid by either of
them. The Administrators agree that their liability under this Agreement, as set
forth herein, shall be joint and several.
8. DURATION AND TERMINATION. This Agreement shall become effective
upon its execution as of the date first written above and, unless sooner
terminated as provided herein, shall continue until May 31, 1994. Thereafter, if
not terminated, this Agreement shall continue automatically for successive terms
of one year, provided that such continuance is specifically approved at least
annually (a) by a vote of a majority of those members of the Company's Board of
Directors who are not parties to this Agreement or "interested persons" of any
such party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Company's Board of Directors or by vote of a "majority
of the outstanding voting securities" of the Company; provided, however, that
this Agreement may be terminated by the Company at any time, without the payment
of any penalty, by vote of a majority of the entire Board of Directors or a vote
of a "majority of the outstanding voting securities" of the Company, on 60-days
written notice to the Administrators, or by the Administrators at any time,
without the payment of any penalty, on 90-days, written notice to the Company.
This Agreement will automatically and immediately terminate in the
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<PAGE> 9
event of its assignment. (As used in this Agreement, the terms majority of the
outstanding voting securities," "interested person" and "assignment" shall have
the same meaning as such terms have in the 1940 Act.)
9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought.
10. NOTICES. Notices of any kind to be given to the Company hereunder
by the Administrators shall be in writing and shall be duly given if mailed or
delivered to the Company at Bellevue Park Corporate Center, Suite 152, 103
Bellevue Parkway, Wilmington, Delaware 19809, Attention: Mr. Edward J. Roach,
Treasurer, with a copy to Philadelphia National Bank Building, 1345 Chestnut
Street, Philadelphia Pennsylvania 19107-3496, Attention: Morgan R. Jones,
Secretary, or at such other address or to such individual as shall be so
specified by the Company to the Administrators. Notices of any kind to be given
to the Administrators hereunder by the Company shall be in writing and shall be
duly given if mailed or delivered to MFD Group, Inc., 259 Radnor-Chester Road,
Suite 135, Radnor, Pennsylvania 19087, Attention: Monroe L. Haegele and to
Provident Financial Processing Corporation, Bellevue Park Corporate Center, 103
Bellevue Parkway, Wilmington, Delaware 19087, Attention: Vincent J. Ciavardini,
or at such other address or to such other individual as shall be so specified by
an Administrator to the Company.
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
12. COUNTERPARTS. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
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<PAGE> 10
MUNICIPAL FUND FOR CALIFORNIA
INVESTORS, INC.
By:/s/ G. Willing Pepper
---------------------------------
PROVIDENT FINANCIAL PROCESSING
CORPORATION
By:/s/ Signature illegible
---------------------------------
MFD GROUP, INC.
By:
---------------------------------
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
MUNICIPAL FUND FOR CALIFORNIA
INVESTORS, INC.
By:
---------------------------------
PROVIDENT FINANCIAL PROCESSING
CORPORATION
By:/s/ Signature illegible
---------------------------------
MFD GROUP, INC.
By:
---------------------------------
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<PAGE> 12
APPENDIX A
to the
ADMINISTRATION AGREEMENT
between
Municipal Fund for California Investors, Inc.
and
Provident Financial Processing Corporation and
MFD Group, Inc.
- --------------------------------------------------------------------------------
California Money Fund (Class A Common Stock, Class A Common Stock - Special
Series 1 and Class A Common Stock - Special Series 2)
-12-
<PAGE> 1
Exhibit 8b
AMENDED AND RESTATED
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this 28th day of July, 1988 by and between
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC., a Maryland corporation (the
"Fund"), and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation
("PFPC"), which is an indirect, wholly-owned subsidiary of PNC Financial Corp.
R E C I T A L
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund entered into a transfer agency agreement
made February 28, 1983 (the "Transfer Agency Agreement") by and between the Fund
and PFPC for services as transfer agent, registrar and dividend disbursing agent
for the Fund, which at such time offered shares in only one portfolio: the
Fund's California Money Fund portfolio (the "Cal Money Portfolio"); and
WHEREAS, the Fund, as of the date hereof, now offers shares in
two portfolios: the Cal Money Portfolio and the Fund's California Intermediate
Municipal Bond portfolio (the "Cal Intermuni Portfolio") (the Cal Money
Portfolio and the Cal Intermuni Portfolio collectively referred to herein as the
"Portfolios" and each as a "Portfolio"); and
<PAGE> 2
WHEREAS, the Fund offers three separate series of Class A
Common Stock, $.001 par value per share, and three separate series of Class B
Common Stock, $.001 par value per share (such shares and all shares of every
class or series hereafter created by the Fund called "Shares", and such classes
or series of Shares and any class or series of Shares hereafter created by the
Fund herein called "Classes"); and
WHEREAS, the Fund desires to amend and restate in full the
Transfer Agency Agreement to retain PFPC to serve as the Fund's transfer agent,
registrar, and dividend disbursing agent with respect to both the Cal Money
Portfolio and the Cal Intermuni Portfolio, and PFPC is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto that the
Transfer Agency Agreement is hereby amended and restated in full as follows:
1. Appointment. The Fund hereby appoints PFPC to serve as
transfer agent, registrar and dividend disbursing agent for the Fund for the
period and on the terms set forth in this Agreement. PFPC accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Paragraph 14 of this Agreement.
