<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Municipal Fund for California Investors, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which
the filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 3
[PROVIDENT INSTITUTIONAL FUNDS LOGO]
November 23, 1998
Dear Shareholder:
The Board of Directors of Municipal Fund for California Investors, Inc. is
pleased to announce a special meeting of shareholders on Thursday, January 28,
1999, at 10:45 a.m. (Eastern time) in the Fourth Floor Conference Room,
Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware, to
address a number of issues that are pertinent to you.
As part of our continuing effort to provide the highest level of quality and
commitment, we are recommending a series of changes to the overall fund
structure as well as the modernization of certain investment limitations. The
Board of Directors has unanimously approved the proposed changes, outlined in
detail in the enclosed proxy materials, which include the approval of:
The election of directors;
- - Ratification of the selection of PricewaterhouseCoopers LLP as the
independent accountants;
- - Approval of the plan to reorganize the Fund into Provident Institutional
Funds, a Delaware business trust;
- - Changes in the fundamental investment limitations in order to modernize and
make uniform the fundamental investment limitations;
- - Changes in the classification of certain fundamental investment limitations
to make such limitations non-fundamental; and
- - The adoption of a new fundamental investment limitation which would permit,
at the director's discretion, the Fund to adopt a master-feeder structure.
The Fund has always been managed with a conservative approach, thereby
providing shareholders with a high-quality money market fund that produce
safety of principal, while preserving the critical elements of liquidity and
return. Consistent with our investment philosophy and approach, which has been
our strength for 25 years, we believe the proposals set forth in this proxy
will improve the competitiveness of the Fund and lead to improved efficiencies
across several fronts.
<PAGE> 4
The Board of Directors recognizes the shareholder benefits described herein and
unanimously recommends your approval of the proposed changes and enhancements.
We value your relationship and look forward to your vote in favor of the
attached proposals.
Sincerely,
Thomas H. Nevin
President
(800) 768-2836
PLEASE REVIEW THE ENCLOSED MATERIAL AND COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD. IT IS IMPORTANT YOU RETURN THE PROXY CARD TO ENSURE YOUR
SHARES WILL BE REPRESENTED AT THE SHAREHOLDER MEETING TO BE HELD ON JANUARY 28,
1999.
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<PAGE> 5
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 28, 1999
NOVEMBER 23, 1998
TO THE SHAREHOLDERS OF
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of the California Money Fund (the "Fund") of Municipal Fund for
California Investors, Inc. (the "Company") will be held on January 28, 1999, at
10:45 a.m. (Eastern time), in the Fourth Floor Conference Room, Bellevue Park
Corporate Center, 400 Bellevue Parkway, Wilmington, DE 19809.
The Meeting will be held with respect to the Fund for the following
purposes, and to transact such other business as may properly come before the
Meeting or any adjournment thereof:
PROPOSAL 1. To elect seven (7) directors.
PROPOSAL 2. To ratify the selection of
PricewaterhouseCoopers LLP as the Company's
independent accountants for its fiscal year
ending January 31, 1999.
PROPOSAL 3. To approve an Agreement and Plan of
Reorganization pursuant to which the Fund
will be reorganized as a separate series of
Provident Institutional Funds, a Delaware
business trust.
PROPOSAL 4. To approve changes to the following
fundamental investment limitations of the
Fund:
(a) limitation on borrowing and senior securities;
(b) limitation on underwriting activities;
(c) limitation on real estate related transactions;
(d) limitation on investment in commodities;
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<PAGE> 6
(e) limitation on loans; and
(f) limitation regarding concentration.
PROPOSAL 5. To approve a change in the following
fundamental investment limitations to make
such limitations non-fundamental:
(a) limitation on eligible investments;
(b) limitation on issuer diversification;
(c) limitation on acquiring securities of other
investment companies;
(d) limitation on purchasing securities on margin, making
short sales or maintaining a short position; and
(e) limitation on investing in illiquid securities.
PROPOSAL 6. To approve a new fundamental investment
limitation to permit the Fund to invest
substantially all of its assets in another
open-end investment company.
The Proposals stated above are discussed in detail in the attached
Proxy Statement. Shareholders of record as of the close of business on
November 13, 1998 are entitled to notice of, and to vote at, the Meeting or any
adjournment thereof.
YOUR DIRECTORS UNANIMOUSLY RECOMMEND
THAT YOU VOTE IN FAVOR OF THE PROPOSALS.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE
COMPANY'S BOARD OF DIRECTORS. THIS IS IMPORTANT FOR THE PURPOSE OF ENSURING A
QUORUM AT THE MEETING. A PROXY MAY BE REVOKED BY ANY SHAREHOLDER AT ANY TIME
BEFORE IT IS EXERCISED BY EXECUTING AND SUBMITTING A REVISED PROXY, BY GIVING
WRITTEN NOTICE OF REVOCATION TO THE COMPANY'S SECRETARY, OR BY WITHDRAWING THE
PROXY AND VOTING IN PERSON AT THE MEETING.
-----------------------------------------
W. Bruce McConnel, III
Secretary
November 23, 1998
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<PAGE> 7
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Municipal Fund for California
Investors, Inc. (the "Company") for use at a Special Meeting of Shareholders of
the Company and any adjournment(s) thereof (the "Meeting") to be held on
January 28, 1999 at 10:45 a.m. (Eastern time), in the Fourth Floor Conference
Room, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, DE
19809 This Proxy Statement and accompanying proxy card will first be mailed on
or about November 23, 1998.
The Company currently offers one (1) investment portfolio, the
California Money Fund, which is referred to herein as the "Fund."
Only shareholders of record of the Fund at the close of business on
November 13, 1998 will be entitled to notice of, and to vote at the Meeting.
On November 13, 1998 there were __________ shares of California Money Fund
entitled to notice of, and to vote at, the Meeting. Each shareholder of record
on that date is entitled to one vote for each full share held and a
proportionate fractional vote for any fractional shares held as to each
proposal on which such shareholder is entitled to vote. The Fund's shares are
referred to herein as "Shares."
Shares of the Fund have been divided into three classes ("Classes"),
California Money Shares (the "Money Share Class"), California Money Dollar
Shares (the "Dollar Shares Class") and California Money Plus Shares (the "Plus
Shares Class"). The Classes differ primarily with respect to expenses. The
Dollar Shares Class alone bears the expense of a shareholder service plan and
the Plus Shares Class alone bears the expense of a 12b-1 Plan. However, none
of the proposals to be presented at the Meeting, as described in this Proxy
Statement, involve a separate vote by a single Class of Shares.
Proxy solicitations will be made primarily by mail. The Company's
officers and employees of the investment adviser may also solicit proxies
personally or by telephone or telefax. ADP has been retained to solicit
proxies in connection with the Meeting for a fee of approximately $750.
BlackRock Institutional Management Corporation ("BIMC"), the investment adviser
for the Fund, will bear all proxy solicitation costs. Any shareholder
submitting a proxy may revoke it at any time before it is exercised by
submitting to the Company a written notice of revocation or a subsequently
executed proxy or by attending the Meeting and voting in person.
- 1 -
<PAGE> 8
Signed proxies received by the Company in time for voting and not so
revoked will be voted in accordance with the directions specified therein. The
Board of Directors recommends a vote FOR the election of directors, as listed;
and FOR each of the matters listed. If no specification is made, the proxy
will be voted FOR the election of directors and FOR such matters.
THE COMPANY WILL FURNISH TO SHAREHOLDERS UPON REQUEST, WITHOUT CHARGE,
COPIES OF ITS ANNUAL REPORT TO SHAREHOLDERS, CONTAINING AUDITED FINANCIAL
STATEMENTS FOR THE FISCAL YEAR ENDED JANUARY 31, 1998 AND ITS SEMI-ANNUAL
REPORT TO SHAREHOLDERS, CONTAINING UNAUDITED FINANCIAL STATEMENTS FOR THE
PERIOD ENDED JULY 31, 1998. REQUESTS FOR COPIES OF THE ANNUAL AND SEMI-ANNUAL
REPORTS SHOULD BE DIRECTED TO THE COMPANY AT THE ADDRESS AT THE BEGINNING OF
THIS DOCUMENT OR BY TELEPHONE AT 1-800-821-7432. THE ANNUAL AND SEMI-ANNUAL
REPORTS ARE NOT TO BE REGARDED AS PROXY SOLICITING MATERIAL.
INTRODUCTION
The Company is one of a family of five investment companies which
currently offer ten separate money market portfolios to institutional
investors. The other four investment companies are: Temporary Investment
Fund, Inc. ("Temp"), Trust for Federal Securities ("Fed"), Municipal Fund for
Temporary Investment ("Muni") and Municipal Fund for New York Investors, Inc.
("NY Muni"). BIMC serves as investment adviser for each of these investment
companies. Additionally, each investment company has the same service
providers and offer shares of one or more similar classes. Each investment
company has similar, but not the same, fundamental investment limitations.
Each of the money market portfolios has historically been marketed together as
the Provident Institutional Funds.
At this Meeting, shareholders of the Company are being asked to
approve proposals designed to reorganize the five investment companies into one
investment company. Similar proposals are also being submitted to the
shareholders of Temp, Fed, Muni and NY Muni. After such reorganization, the
Fund will have the same investment adviser, other service providers, the same
fee and expense structure , and the same investment objective, policies and
limitations as it currently has, subject to any changes approved at this
Meeting. The directors believe that the proposed changes are in the best
interests of the shareholders. If the proposals are approved, the directors
believe that the proposed changes will improve operations, simplify disclosure
and position the Fund to attract additional investment dollars. Each of the
proposals is discussed in greater detail below.
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<PAGE> 9
PROPOSAL 1: ELECTION OF DIRECTORS
BACKGROUND.
At the Meeting, shareholders will be asked to elect seven directors,
who will constitute the entire Board of the Company. If elected, each director
will serve until the next annual meeting of shareholders, or special meeting in
lieu thereof, and until the election and qualification of his or her successor,
or until the director's status as a director is sooner terminated as provided
in the Company's By-laws. Additionally, if the Agreement and Plan of
Reorganization is approved as described in Proposal 3 below, the directors
elected here will also serve as the trustees of the newly formed Delaware
business trust. Normally, there will be no annual meeting of shareholders to
elect directors (or trustees of the Delaware business trust), except as
required by the Investment Company Act of 1940 (the "1940 Act").
The persons named as proxies in the accompanying proxy have been
designated by the Board of Directors and intend to vote for the nominees named
below. All Shares represented by valid proxies will be voted in the election
of directors for each nominee named below, unless authority to vote for a
particular nominee is withheld. Each nominee has consented to being named in
this Proxy Statement and to serve if elected. Should any nominee withdraw from
the election or otherwise be unable to serve, the named proxies will vote for
the election of such substitute nominee as the Board of Directors may recommend
unless a decision is made to reduce the number of directors serving on the
Board. The following table sets forth the nominees, their ages, principal
occupations for the past five years, and any other directorships they hold in
companies which are subject to the reporting requirements of the Securities
Exchange Act of 1934 or are registered as investment companies under the 1940
Act.
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NAME SINCE AGE DURING PAST 5 YEARS
---- --------- --- --------------------
<S> <C> <C> <C>
G. Nicholas Beckwith, III N/A 53 President and Chief Executive Officer,
Beckwith Machinery Company; First Vice
Chairman of the Board of Trustees,
University of Pittsburgh Medical Center
-Shadyside/Presbyterian Hospitals;
Second Vice Chairman of the Board of
Trustees, University of Pittsburgh
Medical Center Health System;
</TABLE>
3
<PAGE> 10
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NAME SINCE AGE DURING PAST 5 YEARS
---- --------- --- --------------------
<S> <C> <C> <C>
Board of Overseers, Brown University School
of Medicine; Board of Trustees, Shadyside
Academy; Trustee, Claude Worthington
Benedum Foundation; Trustee, Chatham
College; Director or Trustee of two other
investment companies advised by BIMC.
Jerrold B. Harris N/A 56 President and Chief Executive Officer,
VWR Scientific Products Corp.; Director
or Trustee of two other investment
companies advised by BIMC.
Rodney D. Johnson* 1993 57 President, Fairmount Capital Advisors,
Inc.; Director or Trustee of five other
investment companies advised by BIMC.
Joseph P. Platt, Jr. N/A 51 Partner, Amarna Partners (private
investment company); formerly, a
Director and Executive Vice President
of Johnson & Higgins.
