<PAGE>
As filed with the Securities and Exchange Commission on February 2, 1999
1933 Act Registration No. 2-47015
1940 Act Registration No. 811-2354
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X]
POST-EFFECTIVE AMENDMENT NO. 61
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]
___________
PROVIDENT INSTITUTIONAL FUNDS
(Exact Name of Registrant As Specified In Charter)
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, Delaware 19809
(Address of Principal Executive Offices)
Registrant's Telephone Number: (302) 791-3329
W. BRUCE McCONNEL, III
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia,
Pennsylvania 19107-3496
(Name and Address of Agent for Service)
Pursuant to Rule 414 of the Securities Act of 1933, Registrant by this filing
adopts the Registration Statement on Form N-1A (File Nos. 2-47015/811-2354) of
Temporary Investment Fund Inc., the Registrant's predecessor, as its own
Registration Statement for all purposes of the Securities Act of 1933 and the
Investment Company Act of 1940.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[X] on February 10, 1999 pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
================================================================================
<PAGE>
TEMPFUND
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS
PROSPECTUS
February __, 1999
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350). For
Wilmington, DE 19809 yield information call: 800-821-6006
(TempFund Shares code: 34; TempFund Dollar
Shares code: 20). 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....................................................... 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 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. While the Fund seeks to maintain
a constant net asset value of $1.00 per share, 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 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 vs. IBC's Money Fund Report: First Tier Institutions - Only
Money Fund Average
IBC's Money Fund Report: First
Tier Institutions - Only
TempFund Shares Money Fund Average
1989 9.39 9.20
1990 8.27 8.10
1991 6.24 6.09
1992 3.89 3.72
1993 3.12 3.00
1994 4.19 4.07
1995 5.99 5.79
1996 5.42 5.22
1997 5.60 5.39
1998 5.52 5.33
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 5 10
Year Years 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 money 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)
- ---------------------------------------------------------------------------------------------
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>
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 Cash Cash
Administration TempFund Plus Reserve Management
TempFund Shares Dollar Shares Shares Shares
Shares (estimated) Shares (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>
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.
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 repurchase agreements, securities lending
transactions and when-issued or delayed
9
<PAGE>
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 Administrators 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 wholly-owned indirect subsidiary of PNC Bank,
Adviser 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 .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."
10
<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 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"), the Fund's
custodian, 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 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,
11
<PAGE>
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.
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.
12
<PAGE>
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 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
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.
13
<PAGE>
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.
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.
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
Operations
Net Investment Income (.0549) .0539 .0541 .0567 .0360
Net Gains or Losses on
Securities (both
realized
and unrealized) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total From Investment
Operations .0549 .0539 .0541 .0567 .0360
- -------------------------------------------------------------------------------------------------
Less Distributions
Dividends (from net
investment income) (.0549) (.0539) (.0541) (.0567) (.0360)
Distributions (from
capital gains) -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Total Distributions (0.549) (.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.
15
<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.
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
<PAGE>
TEMPCASH
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS.
PROSPECTUS
February __, 1999
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware:
Wilmington, DE 19809 302-791-5350). For yield information
call: 800-821-6006 (TempCash Shares
code: 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......................................................
Investment Goal.....................................................
Investment Policies.................................................
Principal Risks of Investing........................................
Who May Want to Invest in the Fund..................................
Performance Information.............................................
Fees and Expenses...................................................
INVESTMENT STRATEGIES AND RISK DISCLOSURE................................
MANAGEMENT OF THE FUND...................................................
SHAREHOLDER INFORMATION..................................................
Price of Fund Shares................................................
Purchase of Shares..................................................
Redemption of Shares................................................
Shareholder Service Plan............................................
Dividends and Distributions.........................................
Taxes...............................................................
FINANCIAL HIGHLIGHTS.....................................................
</TABLE>
-2-
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOAL: The Fund seeks current income with liquidity and
stability of principal.
INVESTMENT POLICIES: 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. 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 OF INVESTING: Although the Fund invests in money market
instruments which 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. While the Fund seeks to maintain a constant
net asset value of $1.00 per share, 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
-3-
<PAGE>
political developments which could affect the
payment of principal and interest when due.
An investment in the Fund is not a deposit in
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 INVEST The Fund is designed for institutional investors
IN THE FUND: seeking current income and 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.
TempCash vs. IBC's Money Fund Report: First Tier Institutions- Only
Money Fund Average
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Fund Report: TempCash Shares 9.56 8.42 6.27 3.83 3.15 4.30 6.02 5.44 5.62 5.55
IBC's Money Fund Report: First Tier
Institutions- Only Money Fund Average 9.20 8.10 6.09 3.72 3.00 4.07 5.79 5.22 5.39 5.33
</TABLE>
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*
- --------------------------------------------------------------------------------
</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: New York State Specific Tax-free Institutions - only
Money Fund Average is comprised of money 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
<TABLE>
<CAPTION>
TEMPCASH
- --------------------------------------------------------------------------------
TEMPCASH TEMPCASH
SHARES DOLLAR SHARES
-------------- -------------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
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, would
have been .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.
-6-
<PAGE>
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>
-7-
<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;
. 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 Obligations. The Fund may purchase obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities and
related custodial receipts.
-8-
<PAGE>
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 Obligations. The Fund may invest in asset-backed securities
which are 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.
Investment Company Securities. The Fund may invest in securities issued by
other open-end investment companies that invest in the type of obligations 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 Obligations. The Fund may, when deemed appropriate by the
Adviser in 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 Investment Contracts. The Fund may make investments in
obligations, such as guaranteed investment contracts and similar funding
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 and Floating Rate Instruments. The Fund may purchase variable or
floating rate notes, which are instruments that provide for adjustments in the
interest rate on certain reset dates or whenever a specified interest rate index
changes, respectively.
Repurchase Agreements. The Fund may enter into repurchase agreements.
-9-
<PAGE>
Reverse Repurchase Agreements and Securities Lending. The Fund may enter
into reverse repurchase agreements. The Fund is permitted to invest up to one-
third of its total assets in reverse repurchase agreements. The Fund may also
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.
Investments in reverse repurchase agreements and securities lending transactions
will be aggregated for purposes of this investment limitation.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
securities on a "when-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.
Illiquid Securities. The Fund will not invest more than 10% of the value of
its 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 Investments. This Prospectus describes the Fund's principal
investment 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 Risk. Generally, a fixed-income security will increase in
value 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 repurchase agreements, securities lending transactions and when-
issued or delayed delivery transactions may involve leverage risk.
-10-
<PAGE>
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 Administrators 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 ADVISER
The Adviser, a wholly-owned indirect subsidiary of PNC 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 .08% (net of waivers) of its average
net assets. The services provided by BIMC and the fees payable by the Fund for
these
-11-
<PAGE>
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.
PURCHASE OF SHARES
Fund shares are sold at the net asset value per share next 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"), the Fund's custodian, 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.
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.
-12-
<PAGE>
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 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 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."
-13-
<PAGE>
SHAREHOLDER SERVICE PLAN
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. 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 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 DISTRIBUTIONS
The Fund declares dividends daily and distributes 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.
-14-
<PAGE>
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.
YEAR ENDED SEPTEMBER 30,
------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Period ----------- ------------ ------------ ------------- -------------
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>
TEMPCASH DOLLAR SHARES
The table below sets forth selected financial data for a TempCash Dollar Share
outstanding throughout each year presented.
YEAR ENDED SEPTEMBER 30,
------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Period ---------- ---------- ---------- ---------- ----------
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 $ 503,809 $ 401,529 $ 527,830 $ 454,156 $ 397,948
Net Assets, End of Year (000's)
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
-18-
<PAGE>
FEDFUND
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS
PROSPECTUS
February __, 1999
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware:
Wilmington, DE 19809 302-791-5350). For yield information
call: 800-821-6006 (FedFund Shares
code: 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......................................................
Investment Goal.....................................................
Investment Policies.................................................
Principal Risks of Investing........................................
Who May Want to Invest in the Fund..................................
Performance Information.............................................
Fees and Expenses...................................................
INVESTMENT STRATEGIES AND RISK DISCLOSURE................................
MANAGEMENT OF THE FUND...................................................
SHAREHOLDER INFORMATION..................................................
Price of Fund Shares................................................
Purchase of Shares.................................................
Redemption of Shares................................................
Shareholder Service Plan............................................
Dividends and Distributions.........................................
Taxes...............................................................
FINANCIAL HIGHLIGHTS.....................................................
</TABLE>
-2-
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOAL: The Fund seeks current income with liquidity and
stability of principal.
INVESTMENT POLICIES: The Fund invests in a portfolio consisting of
U.S. Treasury 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 OF INVESTING: Securities issued or guaranteed by the U.S.
Government, its 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. While the
Fund seeks to maintain a constant net asset value
of $1.00 per share, 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 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.
-3-
<PAGE>
WHO MAY WANT TO INVEST The Fund is designed for institutional investors
IN THE FUND: seeking current 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.
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.
<TABLE>
<CAPTION>
FedFund vs. IBC's Money Fund Report: Government
Institutions - Only Money Fund Average
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FedFund Shares 9.29 8.15 6.13 3.82 3.11 4.22 5.92 5.34 5.47 5.38
IBC's Money Fund Report: Government
Institutions - Only Money Fund Average 9.20 8.10 5.83 3.58 2.89 3.93 5.62 5.06 5.21 5.11
</TABLE>
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 Year 5 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 4.52%
INSTITUTIONS - ONLY MONEY FUND AVERAGE*
- --------------------------------------------------------------------------------
</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 Money 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>
FEDFUND
- --------------------------------------------------------------------------------
FEDFUND FEDFUND DOLLAR
SHARES SHARES
-------------- ------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
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, would have
been .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.
-6-
<PAGE>
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
SHARES DOLLAR SHARES
- ---------------------------------------------------------------
<S> <C> <C>
One Year $ 29 $ 54
Three years $ 90 $170
Five Years $157 $296
Ten Years $356 $665
- ---------------------------------------------------------------
</TABLE>
-7-
<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 Obligations. The Fund may purchase obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities and
related custodial receipts.
Investment Company Securities. The Fund may invest in securities issued by
other open-end investment companies that invest in the type of obligations 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 Agreements. The Fund may enter into repurchase agreements.
Reverse Repurchase Agreements and Securities Lending. The Fund may enter
into reverse repurchase agreements. The Fund is permitted to invest up to one-
third of its total assets in reverse repurchase agreements. The Fund may also
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.
Investments in reverse repurchase agreements and securities lending transactions
will be aggregated for purposes of this investment limitation.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
securities on a "when-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.
-8-
<PAGE>
Other Types of Investments. This Prospectus describes the Fund's
principal investment 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 Risk. Generally, a fixed-income security will increase in
value 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 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 Administrators 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.
-9-
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
The Adviser, a wholly-owned indirect subsidiary of PNC 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 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.
-10-
<PAGE>
PURCHASE OF SHARES
Fund shares are sold at the net asset value per share next 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"), the Fund's custodian, 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.
-11-
<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 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 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.
-12-
<PAGE>
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 SERVICE PLAN
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. 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.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends daily and distributes 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.
-13-
<PAGE>
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.
-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.
FEDFUND SHARES
The table below sets forth selected financial data for a FedFund Share
outstanding throughout each year presented.
YEAR ENDED OCTOBER 31,
----------------------
<TABLE>
<CAPTION>
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 .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 (.0530) (.0529) (.0571) (.0377)
------- -------- -------- -------- --------
Net Asset Value End of Period $ 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/ 8%/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 adviso ry 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.
-15-
<PAGE>
FEDFUND DOLLAR SHARES
The table below sets forth selected financial data for a FedFund Dollar Share
outstanding throughout each year presented.
YEAR ENDED OCTOBER 31,
----------------------
<TABLE>
<CAPTION>
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.
-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
-17-
<PAGE>
T-FUND
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS
PROSPECTUS
February __, 1999
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware:
Wilmington, DE 19809 302-791-5350). For yield information
call: 800-821-6006 (T-Fund Shares
code: 60; T-Fund Dollar Shares code:
61; and T-Fund Plus Shares code: 32).
For other information call:
800-821-7432 or visit our web site at
www.pif.com.
</TABLE>
INVESTMENT ADVISER
BLACK ROCK 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 PAGE
----------------- ----
<TABLE>
<S> <C>
RISK/RETURN SUMMARY............................................
Investment Goal...........................................
Investment Policies.......................................
Principal Risks of Investing..............................
Who May Want to Invest in the Fund........................
Performance Information...................................
Fees and Expenses.........................................
INVESTMENT STRATEGIES AND RISK DISCLOSURE......................
MANAGEMENT OF THE FUND.........................................
SHAREHOLDER INFORMATION........................................
Price of Fund Shares......................................
Purchase of Shares.......................................
Redemption of Shares......................................
Distribution and Shareholder Service Plans................
Dividends and Distributions...............................
Taxes.....................................................
FINANCIAL HIGHLIGHTS...........................................
</TABLE>
-2-
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOAL: The Fund seeks current income with liquidity
and stability of principal.
INVESTMENT POLICIES: The Fund invests in U.S. Treasury bills,
notes, trust receipts and direct obligations
of the U.S. Treasury and repurchase
agreements relating to direct Treasury
obligations.
PRINCIPAL RISK OF INVESTING: Securities issued or guaranteed by the U.S.
Government 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. While
the Fund seeks to maintain a constant net
asset value of $1.00 per share, 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
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.
-3-
<PAGE>
WHO MAY WANT TO INVEST IN The Fund is designed for institutional
THE FUND: investors seeking current 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.
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.
<TABLE>
<CAPTION>
T-Fund vs. IBC's Money Fund Report:
Government Institutions - Only Money
Fund Average
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
T-Fund Shares 9.20 8.22 6.21 3.83 3.07 3.91 5.86 5.33 5.44 5.34
IBC's Money Fund Report: Government Institutions- 9.20 8.10 5.83 3.58 2.89 3.93 5.62 5.06 5.21 5.11
IBC's Only Money Fund Average
</TABLE>
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).
-4-
<PAGE>
THE FUND'S AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
- ----------------------------------------------------------------
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%
- ----------------------------------------------------------------
- ----------------------------------------------------------------
7 DAY YIELD
AS OF DECEMBER 31, 1998
- ----------------------------------------------------------------
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 Money 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>
T-FUND
- ------------------------------------------------------------------------------------------------------------------------------------
T-FUND T-FUND T-FUND DOLLAR T-FUND PLUS T-FUND CASH T-FUND CASH
SHARES ADMINISTRATION SHARES SHARES SHARES RESERVES SHARES MANAGEMENT SHARES
--------- ----------------------- --------------- ------------- ---------------- -----------------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
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.
-6-
<PAGE>
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 PLUS T-FUND CASH T-FUND CASH
SHARES ADMINISTRATION SHARES DOLLAR SHARES SHARES RESERVES SHARES MANAGEMENT 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>
-7-
<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 Obligations. The Fund may purchase 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 Company Securities. The Fund may invest in securities issued by
other open-end investment companies that invest in the type of obligations 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 Agreements. The Fund may enter into repurchase agreements.
Reverse Repurchase Agreements and Securities Lending. The Fund may enter
into reverse repurchase agreements. The Fund is permitted to invest up to one-
third of its total assets in reverse repurchase agreements. The Fund may also
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.
Investments in reverse repurchase agreements and securities lending transactions
will be aggregated for purposes of this investment limitation.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
securities on a "when-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.
Other Types of Investments. This Prospectus describes the Fund's
principal investment 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
-8-
<PAGE>
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 Risk. Generally, a fixed-income security will increase in
value 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.
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 Administrators 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 ADVISER
The Adviser, a wholly-owned indirect subsidiary of PNC 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.
-9-
<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 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 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 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 SHARES
Fund shares are sold at the net asset value per share next 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"), the Fund's custodian, 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.
-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 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 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. 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. Moreover, if a shareholder's T-Fund Shares
account falls
-11-
<PAGE>
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 SHAREHOLDER SERVICE PLANS
The Fund offers six classes of shares. The difference between the classes
of shares is the fees borne by a class 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:
- --------------------------------------------------------------------------------
CASH
SHAREHOLDER CASH SWEEP
SERVICE SERVICE 12B-1 SWEEP MARKETING TOTAL
CLASS FEE FEE FEE FEE FEE FEES
----- --- --- --- --- --- ----
- --------------------------------------------------------------------------------
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%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares daily and distributes 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.
-12-
<PAGE>
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, 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.
-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. 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.
YEAR ENDED OCTOBER 31,
----------------------
<TABLE>
<CAPTION>
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 .0532 .0528 .0528 .0565 .0368
Net Gains or Losses on Securities
(both realized and unrealized) -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total From Investment Operations .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 Period $ 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.
-14-
<PAGE>
T-FUND DOLLAR SHARES
The table below sets forth selected financial data for a T-Fund Dollar Share
outstanding throughout each year presented.
YEAR ENDED OCTOBER 31,
----------------------
<TABLE>
<CAPTION>
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.
-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.
-16-
<PAGE>
TREASURY TRUST FUND
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS
PROSPECTUS
February __, 1999
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware: 302-
Wilmington, DE 19809 791-5350). For yield information call:
800-821-6006 (Treasury Trust Shares
code: 62; Treasury Trust 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......................................................
Investment Goal.....................................................
Investment Policies.................................................
Principal Risks of Investing........................................
Who May Want to Invest in the Fund..................................
Performance Information.............................................
Fees and Expenses...................................................
INVESTMENT STRATEGIES AND RISK DISCLOSURE................................
MANAGEMENT OF THE FUND...................................................
SHAREHOLDER INFORMATION..................................................
Price of Fund Shares................................................
Purchase of Shares..................................................
Redemption of Shares................................................
Shareholder Service Plan............................................
Dividends and Distributions.........................................
Taxes...............................................................
FINANCIAL HIGHLIGHTS.....................................................
</TABLE>
-2-
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOAL: The Fund seeks current income with liquidity
and stability of principal.
INVESTMENT POLICIES: The Fund invests solely in direct
obligations of the U.S. 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 OF INVESTING: Securities issued or guaranteed by the U.S.
Government 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. While
the Fund seeks to maintain a constant net
asset value of $1.00 per share, 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.
-3-
<PAGE>
An investment in the Fund is not a deposit in
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 INVEST IN The Fund is designed for institutional
THE FUND: investors seeking current 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. 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.
-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.
<TABLE>
<CAPTION>
Treasury Trust Fund vs. IBC's Money Fund Report:
Government Institutions - Only Money Fund Average
1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Treasury Trust Fund Shares 7.94 5.87 3.54 2.96 3.98 5.66 5.12 5.19 4.99
IBC's Money Fund Report: Government Institutions - 8.10 5.83 3.58 2.89 3.93 5.62 5.06 5.21 5.11
Only Money Fund Average
</TABLE>
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).
-5-
<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 website at www.pif.com.
- ---------------
* IBC's Money Fund Report: Government Institutions - Only Money Fund
Average is comprised of money funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
-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.
<TABLE>
<CAPTION>
TREASURY TRUST FUND
- ----------------------------------------------------------------------------
TREASURY TRUST TREASURY TRUST FUND
FUND SHARES DOLLAR SHARES
---------------- -------------------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
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, would have been .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.
-7-
<PAGE>
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 FUND TREASURY TRUST FUND
SHARES DOLLAR SHARES
- --------------------------------------------------------------------------
<S> <C> <C>
One Year $ 29 $ 54
Three years $ 90 $170
Five Years $157 $296
Ten Years $356 $665
- --------------------------------------------------------------------------
</TABLE>
-8-
<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 Obligations. To the extent consistent with its investment
objectives, the 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 Company Securities. The Fund may invest in securities issued by
other open-end investment companies that invest in the type of obligations 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.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
securities on a "when-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.
Other Types of Investments. This Prospectus describes the Fund's
principal investment 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.
-9-
<PAGE>
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 Risk. Generally, a fixed-income security will increase in
value 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 Administrators 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 ADVISER
The Adviser, a wholly-owned indirect subsidiary of PNC 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
-10-
<PAGE>
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.
PURCHASE OF SHARES
Fund shares are sold at the net asset value per share next 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"), the Fund's custodian, will be executed
at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M., Eastern
time (or orders accepted earlier in the same day for which payment has not been
received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment
has been received by PNC Bank by that time. Orders received at other times, and
orders for which payment has not been received by 4:00 P.M., Eastern time, will
not be accepted, and notice thereof will be given to the institution placing the
order. (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.
-11-
<PAGE>
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. (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 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."
-12-
<PAGE>
SHAREHOLDER SERVICE PLAN
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. 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 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 DISTRIBUTIONS
The Fund declares dividends daily and distributes 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.
-13-
<PAGE>
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 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.
-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.
TREASURY TRUST FUND SHARES
The table below sets forth selected financial data for a Treasury Trust Fund
Share outstanding throughout each year presented.
YEAR ENDED OCTOBER 31,
----------------------
<TABLE>
<CAPTION>
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 Period
(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.
-15-
<PAGE>
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.
YEAR ENDED OCTOBER 31,
----------------------
<TABLE>
<CAPTION>
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 $471,767 $331,498 $294,228 $ 223,272 $181,934
Net Assets, End of Period
(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 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.
-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.
-17-
<PAGE>
FEDERAL TRUST FUND
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS
PROSPECTUS
February __, 1999
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware:
Wilmington, DE 19809 302-791-5350). For yield information
call: 800-821-6006 (Federal Trust Fund
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............................................
Investment Goal...........................................
Investment Policies.......................................
Principal Risks of Investing..............................
Who May Want to Invest in the Fund........................
Performance Information...................................
Fees and Expenses.........................................
INVESTMENT STRATEGIES AND RISK DISCLOSURE......................
MANAGEMENT OF THE FUND.........................................
SHAREHOLDER INFORMATION........................................
Price of Fund Shares......................................
Purchase of Shares.......................................
Redemption of Shares......................................
Shareholder Service Plan..................................
Dividends and Distributions...............................
Taxes.....................................................
FINANCIAL HIGHLIGHTS...........................................
</TABLE>
-2-
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOAL: The Fund seeks current income with liquidity and
stability of principal.
INVESTMENT POLICIES: The Fund invests in obligations issued or
guaranteed as to 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 OF INVESTING: Securities issued or guaranteed by the U.S.
Government, its 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. While the
Fund seeks to maintain a constant net asset value
of $1.00 per share, 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 PNC
Bank, N.A. and is not insured or guaranteed by the
-3-
<PAGE>
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 INVEST IN THE FUND: The Fund is designed for institutional
investors seeking current 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.
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.
<TABLE>
<CAPTION>
Federal Trust Fund vs. IBC's Money Fund Report:
Government Institutions - Only Money Fund Average
1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal Trust Fund Shares 6.08 3.80 3.06 4.24 5.83 5.26 5.38 5.32
IBC's Money Fund Report: Government
Institutions - Only Money Fund Average 5.83 3.58 2.89 3.93 5.62 5.06 5.21 5.11
</TABLE>
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).
-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 webtsite at www.pif.com.
- -----------------------
* IBC's Money Fund Report: Government Institutions - Only Money Fund Average
is comprised of money 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>
FEDERAL TRUST FUND
- ---------------------------------------------------------------------------------------------
FEDERAL TRUST FEDERAL TRUST FUND
FUND SHARES DOLLAR SHARES
-------------- ------------------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
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, would have been .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.
-6-
<PAGE>
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 FUND FEDERAL TRUST FUND
SHARES DOLLAR SHARES
- ------------------------------------------------------------
<S> <C> <C>
One Year $30 $55
Three years $93 $173
Five Years $163 $302
Ten Years $368 $677
- ------------------------------------------------------------
</TABLE>
-7-
<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 Obligations. The Fund may purchase obligations issued or
guaranteed by 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 Company Securities. The Fund may invest in securities issued by
other open-end investment companies that invest in the type of obligations 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.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
securities on a "when-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.
Other Types of Investments. This Prospectus describes the Fund's
principal investment 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.
-8-
<PAGE>
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 Risk. Generally, a fixed-income security will increase in
value 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 January 1, 2000. This possibility is
commonly known as the "Year 2000 Problem." The Fund has been advised by the
Adviser, the Administrators 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 ADVISER
The Adviser, a wholly-owned indirect subsidiary of PNC 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 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.
PURCHASE OF SHARES
Fund shares are sold at the net asset value per share next 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"), the Fund's custodian, will be executed
at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M., Eastern
time (or orders accepted earlier in the same day for which payment has not been
received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment
has been received by PNC Bank by that time. Orders received at other times, and
orders for which payment has not been received by 4:00 P.M., Eastern time, will
not be accepted, and notice thereof will be given to the institution placing the
order. (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
-10-
<PAGE>
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 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 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 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
-11-
<PAGE>
redeem shares involuntarily under certain special circumstances described in the
Statement of Additional Information under "Additional Purchase and Redemption
Information."
SHAREHOLDER SERVICE PLAN
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. 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 DISTRIBUTIONS
The Fund declares dividends daily and distributes 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. 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,
-12-
<PAGE>
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.
YEAR ENDED OCTOBER 31
---------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Period -------- -------- -------- -------- --------
Income from Investment
Operations
Net Investment Income .0529 .0521 .0523 .0563 .0380
Net Gains or Losses on
Securities -- -- -- -- --
(both realized and -------- -------- -------- -------- --------
unrealized) .0529 .0521 .0523 .0563 .0380
-------- -------- -------- -------- --------
Total From Investment
Operations
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 5.29% 5.21% 5.22% 5.61% 3.85%
to Average Daily Net Assets
</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>
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.
YEAR ENDED OCTOBER 30,
----------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
----------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Period ------- ------- ------- ------- -------
Income from Investment
Operations
Net Investment Income .0504 .0496 .0498 .0538 .0355
Net Gains or Losses on
Securities -- -- -- -- --
(both realized and ------- ------- ------- ------- -------
unrealized) .0504 .0496 .0498 .0538 .0355
------- ------- ------- ------- -------
Total From Investment
Operations
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 $38,633 $38,700 $26,875 $28,402 $ 8,278
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 5.04% 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
-16-
<PAGE>
MUNIFUND
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS
PROSPECTUS
February __, 1999
<TABLE>
<S> <C>
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware:
Wilmington, DE 19809 302-791-5350). For yield information
call: 800-821-6006 (MuniFund Shares
code: 50; MuniFund Dollar Shares
code: 59). For other information
call: 800-821-7432 or visit our web
site at www.pif.com.
</TABLE>
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>
<CAPTION>
TABLE OF CONTENTS PAGE
----------------- ----
<S> <C>
RISK/RETURN SUMMARY............................................
Investment Goal...........................................
Investment Policies.......................................
Principal Risks of Investing..............................
Who May Want to Invest in the Fund........................
Performance Information...................................
Fees and Expenses.........................................
INVESTMENT STRATEGIES AND RISK DISCLOSURE......................