2. Delivery of Documents. The Fund has furnished PFPC with
copies properly certified or authenticated of each of the following:
-2-
<PAGE> 3
(a) Resolutions of the Fund's Board of Directors authorizing
the appointment of PFPC as transfer agent, registrar and dividend disbursing
agent for the Fund and approving this Agreement;
(b) The Fund's Articles of Incorporation filed with the
Department of Assessments and Taxation of the State of Maryland on September 20,
1982 and all amendments thereto (such Articles of Incorporation, as currently in
effect and as they shall from time to time be amended, are herein called the
"Charter");
(c) The Fund's By-Laws and all amendments thereto (such
By-Laws, as currently in effect and as they shall from time to time be amended,
are herein called the "By-Laws");
(d) Resolutions of the Fund's Board of Directors appointing
Provident Institutional Management Corporation ("PIMC") as the Fund's investment
adviser and resolutions of the Fund's Board of Directors and Shareholders
approving a proposed Advisory Agreement between PIMC and the Fund (the "Advisory
Agreement");
(e) Resolutions of the Fund's Board of Directors appointing
Provident National Bank ("Provident") as the Fund's sub-investment adviser and
resolutions of the Fund's Board of Directors and Shareholders approving a
proposed Sub-Advisory Agreement between Provident and PIMC (the "Sub-Advisory
Agreement");
-3-
<PAGE> 4
(f) Resolutions of the Fund's Board of Directors appointing
Shearson/American Express Inc. ("Shearson") as the Fund's distributor and
approving a proposed Distribution Agreement between Shearson and the Fund (the
"Distribution Agreement");
(g) Resolutions of the Fund's Board of Directors appointing
The Boston Company Advisors, Inc. ("Boston Advisors") as the Fund's
administrator and approving a proposed Administration Agreement between Boston
Advisors and the Fund (the "Administration Agreement");
(h) The Advisory Agreement, the Sub-Advisory Agreement, the
Distribution Agreement and the Administration Agreement;
(i) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A with the Securities and Exchange
Commission ("SEC") on September 24, 1982;
(j) The Fund's Registration Statement on Form N-1 under the
1940 Act and the Securities Act of 1933, as amended (the "1933 Act"), as filed
with the SEC on September 24, 1982 (File No. 2-79510) relating to the Shares,
and all amendments thereto; and
(k) The Fund's most recent prospectus relating to each
Portfolio of the Fund (such prospectuses, as currently in effect, and all
amendments and supplements thereto are herein called the "Prospectuses", and
each a "Prospectus").
-4-
<PAGE> 5
The Fund will furnish PFPC from time to time with copies of all
amendments of or supplements to the foregoing, if any.
3. Issuance and Redemption of Shares.
(a) Issuance of Shares. Upon receipt of a purchase order for
the purchase of Shares and sufficient information to enable PFPC to establish a
Shareholder account, and after confirmation of receipt or crediting of Federal
funds for such order from the Fund's Custodian, PFPC shall issue and credit the
account of the Shareholder with Shares in the manner described in the Prospectus
relating to such Shares.
(b) Redemption of Shares. Upon receipt of a redemption order
from Shearson, PFPC shall redeem the number and class of Shares indicated
thereon from the redeeming Shareholder's account and receive from the Fund's
Custodian and disburse to the redeeming Shareholder the redemption proceeds
therefor, or arrange for direct payment of redemption proceeds to such
Shareholder by the Fund's Custodian, in accordance with such procedures and
controls as are mutually agreed upon from time to time by and among the Fund,
PFPC, and the Fund's Custodian.