Robert C. Robb, Jr. (1) N/A 52 Partner, Lewis, Eckert, Robb & Company;
Trustee, EQK Realty Investors;
Director, Tamaqua Cable Products
Company; Director, Brynwood Partners;
former Director, PNC Bank.
Kenneth L. Urish N/A 46 Managing Partner, Urish Popeck & Co.
LLC (accountants and consultants).
</TABLE>
4
<PAGE> 11
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NAME SINCE AGE DURING PAST 5 YEARS
- ---- -------- --- -------------------
<S> <C> <C> <C>
Frederick W. Winter N/A 53 Dean, Joseph M. Katz School of Business
- University of Pittsburgh; formerly,
Dean, School of Management - State
University of New York at Buffalo
(1994-1997); former Director, Rand
Capital (1996-1997); former Director,
Bell Sports (1991-1998); former
Director, Alkon Corporation (1992-1998).
</TABLE>
- ----------------------------------
*Mr. Johnson is an "interested person" of Provident Institutional
Funds, as that term is defined in the 1940 Act, because he is an officer of
Provident Institutional Funds.
1. From 1994 until April 14, 1998, Mr. Robb was a director of PNC Bank.
Mr. Johnson has served as a director since April 19, 1993 when he was
elected by the other directors. Messrs. Howell, Pepper, Peterson and
Santomero, who currently serve as directors of the Company, are not standing
for re-election at this Meeting.
During the fiscal year ended January 31, 1998, the directors held four
regular Board Meetings. Mr. Johnson, the incumbent director, attended all the
meetings held.
The Company has an Executive Committee, comprised of Messrs. Johnson
and Peterson, which may, during the interval between meetings of the Board,
exercise the authority of the Board of Directors in the management of the
Company's business to the extent permitted by law. The Executive Committee did
not hold any meetings during the fiscal year ended January 31, 1998.
The Company has an Audit Committee, comprised of Messrs. Howell,
Peterson and Santomero. The functions of the Audit Committee are to meet with
the Company's independent accountants to review the scope and findings of the
annual audit, discuss the Company's accounting policies, discuss any
recommendations with respect to the Company's management practices, review the
impact of any changes in accounting standards upon the Fund's financial
statements, recommend to the Board of Directors the selection of independent
accountants, and to perform such other duties as may be requested by the Board
of Directors. The Audit Committee met one time during the fiscal year ended
January 31, 1998, and all members of the Audit Committee were present.
The Company has a Nominating Committee comprised of Messrs. Johnson,
Howell and Peterson. The Nominating Committee is responsible for the selection
and nomination of candidates to serve as directors. Although the Nominating
Committee expects to
5
<PAGE> 12
be able to find an adequate number of candidates to serve as directors, the
Nominating Committee is willing to consider nominations received from
shareholders at the address on the front of this Proxy Statement. The
Nominating Committee did not meet during the fiscal year ended January 31,
1998.
As Messrs. Howell, Pepper, Peterson and Santomero will be retiring
from the Board, the new board is expected to reconstitute each of the
Committees immediately after the Meeting.
Each director receives an annual fee of $5,000 plus $250 for each
Board meeting attended and are reimbursed for reasonable expenses incurred in
attending meetings. The Chairman of the Board, Mr. Pepper, receives an
additional $5,000 per annum for his services in such capacity. In addition,
Committee members are entitled to $250 for each Committee meeting attended
which is not held in conjunction with a Board meeting of the Company. Messrs.
Howell, Pepper, Peterson and Santomero, in connection with their retirement
from the Board and from other boards in the Fund Complex, will receive payments
of $4,813, $63,333, $4,813 and $3,375, respectively, in recognition of their
years of service to the Fund Complex. These payments will be made by BIMC and
are not an expense of the Company. Drinker Biddle & Reath LLP, of which W.
Bruce McConnel, III, Secretary of the Company, is a partner, received fees from
the Company for legal services. The directors and officers of the Company own
less than 1% of the outstanding Shares of the Fund.
The following chart provides certain information for the fiscal year
ended January 31, 1998 about the fees received by the directors of the Company
as directors and/or officers of the Company and as directors and/or trustees of
the Fund Complex.
6
<PAGE> 13
<TABLE>
<CAPTION>
==========================================================================================================
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM
AGGREGATE BENEFITS ESTIMATED COMPANY AND
COMPENSATION ACCRUED AS ANNUAL FUND COMPLEX(1)
NAME OF PERSON, FROM PART OF FUND BENEFITS UPON PAID TO
POSITION COMPANY EXPENSES RETIREMENT DIRECTORS
-------- ------- -------- ---------- ---------
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
William R. Howell, $ 6,250 n/a n/a $ 6,250(1)(2)
Director
- ----------------------------------------------------------------------------------------------------------
Rodney D. Johnson, $ 6,250 n/a n/a $56,500(6)(2)
Director
- ----------------------------------------------------------------------------------------------------------
G. Willing Pepper,(3) $ 11,250 n/a n/a $82,250(6)(2)
Chairman of the Board
- ----------------------------------------------------------------------------------------------------------
Rudolph A. Peterson, $ 6,250 n/a n/a $ 6,250(1)(2)
Director
- ----------------------------------------------------------------------------------------------------------
Anthony M. Santomero, $ 6,250 n/a n/a $12,500(3)(2)
Director
==========================================================================================================
</TABLE>
1. A Fund complex means two or more investment companies that hold
themselves out to investors as related companies for purposes of
investment and investor services, or have a common investment adviser
or have an investment adviser that is an affiliated person of the
investment adviser of any of the other investment companies.
2. Total number of investment companies a director served on within the
Fund Complex during the fiscal year ended January 31, 1998.
3. Mr. Pepper was President of the Company and certain other investment
companies in the Fund Complex until December 19, 1997.
PROPOSAL 2: RATIFICATION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
A majority of the directors who are not "interested persons" of the
Company have selected PricewaterhouseCoopers LLP as independent accountants for
the Company for the fiscal year ending January 31, 1999. The ratification of
the selection of independent accountants is to be voted on at the Meeting and
it is intended that the persons named in the accompanying proxy will vote for
PricewaterhouseCoopers LLP unless contrary instructions are given. In
addition, subject to ratification at this Meeting, the trustees of the Delaware
business trust have selected PricewaterhouseCoopers LLP to serve as the
independent accountants for Provident Institutional Funds.
PricewaterhouseCoopers LLP is the successor by merger to Coopers & Lybrand
L.L.P., and have been the Company's independent accountants since the Company's
organization. PricewaterhouseCoopers LLP has informed the Company that it has
no direct or material indirect financial interest in the Company or Provident
Institutional Funds. A representative of
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<PAGE> 14
PricewaterhouseCoopers LLP is expected to be present at the Meeting to make a
statement if desired and to be available to respond to appropriate questions.
PROPOSAL 3: APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION
PURSUANT TO WHICH THE FUND WILL BE REORGANIZED INTO A
SERIES OF A DELAWARE BUSINESS TRUST
GENERAL.
The directors have unanimously approved, subject to shareholder
approval, a proposal for the Fund of the Company to effectuate the transactions
set forth in an Agreement and Plan of Reorganization (the "Plan of
Reorganization") dated November 15, 1998 between the Company and Provident
Institutional Funds, a Delaware business trust ("PIF"). The Plan of
Reorganization is attached to this Proxy Statement as Appendix A. The Plan of
Reorganization provides for the conversion (the "Conversion") of the Fund from
a separate series of the Company into a corresponding separate series of PIF.
The series of the Company is referred to in this Proposal as the "current
Fund." It is also contemplated that each of the investment portfolios of Temp,
Fed, Muni and NY Muni will also be reorganized into a separate series of PIF.
The Conversions will entail organizing PIF as a Delaware business
trust, which will initially have one series, which corresponds to the current
Fund of the Company, and nine additional series that will match the investment
portfolios currently offered by Temp, Fed, Muni and NY Muni. The series of PIF
that corresponds to the current Fund is referred to in this Proposal as the
"successor Fund." To effect the Conversion, the current Fund will transfer all
of its assets and liabilities to the successor Fund. As consideration for the
transfer of such assets and liabilities (together, "net assets"), the successor
Fund will issue shares of beneficial interest to the current Fund and the
current Fund will distribute such shares of beneficial interest pro rata to the
current Fund shareholders in exchange for their Shares.
Upon completion of the Conversion, each shareholder of the successor
Fund of PIF will be the owner of full and fractional shares of beneficial
interest equal in number and aggregate net asset value and of the same class as
its Shares of the current Fund as of the date of the Conversion. Following the
Conversion, the successor Fund will carry on the business of the current Fund.
The successor Fund will have the same investment adviser, other service
providers, the same fee and expense structure and investment objective,
policies and limitations as the current Fund. Any change in the composition of
the Board of Directors and fundamental investment limitations approved at the
Meeting with respect to the current Fund will also apply to the successor Fund.
In addition, approval of the Plan of Reorganization will
8
<PAGE> 15
constitute approval of a new investment advisory agreement, identical in all
material respects to the current investment advisory agreement, except that PNC
Bank, N.A. ("PNC Bank") will no longer serve as sub-adviser (see "Service
Providers," below). Approval of the Plan of Reorganization will also constitute
approval to wind-up the current Fund and the Company.
The Conversion will be accomplished on a tax-free basis and the dollar
value and number of Shares of each investor's investment will not change.
REASONS FOR THE PROPOSED CONVERSION.
The directors believe that a Delaware business trust as a form of
organization offers certain advantages for mutual funds over a Maryland
corporation. The directors believe that the Declaration of Trust of PIF (the
"Delaware Trust Instrument") is clearer and more modern than the Company's
organizational documents. Some of these same improvements could be achieved by
amending the Company's Articles of Incorporation, however, the directors have
concluded that, given the other advantages of a Delaware business trust, it is
preferable to enter into the Plan of Reorganization than to amend the current
organizational documents. For a summary comparison of the Articles of
Incorporation and the proposed Delaware Trust Instrument, see "Description of
Certain Provisions of the Delaware Trust Instrument" below.
The directors also believe that organizing the Fund and the other
investment portfolios offered by Temp, Fed, Muni and NY Muni as separate series
of a single legal entity (PIF) will offer certain marketing and operational
advantages. These investment portfolios have, historically been marketed to
institutional clients as one fund complex although they have differing fiscal
years, differing Boards and differing legal jurisdictions governing their
operations. This reorganization will eliminate these differences, provide
operational efficiencies and enhance the ability of the portfolios to be
marketed as a single fund complex.
The directors also believe that the Delaware business trust form of
organization will enable the successor Funds to adopt new methods of operation
and employ new technologies that are expected to reduce costs of operation
when, and if, implemented. For example, Delaware law authorizes electronic or
telephonic communications between shareholders and a Delaware business trust.
The trustees of PIF may take advantage of this provision in the future to
improve shareholder voting procedures and to reduce associated costs.
The proposed Conversion also offer the potential for future cost
savings, although no immediate cost savings are expected to result from the
Conversion. Although neither a Delaware business trust nor a Maryland
corporation is required to hold an annual
9
<PAGE> 16
meeting of shareholders, Delaware law affords to the trustees greater latitude
to adapt PIF to future contingencies without holding a special shareholders
meeting. Under the Delaware Trust Instrument, the trustees have the power to
amend the Delaware Trust Instrument to dissolve the business trust; to
incorporate PIF; to merge or consolidate with another entity; to sell, lease,
exchange, transfer, pledge or otherwise dispose of all or any part of PIF's
assets; to cause any series to become a separate trust; and to change PIF's
domicile, all without a shareholder vote. Any such exercise of authority by
the trustees will be subject to applicable state and federal law.
The Board of Directors, after reviewing the above, determined that the
potential marketing advantages, coupled with the flexibility of a Delaware
business trust as a form of organization would help to assure that PIF operates
under the most advantageous structure and is able to take advantage of
opportunities to improve operations and to reduce the expense and frequency of
future shareholder meetings.
SUMMARY OF THE PLAN OF REORGANIZATION.
The following discussion summarizes certain terms of the Plan of
Reorganization. This summary of the Plan of Reorganization is qualified in its
entirety by the provisions of the Plan of Reorganization, which is attached to
this Proxy Statement as Appendix A.
