<PAGE>
TempFund
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park For purchase and redemption orders only call: 800-441-
Corporate Center 7450 (in Delaware: 302-791-5350). For yield
400 Bellevue Parkway information call: 800-821-6006 (TempFund Shares code:
Wilmington, DE 19809 34; TempFund Administration Shares code: H1; TempFund
Dollar Shares code: 20; TempFund Plus Shares code: H4;
TempFund Cash Reserve Shares code: H2; TempFund Cash
Management Shares code: H3). For other information
call: 800-821-7432 or visit our web site at
www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 3
Performance Information.................................................. 4
Fees and Expenses........................................................ 6
Investment Strategies and Risk Disclosure.................................. 7
Management of the Fund..................................................... 10
Shareholder Information.................................................... 11
Price of Fund Shares..................................................... 11
Purchase of Shares....................................................... 11
Redemption of Shares..................................................... 12
Distribution and Shareholder Service Plans............................... 13
Dividends and Distributions.............................................. 14
Taxes.................................................................... 14
Financial Highlights....................................................... 16
</TABLE>
2
<PAGE>
Risk/Return Summary ____________________________________________________________
Investment The Fund seeks current income with liquidity and stability
Goal: of principal.
Investment The Fund invests in a broad range of money market
Policies: instruments, including government, bank, and commercial
obligations and repurchase agreements relating to such
obligations.
Principal Risks Although the Fund invests in money market instruments which
of Investing: the investment adviser, BlackRock Institutional Management
Corporation ("BIMC," or the "Adviser") believes present
minimal credit risks at the time of purchase, there is a
risk that an issuer may not be able to make principal and
interest payments when due. The Fund is also subject to
risks related to changes in prevailing interest rates, since
generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest
rates rise.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
Who May Want to The Fund is designed for institutional investors seeking
Invest in the current income and stability of principal. The Fund is
Fund: particularly suitable for banks, corporations and other
financial institutions that seek investment of short-term
funds for their own accounts or for the accounts of their
customers.
3
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
TempFund Shares
[CHART APPEARS HERE]
Year Annualized Returns
1989 9.39
1990 8.27
1991 6.24
1992 3.89
1993 3.12
1994 4.19
1995 5.99
1996 5.42
1997 5.60
1998 5.52
During the ten-year period shown in the bar chart, the highest quarterly
return was 9.89% (for the quarter ended June 30, 1989) and the lowest quarterly
return was 3.08% (for the quarter ended June 30, 1993).
4
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
TempFund Shares...................................... 5.52% 5.24% 5.70%
TempFund Dollar Shares............................... 5.27% 4.99% 5.45%
IBC's Money Fund Report: First Tier Institutions--
Only Money Fund Average*............................ 5.33% 5.16% 5.67%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
TempFund Shares............................................ 5.01%
TempFund Dollar Shares..................................... 4.76%
IBC's Money Fund Report: First Tier Institutions--Only
Money Fund Average*....................................... 4.87%
- -------------------------------------------------------------------------------
</TABLE>
Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management
Shares have not yet commenced operations, therefore no performance information
has been provided for these classes.
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC's Money Fund Report: First Tier Institutions--Only Money Fund Average is
comprised of institutional money market funds investing in First Tier
Eligible money market instruments.
5
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------------------------------
<CAPTION>
TempFund
--------
TempFund TempFund
TempFund TempFund TempFund Cash Cash
TempFund Administration Dollar Plus Reserve Management
Shares Shares Shares Shares Shares Shares
--------- --------------- --------- ----------- ----------- -----------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees............. .11% .11% .11% .11% .11% .11%
Distribution (12b-1) Fees... -- -- -- .25% -- --
Other Expenses.............. .12% .22% .37% .12% .52% .62%
Administration Fees........ .11% .11% .11% .11% .11% .11%
Shareholder Servicing Fees. -- -- .25% -- .25% .25%
Miscellaneous.............. .01% .11% .01% .01% .16% .26%
- --------------------------------------------------------------------------------------------------------
Total Annual Fund Operating
Expenses(1)................ .23% .33% .48% .48% .63% .73%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for TempFund Shares and TempFund
Dollar Shares for the fiscal year ended September 30, 1998, with fee
waivers, were .18% and .43%, respectively, of the Fund's average net
assets. Total Annual Fund Operating Expenses for TempFund Administration
Shares, TempFund Plus Shares, TempFund Cash Reserve Shares and TempFund
Cash Management Shares for the fiscal year ended September 30, 1998, with
fee waivers, would have been .28% (estimated), .43% (estimated), .58%
(estimated) and .68% (estimated), respectively, of the Fund's average net
assets. The Adviser and PFPC Inc., the Fund's co-administrator, may from
time to time waive the investment advisory and administration fees
otherwise payable to them or may reimburse the Fund for its operating
expenses. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
TempFund
--------
TempFund TempFund
TempFund TempFund TempFund Cash Cash
TempFund Administration Dollar Plus Reserve Management
Shares Shares Shares Shares Shares Shares
-------- -------------- -------- ----------- ----------- -----------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C>
One Year................ $ 24 $ 34 $ 49 $ 49 $ 64 $ 75
Three Years............. $ 74 $106 $154 $154 $202 $233
Five Years.............. $130 $185 $269 $269 $351 $406
Ten Years............... $293 $418 $604 $604 $786 $906
- ---------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Investment
Strategies and
Risk Disclosure ________________________________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to seek current income and stability of
principal. The Fund's investment objective may be changed by
the Board of Trustees without shareholder approval. The Fund
invests in a broad range of money market instruments,
including government, bank, and commercial obligations and
repurchase agreements relating to such obligations.
The Fund invests in securities maturing within 13 months
or less from the date of purchase, with certain exceptions.
For example, certain government securities held by the Fund
may have remaining maturities exceeding 13 months if such
securities provide for adjustments in their interest rates
not less frequently than every 13 months. The securities
purchased by the Fund are also subject to the quality,
diversification, and other requirements of Rule 2a-7 under
the Investment Company Act of 1940, as amended, and other
rules of the Securities and Exchange Commission. Pursuant to
Rule 2a-7, the Fund will generally limit its purchases of
any one issuer's securities (other than U.S. Government
obligations, repurchase agreements collateralized by such
securities and securities subject to certain guarantees or
otherwise providing a right to demand payment) to 5% of the
Fund's total assets, except that up to 25% of its total
assets may be invested in securities of one issuer for a
period of up to three business days; provided that the Fund
may not invest more than 25% of its total assets in the
securities of more than one issuer in accordance with the
foregoing at any one time.
The Fund will only purchase securities that present
minimal credit risk as determined by the Adviser pursuant to
guidelines approved by the Board of Trustees of Provident
Institutional Funds. Securities purchased by the Fund (or
the issuers of such securities) will be First Tier Eligible
Securities which are rated at the time of purchase in the
highest rating category by either Standard & Poor's Ratings
Group or Moody's Investors Services, Inc., and will be rated
in the highest rating category by any other nationally
recognized statistical rating organization ( a "NRSRO") that
rates such security (or its issuer).
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
U.S. Government The Fund may purchase obligations issued or guaranteed by
Obligations the U.S. Government or its agencies and instrumentalities
and related custodial receipts.
7
<PAGE>
Bank Obligations The Fund may purchase obligations of issuers in the banking
industry, such as bank holding company obligations,
certificates of deposit, bankers' acceptances and bank notes
issued or supported by the credit of domestic banks or
savings institutions having total assets at the time of
purchase in excess of $1 billion. The Fund may also make
interest-bearing savings deposits in domestic commercial and
savings banks in amounts not in excess of 5% of the Fund's
assets.
Commercial Paper The Fund may invest in commercial paper, short-term notes
and corporate bonds of domestic corporations that meet the
Fund's quality and maturity requirements.
Asset-Backed The Fund may invest in asset-backed securities which are
Obligations backed by mortgages, installment sales contracts, credit
card receivables or other assets.
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Municipal The Fund may, when deemed appropriate by the Adviser in
Obligations light of the Fund's investment objective, invest in high
quality, short-term obligations issued by state and local
governmental issuers which carry yields that are competitive
with those of other types of money market instruments of
comparable quality.
Variable and The Fund may purchase variable or floating rate notes, which
Floating Rate are instruments that provide for adjustments in the interest
Instruments rate on certain reset dates or whenever a specified interest
rate index changes, respectively.
Repurchase The Fund may enter into repurchase agreements.
Agreements
Reverse The Fund may enter into reverse repurchase agreements. The
Repurchase Fund is permitted to invest up to one-third of its total
Agreements and assets in reverse repurchase agreements. The Fund may also
Securities lend its securities with a value of up to one-third of its
Lending total assets (including the value of the collateral for the
loan) to qualified brokers, dealers, banks and other
financial institutions for the purpose of realizing
additional net investment income through the receipt of
interest on the loan. Investments in reverse repurchase
agreements and securities lending transactions will be
aggregated for purposes of this investment limitation.
8
<PAGE>
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed funds will be
greater than the cost of the borrowing. Such borrowings will
be unsecured. The Fund will not purchase portfolio
securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
When-Issued and The Fund may purchase securities on a "when-issued" or
Delayed "delayed settlement" basis. The Fund expects that
Settlement commitments to purchase when-issued or delayed settlement
Transactions securities will not exceed 25% of the value of its total
assets absent unusual market conditions. The Fund does not
intend to purchase when-issued or delayed settlement
securities for speculative purposes but only in furtherance
of its investment objective. The Fund receives no income
from when-issued or delayed settlement securities prior to
delivery of such securities.
Illiquid The Fund will not invest more than 10% of the value of its
Securities total assets in illiquid securities, including time deposits
and repurchase agreements having maturities longer than
seven days. Securities that have readily available market
quotations are not deemed illiquid for purposes of this
limitation.
Other Types This Prospectus describes the Fund's principal investment
of Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. Any other types of investments will comply with the
Fund's quality and maturity guidelines. These supplemental
investment strategies are described in detail in the
Statement of Additional Information, which is referred to on
the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
Government securities are generally considered to be the
safest type of investment in terms of credit risk, with
municipal obligations and
9
<PAGE>
corporate debt securities presenting somewhat higher credit
risk. Credit quality ratings published by an NRSRO are
widely accepted measures of credit risk. The lower a
security is rated by an NRSRO, the more credit risk it is
considered to represent.
Other Risks Certain investment strategies employed by the Fund may
involve additional investment risk. Liquidity risk involves
certain securities which may be difficult or impossible to
sell at the time and the price that the Fund would like.
Reverse repurchase agreements, securities lending
transactions and when-issued or delayed delivery
transactions may involve leverage risk. Leverage risk is
associated with securities or practices that multiply small
market movements into larger changes in the value of the
Fund's investment portfolio. The Fund does not currently
intend to employ investment strategies that involve leverage
risk.
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that they
are actively taking steps to address the Year 2000 Problem
with respect to the computer systems that they use and to
obtain assurances that comparable steps are being taken by
the Fund's other major service providers. While there can be
no assurance that the Fund's service providers will be Year
2000 compliant, the Fund's service providers expect that
their plans to be compliant will be achieved.
Management of the Fund ________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser
and its affiliates are one of the largest U.S. bank managers
of mutual funds, with assets currently under management in
excess of $46 billion. BIMC (formerly known as PNC
Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC,
10
<PAGE>
the co-administrator, may from time to time reduce the
investment advisory and administration fees otherwise
payable to them or may reimburse the Fund for its operating
expenses. Any fees waived and any expenses reimbursed by
BIMC and PFPC with respect to a particular fiscal year are
not recoverable. For the fiscal year ended September 30,
1998, the Fund paid investment advisory fees and
administration fees each aggregating .08% (net of waivers)
of its average net assets. The services provided by BIMC and
the fees payable by the Fund for these services are
described further in the Statement of Additional Information
under "Management of the Funds."
Shareholder Information ________________________________________________________
Price of Fund The Fund's net asset value per share for purposes of pricing
Shares purchase and redemption orders is determined by PFPC Inc.
("PFPC"), the Funds co-administrator, as of 12:00 noon and
5:30 P.M., Eastern time, on each day on which both the New
York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day"). The
net asset value per share of each class of the Fund's shares
is calculated by adding the value of all securities and
other assets of the Fund that are allocable to a particular
class, subtracting liabilities charged to such class, and
dividing the result by the total number of outstanding
shares of such class. In computing net asset value, the Fund
uses the amortized cost method of valuation as described in
the Statement of Additional Information under "Additional
Purchase and Redemption Information." Under the 1940 Act,
the Fund may postpone the date of payment of any redeemable
security for up to seven days.
Purchase of Fund shares are sold at the net asset value per share next
Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted
before 12:00 noon, Eastern time, for which payment has been
received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Fund's custodian, PFPC Trust Company, will be executed at
12:00 noon. Orders accepted after 12:00 noon and before 5:30
P.M., Eastern time (or orders accepted earlier in the same
day for which payment has not been received by 12:00 noon),
will be executed at 5:30 P.M., Eastern time, if payment has
been received by PNC Bank by that time. Orders received at
other times, and orders for which payment has not been
received by 5:30 P.M., Eastern time, will not be accepted,
and notice thereof will be given to the institution placing
the order. (Payment for orders which are not received or
accepted
11
<PAGE>
will be returned after prompt inquiry to the sending
institution.) Between 3:00 P.M. and 5:30 P.M., Eastern time,
purchase orders may only be transmitted by telephone, and
the Fund reserves the right to limit the amount of such
orders. The Fund may in its discretion reject any order for
shares.
Payment for Fund shares may be made only in federal funds
or other funds immediately available to PNC Bank. The
minimum initial investment by an institution is $3 million
for TempFund Shares; there is no minimum initial investment
for TempFund Administration Shares, TempFund Dollar Shares,
TempFund Plus Shares, TempFund Cash Reserve Shares or
TempFund Cash Management Shares, however, broker-dealers and
other institutional investors may set a minimum for their
customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial
investment for TempFund Shares for specific institutions
whose aggregate relationship with the Provident
Institutional Funds is substantially equivalent to this $3
million minimum and warrants this reduction.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with an
institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the Fund
in accordance with its customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in
TempFund Administration Shares, TempFund Dollar Shares,
TempFund Plus Shares, TempFund Cash Reserve Shares or
TempFund Cash Management Shares. (See also "Management of
the Fund--Service Organizations," as described in the
Statement of Additional Information.) Institutions,
including banks regulated by the Comptroller of the Currency
and investment advisers and other money managers subject to
the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult their
legal advisors before investing fiduciary funds in TempFund
Administration Shares, TempFund Dollar Shares, TempFund Plus
Shares, TempFund Cash Reserve Shares or TempFund Cash
Management Shares. (See also "Management of the Fund--
Banking Laws," as described in the Statement of Additional
Information.)
Redemption of Redemption orders must be transmitted to PFPC in Wilmington,
Shares Delaware in the manner described under "Purchase of Shares."
Shares are redeemed at the net asset value per share next
determined after PFPC's receipt of the redemption order.
12
<PAGE>
Telephone instructions for redemptions received between 3:00
P.M. and 5:30 P.M., Eastern time, on a Business Day are
received for execution on that same day, however, the Fund
reserves the right to make payment for such redemptions the
next Business Day. While the Fund intends to use its best
efforts to maintain its net asset value per share at $1.00,
the proceeds paid to a shareholder upon redemption may be
more or less than the amount invested depending upon a
share's net asset value at the time of redemption. Call 1-
800-441-7450 (in Delaware: 302-791-5350) to place redemption
orders.
Payment for redeemed shares for which a redemption order
is received by PFPC by 5:30 P.M., Eastern time, on a
Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment for
redemption orders which are received on a day when PNC Bank
is closed is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any
account if the value of the account is less than $1,000
after sixty-days' prior written notice to the shareholder.
Any such redemption shall be effected at the net asset value
next determined after the redemption order is entered. If
during the sixty-day period the shareholder increases the
value of its account to $1,000 or more, no such redemption
shall take place. In addition, the Fund may also redeem
shares involuntarily under certain special circumstances
described in the Statement of Additional Information under
"Additional Purchase and Redemption Information."
Distribution The Fund offers six classes of shares. The difference
and Shareholder between the classes of shares is the fees borne by a class
Service Plans of shares pursuant to separate fees plans adopted by each
class. TempFund Shares do not bear any fees for
distribution, servicing, shareholder servicing, sweep fees
or cash sweep marketing services. The fees borne by the
other classes are as follows:
-------------------------------------------------------------
<TABLE>
<CAPTION>
Cash
Shareholder 12b- Cash Sweep
Service Service 1 Sweep Marketing Total
Class Fee Fee Fee Fee Fee Fees
------------------------ ------- ----------- ---- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Administration Shares... .10% -- -- -- -- .10%
Dollar Shares........... -- .25% -- -- -- .25%
Plus Shares............. -- -- .25% -- -- .25%
Cash Reserve Shares..... .10% .25% -- .05% -- .40%
Cash Management Shares.. .10% .25% -- .05% .10% .50%
------------------------------------------------------------------
</TABLE>
Service Fees are paid for general shareholder liaison
services. Shareholder Service Fees are paid for services
relating to the processing and administration of
13
<PAGE>
shareholder accounts. The Fund has adopted a plan pursuant
to Rule 12b-1. 12b-1 Fees are paid for distribution and
sales support, and shareholder services. Cash Sweep Fees are
paid for providing a sweep service into the Fund. Cash Sweep
Marketing Fees are paid for providing marketing
administrative activities in connection with the sweep
program.
Shares of the Fund are not sold to individuals, but may
be sold to the following entities, which hold the shares for
the accounts of their customers.
Administration Shares, Dollar Shares, Cash Reserve Shares
and Cash Management Shares are sold to institutional
investors such as banks, saving and loan associations, and
other financial institutions, including affiliates of PNC
Bank Corp. ("Service Organizations"). Plus Shares are sold
to broker-dealers. Because fees associated with the
distribution and/or shareholder service plans are paid out
of the Fund's assets on an outgoing basis, over time holders
of the share classes described above may pay more than the
economic equivalent of the maximum front-end sales charge
permitted by NASD Regulation, Inc.
Dividends and The Fund declares dividends daily and distributes
Distributions substantially all of its net investment income to
shareholders monthly. Shares begin accruing dividends on the
day the purchase order for the shares is effected and
continue to accrue dividends through the day before such
shares are redeemed. Dividends are paid monthly by check, or
by wire transfer if requested in writing by the shareholder,
within five business days after the end of the month or
within five business days after a redemption of all of a
shareholder's shares of a particular class.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Reinvestment
elections, and any revocations thereof, must be made in
writing to PFPC, the Fund's transfer agent, at P.O. Box
8950, Wilmington, Delaware 19885-9628 and will become
effective after its receipt by PFPC with respect to
dividends paid.
Taxes The Fund's distributions will generally be taxable to
shareholders. The Fund expects that all, or substantially
all, of its distributions will consist of ordinary income.
You will be subject to income tax on these distributions
regardless whether they are paid in cash or reinvested in
additional shares.
14
<PAGE>
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal tax
treatment.
Dividends declared in December of any year, and payable
to shareholders of record on a specified date in December,
will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of such year in the event
such dividends are actually paid during January of the
following year.
You should consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
15
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are incorporated by reference into the
Statement of Additional Information and included in the Annual Report, each of
which is available upon request. Administration Shares, Plus Shares, Cash
Reserve Shares and Cash Management Shares of the Fund have not yet commenced
operations, therefore no financial information has been provided for these
classes.
TempFund Shares
The table below sets forth selected financial data for a TempFund Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
Income from Investment Op-
erations
Net Investment Income .0549 .0539 .0541 .0567 .0360
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total From Investment Op-
erations .0549 .0539 .0541 .0567 .0360
- -------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0549) (.0539) (.0541) (.0567) (.0360)
Distributions (from
capital gains) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total Distributions (.0549) (.0539) (.0541) (.0567) (.0360)
- -------------------------------------------------------------------------------------------------
Net Asset Value End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Total Return 5.63% 5.53% 5.55% 5.82% 3.66%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of Year
(000's) $9,686,491 $8,060,501 $5,715,004 $5,351,346 $4,480,851
Ratio of Expenses to
Average Daily Net
Assets .18%(1) .18%(1) .18%(1) .24%(1) .25%(1)
Ratio of Net Investment
Income to Average Daily
Net Assets 5.50% 5.39% 5.41% 5.67% 3.60%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for TempFund Shares would have been
.23% for the year ended September 30, 1998, .24% for the year ended
September 30, 1997, .26% for the year ended September 30, 1996 and .27% for
the years ended September 30, 1995 and 1994, respectively.
16
<PAGE>
Financial Highlights (Continued) _______________________________________________
TempFund Dollar Shares
The table below sets forth selected financial data for a TempFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0524 .0514 .0516 .0542 .0335
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- -----------------------------------------------------------------------------------
Total From Investment
Operations .0524 .0514 .0516 .0542 .0335
- -----------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0524) (.0514) (.0516) (.0542) (.0335)
Distributions (from
capital gains) -- -- -- -- --
- -----------------------------------------------------------------------------------
Total Distributions (.0524) (.0514) (.0516) (.0542) (.0335)
- -----------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Total Return 5.38% 5.27% 5.30% 5.57% 3.41%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Year (000's) $302,476 $355,284 $162,119 $81,828 $102,105
Ratio of Expenses to
Average Daily Net
Assets .43%(1) .43%(1) .43%(1) .49%(1) .50%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 5.25% 5.14% 5.16% 5.42% 3.35%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for TempFund Dollar Shares would have
been .48% for the year ended September 30, 1998, .49% for the year ended
September 30, 1997, .51% for the year ended September 30, 1996 and .52% for
the years ended September 30, 1995 and 1994, respectively.
17
<PAGE>
Where to Find More Information _________________________________________________
The Statement of Additional Information ("the SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make
shareholder inquiries, by calling 1-800-821-7432. Other information is
available on the Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and
copied at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other
information about the Fund are available on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354
TempFund
An Investment Portfolio offered by
Provident Institutional Funds.
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10, 1999
PIF-P-001
<PAGE>
TempCash
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park For purchase and redemption orders only call: 800-441-
Corporate Center 7450 (in Delaware: 302-791-5350). For yield
400 Bellevue Parkway information call: 800-821-6006 (TempCash Shares code:
Wilmington, DE 19809 21; TempCash Dollar Shares code: 23). For other
information call: 800-821-7432 or visit our web site
at www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 3
Performance Information.................................................. 4
Fees and Expenses........................................................ 6
Investment Strategies and Risk Disclosure.................................. 7
Management of the Fund..................................................... 11
Shareholder Information.................................................... 12
Price of Fund Shares..................................................... 12
Purchase of Shares....................................................... 12
Redemption of Shares..................................................... 13
Shareholder Service Plan................................................. 14
Dividends and Distributions.............................................. 15
Taxes.................................................................... 15
Financial Highlights....................................................... 16
</TABLE>
2
<PAGE>
Risk/Return ____________________________________________________________
Summary
Investment The Fund seeks current income with liquidity and stability
Goal: of principal.
Investment The Fund invests in a broad range of money market
Policies: instruments, including government, U.S. and foreign bank and
commercial obligations and repurchase agreements relating to
such obligations. Under normal market conditions, at least
25% of the Fund's total assets will be invested in
obligations of issuers in the financial services industry
and repurchase agreements relating to such obligations.
Principal Risks Although the Fund invests in money market instruments which
of Investing: the investment adviser, BlackRock Institutional Management
Corporation ("BIMC," or the "Adviser") believes present
minimal credit risks at the time of purchase, there is a
risk that an issuer may not be able to make principal and
interest payments when due. The Fund is also subject to
risks related to changes in prevailing interest rates, since
generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest
rates rise.
Because of its concentration in the financial services
industry, the Fund will be exposed to the risks associated
with that industry, such as government regulation, the
availability and cost of capital funds, and general economic
conditions. In addition, securities issued by foreign
entities, including foreign banks and corporations may
involve additional risks. Examples of these risks are the
lack of available public information about the foreign
issuer, and international economic or political developments
which could affect the payment of principal and interest
when due.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
Who May Want to The Fund is designed for institutional investors seeking
Invest in the current income and stability of principal. The Fund is
Fund: particularly suitable for banks, corporations and other
financial institutions that seek investment of short-term
funds for their own accounts or for the accounts of their
customers.
3
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
TempCash Shares
[CHART APPEARS HERE]
Year Annualized Returns
1989 9.56
1990 8.42
1991 6.27
1992 3.83
1993 3.15
1994 4.30
1995 6.02
1996 5.44
1997 5.62
1998 5.55
During the ten-year period shown in the bar chart, the highest quarterly
return was 10.15% (for the quarter ended June 30, 1989) and the lowest
quarterly return was 3.07% (for the quarter ended March 31, 1993).
4
<PAGE>
The Fund's Average Annual Total Return For Periods Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
TempCash Shares...................................... 5.55% 5.29% 5.74%
TempCash Dollar Shares............................... 5.30% 5.04% 5.49%
IBC's Money Fund Report: First Tier Institutions--
Only Money Fund Average*............................ 5.33% 5.16% 5.67%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
TempCash Shares............................................ 5.05%
TempCash Dollar Shares..................................... 4.80%
IBC's Money Fund Report: First Tier Institutions--Only
Money Fund Average*....................................... 4.87%
- -------------------------------------------------------------------------------
</TABLE>
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC's Money Fund Report: First Tier Institutions--Only Money Fund Average is
comprised of institutional money market funds investing in First Tier
Eligible money market instruments.
5
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
TempCash
-----------------------
TempCash TempCash
Shares Dollar Shares
--------- -------------
<S> <C> <C> <C> <C>
Management Fees......................................... .15% .15%
Other Expenses.......................................... .17% .42%
Administration Fees.................................... .15% .15%
Shareholder Servicing Fees............................. -- .25%
Miscellaneous.......................................... .02% .02%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses(1)................. .32% .57%
- --------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for TempCash Shares and TempCash
Dollar Shares for the fiscal year ended September 30, 1998, with fee
waivers, were .18% and .43%, respectively, of the Fund's average net
assets. The Adviser and PFPC Inc., the Fund's co-administrator, may from
time to time waive the investment advisory and administration fees
otherwise payable to them or may reimburse the Fund for its operating
expenses. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
TempCash
----------------------
TempCash TempCash
Shares Dollar Shares
-------- -------------
<S> <C> <C>
One Year................................................. $ 33 $ 58
Three years.............................................. $103 $183
Five Years............................................... $180 $318
Ten Years................................................ $406 $714
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Investment
Strategies and
Risk Disclosure ________________________________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to seek current income and stability of
principal. The Fund's investment objective may be changed by
the Board of Trustees without shareholder approval. The Fund
invests in a broad range of money market instruments,
including government, U.S. and foreign bank and commercial
obligations and repurchase agreements relating to such
obligations. At least 25% of the Fund's total assets will be
invested in obligations of issuers in the financial services
industry and repurchase agreements relating to such
obligations, unless the Fund is in a temporary defensive
position.
The Fund invests in securities maturing within 13 months
or less from the date of purchase, with certain exceptions.
For example, certain government securities held by the Fund
may have remaining maturities exceeding 13 months if such
securities provide for adjustments in their interest rates
not less frequently than every 13 months. The securities
purchased by the Fund are also subject to the quality,
diversification, and other requirements of Rule 2a-7 under
the Investment Company Act of 1940, as amended, and other
rules of the Securities and Exchange Commission. Pursuant to
Rule 2a-7, the Fund generally will limit its purchases of
any one issuer's securities (other than U.S. Government
obligations, repurchase agreements collateralized by such
securities and securities subject to certain guarantees or
otherwise providing a right to demand payment) to 5% of the
Fund's total assets, except that up to 25% of its total
assets may be invested in securities of one issuer for a
period of up to three business days; provided that the Fund
may not invest more than 25% of its total assets in the
securities of more than one issuer in accordance with the
foregoing at any one time.
The Fund will only purchase securities that present
minimal credit risk as determined by the Adviser pursuant to
guidelines approved by the Board of Trustees of Provident
Institutional Funds. Securities purchased by the Fund (or
the issuers of such securities) will be First Tier Eligible
Securities. First Tier Eligible Securities are:
. securities that have ratings at the time of purchase (or
which are guaranteed or in some cases otherwise supported
by guarantees or other credit supports with such ratings)
in the highest rating category by at least two
unaffiliated nationally recognized statistical rating
organizations ("NRSROs"), or one NRSRO, if the security or
guarantee was only rated by one NRSRO;
. securities that are issued or guaranteed by a person with
such ratings;
7
<PAGE>
. securities without such short-term ratings that have been
determined to be of comparable quality by the Adviser
pursuant to guidelines approved by the Board of Trustees;
. securities issued or guaranteed as to principal or
interest by the U.S. Government or any of its agencies or
instrumentalities; or
. securities issued by other open-end investment Companies
that invest in the type of obligations in which the Fund
may invest.
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
U.S. Government The Fund may purchase obligations issued or guaranteed by
Obligations the U.S. Government or its agencies and instrumentalities
and related custodial receipts.
Bank Obligations The Fund may purchase obligations of issuers in the banking
industry, such as bank holding company obligations and
certificates of deposit, bankers' acceptances, bank notes
and time deposits, including U.S. dollar-denominated
instruments issued or supported by the credit of U.S. or
foreign banks or savings institutions having total assets at
the time of purchase in excess of $1 billion. The Fund may
invest substantially in obligations of foreign banks or
foreign branches of U.S. banks where the Adviser deems the
instrument to present minimal credit risks. The Fund may
also make interest-bearing savings deposits in commercial
and savings banks in amounts not in excess of 5% of its
assets.
Commercial Paper The Fund may invest in commercial paper and short-term notes
and corporate bonds that meet the Fund's quality and
maturity restrictions. Commercial paper purchased by the
Fund may include instruments issued by foreign issuers, such
as Canadian Commercial Paper, which is U.S. dollar-
denominated commercial paper issued by a Canadian
corporation or a Canadian counterpart of a U.S. corporation,
and in Europaper, which is U.S. dollar-denominated
commercial paper of a foreign issuer.
Asset-Backed The Fund may invest in asset-backed securities which are
Obligations backed by mortgages, installment sales contracts, credit
card receivables or other assets and collateralized mortgage
obligations ("CMOs") issued or guaranteed by U.S. Government
agencies and instrumentalities or issued by private
companies. Purchasable mortgage-related securities also
include adjustable rate securities. The Fund currently
intends to hold CMOs only as collateral for repurchase
agreements.
8
<PAGE>
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Municipal The Fund may, when deemed appropriate by the Adviser in
Obligations light of the Fund's investment objective, invest in high
quality, short-term obligations issued by state and local
governmental issuers which carry yields that are competitive
with those of other types of money market instruments of
comparable quality.
Guaranteed The Fund may make investments in obligations, such as
Investment guaranteed investment contracts and similar funding
Contracts agreements (collectively "GICs"), issued by highly rated
U.S. insurance companies. GIC investments that do not
provide for payment within seven days after notice are
subject to the Fund's policy regarding investments in
illiquid securities.
Variable The Fund may purchase variable or floating rate notes, which
and Floating are instruments that provide for adjustments in the interest
Rate Instruments rate on certain reset dates or whenever a specified interest
rate index changes, respectively.
Repurchase The Fund may enter into repurchase agreements.
Agreements
Reverse The Fund may enter into reverse repurchase agreements. The
Repurchase Fund is permitted to invest up to one-third of its total
Agreements assets in reverse repurchase agreements. The Fund may also
and Securities lend its securities with a value of up to one-third of its
Lending total assets (including the value of the collateral for the
loan) to qualified brokers, dealers, banks and other
financial institutions for the purpose of realizing
additional net investment income through the receipt of
interest on the loan. Investments in reverse repurchase
agreements and securities lending transactions will be
aggregated for purposes of this investment limitation.
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed funds will be
greater than the cost of the borrowing. Such borrowings will
be unsecured. The Fund will not purchase portfolio
securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
9
<PAGE>
When-Issued and The Fund may purchase securities on a "when-issued" or
Delayed "delayed settlement" basis. The Fund expects that
Settlement commitments to purchase when-issued or delayed settlement
Transactions securities will not exceed 25% of the value of its total
assets absent unusual market conditions. The Fund does not
intend to purchase when-issued or delayed settlement
securities for speculative purposes but only in furtherance
of its investment objective. The Fund receives no income
from when-issued or delayed settlement securities prior to
delivery of such securities.
Illiquid The Fund will not invest more than 10% of the value of its
Securities total assets in illiquid securities, including time deposits
and repurchase agreements having maturities longer than
seven days. Securities that have readily available market
quotations are not deemed illiquid for purposes of this
limitation.
Other Types of This Prospectus describes the Fund's principal investment
Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. Any other types of investments will comply with the
Fund's quality and maturity guidelines. These supplemental
investment strategies are described in detail in the
Statement of Additional Information, which is referred to on
the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
Government securities are generally considered to be the
safest type of investment in terms of credit risk, with
municipal obligations and corporate debt securities
presenting somewhat higher credit risk. Credit quality
ratings published by an NRSRO are widely accepted measures
of credit risk. The lower a security is rated by an NRSRO,
the more credit risk it is considered to represent.
Other Risks Certain investment strategies employed by the Fund may
involve additional investment risk. Liquidity risk involves
certain securities which may be difficult or impossible to
sell at the time and the price that the Fund would like.
Reverse
10
<PAGE>
repurchase agreements, securities lending transactions and
when-issued or delayed delivery transactions may involve
leverage risk. Leverage risk is associated with securities
or practices that multiply small market movements into
larger changes in the value of the Fund's investment
portfolio. The fund does not currently intend to employ
investment strategies that involve leverage risk.
Concentration The Fund intends to concentrate more than 25% of its total
assets in the obligations of issuers in the financial
services industry and repurchase agreements relating to such
obligations. Because the Fund concentrates its assets in the
financial services industry it will be exposed to the risks
associated with that industry, such as government
regulation, the availability and cost of capital funds, and
general economic conditions.
Foreign Exposure Securities issued by foreign entities, including foreign
banks and corporations, may involve additional risks and
considerations. Extensive public information about the
foreign issuer may not be available, and unfavorable
political, economic or governmental developments in the
foreign country involved could affect the payment of
principal and interest.
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that they
are actively taking steps to address the Year 2000 Problem
with respect to the computer systems that they use and to
obtain assurances that comparable steps are being taken by
the Fund's other major service providers. While there can be
no assurance that the Fund's service providers will be Year
2000 compliant, the Fund's service providers expect that
their plans to be compliant will be achieved.
Management of the Fund _________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser
and its affiliates are one of the largest U.S. bank managers
of mutual funds, with assets currently under management in
excess of $46 billion. BIMC (formerly known as PNC
Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
11
<PAGE>
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC, the co-administrator, may
from time to time reduce the investment advisory and
administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. Any fees
waived and any expenses reimbursed by BIMC and PFPC with
respect to a particular fiscal year are not recoverable. For
the fiscal year ended September 30, 1998, the Fund paid
investment advisory fees and administration fees each
aggregating .08% (net of waivers) of its average net assets.
The services provided by BIMC and the fees payable by the
Fund for these services are described further in the
Statement of Additional Information under "Management of the
Funds."
Shareholder Information ________________________________________________________
Price of Fund The Fund's net asset value per share for purposes of pricing
Shares purchase and redemption orders is determined by PFPC Inc.
("PFPC"), the Funds co-administrator, as of 12:00 noon and
4:00 P.M., Eastern time, on each day on which both the New
York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day"). The
net asset value per share of each class of the Fund's shares
is calculated by adding the value of all securities and
other assets of the Fund that are allocable to a particular
class, subtracting liabilities charged to such class, and
dividing the result by the total number of outstanding
shares of such class. In computing net asset value, the Fund
uses the amortized cost method of valuation as described in
the Statement of Additional Information under "Additional
Purchase and Redemption Information." Under the 1940 Act,
the Fund may postpone the date of payment of any redeemable
security for up to seven days.
Purchase of Fund shares are sold at the net asset value per share next
Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted
before 12:00 noon, Eastern time, for which payment has been
received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Fund's custodian, PFPC Trust Company, will be executed at
12:00 noon. Orders accepted after 12:00 noon and before 3:00
P.M., Eastern time (or orders accepted earlier in the same
day for which
12
<PAGE>
payment has not been received by 12:00 noon), will be
executed at 4:00 P.M., Eastern time, if payment has been
received by PNC Bank by that time. Orders received at other
times, and orders for which payment has not been received
by 4:00 P.M., Eastern time, will not be accepted, and
notice thereof will be given to the institution placing the
order. (Payment for orders which are not received or
accepted will be returned after prompt inquiry to the
sending institution.) The Fund may in its discretion reject
any order for shares.
Payment for Fund shares may be made only in federal
funds or other funds immediately available to PNC Bank. The
minimum initial investment by an institution is $3 million
for TempCash Shares and $5,000 for TempCash Dollar Shares;
however, broker-dealers and other institutional investors
may set a higher minimum for their customers. There is no
minimum subsequent investment. The Fund, at its discretion,
may reduce the minimum initial investment for TempCash
Shares for specific institutions whose aggregate
relationship with the Provident Institutional Funds is
substantially equivalent to this $3 million minimum and
warrants this reduction.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with an
institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the
Fund in accordance with its customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in
TempCash Dollar Shares. (See also "Management of the Fund--
Service Organizations," as described in the Statement of
Additional Information.) Institutions, including banks
regulated by the Comptroller of the Currency and investment
advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult their legal
advisors before investing fiduciary funds in TempCash
Dollar Shares. (See also "Management of the Fund--Banking
Laws," as described in the Statement of Additional
Information.)
Redemption of Redemption orders must be transmitted to PFPC in
Shares Wilmington, Delaware in the manner described under
"Purchase of Shares." Shares are redeemed at the net asset
value per share next determined after PFPC's receipt of the
redemption order. While the Fund intends to use its best
efforts to maintain its net asset value per share at $1.00,
the proceeds paid to a shareholder upon redemption may be
more or less than
13
<PAGE>
the amount invested depending upon a share's net asset value
at the time of redemption. Call 1-800-441-7450 (in Delaware:
302-791-5350) to place redemption orders.
Payment for redeemed shares for which a redemption order
is received by PFPC by 3:00 P.M., Eastern time, on a
Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment for
redemption orders which are received between 3:00 P.M. and
4:00 P.M., Eastern time, or on a day when PNC Bank is
closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any
TempCash Shares account if the value of the account is less
than $100,000, and in any TempCash Dollar Shares account if
the value of the account is less than $1,000, after sixty-
days' prior written notice to the shareholder. Any such
redemption shall be effected at the net asset value next
determined after the redemption order is entered. If during
the sixty-day period the shareholder increases the value of
its TempCash Shares account to $100,000 or more or its
TempCash Dollar Shares account to $1,000 or more, no such
redemption shall take place. In addition, the Fund may also
redeem shares involuntarily under certain special
circumstances described in the Statement of Additional
Information under "Additional Purchase and Redemption
Information."
Shareholder Institutional investors, such as banks, savings and loan
Service Plan associations and other financial institutions, including
affiliates of PNC Bank Corp. ("Service Organizations"), may
purchase Dollar Shares. TempCash Dollar Shares are identical
in all respects to TempCash Shares except that they bear the
service fees described below and enjoy certain exclusive
voting rights on matters relating to these fees. The Fund
will enter into an agreement with each Service Organization
which purchases Dollar Shares requiring it to provide
support services to its customers who are the beneficial
owners of such shares in consideration of the Fund's payment
of .25% (on an annualized basis) of the average daily net
asset value of the Dollar Shares held by the Service
Organization for the benefit of customers. Such services,
which are described more fully in the Statement of
Additional Information under "Management of the Fund Service
Organizations," include aggregating and processing purchase
and redemption requests from customers and placing net
purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers;
providing information periodically to customers showing
their positions in Dollar Shares; and providing sub-
accounting or the information necessary for sub-accounting
with respect to Dollar Shares beneficially owned by
customers. Under the terms of the agreements, Service
Organizations are required to provide to their customers a
14
<PAGE>
schedule of any fees that they may charge customers in
connection with their investments in Dollar Shares. TempCash
Shares are sold to institutions that have not entered into
servicing agreements with the Fund in connection with their
investments.
Dividends and The Fund declares dividends daily and distributes
Distributions substantially all of its net investment income to
shareholders monthly. Shares begin accruing dividends on the
day the purchase order for the shares is effected and
continue to accrue dividends through the day before such
shares are redeemed. Dividends are paid monthly by check, or
by wire transfer if requested in writing by the shareholder,
within five business days after the end of the month or
within five business days after a redemption of all of a
shareholder's shares of a particular class.
Dividends are determined in the same manner for each
class of shares of the Fund. TempCash Dollar Shares bear all
the expense of fees paid to Service Organizations, and as a
result, at any given time, the dividend on TempCash Dollar
Shares will be approximately .25% lower than the dividend on
TempCash Shares.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Reinvestment
elections, and any revocations thereof, must be made in
writing to PFPC, the Fund's transfer agent, at P.O. Box
8950, Wilmington, Delaware 19885-9628 and will become
effective after its receipt by PFPC with respect to
dividends paid.
Taxes The Fund's distributions will generally be taxable to
shareholders. The Fund expects that all, or substantially
all, of its distributions will consist of ordinary income.
You will be subject to income tax on these distributions
regardless whether they are paid in cash or reinvested in
additional shares.
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal tax
treatment.
Dividends declared in December or any year, and payable
to shareholders of record on a specified date in December,
will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of such year in the event
such dividends are actually paid during January of the
following year.
You should consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
15
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are incorporated by reference into the
Statement of Additional Information and included in the Annual Report, each of
which is available upon request.
TempCash Shares
The table below sets forth selected financial data for a TempCash Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0552 .0541 .0542 .0575 .0370
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total From Investment
Operations .0552 .0541 .0542 .0575 .0370
- -------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0552) (.0541) (.0542) (.0575) (.0370)
Distributions (from
capital gains) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total Distributions (.0552) (.0541) (.0542) (.0575) (.0370)
- -------------------------------------------------------------------------------------------------
Net Asset Value End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Total Return 5.66% 5.55% 5.56% 5.90% 3.76%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of Year
(000's) $2,499,114 $1,991,037 $1,835,326 $1,316,166 $2,330,456
Ratio of Expenses to
Average Daily Net
Assets .18%(1) .18%(1) .18%(1) .16%(1) .16%(1)
Ratio of Net Investment
Income to Average Daily
Net Assets 5.52% 5.41% 5.42% 5.75% 3.70%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for TempCash Shares would have been
.32% for the year ended September 30, 1998, .30% for the year ended
September 30, 1997, .33% for the year ended September 30, 1996, .30% for
the year ended September 30, 1995 and .33% for the year ended September 30,
1994.
16
<PAGE>
Financial Highlights (Continued) _______________________________________________
TempCash Dollar Shares
The table below sets forth selected financial data for a TempCash Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0527 .0516 .0517 .0550 .0345
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total From Investment
Operations .0527 .0516 .0517 .0550 .0345
- ------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0527) (.0516) (.0517) (.0550) (.0345)
Distributions (from
capital gains) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total Distributions (.0527) (.0516) (.0517) (.0550) (.0345)
- ------------------------------------------------------------------------------------
Net Asset Value End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Return 5.41% 5.29% 5.31% 5.65% 3.51%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Year (000's) $503,809 $401,529 $527,830 $454,156 $397,948
Ratio of Expenses to
Average Daily Net
Assets .43%(1) .43%(1) .43%(1) .41%(1) .41%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 5.27% 5.16% 5.17% 5.50% 3.45%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for TempCash Dollar Shares would have
been .57% for the year ended September 30, 1998, .55% for the year ended
September 30, 1997, .58% for the year ended September 30, 1996, .55% for
the year ended September 30, 1995 and .58% for the year ended September 30,
1994.
17
<PAGE>
Where to Find More Information _______________________________________________
The Statement of Additional Information (the "SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make shareholder
inquiries, by calling 1-800-821-7432. Other information is available on the
Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. Information about the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. Reports and other information
about the Fund are available on the SEC's Internet site at http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
TempCash
An Investment Portfolio offered by
Provident Institutional Funds
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10, 1999
PIF-P-002
<PAGE>
FedFund
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park Corporate For purchase and redemption orders only call: 800-441-
Center 400 Bellevue 7450 (in Delaware: 302-791-5350). For yield
Parkway information call: 800-821-6006 (FedFund Shares code:
Wilmington, DE 19809 30; FedFund Dollar Shares code: 31). For other
information call: 800-821-7432 or visit our web site
at www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 3
Performance Information.................................................. 4
Fees and Expenses........................................................ 6
Investment Strategies and Risk Disclosure.................................. 7
Management of the Fund..................................................... 9
Shareholder Information.................................................... 10
Price of Fund Shares..................................................... 10
Purchase of Shares....................................................... 10
Redemption of Shares..................................................... 11
Shareholder Service Plan................................................. 12
Dividends and Distributions.............................................. 13
Taxes.................................................................... 13
Financial Highlights....................................................... 14
</TABLE>
2
<PAGE>
Risk/Return Summary ____________________________________________________________
Investment The Fund seeks current income with liquidity and stability
Goal: of principal.
Investment The Fund invests in a portfolio consisting of U.S. Treasury
Policies: bills, notes and other obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and
repurchase agreements relating to such obligations.
Principal Risks Securities issued or guaranteed by the U.S. Government, its
of Investing: agencies and instrumentalities have historically involved
little risk of loss of principal if held to maturity.
However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a
shareholder owns shares of the Fund. The Fund is subject to
risks related to changes in prevailing interest rates, since
generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest
rates rise.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
Who May Want to The Fund is designed for institutional investors seeking
Invest in the current income with liquidity and security of principal. The
Fund: Fund is particularly suitable for banks, corporations and
other financial institutions that seek investment of short-
term funds for their own accounts or for the accounts of
their customers.
3
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
FedFund Shares
[PERFORMANCE GRAPH APPEARS HERE]
Year Annualized Returns
1989 9.29
1990 8.15
1991 6.13
1992 3.82
1993 3.11
1994 4.22
1995 5.92
1996 5.34
1997 5.47
1998 5.38
During the ten-year period shown in the bar chart, the highest quarterly
return was 9.81% (for the quarter ended June 30, 1989) and the lowest quarterly
return was 3.07% (for the quarter ended June 30, 1993).
4
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 5
Year Years 10 Years
----- ----- --------
<S> <C> <C> <C>
FedFund Shares.......................................... 5.38% 5.18% 5.67%
FedFund Dollar Shares................................... 5.13% 4.93% 5.42%
IBC's Money Fund Report: Government Institutions--Only
Money Fund Average*.................................... 5.11% 4.99% 5.50%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
FedFund Shares............................................. 4.87%
FedFund Dollar Shares...................................... 4.62%
IBC's Money Fund Report: Government Institutions--Only
Money Fund Average*....................................... 4.52%
- -------------------------------------------------------------------------------
</TABLE>
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC's Money Fund Report: Government Institutions--Only Money Fund Average is
comprised of institutional money market funds investing in U.S. T-bills,
Repurchase Agreements and/or Government Agencies.
5
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING
EXPENSES (expenses
that are deducted from
Fund assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FedFund
-------
FedFund
FedFund Dollar
Shares Shares
--------- ---------
<S> <C> <C> <C> <C>
Management Fees............................................. .12% .12%
Other Expenses.............................................. .16% .41%
Administration Fees........................................ .12% .12%
Shareholder Servicing Fees................................. -- .25%
Miscellaneous.............................................. .04% .04%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses(1)..................... .28% .53%
- --------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for FedFund Shares and FedFund Dollar
Shares for the fiscal year ended October 31, 1998, with fee waivers, were
.20% and .45%, respectively, of the Fund's average net assets. BlackRock
Institutional Management Corporation ("BIMC," or the "Adviser") and PFPC
Inc., the Fund's co-administrator, may from time to time waive the
investment advisory and administration fees otherwise payable to them or
may reimburse the Fund for its operating expenses. The Adviser and PFPC
expect to continue such fee waivers, but can terminate the waivers upon 120
days prior written notice to the Fund.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
FedFund
-------
FedFund
FedFund Dollar
Shares Shares
------- -------
<S> <C> <C>
One Year........................................................ $ 29 $ 54
Three years..................................................... $ 90 $170
Five Years...................................................... $157 $296
Ten Years....................................................... $356 $665
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE>
Investment
Strategies and
Risk Disclosure ________________________________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to seek current income with liquidity and
security of principal. The Fund's investment objective may
be changed by the Board of Trustees without shareholder
approval. The Fund invests in obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities (in addition to direct Treasury
obligations) and repurchase agreements relating to such
obligations.
The Fund invests in securities maturing within 13 months
or less from the date of purchase, with certain exceptions.
