<PAGE>
As filed with the Securities and Exchange
Commission on June 5, 2000
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. 66
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
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
[X] 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)
[_] on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
[_] previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest.
================================================================================
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
=============================
Administration Shares
PROSPECTUS
June 5, 2000
PROVIDENT
INSTITUTIONAL
FUNDS
The Securities and Exchange Commission has not
approved or disapproved the Funds' 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>
HOW TO FIND THE INFORMATION YOU NEED...................................... 1
TEMPFUND.................................................................. 2
T-FUND.................................................................... 12
MUNIFUND.................................................................. 20
CALIFORNIA MONEY FUND..................................................... 29
MANAGEMENT OF THE FUND.................................................... 40
SHAREHOLDER INFORMATION................................................... 41
Price of Fund Shares................................................. 41
Purchase of Shares................................................... 41
Redemption of Shares................................................. 41
Administration Shareholder Service Plan.............................. 43
Dividends and Distributions.......................................... 43
Federal Taxes........................................................ 43
State and Local Taxes................................................ 44
</TABLE>
<PAGE>
HOW TO FIND THE INFORMATION YOU NEED
--------------------------------------------------------------------------------
Welcome to the new Provident Institutional Funds Prospectus for
Administration Shares.
The prospectus has been written to provide you with information you need to
make an informed decision about whether to invest in Administration Shares of
the Provident Institutional Funds (the "Trust").
This prospectus contains information about the four portfolios (the
"Funds") of the Trust that offer Administration shares. To save you time, the
prospectus has been organized so that each Fund has its own short section. All
you have to do is turn to the section for any particular Fund. Once you read
the important facts about the Funds that interest you, read the sections that
tell you about buying and selling shares, certain fees and expenses, shareholder
services, and your rights as a shareholder. These sections apply to all the
Funds.
Administration Shares are sold to institutions that have entered into
servicing agreements with the Trust in connection with their investments.
The Funds are 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.
-1-
<PAGE>
TEMPFUND
--------------------------------------------------------------------------------
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
U.S. dollar-denominated money market
instruments, including government, bank,
and commercial obligations 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. The Fund is also
subject to risks related to changes in
prevailing interest rates, since
generally, a fixed-income security will
increase in value when interest rates
fall and decrease in value when interest
rates rise.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in
the Fund.
Who May Want to Invest in the Fund: The Fund is designed for institutional
investors seeking current income and
stability of principal.
-2-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund 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
Dollar Shares /1/
1990 8.02
1991 5.99
1992 3.64
1993 2.87
1994 3.94
1995 5.74
1996 5.17
1997 5.35
1998 5.27
1999 4.90
During the ten-year period shown in the bar chart, the highest quarterly
return was 8.12% (for the quarter ended June 30, 1990) and the lowest quarterly
return was 2.83% (for the quarter ended June 30, 1993).
__________________
1 As of March 31, 2000, the calendar year to date return was 1.38%
(not annualized).
-3-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TempFund Dollar Shares/1/ 4.90% 5.28% 5.08%
-------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: First Tier Institutions -
Only Money Fund Average* 4.95% 5.21% 4.95%
-------------------------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
-------------------------------------------------------------------------------------------------------------
<S> <C>
TempFund Dollar Shares/1/ 5.23%
-------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: First Tier
Institutions - Only Money Fund Average* 5.49%
-------------------------------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Administration Shares of the Fund has not yet commenced
operations, the performance is the performance of the Dollar Shares of the Fund,
which are offered by a separate prospectus. Dollar Shares and Administration
Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Administration Shares will be greater than Dollar Shares because
they bear different expenses.
* IBC's Money Fund Report: First Tier Institutions -- Only Money Fund Average
is comprised of institutional money market funds investing in First Tier
Eligible money market instruments.
-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.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TempFund
Administration Shares
---------------------
<S> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .09%
Other Expenses .21%
Administration Fees .09%
Miscellaneous .12%
Total Annual Fund
Operating Expenses(1) .30%
===
</TABLE>
________________________________________________________________________________
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers,
but can terminate the waivers upon 120 days prior written notice to the Fund.
<TABLE>
<CAPTION>
TempFund
Administration Shares
---------------------
<S> <C> <C>
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .08%
Other Expenses .20%
Administration Fees .08%
Miscellaneous .12%
Total Annual Fund Operating Expenses
(after current waivers) .28%
====
</TABLE>
--------------------------------------------------------------------------------
-5-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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:
----------------------------------
TempFund Administration Shares
----------------------------------
One Year $ 31
Three Years $ 97
Five Years $169
Ten Years $381
----------------------------------
-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. 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 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.
-7-
<PAGE>
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.
Bank Obligations. The Fund may purchase obligations of issuers in the
banking industry, such as bank holding company obligations, certificates of
deposit, bankers' acceptances, bank notes and time deposits 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 Obligations. The Fund may invest in asset-backed securities
which are backed by mortgages, installment sales contracts, credit card
receivables or other assets.
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. A pro rata of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
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.
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
-8-
<PAGE>
agreements and securities lending transactions will be aggregated for purposes
of this investment limitation.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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 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.
-9-
<PAGE>
Other Risks. Certain investment strategies employed by the Fund may involve
additional investment risk. Liquidity risk involves certain securities which may
be difficult or impossible to sell at the time and the price that the Fund would
like. Reverse repurchase agreements, securities lending transactions and when-
issued or delayed delivery transactions may involve leverage risk. Leverage risk
is associated with securities or practices that multiply small market movements
into larger changes in the value of the Fund's investment portfolio. The Fund
does not currently intend to employ investment strategies that involve leverage
risk.
-10-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended September 30, 1999 and the one
month ended October 31, 1999. 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.
TempFund Dollar Shares
The table below sets forth selected financial data for a TempFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
One Month
Ended Year Ended September 30,
October 31, ----------------------------------------------------
1999 1999 1998 1997 1996 1995
------------ --------- --------- --------- --------- --------
<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............. .0043 .0470 .0524 .0514 .0516 .0542
--------- -------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment Income......... (.0043) (.0470) (.0524) (.0514) (.0516) (.0542)
--------- -------- -------- -------- -------- -------
Net Asset Value,
End of Period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======== =======
Total Return........................ 5.15%/2/ 4.81% 5.38% 5.27% 5.30% 5.57%
Ratios/Supplemental Data:
Net Assets,
End of Period $(000).............. 446,569 497,178 302,476 355,284 162,119 81,828
Ratio of Expenses to Average Daily
Net Assets/1/......................
.43%/2/ .43% .43% .43% .43% .49%
Ratio of Net Investment
Income to Average Daily Net Assets.. 5.06%/2/ 4.71% 5.25% 5.14% 5.16% 5.42%
</TABLE>
1 Without the waiver of advisory and administration fees, the ratio of expenses
to average daily net assets would have been .45% (annualized for the one
month ended October 31, 1999 and .47%, .48%, .49%, .51% and .52% for the
years ended September 30, 1999, 1998, 1997, 1996 and 1995, respectively, for
TempFund Dollar Shares.
2 Annualized.
-11-
<PAGE>
T-FUND
--------------------------------------------------------------------------------
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 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. The Fund is
subject to risks related to changes in
prevailing interest rates, since
generally, a fixed-income security will
increase in value when interest rates
fall and decrease in value when interest
rates rise.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in
the Fund.
Who May Want to Invest in the Fund: The Fund is designed for institutional
investors seeking current income with
liquidity and security of principal.
-12-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund 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.
T-Fund
Dollar Shares /1/
1990 7.97
1991 5.96
1992 3.58
1993 2.82
1994 3.66
1995 5.61
1996 5.08
1997 5.19
1998 5.09
1999 4.64
During the ten-year period shown in the bar chart, the highest quarterly
return was 8.08% (for the quarter ended June 30, 1990) and the lowest quarterly
return was 2.79% (for the quarter ended December 31, 1993).
_________________
1 As of March 31, 2000, the calendar year to date return was 1.32%
(not annualized).
-13-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T-Fund Dollar Shares/1/ 4.64% 5.12% 4.95%
-------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Government Institutions - Only 4.69% 5.02% 4.95%
Money Fund Average*
-------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
---------------------------------------------------------------------------------------------------------
<S> <C>
T-Fund Dollar Shares/1/ 4.47%
---------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Government Institutions - Only Money Fund
Average* 5.06%
---------------------------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Administration Shares of the Fund has not yet commenced
operations, the performance is the performance of the Dollar Shares of the Fund,
which are offered by a separate prospectus. Dollar Shares and Administration
Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Administration Shares will be greater than Dollar Shares because
they bear different expenses.
* IBC's Money Fund Report: Government Institutions - Only Money Fund Average
is comprised of institutional money market funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
-14-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
--------------------------------------------------------------------------------
T-Fund
Administration Shares
---------------------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .12%
Other Expenses .24%
Administration Fees .12%
Miscellaneous .12%
Total Annual Fund
Operating Expenses(1) .36%
====
------------------------------------------------------------------------------
(1) 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. As a result of fee waivers,
estimated "Management Fees," "Other Expenses" and "Total Annual Fund Operating
Expenses" of the Fund for the most recent fiscal year would have been as set
forth below. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
T-Fund
Administration Shares
---------------------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .09%
Other Expenses .21%
Administration Fees .09%
Miscellaneous .12%
Total Annual Fund
Operating Expenses (after current waivers) .30%
====
-------------------------------------------------------------------------------
-15-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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:
------------------------------------------------
T-Fund Administration Shares
------------------------------------------------
One Year $ 37
Three Year $116
Five Year $202
Ten Year $456
------------------------------------------------
-16-
<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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the
-17-
<PAGE>
cost of the borrowing. Such borrowings will be unsecured. The Fund will not
purchase portfolio securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
Other Types of Investments. This Prospectus describes the Fund' 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 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 risks.
-18-
<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.
T-Fund Dollar Shares
The table below sets forth selected financial data for a T-Fund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
<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............................................ .0448 .0507 .0503 .0503 .0540
-------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment Income...................................... (.0448) (.0507) (.0503) (.0503) (.0540)
-------- -------- -------- -------- -------
Net Asset Value, End of Period.................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total Return...................................................... 4.58% 5.21% 5.16% 5.15% 5.55%
Ratios/Supplemental Data:
Net Assets, End of Period $(000).................................. 612,695 777,385 516,092 351,271 82,502
Ratio of Expenses to Average Daily Net Assets/1/................. .45% .45% .45% .44% .43%
Ratio of Net Investment Income to Average Daily
Net Assets...................................................... 4.47% 5.06% 5.03% 5.01% 5.41%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .51%, .52%, .54%, .55%
and .54%, for the years ended October 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for T-Fund Dollar Shares.
-19-
<PAGE>
MUNIFUND
--------------------------------------------------------------------------------
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. The Fund is also
subject to risks related to changes in
prevailing interest rates, since generally, a
fixed-income security will increase in value
when interest rates fall and decrease in
value when interest rates rise.
An investment in the Fund is not a deposit in
PFPC Trust Company or PNC Bank, N.A. and is not
insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it
is possible to lose money by investing in the
Fund.
Who May Want to Invest in The Fund is designed for institutional
The Fund: investors seeking as high a level of current
interest income exempt from federal income
tax as is consistent with relative stability
of principal.
-20-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund 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.
MuniFund
Dollar Shares/1/
1990 5.15
1991 3.53
1992 2.23
1993 1.96
1994 2.36
1995 3.43
1996 3.02
1997 3.20
1998 3.03
1999 2.85
During the ten-year period shown in the bar chart, the highest quarterly
return was 5.62% (for the quarter ended March 31, 1990) and the lowest quarterly
return was 1.84% (for the quarter ended December 31, 1993).
_______________
/1/ As of March 31, 2000, the calendar year to date return was 0.80%
(not annualized).
-21-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MuniFund Dollar Shares/1/ 2.85% 3.11% 3.07%
---------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Tax-Free Institutions - 2.96% 3.22% 3.34%
Only Money Fund Average*
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
-------------------------------------------------------------------------------------------------------
<S> <C>
MuniFund Dollar Shares/1/ 3.41%
-------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Tax-Free Institutions - Only
Money Fund Average* 3.85%
-------------------------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Administration Shares of the Fund has not yet commenced
operations, the performance is the performance of the Dollar Shares of the Fund,
which are offered by a separate prospectus. Dollar Shares and Administration
Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Administration Shares will be greater than Dollar Shares because
they bear different expenses.
* IBC's Money Fund Report: Tax Free Institutions-Only Money Fund Average is
comprised of institutional money market funds investing in obligations of tax-
exempt entities, including state and municipal authorities.
-22-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
MuniFund
Administration Shares
----------------------------------------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<S> <C> <C>
Management Fees .17%
Other Expenses .34%
Administration Fees
.17%
Miscellaneous .17%
Total Annual Fund .51%
Operating Expenses (1) ===
---------------------------------------------------------------------------------------------
</TABLE>
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers,
but can terminate the waivers upon 120 days prior written notice to the Fund.
------------------------------------------------------------------------------
MuniFund
Administration Shares
--------------------------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees .07%
Other Expenses .23%
Administration Fees .07%
Miscellaneous .16%
Total Annual Fund .30%
Operating Expenses (after current waivers) ===
-------------------------------------------------------------------------------
-23-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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 Administration Shares
------------------------------------
One Year $ 52
Three years $164
Five years $285
Ten years $640
------------------------------------
-24-
<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 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 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 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; or
. 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; and
. securities issued by other open-end investment companies that invest in the
type of obligations in which the Fund may invest.
-25-
<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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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
-26-
<PAGE>
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 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. 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. In making investments, the Fund and the Adviser
will rely on issuers' bond counsel and, in the case of derivative securities,
sponsors' counsel for their opinions on the tax-exempt status of interest on
Municipal Obligations and payments under tax-exempt derivative securities.
Neither the Fund nor its Adviser will independently review the bases for these
tax opinions. If any of those tax opinions are ultimately determined to be
incorrect, the Fund and its shareholders could be subject to substantial tax
liabilities.
-27-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended November 30, 1998 and the
eleven months ended October 31, 1999. 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). The information for
the eleven months ended October 31, 1999 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. The financial highlights for the five years in the period ended
November 30, 1998 were audited by KPMG LLP whose report expressed an unqualified
opinion on those statements.
MuniFund Dollar Shares
The table below sets forth selected financial data for a MuniFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended November 30,
October 31, ------------------------------------------------
1999 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.............. .0250 .0302 .0313 .0301 .0335 .0230
--------- ------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income........................ (.0250) (.0302) (.0313) (.0301) (.0335) (.0230)
--------- ------- ------- ------- ------- -------
Net Asset Value,
End of Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======= ======= ======= ======= =======
Total Return........................ 2.77%/2/ 3.07% 3.18% 3.06% 3.41% 2.33%
Ratios/Supplemental Data:
Net Assets, End of Period
$(000)............................. 56,238 51,736 67,387 61,396 6,474 2,785
Ratio of Expenses to Average
Daily Net Assets/1/................ .45%/2/ .50% .52% .52% .52% .51%
Ratio of Net Investment
Income to Average Daily Net Assets.. 2.71%/2/ 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 would have been .66% (annualized) for
the eleven months ended October 31, 1999 and .66%, .66%, .67%, .66% and
.66% for the years ended November 30, 1998, 1997, 1996, 1995 and 1994,
respectively, for MuniFund Dollar Shares.
/2/ Annualized.
-28-
<PAGE>
CALIFORNIA MONEY FUND
--------------------------------------------------------------------------------
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 the interest on
Municipal Obligations that is exempt from
taxation under the Constitution or statutes
of California ("California Municipal
Obligations") are exempt from regular federal
and California State personal income tax.
California Municipal Obligations include
municipal securities issued by the State of
California and its political sub-divisions,
as well as certain other governmental issuers
such as the Commonwealth of Puerto Rico.
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. The Fund is also
subject to risks related to changes in
prevailing interest rates, since generally, a
fixed-
-29-
<PAGE>
income security will increase in value when
interest rates fall and decrease in value
when interest rates rise.
The Fund is non-diversified because it
emphasizes investments in California
Municipal Obligations. This means that it may
invest a greater percentage of its assets in
a particular issuer, and that its performance
will be dependent upon a smaller category of
securities than a diversified portfolio.
Accordingly, the Fund may experience greater
fluctuations in net asset value and may have
greater risk of loss.
Dividends derived from interest on Municipal
Obligations other than California Municipal
Obligations are exempt from federal income
tax but may be subject to California State
personal income tax.
An investment in the Fund is not a deposit in
PFPC Trust Company or PNC Bank, N.A. and is
not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to
preserve 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 The Fund is designed for California
Fund: 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 California
personal income tax as is consistent with the
preservation of capital and relative
stability of principal.
-30-
<PAGE>
Performance Information
The Bar Chart and the Table below indicate the risks of investing in
the Fund by showing: how the performance of Dollar Shares of the Fund has varied
from year to year; and the average annual return for Dollar Shares of the Fund.
The Table shows how the average annual return for Dollar Shares of the Fund 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.
California Money Fund
Dollar Shares/1/
1990 5.04
1991 3.69
1992 2.36
1993 2.01
1994 2.48
1995 3.39
1996 2.96
1997 3.14
1998 2.88
1999 2.57
During the ten-year period shown in the bar chart, the highest
quarterly return was 5.25% (for the quarter ended June 30, 1990) and the lowest
quarterly return was 1.88% (for the quarter ended March 31, 1993).
_________________
/1/ As of March 31, 2000, the calendar year to date return was 0.61%
(not annualized).
-31-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Money Fund Dollar Shares/1/ 2.57% 2.99% 3.05%
------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: California State Specific Tax-Free 2.74% 3.04% 3.17%
Institutions-Only Money Fund Average*
------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
----------------------------------------------------------------------------------------------------
California Money Fund Dollar Shares/1/ 3.08%
----------------------------------------------------------------------------------------------------
IBC's Money Fund Report: California State Specific Tax-Free
Institutions - Only Money Fund Average * 3.47%
----------------------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Administration Shares of the Fund has not yet commenced
operations, the performance is the performance of the Dollar Shares of the Fund,
which are offered by a separate prospectus. Dollar Shares and Administration
Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Administration Shares will be greater than Dollar Shares because
they bear different expenses.
* IBC's Money Fund Report: California State Specific Tax-Free Institutions -
Only Money Fund Average is comprised of institutional money market funds
investing in tax-exempt obligations of California State.
-32-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
--------------------------------------------------------------------------------
California Money Fund
Administration Shares
---------------------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .20%
Other Expenses .35%
Administration Fees .20%
Miscellaneous .15%
Total Annual Fund
Operating Expenses(1) .55%
====
--------------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers.
However, the waivers are voluntary and can be terminated at any time.
California Money Fund
Administration Shares
---------------------
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees .07%
Other Expenses .23%
Administration Fees .07%
Miscellaneous .16%
Total Annual Fund
Operating Expenses (after current waivers) .30%
====
--------------------------------------------------------------------------------
-33-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the
Fund (without the waivers) 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
Administration Shares
-----------------------------------
One Year $ 56
Three years $176
Five Years $307
Ten Years $689
-----------------------------------
-34-
<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 will
invest at least 65% of its net assets in California Municipal Obligations. At
least 50% of the Fund's assets must be invested in obligations which, when held
by an individual, the interest therefrom is exempt from California personal
income taxation (i.e., California Municipal Obligations and certain U.S.
Government obligations) at the close of each quarter of its taxable year so as
to permit the Fund to pay dividends that are exempt from California State
personal income tax. Dividends, regardless of their source, may be subject to
local taxes. The Fund will not knowingly purchase securities the interest on
which is subject to regular federal income tax; however, the Fund may hold
uninvested cash reserves pending investment during temporary defensive periods
or, if in the opinion of the 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 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 and securities issued by the U.S.
government or any agency or instrumentality.
-35-
<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.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
-36-
<PAGE>
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 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. 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. In making investments, the Fund and the Adviser will
rely on issuers' bond counsel and, in the case of derivative securities,
sponsors' counsel for their opinions on the tax-exempt status of interest on
Municipal Obligations and payments under tax-exempt derivative securities.
Neither the Fund nor its Adviser will independently review the bases for those
tax opinions. If any of those tax opinions are ultimately determined to be
incorrect, the Fund and its shareholders could be subject to substantial tax
liabilities.
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
-37-
<PAGE>
California Municipal Obligations to timely meet their continuing obligations
with respect 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 AA-
and AA3, 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 so invested, the Fund will be subject to the
peculiar risks presented by such similar projects to a greater extent than it
would be if the Fund's assets were not so invested.
-38-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended January 31, 1999 and the nine
months ended October 31, 1999. 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.
California Money Fund Dollar Shares
The table below sets forth selected financial data for a California Money Fund
Dollar Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended January 31,
October 31, ---------------------------------------------------
1999 1999 1998 1997 1996 1995
------------ --------- --------- --------- -------- --------
<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................. .0182 .0280 .0309 .0291 .0331 .0256
--------- -------- -------- -------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income............................... (.0182) (.0280) (.0309) (.0291) (.0331) (.0256)
--------- -------- -------- -------- ------- -------
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======= =======
Total Return........................... 2.48%/2/ 2.84% 3.14% 2.96% 3.37% 2.59%
Ratios/Supplemental Data:
Net Assets, End of Period $(000)....... 8,288 139,601 130,547 126,321 31,163 11,026
Ratio of Expenses to Average
Daily Net Assets/1/................... .45%/2/ .45% .45% .45% .45% .45%
Ratio of Net Investment Income
to Average Daily Net Assets........... 2.43%/2/ 2.77% 3.09% 2.90% 3.30% 2.54%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .70% (annualized) for
the nine months ended October 31, 1999 and .70%, .71%, .73%, .73% and .73%
for the years ended January 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for California Money Fund Dollar Shares.
/2/ Annualized.
-39-
<PAGE>
MANAGEMENT OF THE FUND
Investment Adviser
The Adviser, a majority-owned indirect subsidiary of PNC Bank, serves as
the Company'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 $58 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 each Fund and is responsible for all
purchases and sales of Funds' 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 each 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 a 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, 1999, TempFund, T-Fund, MuniFund and California
Money Fund paid investment advisory fees and administration fees each
aggregating .08%, .09%, .07% and .07%, respectively, (net of waivers) of their
average net assets. The services provided by BIMC and the fees payable by each
Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
-40-
<PAGE>
SHAREHOLDER INFORMATION
Price of Fund Shares
A Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PFPC Inc. ("PFPC"), the Trust's co-
administrator, twice 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 of MuniFund and California Money Fund is determined as of
12:00 noon and 4:00 P.M., Eastern time (9:00 A.M., and 1:00 P.M. Pacific time).
The net asset value of TempFund and T-Fund is determined as of 12:00 noon and
5:30 P.M. Eastern Time. The net asset value per share of each class of a Fund's
shares is calculated by adding the value of all securities and other assets of a
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, each 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, a
Fund may postpone the date of payment of any redeemable security for up to seven
days.
On any business day when the Bond Market Association ("BMA") recommends
that the securities markets close early, each Fund reserves the right to close
at or prior to the BMA recommended closing time. If a Fund does so, it will
cease granting same business day credits for purchase and redemption orders
received after the Fund's closing time and credit will be granted to the next
business day.
Purchase of Shares
Shares of each of the Funds are sold at the net asset value per share next
determined after confirmation of a purchase order by PFPC, which also serves as
the Trust's transfer agent. Purchase orders for shares are accepted only on
Business Days and must be transmitted to the Funds' Office in Wilmington,
Delaware by telephone (800-441-7450; in Delaware: 302-797-2350) or until 3:00
PM, Eastern Time, through the Fund's internet-based order entry program, MA2000.
The chart below outlines the cut-off times for when purchase orders are
executed. Purchase orders accepted by PFPC by the cut-off time and for which
payment has been received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Trust's custodian, PFPC Trust Company, by 4:00 PM, Eastern Time (5:30 PM,
Eastern Time, for TempFund and T-Fund) will be executed that day. Purchase
orders received after the cut-off times, and orders for which payment has not
been received by 4:00 PM, Eastern Time (5:30 PM, Eastern Time, for TempFund and
T-Fund) will not be accepted, and notice thereof will be given to the
institution placing the order. Payment for purchase orders which are not
received or accepted will be returned after prompt inquiry to the sending
institution. Each of the Funds may at their discretion reject any purchase order
for Administration Shares.
Portfolio Time
--------- ----
TempFund* 5:30 PM Eastern Time
T-Fund* 5:30 PM Eastern Time
MuniFund 2:30 PM Eastern Time
California Money Fund** 12:00 Noon Eastern Time
*Purchase orders placed between 3:00 PM and 5:30 PM, Eastern Time, may only
be transmitted by telephone, and TempFund and T-Fund reserve the right to limit
the amount of such orders.
**Purchase orders for Administration Shares of the California Money Fund
will be accepted between 12:00 Noon Eastern Time and 1:00 PM Eastern Time up to
a maximum order of $1 million per account. The Fund reserves the right to limit
the amount of such orders.
Payment for Administration Shares of a Fund may be made only in federal
funds or other funds immediately available to PNC Bank. The minimum initial
investment by an institution for Administration Shares is $5,000.00. (However,
institutional investors may set a higher minimum for their customers). There is
no minimum subsequent investment.
Administration Shares of the Funds are sold without charge by a Fund.
Institutional investors purchasing or holding Administration Shares of the Funds
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 Administration Shares of the Funds. An institution purchasing
Administration Shares of the Fund on behalf of its customers is responsible for
transmitting orders to a Fund in accordance with its customer agreements.
Redemption of Shares
Redemption orders must be transmitted to the Funds' Office in Wilmington,
Delaware in the manner described under "Purchase of Shares." Administration
Shares are redeemed without charge by a Fund at the net asset value per share
next determined after PFPC's receipt of the redemption request.
The chart below outlines the cut-off times for the redemption of
Administration Shares of the Funds. Payment for redeemed Administration Shares
of the Funds for which redemption requests are received by PFPC by the
established cut-off times on a Business Day is normally made in federal funds
wired to the redeeming shareholder on the same day. Payment of redemption
-41-
<PAGE>
requests which are received after the established cut-off times, 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.
Portfolio Time
--------- ----
TempFund* 5:30 PM Eastern Time
T-Fund* 5:30 PM Eastern Time
MuniFund 12:00 Noon Eastern Time
California Money Fund** 12:00 Noon Eastern Time
*Redemption orders placed between 3:00 PM and 5:30 PM, Eastern Time, may
only be transmitted by telephone. TempFund and T-Fund reserve the right
to limit the amount of such orders.
**Redemption orders for Administration Shares of the California Money Fund
will be accepted between 12:00 noon Eastern Time and 1:00 PM Eastern Time for a
maximum order of $1 million per account. The Fund reserves the right to limit
the amount of such orders.
The Funds shall have the right to redeem shares in any Administration Share
account if the value of the account is less than $5,000 (other than due to
market fluctuations), after sixty days' prior written notice to the shareholder.
If during the sixty-day period the shareholder increases the value of its
Administration Share account to $5,000 or more, no such redemption shall take
place. If a shareholder's Administration Share account falls below an average of
$5,000 in any particular calendar month, the account may be charged an account
maintenance fee with respect to that month (with the exception of TempFund). Any
such redemption shall be effected at the net asset value next determined after
the redemption order is entered. In addition, a Fund may redeem Administration
Shares involuntarily under certain special circumstances described in the
Statement of Additional Information under "Additional Purchase and Redemption
Information." An institution redeeming shares of the Fund on behalf of its
customers is responsible for transmitting orders to a Fund in accordance with
its customers agreements.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Funds in connection with the investment of fiduciary
funds in Administration 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 investment fiduciary funds in Administration
Shares.
-42-
<PAGE>
Administration 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 Administration Shares. Pursuant to a Shareholder
Services Plan adopted by the trust's Board of Trustees, the Fund will enter into
an agreement with each Service Organization which purchases Administration
Shares. The agreement will require the service organization to provide services
to its customers who are the beneficial owners of such shares in consideration
of the Fund's payment of up to .10% (on an annualized basis) of the average
daily net asset value of the Administration Shares held by the Service
Organization. Such services are described more fully in the Statement of
Additional Information under "Management of the Fund - Service Organization."
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 Administration Shares.
Dividends and Distributions
Each 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.
Federal Taxes
Distributions paid by TempFund and T-Fund will generally be taxable to
shareholders. Each 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. The one major exception to these
-43-
<PAGE>
tax principles is that distribution on, and sales exchanges and redemptions of,
shares held in an IRA (or other tax qualified plan) will not be currently
taxable.
Tax Exempt Funds - MuniFund and California Money Fund ("the Tax-Exempt
----------------
Funds") anticipate that substantially all of their income dividends will be
"exempt interest dividends," which are exempt from federal income taxes.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of a Tax-Exempt Fund generally will not be deductible for federal income tax
purposes. You should note that a portion of the exempt-interest dividends paid
by a Tax-Exempt 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.
State and Local Taxes
Shareholders may also be subject to state and local taxes on distributions.
State income taxes may not apply however, to the portions of each Fund's
distributions, if any, that are attributable to interest on federal securities
or interest on securities of the particular state or localities within the
state.
Dividends that are paid by California Money 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, provided that at least 50% of the aggregate value of the
Fund's assets consist of exempt-interest obligations. 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 paid by California Money Fund 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 of the Funds shareholder or their
authorized representative an annual statement designating the amount, if any, of
any dividends and distributions made during each year and their federal tax
treatment. Additionally, PFPC will send California Money Fund and New York Money
Funds' shareholders or their authorized representatives an annual statement
regarding, as applicable California, New York State and New York City tax
treatment.
-44-
<PAGE>
The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are
nonresident aliens, foreign trusts or estates, or foreign corporations or
partnerships, may be subject to different United States federal income tax
treatment. You should consult your tax adviser for further information regarding
federal, state, local and/or foreign tax consequences relevant to your specific
situation.
-45-
<PAGE>
HOW TO CONTACT PROVIDENT
INSTITUTIONAL FUNDS
For purchase and redemption orders only call: 800-441-7450
For yield call: 800-821-6006
TempFund Administration Shares Code: H1
T-Fund Administration Shares Code: N1
MuniFund Administration Shares Code: K1
California Money Fund Administration Shares Code: R1
For other information call: 800-821-7432 or visit our website at www.pif.com.
Written correspondence may be sent to:
Provident Institutional Funds
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
-46-
<PAGE>
Where to Find More Information
The Statement of Additional Information (the "SAI") includes additional
information about the Trust'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 each 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
Trust's web site at www.pif.com.
-----------
Information about the Trust (including the SAI) can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C., and information on the
operation of the Public Reference Room may be obtained by calling the SEC at 1-
202-942-8090. Reports and other information about the Trust are available on the
EDGAR Database on the SEC's Internet site at http://www.sec.gov; copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected], or by writing the
SEC's Public Reference Section, Washington, D.C. 20549-0102.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
-47-
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
=============================
Cash Reserve Shares
PROSPECTUS
June 5, 2000
PROVIDENT
INSTITUTIONAL
FUNDS
THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THE
FUNDS' 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>
HOW TO FIND THE INFORMATION YOU NEED....................................... 1
TEMPFUND................................................................... 2
T-FUND..................................................................... 12
MUNIFUND................................................................... 20
CALIFORNIA MONEY FUND...................................................... 30
MANAGEMENT OF THE FUND..................................................... 41
SHAREHOLDER INFORMATION.................................................... 42
Price of Fund Shares.................................................. 42
Purchase of Shares.................................................... 42
Redemption of Shares.................................................. 42
Cash Reserve Shareholder Service Plan................................. 43
Dividends and Distributions........................................... 43
Federal Taxes......................................................... 43
State and Local Taxes................................................. 44
</TABLE>
-i-
<PAGE>
HOW TO FIND THE INFORMATION YOU NEED
-------------------------------------------------------------------------------
Welcome to the new Provident Institutional Funds Prospectus for Cash
Reserve Shares.
The prospectus has been written to provide you with information you need to
make an informed decision about whether to invest in Cash Reserve Shares of the
Provident Institutional Funds (the "Trust").
This prospectus contains information about the four portfolios (the
"Funds") of the Trust that offer Cash Reserve Shares. To save you time, the
prospectus has been organized so that each Fund has its own short section. All
you have to do is turn to the section for any particular Fund. Once you read
the important facts about the Funds that interest you, read the sections that
tell you about buying and selling shares, certain fees and expenses, shareholder
services and your rights as a shareholder. These sections apply to all the
Funds.
Cash Reserve Shares are sold to institutions that have entered into
servicing agreements with the Trust in connection with their investments.
The Funds are 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.
-1-
<PAGE>
TEMPFUND
--------------------------------------------------------------------------------
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
U.S. dollar-denominated money market
instruments, including government, bank,
and commercial obligations 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. The Fund is also
subject to risks related to changes in
prevailing interest rates, since
generally, a fixed-income security will
increase in value when interest rates
fall and decrease in value when interest
rates rise.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in
the Fund.
Who May Want to Invest in the Fund: The Fund is designed for institutional
investors seeking current income and
stability of principal.
-2-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund 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.
Temp Fund
Dollar Shares/1/
1990 8.02
1991 5.99
1992 3.64
1993 2.87
1994 3.94
1995 5.74
1996 5.17
1997 5.35
1998 5.27
1999 4.90
During the ten-year period shown in the bar chart, the highest
quarterly return was 8.12% (for the quarter ended June 30, 1990) and the lowest
quarterly return was 2.83% (for the quarter ended June 30, 1993).
_________________
/1/ As of March 31, 2000, the calendar year to date return was 1.38%
(not annualized).
-3-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TempFund Dollar Shares/1/ 4.90% 5.28% 5.08%
---------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: First Tier Institutions - Only Money 4.95% 5.21% 4.95%
Fund Average*
---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
----------------------------------------------------------------------------------------------------------
<S> <C>
TempFund Dollar Shares/1/ 5.23%
----------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: First Tier 5.49%
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.