The successor Fund will initially have only nominal assets and a net
asset value of $1.00 per share. On the closing date of the Conversion (the
"Closing Date"), the Fund will transfer all of its assets to the successor Fund
in exchange for the assumption by the successor Fund of all the liabilities of
the current Fund and the issuance to the current Fund of shares of beneficial
interest of the successor Fund equal to the value (as determined by using the
procedures in the current prospectuses) on the date of the exchange of the
current Fund's net assets. Immediately thereafter, the Fund will liquidate and
distribute shares of beneficial interest to the current Fund's account pro rata
in proportion to the current Fund shareholder's interest in the current Fund in
exchange for such Shares. In these exchanges, the successor Fund will issue
the appropriate number of shares of beneficial interest of each Class of Shares
that currently is outstanding, so that the current Fund will distribute, and
holders of a particular Class of current Fund Shares will receive, the same
number of shares of beneficial interest of the same Class. As soon as
practicable after this distribution of shares of beneficial interest, the
current Fund will be wound up. Certificates evidencing full or fractional
shares of beneficial interest will not be issued. Upon completion of the
Conversion, each current Fund shareholder will be the owner of full and
fractional shares of beneficial interest equivalent in number, Class and
aggregate net asset value to the
10
<PAGE> 17
shareholder's current Fund Shares immediately before the Conversion.
Assuming the Plan of Reorganization is approved, it is currently
contemplated that the Conversion will become effective by January 31, 1999 or
as soon thereafter as possible.
If, at any time before the Closing Date of the Conversion, the
directors determine that it would not be in the best interest of the Company or
the shareholders to proceed with the Conversion, the Conversion will not go
forward, notwithstanding the approval of the Conversion by the shareholders at
the Meeting. The Company and PIF may at any time waive compliance with any of
the conditions contained in, or may amend, the Plan of Reorganization; provided
that such waiver or amendment does not materially adversely affect the
interests of current Fund shareholders.
EXPENSES OF THE CONVERSION.
BIMC will bear the expenses of this Meeting and of the Conversion.
TAX CONSEQUENCES OF THE CONVERSION.
It is a condition to the consummation of the Conversion that the
Company and PIF receive on or before the Closing Date an opinion from Drinker
Biddle & Reath LLP, counsel to the Company and PIF, substantially to the effect
that, among other things, for federal income tax purposes, the Conversion will
constitute a reorganization under Section 368(a)(1)(F) of the Internal Revenue
Code of 1986, as amended, and that no gain or loss will be recognized for
federal income tax purposes by the current Fund, the successor Fund, and the
shareholders of the current Fund upon (1) the transfer of the current Fund's
assets to the corresponding successor Fund in exchange solely for such shares
of beneficial interest and the assumption by the successor Fund of the current
Fund's liabilities or (2) the distribution in liquidation by the current Fund
of such shares of beneficial interest to the current Fund shareholders in
exchange for their Shares. The opinion will further provide, among other
things, that in counsel's view (i) the tax basis of the shares of beneficial
interest to be received by the current Fund shareholder will be the same as
that of his or her current Shares surrendered in exchange therefor and (ii) the
current Fund shareholder's tax holding period for his or her shares of
beneficial interest will include such shareholder's tax holding period for the
current Fund Shares surrendered in exchange therefor, provided that the current
Fund Shares were held as capital assets on the date of the exchange.
11
<PAGE> 18
CONTINUATION OF SHAREHOLDER ACCOUNTS AND PLANS.
PIF's transfer agent will establish accounts for all current Fund
shareholders containing the appropriate number and Class of shares of
beneficial interest to be received by that shareholder under the Plan of
Reorganization. Such accounts will be identical in all material respects to
the accounts currently maintained by the Fund for each shareholder.
INDEPENDENT ACCOUNTANTS.
PricewaterhouseCoopers LLP are presently the independent accountants
for the Company, and will continue to be the independent accountants for PIF
(subject to the required ratification discussed in Proposal 2) for its current
fiscal year.
SHAREHOLDER SERVICING AND DISTRIBUTION PLANS.
The trustees of PIF have adopted a shareholder servicing plan with
respect to Dollar Shares that is identical, in all material respects, to the
current shareholder servicing plan. The trustees of PIF have also adopted a
12b-1 Plan with respect to Plus Shares of the Fund that is identical, in all
material respects, to the current 12b-1 Plan. In addition, PIF, on behalf of
the successor Fund, will assume the current Fund's obligations under
shareholder service plan and distribution plan agreements with institutional
investors such as banks, savings and loan associations and other financial
institutions that act as service organizations.
SERVICE PROVIDERS.
BIMC currently serves as investment adviser to the Fund. PFPC Inc.
("PFPC") and Provident Distributors, Inc. ("PDI") currently serve as
co-administrators to the Fund. In addition, PFPC currently serves as transfer
agent and dividend disbursing agent to the Fund and PDI serves as distributor
to the Fund. PNC Bank currently serves as sub-adviser and custodian to the
Fund. PIF will adopt investment advisory, co-administration, transfer agency
and dividend disbursing agent, distribution and custodian agreements with
respect to the successor Fund that will be substantially the same, in all
material respects, to the current agreements, except that PNC Bank will no
longer serve as sub-adviser, and PDI will no longer serve as co-administrator.
BIMC will serve as a co-administrator with PFPC.
12
<PAGE> 19
PROPOSED NEW ADVISORY AGREEMENT.
If the Plan of Reorganization is approved, BIMC will enter into a new
Advisory Agreement with PIF dated January 31, 1999 (the "New Advisory
Agreement"). BlackRock Institutional Management Corporation (formerly, PNC
Institutional Management Corporation, "BIMC") serves as the Company's
investment adviser pursuant to an advisory agreement dated July 28, 1988 (the
"Current Advisory Agreement"). A copy of the New Advisory Agreement is
attached as Appendix B.
The New Advisory Agreement omits PNC Bank as sub-adviser and
recognizes the fact that all investment advisory services are provided by BIMC.
BIMC is an indirect, majority owned subsidiary of PNC Bank. Prior to March 31,
1998, PNC Bank, as sub-adviser to the Company, provided research, credit
analysis and recommendations with respect to the Fund's investments, and
supplied certain computer facilities, personnel and other services. On March
31, 1998, the facilities, personnel, services and related expenses of PNC Bank
were transferred to BIMC; BIMC assumed PNC Bank's responsibilities under the
sub-advisory agreement; and BIMC's obligation to pay a portion of the advisory
fee to PNC Bank was terminated. The Current Advisory Agreement names PNC Bank
as sub-adviser, and provides for its termination upon the termination of the
sub-advisory agreement. The New Advisory Agreement would delete those
provisions, and BIMC would be the sole investment adviser. Additionally, the
New Advisory Agreement would also cover the investment portfolios of other
investment companies (i.e., the investment portfolios offered by Temp, Fed,
Muni and NY Muni) involved in the Conversions described in this Proposal 3.
The Company's Current Advisory Agreement was last approved by the
directors on March 13, 1998, when the directors, including a majority of those
directors who are not "interested persons" of the Company, approved its
continuation for a twelve month period commencing June 1, 1998. The Current
Advisory Agreement was last approved by the shareholders on July 28, 1989.
DESCRIPTION OF THE PROVISIONS OF THE CURRENT ADVISORY AGREEMENT WHICH
WILL BE CHANGED IN THE NEW ADVISORY AGREEMENT. The terms of the New Advisory
Agreement are the same in all material respects as the terms of the Current
Advisory Agreement, except as follows:
1. ELIMINATION OF PROVISIONS RELATING TO PNC BANK AS SUB-ADVISER.
Under the Current Advisory Agreement PNC Bank is the sub-adviser.
Additionally, the Current Advisory Agreement calls for such agreement to
terminate immediately if the sub-advisory agreement with PNC Bank is
terminated. The New Advisory Agreement will have no such requirement. It
will, however, permit PIF, on behalf of a Fund, to employ a sub-adviser
13
<PAGE> 20
subject to any necessary approvals. PIF does not currently anticipate
employing PNC Bank as sub-adviser to the Funds.
2. ADDITION OF ADDITIONAL INVESTMENT PORTFOLIOS TO THE NEW ADVISORY
AGREEMENT. Several other investment portfolios advised by BIMC (i.e., the
investment portfolios offered by Temp, Fed, Muni and NY Muni) are also expected
to convert assets into separate investment portfolios of PIF. These other
investment portfolios would be managed by BIMC under the New Advisory
Agreement. Their current advisory agreements are substantially the same as the
Current Advisory Agreement.
3. TERM. If approved by the shareholders at this Meeting, the
initial term of the New Advisory Agreement will extend through March 31, 2000,
and thereafter shall continue in effect for successive one-year terms ending on
March 31 of each year. The term of the Current Advisory Agreement expires on
May 31 of each year.
4. MANAGEMENT. Under the Current Advisory Agreement BIMC is
responsible for computing the respective net asset value and net income for the
Fund (and each Class thereof). The New Advisory Agreement will have no such
requirement. This responsibility will shift to the co-administration agreement
and will become the duty of BIMC and PFPC as co-administrators.
5. INCIDENTAL AND CONFORMING CHANGES. Certain minor changes will
be made to the New Advisory Agreement to remove language that is obsolete and
to make conforming changes consistent with the changes described above.
DESCRIPTION OF THE PROVISIONS OF THE CURRENT ADVISORY AGREEMENT AND
THE NEW ADVISORY AGREEMENT WHICH WILL REMAIN UNCHANGED. Except as described
above, the terms and conditions of the New Advisory Agreement are the same in
all material respects as the Current Advisory Agreement. Set forth below is a
summary of the provisions that are the same in both agreements.
BIMC, subject to the supervision of the Company's directors or PIF's
trustees, manages the Fund's portfolio and is responsible for, makes decisions
with respect to and places orders for all purchases and sales of the Fund's
portfolio securities.
For the advisory services provided and expenses assumed by it, BIMC is
entitled to receive a fee, computed daily and payable monthly, at the annual
rate of .20% of the Fund's average net assets.
During the fiscal year ended January 31, 1998, the Fund paid advisory
fees (net of waivers) of $374,215.
14
<PAGE> 21
The agreements provide that BIMC shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund except for 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 it in the performance of its duties or
from reckless disregard by it of its obligations and duties thereunder.
BIMC has agreed to bear all expenses incurred by it in connection with
its activities other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund. BIMC may from time to time reduce
the investment advisory fees otherwise payable to it or may reimburse the Fund
for its operating expenses. In addition, BIMC, PFPC and PDI are required to
reimburse a Fund if the expenses borne by the Fund in any fiscal year exceed
the applicable expense limitations imposed by the securities regulations of any
state in which Shares of the Fund are registered or qualified for sale to the
public. After the Conversion, PDI will no longer be subject to this expense
reimbursement provision.
Continuance of the agreements for successive one-year terms must be
specifically approved at least annually (i) by the vote of a majority of the
directors or trustees who are not parties to such advisory agreement or
"interested persons" (as that term is defined in the 1940 Act) of any such
party, and (ii) by a majority of directors or trustees or by a vote of a
majority of the outstanding Shares of the Company or PIF. Each agreement
provides for termination automatically upon assignment and each are terminable
at any time without penalty by the directors or trustees or by a vote of a
majority of a Fund's outstanding Shares, on 60 days' written notice to BIMC or
by BIMC on 90 days' written notice to the Company or PIF.
INFORMATION ON BIMC. BIMC's offices are located at Bellevue Park
Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. All of the
capital stock of BIMC is owned by BlackRock Advisors, Inc. (formerly, PNC Asset
Management Group, Inc.). All of the capital stock of BlackRock Advisors, Inc.,
which has offices at 345 Park Avenue, New York, New York 10154, is owned by
BlackRock, Inc. A majority of the capital stock of BlackRock, Inc., which has
offices at 345 Park Avenue, New York, New York 10154 is owned by PNC Asset
Management, Inc. PNC Asset Management, Inc. is under the control of PNC Bank.
All of the capital stock of PNC Bank, which has banking offices at 1600 Market
Street, Philadelphia, Pennsylvania 19103, is owned by PNC Bancorp, Inc., which
has offices at 5th and Wood Streets, Pittsburgh, Pennsylvania 15265. All of
the capital stock of PNC Bancorp, Inc. is owned by PNC Bank Corp., a
publicly-held corporation with principal offices in Pittsburgh, Pennsylvania.
15
<PAGE> 22
The names, addresses and principal occupations of the principal
executive officer and each director of BIMC are as follows:
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL
BIMC NAME AND ADDRESS OCCUPATIONS
- ------------- ---------------- -----------
<S> <C> <C>
Director Walter E. Gregg, Jr. Senior Executive
249 Fifth Avenue Vice President,
Pittsburgh, PA 15222 PNC Bank Corp.
