-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VryHSSYFU4afrz9JkJ6aE8FhVcjUEBxorBWBI9G8aHJH/O99axizEJyzoonbc3vV 5htzSdUs60OcxHRjcdQPcA== 0001036050-99-000141.txt : 19990204 0001036050-99-000141.hdr.sgml : 19990204 ACCESSION NUMBER: 0001036050-99-000141 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 39 FILED AS OF DATE: 19990202 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEMPORARY INVESTMENT FUND INC CENTRAL INDEX KEY: 0000097098 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 520983343 STATE OF INCORPORATION: MD FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 002-47015 FILM NUMBER: 99519743 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-02354 FILM NUMBER: 99519744 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PKWY STE 152 CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027912919 MAIL ADDRESS: STREET 1: 400 BELLEVUE PARKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 485APOS 1 FORM N-1A REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on February 2, 1999 1933 Act Registration No. 2-47015 1940 Act Registration No. 811-2354 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X] POST-EFFECTIVE AMENDMENT NO. 61 and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] ___________ PROVIDENT INSTITUTIONAL FUNDS (Exact Name of Registrant As Specified In Charter) Bellevue Park Corporate Center 400 Bellevue Parkway Wilmington, Delaware 19809 (Address of Principal Executive Offices) Registrant's Telephone Number: (302) 791-3329 W. BRUCE McCONNEL, III Drinker Biddle & Reath LLP Philadelphia National Bank Building 1345 Chestnut Street Philadelphia, Pennsylvania 19107-3496 (Name and Address of Agent for Service) Pursuant to Rule 414 of the Securities Act of 1933, Registrant by this filing adopts the Registration Statement on Form N-1A (File Nos. 2-47015/811-2354) of Temporary Investment Fund Inc., the Registrant's predecessor, as its own Registration Statement for all purposes of the Securities Act of 1933 and the Investment Company Act of 1940. It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [ ] on (date) pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(i) [ ] on (date) pursuant to paragraph (a)(i) [ ] 75 days after filing pursuant to paragraph (a)(ii) [X] on February 10, 1999 pursuant to paragraph (a)(ii) of Rule 485 If appropriate, check the following box: [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities Being Registered: Shares of Beneficial Interest ================================================================================ TEMPFUND AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS PROSPECTUS February __, 1999 Bellevue Park Corporate Center For purchase and redemption orders only call: 400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350). For Wilmington, DE 19809 yield information call: 800-821-6006 (TempFund Shares code: 34; TempFund Dollar Shares code: 20). For other information call: 800-821-7432 or visit our web site at www.pif.com. INVESTMENT ADVISER BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE. Table of Contents ______________________________________________________________
Page ---- RISK/RETURN SUMMARY........................................................ 3 Investment Goal.......................................................... 3 Investment Policies...................................................... 3 Principal Risks of Investing............................................. 3 Who May Want to Invest in the Fund....................................... 3 Performance Information.................................................. 4 Fees and Expenses........................................................ 6 INVESTMENT STRATEGIES AND RISK DISCLOSURE.................................. 7 MANAGEMENT OF THE FUND..................................................... 10 SHAREHOLDER INFORMATION.................................................... 11 Price of Fund Shares..................................................... 11 Purchase of Shares....................................................... 11 Redemption of Shares..................................................... 12 Distribution and Shareholder Service Plans............................... 13 Dividends and Distributions.............................................. 14 Taxes.................................................................... 14 FINANCIAL HIGHLIGHTS....................................................... 15
2 Risk/Return Summary ____________________________________________________________ Investment The Fund seeks current income with liquidity and stability Goal: of principal. Investment The Fund invests in a broad range of money market Policies: instruments, including government, bank, and commercial obligations and repurchase agreements relating to such obligations. Principal Risks Although the Fund invests in money market instruments which of Investing: the investment adviser, BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") believes present minimal credit risks at the time of purchase, there is a risk that an issuer may not be able to make principal and interest payments when due. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is also subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. Who May Want to The Fund is designed for institutional investors seeking Invest in the current income and stability of principal. The Fund is Fund: particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. 3 Performance Information The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future. TempFund vs. IBC's Money Fund Report: First Tier Institutions - Only Money Fund Average IBC's Money Fund Report: First Tier Institutions - Only TempFund Shares Money Fund Average 1989 9.39 9.20 1990 8.27 8.10 1991 6.24 6.09 1992 3.89 3.72 1993 3.12 3.00 1994 4.19 4.07 1995 5.99 5.79 1996 5.42 5.22 1997 5.60 5.39 1998 5.52 5.33 During the ten-year period shown in the bar chart, the highest quarterly return was 9.89% (for the quarter ended June 30, 1989) and the lowest quarterly return was 3.08% (for the quarter ended June 30, 1993). 4 The Fund's Average Annual Total Return for Periods Ended December 31, 1998 - --------------------------------------------------------------------------------
1 5 10 Year Years Years ----- ----- ----- TempFund Shares............................................ 5.52% 5.24% 5.70% TempFund Dollar Shares..................................... 5.27% 4.99% 5.45% IBC's Money Fund Report: First Tier Institutions--Only Money Fund Average*....................................... 5.33% 5.16% 5.67% - -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
7 Day Yield as of December 31, 1998 ----------------- TempFund Shares............................................ 5.01% TempFund Dollar Shares..................................... 4.76% IBC's Money Fund Report: First Tier Institutions--Only Money Fund Average*....................................... 4.87% - -------------------------------------------------------------------------------
Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management Shares have not yet commenced operations, therefore no performance information has been provided for these classes. Current Yield: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its web site at www.pif.com. - ------- * IBC's Money Fund Report: First Tier Institutions--Only Money Fund Average is comprised of money funds investing in first tier eligible money market instruments. 5 Fees and Expenses This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) - --------------------------------------------------------------------------------------------- TempFund -------- TempFund TempFund TempFund TempFund TempFund Cash Cash TempFund Administration Dollar Plus Reserve Management Shares Shares Shares Shares Shares Shares -------- -------------- -------- ----------- ----------- ----------- (estimated) (estimated) (estimated) (estimated) Management Fees......... .11% .11% .11% .11% .11% .11% Distribution (12b-1) Fees................... -- -- -- .25% -- -- Other Expenses.......... .12% .22% .37% .12% .52% .62% Administration Fees..... .11% .11% .11% .11% .11% .11% Shareholder Servicing Fees................... -- -- .25% -- .25% .25% Miscellaneous........... .01% .11% .01% .01% .16% .26% - --------------------------------------------------------------------------------------------- Total Annual Fund Operating Expenses(1).. .23% .33% .48% .48% .63% .73% - ---------------------------------------------------------------------------------------------
(1) Total Annual Fund Operating Expenses for TempFund Shares and TempFund Dollar Shares for the fiscal year ended September 30, 1998, with fee waivers, were .18% and .43%, respectively, of the Fund's average net assets. Total Annual Fund Operating Expenses for TempFund Administration Shares, TempFund Plus Shares, TempFund Cash Reserve Shares and TempFund Cash Management Shares for the fiscal year ended September 30, 1998, with fee waivers, would have been .28% (estimated), .43% (estimated), .58% (estimated) and .68% (estimated), respectively, of the Fund's average net assets. The Adviser and PFPC Inc., the Fund's co-administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers, but can terminate the waivers upon 120 days prior written notice to the Fund. EXAMPLE - -------------------------------------------------------------------------------- This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
TempFund -------- TempFund TempFund TempFund TempFund Cash Cash Administration TempFund Plus Reserve Management TempFund Shares Dollar Shares Shares Shares Shares (estimated) Shares (estimated) (estimated) (estimated) -------- -------------- -------- ----------- ----------- ----------- One Year................ $ 24 $ 34 $ 49 $ 49 $ 64 $ 75 Three Years............. $ 74 $106 $154 $154 $202 $233 Five Years.............. $130 $185 $269 $269 $351 $406 Ten Years............... $293 $418 $604 $604 $786 $906 - ---------------------------------------------------------------------------------------------
6 Investment Strategies and Risk Disclosure ________________________________________________________________ The Fund is a money market fund. The investment objective of the Fund is to seek current income and stability of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests in a broad range of money market instruments, including government, bank, and commercial obligations and repurchase agreements relating to such obligations. The Fund invests in securities maturing within 13 months or less from the date of purchase, with certain exceptions. For example, certain government securities held by the Fund may have remaining maturities exceeding 13 months if such securities provide for adjustments in their interest rates not less frequently than every 13 months. The securities purchased by the Fund are also subject to the quality, diversification, and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the Securities and Exchange Commission. Pursuant to Rule 2a-7, the Fund will generally limit its purchases of any one issuer's securities (other than U.S. Government obligations, repurchase agreements collateralized by such securities and securities subject to certain guarantees or otherwise providing a right to demand payment) to 5% of the Fund's total assets, except that up to 25% of its total assets may be invested in securities of one issuer for a period of up to three business days; provided that the Fund may not invest more than 25% of its total assets in the securities of more than one issuer in accordance with the foregoing at any one time. The Fund will only purchase securities that present minimal credit risk as determined by the Adviser pursuant to guidelines approved by the Board of Trustees of Provident Institutional Funds. Securities purchased by the Fund (or the issuers of such securities) will be First Tier Eligible Securities which are rated at the time of purchase in the highest rating category by either Standard & Poor's Ratings Group or Moody's Investors Services, Inc., and will be rated in the highest rating category by any other nationally recognized statistical rating organization ( a "NRSRO") that rates such security (or its issuer). - -------------------------------------------------------------------------------- Investments The Fund's investments may include the following: U.S. Government The Fund may purchase obligations issued or guaranteed by Obligations the U.S. Government or its agencies and instrumentalities and related custodial receipts. 7 Bank Obligations The Fund may purchase obligations of issuers in the banking industry, such as bank holding company obligations, certificates of deposit, bankers' acceptances and bank notes issued or supported by the credit of domestic banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Fund may also make interest-bearing savings deposits in domestic commercial and savings banks in amounts not in excess of 5% of the Fund's assets. Commercial Paper The Fund may invest in commercial paper, short-term notes and corporate bonds of domestic corporations that meet the Fund's quality and maturity requirements. Asset-Backed The Fund may invest in asset-backed securities which are Obligations backed by mortgages, installment sales contracts, credit card receivables or other assets. Investment The Fund may invest in securities issued by other open-end Company investment companies that invest in the type of obligations Securities in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. Municipal The Fund may, when deemed appropriate by the Adviser in Obligations light of the Fund's investment objective, invest in high quality, short-term obligations issued by state and local governmental issuers which carry yields that are competitive with those of other types of money market instruments of comparable quality. Variable and The Fund may purchase variable or floating rate notes, which Floating Rate are instruments that provide for adjustments in the interest Instruments rate on certain reset dates or whenever a specified interest rate index changes, respectively. Repurchase The Fund may enter into repurchase agreements. Agreements Reverse The Fund may enter into reverse repurchase agreements. The Repurchase Fund is permitted to invest up to one-third of its total Agreements and assets in reverse repurchase agreements. The Fund may also Securities lend its securities with a value of up to one-third of its Lending total assets (including the value of the collateral for the loan) to qualified brokers, dealers, banks and other financial institutions for the purpose of realizing additional net investment income through the receipt of interest on the loan. Investments in reverse repurchase agreements and securities lending transactions will be aggregated for purposes of this investment limitation. 8 When-Issued and The Fund may purchase securities on a "when-issued" or Delayed "delayed settlement" basis. The Fund expects that Settlement commitments to purchase when-issued or delayed settlement Transactions securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. Illiquid The Fund will not invest more than 10% of the value of its Securities total assets in illiquid securities, including time deposits and repurchase agreements having maturities longer than seven days. Securities that have readily available market quotations are not deemed illiquid for purposes of this limitation. Other Types of This Prospectus describes the Fund's principal investment Investments strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies in support of its overall investment goal. Any other types of investments will comply with the Fund's quality and maturity guidelines. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. Risk Factors The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. Interest Rate Generally, a fixed-income security will increase in value Risk when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. Government securities are generally considered to be the safest type of investment in terms of credit risk, with municipal obligations and corporate debt securities presenting somewhat higher credit risk. Credit quality ratings published by an NRSRO are widely accepted measures of credit risk. The lower a security is rated by an NRSRO, the more credit risk it is considered to represent. Other Risks Certain investment strategies employed by the Fund may involve additional investment risk. Liquidity risk involves certain securities which may be difficult or impossible to sell at the time and the price that the Fund would like. Reverse repurchase agreements, securities lending transactions and when-issued or delayed 9 delivery transactions may involve leverage risk. Leverage risk is associated with securities or practices that multiply small market movements into larger changes in the value of the Fund's investment portfolio. The Fund does not currently intend to employ investment strategies that involve leverage risk. Year 2000 Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are actively taking steps to address the Year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other major service providers. While there can be no assurance that the Fund's service providers will be Year 2000 compliant, the Fund's service providers expect that their plans to be compliant will be achieved. Management of the Fund _________________________________________________________ Investment The Adviser, a wholly-owned indirect subsidiary of PNC Bank, Adviser serves as the Fund's investment adviser. The Adviser and its affiliates are one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended September 30, 1998, the Fund paid investment advisory fees and administration fees each aggregating .08% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these services are described further in the Statement of Additional Information under "Management of the Funds." 10 Shareholder Information ________________________________________________________ Price of Fund The Fund's net asset value per share for purposes of pricing Shares purchase and redemption orders is determined by PFPC Inc. ("PFPC"), the Funds co-administrator, as of 12:00 noon and 5:30 P.M., Eastern time, on each day on which both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. Purchase of Fund shares are sold at the net asset value per share next Shares determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441-7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted before 12:00 noon, Eastern time, for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and before 5:30 P.M., Eastern time (or orders accepted earlier in the same day for which payment has not been received by 12:00 noon), will be executed at 5:30 P.M., Eastern time, if payment has been received by PNC Bank by that time. Orders received at other times, and orders for which payment has not been received by 5:30 P.M., Eastern time, will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) Between 3:00 P.M. and 5:30 P.M., Eastern time, purchase orders may only be transmitted by telephone, and the Fund reserves the right to limit the amount of such orders. The Fund may in its discretion reject any order for shares. Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $3 million for TempFund Shares; there is no minimum initial investment for TempFund Administration Shares, TempFund Dollar Shares, TempFund Plus Shares, TempFund Cash Reserve Shares or TempFund Cash Management Shares, however, 11 broker-dealers and other institutional investors may set a minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may reduce the minimum initial investment for TempFund Shares for specific institutions whose aggregate relationship with the Provident Institutional Funds is substantially equivalent to this $3 million minimum and warrants this reduction. Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in TempFund Administration Shares, TempFund Dollar Shares, TempFund Plus Shares, TempFund Cash Reserve Shares or TempFund Cash Management Shares. (See also "Management of the Fund--Service Organizations," as described in the Statement of Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in TempFund Administration Shares, TempFund Dollar Shares, TempFund Plus Shares, TempFund Cash Reserve Shares or TempFund Cash Management Shares. (See also "Management of the Fund-- Banking Laws," as described in the Statement of Additional Information). Redemption of Redemption orders must be transmitted to PFPC in Wilmington, Shares Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. Telephone instructions for redemptions received between 3:00 P.M. and 5:30 P.M., Eastern time, on a Business Day are received for execution on that same day, however, the Fund reserves the right to make payment for such redemptions the next Business Day. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. Call 1- 800-441-7450 (in Delaware: 302-791-5350) to place redemption orders. 12 Payment for redeemed shares for which a redemption order is received by PFPC by 5:30 P.M., Eastern time, on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received on a day when PNC Bank is closed is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. The Fund shall have the right to redeem shares in any account if the value of the account is less than $1,000 after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its account to $1,000 or more, no such redemption shall take place. In addition, the Fund may also redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Distribution The Fund offers six classes of shares. The difference and Shareholder between the classes of shares is the fees borne by a class Service Plans of shares pursuant to separate fees plans adopted by each class. TempFund Shares do not bear any fees for distribution, servicing, shareholder servicing, sweep fees or cash sweep marketing services. The fees borne by the other classes are as follows:
------------------------------------------------------------------------- Cash Shareholder Cash Sweep Service Service 12b-1 Sweep Marketing Total Class Fee Fee Fee Fee Fee Fees ------------------------ ------- ----------- ----- ----- --------- ----- Administration Shares... .10% -- -- -- -- .10% Dollar Shares........... -- .25% -- -- -- .25% Plus Shares............. -- -- .25% -- -- .25% Cash Reserve Shares..... .10% .25% -- .05% -- .40% Cash Management Shares.. .10% .25% -- .05% .10% .50% -------------------------------------------------------------------------
Service Fees are paid for general shareholder liaison services. Shareholder Service Fees are paid for services relating to the processing and administration of shareholder accounts. The Fund has adopted a plan pursuant to Rule 12b- 1. 12b-1 Fees are paid for distribution and sales support, and shareholder services. Cash Sweep Fees are paid for distribution and sales support, and shareholder services. Cash Sweep Fees are paid for providing a sweep service into the Fund. Cash Sweep Marketing Fees are paid for providing marketing administrative activities in connection with the sweep program. Shares of the Fund are not sold to individuals, but may be sold to the following entities, which hold the shares for the accounts of their customers. 13 Administration Shares, Dollar Shares, Cash Reserve Shares and Cash Management Shares are sold to institutional investors such as banks, saving and loan associations, and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"). Plus Shares are sold to broker-dealers. Because fees associated with the distribution and/or shareholder service plans are paid out of the Fund's assets on an outgoing basis, over time holders of the share classes described above may pay more than the economic equivalent of the maximum front-end sales charge permitted by NASD Regulation, Inc. Dividends and The Fund declares dividends daily and distributes Distributions substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. Taxes The Fund's distributions will generally be taxable to shareholders. The Fund expects that all, or substantially all, of its distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal tax treatment. Dividends declared in December of any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. 14 Financial Highlights ___________________________________________________________ The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management Shares of the Fund have not yet commenced operations, therefore no financial information has been provided for these classes. TempFund Shares The table below sets forth selected financial data for a TempFund Share outstanding throughout each year presented.
Year Ended September 30, --------------------------------------------------------------------- 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ------------------------------------------------------------------------------------------------- Income from Investment Operations Net Investment Income (.0549) .0539 .0541 .0567 .0360 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- - ------------------------------------------------------------------------------------------------- Total From Investment Operations .0549 .0539 .0541 .0567 .0360 - ------------------------------------------------------------------------------------------------- Less Distributions Dividends (from net investment income) (.0549) (.0539) (.0541) (.0567) (.0360) Distributions (from capital gains) -- -- -- -- -- - ------------------------------------------------------------------------------------------------- Total Distributions (0.549) (.0539) (.0541) (.0567) (.0360) - ------------------------------------------------------------------------------------------------- Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Total Return 5.63% 5.53% 5.55% 5.82% 3.66% - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- Ratios/Supplement Data Net Assets, End of Year (000's) $9,686,491 $8,060,501 $5,715,004 $5,351,346 $4,480,851 Ratio of Expenses to Average Daily Net Assets .18%(1) .18%(1) .18%(1) .24%(1) .25%(1) Ratio of Net Investment Income to Average Daily Net Assets 5.50% 5.39% 5.41% 5.67% 3.60% - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
(1) Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for TempFund Shares would have been .23% for the year ended September 30, 1998, .24% for the year ended September 30, 1997, .26% for the year ended September 30, 1996 and .27% for the years ended September 30, 1995 and 1994, respectively. 15 Financial Highlights (Continued) _______________________________________________ TempFund Dollar Shares The table below sets forth selected financial data for a TempFund Dollar Share outstanding throughout each year presented.
Year Ended September 30, ---------------------------------------------------------- 1998 1997 1996 1995 1994 - ----------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ----------------------------------------------------------------------------------- Income from Investment Operations Net Investment Income .0524 .0514 .0516 .0542 .0335 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- - ----------------------------------------------------------------------------------- Total From Investment Operations .0524 .0514 .0516 .0542 .0335 - ----------------------------------------------------------------------------------- Less Distributions Dividends (from net investment income) (.0524) (.0514) (.0516) (.0542) (.0335) Distributions (from capital gains) -- -- -- -- -- - ----------------------------------------------------------------------------------- Total Distributions (.0524) (.0514) (.0516) (.0542) (.0335) - ----------------------------------------------------------------------------------- Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Total Return 5.38% 5.27% 5.30% 5.57% 3.41% - ----------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------- Ratios/Supplement Data Net Assets, End of Year (000's) $302,476 $355,284 $162,119 $81,828 $102,105 Ratio of Expenses to Average Daily Net Assets .43%(1) .43%(1) .43%(1) .49%(1) .50%(1) Ratio of Net Investment Income to Average Daily Net Assets 5.25% 5.14% 5.16% 5.42% 3.35% - ----------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------
(1) Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for TempFund Dollar Shares would have been .48% for the year ended September 30, 1998, .49% for the year ended September 30, 1997, .51% for the year ended September 30, 1996 and .52% for the years ended September 30, 1995 and 1994, respectively. 16 Where to Find More Information _________________________________________________ The Statement of Additional Information ("the SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354 TEMPCASH AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS. PROSPECTUS February __, 1999 Bellevue Park Corporate Center For purchase and redemption orders only 400 Bellevue Parkway call: 800-441-7450 (in Delaware: Wilmington, DE 19809 302-791-5350). For yield information call: 800-821-6006 (TempCash Shares code: 21; TempCash Dollar Shares code: 23). For other information call: 800-821-7432 or visit our web site at www.pif.com. INVESTMENT ADVISER BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE. TABLE OF CONTENTS -----------------
PAGE ---- RISK/RETURN SUMMARY...................................................... Investment Goal..................................................... Investment Policies................................................. Principal Risks of Investing........................................ Who May Want to Invest in the Fund.................................. Performance Information............................................. Fees and Expenses................................................... INVESTMENT STRATEGIES AND RISK DISCLOSURE................................ MANAGEMENT OF THE FUND................................................... SHAREHOLDER INFORMATION.................................................. Price of Fund Shares................................................ Purchase of Shares.................................................. Redemption of Shares................................................ Shareholder Service Plan............................................ Dividends and Distributions......................................... Taxes............................................................... FINANCIAL HIGHLIGHTS.....................................................
-2- RISK/RETURN SUMMARY INVESTMENT GOAL: The Fund seeks current income with liquidity and stability of principal. INVESTMENT POLICIES: The Fund invests in a broad range of money market instruments, including government, U.S. and foreign bank and commercial obligations and repurchase agreements relating to such obligations. Under normal market conditions, at least 25% of the Fund's total assets will be invested in obligations of issuers in the financial services industry and repurchase agreements relating to such obligations. PRINCIPAL RISKS OF INVESTING: Although the Fund invests in money market instruments which the investment adviser, BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") believes present minimal credit risks at the time of purchase, there is a risk that an issuer may not be able to make principal and interest payments when due. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is also subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. Because of its concentration in the financial services industry, the Fund will be exposed to the risks associated with that industry, such as government regulation, the availability and cost of capital funds, and general economic conditions. In addition, securities issued by foreign entities, including foreign banks and corporations may involve additional risks. Examples of these risks are the lack of available public information about the foreign issuer, and international economic or -3- political developments which could affect the payment of principal and interest when due. An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. WHO MAY WANT TO INVEST The Fund is designed for institutional investors IN THE FUND: seeking current income and stability of principal. The Fund is particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. PERFORMANCE INFORMATION The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future. TempCash vs. IBC's Money Fund Report: First Tier Institutions- Only Money Fund Average
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Money Fund Report: TempCash Shares 9.56 8.42 6.27 3.83 3.15 4.30 6.02 5.44 5.62 5.55 IBC's Money Fund Report: First Tier Institutions- Only Money Fund Average 9.20 8.10 6.09 3.72 3.00 4.07 5.79 5.22 5.39 5.33
During the ten-year period shown in the bar chart, the highest quarterly return was 10.15% (for the quarter ended June 30, 1989) and the lowest quarterly return was 3.07% (for the quarter ended March 31, 1993). -4- THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998
- -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------- TEMPCASH SHARES 5.55% 5.29% 5.74% - -------------------------------------------------------------------------------- TEMPCASH DOLLAR SHARES 5.30% 5.04% 5.49% - -------------------------------------------------------------------------------- IBC'S MONEY FUND REPORT: FIRST TIER INSTITUTIONS - ONLY MONEY FUND AVERAGE* - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 7 DAY YIELD AS OF DECEMBER 31, 1998 - -------------------------------------------------------------------------------- TEMPCASH SHARES 5.05% - -------------------------------------------------------------------------------- TEMPCASH DOLLAR SHARES 4.80% - -------------------------------------------------------------------------------- IBC'S MONEY FUND REPORT: FIRST TIER INSTITUTIONS - ONLY MONEY FUND AVERAGE* 4.87% - --------------------------------------------------------------------------------
CURRENT YIELD: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its web site at www.pif.com. - ----------------------- * IBC'S MONEY FUND REPORT: New York State Specific Tax-free Institutions - only Money Fund Average is comprised of money investing in Tax-Exempt obligations of New York State. -5- FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund
TEMPCASH - -------------------------------------------------------------------------------- TEMPCASH TEMPCASH SHARES DOLLAR SHARES -------------- ------------- ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .15% .15% Other Expenses .17% .42% Administration Fees .15% .15% Shareholder Servicing Fees -- % .25% Miscellaneous .02% .02% Total Annual Fund Operating Expenses(1) .32% .57% ==== ====
- -------------------------------------------------------------------------------- (1) Total Annual Fund Operating Expenses for TempCash Shares and TempCash Dollar Shares for the fiscal year ended September 30, 1998, with fee waivers, would have been .18% and .43%, respectively, of the Fund's average net assets. The Adviser and PFPC Inc., the Fund's co-administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers, but can terminate the waivers upon 120 days prior written notice to the Fund. -6- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
TEMPCASH - ----------------------------------------------------------- TEMPCASH TEMPCASH SHARES DOLLAR SHARES - ----------------------------------------------------------- One Year $ 33 $ 58 Three years $103 $183 Five Years $180 $318 Ten Years $406 $714 - -----------------------------------------------------------
-7- INVESTMENT STRATEGIES AND RISK DISCLOSURE The Fund is a money market fund. The investment objective of the Fund is to seek current income and stability of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests in a broad range of money market instruments, including government, U.S. and foreign bank and commercial obligations and repurchase agreements relating to such obligations. At least 25% of the Fund's total assets will be invested in obligations of issuers in the financial services industry and repurchase agreements relating to such obligations, unless the Fund is in a temporary defensive position. The Fund invests in securities maturing within 13 months or less from the date of purchase, with certain exceptions. For example, certain government securities held by the Fund may have remaining maturities exceeding 13 months if such securities provide for adjustments in their interest rates not less frequently than every 13 months. The securities purchased by the Fund are also subject to the quality, diversification, and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the Securities and Exchange Commission. Pursuant to Rule 2a-7, the Fund generally will limit its purchases of any one issuer's securities (other than U.S. Government obligations, repurchase agreements collateralized by such securities and securities subject to certain guarantees or otherwise providing a right to demand payment) to 5% of the Fund's total assets, except that up to 25% of its total assets may be invested in securities of one issuer for a period of up to three business days; provided that the Fund may not invest more than 25% of its total assets in the securities of more than one issuer in accordance with the foregoing at any one time. The Fund will only purchase securities that present minimal credit risk as determined by the Adviser pursuant to guidelines approved by the Board of Trustees of Provident Institutional Funds. Securities purchased by the Fund (or the issuers of such securities) will be First Tier Eligible Securities. First Tier Eligible Securities are: . securities that have ratings at the time of purchase (or which are guaranteed or in some cases otherwise supported by guarantees or other credit supports with such ratings) in the highest rating category by at least two unaffiliated nationally recognized statistical rating organizations ("NRSROs"), or one NRSRO, if the security or guarantee was only rated by one NRSRO; . securities that are issued or guaranteed by a person with such ratings; . securities without such short-term ratings that have been determined to be of comparable quality by the Adviser pursuant to guidelines approved by the Board of Trustees; . securities issued or guaranteed as to principal or interest by the U.S. Government or any of its agencies or instrumentalities; or . securities issued by other open-end investment Companies that invest in the type of obligations in which the Fund may invest. Investments. The Fund's investments may include the following: U.S. Government Obligations. The Fund may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities and related custodial receipts. -8- Bank Obligations. The Fund may purchase obligations of issuers in the banking industry, such as bank holding company obligations and certificates of deposit, bankers' acceptances, bank notes and time deposits, including U.S. dollar-denominated instruments issued or supported by the credit of U.S. or foreign banks or savings institutions having total assets at the time of purchase in excess of $1 billion. The Fund may invest substantially in obligations of foreign banks or foreign branches of U.S. banks where the Adviser deems the instrument to present minimal credit risks. The Fund may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of its assets. Commercial Paper. The Fund may invest in commercial paper and short-term notes and corporate bonds that meet the Fund's quality and maturity restrictions. Commercial paper purchased by the Fund may include instruments issued by foreign issuers, such as Canadian Commercial Paper, which is U.S. dollar-denominated commercial paper issued by a Canadian corporation or a Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S. dollar-denominated commercial paper of a foreign issuer. Asset-Backed Obligations. The Fund may invest in asset-backed securities which are backed by mortgages, installment sales contracts, credit card receivables or other assets and collateralized mortgage obligations ("CMOs") issued or guaranteed by U.S. Government agencies and instrumentalities or issued by private companies. Purchasable mortgage-related securities also include adjustable rate securities. The Fund currently intends to hold CMOs only as collateral for repurchase agreements. Investment Company Securities. The Fund may invest in securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. Municipal Obligations. The Fund may, when deemed appropriate by the Adviser in light of the Fund's investment objective, invest in high quality, short-term obligations issued by state and local governmental issuers which carry yields that are competitive with those of other types of money market instruments of comparable quality. Guaranteed Investment Contracts. The Fund may make investments in obligations, such as guaranteed investment contracts and similar funding agreements (collectively "GICs"), issued by highly rated U.S. insurance companies. GIC investments that do not provide for payment within seven days after notice are subject to the Fund's policy regarding investments in illiquid securities. Variable and Floating Rate Instruments. The Fund may purchase variable or floating rate notes, which are instruments that provide for adjustments in the interest rate on certain reset dates or whenever a specified interest rate index changes, respectively. Repurchase Agreements. The Fund may enter into repurchase agreements. -9- Reverse Repurchase Agreements and Securities Lending. The Fund may enter into reverse repurchase agreements. The Fund is permitted to invest up to one- third of its total assets in reverse repurchase agreements. The Fund may also lend its securities with a value of up to one-third of its total assets (including the value of the collateral for the loan) to qualified brokers, dealers, banks and other financial institutions for the purpose of realizing additional net investment income through the receipt of interest on the loan. Investments in reverse repurchase agreements and securities lending transactions will be aggregated for purposes of this investment limitation. When-Issued and Delayed Settlement Transactions. The Fund may purchase securities on a "when-issued" or "delayed settlement" basis. The Fund expects that commitments to purchase when-issued or delayed settlement securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. Illiquid Securities. The Fund will not invest more than 10% of the value of its total assets in illiquid securities, including time deposits and repurchase agreements having maturities longer than seven days. Securities that have readily available market quotations are not deemed illiquid for purposes of this limitation. Other Types of Investments. This Prospectus describes the Fund's principal investment strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies in support of its overall investment goal. Any other types of investments will comply with the Fund's quality and maturity guidelines. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. RISK FACTORS. The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. Interest Rate Risk. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk. The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. Government securities are generally considered to be the safest type of investment in terms of credit risk, with municipal obligations and corporate debt securities presenting somewhat higher credit risk. Credit quality ratings published by an NRSRO are widely accepted measures of credit risk. The lower a security is rated by an NRSRO, the more credit risk it is considered to represent. Other Risks. Certain investment strategies employed by the Fund may involve additional investment risk. Liquidity risk involves certain securities which may be difficult or impossible to sell at the time and the price that the Fund would like. Reverse repurchase agreements, securities lending transactions and when- issued or delayed delivery transactions may involve leverage risk. -10- Leverage risk is associated with securities or practices that multiply small market movements into larger changes in the value of the Fund's investment portfolio. The fund does not currently intend to employ investment strategies that involve leverage risk. Concentration. The Fund intends to concentrate more than 25% of its total assets in the obligations of issuers in the financial services industry and repurchase agreements relating to such obligations. Because the Fund concentrates its assets in the financial services industry it will be exposed to the risks associated with that industry, such as government regulation, the availability and cost of capital funds, and general economic conditions. Foreign Exposure. Securities issued by foreign entities, including foreign banks and corporations, may involve additional risks and considerations. Extensive public information about the foreign issuer may not be available, and unfavorable political, economic or governmental developments in the foreign country involved could affect the payment of principal and interest. Year 2000. Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are actively taking steps to address the Year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other major service providers. While there can be no assurance that the Fund's service providers will be Year 2000 compliant, the Fund's service providers expect that their plans to be compliant will be achieved. MANAGEMENT OF THE FUND INVESTMENT ADVISER The Adviser, a wholly-owned indirect subsidiary of PNC Bank, serves as the Fund's investment adviser. The Adviser and its affiliates are one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended September 30, 1998, the Fund paid investment advisory fees and administration fees each aggregating .08% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these -11- services are described further in the Statement of Additional Information under "Management of the Funds." SHAREHOLDER INFORMATION PRICE OF FUND SHARES The Fund's net asset value per share for purposes of pricing purchase and redemption orders is determined by PFPC Inc. ("PFPC"), the Funds co- administrator, as of 12:00 noon and 4:00 P.M., Eastern time, on each day on which both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. PURCHASE OF SHARES Fund shares are sold at the net asset value per share next determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441- 7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted before 12:00 noon, Eastern time, for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and before 3:00 P.M., Eastern time (or orders accepted earlier in the same day for which payment has not been received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been received by PNC Bank by that time. Orders received at other times, and orders for which payment has not been received by 4:00 P.M., Eastern time, will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) The Fund may in its discretion reject any order for shares. Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $3 million for TempCash Shares and $5,000 for TempCash Dollar Shares; however, broker-dealers and other institutional investors may set a higher minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may reduce the minimum initial investment for TempCash Shares for specific institutions whose aggregate relationship with the Provident Institutional Funds is substantially equivalent to this $3 million minimum and warrants this reduction. -12- Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in TempCash Dollar Shares. (See also "Management of the Fund -- Service Organizations," as described in the Statement of Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in TempCash Dollar Shares. (See also "Management of the Fund -- Banking Laws," as described in the Statement of Additional Information.) REDEMPTION OF SHARES Redemption orders must be transmitted to PFPC in Wilmington, Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. Call 1-800-441-7450 (in Delaware: 302-791- 5350) to place redemption orders. Payment for redeemed shares for which a redemption order is received by PFPC by 3:00 P.M., Eastern time, on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received between 3:00 P.M. and 4:00 P.M., Eastern time, or on a day when PNC Bank is closed, is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. The Fund shall have the right to redeem shares in any TempCash Shares account if the value of the account is less than $100,000, and in any TempCash Dollar Shares account if the value of the account is less than $1,000, after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its TempCash Shares account to $100,000 or more or its TempCash Dollar Shares account to $1,000 or more, no such redemption shall take place. In addition, the Fund may also redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." -13- SHAREHOLDER SERVICE PLAN Institutional investors, such as banks, savings and loan associations and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"), may purchase Dollar Shares. TempCash Dollar Shares are identical in all respects to TempCash Shares except that they bear the service fees described below and enjoy certain exclusive voting rights on matters relating to these fees. The Fund will enter into an agreement with each Service Organization which purchases Dollar Shares requiring it to provide support services to its customers who are the beneficial owners of such shares in consideration of the Fund's payment of .25% (on an annualized basis) of the average daily net asset value of the Dollar Shares held by the Service Organization for the benefit of customers. Such services, which are described more fully in the Statement of Additional Information under "Management of the Fund Service Organizations," include aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with PFPC; processing dividend payments from the Fund on behalf of customers; providing information periodically to customers showing their positions in Dollar Shares; and providing sub-accounting or the information necessary for sub-accounting with respect to Dollar Shares beneficially owned by customers. Under the terms of the agreements, Service Organizations are required to provide to their customers a schedule of any fees that they may charge customers in connection with their investments in Dollar Shares. TempCash Shares are sold to institutions that have not entered into servicing agreements with the Fund in connection with their investments. DIVIDENDS AND DISTRIBUTIONS The Fund declares dividends daily and distributes substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Dividends are determined in the same manner for each class of shares of the Fund. TempCash Dollar Shares bear all the expense of fees paid to Service Organizations, and as a result, at any given time, the dividend on TempCash Dollar Shares will be approximately .25% lower than the dividend on TempCash Shares. Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. -14- TAXES The Fund's distributions will generally be taxable to shareholders. The Fund expects that all, or substantially all, of its distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal tax treatment. Dividends declared in December or any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. -15- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. TEMPCASH SHARES The table below sets forth selected financial data for a TempCash Share outstanding throughout each year presented. YEAR ENDED SEPTEMBER 30, ------------------------
1998 1997 1996 1995 1994 ----------- ------------ ------------ ------------- ------------- Net Asset Value, Beginning of $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Period ----------- ------------ ------------ ------------- ------------- Income from Investment Operations Net Investment Income .0552 .0541 .0542 .0575 .0370 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total From Investment Operations .0552 .0541 .0542 .0575 .0370 ---------- ---------- ---------- ---------- ---------- Less Distributions Dividends (from net investment income) (.0552) (.0541) (.0542) (.0575) (.0370) Distributions (from capital gains) -- -- -- -- -- Total Distributions (.0552) (.0541) (.0542) (.0575) (.0370) ---------- ---------- ---------- ---------- ---------- Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== ========== ========== Total Return 5.66% 5.55% 5.56% 5.90% 3.76% Ratios/Supplement Data Net Assets, End of Year (000's) $2,499,114 $1,991,037 $1,835,326 $1,316,166 $2,330,456 Ratio of Expenses to Average Daily Net Assets .18%/1/ .18%/1/ .18%/1/ .16%/1/ .16%/1/ Ratio of Net Investment Income to Average Daily Net Assets 5.52 5.41% 5.42% 5.75% 3.70%
_________________ 1 Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for TempCash Shares would have been .32% for the year ended September 30, 1998, .30% for the year ended September 30, 1997, .33% for the year ended September 30, 1996, .30% for the year ended September 30, 1995 and .33% for the year ended September 30, 1994. -16- TEMPCASH DOLLAR SHARES The table below sets forth selected financial data for a TempCash Dollar Share outstanding throughout each year presented. YEAR ENDED SEPTEMBER 30, ------------------------
1998 1997 1996 1995 1994 ----------- ------------ ------------ ------------- ------------- Net Asset Value, Beginning of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Period ---------- ---------- ---------- ---------- ---------- Income from Investment Operations Net Investment Income .0527 .0516 .0517 .0550 .0345 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total From Investment Operations .0527 .0516 .0517 .0550 .0345 ---------- ---------- ---------- ---------- ---------- Less Distributions Dividends (from net investment income) (.0527) (.0516) (.0517) (.0550) (.0345) Distributions (from capital gains) -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions (.0527) (.0516) (.0517) (.0550) (.0345) ----------- ---------- ---------- ---------- ---------- Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== ========== ========== Total Return 5.41% 5.29% 5.31% 5.65% 3.51% Ratios/Supplement Data $ 503,809 $ 401,529 $ 527,830 $ 454,156 $ 397,948 Net Assets, End of Year (000's) Ratio of Expenses to Average Daily Net Assets .43%/1/ .43%/1/ .43%/1/ .41%/1/ .41%/1/ Ratio of Net Investment Income to Average Daily Net Assets 5.27% 5.16% 5.17% 5.50% 3.45%
_________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for TempCash Dollar Shares would have been .57% for the year ended September 30, 1998, .55% for the year ended September 30, 1997, .58% for the year ended September 30, 1996, .55% for the year ended September 30, 1995 and .58% for the year ended September 30, 1994. -17- WHERE TO FIND MORE INFORMATION The Statement of Additional Information (the "SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354 -18- FEDFUND AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS PROSPECTUS February __, 1999 Bellevue Park Corporate Center For purchase and redemption orders only 400 Bellevue Parkway call: 800-441-7450 (in Delaware: Wilmington, DE 19809 302-791-5350). For yield information call: 800-821-6006 (FedFund Shares code: 30; FedFund Dollar Shares code: 31). For other information call: 800-821-7432 or visit our web site at www.pif.com. INVESTMENT ADVISER BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE. TABLE OF CONTENTS -----------------
PAGE ---- RISK/RETURN SUMMARY...................................................... Investment Goal..................................................... Investment Policies................................................. Principal Risks of Investing........................................ Who May Want to Invest in the Fund.................................. Performance Information............................................. Fees and Expenses................................................... INVESTMENT STRATEGIES AND RISK DISCLOSURE................................ MANAGEMENT OF THE FUND................................................... SHAREHOLDER INFORMATION.................................................. Price of Fund Shares................................................ Purchase of Shares................................................. Redemption of Shares................................................ Shareholder Service Plan............................................ Dividends and Distributions......................................... Taxes............................................................... FINANCIAL HIGHLIGHTS.....................................................