4. Authorized Shares. The Fund's authorized capital stock
consists of 2.3 Billion shares of Class A Common Stock, 300 million shares of
Class A Common Stock-Special Series 1, 300 million shares of Class A Common
Stock-Special Series 2, 80 million shares of Class B Common Stock, 10 million
shares of Class B Common Stock-Special Series 1 and 10 million shares of
-5-
<PAGE> 6
Class B Common Stock-Special Series 2. The Fund certifies that by virtue of its
Charter and the provision of the law of the state of its corporation, Shares
which are redeemed by the Fund from their holders are restored to the status of
authorized and unissued Shares of the same class or series as originally
authorized. The Fund may from time to time authorize the issuance of additional
shares of its Common Stock, issue additional series or classes of its Common
Stock, or classify and reclassify shares of such series or class and shall
notify PFPC of any such authorization, issuance, classification or
reclassification. PFPC shall record issues of all Shares and shall notify the
Fund in case any proposed issue of Shares by the Fund shall result in an
over-issue as defined by Section 8-104(2) of Article 8 of the Maryland Uniform
Commercial Code. In case any issue of Shares would result in such over-issue,
PFPC shall refuse to issue said Shares and shall not countersign and issue
certificates for such Shares. The Fund agrees to notify PFPC promptly of any
change in the number of authorized Shares and of any change in the number of
Shares registered under the 1933 Act.
5. Dividends and Distributions. The Fund shall furnish PFPC
with appropriate evidence of action taken by the Fund's Board of Directors
authorizing the declaration and payment of dividends and distributions to the
Fund's Shareholders. After deducting any amount required to be withheld by any
applicable laws, rules and regulations, PFPC shall, as the agent for each
Shareholder and in accordance with the provisions of the Fund's
-6-
<PAGE> 7
Charter and applicable Prospectus, receive from the Fund's Custodian and pay to
the Shareholders such dividends and distributions in cash, or, with respect to
any Shareholder who has elected in proper manner to reinvest its dividends,
invest such dividends for such Shareholder in additional full and fractional
Shares of the same class as the Shares upon which such dividends were declared
and paid. In lieu of receiving from the Fund's Custodian and paying to the
Shareholders cash dividends and distributions, PFPC may arrange for the direct
payment of cash dividends and distributions to the Shareholders by the Fund's
Custodian, in accordance with such procedures and controls as are mutually
agreed upon from time to time by and among the Fund, PFPC, and the Fund's
Custodian.
PFPC shall prepare and file with the Internal Revenue Service
and/or other appropriate taxing authorities, and address and mail to
Shareholders, such returns and information relating to dividends and
distributions paid by the Fund as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations, or such substitute form of
notice as may from time to time be permitted or required by the Internal Revenue
Service and/or other appropriate taxing authorities. On behalf of the Fund, PFPC
shall pay on a timely basis to the appropriate Federal authorities any taxes by
applicable Federal tax laws to be withheld by the Fund on dividends and
distributions paid by the Fund.
-7-
<PAGE> 8
6. Communications with Shareholders.
(a) Communications to Shareholders. PFPC will address and
mail all communications by the Fund to its Shareholders, including reports to
Shareholders, dividend and distribution notices and proxy material for its
meetings of Shareholders. PFPC will receive and tabulate the proxy cards for the
meetings of the Fund's Shareholders.
(b) Correspondence. PFPC will answer such correspondence
from Shareholders, securities brokers and others relating to its duties
hereunder and such other correspondence as may from time to time be mutually
agreed upon between PFPC and the Fund.
7. Records. PFPC shall keep the following records:
(a) accounts for each Shareholder showing the following
information:
(i) name, address and United States Tax Identification
or Social Security number;
(ii) number and class of Shares held and number and
class of Shares for which certificates, if any, have been issued, including
certificate numbers and denominations;
(iii) historical information regarding the account of
each Shareholder, including dividends and distributions paid and the date and
price for all transactions on a Shareholder's account;
(iv) any stop or restraining order placed against a
Shareholder's account;
-8-
<PAGE> 9
(v) any correspondence relating to the current
maintenance of a Shareholder's account;
(vi) information with respect to withholdings; and
(vii) any information required in order for PFPC to
perform any calculations contemplated or required by this Agreement;
(b) subaccounts for each Shareholder requesting such
services in connection with Shares held by such Shareholder for separate
accounts containing the same information for each subaccount as required by
subparagraph (a) above.
The books and records pertaining to the Fund which are in the
possession of PFPC shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act, as amended, and
other applicable securities laws and rules and regulations and shall, to the
extent practicable, be maintained separately for each Portfolio of the Fund. The
Fund, or the Fund's authorized representatives, shall have access to such books
and records at all times during PFPC's normal business hours, and such books and
records shall be surrendered to the Fund promptly upon request. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by PFPC to the Fund or the Fund's authorized representative at the
Fund's expense.