For example, certain government securities held by the Fund
may have remaining maturities exceeding 13 months if such
securities provide for adjustments in their interest rates
not less frequently than every 13 months. The securities
purchased by the Fund are also subject to the quality,
diversification, and other requirements of Rule 2a-7 under
the Investment Company Act of 1940, as amended, and other
rules of the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
U.S. Government The Fund may purchase obligations issued or guaranteed by
Obligations the U.S. Government or its agencies and instrumentalities
and related custodial receipts.
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Repurchase The Fund may enter into repurchase agreements.
Agreements
Reverse The Fund may enter into reverse repurchase agreements. The
Repurchase Fund is permitted to invest up to one-third of its total
Agreements assets in reverse repurchase agreements. The Fund may also
and Securities lend its securities with a value of up to one-third of its
Lending total assets (including the value of the collateral for the
loan) to qualified brokers, dealers, banks and other
financial institutions for the purpose of realizing
additional net investment income through the receipt of
interest on the loan. Investments in reverse repurchase
7
<PAGE>
agreements and securities lending transactions will be
aggregated for purposes of this investment limitation.
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed funds will be
greater than the cost of borrowing. Such borrowings will be
unsecured. The Fund will not purchase portfolio securities
while borrowings in excess of 5% of the Fund's total assets
are outstanding.
When-Issued and The Fund may purchase securities on a "when-issued" or
Delayed "delayed settlement" basis. The Fund expects that
Settlement commitments to purchase when-issued or delayed settlement
Transactions securities will not exceed 25% of the value of its total
assets absent unusual market conditions. The Fund does not
intend to purchase when-issued or delayed settlement
securities for speculative purposes but only in furtherance
of its investment objective. The Fund receives no income
from when-issued or delayed settlement securities prior to
delivery of such securities.
Other Types This Prospectus describes the Fund's principal investment
of Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. These supplemental investment strategies are described
in detail in the Statement of Additional Information, which
is referred to on the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
Government securities are generally considered to be the
safest type of investment in terms of credit risk. Not all
U.S. Government Securities are backed by the full faith and
credit of the United States. Obligations of certain agencies
and instrumentalities of the U.S. Government are backed by
the full faith and credit of the United States. Others are
backed by the right of the issuer to
8
<PAGE>
borrow from the U.S. Treasury or are backed only by the
credit of the agency or instrumentality issuing the
obligation.
Other Risks Certain investment strategies employed by the Fund may
involve additional investment risk. Reverse repurchase
agreements, securities lending transactions and when-issued
or delayed settlement transactions may involve leverage
risk. Leverage risk is associated with securities or
practices that multiply small market movements into larger
changes in the value of the Fund's investment portfolio. The
Fund does not currently intend to employ investment
strategies that involve leverage risk.
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that they
are actively taking steps to address the Year 2000 Problem
with respect to the computer systems that they use and to
obtain assurances that comparable steps are being taken by
the Fund's other major service providers. While there can be
no assurance that the Fund's service providers will be Year
2000 compliant, the Fund's service providers expect that
their plans to be compliant will be achieved.
Management of the Fund _________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser
and its affiliates are one of the largest U.S. bank managers
of mutual funds, with assets currently under management in
excess of $46 billion. BIMC (formerly known as PNC
Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC, the co-administrator, may
from time to time reduce the investment advisory and
administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. Any fees
waived and any expenses reimbursed by BIMC and
9
<PAGE>
PFPC with respect to a particular fiscal year are not
recoverable. For the fiscal year ended October 31, 1998, the
Fund paid investment advisory fees and administration fees
each aggregating .08% (net of waivers) of its average net
assets. The services provided by BIMC and the fees payable
by the Fund for these services are described further in the
Statement of Additional Information under "Management of the
Funds."
Shareholder Information ________________________________________________________
Price of Fund The Fund's net asset value per share for purposes of pricing
Shares purchase and redemption orders is determined by PFPC Inc.
("PFPC"), the Funds co-administrator, as of 12:00 noon and
4:00 P.M., Eastern time, on each day on which both the New
York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day"). The
net asset value per share of each class of the Fund's shares
is calculated by adding the value of all securities and
other assets of the Fund that are allocable to a particular
class, subtracting liabilities charged to such class, and
dividing the result by the total number of outstanding
shares of such class. In computing net asset value, the Fund
uses the amortized cost method of valuation as described in
the Statement of Additional Information under "Additional
Purchase and Redemption Information." Under the 1940 Act,
the Fund may postpone the date of payment of any redeemable
security for up to seven days.
Purchase Fund shares are sold at the net asset value per share next
of Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted
before 12:00 noon, Eastern time, for which payment has been
received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Fund's custodian, PFPC Trust Company, will be executed at
12:00 noon. Orders accepted after 12:00 noon and before 3:00
P.M., Eastern time (or orders accepted earlier in the same
day for which payment has not been received by 12:00 noon),
will be executed at 4:00 P.M., Eastern time, if payment has
been received by PNC Bank by that time. Orders received at
other times, and orders for which payment has not been
received by 4:00 P.M., Eastern time, will not be accepted,
and notice thereof will be given to the institution placing
the order. (Payment for orders which are not received or
accepted will be returned after prompt inquiry to the
sending institution.) The Fund may in its discretion reject
any order for shares.
10
<PAGE>
Payment for Fund shares may be made only in federal funds
or other funds immediately available to PNC Bank. The
minimum initial investment by an institution is $3 million
for FedFund Shares and $5,000 for FedFund Dollar Shares;
however, broker-dealers and other institutional investors
may set a higher minimum for their customers. There is no
minimum subsequent investment. The Fund, at its discretion,
may reduce the minimum initial investment for FedFund Shares
for specific institutions whose aggregate relationship with
the Provident Institutional Funds is substantially
equivalent to this $3 million minimum and warrants this
reduction.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with an
institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the Fund
in accordance with its customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in FedFund
Dollar Shares. (See also "Management of the Fund--Service
Organizations," as described in the Statement of Additional
Information.) Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and
other money managers subject to the jurisdiction of the SEC,
the Department of Labor or state securities commissions, are
urged to consult their legal advisors before investing
fiduciary funds in FedFund Dollar Shares. (See also
"Management of the Fund--Banking Laws," as described in the
Statement of Additional Information.)
Redemption Redemption orders must be transmitted to PFPC in Wilmington,
of Shares Delaware in the manner described under "Purchase of Shares."
Shares are redeemed at the net asset value per share next
determined after PFPC's receipt of the redemption order.
While the Fund intends to use its best efforts to maintain
its net asset value per share at $1.00, the proceeds paid to
a shareholder upon redemption may be more or less than the
amount invested depending upon a share's net asset value at
the time of redemption. Call 1-800-441-7450 (in Delaware:
302-791-5350) to place redemption orders.
Payment for redeemed shares for which a redemption order
is received by PFPC by 3:00 P.M., Eastern time, on a
Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment for
redemption orders which are received between 3:00 P.M. and
4:00 P.M., Eastern time, or on a
11
<PAGE>
day when PNC Bank is closed is normally wired in federal
funds on the next day following redemption that PNC Bank is
open for business.
The Fund shall have the right to redeem shares in any
account if the value of the account is less than $1,000,
after sixty-days' prior written notice to the shareholder.
Any such redemption shall be effected at the net asset value
next determined after the redemption order is entered. If
during the sixty-day period the shareholder increases the
value of its account to $1,000 or more, no such redemption
shall take place. Moreover, if a shareholder's FedFund
Shares account falls below an average of $100,000 in any
particular calendar month, the account may be charged an
account maintenance fee with respect to that month. In
addition, the Fund may also redeem shares involuntarily
under certain special circumstances described in the
Statement of Additional Information under "Additional
Purchase and Redemption Information."
Shareholder Institutional investors, such as banks, savings and loan
Service Plan associations and other financial institutions, including
affiliates of PNC Bank Corp. ("Service Organizations"), may
purchase Dollar Shares. FedFund Dollar Shares are identical
in all respects to FedFund Shares except that they bear the
service fees described below and enjoy certain exclusive
voting rights on matters relating to these fees. The Fund
will enter into an agreement with each Service Organization
which purchases Dollar Shares requiring it to provide
support services to its customers who are the beneficial
owners of such shares in consideration of the Fund's payment
of .25% (on an annualized basis) of the average daily net
asset value of the Dollar Shares held by the Service
Organization for the benefit of customers. Such services,
which are described more fully in the Statement of
Additional Information under "Management of the Fund--
Service Organizations," include aggregating and processing
purchase and redemption requests from customers and placing
net purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers;
providing information periodically to customers showing
their positions in Dollar Shares; and providing sub-
accounting or the information necessary for sub-accounting
with respect to Dollar Shares beneficially owned by
customers. Under the terms of the agreements, Service
Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in
connection with their investments in Dollar Shares. FedFund
Shares are sold to institutions that have not entered into
servicing agreements with the Fund in connection with their
investments.
12
<PAGE>
Dividends and The Fund declares dividends daily and distributes
Distributions substantially all of its net investment income to
shareholders monthly. Shares begin accruing dividends on the
day the purchase order for the shares is effected and
continue to accrue dividends through the day before such
shares are redeemed. Dividends are paid monthly by check, or
by wire transfer if requested in writing by the shareholder,
within five business days after the end of the month or
within five business days after a redemption of all of a
shareholder's shares of a particular class.
Dividends are determined in the same manner for each
class of shares of the Fund. FedFund Dollar Shares bear all
the expense of fees paid to Service Organizations, and as a
result, at any given time, the dividend on FedFund Dollar
Shares will be approximately .25% lower than the dividend on
FedFund Shares.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Reinvestment
elections, and any revocations thereof, must be made in
writing to PFPC, the Fund's transfer agent, at P.O. Box
8950, Wilmington, Delaware 19885-9628 and will become
effective after its receipt by PFPC with respect to
dividends paid.
Taxes The Fund's distributions will generally be taxable to
shareholders. The Fund expects that all, or substantially
all, of its distributions will consist of ordinary income.
You will be subject to income tax on these distributions
regardless whether they are paid in cash or reinvested in
additional shares.
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal tax
treatment.
Dividends declared in December of any year, and payable
to shareholders of record on a specified date in December,
will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of such year in the event
such dividends are actually paid during January of the
following year.
You should consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
13
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are incorporated by reference into the
Statement of Additional Information and included in the Annual Report, each of
which is available upon request.
FedFund Shares
The table below sets forth selected financial data for a FedFund Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
Income from Investment Op-
erations
Net Investment Income .0535 .0530 .0529 .0571 .0377
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total From Investment
Operations .0535 .0530 .0529 .0571 .0377
- -------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0535) (.0530) (.0529) (.0571) (.0377)
Distributions (from
capital gains) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total Distributions (.0535) (.0530) (.0529) (.0571) (.0377)
- -------------------------------------------------------------------------------------------------
Net Asset Value End of Pe-
riod $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Total Return 5.48% 5.43% 5.41% 5.86% 3.84%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of Year
(000's) $1,116,979 $1,220,857 $1,407,529 $1,377,175 $1,557,562
Ratio of Expenses to
Average Daily Net
Assets .20%(1) .20%(1) .19%(1) .18%(1) .18%(1)
Ratio of Net Investment
Income to Average Daily
Net Assets 5.35% 5.30% 5.29% 5.71% 3.76%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for FedFund Shares would have been
.28% for the year ended October 31, 1998, .29% for the year ended October
31, 1997, .30% for the year ended October 31, 1996, .29% for the year ended
October 31, 1995 and .30% for the year ended October 31, 1994.
14
<PAGE>
Financial Highlights (Continued) _______________________________________________
FedFund Dollar Shares
The table below sets forth selected financial data for a FedFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0510 .0505 .0504 .0546 .0352
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- -----------------------------------------------------------------------------------
Total From Investment
Operations .0510 .0505 .0504 .0546 .0352
- -----------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0510) (.0505) (.0504) (.0546) (.0352)
Distributions (from
capital gains) -- -- -- -- --
- -----------------------------------------------------------------------------------
Total Distributions (.0510) (.0505) (.0504) (.0546) (.0352)
- -----------------------------------------------------------------------------------
Net Asset Value End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Total Return 5.23% 5.18% 5.16% 5.61% 3.59%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Year (000's) $30,459 $116,316 $113,747 $213,177 $135,769
Ratio of Expenses to
Average Daily Net
Assets .45%(1) .45%(1) .44%(1) .43%(1) .43%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 5.10% 5.05% 5.04% 5.46% 3.51%
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average to daily net assets for FedFund Dollar Shares would
have been .53% for the year ended October 31, 1998, .54% for the year ended
October 31, 1997, .55% for the year ended October 31, 1996, .54% for the
year ended October 31, 1995 and .55% for the year ended October 31, 1994.
15
<PAGE>
Where to Find More Information _________________________________________________
The Statement of Additional Information (the "SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make
shareholder inquiries, by calling 1-800-821-7432. Other information is
available on the Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and
copied at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other
information about the Fund are available on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
FedFund
An Investment Portfolio offered by
Provident Institutional Funds
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10,1999
PIF-P-003
<PAGE>
T-Fund
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park For purchase and redemption orders only call: 800-441-
Corporate Center 7450 (in Delaware: 302-791-5350). For yield
400 Bellevue Parkway information call: 800-821-6006 (T-Fund Shares code:
Wilmington, DE 19809 60; T-Fund Administration Shares code: N1; T-Fund
Dollar Shares code: 61; T-Fund Plus Shares code: 32;
T-Fund Cash Reserve Shares code: N2; T-Fund Cash
Management Shares code: N3). For other information
call: 800-821-7432 or visit our web site at
www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 3
Performance Information.................................................. 4
Fees and Expenses........................................................ 6
Investment Strategies and Risk Disclosure.................................. 7
Management of the Fund..................................................... 9
Shareholder Information.................................................... 10
Price of Fund Shares..................................................... 10
Purchase of Shares....................................................... 10
Redemption of Shares..................................................... 11
Distribution and Shareholder Service Plans............................... 12
Dividends and Distributions.............................................. 13
Taxes.................................................................... 13
Financial Highlights....................................................... 15
</TABLE>
2
<PAGE>
Risk/Return Summary ____________________________________________________________
Investment The Fund seeks current income with liquidity and stability
Goal: of principal.
Investment The Fund invests in U.S. Treasury bills, notes, trust
Policies: receipts and direct obligations of the U.S. Treasury and
repurchase agreements relating to direct Treasury
obligations.
Principal Risk Securities issued or guaranteed by the U.S. Government have
of Investing: historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest
rates, the market value of such securities may vary during
the period a shareholder owns shares of the Fund. The Fund
is subject to risks related to changes in prevailing
interest rates, since generally, a fixed-income security
will increase in value when interest rates fall and decrease
in value when interest rates rise.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
Who May Want to The Fund is designed for institutional investors seeking
Invest in the current income with liquidity and security of principal. The
Fund: Fund is particularly suitable for banks, corporations and
other financial institutions that seek investment of short-
term funds for their own accounts or for the accounts of
their customers.
3
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
During the ten-year period shown in the bar chart, the highest quarterly
return was 9.80% (for the quarter ended June 30, 1989) and the lowest quarterly
return was 3.04% (for the quarter ended December 31, 1993).
T-Fund Shares
[BAR CHART APPEARS HERE]
Year Annualized Returns
1989 9.20
1990 8.22
1991 6.21
1992 3.83
1993 3.07
1994 3.91
1995 5.86
1996 5.33
1997 5.44
1998 5.34
4
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
T-Fund Shares ....................................... 5.34% 5.09% 5.63%
T-Fund Dollar Shares ................................ 5.09% 4.84% 5.38%
IBC's Money Fund Report: Government Institutions--
Only Money Fund Average*............................ 5.11% 4.99% 5.50%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
T-Fund Shares ............................................. 4.75%
T-Fund Dollar Shares ...................................... 4.50%
IBC's Money Fund Report: Government Institutions--Only
Money Fund Average* ...................................... 4.52%
- -------------------------------------------------------------------------------
</TABLE>
Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management
Shares have not yet commenced operations, therefore no performance information
has been provided for these classes.
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC's Money Fund Report: Government Institutions--Only Money Fund average is
comprised of institutional money market funds investing in U.S. T-bills,
Repurchase Agreements and/or Government Agencies.
5
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
T-Fund
------
T-Fund T-Fund
T-Fund T-Fund T-Fund Cash Cash
T-Fund Administration Dollar Plus Reserve Management
Shares Shares Shares Shares Shares Shares
--------- --------------- --------- ----------- ----------- -----------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees ........ .13% .13% .13% .13% .13% .13%
Distribution (12b-1)
Fees .................. -- -- -- .25% -- --
Other Expenses ......... .14% .24% .39% .14% .54% .64%
Administration Fees ... .13% .13% .13% .13% .13% .13%
Shareholder Servicing
Fees ................. -- -- .25% -- .25% .25%
Miscellaneous ......... .01% .11% .01% .01% .16% .26%
- -----------------------------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(1) . .27% .37% .52% .52% .67% .77%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for T-Fund Shares and T-Fund Dollar
Shares for the fiscal year ended October 31, 1998, with fee waivers, were
.20% and .43%, respectively, of the Fund's average net assets. Total Annual
Fund Operating Expenses for T-Fund Administration Shares, T-Fund Plus
Shares, T-Fund Cash Reserve Shares and T-Fund Cash Management Shares for
the fiscal year ended October 31, 1998, with fee waivers, would have been
.30% (estimated), .45% (estimated), .60% (estimated), and .70% (estimated),
respectively, of the Fund's average net assets. BlackRock Institutional
Management Corporation ("BIMC," or the "Adviser") and PFPC Inc., the Fund's
co-administrator, may from time to time waive the investment advisory and
administration fees otherwise payable to them or may reimburse the Fund for
its operating expenses. The Adviser and PFPC expect to continue such fee
waivers, but can terminate the waivers upon 120 days prior written notice
to the Fund.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
T-Fund
------
T-Fund T-Fund T-Fund T-Fund Cash T-Fund Cash
T-Fund Administration Dollar Plus Reserve Management
Shares Shares Shares Shares Shares Shares
------ -------------- ------ ----------- ----------- -----------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C>
One Year ..... $ 28 $ 38 $ 53 $ 53 $ 68 $ 79
Three years .. $ 87 $119 $167 $167 $214 $246
Five Years ... $152 $208 $291 $291 $373 $428
Ten Years .... $343 $468 $653 $653 $835 $954
- -------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Investment
Strategies and
Risk Disclosure ________________________________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to seek current income with liquidity and
security of principal. The Fund's investment objective may
be changed by the Board of Trustees without shareholder
approval. The Fund invests solely in direct obligations of
the U.S. Treasury, such as Treasury bills, notes, trust
receipts and repurchase agreements relating to direct
Treasury obligations.
The Fund invests in securities maturing within 13 months
or less from the date of purchase, with certain exceptions.
For example, certain government securities held by the Fund
may have remaining maturities exceeding 13 months if such
securities provide for adjustments in their interest rates
not less frequently than every 13 months. The securities
purchased by the Fund are also subject to the quality,
diversification, and other requirements of Rule 2a-7 under
the Investment Company Act of 1940, as amended, and other
rules of the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
U.S. Treasury The Fund may purchase direct obligations of the U.S.
Obligations Treasury. The Fund may invest in Treasury receipts where the
principal and interest components are traded separately
under the Separate Trading of Registered Interest and
Principal of Securities program ("STRIPS").
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Repurchase The Fund may enter into repurchase agreements.
Agreements
Reverse The Fund may enter into reverse repurchase agreements. The
Repurchase Fund is permitted to invest up to one-third of its total
Agreements and assets in reverse repurchase agreements. The Fund may also
Securities lend its securities with a value of up to one-third of its
Lending total assets (including the value of the collateral for the
loan) to qualified brokers, dealers, banks and other
7
<PAGE>
financial institutions for the purpose of realizing
additional net investment income through the receipt of
interest on the loan. Investments in reverse repurchase
agreements and securities lending transactions will be
aggregated for purposes of this investment limitation.
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed funds will be
greater than the cost of the borrowing. Such borrowings will
be unsecured. The Fund will not purchase portfolio
securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
When-Issued The Fund may purchase securities on a "when-issued" or
and Delayed "delayed settlement" basis. The Fund expects that
Settlement commitments to purchase when-issued or delayed settlement
Transactions securities will not exceed 25% of the value of its total
assets absent unusual market conditions. The Fund does not
intend to purchase when-issued or delayed settlement
securities for speculative purposes but only in furtherance
of its investment objective. The Fund receives no income
from when-issued or delayed settlement securities prior to
delivery of such securities.
Other Types This Prospectus describes the Fund's principal investment
of Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. These supplemental investment strategies are described
in detail in the Statement of Additional Information, which
is referred to on the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
Treasury securities are considered to be the safest type of
investment in terms of credit risk.
8
<PAGE>
Other Risks Certain investment strategies employed by the Fund may
involve additional investment risk. Reverse repurchase
agreements, securities lending transactions and when-issued
or delayed settlement transactions may involve leverage
risk. Leverage risk is associated with securities or
practices that multiply small market movements into larger
changes in the value of the Fund's investment portfolio. The
Fund does not currently intend to employ investment
strategies that involve leverage risk.
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that they
are actively taking steps to address the Year 2000 Problem
with respect to the computer systems that they use and to
obtain assurances that comparable steps are being taken by
the Fund's other major service providers. While there can be
no assurance that the Fund's service providers will be Year
2000 compliant, the Fund's service providers expect that
their plans to be compliant will be achieved.
Management of the Fund _________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser
and its affiliates are one of the largest U.S. bank managers
of mutual funds, with assets currently under management in
excess of $46 billion. BIMC (formerly known as PNC
Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC, the co-administrator, may
from time to time reduce the investment advisory and
administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. Any fees
waived and any expenses reimbursed by BIMC and PFPC with
respect to a particular fiscal year are not recoverable. For
the fiscal year ended October 31, 1998, the Fund paid
investment advisory fees and administration fees each
aggregating .09% (net of waivers) of its average net assets.
The services provided
9
<PAGE>
by BIMC and the fees payable by the Fund for these services
are described further in the Statement of Additional
Information under "Management of the Funds."
Shareholder Information ________________________________________________________
Price of Fund The Fund's net asset value per share for purposes of pricing
Shares purchase and redemption orders is determined by PFPC Inc.
("PFPC"), the Funds co-administrator, as of 12:00 noon and
5:30 P.M., Eastern time, on each day on which both the New
York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day"). The
net asset value per share of each class of the Fund's shares
is calculated by adding the value of all securities and
other assets of the Fund that are allocable to a particular
class, subtracting liabilities charged to such class, and
dividing the result by the total number of outstanding
shares of such class. In computing net asset value, the Fund
uses the amortized cost method of valuation as described in
the Statement of Additional Information under "Additional
Purchase and Redemption Information." Under the 1940 Act,
the Fund may postpone the date of payment of any redeemable
security for up to seven days.
Purchase of Fund shares are sold at the net asset value per share next
Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted
before 12:00 noon, Eastern time, for which payment has been
received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Fund's custodian, PFPC Trust Company, will be executed at
12:00 noon. Orders accepted after 12:00 noon and before 5:30
P.M., Eastern time (or orders accepted earlier in the same
day for which payment has not been received by 12:00 noon),
will be executed at 5:30 P.M., Eastern time, if payment has
been received by PNC Bank by that time. Orders received at
other times, and orders for which payment has not been
received by 5:30 P.M., Eastern time, will not be accepted,
and notice thereof will be given to the institution placing
the order. (Payment for orders which are not received or
accepted will be returned after prompt inquiry to the
sending institution.) Between 3:00 P.M. and 5:30 P.M.,
Eastern time, purchase orders may only be transmitted by
telephone, and the Fund reserves the right to limit the
amount of such orders. The Fund may in its discretion reject
any order for shares.
Payment for Fund shares may be made only in federal funds
or other funds immediately available to PNC Bank. The
minimum initial investment by an institution
10
<PAGE>
is $3 million for T-Fund Shares; there is no minimum initial
investment for T-Fund Administration Shares, T-Fund Dollar
Shares, T-Fund Plus Shares, T-Fund Cash Reserve Shares or T-
Fund Cash Management Shares, however, broker-dealers and
other institutional investors may set a minimum for their
customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial
investment for T-Fund Shares for specific institutions whose
aggregate relationship with the Provident Institutional
Funds is substantially equivalent to this $3 million minimum
and warrants this reduction.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with an
institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the Fund
in accordance with its customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in T-Fund
Administration Shares, T-Fund Dollar Shares, T-Fund Plus
Shares, T-Fund Cash Reserve Shares and T-Fund Cash
Management Shares. (See also "Management of the Fund--
Organizations," as described in the Statement of Additional
Information.) Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and
other money managers subject to the jurisdiction of the SEC,
the Department of Labor or state securities commissions, are
urged to consult their legal advisors before investing
fiduciary funds in T-Fund Administration Shares, T-Fund
Dollar Shares, T-Fund Plus Shares, T-Fund Cash Reserve
Shares and T-Fund Cash Management Shares. (See also
"Management of the Fund--Banking Laws," as described in the
Statement of Additional Information.)
Redemption Redemption orders must be transmitted to PFPC in Wilmington,
of Shares Delaware in the manner described under "Purchase of Shares."
Shares are redeemed at the net asset value per share next
determined after PFPC's receipt of the redemption order.
Telephone instructions for redemptions received between 3:00
P.M. and 5:30 P.M., Eastern time, on a Business Day are
received for execution on that same day, however, the Fund
reserves the right to make payment for such redemptions the
next Business Day. While the Fund intends to use its best
efforts to maintain its net asset value per share at $1.00,
the proceeds paid to a shareholder upon redemption may be
more or less than the amount invested depending upon a
share's net asset value at the
11
<PAGE>
time of redemption. Call 1-800-441-7450 (in Delaware: 302-
791-5350) to place redemption orders.
Payment for redeemed shares for which a redemption order
is received by PFPC by 5:30 P.M., Eastern time, on a
Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment for
redemption orders which are received on a day when PNC Bank
is closed is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any
account if the value of the account is less than $1,000
after sixty-days' prior written notice to the shareholder.
Any such redemption shall be effected at the net asset value
next determined after the redemption order is entered. If
during the sixty-day period the shareholder increases the
value of its account to $1,000 or more, no such redemption
shall take place. Moreover, if a shareholder's T-Fund Shares
account falls below an average of $100,000 in any particular
calendar month, the account may be charged an account
maintenance fee with respect to that month. In addition, the
Fund may also redeem shares involuntarily under certain
special circumstances described in the Statement of
Additional Information under "Additional Purchase and
Redemption Information."
Distribution and The Fund offers six classes of shares. The difference
Shareholder between the classes of shares is the fees borne by a class
Service Plans of shares pursuant to separate fee plans adopted by each
class. T-Fund Shares do not bear any fees for distribution,
servicing, shareholder servicing, sweep fees or cash sweep
marketing services. The fees borne by the other classes are
as follows:
-------------------------------------------------------------
<TABLE>
<CAPTION>
Cash
Shareholder Cash Sweep
Service Service 12b-1 Sweep Marketing Total
Class Fee Fee Fee Fee Fee Fees
------------------------ ------- ----------- ----- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Administration Shares... .10% -- -- -- -- .10%
Dollar Shares........... -- .25% -- -- -- .25%
Plus Shares............. -- -- .25% -- -- .25%
Cash Reserve Shares..... .10% .25% -- .05% -- .40%
Cash Management Shares.. .10% .25% -- .05% .10% .50%
-------------------------------------------------------------------
</TABLE>
Service Fees are paid for general shareholder liaison
services. Shareholder Service Fees are paid for services
relating to the processing and administration of shareholder
accounts. The Fund has adopted a plan pursuant to Rule 12b-
1. 12b-1
12
<PAGE>
Fees are paid for distribution and sales support, and
shareholder services. Cash Sweep Fees are paid for providing
a sweep service into the Fund. Cash Sweep Marketing Fees are
paid for providing marketing administrative activities in
connection with the sweep program.
Shares of the Fund are not sold to individuals, but may
be sold to the following entities, which hold the shares for
the accounts of their customers. Administration Shares,
Dollar Shares, Cash Reserve Shares and Cash Management
Shares are sold to institutional investors such as banks,
saving and loan associations, and other financial
institutions, including affiliates of PNC Bank Corp.
("Service Organizations"). Plus Shares are sold to broker-
dealers. Because fees associated with the distribution
and/or shareholder service plans are paid out of the Fund's
assets on an ongoing basis, over time holders of the share
classes described above may pay more than the economic
equivalent of the maximum front-end sales charge permitted
by NASD regulation, Inc.
Dividends and The Fund declares daily and distributes substantially all of
Distributions its net investment income to shareholders monthly. Shares
begin accruing dividends on the day the purchase order for
the shares is effected and continue to accrue dividends
through the day before such shares are redeemed. Dividends
are paid monthly by check, or by wire transfer if requested
in writing by the shareholder, within five business days
after the end of the month or within five business days
after a redemption of all of a shareholder's shares of a
particular class.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Reinvestment
elections, and any revocations thereof, must be made in
writing to PFPC, the Fund's transfer agent, at P.O. Box
8950, Wilmington, Delaware 19885-9628 and will become
effective after its receipt by PFPC with respect to
dividends paid.
Taxes The Fund's distributions will generally be taxable to
shareholders. The Fund expects that all, or substantially
all, of its distributions will consist of ordinary income.
You will be subject to income tax on these distributions
regardless whether they are paid in cash or reinvested in
additional shares.
Shareholders will generally not be subject to state and
local taxes on distributions to the extent attributable to
interest on U.S. Treasury obligations. State income taxes
may apply however to the portion of the Fund's
distributions, if any,
13
<PAGE>
that are attributable to interest on obligations that are
not Federal Securities, such as repurchase agreements.
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal tax
treatment.
Dividends declared in December of any year, and payable
to shareholders of record on a specified date in December,
will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of such year in the event
such dividends are actually paid during January of the
following year.
You should consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
14
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are incorporated by reference into the
Statement of Additional Information and included in the Annual Report, each of
which is available upon request. Administration Shares, Plus Shares, Cash
Reserve Shares and Cash Management Shares of the Fund have not yet commenced
operations, therefore no financial information has been provided for these
classes.
T-Fund Shares
The table below sets forth selected financial data for a T-Fund Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
Income from Investment Op-
erations
Net Investment Income .0532 .0528 .0528 .0565 .0368
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total From Investment Op-
erations .0532 .0528 .0528 .0565 .0368
- -------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0532) (.0528) (.0528) (.0565) (.0368)
Distributions (from
capital gains) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total Distributions (.0532) (.0528) (.0528) (.0565) (.0368)
- -------------------------------------------------------------------------------------------------
Net Asset Value End of Pe-
riod $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Total Return 5.46% 5.41% 5.40% 5.80% 3.75%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of Year
(000's) $2,544,001 $1,765,332 $1,507,603 $1,211,220 $1,012,977
Ratio of Expenses to
Average Daily Net
Assets .20%(1) .20%(1) .19%(1) .18%(1) .18%(1)
Ratio of Net Investment
Income to Average Daily
Net Assets 5.31% 5.28% 5.26% 5.66% 3.65%
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for T-Fund Shares would have been .27%
for the year ended October 31, 1998, .29% for the year ended October 31,
1997, .30% for the year ended October 31, 1996 and .29% for the years ended
October 31, 1995 and 1994, respectively.
15
<PAGE>
Financial Highlights (Continued) _______________________________________________
T-Fund Dollar
Shares
The table below sets forth selected financial data for a T-Fund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0507 .0503 .0503 .0540 .0343
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- ----------------------------------------------------------------------------------
Total From Investment
Operations .0507 .0503 .0503 .0540 .0343
- ----------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0507) (.0503) (.0503) (.0540) (.0343)
Distributions (from
capital gains) -- -- -- -- --
- ----------------------------------------------------------------------------------
Total Distributions (.0507) (.0503) (.0503) (.0540) (.0343)
- ----------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Total Return 5.21% 5.16% 5.15% 5.55% 3.50%
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Ratios/Supplement Data $777,385 $516,092 $351,271 $82,502 $22,195
Net Assets, End of
Year (000's)
Ratio of Expenses to
Average Daily Net
Assets .45%(1) .45%(1) .44%(1) .43%(1) .43%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 5.06% 5.03% 5.01% 5.41% 3.40%
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for T-Fund Dollar Shares would have
been .52% for the year ended October 31, 1998, .54% for the year ended
October 31, 1997, .55% for the year ended October 31, 1996 and .54% for the
years ended October 31, 1995 and 1994, respectively.
16
<PAGE>
Where to Find More Information _________________________________________________
The Statement of Additional Information (the "SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make
shareholder inquiries, by calling 1-800-821-7432. Other information is
available on the Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and
copied at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other
information about the Fund are available on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
T-Fund
An Investment Portfolio offered by
Provident Institutional Funds
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10, 1999
PIF-P-006
<PAGE>
Treasury Trust Fund
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware: 302-791-
Wilmington, DE 19809 5350). For yield information call: 800-
821-6006 (Treasury Trust Fund Shares
code: 62; Treasury Trust Fund Dollar
Shares code: 63). For other information
call: 800-821-7432 or visit our website
at www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 3
Performance Information.................................................. 4
Fees and Expenses........................................................ 6
Investment Strategies and Risk Disclosure.................................. 7
Management of the Fund..................................................... 9
Shareholder Information.................................................... 9
Price of Fund Shares..................................................... 9
Purchase of Shares....................................................... 9
Redemption of Shares..................................................... 11
Shareholder Service Plan................................................. 11
Dividends and Distributions.............................................. 12
Taxes.................................................................... 12
Financial Highlights....................................................... 14
</TABLE>
2
<PAGE>
Risk/Return Summary ____________________________________________________________
Investment The Fund seeks current income with liquidity and stability
Goal: of principal.
Investment The Fund invests solely in direct obligations of the U.S.
Policies: Treasury, such as Treasury bills, notes and trust receipts.
Because the Fund invests exclusively in direct U.S. Treasury
obligations, investors may benefit from income tax
exclusions or exemptions that are available in certain
states and localities.
Principal Risks Securities issued or guaranteed by the U.S. Government have
of Investing: historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest
rates, the market value of such securities may vary during
the period a shareholder owns shares of the Fund. The Fund
is subject to risks related to changes in prevailing
interest rates, since generally, a fixed-income security
will increase in value when interest rates fall and decrease
in value when interest rates rise.
The Fund may from time to time engage in portfolio
trading for liquidity purposes, in order to enhance its
yield or if otherwise deemed advisable. In selling
securities prior to maturity, the Fund may realize a price
higher or lower than that paid to acquire any given
security, depending upon whether interest rates have
decreased or increased since its acquisition. In addition,
shareholders in a particular state that imposes income tax
should determine through consultation with their own tax
advisors whether such interest income, when distributed by
the Fund, will be considered by the state to have retained
exempt status, and whether the Fund's capital gain and other
income, if any, when distributed will be subject to the
states income tax.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
Who May Want to The Fund is designed for institutional investors seeking
Invest in the current income with liquidity and security of principal. The
Fund: Fund is particularly suitable for banks, corporations and
other financial institutions that seek investment of short-
term funds for their own accounts or for the accounts of
their customers. The Fund's investment policies are intended
to qualify Fund shares for the investment of funds of
federally regulated thrifts. The Fund intends to qualify its
shares as "short-term liquid assets" as established in the
published rulings, interpretations, and regulations of the
Office of Thrift Supervision. However, investing
institutions are advised to consult their primary regulator
for concurrence that Fund shares qualify under applicable
regulations and policies.
3
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
[CHART APPEARS HERE]
Date Annualized Returns
- ---- ------------------
1990 7.94
1991 5.87
1992 3.54
1993 2.96
1994 3.98
1995 5.66
1996 5.12
1997 5.19
1998 4.99
During the ten-year period shown in the bar chart, the highest quarterly
return was 9.01% (for the quarter ended September 30, 1989) and the lowest
quarterly return was 2.84% (for the quarter ended June 30, 1993).
4
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
Treasury Trust Fund Shares........................... 4.99% 4.99% 5.26%
Treasury Trust Fund Dollar Shares.................... 4.74% 4.74% 5.01%
IBC's Money Fund Report: Government Institutions--
Only Money Fund Average*............................ 5.11% 4.99% 5.50%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
Treasury Trust Fund Shares................................. 4.34%
Treasury Trust Fund Dollar Shares.......................... 4.09%
IBC's Money Fund Report: Government Institutions--Only
Money Fund Average*....................................... 4.52%
- -------------------------------------------------------------------------------
</TABLE>
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC's Money Fund Report: Government Institutions--Only Money Fund Average is
comprised of institutional money market funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
5
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- -------------------------------------------------------------------------------
Treasury Trust Fund
-------------------
Treasury Trust
Treasury Trust Fund Dollar
Fund Shares Shares
--------------- ---------------
<S> <C> <C> <C> <C>
Management Fees................................ .12% .12%
Other Expenses................................. .16% .41%
Administration Fees........................... .12% .12%
Shareholder Servicing Fees.................... -- .25%
Miscellaneous................................. .04% .04%
- -------------------------------------------------------------------------------
Total Annual Fund Operating Expenses(1)........ .28% .53%
- -------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for Treasury Trust Fund Shares and
Treasury Trust Fund Dollar Shares for the fiscal year ended October 31,
1998, with fee waivers, were .20% and .45%, respectively, of the Fund's
average net assets. BlackRock Institutional Management Corporation ("BIMC,"
or the "Adviser") and PFPC Inc., the Fund's co-administrator, may from time
to time waive the investment advisory and administration fees otherwise
payable to them or may reimburse the Fund for its operating expenses. The
Adviser and PFPC expect to continue such fee waivers, but can terminate the
waivers upon 120 days prior written notice to the Fund.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Treasury Trust Fund
-------------------
Treasury Trust
Treasury Trust Fund Dollar
Fund Shares Shares
-------------- --------------
<S> <C> <C>
One Year.................................. $ 29 $ 54
Three years............................... $ 90 $170
Five Years................................ $157 $296
Ten Years................................. $356 $665
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Investment
Strategies and
Risk Disclosure ________________________________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to seek current income with liquidity and
security of principal. The Fund's investment objective may
be changed by the Board of Trustees without shareholder
approval. The Fund invests solely in direct obligations of
the U.S. Treasury, such as Treasury bills, notes and trust
receipts.
The Fund invests in securities maturing within one year
or less, with certain exceptions. For example, certain
government securities held by the Fund may have remaining
maturities exceeding 13 months if such securities provide
for adjustments in their interest rates not less frequently
than every 13 months. The securities purchased by the Fund
are also subject to the quality, diversification, and other
requirements of Rule 2a-7 under the Investment Company Act
of 1940, as amended, and other rules of the Securities and
Exchange Commission.
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
U.S. Treasury To the extent consistent with its investment objectives, the
Obligations Fund may invest in direct obligations of the U.S. Treasury.
The Fund may invest in Treasury receipts where the principal
and interest components are traded separately under the
Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS").
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed funds will be
greater than the cost of the borrowing. Such borrowings will
be unsecured. The Fund will not purchase portfolio
securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
7
<PAGE>
When-Issued and The Fund may purchase securities on a "when-issued" or
Delayed "delayed settlement" basis. The Fund expects that
Settlement commitments to purchase when-issued or delayed settlement
Transactions securities will not exceed 25% of the value of its total
assets absent unusual market conditions. The Fund does not
intend to purchase when-issued or delayed settlement
securities for speculative purposes but only in furtherance
of its investment objective. The Fund receives no income
from when-issued or delayed settlement securities prior to
delivery of such securities.
Other Types of This Prospectus describes the Fund's principal investment
Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. These supplemental investment strategies are described
in detail in the Statement of Additional Information, which
is referred to on the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
government securities are generally considered to be the
safest type of investment in terms of credit risk.
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that they
are actively taking steps to address the Year 2000 Problem
with respect to the computer systems that they use and to
obtain assurances that comparable steps are being taken by
the Fund's other major service providers. While there can be
no assurance that the Fund's service providers will be Year
2000 compliant, the Fund's service providers expect that
their plans to be compliant will be achieved.
8
<PAGE>
Management of the Fund _________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser
and its affiliates are one of the largest U.S. bank managers
of mutual funds, with assets currently under management in
excess of $46 billion. BIMC (formerly known as PNC
Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC, the co-administrator, may
from time to time reduce the investment advisory and
administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. Any fees
waived and any expenses reimbursed by BIMC and PFPC with
respect to a particular fiscal year are not recoverable. For
the fiscal year ended October 31, 1998, the Fund paid
investment advisory fees and administration fees each
aggregating .08% (net of waivers) of its average net assets.
The services provided by BIMC and the fees payable by the
Fund for these services are described further in the
Statement of Additional Information under "Management of the
Funds."
Shareholder Information ________________________________________________________
Price of Fund The Fund's net asset value per share for purposes of pricing
Shares purchase and redemption orders is determined by PFPC Inc.
("PFPC"), the Funds co-administrator, as of 12:00 noon and
4:00 P.M., Eastern time, on each day on which both the New
York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day"). The
net asset value per share of each class of the Fund's shares
is calculated by adding the value of all securities and
other assets of the Fund that are allocable to a particular
class, subtracting liabilities charged to such class, and
dividing the result by the total number of outstanding
shares of such class. In computing net asset value, the Fund
uses the amortized cost method of valuation as described in
the Statement of Additional Information under "Additional
Purchase and Redemption Information." Under the 1940 Act,
the Fund may postpone the date of payment of any redeemable
security for up to seven days.
Purchase of Fund shares are sold at the net asset value per share next
Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be
9
<PAGE>
transmitted to PFPC in Wilmington, Delaware by telephone
(800-441-7450; in Delaware: 302-791-5350) or through the
Fund's computer access program. Orders accepted before 12:00
noon, Eastern time, for which payment has been received by
PNC Bank, N.A. ("PNC Bank"), an agent of the Fund's
custodian, PFPC Trust Company, will be executed at 12:00
noon. Orders accepted after 12:00 noon and before 2:30 P.M.,
Eastern time (or orders accepted earlier in the same day for
which payment has not been received by 12:00 noon), will be
executed at 4:00 P.M., Eastern time, if payment has been
received by PNC Bank by that time. Orders received at other
times, and orders for which payment has not been received by
4:00 P.M., Eastern time, will not be accepted, and notice
thereof will be given to the institution placing the order.
(Payment for orders which are not received or accepted will
be returned after prompt inquiry to the sending
institution.) The Fund may in its discretion reject any
order for shares.
Payment for Fund shares may be made only in federal funds
or other funds immediately available to PNC Bank. The
minimum initial investment by an institution is $3 million
for Treasury Trust Fund Shares and $5,000 for Treasury Trust
Fund Dollar Shares; however, broker-dealers and other
institutional investors may set a higher minimum for their
customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial
investment for Treasury Trust Fund Shares for specific
institutions whose aggregate relationship with the Provident
Institutional Funds is substantially equivalent to this $3
million minimum and warrants this reduction.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with an
institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the Fund
in accordance with its customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in
Treasury Trust Fund Dollar Shares. (See also "Management of
the Fund--Service Organizations," as described in the
Statement of Additional Information.) Institutions,
including banks regulated by the Comptroller of the Currency
and investment advisers and other money managers subject to
the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult their
legal advisors before investing fiduciary funds in Treasury
Trust Fund Dollar Shares.
10
<PAGE>
(See also "Management of the Fund--Banking Laws," as
described in the Statement of Additional Information.)
Redemption of Redemption orders must be transmitted to PFPC in Wilmington,
Shares Delaware in the manner described under "Purchase of Shares."
Shares are redeemed at the net asset value per share next
determined after PFPC's receipt of the redemption order.
While the Fund intends to use its best efforts to maintain
its net asset value per share at $1.00, the proceeds paid to
a shareholder upon redemption may be more or less than the
amount invested depending upon a share's net asset value at
the time of redemption. Call 1-800-441-7450 (in Delaware:
302-791-5350) to place redemption orders.
Payment for redeemed shares for which a redemption order
is received by PFPC by 2:30 P.M., Eastern time, on a
Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment for
redemption orders which are received between 2:30 P.M. and
4:00 P.M., Eastern time, or on a day when PNC Bank is
closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any
account if the value of the account is less than $1,000
after sixty-days' prior written notice to the shareholder.
Any such redemption shall be effected at the net asset value
next determined after the redemption order is entered. If
during the sixty-day period the shareholder increases the
value of its account to $1,000 or more, no such redemption
shall take place. Moreover, if a shareholders Treasury Trust
Shares account falls below an average of $100,000 in any
particular calendar month, the account may be charged an
account maintenance fee with respect to that month. In
addition, the Fund may also redeem shares involuntarily
under certain special circumstances described in the
Statement of Additional Information under "Additional
Purchase and Redemption Information."
-------------------------------------------------------------
Shareholder Institutional investors, such as banks, savings and loan
Service Plan associations and other financial institutions, including
affiliates of PNC Bank Corp. ("Service Organizations"), may
purchase Dollar Shares. Treasury Trust Fund Dollar Shares
are identical in all respects to Treasury Trust Fund Shares
except that they bear the service fees described below and
enjoy certain exclusive voting rights on matters relating to
these fees. The Fund will enter into an agreement with each
Service Organization which purchases Dollar Shares requiring
it to provide support services to its customers who are the
beneficial owners of such shares in consideration of the
Fund's payment of .25% (on an annualized basis) of the
average daily net asset value of the Dollar Shares held by
the
11
<PAGE>
Service Organization for the benefit of customers. Such
services, which are described more fully in the Statement of
Additional Information under "Management of the Fund Service
Organizations," include aggregating and processing purchase
and redemption requests from customers and placing net
purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers;
providing information periodically to customers showing
their positions in Dollar Shares; and providing sub-
accounting or the information necessary for sub-accounting
with respect to Dollar Shares beneficially owned by
customers. Under the terms of the agreements, Service
Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in
connection with their investments in Dollar Shares. Treasury
Trust Fund Shares are sold to institutions that have not
entered into servicing agreements with the Fund in
connection with their investments.
Dividends and The Fund declares dividends daily and distributes
Distributions substantially all of its net investment income to
shareholders monthly. Shares begin accruing dividends on the
day the purchase order for the shares is effected and
continue to accrue dividends through the day before such
shares are redeemed. Dividends are paid monthly by check, or
by wire transfer if requested in writing by the shareholder,
within five business days after the end of the month or
within five business days after a redemption of all of a
shareholder's shares of a particular class.
Dividends are determined in the same manner for each
class of shares of the Fund. Treasury Trust Fund Dollar
Shares bear all the expense of fees paid to Service
Organizations, and as a result, at any given time, the
dividend on Treasury Trust Fund Dollar Shares will be
approximately .25% lower than the dividend on Treasury Trust
Fund Shares.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Reinvestment
elections, and any revocations thereof, must be made in
writing to PFPC, the Fund's transfer agent, at P.O. Box
8950, Wilmington, Delaware 19885-9628 and will become
effective after its receipt by PFPC with respect to
dividends paid.
Taxes The Fund's distributions will generally be taxable to
shareholders. The Fund expects that all, or substantially
all, of its distributions will consist of ordinary income.
You will be subject to income tax on these distributions
regardless whether they are paid in cash or reinvested in
additional shares.
12
<PAGE>
To the extent permissible by federal and state law, the
Fund is structured to provide shareholders with income that
is exempt or excluded from taxation at the state and local
level. Substantially all dividends paid to shareholders
residing in certain states will be exempt or excluded from
state income tax. Many states, by statute, judicial decision
or administrative action, have taken the position that
dividends of a regulated investment company such as the Fund
that are attributable to interest on direct U.S. Treasury
obligations are the functional equivalent of interest from
such obligations and are, therefore, exempt from state and
local income taxes. Investors should be aware of the
application of their state and local tax laws to investments
in the Fund.
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal tax
treatment.
Dividends declared in December of any year, and payable
to shareholders of record on a specified date in December,
will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of such year in the event
such dividends are actually paid during January of the
following year.
You should consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
13
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are incorporated by reference into the
Statement of Additional Information and included in the Annual Report, each of
which is available upon request.
Treasury Trust Fund Shares
The table below sets forth selected financial data for a Treasury Trust Fund
Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0502 .0504 .0508 .0545 .0359
Net Gains or Losses on
Securities (both
realized
and unrealized) -- -- -- -- --
- ------------------------------------------------------------------------------------------
Total From Investment
Operations .0502 .0504 .0508 .0545 .0359
- ------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0502) (.0504) (.0508) (.0545) (.0359)
Distributions (from
capital gains) -- -- -- -- --
- ------------------------------------------------------------------------------------------
Total Distributions (.0502) (.0504) (.0508) (.0545) (.0359)
- ------------------------------------------------------------------------------------------
Net Asset Value End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return 5.14% 5.16% 5.20% 5.59% 3.65%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Year (000's) $1,091,366 $786,556 $897,659 $1,101,834 $1,016,635
Ratio of Expenses to
Average Daily Net
Assets .20%(1) .20%(1) .19%(1) .18%(1) .18%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 5.02%(1) 5.04% 5.08% 5.45% 3.57%
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for Treasury Trust Fund Shares would
have been .28% for the year ended October 31, 1998, .30% for the years
ended October 31, 1997 and 1996, and .29% for the years ended October, 31,
1995 and 1994.