-2- RISK/RETURN SUMMARY INVESTMENT GOAL: The Fund seeks current income with liquidity and stability of principal. INVESTMENT POLICIES: The Fund invests in a portfolio consisting of U.S. Treasury bills, notes and other obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities and repurchase agreements relating to such obligations. PRINCIPAL RISKS OF INVESTING: Securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities have historically involved little risk of loss of principal if held to maturity. However, due to fluctuations in interest rates, the market value of such securities may vary during the period a shareholder owns shares of the Fund. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. -3- WHO MAY WANT TO INVEST The Fund is designed for institutional investors IN THE FUND: seeking current income with liquidity and security of principal. The Fund is particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. PERFORMANCE INFORMATION The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future.
FedFund vs. IBC's Money Fund Report: Government Institutions - Only Money Fund Average 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- FedFund Shares 9.29 8.15 6.13 3.82 3.11 4.22 5.92 5.34 5.47 5.38 IBC's Money Fund Report: Government Institutions - Only Money Fund Average 9.20 8.10 5.83 3.58 2.89 3.93 5.62 5.06 5.21 5.11
During the ten-year period shown in the bar chart, the highest quarterly return was 9.81% (for the quarter ended June 30, 1989) and the lowest quarterly return was 3.07% (for the quarter ended June 30, 1993). -4- THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998
- -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------- FEDFUND SHARES 5.38% 5.18% 5.67% - -------------------------------------------------------------------------------- FEDFUND DOLLAR SHARES 5.13% 4.93% 5.42% - -------------------------------------------------------------------------------- IBC's MONEY FUND REPORT: GOVERNMENT INSTITUTIONS - ONLY MONEY FUND AVERAGE* 5.11% 4.99% 5.50% - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 7 DAY YIELD AS OF DECEMBER 31, 1998 - -------------------------------------------------------------------------------- FEDFUND SHARES 4.87% - -------------------------------------------------------------------------------- FEDFUND DOLLAR SHARES 4.62% - -------------------------------------------------------------------------------- IBC's MONEY FUND REPORT: GOVERNMENT 4.52% INSTITUTIONS - ONLY MONEY FUND AVERAGE* - --------------------------------------------------------------------------------
CURRENT YIELD: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its web site at www.pif.com. - ------------------ * IBC's Money Fund Report: Government Institutions - Only Money Fund Average is comprised of Money Funds Investing in U.s. T-bills, Repurchase Agreements and/or Government Agencies. -5- FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund
FEDFUND - -------------------------------------------------------------------------------- FEDFUND FEDFUND DOLLAR SHARES SHARES -------------- ------ ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .12% .12% Other Expenses .16% .41% Administration Fees .12% .12% Shareholder Servicing Fees --% .25% Miscellaneous .04% .04% Total Annual Fund Operating Expenses(1) .28% .53% ==== ==== - --------------------------------------------------------------------------------
(1) Total Annual Fund Operating Expenses for FedFund Shares and FedFund Dollar Shares for the fiscal year ended October 31, 1998, with fee waivers, would have been .20% and .45%, respectively, of the Fund's average net assets. BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") and PFPC Inc., the Fund's co-administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers, but can terminate the waivers upon 120 days prior written notice to the Fund. -6- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
FEDFUND - --------------------------------------------------------------- FEDFUND FEDFUND SHARES DOLLAR SHARES - --------------------------------------------------------------- One Year $ 29 $ 54 Three years $ 90 $170 Five Years $157 $296 Ten Years $356 $665 - ---------------------------------------------------------------
-7- INVESTMENT STRATEGIES AND RISK DISCLOSURE The Fund is a money market fund. The investment objective of the Fund is to seek current income with liquidity and security of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests in obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities (in addition to direct Treasury obligations) and repurchase agreements relating to such obligations. The Fund invests in securities maturing within 13 months or less from the date of purchase, with certain exceptions. For example, certain government securities held by the Fund may have remaining maturities exceeding 13 months if such securities provide for adjustments in their interest rates not less frequently than every 13 months. The securities purchased by the Fund are also subject to the quality, diversification, and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the Securities and Exchange Commission. INVESTMENTS. The Fund's investments may include the following: U.S. Government Obligations. The Fund may purchase obligations issued or guaranteed by the U.S. Government or its agencies and instrumentalities and related custodial receipts. Investment Company Securities. The Fund may invest in securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. Repurchase Agreements. The Fund may enter into repurchase agreements. Reverse Repurchase Agreements and Securities Lending. The Fund may enter into reverse repurchase agreements. The Fund is permitted to invest up to one- third of its total assets in reverse repurchase agreements. The Fund may also lend its securities with a value of up to one-third of its total assets (including the value of the collateral for the loan) to qualified brokers, dealers, banks and other financial institutions for the purpose of realizing additional net investment income through the receipt of interest on the loan. Investments in reverse repurchase agreements and securities lending transactions will be aggregated for purposes of this investment limitation. When-Issued and Delayed Settlement Transactions. The Fund may purchase securities on a "when-issued" or "delayed settlement" basis. The Fund expects that commitments to purchase when-issued or delayed settlement securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. -8- Other Types of Investments. This Prospectus describes the Fund's principal investment strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies in support of its overall investment goal. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. RISK FACTORS. The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. Interest Rate Risk. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk. The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. Government securities are generally considered to be the safest type of investment in terms of credit risk. Not all U.S. Government Securities are backed by the full faith and credit of the United States. Obligations of certain agencies and instrumentalities of the U.S. Government are backed by the full faith and credit of the United States. Others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation. Other Risks. Certain investment strategies employed by the Fund may involve additional investment risk. Reverse repurchase agreements, securities lending transactions and when-issued or delayed settlement transactions may involve leverage risk. Leverage risk is associated with securities or practices that multiply small market movements into larger changes in the value of the Fund's investment portfolio. The Fund does not currently intend to employ investment strategies that involve leverage risk. Year 2000. Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are actively taking steps to address the Year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other major service providers. While there can be no assurance that the Fund's service providers will be Year 2000 compliant, the Fund's service providers expect that their plans to be compliant will be achieved. -9- MANAGEMENT OF THE FUND INVESTMENT ADVISER The Adviser, a wholly-owned indirect subsidiary of PNC Bank, serves as the Fund's investment adviser. The Adviser and its affiliates are one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended October 31, 1998, the Fund paid investment advisory fees and administration fees each aggregating .08% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these services are described further in the Statement of Additional Information under "Management of the Funds." SHAREHOLDER INFORMATION PRICE OF FUND SHARES The Fund's net asset value per share for purposes of pricing purchase and redemption orders is determined by PFPC Inc. ("PFPC"), the Funds co- administrator, as of 12:00 noon and 4:00 P.M., Eastern time, on each day on which both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. -10- PURCHASE OF SHARES Fund shares are sold at the net asset value per share next determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441- 7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted before 12:00 noon, Eastern time, for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and before 3:00 P.M., Eastern time (or orders accepted earlier in the same day for which payment has not been received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been received by PNC Bank by that time. Orders received at other times, and orders for which payment has not been received by 4:00 P.M., Eastern time, will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) The Fund may in its discretion reject any order for shares. -11- Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $3 million for FedFund Shares and $5,000 for FedFund Dollar Shares; however, broker-dealers and other institutional investors may set a higher minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may reduce the minimum initial investment for FedFund Shares for specific institutions whose aggregate relationship with the Provident Institutional Funds is substantially equivalent to this $3 million minimum and warrants this reduction. Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in FedFund Dollar Shares. (See also "Management of the Fund -- Service Organizations," as described in the Statement of Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in FedFund Dollar Shares. (See also "Management of the Fund -- Banking Laws," as described in the Statement of Additional Information.) REDEMPTION OF SHARES Redemption orders must be transmitted to PFPC in Wilmington, Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. Call 1-800-441-7450 (in Delaware: 302-791- 5350) to place redemption orders. Payment for redeemed shares for which a redemption order is received by PFPC by 3:00 P.M., Eastern time, on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received between 3:00 P.M. and 4:00 P.M., Eastern time, or on a day when PNC Bank is closed is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. -12- The Fund shall have the right to redeem shares in any account if the value of the account is less than $1,000, after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its account to $1,000 or more, no such redemption shall take place. Moreover, if a shareholder's FedFund Shares account falls below an average of $100,000 in any particular calendar month, the account may be charged an account maintenance fee with respect to that month. In addition, the Fund may also redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." SHAREHOLDER SERVICE PLAN Institutional investors, such as banks, savings and loan associations and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"), may purchase Dollar Shares. FedFund Dollar Shares are identical in all respects to FedFund Shares except that they bear the service fees described below and enjoy certain exclusive voting rights on matters relating to these fees. The Fund will enter into an agreement with each Service Organization which purchases Dollar Shares requiring it to provide support services to its customers who are the beneficial owners of such shares in consideration of the Fund's payment of .25% (on an annualized basis) of the average daily net asset value of the Dollar Shares held by the Service Organization for the benefit of customers. Such services, which are described more fully in the Statement of Additional Information under "Management of the Fund - Service Organizations," include aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with PFPC; processing dividend payments from the Fund on behalf of customers; providing information periodically to customers showing their positions in Dollar Shares; and providing sub-accounting or the information necessary for sub-accounting with respect to Dollar Shares beneficially owned by customers. Under the terms of the agreements, Service Organizations are required to provide to their customers a schedule of any fees that they may charge customers in connection with their investments in Dollar Shares. FedFund Shares are sold to institutions that have not entered into servicing agreements with the Fund in connection with their investments. DIVIDENDS AND DISTRIBUTIONS The Fund declares dividends daily and distributes substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Dividends are determined in the same manner for each class of shares of the Fund. FedFund Dollar Shares bear all the expense of fees paid to Service Organizations, and as a result, at any given time, the dividend on FedFund Dollar Shares will be approximately .25% lower than the dividend on FedFund Shares. -13- Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. TAXES The Fund's distributions will generally be taxable to shareholders. The Fund expects that all, or substantially all, of its distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal tax treatment. Dividends declared in December of any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. -14- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. FEDFUND SHARES The table below sets forth selected financial data for a FedFund Share outstanding throughout each year presented. YEAR ENDED OCTOBER 31, ----------------------
1998 1997 1996 1995 1994 ----- ----- ----- ----- ----- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- -------- -------- -------- -------- Income from Investment Operations Net Investment Income .0535 .0530 .0529 .0571 .0377 Net Gains or Losses on Securities (both realized and -- -- -- -- -- unrealized) ------- -------- -------- ------- ------- Total From Investment Operations .0535 .0530 .0529 .0571 .0377 ------- -------- -------- ------- ------- Less Distributions Dividends (from net investment income (.0535) (.0530) (.0529) (.0571) (.0377) Distributions (from capital gains) -- -- -- -- -- ------- -------- -------- ------- -------- Total Distributions (.0530) (.0529) (.0571) (.0377) ------- -------- -------- -------- -------- Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======== ======== ======== ======== Total Return 5.48% 5.43% 5.41% 5.86% 3.84% Ratios/Supplement Data Net Assets, End of Year (000's) $1,116,979 $1,220,857 $1,407,529 $1,377,175 1,557,562 Ratio of Expenses to Average Daily Net Assets .20%/1/ .20%/1/ .19%/1/ .18%/1/ 8%/1/ Ratio of Net Investment Income to Average Daily Net Assets 5.35% 5.30% 5.29% 5.71% 3.76%
_________________ /1/ Without the waiver of adviso ry and administration fees, the ratio of expenses to average daily net assets for FedFund Shares would have been .28% for the year ended October 31, 1998, .29% for the year ended October 31, 1997, .30% for the year ended October 31, 1996, .29% for the year ended October 31, 1995 and .30% for the year ended October 31, 1994. -15- FEDFUND DOLLAR SHARES The table below sets forth selected financial data for a FedFund Dollar Share outstanding throughout each year presented. YEAR ENDED OCTOBER 31, ----------------------
1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ---------- ---------- ---------- ---------- Income from Investment Operations Net Investment Income .0510 .0505 .0504 .0546 .0352 Net Gains or Losses on Securities (both realized and -- -- -- -- -- unrealized) ------- ---------- ---------- ---------- ---------- Total From Investment Operations .0510 .0505 .0504 .0546 .0352 ------- ---------- ---------- ---------- ---------- Less Distributions Dividends (from net investment income (.0510) (.0505) (.0504) (.0546) (.0352) Distributions (from capital gains) -- -- -- -- -- ------- ---------- ---------- ---------- ---------- Total Distributions (.0510) (.0505) (.0504) (.0546) (.0352) ------- ---------- ---------- ---------- ---------- Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ========== ========== ========== ========== Total Return 5.23% 5.18% 5.16% 5.61% 3.59% Ratios/Supplement Data Net Assets, End of Year (000's) $30,459 $ 116,316 $ 113,747 $ 213,177 $ 135,769 Ratio of Expenses to Average Daily Net Assets .45%/1/ .45%/1/ .44%/1/ .43%/1/ .43%/1/ Ratio of Net Investment Income to Average Daily Net Assets 5.10% 5.05% 5.04% 5.46% 3.51%
- ----------------------- /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average to daily net assets for FedFund Dollar Shares would have been .53% for the year ended October 31, 1998, .54% for the year ended October 31, 1997, .55% for the year ended October 31, 1996, .54% for the year ended October 31, 1995 and .55% for the year ended October 31, 1994. -16- WHERE TO FIND MORE INFORMATION The Statement of Additional Information (the "SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354 -17- T-FUND AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS PROSPECTUS February __, 1999 Bellevue Park Corporate Center For purchase and redemption orders only 400 Bellevue Parkway call: 800-441-7450 (in Delaware: Wilmington, DE 19809 302-791-5350). For yield information call: 800-821-6006 (T-Fund Shares code: 60; T-Fund Dollar Shares code: 61; and T-Fund Plus Shares code: 32). For other information call: 800-821-7432 or visit our web site at www.pif.com.
INVESTMENT ADVISER BLACK ROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE. TABLE OF CONTENTS PAGE ----------------- ---- RISK/RETURN SUMMARY............................................ Investment Goal........................................... Investment Policies....................................... Principal Risks of Investing.............................. Who May Want to Invest in the Fund........................ Performance Information................................... Fees and Expenses......................................... INVESTMENT STRATEGIES AND RISK DISCLOSURE...................... MANAGEMENT OF THE FUND......................................... SHAREHOLDER INFORMATION........................................ Price of Fund Shares...................................... Purchase of Shares....................................... Redemption of Shares...................................... Distribution and Shareholder Service Plans................ Dividends and Distributions............................... Taxes..................................................... FINANCIAL HIGHLIGHTS...........................................
-2- RISK/RETURN SUMMARY INVESTMENT GOAL: The Fund seeks current income with liquidity and stability of principal. INVESTMENT POLICIES: The Fund invests in U.S. Treasury bills, notes, trust receipts and direct obligations of the U.S. Treasury and repurchase agreements relating to direct Treasury obligations. PRINCIPAL RISK OF INVESTING: Securities issued or guaranteed by the U.S. Government have historically involved little risk of loss of principal if held to maturity. However, due to fluctuations in interest rates, the market value of such securities may vary during the period a shareholder owns shares of the Fund. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. -3- WHO MAY WANT TO INVEST IN The Fund is designed for institutional THE FUND: investors seeking current income with liquidity and security of principal. The Fund is particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. PERFORMANCE INFORMATION The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future.
T-Fund vs. IBC's Money Fund Report: Government Institutions - Only Money Fund Average 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- T-Fund Shares 9.20 8.22 6.21 3.83 3.07 3.91 5.86 5.33 5.44 5.34 IBC's Money Fund Report: Government Institutions- 9.20 8.10 5.83 3.58 2.89 3.93 5.62 5.06 5.21 5.11 IBC's Only Money Fund Average
During the ten-year period shown in the bar chart, the highest quarterly return was 9.80% (for the quarter ended June 30, 1989) and the lowest quarterly return was 3.04% (for the quarter ended December 31, 1993). -4- THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998 - ---------------------------------------------------------------- 1 Year 5 Years 10 Years - ---------------------------------------------------------------- T-FUND SHARES 5.34% 5.09% 5.63% - ---------------------------------------------------------------- T-FUND DOLLAR SHARES 5.09% 4.84% 5.38% - ---------------------------------------------------------------- IBC'S MONEY FUND REPORT: GOVERNMENT INSTITUTIONS - ONLY MONEY FUND AVERAGE* 5.11% 4.99% 5.50% - ---------------------------------------------------------------- - ---------------------------------------------------------------- 7 DAY YIELD AS OF DECEMBER 31, 1998 - ---------------------------------------------------------------- T-FUND SHARES 4.75% - ---------------------------------------------------------------- T-FUND DOLLAR SHARES 4.50% - ---------------------------------------------------------------- IBC'S MONEY FUND REPORT: GOVERNMENT INSTITUTIONS - ONLY MONEY FUND AVERAGE* 4.52% - ----------------------------------------------------------------
Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management Shares have not yet commenced operations, therefore no performance information has been provided for these classes. CURRENT YIELD: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its web site at www.pif.com. - ---------- * IBC'S Money Fund Report: Government Institutions - only Money Fund average is comprised of Money Funds Investing in U.S. T-bills, Repurchase Agreements and/or Government Agencies. -5- FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
T-FUND - ------------------------------------------------------------------------------------------------------------------------------------ T-FUND T-FUND T-FUND DOLLAR T-FUND PLUS T-FUND CASH T-FUND CASH SHARES ADMINISTRATION SHARES SHARES SHARES RESERVES SHARES MANAGEMENT SHARES --------- ----------------------- --------------- ------------- ---------------- ----------------- (estimated) (estimated) (estimated) (estimated) ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .13% .13% .13% .13% .13% .13% Distribution (12b-1) Fees -- -- -- .25% -- -- Other Expenses .14% .24% .39% .14% .54% .64% Administration Fees .13% .13% .13% .13% .13% .13% Shareholder Servicing Fees -- -- .25% -- .25% .25% Miscellaneous .01% .11% .01% .01% .16% .26% Total Annual Fund Operating Expenses(1) .27% .37% .52% .52% .67% .77% === === === === === === - ------------------------------------------------------------------------------------------------------------------------------------
(1) Total Annual Fund Operating Expenses for T-Fund Shares and T-Fund Dollar Shares for the fiscal year ended October 31, 1998, with fee waivers, were .20% and .43%, respectively, of the Fund's average net assets. Total Annual Fund Operating Expenses for T-Fund Administration Shares, T-Fund Plus Shares, T-Fund Cash Reserve Shares and T-Fund Cash Management Shares for the fiscal year ended October 31, 1998, with fee waivers, would have been .30% (estimated), .45% (estimated), .60% (estimated), and .70% (estimated), respectively, of the Fund's average net assets. BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") and PFPC Inc., the Fund's co-administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers, but can terminate the waivers upon 120 days prior written notice to the Fund. -6- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
T-FUND - ---------------------------------------------------------------------------------------------------------------------------------- T-FUND T-FUND T-FUND T-FUND PLUS T-FUND CASH T-FUND CASH SHARES ADMINISTRATION SHARES DOLLAR SHARES SHARES RESERVES SHARES MANAGEMENT SHARES (estimated) (estimated) (estimated) (estimated) - ---------------------------------------------------------------------------------------------------------------------------------- One Year $ 28 $ 38 $ 53 $ 53 $ 68 $ 79 Three years $ 87 $119 $167 $167 $214 $246 Five Years $152 $208 $291 $291 $373 $428 Ten Years $343 $468 $653 $653 $835 $954 - ----------------------------------------------------------------------------------------------------------------------------------
-7- INVESTMENT STRATEGIES AND RISK DISCLOSURE The Fund is a money market fund. The investment objective of the Fund is to seek current income with liquidity and security of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests solely in direct obligations of the U.S. Treasury, such as Treasury bills, notes, trust receipts and repurchase agreements relating to direct Treasury obligations. The Fund invests in securities maturing within 13 months or less from the date of purchase, with certain exceptions. For example, certain government securities held by the Fund may have remaining maturities exceeding 13 months if such securities provide for adjustments in their interest rates not less frequently than every 13 months. The securities purchased by the Fund are also subject to the quality, diversification, and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the Securities and Exchange Commission. INVESTMENTS. The Fund's investments may include the following: U.S. Treasury Obligations. The Fund may purchase direct obligations of the U.S. Treasury. The Fund may invest in Treasury receipts where the principal and interest components are traded separately under the Separate Trading of Registered Interest and Principal of Securities program ("STRIPS"). Investment Company Securities. The Fund may invest in securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. Repurchase Agreements. The Fund may enter into repurchase agreements. Reverse Repurchase Agreements and Securities Lending. The Fund may enter into reverse repurchase agreements. The Fund is permitted to invest up to one- third of its total assets in reverse repurchase agreements. The Fund may also lend its securities with a value of up to one-third of its total assets (including the value of the collateral for the loan) to qualified brokers, dealers, banks and other financial institutions for the purpose of realizing additional net investment income through the receipt of interest on the loan. Investments in reverse repurchase agreements and securities lending transactions will be aggregated for purposes of this investment limitation. When-Issued and Delayed Settlement Transactions. The Fund may purchase securities on a "when-issued" or "delayed settlement" basis. The Fund expects that commitments to purchase when-issued or delayed settlement securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. Other Types of Investments. This Prospectus describes the Fund's principal investment strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies -8- in support of its overall investment goal. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. RISK FACTORS. The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. Interest Rate Risk. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk. The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. Treasury securities are considered to be the safest type of investment in terms of credit risk. Other Risks. Certain investment strategies employed by the Fund may involve additional investment risk. Reverse repurchase agreements, securities lending transactions and when-issued or delayed settlement transactions may involve leverage risk. Leverage risk is associated with securities or practices that multiply small market movements into larger changes in the value of the Fund's investment portfolio. The Fund does not currently intend to employ investment strategies that involve leverage risk. Year 2000. Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are actively taking steps to address the Year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other major service providers. While there can be no assurance that the Fund's service providers will be Year 2000 compliant, the Fund's service providers expect that their plans to be compliant will be achieved. MANAGEMENT OF THE FUND INVESTMENT ADVISER The Adviser, a wholly-owned indirect subsidiary of PNC Bank, serves as the Fund's investment adviser. The Adviser and its affiliates are one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. -9- As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended October 31, 1998, the Fund paid investment advisory fees and administration fees each aggregating .09% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these services are described further in the Statement of Additional Information under "Management of the Funds." SHAREHOLDER INFORMATION PRICE OF FUND SHARES The Fund's net asset value per share for purposes of pricing purchase and redemption orders is determined by PFPC Inc. ("PFPC"), the Funds co- administrator, as of 12:00 noon and 5:30 P.M., Eastern time, on each day on which both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. PURCHASE OF SHARES Fund shares are sold at the net asset value per share next determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441- 7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted before 12:00 noon, Eastern time, for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and before 5:30 P.M., Eastern time (or orders accepted earlier in the same day for which payment has not been received by 12:00 noon), will be executed at 5:30 P.M., Eastern time, if payment has been received by PNC Bank by that time. Orders received at other times, and orders for which payment has not been received by 5:30 P.M., Eastern time, will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) Between 3:00 P.M. and 5:30 P.M., Eastern time, purchase orders may only be transmitted by telephone, and the Fund reserves the right to limit the amount of such orders. The Fund may in its discretion reject any order for shares. -10- Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $3 million for T-Fund Shares; there is no minimum initial investment for T-Fund Administration Shares, T-Fund Dollar Shares, T-Fund Plus Shares, T-Fund Cash Reserve Shares or T-Fund Cash Management Shares, however, broker-dealers and other institutional investors may set a minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may reduce the minimum initial investment for T-Fund Shares for specific institutions whose aggregate relationship with the Provident Institutional Funds is substantially equivalent to this $3 million minimum and warrants this reduction. Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in T-Fund Administration Shares, T-Fund Dollar Shares, T-Fund Plus Shares, T-Fund Cash Reserve Shares and T-Fund Cash Management Shares. (See also "Management of the Fund - Organizations," as described in the Statement of Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in T-Fund Administration Shares, T-Fund Dollar Shares, T-Fund Plus Shares, T-Fund Cash Reserve Shares and T-Fund Cash Management Shares. (See also "Management of the Fund -- Banking Laws," as described in the Statement of Additional Information.) REDEMPTION OF SHARES Redemption orders must be transmitted to PFPC in Wilmington, Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. Telephone instructions for redemptions received between 3:00 P.M. and 5:30 P.M., Eastern time, on a Business Day are received for execution on that same day, however, the Fund reserves the right to make payment for such redemptions the next Business Day. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. Call 1-800- 441-7450 (in Delaware: 302-791-5350) to place redemption orders. Payment for redeemed shares for which a redemption order is received by PFPC by 5:30 P.M., Eastern time, on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received on a day when PNC Bank is closed is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. The Fund shall have the right to redeem shares in any account if the value of the account is less than $1,000 after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its account to $1,000 or more, no such redemption shall take place. Moreover, if a shareholder's T-Fund Shares account falls -11- below an average of $100,000 in any particular calendar month, the account may be charged an account maintenance fee with respect to that month. In addition, the Fund may also redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." DISTRIBUTION AND SHAREHOLDER SERVICE PLANS The Fund offers six classes of shares. The difference between the classes of shares is the fees borne by a class of shares pursuant to separate fee plans adopted by each class. T-Fund Shares do not bear any fees for distribution, servicing, shareholder servicing, sweep fees or cash sweep marketing services. The fees borne by the other classes are as follows: - -------------------------------------------------------------------------------- CASH SHAREHOLDER CASH SWEEP SERVICE SERVICE 12B-1 SWEEP MARKETING TOTAL CLASS FEE FEE FEE FEE FEE FEES ----- --- --- --- --- --- ---- - -------------------------------------------------------------------------------- Administration Shares .10% -- -- -- -- .10% - -------------------------------------------------------------------------------- Dollar Shares -- .25% -- -- -- .25% - -------------------------------------------------------------------------------- Plus Shares -- -- .25% -- -- .25% - -------------------------------------------------------------------------------- Cash Reserve Shares .10% .25% -- .05% -- .40% - -------------------------------------------------------------------------------- Cash Management Shares .10% .25% -- .05% .10% .50% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Service Fees are paid for general shareholder liaison services. Shareholder Service Fees are paid for services relating to the processing and administration of shareholder accounts. The Fund has adopted a plan pursuant to Rule 12b-1. 12b-1 Fees are paid for distribution and sales support, and shareholder services. Cash Sweep Fees are paid for providing a sweep service into the Fund. Cash Sweep Marketing Fees are paid for providing marketing administrative activities in connection with the sweep program. Shares of the Fund are not sold to individuals, but may be sold to the following entities, which hold the shares for the accounts of their customers. Administration Shares, Dollar Shares, Cash Reserve Shares and Cash Management Shares are sold to institutional investors such as banks, saving and loan associations, and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"). Plus Shares are sold to broker-dealers. Because fees associated with the distribution and/or shareholder service plans are paid out of the Fund's assets on an ongoing basis, over time holders of the share classes described above may pay more than the economic equivalent of the maximum front-end sales charge permitted by NASD regulation, Inc. DIVIDENDS AND DISTRIBUTIONS The Fund declares daily and distributes substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. -12- TAXES The Fund's distributions will generally be taxable to shareholders. The Fund expects that all, or substantially all, of its distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. Shareholders will generally not be subject to state and local taxes on distributions to the extent attributable to interest on U.S. Treasury obligations. State income taxes may apply however to the portion of the Fund's distributions, if any, that are attributable to interest on obligations that are not Federal Securities, such as repurchase agreements. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal tax treatment. Dividends declared in December of any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. -13- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management Shares of the Fund have not yet commenced operations, therefore no financial information has been provided for these classes. T-FUND SHARES The table below sets forth selected financial data for a T-Fund Share outstanding throughout each year presented. YEAR ENDED OCTOBER 31, ----------------------
1998 1997 1996 1995 1994 ------------ ----------- ------------ ------------- ------------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ---------- ---------- ---------- ---------- ---------- Income from Investment Operations Net Investment Income .0532 .0528 .0528 .0565 .0368 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total From Investment Operations .0532 .0528 .0528 .0565 .0368 ---------- ---------- ---------- ---------- ---------- Less Distributions Dividends (from net investment income) (.0532) (.0528) (.0528) (.0565) (.0368) Distributions (from capital gains) -- -- -- -- -- ---------- ---------- ---------- ---------- ---------- Total Distributions (.0532) (.0528) (.0528) (.0565) (.0368) ---------- ---------- ---------- ---------- ---------- Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== ========== ========== Total Return 5.46% 5.41% 5.40% 5.80% 3.75% Ratios/Supplement Data Net Assets, End of Year (000's) $2,544,001 $1,765,332 $1,507,603 $1,211,220 $1,012,977 Ratio of Expenses to Average Daily Net Assets .20%/1/ .20%/1/ .19%/1/ .18%/1/ .18%/1/ Ratio of Net Investment Income to Average Daily Net Assets 5.31% 5.28% 5.26% 5.66% 3.65%
_________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for T-Fund Shares would have been .27% for the year ended October 31, 1998, .29% for the year ended October 31, 1997, .30% for the year ended October 31, 1996 and .29% for the years ended October 31, 1995 and 1994, respectively. -14- T-FUND DOLLAR SHARES The table below sets forth selected financial data for a T-Fund Dollar Share outstanding throughout each year presented. YEAR ENDED OCTOBER 31, ----------------------
1998 1997 1996 1995 1994 ------------ ----------- ------------ ------------- ------------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from Investment Operations Net Investment Income .0507 .0503 .0503 .0540 .0343 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- -------- -------- -------- -------- -------- Total From Investment Operations .0507 .0503 .0503 .0540 .0343 -------- -------- -------- -------- -------- Less Distributions Dividends (from net investment income) (.0507) (.0503) (.0503) (.0540) (.0343) Distributions (from capital gains) -- -- -- -- -- -------- -------- -------- -------- -------- Total Distributions (.0507) (.0503) (.0503) (.0540) (.0343) -------- -------- -------- -------- -------- Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return 5.21% 5.16% 5.15% 5.55% 3.50% Ratios/Supplement Data $777,385 $516,092 $351,271 $ 82,502 $22,195 Net Assets, End of Year (000's) Ratio of Expenses to Average Daily Net Assets .45%/1/ .45%/1/ .44%/1/ .43%/1/ .43%/1/ Ratio of Net Investment Income to Average Daily Net Assets 5.06% 5.03% 5.01% 5.41% 3.40%
_________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for T-Fund Dollar Shares would have been .52% for the year ended October 31, 1998, .54% for the year ended October 31, 1997, .55% for the year ended October 31, 1996 and .54% for the years ended October 31, 1995 and 1994, respectively. -15- WHERE TO FIND MORE INFORMATION The Statement of Additional Information (the "SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354. -16- TREASURY TRUST FUND AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS PROSPECTUS February __, 1999 Bellevue Park Corporate Center For purchase and redemption orders only 400 Bellevue Parkway call: 800-441-7450 (in Delaware: 302- Wilmington, DE 19809 791-5350). For yield information call: 800-821-6006 (Treasury Trust Shares code: 62; Treasury Trust Dollar Shares code: 63). For other information call: 800-821-7432 or visit our website at www.pif.com. INVESTMENT ADVISER BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE. TABLE OF CONTENTS -----------------
PAGE ---- RISK/RETURN SUMMARY...................................................... Investment Goal..................................................... Investment Policies................................................. Principal Risks of Investing........................................ Who May Want to Invest in the Fund.................................. Performance Information............................................. Fees and Expenses................................................... INVESTMENT STRATEGIES AND RISK DISCLOSURE................................ MANAGEMENT OF THE FUND................................................... SHAREHOLDER INFORMATION.................................................. Price of Fund Shares................................................ Purchase of Shares.................................................. Redemption of Shares................................................ Shareholder Service Plan............................................ Dividends and Distributions......................................... Taxes............................................................... FINANCIAL HIGHLIGHTS.....................................................