________________________
/1/ Because the Cash Reserve Shares of the Fund have not yet commenced
operations, the performance is the performance of the Dollar Shares of the Fund,
which are offered by a separate prospectus. Dollar Shares and Cash Reserve
Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Reserve Shares will be lower than Dollar Shares because they
bear different expenses.
* IBC's Money Fund Report: First Tier Institutions -- Only Money Fund Average
is comprised of institutional money market funds investing in First Tier
Eligible money market instruments.
-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.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
-------------------------------------------------------------------------------
TempFund
Cash Reserve Shares
-------------------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .09%
Other Expenses .51%
Administration Fees .09%
Shareholder Servicing Fees .25%
Miscellaneous .17%
Total Annual Fund
Operating Expenses(1) .60%
===
-------------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers,
but can terminate the waivers upon 120 days prior written notice to the
Fund.
TempFund
Cash Reserve Shares
-------------------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .08%
Other Expenses .50%
Administration Fees .08%
Shareholder Servicing Fees .25%
Miscellaneous .17%
Total Annual Fund Operating Expenses
(after current waivers) .58%
====
-------------------------------------------------------------------------------
-5-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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:
--------------------------------------------
TempFund Cash Reserve Shares
--------------------------------------------
One Year $ 61
Three Years $192
Five Years $335
Ten Years $750
--------------------------------------------
-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. 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 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.
-7-
<PAGE>
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.
Bank Obligations. The Fund may purchase obligations of issuers in the
banking industry, such as bank holding company obligations, certificates of
deposit, bankers' acceptances, bank notes and time deposits 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 Obligations. The Fund may invest in asset-backed securities
which are backed by mortgages, installment sales contracts, credit card
receivables or other assets.
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. A pro rata portion of the other investment companies'
expenses will be borne by the Funds' shareholders.
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.
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.
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
-8-
<PAGE>
agreements and securities lending transactions will be aggregated for purposes
of this investment limitation.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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 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.
-9-
<PAGE>
Other Risks. Certain investment strategies employed by the Fund may
involve additional investment risk. Liquidity risk involves certain securities
which may be difficult or impossible to sell at the time and the price that the
Fund would like. Reverse repurchase agreements, securities lending transactions
and when-issued or delayed delivery transactions may involve leverage risk.
Leverage risk is associated with securities or practices that multiply small
market movements into larger changes in the value of the Fund's investment
portfolio. The Fund does not currently intend to employ investment strategies
that involve leverage risk.
-10-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended September 30, 1999 and the one
month ended October 31, 1999. 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.
TempFund Dollar Shares
The table below sets forth selected financial data for a TempFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
One Month
Ended Year Ended September 30,
October 31, ----------------------------------------------------
1999 1999 1998 1997 1996 1995
------------ --------- --------- --------- --------- --------
<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............. .0043 .0470 .0524 .0514 .0516 .0542
--------- -------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment Income......... (.0043) (.0470) (.0524) (.0514) (.0516) (.0542)
--------- -------- -------- -------- -------- -------
Net Asset Value,
End of Period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======== =======
Total Return........................ 5.15%/2/ 4.81% 5.38% 5.27% 5.30% 5.57%
Ratios/Supplemental Data:
Net Assets,
End of Period $(000).............. 446,569 497,178 302,476 355,284 162,119 81,828
Ratio of Expenses to Average Daily
Net Assets/1/...................... .43%/2/ .43% .43% .43% .43% .49%
Ratio of Net Investment
Income to Average Daily Net Assets.. 5.06%/2/ 4.71% 5.25% 5.14% 5.16% 5.42%
</TABLE>
1 Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .45% (annualized for
the one month ended October 31, 1999 and, .47%, .48%, .49%, .51% and .52%
for the years ended September 30, 1999, 1998, 1997, 1996 and 1995,
respectively, for TempFund Dollar Shares.
2 Annualized.
-11-
<PAGE>
T-FUND
--------------------------------------------------------------------------------
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 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. The Fund is
subject to risks related to changes in
prevailing interest rates, since
generally, a fixed-income security will
increase in value when interest rates
fall and decrease in value when interest
rates rise.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in
the Fund.
Who May Want to Invest in the Fund: The Fund is designed for institutional
investors seeking current income with
liquidity and security of principal.
-12-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in
the Fund by showing: how the performance of Dollar Shares of the Fund has varied
from year to year; and the average annual return for Dollar Shares of the Fund.
The Table shows how the average annual return for Dollar Shares of the Fund 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.
T-Fund
Dollar Shares/1/
1990 7.97
1991 5.96
1992 3.58
1993 2.82
1994 3.66
1995 5.61
1996 5.08
1997 5.19
1998 5.09
1999 4.64
During the ten-year period shown in the bar chart, the highest
quarterly return was 8.08% (for the quarter ended June 30, 1990) and the lowest
quarterly return was 2.79% (for the quarter ended December 31, 1993).
_____________________
/1/ As of March 31, 2000, the calendar year to date return was 1.32% (not
annualized).
-13-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T-Fund Dollar Shares/1/ 4.64% 5.12% 4.95%
-------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Government Institutions - Only 4.69% 5.02% 4.95%
Money Fund Average *
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C>
T-Fund Dollar Shares/1/ 4.47%
-------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Government Institutions - Only Money Fund
Average* 5.06%
-------------------------------------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Cash Reserve Shares of the Fund have not yet commenced
operations, the performance is the performance of the Dollar Shares of the Fund,
which are offered by a separate prospectus. Dollar Shares and Cash Reserve
Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Reserve Shares will be lower than Dollar Shares because they
bear different expenses.
* IBC's Money Fund Report: Government Institutions - Only Money Fund Average
is comprised of institutional money market funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
-14-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
-------------------------------------------------------------------------------
T-Fund
Cash Reserve Shares
-------------------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .12%
Other Expenses .54%
Administration Fees .12%
Shareholder Servicing Fees .25%
Miscellaneous .17%
Total Annual Fund
Operating Expenses(1) .66%
====
------------------------------------------------------------
(1) 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. As a result of fee waivers,
estimated "Management Fees," "Other Expenses" and "Total Annual Fund Operating
Expenses" of the Fund for the most recent fiscal year would have been as set
forth below. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
T-Fund
Cash Reserve Shares
-------------------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .09%
Other Expenses .51%
Administration Fees .09%
Shareholder Servicing Fees .25%
Miscellaneous .17%
Total Annual Fund
Operating Expenses (after current waivers) .60%
====
-------------------------------------------------------------------------------
-15-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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:
------------------------------------
T-Fund Cash Reserve Shares
------------------------------------
One Year $ 67
Three Year $211
Five Year $368
Ten Year $822
------------------------------------
-16-
<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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money when the
Adviser believes that the return from securities purchased with borrowed funds
will be greater than the
-17-
<PAGE>
cost of the borrowing. Such borrowings will be unsecured. The Fund will not
purchase portfolio securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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 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 risks.
-18-
<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.
T-Fund Dollar Shares
The table below sets forth selected financial data for a T-Fund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
<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............................................ .0448 .0507 .0503 .0503 .0540
-------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment Income...................................... (.0448) (.0507) (.0503) (.0503) (.0540)
-------- -------- -------- -------- -------
Net Asset Value, End of Period.................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total Return...................................................... 4.58% 5.21% 5.16% 5.15% 5.55%
Ratios/Supplemental Data:
Net Assets, End of Period $(000).................................. 612,695 777,385 516,092 351,271 82,502
Ratio of Expenses to Average Daily Net Assets/1/................. .45% .45% .45% .44% .43%
Ratio of Net Investment Income to Average Daily
Net Assets...................................................... 4.47% 5.06% 5.03% 5.01% 5.41%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .51%, .52%, .54%, .55%
and .54%, for the years ended October 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for T-Fund Dollar Shares.
-19-
<PAGE>
MUNIFUND
--------------------------------------------------------------------------------
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. The Fund is also
subject to risks related to changes in
prevailing interest rates, since
generally, a fixed-income security will
increase in value when interest rates
fall and decrease in value when interest
rates rise.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in
the Fund.
-20-
<PAGE>
Who May Want to Invest in The Fund: The Fund is designed for institutional
investors seeking as high a level of
current interest income exempt from
federal income tax as is consistent with
relative stability of principal.
-21-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in
the Fund by showing: how the performance of Dollar Shares of the Fund has varied
from year to year; and the average annual return for Dollar Shares of the Fund.
The Table shows how the average annual return for Dollar Shares of the Fund 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.
MuniFund
Dollar Shares/1/
1990 5.15
1991 3.53
1992 2.23
1993 1.96
1994 2.36
1995 3.43
1996 3.02
1997 3.20
1998 3.03
1999 2.85
During the ten-year period shown in the bar chart, the highest
quarterly return was 5.62% (for the quarter ended March 31, 1990) and the lowest
quarterly return was 1.84% (for the quarter ended December 31, 1993).
______________________
/1/ As of March 31, 2000, the calendar year to date return was 0.80% (not
annualized).
-22-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MuniFund Dollar Shares/1/ 2.85% 3.11% 3.07%
--------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Tax-Free Institutions - Only 2.96% 3.22% 3.34%
Money Fund Average*
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
-------------------------------------------------------------------------------------------------------------
<S> <C>
MuniFund Dollar Shares/1/ 3.41%
-------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Tax-Free Institutions - Only
Money Fund Average* 3.85%
-------------------------------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Cash Reserve Shares of the Fund have not yet commenced
operations, the performance is the performance of the Dollar Shares of the Fund,
which are offered by a separate prospectus. Dollar Shares and Cash Reserve
Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Reserve Shares will be lower than Dollar Shares because they
bear different expenses.
* IBC's Money Fund Report: Tax Free Institutions-Only Money Fund Average is
comprised of institutional money market funds investing in obligations of tax-
exempt entities, including state and municipal authorities.
-23-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
-------------------------------------------------------------------------------
MuniFund
Cash Reserve Shares
-------------------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees .17%
Other Expenses .64%
Administration Fees .17%
Shareholder Servicing Fees .25%
Miscellaneous .22%
Total Annual Fund
Operating Expenses (1) .81%
===
-------------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers,
but can terminate the waivers upon 120 days prior written notice to the
Fund.
-------------------------------------------------------------------------------
MuniFund
Cash Reserves Shares
--------------------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees .07%
Other Expenses .53%
Administration Fees .07%
Shareholder Servicing Fees .25%
Miscellaneous .21%
Total Annual Fund
Operating Expenses (after current waivers) .60%
====
-------------------------------------------------------------------------------
-24-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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 Cash Reserve Shares
-------------------------------------
One Year $ 83
Three years $ 259
Five Years $ 450
Ten Years $1,002
-------------------------------------
-25-
<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 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 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 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; or
. 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; and
. securities issued by other open-end investment companies that invest in the
type of obligations in which the Fund may invest.
-26-
<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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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.
-27-
<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 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. 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. In making investments, the Fund and the Adviser will
rely on issuers' bond counsel and, in the case of derivative securities,
sponsors' counsel for their opinions on the tax-exempt status of interest on
Municipal Obligations and payments under tax-exempt derivative securities.
Neither the Fund nor its Adviser independently review the bases for those tax
opinions. If any of those tax opinions are ultimately determined to be
incorrect, the Fund and its shareholders could be subject to Substantial tax
liabilities.
-28-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended November 30, 1998 and the
eleven months ended October 31, 1999. 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). The information for
the eleven months ended October 31, 1999 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. The financial highlights for the five years in the period ended
November 30, 1998 were audited by KPMG LLP whose report expressed an unqualified
opinion on those statements.
Munifund Dollar Shares
The table below sets forth selected financial data for a MuniFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended November 30,
October 31, ------------------------------------------------
1999 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.............. .0250 .0302 .0313 .0301 .0335 .0230
--------- ------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income........................... (.0250) (.0302) (.0313) (.0301) (.0335) (.0230)
--------- ------- ------- ------- ------- -------
Net Asset Value,
End of Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======= ======= ======= ======= =======
Total Return 2.77%/2/ 3.07% 3.18% 3.06% 3.41% 2.33%
Ratios/Supplemental Data:
Net Assets, End of Period
$(000)............................. 56,238 51,736 67,387 61,396 6,474 2,785
Ratio of Expenses to Average
Daily Net Assets/1/................ .45%/2/ .50% .52% .52% .52% .51%
Ratio of Net Investment
Income to Average Daily Net Assets 2.71%/2/ 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 would have been .66% (annualized) for
the eleven months ended October 31, 1999 and .66%, .66%, .67%, .66% and .66%
for the years ended November 30, 1998, 1997, 1996, 1995 and 1994,
respectively, for MuniFund Dollar Shares.
/2/ Annualized.
-29-
<PAGE>
CALIFORNIA MONEY FUND
--------------------------------------------------------------------------------
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 the interest
on Municipal Obligations that is exempt
from taxation under the Constitution or
statutes of California ("California
Municipal Obligations") are exempt from
regular federal and California State
personal income tax. California
Municipal Obligations include municipal
securities issued by the State of
California and its political sub-
divisions, as well as certain other
governmental issuers such as the
Commonwealth of Puerto Rico.
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. 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.
-30-
<PAGE>
The Fund is non-diversified because it
emphasizes its investments in California
Municipal Obligations. This means that
it may invest a greater percentage of
its assets in a particular issuer, and
that its performance will be dependent
upon a smaller category of securities
than a diversified portfolio.
Accordingly, the Fund may experience
greater fluctuations in net asset value
and may have greater risk of loss.
Dividends derived from interest on
Municipal Obligations other than
California Municipal Obligations are
exempt from federal income tax but may
be subject to California State personal
income tax.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve 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 California
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 California
personal income tax as is consistent
with the preservation of capital and
relative stability of principal.
-31-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund 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.
California Money Fund
Dollar Shares/1/
1990 5.04
1991 3.69
1992 2.36
1993 2.01
1994 2.48
1995 3.39
1996 2.96
1997 3.14
1998 2.88
1999 2.57
During the ten-year period shown in the bar chart, the highest
quarterly return was 5.25% (for the quarter ended June 30, 1990) and the lowest
quarterly return was 1.88% (for the quarter ended March 31, 1993).
_________________
/1/ As of March 31, 2000, the calendar year to date return was 0.61% (not
annualized).
-32-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Money Fund Dollar Shares/1/ 2.57% 2.99% 3.05%
-----------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: California State Specific Tax-Free 2.74% 3.04% 3.17%
Institutions-Only Money Fund Average*
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
------------------------------------------------------------------------------------------------------------
<S> <C>
California Money Fund Dollar Shares/1/ 3.08%
------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: California State Specific Tax-Free
Institutions - Only Money Fund Average 3.47%
------------------------------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Cash Reserve Shares of the Fund have not yet commenced
operations, the performance is the performance of the Dollar Shares of the Fund,
which are offered by a separate prospectus. Dollar Shares and Cash Reserve
Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Reserve Shares will be lower than Dollar Shares because they
bear different expenses.
* IBC's Money Fund Report: California State Specific Tax-Free Institutions -
Only Money Fund Average is comprised of institutional money market funds
investing in tax-exempt obligations of California State.
-33-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
-------------------------------------------------------------------------------
California Money Fund
Cash Reserve Shares
-------------------
Annual Fund Operating
Expenses
(expenses that are deducted
from Fund assets)
Management Fees .20%
Other Expenses .65%
Administration Fees .20%
Shareholder Servicing Fees .25%
Miscellaneous .20%
Total Annual Fund
Operating Expenses(1) .85%
====
-------------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers.
However, the waivers are voluntary and can be terminated at any time.
California Money Fund
Cash Reserve Shares
-------------------
Annual Fund Operating
Expenses
(expenses that are deducted
from Fund assets)
Management Fees .07%
Other Expenses .53%
Administration Fees .07%
Shareholder Servicing Fees .25%
Miscellaneous .21%
Total Annual Fund
Operating Expenses (after current waivers) .60%
====
-------------------------------------------------------------------------------
-34-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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
Cash Reserve Shares
-------------------------------
One Year $ 88
Three years $ 274
Five Years $ 477
Ten Years $1,061
-------------------------------
-35-
<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 will invest at least 65% of its net assets in California Municipal
Obligations. At least 50% of the Fund's assets must be invested in obligations
which, when held by an individual, the interest therefrom is exempt from
California personal income taxation (i.e., California Municipal Obligations and
certain U.S. Government obligations) at the close of each quarter of its taxable
year so as to permit the Fund to pay dividends that are exempt from California
State personal income tax. Dividends, regardless of their source, may be subject
to local taxes. The Fund will not knowingly purchase securities the interest on
which is subject to regular federal income tax; however, the Fund may hold
uninvested cash reserves pending investment during temporary defensive periods
or, if in the opinion of the 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 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 and securities issued by the U.S.
government or any agency or instrumentality.
-36-
<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.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
-37-
<PAGE>
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 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. 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. In making investments, the Fund and the Adviser will
rely on issuers' bond counsel and, in the case of derivative securities,
sponsors' counsel for their opinions on the tax-exempt status of interest on
Municipal Obligations and payments under tax-exempt derivative securities.
Neither the Fund nor its Adviser will independently review the bases for those
tax opinions. If any of those tax opinions are ultimately determined to be
incorrect, the Fund and its shareholders could be subject to substantial tax
liabilities.
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
-38-
<PAGE>
California Municipal Obligations to timely meet their continuing obligations
with respect 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 AA-
and AA3, 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 so invested, the Fund will be subject to the
peculiar risks presented by such similar projects to a greater extent than it
would be if the Fund's assets were not so invested.
-39-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended January 31, 1999 and the nine
months ended October 31, 1999. 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.
California Money Fund Dollar Shares
The table below sets forth selected financial data for a California Money Fund
Dollar Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended January 31,
October 31, ---------------------------------------------------
1999 1999 1998 1997 1996 1995
----------- --------- --------- --------- -------- --------
<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............. .0182 .0280 .0309 .0291 .0331 .0256
--------- -------- -------- -------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income........................... (.0182) (.0280) (.0309) (.0291) (.0331) (.0256)
--------- -------- -------- -------- ------- -------
Net Asset Value, End of Period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======= =======
Total Return....................... 2.48%/2/ 2.84% 3.14% 2.96% 3.37% 2.59%
Ratios/Supplemental Data:
Net Assets, End of Period $(000)... 8,288 139,601 130,547 126,321 31,163 11,026
Ratio of Expenses to Average
Daily Net Assets/1/............... .45%/2/ .45% .45% .45% .45% .45%
Ratio of Net Investment Income
to Average Daily Net Assets....... 2.43%/2/ 2.77% 3.09% 2.90% 3.30% 2.54%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .70% (annualized) for
the nine months ended October 31, 1999 and .70%, .71%, .73%, .73% and .73%
for the years ended January 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for California Money Fund Dollar Shares.
/2/ Annualized.
-40-
<PAGE>
MANAGEMENT OF THE FUND
Investment Adviser
The Adviser, a majority-owned indirect subsidiary of PNC Bank, serves as
the Company'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 $58 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 each Fund and is responsible for all
purchases and sales of Funds' 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 each 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 a 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, 1999, TempFund, T-Fund, MuniFund and California
Money Fund paid investment advisory fees and administration fees each
aggregating .08%, .09%, .07% and .07%, respectively, (net of waivers) of their
average net assets. The services provided by BIMC and the fees payable by each
Fund for these services are described further in the Statement of Additional
Information under "Management of the Funds."
-41-
<PAGE>
SHAREHOLDER INFORMATION
Price of Fund Shares
A Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PFPC Inc. ("PFPC"), the Trust's co-
administrator, twice 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 of MuniFund and California Money Fund is determined as of
12:00 Noon and 4:00 P.M., Eastern Time (9:00 A.M., and 1:00 P.M. Pacific time).
The net asset value of TempFund and T-Fund is determined as of 12:00 Noon and
5:30 P.M. Eastern time. The net asset value per share of each class of a Fund's
shares is calculated by adding the value of all securities and other assets of a
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, each 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, a
Fund may postpone the date of payment of any redeemable security for up to seven
days.
On any business day when the Bond Market Association ("BMA") recommends
that the securities markets close early, each Fund reserves the right to close
at or prior to the BMA recommended closing time. If a Fund does so, it will
cease granting same business day credits for purchase and redemption orders
received after the Fund's closing time and credit will be granted to the next
business day.
Purchase of Shares
Shares of each of the Funds are sold at the net asset value per share next
determined after confirmation of a purchase order by PFPC, which also serves as
the Trust's transfer agent. Purchase orders for shares are accepted only on
Business Days and must be transmitted to the Funds' Office in Wilmington,
Delaware by telephone (800-441-7450; in Delaware: 302-797-2350) or until 3:00
PM, Eastern Time, through the Fund's internet-based order entry program, MA2000.
The chart below outlines the cut-off times for when purchase orders are
executed. Purchase orders accepted by PFPC by the cut-off time and for which
payment has been received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Trust's custodian, PFPC Trust Company, by 4:00 PM, Eastern Time for MuniFund and
California Money Fund or 5:30 PM, Eastern Time, for TempFund and T-Fund will be
executed that day. Purchase orders received after the cut-off times, and orders
for which payment has not been received by 4:00 PM, Eastern Time for Munifund
and California Money Fund or 5:30 PM, Eastern Time, for TempFund and T-Fund will
not be accepted, and notice thereof will be given to the institution placing the
order. Payment for purchase orders which are not received or accepted will be
returned after prompt inquiry to the sending institution. Each of the Funds may
at their discretion reject any purchase order for Cash Reserve Shares.
Portfolio Time
--------- ----
TempFund* 5:30 PM Eastern Time
T-Fund* 5:30 PM Eastern Time
MuniFund 2:30 PM Eastern Time
California Money Fund** 12:00 Noon Eastern Time
*Purchase orders placed between 3:00 PM and 5:30 PM, Eastern Time, may only
be transmitted by telephone, and TempFund and T-Fund reserve the right to limit
the amount of such orders.
**Purchase orders for Cash Reserve Shares of the California Money Fund will
be accepted between 12:00 Noon Eastern Time and 1:00 PM Eastern Time up to a
maximum order of $1 million per account. The Fund reserves the right to limit
the amount of such orders.
Payment for Cash Reserve Shares of a Fund may be made only in federal funds
or other funds immediately available to PNC Bank. The minimum initial investment
by an institution for Cash Reserve Shares is $5,000.00. (However, institutional
investors may set a higher minimum for their customers.) There is no minimum
subsequent investment.
Cash Reserve Shares of the Funds are sold without charge by a Fund.
Institutional investors purchasing or holding Cash Reserve Shares of the Funds
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 Cash Reserve Shares of the Funds. An institution purchasing Cash
Reserve Shares of the Fund on behalf of its customers is responsible for
transmitting orders to a Fund in accordance with its customer agreements.
Redemption of Shares
Redemption orders must be transmitted to the Funds' Office in Wilmington,
Delaware in the manner described under "Purchase of Shares." Cash Reserve Shares
are redeemed without charge by a Fund at the net asset value per share next
determined after PFPC's receipt of the redemption request.
The chart below outlines the cut-off times for the redemption of Cash
Reserve Shares of the Funds. Payment for redeemed Cash Reserve Shares of the
Funds for which redemption requests are received by PFPC by the established cut-
off times on a Business Day is normally made in federal funds wired to the
redeeming shareholder on the same day. Payment of redemption requests which are
received after the established cut-off times, 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.
Portfolio Time
--------- ----
TempFund* 5:30 PM Eastern Time
T-Fund* 5:30 PM Eastern Time
MuniFund 12:00 Noon Eastern Time
California Money Fund** 12:00 Noon Eastern Time
*Redemption orders placed between 3:00 PM and 5:30 PM, Eastern Time, may
only be transmitted by telephone. TempFund and T-Fund reserve the right to limit
the amount of such orders.
**Redemption orders for Cash Reserve Shares of the California Money Fund
will be accepted between 12:00 Noon Eastern Time and 1:00 PM Eastern Time for a
maximum order of $1 million per account. The Fund reserves the right to limit
the amount of such orders.
The Funds shall have the right to redeem shares in any Cash Reserve Share
account if the value of the account is less than $5,000 (other than due to
market fluctuations), after sixty days' prior written notice to the shareholder.
If during the sixty-day period the shareholder increases the value of its Cash
Reserve Share account to $5,000 or more, no such redemption shall take place. If
a shareholder's Cash Reserve Share account falls below an average of $5,000 in
any particular calendar month, the account may be charged an account maintenance
fee with respect to that month (with the exception of TempFund). Any such
redemption shall be effected at the net asset value next determined after the
redemption order is entered. In addition, a Fund may redeem shares involuntarily
under certain special circumstances described in the Statement of Additional
Information under "Additional Purchase and Redemption Information." An
institution redeeming shares of the Fund on behalf of its customers is
responsible for transmitting orders to a Fund in accordance with its customers
agreements.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Funds in connection with the investment of fiduciary
funds in Cash Reserve 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 investment fiduciary funds in Cash Reserve
Shares.
-42-
<PAGE>
Cash Reserve 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 Cash Reserve Shares. Pursuant to a Shareholder
Services Plan adopted by the Trust's Board of Trustees, the Fund will enter into
an agreement with each Service Organization which purchases Cash Reserve Shares.
The agreement will require the service organization to provide services to its
customers who are the beneficial owners of such shares in consideration of the
Fund's payment of up to .40% (on an annualized basis) of the average daily net
asset value of the Cash Reserve Shares held by the Service Organization. Such
services are described more fully in the Statement of Additional Information
under "Management of the Fund - Service Organizations." 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 Cash Reserve Shares.
Dividends and Distributions
Each 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.
Federal Taxes
Distributions paid by TempFund and T-Fund will generally be taxable to
shareholders. Each 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. The one major exception to these tax principles is that
distribution on, and sales exchanges and redemptions of, shares held in an IRA
(or other tax qualified plan) will not be currently taxable.
-43-
<PAGE>
Tax Exempt Funds -- MuniFund and California Money Fund (the "Tax-Exempt
----------------
Funds") anticipate that substantially all of their income dividends will be
"exempt interest dividends," which are exempt from federal income taxes.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of a Tax-Exempt Fund generally will not be deductible for federal income tax
purposes. You should note that a portion of the exempt-interest dividends paid
by a Tax-Exempt 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.
State and Local Taxes
Shareholders may also be subject to state and local taxes on distributions.
State income taxes may not apply however, to the portions of each Fund's
distributions, if any, that are attributable to interest on federal securities
or interest on securities of the particular state or localities within the
state.
Dividends that are paid by California Money 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, provided that at least 50% of the aggregate value of the
Fund's assets consist of exempt-interest obligations. 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 paid by California Money Fund 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 of the Funds shareholder or their
authorized representative an annual statement designating the amount, if any, of
any dividends and distributions made during each year and their federal tax
treatment. Additionally, PFPC will send California Money Fund and New York Money
Funds' shareholders or their authorized representatives an annual statement
regarding, as applicable California, New York State and New York City tax
treatment.
-44-
<PAGE>
The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are
nonresident aliens, foreign trusts or estates, or foreign corporations or
partnerships, may be subject to different United States federal income tax
treatment. You should consult your tax adviser for further information regarding
federal, state, local and/or foreign tax consequences relevant to your specific
situation.
-45-
<PAGE>
How to Contact Provident
Institutional Funds
For purchases and redemption orders only call: 800-441-7450
For yield information call: 800-821-6006
TempFund Cash Reserve Shares Code: H2
T-Fund Cash Reserve Shares Code: N2
MuniFund Cash Reserve Shares Code: K2
California Money Fund Cash Reserve Shares Code: R2
For other information call: 800-821-7432 or visit our website at www.pif.com
-----------
Written correspondence may be set to:
Provident Institutional Funds
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
-46-
<PAGE>
Where to Find More Information
The Statement of Additional Information (the "SAI") includes additional
information about the Trust'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 each 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
Trust's web site at www.pif.com.
Information about the Trust (including the SAI) can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C., and information on the
operation of the Public Reference Room may be obtained by calling the SEC at 1-
202-942-8090. Reports and other information about the Trust are available on the
EDGAR Database on the SEC's Internet site at http://www.sec.gov; copies of this
information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected], or by writing the
SEC's Public Reference Section, Washington, D.C. 20549-0102.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
-47-
<PAGE>
PROVIDENT INSTITUTIONAL FINDS
=============================
Plus Shares
PROSPECTUS
June 5, 2000
PROVIDENT
INSTITUTIONAL
FUNDS
The Securities and Exchange Commission has
not approved or disapproved the Funds' 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>
HOW TO FIND THE INFORMATION YOU NEED .............................. 1
TEMPFUND........................................................... 2
T-FUND............................................................. 12
MUNIFUND........................................................... 20
CALIFORNIA MONEY FUND.............................................. 30
NEW YORK MONEY FUND................................................ 41
MANAGEMENT OF THE FUND............................................. 53
SHAREHOLDER INFORMATION............................................ 53
Price of Fund Shares....................................... 53
Purchase of Shares......................................... 54
Redemption of Shares....................................... 54
Plus Distribution and Service Plan......................... 54
Dividends and Distributions................................ 55
Federal Taxes.............................................. 55
State and Local Taxes...................................... 55
</TABLE>
-i-
<PAGE>
How to Find the Information You Need
------------------------------------------------------------------------------
Welcome to the new Provident Institutional Funds Prospectus for Plus
Shares.
The prospectus has been written to provide you with information you need to
make an informed decision about whether to invest in Plus Shares of the
Provident Institutional Funds (the "Trust").
This prospectus contains information about the five portfolios (the
"Funds") of the Trust that offer Plus Shares. To save you time, the prospectus
has been organized so that each Fund has its own short section. All you have to
do is turn to the section for any particular Fund. Once you read the important
facts about the Funds that interest you, read the sections that tell you about
buying and selling shares, certain fees and expenses, shareholder services and
your rights as a shareholder. These sections apply to all the Funds.
Plus Shares are sold to broker-dealers that have entered into distribution
agreements with the Trust in connection with their investments.
The Funds are particularly suitable for banks, corporations and other
financial institutions that seek investment of short-term funds for their own
accounts or the accounts of their customers.
-1-
<PAGE>
TEMPFUND
------------------------------------------------------------------------------
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
U.S. dollar-denominated money
market instruments, including
government, bank, and commercial
obligations 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. The Fund is also subject to
risks related to changes in
prevailing interest rates, since
generally, a fixed-income security
will increase in value when interest
rates fall and decrease in value when
interest rates rise.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing
in the Fund.
Who May Want to Invest in the Fund: The Fund is designed for
institutional investors seeking
current income and stability of
principal.
-2-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund 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
Dollar Shares/1/
1990 8.02
1991 5.99
1992 3.64
1993 2.87
1994 3.94
1995 5.74
1996 5.17
1997 5.35
1998 5.27
1999 4.90
During the ten-year period shown in the bar chart, the highest quarterly
return was 8.12% (for the quarter ended June 30, 1990) and the lowest quarterly
return was 2.83% (for the quarter ended June 30, 1993).
___________________
/1/ As of March 31, 2000, the calendar year to date was 1.38%
(not annualized).
-3-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
<S> <C> <C> <C>
TempFund Dollar Shares/1/ 4.90% 5.28% 5.08%
--------------------------------------------------------------------------------
IBC's Money Fund Report: First Tier Institutions- 4.95% 5.21% 4.95%
Only Money Fund Average*
--------------------------------------------------------------------------------
</TABLE>
----------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
----------------------------------------------------------------------
TempFund Dollar Shares/1/ 5.23%
----------------------------------------------------------------------
IBC's Money Fund Report: First Tier 5.49%
Institutions - Only Money Fund Average*
----------------------------------------------------------------------
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.
________________________
/1/ Because the Plus Shares of the Fund have not commenced operations, the
performance is the performance of the Dollar Shares of the Fund, which are
offered by a separate prospectus. Dollar Shares and Plus Shares of the Fund
should have returns and seven day yields that are substantially the same because
they represent interests in the same portfolio securities and differ only to the
extent that they bear different expenses. The performance of Plus Shares will be
similar to Dollar Shares because they bear similar expenses.
* IBC's Money Fund Report: First Tier Institutions -- Only Money Fund Average
is comprised of institutional money market funds investing in First Tier
Eligible money market instruments.
-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.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)
-------------------------------------------------------------------
TempFund
Plus Shares
-----------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .09%
Distribution Fees (12b-1) Fees .25%
Other Expenses .11%
Administration Fees .09%
Miscellaneous .02%
Total Annual Fund
Operating Expenses(1) .45%
===
-------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers,
but can terminate the waivers upon 120 days prior written notice to the
Fund.
TempFund
Plus Shares
-----------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .08%
Distribution Fees (12b-1) Fees .25%
Other Expenses .10%
Administration Fees .08%
Miscellaneous .02%
Total Annual Fund Operating Expenses
(after current waivers) .43%
===
-------------------------------------------------------------------
-5-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without waivers) 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:
----------------------------
TempFund Plus Shares
----------------------------
One Year $ 46
Three Years $144
Five Years $252
Ten Years $567
----------------------------
-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. 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 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.
-7-
<PAGE>
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.
Bank Obligations. The Fund may purchase obligations of issuers in the
banking industry, such as bank holding company obligations, certificates of
deposit, bankers' acceptances, bank notes and time deposits 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 Obligations. The Fund may invest in asset-backed securities
which are backed by mortgages, installment sales contracts, credit card
receivables or other assets.
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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's Shareholders.
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.
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.
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.
-8-
<PAGE>
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow
money when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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 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,
-9-
<PAGE>
securities lending transactions and when-issued or delayed delivery transactions
may involve leverage risk. Leverage risk is associated with securities or
practices that multiply small market movements into larger changes in the value
of the Fund's investment portfolio. The Fund does not currently intend to employ
investment strategies that involve leverage risk.
-10-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended September 30, 1999 and the one
month ended October 31, 1999. 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.