Director Helen P. Pudlin Vice President and General
249 Fifth Avenue Counsel, PNC Bank Corp.
Pittsburgh, PA 15222
Chairman, Director Laurence D. Fink Chairman and Chief Executive
and Chief Executive 345 Park Avenue Officer,
Officer New York, New York 10154 BlackRock Financial
Management, Inc.
Director James E. Rohr President, PNC Bank Corp.
249 Fifth Avenue
Pittsburgh, PA 15222
</TABLE>
OTHER ADVISORY CLIENTS. BIMC also acts as investment adviser and/or
sub-adviser to various other registered investment companies. The table below
sets forth certain information with respect to such investment portfolios which
have similar investment objectives to the Fund, excluding investment portfolios
which invest primarily in taxable securities:
<TABLE>
<CAPTION>
ANNUAL RATE OF INVESTMENT
NET ASSETS AS OF ADVISORY/SUBADVISORY
NAME OF FUND AUGUST 31, 1998 FEES
------------ --------------- --------------------------
<S> <C> <C>
Municipal Fund for New
York Investors, Inc. -
New York Money Fund $317,030,887 .20%
Municipal Fund for
Temporary Investment -
MuniFund $635,619,998 .175% of the first $1
billion(1)
MuniCash $489,970,430 .175% of the first $1
billion(1)
</TABLE>
16
<PAGE> 23
<TABLE>
<CAPTION>
ANNUAL RATE OF
INVESTMENT
NET ASSETS AS OF ADVISORY/SUBADVISORY
NAME OF FUND AUGUST 31, 1998 FEES
------------ --------------- --------------------------
<S> <C> <C>
The RBB Fund, Inc. -
Municipal Money
Market $245,170,814 .35% of the first $250
million
New York Municipal $31,054,666 .35% of the first $250
million(2)
BlackRock Funds -
Municipal Money .40% of the first $1
Market $473,315,262 billion(3)
New Jersey .40% of the first $1
Municipal Money $155,568,720 billion(3)
Market
$162,734,891 .40% of the first $1
North Carolina billion(3)
Municipal Money
Market
$121,991,766 .40% of the first $1
Ohio Municipal billion(3)
Money Market
$510,384,830 .40% of the first $1
Pennsylvania Municipal billion(3)
Money Market
$82,650,410 .40% of the first $1
Virginia Municipal billion(3)
Money Market
First Funds - $42,753,092 .08% of the first $500
Municipal Money million(4)
Market
Warburg, Pincus $179,898,444 .25% of net assets
Counsellors, Inc. -
New York Tax Exempt
Fund
</TABLE>
- --------------------
(1) Subsequent breakpoionts are .15% of the next $1 billion; .125% of the
next $1 billion; .10% of the next $1 billion; .095% of the next $1
billion; .09% of the next $1 billion; .085% of the next $1 billion;
and .08% of net assets over $7 billion.
(2) Subsequent breakpoints are .30% of the next $250 million; and .25% of
the net assets over $500 million.
(3) Subsequent breakpoints are .35% of the next $1 billion; .325% of the
next $3 billion; and .30% of net assets over $5 billion.
17
<PAGE> 24
(4) Subsequent breakpoints are .06% of the next $500 million; and .05% of
net assets over $1 billion.
SERVICES TO THE FUND BY RELATED PARTIES. PFPC and PDI serve as
co-administrators to the Fund and jointly receive fees, computed daily and paid
monthly, at the same rate as BIMC's advisory fees described above under
"Description of the Provisions of the Current Advisory Agreement and the New
Advisory Agreement Which Will Remain Unchanged." During the fiscal year ended
January 31, 1998, the Fund paid PFPC and PDI administration fees (net of
waivers) of $374,215.
PFPC also serves as transfer agent and dividend disbursing agent to
the Fund. For transfer agency and dividend disbursing agent services, the Fund
pays PFPC fees at the annual rate of $12 per account plus $1 for each purchase
or redemption transaction by an account, and out-of-pocket expenses in
connection with such services. During the fiscal year ended January 31, 1998,
the Fund paid PFPC $37,106 in transfer agent fees and expenses.
Affiliates of BIMC may also receive fees under the shareholder service
and distribution agreements applicable to the Dollar Share and Plus Share
Classes of the Fund. During the fiscal year ended January 31, 1998, the Dollar
Shares Class paid $428 in service organization fees to affiliates of BIMC.
During the fiscal year ended January 31, 1998, the Plus Shares Class made no
payments in distribution fees to affiliates of BIMC because no such shares were
outstanding.
PNC Bank serves as custodian to the Fund. Pursuant to the Custodian
Agreement, the Fund pays PNC Bank an annual fee, calculated daily on the
average daily gross assets and paid monthly, at the rate of $.25 for each $1000
of the Fund's average gross assets. During the fiscal year ended January 1,
1998, the Fund paid PNC Bank $138,717 in custodian fees and expenses.
DESCRIPTION OF CERTAIN PROVISIONS OF THE DELAWARE TRUST INSTRUMENT.
The following is a summary of certain provisions of the Delaware Trust
Instrument.
SERIES AND CLASSES. The Delaware Trust Instrument permits PIF to
issue series of its shares of beneficial interest which represent interests in
separate portfolios of investments, including the successor Fund. PIF is also
authorized to issue multiple classes of all series. The Company is also
permitted to issue separate series and classes of shares. Both the Company and
PIF may authorize the issuance of additional series or classes without prior
shareholder approval. No series is entitled to share in the assets of any
other series or is liable for the expenses or liabilities of any other series.
The successor Fund would initially have the same Classes of shares as
18
<PAGE> 25
the current Fund, and these Classes would have substantially the same
attributes as the Classes of the current Fund. Shares of the Company and PIF
will have the same redemption, liquidation and dividend rights. The Company's
Shares have a par value of $0.001 per share. The shares of beneficial interest
of PIF have no par value. Neither the Shares of the Company nor the shares of
beneficial interest of PIF have any preemptive rights. The directors believe
that these differences are immaterial.
LIMITATIONS ON DERIVATIVE ACTIONS. In addition to the requirements of
Delaware law, the Delaware Trust Instrument provides that a shareholder of PIF
may bring a derivative action on behalf of PIF only if the following conditions
are met: (a) shareholders eligible to bring such derivative action under
Delaware law who hold at least 10% of the outstanding shares of beneficial
interest of the Delaware business trust, or 10% of the outstanding shares of
beneficial interest of the series or class to which such action relates, must
join in the request for the trustees to commence such action; and (b) the
trustees must be afforded a reasonable amount of time to consider such
shareholder request and to investigate the basis of such claim. The Delaware
Trust Instrument also provides that no person, other than the trustees, who is
not a shareholder of a particular series or class shall be entitled to bring
any derivative action, suit or other proceeding on behalf of or with respect to
such series or class. The trustees will be entitled to retain counsel or other
advisers in considering the merits of the request and may require an
undertaking by the shareholders making such request to reimburse PIF for the
expense of any such advisers in the event that the trustees determine not to
bring such action. No similar provision is applicable to the Company.
SHAREHOLDER MEETINGS AND VOTING RIGHTS. PIF is not required to hold
annual meetings of shareholders and does not intend to hold such meetings. In
the event that a meeting of shareholders is held, each share of beneficial
interest of PIF will be entitled, as determined by the trustees without the
vote or consent of shareholders, to one vote for each share of beneficial
interest on all matters presented to shareholders, including the election of
trustees. However, to the extent required by the 1940 Act or otherwise
determined by the trustees, series and classes of PIF will vote separately from
each other. Shareholders of PIF do not have cumulative voting rights in the
election of trustees. The Company has the same policies regarding annual
meetings and voting rights, except as noted below. Meetings of shareholders of
the Company, PIF, or any series or class thereof, may be called by the
directors, trustees, certain officers or upon the written request of holders of
25% or more of the shares entitled to vote at such meeting. The shareholders
of PIF will have voting rights only with respect to the limited number of
matters specified in the Delaware Trust Instrument and such other matters as
the trustees may determine or may be required by law. With respect to the
Company, whether
19
<PAGE> 26
a matter requires shareholder approval is an issue of Maryland corporate law
and the Company's Articles of Incorporation cannot be amended without
shareholder approval.
INDEMNIFICATION. The Delaware Trust Instrument provides for
indemnification of trustees, officers and agents of PIF unless the recipient is
liable by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such person's
office. The Company provides a similar degree of indemnification in the
Articles of Incorporation.
The Delaware Trust Instrument provides that, if any shareholder or
former shareholder of any series is held personally liable solely by reason of
being or having been a shareholder and not because of the shareholder's acts or
omissions or for some other reason, the shareholder or former shareholder (or
heirs, executors, administrators, legal representatives or general successors)
will be entitled, out of the assets belonging to the applicable series, to be
held harmless from and indemnified against all loss and expense arising from
such liability. PIF, acting on behalf of any affected series, must, upon
request by such shareholder, assume the defense of any claim made against such
shareholder for any act or obligation of the series and satisfy any judgment
thereon from the assets of the series. Shareholders of the Company have no
personal liability for the Company's obligations.
ENDING THE TRUST. The Delaware Trust Instrument permits the winding
up of PIF or of any series or class of PIF (i) by a majority of the affected
shareholders at a meeting of shareholders of the series or class of PIF; or
(ii) by a majority of the trustees without shareholder approval if the trustees
determine that such action is in the best interest of PIF or its shareholders.
The winding up of the Company would be governed by Maryland corporate law and
would generally require shareholder approval.
MERGER, CONSOLIDATION, SALE OF ASSETS, ETC. The Delaware Trust
Instrument authorizes the trustees, without shareholder approval (except as
stated in the next paragraph), to cause PIF, or any series thereof, to merge or
consolidate with any corporation, association, trust or other organization or
sell or exchange all or substantially all of the property belonging to PIF, or
any series thereof. In addition, the trustees, without further shareholder
approval if Proposal 6 is approved, may adopt a master-feeder structure by
investing substantially all of the assets of a series of PIF in the securities
of another open-end investment company. A reorganization, including the
conversion to a master-feeder structure, would require shareholder approval by
the Company.
20
<PAGE> 27
AMENDMENTS. The Delaware Trust Instrument permits the trustees to
amend the Delaware Trust Instrument without a shareholder vote. However,
shareholders of PIF have the right to vote on any amendment (i) that would
adversely affect the voting rights of shareholders; (ii) that is required by
law to be approved by shareholders; (iii) that would amend the voting
provisions of the Delaware Trust Instrument; or (iv) that the trustees
determine to submit to shareholders. Amendment to the Company's Articles of
Incorporation requires shareholder approval for any amendment changing the
terms or contract rights, expressly set forth in the Articles of Incorporation,
of any of its outstanding stock by classification, reclassification or
otherwise.
SERIES TRUSTEES. The trustees may appoint separate trustees with
respect to one or more series or classes of PIF's shares of beneficial
interest. The Company's Articles of Incorporation do not permit the election
of separate directors for a series or class. The trustees of PIF do not
currently intend to appoint Series Trustees.
BOARD OF DIRECTOR'S EVALUATION AND RECOMMENDATION.
The directors discussed the proposed Conversion preliminarily at a
meeting held on September 11, 1998 and in more detail at a special meeting held
on October 22, 1998. The directors took into consideration the fact that the
Conversion may provide operational efficiencies and additional managerial
flexibility to the trustees of PIF. The directors considered the terms and
conditions of the Plan of Reorganization. They also considered the fact that
the Fund will have the same investment adviser, other service providers, and
the same fee and expense structures.
The directors also considered the terms of the New Advisory Agreement
that would be in place for PIF. With respect to the terms and conditions of
the New Advisory Agreement, which are the same in all material respects as
those in the Current Advisory Agreement, the directors considered, among other
things, the quality of the investment advisory services that have been provided
in the past by BIMC, and which are expected to continue to be provided after
January 31, 1999 by substantially the same personnel. They discussed the
impact of the assumption of PNC Bank's duties by BIMC. They considered the
Fund's performance in relation to a selected group of other funds with a
similar investment objective, which comparison reflected very favorably on
BIMC. After consideration of all this information and such other items as were
deemed appropriate, the directors concluded that the New Advisory Agreement
contained terms, including the provisions for fees, that were fair and
reasonable to PIF.
Based on the foregoing, the directors believe that the Conversion will
be beneficial to present shareholders of the Fund
21
<PAGE> 28
as well as to potential investors. At the meeting held on October 22, 1998,
after considering the matters discussed above, and the fact that the costs
associated with this Meeting and the proposed Conversion would be borne
entirely by BIMC, the directors unanimously approved the adoption of the Plan
of Reorganization and determined that the Conversion: (i) is in the best
interest of the Fund and (ii) will not result in dilution of the interests of
the shareholders of the Fund. In addition, the directors unanimously voted to
recommend to the shareholders of the Fund that they approve the Plan of
Reorganization and the transactions contemplated thereunder.