8. Reports. PFPC shall furnish the Fund state by state registration
reports, such periodic and special reports as
-9-
<PAGE> 10
the Fund may reasonably request, and such other information, including
Shareholder lists and statistical information concerning accounts, as may be
agreed upon from time to time between the Fund and PFPC.
9. Cooperation with Accountants. PFPC shall cooperate with
the Fund's independent certified public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement to
assure that the necessary information is made available to such accountants for
the expression of their unqualified opinion, including but not limited to the
opinion included in the Fund's annual report on Form N-1R.
10. Confidentiality. PFPC agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the Fund
all records and other information relative to the Fund and its prior, present or
potential Shareholders and relative to Shearson and its prior, present or
potential customers, and not to use such records and information for any purpose
other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Fund, which approval
shall not be unreasonably withheld and may not be withheld where PFPC may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Fund.
-10-
<PAGE> 11
11. Equipment Failures. In the event of equipment failures beyond
PFPC's control, PFPC shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall have no liability
with respect thereto. PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available.
12. Right to Receive Advice.
(a) Advice of Fund. If PFPC shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall receive, from the Fund
directions or advice.
(b) Advice of Counsel. If PFPC shall be in doubt an to any
question of law involved in any action to be taken or omitted by PFPC, it may
request advice at its own cost from counsel of its own choosing (who may be
counsel for PIMC, Provident National Bank, Shearson, Boston Advisors, the Fund
or PFPC, at the option of PFPC).
(c) Conflicting Advice. In case of conflict between directions
or advice received by PFPC pursuant to subparagraph (a) of this paragraph and
advice received by PFPC pursuant to subparagraph (b) of this paragraph, PFPC
shall be entitled to rely on and follow the advice received pursuant to the
latter provision alone.
(d) Protection of PFPC. PFPC shall be protected in any action
or inaction which it takes in reliance on any
-11-
<PAGE> 12
directions or advice received pursuant to subparagraph (a) or (b) of this
paragraph which PFPC, after receipt of any such directions or advice, reasonably
and in good faith believes to be consistent with such directions or advice.
However, nothing in this paragraph shall be construed as imposing upon PFPC any
obligation (i) to seek such directions or advice, or (ii) to act in accordance
with such directions or advice when received, unless, under the terms of another
provision of this Agreement, the same is a condition to PFPC's properly taking
or omitting to take such action. Nothing in this subparagraph shall excuse PFPC
when an action or omission on the part of PFPC constitutes willful misfeasance,
bad faith, gross negligence or reckless disregard by PFPC of its duties under
this Agreement.
13. Compliance with Governmental Rules and Regulations. The Fund
assumes full responsibility for ensuring that the contents of each prospectus of
the Fund complies with all applicable requirements of the 1933 Act, the 1940
Act, and any laws, rules and regulations of governmental authorities having
jurisdiction.
14. Compensation. As compensation for the services rendered by PFPC
during the term of this Agreement, the Fund will pay to PFPC monthly fees equal
to $12.00 per account and subaccount of the Fund per year, prorated in the case
of accounts and accounts maintained for only a portion of a full year, plus
$1.00 for each purchase or redemption transaction made by an account during the
month (other than a purchase transaction made
-12-
<PAGE> 13
in connection with PFPC's reinvestigation of dividends on behalf of a
Shareholder pursuant to paragraph 5 hereof). In addition, the Fund will
reimburse PFPC for its out-of-pocket expenses relating to its services
hereunder, including, but not limited to, expenses of postage, telephone, TWX
rental and line charges, wire transfer costs, communications forms, and checks
and check processing. In addition to the other services to be rendered by PFPC
under this Agreement, and other expenses to be borne by it hereunder, PFPC
shall, if so instructed by duly authorized officers of the Fund, install, or
cause to be installed, microcomputer systems in the offices of Fund
Shareholders, and shall provide, or cause to be provided, communication networks
in connection with the use of such systems by Fund Shareholders pursuant to
directives given by Shearson/American Express Inc. with respect to the Computer
Access Program in accordance with the Fund's Administration Agreement. In such
event, the Fund shall reimburse PFPC on a monthly basis for its reasonable
out-of-pocket expenses relating to such services, including, but not limited to,
travel, lodging and meal expenses of its personnel who perform such services and
expenses connected with the printing and production of operations manuals,
provided that PFPC shall in no case be reimbursed for any expenses: (i) which
exceed the Fund's then current budget for the Computer Access Program approved
by its Board of Directors; or (ii) which PFPC has not reasonably determined are
in the best interests of the Fund and its Shareholders.