-2- RISK/RETURN SUMMARY INVESTMENT GOAL: The Fund seeks current income with liquidity and stability of principal. INVESTMENT POLICIES: The Fund invests solely in direct obligations of the U.S. Treasury, such as Treasury bills, notes and trust receipts. Because the Fund invests exclusively in direct U.S. Treasury obligations, investors may benefit from income tax exclusions or exemptions that are available in certain states and localities. PRINCIPAL RISKS OF INVESTING: Securities issued or guaranteed by the U.S. Government have historically involved little risk of loss of principal if held to maturity. However, due to fluctuations in interest rates, the market value of such securities may vary during the period a shareholder owns shares of the Fund. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. The Fund may from time to time engage in portfolio trading for liquidity purposes, in order to enhance its yield or if otherwise deemed advisable. In selling securities prior to maturity, the Fund may realize a price higher or lower than that paid to acquire any given security, depending upon whether interest rates have decreased or increased since its acquisition. In addition, shareholders in a particular state that imposes income tax should determine through consultation with their own tax advisors whether such interest income, when distributed by the Fund, will be considered by the state to have retained exempt status, and whether the Fund's capital gain and other income, if any, when distributed will be subject to the states income tax. -3- An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. WHO MAY WANT TO INVEST IN The Fund is designed for institutional THE FUND: investors seeking current income with liquidity and security of principal. The Fund is particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. The Fund's investment policies are intended to qualify Fund shares for the investment of funds of federally regulated thrifts. The Fund intends to qualify its shares as "short-term liquid assets" as established in the published rulings, interpretations, and regulations of the Office of Thrift Supervision. However, investing institutions are advised to consult their primary regulator for concurrence that Fund shares qualify under applicable regulations and policies. -4- PERFORMANCE INFORMATION The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future.
Treasury Trust Fund vs. IBC's Money Fund Report: Government Institutions - Only Money Fund Average 1990 1991 1992 1993 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- Treasury Trust Fund Shares 7.94 5.87 3.54 2.96 3.98 5.66 5.12 5.19 4.99 IBC's Money Fund Report: Government Institutions - 8.10 5.83 3.58 2.89 3.93 5.62 5.06 5.21 5.11 Only Money Fund Average
During the ten-year period shown in the bar chart, the highest quarterly return was 9.01% (for the quarter ended September 30, 1989) and the lowest quarterly return was 2.84% (for the quarter ended June 30, 1993). -5- THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998
- -------------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------------------------------- TREASURY TRUST FUND SHARES 4.99% 4.99% 5.26% - -------------------------------------------------------------------------------------------------------- TREASURY TRUST FUND DOLLAR SHARES 4.74% 4.74% 5.01% - -------------------------------------------------------------------------------------------------------- IBC'S MONEY FUND REPORT: GOVERNMENT INSTITUTIONS-ONLY MONEY FUND AVERAGE* 5.11% 4.99% 5.50% - --------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------- 7 DAY YIELD AS OF DECEMBER 31, 1998 - -------------------------------------------------------------------------------------------------------- TREASURY TRUST FUND SHARES 4.34% - -------------------------------------------------------------------------------------------------------- TREASURY TRUST FUND DOLLAR SHARES 4.09% - -------------------------------------------------------------------------------------------------------- IBC's MONEY FUND REPORT: GOVERNMENT INSTITUTIONS-ONLY MONEY FUND AVERAGE* 4.52% - --------------------------------------------------------------------------------------------------------
CURRENT YIELD: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its website at www.pif.com. - --------------- * IBC's Money Fund Report: Government Institutions - Only Money Fund Average is comprised of money funds investing in U.S. T-Bills, Repurchase Agreements and/or Government Agencies. -6- FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
TREASURY TRUST FUND - ---------------------------------------------------------------------------- TREASURY TRUST TREASURY TRUST FUND FUND SHARES DOLLAR SHARES ---------------- ------------------- ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .12% .12% ---- ---- Other Expenses .16% .41% ---- ---- Administration Fees .12% .12% ---- ---- Shareholder Servicing Fees -- .25% ---- ---- Miscellaneous .04% .04% ---- ---- Total Annual Fund Operating Expenses(1) .28% .53% ==== ==== - ----------------------------------------------------------------------------
(1) Total Annual Fund Operating Expenses for Treasury Trust Fund Shares and Treasury Trust Fund Dollar Shares for the fiscal year ended October 31, 1998, with fee waivers, would have been .20% and .45%, respectively, of the Fund's average net assets. BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") and PFPC Inc., the Fund's co-administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers, but can terminate the waivers upon 120 days prior written notice to the Fund. -7- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
TREASURY TRUST FUND - -------------------------------------------------------------------------- TREASURY TRUST FUND TREASURY TRUST FUND SHARES DOLLAR SHARES - -------------------------------------------------------------------------- One Year $ 29 $ 54 Three years $ 90 $170 Five Years $157 $296 Ten Years $356 $665 - --------------------------------------------------------------------------
-8- INVESTMENT STRATEGIES AND RISK DISCLOSURE The Fund is a money market fund. The investment objective of the Fund is to seek current income with liquidity and security of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests solely in direct obligations of the U.S. Treasury, such as Treasury bills, notes and trust receipts. The Fund invests in securities maturing within one year or less, with certain exceptions. For example, certain government securities held by the Fund may have remaining maturities exceeding 13 months if such securities provide for adjustments in their interest rates not less frequently than every 13 months. The securities purchased by the Fund are also subject to the quality, diversification, and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the Securities and Exchange Commission. INVESTMENTS. The Fund's investments may include the following: U.S. Treasury Obligations. To the extent consistent with its investment objectives, the Fund may invest in direct obligations of the U.S. Treasury. The Fund may invest in Treasury receipts where the principal and interest components are traded separately under the Separate Trading of Registered Interest and Principal of Securities program ("STRIPS"). Investment Company Securities. The Fund may invest in securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. When-Issued and Delayed Settlement Transactions. The Fund may purchase securities on a "when-issued" or "delayed settlement" basis. The Fund expects that commitments to purchase when-issued or delayed settlement securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. Other Types of Investments. This Prospectus describes the Fund's principal investment strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies in support of its overall investment goal. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. -9- RISK FACTORS. The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. Interest Rate Risk. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk. The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. government securities are generally considered to be the safest type of investment in terms of credit risk. Year 2000. Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are actively taking steps to address the Year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other major service providers. While there can be no assurance that the Fund's service providers will be Year 2000 compliant, the Fund's service providers expect that their plans to be compliant will be achieved. MANAGEMENT OF THE FUND INVESTMENT ADVISER The Adviser, a wholly-owned indirect subsidiary of PNC Bank, serves as the Fund's investment adviser. The Adviser and its affiliates are one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended October 31, 1998, the Fund paid investment advisory fees and administration fees each aggregating .08% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these -10- services are described further in the Statement of Additional Information under "Management of the Funds." SHAREHOLDER INFORMATION PRICE OF FUND SHARES The Fund's net asset value per share for purposes of pricing purchase and redemption orders is determined by PFPC Inc. ("PFPC"), the Funds co- administrator, as of 12:00 noon and 4:00 P.M., Eastern time, on each day on which both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. PURCHASE OF SHARES Fund shares are sold at the net asset value per share next determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441- 7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted before 12:00 noon, Eastern time, for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M., Eastern time (or orders accepted earlier in the same day for which payment has not been received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been received by PNC Bank by that time. Orders received at other times, and orders for which payment has not been received by 4:00 P.M., Eastern time, will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) The Fund may in its discretion reject any order for shares. Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $3 million for Treasury Trust Fund Shares and $5,000 for Treasury Trust Fund Dollar Shares; however, broker-dealers and other institutional investors may set a higher minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may reduce the minimum initial investment for Treasury Trust Fund Shares for specific institutions whose aggregate relationship with the Provident Institutional Funds is substantially equivalent to this $3 million minimum and warrants this reduction. -11- Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in Treasury Trust Fund Dollar Shares. (See also "Management of the Fund - - - Service Organizations," as described in the Statement of Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in Treasury Trust Fund Dollar Shares. (See also "Management of the Fund -- Banking Laws," as described in the Statement of Additional Information.) REDEMPTION OF SHARES Redemption orders must be transmitted to PFPC in Wilmington, Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. Call 1-800-441-7450 (in Delaware: 302-791- 5350) to place redemption orders. Payment for redeemed shares for which a redemption order is received by PFPC by 2:30 P.M., Eastern time, on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received between 2:30 P.M. and 4:00 P.M., Eastern time, or on a day when PNC Bank is closed, is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. The Fund shall have the right to redeem shares in any account if the value of the account is less than $1,000 after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its account to $1,000 or more, no such redemption shall take place. Moreover, if a shareholders Treasury Trust Shares account falls below an average of $100,000 in any particular calendar month, the account may be charged an account maintenance fee with respect to that month. In addition, the Fund may also redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." -12- SHAREHOLDER SERVICE PLAN Institutional investors, such as banks, savings and loan associations and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"), may purchase Dollar Shares. Treasury Trust Fund Dollar Shares are identical in all respects to Treasury Trust Fund Shares except that they bear the service fees described below and enjoy certain exclusive voting rights on matters relating to these fees. The Fund will enter into an agreement with each Service Organization which purchases Dollar Shares requiring it to provide support services to its customers who are the beneficial owners of such shares in consideration of the Fund's payment of .25% (on an annualized basis) of the average daily net asset value of the Dollar Shares held by the Service Organization for the benefit of customers. Such services, which are described more fully in the Statement of Additional Information under "Management of the Fund Service Organizations," include aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with PFPC; processing dividend payments from the Fund on behalf of customers; providing information periodically to customers showing their positions in Dollar Shares; and providing sub-accounting or the information necessary for sub-accounting with respect to Dollar Shares beneficially owned by customers. Under the terms of the agreements, Service Organizations are required to provide to their customers a schedule of any fees that they may charge customers in connection with their investments in Dollar Shares. Treasury Trust Fund Shares are sold to institutions that have not entered into servicing agreements with the Fund in connection with their investments. DIVIDENDS AND DISTRIBUTIONS The Fund declares dividends daily and distributes substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Dividends are determined in the same manner for each class of shares of the Fund. Treasury Trust Fund Dollar Shares bear all the expense of fees paid to Service Organizations, and as a result, at any given time, the dividend on Treasury Trust Fund Dollar Shares will be approximately .25% lower than the dividend on Treasury Trust Fund Shares. Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. -13- TAXES The Fund's distributions will generally be taxable to shareholders. The Fund expects that all, or substantially all, of its distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. To the extent permissible by federal and state law, the Fund is structured to provide shareholders with income that is exempt or excluded from taxation at the state and local level. Substantially all dividends paid to shareholders residing in certain states will be exempt or excluded from state income tax. Many states, by statute, judicial decision or administrative action, have taken the position that dividends of a regulated investment company such as the Fund that are attributable to interest on direct U.S. Treasury obligations are the functional equivalent of interest from such obligations and are, therefore, exempt from state and local income taxes. Investors should be aware of the application of their state and local tax laws to investments in the Fund. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal tax treatment. Dividends declared in December of any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. -14- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. TREASURY TRUST FUND SHARES The table below sets forth selected financial data for a Treasury Trust Fund Share outstanding throughout each year presented. YEAR ENDED OCTOBER 31, ----------------------
1998 1997 1996 1995 1994 ----------- ------------ ------------ ------------- ------------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- ---------- ---------- Income from Investment Operations Net Investment Income .0502 .0504 .0508 .0545 .0359 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- --------- -------- -------- ---------- ---------- Total From Investment Operations .0502 .0504 .0508 .0545 .0359 -------- -------- -------- ---------- ---------- Less Distributions Dividends (from net investment income) (.0502) (.0504) (.0508) (.0545) (.0359) Distributions (from capital gains) -- -- -- -- -- -------- -------- -------- ---------- ---------- Total Distributions (.0502) (.0504) (.0508) (.0545) (.0359) -------- -------- -------- ---------- ---------- Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ========== ========== Total Return 5.14% 5.16% 5.20% 5.59% 3.65% Ratios/Supplement Data Net Assets, End of Period (000's) $1,091,366 $786,556 $897,659 $1,101,834 $1,016,635 Ratio of Expenses to Average Daily Net Assets 20%/1/ .20%/1/ .19%/1/ .18%/1/ .18%/1/ Ratio of Net Investment Income to Average Daily Net Assets 5.02%/1/ 5.04% 5.08% 5.45% 3.57%
_________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for Treasury Trust Fund Shares would have been .28% for the year ended October 31, 1998, .30% for the years ended October 31, 1997 and 1996, and .29% for the years ended October, 31, 1995 and 1994. -15- TREASURY TRUST FUND DOLLAR SHARES The table below sets forth selected financial data for a Treasury Trust Fund Dollar Share outstanding throughout each year presented. YEAR ENDED OCTOBER 31, ----------------------
1998 1997 1996 1995 1994 ----------- ------------ ------------ ------------- ------------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from Investment operations -------- -------- -------- -------- -------- Net Investment Income .0477 .0479 .0483 .0520 .0334 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- -------- -------- -------- -------- -------- Total From Investment Operations .0477 .0479 .0483 .0520 .0334 -------- -------- -------- -------- -------- Less Distributions Dividends (from net investment income) (.0477) (.0479) (.0483) (.0520) (.0334) Distributions (from capital gains) -- -- -- -- -- -------- -------- -------- -------- -------- Total Distributions (.0477) (.0479) (.0483) (.0520) (.0334) --------- --------- -------- -------- -------- Net Asset Value, End of Periods $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ========= ======== ========= ======== Total Return 4.89% 4.91% 4.95% 5.34% 3.40% Ratios/Supplement Data $471,767 $331,498 $294,228 $ 223,272 $181,934 Net Assets, End of Period (000's) Ratio of Expenses to Average Daily Net Assets .45%/1/ .45%/1/ .44%/1/ .43%/1/ .43%/1/ Ratio of Net Investment Income to Average Daily Net Assets 4.77% 4.79% 4.83% 5.20% 3.32%
_________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for Treasury Trust Fund Dollar Shares would have been .53% for the year ended October 31, 1998, .55% for the years ended October 31, 1997 and 1996, and .54% for the years ended October 31, 1995 and 1994. -16- WHERE TO FIND MORE INFORMATION The Statement of Additional Information (the "SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354. -17- FEDERAL TRUST FUND AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS PROSPECTUS February __, 1999 Bellevue Park Corporate Center For purchase and redemption orders only 400 Bellevue Parkway call: 800-441-7450 (in Delaware: Wilmington, DE 19809 302-791-5350). For yield information call: 800-821-6006 (Federal Trust Fund Shares code: 11; Federal Trust Fund Dollar Shares code: 12). For other information call: 800-821-7432 or visit our web site at www.pif.com. INVESTMENT ADVISER BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE. TABLE OF CONTENTS -----------------
Page ---- RISK/RETURN SUMMARY............................................ Investment Goal........................................... Investment Policies....................................... Principal Risks of Investing.............................. Who May Want to Invest in the Fund........................ Performance Information................................... Fees and Expenses......................................... INVESTMENT STRATEGIES AND RISK DISCLOSURE...................... MANAGEMENT OF THE FUND......................................... SHAREHOLDER INFORMATION........................................ Price of Fund Shares...................................... Purchase of Shares....................................... Redemption of Shares...................................... Shareholder Service Plan.................................. Dividends and Distributions............................... Taxes..................................................... FINANCIAL HIGHLIGHTS...........................................
-2- RISK/RETURN SUMMARY INVESTMENT GOAL: The Fund seeks current income with liquidity and stability of principal. INVESTMENT POLICIES: The Fund invests in obligations issued or guaranteed as to principal and interest by the U.S. government or by its agencies or instrumentalities thereof the interest income from which, under current law, generally may not be subject to state income tax by reason of federal law. PRINCIPAL RISKS OF INVESTING: Securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities have historically involved little risk of loss of principal if held to maturity. However, due to fluctuations in interest rates, the market value of such securities may vary during the period a shareholder owns shares of the Fund. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. The Fund may from time to time engage in portfolio trading for liquidity purposes, in order to enhance its yield or if otherwise deemed advisable. In selling securities prior to maturity, the Fund may realize a price higher or lower than that paid to acquire any given security, depending upon whether interest rates have decreased or increased since its acquisition. In addition, shareholders in a particular state that imposes an income tax should determine through consultation with their own tax advisors whether such interest income, when distributed by the Fund, will be considered by the state to have retained exempt status, and whether the Fund's capital gain and other income, if any, when distributed will be subject to the state's income tax An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the -3- Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. WHO MAY WANT TO INVEST IN THE FUND: The Fund is designed for institutional investors seeking current income with liquidity and security of principal. The Fund is particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. PERFORMANCE INFORMATION The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future.
Federal Trust Fund vs. IBC's Money Fund Report: Government Institutions - Only Money Fund Average 1991 1992 1993 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- ---- ---- ---- Federal Trust Fund Shares 6.08 3.80 3.06 4.24 5.83 5.26 5.38 5.32 IBC's Money Fund Report: Government Institutions - Only Money Fund Average 5.83 3.58 2.89 3.93 5.62 5.06 5.21 5.11
During the ten-year period shown in the bar chart, the highest quarterly return was 6.91% (for the quarter ended March 31, 1991) and the lowest quarterly return was 3.04% (for the quarter ended June 30, 1993). -4- THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998
1 Year 5 Years 10 Years - ----------------------------------------------------------------------------------------------------------------- FEDERAL TRUST FUND SHARES 5.32% 5.17% 4.89% - ----------------------------------------------------------------------------------------------------------------- FEDERAL TRUST FUND DOLLAR SHARES 5.07% 4.92% 4.64% - ----------------------------------------------------------------------------------------------------------------- IBC'S MONEY FUND REPORT: GOVERNMENT INSTITUTIONS-ONLY MONEY FUND AVERAGE* 5.11% 4.99% 5.50% - -----------------------------------------------------------------------------------------------------------------
7 DAY YIELD AS OF DECEMBER 31, 1998 - -------------------------------------------------------------------------------------------------------- FEDERAL TRUST FUND SHARES 4.78% - -------------------------------------------------------------------------------------------------------- FEDERAL TRUST FUND DOLLAR SHARES 4.53% - -------------------------------------------------------------------------------------------------------- IBC's MONEY FUND REPORT: GOVERNMENT INSTITUTIONS-ONLY MONEY FUND AVERAGE* 4.52% - --------------------------------------------------------------------------------------------------------
CURRENT YIELD: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its webtsite at www.pif.com. - ----------------------- * IBC's Money Fund Report: Government Institutions - Only Money Fund Average is comprised of money funds investing in U.S. T-Bills, Repurchase Agreements and/or Government Agencies. -5- FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
FEDERAL TRUST FUND - --------------------------------------------------------------------------------------------- FEDERAL TRUST FEDERAL TRUST FUND FUND SHARES DOLLAR SHARES -------------- ------------------ ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .13% .13% Other Expenses .16% .41% Administration Fees .13% .13% Shareholder Servicing Fees --% .25% Miscellaneous .03% .03% Total Annual Fund Operating Expenses(1) .29% .54% - ---------------------------------------------------------------------------------------------
(1) Total Annual Fund Operating Expenses for Federal Trust Fund Shares and Federal Trust Fund Dollar Shares for the fiscal year ended October 31, 1998, with fee waivers, would have been .20% and .45%, respectively, of the Fund's average net assets. BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") and PFPC Inc., the Fund's co-administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers, but can terminate the waivers upon 120 days prior written notice to the Fund. -6- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
FEDERAL TRUST FUND - ------------------------------------------------------------ FEDERAL TRUST FUND FEDERAL TRUST FUND SHARES DOLLAR SHARES - ------------------------------------------------------------ One Year $30 $55 Three years $93 $173 Five Years $163 $302 Ten Years $368 $677 - ------------------------------------------------------------
-7- INVESTMENT STRATEGIES AND RISK DISCLOSURE The Fund is a money market fund. The investment objective of the Fund is to seek current income with liquidity and security of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests in obligations issued or guaranteed as to principal and interest by the U.S. Government or by agencies or instrumentalities thereof the interest income from which, under current law, generally may not be subject to state income tax by reason of federal law. The Fund invests in securities maturing within 13 months or less from the date of purchase, with certain exceptions. For example, certain government securities held by the Fund may have remaining maturities exceeding 13 months if such securities provide for adjustments in their interest rates not less frequently than every 13 months. The securities purchased by the Fund are also subject to the quality, diversification, and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the Securities and Exchange Commission. INVESTMENTS. The Fund's investments may include the following: U.S. Government Obligations. The Fund may purchase obligations issued or guaranteed by the U.S. Government, including securities issued by the U.S. Treasury and by certain agencies or instrumentalities such as the Federal Home Loan Bank, Federal Farm Credit Banks Funding Corp. and the Student Loan Marketing Association, and related custodial receipts. Investment Company Securities. The Fund may invest in securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. When-Issued and Delayed Settlement Transactions. The Fund may purchase securities on a "when-issued" or "delayed settlement" basis. The Fund expects that commitments to purchase when-issued or delayed settlement securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. Other Types of Investments. This Prospectus describes the Fund's principal investment strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies in support of its overall investment goal. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. -8- RISK FACTORS. The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. Interest Rate Risk. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk. The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. Government securities are generally considered to be the safest type of investment in terms of credit risk. Not all U.S. Government Securities are backed by the full faith and credit of the United States. Obligations of certain agencies and instrumentlities of the U.S. Government are backed by the full faith and credit of the United States; others are backed by the right of the issuer to borrow from the U.S. Treasury or are backed only by the credit of the agency or instrumentality issuing the obligation. Year 2000. Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are actively taking steps to address the Year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other major service providers. While there can be no assurance that the Fund's service providers will be Year 2000 compliant, the Fund's service providers expect that their plans to be compliant will be achieved. MANAGEMENT OF THE FUND INVESTMENT ADVISER The Adviser, a wholly-owned indirect subsidiary of PNC Bank, serves as the Fund's investment adviser. The Adviser and its affiliates are one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and -9- PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended October 31, 1998, the Fund paid investment advisory fees and administration fees each aggregating .08% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these services are described further in the Statement of Additional Information under "Management of the Funds." SHAREHOLDER INFORMATION PRICE OF FUND SHARES The Fund's net asset value per share for purposes of pricing purchase and redemption orders is determined by PFPC Inc. ("PFPC"), the Funds co- administrator, as of 12:00 noon and 4:00 P.M., Eastern time, on each day on which both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. PURCHASE OF SHARES Fund shares are sold at the net asset value per share next determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441- 7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted before 12:00 noon, Eastern time, for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M., Eastern time (or orders accepted earlier in the same day for which payment has not been received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been received by PNC Bank by that time. Orders received at other times, and orders for which payment has not been received by 4:00 P.M., Eastern time, will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) The Fund may in its discretion reject any order for shares. Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $3 million for Federal Trust Fund Shares and $5,000 for Federal Trust Fund Dollar Shares; however, broker-dealers and other institutional investors may set a higher minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may reduce the minimum initial investment for Federal Trust Fund Shares for specific institutions whose aggregate -10- relationship with the Provident Institutional Funds is substantially equivalent to this $3 million minimum and warrants this reduction. Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in Federal Trust Fund Dollar Shares. (See also "Management of the Fund -- Service Organizations," as described in the Statement of Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in Federal Trust Fund Dollar Shares. (See also "Management of the Fund -- Banking Laws," as described in the Statement of Additional Information). REDEMPTION OF SHARES Redemption orders must be transmitted to PFPC in Wilmington, Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. Call 1-800-441-7450 (in Delaware: 302-791- 5350) to place redemption orders. Payment for redeemed shares for which a redemption order is received by PFPC by 2:30 P.M., Eastern time, on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received between 2:30 P.M. and 4:00 P.M., Eastern time, or on a day when PNC Bank is closed, is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. The Fund shall have the right to redeem shares in any account if the value of the account is less than $1,000 after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its account to $1,000 or more, no such redemption shall take place. Moreover, if a shareholder's Federal Trust Fund Shares account falls below an average of $100,000 in any particular calendar month, the account may be charged an account maintenance fee with respect to that month. In addition, the Fund may also -11- redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." SHAREHOLDER SERVICE PLAN Institutional investors, such as banks, savings and loan associations and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"), may purchase Dollar Shares. Federal Trust Fund Dollar Shares are identical in all respects to Federal Trust Fund Shares except that they bear the service fees described below and enjoy certain exclusive voting rights on matters relating to these fees. The Fund will enter into an agreement with each Service Organization which purchases Dollar Shares requiring it to provide support services to its customers who are the beneficial owners of such shares in consideration of the Fund's payment of .25% (on an annualized basis) of the average daily net asset value of the Dollar Shares held by the Service Organization for the benefit of customers. Such services, which are described more fully in the Statement of Additional Information under "Management of the Fund Service Organizations," include aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with PFPC; processing dividend payments from the Fund on behalf of customers; providing information periodically to customers showing their positions in Dollar Shares; and providing sub-accounting or the information necessary for sub-accounting with respect to Dollar Shares beneficially owned by customers. Under the terms of the agreements, Service Organizations are required to provide to their customers a schedule of any fees that they may charge customers in connection with their investments in Dollar Shares. Federal Trust Fund Shares are sold to institutions that have not entered into servicing agreements with the Fund in connection with their investments. DIVIDENDS AND DISTRIBUTIONS The Fund declares dividends daily and distributes substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Dividends are determined in the same manner for each class of shares of the Fund. Federal Trust Fund Dollar Shares bear all the expense of fees paid to Service Organizations, and as a result, at any given time, the dividend on Federal Trust Fund Dollar Shares will be approximately .25% lower than the dividend on Federal Trust Fund Shares. Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, -12- Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. TAXES The Fund's distributions will generally be taxable to shareholders. The Fund expects that all, or substantially all, of its distributions will consist of ordinary income. You will be subject to income tax on these distributions regardless whether they are paid in cash or reinvested in additional shares. To the extent permissible by federal and state law, the Fund is structured to provide shareholders with income that is exempt or excluded from taxation at the state and local level. Substantially all dividends paid to shareholders residing in certain states will be exempt or excluded from state income tax. Many states, by statute, judicial decision or administrative action, have taken the position that dividends of a regulated investment company such as the Fund that are attributable to interest on obligations of the U.S. Treasury and certain U.S. Government agencies and instrumentalities are the functional equivalent of interest from such obligations and are, therefore, exempt from state and local income taxes. Investors should be aware of the application of their state and local tax laws to investments in the Fund. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal tax treatment. Dividends declared in December of any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. -13- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. FEDERAL TRUST FUND SHARES The table below sets forth selected financial data for a Federal Trust Fund Share outstanding throughout each year presented. YEAR ENDED OCTOBER 31 ---------------------
1998 1997 1996 1995 1994 ----------- ------------ ------------ ------------- ------------- Net Asset Value, Beginning of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Period -------- -------- -------- -------- -------- Income from Investment Operations Net Investment Income .0529 .0521 .0523 .0563 .0380 Net Gains or Losses on Securities -- -- -- -- -- (both realized and -------- -------- -------- -------- -------- unrealized) .0529 .0521 .0523 .0563 .0380 -------- -------- -------- -------- -------- Total From Investment Operations Less Distributions Dividends (from net investment income) (.0529) (.0521) (.0523) (.0563) (.0380) Distributions (from capital gains) -- -- -- -- -- -------- -------- -------- -------- -------- Total Distributions (.0529 (.0521) (.0523) (.0563) (.0380) -------- -------- -------- -------- -------- Net Asset Value End of Period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return 5.42% 5.33% 5.35% 5.77% 3.87% Ratios/Supplement Data Net Assets, End of Year (000's) $280,580 $229,292 $273,752 $237,718 $317,769 Ratio of Expenses to Average Daily Net Assets .20%/1/ .20%/1/ .19%/1/ .18%/1/ .18%/1/ Ratio of Net Investment Income 5.29% 5.21% 5.22% 5.61% 3.85% to Average Daily Net Assets
_________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for Federal Trust Fund Shares would have been .29% for the year ended October 31, 1998, .31% for the years ended October 31, 1997 and 1996, .32% for the year ended October 31, 1995 and .31% for the year ended October 31, 1994. -14- FEDERAL TRUST FUND DOLLAR SHARES The table below sets forth selected financial data for a Federal Trust Fund Dollar Share outstanding throughout each year presented. YEAR ENDED OCTOBER 30, ----------------------
1998 1997 1996 1995 1994 ----------- ------------ ------------ ------------- -------------- Net Asset Value, Beginning of $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Period ------- ------- ------- ------- ------- Income from Investment Operations Net Investment Income .0504 .0496 .0498 .0538 .0355 Net Gains or Losses on Securities -- -- -- -- -- (both realized and ------- ------- ------- ------- ------- unrealized) .0504 .0496 .0498 .0538 .0355 ------- ------- ------- ------- ------- Total From Investment Operations Less Distributions Dividends (from net investment income) (.0504) (.0496) (.0498) (.0538) (.0355) Distributions (from capital gains) -- -- -- -- -- ------- ------- ------- ------- ------- Total Distributions (.0504) (.0496) (.0498) (.0538 (.0355) ------- ------- ------- ------- ------- Net Asset Value, End of Period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return 5.17% 5.08% 5.10% 5.52% 3.62% Ratios/Supplement Data $38,633 $38,700 $26,875 $28,402 $ 8,278 Net Assets, End of Year (000's) Ratio of Expenses to Average Daily Net Assets .45%/1/ .45%/1/ .44%/1/ .43%/1/ .43%/1/ Ratio of Net Investment Income to Average Daily Net Assets 5.04% 4.96% 4.97% 5.36% 3.60%
_________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for Federal Trust Fund Dollar Shares would have been .54% for the year ended October 31, 1998, .56% for the years ended October 31, 1997 and 1996, .57% for the year ended October 31, 1995 and .56% for the year ended October 31, 1994. -15- WHERE TO FIND MORE INFORMATION The Statement of Additional Information (the "SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354 -16- MUNIFUND AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS PROSPECTUS February __, 1999 Bellevue Park Corporate Center For purchase and redemption orders only 400 Bellevue Parkway call: 800-441-7450 (in Delaware: Wilmington, DE 19809 302-791-5350). For yield information call: 800-821-6006 (MuniFund Shares code: 50; MuniFund Dollar Shares code: 59). For other information call: 800-821-7432 or visit our web site at www.pif.com.
INVESTMENT ADVISER BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE.
TABLE OF CONTENTS PAGE ----------------- ---- RISK/RETURN SUMMARY............................................ Investment Goal........................................... Investment Policies....................................... Principal Risks of Investing.............................. Who May Want to Invest in the Fund........................ Performance Information................................... Fees and Expenses......................................... INVESTMENT STRATEGIES AND RISK DISCLOSURE...................... MANAGEMENT OF THE FUND......................................... SHAREHOLDER INFORMATION........................................ Price of Fund Shares...................................... Purchase of Shares........................................ Redemption of Shares...................................... Distribution and Shareholder Service Plans................ Dividends and Distributions............................... Taxes..................................................... FINANCIAL HIGHLIGHTS...........................................
-2- RISK/RETURN SUMMARY INVESTMENT GOAL: The Fund seeks as high a level of current interest income exempt from federal income tax as is consistent with relative stability of principal. INVESTMENT POLICIES: The Fund invests in a broad range of short-term tax-exempt obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their respective authorities, agencies, instrumentalities, and political subdivisions and tax-exempt derivative securities such as tender option bonds, participations, beneficial interests in trusts and partnership interests (collectively, "Municipal Obligations"). PRINCIPAL RISKS OF INVESTING: Although the Fund invests in money market instruments which the investment adviser, BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") believes present minimal credit risks at the time of purchase, there is a risk that an issuer may not be able to make principal and interest payments when due. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is also subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. -3- An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. WHO MAY WANT TO INVEST IN The Fund is designed for institutional investors THE FUND: seeking as high a level of current interest income exempt from federal income tax as is consistent with relative stability of principal. The Fund is particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. PERFORMANCE INFORMATION The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future.