A vote FOR the Conversion will authorize the current Fund, as the sole
shareholder of its corresponding successor Fund: (i) to elect as trustees of PIF
(if Proposal 1 is approved) Messrs. Beckwith, Harris, Johnson, Platt, Robb,
Urish and Winter (see Proposal 1); (ii) to ratify the selection of
PricewaterhouseCoopers LLP as PIF's independent accountants (see Proposal 2);
(iii) to approve the New Advisory Agreement between PIF and BIMC; and (iv) to
approve the fundamental investment limitations for the successor Fund, which if
Proposals 4, 5 and 6 are approved, will be the same as the current fundamental
investment limitations in effect for the Fund, as amended by such Proposals. In
addition, if the Conversion is approved but Proposals 4, 5 and/or 6 are not
approved by a current Fund's shareholders, the current Fund, as sole shareholder
of the successor Fund, will establish only the existing fundamental investment
limitations, as the case may be.
PROPOSAL 4: TO APPROVE CHANGES TO THE FUNDAMENTAL INVESTMENT
LIMITATIONS OF THE FUND
Certain investment limitations of the Fund are matters of fundamental
policy and may not be changed with respect to the Fund without the approval of
its shareholders. BIMC, the Company's investment adviser, has recommended to
the Board of Directors that certain fundamental investment limitations be
amended as shown below. The proposed changes would modernize the limitations
and conform the fundamental investment limitations of the Fund to those of
Temp, Fed, Muni and NY Muni. In addition, if approved at this Meeting, these
fundamental investment limitations will also apply to the successor Fund of
PIF. This will allow BIMC to manage its investment portfolios in a more
streamlined and efficient manner. These changes will also result in a clearer
and simpler statement of these investment limitations. Except as specifically
noted below, these changes do not reflect a change in the investment policies
or techniques of the Fund. Shareholders will vote either for or against
Proposal 4 in its entirety. The directors believe that the proposal is in the
best interests of the Fund's shareholders.
22
<PAGE> 29
(a) AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION ON
BORROWING AND SENIOR SECURITIES
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not borrow money except from banks for A Fund may not borrow money or issue senior
temporary purposes and then in amounts not in excess securities except to the extent permitted under the
of 10% of the value of the Fund's assets at the time 1940 Act.
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.)
</TABLE>
EXPLANATION OF THE PROPOSED CHANGE: The proposed change would
modernize and make the language of this limitation uniform among the money
market funds advised by BIMC. It will also expand the Fund's ability to borrow
money from 10% to 33 1/3% of its total assets at the time of borrowing.
23
<PAGE> 30
(b) AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION ON
UNDERWRITING ACTIVITIES
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not underwrite any issue of securities A Fund may not act as an underwriter of securities.
except to the extent that the purchase of Municipal A Fund will not be an underwriter for purposes of
Obligations directly from the issuer thereof in this limitation if it purchases securities in
accordance with the Fund's investment objective, transactions in which the Fund would not be deemed to
policies and limitations may be deemed to be be an underwriter for purposes of the Securities Act
underwriting. of 1933.
</TABLE>
EXPLANATION OF THE PROPOSED CHANGE: The proposed change would
modernize and make the language of this limitation uniform among the money
market funds managed by BIMC.
(c) AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION
CONCERNING REAL ESTATE RELATED TRANSACTIONS
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not purchase or sell real estate except A Fund may not purchase or sell real estate. The
that the Fund may invest in Municipal Obligations purchase of securities secured by real estate or
secured by real estate or interests therein. interests therein are not considered to be a purchase
of real estate for purposes of the limitation.
</TABLE>
EXPLANATION OF THE PROPOSED CHANGE: The proposed change would
modernize and make uniform the language of this limitation among the money
market funds managed by BIMC.
24
<PAGE> 31
(d) AMENDMENT TO THE FUND'S FUNDAMENTAL INVESTMENT LIMITATIONS
CONCERNING COMMODITIES
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not purchase or sell commodities or A Fund may not purchase or sell commodities or
commodity contracts, or invest in oil, gas or mineral commodities contracts.
exploration or development programs.
The Fund may not write or sell puts, calls,
straddles, spreads or combination thereof.
</TABLE>
EXPLANATION OF THE PROPOSED CHANGE: The proposed change would combine
and make uniform the language of this limitation among the money market funds
managed by BIMC. Additionally, it would delete the language concerning
investments in oil, gas or mineral exploration or development programs. This
language was formerly required by various state securities laws, but is no
longer required. The Fund does not intend on investing in such securities.
(e) AMENDMENT TO THE FUND'S INVESTMENT LIMITATION
CONCERNING LOANS
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund many not make loans except that the Fund may A Fund may not make loans. The purchase of debt
purchase or hold debt obligations in accordance with obligations, the lending of portfolio securities and
its investment objective, policies and limitations. the entry into repurchase agreements are not treated
as the making of loans for purposes of this
limitation.
</TABLE>
EXPLANATION OF THE PROPOSED CHANGE: The proposed change would
modernize the language of this limitation. In addition, it would permit the
Fund to engage in securities lending transactions. If approved, the Fund may
loan its securities up to 33 1/3% of its total assets (including the value of
collateral for the loans) to qualified brokers, dealers, banks and other
financial institutions for the purposes of seeking additional net investment
income through the receipt of interest on the loans. Such loans would involve
risks of delay in receiving additional collateral in the event the collateral
decreased below the value of the securities loaned or of delay in recovering
the securities loaned or even loss of rights in the collateral should the
borrower of the securities fail financially.
25
<PAGE> 32
(f) AMENDMENT TO THE FUND'S INVESTMENT LIMITATION
CONCERNING CONCENTRATION
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not purchase any securities which would A Fund may not purchase any securities which would
cause more than 25% of the value of the Fund's total cause 25% or more of the Fund's total assets at the
assets at the time of purchase to be invested in the time of purchase to be invested in the securities of
securities of issuers conducting their principal one or more issuers conducting their principal
business activities in the same industry; provided business activities in the same industry, provided
that this limitation shall not apply to Municipal that there is no limitation with respect to
Obligations or governmental guarantees of Municipal obligations issued or guaranteed by the U.S.
Obligations; and provided, further, that for the government, any state or territory of the United
purpose of this limitation only, industrial States, or any of their agencies, instrumentalities
development bonds that are considered to be issued by or political subdivisions.
non-governmental users shall not be deemed to be
Municipal Obligations. Notwithstanding the above limitation, there is no
limitation with respect to investments by the Fund in
repurchase agreements, domestic bank obligations and
certain bank obligations considered to be issued by
domestic banks pursuant to regulations or
pronouncements of the SEC or its staff.
</TABLE>
EXPLANATION OF THE PROPOSED CHANGE: The proposed change would
modernize the language of this limitation.
PROPOSAL 5: TO APPROVE A CHANGE IN THE FOLLOWING FUNDAMENTAL
INVESTMENT LIMITATIONS OF THE FUND TO MAKE SUCH
LIMITATIONS NON-FUNDAMENTAL
The following proposals would change certain fundamental investment
limitations of the Fund to non-fundamental investment limitations. Unlike a
fundamental limitation, a non-fundamental investment limitation may be changed
without the approval of shareholders. Neither the 1940 Act nor state
securities laws require such limitations to be fundamental. The proposed
changes would give the directors greater flexibility in responding to
regulatory or market developments. Except as noted below, the directors have
no present intention of changing the investment
26
<PAGE> 33
limitations of the Fund; however, if this proposal is approved, the Board of
Directors may do so in the future. Additionally, if approved at this Meeting,
these limitations will also apply to the successor Fund of PIF. Shareholders
will vote either for or against Proposal 5 in its entirety. The directors
believe that the proposal is in the best interests of the Fund's shareholders.
(a) RECLASSIFICATION OF THE FUNDAMENTAL INVESTMENT LIMITATION ON
ELIGIBLE SECURITIES
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not invest less than 80% of its assets This limitation would be made non-fundamental.
in securities the interest on which is exempt from
Federal income taxes, except during defensive
periods.
</TABLE>
27
<PAGE> 34
(b) RECLASSIFICATION OF THE FUNDAMENTAL INVESTMENT
LIMITATION ON ISSUER DIVERSIFICATION
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not purchase the securities of any This limitation would be made non-fundamental.
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.
</TABLE>
28
<PAGE> 35
EXPLANATION OF THE PROPOSED CHANGE: The Fund is classified as a
non-diversified investment company under the 1940 Act. The current limitation
is not required by the 1940 Act and is a recital of the Internal Revenue Code's
requirements for non-diversified investment companies. The Fund will still be
subject to the requirements of Rule 2a-7 under the 1940 Act with respect to its
issuer diversification requirements.
(c) RECLASSIFICATION OF THE FUNDAMENTAL INVESTMENT LIMITATION
REGARDING ACQUIRING SECURITIES OF OTHER INVESTMENT COMPANIES
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not purchase securities of other This limitation would be made non-fundamental and
investment companies except in connection with a restated as follows:
merger, consolidation, acquisition or reorganization.
A Fund may not acquire any other investment company
or investment company security except in connection
with a merger, consolidation, reorganization or
acquisition of assets or where otherwise permitted by
the 1940 Act.
</TABLE>
EXPLANATION OF THE PROPOSED CHANGE: The proposed change would
modernize the language and modify the restriction to permit investments in
other investment companies within the limits established by the 1940 Act. This
would permit the Fund to invest in other money market funds with similar
investment objectives, policies and limitations. Additionally, as a
non-fundamental policy, future changes to this limitation would not require a
shareholder vote.
(d) RECLASSIFICATION OF THE FUNDAMENTAL INVESTMENT LIMITATION ON
PURCHASING SECURITIES ON MARGIN, MAKING SHORT SALES OR
MAINTAINING A SHORT POSITION
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not purchase securities on margin, make This limitation would be made non-fundamental and
short sales of securities or maintain a short deleted.
position.
</TABLE>
29
<PAGE> 36
(e) RECLASSIFICATION OF THE FUNDAMENTAL INVESTMENT LIMITATION ON
PURCHASING ILLIQUID SECURITIES
<TABLE>
<CAPTION>
CURRENT PROPOSED
------- --------
<S> <C>
The Fund may not invest more than 10% of the value of This limitation would be made non-fundamental.
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.
</TABLE>
PROPOSAL 6: TO APPROVE A NEW FUNDAMENTAL INVESTMENT LIMITATION
TO PERMIT THE FUND TO INVEST SUBSTANTIALLY ALL OF ITS ASSETS IN
ANOTHER OPEN-END INVESTMENT COMPANY
GENERAL.
The directors have approved, subject to shareholder approval, the
adoption of a new fundamental investment limitation that would permit the Fund
to pool its assets with other funds, in a single portfolio (the "Pooled
Portfolio"). The Delaware Trust Instrument permits investment of all of a
Fund's assets in a Pooled Portfolio, but if the proposal to adopt this new
fundamental investment policy is not adopted, the Fund would not be able to
take advantage of such flexibility. If the proposal is approved, the Fund will
be authorized to invest substantially all of its assets in a corresponding
Pooled Portfolio that would invest in the same type of securities (and have
substantially the same objective, restrictions and policies) as the Fund. The
primary purpose of pooling would be to achieve operational efficiencies.
BACKGROUND. Several mutual funds have developed so-called
master-feeder structures under which they invest all their assets in a single
pooled investment. For example, funds offering different types of shareholder
services might pool their investments for investment purposes but retain
different distribution systems and cost structures. This structure allows
several funds with different features, but the same investment objective,
restrictions and policies, to combine their investment instead of managing them
separately. The Fund would combine its investments with those of other funds
by investing all of its assets in the same Pooled Portfolio, which would be
organized and registered as an open-end management investment company (a mutual
fund).
30
<PAGE> 37
PURPOSE OF THE PROPOSAL. BIMC regularly reviews various options for
structuring mutual funds to take maximum advantage of potential efficiencies.
The Fund currently take advantage of the ability to issue multiple classes of
shares, which offer many of the same advantages as investing in a Pooled
Portfolio. While neither the directors nor BIMC have determined that the Fund
should invest in a Pooled Portfolio, the directors believe that it could in the
future be in the best interests of the Fund to adopt such a structure to allow
for investing by the Fund in a Pooled Portfolio without the cost of again
obtaining shareholder approval.
