<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 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential,
for Use of the Commission Only
/X/ Definitive proxy statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
THE PNC(R) FUND
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
THE PNC(R) FUND
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
THE PNC(R) FUND
------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
------------------------------
February 15, 1995
To the Shareholders of
The PNC Fund
A Special Meeting of Shareholders of the Managed Income, Tax-Free Income,
Intermediate Government, Ohio Tax-Free Income, Pennsylvania Tax-Free Income,
Short-Term Bond, Intermediate-Term Bond and Government Income Portfolios of The
PNC Fund (the "Fund") will be held on March 29, 1995 at 10:00 a.m. at the Meadow
Woods Conference Center at Bellevue Park Corporate Center, 201 Bellevue Parkway,
Wilmington, Delaware 19809 for the following purposes:
(1) Shareholders of each of the Managed Income, Tax-Free Income,
Intermediate Government, Ohio Tax-Free Income, Pennsylvania Tax-Free
Income, Short-Term Bond, Intermediate-Term Bond and Government Income
Portfolios will consider the approval or disapproval of a sub-advisory
agreement between PNC Institutional Management Corporation, the Fund's
investment adviser, and BlackRock Financial Management, Inc.; and
(2) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The subjects referred to above are discussed in the Proxy Statement
attached to this Notice. Each shareholder is invited to attend the Special
Meeting of Shareholders in person. Shareholders of record at the close of
business on February 13, 1995 have the right to vote at the meeting. If you
cannot be present at the meeting, we urge you to complete and promptly return
the enclosed Proxy in order that the meeting may be held and a maximum number of
shares may be voted.
MORGAN R. JONES
Secretary
<PAGE> 3
THE PNC(R) FUND
400 BELLEVUE PARKWAY
SUITE 100
WILMINGTON, DELAWARE 19809
PROXY STATEMENT
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF
PROXIES BY THE BOARD OF TRUSTEES OF THE PNC FUND (THE "FUND") FOR USE AT A
SPECIAL MEETING OF SHAREHOLDERS OF THE MANAGED INCOME, TAX-FREE INCOME,
INTERMEDIATE GOVERNMENT, OHIO TAX-FREE INCOME, PENNSYLVANIA TAX-FREE INCOME,
SHORT-TERM BOND, INTERMEDIATE-TERM BOND AND GOVERNMENT INCOME PORTFOLIOS TO BE
HELD AT THE MEADOW WOODS CONFERENCE CENTER AT BELLEVUE PARK CORPORATE CENTER,
201 BELLEVUE PARKWAY, WILMINGTON, DELAWARE ON MARCH 29, 1995 AT 10:00 A.M. (SUCH
MEETING AND ANY ADJOURNMENT THEREOF IS REFERRED TO AS THE "MEETING").
It is expected that the solicitation of proxies will be primarily by mail.
The Fund's officers and service contractors may also solicit proxies by
telephone, telegraph or personal interview. The Fund will bear all proxy
solicitation costs. Any shareholder giving a proxy may revoke it at any time
before it is exercised by submitting to the Fund a written notice of revocation
or a subsequently executed proxy or by attending the Meeting and voting in
person. This Proxy Statement and each enclosed form of proxy ("Proxy") are
expected to be distributed to shareholders on or about February 16, 1995.
<PAGE> 4
Only shareholders of record at the close of business on February 13, 1995
will be entitled to vote at the Meeting. On that date the outstanding shares for
each class were as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
PORTFOLIO CLASS(1) OUTSTANDING
- ------------------------------------------------------------ ----------- --------------
<S> <C> <C>
Managed Income.............................................. F-1 Shares 8,038,784.931
"...................................................... F-2 Shares 1,070,422.113
"...................................................... F-3 Shares 40,802,012.854
Tax-Free Income............................................. H-1 Shares 268,028.231
"...................................................... H-2 Shares 654,544.335
"...................................................... H-3 Shares 9,337.103
Intermediate Government..................................... K-1 Shares 5,917,580.135
"...................................................... K-2 Shares 901,929.327
"...................................................... K-3 Shares 12,399,244.721
Ohio Tax-Free Income........................................ L-1 Shares 500,006.070
"...................................................... L-2 Shares 345,041.871
"...................................................... L-3 Shares 8,405.613
"...................................................... L-4 Shares 6,333.653
Pennsylvania Tax-Free Income................................ M-1 Shares 1,209,689.087
"...................................................... M-2 Shares 4,423,003.777
"...................................................... M-3 Shares 80,424.154
"...................................................... M-4 Shares 124,488.550
Short-Term Bond............................................. R-1 Shares 469,511.725
"...................................................... R-2 Shares 30,126.648
"...................................................... R-3 Shares 1,129,400.624
Intermediate-Term Bond...................................... S-1 Shares 3,880,925.425
"...................................................... S-2 Shares 44,666.637
"...................................................... S-3 Shares 11,042,676.729
Government Income........................................... X-2 Shares 117,398.900
"...................................................... X-4 Shares 414,561.359
</TABLE>
- ---------------
(1) Classes of Service, Series A Investor, Institutional and Series B Investor
Shares are denoted by "-1", "-2", "-3" and "-4", respectively.
The above-referenced portfolios and the shares representing interests
therein are referred to individually as a "Portfolio" and a "Share,"
respectively, and collectively as the "Portfolios" and the "Shares,"
respectively.
A Proxy is enclosed with respect to each Portfolio in which you own Shares.
If you own Shares in more than one Portfolio, each Proxy enclosed should be
completed in full. If each enclosed Proxy is executed properly and returned,
Shares represented by it will be voted at the Meeting in accordance with the
instructions thereon. The Board of Trustees recommends a vote FOR the approval
of the proposed sub-advisory agreements.
2
<PAGE> 5
Voting Procedures. Each full Share is entitled to one vote and each
fractional Share to a proportionate fractional vote. Shareholders of each class
of Shares of a Portfolio will vote together as a single class, and the
shareholders of each Portfolio will vote separately with respect to the approval
or disapproval of a sub-advisory agreement (each a "Sub-Advisory Agreement")
between PNC Institutional Management Corporation ("PIMC") and BlackRock
Financial Management, Inc. ("BlackRock") with respect to such Portfolio.
If a Proxy is properly executed and returned, but marked with an
abstention, the Shares represented thereby will be considered to be present at
the Meeting for purposes of determining the existence of a quorum for the
transaction of business. The approval by each of the Portfolios of a
Sub-Advisory Agreement requires the affirmative vote of the holders of a
"majority of the outstanding Shares" of the Portfolio (as defined by the
Investment Company Act of 1940 (the "1940 Act")), which means the lesser of (a)
the holders of 67% or more of the Shares of the Portfolio present at the Meeting
if the holders of more than 50% of the outstanding Shares of the Portfolio are
present in person or by proxy or (b) more than 50% of the outstanding Shares of
the Portfolio.
In the absence of voting instructions, Shares will be voted FOR the
proposal as indicated on each
Proxy. If a proxy is properly executed and is marked with an abstention, the
Shares represented thereby will be considered to be present at the Meeting for
purposes of determining the existence of a quorum for the transaction of
business. Under Massachusetts law, abstentions will have the same effect as
casting a vote against the proposal. 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 disregarded for all purposes.
If you do not expect to be present at the Meeting and wish your Shares to
be voted, please complete each enclosed Proxy and mail it in the enclosed reply
envelope.
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF THE FUND'S ANNUAL REPORT TO
SHAREHOLDERS DATED SEPTEMBER 30, 1994 TO ANY SHAREHOLDER UPON REQUEST. THE
FUND'S ANNUAL REPORT TO SHAREHOLDERS MAY BE OBTAINED FROM THE FUND BY CALLING
(800) 422-6538.
APPROVAL OR DISAPPROVAL OF PROPOSED SUB-ADVISORY AGREEMENTS
(EACH SUB-ADVISORY AGREEMENT WILL BE VOTED UPON ONLY BY
HOLDERS OF SHARES IN THE PORTFOLIO TO WHICH IT PERTAINS.)
At the Meeting, shareholders of each Portfolio will be asked to approve a
proposed Sub-Advisory Agreement between PIMC and BlackRock with respect to such
Portfolio. A form of Sub-Advisory Agreement for each of the Portfolios is
attached to this Proxy Statement as Exhibit A. The following description of the
Sub-Advisory Agreements is qualified in its entirety by Exhibit A.
The terms and conditions of, and the sub-advisory fees payable to BlackRock
under, the proposed Sub-Advisory Agreements are the same as the terms and
conditions of, and sub-advisory fees payable under, the Portfolios' current
sub-advisory agreements, except as noted in the next paragraph. For each
Portfolio other than the Tax-Free Income Portfolio, BlackRock will employ
certain asset management techniques that are substantially different from those
of the Portfolios' current sub-advisers. BlackRock has developed a very active
management style emphasizing portfolio duration management on a daily
3
<PAGE> 6
basis in order to closely track the duration, and hence the interest rate
sensitivity, of a specified securities index or other benchmark. BlackRock
intends to manage the duration of each Portfolio to be similar to that of a
designated benchmark appropriate to the Portfolio's investment objective and
policies. At the same time, BlackRock will actively manage each Portfolio using
a relative value approach by overweighting certain industry sectors and
selecting individual securities that BlackRock believes will best enable the
Portfolio to achieve its investment objective. In this manner, BlackRock will
seek to outperform each Portfolio's designated benchmark. As a result of
BlackRock's management style, BlackRock believes that each Portfolio other than
the Tax-Free Income Portfolio may experience a portfolio turnover rate that is
substantially higher than the portfolio turnover rate associated with the
Portfolio's current sub-adviser.
BlackRock will primarily provide investment research and credit analysis
with respect to the Tax-Free Income Portfolio and PIMC will be primarily
responsible for actively managing the Portfolio's assets. The Sub-Advisory
Agreement between PIMC and BlackRock with respect to the Portfolio will reflect
this allocation of responsibilities. Because BlackRock would not be primarily
responsible for the active management of the Tax-Free Income Portfolio, the
portfolio turnover rate of the Portfolio is not expected to be materially
affected after BlackRock becomes sub-adviser to the Portfolio.
