485BPOS
1
Registration No. 33-20827
Inv. Co. Act No. 811-5518
As filed with the Securities and Exchange Commission on March 31, 1995
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 27 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 29 [X]
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THE RBB FUND, INC.
(Warburg Pincus Growth & Income Fund: Warburg Pincus Class and Warburg
Pincus Series 2 Class; Warburg Pincus Balanced Portfolio: Warburg
Pincus Class and Warburg Pincus Series 2 Class; Tax-Free Portfolio:
RBB Family Class; Government Securities Portfolio: RBB Family Class;
BEA International Equity Portfolio: BEA Class; BEA Strategic Fixed
Income Portfolio: BEA Class; BEA Emerging Markets Equity Portfolio:
BEA Class; BEA U.S. Core Equity Portfolio: BEA Class; BEA U.S. Core
Fixed Income Portfolio; BEA Class; BEA Global Fixed Income Portfolio:
BEA Class; BEA Municipal Bond Fund Portfolio; BEA Class; BEA Balanced
Fund Portfolio; BEA Class; BEA Short Duration Portfolio: BEA Class;
Laffer/Canto Equity Fund: Laffer/Canto Equity Class; Money Market
Portfolio: RBB Family Class, Cash Preservation Class, Sansom Street
Class, Bedford Class, Janney 1 Class, Beta 1 Class, Gamma 1 Class,
Delta 1 Class, Epsilon 1 Class, Zeta 1 Class, Eta 1 Class and Theta 1
Class; Municipal Money Market Portfolio: RBB Family Class, Cash
Preservation Class, Sansom Street Class, Bedford Class, Bradford
Class, Janney 2 Class, Beta 2 Class, Gamma 2 Class, Delta 2 Class,
Epsilon 2 Class, Zeta 2 Class, Eta 2 Class and Theta 2 Class;
Government Obligations Money Market Portfolio: Sansom Street Class,
Bedford Class, Bradford Class, Janney 3 Class, Beta 3 Class, Gamma 3
Class, Delta 3 Class, Epsilon 3 Class, Zeta 3 Class, Eta 3 Class and
Theta 3 Class; New York Municipal Money Market Portfolio: Bedford
Class, Janney 4 Class, Beta 4 Class, Gamma 4 Class, Delta 4 Class,
Epsilon 4 Class, Zeta 4 Class, Eta 4 Class and Theta 4 Class)
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(Exact Name of Registrant as Specified in Charter)
Bellevue Park Corporate Center
400 Bellevue Parkway
Suite 100
Wilmington, DE 19809
(Address of Principal Executive Offices)
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Registrant's Telephone Number: (302) 792-2555
Copies to:
GARY M. GARDNER, ESQUIRE JOHN N. AKE, ESQUIRE
PNC Bank, National Association Ballard Spahr Andrews & Ingersoll
Broad and Chestnut Streets 1735 Market Street, 51st Floor
Philadelphia, PA 19101 Philadelphia, PA 19101
(Name and Address of
Agent for Service)
Approximate Date of Proposed Public Offering: as soon as possible after
effective date of registration statement.
It is proposed that this filing will become effective
(check appropriate box)
X immediately upon filing pursuant to paragraph (b)
---
---on __________ pursuant to paragraph (b)
---60 days after filing pursuant to paragraph (a)(i)
---on _______________ pursuant to paragraph (a)(i) 75 days
---after filing pursuant to paragraph (a)(ii)
---on _______________ pursuant to paragraph (a)(ii) 485
If appropriate, check following box:
--- this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
------------------------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has elected to register an indefinite number of shares of
common stock of each of the fifty-four classes registered hereby
under the Securities Act of 1933. Registrant filed its notice pursuant
to Rule 24f-2 for the fiscal year ended August 31, 1994 on
October 7, 1994.
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This document contains a total of ___________
pages. Exhibit Index appears on page __________.
THE RBB FUND, INC.
(Janney Shares of the Money Market Portfolio,
Municipal Money Market Portfolio, Government
Obligations Money Market Portfolio
and New York Municipal Money Market Portfolio)
Cross Reference Sheet
Form N-1A Item Location
PART A PROSPECTUS
1. Cover Page............................ Cover Page
2. Synopsis.............................. Introduction
3. Financial Highlights Information...... Inapplicable
4. General Description of Registrant..... Cover Page;
The Fund;
Investment Objec-
tives and Policies;
Description of
Shares
5. Management of the Fund................ Management
6. Capital Stock and Other Securities.... Cover Page;
Dividends and
Distributions;
Description of
Shares
7. Purchase of Securities Being Offered.. Purchase and
Redemption of
Shares - Purchase
Procedures, and Net
Asset Value
8. Redemption or Repurchase.............. Purchase and
Redemption of
Shares - Redemption
of Shares, and Net
Asset Value
9. Legal Proceedings..................... Inapplicable
PART B STATEMENT OF
ADDITIONAL INFORMATION
10. Cover Page............................ Cover Page
11. Table of Contents..................... Contents
12. General Information and History....... General; See
Prospectus -
"The Fund"
13. Investment Objectives and Policies.... Investment Objectives
and Policies
14. Management of the Fund................ Directors and Officers;
Investment Advisory,
Distribution and
Servicing Arrangements
15. Control Persons and Principal Holders
of Securities......................... Miscellaneous
16. Investment Advisory and Other
Services.............................. Investment Advisory,
Distribution and
Servicing Arrangements;
See Prospectus -
"Management"
17. Brokerage Allocation and Other
Practices............................. Portfolio Transactions
18. Capital Stock and Other Securities........ Additional Information
Concerning Fund Shares;
See Prospectus -
"Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchase and Redemption
Information; Valuation
of Shares; See
Prospectus - "Purchase
and Redemption of
Shares" and
"Distribution of
Shares"
20. Tax Status............................ Taxes; See Prospectus -
"Taxes"
21. Underwriters.......................... Not Applicable
22. Calculation of Yield Quotations of
Money Market Funds.................... Valuation of Shares
23. Financial Statements...................... Inappicable
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C of this Registration Statement.
[LOGO] ^
Prospectus
THE ^ JANNEY MONTGOMERY SCOTT MONEY FUNDS
Money Market Portfolio
------------------------------
Municipal
Money Market Portfolio
------------------------------
Government Obligations
Money Market Portfolio
------------------------------
New York Municipal
Money Market Portfolio
^___________, 1995
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION
WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
TABLE OF CONTENTS
Page
----
INTRODUCTION...................................................... 2
INVESTMENT OBJECTIVES AND POLICIES............................... 7
PURCHASE AND REDEMPTION OF SHARES................................ 29
NET ASSET VALUE................................................... 33
MANAGEMENT........................................................ ^ 34
DISTRIBUTION OF SHARES............................................ ^ 37
DIVIDENDS AND DISTRIBUTIONS....................................... ^ 39
DESCRIPTION OF SHARES............................................. ^ 41
OTHER INFORMATION................................................. ^ 47
Investment Adviser
PNC Institutional Management Corporation
Wilmington, Delaware
Custodian
PNC Bank, National Association
Philadelphia, Pennsylvania
Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware
Counsel
Ballard Spahr Andrews & Ingersoll
Philadelphia, Pennsylvania
Independent Accountants
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
THE ^ JANNEY MONTGOMERY SCOTT MONEY FUNDS
of
The RBB Fund, Inc.
The ^ Janney Montgomery Scott Money Funds consists of four classes of
common stock of The RBB Fund, Inc. (the "Fund"), an open-end management
investment company. The shares of such classes (collectively, the " ^ Janney
Shares" or "Shares") offered by this Prospectus represent interests in a
taxable money market portfolio, a municipal money market portfolio, a U.S.
Government obligations money market portfolio and a New York municipal money
market portfolio (collectively, the "Portfolios"). The investment objectives
of each investment portfolio described in this Prospectus are as follows:
Money Market Portfolio--to provide as high a level of current
interest income as is consistent with maintaining liquidity and
stability of principal. It seeks to achieve such objective by
investing in a diversified portfolio of U.S. dollar-denominated money
market instruments.
Municipal Money Market Portfolio--to provide as high a level
of current interest income exempt from Federal income taxes as is
consistent with maintaining liquidity and stability of principal.
It seeks to achieve such objective by investing substantially all of
its assets in a diversified portfolio of short-term Municipal
Obligations. "Municipal Obligations" are obligations issued by or on
behalf of states, territories and possessions of the United States,
the District of Columbia and their political subdivisions, agencies,
instrumentalities and authorities. During periods of normal market
conditions, at least 80% of the net assets of the Portfolio will be
invested in Municipal Obligations, the interest on which is exempt
from the regular Federal income tax but which may constitute an item
of tax preference for purposes of the Federal alternative minimum tax.
Government Obligations Money Market Portfolio--to provide as
high a level of current interest income as is consistent with
maintaining liquidity and stability of principal. It seeks to achieve
such objective by investing in short-term U.S. Treasury bills, notes
and other obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, and repurchase agreements relating
to such obligations.
New York Municipal Money Market Portfolio--to provide as high
a level of current income that is exempt from Federal, New York State
and New York City personal income taxes as is consistent with
preservation of capital and liquidity. It seeks to achieve its
objective by investing primarily in Municipal Obligations, the
interest on which is exempt from the regular Federal income tax and
is not an item of tax preference for purposes of the Federal
alternative minimum tax ("Tax-Exempt Interest") and is exempt from
New York State and New York City personal income taxes.
Shares of the Fund are not deposits or obligations of or ^
guaranteed or endorsed by, PNC Bank, National Association or any other bank
and Shares are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other agency. Investments in
Shares of the Fund involve investment risks, including the possible loss of
principal. There can be no assurance that the Portfolios will be able to
maintain a stable net asset value of $1.00 per share.
PNC Institutional Management Corporation serves as investment
adviser for the Fund, PNC Bank, National Association serves as sub-advisor
for all Portfolios other than the New York Municipal Money Market Portfolio,
which has no sub-advisor, and serves as custodian for the Fund, PFPC Inc.
serves as administrator to the Municipal Money Market and New York Municipal
Money Market Portfolios and transfer and dividend disbursing agent for the
Fund. Counsellors Securities Inc. acts as distributor for the Fund.
This Prospectus contains concise information that a prospective
investor needs to know before investing. Please keep it for future
reference. A Statement of Additional Information, dated ^______________,
1995, has been filed with the Securities and Exchange Commission and is
incorporated by reference in this Prospectus. It may be obtained upon
request free of charge from the Fund's distributor by calling (800) 888-9723.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
^ PROSPECTUS ___________, 1995
1
INTRODUCTION
The RBB Fund, Inc. (the "Fund") is an open-end management
investment company incorporated under the laws of the State of Maryland on
February 29, 1988 and currently operating or proposing to operate nineteen
separate investment portfolios. Each of the four classes of the Fund's shares
(collectively, the " ^ Janney Classes") offered by this Prospectus represents
interests in one of the following of such investment portfolios: the Money
Market Portfolio, the Municipal Money Market Portfolio, the Government
Obligations Money Market Portfolio and the New York Municipal Money Market
Portfolio. The Money Market, Municipal Money Market and Government
Obligations Money Market Portfolios are diversified investment portfolios;
the New York Municipal Money Market Portfolio is a non-diversified
investment portfolio.
The Money Market Portfolio's investment objective is to
provide as high a level of current interest income as is consistent with
maintaining liquidity and stability of principal. It seeks to achieve such
objective by investing in a diversified portfolio of U.S. dollar-denominated
money market instruments which meet certain ratings criteria and present
minimal credit risks. In pursuing its investment objective, the Money Market
Portfolio invests in a broad range of government, bank and commercial
obligations that may be available in the money markets.
The Municipal Money Market Portfolio's investment objective
is to provide as high a level of current interest income exempt from Federal
income taxes as is consistent with maintaining liquidity and stability of
principal. To achieve this objective, the Municipal Money Market Portfolio
invests substantially all of its assets in a diversified portfolio of
short-term Municipal Obligations which meet certain ratings criteria and
present minimal credit risks. During periods of normal market conditions, at
least 80% of the net assets of the Portfolio will be invested in Municipal
Obligations, the interest on which is exempt from the regular Federal income
tax but which may constitute an item of tax preference for purposes of the
Federal alternative minimum tax.
The Government Obligations Money Market Portfolio's
investment objective is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal. To
achieve its objective, the Portfolio invests exclusively in short-term U.S.
Treasury bills, notes and other obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, and enters into repurchase
agreements relating to such obligations.
2
The New York Municipal Money Market Portfolio's investment
objective is to provide as high a level of current income that is exempt from
Federal, New York State and New York City personal income taxes as is
consistent with preservation of capital and liquidity. It seeks to achieve
its objective by investing primarily in Municipal Obligations, the interest
on which is Tax-Exempt Interest and is exempt from New York State and New
York City personal income taxes and which meet certain ratings criteria and
present minimal credit risks.
Each of the Portfolios seeks to maintain a net asset value of
$1.00 per share; however, there can be no assurance that the Portfolios will
be able to maintain a stable net asset value of $1.00 per share.
The Fund's investment adviser is PNC Institutional Management
Corporation ("PIMC"). PNC Bank, National Association ("PNC Bank") serves as
sub-advisor to all Portfolios other than the New York Municipal Money Market
Portfolio, which has no sub-advisor, and serves as custodian to the Fund, and
PFPC Inc. ("PFPC") serves as administrator to the Municipal Money Market and
New York Municipal Money Market Portfolios and transfer and dividend
disbursing agent to the Fund. Counsellors Securities Inc. (the "Distributor")
acts as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of any of the ^
Janney Classes through ^ Janney Montgomery Scott ("JMS") or by direct
purchases or redemptions. See "Purchase and Redemption of Shares."
An investment in any of the ^ Janney Classes is subject to
certain risks, as set forth in detail under "Investment Objectives and
Policies." Any or all of the Portfolios, to the extent set forth under
"Investment Objectives and Policies," may engage in the following investment
practices: the use of repurchase agreements and reverse repurchase
agreements, the purchase of mortgage-related securities, the purchase of
securities on a "when-issued" or "forward commitment" basis, the purchase of
stand-by commitments and the lending of securities. All of these transactions
involve certain special risks, as set forth under "Investment Objectives and
Policies."
For more detailed information of how to purchase or redeem ^
Janney Shares, please refer to the section of this Prospectus entitled
"Purchase and Redemption of Shares."
3
Fee Table
Estimated Annual Fund Operating Expenses ^ (Janney Classes)
After Expense Reimbursements and Waivers
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------
Management fees (after
waivers)*.................. .13% 0% .21% 0%
12b-1 fees (after
waivers)*.................. .60 .60 .60 .60
Other Expenses (after
reimbursements)............ ^.27 .40 .19 .40
Total Fund Operating
Expenses ^(Janney
Classes) (after waivers
and reimbursements) ^...... 1.00% 1.00% 1.00% 1.00%
==== ==== ==== ====
* Management fees and 12b-1 fees are based on average daily net assets and
are calculated daily and paid monthly.
The caption "Other Expenses" does not include extraordinary expenses as
determined by use of generally accepted accounting principles.
Example
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Year 5 Years 10 Years
------ ------ ------- ---------
Money Market*........... $10 ^ $32 N/A N/A
Municipal Money
Market*................ ^ $10 $32 N/A N/A
Government Obligations
Money Market*.......... $10 ^ $32 N/A N/A
New York Municipal
Money Market........... ^ $10 $32 N/A N/A
* Other classes of these Portfolios are sold with different fees and
expenses.
The Fee Table is designed to assist an investor in
understanding the various costs and expenses that an investor in the ^ Janney
Classes of the Fund will bear directly or indirectly. (For more complete
descriptions of the various costs and expenses, see "Management--Investment
4
Adviser and Sub-Advisor" and "Distribution of Shares" below.) The expense
figures are based on estimated costs and estimated fees expected to be
charged to the ^ Janney Classes, taking into account anticipated fee waivers
and reimbursements. The Fee Table reflects a voluntary waiver of Management
fees for each Portfolio. However, there can be no assurance that any future
waivers of Management fees will not vary from the figure reflected in the Fee
Table. To the extent that any service providers assume additional expenses of
the Portfolios, such assumption will have the effect of lowering a
Portfolio's overall expense ratio and increasing its yield to investors.
Absent anticipated fee waivers and reimbursements, estimated expenses for the
current fiscal year, based on each Portfolios average net assets, are as
follows:
Estimated Annual Fund Operating Expenses ^(Janney Classes)
Before Expense Reimbursements and Waivers
Government New York
Municipal Obligations Municipal
Money Market Money Market Money Market Money Market
Portfolio Portfolio Portfolio Portfolio
------------ ------------- ------------- -------------
Management fees....... .38% .34% .45% .45%
12b-1 fees ........... .60 .60 .60 .60
Other Expenses........ ^.27 .40 .19 .40
Total Fund
Operating
Expenses (Janney^
Classes) ^(before
waivers and
reimbursements^)... 1.25% 1.34% 1.24% 1.45%
==== ==== ==== ====
The caption "Other Expenses" does not include extraordinary expenses
as determined by use of generally accepted accounting principles.
The Example in the Fee Table assumes that all dividends and
distributions are reinvested and that the amounts listed under "Annual Fund
Operating Expenses ^(Janney Classes) After Expense Reimbursements and
Waivers" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN.
From time to time a Portfolio advertises its "yield" and
"effective yield." Both yield figures are based on historical earnings and
are not intended to indicate future performance. The "yield" of a Portfolio
refers to the income generated by an investment in a Portfolio over a
seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the
5
investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in a Portfolio is assumed
to be reinvested. The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment. Each
of the Municipal Money Market Portfolio's and the New York Municipal Money
Market Portfolio's "tax-equivalent yield" may also be quoted from time to
time, which shows the level of taxable yield needed to produce an after-tax
equivalent to such Portfolio's tax-free yield. This is done by increasing the
Municipal Money Market Portfolio's yield (calculated as above) by the amount
necessary to reflect the payment of Federal income tax at a stated tax rate
and by increasing the New York Municipal Money Market Portfolio's yield
(calculated as above) by the amount necessary to reflect the payment of
Federal, New York State and New York City personal income taxes at stated
rates.
The yield of any investment is generally a function of
portfolio quality and maturity, type of investment and operating expenses.
The yield on Shares of any of the ^ Janney Classes will fluctuate and is not
necessarily representative of future results. Any fees charged by ^ JMS
directly to their customers in connection with investments in the ^ Janney
Classes are not reflected in the yields of the ^ Janney Shares, and such
fees, if charged, will reduce the actual return received by shareholders on
their investments. The yield on Shares of the ^ Janney Classes may differ
from yields on shares of other classes of the Fund that also represent
interests in the same Portfolio depending on the allocation of expenses to
each of the classes of that Portfolio. See "Expenses."
6
INVESTMENT OBJECTIVES AND POLICIES
Money Market Portfolio
The Money Market Portfolio's investment objective is to
provide as high a level of current interest income as is consistent with
maintaining liquidity and stability of principal. Portfolio obligations held
by the Money Market Portfolio have remaining maturities of 397 calendar days
or less (exclusive of securities subject to repurchase agreements). In
pursuing its investment objective, the Money Market Portfolio invests in a
diversified portfolio of U.S. dollar-denominated instruments, such as
government, bank and commercial obligations, that may be available in the
money markets ("Money Market Instruments") and that meet certain ratings
criteria and present minimal credit risks to the Money Market Portfolio.
See "Eligible Securities." The following descriptions illustrate the types
of Money Market Instruments in which the Money Market Portfolio invests.
Bank Obligations. The Portfolio may purchase obligations of
issuers in the banking industry such as short-term obligations of bank
holding companies, certificates of deposit, bankers' acceptances 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 Portfolio may
invest substantially in obligations of foreign banks or foreign branches of
U.S. banks where the investment adviser deems the instrument to present
minimal credit risks. Such investments may nevertheless entail risks that are
different from those of investments in domestic obligations of U.S. banks due
to differences in political, regulatory and economic systems and conditions.
The Portfolio may also make interest-bearing savings deposits in commercial
and savings banks in amounts not in excess of 5% of its total assets.
Commercial Paper. The Portfolio may purchase commercial paper
rated (at the time of purchase) in the two highest rating categories of a
nationally recognized statistical rating organization ("NRSRO"). These rating
symbols are described in the Appendix to the Statement of Additional
Information. The Portfolio may also purchase unrated commercial paper
provided that such paper is determined to be of comparable quality by the
Portfolio's investment adviser in accordance with guidelines approved by the
Fund's Board of Directors. Commercial paper issues in which the Portfolio may
invest include securities issued by corporations without registration under
the Securities Act of 1933 (the "1933 Act") in reliance on the exemption from
such registration afforded by Section 3(a)(3) thereof, and
7
commercial paper issued in reliance on the so-called "private placement"
exemption from registration which is afforded by Section 4(2) of the 1933
Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the Federal securities laws in that any resale must
similarly be made in an exempt transaction. Section 4(2) paper is normally
resold to other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity.
Commercial paper purchased by the Portfolio may include
instruments issued by foreign issuers, such as Canadian Commercial Paper
("CCP"), 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, subject to the criteria stated above for other commercial paper
issuers.
Variable Rate Demand Notes. The Portfolio may purchase
variable rate demand notes, which are unsecured instruments that permit the
indebtedness thereunder to vary and provide for periodic adjustment in the
interest rate. Although the notes are not normally traded and there may be no
active secondary market in the notes, the Portfolio will be able (at any time
or during the specified periods not exceeding 397 calendar days, depending
upon the note involved) to demand payment of the principal of a note. The
notes are not typically rated by credit rating agencies, but issuers of
variable rate demand notes must satisfy the same criteria as set forth above
for issuers of commercial paper. If an issuer of a variable rate demand note
defaulted on its payment obligation, the Portfolio might be unable to dispose
of the note because of the absence of an active secondary market. For this or
other reasons, the Portfolio might suffer a loss to the extent of the
default. The Portfolio invests in variable rate demand notes only when the
Portfolio's investment adviser deems the investment to involve minimal credit
risk. The Portfolio's investment adviser also monitors the continuing
creditworthiness of issuers of such notes to determine whether the Portfolio
should continue to hold such notes.
Repurchase Agreements. The Portfolio may agree to purchase
securities from financial institutions subject to the seller's agreement to
repurchase them at an agreed-upon time and price ("repurchase agreements").
The securities held subject to a repurchase agreement may have stated
maturities exceeding 397 calendar days, provided the repurchase agreement
itself matures in less than 397 calendar days. The financial institutions
with whom the Portfolio may enter into repurchase agreements will be banks
which the Portfolio's investment adviser considers ^ creditworthy pursuant
to criteria approved by the Board of
8
Directors and non-bank dealers of U.S. Government securities that are listed
on the Federal Reserve Bank of New York's list of reporting dealers. The
Portfolio's investment adviser will consider, among other things, whether
a repurchase obligation of a seller involves minimal credit risk to a
Portfolio in determining whether to have the Portfolio enter into a
repurchase agreement. 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 plus accrued interest. The Portfolio's
investment adviser will mark to market daily the value of the securities,
and will, if necessary, require the seller to maintain additional
securities, to ensure that the value is not less than the repurchase price.
Default by or bankruptcy of the seller would, however, expose the Portfolio
to possible loss because of adverse market action or delays in connection
with the disposition of the underlying obligations.
U.S. Government Obligations. The Portfolio may purchase
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities. 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.
Asset-backed Securities. The Portfolio 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. Asset-backed
securities also include adjustable rate securities. The estimated life of an
asset-backed security varies with the prepayment experience with respect to
the underlying debt instruments. For this and other reasons, an asset-backed
security's stated maturity may be shortened, and the security's total return
may be difficult to predict precisely. Such difficulties are not expected,
however, to have a significant effect on the Portfolio since the remaining
maturity or any asset-backed security acquired will be 397 days or less.
Asset-backed securities are considered an industry for industry concentration
purposes. See "Investment Limitations".
Reverse Repurchase Agreements. The Portfolio may enter into
reverse repurchase agreements with respect to portfolio securities. At the
time the Portfolio enters into a reverse repurchase agreement, it will place
in a segregated custodial account with the Fund's custodian or a qualified
sub-custodian liquid assets such as U.S. Government securities or other
liquid debt securities having a value equal to or greater than the
repurchase price (including accrued interest) and will
9
subsequently monitor the account to ensure that such value is maintained.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Portfolio may decline below the price of the
securities the Portfolio is obligated to repurchase. Reverse repurchase
agreements are considered to be borrowings by the Portfolio under the
Investment Company Act of 1940 (the "1940 Act").
Guaranteed Investment Contracts. The Portfolio may make
investments in obligations, such as guaranteed investment contracts and
similar funding agreements (collectively "GICs"), issued by highly rated U.S.
insurance companies. A GIC is a general obligation of the issuing insurance
company and not a separate account. The Portfolio's Investments in GICs are
not expected to exceed 5% of its total assets at the time of purchase absent
unusual market conditions. GIC investments are subject to the Fund's policy
regarding investment in illiquid securities.
Municipal Obligations. In addition, the Portfolio may, when
deemed appropriate by its investment adviser in light of the Portfolio's
investment objective, invest without limitation in high quality, short-term
Municipal Obligations issued by state and local governmental issuers, the
interest on which may be taxable or tax-exempt for Federal income tax
purposes, provided that such obligations carry yields that are competitive
with those of other types of Money Market Instruments of comparable quality.
For a more complete discussion of Municipal Obligations, see "Investment
Objectives and Policies--Municipal Money Market Portfolio--Municipal
Obligations."
Stand-By Commitments. The Portfolio may acquire "stand-by
commitments" with respect to Municipal Obligations held in its portfolio.
Under a stand-by commitment, a dealer would agree to purchase at the
Portfolio's option specified Municipal Obligations at a specified price. The
acquisition of a stand-by commitment may increase the cost, and thereby
reduce the yield, of the Municipal Obligation to which such commitment
relates. The Portfolio will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
When-Issued Securities. The Portfolio may purchase portfolio
securities on a "when-issued" basis. When issued securities are securities
purchased for delivery beyond the normal settlement date at a stated price
and yield. The Portfolio will generally not pay for such securities or start
earning interest on them until they are received. Securities purchased on a
when-issued basis are recorded as an asset at the time the commitment is
entered into and are subject to changes in value prior to delivery based upon
changes in the general level of interest rates. The Portfolio expects that
commitments to
10
purchase when-issued securities will not exceed 25% of the value of its total
assets absent unusual market conditions. The Portfolio does not intend to
purchase when-issued securities for speculative purposes but only in
furtherance of its investment objective.
Eligible Securities. The Portfolio will only purchase
"eligible securities" that present minimal credit risks as determined by the
Portfolio's investment adviser pursuant to guidelines adopted by the Board of
Directors. Eligible securities generally include: (1) U.S. Government
securities, (2) securities that are rated at the time of purchase in the two
highest rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs") (e.g., commercial paper rated "A-1" or "A-2"
by S&P), (3) securities that are rated at the time of purchase by the only
NRSRO rating the Security in one of its two highest rating categories for
such securities, and (4) securities that are not rated and are issued by an
issuer that does not have comparable obligations rated by an NRSRO ("Unrated
Securities"), provided that such securities are determined to be of
comparable quality to eligible rated securities. For a more complete
description of eligible securities, see "Investment Objectives and Policies"
in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than
10% of its net assets in illiquid securities, including repurchase agreements
which have a maturity of longer than seven days, time deposits with
maturities in excess of seven days, variable rate demand notes with demand
periods in excess of seven days unless the Portfolio's investment adviser
determines that such notes are readily marketable and could be sold promptly
at the prices at which they are valued, and other securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale. Repurchase agreements subject to demand
are deemed to have a maturity equal to the notice period. Securities that
have legal or contractual restrictions on resale but have a readily available
market are not deemed illiquid for purposes of this limitation. The
Portfolio's investment adviser will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors. See "Investment
Objectives and Policies--Illiquid Securities" in the Statement of Additional
Information.
The Money Market Portfolio's investment objective and
policies described above may be changed by the Fund's Board of Directors
without the affirmative vote of the holders of a majority of all outstanding
Shares representing interests in the Portfolio. Such changes may result in
the Portfolio having investment objectives which differ from those an
investor may
11
have considered at the time of investment. There is no assurance that the
investment objective of the Money Market Portfolio will be achieved. The
Portfolio may not, however, change the investment limitations summarized
below without such a vote of shareholders. (A more detailed description of
the following investment limitations, together with other investment
limitations that cannot be changed without a vote of shareholders, is
contained in the Statement of Additional Information under "Investment
Objectives and Policies.")
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market
Instruments, some of which may be subject to repurchase agreements,
but the Portfolio may make interest-bearing savings deposits in
amounts not in excess of 5% of the value of the Portfolio's assets
and may make time deposits.
2. Borrow money, except from banks for temporary purposes and
except for reverse repurchase agreements, and then in amounts not in
excess of 10% of the value of the Portfolio's assets at the time of
such borrowing, and only if after such borrowing there is asset
coverage of at least 300% for all borrowings of the Portfolio; or
mortgage, pledge or hypothecate any of its assets except in
connection with any such borrowing and in amounts not in excess of
10% of the value of the Portfolio's assets at the time of such
borrowing; or purchase portfolio securities while borrowings in
excess of 5% of the Portfolio's net assets are outstanding. (This
borrowing provision is not for investment leverage, but solely to
facilitate management of the Portfolio's securities by enabling the
Portfolio to meet redemption requests where the liquidation of
portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of
purchase, less than 25% of the value of the total assets of the
Portfolio to be invested in the obligations of issuers in the banking
industry, or in obligations, such as repurchase agreements, secured
by such obligations (unless the Portfolio is in a temporary defensive
position) or which would cause, at the time of purchase, more than
25% of the value of its total assets to be invested in the
obligations of issuers in any other industry.
4. Purchase securities of any one issuer, other than
securities issued or guaranteed by the U.S. Government or its
agencies and instrumentalities, if immediately after and as a result
of such purchase more than 5% of the value
12
of its total assets would be invested in the securities of such
issuer, or more than 10% of the outstanding voting securities of
such issuer would be owned by the Portfolio, except that up to 25%
of the value of the Portfolio's total assets may be invested without
regard to such 5% limitation.
So long as it values its portfolio securities on the basis of
the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940
Act, the Money Market Portfolio will meet the following limitations on its
investments in addition to the fundamental investment limitations described
above. These limitations may be changed without a vote of shareholders of the
Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days.
"First Tier Securities" include eligible securities that (i) if rated
by more than one NRSRO, are rated (at the time of purchase) by two or
more NRSROs in the highest rating category for such securities, (ii)
if rated by only one NRSRO, are rated by such NRSRO in its highest
rating category for such securities, (iii) have no short-term rating
and are comparable in priority and security to a class of short-term
obligations of the issuer of such securities that have been rated in
accordance with (i) or (ii) above, or (iv) are Unrated Securities
that are determined to be of comparable quality to such securities.
Purchases of First Tier Securities that come within categories (ii)
and (iv) above will be approved or ratified by the Board of Directors.
2. The Money Market Portfolio will limit its purchases of
Second Tier Securities, which are eligible securities other than
First Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of
Second Tier Securities of one issuer to the greater of 1% of its
total assets or $1 million.
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective
is to provide as high a level of current interest income exempt from Federal
income taxes as is consistent with
13
maintaining liquidity and relative stability of principal. The Municipal
Money Market Portfolio invests substantially all of its assets in a
diversified portfolio of short-term Municipal Obligations, the interest on
which, in the opinion of bond counsel or counsel to the issuer, as the case
may be, is exempt from the regular Federal income tax. During periods of
normal market conditions, at least 80% of the net assets of the Municipal
Money Market Portfolio will be invested in Municipal Obligations. Municipal
Obligations include securities the interest on which is Tax-Exempt Interest,
although to the extent the Portfolio invests in certain private activity
bonds issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a
portion of the interest earned by the Portfolio may constitute an item of
tax preference for purposes of the Federal alternative minimum tax
("AMT Interest").
Municipal Obligations. The Portfolio invests in short-term
Municipal Obligations which are determined by the Portfolio's investment
adviser to present minimal credit risks and that meet certain ratings
criteria pursuant to guidelines established by the Fund's Board of Directors.
The Portfolio may also purchase Unrated Securities provided that such
securities are determined to be of comparable quality to eligible rated
securities. The applicable Municipal Obligations ratings are described in the
Appendix to the Statement of Additional Information.
The Portfolio may hold uninvested cash reserves pending
investment during temporary defensive periods or if, in the opinion of the
Portfolio's investment adviser, suitable obligations bearing Tax-Exempt
Interest or AMT Interest are unavailable. There is no percentage limitation
on the amount of assets which may be held uninvested during temporary
defensive periods. Uninvested cash reserves will not earn income.
The two principal classifications of Municipal Obligations
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 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 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.
14
Municipal Obligations 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.
Municipal Obligations may include variable rate demand notes.
Such notes are frequently not rated by credit rating agencies, but unrated
notes purchased by the Portfolio will have been determined by the Portfolio's
investment adviser to be of comparable quality at the time of the purchase to
rated instruments purchasable by the Portfolio. Where necessary to ensure
that a note is of eligible quality, the Portfolio will require that the
issuer's obligation to pay the principal of the note be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend.
While there may be no active secondary market with respect to a particular
variable rate demand note purchased by a Portfolio, the Portfolio may, upon
the notice specified in the note, demand payment of the principal of the note
at any time or during specified periods not exceeding 397 calendar days,
depending upon the instrument involved. The absence of such an active
secondary market, however, could make it difficult for the Portfolio to
dispose of a variable rate demand note if the issuer defaulted on its payment
obligation or during the periods that the Portfolio is not entitled to
exercise its demand rights. The Portfolio could, for this or other reasons,
suffer a loss to the extent of the default. The Portfolio invests in variable
rate demand notes only when the Portfolio's investment adviser deems the
investment to involve minimal credit risk. The Portfolio's investment adviser
also monitors the continuing creditworthiness of issuers of such notes to
determine whether the Portfolio should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions
of prior law affecting the issuance and use of proceeds of certain Municipal
Obligations. A new definition of private activity bonds applies to many types
of bonds, including those which were industrial development bonds under prior
law. Interest on private activity bonds issued after August 15, 1986 is
tax-exempt only if the bonds fall within certain defined categories of
qualified private activity bonds and meet the requirements specified in those
respective categories. In addition, interest on Alternative Minimum Tax
Securities that is received by taxpayers subject to alternative minimum tax
is taxable. The Act has generally not changed the tax treatment of bonds
issued to finance governmental operations. As used in this Prospectus, the
term "private activity bonds" also includes industrial development revenue
bonds issued prior to the
15
effective date of the provisions of the Tax Reform Act of 1986. Investors
should also be aware of the possibility of state and local alternative
minimum or minimum income tax liability on interest from Alternative
Minimum Tax Securities.
Although the Municipal Money Market Portfolio may invest more
than 25% of its net assets in (i) Municipal Obligations whose issuers are in
the same state, (ii) Municipal Obligations the interest on which is paid
solely from revenues of similar projects, and (iii) private activity bonds
bearing Tax-Exempt Interest, it does not currently intend to do so on a
regular basis. To the extent the Municipal Money Market Portfolio's assets
are concentrated in Municipal Obligations that are payable from the revenues
of similar projects or are issued by issuers located in the same state, the
Portfolio will be subject to the peculiar risks presented by the laws and
economic conditions relating to such states or projects to a greater extent
than it would be if its assets were not so concentrated.
The Municipal Money Market Portfolio may invest in tax-exempt
derivative securities such as tender option bonds, custodial receipts,
participations, beneficial interests in trusts and partnership interests.
A typical tax-exempt derivative security involves the purchase of an
interest in a pool of Municipal Obligations which interest includes a tender
option, demand or other feature, allowing the Portfolio to tender 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 future
principal or interest payments, or both, on underlying municipal securities
held by a custodian and such receipts include the option to tender the
underlying securities to the sponsor (usually a bank, broker-dealer or other
financial institution). Although the Internal Revenue Service has not ruled
on whether the interest received on derivative securities in the form of
participation interests or custodial receipts is Tax-Exempt Interest,
opinions relating to the validity of, and the tax-exempt status of payments
received by, the Portfolio from such derivative securities are rendered by
counsel to the respective sponsors of such derivatives and relied upon by the
Portfolio in purchasing such securities. Neither the Portfolio nor its
investment adviser will review the proceedings relating to the creation of
any tax-exempt derivative securities or the basis for such legal opinions.
^ The Portfolio may also purchase portfolio securities on a
"when-issued" basis such as described under "Investment Objectives and
Policies--Money Market Portfolio--When-Issued Securities."
16
^ The Portfolio may acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio such as described
under "Investment Objectives and Policies--Money Market Portfolio--Stand-by
Commitments."
Eligible Securities. The Municipal Money Market Portfolio
will only purchase "eligible securities" that present minimal credit risks as
determined by the Portfolio's investment adviser pursuant to guidelines
adopted by the Board of Directors. For a more complete description of
eligible securities, see "Investment Objectives and Policies--Money Market
Portfolio--Eligible Securities."