TempFund Dollar Shares
The table below sets forth selected financial data for a TempFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
One Month
Ended
October 31, Year Ended September 30,
---------------------------------------------------
1999 1999 1998 1997 1996 1995
----------- -------- -------- -------- -------- -------
<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............. .0043 .0470 .0524 .0514 .0516 .0542
--------- -------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment Income......... (.0043) (.0470) (.0524) (.0514) (.0516) (.0542)
--------- -------- -------- -------- -------- -------
Net Asset Value,
End of Period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======== =======
Total Return........................ 5.15%/2/ 4.81% 5.38% 5.27% 5.30% 5.57%
Ratios/Supplemental Data:
Net Assets,
End of Period $(000).............. 446,569 497,178 302,476 355,284 162,119 81,828
Ratio of Expenses to Average Daily
Net Assets/1/................... .43%/2/ .43% .43% .43% .43% .49%
Ratio of Net Investment
Income to Average Daily Net Assets.. 5.06%/2/ 4.71% 5.25% 5.14% 5.16% 5.42%
</TABLE>
1 Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .45% (annualized for
the one month ended October 31, 1999 and, .47%, .48%, .49%, .51% and .52%
for the years ended September 30, 1999, 1998, 1997, 1996 and 1995,
respectively, for TempFund Dollar Shares.
2 Annualized.
-11-
<PAGE>
T-FUND
--------------------------------------------------------------------------------
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 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. The Fund is
subject to risks related to changes in
prevailing interest rates, since
generally, a fixed-income security will
increase in value when interest rates
fall and decrease in value when interest
rates rise.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in
the Fund.
Who May Want to Invest in the Fund: The Fund is designed for institutional
investors seeking current income with
liquidity and security of principal.
-12-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund 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.
T-Fund
Dollar Shares/1/
1990 7.97
1991 5.96
1992 3.58
1993 2.82
1994 3.66
1995 5.61
1996 5.08
1997 5.19
1998 5.09
1999 4.64
During the ten-year period shown in the bar chart, the highest quarterly
return was 8.08% (for the quarter ended June 30, 1990) and the lowest quarterly
return was 2.79% (for the quarter ended December 31, 1993).
___________________
/1/ As of March 31, 2000, the calendar year to date return was 1.32%
(not annualized).
-13-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
T-Fund Dollar Shares/1/ 4.64% 5.12% 4.95%
-----------------------------------------------------------------------------------------
IBC's Money Fund Report: Government Institutions - Only 4.69% 5.02% 4.95%
Money Fund Average *
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
-----------------------------------------------------------------------------------------
<S> <C>
T-Fund Dollar Shares/1/ 4.47%
-----------------------------------------------------------------------------------------
IBC's Money Fund Report: Government Institutions - Only Money Fund
Average* 5.06%
-----------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Plus Shares of the Fund have not commenced operations, the
performance is the performance of the Dollar Shares of the Fund, which are
offered by a separate prospectus. Dollar Shares and Plus Shares of the Fund
should have returns and seven day yields that are substantially the same because
they represent interests in the same portfolio securities and differ only to the
extent that they bear different expenses. The performance of Plus Shares will be
similar to Dollar Shares because they bear similar expenses.
* IBC's Money Fund Report: Government Institutions - Only Money Fund Average
is comprised of institutional money market funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
-14-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
--------------------------------------------------------------------------
T-Fund
Plus Shares
-----------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .12%
Distribution (12b-1) Fees .25%
Other Expenses .14%
Administration Fees .12%
Miscellaneous .02%
Total Annual Fund
Operating Expenses(1) .51%
====
------------------------------------------------------------------------------
(1) 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. As a result of fee waivers,
estimated "Management Fees," "Other Expenses" and "Total Annual Fund Operating
Expenses" of the Fund for the most recent fiscal year would have been as set
forth below. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
T-Fund
Plus Shares
-----------
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .09%
Distribution (12b-1) Fees .25%
Other Expenses .11%
Administration Fees .09%
Miscellaneous .02%
Total Annual Fund
Operating Expenses (after current waivers) .45%
===
-------------------------------------------------------------------------------
-15-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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:
----------------------------
T-Fund Plus Shares
----------------------------
One Year $ 52
Three Year $164
Five Year $285
Ten Year $640
----------------------------
-16-
<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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the
-17-
<PAGE>
cost of the borrowing. Such borrowings will be unsecured. The Fund will not
purchase portfolio securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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 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 risks.
-18-
<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.
T-Fund Dollar Shares
The table below sets forth selected financial data for a T-Fund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<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............................................ .0448 .0507 .0503 .0503 .0540
-------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment Income...................................... (.0448) (.0507) (.0503) (.0503) (.0540)
-------- -------- -------- -------- -------
Net Asset Value, End of Period.................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total Return...................................................... 4.58% 5.21% 5.16% 5.15% 5.55%
Ratios/Supplemental Data:
Net Assets, End of Period $(000).................................. 612,695 777,385 516,092 351,271 82,502
Ratio of Expenses to Average Daily Net Assets/1/................. .45% .45% .45% .44% .43%
Ratio of Net Investment Income to Average Daily
Net Assets...................................................... 4.47% 5.06% 5.03% 5.01% 5.41%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .51%, .52%, .54%, .55%
and .54%, for the years ended October 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for T-Fund Dollar Shares.
-19-
<PAGE>
MUNIFUND
-------------------------------------------------------------------------------
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. The Fund is also
subject to risks related to changes in
prevailing interest rates, since
generally, a fixed-income security will
increase in value when interest rates
fall and decrease in value when interest
rates rise.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve the value of your
investment at $1.00 per share, it is
possible to lose money by investing in
the Fund.
-20-
<PAGE>
Who May Want to Invest in The Fund is designed for institutional
The Fund: investors seeking as high a level of
current interest income exempt from
federal income tax as is consistent with
relative stability of principal.
-21-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund 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.
MuniFund
Dollar Shares/1/
1990 5.15
1991 3.53
1992 2.23
1993 1.96
1994 2.36
1995 3.43
1996 3.02
1997 3.20
1998 3.03
1999 2.85
During the ten-year period shown in the bar chart, the highest quarterly
return was 5.62% (for the quarter ended March 31, 1990) and the lowest quarterly
return was 1.84% (for the quarter ended December 31, 1993).
__________________________
/1/ As of March 31, 2000, the calendar year to date return was 0.80% (not
annualized).
-22-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MuniFund Dollar Shares/1/ 2.85% 3.11% 3.07%
------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Tax-Free Institutions - Only 2.96% 3.22% 3.34%
Money Fund Average*
------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
-------------------------------------------------------------------------------------------------------------
<S> <C>
MuniFund Dollar Shares/1/ 3.41%
-------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Tax-Free Institutions - Only
Money Fund Average* 3.85%
-------------------------------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Plus Shares of the Fund have not commenced operations, the
performance is the performance of the Dollar Shares of the Fund, which are
offered by a separate prospectus. Dollar Shares and Plus Shares of the Fund
should have returns and seven day yields that are substantially the same because
they represent interests in the same portfolio securities and differ only to the
extent that they bear different expenses. The performance of Plus Shares will be
similar to Dollar Shares because they bear similar expenses.
* IBC's Money Fund Report: Tax Free Institutions-Only Money Fund Average is
comprised of institutional money market funds investing in obligations of tax-
exempt entities, including state and municipal authorities.
-23-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
------------------------------------------------------------------------------
MuniFund
Plus Shares
-----------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees .17%
Distribution (12b-1) Fees .25%
Other Expenses .24%
Administration Fees .17%
Miscellaneous .07%
Total Annual Fund .66%
Operating Expenses (1) ===
--------------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers,
but can terminate the waivers upon 120 days prior written notice to the Fund.
--------------------------------------------------------------------------------
MuniFund
Plus Shares
-----------
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees .07%
Distribution (12b-1) Fees .25%
Other Expenses .13%
Administration Fees .07%
Miscellaneous .06%
Total Annual Fund .45%
Operating Expenses (after current waivers) ===
-------------------------------------------------------------------------------
-24-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
----------------------------------
MuniFund Plus Shares
----------------------------------
<S> <C>
One Year $ 67
Three years $211
Five Years $368
Ten Years $822
----------------------------------
</TABLE>
-25-
<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 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 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 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; or
. 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; and
. securities issued by other open-end investment companies that invest in the
type of obligations in which the Fund may invest.
-26-
<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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow
money when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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.
-27-
<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 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. 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. In making investments, the Fund and the Adviser will
rely on issuers' bond counsel and, in the case of derivative securities,
sponsors' counsel for their opinions on the tax-exempt status of interest on
Municipal Obligations and payments under tax-exempt derivative securities.
Neither the Fund nor its Adviser will independently review the bases for those
tax opinions. If any of those tax opinions are ultimately determined to be
incorrect, the Fund and its shareholders could be subject to substantial tax
liabilities.
-28-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended November 30, 1998 and the
eleven months ended October 31, 1999. 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). The information for
the eleven months ended October 31, 1999 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. The financial highlights for the five years in the period ended
November 30, 1998 were audited by KPMG LLP whose report expressed an unqualified
opinion on those statements.
MuniFund Dollar Shares
The table below sets forth selected financial data for a MuniFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended November 30,
October 31, -----------------------------------------------
1999 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.............. .0250 .0302 .0313 .0301 .0335 .0230
------------- ------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income........................ (.0250) (.0302) (.0313) (.0301) (.0335) (.0230)
------------- ------- ------- ------- ------- -------
Net Asset Value,
End of Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ======= ======= ======= ======= =======
Total Return........................ 2.77%/2/ 3.07% 3.18% 3.06% 3.41% 2.33%
Ratios/Supplemental Data:
Net Assets, End of Period
$(000)............................. 56,238 51,736 67,387 61,396 6,474 2,785
Ratio of Expenses to Average
Daily Net Assets/1/................ .45%/2/ .50% .52% .52% .52% .51%
Ratio of Net Investment
Income to Average Daily Net Assets 2.71%/2/ 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 would have been .66% (annualized) for
the eleven months ended October 31, 1999 and .66%, .66%, .67%, .66% and
.66% for the years ended November 30, 1998, 1997, 1996, 1995 and 1994,
respectively, for MuniFund Dollar Shares.
/2/ Annualized.
-29-
<PAGE>
CALIFORNIA MONEY FUND
--------------------------------------------------------------------------------
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 the interest
on Municipal Obligations that is exempt
from taxation under the Constitution or
statutes of California ("California
Municipal Obligations") are exempt from
regular federal and California State
personal income tax. California
Municipal Obligations include municipal
securities issued by the State of
California and its political sub-
divisions, as well as certain other
governmental issuers such as the
Commonwealth of Puerto Rico.
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. 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.
-30-
<PAGE>
The Fund is non-diversified because it
emphasizes investments in California
Municipal Obligations. This means that
it may invest a greater percentage of
its assets in a particular issuer, and
that its performance will be dependent
upon a smaller category of securities
than a diversified portfolio.
Accordingly, the Fund may experience
greater fluctuations in net asset value
and may have greater risk of loss.
Dividends derived from interest on
Municipal Obligations other than
California Municipal Obligations are
exempt from federal income tax but may
be subject to California State personal
income tax.
An investment in the Fund is not a
deposit in PFPC Trust Company or PNC
Bank, N.A. and is not insured or
guaranteed by the Federal Deposit
Insurance Corporation or any other
government agency. Although the Fund
seeks to preserve 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 California
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 California
personal income tax as is consistent
with the preservation of capital and
relative stability of principal.
-31-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund 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.
California Money Fund
Dollar Shares/1/
1990 5.04
1991 3.69
1992 2.36
1993 2.01
1994 2.48
1995 3.39
1996 2.96
1997 3.14
1998 2.88
1999 2.57
During the ten-year period shown in the bar chart, the highest quarterly
return was 5.25% (for the quarter ended June 30, 1990) and the lowest quarterly
return was 1.88% (for the quarter ended March 31, 1993).
___________________
/1/ As of March 31, 2000, the calender year to date return was 0.61%
(not annualized).
-32-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Money Fund Dollar Shares/1/ 2.57% 2.99% 3.05%
-----------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: California State Specific Tax-Free 2.74% 3.04% 3.17%
Institutions-Only Money Fund Average*
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
-----------------------------------------------------------------------------------------------------------
<S> <C>
California Money Fund Dollar Shares/1/ 3.08%
-----------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: California State Specific Tax-Free
Institutions - Only Money Fund Average* 3.47%
-----------------------------------------------------------------------------------------------------------
</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.
________________________
/1/ Because the Plus Shares of the Fund have not had shares outstanding for the
last five years, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Plus Shares
of the Fund should have returns and seven day yields that are substantially the
same because they represent interests in the same portfolio securities and
differ only to the extent that they bear different expenses. The performance of
Plus Shares will be similar to Dollar Shares because they bear similar expenses.
* IBC's Money Fund Report: California State Specific Tax-Free Institutions -
Only Money Fund Average is comprised of institutional money market funds
investing in tax-exempt obligations of California State.
-33-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
--------------------------------------------------------------------------------
California Money Fund
Plus Shares
----------------
Annual Fund Operating
Expenses
(expenses that are deducted
from Fund assets)
Management Fees .20%
Distribution (12b-1) Fees .25%
Other Expenses .25%
Administration Fees .20%
Miscellaneous .05%
Total Annual Fund
Operating Expenses(1) .70%
====
--------------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers.
However, the waivers are voluntary and can be terminated at any time.
California Money Fund
Plus Shares
----------------
Annual Fund Operating
Expenses
(expenses that are deducted
from Fund assets)
Management Fees .07%
Distribution (12b-1) Fees .25%
Other Expenses .13%
Administration Fees .07%
Miscellaneous .06%
Total Annual Fund
Operating Expenses (after current waivers) .45%
===
--------------------------------------------------------------------------------
-34-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waiver) with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
------------------------------
California Money Fund
Plus Shares
------------------------------
<S> <C>
One Year $ 73
Three years $227
Five Years $395
Ten Years $883
------------------------------
</TABLE>
-35-
<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
will invest at least 65% of its net assets primarily in California Municipal
Obligations. At least 50% of the Fund's assets must be invested in obligations
which, when held by an individual, the interest therefrom is exempt from
California personal income taxation (i.e., California Municipal Obligations and
certain U.S. Government obligations) at the close of each quarter of its taxable
year so as to permit the Fund to pay dividends that are exempt from California
State personal income tax. Dividends, regardless of their source, may be subject
to local taxes. The Fund will not knowingly purchase securities the interest on
which is subject to regular federal income tax; however, the Fund may hold
uninvested cash reserves pending investment during temporary defensive periods
or, if in the opinion of the 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 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 and securities issued by the U.S.
government or any agency or instrumentality.
-36-
<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.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow
money when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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
-37-
<PAGE>
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 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. 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. In making investments, the Fund and the Adviser will
rely on issuers' bond counsel and, in the case of derivative securities,
sponsors' counsel for their opinions on the tax-exempt status of interest on
Municipal Obligations and payments under tax-exempt derivative securities.
Neither the Fund nor its Adviser will independently review the bases for those
tax opinions. If any of those tax opinions are ultimately determined to be
incorrect, the Fund and its shareholders could be subject to substantial tax
liabilities.
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 respect to the Municipal Obligations. Any reduction in the creditworthiness
of issuers of California Municipal
-38-
<PAGE>
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 AA-
and AA3, 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 so invested, the Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if the Fund's assets were not so invested.
-39-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended January 31, 1999 and the nine
months ended October 31, 1999. 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.
California Money Fund Dollar Shares
The table below sets forth selected financial data for a California Money Fund
Dollar Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended January 31,
October 31, ---------------------------------------------------
1999 1999 1998 1997 1996 1995
------------ --------- --------- --------- -------- --------
<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............. .0182 .0280 .0309 .0291 .0331 .0256
--------- -------- -------- -------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income........................... (.0182) (.0280) (.0309) (.0291) (.0331) (.0256)
--------- -------- -------- -------- ------- -------
Net Asset Value, End of Period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======= =======
Total Return....................... 2.48%/2/ 2.84% 3.14% 2.96% 3.37% 2.59%
Ratios/Supplemental Data:
Net Assets, End of Period $(000)... 8,288 139,601 130,547 126,321 31,163 11,026
Ratio of Expenses to Average
Daily Net Assets/1/............... .45%/2/ .45% .45% .45% .45% .45%
Ratio of Net Investment Income
to Average Daily Net Assets....... 2.43%/2/ 2.77% 3.09% 2.90% 3.30% 2.54%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .70% (annualized) for
the nine months ended October 31, 1999 and .70%, .71%, .73%, .73% and .73%
for the years ended January 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for California Money Fund Dollar Shares.
/2/ Annualized.
-40-
<PAGE>
NEW YORK MONEY FUND
--------------------------------------------------------------------------------
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. The Fund is also
subject to risks related to changes in
-41-
<PAGE>
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 is non-diversified because it
emphasizes investments in New York Municipal
Obligations. This means that it may invest a
greater percentage of its assets in a
particular issuer, and that its performance
will be dependent upon a smaller category of
securities than a diversified portfolio.
Accordingly, the Fund may experience greater
fluctuations in net asset value and may have
greater risk of loss.
Dividends derived from interest on Municipal
Obligations other than New York Municipal
Obligations are exempt from federal income
tax but may be subject to New York State and
New York City personal income tax.
An investment in the Fund is not a deposit in
PFPC Trust Company or PNC Bank, N.A. and is
not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to
preserve 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 The Fund is designed for institutional
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 New York State and New
York City personal income taxes as is
consistent with the preservation of capital
and relative stability of principal.
-42-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of Dollar Shares of the Fund has varied from year
to year; and the average annual return for Dollar Shares of the Fund. The Table
shows how the average annual return for Dollar Shares of the Fund for one, five
and ten years compares to that of a selected market index. The Bar Chart and the
Table assume reinvestment of dividends and distributions. The Fund's past
performance does not necessarily indicate how it will perform in the
future.
New York Money Fund
Dollar Shares/1/
1990 5.15
1991 3.64
1992 2.41
1993 1.97
1994 2.38
1995 3.44
1996 3.05
1997 3.23
1998 2.97
1999 2.74
During the ten-year period shown in the bar chart, the highest quarterly
return was 5.29% (for the quarter ended June 30, 1990) and the lowest quarterly
return was 1.84% (for the quarter ended March 31, 1994).
____________________________
/1/ As of March 31, 2000, the calendar year to date return was 0.75% (not
annualized).
-43-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New York Money Fund Dollar Fund Shares/1/ 2.74% 3.08% 3.09%
---------------------------------------------------------------------------------------------
IBC's Money Fund Report: New York State Specific 2.72% 3.11% 3.22%
Tax-Free Institutions - Only Money Fund Average*
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
---------------------------------------------------------------------------------------------
<S> <C>
New York Money Fund Dollar Shares/1/ 3.31%
---------------------------------------------------------------------------------------------
IBC's Money Fund Report: New York State Specific Tax-Free
Institutions - Only Money Fund Average* 3.55%
---------------------------------------------------------------------------------------------
</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.
_______________________
/1/ Because the Plus Shares of the Fund have not had shares outstanding for the
last five years, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Plus Shares
of the Fund should have returns and seven day yields that are substantially the
same because they represent interests in the same portfolio securities and
differ only to the extent that they bear different expenses. The performance of
Plus Shares will be similar to Dollar Shares because they bear similar expenses.
* IBC's Money Fund Report: New York State Specific Tax-Free Institutions - Only
Money Fund Average is comprised of institutional money market funds investing in
tax-exempt obligations of New York State
-44-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
New York Money Fund
Plus Shares
--------------
<S> <C>
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .20%
Distribution (12b-1) Fees .25%
Other Expenses .30%
Administration Fees .20%
Miscellaneous .10%
Total Annual Fund
Operating Expenses(1) .75%
====
</TABLE>
--------------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers.
However, the waivers are voluntary and can be terminated at any time.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
New York Money Fund
Plus Shares
--------------
<S> <C>
Annual Fund Operating Expenses
(expenses that are deducted
from Fund assets)
Management Fees .05%
Distribution (12b-1) Fees .25%
Other Expenses .15%
Administration Fees .05%
Miscellaneous .10%
Total Annual Fund
Operating Expenses (after current waivers) .45%
===
</TABLE>
--------------------------------------------------------------------------------
-45-
<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>
-----------------------------
New York Money Fund
Plus Shares
-----------------------------
<S> <C>
One Year $ 77
Three years $240
Five Years $417
Ten Years $930
-----------------------------
</TABLE>
-46-
<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
will invest at least 65% of its net assets 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 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
obligations in which the Fund may invest.
-47-
<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.
Borrowing. The Fund is authorized to issue senior securities or borrow
money from banks or other lenders on a temporary basis to the extent permitted
by the Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
-48-
<PAGE>
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 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. 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, at times,
experienced serious financial difficulties. 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. Strong
demand for New York Municipal Obligations has 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
-49-
<PAGE>
issuers of New York Municipal Obligations could result in defaults or declines
in the market values of those issuers' existing obligations and, possibly, in
the obligations of other issuers of New York Municipal Obligations. Although as
of the date of this Prospectus, no issuers of New York Municipal Obligations are
in default with respect to the payment of their Municipal Obligations, the
occurrence of any such default could affect adversely the market values and
marketability of all New York Municipal Obligations and, consequently, the net
asset value of the Fund's portfolio.
Municipal Obligations. In making investments, the Fund and the Adviser will
rely on issuers' bond counsel and, in the case of derivative securities,
sponsors' counsel and, for their opinions on the tax-exempt status of interest
on Municipal Obligations and payments under tax-exempt derivative securities.
Neither the Fund nor its Adviser will independently review the bases for those
tax opinions. If any of those tax opinions are ultimately determined to be
incorrect, the Fund and its shareholders could be subject to substantial tax
liabilities.
-50-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended July 31, 1999 and the three
months ended October 31, 1999. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, are incorporated by reference into the Statement of
Additional Information and included in the Annual Report, each of which is
available upon request.
New York Money Fund Dollar Shares
The table below sets forth selected financial data for a New York Money Fund
Dollar Share outstanding throughout each year presented./3/
<TABLE>
<CAPTION>
Three Months
Ended Year Ended July 31,
October 31, --------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
-------------- ---------- ---------- ---------- ---------- ----------
<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............. -- -- .0303 .0309 .0089 --
-------------- ---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends to Shareholders
from Net Investment
Income............................ -- -- (.0303) (.0309) (.0089) --
-------------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ========== ========== ========== ========== ==========
Total Return........................ -- -- 3.16%/2/ 3.14% 3.05% --
Ratios/Supplemental Data:
Net Assets, End of Period
$(000)............................ -- -- -- 1,148 20 --
Ratio of Expenses to Average
Daily Net Assets/1/............... -- -- .45%/2/ .45% .45% --
Ratio of Net Investment Income
to Average Daily Net Assets........ -- -- 3.11%/2/ 3.09% 3.07% --
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .73% (annualized),
.74% and .75% (annualized) for the years ended July 31, 1998, 1997 and
1996, respectively, for New York Money Fund Dollar Shares.
/2/ Annualized.
/3/ There were no Dollar Shares outstanding during the periods March 28, 1994
to April 14, 1996 and July 21, 1998 to October 31, 1999.
-51-
<PAGE>
MANAGEMENT OF THE FUND
Investment Adviser
The Adviser, a majority-owned indirect subsidiary of PNC Bank, serves as
the Company'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 $58 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 each Fund and is responsible for all
purchases and sales of Funds' 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 each 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 a 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, 1999, TempFund, T-Fund, MuniFund, California Money
Fund and New York Money Fund paid investment advisory fees and administration
fees each aggregating .08%, .09%, .07%, .07%, and .05%, respectively, (net of
waivers) of their average net assets. The services provided by BIMC and the fees
payable by each Fund for these services are described further in the Statement
of Additional Information under "Management of the Funds."
SHAREHOLDER INFORMATION
Price of Fund Shares
A Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PFPC Inc. ("PFPC"), the Trust's co-
administrator, twice 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 of MuniFund, California Money Fund and New York Money Fund
is determined as of 12:00 Noon and 4:00 P.M., Eastern time (9:00 A.M., and 1:00
P.M. Pacific Time). The net asset value of TempFund and T-Fund is determined as
of 12:00 Noon and 5:30 P.M. Eastern Time. The net asset value per share of each
class of a Fund's shares is calculated by adding the value of all securities and
other assets of a 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, each 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, a Fund may postpone the date of payment of any redeemable
security for up to seven days.
-52-
<PAGE>
On any business day when the Bond Market Association ("BMA") recommends
that the securities markets close early, each Fund reserves the right to close
at or prior to the BMA recommended closing time. If a Fund does so, it will
cease granting same business day credits for purchase and redemption orders
received after the Fund's closing time and credit will be granted to the next
business day.
Purchase of Shares
Shares of each of the Funds are sold at the net asset value per share next
determined after confirmation of a purchase order by PFPC, which also serves as
the Trust's transfer agent. Purchase orders for shares are accepted only on
Business Days and must be transmitted to the Funds' Office in Wilmington,
Delaware by telephone (800-441-7450; in Delaware: 302-797-2350) or until 3:00
PM, Eastern Time, through the Fund's internet-based order entry program, MA2000.
The chart below outlines the cut-off times for when purchase orders are
executed. Purchase orders accepted by PFPC by the cut-off time and for which
payment has been received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Trust's custodian, PFPC Trust Company, by 4:00 PM, Eastern Time (5:30 PM,
Eastern Time, for TempFund and T-Fund) will be executed that day. Purchase
orders received after the cut-off times, and orders for which payment has not
been received by 4:00 PM, Eastern Time (5:30 PM, Eastern Time, for TempFund and
T-Fund) will not be accepted, and notice thereof will be given to the
institution placing the order. Payment for purchase orders which are not
received or accepted will be returned after prompt inquiry to the sending
institution. Each of the Funds may at their discretion reject any purchase order
for Plus Shares.
Portfolio Time
--------- ----
TempFund* 5:30 PM Eastern Time
T-Fund* 5:30 PM Eastern Time
MuniFund 2:30 PM Eastern Time
California Money Fund** 12:00 Noon Eastern Time
New York Money Fund 12:00 Noon Eastern Time
*Purchase orders placed between 3:00 PM and 5:30 PM, Eastern Time, may only
be transmitted by telephone, and TempFund and T-Fund reserve the right to limit
the amount of such orders.
**Purchase orders for Plus Shares of the California Money Fund will be
accepted between 12:00 Noon Eastern Time and 1:00 PM Eastern Time up to a
maximum order of $1 million per account. The Fund reserves the right to limit
the amount of such orders.
Payment for Plus Shares of a Fund may be made only in federal funds or
other funds immediately available to PNC Bank. The minimum initial investment by
an institution for Plus Shares is $5,000.00. (However, institutional investors
may set a higher minimum for their customers). There is no minimum subsequent
investment.
Plus Shares of the Funds are sold without charge by a Fund. Institutional
investors purchasing or holding Plus Shares of the Funds 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 Plus
Shares of the Funds. An institution purchasing Plus Shares of the Fund on behalf
of its customers is responsible for transmitting orders to a Fund in accordance
with its customer agreements.
Redemption of Shares
Redemption orders must be transmitted to the Funds Office in Wilmington,
Delaware in the manner described under "Purchase of Shares." Plus Shares are
redeemed without charge by a Fund at the net asset value per share next
determined after PFPC's receipt of the redemption request.
The chart below outlines the cut-off times for the redemption of Plus
Shares of the Funds. Payment for redeemed shares of the Funds for which
redemption requests are received by PFPC by the established cut-off times on a
Business Day is normally made in federal funds wired to the redeeming
shareholder on the same day. Payment of redemption requests which are received
after the established cut-off times, 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.
Portfolio Time
--------- ----
TempFund* 5:30 PM Eastern Time
T-Fund* 5:30 PM Eastern Time
MuniFund 12:00 Noon Eastern Time
California Money Fund** 12:00 Noon Eastern Time
New York Money Fund 12:00 Noon Eastern Time
*Redemption orders placed between 3:00 PM and 5:30 PM, Eastern Time, may
only be transmitted by telephone. TempFund and T-Fund reserve the right to limit
the amount of such orders.
**Redemption requests for Plus Shares of the California Money Fund will be
accepted between 12:00 Noon Eastern Time and 1:00 PM Eastern Time for a maximum
order of $1 million per account. The Fund reserves the right to limit the amount
of such orders.
The Funds shall have the right to redeem shares in any Plus Share account
if the value of the account is less than $5,000 (other than due to market
fluctuations), after sixty days' prior written notice to the shareholder. If
during the sixty-day period the shareholder increases the value of its Plus
Share account to $5,000 or more, no such redemption shall take place. If a
shareholder's Plus Share account falls below an average of $5,000 in any
particular calendar month, the account may be charged an account maintenance fee
with respect to that month (with the exception of TempFund). Any such redemption
shall be effected at the net asset value next determined after the redemption
order is entered. In addition, a Fund may redeem Plus Shares involuntarily under
certain special circumstances described in the Statement of Additional
Information under "Additional Purchase and Redemption Information." An
institution redeeming shares of the Fund on behalf of its customers is
responsible for transmitting orders to a Fund in accordance with its customers
agreements.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Funds in connection with the investment of fiduciary
funds in Plus 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 investment fiduciary funds in Plus Shares.
Plus Distribution and 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 Plus Shares. Pursuant to a Distribution and
Services Plan (12b-1 Plan) adopted by the Trust's Board of Trustees, the Fund
will enter into an agreement with each Service Organization which purchases Plus
Shares. The agreement will require the Service Organization to provide
distribution and sales support and shareholder services to its customers who are
the beneficial owners of such shares in consideration of the Fund's payment of
up to .25% (on an annualized basis) of the average daily net asset value of the
Plus Shares held by the Service Organization. Because such fees are paid out of
the Funds' assets on an on-going basis, overtime these fees will increase the
cost of your investment and may cost more than paying other types of sales
charges. The distribution and sales support and shareholder services are
described more fully in the Statement of Additional Information under
"Management of the Fund - Service Organizations." 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 Plus Shares.
-53-
<PAGE>
Dividends and Distributions
Each 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.
Federal Taxes
Distributions paid by TempFund and T-Fund will generally be taxable to
shareholders. Each 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. The one major exception to these tax principles is that
distribution on, and sales exchanges and redemptions of, shares held in an IRA
(or other tax qualified plan) will not be currently taxable.
Tax Exempt Funds--MuniFund, California Money Fund and New York Money Fund
----------------
(the "Tax-Exempt Funds") anticipate that substantially all of their income
dividends will be "exempt interest dividends," which are exempt from federal
income taxes. Interest on indebtedness incurred by a shareholder to purchase or
carry shares of a Tax-Exempt Fund generally will not be deductible for federal
income tax purposes. You should note that a portion of the exempt-interest
dividends paid by a Tax-Exempt 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.
State and Local Taxes
Shareholders may also be subject to state and local taxes on distributions.
State income taxes may not apply however, to the portions of each Fund's
distributions, if any, that are attributable to interest on federal securities
or interest on securities of the particular state or localities within the
state.
Dividends that are paid by California Money Fund to non-corporate
shareholders and are derived from interest on California Municipal Obligations
or certain U.S. Government
-54-
<PAGE>
obligations are also exempt from California state personal income tax, provided
that at least 50% of the aggregate value of the Fund's assets consist of exempt-
interest obligations. 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 paid by California Money Fund 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.
The New York Money 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.) Dividends and
distributions derived from taxable income and capital gains are exempt from New
York State and New York City 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 of the Funds shareholder or their
authorized representative an annual statement designating the amount, if any, of
any dividends and distributions made during each year and their federal tax
treatment. Additionally, PFPC will send California Money Fund and New York Money
Funds' shareholders or their authorized representatives an annual statement
regarding, as applicable California, New York State and New York City tax
treatment.
The foregoing is only a summary of certain tax considerations under current
law, which may be subject to change in the future. Shareholders who are
nonresident aliens, foreign trusts or estates, or foreign corporations or
partnerships, may be subject to different United States federal income tax
treatment. You should consult your tax adviser for further information regarding
federal, state, local and/or foreign tax consequences relevant to your specific
situation.
-55-
<PAGE>
HOW TO CONTACT PROVIDENT INSTITUTIONAL FUNDS
For purchases and redemption orders only call: 800-441-7450
For yield information call: 800-821-6006
TempFund Plus Shares Code: H4
T-Fund Plus Shares Code: 32
MuniFund Plus Shares Code: K4
California Money Fund Plus Shares Code: 58
New York Money Fund Plus Shares Code: 56
For other information call: 800-821-7432 or visit our website at
www.pif.com
-----------
Written correspondence may be sent to:
Provident Institutional Funds
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
-56-
<PAGE>
Where to Find More Information
The Statement of Additional Information (the "SAI") includes additional
information about the Trust'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 each 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
Trust's web site at www.pif.com. Information about the Trust (including the SAI)
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C., and information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-202-942-8090. Reports and other information
about the Trust are available on the EDGAR Database on the SEC's Internet site
at http://www.sec.gov; copies of this information may be obtained, after paying
a duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
-57-
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
=============================
Cash Management Shares
PROSPECTUS
June 5, 2000
PROVIDENT
INSTITUTIONAL
FUNDS
The Securities and Exchange Commission has not
approved or disapproved the Funds' shares or
determined if this prospectus is accurate or complete.
It is a criminal offense to state otherwise.
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
----
<S> <C>
How to Find the Information You Need........................... 1
TempFund....................................................... 2
TempCash....................................................... 14
FedFund........................................................ 25
T-Fund......................................................... 34
Federal Trust Fund............................................. 43
Treasury Trust Fund............................................ 51
MuniFund....................................................... 59
MuniCash....................................................... 69
California Money Fund.......................................... 79
New York Money Fund............................................ 90
Management of The Fund......................................... 101
Shareholder Information........................................ 101
Price of Fund Shares.............................. 101
Purchase of Shares................................ 102
Redemption of Shares.............................. 103
Cash Management Shareholder Service Plan.......... 104
Dividends and Distributions....................... 105
Federal Taxes..................................... 105
State and Local Taxes............................. 106
</TABLE>
-i-
<PAGE>
How to Find the Information You Need
Welcome to the new Provident Institutional Funds Prospectus for Cash Management
Shares.