-13-
<PAGE> 14
15. Indemnification. The Fund agrees to indemnify and hold harmless
PFPC from all taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the 1933 Act, the
Securities Exchange Act of 1934, the 1940 Act, and any state and foreign
securities and blue sky laws, all as or to be amended from time to time) and
expenses, including (without limitation) attorneys' fees and disbursements,
arising directly or indirectly from any action or thing which PFPC takes or does
or omits to take or do at the request or on the direction of or in reliance on
the advice of the Fund, provided that PFPC shall not be indemnified against any
liability to the Fund or to its Shareholders (or any expenses incident to such
liability) arising out of PFPC's negligent failure to perform its duties under
this Agreement.
16. Responsibility of PFPC. PFPC shall be under no duty to take any
action on behalf of the Fund except as specifically set forth herein or as may
be specifically agreed to by PFPC in writing. In the performance of its duties
hereunder, PFPC shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits to ensure the
accuracy and completeness of all services performed under this Agreement. PFPC
shall be responsible for its own negligent failure to perform its duties under
this Agreement, but to the extent that duties, obligations and responsibilities
are not expressly set forth in this Agreement,
-14-
<PAGE> 15
PFPC shall not be liable for any act or omission which does not constitute
willful misfeasance, bad faith or gross negligence on the part of PFPC or
reckless disregard of such duties, obligations and responsibilities. Without
limiting the generality of the foregoing or of any other provision of this
Agreement, PFPC in connection with its duties under this Agreement shall not be
under any duty or obligation to inquire into and shall not be liable for or in
respect of (a) the validity or invalidity or authority or lack thereof of any
advice, direction, notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which PFPC reasonably believes to be
genuine, or (b) delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical breakdown
(except as provided in paragraph 11), flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
17. Registration as Transfer Agent. PFPC represents that it has and
is currently registered as a transfer agent with the SEC and has complied with
the SEC's regulations for registered transfer agents. PFPC agrees that it will
continue to be registered as a transfer agent with the SEC for the duration of
this Agreement. Should PFPC fail to be registered with the SEC as a transfer
agent at any time during this Agreement, the
-15-
<PAGE> 16
Fund may, on written notice to PFPC, immediately terminate this Agreement.
18. Duration and Termination. This Agreement shall continue until
termination by PFPC or the Fund on sixty (60) days' written notice.
19. Notices. All notices and other communications (collectively
referred to as "Notice" or "Notices" in this paragraph), hereunder shall be in
writing or by confirming telegram, cable, telex or facsimile sending device.
Notices shall be addressed (a) if to PFPC at PFPC's address, at P.O. Box 8950,
Wilmington, Delaware 19899; (b) if to the Fund, at the address of the Fund; or
(c) if to neither of the foregoing, at such other address as shall have been
notified to the sender of any such Notice or other communication. If the
location of the sender of a Notice and the address of the addressee thereof are,
at the time of sending, more than 100 miles apart, the Notice may be sent by
first-class mail, in which case it shall be deemed to have been given three days
after it is sent, or if sent by confirming telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately, and, if the
location of the sender of a Notice and the address of the addressee thereof are,
at the time of sending, not more than 100 miles apart, the Notice may be sent by
first-class mail, in which case it shall be deemed to have been given two days
after it is sent, or if sent by messenger, it shall be deemed to have been given
on the day it is delivered, or if sent by confirming
-16-
<PAGE> 17
telegram, cable, telex or facsimile sending device, it shall be deemed to have
been given immediately. All postage, cable, telegram, telex and facsimile
sending device charges arising from the sending of a Notice hereunder shall be
paid by the sender.
20. Further Actions. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
21. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
22. Delegation. On thirty (30) days' prior written notice to the
Fund, PFPC may assign its rights and delegate its duties hereunder to any
wholly-owned direct or indirect subsidiary of Provident National Bank or PNC
Financial Corp., provided that PFPC may delegate its duties only to a transfer
agent registered and qualified under the Securities and Exchange Act of 1934 and
other applicable law, and further provided the PFPC and such delegate shall
promptly provide such information as the Fund may request, and respond to such
question as the Fund may ask, relative to the delegation, including (without
limitation) the capabilities of the delegate.
23. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are
-17-
<PAGE> 18
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in Delaware and governed by
Delaware law. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding and shall inure
to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on the day and year first above
written.
[SEAL] MUNICIPAL FUND FOR CALIFORNIA
INVESTORS, INC.