Illiquid Securities. The Portfolio will not invest more than
10% of its net assets in illiquid securities, including securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale. Securities that have legal or contractual
restrictions on resale but have a readily available market are not deemed
illiquid for purposes of this limitation. The Portfolio's investment adviser
will monitor the liquidity of such restricted securities under the
supervision of the Board of Directors. See "Investment Objectives and
Policies--Illiquid Securities" in the Statement of Additional Information.
The Municipal Money Market Portfolio's investment objective
and the policies described above may be changed by the Fund's Board of
Directors without the affirmative vote of the holders of a majority of the
Municipal Money Market Portfolio's outstanding shares. Such changes may
result in the Portfolio having investment objectives which differ from those
an investor may have considered at the time of investment. There is no
assurance that the investment objective of the Municipal Money Market
Portfolio will be achieved. The Municipal Money Market Portfolio may not,
however, change the following investment limitations without such a vote of
shareholders. (A more detailed description of the following investment
limitations, together with other investment limitations that cannot be
changed without a vote of shareholders, is contained in the Statement of
Additional Information under "Investment Objectives and Policies.")
The Municipal Money Market Portfolio may not:
1. Purchase the securities of any issuer, other than
securities issued or guaranteed by the U.S. Government or its
agencies and instrumentalities, if immediately after and as a result
of such purchase more than 5% of the value of the Portfolio's assets
would be invested in the securities of such issuer or more than 10%
of the outstanding voting securities of such issuer would be owned
17
by the Portfolio, except that up to 25% of the value of the
Portfolio's assets may be invested without regard to this 5%
limitation.
2. Borrow money, except from banks for temporary purposes and
then in amounts not in excess of 10% of the value of the Portfolio's
assets at the time of such borrowing, and only if after such
borrowing there is asset coverage of at least 300% for all borrowings
of the Portfolio; or mortgage, pledge or hypothecate any of its
assets except in connection with any such borrowing and in amounts
not in excess of the lesser of the dollar amounts borrowed or 10% of
the value of the Portfolio's assets at the time of such borrowing; or
purchase portfolio securities while borrowings in excess of 5% of the
Portfolio's net assets are outstanding. (This borrowing provision is
not for investment leverage, but solely to facilitate management of
the Portfolio's securities by enabling the Portfolio to meet
redemption requests where the liquidation of portfolio securities is
deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of
purchase, more than 25% of the value of the total assets of the
Portfolio to be invested in the obligations of issuers in the same
industry.
In addition, without the affirmative vote of the holders of a
majority of the Portfolio's outstanding shares, the Portfolio may not change
its policy of investing during normal market conditions at least 80% of its
net assets in obligations the interest on which is Tax-Exempt Interest or AMT
Interest.
So long as it values its portfolio securities on the basis of
the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940
Act, the Municipal Money Market Portfolio will meet the following limitation
on its investments in addition to the fundamental investment limitations
described above. This limitation may be changed without a vote of
shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any
Put if after the acquisition of the Put the Municipal Money Market
Portfolio has more than 5% of its total assets invested in instruments
issued by or subject to Puts from the same institution, except that
the foregoing condition shall only be applicable with respect to 75%
of the Municipal Money Market Portfolio's total assets. A "Put" means
a right to sell a
18
specified underlying instrument within a specified period of time and
at a specified exercise price that may be sold, transferred or
assigned only with the underlying instrument.
Government Obligations Money Market Portfolio
The Government Obligations Money Market Portfolio's
investment objective is to provide as high a level of current interest income
as is consistent with maintaining liquidity and stability of principal. It
seeks to achieve such objective by investing in short-term U.S. Treasury
bills, notes and other obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, and entering into repurchase
agreements relating to such obligations. The types of U.S. Government
obligations in which the Portfolio may invest include a variety of U.S.
Treasury obligations, which differ only in their interest rates, maturities,
and times of issuance, and obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, including mortgage-related
securities. Obligations of certain agencies and instrumentalities of the U.S.
Government, such as the Government National Mortgage Association and the
Export-Import Bank of the United States, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others, such as those of the Student Loan Marketing
Association, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, such as those
of the Federal Farm Credit Banks or the Federal Home Loan Mortgage
Corporation, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial
support to U.S. Government-sponsored agencies or instrumentalities if it is
not obligated to do so under law. The Portfolio will invest in the
obligations of such agencies or instrumentalities only when the investment
adviser believes that the credit risk with respect thereto is minimal.
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 representing an interest in the Portfolio. Certain
government securities held by the Portfolio may have remaining maturities
exceeding 397 calendar days if such securities provide for adjustments in
their interest rates not less frequently than every 397 calendar days and the
adjustments are sufficient to cause the securities to have market values,
after adjustment, which approximate their par values.
19
Repurchase Agreements. The Portfolio may agree to purchase
government securities from financial institutions subject to the seller's
agreement to repurchase them at an agreed-upon time and price ("repurchase
agreements"). For a description of repurchase agreements, see "Investment
Objectives and Policies--Money Market Portfolio--Repurchase Agreements."
Reverse Repurchase Agreements. The Portfolio may borrow funds
by entering into reverse repurchase agreements in accordance with the
investment restrictions described below. For a description of reverse
repurchase agreements, see "Investment Objectives and Policies--Money Market
Portfolio--Reverse Repurchase Agreements." The Portfolio would consider
entering into reverse repurchase agreements to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions.
Mortgage-Related Securities. Mortgage loans made by banks,
savings and loan institutions, and other lenders are often assembled into
pools, the interests in which are issued and guaranteed by an agency or
instrumentality of the U.S. Government, though not necessarily by the U.S.
Government itself. Interests in such pools are what this Prospectus calls
"mortgage-related securities."
Mortgage-related securities may include 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
estimated life of an asset-backed security varies with the prepayment
experience with respect to the underlying debt instruments. For this and
other reasons, an asset-backed security's stated maturity may be shortened,
and the security's total return may be difficult to predict precisely. Such
difficulties are not expected, however, to have a significant effect on the
Portfolio since the remaining maturity of any asset-backed security acquired
will be 397 days or less.
One such type of mortgage-related security in which the
Portfolio may invest is a Government National Mortgage Association ("GNMA")
Certificate. GNMA Certificates are backed as to the timely payment of
principal and interest by the full faith and credit of the U.S. Government.
Another type is a Federal National Mortgage Association ("FNMA") Certificate.
Principal and interest payments on FNMA Certificates are guaranteed only by
FNMA itself, not by the full faith and credit of the U.S. Government. A third
type of mortgage-related security in which the Portfolio may invest is a
Federal Home Loan
20
Mortgage Association ("FHLMC") Participation Certificate. This type of
security is guaranteed by FHLMC as to timely payment of principal and
interest but, like a FNMA security, it is not guaranteed by the full faith
and credit of the U.S. Government. For a further discussion of GNMA, FNMA
and FHLMC, see "Mortgage-Related Debt Securities" in the Statement of
Additional Information.
Each of the mortgage-related securities described above is
characterized by monthly payments to the security holder, reflecting the
monthly payments made by the mortgagors of the underlying mortgage loans. The
payments to the security holders (such as the Portfolio), like the payments
on the underlying loans, represent both principal and interest. Although the
underlying mortgage loans are for specified periods of time, such as twenty
or thirty years, the borrowers can, and typically do, repay them sooner.
Thus, the security holders frequently receive prepayments of principal, in
addition to the principal which is part of the regular monthly payments. A
borrower is more likely to prepay a mortgage which bears a relatively high
rate of interest. This means that, in times of declining interest rates, some
of the Portfolio's higher yielding securities might be repaid and thereby
converted to cash and the Portfolio will be forced to accept lower interest
rates when that cash is used to purchase additional securities. The Portfolio
normally will not distribute principal payments (whether regular or prepaid)
to its shareholders. Interest received by the Portfolio will, however, be
distributed to shareholders in the form of dividends.
To compare the prepayment risk for various mortgage-related
securities, various independent mortgage-related securities dealers publish
average remaining life data using proprietary models. In making
determinations concerning average remaining life of mortgage-related
securities for the Portfolio, the investment adviser will rely on such data
to evaluate the prepayment risk in a particular security except to the extent
such data are deemed unreasonable by the investment adviser. The investment
adviser might deem such data unreasonable if such data appeared to present a
significantly different average remaining expected life for a security when
compared to data relating to the average remaining life of comparable
securities as provided by other independent mortgage-related securities
dealers.
Lending of Securities. The Portfolio may also lend its
portfolio securities to financial institutions in accordance with the
investment restrictions described below. 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. However, loans will
21
be made only to borrowers deemed by the Portfolio's investment adviser to be
of good standing and only when, in the adviser's judgment, the income to be
earned from the loans justifies the attendant risks. Any loans of the
Portfolio's securities will be fully collateralized and marked to market
daily.
Short Sales. The Portfolio may engage in short sales. In a
short sale, the Portfolio sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. The Portfolio may
engage in short sales only if at the time of the short sale it owns or has
the right to obtain, at no additional cost, an equal amount of the security
being sold short. This investment technique is known as a short sale "against
the box." The Portfolio will not engage in short sales against the box to
enhance the Portfolio's yield or to increase the Portfolio's income. The
Portfolio may, however, make a short sale against the box as a hedge. The
Portfolio will engage in short sales against the box when it believes that
the price of security may decline, causing a decline in the value of a
security owned by the Portfolio (or a security convertible or exchangeable
for such security), or when the Portfolio wants to sell the security at an
attractive current price, but also wishes to defer recognition of gain or
loss for Federal income tax purposes and for certain purposes of satisfying
certain tests applicable to regulated investment companies under the Internal
Revenue Code. In a short sale, the seller does not immediately deliver the
securities sold and is said to have a short position in those securities
until delivery occurs. If the Portfolio engages in a short sale, the
collateral for the short position will be maintained by the Fund's custodian
or a qualified sub-custodian. While the short sale is open, the Portfolio
will maintain in a segregated account an amount of securities equal in kind
and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities. A more detailed discussion of
short sales is contained in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than
10% of its net assets in illiquid securities, including repurchase agreements
which have a maturity of longer than seven days and other securities that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale. Repurchase agreements subject to demand
are deemed to have a maturity equal to the notice period. Securities that
have legal or contractual restrictions on resale but have a readily available
market are not deemed illiquid for purposes of this limitation. The
Portfolio's investment adviser will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors. See "Investment
Objectives and Policies--Illiquid Securities" in the Statement of Additional
Information.
22
The Government Obligations Money Market Portfolio's
investment objective and policies described above may be changed by the
Fund's Board of Directors without the affirmative vote of the holders of a
majority of the Portfolio's outstanding shares. Such changes may result in
the Portfolio having investment objectives which differ from those an
investor may have considered at the time of investment. There is no assurance
that the investment objective of the Government Obligations Money Market
Portfolio will be achieved. The investment limitations summarized below may
not be changed, however, without such a vote of shareholders. (A more
detailed description of the following investment limitations is contained in
the Statement of Additional Information under "Investment Objectives and
Policies.")
The Government Obligations Money Market Portfolio may not:
1. Purchase securities other than 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.
2. Borrow money, except from banks for temporary purposes,
and except for reverse repurchase agreements, and then in an amount
not exceeding 10% of the value of the Portfolio's total assets, and
only if after such borrowing there is asset coverage of at least 300%
for all borrowings of the Portfolio; or mortgage, pledge or
hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of 10% of the value of the Portfolio's
assets at the time of such borrowing; or purchase portfolio
securities while borrowings in excess of 5% of the Portfolio's net
assets are outstanding. (This borrowing provision is not for
investment leverage, but solely to facilitate management of the
Portfolio by enabling the Portfolio to meet redemption requests
where liquidation of Portfolio securities is deemed to be
inconvenient or disadvantageous.)
3. Make loans except that the Portfolio may purchase or hold
debt obligations in accordance with its investment objective,
policies and limitations, may enter into repurchase agreements for
securities, and may lend portfolio securities against collateral,
consisting of cash or securities which are consistent with the
Portfolio's permitted investments, which is equal at all times to
at least 100% of the value of the securities loaned. There is no
investment restriction on the amount of securities that may be
loaned, except that payments received on such loans, including
amounts received during the loan on account of
23
interest on the securities loaned, may not (together with all
non-qualifying income) exceed 10% of the Portfolio's annual gross
income (without offset for realized capital gains) unless, in the
opinion of counsel to the Fund, such amounts are qualifying income
under Federal income tax applicable to regulated investment companies.
New York Municipal Money Market Portfolio
The New York Municipal Money Market Portfolio's investment
objective is to provide as high a level of current interest income that is
exempt from Federal, New York State and New York City personal income taxes
as is consistent with preservation of capital and liquidity. During periods
of normal market conditions, at least 80% of the assets will be invested in
Municipal Obligations, the interest on which is Tax-Exempt Interest and which
meet certain ratings criteria and present minimal credit risks to the
Portfolio. Portfolio obligations held by the New York Municipal Money Market
Portfolio will have remaining maturities of 397 calendar days or less
("short-term" obligations). Dividends paid by the Portfolio which are derived
from interest attributable to tax-exempt obligations of the State of New York
and its political subdivisions, as well as of certain other governmental
issuers such as Puerto Rico ("New York Municipal Obligations"), will be
excluded from gross income for Federal income tax purposes and exempt from
New York State and New York City personal income taxes, but will be subject
to corporate franchise taxes. Dividends derived from interest on tax-exempt
obligations of other governmental issuers will be excluded from gross income
for Federal income tax purposes, but will be subject to New York State and
New York City personal income taxes. The Fund expects that, except during
temporary defensive periods or when acceptable securities are unavailable for
investment by the Fund, at least 65% of the Fund's assets will be invested in
New York Municipal Obligations. There is no assurance that the investment
objective of the New York Municipal Money Market Portfolio will be achieved.
Municipal Obligations. The Portfolio invests in short-term
Municipal Obligations which are determined by the Portfolio's investment
adviser to present minimal credit risks and that meet certain ratings
criteria pursuant to guidelines established by the Fund's Board of Directors.
The Portfolio may also purchase Unrated Securities provided that such
securities are determined to be of comparable quality to eligible rated
securities. The applicable Municipal Obligations ratings are described in the
Appendix to the Statement of Additional Information. For a more complete
discussion of Municipal Obligations, see "Investment Objectives and
Policies--Municipal Money Market Portfolio."
24
Up to 20% of the Portfolio's assets may be invested in
Alternative Minimum Tax Securities. Investors should be aware of the
possibility of Federal, state and local alternative minimum or minimum income
tax liability on interest from Alternative Minimum Tax Securities.
Although the New York Municipal Money Market Portfolio may
invest more than 25% of its net assets in (i) Municipal Obligations the
interest on which is paid solely from revenues of similar projects, and (ii)
private activity bonds bearing Tax-Exempt Interest, it does not currently
intend to do so on a regular basis. To the extent the New York Municipal
Money Market Portfolio's assets are concentrated in Municipal Obligations
that are payable from the revenues of similar projects, the Portfolio will be
subject to the peculiar risks presented by the laws and economic conditions
relating to such states or projects to a greater extent than it would be if
its assets were not so concentrated.
The New York Municipal Money Market Portfolio may invest in
tax-exempt derivative securities such as tender option bonds, custodial
receipts, participations, beneficial interests in trusts and partnership
interests. For a description of such securities, see "Investment Objectives
and Policies--Municipal Money Market Portfolio--Municipal Obligations.
The Portfolio may also purchase portfolio securities on a
"when-issued" basis such as described under "Investment Objectives and
Policies--Money Market--Municipal Obligations.
The Portfolio may acquire "stand-by commitments" with respect to
Municipal Obligations held in its portfolio such as described under
"Investment Objectives and Policies--Municipal Money Market
Portfolio--Municipal Obligations.
Taxable Investments. The Portfolio may for defensive or other
purposes invest in certain short-term taxable securities when the Portfolio's
investment adviser believes that it would be in the best interests of the
Portfolio's investors to do so. Taxable securities in which the Portfolio may
invest on a short-term basis are obligations of the U.S. Government, its
agencies or instrumentalities, including repurchase agreements with banks or
securities dealers involving such securities; time deposits maturing in not
more than seven days; other debt securities rated within the two highest
ratings assigned by Moody's or S&P; commercial paper rated in the highest
grade by Moody's or S&P; and certificates of deposit issued by United States
branches of United States banks with assets of $1 billion
25
or more. At no time will more than 20% of the Portfolio's total assets be
invested in taxable short-term securities unless the Portfolio's investment
adviser has determined to temporarily adopt a defensive investment policy in
the face of an anticipated softening in the market for Municipal Obligations
in general.
Eligible Securities. The New York Municipal Money Market
Portfolio will only purchase "eligible securities" that present minimal
credit risks as determined by the Portfolio's Investment adviser pursuant to
guidelines adopted by the Board of Directors. Eligible securities generally
include U.S. Government securities, securities that are rated (at the time of
purchase) by NRSROs in the two highest rating categories for such securities
and Unrated Securities, provided that such securities are determined to be of
comparable quality to eligible rated securities. For a more complete
description of eligible securities, see "Investment Objectives and Policies"
in the Statement of Additional Information.
Special Considerations. As a non-diversified investment
company, the Portfolio may invest a greater proportion of its assets in the
obligations of a smaller number of issuers relative to a diversified
portfolio. As a result, the value of a non-diversified investment portfolio
will fluctuate to a greater degree upon changes in the value of each
underlying security. In the opinion of the Portfolio's investment adviser,
any risk to the Portfolio should be limited by its intention to continue to
conduct its operations so as to qualify as a "regulated investment company"
for purposes of the Internal Revenue Code of 1986, as amended, and by its
policies restricting investments to obligations with short-term maturities
and obligations which qualify as eligible securities. In order to qualify as
a "regulated investment company" under the Internal Revenue Code of 1986, as
amended, the Portfolio will not purchase the securities of any issuer if as a
result more than 5% of the value of the Portfolio's assets would be invested
in the securities of such issuer, except that (a) up to 50% of the value of
the Portfolio's assets may be invested without regard to this 5% limitation,
provided that no more than 25% of the value of the Portfolio's assets are
invested in the securities of any one issuer and (b) this 5% limitation does
not apply to securities issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities. For purposes of this limitation, a security is
considered to be issued by the governmental entity (or entities) whose assets
and revenues back the security, or, with respect to a private activity bond
that is backed only by the assets and revenues of a non-governmental user, by
such non-governmental user. In certain circumstances, the guarantor of a
guaranteed security may also be considered to be an issuer in connection with
such guarantee.
26
The Portfolio's ability to meet its investment objective is
dependent upon the ability of issuers of New York Municipal Obligations to
meet their continuing obligations for the payment of principal and interest
on their securities. New York State and New York City face long-term
worsening economic problems which could seriously affect their ability and
that of other issuers of New York Municipal Obligations to meet their
financial obligations.
Investors should be aware that certain substantial issuers of
New York Municipal Obligations (including issuers whose obligations may be
acquired by the Portfolio) have experienced serious financial difficulties in
recent years. These difficulties have at times jeopardized the credit
standing and impaired the borrowing abilities of all New York issuers and
have generally contributed to higher interest costs for their borrowing and
lower market prices for their outstanding debt obligations. In recent years,
several different issues of municipal securities of New York State and its
agencies and instrumentalities and of New York City have been downgraded by
Standard & Poor's Corporation ("S&P") and Moody's Investor Service, Inc.
("Moody's"). On the other hand, strong demand for New York Municipal
Obligations has more recently 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 such issuers could result in
defaults or declines in the market values of those issuer's existing
obligations and, possibly, in the obligations of other issuers of New York
Municipal Obligations. Although no issuers of New York Municipal Obligations
were as of the date of this Prospectus in default with respect to the payment
of their debt obligations, the occurrence of any such default could adversely
affect the market values and market ability of all New York Municipal
Obligations and consequently, the net asset value of the Portfolio's shows.
Some of the significant financial considerations relating to the Fund's
investments in New York Municipal Obligations are summarized in the Statement
of Additional Information.
Illiquid Securities. The Portfolio will not invest more than
10% of its net assets in illiquid securities, including repurchase agreements
which have a maturity of longer than seven days, time deposits with
maturities in excess of seven days and other securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Repurchase agreements subject to demand are deemed to
have a maturity equal to the notice period. Securities that have legal or
contractual restrictions on resale but have a readily available market are
not deemed illiquid for purposes of this
27
limitation. The Portfolio's investment adviser will monitor the liquidity of
such restricted securities under the supervision of the Board of Directors.
See "Investment Objectives and Policies--Illiquid Securities" in the
Statement of Additional Information.
The New York Municipal Money Market Portfolio's investment
objective and the policies described above may be changed by the Fund's Board
of Directors without the affirmative vote of the holders of a majority of the
New York Municipal Money Market Portfolio's outstanding shares. Such changes
may result in the Portfolio having investment objectives which differ from
those an investor may have considered at the time of investment. There is no
assurance that the investment objective of the New York Municipal Money
Market will be achieved. The New York Municipal Money Market Portfolio may
not, however, change the following investment limitations without such a vote
of shareholders. (A more detailed description of the following investment
limitations, together with other investment limitations that cannot be
changed without a vote of shareholders, is contained in the Statement of
Additional Information under "Investment Objectives and Policies.")
The New York Municipal Money Market Portfolio may not:
1. Borrow money, except from banks for temporary purposes and
except for reverse repurchase agreements, and then in amounts not in
excess of 10% of the value of the Portfolio's assets at the time of
such borrowing, and only if after such borrowing there is asset
coverage of at least 300% for all borrowings of the Portfolio; or
mortgage, pledge or hypothecate any of its assets except in
connection with any such borrowing and in amounts not in excess of
10% of the value of the Portfolio's assets at the time of such
borrowing; or purchase portfolio securities while borrowings in
excess of 5% of the Portfolio's net assets are outstanding. (This
borrowing provision is not for investment leverage, but solely to
facilitate management of the Portfolio's securities by enabling the
Portfolio to meet redemption requests where the liquidation of
portfolio securities is deemed to be disadvantageous or inconvenient.)
2. Purchase any securities which would cause 25% or more of
the value of the Portfolio's total assets at the time of purchase to
be invested in the securities of issuers conducting their principal
business activities in the same industry; provided that this
limitation shall not apply to Municipal Obligations or governmental
guarantees of Municipal Obligations; and provided, further, that for
the purpose of this limitation only, private activity bonds that are
considered to be issued by non-governmental users (see
28
the second investment limitation above) shall not be deemed to be
Municipal Obligations.
In addition, without the affirmative vote of the holders of a
majority of the Portfolio's outstanding shares, the Portfolio may not change
its policy of investing during normal market conditions at least 80% of its
net assets in obligations the interest on which is Tax-Exempt Interest.
So long as it values its portfolio securities on the basis of
the amortized cost method of valuation pursuant to Rule 2a-7 under the 1940
Act, the New York Municipal Money Market Portfolio will meet the following
limitation on its investments in addition to the fundamental investment
limitations described above. This limitation may be changed without a vote of
shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not
purchase any Put if after the acquisition of the Put the New York
Municipal Money Market Portfolio has more than 5% of its total assets
invested in instruments issued by or subject to Puts from the same
institution, except that the foregoing condition shall only be
applicable with respect to 75% of the New York Municipal Money Market
Portfolio's total assets. A "Put" means a right to sell a specified
underlying instrument within a specified period of time and at a
specified exercise price that may be sold, transferred or assigned
only with the underlying instrument.
Opinions relating to the validity of Municipal Obligations
and to the exemption of interest thereon from Federal income tax (and, with
respect to New York Municipal Obligations, to the exemption of interest
thereon from New York State and New York City personal income tax) are
rendered by bond counsel to the respective issuers at the time of issuance.
Neither the Fund nor its investment adviser will review the proceedings
relating to the issuance of Municipal Obligations or the basis for such
opinions.
PURCHASE AND REDEMPTION OF SHARES
Purchase Procedures
General. ^ Janney Shares are sold without a sales load on a
continuous basis ^. Investors may purchase ^ Janney Shares through an account
maintained by the investor with ^ JMS ("the Account"). The minimum initial
investment is $1,000, and the minimum subsequent investment is $100. The Fund
in its sole
29
discretion may accept or reject any order for purchases of ^ Janney Shares.
All payments for initial and subsequent investments should be
in U.S. dollars. JMS is responsible for the prompt transmission of the order
to the Fund's transfer agent. Purchases will be effected at the net asset
value next determined after PFPC, the Fund's transfer agent, has received a
purchase order in proper form from JMS and the Fund's custodian has Federal
Funds immediately available to it. In those cases where payment is made by
check, Federal Funds will generally become available two Business Days after
the check is received by JMS. Orders which are accompanied by Federal Funds
and received by the Fund by 12:00 noon Eastern Time, and orders as to which
payment has been converted into Federal Funds by 12:00 noon Eastern Time,
will be executed as of 12:00 noon that Business Day. Orders which are
accompanied by Federal Funds and received by the Fund after 12:00 noon
Eastern Time but prior to 4:00 p.m. Eastern Time, and orders as to which
payment has been converted into Federal Funds after 12:00 noon Eastern Time
but prior to 4:00 p.m. Eastern Time on any Business Day of the Fund, will be
executed as of 4:00 p.m. Eastern Time on that Business Day, but will not be
entitled to receive dividends declared on such Business Day. Orders which are
accompanied by Federal Funds and received by the Fund as of 4:00 p.m. Eastern
Time or later, and orders as to which payment has been converted to Federal
Funds as of 4:00 p.m. Eastern Time or later on a Business Day will be
processed as of 12:00 noon Eastern Time on the following Business Day. A
"Business Day" is any day that both the New York Stock Exchange (the "NYSE")
and the Federal Reserve Bank of Philadelphia (the "FRB") are open. Currently,
the NYSE or the FRB are closed on weekends and New Years' Day, Martin Luther
^ King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day
(observed) Labor Day, Thanksgiving Day and Christmas Day (observed).
Purchases through an Account. Purchases of Shares may be
effected through an investor's Account with ^ JMS through procedures
established in connection with the requirements of Accounts at ^ JMS. In such
event, beneficial ownership of ^ Janney Shares will be recorded by ^ JMS and
will be reflected in the Account statements provided by ^ JMS to such
investors. ^ JMS may impose minimum investor Account requirements. Although
^ JMS does not impose a sales charge for purchases of ^ Janney Shares,
depending on the terms of an investor's Account with ^ JMS, JMS may charge
an investor's Account fees for automatic investment and other services
provided to the Account. Information concerning Account requirements,
services and charges should be obtained from ^ JMS. This Prospectus should
be read in conjunction with any information received from ^ JMS.
30
^ JMS may offer investors ^ the ability to purchase ^ Janney
Shares under an automatic purchase program (a "Purchase Program") established
by ^ it. An investor who participates in a Purchase Program will have his
"free-credit" cash balances in his Account with JMS automatically invested in
Shares of ^ Janney Class designated by the investor as the "Primary ^ Janney
Class" for his Purchase Program. The frequency of investments and the minimum
investment requirement will be established by ^ JMS and the Fund. In
addition, ^ JMS may require a minimum amount of cash and/or securities to be
deposited in an Account for participants in its Purchase Program. The
description of the particular ^ JMS's Purchase Program should be read for
details, and any inquiries concerning an Account under a Purchase Program
should be directed to ^ JMS. A participant in a Purchase Program may change
the designation of the Primary ^ Janney Class at any time by so instructing ^
JMS.
If ^ JMS makes special arrangements under which orders for ^
Janney Shares are received by PFPC prior to 12:00 noon Eastern Time, and the
^ JMS guarantees that payment for such Shares will be made in Federal Funds
to the Fund's custodian prior to 4:00 p.m. Eastern Time, on the same day,
such purchase orders will be effective and Shares will be purchased at the
offering price in effect as of 12:00 noon Eastern Time on the date the
purchase order is received by PFPC.
^
Redemption Procedures
Redemption orders are effected at the net asset value per
share next determined after receipt of the order in proper form by the Fund's
transfer agent, PFPC. Investors may redeem all or some of their Shares in
accordance with one of the procedures described below.
Redemption of Shares in an Account. An investor who
beneficially owns ^ Janney Shares may redeem ^ Janney Shares in his Account
in accordance with instructions and limitations pertaining to his Account by
contacting ^ JMS. It is the responsibility of JMS to transmit purchase and
redemption orders to PFPC and credit its investors' accounts with the
redemption proceeds on a timely basis. If such notice is received by PFPC by
12:00 noon Eastern Time on any Business Day, the redemption will be effective
as of 12:00 noon Eastern Time on that day.
31
Payment of the redemption proceeds will be made after 12:00 noon Eastern Time
on the day the redemption is effected, provided that the Fund's custodian is
open for business. If the custodian is not open, payment will be made on the
next bank business day. If the redemption request is received between 12:00
noon and 4:00 p.m. Eastern Time on a Business Day, the redemption will be
effective as of 4:00 p.m. Eastern Time on such Business Day and payment will
be made on the next bank business day following receipt of the redemption
request. If all shares are redeemed, all accrued but unpaid dividends on
those shares will be paid with the redemption proceeds.
^ JMS will also redeem each day a sufficient number of Shares
of the Primary ^ Janney Class to cover debit balances created by transactions
in the Account or instructions for cash disbursements. Janney Shares will be
redeemed on the same day that a transaction occurs that results in such a
debit balance or charge.
^ JMS reserves the right to waive or modify criteria for
participation in an Account or to terminate participation in an Account for
any reason.
^
Redemption by Check. Upon request, the Fund will provide any
^ investor ^ who does not have check writing privileges for his Account with
forms of drafts ("checks") payable through PNC Bank. These checks may be made
payable to the order of anyone. An investor wishing to use this check writing
redemption procedure should complete specimen signature cards, and then
forward such signature cards to ^ JMS. JMS will then arrange for the checks
to be honored by PNC Bank. Investors who own Janney Shares through an Account
should contact ^ JMS for signature cards. Investors of joint accounts may
elect to have checks honored with a single signature. Check redemptions will
be subject to PNC Bank's rules governing checks. An investor will be able to
stop payment on a check redemption. The Fund or PNC Bank may terminate this
redemption service at any time, and neither shall incur any liability for
honoring checks, for effecting redemptions to pay checks, or for returning
checks which have not been accepted.
When a check is presented to PNC Bank for clearance, PNC
Bank, as the investor's agent, will cause the Fund to redeem a sufficient
number of full and fractional Shares owned by the investor to cover the
amount of the check. This procedure enables the investor to continue to
receive dividends on those Shares equalling the amount being redeemed by
check until such
32
time as the check is presented to PNC Bank. Checks may not be presented for
cash payment at the offices of PNC Bank because, under 1940 Act rules,
redemptions may be effected only at the redemption price next determined
after the redemption request is presented to PFPC. This limitation does not
affect checks used for the payment of bills or cash at other banks.
Additional Redemption Information. The Fund ordinarily will
make payment for all Shares redeemed within seven days after receipt by PFPC
of a redemption request in proper form. However, Shares purchased by check
will not be redeemed for a period of up to fifteen days after their purchase,
pending a determination that the check has cleared. This procedure does not
apply to Shares purchased by wire payment. During the period prior to the
time Shares are redeemed, dividends on such Shares will accrue and be
payable.
^ NET ASSET VALUE
The net asset value per share of each of the Portfolios for
the purpose of pricing purchase and redemption orders is determined twice
each day, once as of 12:00 noon Eastern Time and once as of 4:00 p.m. Eastern
Time on each weekday with the exception of those holidays on which either
the NYSE or the FRB is closed. Currently, the NYSE or the FRB, or both, are
closed on the customary national business holidays of New Year's Day, Martin
Luther ^ King, Jr. Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas Day (observed). Each Portfolio's net asset
value per share is calculated by adding the value of all securities and other
assets of the Portfolio, subtracting its liabilities and dividing the result
by the number of its outstanding shares. The net asset value per share of
each Portfolio is determined independently of any of the Fund's other
investment portfolios.
The Fund seeks to maintain for each of the Portfolios a net
asset value of $1.00 per share for purposes of purchases and redemptions and
values its portfolio securities on the basis of the amortized cost method of
valuation described in the Statement of Additional Information under the
heading "Valuation of
33
Shares." There can be no assurance that net asset value per share will
not vary.
With the approval of the Board of Directors, a Portfolio may
use a pricing service, bank or broker-dealer experienced in such matters to
value the Portfolio's securities. A more detailed discussion of net asset
value and security valuation is contained in the Statement of Additional
Information.
MANAGEMENT
Board of Directors
The business and affairs of the Fund and each investment
portfolio are managed under the direction of the Fund's Board of Directors.
The Fund currently operates or proposes to operate nineteen separate
investment portfolios. Each of the ^ Janney Classes represents interests in
one of the following such investment portfolios: the Money Market Portfolio,
the Municipal Money Market Portfolio, the Government Obligations Money Market
Portfolio and the New York Municipal Money Market Portfolio.
Investment Adviser and Sub-Advisor
PIMC, a wholly owned subsidiary of PNC Bank, serves as the
investment adviser for each of the Portfolios. 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. PNC Bank serves as the sub-advisor for each of
the Portfolios other than the New York Municipal Money Market Portfolio,
which has no sub-advisor. PNC Bank and its predecessors have been in the
business of managing the investments of fiduciary and other accounts in the
Philadelphia area since 1847. PNC Bank and its subsidiaries currently manage
over $30 billion of assets, of which approximately $28 billion are mutual
funds. PNC Bank, a national bank whose principal business address is Broad
and Chestnut Streets, Philadelphia, Pennsylvania 19101, is a wholly owned
subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc. is a bank holding company
and a wholly owned subsidiary of PNC Bank Corp, a multi-bank holding Company.
As investment adviser to the Portfolios, PIMC manages such
Portfolios and is responsible for all purchases and sales of portfolio
securities. PIMC also assists generally in supervising the operations of the
Portfolios, and maintains the Portfolios' financial accounts and records. PNC
Bank, as sub-advisor to all Portfolios other than the New York Municipal
Money Market
34
Portfolio, which has no sub-advisor, provides research and credit analysis
and provides PIMC with certain other services. In entering into Portfolio
transactions for a Portfolio with a broker, PIMC may take into account the
sale by such broker of shares of the Fund, subject to the requirements of
best execution.
For the services provided to and expenses assumed by it for
the benefit of each of the Money Market and Government Obligations Money
Market Portfolios, PIMC is entitled to receive the following fees, computed
daily and payable monthly based on a Portfolio's average daily net assets:
.45% of the first $250 million; .40% of the next $250 million; and .35% of
net assets in excess of $500 million.
For the services provided and expenses assumed by it with
respect to the Municipal Money Market and the New York Municipal Money Market
Portfolios, PIMC is entitled to receive the following fees, computed daily
and payable monthly based on the Portfolio's average daily net assets: .35%
of the first $250 million; .30% of the next $250 million; and .25% of net
assets in excess of $500 million.
PIMC may in its discretion from time to time agree to waive
voluntarily all or any portion of its advisory fee for any Portfolio. For its
sub-advisory services, PNC Bank is entitled to receive from PIMC an amount
equal to 75% of the advisory fees paid by the Fund to PIMC with respect to
any Portfolio for which PNC Bank acts as sub-advisor. Such sub-advisory fees
have no effect on the advisory fees payable by such Portfolio to PIMC. In
addition, PIMC may from time to time enter into an agreement with one of its
affiliates pursuant to which it delegates some or all of its accounting and
administrative obligations under its advisory agreements with the Fund
relating to any Portfolio. Any such arrangement would have no effect on the
advisory fees payable by each Portfolio to PIMC.
For the Fund's fiscal year ended August 31, 1994, the Fund
paid investment advisory fees aggregating .18% of the average net assets of
the Money Market Portfolio, 0% of the average net assets of the Municipal
Money Market Portfolio, .25% of the average net assets of the Government
Obligations Money Market Portfolio and 0% of the average net assets of the
New York Municipal Money Market Portfolio. For that same year, PIMC waived
approximately .20%, .34%, .20% and .45% of the average net assets of the
Money Market Portfolio, the Municipal Money Market Portfolio, the Government
Obligations Money Market Portfolio and the New York Municipal Money Market
Portfolio, respectively.
35
Administrator
PFPC serves as the administrator for the Municipal Money
Market and the New York Municipal Money Market Portfolios and generally
assists such Portfolios in all aspects of their administration and
operations, including matters relating to the maintenance of financial
records and accounting. PFPC is entitled to an administration fee, computed
daily and payable monthly at a rate of .10% of the average daily net assets
of the Municipal Money Market and New York Municipal Money Market Portfolios.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank also serves as the Fund's custodian and PFPC, an
indirect wholly owned subsidiary of PNC Bank Corp, serves as the Fund's
transfer agent and dividend disbursing agent. PFPC may enter into shareholder
servicing agreements with registered broker/dealers who have entered into
dealer agreements with the Distributor for the provision of certain
shareholder support services to customers of such broker/dealers who are
shareholders of the Portfolios. The services provided and the fees payable by
the Fund for these services are described in the Statement of Additional
Information under "Investment Advisory, Distribution and Servicing
Arrangements."