MANAGEMENT OF THE FUND.........................................
SHAREHOLDER INFORMATION........................................
Price of Fund Shares......................................
Purchase of Shares........................................
Redemption of Shares......................................
Distribution and Shareholder Service Plans................
Dividends and Distributions...............................
Taxes.....................................................
FINANCIAL HIGHLIGHTS...........................................
</TABLE>
-2-
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOAL: The Fund seeks as high a level of current interest
income exempt from federal income tax as is
consistent with relative stability of principal.
INVESTMENT POLICIES: The Fund invests in a broad range of short-term
tax-exempt obligations issued by or on behalf of
states, territories, and possessions of the United
States, the District of Columbia, and their
respective authorities, agencies,
instrumentalities, and political subdivisions and
tax-exempt derivative securities such as tender
option bonds, participations, beneficial interests
in trusts and partnership interests (collectively,
"Municipal Obligations").
PRINCIPAL RISKS OF INVESTING: Although the Fund invests in money market
instruments which 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.
While the Fund seeks to maintain a constant net
asset value of $1.00 per share, 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.
-3-
<PAGE>
An investment in the Fund is not a deposit in 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 INVEST IN The Fund is designed for institutional investors
THE FUND: seeking as high a level of current interest income
exempt from federal 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.
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.
<TABLE>
<CAPTION>
MuniFund vs. IBC's Money Fund Report:
Tax-Free Institutions - Only
Money Fund Average
MuniFund vs IBC's Money Fund Report:
Tax-Free Institutions - Only Money
Fund Average
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MuniFund Shares 5.99 5.40 3.78 2.48 2.21 2.61 3.68 3.27 3.45 3.28
IBC's Money Fund Report: 6.16 5.69 4.53 2.85 2.20 2.62 3.62 3.19 3.36 3.19
Tax Free Institutions- Only
Money Fund Average
</TABLE>
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>
- ----------------------------------------------------------------
7 DAY YIELD
AS OF DECEMBER 31, 1998
- ----------------------------------------------------------------
MUNIFUND SHARES 3.51%
- ----------------------------------------------------------------
MUNIFUND DOLLAR SHARES 3.26%
- ----------------------------------------------------------------
IBC'S MONEY FUND REPORT:
TAX-FREE INSTITUTIONS - ONLY
MONEY FUND AVERAGE* 3.25%
- ----------------------------------------------------------------
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 MONEY 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>
MUNIFUND
- -----------------------------------------------------------------------------------------------------------------------------------
MUNIFUND MUNIFUND MUNIFUND DOLLAR MUNIFUND PLUS MUNIFUND CASH MUNIFUND CASH
SHARES ADMINISTRATION SHARES SHARES SHARES RESERVES SHARES MANAGEMENT SHARES
--------- --------------------- --------------- ------------- ---------------- -----------------
(estimated) (estimated) (estimated) (estimated)
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
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 Adinistration 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.
-6-
<PAGE>
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:
MUNIFUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
MUNIFUND MUNIFUND MUNIFUND MUNIFUND MUNIFUND CASH MUNIFUND CASH
SHARES ADMINISTRATION DOLLAR SHARES PLUS SHARES RESERVE SHARES MANAGEMENT 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>
-7-
<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 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.
-8-
<PAGE>
INVESTMENTS. The Fund's investments may include the following:
Municipal Obligations. The Fund may purchase Municipal Obligations which
are 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 Company Securities. The Fund may invest in securities issued by
other open-end investment companies that invest in the type of obligations 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 Floating Rate Instruments. The Fund may purchase variable or
floating rate notes, which are instruments that provide for adjustments in the
interest rate on certain reset dates or whenever a specified interest rate index
changes, respectively.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
Municipal Obligations on a "when-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.
Stand-by Commitments. The Fund may acquire "stand-by commitments" with
respect to 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.
Illiquid Securities. The Fund will not invest more than 10% of the value
of its 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 Investments. This Prospectus describes the Fund's
principal investment 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.
-9-
<PAGE>
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 Risk. Generally, a fixed-income security will increase in
value 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.
Municipal Obligations. Opinions relating to the validity of Municipal
Obligations and to the exemption of interest thereon from federal income tax are
rendered by bond counsel to the respective issuers at the time of issuance, and
opinions relating to the validity of and the tax-exempt status of payments
received by the Fund 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 Administrators 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.
-10-
<PAGE>
MANAGEMENT OF THE FUND
INVESTMENT ADVISER
The Adviser, a wholly-owned indirect subsidiary of PNC 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, 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 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 SHARES
Fund shares are sold at the net asset value per share next 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"), the Fund's custodian, will be executed
at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M., Eastern
time (or orders accepted earlier in the same day for which payment has not been
received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment
has been received by PNC Bank by that time. Orders received at other times, and
orders for which payment has not been received by 4:00 P.M., Eastern time, will
not be accepted, and notice thereof will be given to the institution placing the
order. (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).
-12-
<PAGE>
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 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 AND SHAREHOLDER SERVICE PLANS
The Fund offers six classes of shares. The difference between the classes
of shares is the fees borne by a class 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 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.
-13-
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends daily and distributes 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 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.
-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 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.
YEAR ENDED NOVEMBER 30,
-----------------------
<TABLE>
<CAPTION>
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 year ended November 30, 1998, .41% for the year ended November 30, 1997,
.42% for the year ended November 30, 1996 and .41% for the years ended November
30, 1995 and 1994, respectively.
-15-
<PAGE>
MUNIFUND DOLLAR SHARES
The table below sets forth selected financial data for a MuniFund Dollar Share
outstanding throughout each year presented.
YEAR ENDED NOVEMBER 30,
-----------------------
<TABLE>
<CAPTION>
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% 3.14% 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 year ended November 30, 1998, .66% for the year ended November 30,
1997, .67% for the year ended November 30, 1996 and .66% for the years ended
November 30, 1995 and 1994, respectively.
-16-
<PAGE>
[BACK COVER]
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
-17-
<PAGE>
MUNICASH
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS
PROSPECTUS
February __, 1999
Bellevue Park Corporate Center For purchase and redemption orders only call:
400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350).
Wilmington, DE 19809 For yield information call: 800-821-6006
(MuniCash Shares code: 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...........................................
Investment Goal..........................................
Investment Policies......................................
Principal Risks of Investing.............................
Who May Want to Invest in the Fund.......................
Performance Information..................................
Fees and Expenses........................................
INVESTMENT STRATEGIES AND RISK DISCLOSURE.....................
MANAGEMENT OF THE FUND........................................
SHAREHOLDER INFORMATION.......................................
Price of Fund Shares.....................................
Purchase of Shares.......................................
Redemption of Shares.....................................
Shareholder Service Plan.................................
Dividends and Distributions..............................
Taxes....................................................
FINANCIAL HIGHLIGHTS..........................................
</TABLE>
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOAL: The Fund seeks as high a level of current interest
income exempt from federal income tax as is
consistent with relative stability of principal.
INVESTMENT POLICIES: The Fund invests in a broad range of short-term
tax-exempt obligations issued by or on behalf of
states, territories, and possessions of the United
States, the District of Columbia, and their
respective authorities, agencies,
instrumentalities, and political subdivisions and
tax-exempt derivative securities such as tender
option bonds, participations, beneficial interests
in trusts and partnership interests (collectively,
"Municipal Obligations").
PRINCIPAL RISKS OF INVESTING: Although the Fund invests in money market
instruments which 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.
While the Fund seeks to maintain a constant net
asset value of $1.00 per share, 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.
<PAGE>
An investment in the Fund is not a deposit in 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 INVEST IN The Fund is designed for institutional investors
THE FUND: seeking as high a level of current interest income
exempt from federal 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.
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.
<TABLE>
<CAPTION>
MuniCash vs. IBC's Money Fund Report:
Tax-Free Institutions - Only
Money Fund Average
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MuniCash Shares 6.31 5.94 4.46 2.91 2.34 2.83 3.91 3.51 3.65 3.47
IBC's Money Fund Report: 6.16 5.69 4.53 2.85 2.20 2.62 3.62 3.19 3.36 3.19
Tax Free Institions- Only
Money Fund Averge
</TABLE>
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).
-2-
<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 money funds investing in obligations of tax-exempt entities,
including state and municipal authorities.
-3-
<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>
MUNICASH
- --------------------------------------------------------------------------------
MUNICASH MUNICASH
SHARES DOLLAR SHARES
-------------- -------------
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
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, would have
been .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.
-4-
<PAGE>
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>
-5-
<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);
. 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.
-6-
<PAGE>
INVESTMENTS. The Fund's investments may include the following:
Municipal Obligations. The Fund may purchase Municipal Obligations which
are 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 Company Securities. The Fund may invest in securities issued by
other open-end investment companies that invest in the type of obligations 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 Floating Rate Instruments. The Fund may purchase variable or
floating rate notes, which are instruments that provide for adjustments in the
interest rate on certain reset dates or whenever a specified interest rate index
changes, respectively.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
Municipal Obligations on a "when-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.
Illiquid Securities. The Fund will not invest more than 10% of the value of
its 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 Commitments. The Fund may acquire "stand-by commitments" with
respect to 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 Investments. This Prospectus describes the Fund's
principal investment 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.
-7-
<PAGE>
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 Risk. Generally, a fixed-income security will increase in
value 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.
Municipal Obligations. Opinions relating to the validity of Municipal
Obligations and to the exemption of interest thereon from federal income tax are
rendered by bond counsel to the respective issuers at the time of issuance, and
opinions relating to the validity of and the tax-exempt status of payments
received by the Fund 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 Administrators 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 ADVISER
The Adviser, a wholly-owned indirect subsidiary of PNC 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.
-9-
<PAGE>
PURCHASE OF SHARES
Fund shares are sold at the net asset value per share next 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"), the Fund's custodian, will be executed
at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M., Eastern
time (or orders accepted earlier in the same day for which payment has not been
received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment
has been received by PNC Bank by that time. Orders received at other times, and
orders for which payment has not been received by 4:00 P.M., Eastern time, will
not be accepted, and notice thereof will be given to the institution placing the
order. (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, 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).
-10-
<PAGE>
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."
-11-
<PAGE>
SHAREHOLDER SERVICE PLAN
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar Shares. 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 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, CAPITAL GAINS AND DISTRIBUTIONS AND TAXES
The Fund declares dividends daily and distributes 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.
-12-
<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.
-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 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.
YEAR ENDED NOVEMBER 30,
-----------------------
<TABLE>
<CAPTION>
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%/1/ 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.
-14-
<PAGE>
MUNICASH DOLLAR SHARES
The table below sets forth selected financial data for a MuniCash Dollar Share
outstanding throughout each year presented.
YEAR ENDED NOVEMBER 30,
-----------------------
<TABLE>
<CAPTION>
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 $91,404 $150,089 $101,528 $101,424 $ 99,688
Net Assets, End of Year (000's)
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.
-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
-16-
<PAGE>
CALIFORNIA MONEY FUND
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS
PROSPECTUS
February __, 1999
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware:
Wilmington, DE 19809 302-791-5350). For yield information
call: 800-821-6006 (Money Shares code:
52; Dollar Shares code: 57; Plus
Shares code: 58). 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..............................
Investment Goal.............................
Principal Investment........................
Principal Risks of Investing................
Who May Want to Invest in the Fund..........
Performance Information.....................
Fees and Expenses...........................
INVESTMENT STRATEGIES AND RISK DISCLOSURE........
MANAGEMENT OF THE FUND...........................
SHAREHOLDER INFORMATION..........................
Price of Fund Shares........................
Purchase of Shares..........................
Redemption of Shares........................
Distribution and Shareholder Service Plans..
Dividends and Distributions.................
Taxes.......................................
FINANCIAL HIGHLIGHTS.............................
</TABLE>
-i-
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOAL: The Fund seeks 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.
INVESTMENT POLICIES: The Fund invests primarily in debt obligations
issued by or on behalf of the State of California
and other states, territories, and possessions of
the United States, the District of Columbia, and
their respective authorities, agencies,
instrumentalities and political subdivisions, and
tax-exempt 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 OF INVESTING: Although the Fund invests in money market
instruments which 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.
While the Fund seeks to maintain a constant net
asset value of $1.00 per share, 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.
<PAGE>
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 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 INVEST IN The Fund is designed for California institutional
THE FUND: investors and their customers seeking as high a
level of current 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.
-2-
<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.
<TABLE>
<CAPTION>
California Money Fund vs. IBC's Money Fund Report:
California State Specific Tax-Free Institutions-
Only Money Fund Average
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California Money Shares 5.97 5.29 3.94 2.61 2.26 2.73 3.64 3.21 3.39 3.13
IBC's Money Fund Report:California State 5.89 5.44 4.18 2.69 2.17 2.54 3.41 3.03 3.20 2.91
Specific Tax-Free Institutions-Only
Money Fund Average
</TABLE>
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).
-3-
<PAGE>
THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS
ENDED DECEMBER 31
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MONEY SHARES 3.13% 3.24% 3.62%
- ------------------------------------------------------------------------------------------------------------
DOLLAR SHARES 2.88% 2.99% 3.37%
- ------------------------------------------------------------------------------------------------------------
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, 1999
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
MONEY SHARES 3.34%
- -------------------------------------------------------------------------------------------------------------------
DOLLAR SHARES 3.09%
- -------------------------------------------------------------------------------------------------------------------
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 Intitutions-
Only Money Fund Average is comprised of money funds investing in tax-
exempt obligations of California State.
-4-
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund
CALIFORNIA MONEY FUND
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY DOLLAR PLUS CASH RESERVE
SHARES ADMINISTRATION SHARES SHARES SHARES SHARES
------ --------------------- ------ ------ ------------
(ESTIMATED) (ESTIMATED) (ESTIMATED)
<S> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
Management Fees .20% .20% .20% .20% .20%
Distribution (12b-1) Fees -- -- -- .25% --
Other Expenses .26% .36% .51% .26% .66%
Administration Fees .20% .20% .20% .20% .20%
Shareholder Servicing Fees -- -- .25% -- .25%
Miscellaneous .06% .16% .06% .06% .21%
Total Annual Fund
Operating Expenses(1) .46% .56% .71% .71% .86%
=== === === === ===
<CAPTION>
CASH MANAGEMENT
SHARES
---------------
(ESTIMATED)
<S> <C>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
Management Fees .20%
Distribution (12b-1) Fees --
Other Expenses .76%
Administration Fees .20%
Shareholder Servicing Fees .25%
Miscellaneous .31%
Total Annual Fund
Operating Expenses(1) .96%
===
</TABLE>
- -----------------------------------------------
(1) Total Annual Fund Operating Expenses for Money Shares and 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 Administration Shares, Plus Shares, Cash Reserve
Shares and 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.
-5-
<PAGE>
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:
CALIFORNIA MONEY FUND
---------------------
<TABLE>
<CAPTION>
MONEY SHARES ADMINISTRATION DOLLAR SHARES PLUS SHARES CASH RESERVE CASH MANAGEMENT
SHARES (estimated) SHARES SHARES
(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>
-6-
<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);
. 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.
-7-
<PAGE>
INVESTMENTS. The Fund's investments may include the following:
Municipal Obligations. The Fund may purchase Municipal Obligations which
are 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 Floating Rate Instruments. The Fund may purchase variable or
floating rate notes issued by industrial development authorities and other
governmental 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.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
securities on a "when-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
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.
Stand-by Commitments. The Fund may acquire "stand-by commitments" with
respect to 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 Company Securities. The Fund may invest in securities issued by
other open-end investment companies that invest in the type of obligations 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 Securities. The Fund will not invest more than 10% of the value
of its 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 Investments. This Prospectus describes the Fund's
principal investment 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.
-8-
<PAGE>
Interest Rate Risk. Generally, a fixed-income security will increase in
value 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.
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 Obligations. Opinions relating to the validity of Municipal
Obligations and to the exemption of interest thereon from federal income tax are
rendered by bond counsel to the respective issuers at the time of issuance, and
opinions relating to the validity of and the tax-exempt status of payments
received by the Fund 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 Considerations Affecting the Fund. The Fund is concentrated in
securities issued by the State of California or entities within the State of
California and therefore, investment in the Fund may be riskier than an
investment in other types of money market funds. The Fund'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
-9-
<PAGE>
peculiar risks presented by such projects to a greater extent than it would be
if the Fund's assets were not so concentrated.
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 Administrators 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 ADVISER
The Adviser, a wholly-owned indirect subsidiary of PNC 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."
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 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
-10-
<PAGE>
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 SHARES
Fund shares are sold at the net asset value per share next 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"), the Fund's custodian
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 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 Administration Shares, Dollar Shares, Plus Shares, Cash Reserve Shares
or 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
-11-
<PAGE>
"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 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."
DISTRIBUTION AND SHAREHOLDER SERVICE PLANS
The Fund offers six classes of shares. The difference between the classes
of shares is the fees borne by a class 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.
-12-
<PAGE>
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.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends daily and distributes 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. Dollar and Plus Shares bear all the expense of fees paid to Service
Organizations, and as a result, at any given time, the dividend on Dollar or
Plus Shares will be approximately .25% lower than the dividend on Money 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 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 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.
-13-
<PAGE>
-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, 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.
MONEY SHARES
The table below sets forth selected financial data for a 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 0.0334 0.0316 0.0356 0.0281 0.0223
-------- -------- -------- -------- -------- --------
Net Gains or Losses on Securities
(both realized and unrealized)................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total From Investment Operations................. .0159 0.0334 0.0316 0.0356 0.0281 0.0223
-------- -------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment
income).......................................... (.0159) (0.0334) (0.0316) (0.0356) (0.0281) (0.0223)
-------- -------- -------- -------- -------- --------
Distributions (from capital gains)............... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions.............................. (.0159) (0.0334) (0.0316) (0.0356) (0.0281) (0.0223)
-------- -------- -------- -------- -------- --------
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 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.
-15-
<PAGE>
DOLLAR SHARES
The table below sets forth selected financial data for a Dollar Share
outstanding throughout each year presented.
YEAR ENDED JANUARY 31,
----------------------
<TABLE>
<CAPTION>
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............................ .0147 0.0309 0.0291 0.0331 0.0256 0.0198
-------- -------- -------- -------- ------- --------
Net Gains or Losses on Securities
(both realized and unrealized)................. -- -- -- -- -- --
-------- -------- -------- -------- ------- --------
Total From Investment Operations................. .0147 0.0309 0.0291 0.0331 0.0256 0.0198
-------- -------- -------- -------- ------- --------
Less Distributions
Dividends (from net investment
income)....................................... (.0147) (0.0309) (0.0291) (0.0331) 0.0256 (0.0198)
-------- -------- -------- -------- ------- --------
Distributions (from capital gains)............... -- -- -- -- -- --
-------- -------- -------- -------- ------- --------
Total Distributions.............................. (.0147) (0.0309) (0.0291) (0.0331) 0.0256 (0.0198)
-------- -------- -------- -------- ------- --------
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% -- 2.00%
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......................... 2.96%/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 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.
-16-
<PAGE>
-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
-18-
<PAGE>
NEW YORK MONEY FUND
AN INVESTMENT PORTFOLIO OFFERED BY
PROVIDENT INSTITUTIONAL FUNDS
PROSPECTUS
February __, 1998
Bellevue Park Corporate Center For purchase and redemption orders only
400 Bellevue Parkway call: 800-441-7450 (in Delaware:
Wilmington, DE 19809 302-791-5350). For yield information
call: 800-821-6006 (Money Shares code:
53; Dollar Shares code: 55; 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.....................................................
Investment Goal....................................................
Investment Policies................................................
Principal Risks of Investing.......................................
Who May Want to Invest in the Fund.................................
Performance Information............................................
Fees and Expenses..................................................
INVESTMENT STRATEGIES AND RISK DISCLOSURE...............................
MANAGEMENT OF THE FUND..................................................
SHAREHOLDER INFORMATION.................................................
Price of Fund Shares...............................................
Purchase of Shares.................................................
Redemption of Shares...............................................
Shareholder Service and Distribution Plans.........................
Dividends and Distributions........................................
Taxes..............................................................
FINANCIAL HIGHLIGHTS....................................................
</TABLE>
<PAGE>
RISK/RETURN SUMMARY
INVESTMENT GOAL: The Fund seeks 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.
INVESTMENT POLICIES: The Fund invests primarily in debt obligations
issued by or 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 OF INVESTING: Although the Fund invests in money market
instruments which 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. While the Fund seeks to maintain a
constant net asset value of $1.00 per share,
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.
<PAGE>
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 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 INVEST IN THE FUND: The Fund is designed for institutional
investors and their customers seeking 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 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.
-2-
<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.
<TABLE>
<CAPTION>
New York Money vs IBC's Money Fund Report:
New York State Specific Tax-Free
Institutions-Only Money Fund Average
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New York Money Shares 5.80 5.40 3.89 2.66 2.22 2.63 3.69 3.30 3.48 3.22
IBC's Money Fund Report: New York State Specific 5.66 5.56 4.16 2.68 2.12 2.57 3.55 3.08 3.20 2.96
Tax-Free Institutions-Only Money Fund Average
</TABLE>
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).
-3-
<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>
MONEY SHARES 3.22% 3.26% 3.62%
- -----------------------------------------------------------------------------------------------------
DOLLAR SHARES 2.97% 3.01% 3.37%
- -----------------------------------------------------------------------------------------------------
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>
MONEY SHARES 3.43%
- -----------------------------------------------------------------------------------------------------
DOLLAR SHARES 3.18%
- -----------------------------------------------------------------------------------------------------
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 Money Investing in Tax-Exempt obligations of
New York State
-4-
<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>
NEW YORK MONEY FUND
- -------------------------------------------------------------------------------
MONEY DOLLAR PLUS
SHARES SHARES SHARES
---------- ------ ------
(ESTIMATED)
ANNUAL FUND OPERATING EXPENSES
<S> <C> <C> <C>
(expenses that are deducted
from Fund assets)
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 Money Shares, Dollar Shares and
Plus Shares for the fiscal year ended July 31, 1998, with fee waivers,
would have been .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.
-5-
<PAGE>
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:
NEW YORK MONEY FUND
-------------------
<TABLE>
<CAPTION>
MONEY SHARES DOLLAR SHARES PLUS 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>
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 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
. shares of other open-end investment companies that invest in the type of
obligation in which the Fund may invest.
-7-
<PAGE>
INVESTMENTS. The Fund's investments may include the following:
Municipal Obligations. They may purchase Municipal Obligations which are
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 Floating Rate Instruments. The Fund may purchase variable or
floating rate notes issued by industrial development authorities and other
governmental 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.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
securities on a "when-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
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.
Stand-by Commitments. The Fund may acquire "stand-by commitments" with
respect to 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 Company Securities. The Fund may invest in securities issued by
other open-end investment companies that invest in the type of obligations 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 Securities. The Fund will not invest more than 10% of the value
of its 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 Investments. This Prospectus describes the Fund's
principal investment 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.
-8-
<PAGE>
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 Risk. Generally, a fixed-income security will increase in
value 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.
Special Considerations Affecting the Fund. The Fund's ability to achieve
its investment objective is dependent upon the ability of the issuers of New
York Municipal Obligations to meet their continuing obligations 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.
-9-
<PAGE>
Municipal Obligations. Opinions relating to the validity of Municipal
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.
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 Administrators 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 ADVISER
The Adviser, a wholly-owned indirect subsidiary of PNC 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."
-10-
<PAGE>
PRICE OF FUND SHARES
The Fund's net asset value per share for purposes of pricing 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 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 SHARES
Fund shares are sold at the net asset value per share next 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"), the Fund's custodian 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 Dollar Shares or Plus Shares. (See also "Management of the Fund --
Service Organizations," as described in the Statement of
-11-
<PAGE>
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 Dollar Shares or Plus 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 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 SERVICE AND DISTRIBUTION PLANS
Institutional investors, such as banks, savings and loan associations and
other financial institutions, including affiliates of PNC Bank Corp. ("Service
Organizations"), may purchase Dollar or Plus Shares. Dollar and 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 Dollar Shares or Plus 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 or 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
-12-
<PAGE>
"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 or Plus Shares; and providing sub-accounting
or the information necessary for sub-accounting with respect to Dollar or Plus
Shares beneficially owned by customers. In addition, broker-dealers purchasing
Plus Shares may be requested to provide from time to time assistance (such as
the forwarding of sales literature and advertising to their customers) in
connection with the distribution of Plus Shares. Under the terms of the
agreements, Service Organizations are required to provide to their customers a
schedule of any fees that they may charge 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.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends daily and distributes 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. Dollar and Plus Shares bear all the expense of fees paid to Service
Organizations, and as a result, at any given time, the dividend on Dollar or
Plus Shares will be approximately .25% lower than the dividend on Money 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 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.
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.
-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.
MONEY SHARES
The table below sets forth selected financial data for a Money Share
outstanding throughout each year presented.
YEAR ENDED JULY 31,
-------------------
<TABLE>
<CAPTION>
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...................... 0.0336 0.0334 0.0339 0.0338 0.0226
-------- -------- -------- -------- --------
Net Gains or Losses on Securities
(both realized and unrealized)............ -- -- -- -- --
-------- -------- -------- -------- --------
Total From Investment Operations........... 0.0336 0.0334 00339 0.0338 0.0226
-------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment
Income)................................. (0.0336) (0.0334) (0.0339) (0.0338) 0.0226)
-------- -------- -------- -------- --------
Distributions (from capital gains)......... -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions........................ (0.0336) (0.0334) (0.0339) (0.0338) (0.0226)
-------- -------- -------- -------- --------
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 Data:
Net Assets, End of Year $(000's)........... 318,091 269,821 272,145 246,650 279,483
Ratios of Expenses to Average Net Assets/1/ .20% .20% .20% .20% .20%
Ratios of Net Investment Income to
Average 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 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.
-14-
<PAGE>
DOLLAR SHARES
The table below sets forth selected financial data for a Dollar Share
outstanding throughout each year presented.
YEAR ENDED JULY 31,
-------------------
<TABLE>
<CAPTION>
1998 1997 1996 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 Operations
Net Investment Income................. 0.0303 0.0309 0.0089 0.000 0.0127
-------- -------- -------- ------ --------
Net Gains or Losses on Securities
(both realized and unrealized)...... -- -- -- -- --
-------- -------- -------- ------ --------
Total From Investment Operations...... 0.0303 0.0309 0.0089 0.000 0.0127
-------- -------- -------- ------ --------
Less Distributions
Dividends (from net investment
Income)............................ (0.0303) (0.0309) (0.0089) 0.00 (0.0127)
-------- -------- -------- ------ --------
Distributions (from capital gains).... -- -- -- -- --
-------- -------- -------- ------ --------
Total Distributions................... (0.0303) (0.0309) (0.0089) 0.00 (0.0127)
-------- -------- -------- ------ --------
Net Asset Value, End of Period........ $ 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 Average
Net Assets/3/......................... .45%/2/ .45% .45%/2/ -- .45%/2/
Ratios of Net Investment Income to
Average Daily Net Assets.............. 3.11%/2/ 3.09%/2/ 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 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, .73%
(annualized) for the years ended July 31, 1995 and .76% (annualized) for
the year ended July 31, 1994.