Attest:/s/ Morgan R. Jones By:/s/ Edward J. Roach
--------------------------- ---------------------------------
[SEAL] PROVIDENT FINANCIAL PROCESSING
CORPORATION
Attest:/s/ Signature illegible By:/s/ Signature illegible
--------------------------- ---------------------------------
-18-
<PAGE> 1
EXHIBIT 10
Law Offices
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Telephone: (215) 988-2700
Telex: 834684
Fax: (215) 988-2757
May 28, 1998
Municipal Fund for California Investors, Inc.
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, Delaware 19809
Re: Post-Effective Amendment No. 19 to Registration
Statement on Form N-1A for Municipal Fund for
California Investors, Inc. (Registration Nos. 2-79510;
811-3574)
Gentlemen:
We have acted as counsel for Municipal Fund for California
Investors, Inc., a Maryland corporation (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission of
Post-Effective Amendment No. 19 to the Company's Registration Statement under
the Securities Act of 1933, as amended.
The Company is an open-end investment company authorized to issue a
total of three billion shares of Common Stock, par value $.001 per share. The
Board of Directors of the Company has the power to designate one or more classes
("Portfolios") of Shares and to designate separate series of Shares within the
same Portfolio. The Board of Directors have authorized the issuance of one class
of Shares to the public. Currently, the Company is offering Shares of one
Portfolio with three separate series as follows:
<PAGE> 2
Municipal Fund for California
Investors, Inc.
May 28, 1998
Page 2
<TABLE>
<CAPTION>
Number of Shares of
California Money Fund Portfolio Common Stock Allocated
- ------------------------------- ----------------------
<S> <C>
California Money Shares Series 2,300,000,000
California Money Dollar Shares Series 300,000,000
California Money Plus Shares Series 300,000,000
</TABLE>
We have reviewed the Company's Articles of Incorporation, its
By-Laws, resolutions adopted by its Board of Directors and shareholders and such
other legal and factual matters as we have deemed appropriate. We assume that
the Shares have been or will be issued against payment therefor as described in
the Company's applicable Prospectuses relating thereto and that the number of
outstanding shares has not and will not exceed the number of Shares authorized
for the particular class or series.
This opinion is based exclusively on the Maryland General
Corporation Law and the federal law of the United States of America.
Based upon the foregoing, it is our opinion that all of the Shares
issued by the Company since January 31, 1997 that were not included in our
opinions dated March 24, 1997 and May 29, 1997, were validly issued, fully paid
and non-assessable by the Company, and further, that the Shares issued after the
date hereof pursuant to and for the consideration provided for in the
Registration Statement will be, when so issued, validly issued, fully paid and
non-assessable by the Company.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to Post-Effective Amendment No. 19 to the
Company's Registration Statement.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
------------------------------
DRINKER BIDDLE & REATH LLP
<PAGE> 1
EXHIBIT 11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No. 19
to the Registration Statement (File No. 2-79510) of Municipal Fund for
California Investors, Inc. (the "Company") on Form N-1A under the Securities Act
of 1933 of our report dated March 6, 1998 on our audit of the financial
statements and financial highlights of the Company, which report is included in
the Annual Report to Shareholders for the year ended January 31, 1998 which is
incorporated by reference in the Post-Effective Amendment to the Registration
Statement. We also consent to the reference to our Firm under the caption
"Financial Highlights" in the Prospectuses and under the captions "Independent
Accountants" and "Financial Statements" in the Statement of Additional
Information.
/s/ Coopers & Lybrand LLP
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
May 28, 1998
<PAGE> 1
EXHIBIT 11(b)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our
firm under the caption "Counsel" in the Statement of Additional Information
included in this Post-Effective Amendment No. 19 to the Registration Statement
(No. 2- 79510) on Form N-1A of Municipal Fund for California Investors, Inc.
under the Securities Act of 1933 and the Investment Company Act of 1940,
respectively.