14
<PAGE>
Financial Highlights (Continued) _______________________________________________
Treasury Trust Fund Dollar Shares
The table below sets forth selected financial data for a Treasury Trust Fund
Dollar Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0477 .0479 .0483 .0520 .0334
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total From Investment
Operations .0477 .0479 .0483 .0520 .0334
- ------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0477) (.0479) (.0483) (.0520) (.0334)
Distributions (from
capital gains) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total Distributions (.0477) (.0479) (.0483) (.0520) (.0334)
- ------------------------------------------------------------------------------------
Net Asset Value, End of
Periods $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Return 4.89% 4.91% 4.95% 5.34% 3.40%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Period (000's) $471,767 $331,498 $294,228 $223,272 $181,934
Ratio of Expenses to
Average Daily Net
Assets .45%(1) .45%(1) .44%(1) .43%(1) .43%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 4.77% 4.79% 4.83% 5.20% 3.32%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for Treasury Trust Fund Dollar Shares
would have been .53% for the year ended October 31, 1998, .55% for the
years ended October 31, 1997 and 1996, and .54% for the years ended October
31, 1995 and 1994.
15
<PAGE>
Where to Find More Information _________________________________________________
The Statement of Additional Information (the "SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make
shareholder inquiries, by calling 1-800-821-7432. Other information is
available on the Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and
copied at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other
information about the Fund are available on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
Treasury
Trust Fund
An Investment Portfolio offered by
Provident Institutional Funds
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10, 1999
PIF-P-008
<PAGE>
Federal Trust Fund
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park For purchase and redemption orders only call: 800-441-
Corporate Center 7450 (in Delaware: 302-791-5350). For yield
400 Bellevue Parkway information call: 800-821-6006 (Federal Trust Fund
Wilmington, DE 19809 Shares code: 11; Federal Trust Fund Dollar Shares
code: 12). For other information call: 800-821-7432 or
visit our web site at www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 3
Performance Information.................................................. 4
Fees and Expenses........................................................ 6
Investment Strategies and Risk Disclosure.................................. 7
Management of the Fund..................................................... 9
Shareholder Information.................................................... 9
Price of Fund Shares..................................................... 9
Purchase of Shares....................................................... 10
Redemption of Shares..................................................... 11
Shareholder Service Plan................................................. 12
Dividends and Distributions.............................................. 12
Taxes.................................................................... 13
Financial Highlights....................................................... 14
</TABLE>
2
<PAGE>
Risk/Return Summary ____________________________________________________________
Investment The Fund seeks current income with liquidity and stability
Goal: of principal.
Investment The Fund invests in obligations issued or guaranteed as to
Policies: principal and interest by the U.S. government or by its
agencies or instrumentalities thereof the interest income
from which, under current law, generally may not be subject
to state income tax by reason of federal law.
Principal Risks Securities issued or guaranteed by the U.S. Government, its
of Investing: agencies and instrumentalities have historically involved
little risk of loss of principal if held to maturity.
However, due to fluctuations in interest rates, the market
value of such securities may vary during the period a
shareholder owns shares of the Fund. The Fund is subject to
risks related to changes in prevailing interest rates, since
generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest
rates rise.
The Fund may from time to time engage in portfolio
trading for liquidity purposes, in order to enhance its
yield or if otherwise deemed advisable. In selling
securities prior to maturity, the Fund may realize a price
higher or lower than that paid to acquire any given
security, depending upon whether interest rates have
decreased or increased since its acquisition. In addition,
shareholders in a particular state that imposes an income
tax should determine through consultation with their own tax
advisors whether such interest income, when distributed by
the Fund, will be considered by the state to have retained
exempt status, and whether the Fund's capital gain and other
income, if any, when distributed will be subject to the
state's income tax.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
Who May Want to The Fund is designed for institutional investors seeking
Invest in the current income for institutional investors seeking current
Fund: income with liquidity and security of principal. The Fund is
particularly suitable for banks, corporations and other
financial institutions that seek investment of short-term
funds for their own accounts or for the accounts of their
customers.
3
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
During the ten-year period shown in the bar chart, the highest quarterly
return was 6.91% (for the quarter ended March 31, 1991) and the lowest
quarterly return was 3.04% (for the quarter ended June 30, 1993).
Federal Trust Fund Shares
[PERFORMANCE CHART APPEARS HERE]
Year Annualized Returns
1991 6.08
1992 3.80
1993 3.06
1994 4.24
1995 5.83
1996 5.26
1997 5.38
1998 5.32
4
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
Federal Trust Fund Shares............................ 5.32% 5.17% 4.89%
Federal Trust Fund Dollar Shares..................... 5.07% 4.92% 4.64%
IBC's Money Fund Report: Government Institutions--
Only Money Fund Average*............................ 5.11% 4.99% 5.50%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
Federal Trust Fund Shares.................................. 4.78%
Federal Trust Fund Dollar Shares........................... 4.53%
IBC's Money Fund Report: Government Institutions--Only
Money Fund Average*....................................... 4.52%
- -------------------------------------------------------------------------------
</TABLE>
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC's Money Fund Report: Government Institutions--Only Money Fund Average is
comprised of institutional money market funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
5
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- -------------------------------------------------------------------------------
<CAPTION>
Federal Trust Fund
------------------
Federal Trust
Federal Trust Fund Dollar
Fund Shares Shares
------------- -------------
<S> <C> <C> <C> <C>
Management Fees................................ .13% .13%
Other Expenses................................. .16% .41%
Administration Fees........................... .13% .13%
Shareholder Servicing Fees.................... -- .25%
Miscellaneous................................. .03% .03%
- -------------------------------------------------------------------------------
Total Annual Fund Operating Expenses(1)........ .29% .54%
- -------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for Federal Trust Fund Shares and
Federal Trust Fund Dollar Shares for the fiscal year ended October 31,
1998, with fee waivers, were .20% and .45%, respectively, of the Fund's
average net assets. BlackRock Institutional Management Corporation ("BIMC,"
or the "Adviser") and PFPC Inc., the Fund's co-administrator, may from time
to time waive the investment advisory and administration fees otherwise
payable to them or may reimburse the Fund for its operating expenses. The
Adviser and PFPC expect to continue such fee waivers, but can terminate the
waivers upon 120 days prior written notice to the Fund.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Federal Trust Fund
------------------
Federal Trust
Federal Trust Fund Dollar
Fund Shares Shares
------------- -------------
<S> <C> <C>
One Year.................................... $ 30 $ 55
Three Years................................. $ 93 $173
Five Years.................................. $163 $302
Ten Years................................... $368 $677
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Investment
Strategies and
Risk Disclosure ________________________________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to seek current income with liquidity and
security of principal. The Fund's investment objective may
be changed by the Board of Trustees without shareholder
approval. The Fund invests in obligations issued or
guaranteed as to principal and interest by the U.S.
Government or by agencies or instrumentalities thereof the
interest income from which, under current law, generally may
not be subject to state income tax by reason of federal law.
The Fund invests in securities maturing within 13 months
or less from the date of purchase, with certain exceptions.
For example, certain government securities held by the Fund
may have remaining maturities exceeding 13 months if such
securities provide for adjustments in their interest rates
not less frequently than every 13 months. The securities
purchased by the Fund are also subject to the quality,
diversification, and other requirements of Rule 2a-7 under
the Investment Company Act of 1940, as amended, and other
rules of the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
U.S. Government The Fund may purchase obligations issued or guaranteed by
Obligations the U.S. Government, including securities issued by the U.S.
Treasury and by certain agencies or instrumentalities such
as the Federal Home Loan Bank, Federal Farm Credit Banks
Funding Corp. and the Student Loan Marketing Association,
and related custodial receipts.
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed funds will be
greater than the cost of the borrowing. Such borrowings will
be unsecured. The Fund
7
<PAGE>
will not purchase portfolio securities while borrowings in
excess of 5% of the Fund's total assets are outstanding.
When-Issued The Fund may purchase securities on a "when-issued" or
and Delayed "delayed settlement" basis. The Fund expects that
Settlement commitments to purchase when-issued or delayed settlement
Transactions securities will not exceed 25% of the value of its total
assets absent unusual market conditions. The Fund does not
intend to purchase when-issued or delayed settlement
securities for speculative purposes but only in furtherance
of its investment objective. The Fund receives no income
from when-issued or delayed settlement securities prior to
delivery of such securities.
Other Types of This Prospectus describes the Fund's principal investment
Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. These supplemental investment strategies are described
in detail in the Statement of Additional Information, which
is referred to on the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
Government securities are generally considered to be the
safest type of investment in terms of credit risk. Not all
U.S. Government Securities are backed by the full faith and
credit of the United States. Obligations of certain agencies
and instrumentlities of the U.S. Government are backed by
the full faith and credit of the United States; others are
backed by the right of the issuer to borrow from the U.S.
Treasury or are backed only by the credit of the agency or
instrumentality issuing the obligation.
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
8
<PAGE>
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that they
are actively taking steps to address the Year 2000 Problem
with respect to the computer systems that they use and to
obtain assurances that comparable steps are being taken by
the Fund's other major service providers. While there can be
no assurance that the Fund's service providers will be Year
2000 compliant, the Fund's service providers expect that
their plans to be compliant will be achieved.
Management of the Fund _________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser
and its affiliates are one of the largest U.S. bank managers
of mutual funds, with assets currently under management in
excess of $46 billion. BIMC (formerly known as PNC
Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC, the co-administrator, may
from time to time reduce the investment advisory and
administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. Any fees
waived and any expenses reimbursed by BIMC and PFPC with
respect to a particular fiscal year are not recoverable. For
the fiscal year ended October 31, 1998, the Fund paid
investment advisory fees and administration fees each
aggregating .08% (net of waivers) of its average net assets.
The services provided by BIMC and the fees payable by the
Fund for these services are described further in the
Statement of Additional Information under "Management of the
Funds."
Shareholder Information ________________________________________________________
Price of Fund The Fund's net asset value per share for purposes of pricing
Shares purchase and redemption orders is determined by PFPC Inc.
("PFPC"), the Funds co-administrator, as of 12:00 noon and
4:00 P.M., Eastern time, on each day on which both the New
York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day"). The
net asset value per share of each class of the Fund's shares
is calculated by adding the value of all securities and
other assets of the Fund that are
9
<PAGE>
allocable to a particular class, subtracting liabilities
charged to such class, and dividing the result by the total
number of outstanding shares of such class. In computing net
asset value, the Fund uses the amortized cost method of
valuation as described in the Statement of Additional
Information under "Additional Purchase and Redemption
Information." Under the 1940 Act, the Fund may postpone the
date of payment of any redeemable security for up to seven
days.
Purchase of Fund shares are sold at the net asset value per share next
Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted
before 12:00 noon, Eastern time, for which payment has been
received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Fund's custodian, PFPC Trust Company, will be executed at
12:00 noon. Orders accepted after 12:00 noon and before 2:30
P.M., Eastern time (or orders accepted earlier in the same
day for which payment has not been received by 12:00 noon),
will be executed at 4:00 P.M., Eastern time, if payment has
been received by PNC Bank by that time. Orders received at
other times, and orders for which payment has not been
received by 4:00 P.M., Eastern time, will not be accepted,
and notice thereof will be given to the institution placing
the order. (Payment for orders which are not received or
accepted will be returned after prompt inquiry to the
sending institution.) The Fund may in its discretion reject
any order for shares.
Payment for Fund shares may be made only in federal funds
or other funds immediately available to PNC Bank. The
minimum initial investment by an institution is $3 million
for Federal Trust Fund Shares and $5,000 for Federal Trust
Fund Dollar Shares; however, broker-dealers and other
institutional investors may set a higher minimum for their
customers. There is no minimum subsequent investment. The
Fund, at its discretion, may reduce the minimum initial
investment for Federal Trust Fund Shares for specific
institutions whose aggregate relationship with the Provident
Institutional Funds is substantially equivalent to this $3
million minimum and warrants this reduction.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with an
institution before purchasing Fund shares. An institution
purchasing or redeeming
10
<PAGE>
Fund shares on behalf of its customers is responsible for
transmitting orders to the Fund in accordance with its
customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in Federal
Trust Fund Dollar Shares. (See also "Management of the
Fund--Service Organizations," as described in the Statement
of Additional Information.) Institutions, including banks
regulated by the Comptroller of the Currency and investment
advisers and other money managers subject to the
jurisdiction of the SEC, the Department of Labor or state
securities commissions, are urged to consult their legal
advisors before investing fiduciary funds in Federal Trust
Fund Dollar Shares. (See also "Management of the Fund--
Banking Laws," as described in the Statement of Additional
Information.)
Redemption of Redemption orders must be transmitted to PFPC in Wilmington,
Shares Delaware in the manner described under "Purchase of Shares."
Shares are redeemed at the net asset value per share next
determined after PFPC's receipt of the redemption order.
While the Fund intends to use its best efforts to maintain
its net asset value per share at $1.00, the proceeds paid to
a shareholder upon redemption may be more or less than the
amount invested depending upon a share's net asset value at
the time of redemption. Call 1-800-441-7450 (in Delaware:
302-791-5350) to place redemption orders.
Payment for redeemed shares for which a redemption order
is received by PFPC by 2:30 P.M., Eastern time, on a
Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment for
redemption orders which are received between 2:30 P.M. and
4:00 P.M., Eastern time, or on a day when PNC Bank is
closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any
account if the value of the account is less than $1,000
after sixty-days' prior written notice to the shareholder.
Any such redemption shall be effected at the net asset value
next determined after the redemption order is entered. If
during the sixty-day period the shareholder increases the
value of its account to $1,000 or more, no such redemption
shall take place. Moreover, if a shareholder's Federal Trust
Fund Shares account falls below an average of $100,000 in
any particular calendar month, the account may be charged an
account maintenance fee with respect to that month. In
addition, the Fund may also redeem shares involuntarily
under certain special circumstances described in the
Statement of Additional Information under "Additional
Purchase and Redemption Information."
11
<PAGE>
Shareholder Institutional investors, such as banks, savings and loan
Service Plan associations and other financial institutions, including
affiliates of PNC Bank Corp. ("Service Organizations"), may
purchase Dollar Shares. Federal Trust Fund Dollar Shares are
identical in all respects to Federal Trust Fund Shares
except that they bear the service fees described below and
enjoy certain exclusive voting rights on matters relating to
these fees. The Fund will enter into an agreement with each
Service Organization which purchases Dollar Shares requiring
it to provide support services to its customers who are the
beneficial owners of such shares in consideration of the
Fund's payment of .25% (on an annualized basis) of the
average daily net asset value of the Dollar Shares held by
the Service Organization for the benefit of customers. Such
services, which are described more fully in the Statement of
Additional Information under "Management of the Fund Service
Organizations," include aggregating and processing purchase
and redemption requests from customers and placing net
purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers;
providing information periodically to customers showing
their positions in Dollar Shares; and providing sub-
accounting or the information necessary for sub-accounting
with respect to Dollar Shares beneficially owned by
customers. Under the terms of the agreements, Service
Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in
connection with their investments in Dollar Shares. Federal
Trust Fund Shares are sold to institutions that have not
entered into servicing agreements with the Fund in
connection with their investments.
Dividends and The Fund declares dividends daily and distributes
Distributions substantially all of its net investment income to
shareholders monthly. Shares begin accruing dividends on the
day the purchase order for the shares is effected and
continue to accrue dividends through the day before such
shares are redeemed. Dividends are paid monthly by check, or
by wire transfer if requested in writing by the shareholder,
within five business days after the end of the month or
within five business days after a redemption of all of a
shareholder's shares of a particular class.
Dividends are determined in the same manner for each
class of shares of the Fund. Federal Trust Fund Dollar
Shares bear all the expense of fees paid to Service
Organizations, and as a result, at any given time, the
dividend on Federal Trust Fund Dollar Shares will be
approximately .25% lower than the dividend on Federal Trust
Fund Shares.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date.
12
<PAGE>
Reinvested dividends receive the same tax treatment as
dividends paid in cash. Reinvestment elections, and any
revocations thereof, must be made in writing to PFPC, the
Fund's transfer agent, at P.O. Box 8950, Wilmington,
Delaware 19885-9628 and will become effective after its
receipt by PFPC with respect to dividends paid.
Taxes The Fund's distributions will generally be taxable to
shareholders. The Fund expects that all, or substantially
all, of its distributions will consist of ordinary income.
You will be subject to income tax on these distributions
regardless whether they are paid in cash or reinvested in
additional shares.
To the extent permissible by federal and state law, the
Fund is structured to provide shareholders with income that
is exempt or excluded from taxation at the state and local
level. Substantially all dividends paid to shareholders
residing in certain states will be exempt or excluded from
state income tax. Many states, by statute, judicial decision
or administrative action, have taken the position that
dividends of a regulated investment company such as the Fund
that are attributable to interest on obligations of the U.S.
Treasury and certain U.S. Government agencies and
instrumentalities are the functional equivalent of interest
from such obligations and are, therefore, exempt from state
and local income taxes. Investors should be aware of the
application of their state and local tax laws to investments
in the Fund.
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal tax
treatment.
Dividends declared in December of any year, and payable
to shareholders of record on a specified date in December,
will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of such year in the event
such dividends are actually paid during January of the
following year.
You should consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
13
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are incorporated by reference into the
Statement of Additional Information and included in the Annual Report, each of
which is available upon request.
Federal Trust
Fund Shares
The table below sets forth selected financial data for a Federal Trust Fund
Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0529 .0521 .0523 .0563 .0380
Net Gains or Losses on
Securities (both
realized
and unrealized) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total From Investment
Operations .0529 .0521 .0523 .0563 .0380
- ------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0529) (.0521) (.0523) (.0563) (.0380)
Distributions (from
capital gains) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total Distributions (.0529) (.0521) (.0523) (.0563) (.0380)
- ------------------------------------------------------------------------------------
Net Asset Value End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Return 5.42% 5.33% 5.35% 5.77% 3.87%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Year (000's) $280,580 $229,292 $273,752 $237,718 $317,769
Ratio of Expenses to
Average Daily Net
Assets .20%(1) .20%(1) .19%(1) .18%(1) .18%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 5.29% 5.21% 5.22% 5.61% 3.85%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for Federal Trust Fund Shares would
have been .29% for the year ended October 31, 1998, .31% for the years
ended October 31, 1997 and 1996, .32% for the year ended October 31, 1995
and .31% for the year ended October 31, 1994.
14
<PAGE>
Financial Highlights (Continued) _______________________________________________
Federal Trust Fund Dollar Shares
The table below sets forth selected financial data for a Federal Trust Fund
Dollar Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0504 .0496 .0498 .0538 .0355
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- -------------------------------------------------------------------------------
Total From Investment
Operations .0504 .0496 .0498 .0538 .0355
- -------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0504) (.0496) (.0498) (.0538) (.0355)
Distributions (from
capital gains) -- -- -- -- --
- -------------------------------------------------------------------------------
Total Distributions (.0504) (.0496) (.0498) (.0538) (.0355)
- -------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Return 5.17% 5.08% 5.10% 5.52% 3.62%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Year (000's) $38,633 $38,700 $26,875 $28,402 $ 8,278
Ratio of Expenses to
Average Daily Net
Assets .45%(1) .45%(1) .44%(1) .43%(1) .43%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 5.04% 4.96% 4.97% 5.36% 3.60%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for Federal Trust Fund Dollar Shares
would have been .54% for the year ended October 31, 1998, .56% for the
years ended October 31, 1997 and 1996, .57% for the year ended October 31,
1995 and .56% for the year ended October 31, 1994.
15
<PAGE>
Where to Find More Information _______________________________________________
The Statement of Additional Information (the "SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make shareholder
inquiries, by calling 1-800-821-7432. Other information is available on the
Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. Information about the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. Reports and other information
about the Fund are available on the SEC's Internet site at http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
Federal
Trust Fund
An Investment Portfolio offered by
Provident Institutional Funds
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10, 1999
PIF-P-005
<PAGE>
MuniFund
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park For purchase and redemption orders only call: 800-441-
Corporate Center 7450 (in Delaware: 302-791-5350). For yield
400 Bellevue Parkway information call: 800-821-6006 (MuniFund Shares code:
Wilmington, DE 19809 50; MuniFund Administration Shares Code: K1; MuniFund
Dollar Shares code: 59; MuniFund Plus Shares code: K4;
MuniFund Cash Reserve Shares code: K2; MuniFund Cash
Management Shares code: K3). For other information
call: 800-821-7432 or visit our web site at
www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 3
Performance Information.................................................. 4
Fees and Expenses........................................................ 6
Investment Strategies And Risk Disclosure.................................. 7
Management of the Fund..................................................... 10
Shareholder Information.................................................... 11
Price of Fund Shares..................................................... 11
Purchase of Shares....................................................... 11
Redemption of Shares..................................................... 12
Distribution and Shareholder Service Plans............................... 13
Dividends and Distributions.............................................. 14
Taxes.................................................................... 14
Financial Highlights....................................................... 16
</TABLE>
2
<PAGE>
Risk/Return Summary ____________________________________________________________
Investment The Fund seeks as high a level of current interest income
Goal: exempt from federal income tax as is consistent with
relative stability of principal.
Investment The Fund invests in a broad range of short-term tax-exempt
Policies: obligations issued by or on behalf of states, territories,
and possessions of the United States, the District of
Columbia, and their respective authorities, agencies,
instrumentalities, and political subdivisions and tax-exempt
derivative securities such as tender option bonds,
participations, beneficial interests in trusts and
partnership interests (collectively, "Municipal
Obligations").
Principal Risks Although the Fund invests in money market instruments which
of Investing: the investment adviser, BlackRock Institutional Management
Corporation ("BIMC," or the "Adviser") believes present
minimal credit risks at the time of purchase, there is a
risk that an issuer may not be able to make principal and
interest payments when due. The Fund is also subject to
risks related to changes in prevailing interest rates, since
generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest
rates rise.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
Who May Want to The Fund is designed for institutional investors seeking as
Invest in the high a level of current interest income exempt from federal
Fund: income tax as is consistent with relative stability of
principal. The Fund is particularly suitable for banks,
corporations and other financial institutions that seek
investment of short-term funds for their own accounts or for
the accounts of their customers.
3
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
[PERFORMANCE CHART APPEARS HERE]
Annualized
Year Returns
---- ----------
1989 5.99
1990 5.40
1991 3.78
1992 2.48
1993 2.21
1994 2.61
1995 3.68
1996 3.27
1997 3.45
1998 3.28
During the ten-year period shown in the bar chart, the highest quarterly
return was 6.49% (for the quarter ended March 31, 1989) and the lowest
quarterly return was 2.09% (for the quarter ended December 31, 1993).
4
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1998
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
MuniFund Shares...................................... 3.28% 3.20% 3.61%
MuniFund Dollar Shares............................... 3.03% 2.95% 3.36%
IBC's Money Fund Report: Tax-Free Institutions--Only
Money Fund Average*................................. 3.20% 3.20% 3.71%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
MuniFund Shares............................................ 3.51%
MuniFund Dollar Shares..................................... 3.26%
IBC's Money Fund Report: Tax-Free Institutions--Only Money
Fund Average*............................................. 3.25%
- -------------------------------------------------------------------------------
</TABLE>
Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management
Shares have not yet commenced operations, therefore no performance information
has been provided for these classes.
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC's Money Fund Report: Tax-Free Institutions--Only Money Fund Average is
comprised of institutional money market funds investing in obligations of
tax-exempt entities, including state and municipal authorities.
5
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- ------------------------------------------------------------------------------------------------
MuniFund
--------
MuniFund MuniFund
MuniFund MuniFund MuniFund Cash Cash
MuniFund Administration Dollar Plus Reserves Management
Shares Shares Shares Shares Shares Shares
--------- --------------- --------- ----------- ----------- -----------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C>
Management Fees........ .17% .17% .17% .17% .17% .17%
Distribution (12b-1)
Fees.................. -- -- -- .25% -- --
Other Expenses......... .24% .34% .49% .24% .64% .74%
Administration Fees... .17% .17% .17% .17% .17% .17%
Shareholder Servicing
Fees.................. -- -- .25% -- .25% .25%
Miscellaneous......... .07% .17% .07% .07% .22% .32%
- ------------------------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(1). .41% .51% .66% .66% .81% .91%
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for MuniFund Shares and MuniFund
Dollar Shares for the fiscal year ended November 30, 1998, with fee
waivers, were .27% and .52%, respectively, of the Fund's average net
assets. Total Annual Fund Operating Expenses for MuniFund Administration
Shares, MuniFund Plus Shares, MuniFund Cash Reserve Shares and MuniFund
Cash Management Shares for the fiscal year ended November 30, 1998, with
fee waivers, would have been .37% (estimated), .52% (estimated), .67%
(estimated) and .77% (estimated), respectively, of the Fund's average net
assets. The Adviser and PFPC Inc., the Fund's co-administrator, may from
time to time waive the investment advisory and administration fees
otherwise payable to them or may reimburse the Fund for its operating
expenses. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
MuniFund
--------
MuniFund MuniFund
MuniFund MuniFund MuniFund Cash Cash
MuniFund Administration Dollar Plus Reserves Management
Shares Shares Shares Shares Shares Shares
-------- -------------- -------- ----------- ----------- -----------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C>
One Year................ $ 42 $ 52 $ 67 $ 67 $ 83 $ 93
Three years............. $132 $164 $211 $211 $ 259 $ 290
Five Years.............. $230 $285 $368 $368 $ 450 $ 504
Ten Years............... $518 $640 $822 $822 $1,002 $1,120
- ---------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Investment
Strategies and
Risk Disclosure ________________________________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to seek as high a level of current interest
income exempt from federal income tax as is consistent with
relative stability of principal. The Fund's investment
objective may be changed by the Board of Trustees without
shareholder approval. The Fund invests substantially all its
assets in a diversified portfolio of Municipal Obligations.
The Fund will not knowingly purchase securities the interest
on which is subject to regular federal income tax.
Except during periods of unusual market conditions or
during temporary defensive periods, the Fund invests
substantially all, but in no event less than 80% of its
total assets in Municipal Obligations with remaining
maturities of 13 months or less as determined in accordance
with the rules of the Securities and Exchange Commission.
The Fund may hold uninvested cash reserves pending
investment, during temporary defensive periods or if, in the
opinion of the Adviser, suitable tax-exempt obligations are
unavailable. There is no percentage limitation on the amount
of assets which may be held uninvested. Uninvested cash
reserves will not earn income. The securities purchased by
the Fund are also subject to the quality, diversification,
and other requirements of Rule 2a-7 under the Investment
Company Act of 1940, as amended, and other rules of the SEC.
Pursuant to Rule 2a-7, the Fund generally will limit its
purchase of any one issuer's securities (other than U.S.
Government securities, repurchase agreements collaterialized
by such securities and securities subject to certain
guarantees or otherwise providing a right to demand payment)
to 5% of the Fund's total assets, except that up to 25% of
its total assets may be invested in the securities of one
issuer for a period of up to three business days; provided
that the Fund may not invest more than 25% of its total
assets in the securities of more than one issuer in
accordance with the foregoing at any one time.
The Fund will only purchase securities that present
minimal credit risk as determined by the Adviser pursuant to
guidelines approved by the Board of Trustees of Provident
Institutional Funds. Securities purchased by the Fund (or
the issuers of such securities) will be First Tier Eligible
Securities. Applicable First Tier Eligible Securities are:
. securities that have short-term debt ratings at the time
of purchase (or which are guaranteed or in some cases
otherwise supported by guarantees or other credit supports
with such ratings) in the highest rating category by at
least two
7
<PAGE>
unaffiliated nationally recognized statistical rating
organizations ("NRSROs") (or one NRSRO if the security or
guarantee was rated by only one NRSRO);
. securities that are issued or guaranteed by a person with
such ratings;
. securities without such short-term ratings that have been
determined to be of comparable quality by the Adviser
pursuant to guidelines approved by the Board of Trustees;
or
. securities issued by other open-end investment companies
that invest in the type of obligations in which the Fund
may invest.
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
Municipal The Fund may purchase Municipal Obligations which are
Obligations classified as "general obligation" securities and "revenue"
securities. Revenue securities include private activity
bonds which are not payable from the unrestricted revenues
of the issuer. Consequently, the credit quality of private
activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
While interest paid on private activity bonds will be exempt
from regular federal income tax, it may be treated as a
specific tax preference item under the federal alternative
minimum tax. The portfolio may also include "moral
obligation" bonds.
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Variable and The Fund may purchase variable or floating rate notes, which
Floating Rate are instruments that provide for adjustments in the interest
Instruments rate on certain reset dates or whenever a specified interest
rate index changes, respectively.
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed funds will be
greater then the cost of the borrowing. Such borrowings will
be unsecured. The Fund will not purchase portfolio
securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
8
<PAGE>
When-Issued The Fund may purchase Municipal Obligations on a "when-
and Delayed issued" or "delayed settlement" basis. The Fund expects that
commitments to purchase when-issued or delayed settlement
securities will not exceed 25% of the value of its total
assets absent unusual market conditions. The Fund does not
intend to purchase when-issued or delayed settlement
securities for speculative purposes but only in furtherance
of its investment objective. The Fund receives no income
from when-issued or delayed settlement securities prior to
delivery of such securities.
Settlement The Fund may acquire "stand-by commitments" with respect to
Transactions Municipal Obligations held in its portfolio. The Fund will
Stand-by acquire stand-by commitments solely to facilitate portfolio
Commitments liquidity and does not intend to exercise its rights
thereunder for trading purposes.
Illiquid The Fund will not invest more than 10% of the value of its
Securities total assets in illiquid securities, including time deposits
and repurchase agreements having maturities longer than
seven days. Securities that have readily available market
quotations are not deemed illiquid for purposes of this
limitation.
Other Types of This Prospectus describes the Fund's principal investment
Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. These supplemental investment strategies are described
in detail in the Statement of Additional Information, which
is referred to on the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
government securities are generally considered to be the
safest type of investment in terms of credit risk. Municipal
obligations generally rank between U.S. government
securities and corporate debt securities in terms of credit
safety. Credit quality ratings published by an NRSRO are
widely accepted measures of credit risk. The lower a
security is rated by an NRSRO, the more credit risk it is
considered to represent.
9
<PAGE>
Other Risks Certain investment strategies employed by the Fund may
involve additional investment risk. Liquidity risk involves
certain securities which may be difficult or impossible to
sell at the time and the price that the Fund would like.
Municipal Opinions relating to the validity of Municipal Obligations
Obligations and to the exemption of interest thereon from federal income
tax are rendered by bond counsel to the respective issuers
at the time of issuance, and opinions relating to the
validity of and the tax-exempt status of payments received
by the Fund for tax-exempt derivative securities are
rendered by counsel to the respective sponsors of such
securities. The Adviser will rely on such opinions and will
not review independently the underlying proceedings relating
to the issuance of Municipal Obligations, the creation of
any tax-exempt derivative securities, or the bases for such
opinions.
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that they
are actively taking steps to address the Year 2000 Problem
with respect to the computer systems that they use and to
obtain assurances that comparable steps are being taken by
the Fund's other major service providers. While there can be
assurance that the Fund's service providers will be Year
2000 compliant, the Fund's service providers expect that
their plans to be compliant will be achieved.
Management of the Fund _________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser,
with its affiliates, is one of the largest U.S. bank
managers of mutual funds, with assets currently under
management in excess of $46 billion. BIMC (formerly known as
PNC Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC,
10
<PAGE>
the co-administrator, may from time to time reduce the
investment advisory and administration fees otherwise
payable to them or may reimburse the Fund for its operating
expenses. Any fees waived and any expenses reimbursed by
BIMC and PFPC with respect to a particular fiscal year are
not recoverable. For the fiscal year ended November 30,
1998, the Fund paid investment advisory fees and
administration fees each aggregating .09% (net of waivers)
of its average net assets. The services provided by BIMC and
the fees payable by the Fund for these services are
described further in the Statement of Additional Information
under "Management of the Funds."
Shareholder Information ________________________________________________________
Price of Fund The Fund's net asset value per share for purposes of pricing
Shares purchase and redemption orders is determined by PFPC Inc.
("PFPC"), the Funds co-administrator, as of 12:00 noon and
4:00 P.M., Eastern time, on each day on which both the New
York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day"). The
net asset value per share of each class of the Fund's shares
is calculated by adding the value of all securities and
other assets of the Fund that are allocable to a particular
class, subtracting liabilities charged to such class, and
dividing the result by the total number of outstanding
shares of such class. In computing net asset value, the Fund
uses the amortized cost method of valuation as described in
the Statement of Additional Information under "Additional
Purchase and Redemption Information." Under the 1940 Act,
the Fund may postpone the date of payment of any redeemable
security for up to seven days.
Purchase of Fund shares are sold at the net asset value per share next
Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted
before 12:00 noon, Eastern time, for which payment has been
received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Fund's custodian, PFPC Trust Company, will be executed at
12:00 noon. Orders accepted after 12:00 noon and before 2:30
P.M., Eastern time (or orders accepted earlier in the same
day for which payment has not been received by 12:00 noon),
will be executed at 4:00 P.M., Eastern time, if payment has
been received by PNC Bank by that time. Orders received at
other times, and orders for which payment has not been
received by 4:00 P.M., Eastern time, will not be accepted,
and notice thereof will be given to the institution placing
the order.
11
<PAGE>
(Payment for orders which are not received or accepted will
be returned after prompt inquiry to the sending
institution.) The Fund may in its discretion reject any
order for shares.
Payment for Fund shares may be made only in federal funds
or other funds immediately available to PNC Bank. The
minimum initial investment by an institution is $3 million
for MuniFund Shares; there is no minimum initial investment
for Administration Shares, Dollar Shares, Plus Shares, Cash
Reserve Shares or Cash Management Shares, however, broker-
dealers and other institutional investors may set a minimum
for their customers. There is no minimum subsequent
investment. The Fund, at its discretion, may reduce the
minimum initial investment for MuniFund Shares for specific
institutions whose aggregate relationship with the Provident
Institutional Funds is substantially equivalent to this $3
million minimum and warrants this reduction.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with an
institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the Fund
in accordance with its customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in
MuniFund Administration Shares, MuniFund Dollar Shares,
MuniFund Plus Shares, MuniFund Cash Reserve Shares and
MuniFund Cash Management Shares. (See also "Management of
the Fund--Service Organizations," as described in the
Statement of Additional Information.) Institutions,
including banks regulated by the Comptroller of the Currency
and investment advisers and other money managers subject to
the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult their
legal advisors before investing fiduciary funds in MuniFund
Administration Shares, MuniFund Dollar Shares, MuniFund Plus
Shares, MuniFund Cash Reserve Shares and MuniFund Cash
Management Shares. (See also "Management of the Fund--
Banking Laws," as described in the Statement of Additional
Information.)
Redemption of Redemption orders must be transmitted to PFPC in Wilmington,
Shares Delaware in the manner described under "Purchase of Shares."
Shares are redeemed at the net asset value per share next
determined after PFPC's receipt of the redemption order.
While the Fund intends to use its best efforts to maintain
its net asset value per share at
12
<PAGE>
$1.00, the proceeds paid to a shareholder upon redemption
may be more or less than the amount invested depending upon
a share's net asset value at the time of redemption. Call 1-
800-441-7450 (in Delaware: 302-791-5350) to place redemption
orders.
Payment for redeemed shares for which a redemption order
is received by PFPC by 12:00 P.M., Eastern time, on a
Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment for
redemption orders which are received between 12:00 noon and
4:00 P.M., Eastern time, or on a day when PNC Bank is
closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any
account if the value of the account is less than $1,000
after sixty-days' prior written notice to the shareholder.
Any such redemption shall be effected at the net asset value
next determined after the redemption order is entered. If
during the sixty-day period the shareholder increases the
value of its account to $1,000 or more, no such redemption
shall take place. Moreover, if a shareholder's MuniFund
Shares account falls below an average of $100,000 in any
particular calendar month, the account may be charged an
account maintenance fee with respect to that month. In
addition, the Fund may also redeem shares involuntarily
under certain special circumstances described in the
Statement of Additional Information under "Additional
Purchase and Redemption Information."
Distribution The Fund offers six classes of shares. The difference
and Shareholder between the classes of shares is the fees borne by a class
Service Plans of shares pursuant to separate fee plans adopted by each
class. MuniFund Shares do not bear any fees for
distribution, servicing, shareholder servicing, sweep fees
or cash sweep marketing services. The fees borne by the
other classes are as follows:
-------------------------------------------------------------
<TABLE>
<CAPTION>
Cash
Shareholder Cash Sweep
Service Service 12B-1 Sweep Marketing Total
Class Fee Fee Fee Fee Fee Fees
------------------------ ------- ----------- --------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Administration Shares... .10% -- -- -- -- .10%
Dollar Shares........... -- .25% -- -- -- .25%
Plus Shares............. -- -- .25% -- -- .25%
Cash Reserve Shares..... .10% .25% -- .05% -- .40%
Cash Management Shares.. .10% .25% -- .05% .10% .50%
----------------------------------------------------------------------------------------------------
</TABLE>
Service Fees are paid for general shareholder liaison
services. Shareholder Service Fees are paid for services
relating to the processing and administration of
13
<PAGE>
shareholder accounts. The Fund has adopted a plan pursuant
to Rule 12b-1. 12b-1 Fees are paid for distribution and
sales support, and shareholder services. Cash Sweep Fees are
paid for providing a sweep service into the Fund. Cash Sweep
Marketing Fees are paid for providing marketing
administrative activities in connection with the sweep
program.
Shares of the Fund are not sold to individuals, but may
be sold to the following entities, which hold the shares for
the accounts of their customers. Administration Shares,
Dollar Shares, Cash Reserve Shares and Cash Management
Shares are sold to institutional investors such as banks,
saving and loan associations, and other financial
institutions, including affiliates of PNC Bank Corp.
("Service Organizations"). Plus Shares are sold to broker-
dealers. Because fees associated with the distribution
and/or shareholder service plans are paid out of the Fund's
assets on an ongoing basis, over time holders of the share
classes described above may pay more than the economic
equivalent of the maximum front-end sales charge permitted
by NASD Regulation, Inc.
Dividends and The Fund declares dividends daily and distributes
Distributions substantially all of its net investment income to
shareholders monthly. Shares begin accruing dividends on the
day the purchase order for the shares is effected and
continue to accrue dividends through the day before such
shares are redeemed. Dividends are paid monthly by check, or
by wire transfer if requested in writing by the shareholder,
within five business days after the end of the month or
within five business days after a redemption of all of a
shareholder's shares of a particular class.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Reinvestment
elections, and any revocations thereof, must be made in
writing to PFPC, the Fund's transfer agent, at P.O. Box
8950, Wilmington, Delaware 19885-9628 and will become
effective after its receipt by PFPC with respect to
dividends paid.
Taxes The Fund's distributions will generally constitute tax-
exempt income for shareholders for federal income tax
purposes. It is possible, depending upon the Fund's
investments, that a portion of the Fund's distributions
could be taxable to shareholders as ordinary income or
capital gains, but the Fund does not expect that this will
be the case. Moreover, although the distributions are exempt
for federal
14
<PAGE>
income tax purposes, they will generally constitute taxable
income for state and local income tax purposes except that,
subject to limitations that vary depending on the state,
distributions from interest paid by a state or municipal
entity may be exempt from tax in that state.
Interest on indebtedness incurred by a shareholder to
purchase or carry shares of the Fund generally will not be
deductible for federal income tax purposes.
You should note that a portion of the exempt-interest
dividends paid by the Fund may constitute an item of tax
preference for purposes of determining federal alternative
minimum tax liability. Exempt-interest dividends will also
be considered along with other adjusted gross income in
determining whether any Social Security or railroad
retirement payments received by you are subject to federal
income taxes.
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal tax
treatment.
Dividends declared in December of any year, and payable
to shareholders of record on a specified date in December,
will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of such year in the event
such dividends are actually paid during January of the
following year.
You should also consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
15
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the Fund's
financial statements, are incorporated by reference into the Statement of
Additional Information and included in the Annual Report, each of which is
available upon request. Administration Shares, Plus Shares, Cash Reserve Shares
and Cash Management Shares have not yet commenced operations, therefore no
financial information has been provided for these classes.
MuniFund Shares
The table below sets forth selected financial data for a MuniFund Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended November 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0327 .0338 .0326 .0360 .0255
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total From Investment
Operations .0327 .0338 .0326 .0360 .0255
- ------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0327) (.0338) (.0326) (.0360) (.0255)
Distributions (from
capital gains) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total Distributions (.0327) (.0338) (.0326) (.0360) (.0255)
- ------------------------------------------------------------------------------------
Net Asset Value End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Return 3.32% 3.43% 3.31% 3.66% 2.58%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Year (000's) $467,760 $536,794 $530,204 $720,318 $687,895
Ratio of Expenses to
Average Daily Net
Assets .25%(1) .27%(1) .27%(1) .27%(1) .26%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 3.26% 3.38% 3.26% 3.59% 2.53%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for MuniFund Shares would have been
.41% for the years ended November 30, 1998 and 1997, .42% for the year
ended November 30, 1996 and .41% for the years ended November 30, 1995 and
1994, respectively.
16
<PAGE>
Financial Highlights (Continued) _______________________________________________
MuniFund Dollar Shares
The table below sets forth selected financial data for a MuniFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended November 30,
---------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0302 .0313 .0301 .0335 .0230
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- -------------------------------------------------------------------------------
Total From Investment
Operations .0302 .0313 .0301 .0335 .0230
- -------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0302) (.0313) (.0301) (.0335) (.0230)
Distributions (from
capital gains) -- -- -- -- --
- -------------------------------------------------------------------------------
Total Distributions (.0302) (.0313) (.0301) (.0335) (.0230)
- -------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Return 3.07% 3.18% 3.06% 3.41% 2.33%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Year (000's) $51,736 67,387 $ 61,396 $ 6,474 $ 2,785
Ratio of Expenses to
Average Daily Net
Assets .50%(1) .52%(1) .52%(1) .52%(1) .51%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 3.01% 3.13% 3.01% 3.34% 2.28%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for MuniFund Dollar Shares would have
been .66% for the years ended November 30, 1998 and 1997, .67% for the year
ended November 30, 1996 and .66% for the years ended November 30, 1995 and
1994, respectively.
17
<PAGE>
Where to Find More Information________________________________________________
The Statement of Additional Information (the "SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make shareholder
inquiries, by calling 1-800-821-7432. Other information is available on the
Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. Information about the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. Reports and other information
about the Fund are available on the SEC's Internet site at http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
MuniFund
An Investment Portfolio offered by
Provident Institutional Funds
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10, 1999
PIF-P-009
<PAGE>
MuniCash
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park For purchase and redemption orders only call:
Corporate Center 800-441-7450 (in Delaware: 302-791-5350). For yield
400 Bellevue Parkway information call: 800-821-6006 (MuniCash Shares code:
Wilmington, DE 19809 48; MuniCash Dollar Share code: 54). For other
information call: 800-821-7432 or visit our web site
at www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 3
Performance Information.................................................. 4
Fees and Expenses........................................................ 6
Investment Strategies and Risk Disclosure.................................. 7
Management of the Fund..................................................... 11
Shareholder Information.................................................... 11
Price of Fund Shares..................................................... 11
Purchase of Shares....................................................... 12
Redemption of Shares..................................................... 13
Shareholder Service Plan................................................. 13
Dividends and Distributions ............................................. 14
Taxes.................................................................... 15
Financial Highlights....................................................... 16
</TABLE>
2
<PAGE>
Risk/Return Summary ____________________________________________________________
Investment The Fund seeks as high a level of current interest income
Goal: exempt from federal income tax as is consistent with
relative stability of principal.
Investment The Fund invests in a broad range of short-term tax-exempt
Policies: obligations issued by or on behalf of states, territories,
and possessions of the United States, the District of
Columbia, and their respective authorities, agencies,
instrumentalities, and political subdivisions and tax-exempt
derivative securities such as tender option bonds,
participations, beneficial interests in trusts and
partnership interests (collectively, "Municipal
Obligations").
Principal Risks Although the Fund invests in money market instruments which
of Investing: the investment adviser, BlackRock Institutional Management
Corporation ("BIMC," or the "Adviser") believes present
minimal credit risks at the time of purchase, there is a
risk that an issuer may not be able to make principal and
interest payments when due. The Fund is also subject to
risks related to changes in prevailing interest rates, since
generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest
rates rise.
Although the Fund intends to invest its assets in tax-
exempt obligations, the Fund is permitted to invest in
private activity bonds and other securities which may be
subject to the federal alternative minimum tax.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund.
Who May Want to The Fund is designed for institutional investors seeking as
Invest in the high a level of current interest income exempt from federal
Fund: income tax as is consistent with relative stability of
principal. The Fund is particularly suitable for banks,
corporations and other financial institutions that seek
investment of short-term funds for their own accounts or for
the accounts of their customers.
3
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
MuniCash Shares
[CHART APPEARS HERE]
Annualized
Years Returns
------ ----------
1989 6.31
1990 5.94
1991 4.46
1992 2.91
1993 2.34
1994 2.83
1995 3.91
1996 3.51
1997 3.65
1998 3.47
During the ten-year period shown in the bar chart, the highest quarterly
return was 6.76% (for the quarter ended June 30, 1989) and the lowest quarterly
return was 2.25% (for the quarter ended March 31, 1994).
4
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
MuniCash Shares....................................... 3.47% 3.42% 3.93%
MuniCash Dollar Shares................................ 3.22% 3.17% 3.68%
IBC's Money Fund Report: Tax-Free Institutions--Only
Money Fund Average*.................................. 3.25% 3.20% 3.71%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
MuniCash Shares............................................ 3.56%
MuniCash Dollar Shares..................................... 3.31%
IBC's Money Fund Report: Tax-Free Institutions--Only Money
Fund Average*............................................. 3.25%
- -------------------------------------------------------------------------------
</TABLE>
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC's Money Fund Report: Tax-Free Institutions--Only Money Fund Average is
comprised of institutional money market funds investing in obligations of
tax-exempt entities, including state and municipal authorities.
5
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MuniCash
--------
MuniCash MuniCash
Shares Dollar Shares
-------- ------------- ----
<S> <C> <C> <C> <C>
Management Fees....................... .18% .18%
Other Expenses........................ .22% .47%
Administration Fees................. .18% .18%
Shareholder Servicing Fees.......... -- .25%
Miscellaneous....................... .04% .04%
- -------------------------------------------------------------------------------
Total Annual Fund Operating
Expenses(1).......................... .40% .65%
- -------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for MuniCash Shares and MuniCash
Dollar Shares for the fiscal year ended November 30, 1998, with fee
waivers, were .18% and .43%, respectively, of the Fund's average net
assets. The Adviser and PFPC Inc., the Fund's co-administrator, may from
time to time waive the investment advisory and administration fees
otherwise payable to them or may reimburse the Fund for its operating
expenses. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
MuniCash
--------
MuniCash MuniCash
Shares Dollar Shares
-------- -------------
<S> <C> <C>
One Year................................................. $ 41 $ 66
Three years.............................................. $128 $208
Five Years............................................... $224 $362
Ten Years................................................ $505 $810
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Investment
Strategies and
Risk Disclosure ________________________________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to seek as high a level of current interest
income exempt from federal income tax as is consistent with
relative stability of principal. The Fund's investment
objective may be changed by the Board of Trustees without
shareholder approval. The Fund invests substantially all of
its assets in a diversified portfolio of Municipal
Obligations. The Fund will not knowingly purchase securities
the interest on which is subject to regular federal income
tax.
Except during periods of unusual market conditions or
during temporary defensive periods, the Fund invests
substantially all, but in no event less than 80% of its
total assets in Municipal Obligations with remaining
maturities of 13 months or less as determined in accordance
with the rules of the Securities and Exchange Commission.
The Fund may hold uninvested cash reserves pending
investment, during temporary defensive periods or if, in the
opinion of the Adviser, suitable tax-exempt obligations are
unavailable. There is no percentage limitation on the amount
of assets which may be held uninvested. Uninvested cash
reserves will not earn income. The securities purchased by
the Fund are also subject to the quality, diversification,
and other requirements of Rule 2a-7 under the Investment
Company Act of 1940, as amended, and other rules of the SEC.
Pursuant to Rule 2a-7, the Fund generally will limit its
purchase of any one issuer's securities (other than U.S.
Government securities, repurchase agreements collaterialized
by such securities and securities subject to certain
guarantees or otherwise providing the right to demand
payment) to 5% of the Fund's total assets, except that up to
25% of its total assets may be invested in the securities of
one issuer for a period of up to three business days;
provided that the Fund may not invest more than 25% of its
total assets in the securities of more than one issuer in
accordance with the foregoing at any one time.