Expenses
The expenses of each Portfolio are deducted from the total
income of such Portfolio before dividends are paid. These expenses include,
but are not limited to, organizational costs, fees paid to the investment
adviser, fees and expenses of officers and directors who are not affiliated
with the Portfolio's investment adviser or Distributor, taxes, interest,
legal fees, custodian fees, auditing fees, brokerage fees and commissions,
certain of the fees and expenses of registering and qualifying the Portfolio
and its shares for distribution under Federal and state securities laws,
expenses of preparing prospectuses and statements of additional information
and of printing and distributing prospectuses and statements of additional
information annually to existing shareholders that are not attributable to a
particular class, the expense of reports to shareholders, shareholders'
meetings and proxy solicitations that are not attributable to a particular
class, fidelity bond and directors and officers liability insurance premiums,
the expense of using independent pricing services and other expenses which
are not expressly assumed by the Portfolio's investment adviser under its
advisory agreement with the Portfolio. Any general expenses of the Fund that
are not readily identifiable as belonging to a particular investment
portfolio of the Fund will be allocated among all investment portfolios of
the Fund based
36
upon the relative net assets of the investment portfolios at the time such
expenses were accrued. In addition, distribution expenses, transfer agency
expenses, expenses of preparing, printing and distributing prospectuses,
statements of additional information, proxy statements and reports to
shareholders, and registration fees identified as belonging to a particular
class, are allocated to such class.
The investment adviser has agreed to reimburse each Portfolio
for the amount, if any, by which the total operating and management expenses
of such Portfolio for any fiscal year exceed the most restrictive state blue
sky expense limitation in effect from time to time, to the extent required by
such limitation.
The investment adviser may assume additional expenses of the
Portfolios from time to time. In certain circumstances, it may assume such
expenses on the condition that it is reimbursed by the Portfolios for such
amounts prior to the end of a fiscal year. In such event, the reimbursement
of such amounts will have the effect of increasing a Portfolio's expense
ratio and of decreasing yield to investors.
DISTRIBUTION OF SHARES
Counsellors Securities Inc. (the "Distributor"), a wholly
owned subsidiary of Warburg, Pincus Counsellors Inc., with an address at 466
Lexington Avenue, New York, New York, acts as distributor of the Shares of
each of the ^ Janney Classes of the Fund pursuant to separate distribution
contracts (collectively, the "Distribution Contracts") with the Fund on
behalf of each of the ^ Janney Classes.
The Board of Directors of the Fund approved and adopted the
Distribution Contracts and separate Plans of Distribution for each of the
Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940
Act. Under each of the Plans, the Distributor is entitled to receive from the
relevant ^ Janney Class a distribution fee, which is accrued daily and paid
monthly, of up to .65% on an annualized basis of the average daily net assets
of the relevant ^ Janney Class. The actual amount of such compensation is
agreed upon from time to time by the Fund's Board of Directors and the
Distributor. Under the Distribution Contracts, the Distributor has agreed to
accept compensation for its services thereunder and under the Plans in the
amount of .60% of the average daily net assets of the class on an annualized
basis in any year. Pursuant to the conditions of an exemptive order granted
by the Securities and Exchange Commission, the Distributor has agreed to
waive its fee with respect to a ^ Janney Class on any day to the extent
necessary to
37
assure that the fee required to be accrued by such Class does not exceed the
income of such Class on that day. In addition, the Distributor may, in its
discretion, voluntarily waive from time to time all or any portion of its
distribution fee.
Under each of the Distribution Contracts and the relevant
Plan, the Distributor may reallocate an amount up to the full fee that it
receives to financial institutions, including broker/dealers, based upon the
aggregate investment amounts maintained by and services provided to
shareholders of any relevant Class serviced by such financial institutions.
The Distributor may also reimburse broker/dealers for other expenses incurred
in the promotion of the sale of Fund shares. The Distributor and/or
broker/dealers pay for the cost of printing (excluding typesetting) and
mailing to prospective investors prospectuses and other materials relating
to the Fund as well as for related direct mail, advertising and promotional
expenses.
Each of the Plans obligates the Fund, during the period it is
in effect, to accrue and pay to the Distributor on behalf of each ^ Janney
Class the fee agreed to under the relevant Distribution Contract. None of the
Plans obligates the Fund to reimburse the Distributor for the actual expenses
the Distributor may incur in fulfilling its obligations under a Plan on
behalf of the relevant ^ Janney Class. Thus, under each of the Plans, even if
the Distributor's actual expenses exceed the fee payable to the Distributor
thereunder at any given time, the Fund will not be obligated to pay more than
that fee. If the Distributor's actual expenses are less than the fee it
receives, the Distributor will retain the full amount of the fee.
The Plans in effect with respect to the ^ Janney Classes of
the Money Market, Municipal Money Market, Government Obligations Money Market
and New York Municipal Money Market Portfolios have been approved by the sole
shareholder of each such Class. Under the terms of Rule 12b-1, each will
remain in effect only if approved at least annually by the Fund's Board of
Directors, including those directors who are not "interested persons" of the
Fund as that term is defined in the 1940 Act and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related thereto ("12b-1 Directors"). Each of the Plans may be terminated at
any time by vote of a majority of the 12b-1 Directors or by vote of a
majority of the Fund's outstanding voting securities of the relevant ^ Janney
Class. The fee set forth above will be paid by the Fund on behalf of the
relevant ^ Janney Class to the Distributor unless and until the relevant Plan
is terminated or not renewed.
38
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net
investment income and net realized capital gains, if any, of each of the
Portfolios to each Portfolio's shareholders. All distributions are reinvested
in the form of additional full and fractional Shares of the relevant ^ Janney
Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term
capital gains) earned by each Portfolio will be declared as a dividend on a
daily basis and paid monthly. Dividends are payable to shareholders of record
immediately prior to the determination of net asset value made as of 4:00
p.m. Eastern Time. Net short-term capital gains, if any, will be distributed
at least annually.
TAXES
The following discussion is only a brief summary of some of
the important tax considerations generally affecting the Portfolios and their
shareholders and is not intended as a substitute for careful tax planning.
Accordingly, investors in the Portfolios should consult their tax advisers
with specific reference to their own tax situation.
Each Portfolio will elect to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended. So long as a Portfolio qualifies for this tax treatment, such
Portfolio will be relieved of Federal income tax on amounts distributed to
shareholders, but shareholders, unless otherwise exempt, will pay income or
capital gains taxes on amounts so distributed (except distributions that
constitute "exempt interest dividends" or that are treated as a return of
capital) regardless of whether such distributions are paid in cash or
reinvested in additional shares. None of the Portfolios intends to make
distributions that will be eligible for the corporate dividends received
deduction.
Distributions out of the "net capital gain" (the excess of
net long-term capital gain over net short-term capital loss), if any, of any
Portfolio will be taxed to shareholders as long-term capital gain regardless
of the length of time a shareholder has held his Shares, whether such gain
was reflected in the price paid for the Shares, or whether such gain was
attributable to securities bearing tax-exempt interest. All other
distributions, to the extent they are taxable, are taxed to shareholders as
ordinary income. The maximum marginal rate on ordinary income for
individuals, trusts and estates is generally 31%, while the maximum rate
imposed on net capital gain of such
39
taxpayers is 28%. Corporate taxpayers are taxed at the same rates on both
ordinary income and capital gains.
The Municipal Money Market Portfolio and the New York
Municipal Money Market Portfolio intend to pay substantially all of their
dividends as "exempt interest dividends." Investors in either of these
Portfolios should note, however, that taxpayers are required to report the
receipt of tax-exempt interest and "exempt interest dividends" in their
Federal income tax returns and that in two circumstances such amounts, while
exempt from regular Federal income tax, are subject to Federal alternative
minimum tax at a rate of 24% in the case of individuals, trusts and estates
and 20% in the case of corporate taxpayers. First, tax-exempt interest and
"exempt interest dividends" derived from certain private activity bonds
issued after August 7, 1986, will generally constitute an item of tax
preference for corporate and noncorporate taxpayers in determining Federal
alternative minimum tax liability. The New York Municipal Money Market
Portfolio may invest up to 20% of its net assets in such private activity
bonds and the Municipal Money Market Portfolio may invest up to 100% of
its net assets in such private activity bonds, although the Municipal Money
Market Portfolio does not presently intend to do so. Secondly, tax-exempt
interest and "exempt interest dividends" derived from all Municipal
Obligations must be taken into account by corporate taxpayers in determining
their adjusted current earnings adjustment for Federal alternative minimum
tax purposes. Investors should be aware of the possibility of state and
local alternative minimum or minimum income tax liability, in addition to
Federal alternative minimum tax. Shareholders who are recipients of Social
Security Act or Railroad Retirement Act benefits should further note that
tax-exempt interest and "exempt interest dividends" derived from all types
of Municipal Obligations will be taken into account in determining the
taxability of their benefit payments. Exempt interest dividends derived
from interest on New York Municipal Obligations will also be exempt from
New York State and New York City personal income (but not corporate
franchise) taxes.
Each of the Municipal Money Market Portfolio and the New York
Municipal Money Market Portfolio will determine annually the percentages of
its net investment income which are exempt from the regular Federal income
tax, which constitute an item of tax preference for purposes of the Federal
alternative minimum tax, and which are fully taxable and will apply such
percentages uniformly to all distributions declared from net investment
income during that year. These percentages may differ significantly from the
actual percentages for any particular day. In addition, the New York
Municipal Money Market Portfolio will determine annually the percentage
amounts exempt from New York State and New York City personal income taxes,
and the amounts, if any, subject to such taxes. The exclusion or exemption of
40
interest income for Federal income tax purposes, or New York State or New
York City personal income tax purposes, in most cases does not result in an
exemption under the tax laws of any other state or local authority. Investors
who are subject to tax in other states or localities should consult their own
tax advisers about the taxation of dividends and distributions from each
Portfolio by such states and localities.
The Fund will send written notices to shareholders annually
regarding the tax status of distributions made by each Portfolio. Dividends
declared in October, November or December of any year payable to shareholders
of record on a specified date in such a month will be deemed to have been
received by the shareholders on December 31, provided such dividends are paid
during January of the following year. Each Portfolio intends to make
sufficient actual or deemed distributions prior to the end of each calendar
year to avoid liability for Federal excise tax.
Shareholders who are nonresident alien individuals, foreign
trusts or estates, foreign corporations or foreign partnerships may be
subject to different U.S. Federal income tax treatment.
An investment in any one Portfolio is not intended to
constitute a balanced investment program. Shares of the Municipal Money
Market Portfolio and New York Municipal Money Market Portfolio 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 since such plans and accounts are generally tax-exempt
and, therefore, not only would not gain any additional benefit from the
Portfolios' dividends being tax-exempt but also such dividends would be
taxable when distributed to the beneficiary.
Future legislative or administrative changes or court
decisions may materially affect the tax consequences of investing in one or
more Portfolios of the Fund. Shareholders are also urged to consult their tax
advisers concerning the application of state and local income taxes to
investments in the Fund which may differ from the Federal and state income
tax consequences described above.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of
Common Stock, $.001 par value per share, of which ^ 12.2 billion shares are
currently classified as follows: 100 million shares are classified as Class A
Common Stock (Growth & Income), 100 million shares are classified as Class B
Common
41
Stock, 100 million shares are classified as Class C Common Stock
(Balanced), 100 million shares are classified as Class D Common Stock
(Tax-Free), 500 million shares are classified as Class E Common Stock (Money),
500 million shares are classified as Class F Common Stock (Municipal Money),
500 million shares are classified as Class G Common Stock (Money), 500
million shares are classified as Class H Common Stock (Municipal Money), 1
billion shares are classified as Class I Common Stock (Money), 500 million
shares are classified as Class J Common Stock (Municipal Money), 500 million
shares are classified as Class K Common Stock (U.S. Government Money), 1,500
million shares are classified as Class L Common Stock (Money), 500 million
shares are classified as Class M Common Stock (Municipal Money), 500 million
shares are classified as Class N Common Stock (U.S. Government Money), 500
million shares are classified as Class O Common Stock (N.Y. Money), 100
million shares are classified as Class P Common Stock (Government), 100
million shares are classified as Class Q Common Stock, 500 million shares are
classified as Class R Common Stock (Municipal Money), 500 million shares are
classified as Class S Common Stock (U.S. Government Money), 500 million
shares are classified as Class T Common Stock (International), 500 million
shares are classified as Class U Common Stock (Strategic), 500 million shares
are classified as Class V Common Stock (Emerging), 100 million shares are
classified as Class W Common Stock (Laffer/Canto Equity), 50 million shares
are classified as Class X Common Stock (U.S. Core Equity), 50 million shares
are classified as Class Y Common Stock (U.S. Core Fixed Income), 50 million
shares are classified as Class Z Common Stock (Global Fixed Income), 50
million shares are classified as Class AA Common Stock (Municipal Bond), 50
million shares are classified as Class BB Common Stock (BEA Balanced), 50
million shares are classified as Class CC Common Stock (Short Duration), 100
million shares are classified as Class DD Common Stock (Growth & Income
Series 2), 100 million shares are classified as Class EE Common Stock
(Balanced Series 2), ^ 700 million shares are classified as Class Alpha 1
Common Stock (Money), ^ 200 million shares are classified as Class Alpha 2
Common Stock (Municipal Money), ^ 500 million shares are classified as Class
Alpha 3 Common Stock (U.S. Government Money), ^ 100 million shares are
classified as Class Alpha 4 Common Stock (N.Y. Money), 1 million shares are
classified as Class Beta 1 Common Stock (Money), 1 million shares are
classified as Class Beta 2 Common Stock (Municipal Money), 1 million shares
are classified as Class Beta 3 Common Stock (U.S. Government Money), 1
million shares are classified as Class Beta 4 Common Stock (N.Y. Money), 1
million shares are classified as Gamma 1 Common Stock (Money), 1 million
shares are classified as Gamma 2 Common Stock (Municipal Money), 1 million
shares are classified as Gamma 3 Common Stock (U.S. Government Money), 1
million shares are classified as Gamma 4 Common Stock (N.Y. Money), 1 million
shares are classified as Delta 1 Common Stock (Money), 1 million shares
42
are classified as Delta 2 Common Stock (Municipal Money), 1 million shares
are classified as Delta 3 Common Stock (U.S. Government Money), 1 million
shares are classified as Delta 4 Common Stock (N.Y. Money), 1 million shares
are classified as Epsilon 1 Common Stock (Money), 1 million shares are
classified as Epsilon 2 Common Stock (Municipal Money), 1 million shares are
classified as Epsilon 3 Common Stock (U.S. Government Money), 1 million
shares are classified as Epsilon 4 Common Stock (N.Y. Money), 1 million
shares are classified as Zeta 1 Common Stock (Money), 1 million shares are
classified as Zeta 2 Common Stock (Municipal Money), 1 million shares are
classified as Zeta 3 Common Stock (U.S. Government Money), 1 million shares
are classified as Zeta 4 Common Stock (N.Y. Money), 1 million shares are
classified as Eta 1 Common Stock (Money), 1 million shares are classified as
Eta 2 Common Stock (Municipal Money), 1 million shares are classified as Eta
3 Common Stock (U.S. Government Money), 1 million shares are classified as
Eta 4 Common Stock (N.Y. Money), 1 million shares are classified as Theta 1
Common Stock (Money), 1 million shares are classified as Theta 2 Common Stock
(Municipal Money), 1 million shares are classified as Theta 3 Common Stock
(U.S. Government Money), and 1 million shares are classified as Theta 4
Common Stock (N.Y. Money). Shares of Class Alpha 1 Common Stock, Class Alpha
2 Common Stock, Class Alpha 3 Common Stock and Class Alpha 4 Common Stock
constitute the ^ Janney Classes. Under the Fund's charter the Board of
Directors has the power to classify or reclassify any unissued shares of
Common Stock from time to time.
The classes of Common Stock have been grouped into sixteen
separate "families": the RBB Family, the Warburg Pincus Family, the Cash
Preservation Family, the Sansom Street Family, the Bedford Family, the
Bradford Family, the BEA Family, Laffer/Canto Family, the ^ Janney Montgomery
Scott Money Funds, the Beta Family, the Gamma Family, the Delta Family, the
Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB
Family represents interests in two non-money market portfolios as well as the
Money Market and Municipal Money Market Portfolios; the Warburg Pincus Family
represents interest in the Growth & Income Fund and Balanced Fund; the Cash
Preservation Family represents interests in the Money Market and Municipal
Money Market Portfolios; the Sansom Street Family represents interests in the
Money Market, Municipal Money Market and Government Obligations Money Market
Portfolios; Bedford Family represents interests in the Money Market,
Municipal Money Market, Government Obligations Money Market and New York
Municipal Money Market Portfolios; the Bradford Family represents interests
in the Municipal Money Market and Government Obligations Money Market
Portfolios; the BEA Family represents interests in nine non-money market
portfolios; the Laffer/Canto Family represents interests in Laffer/Canto
Equity Portfolio and ^ Beta, Gamma, Delta, Epsilon, Zeta, Eta and Theta
Families (collectively, the
43
"Additional Families") represent interests in the Money Market, Municipal
Money Market, Government Obligations Money Market and New York Municipal
Money Market Portfolios.
The Fund offers multiple classes of shares in each of its
Money Market Portfolio, Municipal Money Market Portfolio, Government
Obligations Money Market Portfolio and New York Municipal Money Market
Portfolio to expand its marketing alternatives and to broaden its range of
services to different investors. The expenses of the various classes within
these Portfolios vary based upon the services provided. For example,
shareholders in the Sansom Street Family bear non-12b-1 shareholder servicing
fees in the amount of .10% of the daily net asset value of their shares. Each
class of Common Stock of the Fund has a separate Rule 12b-1 distribution
plan. Under the Distribution Contracts entered into with the Distributor and
pursuant to each of the distribution plans, the Distributor is entitled to
receive from the relevant class as compensation for distribution services
provided to the various families a distribution fee based on average daily
net assets in the following amounts: the RBB Family: .40%, Cash Preservation
Family: .40%, Sansom Street Family: Municipal Money Market and Government
Obligations Money market Portfolios .05% and Money Market Portfolio up to
.20%, Bedford Family: .60%, Bradford Family: .60% and each of the
Additional Families: .60% A salesperson or any other person entitled to
receive compensation for servicing Fund shares may receive different
compensation with respect to different classes in a Portfolio of the Fund.
For the year ended August 31, 1994, the expense ratio of each of the RBB,
Cash Preservation, Sansom Street and Bedford Classes in the Money Market
Portfolio, taking into account fee waivers and reimbursement of expenses, was
as follows: RBB: 1.00% (reflecting waivers of 13.62%), Cash Preservation:
.95% (reflecting waivers of 1.57%), Sansom Street: .39% (reflecting waivers
of .21%) and Bedford: .95% (reflecting waivers of .21%); for each of the RBB,
Cash Preservation, Sansom Street, Bedford and Bradford Classes in the
Municipal Money Market Portfolio, taking into account fee waivers and
reimbursement of expenses, was as follows: RBB: 1.00% (reflecting waivers of
153.22%), Cash Preservation: .98% (reflecting waivers of 10.54%), Bedford:
.77% (reflecting waivers of .35%) and Bradford: .77% (reflecting waivers of
.34%); for each of the Bedford and Bradford Classes of the Government
Obligations Money Market Portfolio, taking into account fee waivers and
reimbursement of expenses, was as follows: Bedford: .975% (reflecting
waivers of .195%) and Bradford: .975% (reflecting waivers of .205%); and for
the Bedford Class of the New York Municipal Money Market Portfolio, taking
into account fee waivers and reimbursement of expenses, was .50% (reflecting
waivers of .70%). No expense ratio is given for the Sansom Street Class of
the Government Obligations Money Market Portfolio as such class ceased
operations on December 4, 1991. No expense
44
ratio is given for the Sansom Street Class of the Municipal Money Market
Portfolio as no shares of such class had been sold to the public during the
year ended August 31, 1994. No expense ratio is given for the ^ Janney, Beta,
Gamma, Delta, Epsilon, Zeta, Eta and Theta Classes of the Money Market,
Municipal Money Market, Government Obligations Money Market and New York
Municipal Money Market Portfolios as no shares of such classes had been sold
to the public during the year ended August 31, 1994. The ratio of net
investment income to average net assets for each of the RBB, Cash
Preservation, Sansom Street and Bedford Classes in the Money Market
Portfolio, was as follows: RBB: 2.73%, Cash Preservation: 2.78%, Sansom
Street: 3.34% and Bedford: 2.78%; for each of the RBB, Cash Preservation,
Sansom Street, Bedford and Bradford Classes in the Municipal Money Market
Portfolio, was as follows: RBB: 1.72%, Cash Preservation: 1.74%, Sansom
Street: 0%, Bedford 1.95% and Bradford 1.95; for the Bedford, Bradford and
Sansom Street Classes of the Government Obligations Money Market Portfolio,
was as follows: Bedford: 2.70%, Bradford: 2.70% and no net investment income
to average net assets ratio is given for the Sansom Street Class of the
Government Obligations Money Market Portfolio as such class ceased operations
on December 4, 1991; and for the Bedford Class of the New York Municipal
Money Market Portfolio, was 1.98%.
Shares of a class of Common Stock in the Cash Preservation
Family may be exchanged for another class of Common Stock in such Family as
well as for shares of the non-money market classes of Common Stock of the RBB
Family. Otherwise, no exchanges between families are permitted.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION
INCORPORATED HEREIN RELATE PRIMARILY TO THE ^ JANNEY CLASSES AND DESCRIBE
ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER
MATTERS RELATING TO THE ^ JANNEY CLASSES.
Each share that represents an interest in a Portfolio has an
equal proportionate interest in the assets belonging to such Portfolio with
each other share that represents an interest in such Portfolio, even where a
share has a different class designation than another share representing an
interest in that Portfolio. Shares of the Fund do not have preemptive or
conversion rights. When issued for payment as described in this Prospectus,
Shares of the Fund will be fully paid and non-assessable.
The Fund currently does not intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
law under certain circumstances provides shareholders with the right to call
for a meeting of shareholders to consider the removal of one or more
directors.
45
To the extent required by law, the Fund will assist in shareholder
communication in such matters.
Holders of shares of each of the Portfolios will vote in the
aggregate and not by class on all matters, except where otherwise required by
law. Further, shareholders of all investment portfolios of the Fund will vote
in the aggregate and not by portfolio except as otherwise required by law or
when the Board of Directors determines that the matter to be voted upon
affects only the interests of the shareholders of a particular investment
portfolio. (See the Statement of Additional Information under "Additional
Information Concerning Fund Shares" for examples when the 1940 Act requires
voting by investment portfolio or by class.) Shareholders of the Fund are
entitled to one vote for each full share held (irrespective of class or
portfolio) and fractional votes for fractional shares held. Voting rights are
not cumulative and, accordingly, the holders of more than 50% of the
aggregate shares of Common Stock of the Fund may elect all of the directors.
As of ^ January 27, 1995, to the Fund's knowledge, no person
held of record or beneficially 25% or more of the outstanding shares of all
of the classes of the Fund, although as of such date, Boston Financial Data
Services owned more than 25% of the outstanding shares of the Warburg Pincus
Family Class representing an interest in the Growth & Income Fund; Warburg,
Pincus Counsellors, Inc. owned more than 25% of the outstanding shares of the
Warburg Pincus Family Class representing an interest in the Balanced Fund;
Seymour Fein owned more than 25% of the outstanding shares of the RBB Family
Class representing an interest in the Municipal Money Market Portfolio;
Jewish Family and Childrens Agency of Philadelphia Capital Campaign owned
more than 25% of the outstanding shares of the Cash Preservation Family Class
representing an interest in the Money Market Portfolio; Deborah C. Brown
Trustee/Barbara J.C. Curtis, Trustee, the Crowe Trust owned more than 25% of
the outstanding shares of the Cash Preservation Family Class representing an
interest in the Municipal Money Market Portfolio; Wasner & Co. for the
account of Paine Webber Managed Assets - Sundry Holdings owned more than 25%
of the outstanding shares of the Sansom Street Class representing an interest
in the Money Market Portfolio; John Hancock Clearing Corporation owned more
than 25% of the outstanding shares of the Laffer/Canto Family Class
representing an interest in the Laffer/Canto Equity Fund Portfolio; Home
Insurance Company owned more than 25% of the outstanding shares of the RBB
Family Class representing an interest in the Government Securities Portfolio;
State of Oregon owned more than 25% of the outstanding shares of the BEA
Family Class representing an interest in the BEA Strategic Fixed Income
Portfolio; Bank of New York, Trust APU Buckeye Pipeline owned more than 25%
of the outstanding shares of the BEA Family Class
46
representing an interest in
the BEA U.S. Core Equity Portfolio; New England UFCW & Employers Pension Fund
Board of Trustees and Bankers Trust Pechinery Corporation Pension Master
Trust each owned more than 25% of the outstanding shares of the BEA Family
Class representing an interest in the BEA U.S. Core Fixed Income Portfolio
and Bank of New York Eastern Enterprises Retirement Plan Trust owned more
than 25% of the outstanding shares of the BEA Family Class representing an
interest in the BEA Global Fixed Income portfolio.
The Fund will issue share certificates for any of the ^
Janney Shares only upon the written request of a shareholder sent to PFPC.
OTHER INFORMATION
Reports and Inquiries
Shareholders will receive unaudited semi-annual reports
describing the Fund's investment operations and annual financial statements
audited by independent accountants. Shareholder inquiries should be addressed
to PFPC, the Fund's transfer agent, Bellevue Park Corporate Center, 400
Bellevue Parkway, Wilmington, Delaware 19809, toll-free (800) 447-1139 (in
Delaware call collect (302) 791-1031).
47
^ JANNEY MONTGOMERY SCOTT MONEY FUNDS
Money Market Portfolio,
Municipal Money Market Portfolio,
Government Obligations Money Market Portfolio and
New York Municipal Money Market Portfolio
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary information
pertaining to shares of four classes (the " ^ Janney Shares") representing
interests in four investment portfolios (the "Portfolios") of The RBB Fund,
Inc. (the "Fund"): the Money Market Portfolio, the Municipal Money Market
Portfolio, the Government Obligations Money Market Portfolio and the New
York Municipal Money Market Portfolio. This Statement of Additional
Information is not a prospectus, and should be read only in conjunction
with the ^ Janney Montgomery Scott Money Funds Prospectus of the Fund dated
^__________, 1995, (the "Prospectus"). A copy of the Prospectus may be
obtained through the Fund's distributor by calling toll-free (800) 888-
9723. This Statement of Additional Information is dated ^ __________,
1995.
CONTENTS
Prospectus
Page Page
---- ----
General .................................. 2 2
Investment Objectives and Policies ....... 2 6
Directors and Officers ................... 32 N/A
Investment Advisory, Distribution and
Servicing Arrangements ................. 35 37
Portfolio Transactions ................... 41 N/A
Purchase and Redemption Information ...... 42 30
Valuation of Shares ...................... 43 36
Taxes .................................... 45 42
Additional Information Concerning Fund
Shares.................................. 50 44
Miscellaneous ............................ 51 N/A
Appendix ................................. A-1 N/A
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information
in connection with the offering made by the Prospectus and, if given or
made, such information or representations must not be relied upon as having
been authorized by the Fund or its distributor. The Prospectus does not
constitute an offering by the Fund or by the distributor in any
jurisdiction in which such offering may not lawfully be made.
1
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management
investment company currently operating or proposing to operate nineteen
separate investment portfolios. This Statement of Additional Information
pertains to four classes of shares (the " ^ Janney Classes") representing
interests in four investment portfolios (the "Portfolios") of the Fund: the
Money Market Portfolio, the Municipal Money Market Portfolio, the
Government Obligations Money Market Portfolio and the New York Municipal
Money Market Portfolio. The ^ Janney Classes are offered by the Prospectus
dated ^__________, 1995. The Fund was organized as a Maryland corporation
on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the
same meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the
Prospectus concerning the investment objectives and policies of the
Portfolios. A description of ratings of Municipal Obligations and
commercial paper is set forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements
involve the sale of securities held by a Portfolio pursuant to a
Portfolio's agreement to repurchase the securities at an agreed upon price,
date and rate of interest. Such agreements are considered to be borrowings
under the Investment Company Act of 1940 (the "1940 Act"), and may be
entered into only for temporary or emergency purposes. While reverse
repurchase transactions are outstanding, a Portfolio will maintain in a
segregated account with the Fund's custodian or a qualified sub-custodian,
cash, U.S. Government securities or other liquid, high-grade debt
securities of an amount at least equal to the market value of the
securities, plus accrued interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments
held by the Money Market Portfolio or the Municipal Money Market Portfolio
may have maturities of more than 397 calendar days, provided: (i) the
Portfolio is entitled to the payment of principal at any time, or during
specified intervals not exceeding 397 calendar days, 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 397 calendar days. In determining the average weighted
maturity of the Money Market, Municipal Money Market or New York Municipal
Money Market Portfolio and whether a variable rate demand instrument has a
remaining maturity of 397 calendar days or less, each instrument will be
deemed by the Portfolio to have a maturity equal to the longer of the
period remaining until
2
its next interest rate adjustment or the period remaining until the
principal amount can be recovered through demand. In determining whether
an unrated variable rate demand instrument is an eligible security, the
Portfolio's investment adviser will follow guidelines adopted by the Fund's
Board of Directors.
Firm Commitments. Firm commitments for securities include "when
issued" and delayed delivery securities purchased for delivery beyond the
normal settlement date at a stated price and yield. While the Money Market
Portfolio, Municipal Money Market Portfolio or New York Municipal Money
Market Portfolio has firm commitments outstanding, such Portfolio will
maintain in a segregated account with the Fund's custodian or a qualified
sub-custodian, cash, U.S. government securities or other liquid, high grade
debt securities of an amount at least equal to the purchase price of the
securities to be purchased. Normally, the custodian for the relevant
Portfolio will set aside portfolio securities to satisfy a purchase
commitment and, in such a case, such Portfolio 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 Portfolio's
commitment. It may be expected that such Portfolio's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to
cover such purchase commitments than when it sets aside cash. Because such
Portfolio's liquidity and ability to manage its portfolio might be affected
when it sets aside cash or portfolio securities to cover such purchase
commitments, such Portfolio expects that commitments to purchase "when
issued" securities will not exceed 25% of the value of its total assets
absent unusual market conditions. When any of the Money Market Portfolio,
Municipal Money Market Portfolio or the New York Municipal Money Market
Portfolio engages in when-issued transactions, it relies on the seller to
consummate the trade. Failure of the seller to do so may result in such
Portfolio's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
Stand-by Commitments. Each of the Money Market Portfolio,
Municipal Money Market Portfolio and New York Municipal Money Market
Portfolio may enter into stand-by commitments with respect to obligations
issued by or on behalf of states, territories, and possessions of the
United States, the District of Columbia, and their political subdivisions,
agencies, instrumentalities and authorities (collectively, "Municipal
Obligations") held in its portfolio. Under a stand-by commitment, a dealer
would agree to purchase at the Portfolio's option a specified Municipal
Obligation at its amortized cost value to the Portfolio plus accrued
interest, if any. Stand-by commitments may be exercisable by the Money
Market Portfolio, Municipal Money Market Portfolio or New York Municipal
Money Market Portfolio at any time before the maturity of the underlying
Municipal Obligations and may be sold, transferred or assigned only with
the instruments involved.
Each of the Money Market Portfolio, Municipal Money Market
Portfolio and New York Municipal Money Market Portfolio expects that stand-
by commitments will generally be available without the payment of any
direct or indirect consideration. However, if necessary or advisable,
either such
3
Portfolio may pay for a stand-by commitment either separately
in cash or by paying a higher price for portfolio securities which are
acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in
either manner for outstanding stand-by commitments held by the Money Market
Portfolio, Municipal Money Market Portfolio and New York Municipal Money
Market Portfolio will not exceed 1/2 of 1% of the value of the relevant
Portfolio's total assets calculated immediately after each stand-by
commitment is acquired.
Each of the Money Market Portfolio, Municipal Money Market
Portfolio and New York Municipal Money Market Portfolio intends to enter
into stand-by commitments only with dealers, banks and broker-dealers
which, in the investment adviser's opinion, present minimal credit risks.
Any such Portfolio's reliance upon the credit of these dealers, banks and
broker-dealers will be secured by the value of the underlying Municipal
Obligations that are subject to the commitment.
The Money Market Portfolio, Municipal Money Market Portfolio and
New York Municipal Money Market Portfolio will acquire stand-by commitments
solely to facilitate portfolio liquidity and do not intend to exercise
their rights thereunder for trading purposes. The acquisition of a stand-
by commitment will not affect the valuation or assumed maturity of the
underlying Municipal Obligation which will continue to be valued in
accordance with the amortized cost method. The actual stand-by commitment
will be valued at zero in determining net asset value. Accordingly, where
either such Portfolio pays directly or indirectly for a stand-by
commitment, its cost will be reflected as an unrealized loss for the period
during which the commitment is held by such Portfolio and will be reflected
in realized gain or loss when the commitment is exercised or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches
of U.S. Banks. For purposes of the Money Market Portfolio's investment
policies with respect to bank obligations, the assets of a bank or savings
institution will be deemed to include the assets of its domestic and
foreign branches. Investments in bank obligations will include obligations
of domestic branches of foreign banks and foreign branches of domestic
banks. Such investments may involve risks that are different from
investments in securities of domestic branches of U.S. banks. These risks
may include future unfavorable political and economic developments,
possible withholding taxes on interest income, seizure or nationalization
of foreign deposits, currency controls, interest limitations, or other
governmental restrictions which might affect the payment of principal or
interest on the securities held in the Money Market Portfolio.
Additionally, these institutions may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting and
recordkeeping requirements than those applicable to domestic branches of
U.S. banks. The Money Market Portfolio will invest in obligations of
domestic branches of foreign banks and foreign branches of domestic banks
only when its investment adviser believes that the risks associated with
such investment are minimal.
4
Short Sales "Against the Box." In a short sale, the Government
Obligations Money Market Portfolio sells a borrowed security and has a
corresponding obligation to the lender to return the identical security.
The Portfolio may engage in short sales if at the time of the short sale it
owns or has the right to obtain, at no additional cost, an equal amount of
the security being sold short. This investment technique is known as a
short sale "against the box." In a short sale, a seller does not
immediately deliver the securities sold and is said to have a short
position in those securities until delivery occurs. If the Portfolio
engages in a short sale, the collateral for the short position will be
maintained by the Portfolio's custodian or a qualified sub-custodian.
While the short sale is open, the Portfolio will maintain in a segregated
account an amount of securities equal in kind and amount to the securities
sold short or securities convertible into or exchangeable for such
equivalent securities. These securities constitute the Portfolio's long
position. The Portfolio will not engage in short sales against the box for
investment purposes. A Portfolio may, however, make a short sale as a
hedge, when it believes that the price of a security may decline, causing a
decline in the value of a security owned by the Portfolio (or a security
convertible or exchangeable for such security), or when the Portfolio wants
to sell the security at an attractive current price, but also wishes to
defer recognition of gain or loss for federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code. In such case, any future losses
in the Portfolio's long position should be reduced by a gain in the short
position. Conversely, any gain in the long position should be reduced by a
loss in the short position. The extent to which such gains or losses are
reduced will depend upon the amount of the security sold short relative to
the amount the Portfolio owns. There will be certain additional
transaction costs associated with short sales against the box, but the
Portfolio will endeavor to offset these costs with the income from the
investment of the cash proceeds of short sales. The dollar amount of short
sales at any time will not exceed 25% of the net assets of the Government
Obligations Money Market Portfolio, and the value of securities of any one
issuer in which the Portfolio is short will not exceed the lesser of 2% of
net assets or 2% of the securities of any class of an issuer.
U.S. Government Obligations. Examples of types of U.S. Government
obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds
and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks,
Federal Land Banks, the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Federal National Mortgage Association, Government National
Mortgage Association, General Services Administration, Student Loan
Marketing Association, Central Bank for Cooperatives, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, Maritime
Administration, International Bank for Reconstruction and Development (the
"World Bank"), the Asian-American Development Bank and the Inter-American
Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which
is issued in reliance on the "private placement" exemption from
5
registration which is afforded by Section 4(2) of the Securities Act of
1933. Section 4(2) paper is restricted as to disposition under the Federal
securities laws and is generally sold to institutional investors such as
the Fund which agree that they are purchasing the paper for investment and
not with a view to public distribution. Any resale by the purchaser must
be in an exempt transaction. Section 4(2) paper normally is resold to
other institutional investors through or with the assistance of investment
dealers who make a market in the Section 4(2) paper, thereby providing
liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase
agreements described in the Prospectus generally equals the price paid by a
Portfolio 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 Fund's custodian in the Federal Reserve/Treasury book-entry
system or by another authorized securities depository. Repurchase
agreements are considered to be loans by a Portfolio under the 1940 Act.