/2/ Annualized.
/3/ There were no Dollar shares outstanding during the period from March 28,
1994 to April 14, 1996 and July 21, 1998 to July 31, 1998.
-15-
<PAGE>
PLUS SHARES
The table below sets forth selected financial data for a Plus Share
outstanding throughout each year presented.
YEAR ENDED JULY 31,
-------------------
<TABLE>
<CAPTION>
1998/3/ 1997/3/ 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 Operations
Net Investment Income................. 0.00 0.00 0.00 0.0090 0.0201
-------- -------- -------- -------- --------
Net Gains or Losses on Securities
(both realized and unrealized)...... -- -- -- -- --
-------- -------- -------- -------- --------
Total From Investment Operations...... 0.00 0.00 0.00 0.0090 0.0201
-------- -------- -------- -------- --------
Less Distributions
Dividends (from net investment
Income)............................ (0.00) (0.00) (0.00) (0.0090) (0.0201)
-------- -------- -------- -------- --------
Distributions (from capital gains).... -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions................... (0.00) (0.00) (0.00) (0.0090) (0.0201)
-------- -------- -------- -------- --------
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 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 Plus Shares outstanding during the period from December 2,
1994 to July 31, 1998.
-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
-17-
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
Statement of Additional Information
February __, 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 __, 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........................................................
Investment Strategies, Risks and Policies..................................
Portfolio Transactions................................................
Investment Instruments and Policies...................................
Variable and Floating Rate Instruments...........................
Repurchase Agreements............................................
Securities Lending...............................................
Reverse Repurchase Agreements....................................
When-Issued and Delayed Settlement Transactions..................
U.S. Government Obligations......................................
Mortgage-Related and Other Asset-Backed Securities...............
Banking Industry Obligations.....................................
Special Considerations Regarding Foreign Investments.............
Guaranteed Investment Contracts..................................
Investment Company Securities....................................
Municipal Obligations............................................
Restricted and Other Illiquid Securities.........................
Stand-By Commitments.............................................
Short-Term Trading...............................................
Special Considerations with Respect to California Money Fund..........
Special Considerations with Respect to New York Money Fund............
Investment Limitations.....................................................
Additional Purchase and Redemption Information.............................
In General............................................................
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Net Asset Value.......................................................
Management of the Funds....................................................
Trustees and Officers.................................................
Investment Adviser....................................................
Banking Laws..........................................................
Co-Administrators.....................................................
Distributor...........................................................
Custodian and Transfer Agent..........................................
Service Organization..................................................
Expenses..............................................................
Additional Information Concerning Taxes....................................
Dividends..................................................................
Additional Yield Information...............................................
Description Concerning Shares..............................................
Counsel....................................................................
Auditors...................................................................
Financial Statements.......................................................
- --------------------
Miscellaneous..............................................................
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 __, 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
or Midland 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 or Midland. Also, as a master servicer,
PNC Mortgage or Midland 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 or Midland to repurchase the mortgages from the
issuing trust. Finally, PNC Mortgage or Midland 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 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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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
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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
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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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<PAGE>
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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<PAGE>
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.
DISTRIBUTOR
-49-
<PAGE>
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, PNC Bank, an affiliate of the
Adviser, serves as each Fund's custodian, holding a Fund's portfolio securities,
cash and other property. PNC Bank has its principal offices at 1600 Market
Street, Philadelphia, PA 19103. Under the Custodian Agreement, PNC Bank has
agreed to provide the following services: (i) maintain a separate account or
accounts in the name of a Fund; (ii) hold and disburse portfolio securities on
account of a Fund; (iii) collect and make disbursements of money on behalf of a
Fund; (iv) collect and receive all income and other payments and distributions
on account of a Fund's portfolio securities; and (v) make periodic reports to
the Board of Trustees concerning a Fund's operations.
PNC Bank is also authorized to select one or more banks or trust
companies to serve as sub-custodian on behalf of a Fund, provided that PNC Bank
shall remain responsible for the performance of all of its duties under the
Custodian Agreement and shall hold each Fund harmless from the acts and
omissions of any bank or trust company serving as sub-custodian chosen by PNC
Bank.
Under the Custodian Agreement, each Fund pays PNC Bank 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.
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.
-66-
<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%).
-67-
<PAGE>
APPENDIX A
----------
COMMERCIAL PAPER RATINGS
- ------------------------
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the 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
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS, INC.
PART C
OTHER INFORMATION
Item 23. EXHIBITS:
(a) (1) Certificate of Trust dated October 21, 1998.
(2) Registrant's Agreement and Declaration of Trust dated
October 21, 1998.
(b) Registrant's By-Laws dated October 22, 1998.
(c) See Article II, Section 2.6, Section 2.7, Section 2.8,
Section 2.9, Section 2.10, Section 2.11 and Section
2.12; Article III, Section 3.7; Article VI; Article
VII; Article VIII, Section 8.5 and Article IX of the
Registrant's Declaration of Trust dated October 21,
1998, included herewith, and Article IV, Article V and
Article VI of the Registrant's By-Laws dated October
22, 1998, included herewith.
(d) Form of Investment Advisory Agreement between
Registrant and BlackRock Institutional Management
Corporation ("BIMC") dated February __, 1999.
(e) Form of Distribution Agreement between Registrant and
Provident Distributors, Inc. ("PDI").
(f) None.
(g) Custodian Services Agreement to be filed by amendment.
(h) (1) Co-Administration Agreement to be filed by amendment.
(2) Transfer Agency Agreement to be filed by amendment.
(3) Form of Share Purchase Agreements.
(i) Opinion and Consent of Drinker Biddle & Reath LLP.
(j) (1) Consent of PricewaterhouseCoopers LLP.
(2) Consent of KPMG LLP.
<PAGE>
(3) Consent of Willkie Farr & Gallagher.
(4) Consent of O'Melveny & Myers.
(k) None.
(l) None.
(m) (1) Registrant's Form of Amended Distribution Plan with
respect to Plus Shares and Form of Distribution
Agreement.
(2) Registrant's Shareholder Services Plan with respect to
Dollar Shares.
(3) Registrant's Form of Shareholder Service Plan with
respect to Administration Shares.
(4) Registrant's Form of Shareholder Service Plan with
respect to Cash Reserve Shares.
(5) Registrant's Form of Shareholder Service Plan with
Respect to Cash Management Shares.
(6) Form of Shareholder Services Agreement.
(n) Financial Data Schedules.
(o) Form of Amended Rule 18f-3 Plan for Multi-Class System.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant is controlled by its Board of Trustees.
ITEM 25. INDEMNIFICATION
Indemnification of Registrant's Co-Administrators, Principal
Underwriter, Custodian and Transfer Agent against certain stated
liabilities is provided for in Section 11 of the Co-Administration
Agreement, Section 5 of the Distribution Agreement, Section 12 of the
Custodian Services Agreement and Section 12 of the Transfer Agency
Agreement, respectively, which Agreements are included herewith.
Registrant has obtained from a major insurance carrier a directors'
and officers' liability policy covering certain types of errors and
omissions.
Article VIII of Registrant's Agreement and Declaration of Trust,
included herewith, provides for the indemnification of Registrant's
trustees and officers.
-2-
<PAGE>
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling
persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
BIMC performs investment advisory services for Registrant and certain
other investment companies and accounts. The information required by
this Item 26 with respect to each director, officer and partner of
BIMC is incorporated by reference to Schedules A and D of Form ADV
filed by BIMC with the Securities and Exchange Commission pursuant to
the Investment Advisers Act of 1940 (SEC File No. 801-13304).
ITEM 27. PRINCIPAL UNDERWRITER
(a) PDI currently acts as principal underwriter for, in addition to
the Registrant, the following funds: Pacific Horizon Funds, Inc.,
Time Horizon Funds, World Horizon Funds, Inc., Pacific Innovations
Trust, International Dollar Reserve Fund I, Ltd, Columbia Common Stock
Fund, Inc., Columbia Growth Fund, Inc., Columbia International Stock
Fund, Inc., Columbia Special Fund, Inc., Columbia Small Cap Fund,
Inc., Columbia Real Estate Equity Fund, Inc., Columbia Balanced Fund,
Inc., Columbia Daily Income Company, Columbia U.S. Government
Securities Fund, Inc., Columbia Fixed Income Securities Fund, Inc.,
Columbia Municipal Bond Fund, Inc., Columbia High Yield Fund, Inc.,
Kiewit Mutual Fund, Kalmar Pooled Investment Trust, The RBB Fund,
Inc., Robertson Stephenson Investment Trust, Hilliard-Lyons Government
Fund, Inc., Hilliard-Lyons Growth Fund, Inc., The Rodney Square Fund,
Inc., The Rodney Square Tax-Exempt Fund, Inc., The Rodney Square
Strategic Equity Fund, Inc. and The Rodney Square Strategic Fixed-
Income Fund, Inc.
(b) The information required by this Item 27 with respect to each
director, officer or partner of PDI is incorporated by reference to
Schedule A of Form BD filed by PDI with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 (SEC File
No. 8-46564).
-3-
<PAGE>
(c) The following represents all commissions and other compensation
received by each principal underwriter who is not an affiliated person
of the registrant:
<TABLE>
<CAPTION>
NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION AND BROKERAGE OTHER
Underwriter COMMISSIONS REPURCHASE COMMISSIONS COMPENSATION
- ----------- ---------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Provident
Distributors, Inc. $0 $0 $0 $0
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
(1) PNC Bank, National Association, 200 Stevens Drive, Lester,
Pennsylvania 19113 (records relating to its function as
custodian).
(2) Provident Distributors, Inc., Four Falls Corporate Center,
6th Floor, West Conshohocken, Pennsylvania 19428 (records
relating to its function as distributor).
(3) BlackRock Institutional Management Corporation, Bellevue
Park Corporate Center, 400 Bellevue Parkway, Wilmington,
Delaware 19809 (records relating to its functions as
investment adviser and co-administrator).
(4) PFPC Inc., 400 Bellevue Parkway, Bellevue Park Corporate
Center, Wilmington, Delaware 19809 (records relating to its
functions as co-administrator, transfer agent, registrar and
dividend disbursing agent).
(5) Drinker Biddle & Reath LLP, Philadelphia National Bank
Building, 1345 Chestnut Street, Philadelphia, Pennsylvania
19107 (Registrant's Charter, By-Laws, and Minutes Books).
-4-
<PAGE>
ITEM 29. MANAGEMENT SERVICES
None.
ITEM 30. UNDERTAKINGS
Registrant hereby undertakes to furnish its Annual Report to
Shareholders upon request and without charge to any person to whom a
prospectus is delivered.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Provident Institutional Funds has duly caused
this Post Effective Amendment No. 61 to its Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of
Philadelphia, and State of Pennsylvania, on February 1, 1999.
PROVIDENT INSTITUTIONAL FUNDS
/s/ Rodney D. Johnson
-----------------------------
Rodney D. Johnson
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 61 to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
*G. Nicholas Beckwith, III Trustee February 1, 1999
- ----------------------------
G. Nicholas Beckwith, III
*Jerrold B. Harris Trustee February 1, 1999
- ----------------------------
Jerrold B. Harris
*Joseph P. Platt Trustee February 1, 1999
- ----------------------------
Joseph P. Platt
*Robert C. Robb, Jr. Trustee February 1, 1999
- ----------------------------
Robert C. Robb, Jr.
*Kenneth L. Urish Trustee February 1, 1999
- ----------------------------
Kenneth L. Urish
*Frederick W. Winter Trustee February 1, 1999
- ----------------------------
Frederick W. Winter
/s/ Rodney D. Johnson Chairman of the Board February 1, 1999
- ----------------------------
Rodney D. Johnson of Trustees, President
and Treasurer (Chief
Executive Officer and
Principal Financial and
Accounting Officer)
*By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Attorney-in-Fact
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
Power of Attorney
I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney
for me, with full power of substitution, and in my name and on my behalf as a
trustee to sign any Registration Statement or Amendment thereto of PROVIDENT
INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on January 21, 1999.
/s/ G. Nicholas Beckwith, III
------------------------------------------
G. Nicholas Beckwith, III
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
Power of Attorney
I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney
for me, with full power of substitution, and in my name and on my behalf as a
trustee to sign any Registration Statement or Amendment thereto of PROVIDENT
INSTITUTIONAL FUNDS. (Registration No. 2-47015) to be filed with the
Securities and Exchange Commission under the Securities Act of 1933, and
generally to do and perform all things necessary to be done in that
connection.
I have signed this Power of Attorney on January 21, 1999.
/s/ Joseph P. Platt, Jr.
-----------------------------------------
Joseph P. Platt, Jr.
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
POWER OF ATTORNEY
I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney
for me, with full power of substitution, and in my name and on my behalf as a
trustee to sign any Registration Statement or Amendment thereto of PROVIDENT
INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on January 21, 1999.
/s/ Jerrold B. Harris
-----------------------------------
Jerrold B. Harris
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
POWER OF ATTORNEY
I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney
for me, with full power of substitution, and in my name and on my behalf as a
trustee to sign any Registration Statement or Amendment thereto of PROVIDENT
INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on January 21, 1999.
/s/ Robert C. Robb, Jr.
----------------------------------
Robert C. Robb, Jr.
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
POWER OF ATTORNEY
I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney
for me, with full power of substitution, and in my name and on my behalf as a
trustee to sign any Registration Statement or Amendment thereto of PROVIDENT
INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on January 21, 1999.
/s/ Kenneth L. Urish
---------------------------------------
Kenneth L. Urish
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
POWER OF ATTORNEY
I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney
for me, with full power of substitution, and in my name and on my behalf as a
trustee to sign any Registration Statement or Amendment thereto of PROVIDENT
INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, and generally to do
and perform all things necessary to be done in that connection.
I have signed this Power of Attorney on January 20, 1999.
/s/ Frederick W. Winter
------------------------------------
Frederick W. Winter
<PAGE>
Exhibit Index
------- -----
(a) (1) Certificate of Trust.
(2) Agreement and Declaration of Trust.
(b) By-laws.
(d) Form of Investment Advisory Agreement.
(e) Form of Distribution Agreement.
(h) (3) Form of Share Purchase Agreements.
(i) Opinion and Consent of Drinker Biddle & Reath LLP.
(j) (1) Consent of PricewaterhouseCoopers LLP.
(2) Consent of KPMG LLP.
(3) Consent of Willkie Farr & Gallagher.
(4) Consent of O'Melveney & Myers.
(m) (1) Registrant's Form of Amended Distribution Plan with respect to Plus
Shares and Form of Distribution Agreement.
(2) Registrant's Shareholder Services Plan with respect to Dollar
Shares.
(3) Registrant's Form of Shareholder Service Plan with respect to
Administration Shares.
(4) Registrant's Form of Shareholder Service Plan with respect to Cash
Reserve Shares.
(5) Registrant's Form of Shareholder Service Plan with respect to Cash
Management Shares.
(6) Form of Shareholder Services Agreement.
(n) Financial Data Schedules.
(o) Form of Amended Rule 18f-3 Plan for Multi-Class System.
<PAGE>
CERTIFICATE OF TRUST
OF
PROVIDENT INSTITUTIONAL FUNDS
This Certificate of Trust is being executed as of October 21, 1998 for
the purpose of organizing a business trust pursuant to the Delaware Business
Trust Act, 12 Del. C. (S)(S) 3801 et seq. (the "Act").
--- - -- ---
The undersigned hereby certifies as follows:
1. Name. The name of the business trust is Provident Institutional
----
Funds (the "Trust").
2. Registered Investment Company. The Trust is or will become a
-----------------------------
registered investment company under the Investment Company Act of 1940, as
amended.
3. Effective Date. This Certificate of Trust shall be effective upon
--------------
the date and time of filing.
4. Registered Office and Registered Agent. The registered office of
--------------------------------------
the Trust in the State of Delaware is located at Bellevue Park Corporate Center,
400 Bellevue Parkway, Wilmington, New Castle County, Delaware 19809. The name of
the registered agent of the Trust for service of process at such location is
Lisa M. Buono.
5. Notice of Limitation of Liabilities of Series. Notice is hereby
---------------------------------------------
given that pursuant to Section 3804 of the Act the Trust is or may hereafter be
constituted a series trust. The debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to any particular
series shall be enforceable against the assets of such series only, and not
against the assets of the Trust generally or any other series of the Trust, and
none of the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to the Trust generally or any other
series of the Trust shall be enforceable against the assets of such series.
IN WITNESS WHEREOF, the undersigned, being the sole initial trustee of
the Trust, has duly executed this Certificate of Trust as of the day and year
first above written.
TRUSTEE
/s/ Rodney D. Johnson
_______________________________
as Trustee and not individually
<PAGE>
----------------------
PROVIDENT INSTITUTIONAL FUNDS AGREEMENT AND
DECLARATION OF TRUST
Dated: October 21, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I NAME AND DEFINITIONS......................................... 1
Section 1.1 Name 1
Section 1.2 Definitions.................................................. 1
ARTICLE II BENEFICIAL INTEREST.......................................... 2
Section 2.1 Shares of Beneficial Interest................................ 2
Section 2.2 Issuance of Shares........................................... 3
Section 2.3 Register of Shares and Share Certificates.................... 3
Section 2.4 Transfer of Shares........................................... 3
Section 2.5 Treasury Shares.............................................. 4
Section 2.6 Establishment of Series and Classes.......................... 4
Section 2.7 Investment in the Trust...................................... 5
Section 2.8 Assets and Liabilities Belonging to Series, etc.............. 5
Section 2.9 No Preemptive Rights......................................... 6
Section 2.10 Conversion Rights............................................ 6
Section 2.11 Legal Proceedings............................................ 7
Section 2.12 Status of Shares............................................. 7
ARTICLE III THE TRUSTEES................................................. 8
Section 3.1 Management of the Trust...................................... 8
Section 3.2 Term of Office of Trustees................................... 8
Section 3.3 Vacancies and Appointment of Trustees........................ 8
Section 3.4 Temporary Absence of Trustee................................. 9
Section 3.5 Number of Trustees........................................... 9
Section 3.6 Effect of Death, Resignation, Etc. of a Trustee.............. 9
Section 3.7 Ownership of Assets of the Trust............................. 9
Section 3.8 Series Trustees.............................................. 10
Section 3.9 No Accounting................................................ 10
ARTICLE IV POWERS OF THE TRUSTEES....................................... 10
Section 4.1 Powers....................................................... 10
Section 4.2 Issuance and Repurchase of Shares............................ 14
Section 4.3 Trustees and Officers as Shareholders........................ 14
Section 4.4 Action by the Trustees and Committees........................ 14
Section 4.5 Chairman of the Trustees..................................... 15
Section 4.6 Principal Transactions....................................... 15
ARTICLE V INVESTMENT ADVISOR, INVESTMENT SUB-ADVISOR,
PRINCIPAL UNDERWRITER, ADMINISTRATOR,
TRANSFER AGENT, CUSTODIAN AND OTHER
CONTRACTORS.................................................. 15
Section 5.1 Certain Contracts............................................ 15
ARTICLE VI SHAREHOLDER VOTING POWERS AND MEETINGS....................... 17
Section 6.1 Voting....................................................... 17
Section 6.2 Meetings..................................................... 18
Section 6.3 Quorum and Required Vote..................................... 18
Section 6.4 Action by Written Consent.................................... 19
</TABLE>
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<PAGE>
PROVIDENT INSTITUTIONAL FUNDS AGREEMENT AND
--------------------------------------------
DECLARATION OF TRUST
--------------------
AGREEMENT AND DECLARATION OF TRUST of Provident Institutional Funds, a
Delaware statutory business trust, made as of October 21, 1998, by the
undersigned Trustee.
WHEREAS, the undersigned Trustee desires to establish a trust for the
investment and reinvestment of funds contributed thereto;
WHEREAS, the Trustee desires that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
WHEREAS, the Trustee declares that all money and property contributed to
the trust established hereunder shall be held and managed in trust for the
benefit of the holders of the shares of beneficial interest issued hereunder and
subject to the provisions hereof;
NOW, THEREFORE, in consideration of the foregoing, the undersigned Trustee
hereby declares that all money and property contributed to the trust hereunder
shall be held and managed in trust under this Declaration of Trust ("Trust
Instrument") as herein set forth below.
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
Section 1.1 Name. The name of the trust established hereby is the "Provident
----
Institutional Funds."
Section 1.2 Definitions. Wherever used herein, unless otherwise required by
-----------
the context or specifically provided:
(a) "Act" means the Delaware Business Trust Act, 12 Del. C. (S)(S)
---- --
3801 et seq., as from time to time amended;
-- ---
(b) "By-laws" means the By-laws referred to in Section 4.1(e) hereof,
as from time to time amended;
(c) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person" and "Principal Underwriter" shall have the meanings given
them in the 1940 Act. "Majority Shareholder Vote" shall have the same meaning as
the term "vote of a majority of the outstanding voting securities" is given in
the 1940 Act;
(d) "Class" means any division of Shares within a Series, which Class
is or has been established in accordance with the provisions of Article II.
<PAGE>
(e) "Net Asset Value" means the net asset value of each Series or
Class of the Trust determined in the manner provided in Section 7.4 hereof;
(f) "Outstanding Shares" means those Shares recorded from time to
time in the books of the Trust or its transfer agent as then issued and
outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in the treasury of the
Trust;
(g) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Section 2.6 hereof;
(h) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or Class thereof shall be divided and may include fractions of Shares as
well as whole Shares;
(j) "Trust" refers to Provident Institutional Funds and reference to
the Trust, when applicable to one or more Series of the Trust, shall refer to
any such Series;
(k) "Trustee" or "Trustees" means the person or persons who has or
have signed this Trust Instrument, so long as such person or persons shall
continue in office in accordance with the terms hereof, and all other persons
who may from time to time be duly qualified and serving as Trustees in
accordance with the provisions of Article III hereof, and reference herein to a
Trustee or to the Trustees shall refer to the individual Trustees in their
capacity as Trustees hereunder;
(l) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(m) The "1940 Act" refers to the Investment Company Act of 1940 and
the Rules and Regulations thereunder, all as may be amended from time to time.
ARTICLE II
----------
BENEFICIAL INTEREST
Section 2.1 Shares of Beneficial Interest. The beneficial interest in the
-----------------------------
Trust shall be divided into such transferable Shares of one or more separate and
distinct Series and Classes within a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series and Class
authorized hereunder is unlimited. Each Share shall have no par value, unless
otherwise determined by the Trustees in connection with the creation and
establishment of a Series or Class. All Shares issued hereunder, including
without limitation,
-2-
<PAGE>
Class Shares issued in connection with a dividend in Shares or a split or
reverse split of Shares, shall be fully paid and nonassessable.
Section 2.2 Issuance of Shares. The Trustees in their discretion may, from
------------------
time to time, without vote of the Shareholders, issue Shares of each Series and
Class to such party or parties and for such amount and type of consideration (or
for no consideration if pursuant to a Share dividend or split-up), subject to
applicable law, including cash or securities (including Shares of a different
Series or Class), at such time or times and on such terms as the Trustees may
deem appropriate, and may in such manner acquire other assets (including the
acquisitions of assets subject to, and in connection with, the assumption of
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the treasury. The
Trustees may from time to time divide or combine the Shares into a greater or
lesser number without thereby changing the proportionate beneficial interests in
the Trust. The Trustees may classify or reclassify any unissued Shares or any
Shares previously issued and reacquired of any Series or Class into one or more
Series or Classes that may be established and designated from time to time.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such person is interested, may acquire, own, hold and dispose of
Shares of any Series or Class of the Trust to the same extent as if such person
were not a Trustee, officer or other agent of the Trust; and the Trust may issue
and sell or cause to be issued and sold and may purchase Shares of any Series or
Class from any such person or any such organization subject only to the general
limitations, restrictions or other provisions applicable to the sale or purchase
of Shares of such Series or Class generally.
Section 2.3 Register of Shares and Share Certificates. A register shall be
-----------------------------------------
kept at the principal office of the Trust or an office of the Trust's transfer
agent which shall contain the names and addresses of the Shareholders of each
Series and Class, the number of Shares of that Series and Class thereof held by
them respectively and a record of all transfers thereof. As to Shares for which
no certificate has been issued, such register shall be conclusive as to who are
the holders of the Shares and who shall be entitled to receive dividends or
other distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or other distribution, nor to have notice given to him as herein or in
the By-laws provided, until he has given his address to the transfer agent or
such other officer or agent of the Trust as shall keep the said register for
entry thereon. The Trustees, in their discretion, may authorize the issuance of
share certificates and promulgate appropriate rules and regulations as to their
use. In the event that one or more certificates are issued, whether in the name
of a Shareholder or a nominee, such certificate or certificates shall constitute
evidence of ownership of Shares for all purposes, including transfer, assignment
or sale of such Shares, subject to such limitations as the Trustees may, in
their discretion, prescribe.
Section 2.4 Transfer of Shares. Except as otherwise provided by the
------------------
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's
-3-
<PAGE>
transfer agent of a duly executed instrument of transfer, together with a Share
certificate, if one is outstanding, and such evidence of the genuineness of each
such execution and authorization and of such other matters as may be required by
the Trustees. Upon such delivery the transfer shall be recorded on the register
of the Trust. Until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereunder and neither
the Trustees nor the Trust, nor any transfer agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Section 2.5 Treasury Shares. Shares held in the treasury shall, until
---------------
reissued pursuant to Section 2.2 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.6 Establishment of Series and Classes. The Trust shall consist of
-----------------------------------
one or more Series and Classes and separate and distinct records shall be
maintained by the Trust for each Series and Class. The Trustees shall have full
power and authority, in their sole discretion, and without obtaining any prior
authorization or vote of the Shareholders of any Series or Class of the Trust,
to establish and designate and to change in any manner any initial or additional
Series or Classes and to fix such preferences, voting powers, rights and
privileges of such Series or Classes as the Trustees may from time to time
determine, to divide or combine the Shares or any Series or Classes into a
greater or lesser number, to classify or reclassify any issued Shares or any
Series or Classes into one or more Series or Classes of Shares, and to take such
other action with respect to the Shares as the Trustees may deem desirable.
Unless another time is specified by the Trustees, the establishment and
designation of any Series or Class shall be effective upon the adoption of a
resolution by the Trustees setting forth such establishment and designation and
the preferences, powers, rights and privileges of the Shares of such Series or
Class, whether directly in such resolution or by reference to, or approval of,
another document that sets forth such relative rights and preferences of such
Series (or Class) including, without limitation, any registration statemet of
the Trust, or as otherwise provided in such resolution. The Trust may issue any
number of Shares of each Series or Class and need not issue certificates for any
Shares.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series or Classes as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series and
Class of the Trust except as the context otherwise requires.