The prospectus has been written to provide you with information you need to make
an informed decision about whether to invest in Cash Management Shares of the
Provident Institutional Funds (the "Trust").
This prospectus contains information about all ten portfolios (the "Funds") of
the Trust that offer Cash Management Shares. To save you time, the prospectus
has been organized so that each Fund has its own short section. All you have to
do is turn to the section for any particular Fund. Once you read the important
facts about the Funds that interest you, read the sections that tell you about
buying and selling shares, certain fees and expenses, shareholder services, and
your rights as a shareholder. These sections apply to all the Funds.
Cash Management Shares are sold to institutions that have entered into servicing
agreements with the Trust in connection with their investments.
The Funds are 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.
-1-
<PAGE>
TempFund
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 U.S. dollar-denominated money market
instruments, including government, bank, and commercial obligations 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. The Fund is also subject to risks related to changes in prevailing
interest rates, since generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest rates rise.
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Who May Want to Invest in the Fund:
The Fund is designed for institutional investors seeking current income and
stability of principal.
-2-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Dollar Shares of the
Fund by showing: how the performance of Dollar Shares of the Fund has varied
from year to year; and the average annual return for Dollar Shares of the Fund.
The Table shows how the average annual return for Dollar Shares of the Fund 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
Dollar Shares/1/
1990 8.02
1991 5.99
1992 3.64
1993 2.87
1994 3.94
1995 5.74
1996 5.17
1997 5.35
1998 5.27
1999 4.90
During the ten-year period shown in the bar chart, the highest quarterly return
was 8.12% (for the quarter ended June 30, 1990) and the lowest quarterly return
was 2.83% (for the quarter ended June 30, 1993).
_______________
/1/ As of March 31, 2000, the calendar year to date return was 1.38%
(not annualized).
-3-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TempFund Dollar Shares/1/ 4.90% 5.28% 5.08%
------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report:
First Tier Institutions - Only Money Fund Average* 4.95% 5.21% 4.95%
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
TempFund Dollar Shares/1/ 5.23%
---------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report:
First Tier Institutions - Only Money Fund Average 5.49%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Because the Cash Management Shares of the Fund have less than one year's
performance, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Cash
Management Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
*IBC's Money Fund Report: First Tier Institutions -- Only Money Fund Average is
comprised of institutional money market funds investing in First Tier Eligible
money market instruments.
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.
-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.
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TempFund
Cash Management Shares
----------------------
<S> <C>
Management Fees .09%
Other Expenses .61%
Administration Fees .09%
Shareholder Servicing Fees .25%
Miscellaneous .27%
Total Annual Fund Operating Expenses(1) .70%
</TABLE> ====
--------------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, annualized "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year are set forth
below. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
<TABLE>
<CAPTION>
TempFund
Cash Management Shares
----------------------
<S> <C>
Management Fees .08%
Other Expenses .60%
Administration Fees .08%
Shareholder Servicing Fees .25%
Miscellaneous .27%
Total Annual Fund Operating Expenses (after current waivers) .68%
</TABLE> ====
--------------------------------------------------------------------------------
-5-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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
Cash Management Shares
-------------------------------------------------------------------------------------------------
<S> <C>
One Year $ 72
Three Years $224
Five Years $390
Ten Years $871
-------------------------------------------------------------------------------------------------
</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. 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 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
-7-
<PAGE>
. 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:
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.
Bank Obligations. The Fund may purchase obligations of issuers in the banking
industry, such as bank holding company obligations, certificates of deposit,
bankers' acceptances, bank notes and time deposits 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 Obligations. The Fund may invest in asset-backed securities which
are backed by mortgages, installment sales contracts, credit card receivables or
other assets.
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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
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.
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,
-9-
<PAGE>
dealers, banks and other financial institutions for the purpose of realizing
additional net investment income through the receipt of interest on the loan.
Investments in reverse repurchase agreements and securities lending transactions
will be aggregated for purposes of this investment limitation.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money when the
Adviser believes that the return from securities purchased with borrowed funds
will be greater than the cost of the borrowing. Such borrowings will be
unsecured. The Fund will not purchase portfolio securities while borrowings in
excess of 5% of the Fund's total assets are outstanding.
When-Issued and Delayed Settlement Transactions. The Fund may purchase
securities on a "when-issued" or "delayed settlement" basis to the extent
permitted by the Investment Company Act of 1940, as amended. The Fund expects
that commitments to purchase when-issued or delayed settlement securities will
not exceed 25% of the value of its total assets absent unusual market
conditions. The Fund does not intend to purchase when-issued or delayed
settlement securities for speculative purposes but only in furtherance of its
investment objective. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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 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.
-10-
<PAGE>
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.
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.
-11-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand TempFund
Cash Management Shares' financial performance for the period June 14, 1999
through September 30, 1999 and the one month ended October 31, 1999 and Temp
Fund Dollar Shares' financial performance for the past five years ended
September 30, 1999 and the one month ended October 31, 1999. Certain information
reflects financial results for a single Fund share. The total returns in the
tables 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.
TempFund Cash Management Shares
The table below sets forth selected financial data for a TempFund Cash
Management Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
For the Period
One Month June 14, 1999/1/
Ended Through
October 31, September 30,
1999 1999
------------- ----------------
<S> <C> <C>
Net Asset Value,
Beginning of Period $ 1.00 $ 1.00
----------- ---------
Income From Investment Operations:
Net Investment Income .0041 .0135
----------- ---------
Less Distributions:
Dividends to Shareholders
From Net Investment Income (.0041) (.0135)
----------- ---------
Net Asset Value,
End of Period $ 1.00 $ 1.00
Total Return 4.92%/2/ 4.60%/2/
Ratios/Supplemental Data:
Net Assets, End of Period $(000) 14,069 13,789
Ratio of Expenses to Average Daily Net Assets/3/ .68%/2/ .68%/2/
Ratio of Net Investment Income to Average Daily Net Assets 4.81%/2/ 4.57%/2/
</TABLE>
--------------------
/1/ Commencement of Operations.
/2/ Annualized.
/3/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for TempFund Cash Management Shares
would have been .70% (annualized) for one month ended October 31, 1999 and
.71% (annualized) for the period ended September 30, 1999.
-12-
<PAGE>
TempFund Dollar Shares
The table below sets forth selected financial data for a TempFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
One Month
Ended
October 31, Year Ended September 30,
--------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
------------ --------- --------- --------- --------- --------
<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............... .0043 .0470 .0524 .0514 .0516 .0542
--------- -------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment Income........... (.0043) (.0470) (.0524) (.0514) (.0516) (.0542)
--------- -------- -------- -------- -------- -------
Net Asset Value,
End of Period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======== =======
Total Return.......................... 5.15%/2/ 4.81% 5.38% 5.27% 5.30% 5.57%
Ratios/Supplemental Data:
Net Assets,
End of Period $(000)................ 446,569 497,178 302,476 355,284 162,119 81,828
Ratio of Expenses to Average Daily
Net Assets/1/.................... .43%/2/ .43% .43% .43% .43% .49%
Ratio of Net Investment
Income to Average Daily Net Assets.... 5.06%/2/ 4.71% 5.25% 5.14% 5.16% 5.42%
</TABLE>
1 Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .45% (annualized for
the one month ended October 31, 1999 and .47%, .48%, .49%, .51% and .52%
for the years ended September 30, 1999, 1998, 1997, 1996 and 1995,
respectively, for TempFund Dollar Shares.
2 Annualized.
-13-
<PAGE>
TempCash
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 U.S. dollar-denominated 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. The Fund is also subject to risks related to changes in prevailing
interest rates, since generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest rates rise.
Because of its concentration in the financial services industry, the Fund will
be exposed to the risks associated with that industry, such as government
regulation, the availability and cost of capital funds, and general economic
conditions. In addition, securities issued by foreign entities, including
foreign banks and corporations may involve additional risks. Examples of these
risks are the lack of available public information about the foreign issuer, and
international economic or political developments which could affect the payment
of principal and interest when due.
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Who May Want to Invest in the Fund:
The Fund is designed for institutional investors seeking current income and
stability of principal.
-14-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in Dollar Shares of the
Fund by showing how the performance of Dollar Shares of the Fund has varied from
year to year; and the average annual return for Dollar Shares of the Fund. The
Table shows how the Dollar Shares of 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
Dollar Shares/1/
1990 8.17
1991 6.02
1992 3.55
1993 2.90
1994 4.05
1995 5.77
1996 5.19
1997 5.37
1998 5.30
1999 4.88
During the ten-year period shown in the bar chart, the highest quarterly return
was 8.28% (for the quarter ended June 30, 1990) and the lowest quarterly return
was 2.82% (for the quarter ended March 31, 1993).
-----------
/1/ As of March 31, 2000, the calendar year to date return was 1.43%
(not annualized).
-15-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TempCash Dollar Shares/1/ 4.88% 5.30% 5.10%
--------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: First Tier Institutions - Only Money Fund Average* 4.95% 5.21% 4.95%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C>
TempCash Dollar Shares/1/ 5.33%
--------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: First Tier
Institutions - Only Money Fund Average* 5.49%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Because the Cash Management Shares of the Fund have less than one year's
performance, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Cash
Management Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
*IBC's Money Fund Report: First Tier Institutions - Only Money Fund Average is
comprised of institutional money market funds investing in First Tier Eligible
money market instruments.
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.
-16-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TempCash
Cash Management Shares
----------------------
<S> <C>
Management Fees .16%
Other Expenses .68%
Administration Fees .16%
Shareholder Servicing Fees .25%
Miscellaneous .27%
Total Annual Fund
Operating Expenses(1) .84%
</TABLE> ====
--------------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers but
can terminate the waivers upon 120 days prior written notice to the Fund.
<TABLE>
<CAPTION>
TempCash
Cash Management Shares
----------------------
<S> <C>
Management Fees .08%
Other Expenses .60%
Administration Fees .08%
Shareholder Servicing Fees .25%
Miscellaneous .27%
Total Annual Fund Operating Expenses
(after current waivers) .68%
</TABLE> ====
-17-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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
Cash Management Shares
-----------------------------------------------------------------------------
<S> <C>
One Year $ 86
Three Years $ 268
Five Years $ 466
Ten Years $1,037
-----------------------------------------------------------------------------
</TABLE>
-18-
<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 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;
-19-
<PAGE>
. 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.
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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
-20-
<PAGE>
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.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money when the
Adviser believes that the return from securities purchased with borrowed funds
will be greater than the cost of the borrowing. Such borrowings will be
unsecured. The Fund will not purchase portfolio securities while borrowings in
excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
-21-
<PAGE>
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 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. 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.
-22-
<PAGE>
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.
-23-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended September 30, 1999 and the one
month ended October 31, 1999. 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 Dollar Shares
The table below sets forth selected financial data for a TempCash Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
One Month
Ended
October 31, Year Ended September 30,
-----------------------------------------------------
1999 1999 1998 1997 1996 1995
------------- --------- --------- --------- --------- ---------
<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............. .0042 .0471 .0527 .0516 .0517 .0550
--------- -------- -------- -------- -------- --------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income........................... (.0042) (.0471) (.0527) (.0516) (.0517) (.0550)
--------- -------- -------- -------- -------- --------
Net Asset Value,
End of Period.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======== ========
Total Return...................... 5.06%/2/ 4.82% 5.41% 5.29% 5.31% 5.65%
Ratios/Supplemental
Data:
Net Assets, End of Period
$(000)........................... 401,426 378,010 503,809 401,529 527,830 454,156
Ratio of Expenses to Average .43%/2/ .43% .43% .43% .43% .41%
Daily Net Assets/1/..............
Ratio of Net Investment
Income to Average 4.94%/2/ 4.70% 5.27% 5.16% 5.17% 5.50%
Daily Net Assets.................
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .59% (annualized) for
the one month ended October 31, 1999 and .55%, .57%, .55%, .58% and .55%
for the years ended September 30, 1999, 1998, 1997, 1996 and 1995,
respectively, for TempCash Dollar Shares.
/2/ Annualized.
-24-
<PAGE>
FedFund
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. The Fund is subject to risks related to changes in prevailing interest
rates, since generally, a fixed-income security will increase in value when
interest rates fall and decrease in value when interest rates rise.
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Who May Want to Invest in the Fund:
The Fund is designed for institutional investors seeking current income with
liquidity and security of principal.
-25-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Dollar Shares of the
Fund by showing the performance of the Dollar Shares of the Fund has varied from
year to year; and the average annual return for Dollar Shares of the Fund. The
Table shows how the Dollar Shares of the Fund's average annual return for one,
five and ten years compares to that of a selected market index. The Bar Chart
and the Table assume reinvestment of dividends and distributions. The Fund's
past performance does not necessarily indicate how it will perform in the
future.
FedFund
Dollar Shares/1/
1990 7.90
1991 5.88
1992 3.57
1993 2.86
1994 3.97
1995 5.67
1996 5.09
1997 5.22
1998 5.13
1999 4.76
During the ten-year period shown in the bar chart, the highest quarterly return
was 7.99% (for the quarter ended June 30, 1990) and the lowest quarterly return
was 2.82% (for the quarter ended June 30, 1993).
_________________
/1/ As of March 31, 2000, the calendar year to date return was 1.37%
(not annualized).
-26-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31,
1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
<S> <C> <C> <C>
FedFund Dollar Shares/1/ 4.76% 5.17% 5.00%
------------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Government Institutions -- Only
Money Fund Average* 4.69% 5.02% 4.95%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
<S> <C>
FedFund Dollar Shares/1/ 4.88%
------------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report:
Government Institutions -- Only Money Fund Average* 5.06%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Because the Cash Management Shares of the Fund have less than one year's
performance, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Cash
Management Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
*IBC's Money Fund Report: Government Institutions -- Only Money Fund Average is
comprised of institutional money market funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
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.
-27-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
FedFund
Cash Management Shares
----------------------
<S> <C>
Management Fees .12%
Other Expenses .66%
Administration Fees .12%
Shareholder Servicing Fees .50%
Miscellaneous .04%
Total Annual Fund
Operating Expenses(1) .78%
===
--------------------------------------------------------------------------------
</TABLE>
(1) 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. As a result of fee waivers,
estimated "Management Fees," "Other Expenses" and "Total Annual Fund Operating
Expenses" of the Fund for the most recent fiscal year would have been as set
forth below. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
<TABLE>
<CAPTION>
FedFund
Cash Management Shares
----------------------
<S> <C>
Management Fees .08%
Other Expenses .62%
Administration Fees .08%
Shareholder Servicing Fees .50%
Miscellaneous .04%
Total Annual Fund
Operating Expenses .70%
===
</TABLE>
-28-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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
Cash Management Shares
--------------------------------------------------------------------------------
<S> <C>
One Year $ 80
Three Years $249
Five Years $433
Ten Years $966
--------------------------------------------------------------------------------
</TABLE>
-29-
<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 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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money when the
Adviser believes that
-30-
<PAGE>
the return from securities purchased with borrowed funds will be greater than
the cost of the borrowing. Such borrowings will be unsecured. The Fund will not
purchase portfolio securities while borrowings in excess of 5% of the Fund's
total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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 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. Reserve repurchase agreements, securities lending
transactions and when-issued or delayed delivery transactions may involve
leverage risk. Leverage risk is associated with securities or practices that
multiply small market movements into larger changes in the value of
-31-
<PAGE>
the Fund's investment portfolio. The Fund does not currently intend to employ
investment strategies that involve leverage risk.
-32-
<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 Dollar Shares
The table below sets forth selected financial data for a FedFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
1999 1998 1997 1996 1995
-------- -------- --------- --------- ---------
<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......................... .0458 .0510 .0505 .0504 .0546
------- ------- -------- -------- --------
Less Distributions:
Dividends to Shareholders From Net
Investment Income............................ (.0458) (.0510) (.0505) (.0504) (.0546)
------- ------- -------- -------- --------
Net Asset Value, End of Period................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== ======== ========
Total Return................................... 4.69% 5.23% 5.18% 5.16% 5.61%
Ratios/Supplemental Data:
Net Assets, End of Period $(000)............... 34,611 30,459 116,316 113,747 213,177
Ratio of Expenses to Average Daily Net
Assets/1/.................................... .45% .45% .45% .44% .43%
Ratio of Net Investment Income to Average
Daily Net Assets............................. 4.56% 5.10% 5.05% 5.04% 5.46%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .53%, .53%, .54%, .55%
and .54% for the years ended October 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for FedFund Dollar Shares.
-33-
<PAGE>
T-Fund
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 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. The Fund is subject to
risks related to changes in prevailing interest rates, since generally, a fixed-
income security will increase in value when interest rates fall and decrease in
value when interest rates rise.
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Who May Want to Invest in the Fund:
The Fund is designed for institutional investors seeking current income with
liquidity and security of principal.
-34-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Dollar Shares of the
Fund by showing: how the performance of Dollar Shares of the Fund has varied
from year to year; and the average annual return for Dollar Shares of the Fund.
The Table shows how the average annual return for Dollar Shares of the Fund 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.
T-Fund
Dollar Shares/1/
1990 7.97
1991 5.96
1992 3.58
1993 2.82
1994 3.66
1995 5.61
1996 5.08
1997 5.19
1998 5.09
1999 4.64
During the ten-year period shown in the bar chart, the highest quarterly return
was 8.08% (for the quarter ended June 30, 1990) and the lowest quarterly return
was 2.79% (for the quarter ended December 31, 1993).
_____________________
/1/ As of March 31, 2000, the calendar year to date return was 1.32%
(not annualized).
-35-
<PAGE>
The Fund's Cash Management Average Annual Total Return for Periods Ended
December 31, 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T-Fund Dollar Shares/1/ 4.64% 5.12% 4.95%
-----------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report:
Government Institutions - Only Money Fund Average * 4.69% 5.02% 4.95%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C>
T-Fund Dollar Shares/1/ 4.47%
-------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report:
Government Institutions - Only Money Fund Average 5.06%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Because the Cash Management Shares of the Fund have less than one year's
performance, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Cash
Management Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
* IBC's Money Fund Report: Government Institutions - Only Money Fund Average is
comprised of institutional money market funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
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.
-36-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
T-Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .12%
Other Expenses .66%
Administration Fees .12%
Shareholder Servicing Fees .25%
Miscellaneous .29%
Total Annual Fund
Operating Expenses(1) .78%
====
</TABLE>
--------------------------------------------------------------------------------
(1) 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. As a result of fee waivers,
annualized "Management Fees," "Other Expenses" and "Total Annual Fund Operating
Expenses" of the Fund for the most recent fiscal year are set forth below. The
Adviser and PFPC expect to continue such fee waivers, but can terminate the
waivers upon 120 days prior written notice to the Fund.
<TABLE>
<CAPTION>
T-Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .09%
Other Expenses .61%
Administration Fees .09%
Shareholder Servicing Fees .25%
Miscellaneous .27%
Total Annual Fund
Operating Expenses (after current waivers) .70%
====
</TABLE>
-37-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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
Cash Management Shares
-------------------------------------------------------------------------------------------------
<S> <C>
One Year $ 80
Three Years $249
Five Years $433
Ten Years $966
-------------------------------------------------------------------------------------------------
</TABLE>
-38-
<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. A pro rata portion of the other investment
companies' expenses will be borne by the Fund's shareholders.
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.
-39-
<PAGE>
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money when the
Adviser believes that the return from securities purchased with borrowed funds
will be greater than the cost of the borrowing. Such borrowings will be
unsecured. The Fund will not purchase portfolio securities while borrowings in
excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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 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 risks.
-40-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the T-Fund
Cash Management Shares' financial performance for the period May 17, 1999
through October 31, 1999 and T-Fund Dollar Shares' financial performance for the
past five 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.
T-Fund Cash Management Shares
The table below sets forth selected financial data for a T-Fund Cash Management
Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
For the Period
May 17, 1999/1/
Through
October 31,
1999
----------------------
<S> <C>
Net Asset Value, Beginning of Period $ 1.00
---------
Income From Investment Operations:
Net Investment Income .0197
---------
Less Distributions:
Dividends to Shareholders From Net Investment Income (.0197)
---------
Net Asset Value, End of Period $ 1.00
Total Return 4.37%/2/
Ratios/Supplemental Data:
Net Assets, End of Period $(000) 3,252
Ratio of Expenses to Average Daily Net Assets/3/ .70%/2/
Ratio of Net Investment Income to Average Daily Net Assets 4.43%/2/
</TABLE>
/1/ Commencement of Operations.
/2/ Annualized.
/3/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for T-Fund Cash Management Shares would
have been .78% (annualized) for the period ended October 31, 1999.
-41-
<PAGE>
T-Fund Dollar Shares
The table below sets forth selected financial data for a T-Fund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
<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............................................ .0448 .0507 .0503 .0503 .0540
-------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment Income...................................... (.0448) (.0507) (.0503) (.0503) (.0540)
-------- -------- -------- -------- -------
Net Asset Value, End of Period.................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total Return...................................................... 4.58% 5.21% 5.16% 5.15% 5.55%
Ratios/Supplemental Data:
Net Assets, End of Period $(000).................................. 612,695 777,385 516,092 351,271 82,502
Ratio of Expenses to Average Daily Net Assets/1/................. .45% .45% .45% .44% .43%
Ratio of Net Investment Income to Average Daily
Net Assets...................................................... 4.47% 5.06% 5.03% 5.01% 5.41%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .51%, .52%, .54%, .55%
and .54%, for the years ended October 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for T-Fund Dollar Shares.
-42-
<PAGE>
Federal Trust Fund
Risk/Return Summary
Investment Goal:
The Fund seeks current income with liquidity and relative 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. The Fund is subject to risks related to changes in prevailing interest
rates, since generally, a fixed-income security will increase in value when
interest rates fall and decrease in value when interest rates rise.
The Fund may from time to time engage in portfolio trading for liquidity
purposes, in order to enhance its yield or if otherwise deemed advisable. In
selling securities prior to maturity, the Fund may realize a price higher or
lower than that paid to acquire any given security, depending upon whether
interest rates have decreased or increased since its acquisition. In addition,
shareholders in a particular state that imposes an income tax should determine
through consultation with their own tax advisors whether such interest income,
when distributed by the Fund, will be considered by the state to have retained
exempt status, and whether the Fund's capital gain and other income, if any,
when distributed will be subject to the state's income tax
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Who May Want to Invest in the Fund:
The Fund is designed for institutional investors seeking current income with
liquidity and security of principal.
-43-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Dollar Shares of the
Fund by showing how the performance of the Dollar Shares of the Fund has varied
from year to year; and the average annual return for Dollar Shares of the Fund.
The Table shows how the Dollar Shares of the Fund's average annual return for
one, five and since inception 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
Dollar Shares/1/
<S> <C>
1991 5.83
1992 3.55
1993 2.81
1994 3.99
1995 5.58
1996 5.01
1997 5.13
1998 5.07
1999 4.73
</TABLE>
During the nine-year period shown in the bar chart, the highest quarterly return
was 6.66% (for the quarter ended March 31, 1991) and the lowest quarterly return
was 2.79% (for the quarter ended June 30, 1993).
_________________
/1/ As of March 31, 2000, the calendar year to date return was 1.37%
(not annualized).
-44-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31,
1999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years Since
Inception
December 31,
1990
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal Trust Fund Dollar Shares/1/ 4.73% 5.11% 4.64%
------------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Government Institutions -- Only Money Fund Average*
4.69% 5.02% 4.95%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Federal Trust Fund Dollar Shares/1/ 5.26%
------------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Government Institutions -- Only Money Fund Average* 5.06%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/Because the Cash Management Shares of the Fund have less than one year's
performance, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Cash
Management Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
*IBC's Money Fund Report: Government Institutions - Only Money Fund Average is
comprised of institutional money market funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
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.
-45-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Federal Trust Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .12%
Other Expenses .70%
Administration Fees .12%
Shareholder Servicing Fees .25%
Miscellaneous .33%
Total Annual Fund
Operating Expenses(1) .82%
===
--------------------------------------------------------------------------------
</TABLE>
(1) 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. As a result of fee waivers,
estimated "Management Fees," "Other Expenses" and "Total Annual Fund Operating
Expenses" of the Fund for the most recent fiscal year would have been as set
forth below. The Adviser and PFPC expect to continue such fee waivers, but can
terminate the waivers upon 120 days prior written notice to the Fund.
<TABLE>
<CAPTION>
Federal Trust Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .06%
Other Expenses .64%
Administration Fees .06%
Shareholder Servicing Fees .25%
Miscellaneous .33%
Total Annual Fund
Operating Expenses (after current waivers) .70%
===
</TABLE>
-46-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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
Cash Management Shares
----------------------------------------------------------------------------
<S> <C>
One Year $ 84
Three Years $ 262
Five Years $ 455
Ten Years $1,014
---------------------------------------------------------------------------
</TABLE>
-47-
<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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money when the
Adviser believes that the return from securities purchased with borrowed funds
will be greater than the cost of the borrowing. Such borrowings will be
unsecured. The Fund will not purchase portfolio securities while borrowings in
excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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.
-48-
<PAGE>
The Fund receives no income from when-issued or delayed settlement securities
prior to delivery of such securities.
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 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.
-49-
<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 Dollar Shares
The table below sets forth selected financial data for a Federal Trust Dollar
Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<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.................................... .0453 .0504 .0496 .0498 .0538
------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders From Net Investment
Income.................................................. (.0453) (.0504) (.0496) (.0498) (.0538)
------- ------- ------- ------- -------
Net Asset Value, End of Period............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return.............................................. 4.63% 5.17% 5.08% 5.10% 5.52%
Ratios/Supplemental Data:
Net Assets, End of Period $(000).......................... 27,539 38,633 38,700 26,875 28,402
Ratio of Expenses to Average Daily Net Assets/1/.......... .45% .45% .45% .44% .43%
Ratio of Net Investment Income to Average Daily Net
Assets................................................... 4.51% 5.04% 4.96% 4.97% 5.36%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .57%, .54%, .56%, .56%
and .57% for the years ended October 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for Federal Trust Fund Dollar Shares.
-50-
<PAGE>
Treasury Trust Fund
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. 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 state's income tax.
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Who May Want to Invest in the Fund:
The Fund is designed for institutional investors seeking current income with
liquidity and security of principal. 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
-51-
<PAGE>
"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.
Performance Information
The Bar Chart below indicates the risks of investing in the Dollar Shares of the
Fund by showing: how the performance of the Dollar Shares of the Fund has varied
from year to year; and the average annual return for Dollar Shares of the Fund.
The Table shows how the Dollar Shares of 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
Dollar Shares/1/
<S> <C>
1990 7.69
1991 5.62
1992 3.29
1993 2.71
1994 3.73
1995 5.41
1996 4.87
1997 4.94
1998 4.74
1999 4.36
</TABLE>
During the ten-year period shown in the bar chart, the highest quarterly return
was 8.03% (for the quarter ended March 31, 1990) and the lowest quarterly return
was 2.59% (for the quarter ended June 30, 1993).
_____________________
/1/ As of March 31, 2000, the calendar year to date return was 1.26% (not
annualized).
-52-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31,
1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Treasury Trust Fund Dollar Shares/1/ 4.36% 4.87% 4.73%
------------------------------------------------------------------------------------------
IBC's Money Fund Report: Government
Institutions - Only Money Fund Average* 4.69% 5.02% 4.95%
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
------------------------------------------------------------------------------------------
<S> <C>
Treasury Trust Fund Dollar Shares/1/ 4.73%
------------------------------------------------------------------------------------------
IBC's Money Fund Report: Government
Institutions - Only Money Fund Average* 5.06%
------------------------------------------------------------------------------------------
</TABLE>
/1/Because the Cash Management Shares of the Fund have less than one year's
performance, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Cash
Management Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
*IBC's Money Fund Report Government Institutions - Only Fund Average is
comprised of institutional money market funds investing in U.S. T-Bills,
Repurchase Agreements and/or Government Agencies.
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.
-53-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Treasury Trust Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .12%
Other Expenses .66%
Administration Fees .12%
Shareholder Servicing Fees .50%
Miscellaneous .04%
Total Annual Fund
Operating Expenses(1) .78%
===
--------------------------------------------------------------------------------
</TABLE>
(1) 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. As a result of fee waivers,
estimated "Management Fees," "Other Expenses" and "Total Annual Fund Operating
Expenses" for the most recent fiscal year would have been as set forth below.
The Adviser and PFPC expect to continue such fee waivers, but can terminate the
waivers upon 120 days prior written notice to the Fund.
<TABLE>
<CAPTION>
Treasury Trust Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .08%
Other Expenses .62%
Administration Fees .08%
Shareholder Servicing Fees .50%
Miscellaneous .04%
Total Annual Fund
Operating Expenses (after current waivers) .70%
===
</TABLE>
-54-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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
Cash Management Shares
--------------------------------------------------------------------------------
<S> <C>
One Year $ 80
Three Years $249
Five Years $433
Ten Years $966
--------------------------------------------------------------------------------
</TABLE>
-55-
<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. A pro rata portion of other investment companies' expenses
will be borne by the Fund's shareholders.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended . The Fund will borrow money when the
Adviser believes that the return from securities purchased with borrowed funds
will be greater than the cost of the borrowing. Such borrowings will be
unsecured. The Fund will not purchase portfolio securities while borrowings in
excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
-56-
<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 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.
-57-
<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 Dollar Shares
The table below sets forth selected financial data for a Treasury Trust Fund
Dollar Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<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.......................... .0417 .0477 .0479 .0483 .0520
-------- -------- -------- -------- --------
Less Distributions:
Dividends to Shareholders From Net
Investment Income............................. (.0417) (.0477) (.0479) (.0483) (.0520)
-------- -------- -------- -------- --------
Net Asset Value, End of Period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return.................................... 4.26% 4.89% 4.91% 4.95% 5.34%
Ratios/Supplemental Data:
Net Assets, End of Period $(000)................ 398,972 471,767 331,498 294,228 223,272
Ratio of Expenses to Average Daily Net
Assets/1/...................................... .45% .45% .45% .44% .43%
Ratio of Net Investment Income to Average
Daily Net Assets............................... 4.14% 4.77% 4.79% 4.83% 5.20%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .53%, .53%, .55%, .55%
and .54% for the years ended October 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for Treasury Trust Fund Dollar Shares.
-58-
<PAGE>
MuniFund
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. The Fund is also subject to risks related to changes in prevailing
interest rates, since generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest rates rise.
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Who May Want to Invest in The Fund:
The Fund is designed for institutional investors seeking as high a level of
current interest income exempt from federal income tax as is consistent with
relative stability of principal.
-59-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by showing: how
the performance of Dollar Shares of the Fund has varied from year to year; and
the average annual return for Dollar Shares of the Fund. The Table shows how the
average annual return for Dollar Shares of the Fund 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.
MuniFund
Dollar Shares/1/
1990 5.15
1991 3.53
1992 2.23
1993 1.96
1994 2.36
1995 3.43
1996 3.02
1997 3.20
1998 3.03
1999 2.85
During the ten-year period shown in the bar chart, the highest quarterly return
was 5.62% (for the quarter ended March 31, 1990) and the lowest quarterly return
was 1.84% (for the quarter ended December 31, 1993).
_____________________
/1/ As of March 31, 2000, the calendar year to date return was 0.80% (not
annualized).
-60-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MuniFund Dollar Shares/1/ 2.85% 3.11% 3.07%
---------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Tax-Free Institutions - Only Money Fund Average* 2.96% 3.22% 3.34%
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
MuniFund Dollar Shares/1/ 3.41%
----------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: Tax-Free Institutions - Only
Money Fund Average* 3.85%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Because the Cash Management Shares of the Fund have less than one year's
performance, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Cash
Management Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
*IBC's Money Fund Report: Tax Free Institutions-Only Money Fund Average is
comprised of institutional money market funds investing in obligations of tax-
exempt entities, including state and municipal authorities.
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.
-61-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
MuniFund
Cash Management Shares
---------------------------------------------
<S> <C>
Management Fees .17%
Other Expenses .75%
Administration Fees .17%
Shareholder Servicing Fees .25%
Miscellaneous .33%
Total Annual Fund
Operating Expenses (1) .92%
====
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers,
but can terminate the waivers upon 120 days prior written notice to the Fund.
<TABLE>
<CAPTION>
MuniFund
Cash Management Shares
---------------------------------------------
<S> <C>
Management Fees .07%
Other Expenses .63%
Administration Fees .07%
Shareholder Servicing Fees .25%
Miscellaneous .31%
Total Annual Fund
Operating Expenses (after current waivers) .70%
====
</TABLE>
-62-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
---------------------------------------------------
MuniFund Cash
Management Shares
---------------------------------------------------
<S> <C>
One Year $ 94
Three Years $ 293
Five Years $ 509
Ten Years $1,131
---------------------------------------------------
</TABLE>
-63-
<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 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 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 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; or
-64-
<PAGE>
. securities without such short-term ratings that have been determined to be
of comparable quality by the Adviser pursuant to guidelines approved by the
Board of Trustees; and
. securities issued by other open-end investment companies that invest in the
type of obligations in which the Fund may invest.
-65-
<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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money when the
Adviser believes that the return from securities purchased with borrowed funds
will be greater than the cost of the borrowing. Such borrowings will be
unsecured. The Fund will not purchase portfolio securities while borrowings in
excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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.
-66-
<PAGE>
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 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. 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. In making investments, the Fund and the Adviser will rely
on issuers' bond counsel and, in the case of derivative securities, sponsors'
counsel for their opinions on the tax-exempt status of interest on Municipal
Obligations and payments under tax-exempt derivative securities. Neither the
Fund nor its Adviser will independently review the bases for those tax opinions.
If any of those tax opinions are ultimately determined to be incorrect, the Fund
and its shareholders could be subject to substantial tax liabilities.
-67-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the
financial performance for MuniFund Cash Management Shares for the period June
14, 1999 through October 31, 1999 and for MuniFund Dollar Shares for the past
five years ended November 30, 1998 and the eleven months ended October 31, 1999.