Mortgage-Related Debt Securities. Mortgage-related debt securities
represent ownership interests in individual pools of residential mortgage
loans. These securities are designed to provide monthly payments of
interest and principal to the investor. Each mortgagor's monthly payment
to his lending institution on his residential mortgage is "passed-through"
to investors. Mortgage pools consist of whole mortgage loans or
participations in loans. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools.
Lending institutions which originate mortgages for the pools are subject to
certain standards, including credit and underwriting criteria for
individual mortgages included in the pools.
Since the inception of the mortgage-related pass-through security
in 1970, the market for these securities has expanded considerably. The
size of the primary issuance market, and active participation in the
secondary market by securities dealers and many types of investors,
historically have made interests in government and government-related pass-
through pools highly liquid, although no guarantee regarding future market
conditions can be made. The average life of pass-through pools varies with
the maturities of the underlying mortgage instruments. In addition, a
pool's term may be shortened by unscheduled or early payments of principal
and interest on the underlying mortgages. The occurrence of mortgage
prepayments is affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgages and
various social and demographic conditions. Because prepayment rates of
individual pools vary widely, it is not possible to predict accurately the
average life of a particular pool. For pools of fixed rate 30 year
mortgages, common industry practice is to assume that prepayments will
result in a 12 year average life. Pools of mortgages with other maturities
or different characteristics will have varying assumptions concerning
average life. The assumed average life of pools of mortgages having terms
of less than 30 years is less than 12 years, but
6
typically not less than 5 years. Yields on pass-through securities are
typically quoted by investment dealers and vendors based on the maturity of
the underlying instruments and the associated average life assumption. In
periods of falling interest rates, the rate of prepayment tends to increase,
thereby shortening the actual average life of a pool of underlying mortgage-
related securities. Conversely, in periods of rising rates the rate of
prepayment tends to decrease, thereby lengthening the actual average life of
the pool. Historically, actual average life has been consistent with the
12-year assumption referred to above. Actual prepayment experience may
cause the yield of mortgage-related securities to differ from the assumed
average life yield. In addition, as noted in the Prospectus, reinvestment
of prepayments may occur at higher or lower interest rates than the original
investment, thus affecting the yield of the Portfolio involved.
The coupon rate of interest on mortgage-related securities is lower
than the interest rates paid on the mortgages included in the underlying
pool, but only by the amount of the fees paid to the mortgage pooler,
issuer, and/or guarantor of payment of the securities for the guarantee of
the services of passing through monthly payments to investors. Actual
yield may vary from the coupon rate, however, if mortgage-related
securities are purchased at a premium or discount, traded in the secondary
market at a premium or discount, or to the extent that mortgages in the
underlying pool are prepaid as noted above. In addition, interest on
mortgage-related securities is earned monthly, rather than semi-annually as
is the case for traditional bonds, and monthly compounding may tend to
raise the effective yield earned on such securities.
Lending of Securities. With respect to loans by the Government
Obligations Money Market Portfolio of its portfolio securities as described
in the Prospectus, such Portfolio would continue to accrue interest on
loaned securities and would also earn income on loans. Any cash collateral
received by such Portfolio in connection with such loans would be invested
in short-term U.S. Government obligations. Any loan by the Government
Obligations Money Market Portfolio of its portfolio's securities will be
fully collateralized and marked to market daily.
Eligible Securities. The Portfolios will only purchase "eligible
securities" that present minimal credit risks as determined by the
investment adviser pursuant to guidelines adopted by the Board of
Directors. Eligible securities generally include (1) U.S. Government
securities, (2) securities that (a) are rated (at the time of purchase) by
two or more nationally recognized statistical rating organizations
("NRSROs") in the two highest rating categories for such securities (e.g.,
commercial paper rated "A-1" or "A-2" by S&P, or rated "Prime-1" or "Prime-
2" by Moody's), or (b) are rated (at the time of purchase) by the only
NRSRO rating the security in one of its two highest rating categories for
such securities; (3) short-term obligations and long-term obligations that
have remaining maturities of 397 calendar days or less, provided in each
instance that such obligations have no short-term rating and are comparable
in priority and security to a class of short-term obligations of the issuer
that has been rated in accordance with (2)(a) or (b)
7
above ("comparable obligations"); (4) securities that are not rated and are
issued by an issuer that does not have comparable obligations rated by an
NRSRO ("Unrated Securities"), provided that such securities are determined
to be of comparable quality to a security satisfying (2) or (3) above; and
(5) long-term obligations that have remaining maturities in excess of 397
calendar days that are subject to a demand feature or put (such as a
guarantee, a letter of credit or similar credit enhancement) ("demand
instrument") (a) that are unconditional (readily exercisable in the event
of default), provided that the demand feature satisfies (2), (3) or (4)
above, or (b) that are not unconditional, provided that the demand feature
satisfies (2), (3) or (4) above, and the demand instrument or long-term
obligations of the issuer satisfy (2) or (4) above for long-term debt
obligations. The Board of Directors will approve or ratify any purchases
by the Money Market and Government Obligations Money Market Portfolios of
securities that are rated by only one NRSRO or that are Unrated Securities.
Illiquid Securities. None of the Portfolios may invest more than
10% of its net assets in illiquid securities (including with respect to all
Portfolios other than the Municipal Money Market Portfolio, repurchase
agreements which have a maturity of longer than seven days), including
securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale.
Securities that have legal or contractual restrictions on resale but have a
readily available market are not considered illiquid for purposes of this
limitation. Each Portfolio's investment adviser will monitor the liquidity
of such restricted securities under the supervision of the Board of
Directors. With respect to the Money Market Portfolio, the Government
Obligations Money Market Portfolio, and the New York Municipal Money Market
Portfolio, repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.
Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and, except as
to the Municipal Money Market Portfolio, repurchase agreements having a
maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements
or restricted securities and are purchased directly from the issuer or in
the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations
on resale may have an adverse effect on the marketability of portfolio
securities and a mutual fund might be unable to dispose of restricted or
other illiquid securities promptly or at reasonable prices and might
thereby experience difficulty satisfying redemptions within seven days. A
mutual fund might also have to register such restricted securities in order
to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.
8
In recent years, however, a large institutional market has
developed for certain securities that are not registered under the
Securities Act including repurchase agreements, commercial paper, foreign
securities, municipal securities and corporate bonds and notes.
Institutional investors depend on an efficient institutional market in
which the unregistered security can be readily resold or on an issuer's
ability to honor a demand for repayment. The fact that there are
contractual or legal restrictions on resale to the general public or to
certain institutions may not be indicative of the liquidity of such
investments.
SEC Rule 144A 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 Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that
the market for certain restricted securities such as institutional
commercial paper will expand further as a result of this relatively new
regulation and the development of automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the NASD.
Each Portfolio's investment adviser will monitor the liquidity of
restricted securities in each Portfolio under the supervision of the Board
of Directors. In reaching liquidity decisions, the investment adviser may
consider, inter alia, the following factors: (1) the unregistered nature
of the security; (2) the frequency of trades and quotes for the security;
(3) the number of dealers wishing to purchase or sell the security and the
number of other potential purchasers; (4) dealer undertakings to make a
market in the security and (5) the nature of the security and the nature of
the marketplace trades (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of the transfer).
Special Considerations Relating to New York Municipal Obligations.
Some of the significant financial considerations relating to the
New York Municipal Money Market Portfolio's investments in New York
Municipal Obligations are summarized below. This summary information is
derived principally from official statements released prior to the date of
this Statement of Additional Information relating to issues of New York
Municipal Obligations and does not purport to be a complete description of
any of the considerations mentioned herein. The accuracy and completeness
of the information contained in such official statements has not been
independently verified.
State Economy. New York is the second most populous state in the
nation and has a relatively high level of personal wealth. The State's
economy is diverse with a comparatively large share of the nation's
finance, insurance, transportation, communications and services employment,
and a comparatively small share of the nation's farming and mining
activity. The State has a declining proportion of its workforce engaged in
manufacturing,
9
and an increasing proportion engaged in service industries. New York City
(the "City"), which is the most populous city in the State and nation and is
the center of the nation's largest metropolitan area, accounts for
approximately 41% of both the State's population and personal income.
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the
nation as a whole, gradually eroding its relative economic affluence. The
recession has been more severe in the State, owing to a significant
retrenchment in the financial services industry, cutbacks in defense
spending, and an overbuilt real estate market. There can be no assurance
that the State economy will not experience worse-than-predicted results in
the 1993-94 fiscal year, with corresponding material and adverse effects on
the State's projections of receipts and disbursements.
The unemployment rate in the State dipped below the national rate
in the second half of 1981 and remained lower until 1991. The total
employment growth rate in the State has been below the national average
since 1984, and in 1992 the unemployment rate rose to 8.5%. State per
capita personal income for 1992 was $23,534, which is 18.6% above the 1992
national average of $19,841. Between 1970 and 1980, the percentage by
which the State's per capita income exceeded that of the national average
fell from 19.8% to 8.1%, and the State dropped from fifth to eleventh in
the nation in terms of per capita income. However, since 1980, the State's
rate of per capita income growth was greater than that of the nation
generally and the State's rank improved to fourth in 1990 and remained
fourth in 1991 and 1992. Some analysts believe that the decline in jobs in
both the city and New York State is the result of State and local taxation,
which is among the highest in the nation, and which may cause corporations
to locate outside New York State. The current high level of taxes limits
the ability of New York State and the city to impose higher taxes in the
event of future difficulties.
State Budget. The State Constitution requires the Governor to
submit to the Legislature a balanced Executive Budget which contains a
complete plan of expenditures for the ensuing fiscal year and all moneys
and revenues estimated to be available therefor, accompanied by bills
containing all proposed appropriations or reappropriations and any new or
modified revenue measures to be enacted in connection with the Executive
Budget. The entire plan constitutes the proposed State Financial Plan for
that fiscal year. The Governor submits to the Legislature, on at least a
quarterly basis, reports of actual receipts, revenues, disbursements,
expenditures, tax refunds and reimbursements, and repayment of advances in
form suitable for comparison with the State Financial Plan, together with
explanations of deviations from the State Financial Plan.
At such time, the Governor is required to submit any amendments to
the State financial plan necessitated by such deviations. The third
quarterly update to the 1992-93 State Financial Plan was submitted by the
Governor on January 19, 1993. Such revision projected that the State will
complete its 1992-93 fiscal year with a cash-basis General Fund positive
margin of $184
10
million. This positive balance will be made available for
income tax refunds in the 1993-94 fiscal year.
The Governor released the recommenced Executive Budget for the
1993-94 fiscal year on January 19, 1993 and amended it on February 18,
1993. The recommended 1993-94 State Financial Plan projected a balanced
General Fund. General Fund receipts and transfers from other funds were
projected at $31.556 billion, including $184 million expected to be carried
over from the 1993-94 fiscal year. Disbursements and transfers to other
funds were projected at $31.489 billion, not including a $67 million
repayment to the State's Tax Stabilization Reserve Fund.
The 1993-94 State Financial Plan formulated on April 16, 1993 (the
"1993-94 State Financial Plan"), following enactment of the State's 1993-94
budget, projected General Fund receipts and transfers from other funds at
$32.367 billion and disbursements and transfers to other funds at $32.300
billion. Excess receipts of $67 million will be used for a required
payment to the State's Tax Stabilization Reserve Fund. In comparison to
the recommended 1993-94 Executive Budget, the 1993-94 State budget, as
enacted, reflected increases in both receipts and disbursements in General
Funds of $811 million.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant
disparity between tax revenues projected from a lower recurring receipts
base and the spending required to maintain State programs at current
levels. To address any potential budgetary imbalance, the State may need
to take significant actions to align recurring receipts and disbursements
in future fiscal years.
The 1993-94 State Financial Plan is based on a number of
assumptions and projections. Because it is not possible to predict
accurately the occurrence of all factors that may affect the 1993-94 State
Financial Plan, actual results may differ and have differed materially in
recent years, from projections made at the outset of a fiscal year. The
1993-94 State Financial Plan has been prepared on a cash basis and on the
basis of generally accepted accounting principles ("GAAP") using the four
GAAP defined governmental fund types: the General Fund, Special Revenue
Funds, Capital Projects Funds and Debt Service Funds.
Recent Financial Results. During its 1989-90, 1990-91 and 1991-92
fiscal years, the State incurred cash-basis operating deficits, prior to
the issuance of short-term tax and revenue anticipation notes, owing to
lower-than-projected receipts, which it believes to have been principally
the result of a significant slowdown in the New York and regional economy,
and with respect to the 1989-90 fiscal year, changes in taxpayer behavior
caused by the Federal Tax Reform Act of 1986.
The General Fund is the principal operating fund of the State. It
receives all State income that is not required by law to be deposited in
11
another fund which for the State's 1993-94 fiscal year, comprises
approximately 52% of total projected governmental fund receipts.
General Fund receipts, excluding transfers from other funds,
totalled $28.818 billion in the State's 1991-92 fiscal year (before
repayment of $1.081 billion of deficit notes issued in its 1990-91 fiscal
year and before issuance of $531 million in deficit notes to close the
1991-92 fiscal year General Fund cash basis operating deficit), and $29.950
billion in the State's 1991-92 fiscal year (before repayment of $531
million in deficit notes issued to close the State's 1991-92 fiscal year
General Fund cash basis deficit). General Fund receipts in the State's
1993-94 fiscal year are estimated in the 1993-94 State Financial Plan at
$30.765 billion. Taxes account for 96% of estimated 1993-94 General Fund
receipts, with the balance comprised of miscellaneous receipts.
General Fund disbursements, exclusive of transfers to other funds,
totalled $28.058 billion in the State's 1991-92 fiscal year and $29.068
billion in the State's 1992-93 fiscal year and are estimated to total
$30.346 billion in the State's 1993-94 fiscal year.
The State's financial position as shown in its Combined Balance
Sheet as of March 31, 1992 included an accumulated deficit in its combined
governmental funds of $3.315 billion represented by liabilities of $14.166
billion and assets of $10.851 billion available to liquidate such
liabilities.
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 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 debt that may be so authorized and subsequently
incurred by the State. The total amount of long-term State general
obligation debt authorized but not issued as of March 3, 1993 was
approximately $2.427 billion.
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 form the sale of duly authorized but unissued 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 of New York also employs two other types of long-term
financing mechanisms which are State-supported but are not general
obligations
12
of the State: moral obligation and lease-purchase or contractual-obligation
financing.
In 1990, as part of a State fiscal reform program, legislation was
enacted creating the New York Local Government Assistance Corporation
("LGAC"), a public benefit corporation empowered to issue long-term
obligations to fund certain payments to local governments traditionally
funded through New York State's annual seasonal borrowing. The Legislation
empowered LGAC to issue its bonds and notes in an amount not in excess of
$4.7 billion (exclusive of certain refunding bonds) plus certain other
amounts. Over a period of years, the issuance of those long-term
obligations, which will be amortized over no more than 30 years, is
expected to result in eliminating the need for continuing short-term
seasonal borrowing for those purposes. The legislation also imposed a cap
on the annual seasonal borrowing of the State at $4.7 billion, less net
proceeds of bonds issued by LGAC and bonds issued to provide for
capitalized interest, except in cases where the Governor and the
legislative leaders have certified both the need for additional borrowing
and provided a schedule for reducing it to the cap. If borrowing above the
cap is thus permitted in any fiscal year, it is required by law to be
reduced to the cap by the fourth fiscal year after the limit was first
exceeded. To date, LGAC has issued its bonds to provide net proceeds of
$3.281 billion. LGAC has been authorized to issue its bonds to provide net
proceeds of up to an additional $703 million during the State's 1993-94
fiscal year.
In April 1993, legislation was also enacted providing for
significant changes in the long-term financing practices of the State and
the Authorities.
The Legislature passed a proposed constitutional amendment that
would permit the State, without a voter referendum but within a formula-
based cap, to issue revenue bonds, which would be debt of the State secured
solely by a pledge of certain State tax receipts (including those allocated
to State funds dedicated for transportation purposes), and not by the full
faith and credit of the State. In addition, the proposed amendment would
require that State debt be incurred only for capital projects included in a
multi-year capital financing plan and would prohibit lease-purchase and
contractual-obligation financing mechanisms for State facilities. The
Governor and the Legislative leaders have indicated that public hearings
will be held on the proposed constitutional amendment. Before becoming
effective, the proposed constitutional amendment must first be passed again
by the next separately elected Legislature and then approved by the voters
at a general election, so that it could not become effective until after
the general election in November 1995.
On March 26, 1990, Standard & Poor's Corporation ("S&P") downgraded
New York State's (1) general obligation bonds from "AA-" to "A" and (2)
commercial paper from "A-1+" to "A-1". Also downgraded was certain of New
York State's variously rated moral obligation, lease-purchase, guaranteed
and contractual-obligation debt, including debt issued by certain New York
State agencies. On August 27, 1990, S&P affirmed these ratings without
change. On
13
June 6, 1990, Moody's changed its ratings on all the State's outstanding
general obligation bonds from "A-1" to "A". On March 26, 1990, S&P changed
its ratings of all the State's outstanding general obligations bonds from
"AA-" to "A". On January 6, 1992, Moody's lowered from "A" to "Baa-1" the
ratings on certain appropriation-backed debt of the State of New York and
its agencies. Approximately two-thirds of the State's tax-supported debt is
affected by Moody's rating action. Moody's stated that the more secure
general obligation, state-guaranteed and LGAC bonds continue to be rated
"A", but are placed under review for possible downgrade over the coming
months. On January 13, 1992, S&P lowered its rating on $4.8 billion of New
York State general obligation bonds to "A-" from "A". Various agency debt,
state moral obligations, contractual obligations, lease-purchase obligations
and state guarantees are also affected by S&P's action. Additionally, under
S&P's minimum-rating approach, New York local school district debt will now
carry a minimum rating of "A-" rather than "A" and school districts
currently rated "A" are placed on CreditWatch with negative implications.
In taking these rating actions, Moody's and S&P variously cited continued
economic deterioration, chronic operating deficits, mounting GAAP fund
balance deficits and the legislative stalemate in seeking permanent and
structurally sound fiscal operations. On January 15, 1992, S&P took further
action by lowering the rating on the claims-paying ability of the State of
New York Mortgage Agency Mortgage Insurance Fund to "BBB+" from "A-"
following the January 13, 1992 downgrade of New York State's general
obligation bond rating to "A-".
The State anticipates that its borrowings for capital purposes in
its 1993-94 fiscal year will consist of approximately $460 million in
general obligation bonds and $140 million in new commercial paper
issuances. In addition, it is anticipated that the State will issue $140
million in general obligation bonds for the purpose of redeeming
outstanding bond anticipation notes. The Legislature has also authorized
the issuance of up to $85 million in certificates of participation for
equipment purchases and real property purposes during the State's 1993-94
fiscal year. The projection of the State regarding its borrowings for the
1993-94 fiscal year may change if actual receipts fall short of State
projections or if other circumstances require.
Payments for principal and interest due on general obligation
bonds, interest due on bond anticipation notes and on tax and revenue
anticipation notes, and contractual-obligation and lease-purchase
commitments were $1.783 billion and $2.045 billion in the aggregate, for
New York State's 1991-92 and 1992-93 fiscal years, respectively, and are
estimated to be $2.326 billion for the State's 1993-94 fiscal year. These
figures do not include interest payable on either New York State General
Obligation Refunding Bonds issued on July 30, 1992, to the extent that such
interest is to be paid from an escrow fund established with the proceeds of
such bonds or New York State's installment payments relating to the
issuance of certificates of participation.
New York State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or
14
contractual-obligation financing arrangements and has never been called
upon to make any direct payments pursuant to its guarantees. Three has
never been a default on any moral obligation debt of any Authority.
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 New York; (2) certain aspects of New York State's Medicaid
policies and its rates and regulations, including reimbursements to
providers of mandatory and optional Medicare services; (3) contamination in
the Love Canal area of Niagara Falls; (4) an action against New York State
and New York city officials alleging inadequate shelter allowances to
maintain proper housing; (5) challenges to the practice of reimbursing
certain Office of Mental Health patient care expenses from the client's
Social Security benefits; (6) alleged responsibility of New York State
officials to assist in remedying racial segregation in the City of Yonkers;
(7) a challenge to the methods by which New York State reimburses
localities for the administrative costs of food stamp programs; (8) a
challenge to New York State's possession of certain property taken pursuant
to New York State's Abandoned Property Law; (9) an action, in which New
York State is a third party defendant, for injunctive or other appropriate
relief, concerning liability for the maintenance of stone groins
constructed along certain areas of Long Island's shoreline; (10) the
constitutionality of legislation enacted during the 1990 legislative
session which changed actuarial funding methods for determining state and
local contributions to the state employee retirement system; (11) action by
school districts and their employees challenging the constitutionality of
Chapter 175 of the Laws of 1990 which deferred school district
contributions to the public retirement system and reduced by like amount
state aid to the school districts; (12) challenges to portions of Public
Health law, which imposed a 13% surcharge on inpatient hospital bills paid
by commercial insurers and employee welfare benefit plans and portions of
Chapter 55 of the Laws of 1992 requiring hospitals to impose and remit to
the State an 11% surcharge on hospital bills paid by commercial insurers,
and which required health maintenance organizations to remit to the State a
surcharge of up to 9%; and (13) a challenge to provisions of the Public
Health Law and implementing regulations that imposed a bad debt and charity
care allowance on all hospital bills and a 13% surcharge on inpatient bills
paid by employee welfare benefit plans.
A number of cases have also been instituted against the State
challenging the constitutionality of various public authority financing
programs. In Schulz, et al. v. State of New York, a proceeding was
commenced on April 29, 1991 in the Supreme Court, Albany County challenging
the constitutionality of certain state bonding and financing programs
authorized by Chapter 190 of the Laws of 1990. By opinion dated May 11,
1993, the Court of Appeals held that petitioners have standing as voters
pursuant to Section 11 of Article VII of the State but affirmed the order
dismissing the proceeding on the ground of laches.
15
In a proceeding commenced on August 6, 1991 (Schulz, et al. v.
State of New York, et al., Supreme Court, Albany County), petitioners
challenge the constitutionality of two bonding programs of the New York
State Thruway Authority authorizing by Chapters 166 and 410 of the Laws of
1991. The defendants' motion to dismiss the action on procedural grounds
was denied by order of the Supreme Court dated January 2, 1992. By order
dated November 5, 1992, the Appellate Division, Third Department, reversed
the order of the Supreme Court and granted defendants' motion to dismiss on
grounds of standing and mootness. The proceeding is pending.
In an action commenced on February 6, 1992 (Schulz, et al. v. State
of New York, et al., Supreme Court, Albany County) plaintiffs seek a
judgment declaring unconstitutional sections 1, 2, 3 and 10 of Chapter 220
of the Laws of 1990 which relate to the creation and operation of LGAC. On
Mach 3, 1992 the Supreme Court, Albany County, granted defendants' motion
for summary judgment in all respects and dismissed the complaint. On July
23, 1992 the Appellate Division, Third Department, modified and affirmed
the judgment of the Supreme Court, holding that the plaintiffs lacked
standing. By opinion dated May 11, 1993, the Court of Appeals denied
plaintiffs' motion for leave to appeal and dismissed the litigation. The
Court noted that plaintiffs had failed to plead standing as voters pursuant
to Section 11 of Article VII of the State Constitution, and, thus, the
motion for leave to appeal did not directly involve a substantial
constitutional question.
In Schulz, et al. v. State of New York, et al., commenced May 24,
1993, Supreme Court, Albany County, petitioners challenge, among other
things, the constitutionality of, and seek to enjoin certain highway,
bridge and mass transportation bonding programs of the New York State
Thruway Authority and the Metropolitan Transportation Authority authorized
by Chapter 56 of the Laws of 1933. Petitioners contend that the
application of State tax receipts held in dedicated transportation funds to
pay debt service on bonds of the Thruway Authority and of the Metropolitan
Transportation Authority violates Section 8 and 11 of Article VII and
Section 5 of Article X of the State Constitution and due process provisions
of the State and Federal Constitutions. By order dated May 24, 1993, the
Supreme Court temporarily enjoined the State from implementing the bonding
programs of the Thruway Authority and Metropolitan Transportation Authority
described above.
Several actions challenging the withholdings of pay from civil
employees by the State have also been decided against the State. A
settlement has been announced in the actions brought by certain health
insurers and health maintenance organizations challenging the
constitutionality of the State's statutory scheme relating to excess
medical malpractice insurance premiums. The U.S. District Court for the
Wester District of New York has approved a settlement and award to
plaintiffs in various employment discrimination suits brought against the
State and its agencies. A stipulation to dismiss an action involving the
treatment provided at a state facility for the developmentally disabled has
been filed by the involved parties and approved by order of the District
Court.
16
The legal proceedings noted above involve State finances, State
programs and miscellaneous tort, real property and contract claims in which
the State is a defendant and the monetary damages sought are substantial.
These proceedings could affect adversely the financial condition of the
State in the 1993-94 fiscal year or thereafter. Adverse developments in
these proceedings or the initiation of new proceedings could affect the
ability of the State to maintain a balanced 1993-94 State Financial Plan.
An adverse decision in any of these proceedings could exceed the amount of
the 1993-94 State Financial Plan reserve for the payment of judgments and,
therefore, could affect the ability of the State to maintain a balanced
1993-94 State Financial Plan. In its audited financial statements for the
1991-92 fiscal year, the State reported its estimated liability for awarded
and anticipated unfavorable judgments to be $489 million. The State has
stated its belief that the 1993-94 State Financial Plan includes sufficient
reserves for the payment of judgments that may be required during the 1993-
94 fiscal year.
Although other litigation is pending against New York State, except
as described above, 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.
The Authorities. The fiscal stability of the State is related 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. As of September
30, 1992, the latest data available, there were 18 Authorities that had
outstanding debt of $100 million or more. The aggregate outstanding debt,
including refunding bonds, of these 18 Authorities was $62.2 billion as of
September 30, 1992, of which approximately $8.2 billion was moral
obligation debt and approximately $17.1 billion was financed under lease-
purchase or contractual-obligation financing arrangements.
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, the State has provided financial assistance through
appropriations, in some cases of a recurring nature, to certain of the 18
Authorities for operating and other expenses and, in fulfillment of its
commitments on moral obligation indebtedness or otherwise, for debt
service. This assistance is expected to continue to be required in future
years. New York State provided $947.4 million and $955.5 million in
financial assistance to the 18 Authorities during New York State's 1991-92
and 1992-93 fiscal years, respectively, and expects to provide
approximately $1,096.6 million in financial assistance to these Authorities
in its 1993-94 fiscal year. The amounts set forth above exclude, however,
amounts provided for capital construction and pursuant to
17
lease-purchase or contractual-obligation (including service contract debt)
financing arrangements.
New York State provided $947.4 million and $955.5 million in
financial assistance to the 18 Authorities during New York State's 1991-92
and 1992-93 fiscal years, respectively, and expects to provide
approximately $1,096.6 million in financial assistance to these Authorities
in its 1993-94 fiscal year. The amounts set forth above exclude, however,
amounts provided for capital construction and pursuant to lease-purchase or
contractual-obligation (including service contract debt) financing
arrangements.
Experience has shown that if an Authority suffers serious financial
difficulties, both the ability of the State and the Authorities to obtain
financing in the public credit markets and the market price of the State's
outstanding bonds and notes may be adversely affected. The New York State
Housing Finance Agency and the New York State Urban Development Corporation
have in the past required substantial amounts of assistance from the State
to meet debt service costs or to pay operating expenses. Further
assistance, possibly in increasing amounts, may be required for these, or
other, Authorities in the future. In addition, certain statutory
arrangements provide for State local assistance payments otherwise payable
to localities to be made under certain circumstances to certain
Authorities. The State has no obligation to provide additional assistance
to localities whose local assistance payments have been paid to Authorities
under these arrangements. However, in the event that such local assistance
payments are so diverted, the affected localities could seek additional
State funds.
New York city and Other Localities. The fiscal health of the State
of New York is closely related to the fiscal health of its localities,
particularly the City of New York, which has required and continues to
require significant financial assistance from New York State. The City's
independently audited operating results for each of its 1981 through 1992
fiscal years, which end on June 30, show a General Fund surplus reported in
accordance with GAAP. The City has eliminated the cumulative deficit in
its net General Fund position. In addition, the city's financial
statements for the 1992 fiscal year received an unqualified opinion from
the City's independent auditors, the tenth consecutive year the City has
received such an opinion.
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 public credit markets. The City was not able to sell
short-term notes to the public again until 1979. Since 1981, the City has
fully satisfied its seasonal financing needs with sales of short-term notes
in the public credit markets ranging from $850 million in fiscal year 1985
to $1.2 billion in fiscal year 1989.
On February 11, 1991, Moody's lowered their rating on the city's
general obligation bonds to "Baa-1" from "A". Moody's expressed doubts
about
18
whether the City's January 16, 1991 financial plan presents a "reasonable
program to achieve budget balance in fiscal 1991 and 1992 and assure
long-term structural integrity." Moody's stated "the enormity of the
current problem, the severity of required expenditure cuts, the substantial
revenue enhancements that will be require to achieve balance, the
vulnerability to exogenous factors, and the extremely short time frame
within which all this must be accomplished introduce substantial new risk
to the city's short- and long-term credit outlook." On April 29, 1991, S&P
downgraded New York city's outstanding $1.3 billion of general obligation
revenue and anticipation notes from "SP-1" to "SP-2". S&P also announced a
rating of "SP-2" for the City's offering of $1.25 billion of general
obligation revenue anticipation notes. The lower ratings of S&P "reflect
the City's aggravated short-term cash position for fiscal 1991, the
unusually high level of total revenue anticipation note exposure resulting
from the State's delay in passing its budget and distributing fiscal aid,
and continued pressure on revenues and expenditures due to prevailing
economic conditions." On April 30, 1991, Moody's assigned a rating of
"MIG-2" to the same offering of $1.25 billion of general obligation revenue
anticipation notes. Moody's stated that "although an increasingly strained
financial outlook for both the City and the State complicates the State
budget adoption process, this rating on revenue anticipation notes relies
explicitly on the expectation that the State is fully cognizant of the
consequences of further untimely delays in state budget adoption and will
act responsibly. Failure of the State to find a timely resolution to the
budget process will have sever implications for the normal financial
performance of New York City and other local governments in New York
State." On October 7, 1991, Moody's again assigned a "MIG-2" rating to New
York City's $1.25 billion of revenue anticipation notes, fiscal 1992,
Series A.
Moody's stated in its January 6, 1992 downgrade of certain New York
State obligations that while such action did not directly affect the bond
ratings of local governments in New York State, the impact of the State's
fiscal stringency on local government bond ratings will be assessed on a
case-by-case basis. On June 22, 1992, Moody's gave its MIG-1 rating tot he
city's $1.4 billion revenue anticipation notes and tax anticipation notes
citing New York City's "markedly improved" short-term credit position.
On July 6, 1993, S&P reaffirmed the city's "A-" rating on $20.4
billion of general obligation bonds stating that "the City has identified
additional gap-closing measures that have recurring value and will reduce
next year's budget gap... by approximately $400 million." Officials at
Moody's also indicated that there were no plans to alter its "Baa1" rating
on the city's general obligation bonds.
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 credited the Municipal Assistance
Corporation ("MAC") in 1975. MAC is authorized to issue bonds and notes
payable from
19
certain stock transfer tax revenues, from the City's portion of the State
sales tax derived in the City and 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. As of
September 30, 1991, MAC had outstanding an aggregate of approximately $6.471
billion of its bonds. 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. Under its enabling legislation, MAC's authority to issue
bonds and notes (other than refunding bonds and notes) expired on December
31, 1984. Legislation has been passed by the Legislature which would, under
certain conditions, permit MAC to issue up to $1.465 billion of additional
bonds.
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.
1993-1996 Financial Plan
On June 11, 1992, the City submitted to the Control Board a new
four-year financial plan covering fiscal years 1993 through 1996 ("the
1993-1996 Financial Plan"). The 1993-1996 Financial Plan is based on the
City's adopted expense budget for fiscal year 1993, which includes actions
to close a previously projected gap of approximately $1.2 billion. The
1993-1996 Financial Plan projected a balanced budget for fiscal year 1993
based upon revenues of $29.508 billion, but budget gaps of $1.6 billion,
$1.7 billion and $2.3 billion in fiscal years 1994, 1995, and 1996,
respectively. The 1993-1996 Financial Plan proposes to eliminate these
gaps through a program of City, State and Federal actions.
On February 9, 1993, the City issued a modification to the 1993-
1996 Financial Plan (the "February Modification"). After taking into
account potential higher labor costs based upon a labor agreement reached
in January and various other re-estimates of revenues and expenditures, the
February Modification projected a balanced budget for fiscal year 1993,
based upon
20
revenues of $30.367 billion. The February Modification projected budget
gaps in the subsequent years that are substantially larger than those
projected in the 1993-1996 Financial Plan. Among the reasons for the
larger gaps are lower estimates of real property tax revenues, higher
estimates of labor costs deriving from the labor settlement reached
in January and increased projections of spending for the Board of
Education. Taking these and other developments into account, the February
Modifications projected budget gaps for fiscal years 1994, 1995 and 1996 of
$2.1 billion, $3.1 billion and $3.8 billion, respectively. The February
Modification included resources from additional City, State and federal
actions to offset these larger gaps.
On March 25, 1993, the staff of the Control Board issued a report
on the February Modification. The staff concluded that, while the City
will balance its budget in fiscal 1993, the February Modification does not
make progress towards establishing structural balance with a revenue base
sufficient to sustain a stable level of services. After taking into
account what the staff considered to be the achievable elements of the
City's gap-closing program, the report identified risks of approximately
$1.0 billion, $1.9 billion, $2.3 billion and $2.6 billion in fiscal years
1994 through 1997, respectively. The report identified these major risks
as actions that require State or federal approval; unspecified City gap-
closing actions; risks associated with the City's revenue and expenditure
estimates, including lower-than-planned revenues from the City lottery and
higher-than-planned overtime costs; proposed Board of Education expenditure
reductions; and the proposed sale of certain property tax receivables. In
addition, the report explored issues related to the growth of the City's
substantial debt-service burden and personal-services budget, and noted
that the City's property tax forecast may need further reduction.
On May 3, 1993, the Mayor released his Executive Budget for fiscal
year 1994 and revised projections for fiscal years 1993 through 1997 (the
"Revised Financial Plan"). The Revised Financial Plan projects a balanced
budget for fiscal year 1993 based upon revenues of $30.659 billion, after
the prepayment in fiscal year 1993 of $345 million in expenditures
previously planned for fiscal year 1994. After taking the prepayment into
account, the Revised Financial Plan also projects a balanced budget for
fiscal year 1994 based upon revenues of $31.399 billion. Budget balance in
that year is dependent upon the success of the Revised Plan's fiscal year
1994 revenue enhancement and cost reduction program, the major elements of
which include agency initiatives valued at $791 million, the receipt of
$530 million of anticipated but as yet unidentified State and federal aid,
and the completion for a sale of real estate tax receivables which is
expected to generate $215 million. For City fiscal years 1995, 1996 and
1997, the Revised Financial Plan projects gaps of $1.7 billion, $2.2
billion and $2.6 billion, respectively, after taking into account the
recurring impact of the fiscal year 1994 revenue enhancement and cost
reduction program. The Revised Financial Plan proposes to close these gaps
through a combination of city, State and federal actions.
21
On June 4, 1993, OSDC issued a report on the Revised Financial
Plan. The report concluded that budget balance for fiscal year 1994 will
be difficult to achieve. The report found that expenditures could be $280
million higher, due to higher estimates for payments to the Health and
Hospitals Corporation (HHC) and for overtime in the uniformed services. In
addition, the report noted that revenues could be $111 million lower, in
part, because it is unlikely that resources from a sale or restructuring of
the Off-Track Betting Corporation will be realized as planned. The report
also found that much of the anticipated budget relief of $530 million from
the federal and State governments was unlikely to materialize and that it
was uncertain whether the City would be able to realize a one-time gain of
$215 million from the proposed sale of certain real estate tax receivables.
For fiscal years 1995 through 1997, the OSDC report found that the
budget gaps faced by the City could be greater than in the Revised
Financial Plan by $345 million in fiscal year 1995, $350 million in fiscal
year 1996 and $322 million in fiscal year 1997. These estimates reflect
higher payments to HHC and the expectation that receipts from a City-run
lottery will not materialize. The report noted that the Revised Financial
Plan makes no provision for collective bargaining costs after the
expiration for current contracts in mid-fiscal year 1995 and estimated that
each annual wage increase of one percent would cause the projected budget
gaps to widen by $56 million, $209 million and $363 million in fiscal years
1995 through 1997, respectively. Finally, the report concluded that with
City spending growing faster than revenues, the challenge of balancing
future budgets is formidable.