All Shares of each Class of a particular Series shall represent an equal
proportionate interest in the assets belonging to that Series (subject to the
liabilities belonging to the Series, and, in the case of each Class, to the
liabilities belonging to that Class), and each Share of any Class of a
particular Series shall be equal to each other Share of that Class; but the
provisions of this sentence shall not restrict any distinctions permissible
under this Section 2.6.
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<PAGE>
Section 2.7 Investment in the Trust. The Trustees shall accept investments
-----------------------
in any Series of the Trust or Class, if the Series has been divided into
Classes, from such persons and on such terms as they may from time to time
authorize. At the Trustees' discretion, such investments, subject to applicable
law, may be in the form of cash or securities in which the affected Series is
authorized to invest, valued as provided in Section 7.4 hereof. Unless the
Trustees otherwise determine, investments in a Series shall be credited to each
Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received. Without limiting the
generality of the foregoing, the Trustees may, in their sole discretion, (a) fix
the Net Asset Value per Share of the initial capital contribution, (b) impose
sales or other charges upon investments in the Trust or (c) issue fractional
Shares.
Section 2.8 Assets and Liabilities Belonging to Series, etc. All
------------------------------------------------
consideration received by the Trust for the issue or sale of Shares of a
particular Series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held and accounted for separately
from the other assets of the Trust and of every other Series and may be referred
to herein as "assets belonging to" that Series. The assets belonging to a
particular Series shall belong to that Series for all purposes, and to no other
Series, subject only to the rights of creditors of that Series. In addition,
any assets, income, earnings, profits or funds, or payments and proceeds with
respect thereto, which are not readily identifiable as belonging to any
particular Series shall be allocated by the Trustees between and among one or
more of the Series in such manner as the Trustees, in their sole discretion,
deem fair and equitable. If there are classes of Shares within a Series, the
assets belonging to the Series shall be further allocated to each Class in the
proportion that the "assets belonging to" the Class (calculated in the same
manner as with determination of assets "belonging to" the Series) bears to the
assets of all Classes within the Series. Each such allocation shall be
conclusive and binding upon the Shareholders of all Series and Classes for all
purposes, and such assets, income, earnings, profits or funds, or payments and
proceeds with respect thereto shall be assets belonging to that Series or Class,
as the case may be. The assets belonging to a particular Series and Class shall
be so recorded upon the books of the Trust, and shall be held by the Trustees in
trust for the benefit of the holders of Shares of that Series or Class, as the
case may be.
The assets belonging to each Series shall be charged with the
liabilities of that Series and all expenses, costs, charges and reserves
attributable to that Series. Any general liabilities, expenses, costs, charges
or reserves of the Trust which are not readily identifiable as belonging to any
particular Series shall be allocated and charged by the Trustees between or
among any one or more of the Series in such manner as the Trustees in their sole
discretion deem fair and equitable. Each such allocation shall be conclusive
and binding upon the Shareholders of all Series for all purposes. The
liabilities, expenses, costs, charges and reserves allocated and so charged to a
Series are herein referred to as "liabilities belonging to" that Series. Except
as provided in the next sentence or otherwise required or permitted by
applicable law or any rule or order of the Commission, the "liabilities
belonging to" such
-5-
<PAGE>
Series shall be allocated to each Class of a Series in the proportion that the
assets belonging to such Class bear to the assets belonging to all Classes in
the Series. To the extent permitted by rule or order of the Commission, the
Trustees may allocate all or a portion of any liabilities belonging to a Series
to a particular Class or Classes (collectively, "Class Expenses") as the
Trustees may from time to time determine is appropriate. In addition, all
liabilities, expenses, costs, charges and reserves belonging to a Class shall be
allocated to such Class.
Without limitation of the foregoing provisions of this Section 2.8, but
subject to the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Series shall be enforceable against the
assets belonging to such Series only, and not against the assets of the Trust
generally or any other Series. Notice of this limitation on inter-Series
liabilities shall be set forth in the certificate of trust of the Trust (whether
originally or by amendment) as filed or to be filed in the Office of the
Secretary of State of the State of Delaware pursuant to the Act, and upon the
giving of such notice in the certificate of trust, the statutory provisions of
Section 3804 of the Act relating to limitations on inter-Series liabilities (and
the statutory effect under Section 3804 of setting forth such notice in the
certificate of trust) shall become applicable to the Trust and each Series. Any
person extending credit to, contracting with or having any claim against any
Series may satisfy or enforce any debt, liability, obligation or expense
incurred, contracted for or otherwise existing with respect to that Series from
the assets of that Series only. No Shareholder or former Shareholder of any
Series shall have a claim on or any right to any assets allocated or belonging
to any other Series.
Similarly, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Class shall be
enforceable against the assets belonging to such Class only, and not against the
assets of the Series or the Trust generally or any other Class. Each contract
entered into by the Trust which is or may be an obligation of a Class within a
Series shall contain a provision to the effect that the parties to the contract
will look only to the assets belonging to the Class for the satisfaction of any
liability, and not to any extent to the assets of any other Class or Series or
the Trust generally. If, notwithstanding the preceding sentence, any liability
properly charged to a Class is paid from the assets of another Class, the Class
from whose assets the liability was paid shall be reimbursed from the assets of
the Class to which such liability belonged.
Section 2.9 No Preemptive Rights. Shareholders shall have no preemptive or
--------------------
other similar rights to subscribe to any additional Shares or other securities
issued by the Trust or the Trustees, whether of the same or another Series or
Class.
Section 2.10 Conversion Rights. The Trustees shall have the authority to
-----------------
provide from time to time that the holders of Shares of any Series or Class
shall have the right to convert or exchange said Shares for or into Shares of
one or more other Series or Classes in accordance with such requirements and
procedures as may be established from time to time by the Trustees.
-6-
<PAGE>
Section 2.11 Legal Proceedings. No person, other than a Trustee, who is not
-----------------
a Shareholder of a particular Series or Class shall be entitled to bring any
derivative action, suit or other proceeding on behalf of or with respect to such
Series or Class. No Shareholder of a Series or a Class may maintain a
derivative action with respect to such Series or Class unless holders of a least
ten percent (10%) of the outstanding Shares of such Series or Class join in the
bringing of such action. Except as otherwise provided in Section 3816 of the
Act and the foregoing provisions of this Section 2.11, all matters relating to
the bringing of derivative actions in the right of the Trust shall be governed
by the General Corporation Law of the State of Delaware relating to derivative
actions, and judicial interpretations thereunder, as if the Trust were a
Delaware Corporation and the Shareholders were shareholders of a Delaware
corporation.
In addition to the requirements set forth in Section 3816 of the Act, a
Shareholder may bring a derivative action on behalf of the Trust with respect to
a Series or Class only if the following conditions are met: (a) the Shareholder
or Shareholders must make a pre-suit demand upon the Trustees to bring the
subject action unless an effort to cause the Trustees to bring such an action is
not likely to succeed; and a demand on the Trustees shall only be deemed not
likely to succeed and therefore excused if a majority of the Trustees, or a
majority of any committee established to consider the merits of such action, has
a personal financial interest in the transaction at issue, and a Trustee shall
not be deemed interested in a transaction or otherwise disqualified from ruling
on the merits of a Shareholder demand by virtue of the fact that such Trustee
receives remuneration for his service as a Trustee of the Trust or as a trustee
or director of one or more investment companies that are under common management
with or otherwise affiliated with the Trust; and (b) unless a demand is not
required under clause (a) of this paragraph, the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and to
investigate the basis of such claim; and the Trustees shall be entitled to
retain counsel or other advisors in considering the merits of the request and
shall require an undertaking by the Shareholders making such request to
reimburse the Trust for the expense of any such advisors in the event that the
Trustees determine not to bring such action. For purposes of this Section 2.11,
the Trustees may designate a committee of one Trustee to consider a Shareholder
demand if necessary to create a committee with a majority of Trustees who do not
have a personal financial interest in the transaction at issue.
Section 2.12 Status of Shares. Shares shall be deemed to be personal
----------------
property giving only the rights provided in this instrument. Every Shareholder
by virtue of having become a Shareholder shall be held to have expressly
assented and agreed to the terms hereof. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the Trust nor entitle
the representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the Shareholders
partners.
-7-
<PAGE>
ARTICLE III
-----------
THE TRUSTEES
------------
Section 3.1 Management of the Trust. The Trustees shall have exclusive and
-----------------------
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct
the business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the State of Delaware, in
any and all states of the United States of America, in the District of Columbia,
in any and all commonwealths, territories, dependencies, colonies, or
possessions of the United States of America, and in any foreign jurisdiction and
to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination
as to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Trust Instrument, the
presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall not be
construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Except for the Trustees named herein or appointed pursuant to Section 3.8,
or Trustees appointed to fill vacancies pursuant to Section 3.3 hereof, the
Trustees shall be elected by the Shareholders owning of record a plurality of
the Shares voting at a meeting of Shareholders. The initial Trustee of the
Trust shall be Rodney Johnson.
Section 3.2 Term of Office of Trustees. Each Trustee shall hold office
--------------------------
during the existence of this Trust, and until its termination as herein
provided; except: (a) that any Trustee may resign his trust by written
instrument signed by him and delivered to the Chairman, President, Secretary, or
other Trustee of the Trust, which shall take effect upon such delivery or upon
such later date as is specified therein; (b) that any Trustee may be removed at
any time by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) that any Trustee who requests in writing to be retired or
who has died, become physically or mentally incapacitated by reason of disease
or otherwise, or is otherwise unable to serve, may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) that a Trustee may be removed at any meeting of the
Shareholders of the Trust by a vote of Shareholders owning at least two-thirds
of the outstanding Shares of all Series.
Section 3.3 Vacancies and Appointment of Trustees. In case of the
-------------------------------------
declination to serve, death, resignation, retirement, removal, physical or
mental incapacity by reason of disease or otherwise of a Trustee, or a Trustee
is otherwise unable to serve, or an increase in
-8-
<PAGE>
the number of Trustees, a vacancy shall occur. Whenever a vacancy in the Board
of Trustees shall occur, until such vacancy is filled, the other Trustees shall
have all the powers hereunder and the certificate of the other Trustees of such
vacancy shall be conclusive. In the case of an existing vacancy, the remaining
Trustee or Trustees shall fill such vacancy by appointing such other person as
such Trustee or Trustees in their discretion shall see fit consistent with the
limitations under the 1940 Act, unless such Trustee or Trustees determine, in
accordance with Section 3.5, to decrease the size of the Board to the number of
remaining Trustees.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees.
An appointment of a Trustee shall be effective upon the acceptance of the
person so appointed to serve as trustee, except that any such appointment in
anticipation of a vacancy shall become effective at or after the date such
vacancy occurs.
Section 3.4 Temporary Absence of Trustee. Any Trustee may, by power of
----------------------------
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees, provided that in no case shall less than
two Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided or unless there is only one or two Trustees.
Section 3.5 Number of Trustees. The number of Trustees shall be one, or such
------------------
other number as shall be fixed from time to time by the Trustees.
Section 3.6 Effect of Death, Resignation, Etc. of a Trustee. The declination
-----------------------------------------------
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the Trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
Section 3.7 Ownership of Assets of the Trust. Legal title in and beneficial
--------------------------------
ownership of all of the assets of the Trust shall at all times be considered as
vested in the Trust, except that the Trustees may cause legal title in and
beneficial ownership of any Trust Property to be held by, or in the name of one
or more of the Trustees acting for and on behalf of the Trust, or in the name of
any person as nominee acting for and on behalf of the Trust. No Shareholder
shall be deemed to have a severable ownership interest in any individual asset
of the Trust or of any Series or Class, or any right of partition or possession
thereof, but each Shareholder shall have, except as otherwise provided for
herein, a proportionate undivided beneficial interest in each Series or Class
the Shares of which are owned by such Shareholders. The Shares shall be
personal property giving only the rights specifically set forth in this Trust
Instrument. The Trust, or at the determination of the Trustees, one or more of
the Trustees or a nominee acting for and on behalf of the Trust, shall be deemed
to hold legal title and beneficial ownership of any income earned on securities
of the Trust issued by any business entities formed, organized, or existing
under the laws of any jurisdiction, including the laws of any foreign country.
-9-
<PAGE>
Section 3.8 Series Trustees. In connection with the establishment of one or
---------------
more Series or Classes, the Trustees establishing such Series or Class may
appoint, to the extent permitted by the 1940 Act, separate Trustees with respect
to such Series or Classes (the "Series Trustees"). Series Trustees may, but are
not required to, serve as Trustees of the Trust of any other Series or Class of
the Trust. To the extent provided by the Trustees in the appointment of Series
Trustees, the Series Trustees may have, to the exclusion of any other Trustee of
the Trust, all the powers and authorities of Trustees hereunder with respect to
such Series or Class, but may have no power or authority with respect to any
other Series or Class. Any provision of this Trust Instrument relating to
election of Trustees by Shareholders only shall entitle the Shareholders of a
Series or Class for which Series Trustees have been appointed to vote with
respect to the election of such Series Trustees and the Shareholders of any
other Series or Class shall not be entitled to participate in such vote. In the
event that Series Trustees are appointed, the Trustees initially appointing such
Series Trustees shall, without the approval of any Outstanding Shares, amend
either this Trust Instrument or the By-laws to provide for the respective
responsibilities of the Trustees and the Series Trustees in circumstances where
an action of the Trustees or Series Trustees affects all Series of the Trust or
two or more Series represented by different Trustees.
Section 3.9 No Accounting. Except to the extent required by the 1940 Act or,
-------------
if determined to be necessary or appropriate by the other Trustees under
circumstances which would justify his or her removal for cause, no person
ceasing to be a Trustee for reasons including, but not limited to, death,
resignation, retirement, removal or incapacity (nor the estate of any such
person) shall be required to make an accounting to the Shareholders or remaining
Trustees upon such cessation.
ARTICLE IV
----------
POWERS OF THE TRUSTEES
----------------------
Section 4.1 Powers. The Trustees in all instances shall act as principals,
------
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or appropriate in connection with the management of the Trust. The Trustees
shall have full authority and power to make any and all investments which they,
in their sole discretion, shall deem proper to accomplish the purpose of this
Trust. Subject to any applicable limitation in this Trust Instrument, the
Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, and to sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
operators, including the power to invest all or any part of its assets in the
securities of another investment company;
-10-
<PAGE>
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation, liability or engagement of any
person and to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a Principal Underwriter in the manner hereinafter provided for or by the
Trust itself, or both, or otherwise pursuant to a plan of distribution of any
kind;
(e) To adopt By-laws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders,
which By-laws shall be deemed a part of this Trust Instrument and are
incorporated herein by reference;
(f) To elect and remove such officers and appoint and terminate such
agents and contractors as they consider appropriate, any of whom may be a
Trustee, and may provide for the compensation of all of the foregoing;
(g) To employ one or more banks, trust companies or companies that
are members of a national securities exchange or such other entities as
custodians of any assets of the Trust, subject to the 1940 Act and to any
conditions set forth in this Trust Instrument;
(h) To retain one or more transfer agents and shareholder servicing
agents, or both;
(i) To set record dates in the manner provided herein or in the By-
laws;
(j) To delegate such authority (which delegation may include the
power to subdelegate) as they consider desirable to any officers of the Trust
and to any investment adviser, manager, administrator, custodian, underwriter or
other agent or independent contractor;
(k) To join with other holders of any securities or debt instruments
in acting through a committee, depository, voting trustee or otherwise, and in
that connection to deposit any security or debt instrument with, or transfer any
security or debt instrument to, any such committee, depository or trustee, and
to delegate to them such power and authority with relation to any security or
debt instrument (whether or not so deposited or transferred) as the Trustees
shall deem proper and to agree to pay, and to pay, such portion of the expenses
and compensation of such committee, depository or trustee as the Trustees shall
deem proper;
(l) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(m) To pay pensions for faithful service, as deemed appropriate by
the Trustees, and to adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and
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provisions, including the purchasing of life insurance and annuity contracts as
a means of providing such retirement and other benefits, for any or all of the
Trustees, officers, employees and agents of the Trust;
(n) To the extent permitted by law, indemnify any person with whom
the Trust or any Series or Class has dealings;
(o) To engage in and to prosecute, defend, compromise, abandon, or
adjust by arbitration, or otherwise, any actions, suits, proceedings, disputes,
claims and demands relating to the Trust, and out of the assets of the Trust or
any Series or Class thereof to pay or to satisfy any debts, claims or expenses
incurred in connection therewith, including those of litigation, and such power
shall include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business judgment,
to dismiss any action, suit, proceeding, dispute, claim or demand, derivative or
otherwise, brought by any person, including a Shareholder in its own name or the
name of the Trust, whether or not the Trust or any of the Trustees may be named
individually therein or the subject matter arises by reason of business for or
on behalf of the Trust;
(p) To purchase and pay for entirely out of Trust Property such
insurance as they may deem necessary or appropriate for the conduct of the
business of the Trust, including, without limitation, insurance policies
insuring the Trust Property and payment of distributions and principal on its
investments, and insurance policies insuring the Shareholders, Trustees,
officers, representatives, employees, agents, investment advisers, managers,
administrators, custodians, underwriters, or independent contractors of the
Trust individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
such capacity, including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability;
(q) To sell, exchange, lend, pledge, mortgage, hypothecate, write
options on and lease any or all of the assets of the Trust, subject to the
provisions of Section 9.4(b) hereof;
(r) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities, debt instruments or property; and to
execute and deliver powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and discretion
with relation to securities, debt instruments or property as the Trustees shall
deem proper;
(s) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities or debt instruments;
(t) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of
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the Trustees or of the Trust or in the name of a custodian, subcustodian or
other depository or a nominee or nominees or otherwise;
(u) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish Classes
thereof having relative rights, powers and duties as they may provide consistent
with applicable law;
(v) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation, issuer or concern, any security or
debt instrument of which is held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation, issuer or
concern, and to pay calls or subscriptions with respect to any security or debt
instrument held in the Trust;
(w) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(x) To make distributions of income and of capital gains to
Shareholders in the manner herein provided;
(y) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or Classes, and to require
the redemption of the Shares of any Shareholders whose investment is less than
such minimum upon giving notice to such Shareholder;
(z) To cause each Shareholder, or each Shareholder of any particular
Series of Class, to pay directly, in advance or arrears, for charges of the
Trust's custodian or transfer, shareholder servicing or similar agent, an amount
fixed from time to time by the Trustees, by setting off such charges due from
such Shareholder from declared but unpaid dividends owed such Shareholder and/or
by reducing the number of Shares in the account of such Shareholder by that
number of full and/or fractional Shares which represents the outstanding amount
of such charges due from such Shareholder;
(aa) To establish one or more committees comprised of one or more of
the Trustees, and to delegate any of the powers of the Trustees to said
committees;
(bb) To interpret the investment policies, practices or limitations of
any Series or Class;
(cc) To establish a registered office and have a registered agent in
the State of Delaware;
(dd) To compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents, consultants,
contractors and employees of the Trust or the Trustees on such terms as they
deem appropriate;
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(ee) To invest part or all of the Trust Property (or part or all of
the assets of any Series), or to dispose of part or all of the Trust Property
(or part or all of the assets of any Series) and invest the proceeds of such
disposition, in interests issued by one or more other investment companies or
pooled portfolios (including investment by means of transfer of part or all of
the Trust Property in exchange for an interest or interests in such one or more
investment companies or pooled portfolios) all without any requirement of
approval by Shareholders. Any such other investment company or pooled portfolio
may (but need not) be a trust (formed under the laws of any state or
jurisdiction) which is classified as a partnership for federal income tax
purposes; and
(ff) In general, to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power herein set forth, either alone or in association
with others, and to do every other act or thing incidental or appurtenant to or
growing out of or connected with the aforesaid business or purposes, objects or
powers.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees. Any action by one or
more of the Trustees in their capacity as such hereunder shall be deemed an
action on behalf of the Trust or the applicable Series or Class, and not an
action in an individual capacity.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
Section 4.2 Issuance and Repurchase of Shares. The Trustees shall have
---------------------------------
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, exchange, and otherwise deal in Shares and, subject
to the provisions set forth in Article II and Article VII, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series or Class of the Trust,
with respect to which such Shares are issued.
Section 4.3 Trustees and Officers as Shareholders. Any Trustee, officer
-------------------------------------
or other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if such person were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which such person invested,
subject to the general limitations herein contained as to the sale and purchase
of such Shares.
Section 4.4 Action by the Trustees and Committees. The Trustees (and any
-------------------------------------
committee thereof) may act at a meeting held in person or in whole or in part by
conference telecommunications equipment. One-third, but not less than two, of
the Trustees shall constitute a quorum at any meeting unless there is only one
Trustee. Except as the Trustees may otherwise determine, one-third of the
members of any committee shall constitute a quorum at any meeting. The vote of
a majority of the Trustees (or committee members)
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present at a meeting at which a quorum is present shall be the act of the
Trustees (or any committee thereof). The Trustees (and any committee thereof)
may also act by written consent signed by a majority of the Trustees (or
committee members). Regular meetings of the Trustees may be held at such places
and at such times as the Trustees may from time to time determine. Special
meetings of the Trustees (and meetings of any committee thereof) may be called
orally or in writing by the Chairman of the Board of Trustees (or the chairman
of any committee thereof) or by any two other Trustees. Notice of the time, date
and place of all meetings of the Trustees (or any committee thereof) shall be
given by the party calling the meeting to each Trustee (or committee member) by
telephone, telefax, or telegram sent to the person's home or business address at
least twenty-four hours in advance of the meeting or by written notice mailed to
the person's home or business address at least seventy-two hours in advance of
the meeting. Notice of all proposed written consents of Trustees (or committees
thereof) shall be given to each Trustee (or committee member) by telephone,
telefax, telegram, or first class mail sent to the person's home or business
address. Notice need not be given to any person who attends a meeting without
objecting to the lack of notice or who executes a written consent or a written
waiver of notice with respect to a meeting. Written consents or waivers may be
executed in one or more counterparts. Execution of a written consent or waiver
and delivery thereof may be accomplished by telefax or other electronic means
approved by the Trustees.
Section 4.5 Chairman of the Trustees. The Trustees may appoint one of
------------------------
their number to be Chairman of the Board of Trustees. The Chairman shall preside
at all meetings of the Trustees at which he is present and may be (but is not
required to be) the chief executive officer of the Trust.
Section 4.6 Principal Transactions. Except to the extent prohibited by
----------------------
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any Affiliated Person
of the Trust, investment adviser, investment sub-adviser, distributor or
transfer agent for the Trust or with any Interested Person of such Affiliated
Person or other person; and the Trust may employ any such Affiliated Person or
other person, or firm or company in which such Affiliated Person or other person
is an Interested Person, as broker, legal counsel, registrar, investment
advisor, investment sub-advisor, distributor, transfer agent, dividend
disbursing agent, custodian or in any other capacity upon customary terms.
ARTICLE V
---------
INVESTMENT ADVISOR, INVESTMENT SUB-ADVISOR,
PRINCIPAL UNDERWRITER, ADMINISTRATOR, TRANSFER AGENT,
CUSTODIAN AND OTHER CONTRACTORS
-------------------------------
Section 5.1 Certain Contracts. Subject to compliance with the provisions
-----------------
of the 1940 Act, but notwithstanding any limitations of present and future law
or custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to
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time and without limiting the generality of their powers and authority otherwise
set forth herein, enter into one or more contracts with any one or more
corporations, trusts, associations, partnerships, limited partnerships, other
type of organizations, or individuals to provide for the performance and
assumption of some or all of the following services, duties and responsibilities
to, for or of the Trust and/or the Trustees, and to provide for the performance
and assumption of such other services, duties and responsibilities in addition
to those set forth below as the Trustees may determine to be appropriate:
(a) Investment Adviser and Investment Sub-Adviser. The Trustees may
---------------------------------------------
in their discretion, from time to time, enter into an investment advisory or
management contract or contracts with respect to the Trust or any Series whereby
the other party or parties to such contract or contracts shall undertake to
furnish the Trust with such management, investment advisory, statistical and
research facilities and services and such other facilities and services, if any,
and all upon such terms and conditions, as the Trustees may in their discretion
determine. Notwithstanding any other provision of this Trust Instrument, the
Trustees may authorize any investment adviser (subject to such general or
specific instructions as the Trustees may from time to time adopt) to effect
purchases, sales or exchanges of portfolio securities, other investment
instruments of the Trust, or other Trust Property on behalf of the Trustees, or
may authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser (and all without
further action by the Trustees). Any such purchases, sales and exchanges shall
be deemed to have been authorized by the Trustees.
The Trustees may authorize, subject to applicable requirements of the 1940
Act, the investment adviser to employ, from time to time, one or more sub-
advisers to perform such of the acts and services of the investment adviser, and
upon such terms and conditions, as may be agreed upon between the investment
adviser and sub-adviser. Any reference in this Trust Instrument to the
investment adviser shall be deemed to include such sub-advisers, unless the
context otherwise requires.
(b) Principal Underwriter. The Trustees may in their discretion from
---------------------
time to time enter into an exclusive or non-exclusive underwriting contract or
contracts providing for the sale of Shares, whereby the Trust may either agree
to sell Shares to the other party to the contract or appoint such other party
its sales agent for such Shares. In either case, the contract may also provide
for the repurchase or sale of Shares by such other party as principal or as
agent of the Trust.
(c) Administrator. The Trustees may in their discretion from time to
-------------
time enter into one or more contracts whereby the other party or parties shall
undertake to furnish the Trust with administrative services. The contract or
contracts shall be on such terms and conditions as the Trustees may in their
discretion determine.
(d) Transfer Agent. The Trustees may in their discretion from time
--------------
to time enter into one or more transfer agency and Shareholder service contracts
whereby the other party or parties shall undertake to furnish the Trustees with
transfer agency and Shareholder
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services. The contract or contracts shall be on such terms and conditions as the
Trustees may in their discretion determine.
(e) Administrative Service and Distribution Plans. The Trustees may,
---------------------------------------------
on such terms and conditions as they may in their discretion determine, adopt
one or more plans pursuant to which compensation may be paid directly or
indirectly by the Trust for Shareholder servicing, administration and/or
distribution services with respect to one or more Series or Classes including
without limitation, plans subject to Rule 12b-1 under the 1940 Act, and the
Trustees may enter into agreements pursuant to such plans.
(f) Fund Accounting. The Trustees may in their discretion from time
---------------
to time enter into one or more contracts whereby the other party or parties
undertakes to handle all or any part of the Trust's accounting responsibilities,
whether with respect to the Trust's properties, Shareholders or otherwise.