Certain information reflects financial results for a single Fund share. The
total returns in the tables represent the rate that an investor would have
earned or lost on an investment in the Fund (assuming reinvestment of all
dividends and distributions). The information for the eleven months ended
October 31, 1999 for both MuniFund Cash Management Shares and Munifund Dollar
Shares was 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. The information for MuniFund Dollar Shares for the five
year period ended November 30, 1998 was audited by KPMG LLP whose report
expressed an unqualified opinion on those statements.
MuniFund Cash Management Shares
The table below sets forth selected financial data for a MuniFund Cash
Management Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
For the Period
June 14, 1999/1/
Through
October 31,
1999
----------------------
<S> <C>
Net Asset Value, Beginning of Period $ 1.00
----------
Income From Investment Operations:
Net Investment Income .0099
----------
Less Distributions:
Dividends to Shareholders From Net Investment Income (.0099)
----------
Net Asset Value, End of Period $ 1.00
Total Return 2.61%/2/
Ratios/Supplemental Data:
Net Assets, End of Period $(000) 2,712
Ratio of Expenses to Average
Daily Net Assets/3/ .70%/2/
Ratio of Net Investment
Income to Average Daily Net Assets 2.58%/2/
</TABLE>
/1/ Commencement of Operations.
/2/ Annualized.
/3/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets for MuniFund Cash Management Shares would
have been .92% (annualized) for the period ended October 31, 1999.
-68-
<PAGE>
MuniFund Dollar Shares
The table below sets forth selected financial data for a MuniFund Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Eleven Months
Ended
October 31, Year Ended November 30,
-----------------------------------------------
1999 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.............. .0250 .0302 .0313 .0301 .0335 .0230
--------- ------- ------- ------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income........................ (.0250) (.0302) (.0313) (.0301) (.0335) (.0230)
--------- ------- ------- ------- ------- -------
Net Asset Value,
End of Period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======= ======= ======= ======= =======
Total Return 2.77%/2/ 3.07% 3.18% 3.06% 3.41% 2.33%
Ratios/Supplemental Data:
Net Assets, End of Period
$(000)............................. 56,238 51,736 67,387 61,396 6,474 2,785
Ratio of Expenses to Average
Daily Net Assets/1/................ .45%/2/ .50% .52% .52% .52% .51%
Ratio of Net Investment
Income to Average Daily Net Assets.. 2.71%/2/ 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 would have been .66% (annualized) for
the eleven months ended October 31, 1999 and .66%, .66%, .67%, .66% and
.66% for the years ended November 30, 1998, 1997, 1996, 1995 and 1994,
respectively, for MuniFund Dollar Shares.
/2/ Annualized.
-69-
<PAGE>
MuniCash
--------------------------------------------------------------------------------
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. The Fund is also subject to risks related to changes in prevailing
interest rates, since generally, a fixed-income security will increase in value
when interest rates fall and decrease in value when interest rates rise.
Although the Fund intends to invest its assets in tax-exempt obligations, the
Fund is permitted to invest in private activity bonds and other securities which
may be subject to the federal alternative minimum tax.
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
Who May Want to Invest in the Fund:
The Fund is designed for institutional investors seeking as high a level of
current interest income exempt from federal income tax as is consistent with
relative stability of principal.
-70-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Dollar Shares of the
Fund by showing how the performance of the Dollar Shares of the Fund has varied
from year to year; and the average annual return for Dollar Shares of the Fund.
The Table shows how the Dollar Shares of the Fund's average annual return for
one, five and ten years compares to that of a selected market index. The Bar
Chart and the Table assume reinvestment of dividends and distributions. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
MuniCash
Dollar Shares/1/
1990 5.69
1991 4.21
1992 2.66
1993 2.09
1994 2.58
1995 3.66
1996 3.26
1997 3.40
1998 3.22
1999 2.93
During the ten-year period shown in the bar chart, the highest quarterly return
was 5.82% (for the quarter ended June 30, 1990) and the lowest quarterly return
was 2.00% (for the quarter ended March 31, 1994).
________________
/1/As of March 31, 2000, the calendar year to date return was 0.83% (not
annualized).
-71-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31,
1999
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MuniCash Dollar Shares/1/ 2.93% 3.29% 3.37%
--------------------------------------------------------------------------------------------
IBC's Money Fund Report:
Tax-Free Institutions-Only Money Fund Average* 2.96% 3.22% 3.34%
--------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
--------------------------------------------------------------------------------------------
<S> <C>
MuniCash Dollar Shares/1/ 3.45%
--------------------------------------------------------------------------------------------
IBC's Money Fund Report: Tax-Free Institutions-Only Money
Fund Average* 3.85%
--------------------------------------------------------------------------------------------
</TABLE>
________________________
/1/Because the Cash Management Shares of the Fund have less than one year's
performance, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Cash
Management Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
* IBC's Money Fund Report: Tax-Free Institutions-Only Money Fund Average is
comprised of institutional money market funds investing in obligations of tax-
exempt entities, including state and municipal authorities.
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.
-72-
<PAGE>
Fees And Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
MuniCash
Cash Management Shares
----------------------
<S> <C>
Management Fees .17%
Other Expenses .74%
Administration Fees .17%
Shareholder Servicing Fees .25%
Miscellaneous .32%
Total Annual Fund
Operating Expenses(1) .91%
====
--------------------------------------------------------------------------------
</TABLE>
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers,
but can terminate the waivers upon 120 days prior written notice to the
Fund.
<TABLE>
<CAPTION>
MuniCash
Cash Management Shares
----------------------
<S> <C>
Management Fees .07%
Other Expenses .63%
Administration Fees .07%
Shareholder Servicing Fees .25%
Miscellaneous .31%
Total Annual Fund
Operating Expenses (after current waivers) .70%
====
</TABLE>
-73-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) 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
Cash Management Shares
-------------------------------------------------------------------------------
<S> <C>
One Year $ 93
Three Years $ 290
Five Years $ 504
Ten Years $1,120
-------------------------------------------------------------------------------
</TABLE>
-74-
<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 collateralized 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 generally 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 credit support
with such rating 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
-75-
<PAGE>
. shares of other open-end investment companies that invest in the type of
obligations in which the Fund may invest.
INVESTMENTS. The Fund's investments may include the following:
Municipal 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. A pro rata portion of other investment companies' expenses
will be borne by the Fund's shareholders.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money when the
Adviser believes that the return from securities purchased with borrowed funds
will be greater than the cost of the borrowing. Such borrowings will be
unsecured. The Fund will not purchase portfolio securities while borrowings in
excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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
-76-
<PAGE>
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 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. 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. In making investments, the Fund and the Adviser will rely
on issuers' bond counsel and, in the case of derivative securities, sponsors'
counsel for their opinions on the tax-exempt status of interest on Municipal
Obligatins and payments under tax-exempt derivative securities. Neither the Fund
nor its Adviser will independently review the bases for those tax opinions. If
any of those tax opinions are ultimately determined to be incorrect, the Fund
and its shareholders could be subject to substantial tax liabilities.
-77-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended November 30, 1998 and the
eleven months ended October 31, 1999. 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). The information for
the eleven months ended October 31, 1999 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. The financial highlights for the five year period ended November 30,
1998 were audited by KPMG LLP whose report dated expressed an unqualified
opinion on those statements.
MuniCash Dollar Shares
The table below sets forth selected financial data for a MuniCash Dollar Share
outstanding throughout each year presented.
<TABLE>
<CAPTION>
Eleven Months
Ended
October 31, Year Ended November 30,
--------------------------------------------------
1999 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................. .0258 .0321 .0333 .0325 .0357 .0241
--------- ------- -------- -------- -------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment Income........... (.0258) (.0321) (.0333) (.0325) (.0357) (.0241)
--------- ------- -------- -------- -------- -------
Net Asset Value, End of Period......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======= ======== ======== ======== =======
Total Return........................... 2.86%/2/ 3.26% 3.38% 3.31% 3.64% 2.44%
Ratios/Supplemental Data:
Net Assets, End of Period $(000)....... 123,017 91,404 150,089 101,528 101,424 99,688
Ratio of Expenses to Average
Daily Net Assets/1/................... .45%/2/ .43% .43% .43% .43% .44%
Ratio of Net Investment
Income to Average Daily Net
Assets............................... 2.80%/2/ 3.22% 3.33% 3.25% 3.58% 2.34%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .66% (annualized) for
the eleven months ended October 31, 1999 and .65%, .66%, .67%, .66% and
.67% for the years ended November 30, 1998, 1997, 1996, 1995 and 1994,
respectively, for MuniCash Dollar Shares.
/2/ Annualized.
-78-
<PAGE>
California Money Fund
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 the interest on Municipal Obligations that is
exempt from taxation under the Constitution or statutes of California
("California Municipal Obligations") are exempt from regular federal and
California State personal income tax. California Municipal Obligations include
municipal securities issued by the State of California and its political sub-
divisions, as well as certain other governmental issuers such as the
Commonwealth of Puerto Rico.
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. 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.
The Fund is non-diversified because it emphasizes investments in California
Municipal Obligations. 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.
-79-
<PAGE>
Dividends derived from interest on Municipal Obligations other than California
Municipal Obligations are exempt from federal income tax but may be subject to
California State personal income tax.
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
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 California 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 California personal income tax as
is consistent with the preservation of capital and relative stability of
principal.
-80-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Fund by
showing: how the performance of the Dollar Shares of the Fund has varied from
year to year; and the average annual return for Dollar Shares of the Fund. The
Table shows how the average annual return for Dollar Shares of the Fund 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.
California Money Fund
Dollar Shares/1/
1990 5.04
1991 3.69
1992 2.36
1993 2.01
1994 2.48
1995 3.39
1996 2.96
1997 3.14
1998 2.88
1999 2.57
During the ten-year period shown in the bar chart, the highest quarterly return
was 5.25% (for the quarter ended June 30, 1990) and the lowest quarterly return
was 1.88% (for the quarter ended March 31, 1993).
________________
/1/ As of March 31, 2000, the calendar year to date return was 0.61%
(not annualized).
-81-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31, 1999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Money Fund Dollar Shares/1/ 2.57% 2.99% 3.05%
-----------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: California State Specific Tax-Free Institutions-Only Money Fund
Average* 2.74% 3.04% 3.17%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
California Money Fund Dollar Shares/1/ 3.08%
----------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: California State Specific Tax-Free
Institutions - Only Money Fund Average * 3.47%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Because the Cash Management Shares of the Fund have not yet commenced
operations, the performance is the performance of the Dollar Shares of the Fund,
which are offered by a separate prospectus. Dollar Shares and Cash Management
Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
*IBC's Money Fund Report: California State Specific Tax-Free Institutions -
Only Money Fund Average is comprised of institutional money market funds
investing in tax-exempt obligations of California State.
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.
-82-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
California Money Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .20%
Other Expenses .75%
Administration Fees .20%
Shareholder Servicing Fees .25%
Miscellaneous .30%
Total Annual Fund
Operating Expenses(1) .95%
</TABLE> ====
----------------------------------------------------------------------------
(1) 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. As a result of fee
waivers, estimated "Management Fees," "Other Expenses" and "Total Annual Fund
Operating Expenses" of the Fund for the most recent fiscal year would have been
as set forth below. The Adviser and PFPC expect to continue such fee waivers.
However, the waivers are voluntary and can be terminated at any time.
<TABLE>
<CAPTION>
California Money Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .07%
Other Expenses .63%
Administration Fees .07%
Shareholder Servicing Fees .25%
Miscellaneous .31%
Total Annual Fund
Operating Expenses (after current waivers) .70%
</TABLE> ====
-83-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waiver) with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
California Money Fund
Cash Management Shares
--------------------------------------------------------------------------------
<S> <C>
One Year $ 97
Three Years $ 303
Five Years $ 525
Ten Years $1,166
--------------------------------------------------------------------------------
</TABLE>
-84-
<PAGE>
INVESTMENT STRATEGIES AND RISK DISCLOSURES
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 will
invest at least 65% of its net assets in California Municipal Obligations. At
least 50% of the Fund's assets must be invested in obligations which, when held
by an individual, the interest therefrom is exempt from California personal
income taxation (i.e., California Municipal Obligations and certain U.S.
Government obligations) at the close of each quarter of its taxable year so as
to permit the Fund to pay dividends that are exempt from California State
personal income tax. Dividends, regardless of their source, may be subject to
local taxes. The Fund will not knowingly purchase securities the interest on
which is subject to regular federal income tax; however, the Fund may hold
uninvested cash reserves pending investment during temporary defensive periods
or, if in the opinion of the 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 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
-85-
<PAGE>
. shares of other open-end investment companies that invest in the type of
obligations in which the Fund may invest and securities issued by the U.S.
government or any agency or instrumentality.
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.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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.
-86-
<PAGE>
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. A pro rata portion of the other investment companies'
expenses will be borne by the Fund's shareholders.
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 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. 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. In making investments, the Fund and the Adviser will rely
on issuers' bond counsel and, in the case of derivative securities, sponsors'
counsel for their opinions on the tax-
-87-
<PAGE>
exempt status of interest on Municipal Obligations and payments under tax-exempt
derivative securities. Neither the Fund nor its Adviser will independently
review the bases for those tax opinions. If any of those tax opinions are
ultimately determined to be incorrect, the Fund and its shareholders could be
subject to substantial tax liabilities.
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 respect 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 AA- and
AA3, 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 so invested, the Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if the Fund's assets were not so invested.
-88-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended January 31, 1999 and the nine
months ended October 31, 1999. 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.
California Money Fund Dollar Shares
The table below sets forth selected financial data for a California Money Fund
Dollar Share outstanding throughout each year presented.
<TABLE>
<CAPTION>
Nine Months
Ended
October 31, Year Ended January 31,
--------------------------------------------------
1999 1999 1998 1997 1996 1995
--------- -------- -------- -------- ------- -------
<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............. .0182 .0280 .0309 .0291 .0331 .0256
--------- -------- -------- -------- ------- -------
Less Distributions:
Dividends to Shareholders
From Net Investment
Income........................... (.0182) (.0280) (.0309) (.0291) (.0331) (.0256)
--------- -------- -------- -------- ------- -------
Net Asset Value, End of Period..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======= =======
Total Return....................... 2.48%/2/ 2.84% 3.14% 2.96% 3.37% 2.59%
Ratios/Supplemental Data:
Net Assets, End of Period $(000)... 8,288 139,601 130,547 126,321 31,163 11,026
Ratio of Expenses to Average
Daily Net Assets/1/............... .45%/2/ .45% .45% .45% .45% .45%
Ratio of Net Investment Income
to Average Daily Net Assets....... 2.43%/2/ 2.77% 3.09% 2.90% 3.30% 2.54%
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .70% (annualized) for
the nine months ended October 31, 1999 and .70%, .71%, .73%, .73% and .73%
for the years ended January 31, 1999, 1998, 1997, 1996 and 1995,
respectively, for California Money Fund Dollar Shares.
/2/ Annualized.
-89-
<PAGE>
New York Money Fund
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. 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.
The Fund is non-diversified because it emphasizes investments in New York
Municipal Obligations. 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.
-90-
<PAGE>
Dividends derived from interest on Municipal Obligations other than New York
Municipal Obligations are exempt from federal income tax but may be subject to
New York State and New York City personal income tax.
An investment in the Fund is not a deposit in PFPC Trust Company or PNC Bank,
N.A. and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the Fund seeks to preserve
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.
-91-
<PAGE>
Performance Information
The Bar Chart below indicates the risks of investing in the Dollar Shares of the
Fund by showing: how the performance of the Dollar Shares of the Fund has varied
from year to year; and the average annual return for Dollar Shares of the Fund.
The Table shows how the Dollar Shares of the Fund's average annual return for
one, five and ten years compares to that of a selected market index. The Bar
Chart and the Table assume reinvestment of dividends and distributions. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
New York Money Fund
Dollar Shares/1/
1990 5.15
1991 3.64
1992 2.41
1993 1.97
1994 2.38
1995 3.44
1996 3.05
1997 3.23
1998 2.97
1999 2.74
During the ten-year period shown in the bar chart, the highest quarterly return
was 5.29% (for the quarter ended June 30, 1990) and the lowest quarterly return
was 1.84% (for the quarter ended March 31, 1994).
__________
/1/ As of March 31, 2000, the calendar year to date return was 0.75%
(not annualized).
-92-
<PAGE>
The Fund's Average Annual Total Return for Periods Ended December 31,
1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
<S> <C> <C> <C>
New York Money Fund Dollar Shares/1/ 2.74% 3.08% 3.09%
------------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: New York State Specific
Tax-Free Institutions -- Only Money Fund Average * 2.72% 3.11% 3.22%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
7 Day Yield
As of December 31, 1999
<S> <C>
New York Money Fund Dollar Shares/1/ 3.31%
------------------------------------------------------------------------------------------------------------------------------------
IBC's Money Fund Report: New York State Specific Tax-Free
Institutions -- Only Money Fund Average* 3.55%
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Because the Cash Management Shares of the Fund have less than one year's
performance, the performance is the performance of the Dollar Shares of the
Fund, which are offered by a separate prospectus. Dollar Shares and Cash
Management Shares of the Fund should have returns and seven day yields that are
substantially the same because they represent interests in the same portfolio
securities and differ only to the extent that they bear different expenses. The
performance of Cash Management Shares will be lower than Dollar Shares because
they bear different expenses.
*IBC's Money Fund Report: New York State Specific Tax-Free Institutions -- Only
Money Fund Average is comprised of institutional money market funds investing in
tax-exempt obligations of New York State
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.
-93-
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
New York Money Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .20%
Other Expenses .80%
Administration Fees .20%
Shareholder Servicing Fees .25%
Miscellaneous .35%
Total Annual Fund
Operating Expenses(1) 1.00%
=====
--------------------------------------------------------------------------------
</TABLE>
(1) 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. As a
result of fee waivers, estimated "Management Fees," "Other Expenses" and
"Total Annual Fund Operating Expenses" of the Fund for the most recent
fiscal year would have been as set forth below. The Adviser and PFPC expect
to continue such fee waivers. However, the waivers are voluntary and can be
terminated at any time.
<TABLE>
<CAPTION>
New York Money Fund
Cash Management Shares
----------------------
<S> <C>
Management Fees .05%
Other Expenses .65%
Administration Fees .05%
Shareholder Servicing Fees .25%
Miscellaneous .35%
Total Annual Fund
Operating Expenses (after current waivers) .70%
====
</TABLE>
-94-
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
(without the waivers) with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
New York Money Fund
Cash Management Shares
--------------------------------------------------------------------------------
<S> <C>
One Year $ 102
Three Years $ 318
Five Years $ 552
Ten Years $1,225
--------------------------------------------------------------------------------
</TABLE>
-95-
<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 will
invest at least 65% of its net assets 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 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
obligations in which the Fund may invest.
-96-
<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.
Borrowing. The Fund is authorized to issue senior securities or borrow money
from banks or other lenders on a temporary basis to the extent permitted by the
Investment Company Act of 1940, as amended. The Fund will borrow money
when the Adviser believes that the return from securities purchased with
borrowed funds will be greater than the cost of the borrowing. Such borrowings
will be unsecured. The Fund will not purchase portfolio securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
When-Issued and 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. The Fund receives no income from when-issued or delayed
settlement securities prior to delivery of such securities.
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. A pro rata portion of
-97-
<PAGE>
the other investment companies' expenses will be borne by the Fund's
shareholders.
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 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. 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, at times, experienced
serious financial difficulties. These difficulties have at times jeopardized the
credit standing and impaired the
-98-
<PAGE>
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. Strong demand for New York Municipal Obligations
has at times had the effect of permitting New York Municipal Obligations to be
issued with yields relatively lower, and after issuance, to trade in the market
at prices relatively higher, than comparably rated municipal obligations issued
by other jurisdictions. A recurrence of the financial difficulties previously
experienced by certain issuers of New York Municipal Obligations could result in
defaults or declines in the market values of those issuers' existing obligations
and, possibly, in the obligations of other issuers of New York Municipal
Obligations. Although as of the date of this Prospectus, no issuers of New York
Municipal Obligations are in default with respect to the payment of their
Municipal Obligations, the occurrence of any such default could affect adversely
the market values and marketability of all New York Municipal Obligations and,
consequently, the net asset value of the Fund's portfolio.
Municipal Obligations. In making investments, the Fund and the Adviser will rely
on issuers' bond counsel and, in the case of derivative securities, sponsors'
counsel for their opinions on the tax-exempt status of interest on Municipal
Obligations and payments under tax-exempt derivative securities. Neither the
Fund nor its Adviser will independently review the bases for those tax opinions.
If any of those tax opinions are ultimately determined to be incorrect, the Fund
and its shareholders could be subject to substantial tax liabilities.
-99-
<PAGE>
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance for the past 5 years ended July 31, 1999 and the three
months ended October 31, 1999. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's
financial statements, are incorporated by reference into the Statement of
Additional Information and included in the Annual Report, each of which is
available upon request.
New York Money Fund Dollar Shares
The table below sets forth selected financial data for a New York Money Fund
Dollar Share outstanding throughout each year presented./3/
<TABLE>
<CAPTION>
Three Months
Ended Year Ended July 31,
October 31, ---------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<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............. -- -- .0303 .0309 .0089 --
------------ ------------ ------------ ------------ ------------ ------------
Less Distributions:
Dividends to Shareholders
from Net Investment
Income............................ -- -- (.0303) (.0309) (.0089) --
------------ ------------ ------------ ------------ ------------ ------------
Net Asset Value, End of Period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============ ============
Total Return........................ -- -- 3.16%/2/ 3.14% 3.05% --
Ratios/Supplemental Data:
Net Assets, End of Period
$(000)............................ -- -- -- 1,148 20 --
Ratio of Expenses to Average
Daily Net Assets/1/............... -- -- .45%/2/ .45% .45% --
Ratio of Net Investment Income
to Average Daily Net Assets........ -- -- 3.11%/2/ 3.09% 3.07% --
</TABLE>
/1/ Without the waiver of advisory and administration fees, the ratio of
expenses to average daily net assets would have been .73% (annualized),
.74% and .75% (annualized) for the years ended July 31, 1998, 1997 and
1996, respectively, for New York Money Fund Dollar Shares.
/2/ Annualized.
/3/ There were no Dollar Shares outstanding during the periods March 28, 1994
to April 14, 1996 and July 21, 1998 to October 31, 1999.
-100-
<PAGE>
MANAGEMENT OF THE FUND
Investment Adviser
The Adviser, a majority-owned indirect subsidiary of PNC Bank N.A., serves as
the Company'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 $58 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 each Fund and is responsible for all
purchases and sales of Funds' 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 each 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 a 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, 1999, TempFund, TempCash, FedFund, T-Fund,
Federal Trust Fund, Treasury Trust Fund, MuniFund, MuniCash, California Money
Fund and New York Money Fund paid investment advisory fees and administration
fees each aggregating .08%, .08%, .08%, .09%, .06%, .08%, .07%, .07%,
.07%, and .05%, respectively, (net of waivers) of their average net assets.
The services provided by BIMC and the fees payable by each Fund for these
services are described further in the Statement of Additional Information under
"Management of the Funds."
SHAREHOLDER INFORMATION
Price of Fund Shares
A Fund's net asset value per share for purposes of pricing purchase and
redemption orders is determined by PFPC Inc. ("PFPC"), the Trust's co-
administrator, twice 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 of [each Fund, except for TempFund and T-Fund,] is
determined as of 12:00 Noon and 4:00 PM[,] Eastern Time (9:00 AM and 1:00 PM
Pacific Time). The net asset value of TempFund and T-Fund is determined as of
12:00 Noon and 5:30 PM Eastern Time. The net asset value per share of each class
of a Fund's shares is calculated by adding the value of all securities and other
assets of a 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, each Fund
uses the amortized cost method of valuation as described in the Statement of
Additional Information under "Additional Purchase and Redemption Information."
Under the
-101-
<PAGE>
1940 Act, a Fund may postpone the date of payment of any redeemable security for
up to seven days.
On any business day when the Bond Market Association ("BMA") recommends that the
securities markets close early, each Fund reserves the right to close at or
prior to the BMA recommended closing time. If a Fund does so, it will cease
granting same business day credits for purchase and redemption orders received
after the Fund's closing time and credit will be granted to the next business
day.
Purchase of Shares
Shares of each of the Funds are sold at the net asset value per share next
determined after confirmation of a purchase order by PFPC, which also serves as
the Trust's transfer agent. Purchase orders for shares are accepted only on
Business Days and must be transmitted to the Funds' Office in Wilmington,
Delaware by telephone (800-441-7450; in Delaware: 302-797-2350) or until 3:00 PM
Eastern Time, through the Fund's internet-based order entry program,
MA2000.
The chart below outlines the cut-off times for when purchase orders are
executed. Purchase orders accepted by PFPC by the cut-off time and for which
payment has been received by PNC Bank, N.A. ("PNC Bank"), an agent of the
Trust's custodian, PFPC Trust Company, by 4:00 PM Eastern Time (5:30 PM
Eastern Time for TempFund and T-Fund) will be executed that day. Purchase
orders received after the cut-off times, and orders for which payment has not
been received by 4:00 PM Eastern Time (5:30 PM, Eastern Time for TempFund and
T-Fund) will not be accepted, and notice thereof will be given to the
institution placing the order. Payment for purchase orders which are not
received or accepted will be returned after prompt inquiry to the sending
institution. Each of the Funds may at their discretion reject any purchase order
for Cash Management Shares.
<TABLE>
<CAPTION>
Portfolio Time
--------- ----
<S> <C>
TempFund* 5:30 PM Eastern Time
TempCash 3:00 PM Eastern Time
FedFund 3:00 PM Eastern Time
T-Fund* 5:30 PM Eastern Time
Federal Trust Fund 2:30 PM Eastern Time
Treasury Trust Fund 2:30 PM Eastern Time
MuniFund 2:30 PM Eastern Time
MuniCash 2:30 PM Eastern Time
California Money Fund** 12:00 Noon Eastern Time
New York Money Fund 12:00 Noon Eastern Time
</TABLE>
-102-
<PAGE>
*Purchase orders placed between 3:00 PM and 5:30 PM Eastern Time, may only
be transmitted by telephone, and TempFund and T-Fund reserve the right to limit
the amount of such orders.
**Purchase orders for Cash Management Shares of the California Money Fund
will be accepted between 12:00 Noon Eastern Time and 1:00 PM Eastern Time up to
a maximum order of $1 million per account. The Fund reserves the right to limit
the amount of such orders.
Payment for Cash Management Shares of a Fund may be made only in federal funds
or other funds immediately available to PNC Bank. The minimum initial
investment by an institution for Cash Management Shares is $5,000.00. (However,
institutional investors may set a higher minimum for their customers). There is
no minimum subsequent investment.
Cash Management Shares of the Funds are sold without charge by a Fund.
Institutional investors purchasing or holding Cash Management Shares of the
Funds 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 Cash Management Shares of the Funds. An institution purchasing Cash
Management Shares of the Fund on behalf of its customers is responsible for
transmitting orders to a Fund in accordance with its customer agreements.
Redemption of Shares
Redemption orders must be transmitted to the Funds' Office in Wilmington,
Delaware in the manner described under "Purchase of Shares." Cash Management
Shares are redeemed without charge by a Fund at the net asset value per share
next determined after PFPC's receipt of the redemption request.
The chart below outlines the cut-off times for the redemption of Cash Management
Shares of the Funds. Payment for redeemed shares of the Funds for which
redemption are received by PFPC by the established cut-off times on a Business
Day is normally made in federal funds wired to the redeeming shareholder on the
same day. Payment of redemption requests which are received after the
established cut-off times, 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.
<TABLE>
<CAPTION>
Portfolio Time
--------- ----
<S> <C>
TempFund* 5:30 PM Eastern Time
TempCash 3:00 PM Eastern Time
FedFund 3:00 PM Eastern Time
</TABLE>
-103-
<PAGE>
<TABLE>
<S> <C>
T-Fund* 5:30 PM Eastern Time
Federal Trust Fund 2:30 PM Eastern Time
Treasury Trust Fund 2:30 PM Eastern Time
MuniFund 12:00 Noon Eastern Time
MuniCash 12:00 Noon Eastern Time
California Money Fund** 12:00 Noon Eastern Time
New York Money Fund 12:00 Noon Eastern Time
</TABLE>
*Redemption orders placed between 3:00 PM and 5:30 PM Eastern Time, may
only be transmitted by telephone. TempFund and T-Fund reserve the right to
limit the amount of such orders.
** Redemptions orders for Cash Management Shares of the California Money
Fund will be accepted between 12:00 Noon Eastern Time and 1:00 PM Eastern Time
for a maximum order of $1 million per account. The Fund reserves the right to
limit the amount of such orders.
The Funds shall have the right to redeem shares in any Cash Management Share
account if the value of the account is less than $5,000 (other than due to
market fluctuations), after sixty days' prior written notice to the shareholder.
If during the sixty-day period the shareholder increases the value of its Cash
Management Share account to $5,000 or more, no such redemption shall take place.
If a shareholder's Cash Management share account falls below an average of
$5,000 in any particular calendar month, the account may be charged an account
maintenance fee with respect to that month (with the exception of TempFund). Any
such redemption shall be effected at the net asset value next determined after
the redemption order is entered. In addition, a Fund may redeem Cash Management
Shares involuntarily under certain special circumstances described in the
Statement of Additional Information under "Additional Purchase and Redemption
Information." An institution redeeming shares of the Fund on behalf of its
customers is responsible for transmitting orders to a Fund in accordance with
its customers agreements.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Funds in connection with the investment of fiduciary
funds in 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 Cash Management
Shares.
Cash Management 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
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Cash Management Shares. Pursuant to a Shareholder Services Plan adopted by the
Trust's Board of Trustees, the Fund will enter into an agreement with each
Service Organization which purchases Cash Management Shares. The agreement will
require the service organization to provide services to its customers who are
the beneficial owners of such shares in consideration of the Fund's payment of
up to .50% (on an annualized basis) of the average daily net asset value of the
Cash Management Shares held by the Service Organization. Such services are
described more fully in the Statement of Additional Information under
"Management of the Fund - Service Organizations." 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 Cash Management Shares.
Dividends and Distributions
Each 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.
Federal Taxes
Distributions paid by TempFund, TempCash, FedFund, T-Fund, Federal Trust Fund
and Treasury Trust Fund, will generally be taxable to shareholders. Each of
these Funds 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. The one major exception to these tax principles is that
distribution on, and sales exchanges and redemptions of, shares held in an IRA
(or other tax qualified plan) will not be currently taxable.
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MuniFund, MuniCash, California Money Fund and New York Money Fund (the
"Tax-Exempt Funds") anticipate that substantially all of their income dividends
will be "exempt interest dividends," which are exempt from federal income taxes.
Interest on indebtedness incurred by a shareholder to purchase or carry shares
of a Tax-Exempt Fund generally will not be deductible for federal income tax
purposes. You should note that a portion of the exempt-interest dividends paid
by a Tax-Exempt 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.
State and Local Taxes
Shareholders may also be subject to state and local taxes on distributions.
State income taxes may not apply however, to the portions of each Fund's
distributions, if any, that are attributable to interest on federal securities
or interest on securities of the particular state or localities within the
state.
Dividends that are paid by California Money Fund to non-corporate shareholders
and are derived from interest on California Municipal Obligations or certain
U.S. Government obligations are also exempti from California state personal
income tax, provided that at least 50% of the aggregate value of the Fund's
assets consist of exempt-interest obligations. However, dividens 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 paid by California Money Fund 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 obligaitons which, if
realized directly, would be exempt from such income taxes.
The New York Money Fund intends to comply with certain state tax requirements
so that the exempt-interest diviedns 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.) Dividends and
distributions derived from taxable income and capital gains are exempt from New
York State and New York City taxes. Interest on indebtedness incurred by a
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shareholder to purchase or carry shares of the Fund is not deductible for
federal, New York State of 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 of the Funds' shareholders or their
authorized representative an annual statement designating the amount, if any, of
any dividends and distributions made during each year and their federal tax
treatment. Additionally, PFPC will send California Money Fund and New York
Money Funds' shareholders or their authorized representatives an annual
statement regarding, as applicable California, New York State and New York
City tax treatment.
The foregoing is only a summary of certain tax considerations under current law,
which may be subject to change in the future. Shareholders who are nonresident
aliens, foreign trusts or estates, or foreign corporations or partnerships, may
be subject to different United States federal income tax treatment. You should
consult your tax adviser for further information regarding federal, state, local
and/or foreign tax consequences relevant to your specific situation.
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How to Contact Provident Institutional Funds
For purchases and redemption orders only call: 800-441-7450
For yield information call: 800-821-6006
TempFund Cash Management Shares Code: H3
TempCash Cash Management Shares Code:____
FedFund Cash Management Shares ______
T-Fund Cash Management Shares Code: N3
Federal Trust Fund Cash Management Shares Code:____
Treasury Trust Fund Cash Management Shares ______
MuniFund Cash Management Shares Code: K3
MuniCash Cash Management Shares Code:____
California Money Fund Cash Management Shares Code: R3
New York Money Fund Cash Management Shares Code:____
For other information call: 800-821-7432 or visit our website at www.pif.com
Written correspondence may be sent to:
Provident Institutional Funds
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
<PAGE>
Where to Find More Information
The Statement of Additional Information (the "SAI") includes additional
information about the Trust'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 each 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
Trust's web site at www.pif.com.
Information about the Trust (including the SAI) can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C., and information on the
operation of the Public Reference Room may be obtained by calling the SEC at
1-202-942-8090. Reports and other information about the Trust are available on
the EDGAR Database on the SEC's Internet site at http://www.sec.gov; copies of
this information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected], or by writing the
SEC's Public Reference Section, Washington, D.C. 20549-0102.
The Provident Institutional Funds 1940 Act File No. is 811-2354.