The Fund will only purchase securities that present
minimal credit risk as determined by the Adviser pursuant to
guidelines approved by the Board of Trustees of Provident
Institutional Funds. Securities purchased by the Fund (or
the issuers of such securities) will be Eligible Securities.
Applicable Eligible Securities are:
. securities that have short-term debt ratings at the time
of purchase (or which are guaranteed or in some cases
otherwise supported by guarantees or other credit
supports with such ratings) in the two highest rating
categories by at least two unaffiliated nationally
recognized statistical rating organizations ("NRSROs")
(or one NRSRO if the security or guarantee was rated by
only one NRSRO);
7
<PAGE>
. securities that are issued or guaranteed by a person with
such ratings;
. securities without such short-term ratings that have been
determined to be of comparable quality by the Adviser
pursuant to guidelines approved by the Board of Trustees;
or
. shares of other open-end investment companies that invest
in the type of obligations in which the Fund may invest.
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
Municipal The Fund may purchase Municipal Obligations which are
Obligations classified as "general obligation" securities and "revenue"
securities. Revenue securities include private activity
bonds which are not payable from the unrestricted revenues
of the issuer. Consequently, the credit quality of private
activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
While interest paid on private activity bonds will be exempt
from regular federal income tax, it may be treated as a
specific tax preference item under the federal alternative
minimum tax. The portfolio may also include "moral
obligation" bonds.
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Variable and The Fund may purchase variable or floating rate notes, which
Floating Rate are instruments that provide for adjustments in the interest
Instruments rate on certain reset dates or whenever a specified interest
rate index changes, respectively.
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed funds will be
greater than the cost of the borrowing. Such borrowings will
be unsecured. The Fund will not purchase portfolio
securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
When-Issued and The Fund may purchase Municipal Obligations on a "when-
Delayed issued" or "delayed settlement" basis. The Fund expects that
Settlement commitments to purchase when-issued or
Transactions
8
<PAGE>
delayed settlement securities will not exceed 25% of the
value of its total assets absent unusual market conditions.
The Fund does not intend to purchase when-issued or delayed
settlement securities for speculative purposes but only in
furtherance of its investment objective. The Fund receives
no income from when-issued or delayed settlement securities
prior to delivery of such securities.
Illiquid The Fund will not invest more than 10% of the value of its
Securities total assets in illiquid securities, including time deposits
and repurchase agreements having maturities longer than
seven days. Securities that have readily available market
quotations are not deemed illiquid for purposes of this
limitation.
Stand-by The Fund may acquire "stand-by commitments" with respect to
Commitments Municipal Obligations held in its portfolio. The Fund will
acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights
thereunder for trading purposes.
Other Types of This Prospectus describes the Fund's principal investment
Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. These supplemental investment strategies are described
in detail in the Statement of Additional Information, which
is referred to on the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
government securities are generally considered to be the
safest type of investment in terms of credit risk. Municipal
obligations generally rank between U.S. government
securities and corporate debt securities in terms of credit
safety. Credit quality ratings published by an NRSRO are
widely accepted measures of credit risk. The lower a
security is rated by an NRSRO, the more credit risk it is
considered to represent.
9
<PAGE>
Other Risks Certain investment strategies employed by the Fund may
involve additional investment risk. Liquidity risk involves
certain securities which may be difficult or impossible to
sell at the time and the price that the Fund would like.
Municipal Opinions relating to the validity of Municipal Obligations
Obligations and to the exemption of interest thereon from federal income
tax are rendered by bond counsel to the respective issuers
at the time of issuance, and opinions relating to the
validity of and the tax-exempt status of payments received
by the Fund for tax-exempt derivative securities are
rendered by counsel to the respective sponsors of such
securities. The Adviser will rely on such opinions and will
not review independently the underlying proceedings relating
to the issuance of Municipal Obligations, the creation of
any tax-exempt derivative securities, or the bases for such
opinions.
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that they
are actively taking steps to address the Year 2000 Problem
with respect to the computer systems that they use and to
obtain assurances that comparable steps are being taken by
the Fund's other major service providers. While there can be
no assurance that the Fund's service providers will be Year
2000 compliant, the Fund's service providers expect that
their plans to be compliant will be achieved.
10
<PAGE>
Management of the Fund _________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser
and its affiliates are one of the largest U.S. bank managers
of mutual funds, with assets currently under management in
excess of $46 billion. BIMC (formerly known as PNC
Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC, the co-administrator, may
from time to time reduce the investment advisory and
administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. Any fees
waived and any expenses reimbursed by BIMC and PFPC with
respect to a particular fiscal year are not recoverable. For
the fiscal year ended September 30, 1998, the Fund paid
investment advisory fees and administration fees each
aggregating .07% (net of waivers) of its average net assets.
The services provided by BIMC and the fees payable by the
Fund for these services are described further in the
Statement of Additional Information under "Management of the
Funds."
Shareholder Information ________________________________________________________
Price of Fund
Shares The Fund's net asset value per share for purposes of pricing
purchase and redemption orders is determined by PFPC Inc.
("PFPC"), the Funds co-administrator, as of 12:00 noon and
4:00 P.M., Eastern time, on each day on which both the New
York Stock Exchange and the Federal Reserve Bank of
Philadelphia are open for business (a "Business Day"). The
net asset value per share of each class of the Fund's shares
is calculated by adding the value of all securities and
other assets of the Fund that are allocable to a particular
class, subtracting liabilities charged to such class, and
dividing the result by the total number of outstanding
shares of such class. In computing net asset value, the Fund
uses the amortized cost method of valuation as described in
the Statement of Additional Information under "Additional
Purchase and Redemption Information." Under the 1940 Act,
the Fund may postpone the date of payment of any redeemable
security for up to seven days.
11
<PAGE>
Purchase of Fund shares are sold at the net asset value per share next
Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted
before 12:00 noon, Eastern time, for which payment has been
received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Fund's custodian, PFPC Trust Company, will be executed at
12:00 noon. Orders accepted after 12:00 noon and before 2:30
P.M., Eastern time (or orders accepted earlier in the same
day for which payment has not been received by 12:00 noon),
will be executed at 4:00 P.M., Eastern time, if payment has
been received by PNC Bank by that time. Orders received at
other times, and orders for which payment has not been
received by 4:00 P.M., Eastern time, will not be accepted,
and notice thereof will be given to the institution placing
the order. (Payment for orders which are not received or
accepted will be returned after prompt inquiry to the
sending institution.) The Fund may in its discretion reject
any order for shares.
Payment for Fund shares may be made only in federal funds
or other funds immediately available to PNC Bank. The
minimum initial investment by an institution is $3 million
for MuniCash Shares and $5,000 for MuniCash Dollar Shares;
however, broker-dealers and other institutional investors
may set a higher minimum for their customers. There is no
minimum subsequent investment. The Fund, at its discretion,
may reduce the minimum initial investment for MuniCash
Shares for specific institutions whose aggregate
relationship with the Provident Institutional Funds is
substantially equivalent to this $3 million minimum and
warrants this reduction.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with an
institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the Fund
in accordance with its customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in
MuniCash Dollar Shares. (See also "Management of the Fund--
Service Organizations," as described in the Statement of
Additional Information.) Institutions, including banks
regulated by the Comptroller of the Currency and investment
advisers and other money managers subject to the
jurisdiction of the SEC,
12
<PAGE>
the Department of Labor or state securities commissions, are
urged to consult their legal advisors before investing
fiduciary funds in MuniCash Dollar Shares. (See also
"Management of the Fund--Banking Laws," as described in the
Statement of Additional Information.)
Redemption of
Shares Redemption orders must be transmitted to PFPC in Wilmington,
Delaware in the manner described under "Purchase of Shares."
Shares are redeemed at the net asset value per share next
determined after PFPC's receipt of the redemption order.
While the Fund intends to use its best efforts to maintain
its net asset value per share at $1.00, the proceeds paid to
a shareholder upon redemption may be more or less than the
amount invested depending upon a share's net asset value at
the time of redemption. Call 1-800-441-7450 (in Delaware:
302-791-5350) to place redemption orders.
Payment for redeemed shares for which a redemption order
is received by PFPC before 12:00 noon, Eastern time, on a
Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment for
redemption orders which are received between 12:00 noon and
4:00 P.M., Eastern time, or on a day when PNC Bank is
closed, is normally wired in federal funds on the next day
following redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any
account if the value of the account is less than $1,000
after sixty-days' prior written notice to the shareholder.
Any such redemption shall be effected at the net asset value
next determined after the redemption order is entered. If
during the sixty-day period the shareholder increases the
value of its account to $1,000 or more, no such redemption
shall take place. Moreover, if a shareholder's MuniCash
Shares account falls below an average of $100,000 in any
particular calendar month, the account may be charged an
account maintenance fee with respect to that month. In
addition, the Fund may also redeem shares involuntarily
under certain special circumstances described in the
Statement of Additional Information under "Additional
Purchase and Redemption Information."
Shareholder Institutional investors, such as banks, savings and loan
Service Plan associations and other financial institutions, including
affiliates of PNC Bank Corp. ("Service Organizations"), may
purchase Dollar Shares. MuniCash Dollar Shares are identical
in all respects to MuniCash Shares except that they bear the
service fees described below and enjoy certain exclusive
voting rights on matters relating to these fees. The Fund
will enter into an agreement with each Service Organization
which purchases Dollar Shares requiring it to provide
support services to its customers who are the beneficial
owners
13
<PAGE>
of such shares in consideration of the Fund's payment of
.25% (on an annualized basis) of the average daily net asset
value of the Dollar Shares held by the Service Organization
for the benefit of customers. Such services, which are
described more fully in the Statement of Additional
Information under "Management of the Fund--Service
Organizations," include aggregating and processing purchase
and redemption requests from customers and placing net
purchase and redemption orders with PFPC; processing
dividend payments from the Fund on behalf of customers;
providing information periodically to customers showing
their positions in Dollar Shares; and providing sub-
accounting or the information necessary for sub-accounting
with respect to Dollar Shares beneficially owned by
customers. Under the terms of the agreements, Service
Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in
connection with their investments in Dollar Shares. MuniCash
Shares are sold to institutions that have not entered into
servicing agreements with the Fund in connection with their
investments.
Dividends and The Fund declares dividends daily and distributes
Distributions substantially all of its net investment income to
shareholders monthly. Shares begin accruing dividends on the
day the purchase order for the shares is effected and
continue to accrue dividends through the day before such
shares are redeemed. Dividends are paid monthly by check, or
by wire transfer if requested in writing by the shareholder,
within five business days after the end of the month or
within five business days after a redemption of all of a
shareholder's shares of a particular class.
Dividends are determined in the same manner for each
class of shares of the Fund. MuniCash Dollar Shares bear all
the expense of fees paid to Service Organizations, and as a
result, at any given time, the dividend on MuniCash Dollar
Shares will be approximately .25% lower than the dividend on
MuniCash Shares.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Reinvestment
elections, and any revocations thereof, must be made in
writing to PFPC, the Fund's transfer agent, at P.O. Box
8950, Wilmington, Delaware 19885-9628 and will become
effective after its receipt by PFPC with respect to
dividends paid.
14
<PAGE>
Taxes The Fund's distributions will generally constitute tax-
exempt income for shareholders for federal income tax
purposes. It is possible, depending upon the Fund's
investments, that a portion of the Fund's distributions
could be taxable to shareholders as ordinary income or
capital gains, but the Fund does not expect that this will
be the case. Moreover, although the distributions are exempt
for federal income tax purposes, they will generally
constitute taxable income for state and local income tax
purposes except that, subject to limitations that vary
depending on the state, distributions from interest paid by
a state or municipal entity may be exempt from tax in that
state.
Interest on indebtedness incurred by a shareholder to
purchase or carry shares of the Fund generally will not be
deductible for federal income tax purposes.
You should note that a portion of the exempt-interest
dividends paid by the Fund may constitute an item of tax
preference for purposes of determining federal alternative
minimum tax liability. Exempt-interest dividends will also
be considered along with other adjusted gross income in
determining whether any Social Security or railroad
retirement payments received by you are subject to federal
income taxes.
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal tax
treatment.
Dividends declared in December of any year, and payable
to shareholders of record on a specified date in December,
will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of such year in the event
such dividends are actually paid during January of the
following year.
You should also consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
15
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG LLP, whose report, along with the Fund's
financial statements, are incorporated by reference into the Statement of
Additional Information and included in the Annual Report, each of which is
available upon request.
MuniCash Shares
The table below sets forth selected financial data for a MuniCash Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended November 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0346 .0358 .0350 .0382 .0266
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total From Investment
Operations .0346 .0358 .0350 .0382 .0266
- ------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0346) (.0358) (.0350) (.0382) (.0266)
Distributions (from
capital gains) -- -- -- -- --
- ------------------------------------------------------------------------------------
Total Distributions (.0346) (.0358) (.0350) (.0382) (.0266)
- ------------------------------------------------------------------------------------
Net Asset Value End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Return 3.51% 3.63% 3.56% 3.89% 2.69%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Period (000's) $500,254 $397,681 $281,544 $321,642 $273,439
Ratio of Expenses to
Average Daily Net
Assets .18%(1) .18%(1) .18%(1) .18%(1) .19%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 3.47% 3.58% 3.50% 3.83% 2.59%
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets for MuniCash would have been .40% for
the year ended November 30, 1998, .41% for the year ended November 30,
1997, .42% for the year ended November 30, 1996, .41% for the year ended
November 30, 1995 and .42% for the year ended November 30, 1994.
16
<PAGE>
Financial Highlights (Continued) _______________________________________________
MuniCash Dollar Shares
The table below sets forth selected financial data for a MuniCash Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended November 30,
-----------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------
Income from Investment
Operations
Net Investment Income .0321 .0333 .0325 .0357 .0241
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- --
- ---------------------------------------------------------------------------------
Total From Investment
Operations .0321 .0333 .0325 .0357 .0241
- ---------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0321) (.0333) (.0325) (.0357) (.0241)
Distributions (from
capital gains) -- -- -- -- --
- ---------------------------------------------------------------------------------
Total Distributions (.0321) (.0333) (.0325) (.0357) (.0241)
- ---------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Total Return 3.26% 3.38% 3.31% 3.64% 2.44%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Ratios/Supplement Data
Net Assets, End of
Year (000's) $91,404 $150,089 $101,528 $101,424 $ 99,688
Ratio of Expenses to
Average Daily Net
Assets .43%(1) .43%(1) .43%(1) .43%(1) .44%(1)
Ratio of Net
Investment Income to
Average Daily Net
Assets 3.22% 3.33% 3.25% 3.58% 2.34%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratios of
expenses to average daily net assets would have been .65% for the year
ended November 30, 1998, .66% for the year ended November 30, 1997, .67%
for the year ended November 30, 1996, .66% for the year ended November 30,
1995 and .67% for the year ended November 30, 1994.
17
<PAGE>
Where To Find More Information _________________________________________________
The Statement of Additional Information (the "SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make
shareholder inquiries, by calling 1-800-821-7432. Other information is
available on the Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and
copied at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other
information about the Fund are available on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354
MuniCash
An Investment Portfolio offered by
Provident Institutional Funds
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10, 1999
PIF-P-010
<PAGE>
California Money Fund
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware: 302-791-
Wilmington, DE 19809 5350). For yield information call: 800-821-
6006 (California Money Shares code: 52;
California Administration Shares code: R1;
California Dollar Shares code: 57;
California Plus Shares code: 58; California
Cash Reserve Shares code: R2; California
Cash Management Shares code: R3). For other
information call: 800-821-7432 or visit our
web site at www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 4
Performance Information.................................................. 5
Fees and Expenses........................................................ 7
Investment Strategies and Risk Disclosure.................................. 8
Management of the Fund..................................................... 12
Shareholder Information.................................................... 13
Price of Fund Shares..................................................... 13
Purchase of Shares....................................................... 13
Redemption of Shares..................................................... 14
Distribution and Shareholder Service Plans............................... 15
Dividends and Distributions.............................................. 16
Taxes.................................................................... 16
Financial Highlights....................................................... 18
</TABLE>
2
<PAGE>
Risk/Return Summary ____________________________________________________________
Investment The Fund seeks to provide investors with as high a level of
Goal: current interest income that is exempt from federal income
tax and, to the extent possible, from California State
personal income tax as is consistent with the preservation
of capital and relative stability of principal.
Investment The Fund invests primarily in debt obligations issued by or
Policies: on behalf of the State of California and other states,
territories, and possessions of the United States, the
District of Columbia, and their respective authorities,
agencies, instrumentalities and political subdivisions, and
tax-exempt derivative securities such as tender option
bonds, participations, beneficial interests in trusts and
partnership interests ("Municipal Obligations"). Dividends
paid by the Fund that are derived from interest on
obligations that is exempt from taxation under the
Constitution or statutes of California ("California
Municipal Obligations") are exempt from regular federal,
California State personal income tax. California Municipal
Obligations include municipal securities issued by the State
of California and its political sub-divisions, as well as
certain other governmental issuers such as the Commonwealth
of Puerto Rico.
Principal Risks Although the Fund invests in money market instruments which
of Investing: the investment adviser, BlackRock Institutional Management
Corporation ("BIMC," or the "Adviser") believes present
minimal credit risks at the time of purchase, there is a
risk that an issuer may not be able to make principal and
interest payments when due. The Fund is also subject to
risks related to changes in prevailing interest rates, since
generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest
rates rise.
Because the Fund concentrates its investments in
California Municipal Obligations, it is classified as non-
diversified. This means that it may invest a greater
percentage of its assets in a particular issuer, and that
its performance will be dependent upon a smaller category of
securities than a diversified portfolio. Accordingly, the
Fund may experience greater fluctuations in net asset value
and may have greater risk of loss.
Dividends derived from interest on Municipal Obligations
other than California Municipal Obligations are exempt from
federal income tax but may be subject to California State
personal income tax.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
3
<PAGE>
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
Who May Want to The Fund is designed for California institutional investors
Invest in the and their customers seeking as high a level of current
Fund: interest income that is exempt from federal income tax and,
to the extent possible, from California personal income tax
as is consistent with the preservation of capital and
relative stability of principal. The Fund is particularly
suitable for banks, corporations and other financial
institutions that seek investment of short-term funds for
their own accounts or for the accounts of their customers.
4
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
[CHART APPEARS HERE]
Date Annualized Returns
- ---- ------------------
1989 5.97
1990 5.29
1991 3.94
1992 2.61
1993 2.26
1994 2.73
1995 3.64
1996 3.21
1997 3.39
1998 3.13
During the ten-year period shown in the bar chart, the highest quarterly
return was 6.35% (for the quarter ended June 30, 1989) and the lowest quarterly
return was 2.13% (for the quarter ended March 31, 1993).
5
<PAGE>
The Fund's Average Annual Total Return For Periods Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 5
Year Years 10 Years
----- ----- --------
<S> <C> <C> <C>
California Money Shares................................. 3.13% 3.24% 3.62%
California Dollar Shares................................ 2.88% 2.99% 3.37%
California Plus Shares (estimated)...................... 2.88% 2.99% 3.37%
IBC's Money Fund Report: California State Specific Tax-
Free Institutions--Only Money Fund Average*............ 2.91% 3.01% 3.54%
- -------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
California Money Shares.................................... 3.34%
California Dollar Shares................................... 3.09%
California Plus Shares (estimated)......................... 3.09%
IBC's Money Fund Report: California State Specific Tax-Free
Institutions--Only Money Fund Average*.................... 3.03%
- --------------------------------------------------------------------------------
</TABLE>
Administration Shares, Cash Reserve Shares and Cash Management Shares have not
yet commenced operations, therefore no performance information has been
provided for these classes.
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC's Money Fund Report: California State Specific Tax-Free Institutions--
Only Money Fund Average is comprised of institutional money market funds
investing in tax-exempt obligations of California State.
6
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
California Money Fund
---------------------
Cash Cash
Money Administration Dollar Plus Reserve Management
Shares Shares Shares Shares Shares Shares
-------- ---------------- -------- ------------ ------------ ------------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees......... .20% .20% .20% .20% .20% .20%
Distribution (12b-1)
Fees................... -- -- -- .25% -- --
Other Expenses.......... .26% .36% .51% .26% .66% .76%
Administration Fees.... .20% .20% .20% .20% .20% .20%
Shareholder Servicing
Fees.................. -- -- .25% -- .25% .25%
Miscellaneous.......... .06% .16% .06% .06% .21% .31%
- ------------------------------------------------------------------------------------------------------------
Total Annual Fund
Operating Expenses(1).. .46% .56% .71% .71% .86% .96%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for California Money Shares and
California Dollar Shares for the fiscal year ended January 31, 1998, with
fee waivers, were .20% and .45%, respectively, of the Fund's average net
assets. Total Annual Fund Operating Expenses for California Administration
Shares, California Plus Shares, California Cash Reserve Shares and
California Cash Management Shares for the fiscal year ended January 31,
1998, with fee waivers, would have been .30% (estimated), .45% (estimated),
.60% (estimated) and .70% (estimated), respectively, of the Fund's average
net assets. The Adviser and PFPC Inc., the Fund's co-administrator, may
from time to time waive the investment advisory and administration fees
otherwise payable to them or may reimburse the Fund for its operating
expenses. The Adviser and PFPC expect to continue such fee waivers.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
California Money Fund
---------------------
Cash Cash
Money Administration Dollar Plus Reserve Management
Shares Shares Shares Shares Shares Shares
------ -------------- ------ ----------- ----------- -----------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C>
One Year...... $ 47 $ 57 $ 73 $ 73 $ 88 $ 98
Three years... $148 $179 $227 $227 $ 274 $ 306
Five Years.... $258 $313 $395 $395 $ 477 $ 531
Ten Years..... $579 $701 $883 $883 $1,061 $1,178
- -------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Investment
Strategies and
Risk Disclosure ________________________________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to provide investors with as high a level of
current interest income that is exempt from federal income
tax and, to the extent possible, from California State
personal income tax as is consistent with the preservation
of capital and relative stability of principal. The Fund's
investment objective may be changed by the Board of Trustees
without shareholder approval. The Fund invests primarily in
California Municipal Obligations.
Substantially all of the Fund's assets are invested in
Municipal Obligations. The Fund expects that, except during
temporary defensive periods or when acceptable securities
are unavailable for investment by the Fund, the Fund's
assets will be invested primarily in California Municipal
Obligations. At least 50% of the Fund's assets must be
invested in obligations which, when held by an individual,
the interest therefrom is exempt from California personal
income taxation (i.e., California Municipal Obligations and
certain U.S. Government obligations) at the close of each
quarter of its taxable year so as to permit the Fund to pay
dividends that are exempt from California State personal
income tax. Dividends, regardless of their source, may be
subject to local taxes. The Fund will not knowingly purchase
securities the interest on which is subject to federal
income tax; however, the Fund may hold uninvested cash
reserves pending investment during temporary defensive
periods or, if in the opinion of the Adviser, suitable tax-
exempt obligations are unavailable. Uninvested cash reserves
will not earn income.
The Fund invests in Municipal Obligations which are
determined by the Adviser to present minimal credit risk
pursuant to guidelines approved by the Board of Trustees of
Provident Institutional Funds pursuant to Rule 2a-7 under
the Investment Company Act of 1940, as amended, and other
rules of the Securities and Exchange Commission. Pursuant to
Rule 2a-7, the Fund is authorized to purchase instruments
that are determined to have minimum credit risk and are
Eligible Securities. Applicable Eligible Securities are:
. instruments which are rated at the time of purchase (or
which are guaranteed or in some cases otherwise supported
by guarantees or other credit supports with such ratings)
in one of the top two rating categories by two
unaffiliated nationally recognized statistical rating
organizations ("NRSRO") (or one NRSRO if the security or
guarantee was rated by only one NRSRO);
8
<PAGE>
. instruments issued or guaranteed by persons with short-
term debt having such ratings;
. unrated instruments determined by the Adviser, pursuant to
procedures approved by the Board of Trustees, to be of
comparable quality to such instruments; and
. shares of other open-end investment companies that invest
in the type of obligations in which the Fund may invest.
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
Municipal The Fund may purchase Municipal Obligations which are
Obligations classified as "general obligation" securities and "revenue"
securities. Revenue securities may include private activity
bonds which are not payable from the unrestricted revenues
of the issuer. Consequently, the credit quality of private
activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
While interest paid on private activity bonds will be exempt
from regular federal income tax, it may be treated as a
specific tax preference item under the federal alternative
minimum tax. The portfolio may also include "moral
obligation" securities.
Variable and The Fund may purchase variable or floating rate notes issued
Floating Rate by industrial development authorities and other governmental
Instruments entities, which are instruments that provide for adjustments
in the interest rate on certain reset dates or whenever a
specified interest rate index changes, respectively.
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed funds will be
greater than the cost of the borrowing. Such borrowings will
be unsecured. The Fund will not purchase portfolio
securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
When-Issued and The Fund may purchase securities on a "when-issued" or
Delayed "delayed settlement" basis. The Fund expects that
Settlement commitments to purchase when-issued or delayed settlement
Transactions securities will not exceed 25% of the value of its total
assets absent unusual market conditions and that commitments
by the Fund to purchase when-issued securities will not
exceed 45 days. The Fund does not intend to purchase when-
issued or delayed settlement securities for speculative
purposes but only in furtherance of its investment
objective. The Fund receives no income from when-issued or
delayed settlement securities prior to delivery of such
securities.
9
<PAGE>
Stand-by The Fund may acquire "stand-by commitments" with respect to
Commitments Municipal Obligations held in its portfolio. The Fund will
acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights
thereunder for trading purposes.
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Illiquid The Fund will not invest more than 10% of the value of its
Securities total assets in illiquid securities, which may be illiquid
due to legal or contractual restrictions on resale or the
absence of readily available market quotations. Securities
that have readily available market quotations are not deemed
illiquid for purposes of this limitation.
Other Types of This Prospectus describes the Fund's principal investment
Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. These supplemental investment strategies are described
in detail in the Statement of Additional Information, which
is referred to on the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
government securities are generally considered to be the
safest type of investment in terms of credit risk. Municipal
obligations generally rank between U.S. government
securities and corporate debt securities in terms of credit
safety. Credit quality ratings published by a NRSRO are
widely accepted measures of credit risk. The lower a
security is rated by a NRSRO the more credit risk it is
considered to represent.
10
<PAGE>
Other Risks Certain investment strategies employed by the Fund may
involve additional investment risk. Liquidity risk involves
certain securities which may be difficult or impossible to
sell at the time and the price that the Fund would like.
Municipal Opinions relating to the validity of Municipal Obligations
Obligations and to the exemption of interest thereon from federal income
tax are rendered by bond counsel to the respective issuers
at the time of issuance, and opinions relating to the
validity of and the tax-exempt status of payments received
by the Fund for tax-exempt derivative securities are
rendered by counsel to the respective sponsors of such
securities. The Adviser will rely on such opinions and will
not review independently the underlying proceedings relating
to the issuance of Municipal Obligations, the creation of
any tax- exempt derivative securities, or the bases for such
opinions.
Special The Fund is concentrated in securities issued by the State
Considerations of California or entities within the State of California and
Affecting the therefore, investment in the Fund may be riskier than an
Fund investment in other types of money market funds. The Fund's
ability to achieve its investment objective is dependent
upon the ability of the issuers of California Municipal
Obligations to timely meet their continuing obligations with
respects to the Municipal Obligations. Any reduction in the
creditworthiness of issuers of California Municipal
Obligations could adversely affect the market values and
marketability of California Municipal Obligations, and,
consequently, the net asset value of the Fund's portfolio.
General obligation bonds of the state of California are
currently rated A+ and A1, respectively, by Standard &
Poor's Ratings Services and Moody's Investors Service, Inc.
Certain California constitutional amendments, legislative
measures, executive orders, administrative regulations and
voter initiatives could result in certain adverse
consequences affecting California Municipal Obligations.
Significant financial and other considerations relating to
the Fund's investments in California Municipal Obligations
are summarized in the Statement of Additional Information.
The Fund may invest more than 25% of its assets in Municipal
Obligations the interest on which is paid solely from
revenues of similar projects if such investment is deemed
necessary or appropriate by the Fund's Adviser. To the
extent that the Fund's assets are concentrated in Municipal
Obligations payable from revenues on similar projects, the
Fund will be subject to the peculiar risks presented by such
projects to a greater extent than it would be if the Fund's
assets were not so concentrated.
11
<PAGE>
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that they
are taking steps to address the year 2000 Problem with
respect to the computer systems that they use and to obtain
assurances that comparable steps are being taken by the
Fund's other service providers. While there can be no
assurance that the Fund's service providers will be Year
2000 compliant, the Fund's service providers expect that
their plan to be compliant will be achieved.
Management of the Fund _________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser
and its affiliates are one of the largest U.S. bank managers
of mutual funds, with assets currently under management in
excess of $46 billion. BIMC (formerly known as PNC
Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC, the co-administrator, may
from time to time reduce the investment advisory and
administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. Any fees
waived and any expenses reimbursed by BIMC and PFPC with
respect to a particular fiscal year are not recoverable. For
the fiscal year ended January 31, 1998, the Fund paid
investment advisory fees and administration fees each
aggregating .07% (net of waivers) of its average net assets.
The services provided by BIMC and the fees payable by the
Fund for these services are described further in the
Statement of Additional Information under "Management of the
Funds."
12
<PAGE>
Shareholder Information ________________________________________________________
Price of Fund The Fund's net asset value per share for purposes of pricing
Shares purchase and redemption orders is determined by BIMC, the
Funds adviser, as of 12:00 noon and 4:00 P.M., Eastern time,
(9:00 A.M. and 1:00 P.M., Pacific Time) on each day on which
both the California Stock Exchange and the Federal Reserve
Bank of Philadelphia are open for business (a "Business
Day"). The net asset value per share of each class of the
Fund's shares is calculated by adding the value of all
securities and other assets of the Fund that are allocable
to a particular class, subtracting liabilities charged to
such class, and dividing the result by the total number of
outstanding shares of such class. In computing net asset
value, the Fund uses the amortized cost method of valuation
as described in the Statement of Additional Information
under "Additional Purchase and Redemption Information."
Under the 1940 Act, the Fund may postpone the date of
payment of any redeemable security for up to seven days.
Purchase of Fund shares are sold at the net asset value per share next
Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted
by 12:00 noon, Eastern time (9:00 A.M., Pacific Time), for
which payment has been received by PNC Bank, N.A. ("PNC
Bank"), an agent of the Fund's custodian, PFPC Trust Company
by 4:00 P.M., Eastern Time (1:00 P.M., Pacific Time), will
be executed the same day. Orders received after 12:00 noon
Eastern Time (9:00 A.M., Pacific Time) and orders for which
payment has not been received by 4:00 P.M. Eastern Time
(1:00 P.M., Pacific Time), will not be accepted, and notice
thereof will be given to the institution placing the order.
(Payment for orders which are not received or accepted will
be returned after prompt inquiry to the sending
institution.)
Payment for Fund shares may be made only in federal funds
or other funds immediately available to PNC Bank. The
minimum initial investment by an institution is $5,000;
however, broker-dealers and other institutional investors
may set a higher minimum for their customers. There is no
minimum subsequent investment. The Fund, at its discretion,
may limit or reject any order for shares.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with
13
<PAGE>
an institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the Fund
in accordance with its customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in
California Administration Shares, California Dollar Shares,
California Plus Shares, California Cash Reserve Shares or
California Cash Management Shares. (See also "Management of
the Fund--Service Organizations," as described in the
Statement of Additional Information.) Institutions,
including banks regulated by the Comptroller of the Currency
and investment advisers and other money managers subject to
the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult their
legal advisors before investing fiduciary funds in
Administration Shares, Dollar Shares, Plus Shares, Cash
Reserve Shares or Cash Management Shares. (See also
"Management of the Fund--Banking Laws," as described in the
Statement of Additional Information.)
Redemption of Redemption orders must be transmitted to PFPC in Wilmington,
Shares Delaware in the manner described under "Purchase of Shares."
Shares are redeemed at the net asset value per share next
determined after PFPC's receipt of the redemption order.
While the Fund intends to use its best efforts to maintain
its net asset value per share at $1.00, the proceeds paid to
a shareholder upon redemption may be more or less than the
amount invested depending upon a share's net asset value at
the time of redemption. Call 1-800-441-7450 (in Delaware:
302-791-5350) to place redemption orders.
Payment for redeemed shares for which a redemption order
is accepted by PFPC prior to Noon, Eastern time (9:00 A.M.,
Pacific Time), on a Business Day is normally made in federal
funds wired to the redeeming shareholder on the same day.
Payment for redemption orders which are received after Noon,
Eastern time or on a day when PNC Bank is closed, is
normally wired in federal funds on the next day following
redemption that PNC Bank is open for business.
The Fund shall have the right to redeem shares in any
Fund account if the value of the account is less than $500,
after sixty-days' prior written notice to the shareholder.
Any such redemption shall be effected at the net asset value
next determined after the redemption order is entered. If
during the sixty-day period the shareholder increases the
value of its Fund account to $500 or more, no such
redemption shall take place. In addition, the Fund may also
redeem shares involuntarily under certain special
circumstances described in the Statement of Additional
Information under "Additional Purchase and Redemption
Information."
14
<PAGE>
Distribution The Fund offers six classes of shares. The difference
and Shareholder between the classes of shares is the fees borne by a class
Service Plans of shares pursuant to separate fee plans adopted by each
class. California Money Fund Shares do not bear any fees for
distribution, servicing, shareholder servicing, sweep fees
or cash sweep marketing services. The fees borne by the
other classes are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Cash
Shareholder Cash Sweep
Service Service 12B-1 Sweep Marketing Total
Class Fee Fee Fee Fee Fee Fees
------------------------ ------- ----------- ----- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Administration Shares... .10% -- -- -- -- .10%
Dollar Shares........... -- .25% -- -- -- .25%
Plus Shares............. -- -- .25% -- -- .25%
Cash Reserve Shares..... .10% .25% -- .05% -- .40%
Cash Management Shares.. .10% .25% -- .05% .10% .50%
------------------------------------------------------------------------
</TABLE>
Service Fees are paid for general shareholder liaison
services. Shareholder Service Fees are paid for services
relating to the processing and administration of shareholder
accounts. The Fund has adopted a plan pursuant to Rule 12b-
1. 12b-1 Fees are paid for distribution and sales support,
and shareholder services. Cash Sweep Fees are paid for
providing a sweep service into the Fund. Cash Sweep
Marketing Fees are paid for providing marketing
administrative activities in connection with the sweep
program.
Shares of the Fund are not sold to individuals, but may
be sold to the following entities, which hold the shares for
the accounts of their customers. Administration Shares,
Dollar Shares, Cash Reserve Shares and Cash Management
Shares are sold to institutional investors such as banks,
saving and loan associations, and other financial
institutions, including affiliates of PNC Bank Corp.
("Service Organizations"). Plus Shares are sold to broker-
dealers. Because fees associated with the distribution
and/or shareholder service plans are paid out of the Fund's
assets on an ongoing basis, over time holders of the share
classes described above may pay more than the economic
equivalent of the maximum front-end sales charge permitted
by NASD Regulation, Inc. Plus Shares may be requested to
provide from time to time assistance (such as the forwarding
of sales literature and advertising to their customers) in
connection with the distribution of Plus Shares. Under the
terms of the agreements, Service Organizations are required
to provide to their customers a schedule of any fees that
they may charge customers in connection with their
investments in Dollar or Plus Shares. Money Shares are sold
to institutions that have not entered into servicing
agreements with the Fund in connection with their investments.
15
<PAGE>
Dividends The Fund declares dividends daily and distributes
and substantially all of its net investment income to
Distributions shareholders monthly. Shares begin accruing dividends on the
day the purchase order for the shares is effected and
continue to accrue dividends through the day before such
shares are redeemed. Dividends are paid monthly by check, or
by wire transfer if requested in writing by the shareholder,
within five business days after the end of the month or
within five business days after a redemption of all of a
shareholder's shares of a particular class.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Reinvestment
elections, and any revocations thereof, must be made in
writing to PFPC, the Fund's transfer agent, at P.O. Box
8950, Wilmington, Delaware 19885-9628 and will become
effective after its receipt by PFPC with respect to
dividends paid.
Taxes The Fund's distributions will generally constitute tax-
exempt income for shareholders for federal income tax
purposes. It is possible, depending upon the Fund's
investments, that a portion of the Fund's distributions
could be taxable to shareholders as ordinary income or
capital gains, but the Fund does not expect that this will
be the case.
Interest on indebtedness incurred by a shareholder to
purchase or carry shares of the Fund generally will not be
deductible for federal income tax purposes.
You should note that a portion of the exempt-interest
dividends paid by the Fund may constitute an item of tax
preference for purposes of determining federal alternative
minimum tax liability. Exempt-interest dividends will also
be considered along with other adjusted gross income in
determining whether any Social Security or railroad
retirement payments received by you are subject to federal
income taxes.
Dividends that are paid by the Fund to non-corporate
shareholders and are derived from interest on California
Municipal Obligations or certain U.S. Government obligations
are also exempt from California state personal income tax.
However, dividends paid to corporate shareholders subject to
California state franchise tax or California state corporate
income tax will be taxed as ordinary income to such
shareholders, notwithstanding that all or a portion of such
dividends is exempt from California state personal income
tax. Moreover, to the extent that the Fund's dividends are
derived from interest on debt obligations other than
California Municipal Obligations or certain U.S. Government
obligations such dividends will be
16
<PAGE>
subject to California state personal income tax, even though
such dividends may be exempt for Federal income tax
purposes.
Dividends derived from U.S. Government obligations
generally will be exempt from state and local tax as well.
However, except as noted with respect to California state
personal income tax, in some situations distributions of net
investment income may be taxable to investors under state or
local law as dividend income even though all or a portion of
such distributions may be derived from interest on tax-
exempt obligations which, if realized directly, would be
exempt from such income taxes.
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal and
California tax treatment.
Dividends declared in the last quarter of any year, and
payable to shareholders of record on a specified date in
December, will be deemed to have been received by the
shareholders and paid by the Fund on December 31 of such
year in the event such dividends are actually paid during
January of the following year.
You should also consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
17
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information, except for the 6 month period ended July 31, 1998, has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, are incorporated by reference into the Statement of
Additional Information and included in the Annual Report, each of which is
available upon request. No Plus Shares were issued or outstanding during the
periods covered by these financial highlights. Administration Shares, Cash
Reserve Shares and Cash Management Shares have not yet commenced operations,
therefore no financial information has been provided for these classes.
California Money Shares
The table below sets forth selected financial data for a California Money Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended January 31,
------------- ------------------------------------------------
6 Month
Period Ended
July 31, 1998 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .0159 .0334 .0316 .0356 .0281 .0223
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------
Total From Investment
Operations .0159 .0334 .0316 .0356 .0281 .0223
- -----------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0159) (.0334) (.0316) (.0356) (.0281) (.0223)
Distributions (from
capital gains) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------
Total Distributions (.0159) (.0334) (.0316) (.0356) (.0281) (.0223)
- -----------------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Total Return 3.23%(2) 3.39% 3.21% 3.62% 2.84% 2.25%
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Ratios/Supplemental
Data:
Net Assets, End of
Year $(000's) $513,797 $460,339 $326,521 $389,883 $385,824 $356,501
Ratios of Expenses to
Average Daily Net
Assets(1) .20%(2) .20% .20% .20% .20% .20%
Ratios of Net
Investment Income to
Average Daily Net
Assets 3.19%(2) 3.34% 3.15% 3.55% 2.79% 2.23%
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for California Money Shares would have
been .46% for the six months ended July 31, 1998, .46% for the year ended
January 31, 1998, .48% for the years ended January 31, 1997, 1996 and 1995,
respectively, and .49% for the year ended January 31, 1994.
(2) Annualized.
18
<PAGE>
Financial Highlights (Continued) _______________________________________________
California Dollar Shares
The table below sets forth selected financial data for a California Dollar
Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
6 Month Year Ended January 31,
Period Ended --------------------------------------------
July 31, 1998 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .0147 .0309 .0291 .0331 .0256 .0198
Net Gains or Losses on
Securities (both
realized and
unrealized) -- -- -- -- -- --
- --------------------------------------------------------------------------------------
Total From Investment
Operations .0147 .0309 .0291 .0331 .0256 .0198
- --------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0147) (.0309) (.0291) (.0331) .0256 (.0198)
Distributions (from
capital gains) -- -- -- -- -- --
- --------------------------------------------------------------------------------------
Total Distributions (.0147) (.0309) (.0291) (.0331) .0256 (.0198)
- --------------------------------------------------------------------------------------
Net Asset Value, End of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Total Return 2.98%(2) 3.14% 2.96% 3.37% 2.59% 2.00%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of
Year $(000's) $108,221 $130,547 $126,321 $31,163 $11,026 $19,098
Ratios of Expenses to
Average Daily Net
Assets(1) .45%(2) .45% .45% .45% .45% .45%
Ratios of Net
Investment Income to
Average Daily Net
Assets 2.94%(2) 3.09% 2.90% 3.30% 2.54% 1.98%
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for California Dollar Shares would
have been .71% for the six months ended July 31, 1998, .71% for the year
ended January 31, 1998, .73% for the years ended January 31, 1997, 1996 and
1995, respectively and .74% for the year ended January 31, 1994.
(2) Annualized.
19
<PAGE>
Where to Find More Information _________________________________________________
The Statement of Additional Information (the "SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make
shareholder inquiries, by calling 1-800-821-7432. Other information is
available on the Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and
copied at the Securities and Exchange Commission's Public Reference Room in
Washington, D.C. Information about the operation of the Public Reference Room
may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other
information about the Fund are available on the SEC's Internet site at
http://www.sec.gov. Copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354
California
Money Fund
An Investment Portfolio offered by
Provident Institutional Funds
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10, 1999
PIF-P-011
<PAGE>
New York Money Fund
An investment portfolio offered by
Provident Institutional Funds
Prospectus
February 10, 1999
Bellevue Park For purchase and redemption orders only call: 800-441-
Corporate Center 7450 (in Delaware: 302-791-5350). For yield
400 Bellevue Parkway information call: 800-821-6006 (New York Money Shares
Wilmington, DE 19809 code: 53; New York Dollar Shares code: 55; New York
Plus Shares code: 56). For other information call:
800-821-7432 or visit our web site at www.pif.com.
Investment Adviser
BlackRock Institutional Management Corporation
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined if this prospectus is accurate or complete. It is a
criminal offense to state otherwise.
<PAGE>
Table of Contents ______________________________________________________________
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk/Return Summary........................................................ 3
Investment Goal.......................................................... 3
Investment Policies...................................................... 3
Principal Risks of Investing............................................. 3
Who May Want to Invest in the Fund....................................... 4
Performance Information.................................................. 4
Fees and Expenses........................................................ 6
Investment Strategies and Risk Disclosure.................................. 7
Management of the Fund..................................................... 11
Shareholder Information.................................................... 11
Price of Fund Shares..................................................... 11
Purchase of Shares....................................................... 12
Redemption of Shares..................................................... 13
Shareholder Service and Distribution Plans............................... 13
Dividends and Distributions.............................................. 14
Taxes.................................................................... 14
Financial Highlights....................................................... 16
</TABLE>
2
<PAGE>
Risk/Return Summary ____________________________________________________________
Investment The Fund seeks to provide investors with as high a level of
Goal: current interest income that is exempt from federal income
tax and, to the extent possible, from New York State and New
York City personal income taxes as is consistent with the
preservation of capital and relative stability of principal.
Investment The Fund invests primarily in debt obligations issued by or
Policies: on behalf of the State of New York. We may also invest in
debt obligations issued by or on behalf of other states,
territories, and possessions of the United States, the
District of Columbia, and their respective authorities,
agencies, instrumentalities and political subdivisions, and
tax-exempt derivative securities such as tender option
bonds, participations, beneficial interests in trusts and
partnership interests ("Municipal Obligations"). Dividends
paid by the Fund that are derived from interest on
obligations that is exempt from taxation under the
Constitution or statutes of New York ("New York Municipal
Obligations") are exempt from regular federal, New York
State and New York City personal income tax. New York
Municipal Obligations include municipal securities issued by
the State of New York and its political sub-divisions, as
well as certain other governmental issuers such as the
Commonwealth of Puerto Rico.
Principal Risks Although the Fund invests in money market instruments which
of Investing: the investment adviser, BlackRock Institutional Management
Corporation ("BIMC," or the "Adviser") believes present
minimal credit risks at the time of purchase, there is a
risk that an issuer may not be able to make principal and
interest payments when due. The Fund is also subject to
risks related to changes in prevailing interest rates, since
generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest
rates rise.
Because the Fund concentrates its investments in New York
Municipal Obligations, it is classified as non-diversified.
This means that it may invest a greater percentage of its
assets in a particular issuer, and that its performance will
be dependent upon a smaller category of securities than a
diversified portfolio. Accordingly, the Fund may experience
greater fluctuations in net asset value and may have greater
risk of loss.
Dividends derived from interest on Municipal Obligations
other than New York Municipal Obligations are exempt from
federal income tax but may be subject to New York State and
New York City personal income tax.
An investment in the Fund is not a deposit in PFPC Trust
Company or PNC Bank, N.A. and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve
3
<PAGE>
the value of your investment at $1.00 per share, it is
possible to lose money by investing in the Fund.
Who May Want to The Fund is designed for institutional investors and their
Invest in the customers seeking as high a level of current interest income
Fund: that is exempt from federal income tax and, to the extent
possible, from New York State and New York City personal
income taxes as is consistent with the preservation of
capital and relative stability of principal. The Fund is
particularly suitable for banks, corporations and other
financial institutions that seek investment of short-term
funds for their own accounts or for the accounts of their
customers.
Performance Information
The Bar Chart and the Table below indicate the risks of investing in the Fund
by showing how the performance of the Fund has varied from year to year. The
Table shows how the Fund's average annual return for one, five and ten years
compares to that of a selected market index. The Bar Chart and the Table assume
reinvestment of dividends and distributions. The Fund's past performance does
not necessarily indicate how it will perform in the future.
New York Money Shares
[PERFORMANCE CHART APPEARS HERE]
Year Annualized Returns
1989 5.80
1990 5.40
1991 3.89
1992 2.66
1993 2.22
1994 2.63
1995 3.69
1996 3.30
1997 3.48
1998 3.22
4
<PAGE>
During the ten-year period shown in the bar chart, the highest quarterly
return was 6.22% (for the quarter ended June 30, 1989) and the lowest quarterly
return was 2.09% (for the quarter ended March 31, 1994).
The Fund's Average Annual Total Return for Periods Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------ ------- --------
<S> <C> <C> <C>
New York Money Shares................................. 3.22% 3.26% 3.62%
New York Dollar Shares................................ 2.97% 3.01% 3.37%
New York Plus Shares (estimated)...................... 2.97% 3.01% 3.37%
IBC's Money Fund Report: New York State Specific Tax-
Free Institutions--Only Money Fund Average*.......... 2.96% 3.06% 3.55%
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
7 Day Yield as of
December 31, 1998
-----------------
<S> <C>
New York Money Shares....................................... 3.43%
New York Dollar Shares...................................... 3.18%
New York Plus Shares (estimated)............................ 3.18%
IBC's Money Fund Report: New York State Specific Tax-Free
Institutions--Only Money Fund Average*..................... 3.05%
- -------------------------------------------------------------------------------
</TABLE>
Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800-
821-7432 or by visiting its web site at www.pif.com.
- -------
* IBC'S Money Fund Report: New York State Specific Tax-Free Institutions--Only
Money Fund Average is comprised of institutional money market funds
investing in tax-exempt obligations of New York State
5
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
New York Money Fund
-------------------
Money Dollar
Shares Shares Plus Shares
------ ------ -----------
(estimated)
<S> <C> <C> <C> <C> <C> <C>
Management Fees................................. .20% .20% .20%
Distribution (12b-1) Fees....................... -- -- .25%
Other Expenses.................................. .28% .53% .28%
Administration Fees............................ .20% .20% .20%
Shareholder Servicing Fees..................... -- .25% --
Miscellaneous.................................. .08% .08% .08%
- --------------------------------------------------------------------------------
Total Annual Fund Operating Expenses(1)......... .48% .73% .73%
- --------------------------------------------------------------------------------
</TABLE>
(1) Total Annual Fund Operating Expenses for New York Money Shares, New York
Dollar Shares and New York Plus Shares for the fiscal year ended July 31,
1998, with fee waivers, were .20%, .45% and .45% (estimated),
respectively, of the Fund's average net assets. The Adviser and PFPC Inc.,
the Fund's co-administrator, may from time to time waive the investment
advisory and administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. The Adviser and PFPC expect
to continue such fee waivers.