(g) Custodian and Depository. The Trustees may in their discretion
------------------------
from time to time enter into one or more contracts whereby the other party or
parties undertakes to act as depository for and to maintain custody of the
property of the Trust or any Series or Class and accounting records in
connection therewith.
(h) Parties to Contract. Any contract described in this Article V
-------------------
hereof may be entered into with any corporation, firm, partnership, trust or
association, although one or more of the Trustees or officers of the Trust may
be an officer, director, trustee, shareholder, or member of such other party to
the contract, and no such contract shall be invalidated or rendered void or
voidable by reason of the existence of any relationship, nor shall any person
holding such relationship be disqualified from voting on or executing the same
in his capacity as Shareholder and/or Trustee, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said contract or accountable for any
profit realized directly or indirectly therefrom, provided that the contract
when entered into was not inconsistent with the provisions of this Article V.
The same person (including a firm, corporation, partnership, trust, or
association) may be the other party to contracts entered into pursuant to this
Article V, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 5.1.
ARTICLE VI
----------
SHAREHOLDER VOTING POWERS AND MEETINGS
--------------------------------------
Section 6.1 Voting. The Shareholders shall have power to vote only: (a)
------
for the election of one or more Trustees in order to comply with the provisions
of the 1940 Act (including Section 16(a) thereof); (b) with respect to any
contract entered into pursuant to Article V to the extent required by the 1940
Act; (c) with respect to termination of the Trust or a Series or Class thereof
to the extent required by applicable law; (d) with respect to any plan adopted
pursuant to Rule 12b-1 (or any successor rule) under the 1940 Act, and related
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matters, to the extent required under the 1940 Act; and (e) with respect to such
additional matters relating to the Trust as may be required by this Trust
Instrument, the By-laws or any registration of the Trust or Series as an
investment company under the 1940 Act with the Commission (or any successor
agency) or as the Trustees may consider necessary or desirable.
On each matter submitted to a vote of Shareholders, unless the Trustees
determine otherwise, all Shares of all Series and Classes shall vote as a single
class; provided, however, that: (a) as to any matter with respect to which a
separate vote of any Series or Class is required by the 1940 Act or other
applicable law or is required by attributes applicable to any Series or Class,
such requirements as to a separate vote by that Series or Class shall apply; (b)
unless the Trustees determine that this clause (b) shall not apply in a
particular case, to the extent that a matter referred to in clause (a) above
affects more than one Series or Class and the interests of each such Series or
Class in the matter are identical, then the Shares of all such affected Series
or Classes shall vote as a single class; and (c) as to any matter which does not
affect the interests of a particular Series or Class, only the holders of Shares
of the one or more affected Series or Classes shall be entitled to vote. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote, and each fractional Share shall be entitled to a proportionate
fractional vote. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy or in any manner provided
for in the By-laws. A proxy may be given in writing, by telefax, or in any
other manner provided for in the By-laws. Anything in this Trust Instrument to
the contrary notwithstanding, in the event a proposal by anyone other than the
officers or Trustees of the Trust is submitted to a vote of the Shareholders of
the Trust or one or more Series or Classes thereof, or in the event of any proxy
contest or proxy solicitation or proposal in opposition to any proposal by the
officers or Trustees of the Trust, Shares may be voted only in person or by
written proxy. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required or permitted by law, this Trust
Instrument or any of the By-laws of the Trust to be taken by Shareholders.
Section 6.2 Meetings. Meetings of Shareholders (including meetings
--------
involving only the holders of Shares of one or more but less than all Series or
Classes) may be called by the Trustees from time to time to be held at such
place within or without the State of Delaware, and on such date as may be
designated in the call thereof for the purpose of taking action upon any matter
as to which the vote or authority of the Shareholders is required or permitted
as provided in Section 6.1. Special meetings of the Shareholders of any Series
may be called by the Trustees and shall be called by the Trustees upon the
written request of Shareholders owning at least twenty-five percent (25%) of the
Outstanding Shares entitled to vote, except to the extent that a lesser
percentage is prescribed by the 1940 Act. Notice shall be sent, postage prepaid,
by mail or such other means determined by the Trustees, at least 7 days prior to
any such meeting.
Section 6.3 Quorum and Required Vote. Unless a larger percentage is
------------------------
required by law, by any provision of this Trust Instrument or by the Trustees,
one-third of the Shares entitled to vote in person or by proxy on a particular
matter shall be a quorum for the transaction of business at a Shareholders'
meeting with respect to that matter. Any lesser
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number shall be sufficient for adjournments. Any adjourned session or sessions
may be held without the necessity of further notice. Except when a larger vote
is required by law, by any provision of this Trust Instrument or by the
Trustees, a majority of the Shares voted in person or by proxy on a particular
matter at a meeting at which a quorum is present shall decide any questions with
respect to that matter and a plurality shall elect a Trustee.
Section 6.4 Action by Written Consent. Subject to the provisions of the
-------------------------
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of the Shares entitled to vote on the matter (or
such larger proportion thereof as shall be required by law, by any provision of
this Trust Instrument or by the Trustees) consent to the action in writing. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders. The Trustees may adopt additional rules and procedures regarding
the taking of Shareholder action by written consents.
ARTICLE VII
-----------
DISTRIBUTIONS AND REDEMPTIONS
-----------------------------
Section 7.1 Distributions.
-------------
(a) The Trustees may from time to time declare and pay dividends or
other distributions with respect to any Series or Class. The amount of such
dividends or distributions and the payment of them and whether they are in cash
or any other Trust Property shall be wholly in the discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. All dividends and other distributions on Shares of a particular
Class shall be distributed pro rata to the Shareholders of that Series or Class
in proportion to the number of Shares of that Series or Class they held on the
record date established for such payment, except that in connection with any
dividend or distribution program or procedure the Trustees may determine that no
dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment in the prescribed form has not been
received by the time or times established by the Trustees under such program or
procedure. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute a stock
dividend pro rata among the Shareholders of a particular Series, or Class
thereof, as of the record date of that Series or Class fixed as provided in
Section (b) hereof. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income
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and which items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
Section 7.2 Redemption by Shareholder.
-------------------------
(a) Unless the Trustees otherwise determine with respect to a
particular Series or Class at the time of establishing and designating the same,
each holder of Shares of a particular Series or Class thereof shall have the
right at such times as may be permitted by the Trust, but no less frequently
than once each week, to require the Trust to redeem (out of the assets belonging
to the applicable Series or Class) all or any part of his Shares at a redemption
price equal to the Net Asset Value per Share of that Series or Class next
determined in accordance with Section 7.4 after the Shares are properly tendered
for redemption, less such redemption fee or other charge, if any, as may be
fixed by the Trustees. Except as otherwise provided in this Trust Instrument,
payment of the redemption price shall be in cash; provided, however, that to the
extent permitted by applicable law, the Trustees may authorize the Trust to make
payment wholly or partly in securities or other assets belonging to the
applicable Series at the value of such securities or assets used in such
determination of Net Asset Value.
(b) Notwithstanding the foregoing, the Trust may postpone payment of
the redemption price and may suspend the right of the holders of Shares of any
Series or Class to require the Trust to redeem Shares of that Series or Class
during any period or at any time when and to the extent permissible under the
1940 Act.
(c) In the event that a Shareholder shall submit a request for the
redemption of a greater number of Shares than are then allocated to such
Shareholder, such request shall not be honored.
Section 7.3 Redemption by Trust. Unless the Trustees otherwise determine
-------------------
with respect to a particular Series or Class at the time of establishing and
designating the same, each Share of each Series or Class thereof that has been
established and designated is subject to redemption (out of the assets belonging
to the applicable Series or Class) by the Trust at the redemption price which
would be applicable if such Share was then being redeemed by the Shareholder
pursuant to Section 7.2 at any time if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse consequences to
the holders of the Shares, or any Series or Class of the Trust, and upon such
redemption the holders of the Shares so redeemed shall have no further right
with respect thereto other than to receive payment of such redemption price. In
addition, the Trustees, in their sole discretion, may cause the Trust to redeem
(out of the assets belonging to the applicable Series or Class) all of the
Shares of one or more Series or Classes held by (a) any Shareholder if the value
of such Shares held by such Shareholder is less than the minimum amount
established from time to time by the Trustees, (b) all Shareholders of one or
more Series or Classes if the value of such Shares held by all Shareholders is
less than the minimum amount established from time to time by the Trustees or
(c) any Shareholder to reimburse the Trust for any loss or expense it has
sustained or incurred by reason of the failure of such Shareholder to make full
payment for Shares purchased by such Shareholder, or by reason of any defective
redemption request, or by reason of indebtedness incurred because of such
Shareholder as described in Section 9.11 or to
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<PAGE>
collect any charge relating to a transaction effected for the benefit of such
Shareholder or as provided in the prospectus relating to such Shares.
Section 7.4 Net Asset Value. The Net Asset Value per Share of any Series
---------------
or Class thereof shall be the quotient obtained by dividing the value of the net
assets of that Series or Class (being the value of the assets belonging to that
Series or Class less the liabilities belonging to that Series or Class) by the
total number of Shares of that Series or Class outstanding, all determined in
accordance with the methods and procedures, including without limitation those
with respect to rounding, established by the Trustees from time to time.
The Trustees may determine to maintain the Net Asset Value per Share
of any Series at a designated constant dollar amount and in connection therewith
may adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Series or Class thereof as dividends
payable in additional Shares of that Series or Class thereof at the designated
constant dollar amount and for the handling of any losses attributable to that
Series or Class thereof. Such procedures may, among other things, provide that
in the event of any loss each Shareholder of a Series or Class thereof shall be
deemed to have contributed to the capital of the Trust attributable to that
Series or Class thereof his pro rata portion of the total number of Shares
required to be cancelled in order to permit the Net Asset Value per Share of
that Series or Class thereof to be maintained, after reflecting such loss, at
the designated constant dollar amount. Each Shareholder of the Trust shall be
deemed to have agreed, by his investment in the Trust, to make the contribution
referred to in the preceding sentence in the event of any such loss.
ARTICLE VIII
------------
LIMITATION OF LIABILITY AND INDEMNIFICATION
-------------------------------------------
Section 8.1 Limitation of Liability. Neither a Trustee nor an officer of
-----------------------
the Trust, when acting in such capacity, shall be personally liable to any
person other than the Trust or a beneficial owner for any act, omission or
obligation of the Trust, any Trustee or any officer of the Trust. Neither a
Trustee nor an officer of the Trust shall be liable for any act or omission in
his capacity as Trustee or as an officer of the Trust, or for any act or
omission of any other officer or any employee of the Trust or of any other
person or party, provided that nothing contained herein or in the Act shall
protect any Trustee or officer against any liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee or the duties of such officer
hereunder.
Section 8.2 Indemnification. The Trust shall indemnify each of its
---------------
Trustees and officers and persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any interest
as a shareholder, creditor, or otherwise, and may indemnify any trustee,
director or officer of a predecessor organization (each a "Covered Person"),
against all liabilities and expenses (including amounts paid in satisfaction of
judgments, in compromise, as fines and penalties, and expenses including
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reasonable accountants' and counsel fees) reasonably incurred in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or legislative body, in
which he may be involved or with which he may be threatened, while as a Covered
Person or thereafter, by reason of being or having been such a Covered Person,
except that no Covered Person shall be indemnified against any liability to the
Trust or its Shareholders to which such Covered Person would otherwise be
subject by reason of bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties involved in the conduct of such Covered
Person's office (such willful misfeasance, bad faith, gross negligence or
reckless disregard being referred to herein as "Disabling Conduct"). Expenses,
including accountants' and counsel fees so incurred by any such Covered Person
(but excluding amounts paid in satisfaction of judgments, in compromise or as
fines or penalties), may be paid from time to time by the Trust in advance of
the final disposition of any such action, suit or proceeding upon receipt of (a)
an undertaking by or on behalf of such Covered Person to repay amounts so paid
to the Trust if it is ultimately determined that indemnification of such
expenses is not authorized under this Article VIII and either (b) such Covered
Person provides security for such undertaking, (c) the Trust is insured against
losses arising by reason of such payment, or (d) a majority of a quorum of
disinterested, non-party Trustees, or independent legal counsel in a written
opinion, determines, based on a review of readily available facts, that there is
reason to believe that such Covered Person ultimately will be found entitled to
indemnification.
Section 8.3 Indemnification Determinations. Indemnification of a Covered
------------------------------
Person pursuant to Section 8.2 shall be made if (a) the court or body before
whom the proceeding is brought determines, in a final decision on the merits,
that such Covered Person was not liable by reason of Disabling Conduct or (b) in
the absence of such a determination, a majority of a quorum of disinterested,
non-party Trustees or independent legal counsel in a written opinion make a
reasonable determination, based upon a review of the facts, that such Covered
Person was not liable by reason of Disabling Conduct.
Section 8.4 Indemnification Not Exclusive. The right of indemnification
-----------------------------
provided by this Article VIII shall not be exclusive of or affect any other
rights to which any such Covered Person may be entitled. As used in this
Article VIII, "Covered Person" shall include such person's heirs, executors and
administrators, and a "disinterested, non-party Trustee" is a Trustee who is
neither an Interested Person of the Trust nor a party to the proceeding in
question.
Section 8.5 Shareholders. Each Shareholder of the Trust and of each Series
------------
or Class shall not be personally liable for the debts, liabilities, obligations
and expenses incurred by, contracted for, or otherwise existing with respect to,
the Trust or by or on behalf of any Series or Class. The Trustees shall have no
power to bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay pursuant to terms hereof or
by way of subscription for any Shares or otherwise.
In case any Shareholder or former Shareholder of any Series or Class shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series
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<PAGE>
or Class and not because of his acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his heirs, executors, administrators or
other legal representatives, or, in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Series or Class to be held harmless from and
indemnified against all loss and expense arising from such liability. The Trust,
on behalf of the affected Series, shall, upon request by the Shareholder, assume
the defense of any claim made against the Shareholder for any act or obligation
of the Series or Class and satisfy any judgment thereon from the assets of the
Series or Class. The indemnification and reimbursement required by the preceding
sentence shall be made only out of assets of the one or more Series or Classes
whose Shares were held by said Shareholder at the time the act or event occurred
which gave rise to the claim against or liability of said Shareholder. The
rights accruing to a Shareholder under this Section shall not impair any other
right to which such Shareholder may be lawfully entitled, nor shall anything
herein contained restrict the right of the Trust or any Series or Class thereof
to indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
ARTICLE IX
----------
MISCELLANEOUS
-------------
Section 9.1 Trust Not a Partnership. It is hereby expressly declared that
-----------------------
a trust and not a partnership is created hereby. All persons extending credit
to, contracting with or having any claim against any Series of the Trust or any
Class within any Series shall look only to the assets of such Series or Class
for payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees, nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Every note, bond,
contract or other undertaking issued by or on behalf of the Trust or the
Trustees relating to the Trust or to a Series or Class shall include a
recitation limiting the obligations represented thereby to the Trust or to one
or more Series or Classes and its or their assets (but the omission of such a
recitation shall not operate to bind any Shareholder, Trustee, officer, employee
or agent of the Trust).
Section 9.2 Trustees' Good Faith Action, Expert Advice, No Bond or Surety.
-------------------------------------------------------------
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. Subject to the provisions of Article VIII:
(i) the Trustees shall not be responsible or liable in any event for any neglect
or wrongdoing of any officer, agent, employee, consultant, adviser,
administrator, distributor or principal underwriter, custodian or transfer,
dividend disbursing, Shareholder servicing or accounting agent of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee;
(ii) the Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Trust Instrument and their duties as Trustees,
and shall be under no liability for any act or omission in accordance with such
advice or for failing to follow such advice; and (iii) in discharging
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their duties, the Trustees, when acting in good faith, shall be entitled to rely
upon the books of account of the Trust and upon written reports made to the
Trustees by any officer appointed by them, any independent public accountant,
and (with respect to the subject matter of the contract involved) any officer,
partner or responsible employee of a contracting party appointed by the
Trustees. The Trustees as such shall not be required to give any bond or surety
or any other security for the performance of their duties.
Section 9.3 Establishment of Record Dates. The Trustees may close the
-----------------------------
Share transfer books of the Trust for a period not exceeding one hundred twenty
(120) days preceding the date of any meeting of Shareholders, or the date for
the payment of any dividends or other distributions, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares shall go into effect; or in lieu of closing the stock transfer books as
aforesaid, the Trustees may fix in advance a date, not exceeding one hundred
twenty (120) days preceding the date of any meeting of Shareholders, or the date
for payment of any dividend or other distribution, or the date for the allotment
of rights, or the date when any change or conversion or exchange of Shares shall
go into effect, as a record date for the determination of the Shareholders
entitled to notice of, and to vote at, any such meeting, or entitled to receive
payment of any such dividend or other distribution, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of Shares, and in such case such Shareholders and only such
Shareholders as shall be Shareholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, or to receive payment
of such dividend or other distribution, or to receive such allotment or rights,
or to exercise such rights, as the case may be, notwithstanding any transfer of
any Shares on the books of the Trust after any such record date fixed as
aforesaid.
Section 9.4 Dissolution and Termination of Trust or Series.
----------------------------------------------
(a) This Trust shall continue without limitation of time but subject
to the provisions of sub-sections (b) and (c) of this Section 9.4.
(b) Notwithstanding anything in Section 9.5 to the contrary, the
Trustees may without Shareholder approval (unless such approval is required by
the 1940 Act) in dissolution of the Trust or an applicable Series or Class,
(i) sell and convey all or substantially all of the assets of
the Trust or any Series or Class to another trust,
partnership, limited liability company, association or
corporation, or to a separate Series or Class of shares
thereof, organized under the laws of any state or
jurisdiction, for adequate consideration which may
include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent, of
the Trust or any Series or Class, and which may include
shares of beneficial interest, stock or other ownership
interests of such trust, partnership, limited liability
company, association or corporation or of a series
thereof; or
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<PAGE>
(ii) at any time sell and convert into money all of the assets
of the Trust or any Series or Class.
Following a sale or conversion in accordance with the foregoing sub-section
9.4(b)(i) or (ii), and upon making reasonable provision, in the determination of
the Trustees, for the payment of all liabilities of the Trust or the affected
Series or Class as required by applicable law, by such assumption or otherwise,
the Shareholders of each Class of a Series involved in such sale or conversion
shall be entitled to receive, as a Class, when and as declared by the Trustees,
the excess of the assets belonging to that Series that are allocated to such
Class over the liabilities belonging to that Series that are allocated to such
Class. The assets so distributable to the Shareholders of any particular Class
of a Series shall be distributed among such Shareholders in proportion to the
number of Shares of that Class held by them and recorded on the books of the
Trust. In the event a Series is not divided into Classes, the foregoing
provisions shall be applied on a Series by Series basis.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-section (b), the Trust (in the case of a
sale or conversion with respect to the Trust as a whole or the last remaining
Series) or any affected Series or Class shall terminate and the Trustees and the
Trust or any affected Series or Class shall be discharged of any and all further
liabilities and duties hereunder and the right, title and interest of all
parties with respect to the Trust or such affected Series or Class shall be
cancelled and discharged.
Upon termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a certificate of cancellation of the Trust's
certificate of trust to be filed in accordance with the Act, which certificate
of cancellation may be signed by any one Trustee.
Section 9.5 Merger, Consolidation, Incorporation. Anything in this Trust
------------------------------------
Instrument to the contrary notwithstanding, the Trustees, in order to change the
form of organization and/or domicile of the Trust, may, without prior
Shareholder approval, (i) cause the Trust to merge or consolidate with or into
one or more trusts, partnerships, limited liability companies, associations or
corporations which is or are formed, organized or existing under the laws of a
state, commonwealth possession or colony of the United States, or (ii) cause the
Trust to incorporate under the laws of Delaware. Any agreement of merger or
consolidation or certificate of merger may be signed by a majority of the
Trustees. Pursuant to and in accordance with the provisions of Section 3815(f)
of the Act, and notwithstanding anything to the contrary contained in this Trust
Instrument, an agreement of any merger or consolidation approved in accordance
with this Section 9.5 may effect any amendment to the Trust Instrument or effect
the adoption of a new trust instrument of the Trust if it is the surviving or
resulting trust in the merger or consolidation. Any merger or consolidation of
the Trust other than as described in the foregoing provisions of this Section
9.5 shall, in addition to the approval of the Trustees, require a Majority
Shareholder Vote. Nothing in this Section 9.5 shall require, however,
Shareholder approval of any transaction whereby the Trust or any Series thereof
acquires or assumes all or any part of the assets and liabilities of any other
entity.
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<PAGE>
Section 9.6 Filing of Copies, References, Headings. The original or a copy
--------------------------------------
of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument.
All expressions like "his", "he" and "him", shall be deemed to include the
feminine and neuter, as well as masculine, genders. Headings are placed herein
for convenience of reference only and in case of any conflict, the text of this
Trust Instrument rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts each of which shall be deemed an
original.
Section 9.7 Applicable Law. The trust set forth in this instrument is made
--------------
in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Act and the laws of
said State; provided, however, that there shall not be applicable to the Trust,
the Trustees or this Trust Instrument (a) the provisions of Section 3540 of
Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Act) pertaining to trusts which
relate to or regulate: (i) the filing with any court or governmental body or
agency of trustee accounts or schedules of trustee fees and charges, (ii)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust", and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Act, and the absence of a specific reference herein to any such
power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions.
Section 9.8 Amendments. Except as specifically provided herein, the
----------
Trustees may, without Shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust
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<PAGE>
instrument. Shareholders shall have the right to vote: (i) on any amendment
which would affect their right to vote granted in Section 6.1, (ii) on any
amendment to this Section 9.8, (iii) on any amendment for which such vote is
required by law and (iv) on any amendment submitted to them by the Trustees. Any
amendment required or permitted to be submitted to Shareholders which, as the
Trustees determine, shall affect the Shareholders of one or more Series or
Classes shall be authorized by vote of the Shareholders of each Series or Class
affected and no vote of shareholders of a Series or Class not affected shall be
required. Anything in this Trust Instrument to the contrary notwithstanding, any
amendment to Article VIII hereof shall not limit the rights to indemnification
or insurance provided therein with respect to action or omission of any persons
protected thereby prior to such amendment.
Section 9.9 Fiscal Year. The fiscal year of the Trust shall end on a
-----------
specified date as determined from time to time by the Trustees.
Section 9.10 Provisions in Conflict with Law. The provisions of this Trust
-------------------------------
Instrument are severable, and if the Trustees shall determine, with the advice
of counsel, that any of such provisions is in conflict with the 1940 Act, the
regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provisions in any other jurisdiction or any
other provision of this Trust Instrument in any jurisdiction.
Section 9.11 Allocation of Certain Expenses. Each Shareholder will, at the
------------------------------
discretion of the Trustees, indemnify the Trust against all expenses and losses
resulting from indebtedness incurred in connection with facilitating (i)
requests pending receipt of the collected funds from investments sold on the
date of such Shareholder's redemption request; (ii) redemption requests from
such Shareholder who has also notified the Trust of its intention to deposit
funds in its accounts on the date of said redemption request; or (iii) the
purchase of investments pending receipt of collected funds from such Shareholder
who has notified the Trust of its intention to deposit funds in its accounts on
the date of the purchase of the investments.
IN WITNESS WHEREOF, the undersigned, being the Trustee of the Trust, has
executed this Declaration of Trust as of the 21st day of October, 1998.
/s/ Rodney D. Johnson
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<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
BY-LAWS
These By-laws (the "By-laws") of Provident Institutional Funds (the
"Trust"), a Delaware business trust, are subject to the Provident Institutional
Funds Declaration of Trust dated October 21, 1998, as from time to time
amended, supplemented or restated (the "Trust Instrument"). Capitalized terms
used herein which are defined in the Trust Instrument are used as therein
defined.
ARTICLE I
---------
PRINCIPAL OFFICE
----------------
The principal office of the Trust shall be located in such location as
the Trustees may from time to time determine. The Trust may establish and
maintain such other offices and places of business as the Trustees may from time
to time determine.
ARTICLE II
----------
OFFICERS AND THEIR ELECTION
---------------------------
SECTION 2.1 OFFICERS. The officers of the Trust shall be a
--------
President, a Treasurer, a Secretary, and such other officers as the Trustees may
from time to time elect. It shall not be necessary for any Trustee or other
officer to be a holder of Shares in the Trust.
SECTION 2.2 ELECTION OF OFFICERS. Two or more offices may be held
--------------------
by a single person. Subject to the provisions of Section 2.3 hereof, the
officers shall hold office until their successors are chosen and qualified and
serve at the pleasure of the Trustees.
SECTION 2.3 RESIGNATIONS. Any officer of the Trust may resign by
------------
filing a written resignation with the President, the Secretary or the Trustees,
which resignation shall take effect on being so filed or at such later time as
may be therein specified.
<PAGE>
ARTICLE III
-----------
POWERS AND DUTIES OF OFFICERS AND TRUSTEES
------------------------------------------
SECTION 3.1 CHIEF EXECUTIVE OFFICER. Unless the Trustees have
-----------------------
designated the Chairman as the chief executive officer of the Trust, the
President shall be the chief executive officer of the Trust and shall preside at
all meetings of the Shareholders.
SECTION 3.2 TREASURER. The Treasurer shall be the principal
---------
financial and accounting officer of the Trust. He shall deliver all funds and
securities of the Trust which may come into his hands to such company as the
Trustees shall employ as Custodian in accordance with the Trust Instrument and
applicable provisions of law. He shall make annual reports regarding the
business and condition of the Trust, which reports shall be preserved in Trust
records, and he shall furnish such other reports regarding the business and
condition of the Trust as the Trustees may from time to time require. The
Treasurer shall perform such additional duties as the Trustees or the chief
executive officer may from time to time designate.
SECTION 3.3 SECRETARY. The Secretary shall record in books kept
---------
for the purpose all votes and proceedings of the Trustees and the Shareholders
at their respective meetings. He shall have the custody of the seal of the
Trust. The Secretary shall perform such additional duties as the Trustees or the
chief executive officer may from time to time designate.
SECTION 3.4 VICE PRESIDENT. Any Vice President of the Trust shall
--------------
perform such duties as the Trustees or the chief executive officer may from time
to time designate. At the request or in the absence or disability of the
President, the most senior Vice President present and able to act may perform
all the duties of the President and, when so acting, shall have all the powers
of and be subject to all the restrictions upon the President.
SECTION 3.5 ASSISTANT TREASURER. Any Assistant Treasurer of the
-------------------
Trust shall perform such duties as the Trustees or the Treasurer may from time
to time designate, and, in the absence of the Treasurer, the most senior
Assistant Treasurer present and able to act may perform all the duties of the
Treasurer.