On June 13, 1993, the City Council adopted a budget for fiscal year
1994 which projects balanced operations based upon revenues of $31,269
billion (the "Adopted Budget"). The Adopted Budget eliminates $300 million
of anticipated aid from the State and federal governments that was included
in the Revised Financial Plan as it related to fiscal year 1994. The
impact of the elimination is offset in the Adopted Budget by a larger
program of agency spending reductions and revenue enhancements, as well as
various re-estimates of revenues and expenditures.
On June 23, 1993, the City submitted to the Control Board a fourth
quarter modification to the Revised Financial Plan as it relates to fiscal
year 1993. The modification projects a balanced budget based on revenues
of $30,653 billion after taking into account a discretionary transfer of
surplus fiscal year 1993 funds to fiscal year 1994. The modification also
includes an unallocated reserve of $40 million, which the City believes
should be adequate to provide for any adjustments required by the year-end
audit of its fiscal year 1993 operating results. Such audited results are
expected to be known on or about October 31, 1993.
The City is expected to submit to the Control Board a four-year
Financial Plan covering fiscal years 1994 through 1997 based on the Adopted
Budget. OSDC and the staff of the Control Board are expected to issue
reports commenting on their reviews of that Financial Plan.
22
Estimates of the City's revenues and expenditures are based on
numerous assumptions and subject to various uncertainties. If expected
Federal or New York State aid is not forthcoming, if unforeseen
developments in the economy significantly reduce revenues derived from
economically sensitive taxes or necessitate increased expenditures for
public assistance, if the City should negotiate wage increases for its
employees greater than the amounts provided for in the City's financial
plan or if other uncertainties materialize that reduce expected revenues or
increase projected expenditures, then, to avoid operating deficits, the
City may be required to implement additional actions, including increases
in taxes and reductions in essential City services. The City might also
seek additional assistance from New York State.
Borrowings
The City requires certain amounts of financing for seasonal and
capital spending purposes. The City has issued $1.4 billion of notes for
seasonal financing purposes during its 1993 fiscal year and expects this
amount will be sufficient for the year. The City's capital financing
program projects long-term financing requirements of approximately $16.8
billion for the City's fiscal years 1994 through 1997 for the construction
and rehabilitation of the City's infrastructure and other fixed assets.
The major capital requirements include expenditures for the City's water
supply system, sewage and waste disposal systems, roads, bridges, mass
transit, schools and housing. In addition to financing for new purposes,
the City and the New York City Municipal Water Finance Authority have
issued refunding bonds totalling $3.6 billion.
Other Localities
Certain localities in addition to New York City could have
financial problems leading to requests for additional State assistance
during the State's 1993-1994 fiscal year and thereafter. The potential
impact on the State of such actions by localities is not included in the
projections of the State receipts and disbursements in the State's 1993-
1994 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of
Yonkers (the "Yonkers Board") by the State in 1984. The Yonkers Board is
charged with oversight of the fiscal affairs of Yonkers. Future actions
taken by the Governor of the State Legislature to assist Yonkers could
result in allocation of State resources in amounts that cannot yet be
determined.
Certain Municipal Indebtedness
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1991, the total indebtedness of
all localities in the State was approximately $32.2 billion, of which $16.8
billion was debt of New York City (excluding $6.7 billion in MAC debt); a
small portion (approximately 39.0 million) this indebtedness represented
23
borrowing to finance budgetary deficits and was issued pursuant to enabling
State legislation. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units
other than New York City authorized by State law to issue debt to finance
deficits during the period that such deficit financing is outstanding.
Fifteen localities had outstanding indebtedness for deficit financing at
the close of their fiscal year ending in 1991.
In 1992, an unusually large number of local government units
requested authorization for deficit financing. According to the
Comptroller, ten local government units have been authorized to issue
deficit financing in the aggregate amount of $131.1 million. The current
session of Legislature may receive as many or more requests for deficit-
financing authorizations as a result of deficits previously incurred by
local governments. Although the Comptroller has indicated that the level
of deficit financing requests is unprecedented, such developments are not
expected to have a material adverse effect on the financial condition of
the State.
Certain proposed Federal expenditure reductions would reduce, or in
some cases eliminate, Federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities to increase local revenues to sustain those
expenditures. If the State, New York 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. The longer-range potential problems of declining urban population,
increasing expenditures, and other economic trends could adversely affect
certain localities and require increasing State assistance in the future.
Investment Limitations.
Money Market Portfolio and Municipal Money Market Portfolio.
Neither the Money Market Portfolio nor the Municipal Money Market Portfolio
may:
(1) borrow money, except from banks for temporary
purposes (and with respect to the Money Market Portfolio only, except
for reverse repurchase agreements) and then in amounts not in excess
of 10% of the value of the Portfolio's total assets at the time of
such borrowing, and only if after such borrowing there is asset
coverage of at least 300 percent for all borrowings of the Portfolio;
or mortgage, pledge, hypothecate any of its assets except in
connection with such borrowings and then, with respect to the Money
Market Portfolio, in amounts not in excess of 10% of the value of a
Portfolio's total assets at the time of such borrowing and, with
respect to the Municipal Money Market Portfolio, in amounts not in
excess of the lesser of the dollar
24
amounts borrowed or 10% of the value of a Portfolio's total assets at
the time of such borrowing; or purchase portfolio securities while
borrowings in excess of 5% of the Portfolio's net assets are
outstanding. (This borrowing provision is not for investment leverage,
but solely to facilitate management of the Portfolio's securities by
enabling the Portfolio to meet redemption requests where the
liquidation of portfolio securities is deemed to be disadvantageous or
inconvenient.);
(2) purchase securities of any one issuer, other than
securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities, if immediately after and as a result of such
purchase more than 5% of a Portfolio's total assets would be invested
in the securities of such issuer, or more than 10% of the outstanding
voting securities of such issuer would be owned by the Portfolio,
except that up to 25% of the value of a Portfolio's assets may be
invested without regard to this 5% limitation;
(3) purchase securities on margin, except for short-term
credit necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the
extent that, in connection with the disposition of portfolio
securities, a Portfolio may be deemed an underwriter under Federal
securities laws and except to the extent that the purchase of
Municipal Obligations directly from the issuer thereof in accordance
with a Portfolio's investment objective, policies and limitations may
be deemed to be an underwriting;
(5) make short sales of securities or maintain a short
position or write or sell puts, calls, straddles, spreads or
combinations thereof;
(6) purchase or sell real estate, provided that a
Portfolio may invest in securities secured by real estate or interests
therein or issued by companies which invest in real estate or
interests therein;
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or
development programs;
(9) make loans except that a Portfolio may purchase or
hold debt obligations in accordance with its investment objective,
policies and limitations and (except for the Municipal Money Market
Portfolio) may enter into repurchase agreements;
25
(10) purchase any securities issued by any other
investment company except in connection with the merger,
consolidation, acquisition or reorganization of all the securities or
assets of such an issuer; or
(11) make investments for the purpose of exercising control
or management.
In addition to the foregoing enumerated investment limitations, the
Municipal Money Market Portfolio may not (i) under normal market conditions
invest less than 80% of its net assets in securities the interest on which
is exempt from the regular Federal income tax, although the interest on
such securities may constitute an item of tax preference for purposes of
the Federal alternative minimum tax, (ii) invest in private activity bonds
where the payment of principal and interest are the responsibility of a
company (including its predecessors) with less than three years of
continuous operations; and (iii) purchase any securities which would cause,
at the time of purchase, more than 25% of the value of the total assets of
the Portfolio to be invested in the obligations of the issuers in the same
industry.
In addition to the foregoing enumerated investment limitations, the
Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments,
some of which may be subject to repurchase agreements, but the Portfolio
may make interest-bearing savings deposits in amounts not in excess of 5%
of the value of the Portfolio's assets and may make time deposits;
(b) Purchase any securities which would cause, at the time of
purchase, less than 25% of the value of the total assets of the Portfolio
to be invested in the obligations of issuers in the banking industry, or in
obligations, such as repurchase agreements, secured by such obligations
(unless the Portfolio is in a temporary defensive position) or which would
cause, at the time of purchase, more than 25% of the value of its total
assets to be invested in the obligations of issuers in any other industry;
and
(c) Invest more than 5% of its total assets (taken at the time of
purchase) in securities of issuers (including their predecessors) with less
than three years of continuous operations.
The foregoing investment limitations cannot be changed without the
affirmative vote of the lesser of (a) more than 50% of the outstanding
shares of the Portfolio or (b) 67% or more of the shares of the Portfolio
present at a shareholders' meeting if more than 50% of the outstanding
shares the Portfolio are represented at the meeting in person or by proxy.
With respect to limitation (b) above concerning industry
concentration (applicable to the Money Market Portfolio), the Portfolio
will consider wholly-owned finance companies to be in the industries of
their parents if their activities are primarily related to financing the
activities
26
of the parents, and will divide utility companies according to their
services. For example, gas, gas transmission, electric and gas, electric
and telephone will each be considered a separate industry. The policy and
practices stated in this paragraph may be changed without the affirmative
vote of the holders of a majority of the affected Money Market Portfolio's
outstanding shares, but any such change may require the approval of the
Securities and Exchange Commission (the "SEC") and would be disclosed in the
Prospectus prior to being made.
So long as it values its portfolio securities on the basis of the
amortized cost method of valuation pursuant to Rule 2a-7 under the 1940
Act, the Municipal Money Market Portfolio will meet the following
limitation on its investments in addition to the fundamental investment
limitations described above. This limitation may be changed without a vote
of shareholders of the Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase
any Put if after the acquisition of the Put the Municipal Money Market
Portfolio has more than 5% of its total assets invested in instruments
issued by or subject to Puts from the same institution, except that
the foregoing condition shall only be applicable with respect to 75%
of the Municipal Money Market Portfolio's total assets. A "Put" means
a right to sell a specified underlying instrument within a specified
period of time and at a specified exercise price that may be sold,
transferred or assigned only with the underlying instrument.
So long as it values its portfolio securities on the basis of the
amortized cost method of valuation pursuant to Rule 2a-7 under the 1940
Act, the Money Market Portfolio will meet the following limitations on its
investments in addition to the fundamental investment limitations described
above. These limitations may be changed without a vote of shareholders of
the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of
the securities of any one issuer, other than issuers of U.S.
Government securities, to 5% of its total assets, except that the
Money Market Portfolio may invest more than 5% of its total assets in
First Tier Securities of one issuer for a period of up to three
business days. "First Tier Securities" include eligible securities
that (i) if rated by more than one NRSRO, are rated (at the time of
purchase) by two or more NRSROs in the highest rating category for
such securities, (ii) if rated by only one NRSRO, are rated by such
NRSRO in its highest rating category for such securities, (iii) have
no short-term rating and are comparable in priority and security to a
class of short-term obligations of the issuer of such securities that
have been rated in accordance with (i) or (ii) above, or (iv) are
Unrated Securities that are determined to be of comparable quality to
such securities. Purchases of First Tier Securities that come within
categories (ii) and (iv) above will be approved or ratified by the
Board of Directors.
27
2. The Money Market Portfolio will limit its purchases of
Second Tier Securities, which are eligible securities other than First
Tier Securities, to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of
Second Tier Securities of one issuer to the greater of 1% of its total
assets or $1 million.
Government Obligations Money Market Portfolio. The Government
Obligations Money Market Portfolio may not:
1. Purchase securities other than 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. There is no limit on the
amount of the Portfolio's assets which may be invested in the
securities of any one issuer of obligations that the Portfolio is
permitted to purchase.
2. Borrow money, except from banks for temporary purposes,
and except for reverse repurchase agreements, and then in an amount
not exceeding 10% of the value of the Portfolio's total assets, and
only if after such borrowing there is asset coverage of at least 300
percent for all borrowings of the Portfolio; or mortgage, pledge,
hypothecate its assets except in connection with any such borrowing
and in amounts not in excess of 10% of the value of the Portfolio's
assets at the time of such borrowing; or purchase portfolio securities
while borrowings in excess of 5% of the Portfolio's net assets are
outstanding. (This borrowing provision is not for investment
leverage, but solely to facilitate management of the Portfolio by
enabling the Portfolio to meet redemption requests where the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous.)
3. Act as an underwriter.
4. Make loans except that the Portfolio may purchase or
hold debt obligations in accordance with its investment objective,
policies and limitations, may enter into repurchase agreements for
securities, and may lend portfolio securities against collateral
consisting of cash or securities which are consistent with the
Portfolio's permitted investments, which is equal at all times to at
least 100% of the value of the securities loaned. There is no
investment restriction on the amount of securities that may be loaned,
except that payments received on such loans, including amounts
received during the loan on account of interest on the securities
loaned, may not (together with all non-qualifying income) exceed 10%
of the Portfolio's annual gross income (without offset for realized
capital gains) unless, in the opinion of counsel to the Fund, such
amounts are qualifying income under Federal income tax provisions
applicable to regulated investment companies.
28
The foregoing investment limitations cannot be changed without the
affirmative vote of the lesser of (a) more than 50% of the outstanding
shares of the Portfolio or (b) 67% or more of the shares of the Portfolio
present at a shareholders' meeting if more than 50% of the outstanding
shares of the Portfolio are represented at the meeting in person or by
proxy.
The Portfolio may purchase securities on margin only to obtain
short-term credit necessary for clearance of portfolio transactions.
New York Municipal Money Market Portfolio. The New York Municipal
Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes
and except for reverse repurchase agreements, and then in amounts not
in excess of 10% of the value of the Portfolio's total assets at the
time of such borrowing, and only if after such borrowing there is
asset coverage of at least 300 percent for all borrowings of the
Portfolio; or mortgage, pledge, hypothecate any of its assets except
in connection with such borrowings and then in amounts not in excess
of 10% of the value of a Portfolio's total assets at the time of such
borrowing; or purchase portfolio securities while borrowings in excess
of 5% of the Portfolio's net assets are outstanding. (This borrowing
provision is not for investment leverage, but solely to facilitate
management of the Portfolio's securities by enabling the Portfolio to
meet redemption requests where the liquidation of portfolio securities
is deemed to be disadvantageous or inconvenient);
(2) purchase securities on margin, except for short-term
credit necessary for clearance of portfolio transactions;
(3) underwrite securities of other issuers, except to the
extent that, in connection with the disposition of portfolio
securities, the Portfolio may be deemed an underwriter under Federal
securities laws and except to the extent that the purchase of
Municipal Obligations directly from the issuer thereof in accordance
with the Portfolio's investment objective, policies and limitations
may be deemed to be an underwriting;
(4) make short sales of securities or maintain a short
position or write or sell puts, calls, straddles, spreads or
combinations thereof;
(5) purchase or sell real estate, provided that the
Portfolio may invest in securities secured by real estate or interests
therein or issued by companies which invest in real estate or
interests therein;
29
(6) purchase or sell commodities or commodity contracts;
(7) invest in oil, gas or mineral exploration or
development programs;
(8) make loans except that the Portfolio may purchase or
hold debt obligations in accordance with its investment objective,
policies and limitations and may enter into repurchase agreements;
(9) purchase any securities issued by any other investment
company except in connection with the merger, consolidation,
acquisition or reorganization of all the securities or assets of such
an issuer; or
(10) make investments for the purpose of exercising control
or management.
In addition to the foregoing enumerated investment limitations, the
New York Municipal Money Market Portfolio may not (i) under normal market
conditions, invest less than 80% of its net assets in securities the
interest on which is exempt from the regular Federal income tax and does
not constitute an item of tax preference for purposes of the Federal
alternative minimum tax ("Tax-Exempt Interest"), (ii) invest in private
activity bonds where the payment of principal and interest are the
responsibility of a company (including its predecessors) with less than
three years of continuous operations; and (iii) purchase any securities
which would cause, at the time of purchase, more than 25% of the value of
the total assets of the Portfolio to be invested in the obligations of the
issuers in the same industry; provided that this limitation shall not apply
to Municipal Obligations or governmental guarantees of Municipal
Obligations; and provided, further, that for the purpose of this limitation
only, private activity bonds that are considered to be issued by non-
governmental users (see the second investment limitation above) shall not
be deemed to be Municipal Obligations.
The foregoing investment limitations cannot be changed without the
affirmative vote of the lesser of (a) more than 50% of the outstanding
shares of the Portfolio or (b) 67% or more of the shares of the Portfolio
present at a shareholders' meeting if more than 50% of the outstanding
shares of the Portfolio affected are represented at the meeting in person
or by proxy.
So long as it values its portfolio securities on the basis of the
amortized cost method of valuation pursuant to Rule 2a-7 under the 1940
Act, the New York Municipal Money Market Portfolio will meet the following
limitation on its investments in addition to the fundamental investment
limitations described above. This limitation may be changed without a vote
of shareholders of the New York Municipal Money Market Portfolio.
1. The New York Municipal Money Market Portfolio will not
purchase any Put if after the acquisition of the Put the New York
Municipal Money Market Portfolio has more than 5% of its total assets
invested in instruments issued by or subject to Puts from the same
institution, except that the foregoing condition shall only be
30
applicable with respect to 75% of the New York Municipal Money Market
Portfolio's total assets. A "Put" means a right to sell a specified
underlying instrument within a specified period of time and at a
specified exercise price that may be sold, transferred or assigned
only with the underlying instrument.
In order to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended, the Portfolio will not purchase
the securities of any issuer if as a result more than 5% of the value of
the Portfolio's assets would be invested in the securities of such issuer,
except that (a) up to 50% of the value of the Portfolio's assets may be
invested without regard to this 5% limitation, provided that no more than
25% of the value of the Portfolio's assets are invested in the securities
of any one issuer and (b) this 5% limitation does not apply to securities
issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities. For purposes of this limitation, a security is
considered to be issued by the governmental entity (or entities) whose
assets and revenues back the security, or, with respect to a private
activity bond that is backed only by the assets and revenues of a non-
governmental user, by such non-governmental user. In certain
circumstances, the guarantor of a guaranteed security may also be
considered to be an issuer in connection with such guarantee. This
investment policy is not fundamental and may be changed by the Board of
Directors without shareholder approval.
In order to permit the sale of its shares in certain states, the
Fund may make commitments more restrictive than the investment limitations
described above. Should the Fund determine that any such commitment is no
longer in its best interest, it will revoke the commitment and terminate
sales of its shares in the state involved.
31
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their business
addresses and principal occupations during the past five years are:
Principal Occupation
Name and Address Position with Fund During Past Five Years
---------------- ------------------- -----------------------
Arnold M. Reichman* Director Since 1986, Managing
466 Lexington Avenue Director and Assistant
New York, NY 10017 Secretary, E.M. Warburg, Pincus & Co.,
Inc.; Since 1990, Chief Executive Officer
and since 1991, Secretary, Counsellors
Securities Inc.; Officer of various
investment companies advised by Warburg,
Pincus Counsellors, Inc.
Robert Sablowsky** Director Since 1985, Executive
14 Wall Street Vice President of
New York, NY 10005 Gruntal & Co., Inc.,
Director, Gruntal & Co.,
Inc. and Gruntal
Financial Corp.
Francis J. McKay Director Since 1963, Executive
7701 Burholme Avenue Vice President, Fox
Philadelphia, PA 19111 Chase Cancer Center
(Biomedical research and
medical care).
Marvin E. Sternberg Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc.
(manufacturer of dental supplies and precision
coated abrasives); Since 1968, Director and
President, Mart MMM, Inc. (formerly Montgomeryville
Merchandise Mart, Inc.), Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart, Inc.) (shopping
centers); and Since 1975, Director and Executive
Vice President, Cellucap Mfg. Co., Inc.
(manufacturer of disposable headwear).
32
Julian A. Brodsky Director Director and Vice
1234 Market Street Chairman, Comcast
16th Floor Corporation; Director
Philadelphia, PA 19107-3723 Comcast Cablevision of Philadelphia (cable
television and Communications) and Nextel
(Wireless Communication)
Donald van Roden Director Self-employed
1200 Old Mill Lane businessman. From
Wyomissing, PA 19610 February 1980 to March 1987, Vice Chairman,
SmithKline Beckman Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic (auto service);
Director, Keystone Insurance Co.
Edward J. Roach President and Treasurer Certified Public
Suite 152 Accountant; Vice
Bellevue Park Corporate Chairman of the Board,
Center Fox Chase Cancer
^ 400 Bellevue Parkway Center; ^ Trustee Emeritus;
Wilmington, DE 19809 ^ Pennsylvania School for the Deaf; Trustee Emeritus,
Immaculata College; Vice President and Treasurer of
various investment companies advised by PNC
Institutional Management Corporation.
33
Morgan R. Jones Secretary ^ Chairman of the law firm of
1100 PNB Bank Building Drinker Biddle & Reath, Broad and Chestnut Streets
Philadelphia, PA 19107 Philadelphia, Pennsylvania^; ^ Director, Rocking
Horse Child Care Centers of America, Inc.
_________________________
* Mr. Reichman is an "interested person" of the Fund as that term is
defined in the 1940 Act by virtue of his position with Counsellors
Securities Inc., the Fund's distributor.
** Mr. Sablowsky is an "interested person" of the Fund as that term is
defined in the 1940 Act by virtue of his position with Gruntal & Co.,
Inc., a broker-dealer.
Messrs. McKay, Sternberg and Brodsky are members of the Audit
Committee of the Board of Directors. The Audit Committee, among other
things, reviews results of the annual audit and recommends to the Fund the
firm to be selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive
Committee of the Board of Directors. The Executive Committee may generally
carry on and manage the business of the Fund when the Board of Directors is
not in session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the
Nominating Committee of the Board of Directors. The Nominating Committee
recommends to the Board annually all persons to be nominated as directors
of the Fund.
The Fund pays directors who are not "affiliated persons" (as that
term is defined in the 1940 Act) of the Fund $5,000 annually and $650 per
meeting of the Board or any committee thereof that is not held in
conjunction with a Board meeting. Directors who are not affiliated persons
of the Fund are reimbursed for any expenses incurred in attending meetings
of the Board of Directors or any committee thereof. For the year ended
August 31, 1994, Directors and officers of the Fund received compensation
and reimbursement of expenses in the aggregate amount of $35,999. On
October 24, 1990 the Fund adopted, as a participating employer, the Fund
Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement
plan for employees (currently Edward J. Roach) pursuant to which the Fund
will contribute on a monthly basis amounts equal to 10% of the monthly
compensation of each eligible employee. By virtue of the services
performed by PNC Institutional Management Corporation ("PIMC"), the Fund's
adviser, PNC Bank, National Association ("PNC Bank"), the sub-advisor to
all Portfolios other than the New York Municipal Money Market Portfolio,
which has no sub-advisor, and the
34
Fund's custodian, PFPC Inc. ("PFPC"), the administrator to the Municipal
Money Market and New York Municipal Money Market Portfolios and the Fund's
transfer and dividend disbursing agent, and Counsellors Securities Inc.
(the "Distributor"), the Fund's distributor, the Fund itself requires only
one part-time employee. No officer, director or employee of PIMC, PNC Bank,
PFPC or the Distributor currently receives any compensation from the Fund.
For the year ended August 31, 1994, each of the following members
of the Board of Directors received compensation from the Fund for expenses
incurred in attending meetings of the Board of Directors or any other
committee thereof; Julian A. Brodsky in the aggregate amount of $6,950;
Francis J. McKay in the aggregate amount of $7,600; Marvin E. Sternberg in
the aggregate amount of $7,600; Donald van Roden in the aggregate amount of
$8,600.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The advisory and sub-
advisory services provided by PIMC and PNC Bank and the fees received by
PIMC and PNC Bank for such services are described in the Prospectus. PIMC
renders advisory services to each of the Portfolios and also renders
administrative services to the Money Market and Government Obligations
Money Market Portfolios pursuant to separate investment advisory
agreements, and PNC Bank renders sub-advisory services to each of the
Portfolios other than the New York Municipal Money Market Portfolio, which
has no sub-advisor, pursuant to separate sub-advisory agreements. Each of
the Sub-Advisory Agreements is dated August 16, 1988. The advisory
agreements relating to the Money Market and Government Obligations Money
Market Portfolios are each dated August 16, 1988, the advisory agreement
relating to the New York Municipal Money Market Portfolio is dated November
5, 1991 and the advisory agreement relating to the Municipal Money Market
Portfolio is dated April 21, 1992. Such advisory and sub-advisory
agreements are hereinafter collectively referred to as the "Advisory
Contracts."
For the year ended August 31, 1994, PIMC received (after waivers)
$1,947,768 in advisory fees with respect to the Money Market Portfolio
$7,733 in advisory fees with respect to the Municipal Money Market
Portfolio, $580,435 in advisory fees with respect to Government Obligations
Money market Portfolio and waived all of the investment advisory fees
payable to it of $193,386 with respect to the New York Municipal Money
Market Portfolio under its Advisory Contract with the Fund. During the
same year, PIMC waived $2,255,986 of advisory fees with respect to the
Money Market Portfolio, $1,091,646 of advisory fees with respect to the
Municipal Money Market Portfolio, $461,938 of advisory fees with respect to
Government Obligations Money Market Portfolio. For the year ended August
31, 1993, PIMC received (after waivers) $1,461,628 in advisory fees with
respect to the Money Market Portfolio and waived all of the investment
advisory fees payable to it of $978,352 with respect to the Municipal Money
Market Portfolio under its Advisory Contract with the Fund, $636,070 in
advisory fees with respect to the Government Obligations Money Market
Portfolio and waived all of the investment
35
advisory fees payable to it of $175,804 with respect to the Municipal
Money Market Portfolio under its Advisory Contract with the Fund. During
that same year, PIMC waived $2,343,596 of advisory fees with respect to the
Money Market Portfolio, $544,058 of advisory fees with respect to the
Government Obligations Money ^ Market Portfolio. For the year ended August
31, 1992, PIMC received (after waivers) $1,322,859 in advisory fees with
respect to the Money Market Portfolio, $173,169 in advisory fees with
respect to the Municipal Money Market Portfolio, $970,969 in advisory fees
with respect to the Government Obligations Money Market Portfolio and
$12,600 in advisory fees with respect to the New York Municipal Money Market
Portfolio. During that same year, PIMC waived $2,452,731 of advisory fees
with respect to the Money Market Portfolio, $947,866 of advisory fees with
respect to the Municipal Money Market Portfolio, $498,224 of advisory fees
with respect to the Government Obligations Money Market Portfolio and
$134,408 of advisory fees with respect to the New York Municipal Money
Market Portfolio. For the year ended August 31, 1991, PIMC received (after
waivers) $1,320,964 in advisory fees with respect to the Money Market
Portfolio, $153,648 in advisory fees with respect to the Municipal Money
Market Portfolio, $701,526 in advisory fees with respect to the Government
Obligations Money Market Portfolio and $42,341 in advisory fees with respect
to the New York Municipal Money Market Portfolio. During that same year,
PIMC waived $2,216,458 of advisory fees with respect to the Money Market
Portfolio, $951,712 of advisory fees with respect to the Municipal Money
Market Portfolio, $447,039 of advisory fees with respect to the Government
Obligations Money Market Portfolio and $116,895 of advisory fees with
respect to the New York Municipal Money Market Portfolio. For the year or
period ended August 31, 1990, PIMC received (after waivers) $708,243 in
advisory fees with respect to the Money Market Portfolio, $81,166 in
advisory fees with respect to the Municipal Money Market Portfolio,
$261,347 in advisory fees with respect to the Government Obligations Money
Market Portfolio and $13,307 in advisory fees with respect to the New York
Municipal Money Market Portfolio. During that same period, PIMC waived
$960,499 of advisory fees with respect to the Money Market Portfolio,
$550,735 in advisory fees with respect to the Municipal Money Market
Portfolio, $235,451 of advisory fees with respect to the Government
Obligations Money Market Portfolio and $10,110 in advisory fees with
respect to the New York Municipal Money Market Portfolio under the
applicable Advisory Contract.
As required by various state regulations, PIMC will reimburse the
Fund or a Portfolio affected (as applicable) if and to the extent that the
aggregate operating expenses of the Fund or a Portfolio affected exceed
applicable state limits for the fiscal year, to the extent required by such
state regulations. Currently, the most restrictive of such applicable
limits is 2.5% of the first $30 million of average annual net assets, 2% of
the next $70 million of average annual net assets and 1-1/2% of the
remaining average annual net assets. Certain expenses, such as brokerage
commissions, taxes, interest and extraordinary items, are excluded from
this limitation. Whether such expense limitations apply to the Fund as a
whole or to each Portfolio on an individual basis depends upon the
particular regulations of such states.
36
Each Portfolio bears all of its own expenses not specifically
assumed by PIMC. General expenses of the Fund not readily identifiable as
belonging to a portfolio of the Fund are allocated among all investment
portfolios by or under the direction of the Fund's Board of Directors in
such manner as the Board determines to be fair and equitable. Expenses
borne by a portfolio include, but are not limited to, the following (or a
portfolio's share of the following): (a) the cost (including brokerage
commissions) of securities purchased or sold by a portfolio and any losses
incurred in connection therewith; (b) fees payable to and expenses incurred
on behalf of a portfolio by PIMC; (c) expenses of organizing the Fund that
are not attributable to a class of the Fund; (d) certain of the filing fees
and expenses relating to the registration and qualification of the Fund and
a portfolio's shares under Federal and/or state securities laws and
maintaining such registrations and qualifications; (e) fees and salaries
payable to the Fund's directors and officers; (f) taxes (including any
income or franchise taxes) and governmental fees; (g) costs of any
liability and other insurance or fidelity bonds; (h) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Fund or a portfolio for violation of any law; (i)
legal, accounting and auditing expenses, including legal fees of special
counsel for the independent directors; (j) charges of custodians and other
agents; (k) expenses of setting in type and printing prospectuses,
statements of additional information and supplements thereto for existing
shareholders, reports, statements, and confirmations to shareholders and
proxy material that are not attributable to a class; (l) costs of mailing
prospectuses, statements of additional information and supplements thereto
to existing shareholders, as well as reports to shareholders and proxy
material that are not attributable to a class; (m) any extraordinary
expenses; (n) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (o) costs
of mailing and tabulating proxies and costs of shareholders' and directors'
meetings; (p) costs of PIMC's use of independent pricing services to value
a portfolio's securities; and (q) the cost of investment company literature
and other publications provided by the Fund to its directors and officers.
Distribution expenses, transfer agency expenses, expenses of preparation,
printing and mailing prospectuses, statements of
additional information, proxy statements and reports to shareholders, and
organizational expenses and registration fees, identified as belonging to a
particular class of the Fund, are allocated to such class.
Under the Advisory Contracts, PIMC and PNC Bank will not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Fund or a Portfolio in connection with the performance of the Advisory
Contracts, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of PIMC or PNC Bank in the performance of
their respective duties or from reckless disregard of their duties and
obligations thereunder.
The Advisory Contracts were each most recently approved August ^ 3,
1994 by a vote of the Fund's Board of Directors, including a majority of
those directors who are not parties to the Advisory Contracts or
"interested
37
persons" (as defined in the 1940 Act) of such parties. The Advisory
Contracts were each approved with respect to the Money Market and
Government Obligations Money Market Portfolios by the shareholders of each
Portfolio at a special meeting held on December 22, 1989, as adjourned.
The investment advisory agreement was approved with respect to the
Municipal Money Market Portfolio by shareholders at a special meeting held
June 10, 1992, as adjourned and the sub-advisory agreement was approved
with respect to the Municipal Money Market Portfolio by shareholders at a
special meeting held on December 22, 1989. The Advisory Contract was
approved with respect to the New York Municipal Money Market Portfolio by
the Portfolio's shareholders at a special meeting of shareholders held
November 21, 1991, as adjourned. Each Advisory Contract is terminable by
vote of the Fund's Board of Directors or by the holders of a majority of
the outstanding voting securities of the relevant Portfolio, at any time
without penalty, on 60 days' written notice to PIMC or PNC Bank. Each of
the Advisory Contracts may also be terminated by PIMC or PNC Bank,
respectively, on 60 days' written notice to the Fund. Each of the Advisory
Contracts terminates automatically in the event of assignment thereof.
Administration Agreements. PFPC serves as the administrator to the
New York Municipal Money Market Portfolio pursuant to an Administration
Agreement dated November 5, 1991 and as the administrator to the Municipal
Money Market Portfolio pursuant to an Administration and Accounting
Services Agreement dated April 21, 1992 (together, the "Administration
Agreements"). PFPC has agreed to furnish to the Fund on behalf of the
Municipal Money Market and New York Municipal Money Market Portfolio
statistical and research data, clerical, accounting, and bookkeeping
services, and certain other services required by the Fund. PFPC has also
agreed to prepare and file various reports with the appropriate regulatory
agencies, and prepare materials required by the SEC or any state securities
commission having jurisdiction over the Fund.
The Administration Agreements provide that PFPC shall not be liable
for any error of judgment or mistake of law or any loss suffered by the
Fund or a Portfolio in connection with the performance of the agreement,
except a loss resulting from willful misfeasance, gross negligence or
reckless disregard by it of its duties and obligations thereunder. In
consideration for providing services pursuant to the Administration
Agreements, PFPC receives a fee of .10% of the average daily net assets of
the Municipal Money Market and New York Municipal Money Market Portfolios.
Custodian and Transfer Agency Agreements. PNC Bank is custodian of
the Fund's assets pursuant to a custodian agreement dated August 16, 1988,
as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC
Bank (a) maintains a separate account or accounts in the name of each
Portfolio (b) holds and transfers portfolio securities on account of each
Portfolio, (c) accepts receipts and makes disbursements of money on behalf
of each Portfolio, (d) collects and receives all income and other payments
and distributions on account of each Portfolio's portfolio securities and
(e) makes periodic reports to the Fund's Board of Directors concerning each
Portfolio's operations. PNC Bank is authorized to select one or more banks
or
38
trust companies to serve as sub-custodian on behalf of the Fund, provided
that PNC Bank remains responsible for the performance of all its duties
under the Custodian Agreement and holds the Fund harmless from the acts and
omissions of any sub-custodian. For its services to the Fund under the
Custodian Agreement, PNC Bank receives a fee which is calculated based upon
each Portfolio's average daily gross assets as follows: $.25 per $1,000 on
the first $50 million of average daily gross assets; $.20 per $1,000 on the
next $50 million of average daily gross assets; and $.15 per $1,000 on
average daily gross assets over $100 million, with a minimum monthly fee of
$1,000 per Portfolio, exclusive of transaction charges and out-of-pocket
expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend
disbursing agent for the Fund's ^ Janney Classes pursuant to a Transfer
Agency Agreement dated November 5, 1991 and supplements dated November 5,
1991 (the "Transfer Agency Agreement"), under which PFPC (a) issues and
redeems shares of each of the ^ Janney Classes, (b) addresses and mails all
communications by each Portfolio to record owners of shares of each such
Class, including reports to shareholders, dividend and distribution notices
and proxy materials for its meetings of shareholders, (c) maintains
shareholder accounts and, if requested, sub-accounts and (d) makes periodic
reports to the Fund's Board of Directors concerning the operations of each
^ Janney Class. PFPC may, on 30 days' notice to the Fund, assign its
duties as transfer and dividend disbursing agent to any other affiliate of
PNC Bank Corp. For its services to the Fund under the Transfer Agency
Agreement, PFPC receives a fee at the annual rate of $15.00 per account in
each Portfolio for orders which are placed via third parties and relayed
electronically to PFPC, and at an annual rate of $17.00 per account in each
Portfolio for all other orders, exclusive of out-of-pocket expenses and
also receives a fee for each redemption check cleared and reimbursement of
its out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder
servicing agreements ("Shareholder Servicing Agreements") with various
dealers ("Authorized Dealers") for the provision of certain support
services to customers of such Authorized Dealers who are shareholders of
the Portfolios. Pursuant to the Shareholder Servicing Agreements, the
Authorized Dealers have agreed to prepare monthly account statements,
process dividend payments from the Fund on behalf of their customers and to
provide sweep processing for uninvested cash balances for customers
participating in a cash management account. In addition to the shareholder
records maintained by PFPC, Authorized Dealers may maintain duplicate
records for their customers who are shareholders of the Portfolios for
purposes of responding to customer inquiries and brokerage instructions.
In consideration for providing such services, Authorized Dealers may
receive fees from PFPC. Such fees will have no effect upon the fees paid
by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution
contract, dated as of April 10, 1991, and supplements ^ entered into by the
Distributor and the Fund on behalf of each of the ^ Janney Classes,
(collectively, the "Distribution Contracts") and separate Plans of
39
Distribution for each of the ^ Janney Classes (collectively, the "Plans"),
all of which were adopted by the Fund in the manner prescribed by Rule 12b-
1 under the 1940 Act, the Distributor will use its best efforts to
distribute shares of each of the ^ Janney Classes. As compensation for its
distribution services, the Distributor will receive, pursuant to the terms
of the Distribution Contracts, a distribution fee, to be calculated daily
and paid monthly, at the annual rate set forth in the Prospectus. The
Distributor currently proposes to reallow up to all of its distribution
payments to broker/dealers for selling shares of each of the Portfolios
based on a percentage of the amounts invested by their customers.