It is currently estimated that under normal market conditions the annual
portfolio turnover rate for each Portfolio will not exceed 100%. Although the
portfolio turnover rate may equal 400% for each Portfolio other than the
Tax-Free Income Portfolio with BlackRock as sub-adviser, it is expected that the
portfolio turnover rates will ordinarily be lower than 400%. Portfolio turnover
may vary greatly from year to year as well as within a particular year. High
portfolio turnover rates will generally result in higher transaction costs to a
Portfolio.
The Managed Income, Intermediate Government, Short-Term Bond,
Intermediate-Term Bond and Government Income Portfolios may currently invest in
mortgage-related securities, including collateralized mortgage obligations. The
Managed Income, Short-Term Bond and Intermediate-Term Bond Portfolios may
currently invest in asset-backed securities, which represent a participation in,
or are secured by and payable from, a stream of payments generated by particular
assets, most often a pool of assets similar to one another (e.g., credit card
receivables and home equity loans). The Tax-Free Income, Ohio Tax-Free Income
and Pennsylvania Tax-Free Income Portfolios may currently invest in tax-exempt
derivative securities relating to municipal obligations, including tender option
bonds, participations, beneficial interests in trusts and partnership interests.
In addition, each of the Portfolios may currently invest in options and futures.
These investments are commonly referred to as derivative instruments or
"derivatives." BlackRock's investment strategy may include investments in such
derivatives in accordance with each Portfolio's investment objective and
policies. Investments in derivatives involve special risks and the value of
derivatives may be more volatile than the value of other securities.
PIMC serves as investment adviser to each of the Portfolios. Pursuant to
each advisory agreement between the Fund and PIMC, PIMC is authorized to enter
into sub-advisory agreements with other service providers to assist PIMC in the
performance of its duties as adviser. PNC Bank, Ohio, National Association ("PNC
Bank Ohio") has served as the Ohio Tax-Free Income Portfolio's sub-adviser since
February 3, 1992 under a sub-advisory agreement similar to the proposed
Sub-Advisory Agreement for such Portfolio. PNC Bank, National Association ("PNC
Bank") has served as the Tax-Free Income Portfolio's sub-adviser since April 6,
1990 under a sub-advisory agreement similar to the proposed Sub-Advisory
Agreement for such Portfolio. PNC Bank has served as the Managed Income and
Intermedi-
4
<PAGE> 7
ate Government Portfolios' sub-adviser since September 10, 1993 under
sub-advisory agreements similar to the proposed Sub-Advisory Agreements for such
Portfolios. PNC Bank has served as the Short-Term Bond and Intermediate-Term
Bond Portfolios' sub-adviser since March 1, 1993 under a sub-advisory agreement
similar to the proposed Sub-Advisory Agreements for such Portfolios. PNC Bank
has served as the Government Income Portfolio's sub-adviser since December 17,
1993 under a sub-advisory agreement similar to the proposed Sub-Advisory
Agreement for such Portfolio. PNC Bank has served as the Pennsylvania Tax-Free
Income Portfolio's sub-adviser since February 3, 1992 under a sub-advisory
agreement similar to the proposed Sub-Advisory Agreement for such Portfolio. The
approval or disapproval of the Sub-Advisory Agreements relates solely to the
identity of the Portfolios' sub-adviser and will have no effect on the
Portfolios' respective expense ratios. A description of other terms of the
Fund's advisory agreements with PIMC, including information on advisory fees
paid to PIMC, appears below under "Information about PIMC, BlackRock, PNC Bank,
PNC Bank Ohio and Provident Distributors, Inc."
On June 16, 1994, the partners of BlackRock Financial Management L.P.
entered into a definitive agreement to sell their partnership interests to PNC
Bank for $240 million in the form of cash and notes. PNC Bank expects that the
closing of the acquisition of BlackRock Financial Management L.P. will be
completed on or about February 28, 1995. On December 16, 1994, each of the
proposed Sub-Advisory Agreements was approved by the Fund's Board of Trustees,
including a majority of the Fund's trustees who are not "interested persons" of
the Fund or of BlackRock. The Board's approval of the proposed Sub-Advisory
Agreements was based on its consideration of several factors, including: i) the
recommendation of PIMC to appoint BlackRock as the new sub-adviser to the
Portfolios; ii) BlackRock's investment management philosophy and techniques, and
the nature and quality of the advisory services provided by BlackRock to its
current advisory clients; iii) the representations of PNC Bank and BlackRock
that all key BlackRock employees are expected to remain with BlackRock after the
acquisition of BlackRock by PNC Bank; iv) the fact that the terms and conditions
of, and the sub-advisory fees payable to BlackRock under, the proposed
Sub-Advisory Agreements are the same as the terms and conditions of, and
sub-advisory fees payable under, each Portfolio's current sub-advisory
agreement, and that the Portfolios' respective expense ratios will not be
affected by the proposed Sub-Advisory Agreements; and v) the Board's
determination that the terms and conditions of, and the sub-advisory fees
payable to BlackRock under, the proposed Sub-Advisory Agreements are fair and
reasonable.
DESCRIPTION OF THE SUB-ADVISORY AGREEMENTS
The terms and conditions of, and the sub-advisory fees payable to BlackRock
under, the proposed Sub-Advisory Agreements are the same as the terms and
conditions of, and sub-advisory fees payable under, the Portfolios' current
sub-advisory agreements, except as noted in the next paragraph with respect to
the Tax-Free Income Portfolio.
Under the proposed Sub-Advisory Agreements between PIMC and BlackRock with
respect to each Portfolio other than the Tax-Free Income Portfolio, BlackRock
would supervise the day-to-day operations of such Portfolios, subject to the
oversight and supervision of PIMC and the Fund's Board of Trustees. Pursuant to
each such Sub-Advisory Agreement, BlackRock would: (i) provide investment
research and credit analysis concerning a Portfolio's investments, (ii) conduct
a continual program of investment for the Portfolio's assets, (iii) determine
what securities and other investments will be purchased, retained or sold by the
Portfolio, (iv) place orders for all purchases and sales of the
5
<PAGE> 8
investments made for the Portfolio, and (v) maintain the books and records as
are required to support the Fund's operations (in conjunction with
record-keeping and accounting functions performed by PIMC as investment
adviser). The proposed Sub-Advisory Agreement between PIMC and BlackRock with
respect to the Tax-Free Income Portfolio will differ from the Portfolio's
current sub-advisory agreement in that BlackRock is not required to supervise
the day-to-day operations of the Portfolio. BlackRock is expected primarily to
provide investment research and credit analysis with respect to the Tax-Free
Income Portfolio.
For its sub-advisory services to each of the Portfolios, BlackRock would be
entitled to receive from PIMC fees, computed daily and payable monthly, at the
following annual rates for the specified Portfolios:
<TABLE>
<CAPTION>
ANNUAL SUB-ADVISORY FEE
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
------------------------------------------------------
OHIO
MANAGED INTERMEDIATE TAX-FREE TAX-FREE
INCOME GOVERNMENT INCOME INCOME
AVERAGE DAILY NET ASSETS PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C>
first $1 billion................ .35 % .35 % .35 % .35 %
$1 billion -- $2 billion........ .30 .30 .30 .30
$2 billion -- $3 billion........ .275 .275 .275 .275
greater than $3 billion......... .25 .25 .25 .25
</TABLE>
<TABLE>
<CAPTION>
PENNSYLVANIA
GOVERNMENT TAX-FREE SHORT-TERM INTERMEDIATE
INCOME INCOME BOND TERM BOND
AVERAGE DAILY NET ASSETS PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
first $1 billion.............. .35% .35% .35% .35%
$1 billion -- $2 billion...... .30 .30 .30 .30
$2 billion -- $3 billion...... .275 .275 .275 .275
greater than $3 billion....... .25 .25 .25 .25
</TABLE>
Each proposed Sub-Advisory Agreement provides that BlackRock will pay all
expenses incurred by it in connection with its activities under the Sub-Advisory
Agreement other than the cost of securities, commodities and other investments,
and brokerage commissions and other transaction charges. The Sub-Advisory
Agreements also provide that BlackRock shall not be liable for any error of
judgment or mistake of law or for any loss suffered by PIMC or a Portfolio in
connection with the performance of the Sub-Advisory Agreements, 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 BlackRock in the performance of its
duties as sub-adviser or from reckless disregard by BlackRock of its obligations
or duties under the Sub-Advisory Agreements.
If approved by the holders of a majority of the outstanding Shares of a
Portfolio, a Sub-Advisory Agreement would become effective on the first business
day following the Meeting, or at the close of business on the day the
acquisition of BlackRock by PNC Bank is consummated, whichever occurs last. If
approved, the Sub-Advisory Agreement would continue in effect with respect to
the Portfolio until March 31, 1996, provided that the Sub-Advisory Agreement and
the advisory agreement between the Fund and PIMC with respect to such Portfolio
is not sooner terminated. Thereafter, the Sub-Advisory Agreement would continue
in effect with respect to the Portfolio for successive annual periods, provided
that such continuance is approved at least annually (i) by the vote of a
majority of those members of the
6
<PAGE> 9
Board of Trustees who are not interested persons of any party to the
Sub-Advisory Agreement cast in person at a meeting called for the purpose of
voting on such approval and (ii) by the Board of Trustees or by vote of a
majority of the outstanding Shares of the Portfolio.
Each proposed Sub-Advisory Agreement provides that it will terminate
automatically in the event of its assignment. Each proposed Sub-Advisory
Agreement also provides that it is terminable with respect to a Portfolio,
without penalty, by the Fund (by vote of the Board of Trustees of the Fund or by
vote of a majority of the outstanding Shares of such Portfolio) or by PIMC or
BlackRock on 60 days' written notice, and will terminate automatically upon any
termination of the investment advisory agreement between the Fund and PIMC with
respect to such Portfolio.