SECTION 3.6 ASSISTANT SECRETARY. Any Assistant Secretary of the
-------------------
Trust shall perform such duties as the Trustees or the Secretary may from time
to time designate, and, in the absence of the Secretary, the most senior
Assistant Secretary present and able to act may perform all the duties of the
Secretary.
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<PAGE>
SECTION 3.7 ADDITIONAL OFFICERS. The Trustees from time to time
-------------------
may appoint such other officers or agents as they may deem advisable, each of
whom shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine.
SECTION 3.8 SURETY BONDS. The Trustees may require any officer or
------------
agent of the Trust to execute a bond (including, without limitation, any bond
required by the Investment Company Act of 1940 (the "1940 Act")) in such sum and
with such surety or sureties as the Trustees may determine, conditioned upon the
faithful performance of his duties to the Trust including responsibility for
negligence and for the accounting of any of the Trust's property, funds or
securities that may come into his hands.
SECTION 3.9 REMOVAL. Any officer may be removed from office at any
-------
time by the Trustees.
SECTION 3.10 REMUNERATION. The salaries or other compensation, if
------------
any, of the officers of the Trust shall be fixed from time to time by resolution
of the Trustees.
SECTION 3.11 QUALIFICATIONS OF DIRECTORS. No person over the age of
---------------------------
75 shall be eligible to serve as a trustee of the Trust. Trustees of the Trust
shall retire as trustees when they attain the age of 72.
ARTICLE IV
----------
SHAREHOLDERS' MEETINGS
----------------------
SECTION 4.1 NOTICES. Notices of any meeting of the Shareholders
-------
shall be given by the Secretary by delivering or mailing, postage prepaid, to
each Shareholder entitled to vote at said meeting, written or printed
notification of such meeting at least seven days before the meeting, to such
address as may be registered with the Trust by the Shareholder. Notice of any
Shareholder meeting need not be given to any Shareholder if a written waiver of
notice, executed before or after such meeting, is filed with the record of such
meeting, or to any Shareholder who shall attend such meeting in person or by
proxy. Notice of adjournment of a Shareholders' meeting to another time or
place need not be given, if such time and place are announced at the meeting or
reasonable notice is given to persons present at the meeting.
SECTION 4.2 VOTING-PROXIES. Subject to the provisions of the Trust
--------------
Instrument, Shareholders entitled to vote may vote either in person or by proxy,
provided that either (i) an instrument authorizing such proxy to act is executed
by the
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<PAGE>
Shareholder in writing and dated not more than eleven months before the meeting,
unless the instrument specifically provides for a longer period or (ii) the
Trustees adopt by resolution an electronic, telephonic, computerized or other
alternative to execution of a written instrument authorizing the proxy to act,
which authorization is received not more than eleven months before the meeting.
Proxies shall be delivered to the Secretary of the Trust or other person
responsible for recording the proceedings before being voted. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters, the validity of proxies, and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting. Except as otherwise provided
herein or in the Trust Instrument, all matters relating to the giving, voting or
validity of proxies shall be governed by the General Corporation Law of the
State of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Trust were a Delaware corporation and the Shareholders were
shareholders of a Delaware corporation.
SECTION 4.3 PLACE OF MEETING. All meetings of the Shareholders
----------------
shall be held at such places as the Trustees may designate.
ARTICLE V
---------
SHARES OF BENEFICIAL INTEREST
-----------------------------
SECTION 5.1 SHARE CERTIFICATE. No certificates certifying the
-----------------
ownership of Shares shall be issued except as the Trustees may otherwise
authorize. The Trustees may issue certificates to a Shareholder of any Series or
Class thereof for any purpose and the issuance of a certificate to one or more
Shareholders shall not require the issuance of certificates generally. In the
event that the Trustees authorize the issuance of Share certificates, such
certificate shall be in the form prescribed from time to time by the Trustees
and shall be signed by the President or a Vice President and by the Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary. Such signatures may be
facsimiles if the certificate is signed by a transfer or shareholder services
agent or by a registrar, other than a Trustee, officer or employee of the Trust.
In case any
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<PAGE>
officer who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
SECTION 5.2 LOSS OF CERTIFICATE. In case of the alleged loss or
-------------------
destruction or the mutilation of a Share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
SECTION 5.3 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The
------------------------------------------
Trustees may at any time discontinue the issuance of Share certificates and may,
by written notice to each Shareholder, require the surrender of Share
certificates to the Trust for cancellation. Such surrender and cancellation
shall not affect the ownership of Shares in the Trust.
ARTICLE VI
----------
INSPECTION OF BOOKS
-------------------
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the Shareholders; and no Shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees.
ARTICLE VII
-----------
AMENDMENTS
----------
These By-laws may be amended from time to time by the Trustees.
ARTICLE VIII
------------
HEADINGS
--------
Headings are placed in these By-laws for convenience of reference only
and, in case of any conflict, the text of these By-laws rather than the headings
shall control.
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<PAGE>
ADVISORY AGREEMENT
AGREEMENT made as of February __, 1999 between PROVIDENT INSTITUTIONAL
FUNDS, a Delaware business trust (the "Trust"), and BLACKROCK INSTITUTIONAL
MANAGEMENT CORPORATION, a Delaware corporation (the "Investment Adviser"),
registered as an investment adviser under the Investment Advisers Act of 1940.
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and presently
offers shares representing interests in ten separate investment portfolios; and
WHEREAS, the Trust desires to retain the Investment Adviser to render
investment advisory services to the Trust, and the Investment Adviser is willing
to so render such services;
NOW, THEREFORE, this Agreement
WITNESSETH:
In consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT.
-----------
(a) The Trust hereby appoints the Investment Adviser to act as
investment adviser to the following portfolios of the Trust: TempFund,
TempCash, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund, MuniFund,
MuniCash, California Money Fund and New York Money Fund (each a "Portfolio," and
collectively, the "Portfolios") for the period and on the terms set forth in
this Agreement. The Investment Adviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
(b) In the event that the Trust establishes one or more
portfolios other than the Portfolios with respect to which it desires to retain
the Investment Adviser to act as investment adviser hereunder, the Trust shall
notify the Investment Adviser in writing. If the Investment Adviser is willing
to render such services it shall notify the Trust in writing whereupon, subject
to such shareholder approval as may be required pursuant to Paragraph 9 hereof,
such portfolio shall become a Portfolio hereunder and the compensation payable
by such new Portfolio to the Investment Adviser will be as agreed in writing at
the time.
<PAGE>
2. MANAGEMENT. Subject to the supervision of the Board of Trustees
----------
of the Trust, the Investment Adviser will provide a continuous investment
program for each of the Portfolios, including investment research and management
with respect to all securities, investments, cash and cash equivalents in the
Portfolios. The Investment Adviser will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Trust for each of its Portfolios. The Investment Adviser will provide the
services rendered by it hereunder in accordance with the investment objective
and policies of each of the Portfolios as stated in their respective
Prospectuses. The Investment Adviser further agrees that it:
(a) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission (herein called the "Rules"), and will in
addition conduct its activities under this Agreement in accordance with all
other applicable laws;
(b) will maintain all books and records with respect to the
securities transactions of the Portfolios, keep their respective books of
account and will render to the Trust's Board of Trustees such periodic and
special reports as the Board may request; and
(c) will treat confidentiality and as proprietary information of
the Trust all records and other information relative to the Trust and prior,
present or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Trust which approval shall not be unreasonably withheld and may not be withheld
where the Investment Adviser may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
3. SERVICES NOT EXCLUSIVE. The investment management services
----------------------
rendered by the Investment Adviser hereunder are not to be deemed exclusive, and
the Investment Adviser shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
4. SUB-ADVISER. It is understood that the Investment Adviser may,
-----------
if it deems it desirable, from time to time employ such person or persons as
the Investment Adviser believes to be capable of assisting in the performance of
its obligations under this Agreement (each a "Sub-Adviser") and to terminate the
services of any such person; provided, however, that the compensation of such
person or persons shall be paid by the Investment Adviser and that the
Investment Adviser shall be as fully responsible to the Trust for the acts and
omissions of any
-2-
<PAGE>
such person as it is for its own acts and omissions; and provided further, that
the retention of any Sub-Adviser shall be approved by the trustees and
shareholders to the extent required by the 1940 Act.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule
-----------------
31a-3 of the Rules, the Investment Adviser hereby agrees that all records which
it maintains for each Portfolio are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's request.
The Investment Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 the records required to be maintained by Rule 31a-1 of the Rules.
6. EXPENSES. During the term of this Agreement, the Investment
--------
Adviser will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of (including brokerage commissions, if
any) securities purchased for the Portfolios.
In addition, if the expenses borne by any Portfolio in any fiscal year
exceed the applicable expense limitations imposed by the securities regulations
of any state in which the Shares are registered or qualified for sale to the
public, the Investment Adviser shall reimburse such Portfolio for one-half of
any excess up to the amount of the fees payable by the particular Portfolio to
it during such fiscal year pursuant to Paragraph 7 hereof; provided, however,
-------- -------
that notwithstanding the foregoing, the Investment Adviser shall reimburse such
Portfolio for one-half of such excess expenses regardless of the amount of such
fees payable to it during such fiscal year to the extent that the securities
regulations of any state in which the Shares are registered or qualified for
sale so require.
7. COMPENSATION. For the services provided and the expenses assumed
------------
pursuant to this Agreement, the Trust, on behalf of each Portfolio, will pay the
Investment Adviser and the Investment Adviser will accept as full compensation
therefor a fee, computed daily and payable monthly, as described in the fee
schedule attached as Appendix A. The fee attributable to each Portfolio shall
be the several (and not joint or joint and several) obligation of each such
Portfolio.
8. LIMITATION OF LIABILITY OF THE INVESTMENT ADVISER. The
-------------------------------------------------
Investment Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust in connection with the matters to
which this Agreement relates, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
-3-
<PAGE>
9. DURATION AND TERMINATION. This Agreement shall become effective
------------------------
with respect to a Portfolio upon approval of this Agreement by vote of a
majority of the outstanding voting securities of such Portfolio and, unless
sooner terminated as provided herein, shall continue with respect to such
Portfolio until March 31, 2000. Thereafter, if not terminated, this Agreement
shall continue with respect to a Portfolio for successive annual periods ending
on March 31, provided such continuance is specifically approved at least
--------
annually (a) by the vote of a majority of those members of the Board of Trustees
of the Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of such Portfolio; provided, however, that
-------- -------
this Agreement may be terminated with respect to a Portfolio by the Trust at any
time, without the payment of any penalty, by the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting securities of such Portfolio,
on 60 days' written notice to the Investment Adviser, or by the Investment
Adviser at any time, without payment of any penalty, on 90 days' written notice
to the Trust. This Agreement will immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meaning as such terms have in the 1940 Act.)
10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
---------------------------
be changed, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, discharge
or termination is sought, and no amendment of this Agreement affecting a
Portfolio shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of such Portfolio.
11. MISCELLANEOUS. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Delaware law.
12. LIMITATION OF LIABILITY. Reference is hereby made to the
-----------------------
Declaration of Trust which contains certain provisions limiting the liability of
the Board of Trustees, shareholders, officers, employees and agents of the
Trust. The obligations of the Trust created hereunder are not personally
binding upon, nor shall resort be had to the property of, any of the Board of
Trustees, shareholders, officers, employees or agents of the
-4-
<PAGE>
Trust. In addition, only the Trust property included in the Portfolio which
incurs any liability shall be used to pay such liability.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
PROVIDENT INSTITUTIONAL FUNDS
Attest:
__________________________________ _________________________________
By: By:
Title: Title:
BLACKROCK INSTITUTIONAL
MANAGEMENT CORPORATION
Attest:
__________________________________ _________________________________
By: By:
Title: Title:
-5-
<PAGE>
APPENDIX A
FEE SCHEDULE
TEMPFUND.
- --------
For the services provided and the expenses assumed pursuant to this
Advisory Agreement with respect to TempFund, the Trust will pay the Investment
Adviser from the assets of TempFund and the Investment Adviser will accept as
full compensation therefor a fee, computed daily and payable monthly at the
following annual rate: .175% of the first $1 billion of TempFund's average net
assets, plus .15% of its next $1 billion of its average net assets, plus .125%
of its next $1 billion of its average net assets, plus .1% of its next $1
billion of average net assets, plus .095% of its next $1 billion of average its
average net assets, plus .09% of the next $1 billion of its average net assets,
plus .08% of its next $1 billion of its average net assets, plus .075% of the
next $1 billion of its average net assets, plus .07% of its average net assets
over $8 billion. The fee will be reduced by one-half of the amount necessary to
ensure that the ordinary operating expenses (excluding interest, taxes,
brokerage, payments to Service Organizations pursuant to Servicing Agreements
and extraordinary expenses) of TempFund do not exceed .45% of TempFund's average
net assets for any fiscal year.
TEMPCASH AND MUNICASH.
- ---------------------
For the services provided and the expenses assumed pursuant to this
Advisory Agreement with respect to TempCash and MuniCash, the Trust will pay the
Investment Adviser from the assets belonging to either TempCash or MuniCash, as
applicable, and the Investment Adviser will accept as full compensation therefor
a fee, computed daily and payable monthly, at the following rate: .175% of the
first $1 billion of such Portfolio's average net assets, plus .15% of its next
$1 billion of average net assets, plus .125% of its next $1 billion of average
net assets, plus .1% of its next $1 billion of average net assets, plus .095% of
its next $1 billion of average net assets, plus .09% of its next $1 billion of
average net assets, plus .085% of its next $1 billion of average net assets,
plus .08% of its average net assets over $7 billion.
FEDFUND, T-FUND, FEDERAL TRUST FUND AND TREASURY TRUST FUND.
- -----------------------------------------------------------
For the services provided and the expenses assumed pursuant to the Advisory
Agreement with respect to FedFund, T-Fund, Federal Trust Fund and Treasury Trust
Fund, the Trust will pay the Investment Adviser from the assets belonging to
FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund (in proportion to
each such Portfolio's average net assets) and the Investment Adviser will accept
as full compensation therefor a fee, computed
-6-
<PAGE>
daily and payable monthly, at the following annual rate: .175% of the first $1
billion of the combined average net assets of FedFund, T-Fund, Federal Trust
Fund and Treasury Trust Fund; plus .150% of its next $1 billion of their
combined average net assets, plus .125% of its next $1 billion of their combined
average net assets, plus .100% of the next $1 billion of their combined average
net assets, plus .095% of the next $1 billion of their combined average net
assets, plus .090% of the next $1 billion of their combined average net assets,
plus .085% of the next $1 billion of their combined average net assets, plus
.080% of their combined average net assets over $7 billion. The fee will be
reduced by one-half of the amount necessary to ensure that the ordinary
operating expenses (excluding interest, taxes, brokerage, payments to Service
Organizations pursuant to Servicing Agreements and extraordinary expenses) of
FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund do not exceed .45%
of each such Portfolio's average net assets for any fiscal year.
MUNI FUND.
- ---------
For the services provided and the expenses assumed pursuant to this
Advisory Agreement with respect to MuniFund, the Trust will pay the Investment
Adviser from the assets belonging to MuniFund and the Investment Adviser will
accept as full compensation therefor a fee, computed daily and payable monthly,
at the following annual rate: .175% of the first $1 billion of MuniFund's
average net assets, plus .15% of its next $1 billion of average net assets, plus
.125% of its next $1 billion of average net assets, plus .1% of its next $1
billion of average net assets, plus .095% of its next $1 billion of average net
assets, plus .09% of its next $1 billion of average net assets, plus .085% of
its next $1 billion of average net assets, plus .08% of its average net assets
over $7 billion. The fee will be reduced by one-half of the amount necessary to
ensure that the ordinary operating expenses (excluding interest, taxes,
brokerage, payments to Service Organizations pursuant to Servicing Agreements
and extraordinary expenses) of MuniFund do not exceed .45% of MuniFund's average
net assets for any fiscal year.
CALIFORNIA MONEY FUND AND NEW YORK MONEY FUND.
- ---------------------------------------------
For the services provided and the expenses assumed pursuant to this
Advisory Agreement, California Money Fund and New York Money Fund, as
applicable, will pay the Investment Adviser and the Investment Adviser will
accept as full compensation therefor a fee, computed daily and payable monthly,
at an annual rate of .20% of such Portfolio's average net assets.
-7-
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
DISTRIBUTION AGREEMENT
----------------------
Agreement dated February __, 1999 between PROVIDENT INSTITUTIONAL
FUNDS, a Delaware business trust, (the "Company"), and PROVIDENT DISTRIBUTORS,
INC., a Delaware corporation (the "Distributor").
WHEREAS, the Company is an open-end, diversified management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company desires to retain the Distributor as its
distributor to provide for the sale and distribution of each class and series of
shares ("shares") in each of the Company's investment portfolios (individually,
a "Fund," collectively, the "Funds") as listed on Appendix A (as such Appendix
may, from time to time, be supplemented (or amended)), and the Distributor is
willing to render such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth and intending to be legally bound, the parties hereto agree as
follows:
1. APPOINTMENT OF DISTRIBUTOR. The Company hereby appoints the
--------------------------
Distributor as distributor of each class and series of shares in each of the
Company's Funds on the terms and for the period set forth in this Agreement.
The Distributor hereby accepts such appointment and agrees to render the
services and duties set forth in Section 2 below. In the event that the Company
establishes additional classes or investment portfolios other than the Funds
listed on Appendix A with respect to which it desires to retain the Distributor
to act as distributor hereunder, the Company shall notify the Distributor,
whereupon such Appendix A shall be supplemented (or amended) and such portfolio
shall become a Fund hereunder and shall be subject to the provisions of this
Agreement to the same extent as the Funds (except to the extent that said
provisions may be modified in writing by the Company and Distributor at the
time).
2. SERVICES AND DUTIES. The Distributor enters into the following
-------------------
covenants with respect to its services and duties:
a. The Distributor agrees to sell, as agent, from time to time
during the term of this Agreement, shares upon the terms and at the current
offering price as described in the Prospectuses. The Distributor will act only
in its own behalf as principal in making agreements with selected dealers. No
brokerdealer or other person which enters into a selling or servicing agreement
with the Distributor shall be authorized to act as agent for the Company or its
Funds in connection with the offering or sale of shares to the public or
otherwise. The Distributor shall use its best efforts to sell shares of each
<PAGE>
class or series of each of the Funds but shall not be obligated to sell any
certain number of shares.
b. The Distributor shall prepare or review, provide advice with
respect to, and file with the federal and state agencies or other organization
as required by federal, state, or other applicable laws and regulations, all
sales literature (advertisements, brochures and shareholder communications) for
each of the Funds and any class or series thereof.
c. In performing all of its services and duties as Distributor,
the Distributor will act in conformity with the Declaration of Trust, By-Laws,
Prospectuses and resolutions and other instructions of the Company's Board of
Trustees and will comply with the requirements of the Securities Act of 1933, as
amended (the "1933 Act"), the Securities Exchange Act of 1934, the 1940 Act and
all other applicable federal or state law.
d. The Distributor will bear the cost of (i) printing and
distributing any Prospectus (including any supplement thereto) to persons who
are not shareholders, and (ii) preparing, printing and distributing any
literature, advertisement or material which is primarily intended to result in
the sale of shares; provided, however, that the Distributor shall not be
-------- -------
obligated to bear the expenses incurred by the Company in connection with the
preparation and printing of any amendment to any Registration Statement or
Prospectus necessary for the continued effective registration of the shares
under the 1933 Act and state securities laws and the distribution of any such
document to existing shareholders of the Company's Funds.
e. The Company shall have the right to suspend the sale of
shares at any time in response to conditions in the securities markets or
otherwise, and to suspend the redemption of shares of any Fund at any time
permitted by the 1940 Act or the rules and regulations of the Commission
("Rules").
f. The Company reserves the right to reject any order for
shares but will not do so arbitrarily, or without reasonable cause.
3. LIMITATIONS OF LIABILITY. The Distributor shall not be liable for
------------------------
any error of judgment or mistake of law or for any loss suffered by the Company
in connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
4. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Distributor agrees
----------------------------------------
on behalf of itself and its employees to treat confidentially and as proprietary
information of the Company all
-2-
<PAGE>
records and other information relative to the Company and its Funds and prior,
present or potential shareholders, and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Company, which approval shall not be unreasonably withheld and may not be
withheld where the Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Company.
5. INDEMNIFICATION.
---------------
a. The Company represents and warrants to the Distributor that
the Registration Statement contains, and that the Prospectuses at all times will
contain, all statements required by the 1933 Act and the Rules of the
Commission, will in all material respects conform to the applicable requirements
of the 1933 Act and the Rules and will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation or warranty
in this Section 5 shall apply to statements or omissions made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Distributor or either of the Company's co-administrators expressly
for use in the Registration Statement or Prospectuses.
b. The Company on behalf of each Fund agrees that each Fund
will indemnify, defend and hold harmless the Distributor, its several officers,
and directors, and any person who controls the Distributor within the meaning of
Section 15 of the 1933 Act, from and against any losses, claims, damages or
liabilities, joint or several, to which the Distributor, its several officers,
and directors, and any person who controls the Distributor within the meaning of
Section 15 of the 1933 Act, may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectuses or in any application or other document
executed by or on behalf of the Company with respect to such Fund or are based
upon information furnished by or on behalf of the Company with respect to such
Fund filed in any state in order to qualify the shares under the securities or
blue sky laws thereof ("Blue Sky application") or arise out of, or are based
upon, the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Distributor, its several officers, and directors, and any
person who controls the Distributor within the meaning of Section 15 of the 1933
Act, for any legal or other expenses
-3-
<PAGE>
reasonably incurred by the Distributor, its several officers, and directors, and
any person who controls the Distributor within the meaning of Section 15 of the
1933 Act, in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall not be liable in
-------- -------
any case to the extent that such loss, claim, damage or liability arises out of,
or is based upon, any untrue statement, alleged untrue statement, or omission or
alleged omission made in the Registration Statement, the Prospectus or any Blue
Sky application with respect to such Fund in reliance upon and in conformity
with written information furnished to the Company by or on behalf of the
Distributor or either of the Company's coadministrators specifically for
inclusion therein or arising out of the failure of the Distributor to deliver a
current Prospectus.
c. The Company on behalf of each Fund shall not indemnify any
person pursuant to this Section 5 unless the court or other body before which
the proceeding was brought has rendered a final decision on the merits that such
person was not liable by reason of his or her willful misfeasance, bad faith or
gross negligence in the performance of his or her duties, or his or her reckless
disregard of any obligations and duties, under this Agreement ("disabling
conduct") or, in the absence of such a decision, a reasonable determination
(based upon a review of the facts) that such person was not liable by reason of
disabling conduct has been made by the vote of a majority of a quorum of the
trustees of the Company who are neither "interested parties" (as defined in the
1940 Act) nor parties to the proceeding, or by independent legal counsel in a
written opinion.
d. The Distributor will indemnify and hold harmless the Company
and each of its Funds and its several officers and trustees, and any person who
controls the Company within the meaning of Section 15 of the 1933 Act, from and
against any losses, claims, damages or liabilities, joint or several, to which
any of them may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus or any Blue Sky application, or arise out of, or are based upon, the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
statement or omission was made in reliance upon and in conformity with
information furnished in writing to the Company or any of its several officers
and trustees by or on behalf of the Distributor or either of the Company's co-
administrators specifically for inclusion therein, and will reimburse the
Company and its several officers, trustees and such controlling persons for any
legal or other expenses reasonably incurred by
-4-
<PAGE>
any of them in investigating, defending or preparing to defend any such action,
proceeding or claim.
e. The obligations of each Fund under this Section 5 shall be
the several (and not the joint or joint and several) obligation of each Fund.
6. DURATION AND TERMINATION. This Agreement shall become effective
------------------------
upon its execution as of the date first written above and, unless sooner
terminated as provided herein, shall continue until ____________________, 2000.
Thereafter, if not terminated, this Agreement shall continue automatically for
successive terms of one year, provided that such continuance is specifically
approved at least annually (a) by a vote of a majority of those members of the
Company's Board of Trustees who are not parties to this Agreement or "interested
persons" of any such party, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the Company's Board of Trustees or by
vote of a "majority of the outstanding voting securities" of the Company;
provided, however, that this Agreement may be terminated by the Company at any
- --------
time, without the payment of any penalty, by vote of a majority of the entire
Board of Trustees or by a vote of a "majority of the outstanding voting
securities" of the Company on 60-days' written notice to the Distributor, or by
the Distributor at any time, without the payment of any penalty, on 90-days'
written notice to the Company. This Agreement will automatically and
immediately terminate in the event of its "assignment." (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings as such terms
have in the 1940 Act.)
7. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
---------------------------
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the patty against which an enforcement of the change,
waiver, discharge or termination is sought.
8. NOTICES. Notices of any kind to be given to the Company hereunder
-------
by the Distributor shall be in writing and shall be duly given if mailed or
delivered to the Company at Bellevue Park Corporate Center, 400 Bellevue
Parkway, Wilmington, Delaware 19809, Attention: ________________________, with
a copy to Philadelphia National Bank Building, 1345 Chestnut Street,
Philadelphia Pennsylvania 19107-3496, Attention: W. Bruce McConnel, III,
Secretary, or at such other address or to such individual as shall be so
specified by the Company to the Distributor. Notices of any kind to be given to
the Distributor hereunder by the Company shall be in writing and shall be duly
given if mailed or delivered to Provident Distributors, Inc., Four Falls
Corporate Center, 6/th/ Floor, West Conshohocken, PA 19428, Attention: Monroe
J. Haegele or at such other address or
-5-
<PAGE>
to such other individual as shall be so specified by the Distributor to the
Company.
9. MISCELLANEOUS. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
10. COUNTERPARTS. This Agreement may be executed in counterparts,
------------
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
PROVIDENT INSTITUTIONAL FUNDS
_______________________________
By:
Title:
PROVIDENT DISTRIBUTORS, INC.
_______________________________
By:
Title:
-6-
<PAGE>
APPENDIX A
TO THE
DISTRIBUTION AGREEMENT
BETWEEN
PROVIDENT INSTITUTIONAL FUNDS
AND
PROVIDENT DISTRIBUTORS, INC.
_______________________________________________________________________
TempFund
TempCash
FedFund
T-Fund
Federal Trust Fund
Treasury Trust Fund
MuniFund
MuniCash
California Money Fund
New York Money Fund
-7-
<PAGE>
FORM OF
SHARE PURCHASE AGREEMENT
Provident Institutional Funds, a Delaware business trust (the "Trust")
and Temporary Investment Fund, Inc., a Maryland corporation (the "Company")
hereby agree with each other as follows:
1. The Trust hereby offers the Company and the Company hereby
purchases one share (the "Share") each of the Trust's TempFund and TempCash
portfolios for $1 per share. The Trust hereby acknowledges receipt from the
Company of funds in the total amount of $2 in full payment for such Shares.