Each of the Plans relating to the ^ Janney Classes of the Money
Market, Municipal Money Market, Government Obligations Money Market and New
York Municipal Money Market Portfolios was most recently approved ^ for
continuation on August 3, 1994 by the Fund's Board of Directors, including
the directors who are not "interested persons" of the Fund and who have no
direct or indirect financial interest in the operation of the Plans or any
agreements related to the Plans ("12b-1 Directors"). Each of the Plans
relating to the ^ Janney Class of the Money Market, Municipal Money Market,
Government Obligations Money Market and New York Municipal Money Market
Portfolios was approved by the sole shareholder of each ^ Janney Class on
November 5, 1991.
Among other things, each of the Plans provides that: (1) the
Distributor shall be required to submit quarterly reports to the directors
of the Fund regarding all amounts expended under the Plan and the purposes
for which such expenditures were made, including commissions, advertising,
printing, interest, carrying charges and any allocated overhead expenses;
(2) the Plan will continue in effect only so long as it is approved at
least annually, and any material amendment thereto is approved, by the
Fund's directors, including the 12b-1 Directors, acting in person at a
meeting called for said purpose; (3) the aggregate amount to be spent by
the Fund on the distribution of the Fund's shares of the ^ Janney Class
under the Plan shall not be materially increased without the affirmative
vote of the holders of a majority of the Fund's shares in the affected ^
Janney Class; and (4) while the Plan remains in effect, the selection and
nomination of the Fund's directors who are not "interested persons" of the
Fund (as defined in the 1940 Act) shall be committed to the discretion of
the directors who are not interested persons of the Fund.
The Fund believes that such Plans may benefit the Fund by
increasing sales of Shares. Mr. Reichman, a Director of the Fund, has an
indirect financial interest in the operation of the Plans by virtue of his
position as Chief Executive Officer and Secretary of the Distributor. Mr.
Sablowsky, a Director of the Fund, has an indirect interest in the
operation of the Plans by virtue of his position as Executive Vice
President of Gruntal & Co., Inc., a broker-dealer which sells the Fund's
shares.
40
PORTFOLIO TRANSACTIONS
Each of the Portfolios intends to purchase securities with
remaining maturities of 397 calendar days or less, except for securities
that are subject to repurchase agreements (which in turn may have
maturities of 397 calendar days or less), and except that each of the Money
Market Portfolio, Municipal Money Market Portfolio and New York Municipal
Money Market Portfolio may purchase variable rate securities with remaining
maturities of 397 calendar days or more so long as such securities comply
with conditions established by the SEC under which they may be considered
to have remaining maturities of 397 calendar days or less. Because all
Portfolios intend to purchase only securities with remaining maturities of
397 calendar days or less, their portfolio turnover rates will be
relatively high. However, because brokerage commissions will not normally
be paid with respect to investments made by each such Portfolio, the
turnover rate should not adversely affect such Portfolio's net asset value
or net income. The Portfolios do not intend to seek profits through short
term trading.
Purchases of portfolio securities by each of the Portfolios are
made from dealers, underwriters and issuers; sales are made to dealers and
issuers. None of the Portfolios currently expects to incur any brokerage
commission expense on such transactions because money market instruments
are generally traded on a "net" basis with dealers acting as principal for
their own accounts without a stated commission. The price of the security,
however, usually includes a profit to the dealer. Securities purchased in
underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or
discount. When securities are purchased directly from or sold directly to
an issuer, no commissions or discounts are paid. It is the policy of such
Portfolios to give primary consideration to obtaining the most favorable
price and efficient execution of transactions. In seeking to implement the
policies of such Portfolios, PIMC will effect transactions with those
dealers it believes provide the most favorable prices and are capable of
providing efficient executions. In no instance will portfolio securities
be purchased from or sold to the Distributor, PIMC or PNC Bank or any
affiliated person of the foregoing entities except to the extent permitted
by SEC exemptive order or by applicable law.
PIMC may seek to obtain an undertaking from issuers of commercial
paper or dealers selling commercial paper to consider the repurchase of
such securities from a Portfolio prior to their maturity at their original
cost plus interest (sometimes adjusted to reflect the actual maturity of
the securities), if it believes that a Portfolio's anticipated need for
liquidity makes such action desirable. Any such repurchase prior to
maturity reduces the possibility that the Portfolio would incur a capital
loss in liquidating commercial paper (for which there is no established
market), especially if interest rates have risen since acquisition of the
particular commercial paper.
41
Investment decisions for each Portfolio and for other investment
accounts managed by PIMC or PNC Bank are made independently of each other
in the light of differing conditions. However, the same investment
decision may occasionally be made for two or more of such accounts. In such
cases, simultaneous transactions are inevitable. Purchases or sales are
then averaged as to price and allocated as to amount according to a formula
deemed equitable to each such account. While in some cases this practice
could have a detrimental effect upon the price or value of the security as
far as a Portfolio is concerned, in other cases it is believed to be
beneficial to a Portfolio. A Portfolio will not purchase securities during
the existence of any underwriting or selling group relating to such
security of which PIMC or PNC Bank or any affiliated person (as defined in
the 1940 Act) thereof is a member except pursuant to procedures adopted by
the Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act.
Among other things, these procedures, which will be reviewed by the Fund's
directors annually, require that the commission paid in connection with
such a purchase be reasonable and fair, that the purchase be at not more
than the public offering price prior to the end of the first business day
after the date of the public offer, and that PIMC and PNC Bank not
participate in or benefit from the sale to a Portfolio.
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase of
a Portfolio's shares by making payment in whole or in part in securities
chosen by the Fund and valued in the same way as they would be valued for
purposes of computing a Portfolio's net asset value. If payment is made in
securities, a shareholder may incur transaction costs in converting these
securities into cash. The Fund has elected, however, to be governed by
Rule 18f-1 under the 1940 Act so that a Portfolio is obligated to redeem
its shares solely in cash up to the lesser of $250,000 or 1% of its net
asset value during any 90-day period for any one shareholder of a
Portfolio.
Under the 1940 Act, a Portfolio may suspend the right of redemption
or postpone the date of payment upon redemption for any period during which
the New York Stock Exchange (the "NYSE") 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 Portfolio may also suspend or postpone
the recordation of the transfer of its shares upon the occurrence of any of
the foregoing conditions.)
42
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset
value of each of the Portfolios at $1.00 per share. Net asset value per
share, the value of an individual share in a Portfolio, is computed by
dividing a Portfolio's net assets by the number of outstanding shares of a
Portfolio. A Portfolio's "net assets" equal the value of a Portfolio's
investments and other securities less its liabilities. The Fund's net
asset value per share is computed twice each day, as of 12:00 noon
(Eastern Time) and as of 4:00 P.M. (Eastern Time), on each Business Day.
"Business Day" means each day, Monday through Friday, when both the NYSE
and the Federal Reserve Bank of Philadelphia (the "FRB") are open.
Currently, the NYSE or the FRB, or both, are closed on New Year's Day,
Martin Luther King's ^ Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas Day (observed).
The Fund calculates the value of the portfolio securities of each
of the Portfolios by using the amortized cost method of valuation. Under
this method the market value of an instrument is approximated by amortizing
the difference between the acquisition cost and value at maturity of the
instrument on a straight-line basis over the remaining life of the
instrument. The effect of changes in the market value of a security as a
result of fluctuating interest rates is not taken into account. The market
value of debt securities usually reflects yields generally available on
securities of similar quality. When such yields decline, market values can
be expected to increase, and when yields increase, market values can be
expected to decline. In addition, if a large number of redemptions take
place at a time when interest rates have increased, a Portfolio may have to
sell portfolio securities prior to maturity and at a price which might not
be as desirable.
The amortized cost method of valuation may result in the value of a
security being higher or lower than its market price, the price a Portfolio
would receive if the security were sold prior to maturity. The Fund's
Board of Directors has established procedures for the purpose of
maintaining a constant net asset value of $1.00 per share for each
Portfolio, which include a review of the extent of any deviation of net
asset value per share, based on available market quotations, from the $1.00
amortized cost per share. Should that deviation exceed 1/2 of 1% for a
Portfolio, the Board of Directors will promptly consider whether any action
should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redeeming shares
in kind, selling portfolio securities prior to maturity, reducing or
withholding dividends, and utilizing a net asset value per share as
determined by using available market quotations.
Each of the Portfolios will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument
with a deemed maturity under Rule 2a-7 of the 1940 Act greater than 397
calendar days, will limit portfolio investments, including repurchase
agreements (where permitted), to those United States dollar-denominated
instruments that PIMC
43
determines present minimal credit risks pursuant to guidelines adopted by
the Board of Directors, and PIMC will comply with certain reporting and
recordkeeping procedures concerning such credit determination. There is no
assurance that constant net asset value will be maintained. In the event
amortized cost ceases to represent fair value in the judgment of the Fund's
Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio
investments, the Fund may employ outside organizations, which may use a
matrix or formula method that takes into consideration market indices,
matrices, yield curves and other specific adjustments. This may result in
the securities being valued at a price different from the price that would
have been determined had the matrix or formula method not been used. All
cash, receivables and current payables are carried on the Fund's books at
their face value. Other assets, if any, are valued at fair value as
determined in good faith by the Fund's Board of Directors.
Performance Information. Each of the Portfolio's current and
effective yields are computed using standardized methods required by the
SEC. The annualized yields for a Portfolio are computed by: (a)
determining the net change in the value of a hypothetical account having a
balance of one share at the beginning of a seven-calendar day period; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results
(i.e., multiplying the base period return by 365/7). The net change in the
value of the account reflects the value of additional shares purchased with
dividends declared and all dividends declared on both the original share
and such additional shares, but does not include realized gains and losses
or unrealized appreciation and depreciation. Compound effective yields are
computed by adding 1 to the base period return (calculated as described
above), raising the sum to a power equal to 365/7 and subtracting 1.
Yield may fluctuate daily and does not provide a basis for
determining future yields. Because the yields of each Portfolio will
fluctuate, they cannot be compared with yields on savings account or other
investment alternatives that provide an agreed to or guaranteed fixed yield
for a stated period of time. However, yield information may be useful to
an investor considering temporary investments in money market instruments.
In comparing the yield of one money market fund to another, consideration
should be given to each fund's investment policies, including the types of
investments made, lengths of maturities of the portfolio securities, the
method used by each fund to compute the yield (methods may differ) and
whether there are any special account charges which may reduce the
effective yield.
The yields on certain obligations, including the money market
instruments in which each Portfolio invests (such as commercial paper and
bank obligations), are dependent on a variety of factors, including general
money market conditions, conditions in the particular market for the
obligation, the financial condition of the issuer, the size of the
offering, the maturity of the obligation and the ratings of the issue. The
ratings of Moody's and S&P
44
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. In addition,
subsequent to its purchase by a Portfolio, an issue may cease to be rated or
may have its rating reduced below the minimum required for purchase. In
such an event, PIMC will consider whether a Portfolio should continue to
hold the obligation.
From time to time, in advertisements or in reports to shareholders,
the yields of a Portfolio may be quoted and compared to those of other
mutual funds with similar investment objectives and to stock or other
relevant indices. For example, the yield of a Portfolio may be compared to
the Donoghue's Money Fund Average, which is an average compiled by
IBC/Donoghue's MONEY FUND REPORT(R) of Holliston, MA 01746, a widely
recognized independent publication that monitors the performance of money
market funds, or to the data prepared by Lipper Analytical Services, Inc.,
a widely-recognized independent service that monitors the performance of
mutual funds.
TAXES
The following is only a summary of certain additional tax
considerations generally affecting the Portfolios and their shareholders
that are not described in the Fund's Prospectus. No attempt is made to
present a detailed explanation of the tax treatment of the Portfolios or
their shareholders, and the discussion here and in the Prospectus is not
intended as a substitute for careful tax planning. Investors are urged to
consult their tax advisers with specific reference to their own tax
situation.
Each Portfolio has elected to be taxed as a regulated investment
company under Part I of Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As a regulated investment company, each Portfolio
is exempt from Federal income tax on its net investment income and realized
capital gains which it distributes to shareholders, provided that it
distributes an amount equal to the sum of (a) at least 90% of its
investment company taxable income (net investment income and the excess of
net short-term capital gain over net long-term capital loss), if any, for
the year and (b) at least 90% of its net tax-exempt interest income, if
any, for the year (the "Distribution Requirement") and satisfies certain
other requirements of the Code that are described below. Distributions of
investment company taxable income and net tax-exempt interest income made
during the taxable year or, under specified circumstances, within twelve
months after the close of the taxable year will satisfy the Distribution
Requirement. The Distribution Requirement for any year may be waived if a
regulated investment company establishes to the satisfaction of the
Internal Revenue Service that it is unable to satisfy the Distribution
Requirement by reason of distributions previously made for the purpose of
avoiding liability for Federal excise tax (discussed below).
45
In addition to satisfaction of the Distribution Requirement each
Portfolio must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans and gains from
the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in
such stock, securities, or currencies (the "Income Requirement") and derive
less than 30% of its gross income from the sale or other disposition of any
of the following investments if such investments were held for less than
three months: (a) stock or securities (as defined in Section 2(a)(36) of
the 1940 Act); (b) options, futures or forward contracts (other than
options, futures or forward contracts on foreign currencies); and (c)
foreign currencies (or options, futures or forward contracts on foreign
currencies) but only if such currencies (or options, futures or forward
contracts) are not directly related to the regulated investment company's
principal business of investing in stock or securities (or options and
futures with respect to stocks or securities) (the "Short-Short Gain
Test"). Interest (including original issue discount and, in the case of
debt securities bearing taxable interest income "accrued market discount")
received by a Portfolio at maturity or on disposition of a security held
for less than three months will not be treated as gross income derived from
the sale or other disposition of such security for purposes of the Short-
Short Gain Test. However, any other income which is attributable to
realized market appreciation will be treated as gross income from the sale
or other disposition of securities for this purpose.
Income derived by a regulated investment company from a partnership
or trust will satisfy the Income Requirement only to the extent such income
is attributable to items of income of the partnership or trust that would
satisfy the Income Requirement if they were realized by a regulated
investment company in the same manner as realized by the partnership or
trust.
In addition to the foregoing requirements, at the close of each
quarter of its taxable year, at least 50% of the value of each Portfolio's
assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and securities of other
issuers (as to which a Portfolio has not invested more than 5% of the value
of its total assets in securities of such issuer and as to which a
Portfolio does not hold more than 10% of the outstanding voting securities
of such issuer), and no more than 25% of the value of each Portfolio's
total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which such Portfolio
controls and which are engaged in the same or similar trades or businesses
(the "Asset Diversification Requirement").
The Internal Revenue Service has taken the position, in informal
rulings issued to other taxpayers, that the issuer of a repurchase
agreement is the bank or dealer from which securities are purchased. The
Money Market Portfolio, Government Obligations Money Market Portfolio and
New York Municipal Money Market Portfolio will not enter into repurchase
agreements with any one bank or dealer if entering into such agreements
46
would, under the informal position expressed by the Internal Revenue
Service, cause any of them to fail to satisfy the Asset Diversification
Requirement.
The Municipal Money Market Portfolio and the New York Municipal
Money Market Portfolio are designed to provide investors with current tax-
exempt interest income. Exempt interest dividends distributed to
shareholders of the Portfolios are not included in the shareholder's gross
income for regular Federal income tax purposes. In order for the Municipal
Money Market Portfolio and New York Municipal Money Market Portfolio to pay
exempt interest dividends during any taxable year, at the close of each
fiscal quarter at least 50% of the value of each such Portfolio must
consist of exempt interest obligations.
All shareholders required to file a Federal income tax return are
required to report the receipt of exempt interest dividends and other
exempt interest on their returns. Moreover, while such dividends and
interest are exempt from regular Federal income tax, they may be subject to
alternative minimum tax as described in the Prospectus. By operation of
the adjusted current earnings alternative minimum tax adjustment, exempt
interest income received by certain corporations may be taxed at an
effective rate of 15%. In addition, corporate investors should note that,
under the Superfund Amendments and Reauthorization Act of 1986, an
environmental tax is imposed for taxable years beginning after 1986 and
before 1996 at the rate of 0.12% on the excess of the modified alternative
minimum taxable income of corporate taxpayers over $2 million, regardless
of whether such taxpayers are liable for alternative minimum tax. Receipt
of exempt interest dividends may result in collateral Federal income tax
consequences to certain other taxpayers, including financial institutions,
property and casualty insurance companies, individual recipients of Social
Security or Railroad Retirement benefits, and foreign corporations engaged
in a trade or business in the United States. Prospective investors should
consult their own tax advisors as to such consequences.
Neither the Municipal Money Market Portfolio nor the New York
Municipal Money Market Portfolio may be an appropriate investment for
entities which are "substantial users" of facilities financed by private
activity bonds or "related persons" thereof. "Substantial user" is defined
under U.S. Treasury Regulations to include a non exempt person who
regularly uses a part of such facilities in his trade or business and (a)
whose gross revenues derived with respect to the facilities financed by the
issuance of bonds are more than 5% of the total revenue derived by all
users of such facilities, (b) who occupies more than 5% of the entire
usable area of such facilities, or (c) for whom such facilities or a part
thereof were specifically constructed, reconstructed or acquired. "Related
persons" include certain related natural persons, affiliated corporations,
a partnership and its partners and an S Corporation and its shareholders.
Each of the Money Market Portfolio, Municipal Money Market
Portfolio and New York Municipal Money Market Portfolio may acquire standby
commitments with respect to Municipal Obligations held in its portfolio and
will treat any interest received on Municipal Obligations subject to such
47
standby commitments as tax-exempt income. In Rev. Rul. 82-144, 1982-2 C.B.
34, the Internal Revenue Service held that a mutual fund acquired ownership
of municipal obligations for Federal income tax purposes, even though the
fund simultaneously purchased "put" agreements with respect to the same
municipal obligations from the seller of the obligations. The Fund will
not engage in transactions involving the use of standby commitments that
differ materially from the transaction described in Rev. Rul. 82-144
without first obtaining a private letter ruling from the Internal Revenue
Service or the opinion of counsel.
Interest on indebtedness incurred by a shareholder to purchase or
carry shares of the Municipal Money Market Portfolio or the New York
Municipal Money Market Portfolio is not deductible for income tax purposes
if (as expected) the Municipal Money Market Portfolio or the New York
Municipal Money Market Portfolio distributes exempt interest dividends
during the shareholder's taxable year.
Distributions of net investment income received by a Portfolio
from investments in debt securities (other than interest on tax-exempt
Municipal Obligations that is distributed as exempt interest dividends) and
any net realized short-term capital gains distributed by a Portfolio will
be taxable to shareholders as ordinary income and will not be eligible for
the dividends received deduction for corporations. Although each of the
Municipal Money Market Portfolio and New York Municipal Money Market
Portfolio generally does not expect to receive net investment income other
than Tax-Exempt Interest and AMT Interest, up to 20% of the net assets of
each such Portfolio may be invested in Municipal Obligations that do not
bear Tax-Exempt Interest or AMT Interest, and any taxable income recognized
by such Portfolio will be distributed and taxed to its shareholders.
While none of the Portfolios expects to realize long-term capital
gains, any net realized long-term capital gains, such as gains from the
sale of debt securities and realized market discount on tax-exempt
Municipal Obligations, will be distributed annually. None of the
Portfolios will have tax liability with respect to such gains and the
distributions will be taxable to Portfolio shareholders as long-term
capital gains, regardless of how long a shareholder has held Portfolio
shares. The aggregate amount of distributions designated by each Portfolio
as capital gain dividends may not exceed the net capital gain of such
Portfolio for any taxable year, determined by excluding any net capital
loss or net long-term capital loss attributable to transactions occurring
after October 31 of such year and by treating any such loss as if it arose
on the first day of the following taxable year. Such distributions will be
designated as a capital gains dividend in a written notice mailed by the
Fund to shareholders not later than 60 days after the close of each
Portfolio's respective taxable year.
Investors should note that changes made to the Code by the Tax
Reform Act of 1986 and subsequent legislation have not entirely eliminated
the distinctions in the tax treatment of capital gain and ordinary income
distributions. The nominal maximum marginal rate on ordinary income for
48
individuals, trusts and estates is currently 31%, but for individual
taxpayers whose adjusted gross income exceeds certain threshold amounts
(that differ depending on the taxpayer's filing status) in taxable years
beginning before 1996, provisions phasing out personal exemptions and
limiting itemized deductions may cause the actual maximum marginal rate to
exceed 31%. The maximum rate on the net capital gain of individuals,
trusts and estates, however, is in all cases 28%. Capital gains and
ordinary income of corporate taxpayers are taxed at a nominal maximum rate
of 34% (an effective marginal rate of 39% applies in the case of
corporations having taxable income between $100,000 and $335,000).
If for any taxable year any Portfolio does not qualify as a
regulated investment company, all of its taxable income will be subject to
tax at regular corporate rates without any deduction for distributions to
shareholders, and all distributions will be taxable as ordinary dividends
(including amounts derived from interest on Municipal Obligations in the
case of the Municipal Money Market Portfolio and the New York Municipal
Money Market Portfolio) to the extent of such Portfolio's current and
accumulated earning and profits. Such distributions will be eligible for
the dividends received deduction in the case of corporate shareholders.
The Code imposes a non-deductible 4% excise tax on regulated
investment companies that do not distribute with respect to each calendar
year an amount equal to 98 percent of their ordinary income for the
calendar year plus 98 percent of their capital gain net income for the 1-
year period ending on October 31 of such calendar year. The balance of
such income must be distributed during the next calendar year. For the
foregoing purposes, a company is treated as having distributed any amount
on which it is subject to income tax for any taxable year ending in such
calendar year. Because each Portfolio intends to distribute all of its
taxable income currently, no Portfolio anticipates incurring any liability
for this excise tax.
The Fund will be required in certain cases to withhold and remit to
the United States Treasury 31% of dividends (other than exempt interest
dividends) paid to any shareholder (1) who has provided either an incorrect
tax identification number or no number at all, (2) who is subject to backup
withholding by the Internal Revenue Service for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that he is not subject to backup withholding or that he
is an "exempt recipient."
The foregoing general discussion of Federal income tax consequences
is based on the Code and the regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative
or administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
49
Although each Portfolio expects to qualify as a "regulated
investment company" and to be relieved of all or substantially all Federal
income taxes, depending upon the extent of its activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located or in which it is otherwise deemed to
be conducting business, each Portfolio may be subject to the tax laws of
such states or localities.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
The Fund does not currently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law.
The Fund's amended By-Laws provide that shareholders owning at least ten
percent of the outstanding shares of all classes of Common Stock of the
Fund have the right to call for a meeting of shareholders to consider the
removal of one or more directors. To the extent required by law, the Fund
will assist in shareholder communication in such matters.
As stated in the Prospectus, holders of shares of each class of the
Fund will vote in the aggregate and not by class on all matters, except
where otherwise required by law. Further, shareholders of the Fund will
vote in the aggregate and not by portfolio except as otherwise required by
law or when the Board of Directors 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 Fund shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares
of each portfolio affected by the matter. Rule 18f-2 further provides that
a portfolio shall be deemed to be affected by a matter unless it is clear
that the interests of each portfolio in the matter are identical or that
the matter does not affect any interest of the portfolio. Under the Rule
the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with respect
to a portfolio only if approved by the holders of a majority of the
outstanding voting securities of such portfolio. However, the Rule also
provides that the ratification of the selection of independent public
accountants, the approval of principal underwriting contracts and the
election of directors are not subject to the separate voting requirements
and may be effectively acted upon by shareholders of an investment company
voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater
vote of shares of the Fund'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 Fund's
Articles of Incorporation, the Fund 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).
50
MISCELLANEOUS
Counsel. The law firm of Ballard Spahr Andrews & Ingersoll, 1735
Market Street, 51st Floor, Philadelphia, Pennsylvania 19103, serves as
counsel to the Fund, PIMC, PNC Bank and PFPC. The law firm of Drinker
Biddle & Reath, 1100 Philadelphia National Bank Building, Broad and
Chestnut Streets, Philadelphia, Pennsylvania 19107, serves as counsel to
the Fund's independent directors.
Independent Accountants. Coopers & Lybrand L.L.P., 2400 Eleven
Penn Center, Philadelphia, Pennsylvania 19103, serves as the Fund's
independent accountants.
^
Control Persons. As of ^ JANUARY 27, 1995, to the Fund's
knowledge, the following named persons at the addresses shown below owned
of record approximately 5% or more of the total outstanding shares of the
class of the Fund indicated below. Such classes are described in the
Prospectus. The Fund does not know whether such persons also beneficially
own such shares.
51
Percent of
Outstanding
Names and Addresses Shares of
Class of Common Stock of Record Owners Class Owned
--------------------- ------------------- -----------
Class A Boston Financial Data Services 99%
(Growth & Income) Omnibus Account
Attn.: Warburg Pincus, 3rd Fl.
2 Heritage Drive
Quincy, MA 02171
Class C Warburg, Pincus Counsellors, Inc. 44%
(Balanced) 466 Lexington Avenue
New York, NY 10017
Class C Planco Inc. 30%
(Balanced) Profit Sharing Plan Trust
16 Industrial Blvd.
Paoli, PA 19301
Class C Jane T. Bell 9%
(Balanced) 15 Schooner Drive
Mystic, CT 06335
Class D Gruntal Co. 8%
(Tax-Free) FBO 955-16852-14
14 Wall Street
New York, NY 10005
Class D Gruntal Co. 8%
(Tax-Free) FBO 955-10773-13
14 Wall Street
New York, NY 10005
Class D Gruntal Co. 8%
(Tax-Free) FBO 955-10702-19
14 Wall Street
New York, NY 10005
Class F SEYMOUR FEIN 91%
(Municipal) P.O. 486 Tremont Post Office
Bronx, NY 10457-0848
Class F William B. Pettus & Augustine W. 9%
(Municipal) Pettus Trust
827 Winding Path Lane
St. Louis, MO 63021-6635
52
Class G Saver's Marketing Inc. 20%
(Money) c/o Planco
16 Industrial Blvd.
Paoli, PA 19301
Class G Lynda R. Campbell Succ. Trustee 6%
(Money) For IN TR Under the Lynda R. Campbell
Caring Trust dtd. 10/19/92
935 Rutger Street
St. Louis, MO 63104
Class G Jewish Family and Childrens Agency of 36%
(Money) Philadelphia Capital Campaign
1610 Spruce Street
Philadelphia, PA 19103
Attn: S. Ramm
Class G Dominic & Barbara Pisciotta and SUCCESSORS 6%
(Money) IN TR Under the Dominic Trust &
Barbara Pisciotta Caring TR dtd 1/24/92
424 Quite Drive
St. Charles, MO 63303
Class H Deborah C. Brown, Trustee 26%
(Municipal) Barbara J, C, Curtis, Trustee
The Crowe Trust dtd 11/23/88
9921 West 128th Terr
Overlond Dale, KS 662133
Class H Kelly H. Vandelight 5%
(Municipal) Crystal C. Vandelight
P.O. Box 296
Belle, MO 65013
Class H Emil R. Hunter 12%
(Municipal) Mary J. Hunter
4518 Shenandoah
St. Louis, MO 63110
Class H Gary L. Lange 5%
(Municipal) Susan D. Lange
13 Muirfield Court North
St. Charles, MO 63304
53
Class H David L. Ferguson & 9%
(Municipal) Jill A. Ferguson
JT TEN WROS
873 D. Foxsprings Drive
Chesterfield, MO 63017
Class H Larnie Johnson 6%
(Municipal) Mary Alice Johnson
4927 Lee Avenue
St. Louis, MO 63115-1726
Class I Wasner & Co. 83%
(Money) For Account of Paine Webber
Managed Assets-Sundry Holdings
Attn: Judy Guille 01-04-01
1632 Chestnut St.
Philadelphia, PA 19103
Class I Wasner & Co. 15%
(Municipal) For Account of Paine Webber
Managed Assets - Sunday Holdings
Attn: Joe Domizio
200 Stevens Drive
Lester, PA 19113
Class P Home Insurance Company 72%
(Government) Att. Edward F. Linekin
59 Maiden Lane
21st Floor
New York, NY 10038
Class P Home Indemnity Company 6%
(Government) Att. Edward F. Linekin
59 Maiden Lane
21st Floor
New York, NY 10038
54
Class ^ T ^ EG & ^ G Inc. 5%
^ (International) ^ EG & G Master Trust
^ 45 William St.
^ Wellesley, MA 02181-4078
Class U State of Oregon 43%
(Strategic) Treasury Department
159 State Capital Building
Salem, Oregon 97310
Class U The Chase Manhattan Bankers Trust 14%
(Strategic) For Kendale Company Master
Pension Plan
Attn: Mark Tesoriero
3 Metrotech Ctr. 6th Fl.
Brooklyn, NY 11245
^ Class V Amherst H. Wilder Foundation 6%
(Emerging) 919 Lafond Avenue
Saint Paul, MN 55104
Class V Northern Trust Company TTEE 23%
(Emerging) Texas Instruments Employee Plan
P.O. Box 92956
AC 22-69966/2-059328
Chicago, IL 60675-2956
Class V Wachovia Bank North Carolina 6%
(Emerging) Fleming Companies Inc.
Noster Pension Trust
307 North Hain St.
P. O. Box 3099
Winston Salem, NC 27150
Class V Bryn Mawr College 12%
(Emerging) 101 North Merion Avenue
Bryn Mawr, PA 19010-2899
Class V Wachovia Bank North Carolina ^ 9%
(Emerging) Carolina Power & Light Co.
Supplemental Retirement Trust
301 Main St.
Winston Salem, NC 27150
Class W PNC Bank, N.A.Cust. FBO Victor 9%
(Equity) A. Canto
P. O. Box 1471
Ranclo Santa Fe, CA
55
Class ^ W John Hancock Clearing 39%
(Equity) Corporation
Special Custody Acct. and the Exclusive
Benefit of Customers
One WFC 200 Liberty St.
New York, NY 10281
Class W Lois G. Smith FBO 7%
Equity Lois G. Smith Trust
12035 Hooiser CRT Apt. 103
Bayonne Point, FL 34667-3143
Class X Bank of New York 100%
(Core Equity) Trust APU Buckeye Pipeline
One Wall Street
New York, NY 10286
Class Y New England UFCW & Employers 47%
(Core Fixed Income) Pension Fund Board of Trustees
161 Forbes Rd., Suite 201
Braintree, MA 02184
Class Y Bankers Trust 40%
(Core Fixed Income) Pechiney Corporation Pension
Master Trust
34 Exchange Place, 4th Fl.
Jersey City, NJ 07302
Class Y Chapin School Ltd. and Endowment Fund 5%
(Core Fixed Income) Attn: Gordon Pattee
9 West 57th Street, Suite 4605
New York, NY 10019
Class Z Bank of New York 100%
(Global Fixed Income) Eastern Enterprixes
Retirement Plain Trust
One Wall Street, 8th Fl.
New York, NY 10286
Class AA Howard Isermann 10%
(Municipal Bond) 9 Tulane Dr.
Livingston, NJ 07039
Class AA John C. Cahill 6%
(Municipal Bond) c/o David Holmgren
30 White Birch Lane
Coss Cot, CT 06870
56
As of such date, no person owned of record or, to the Fund's knowledge,
beneficially, more than 25% of the outstanding shares of all classes of the
Fund.
As of the above date, directors and officers as a group owned less
than one percent of the shares of the Fund.
Litigation. There is currently no material litigation affecting
the Fund.
^
57
Appendix
Description of Bond Ratings
The following summarizes the highest two ratings used by Standard &
Poor's Corporation for bonds:
AAA-Debt rated AAA has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from AAA issues only in small
degree. The "AA" rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA rating
category.
The following summarizes the highest two ratings used by Moody's
Investors Service, Inc. for bonds:
Aaa-Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." 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 that are rated Aa 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 risks appear somewhat larger than in Aaa securities.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds
rated Aa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-
range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
The rating SP-1 is the highest rating assigned by Standard & Poor's
to municipal notes and indicates very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming
safety characteristics are given a plus (+) designation.
A-1
The following summarizes the two highest ratings used by Moody's
for short-term notes and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of the
best quality, enjoying strong protection by established cash flows,
superior liquidity support or demonstrated broad-based access to the market
for refinancing.
MIG-2/VMIG-2. Obligations bearing these designations are of high
quality with margins of protection ample although not as large as in the
preceding group.
Description of Commercial Paper Ratings
Commercial paper rated A-1 by Standard & Poor's indicates that the
degree of safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety
characteristics are designated A-1+. Capacity for timely payment on
commercial paper rated A-2 is strong, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned
by Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 (or related supporting
institutions) are considered to have strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many
of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is
maintained.
A-2
PART C
OTHER INFORMATION
See
Item 24. Financial Statements and Exhibits Note #
(a) Financial Statements:
(1) Included in Part A of the Registration Statement:
No Per Share Data and Ratios ^ is given for the fiscal year ended
August 31, 1994 as no such shares had been sold to the public
for: Janney Classes (Alpha 1, Alpha 2, Alpha 3 and Alpha 4).
Included in Part B of the Registration Statement:
^ None
(b) Exhibits:
(1) (a) Articles of Incorporation of Registrant. 1
(b) Articles Supplementary of Registrant. 1
(c) Articles of Amendment to Articles of Incorporation of Registrant. 2
(d) Articles Supplementary of Registrant. 2
(e) Articles Supplementary of Registrant. 5
(f) Articles Supplementary of Registrant. 6
(g) Articles Supplementary of Registrant. 9
(h) Articles Supplementary of Registrant. 10
(i) Articles Supplementary of Registrant. 14
(j) Articles Supplementary of Registrant. 14
(k) Articles Supplementary of Registrant. 19
(l) Articles Supplementary of Registrant. 19
(m) Articles Supplementary of Registrant. 19
(n) Articles Supplementary of Registrant. 19
(o) Form of Articles Supplementary of Registrant.
1
(2) Amended By-Laws adopted August 16, 1988. 3
(a) Amendment to By-Laws adopted July 25, 1989. 4
(b) By-Laws amended through October 24, 1989. 5
(3) None.