For certain additional information about BlackRock, see "Information about
PIMC, BlackRock, PNC Bank, PNC Bank Ohio and Provident Distributors, Inc."
APPROVAL OF SUB-ADVISORY AGREEMENTS
If a Sub-Advisory Agreement with respect to a Portfolio is approved, then
the Portfolio's current sub-advisory agreement will terminate at the close of
business on the day of the Meeting, or at the close of business on the day the
acquisition of BlackRock by PNC Bank is consummated, whichever occurs last. If a
proposed Sub-Advisory Agreement is not approved by the shareholders of a
Portfolio, the Portfolio's current sub-adviser will continue to serve in that
capacity.
THE FUND'S BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS OF EACH OF
THE PORTFOLIOS VOTE "FOR" APPROVAL OF THE RESPECTIVE SUB-ADVISORY AGREEMENTS.
INFORMATION ABOUT PIMC, BLACKROCK, PNC BANK, PNC BANK OHIO AND PROVIDENT
DISTRIBUTORS, INC.
DESCRIPTION OF THE INVESTMENT ADVISORY AGREEMENTS
INVESTMENT ADVISORY AGREEMENTS RELATING TO THE PORTFOLIOS. PIMC serves as
investment adviser to: (i) the Managed Income and Tax-Free Income Portfolios
under an investment advisory agreement dated as of October 4, 1989, (ii) the
Intermediate Government, Pennsylvania Tax-Free Income and Ohio Tax-Free Income
Portfolios under an investment advisory agreement dated as of February 3, 1992,
(iii) the Government Income Portfolio under an investment advisory agreement
dated as of December 17, 1993, and (iv) the Short-Term Bond and
Intermediate-Term Bond Portfolios under an investment advisory agreement dated
as of March 1, 1993 (collectively, the "Investment Advisory Agreements"). In the
Investment Advisory Agreements, PIMC has agreed, subject to the general
supervision of the Fund's Board of Trustees and in accordance with each
Portfolio's investment objective and policies, either directly or through a
sub-adviser, to manage each Portfolio's assets, to provide investment research
and to be responsible for, make decisions with respect to and place orders for
all purchases and sales of portfolio securities.
7
<PAGE> 10
Under the Investment Advisory Agreements, PIMC is entitled to an advisory
fee, computed daily and paid monthly, at the following annual rates:
<TABLE>
<CAPTION>
ANNUAL ADVISORY FEE
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
------------------------------------------------------------
GOVERNMENT MANAGED INTERMEDIATE TAX-FREE
AVERAGE DAILY NET INCOME INCOME GOVERNMENT INCOME
ASSETS PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- ------------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
first $1 billion...... .50 % .50 % .50 % .50 %
$1 billion -- $2
billion............. .45 .45 .45 .45
$2 billion -- $3
billion............. .425 .425 .425 .425
greater than $3
billion............. .40 .40 .40 .40
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE- OHIO TAX-FREE PENNSYLVANIA SHORT-TERM
AVERAGE DAILY NET TERM BOND INCOME TAX-FREE INCOME BOND
ASSETS PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- ------------- ------------- --------------- ----------
<S> <C> <C> <C> <C>
first $1 billion...... .50 % .50 % .50 % .50 %
$1 billion -- $2
billion............. .45 .45 .45 .45
$2 billion -- $3
billion............. .425 .425 .425 .425
greater than $3
billion............. .40 .40 .40 .40
</TABLE>
The table below sets forth the aggregate advisory fees paid (and the
corresponding percentages of average daily net assets which such aggregate fees
paid represent) by each of the Portfolios for the fiscal year ended September
30, 1994 and the aggregate advisory fees waived by PIMC with respect to each
such Portfolio.
<TABLE>
<CAPTION>
% OF
AVERAGE
ADVISORY DAILY NET ADVISORY
PORTFOLIO FEES PAID ASSETS PAID FEES WAIVED
------------------------------------------- ---------- ----------- -----------
<S> <C> <C> <C>
Managed Income............................. $1,398,343 .35% $ 599,290
Tax-Free Income............................ 0 0 47,655
Intermediate Government.................... 368,546 .20 552,819
Ohio Tax-Free Income....................... 0 0 35,709
Pennsylvania Tax-Free Income............... 49,646 .09 227,003
Short-Term Bond............................ 36,893 .11 137,696
Intermediate-Term Bond..................... 131,294 .19 206,071
Government Income(1)....................... n/a n/a n/a
</TABLE>
- ---------------
(1) No Shares of the Government Income Portfolio were outstanding during the
fiscal year ended September 30, 1994.
Each Investment Advisory Agreement provides that PIMC will pay all expenses
incurred by it in connection with its activities under the Investment Advisory
Agreement other than the expenses to be borne by the Fund's Portfolios, which
include the cost of securities, commodities and other investments, and brokerage
commissions and other transaction charges. Any fees or compensation payable to
sub-advisers or other sub-contractors are to be paid by PIMC. Each Investment
Advisory Agreement also provides that PIMC shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of the Investment Advisory Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or
8
<PAGE> 11
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations or duties under the Investment Advisory Agreement.
Each Investment Advisory Agreement will continue in effect with respect to
each of the Portfolios until March 31, 1995 and thereafter from year to year,
provided that such continuance is approved at least annually (i) by the vote of
a majority of those members of the Board of Trustees who are not "interested
persons" (as that term is defined in the 1940 Act) of any party to the
Investment Advisory Agreement and (ii) by the Board of Trustees or by vote of a
majority of the outstanding Shares of each such Portfolio. Each Investment
Advisory Agreement provides that it will terminate automatically in the event of
its assignment. Each Investment Advisory Agreement also provides that it is
terminable without penalty with respect to each Portfolio by the Fund (by vote
of the Board of Trustees of the Fund or by vote of the holders of a majority of
the outstanding Shares of such Portfolio) or by PIMC on 60 days' written notice.
The Investment Advisory Agreement dated as of October 4, 1989 was approved
by the holders of a majority of the outstanding Shares of each of the Managed
Income and Tax-Free Income Portfolios of the Fund at a special meeting of
shareholders held on September 27, 1990 to satisfy conditions imposed by the
Securities and Exchange Commission ("SEC") in connection with the registration
of the Shares of such Portfolios under the Securities Act of 1933 (the "1933
Act"). The Investment Advisory Agreement dated as of February 3, 1992 was
approved by the sole shareholder of the Intermediate Government, Pennsylvania
Tax-Free Income and Ohio Tax-Free Income Portfolios by consent action on
February 5, 1992; the Investment Advisory Agreement dated as of December 17,
1993 was approved by the sole shareholder of the Government Income Portfolio by
consent action on February 1, 1994; and the Investment Advisory Agreement dated
as of March 1, 1993 was approved by the sole shareholder of the Short-Term Bond
and Intermediate-Term Bond Portfolios by consent action on March 23, 1993 to
satisfy conditions imposed by the SEC in connection with the registration of the
Shares of such Portfolios under the 1933 Act. Each of the above-referenced
Investment Advisory Agreements was last approved by the Board of Trustees on
October 18, 1994 in connection with the annual review of all of the Fund's
advisory arrangements required by the 1940 Act.
SUB-ADVISORY AGREEMENTS RELATING TO THE PORTFOLIOS. PNC Bank serves as
sub-adviser to the: i) Tax-Free Income Portfolio pursuant to a sub-advisory
agreement with PIMC dated as of April 6, 1990, ii) Managed Income and
Intermediate Government Portfolios pursuant to sub-advisory agreements with PIMC
dated as of September 10, 1993, iii) Short-Term Bond and Intermediate-Term Bond
Portfolios pursuant to a sub-advisory agreement with PIMC dated as of March 1,
1993, iv) Pennsylvania Tax-Free Income Portfolio pursuant to a sub-advisory
agreement with PIMC dated as of February 3, 1992, and v) Government Income
Portfolio pursuant to a sub-advisory agreement with PIMC dated as of December
17, 1993. These sub-advisory agreements are the same as the proposed
Sub-Advisory Agreements for the Managed Income, Intermediate Government,
Tax-Free Income, Pennsylvania Tax-Free Income, Short-Term Bond,
Intermediate-Term Bond and Government Income Portfolios, except as noted above
with respect to the Tax-Free Income Portfolio. Pursuant to each such
sub-advisory agreement, PNC Bank is entitled to receive sub-advisory fees from
PIMC with respect to each of the Managed Income, Tax-Free Income, Intermediate
Government, Pennsylvania Tax-Free Income, Government Income, Short-Term Bond and
Intermediate-Term Bond Portfolios at the annual rate of .35% of the first $1
billion of average daily net assets, .30% of the next $1 billion of average
daily net
9
<PAGE> 12
assets, .275% of the next $1 billion of average daily net assets, and .25% of
the Portfolio's average daily net assets in excess of $3 billion.
The sub-advisory agreement between PIMC and PNC Bank dated as of April 6,
1990 was approved by the holders of a majority of the outstanding Shares of the
Tax-Free Income Portfolio at a special meeting of shareholders held on September
27, 1990 to satisfy conditions imposed by the SEC in connection with the
registration of the Shares of such Portfolio under the 1933 Act. The
sub-advisory agreements between PIMC and PNC Bank dated as of September 10, 1993
were approved by the holders of a majority of the outstanding Shares of the
Managed Income and Intermediate Government Portfolios, respectively, at a
special meeting of shareholders held on September 10, 1993 in connection with
the approval of PNC Bank as sub-adviser. The sub-advisory agreement between PIMC
and PNC Bank dated as of February 3, 1992 was approved by the sole shareholder
of the Pennsylvania Tax-Free Income Portfolio by consent action on February 5,
1992; the sub-advisory agreement between PIMC and PNC Bank dated as of March 1,
1993 was approved by the sole shareholder of the Short-Term Bond and
Intermediate-Term Bond Portfolios by consent action on March 23, 1993; and the
sub-advisory agreement between PIMC and PNC Bank dated as of December 17, 1993
was approved by the sole shareholder of the Government Income Portfolio by
consent action on February 1, 1994 to satisfy conditions imposed by the SEC in
connection with the registration of the Shares of such Portfolios under the 1933
Act. Each of the above-referenced sub-advisory agreements was last approved by
the Fund's Board of Trustees on October 18, 1994 in connection with the annual
review of all of the Fund's advisory arrangements required by the 1940 Act.