At present, some of the Fund's fundamental investment limitations
prevent the Fund from investing all of its assets in another investment
company, and require a vote of shareholders of the Fund before such a
master-feeder structure could be adopted. To avoid the costs associated with a
subsequent shareholder meeting, the directors recommend that shareholders of
the Fund vote to permit the assets of the Fund to be invested in a Pooled
Portfolio, without an additional vote of Fund shareholders, if the directors
(or trustees of PIF) determine the adoption of a master-feeder structure to be
in the best interest of the Fund and its shareholders. If shareholders approve
this Proposal, any fundamental and non-fundamental limitations of the Fund that
currently prohibit investment in shares of a single investment company would be
subject to modification to the extent necessary to permit investment in Pooled
Portfolios. These policies include, for example, the Fund's restrictions on
investments in the securities of any one issuer, and issuers in any one
industry, as well as the restriction concerning acting as an underwriter.
At present, the directors are not considering any proposal to adopt a
master-feeder structure. The directors (or trustees of PIF) will authorize
investing the Fund's assets in a Pooled Portfolio only if they determine that
pooling is in the best interests of the Fund and its shareholders and if they
determine that the investment will not have material adverse tax or other
consequences to the Fund or the shareholders. In determining whether the Fund
should invest in a Pooled Portfolio, the directors (or trustees of PIF) will
consider, among other things, the opportunity to reduce costs and to achieve
operational efficiencies. There is no assurance that cost reductions or
increased efficiencies will be achieved.
BIMC or its affiliates may benefit from the use of a Pooled Portfolio
if overall assets are increased, since BIMC's fees under the existing and
proposed advisory agreements are based on assets under management. Also,
BIMC's or its affiliates' expenses of providing investment and other services
to the Fund may be reduced. If the Fund's investment in a Pooled Portfolio
were to reduce the expenses of BIMC or its affiliates (as the case may be)
materially, the directors (or trustees of PIF) would
31
<PAGE> 38
consider whether a reduction of the management fee paid to BIMC or its
affiliates (as the case may be) would be appropriate.
PROPOSED FUNDAMENTAL LIMITATION.
In order to permit the Fund to invest in a Pooled Portfolio at a
future date, the directors recommend that the shareholders of the Fund adopt
the following fundamental policy:
A Fund may, notwithstanding any other fundamental investment
limitations, invest all of its assets in a single open-end investment company
or series thereof with substantially the same investment objectives,
restrictions and policies as the Fund.
BOARD OF DIRECTORS' AND TRUSTEES' EVALUATION AND RECOMMENDATION.
At meetings held on October 22, 1998, after considering the matters
discussed above and other matters deemed to be relevant, the directors and
trustees unanimously adopted and voted to recommend to the shareholders that
they adopt the proposed new fundamental investment limitation that would permit
the Fund, subject to future review by the Boards, as described above, to invest
all of its assets in an open-end investment company with substantially the same
investment objectives, restrictions and policies as the Fund. In taking such
action and making such recommendations, the directors and trustees took into
consideration that the proposed modifications may provide operational
efficiencies and facilitate the introduction of new PIF mutual funds and
thereby increase the investment options available to shareholders. The
directors and trustees believe that the ability to use a master-feeder
structure may be beneficial to present shareholders of the Fund as well as
potential investors.
OTHER MATTERS
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to adjournment of the Meeting,
the persons named a proxies will vote thereon according to their best judgment
in the interests of the Company and its shareholders.
VOTES REQUIRED FOR THE ELECTION OF DIRECTORS AND
APPROVAL OF MATTERS AT THE MEETING
A quorum for the transaction of business at the Meeting is constituted
by the presence in person or by proxy of holders of a majority of the
outstanding voting securities of the Fund. If a Proxy is properly executed and
returned accompanied by instructions to withhold authority, or is marked with
an abstention, the shares represented thereby will be considered to
32
<PAGE> 39
be present at the Meeting for purposes of determining the existence of a quorum
for the transaction of business. In the election of directors, the six
nominees receiving the highest number of votes cast at the Meeting will be
elected. The withholding of voting authority with respect to the election of a
director means that the shares withheld will not be counted. Approval of
Proposal 2 requires the affirmative vote of the holders of a majority of the
votes cast at the Meeting. Approval of Proposals 3-6 requires the affirmative
vote of a "majority of the outstanding voting securities" of the Fund. The
term "majority of the outstanding voting securities" means the vote of (a) 67%
or more of the voting securities of the Fund present at such meeting, if the
holders of more than 50% of the outstanding voting securities of such Fund are
present or represented by proxy; or (b) more than 50% of the outstanding voting
securities of the Fund, whichever is less. Under Maryland law, abstentions do
not constitute a vote "for" or "against" a matter and will be disregarded in
determining the "votes cast" on an issue. Broker "non-votes" (i.e., proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
on a particular matter with respect to which the brokers or nominees do not
have discretionary power) will be deemed to be abstentions. Shares for which
there has been an abstention will be treated as present for the purpose of
determining the existence of a quorum but will have no effect (i.e. will not be
considered a vote "for" or "against") with respect to Proposal 2, and will have
the effect of a vote against Proposals 3-6.
A vote FOR the Conversion will authorize the Fund, as the sole
shareholder of its corresponding successor Fund: (i) to elect as trustees of PIF
(if Proposal 1 is approved) Messrs. Beckwith, Harris, Johnson, Platt, Robb,
Urish, and Winter (see Proposal 1); (ii) to ratify the selection of
PricewaterhouseCoopers LLP as PIF's independent accountants (see Proposal 2);
(iii) to approve the New Advisory Agreement between PIF and BIMC; and (iv) to
approve the fundamental investment limitations for the successor Fund, which if
Proposals 4, 5 and 6 are approved, will be the same as the current fundamental
investment limitations in effect for the Fund, as amended by such Proposals. In
addition, if the Conversion is approved but Proposals 4, 5 and/or 6 are not
approved by a current Fund's shareholders, the current Fund, as sole shareholder
of the successor Fund, will establish only the existing fundamental investment
limitations, as the case may be.
ADDITIONAL INFORMATION
MANAGEMENT.
Officers of the Company are elected and appointed by the directors and
hold office until they resign or are removed. The
33
<PAGE> 40
following table sets forth certain information about the Company's officers:
<TABLE>
<CAPTION>
OFFICER PRINCIPAL OCCUPATION
NAME AGE SINCE POSITION DURING PAST 5 YEARS
---- --- ----- -------- -------------------
<S> <C> <C> <C> <C>
Thomas H. Nevin 51 1997 President Managing Director of BIMC since
1997; prior thereto President
and Chief Investment Officer,
BIMC
Lisa M. Buono 33 1997 Treasurer Vice President, Provident
Advisors, Inc. since 1997; prior
thereto, Director of Finance and
Compliance, Provident
Distributors, Inc.
W. Bruce McConnel, III 55 1997 Secretary Partner, law firm of Drinker
Biddle & Reath LLP
</TABLE>
INVESTMENT ADVISER AND SUB-ADVISER.
BIMC serves as investment adviser for the Fund. BIMC is located at
Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, DE 19809.
PNC Bank is the sub-adviser for the Fund. PNC Bank is located at 1600 Market
Street, Philadelphia, PA 19103.
CO-ADMINISTRATORS AND DISTRIBUTOR.
PFPC and PDI serve as the co-administrators for the Fund. PDI also
serves as the distributor for the Fund. PFPC is located at Bellevue Park
Corporate Center, 400 Bellevue Parkway, Wilmington, DE 19809. PDI is located
at Four Falls Corporate Center, 6th Floor, West Conshohocken, PA 19428.
BENEFICIAL OWNERS OF THE COMPANY.
The beneficial owners of more than 5% of the outstanding shares of the
Fund as of November 13, 1998, the record date, are as follows:
NAME AND
ADDRESS OF
NAME OF BENEFICIAL NUMBER OF PERCENTAGE
CLASS OWNER SHARES OWNED OF FUND
- ------- ----------- ------------ -----------
34
<PAGE> 41
SHAREHOLDER PROPOSALS
The Company does not hold annual meetings of shareholders. It is not
expected the PIF will hold annual meetings of shareholders, except as required
by the 1940 Act. Any proposal by a shareholder for consideration at a
subsequent meeting of shareholders should be sent in writing to Thomas H.
Nevin, President, Municipal Fund for California Investors, Inc., Bellevue Park
Corporate Center, 400 Bellevue Parkway, Wilmington, DE 19809.
November 23, 1998
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
35
<PAGE> 42
APPENDIX A
AGREEMENT AND PLAN OF
REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made as of the 15th day
of November, 1998, by and between Municipal Fund for California Investors, Inc.
(the "Company"), a Maryland corporation, on behalf of California Money Fund
(the "Fund"), and Provident Institutional Funds (the "Trust"), a Delaware
business trust.
This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368(a)(1)(F) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), and is intended to effect the
reorganization (a "Reorganization") of the Fund as a new series of the Trust
(the "Successor Fund"). Each Reorganization will include the transfer of all of
the assets of the Fund to the Successor Fund of the Trust solely in exchange
for (1) the assumption by the Successor Fund of all liabilities of the Fund and
(2) the issuance by the Trust to the Fund of shares of beneficial interest of
the Successor Fund. The aggregate number of shares of beneficial interest of
each class of the Successor Fund issued to the Fund will be equal to the number
of full and fractional shares of common stock ("Shares") of the Fund class
outstanding immediately before the Reorganization. These transactions will be
promptly followed by a pro rata distribution by the Fund of the shares of
beneficial interest it receives in the exchange described above to the holders
of the Fund Shares in exchange for those Fund Shares, in liquidation of the
Fund, and the cancellation of the Fund's Shares, all upon the terms and
conditions hereinafter set forth in this Agreement.
In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows.
1. TRANSFER OF ASSETS OF THE FUND IN EXCHANGE FOR ASSUMPTION OF
LIABILITIES AND ISSUANCE OF SHARES OF BENEFICIAL INTEREST
1.1 Subject to the terms and conditions set forth herein and on the
basis of the representations and warranties contained herein, the Fund agrees
to transfer all of its assets (as described in paragraph 1.2) and to assign and
transfer all of its liabilities to the Successor Fund organized solely for the
purpose of acquiring all of the assets and assuming all of the liabilities of
the Fund. The Trust, on behalf of the Successor Fund, agrees that in exchange
for all of the assets of the Fund: (1) the Successor Fund shall assume all of
the liabilities of the Fund, whether contingent or otherwise, then existing,
and (2) the
- 1 -
<PAGE> 43
Trust shall issue shares of beneficial interest to the Fund. The number of
shares of beneficial interest of each class to be issued by the Trust on behalf
of the Successor Fund will be identical to the number of full and fractional
Shares of the corresponding class of the Fund outstanding on the Closing Date
provided for in paragraph 3.1. Such transactions shall take place at the
Closing provided for in paragraph 3.1.
1.2 The assets of the Fund to be acquired by the Successor Fund shall
include, without limitation, all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), any tax operating
losses, any claims or rights of action or rights to register Shares under
applicable securities laws, any books or records of the Fund and other property
owned by the Fund and any deferred or prepaid expenses shown as assets on the
books of the Fund on the Closing Date provided for in paragraph 3.1.
1.3 Immediately after delivery to the Fund of corresponding shares of
beneficial interest, a duly authorized officer of the Company shall cause the
Fund, as the sole shareholder of the Successor Fund, to (i) elect the trustees
of the Trust; (ii) ratify the selection of the Trust's independent accountants;
(iii) adopt investment limitations which are substantially identical to those of
the Fund immediately prior to the Closing of the reorganization, including any
changes thereto approved by the shareholders of the Fund at the meeting of
shareholders to be held on January 28, 1999; and (iv) approve an investment
advisory agreement between the Trust and BlackRock Institutional Management
Corporation.
1.4 On the Closing Date, the Fund will distribute in liquidation the
shares of beneficial interest of each class to each shareholder of record,
determined as of the close of business on the Closing Date, of the
corresponding class of the Fund pro rata in proportion to such shareholder's
beneficial interest in that class and in exchange for that shareholder's
Shares. Such distribution will be accomplished by the transfer of the shares
of beneficial interest then credited to the account of the Fund on the records
of the Trust to open accounts on those records in the names of the Fund
shareholders and representing the respective pro rata number of each class of
the shares of beneficial interest received from the Successor Fund which is due
to the Fund shareholders. Fractional shares of beneficial interest shall be
rounded to the third place after the decimal point.