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
New York Money Fund
-------------------
Money Dollar Plus
Shares Shares Shares
------ ------ ------
(estimated)
<S> <C> <C> <C>
One Year.............................................. $ 49 $ 75 $ 75
Three years........................................... $154 $233 $233
Five Years............................................ $269 $406 $406
Ten Years............................................. $604 $906 $906
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
InvestmentStrategies andRisk Disclosure ________________________________________
The Fund is a money market fund. The investment objective of
the Fund is to provide investors with as high a level of
current interest income that is exempt from federal income
tax and, to the extent possible, from New York State and New
York City personal income taxes as is consistent with the
preservation of capital and relative stability of principal.
The Fund's investment objective may be changed by the Board
of Trustees without shareholder approval. The Fund invests
primarily in New York Municipal Obligations.
Substantially all of the Fund's assets are invested in
Municipal Obligations. The Fund expects that, except during
temporary defensive periods or when acceptable securities
are unavailable for investment by the Fund, the Fund's
assets will be invested primarily in New York Municipal
Obligations, although the amount of the Fund's assets
invested in such securities will vary from time to time. The
Fund will not knowingly purchase securities the interest on
which is subject to regular federal income tax; however, the
Fund may hold uninvested cash reserves pending investment
during temporary defensive periods or, if in the opinion of
the Adviser, suitable tax-exempt obligations are
unavailable. Uninvested cash reserves will not earn income.
The securities purchased by the Fund are subject to the
quality, diversification, and other requirements of Rule 2a-
7 under the Investment Company Act of 1940, as amended, and
other rules of the Securities and Exchange Commission. The
Fund will only purchase securities that present minimal
credit risk as determined by the Adviser pursuant to
guidelines approved by the Board of Trustees of Provident
Institutional Funds. Securities purchased by the Fund (or
the issuers of such securities) will be Eligible Securities.
Applicable Eligible Securities are:
. instruments which are rated at the time of purchase (or
which are guaranteed or in some cases otherwise supported
by guarantees or other credit supports with such ratings)
in one of the top two rating categories by two
unaffiliated nationally recognized statistical rating
organizations ("NRSROs") (or one NRSRO if the security or
guarantee was rated by only one NRSRO);
. instruments issued or guaranteed by persons with short-
term debt having such ratings;
. unrated instruments determined by the Adviser, pursuant to
procedures approved by the Board of Trustees, to be of
comparable quality to such instruments; and
7
<PAGE>
. shares of other open-end investment companies that invest
in the type of obligation in which the Fund may invest.
- --------------------------------------------------------------------------------
Investments The Fund's investments may include the following:
Municipal They may purchase Municipal Obligations which are classified
Obligations as "general obligation" securities and "revenue" securities.
Revenue securities may include private activity bonds which
are not payable from the unrestricted revenues of the
issuer. Consequently, the credit quality of private activity
bonds is usually directly related to the credit standing of
the corporate user of the facility involved. While interest
paid on private activity bonds will be exempt from regular
federal income tax, it may be treated as a specific tax
preference item under the federal alternative minimum tax.
The portfolio may also include "moral obligation"
securities.
Variable and The Fund may purchase variable or floating rate notes issued
Floating Rate by industrial development authorities and other governmental
Instruments entities, which are instruments that provide for adjustments
in the interest rate on certain reset dates or whenever a
specified interest rate index changes, respectively.
Borrowing The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis. The
Fund will borrow money when the Adviser believes that the
return from securities purchased with borrowed fund will be
greater than the cost of the borrowing. Such borrowings will
be unsecured. The Fund will not purchase portfolio
securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
When-Issued and The Fund may purchase securities on a "when-issued" or
Delayed "delayed settlement" basis. The Fund expects that
Settlement commitments to purchase when-issued or delayed settlement
Transactions securities will not exceed 25% of the value of its total
assets absent unusual market conditions and that commitments
by the Fund to purchase when-issued securities will not
exceed 45 days. The Fund does not intend to purchase when-
issued or delayed settlement securities for speculative
purposes but only in furtherance of its investment
objective. The Fund receives no income from when-issued or
delayed settlement securities prior to delivery of such
securities.
Stand-by The Fund may acquire "stand-by commitments" with respect to
Commitments Municipal Obligations held in its portfolio. The Fund will
acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights
thereunder for trading purposes.
8
<PAGE>
Investment The Fund may invest in securities issued by other open-end
Company investment companies that invest in the type of obligations
Securities in which the Fund may invest and that determine their net
asset value per share based upon the amortized cost or penny
rounding method. Investments in the securities of other
investment companies will cause the Fund (and, indirectly
the Fund's shareholders) to bear proportionately the costs
incurred in connection with the other investment companies'
operations.
Illiquid The Fund will not invest more than 10% of the value of its
Securities total assets in illiquid securities, which may be illiquid
due to legal or contractual restrictions on resale or the
absence of readily available market quotations. Securities
that have readily available market quotations are not deemed
illiquid for purposes of this limitation.
Other Types This Prospectus describes the Fund's principal investment
of Investments strategies, and the particular types of securities in which
the Fund principally invests. The Fund may, from time to
time, make other types of investments and pursue other
investment strategies in support of its overall investment
goal. These supplemental investment strategies are described
in detail in the Statement of Additional Information, which
is referred to on the back cover of this Prospectus.
Risk Factors The principal risks of investing in the Fund are also
described above in the Risk/Return Summary. The following
supplements that description.
Interest Rate Generally, a fixed-income security will increase in value
Risk when interest rates fall and decrease in value when interest
rates rise. As a result, if interest rates were to change
rapidly, there is a risk that the change in market value of
the Fund's assets may not enable the Fund to maintain a
stable net asset value of $1.00 per share.
Credit Risk The risk that an issuer will be unable to make principal and
interest payments when due is known as "credit risk." U.S.
government securities are generally considered to be the
safest type of investment in terms of credit risk. Municipal
obligations generally rank between U.S. government
securities and corporate debt securities in terms of credit
safety. Credit quality ratings published by an NRSRO are
widely accepted measures of credit risk. The lower a
security is rated by an NRSRO, the more credit risk it is
considered to represent.
Other Risks Certain investment strategies employed by the Fund may
involve additional investment risk. Liquidity risk involves
certain securities which may be difficult or impossible to
sell at the time and the price that the Fund would like.
9
<PAGE>
Special The Fund's ability to achieve its investment objective is
Considerations dependent upon the ability of the issuers of New York
Affecting Municipal Obligations to meet their continuing obligations
the Fund for the payment of principal and interest.
Certain substantial issuers of New York Municipal
Obligations (including issuers whose obligations may be
acquired by the Fund) have experienced serious financial
difficulties in recent years. These difficulties have at
times jeopardized the credit standing and impaired the
borrowings abilities of all New York issuers and have
generally contributed to higher interest costs for their
borrowing and fewer markets for their outstanding debt
obligations. Although, several different issues of municipal
securities of New York State and its agencies and
instrumentalities and of New York City have been downgraded
by Standard & Poor's Ratings Services ("S&P") and Moody's
Investors Service, Inc. ("Moody's"), in recent years, the
most recent actions of S&P and Moody's have been to place
the debt obligations of New York State and New York City on
Credit Watch with positive implications and to upgrade the
debt obligations of New York City respectively. Strong
demand for New York Municipal Obligations has also at times
had the effect of permitting New York Municipal Obligations
to be issued with yields relatively lower, and after
issuance, to trade in the market at prices relatively
higher, than comparably rated municipal obligations issued
by other jurisdictions. A recurrence of the financial
difficulties previously experienced by certain issuers of
New York Municipal Obligations could result in defaults or
declines in the market values of those issuers' existing
obligations and, possibly, in the obligations of other
issuers of New York Municipal Obligations. Although as of
the date of this Prospectus, no issuers of New York
Municipal Obligations are in default with respect to the
payment of their Municipal Obligations, the occurrence of
any such default could affect adversely the market values
and marketability of all New York Municipal Obligations and,
consequently, the net asset value of the Fund's portfolio.
Municipal Opinions relating to the validity of Municipal Obligations
Obligations and to the exemption of interest thereon from federal income
tax (and, with respect to New York Municipal Obligations, to
the exemption of interest thereon from New York State and
New York City personal income taxes) are rendered by bond
counsel to the respective issuers at the time of issuance,
and opinions relating to the validity of and the tax-exempt
status of payments received by the Fund for tax-exempt
derivative securities are rendered by counsel to the
respective sponsors of such securities. The Adviser will
rely on such opinions and will not review independently the
underlying proceedings relating to the issuance of Municipal
Obligations, the creation of any tax-exempt derivative
securities, or the bases for such opinions.
10
<PAGE>
Year 2000 Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser and the Fund's other service providers, or
persons with whom they deal, do not properly process and
calculate date-related information and data from and after
January 1, 2000. This possibility is commonly known as the
"Year 2000 Problem." The Fund has been advised by the
Adviser, the co-administrator and the custodian that
they are actively taking steps to address the year 2000
Problem with respect to the computer systems that they use
and to obtain assurances that comparable steps are being
taken by the Fund's other service providers. While there can
be no assurance that the Fund's service providers will by
Year 2000 compliant, the Fund's service providers expect
that their plans to be compliant will be achieved.
Management of the Fund _________________________________________________________
Investment The Adviser, a majority-owned indirect subsidiary of PNC
Adviser Bank, serves as the Fund's investment adviser. The Adviser
and its affiliates are one of the largest U.S. bank managers
of mutual funds, with assets currently under management in
excess of $46 billion. BIMC (formerly known as PNC
Institutional Management Corporation or "PIMC") was
organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at
Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809.
As investment adviser, BIMC manages the Fund and is
responsible for all purchases and sales of the Fund's
securities. For the investment advisory services provided
and expenses assumed by it, BIMC is entitled to receive a
fee, computed daily and payable monthly, based on the Fund's
average net assets. BIMC and PFPC, the co-administrator, may
from time to time reduce the investment advisory and
administration fees otherwise payable to them or may
reimburse the Fund for its operating expenses. Any fees
waived and any expenses reimbursed by BIMC and PFPC with
respect to a particular fiscal year are not recoverable. For
the fiscal year ended July 31, 1998, the Fund paid
investment advisory fees and administration fees each
aggregating .06% (net of waivers) of its average net assets.
The services provided by BIMC and the fees payable by the
Fund for these services are described further in the
Statement of Additional Information under "Management of the
Funds."
Shareholder Information ________________________________________________________
Price of The Fund's net asset value per share for purposes of pricing
Fund Shares purchase and redemption orders is determined by BIMC, the
Funds adviser, as of 12:00 noon and 4:00 P.M., Eastern time,
on each day on which both the New York Stock Exchange and
the
11
<PAGE>
Federal Reserve Bank of Philadelphia are open for business
(a "Business Day"). The net asset value per share of each
class of the Fund's shares is calculated by adding the value
of all securities and other assets of the Fund that are
allocable to a particular class, subtracting liabilities
charged to such class, and dividing the result by the total
number of outstanding shares of such class. In computing net
asset value, the Fund uses the amortized cost method of
valuation as described in the Statement of Additional
Information under "Additional Purchase and Redemption
Information." Under the 1940 Act, the Fund may postpone the
date of payment of any redeemable security for up to seven
days.
Purchase Fund shares are sold at the net asset value per share next
of Shares determined after confirmation of a purchase order by PFPC,
which also serves as the Fund's transfer agent. Purchase
orders for shares are accepted only on Business Days and
must be transmitted to PFPC in Wilmington, Delaware by
telephone (800-441-7450; in Delaware: 302-791-5350) or
through the Fund's computer access program. Orders accepted
by 12:00 noon, Eastern time, for which payment has been
received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Fund's custodian, PFPC Trust Company, by 4:00 P.M., Eastern
Time, will be executed the same day. Orders received after
12:00 noon Eastern Time and orders for which payment has not
been received by 4:00 P.M. Eastern Time, will not be
accepted, and notice thereof will be given to the
institution placing the order. (Payment for orders which are
not received or accepted will be returned after prompt
inquiry to the sending institution.)
Payment for Fund shares may be made only in federal funds
or other funds immediately available to PNC Bank. The
minimum initial investment by an institution is $5,000;
however, broker-dealers and other institutional investors
may set a higher minimum for their customers. There is no
minimum subsequent investment. The Fund, at its discretion,
may limit or reject any order for shares.
Fund shares are sold and redeemed without charge by the
Fund. Institutional investors purchasing or holding Fund
shares for their customer accounts may charge customer fees
for cash management and other services provided in
connection with their accounts. A customer should,
therefore, consider the terms of its account with an
institution before purchasing Fund shares. An institution
purchasing or redeeming Fund shares on behalf of its
customers is responsible for transmitting orders to the Fund
in accordance with its customer agreements.
Conflict of interest restrictions may apply to an
institution's receipt of compensation paid by the Fund in
connection with the investment of fiduciary funds in New
York Dollar Shares or New York Plus Shares. (See also
"Management of the Fund--Service Organizations," as
described in the Statement of Additional
12
<PAGE>
Information.) Institutions, including banks regulated by the
Comptroller of the Currency and investment advisers and
other money managers subject to the jurisdiction of the SEC,
the Department of Labor or state securities commissions, are
urged to consult their legal advisors before investing
fiduciary funds in New York Dollar Shares or New York Plus
Shares. (See also "Management of the Fund--Banking Laws," as
described in the Statement of Additional Information.)
Redemption Redemption orders must be transmitted to PFPC in Wilmington,
of Shares Delaware in the manner described under "Purchase of Shares."
Shares are redeemed at the net asset value per share next
determined after PFPC's receipt of the redemption order.
While the Fund intends to use its best efforts to maintain
its net asset value per share at $1.00, the proceeds paid to
a shareholder upon redemption may be more or less than the
amount invested depending upon a share's net asset value at
the time of redemption. Call 1-800-441-7450 (in Delaware:
302-791-5350) to place redemption orders.
Payment for redeemed shares for which a redemption order
is accepted by PFPC prior to Noon, Eastern time, on a
Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment for
redemption orders which are received after Noon, Eastern
time or on a day when PNC Bank is closed, is normally wired
in federal funds on the next day following redemption that
PNC Bank is open for business.
The Fund shall have the right to redeem shares in any
Fund account if the value of the account is less than
$4,000, after sixty-days' prior written notice to the
shareholder. Any such redemption shall be effected at the
net asset value next determined after the redemption order
is entered. If during the sixty-day period the shareholder
increases the value of its Fund account to $4,000 or more,
no such redemption shall take place. In addition, the Fund
may also redeem shares involuntarily under certain special
circumstances described in the Statement of Additional
Information under "Additional Purchase and Redemption
Information."
Shareholder Institutional investors, such as banks, savings and loan
Service and associations and other financial institutions, including
Distribution affiliates of PNC Bank Corp. ("Service Organizations"), may
Plans purchase New York Dollar or New York Plus Shares. New York
Dollar and New York Plus Shares are identical in all
respects to Money Shares except that they bear the service
fees described below and enjoy certain exclusive voting
rights on matters relating to these fees. The Fund will
enter into an agreement with each Service Organization which
purchases New York Dollar Shares or New York Plus Shares
requiring it to provide support services to its customers
who are the beneficial owners
13
<PAGE>
of such shares in consideration of the Fund's payment of
.25% (on an annualized basis) of the average daily net asset
value of the New York Dollar Shares or New York Plus Shares
held by the Service Organization for the benefit of
customers. Such services, which are described more fully in
the Statement of Additional Information under "Management of
the Fund Service Organizations," include aggregating and
processing purchase and redemption requests from customers
and placing net purchase and redemption orders with PFPC;
processing dividend payments from the Fund on behalf of
customers; providing information periodically to customers
showing their positions in New York Dollar or New York Plus
Shares; and providing sub-accounting or the information
necessary for sub-accounting with respect to New York Dollar
or New York Plus Shares beneficially owned by customers. In
addition, broker-dealers purchasing New York Plus Shares may
be requested to provide from time to time assistance (such
as the forwarding of sales literature and advertising to
their customers) in connection with the distribution of New
York Plus Shares. Under the terms of the agreements, Service
Organizations are required to provide to their customers a
schedule of any fees that they may charge customers in
connection with their investments in New York Dollar or New
York Plus Shares. New York Money Shares are sold to
institutions that have not entered into servicing agreements
with the Fund in connection with their investments.
Dividends and The Fund declares dividends daily and distributes
Distributions substantially all of its net investment income to
shareholders monthly. Shares begin accruing dividends on the
day the purchase order for the shares is effected and
continue to accrue dividends through the day before such
shares are redeemed. Dividends are paid monthly by check, or
by wire transfer if requested in writing by the shareholder,
within five business days after the end of the month or
within five business days after a redemption of all of a
shareholder's shares of a particular class.
Institutional shareholders may elect to have their
dividends reinvested in additional full and fractional
shares of the same class of shares with respect to which
such dividends are declared at the net asset value of such
shares on the payment date. Reinvested dividends receive the
same tax treatment as dividends paid in cash. Reinvestment
elections, and any revocations thereof, must be made in
writing to PFPC, the Fund's transfer agent, at P.O. Box
8950, Wilmington, Delaware 19885-9628 and will become
effective after its receipt by PFPC with respect to
dividends paid.
Taxes The Fund's distributions will generally constitute tax-
exempt income for shareholders for federal income tax
purposes. It is possible, depending upon the Fund's
14
<PAGE>
investments, that a portion of the Fund's distributions
could be taxable to shareholders as ordinary income or
capital gains, but the Fund does not expect that this will
be the case.
You should note that a portion of the exempt-interest
dividends paid by the Fund may constitute an item of tax
preference for purposes of determining federal alternative
minimum tax liability. Exempt-interest dividends will also
be considered along with other adjusted gross income in
determining whether any Social Security or railroad
retirement payments received by you are subject to federal
income taxes.
The Fund intends to comply with certain state tax
requirements so that the exempt-interest dividends derived
from interest on New York Municipal Obligations will be
exempt from New York State and New York City personal income
taxes (but not corporate franchise taxes.) Interest on
indebtedness incurred by a shareholder to purchase or carry
shares of the Fund is not deductible for Federal, New York
State or New York City personal income tax purposes. Except
as noted with respect to New York State and New York City
personal income taxes, dividends and distributions paid to
shareholders that are derived from income on Municipal
Obligations may be taxable income under state or local law
even though all or a portion of such dividends or
distributions may be derived from interest on tax-exempt
obligations that, if paid directly to shareholders, would be
tax-exempt income.
PFPC, as transfer agent, will send each Fund shareholder
or its authorized representative an annual statement
designating the amount, if any, of any dividends and
distributions made during each year and their federal, New
York State and New York City tax treatment.
Dividends declared in December of any year, and payable
to shareholders of record on a specified date in December,
will be deemed to have been received by the shareholders and
paid by the Fund on December 31 of such year in the event
such dividends are actually paid during January of the
following year.
You should also consult your tax adviser for further
information regarding the federal, state and local tax
consequences with respect to your specific situation.
15
<PAGE>
Financial Highlights ___________________________________________________________
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are incorporated by reference into the
Statement of Additional Information and included in the Annual Report, each of
which is available upon request.
New York Money Shares
The table below sets forth selected financial data for a New York Money Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income .0336 .0334 .0339 .0338 .0226
Net Gains or Losses on
Securities (both re-
alized and
unrealized) -- -- -- -- --
- -------------------------------------------------------------------------------
Total From Investment
Operations .0336 .0334 .0339 .0338 .0226
- -------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0336) (.0334) (.0339) (.0338) (.0226)
Distributions (from
capital gains) -- -- -- -- --
- -------------------------------------------------------------------------------
Total Distributions (.0336) (.0334) (.0339) (.0338) (.0226)
- -------------------------------------------------------------------------------
Net Asset Value, End of
Year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Return 3.41% 3.39% 3.44% 3.43% 2.29%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Ratios/Supplemental Da-
ta:
Net Assets, End of
Year $(000's) 318,091 269,821 272,145 246,650 279,483
Ratios of Expenses to
Average Net Assets .20%(1) .20%(1) .20%(1) .20%(1) .20%(1)
Ratios of Net Invest-
ment Income to Aver-
age Daily Net Assets 3.35% 3.34% 3.37% 3.36% 2.28%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for New York Money Shares would have
been .48% for the year ended July 31, 1998, .49% for the year ended July
31, 1997, .50% for the year ended July 31, 1996, .49% for the year ended
July 31, 1995 and .48% for the year ended July 31, 1994.
16
<PAGE>
Financial Highlights (Continued) _______________________________________________
New York Dollar Shares
The table below sets forth selected financial data for a New York Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------
1998(3) 1997 1996(3) 1995(3) 1994(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
Income From Investment Opera-
tions
Net Investment Income .0303 .0309 .0089 .0000 .0127
Net Gains or Losses on Se-
curities (both realized
and unrealized) -- -- -- -- --
- --------------------------------------------------------------------------------
Total From Investment Opera-
tions .0303 .0309 .0089 .0000 .0127
- --------------------------------------------------------------------------------
Less Distributions
Dividends (from net invest-
ment income) (.0303) (.0309) (.0089) .0000 (.0127)
Distributions (from capital
gains) -- -- -- -- --
- --------------------------------------------------------------------------------
Total Distributions (.0303) (.0309) (.0089) .0000 (.0127)
- --------------------------------------------------------------------------------
Net Asset Value, End of Pe-
riod $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Return 3.16%(2) 3.14% 3.05%(2) -- 1.96%(2)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Year
$(000's) -- 1,148 20 -- --
Ratios of Expenses to Aver-
age Net Assets(1) .45%(2) .45% .45%(2) -- .45%(2)
Ratios of Net Investment
Income to Average Daily
Net Assets 3.11%(2) 3.09% 3.07%(2) -- 1.94%(2)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for New York Dollar Shares would have
been .73% (annualized) for the year ended July 31, 1998, .74% for the year
ended July 31, 1997, .75% (annualized) for the year ended July 31, 1996
and .76% (annualized) for the year ended July 31, 1994.
(2) Annualized.
(3) There were no New York Dollar shares outstanding during the period from
March 28, 1994 to April 14, 1996 and July 21, 1998 to July 31, 1998.
17
<PAGE>
Financial Highlights (Continued) _______________________________________________
New York Plus Shares
The table below sets forth selected financial data for a New York Plus Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended July 31,
-------------------
1998(3) 1997(3) 1996(3) 1995(3) 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Pe-
riod $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income .0000 .0000 .0000 .0090 .0201
Net Gains or Losses on Securi-
ties (both realized and
unrealized) -- -- -- -- --
- --------------------------------------------------------------------------------
Total From Investment Operations .0000 .0000 .0000 .0090 .0201
- --------------------------------------------------------------------------------
Less Distributions
Dividends (from net investment
income) (.0000) (.0000) (.0000) (.0090) (.0201)
Distributions (from capital
gains) -- -- -- -- --
- --------------------------------------------------------------------------------
Total Distributions (.0000) (.0000) (.0000) (.0090) (.0201)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Returns -- -- -- 2.69%(2) 2.04%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Year
$(000's) -- -- -- -- 435
Ratios of expenses to Average
Net Assets(1) -- -- -- .45%(2) .45%
Ratios of Net Investment Income
to Average Daily Net Assets -- -- -- 2.64%(2) 2.03%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for New York Plus Shares would have
been .73% (annualized) for the year ended July 31, 1995 and .73% for the
year ended July 31, 1994.
(2) Annualized.
(3) There were no New York Plus Shares outstanding during the period from
December 2, 1994 to July 31, 1998.
18
<PAGE>
Where to Find More Information________________________________________________
The Statement of Additional Information (the "SAI") includes additional
information about the Fund's investment policies, organization and management.
It is legally part of this prospectus (it is incorporated by reference). The
Annual and Semi-Annual Reports provide additional information about the Fund's
investments, performance and portfolio holdings.
Investors can get free copies of the above named documents, and make shareholder
inquiries, by calling 1-800-821-7432. Other information is available on the
Fund's web site at www.pif.com.
Information about the Fund (including the Fund's SAI) can be reviewed and copied
at the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. Information about the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. Reports and other information
about the Fund are available on the SEC's Internet site at http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
NewYork
Money Fund
An Investment Portfolio offered by
Provident Institutional Funds
[ARTWORK PROVIDENT
APPEARS HERE] INSTITUTIONAL
FUNDS
Prospectus
February 10, 1999
PIF-P-012
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
Statement of Additional Information
February 10, 1999
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the current Prospectuses for TempFund, TempCash,
FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund, MuniFund, MuniCash,
California Money Fund and New York Money Fund, each dated February 10, 1999, of
Provident Institutional Funds ("PIF" or the "Company"), as they may from time to
time be supplemented or revised. No investment in shares should be made without
reading the Prospectus of the Fund. This Statement of Additional Information is
incorporated by reference in its entirety into each Prospectus. Copies of the
Prospectuses and Annual Reports of each of the Funds may be obtained, without
charge, by writing PIF, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, DE 19809 or calling PIF at 1-800-821-7432. The financial statements
included in the Annual Reports of each of the Funds are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information........................................................ 1
Investment Strategies, Risks and Policies.................................. 2
Portfolio Transactions................................................ 2
Investment Instruments and Policies................................... 3
Variable and Floating Rate Instruments........................... 3
Repurchase Agreements............................................ 4
Securities Lending............................................... 4
Reverse Repurchase Agreements.................................... 4
When-Issued and Delayed Settlement Transactions.................. 5
U.S. Government Obligations...................................... 5
Mortgage-Related and Other Asset-Backed Securities............... 6
Banking Industry Obligations..................................... 8
Special Considerations Regarding Foreign Investments............. 8
Guaranteed Investment Contracts.................................. 8
Investment Company Securities.................................... 9
Municipal Obligations............................................ 9
Restricted and Other Illiquid Securities......................... 11
Stand-By Commitments............................................. 12
Short-Term Trading............................................... 12
Special Considerations with Respect to California Money Fund.......... 12
Special Considerations with Respect to New York Money Fund............ 25
Investment Limitations..................................................... 38
Additional Purchase and Redemption Information............................. 40
In General............................................................ 40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Net Asset Value....................................................... 41
Management of the Funds.................................................... 42
Trustees and Officers................................................. 42
Investment Adviser.................................................... 46
Co-Administrators..................................................... 48
Distributor........................................................... 50
Custodian and Transfer Agent.......................................... 50
Service Organization.................................................. 52
Expenses.............................................................. 55
Additional Information Concerning Taxes.................................... 55
Dividends.................................................................. 57
Additional Yield Information............................................... 57
Additional Description Concerning Shares................................... 61
Counsel.................................................................... 62
Auditors................................................................... 62
Financial Statements....................................................... 62
Miscellaneous.............................................................. 63
APPENDIX A................................................................. A-1
</TABLE>
-ii-
<PAGE>
GENERAL INFORMATION
PIF was organized as a Delaware business trust on October 21, 1998. It
is the successor to the following five investment companies: (1) Temporary
Investment Fund, Inc. ("Temp"), (2) Trust for Federal Securities ("Fed"), (3)
Municipal Fund for Temporary Investment ("Muni"); (4) Municipal Fund for
California Investors, Inc. ("Cal Muni") and (5) Municipal Fund for New York
Investors, Inc. ("NY Muni") (each a "Predecessor Company", collectively the
"Predecessor Companies"). The Predecessor Companies were comprised of the
following portfolios (each, a "Fund" or "Predecessor Fund", collectively, the
"Funds" or "Predecessor Funds"): Temp - TempFund and TempCash; Fed - FedFund,
T-Fund, Federal Trust Fund and Treasury Trust Fund; Muni - MuniFund and
MuniCash; Cal Muni - California Money Fund; and NY Muni - New York Money Fund.
The Funds commenced operations as follows: TempFund - October 1973;
TempCash - February 1984; FedFund - October 1975; T-Fund - March 1980; Federal
Trust Fund - December 1980; - Treasury Trust Fund - May 1989; MuniFund -February
1980; MuniCash - February 1984; California Money Fund - February 1983 and New
York Money Fund March 1983.
The present fiscal year end for each of the Predecessor Companies and
their respective Funds is as follows: Temp - September 30, Fed - October 31,
Muni - November 30, Cal Muni - January 31 and NY Muni - July 31. This Statement
of Additional Information contains various charts with respect to fees and
performance information of the Predecessor Companies and/or Predecessor Funds.
On February 10, 1999, each of the Predecessor Funds was reorganized
into a separate series of PIF. PIF is a no-load open-end management investment
company. Currently, PIF offers shares of each of ten Funds. Each Fund is a
diversified fund, with the exception of California Money Fund and New York Money
Fund which are classified as non-diversified investment companies under the 1940
Act. Each of the Funds offers a class of Shares to institutional investors.
Each of the Funds also offers to institutional investors, such as banks, savings
and loan associations and other financial institutions ("Service
Organizations"), a separate class of shares, Dollar Shares. Additionally,
TempFund, MuniFund, T-Fund and California Money Fund offer to Service
Organizations the following separate classes of Shares: Administration Shares,
Cash Reserve Shares and Cash Management Shares. TempFund, T-Fund, MuniFund, New
York Money Fund and the California Money Fund, also offer to broker dealers, who
provide assistance in the sale of shares and institutional services to their
customers, a separate class of shares, Plus Shares.
<PAGE>
INVESTMENT STRATEGIES, RISKS AND POLICIES
PORTFOLIO TRANSACTIONS
Subject to the general control of the Board of Trustees, BlackRock
Institutional Management Corporation ("BIMC", or the "Adviser"), each Fund's
investment adviser, is responsible for, makes decisions with respect to, and
places orders for all purchases and sales of portfolio securities for a Fund.
BIMC purchases portfolio securities for the Funds either directly from the
issuer or from dealers who specialize in money market instruments. Such
purchases are usually without brokerage commissions. In making portfolio
investments, BIMC seeks to obtain the best net price and the most favorable
execution of orders. To the extent that the execution and price offered by more
than one dealer are comparable, BIMC may, in its discretion, effect transactions
in portfolio securities with dealers who provide the Funds with research advice
or other services.
With respect to TempFund and TempCash, BIMC may seek to obtain an
undertaking from issuers of commercial paper or dealers selling commercial paper
to consider the repurchase of such securities from a Fund prior to their
maturity at their original cost plus interest (interest may sometimes be
adjusted to reflect the actual maturity of the securities) if BIMC believes that
those Fund's anticipated need for liquidity makes such action desirable.
Certain dealers (but not issuers) have charged and may in the future charge a
higher price for commercial paper where they undertake to repurchase prior to
maturity. The payment of a higher price in order to obtain such an undertaking
reduces the yield which might otherwise be received by a Fund on the commercial
paper. The Company's Board of Trustees has authorized BIMC to pay a higher
price for commercial paper where it secures such an undertaking if BIMC believes
that the prepayment privilege is desirable to assure a Fund's liquidity and such
an undertaking cannot otherwise be obtained.
Investment decisions for each Fund are made independently from those
for another of the Company's portfolios or other investment company portfolios
or accounts advised or managed by BIMC. Such other portfolios may also invest
in the same securities as the Funds. When purchases or sales of the same
security are made at substantially the same time on behalf of such other
portfolios, transactions are averaged as to price, and available investments
allocated as to amount, in a manner which BIMC believes to be equitable to each
Fund and its customers who also are acquiring securities, including the Fund.
In some instances, this investment procedure may adversely affect the price paid
or received by a Fund or the size of the position obtained for a Fund. To the
extent permitted by law, BIMC may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for such other
portfolios in order to obtain best execution.
The Funds will not execute portfolio transactions through or acquire
portfolio securities issued by BIMC, PNC Bank, National Association ("PNC
Bank"), PFPC Inc. ("PFPC"), and Provident Distributors, Inc. ("PDI"), or any
affiliated person (as such term is defined in the Investment Company Act of 1940
(the "1940 Act")) of any of them, except to the extent permitted by the
Securities and Exchange Commission (the "SEC"). In addition, with
-2-
<PAGE>
respect to such transactions, securities, deposits and agreements, the Funds
will not give preference to Service Organizations with whom a Fund enters into
agreements concerning the provision of support services to customers who
beneficially own Dollar Shares, Administration Shares, Cash Reserve Shares, Cash
Management Shares and Plus Shares.
The Funds do not intend to seek profits through short-term trading.
Each Fund's annual portfolio turnover will be relatively high, but is not
expected to have a material effect on its net income. Each Fund's portfolio
turnover rate is expected to be zero for regulatory reporting purposes.
INVESTMENT INSTRUMENTS AND POLICIES
The following supplements the description of the investment
instruments and/or policies which are applicable to the Funds. In such cases
where an instrument or policy is utilized only by a specific Fund or Funds, its
applicability to the specific Fund is noted below:
VARIABLE AND FLOATING RATE INSTRUMENTS. TempFund, TempCash, MuniFund,
MuniCash, California Money Fund and New York Money Fund may purchase variable
and floating rate instruments. Variable and floating rate instruments are
subject to the credit quality standards described in the Prospectuses. In some
cases the Funds may require that the obligation to pay the principal of the
instrument be backed by a letter or line of credit or guarantee. Such
instruments may carry stated maturities in excess of 13 months provided that the
maturity-shortening provisions stated in Rule 2a-7 are satisfied. Although a
particular variable or floating rate demand instrument may not be actively
traded in a secondary market, in some cases, a Fund may be entitled to principal
on demand and may be able to resell such notes in the dealer market.
Variable and floating rate demand instruments held by a Fund may have
maturities of more than 13 months provided: (i) the Fund is entitled to the
payment of principal at any time, or during specified intervals not exceeding 13
months, upon giving the prescribed notice (which may not exceed 30 days), and
(ii) the rate of interest on such instruments is adjusted at periodic intervals
which may extend up to 13 months. Variable and floating rate notes that do not
provide for payment within seven days may be deemed illiquid and subject to a
10% limitation on such investments.
In determining a Fund's average weighted portfolio maturity and
whether a long-term variable or floating rate demand instrument has a remaining
maturity of 13 months or less, each instrument will be deemed by a Fund to have
a maturity equal to the longer of the period remaining until its next interest
rate adjustment or the period remaining until the principal amount can be
recovered through demand. Variable and floating notes are not typically rated
by credit rating agencies, but their issuers must satisfy the Fund's quality and
maturity requirements. If an issuer of such a note were to default on its
payment obligation, the Fund might be unable to dispose of the note because of
the absence of an active secondary market and might, for this or other reasons,
suffer a loss. The Fund invests in variable or floating rate notes only when
the Adviser deems the investment to involve minimal credit risk.
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REPURCHASE AGREEMENTS. TempFund, TempCash, FedFund and T-Fund may
purchase repurchase agreements. In a repurchase agreement, a Fund purchases
money market instruments from financial institutions, such as banks and broker-
dealers, subject to the seller's agreement to repurchase them at an agreed upon
time and price, reflecting interest on the repurchase price for the securities
subject to the repurchase agreement. The securities subject to a repurchase
agreement may bear maturities exceeding 13 months, provided the repurchase
agreement itself matures in 13 months or less. The seller under a repurchase
agreement will be required to maintain the value of the securities subject to
the agreement at not less than the repurchase price. Default by the seller
would, however, expose the Fund to possible loss because of adverse market
action or delay in connection with the disposition of the underlying securities.
Collateral for a repurchase agreement may include cash items, obligations issued
by the U.S. Government or its agencies or instrumentalities or obligations rated
in the highest category by a nationally recognized statistical rating
organization (an "NRSRO"). The ratings by NRSROs represent their respective
opinions as to the quality of the obligations they undertake to rate. Ratings,
however, are general and are not absolute standards of quality. Consequently,
obligations with the same rating, maturity, and interest rate may have different
market prices. The Appendix to this Statement of Additional Information
contains a description of the relevant rating symbols used by NRSROs for
commercial paper that may be purchased by each Fund. The repurchase price under
the repurchase agreements described in the Funds' Prospectuses generally equals
the price paid by that Fund plus interest negotiated on the basis of current
short-term rates (which may be more or less than the rate on the securities
underlying the repurchase agreement). Securities subject to repurchase
agreements will be held by the Company's custodian or sub-custodian, or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by the Funds under the 1940 Act.
SECURITIES LENDING. Each of TempFund, TempCash, FedFund and T-Fund
may lend its securities with a value of up to one-third of its total assets
(including the value of the collateral for the loan) to qualified brokers,
dealers, banks and other financial institutions for the purpose of realizing
additional net investment income through the receipt of interest on the loan.
Such loans would involve risks of delay in receiving additional collateral in
the event the value of the collateral decreased below the value of the
securities loaned or of delay in recovering the securities loaned or even loss
of rights in the collateral should the borrower of the securities fail
financially. Loans will only be made to borrowers deemed by the Adviser to be
creditworthy.
REVERSE REPURCHASE AGREEMENTS. Each of TempFund, TempCash, FedFund
and T-Fund may enter into reverse repurchase agreements. In a reverse
repurchase agreement a Fund sells a security and simultaneously commits to
repurchase that security at a future date from the buyer. In effect, the Fund
is temporarily borrowing money at an agreed upon interest rate from the
purchaser of the security, and the security sold represents collateral for the
loan.
A Fund's investment of the proceeds of a reverse repurchase agreement
involves the speculative factor known as leverage. A Fund may enter into a
reverse repurchase agreement only if the interest income from investment of the
proceeds is greater than the interest expense of the transaction and the
proceeds are invested for a period no longer than the term of the agreement. A
Fund will maintain in a segregated account, liquid securities at least equal to
its
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purchase obligations under these agreements. The Adviser will evaluate the
creditworthiness of the other party in determining whether a Fund will enter
into a reverse repurchase agreement. The use of reverse repurchase agreements
involves certain risks. For example, the securities acquired by a Fund with the
proceeds of such an agreement may decline in value, although the Fund is
obligated to repurchase the securities sold to the counter party at the agreed
upon price. In addition, the market value of the securities sold by a Fund may
decline below the repurchase price to which the Fund remains committed.
Each of TempFund, TempCash, FedFund and T-Fund is permitted to invest
up to one-third of its total assets in reverse repurchase agreements and
securities lending transactions. Investments in reverse repurchase agreements
and securities lending transaction will be aggregated for purposes of this
investment limitation.
WHEN-ISSUED AND DELAYED SETTLEMENT TRANSACTIONS. The Funds may
utilize when-issued and delayed settlement transactions. When-issued securities
are securities purchased for delivery beyond the normal settlement date at a
stated price and yield. Delayed settlement describes settlement of a securities
transaction in the secondary market sometime in the future. The Fund will
generally not pay for such securities or start earning interest on them until
they are received. Securities purchased on a when-issued or delayed settlement
basis are recorded as an asset and are subject to changes in value based upon
changes in the general level of interest rates. When a Fund agrees to purchase
when-issued or delayed settlement securities, the custodian will set aside cash
or liquid portfolio securities equal to the amount of the commitment in a
separate account. Normally, the custodian will set aside portfolio securities
to satisfy a purchase commitment, and in such a case that Fund may be required
subsequently to place additional assets in the separate account in order to
ensure that the value of the account remains equal to the amount of such Fund's
commitment. It may be expected that the market value of the Fund's net assets
will fluctuate to a greater degree when it sets aside portfolio securities to
cover such purchase commitments than when it sets aside cash. A Fund's
liquidity and ability to manage its portfolio might be affected when it sets
aside cash or portfolio securities to cover such purchase commitments. When a
Fund engages in when-issued or delayed settlement transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous. The Funds do not intend to purchase when-issued or delayed
settlement securities for speculative purposes but only in furtherance of a
Fund's investment objective. Each Fund reserves the right to sell these
securities before the settlement date if it is deemed advisable.
U.S. GOVERNMENT OBLIGATIONS. Examples of the types of U.S. Government
obligations that may be held by the Funds include U.S. Treasury Bills, Treasury
Notes, and Treasury Bonds and the obligations of the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association,
Federal National Mortgage Association, Federal Financing Bank, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
Federal Intermediate Credit Banks, Federal Land Banks, Federal Farm Credit
Banks, Maritime
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Administration, Tennessee Valley Authority, Washington D.C. Armory Board, and
International Bank for Reconstruction and Development. The Funds may also invest
in mortgage-related securities issued or guaranteed by U.S. Government agencies
and instrumentalities, including such instruments as obligations of the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES. TempFund and
TempCash may purchase mortgage-related and other asset-backed securities.
Mortgage-related securities include fixed and adjustable Mortgage Pass-Through
Certificates, which provide the holder with a pro-rata share of interest and
principal payments on a pool of mortgages, ordinarily on residential properties.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Pass-Through Certificates guaranteed
by GNMA (also known as "Ginnie Maes") are guaranteed as to the timely payment of
principal and interest by GNMA, whose guarantee is backed by the full faith and
credit of the United States. Mortgage-related securities issued by FNMA include
FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are guaranteed as to timely payment of principal and interest by FNMA.
They are not backed by or entitled to the full faith and credit of the United
States, but are supported by the right of the FNMA to borrow from the Treasury.
Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs"). Freddie Macs are not guaranteed by
the United States or by any Federal Home Loan Banks and do not constitute a debt
or obligation of the United States or of any Federal Home Loan Bank. Freddie
Macs entitle the holder to timely payment of interest, which is guaranteed by
the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. When FHLMC does not
guarantee timely payment of principal, FHLMC is required to remit the amount due
on account of its guarantee of ultimate payment of principal no later than one
year after it becomes payable.
A Fund from time to time may purchase in the secondary market (i)
certain mortgage pass-through securities packaged and master serviced by PNC
Mortgage Securities Corp. ("PNC Mortgage") (or Sears Mortgage if PNC Mortgage
succeeded to the rights and duties of Sears Mortgage) or Midland Loan Services,
Inc. ("Midland"), or (ii) mortgage-related securities containing loans or
mortgages originated by PNC Bank, National Association ("PNC Bank") or its
affiliates). It is possible that under some circumstances, PNC Mortgage, Midland
or other affiliates could have interests that are in conflict with the holders
of these mortgage-backed securities, and such holders could have rights against
PNC Mortgage, Midland or their affiliates. For example, if PNC Mortgage, Midland
or their affiliates engaged in negligence or willful misconduct in carrying out
its duties as a master servicer, then any holder of the mortgage-backed security
could seek recourse against PNC Mortgage, Midland or their affiliates, as
applicable. Also, as a master servicer, PNC Mortgage, Midland or their
affiliates may make certain representations and warranties regarding the quality
of the mortgages and properties underlying a mortgage-backed security. If one or
more of those representations or warranties is false, then the holders of the
mortgage-backed securities could trigger an obligation of PNC Mortgage, Midland
or their affiliates, as applicable, to repurchase the mortgages from the issuing
trust. Finally, PNC Mortgage, Midland or their affiliates may own securities
that are subordinate to the senior mortgage-backed securities owned by a Fund.
TempCash only may also invest in classes of collateralized mortgage
obligations ("CMOs") which have a remaining maturity of 13 months or less in
accordance with the requirements of Rule 2a-7 under the 1940 Act. Each class of
a CMO, which frequently elect to be taxed as a real estate mortgage investment
conduit ("REMIC"), represents an ownership interest in, and the right to receive
a specified portion of, the cash flow consisting of interest and principal on a
pool of residential mortgage loans or mortgage pass-through securities
("Mortgage
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Assets"). CMOs are issued in multiple classes, each with a specified fixed or
floating interest rate and a final distribution date. The relative payment
rights of the various CMO classes may be structured in many ways. In most cases,
however, payments of principal are applied to the CMO classes in the order of
their respective stated maturities, so that no principal payments will be made
on a CMO class until all other classes having an earlier stated maturity date
are paid in full. These multiple class securities may be issued or guaranteed by
U.S. Government agencies or instrumentalities, including GNMA, FNMA and FHLMC,
or issued by trusts formed by private originators of, or investors in, mortgage
loans. Classes in CMOs which TempCash may hold are known as "regular" interests.
CMOs also issue "residual" interests, which in general are junior to and more
volatile than regular interests. TempCash does not intend to purchase residual
interests.
TempFund and TempCash may also invest in non-mortgage asset-backed
securities (backed, e.g., by installment sales contracts, credit card
----
receivables or other assets). Asset-backed securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in an underlying pool of assets, or as debt instruments, which are
also known as collateralized obligations, and are generally issued as the debt
of a special purpose entity organized solely for the purpose of owning such
assets and issuing such debt.
The yield characteristics of certain mortgage-related and asset-backed
securities may differ from traditional debt securities. One such major
difference is that all or a principal part of the obligations may be prepaid at
any time because the underlying assets (i.e., loans) may be prepaid at any time.
----
As a result, a decrease in interest rates in the market may result in increases
in the level of prepayments as borrowers, particularly mortgagors, refinance and
repay their loans. An increased prepayment rate with respect to a mortgage-
related or asset-backed security subject to such a prepayment feature will have
the effect of shortening the maturity of the security. If a Fund has purchased
such a mortgage-related or asset-backed security at a premium, a faster than
anticipated prepayment rate could result in a loss of principal to the extent of
the premium paid. Conversely, an increase in interest rates may result in
lengthening the anticipated maturity of such a security because expected
prepayments are reduced. A prepayment rate that is faster than expected will
reduce the yield to maturity of such a security, while a prepayment rate that is
slower than expected may have the opposite effect of increasing yield to
maturity.
In general, the assets supporting non-mortgage asset-backed securities
are of shorter maturity than the assets supporting mortgage-related securities.
Like other fixed-income securities, when interest rates rise the value of an
asset-backed security generally will decline; however, when interest rates
decline, the value of an asset-backed security with prepayment features may not
increase as much as that of other fixed-income securities, and, as noted above,
changes in market rates of interest may accelerate or retard prepayments and
thus affect maturities.
These characteristics may result in a higher level of price volatility
for asset-backed securities with prepayment features under certain market
conditions. In addition, while
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the trading market for short-term mortgages and asset backed securities is
ordinarily quite liquid, in times of financial stress the trading market for
these securities sometimes becomes restricted.
BANKING INDUSTRY OBLIGATIONS. For purposes of TempCash's investment
policies with respect to obligations of issuers in the financial services
industry, the assets of a bank or savings institution will be deemed to include
the assets of its domestic and foreign branches. Obligations of foreign banks
in which TempCash may invest include Eurodollar Certificates of Deposit ("ECDs")
which are U.S. dollar-denominated certificates of deposit issued by offices of
foreign and domestic banks located outside the United States; Eurodollar Time
Deposits ("ETDs") which are U.S. dollar-denominated deposits in a foreign branch
of a U.S. bank or a foreign bank; Canadian Time Deposits ("CTDs") which are
essentially the same as ETDs except they are issued by Canadian offices of major
Canadian banks; and Yankee Certificates of Deposit ("Yankee CDs") which are U.S.
dollar-denominated certificates of deposit issued by a U.S. branch of a foreign
bank and held in the United States.
SPECIAL CONSIDERATIONS REGARDING FOREIGN INVESTMENTS. TempCash's
investments in the obligations of foreign issuers, including foreign
governments, foreign banks and foreign branches of U.S. banks, may subject
TempCash to investment risks that are different in some respects from those of
investments in obligations of U.S. domestic issuers. These risks may include
future unfavorable political and economic developments, possible withholding
taxes on interest income, seizure or nationalization of foreign deposits,
interest limitations, the possible establishment of exchange controls, or other
governmental restrictions which might affect the payment of principal or
interest on the securities held by the Fund. Additionally, foreign branches of
U.S. banks and foreign banks may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting and recordkeeping
requirements than those applicable to domestic branches of U.S. banks. TempCash
will acquire U.S. dollar-denominated securities issued by foreign issuers,
including foreign governments, foreign banks and foreign branches of U.S. banks,
only when the Fund's investment adviser believes that the risks associated with
such instruments are minimal.
GUARANTEED INVESTMENT CONTRACTS. TempCash may invest in guaranteed
investment contracts and similar funding agreements ("GICs"). In connection
with this TempCash makes cash contributions to a deposit fund of the insurance
company's general account. The insurance company then credits to the Fund on a
monthly basis guaranteed interest which is based on an index (in most cases this
index is expected to be the Salomon Brothers CD Index). The GICs provide that
this guaranteed interest will not be less than a certain minimum rate. The
purchase price paid for a GIC becomes part of the general assets of the
insurance company, and the contract is paid from the general assets of the
insurance company. TempCash will only purchase GICs from insurance companies
which, at the time of purchase, are rated "A+" by A.M. Best Company, have assets
of $1 billion or more and meet quality and credit standards established by the
adviser under guidelines approved by the Board of Trustees. Generally, GICs are
not assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in some GICs does not currently exist.
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<PAGE>
INVESTMENT COMPANY SECURITIES. The Funds may invest in securities
issued by other open-end investment companies that invest in the type of
obligations in which such Fund may invest and that determine their net asset
value per share based upon the amortized cost or penny rounding method.