The table below sets forth the aggregate sub-advisory fees paid by PIMC to
PNC Bank during the fiscal year ended September 30, 1994 and the aggregate
sub-advisory fees waived by PNC Bank during such period with respect to each of
the following Portfolios:
<TABLE>
<CAPTION>
% OF
AVERAGE
SUB-ADVISORY DAILY NET SUB-ADVISORY
PORTFOLIO FEES PAID ASSETS PAID FEES WAIVED
------------------------------------------- ------------ ----------- ------------
<S> <C> <C> <C>
Managed Income............................. $1,198,580 .30% $199,763
Tax-Free Income............................ 0 0 33,359
Intermediate Government.................... 276,410 .15 368,546
Short-Term Bond............................ 36,893 .11 85,319
Intermediate-Term Bond..................... 97,470 .14 138,685
Government Income(1)....................... 0 0 0
Pennsylvania Tax-Free Income............... 33,198 .06 160,456
</TABLE>
- ---------------
(1) No Shares of the Government Income Portfolio were outstanding during the
fiscal year ended September 30, 1994.
PNC Bank Ohio serves as sub-adviser to the Ohio Tax-Free Income Portfolio
pursuant to a sub-advisory agreement with PIMC dated as of February 3, 1992
which is the same as the proposed Sub-Advisory Agreement for the Ohio Tax-Free
Income Portfolio. For its services as sub-adviser, PNC Bank Ohio receives
compensation from PIMC at the annual rate of .35% of the first $1 billion of
average daily net assets, .30% of the next $1 billion of average daily net
assets, .275% of the next $1 billion of average daily net assets and .25% of the
average daily net assets of the Ohio Tax-Free Income Portfolio in excess of $3
billion. The sub-advisory agreement was approved by the sole shareholder of the
Ohio Tax-Free
10
<PAGE> 13
Income Portfolio by consent action on February 5, 1992 to satisfy conditions
imposed by the SEC in connection with the registration of the Shares of the
Portfolio under the 1933 Act. The sub-advisory agreement was last approved by
the Fund's Board of Trustees on October 18, 1994 in connection with the annual
review of all of the Fund's advisory arrangements required by the 1940 Act.
PNC Bank Ohio waived all sub-advisory fees with respect to the Ohio
Tax-Free Income Portfolio for the fiscal year ended September 30, 1994. The
aggregate amount of sub-advisory fees waived by PNC Bank Ohio with respect to
the Portfolio for that year was $24,996.
PIMC AND PNC BANK. PIMC's principal offices are located at Bellevue Park
Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. All of the
capital stock of PIMC is owned by PNC Bank. All of the capital stock of PNC
Bank, which has principal offices at Broad and Chestnut Streets, Philadelphia,
Pennsylvania 19101, is owned by PNC Bancorp, Inc. All of the capital stock of
PNC Bancorp, Inc., which is located at 3411 Silverside Road, Wilmington,
Delaware 19810, is owned by PNC Bank Corp. PNC Bank Corp. is a publicly held
bank holding company with principal offices at 5th and Wood Streets, Pittsburgh,
Pennsylvania 15265. To the Fund's knowledge, no person owned beneficially or of
record 10% or more of any class of issued and outstanding voting securities of
PNC Bank Corp. at January 18, 1995.
The name and principal occupation of the principal executive officer and
each director of PIMC as of January 18, 1995 was as follows: J. Richard Carnall,
Chairman of PIMC and Executive Vice President, PNC Bank, N.A.; Richard C.
Caldwell, Executive Vice President, PNC Bank Corp.; Richard L. Smoot, President
and Chief Executive Officer, PNC Bank, N.A. (Philadelphia); Joseph N. Sgroi,
Jr., Vice President and Secretary, PNC Bank, Delaware, N.A.; and Thomas H.
Nevin, President and Chief Investment Officer. All of the above persons may be
reached c/o PIMC, 400 Bellevue Parkway, Wilmington, Delaware 19809.
The name and principal occupation of the principal executive officer and
each director of PNC Bank, National Association as of January 18, 1995 was as
follows: B. R. Brown, President and Chief Executive Officer of Consol, Inc.;
Constance E. Clayton, Chief, Division of Community Health Care, Medical College
of Pennsylvania; Eberhard Faber, IV, Chairman and Chief Executive Officer,
E.F.L., Inc.; Dr. Stuart Heydt, President and Chief Executive Officer, Geisinger
Foundation; Edward P. Junker, III, Vice Chairman; Thomas A. McConomy, President,
Chief Executive Officer and Chairman, Calgon Garbon Corporation; Robert C.
Milsom, Retired Officer; Thomas H. O'Brien, Chairman of PNC Bank and Chairman
and Chief Executive Officer, PNC Bank Corp.; Dr. J. Dennis O'Connor, Chancellor,
University of Pittsburgh; Rocco A. Ortenzio, Chairman and Chief Executive
Officer, Continental Medical Systems, Inc.; Jane G. Pepper, President,
Pennsylvania Horticultural Society; Robert C. Robb, Jr., President, Lewis,
Eckert, Robb & Company; James E. Rohr, President, PNC Bank Corp.; Daniel M.
Rooney, President, Pittsburgh Steelers Football Club of the National Football
League; Seth E. Schofield, Chairman, President and Chief Executive Officer,
USAir Group, Inc.; and Robert M. Valentini, Retired Officer. All of the above
persons may be reached c/o PNC Bank, 5th and Wood Streets, Pittsburgh,
Pennsylvania 15265.
Pursuant to a Custodian Agreement, PNC Bank serves as the custodian of the
Fund's assets. The Fund pays PNC Bank an annual fee for its custodial services
equal to $.25 for each $1,000 of average gross assets for the first $50 million
of each Portfolio's average gross assets, $.20 for each $1,000 of average gross
assets for the next $50 million of such Portfolio's average gross assets, and
$.15 per each $1,000 of average gross assets of such Portfolio in excess of $100
million. The table below sets forth the
11
<PAGE> 14
aggregate custody fees paid by the Fund to PNC Bank during the fiscal year ended
September 30, 1994 with respect to each of the following Portfolios:
<TABLE>
<CAPTION>
PORTFOLIO CUSTODY FEES PAID
-------------------------------------------------------------- -----------------
<S> <C>
Managed Income................................................ $ 76,557
Tax-Free Income............................................... 12,380
Intermediate Government....................................... 39,103
Short-Term Bond............................................... 17,095
Intermediate-Term Bond........................................ 22,453
Government Income(1).......................................... 0
Pennsylvania Tax-Free Income.................................. 14,992
Ohio Tax-Free Income.......................................... 13,706
</TABLE>
- ---------------
(1) No Shares of the Government Income Portfolio were outstanding during the
fiscal year ended September 30, 1994.
PNC Bank would continue to serve as the Fund's custodian if the proposed
Sub-Advisory Agreements are approved.
PFPC Inc. ("PFPC") and Provident Distributors, Inc. ("PDI") serve as
administrators to the Fund under an Administration Agreement dated as of January
18, 1993. PFPC is affiliated with PIMC and PNC Bank. PFPC's offices are located
at 400 Bellevue Parkway, Wilmington, DE 19809. PFPC and PDI are entitled to
receive a combined fee, computed daily and payable monthly, at an annual rate of
.20% of the first $500 million of each Portfolio's average daily net assets,
.18% of the next $500 million of average daily net assets, .16% of the next $1
billion of average daily net assets and .15% of the Portfolio's average daily
net assets in excess of $2 billion. The table below sets forth the
administration fees paid by the Fund to PFPC during the fiscal year ended
September 30, 1994 with respect to each of the following Portfolios:
<TABLE>
<CAPTION>
ADMINISTRATION FEES
PORTFOLIO PAID TO PFPC
------------------------------------------------------- ---------------------------
<S> <C>
Managed Income......................................... $ 481,251
Tax-Free Income........................................ 0
Intermediate Government................................ 168,315
Short-Term Bond........................................ 11,266
Intermediate-Term Bond................................. 46,068
Government Income(1)................................... 0
Pennsylvania Tax-Free Income........................... 14,364
Ohio Tax-Free Income................................... 0
</TABLE>
- ---------------
(1) No Shares of the Government Income Portfolio were outstanding during the
fiscal year ended September 30, 1994.
PFPC also serves as the Fund's transfer agent, registrar and dividend
disbursing agent under a Transfer Agency Agreement dated as of October 4, 1989.
The table below sets forth the aggregate fees
12
<PAGE> 15
paid by the Fund to PFPC under the Transfer Agency Agreement during the fiscal
year ended September 30, 1994 with respect to each of the following Portfolios:
<TABLE>
<CAPTION>
FEES PAID TO PFPC UNDER
PORTFOLIO TRANSFER AGENCY AGREEMENT
-------------------------------------------------------- -------------------------
<S> <C>
Managed Income.......................................... $36,247
Tax-Free Income......................................... 47,988
Intermediate Government................................. 37,794
Short-Term Bond......................................... 27,286
Intermediate-Term Bond.................................. 25,286
Government Income(1..................................... 0
Pennsylvania Tax-Free Income............................ 40,804
Ohio Tax-Free Income.................................... 23,124
</TABLE>
- ---------------
(1) No Shares of the Government Income Portfolio were outstanding during the
fiscal year ended September 30, 1994.