<PAGE>
PROVIDENT INSTITUTIONAL FUNDS
Statement of Additional Information
June 5, 2000
This Statement of Additional Information is not a Prospectus and
should be read in conjunction with each of the current Prospectuses for the
Institutional and Dollar Classes of TempFund, TempCash, FedFund, T-Fund, Federal
Trust Fund, Treasury Trust Fund, MuniFund, MuniCash, California Money Fund, and
New York Money Fund; the Administration and Cash Reserve Classes of TempFund, T-
Fund, MuniFund and California Money Fund; the Plus Class of TempFund, T-Fund,
MuniFund, California Money Fund and New York Money Fund and the Institutional
Class of TempCash and MuniCash, of Provident Institutional Funds ("PIF" or the
"Trust") and the Cash Management Class of TempFund, TempCash, FedFund, T-Fund,
Federal Trust Fund, Treasury Trust Fund, MuniFund, MuniCash, California Money
Fund and New York Money Fund, as they may from time to time be supplemented or
revised. No investment in shares should be made without reading the appropriate
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 Report for 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>
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General Information................................................. 3
Investment Strategies, Risks and Policies........................... 4
Portfolio Transactions........................................ 4
Investment Instruments and Policies........................... 5
Variable and Floating Rate Instruments........................ 5
Repurchase Agreements......................................... 5
Securities Lending............................................ 7
Reverse Repurchase Agreements................................. 7
U.S. Government Obligations................................... 8
Mortgage-Related and Other Asset-Backed Securities............ 8
Banking Industry Obligations.................................. 10
Special Considerations Regarding Foreign Investments.......... 11
Guaranteed Investment Contracts............................... 11
Investment Company Securities................................. 11
</TABLE>
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Municipal Obligations............................................... 12
Restricted and Other Illiquid Securities............................ 14
Stand-By Commitments................................................ 14
Short-Term Trading.................................................. 14
* 1 moved from here; text not shown
Special Considerations With Respect To California Money Fund........ 15
Special Considerations With Respect To New York Money Fund.......... 26
Investment Limitations................................................... 37
Additional Purchase and Redemption Information........................... 40
In General.......................................................... 40
Net Asset Value..................................................... 41
Management of the Funds.................................................. 43
Trustees and Officers............................................... 43
Investment Adviser.................................................. 46
Co-Administrators................................................... 48
Distributor......................................................... 50
Custodian and Transfer Agent........................................ 51
Service Organizations............................................... 52
Additional Information Concerning Taxes.................................. 60
Dividends................................................................ 62
General............................................................. 62
Additional Yield and Other Performance Information....................... 62
Additional Description Concerning Shares................................. 67
Counsel.................................................................. 68
Auditors................................................................. 68
Financial Statements..................................................... 69
Miscellaneous............................................................ 69
Shareholder Vote.................................................... 69
Securities Holdings of Brokers...................................... 69
Certain Record Holders.............................................. 70
APPENDIX A............................................................... A-1
</TABLE>
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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 fiscal year end for each of the Predecessor Companies and their
respective Funds was as follows: Temp - September 30, Fed - October 31, Muni -
November 30, Cal Muni - January 31 and NY Muni - July 31. The Trust's current
fiscal year end for each of the Funds is October 31. This Statement of
Additional Information contains various charts with respect to fees and
performance information of the Predecessor Companies and/or Predecessor Funds.
On February 10, 1999, each of the Predecessor Funds was reorganized
into a separate series of PIF. PIF is a no-load open-end management investment
company. Currently, PIF offers shares of each of ten Funds. Each Fund is a
diversified fund, with the exception of California Money Fund and New York Money
Fund which are classified as non-diversified investment companies under the 1940
Act. Each of the Funds offers a class of Shares to institutional investors
("Institutional Shares"). Each of the Funds also offers to institutional
investors, such as banks, savings and loan associations and other financial
institutions ("Service Organizations"), two separate classes of shares, Dollar
Shares and Cash Management Shares. TempFund, MuniFund, T-Fund and California
Money Fund also offer to Service Organizations two separate classes of Shares
known as Administration Shares and Cash Reserve Shares. TempFund, T-Fund,
MuniFund, New York Money Fund and the California Money Fund, 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.
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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"), the Trust'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.
Investment decisions for each Fund are made independently from those
for another of the Trust'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 and price on behalf of such other
portfolios, transactions are 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
affect 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 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.
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Investment Instruments and Policies
The following supplements the description of the investment
instruments and/or policies which are applicable to certain Funds.
Variable and Floating Rate Instruments. The Funds 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 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 and interest 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 illiquid investments.
In determining a Fund's average weighted portfolio maturity and
whether a long-term variable rate demand instrument has a remaining maturity of
13 months or less, the 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. In determining a Fund's average weighted portfolio maturity and
whether a long-term floating rate demand instrument has a remaining maturity of
13 months or less, the instrument will be deemed by a Fund to have a maturity
equal to 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.
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. 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
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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 at least two
nationally recognized statistical rating organizations (an "NRSRO") (or by the
only NRSRO providing a rating). 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. Collateral for repurchase agreements entered
into by TempFund, TempCash and FedFund may also include classes of
collateralized mortgage obligations (CMOs) issued by agencies and
instrumentalities of the U.S. Government, such as interest only (IOs) and
principal only (POs) securities, residual interests, planned amortization class
(PACs) certificates and targeted amortization class (TACs) certificates.
IOs and POs are stripped mortgage-backed securities representing
interests in a pool of mortgages the cash flow from which has been separated
into interest and principal components. "IOs" (interest only securities) receive
the interest portion of the cash flow while "POs" (principal only securities)
receive the principal portion. IOs and POs can be extremely volatile in response
to changes in interest rates. As interest rates rise and fall, the value of IOs
tends to move in the same direction as interest rates. POs perform best when
prepayments on the underlying mortgages rise since this increases the rate at
which the investment is returned and the yield to maturity on the PO. When
payments on mortgages underlying a PO are slow, the life of the PO is lengthened
and the yield to maturity is reduced. See "Mortgage-Related and Other Asset-
Backed Securities" for information about residual interests.
PACs are parallel pay REMIC pass-through or participation certificates
("REMIC Certificates") which generally require that specified amounts of
principal be applied on each payment date to one or more classes of REMIC
Certificates (the "PAC Certificates"), even though all other principal payments
and prepayments of the mortgage assets are then required to be applied to one or
more other classes of the Certificates. The scheduled principal payments for the
PAC Certificates generally have the highest priority on each payment date after
interest due has been paid to all classes entitled to receive interest
currently. Shortfalls, if any, are added to the amount payable on the next
payment date. The PAC Certificate payment schedule is taken into account in
calculating the final distribution date of each class of PAC. In order to create
PAC tranches, one or more tranches generally must be created that absorb most of
the volatility in the underlying mortgage assets. These tranches tend to have
market prices and yields that are more volatile than the PAC classes.
TACs are similar to PACs in that they require that specified amounts
of principal be applied on each payment date to one or more classes of REMIC
Certificates. A PAC's payment schedule, however, remains in effect as long as
prepayment rates on the underlying mortgages do no exceed certain ranges. In
contrast, a TAC provides investors with protection, to a certain level, against
either faster than expected or slower than expected prepayment rates, but not
both.
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<PAGE>
TACs thus provide more cash flow stability than a regular CMO class, but less
than a PAC. TACs also tend to have market prices and yields that are more
volatile than PACs.
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,
Federal Trust Fund and Treasury Trust 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 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.
Reverse repurchase are considered to be borrowings under the
Investment Company Act of 1940 and may be entered into only for temporary or
emergency purposes. 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.
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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. 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 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
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<PAGE>
known as "Fannie Maes") which are guaranteed as to timely payment of principal
and interest by FNMA. They are not backed by or entitled to the full faith and
credit of the United States, but are supported by the right of the FNMA to
borrow from the Treasury. Mortgage-related securities issued by FHLMC include
FHLMC Mortgage Participation Certificates (also known as "Freddie Macs").
Freddie Macs are not guaranteed by the United States or by any Federal Home Loan
Banks and do not constitute a debt or obligation of the United States or of any
Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of
interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate
collection or timely payment of all principal payments on the underlying
mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC
is required to remit the amount due on account of its guarantee of ultimate
payment of principal no later than one year after it becomes payable.
A Fund from time to time may purchase in the secondary market (i)
certain mortgage pass-through securities packaged and master serviced by PNC
Mortgage Securities Corp. ("PNC Mortgage") (or Sears Mortgage if PNC Mortgage
succeeded to the rights and duties of Sears Mortgage) or Midland Loan Services,
Inc. ("Midland"), or (ii) mortgage-related securities containing loans or
mortgages originated by PNC Bank, National Association ("PNC Bank") or its
affiliates). It is possible that under some circumstances, PNC Mortgage, Midland
or other affiliates could have interests that are in conflict with the holders
of these mortgage-backed securities, and such holders could have rights against
PNC Mortgage, Midland or their affiliates. For example, if PNC Mortgage, Midland
or their affiliates engaged in negligence or willful misconduct in carrying out
its duties as a master servicer, then any holder of the mortgage-backed security
could seek recourse against PNC Mortgage, Midland or their affiliates, as
applicable. Also, as a master servicer, PNC Mortgage, Midland or their
affiliates may make certain representations and warranties regarding the quality
of the mortgages and properties underlying a mortgage-backed security. If one or
more of those representations or warranties is false, then the holders of the
mortgage-backed securities could trigger an obligation of PNC Mortgage, Midland
or their affiliates, as applicable, to repurchase the mortgages from the issuing
trust. Finally, PNC Mortgage, Midland or their affiliates may own securities
that are subordinate to the senior mortgage-backed securities owned by a Fund.
TempCash only may also invest in classes of collateralized mortgage
obligations ("CMOs") deemed to 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 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. TempCash may also hold "residual" interests, which in
general are
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junior to and more volatile than regular interests. The residual in a CMO
structure generally represents the interest in any excess cash flow remaining
after making required payments of principal of and interest on the CMOs, as well
as the related administrative expenses of the issuer. The market for CMOs may be
more illiquid than those of other securities. TempCash currently intends to hold
CMOs only as collateral for repurchase agreements.
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 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 TempFund's and
TempCash's investment policies, 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-
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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. TempFund may invest in U.S. dollar-denominated time deposits
in a foreign branch of a U.S. bank.
Special Considerations Regarding Foreign Investments. Investments in
the obligations of foreign issuers, including foreign governments, foreign banks
and foreign branches of U.S. banks, may subject a Fund 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 record keeping requirements than those applicable to
domestic branches of U.S. banks. A Fund will acquire U.S. dollar-denominated
securities issued by foreign issuers, including foreign governments, foreign
banks and foreign branches of U.S. banks, only when the Fund's investment
adviser believes that the risks associated with such instruments are minimal.
Guaranteed Investment Contracts. TempCash may invest in guaranteed
investment contracts and similar funding agreements ("GICs"). In connection with
this TempCash makes cash contributions to a deposit fund of the insurance
company's general account. The insurance company then credits to the Fund on a
monthly basis guaranteed interest which is based on an index (in most cases this
index is expected to be the Salomon Brothers CD Index). The GICs provide that
this guaranteed interest will not be less than a certain minimum rate. The
purchase price paid for a GIC becomes part of the general assets of the
insurance company, and the contract is paid from the general assets of the
insurance company. TempCash will only purchase GICs from insurance companies
which, at the time of purchase, are rated "A+" by A.M. Best Company, have assets
of $1 billion or more and meet quality and credit standards established by the
adviser under guidelines approved by the Board of Trustees. Generally, GICs are
not assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in some GICs does not currently exist.
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
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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 an 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 Trust 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.
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
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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 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
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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 Adviser may purchase tax-exempt derivatives for the
Funds so long as after any purchase not more than 25% 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 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).
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.
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Special Considerations with Respect 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 Trust has not independently
verified such information, it has no reason to believe that such information is
not correct in all material respects.
1995-96 through 1997-98 Fiscal Years
With the end of the recession of the early 1990's and a growing
economy beginning in 1994, the State's financial condition improved markedly
through a combination of increasing revenues, slowdown in growth of social
welfare programs, and continued spending restraint. The last of the recession-
induced budget deficits was repaid, allowing the State's Special Fund for
Economic Uncertainties (the "SFEU") to post a position 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 improved and no deficit borrowing occurred over the
last four fiscal years.
The economy grew strongly during these fiscal years, and as a result,
the General Fund took in substantially greater tax revenues (approximately $2.2
billion in 1995-96, $1.6 billion in 1996-97, $2.4 billion in 1997-98 and $1.0
billion in 1998-99) 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 eliminated.
The 1998-99 Fiscal Year Budget
The following were major features of the 1998 Budget Act and certain
additional fiscal bills enacted before the end of the legislative session:
1. The most significant feature of the 1998-99 budget was agreement
on a total of $1.4 billion of tax cuts. The central element was a bill which
provided for a phased-in reduction of the Vehicle License Fee ("VLF"). Since the
VLF is transferred to cities and counties under existing law, the bill provided
for the General Fund to replace the lost revenues. Starting on January 1, 1999,
the VLF was reduced by 25 percent, 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 of VLF, the 1998-99 budget included both
temporary and permanent increases in the personal income tax dependent credit
($612 million General Fund cost in 1998-99, and less in future years), a
nonrefundable renter's tax credit ($133 million), and various targeted business
tax credits ($106 million).
2. Proposition 98 funding for K-14 schools was increased by $1.7
billion in General Fund moneys over revised 1997-98 levels, approximately $300
million higher than the
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minimum Proposition 98 guarantee. Of the 1998-99 funds, major new programs
included money for institutional and library materials, previously deferred
maintenance, support for increasing the school year to 180 days and reduction
for class sizes in Grade 9.
3. Funding for higher education increased substantially above the
actual 1997-98 level. General Fund support was increased by $340 million (15.6
percent) for the University of California and $267 million (14.1 percent) for
the California State University system. In addition, Community Colleges funding
increased by $300 million (6.6 percent).
4. The budget included increased funding for health, welfare and
social services programs. At 4.9 percent grant increase was included in the
basic welfare grants, the first increase in those grants in nine years.
5. Funding for the judiciary and criminal justice programs increased
approximately 11 percent over 1997-98, primarily to reflect increased State
support for local trial courts and rising prison population.
6. Major legislation enacted after the 1998 Budget Act included new
funding for resources projects, a share of the purchase of the Headwaters
Forest, funding for the Infrastructure and Economic Development Bank ($50
million) and funding for the construction of local jails. The State realized
savings of $433 million from a reduction in the State's contribution to the
State Teacher's Retirement System in 1998-99.
1999-2000 Fiscal Year Budget
On January 8, 1999, Governor Davis released his proposed budget for
Fiscal Year 1999-2000 (the "Budget"). The Budget generally reported that General
Fund revenues for FY 1998-99 and FY 1999-00 would be lower than earlier
projections (primarily due to the overseas economic conditions perceived in late
1998), while some case loads would be higher than earlier projections. The
Budget proposed $60.5 billion of general fund expenditures FY 1999-2000, with a
$415 million SFEU reserve at June 30, 2000.
The 1999 May Revision showed an additional $4.3 billion of revenues
for combined fiscal years 1998-99 and 1999-2000. The final Budget Bill was
adopted by the Legislature on June 16, 1999, and was signed by the Governor on
June 29, 1999 (the "1999 Budget Act"), meeting the Constitutional deadline for
budget enactment for only the second time in the 1990's.
The final 1999 Budget Act estimated General Fund revenues and
transfers of $63.0 billion, and contained expenditures totaling $63.7 billion
after the Governor used his line-item veto to reduce the legislative Budget Bill
expenditures by $581 million (both General Fund and Special Fund). The 1999
Budget Act also contained expenditures of $16.1 billion from special funds and
$1.5 billion from bond funds. The Administration estimated that the SFEU would
have a balance at June 30, 2000, of about $880 million. Not included in this
amount was an additional $300 million which (after the Governor's vetoes) was
"set aside" to provide funds for employee salary increases (to be negotiated in
bargaining with employee unions), and for litigation reserves. The 1999 Budget
Act anticipates normal cash flow borrowing during the fiscal year.
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The principal features of the 1999 Budget Act include the following:
1. Proposition 98 funding for K-12 schools was increased by $1.6
billion in General Fund moneys over revised 1998-99 levels, $108.6 million
higher than the minimum Proposition 98 guarantee. Of the 1999-2000 funds, major
new programs included money for reading improvement, new textbooks, school
safety, improving teacher quality, funding teacher bonuses, providing greater
accountability for school performance, increasing preschool and after school
care programs and funding deferred maintenance of school facilities.
2. Funding for higher education increased substantially above the
actual 1998-99 level. General Fund support was increased by $184 million (7.3
percent) for the University of California and $126 million (5.9 percent) for the
California State University system. In addition, Community Colleges funding
increased by $324.3 million (6.6 percent). As a result, undergraduate fees at
the University of California and the California State University System will be
reduced for the second consecutive year, and the per-unit charge at Community
Colleges will be reduced by $1.
3. The Budget included increased funding of nearly $600 million for
health and human services.
4. About $800 million from the General Fund will be directed toward
infrastructure costs, including $425 million in additional funding for the
Infrastructure Bank, initial planning costs for a new prison in the Central
Valley, additional equipment for train and ferry service, and payment of
deferred maintenance for state parks.
5. The Legislature enacted a one-year additional reduction of 10
percent of the VLF for calendar year 2000, at a General Fund cost of about $250
million in each of FY 1999-2000 and 2000-01 to make up lost funding to local
governments. Conversion of this one-time reduction to a permanent cut will
remain subject to the revenue tests in the legislation adopted last year.
6. A one-time appropriation of $150 million, to be split between
cities and counties, was made to offset property tax shifts during the early
1990's. Additionally, an ongoing $50 million was appropriated as a subvention to
cities for jail booking or processing fees charged by counties when an
individual arrested by city personnel is taken to a county detention facility.
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.
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Revenue Distribution. Certain Debt Obligations in the Portfolio may be
obligations of issuers which rely in whole or in part on 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 requires that
the State 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 are paid for
non-emergency acute inpatient services rendered to 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 state legislature
appropriates adequate funding therefor.
California law 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.
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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, State law requires the State Treasurer to
issue debentures payable out of a reserve fund established under the insurance
program or to 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 statute, commonly known as
the "one form of action" rule, requires creditors secured by real property to
exhaust their real property security by foreclosure before bringing a personal
action against the debtor. The fourth statutory provision limits any deficiency
judgment obtained by a creditor secured by real property following a judicial
sale of such property to the excess of the outstanding debt over the fair value
of the property at the time of the sale, thus preventing the creditor from
obtaining a large deficiency judgment against the debtor as the result of low
bids at a judicial sale. The fifth statutory provision gives the debtor the
right to redeem the real property from any judicial foreclosure sale as to which
a deficiency judgment may be ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to 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 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
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available to an issuer for the payment of debt service on the Debt 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 statutory limitations described
above applicable to obligations secured by real property. Under 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.
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 Debt
Obligations which financed such home mortgages.
Proposition 13. Certain of the Debt Obligations may be obligations of
issuers who rely in whole or in part on ad valorem real property taxes as a
source of revenue. On June 6, 1978, California voters approved an amendment to
the California Constitution known as Proposition 13, which added Article XIIIA
to the California Constitution. The effect of Article XIIIA was to limit ad
valorem taxes on real property and to restrict the ability of taxing entities to
increase real property tax revenues.
Section 1 of Article XIIIA, as amended, limits the maximum ad valorem
tax on real property to 1% of full cash value to be collected by the counties
and apportioned according to law. The 1% limitation does not apply to ad valorem
taxes or special assessments to pay the interest and redemption charges on any
bonded indebtedness for the acquisition or improvement of real property approved
by two-thirds of the votes cast by the voters voting on the proposition. Section
2 of Article XIIIA defines "full cash value" to mean "the County Assessor's
valuation of real property as shown on the 1975/76 tax bill under "full cash
value" or, thereafter, the appraised value of real property when purchased,
newly constructed, or a change in ownership has occurred after the 1975
assessment." The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the common price index or
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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, 1998, voters of the State approved
Proposition 98, a combined initiative constitutional amendment and statute.
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, K-14 schools are guaranteed the greater of (a) in general, a
fixed percent of General Fund revenues ("Test 1"), (b) the amount appropriated
to K-14 schools in the prior year, adjusted for changes in the cost of living
(measured as in Article XIIIB 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, 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 XIIIB limit to K-14 schools.
During the recession in the early 1990s, General Fund revenues for
several years were less than originally projected, so that the original
Proposition 98 appropriations turned out
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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' entitlements, and also
intended that the "extra" payments would not be included in the "base" for
calculating future years' entitlements.
In 1992, a lawsuit was filed, called California Teachers' Association
v. Gould, which challenged the validity of these off-budget loans. During the
course of this litigation, a trial court determined that almost $2 billion in
"loans" which had been provided to school districts during the recession
violated the constitutional protection of support for public education. A
settlement was reached on April 12, 1996 which ensures that future school
funding will not be in jeopardy over repayment of these so-called loans.
Proposition 111. On June 30, 1989, the California Legislature enacted
Senate Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding provisions of
Proposition 98. Senate Constitutional Amendment 1 - on the June 5, 1990 ballot
as Proposition 111 - was approved by the voters and took effect on July 1, 1990.
Among a number of important provisions, Proposition 111 recalculated spending
limits for the State and for local governments, allowed greater annual increases
in the limits, allowed the averaging of two years' tax revenues before requiring
action regarding excess tax revenues, reduced the amount of the funding
guarantee in recession years for school districts and community college
districts (but with a floor of 40.9 percent of State general fund tax revenues),
removed the provision of Proposition 98 which included excess moneys transferred
to school districts and community college districts in the base calculation for
the next year, limited the amount of State tax revenue over the limit which
would be transferred to school districts and community college districts, and
exempted increased gasoline taxes and truck weight fees from the State
appropriations limit. Additionally, Proposition 111 exempted from the State
appropriations limit funding for capital outlays.
Proposition 62. On November 4, 1986, California voters approved an
initiative statute known as Proposition 62. This initiative provided the
following:
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;
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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 of 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 provided for an unconstitutional referanda. 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. 4/th/ 220, reh'g denied, modified (Dec. 14, 1995) 12 Cal. 4/th/
----- ------ --------
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. 4/th/ 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.
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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 electorate 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 1, 1995 against challenge.
Assembly Bill 1362 (Mazzoni), introduced February 28, 1997, which
would have made the Guardino decision inapplicable to any tax first imposed or
--------
increased by an ordinance of resolution adopted before December 14, 1995, was
vetoed by the Governor on October 11, 1997. The California State Senate had
passed the Bill on May 16, 1996 and the California State Assembly had passed the
bill on September 11, 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, a constitutional initiative, entitled the "Right to
Vote on Taxes Act" ("Proposition 218"). Proposition 218 adds Articles XIII C and
XIII D to the California Constitution and contains a number of interrelated
provisions affecting the ability of local governments to levy and collect both
existing and future taxes, assessments, fees and charges. Proposition 218 became
effective on November 6, 1996. The Sponsors are unable to predict whether and to
what extent Proposition 218 may be held to be constitutional or how its terms
will be interpreted and applied by the courts. However, if upheld, Proposition
218 could substantially restrict certain local governments' ability to raise
future revenues and could subject certain existing sources of revenue to
reduction or repeal, and increase local government costs to hold elections,
calculate fees and assessments, notify the public and defend local government
fees and assessments in court.
Article XIII C of Proposition 218 requires majority voter approval for
the imposition, extension or increase of general taxes and two-thirds voter
approval for the imposition, extension or increase of special taxes, including
special taxes deposited into a local government's general fund. Proposition 218
also provides that any general tax imposed, extended or increased without voter
approval by any local government on or after January 1, 1995 and prior to
November 6, 1996 shall continue to be imposed only if approved by a majority
vote in an election held within two years of November 6, 1996.
Article XIII C of Proposition 218 also expressly extends the
initiative power to give voters the power to reduce or repeal local taxes,
assessments, fees and charges, regardless of the date such taxes, assessments,
fees or charges were imposed. This extension of the initiative power to some
extent constitutionalizes the March 6, 1995 State Supreme Court decision in
Rossi v. Brown, which upheld an initiative that repealed a local tax and held
--------------
that the State constitution does not preclude the repeal, including a
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
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voters to enact legislation upon obtaining requisite voter approval at a general
election. Proposition 218 extends the authority stated in Rossi v. Brown by
--------------
expanding the initiative power to include reducing or repealing assessments,
fees and charges, which had previously been considered administrative rather
than legislative matters and therefore beyond the initiative power.
The initiative power granted under Article XIII C of Proposition 218,
by its terms, applies to all local taxes, assessments, fees and charges and is
not limited to local taxes, assessments, fees and charges that are property
related.
Article XIII D of Proposition 218 adds several new requirements making
it generally more difficult for local agencies to levy and maintain
"assessments" for municipal services and programs. "Assessment" is defined to
mean any levy or charge upon real property for a special benefit conferred upon
the real property.
Article XIII D of Proposition 218 also adds several provisions
affecting "fees" and "charges" which are defined as "any levy other than an ad
valorem tax, a special tax, or an assessment, imposed by a local government upon
a parcel or upon a person as an incident of property ownership, including a user
fee or charge for a property related service." All new and, after June 30, 1997,
existing property related fees and charges must conform to requirements
prohibiting, among other things, fees and charges which (i) generate revenues
exceeding the funds required to provide the property related service, (ii) are
used for any purpose other than those for which the fees and charges are
imposed, (iii) are for a service not actually used by, or immediately available
to, the owner of the property in question, or (iv) are used for general
governmental services, including police, fire or library services, where the
service is available 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 approved by voters on or after January 1, 1989.
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Special Considerations with Respect to New York Money Fund
Some of the significant financial considerations relating to the New
York Tax Exempt Fund's investments in New York Municipal Securities are
summarized below. This summary information is not intended to be a complete
description and is principally derived from the Annual Information Statement of
the State of New York as supplemented and contained in official statements
relating to issues of New York Municipal Securities 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 one of the most populous states 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.
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.
The economic forecast of the State has also been modified for 2000 and
2001 from the mid-year forecast to reflect a stronger-than-expected economy.
Continued growth is projected for 2000 and 2001 for employment, wages, and
personal income, although the growth in employment will moderate from the 1999
pace. Personal income is estimated to have grown by 4.7 percent in 1999, fueled
in part by a large increase in financial sector bonus payments at the year's
end. Personal income is projected to grow 5.5 percent in 2000 and 4.8 percent
in 2001. Total bonus payments are projected to increase by 11 percent in 2000
and 10.5 percent in 2001. Overall employment growth is expected to continue at
a more modest pace than in 1999, reflecting the slower growth in the national
economy, continued spending restraint by government employers, and restructuring
in the manufacturing, 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
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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). On March 31, 1999, the State adopted the debt service
portion of the State budget for the 1999-2000 fiscal year; four months later, on
August 4, 1999, it enacted the remainder of the budget. The Governor approved
the budget as passed by the Legislature. Prior to passing the budget in its
entirety for the current fiscal year, the State enacted appropriations that
permitted the State to continue its operations.
The State revised the cash-basis 1999-2000 State Financial Plan on
January 11, 2000, with the release of the 2000-01 Executive Budget. The State
updated the Financial Plan on January 31, 2000 to reflect the Governor's
amendments to his Executive Budget. After these changes, the Division of the
Budget ("DOB") now expects the State to close the 1999-2000 fiscal year with an
available cash surplus of $758 million in the General Fund, an increase of $733
million over the surplus estimate in the mid-year update. The larger projected
surplus derives from $499 million in net higher projected receipts and $259
million in net lower estimated disbursements. DOB revised both its projected
receipts and disbursements based on a review of actual operating results through
December 1999, as well as an analysis of underlying economic and programmatic
trends it believes may affect the Financial Plan for the balance of the year.
The State plans to use the entire $758 million surplus to make
additional deposits to reserve funds. At the close of the current fiscal year,
the State expects to deposit $75 million from the surplus into the State's Tax
Stabilization Reserve Fund ("TSRF") - the fifth consecutive annual deposit. In
the 2000-01 Executive Budget, as amended, the Governor is proposing to use the
remaining $683 million from the 1999-2000 surplus to fully finance the estimated
2001-02 and 2002-03 costs of his proposed tax reduction package ($433 million)
and to increase the Debt Reduction Reserve Fund ("DRRF") ($250 million).
DOB projects total General Fund disbursements of $37.06 billion in
1999-2000, a decline of $282 million from the October estimate. Of this amount,
$33 million is related to the timing of spending and accounting adjustments and
therefore does not contribute to the surplus projected by DOB. The $33 million
consists of lower timing-related spending of $65 million from the Community
Projects Fund ("CPF") and $50 million from the Collective Bargaining Reserve,
offset by the Medicaid reclassification of $82 million described above.
Accordingly, lower disbursements since October contribute $249 million to the
1999-2000 surplus, which, when combined with the $10 million in
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lower disbursements recognized in the mid-year update, produce a total reduction
in estimated disbursements of $259 million for the current year.
State Operations spending is now projected to total $6.63 billion in
1999-2000. In the revised Financial Plan, $50 million of an original $100
million for new collective bargaining costs is set aside in a reserve to cover
the cost of labor agreements in 1999-2000, and the balance is transferred to
General State Charges in the current year to pay for the recently approved labor
contract with State University employees and other labor costs. The remaining
revisions to the State Operations estimate are comprised of savings from agency
efficiencies and timing-related changes that do not affect the surplus.
The State projects a closing balance of $1.17 billion in the General
Fund, after the tax refund reserve transaction. The balance is comprised of
$548 million in the Tax Stabilization Reserve Fund ("TSRF") after a $75 million
deposit in 1999-2000; $265 million in the CPF, which pays for Legislative
initiatives; $250 million in the DRRF; and $107 million in the Contingency
Reserve Fund ("CRF") (which guards against litigation risks).
In addition to the General Fund closing balance of $1.17 billion, the
State will have a projected $3.09 billion in the tax refund reserve account at
the end of 1999-2000. The refund reserve account is used to adjust personal
income tax collections across fiscal years to pay for tax refunds, as well as to
accomplish other Financial Plan objectives. The projected balance of $3.09
billion is comprised of $1.82 billion in tax reduction reserves from the 1998-99
surplus; $683 million from the 1999-2000 surplus; $521 million from LGAC that
may be used to pay tax refunds during 2000-01 but must be on deposit at the
close of the fiscal year; $50 million in collective bargaining reserves from
1999-2000; and $25 million in reserves for tax credits.
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 received
almost all State taxes and other resources not dedicated to particular purposes.
General Fund moneys are also transferred to other funds, primarily to support
certain capital projects and debt service payments in other fund types.
The Governor presented his 2000-01 Executive Budget to the Legislature
on January 10, 2000. The Executive Budget contains financial projections for
the State's 1999-2000 through 2002-03 fiscal years, a detailed explanation of
receipts estimates and the economic forecast on which it is based, and proposed
Capital Program and Financing Plan for the 2000-01 through 2004-05 fiscal years.
On January 31, 2000, the Governor submitted amendments to his Executive Budget,
the most significant of which recommends eliminating all gross receipts taxes on
energy providers.
There can be no assurance that the Legislature will enact into law the
Governor's Executive Budget, as amended, or that the State's adopted budget
projections will not differ materially and adversely from the projections set
forth therein.
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The 2000-01 Financial Plan is projected to have receipts in excess of
disbursements on a cash basis in the General Fund, after accounting for the
transfer of available receipts from 1999-2000 to 2000-01. Under the Governor's
Executive Budget, as amended, total General Fund receipts, including transfers
from other funds, are projected at $38.62 billion, an increase of $1.28 billion
(3.4 percent) over the current fiscal year. General Fund disbursements,
including transfers to other funds, are recommended to grow by 2.3 percent to
$37.93 billion, an increase of $869 million over 1999-2000. State Funds
spending (the portion of the budget supported exclusively by State taxes, fees,
and revenues) is projected to total $52.46 billion, an increase of $2.57 billion
or 5.1 percent. Spending from All Government Funds is expected to grow by 5.5
percent, increasing by $4.0 billion to $76.82 billion.
The State projects a closing balance of $1.61 billion in the General
Fund at the end of 2000-01. This balance is comprised of a $433 million reserve
set aside from the 1999-2000 surplus to finance the estimated costs of the
Governor's proposed tax reduction package in 2001-02 and 2002-03, $475 million
in cumulative reserves for collective bargaining ($425 million from 2000-01 plus
$50 million from 1999-2000), $548 million in the TSRF, and $150 million in the
CRF after a proposed $43 million deposit in 2000-01. The change in the closing
fund balance compared to 1999-2000 results from the planned use in 2000-01 of
$265 million for existing legislative initiatives financed from the CPF and the
reclassification of DRRF into the CPF, offset by increased reserves for
collective bargaining, tax reduction, and litigation discussed above.
In addition to the General Fund closing balance of $1.61 billion, the
State will have a projected $567 million in the tax refund reserve at the end of
2000-01. Also, $1.2 billion is proposed to be on deposit in the Star Special
Revenue Fund to be used in 2001-02 for State-funded local tax reductions and
$250 million is proposed to be on deposit in the DRRF. The balance in the DRRF
is projected to be used in 2001-02 to retire existing high-cost State-supported
debt and increase pay-as-you-go financing of capital projects.
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.
The projections assume no changes in federal tax law, which could substantially
alter the current receipts forecast. In addition, these projections do not
include funding for new collective bargaining agreements after the current
contracts expire. Actual results, however, could differ materially and
adversely from their projections, and those projections may be changed
materially and adversely from time to time.
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Debt Limits and Outstanding Debt. There are a number of methods by
--------------------------------
which the State of New York may incur debt. Under the State Constitution, the
State may not, with limited exceptions for emergencies, undertake long-term
general obligation borrowing (i.e., borrowing for more than one year) unless the
borrowing is authorized in a specific amount for a single work or purpose by the
Legislature and approved by the voters. There is no limitation on the amount of
long-term general obligation debt that may be so authorized and subsequently
incurred by the State.