2. The Company represents and warrants to the Trust that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the
parties hereto have executed this Agreement as of the ______ day of February,
1999.
PROVIDENT INSTITUTIONAL FUNDS
------------------------------------------------
By:
Title:
TEMPORARY INVESTMENT FUND, INC.
------------------------------------------------
By:
Title:
<PAGE>
FORM OF
SHARE PURCHASE AGREEMENT
Provident Institutional Funds, a Delaware business trust (the "Trust")
and Trust for Federal Securities, a Pennsylvania business trust(the "Company")
hereby agree with each other as follows:
1. The Trust hereby offers the Company and the Company hereby
purchases one share (the "Share") each of the Trust's FedFund, T-Fund, Federal
Trust Fund and Treasury Trust Fund portfolios for $1 per share. The Trust hereby
acknowledges receipt from the Company of funds in the total amount of $4 in full
payment for such Shares.
2. The Company represents and warrants to the Trust that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the
parties hereto have executed this Agreement as of the ______ day of February,
1999.
PROVIDENT INSTITUTIONAL FUNDS
-------------------------------------------
By:
Title:
TRUST FOR FEDERAL SECURITIES
-------------------------------------------
By:
Title:
<PAGE>
FORM OF
SHARE PURCHASE AGREEMENT
Provident Institutional Funds, a Delaware business trust (the "Trust")
and Municipal Fund for Temporary Investment, a Pennsylvania common law trust
(the "Company") hereby agree with each other as follows:
1. The Trust hereby offers the Company and the Company hereby
purchases one share (the "Share") each of the Trust's MuniFund and MuniCash
portfolios for $1 per share. The Trust hereby acknowledges receipt from the
Company of funds in the total amount of $2 in full payment for such Shares.
2. The Company represents and warrants to the Trust that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the
parties hereto have executed this Agreement as of the ______ day of February,
1999.
PROVIDENT INSTITUTIONAL FUNDS
------------------------------------------
By:
Title:
MUNICIPAL FUND FOR TEMPORARY
INVESTMENT
------------------------------------------
By:
Title:
<PAGE>
FORM OF
SHARE PURCHASE AGREEMENT
Provident Institutional Funds, a Delaware business trust (the "Trust")
and Municipal Fund for California Investors, Inc., a Maryland corporation (the
"Company") hereby agree with each other as follows:
1. The Trust hereby offers the Company and the Company hereby
purchases one share (the "Share") of the Trust's California Money Fund portfolio
for $1 per share. The Trust hereby acknowledges receipt from the Company of
funds in the total amount of $1 in full payment for such Shares.
2. The Company represents and warrants to the Trust that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the
parties hereto have executed this Agreement as of the ______ day of February,
1999.
PROVIDENT INSTITUTIONAL FUNDS
------------------------------------------
By:
Title:
MUNICIPAL FUND FOR CALIFORNIA
INVESTORS, INC.
------------------------------------------
By:
Title:
<PAGE>
FORM OF
SHARE PURCHASE AGREEMENT
Provident Institutional Funds, a Delaware business trust (the "Trust")
and Municipal Fund for New York Investors, Inc., a Maryland corporation (the
"Company") hereby agree with each other as follows:
1. The Trust hereby offers the Company and the Company hereby
purchases one share (the "Share") each of the Trust's New York Money Fund
portfolio for $1 per share. The Trust hereby acknowledges receipt from the
Company of funds in the total amount of $1 in full payment for such Shares.
2. The Company represents and warrants to the Trust that the Shares
are being acquired for investment purposes and not with a view to the
distribution thereof.
IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the
parties hereto have executed this Agreement as of the ______ day of February,
1999.
PROVIDENT INSTITUTIONAL FUNDS
-------------------------------------------
By:
Title:
MUNICIPAL FUND FOR NEW YORK
INVESTORS, INC.
-------------------------------------------
By:
Title:
<PAGE>
LAW OFFICES
DRINKER BIDDLE & REATH LLP
PHILADELPHIA NATIONAL BANK BUILDING
1345 CHESTNUT STREET
PHILADELPHIA, PA 19107-3196
TELEPHONE: (215) 988-2700
FAX: (215) 988-2757
February 2, 1999
Provident Institutional Funds
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
Re: Post-Effective Amendment No. 61 to Registration Statement on Form
-----------------------------------------------------------------
N-1A for Prudential Institutional Funds (Registration Nos.
----------------------------------------------------------
2-47015; 811-2354)
------------------
Ladies and Gentlemen:
We have acted as counsel to Provident Institutional Funds, a Delaware
business trust (the "Trust"), in connection with the preparation and filing with
the Securities and Exchange Commission of the Post-Effective Amendment No. 61 to
the Trust's Registration Statement on Form N-1A under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended.
The Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), with no par value. The Board of Trustees of
the Trust has the power to create and establish one or more series of Shares and
one or more classes of Shares within such series and to classify or reclassify
any unissued Shares with respect to such series and classes.
We have reviewed the Trust's Agreement and Declaration of Trust,
By-Laws, and resolutions adopted by Board of Trustees of the Trust and such
other legal and factual matters as we have deemed appropriate. We have assumed
that the Shares will be issued against payment therefor as described in the
Trust's Prospectuses.
This opinion is based exclusively on the Delaware Business Trust Act
and the federal law of the United States of America.
<PAGE>
Currently, the Trust is authorized to offer Shares of the following
series and classes within such series:
Series and Classes Series and Classes
- ------------------ ------------------
Series A (TempFund) Series F (Treasury Trust Fund)
Class A Fund Shares Class A Fund Shares
Class B Dollar Shares Class B Dollar Shares
Series B (TempCash) Series G (MuniFund)
Class A Fund Shares Class A Fund Shares
Class B Fund Shares Class B Dollar Shares
Series C (FedFund) Series H (MuniCash)
Class A Fund Shares Class A Fund Shares
Class B Dollar Shares Class B Dollar Shares
Series D (T-Fund) Series I (California Money Fund)
Class A Fund Shares Class A Fund Shares
Class B Dollar Shares Class B Dollar Shares
Class C Plus Shares Class C Plus Shares
Series E (Federal Trust Fund) Series J (New York Money Fund)
Class A Fund Shares Class A Fund Shares
Class B Dollar Shares Class B Dollar Shares
Class C Plus Shares
Based on the foregoing, it is our opinion that the Shares of the Trust
will be validly issued, fully paid and non-assessable by the Trust, and that the
holders of the Shares of the Trust will be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the general corporation law of the State of Delaware (except
that we express no opinion as to such holders who are also trustees of the
Trust).
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Trust's Post-Effective Amendment No. 61 to Registration Statement on Form N-1A.
Very truly yours,
/S/ Drinker Biddle & Reath
--------------------------
DRINKER BIDDLE & REATH LLP
-2-
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of the following reports in this
Post-Effective Amendment No. 61 under the Securities Act of 1933, as amended, to
this Registration Statement on Form N-1A (No.2-47015) of the Provident
Institutional Funds, Inc.:
. Our report dated October 30, 1998 for Temporary Investment Fund, Inc.
. Our report dated December 5, 1998 for Trust for Federal Securities
. Our report dated March 6, 1998 for Municipal Fund for California
Investors, Inc.
. Our report dated August 28, 1998 for Municipal Fund for New York
Investors, Inc.
We also consent to the reference to our Firm under the headings "Auditors" and
"Financial Statements" in the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 1, 1999
<PAGE>
INDEPENDENT AUDITORS' CONSENT
-----------------------------
To the Trustees
Municipal Fund for Temporary Investment:
We consent to the use of our report dated January 8, 1999 incorporated by
reference herein and to the references to our firm under the heading "Financial
Highlights" in the MuniFund and MuniCash Prospectuses and under the heading
"Financial Statements" in the Statement of Additional Information in the
Registration Statement.
/s/ KPMG LLP
KPMG LLP
Philadelphia, PA
February 1, 1999
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references
to our Firm under the caption "Counsel" included in the Statement of Additional
Information that is included in Post-Effective Amendment No. 61 to the
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, and under the Investment Company Act of 1940, as amended (Nos.
2-47015/811-2354) of Provident Institutional Funds.
/s/ Willkie Farr & Gallagher
----------------------------
Willkie Farr & Gallagher
January 29, 1999
New York, New York
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference
to our firm under the caption "Counsel" in the Statement of Additional
Information included in this Post-Effective Amendment No. 61 to the Registration
Statement (No. 2-47015) on Form N-1A of Provident Institutional Funds under the
Securities Act of 1933 and the Investment Company Act of 1940, respectively.
/s/ O'Melveny & Myers LLP
-------------------------
O'MELVENY & MYERS LLP
Los Angeles, California
February 1, 1999
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
(DOLLAR SHARES)
SHAREHOLDERS SERVICES PLAN
Section 1. Upon the recommendation of PFPC Inc. ("PFPC" or the
----------
"Administrator"), a co-administrator of Provident Institutional Funds (the
"Company"), any officer of the Company is authorized to execute and deliver, in
the name and on behalf of the Company, written agreements in substantially the
form attached hereto or in any other form duly approved by the Board of Trustees
("Servicing Agreements") with institutional shareholders of record ("Service
Organizations") of a series of the Company's shares of beneficial interest
("Dollar Shares") of the TempFund, TempCash, FedFund, T-Fund, Federal Trust
Fund, Treasury Trust Fund, MuniFund, MuniCash, California Money Fund and New
York Money Fund. Such Servicing Agreements shall require the Service
Organizations to provide support services as set forth therein to their
customers who beneficially own such Dollar Shares (as described in the Company's
respective Prospectuses) in consideration for a fee, computed daily and paid
monthly in the manner set forth in the Servicing Agreements, at the annual rate
of .25% of the average daily net asset value of the Dollar Shares held by the
Service Organizations on behalf of their customers. All expenses incurred by
the Company with respect to Dollar Shares of a particular investment portfolio
in connection with the Servicing Agreements and the implementation of this Plan
shall be borne entirely by the holders of such portfolio's Dollar Shares.
Section 2. The Administrator shall monitor the arrangements
----------
pertaining to the Company's Servicing Agreements with Service Organizations in
accordance with the terms of the administration agreement with the Company. The
Administrator shall not, however, be obliged by this Plan to recommend, and the
Company shall not be obliged to execute, any Servicing Agreement with any
qualifying Service Organization.
Section 3. So long as this Plan is in effect, the Administrator shall
----------
provide to the Company's Board of Trustees, and the trustees shall review, at
least quarterly, a written report of the amounts expended pursuant to this Plan
and the purposes for which such expenditures were made.
Section 4. This Plan shall become effective as of January 31, 1999
----------
upon the approval of the Plan (and the form of Servicing Agreement attached
hereto) by a majority of the Board of Trustees, including a majority of the
trustees who are not "interested persons" as defined in the Investment Company
Act of 1940 (the "Act") of the Company and have no direct or indirect financial
interest in the operation of this Plan or in any Servicing Agreements or other
agreements related to this Plan
<PAGE>
(the "Disinterested Trustees"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of this Plan (and form of
Servicing Agreement).
Section 5. Unless sooner terminated, this Plan shall continue until
----------
__________________, 2000, and thereafter shall continue automatically for
successive annual periods provided such continuance is approved at least
annually in the manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Board of
----------
Trustees, provided that any material amendments of the terms of this Plan shall
become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a majority
----------
of the Disinterested Trustees.
Section 8. While this Plan is in effect, the selection and nomination
----------
of those trustees who are not "interested person" (as defined in the Act) of the
Company shall be committed to the discretion of the Disinterested Trustees.
Section 9. All persons dealing with the Company or the "Trustees" of
----------
the Company must look solely to the Company's property for the enforcement of
any claims against the Company, as neither the trustees, officers, agents nor
shareholders assume any personal liability for obligations entered into on the
Company's behalf.
-2-
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
(the "Trust")
AMENDED DISTRIBUTION PLAN
-------------------------
This Distribution Plan (the "Plan") is adopted in accordance
with Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as
amended (the "1940 Act"), by the Trust, with respect to the Plus Shares (the
"Shares") of TempFund, T-Fund, MuniFund, California Money Fund and New York
Money Fund (each a "Series") of the Trust as amended from time to time, subject
to the terms and conditions set forth herein.
Section 1. Distribution Fees
-----------------
(a) Pursuant to the Plan, the Trust may pay to the
Distributor of its shares, Provident Distributors, Inc., or any entity that may
in the future act as a distributor for its shares (collectively, the
"Distributor"), with respect to and at the expense of the Shares of a Series, a
fee for distribution and sales support services, as applicable, and as more
fully described in Section 1(b) hereof (the "Distribution Fee"), such fee in the
aggregate to be at the annual rate of .25% of the Plus Shares of TempFund,
T-Fund and MuniFund, and in the aggregate to be at the annual rate of up to .40%
of the Plus Shares of California Money Fund and New York Money Fund.
(b) Payments of the Distribution Fee under the Plan shall be
used primarily to compensate the Distributor for distribution services and sales
support services provided in connection with the offering and sale of the Shares
of a Series, and to reimburse the Distributor for related expenses incurred,
including payments by the Distributor to compensate or reimburse brokers,
dealers, other financial institutions or other industry professionals
(collectively, "Selling Agents"), for sales support services provided and
related expenses incurred by such Selling Agents. The services and expenses
described in this Section l(b) may include, but are not limited to, the
following: (i) the development, formulation and implementation of marketing and
promotional activities, including direct mail promotions and television, radio,
magazine, newspaper, electronic and other mass media advertising; (ii) the
preparation, printing and distribution of prospectuses and reports (other than
prospectuses or reports used for regulatory purposes or for distribution to
existing shareholders); (iii) the preparation, printing and distribution of
sales literature; (iv) expenditures for sales or distribution support services
such as for telephone facilities and in-house telemarketing; (v) preparation of
information, analyses and opinions with respect to marketing and promotional
activities; (vi) commissions, incentive compensation or other compensation to,
and expenses of, account executives or other employees of the Distributor or
Selling Agents, attributable to distribution or sales support activities, as
applicable, including interest expenses and other costs associated with
financing of such commissions, compensation and expenses; (vii) travel,
equipment, printing, delivery and mailing costs, overhead and other office
expenses of the Distributor or Selling Agents, attributable to
<PAGE>
distribution or sales support activities, as applicable; (viii) the costs of
administering the Plan; (ix) expenses of organizing and conducting sales
seminars; and (x) any other costs and expenses relating to distribution or sales
support activities.
(c) Payments of the Distribution Fee on behalf of a Series
must be in consideration of services rendered for or on behalf of a Series.
However, joint distribution or sales support financing with respect to the
Shares of a Series (which financing may also involve other investment portfolios
or companies that are affiliated persons of such a person, or affiliated persons
of the Distributor) shall be permitted in accordance with applicable law.
Payments of the Distribution Fee under Section 1 of the Plan may be made without
regard to expenses actually incurred.
(d) It is acknowledged that the Distributor and other
parties that receive fees from the Trust may each make payments without
limitation as to amount relating to distribution or sales support activities, as
applicable, in connection with the Shares of a Series out of its past profits or
any additional sources other than the Distribution Fee which are available to
it.
Section 2. Calculation and Payment of Fees
-------------------------------
The amount of the Distribution Fee payable with respect to the
Shares of a Series shall be calculated daily and paid monthly, at the applicable
annual rates of .25% of TempFund, T-Fund and MuniFund, and up to .40% for
California Money Fund and New York Money Fund. The Distribution Fee shall be
calculated and paid separately for the Shares of each Series.
Section 3. Approval of Plan
----------------
The Plan will become effective immediately upon its approval
by (a) a majority of the Board of Trustees, including a majority of the trustees
who are not "interested persons" (as defined in the Act) of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements entered into in connection with the Plan, pursuant to a vote cast
in person at a meeting called for the purpose of voting on the approval of the
Plan, and (b) a majority of the outstanding Shares of a Series.
-2-
<PAGE>
Section 4. Continuance of the Plan
-----------------------
The Plan will continue in effect for so long as its
continuance is specifically approved at least annually by the Trust's Board of
Trustees in the manner described in Section 3 above.
Section 5. Additional Classes and Funds
----------------------------
The Plan shall become effective with respect to classes of
shares of other Series of the Trust upon obtaining the requisite approvals with
respect to such classes of a Series in accordance with Section 3 above.
Section 6. Termination
-----------
The Plan may be terminated at any time without penalty at any
time by (a) a vote of a majority of the Trustees who are not "interested
persons" (as defined in the Act) of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements entered
into in connection with the Plan, or (b) a vote of a majority of the outstanding
Shares of a Series.
Section 7. Amendments
----------
The Plan may not be amended so as to increase materially the
amount of the Distribution Fee described in Section 1 above unless the amendment
is approved by a vote of at least a majority of the outstanding Shares of a
Series and otherwise complies with Rule 18f-3(e)(2) under the Act or any
successor provision as in effect at the time of such amendment. In addition, no
material amendment to the Plan may be made unless approved by the Trust's Board
of Trustees in the manner described in Section 3 above.
Section 8. Selection of Certain Trustees
-----------------------------
While the Plan is in effect, the selection and nomination of
the Trust's Trustees who are not "interested persons" of the Trust (as defined
in the Act) will be committed to the discretion of the Trustees then in office
who are not "interested persons" (as so defined) of the Trust.
Section 9. Written Reports
---------------
While the Plan is in effect, the Trust's Board of Trustees
shall receive, and the Trustees shall review, at least quarterly, written
reports complying with the requirements of the Rule, which set out the amounts
expended under the Plan and the purposes for which those expenditures were made.
-3-
<PAGE>
Section 10. Preservation of Materials
-------------------------
The Trust will preserve copies of the Plan, any agreement
relating to the Plan and any report made pursuant to Section 9 above, for a
period of not less than six years (the first two years in an easily accessible
place) from the date of the Plan, agreement or report.
Section 11. Limitation of Liability
-----------------------
The names "Provident Institutional Funds" and "Trustees of
Provident Institutional Funds" refer respectively to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated October 21, 1998, which is hereby
referred to and a copy of which is on file at the principal office of the Trust.
The obligations of "Provident Institutional Funds" entered into in the name or
on behalf thereof by any of the Trustees, officers, representatives or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, Shareholders, officers, representatives or agents of the Trust
personally, but bind only the Trust Property (as defined in the Declaration of
Trust), and all persons dealing with any class of shares of the Trust must look
solely to the Trust Property allocated to such shares for the enforcement of any
claims against the Trust.
Section 12. Miscellaneous
-------------
The captions in the Plan are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
-4-
<PAGE>
DISTRIBUTION AGREEMENT
Gentlemen:
We wish to enter into this Distribution Agreement
("Agreement") with you concerning the provision of distribution services (and,
to the extent provided below, support services) to your Customers ("Customers")
who may from time to time beneficially own Plus Shares ("Shares") of TempFund,
T-Fund, MuniFund, California Money Fund and/or New York Money Fund offered by
Provident Institutional Funds (the "Trust"), of which we are or will be the
principal underwriter as defined in the Investment Company Act of 1940 (the
"Act") and the exclusive agent for the continuous distribution of said Shares.
The terms and conditions of this Agreement are as follows:
Section 1. You agree to provide1: (a) reasonable assistance
in connection with the distribution of Shares to Customers as requested from
time to time by us, which assistance may include forwarding sales literature and
advertising provided by us for Customers; and (b) the following support services
to Customer who may from time to time acquire and beneficially own Shares: (i)
establishing and maintaining accounts and records relating to Customers that
invest in Shares; (ii) processing dividend and distribution payments from a
Series on behalf of Customers; (iii) providing information periodically to
Customers showing their positions in Shares; (iv) arranging for bank wires; (v)
responding to Customer inquiries relating to the services performed by you; (vi)
responding to routine inquiries from Customers concerning their investments in
Shares; (vii) providing subaccounting with respect to Shares beneficially owned
by Customers or the information to the Trust necessary for subaccounting; (viii)
if required by law, forwarding shareholder communications from a Series (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (ix) assisting in
processing purchase, exchange and redemption requests from Customers and in
placing such orders with our service contractors; (x) assisting Customers in
changing dividend options, account designations and addresses; (xi) providing
Customers with a service that invests the assets of their accounts in Shares
pursuant to specific or pre-authorized instructions; and (xii) providing such
other similar services as we may reasonably request to the extent you are
permitted to do so under applicable statutes, rules and regulations.
- -------------------
1 Services may be modified or omitted in the particular case and items
relettered or renumbered.
<PAGE>
Section 2. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in order to
provide the aforementioned services and assistance to Customers.
Section 3. Neither you nor any of your officers, employees
or agents are authorized to make any representations concerning us or the Shares
except those contained in a Series's applicable prospectuses and statements of
additional information for the Shares, copies of which will be supplied by us to
you, or in such supplemental literature or advertising as may be authorized by
us in writing.
Section 4. For all purposes of this Agreement you will be
deemed to be an independent contractor, and will have no authority to act as
agent for us or a Series in any matter or in any respect. By your written
acceptance of this Agreement, you agree to and do release, indemnify and hold us
harmless and a Series harmless from and against any and all direct or indirect
liabilities or losses resulting from requests, directions, actions or inactions
of or by you or your officers, employees or agents regarding your
responsibilities hereunder or the purchase, redemption, transfer or registration
of Shares (or orders relating to the same) by or on behalf of Customers. You and
your employees will, upon request, be available during normal business hours to
consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
Section 5. In consideration of the services and facilities
provided by you hereunder, we will pay to you, and you will accept as full
payment therefor, a fee at the annual rate of .___ of 1% of the average daily
net asset value of the Shares beneficially owned by your Customers for whom you
are the dealer of record or holder of record or with whom you have a servicing
relationship (the "Customers' Shares"), which fee will be computed daily and
payable monthly. For purposes of determining the fees payable under this Section
5, the average daily net asset value of the Customers' Shares will be computed
in the manner specified in the Trust's Registration Statement (as the same is in
effect from time to time) in connection with the computation of the net asset
value of the particular Shares involved for purposes of purchases and
redemptions. By your acceptance of this Agreement, you agree to and do waive
such portion of any fee payable to you hereunder to the extent necessary to
assure that such fee and other expenses required to be accrued hereunder on any
day with respect to the Customers' Shares in any Series that declares its net
investment income as a dividend to shareholders on a daily basis do not exceed
the income to be accrued by the Series to such Shares on that day. The fee rate
stated above may be prospectively increased or
-2-
<PAGE>
decreased by us, in our sole discretion, at any time upon notice to you.
Further, we may, in our discretion and without notice, suspend or withdraw the
sale of Shares, including the sale of Shares for the account of any Customer or
Customers.
Section 6. Any person authorized to direct the disposition
of monies paid or payable by us pursuant to this Agreement will provide to us
and the Trust, and the Trust's trustees will review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made. In addition, you will furnish us or our designees with
such information as we or they may reasonably request (including, without
limitation, periodic certifications confirming the provision to Customers of the
services described herein), and will otherwise cooperate with us and our
designees (including, without limitation, any auditors designated by us), in
connection with the preparation of reports to the Trust's Board of Trustees
concerning this Agreement and the monies paid or payable by us pursuant hereto,
as well as any other reports or filings that may be required by law.
Section 7. We may enter into other similar Agreements with
any other person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you
represent, warrant and agree that the compensation payable to you hereunder,
together with any other compensation you receive from Customers for services
contemplated by this Agreement, will be disclosed by you to your Customers, will
be authorized by your Customers and will not be excessive or unreasonable under
the laws and instruments governing your relationships with Customers. In
addition, you understand that this Agreement has been entered into pursuant to
Rule 12b-1 under the Act, and is subject to the provisions of said Rule, as well
as any other applicable rules or regulations promulgated by the Securities and
Exchange Commission.
Section 9. This Agreement will become effective on the date
a fully executed copy of this Agreement is received by us or our designee.
Unless sooner terminated, this Agreement will continue for a period of one year,
and thereafter will continue automatically for successive annual periods
provided such continuance is specifically approved at least annually by the
Trust in the manner described in Section 12. This Agreement is terminable with
respect to Shares, without penalty, at any time by the Trust (which termination
may be by a vote of a majority of the Disinterested Trustees as defined in
Section 12 or by vote of the holders of a majority of the outstanding Shares of
such Class) or by us or you upon notice to the other party hereto. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the Act).
-3-
<PAGE>
Section 10. All notices and other communications to either
you or us will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device to the appropriate address stated herein, or
to such other address as either party shall so provide the other.
Section 11. This Agreement will be construed in accordance
with the laws of the State of Delaware.
Section 12. This Agreement has been approved by vote of a
majority of (i) the Trust's Board of Trustees and (ii) those Trustees of the
Trust who are not "interested persons" (as defined in the Act) of the Trust and
have no direct or indirect financial interest in the operation of the
Distribution Plan adopted by the Trust regarding the provision of distribution
and support services in connection with the Shares or in any agreement related
thereto cast in person at a meeting called for the purpose of voting on such
approval ("Disinterested Trustees").
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter where indicated below and promptly
return it to us, at the following address:
______________________________________________________________________________
___________.
Very truly yours,
PROVIDENT DISTRIBUTORS, INC.
Date: ____________________ By:________________________________
(Authorized Officer)
Accepted and Agreed to:
[Service Organization]
Date: ____________________ By:________________________________
(Authorized Officer)
Address of Service Organization:
------------------------------------------------
------------------------------------------------
------------------------------------------------
-4-
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
ADMINISTRATION SHAREHOLDER SERVICES PLAN
----------------------------------------
This Shareholder Services Plan ("the Plan") is adopted by the
Trust with respect to the Administration Shares of TempFund, T-Fund, MuniFund
and California Money Fund (each "a Series") of the Trust, as amended from time
to time, subject to the terms and conditions set forth herein.
Section 1. Upon the recommendation of PFPC Inc. ("PFPC" or the
---------
"Co-Administrator"), a co-administrator of Provident Institutional Funds (the
"Trust"), any officer of the Trust is authorized to execute and deliver, in the
name and on behalf of the Trust, written agreements in substantially the form
attached hereto or in any other form duly approved by the Board of Trustees
("Administration Servicing Agreements") with institutional shareholders of
record ("Service Organizations") of Administration Shares of a Series of the
Trust's shares of beneficial interest, including TempFund, T-Fund, MuniFund, and
California Money Fund. Such Servicing Agreements shall require the Service
Organizations to provide support services as set forth therein to their
customers who beneficially own such Administration Shares (as described in the
Trust's respective Prospectuses) in consideration for a fee, computed daily and
paid monthly in the manner set forth in the Servicing Agreements, at the annual
rate of .10% of the average daily net asset value of the Administration Shares
held by the Service Organizations on behalf of their customers. All expenses
incurred by the Trust with respect to Administration Shares of a particular
investment portfolio in connection with the Servicing Agreements and the
implementation of this Plan shall be an expense of the Administration Class of
Shares.