Investments in the other investment companies will cause a Fund (and,
indirectly, the Fund's shareholders) to bear proportionately the costs incurred
in connection with the other investment companies' operations. Except as
otherwise permitted under the 1940 Act, each Fund currently intends to limit its
investments in other investment companies so that, as determined immediately
after a securities purchase is made: (a) not more that 5% of the value of its
total assets will be invested in the securities of any one investment company;
(b) not more than 10% of its total assets will be invested in the aggregate in
securities of investment companies as a group; and (c) not more than 3% of the
outstanding voting securities of any one investment company will be owned by the
Fund. A Fund, as discussed below in "Investment Limitations" may invest all of
its assets in a open-end investment company or series thereof with substantially
the same investment objectives, restrictions and policies as the Fund.
MUNICIPAL OBLIGATIONS. MuniFund, MuniCash, California Money Fund, New
York Money Fund TempFund and TempCash, may purchase municipal obligations.
Municipal Obligations include debt obligations issued by governmental entities
to obtain funds for various public purposes, including the construction of a
wide range of public facilities, the refunding of outstanding obligations, the
payment of general operating expenses and the extension of loans to public
institutions and facilities. Private activity bonds that are issued by or on
behalf of public authorities to finance various privately-operated facilities
are included within the term Municipal Obligations if the interest paid thereon
is (subject to the federal alternative minimum tax) exempt from regular federal
income tax.
From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax exemption for
interest on Municipal Obligations. For example, under the Tax Reform Act of
1986, enacted in October 1986, interest on certain private activity bonds must
be included in an investor's alternative minimum taxable income, and corporate
investors must include all tax-exempt interest in the calculation of adjusted
current earnings for purposes of determining the corporation's alternative
minimum tax liability. The Company cannot predict what legislation or
regulations, if any, may be proposed in Congress or promulgated by the
Department of Treasury as regards the federal income tax exemption of interest
on such obligations or the impact of such legislative and regulatory activity on
such exemption.
The two principal classifications of Municipal Obligations which may
be held by the Funds are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit, and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as the user of the
facility being financed. Revenue securities include private activity bonds
which are not payable from the unrestricted revenues of the Municipal issuer.
Consequently, the credit quality of private activity bonds is usually related to
the credit standing of the corporate user of the facility involved.
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<PAGE>
The Funds' portfolios may also include "moral obligation" bonds, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation bonds is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
There are, of course, variations in the quality of Municipal
Obligations, both within a particular classification and between
classifications, and the yields on Municipal Obligations depend upon a variety
of factors, including general money market conditions, the financial condition
of the issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
The ratings of Moody's and S&P represent their opinions as to the quality of
Municipal Obligations. It should be emphasized, however, that ratings are
general and are not absolute standards of quality, and Municipal Obligations
with the same maturity, interest rate and rating may have different yields while
Municipal Obligations of the same maturity and interest rate with different
ratings may have the same yield. Subsequent to its purchase by the Funds, an
issue of Municipal Obligations may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Funds. The
Adviser will consider such an event in determining whether the Funds should
continue to hold the obligation.
An issuer's obligations under its Municipal Obligations are subject to
the provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the federal Bankruptcy Code, and laws, if any,
which may be enacted by federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Municipal Obligations may be
materially adversely affected by litigation or other conditions.
Among other types of Municipal Obligations, the Funds may purchase
short-term General Obligation Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, Tax-Exempt Commercial Paper, Construction
Loan Notes and other forms of short-term loans. Such instruments are issued
with a short-term maturity in anticipation of the receipt of tax funds, the
proceeds of bond placements or other revenues. In addition, the Funds may
invest in other types of tax-exempt instruments, including general obligation
and private activity bonds, provided they have remaining maturities of 13 months
or less at the time of purchase.
MuniFund, MuniCash, California Money Fund and New York Money Fund may
hold tax-exempt derivatives which may be in the form of tender option bonds,
participations, beneficial interests in a trust, partnership interests or other
forms. A number of different structures have been used. For example, interests
in long-term fixed-rate Municipal Obligations, held by a bank as trustee or
custodian, are coupled with tender option, demand and other features when the
tax-exempt derivatives are created. Together, these features entitle the holder
of the
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interest to tender (or put) the underlying Municipal Obligation to a third party
at periodic intervals and to receive the principal amount thereof. In some
cases, Municipal Obligations are represented by custodial receipts evidencing
rights to receive specific future interest payments, principal payments, or
both, on the underlying municipal securities held by the custodian. Under such
arrangements, the holder of the custodial receipt has the option to tender the
underlying municipal security at its face value to the sponsor (usually a bank
or broker dealer or other financial institution), which is paid periodic fees
equal to the difference between the bond's fixed coupon rate and the rate that
would cause the bond, coupled with the tender option, to trade at par on the
date of a rate adjustment. The Funds may hold tax-exempt derivatives, such as
participation interests and custodial receipts, for Municipal Obligations which
give the holder the right to receive payment of principal subject to the
conditions described above. The Internal Revenue Service has not ruled on
whether the interest received on tax-exempt derivatives in the form of
participation interests or custodial receipts is tax-exempt, and accordingly,
purchases of any such interests or receipts are based on the opinion of counsel
to the sponsors of such derivative securities. Neither the Funds nor the Adviser
will independently review the underlying proceedings related to the creation of
any tax-exempt derivatives or the bases for such opinion.
Before purchasing a tax-exempt derivative for such Funds, the Adviser
is required by the Funds' procedures to conclude that the tax-exempt security
and the supporting short-term obligation involve minimal credit risks and are
Eligible Securities under the Funds' Rule 2a-7 procedures. In evaluating the
creditworthiness of the entity obligated to purchase the tax-exempt security,
the Adviser will review periodically the entity's relevant financial
information. Currently, the Trustees have authorized the purchase of tax-exempt
derivatives by the Funds so long as after any purchase not more than 10% of the
Funds' assets are invested in such securities.
RESTRICTED AND OTHER ILLIQUID SECURITIES. The SEC has adopted Rule
144A under the Securities Act of 1933 (the "1933 Act") that allows for a broader
institutional trading market for securities otherwise subject to restriction on
resale to the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. The Adviser anticipates that the market for
certain restricted securities such as institutional commercial paper will expand
further as a result of this regulation and the development of automated systems
for the trading, clearance and settlement of unregistered securities of domestic
and foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers.
The Adviser will monitor the liquidity of restricted and other
illiquid securities under the supervision of the Board of Trustees. In reaching
liquidity decisions, the Adviser will consider, inter alia, the following
----- ----
factors: (1) the unregistered nature of a Rule 144A security; (2) the frequency
of trades and quotes for the Rule 144A security; (3) the number of dealers
wishing to purchase or sell the Rule 144A security and the number of other
potential purchasers; (4) dealer undertakings to make a market in the Rule 144A
security; (5) the trading markets for the Rule 144A security; and (6) the nature
of the Rule 144A security and the nature of the marketplace trades (e.g., the
----
time needed to dispose of the Rule 144A security, the method of soliciting
offers and the mechanics of the transfer).
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STAND-BY COMMITMENTS. MuniFund, MuniCash, California Money Fund and
New York Money Fund may acquire stand-by commitments. Under a stand-by
commitment, a dealer would agree to purchase at a Fund's option specified
Municipal Obligations at their amortized cost value to the Fund plus accrued
interest, if any. (Stand-by commitments acquired by a Fund may also be referred
to as "put" options.) Stand-by commitments may be exercisable by a Fund at any
time before the maturity of the underlying Municipal Obligations and may be
sold, transferred, or assigned only with the instruments involved. A Fund's
right to exercise stand-by commitments will be unconditional and
unqualified.
SHORT-TERM TRADING. Federal Trust Fund and Treasury Trust Fund may
seek profits through short-term trading and engage in short-term trading for
liquidity purposes. Increased trading may provide greater potential for capital
gains and losses, and also involves correspondingly greater trading costs which
are borne by the Fund involved. BIMC will consider such costs in determining
whether or not a Fund should engage in such trading. The portfolio turnover
rate for the Funds is expected to be zero for regulatory reporting purposes.
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA MONEY FUND.
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based on information available as
of the date of this Statement of Additional Information from official statements
and prospectuses relating to securities offerings of the State of California and
various local agencies in California. While the Company has not independently
verified such information, they have no reason to believe that such information
is not correct in all material respects.
ECONOMIC FACTORS
FISCAL YEARS PRIOR TO 1995-96. Pressures on the State's budget in the
late 1980's and early 1990's were caused by a combination of external economic
conditions and growth of the largest General Fund Programs - K-14 education,
health, welfare and corrections -- at rates faster than the revenue base. These
pressures could continue as the State's overall population and school age
population continue to grow, and as the State's corrections program responds to
a "Three Strikes" law enacted in 1994, which requires mandatory life prison
terms for certain third-time felony offenders. In addition, the State's health
and welfare programs are in a transition period as a result of recent federal
and State welfare reform initiatives.
As a result of these factors and others, and especially because a
severe recession between 1990-94 reduced revenues and increased expenditures for
social welfare programs, from the late 1980's until 1992-93, the State had
periods of significant budget imbalance. During this period, expenditures
exceeded revenues in four out of six years, and the State accumulated and
sustained a budget deficit in its budget reserve, the Special Fund for Economic
Uncertainties ("SFEU") approaching $2.8 billion at its peak on June 30, 1993.
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Between the 1991-92 and 1994-95 Fiscal Years, each budget required
multibillion dollar actions to bring projected revenues and expenditures into
balance, including significant cuts in health and welfare program expenditures;
transfers of program responsibilities and funding from the State to local
governments; transfers of about $3.6 billion in annual local property tax
revenues from other local governments to local school districts, thereby
reducing State funding for schools under Proposition 98; and revenue increases
(particularly in the 1991-92 Fiscal Year budget), most of which were for a short
duration.
Despite these budget actions, as noted, the effects of the recession
led to large, unanticipated deficits in the SFEU, as compared to projected
positive balances. By the 1993-94 Fiscal Year, the accumulated deficit was so
large that it was impractical to budget to retire such deficits in one year, so
a two-year program was implemented, using the issuance of revenue anticipation
warrants to carry a portion of the deficit over the end of the fiscal year. When
the economy failed to recover sufficiently in 1993-94, a second two-year plan
was implemented in 1994-95, again using cross-fiscal year revenue anticipation
warrants to partly finance the deficit into the 1995-96 fiscal year.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to local school districts "borrowed"
from future fiscal years and hence not shown in the annual budget, was to
significantly reduce the State's cash resources available to pay its ongoing
obligations. When the Legislature and the Governor failed to adopt a budget for
the 1992-93 Fiscal Year by July 1, 1992, which would have allowed the State to
carry out its normal annual cash flow borrowing to replenish cash reserves, the
State Controller issued registered warrants to pay a variety of obligations
representing prior years' or continuing appropriations, and mandates from court
orders. Available funds were used to make constitutionally-mandated payments,
such as debt service on bonds and warrants. Between July 1 and September 4,
1992, when the budget was adopted, the State Controller issued a total of
approximately $3.8 billion of registered warrants.
For several fiscal years during the recession, the State was forced to
rely on external debt markets to meet its cash needs, as a succession of notes
and revenue anticipation warrants were issued in the period from June 1992 to
July 1994, often needed to pay previously maturing notes or warrants. These
borrowings were used also in part to spread out the repayment of the accumulated
budget deficit over the end of a fiscal year, as noted earlier. The last and
largest of these borrowings was $4.0 billion of revenue anticipation warrants
which were issued in July, 1994 and matured on April 25, 1996.
1995-96 THROUGH 1997-98 FISCAL YEARS
With the end of the recession, and a growing economy beginning in
1994, the State's financial condition improved markedly in the last three fiscal
years, with a combination of better than expected revenues, slowdown in growth
of social welfare programs, and continued spending restraint based on the
actions taken in earlier years. The last of the recession-induced budget
deficits was repaid, allowing the SFEU to post a positive cash balance for only
the second time in the 1990's, totaling $281 million as of June 30, 1997. The
State's cash position also
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returned to health, as cash flow borrowing was limited to $3 billion in 1996-97,
and no deficit borrowing has occurred over the end of these last three fiscal
years.
The economy grew strongly during these fiscal years, and as a result,
the General Fund took in substantially greater tax revenues (around $2.2 billion
in 1995-96, $1.6 billion in 1996-97 and $2.2 billion in 1997-98) than were
initially planned when the budgets were enacted. These additional funds were
largely directed to school spending as mandated by Proposition 98, and to make
up shortfalls from reduced federal health and welfare aid in 1995-96 and 1996-
97. The accumulated budget deficit from the recession years was finally
eliminated. The Department of Finance estimates that the State's budget reserve
(the SFEU) totaled $639.8 million as of June 30, 1997 and 1.782 billion as of
June 30, 1998.
1998-99 FISCAL YEAR BUDGET
When the Governor released his proposed 1998-99 Fiscal Year Budget on
January 9, 1998, he projected General Fund revenues for the 1998-99 Fiscal Year
of $55.4 billion and proposed expenditures in the same amount. By the time the
Governor released the May Revision to the 1998-99 Budget ("May Revision") on May
14, 1998, the Administration projected that revenues for the 1997-98 and 1998-99
Fiscal Years combined would be more than $4.2 billion higher than was projected
in January. The Governor proposed that most of this increased revenue be
dedicated to fund a 75% cut in the Vehicle License Fee ("VLF").
The Legislature passed the 1998-99 Budget Bill on August 11, 1998, and
the Governor signed it on August 21, 1998. Some 33 companion bills necessary to
implement the budget were also signed. In signing the Budget Bill, the Governor
used his line-item veto power to reduce expenditures by $1.360 billion from the
General Fund, and $160 million from Special Funds. Of this total, the Governor
indicated that about $250 million of vetoed funds were "set aside" to fund
programs for education. Vetoed items included education funds, salary increases
and many individual resources and capital projects.
The 1998-99 Budget Act is based on projected General Fund revenues and
transfers of $57.0 billion (after giving effect to various tax reductions
enacted in 1997 and 1998), a 4.2% increase from the revised 1997-98 figures.
Special Fund revenues were estimated at $14.3 billion. The revenue projections
were based on the May Revision. Economic problems overseas since that time may
affect the May Revision projections. See "Economic Assumptions" below.
After giving effect to the Governor's vetoes, the Budget Act provides
authority for expenditures of $57.3 billion from the General Fund (a 7.3%
increase from 1997-98), $14.7 billion from Special Funds, and $3.4 billion from
bond funds. The Budget Act projects a balance in the SFEU at June 30, 1999 (but
without including the "set aside" veto amount) of $1.255 billion, a little more
than 2% of General Fund revenues. The Budget Act assumes the State will carry
out its normal intra-year cash flow borrowing in the amount of $1.7 billion of
revenue anticipation notes which were issued on October 1, 1998.
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The most significant feature of the 1998-99 Budget was agreement on a
total of $1.4 billion of tax cuts. The central element is a bill which provides
for a phased-in reduction of the VLF. Sine the VLF is currently transferred to
cities and counties, the bill provides for the General Fund to replace the lose
revenues. Starting on January 1, 1999, the VLF will be reduced 25%, at a cost to
the General Fund of approximately $500 million in the 1998-99 Fiscal Year and
about $1 billion annually thereafter.
In addition to the cut in VLF, the1998-99 Budget includes both
temporary and permanent increase in the personal income tax dependent credit
($612 million General Fund cost in 1998-99, but less in future years), a
nonrefundable renters tax credit ($133 million), and various targeted business
tax credits ($106 million).
Other significant elements of the 1998-99 Budget Act are as follows:
-------------------------------------------------------------------
1. Proposition 98 funding for K-12 schools is increased by $1.7
billion in General Fund moneys over revised 1997-98 levels, about $300 million
higher than the minimum Proposition 98 guaranty. An additional $600 million was
appropriated to "settle up" prior years' Proposition 98 entitlements, and was
primarily devoted to one-time uses such as block grants, deferred maintenance,
and computer and laboratory equipment. Of the 1998-99 funds, major new programs
include money for institutional and library materials deferred maintenance,
support for increasing the school year to 180 days and reduction of class sizes
in Grade 9. The Governor held $250 million of education funds which were vetoed
as set-aside for enactment of additional reforms. Overall, per-pupil spending
for K-12 schools under Proposition 98 is increased to $5,696, more than one
third higher than the level in the last recession year of 1993-4. The Budget
also includes $250 million a repayment of prior years' loans to schools, as part
of the settlement of the CTA v. Gould lawsuit.
------------
2. Funding for higher education increased substantially above the
level called for in the Governor's four-year compact. General Fund support was
increased by $340 million (15.6%) for the University of California and $267
million (14.1%) for the California State University system. In addition,
Community Colleges received a $300 million (6.6%) increase under Proposition
98.
3. The Budget includes increased funding for health, welfare and
social services programs. A 4.9% grant increase was included in the basic
welfare grants, the first increase in those grants in 9 years. Future increases
will depend on sufficient General Fund revenue to trigger the phased costs in
VLF described above.
4. Funding for the judiciary and criminal justice programs increased
by about 11% over 1997-98, primarily to reflect increased State support for
local trial courts and rising prison population.
5. Various other highlights of the Budget included new funding for
resources projects, dedication of $376 million of General Fund moneys for
capital outlay projects, funding of a 3% State employee salary increase, funding
of 2,000 new Department of Transportation
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positions to accelerate transportation construction projects and funding of the
Infrastructure and Economic Development Bank ($50 million).
6. The State of California received approximately $167 million of
federal reimbursements to offset costs related to the incarceration of
undocumented alien felons for federal fiscal year 1997. The State anticipates
receiving approximately $195 million in federal reimbursements for federal
fiscal year 1998.
After the Budget Act was signed, and prior to the close of the
Legislative session on August 31, 1998, the Legislature passed a variety of
fiscal bills. The Governor had until September 30, 1998 to sign or veto these
bills. The bills with the most significant fiscal impact which the Governor
signed include $235 million for certain water system improvements in Southern
California, $243 million for the State's share of the purchase of
environmentally sensitive forest lands, $178 million for state prisons, $160
million for housing assistance ($40 million of which was included in the 1998-99
Budget Act and an additional $120 million reflected in Proposition 1A), and $125
million for juvenile facilities. The Governor also signed bills totaling $223
million for education programs which were part of the Governor's $250 million
veto "set aside," and $32 million for local governments fiscal relief. In
addition, he signed a bill reducing by $577 million the State's obligation to
contribute to the State Teachers' Retirement System in the 1998-99 Fiscal
Year.
Based solely on the legislation enacted, on a net basis, the reserve
for June 30, 1999, was reduced by $256 million. On the other hand, 1997-98
revenues have been increased by $160 million. The revised June 30, 1999,
reserve is projected to be $1,159 million or $96 million below the level
projected at the Budget Act. The reserve projected in the Budget Act was $1,255
million. It is important to emphasize that the new reserve level is based on
1998-99 revenue and expenditure assumptions as of the Budget Act except to
augment for legislation signed after the budget enactment. These assumptions
will not be updated until the 1999-00 Governor's Budget is released or January
10, 1999. In November, 1998, the Legislative Analyst's Office released a report
predicting that General Fund revenues for 1998-99 would be somewhat lower, and
expenditures somewhat higher, than the Budget Act forecasts, but the net
variance would be within the projected $1.2 billion year-end reserve
amount.
OTHER MATTERS. On December 6, 1994, Orange County, California and its
Investment Pool (the "Pool") filed for bankruptcy under Chapter 9 of the United
States Bankruptcy Code. The subsequent restructuring led to the sale of
substantially all of the Pool's portfolio and resulted in losses estimated to be
approximately $1.7 billion (or approximately 22% of amounts deposited by the
Pool investors). Approximately 187 California public entities -- substantially
all of which are public agencies within the county -- had various bonds, notes
or other forms of indebtedness outstanding. In some instances the proceeds of
such indebtedness were invested in the Pool.
In April, 1996, the County emerged from bankruptcy after closing on a
$900 million recovery bond transaction. At that time, the County and its
financial advisors stated that the County had emerged from the bankruptcy
without any structural fiscal problems and assured
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that the County would not slip back into bankruptcy. However, for many of the
cities, schools and special districts that lost money in the County portfolio,
repayment remains contingent on the outcome of litigation which is pending
against investment firms and other finance professionals. Settlement discussions
involving a number of defendants have occurred and a number of agreements have
been executed, however, until any such agreements become final and any remaining
litigation is resolved, it is impossible to determine the ultimate impact of the
bankruptcy and its aftermath on these various agencies and their claims.
CONSTITUTIONAL, LEGISLATIVE AND OTHER FACTORS.
Certain California constitutional amendments, legislative measures,
executive orders, administrative regulations and voter initiatives could produce
the adverse effects described below, among others.
REVENUE DISTRIBUTION. Certain Debt Obligations in the Portfolio may be
obligations of issuers which rely in whole or in part on California State
revenues for payment of these obligations. Property tax revenues and a portion
of the State's general fund surplus are distributed to counties, cities and
their various taxing entities and the State assumes certain obligations
theretofore paid out of local funds. Whether and to what extent a portion of the
State's general fund will be distributed in the future to counties, cities and
their various entities is unclear.
HEALTH CARE LEGISLATION. Certain Debt Obligations in the Portfolio may
be obligations which are payable solely from the revenues of health care
institutions. Certain provisions under California law may adversely affect these
revenues and, consequently, payment on those Debt Obligations.
The federally sponsored Medicaid program for health care services to
eligible welfare beneficiaries in California is known as the Medi-Cal program.
Historically, the Medi-Cal program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any
hospital wanting to participate in the Medi-Cal program, provided such hospital
met applicable requirements for participation. California law now provides that
the State of California shall selectively contract with hospitals to provide
acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently
apply only to acute inpatient services. Generally, such selective contracting is
made on a flat per diem payment basis for all services to Medi-Cal
beneficiaries, and generally such payment has not increased in relation to
inflation, costs or other factors. Other reductions or limitations may be
imposed on payment for services rendered to Medi-Cal beneficiaries in the
future.
Under this approach, in most geographical areas of California, only
those hospitals which enter into a Medi-Cal contract with the State of
California will be paid for non-emergency acute inpatient services rendered to
Medi-Cal beneficiaries. The State may also terminate these contracts without
notice under certain circumstances and is obligated to make contractual payments
only to the extent the California legislature appropriates adequate funding
therefor.
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California enacted legislation in 1982 that authorizes private health
plans and insurers to contract directly with hospitals for services to
beneficiaries on negotiated terms. Some insurers have introduced plans known as
"preferred provider organizations" ("PPOs"), which offer financial incentives
for subscribers who use only the hospitals which contract with the plan. Under
an exclusive provider plan, which includes most health maintenance organizations
("HMOs"), private payors limit coverage to those services provided by selected
hospitals. Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly from
projections. Often, HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the respective HMO or PPO. It
is expected that failure to execute and maintain such PPO and HMO contracts
would reduce a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but may result in
reduced payment and lower net income to the contracting hospitals.
These Debt Obligations may also be insured by the State of California
pursuant to an insurance program implemented by the Office of Statewide Health
Planning and Development for health facility construction loans. If a default
occurs on insured Debt Obligations, the State Treasurer will issue debentures
payable out of a reserve fund established under the insurance program or will
pay principal and interest on an unaccelerated basis from unappropriated State
funds. At the request of the Office of Statewide Health Planning and
Development, Arthur D. Little, Inc. prepared a study in December 1983, to
evaluate the adequacy of the reserve fund established under the insurance
program and based on certain formulations and assumptions found the reserve fund
substantially underfunded. In September of 1986, Arthur D. Little, Inc. prepared
an update of the study and concluded that an additional 10% reserve be
established for "multi-level" facilities. For the balance of the reserve fund,
the update recommended maintaining the current reserve calculation method. In
March of 1990, Arthur D. Little, Inc. prepared a further review of the study and
recommended that separate reserves continue to be established for "multi-level"
facilities at a reserve level consistent with those that would be required by an
insurance company.
MORTGAGES AND DEEDS. Certain Debt Obligations in the Portfolio may be
obligations which are secured in whole or in part by a mortgage or deed of trust
on real property. California has five principal statutory provisions which
limit the remedies of a creditor secured by a mortgage or deed of trust. Two
statutes limit the creditor's right to obtain a deficiency judgment, one
limitation being based on the method of foreclosure and the other on the type of
debt secured. Under the former, a deficiency judgment is barred when the
foreclosure is accomplished by means of a nonjudicial trustee's sale. Under the
latter, a deficiency judgment is barred when the foreclosed mortgage or deed of
trust secures certain purchase money obligations. Another California statute,
commonly known as the "one form of action" rule, requires creditors secured by
real property to exhaust their real property security by foreclosure before
bringing a personal action against the debtor. The fourth statutory provision
limits any deficiency judgment obtained by a creditor secured by real property
following a judicial sale of such property to the excess of the outstanding debt
over the fair value of the property at the time
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of the sale, thus preventing the creditor from obtaining a large deficiency
judgment against the debtor as the result of low bids at a judicial sale. The
fifth statutory provision gives the debtor the right to redeem the real property
from any judicial foreclosure sale as to which a deficiency judgment may be
ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to
California real property, the creditor's nonjudicial foreclosure rights under
the power of sale contained in the mortgage or deed of trust are subject to the
constraints imposed by California law upon transfers of title to real property
by private power of sale. During the three-month period beginning with the
filing of a formal notice of default, the debtor is entitled to reinstate the
mortgage by making any overdue payments. Under standard loan servicing
procedures, the filing of the formal notice of default does not occur unless at
least three full monthly payments have become due and remain unpaid. The power
of sale is exercised by posting and publishing a notice of sale for at least 20
days after expiration of the three-month reinstatement period. The debtor may
reinstate the mortgage, in the manner described above, up to five business days
prior to the scheduled sale date. Therefore, the effective minimum period for
foreclosing on a mortgage could be in excess of seven months after the initial
default. Such time delays in collections could disrupt the flow of revenues
available to an issuer for the payment of debt service on the outstanding
obligations if such defaults occur with respect to a substantial number of
mortgages or deeds of trust securing an issuer's obligations.
In addition, a court could find that there is sufficient involvement
of the issuer in the nonjudicial sale of property securing a mortgage for such
private sale to constitute "state action," and could hold that the
private-right-of-sale proceedings violate the due process requirements of the
Federal or State Constitutions, consequently preventing an issuer from using the
nonjudicial foreclosure remedy described above.
Certain Debt Obligations in the Portfolio may be obligations which
finance the acquisition of single family home mortgages for low and moderate
income mortgagors. These obligations may be payable solely from revenues derived
from the home mortgages, and are subject to California's statutory limitations
described above applicable to obligations secured by real property. Under
California antideficiency legislation, there is no personal recourse against a
mortgagor of a single family residence purchased with the loan secured by the
mortgage, regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
Under California law, mortgage loans secured by single-family owner-
occupied dwellings may be prepaid at any time. Prepayment charges on such
mortgage loans may be imposed only with respect to voluntary prepayments made
during the first five years during the term of the mortgage loan, and then only
if the borrower prepays an amount in excess of 20% of the original principal
amount of the mortgage loan in a 12-month period; a prepayment charge cannot in
any event exceed six months' advance interest on the amount prepaid during the
12-month period in excess of 20% of the original principal amount of the loan.
This limitation could affect the flow of revenues available to an issuer for
debt service on the outstanding debt obligations which financed such home
mortgages.
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<PAGE>
PROPOSITION 13. Certain of the Debt Obligations may be obligations of
issuers who rely in whole or in part on ad valorem real property taxes as a
source of revenue. On June 6, 1978, California voters approved an amendment to
the California Constitution known as Proposition 13, which added Article XIIIA
to the California Constitution. The effect of Article XIIIA was to limit ad
valorem taxes on real property and to restrict the ability of taxing entities to
increase real property tax revenues.
Section 1 of Article XIIIA, as amended, limits the maximum ad valorem
tax on real property to 1% of full cash value to be collected by the counties
and apportioned according to law. The 1% limitation does not apply to ad valorem
taxes or special assessments to pay the interest and redemption charges on any
bonded indebtedness for the acquisition or improvement of real property approved
by two-thirds of the votes cast by the voters voting on the proposition. Section
2 of Article XIIIA defines "full cash value" to mean "the County Assessor's
valuation of real property as shown on the 1975/76 tax bill under 'full cash
value' or, thereafter, the appraised value of real property when purchased,
newly constructed, or a change in ownership has occurred after the 1975
assessment." The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by damage, destruction or other factors.
Legislation enacted by the California Legislature to implement Article
XIIIA provides that notwithstanding any other law, local agencies may not levy
any ad valorem property tax except to pay debt service on indebtedness approved
by the voters prior to July 1, 1978, and that each county will levy the maximum
tax permitted by Article XIIIA.
PROPOSITION 9. On November 6, 1979, an initiative known as
"Proposition 9" or the "Gann Initiative" was approved by the California voters,
which added Article XIIIB to the California Constitution. Under Article XIIIB,
State and local governmental entities have an annual "appropriations limit" and
are not allowed to spend certain moneys called "appropriations subject to
limitation" in an amount higher than the "appropriations limit." Article XIIIB
does not affect the appropriation of moneys which are excluded from the
definition of "appropriations subject to limitation," including debt service on
indebtedness existing or authorized as of January 1, 1979, or bonded
indebtedness subsequently approved by the voters. In general terms, the
"appropriations limit" is required to be based on certain 1978/79 expenditures,
and is to be adjusted annually to reflect changes in consumer prices,
population, and certain services provided by these entities. Article XIIIB also
provides that if these entities' revenues in any year exceed the amounts
permitted to be spent, the excess is to be returned by revising tax rates or fee
schedules over the subsequent two years.
PROPOSITION 98. On November 8, 1988, voters of the State approved
Proposition 98, a combined initiative constitutional amendment and statute
called the "Classroom Instructional Improvement and Accountability Act."
Proposition 98 changed State funding of public education below the university
level and the operation of the State Appropriations Limit, primarily by
guaranteeing K-14 schools a minimum share of General Fund revenues. Under
Proposition 98 (modified by Proposition 111 as discussed below), K-14 schools
are guaranteed
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the greater of (a) in general, a fixed percent of General Fund revenues ("Test
1"), (b) the amount appropriated to K-14 schools in the prior year, adjusted for
changes in the cost of living (measured as in Article XIII B by reference to
State per capita personal income) and enrollment ("Test 2"), or (c) a third
test, which would replace Test 2 in any year when the percentage growth in per
capita General Fund revenues from the prior year plus one half of one percent is
less than the percentage growth in State per capita personal income ("Test 3").
Under Test 3, schools would receive the amount appropriated in the prior year
adjusted for changes in enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If Test 3 is used in any year, the
difference between Test 3 and Test 2 would become a "credit" to schools which
would be the basis of payments in future years when per capita General Fund
revenue growth exceeds per capita personal income growth.
Proposition 98 permits the Legislature -- by two-thirds vote of both houses,
with the Governor's concurrence -- to suspend the K-14 schools' minimum funding
formula for a one-year period. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools.
During the recession years of the early 1990s, General Fund revenues for
several years were less than originally projected, so that the original
Proposition 98 appropriations turned out to be higher than the minimum
percentage provided in the law. The Legislature responded to these developments
by designating the "extra" Proposition 98 payments in one year as a "loan" from
future years' Proposition 98 entitlements, and also intended that the "extra"
payments would not be included in the Proposition 98 "base" for calculating
future years' entitlements. In 1992, a lawsuit was filed, California Teachers'
--------------------
Association v. Gould, which challenged the validity of these off-budget loans.
- --------------------
During the course of this litigation, a trial court determined that almost $2
billion in "loans" which had been provided to school districts during the
recession violated the constitutional protection of support for public
education. A settlement was reached on April 12, 1996 which ensures that future
school funding will not be in jeopardy over repayment of these so-called
loans.
PROPOSITION 111. On June 30, 1989, the California Legislature enacted Senate
Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding provisions of
Proposition 98. Senate Constitutional Amendment 1 -- on the June 5, 1990 ballot
as Proposition 111 -- was approved by the voters and took effect on July 1,
1990. Among a number of important provisions, Proposition 111 recalculated
spending limits for the State and for local governments, allowed greater annual
increases in the limits, allowed the averaging of two years' tax revenues before
requiring action regarding excess tax revenues, reduced the amount of the
funding guarantee in recession years for school districts and community college
districts (but with a floor of 40.9 percent of State general fund tax revenues),
removed the provision of Proposition 98 which included excess moneys transferred
to school districts and community college districts in the base calculation for
the next year, limited the amount of State tax revenue over the limit which
would be transferred to school districts and community college districts, and
exempted increased gasoline taxes and truck weight fees from the State
appropriations limit. Additionally, Proposition 111 exempted from the State
appropriations limit funding for capital outlays.
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PROPOSITION 62. On November 4, 1986, California voters approved an
initiative statute known as Proposition 62. This initiative provided the
following:
1. Requires that any tax for general governmental purposes imposed
by local governments be approved by resolution or ordinance adopted by a
two-thirds vote of the governmental entity's legislative body and by a
majority vote of the electorate of the governmental entity;
2. Requires that any special tax (defined as taxes levied for other
than general governmental purposes) imposed by a local governmental entity
be approved by a two-thirds vote of the voters within that jurisdiction;
3. Restricts the use of revenues from a special tax to the purposes
or for the service for which the special tax was imposed;
4. Prohibits the imposition of ad valorem taxes on real property by
local governmental entities except as permitted by Article XIIIA;
5. Prohibits the imposition of transaction taxes and sales taxes on
the sale of real property by local governments;
6. Requires that any tax imposed by a local government on or after
August 1, 1985 be ratified by a majority vote of the electorate within two
years of the adoption of the initiative;
7. Requires that, in the event a local government fails to comply
with the provisions of this measure, a reduction in the amount of property
tax revenue allocated to such local government occurs in an amount equal to
the revenues received by such entity attributable to the tax levied in
violation of the initiative; and
8. Permits these provisions to be amended exclusively by the voters
of the State of California.
In September 1988, the California Court of Appeal in City of
-------
Westminster v. County of Orange, 204 Cal.App. 3d 623, 215 Cal.Rptr. 511
- -------------------------------
(Cal.Ct.App. 1988), held that Proposition 62 is unconstitutional to the extent
that it requires a general tax by a general law city, enacted on or after August
1, 1985 and prior to the effective date of Proposition 62, to be subject to
approval by a majority of voters. The Court held that the California
Constitution prohibits the imposition of a requirement that local tax measures
be submitted to the electorate by either referendum or initiative. It is
impossible to predict the impact of this decision on charter cities, on special
taxes or on new taxes imposed after the effective date of Proposition 62. The
California Court of Appeal in City of Woodlake v. Logan, (1991) 230 Cal.App.3d
-------------------------
1058, subsequently held that Proposition 62's popular vote requirements for
future local taxes also
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provided for an unconstitutional referenda. The California Supreme Court
declined to review both the City of Westminster and the City of Woodlake
------------------- ----------------
decisions.
In Santa Clara Local Transportation Authority v. Guardino, (Sept. 28, 1995) 11
------------------------------------------------------
Cal.4th 220, reh'g denied, modified (Dec. 14, 1995) 12 Cal.4th 344e, the
----- ------ --------
California Supreme Court upheld the constitutionality of Proposition 62's
popular vote requirements for future taxes, and specifically disapproved of the
City of Woodlake decision as erroneous. The Court did not determine the
- ----------------
correctness of the City of Westminster decision, because that case appeared
-------------------
distinguishable, was not relied on by the parties in Guardino, and involved
--------
taxes not likely to still be at issue. It is impossible to predict the impact
of the Supreme Court's decision on charter cities or on taxes imposed in
reliance on the City of Woodlake case.
----------------
In McBrearty v. City of Brawley, 59 Cal. App.4th 1441, 69 Cal. Rptr. 2d 862
----------------------------
(Cal. Ct. App. 1997), the Court of Appeal held that the city of Brawley must
either hold an election or cease collection of utility taxes that were not
submitted to a vote. In 1991, the City of Brawley adopted an ordinance imposing
a utility tax on its residents and began collecting the tax without first
seeking voter approval. In 1996, the taxpayer petitioned for writ of mandate
contending that Proposition 62 required the city to submit its utility tax on
residents to vote of local electorate. The trial court issued a writ of
mandamus and the city appealed.
First, the Court of Appeal held that the taxpayer's cause of action accrued
for statute of limitation purposes at the time of the Guardino decision rather
--------
than at the time when the city adopted the tax ordinance which was July 1991.
Second, the Court held that the voter approval requirement in Proposition 62 was
not an invalid mechanism under the state constitution for the involvement of the
exectorate in the legislative process. Third, the Court rejected the city's
argument that Guardino should only be applied on a prospective basis. Finally,
--------
the Court held Proposition 218 (see discussion below) did not impliedly protect
any local general taxes imposed prior January 21, 1995 against challenge.
Assembly Bill 1362 (Mazzoni), introduced February 28, 1997, which would have
made the Guardino decision inapplicable to any tax first imposed or increased by
--------
an ordinance or resolution adopted before December 14, 1995, was vetoed by the
Governor on December 11, 1997. The California State Senate had passed the Bill
on September 8, 1997 and the California State Assembly had passed the Bill on
September 8, 1997. It is not clear whether the Bill, if enacted, would have
been constitutional as a non-voted amendment to Proposition 62 or as a non-voted
change to Proposition 62's operative date.
PROPOSITION 218. On November 5, 1996,the voters of the State approved
Proposition 218, a constitutional initiative, entitled the "Right to Vote on
Taxes Act" ("Proposition 218"). Proposition 218 adds Articles XIII C and XIII D
to the California Constitution and contains a number of interrelated provisions
affecting the ability of local governments to levy and collect both existing and
future taxes, assessments, fees and charges. Proposition 218 became effective
on November 6, 1996. The Sponsors are unable to predict whether and to what
extent Proposition 218 may be held to be constitutional or how its terms will be
interpreted and applied by the courts. However, if upheld, Proposition 218
could
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substantially restrict certain local governments' ability to raise future
revenues and could subject certain existing sources of revenue to reduction or
repeal, and increase local government costs to hold elections, calculate fees
and assessments, notify the public and defend local government fees and
assessments in court.
Article XIII C of Proposition 218 requires majority voter approval for the
imposition, extension or increase of general taxes and two-thirds voter approval
for the imposition, extension or increase of special taxes, including special
taxes deposited into a local government's general fund. Proposition 218 also
provides that any general tax imposed, extended or increased without voter
approval by any local government on or after January 1, 1995 and prior to
November 6, 1996 shall continue to be imposed only if approved by a majority
vote in an election held within two years of November 6, 1996.
Article XIII C of Proposition 218 also expressly extends the initiative power
to give voters the power to reduce or repeal local taxes, assessments, fees and
charges, regardless of the date such taxes, assessments, fees or charges were
imposed. This extension of the initiative power to some extent
constitutionalizes the March 6, 1995 State Supreme Court decision in Rossi v.
--------
Brown, which upheld an initiative that repealed a local tax and held that the
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State constitution does not preclude the repeal, including the prospective
repeal, of a tax ordinance by an initiative, as contrasted with the State
constitutional prohibition on referendum powers regarding statutes and
ordinances which impose a tax. Generally, the initiative process enables
California voters to enact legislation upon obtaining requisite voter approval
at a general election. Proposition 218 extends the authority stated in Rossi v.
--------
Brown by expanding the initiative power to include reducing or repealing
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assessments, fees and charges, which had previously been considered
administrative rather than legislative matters and therefore beyond the
initiative power.
The initiative power granted under Article XIII C of Proposition 218, by its
terms, applies to all local taxes, assessments, fees and charges and is not
limited to local taxes, assessments, fees and charges that are property related.
Article XIII D of Proposition 218 adds several new requirements making it
generally more difficult for local agencies to levy and maintain "assessments"
for municipal services and programs. "Assessment" is defined to mean any levy
or charge upon real property for a special benefit conferred upon the real
property.
Article XIII D of Proposition 218 also adds several provisions affecting
"fees" and "charges" which are defined as "any levy other than an ad valorem
tax, a special tax, or an assessment, imposed by a local government upon a
parcel or upon a person as an incident of property ownership, including a user
fee or charge for a property related service." All new and, after June 30,
1997, existing property related fees and charges must conform to requirements
prohibiting, among other things, fees and charges which (i) generate revenues
exceeding the funds required to provide the property related service, (ii) are
used for any purpose other than those for which the fees and charges are
imposed, (iii) are for a service not actually used by, or immediately available
to, the owner of the property in question, or (iv) are used for general
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governmental services, including police, fire or library services, where the
service is available to the public at large in substantially the same manner as
it is to property owners. Further, before any property related fee or charge
may be imposed or increased, written notice must be given to the record owner of
each parcel of land affected by such fee or charges. The local government must
then hold a hearing upon the proposed imposition or increase of such property
based fee, and if written protests against the proposal are presented by a
majority of the owners of the identified parcels, the local government may not
impose or increase the fee or charge. Moreover, except for fees or charges for
sewer, water and refuse collection services, no property related fee or charge
may be imposed or increased without majority approval by the property owners
subject to the fee or charge or, at the option of the local agency, two-thirds
voter approval by the electorate residing in the affected area.
PROPOSITION 87. On November 8, 1988, California voters approved Proposition
87. Proposition 87 amended Article XVI, Section 16, of the California
Constitution by authorizing the California Legislature to prohibit redevelopment
agencies from receiving any of the property tax revenue raised by increased
property tax rates levied to repay bonded indebtedness of local governments
which is approved by voters on or after January 1, 1989.
SPECIAL CONSIDERATIONS WITH RESPECT TO NEW YORK MONEY FUND
Some of the significant financial considerations relating to investments in
New York Municipal Obligations are summarized below. This summary information is
not intended to be a complete description and is principally derived from
official statements relating to issues of New York Municipal Obligations that
were available prior to the date of this Statement of Additional Information.
The accuracy and completeness of the information contained in those official
statements have not been independently verified.
STATE ECONOMY. New York is the third most populous state in the nation and
has a relatively high level of personal wealth. The State's economy is diverse
with a comparatively large share of the nation's finance, insurance,
transportation, communications and services employment, and a very small share
of the nation's farming and mining activity. The State's location and its
excellent air transport facilities and natural harbors have made it an important
link in international commerce. Travel and tourism constitute an important part
of the economy. Like the rest of the nation, New York has a declining
proportion of its workforce engaged in manufacturing, and an increasing
proportion engaged in service industries.
The State has historically been one of the wealthiest states in the nation.
For decades, however, the State has grown more slowly than the nation as a
whole, gradually eroding its relative economic position. State per capita
personal income has historically been significantly higher than the national
average, although the ratio has varied substantially. Because New York City (the
"City") is a regional employment center for a multi-state region, State personal
income measured on a residence basis understates the relative importance of the
State to the national economy and the size of the base to which State taxation
applies.
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The State economic forecast has been raised slightly from the enacted
budget forecast. Continued growth is projected in 1998 and 1999 for employment,
wages, and personal income, although the growth rates of personal income and
wages are expected to be lower than those in 1997. The growth of personal
income is projected to decline from 5.7 percent in 1997 to 4.8 percent in 1998
and 4.2 percent in 1999, in part because growth in bonus payments is expected to
slow down, a distinct shift from the torrid rate of the last few years. Overall
employment growth is expected to be 1.9 percent in 1998, the strongest in a
decade, but will drop to 1.0 percent in 1999, reflecting the slowing growth in
the national economy, continued restraint in governmental spending, and
restructuring in the health care, social service, and banking sectors.
There can be no assurance that the State economy will not experience
worse-than-predicted results, with corresponding material and adverse effects on
the State's projections of receipts and disbursements.
STATE BUDGET. The State Constitution requires the governor (the
"Governor") to submit to the State legislature (the "Legislature") a balanced
executive budget which contains a complete plan of expenditures for the ensuing
fiscal year and all moneys and revenues estimated to be available therefor,
accompanied by bills containing all proposed appropriations or reappropriations
and any new or modified revenue measures to be enacted in connection with the
executive budget. The entire plan constitutes the proposed State financial plan
for that fiscal year. The Governor is required to submit to the Legislature
quarterly budget updates which include a revised cash-basis state financial
plan, and an explanation of any changes from the previous state financial plan.
State law requires the Governor to propose a balanced budget each
year. In recent years, the State has closed projected budget gaps of $5.0
billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than
$1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget
projections submitted to the Legislature in February 1998, projected a 1999-00
General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7
billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00
gap is now expected to be roughly $1.3 billion, or about $400 million less than
previously projected, after application of reserves created as part of the 1998-
99 budget process. Such reserves would not be available against subsequent year
imbalances.
Sustained growth in the State's economy could contribute to closing
projected budget gaps over the next several years, both in terms of higher-than-
projected tax receipts and in lower-than-expected entitlement spending.
However, the State's projections in 1999-00 currently assume actions to achieve
$600 million in lower disbursements and $250 million in additional receipts from
the settlement of State claims against the tobacco industry. Consistent with
past practice, the projections do not include any costs associated with new
collective bargaining agreements after the expiration of the current round of
contracts at the end of the 1998-99 fiscal year. The State expects that the
1990-00 Financial Plan will achieve savings from initiatives by State agencies
to deliver services more efficiently, workforce management efforts, maximization
of federal and non-General Fund spending offsets, and other actions necessary to
bring projected disbursements and receipts into balance.
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The State will formally update its outyear projections of receipts and
disbursements for the 2000-01 and 2001-02 fiscal years as a part of the 1999-00
Executive Budget process, as required by law. The revised expectations for
years 2000-01 and 2001-02 will reflect the cumulative impact of tax reductions
and spending commitments enacted over the last several years as well as new
1999-00 Executive Budget recommendations. The School Tax Relief Program
("STAR") program, which dedicates a portion of personal income tax receipts to
fund school tax reductions, has a significant impact on General Fund receipts.
STAR is projected to reduce personal income tax revenues available to the
General Fund by an estimated $1.3 billion in 2000-01. Measured from the 1998-99
base, scheduled reductions to estate and gift, sales and other taxes, reflecting
tax cuts enacted in 1997-98 and 1998-99, will lower General Fund taxes and fees
by an estimated $1.8 billion in 2000-01. Disbursement projections for the
outyears currently assume additional outlays for school aid, Medicaid, welfare
reform, mental health community reinvestment, and other multi-year spending
commitments in law.
On September 11, 1997, the New York State Comptroller issued a report
which noted that the ability to deal with future budget gaps could become a
significant issue in the State's 2000-2001 fiscal year, when the cost of tax
cuts increases by $1.9 billion. The report contained projections that, based on
current economic conditions and current law for taxes and spending, showed a gap
in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the
2001-2002 State fiscal year. The report noted that these gaps would be smaller
if recurring spending reductions produce savings in earlier years. The State
Comptroller has also stated that if Wall Street earnings moderate and the State
experiences a moderate recession, the gap for the 2001-2002 State fiscal year
could grow to nearly $12 billion.
The State's current fiscal year began on April 1, 1998 and ends on
March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year.
The Legislature adopted the debt service component of the State budget for the
1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April
18, 1998. In the period prior to adoption of the budget for the current fiscal
year, the Legislature also enacted appropriations to permit the State to
continue its operations and provide for other purposes. On April 25, 1998, the
Governor vetoed certain items that the Legislature added to the Executive
Budget. The Legislature had not overridden any of the Governor's vetoes as of
the start of the legislative recess on June 19, 1998 (under the State
Constitution, the Legislature can override one or more of the Governor's vetoes
with the approval of two-thirds of the members of each house).
General Fund disbursements in 1998-99 are now projected to grow by
$2.43 billion over 1997-98 levels, or $690 million more than proposed in the
Governor's Executive Budget, as amended. The change in General Fund
disbursements from the Executive Budget to the enacted budget reflects
legislative additions (net of the value of the Governor's vetoes), actions taken
at the end of the regular legislative session, as well as spending that was
originally anticipated to occur in 1997-98 but is now expected to occur in 1998-
99. The State projects that the 1998-99 State Financial Plan is balanced on a
cash basis, with an estimated reserve for future needs of $761 million.
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The State's enacted budget includes several new multi-year tax
reduction initiatives, including acceleration of State-funded property and local
income tax relief for senior citizens under the STAR, expansion of the child
care income-tax credit for middle-income families, a phased-in reduction of the
general business tax, and reduction of several other taxes and fees, including
an accelerated phase-out of assessments on medical providers. The enacted
budget also provides for significant increases in spending for public schools,
special education programs, and for the State and City university systems. It
also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that
may eventually be used to pay debt service costs on or to prepay outstanding
State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the
General Fund of $1.42 billion that is comprised of a reserve of $761 million
available for future needs, a balance of $400 million in the Tax Stabilization
Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund
("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF").
The TSRF can be used in the event of an unanticipated General Fund cash
operating deficit, as provided under the State Constitution and State Finance
Law. The CPF is used to finance various legislative and executive initiatives.
The CRF provides resource to help finance any extraordinary litigation costs
during the fiscal year.