The State may undertake short-term borrowings without voter approval
(i) in anticipation of the receipt of taxes and revenues, by issuing tax and
revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds
from the sale of duly authorized but unissued general obligation bonds, by
issuing bond anticipation notes. The State may also, pursuant to specific
constitutional authorization, directly guarantee certain obligations of the
State of New York's authorities and public benefit corporations ("Authorities").
Payments of debt service on New York State general obligation and New York
State-guaranteed bonds and notes are legally enforceable obligations of the
State of New York.
The State employs additional long-term financing mechanisms, lease-
purchase and contractual-obligation financings, which involve obligations of
public authorities or municipalities that are State-supported but are not
general obligations of the State. Under these financing arrangements, certain
public authorities and municipalities have issued obligations to finance the
construction and rehabilitation of facilities or the acquisition and
rehabilitation of equipment, and expect to meet their debt service requirements
through the receipt of rental or other contractual payments made by the State.
Although these financing arrangements involve a contractual agreement by the
State to make payments to a public authority, municipality or other entity, the
State's obligation to make such payments is generally expressly made subject to
appropriation by the Legislature and the actual availability of money to the
State for making the payments. The State has also entered into a contractual-
obligation financing arrangement with the LGAC to restructure the way the State
makes certain local aid payments.
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. The
State assumes that the 2000-01 Financial Plan will achieve $500 million in
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 help bring projected
disbursements and receipts into balance. The projections do not assume any gap-
closing benefit from the potential settlement of State claims against the
tobacco industry.
On January 13, 1992, S&P 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, S&P 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
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contractual obligation debt. On March 5, 1999, S&P affirmed its A rating on the
State's outstanding bonds. Subsequent to that time, the State's general
obligations have not been downgraded by S&P.
On January 6, 1992, 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 March 5, 1999, Moody's affirmed its A2 rating with a stable outlook to the
State's general obligations.
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 seeking enforcement
of certain sales and excise taxes and tobacco products and motor fuel sold to
non-Indian consumers on Indian reservations; and (4) 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 were 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
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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 current fiscal year or thereafter. Adverse
developments in these proceedings, other proceedings for which 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.
On November 23, 1998, the attorneys general for forty-six states
(including New York) entered into a master settlement agreement ("MSA") with the
nation's largest tobacco manufacturers. Under the terms of the MSA, the states
agreed to release the manufacturers from all smoking-related claims in exchange
for specified payments and the imposition of restrictions on tobacco advertising
and marketing. New York is projected to receive $25 billion over 25 years under
the MSA, with payments apportioned among the State (51 percent), counties (22
percent), and New York City (27 percent). The projected payments are an
estimate and subject to adjustments for, among other things, the annual change
in the volume of cigarette shipments and the rate of inflation.
From 1999-2000 through 2002-03, the State expects to receive $1.54
billion under the nationwide settlement with cigarette manufacturers. Counties,
including New York City, will receive settlement payments of $1.47 billion over
the same period.
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
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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.
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 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 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.
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.
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, S&P 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 S&P.
On July 2, 1985, S&P 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,
S&P assigned a BBB+ rating to the City's general obligation debt and placed the
ratings on CreditWatch with positive implications. On March 9, 1999, S&P
assigned its A- rating to Series 1999H of New York City general obligation bonds
and affirmed the A- rating on various previously issued New York City bonds.
Subsequent to that time, the City's general obligation bonds have not been
downgraded by S&P.
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<PAGE>
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 approximately $28 billion of the City's general obligations from Baa1
to A3. On June 9, 1998, Moody's affirmed its A3 rating to the City's general
obligations and stated that its outlook was stable.
On March 8, 1999, Fitch IBCA upgraded New York City's $26 billion
outstanding general obligation bonds from A- to A. Subsequent to that time, the
City's general obligation bonds have not been downgraded by Fitch IBCA.
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
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.
Although the City has consistently maintained balanced budgets and is
projected to achieve balanced operating results for the current fiscal year,
there can be no assurance that the gap-closing actions proposed in its 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
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<PAGE>
increases and reductions in essential City services could adversely affect the
City's economic base.
The projections set forth in the City's 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 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.
To successfully implement its Financial Plan, the City and certain
entities issuing debt for the benefit of the City must market their securities
successfully. The City issues securities to finance the rehabilitation of its
infrastructure and other capital needs and to refinance existing debt, as well
as for seasonal financing needs. In fiscal year 1998 and again in fiscal year
2000, the State constitutional debt limit would have prevented the City from
entering into new capital contracts. To prevent these disruptions in the
capital program, two entities were created to issue debt to increase the City's
capital financing capacity: (i) the State Legislature created the Transitional
Finance Authority ("TFA") in 1997, and (ii) the City created the Tobacco
Settlement Asset Securitization Corporation in 1999. Despite these actions, the
City, in order to continue its capital program, will need additional financing
capacity in fiscal year 2002, which could be provided through increasing the
borrowing authority of the TFA or amending the State constitutional debt limit.
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. 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
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<PAGE>
by localities for additional assistance is not included in the State's
projections of its receipts and disbursements for the fiscal year.
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.
Municipalities and school districts have engaged in substantial short-
term and long-term borrowings. 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.
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. To date, the State has experienced no
--------------------
significant Year 2000 computer disruptions. Monitoring will continue over the
next few months to identify and correct any problems that may arise. However,
there can be no assurance that outside parties who provide goods and services to
the State will not experience computer problems related to Year 2000 programming
in the future, or that such disruptions, if they occur, will not have an adverse
impact on State operations or finances.
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<PAGE>
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 be 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.
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.
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<PAGE>
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. TempFund, TempCash, MuniFund and MuniCash: 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. TempFund: 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. TempCash: 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. California Money Fund and New York Money Fund: 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.
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.
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<PAGE>
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. TempFund, TempCash, MuniFund, MuniCash, California Money Fund and
-----------------------------------------------------------------
New York Money Fund: 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. California Money Fund, New York Money Fund, MuniCash and
--------------------------------------------------------
MuniFund: The Fund may not invest less than 80% of its assets in securities the
--------
interest on which is exempt from Federal income taxes, except during defensive
periods or during periods of unusual market conditions.
4. TempFund: Securities purchased by the Fund (or the issuers of
--------
such securities) will be First Tier Eligible Securities which are rated at the
time of the 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).
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<PAGE>
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 Trust 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 Trust'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 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 Trustees of the Trust,
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 Trust'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
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<PAGE>
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 record keeping). 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 Trust 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 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
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<PAGE>
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.
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<PAGE>
MANAGEMENT OF THE FUNDS
Trustees and Officers
The business and affairs of the Trust 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:
<TABLE>
<CAPTION>
Position with Principal Occupation
Name the Trust Age During Past 5 Years
---- --------- --- -------------------
<S> <C> <C> <C>
G. Nicholas Beckwith, III Trustee 55 President and Chief Executive
Beckwith Machinery Company Officer, Beckwith Machinery Company;
4565 William Penn Highway First Vice Chairman of the Board of
Murrysville, PA 15668 Directors, University of Pittsburgh
Medical Center -Shady
Side/Presbyterian Hospitals; Second
Vice Chairman of the Board of
Directors, University of Pittsburgh
Medical Center Health System; Brown
University's Corporation Committee on
Biomedical Affairs; Board of
Trustees, Shady Side Academy;
Trustee, Claude Worthington Benedum
Foundation; Trustee, Chatham College.
Jerrold B. Harris Trustee 57 Until September 1, 1999, President
VWR Scientific Products Corp. and Chief Executive Officer, VWR
1310 Goshen Parkway Scientific Products Corp. Currently,
West Chester, PA 19380 Director, VWR Scientific Products Corp.
Rodney D. Johnson* Trustee, 58 President, Fairmount Capital
Fairmount Capital Advisors, Inc. President and Advisors, Inc.
1435 Walnut Street, Suite 300 Treasurer
Philadelphia, PA 19102-3222
Joseph P. Platt, Jr. Trustee 52 Partner, Amarna Partners (private
Amarna Partners investment company); formerly, a
One Oxford Centre, Suite 4260 Director and Executive Vice President
Pittsburgh, PA 15219 of Johnson & Higgins.
Robert C. Robb, Jr./1/ Trustee 54 Partner, Lewis, Eckert, Robb &
Lewis, Eckert, Robb & Co. Company (management and financial
425 One Plymouth Meeting consulting firm); Trustee, EQK Realty
Plymouth Meeting, PA 19462 Investors; Director, Tamaqua Cable
Products Company; Director, Brynwood
Partners; former Director, PNC Bank.
Kenneth L. Urish Trustee 49 Managing Partner, Urish Popeck &
</TABLE>
-43-
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation
Name the Trust Age During Past 5 Years
---- --------- --- -------------------
<S> <C> <C> <C>
Urish Popeck & Co. Co. LLC (certified public accountants and
Three Gateway Center, Suite 2400 consultants).
Pittsburgh, PA 15222
Frederick W. Winter Trustee 55 Dean, Joseph M. Katz School of
Dean-Katz Graduate School of Business Business - University of Pittsburgh;
University of Pittsburgh formerly, Dean, School of Management
372 Mervis Hall - State University of New York at
Pittsburgh, PA 15260 Buffalo (1994-1997); former Director,
Rand Capital (1996-1997); former
Director, Bell Sports (1991-1998);
Director, Alkon Corporation (1992-present).
W. Bruce McConnel Secretary 57 Partner of the law firm of Drinker
Drinker Biddle & Reath LLP Biddle & Reath LLP, Philadelphia, Pennsylvania.
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
</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
Trust.
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 of PIF for the year ending October 31, 1999.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Total
Pension or Compensation from
Retirement Estimated Trust and
Aggregate Benefits Annual Trust Complex
Name of person, Compensation Accrued as part Benefits upon Paid to
Position From Trust Of Trust Expenses Retirement Trustees
-------- ---------- ----------------- ---------- --------
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
G. Nicholas Beckwith, III, Trustee $46,000.00 n/a n/a $46,000.00
----------------------------------------------------------------------------------------------------
Jerrold B. Harris, Trustee $46,000.00 n/a n/a $46,000.00
----------------------------------------------------------------------------------------------------
Rodney D. Johnson*, Trustee, $56,000.00 n/a n/a $56,000.00
President and Treasurer
----------------------------------------------------------------------------------------------------
Joseph P. Platt, Jr., Trustee $46,000.00 n/a n/a $46,000.00
----------------------------------------------------------------------------------------------------
Robert C. Robb, Jr., /1/ Trustee $46,000.00 n/a n/a $46,000.00
----------------------------------------------------------------------------------------------------
Kenneth L. Urish, Trustee $46,000.00 n/a n/a $46,000.00
----------------------------------------------------------------------------------------------------
Frederick W. Winter, Trustee $46,000.00 n/a n/a $46,000.00
====================================================================================================
</TABLE>
1. A Trust 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.
* This trustee is considered by the Trust to be an "interested person" of the
Trust as defined by the 1940 Act.
Drinker Biddle & Reath LLP, of which Mr. McConnel is a partner,
receives legal fees as counsel to the Trust. No employee of PDI, BIMC, PFPC or
PNC Bank receives any compensation from the Trust for acting as an officer or
director of the Trust. The directors and officers of the Trust as a group owned
less than 1% of the shares of each of the 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.
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<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 or
period of each Fund ended in 1997, 1998 and 1999. The Funds' fiscal year ends
for 1997 and 1998 were as follows: 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. The Trust's current fiscal year for all Funds is October
31.
-47-
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
FUND 1999 1998 1997
-------------------------------------------------------------------------------------------------------------------------
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+ $10,104,651 $2,385,356 $8,126,927 $2,315,278 $6,560,502 $2,576,521
-------------------------------------------------------------------------------------------------------------------------
TempCash+ 2,818,512 2,151,178 2,388,597 2,096,653 2,176,446 2,041,599
-------------------------------------------------------------------------------------------------------------------------
FedFund 764,530 406,724 955,784 478,660 1,161,493 669,760
-------------------------------------------------------------------------------------------------------------------------
T-Fund 3,101,621 1,210,222 2,678,630 1,095,039 1,750,181 940,954
-------------------------------------------------------------------------------------------------------------------------
Federal Trust
Fund 177,827 171,451 227,374 136,957 203,068 156,965
-------------------------------------------------------------------------------------------------------------------------
Treasury Trust
Fund 1,090,341 522,634 1,093,223 499,881 1,002,514 587,865
-------------------------------------------------------------------------------------------------------------------------
MuniFund* 396,104 602,901 567,677 489,376 717,070 497,287
-------------------------------------------------------------------------------------------------------------------------
MuniCash* 297,756 471,218 367,734 615,881 268,834 534,948
-------------------------------------------------------------------------------------------------------------------------
California
Money Fund** 505,469 839,248 374,215 729,108 268,716 621,301
-------------------------------------------------------------------------------------------------------------------------
New York Money
Fund++ 189,702 463,605 202,770 450,544 150,755 420,034
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
________________________
+ The information in the 1999 section of the chart relates to the fiscal year
ended September 30, 1999. For the one month ended October 31, 1999,
TempFund and TempCash paid advisory fees of $1,017,087 and $153,069,
respectively, and advisory fees of $147,154 and $167,774, respectively,
were waived.
* The information in the 1999 section of the chart relates to the eleven
months ended October 31, 1999.
** The information in the 1999 section of the chart relates to the twelve
months ended January 31, 1999. For the nine months ended October 31, 1999,
California Money Fund paid advisory fees of $347,895, and advisory fees of
$615,723 were waived.
++ The information contained in the 1999 section of the chart relates to the
fiscal year ended July 31, 1999. For the three months ended October 31,
1999, New York Money Fund paid advisory fees of $38,851 and advisory fees
of $118,586 were waived.
Co-Administrators
BIMC and PFPC serve as the Trust'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 Trust's 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,
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<PAGE>
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' 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 Trust, participate in counseling
and assisting the Trust in relation to routine regulatory examinations and
investigations, and work with the Trust'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 or period for each Fund ended in 1997, 1998 and 1999. The
Funds' fiscal year ends for 1997 and 1998 were as follows: 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. The Trust's current fiscal year
for all Funds is October 31.
-49-
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
FUND 1999 1998 1997
-----------------------------------------------------------------------------------------------------------------------------------
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+ $10,104,651 $2,385,356 $8,126,927 $2,315,278 $6,560,502 $2,576,521
-----------------------------------------------------------------------------------------------------------------------------------
TempCash+ 2,818,512 2,151,178 2,388,597 2,096,653 2,176,446 2,041,599
-----------------------------------------------------------------------------------------------------------------------------------
FedFund 764,530 406,724 955,784 478,660 1,161,493 669,760
-----------------------------------------------------------------------------------------------------------------------------------
T-Fund 3,101,621 1,210,222 2,678,630 1,095,039 1,750,181 940,954
-----------------------------------------------------------------------------------------------------------------------------------
Federal Trust
Fund 177,827 171,451 227,374 136,957 203,068 156,965
-----------------------------------------------------------------------------------------------------------------------------------
Treasury Trust
Fund 1,090,341 522,634 1,093,223 499,881 1,002,514 587,865
-----------------------------------------------------------------------------------------------------------------------------------
MuniFund* 396,104 602,901 567,677 489,376 717,070 497,287
-----------------------------------------------------------------------------------------------------------------------------------
MuniCash* 297,756 471,218 367,734 615,881 268,834 534,948
-----------------------------------------------------------------------------------------------------------------------------------
California
Money Fund** 505,469 839,248 374,215 729,108 268,716 621,301
-----------------------------------------------------------------------------------------------------------------------------------
New York Money
Fund++ 189,702 463,605 202,770 450,544 150,755 420,034
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The information in the 1999 section of the chart relates to the fiscal year
ended September 30, 1999. For the one month ended October 31, 1999,
TempFund and TempCash paid administration fees of $1,017,087 and $153,069,
respectively, and administration fees of $147,154 and $167,774,
respectively were waived.
* The information in the 1999 section of the chart relates to the eleven
months ended October 31, 1999.
** The information in the 1999 section of the chart relates to the twelve
months ended January 31, 1999. For the nine months ended October 31, 1999,
California Money Fund paid administration fees of $347,895, and
administration fees of $615,723 were waived.
++ The information contained in the 1999 section of the chart relates to the
fiscal year ended July 31, 1999. For the three months ended October 31,
1999, New York Money Fund paid administration fees of $38,851 and
administration fees of $118,586 were waived.
Distributor
Provident Distributors, Inc. ("PDI") acts as the distributor of the
Trust's shares. PDI is a Delaware corporation and has its principal business
address at 3200 Horizon Drive, King of Prussia, Pennsylvania 19406. 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
-50-
<PAGE>
communications) for each of the Funds and any class or subclass thereof. No
compensation is payable by the Trust to the distributor for its distribution
services.
Custodian and Transfer Agent
Pursuant to a Custodian Agreement, PFPC Trust Company, an affiliate of
the Adviser, serves as each Fund's custodian, holding a Fund's portfolio
securities, cash and other property. PFPC Trust Company has its principal
offices at 400 Bellevue Parkway, Wilmington, Delaware 19809, with an additional
custodial services location at 200 Stevens Drive, Suite 410, Lester,
Pennsylvania 19113. Under the Custodian Agreement, PFPC Trust Company has agreed
to provide the following services: (i) maintain a separate account or accounts
in the name of a Fund; (ii) hold and disburse portfolio securities on account of
a Fund; (iii) collect and make disbursements of money on behalf of a Fund; (iv)
collect and receive all income and other payments and distributions on account
of a Fund's portfolio securities; and (v) make periodic reports to the Board of
Trustees concerning a Fund's operations.
PFPC Trust Company is also authorized to select one or more banks or
trust companies to serve as sub-custodian or agent on behalf of a Fund, provided
that PFPC Trust Company shall remain responsible for the performance of all of
its duties under the Custodian Agreement and shall hold each Fund harmless from
the acts and omissions of any bank or trust company serving as sub-custodian or
agent chosen by PFPC Trust Company. Currently, PFPC Trust Company has chosen PNC
Bank to serve as agent.
Under the Custodian Agreement, each Fund pays PFPC Trust Company an
annual fee equal to $.25 for each $1,000 of each Fund's average daily gross
assets. With respect to TempFund, TempCash, FedFund, T-Fund, Federal Trust Fund,
Treasury Trust Fund, MuniFund and MuniCash, such fee declines as each such
Fund's average daily gross assets increase. In addition, each Fund pays the
custodian certain types of transaction charges, and reimburses the custodian for
out-of-pocket expenses incurred on behalf of the Fund. The fees of PNC Bank are
paid by PFPC Trust Company and not the Funds.
PFPC 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
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
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<PAGE>
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.
Service Organizations
The Funds may enter into agreements with institutional investors ("Service
Organizations") requiring them to provide certain services to their customers
who beneficially own shares of the Funds. The Trust'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 Trust'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 Trust's agreements
with Service Organizations and the purposes for which the expenditures were
made. In addition, the Trust's arrangements with Service Organizations must be
approved annually by a majority of the Trust's trustees, including a majority of
the trustees who are not "interested persons" of the Trust as defined in the
1940 Act and have no direct or indirect financial interest in such arrangements.
Pursuant to the Dollar Shareholder Services Plan, each of the Funds
may enter into agreements with Service Organizations requiring them to provide
services to their customers who beneficially own Dollar Shares in consideration
of .25% (on an annualized basis) of the average daily net asset value of the
Dollar Shares held by the Service Organizations for the benefit of their
customers. Such services provided by a Service Organization 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; (ii)
assisting shareholders in designating and changing dividend options, account
designations and addresses; (iii) aggregating and processing purchase and
redemption requests from shareholders and placing net purchase and redemption
orders with the distributor; (iv) providing shareholders with a service that
invests the assets of their accounts in shares pursuant to specific or pre-
authorized instructions; (v) processing dividend payments from the particular
Series on behalf of shareholders; (vi) providing information periodically to
shareholders showing their positions in Dollar Shares; (vii) arranging for bank
wires; (viii) responding to shareholder inquiries relating to a particular
Series or the services performed by the Service Organization; (ix) providing
sub-accounting with respect to a Series of shares beneficially owned by
shareholders or the information necessary for sub-accounting; (x) if required by
law, forwarding shareholder communications from the particular Series (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to shareholders; and (xi) other similar
services to the extent permitted under applicable statutes, rules or
regulations.
Pursuant to the Distribution and Services Plan (12b-1 Plan), TempFund,
T-Fund, MuniFund, New York Money Fund and California Money Fund may enter into
agreements with Service Organizations requiring them to provide certain sales
and support services to their shareholders who beneficially own Plus Shares in
consideration of .25% (on an annualized basis) of the average daily net asset
value of the Plus Shares held by the Service Organization for the benefit of
shareholders. Sales and support services provided by the Service Organizations
may include: (a) reasonable assistance in connection with the distribution of
Plus Shares to shareholders as requested from time to
-52-
<PAGE>
time by the distributor, which assistance may include forwarding sales
literature and advertising provided by the distributor for shareholders; and (b)
the following support services to shareholders who may from time to time acquire
and beneficially own Plus Shares: (i) establishing and maintaining accounts and
records relating to shareholders that invest in Plus Shares; (ii) processing
dividend and distribution payments from a particular series on behalf of
shareholders; (iii) providing information periodically to shareholders showing
their positions in Plus Shares; (iv) arranging for bank wires; (v) responding to
shareholder inquiries relating to the services performed by the Service
Organization; (vi) responding to routine inquiries from shareholders concerning
their investments in Plus Shares; (vii) providing subaccounting with respect to
Plus Shares beneficially owned by shareholders 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 shareholders; (ix) assisting in processing purchase, exchange and
redemption requests from shareholders and in placing such orders with service
contractors; (x) assisting shareholders in changing dividend options, account
designations and addresses; (xi) providing shareholders 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.
Pursuant to the Administration Shareholder Services Plan, TempFund, T-
Fund, MuniFund and California Money Fund may also enter into agreements with
Service Organizations requiring them to provide certain services to their
shareholders 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
shareholders. Services provided by the Service Organizations 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.
Pursuant to the Cash Reserve Shareholder Services Plan, TempFund, T-
Fund, MuniFund and California Money Fund may also enter into agreements with
Service Organizations requiring them to provide certain services to their
shareholders 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
shareholders. An initial .10% (on an annual basis) of the average daily net
asset value of such Shares will be paid to Service Organizations for providing
administrative services which may include the services provided for
Administrative Shares as described above. Another .25% (on an annual basis) of
the average daily net asset value of such Shares will be paid to Service
Organizations for providing support services which may include the services
provided for Dollar Shares as described in sub-sections (iii) through (xi)
above. Another .5% (on an
-53-
<PAGE>
annual basis) of the average daily net asset value of such Shares will be paid
to Service Organizations for providing sweep services ("Sweep Services") which
may include: (i) providing the necessary computer hardware and software which
links the Service Organization's DDA system to an account management system;
(ii) providing software that aggregates the shareholders orders and establishes
an order to purchase or redeem shares of a Series based on established target
levels for the shareholder's demand deposit accounts; (iii) providing periodic
statements showing a shareholder's account balance and, to the extent
practicable, integrating such information with other shareholder transactions
otherwise effected through or with the Service Organization; and (iv) 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.
Pursuant to the Cash Management Shareholder Services Plan, each of the
Funds may also enter into agreements with Service Organizations requiring them
to provide support services to their shareholders 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 shareholders. An initial .10% (on an
annual basis) of the average daily net asset value of such Shares will be paid
to Service Organizations for providing administrative services which may include
the services provided for Administration Shares as described above. Another
.25% (on an annual basis) of the average daily net asset value of such Shares
will be paid to Service Organizations for providing services which may include
the services provided for Dollar Shares as described in sub-sections (iii)
through (xi) above. Another .5% (on an annual basis) of the average daily net
asset value of such Shares will be paid to Service Organizations for providing
Sweep Services as described above. Another .10% (on an annual basis) of the
average daily net asset value of such Shares will be paid to Service
Organizations for providing the sweep marketing services which may include: (i)
marketing and activities, including direct mail promotions that promote the
Sweep Service, (ii) expenditures for other similar marketing support such as for
telephone facilities and in-house telemarketing, (iii) distribution of
literature promoting Sweep Services, (iv) travel, equipment, printing, delivery
and mailing costs overhead and other office expenses attributable to the
marketing of the Sweep Services.
The Board of Trustees have approved the Trust's arrangements with
Service Organizations based on information provided to the Board 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 Trust's arrangements with Service Organizations must be made in a manner
approved by a majority of the Trust's 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 (12b-1 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 with respect to California Money Fund and New
-54-
<PAGE>
York Money Fund permits the Board to increase this fee to .40% without
shareholder approval.) So long as the Trust's arrangements with Service
Organizations are in effect, the selection and nomination of the members of the
Trust's Board of Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust will be committed to the discretion of such non-
interested directors.
The Adviser, PDI, and/or their affiliates may pay additional
compensation from time to time, out of their assets and not as an additional
charge to the Funds, to selected Service Organizations and other persons in
connection with providing services to shareholders of the Trust. In addition,
subject to applicable NASD regulations, the Adviser, PDI and/or their affiliates
may also contribute to various cash and non-cash incentive arrangements to
promote the sale of shares. This additional compensation can vary among Service
Organizations depending upon such factors as the amounts their customers have
invested (or may invest) in particular Funds, the particular program involved,
or the amount of reimbursable expenses.
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 years or period for each Fund ended in 1997, 1998 and 1999.
The Funds' 1997 and 1998 fiscal year ends were as follows: 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. The Trust's current fiscal year
for all Funds is October 31.
-55-
<PAGE>
the distributor, which assistance may include forwarding sales literature and
advertising provided by the distributor for shareholders; and (b) the following
support services to shareholders who may from time to time acquire and
beneficially own Plus Shares: (i) establishing and maintaining accounts and
records relating to shareholders that invest in Plus Shares; (ii) processing
dividend and distribution payments from a particular series on behalf of
shareholders; (iii) providing information periodically to shareholders showing
their positions in Plus Shares; (iv) arranging for bank wires; (v) responding to
shareholder inquiries relating to the services performed by the Service
Organization; (vi) responding to routine inquiries from shareholders concerning
their investments in Plus Shares; (vii) providing subaccounting with respect to
Plus Shares beneficially owned by shareholders 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 shareholders; (ix) assisting in processing purchase, exchange and
redemption requests from shareholders and in placing such orders with service
contractors; (x) assisting shareholders in changing dividend options, account
designations and addresses; (xi) providing shareholders 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.
TempFund, T-Fund, MuniFund and California Money Fund may also enter
into agreements with Service Organizations requiring them to provide certain
services to their shareholders 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 shareholders. Services provided by the Service Organizations
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.
TempFund, T-Fund, MuniFund and California Money Fund may also enter
into agreements with Service Organizations requiring them to provide certain
services to their shareholders 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 shareholders. An initial .10% (on an annual basis) of the
average daily net asset value of such Shares will be paid to Service
Organizations for providing administrative services which may include the
services provided for Administrative Shares as described above. Another .25% (on
an annual basis) of the average daily net asset value of such Shares will be
paid to Service Organizations for providing support services which may include
the services provided for Dollar Shares as described in sub-sections (iii)
through (xi) above. Another .5% (on an annual basis) of the average daily net
asset value of such Shares will be paid to Service Organizations for providing
sweep services ("Sweep Services") which may include: (i) providing the necessary
computer hardware and software which links the Service Organization's DDA system
to an account management system; (ii) providing software that aggregates the
shareholders orders and establishes an order to purchase or redeem shares of a
Series based on established target levels for the shareholder's demand deposit
accounts; (iii)
-56-
<PAGE>
providing periodic statements showing a shareholder's account balance and, to
the extent practicable, integrating such information with other shareholder
transactions otherwise effected through or with the Service Organization; and
(iv) 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.
Each of the Funds may also enter into agreements with Service
Organizations requiring them to provide support services to their shareholders
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 shareholders.
An initial .10% (on an annual basis) of the average daily net asset value of
such Shares will be paid to Service Organizations for providing administrative
services which may include the services provided for Administration Shares as
described above. Another .25% (on an annual basis) of the average daily net
asset value of such Shares will be paid to Service Organizations for providing
services which may include the services provided for Dollar Shares as described
in sub-sections (iii) through (xi) above. Another .5% (on an annual basis) of
the average daily net asset value of such Shares will be paid to Service
Organizations for providing Sweep Services as described above. Another .10% (on
an annual basis) of the average daily net asset value of such Shares will be
paid to Service Organizations for providing the sweep marketing services which
may include (i): marketing and activities, including direct mail promotions that
promote the Sweep Service, (ii) expenditures for other similar marketing support
such as for telephone facilities and in-house telemarketing, (iii) distribution
of literature promoting Sweep Services, (iv) travel, equipment, printing,
delivery and mailing costs overhead and other office expenses attributable to
the marketing of the Sweep Services.
The Trust'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 Trust'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 Trust's agreements with Service Organizations and the
purposes for which the expenditures were made. In addition, the Trust's
arrangements with Service Organizations must be approved annually by a majority
of the Trust's trustees, including a majority of the trustees who are not
"interested persons" of the Trust as defined in the 1940 Act and have no direct
or indirect financial interest in such arrangements.
The Board of Trustees have approved the Trust's arrangements with
Service Organizations based on information provided to the Board 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 Trust's arrangements with Service Organizations must be made in a manner
approved by a majority of the Trust's 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
-57-
<PAGE>
adopted by the Board of Trustees with respect to California Money Fund and New
York Money Fund permits the Board to increase this fee to .40% without
shareholder approval.) So long as the Trust's arrangements with Service
Organizations are in effect, the selection and nomination of the members of the
Trust's Board of Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust will be committed to the discretion of such non-
interested directors.
The Adviser, PDI, and/or their affiliates may pay additional
compensation from time to time, out of their assets and not as an additional
charge to the Funds, to selected Service Organizations and other persons in
connection with providing services to shareholders of the Trust. In addition,
subject to applicable NASD regulations, the Adviser, PDI and/or their affiliates
may also contribute to various cash and non-cash incentive arrangements to
promote the sale of shares. This additional compensation can vary among Service
Organizations depending upon such factors as the amounts their customers have
invested (or may invest) in particular Funds, the particular program involved,
or the amount of reimbursable expenses.
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 years or period for each Fund ended in 1997, 1998 and 1999.
The Funds' 1997 and 1998 fiscal year ends were as follows: 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. The Trust's current fiscal year
for all Funds is October 31.
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<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
FUND 1999 1998 1997
-----------------------------------------------------------------------------------------------------------------------
Total Fees/Fees to Total Fees/Fees to Total Fees/Fees to
Affiliates Affiliates Affiliates
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TempFund Administration+ N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
TempFund Dollar+ $998,538/$99,384 $772,304/$104,448 $863,301/$617,378
-----------------------------------------------------------------------------------------------------------------------
TempFund Cash Reserve+ N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
TempFund Cash
Management+ 12,627/0 N/A N/A
-----------------------------------------------------------------------------------------------------------------------
TempFund Plus+ N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
TempCash Dollar+ 1,059,560/29,363 1,088,006/27,566 1,214,833/380,851
-----------------------------------------------------------------------------------------------------------------------
TempCash Cash Management N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
FedFund Dollar 75,161/522 125,091/1,900 189,582/12,793
-----------------------------------------------------------------------------------------------------------------------
FedFund Cash Management N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
T-Fund Administration* N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
T-Fund Dollar 1,710,872/179,262 1,483,848/1,020,059 1,066,632/664,865
-----------------------------------------------------------------------------------------------------------------------
T-Fund Cash Reserve* N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
T-Fund Cash Management 4,674/0 N/A N/A
-----------------------------------------------------------------------------------------------------------------------
T-Fund Plus* N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
Treasury Trust Dollar 1,147,232/48,879 1,007,664/206,583 895,799/281,300
-----------------------------------------------------------------------------------------------------------------------
Treasury Trust Cash Management N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
Federal Trust Dollar 76,231/0 95,541/0 88,473/0
-----------------------------------------------------------------------------------------------------------------------
Federal Trust Cash Management N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
MuniFund Administration** N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
MuniFund Dollar** 126,439/0 144,751/0 150,996/272
-----------------------------------------------------------------------------------------------------------------------
MuniFund Cash Reserve** N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
MuniFund Cash
Management** 4,819/0 N/A N/A
-----------------------------------------------------------------------------------------------------------------------
MuniFund Plus** N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
MuniCash Dollar** 262,380/0 273,684/0 285,897/11,464
-----------------------------------------------------------------------------------------------------------------------
MuniCash Cash Management N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
California Money Fund
Administration*** N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
California Money Fund Dollar*** 302,866/0 308,298/428 187,911/2,115
-----------------------------------------------------------------------------------------------------------------------
California Money Fund Cash
Reserve*** N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
California Money Fund Cash
Management*** N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
California Money Fund Plus*** N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
New York Money Fund Dollar++ N/A 504/0 8,458/8,408
-----------------------------------------------------------------------------------------------------------------------
New York Money Fund Cash
Management N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
New York Money Fund Plus++ N/A N/A N/A
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
_______________________
-59-
<PAGE>
+ Information in the 1999 section of the chart relates to fiscal year ended
September 30 1999. For the one month ended October 1, 1999, TempFund Dollar
and TempFund Cash Management paid $99,768/$8,360 and $6,551/$0,
respectively and TempCash Dollar paid $85,468/$2,563. For this time period,
TempFund Administration, TempFund Cash Reserve, and TempFund Plus had no
shares outstanding and paid no fees.
* For the fiscal year ended October 31, 1999, T-Fund Administration, T-Fund
Cash Reserve and T-Fund Plus had no shares outstanding and paid no fees.
** The information in the 1999 section of the chart relates to the eleven
months ended October 31, 1999. For this time period, MuniFund
Administration, MuniFund Cash Reserve and MuniFund Plus had no shares
outstanding and paid no fees.
*** The information in the 1999 section of the chart relates to the fiscal year
ended January 31, 1999. For nine months ended October 31, 1999 California
Money Fund Dollar paid $58,139/0. For this time period, California Money
Fund Administration, California Money Fund Cash Reserve, California Money
Fund Cash Management and California Money Fund Plus had no shares
outstanding and paid no fees.