PFPC would continue to serve as the Fund's co-administrator, transfer
agent, registrar and dividend disbursing agent if the proposed Sub-Advisory
Agreements are approved.
PNC BANK OHIO. All of the capital stock of PNC Bank Ohio is owned by PNC
Banc Corp., Ohio. Both PNC Bank Ohio and PNC Banc Corp., Ohio have principal
offices at 201 East 5th Street, Cincinnati, Ohio 45202. All of the capital stock
of PNC Banc Corp., Ohio is owned by PNC Bank Corp., whose principal offices are
at 5th & Wood Streets, Pittsburgh, Pennsylvania 15265. The name and principal
occupation of the chief executive officer and each director of PNC Bank Ohio as
of January 18, 1995 are as follows: Jack E. Brown, Chairman and Chief Executive
Officer, BBI Marketing Services, Inc.; Robert H. Castellini, Chairman and Chief
Executive Officer, The Castellini Company; Phillip R. Cox, President and Chief
Executive Officer, Cox Financial Corporation; Benjamin Gettler, Chairman and
President, Vulcan Corporation; Cortland J. Meader, Executive Vice President;
Ralph S. Michel, III, President and Chief Executive Officer; Jackson H.
Randolph, Chairman and Chief Executive Officer, CINergy Corp.; Stephen C.
Schatleman, President and Chief Executive Officer, PNC Bank, Northern Kentucky,
N.A.; Jack Twyman, Chairman, Super Food Services, Inc.; Thomas L. Williams,
President, North American Properties; Allen G. Zaring, Jr., Chairman, Zaring
Homes, Inc; and William H. Zimmer, Jr., Vice Chairman of the Board, Cincinnati
Financial Corporation. All of the above may be reached c/o PNC Bank Ohio, 201
East 5th Street, Cincinnati, Ohio 45202.
BLACKROCK. BlackRock Financial Management L.P. is a Delaware limited
partnership founded in April 1988 by Laurence D. Fink and Ralph L. Schlosstein.
BlackRock Financial Management L.P. is registered as an investment adviser under
the Investment Advisers Act of 1940.
It is expected that BlackRock Financial Management L.P. will become a
wholly-owned corporate subsidiary of PNC Asset Management Group, Inc. ("PAMG")
on or before February 28, 1995. All of the capital stock of PAMG, which is
located at 1835 Market Street, 15th Floor, Philadelphia, Pennsylvania 19103, is
owned by PNC Bank. All of the capital stock of PNC Bank, which has principal
offices at Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101, is
owned by PNC Bancorp, Inc. All of the capital stock of PNC Bancorp, Inc., which
is located at 3411 Silverside Road, Wilmington, Delaware 19810, is owned by PNC
Bank Corp. PNC Bank Corp. is a publicly held bank holding company with principal
offices at 5th and Wood Streets, Pittsburgh, Pennsylvania 15265.
13
<PAGE> 16
The name and principal occupation of the principal executive officer and
the general partner of BlackRock Financial Management L.P. as of January 18,
1995 was as follows: Laurence D. Fink, Chairman and Chief Executive Officer;
Ralph L. Schlosstein, President; and BFM Management Partners L.P. ("BFM
Management"), a Delaware limited partnership. The general partner of BFM
Management is BFM Management Corp., a Delaware corporation whose stock is owned
by Messrs. Fink and Schlosstein. It is expected that the name and principal
occupation of the principal executive officers of BlackRock as of the date the
acquisition of BlackRock by PNC Bank is consummated will be as follows: Laurence
D. Fink, Chairman and Chief Executive Officer; and Ralph L. Schlosstein,
President. The name of each director of BlackRock is expected to be as follows:
Richard C. Caldwell, Executive Vice President of PNC Bank Corp.; and Messrs.
Fink and Schlosstein. All of the above may be reached c/o BlackRock, 345 Park
Avenue, New York, New York 10154.
OTHER INVESTMENT COMPANIES ADVISED BY PIMC, PNC BANK AND BLACKROCK. The
table below sets forth certain information concerning the other investment
companies which share similar investment objectives to that of the Portfolios
and for which PIMC, PNC Bank or BlackRock act as investment adviser or
sub-adviser, and describes the existing fee agreements with them as of December
31, 1994. PIMC, PNC Bank and BlackRock were waiving, as of the date of this
Proxy Statement, some or all of the advisory fees payable by certain of the
companies listed below. Those waivers are not reflected in the table.
PIMC AND PNC BANK ADVISED FUNDS
<TABLE>
<CAPTION>
ANNUAL FEE
NAME OF INVESTMENT COMPANY NET ASSET VALUE (BASED ON AVERAGE NET
AND/OR PORTFOLIO AS OF 12/31/94 ASSETS)
- -------------------------------------------- --------------- ---------------------------
<S> <C> <C>
Independence Square Income Securities Inc.
("ISIS").................................. $ 30,390,294 .20% of net assets.
- -----------------------------------------------------------------------------------------------
Municipal Fund for California Investors,
Inc., California Intermediate Fund........ $ 17,490,968 .20% of net assets.
- -----------------------------------------------------------------------------------------------
Municipal Fund for Temporary Investment,
Intermediate Municipal Fund............... $ 14,107,674 .20% of net assets.
- -----------------------------------------------------------------------------------------------
Trust for Federal Securities, Short
Government Fund........................... $ 4,801,886 .20% of net assets.
</TABLE>
PIMC AND PNC BANK SUB-ADVISED FUNDS
<TABLE>
<CAPTION>
ANNUAL FEE
NAME OF INVESTMENT COMPANY NET ASSET VALUE (BASED ON AVERAGE NET
AND/OR PORTFOLIO AS OF 12/31/94 ASSETS)
- -------------------------------------------- --------------- ---------------------------
<S> <C> <C>
Counsellors New York Tax-Exempt Fund,
Inc....................................... $ 88,481,200 .25% of net assets.
- -----------------------------------------------------------------------------------------------
RBB Fund, Inc. Tax-Free Bond................ $ 4,577,303 .50% of first $250 million;
.45% of next $250 million;
.40% of net assets over
$500 million.
</TABLE>
14
<PAGE> 17
BLACKROCK ADVISED/SUB-ADVISED FUNDS
<TABLE>
<CAPTION>
NAME OF INVESTMENT COMPANY
AND/OR PORTFOLIO APPROXIMATE ANNUAL FEE
(OPEN-END MANAGEMENT NET ASSET VALUE (BASED ON AVERAGE NET
INVESTMENT COMPANIES) AS OF 11/30/94 ASSETS)
- -------------------------------------------- --------------- ---------------------------
<S> <C> <C>
The BlackRock Government Income Trust....... $ 56,645,000 .25% of the average
daily net asset value
- -----------------------------------------------------------------------------------------------
Dean Witter Premier Income Trust............ $ 41,349,000 .20% of the average
daily net asset value
- -----------------------------------------------------------------------------------------------
Smith Barney Adjustable Rate Government
Income Trust.............................. $ 205,593,000 .20% of the average
daily net asset value
- -----------------------------------------------------------------------------------------------
Accessor Funds, Inc. Mortgage Securities
Portfolio................................. $ 33,032,000 .25%** of the average
daily net asset value
- -----------------------------------------------------------------------------------------------
Frank Russell Investment Company............ $ 98,265,000 .25% of the average
daily net asset value up to
$100 million;
.20% in excess of $100
million
- -----------------------------------------------------------------------------------------------
The BFM Institutional Trust Inc............. $ 128,031,000 .30% of the average
daily net asset value***
- -----------------------------------------------------------------------------------------------
U.S. Affinity Tax-Free Municipal Fund....... $ 1,840,000 .20% of the average daily
net asset value up to
$100 million;
.15% of the next $200
million;
.125% of the next $300
million;
.10% of the next $400
million; and
.075% of such assets
in excess of $1 billion
</TABLE>
- ---------------
** The maximum fee that can be earned is .25% (a portion of the fee is fixed
and the balance is based on performance).
*** This is a series fund currently consisting of the Short Duration Portfolio
and the Core Fixed Income Portfolio. The Short Duration Portfolio's advisory
fee rate is .30% and the Core Fixed Income Portfolio's advisory fee rate is
.35%; however, BlackRock Financial Management L.P. has agreed to waive .05%
of its fee for the Core Fixed Income Portfolio.