The forecast of General Fund receipts in 1998-99 incorporates several
Executive Budget tax proposals that, if enacted, would further reduce receipts
otherwise available to the General Fund by approximately $700 million during
1998-99. The Executive Budget proposes accelerating school tax relief for
senior citizens under STAR, which is projected to reduce General Fund receipts
by $537 million in 1998-99. The proposed reduction supplements STAR tax
reductions already scheduled in law, which are projected at $187 million in
1998-99. The Budget also proposes several new tax-cut initiatives and other
funding changes that are projected to further reduce receipts available to the
General Fund by over $200 million. These initiatives include reducing the fee
to register passenger motor vehicles and earmarking a larger portion of such
fees to dedicated funds and other purposes; extending the number of weeks in
which certain clothing purchases are exempt from sales taxes; more fully
conforming State law to reflect recent Federal changes in estate taxes;
continuing lower pari-mutuel tax rates; and accelerating scheduled property tax
relief for farmers from 1999 to 1998. In addition to the specific tax and fee
reductions discussed above, the Executive Budget also proposes establishing a
reserve of $100 million to permit the acceleration into 1998-99 of other tax
reductions that are otherwise scheduled in law for implementation in future
fiscal years.
The Division of the Budget ("DOB") estimates that the 1998-99
Financial Plan includes approximately $64 million in non-recurring resources,
comprising less than two-tenths of one percent of General Fund disbursements.
The non-recurring resources projected for use in 1998-99 consist of $27 million
in retroactive federal welfare reimbursements for family assistance recipients
with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were
originally anticipated in 1997-98, and $10 million in other measures, including
$5 million in asset sales.
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Disbursements from Capital Projects funds in 1998-99 are estimated at
$4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan
includes: $2.51 billion in disbursements for transportation purposes, including
the State and local highway and bridge program; $815 million for environmental
activities; $379 million for correctional services; $228 million for the State
University of New York ("SUNY") and the City University of New York ("CUNY");
$290 million for mental hygiene projects; and $375 million for CEFAP.
Approximately 28 percent of capital projects are proposed to be financed by
"pay-as-you-go" resources. State-supported bond issuances finance 46 percent of
capital projects, with federal grants financing the remaining 26 percent.
Many complex political, social and economic forces influence the
State's economy and finances, which may in turn affect the State's Financial
Plan. These forces may affect the State unpredictably from fiscal year to
fiscal year and are influenced by governments, institutions, and organizations
that are not subject to the State's control. The State Financial Plan is also
necessarily based upon forecasts of national and State economic activity.
Economic forecasts have frequently failed to predict accurately the timing and
magnitude of changes in the national and the State economies. The DOB believes
that its projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from their
projections, and those projections may be changed materially and adversely from
time to time.
In the past, the State has taken management actions and made use of
internal sources to address potential State financial plan shortfalls, and the
DOB believes it could take similar actions should variances occur in its
projections for the current fiscal year.
RECENT FINANCIAL RESULTS. The General Fund is the principal operating
fund of the State and is used to account for all financial transactions, except
those required to be accounted for in another fund. It is the State's largest
fund and receives almost all State taxes and other resources not dedicated to
particular purposes.
On March 31, 1998, the State recorded, on a GAAP-basis, its first-
ever, accumulated positive balance in its General Fund. This "accumulated
surplus" was $567 million. The improvement in the State's GAAP position is
attributable, in part, to the cash surplus recorded at the end of the State's
1997-98 fiscal year. Much of that surplus is reserved for future requirements,
but a portion is being used to meet spending needs in 1998-99. Thus, the State
expects some deterioration in its GAAP position, but expects to maintain a
positive GAAP balance through the end of the current fiscal year.
The State completed its 1997-98 fiscal year with a combined
Governmental Funds operating surplus of $1.80 billion, which included an
operating surplus in the General Fund of $1.56 billion, in Capital Projects
Funds of $232 million and in Special Revenue Funds of $49 million, offset in
part by an operating deficit of $43 million in Debt Service Funds.
The State reported a General Fund operating surplus of $1.56 billion
for the 1997-98 fiscal year, as compared to an operating surplus of $1.93
billion for the 1996-97 fiscal year.
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As a result, the State reported an accumulated surplus of $567 million in the
General Fund for the first time since it began reporting its operations on a
GAAP-basis. The 1997-98 fiscal year operating surplus reflects several major
factors, including the cash-basis operating surplus resulting from the higher-
than-anticipated personal income tax receipts, an increase in taxes receivable
of $681 million, an increase in other assets of $195 million and a decrease in
pension liabilities of $144 million. This was partially offset by an increase in
payables to local governments of $270 million and tax refunds payable of $147
million.
DEBT LIMITS AND OUTSTANDING DEBT. There are a number of methods by
which the State of New York may incur debt. Under the State Constitution, the
State may not, with limited exceptions for emergencies, undertake long-term
general obligation borrowing (i.e., borrowing for more than one year) unless the
-----
borrowing is authorized in a specific amount for a single work or purpose by the
Legislature and approved by the voters. There is no limitation on the amount of
long-term general obligation debt that may be so authorized and subsequently
incurred by the State.
The State may undertake short-term borrowings without voter approval
(i) in anticipation of the receipt of taxes and revenues, by issuing tax and
revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds
from the sale of duly authorized but unissued general obligation bonds, by
issuing bond anticipation notes. The State may also, pursuant to specific
constitutional authorization, directly guarantee certain obligations of the
State of New York's authorities and public benefit corporations ("Authorities").
Payments of debt service on New York State general obligation and New York
State-guaranteed bonds and notes are legally enforceable obligations of the
State of New York.
The State employs additional long-term financing mechanisms, lease-
purchase and contractual-obligation financings, which involve obligations of
public authorities or municipalities that are State-supported but are not
general obligations of the State. Under these financing arrangements, certain
public authorities and municipalities have issued obligations to finance the
construction and rehabilitation of facilities or the acquisition and
rehabilitation of equipment, and expect to meet their debt service requirements
through the receipt of rental or other contractual payments made by the State.
Although these financing arrangements involve a contractual agreement by the
State to make payments to a public authority, municipality or other entity, the
State's obligation to make such payments is generally expressly made subject to
appropriation by the Legislature and the actual availability of money to the
State for making the payments. The State has also entered into a contractual-
obligation financing arrangement with the LGAC to restructure the way the State
makes certain local aid payments.
In February 1997, the Job Development Authority ("JDA") issued
approximately $85 million of State-guaranteed bonds to refinance certain of its
outstanding bonds and notes in order to restructure and improve JDA's capital
structure. Due to concerns regarding the economic viability of its programs,
JDA's loan and loan guarantee activities had been suspended since the Governor
took office in 1995. As a result of the structural imbalances in JDA's capital
structure, and defaults in its loan portfolio and loan guarantee program
incurred between 1991 and 1996, JDA would have experienced a debt service cash
flow shortfall had it not completed
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its recent refinancing. JDA anticipates that it will transact additional
refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance
and further alleviate cash flow imbalances which are likely to occur in future
years. JDA recently resumed its lending activities under a revised set of
lending programs and underwriting guidelines.
On January 13, 1992, Standard & Poor's Ratings Services ("Standard &
Poor's") reduced its ratings on the State's general obligation bonds from A to
A- and, in addition, reduced its ratings on the State's moral obligation, lease
purchase, guaranteed and contractual obligation debt. On August 28, 1997,
Standard & Poor's revised its ratings on the State's general obligation bonds
from A- to A and revised its ratings on the State's moral obligation, lease
purchase, guaranteed and contractual obligation debt. On March 2, 1998,
Standard & Poor's affirmed its A rating on the State's outstanding bonds.
On January 6, 1992, Moody's Investors Service, Inc. ("Moody's")
reduced its ratings on outstanding limited-liability State lease purchase and
contractual obligations from A to Baa1. On February 28, 1994, Moody's
reconfirmed its A rating on the State's general obligation long-term
indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper
rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's
assigned an A2 rating with a stable outlook to the State's general obligations.
The State anticipates that its capital programs will be financed, in
part, through borrowings by the State and its public authorities in the 1998-99
fiscal year. Information on the State's five-year Capital Program and Financing
Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions
taken in the 1998-99 State budget (the "Plan"), was released on July 30, 1998.
The projection of State borrowings for the 1998-99 fiscal year is subject to
change as market conditions, interest rates and other factors vary throughout
the fiscal year.
The State expects to issue $528 million in general obligation bonds
(including $154 million for purposes of redeeming outstanding BANs) and $154
million in general obligation commercial paper. The State also anticipates the
issuance of up to a total of $419 million in Certificates of Participation to
finance equipment purchases (including costs of issuance, reserve funds, and
other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated
that approximately $191 million will be issued to finance agency equipment
acquisitions, including amounts to address Statewide technology issues related
to Year 2000 compliance. Approximately $228 million will also be issued to
finance equipment acquisitions for welfare reform-related information technology
systems.
Borrowings by public authorities pursuant to lease-purchase and
contractual-obligation financings for capital programs of the State are
projected to total approximately $2.93 billion, including costs of issuance,
reserve funds, and other costs, net of anticipated refundings and other
adjustments in 1998-99.
As a part of the Plan, changes were proposed to the State's borrowing
plan, including: the delay in the issuance of COPs to finance welfare
information systems until 1998-
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99 to permit a thorough assessment of needs; and the elimination of issuances
for the CEFAP to reflect the proposed conversion of that bond-financed program
to pay-as-you-go financing.
New York State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or contractual-obligation
financing arrangements and has never been called upon to make any direct
payments pursuant to its guarantees.
LITIGATION. Certain litigation pending against New York State or its
officers or employees could have a substantial or long-term adverse effect on
New York State finances. Among the more significant of these cases are those
that involve (1) the validity of agreements and treaties by which various Indian
tribes transferred title to New York State of certain land in central and
upstate New York; (2) certain aspects of New York State's Medicaid policies,
including its rates, regulations and procedures; (3) action against New York
State and New York City officials alleging inadequate shelter allowances to
maintain proper housing; (4) alleged responsibility of New York State officials
to assist in remedying racial segregation in the City of Yonkers; (5) challenges
to regulations promulgated by the Superintendent of Insurance establishing
certain excess medical malpractice premium rates; (6) challenges to the
constitutionality of Public Health Law 2807-d, which imposes a gross receipts
tax from certain patient care services; (7) action seeking enforcement of
certain sales and excise taxes and tobacco products and motor fuel sold to non-
Indian consumers on Indian reservations; and (8) a challenge to the Governor's
application of his constitutional line item veto authority.
Several actions challenging the constitutionality of legislation
enacted during the 1990 legislative session which changed actuarial funding
methods for determining state and local contributions to state employee
retirement systems have been decided against the State. As a result, the
Comptroller developed a plan to restore the State's retirement systems to prior
funding levels. Such funding is expected to exceed prior levels by $116 million
in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in
fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under
the Comptroller's plan are projected to be less than that required under the
prior funding method. As a result of the United States Supreme Court decision
in the case of State of Delaware v. State of New York, on January 21, 1994, the
State entered into a settlement agreement with various parties. Pursuant to all
agreements executed in connection with the action, the State was required to
make aggregate payments of $351.4 million. Annual payments to the various
parties will continue through the State's 2002-03 fiscal year in amounts which
will not exceed $48.4 million in any fiscal year subsequent to the State's 1994-
95 fiscal year. Litigation challenging the constitutionality of the treatment
of certain moneys held in a reserve fund was settled in June 1996 and certain
amounts in a Supplemental Reserve Fund previously credited by the State against
prior State and local pension contributions will be paid in 1998.
The legal proceedings noted above involve State finances, State
programs and miscellaneous cure rights, tort, real property and contract claims
in which the State is a defendant and the monetary damages sought are
substantial, generally in excess of $100 million. These proceedings could
affect adversely the financial condition of the State in the 1998-99 fiscal year
or thereafter. Adverse developments in these proceedings, other proceedings for
which
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there are unanticipated, unfavorable and material judgments, or the
initiation of new proceedings could affect the ability of the State to maintain
a balanced financial plan. An adverse decision in any of these proceedings
could exceed the amount of the reserve established in the State's financial plan
for the payment of judgments and, therefore, could affect the ability of the
State to maintain a balanced financial plan.
Although other litigation is pending against New York State, except as
described herein, no current litigation involves New York State's authority, as
a matter of law, to contract indebtedness, issue its obligations, or pay such
indebtedness when it matures, or affects New York State's power or ability, as a
matter of law, to impose or collect significant amounts of taxes and revenues.
AUTHORITIES. The fiscal stability of New York State is related, in
part, to the fiscal stability of its Authorities, which generally have
responsibility for financing, constructing and operating revenue-producing
public benefit facilities. Authorities are not subject to the constitutional
restrictions on the incurrence of debt which apply to the State itself, and may
issue bonds and notes within the amounts of, and as otherwise restricted by,
their legislative authorization. The State's access to the public credit markets
could be impaired, and the market price of its outstanding debt may be
materially and adversely affected, if any of the Authorities were to default on
their respective obligations, particularly with respect to debt that is State-
supported or State-related.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years, however,
New York State has provided financial assistance through appropriations, in some
cases of a recurring nature, to certain of the Authorities for operating and
other expenses and, in fulfillment of its commitments on moral obligation
indebtedness or otherwise, for debt service. This operating assistance is
expected to continue to be required in future years. In addition, certain
statutory arrangements provide for State local assistance payments otherwise
payable to localities to be made under certain circumstances to certain
Authorities. The State has no obligation to provide additional assistance to
localities whose local assistance payments have been paid to Authorities under
these arrangements. However, in the event that such local assistance payments
are so diverted, the affected localities could seek additional State funds.
NEW YORK CITY AND OTHER LOCALITIES. The fiscal health of the State may
also be impacted by the fiscal health of its localities, particularly the City,
which has required and continues to require significant financial assistance
from the State. The City depends on State aid both to enable the City to balance
its budget and to meet its cash requirements. There can be no assurance that
there will not be reductions in State aid to the City from amounts currently
projected or that State budgets will be adopted by the April 1 statutory
deadline or that any such reductions or delays will not have adverse effects on
the City's cash flow or expenditures. In addition, the Federal budget
negotiation process could result in a reduction in or a delay in the receipt of
Federal grants which could have additional adverse effects on the City's cash
flow or revenues.
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In 1975, New York City suffered a fiscal crisis that impaired the
borrowing ability of both the City and New York State. In that year the City
lost access to the public credit markets. The City was not able to sell short-
term notes to the public again until 1979. In 1975, Standard & Poor's suspended
its A rating of City bonds. This suspension remained in effect until March
1981, at which time the City received an investment grade rating of BBB from
Standard & Poor's.
On July 2, 1985, Standard & Poor's revised its rating of City bonds
upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on
May 27, 1998, Standard & Poor's assigned a BBB+ rating to the City's general
obligation debt and placed the ratings on CreditWatch with positive
implications.
Moody's ratings of City bonds were revised in November 1981 from B (in
effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in
May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's
upgraded nearly $28 billion of the City's general obligations from Baa1 to A3.
On June 9, 1998, Moody's again assigned on A3 rating to the City's general
obligations and stated that its outlook was stable.
New York City is heavily dependent on New York State and federal
assistance to cover insufficiencies in its revenues. There can be no assurance
that in the future federal and State assistance will enable the City to make up
its budget deficits. To help alleviate the City's financial difficulties, the
Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since
its creation, MAC has provided, among other things, financing assistance to the
City by refunding maturing City short-term debt and transferring to the City
funds received from sales of MAC bonds and notes. MAC is authorized to issue
bonds and notes payable from certain stock transfer tax revenues, from the
City's portion of the State sales tax derived in the City and, subject to
certain prior claims, from State per capita aid otherwise payable by the State
to the City. Failure by the State to continue the imposition of such taxes, the
reduction of the rate of such taxes to rates less than those in effect on July
2, 1975, failure by the State to pay such aid revenues and the reduction of such
aid revenues below a specified level are included among the events of default in
the resolutions authorizing MAC's long-term debt. The occurrence of an event of
default may result in the acceleration of the maturity of all or a portion of
MAC's debt. MAC bonds and notes constitute general obligations of MAC and do
not constitute an enforceable obligation or debt of either the State or the
City.
Since 1975, the City's financial condition has been subject to
oversight and review by the New York State Financial Control Board (the "Control
Board") and since 1978 the City's financial statements have been audited by
independent accounting firms. To be eligible for guarantees and assistance, the
City is required during a "control period" to submit annually for Control Board
approval, and when a control period is not in effect for Control Board review, a
financial plan for the next four fiscal years covering the City and certain
agencies showing balanced budgets determined in accordance with GAAP. New York
State also established the Office of the State Deputy Comptroller for New York
City ("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the City satisfied the statutory
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requirements for termination of the control period. This means that the Control
Board's powers of approval are suspended, but the Board continues to have
oversight responsibilities.
On June 10, 1997, the City submitted to the Control Board the
Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal
years, relating to the City, the Board of Education ("BOE") and CUNY and
reflected the City's expense and capital budgets for the 1998 fiscal year, which
were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues
and expenditures for the 1998 fiscal year balanced in accordance with GAAP.
The 1998-99 Financial Plan projects General Fund receipts (including transfers
from other funds) of $36.22 billion, an increase of $1.02 billion over the
estimated 1997-1998 level. Recurring growth in the State General Fund tax base
is projected to be approximately six percent during 1998-99, after adjusting for
tax law and administrative changes. This growth rate is lower than the rates
for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the
rate for 1995-96.
The 1998-99 forecast for user taxes and fees also reflects the impact
of scheduled tax reductions that will lower receipts by $38 million, as well as
the impact of two Executive Budget proposals that are projected to lower
receipts by an additional $79 million. The first proposal would divert $30
million in motor vehicle registration fees from the General Fund to the
Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor
vehicle registrations, which would further lower receipts by $49 million. The
underlying growth of receipts in this category is projected at 4 percent, after
adjusting for these scheduled and recommended changes.
In comparison to the current fiscal year, business tax receipts are
projected to decline slightly in 1998-99, falling from $4.98 million to $4.96
billion. The decline in this category is largely attributable to scheduled tax
reductions. In total, collections for corporation and utility taxes and the
petroleum business tax are projected to fall by $107 million from 1997-98. The
decline in receipts in these categories is partially offset by growth in the
corporation franchise, insurance and bank taxes, which are projected to grow by
$88 million over the current fiscal year.
The Financial Plan is projected to show a GAAP-basis surplus of $131
million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the
General Fund, primarily as a result of the use of the 1997-98 cash surplus. In
1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68
billion, total expenditures of $35.94 billion, and net other financing sources
and uses of $42 million.
Although the City has maintained balanced budgets in each of its last
eighteen fiscal years and is projected to achieve balanced operating results for
the 1999 fiscal year, there can be no assurance that the gap-closing actions
proposed in the 1998-2001 Financial Plan can be successfully implemented or that
the City will maintain a balanced budget in future years without additional
State aid, revenue increases or expenditure reductions. Additional tax
increases and reductions in essential City services could adversely affect the
City's economic base.
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<PAGE>
The projections set forth in the 1998-2001 Financial Plan were based
on various assumptions and contingencies which are uncertain and which may not
materialize. Changes in major assumptions could significantly affect the City's
ability to balance its budget as required by State law and to meet its annual
cash flow and financing requirements. Such assumptions and contingencies
include the condition of the regional and local economies, the impact on real
estate tax revenues of the real estate market, wage increases for City employees
consistent with those assumed in the 1998-2001 Financial Plan, employment
growth, the ability to implement proposed reductions in City personnel and other
cost reduction initiatives, the ability of the Health and Hospitals Corporation
and the BOE to take actions to offset reduced revenues, the ability to complete
revenue generating transactions, provision of State and Federal aid and mandate
relief and the impact on City revenues and expenditures of Federal and State
welfare reform and any future legislation affecting Medicare or other
entitlements.
Implementation of the 1998-2001 Financial Plan is also dependent upon
the City's ability to market its securities successfully. The City's financing
program for fiscal years 1998 through 2001 contemplates the issuance of $5.7
billion of general obligation bonds and $5.7 billion of bonds to be issued by
the proposed New York City Transitional Finance Authority (the "Finance
Authority") to finance City capital projects. The Finance Authority, was
created as part of the City's effort to assist in keeping the City's
indebtedness within the forecast level of the constitutional restrictions on the
amount of debt the City is authorized to incur. Despite this additional
financing mechanism, the City currently projects that, if no further action is
taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness
subject to the constitutional debt limit includes liability on capital contracts
that are expected to be funded with general obligation bonds, as well as general
obligation bonds. On June 2, 1997, an action was commenced seeking a
declaratory judgment declaring the legislation establishing the Transitional
Finance Authority to be unconstitutional. If such legislation were voided,
projected contracts for the City capital projects would exceed the City's debt
limit during fiscal year 1997-98. Future developments concerning the City or
entities issuing debt for the benefit of the City, and public discussion of such
developments, as well as prevailing market conditions and securities credit
ratings, may affect the ability or cost to sell securities issued by the City or
such entities and may also affect the market for their outstanding securities.
The City Comptroller and other agencies and public officials have
issued reports and made public statements which, among other things, state that
projected revenues and expenditures may be different from those forecast in the
City's financial plans. It is reasonable to expect that such reports and
statements will continue to be issued and to engender public comment.
The City since 1981 has fully satisfied its seasonal financing needs
in the public credit markets, repaying all short-term obligations within their
fiscal year of issuance. Although the City's 1998 fiscal year financial plan
projected $2.4 billion of seasonal financing for the 1998 fiscal year, the City
expected to undertake only approximately $1.4 billion of seasonal financing.
The City issued $2.4 billion of short-term obligations in fiscal year 1997.
Seasonal financing requirements for the 1996 fiscal year increased to $2.4
billion from $2.2 billion and
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<PAGE>
$1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal
financing requirements were $1.4 billion in the 1993 fiscal year. The delay in
the adoption of the State's budget in certain past fiscal years has required the
City to issue short-term notes in amounts exceeding those expected early in such
fiscal years.
Certain localities, in addition to the City, have experienced
financial problems and have requested and received additional New York State
assistance during the last several State fiscal years. The potential impact on
the State of any future requests by localities for additional assistance is not
included in the State's projections of its receipts and disbursements for the
1997-98 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the re-establishment of the Financial Control Board for the City of
Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is
charged with oversight of the fiscal affairs of Yonkers. Future actions taken
by the State to assist Yonkers could result in increased State expenditures for
extraordinary local assistance.
Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the City
of Troy in 1994. The Supervisory Board's powers were increased in 1995, when
Troy MAC was created to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the city of Troy from seeking federal
bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued
bonds to effect a restructuring of the City of Troy's obligations.
Eighteen municipalities received extraordinary assistance during the
1996 legislative session through $50 million in special appropriations targeted
for distressed cities, and that was largely continued in 1997. Twenty-eight
municipalities were scheduled to share in more than $32 million in targeted
unrestricted aid allocated in the 1997-98 budget. An additional $21 million
will be dispersed among all cities, towns and villages, a 3.97% increase in
General Purpose State Aid.
The 1998-99 budget includes an additional $29.4 million in
unrestricted aid targeted to 57 municipalities across the State. Other
assistance for municipalities with special needs totals more than $25.6 million.
Twelve upstate cities will receive $24.2 million in one-time assistance from a
cash flow acceleration of State aid.
Municipalities and school districts have engaged in substantial short-
term and long-term borrowings. In 1996, the total indebtedness of all localities
in the State other than New York City was approximately $20.0 billion. A small
portion (approximately $77.2 million) of that indebtedness represented borrowing
to finance budgetary deficits and was issued pursuant to enabling State
legislation. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than New York City that are authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding.
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<PAGE>
From time to time, federal expenditure reductions could reduce, or in
some cases eliminate, federal funding of some local programs and accordingly
might impose substantial increased expenditure requirements on affected
localities. If the State, the City or any of the Authorities were to suffer
serious financial difficulties jeopardizing their respective access to the
public credit markets, the marketability of notes and bonds issued by localities
within the State could be adversely affected. Localities also face anticipated
and potential problems resulting from certain pending litigation, judicial
decisions and long-range economic trends. Long-range potential problems of
declining urban population, increasing expenditures and other economic trends
could adversely affect localities and require increasing the State assistance in
the future.
YEAR 2000 COMPLIANCE. The State is currently addressing "Year 2000"
data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises
because most computer software programs allocate two digits to the data field
for "year" on the assumption that the first two digits will be "19". Such
programs will thus interpret the year 2000 as the year 1900 absent
reprogramming. Y2K could impact both the ability to enter data into computer
programs and the ability of such programs to correctly process data.
The Office for Technology is monitoring compliance on a quarterly
basis and is providing assistance and assigning resources to accelerate
compliance for mission critical systems, with most compliance testing expected
to be completed by mid-1999. There can be no guarantee, however, that all of
the State's mission-critical and high-priority computer systems will be Year
2000 compliant and that there will not be an adverse impact upon State
operations or State finances as a result.
INVESTMENT LIMITATIONS
The following is a complete list of investment limitations and
policies applicable to each of the Funds or, as indicated below, to specific
Funds, that may not changed without the affirmative votes of the holders of a
majority of each Fund's outstanding shares (as defined below under
"Miscellaneous"):
1. A Fund may not borrow money or issue senior securities except to
the extent permitted under the 1940 Act.
2. A Fund may not act as an underwriter of securities. A Fund will not
be an underwriter for purposes of this limitation if it purchases securities in
transactions in which the Fund would not be deemed to be an underwriter for
purposes of the Securities Act of 1933.
3. A Fund may not make loans. The purchase of debt obligations, the
lending of portfolio securities and the entry into repurchase agreements are not
treated as the making of loans for purposes of this limitation.
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<PAGE>
4. A Fund may not purchase or sell real estate. The purchase of
securities secured by real estate or interests therein are not considered to be
a purchase of real estate for the purposes of the limitation.
5. A Fund may not purchase or sell commodities or commodities
contracts.
6. A Fund may, notwithstanding any other fundamental investment
limitations, invest all of its assets in a single open-end investment company or
series thereof with substantially the same investment objectives, restrictions
and policies as the Fund.
7. With respect to TempFund, TempCash, MuniFund and MuniCash only: A
--------------------------------------------------------------
Fund may not purchase the securities of any issuer if as a result more than 5%
of the value of the Fund's assets would be invested in the securities of such
issuer except that up to 25% of the value of the Fund's assets may be invested
without regard to this 5% limitation.
8. With respect to TempFund only. TempFund may not purchase any
-----------------------------
securities which would cause 25% or more of the value of its total assets at the
time of such purchase to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that (a) there is no limitation with respect to investments in U.S. Treasury
Bills, other obligations issued or guaranteed by the federal government, its
agencies and instrumentalities, certificates of deposit, and bankers'
acceptances and (b) neither all finance companies, as a group, nor all utility
companies, as a group, are considered a single industry for purposes of this
policy. The Fund interprets the exception for "certificates of deposit, and
bankers' acceptances" in this fundamental policy to include other similar
obligations of domestic banks.
9. With respect to TempCash only: TempCash may not purchase any
-----------------------------
securities which would cause, at the time of purchase, less than 25% of the
value of its total assets to be invested in obligations of issuers in the
financial services industry or in obligations, such as repurchase agreements,
secured by such obligations (unless the Fund is in a temporary defensive
position) or which would cause, at the time of purchase, 25% or more of the
value of its total assets to be invested in the obligations of issuers in any
other industry, provided that (a) there is no limitation with respect to
investments in U.S. Treasury Bills and other obligations issued or guaranteed by
the federal government, its agencies and instrumentalities and (b) neither all
finance companies, as a group, nor all utility companies, as a group, are
considered a single industry for purposes of this policy.
10. With respect to California Money Fund and New York Money Fund
-------------------------------------------------------------
only: Each of these Funds may not purchase any securities which would cause 25%
- ----
or more of the Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state or territory
of the United States, or any of their agencies, instrumentalities or political
subdivisions.
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<PAGE>
The following is a list of non-fundamental investment limitations
applicable to each of the Funds or, as indicated below, to specific Funds.
Unlike a fundamental limitation, a non-fundamental investment limitation may be
changed without the approval of shareholders.
1. A Fund may not acquire any other investment company or investment
company security except in connection with a merger, consolidation,
reorganization or acquisition of assets or where otherwise permitted by the 1940
Act.
2. With Respect to MuniFund, MuniCash, Cal Money and NY Money only:
---------------------------------------------------------------
The Fund may not invest more than 10% of the value of the Fund's total assets in
illiquid securities which may be illiquid due to legal or contractual
restrictions on resale or the absence of readily available market quotations.
3. MuniFund and MuniCash only: A Fund may not invest in industrial
--------------------------
revenue bonds where the payment of principal and interest are the responsibility
of a company (including its predecessors) with less than 3 years of continuous
operations.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
IN GENERAL
Information on how to purchase and redeem each Fund's shares is
included in the applicable Prospectuses. The issuance of shares is recorded on
a Fund's books, and share certificates are not issued unless expressly requested
in writing. Certificates are not issued for fractional shares.
The regulations of the Comptroller of the Currency provide that funds
held in a fiduciary capacity by a national bank approved by the Comptroller to
exercise fiduciary powers must be invested in accordance with the instrument
establishing the fiduciary relationship and local law. The Company believes
that the purchase of shares of the Funds by such national banks acting on behalf
of their fiduciary accounts is not contrary to applicable regulations if
consistent with the particular account and proper under the law governing the
administration of the account.
Prior to effecting a redemption of shares represented by certificates,
PFPC, the Company's transfer agent, must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance the
signature must be guaranteed. A signature guarantee may be obtained from a
domestic bank or trust company, broker, dealer, clearing agency or savings
association who are participants in a medallion program recognized by the
Securities Transfer Association. The three recognized medallion programs are
Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion
Signature Program (MSP) and the New York Stock Exchange, Inc. Medallion
Securities Program. Signature guarantees that are not part of
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<PAGE>
these programs will not be accepted. A Fund may require any additional
information reasonably necessary to evidence that a redemption has been duly
authorized.
Under the 1940 Act, a Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the New
York Stock Exchange is closed, other than customary weekend and holiday
closings, or during which trading on said Exchange is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (A Fund may also
suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.)
In addition, if, in the opinion of the directors of the Company,
ownership of shares has or may become concentrated to an extent which would
cause a Fund to be deemed a personal holding company, a Fund may compel the
redemption of, reject any order for or refuse to give effect on the books of a
Fund to the transfer of a Fund's shares in an effort to prevent that
consequence. A Fund may also redeem shares involuntarily if such redemption
appears appropriate in light of a Fund's responsibilities under the 1940 Act or
otherwise. If the Company's Board of Directors determines that conditions exist
which make payment of redemption proceeds wholly in cash unwise or undesirable,
a Fund may make payment wholly or partly in securities or other property. In
certain instances, a Fund may redeem shares pro rata from each shareholder of
record without payment of monetary consideration.
Any institution purchasing shares on behalf of separate accounts will
be required to hold the shares in a single nominee name (a "Master Account").
Institutions investing in more than one of the portfolios, or classes of shares,
must maintain a separate Master Account for each Fund's class of shares.
Institutions may also arrange with PFPC for certain sub-accounting services
(such as purchase, redemption, and dividend recordkeeping). Sub-accounts may be
established by name or number either when the Master Account is opened or later.
NET ASSET VALUE
Net asset value per share of each share in a particular Fund is
calculated by adding the value of all portfolio securities and other assets
belonging to a Fund, subtracting the Fund's liabilities, and dividing the result
by the number of outstanding shares in the Fund. "Assets belonging to" a Fund
consist of the consideration received upon the issuance of Fund shares together
with all income, earnings, profits and proceeds derived from the investment
thereof, including any proceeds from the sale of such investments, any funds or
payments derived from any reinvestment of such proceeds, and a portion of any
general assets not belonging to a particular portfolio. Assets belonging to a
Fund are charged with the direct liabilities of that Fund and with a share of
the general liabilities of the Company allocated on a daily basis in proportion
to the relative net assets of each of the portfolios. Determinations made in
good faith and in accordance with generally accepted accounting principles by
the Board of Trustees as to the allocation of any assets or liabilities with
respect to a Fund are conclusive. The expenses that are charged to a Fund are
borne equally by each share of the Fund, and
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<PAGE>
payments to Service Organizations are borne solely by the Dollar Shares, Plus
Shares, Administration Shares, Cash Reserve Shares and Cash Management Shares,
respectively.
In computing the net asset value of its shares for purposes of sales
and redemptions, each Fund uses the amortized cost method of valuation pursuant
to Rule 2a-7. Under this method, a Fund values each of its portfolio securities
at cost on the date of purchase and thereafter assumes a constant proportionate
amortization of any discount or premium until maturity of the security. As a
result, the value of a portfolio security for purposes of determining net asset
value normally does not change in response to fluctuating interest rates. While
the amortized cost method seems to provide certainty in portfolio valuation, it
may result in valuations of a Fund's securities which are higher or lower than
the market value of such securities.
In connection with its use of amortized cost valuation, each Fund
limits the dollar-weighted average maturity of its portfolio to not more than 90
days and does not purchase any instrument with a remaining maturity of more than
13 months (with certain exceptions). The Board of Trustees has also established
procedures, pursuant to rules promulgated by the SEC, that are intended to
stabilize each Fund's net asset value per share for purposes of sales and
redemptions at $1.00. Such procedures include the determination, at such
intervals as the Board deems appropriate, of the extent, if any, to which a
Fund's net asset value per share calculated by using available market quotations
deviates from $1.00 per share. In the event such deviation exceeds 1/2 of 1%,
the Board will promptly consider what action, if any, should be initiated. If
the Board believes that the amount of any deviation from a Fund's $1.00
amortized cost price per share may result in material dilution or other unfair
results to investors or existing shareholders, it will take such steps as it
considers appropriate to eliminate or reduce to the extent reasonably
practicable any such dilution or unfair results. These steps may include
selling portfolio instruments prior to maturity to realize capital gains or
losses or to shorten a Fund's average portfolio maturity, redeeming shares in
kind, reducing or withholding dividends, or utilizing a net asset value per
share determined by using available market quotations.
MANAGEMENT OF THE FUNDS
TRUSTEES AND OFFICERS
The business and affairs of the Company are managed under the
direction of the Board of Trustees. The Trustees and executive officers, their
addresses, ages, principal occupations during the past five years and other
affiliations are as follows:
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<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation
Name the Company Age During Past 5 Years
- ---- ----------- --- -------------------
<S> <C> <C> <C>
G. Nicholas Beckwith, III Trustee 53 President and Chief Executive
Beckwith Machinery Company Officer, Beckwith Machinery
4565 William Penn Highway Company; First Vice Chairman of
Murrysville, PA 15668 the Board of Directors,
University of Pittsburgh Medical
Center Shadyside/Presbyterian
Hospitals; Second Vice Chairman of
the Board of Directors, University
of Pittsburgh Medical Center
Health System; Board of Overseers,
Brown University School of
Medicine; Board of Trustees, Shady
Side Academy; Trustee, Claude
Worthington Benedum Foundation;
Trustee, Chatham College; Director
or Trustee of two other investment
companies advised by BIMC.
Jerrold B. Harris Trustee, 56 President and Chief Executive
VWR Scientific Products Corp. President and Officer, VWR Scientific Products
1310 Goshen Parkway Treasurer Corp.; Director or Trustee of two
West Chester, PA 19380 other investment companies advised
by BIMC.
Rodney D. Johnson* Trustee, 57 President, Fairmount Capital
Fairmount Capital Advisors, Inc. President and Advisors, Inc.; Director or
1435 Walnut Street, Suite 300 Treasurer Trustee of five other investment
Philadelphia, PA 19102-3222 companies advised by BIMC.
Joseph P. Platt, Jr. Trustee 51 Partner, Amarna Partners (private
Amarna Partners investment company); formerly, a
One Oxford Centre, Suite 4260 Director and Executive Vice
Pittsburgh, PA 15219 President of Johnson & Higgins.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation
Name the Company Age During Past 5 Years
- ---- ----------- --- -------------------
<S> <C> <C> <C>
Robert C. Robb, Jr.1 Trustee 53 Partner, Lewis, Eckert, Robb &
Lewis, Eckert, Robb & Co. Company (management and financial
425 One Plymouth Meeting consulting firm); Trustee, EQK
Plymouth Meeting, PA 19462 Realty Investors; Director,
Tamaqua Cable Products Company;
Director, Brynwood Partners;
former Director, PNC Bank.
Kenneth L. Urish Trustee 47 Managing Partner, Urish Popeck &
Urish Popeck & Co. Co. LLC (certified public
Three Gateway Center, Suite 2400 accountants and consultants).
Pittsburgh, PA 15222
Frederick W. Winter Trustee 53 Dean, Joseph M. Katz School of
Dean-Katz Graduate School of Business University of
Business Pittsburgh; formerly, Dean, School
University of Pittsburgh of Management - State University
372 Mervis Hall of New York at Buffalo
Pittsburgh, PA 15260 (1994-1997); former Director, Rand
Capital (1996-1997); former
Director, Bell Sports (1991-1998);
former Director, Alkon Corporation
(1992-1998).
W. Bruce McConnel, III Secretary 54 Partner of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP,
1345 Chestnut Street Philadelphia, Pennsylvania
Phildelphia, PA 19107-3496
</TABLE>
_____________________________
* Mr. Johnson is an "interested person" of Provident Institutional Funds, as
that term is defined in the 1940 Act, because he is an officer of the
Company.
1. From 1994 until April 14, 1998, Mr. Robb was a director of PNC Bank.
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<PAGE>
The following provides certain information about the fees received by
the trustees/directors of the Predecessor Companies and/or the Company and as
directors/trustees of the Fund Complex for the year ending December 31, 1998.
<TABLE>
<CAPTION>
==========================================================================================================================
PENSION OR TOTAL
RETIREMENT COMPENSATION FROM
AGGREGATE BENEFITS COMPANY AND/OR
COMPENSATION ACCRUED AS PART PREDECESSOR
FROM OF COMPANY AND/OR ESTIMATED COMPANIES AND
COMPANY AND/OR PREDECESSOR ANNUAL FUND COMPLEX/1/
NAME OF PERSON, PREDECESSOR COMPANIES BENEFITS UPON PAID TO
POSITION COMPANIES EXPENSES RETIREMENT TRUSTEES
-------- --------- -------- ---------- --------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
G. Nicholas Beckwith, III, Trustee $44,000.00 n/a n/a $44,000.002
- -------------------------------------------------------------------------------------------------------------------------
Jerrold B. Harris, Trustee $44,000.00 n/a n/a $44,000.002
- -------------------------------------------------------------------------------------------------------------------------
Rodney D. Johnson*, Trustee, $56,500.00 n/a n/a $56,500.002
President and Treasurer
- -------------------------------------------------------------------------------------------------------------------------
Joseph P. Platt, Jr., Trustee $ 0 n/a n/a $ 0
- -------------------------------------------------------------------------------------------------------------------------
Robert C. Robb, Jr., 1 Trustee $ 0 n/a n/a $ 0
- -------------------------------------------------------------------------------------------------------------------------
Kenneth L. Urish, Trust $ 0 n/a n/a $ 0
- -------------------------------------------------------------------------------------------------------------------------
Frederick W. Winter, Trustee $ 0 n/a n/a $ 0
==========================================================================================================================
</TABLE>
1. A Fund complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and
investor services, or have a common investment adviser or have an
investment adviser that is an affiliated person of the investment adviser
of any of the other investment companies.
2. Total number of such other investment companies a trustee served on within
the Fund Complex.
* This trustee is considered by the Company to be an "interested person" of
the Company as defined by the 1940 Act.
Until January 28, 1999, when the Predecessor Companies were
reorganized into the Company, G. Willing Pepper was director/trustee and
Chairman of the Board of Temp, Fed and Cal Muni. William R. Howell and Rudolph
A. Peterson were each directors of Cal Muni. Anthony Santomero was a director
of Cal Muni and NY Muni. Philip E. Coldwell and Robert F. Fortune were
directors/trustees of Temp, Fed and Muni. Thomas A. Melfe and Francis E. Drake
were each directors of NY Muni. Mr. Melfe was also Chairman of the Board of NY
Muni.
Drinker Biddle & Reath LLP, of which Mr. McConnel is a partner,
receive legal fees as counsel to the Predecessor Companies and receives legal
fees as counsel to the Company. No employee of PDI, BIMC, PFPC or PNC Bank
receives any compensation from the Predecessor Companies for acting as an
officer or director of the Predecessor Companies. The directors and officers of
the Predecessor Companies as a group own less than 1% of the shares of each of
the Predecessor Funds.
-45-
<PAGE>
INVESTMENT ADVISER
The advisory services provided by BIMC are described in the Funds'
Prospectuses. For the advisory services provided and expenses assumed by it,
BIMC is entitled to receive fees, computed daily and payable monthly, at the
following annual rates:
TEMPFUND:
--------
ANNUAL FEE AVERAGE NET ASSETS
---------- ------------------
.175%......................... of the first $1 billion
.150%......................... of the next $1 billion
.125%......................... of the next $1 billion
.100%......................... of the next $1 billion
.095%......................... of the next $1 billion
.090%......................... of the next $1 billion
.080%......................... of the next $1 billion
.075%......................... of the next $1 billion
.070%......................... of amounts in excess of $8 billion.
TEMPCASH, MUNIFUND AND MUNICASH:
-------------------------------
ANNUAL FEE A FUND'S AVERAGE NET ASSETS
---------- ---------------------------
.175%......................... of the first $1 billion
.150%......................... of the next $1 billion
.125%......................... of the next $1 billion
.100%......................... of the next $1 billion
.095%......................... of the next $1 billion
.090%......................... of the next $1 billion
.085%......................... of the next $1 billion
.080%......................... of amounts in excess of $7 billion.
-46-
<PAGE>
FED FUND, T FUND, FEDERAL TRUST FUND AND TREASURY TRUST FUND:
------------------------------------------------------------
THE FUNDS' COMBINED
ANNUAL FEE AVERAGE NET ASSETS
---------- ------------------
.175%....................... of the first $1 billion
.150%....................... of the next $1 billion
.125%....................... of the next $1 billion
.100%....................... of the next $1 billion
.095%....................... of the next $1 billion
.090%....................... of the next $1 billion
.085%....................... of the next $1 billion
.080%....................... of amounts in excess of $7 billion.
CALIFORNIA MONEY FUND AND NEW YORK MONEY FUND:
---------------------------------------------
ANNUAL FEE A FUND'S AVERAGE NET ASSETS
---------- ---------------------------
.20%....................... of the total net assets
PFPC, as described below under "Co-Administrators", and BIMC are co-
administrators of the Fund. They may from time to time reduce their fees to
ensure that the ordinary operating expenses (excluding interest, taxes,
brokerage fees, fees paid to Service Organizations pursuant to Servicing
Agreements, and extraordinary expenses) do not exceed a specified percentage of
each Funds' average net assets.
The following chart provides information with respect to the advisory
fees paid (net of waivers) and advisory fees waived during the fiscal year of
each Fund ended in 1996, 1997 and 1998:
-47-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FUND 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
ADVISORY ADVISORY ADVISORY ADVISORY ADVISORY ADVISORY
FEES FEES FEES FEES FEES FEES
PAID WAIVED PAID WAIVED PAID WAIVED
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TempFund $8,126,927 $2,315,278 $6,560,502 $2,576,521 $5,254,506 $2,765,282
- --------------------------------------------------------------------------------------------------------------------------
TempCash 2,388,597 2,096,653 2,176,446 2,041,599 2,170,845 2,106,346
- --------------------------------------------------------------------------------------------------------------------------
FedFund 955,784 478,660 1,161,493 669,760 1,092,318 764,599
- --------------------------------------------------------------------------------------------------------------------------
T-Fund 2,678,630 1,095,039 1,750,181 940,954 1,199,099 798,740
- --------------------------------------------------------------------------------------------------------------------------
Federal Trust
Fund 227,374 136,957 203,068 156,965 203,379 170,171
- --------------------------------------------------------------------------------------------------------------------------
Treasury Trust
Fund 1,093,223 499,881 1,002,514 587,865 907,460 653,409
- --------------------------------------------------------------------------------------------------------------------------
MuniFund 567,677 489,376 717,070 497,287 752,680 545,635
- --------------------------------------------------------------------------------------------------------------------------
MuniCash 367,734 615,881 268,834 534,948 238,520 488,851
- --------------------------------------------------------------------------------------------------------------------------
California 374,215 729,108 268,716 621,301 254,168 594,290
Money
- --------------------------------------------------------------------------------------------------------------------------
New York
Money 202,770 450,544 150,755 420,034 133,705 391,595
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
________________________
The Funds' fiscal year ends were as follows: October 31: TempFund and TempCash
September 30, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund October
31, MuniFund and MuniCash November 30, California Money Fund January 31 and New
York Money Fund July 31.
CO-ADMINISTRATORS
BIMC and PFPC serve as the Fund's co-administrators. PFPC has its
principal business address at 400 Bellevue Parkway, Wilmington, Delaware 19809
and is an indirect, wholly-owned subsidiary of PNC Bank Corp. and is an
affiliate of BIMC As the Funds' co-administrators, BIMC and PFPC have agreed to
provide the following services: (i) assist generally in supervising the Funds'
operations, including providing a Wilmington, Delaware order-taking facility
with toll-free IN-WATS telephone lines, providing for the preparing, supervising
and mailing of purchase and redemption order confirmations to shareholders of
record, providing and supervising the operation of an automated data processing
system to process purchase and redemption orders, maintaining a back-up
procedure to reconstruct lost purchase and redemption data, providing
information concerning the Funds to their shareholders of record, handling
shareholder problems, providing the services of employees to preserve and
strengthen shareholder relations and monitoring the arrangements pertaining to
the Funds' agreements with Service Organizations; (ii) assure that persons are
available to receive and transmit purchase and redemption orders; (iii)
participate in the periodic updating of the Funds'
-48-
<PAGE>
prospectuses; (iv) assist in the Funds' Wilmington, Delaware office; (v)
accumulate information for and coordinate the preparation of reports to the
Funds' shareholders and the SEC; (vi) maintain the registration of the Funds'
shares for sale under state securities laws; (vii) review and provide advice
with respect to all sales literature of the Funds; and (viii) assist in the
monitoring of regulatory and legislative developments which may affect the
Company, participate in counseling and assisting the Company in relation to
routine regulatory examinations and investigations, and work with the Company's
counsel in connection with regulatory matters and litigation.
For their administrative services, the co-administrators are entitled
jointly to receive fees, computed daily and payable monthly, as described above
determined in the same manner as BIMC's advisory fee set forth above. For
information regarding the administrators' obligation to reimburse the Funds in
the event their expenses exceed certain prescribed limits, see "Investment
Adviser" above. Any fees waived by the administrators with respect to a
particular fiscal year are not recoverable.
The following chart provides information with respect to the
administration fees (net of waivers) paid and administration fees waived during
the fiscal years for each Fund ended in 1996, 1997 and 1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
FUND 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION
FEES PAID FEES WAIVED FEES PAID FEES WAIVED FEES PAID FEES WAIVED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TempFund $8,126,927 $2,315,278 $6,560,502 $2,576,521 $5,254,506 $2,765,282
- ------------------------------------------------------------------------------------------------------------------
TempCash 2,388,597 2,096,653 2,176,446 2,041,599 2,170,845 2,106,346
- ------------------------------------------------------------------------------------------------------------------
FedFund 955,784 478,660 1,161,493 669,760 1,092,318 764,599
- ------------------------------------------------------------------------------------------------------------------
T-Fund 2,678,630 1,095,039 1,750,181 940,954 1,199,099 798,740
- ------------------------------------------------------------------------------------------------------------------
Federal Trust
Fund 227,374 136,957 203,068 156,965 203,379 170,171
- ------------------------------------------------------------------------------------------------------------------
Treasury Trust
Fund 1,093,223 499,881 1,002,514 587,865 907,460 653,409
- ------------------------------------------------------------------------------------------------------------------
MuniFund 567,677 489,376 717,070 497,287 752,680 545,635
- ------------------------------------------------------------------------------------------------------------------
MuniCash 367,734 615,881 268,834 534,948 238,520 488,851
- ------------------------------------------------------------------------------------------------------------------
California 374,215 729,108 268,716 621,301 254,168 594,290
Money
- ------------------------------------------------------------------------------------------------------------------
New York
Money 202,770 450,544 150,755 420,034 133,705 391,595
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The Funds' fiscal year ends were as follows: October 31: TempFund and
TempCash September 30, FedFund, T-Fund, Federal Trust Fund, Treasury Trust
Fund October 31, MuniFund and MuniCash November 30, California Money Fund
January 31, and New York Money Fund July 31.