MuniFund vs. IBC's Money Fund Report: Tax-Free Institutions - Only Money Fund Average MuniFund vs IBC's Money Fund Report: Tax-Free Institutions - Only Money Fund Average 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- MuniFund Shares 5.99 5.40 3.78 2.48 2.21 2.61 3.68 3.27 3.45 3.28 IBC's Money Fund Report: 6.16 5.69 4.53 2.85 2.20 2.62 3.62 3.19 3.36 3.19 Tax Free Institutions- Only Money Fund Average
During the ten-year period shown in the bar chart, the highest quarterly return was 6.49% (for the quarter ended March 31, 1989) and the lowest quarterly return was 2.09% (for the quarter ended December 31, 1993). -4- THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998
- ---------------------------------------------------------------- 1 Year 5 Years 10 Years - ---------------------------------------------------------------- MUNIFUND SHARES 3.28% 3.20% 3.61% - ---------------------------------------------------------------- MUNIFUND DOLLAR SHARES 3.03% 2.95% 3.36% - ---------------------------------------------------------------- IBC'S MONEY FUND REPORT: TAX-FREE INSTITUTIONS - ONLY MONEY FUND AVERAGE* 3.20% 3.20% 3.71% - ----------------------------------------------------------------
- ---------------------------------------------------------------- 7 DAY YIELD AS OF DECEMBER 31, 1998 - ---------------------------------------------------------------- MUNIFUND SHARES 3.51% - ---------------------------------------------------------------- MUNIFUND DOLLAR SHARES 3.26% - ---------------------------------------------------------------- IBC'S MONEY FUND REPORT: TAX-FREE INSTITUTIONS - ONLY MONEY FUND AVERAGE* 3.25% - ---------------------------------------------------------------- Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management Shares have not yet commenced operations, therefore no performance information has been provided for these classes. CURRENT YIELD: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its web site at www.pif.com. - ----------------------------- * IBC'S MONEY FUND REPORT: TAX-FREE INSTITUTIONS - ONLY MONEY FUND AVERAGE IS COMPRISED OF MONEY FUNDS INVESTING IN OBLIGATIONS OF TAX-EXEMPT ENTITIES, INCLUDING STATE AND MUNICIPAL AUTHORITIES. -5- FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
MUNIFUND - ----------------------------------------------------------------------------------------------------------------------------------- MUNIFUND MUNIFUND MUNIFUND DOLLAR MUNIFUND PLUS MUNIFUND CASH MUNIFUND CASH SHARES ADMINISTRATION SHARES SHARES SHARES RESERVES SHARES MANAGEMENT SHARES --------- --------------------- --------------- ------------- ---------------- ----------------- (estimated) (estimated) (estimated) (estimated) ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .17% .17% .17% .17% .17% .17% Distribution (12b-1) Fees -- -- -- .25% -- -- Other Expenses .24% .34% .49% .24% .64% .74% Administration Fees .17% .17% .17% .17% .17% .17% Shareholder Servicing Fees -- -- .25% -- .25% .25% Miscellaneous .07% .17% .07% .07% .22% .32% Total Annual Fund Operating Expenses(1) .41% .51% .66% .66% .81% .91% === === === === === === - ------------------------------------------------------------------------------------------------------------------------------------
(1) Total Annual Fund Operating Expenses for MuniFund Shares and MuniFund Dollar Shares for the fiscal year ended November 30, 1998, with fee waivers, were .27% and .52%, respectively, of the Fund's average net assets. Total Annual Fund Operating Expenses for MuniFund Adinistration Shares, MuniFund Plus Shares, MuniFund Cash Reserve Shares and MuniFund Cash Management Shares for the fiscal year ended November 30, 1998, with fee waivers, would have been .37% (estimated), .52% (estimated), .67% (estimated) and .77% (estimated), respectively, of the Fund's average net assets. The Adviser and PFPC Inc., the Fund's Co-administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers, but can terminate the waivers upon 120 days prior written notice to the Fund. -6- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: MUNIFUND
- ----------------------------------------------------------------------------------------------------------------------- MUNIFUND MUNIFUND MUNIFUND MUNIFUND MUNIFUND CASH MUNIFUND CASH SHARES ADMINISTRATION DOLLAR SHARES PLUS SHARES RESERVE SHARES MANAGEMENT SHARES SHARES (estimated) (estimated) (estimated) (estimated) - ----------------------------------------------------------------------------------------------------------------------- One Year $ 42 $ 52 $ 67 $ 67 $ 83 $ 93 Three years $132 $164 $211 $211 $ 259 $ 290 Five Years $230 $285 $368 $368 $ 450 $ 504 Ten Years $518 $640 $822 $822 $1,002 $1,120
-7- INVESTMENT STRATEGIES AND RISK DISCLOSURE The Fund is a money market fund. The investment objective of the Fund is to seek as high a level of current interest income exempt from federal income tax as is consistent with relative stability of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests substantially all its assets in a diversified portfolio of Municipal Obligations. The Fund will not knowingly purchase securities the interest on which is subject to regular federal income tax. Except during periods of unusual market conditions or during temporary defensive periods, the Fund invests substantially all, but in no event less than 80% of its total assets in Municipal Obligations with remaining maturities of 13 months or less as determined in accordance with the rules of the Securities and Exchange Commission. The Fund may hold uninvested cash reserves pending investment, during temporary defensive periods or if, in the opinion of the Adviser, suitable tax-exempt obligations are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested. Uninvested cash reserves will not earn income. The securities purchased by the Fund are also subject to the quality, diversification, and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the SEC. Pursuant to Rule 2a-7, the Fund generally will limit its purchase of any one issuer's securities (other than U.S. Government securities, repurchase agreements collaterialized by such securities and securities subject to certain guarantees or otherwise providing a right to demand payment) to 5% of the Fund's total assets, except that up to 25% of its total assets may be invested in the securities of one issuer for a period of up to three business days; provided that the Fund may not invest more than 25% of its total assets in the securities of more than one issuer in accordance with the foregoing at any one time. The Fund will only purchase securities that present minimal credit risk as determined by the Adviser pursuant to guidelines approved by the Board of Trustees of Provident Institutional Funds. Securities purchased by the Fund (or the issuers of such securities) will be First Tier Eligible Securities. Applicable First Tier Eligible Securities are: . securities that have short-term debt ratings at the time of purchase (or which are guaranteed or in some cases otherwise supported by guarantees or other credit supports with such ratings) in the highest rating category by at least two unaffiliated nationally recognized statistical rating organizations ("NRSROs") (or one NRSRO if the security or guarantee was rated by only one NRSRO); . securities that are issued or guaranteed by a person with such ratings; . securities without such short-term ratings that have been determined to be of comparable quality by the Adviser pursuant to guidelines approved by the Board of Trustees; or . securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest. -8- INVESTMENTS. The Fund's investments may include the following: Municipal Obligations. The Fund may purchase Municipal Obligations which are classified as "general obligation" securities and "revenue" securities. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved. While interest paid on private activity bonds will be exempt from regular federal income tax, it may be treated as a specific tax preference item under the federal alternative minimum tax. The portfolio may also include "moral obligation" bonds. Investment Company Securities. The Fund may invest in securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. Variable and Floating Rate Instruments. The Fund may purchase variable or floating rate notes, which are instruments that provide for adjustments in the interest rate on certain reset dates or whenever a specified interest rate index changes, respectively. When-Issued and Delayed Settlement Transactions. The Fund may purchase Municipal Obligations on a "when-issued" or "delayed settlement" basis. The Fund expects that commitments to purchase when-issued or delayed settlement securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. Stand-by Commitments. The Fund may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. The Fund will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes. Illiquid Securities. The Fund will not invest more than 10% of the value of its total assets in illiquid securities, including time deposits and repurchase agreements having maturities longer than seven days. Securities that have readily available market quotations are not deemed illiquid for purposes of this limitation. Other Types of Investments. This Prospectus describes the Fund's principal investment strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies in support of its overall investment goal. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. -9- RISK FACTORS. The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. Interest Rate Risk. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk. The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. government securities are generally considered to be the safest type of investment in terms of credit risk. Municipal obligations generally rank between U.S. government securities and corporate debt securities in terms of credit safety. Credit quality ratings published by an NRSRO are widely accepted measures of credit risk. The lower a security is rated by an NRSRO, the more credit risk it is considered to represent. Other Risks. Certain investment strategies employed by the Fund may involve additional investment risk. Liquidity risk involves certain securities which may be difficult or impossible to sell at the time and the price that the Fund would like. Municipal Obligations. Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance, and opinions relating to the validity of and the tax-exempt status of payments received by the Fund for tax-exempt derivative securities are rendered by counsel to the respective sponsors of such securities. The Adviser will rely on such opinions and will not review independently the underlying proceedings relating to the issuance of Municipal Obligations, the creation of any tax- exempt derivative securities, or the bases for such opinions. Year 2000. Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are actively taking steps to address the Year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other major service providers. While there can be assurance that the Fund's service providers will be Year 2000 compliant, the Fund's service providers expect that their plans to be compliant will be achieved. -10- MANAGEMENT OF THE FUND INVESTMENT ADVISER The Adviser, a wholly-owned indirect subsidiary of PNC Bank, serves as the Fund's investment adviser. The Adviser, with its affiliates, is one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended November 30, 1998, the Fund paid investment advisory fees and administration fees each aggregating .09% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these services are described further in the Statement of Additional Information under "Management of the Funds." SHAREHOLDER INFORMATION PRICE OF FUND SHARES The Fund's net asset value per share for purposes of pricing purchase and redemption orders is determined by PFPC Inc. ("PFPC"), the Funds co- administrator, as of 12:00 noon and 4:00 P.M., Eastern time, on each day on which both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. -11- PURCHASE OF SHARES Fund shares are sold at the net asset value per share next determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441- 7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted before 12:00 noon, Eastern time, for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M., Eastern time (or orders accepted earlier in the same day for which payment has not been received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been received by PNC Bank by that time. Orders received at other times, and orders for which payment has not been received by 4:00 P.M., Eastern time, will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) The Fund may in its discretion reject any order for shares. Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $3 million for MuniFund Shares; there is no minimum initial investment for Administration Shares, Dollar Shares, Plus Shares, Cash Reserve Shares or Cash Management Shares, however, broker-dealers and other institutional investors may set a minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may reduce the minimum initial investment for MuniFund Shares for specific institutions whose aggregate relationship with the Provident Institutional Funds is substantially equivalent to this $3 million minimum and warrants this reduction. Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in MuniFund Administration Shares, MuniFund Dollar Shares, MuniFund Plus Shares, MuniFund Cash Reserve Shares and MuniFund Cash Management Shares. (See also "Management of the Fund -- Service Organizations," as described in the Statement of Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in MuniFund Administration Shares, MuniFund Dollar Shares, MuniFund Plus Shares, MuniFund Cash Reserve Shares and MuniFund Cash Management Shares. (See also "Management of the Fund --Banking Laws," as described in the Statement of Additional Information). -12- REDEMPTION OF SHARES Redemption orders must be transmitted to PFPC in Wilmington, Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. Call 1-800-441-7450 (in Delaware: 302-791- 5350) to place redemption orders. Payment for redeemed shares for which a redemption order is received by PFPC by 12:00 P.M., Eastern time, on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received between 12:00 noon and 4:00 P.M., Eastern time, or on a day when PNC Bank is closed, is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. The Fund shall have the right to redeem shares in any account if the value of the account is less than $1,000 after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its account to $1,000 or more, no such redemption shall take place. Moreover, if a shareholder's MuniFund Shares account falls below an average of $100,000 in any particular calendar month, the account may be charged an account maintenance fee with respect to that month. In addition, the Fund may also redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." DISTRIBUTION AND SHAREHOLDER SERVICE PLANS The Fund offers six classes of shares. The difference between the classes of shares is the fees borne by a class of shares pursuant to separate fee plans adopted by each class. MuniFund Shares do not bear any fees for distribution, servicing, shareholder servicing, sweep fees or cash sweep marketing services. The fees borne by the other classes are as follows:
CASH SHAREHOLDER CASH SWEEP SERVICE SERVICE 12B-1 SWEEP MARKETING TOTAL CLASS FEE FEE FEE FEE FEE FEES ----- --- --- --- --- --- ---- - ------------------------------------------------------------------------------------------------------------- Administration Shares .10% -- -- -- -- .10% - ------------------------------------------------------------------------------------------------------------- Dollar Shares -- .25% -- -- -- .25% - ------------------------------------------------------------------------------------------------------------- Plus Shares -- -- .25% -- -- .25% - ------------------------------------------------------------------------------------------------------------- Cash Reserve Shares .10% .25% -- .05% -- .40% - ------------------------------------------------------------------------------------------------------------- Cash Management Shares .10% .25% -- .05% .10% .50% - ------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------
Service Fees are paid for general shareholder liaison services. Shareholder Service Fees are paid for services relating to the processing and administration of shareholder accounts. The Fund has adopted a plan pursuant to Rule 12b-1. 12b-1 Fees are paid for distribution and sales support, and shareholder services. Cash Sweep Fees are paid for providing a sweep service into the Fund. Cash Sweep Marketing Fees are paid for providing marketing administrative activities in connection with the sweep program. Shares of the Fund are not sold to individuals, but may be sold to the following entities, which hold the shares for the accounts of their customers. Administration Shares. Dollar Shares, Cash Reserve Shares and Cash Management Shares are sold to institutional investors such as banks, saving and loan associations, and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"). Plus Shares are sold to broker-dealers. Because fees associated with the distribution and/or shareholder service plans are paid out of the Fund's assets on an ongoing basis, over time holders of the share classes described above may pay more than the economic equivalent of the maximum front-end sales charge permitted by NASD Regulation, Inc. -13- DIVIDENDS AND DISTRIBUTIONS The Fund declares dividends daily and distributes substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. TAXES The Fund's distributions will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Fund's investments, that a portion of the Fund's distributions could be taxable to shareholders as ordinary income or capital gains, but the Fund does not expect that this will be the case. Moreover, although the distributions are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state. Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Fund generally will not be deductible for federal income tax purposes. You should note that a portion of the exempt-interest dividends paid by the Fund may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal tax treatment. Dividends declared in December of any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should also consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. -14- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management Shares have not yet commenced operations, therefore no financial information has been provided for these classes. MUNIFUND SHARES The table below sets forth selected financial data for a MuniFund Share outstanding throughout each year presented. YEAR ENDED NOVEMBER 30, -----------------------
1998 1997 1996 1995 1994 ----------- ------------ ------------ ------------- ------------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from Investment Operations Net Investment Income .0327 .0338 .0326 .0360 .0255 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- -------- -------- -------- -------- -------- Total From Investment Operations .0327 .0338 .0326 .0360 .0255 -------- -------- -------- -------- -------- Less Distributions Dividends (from net investment income) (.0327) (.0338) (.0326) (.0360) (.0255) Distributions (from capital gains) -- -- -- -- -- -------- -------- -------- -------- -------- Total Distributions (.0327) (.0338) (.0326) (.0360) (.0255) -------- -------- -------- -------- -------- Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return 3.32% 3.43% 3.31% 3.66% 2.58% Ratios/Supplement Data Net Assets, End of Year (000's) $467,760 $536,794 $530,204 $720,318 $687,895 Ratio of Expenses to Average Daily Net Assets .25%/1/ .27%/1/ .27%/1/ .27%/1/ .26%/1/ Ratio of Net Investment Income to Average Daily Net Assets 3.26% 3.38% 3.26% 3.59% 2.53%
_________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for MuniFund Shares would have been .41% for the year ended November 30, 1998, .41% for the year ended November 30, 1997, .42% for the year ended November 30, 1996 and .41% for the years ended November 30, 1995 and 1994, respectively. -15- MUNIFUND DOLLAR SHARES The table below sets forth selected financial data for a MuniFund Dollar Share outstanding throughout each year presented. YEAR ENDED NOVEMBER 30, -----------------------
1998 1997 1996 1995 1994 ----------- ------------ ------------ ------------- ------------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from Investment Operations Net Investment Income .0302 .0313 .0301 .0335 .0230 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- -------- -------- -------- -------- -------- Total From Investment Operations .0302 .0313 .0301 .0335 .0230 -------- -------- -------- -------- -------- Less Distributions Dividends (from net investment income) (.0302) (.0313) (.0301) (.0335) (.0230) Distributions (from capital gains) -- -- -- -- -- -------- -------- -------- -------- -------- Total Distributions (.0302) (.0313) (.0301) (.0335) (.0230) -------- -------- -------- -------- -------- Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return 3.07% 3.18% 3.06% 3.14% 2.33% Ratios/Supplement Data Net Assets, End of Year (000's) $51,736 67,387 $ 61,396 $ 6,474 $ 2,785 Ratio of Expenses to Average Daily Net Assets .50%/1/ .52%/1/ .52%/1/ .52%/1/ .51%/1/ Ratio of Net Investment Income to Average Daily Net Assets 3.01% 3.13% 3.01% 3.34% 2.28%
_________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for MuniFund Dollar Shares would have been .66% for the year ended November 30, 1998, .66% for the year ended November 30, 1997, .67% for the year ended November 30, 1996 and .66% for the years ended November 30, 1995 and 1994, respectively. -16- [BACK COVER] WHERE TO FIND MORE INFORMATION The Statement of Additional Information (the "SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354 -17- MUNICASH AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS PROSPECTUS February __, 1999 Bellevue Park Corporate Center For purchase and redemption orders only call: 400 Bellevue Parkway 800-441-7450 (in Delaware: 302-791-5350). Wilmington, DE 19809 For yield information call: 800-821-6006 (MuniCash Shares code: 48; MuniCash Dollar Share code: 54). For other information call: 800-821-7432 or visit our web site at www.pif.com INVESTMENT ADVISER BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE. TABLE OF CONTENTS -----------------
PAGE ---- RISK/RETURN SUMMARY........................................... Investment Goal.......................................... Investment Policies...................................... Principal Risks of Investing............................. Who May Want to Invest in the Fund....................... Performance Information.................................. Fees and Expenses........................................ INVESTMENT STRATEGIES AND RISK DISCLOSURE..................... MANAGEMENT OF THE FUND........................................ SHAREHOLDER INFORMATION....................................... Price of Fund Shares..................................... Purchase of Shares....................................... Redemption of Shares..................................... Shareholder Service Plan................................. Dividends and Distributions.............................. Taxes.................................................... FINANCIAL HIGHLIGHTS..........................................
RISK/RETURN SUMMARY INVESTMENT GOAL: The Fund seeks as high a level of current interest income exempt from federal income tax as is consistent with relative stability of principal. INVESTMENT POLICIES: The Fund invests in a broad range of short-term tax-exempt obligations issued by or on behalf of states, territories, and possessions of the United States, the District of Columbia, and their respective authorities, agencies, instrumentalities, and political subdivisions and tax-exempt derivative securities such as tender option bonds, participations, beneficial interests in trusts and partnership interests (collectively, "Municipal Obligations"). PRINCIPAL RISKS OF INVESTING: Although the Fund invests in money market instruments which the investment adviser, BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") believes present minimal credit risks at the time of purchase, there is a risk that an issuer may not be able to make principal and interest payments when due. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is also subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. Although the Fund intends to invest its assets in tax-exempt obligations, the Fund is permitted to invest in private activity bonds and other securities which may be subject to the federal alternative minimum tax. An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. WHO MAY WANT TO INVEST IN The Fund is designed for institutional investors THE FUND: seeking as high a level of current interest income exempt from federal income tax as is consistent with relative stability of principal. The Fund is particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. PERFORMANCE INFORMATION The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future.
MuniCash vs. IBC's Money Fund Report: Tax-Free Institutions - Only Money Fund Average 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- MuniCash Shares 6.31 5.94 4.46 2.91 2.34 2.83 3.91 3.51 3.65 3.47 IBC's Money Fund Report: 6.16 5.69 4.53 2.85 2.20 2.62 3.62 3.19 3.36 3.19 Tax Free Institions- Only Money Fund Averge
During the ten-year period shown in the bar chart, the highest quarterly return was 6.76% (for the quarter ended June 30, 1989) and the lowest quarterly return was 2.25% (for the quarter ended March 31, 1994). -2- THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998
- -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------- MUNICASH SHARES 3.47% 3.42% 3.93% - -------------------------------------------------------------------------------- MUNICASH DOLLAR SHARES 3.22% 3.17% 3.68% - -------------------------------------------------------------------------------- IBC'S MONEY FUND REPORT: TAX-FREE INSTITUTIONS-ONLY MONEY FUND AVERAGE* 3.25% 3.20% 3.71% - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 7 DAY YIELD AS OF DECEMBER 31, 1998 - -------------------------------------------------------------------------------- MUNICASH SHARES 3.56% - -------------------------------------------------------------------------------- MUNICASH DOLLAR SHARES 3.31% - -------------------------------------------------------------------------------- IBC'S MONEY FUND REPORT: TAX-FREE INSTITUTIONS-ONLY MONEY FUND AVERAGE* 3.25% - --------------------------------------------------------------------------------
CURRENT YIELD: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its web site at www.pif.com. - ------------------------------- * IBC's Money Fund Report: Tax-Free Institutions-Only Money Fund Average is comprised of money funds investing in obligations of tax-exempt entities, including state and municipal authorities. -3- FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
MUNICASH - -------------------------------------------------------------------------------- MUNICASH MUNICASH SHARES DOLLAR SHARES -------------- ------------- ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .18% .18% --- --- Other Expenses .22% .47% --- --- Administration Fees .18% .18% --- --- Shareholder Servicing Fees __% .25% --- --- Miscellaneous .04% .04% --- --- Total Annual Fund Operating Expenses(1) .40% .65% === === - --------------------------------------------------------------------------------
(1) Total Annual Fund Operating Expenses for MuniCash Shares and MuniCash Dollar Shares for the fiscal year ended November 30, 1998, with fee waivers, would have been .18% and .43%, respectively, of the Fund's average net assets. The Adviser and PFPC Inc., the Fund's co-administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers, but can terminate the waivers upon 120 days prior written notice to the Fund. -4- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
MUNICASH - ------------------------------------------------------------------------ MUNICASH MUNICASH SHARES DOLLAR SHARES - ------------------------------------------------------------------------ One Year $ 41 $ 66 Three years $128 $208 Five Years $224 $362 Ten Years $505 $810 - ------------------------------------------------------------------------
-5- INVESTMENT STRATEGIES AND RISK DISCLOSURE The Fund is a money market fund. The investment objective of the Fund is to seek as high a level of current interest income exempt from federal income tax as is consistent with relative stability of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests substantially all of its assets in a diversified portfolio of Municipal Obligations. The Fund will not knowingly purchase securities the interest on which is subject to regular federal income tax. Except during periods of unusual market conditions or during temporary defensive periods, the Fund invests substantially all, but in no event less than 80% of its total assets in Municipal Obligations with remaining maturities of 13 months or less as determined in accordance with the rules of the Securities and Exchange Commission. The Fund may hold uninvested cash reserves pending investment, during temporary defensive periods or if, in the opinion of the Adviser, suitable tax-exempt obligations are unavailable. There is no percentage limitation on the amount of assets which may be held uninvested. Uninvested cash reserves will not earn income. The securities purchased by the Fund are also subject to the quality, diversification, and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the SEC. Pursuant to Rule 2a-7, the Fund generally will limit its purchase of any one issuer's securities (other than U.S. Government securities, repurchase agreements collaterialized by such securities and securities subject to certain guarantees or otherwise providing the right to demand payment) to 5% of the Fund's total assets, except that up to 25% of its total assets may be invested in the securities of one issuer for a period of up to three business days; provided that the Fund may not invest more than 25% of its total assets in the securities of more than one issuer in accordance with the foregoing at any one time. The Fund will only purchase securities that present minimal credit risk as determined by the Adviser pursuant to guidelines approved by the Board of Trustees of Provident Institutional Funds. Securities purchased by the Fund (or the issuers of such securities) will be Eligible Securities. Applicable Eligible Securities are: . securities that have short-term debt ratings at the time of purchase (or which are guaranteed or in some cases otherwise supported by guarantees or other credit supports with such ratings) in the two highest rating categories by at least two unaffiliated nationally recognized statistical rating organizations ("NRSROs") (or one NRSRO if the security or guarantee was rated by only one NRSRO); . securities that are issued or guaranteed by a person with such ratings; . securities without such short-term ratings that have been determined to be of comparable quality by the Adviser pursuant to guidelines approved by the Board of Trustees; or . shares of other open-end investment companies that invest in the type of obligations in which the Fund may invest. -6- INVESTMENTS. The Fund's investments may include the following: Municipal Obligations. The Fund may purchase Municipal Obligations which are classified as "general obligation" securities and "revenue" securities. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved. While interest paid on private activity bonds will be exempt from regular federal income tax, it may be treated as a specific tax preference item under the federal alternative minimum tax. The portfolio may also include "moral obligation" bonds. Investment Company Securities. The Fund may invest in securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. Variable and Floating Rate Instruments. The Fund may purchase variable or floating rate notes, which are instruments that provide for adjustments in the interest rate on certain reset dates or whenever a specified interest rate index changes, respectively. When-Issued and Delayed Settlement Transactions. The Fund may purchase Municipal Obligations on a "when-issued" or "delayed settlement" basis. The Fund expects that commitments to purchase when-issued or delayed settlement securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. Illiquid Securities. The Fund will not invest more than 10% of the value of its total assets in illiquid securities, including time deposits and repurchase agreements having maturities longer than seven days. Securities that have readily available market quotations are not deemed illiquid for purposes of this limitation. Stand-by Commitments. The Fund may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. The Fund will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes. Other Types of Investments. This Prospectus describes the Fund's principal investment strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies in support of its overall investment goal. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. -7- RISK FACTORS. The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. Interest Rate Risk. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk. The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. government securities are generally considered to be the safest type of investment in terms of credit risk. Municipal obligations generally rank between U.S. government securities and corporate debt securities in terms of credit safety. Credit quality ratings published by an NRSRO are widely accepted measures of credit risk. The lower a security is rated by an NRSRO, the more credit risk it is considered to represent. Other Risks. Certain investment strategies employed by the Fund may involve additional investment risk. Liquidity risk involves certain securities which may be difficult or impossible to sell at the time and the price that the Fund would like. Municipal Obligations. Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance, and opinions relating to the validity of and the tax-exempt status of payments received by the Fund for tax-exempt derivative securities are rendered by counsel to the respective sponsors of such securities. The Adviser will rely on such opinions and will not review independently the underlying proceedings relating to the issuance of Municipal Obligations, the creation of any tax- exempt derivative securities, or the bases for such opinions. Year 2000. Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are actively taking steps to address the Year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other major service providers. While there can be no assurance that the Fund's service providers will be Year 2000 compliant, the Fund's service providers expect that their plans to be compliant will be achieved. -8- MANAGEMENT OF THE FUND INVESTMENT ADVISER The Adviser, a wholly-owned indirect subsidiary of PNC Bank, serves as the Fund's investment adviser. The Adviser and its affiliates are one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended September 30, 1998, the Fund paid investment advisory fees and administration fees each aggregating .07% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these services are described further in the Statement of Additional Information under "Management of the Funds." SHAREHOLDER INFORMATION PRICE OF FUND SHARES The Fund's net asset value per share for purposes of pricing purchase and redemption orders is determined by PFPC Inc. ("PFPC"), the Funds co- administrator, as of 12:00 noon and 4:00 P.M., Eastern time, on each day on which both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. -9- PURCHASE OF SHARES Fund shares are sold at the net asset value per share next determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441- 7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted before 12:00 noon, Eastern time, for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian, will be executed at 12:00 noon. Orders accepted after 12:00 noon and before 2:30 P.M., Eastern time (or orders accepted earlier in the same day for which payment has not been received by 12:00 noon), will be executed at 4:00 P.M., Eastern time, if payment has been received by PNC Bank by that time. Orders received at other times, and orders for which payment has not been received by 4:00 P.M., Eastern time, will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) The Fund may in its discretion reject any order for shares. Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $3 million for MuniCash Shares and $5,000 for MuniCash Dollar Shares; however, broker-dealers and other institutional investors may set a higher minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may reduce the minimum initial investment for MuniCash Shares for specific institutions whose aggregate relationship with the Provident Institutional Funds is substantially equivalent to this $3 million minimum and warrants this reduction. Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in MuniCash Dollar Shares. (See also "Management of the Fund -- Service Organizations," as described in the Statement of Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in MuniCash Dollar Shares. (See also "Management of the Fund -- Banking Laws," as described in the Statement of Additional Information). -10- REDEMPTION OF SHARES Redemption orders must be transmitted to PFPC in Wilmington, Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. Call 1-800-441-7450 (in Delaware: 302-791- 5350) to place redemption orders. Payment for redeemed shares for which a redemption order is received by PFPC before 12:00 noon, Eastern time, on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received between 12:00 noon and 4:00 P.M., Eastern time, or on a day when PNC Bank is closed, is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. The Fund shall have the right to redeem shares in any account if the value of the account is less than $1,000 after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its account to $1,000 or more, no such redemption shall take place. Moreover, if a shareholder's MuniCash Shares account falls below an average of $100,000 in any particular calendar month, the account may be charged an account maintenance fee with respect to that month. In addition, the Fund may also redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." -11- SHAREHOLDER SERVICE PLAN Institutional investors, such as banks, savings and loan associations and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"), may purchase Dollar Shares. MuniCash Dollar Shares are identical in all respects to MuniCash Shares except that they bear the service fees described below and enjoy certain exclusive voting rights on matters relating to these fees. The Fund will enter into an agreement with each Service Organization which purchases Dollar Shares requiring it to provide support services to its customers who are the beneficial owners of such shares in consideration of the Fund's payment of .25% (on an annualized basis) of the average daily net asset value of the Dollar Shares held by the Service Organization for the benefit of customers. Such services, which are described more fully in the Statement of Additional Information under "Management of the Fund - Service Organizations," include aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with PFPC; processing dividend payments from the Fund on behalf of customers; providing information periodically to customers showing their positions in Dollar Shares; and providing sub-accounting or the information necessary for sub-accounting with respect to Dollar Shares beneficially owned by customers. Under the terms of the agreements, Service Organizations are required to provide to their customers a schedule of any fees that they may charge customers in connection with their investments in Dollar Shares. MuniCash Shares are sold to institutions that have not entered into servicing agreements with the Fund in connection with their investments. DIVIDENDS, CAPITAL GAINS AND DISTRIBUTIONS AND TAXES The Fund declares dividends daily and distributes substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Dividends are determined in the same manner for each class of shares of the Fund. MuniCash Dollar Shares bear all the expense of fees paid to Service Organizations, and as a result, at any given time, the dividend on MuniCash Dollar Shares will be approximately .25% lower than the dividend on MuniCash Shares. Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. -12- TAXES The Fund's distributions will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Fund's investments, that a portion of the Fund's distributions could be taxable to shareholders as ordinary income or capital gains, but the Fund does not expect that this will be the case. Moreover, although the distributions are exempt for federal income tax purposes, they will generally constitute taxable income for state and local income tax purposes except that, subject to limitations that vary depending on the state, distributions from interest paid by a state or municipal entity may be exempt from tax in that state. Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Fund generally will not be deductible for federal income tax purposes. You should note that a portion of the exempt-interest dividends paid by the Fund may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal tax treatment. Dividends declared in December of any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should also consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. -13- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by KPMG LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. MUNICASH SHARES The table below sets forth selected financial data for a MuniCash Share outstanding throughout each year presented. YEAR ENDED NOVEMBER 30, -----------------------
1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- --------- -------- -------- Income from Investment Operations Net Investment Income .0346 .0358 .0350 .0382 .0266 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- -------- -------- -------- ------- -------- Total From Investment Operations .0346 .0358 .0350 .0382 .0266 -------- -------- -------- ------- -------- Less Distributions Dividends (from net investment income) (.0346) (.0358) (.0350) (.0382) (.0266) Distributions (from capital gains) -- -- -- -- -- Total Distributions (.0346) (.0358) (.0350) (.0382) (.0266) -------- -------- -------- ------ ------- Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ====== ======== Total Return 3.51% 3.63% 3.56% 3.89% 2.69% Ratios/Supplement Data Net Assets, End of Period (000's) $500,254 $397,681 $281,544 $321,642 $273,439 Ratio of Expenses to Average Daily Net Assets .18%/1/ .18%/1/ .18%/1/ .18%/1/ .19%/1/ Ratio of Net Investment Income to Average Daily Net Assets 3.47%/1/ 3.58% 3.50% 3.83% 2.59%
_________________ /1/ Without the waiver of advisory and administration fees, the ratios of expenses to average daily net assets for MuniCash would have been .40% for the year ended November 30, 1998, .41% for the year ended November 30, 1997, .42% for the year ended November 30, 1996, .41% for the year ended November 30, 1995 and .42% for the year ended November 30, 1994. -14- MUNICASH DOLLAR SHARES The table below sets forth selected financial data for a MuniCash Dollar Share outstanding throughout each year presented. YEAR ENDED NOVEMBER 30, -----------------------
1998 1997 1996 1995 1994 ------- --------- --------- ---------- ---------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- -------- -------- -------- -------- Income from Investment Operations Net Investment Income .0321 .0333 .0325 .0357 .0241 Net Gains or Losses on Securities (both realized and unrealized) -- -- -- -- -- ------- ------- -------- -------- --------- Total From Investment Operations .0321 .0333 .0325 .0357 .0241 ------- -------- -------- -------- --------- Less Distributions Dividends (from net investment income) (.0321) (.0333) (.0325) (.0357) (.0241) Distributions (from capital gains) -- -- -- -- -- ------- -------- -------- -------- --------- Total Distributions (.0321) (.0333) (.0325) (.0357) (.0241) Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======== ======== ======== ======== Total Return 3.26% 3.38% 3.31% 3.64% 2.44% Ratios/Supplement Data $91,404 $150,089 $101,528 $101,424 $ 99,688 Net Assets, End of Year (000's) Ratio of Expenses to Average Daily Net Assets .43%/1/ .43%/1/ .43%/1/ .43%/1/ .44%/1/ Ratio of Net Investment Income to Average Daily Net Assets 3.22% 3.33% 3.25% 3.58% 2.34%
_________________ /1/ Without the waiver of advisory and administration fees, the ratios of expenses to average daily net assets would have been .65% for the year ended November 30, 1998, .66% for the year ended November 30, 1997, .67% for the year ended November 30, 1996, .66% for the year ended November 30, 1995 and .67% for the year ended November 30, 1994. -15- WHERE TO FIND MORE INFORMATION The Statement of Additional Information (the "SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354 -16- CALIFORNIA MONEY FUND AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS PROSPECTUS February __, 1999 Bellevue Park Corporate Center For purchase and redemption orders only 400 Bellevue Parkway call: 800-441-7450 (in Delaware: Wilmington, DE 19809 302-791-5350). For yield information call: 800-821-6006 (Money Shares code: 52; Dollar Shares code: 57; Plus Shares code: 58). For other information call: 800-821-7432 or visit our web site at www.pif.com. INVESTMENT ADVISER BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE. TABLE OF CONTENTS -----------------
Page RISK/RETURN SUMMARY.............................. Investment Goal............................. Principal Investment........................ Principal Risks of Investing................ Who May Want to Invest in the Fund.......... Performance Information..................... Fees and Expenses........................... INVESTMENT STRATEGIES AND RISK DISCLOSURE........ MANAGEMENT OF THE FUND........................... SHAREHOLDER INFORMATION.......................... Price of Fund Shares........................ Purchase of Shares.......................... Redemption of Shares........................ Distribution and Shareholder Service Plans.. Dividends and Distributions................. Taxes....................................... FINANCIAL HIGHLIGHTS.............................