Section 2. The Co-Administrator shall monitor the arrangements
---------
pertaining to the Trust's Administration Servicing Agreements with Service
Organizations in accordance with the terms of the Administration Agreement with
the Trust. The Co-Administrator shall not, however, be obliged by this Plan to
recommend, and the Trust shall not be obliged to execute, any Administration
Servicing Agreement with any qualifying Service Organization.
Section 3. So long as this Plan is in effect, the
---------
Co-Administrator shall provide to the Trust's Board of Trustees, and the
trustees shall review, at least quarterly, a written report of the amounts
expended pursuant to this Plan and the purposes for which such expenditures were
made.
Section 4. This Plan shall become effective as of January 31,
---------
1999 subject to the approval of the Plan (and the
<PAGE>
form of Administration Servicing Agreement attached hereto) by a majority of the
Board of Trustees, including a majority of the trustees who are not "interested
persons" as defined in the Investment Company Act of 1940 (the "Act") of the
Trust and have no direct or indirect financial interest in the operation of this
Plan or in any Administration Servicing Agreements or other agreements related
to this Plan (the "Disinterested Trustees"), pursuant to a vote cast in person
at a meeting called for the purpose of voting on the approval of this Plan (and
form of Servicing Agreement).
Section 5. Unless sooner terminated, this Plan shall continue
---------
so long as its continuance is specifically approved at least annually in the
manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Board
---------
of Trustees, provided that any material amendments of the terms of this Plan
shall become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a
---------
majority of the Disinterested Trustees.
Section 8. The names "Provident Institutional Funds" and
---------
"Trustees of Provident Institutional Funds" refer respectively to the trust
created and the Trustees, as trustees but not individually or personally, acting
from time to time under a Declaration of Trust dated October 21, 1998, which is
hereby referred to and a copy of which is on file at the principal office of the
Trust. The obligations of "Provident Institutional Funds" entered into in the
name or on behalf thereof by any of the Trustees, officers, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, Shareholders, officers, representatives or agents of
the Trust personally, but bind only the Trust Property (as defined in the
Declaration of Trust), and all persons dealing with any class of shares of the
Trust must look solely to the Trust Property allocated to such shares for the
enforcement of any claims against the Trust.
-2-
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
CASH RESERVE SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("the Plan") is adopted by the
Trust with respect to the Cash Reserve Shares of TempFund, T-Fund, MuniFund and
California Money Fund (each "a Series") of the Trust, as amended from time to
time, subject to the terms and conditions set forth herein.
Section 1. Upon the recommendation of PFPC Inc. ("PFPC" or the
---------
"Co-Administrator"), a co-administrator of Provident Institutional Funds (the
"Trust"), any officer of the Trust is authorized to execute and deliver, in the
name and on behalf of the Trust, written agreements in substantially the form
attached hereto or in any other form duly approved by the Board of Trustees
("Cash Reserve Servicing Agreements") with institutional shareholders of record
("Service Organizations") of Cash Reserve Shares of a Series of the Trust's
shares of beneficial interest, including TempFund, T-Fund, MuniFund, and
California Money Fund. Such Cash Reserve Servicing Agreements shall require the
Service Organizations to provide support services as set forth therein to their
customers who beneficially own such Cash Reserve Shares (as described in the
Trust's respective Prospectuses) in consideration for a fee, computed daily and
paid monthly in the manner, and pursuant to the allocation, set forth in the
Cash Reserve Servicing Agreements, at the annual rate of .40% of the average
daily net asset value of the Cash Reserve Shares held by the Service
Organization on behalf of their customers. All expenses incurred by the Trust
with respect to Cash Reserve Shares of a particular investment portfolio in
connection with the Cash Reserve Servicing Agreements and the implementation of
this Plan shall be expenses of the Cash Reserve Class of Shares.
Section 2. The Co-Administrator shall monitor the arrangements
---------
pertaining to the Trust's Cash Reserve Servicing Agreements with Service
Organizations in accordance with the terms of the Administration Agreement with
the Trust. The Co-Administrator shall not, however, be obliged by this Plan to
recommend, and the Trust shall not be obliged to execute, any Cash Reserve
Servicing Agreement with any qualifying Service Organization.
Section 3. So long as this Plan is in effect, the
---------
Co-Administrator shall provide to the Trust's Board of Trustees, and the
trustees shall review, at least quarterly, a written report of the amounts
expended pursuant to this Plan and the purposes for which such expenditures were
made.
Section 4. This Plan shall become effective as of January 31,
---------
1999 subject to the approval of the Plan (and the
<PAGE>
form of Cash Reserve Servicing Agreement attached hereto) by a majority of the
Board of Trustees, including a majority of the trustees who are not "interested
persons" as defined in the Investment Company Act of 1940 (the "Act") of the
Trust and have no direct or indirect financial interest in the operation of this
Plan or in any Cash Reserve Servicing Agreements or other agreements related to
this Plan (the "Disinterested Trustees"), pursuant to a vote cast in person at a
meeting called for the purpose of voting on the approval of this Plan (and form
of Servicing Agreement).
Section 5. Unless sooner terminated, this Plan shall continue
---------
so long as its continuances is specifically approved at least annually in the
manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Board
---------
of Trustees, provided that any material amendments of the terms of this Plan
shall become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a
---------
majority of the Disinterested Trustees.
Section 8. The names "Provident Institutional Funds" and
---------
"Trustees of Provident Institutional Funds" refer respectively to the trust
created and the Trustees, as trustees but not individually or personally, acting
from time to time under a Declaration of Trust dated October 21, 1998, which is
hereby referred to and a copy of which is on file at the principal office of the
Trust. The obligations of "Provident Institutional Funds" entered into in the
name or on behalf thereof by any of the Trustees, officers, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, Shareholders, officers, representatives or agents of
the Trust personally, but bind only the Trust Property (as defined in the
Declaration of Trust), and all persons dealing with any class of shares of the
Trust must look solely to the Trust Property allocated to such shares for the
enforcement of any claims against the Trust.
-2-
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
CASH MANAGEMENT SHAREHOLDER SERVICES PLAN
-----------------------------------------
This Shareholder Services Plan ("the Plan") is adopted by the
Trust with respect to the Cash Reserve Shares of TempFund, T-Fund, MuniFund and
California Money Fund (each "a Series") of the Trust as amended from time to
time, subject to the terms and conditions set forth herein.
Section 1. Upon the recommendation of PFPC Inc. ("PFPC" or the
----------
"Co-Administrator"), a co-administrator of Provident Institutional Funds (the
"Trust"), any officer of the Trust is authorized to execute and deliver, in the
name and on behalf of the Trust, written agreements in substantially the form
attached hereto or in any other form duly approved by the Board of Trustees
("Cash Management Servicing Agreements") with institutional shareholders of
record ("Service Organizations") of Cash Management Shares of a Series of the
Trust's shares of beneficial interest, including TempFund, T-Fund, MuniFund, and
California Money Fund. Such Servicing Agreements shall require the Service
Organizations to provide support services as set forth therein to their
customers who beneficially own such Cash Management Shares (as described in the
Trust's respective Prospectuses) in consideration for a fee, computed daily and
paid monthly in the manner, and pursuant to the allocation, set forth in the
Servicing Agreements, at the annual rate of .50% of the average daily net asset
value of the Cash Management Shares held by the Service Organizations on behalf
of their customers. All expenses incurred by the Trust with respect to Cash
Management Shares of a particular investment portfolio in connection with the
Cash Management Servicing Agreements and the implementation of this Plan shall
be expenses of the Cash Management Class of Shares.
Section 2. The Co-Administrator shall monitor the arrangements
---------
pertaining to the Trust's Servicing Agreements with Service Organizations in
accordance with the terms of the Administration agreement with the Trust. The
Co-Administrator shall not, however, be obliged by this Plan to recommend, and
the Trust shall not be obliged to execute, any Cash Management Shareholder
Servicing Agreement with any qualifying Service Organization.
Section 3. So long as this Plan is in effect, the
---------
Co-Administrator shall provide to the Trust's Board of Trustees, and the
trustees shall review, at least quarterly, a written report of the amounts
expended pursuant to this Plan and the purposes for which such expenditures were
made.
<PAGE>
Section 4. This Plan shall become effective as of January 31,
---------
1999 subject to the approval of the Plan (and the form of Servicing Agreement
attached hereto) by a majority of the Board of Trustees, including a majority of
the trustees who are not "interested persons" as defined in the Investment
Company Act of 1940 (the "Act") of the Trust and have no direct or indirect
financial interest in the operation of this Plan or in any Cash Management
Servicing Agreements or other agreements related to this Plan (the
"Disinterested Trustees"), pursuant to a vote cast in person at a meeting called
for the purpose of voting on the approval of this Plan (and form of Servicing
Agreement).
Section 5. Unless sooner terminated, this Plan shall continue
---------
so long as its continuance is specifically approved at least annually in the
manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Board
---------
of Trustees, provided that any material amendments of the terms of this Plan
shall become effective only upon the approvals set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a
----------
majority of the Disinterested Trustees.
Section 8. The names "Provident Institutional Funds" and
---------
"Trustees of Provident Institutional Funds" refer respectively to the trust
created and the Trustees, as trustees but not individually or personally, acting
from time to time under a Declaration of Trust dated October 21, 1998, which is
hereby referred to and a copy of which is on file at the principal office of the
Trust. The obligations of "Provident Institutional Funds" entered into in the
name or on behalf thereof by any of the Trustees, officers, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, Shareholders, officers, representatives or agents of
the Trust personally, but bind only the Trust Property (as defined in the
Declaration of Trust), and all persons dealing with any class of shares of the
Trust must look solely to the Trust Property allocated to such shares for the
enforcement of any claims against the Trust.
-2-
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
(the "Trust")
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, Delaware 19809
SERVICING AGREEMENT
Ladies and Gentlemen:
This is a Servicing Agreement between the Trust and you as the
Servicer named below concerning the provision of support services to your
customers and customers of affiliated banks (collectively, "customers") who may
from time to time beneficially own Administration Shares, Dollar Shares, Cash
Reserve Shares and/or Cash Management Shares of one or more of the Trust's
investment portfolios. Each Series and Class which are currently being offered
are listed on Appendix A and the Class of Shares to which the Agreement (and the
related fees) applies are identified by you on Appendix A. As used herein, "you"
means the Servicer which has executed this Agreement and "we" (or "us") means
the Trust.
The terms and conditions of this Servicing Agreement are as
follows:
Section 1.
- ----------
1(a) Administration Shares.
---------------------------
You agree to provide the support services to customers, who may from time to
time beneficially own a Series' Administration Shares for a fee, which will not
exceed .10% (on an annual basis) of the average daily net asset value of a
Series' Administration Shares held by you for the benefit of customers. Such
support services may include the following: (i) answering client 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 clients' investments; and (ii) assisting clients in designating and
changing dividend options, account designations and addresses. You will provide
to customers a schedule of all fees that you may charge to them relating to the
investment of their assets in a Series Administration Shares.
1(b) Dollar Shares.
-------------------
You agree to provide the support services to customers who may
from time to time beneficially own a Series' Dollar Shares for a fee which will
not exceed .25% (on an annual basis) of the average daily net asset value of
such Series' Dollar Shares held by you for the benefit of customers. Such
support
<PAGE>
services may include the following: (i) the services listed above under Section
1(a) with respect to Administration Shares, (ii) aggregating and processing
purchase and redemption requests from customers and placing net purchase and
redemption orders with our distributor; (iii) providing customers with a service
that invests the assets of their accounts in shares pursuant to specific or
pre-authorized instructions; (iv) processing dividend payment from us on behalf
of customers; (v) providing information periodically to customers showing their
positions in a Series' shares; (vi) arranging for bank wires; (vii) responding
to customer inquires relating to the Series or the services performed by you;
(viii) providing sub-accounting with respect to a Series' shares beneficially
owned by customers or the information to us necessary for sub-accounting; (ix)
if required by law forwarding shareholder communications from us (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to customers; and (x) providing such
other similar services as we may reasonable request to the extent you are
permitted to do so under applicable statutes, rules or regulations. You will
provide to customers a schedule of all fees that you may charge to them relating
to the investment of their assets in a Series' Dollar Shares.
1(c) Cash Reserve Shares.
-------------------------
You agree to provide the support services to customers, who
may from time to time beneficially own a Series' Cash Reserve Shares, for a fee
which will not exceed .40% (on an annual basis) of the average daily net asset
value of a Series' Cash Reserve Shares held by you for the benefit of customers.
An initial .20% (on an annual basis) of the average daily net asset value of
such Shares will be paid to you 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 you, (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 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 you 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
2
<PAGE>
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 your 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 you; 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.
You will provide to customers a schedule of all fees that you may charge to them
relating to the investment of their assets in a Series' Cash Reserve Shares.
1 (d) Cash Management Shares.
-----------------------------
You agree to provide the support services to customers, who
may from time to time beneficially own a Series' Cash Management Shares, for a
fee which will not exceed .50% (on an annual basis) of the average daily net
asset value of a Series' Cash Management Shares held by you for the benefit of
customers. An initial .25% (on an annual basis) of the average daily net asset
value of such Shares will be paid to you 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 you, (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 you for providing the following services: (x)
aggregating and processing purchase and redemption requests from customers and
placing net purchase and redemption orders with the transfer agent, (xi)
processing
3
<PAGE>
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 your 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
you; and (ixx) furnishing (either separately or an integrated basis with other
reports sent to a shareholder by you) monthly and year-end statements and
confirmations of purchases, exchanges and redemptions. You will provide to
customers a schedule of all fees that you may charge to them relating to the
investment of their assets in a Series' Cash Management Shares.
Section 2. You will provide such office space and equipment, telephone and
- ----------
personnel (which may be any part of the space, equipment and facilities
currently used in your business, or any personnel employed by you) as may be
reasonably necessary or beneficial in order to provide the aforementioned
services to customers.
Section 3. Neither you nor any of your officers, employees or agents are
- ----------
authorized to make any representations concerning us or a Series' shares except
those contained in our then current prospectus for such class of shares, copies
of which will be supplied by us to you, or in such supplemental literature or
advertising as may be authorized by us in writing.
Section 4. For all purposes of this Agreement you will be deemed to be an
- ----------
independent contractor, and will have no authority to act as agent for us in any
matter or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct liabilities or losses resulting from requests, directions, actions or
inactions of or by you or your officers, employees or agents regarding your
responsibilities hereunder or the purchase, redemption, transfer or registration
of shares by or on behalf of customers. You and your employees will, upon
request, be available during normal business hours to consult with us or our
designees concerning the performance of your responsibilities under this
Agreement.
Section 5. In consideration of the services and facilities provided by you
- ----------
hereunder, we will pay to you, and you will
4
<PAGE>
accept as full payment, a fee as described above. Such fee will be computed
daily and payable monthly. The fee rate payable to you may be prospectively
increased or decreased by us, in our sole discretion, at any time upon notice to
you. Further, we may, in our discretion and without notice, suspend or withdraw
the sale of any class of shares, including the sale of such shares to you for
the account of any customer(s).
Section 6. Any person authorized to direct the disposition of monies paid or
- ----------
payable by us pursuant to this Agreement will provide to the Board of Trustees,
and the Trustees will review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made. In
addition, you will furnish us or our designees with such information as we or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to customers of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Trustees concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filings that may be required by law.
Section 7. We may enter into other similar Servicing Agreements with any other
- ----------
person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent, warrant
- ----------
and agree that (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any shares issued by
us; and (ii) the compensation payable to you hereunder, together with any other
compensation you receive from customers for services contemplated by this
Agreement, will not be excessive or unreasonable under the laws and instruments
governing your relationships with customers.
Section 9. This Agreement will become effective on the date a fully executed
- ----------
copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue for a period of one year and thereafter
will continue automatically for successive annual periods. This Agreement is
terminable, without penalty, at any time by us or by you upon notice to us.
Section 10. All notices and other communications to either you or us will be
- ----------
duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown above.
Section 11. This Agreement will be construed in accordance with the laws of the
- ----------
State of Delaware and is non-assignable by the parties hereto.
5
<PAGE>
Section 12. The names "Provident Institutional Funds" and "Trustees of Provident
- -----------
Institutional Funds" refer respectively to the trust created and the Trustees,
as trustees but not individually or personally, acting from time to time under a
Declaration of Trust dated October 21, 1998, which is hereby referred to and a
copy of which is on file at the principal office of the Trust. The obligations
of "Provident Institutional Funds" entered into in the name or on behalf thereof
by any of the Trustees, officers, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, Shareholders, officers, representatives or agents of the Trust
personally, but bind only the Trust Property (as defined in the Declaration of
Trust), and all persons dealing with any class of shares of the Trust must look
solely to the Trust Property allocated to such shares for the enforcement of any
claims against the Trust.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us, PFPC Inc., c/o Rhonda Stanford at Bellevue Corporate Center, 400 Bellevue
Parkway, W3-F400-01-3 Wilmington, DE 19809.
Very truly yours,
Provident Institutional Funds
__________________________________
Authorized Officer
Date:_____________________________
Accepted and Agreed to:
By:_______________________________
Date:_____________________________
6
<PAGE>
APPENDIX A
Please check the appropriate boxes to indicate both the Class
of Shares and the respective Fund(s) for which you wish to act as a Service
Organization:
ADMINISTRATION SHARES = 10% TOTAL ANNUAL FEE
--------------------------------------------
[_] TempFund
[_] T-Fund
[_] MuniFund
[_] California Money Fund
DOLLAR SHARES = .25% TOTAL ANNUAL FEE
-------------------------------------
[_] TempFund
[_] TempCash
[_] FedFund
[_] T-Fund
[_] Federal Trust Fund
[_] Treasury Trust Fund
[_] MuniFund
[_] MuniCash Fund
[_] California Money Fund
[_] New York Money Fund
CASH RESERVE SHARES = .40% TOTAL ANNUAL FEE
--------------------------------------------
[_] TempFund
[_] T-Fund
[_] MuniFund
[_] California Money Fund
CASH MANAGEMENT SHARES = .50% TOTAL ANNUAL FEE
----------------------------------------------
[_] TempFund
[_] T-Fund
[_] MuniFund
[_] California Money Fund
7
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
(the "Trust")
AMENDED PLAN PURSUANT TO RULE 18f-3 FOR OPERATION OF
A MULTI-CLASS SYSTEM
I. INTRODUCTION
Rule 18f-3, which became effective on April 3, 1995, requires an
investment company to file with the Commission a written plan specifying all of
the differences among classes, including the various services offered to
shareholders, different distribution arrangements for each class, methods for
allocating expenses relating to those differences and any conversion features or
exchange privileges. This Amended Plan shall become effective when filed with
the Securities and Exchange Commission.
II. ATTRIBUTES OF CLASSES
A. Generally.
---------
Pursuant to this Plan, each Series of the Trust will offer up to six
classes of shares - Fund Shares, Dollar Shares, Plus Shares, Administration
Shares, Cash Reserve Shares and Cash Management Shares - as indicated in
Appendix A attached hereto. In general, shares of each class will be identical
except for different expense variables (which will result in different returns
for each class), certain related rights and certain shareholder services. More
particularly, Fund Shares, Dollar Shares, Plus Shares, Administration Shares,
Cash Reserve Shares and Cash Management Shares will represent interests in the
same portfolio of investments of a particular Series, and will be identical in
all respects, except for: (a) the impact of (i) expenses assessed pursuant, as
applicable, to the Fund Shareholder Services Plan, Dollar Shareholder Services
Plan, Plus Distribution Plan, Administration Shareholder Services Plan, Cash
Reserve Shareholders Services Plan and Cash Management Shareholder Services
Plan, and the related Agreements entered into pursuant to such Plans
(collectively "Plans and Related Agreements") and (ii) any other incremental
expenses identified that should be properly allocated to one class, approved by
the Board of Trustees, including a majority of the trustees who are not
interested persons of the Trust; and (b) the fact that (i) a class will vote
separately on matters which pertain to the Plans and Agreements and(ii) each
class will vote separately on any matter submitted to shareholders relating to
class expenses; (c) the designation of each class of shares of a Series; and (d)
the different shareholder services relating to a class of shares and (e) the
dividends that may be paid to the holders of shares of each class.
<PAGE>
B. Distribution Arrangements, Expenses and Sales Charges.
-----------------------------------------------------
1. Fund Shares
-----------
Fund Shares will be available for purchase by institutional investors
and will be offered without a sales charge. Fund Shares will not be subject to a
fee payable pursuant to Plans and Agreements.
2. Dollar Shares.
-------------
Dollar Shares will be available for purchase by institutional investors
and will be offered without a sales charge. Dollar Shares will be subject to a
fee payable pursuant to a Dollar Shareholder Plan and related Shareholders
Service Agreement which will not exceed 0.25% (on an annual basis) of the
average daily net asset value of a particular Series' Dollar Shares held by a
service organization for the benefit of its customers. Services provided by a
service organization under the Shareholder Service Agreement may include (i)
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; and (ii)
assisting shareholders in designating and changing dividend options, account
designations and addresses;(iii) aggregating and processing purchase and
redemption requests from customers and placing net purchase and redemption
orders with the transfer agent; (iv) providing customers with a service that
invests the assets of their accounts in Dollar Shares; (v) processing dividend
payments from the particular portfolio on behalf of customers; (vi) providing
information periodically to customers showing their positions in Dollar Shares;
(vii) arranging for bank wires; (viii) responding to customer inquiries relating
to the services performed by the Service Organization; (ix) providing
sub-accounting with respect to Dollar Shares beneficially owned by customers or
the information necessary for sub-accounting; (x) 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; and (xi) other similar
services if requested by the particular portfolio.
3. Plus Shares.
-----------
Plus Shares will be available for purchase by institutional investors
and will be offered without a sales charge. Plus Shares will be subject to a
distribution fee payable pursuant to a Distribution Plan and related Agreement
which will not exceed 0.25% (on an annual basis) of the average daily net asset
value of TempFund's, T-Fund's and MuniFund's Plus Shares and will not exceed
0.40% of the California Money Fund's
-2-
<PAGE>
and New York Money Fund's Plus Shares held by the particular service
organization for the benefit of its customers. Sales and support services
provided by a service organization under a Distribution Plan and related
Agreement may include: (a) reasonable assistance in connection with the
distribution of Plus Shares to Shareholders as requested from time to time by
the Distributor, which assistance may include forwarding sales literature and
advertising provided by the Distributor for Customers; and (b) the following
support services to Customers who may from time to time acquire and beneficially
own Plus Shares: (i) establishing and maintaining accounts and records relating
to Customers that invest in Plus Shares; (ii) processing dividend and
distribution payments from a particular Series on behalf of Customers; (iii)
providing information periodically to Customers showing their positions in Plus
Shares; (iv) arranging for bank wires; (v) responding to Client inquiries
relating to the services performed by the Service Organization; (vi) responding
to routine inquiries from Customers concerning their investments in Plus Shares;
(vii) providing subaccounting with respect to Plus Shares beneficially owned by
Customers or the information to the Trust necessary for subaccounting; (viii) if
required by law, forwarding shareholder communications from a particular Series
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to Customers; (ix)
assisting in processing purchase, exchange and redemption requests from
Customers and in placing such orders with service contractors; (x) assisting
Customers in changing dividend options, account designations and addresses; (xi)
providing Customers with a service that invests the assets of their accounts in
Plus Shares pursuant to specific or pre-authorized instructions; and (xii)
providing such other similar services as the Distributor may reasonably request
to the extent the Service Organization is permitted to do so under applicable
statutes, rules and regulations.
4. Administration Shares.
---------------------
Administration Shares will be available for purchase by institutional
investors and will be offered without a sales charge. Administration Shares will
be subject to a fee payable pursuant to the Administration Shareholder Service
Plan and related Agreement which will not exceed 0.10% (on an annual basis) of
the average daily net asset value of a Series' Administration Shares held by the
particular service organization for the benefit of its customers. Services
provided by a service organization under the Administration Shareholder Service
Plan and related Agreement may include (i) 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; and (ii) assisting shareholders in designating
and changing dividend options, account designations and addresses.
-3-
<PAGE>
5. Cash Reserve Shares.
-------------------
Cash Reserve Shares will be available to institutional investors and
will be offered without a sales charge. Cash Reserve Shares will be subject to a
fee payable pursuant to a Cash Reserve Shareholder Service Plan and related
Agreement which will not exceed a specified percentage (on an annual basis) of
the average daily net asset value of a particular Series' Cash Reserve Shares
held by the service organization for the benefit of its 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 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.
-4-
<PAGE>
6. Cash Management Shares.
----------------------
Cash Management Shares will be available for purchase by institutional
investors and will be offered without a sales charge. Cash Management Shares
will be subject to a fee payable pursuant to a Cash Management Shareholder
Service Plan and related Agreement which will not exceed a specified percentage
(on an annual basis) of the average daily net asset value of a particular
Series' Cash Management Shares held by the service organization for the benefit
of its 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 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
-5-
<PAGE>
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.
C. Methods for Allocating Expenses Among Classes.
---------------------------------------------
Class expenses are allocated to the specific class of shares of the
particular portfolio. All other expenses are allocated in accordance with Rule
18f-3(c).
-6-
<PAGE>
Appendix A
Series and Classes
------------------
Series A (TempFund)
Class A Fund Shares
Class B Dollar Shares
Class C Plus Shares
Class D Administration Shares
Class E Cash Reserve Shares
Class F Cash Management Shares
Series B (TempCash)
Class A Fund Shares
Class B Dollar Shares
Series C (FedFund)
Class A Fund Shares
Class B Dollar Shares
Series D (T-Fund)
Class A Fund Shares
Class B Dollar Shares
Class C Plus Shares
Class D Administration Shares
Class E Cash Reserve Shares
Class F Cash Management Shares
Series E (Federal Trust Fund)
Class A Fund Shares
Class B Dollar Shares
Series F (Treasury Trust Fund)
Class A Fund Shares
Class B Dollar Shares
-7-
<PAGE>
Series and Classes
------------------
Series G (MuniFund)
Class A Fund Shares
Class B Dollar Shares
Class C Plus Shares
Class D Administration Shares
Class E Cash Reserve Shares
Class F Cash Management Shares
Series H (MuniCash)
Class A Fund Shares
Class B Dollar Shares
Series I (California Money Fund)
Class A Fund Shares
Class B Dollar Shares
Class C Plus Shares
Class D Administration Shares
Class E Cash Reserve Shares
Class F Cash Management Shares
Series J (New York Money Fund)
Class A Fund Shares
Class B Dollar Shares
Class C Plus Shares
-8-
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<PER-SHARE-NAV-END> 1.00
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<ARTICLE> 6
<CIK> 0000097098
<NAME> TRUST FOR FEDERAL SECURITIES
<SERIES>
<NUMBER> 081
<NAME> FED TRUST FUND - MAIN CLASS
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 319,716,082
<INVESTMENTS-AT-VALUE> 319,716,082
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