-49-
<PAGE>
DISTRIBUTOR
Provident Distributos, Inc. ("PDI") acts as the distributor of the
Fund's shares. PDI is a Delaware corporation and has its principal business
address at Four Falls Corporate Center, 6th Floor, West Conshohocken,
Pennsylvania 19428. Each Fund's shares are sold on a continuous basis by the
distributor as agent, although it is not obliged to sell any particular amount
of shares. The distributor pays the cost of printing and distributing
prospectuses to persons who are not shareholders of the Funds (excluding
preparation and printing expenses necessary for the continued registration of
the Fund shares). The distributor prepares or reviews, provides advice with
respect to, and files with the federal and state agencies or other organizations
as required by federal, state or other applicable laws and regulations, all
sales literature (advertisements, brochures and shareholder communications) for
each of the Funds and any class or subclass thereof. No compensation is payable
by the Fund to the distributor for its distribution services.
CUSTODIAN AND TRANSFER AGENT
Pursuant to a Custodian Agreement, PFPC Trust Company, an affiliate of
the Adviser, serves as each Fund's custodian, holding a Fund's portfolio
securities, cash and other property. PFPC Trust Company has its principal
offices at 400 Bellevue Parkway, Wilmington, Delaware 19809, with an additional
custodial services location at 200 Stevens Drive, Suite 410, Lester,
Pennsylvania 19113. Under the Custodian Agreement, PFPC Trust Company has agreed
to provide the following services: (i) maintain a separate account or accounts
in the name of a Fund; (ii) hold and disburse portfolio securities on account of
a Fund; (iii) collect and make disbursements of money on behalf of a Fund; (iv)
collect and receive all income and other payments and distributions on account
of a Fund's portfolio securities; and (v) make periodic reports to the Board of
Trustees concerning a Fund's operations.
PFPC Trust Company is also authorized to select one or more banks or
trust companies to serve as sub-custodian or agent on behalf of a Fund, provided
that PFPC Trust Company shall remain responsible for the performance of all of
its duties under the Custodian Agreement and shall hold each Fund harmless from
the acts and omissions of any bank or trust company serving as sub-custodian or
agent chosen by PFPC Trust Company. Currently, PFPC Trust Company has chosen PNC
Bank to serve as agent to the Funds.
Under the Custodian Agreement, each Fund pays PFPC Trust Company an
annual fee equal to $.25 for each $1,000 of each Fund's average daily gross
assets. With respect to TempFund, TempCash, FedFund, T-Fund, Federal Trust Fund,
Treasury Trust Fund, MuniFund and MuniCash, such fee declines as each such
Fund's average daily gross assets increase. In addition, each Fund pays the
custodian certain types of transaction charges, and reimburses the custodian for
out-of-pocket expenses incurred on behalf of the Fund. The fees of PNC Bank are
paid by PFPC Trust Company and not the Funds.
PFPC also serves as transfer agent, registrar and dividend disbursing
agent to each Fund pursuant to a Transfer Agency Agreement. Under the
Agreement, PFPC has agreed to provide the following services: (i) maintain a
separate account or accounts in the name of a Fund; (ii) issue, transfer and
redeem Fund shares; (iii) transmit all communications by a Fund to its
shareholders of record, including reports to shareholders, dividend and
distribution notices and proxy material for its meetings of shareholders; (iv)
respond to correspondence by
-50-
<PAGE>
shareholders, security brokers and others relating to its duties; (v) maintain
shareholder accounts and sub-accounts; (vi) provide installation and other
services in connection with the Funds' computer access program maintained to
facilitate shareholder access to a Fund; (vii) send each shareholder of record a
monthly statement showing the total number of a Fund's shares owned as of the
last business day of the month (as well as the dividends paid during the current
month and year); and (viii) provide each shareholder of record with a daily
transaction report for each day on which a transaction occurs in the
shareholder's Master Account with a Fund. Further, an institution establishing
sub-accounts with PFPC is provided with a daily transaction report for each day
on which a transaction occurs in a sub-account and, as of the last calendar day
of each month, a report which sets forth the share balances for the sub-accounts
at the beginning and end of the month and income paid or reinvested during the
month. Finally, PFPC provides each shareholder of record with copies of all
information relating to dividends and distributions which is required to be
filed with the Internal Revenue Service and other appropriate taxing
authorities.
For transfer agency and dividend disbursing services, each Fund pays
PFPC fees at the annual rate of $12.00 per account and sub-account maintained by
PFPC plus $1.00 for each purchase or redemption transaction by an account (other
than a purchase transaction made in connection with the automatic reinvestment
of dividends). Payments to PFPC for sub-accounting services provided by others
are limited to the amount which PFPC pays to others for such services. In
addition, each Fund reimburses PNC Bank and PFPC for out-of-pocket expenses
related to such services.
BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company engaged continuously in the issuance of
its shares, and prohibit banks generally from issuing, underwriting, selling or
distributing securities such as Fund shares. Such banking laws and regulations
do not prohibit such a holding company or affiliate or banks generally from
acting as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company for or upon the order of
customers.
BIMC, PNC Bank and PFPC believe that they may perform the services for
the Funds contemplated by their respective agreements, Prospectuses and this
Statement of Additional Information without violation of applicable banking laws
or regulations. It should be noted, however, that future changes in legal
requirements relating to the permissible activities of banks and their
affiliates, as well as further interpretations of present requirements, could
prevent BIMC and PFPC from continuing to perform such services for the Funds.
If BIMC and PFPC were prohibited from continuing to perform such services, it is
expected that the Company's Board of Trustees would recommend that the Funds
enter into new agreements with other qualified firms. Any new advisory
agreement would be subject to shareholder approval.
-51-
<PAGE>
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
SERVICE ORGANIZATIONS
Each of the Funds enter into agreements with institutional investors
("Service Organizations") requiring them to provide support services to their
customers who beneficially own Dollar Shares and, with respect to T-Fund,
MuniFund, TempFund, NY Money Fund and California Money Fund, Plus Shares, in
consideration of .25% (on an annualized basis) of the average daily net asset
value of the Dollar and Plus Shares held by the Service Organizations for the
benefit of their customers. Such services include: (i) aggregating and
processing purchase and redemption requests from customers and placing net
purchase and redemption orders with the transfer agent; (ii) providing customers
with a service that invests the assets of their accounts in Dollar or Plus
Shares; (iii) processing dividend payments from the Fund on behalf of customers;
(iv) providing information periodically to customers showing their positions in
Dollar and Plus Shares; (v) arranging for bank wires; (vi) responding to
customer inquiries relating to the services performed by the Service
Organizations; (vii) providing sub-accounting with respect to Dollar and Plus
Shares beneficially owned by customers or the information necessary for sub-
accounting; (viii) forwarding shareholder communications from the Fund (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to customers, if required by law; and
(ix) other similar services if requested by the Fund. In addition,
broker/dealers purchasing Plus Shares provide from time to time assistance (such
as the forwarding of sales literature and advertising to customers) in
connection with the distribution of Plus Shares.
TempFund, T-Fund, MuniFund and California Money Fund may also enter
into agreements with Service Organizations requiring them to provide support
services to their customers who beneficially own Administration Shares, in
consideration of .10% (on an annualized basis) of the average daily net asset
value of the Administration Shares held by the Service Organization for the
benefit of their customers. Such services include, but are not limited to: (i)
answering shareholder inquiries regarding account status and history, the manner
in which purchases, exchanges and redemptions of shares may be effected and
certain other matters pertaining to the shareholders' investments; and (ii)
assisting shareholders in designating and changing dividend options, account
designations and addresses.
TempFund, T-Fund, MuniFund and California Money Fund may also enter
into agreements with Service Organizations requiring them to provide support
services to their customers who beneficially own Cash Reserve Shares, in
consideration of a total of .40% (on an annualized basis) of the average net
asset value of the Cash Reserve Shares held by the Service Organization for the
benefit of their customers. An initial.20% (on an annual basis) of the average
daily net asset value of such Shares will be paid for service organizations for
providing the following Services: (i) providing customers with a service that
invests the assets of their account in Cash Reserve Shares, (ii) responding to
customer inquiries related to the services performed by the Service
Organization, (iii) answering shareholder inquiries regarding account
-52-
<PAGE>
status and history, the manner in which purchases, exchanges and redemption of
shares may be effected and certain other matters pertaining to the shareholders'
investments, (iv) assisting shareholders in designating and changing dividend
options, account designations and addresses and (v) providing software that
aggregates the customers orders and establishes an order to purchase or redeem
shares of a Series (a "Sweep Service") based on established target levels for
the customer's demand deposit accounts. Another .20% (on an annual basis) of the
average daily net asset value of such Shares will be paid to service
organizations for providing the following Services: (vi) aggregating and
processing purchase and redemption requests from customers and placing net
purchase and redemption orders with the transfer agent, (vii) processing
dividend payments from the particular portfolio on behalf of customers; (viii)
providing information periodically to customers showing their position in Cash
Reserve Shares, (ix) arranging for bank wires; (x) providing sub-accounting with
respect to Cash Reserve Shares beneficially owned by customers or the
information necessary for sub-accounting; (xi) forwarding shareholder
communications from the particular portfolio (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to customers, if required by law; (xii) other similar services
if requested by the particular portfolio, (xiii) providing the necessary
computer hardware and software which links the service organization's DDA system
to an account management system; (xiv) providing period statements showing a
customer's account balance and, to the extent practicable, integrating such
information with other customer transactions otherwise effected through or with
a service organization; and (xv) furnishing (either separately or an integrated
basis with other reports sent to a shareholder by a service organization)
monthly and year-end statements and confirmations of purchases, exchanges and
redemptions.
TempFund, T-Fund, MuniFund and California Money Fund may also enter
into agreements with Service Organizations requiring them to provide support
services to their customers who beneficially own Cash Management Shares, in
consideration of a total of .50% (on an annualized basis) of the average net
asset value of the Cash Management Shares held by the Service Organization for
the benefit of their customers. An initial.25% (on an annual basis) of the
average daily net asset value of such Shares will be paid to service
organizations for providing the following Services: (i) providing customers
with a service that invests the assets of their account in Cash Management
Shares, (ii) responding to customer inquiries related to the services performed
by the service organization, (iii) answering shareholder inquiries regarding
account status and history, the manner in which purchases, exchanges and
redemption of shares may be effected and certain other matters pertaining to the
shareholders' investments, (iv) assisting shareholders in designating and
changing dividend options, account designations and addresses, (v) providing
software that aggregates the customers orders and establishes an order to
purchase or redeem shares of a Series (a "Sweep Service") based on established
target levels for the customer's demand deposit accounts, (vi) marketing and
activities, including direct mail promotions that promote sweep service, (vii)
expenditures for other similar marketing support such as for telephone
facilities and in-house telemarketing (viii) distribution of literature
promoting sweep services, (ix) travel, equipment, printing, delivery and mailing
costs overhead and other office expenses attributable to the marketing of sweep
services. Another .25% (on an annual basis) of the average daily net asset
value of such Shares will be paid to service organizations for providing the
following services: (x) aggregating and processing
-53-
<PAGE>
purchase and redemption requests from customers and placing net purchase and
redemption orders with the transfer agent, (xi) processing dividend payments
from the particular portfolio on behalf of customers; (xii) providing
information periodically to customers showing their position in Cash Management
Shares, (xiii) arranging for bank wires; (xiv) providing sub-accounting with
respect to Cash Management Shares beneficially owned by customers or the
information necessary for sub-accounting; (xv) forwarding shareholder
communications from the particular portfolio (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to customers, if required by law; (xvi) other similar services
if requested by the particular portfolio, (xvii) providing the necessary
computer hardware and software which links the service organization's DDA system
to an account management system; (xviii) providing period statements showing a
customer's account balance and, to the extent practicable, integrating such
information with other customer transactions otherwise effected through or with
a service organization; and (ixx) furnishing (either separately or an integrated
basis with other reports sent to a shareholder by a service organizations)
monthly and year-end statements and confirmations of purchases, exchanges and
redemptions.
The Fund's agreements with Service Organizations are governed by Plans
(called "Shareholder Services Plan" for the Dollar, Administration, Cash
Reserves and Cash Management Shares and "Distribution and Services Plan" for the
Plus shares), which have been adopted by the Fund's Board of Trustees pursuant
to applicable rules and regulations of the SEC. Pursuant to the Plans, the
Board of Trustees reviews, at least quarterly, a written report of the amounts
expended under the Fund's agreements with Service Organizations and the purposes
for which the expenditures were made. In addition, the Fund's arrangements with
Service Organizations must be approved annually by a majority of the Fund's
trustees, including a majority of the trustees who are not "interested persons"
of the Fund as defined in the 1940 Act and have no direct or indirect financial
interest in such arrangements.
The Board of Trustees have approved the Funds' arrangements with
Service Organizations based on information provided to the Boards that there is
a reasonable likelihood that the arrangements will benefit the Class of Shares
of the Fund charged with such fees and its shareholders. Any material amendment
to the Funds' arrangements with Service Organizations must be made in a manner
approved by a majority of the Funds' Board of Trustees (including a majority of
the Non-Interested Trustees), and any amendment to increase materially the costs
under the Distribution and Services Plan adopted by the Board with respect to
Plus shares must be approved by the holders of a majority of the outstanding
Plus shares. (It should be noted that while the annual service fee with respect
to Plus shares is currently set at .25%, the Plans adopted by the Board of
Trustees permits the Board to increase this fee to .40% without shareholder
approval.) So long as the Funds' arrangements with Service Organizations are in
effect, the selection and nomination of the members of the Funds' Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund will be committed to the discretion of such non-interested directors.
The following chart provides information with respect to the fees paid
to Service Organizations, including the amounts paid to affiliates of BIMC
during the fiscal year for each Fund ended in 1996, 1997 and 1998.
-54-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
FUND 1998 1997 1996
- -----------------------------------------------------------------------------------------------------
Total Fees/Fees to Total Fees/Fees to Total Fees/Fees to
Affiliates Affiliates Affiliates
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TempFund Dollar $ 772,304/$104,448 $ 863,301/$617,378 $ 307,468/$215,093
- -----------------------------------------------------------------------------------------------------
TempCash Dollar 1,088,006/27,566 1,214,833/380,851 1,226,772/328,534
- -----------------------------------------------------------------------------------------------------
FedFund Dollar 125,091/1,900 189,582/12,793 274,229/45,165
- -----------------------------------------------------------------------------------------------------
T-Fund Dollar 1,483,848/1,020,059 1,066,632/664,865 492,530/421,267
- -----------------------------------------------------------------------------------------------------
Treasury Trust Dollar 1,007,664/206,583 895,799/281,300 647,320/147,014
- -----------------------------------------------------------------------------------------------------
Federal Trust Dollar 95,541/0 88,473/0 61,691/17,418
- -----------------------------------------------------------------------------------------------------
MuniFund Dollar 144,751/0 150,996/272 130,964/1,964
- -----------------------------------------------------------------------------------------------------
MuniCash Dollar 273,684/0 285,897/11,464 248,904/25,886
- -----------------------------------------------------------------------------------------------------
California Money Dollar 308,298/428 187,911/2,115 59,647/2,244
- -----------------------------------------------------------------------------------------------------
California Money Plus 0/0 0/0 0/0
- -----------------------------------------------------------------------------------------------------
New York Money Dollar 504/0 8,458/8,408 22/0
- -----------------------------------------------------------------------------------------------------
New York Money Plus 0/0 0/0 0/0
- -----------------------------------------------------------------------------------------------------
</TABLE>
_________________
The Funds' fiscal year ends were as follows: October 31: TempFund and
TempCash-September 30, FedFund, T-Fund, Federal Trust Fund, Treasury Trust
Fund-October 31, MuniFund and MuniCash-November 30, California Money Fund-
January 31, and New York Money Fund-July 31.
EXPENSES
- --------
A Fund's expenses include taxes, interest, fees and salaries of the
Company's Trustees and officers who are not Trustees, officers or employees of
the Company's service contractors, SEC fees, state securities registration fees,
costs of preparing and printing prospectuses for regulatory purposes and for
distribution to shareholders, advisory and administration fees, charges of the
custodian and of the transfer and dividend disbursing agent, Service
Organization fees, costs of the Funds' computer access program, certain
insurance premiums, outside auditing and legal expenses, costs of shareholder
reports and shareholder meetings and any extraordinary expenses. A Fund also
pays for brokerage fees and commissions (if any) in connection with the purchase
and sale of portfolio securities.
ADDITIONAL INFORMATION CONCERNING TAXES
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and to distribute out its income to
shareholders each year, so that each Fund itself will be relieved of federal
income and excise taxes. If a Fund were to fail to so qualify: (1) the Fund
would be taxed at regular corporate rates without any
-55-
<PAGE>
deduction for distributions to shareholders; and (2) shareholders would be taxed
as if they received ordinary dividends, although corporate shareholders could be
eligible for the dividends received deduction.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail currently to distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income (excess
of capital gains over capital losses). Each Fund intends to make sufficient
distributions or deemed distributions of its ordinary taxable income and any
capital gain net income prior to the end of each calendar year to avoid
liability for this excise tax.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends or 31% of gross proceeds paid to a
shareholder who has failed to provide a correct tax identification number in the
manner required, is subject to withholding by the Internal Revenue Service for
failure properly to include on his return payments of taxable interest or
dividends, or has failed to certify to the Fund that he is not subject to backup
withholding when required to do so or that it is an "exempt recipient."
The following is applicable to MuniFund, MuniCash, California Money
Fund and New York Money Fund only:
As described above and in the Funds' Prospectuses, each Fund is
designed to provide institutions with current tax-exempt interest income.
Neither Fund is intended to constitute a balanced investment program nor is
designed for investors seeking capital appreciation or maximum tax-exempt income
irrespective of fluctuations in principal. Shares of a Fund would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans and individual
retirement accounts because such plans and accounts are generally tax-exempt
and, therefore, not only would not gain any additional benefit from a Fund's
dividends being tax-exempt but also such dividends would be taxable when
distributed to the beneficiary. In addition, a Fund may not be an appropriate
investment for entities which are "substantial users" of facilities financed by
private activity bonds or "related persons" thereof. "Substantial user" is
defined under U.S. Treasury Regulations to include a non-exempt person who
regularly uses a part of such facilities in his or her trade or business and
whose gross revenues derived with respect to the facilities financed by the
issuance of bonds are more than 5% of the total revenues derived by all users of
such facilities, or who occupies more than 5% of the usable area of such
facilities or for whom such facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons" include certain
related natural persons, affiliated corporations, a partnership and its
partners, and an S Corporation and its shareholders.
In order for a Fund to pay exempt-interest dividends for any taxable
year, at least 50% of the aggregate value of that Fund's assets must consist of
exempt-interest obligations
-56-
<PAGE>
DIVIDENDS
GENERAL
- -------
Each Fund's net investment income for dividend purposes consists of
(i) interest accrued and original issue discount earned on that Fund's assets,
(ii) plus the amortization of market discount and minus the amortization of
market premium on such assets and (iii) less accrued expenses directly
attributable to that Fund and the general expenses (e.g. legal, accounting and
Trustees' fees) of the Company prorated to such Fund on the basis of its
relative net assets. Any realized short-term capital gains may also be
distributed as dividends to Fund shareholders. In addition, a Fund's Dollar
Shares and/or Plus Shares bear exclusively the expense of fees paid to Service
Organizations. (See "Management of the Funds -- Service Organizations.")
As stated, the Company uses its best efforts to maintain the net asset
value per share of each Fund at $1.00. As a result of a significant expense or
realized or unrealized loss incurred by either Fund, it is possible that the
Fund's net asset value per share may fall below $1.00.
ADDITIONAL YIELD AND OTHER PERFORMANCE INFORMATION
The "yields" and "effective yields" are calculated separately for each
Fund. The seven-day yield for each class or sub-class of shares in a Fund is
calculated by determining the net change in the value of a hypothetical pre-
existing account in a Fund having a balance of one share of the class involved
at the beginning of the period, dividing the net change by the value of the
account at the beginning of the period to obtain the base period return, and
multiplying the base period return by 365/7. The net change in the value of an
account in a Fund includes the value of additional shares purchased with
dividends from the original share and dividends declared on the original share
and any such additional shares, net of all fees charged to all shareholder
accounts in proportion to the length of the base period and the Fund's average
account size, but does not include gains and losses or unrealized appreciation
and depreciation. In addition, the effective annualized yield may be computed
on a compounded basis (calculated as described above) by adding 1 to the base
period return, raising the sum to a power equal to 365/7, and subtracting 1 from
the result. Similarly, based on the calculations described above, 30-day (or
one-month) yields and effective yields may also be calculated.
-57-
<PAGE>
The following chart provides information with respect to the yields as
of each Fund's most recent fiscal year or period.*
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
7 DAY 30 DAY
- ---------------------------------------------------------------------------------------------------------------------
YIELD COMPOUNDED YIELD COMPOUNDED
EFFECTIVE EFFECTIVE
YIELD YIELD
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TempFund 5.43% 5.58% 5.45% 5.60%
- ---------------------------------------------------------------------------------------------------------------------
TempFund Dollar 5.18 5.31 5.20 5.33
- ---------------------------------------------------------------------------------------------------------------------
TempCash 5.45 5.60 5.47 5.62
- ---------------------------------------------------------------------------------------------------------------------
TempCash Dollar 5.20 5.33 5.22 5.36
- ---------------------------------------------------------------------------------------------------------------------
FedFund 4.91 5.03 5.01 5.14
- ---------------------------------------------------------------------------------------------------------------------
FedFund Dollar 4.66 4.77 4.76 4.87
- ---------------------------------------------------------------------------------------------------------------------
T-Fund 4.80 4.91 4.91 5.03
- ---------------------------------------------------------------------------------------------------------------------
T-Fund Dollar 4.55 4.65 4.66 4.77
- ---------------------------------------------------------------------------------------------------------------------
Federal Trust Fund 4.88 5.00 5.01 5.14
- ---------------------------------------------------------------------------------------------------------------------
Federal Trust Dollar 4.63 4.74 4.76 4.87
- ---------------------------------------------------------------------------------------------------------------------
Treasury Trust Fund 4.59 4.69 4.63 4.74
- ---------------------------------------------------------------------------------------------------------------------
Treasury Trust Dollar 4.34 4.43 4.38 4.48
- ---------------------------------------------------------------------------------------------------------------------
MuniFund 3.06 3.11 3.06 3.11
- ---------------------------------------------------------------------------------------------------------------------
MuniFund Dollar 3.81 2.85 2.81 2.85
- ---------------------------------------------------------------------------------------------------------------------
MuniCash 3.22 3.27 3.19 3.24
- ---------------------------------------------------------------------------------------------------------------------
MuniCash Dollar 2.97 3.01 2.94 2.98
- ---------------------------------------------------------------------------------------------------------------------
California Money Fund 3.15 3.20 3.02 3.07
- ---------------------------------------------------------------------------------------------------------------------
California Money Dollar 2.90 2.94 2.77 2.81
- ---------------------------------------------------------------------------------------------------------------------
California Money Plus+ 2.90 2.94 2.77 2.81
- ---------------------------------------------------------------------------------------------------------------------
New York Money Fund 3.32 3.37 3.15 3.20
- ---------------------------------------------------------------------------------------------------------------------
New York Money Dollar+ 3.07 3.12 2.90 2.94
- ---------------------------------------------------------------------------------------------------------------------
New York Money Plus+ 3.07 3.12 2.90 2.94
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The Funds' fiscal year ends were as follows: October 31: TempFund and
TempCash-September 30, Fed Fund, T-Fund, Federal Trust Fund, Treasury Trust-
Fund October 31, MuniFund and MuniCash-November 30, California Money Fund-
January 31 and New York Money Fund-July 31.
* No information is provided regarding the yields with respect to the
Administration, Cash Reserves and Cash Management Classes of TempFund,
MuniFund, T-Fund and California Money Fund and the Plus Shares of T-Fund,
MuniFund and TempFund because such Classes had no Shares outstanding on
December 31, 1998.
+ Estimated
-58-
<PAGE>
From time to time, in reports to shareholders or otherwise, a Fund's
yield or total return may be quoted and compared to that of other money market
funds or accounts with similar investment objectives, to stock or other relevant
indices and to other reports or analyses that relate to yields, interest rates,
total return, market performance, etc. For example, the yield of the Fund may
be compared to the IBC/Donoghue's Money Fund Average, which is an average
----- ---- -------
compiled by IBC/Donoghue's MONEY FUND REPORT(R) of Holliston, MA 01746, a
widely recognized independent publication that monitors the performance of money
market funds, or to the average yields reported by the Bank Rate Monitor from
---- ---- -------
money market deposit accounts offered by the 50 leading banks and thrift
institutions in the top five standard metropolitan statistical areas.
YIELD AND RETURN WILL FLUCTUATE, AND ANY QUOTATION OF YIELD OR RETURN
SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE
FUND. Since yields and returns fluctuate, performance data cannot necessarily
be used to compare an investment in a Fund's shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an agreed or
guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance and yield are generally functions of the kind and
quality of the investments held in a fund, portfolio maturity, operating
expenses and market conditions. Any fees charged by banks with respect to
customer accounts in investing in shares of a Fund will not be included in yield
or return calculations; such fees, if charged, would reduce the actual yield or
return from that quoted.
The Funds may also from time to time include in advertisements, sales
literature, communications to shareholders and other materials ("Materials"),
discussions or illustrations of the effects of compounding. "Compounding"
refers to the fact that, if dividends or other distributions on an investment
are reinvested by being paid in additional Portfolio shares, any future income
or capital appreciation of a Fund would increase the value, not only of the
original investment, but also of the additional shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the Funds may also include in Materials discussions
and/or illustrations of the potential investment goals of a prospective investor
(including materials that describe general principles of investing,
questionnaires designed to help create a personal financial profile, worksheets
used to project savings needs based on certain assumptions and action plans
offering investment alternatives), investment management strategies, techniques,
policies or investment suitability of a Fund, economic and political conditions,
the relationship between sectors of the economy and the economy as a whole,
various securities markets, the effects of inflation and historical performance
of various asset classes, including but not limited to, stocks, bonds and
Treasury securities, and hypothetical investment returns based on certain
assumptions. From time to time, Materials may summarize the substance of
information contained in shareholder reports (including the investment
composition of a Fund), as well as the views of the advisers as to current
market, economic, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to be
of relevance to a Fund. In addition, selected indices may be used to illustrate
historical
-59-
<PAGE>
performance of select asset classes. The Funds may also include in Materials
charts, graphs or drawings which compare the investment objective, return
potential, relative stability and/or growth possibilities of the Funds and/or
other mutual funds, or illustrate the potential risks and rewards of investment
in various investment vehicles, including but not limited to, stocks, bonds,
Treasury securities and shares of a Fund and/or other mutual funds. Materials
may include a discussion of certain attributes or benefits to be derived by an
investment in a Fund and/or other mutual funds (such as value investing, market
timing, dollar cost averaging, asset allocation, constant ratio transfer,
automatic accounting rebalancing and the advantages and disadvantages of
investing in tax-deferred and taxable investments), shareholder profiles and
hypothetical investor scenarios, timely information on financial management, tax
and retirement planning and investment alternatives to certificates of deposit
and other financial instruments, designations assigned a Fund by various rating
or ranking organizations, and Fund identifiers (such as CUSIP numbers or NASDAQ
symbols). Such Materials may include symbols, headlines or other material which
highlight or summarize the information discussed in more detail therein.
Materials may include lists of representative clients of the Funds'
investment adviser, may include discussions of other products or services, may
contain information regarding average weighted maturity or other maturity
characteristics, and may contain information regarding the background,
expertise, etc. of the investment adviser or of a Fund's portfolio manager.
From time to time in advertisements, sales literature and
communications to shareholders, the Funds may compare their total returns to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, such
data is found in IBC/Donoghue's Money Fund Report and reports prepared by Lipper
Analytical Services, Inc. Total return is the change in value of an investment
in a Fund over a particular period, assuming that all distributions have been
reinvested. SUCH RANKINGS REPRESENT THE FUNDS' PAST PERFORMANCE AND SHOULD NOT
BE CONSIDERED AS REPRESENTATIVE OF FUTURE RESULTS.
The following information has been provided by the Funds' distributor:
In managing each Fund's portfolio, the investment adviser utilizes a "pure and
simple" approach, which may include disciplined research, stringent credit
standards and careful management of maturities.
-60-
<PAGE>
ADDITIONAL DESCRIPTION CONCERNING SHARES
The Company was organized as a Delaware business trust on October 21,
1998. The Company's Declaration of Trust authorizes the Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
in the Company and to classify or reclassify any unissued shares into one or
more series of shares. Pursuant to such authority, the Board of Trustees has
authorized the issuance of ten series of shares designated as TempFund,
TempCash, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund, MuniFund,
MuniCash, California Money Fund and New York Money Fund. The Declaration of
Trust further authorizes the trustees to classify or reclassify any series of
shares into one or more classes. Currently, the classes authorized are Dollar,
Plus, Administration, Cash Reserves and Cash Management.
The Company does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. Upon
the written request of shareholders owning at least 25% of the Company's shares,
the Company will call for a meeting of shareholders to consider the removal of
one or more Trustees and other certain matters. To the extent required by law,
the Company will assist in shareholder communication in such matters.
Holders of shares in a Fund in the Company will vote in the aggregate
and not by class or sub-class on all matters, except as described above, and
except that Fund's Dollar Plus, Administration, Cash Reserves and Cash
Management Shares, as described in "Service Organizations" above, shall be
entitled to vote on matters submitted to a vote of shareholders pertaining to
that Fund's arrangements with its Service Organizations. Further, shareholders
of each of the Company's portfolios will vote in the aggregate and not by
portfolio except as otherwise required by law or when the Board of Trustees
determines that the matter to be voted upon affects only the interests of the
shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides
that any matter required to be submitted by the provisions of such Act or
applicable state law, or otherwise, to the holders of the outstanding securities
of an investment company such as the Company shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each portfolio affected by the matter. Rule 18f-2 further
provides that a portfolio shall be deemed to be affected by a matter unless it
is clear that the interests of each portfolio in the matter are identical or
that the matter does not affect any interest of the portfolio. Under the Rule,
the approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a portfolio
only if approved by the holders of a majority of the outstanding voting
securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent accountants, the approval of
principal underwriting contracts, and the election of Trustees are not subject
to the separate voting requirements and may be effectively acted upon by
shareholders of the investment company voting without regard to portfolio.
Notwithstanding any provision of Delaware law requiring a greater vote
of shares of the Company's Common Stock (or of any class voting as a class) in
connection with any corporate action, unless otherwise provided by law (for
example by Rule 18f-2 discussed above)
-61-
<PAGE>
or by the Company's Charter, the Company may take or authorize such action upon
the favorable vote of the holders of more than 50% of all of the outstanding
shares of Common Stock voting without regard to class (or portfolio).
COUNSEL
Drinker Biddle & Reath LLP, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107-3496, of which W. Bruce
McConnel, III, Secretary of the Company, is a partner, will pass upon the
legality of the shares offered hereby.
Wilkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022, acts as special New York Counsel for the Company and
has reviewed the portions of this Statement of Additional Information and the
New York Money Fund's Prospectus concerning New York taxes and the description
of special considerations relating to New York Municipal Obligations. O'Melveny
& Myers LLP, 400 South Hope Street, Los Angeles, California 90071, acts as
special California Counsel and has reviewed the portions of this Statement of
Additional Information and the California Money Fund's Prospectus concerning
California taxes and the description of special considerations relating to
California Municipal Obligations.
AUDITORS
PricewaterhouseCoopers LLP, with offices at 2400 Eleven Penn Center,
Philadelphia, Pennsylvania 19103 has been selected as the independent
accountants of each Fund for the fiscal year ended October 31, 1999.
FINANCIAL STATEMENTS
The Annual Reports to Shareholders of Temp, Fed, Muni, Cal Muni and NY Muni
for their respective fiscal year ended September 30, 1998, October 31, 1998,
November 30, 1998, January 31, 1998 and July 31, 1998 have been filed with the
Securities and Exchange Commission. The financial statements in such Annual
Reports ("the Financial Statements") are incorporated by reference into this
Statement of Additional Information by reference. The Financial Statements for
Temp, Fed, Cal Muni and NY Muni have been audited by such Companies independent
accountant, PricewaterhouseCoopers LLP, whose reports thereon also appears in
the applicable Annual Reports and is incorporated herein by reference. The
Financial Statement for Muni has been audited by Muni's independent accountant,
KPMG, whose report thereon also appears in Muni's Annual Report and is
incorporated by reference. The Financial Statements in the Annual Reports have
been incorporated herein in reliance upon such reports given upon the authority
of such firms as experts in accounting and auditing.
-62-
<PAGE>
MISCELLANEOUS
SHAREHOLDER VOTE
As used in this Statement of Additional Information, a "majority of
the outstanding shares" of a Fund or of a particular portfolio means, with
respect to the approval of an investment advisory agreement, a distribution plan
or a change in a fundamental investment policy, the lesser of (1) 67% of that
Fund's shares (irrespective of class or subclass) or of the portfolio
represented at a meeting at which the holders of more than 50% of the
outstanding shares of that Fund or portfolio are present in person or by proxy,
or (2) more than 50% of the outstanding shares of a Fund (irrespective of class
or subclass) or of the portfolio.
SECURITIES HOLDINGS OF BROKERS
As of September 30, 1998, the value of TempFund's aggregate holdings
of the securities of each of its regular brokers or dealers or their parents
was: Morgan Stanley & Co., $1,398,136,000; Goldman Sachs & Co., $790,000,000;
Merrill Lynch; $558,685,000; Bear Stearns & Co., $45,000,000; GE Capital Corp.,
$442,685,000; SBC Warburg Dillon Read, Inc., $302,000,000; Lehman Brothers
Holding, Inc., $200,000,000 and Credit Suisse First Boston Corp.,
$147,094,000
As of September 30, 1998, the value of TempCash's aggregate holdings
of the securities of each of its regular brokers or dealers or their parent was:
Lehman Brothers Holding, Inc., $153,106,000; Bear Stearns & Co., $150,000,000;
GE Capital Corp., $123,471,000 and Merrill Lynch, $98,300,000.
CERTAIN RECORD HOLDERS
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of Federal Trust Fund were as follows: WESTCO Park West Bank
& Trust Co. Elaine Bourbonnais/Trust Dept. Westbank Annex 229 Park Avenue W.
Springfield, MA 01089 (7.350%); Administrative Services (IFG) Chase Manhattan
Bank Client Service Dept. Attn: Sevan Marinos, 16th Fl. 1Chase Manhattan Plaza
New York, NY 10017 (13.470%); Green Mountain Bank Trust Operations Department
P.O. Box 669 Rutland, VT 05702 (7.840%); Peoples Two Ten Company Summit Bank
FBO BSB Bank & Trust ATTN: Trust Operations-7th Fl. P.O. Box 821 Hackensack, NJ
47602 (9.850%); Payroll People Partnership II Attn: Ms. Robynne Whetton 1922 N.
Helm Street Fresno, CA 93727 (5.580%); Obie & Co. Chase Bank of Texas Attn:
STIF Unit Mail Code 18HCB340 P.O. Box 2558 Houston, TX 77252 (23.420%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of Federal Trust Fund Dollar Shares were as follows:
Sanbarco, Santa Barbara Bank & Trust, Attn: Trust Div./Money Mkt. Desk, P.O.
Box 2340, Santa Barbara, CA 93120 (74.620%); TTEE/KES L C
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<PAGE>
Collateral Acct., Bank of Tokyo Trust Co., Attn: Kristy Yee, Corporate Trust
Dept. 10th Fl., 1251 Avenue of the Americas, New York, NY 10020 (10.090%);
County/Highview Trust & Co., Commercial Natl. Westmoreland, HUT Partners/Corp.
Cash Sweep, Attn: James Harris, 19 N. Main Street Greensburg, PA 15601
(7.840%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of TempFund were as follows: Saxon & Company, PNC Bank, Attn:
Income Collect, Airport Bus, Ctr./Intl.Court 2, 200 Stevens Dr. F3-F076-02-2,
Lester, PA 19115 (5.140%); Worldcom Inc., Attn: General Accounting, 515 East
Amite, Jackson, MS 39201 (8.060%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of TempFund Dollar Shares were as follows: Hershey Trust Co.,
Attn: Rob Vowler, P.O. Box 445, Hershey, PA 17033, (5.900%); Sanbarco, Santa
Barbara Bank & Trust, Attn: Trust Div./Money Mkt. Desk, P.O. Box 2340, Santa
Barbara, CA 93120 (11.310%); Cash Management Temp Fund, Broadway National Bank,
Sweep Omnibus Account, Attn: Eleanor Thomas, P.O. Box 17001, San Antonio, TX
78217 (12.140%); D & N Bank, Attn: Duane Aho, 400 Quincy Street, Hancock, MI
49930, (5.920); Mutual Partner/Corp. Cash Sweep, PNCBank New England, 125 High
Street, Boston, MA 02110 (11.090%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of TempCash were as follows: Saxon & Company, PNC Bank, Attn:
Income College, Airport Bus. Ctr./Intl. Court 2, 200 Stevens Dr. F3-F076-02-2,
Lester, PA 19113 (11.110%); SLAM, Chase Manhattan, Steve Yonkers/SEC Lending, 4
New York Plaza - 11th Fl., New York, NY 10004 (5.100%); Wellnik & Co., BZN
Barclays Global Investors, Attn: Peter Mandis, 45 Fremont Street - 16th Fl.,
San Francisco, CA 94105 (9.340%); USAA Brokerage Services, Attn: Karl
Borgerding, BSB/Brokerage OPS/A03S, 9800 Fredericksburg Road, San Antonio, TX
78230 (5.340%); AT&T Capital Corporation, Attn: Chris Grimes, 44 Whippany Road,
Morristown, NJ 07962, (5.450%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of TempCash Dollar Shares were as follows: Cash Balance
Sweeps, BHC Securities Inc., Attn: Jeanmarie Beukers, 2005 Market Street, One
Commerce Square - 11th Fl., Philadelphia, PA 19103 (50.790%); Citibank NA, ICBD
Cash Management, Attn: Denise Stanley, 3800 Citibank Center Tampa, Tampa, FL
33610 (19.550%); Norwest Investment Services, Inc., Attn: Pamela Siner, 608
2nd, Avenue South - 8/th/ Fl., Minneapolis, MN 55479 (9.130%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of FedFund were as follows: Marine Midland Gen. Acct. #10,
Marine Midland Bank NA, Collective TR Funds - 17/th/ Floor, Attn: Christine
Hencel, 1 Marine Midland Center, Buffalo, NY 14203
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<PAGE>
(6.720%); Merchantile Bank, NA, Trust Securities Unit 17-1, Attn: Cash
Management, P.O. Box 387, Main Post Office, St. Louis, MO 63166 (7.700%); Saxon
& Company/Custody PNC Bank, Income Collections 76-A-260, Airport Bus Ctr./Intl.
Court 2, 200 Stevens Drive Lester, PA 19113 (6.070%); Administrative Services
(IFG), Chase Manhattan Bank, Client Service Dept., Attn: Sevan Marinds - 16/th/
Fl., 1 Chase Manhattan Plaza, New York, NY 10017 (6.440%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of FedFund Dollar Shares were as follows: First Nat'l Bank of
Cortland, Attn: Trust Dept., P.O. Box 5430, Cortland, NV 33045 (10.850%);
Straco, Bank of Lancaster County NA, Attn: Trust Technical Services, P.O. Box
38, 1097 Commercial Avenue, East Petersburg, PA 17520 (8.310%); Rogers &
Company, C/O Advest Bank, 90 State House Square, Hartford, CT 06103 (5.270%);
Norwest Investment Services, Inc., Attn: Pamela Siner, 608 2nd Avenue South -
8th Fl., Minneapolis, MN 55479 (29.730%); GSB & Co, Glenview State Bank, Mut.
Partners/Corp. Cash Sweep, Attn: Trust Department, 800 Waukegan Road, Glenview,
IL 60025 (32.730%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of MuniFund were as follows: Saxon & Company, PNC Bank, Attn:
Income Collect, Airport Bus. Ctr/Intl. Court 2, 200 Stevens Dr., F3-F076-02-2,
Lester, PA 19113 (5.020%); Norwest Bank of Minneapolis NA, Attn: Cash Sweep
Processing, 733 Marquette Avenue, Minneapolis, MN 55479 (9.480%);
Administrative Services (IFG), Chase Manhattan Bank, Client Service Dept., Attn:
Sevan Marinos - 36/th/ Fl., 1 Chase Manhattan Plaza, New York, NY 10017
(20.410%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of MuniFund Dollar Shares were as follows: Sunshine State
Govt. Commission, Bankers Trust Company, Dade County Fl/Ins Reserve, 4 Albany
Street - 4th Floor, New York, NY 10006 (77.980%); Sunshine State Govt.
Commission, Bankers Trust Company, Tax Exempt/Initial Excess Int., 4 Albany
Street - 4/th/ Floor, New York, NY 10006 (7.790%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of MuniCash were as follows: Laird Norton Trust Company,
Norton Building 11th Fl., 801 2nd Avenue Seattle, WA 98104 (10.490%); Transco &
Company, Intrust Bank, NA, Attn: Trust Operations P.O. Box 1, Wichita, KS 67201
(7.510%); Saxon & Company/Cash Advisor, PNC Bank Attn: Income Collect 76-A-260,
Airport Bus Ctr./Intl. Court 2, 200 Stevens Drive, Lester, PA 19113 (11.330%);
Patterson Dental Company, Attn: Thomas E. Alderman, 1031 Mendota Heights Road,
St. Paul, MN 55120 (6.800%); Tax-Exempt Money Market Fund, Cash Resource Trust,
c/o IFTC A/C 74-9425-005, P.O. Box 419847, Kansas City, MO 64141 (5.910%);
Electronics Boutique Inc., Attn: Pedro Alvarez, 931 S. Matlack Street, West
Chester, PA 19382 (5.490%); USAA Brokerage Services, Attn: Karl Borgerding,
BSB/Brokerage OPS/A03S, 9800 Fredericksburg Road, San Antonio, TX 78230
(20.440%)
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<PAGE>
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of MuniCash Dollar Shares were as follows: Cash Balance
Sweeps, BMC Securities Inc., Attn: Jeanmarie Beukers, 2005 Market Street, One
Commerce Square 11th Fl., Philadelphia, PA 19103 (38.250%); Laird Norton Trust
Company, Attn: Mutual Funds Cashier, Norton Building 11/th/ Floor, b801 2nd
Avenue, Seattle, WA 98104 (43.600%); Capital Network Services, Attn: Jena
Ruhland, One Bush Street 11/th/ Fl., San Francisco, CA 94104 (8.250%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of California Money Fund were as follows: GSS as Agent, Chase
Manhattan Bank, N.A., Ray DeJesus/Bk Coding/Money Fd, 4 New York Plaza 9th
Floor, New York, NY 10004 (25.160%); Sanbarco Santa Barbara Bank & Trust, Attn:
Trust Div./Money Mkt. Desk, P.O. Box 2340, Santa Barbara, CA 93120 (8.990%);
City National Bank, Attn: Nina Concio, P.O. Box 60520, Los Angeles, CA 90066
(17.380%); The Whittaker Trust Company, Attn: Renee McQueen, 1600 Huntington
Drive, South Pasadena, CA 91030 (7.990%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of California Money Fund Dollar Shares were as follows:
Morgan Guaranty Trust Co. of NY, Funds Transfer Agency Group, Attn: Kenneth A.
Faith 2/OPS3, 500 Stanton Christiana Rd., Newark, DE 19713 (89.060%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of New York Money Fund were as follows: Trulin & Co., Chase
Manhattan Bank N.A., Attn: Pooled Funds, P.O. Box 1412, Rochester, NY 14603
(20.670%); Fleet New York, Fleet Investment Services, Attn: Barbara Lumba, 159
East Main St., NV/RO/T03C, Rochester, NY 14638 (13.980%); GSS As Agent, Chase
Manhattan Bank N/A, Ray DeJesus/Bk Coding/Money FD, 4 New York Plaza - 9/th/
Floor, New York, NY 10004 (7.130%); Administrative Services (IFG), Chase
Manhattan Bank, Client Service Dept., Attn: Sevan Marions - 16/th/ Fl., 3 Chase
Manhattan Plaza New York, NY 10017 (28.760%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of T-Fund were as follows: PNC Mortgage Securities Corp.,
Attn: Master Servicing-TR Cash, 75 N. Fairway Drive, Vernon Hills, IL 60061
(14.460%); Union Bank, Jeanne Chizek/Tr Fund Acctg., P.O. Box 85602, San Diego,
CA 92186 (10.450%); Obie & Co., Chase Bank of Texas, Attn: STIF Unit, P.O. Box
2558, Houston, TX 77252 (7.250%); Midland Loan Services Inc., Attn: Laurie
Degraaf, 210 W. 10th Street, Kansas City, MD 64105 (12.500%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of T-Fund Dollar Shares were as follows: Saxon & Company, PNC
Bank, Attn: Income Collect, Airport Bus Ctr./Intl. Court 2, 200 Stevens Dr.,
F3-F076-02-2, Lester, PA 19113 (5.740%); Obie & Co.
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<PAGE>
Chase Bank of Texas, Attn: STIF Unit, Mail Code 18HCB340, P.O. Box 2558,
Houston, TX 77252 (61.900%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of Treasury Trust Fund were as follows: Saxon & Company, PNC
Bank, Attn: Income Collect, Airport Bus. Ctr./Intl. Court 2, 200 Stevens Dr.,
F3-F076-02-2, Lester, PA 19113 (5.850%); C/O M & I National Trust Co., Finweb
Co., Attn: Mark & Kandel, P.O. Box 1980, West Bend, WI 53095 (5.510%); Trust
Department, Zions First National Bank, Attn: Trust Department, P.O. Box 30880,
Salt Lake City, UT 84130 (7.660%); Administrative Services (IFG), Chase
Manhattan Bank, Client Service Dept., Attn: Sevan Marinos 16/th/ Fl., 1 Chase
Manhattan Plaza, New York, NY 10017 (5.440%); FBO Omnibus Accounts, PNC
Bank/Saxon & Co., Mutual Fund Processing/2nd Fl., P.O. Box 7760 1888,
Philadelphia, PA 19182 (6.600%); General Fund County of Alleghney, Mary Alice
McDonough - Treasurer, Attn: Joe Gurcak, Room 109, Courthouse Grant St.,
Pittsburgh, PA 15219 (6.660%).
As of January 11, 1999, the name, address and percentage of ownership
of each institutional investor that owned of record 5% or more of the
outstanding shares of Treasury Trust Fund Dollar Shares were as follows: Bankers
Trust Company, Attn: Mike Joseph, 1 South Street 18th Floor, Baltimore, MD
21202 (41.750%); Obie & Co., Chase Bank of Texas, Attn: STIF Unit, Mail Code
18HCB340, P.O. Box 2558, Houston, TX 77252 (13.750%); NMAC Collection Account
#2, Bank of Tokyo Trust Co., Attn: Kristy YEE, Corporate Trust Dept. 10/th/ Fl.,
1251 Avenue of the Americas, New York, NY 10020 (12.360%).
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APPENDIX A
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COMMERCIAL PAPER RATINGS
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A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the applicable
rating categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the applicable rating categories used by Moody's for commercial
paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
The applicable rating categories of Duff & Phelps for commercial paper
and short-term debt are "D-1" and "D-2." Duff & Phelps employs three
designations, "D-1+," "D-1" and "D-1-," within the highest rating category. The
following summarizes the rating categories used by Duff & Phelps for commercial
paper:
A-1
<PAGE>
"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the applicable ratings
used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's second-
highest category and indicates that while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1."
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------
The following summarizes the applicable ratings used by Standard &
Poor's for corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
PLUS (+) OR MINUS (-) - The rating "AA" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
The following summarizes the applicable ratings used by Moody's for
corporate and municipal long-term debt:
A-2
<PAGE>
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than the "Aaa"
securities.
Note: Moody's applies numerical modifiers 1, 2, and 3 in the generic
rating classification "Aa". The modifier 1 indicates that the obligation ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
its generic rating category.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
To provide more detailed indications of credit quality, the "AA," and
"A," ratings may be modified by the addition of a plus (+) or minus (-) sign to
show relative standing within these major categories.
The following summarizes the applicable ratings used by Fitch IBCA for
corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of credit risk and
are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and indicate
very strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.
A-3
<PAGE>
To provide more detailed indications of credit quality, the Fitch IBCA
ratings "AA" may be modified by the addition of a plus (+) or minus (-) sign to
show relative standing within these major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation indicates that the ability to repay principal
and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis, with limited incremental risk compared
to issues rated in the highest category.
PLUS (+) OR MINUS (-) - The ratings may include a plus or minus sign
designation which indicates where within the respective category the issue is
placed.
MUNICIPAL NOTE RATINGS
- ----------------------
A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.
A-4
<PAGE>
"MIG-2"/"VMIG-2" - This designation denotes high quality, with margins
of protection that are ample although not so large as in the preceding group.
Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-5