1.5 Ownership of the shares of beneficial interest by the Successor
Fund shareholder shall be recorded separately on the books of PFPC Inc., as the
Trust's transfer agent.
- 2 -
<PAGE> 44
1.6 Any transfer taxes payable upon the issuance of shares of
beneficial interest in a name other than the registered holder of the Fund
Shares on the books of the Fund shall be paid by the person to whom such shares
of beneficial interest are to be distributed as a condition of such transfer.
1.7 The legal existence of the Fund and the Company shall be
terminated as promptly as reasonably practicable after the Closing Date. After
the Closing Date, the Fund and the Company shall not conduct any business
except in connection with its liquidation and termination.
2. VALUATION
2.1 The value of the Fund's assets to be acquired by the Trust on
behalf of the Successor Fund hereunder shall be the net asset value computed as
of the valuation time provided in the Fund's prospectus(es) on the Closing Date
using the valuation procedures set forth in the Fund's current prospectus(es)
and statement of additional information.
2.2 The value of full and fractional shares of beneficial interest of
each class to be issued in exchange for the Fund's assets shall be equal to the
value of the net assets of the corresponding class of the Fund on the Closing
Date, and the number of such shares of beneficial interest of each class shall
equal the number of full and fractional Fund Shares outstanding on the Closing
Date.
2.3 All computations of value shall be made by PFPC Inc., as
co-administrator for the Funds and the Trust.
3. CLOSING AND CLOSING DATE
3.1 The transfer of the Fund's assets in exchange for the assumption
by the Successor Fund of the Fund's liabilities and the issuance of shares of
beneficial interest to the Fund, as described above, together with related acts
necessary to consummate such acts (the "Closing"), shall occur at Bellevue Park
Corporate Center, 400 Bellevue Parkway, Wilmington, DE 19809 on January 31,
1999 ("Closing Date"), or at such other place or date as the parties may agree
in writing.
- 3 -
<PAGE> 45
3.2 At the Closing each party shall deliver to the other such bills
of sale, checks, assignments, stock certificates, receipts or other documents
as such other party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Company represents and warrants, on behalf of itself and the
Fund, as follows:
4.1.A. At the Closing Date, the Company, on behalf of the Fund,
will have good and marketable title to the assets to be transferred to the
Trust, on behalf of the Successor Fund, pursuant to paragraph 1.1, and will
have full right, power and authority to sell, assign, transfer and deliver such
assets hereunder. Upon delivery and in payment for such assets, the Trust on
behalf of the Successor Fund will acquire good and marketable title thereto
subject to no restrictions on the full transfer thereof, including such
restrictions as might arise under the Securities Act of 1933, as amended (the
"1933 Act");
4.1.B. The execution, delivery and performance of this
Agreement will have been duly authorized prior to the Closing Date by all
necessary action on the part of the Company. This Agreement constitutes a
valid and binding obligation of the Company and the Fund enforceable in
accordance with its terms, subject to the approval of the Fund's shareholders;
4.1.C. No consent, approval, authorization or order of any
court or governmental authority is required for the consummation by the
Company, on behalf of the Fund, of the transactions contemplated herein, except
such as shall have been obtained prior to the Closing Date; and
4.1.D. The Company will file with the Securities and Exchange
Commission ("SEC") proxy materials (the "Proxy Statement") complying in all
material respects with the requirements of the Securities Exchange Act of 1934,
as amended, the Investment Company Act of 1940 (the "1940 Act"), and applicable
rules and regulations thereunder, relating to a meeting of its shareholders to
be called to consider and act upon the transactions contemplated herein.
4.2 The Trust represents and warrants, on behalf of itself and the
Successor Fund, as follows:
- 4 -
<PAGE> 46
4.2.A. Shares of beneficial interest issued in connection with
the transactions contemplated herein will be duly and validly issued and
outstanding and fully paid and non-assessable by the Trust;
4.2.B. The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of the
Trust, and this Agreement constitutes a valid and binding obligation of the
Trust and the Successor Fund enforceable against the Trust and the Successor
Fund in accordance with its terms;
4.2.C. No consent, approval, authorization or order of any
court or governmental authority is required for the consummation by the Trust
or the Successor Fund of the transactions contemplated herein, except such as
shall have been obtained prior to the Closing Date; and
4.2.D. The Trust, on behalf of the Successor Fund, shall use
all reasonable efforts to obtain the approvals and authorizations required by
the 1933 Act, the 1940 Act and such state securities laws as it may deem
appropriate in order to operate after the Closing Date.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY, THE FUND, THE
TRUST AND THE SUCCESSOR FUND
The obligations of the Company, the Fund, the Trust and the Successor
Fund are each subject to the conditions that on or before the Closing Date:
5.1 This Agreement and the transactions contemplated herein shall
have been approved by the directors of the Company and the trustees of the
Trust and by the requisite vote of the Company's shareholders in accordance
with applicable law;
5.2 All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the SEC and of state securities authorities) deemed necessary by the Company or
the Trust to permit consummation, in all material respects, of the transactions
contemplated hereby shall have been obtained, except where failure to obtain
any such consent, order or permit would not involve a risk of a material
adverse effect on the assets or properties of the Company, the Fund, the Trust
or the Successor
- 5 -
<PAGE> 47
Fund, provided that either party hereto may waive any of such conditions for
itself or its respective series;
5.3 The Company and the Trust shall have received on or before the
Closing Date an opinion of Drinker Biddle & Reath LLP satisfactory to them,
substantially to the effect that for federal income tax purposes:
5.3.A. The acquisition of all of the assets of the Fund by the
Successor Fund solely in exchange for the issuance of shares of beneficial
interest to the Fund and the assumption by the Successor Fund of all of the
liabilities of the Fund, followed by the distribution in liquidation by the
Fund of such shares of beneficial interest to the Fund shareholders in exchange
for their Fund Shares and the termination of the Fund, will constitute a
reorganization within the meaning of Section 368(a)(1)(F) of the Code, and the
Fund and the Successor Fund will each be "a party to a reorganization" within
the meaning of Section 368(b) of the Code;
5.3.B. No gain or loss will be recognized by the Fund upon (i)
the transfer of all of its assets to the Successor Fund solely in exchange for
the issuance of shares of beneficial interest to the Fund and the assumption by
the Successor Fund of the Fund's liabilities and (ii) the distribution by the
Fund of such shares of beneficial interest to the Fund shareholders;
5.3.C. No gain or loss will be recognized by the Successor Fund
upon its receipt of all of the Fund's assets solely in exchange for the
issuance of the shares of beneficial interest to the Fund and the assumption by
the Successor Fund of all of the liabilities of the Fund;
5.3.D. The tax basis of the assets acquired by a Successor Fund
from the Fund will be, in each instance, the same as the tax basis of those
assets in the Fund's hands immediately prior to the transfer;
5.3.E. The tax holding period of the assets of the Fund in the
hands of the Successor Fund will, in each instance, include the Fund's tax
holding period for those assets;
5.3.F. The Fund's shareholders will not recognize gain or loss
upon the exchange of all of their Shares of the Fund solely for shares of
beneficial interest as part of the transaction;
- 6 -
<PAGE> 48
5.3.G. The tax basis of the shares of beneficial interest
received by Fund shareholders in the transaction will be, for each shareholder,
the same as the tax basis of the Fund Shares surrendered in exchange therefor;
and
5.3.H. The tax holding period of the shares of beneficial
interest received by Fund Shareholders will include, for each shareholder, the
tax holding period for the Fund Shares surrendered in exchange therefor,
provided that the Fund Shares were held as capital assets on the date of the
exchange.
The Company and the Trust each agree to make and provide
representations with respect to the Fund and the Successor Fund, respectively,
which are reasonably necessary to enable Drinker Biddle & Reath LLP to deliver
an opinion substantially as set forth in this paragraph 5.3, which opinion may
address such other federal income tax consequences, if any, that Drinker Biddle
& Reath LLP believes to be material to the Reorganization.
6. BROKERAGE FEES
The Company and the Trust, on behalf of the Fund and the Successor
Fund, each represent and warrant to the other that there are no broker's or
finder's fees payable in connection with the transactions contemplated hereby.
7. TERMINATION
This Agreement may be terminated by the mutual agreement of the
Company and the Trust, and the parties may abandon the reorganization
contemplated hereby, notwithstanding approval thereof by the shareholders of
the Company, at any time prior to Closing, if circumstances should develop
that, in the parties judgment, make proceeding with the Agreement inadvisable.
8. AMENDMENT
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the parties; provided, however,
that following the approval of this Agreement by the Fund's shareholders, no
such amendment may have the effect of changing the provisions for determining
the number of shares of beneficial interest to be paid to the Fund's
- 7 -
<PAGE> 49
shareholders under this Agreement to the detriment of the Fund shareholders
without their further approval.
9. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; SURVIVAL; WAIVER
9.1 The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
9.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
9.4 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm or corporation other than the parties hereto and their
respective successors and assigns any rights or remedies under or by reason of
this Agreement.
9.5 All persons dealing with the Company, the Fund, the Trust or the
Successor Fund must look solely to the property of the Company, the Fund, the
Trust or the Successor Fund, respectively, for the enforcement of any claims
against the Company, the Fund, the Trust or the Successor Fund, as neither the
directors, trustees, officers, agents nor shareholders of the Company or the
Trust assume any personal liability for obligations entered into on behalf of
the Company or the Trust respectively. Neither the series of the Company nor
the Trust, nor any class within the series, shall be responsible for any
obligations assumed by or on behalf of any other series, or class within such
series, of the Company or the Trust under this Agreement.
9.6 The representations, warranties, covenants and agreements of the
parties contained herein shall not survive the Closing Date, except for the
provisions of Sections 1.7 and 9.8.
9.7 The Company or the Trust, after consultation with their
respective counsel and by consent of their respective Boards of Directors,
Trustees, Executive Committees or an officer
- 8 -
<PAGE> 50
authorized by such Boards of Directors or Trustees, may waive any condition to
their respective obligations hereunder if, in their or such officer's judgment,
such waiver will not have a material adverse effect on the interests of the
shareholders of the Company and the Trust.
9.8 From and after the Closing Date, the Trust will assume and
honor any obligation as provided for or permitted by applicable federal and
state law in effect immediately prior to the Closing Date with respect to the
indemnification of each person who is now, or has been at any time prior to the
date hereof or who becomes prior to the Closing Date, a director or officer of
the Company (for the purposes of this Section, the "Indemnified Parties") to
the maximum extent available and permitted by applicable law or regulation
against any and all losses in connection with or arising out of any claim which
is based upon, arises out of or in any way relates to any actual or alleged act
or omission occurring at or prior to the Closing Date, including any actions
taken to approve and implement this Agreement and the transactions contemplated
hereby, in the Indemnified Parties' capacities as director or officer (whether
elected or appointed), of the Company. This Section 9.8 will be construed as
an agreement as to which the Indemnified Parties are intended to be third-party
beneficiaries.
10. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy or certified mail addressed to the Company or the Trust,
each at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, DE
19809, Attention: President.
- 9 -
<PAGE> 51
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
------------------------------------------------
Name:
Title:
PROVIDENT INSTITUTIONAL FUNDS
------------------------------------------------
Name:
Title:
- 10 -
<PAGE> 52
APPENDIX B
ADVISORY AGREEMENT
AGREEMENT made as of January 31, 1999 between PROVIDENT INSTITUTIONAL
FUNDS, a Delaware business trust (the "Trust"), and BLACKROCK INSTITUTIONAL
MANAGEMENT CORPORATION, a Delaware corporation (the "Investment Adviser"),
registered as an investment adviser under the Investment Advisers Act of 1940.
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and presently
offers shares representing interests in ten separate investment portfolios; and
WHEREAS, the Trust desires to retain the Investment Adviser to render
investment advisory services to the Trust, 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 as follows:
1. APPOINTMENT.
(a) The Trust hereby appoints the Investment Adviser to
act as investment adviser to the following portfolios of the Trust: TempFund,
TempCash, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund, MuniFund,
MuniCash, California Money Fund and New York Money Fund (each a "Portfolio,"
and collectively, 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.
(b) In the event that the Trust establishes one or more
portfolios other than the Portfolios with respect to which it desires to retain
the Investment Adviser to act as investment adviser hereunder, the Trust shall
notify the Investment Adviser in writing. If the Investment Adviser is willing
to render such services it shall notify the Trust in writing whereupon, subject
to such shareholder approval as may be required pursuant to Paragraph 9 hereof,
such portfolio shall become a Portfolio hereunder and the compensation payable
by such new Portfolio to the Investment Adviser will be as agreed in writing at
the time.