++ The information contained in the 1999 section of the chart relates to the
fiscal year ended July 31, 1999. For the three months ended October 31,
1999, New York Money Fund Dollar, and New York Money Fund Plus had no
shares outstanding and paid no fees.
N/A Indicates that Share Classes had no shares outstanding and paid no fees.
Expenses
A Fund's expenses include taxes, interest, fees and salaries of the
Trust's Trustees and officers who are not Trustees, officers or employees of the
Trust'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 qualified during its last taxable year and intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, and to distribute all, or substantially all, of its
income each year, so that the Fund itself generally will be relieved of federal
income and excise taxes. If a Fund were to fail to so qualify: (1) the Fund
-60-
<PAGE>
would be taxed on its taxable income at regular corporate rates without any
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% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute with respect to each calendar year at least
98% of their ordinary taxable income for the calendar year and capital gain net
income (excess of capital gains over capital losses) for the one year period
ending October 31 of such calendar year. 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.
Dividends declared in October, November or December of any year that
are payable to shareholders of record on a specified date in such months will be
deemed to have been received by shareholders and paid by a Fund on December 31
of such year if such dividends are actually paid during January of the following
year.
The Funds will be required in certain cases to withhold and remit to
the United States Treasury 31% of taxable dividends or gross sale proceeds paid
to any shareholder who (i) has failed to provide a correct tax identification
number, (ii) is subject to back-up withholding by the Internal Revenue Service
for failure to properly include on his or her return payments of taxable
interest or dividends, or (iii) has failed to certify to the Funds that he or
she is not subject to back-up withholding when required to do so or that he or
she is an "exempt recipient."
The following is applicable to MuniFund, MuniCash, California Money
Fund and New York Money Fund ("Tax Exempt Fund") only:
For a Fund to pay tax-exempt dividends for any taxable year, at least
50% of the aggregate value of the Fund's assets at the close of each quarter of
the Fund's taxable year must consist of exempt-interest obligations.
An investment in a Tax-Exempt Fund is not intended to constitute a
balanced investment program. Shares of the Funds 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 the shareholder not gain any additional benefit from the Funds'
dividends being tax-exempt, but such dividends would be ultimately taxable to
the beneficiaries when distributed. In addition, the Funds may not be an
appropriate investment for entities that 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 (i) 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, (ii) occupies more than 5% of the usable area of such
facilities or (iii) are persons for whom such facilities or a part thereof were
specifically constructed, reconstructed or acquired. "Related persons" include
certain
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<PAGE>
related natural persons, affiliated corporations, a partnership and its partners
and an S corporation and its shareholders.
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 Trust 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 Administration Shares,
Dollar Shares, Cash Reserve Shares and Cash Management and/or Plus Shares bear
exclusively the expense of fees paid to Service Organizations. (See "Management
of the Funds -- Service Organizations.")
As stated, the Trust 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.
The following chart provides information with respect to the yields as
of October 31, 1999. No information is provided regarding the yields with
respect to the Administration and Cash Reserves Classes of TempFund, MuniFund,
T-Fund and California Money Fund; the Cash Management Shares of TempCash,
FedFund, Federal Trust Fund, Treasury Trust Fund, MuniCash, California Money
Fund and New York Money Fund; the Plus Shares of T-Fund, MuniFund, TempFund, New
York Money Fund and California Money
-62-
<PAGE>
Fund; and the Dollar Class of New York Money Fund because such Classes had no
Shares outstanding on October 31, 1999.
-63
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
7 DAY 30 DAY
---------------------------------------------------------------------------------------------------------------
COMPOUNDED COMPOUNDED
EFFECTIVE EFFECTIVE
YIELD YIELD YIELD YIELD
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TempFund Institutional 5.37% 5.51% 5.29% 5.43%
---------------------------------------------------------------------------------------------------------------
TempFund Dollar 5.12 5.25 5.04 5.17
---------------------------------------------------------------------------------------------------------------
TempCash Institutional 5.24 5.38 5.19 5.32
---------------------------------------------------------------------------------------------------------------
TempCash Dollar 4.99 5.11 4.94 5.06
---------------------------------------------------------------------------------------------------------------
TempFund Cash Management 4.87 4.99 4.79 4.90
---------------------------------------------------------------------------------------------------------------
FedFund Institutional 5.13 5.26 5.09 5.22
---------------------------------------------------------------------------------------------------------------
FedFund Dollar 4.88 5.00 4.84 4.96
---------------------------------------------------------------------------------------------------------------
T-Fund Institutional 5.00 5.12 4.96 5.08
---------------------------------------------------------------------------------------------------------------
T-Fund Dollar 4.75 4.86 4.71 4.82
---------------------------------------------------------------------------------------------------------------
T-Fund Cash Management 4.50 4.60 4.46 4.56
---------------------------------------------------------------------------------------------------------------
Federal Trust Fund
Institutional 5.14 5.27 5.09 5.22
---------------------------------------------------------------------------------------------------------------
Federal Trust Dollar 4.89 5.01 4.84 4.96
---------------------------------------------------------------------------------------------------------------
Treasury Trust Fund
Institutional 4.70 4.81 4.67 4.78
---------------------------------------------------------------------------------------------------------------
Treasury Trust Dollar 4.45 4.55 4.42 4.52
---------------------------------------------------------------------------------------------------------------
MuniFund Institutional 3.24 3.29 3.21 3.26
---------------------------------------------------------------------------------------------------------------
MuniFund Dollar 2.99 3.03 2.96 3.00
---------------------------------------------------------------------------------------------------------------
MuniFund Cash Management 2.74 2.78 2.71 2.75
---------------------------------------------------------------------------------------------------------------
MuniCash Institutional 3.27 3.32 3.25 3.30
---------------------------------------------------------------------------------------------------------------
MuniCash Dollar 3.02 3.07 3.00 3.04
---------------------------------------------------------------------------------------------------------------
California Money Fund
Institutional 2.96 3.00 2.81 2.85
---------------------------------------------------------------------------------------------------------------
California Money Fund Dollar 2.71 2.75 2.56 2.59
---------------------------------------------------------------------------------------------------------------
New York Money Fund
Institutional 3.18 3.23 3.10 3.15
-------------------------------------------------------------------------------------------------------------
</TABLE>
-64-
<PAGE>
The following tax equivalent yields for the "Tax-Exempt Funds" assume
a federal income tax rate of 28.00%, a New York income tax rate of 10.25% and a
California income tax rate of 11.05%.
-------------------------------------------------------------------------------
7 DAY 30 DAY
-------------------------------
Tax Equivalent
Tax Equivalent Compounded
Yield Effective Yield
-------------------------------------------------------------------------------
MuniFund Institutional 4.50% 4.60%
-------------------------------------------------------------------------------
MuniFund Dollar 4.15 4.24
-------------------------------------------------------------------------------
MuniFund Cash Management 3.81 3.88
-------------------------------------------------------------------------------
MuniCash Institutional 4.54 4.64
-------------------------------------------------------------------------------
MuniCash Dollar 4.19 4.28
-------------------------------------------------------------------------------
New York Money Fund Institutional 4.92 5.04
-------------------------------------------------------------------------------
California Money Fund Institutional 4.62 4.73
-------------------------------------------------------------------------------
California Money Fund Dollar 4.23 4.32
-------------------------------------------------------------------------------
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 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
-65-
<PAGE>
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 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.
-66-
<PAGE>
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.
ADDITIONAL DESCRIPTION CONCERNING SHARES
The Trust was organized as a Delaware business trust on October 21,
1998. The Trust's Declaration of Trust authorizes the Board of Trustees to issue
an unlimited number of full and fractional shares of beneficial interest in the
Trust 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 Board of Trustees has full power and
authority, in its sole discretion, and without obtaining shareholder approval,
to divide or combine the shares or any class or series thereof into a greater or
lesser number, to classify or reclassify any issued shares or any class or
series thereof into one or more classes or series of shares, and to take such
other action with respect to the Trust's shares as the Board of Trustees may
deem desirable. The Agreement and Declaration of Trust authorizes the Trustees
without shareholder approval to cause the Trust to merge or to consolidate with
any corporation, association, trust or other organization in order to change the
form of organization and/or domicile of the Trust or to sell or exchange all or
substantially all of the assets of the Trust, or any series or class thereof, in
dissolution of the Trust, or any series or class thereof. The Agreement and
Declaration of Trust permits the termination of the Trust or of any series or
class of the Trust by the Trustees without shareholder approval. 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
Institutional, Administration, Dollar, Plus, Cash Reserves and Cash Management.
The Trust 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 Trust's shares,
the Trust 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
Trust will assist in shareholder communication in such matters.
Holders of shares in a Fund in the Trust will vote in the aggregate
and not by class or sub-class on all matters, except as described above, and
except that each Fund's Administration, Dollar, Plus, 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 Trust'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 Trust shall not be deemed to have been
effectively acted upon
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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 Trust'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) or by the Trust's Charter, the Trust 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, One Logan Square, 18/th/ and Cherry
Streets, Philadelphia, Pennsylvania 19103-6996, of which W. Bruce McConnel,
Secretary of the Trust, is a partner, will pass upon the legality of the shares
offered hereby.
Willkie Farr & Gallagher, The Equitable Center, 787 Seventh Avenue,
New York, New York 10019-6099, acts as special New York Counsel for the Trust
and has reviewed the portions of this Statement of Additional Information and
the disclosure in the Prospectuses 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 disclosure in the Prospectuses 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 the Trust for the fiscal year ending October 31, 2000.
FINANCIAL STATEMENTS
The Annual Report for the fiscal year ended October 31, 1999 has been
filed with the Securities and Exchange Commission. The financial statements in
such Annual Report ("the Financial Statements") are incorporated by reference
into this Statement of Additional
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Information. The Financial Statements for the Trust have been audited by the
Trust's independent accountants, PricewaterhouseCoopers LLP, whose reports
thereon also appear in the Annual Report and are incorporated herein by
reference. The Financial Statements for Muni for the year ended November 30,
1998 and the financial highlights for the nine years in the period ended
November 30, 1998 have been audited by Muni's former independent accountants,
KPMG LLP. The Financial Statements in the Annual Report have been incorporated
herein in reliance upon such reports given upon the authority of such firms as
experts in accounting and auditing.
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 October 31, 1999, 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., Inc. $1,283,664,000; Goldman Sachs & Co. $1,160,000,000;
Deutsche Bank Securities, Inc. $1,000,000,000; Morgan (J.P.) Securities, Inc.
$404,755,000; Lehman Brothers, Inc. $350,000,000; Warburg Dillion Read LLC
$200,000,000 and Merrill Lynch $100,000,000.
As of October 31, 1999, the value of TempCash's aggregate holdings of
the securities of each of its regular brokers or dealers or their parents was:
Goldman Sachs & Co. $100,000,000; Lehman Brothers, Inc. $15,100,000 and Morgan
Stanley & Co., Inc. $4,000,000.
As of October 31, 1999, the value of FedFund's aggregate holdings of
the securities of each of its regular brokers or dealers or their parents was:
Morgan Stanley & Co., Inc. $190,000,000; Goldman Sachs & Co. $80,000,000 and
Lehman Brothers, Inc. $5,800,000.
As of October 31, 1999, the value of T-Fund's aggregate holdings of
the securities of each of its regular brokers or dealers or their parents was:
Deutsche Bank Securities, Inc. $550,000,000; Morgan Stanley & Co., Inc.
$340,900,000; Greenwich Capital Markets Inc. $300,000,000; Credit Suisse First
Boston Corp. $175,000,000; ABN AMRO Inc. $135,000,000; Barclay's Capital Inc.
$135,000,000; Bear Stearns & Co. Inc. $135,000,000 and Nesbitt Burns Securities
Inc. $135,000,000; Salomon Smith Barney Inc. $135,000,000; Lehman Brothers Inc.
$100,000,000; Warburg Dillion Read Inc. $100,000,000; Merrill Lynch Government
Securities Inc. $50,000,000 and Goldman Sach & Co. $38,000,000.
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Certain Record Holders
As of May 18, 2000, the name, address and percentage of ownership of each
institutional investor that owned of record 5% or more of the outstanding shares
of Tempfund Cash Management Shares were as follows: FBO Gibraltor Bank FSB,
Marshall & Ilsley Trust Co., 1000 N. Water Street, 14/th/ Floor, Milwaukee, WI
53202 (80.30%) and the Business Bank/Baton Rouge, Mutual Partners/Corp. Cash
Sweep, P.O. box 98509, Baton Rouge, LA 70884 (18.11%).
As of May 18, 2000, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of TempFund Institutional Shares were as follows: Saxon & Co., PNC Bank,
200 Stevens Drive, Ste. 260A, Lester, PA 19113 (7.86%).
As of May 18, 2000, 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: CitiBank Services, IC & D
Cash Management, 3800 Citibank Center Tampa, Tampa, FL, 33610 (5.48%); Broadway
National Bank, Cash Management Temp Fund, P.O. Box 17001, San Antonio, CA 78217
(8.14%); Morgan Keegan & Co., Inc., 50 Front Street, 18/th/ Floor, Memphis, TN
38103 (9.52%); PNC Advisors (Connecticut), 125 E. Putnam Avenue, Greenwich, CT
06830 (28.43%) and PNC Bank Sweep, 620 Liberty Avenue, Pittsburgh, PA 15265
(8.06%).
As of May 18, 2000, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of TempCash Institutional Shares were as follows: Saxon & Co., PNC Bank,
200 Stevens Drive, Ste. 260A, Lester, PA 19113 (24.56%); California Bank &
Trust, Sumitomo Network Inv. Cust., 101 S. San Pedro St., Ste. 900, Los Angeles
CA 90012 (5.32%); and USAA Brokerage Services, 9800 Fredericksburg Road, San
Antonio, TX 78288 (13.07%).
As of May 18, 2000, 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, 2005 Market Street, One Commerce Square, 11/th/ Floor, Philadelphia,
PA 19103 (39.79%); Citibank NA, IC&D Cash Management, 3800 Citibank Center
Tampa, Tampa, FL 33610 (16.46%); Norwest Investment Services, 608 2/nd/ Avenue
South, 8/th/ Floor, Minneapolis, MN 55479 (9.97%) and Hilliard Lyons, Cash
Balance Sweeps, 501 Hilliard Lyons Center, Louisville, KY 40202 (18.68%).
As of May 18, 2000, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of FedFund Institutional Shares were as follows: Washington Trust Bank,
WABANC & CO, P.O. Box 2127, Spokane, WA 99210 (6.04%); HSBC Bank USA, HSBC Bank
Gen. Acct. #10, P.O. Box 4203, Buffalo, NY 14240 (6.14%); Chase Manhattan Bank
NA, GSS As Agent, 4 New York Plaza, 13/th/ Floor, New York, NY 10004 (7.12%);
Mercantile Bank NA, Trust Securities Unit, P.O. Box 387, Main Post Office, St.
Louis,
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MO 63116 (7.16%); United States National Bank, Meg & Co., P.O. Box 520,
Johnstown, PA 15907 (6.01%); Saxon & Co., PNC Bank, 200 Stevens Drive, Ste.
206A, Lester, PA 19113 (7.59%); Chase Manhattan Bank, Administrative Services, 1
Chase Manhattan Plaza, New York, NY 10005 (7.11%) and Saxon & Co., FBO Omnibus
Accounts, 200 Stevens Drive, Ste. 206A, Lester, PA 19113 (5.78%).
As of May 18, 2000, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of MuniFund Cash Management Shares were as follows: FBO Gilbraltar Bank
FSB, Marshall & Ilsely Trust Co., 1000 N. Water Street, 14/th/ Floor, Milwaukee,
WI 53202 (72.55%) and the Harbor Bank of Maryland, Mut. Partners/Corp. Cash
Sweep, 25 West Fayette Street, Baltimore, MD 21201 (27.45%).
As of May 18, 2000, 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: Norwest Investment Services,
608 2/nd/ Avenue South, 8/th/ Floor, Minneapolis, MN 55479 (8.09%); Glenview
State Bank, GSB & CO, 800 Waukegan Road, Glenview, IL 60025 (32.14%); Allied
Security Inc., Provident Advisers/Service Agent, 2840 Library Road, Pittsburgh,
PA 15234 (8.92%) and PNC Bank Sweep, 620 Liberty Avenue, Pittsburgh, PA 15265
(37.33%).
As of May 18, 2000, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of MuniFund Institutional Shares were as follows: Chase Manhattan Bank
NA, GSS As Agent, 4 New York Plaza, 13/th/ Floor, New York, NY 10004 (18.25%);
Exchange Bank, Trust Department, P.O. Box 208, Santa Rosa, CA 95402 (5.11%) and
Chase Manhattan Bank, Administrative Services, 1 Chase Manhattan Plaza, New
York, NY 10005 (26.42%).
As of May 18, 2000, 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: Bankers Trust Company,
Sunshine State Govt. Commission, Dade County FL/Ins. Reserve, 4 Albany Street,
4/th/ Floor, New York, NY 10006 (63.58%); Bankers Trust Company, Sunshine State
Govt. Commission, Tax Exempt/Initial Excess Int., 4 Albany Street, 4/th/ Floor,
New York, NY 10006 (6.66%); D&N Bank, 400 Quincy Street, Hancock, MI 49930
(7.89%) and Morgan Keegan & Co., Inc., 50 Front Street, 18/th/ Floor, Memphis,
TN 38103 (11.32%).
As of May 18, 2000, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of MuniCash Institutional Shares were as follows: Saxton & Company. PNC
Bank, 8800 Tinicum Blvd., Philadelphia, PA 19153 (13.69%); Patterson Dental
Company, 1031 Mendota Heights Road, St. Paul, MN 55120 (9.28%); Automatic Data
Processing Inc., 1 ADP Blvd., MS 420, Roseland, NJ 07068 (7.30%); USAA Brokerage
Services, 9800 Fredericksburg Road, San Antonio, TX 78288 (31.75%) and Network
Appliance Inc., 495 East Java Drive, Sunnyvale, CA 94089 (7.28%).
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As of May 18, 2000, 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, BHC
Securities, 2005 Market Street, One Commerce Square, 11/th/ Floor, Philadelphia,
PA 19103 (19.78%); Laird Norton Trust Company, Norton Building, 11/th/ Floor,
801 2/nd/ Avenue, Seattle, WA 98104 (64.32%) and Hilliard Lyons, Cash Balance
Sweeps, 501 Hilliard Lyons Center, Louisville, KY 40202 (6.59%).
As of May 18, 2000, 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 Institutional Shares were as follows: Sanwa
Bank California, P.O. Box 60078, Los Angeles, CA 90060 (6.48%); Chase Manhattan
Bank NA, GSS As Agent, 4 New York Plaza, 13/th/ Floor, New York, NY 10004
(29.56%); Santa Barbara Bank & Trust, SANBARCO, 820 State Street, Santa Barbara,
CA 93101 (6.44%); City National Bank, P.O. Box 60520, Los Angeles, CA 90066
(12.26%); Comerica Bank, Calhoun & Co., 411 Lafayette, Detroit, MI 48226
(8.05%); The Whitter Trust Company, Fiduciary Account, 1600 Huntington Drive,
South Pasadena, CA 91030 (5.64%) and California Bank & Trust, Sas Agent for its
Cash Sweep & Sonitorno Network Inv. Cust., 101 S. San Pedro St., Ste. 900, Los
Angeles, CA 90012 (5.51%).
As of May 18, 2000, 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: Santa Barbara
Bank & Trust, SANBARCO, 820 State Street, Santa Barbara, CA 93101 (27.42%);
Laird Norton Trust Company, Norton Building, 11/th/ Floor, 801 2/nd/ Avenue,
Seattle, WA 98104 (42.84%) and City National Bank, Fiduciary for Various
Accounts, P.O. Box 60520, Los Angeles, CA 90060 (29.75%).
As of May 18, 2000, 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 Institutional Shares were as follows: Chase
Manhattan Bank NA, Trulin & Co., P.O. Box 1412, Rochester, NY 14603 (17.26%);
HSBC Bank USA, HSBC Bank Gen. Acct. #10, P.O. Box 4203, Buffalo, NY 14240
(13.82%); Fleet Investment Services, Fleet New York, 159 East Main St.,
Rochester, NY 14638 (15.74%); Chase Manhattan Bank NA, GSS As Agent, 4 New York
Plaza, 13/th/ Floor, New York, NY 10004 (10.26%) and Chase Manhattan Bank,
Administrative Services, 1 Chase Manhattan Plaza, New York, NY 10005 (28.69%).
As of May 18, 2000, 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 Dollar Shares were as follows: Hillard Lyons,
Cash Balance Sweeps, 501 Hilliard Lyons Center, Louisville, KY 40202 (100%).
As of May 18, 2000, the name, address and percentage of ownership of
each institutional investor that owned of record 5% or more of the outstanding
shares of
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T-Fund Cash Management Shares were as follows: the Harbor Bank of Maryland, Mut.
Partners/Corp. Cash Sweep, 25 West Fayette Street, Baltimore, MD 21201 (11.60%)
and Union Bank, Lenore Nelson/Tr. Fund Acctg., P.O. Box 85602, San Diego, CA
92186 (86.38%).
As of May 18, 2000, 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 Institutional Shares were as follows: Union Bank, P.O. Box
85602, San Diego, CA 92186 (17.85%); Midland Loan Services Inc., 210 W. 10/th/
Street, Kansas City, MO 64105 (21.11%) and Washington State, Investment Board,
P.O. Box 40916, Olympia, WA 98504 (6.19%).
As of May 18, 2000, 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: Zions First National Bank,
Trust Department, P.O. Box 30880, Salt Lake City, UT 84130 (11.34%); Obie &
Co., Chase Bank of Texas, P.O. Box 2558, Houston, TX 77252 (33.73%); Bank of
Tokyo-Mitsubishi Tr. Co., NMAC Yield Supplement 99, 1251 Avenue of the Americas,
New York, NY 10020 (8.34%) and PNC Bank Sweep, 620 Liberty Avenue, Pittsburgh,
PA 15265 (14.12%).
As of May 18, 2000, 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 Institutional Shares were as follows: Chase
Manhattan Bank, Administrative Services, 1 Chase Manhattan Plaza, New York, NY
10005 (14.19%); Union Trust Company, Branch & Co., P.O. Box 479, Ellsworth, ME
04605 (9.67%) and Chase Bank of Texas, OBIE &CO, P.O. Box 2558, Houston, TX
77252 (37.44%).
As of May 18, 2000, 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: Santa Barbara Bank
& Trust, SANBARCO, 820 State Street, Santa Barbara, CA 93101 (75.54%) and
Commercial National Westmoreland, County/Highview Trust & Co., 19 N. Main
Street, Greensburg, PA 15601 (12.08%).
As of May 18, 2000, 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 Institutional Shares were as follows: Zions First
National Bank, Trust Department, P.O. Box 30880, Salt Lake City, UT 84130
(8.31%); Chase Manhattan Bank, Administrative Services, 1 Chase Manhattan Plaza,
New York, NY 10005 (12.35%); Saxon & Co., FBO Omnibus Accounts, 200 Stevens
Drive, Ste. 206A, Lester, PA 19113 (5.05%); Associated Trust Company, ESOR &
CO, P.O. Box 12800, Green Bay, WI 54307 (8.29%) and United States Fire
Insurance Co., Operating Accounting, 305 Madison Ave., P.O. Box 1973,
Morristown, NJ 07960 (5.44%).
As of May 18, 2000, 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, 1 South Street, 19/th/ Floor, Baltimore, MD 21202 (64.88%); Chase Bank
of Texas, P.O. Box 2558, Houston, TX 77252 (15.42%) and PNC Bank Sweep, 620
Liberty Avenue, Pittsburgh, PA 15265 (8.69%).
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APPENDIX A
Commercial Paper Ratings
------------------------
A Standard & Poor's commercial paper rating is a current opinion of
the creditworthiness of an obligor with respect to financial obligations having
an original maturity of no more than 365 days. The following summarizes the
rating categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment 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 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 category of Duff & Phelps for investment grade
commercial paper and short-term debt is "D-1." 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 Financial 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 Financial BankWatch:
"TBW-1" - This designation represents Thomson Financial 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 Financial 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 ratings "AA" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
A-2
<PAGE>
The following summarizes the applicable ratings used by Moody's for
corporate and municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term 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,"
rating 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
denote relative standing within these major rating categories.
Thomson Financial 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 note rating reflects the liquidity factors and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's 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 a
very strong capacity to pay debt service 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. Margins of
protection 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.
(a) (1) Certificate of Trust dated October 21, 1998 is
incorporated by reference to Exhibit (a) (1) of Post-
Effective Amendment No. 61 to Registrant's Registration
Statement, file Nos. 2-47015/811-2354, filed February
2, 1999 ("PEA No. 61").
(2) Registrant's Agreement and Declaration of Trust dated
October 21, 1998 is incorporated by reference to
Exhibit (a) (2) of PEA No. 61.
(b) Registrant's By-Laws dated October 22, 1998 is
incorporated by reference to Exhibit (b) of PEA
No. 61.
(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 is incorporated by reference to Exhibit (a) (2) of
PEA No. 61, and Article IV, Article V and Article VI of
the Registrant's By-Laws dated October 22, 1998 is
incorporated by reference to Exhibit (b) PEA No. 61.
(d) Investment Advisory Agreement between Registrant and
BlackRock Institutional Management Corporation ("BIMC")
dated February 10, 1999 is incorporated by reference to
Exhibit (d) of Post-Effective Amendment No. 63 to
Registrant's Registration Statement, file Nos. 2-
47015/811-2354, filed November 30, 1999 ("PEA No. 63").
(e) (1) Distribution Agreement between Registrant and Provident
Distributors, Inc. ("PDI") dated February 10, 1999 is
incorporated by reference to Exhibit (e)(1) of PEA No.
63.
(2) Distribution Agreement between Registrant and PDI dated
June 25, 1999 is incorporated by reference to Exhibit
(e)(2)
<PAGE>
of PEA No. 63.
(f) None.
(g) (1) Custodian Services Agreement between Registrant and PNC
Bank N.A. dated February 10, 1999 is incorporated by
reference to Exhibit (g)(1) of PEA No. 63.
(2) Custodian Services Agreement between Registrant and
PFPC Trust Company dated February 11, 1999 is
incorporated by reference to Exhibit (g)(2) of PEA
No. 63.
(h) (1) Administration Agreement between Registrant, BIMC and
PFPC Inc., dated February 10, 1999 is incorporated by
reference to Exhibit (h)(1) of PEA No. 63.
(2) Transfer Agency Agreement between Registrant and PFPC
Inc. dated February 10, 1999 is incorporated by
reference to Exhibit (h)(2) of PEA No. 63.
(3) (a) Share Purchase Agreement between Registrant and
Temporary Investment Fund, Inc. dated February 10,
1999 is incorporated by reference to Exhibit
(h)(3)(a) of Post-Effective Amendment No. 65 to
Registrant's Registration Statement file Nos. 2-
47015/811-2354, filed April 6, 2000 ("PEA No.
65").
(b) Share Purchase Agreement between Registrant and
Trust for Federal Securities dated February 10,
1999 is incorporated by reference to Exhibit
(h)(3)(b) of PEA No. 65.
(c) Share Purchase Agreement between Registrant and
Municipal Fund for Temporary Investment dated
February 10, 1999 is incorporated by reference to
Exhibit (h)(3)(c) of PEA No. 65.
(d) Share Purchase Agreement between Registrant and
Municipal Fund for California Investors, Inc.
dated February 10, 1999 is incorporated by
reference to Exhibit (h)(3)(d) of PEA No. 65.
(e) Share Purchase Agreement between Registrant and
Municipal Fund for New York Investors, Inc. dated
February 10, 1999 is incorporated by reference to
Exhibit (h)(3)(e) of PEA No. 65.
<PAGE>
(i) None.
(j) (1) Opinion and Consent of Counsel.
(2) Consent of PricewaterhouseCoopers LLP.
(3) Consent of KPMG LLP.
(4) Consent of O'Melveny & Myers LLP.
(5) Consent of Willkie Farr & Gallagher.
(k) None.
(l) None.
(m) (1) Registrant's Amended Distribution Plan with respect to
Plus Shares and Form of Distribution Agreement is
incorporated by reference to Exhibit (m) (1) of
PEA No. 61.
(2) Registrant's Shareholder Services Plan with respect to
Dollar Shares is incorporated by reference to Exhibit
(m) (2) of PEA No. 61.
(3) Registrant's Shareholder Service Plan with respect to
Administration Shares is incorporated by reference to
Exhibit (m) (3) PEA No. 61.
(4) Registrant's Shareholder Service Plan with respect to
Cash Reserve Shares is incorporated by reference to
Exhibit (m) (4) of PEA No. 61.
(5) Registrant's Shareholder Service Plan with Respect to
Cash Management Shares is incorporated by reference to
Exhibit (m) (5) of PEA No. 61.
(6) Registrant's Amended Cash Management Shareholder
Services Plan dated May 10, 2000.
(7) Form of Registrant's Servicing Agreement dated May 10,
2000.
<PAGE>
(n) Not Applicable.
(o) (1) Amended Rule 18f-3 Plan for Multi-Class System dated
May 10, 2000.
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, a form of which is
incorporated by reference to Exhibit (e) of PEA No. 61, Section 12 of
the Custodian Services Agreement, a form of which is included
herewith, and Section 12 of the Transfer Agency Agreement.
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, which
is incorporated by reference to Exhibit (a) (2) of PEA No. 61,
provides for the indemnification of Registrant's trustees and
officers.
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.
<PAGE>
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 investment companies:
International Dollar Reserve Fund I, Ltd.
Provident Institutional Funds Trust
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.
Columbia National Municipal Bond Fund, Inc.
GAMNA Series Funds, Inc.
WT Investment Trust
Kalmar Pooled Investment Trust
The RBB Fund, Inc.
Robertson Stephens Investment Trust
HT Insight Funds, Inc.
Harris Insight Funds Trust
Hilliard-Lyons Government Fund, Inc.
Hilliard-Lyons Growth Fund, Inc.
Hilliard-Lyons Research Trust
Senbanc Fund
Warburg Pincus Trust
ABN AMRO Funds
Alleghany Funds
BT Insurance Funds Trust
First Choice Funds Trust
<PAGE>
Forward Funds, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
IBJ Funds Trust
Light Index Funds, Inc.
LKCM Funds
Matthews International Funds
McM Funds
Metropolitan West Funds
New Covenant Funds, Inc.
Panorama Trust
Smith Breeden Series Funds
Smith Breeden Trust
Stratton Growth Fund, Inc.
Stratton Monthly Dividend REIT Shares, Inc.
The Stratton Funds, Inc.
The Galaxy Fund
The Galaxy VIP Fund
Galaxy Fund II
The Govett Funds, Inc.
Trainer, Wortham First Mutual Funds
Undiscovered Managers Funds
Wilshire Target Funds, Inc.
Weiss, Peck & Greer Funds Trust
Weiss, Peck & Greer International Fund
WPG Growth and Income Fund
WPG Growth Fund
WPG Tudor Fund
RWB/WPG U.S. Large Stock Fund
Tomorrow Funds Retirement Trust
<PAGE>
The BlackRock Funds, Inc. (Distributed by BlackRock Distributors,
Inc. a wholly owned subsidiary of Provident Distributors, Inc.)
Northern Funds Trust and Northern Institutional Funds Trust
(Distributed by Northern Funds Distributors, LLC a wholly owned
subsidiary of Provident Distributors, Inc.)
The OffitBank Investment Fund, Inc. (Distributed by Offit Funds
Distributor, Inc. a wholly owned subsidiary of Provident
Distributors, Inc.)
The OffitBank Variable Insurance Fund, Inc. (Distributed by Offit
Funds Distributor, Inc. a wholly owned subsidiary of Provident
Distributors, Inc.)
Provident Distributors, Inc. is registered with the Securities and
Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. Provident Distributors, Inc. is located at
3200 Horizon Drive, King of Prussia, PA 19406.
(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).
(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
<PAGE>
function as subcustodian for PFPC Trust Company, the
registrant's custodian).
(2) Provident Distributors, Inc., 3200 Horizon Drive, King of
Prussia, PA 19406 (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, One Logan Square, 18th & Cherry
Streets, Philadelphia, PA 19103-6996 (Registrant's Charter,
By-Laws, and Minutes Books).
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, Provident Institutional Funds certifies that it
meets all the requirements for effectiveness of this Post-Effective Amendment
No. 66 to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Philadelphia, and State of
Pennsylvania, on June 5, 2000.
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. 66 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 June 5, 2000
----------------------------
G. Nicholas Beckwith, III
*Jerrold B. Harris Trustee June 5, 2000
----------------------------
Jerrold B. Harris
*Joseph P. Platt Trustee June 5, 2000
----------------------------
Joseph P. Platt
*Robert C. Robb, Jr. Trustee June 5, 2000
----------------------------
Robert C. Robb, Jr.
*Kenneth L. Urish Trustee June 5, 2000
----------------------------
Kenneth L. Urish
*Frederick W. Winter Trustee June 5, 2000
----------------------------
Frederick W. Winter
/s/ Rodney D. Johnson Chairman of the Board of June 5, 2000
---------------------------- Trustees, President and
Rodney D. Johnson Treasurer (Chief Executive Officer
and Principal Financial and
Accounting Officer)
*By: /s/ W. Bruce McConnel
---------------------
W. Bruce McConnel
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
-------------
(j) (1) Opinion and Consent of Counsel.
(2) Consent of Pricewaterhouse Coopers LLP.
(3) Consent of KPMG LLP.
(4) Consent of O'Melveny & Myers.
(5) Consent of Willkie Farr & Gallagher.
(m) (6) Registrant's Amended Cash Management Shareholder Services
Plan dated May 10, 2000.
(7) Form of Registrant's Servicing Agreement dated May 10, 2000.
(o) (1) Amended Rule 18f-3 Plan for Multi-Class System dated May 10,
2000.