(4) Specimen Certificates
a) SafeGuard Equity Growth and Income Shares 3
b) SafeGuard Fixed Income Shares 3
c) SafeGuard Balanced Shares 3
d) SafeGuard Tax-Free Shares 3
e) SafeGuard Money Market Shares 3
f) SafeGuard Tax-Free Money Market Shares 3
g) Cash Preservation Money Market Shares 3
h) Cash Preservation Tax-Free Money Market Shares 3
i) Sansom Street Money Market Shares 3
j) Sansom Street Tax-Free Money Market Shares 3
k) Sansom Street Government Obligations Money Market Shares 3
l) Bedford Money Market Shares 3
m) Bedford Tax-Free Money Market Shares 3
n) Bedford Government Obligations Money Market Shares 3
o) Bedford New York Municipal Money Market Shares 5
p) SafeGuard Government Securities Shares 5
q) Income Opportunities High Yield Bond Shares 6
r) Bradford Tax-Free Money Market Shares 8
s) Bradford Government Obligations Money Market Shares 8
t) Alpha 1 Money Market Shares 8
u) Alpha 2 Tax-Free Money Market Shares 8
v) Alpha 3 Government Obligations Money Market Shares 8
w) Alpha 4 New York Municipal Money Market Shares 8
x) Beta 1 Money Market Shares 8
y) Beta 2 Tax-Free Money Market Shares 8
z) Beta 3 Government Obligations Money Market Shares 8
aa) Beta 4 New York Municipal Money Market Shares 8
bb) Gamma 1 Money Market Shares 8
cc) Gamma 2 Tax-Free Money Market Shares 8
dd) Gamma 3 Government Obligations Money Market Shares 8
ee) Gamma 4 New York Municipal Money Market Shares 8
ff) Delta 1 Money Market Shares 8
2
gg) Delta 2 Tax-Free Money Market Shares 8
hh) Delta 3 Government Obligations Money Market Shares 8
ii) Delta 4 New York Municipal Money Market Shares 8
jj) Epsilon 1 Money Market Shares 8
kk) Epsilon 2 Tax-Free Money Market Shares 8
ll) Epsilon 3 Government Obligations Money Market Shares 8
mm) Epsilon 4 New York Municipal Money Market Shares 8
nn) Zeta 1 Money Market Shares 8
oo) Zeta 2 Tax-Free Money Market Shares 8
pp) Zeta 3 Government Obligations Money Market Shares 8
qq) Zeta 4 New York Municipal Money Market Shares 8
rr) Eta 1 Money Market Shares 8
ss) Eta 2 Tax-Free Money Market Shares 8
tt) Eta 3 Government Obligations Money Market Shares 8
uu) Eta 4 New York Municipal Money Market Shares 8
vv) Theta 1 Money Market Shares 8
ww) Theta 2 Tax-Free Money Market Shares 8
xx) Theta 3 Government Obligations Money Market Shares 8
yy) Theta 4 New York Municipal Money Market Shares 8
zz) BEA International Equity Shares 9
a1) BEA Strategic Fixed Income Shares 9
a2) BEA Emerging Markets Equity Shares 9
a3) Laffer/Canto Equity Shares 12
a4) BEA U.S. Core Equity Shares 13
a5) BEA U.S. Core Fixed Income Shares 13
a6) BEA Global Fixed Income Shares 13
a7) BEA Municipal Bond Shares 13
a8) BEA Balanced Shares 16
a9) BEA Short Duration Shares 16
a10) Form of Warburg Growth & Income Shares 18
a11) Form of Warburg Balanced Shares 18
(5) (a) Investment Advisory Agreement (Money) between Registrant and
Provident Institutional Management Corporation, dated as of
August 16, 1988. 3
(b) Sub-Advisory Agreement (Money) between Provident
Institutional Management Corporation and Provident National
Bank, dated as of August 16, 1988. 3
(c) Investment Advisory Agreement
3
(Tax-Free Money) between Registrant and Provident Institutional
Management Corporation, dated as of August 16, 1988. 3
(d) Sub-Advisory Agreement (Tax-Free Money) between Provident
Institutional Management Corporation and Provident National
Bank, dated as of August 16, 1988. 3
(e) Investment Advisory Agreement (Government Money) between
Registrant and Provident Institutional Management
Corporation, dated as of August 16, 1988. 3
(f) Sub-Advisory Agreement (Government Money) between Provident
Institutional Management Corporation and Provident National
Bank, dated as of August 16, 1988. 3
(k) Investment Advisory Agreement (Balanced) between Registrant
and Provident Institutional Management Corporation, dated as
of August 16, 1988. 3
(l) Sub-Advisory Agreement (Balanced) between Provident
Institutional Management Corporation and Provident National
Bank, dated as of August 16, 1988. 3
(m) Investment Advisory Agreement (Tax-Free) between Registrant
and Provident Institutional Management Corporation, dated as
of August 16, 1988. 3
(n) Sub-Advisory Agreement (Tax-Free) between Provident
Institutional Management Corporation and Provident National
Bank, dated as of August 16, 1988. 3
(s) Investment Advisory Agreement (Government Securities)
between Registrant and Provident Institutional Management
Corporation dated as of April 8, 1991. 8
(t) Investment Advisory Agreement (High Yield Bond) between
Registrant and Provident Institutional Management
Corporation dated as of April 8, 1991. 8
(u) Sub-Advisory Agreement (High Yield Bond) between Registrant
and Warburg,
4
Pincus Counsellors, Inc. dated as of April 8, 1991. 8
(v) Investment Advisory Agreement (New York Municipal Money
Market) between Registrant and Provident Institutional
Management Corporation dated November 5, 1991. 9
(w) Investment Advisory Agreement (Equity) between Registrant
and Provident Institutional Management Corporation dated
November 5, 1991. 10
(x) Sub-Advisory Agreement (Equity) between Registrant,
Provident Institutional Management Corporation and Warburg,
Pincus Counsellors, Inc. dated November 5, 1991. 10
(y) Investment Advisory Agreement (Tax-Free Money Market)
between Registrant and Provident Institutional Management
Corporation dated April 21, 1992. 10
(z) Investment Advisory Agreement (BEA International Equity
Portfolio) between Registrant and BEA Associates. 11
(aa) Investment Advisory Agreement (BEA Strategic Fixed Income
Portfolio) between Registrant and BEA Associates. 11
(bb) Investment Advisory Agreement (BEA Emerging Markets Equity
Portfolio) between Registrant and BEA Associates. 11
(cc) Investment Advisory Agreement (Laffer/Canto Equity
Portfolio) between Registrant and Laffer Advisors
Incorporated, dated as of July 21, 1993. 14
(dd) Sub-Advisory Agreement (Laffer/Canto Sector Equity
Portfolio) between PNC Institutional Management Corporation
and Laffer Advisors Incorporated, dated as of July 21, 1993. 12
(ee) Investment Advisory Agreement (BEA U.S. Core Equity
Portfolio) between
5
Registrant and BEA Associates, dated as
of October 27, 1993. 15
(ff) Investment Advisory Agreement (BEA U.S. Core Fixed Income
Portfolio) between Registrant and BEA Associates, dated as
of October 27, 1993. 15
(gg) Investment Advisory Agreement (BEA Global Fixed Income
Portfolio) between Registrant and BEA Associates, dated as
of October 27, 1993. 15
(hh) Investment Advisory Agreement (BEA Municipal Bond Fund
Portfolio) between Registrant and BEA Associates, dated as
of October 27, 1993. 15
(ii) Investment Advisory Agreement (Warburg Pincus Growth and Income
Fund) between Registrant and Warburg, Pincus Counsellors, Inc. 14
(jj) Investment Advisory Agreement (Warburg Pincus Balanced Fund)
between Registrant and Warburg, Pincus Counsellors, Inc. 16
(kk) Form of Investment Advisory Agreement (BEA Balanced) between
Registrant and BEA Associates. 16
(ll) Form of Investment Advisory Agreement (BEA Short Duration
Portfolio) between Registrant and BEA Associates. 16
(6) (r) Distribution Agreement and Supplements (Classes A through Q)
between the Registrant and Counsellors Securities Inc. dated as
of April 10, 1991. 8
(s) Distribution Agreement Supplement (Classes L, M, N and O) between
the Registrant and Counsellors Securities Inc. dated as of
November 5, 1991. 9
(t) Distribution Agreement Supplements (Classes R, S, and Alpha 1
through Theta 4) between the Registrant and Counsellors
Securities Inc. dated as of November 5, 1991. 9
6
(u) Distribution Agreement Supplement (Classes T, U and V) between
the Registrant and Counsellors Securities Inc. dated as of
September 18, 1992. 10
(v) Distribution Agreement Supplement (Class W) between the
Registrant and Counsellors Securities Inc. dated as of July 21,
1993. 14
(w) Distribution Agreement Supplement (Classes X, Y, Z and AA)
between the Registrant and Counselors Securities Inc. 14
(x) Distribution Agreement Supplement (Classes BB and CC) between
Registrant and Counsellor's Securities Inc. dated as of October
26, 1994. 18
(y) Distribution Agreement Supplement (Classes DD and EE) between
Registrant and Counsellor's Securities Inc. dated as of October
26, 1994. 18
(z) Form of Distribution Agreement Supplement (Classes L, M, N and O)
between the Registrant and Counsellor's Securities Inc. 19
(aa) Form of Distribution Agreement Supplement (Classes R, S) between
the Registrant and Counsellor's Securities Inc. 19
(bb) Form of Distribution Agreement Supplements (Classes Alpha 1
through Theta 4) between the Registrant and Counsellor's
Securities Inc. 19
(cc) Distribution Agreement Supplement Janney Classes (Alpha 1,
Alpha 2, Alpha 3 and Alpha 4 between the Registrant and
Counsellor's Securities Inc.
(7) Fund Office Retirement Profit-Sharing and Trust Agreement, dated as of
October 24, 1990. 7
(8) (a) Custodian Agreement between Registrant and Provident National
Bank dated as of August 16, 1988. 3
(b) Sub-Custodian Agreement among
7
The Chase Manhattan Bank, N.A., the Registrant and Provident
National Bank, dated as of July 13, 1992, relating to custody of
Registrant's foreign securities. 10
(e) Amendment No. 1 to Custodian Agreement dated August 16, 1988. 9
(f) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA International Equity Portfolio, dated September 18,
1992. 10
(g) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA Strategic Fixed Income Portfolio, dated September
18, 1992. 10
(h) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA Emerging Markets Equity Portfolio, dated September
18, 1992. 10
(i) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA Emerging Markets Equity, BEA International Equity,
BEA Strategic Fixed Income and BEA Global Fixed Income
Portfolios, dated as of November 29, 1993. 15
(j) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA U.S. Core Equity and BEA U.S. Core Fixed Income
Portfolio dated as of November 29, 1993. 15
(k) Form of Custodian Contract between Registrant and State Street
Bank and Trust Company. 18
(9) (a) Transfer Agency Agreement (Sansom Street) between Registrant and
Provident Financial Processing Corporation, dated as of August
16, 1988. 3
(b) Transfer Agency Agreement (Cash Preservation) between Registrant
and Provident Financial Processing Corporation, dated as of
August 16, 1988. 3
(c) Shareholder Servicing Agreement
8
(Sansom Street Money). 3
(d) Shareholder Servicing Agreement (Sansom Street Tax-Free Money). 3
(e) Shareholder Servicing Agreement (Sansom Street Government Money). 3
(f) Shareholder Services Plan (Sansom Street Money). 3
(g) Shareholder Services Plan (Sansom Street Tax-Free Money). 3
(h) Shareholder Services Plan (Sansom Street Government Money). 3
(i) Transfer Agency Agreement (SafeGuard) between Registrant and
Provident Financial Processing Corporation, dated as of August
16, 1988. 3
(j) Transfer Agency Agreement (Bedford) between Registrant and
Provident Financial Processing Corporation, dated as of August
16, 1988. 3
(k) Transfer Agency Agreement (Income Opportunities) between
Registrant and Provident Financial Processing Corporation dated
June 25, 1990. 7
(l) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to Government Securities Portfolio, dated as of April
10, 1991. 8
(m) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to New York Municipal Money Market Portfolio dated as of
November 5, 1991. 9
9
(n) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to Equity Portfolio dated as of November 5, 1991. 9
(o) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to High Yield Bond Portfolio, dated as of April 10,
1991. 9
(p) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation
(International) dated September 18, 1992. 10
(q) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation
(Strategic) dated September 18, 1992; 10
(r) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation
(Emerging) dated September 18, 1992. 10
(s) Transfer Agency Agreement and Supplements (Bradford, Alpha, Beta,
Gamma, Delta, Epsilon, Zeta, Eta and Theta) between Registrant
and Provident Financial Processing Corporation dated as of
November 5, 1991. 9
(t) Transfer Agency Agreement Supplement (BEA) between Registrant and
Provident Financial Processing Corporation dated as of September
18, 1992. 10
(u) Administrative Services Agreement between Registrant and
Counsellor's Fund Services, Inc. (BEA Portfolios) dated September
18, 1992. 10
(v) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to Tax-Free Money Market Portfolio, dated as of April
21, 1992. 10
(w) Transfer Agency Agreement Supplement (Laffer) between Registrant
and PFPC Inc. dated as of July 21, 1993. 12
(x) Administration and Accounting Services Agreement between
Registrant and PFPC Inc., relating to Laffer/Canto Equity Fund,
10
dated July 21, 1993. 12
(y) Transfer Agency Agreement Supplement (BEA U.S. Core Equity, BEA
U.S. Core Fixed Income, BEA Global Fixed Income and BEA Municipal
Bond Fund) between Registrant and PFPC Inc. dated as of October
27, 1993. 15
(z) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. relating to (Core Equity) dated as of
October 27, 1993. 15
(aa) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. (Core Fixed Income) dated October 27,
1993. 15
(bb) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. (International Fixed Income) dated
October 27, 1993 15
(cc) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. (Municipal Bond) dated October 27, 1993. 15
(dd) Transfer Agency Agreement Supplement (BEA Balanced and Short
Duration) between Registrant and PFPC Inc. dated October 26,
1994. 18
(ee) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. (BEA Balanced) dated October 26, 1994. 18
(ff) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. (BEA Short Duration) dated October 26,
1994. 18
(gg) Co-Administration Agreement between Registrant and PFPC Inc.
(Warburg Pincus Growth & Income Fund) dated August 4, 1994. 18
(hh) Co-Administration Agreement between Registrant and PFPC Inc.
(Warburg Pincus Balanced Fund) dated August 4, 1994. 18
11
(ii) Co-Administration Agreement between Registrant and Counsellors
Funds Services, Inc. (Warburg Pincus Growth & Income Fund) dated
August 4, 1994. 18
(jj) Co-Administration Agreement between Registrant and Counsellors
Funds Services, Inc. (Warburg Pincus Balanced Fund) dated August
4, 1994. 18
(kk) Administrative Services Agreement Supplement between Registrant
and Counsellor's Fund Services, Inc. (BEA Classes) dated October
26, 1994. 18
(10) (a) Opinion of Counsel.
Incorporated by reference herein to Registrant's 24f-2 Notice for
the fiscal year ending August 31, 1994 filed on October 7, 1994.
(b) Consent of Counsel.
(11) Consent of Independent Accountants.
(12) None.
(13) (a) Subscription Agreement (relating to Classes A through N). 2
(b) Subscription Agreement between Registrant and Planco Financial
Services, Inc., relating to Classes O and P. 7
(c) Subscription Agreement between Registrant and Planco Financial
Services, Inc., relating to Class Q. 7
(d) Subscription Agreement between Registrant and Counsellors
Securities Inc. relating to Classes R, S, and Alpha 1 through
Theta 4. 9
(e) Subscription Agreement between Registrant and Counsellors
Securities Inc. relating to Classes T, U and V. 10
(f) Subscription Agreement between Registrant and Counsellor's
Securities Inc. relating to Classes BB and CC. 18
12
(g) Purchase Agreement between Registrant and Counsellors Securities
Inc. relating to Classes DD and EE. 18
(14) None.
(15) (a) Plan of Distribution (Sansom Street Money). 3
(b) Plan of Distribution (Sansom Street Tax-Free Money). 3
(c) Plan of Distribution (Sansom Street Government Money). 3
(d) Plan of Distribution (Cash Preservation Money). 3
(e) Plan of Distribution (Cash Preservation Tax-Free Money). 3
(f) Plan of Distribution (SafeGuard Equity). 3
(g) Plan of Distribution (SafeGuard Fixed Income). 3
(h) Plan of Distribution (SafeGuard Balanced). 3
(i) Plan of Distribution (SafeGuard Tax-Free). 3
(j) Plan of Distribution (SafeGuard Money). 3
(k) Plan of Distribution (SafeGuard Tax-Free Money). 3
(l) Plan of Distribution (Bedford Money). 3
(m) Plan of Distribution (Bedford Tax-Free Money). 3
(n) Plan of Distribution (Bedford Government Money). 3
(o) Plan of Distribution (Bedford New York Municipal Money). 7
(p) Plan of Distribution (SafeGuard Government Securities). 7
13
(q) Plan of Distribution (Income Opportunities High Yield). 7
(r) Amendment No. 1 to Plans of Distribution (Classes A through Q). 8
(s) Plan of Distribution (Bradford Tax-Free Money). 9
(t) Plan of Distribution (Bradford Government Money). 9
(u) Plan of Distribution (Alpha Money). 9
(v) Plan of Distribution (Alpha Tax-Free Money). 9
(w) Plan of Distribution (Alpha Government Money). 9
(x) Plan of Distribution (Alpha New York Money). 9
(y) Plan of Distribution (Beta Money). 9
(z) Plan of Distribution (Beta Tax-Free Money). 9
(aa) Plan of Distribution (Beta Government Money). 9
(bb) Plan of Distribution (Beta New York Money). 9
(cc) Plan of Distribution (Gamma Money). 9
(dd) Plan of Distribution (Gamma Tax-Free Money). 9
(ee) Plan of Distribution (Gamma Government Money). 9
(ff) Plan of Distribution (Gamma New York Money). 9
(gg) Plan of Distribution (Delta Money). 9
(hh) Plan of Distribution (Delta Tax-Free Money). 9
14
(ii) Plan of Distribution (Delta Government Money). 9
(jj) Plan of Distribution (Delta New York Money). 9
(kk) Plan of Distribution (Epsilon Money). 9
(ll) Plan of Distribution (Epsilon Tax-Free Money). 9
(mm) Plan of Distribution (Epsilon Government Money). 9
(nn) Plan of Distribution (Epsilon New York Money). 9
(oo) Plan of Distribution (Zeta Money). 9
(pp) Plan of Distribution (Zeta Tax-Free Money). 9
(qq) Plan of Distribution (Zeta Government Money). 9
(rr) Plan of Distribution (Zeta New York Money). 9
(ss) Plan of Distribution (Eta Money). 9
(tt) Plan of Distribution (Eta Tax-Free Money). 9
(uu) Plan of Distribution (Eta Government Money). 9
(vv) Plan of Distribution (Eta New York Money). 9
(ww) Plan of Distribution (Theta Money). 9
(xx) Plan of Distribution (Theta Tax-Free Money). 9
(yy) Plan of Distribution (Theta Government Money). 9
(zz) Plan of Distribution (Theta New York Money). 9
(aaa) Plan of Distribution (Laffer Equity). 12
15
(bbb) Plan Distribution (Warburg Pincus Growth & Income Series 2). 18
(ccc) Plan of Distribution (Warburg Pincus Balanced Series 2). 18
(16) Schedule of Computation of Performance Quotations. 3
(17) Representation of Ballard Spahr Andrews & Ingersoll pursuant to Rule 485(b)
under the Securities Act of 1933.
16
-----------------
1 Incorporated herein by reference to the same exhibit number of
Registrant's Registration Statement (No. 33-20827) filed on March 24,
1988.
2 Incorporated herein by reference to the same exhibit number of
Pre-Effective Amendment No. 2 to Registrant's Registration Statement (No.
33-20827) filed on July 12, 1988.
3 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 1 to Registrant's Registration Statement
(No. 33-20827) filed on March 23, 1989.
4 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 2 to Registrant's Registration Statement
(No. 33-20827) filed on October 25, 1989.
5 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 3 to the Registrant's Registration Statement
(No. 33-20827) filed on April 27, 1990.
6 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 4 to the Registrant's Registration Statement
(No. 33-20827) filed on May 1, 1990.
7 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 5 to the Registrant's Registration Statement
(No. 33-20827) filed on December 14, 1990.
8 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 6 to the Registrant's Registration Statement
(No. 33-20827) filed on October 24, 1991.
9 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 7 to the Registrant's Registration Statement
(No. 33-20827) filed on July 15, 1992.
10 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 8 to the Registrant's Registration Statement
(No. 33-20827) filed on October 22, 1992.
11 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 9 to the Registrant's Registration Statement
(No. 33-20827) filed on December 16, 1992.
12 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 11 to the Registrant's Registrant Statement
(No. 33-20827) filed on June 21, 1993.
17
13 Incorporated herein by reference to the same exhibit number
Post-Effective Amendment No. 12 to the Registrant's Registration
Statement (No. 33-20827) filed on July 27, 1993.
14 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 13 to the Registrant's Registration
Statement (No. 33-20827) filed on October 29, 1993.
15 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 14 to the Registrant's Registration
Statement No. 33-20827 filed on December 21, 1993.
16 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 19 to the Registrant's Registration
Statement (No. 33-20827) filed on October 14, 1994.
17 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 20 to the Registrant's Registration
Statement No. 33-20827 filed on October 21, 1994.
18 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 21 to the Registrant's Registration
Statement No. 33-20827 filed on October 28, 1994.
19 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 22 to the Registrant's Registration
Statement No. 33-20827 filed on December 19, 1994.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
The following information is given as of January 27, 1995.
Title of Class of Common Stock Number of Record Holders
a) Warburg Pincus Growth & Income 312
b) Warburg Pincus Balanced 17
c) RBB Tax-Free 170
d) RBB Money Market 13
e) RBB Municipal Money Market 2
f) Cash Preservation Money Market 40
g) Cash Preservation Municipal Money Market 78
h) Sansom Street Money Market 3
i) Sansom Street Municipal Money Market 0
j) Sansom Street Government Obligations
Money Market 0
k) Bedford Money Market 81,359
l) Bedford Municipal Money Market 5,813
18
m) Bedford Government Obligations Money
Market 3,684
n) Bedford New York Municipal Money Market 2,787
o) RBB Government Securities 810
p) Bradford Municipal Money Market 3,295
q) Bradford Government Obligations Money
Market 1,496
r) BEA International Equity 227
s) BEA Strategic Fixed Income 206
t) BEA Emerging Markets Equity 140
u) Laffer/Canto Equity 51
v) BEA U.S. Core Equity 105
w) BEA U.S. Core Fixed Income 114
x) BEA U.S. Global Fixed Income 105
y) BEA Municipal Bond fund 150
Item 27. Indemnification
Sections 1, 2, 3 and 4 of Article VIII of Registrant's Articles of
Incorporation, as amended, incorporated herein by reference as Exhibits 1(a)
and 1(c), provide as follows:
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the Corporation
shall have any liability to the Corporation or its shareholders for
damages. This limitation on liability applies to events occurring at
the time a person serves as a director or officer of the Corporation
whether or not such person is a director or officer at the time of
any proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance expenses
to its currently acting and its former directors to the fullest extent
that indemnification of directors is permitted by the Maryland General
Corporation Law. The Corporation shall indemnify and advance expenses
to its officers to the same extent as its directors and to such
further extent as is consistent with law. The Board of Directors may
by By-law, resolution or agreement make further provision for
indemnification of directors, officers, employees and agents to the
fullest extent permitted by the Maryland General Corporation Law.
Section 3. No provision of this Article shall be effective to
protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security
holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
19
Section 4. References to the Maryland General Corporation Law in
this Article are to the law as from time to time amended. No further
amendment to the Articles of Incorporation of the Corporation shall
decrease, but may expand, any right of any person under this Article
based on any event, omission or proceeding prior to such amendment.
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 Securities and Exchange
Commission 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 beingregistered, Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Information as to any other business, profession, vocation or
employment of a substantial nature in which any directors and officers of
PIMC, BEA, Laffer Advisors and Warburg are, or at any time during the past
two (2) years have been, engaged for their own accounts or in the capacity
of director, officer, employee, partner or trustee is incorporated herein
by reference to Schedules A and D of PIMC's Form ADV (File No. 801-13304)
filed on March 28, 1993, Schedules B and D of BEA's Form ADV (File No.
801-37170) filed on March 30, 1993, Schedules A and D of Laffer Advisors
Form ADV (File No. 801-16816) filed on March 22, 1993 and Schedules A and
D of Warburg's Form ADV (File No. 801-07321) filed on August 28, 1992,
respectively.
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of PNC Bank, National Association (successor by merger to
Provident National Bank) ("PNC Bank"), is, or at any time during the past two
years has been, engaged for his own account or in the capacity of director,
officer, employee, partner or trustee.
PNC BANK, NATIONAL ASSOCIATION
Directors and Officers
To the knowledge of Registrant, none of the directors or officers
of PNC except those set forth below, is or has been, at any time during the
20
past two years, engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain directors and
officers of PNC Bank also hold various positions with, and engage in
business for, PNC Bank Corp. (formerly PNC Financial Corp), which owns all
the outstanding stock of PNC Bank, or other subsidiaries of PNC Bank Corp.
Set forth below are the names and principal businesses of the directors and
certain of the senior executive officers of PNC Bank who are engaged in any
other business, profession, vocation or employment of substantial nature.
21
PNC BANK, NATIONAL ASSOCIATION
Position with
PNC Bank,
National Other Business Type of
Association Name Connections Business
Director B.R. Brown President and C.E.O. of Coal
Consol, Inc.
Pittsburgh, PA (22)
Director Constance E. Clayton Superintendent of Schools Educator
The School District of
Philadelphia
Philadelphia, PA (23)
Director F. Eugene Dixon, Jr. Private Trustee Trustee
Lafayette Hill, PA (24)
Director A. James Freeman Vice Chairman and C.E.O. Manufacturing
Lord Corporation
Erie, PA (25)
Director Banking
Marine Bank
Erie, PA (26)
Director Dr. Stuart Heydt President and C.E.O. Medical
Geisinger Foundation
Danville, PA (27)
Director Edward P. Junker, III Chairman and C.E.O. Banking
Marine Bank
Erie, PA (26)
Director Thomas A. McConomy President, C.E.O. and Manufacturing
Chairman, Calgon Carbon
Corporation
Pittsburgh, PA (28)
Director Robert C. Milsom Retired
Pittsburgh, PA*
Director Thomas H. O'Brien Chairman and C.E.O. Bank Holding
PNC Bank Corp. (14)
Director Dr. J. Dennis O'Connor Chancellor Education
University of Pittsburgh
Pittsburgh, PA (29)
22
Director Rocco A. Ortenzio Chairman and C.E.O. Medical
Continental Medical Systems,
Inc.
Mechanicsburg, PA (30)
Director Robert C. Robb, Jr. Partner Financial and
Lewis, Eckert, Robb & Management
Company Consultants
Plymouth Meeting, PA (31)
Director Daniel M. Rooney President, Pittsburgh Football
Steelers Football Club
of the National Football
League
Pittsburgh, PA (32)
Director Seth E. Schofield Chairman, President and Airline
C.E.O.
USAir Group, Inc. and
USAir, Inc.
Arlington, VA (33)
Director Robert M. Valentini President and C.E.O. Bell of Communica-
Pennsylvania and Chairman tions
Network Policy Council of Bell
Atlantic Corporation
Philadelphia, PA (34)
President and James E. Rohr President Bank
Chief Executive PNC Bank Corp. Holding
Officer (14) Company
President and Bruce E. Robbins None.
Chief Executive
Officer of PNC
Bank, National
Association,
Pittsburgh
Senior Executive Edward V. Randall, Jr. None.
Vice President
Executive J. Richard Carnall Director Banking
Vice President PNC National Bank (2)
Chairman and Director Financial-
PFPC Inc. (3) Related
Services
23
Director
PNC Trust Company Fiduciary
of New York (11) Activities
Director Equipment
Hayden Bolts, Inc.* Leasing
Director, Real Estate
Parkway Real Estate
Company*
Director Investment
Provident Capital Advisory
Management, Inc. (5)
Director Investment
Advanced Investment Advisory
Management, Inc. (15)
Executive Richard C. Caldwell Director Banking
Vice President PNC National Bank (2)
Director Investment
Provident Capital Advisory
Management, Inc. (5)
Director Fiduciary
PNC Trust Company Activities
of New York (11)
Executive Vice President Bank Holding
PNC Bank Corp. (14) Company
Director Investment
Advanced Investment Advisory
Management, Inc. (15)
Director Banking
PNC Bank, New Jersey,
New Jersey, National
Association (16)
Director Financial-
PFPC Inc. (3) Related
Services
Executive Vice Herbert G. None.
President Summerfield, Jr.
24
Executive Vice Joe R. Irwin None.
President
President and Richard L. Smoot Senior Vice President Banking
Chief Executive Operations
Officer of PNC PNC Bank Corp. (20)
Bank, National
Association, Director Fiduciary
Philadelphia PNC Trust Company of Activities
New York (11)
Director Investment
PNC Institutional Advisory
Management Corporation (28)
Director Financial
PFPC Inc. (3) Related
Services
Executive Vice W. Herbert Crowder, III None.
President
Executive Vice Walter L. West None.
President
Senior Vice George Lula None.
President
Secretary William F. Strome Director International
PNC Bank International (35) Banking
Services
Managing General Counsel Bank Holding
and Senior Vice President Company
PNC Bank Corp.
Senior Vice James P. Conley None.
President/
Credit Policy
--------------------
* For more information, contact William F. Strome, PNC Bank, National
Association, Broad and Chestnut Streets, Philadelphia, PA 19101.
(1) PNC Bank, National Association, 120 S. 17th Street, Philadelphia, PA
19103.
(2) PNC National Bank, 103 Bellevue Parkway, Wilmington, DE 19809.
(3) PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
(4) PNC Service Corp, 103 Bellevue Parkway, Wilmington, DE 19809.
25
(5) Provident Capital Management, Inc., 30 S. 17th Street, Site 1500,
Philadelphia, PA 19103.
(6) PNC National Investment Corporation, Broad and Chestnut Streets,
Philadelphia, PA 19101.
(7) Provident Realty Management, Inc., Broad and Chestnut Streets,
Philadelphia, PA 19101.
(8) Provident Realty, Inc., Broad and Chestnut Streets, Philadelphia, PA
19101.
(9) PNC Bancorp, Inc. 3411 Silverside Park, Wilmington, DE 19810
(10) PNC New Jersey Credit Corp, 1415 Route 70 East, Suite 604, Cherry
Hill, NJ 08034.
(11) PNC Trust Company of New York, 40 Broad Street, New York, NY 10084.
(12) Provcor Properties, Inc., Broad and Chestnut Streets, Philadelphia, PA
19101.
(13) PNC Credit Corp, 103 Bellevue Parkway, Wilmington, DE 19809.
(14) PNC Bank Corp., 5th Avenue and Wood Streets, Pittsburgh, PA 15265.
(15) Advanced Investment Management, Inc., 27th Floor, One Oliver Plaza,
Pittsburgh, PA 15265.
(16) PNC Bank of New Jersey, National Association, Woodland Falls Corporate
Park, 210 Lake Drive East, Cherry Hill, NJ 08002.
(17) PNC Institutional Management Corporation, 400 Bellevue Parkway,
Wilmington, DE 19809.
(18) Provident National Leasing Corporation, Broad and Chestnut Streets,
Philadelphia, PA 19101
(19) Provident National Bank Corp. New Jersey, 1 Centennial Square,
Haddonfield, NJ 08033
(20) The Clayton Bank and Trust Company, Clayton, DE 19938
(21) Keystone Life Insurance Company, 1207 Chestnut Street, Philadelphia,
PA 19107-4101
(22) Consol, Inc., Consol Plaza, Pittsburgh, PA 15241
(23) School District of Philadelphia, 21 Street and The Parkway,
Philadelphia, PA 19103-1099
(24) F. Eugene Dixon, Jr., Private Trustee, 665 Thomas Road, Lafayette
Hill, PA 19444-0178
(25) Lord Corporation, 2000 W. Grandview Boulevard, Erie, PA 16514
(26) Marine Bank, Ninth and State Streets, Erie, PA 16553
(27) Geisinger Foundation, 100 N. Academy Avenue, Danville, PA 17822
(28) Calgon Carbon Corporation, P.O. Box 717, Pittsburgh, PA 15230-0717
(29) University of Pittsburgh, 107 Cathedral of Learning, Pittsburgh, PA
15260
(30) Continental Medical Systems, Inc., P.O. Box 715, Mechanicsburg, PA
17055
(31) Lewis, Eckert, Robb & Company, 425 One Plymouth Meeting, Plymouth
Meeting, PA 19462
(32) Football Club of the National Football League, 300 Stadium Circle,
Pittsburgh, PA 15212
(33) USAir Group, Inc. and USAir, Inc., 2345 Crystal Drive, Arlington, VA
22227
(34) Bell of Pennsylvania, One Parkway, Philadelphia, PA 19102
(35) PNC Bank International, 5th and Wood Streets, Pittsburgh, PA 15222
26
Item. 29. Principal Underwriter
(a) Counsellors Securities Inc. (the "Distributor") acts as
distributor for the following investment companies:
Warburg, Pincus Cash Reserve Fund
Warburg, Pincus New York Tax Exempt Fund
Warburg, Pincus New York Municipal Bond Fund
Warburg, Pincus Intermediate Maturity Government Fund
Warburg, Pincus Fixed Income Fund
Warburg, Pincus Global Fixed Income Fund
Warburg, Pincus Capital Appreciation Fund
Warburg, Pincus Emerging Growth Fund
Warburg, Pincus International Equity Fund
Warburg, Pincus Japan OTC Fund
Counsellors Tandem Securities Fund
Warburg Pincus Growth & Income Fund
Warburg Pincus Balanced Fund
The Distributor acts as a principal underwriter, depositor or investment
adviser for the following investment companies: None other than Registrant
and companies listed above.
(b) Information for each director or officer of the Distributor
is set forth below:
Name and Principal Positions and Offices Positions and Offices
Business Address with the Distributor with Registrant
John L. Vogelstein Director
466 Lexington Avenue
New York, New York 10017
Lionel I. Pincus Director
466 Lexington Avenue
New York, New York 10017
Reuben S. Leibowitz Director,
466 Lexington Avenue President and Chief
New York, New York 10017 Financial Officer
John L. Furth Director
466 Lexington Avenue
New York, New York 10017
Arnold M. Reichman Vice President, Director
466 Lexington Avenue Secretary and
New York, New York 10017 Chief Operating Officer
Roger Reinlieb Vice President
466 Lexington Avenue
27
New York, New York 10017
Karen Amato Assistant Secretary
466 Lexington Avenue
New York, New York 10017
Stephen Distler Treasurer
466 Lexington Avenue
New York, New York 10017
(c) Information as to commissions and other compensation received
by the principal underwriter is set forth below.
Net
Name of Underwriting Compensation
Principal Discounts and on Redemption Brokerage Other
Underwriter Commissions and Repurchase Commissions Compensation
Counsellors $ 0 $ 0 $ 0 $ 0
Securities
Inc.
Item 30. Location of Accounts and Records
(1) PNC Bank, National Association (successor by merger to Provident
National Bank), Broad and Chestnut Street, Philadelphia, PA 19101
(records relating to its functions as sub-adviser and custodian).
(2) Counsellors Securities Inc., 466 Lexington Avenue, New York,
New York 10017 (records relating to its functions as distributor).
(3) PNC Institutional Management Corporation (formerly Provident
Institutional Management Corporation), Bellevue Corporate Center,
103 Bellevue Parkway, Wilmington, Delaware 19809 (records relating
to its functions as investment adviser, sub-adviser and
administrator).
(4) PFPC Inc. (formerly Provident Financial Processing Corporation),
Bellevue Corporate Center, 400 Bellevue Parkway, Wilmington,
Delaware 19809 (records relating to its functions as transfer
agent and dividend disbursing agent).
(5) Ballard Spahr Andrews & Ingersoll, 1735 Market Street - 51st Floor,
Philadelphia, Pennsylvania 19103 (Registrant's Articles of
Incorporation, By-Laws and Minute Books).
(6) BEA Associates, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022 (records relating to its function as investment
adviser).
28
(7) Laffer Advisors Incorporated, 4275 Executive Square #330, La Jolla,
California 92037 (records relating to its function as investment
adviser).
(8) Warburg, Pincus Counsellors, Inc., 466 Lexington Avenue, New York,
New York 10017-3147.
Item 31. Management Services
None.
Item 32. Undertakings
(a) Registrant hereby undertakes to hold a meeting of shareholders
for the purpose of considering the removal of directors in the
event the requisite number of shareholders so request.
29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Wilmington, and State of Delaware, on ^ March 24, 1995.
THE RBB FUND, INC.
By: /s/ Edward J. Roach
--------------------
Edward J. Roach
President and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to Registrant's Registration Statement has been
signed below by the following persons in the capacities and on the date
indicated.
Signature Title Date
/s/ Edward J. Roach President (Principal March 24, 1995
----------------------
Edward J. Roach Executive Officer) and
Treasurer (Principal
Financial and Accounting
Officer)
/s/ Donald van Roden Director March 24, 1995
-----------------------
Donald van Roden
/s/ Francis J. McKay Director March 24, 1995
-----------------------
Francis J. McKay
/s/ Marvin E. Sternberg Director March 24, 1995
-----------------------
Marvin E. Sternberg
/s/ Julian A. Brodsky Director March 24, 1995
-----------------------
Julian A. Brodsky
/s/ Arnold M. Reichman Director March 24, 1995
-----------------------
Arnold M. Reichman
/s/ Robert Sablowsky Director March 24, 1995
-----------------------
Robert Sablowsky
THE RBB FUND, INC.
RBB CLASSES
WARBURG PINCUS CLASSES
WARBURG PINCUS SERIES 2 CLASSES
CASH PRESERVATION CLASSES
SANSOM STREET CLASSES
BEDFORD CLASSES
BRADFORD CLASSES
BEA CLASSES
LAFFER/CANTO EQUITY CLASS
JANNEY CLASSES
BETA CLASSES
GAMMA CLASSES
DELTA CLASSES
EPSILON CLASSES
ZETA CLASSES
ETA CLASSES
THETA CLASSES
EXHIBIT INDEX
See
Exhibit Page Note #
(1) (a) Articles of Incorporation of Registrant 1
(b) Articles Supplementary of Registrant. 1
(c) Articles of Amendment to Articles of
Incorporation of Registrant. 2
(d) Articles Supplementary of Registrant. 2
(e) Articles Supplementary of Registrant. 5
(f) Articles Supplementary of Registrant. 6
(g) Articles Supplementary of Registrant. 9
(h) Articles Supplementary of Registrant. 10
(i) Articles Supplementary of Registrant. 14
(j) Articles Supplementary of Registrant. 14
(k) Articles Supplementary of Registrant. 19
(l) Articles Supplementary of Registrant. 19
(m) Articles Supplementary of Registrant. 19
i
See
Exhibit Page Note #
(n) Articles Supplementary of Registrant. 19
(o) Form of Articles Supplementary of Registrant
(2) Amended By-Laws adopted August 16, 1988. 3
(a) Amendment to By-Laws adopted July 25, 1989. 4
(b) By-Laws amended through October 24, 1989. 5
(3) None.