15
<PAGE> 18
<TABLE>
<CAPTION>
NAME OF INVESTMENT COMPANY
AND/OR PORTFOLIO APPROXIMATE ANNUAL FEE
(CLOSED-END MANAGEMENT NET ASSET VALUE (BASED ON AVERAGE NET
INVESTMENT COMPANIES) AS OF 11/30/94 ASSETS)
- -------------------------------------------- --------------- ---------------------------
<S> <C> <C>
The BlackRock Advantage Term Trust Inc. .... $ 87,030,000 .60% of the average
weekly net assets until
December 31, 1995;
.50% from January 1, 1996
through December 31, 2000;
.40% from January 1, 2001
through termination
- -----------------------------------------------------------------------------------------------
The BlackRock Income Trust Inc. ............ $ 449,618,000 .65% of the average
weekly net assets
- -----------------------------------------------------------------------------------------------
The BlackRock Municipal Target Term Trust
Inc. ..................................... $ 438,816,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock 1998 Term Trust Inc. ......... $ 528,907,000 .50% of the average
weekly net assets until
December 31, 1994;
.40% from January 1, 1995
through December 31, 1996;
.30% from January 1, 1997
through termination
- -----------------------------------------------------------------------------------------------
The BlackRock 1999 Term Trust Inc. ......... $ 183,726,000 .40% of the average
weekly net assets
- -----------------------------------------------------------------------------------------------
The BlackRock 2001 Term Trust Inc. ......... $ 1,149,975,000 .40% of the average
weekly net assets
- -----------------------------------------------------------------------------------------------
The BlackRock Insured Municipal 2008 Term
Trust Inc. ............................... $ 357,309,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock New York Insured Municipal
2008 Term Trust Inc. ..................... $ 146,553,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock California Insured Municipal
2008 Term Trust Inc. ..................... $ 134,277,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock Florida Insured Municipal 2008
Term Trust Inc. .......................... $ 113,839,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock Broad Investment Grade 2009
Term Trust Inc. .......................... $ 34,868,000 .55% of the average
weekly net assets
- -----------------------------------------------------------------------------------------------
The BlackRock North American Government
Income Trust Inc. ........................ $ 358,364,000 .60% of the average
weekly net assets
- -----------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
NAME OF INVESTMENT COMPANY
AND/OR PORTFOLIO APPROXIMATE ANNUAL FEE
(CLOSED-END MANAGEMENT NET ASSET VALUE (BASED ON AVERAGE NET
INVESTMENT COMPANIES) AS OF 11/30/94 ASSETS)
- -------------------------------------------- --------------- ---------------------------
<S> <C> <C>
The BlackRock Strategic Term Trust Inc. .... $ 469,319,000 .60% of the average
weekly net assets until
December 31, 1994;
.45% from January 1, 1995
through December 31, 1998;
.30% from January 1, 1999
through termination
- -----------------------------------------------------------------------------------------------
The BlackRock Target Term Trust Inc. ....... $ 865,473,000 .45% of the average
weekly net assets until
December 31, 1996;
.30% from January 1, 1997
through termination
- -----------------------------------------------------------------------------------------------
The BlackRock Insured Municipal Term
Trust Inc. ............................... $ 240,732,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock Investment Quality Term
Trust Inc. ............................... $ 304,461,000 .60% of the average
weekly net assets until
December 31, 1998;
.50% from January 1, 1999
through December 31, 2002;
.40% from January 1, 2003
through termination
- -----------------------------------------------------------------------------------------------
The BlackRock Investment Quality Municipal
Trust Inc. ............................... $ 185,103,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock California Investment Quality
Municipal Trust Inc. ..................... $ 11,137,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock Florida Investment Quality
Municipal Trust........................... $ 12,215,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock New Jersey Investment Quality
Municipal Trust Inc. ..................... $ 10,679,000 .35% of the average
weekly total assets
- -----------------------------------------------------------------------------------------------
The BlackRock New York Investment Quality
Municipal Trust Inc. ..................... $ 13,935,000 .35% of the average
weekly total assets
</TABLE>
PROVIDENT DISTRIBUTORS, INC. Provident Distributors, Inc. ("PDI") serves
as the Fund's distributor. PDI's offices are located at 259 Radnor-Chester Road,
Suite 120, Radnor, PA 19087.
17
<PAGE> 20
ADDITIONAL INFORMATION
BENEFICIAL OWNERS
PNC Bank and PNC Bank Ohio have no investment power over the Shares they
held of record and disclaim beneficial ownership of such Shares. At February 13,
1995 the Fund's officers and trustees as a group owned less than 1% of the
outstanding Shares of each Portfolio of the Fund. To the Fund's knowledge, at
February 13, 1995 the name, address and percentage ownership of each person that
beneficially owned 5% or more of the outstanding Shares of any class of a
Portfolio was as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE OF
NAME AND ADDRESS OF CLASS AND AMOUNT OF OF CLASS PORTFOLIO SHARES
PORTFOLIO BENEFICIAL OWNER SHARES OWNED(1) OWNED OWNED
- ----------------------- ----------------------- ------------------- ----------- ----------------
<S> <C> <C> <C> <C>
Managed Income......... Saxon & Company 8,030,807.072 99.9% 91.5%
PNC Bank Shares of
Attn: Income Class F-1
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
BHC Securities 681,810.803 63.6% 0.01366%
Attn: Mutual Funds Shares of
Department Class F-2
100 N. 20th Street
Philadelphia, PA 19103
Saxon & Company 37,675,892.249 92.3% 91.5%
PNC Bank Shares of
Attn: Income Class F-3
Collections 200 Stevens
Drive, Suite 260
Lester, PA 19113
Tax-Free Income........ Saxon & Company 268,028.231 100% 29.7%
PNC Bank Shares of
Attn: Income Class H-1
Collections
200 Stevens Drive,
Suite 260
Lester, PA 19113
BHC Securities 155,700.407 23.7% 16.7%
Attn: Mutual Funds Shares of
Department Class H-2
100 N. 20th Street
Philadelphia, PA 19103
Saxon & Company 9,337.103 100% 29.7%
PNC Bank Shares of
Attn: Income Class H-3
Collections
200 Stevens Drive,
Suite 260
Lester, PA 19113
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE OF
NAME AND ADDRESS OF CLASS AND AMOUNT OF OF CLASS PORTFOLIO SHARES
PORTFOLIO BENEFICIAL OWNER SHARES OWNED(1) OWNED OWNED
- ----------------------- ----------------------- ------------------- ----------- ----------------
<S> <C> <C> <C> <C>
Intermediate
Government........... Saxon & Company 5,917,580.135 100% 92.1%
PNC Bank Shares of
Attn: Income Class K-1
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
BHC Securities 723,008.136 80.1% 0.03766%
Attn: Mutual Funds Shares of
Department Class K-2
100 N. 20th Street
Philadelphia, PA 19103
Saxon & Company 11,789,254.896 95.5% 92.1%
PNC Bank Shares of
Attn: Income Class K-3
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
Ohio Tax-Free Income... Saxon & Company 500,006.070 100% 58.5%
PNC Bank Shares of
Attn: Income Class L-1
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
BHC Securities 253,214.182 73.0% 30.1%
Attn: Mutual Funds Shares of
Department Class L-2
100 N. 20th Street
Philadelphia, PA 19103
Saxon & Company 3,739.831 4.44% 58.5%
PNC Bank Shares of
Attn: Income Class L-3
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
Garlow & Company 4,665.782 55.5% 0.00542%
Citizens National Bank Shares of
Attn: Jackie Griggs Class L-3
12 E. Main Street
P.O. Box 69 Norwalk, OH
44857
BHC Securities 6,332.641 99.9% 30.1%
Attn: Mutual Funds Shares of
Department Class L-4
100 N. 20th Street
Philadelphia, PA 19103
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE OF
NAME AND ADDRESS OF CLASS AND AMOUNT OF OF CLASS PORTFOLIO SHARES
PORTFOLIO BENEFICIAL OWNER SHARES OWNED(1) OWNED OWNED
- ----------------------- ----------------------- ------------------- ----------- ----------------
<S> <C> <C> <C> <C>
Pennsylvania Tax-Free
Income............... Saxon & Company 1,209,689.087 100% 22.0%
PNC Bank Shares of
Attn: Income Class M-1
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
BHC Securities 2,892,904.628 65.4% 50.0%
Attn: Mutual Funds Shares of
Department Class M-2
100 N. 20th Street
Philadelphia, PA 19103
Saxon & Company 80,424.154 100% 22.0%
PNC Bank Shares of
Attn: Income Class M-3
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
BHC Securities 27,125.974 21.7% 50.0%
Attn: Mutual Funds Shares of
Department Class M-4
100 N. 20th Street
Philadelphia, PA 19103
Short-Term Bond........ Saxon & Company 469,511.725 100% 84.6%
PNC Bank Shares of
Attn: Income Class R-1
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
BHC Securities 21,075.047 69.9% 0.0129%
Attn: Mutual Funds Shares of
Department Class R-2
100 N. 20th Street
Philadelphia, PA 19103
MMC&P Inc. Recordkeeper 4,285.744 14.2% 0.00262%
for Sage Corporation Shares of
Profit Sharing Plan Class R-2
One Gateway Center,
11th Floor
Pittsburgh, PA 15222
Rafiou Barry & Raye 2,686.817 8.9% 0.00164%
Barry Shares of
JTWROS Class R-2
C/O Halco Mining Inc
900 Two Allegheny
Center
Pittsburgh, PA 15212
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE OF
NAME AND ADDRESS OF CLASS AND AMOUNT OF OF CLASS PORTFOLIO SHARES
PORTFOLIO BENEFICIAL OWNER SHARES OWNED(1) OWNED OWNED
- ----------------------- ----------------------- ------------------- ----------- ----------------
<S> <C> <C> <C> <C>
Saxon & Company 909,050.602 80.5% 84.6%
PNC Bank Shares of
Attn: Income Class R-3
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
Medical Practice 220,350.022 19.4% 13.4%
Account Shares of
Thomas Jefferson Class R-3
University
Attn: Treasurer's
Office
1020 Walnut Street
Philadelphia, PA 19107
Intermediate-Term
Bond................. Saxon & Company 3,880,925.425 100% 99.7%
PNC Bank Shares of
Attn: Income Class S-1
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
BHC Securities 13,572.519 30.3% 0.0009%
Attn: Mutual Funds Shares of
Department Class S-2
100 N. 20th Street
Philadelphia, PA 19103
MMC&P Inc. Recordkeeper 9,947.845 22.3% 0.00066%
For Daily Farms Profit Shares of
Sharing Plan Class S-2
One Gateway Center,
11th Floor
Pittsburgh, PA 15222
MMC&P Inc. Recordkeeper 18,127.445 40.6% 0.00121%
For Shares of
Wolfers Service Station Class S-2
Money Purchase Pension
Plan
One Gateway Center,
11th Floor
Pittsburgh, PA 15222
Saxon & Company 11,042,676.729 100% 99.7%
PNC Bank Shares of
Attn: Income Class S-3
Collections
200 Stevens Drive,
Suite 260 Lester, PA
19113
Government Income...... BHC Securities 108,951.511 92.8% 20.4%
Attn: Mutual Funds Shares of
Department Class X-2
100 N. 20th Street
Philadelphia, PA 19103
</TABLE>
21
<PAGE> 24
- ---------------
(1) Share classes designated by "-1", "-2", "-3" and "-4" represent Service,
Series A Investor, Institutional and Series B Investor Shares, respectively,
in a Portfolio. Service, Series A Investor, Series B Investor and
Institutional Shares represent equal pro rata interests in a Portfolio,
except that they bear different expenses which reflect the difference in the
range of services provided to them. Service Shares bear the expense of fees
at an annual rate not to exceed .15% of the average daily net asset value of
each Portfolio's outstanding Service Shares. Service Shares also bear the
expense of a service fee at an annual rate not to exceed .15% of the average
daily net asset value of each Portfolio's outstanding Service Shares. Series
A Investor Shares bear the expense of the Fund's Amended and Restated
Distribution and Service Plan at an annual rate not to exceed .55% of the
average daily net asset value of each Portfolio's outstanding Series A
Investor Shares. Series B Investor Shares bear the expense of the Fund's
Series B Distribution Plan and Series B Service Plan at annual rates not to
exceed .75% and .25%, respectively, of the average daily net asset value of
each Portfolio's outstanding Series B Investor Shares. Institutional Shares
bear no expenses relating to the Fund's Service, Distribution and Service,
Series B Distribution or Series B Service Plans.