-i- RISK/RETURN SUMMARY INVESTMENT GOAL: The Fund seeks to provide investors with as high a level of current interest income that is exempt from federal income tax and, to the extent possible, from California State personal income tax as is consistent with the preservation of capital and relative stability of principal. INVESTMENT POLICIES: The Fund invests primarily in debt obligations issued by or on behalf of the State of California and other states, territories, and possessions of the United States, the District of Columbia, and their respective authorities, agencies, instrumentalities and political subdivisions, and tax-exempt derivative securities such as tender option bonds, participations, beneficial interests in trusts and partnership interests ("Municipal Obligations"). Dividends paid by the Fund that are derived from interest on obligations that is exempt from taxation under the Constitution or statutes of California ("California Municipal Obligations") are exempt from regular federal, California State personal income tax. California Municipal Obligations include municipal securities issued by the State of California and its political sub-divisions, as well as certain other governmental issuers such as the Commonwealth of Puerto Rico. PRINCIPAL RISKS OF INVESTING: Although the Fund invests in money market instruments which the investment adviser, BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") believes present minimal credit risks at the time of purchase, there is a risk that an issuer may not be able to make principal and interest payments when due. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is also subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. Because the Fund concentrates its investments in California Municipal Obligations, it is classified as non-diversified. This means that it may invest a greater percentage of its assets in a particular issuer, and that its performance will be dependent upon a smaller category of securities than a diversified portfolio. Accordingly, the Fund may experience greater fluctuations in net asset value and may have greater risk of loss. Dividends derived from interest on Municipal Obligations other than California Municipal Obligations are exempt from federal income tax but may be subject to California State personal income tax. An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. WHO MAY WANT TO INVEST IN The Fund is designed for California institutional THE FUND: investors and their customers seeking as high a level of current interest income that is exempt from federal income tax and, to the extent possible, from California personal income tax as is consistent with the preservation of capital and relative stability of principal. The Fund is particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. -2- PERFORMANCE INFORMATION The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future.
California Money Fund vs. IBC's Money Fund Report: California State Specific Tax-Free Institutions- Only Money Fund Average 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- California Money Shares 5.97 5.29 3.94 2.61 2.26 2.73 3.64 3.21 3.39 3.13 IBC's Money Fund Report:California State 5.89 5.44 4.18 2.69 2.17 2.54 3.41 3.03 3.20 2.91 Specific Tax-Free Institutions-Only Money Fund Average
During the ten-year period shown in the bar chart, the highest quarterly return was 6.35% (for the quarter ended June 30, 1989) and the lowest quarterly return was 2.13% (for the quarter ended March 31, 1993). -3- THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31
1 Year 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------ MONEY SHARES 3.13% 3.24% 3.62% - ------------------------------------------------------------------------------------------------------------ DOLLAR SHARES 2.88% 2.99% 3.37% - ------------------------------------------------------------------------------------------------------------ PLUS SHARES (estimated) 2.88% 2.99% 3.37% - ------------------------------------------------------------------------------------------------------------ IBC'S MONEY FUND REPORT: CALIFORNIA STATE SPECIFIC TAX-FREE INSTITUTIONS-ONLY MONEY FUND AVERAGE* 2.91% 3.01% 3.54% - ------------------------------------------------------------------------------------------------------------
7 DAY YIELD AS OF DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------------------------------- MONEY SHARES 3.34% - ------------------------------------------------------------------------------------------------------------------- DOLLAR SHARES 3.09% - ------------------------------------------------------------------------------------------------------------------- PLUS SHARES (estimated) 3.09% - ------------------------------------------------------------------------------------------------------------------- IBC'S MONEY FUND REPORT: CALIFORNIA STATE SPECIFIC TAX-FREE INSTITUTIONS - -ONLY MONEY FUND AVERAGE* 3.03% - -------------------------------------------------------------------------------------------------------------------
Administration Shares, Cash Reserve Shares and Cash Management Shares have not yet commenced operations, therefore no performance information has been provided for these classes. CURRENT YIELD: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its web site at www.pif.com. - ------------------------- * IBC's Money Fund Report: California State Specific Tax-Free Intitutions- Only Money Fund Average is comprised of money funds investing in tax- exempt obligations of California State. -4- FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund CALIFORNIA MONEY FUND - -------------------------------------------------------------------------
MONEY DOLLAR PLUS CASH RESERVE SHARES ADMINISTRATION SHARES SHARES SHARES SHARES ------ --------------------- ------ ------ ------------ (ESTIMATED) (ESTIMATED) (ESTIMATED) ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .20% .20% .20% .20% .20% Distribution (12b-1) Fees -- -- -- .25% -- Other Expenses .26% .36% .51% .26% .66% Administration Fees .20% .20% .20% .20% .20% Shareholder Servicing Fees -- -- .25% -- .25% Miscellaneous .06% .16% .06% .06% .21% Total Annual Fund Operating Expenses(1) .46% .56% .71% .71% .86% === === === === === CASH MANAGEMENT SHARES --------------- (ESTIMATED) ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .20% Distribution (12b-1) Fees -- Other Expenses .76% Administration Fees .20% Shareholder Servicing Fees .25% Miscellaneous .31% Total Annual Fund Operating Expenses(1) .96% ===
- ----------------------------------------------- (1) Total Annual Fund Operating Expenses for Money Shares and Dollar Shares for the fiscal year ended January 31, 1998, with fee waivers, were .20% and .45%, respectively, of the Fund's average net assets. Total Annual Fund Operating Expenses for Administration Shares, Plus Shares, Cash Reserve Shares and Cash Management Shares for the fiscal year ended January 31, 1998, with fee waivers, would have been .30% (estimated), .45% (estimated), .60% (estimated) and .70% (estimated), respectively, of the Fund's average net assets. The Adviser and PFPC Inc., the Fund's co-administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers. -5- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: CALIFORNIA MONEY FUND ---------------------
MONEY SHARES ADMINISTRATION DOLLAR SHARES PLUS SHARES CASH RESERVE CASH MANAGEMENT SHARES (estimated) SHARES SHARES (estimated) (estimated) (estimated) - ------------------------------------------------------------------------------------------------------------------ One Year $ 47 $ 57 $ 73 $ 73 $ 88 $ 98 Three years $148 $179 $227 $227 $ 274 $ 306 Five Years $258 $313 $395 $395 $ 477 $ 531 Ten Years $579 $701 $883 $883 $1,061 $1,178 - ------------------------------------------------------------------------------------------------------------------
-6- INVESTMENT STRATEGIES AND RISK DISCLOSURE The Fund is a money market fund. The investment objective of the Fund is to provide investors with as high a level of current interest income that is exempt from federal income tax and, to the extent possible, from California State personal income tax as is consistent with the preservation of capital and relative stability of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests primarily in California Municipal Obligations. Substantially all of the Fund's assets are invested in Municipal Obligations. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, the Fund's assets will be invested primarily in California Municipal Obligations. At least 50% of the Fund's assets must be invested in obligations which, when held by an individual, the interest therefrom is exempt from California personal income taxation (i.e., California Municipal Obligations and certain U.S. Government obligations) at the close of each quarter of its taxable year so as to permit the Fund to pay dividends that are exempt from California State personal income tax. Dividends, regardless of their source, may be subject to local taxes. The Fund will not knowingly purchase securities the interest on which is subject to federal income tax; however, the Fund may hold uninvested cash reserves pending investment during temporary defensive periods or, if in the opinion of the Adviser, suitable tax-exempt obligations are unavailable. Uninvested cash reserves will not earn income. The Fund invests in Municipal Obligations which are determined by the Adviser to present minimal credit risk pursuant to guidelines approved by the Board of Trustees of Provident Institutional Funds pursuant to Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the Securities and Exchange Commission. Pursuant to Rule 2a-7, the Fund is authorized to purchase instruments that are determined to have minimum credit risk and are Eligible Securities. Applicable Eligible Securities are: . instruments which are rated at the time of purchase (or which are guaranteed or in some cases otherwise supported by guarantees or other credit supports with such ratings) in one of the top two rating categories by two unaffiliated nationally recognized statistical rating organizations ("NRSRO") (or one NRSRO if the security or guarantee was rated by only one NRSRO); . instruments issued or guaranteed by persons with short-term debt having such ratings; . unrated instruments determined by the Adviser, pursuant to procedures approved by the Board of Trustees, to be of comparable quality to such instruments; and . shares of other open-end investment companies that invest in the type of obligations in which the Fund may invest. -7- INVESTMENTS. The Fund's investments may include the following: Municipal Obligations. The Fund may purchase Municipal Obligations which are classified as "general obligation" securities and "revenue" securities. Revenue securities may include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved. While interest paid on private activity bonds will be exempt from regular federal income tax, it may be treated as a specific tax preference item under the federal alternative minimum tax. The portfolio may also include "moral obligation" securities. Variable and Floating Rate Instruments. The Fund may purchase variable or floating rate notes issued by industrial development authorities and other governmental entities, which are instruments that provide for adjustments in the interest rate on certain reset dates or whenever a specified interest rate index changes, respectively. When-Issued and Delayed Settlement Transactions. The Fund may purchase securities on a "when-issued" or "delayed settlement" basis. The Fund expects that commitments to purchase when-issued or delayed settlement securities will not exceed 25% of the value of its total assets absent unusual market conditions and that commitments by the Fund to purchase when-issued securities will not exceed 45 days. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. Stand-by Commitments. The Fund may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. The Fund will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes. Investment Company Securities. The Fund may invest in securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. Illiquid Securities. The Fund will not invest more than 10% of the value of its total assets in illiquid securities, which may be illiquid due to legal or contractual restrictions on resale or the absence of readily available market quotations. Securities that have readily available market quotations are not deemed illiquid for purposes of this limitation. Other Types of Investments. This Prospectus describes the Fund's principal investment strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies in support of its overall investment goal. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. RISK FACTORS. The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. -8- Interest Rate Risk. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk. The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. government securities are generally considered to be the safest type of investment in terms of credit risk. Municipal obligations generally rank between U.S. government securities and corporate debt securities in terms of credit safety. Credit quality ratings published by a NRSRO are widely accepted measures of credit risk. The lower a security is rated by a NRSRO the more credit risk it is considered to represent. Other Risks. Certain investment strategies employed by the Fund may involve additional investment risk. Liquidity risk involves certain securities which may be difficult or impossible to sell at the time and the price that the Fund would like. Municipal Obligations. Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax are rendered by bond counsel to the respective issuers at the time of issuance, and opinions relating to the validity of and the tax-exempt status of payments received by the Fund for tax-exempt derivative securities are rendered by counsel to the respective sponsors of such securities. The Adviser will rely on such opinions and will not review independently the underlying proceedings relating to the issuance of Municipal Obligations, the creation of any tax- exempt derivative securities, or the bases for such opinions. Special Considerations Affecting the Fund. The Fund is concentrated in securities issued by the State of California or entities within the State of California and therefore, investment in the Fund may be riskier than an investment in other types of money market funds. The Fund's ability to achieve its investment objective is dependent upon the ability of the issuers of California Municipal Obligations to timely meet their continuing obligations with respects to the Municipal Obligations. Any reduction in the creditworthiness of issuers of California Municipal Obligations could adversely affect the market values and marketability of California Municipal Obligations, and, consequently, the net asset value of the Fund's portfolio. General obligation bonds of the state of California are currently rated A+ and A1, respectively, by Standard & Poor's Ratings Services and Moody's Investors Service, Inc. Certain California constitutional amendments, legislative measures, executive orders, administrative regulations and voter initiatives could result in certain adverse consequences affecting California Municipal Obligations. Significant financial and other considerations relating to the Fund's investments in California Municipal Obligations are summarized in the Statement of Additional Information. The Fund may invest more than 25% of its assets in Municipal Obligations the interest on which is paid solely from revenues of similar projects if such investment is deemed necessary or appropriate by the Fund's Adviser. To the extent that the Fund's assets are concentrated in Municipal Obligations payable from revenues on similar projects, the Fund will be subject to the -9- peculiar risks presented by such projects to a greater extent than it would be if the Fund's assets were not so concentrated. Year 2000. Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are taking steps to address the year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other service providers. While there can be no assurance that the Fund's service providers will be Year 2000 compliant, the Fund's service providers expect that their plan to be compliant will be achieved. MANAGEMENT OF THE FUND INVESTMENT ADVISER The Adviser, a wholly-owned indirect subsidiary of PNC Bank, serves as the Fund's investment adviser. The Adviser and its affiliates are one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended January 31, 1998, the Fund paid investment advisory fees and administration fees each aggregating .07% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these services are described further in the Statement of Additional Information under "Management of the Funds." SHAREHOLDER INFORMATION PRICE OF FUND SHARES The Fund's net asset value per share for purposes of pricing purchase and redemption orders is determined by BIMC, the Funds adviser, as of 12:00 noon and 4:00 P.M., Eastern time, (9:00 A.M. and 1:00 P.M., Pacific Time) on each day on which both the California Stock -10- Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. PURCHASE OF SHARES Fund shares are sold at the net asset value per share next determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441- 7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted by 12:00 noon, Eastern time (9:00 A.M., Pacific Time), for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian by 4:00 P.M., Eastern Time (1:00 P.M., Pacific Time), will be executed the same day. Orders received after 12:00 noon Eastern Time (9:00 A.M., Pacific Time) and orders for which payment has not been received by 4:00 P.M. Eastern Time (1:00 P.M., Pacific Time), will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $5,000; however, broker-dealers and other institutional investors may set a higher minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may limit or reject any order for shares. Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in Administration Shares, Dollar Shares, Plus Shares, Cash Reserve Shares or Cash Management Shares. (See also "Management of the Fund -- Service Organizations," as described in the Statement of Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in Administration Shares, Dollar Shares, Plus Shares, Cash Reserve Shares or Cash Management Shares. (See also -11- "Management of the Fund -- Banking Laws," as described in the Statement of Additional Information). REDEMPTION OF SHARES Redemption orders must be transmitted to PFPC in Wilmington, Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. (Call 1-800-441-7450 (in Delaware: 302-791- 5350) to place redemption orders). Payment for redeemed shares for which a redemption order is accepted by PFPC prior to Noon, Eastern time (9:00 A.M., Pacific Time), on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received after Noon, Eastern time or on a day when PNC Bank is closed, is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. The Fund shall have the right to redeem shares in any Fund account if the value of the account is less than $500, after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its Fund account to $500 or more, no such redemption shall take place. In addition, the Fund may also redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." DISTRIBUTION AND SHAREHOLDER SERVICE PLANS The Fund offers six classes of shares. The difference between the classes of shares is the fees borne by a class of shares pursuant to separate fee plans adopted by each class. California Money Fund Shares do not bear any fees for distribution, servicing, shareholder servicing, sweep fees or cash sweep marketing services. The fees borne by the other classes are as follows:
- ------------------------------------------------------------------------------- CASH SHAREHOLDER CASH SWEEP SERVICE SERVICE 12B-1 SWEEP MARKETING TOTAL CLASS FEE FEE FEE FEE FEE FEES ----- --- --- --- --- --- ---- - ------------------------------------------------------------------------------- Administration Shares .10% -- -- -- -- .10% - ------------------------------------------------------------------------------- Dollar Shares -- .25% -- -- -- .25% - ------------------------------------------------------------------------------- Plus Shares -- -- .25% -- -- .25% - ------------------------------------------------------------------------------- Cash Reserve Shares .10% .25% -- .05% -- .40% - ------------------------------------------------------------------------------- Cash Management Shares .10% .25% -- .05% .10% .50% - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Service Fees are paid for general shareholder liaison services. Shareholder Service Fees are paid for services relating to the processing and administration of shareholder accounts. The Fund has adopted a plan pursuant to Rule 12b-1. 12b-1 Fees are paid for distribution and sales support, and shareholder services. Cash Sweep Fees are paid for providing a sweep service into the Fund. Cash Sweep Marketing Fees are paid for providing marketing administrative activities in connection with the sweep program. Shares of the Fund are not sold to individuals, but may be sold to the following entities, which hold the shares for the accounts of their customers. Administration Shares. Dollar Shares, Cash Reserve Shares and Cash Management Shares are sold to institutional investors such as banks, saving and loan associations, and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"). Plus Shares are sold to broker-dealers. Because fees associated with the distribution and/or shareholder service plans are paid out of the Fund's assets on an ongoing basis, over time holders of the share classes described above may pay more than the economic equivalent of the maximum front-end sales charge permitted by NASD Regulation, Inc. -12- Plus Shares may be requested to provide from time to time assistance (such as the forwarding of sales literature and advertising to their customers) in connection with the distribution of Plus Shares. Under the terms of the agreements, Service Organizations are required to provide to their customers a schedule of any fees that they may charge customers in connection with their investments in Dollar or Plus Shares. Money Shares are sold to institutions that have not entered into servicing agreements with the Fund in connection with their investments. DIVIDENDS AND DISTRIBUTIONS The Fund declares dividends daily and distributes substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Dividends are determined in the same manner for each class of shares of the Fund. Dollar and Plus Shares bear all the expense of fees paid to Service Organizations, and as a result, at any given time, the dividend on Dollar or Plus Shares will be approximately .25% lower than the dividend on Money Shares. Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. TAXES The Fund's distributions will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Fund's investments, that a portion of the Fund's distributions could be taxable to shareholders as ordinary income or capital gains, but the Fund does not expect that this will be the case. Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Fund generally will not be deductible for federal income tax purposes. You should note that a portion of the exempt-interest dividends paid by the Fund may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes. Dividends that are paid by the Fund to non-corporate shareholders and are derived from interest on California Municipal Obligations or certain U.S. Government obligations are also exempt from California state personal income tax. However, dividends paid to corporate shareholders subject to California state franchise tax or California state corporate income tax will be taxed as ordinary income to such shareholders, notwithstanding that all or a portion of such dividends is exempt from California state personal income tax. Moreover, to the extent that the Fund's dividends are derived from interest on debt obligations other than California Municipal Obligations or certain U.S. Government obligations such dividends will be subject to California state personal income tax, even though such dividends may be exempt for Federal income tax purposes. Dividends derived from U.S. Government obligations generally will be exempt from state and local tax as well. However, except as noted with respect to California state personal income tax, in some situations distributions of net investment income may be taxable to investors under state or local law as dividend income even though all or a portion of such distributions may be derived from interest on tax-exempt obligations which, if realized directly, would be exempt from such income taxes. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal and California tax treatment. Dividends declared in the last quarter of any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should also consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. -13- -14- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information, except for the 6 month period ended July 31, 1998, has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. No Plus Shares were issued or outstanding during the periods covered by these financial highlights. Administration Shares, Cash Reserve Shares and Cash Management Shares have not yet commenced operations, therefore no financial information has been provided for these classes. MONEY SHARES The table below sets forth selected financial data for a Money Share outstanding throughout each year presented.
YEAR ENDED JANUARY 31, ---------------------- 6 MONTH PERIOD ENDED JULY 31, 1998 1998 1997 1996 1995 1994 ------------- ------------------------------------------------------------- Net Asset Value, Beginning of Period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income............................ .0159 0.0334 0.0316 0.0356 0.0281 0.0223 -------- -------- -------- -------- -------- -------- Net Gains or Losses on Securities (both realized and unrealized)................... -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total From Investment Operations................. .0159 0.0334 0.0316 0.0356 0.0281 0.0223 -------- -------- -------- -------- -------- -------- Less Distributions Dividends (from net investment income).......................................... (.0159) (0.0334) (0.0316) (0.0356) (0.0281) (0.0223) -------- -------- -------- -------- -------- -------- Distributions (from capital gains)............... -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total Distributions.............................. (.0159) (0.0334) (0.0316) (0.0356) (0.0281) (0.0223) -------- -------- -------- -------- -------- -------- Net Asset Value, End of Period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== ======== Total Return..................................... 3.23%/2/ 3.39% 3.21% 3.62% 2.84% 2.25% Ratios/Supplemental Data: Net Assets, End of Year $(000's)................. $513,797 $460,339 $326,521 $389,883 $385,824 $356,501 Ratios of Expenses to Average Daily Net Assets/1/...................................... 20%/2/ .20% .20% .20% .20% .20% Ratios of Net Investment Income to Average Daily Net Assets......................... 3.19%/2/ 3.34% 3.15% 3.55% 2.79% 2.23%
__________________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for Money Shares would have been .46% for the six months ended July 31, 1998, .46% for the year ended January 31, 1998, .48% for the years ended January 31, 1997, 1996 and 1995, respectively, and .49% for the year ended January 31, 1994. /2/ Annualized. -15- DOLLAR SHARES The table below sets forth selected financial data for a Dollar Share outstanding throughout each year presented. YEAR ENDED JANUARY 31, ----------------------
6 MONTH PERIOD ENDED JULY 31, 1998 1998 1997 1996 1995 1994 ------------- ----------------------------------------------------------- Net Asset Value, Beginning of Period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- ------- -------- Income From Investment Operations Net Investment Income............................ .0147 0.0309 0.0291 0.0331 0.0256 0.0198 -------- -------- -------- -------- ------- -------- Net Gains or Losses on Securities (both realized and unrealized)................. -- -- -- -- -- -- -------- -------- -------- -------- ------- -------- Total From Investment Operations................. .0147 0.0309 0.0291 0.0331 0.0256 0.0198 -------- -------- -------- -------- ------- -------- Less Distributions Dividends (from net investment income)....................................... (.0147) (0.0309) (0.0291) (0.0331) 0.0256 (0.0198) -------- -------- -------- -------- ------- -------- Distributions (from capital gains)............... -- -- -- -- -- -- -------- -------- -------- -------- ------- -------- Total Distributions.............................. (.0147) (0.0309) (0.0291) (0.0331) 0.0256 (0.0198) -------- -------- -------- -------- ------- -------- Net Asset Value, End of Period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======= ======== Total Return..................................... 2.98%/2/ 3.14% 2.96% 3.37% -- 2.00% Ratios/Supplemental Data Net Assets, End of Year $(000's)................. $108,221 $130,547 $126,321 $ 31,163 $11,026 $ 19,098 Ratios of Expenses to Average Daily Net Assets/1/....................................... .45%/2/ .45% .45% .45% .45% .45% Ratios of Net Investment Income to Average Daily Net Assets......................... 2.96%/2/ 3.09% 2.90% 3.30% 2.54% 1.98%
_________________________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for Dollar Shares would have been .71% for the six months ended July 31, 1998, .71% for the year ended January 31, 1998, .73% for the years ended January 31, 1997, 1996 and 1995, respectively and .74% for the year ended January 31, 1994. /2/ Annualized. -16- -17- WHERE TO FIND MORE INFORMATION The Statement of Additional Information (the "SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354 -18- NEW YORK MONEY FUND AN INVESTMENT PORTFOLIO OFFERED BY PROVIDENT INSTITUTIONAL FUNDS PROSPECTUS February __, 1998 Bellevue Park Corporate Center For purchase and redemption orders only 400 Bellevue Parkway call: 800-441-7450 (in Delaware: Wilmington, DE 19809 302-791-5350). For yield information call: 800-821-6006 (Money Shares code: 53; Dollar Shares code: 55; Plus Shares code: 56). For other information call: 800-821-7432 or visit our web site at www.pif.com. INVESTMENT ADVISER BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE FUND'S SHARES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO STATE OTHERWISE. TABLE OF CONTENTS -----------------
PAGE ---- RISK/RETURN SUMMARY..................................................... Investment Goal.................................................... Investment Policies................................................ Principal Risks of Investing....................................... Who May Want to Invest in the Fund................................. Performance Information............................................ Fees and Expenses.................................................. INVESTMENT STRATEGIES AND RISK DISCLOSURE............................... MANAGEMENT OF THE FUND.................................................. SHAREHOLDER INFORMATION................................................. Price of Fund Shares............................................... Purchase of Shares................................................. Redemption of Shares............................................... Shareholder Service and Distribution Plans......................... Dividends and Distributions........................................ Taxes.............................................................. FINANCIAL HIGHLIGHTS....................................................
RISK/RETURN SUMMARY INVESTMENT GOAL: The Fund seeks to provide investors with as high a level of current interest income that is exempt from federal income tax and, to the extent possible, from New York State and New York City personal income taxes as is consistent with the preservation of capital and relative stability of principal. INVESTMENT POLICIES: The Fund invests primarily in debt obligations issued by or on behalf of the State of New York. We may also invest in debt obligations issued by or on behalf of other states, territories, and possessions of the United States, the District of Columbia, and their respective authorities, agencies, instrumentalities and political subdivisions, and tax-exempt derivative securities such as tender option bonds, participations, beneficial interests in trusts and partnership interests ("Municipal Obligations"). Dividends paid by the Fund that are derived from interest on obligations that is exempt from taxation under the Constitution or statutes of New York ("New York Municipal Obligations") are exempt from regular federal, New York State and New York City personal income tax. New York Municipal Obligations include municipal securities issued by the State of New York and its political sub-divisions, as well as certain other governmental issuers such as the Commonwealth of Puerto Rico. PRINCIPAL RISKS OF INVESTING: Although the Fund invests in money market instruments which the investment adviser, BlackRock Institutional Management Corporation ("BIMC," or the "Adviser") believes present minimal credit risks at the time of purchase, there is a risk that an issuer may not be able to make principal and interest payments when due. While the Fund seeks to maintain a constant net asset value of $1.00 per share, the Fund is also subject to risks related to changes in prevailing interest rates, since generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. Because the Fund concentrates its investments in New York Municipal Obligations, it is classified as non- diversified. This means that it may invest a greater percentage of its assets in a particular issuer, and that its performance will be dependent upon a smaller category of securities than a diversified portfolio. Accordingly, the Fund may experience greater fluctuations in net asset value and may have greater risk of loss. Dividends derived from interest on Municipal Obligations other than New York Municipal Obligations are exempt from federal income tax but may be subject to New York State and New York City personal income tax. An investment in the Fund is not a deposit in PNC Bank, N.A. and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. WHO MAY WANT TO INVEST IN THE FUND: The Fund is designed for institutional investors and their customers seeking as high a level of current interest income that is exempt from federal income tax and, to the extent possible, from New York State and New York City personal income taxes as is consistent with the preservation of capital and relative stability of principal. The Fund is particularly suitable for banks, corporations and other financial institutions that seek investment of short-term funds for their own accounts or for the accounts of their customers. -2- PERFORMANCE INFORMATION The Bar Chart and the Table below indicate the risks of investing in the Fund by showing how the performance of the Fund has varied from year to year. The Table shows how the Fund's average annual return for one, five and ten years compares to that of a selected market index. The Bar Chart and the Table assume reinvestment of dividends and distributions. The Fund's past performance does not necessarily indicate how it will perform in the future.