(4) Specimen Certificates
a) SafeGuard Equity Growth and Income Shares 3
b) SafeGuard Fixed Income Shares 3
c) SafeGuard Balanced Shares 3
d) SafeGuard Tax-Free Shares 3
e) SafeGuard Money Market Shares 3
f) SafeGuard Tax-Free Money Market Shares 3
g) Cash Preservation Money Market Shares 3
h) Cash Preservation Tax-Free Money Market Shares 3
i) Sansom Street Money Market Shares 3
j) Sansom Street Tax-Free Money Market Shares 3
k) Sansom Street Government Obligations Money Market Shares 3
l) Bedford Money Market Shares 3
m) Bedford Tax-Free Money Market Shares 3
n) Bedford Government Obligations Money Market Shares 3
o) Bedford New York Municipal Money Market Shares 5
ii
See
Exhibit Page Note #
p) SafeGuard Government Securities Shares 5
q) Income Opportunities High Yield Bond Shares 6
r) Bradford Tax-Free Money Market Shares 8
s) Bradford Government Obligations Money Market Shares 8
t) Alpha 1 Money Market Shares 8
u) Alpha 2 Tax-Free Money Market Shares 8
v) Alpha 3 Government Obligations Money Market Shares 8
w) Alpha 4 New York Municipal Money Market Shares 8
x) Beta 1 Money Market Shares 8
y) Beta 2 Tax-Free Money Market Shares 8
z) Beta 3 Government Obligations Money Market Shares 8
aa) Beta 4 New York Municipal Money Market Shares 8
bb) Gamma 1 Money Market Shares 8
cc) Gamma 2 Tax-Free Money Market Shares 8
dd) Gamma 3 Government Obligations Money Market Shares 8
ee) Gamma 4 New York Municipal Money Market Shares 8
ff) Delta 1 Money Market Shares 8
gg) Delta 2 Tax-Free Money Market Shares 8
hh) Delta 3 Government Obligations Money Market Shares 8
ii) Delta 4 New York Municipal Money Market Shares 8
jj) Epsilon 1 Money Market Shares 8
iii
See
Exhibit Page Note #
kk) Epsilon 2 Tax-Free Money Market Shares 8
ll) Epsilon 3 Government Obligations Money Market Shares 8
mm) Epsilon 4 New York Municipal Money Market Shares 8
nn) Zeta 1 Money Market Shares 8
oo) Zeta 2 Tax-Free Money Market Shares 8
pp) Zeta 3 Government Obligations Money Market Shares 8
qq) Zeta 4 New York Municipal Money Market Shares 8
rr) Eta 1 Money Market Shares 8
ss) Eta 2 Tax-Free Money Market Shares 8
tt) Eta 3 Government Obligations Money Market Shares 8
uu) Eta 4 New York Municipal Money Market Shares 8
vv) Theta 1 Money Market Shares 8
ww) Theta 2 Tax-Free Money Market Shares 8
xx) Theta 3 Government Obligations Money Market Shares 8
yy) Theta 4 New York Municipal Money Market Shares 8
zz) BEA International Equity Shares 9
a1) BEA Strategic Fixed Income Shares 9
a2) BEA Emerging Markets Equity Shares 9
a3) Laffer/Canto Equity Shares 12
a4) BEA U.S. Core Equity Shares 13
a5) BEA U.S. Core Fixed Income Shares 13
a6) BEA Global Fixed Income Shares 13
iv
See
Exhibit Page Note #
a7) BEA Municipal Bond Fund Shares 13
a8) BEA Balanced Shares 16
a9) BEA Short Duration Shares 16
a10) Form of Warburg Growth & Income Shares 18
a11) Form of Warburg Balanced Shares 18
(5) (a) Investment Advisory Agreement (Money) between Registrant and
Provident Institutional Management Corporation, dated as of
August 16, 1988. 3
(b) Sub-Advisory Agreement (Money) between Provident Institutional
Management Corporation and Provident National Bank, dated as of
August 16, 1988. 3
(c) Investment Advisory Agreement (Tax-Free Money) between Registrant
and Provident Institutional Management Corporation, dated as of
August 16, 1988. 3
(d) Sub-Advisory Agreement (Tax-Free Money) between Provident
Institutional Management Corporation and Provident National Bank,
dated as of August 16, 1988. 3
(e) Investment Advisory Agreement (Government Money) between
Registrant and Provident Institutional Management Corporation,
dated as of August 16, 1988. 3
(f) Sub-Advisory Agreement (Government Money) between Provident
Institutional Management Corporation and Provident National Bank,
dated as of August 16, 1988. 3
(k) Investment Advisory Agreement (Balanced) between Registrant and
Provident Institutional Management Corporation, dated as of
August 16, 1988. 3
v
See
Exhibit Page Note #
(l) Sub-Advisory Agreement (Balanced) between Provident Institutional
Management Corporation and Provident National Bank, dated as of
August 16, 1988. 3
(m) Investment Advisory Agreement (Tax-Free) between Registrant and
Provident Institutional Management Corporation, dated as of
August 16, 1988. 3
(n) Sub-Advisory Agreement (Tax-Free) between Provident Institutional
Management Corporation and Provident National Bank, dated as of
August 16, 1988. 3
(s) Investment Advisory Agreement (Government Securities) between
Registrant and Provident Institutional Management Corporation
dated as of April 8, 1991. 8
(t) Investment Advisory Agreement (High Yield Bond) between
Registrant and Provident Institutional Management Corporation
dated as of April 8, 1991. 8
(u) Sub-Advisory Agreement (High Yield Bond) between Registrant and
Warburg, Pincus Counsellors, Inc. dated as of April 8, 1991. 8
(v) Investment Advisory Agreement (New York Municipal Money Market)
between Registrant and Provident Institutional Management
Corporation dated November 5, 1991. 9
(w) Investment Advisory Agreement (Equity) between Registrant and
Provident Institutional Management Corporation dated November 5,
1991. 10
(x) Sub-Advisory Agreement (Equity) between Registrant, Provident
Institutional Management Corporation and Warburg, Pincus
Counsellors, Inc. dated November 5, 1991. 10
vi
See
Exhibit Page Note #
(y) Investment Advisory Agreement (Tax-Free Money Market) between
Registrant and Provident Institutional Management Corporation
dated April 21, 1992. 10
(z) Investment Advisory Agreement (BEA International Equity
Portfolio) between Registrant and BEA Associates. 11
(aa) Investment Advisory Agreement (BEA Strategic Fixed Income
Portfolio) between Registrant and BEA Associates. 11
(bb) Investment Advisory Agreement (BEA Emerging Markets Equity
Portfolio) between Registrant and BEA Associates. 11
(cc) Investment Advisory Agreement (Laffer/Canto Equity Portfolio)
between Registrant and Laffer Advisors, Incorporated, dated as of
July 21, 1993. 14
(dd) Sub-Advisory Agreement (Laffer/Canto Portfolio) between PNC
Institutional Management Corporation and Laffer Advisors,
Incorporated, dated as of July 21, 1993. 12
(ee) Investment Advisory Agreement (BEA U.S. Core Equity Portfolio)
between Registrant and BEA Associates, dated as of October 27,
1993. 15
(ff) Investment Advisory Agreement (BEA U.S. Core Fixed Income
Portfolio) between Registrant and BEA Associates, dated as of
October 27, 1993. 15
(gg) Investment Advisory Agreement (BEA Global Fixed Income Portfolio)
between Registrant and BEA Associates, dated as of October 27
1993. 15
(hh) Investment Advisory Agreement (BEA Municipal Bond Fund Portfolio)
between Registrant and BEA Associates, dated as of October 27,
1993. 15
vii
See
Exhibit Page Note #
(ii) Investment Advisory Agreement (Warburg Pincus Growth & Income
Fund) between Registrant and Warburg, Pincus Counsellors, Inc. 14
(jj) Form of Investment Advisory Agreement (Warburg Pincus Balanced
Fund) between Registrant and Warburg, Pincus Counsellors, Inc. 16
(kk) Form of Investment Advisory Agreement (BEA Balanced) between
Registrant and BEA Associates. 16
(ll) Form of Investment Advisory Agreement (BEA Short Duration)
between Registrant and BEA Associates. 16
(6) (r) Distribution Agreement and Supplements (Classes A through Q)
between the Registrant and Counsellors Securities Inc. dated as
of April 10, 1991. 8
(s) Distribution Agreement Supplement (Classes L, M, N and O) between
the Registrant and Counsellors Securities Inc. dated as of
November 5, 1991. 9
(t) Distribution Agreement Supplements (Classes R, S, and Alpha 1
through Theta 4) between the Registrant and Counsellors
Securities Inc. dated as of November 5, 1991. 9
(u) Distribution Agreement Supplement (Classes T, U and V) between
the Registrant and Counsellors Securities Inc. dated as of
September 18, 1992. 10
(v) Distribution Agreement Supplement (Class W) between the
Registrant and Counsellors Securities Inc. dated as of July 21,
1993. 14
(w) Distribution Agreement Supplement (Classes X, Y, Z and AA)
between the Registrant and Counsellors Securities Inc. 14
viii
See
Exhibit Page Note #
(x) Distribution Agreement Supplement (Classes BB and CC) between
Registrant and Counsellors Securities Inc. dated as of October
26, 1994. 18
(y) Distribution Agreement Supplement (Classes DD and EE) between
Registrant and Counsellors Securities Inc. dated as of October
26, 1994. 18
(z) Form of Distribution Agreement Supplement (Classes L, M, N, and
O) between the Registrant and Counselor's Securities Inc. 19
(aa) Form of Distribution Agreement Supplement (Classes R and S)
between the Registrant and Counselor's Securities Inc. 19
(bb) Form of Distribution Agreement Supplements (Classes Alpha 1
through Theta 4) between Registrant and Counsellor's Securities
Inc.) 19
(cc) Distribution Agreement Supplement, Janney Classes (Alpha 1,
Alpha 2, Alpha 3 and Alpha 4) between Registrant and
Counsellor's Securities Inc.
(7) Fund Office Retirement Profit-Sharing and Trust Agreement, dated as of
October 24, 1990. 7
(8) (a) Custodian Agreement between Registrant and Provident National
Bank dated as of August 16, 1988. 3
(b) Sub-Custodian Agreement among The Chase Manhattan Bank, N.A., the
Registrant and Provident National Bank, dated as of July 13,
1992, relating to custody of Registrant's foreign securities. 10
(e) Amendment No. 1 to Custodian Agreement dated August 16, 1988. 9
(f) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA International Equity Portfolio, dated September 18,
1992. 10
ix
See
Exhibit Page Note #
(g) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA Strategic Fixed Income Portfolio, dated September
18, 1992. 10
(h) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA Emerging Markets Equity Portfolio, dated September
18, 1992. 10
(i) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA International Equity, BEA Emerging Markets, BEA
Strategic Fixed Income and BEA Global Fixed Income Portfolio,
dated as of November 29, 1993. 15
(j) Agreement between Brown Brothers Harriman & Co. and Registrant on
behalf of BEA U.S. Core Equity and BEA U.S. Core Fixed Income
Portfolios, dated as of November 29, 1993. 15
(k) Form of Custodian Contract between Registrant and State Street
Bank and Trust Company. 18
(9) (a) Transfer Agency Agreement (Sansom Street) between Registrant and
Provident Financial Processing Corporation, dated as of August
16, 1988. 3
(b) Transfer Agency Agreement (Cash Preservation) between Registrant
and Provident Financial Processing Corporation, dated as of
August 16, 1988. 3
(c) Shareholder Servicing Agreement (Sansom Street Money). 3
(d) Shareholder Servicing Agreement (Sansom Street Tax-Free Money). 3
(e) Shareholder Servicing Agreement (Sansom Street Government Money). 3
(f) Shareholder Services Plan (Sansom Street Money). 3
x
See
Exhibit Page Note #
(g) Shareholder Services Plan (Sansom Street Tax-Free Money). 3
(h) Shareholder Services Plan (Sansom Street Government Money). 3
(i) Transfer Agency Agreement (SafeGuard) between Registrant and
Provident Financial Processing Corporation, dated as of August
16, 1988. 3
(j) Transfer Agency Agreement (Bedford) between Registrant and
Provident Financial Processing Corporation, dated as of August
16, 1988. 3
(k) Transfer Agency Agreement (Income Opportunities) between
Registrant and Provident Financial Processing Corporation dated
June 25, 1990. 7
(l) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to Government Securities Portfolio, dated as of April
10, 1991. 8
(m) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to New York Municipal Money Market Portfolio dated as of
November 5, 1991. 9
(n) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to Equity Portfolio dated as of November 5, 1991. 9
(o) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to High Yield Bond Portfolio, dated as of April 10,
1991. 9
xi
See
Exhibit Page Note #
(p) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation
(International) dated as of September 18, 1992. (q)
Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation
(Strategic) dated September 18, 1992. 10
(r) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation
(Emerging) dated September 18, 1992. 10
(s) Transfer Agency Agreement and Supplements (Bradford, Alpha, Beta,
Gamma, Delta, Epsilon, Zeta, Eta and Theta) between Registrant
and Provident Financial Processing Corporation dated as of
November 5, 1991. 9
(t) Transfer Agency Agreement Supplement (BEA) between Registrant and
Provident Financial Processing Corporation. 10
(u) Administration Services Agreement between Registrant and
Counsellor's Fund Services, Inc. (BEA Portfolios) dated September
18, 1992. 10
(v) Administration and Accounting Services Agreement between
Registrant and Provident Financial Processing Corporation,
relating to Tax-Free Money Market Portfolio, dated as of April
21, 1992. 10
(w) Transfer Agency Agreement Supplement (Laffer) between Registrant
and PFPC Inc. dated as of July 21, 1993. 12
(x) Administration and Accounting Services Agreement between
Registrant and PFPC Inc., relating to Laffer/Canto Equity Fund,
dated July 21, 1993. 12
xii
See
Exhibit Page Note #
(y) Transfer Agency Agreement Supplemental (BEA U.S. Core Equity, BEA
U.S. Core Fixed Income, BEA Global Fixed Income and BEA Municipal
Bond Fund) between Registrant and PFPC Inc. dated as of October
27, 1993. 15
(z) Administration and Accounting Services Agreement between
Registrant and PFPC Inc., (Core Equity) dated October 27, 1993. 15
(aa) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. (Core Fixed Income) dated October 27,
1993. 15
(bb) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. (International Fixed Income) dated
October 27, 1993. 15
(cc) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. dated October 27, 1993. 15
(dd) Transfer Agency Agreement Supplement (BEA Balanced and Short
Duration) between Registrant and PFPC Inc. dated October 26,
1994. 18
(ee) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. (BEA Balanced) dated October 26, 1994. 18
(ff) Administration and Accounting Services Agreement between
Registrant and PFPC Inc. (BEA Short Duration) dated October 26,
1994. 18
(gg) Co-Administration Agreement between Registrant and PFPC Inc.
(Warburg Pincus Growth & Income Fund) dated August 4, 1994. 18
(hh) Co-Administration Agreement between Registrant and PFPC Inc.
(Warburg Pincus Balanced Fund) dated August 4, 1994. 18
xiii
See
Exhibit Page Note #
(ii) Co-Administration Agreement between Registrant and Counsellors
Fund Service, Inc. (Warburg Pincus Growth Income Fund) dated
August 4, 1994. 18
(jj) Co-Administration Agreement between Registrant and Counsellors
Fund Service, Inc. (Warburg Pincus Balanced Fund) dated August 4,
1994. 18
(kk) Administrative Services Agreement Supplement between Registrant
and Counsellor's Fund Services, Inc. (BEA Classes) dated October
26, 1994. 18
(10) (a) Opinion of Counsel.
Incorporated by reference herein to Registrant's 24f-2 Notice for
the fiscal year ending August 31, 1994 filed on October 7, 1994.
(b) Consent of Counsel.
(11) Consent of Independent Accountants.
(12) None.
(13) (a) Subscription Agreement (relating to Classes A through N). 2
(b) Subscription Agreement between Registrant and Planco Financial
Services, Inc., relating to Classes O and P. 7
(c) Subscription Agreement between Registrant and Planco Financial
Services, Inc., relating to Class Q. 7
(d) Subscription Agreement between Registrant and Counsellors
Securities Inc. relating to Classes R, S, and Alpha 1 through
Theta 4. 9
(e) Subscription Agreement between Registrant and Counsellors
Securities Inc. relating to Classes T, U and V. 10
(f) Subscription Agreement between Registrant and Counsellors
Securities Inc. relating to Classes BB and CC. 18
xiv
See
Exhibit Page Note #
^ (g) Purchase Agreement between Registrant and Counsellors Securities
Inc. relating to Classes DD and EE. 18
(14) None.
(15) (a) Plan of Distribution (Sansom Street Money). 3
(b) Plan of Distribution (Sansom Street Tax-Free Money). 3
(c) Plan of Distribution (Sansom Street Government Money). 3
(d) Plan of Distribution (Cash Preservation Money). 3
(e) Plan of Distribution (Cash Preservation Tax-Free Money). 3
(f) Plan of Distribution (SafeGuard Equity). 3
(g) Plan of Distribution (SafeGuard Fixed Income). 3
(h) Plan of Distribution (SafeGuard Balanced). 3
(i) Plan of Distribution (SafeGuard Tax-Free). 3
(j) Plan of Distribution (SafeGuard Money). 3
(k) Plan of Distribution (SafeGuard Tax-Free Money). 3
(l) Plan of Distribution (Bedford Money). 3
(m) Plan of Distribution (Bedford Tax-Free Money). 3
(n) Plan of Distribution (Bedford Government Money). 3
(o) Plan of Distribution (Bedford New York Municipal Money). 7
(p) Plan of Distribution (SafeGuard Government Securities). 7
xv
See
Exhibit Page Note #
(q) Plan of Distribution (Income Opportunities High Yield). 7
(r) Amendment No. 1 to Plans of Distribution (Classes A through Q). 8
(s) Plan of Distribution (Bradford Tax-Free Money). 9
(t) Plan of Distribution (Bradford Government Money). 9
(u) Plan of Distribution (Alpha Money). 9
(v) Plan of Distribution (Alpha Tax-Free Money). 9
(w) Plan of Distribution (Alpha Government Money). 9
(x) Plan of Distribution (Alpha New York Money). 9
(y) Plan of Distribution (Beta Money). 9
(z) Plan of Distribution (Beta Tax-Free Money). 9
(aa) Plan of Distribution (Beta Government Money). 9
(bb) Plan of Distribution (Beta New York Money). 9
(cc) Plan of Distribution (Gamma Money). 9
(dd) Plan of Distribution (Gamma Tax-Free Money). 9
(ee) Plan of Distribution (Gamma Government Money). 9
(ff) Plan of Distribution (Gamma New York Money). 9
(gg) Plan of Distribution (Delta Money). 9
(hh) Plan of Distribution (Delta Tax-Free Money). 9
(ii) Plan of Distribution (Delta Government Money). 9
xvi
See
Exhibit Page Note #
(jj) Plan of Distribution (Delta New York Money). 9
(kk) Plan of Distribution (Epsilon Money). 9
(ll) Plan of Distribution (Epsilon Tax-Free Money). 9
(mm) Plan of Distribution (Epsilon Government Money). 9
(nn) Plan of Distribution (Epsilon New York Money). 9
(oo) Plan of Distribution (Zeta Money). 9
(pp) Plan of Distribution (Zeta Tax-Free Money). 9
(qq) Plan of Distribution (Zeta Government Money). 9
(rr) Plan of Distribution (Zeta New York Money). 9
(ss) Plan of Distribution (Eta Money). 9
(tt) Plan of Distribution (Eta Tax-Free Money). 9
(uu) Plan of Distribution (Eta Government Money). 9
(vv) Plan of Distribution (Eta New York Money). 9
(ww) Plan of Distribution (Theta Money). 9
(xx) Plan of Distribution (Theta Tax-Free Money). 9
(yy) Plan of Distribution (Theta Government Money). 9
(zz) Plan of Distribution (Theta New York Money). 9
(aaa) Plan of Distribution (Laffer Equity). 12
(bbb) Plan Distribution (Warburg Pincus Growth & Income Series 2). 18
xvii
See
Exhibit Page Note #
(ccc) Plan of Distribution (Warburg Pincus Balanced Series 2). 18
(16) Schedule of Computation of Performance Quotations. 3
(17) Representation of Ballard Spahr Andrews & Ingersoll pursuant to Rule 485(b)
under the Securities Act of 1933.
-----------------
1 Incorporated herein by reference to the same exhibit number of
Registrant's Registration Statement (No. 33-20827) filed on March 24,
1988.
2 Incorporated herein by reference to the same exhibit number of
Pre-Effective Amendment No. 2 to Registrant's Registration Statement
(No. 33-20827) filed on July 12, 1988.
3 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 1 to Registrant's Registration Statement
(No. 33-20827) filed on March 23, 1989.
4 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 2 to Registrant's Registration Statement
(No. 33-20827) filed on October 25, 1989.
5 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 3 to the Registrant's Registration
Statement (No. 33-20827) filed on April 27, 1990.
6 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 4 to the Registrant's Registration
Statement (No. 33-20827) filed on May 1, 1990.
7 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 5 to the Registrant's Registration
Statement (No. 33-20827) filed on December 14, 1990.
8 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 6 to the
xviii
Registrant's Registration Statement (No. 33-20827) filed on
October 24, 1991.
9 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 7 to the Registrant's Registration
Statement (No. 33-20827) filed on July 15, 1992.
10 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 8 to the Registrant's Registration
Statement (No. 33-20827) filed on October 22, 1992.
11 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 9 to the Registrant's Registration
Statement (No. 33-20827) filed on December 16, 1992.
12 Incorporated herein by reference to the same exhibit number of Post
Effective Amendment No. 11 to the Registration Statement (No.
33-20827) filed on June 21, 1993.
13 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 12 to Registration Statement (No.
33-20827) filed on July 27, 1993.
14 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 13 to Registration Statement (No.
33-20827 filed on October 29, 1993.
15 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 14 to Registration Statement (No.
33-20827) filed on December 21, 1993.
16 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 19 to Registration Statement (No.
33-20827) filed on October 14, 1994.
17 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 20 to Registration Statement (No.
33-20827) filed on October 21, 1994.
18 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 21 to Registration Statement (No.
33-20827) filed on October 28, 1994.
xix
19 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 22 to Registration Statement (No.
33-20827) filed on December 19, 1994.
xx
EX-1
2
Exhibit (1)(o)
THE RBB FUND, INC.
ARTICLES SUPPLEMENTARY TO THE
CHARTER
THE RBB FUND, INC., a Maryland corporation having its principal
office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: The Board of Directors of the Corporation, an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and having authorized capital of thirty billion (30,000,000,000)
shares of common stock, par value $.001 per share, has adopted a unanimous
resolution increasing the number of shares of common stock that are
classified (but not increasing the aggregate number of authorized shares)
into separate classes by:
classifying an additional six hundred ninety-nine million
(699,000,000) of the previously authorized, unissued and unclassified
shares of the common stock, par value $.001 per share, with an aggregate
par value of six hundred ninety-nine thousand dollars ($699,000), as Class
Apha 1 Common Stock (Money Market);
classifying an additional one hundred ninety-nine million
(199,000,000) of the previously authorized, unissued and unclassified
shares of the common stock,
1
par value $.001 per share, with an aggregate par value of one hundred
ninety-nine thousand dollars ($199,000), as Class Apha 2 Common Stock
(Municipal Money Market);
classifying an additional four hundred ninety-nine million
(499,000,000) of the previously authorized, unissued and unclassified
shares of the common stock, par value $.001 per share, with an aggregate
par value of four hundred ninety-nine thousand dollars ($499,000), as Class
Alpha 3 Common Stock (Government Obligations Money Market);
classifying an additional ninety-nine million (99,000,000) of the
previously authorized, unissued and unclassified shares of the common
stock, par value $.001 per share, with an aggregate par value of ninety-
nine thousand dollars ($99,000), as Class Alpha 4 Common Stock (New York
Municipal Money Market);
SECOND: A description of the shares so classified with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as set or changed by the Board of Directors of the Corporation
is as follows:
2
A description of the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions or redemption of each class of common stock of the
Corporation is set forth in Article VI, Section (6) of the Corporation's
Charter, and has not been changed by the Board of Directors of the
Corporation.
THIRD: The shares aforesaid have been duly classified by the Board
of Directors of the Corporation pursuant to authority and power contained
in the charter of the Corporation.
FOURTH: Immediately before the increase in the number of shares of
common stock that have been classified into separate classes:
(a) the Corporation had authority to issue thirty billion
(30,000,000,000) shares of its common stock and the aggregate par value of
all the shares of all classes was thirty million dollars ($30,000,000);
(b) the number of shares of each authorized class of common
stock was as follows: Class A - one hundred million (100,000,000), par
value $.001 per share; Class B - one hundred million (100,000,000), par
value $.001 per share; Class C - one hundred million (100,000,000), par
value $.001 per share; Class D - one hundred million (100,000,000), par
value $.001 per share; Class E - five hundred million (500,000,000), par
value $.001 per share; Class F - five hundred million (500,000,000), par
value $.001 per share; Class G - five hundred million (500,000,000),
3
par value $.001 per share; Class H - five hundred million (500,000,000), par
value $.001 per share; Class I - one billion (1,000,000,000), par value
$.001 per share; Class J - five hundred million (500,000,000), par value
$.001 per share; Class K - five hundred million (500,000,000), par value
$.001 per share; Class L - one billion five hundred million
(1,500,000,000), par value $.001 per share; Class M - five hundred million
(500,000,000), par value $.001 per share; Class N - five hundred million
(500,000,000), par value $.001 per share; Class O - five hundred million
(500,000,000), par value $.001 per share; Class P - one hundred million
(100,000,000), par value $.001 per share; Class Q - one hundred million
(100,000,000), par value $.001 per share; Class R - five hundred million
(500,000,000), par value $.001 per share; Class S - five hundred million
(500,000,000), par value $.001 per share; Class T - five hundred million
(500,000,000), par value $.001 per share; Class U - five hundred million
(500,000,000), par value $.001 per share; Class V - five hundred million
(500,000,000), par value $.01 per share; Class W - one hundred million
(100,000,000), par value $.001 per share; Class X - fifty million
(50,000,000), par value $.001 per share; Class Y - fifty million
(50,000,000), par value $.001 per share; Class Z - fifty million
(50,000,000), par value $.001 per share; Class AA - fifty million
(50,000,000), par value $.001 per share; Class BB - fifty million
(50,000,000), par value $.001 per share; Class CC - fifty million
(50,000,000), par value $.001 per share;
4
Class DD - one hundred million
(100,000,000), par value $.001 per share; Class EE - one hundred million
(100,000,000), par value $.001 per share; Class Alpha 1 - one million
(1,000,000), par value $.001 per share; Class Alpha 2 - one million
(1,000,000), par value $.001 per share; Class Alpha 3 - one million
(1,000,000), par value $.001 per share; Class Alpha 4 - one million
(1,000,000), par value $.001 per share; Class Beta 1 - one million
(1,000,000), par value $.001 per share; Class Beta 2 - one million
(1,000,000), par value $.001 per share; Class Beta 3 - one million
(1,000,000), par value $.001 per share; Class Beta 4 - one million
(1,000,000), par value $.001 per share; Class Gamma 1 - one million
(1,000,000), par value $.001 per share; Class Gamma 2 - one million
(1,000,000), par value $.001 per share; Class Gamma 3 - one million
(1,000,000), par value $.001 per share; Class Gamma 4 - one million
(1,000,000), par value $.001 per share; Class Delta 1 - one million
(1,000,000), par value $.001 per share; Class Delta 2 - one million
(1,000,000), par value $.001 per share; Class Delta 3 - one million
(1,000,000), par value $.001 per share; Class Delta 4 - one million
(1,000,000), par value $.001 per share; Class Epsilon 1 - five hundred
million (1,000,000), par value $.001 per share; Class Epsilon 2 - one
million (1,000,000), par value $.001 per share; Class Epsilon 3 - one
million (1,000,000), par value $.001 per share; Class Epsilon 4 - one
million (1,000,000), par value $.001 per share; Class Zeta 1 - one million
(1,000,000), par
5
value $.001 per share; Class Zeta 2 - one million
(1,000,000), par value $.001 per share; Class Zeta 3 - one million
(1,000,000), par value $.001 per share; Class Zeta 4 - one hundred million
(1,000,000), par value $.001 per share; Class Eta 1 - one million
(1,000,000), par value $.001 per share; Class Eta 2 - one million
(1,000,000) par value $.001 per share; Class Eta 3 - one million
(1,000,000), par value $.001 per share; Class Eta 4 - one million
(1,000,000), par value $.001 per share; Class Theta 1 - one million
(1,000,000), par value $.001 per share; Class Theta 2 - one million
(1,000,000), par value $.001 per share; Class Theta 3 - one million
(1,000,000), par value $.001 per share; and Class Theta 4 - one million
(1,000,000), par value $.001 per share, for a total of ten billion seven
hundred thirty-two million (10,732,000,000) shares classified into separate
classes of common stock.
After the increase in the number of shares of common stock that
have been classified into separate classes:
(c) the Corporation has the authority to issue thirty billion
(30,000,000,000) shares of its common stock and the aggregate par value of
all the shares of all classes is now thirty million dollars ($30,000,000);
and
(d) the number of authorized shares of each class is now as
follows: Class A - one hundred million (100,000,000), par value $.001 per
share; Class B - one hundred million (100,000,000), par value $.001 per
share; Class C - one hundred
6
million (100,000,000), par value $.001 per
share; Class D - one hundred million (100,000,000), par value $.001 per
share; Class E - one billion (1,000,000,000), par value $.001 per share;
Class F - five hundred million (500,000,000), par value $.001 per share;
Class G - five hundred million (500,000,000), par value $.001 per share;
Class H - five hundred million (500,000,000), par value $.001 per share;
Class I - one billion (1,000,000,000), par value $.001 per share; Class J -
five hundred million (500,000,000), par value $.001 per share; Class K -
five hundred million (500,000,000), par value $.001 per share; Class L -
one billion five hundred million (1,500,000,000), par value $.001 per
share; Class M - five hundred million (500,000,000), par value $.001 per
share; Class N - five hundred million (500,000,000), par value $.001 per
share; Class O - five hundred million (500,000,000), par value $.001 per
share; Class P - one hundred million (100,000,000), par value $.001 per
share; Class Q - one hundred million (100,000,000), par value $.001 per
share; Class R - five hundred million (500,000,000), par value $.001 per
share; Class S - five hundred million (500,000,000), par value $.001 per
share; Class T - five hundred million (500,000,000), par value $.001 per
share; Class U - five hundred million (500,000,000), par value $.001 per
share; Class V - five hundred million (500,000,000), par value $.001 per
share; Class W - one hundred million (100,000,000), par value $.001 per
share; Class X - fifty million (50,000,000), par value $.001 per share;
Class Y - fifty million
7
(50,000,000), par value $.001 per share; Class Z -
fifty million (50,000,000), par value $.001 per share; Class AA - fifty
million (50,000,000), par value $.001 per share; Class BB - fifty million
(50,000,000), par value $.001 per share; Class CC - fifty million
(50,000,000), par value $.001 per share; Class DD - one hundred million
(100,000,000), par value $.001 per share; Class EE - one hundred million
(100,000,000), par value $.001 per share; Class Alpha 1 - seven hundred
million (700,000,000), par value $.001 per share; Class Alpha 2 - two
hundred million (200,000,000), par value $.001 per share; Class Janney 3 -
five hundred million (500,000,000), par value $.001 per share; Class Alpha
4 - one hundred million (100,000,000), par value $.001 per share; Class
Beta 1 - one million (1,000,000), par value $.001 per share; Class Beta 2 -
one million (1,000,000), par value $.001 per share; Class Beta 3 - one
million (1,000,000), par value $.001 per share; Class Beta 4 - one million
(1,000,000), par value $.001 per share; Class Gamma 1 - one million
(1,000,000), par value $.001 per share; Class Gamma 2 - one million
(1,000,000), par value $.001 per share; Class Gamma 3 - one million
(1,000,000), par value $.001 per share; Class Gamma 4 - one million
(1,000,000), par value $.001 per share; Class Delta 1 - one million
(1,000,000), par value $.001 per share; Class Delta 2 - one million
(1,000,000), par value $.001 per share; Class Delta 3 - one million
(1,000,000), par value $.001 per share; Class Delta 4 - one million
(1,000,000), par value $.001 per share; Class
8
Epsilon 1 - one million
(1,000,000), par value $.001 per share; Class Epsilon 2 - one million
(1,000,000), par value $.001 per share; Class Epsilon 3 - one million
(1,000,000), par value $.001 per share; Class Epsilon 4 - one million
(1,000,000), par value $.001 per share; Class Zeta 1 - one million
(1,000,000), par value $.001 per share; Class Zeta 2 - one million
(1,000,000), par value $.001 per share; Class Zeta 3 - one million
(1,000,000), par value $.001 per share; Class Zeta 4 - one million
(1,000,000), par value $.001 per share; Class Eta 1 - one million
(1,000,000), par value $.001 per share; Class Eta 2 - one million
(1,000,000) par value $.001 per share; Class Eta 3 - one million
(1,000,000), par value $.001 per share; Class Eta 4 - one million
(1,000,000), par value $.001 per share; Class Theta 1 - one million
(1,000,000), par value $.001 per share; Class Theta 2 - one million
(1,000,000), par value $.001 per share; Class Theta 3 - one million
(1,000,000), par value $.001 per share; Class Theta 4 - one million
(1,000,000), par value $.001 per share; for a total of twelve billion two
hundred twenty-eight million (12,228,000,000) shares classified into
separate classes of common stock.
9
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to
be signed and attested in its name and on its behalf by its President and
Secretary on __________, 1995.
THE RBB FUND, INC.
ATTEST:
By:
Morgan R. Jones Edward J. Roach
Secretary President
10
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed on
behalf of said corporation the foregoing Articles Supplementary to the
Charter, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, and further certifies that, to
the best of his knowledge, information and belief, the matters and facts
set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
Edward J. Roach
President
EX-6
3
Exhibit (6)(cc)
DISTRIBUTION AGREEMENT SUPPLEMENT
(Janney)
This supplemental agreement is entered into this ___ day of
_______, 1995, by and between THE RBB FUND, INC. (the "Fund") and
COUNSELLORS SECURITIES INC. (the "Distributor").
The Fund is a corporation organized under the laws of the State of
Maryland and is an open-end management investment company. The Fund and
the Distributor have entered into a Distribution Agreement, dated of even
date herewith (as from time to time amended and supplemented, the
"Distribution Agreement"), pursuant to which the Distributor has undertaken
to act as distributor for the Fund, as more fully set forth therein.
Certain capitalized terms used without definition in this Distribution
Agreement Supplement have the meaning specified in the Distribution
Agreement.
The Fund agrees with the Distributor as follows:
1. Adoption of Distribution Agreement. The Distribution
Agreement is hereby adopted for the Janney Classes of Common Stock (Classes
Alpha 1, Alpha 2, Alpha 3 and Alpha 4) of the Fund. Each such Janney Class
shall constitute a "Class" as referred to in the Distribution Agreement and
its shares shall be "Class Shares" as referred to therein.
2. Payment of Fees. For all services to be rendered,
facilities furnished and expenses paid or assumed by the Distributor as
provided in the Distribution Agreement and herein, the Fund shall pay the
Distributor a monthly 12b-1 fee on the first business day of each month,
based upon the average daily value (as determined on each business day at
the time set forth in the Prospectus for determining net asset value per
share) of the net assets of the Class during the preceding month, at an
annual rate of .60%.
IN WITNESS WHEREOF, the undersigned have entered into this
Agreement, intending to be legally bound hereby, as of the date and year
first above written.
THE RBB FUND, INC. COUNSELLORS SECURITIES INC.
By_________________________ By_______________________
Edward J. Roach, President
EX-10
4
Exhibit (10)(b)
CONSENT
We hereby consent to the use of our name under the caption
"Miscellaneous-Counsel" in the Statement of Additional Information of Post-
Effective Amendment No. 27 to the Registration Statement on Form N-1A of
The RBB Fund, Inc. (Registration No. 33-20827) filed under the Securities
Act of 1933 and Amendment No. 29 under the Investment Company Act of 1940.
/s/ Ballard Spahr Andrews & Ingersoll
--------------------------------------
Ballard Spahr Andrews & Ingersoll
March 27, 1995
EX-11
5
Exhibit (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the following with respect to Post-Effective Amendment
No. 27 to the Registration Statement (No. 33-20827) on Form N-1A under the
Securities Act of 1933, as amended, of The RBB Fund, Inc.:
/BULLET/ The reference to our Firm under the heading
"Independent Accountants" in the
Statement of Additional Information.
/s/ Coopers & Lybrand L.L.P.
-----------------------------
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
March 27, 1995
EX-17
6
Exhibit (17)
REPRESENTATION OF COUNSEL PURSUANT TO RULE
485(b) UNDER THE SECURITIES ACT OF 1933
We hereby represent that Post-Effective Amendment No. 27 to the
Registration Statement on Form N-1A of The RBB Fund, Inc. (Registration
No. 33-20827) filed with the Securities and Exchange Commission under the
Securities Act of 1933 and the Investment Company Act of 1940 contains no
disclosures which would render it ineligible to become effective pursuant
to paragraph (b) of Rule 485 under the Securities Act of 1933.
/s/ Ballard Spahr Andrews & Ingersoll
--------------------------------------
Ballard Spahr Andrews & Ingersoll
March 27, 1995