- 1 -
<PAGE> 53
2. MANAGEMENT. Subject to the supervision of the Board of
Trustees of the Trust, the Investment Adviser will provide a continuous
investment program for each of the Portfolios, including investment research
and management with respect to all securities, investments, cash and cash
equivalents in the Portfolios. The Investment Adviser will determine from time
to time what securities and other investments will be purchased, retained or
sold by the Trust for each of its Portfolios. The Investment Adviser will
provide the services rendered by it hereunder in accordance with the investment
objective and policies of each of the Portfolios as stated in their respective
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 all other applicable laws;
(b) will maintain all books and records with respect to
the securities transactions of the Portfolios, keep their respective books of
account and will render to the Trust's Board of Trustees such periodic and
special reports as the Board may request; and
(c) will treat confidentiality and as proprietary
information of the Trust all records and other information relative to the
Trust 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 Trust which approval shall not be unreasonably
withheld and may not be withheld where the Investment Adviser 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 Trust.
3. 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.
4. SUB-ADVISER. It is understood that the Investment Adviser
may, if it deems it desirable, from time to time employ such person or persons
as the Investment Adviser believes to be capable of assisting in the
performance of its obligations under this Agreement (each a "Sub-Adviser") and
to terminate the services of any such person; provided, however, that the
compensation of such person or persons shall be paid by the Investment Adviser
and that the Investment Adviser shall be as fully responsible to the Trust for
the acts and omissions of any
- 2 -
<PAGE> 54
such person as it is for its own acts and omissions; and provided further, that
the retention of any Sub-Adviser shall be approved by the trustees and
shareholders to the extent required by the 1940 Act.
5. 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 Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust'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-1 of
the Rules.
6. 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 the Portfolios.
In addition, if the expenses borne by any 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 such Portfolio for one-half of
any excess up to the amount of the fees payable by the particular Portfolio to
it during such fiscal year pursuant to Paragraph 7 hereof; provided, however,
that notwithstanding the foregoing, the Investment Adviser shall reimburse such
Portfolio for one-half of such excess expenses regardless of the amount of such
fees payable 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.
7. COMPENSATION. For the services provided and the expenses
assumed pursuant to this Agreement, the Trust, on behalf of each Portfolio,
will pay the Investment Adviser and the Investment Adviser will accept as full
compensation therefor a fee, computed daily and payable monthly, as described
in the fee schedule attached as Appendix A. The fee attributable to each
Portfolio shall be the several (and not joint or joint and several) obligation
of each such Portfolio.
8. LIMITATION OF LIABILITY OF THE INVESTMENT ADVISER. The
Investment Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust 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 obligations and duties under this Agreement.
- 3 -
<PAGE> 55
9. DURATION AND TERMINATION. This Agreement shall become
effective with respect to a Portfolio upon approval of this Agreement by vote
of a majority of the outstanding voting securities of such Portfolio and,
unless sooner terminated as provided herein, shall continue with respect to
such Portfolio until March 31, 2000. Thereafter, if not terminated, this
Agreement shall continue with respect to a Portfolio for successive annual
periods ending on March 31, provided such continuance is specifically approved
at least annually (a) by the vote of a majority of those members of the Board
of Trustees of the Trust 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 Trustees of the Trust or by
vote of a majority of the outstanding voting securities of such Portfolio;
provided, however, that this Agreement may be terminated with respect to a
Portfolio by the Trust at any time, without the payment of any penalty, by the
Board of Trustees of the Trust or by vote of a majority of the outstanding
voting securities of such 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 Trust. This Agreement will
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 meaning as such terms
have in the 1940 Act.)
10. 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, and no amendment of this Agreement affecting a
Portfolio shall be effective until approved by vote of the holders of a
majority of the outstanding voting securities of such Portfolio.
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 and shall be
governed by Delaware law.
12. LIMITATION OF LIABILITY. Reference is hereby made to the
Declaration of Trust which contains certain provisions limiting the liability
of the Board of Trustees, shareholders, officers, employees and agents of the
Trust. The obligations of the Trust created hereunder are not personally
binding upon, nor shall resort be had to the property of, any of the Board of
Trustees, shareholders, officers, employees or agents of the
- 4 -
<PAGE> 56
Trust. In addition, only the Trust property included in the Portfolio which
incurs any liability shall be used to pay such liability.
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 INSTITUTIONAL FUNDS
Attest:
- ----------------------------- -------------------------------------------
By: By:
Title: Title:
BLACKROCK INSTITUTIONAL
MANAGEMENT CORPORATION
Attest:
- ----------------------------- -------------------------------------------
By: By:
Title: Title:
- 5 -
<PAGE> 57
APPENDIX A
FEE SCHEDULE
TEMPFUND.
For the services provided and the expenses assumed pursuant to this
Advisory Agreement with respect to TempFund, the Trust will pay the Investment
Adviser from the assets of TempFund and the Investment Adviser will accept as
full compensation therefor a fee, computed daily and payable monthly at the
following annual rate: .175% of the first $1 billion of TempFund's average net
assets, plus .15% of its next $1 billion of its average net assets, plus .125%
of its next $1 billion of its average net assets, plus .1% of its next $1
billion of average net assets, plus .095% of its next $1 billion of average its
average net assets, plus .09% of the next $1 billion of its average net assets,
plus .08% of its next $1 billion of its average net assets, plus .075% of the
next $1 billion of its average net assets, plus .07% of its average net assets
over $8 billion. The fee will be reduced by one-half of the amount necessary
to ensure that the ordinary operating expenses (excluding interest, taxes,
brokerage, payments to Service Organizations pursuant to Servicing Agreements
and extraordinary expenses) of TempFund do not exceed .45% of TempFund's
average net assets for any fiscal year.
TEMPCASH AND MUNICASH.
For the services provided and the expenses assumed pursuant to this
Advisory Agreement with respect to TempCash and MuniCash, the Trust will pay
the Investment Adviser from the assets belonging to either TempCash or
MuniCash, as applicable, and the Investment Adviser will accept as full
compensation therefor a fee, computed daily and payable monthly, at the
following rate: .175% of the first $1 billion of such Portfolio's average net
assets, plus .15% of its next $1 billion of average net assets, plus .125% of
its next $1 billion of average net assets, plus .1% of its next $1 billion of
average net assets, plus .095% of its next $1 billion of average net assets,
plus .09% of its next $1 billion of average net assets, plus .085% of its next
$1 billion of average net assets, plus .08% of its average net assets over $7
billion.
FEDFUND, T-FUND, FEDERAL TRUST FUND AND TREASURY TRUST FUND.
For the services provided and the expenses assumed pursuant to the
Advisory Agreement with respect to FedFund, T-Fund, Federal Trust Fund and
Treasury Trust Fund, the Trust will pay the Investment Adviser from the assets
belonging to FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund (in
proportion to each such Portfolio's average net assets) and the Investment
Adviser will accept as full compensation therefor a fee, computed
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<PAGE> 58
daily and payable monthly, at the following annual rate: .175% of the first $1
billion of the combined average net assets of FedFund, T-Fund, Federal Trust
Fund and Treasury Trust Fund; plus .150% of its next $1 billion of their
combined average net assets, plus .125% of its next $1 billion of their
combined average net assets, plus .100% of the next $1 billion of their
combined average net assets, plus .095% of the next $1 billion of their
combined average net assets, plus .090% of the next $1 billion of their
combined average net assets, plus .085% of the next $1 billion of their
combined average net assets, plus .080% of their combined average net assets
over $7 billion. The fee will be reduced by one-half of the amount necessary
to ensure that the ordinary operating expenses (excluding interest, taxes,
brokerage, payments to Service Organizations pursuant to Servicing Agreements
and extraordinary expenses) of FedFund, T-Fund, Federal Trust Fund and Treasury
Trust Fund do not exceed .45% of each such Portfolio's average net assets for
any fiscal year.
MUNI FUND.
For the services provided and the expenses assumed pursuant to this
Advisory Agreement with respect to MuniFund, the Trust will pay the Investment
Adviser from the assets belonging to MuniFund and the Investment Adviser will
accept as full compensation therefor a fee, computed daily and payable monthly,
at the following annual rate: .175% of the first $1 billion of MuniFund's
average net assets, plus .15% of its next $1 billion of average net assets,
plus .125% of its next $1 billion of average net assets, plus .1% of its next
$1 billion of average net assets, plus .095% of its next $1 billion of average
net assets, plus .09% of its next $1 billion of average net assets, plus .085%
of its next $1 billion of average net assets, plus .08% of its average net
assets over $7 billion. The fee will be reduced by one-half of the amount
necessary to ensure that the ordinary operating expenses (excluding interest,
taxes, brokerage, payments to Service Organizations pursuant to Servicing
Agreements and extraordinary expenses) of MuniFund do not exceed .45% of
MuniFund's average net assets for any fiscal year.
CALIFORNIA MONEY FUND AND NEW YORK MONEY FUND.
For the services provided and the expenses assumed pursuant to this
Advisory Agreement, California Money Fund and New York Money Fund, as
applicable, 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 such Portfolio's average net assets.
- 7 -
<PAGE> 59
VOTE THIS PROXY CARD TODAY!
MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC.
BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
CALIFORNIA MONEY FUND SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF MUNICIPAL FUND FOR
CALIFORNIA INVESTORS, INC. (THE "COMPANY") FOR USE AT A SPECIAL MEETING OF
SHAREHOLDERS OF THE ABOVE-REFERENCED FUND OF THE COMPANY TO BE HELD ON JANUARY
28, 1999 AT 10:45 A.M. (EASTERN TIME) IN THE FOURTH FLOOR CONFERENCE ROOM,
BELLEVUE PARK CORPORATE CENTER, 400 BELLEVUE PARKWAY, WILMINGTON, DE 19809.
The undersigned hereby appoints Lisa M. Buono and Thomas H. Nevin and each of
them, with full power of substitution, as proxies of the undersigned to vote at
the above-referenced Special Meeting of Shareholders, and at all adjournments
thereof, all shares of common stock of the Fund held of record by the
undersigned on the record date for the Special Meeting, upon the following
matters, and at their discretion upon any other matter which may properly come
before the Special Meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY SPECIFICATION, THIS
PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Directors
[ ] FOR ALL NOMINEES LISTED BELOW (EXCEPT [ ] WITHHOLD AUTHORITY TO VOTE
AS MARKED TO THE CONTRARY BELOW). FOR ALL NOMINEES LISTED BELOW.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH
HIS NAME IN THE LIST BELOW:
G. Nicholas Beckwith, III, Jerrold B. Harris, Rodney D. Johnson, Joseph P. Platt, Jr., Robert
C. Robb, Jr., Kenneth L. Urish, Frederick M. Winter
FOR AGAINST ABSTAIN
2. To ratify the selection of PricewaterhouseCoopers LLP as the Company's independent [ ] [ ] [ ]
accountants for its fiscal year ending January 31, 1999.
3. To approve an Agreement and Plan of Reorganization pursuant to which the Fund will be [ ] [ ] [ ]
reorganized as a separate series of Provident Institutional Funds, a Delaware business trust.
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
4. To approve changes to the following fundamental investment limitations of the Fund: [ ] [ ] [ ]
a) limitation on borrowing and senior securities;
b) limitation on underwriting activities;
c) limitation on real estate related transactions;
d) limitation on investment in commodities;
e) limitation on loans; and
f) limitation regarding concentration.
5. To approve a change in the following fundamental investment limitations to make such [ ] [ ] [ ]
limitations non-fundamental:
a) limitation on eligible investments;
b) limitation on issuer diversification;
c) limitation on acquiring securities of other investment companies;
d) limitation on purchasing securities on margin, making short sales or maintaining a short
position; and
e) limitation on investing in illiquid securities.
6. To approve a new fundamental investment limitation to permit the Fund to invest substantially [ ] [ ] [ ]
all of its assets in another open-end investment company.
</TABLE>
<PAGE> 61
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF THE COMPANY AND THE PROXY STATEMENT DATED NOVEMBER 23, 1998.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
----------------------------------------
----------------------------------------
Signature(s), (Title(s), if applicable)
Please sign above exactly as name(s)
appear(s) hereon. Corporate or
partnership proxies should be signed in
full corporate or partnership name by an
authorized officer. Each joint owner
should sign personally. When signing as
a fiduciary, please give full title as
such.
DATE: , 199
-------------------- -