/s/ O'Melveny & Myers LLP
---------------------------
O'MELVENY & MYERS LLP
Los Angeles, California
May 28, 1998
<PAGE> 1
Exhibit 14a
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
AMENDED AND RESTATED
12b-1 SERVICES PLAN
Section 1. Upon the recommendation of PFPC Inc. ("PFPC") and
Pennsylvania Merchant Group Limited/MFD Group Incorporated ("PMG/MFD"), the
Fund's Co-Administrators, any officer of Municipal Fund for California
Investors, Inc. (the "Company") is authorized to execute and deliver, in the
name and on behalf of the Company written agreements in substantially the form
attached hereto or in any other form duly approved by the Board of Directors
("Servicing Agreements") with non-bank institutional shareholders of record
("Service Organizations") of the Company's Class A Common Stock - Special Series
2 (said Series known as "California Money Plus"). The Servicing Agreement shall
require the Service Organizations to provide support and distribution services
on behalf of the Company as set forth therein to their clients who beneficially
own shares of California Money Plus ("Money Plus Shares") in consideration for a
fee, computed daily and paid monthly in the manner set forth in the Servicing
Agreements, at an annual rate not to exceed .40% of the average daily net asset
value of the Money Plus Shares held by the Service Organizations on behalf of
their clients. Subject to the limitations stated above, the rate of the fees
payable to Service Organizations shall be set from time to time by resolution
adopted by the Company's Board of Directors (including a majority of its
Disinterested Directors) in the manner set forth in Section 4(a). All expenses
incurred by the Company in connection with the Servicing Agreements and the
implementation of this Plan with respect to Money Plus Shares shall be borne
entirely by the holders of Money Plus Shares.
Section 2. PMG/MFD shall monitor the arrangements pertaining
to the Company's Servicing Agreements with Service Organizations in accordance
with the terms of PMG/MFD administration agreement with the Company. PMG/MFD
shall not, however, be obliged by this Plan to recommend, and the Company shall
not be obliged to execute, any Servicing Agreement with any qualifying Servicing
Organization.
Section 3. So long as this Plan is in effect, PMG/MFD shall
provide to the Company's Board of Directors, and the Directors shall review, at
least quarterly, a written report of the amounts expended pursuant to the Plan
and the purposes for which such expenditures were made.
Section 4. This Amended and Restated Plan shall become
effective immediately upon the approval of the Plan (and the Form of Servicing
Agreement attached hereto) by a majority of the Board of Directors, including a
majority of the Directors who are
<PAGE> 2
not "interested persons" as defined on the Investment Company Act of 1940 (the
"Act") of the Company and who have no direct or indirect financial interest in
the operation of this Plan - (the "Disinterested Directors") pursuant to a vote
cast in person at a meeting called for the purpose of voting on the approval of
this Plan (and form of Servicing Agreement).
Section 5. Unless sooner terminated, this Plan shall continue
until May 31, 1999, and thereafter shall continue automatically for successive
annual periods ending on May 31 provided such continuance is approved at least
annually in the manner set forth in Section 4(a).
Section 6. This Plan may be amended at any time by the Board
of Directors, provided that (a) any amendment to increase materially the costs
(whether for distribution or any other purpose) which the Company may bear
pursuant to this Plan shall be effective only upon the favorable vote of a
majority (as defined in the Act) of the outstanding Money Plus Shares and (b)
any material amendment of the terms of this Plan shall become effective only
upon the approval set forth in Section 4 (a) and upon the approval of a majority
(as defined in the Act) of the outstanding Money Plus Shares.
Section 7. This Plan is terminable at any time (a) by vote of
a majority of the disinterested Directors, or (b) by vote of a majority (as
defined in the Act) of the Money Plus Shares.
Section 8. While this Plan is in effect, the selection and
nomination of those Directors who are not "interested persons" (as defined in
the Act) of the Company shall be committed to the discretion of such
non-interested Directors.
Section 9. The Company has adopted this Amended and Restated
12b-1 Services Plan as of May 31, 1998 pursuant to Section 12(b) of the Act and
the rules and regulations promulgated thereunder.
-2-
<PAGE> 1
Exhibit 14b
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
(Dollar Shares)
AMENDED AND RESTATED NON-12B-1 SHAREHOLDER SERVICES
PLAN
Section 1. Upon the recommendation of PFPC Inc. ("PFPC" or the
"Administrator"), a co-administrator of Municipal Fund for California Investors,
Inc. (the "Company"), any officer of the Company is authorized to execute and
deliver, in the name and on behalf of the Company, written agreements in
substantially the form attached hereto or in any other form duly approved by the
Board of Directors ("Servicing Agreements") with shareholders of record other
than broker/dealers ("Service Organizations") of the Company's Class A Common
Stock - Special Series 1 (said Series known as "California Money Dollar"). Such
Servicing Agreements shall require the Service Organizations to provide support
services as set forth therein to their customers who beneficially own shares of
California Money Dollar ("Money Dollar Shares") (as described in the Company's
Prospectus) in consideration for a fee, computed daily and paid monthly in the
manner set forth in the Servicing Agreements, at the annual rate of .25% of the
average daily net asset value of the Money Dollar Shares held by the Service
Organizations on behalf of their customers. All expenses incurred by the Company
with respect to Money Dollar Shares shall be borne entirely by the holders of
Money Dollar Shares in connection with the Servicing Agreements and the
implementation of this Plan.