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 an adjournment of the Meeting, the persons
named in the enclosed Proxy will vote thereon according to their best judgment
in the interests of the Fund.
Dated: February 15, 1995
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO COMPLETE THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
22
<PAGE> 25
TABLE OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
-------
<S> <C>
Form of Sub-Advisory Agreement........................................................... A-1
</TABLE>
23
<PAGE> 26
EXHIBIT A-1
SUB-ADVISORY AGREEMENT
( Portfolio)
AGREEMENT dated as of , 1995 between PNC Institutional
Management Corporation, a Delaware corporation ("Advisor"), and BlackRock
Financial Management, Inc., a Delaware corporation ("Sub-Advisor").
WHEREAS, Advisor has agreed to furnish investment advisory services to the
Portfolio (the "Portfolio") of The PNC(R) Fund (the "Fund"),
an open-end, management investment company registered under the Investment
Company Act of 1940 ("1940 Act"); and
WHEREAS, Advisor wishes to retain the Sub-Advisor to provide it with
investment research and statistical services in connection with Advisor's
advisory activities on behalf of the Portfolio;
WHEREAS, the advisory agreement between Advisor and the Fund dated as of
, 19 (such Agreement or the most recent successor agreement between
such parties relating to advisory services to the Portfolio is referred to
herein as the "Advisory Agreement") specifically provides that Advisor will
sub-contract investment advisory services with respect to the Portfolio to
Sub-Advisor pursuant to a sub-advisory agreement agreeable to the Fund and
approved in accordance with the provisions of the 1940 Act;
WHEREAS, the Board of Trustees of the Fund and the Fund's shareholders have
approved this Agreement, and Sub-Advisor is willing to furnish such services
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Advisor hereby appoints Sub-Advisor to act as sub-advisor
with respect to the Portfolio as provided in Section 2 of the Advisory
Agreement. Sub-Advisor accepts such appointment and agrees to render the
services herein set forth for the compensation herein provided.
2. Services of Sub-Advisor. Subject to the oversight and supervision of
Advisor and the Fund's Board of Trustees, Sub-Advisor will supervise the
day-to-day operations of the Portfolio and perform the following services: (i)
provide investment research and credit analysis concerning the Portfolio's
investments, (ii) conduct a continual program of investment of the Portfolio's
assets, (iii) determine what portion of the Portfolio's assets will be invested
in cash, cash equivalents and money market instruments, (iv) place orders for
all purchases and sales of the investments made for the Portfolio, and (v)
maintain the books and records as are required to support Fund operations (in
conjunction with record-keeping and accounting functions performed by Advisor).
In addition, Sub-Advisor will keep the Fund and Advisor informed of developments
materially affecting the Fund and shall, on its own initiative, furnish to the
Fund from time to time whatever information Sub-Advisor believes appropriate for
this purpose. Sub-Advisor will communicate to Advisor on each day that a
purchase or sale of an instrument is effected for the Portfolio (i) the name of
the issuer, (ii) the amount of the purchase or sale, (iii) the name of the
broker or dealer, if any, through which the purchase or sale will be effected,
(iv) the CUSIP number of the instrument, if any, and (v) such other information
as Advisor may reasonably require for purposes of fulfilling its obligations to
the Fund under the Advisory Agreement.
24
<PAGE> 27
Sub-Advisor will provide the services rendered by it under this Agreement in
accordance with the Portfolio's investment objective, policies and restrictions
as stated in the Portfolio's Prospectus and Statement of Additional Information
(as currently in effect and as they may be amended or supplemented from time to
time), and the resolutions of the Fund's Board of Trustees.
3. Other Sub-Advisor Covenants. Sub-Advisor further agrees that it:
(a) will comply with all applicable Rules and Regulations of the Securities
and Exchange Commission (the "SEC") and will in addition conduct its activities
under this Agreement in accordance with other applicable law;
(b) will place orders either directly with the issuer or with any broker or
dealer. Subject to the other provisions of this paragraph, in placing orders
with brokers and dealers, Sub-Advisor will attempt to obtain the best price and
the most favorable execution of its orders. In placing orders, Sub-Advisor will
consider the experience and skill of the firm's securities traders as well as
the firm's financial responsibility and administrative efficiency. Consistent
with this obligation, Sub-Advisor may, subject to the approval of the Fund's
Board of Trustees, select brokers on the basis of the research, statistical and
pricing services they provide to the Portfolio and other clients of Advisor or
Sub-Advisor. Information and research received from such brokers will be in
addition to, and not in lieu of, the services required to be performed by
Sub-Advisor hereunder. A commission paid to such brokers may be higher than that
which another qualified broker would have charged for effecting the same
transaction, provided that Sub-Advisor determines in good faith that such
commission is reasonable in terms either of the transaction or the overall
responsibility of Advisor and Sub-Advisor to the Portfolio and their other
clients and that the total commissions paid by the Portfolio will be reasonable
in relation to the benefits to the Portfolio over the long-term. In addition,
Sub-Advisor is authorized to take into account the sale of shares of the Fund in
allocating purchase and sale orders for portfolio securities to brokers or
dealers (including brokers and dealers that are affiliated with Advisor,
Sub-Advisor or the Fund's distributor), provided that Sub-Advisor believes that
the quality of the transaction and the commission are comparable to what they
would be with other qualified firms. In no instance, however, will the
Portfolio's securities be purchased from or sold to the Advisor, Sub-Advisor,
the Fund's distributor or any affiliated person thereof, except to the extent
permitted by the SEC or by applicable law;
(c) will maintain or cause Advisor to maintain books and records with
respect to the Portfolio's securities transactions and will render to Advisor
and the Fund's Board of Trustees such periodic and special reports as they may
request;
(d) will maintain a policy and practice of conducting its investment
advisory services hereunder independently of the commercial banking operations
of its affiliates. When Sub-Advisor makes investment recommendations for the
Portfolio, its investment advisory personnel will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale for
the Portfolio's account are customers of the commercial department of its
affiliates; and
(e) will treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund, the Portfolio and the
Fund's prior, current or potential shareholders, and will not use such records
and information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in writing
by the Fund, which approval shall not be unreasonably withheld and may not be
withheld where Sub-Advisor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Fund.
25
<PAGE> 28
4. Services Not Exclusive. Sub-Advisor's services hereunder are not deemed
to be exclusive, and Sub-Advisor shall be free to render similar services to
others so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Sub-Advisor hereby agrees that all records which it
maintains for the Portfolio are the property of the Fund and further agrees to
surrender promptly to the Fund any such records upon the Fund's request.
Sub-Advisor further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
6. Expenses. During the term of this Agreement, Sub-Advisor will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities, and other investments (including
brokerage commissions and other transaction charges, if any) purchased or sold
for the Portfolio.
7. Compensation. For the services which the Sub-Advisor will render to
Advisor under this Agreement, Advisor will pay to Sub-Advisor a fee, computed
daily and payable monthly, at the following annual rates for the Portfolio: .35%
of its first $1 billion of average daily net assets; .30% of its next $1 billion
of average daily net assets; .275% of its next $1 billion of average daily net
assets; and .25% of its average daily net assets in excess of $3 billion.
If the Advisor waives any or all of its advisory fee payable under the
Advisory Agreement, or reimburses the Fund pursuant to Section 8(b) of that
Agreement, with respect to the Portfolio, the Sub-Advisor will bear its share of
the amount of such waiver or reimbursement by waiving fees otherwise payable to
it hereunder on a proportionate basis to be determined by comparing the
aggregate fees otherwise payable to it hereunder with respect to the Portfolio
to the aggregate fees otherwise payable by the Fund to the Advisor under the
Advisory Agreement with respect to the Portfolio. Advisor shall inform
Sub-Advisor prior to waiving any advisory fees.
8. Limitation on Liability. Sub-Advisor will not be liable for any error
of judgment or mistake of law or for any loss suffered by Advisor or by the
Portfolio in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations or duties under this Agreement.
9. Duration and Termination. This Agreement will become effective as of
the date hereof and, unless sooner terminated with respect to the Portfolio as
provided herein, shall continue in effect with respect to the Portfolio until
March 31, 1996. Thereafter, if not terminated, this Agreement shall continue in
effect with respect to the 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 Fund's Board of Trustees
who are not interested persons of any party to this Agreement, cast in person at
a meeting called for the purpose of voting on such approval, and (b) by the
Fund's Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Portfolio. Notwithstanding the foregoing, this Agreement may
be terminated with respect to the Portfolio at any time, without the payment of
any penalty, by the Fund (by vote of the Fund's Board of Trustees or by vote of
a majority of the outstanding voting securities of the Portfolio), or by Advisor
or Sub-Advisor, on 60 days' written notice and will terminate automatically upon
any termination of the Advisory Agreement between the Fund and Advisor. This
Agreement will also immediately terminate in the event
26
<PAGE> 29
of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person" and "assignment" shall have
the same meanings of such terms in the 1940 Act.)