New York Money vs IBC's Money Fund Report: New York State Specific Tax-Free Institutions-Only Money Fund Average 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 ---- ---- ---- ---- ---- ---- ---- ----- ---- ---- New York Money Shares 5.80 5.40 3.89 2.66 2.22 2.63 3.69 3.30 3.48 3.22 IBC's Money Fund Report: New York State Specific 5.66 5.56 4.16 2.68 2.12 2.57 3.55 3.08 3.20 2.96 Tax-Free Institutions-Only Money Fund Average
During the ten-year period shown in the bar chart, the highest quarterly return was 6.22% (for the quarter ended June 30, 1989) and the lowest quarterly return was 2.09% (for the quarter ended March 31, 1994). -3- THE FUND'S AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED DECEMBER 31, 1998
- ----------------------------------------------------------------------------------------------------- 1 Year 5 Years 10 Years - ----------------------------------------------------------------------------------------------------- MONEY SHARES 3.22% 3.26% 3.62% - ----------------------------------------------------------------------------------------------------- DOLLAR SHARES 2.97% 3.01% 3.37% - ----------------------------------------------------------------------------------------------------- PLUS SHARES (estimated) 2.97% 3.01% 3.37% - ----------------------------------------------------------------------------------------------------- IBC'S MONEY FUND REPORT: NEW YORK STATE SPECIFIC TAX-FREE INSTITUTIONS - ONLY MONEY FUND AVERAGE* 2.96% 3.06% 3.55% - -----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------- 7 DAY YIELD AS OF DECEMBER 31, 1998 - ----------------------------------------------------------------------------------------------------- MONEY SHARES 3.43% - ----------------------------------------------------------------------------------------------------- DOLLAR SHARES 3.18% - ----------------------------------------------------------------------------------------------------- PLUS SHARES (estimated) 3.18% - ----------------------------------------------------------------------------------------------------- IBC'S MONEY FUND REPORT: NEW YORK STATE SPECIFIC TAX-FREE INSTITUTIONS - ONLY MONEY FUND AVERAGE* 3.05% - -----------------------------------------------------------------------------------------------------
CURRENT YIELD: You may obtain the Fund's current 7-day yield by calling 1-800- 821-7432 or by visiting its web site at www.pif.com. - -------------------------- * IBC'S Money Fund Report: New York State Specific Tax-free Institutions - only Money Fund Average is comprised of Money Investing in Tax-Exempt obligations of New York State -4- FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund
NEW YORK MONEY FUND - ------------------------------------------------------------------------------- MONEY DOLLAR PLUS SHARES SHARES SHARES ---------- ------ ------ (ESTIMATED) ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees .20% .20% .20% Distribution (12b-1) Fees -- -- .25% Other Expenses .28% .53% .28% Administration Fees .20% .20% .20% Shareholder Servicing Fees -- .25% -- Miscellaneous .08% .08% .08% Total Annual Fund Operating Expenses(1) .48% .73% .73% === === === - -------------------------------------------------------------------------------
(1) Total Annual Fund Operating Expenses for Money Shares, Dollar Shares and Plus Shares for the fiscal year ended July 31, 1998, with fee waivers, would have been .20%, .45% and .45% (estimated), respectively, of the Fund's average net assets. The Adviser and PFPC Inc., the Fund's co- administrator, may from time to time waive the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. The Adviser and PFPC expect to continue such fee waivers. -5- EXAMPLE This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be: NEW YORK MONEY FUND -------------------
MONEY SHARES DOLLAR SHARES PLUS SHARES (estimated) - ------------------------------------------------------------------- One Year $ 49 $ 75 $ 75 Three years $154 $233 $233 Five Years $269 $406 $406 Ten Years $604 $906 $906 - -------------------------------------------------------------------
-6- INVESTMENT STRATEGIES AND RISK DISCLOSURE The Fund is a money market fund. The investment objective of the Fund is to provide investors with as high a level of current interest income that is exempt from federal income tax and, to the extent possible, from New York State and New York City personal income taxes as is consistent with the preservation of capital and relative stability of principal. The Fund's investment objective may be changed by the Board of Trustees without shareholder approval. The Fund invests primarily in New York Municipal Obligations. Substantially all of the Fund's assets are invested in Municipal Obligations. The Fund expects that, except during temporary defensive periods or when acceptable securities are unavailable for investment by the Fund, the Fund's assets will be invested primarily in New York Municipal Obligations, although the amount of the Fund's assets invested in such securities will vary from time to time. The Fund will not knowingly purchase securities the interest on which is subject to regular federal income tax; however, the Fund may hold uninvested cash reserves pending investment during temporary defensive periods or, if in the opinion of the Adviser, suitable tax-exempt obligations are unavailable. Uninvested cash reserves will not earn income. The securities purchased by the Fund are subject to the quality, diversification, and other requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and other rules of the Securities and Exchange Commission. The Fund will only purchase securities that present minimal credit risk as determined by the Adviser pursuant to guidelines approved by the Board of Trustees of Provident Institutional Funds. Securities purchased by the Fund (or the issuers of such securities) will be Eligible Securities. Applicable Eligible Securities are: . instruments which are rated at the time of purchase (or which are guaranteed or in some cases otherwise supported by guarantees or other credit supports with such ratings) in one of the top two rating categories by two unaffiliated nationally recognized statistical rating organizations ("NRSROs") (or one NRSRO if the security or guarantee was rated by only one NRSRO); . instruments issued or guaranteed by persons with short-term debt having such ratings; . unrated instruments determined by the Adviser, pursuant to procedures approved by the Board of Trustees, to be of comparable quality to such instruments; and . shares of other open-end investment companies that invest in the type of obligation in which the Fund may invest. -7- INVESTMENTS. The Fund's investments may include the following: Municipal Obligations. They may purchase Municipal Obligations which are classified as "general obligation" securities and "revenue" securities. Revenue securities may include private activity bonds which are not payable from the unrestricted revenues of the issuer. Consequently, the credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved. While interest paid on private activity bonds will be exempt from regular federal income tax, it may be treated as a specific tax preference item under the federal alternative minimum tax. The portfolio may also include "moral obligation" securities. Variable and Floating Rate Instruments. The Fund may purchase variable or floating rate notes issued by industrial development authorities and other governmental entities, which are instruments that provide for adjustments in the interest rate on certain reset dates or whenever a specified interest rate index changes, respectively. When-Issued and Delayed Settlement Transactions. The Fund may purchase securities on a "when-issued" or "delayed settlement" basis. The Fund expects that commitments to purchase when-issued or delayed settlement securities will not exceed 25% of the value of its total assets absent unusual market conditions and that commitments by the Fund to purchase when-issued securities will not exceed 45 days. The Fund does not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of its investment objective. Stand-by Commitments. The Fund may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. The Fund will acquire stand-by commitments solely to facilitate portfolio liquidity and does not intend to exercise its rights thereunder for trading purposes. Investment Company Securities. The Fund may invest in securities issued by other open-end investment companies that invest in the type of obligations in which the Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the securities of other investment companies will cause the Fund (and, indirectly the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. Illiquid Securities. The Fund will not invest more than 10% of the value of its total assets in illiquid securities, which may be illiquid due to legal or contractual restrictions on resale or the absence of readily available market quotations. Securities that have readily available market quotations are not deemed illiquid for purposes of this limitation. Other Types of Investments. This Prospectus describes the Fund's principal investment strategies, and the particular types of securities in which the Fund principally invests. The Fund may, from time to time, make other types of investments and pursue other investment strategies in support of its overall investment goal. These supplemental investment strategies are described in detail in the Statement of Additional Information, which is referred to on the back cover of this Prospectus. -8- RISK FACTORS. The principal risks of investing in the Fund are also described above in the Risk/Return Summary. The following supplements that description. Interest Rate Risk. Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. As a result, if interest rates were to change rapidly, there is a risk that the change in market value of the Fund's assets may not enable the Fund to maintain a stable net asset value of $1.00 per share. Credit Risk. The risk that an issuer will be unable to make principal and interest payments when due is known as "credit risk." U.S. government securities are generally considered to be the safest type of investment in terms of credit risk. Municipal obligations generally rank between U.S. government securities and corporate debt securities in terms of credit safety. Credit quality ratings published by an NRSRO are widely accepted measures of credit risk. The lower a security is rated by an NRSRO, the more credit risk it is considered to represent. Other Risks. Certain investment strategies employed by the Fund may involve additional investment risk. Liquidity risk involves certain securities which may be difficult or impossible to sell at the time and the price that the Fund would like. Special Considerations Affecting the Fund. The Fund's ability to achieve its investment objective is dependent upon the ability of the issuers of New York Municipal Obligations to meet their continuing obligations for the payment of principal and interest. Certain substantial issuers of New York Municipal Obligations (including issuers whose obligations may be acquired by the Fund) have experienced serious financial difficulties in recent years. These difficulties have at times jeopardized the credit standing and impaired the borrowings abilities of all New York issuers and have generally contributed to higher interest costs for their borrowing and fewer markets for their outstanding debt obligations. Although, several different issues of municipal securities of New York State and its agencies and instrumentalities and of New York City have been downgraded by Standard & Poor's Ratings Services ("S&P") and Moody's Investors Service, Inc. ("Moody's"), in recent years, the most recent actions of S&P and Moody's have been to place the debt obligations of New York State and New York City on Credit Watch with positive implications and to upgrade the debt obligations of New York City respectively. Strong demand for New York Municipal Obligations has also at times had the effect of permitting New York Municipal Obligations to be issued with yields relatively lower, and after issuance, to trade in the market at prices relatively higher, than comparably rated municipal obligations issued by other jurisdictions. A recurrence of the financial difficulties previously experienced by certain issuers of New York Municipal Obligations could result in defaults or declines in the market values of those issuers' existing obligations and, possibly, in the obligations of other issuers of New York Municipal Obligations. Although as of the date of this Prospectus, no issuers of New York Municipal Obligations are in default with respect to the payment of their Municipal Obligations, the occurrence of any such default could affect adversely the market values and marketability of all New York Municipal Obligations and, consequently, the net asset value of the Fund's portfolio. -9- Municipal Obligations. Opinions relating to the validity of Municipal Obligations and to the exemption of interest thereon from federal income tax (and, with respect to New York Municipal Obligations, to the exemption of interest thereon from New York State and New York City personal income taxes) are rendered by bond counsel to the respective issuers at the time of issuance, and opinions relating to the validity of and the tax-exempt status of payments received by the Fund for tax-exempt derivative securities are rendered by counsel to the respective sponsors of such securities. The Adviser will rely on such opinions and will not review independently the underlying proceedings relating to the issuance of Municipal Obligations, the creation of any tax- exempt derivative securities, or the bases for such opinions. Year 2000. Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser and the Fund's other service providers, or persons with whom they deal, do not properly process and calculate date-related information and data from and after January 1, 2000. This possibility is commonly known as the "Year 2000 Problem." The Fund has been advised by the Adviser, the Administrators and the Custodian that they are actively taking steps to address the year 2000 Problem with respect to the computer systems that they use and to obtain assurances that comparable steps are being taken by the Fund's other service providers. While there can be no assurance that the Fund's service providers will by Year 2000 compliant, the Fund's service providers expect that their plans to be compliant will be achieved. MANAGEMENT OF THE FUND INVESTMENT ADVISER The Adviser, a wholly-owned indirect subsidiary of PNC Bank, serves as the Fund's investment adviser. The Adviser and its affiliates are one of the largest U.S. bank managers of mutual funds, with assets currently under management in excess of $46 billion. BIMC (formerly known as PNC Institutional Management Corporation or "PIMC") was organized in 1977 by PNC Bank to perform advisory services for investment companies and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. As investment adviser, BIMC manages the Fund and is responsible for all purchases and sales of the Fund's securities. For the investment advisory services provided and expenses assumed by it, BIMC is entitled to receive a fee, computed daily and payable monthly, based on the Fund's average net assets. BIMC and PFPC, the co-administrator, may from time to time reduce the investment advisory and administration fees otherwise payable to them or may reimburse the Fund for its operating expenses. Any fees waived and any expenses reimbursed by BIMC and PFPC with respect to a particular fiscal year are not recoverable. For the fiscal year ended July 31, 1998, the Fund paid investment advisory fees and administration fees each aggregating .06% (net of waivers) of its average net assets. The services provided by BIMC and the fees payable by the Fund for these services are described further in the Statement of Additional Information under "Management of the Funds." -10- PRICE OF FUND SHARES The Fund's net asset value per share for purposes of pricing purchase and redemption orders is determined by BIMC, the Funds adviser, as of 12:00 noon and 4:00 P.M., Eastern time, on each day on which both the New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open for business (a "Business Day"). The net asset value per share of each class of the Fund's shares is calculated by adding the value of all securities and other assets of the Fund that are allocable to a particular class, subtracting liabilities charged to such class, and dividing the result by the total number of outstanding shares of such class. In computing net asset value, the Fund uses the amortized cost method of valuation as described in the Statement of Additional Information under "Additional Purchase and Redemption Information." Under the 1940 Act, the Fund may postpone the date of payment of any redeemable security for up to seven days. PURCHASE OF SHARES Fund shares are sold at the net asset value per share next determined after confirmation of a purchase order by PFPC, which also serves as the Fund's transfer agent. Purchase orders for shares are accepted only on Business Days and must be transmitted to PFPC in Wilmington, Delaware by telephone (800-441- 7450; in Delaware: 302-791-5350) or through the Fund's computer access program. Orders accepted by 12:00 noon, Eastern time, for which payment has been received by PNC Bank, N.A. ("PNC Bank"), the Fund's custodian by 4:00 P.M., Eastern Time, will be executed the same day. Orders received after 12:00 noon Eastern Time and orders for which payment has not been received by 4:00 P.M. Eastern Time, will not be accepted, and notice thereof will be given to the institution placing the order. (Payment for orders which are not received or accepted will be returned after prompt inquiry to the sending institution.) Payment for Fund shares may be made only in federal funds or other funds immediately available to PNC Bank. The minimum initial investment by an institution is $5,000; however, broker-dealers and other institutional investors may set a higher minimum for their customers. There is no minimum subsequent investment. The Fund, at its discretion, may limit or reject any order for shares. Fund shares are sold and redeemed without charge by the Fund. Institutional investors purchasing or holding Fund shares for their customer accounts may charge customer fees for cash management and other services provided in connection with their accounts. A customer should, therefore, consider the terms of its account with an institution before purchasing Fund shares. An institution purchasing or redeeming Fund shares on behalf of its customers is responsible for transmitting orders to the Fund in accordance with its customer agreements. Conflict of interest restrictions may apply to an institution's receipt of compensation paid by the Fund in connection with the investment of fiduciary funds in Dollar Shares or Plus Shares. (See also "Management of the Fund -- Service Organizations," as described in the Statement of -11- Additional Information.) Institutions, including banks regulated by the Comptroller of the Currency and investment advisers and other money managers subject to the jurisdiction of the SEC, the Department of Labor or state securities commissions, are urged to consult their legal advisors before investing fiduciary funds in Dollar Shares or Plus Shares. (See also "Management of the Fund -- Banking Laws," as described in the Statement of Additional Information). REDEMPTION OF SHARES Redemption orders must be transmitted to PFPC in Wilmington, Delaware in the manner described under "Purchase of Shares." Shares are redeemed at the net asset value per share next determined after PFPC's receipt of the redemption order. While the Fund intends to use its best efforts to maintain its net asset value per share at $1.00, the proceeds paid to a shareholder upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. (Call 1-800-441-7450 (in Delaware: 302-791- 5350) to place redemption orders). Payment for redeemed shares for which a redemption order is accepted by PFPC prior to Noon, Eastern time, on a Business Day is normally made in federal funds wired to the redeeming shareholder on the same day. Payment for redemption orders which are received after Noon, Eastern time or on a day when PNC Bank is closed, is normally wired in federal funds on the next day following redemption that PNC Bank is open for business. The Fund shall have the right to redeem shares in any Fund account if the value of the account is less than $4,000, after sixty-days' prior written notice to the shareholder. Any such redemption shall be effected at the net asset value next determined after the redemption order is entered. If during the sixty-day period the shareholder increases the value of its Fund account to $4,000 or more, no such redemption shall take place. In addition, the Fund may also redeem shares involuntarily under certain special circumstances described in the Statement of Additional Information under "Additional Purchase and Redemption Information." SHAREHOLDER SERVICE AND DISTRIBUTION PLANS Institutional investors, such as banks, savings and loan associations and other financial institutions, including affiliates of PNC Bank Corp. ("Service Organizations"), may purchase Dollar or Plus Shares. Dollar and Plus Shares are identical in all respects to Money Shares except that they bear the service fees described below and enjoy certain exclusive voting rights on matters relating to these fees. The Fund will enter into an agreement with each Service Organization which purchases Dollar Shares or Plus Shares requiring it to provide support services to its customers who are the beneficial owners of such shares in consideration of the Fund's payment of .25% (on an annualized basis) of the average daily net asset value of the Dollar Shares or Plus Shares held by the Service Organization for the benefit of customers. Such services, which are described more fully in the Statement of Additional Information under -12- "Management of the Fund Service Organizations," include aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with PFPC; processing dividend payments from the Fund on behalf of customers; providing information periodically to customers showing their positions in Dollar or Plus Shares; and providing sub-accounting or the information necessary for sub-accounting with respect to Dollar or Plus Shares beneficially owned by customers. In addition, broker-dealers purchasing Plus Shares may be requested to provide from time to time assistance (such as the forwarding of sales literature and advertising to their customers) in connection with the distribution of Plus Shares. Under the terms of the agreements, Service Organizations are required to provide to their customers a schedule of any fees that they may charge customers in connection with their investments in Dollar or Plus Shares. Money Shares are sold to institutions that have not entered into servicing agreements with the Fund in connection with their investments. DIVIDENDS AND DISTRIBUTIONS The Fund declares dividends daily and distributes substantially all of its net investment income to shareholders monthly. Shares begin accruing dividends on the day the purchase order for the shares is effected and continue to accrue dividends through the day before such shares are redeemed. Dividends are paid monthly by check, or by wire transfer if requested in writing by the shareholder, within five business days after the end of the month or within five business days after a redemption of all of a shareholder's shares of a particular class. Dividends are determined in the same manner for each class of shares of the Fund. Dollar and Plus Shares bear all the expense of fees paid to Service Organizations, and as a result, at any given time, the dividend on Dollar or Plus Shares will be approximately .25% lower than the dividend on Money Shares. Institutional shareholders may elect to have their dividends reinvested in additional full and fractional shares of the same class of shares with respect to which such dividends are declared at the net asset value of such shares on the payment date. Reinvested dividends receive the same tax treatment as dividends paid in cash. Reinvestment elections, and any revocations thereof, must be made in writing to PFPC, the Fund's transfer agent, at P.O. Box 8950, Wilmington, Delaware 19885-9628 and will become effective after its receipt by PFPC with respect to dividends paid. TAXES The Fund's distributions will generally constitute tax-exempt income for shareholders for federal income tax purposes. It is possible, depending upon the Fund's investments, that a portion of the Fund's distributions could be taxable to shareholders as ordinary income or capital gains, but the Fund does not expect that this will be the case. You should note that a portion of the exempt-interest dividends paid by the Fund may constitute an item of tax preference for purposes of determining federal alternative minimum tax liability. Exempt-interest dividends will also be considered along with other adjusted gross income in determining whether any Social Security or railroad retirement payments received by you are subject to federal income taxes. The Fund intends to comply with certain state tax requirements so that the exempt-interest dividends derived from interest on New York Municipal Obligations will be exempt from New York State and New York City personal income taxes (but not corporate franchise taxes.) Interest on indebtedness incurred by a shareholder to purchase or carry shares of the Fund is not deductible for Federal, New York State or New York City personal income tax purposes. Except as noted with respect to New York State and New York City personal income taxes, dividends and distributions paid to shareholders that are derived from income on Municipal Obligations may be taxable income under state or local law even though all or a portion of such dividends or distributions may be derived from interest on tax-exempt obligations that, if paid directly to shareholders, would be tax- exempt income. PFPC, as transfer agent, will send each Fund shareholder or its authorized representative an annual statement designating the amount, if any, of any dividends and distributions made during each year and their federal, New York State and New York City tax treatment. Dividends declared in December of any year, and payable to shareholders of record on a specified date in December, will be deemed to have been received by the shareholders and paid by the Fund on December 31 of such year in the event such dividends are actually paid during January of the following year. You should also consult your tax adviser for further information regarding the federal, state and local tax consequences with respect to your specific situation. -13- FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund's financial statements, are incorporated by reference into the Statement of Additional Information and included in the Annual Report, each of which is available upon request. MONEY SHARES The table below sets forth selected financial data for a Money Share outstanding throughout each year presented. YEAR ENDED JULY 31, -------------------
1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- Net Asset Value, Beginning of Period....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income...................... 0.0336 0.0334 0.0339 0.0338 0.0226 -------- -------- -------- -------- -------- Net Gains or Losses on Securities (both realized and unrealized)............ -- -- -- -- -- -------- -------- -------- -------- -------- Total From Investment Operations........... 0.0336 0.0334 00339 0.0338 0.0226 -------- -------- -------- -------- -------- Less Distributions Dividends (from net investment Income)................................. (0.0336) (0.0334) (0.0339) (0.0338) 0.0226) -------- -------- -------- -------- -------- Distributions (from capital gains)......... -- -- -- -- -- -------- -------- -------- -------- -------- Total Distributions........................ (0.0336) (0.0334) (0.0339) (0.0338) (0.0226) -------- -------- -------- -------- -------- Net Asset Value, End of Year............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return............................... 3.41% 3.39% 3.44% 3.43% 2.29% Ratios/Supplemental Data: Net Assets, End of Year $(000's)........... 318,091 269,821 272,145 246,650 279,483 Ratios of Expenses to Average Net Assets/1/ .20% .20% .20% .20% .20% Ratios of Net Investment Income to Average Daily Net Assets................. 3.35% 3.34% 3.37% 3.36% 2.28%
__________________________ 1 Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for Money Shares would have been .48% for the year ended July 31, 1998, .49% for the year ended July 31, 1997, .50% for the year ended July 31, 1996, .49% for the year ended July 31, 1995 and .48% for the year ended July 31, 1994. -14- DOLLAR SHARES The table below sets forth selected financial data for a Dollar Share outstanding throughout each year presented. YEAR ENDED JULY 31, -------------------
1998 1997 1996 1995/3/ 1994/3/ --------------------------------------------------------------- Net Asset Value, Beginning of Period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- ------ -------- Income From Investment Operations Net Investment Income................. 0.0303 0.0309 0.0089 0.000 0.0127 -------- -------- -------- ------ -------- Net Gains or Losses on Securities (both realized and unrealized)...... -- -- -- -- -- -------- -------- -------- ------ -------- Total From Investment Operations...... 0.0303 0.0309 0.0089 0.000 0.0127 -------- -------- -------- ------ -------- Less Distributions Dividends (from net investment Income)............................ (0.0303) (0.0309) (0.0089) 0.00 (0.0127) -------- -------- -------- ------ -------- Distributions (from capital gains).... -- -- -- -- -- -------- -------- -------- ------ -------- Total Distributions................... (0.0303) (0.0309) (0.0089) 0.00 (0.0127) -------- -------- -------- ------ -------- Net Asset Value, End of Period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ========= ====== ======== Total Return.......................... 3.16%/2/ 3.14% 3.05%/2/ -- 1.96%/2/ Ratios/Supplemental Data Net Assets, End of Year $(000's)...... -- 1,148 20 -- -- Ratios of Expenses to Average Net Assets/3/......................... .45%/2/ .45% .45%/2/ -- .45%/2/ Ratios of Net Investment Income to Average Daily Net Assets.............. 3.11%/2/ 3.09%/2/ 3.07%/2/ -- 1.94%/2/
_________________________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for Dollar Shares would have been .73% (annualized) for the year ended July 31, 1998, .74% for the year ended July 31, 1997, .75% (annualized) for the year ended July 31, 1996, .73% (annualized) for the years ended July 31, 1995 and .76% (annualized) for the year ended July 31, 1994. /2/ Annualized. /3/ There were no Dollar shares outstanding during the period from March 28, 1994 to April 14, 1996 and July 21, 1998 to July 31, 1998. -15- PLUS SHARES The table below sets forth selected financial data for a Plus Share outstanding throughout each year presented. YEAR ENDED JULY 31, -------------------
1998/3/ 1997/3/ 1996/3/ 1995/3/ 1994/3/ - -------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income From Investment Operations Net Investment Income................. 0.00 0.00 0.00 0.0090 0.0201 -------- -------- -------- -------- -------- Net Gains or Losses on Securities (both realized and unrealized)...... -- -- -- -- -- -------- -------- -------- -------- -------- Total From Investment Operations...... 0.00 0.00 0.00 0.0090 0.0201 -------- -------- -------- -------- -------- Less Distributions Dividends (from net investment Income)............................ (0.00) (0.00) (0.00) (0.0090) (0.0201) -------- -------- -------- -------- -------- Distributions (from capital gains).... -- -- -- -- -- -------- -------- -------- -------- -------- Total Distributions................... (0.00) (0.00) (0.00) (0.0090) (0.0201) -------- -------- -------- -------- -------- Net Asset Value, End of Period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Returns......................... -- -- -- 2.69%/2/ 2.04% Ratios/Supplemental Data: Net Assets, End of Year $(000's)...... -- -- -- -- 435 Ratios of expenses to Average Net Assets/1/......................... -- -- -- .45%/2/ .45% Ratios of Net Investment Income to Average Daily Net Assets.............. -- -- -- 2.64%/2/ 2.03%
_________________________________ /1/ Without the waiver of advisory and administration fees, the ratio of expenses to average daily net assets for Plus Shares would have been .73% (annualized) for the year ended July 31, 1995 and .73% for the year ended July 31, 1994. /2/ Annualized. /3/ There were no Plus Shares outstanding during the period from December 2, 1994 to July 31, 1998. -16- WHERE TO FIND MORE INFORMATION The Statement of Additional Information (the "SAI") includes additional information about the Fund's investment policies, organization and management. It is legally part of this prospectus (it is incorporated by reference). The Annual and Semi-Annual Reports provide additional information about the Fund's investments, performance and portfolio holdings. Investors can get free copies of the above named documents, and make shareholder inquiries, by calling 1-800-821-7432. Other information is available on the Fund's web site at www.pif.com. Information about the Fund (including the Fund's SAI) can be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information about the Fund are available on the SEC's Internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, D.C. 20549-6009. The Provident Institutional Funds 1940 Act File No. is 811-2354 -17- PROVIDENT INSTITUTIONAL FUNDS Statement of Additional Information February __, 1999 This Statement of Additional Information is not a Prospectus and should be read in conjunction with the current Prospectuses for TempFund, TempCash, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund, MuniFund, MuniCash, California Money Fund and New York Money Fund, each dated February __, 1999, of Provident Institutional Funds ("PIF" or the "Company"), as they may from time to time be supplemented or revised. No investment in shares should be made without reading the Prospectus of the Fund. This Statement of Additional Information is incorporated by reference in its entirety into each Prospectus. Copies of the Prospectuses and Annual Reports of each of the Funds may be obtained, without charge, by writing PIF, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, DE 19809 or calling PIF at 1-800-821-7432. The financial statements included in the Annual Reports of each of the Funds are incorporated by reference into this Statement of Additional Information. TABLE OF CONTENTS -----------------
Page ---- General Information........................................................ Investment Strategies, Risks and Policies.................................. Portfolio Transactions................................................ Investment Instruments and Policies................................... Variable and Floating Rate Instruments........................... Repurchase Agreements............................................ Securities Lending............................................... Reverse Repurchase Agreements.................................... When-Issued and Delayed Settlement Transactions.................. U.S. Government Obligations...................................... Mortgage-Related and Other Asset-Backed Securities............... Banking Industry Obligations..................................... Special Considerations Regarding Foreign Investments............. Guaranteed Investment Contracts.................................. Investment Company Securities.................................... Municipal Obligations............................................ Restricted and Other Illiquid Securities......................... Stand-By Commitments............................................. Short-Term Trading............................................... Special Considerations with Respect to California Money Fund.......... Special Considerations with Respect to New York Money Fund............ Investment Limitations..................................................... Additional Purchase and Redemption Information............................. In General............................................................
-i-
Page ---- Net Asset Value....................................................... Management of the Funds.................................................... Trustees and Officers................................................. Investment Adviser.................................................... Banking Laws.......................................................... Co-Administrators..................................................... Distributor........................................................... Custodian and Transfer Agent.......................................... Service Organization.................................................. Expenses.............................................................. Additional Information Concerning Taxes.................................... Dividends.................................................................. Additional Yield Information............................................... Description Concerning Shares.............................................. Counsel.................................................................... Auditors................................................................... Financial Statements....................................................... - -------------------- Miscellaneous.............................................................. APPENDIX A................................................................. A-1
-ii- GENERAL INFORMATION PIF was organized as a Delaware business trust on October 21, 1998. It is the successor to the following five investment companies: (1) Temporary Investment Fund, Inc. ("Temp"), (2) Trust for Federal Securities ("Fed"), (3) Municipal Fund for Temporary Investment ("Muni"); (4) Municipal Fund for California Investors, Inc. ("Cal Muni") and (5) Municipal Fund for New York Investors, Inc. ("NY Muni") (each a "Predecessor Company", collectively the "Predecessor Companies"). The Predecessor Companies were comprised of the following portfolios (each, a "Fund" or "Predecessor Fund", collectively, the "Funds" or "Predecessor Funds"): Temp - TempFund and TempCash; Fed - FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund; Muni - MuniFund and MuniCash; Cal Muni - California Money Fund; and NY Muni - New York Money Fund. The Funds commenced operations as follows: TempFund - October 1973; TempCash - February 1984; FedFund - October 1975; T-Fund - March 1980; Federal Trust Fund - December 1980; - Treasury Trust Fund - May 1989; MuniFund -February 1980; MuniCash - February 1984; California Money Fund - February 1983 and New York Money Fund March 1983. The present fiscal year end for each of the Predecessor Companies and their respective Funds is as follows: Temp - September 30, Fed - October 31, Muni - November 30, Cal Muni - January 31 and NY Muni - July 31. This Statement of Additional Information contains various charts with respect to fees and performance information of the Predecessor Companies and/or Predecessor Funds. On February __, 1999, each of the Predecessor Funds was reorganized into a separate series of PIF. PIF is a no-load open-end management investment company. Currently, PIF offers shares of each of ten Funds. Each Fund is a diversified fund, with the exception of California Money Fund and New York Money Fund which are classified as non-diversified investment companies under the 1940 Act. Each of the Funds offers a class of Shares to institutional investors. Each of the Funds also offers to institutional investors, such as banks, savings and loan associations and other financial institutions ("Service Organizations"), a separate class of shares, Dollar Shares. Additionally, TempFund, MuniFund, T-Fund and California Money Fund offer to Service Organizations the following separate classes of Shares: Administration Shares, Cash Reserve Shares and Cash Management Shares. TempFund, T-Fund, MuniFund, New York Money Fund and the California Money Fund, also offer to broker dealers, who provide assistance in the sale of shares and institutional services to their customers, a separate class of shares, Plus Shares. INVESTMENT STRATEGIES, RISKS AND POLICIES PORTFOLIO TRANSACTIONS Subject to the general control of the Board of Trustees, BlackRock Institutional Management Corporation ("BIMC", or the "Adviser"), each Fund's investment adviser, is responsible for, makes decisions with respect to, and places orders for all purchases and sales of portfolio securities for a Fund. BIMC purchases portfolio securities for the Funds either directly from the issuer or from dealers who specialize in money market instruments. Such purchases are usually without brokerage commissions. In making portfolio investments, BIMC seeks to obtain the best net price and the most favorable execution of orders. To the extent that the execution and price offered by more than one dealer are comparable, BIMC may, in its discretion, effect transactions in portfolio securities with dealers who provide the Funds with research advice or other services. With respect to TempFund and TempCash, BIMC may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from a Fund prior to their maturity at their original cost plus interest (interest may sometimes be adjusted to reflect the actual maturity of the securities) if BIMC believes that those Fund's anticipated need for liquidity makes such action desirable. Certain dealers (but not issuers) have charged and may in the future charge a higher price for commercial paper where they undertake to repurchase prior to maturity. The payment of a higher price in order to obtain such an undertaking reduces the yield which might otherwise be received by a Fund on the commercial paper. The Company's Board of Trustees has authorized BIMC to pay a higher price for commercial paper where it secures such an undertaking if BIMC believes that the prepayment privilege is desirable to assure a Fund's liquidity and such an undertaking cannot otherwise be obtained. Investment decisions for each Fund are made independently from those for another of the Company's portfolios or other investment company portfolios or accounts advised or managed by BIMC. Such other portfolios may also invest in the same securities as the Funds. When purchases or sales of the same security are made at substantially the same time on behalf of such other portfolios, transactions are averaged as to price, and available investments allocated as to amount, in a manner which BIMC believes to be equitable to each Fund and its customers who also are acquiring securities, including the Fund. In some instances, this investment procedure may adversely affect the price paid or received by a Fund or the size of the position obtained for a Fund. To the extent permitted by law, BIMC may aggregate the securities to be sold or purchased for a Fund with those to be sold or purchased for such other portfolios in order to obtain best execution. The Funds will not execute portfolio transactions through or acquire portfolio securities issued by BIMC, PNC Bank, National Association ("PNC Bank"), PFPC Inc. ("PFPC"), and Provident Distributors, Inc. ("PDI"), or any affiliated person (as such term is defined in the Investment Company Act of 1940 (the "1940 Act")) of any of them, except to the extent permitted by the Securities and Exchange Commission (the "SEC"). In addition, with -2- respect to such transactions, securities, deposits and agreements, the Funds will not give preference to Service Organizations with whom a Fund enters into agreements concerning the provision of support services to customers who beneficially own Dollar Shares, Administration Shares, Cash Reserve Shares, Cash Management Shares and Plus Shares. The Funds do not intend to seek profits through short-term trading. Each Fund's annual portfolio turnover will be relatively high, but is not expected to have a material effect on its net income. Each Fund's portfolio turnover rate is expected to be zero for regulatory reporting purposes. INVESTMENT INSTRUMENTS AND POLICIES The following supplements the description of the investment instruments and/or policies which are applicable to the Funds. In such cases where an instrument or policy is utilized only by a specific Fund or Funds, its applicability to the specific Fund is noted below: VARIABLE AND FLOATING RATE INSTRUMENTS. TempFund, TempCash, MuniFund, MuniCash, California Money Fund and New York Money Fund may purchase variable and floating rate instruments. Variable and floating rate instruments are subject to the credit quality standards described in the Prospectuses. In some cases the Funds may require that the obligation to pay the principal of the instrument be backed by a letter or line of credit or guarantee. Such instruments may carry stated maturities in excess of 13 months provided that the maturity-shortening provisions stated in Rule 2a-7 are satisfied. Although a particular variable or floating rate demand instrument may not be actively traded in a secondary market, in some cases, a Fund may be entitled to principal on demand and may be able to resell such notes in the dealer market. Variable and floating rate demand instruments held by a Fund may have maturities of more than 13 months provided: (i) the Fund is entitled to the payment of principal at any time, or during specified intervals not exceeding 13 months, upon giving the prescribed notice (which may not exceed 30 days), and (ii) the rate of interest on such instruments is adjusted at periodic intervals which may extend up to 13 months. Variable and floating rate notes that do not provide for payment within seven days may be deemed illiquid and subject to a 10% limitation on such investments. In determining a Fund's average weighted portfolio maturity and whether a long-term variable or floating rate demand instrument has a remaining maturity of 13 months or less, each instrument will be deemed by a Fund to have a maturity equal to the longer of the period remaining until its next interest rate adjustment or the period remaining until the principal amount can be recovered through demand. Variable and floating notes are not typically rated by credit rating agencies, but their issuers must satisfy the Fund's quality and maturity requirements. If an issuer of such a note were to default on its payment obligation, the Fund might be unable to dispose of the note because of the absence of an active secondary market and might, for this or other reasons, suffer a loss. The Fund invests in variable or floating rate notes only when the Adviser deems the investment to involve minimal credit risk. -3- REPURCHASE AGREEMENTS. TempFund, TempCash, FedFund and T-Fund may purchase repurchase agreements. In a repurchase agreement, a Fund purchases money market instruments from financial institutions, such as banks and broker- dealers, subject to the seller's agreement to repurchase them at an agreed upon time and price, reflecting interest on the repurchase price for the securities subject to the repurchase agreement. The securities subject to a repurchase agreement may bear maturities exceeding 13 months, provided the repurchase agreement itself matures in 13 months or less. The seller under a repurchase agreement will be required to maintain the value of the securities subject to the agreement at not less than the repurchase price. Default by the seller would, however, expose the Fund to possible loss because of adverse market action or delay in connection with the disposition of the underlying securities. Collateral for a repurchase agreement may include cash items, obligations issued by the U.S. Government or its agencies or instrumentalities or obligations rated in the highest category by a nationally recognized statistical rating organization (an "NRSRO"). The ratings by NRSROs represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity, and interest rate may have different market prices. The Appendix to this Statement of Additional Information contains a description of the relevant rating symbols used by NRSROs for commercial paper that may be purchased by each Fund. The repurchase price under the repurchase agreements described in the Funds' Prospectuses generally equals the price paid by that Fund plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). Securities subject to repurchase agreements will be held by the Company's custodian or sub-custodian, or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are considered to be loans by the Funds under the 1940 Act. SECURITIES LENDING. Each of TempFund, TempCash, FedFund and T-Fund may lend its securities with a value of up to one-third of its total assets (including the value of the collateral for the loan) to qualified brokers, dealers, banks and other financial institutions for the purpose of realizing additional net investment income through the receipt of interest on the loan. Such loans would involve risks of delay in receiving additional collateral in the event the value of the collateral decreased below the value of the securities loaned or of delay in recovering the securities loaned or even loss of rights in the collateral should the borrower of the securities fail financially. Loans will only be made to borrowers deemed by the Adviser to be creditworthy. REVERSE REPURCHASE AGREEMENTS. Each of TempFund, TempCash, FedFund and T-Fund may enter into reverse repurchase agreements. In a reverse repurchase agreement a Fund sells a security and simultaneously commits to repurchase that security at a future date from the buyer. In effect, the Fund is temporarily borrowing money at an agreed upon interest rate from the purchaser of the security, and the security sold represents collateral for the loan. A Fund's investment of the proceeds of a reverse repurchase agreement involves the speculative factor known as leverage. A Fund may enter into a reverse repurchase agreement only if the interest income from investment of the proceeds is greater than the interest expense of the transaction and the proceeds are invested for a period no longer than the term of the agreement. A Fund will maintain in a segregated account, liquid securities at least equal to its -4- purchase obligations under these agreements. The Adviser will evaluate the creditworthiness of the other party in determining whether a Fund will enter into a reverse repurchase agreement. The use of reverse repurchase agreements involves certain risks. For example, the securities acquired by a Fund with the proceeds of such an agreement may decline in value, although the Fund is obligated to repurchase the securities sold to the counter party at the agreed upon price. In addition, the market value of the securities sold by a Fund may decline below the repurchase price to which the Fund remains committed. Each of TempFund, TempCash, FedFund and T-Fund is permitted to invest up to one-third of its total assets in reverse repurchase agreements and securities lending transactions. Investments in reverse repurchase agreements and securities lending transaction will be aggregated for purposes of this investment limitation. WHEN-ISSUED AND DELAYED SETTLEMENT TRANSACTIONS. The Funds may utilize when-issued and delayed settlement transactions. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield. Delayed settlement describes settlement of a securities transaction in the secondary market sometime in the future. The Fund will generally not pay for such securities or start earning interest on them until they are received. Securities purchased on a when-issued or delayed settlement basis are recorded as an asset and are subject to changes in value based upon changes in the general level of interest rates. When a Fund agrees to purchase when-issued or delayed settlement securities, the custodian will set aside cash or liquid portfolio securities equal to the amount of the commitment in a separate account. Normally, the custodian will set aside portfolio securities to satisfy a purchase commitment, and in such a case that Fund may be required subsequently to place additional assets in the separate account in order to ensure that the value of the account remains equal to the amount of such Fund's commitment. It may be expected that the market value of the Fund's net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover such purchase commitments than when it sets aside cash. A Fund's liquidity and ability to manage its portfolio might be affected when it sets aside cash or portfolio securities to cover such purchase commitments. When a Fund engages in when-issued or delayed settlement transactions, it relies on the seller to consummate the trade. Failure of the seller to do so may result in a Fund's incurring a loss or missing an opportunity to obtain a price considered to be advantageous. The Funds do not intend to purchase when-issued or delayed settlement securities for speculative purposes but only in furtherance of a Fund's investment objective. Each Fund reserves the right to sell these securities before the settlement date if it is deemed advisable. U.S. GOVERNMENT OBLIGATIONS. Examples of the types of U.S. Government obligations that may be held by the Funds include U.S. Treasury Bills, Treasury Notes, and Treasury Bonds and the obligations of the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Government National Mortgage Association, Federal National Mortgage Association, Federal Financing Bank, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Federal Farm Credit Banks, Maritime -5- Administration, Tennessee Valley Authority, Washington D.C. Armory Board, and International Bank for Reconstruction and Development. The Funds may also invest in mortgage-related securities issued or guaranteed by U.S. Government agencies and instrumentalities, including such instruments as obligations of the Government National Mortgage Association ("GNMA"), Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES. TempFund and TempCash may purchase mortgage-related and other asset-backed securities. Mortgage-related securities include fixed and adjustable Mortgage Pass-Through Certificates, which provide the holder with a pro-rata share of interest and principal payments on a pool of mortgages, ordinarily on residential properties. There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. Pass-Through Certificates guaranteed by GNMA (also known as "Ginnie Maes") are guaranteed as to the timely payment of principal and interest by GNMA, whose guarantee is backed by the full faith and credit of the United States. Mortgage-related securities issued by FNMA include FNMA guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are guaranteed as to timely payment of principal and interest by FNMA. They are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the FNMA to borrow from the Treasury. Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs"). Freddie Macs are not guaranteed by the United States or by any Federal Home Loan Banks and do not constitute a debt or obligation of the United States or of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely payment of interest, which is guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely payment of all principal payments on the underlying mortgage loans. When FHLMC does not guarantee timely payment of principal, FHLMC is required to remit the amount due on account of its guarantee of ultimate payment of principal no later than one year after it becomes payable. A Fund from time to time may purchase in the secondary market (i) certain mortgage pass-through securities packaged and master serviced by PNC Mortgage Securities Corp. ("PNC Mortgage") (or Sears Mortgage if PNC Mortgage succeeded to the rights and duties of Sears Mortgage) or Midland Loan Services, Inc. ("Midland"), or (ii) mortgage-related securities containing loans or mortgages originated by PNC Bank, National Association ("PNC Bank") or its affiliates). It is possible that under some circumstances, PNC Mortgage, Midland or other affiliates could have interests that are in conflict with the holders of these mortgage-backed securities, and such holders could have rights against PNC Mortgage, Midland or their affiliates. For example, if PNC Mortgage or Midland engaged in negligence or willful misconduct in carrying out its duties as a master servicer, then any holder of the mortgage-backed security could seek recourse against PNC Mortgage or Midland. Also, as a master servicer, PNC Mortgage or Midland may make certain representations and warranties regarding the quality of the mortgages and properties underlying a mortgage-backed security. If one or more of those representations or warranties is false, then the holders of the mortgage-backed securities could trigger an obligation of PNC Mortgage or Midland to repurchase the mortgages from the issuing trust. Finally, PNC Mortgage or Midland may own securities that are subordinate to the senior mortgage-backed securities owned by a Fund. TempCash only may also invest in classes of collateralized mortgage obligations ("CMOs") which have a remaining maturity of 13 months or less in accordance with the requirements of Rule 2a-7 under the 1940 Act. Each class of a CMO, which frequently elect to be taxed as a real estate mortgage investment conduit ("REMIC"), represents an ownership interest in, and the right to receive a specified portion of, the cash flow consisting of interest and principal on a pool of residential mortgage loans or mortgage pass-through securities ("Mortgage -6- Assets"). CMOs are issued in multiple classes, each with a specified fixed or floating interest rate and a final distribution date. The relative payment rights of the various CMO classes may be structured in many ways. In most cases, however, payments of principal are applied to the CMO classes in the order of their respective stated maturities, so that no principal payments will be made on a CMO class until all other classes having an earlier stated maturity date are paid in full. These multiple class securities may be issued or guaranteed by U.S. Government agencies or instrumentalities, including GNMA, FNMA and FHLMC, or issued by trusts formed by private originators of, or investors in, mortgage loans. Classes in CMOs which TempCash may hold are known as "regular" interests. CMOs also issue "residual" interests, which in general are junior to and more volatile than regular interests. TempCash does not intend to purchase residual interests. TempFund and TempCash may also invest in non-mortgage asset-backed securities (backed, e.g., by installment sales contracts, credit card ---- receivables or other assets). Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. The yield characteristics of certain mortgage-related and asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. ---- As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to a mortgage- related or asset-backed security subject to such a prepayment feature will have the effect of shortening the maturity of the security. If a Fund has purchased such a mortgage-related or asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid. Conversely, an increase in interest rates may result in lengthening the anticipated maturity of such a security because expected prepayments are reduced. A prepayment rate that is faster than expected will reduce the yield to maturity of such a security, while a prepayment rate that is slower than expected may have the opposite effect of increasing yield to maturity. In general, the assets supporting non-mortgage asset-backed securities are of shorter maturity than the assets supporting mortgage-related securities. Like other fixed-income securities, when interest rates rise the value of an asset-backed security generally will decline; however, when interest rates decline, the value of an asset-backed security with prepayment features may not increase as much as that of other fixed-income securities, and, as noted above, changes in market rates of interest may accelerate or retard prepayments and thus affect maturities. These characteristics may result in a higher level of price volatility for asset-backed securities with prepayment features under certain market conditions. In addition, while -7- the trading market for short-term mortgages and asset backed securities is ordinarily quite liquid, in times of financial stress the trading market for these securities sometimes becomes restricted. BANKING INDUSTRY OBLIGATIONS. For purposes of TempCash's investment policies with respect to obligations of issuers in the financial services industry, the assets of a bank or savings institution will be deemed to include the assets of its domestic and foreign branches. Obligations of foreign banks in which TempCash may invest include Eurodollar Certificates of Deposit ("ECDs") which are U.S. dollar-denominated certificates of deposit issued by offices of foreign and domestic banks located outside the United States; Eurodollar Time Deposits ("ETDs") which are U.S. dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign bank; Canadian Time Deposits ("CTDs") which are essentially the same as ETDs except they are issued by Canadian offices of major Canadian banks; and Yankee Certificates of Deposit ("Yankee CDs") which are U.S. dollar-denominated certificates of deposit issued by a U.S. branch of a foreign bank and held in the United States. SPECIAL CONSIDERATIONS REGARDING FOREIGN INVESTMENTS. TempCash's investments in the obligations of foreign issuers, including foreign governments, foreign banks and foreign branches of U.S. banks, may subject TempCash to investment risks that are different in some respects from those of investments in obligations of U.S. domestic issuers. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, interest limitations, the possible establishment of exchange controls, or other governmental restrictions which might affect the payment of principal or interest on the securities held by the Fund. Additionally, foreign branches of U.S. banks and foreign banks may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. TempCash will acquire securities issued by foreign issuers, including foreign governments, foreign banks and foreign branches of U.S. banks, only when the Fund's investment adviser believes that the risks associated with such instruments are minimal. GUARANTEED INVESTMENT CONTRACTS. TempCash may invest in guaranteed investment contracts and similar funding agreements ("GICs"). In connection with this TempCash makes cash contributions to a deposit fund of the insurance company's general account. The insurance company then credits to the Fund on a monthly basis guaranteed interest which is based on an index (in most cases this index is expected to be the Salomon Brothers CD Index). The GICs provide that this guaranteed interest will not be less than a certain minimum rate. The purchase price paid for a GIC becomes part of the general assets of the insurance company, and the contract is paid from the general assets of the insurance company. TempCash will only purchase GICs from insurance companies which, at the time of purchase, are rated "A+" by A.M. Best Company, have assets of $1 billion or more and meet quality and credit standards established by the adviser under guidelines approved by the Board of Trustees. Generally, GICs are not assignable or transferable without the permission of the issuing insurance companies, and an active secondary market in some GICs does not currently exist. -8- INVESTMENT COMPANY SECURITIES. The Funds may invest in securities issued by other open-end investment companies that invest in the type of obligations in which such Fund may invest and that determine their net asset value per share based upon the amortized cost or penny rounding method. Investments in the other investment companies will cause a Fund (and, indirectly, the Fund's shareholders) to bear proportionately the costs incurred in connection with the other investment companies' operations. Except as otherwise permitted under the 1940 Act, each Fund currently intends to limit its investments in other investment companies so that, as determined immediately after a securities purchase is made: (a) not more that 5% of the value of its total assets will be invested in the securities of any one investment company; (b) not more than 10% of its total assets will be invested in the aggregate in securities of investment companies as a group; and (c) not more than 3% of the outstanding voting securities of any one investment company will be owned by the Fund. A Fund, as discussed below in "Investment Limitations" may invest all of its assets in a open-end investment company or series thereof with substantially the same investment objectives, restrictions and policies as the Fund. MUNICIPAL OBLIGATIONS. MuniFund, MuniCash, California Money Fund, New York Money Fund TempFund and TempCash, may purchase municipal obligations. Municipal Obligations include debt obligations issued by governmental entities to obtain funds for various public purposes, including the construction of a wide range of public facilities, the refunding of outstanding obligations, the payment of general operating expenses and the extension of loans to public institutions and facilities. Private activity bonds that are issued by or on behalf of public authorities to finance various privately-operated facilities are included within the term Municipal Obligations if the interest paid thereon is (subject to the federal alternative minimum tax) exempt from regular federal income tax. From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating the federal income tax exemption for interest on Municipal Obligations. For example, under the Tax Reform Act of 1986, enacted in October 1986, interest on certain private activity bonds must be included in an investor's alternative minimum taxable income, and corporate investors must include all tax-exempt interest in the calculation of adjusted current earnings for purposes of determining the corporation's alternative minimum tax liability. The Company cannot predict what legislation or regulations, if any, may be proposed in Congress or promulgated by the Department of Treasury as regards the federal income tax exemption of interest on such obligations or the impact of such legislative and regulatory activity on such exemption. The two principal classifications of Municipal Obligations which may be held by the Funds are "general obligation" securities and "revenue" securities. General obligation securities are secured by the issuer's pledge of its full faith, credit, and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific revenue source such as the user of the facility being financed. Revenue securities include private activity bonds which are not payable from the unrestricted revenues of the Municipal issuer. Consequently, the credit quality of private activity bonds is usually related to the credit standing of the corporate user of the facility involved. -9- The Funds' portfolios may also include "moral obligation" bonds, which are normally issued by special purpose public authorities. If the issuer of moral obligation bonds is unable to meet its debt service obligations from current revenues, it may draw on a reserve fund, the restoration of which is a moral commitment but not a legal obligation of the state or municipality which created the issuer. There are, of course, variations in the quality of Municipal Obligations, both within a particular classification and between classifications, and the yields on Municipal Obligations depend upon a variety of factors, including general money market conditions, the financial condition of the issuer, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of Moody's and S&P represent their opinions as to the quality of Municipal Obligations. It should be emphasized, however, that ratings are general and are not absolute standards of quality, and Municipal Obligations with the same maturity, interest rate and rating may have different yields while Municipal Obligations of the same maturity and interest rate with different ratings may have the same yield. Subsequent to its purchase by the Funds, an issue of Municipal Obligations may cease to be rated or its rating may be reduced below the minimum rating required for purchase by the Funds. The Adviser will consider such an event in determining whether the Funds should continue to hold the obligation. An issuer's obligations under its Municipal Obligations are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code, and laws, if any, which may be enacted by federal or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations or upon the ability of municipalities to levy taxes. The power or ability of an issuer to meet its obligations for the payment of interest on and principal of its Municipal Obligations may be materially adversely affected by litigation or other conditions. Among other types of Municipal Obligations, the Funds may purchase short-term General Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation Notes, Tax-Exempt Commercial Paper, Construction Loan Notes and other forms of short-term loans. Such instruments are issued with a short-term maturity in anticipation of the receipt of tax funds, the proceeds of bond placements or other revenues. In addition, the Funds may invest in other types of tax-exempt instruments, including general obligation and private activity bonds, provided they have remaining maturities of 13 months or less at the time of purchase. MuniFund, MuniCash, California Money Fund and New York Money Fund may hold tax-exempt derivatives which may be in the form of tender option bonds, participations, beneficial interests in a trust, partnership interests or other forms. A number of different structures have been used. For example, interests in long-term fixed-rate Municipal Obligations, held by a bank as trustee or custodian, are coupled with tender option, demand and other features when the tax-exempt derivatives are created. Together, these features entitle the holder of the -10- interest to tender (or put) the underlying Municipal Obligation to a third party at periodic intervals and to receive the principal amount thereof. In some cases, Municipal Obligations are represented by custodial receipts evidencing rights to receive specific future interest payments, principal payments, or both, on the underlying municipal securities held by the custodian. Under such arrangements, the holder of the custodial receipt has the option to tender the underlying municipal security at its face value to the sponsor (usually a bank or broker dealer or other financial institution), which is paid periodic fees equal to the difference between the bond's fixed coupon rate and the rate that would cause the bond, coupled with the tender option, to trade at par on the date of a rate adjustment. The Funds may hold tax-exempt derivatives, such as participation interests and custodial receipts, for Municipal Obligations which give the holder the right to receive payment of principal subject to the conditions described above. The Internal Revenue Service has not ruled on whether the interest received on tax-exempt derivatives in the form of participation interests or custodial receipts is tax-exempt, and accordingly, purchases of any such interests or receipts are based on the opinion of counsel to the sponsors of such derivative securities. Neither the Funds nor the Adviser will independently review the underlying proceedings related to the creation of any tax-exempt derivatives or the bases for such opinion. Before purchasing a tax-exempt derivative for such Funds, the Adviser is required by the Funds' procedures to conclude that the tax-exempt security and the supporting short-term obligation involve minimal credit risks and are Eligible Securities under the Funds' Rule 2a-7 procedures. In evaluating the creditworthiness of the entity obligated to purchase the tax-exempt security, the Adviser will review periodically the entity's relevant financial information. Currently, the Trustees have authorized the purchase of tax-exempt derivatives by the Funds so long as after any purchase not more than 10% of the Funds' assets are invested in such securities. RESTRICTED AND OTHER ILLIQUID SECURITIES. The SEC has adopted Rule 144A under the Securities Act of 1933 (the "1933 Act") that allows for a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the 1933 Act for resales of certain securities to qualified institutional buyers. The Adviser anticipates that the market for certain restricted securities such as institutional commercial paper will expand further as a result of this regulation and the development of automated systems for the trading, clearance and settlement of unregistered securities of domestic and foreign issuers, such as the PORTAL System sponsored by the National Association of Securities Dealers. The Adviser will monitor the liquidity of restricted and other illiquid securities under the supervision of the Board of Trustees. In reaching liquidity decisions, the Adviser will consider, inter alia, the following ----- ---- factors: (1) the unregistered nature of a Rule 144A security; (2) the frequency of trades and quotes for the Rule 144A security; (3) the number of dealers wishing to purchase or sell the Rule 144A security and the number of other potential purchasers; (4) dealer undertakings to make a market in the Rule 144A security; (5) the trading markets for the Rule 144A security; and (6) the nature of the Rule 144A security and the nature of the marketplace trades (e.g., the ---- time needed to dispose of the Rule 144A security, the method of soliciting offers and the mechanics of the transfer). -11- STAND-BY COMMITMENTS. MuniFund, MuniCash, California Money Fund and New York Money Fund may acquire stand-by commitments. Under a stand-by commitment, a dealer would agree to purchase at a Fund's option specified Municipal Obligations at their amortized cost value to the Fund plus accrued interest, if any. (Stand-by commitments acquired by a Fund may also be referred to as "put" options.) Stand-by commitments may be exercisable by a Fund at any time before the maturity of the underlying Municipal Obligations and may be sold, transferred, or assigned only with the instruments involved. A Fund's right to exercise stand-by commitments will be unconditional and unqualified. SHORT-TERM TRADING. Federal Trust Fund and Treasury Trust Fund may seek profits through short-term trading and engage in short-term trading for liquidity purposes. Increased trading may provide greater potential for capital gains and losses, and also involves correspondingly greater trading costs which are borne by the Fund involved. BIMC will consider such costs in determining whether or not a Fund should engage in such trading. The portfolio turnover rate for the Funds is expected to be zero for regulatory reporting purposes. SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA MONEY FUND. The following information constitutes only a brief summary, does not purport to be a complete description, and is based on information available as of the date of this Statement of Additional Information from official statements and prospectuses relating to securities offerings of the State of California and various local agencies in California. While the Company has not independently verified such information, they have no reason to believe that such information is not correct in all material respects. ECONOMIC FACTORS FISCAL YEARS PRIOR TO 1995-96. Pressures on the State's budget in the late 1980's and early 1990's were caused by a combination of external economic conditions and growth of the largest General Fund Programs - K-14 education, health, welfare and corrections -- at rates faster than the revenue base. These pressures could continue as the State's overall population and school age population continue to grow, and as the State's corrections program responds to a "Three Strikes" law enacted in 1994, which requires mandatory life prison terms for certain third-time felony offenders. In addition, the State's health and welfare programs are in a transition period as a result of recent federal and State welfare reform initiatives. As a result of these factors and others, and especially because a severe recession between 1990-94 reduced revenues and increased expenditures for social welfare programs, from the late 1980's until 1992-93, the State had periods of significant budget imbalance. During this period, expenditures exceeded revenues in four out of six years, and the State accumulated and sustained a budget deficit in its budget reserve, the Special Fund for Economic Uncertainties ("SFEU") approaching $2.8 billion at its peak on June 30, 1993. -12- Between the 1991-92 and 1994-95 Fiscal Years, each budget required multibillion dollar actions to bring projected revenues and expenditures into balance, including significant cuts in health and welfare program expenditures; transfers of program responsibilities and funding from the State to local governments; transfers of about $3.6 billion in annual local property tax revenues from other local governments to local school districts, thereby reducing State funding for schools under Proposition 98; and revenue increases (particularly in the 1991-92 Fiscal Year budget), most of which were for a short duration. Despite these budget actions, as noted, the effects of the recession led to large, unanticipated deficits in the SFEU, as compared to projected positive balances. By the 1993-94 Fiscal Year, the accumulated deficit was so large that it was impractical to budget to retire such deficits in one year, so a two-year program was implemented, using the issuance of revenue anticipation warrants to carry a portion of the deficit over the end of the fiscal year. When the economy failed to recover sufficiently in 1993-94, a second two-year plan was implemented in 1994-95, again using cross-fiscal year revenue anticipation warrants to partly finance the deficit into the 1995-96 fiscal year. Another consequence of the accumulated budget deficits, together with other factors such as disbursement of funds to local school districts "borrowed" from future fiscal years and hence not shown in the annual budget, was to significantly reduce the State's cash resources available to pay its ongoing obligations. When the Legislature and the Governor failed to adopt a budget for the 1992-93 Fiscal Year by July 1, 1992, which would have allowed the State to carry out its normal annual cash flow borrowing to replenish cash reserves, the State Controller issued registered warrants to pay a variety of obligations representing prior years' or continuing appropriations, and mandates from court orders. Available funds were used to make constitutionally-mandated payments, such as debt service on bonds and warrants. Between July 1 and September 4, 1992, when the budget was adopted, the State Controller issued a total of approximately $3.8 billion of registered warrants. For several fiscal years during the recession, the State was forced to rely on external debt markets to meet its cash needs, as a succession of notes and revenue anticipation warrants were issued in the period from June 1992 to July 1994, often needed to pay previously maturing notes or warrants. These borrowings were used also in part to spread out the repayment of the accumulated budget deficit over the end of a fiscal year, as noted earlier. The last and largest of these borrowings was $4.0 billion of revenue anticipation warrants which were issued in July, 1994 and matured on April 25, 1996. 1995-96 THROUGH 1997-98 FISCAL YEARS With the end of the recession, and a growing economy beginning in 1994, the State's financial condition improved markedly in the last three fiscal years, with a combination of better than expected revenues, slowdown in growth of social welfare programs, and continued spending restraint based on the actions taken in earlier years. The last of the recession-induced budget deficits was repaid, allowing the SFEU to post a positive cash balance for only the second time in the 1990's, totaling $281 million as of June 30, 1997. The State's cash position also -13- returned to health, as cash flow borrowing was limited to $3 billion in 1996-97, and no deficit borrowing has occurred over the end of these last three fiscal years. The economy grew strongly during these fiscal years, and as a result, the General Fund took in substantially greater tax revenues (around $2.2 billion in 1995-96, $1.6 billion in 1996-97 and $2.2 billion in 1997-98) than were initially planned when the budgets were enacted. These additional funds were largely directed to school spending as mandated by Proposition 98, and to make up shortfalls from reduced federal health and welfare aid in 1995-96 and 1996- 97. The accumulated budget deficit from the recession years was finally eliminated. The Department of Finance estimates that the State's budget reserve (the SFEU) totaled $639.8 million as of June 30, 1997 and 1.782 billion as of June 30, 1998. 1998-99 FISCAL YEAR BUDGET When the Governor released his proposed 1998-99 Fiscal Year Budget on January 9, 1998, he projected General Fund revenues for the 1998-99 Fiscal Year of $55.4 billion and proposed expenditures in the same amount. By the time the Governor released the May Revision to the 1998-99 Budget ("May Revision") on May 14, 1998, the Administration projected that revenues for the 1997-98 and 1998-99 Fiscal Years combined would be more than $4.2 billion higher than was projected in January. The Governor proposed that most of this increased revenue be dedicated to fund a 75% cut in the Vehicle License Fee ("VLF"). The Legislature passed the 1998-99 Budget Bill on August 11, 1998, and the Governor signed it on August 21, 1998. Some 33 companion bills necessary to implement the budget were also signed. In signing the Budget Bill, the Governor used his line-item veto power to reduce expenditures by $1.360 billion from the General Fund, and $160 million from Special Funds. Of this total, the Governor indicated that about $250 million of vetoed funds were "set aside" to fund programs for education. Vetoed items included education funds, salary increases and many individual resources and capital projects. The 1998-99 Budget Act is based on projected General Fund revenues and transfers of $57.0 billion (after giving effect to various tax reductions enacted in 1997 and 1998), a 4.2% increase from the revised 1997-98 figures. Special Fund revenues were estimated at $14.3 billion. The revenue projections were based on the May Revision. Economic problems overseas since that time may affect the May Revision projections. See "Economic Assumptions" below. After giving effect to the Governor's vetoes, the Budget Act provides authority for expenditures of $57.3 billion from the General Fund (a 7.3% increase from 1997-98), $14.7 billion from Special Funds, and $3.4 billion from bond funds. The Budget Act projects a balance in the SFEU at June 30, 1999 (but without including the "set aside" veto amount) of $1.255 billion, a little more than 2% of General Fund revenues. The Budget Act assumes the State will carry out its normal intra-year cash flow borrowing in the amount of $1.7 billion of revenue anticipation notes which were issued on October 1, 1998. -14- The most significant feature of the 1998-99 Budget was agreement on a total of $1.4 billion of tax cuts. The central element is a bill which provides for a phased-in reduction of the VLF. Sine the VLF is currently transferred to cities and counties, the bill provides for the General Fund to replace the lose revenues. Starting on January 1, 1999, the VLF will be reduced 25%, at a cost to the General Fund of approximately $500 million in the 1998-99 Fiscal Year and about $1 billion annually thereafter. In addition to the cut in VLF, the1998-99 Budget includes both temporary and permanent increase in the personal income tax dependent credit ($612 million General Fund cost in 1998-99, but less in future years), a nonrefundable renters tax credit ($133 million), and various targeted business tax credits ($106 million). Other significant elements of the 1998-99 Budget Act are as follows: ------------------------------------------------------------------- 1. Proposition 98 funding for K-12 schools is increased by $1.7 billion in General Fund moneys over revised 1997-98 levels, about $300 million higher than the minimum Proposition 98 guaranty. An additional $600 million was appropriated to "settle up" prior years' Proposition 98 entitlements, and was primarily devoted to one-time uses such as block grants, deferred maintenance, and computer and laboratory equipment. Of the 1998-99 funds, major new programs include money for institutional and library materials deferred maintenance, support for increasing the school year to 180 days and reduction of class sizes in Grade 9. The Governor held $250 million of education funds which were vetoed as set-aside for enactment of additional reforms. Overall, per-pupil spending for K-12 schools under Proposition 98 is increased to $5,696, more than one third higher than the level in the last recession year of 1993-4. The Budget also includes $250 million a repayment of prior years' loans to schools, as part of the settlement of the CTA v. Gould lawsuit. ------------ 2. Funding for higher education increased substantially above the level called for in the Governor's four-year compact. General Fund support was increased by $340 million (15.6%) for the University of California and $267 million (14.1%) for the California State University system. In addition, Community Colleges received a $300 million (6.6%) increase under Proposition 98. 3. The Budget includes increased funding for health, welfare and social services programs. A 4.9% grant increase was included in the basic welfare grants, the first increase in those grants in 9 years. Future increases will depend on sufficient General Fund revenue to trigger the phased costs in VLF described above. 4. Funding for the judiciary and criminal justice programs increased by about 11% over 1997-98, primarily to reflect increased State support for local trial courts and rising prison population. 5. Various other highlights of the Budget included new funding for resources projects, dedication of $376 million of General Fund moneys for capital outlay projects, funding of a 3% State employee salary increase, funding of 2,000 new Department of Transportation -15- positions to accelerate transportation construction projects and funding of the Infrastructure and Economic Development Bank ($50 million). 6. The State of California received approximately $167 million of federal reimbursements to offset costs related to the incarceration of undocumented alien felons for federal fiscal year 1997. The State anticipates receiving approximately $195 million in federal reimbursements for federal fiscal year 1998. After the Budget Act was signed, and prior to the close of the Legislative session on August 31, 1998, the Legislature passed a variety of fiscal bills. The Governor had until September 30, 1998 to sign or veto these bills. The bills with the most significant fiscal impact which the Governor signed include $235 million for certain water system improvements in Southern California, $243 million for the State's share of the purchase of environmentally sensitive forest lands, $178 million for state prisons, $160 million for housing assistance ($40 million of which was included in the 1998-99 Budget Act and an additional $120 million reflected in Proposition 1A), and $125 million for juvenile facilities. The Governor also signed bills totaling $223 million for education programs which were part of the Governor's $250 million veto "set aside," and $32 million for local governments fiscal relief. In addition, he signed a bill reducing by $577 million the State's obligation to contribute to the State Teachers' Retirement System in the 1998-99 Fiscal Year. Based solely on the legislation enacted, on a net basis, the reserve for June 30, 1999, was reduced by $256 million. On the other hand, 1997-98 revenues have been increased by $160 million. The revised June 30, 1999, reserve is projected to be $1,159 million or $96 million below the level projected at the Budget Act. The reserve projected in the Budget Act was $1,255 million. It is important to emphasize that the new reserve level is based on 1998-99 revenue and expenditure assumptions as of the Budget Act except to augment for legislation signed after the budget enactment. These assumptions will not be updated until the 1999-00 Governor's Budget is released or January 10, 1999. In November, 1998, the Legislative Analyst's Office released a report predicting that General Fund revenues for 1998-99 would be somewhat lower, and expenditures somewhat higher, than the Budget Act forecasts, but the net variance would be within the projected $1.2 billion year-end reserve amount. OTHER MATTERS. On December 6, 1994, Orange County, California and its Investment Pool (the "Pool") filed for bankruptcy under Chapter 9 of the United States Bankruptcy Code. The subsequent restructuring led to the sale of substantially all of the Pool's portfolio and resulted in losses estimated to be approximately $1.7 billion (or approximately 22% of amounts deposited by the Pool investors). Approximately 187 California public entities -- substantially all of which are public agencies within the county -- had various bonds, notes or other forms of indebtedness outstanding. In some instances the proceeds of such indebtedness were invested in the Pool. In April, 1996, the County emerged from bankruptcy after closing on a $900 million recovery bond transaction. At that time, the County and its financial advisors stated that the County had emerged from the bankruptcy without any structural fiscal problems and assured -16- that the County would not slip back into bankruptcy. However, for many of the cities, schools and special districts that lost money in the County portfolio, repayment remains contingent on the outcome of litigation which is pending against investment firms and other finance professionals. Settlement discussions involving a number of defendants have occurred and a number of agreements have been executed, however, until any such agreements become final and any remaining litigation is resolved, it is impossible to determine the ultimate impact of the bankruptcy and its aftermath on these various agencies and their claims. CONSTITUTIONAL, LEGISLATIVE AND OTHER FACTORS. Certain California constitutional amendments, legislative measures, executive orders, administrative regulations and voter initiatives could produce the adverse effects described below, among others. REVENUE DISTRIBUTION. Certain Debt Obligations in the Portfolio may be obligations of issuers which rely in whole or in part on California State revenues for payment of these obligations. Property tax revenues and a portion of the State's general fund surplus are distributed to counties, cities and their various taxing entities and the State assumes certain obligations theretofore paid out of local funds. Whether and to what extent a portion of the State's general fund will be distributed in the future to counties, cities and their various entities is unclear. HEALTH CARE LEGISLATION. Certain Debt Obligations in the Portfolio may be obligations which are payable solely from the revenues of health care institutions. Certain provisions under California law may adversely affect these revenues and, consequently, payment on those Debt Obligations. The federally sponsored Medicaid program for health care services to eligible welfare beneficiaries in California is known as the Medi-Cal program. Historically, the Medi-Cal program has provided for a cost-based system of reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any hospital wanting to participate in the Medi-Cal program, provided such hospital met applicable requirements for participation. California law now provides that the State of California shall selectively contract with hospitals to provide acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently apply only to acute inpatient services. Generally, such selective contracting is made on a flat per diem payment basis for all services to Medi-Cal beneficiaries, and generally such payment has not increased in relation to inflation, costs or other factors. Other reductions or limitations may be imposed on payment for services rendered to Medi-Cal beneficiaries in the future. Under this approach, in most geographical areas of California, only those hospitals which enter into a Medi-Cal contract with the State of California will be paid for non-emergency acute inpatient services rendered to Medi-Cal beneficiaries. The State may also terminate these contracts without notice under certain circumstances and is obligated to make contractual payments only to the extent the California legislature appropriates adequate funding therefor. -17- California enacted legislation in 1982 that authorizes private health plans and insurers to contract directly with hospitals for services to beneficiaries on negotiated terms. Some insurers have introduced plans known as "preferred provider organizations" ("PPOs"), which offer financial incentives for subscribers who use only the hospitals which contract with the plan. Under an exclusive provider plan, which includes most health maintenance organizations ("HMOs"), private payors limit coverage to those services provided by selected hospitals. Discounts offered to HMOs and PPOs may result in payment to the contracting hospital of less than actual cost and the volume of patients directed to a hospital under an HMO or PPO contract may vary significantly from projections. Often, HMO or PPO contracts are enforceable for a stated term, regardless of provider losses or of bankruptcy of the respective HMO or PPO. It is expected that failure to execute and maintain such PPO and HMO contracts would reduce a hospital's patient base or gross revenues. Conversely, participation may maintain or increase the patient base, but may result in reduced payment and lower net income to the contracting hospitals. These Debt Obligations may also be insured by the State of California pursuant to an insurance program implemented by the Office of Statewide Health Planning and Development for health facility construction loans. If a default occurs on insured Debt Obligations, the State Treasurer will issue debentures payable out of a reserve fund established under the insurance program or will pay principal and interest on an unaccelerated basis from unappropriated State funds. At the request of the Office of Statewide Health Planning and Development, Arthur D. Little, Inc. prepared a study in December 1983, to evaluate the adequacy of the reserve fund established under the insurance program and based on certain formulations and assumptions found the reserve fund substantially underfunded. In September of 1986, Arthur D. Little, Inc. prepared an update of the study and concluded that an additional 10% reserve be established for "multi-level" facilities. For the balance of the reserve fund, the update recommended maintaining the current reserve calculation method. In March of 1990, Arthur D. Little, Inc. prepared a further review of the study and recommended that separate reserves continue to be established for "multi-level" facilities at a reserve level consistent with those that would be required by an insurance company. MORTGAGES AND DEEDS. Certain Debt Obligations in the Portfolio may be obligations which are secured in whole or in part by a mortgage or deed of trust on real property. California has five principal statutory provisions which limit the remedies of a creditor secured by a mortgage or deed of trust. Two statutes limit the creditor's right to obtain a deficiency judgment, one limitation being based on the method of foreclosure and the other on the type of debt secured. Under the former, a deficiency judgment is barred when the foreclosure is accomplished by means of a nonjudicial trustee's sale. Under the latter, a deficiency judgment is barred when the foreclosed mortgage or deed of trust secures certain purchase money obligations. Another California statute, commonly known as the "one form of action" rule, requires creditors secured by real property to exhaust their real property security by foreclosure before bringing a personal action against the debtor. The fourth statutory provision limits any deficiency judgment obtained by a creditor secured by real property following a judicial sale of such property to the excess of the outstanding debt over the fair value of the property at the time -18- of the sale, thus preventing the creditor from obtaining a large deficiency judgment against the debtor as the result of low bids at a judicial sale. The fifth statutory provision gives the debtor the right to redeem the real property from any judicial foreclosure sale as to which a deficiency judgment may be ordered against the debtor. Upon the default of a mortgage or deed of trust with respect to California real property, the creditor's nonjudicial foreclosure rights under the power of sale contained in the mortgage or deed of trust are subject to the constraints imposed by California law upon transfers of title to real property by private power of sale. During the three-month period beginning with the filing of a formal notice of default, the debtor is entitled to reinstate the mortgage by making any overdue payments. Under standard loan servicing procedures, the filing of the formal notice of default does not occur unless at least three full monthly payments have become due and remain unpaid. The power of sale is exercised by posting and publishing a notice of sale for at least 20 days after expiration of the three-month reinstatement period. The debtor may reinstate the mortgage, in the manner described above, up to five business days prior to the scheduled sale date. Therefore, the effective minimum period for foreclosing on a mortgage could be in excess of seven months after the initial default. Such time delays in collections could disrupt the flow of revenues available to an issuer for the payment of debt service on the outstanding obligations if such defaults occur with respect to a substantial number of mortgages or deeds of trust securing an issuer's obligations. In addition, a court could find that there is sufficient involvement of the issuer in the nonjudicial sale of property securing a mortgage for such private sale to constitute "state action," and could hold that the private-right-of-sale proceedings violate the due process requirements of the Federal or State Constitutions, consequently preventing an issuer from using the nonjudicial foreclosure remedy described above. Certain Debt Obligations in the Portfolio may be obligations which finance the acquisition of single family home mortgages for low and moderate income mortgagors. These obligations may be payable solely from revenues derived from the home mortgages, and are subject to California's statutory limitations described above applicable to obligations secured by real property. Under California antideficiency legislation, there is no personal recourse against a mortgagor of a single family residence purchased with the loan secured by the mortgage, regardless of whether the creditor chooses judicial or nonjudicial foreclosure. Under California law, mortgage loans secured by single-family owner- occupied dwellings may be prepaid at any