Section 2. The Administrator shall monitor the arrangements
pertaining to the Company's Servicing Agreements with Service Organizations in
accordance with the terms of the administration agreement with the Company. The
Administrator shall not, however, be obliged by this Plan to recommend, and the
Company shall not be obliged to execute, any Servicing Agreement with any
qualifying Service Organization.
Section 3. So long as this Plan is in effect, the
Administrator shall provide to the Company's Board of Directors, and the
directors shall review, at least quarterly, a written report of the amounts
expended pursuant to this Plan and the purposes for which such expenditures were
made.
Section 4. This Plan shall become effective as of May 31,
1998, but not earlier than the date of the approval of the Plan (and the form of
Servicing Agreement attached hereto) by a majority of the Board of Directors,
including a majority of the directors who are not "interested persons" as
defined in the Investment Company Act of 1940 (the "Act") of the Company and
have no direct or indirect financial interest in the operation of
<PAGE> 2
this Plan or in any Servicing Agreements or other agreement related to this Plan
(the "Disinterested Directors"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of this Plan (and form of
Servicing Agreement).
Section 5. Unless sooner terminated, this Plan shall continue
until May 31, 1999, and thereafter shall continue automatically for successive
annual periods provided such continuance is approved at least annually in the
manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Board
of Directors, provided that any material amendments to the terms of this Plan
shall become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a
majority of the Disinterested Directors.
Section 8. While this Plan is in effect, the selection and
nomination of those Directors who are not "interested persons" (as defined in
the Act) of the Company shall be committed to the discretion of the
Disinterested Directors.
Section 9. The Company adopted this Amended and Restated
Non-12b-1 Shareholder Services Plan as of May 31, 1998.
-2-
<PAGE> 1
EXHIBIT 15
CALIFORNIA MONEY FUND
SCHEDULE FOR COMPUTATION OF PERFORMANCE
QUOTATIONS
YIELD -- CALIFORNIA MONEY SHARES
For the Seven-Day Period Ended January 31, 1992
Last 7 Daily Dividend Factors:
DAY 1: 0.000069070
DAY 2: 0.000069070
DAY 3: 0.000068915
DAY 4: 0.000070473
DAY 5: 0.000076933
DAY 6: 0.000078476
DAY 7: 0.000078934
--------------------
0.000511871 = BASE PERIOD RETURN
(BPR)
--------------------
ANNUALIZED YIELD = (BPR/1) X 365/7 2.67%
EFFECTIVE YIELD = (BPR + 1) TO THE
365/7 POWER - 1 2.71%
TAX-EQUIVALENT YIELD = ANNUALIZED YIELD 4.41%
---------------------
1 - (COMBINED FEDERAL
AND CALIFORNIA
STATE TAX RATE)
<PAGE> 2
YIELD -- CALIFORNIA MONEY PLUS SHARES
For the Seven-Day Period Ended January 31, 1992
Last 7 Daily Dividend Factors:
DAY 1: 0.000062222
DAY 2: 0.000062222
DAY 3: 0.000062067
DAY 4: 0.000063625
DAY 5: 0.000070084
DAY 6: 0.000071628
DAY 7: 0.000072085
--------------------
0.000463933 = BASE PERIOD RETURN
(BPR)
--------------------
ANNUALIZED YIELD = (BPR/1) X 365/7 2.42%
EFFECTIVE YIELD = (BPR + 1) TO THE
365/7 POWER - 1 2.45%
TAX-EQUIVALENT YIELD = ANNUALIZED YIELD 3.99%
---------------------
1 - (COMBINED FEDERAL
AND CALIFORNIA
STATE TAX RATE)
<PAGE> 3
YIELD -- CALIFORNIA MONEY DOLLAR SHARES
For the Seven-Day Period Ended January 31, 1992
Last 7 Daily Dividend Factors:
DAY 1: 0.000062222
DAY 2: 0.000062222
DAY 3: 0.000062067
DAY 4: 0.000063625
DAY 5: 0.000070084
DAY 6: 0.000071628
DAY 7: 0.000072085
--------------------
0.000463933 = BASE PERIOD RETURN
(BPR)
====================
ANNUALIZED YIELD = (BPR/1) X 365/7 2.42%
EFFECTIVE YIELD = (BPR + 1) TO THE
365/7 POWER - 1 2.45%
TAX-EQUIVALENT YIELD = ANNUALIZED YIELD 3.99%
---------------------
1 - (COMBINED FEDERAL
AND CALIFORNIA
STATE TAX RATE)
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