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the 1940 Act.
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 on, and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
12. Counterparts. This Agreement may be executed in counterparts by the
parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.
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.
PNC INSTITUTIONAL
MANAGEMENT CORPORATION
By:
BLACKROCK FINANCIAL
MANAGEMENT, INC.
By:
27
<PAGE> 30
PROXY THE PNC(R) FUND
TAX-FREE INCOME PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The PNC(R) Fund (the
"Fund") for use at a Special Meeting of Shareholders to be held at the Meadow
Woods Conference Center at Bellevue Park Corporate Center, 201 Bellevue Parkway,
Wilmington, DE 19809 on March 29, 1995 at 10:00 a.m.
The undersigned hereby appoints Edward J. Roach and G. Willing Pepper, and
either of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest of the Tax-Free Income
Portfolio held of record by the undersigned on the record date for the meeting,
upon the following matters AND UPON ANY OTHER MATTER WHICH MAY COME BEFORE THE
MEETING, IN THEIR DISCRETION:
(1) Proposal to approve the Sub-Advisory Agreement for the Tax-Free Income
Portfolio between PNC Institutional Management Corporation and BlackRock
Financial Management, Inc.
/ / FOR / / AGAINST / / ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued, and to be signed on reverse side)
<PAGE> 31
(Continued from other side)
Every properly signed proxy will be voted in the manner specified hereon
and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE FOR PROPOSAL (1).
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney or as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 1995
X
------------------------------
Signature
X
------------------------------
Signature, if held jointly
<PAGE> 32
PROXY THE PNC(R) FUND
INTERMEDIATE GOVERNMENT PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The PNC(R) Fund (the
"Fund") for use at a Special Meeting of Shareholders to be held at the Meadow
Woods Conference Center at Bellevue Park Corporate Center, 201 Bellevue Parkway,
Wilmington, DE 19809 on March 29, 1995 at 10:00 a.m.
The undersigned hereby appoints Edward J. Roach and G. Willing Pepper, and
either of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest of the Intermediate
Government Portfolio held of record by the undersigned on the record date for
the meeting, upon the following matters AND UPON ANY OTHER MATTER WHICH MAY COME
BEFORE THE MEETING, IN THEIR DISCRETION:
(1) Proposal to approve the Sub-Advisory Agreement for the Intermediate
Government Portfolio between PNC Institutional Management Corporation
and BlackRock Financial Management, Inc.
/ / FOR / / AGAINST / / ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued, and to be signed on reverse side)
<PAGE> 33
(Continued from other side)
Every properly signed proxy will be voted in the manner specified hereon
and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE FOR PROPOSAL (1).
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney or as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 1995
X
------------------------------
Signature
X
------------------------------
Signature, if held jointly
<PAGE> 34
PROXY THE PNC(R) FUND
OHIO TAX-FREE INCOME PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The PNC(R) Fund (the
"Fund") for use at a Special Meeting of Shareholders to be held at the Meadow
Woods Conference Center at Bellevue Park Corporate Center, 201 Bellevue Parkway,
Wilmington, DE 19809 on March 29, 1995 at 10:00 a.m.
The undersigned hereby appoints Edward J. Roach and G. Willing Pepper, and
either of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest of the Ohio Tax-Free
Income Portfolio held of record by the undersigned on the record date for the
meeting, upon the following matters AND UPON ANY OTHER MATTER WHICH MAY COME
BEFORE THE MEETING, IN THEIR DISCRETION:
(1) Proposal to approve the Sub-Advisory Agreement for the Ohio Tax-Free
Income Portfolio between PNC Institutional Management Corporation and
BlackRock Financial Management, Inc.
/ / FOR / / AGAINST / / ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued, and to be signed on reverse side)
<PAGE> 35
(Continued from other side)
Every properly signed proxy will be voted in the manner specified hereon
and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE FOR PROPOSAL (1).
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney or as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 1995
X
------------------------------
Signature
X
------------------------------
Signature, if held jointly
<PAGE> 36
PROXY THE PNC(R) FUND
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The PNC(R) Fund (the
"Fund") for use at a Special Meeting of Shareholders to be held at the Meadow
Woods Conference Center at Bellevue Park Corporate Center, 201 Bellevue Parkway,
Wilmington, DE 19809 on March 29, 1995 at 10:00 a.m.
The undersigned hereby appoints Edward J. Roach and G. Willing Pepper, and
either of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest of the Pennsylvania
Tax-Free Income Portfolio held of record by the undersigned on the record date
for the meeting, upon the following matters AND UPON ANY OTHER MATTER WHICH MAY
COME BEFORE THE MEETING, IN THEIR DISCRETION:
(1) Proposal to approve the Sub-Advisory Agreement for the Pennsylvania
Tax-Free Income Portfolio between PNC Institutional Management
Corporation and BlackRock Financial Management, Inc.
/ / FOR / / AGAINST / / ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued, and to be signed on reverse side)
<PAGE> 37
(Continued from other side)
Every properly signed proxy will be voted in the manner specified hereon
and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE FOR PROPOSAL (1).
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney or as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 1995
X
------------------------------
Signature
X
------------------------------
Signature, if held jointly
<PAGE> 38
PROXY THE PNC(R) FUND
SHORT-TERM BOND PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The PNC(R) Fund (the
"Fund") for use at a Special Meeting of Shareholders to be held at the Meadow
Woods Conference Center at Bellevue Park Corporate Center, 201 Bellevue Parkway,
Wilmington, DE 19809 on March 29, 1995 at 10:00 a.m.
The undersigned hereby appoints Edward J. Roach and G. Willing Pepper, and
either of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest of the Short-Term Bond
Portfolio held of record by the undersigned on the record date for the meeting,
upon the following matters AND UPON ANY OTHER MATTER WHICH MAY COME BEFORE THE
MEETING, IN THEIR DISCRETION:
(1) Proposal to approve the Sub-Advisory Agreement for the Short-Term Bond
Portfolio between PNC Institutional Management Corporation and BlackRock
Financial Management, Inc.
/ / FOR / / AGAINST / / ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued, and to be signed on reverse side)
<PAGE> 39
(Continued from other side)
Every properly signed proxy will be voted in the manner specified hereon
and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE FOR PROPOSAL (1).
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney or as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 1995
X
------------------------------
Signature
X
------------------------------
Signature, if held jointly
<PAGE> 40
PROXY THE PNC(R) FUND
INTERMEDIATE-TERM BOND PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The PNC(R) Fund (the
"Fund") for use at a Special Meeting of Shareholders to be held at the Meadow
Woods Conference Center at Bellevue Park Corporate Center, 201 Bellevue Parkway,
Wilmington, DE 19809 on March 29, 1995 at 10:00 a.m.
The undersigned hereby appoints Edward J. Roach and G. Willing Pepper, and
either of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest of the
Intermediate-Term Bond Portfolio held of record by the undersigned on the record
date for the meeting, upon the following matters AND UPON ANY OTHER MATTER WHICH
MAY COME BEFORE THE MEETING, IN THEIR DISCRETION:
(1) Proposal to approve the Sub-Advisory Agreement for the Intermediate-Term
Bond Portfolio between PNC Institutional Management Corporation and
BlackRock Financial Management, Inc.
/ / FOR / / AGAINST / / ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued, and to be signed on reverse side)
<PAGE> 41
(Continued from other side)
Every properly signed proxy will be voted in the manner specified hereon
and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE FOR PROPOSAL (1).
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney or as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 1995
X
------------------------------
Signature
X
------------------------------
Signature, if held jointly
<PAGE> 42
PROXY THE PNC(R) FUND
GOVERNMENT INCOME PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The PNC(R) Fund (the
"Fund") for use at a Special Meeting of Shareholders to be held at the Meadow
Woods Conference Center at Bellevue Park Corporate Center, 201 Bellevue Parkway,
Wilmington, DE 19809 on March 29, 1995 at 10:00 a.m.
The undersigned hereby appoints Edward J. Roach and G. Willing Pepper, and
either of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest of the Government
Income Portfolio held of record by the undersigned on the record date for the
meeting, upon the following matters AND UPON ANY OTHER MATTER WHICH MAY COME
BEFORE THE MEETING, IN THEIR DISCRETION:
(1) Proposal to approve the Sub-Advisory Agreement for the Government Income
Portfolio between PNC Institutional Management Corporation and BlackRock
Financial Management, Inc.
/ / FOR / / AGAINST / / ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued, and to be signed on reverse side)
<PAGE> 43
(Continued from other side)
Every properly signed proxy will be voted in the manner specified hereon
and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE FOR PROPOSAL (1).
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney or as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 1995
X
------------------------------
Signature
X
------------------------------
Signature, if held jointly
<PAGE> 44
PROXY THE PNC(R) FUND
MANAGED INCOME PORTFOLIO
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The PNC(R) Fund (the
"Fund") for use at a Special Meeting of Shareholders to be held at the Meadow
Woods Conference Center at Bellevue Park Corporate Center, 201 Bellevue Parkway,
Wilmington, DE 19809 on March 29, 1995 at 10:00 a.m.
The undersigned hereby appoints Edward J. Roach and G. Willing Pepper, and
either of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest of the Managed Income
Portfolio held of record by the undersigned on the record date for the meeting,
upon the following matters AND UPON ANY OTHER MATTER WHICH MAY COME BEFORE THE
MEETING, IN THEIR DISCRETION:
(1) Proposal to approve the Sub-Advisory Agreement for the Managed Income
Portfolio between PNC Institutional Management Corporation and BlackRock
Financial Management, Inc.
/ / FOR / / AGAINST / / ABSTAIN
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued, and to be signed on reverse side)
<PAGE> 45
(Continued from other side)
Every properly signed proxy will be voted in the manner specified hereon
and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE FOR PROPOSAL (1).
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney or as executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated: , 1995
X
------------------------------
Signature
X
-----------------------------
Signature, if held jointly