time. Prepayment charges on such mortgage loans may be imposed only with respect to voluntary prepayments made during the first five years during the term of the mortgage loan, and then only if the borrower prepays an amount in excess of 20% of the original principal amount of the mortgage loan in a 12-month period; a prepayment charge cannot in any event exceed six months' advance interest on the amount prepaid during the 12-month period in excess of 20% of the original principal amount of the loan. This limitation could affect the flow of revenues available to an issuer for debt service on the outstanding debt obligations which financed such home mortgages. -19- PROPOSITION 13. Certain of the Debt Obligations may be obligations of issuers who rely in whole or in part on ad valorem real property taxes as a source of revenue. On June 6, 1978, California voters approved an amendment to the California Constitution known as Proposition 13, which added Article XIIIA to the California Constitution. The effect of Article XIIIA was to limit ad valorem taxes on real property and to restrict the ability of taxing entities to increase real property tax revenues. Section 1 of Article XIIIA, as amended, limits the maximum ad valorem tax on real property to 1% of full cash value to be collected by the counties and apportioned according to law. The 1% limitation does not apply to ad valorem taxes or special assessments to pay the interest and redemption charges on any bonded indebtedness for the acquisition or improvement of real property approved by two-thirds of the votes cast by the voters voting on the proposition. Section 2 of Article XIIIA defines "full cash value" to mean "the County Assessor's valuation of real property as shown on the 1975/76 tax bill under 'full cash value' or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or reduction in the consumer price index or comparable local data, or reduced in the event of declining property value caused by damage, destruction or other factors. Legislation enacted by the California Legislature to implement Article XIIIA provides that notwithstanding any other law, local agencies may not levy any ad valorem property tax except to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by Article XIIIA. PROPOSITION 9. On November 6, 1979, an initiative known as "Proposition 9" or the "Gann Initiative" was approved by the California voters, which added Article XIIIB to the California Constitution. Under Article XIIIB, State and local governmental entities have an annual "appropriations limit" and are not allowed to spend certain moneys called "appropriations subject to limitation" in an amount higher than the "appropriations limit." Article XIIIB does not affect the appropriation of moneys which are excluded from the definition of "appropriations subject to limitation," including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the "appropriations limit" is required to be based on certain 1978/79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, population, and certain services provided by these entities. Article XIIIB also provides that if these entities' revenues in any year exceed the amounts permitted to be spent, the excess is to be returned by revising tax rates or fee schedules over the subsequent two years. PROPOSITION 98. On November 8, 1988, voters of the State approved Proposition 98, a combined initiative constitutional amendment and statute called the "Classroom Instructional Improvement and Accountability Act." Proposition 98 changed State funding of public education below the university level and the operation of the State Appropriations Limit, primarily by guaranteeing K-14 schools a minimum share of General Fund revenues. Under Proposition 98 (modified by Proposition 111 as discussed below), K-14 schools are guaranteed -20- the greater of (a) in general, a fixed percent of General Fund revenues ("Test 1"), (b) the amount appropriated to K-14 schools in the prior year, adjusted for changes in the cost of living (measured as in Article XIII B by reference to State per capita personal income) and enrollment ("Test 2"), or (c) a third test, which would replace Test 2 in any year when the percentage growth in per capita General Fund revenues from the prior year plus one half of one percent is less than the percentage growth in State per capita personal income ("Test 3"). Under Test 3, schools would receive the amount appropriated in the prior year adjusted for changes in enrollment and per capita General Fund revenues, plus an additional small adjustment factor. If Test 3 is used in any year, the difference between Test 3 and Test 2 would become a "credit" to schools which would be the basis of payments in future years when per capita General Fund revenue growth exceeds per capita personal income growth. Proposition 98 permits the Legislature -- by two-thirds vote of both houses, with the Governor's concurrence -- to suspend the K-14 schools' minimum funding formula for a one-year period. Proposition 98 also contains provisions transferring certain State tax revenues in excess of the Article XIII B limit to K-14 schools. During the recession years of the early 1990s, General Fund revenues for several years were less than originally projected, so that the original Proposition 98 appropriations turned out to be higher than the minimum percentage provided in the law. The Legislature responded to these developments by designating the "extra" Proposition 98 payments in one year as a "loan" from future years' Proposition 98 entitlements, and also intended that the "extra" payments would not be included in the Proposition 98 "base" for calculating future years' entitlements. In 1992, a lawsuit was filed, California Teachers' -------------------- Association v. Gould, which challenged the validity of these off-budget loans. - -------------------- During the course of this litigation, a trial court determined that almost $2 billion in "loans" which had been provided to school districts during the recession violated the constitutional protection of support for public education. A settlement was reached on April 12, 1996 which ensures that future school funding will not be in jeopardy over repayment of these so-called loans. PROPOSITION 111. On June 30, 1989, the California Legislature enacted Senate Constitutional Amendment 1, a proposed modification of the California Constitution to alter the spending limit and the education funding provisions of Proposition 98. Senate Constitutional Amendment 1 -- on the June 5, 1990 ballot as Proposition 111 -- was approved by the voters and took effect on July 1, 1990. Among a number of important provisions, Proposition 111 recalculated spending limits for the State and for local governments, allowed greater annual increases in the limits, allowed the averaging of two years' tax revenues before requiring action regarding excess tax revenues, reduced the amount of the funding guarantee in recession years for school districts and community college districts (but with a floor of 40.9 percent of State general fund tax revenues), removed the provision of Proposition 98 which included excess moneys transferred to school districts and community college districts in the base calculation for the next year, limited the amount of State tax revenue over the limit which would be transferred to school districts and community college districts, and exempted increased gasoline taxes and truck weight fees from the State appropriations limit. Additionally, Proposition 111 exempted from the State appropriations limit funding for capital outlays. -21- PROPOSITION 62. On November 4, 1986, California voters approved an initiative statute known as Proposition 62. This initiative provided the following: 1. Requires that any tax for general governmental purposes imposed by local governments be approved by resolution or ordinance adopted by a two-thirds vote of the governmental entity's legislative body and by a majority vote of the electorate of the governmental entity; 2. Requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters within that jurisdiction; 3. Restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed; 4. Prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA; 5. Prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governments; 6. Requires that any tax imposed by a local government on or after August 1, 1985 be ratified by a majority vote of the electorate within two years of the adoption of the initiative; 7. Requires that, in the event a local government fails to comply with the provisions of this measure, a reduction in the amount of property tax revenue allocated to such local government occurs in an amount equal to the revenues received by such entity attributable to the tax levied in violation of the initiative; and 8. Permits these provisions to be amended exclusively by the voters of the State of California. In September 1988, the California Court of Appeal in City of ------- Westminster v. County of Orange, 204 Cal.App. 3d 623, 215 Cal.Rptr. 511 - ------------------------------- (Cal.Ct.App. 1988), held that Proposition 62 is unconstitutional to the extent that it requires a general tax by a general law city, enacted on or after August 1, 1985 and prior to the effective date of Proposition 62, to be subject to approval by a majority of voters. The Court held that the California Constitution prohibits the imposition of a requirement that local tax measures be submitted to the electorate by either referendum or initiative. It is impossible to predict the impact of this decision on charter cities, on special taxes or on new taxes imposed after the effective date of Proposition 62. The California Court of Appeal in City of Woodlake v. Logan, (1991) 230 Cal.App.3d ------------------------- 1058, subsequently held that Proposition 62's popular vote requirements for future local taxes also -22- provided for an unconstitutional referenda. The California Supreme Court declined to review both the City of Westminster and the City of Woodlake ------------------- ---------------- decisions. In Santa Clara Local Transportation Authority v. Guardino, (Sept. 28, 1995) 11 ------------------------------------------------------ Cal.4th 220, reh'g denied, modified (Dec. 14, 1995) 12 Cal.4th 344e, the ----- ------ -------- California Supreme Court upheld the constitutionality of Proposition 62's popular vote requirements for future taxes, and specifically disapproved of the City of Woodlake decision as erroneous. The Court did not determine the - ---------------- correctness of the City of Westminster decision, because that case appeared ------------------- distinguishable, was not relied on by the parties in Guardino, and involved -------- taxes not likely to still be at issue. It is impossible to predict the impact of the Supreme Court's decision on charter cities or on taxes imposed in reliance on the City of Woodlake case. ---------------- In McBrearty v. City of Brawley, 59 Cal. App.4th 1441, 69 Cal. Rptr. 2d 862 ---------------------------- (Cal. Ct. App. 1997), the Court of Appeal held that the city of Brawley must either hold an election or cease collection of utility taxes that were not submitted to a vote. In 1991, the City of Brawley adopted an ordinance imposing a utility tax on its residents and began collecting the tax without first seeking voter approval. In 1996, the taxpayer petitioned for writ of mandate contending that Proposition 62 required the city to submit its utility tax on residents to vote of local electorate. The trial court issued a writ of mandamus and the city appealed. First, the Court of Appeal held that the taxpayer's cause of action accrued for statute of limitation purposes at the time of the Guardino decision rather -------- than at the time when the city adopted the tax ordinance which was July 1991. Second, the Court held that the voter approval requirement in Proposition 62 was not an invalid mechanism under the state constitution for the involvement of the exectorate in the legislative process. Third, the Court rejected the city's argument that Guardino should only be applied on a prospective basis. Finally, -------- the Court held Proposition 218 (see discussion below) did not impliedly protect any local general taxes imposed prior January 21, 1995 against challenge. Assembly Bill 1362 (Mazzoni), introduced February 28, 1997, which would have made the Guardino decision inapplicable to any tax first imposed or increased by -------- an ordinance or resolution adopted before December 14, 1995, was vetoed by the Governor on December 11, 1997. The California State Senate had passed the Bill on September 8, 1997 and the California State Assembly had passed the Bill on September 8, 1997. It is not clear whether the Bill, if enacted, would have been constitutional as a non-voted amendment to Proposition 62 or as a non-voted change to Proposition 62's operative date. PROPOSITION 218. On November 5, 1996,the voters of the State approved Proposition 218, a constitutional initiative, entitled the "Right to Vote on Taxes Act" ("Proposition 218"). Proposition 218 adds Articles XIII C and XIII D to the California Constitution and contains a number of interrelated provisions affecting the ability of local governments to levy and collect both existing and future taxes, assessments, fees and charges. Proposition 218 became effective on November 6, 1996. The Sponsors are unable to predict whether and to what extent Proposition 218 may be held to be constitutional or how its terms will be interpreted and applied by the courts. However, if upheld, Proposition 218 could -23- substantially restrict certain local governments' ability to raise future revenues and could subject certain existing sources of revenue to reduction or repeal, and increase local government costs to hold elections, calculate fees and assessments, notify the public and defend local government fees and assessments in court. Article XIII C of Proposition 218 requires majority voter approval for the imposition, extension or increase of general taxes and two-thirds voter approval for the imposition, extension or increase of special taxes, including special taxes deposited into a local government's general fund. Proposition 218 also provides that any general tax imposed, extended or increased without voter approval by any local government on or after January 1, 1995 and prior to November 6, 1996 shall continue to be imposed only if approved by a majority vote in an election held within two years of November 6, 1996. Article XIII C of Proposition 218 also expressly extends the initiative power to give voters the power to reduce or repeal local taxes, assessments, fees and charges, regardless of the date such taxes, assessments, fees or charges were imposed. This extension of the initiative power to some extent constitutionalizes the March 6, 1995 State Supreme Court decision in Rossi v. -------- Brown, which upheld an initiative that repealed a local tax and held that the - ----- State constitution does not preclude the repeal, including the prospective repeal, of a tax ordinance by an initiative, as contrasted with the State constitutional prohibition on referendum powers regarding statutes and ordinances which impose a tax. Generally, the initiative process enables California voters to enact legislation upon obtaining requisite voter approval at a general election. Proposition 218 extends the authority stated in Rossi v. -------- Brown by expanding the initiative power to include reducing or repealing - ----- assessments, fees and charges, which had previously been considered administrative rather than legislative matters and therefore beyond the initiative power. The initiative power granted under Article XIII C of Proposition 218, by its terms, applies to all local taxes, assessments, fees and charges and is not limited to local taxes, assessments, fees and charges that are property related. Article XIII D of Proposition 218 adds several new requirements making it generally more difficult for local agencies to levy and maintain "assessments" for municipal services and programs. "Assessment" is defined to mean any levy or charge upon real property for a special benefit conferred upon the real property. Article XIII D of Proposition 218 also adds several provisions affecting "fees" and "charges" which are defined as "any levy other than an ad valorem tax, a special tax, or an assessment, imposed by a local government upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service." All new and, after June 30, 1997, existing property related fees and charges must conform to requirements prohibiting, among other things, fees and charges which (i) generate revenues exceeding the funds required to provide the property related service, (ii) are used for any purpose other than those for which the fees and charges are imposed, (iii) are for a service not actually used by, or immediately available to, the owner of the property in question, or (iv) are used for general -24- governmental services, including police, fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. Further, before any property related fee or charge may be imposed or increased, written notice must be given to the record owner of each parcel of land affected by such fee or charges. The local government must then hold a hearing upon the proposed imposition or increase of such property based fee, and if written protests against the proposal are presented by a majority of the owners of the identified parcels, the local government may not impose or increase the fee or charge. Moreover, except for fees or charges for sewer, water and refuse collection services, no property related fee or charge may be imposed or increased without majority approval by the property owners subject to the fee or charge or, at the option of the local agency, two-thirds voter approval by the electorate residing in the affected area. PROPOSITION 87. On November 8, 1988, California voters approved Proposition 87. Proposition 87 amended Article XVI, Section 16, of the California Constitution by authorizing the California Legislature to prohibit redevelopment agencies from receiving any of the property tax revenue raised by increased property tax rates levied to repay bonded indebtedness of local governments which is approved by voters on or after January 1, 1989. SPECIAL CONSIDERATIONS WITH RESPECT TO NEW YORK MONEY FUND Some of the significant financial considerations relating to investments in New York Municipal Obligations are summarized below. This summary information is not intended to be a complete description and is principally derived from official statements relating to issues of New York Municipal Obligations that were available prior to the date of this Statement of Additional Information. The accuracy and completeness of the information contained in those official statements have not been independently verified. STATE ECONOMY. New York is the third most populous state in the nation and has a relatively high level of personal wealth. The State's economy is diverse with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment, and a very small share of the nation's farming and mining activity. The State's location and its excellent air transport facilities and natural harbors have made it an important link in international commerce. Travel and tourism constitute an important part of the economy. Like the rest of the nation, New York has a declining proportion of its workforce engaged in manufacturing, and an increasing proportion engaged in service industries. The State has historically been one of the wealthiest states in the nation. For decades, however, the State has grown more slowly than the nation as a whole, gradually eroding its relative economic position. State per capita personal income has historically been significantly higher than the national average, although the ratio has varied substantially. Because New York City (the "City") is a regional employment center for a multi-state region, State personal income measured on a residence basis understates the relative importance of the State to the national economy and the size of the base to which State taxation applies. -25- The State economic forecast has been raised slightly from the enacted budget forecast. Continued growth is projected in 1998 and 1999 for employment, wages, and personal income, although the growth rates of personal income and wages are expected to be lower than those in 1997. The growth of personal income is projected to decline from 5.7 percent in 1997 to 4.8 percent in 1998 and 4.2 percent in 1999, in part because growth in bonus payments is expected to slow down, a distinct shift from the torrid rate of the last few years. Overall employment growth is expected to be 1.9 percent in 1998, the strongest in a decade, but will drop to 1.0 percent in 1999, reflecting the slowing growth in the national economy, continued restraint in governmental spending, and restructuring in the health care, social service, and banking sectors. There can be no assurance that the State economy will not experience worse-than-predicted results, with corresponding material and adverse effects on the State's projections of receipts and disbursements. STATE BUDGET. The State Constitution requires the governor (the "Governor") to submit to the State legislature (the "Legislature") a balanced executive budget which contains a complete plan of expenditures for the ensuing fiscal year and all moneys and revenues estimated to be available therefor, accompanied by bills containing all proposed appropriations or reappropriations and any new or modified revenue measures to be enacted in connection with the executive budget. The entire plan constitutes the proposed State financial plan for that fiscal year. The Governor is required to submit to the Legislature quarterly budget updates which include a revised cash-basis state financial plan, and an explanation of any changes from the previous state financial plan. State law requires the Governor to propose a balanced budget each year. In recent years, the State has closed projected budget gaps of $5.0 billion (1995-96), $3.9 billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The State, as a part of the 1998-99 Executive Budget projections submitted to the Legislature in February 1998, projected a 1999-00 General Fund budget gap of approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to be roughly $1.3 billion, or about $400 million less than previously projected, after application of reserves created as part of the 1998- 99 budget process. Such reserves would not be available against subsequent year imbalances. Sustained growth in the State's economy could contribute to closing projected budget gaps over the next several years, both in terms of higher-than- projected tax receipts and in lower-than-expected entitlement spending. However, the State's projections in 1999-00 currently assume actions to achieve $600 million in lower disbursements and $250 million in additional receipts from the settlement of State claims against the tobacco industry. Consistent with past practice, the projections do not include any costs associated with new collective bargaining agreements after the expiration of the current round of contracts at the end of the 1998-99 fiscal year. The State expects that the 1990-00 Financial Plan will achieve savings from initiatives by State agencies to deliver services more efficiently, workforce management efforts, maximization of federal and non-General Fund spending offsets, and other actions necessary to bring projected disbursements and receipts into balance. -26- The State will formally update its outyear projections of receipts and disbursements for the 2000-01 and 2001-02 fiscal years as a part of the 1999-00 Executive Budget process, as required by law. The revised expectations for years 2000-01 and 2001-02 will reflect the cumulative impact of tax reductions and spending commitments enacted over the last several years as well as new 1999-00 Executive Budget recommendations. The School Tax Relief Program ("STAR") program, which dedicates a portion of personal income tax receipts to fund school tax reductions, has a significant impact on General Fund receipts. STAR is projected to reduce personal income tax revenues available to the General Fund by an estimated $1.3 billion in 2000-01. Measured from the 1998-99 base, scheduled reductions to estate and gift, sales and other taxes, reflecting tax cuts enacted in 1997-98 and 1998-99, will lower General Fund taxes and fees by an estimated $1.8 billion in 2000-01. Disbursement projections for the outyears currently assume additional outlays for school aid, Medicaid, welfare reform, mental health community reinvestment, and other multi-year spending commitments in law. On September 11, 1997, the New York State Comptroller issued a report which noted that the ability to deal with future budget gaps could become a significant issue in the State's 2000-2001 fiscal year, when the cost of tax cuts increases by $1.9 billion. The report contained projections that, based on current economic conditions and current law for taxes and spending, showed a gap in the 2000-2001 State fiscal year of $5.6 billion and of $7.4 billion in the 2001-2002 State fiscal year. The report noted that these gaps would be smaller if recurring spending reductions produce savings in earlier years. The State Comptroller has also stated that if Wall Street earnings moderate and the State experiences a moderate recession, the gap for the 2001-2002 State fiscal year could grow to nearly $12 billion. The State's current fiscal year began on April 1, 1998 and ends on March 31, 1999 and is referred to herein as the State's 1998-99 fiscal year. The Legislature adopted the debt service component of the State budget for the 1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April 18, 1998. In the period prior to adoption of the budget for the current fiscal year, the Legislature also enacted appropriations to permit the State to continue its operations and provide for other purposes. On April 25, 1998, the Governor vetoed certain items that the Legislature added to the Executive Budget. The Legislature had not overridden any of the Governor's vetoes as of the start of the legislative recess on June 19, 1998 (under the State Constitution, the Legislature can override one or more of the Governor's vetoes with the approval of two-thirds of the members of each house). General Fund disbursements in 1998-99 are now projected to grow by $2.43 billion over 1997-98 levels, or $690 million more than proposed in the Governor's Executive Budget, as amended. The change in General Fund disbursements from the Executive Budget to the enacted budget reflects legislative additions (net of the value of the Governor's vetoes), actions taken at the end of the regular legislative session, as well as spending that was originally anticipated to occur in 1997-98 but is now expected to occur in 1998- 99. The State projects that the 1998-99 State Financial Plan is balanced on a cash basis, with an estimated reserve for future needs of $761 million. -27- The State's enacted budget includes several new multi-year tax reduction initiatives, including acceleration of State-funded property and local income tax relief for senior citizens under the STAR, expansion of the child care income-tax credit for middle-income families, a phased-in reduction of the general business tax, and reduction of several other taxes and fees, including an accelerated phase-out of assessments on medical providers. The enacted budget also provides for significant increases in spending for public schools, special education programs, and for the State and City university systems. It also allocates $50 million for a new Debt Reduction Reserve Fund ("DRRF") that may eventually be used to pay debt service costs on or to prepay outstanding State-supported bonds. The 1998-99 State Financial Plan projects a closing balance in the General Fund of $1.42 billion that is comprised of a reserve of $761 million available for future needs, a balance of $400 million in the Tax Stabilization Reserve Fund ("TSRF"), a balance of $158 million in the Community Projects Fund ("CPF"), and a balance of $100 million in the Contingency Reserve Fund ("CRF"). The TSRF can be used in the event of an unanticipated General Fund cash operating deficit, as provided under the State Constitution and State Finance Law. The CPF is used to finance various legislative and executive initiatives. The CRF provides resource to help finance any extraordinary litigation costs during the fiscal year. The forecast of General Fund receipts in 1998-99 incorporates several Executive Budget tax proposals that, if enacted, would further reduce receipts otherwise available to the General Fund by approximately $700 million during 1998-99. The Executive Budget proposes accelerating school tax relief for senior citizens under STAR, which is projected to reduce General Fund receipts by $537 million in 1998-99. The proposed reduction supplements STAR tax reductions already scheduled in law, which are projected at $187 million in 1998-99. The Budget also proposes several new tax-cut initiatives and other funding changes that are projected to further reduce receipts available to the General Fund by over $200 million. These initiatives include reducing the fee to register passenger motor vehicles and earmarking a larger portion of such fees to dedicated funds and other purposes; extending the number of weeks in which certain clothing purchases are exempt from sales taxes; more fully conforming State law to reflect recent Federal changes in estate taxes; continuing lower pari-mutuel tax rates; and accelerating scheduled property tax relief for farmers from 1999 to 1998. In addition to the specific tax and fee reductions discussed above, the Executive Budget also proposes establishing a reserve of $100 million to permit the acceleration into 1998-99 of other tax reductions that are otherwise scheduled in law for implementation in future fiscal years. The Division of the Budget ("DOB") estimates that the 1998-99 Financial Plan includes approximately $64 million in non-recurring resources, comprising less than two-tenths of one percent of General Fund disbursements. The non-recurring resources projected for use in 1998-99 consist of $27 million in retroactive federal welfare reimbursements for family assistance recipients with HIV/AIDS, $25 million in receipts from the Housing Finance Agency that were originally anticipated in 1997-98, and $10 million in other measures, including $5 million in asset sales. -28- Disbursements from Capital Projects funds in 1998-99 are estimated at $4.82 billion, or $1.07 billion higher than 1997-98. The proposed spending plan includes: $2.51 billion in disbursements for transportation purposes, including the State and local highway and bridge program; $815 million for environmental activities; $379 million for correctional services; $228 million for the State University of New York ("SUNY") and the City University of New York ("CUNY"); $290 million for mental hygiene projects; and $375 million for CEFAP. Approximately 28 percent of capital projects are proposed to be financed by "pay-as-you-go" resources. State-supported bond issuances finance 46 percent of capital projects, with federal grants financing the remaining 26 percent. Many complex political, social and economic forces influence the State's economy and finances, which may in turn affect the State's Financial Plan. These forces may affect the State unpredictably from fiscal year to fiscal year and are influenced by governments, institutions, and organizations that are not subject to the State's control. The State Financial Plan is also necessarily based upon forecasts of national and State economic activity. Economic forecasts have frequently failed to predict accurately the timing and magnitude of changes in the national and the State economies. The DOB believes that its projections of receipts and disbursements relating to the current State Financial Plan, and the assumptions on which they are based, are reasonable. Actual results, however, could differ materially and adversely from their projections, and those projections may be changed materially and adversely from time to time. In the past, the State has taken management actions and made use of internal sources to address potential State financial plan shortfalls, and the DOB believes it could take similar actions should variances occur in its projections for the current fiscal year. RECENT FINANCIAL RESULTS. The General Fund is the principal operating fund of the State and is used to account for all financial transactions, except those required to be accounted for in another fund. It is the State's largest fund and receives almost all State taxes and other resources not dedicated to particular purposes. On March 31, 1998, the State recorded, on a GAAP-basis, its first- ever, accumulated positive balance in its General Fund. This "accumulated surplus" was $567 million. The improvement in the State's GAAP position is attributable, in part, to the cash surplus recorded at the end of the State's 1997-98 fiscal year. Much of that surplus is reserved for future requirements, but a portion is being used to meet spending needs in 1998-99. Thus, the State expects some deterioration in its GAAP position, but expects to maintain a positive GAAP balance through the end of the current fiscal year. The State completed its 1997-98 fiscal year with a combined Governmental Funds operating surplus of $1.80 billion, which included an operating surplus in the General Fund of $1.56 billion, in Capital Projects Funds of $232 million and in Special Revenue Funds of $49 million, offset in part by an operating deficit of $43 million in Debt Service Funds. The State reported a General Fund operating surplus of $1.56 billion for the 1997-98 fiscal year, as compared to an operating surplus of $1.93 billion for the 1996-97 fiscal year. -29- As a result, the State reported an accumulated surplus of $567 million in the General Fund for the first time since it began reporting its operations on a GAAP-basis. The 1997-98 fiscal year operating surplus reflects several major factors, including the cash-basis operating surplus resulting from the higher- than-anticipated personal income tax receipts, an increase in taxes receivable of $681 million, an increase in other assets of $195 million and a decrease in pension liabilities of $144 million. This was partially offset by an increase in payables to local governments of $270 million and tax refunds payable of $147 million. DEBT LIMITS AND OUTSTANDING DEBT. There are a number of methods by which the State of New York may incur debt. Under the State Constitution, the State may not, with limited exceptions for emergencies, undertake long-term general obligation borrowing (i.e., borrowing for more than one year) unless the ----- borrowing is authorized in a specific amount for a single work or purpose by the Legislature and approved by the voters. There is no limitation on the amount of long-term general obligation debt that may be so authorized and subsequently incurred by the State. The State may undertake short-term borrowings without voter approval (i) in anticipation of the receipt of taxes and revenues, by issuing tax and revenue anticipation notes, and (ii) in anticipation of the receipt of proceeds from the sale of duly authorized but unissued general obligation bonds, by issuing bond anticipation notes. The State may also, pursuant to specific constitutional authorization, directly guarantee certain obligations of the State of New York's authorities and public benefit corporations ("Authorities"). Payments of debt service on New York State general obligation and New York State-guaranteed bonds and notes are legally enforceable obligations of the State of New York. The State employs additional long-term financing mechanisms, lease- purchase and contractual-obligation financings, which involve obligations of public authorities or municipalities that are State-supported but are not general obligations of the State. Under these financing arrangements, certain public authorities and municipalities have issued obligations to finance the construction and rehabilitation of facilities or the acquisition and rehabilitation of equipment, and expect to meet their debt service requirements through the receipt of rental or other contractual payments made by the State. Although these financing arrangements involve a contractual agreement by the State to make payments to a public authority, municipality or other entity, the State's obligation to make such payments is generally expressly made subject to appropriation by the Legislature and the actual availability of money to the State for making the payments. The State has also entered into a contractual- obligation financing arrangement with the LGAC to restructure the way the State makes certain local aid payments. In February 1997, the Job Development Authority ("JDA") issued approximately $85 million of State-guaranteed bonds to refinance certain of its outstanding bonds and notes in order to restructure and improve JDA's capital structure. Due to concerns regarding the economic viability of its programs, JDA's loan and loan guarantee activities had been suspended since the Governor took office in 1995. As a result of the structural imbalances in JDA's capital structure, and defaults in its loan portfolio and loan guarantee program incurred between 1991 and 1996, JDA would have experienced a debt service cash flow shortfall had it not completed -30- its recent refinancing. JDA anticipates that it will transact additional refinancings in 1999, 2000 and 2003 to complete its long-term plan of finance and further alleviate cash flow imbalances which are likely to occur in future years. JDA recently resumed its lending activities under a revised set of lending programs and underwriting guidelines. On January 13, 1992, Standard & Poor's Ratings Services ("Standard & Poor's") reduced its ratings on the State's general obligation bonds from A to A- and, in addition, reduced its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On August 28, 1997, Standard & Poor's revised its ratings on the State's general obligation bonds from A- to A and revised its ratings on the State's moral obligation, lease purchase, guaranteed and contractual obligation debt. On March 2, 1998, Standard & Poor's affirmed its A rating on the State's outstanding bonds. On January 6, 1992, Moody's Investors Service, Inc. ("Moody's") reduced its ratings on outstanding limited-liability State lease purchase and contractual obligations from A to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the State's general obligation long-term indebtedness. On March 20, 1998, Moody's assigned the highest commercial paper rating of P-1 to the short-term notes of the State. On July 6, 1998, Moody's assigned an A2 rating with a stable outlook to the State's general obligations. The State anticipates that its capital programs will be financed, in part, through borrowings by the State and its public authorities in the 1998-99 fiscal year. Information on the State's five-year Capital Program and Financing Plan for the 1998-99 through 2002-03 fiscal years, updated to reflect actions taken in the 1998-99 State budget (the "Plan"), was released on July 30, 1998. The projection of State borrowings for the 1998-99 fiscal year is subject to change as market conditions, interest rates and other factors vary throughout the fiscal year. The State expects to issue $528 million in general obligation bonds (including $154 million for purposes of redeeming outstanding BANs) and $154 million in general obligation commercial paper. The State also anticipates the issuance of up to a total of $419 million in Certificates of Participation to finance equipment purchases (including costs of issuance, reserve funds, and other costs) during the 1998-99 fiscal year. Of this amount, it is anticipated that approximately $191 million will be issued to finance agency equipment acquisitions, including amounts to address Statewide technology issues related to Year 2000 compliance. Approximately $228 million will also be issued to finance equipment acquisitions for welfare reform-related information technology systems. Borrowings by public authorities pursuant to lease-purchase and contractual-obligation financings for capital programs of the State are projected to total approximately $2.93 billion, including costs of issuance, reserve funds, and other costs, net of anticipated refundings and other adjustments in 1998-99. As a part of the Plan, changes were proposed to the State's borrowing plan, including: the delay in the issuance of COPs to finance welfare information systems until 1998- -31- 99 to permit a thorough assessment of needs; and the elimination of issuances for the CEFAP to reflect the proposed conversion of that bond-financed program to pay-as-you-go financing. New York State has never defaulted on any of its general obligation indebtedness or its obligations under lease-purchase or contractual-obligation financing arrangements and has never been called upon to make any direct payments pursuant to its guarantees. LITIGATION. Certain litigation pending against New York State or its officers or employees could have a substantial or long-term adverse effect on New York State finances. Among the more significant of these cases are those that involve (1) the validity of agreements and treaties by which various Indian tribes transferred title to New York State of certain land in central and upstate New York; (2) certain aspects of New York State's Medicaid policies, including its rates, regulations and procedures; (3) action against New York State and New York City officials alleging inadequate shelter allowances to maintain proper housing; (4) alleged responsibility of New York State officials to assist in remedying racial segregation in the City of Yonkers; (5) challenges to regulations promulgated by the Superintendent of Insurance establishing certain excess medical malpractice premium rates; (6) challenges to the constitutionality of Public Health Law 2807-d, which imposes a gross receipts tax from certain patient care services; (7) action seeking enforcement of certain sales and excise taxes and tobacco products and motor fuel sold to non- Indian consumers on Indian reservations; and (8) a challenge to the Governor's application of his constitutional line item veto authority. Several actions challenging the constitutionality of legislation enacted during the 1990 legislative session which changed actuarial funding methods for determining state and local contributions to state employee retirement systems have been decided against the State. As a result, the Comptroller developed a plan to restore the State's retirement systems to prior funding levels. Such funding is expected to exceed prior levels by $116 million in fiscal 1996-97, $193 million in fiscal 1997-98, peaking at $241 million in fiscal 1998-99. Beginning in fiscal 2001-02, State contributions required under the Comptroller's plan are projected to be less than that required under the prior funding method. As a result of the United States Supreme Court decision in the case of State of Delaware v. State of New York, on January 21, 1994, the State entered into a settlement agreement with various parties. Pursuant to all agreements executed in connection with the action, the State was required to make aggregate payments of $351.4 million. Annual payments to the various parties will continue through the State's 2002-03 fiscal year in amounts which will not exceed $48.4 million in any fiscal year subsequent to the State's 1994- 95 fiscal year. Litigation challenging the constitutionality of the treatment of certain moneys held in a reserve fund was settled in June 1996 and certain amounts in a Supplemental Reserve Fund previously credited by the State against prior State and local pension contributions will be paid in 1998. The legal proceedings noted above involve State finances, State programs and miscellaneous cure rights, tort, real property and contract claims in which the State is a defendant and the monetary damages sought are substantial, generally in excess of $100 million. These proceedings could affect adversely the financial condition of the State in the 1998-99 fiscal year or thereafter. Adverse developments in these proceedings, other proceedings for which -32- there are unanticipated, unfavorable and material judgments, or the initiation of new proceedings could affect the ability of the State to maintain a balanced financial plan. An adverse decision in any of these proceedings could exceed the amount of the reserve established in the State's financial plan for the payment of judgments and, therefore, could affect the ability of the State to maintain a balanced financial plan. Although other litigation is pending against New York State, except as described herein, no current litigation involves New York State's authority, as a matter of law, to contract indebtedness, issue its obligations, or pay such indebtedness when it matures, or affects New York State's power or ability, as a matter of law, to impose or collect significant amounts of taxes and revenues. AUTHORITIES. The fiscal stability of New York State is related, in part, to the fiscal stability of its Authorities, which generally have responsibility for financing, constructing and operating revenue-producing public benefit facilities. Authorities are not subject to the constitutional restrictions on the incurrence of debt which apply to the State itself, and may issue bonds and notes within the amounts of, and as otherwise restricted by, their legislative authorization. The State's access to the public credit markets could be impaired, and the market price of its outstanding debt may be materially and adversely affected, if any of the Authorities were to default on their respective obligations, particularly with respect to debt that is State- supported or State-related. Authorities are generally supported by revenues generated by the projects financed or operated, such as fares, user fees on bridges, highway tolls and rentals for dormitory rooms and housing. In recent years, however, New York State has provided financial assistance through appropriations, in some cases of a recurring nature, to certain of the Authorities for operating and other expenses and, in fulfillment of its commitments on moral obligation indebtedness or otherwise, for debt service. This operating assistance is expected to continue to be required in future years. In addition, certain statutory arrangements provide for State local assistance payments otherwise payable to localities to be made under certain circumstances to certain Authorities. The State has no obligation to provide additional assistance to localities whose local assistance payments have been paid to Authorities under these arrangements. However, in the event that such local assistance payments are so diverted, the affected localities could seek additional State funds. NEW YORK CITY AND OTHER LOCALITIES. The fiscal health of the State may also be impacted by the fiscal health of its localities, particularly the City, which has required and continues to require significant financial assistance from the State. The City depends on State aid both to enable the City to balance its budget and to meet its cash requirements. There can be no assurance that there will not be reductions in State aid to the City from amounts currently projected or that State budgets will be adopted by the April 1 statutory deadline or that any such reductions or delays will not have adverse effects on the City's cash flow or expenditures. In addition, the Federal budget negotiation process could result in a reduction in or a delay in the receipt of Federal grants which could have additional adverse effects on the City's cash flow or revenues. -33- In 1975, New York City suffered a fiscal crisis that impaired the borrowing ability of both the City and New York State. In that year the City lost access to the public credit markets. The City was not able to sell short- term notes to the public again until 1979. In 1975, Standard & Poor's suspended its A rating of City bonds. This suspension remained in effect until March 1981, at which time the City received an investment grade rating of BBB from Standard & Poor's. On July 2, 1985, Standard & Poor's revised its rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On February 3, 1998 and again on May 27, 1998, Standard & Poor's assigned a BBB+ rating to the City's general obligation debt and placed the ratings on CreditWatch with positive implications. Moody's ratings of City bonds were revised in November 1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1. On February 25, 1998, Moody's upgraded nearly $28 billion of the City's general obligations from Baa1 to A3. On June 9, 1998, Moody's again assigned on A3 rating to the City's general obligations and stated that its outlook was stable. New York City is heavily dependent on New York State and federal assistance to cover insufficiencies in its revenues. There can be no assurance that in the future federal and State assistance will enable the City to make up its budget deficits. To help alleviate the City's financial difficulties, the Legislature created the Municipal Assistance Corporation ("MAC") in 1975. Since its creation, MAC has provided, among other things, financing assistance to the City by refunding maturing City short-term debt and transferring to the City funds received from sales of MAC bonds and notes. MAC is authorized to issue bonds and notes payable from certain stock transfer tax revenues, from the City's portion of the State sales tax derived in the City and, subject to certain prior claims, from State per capita aid otherwise payable by the State to the City. Failure by the State to continue the imposition of such taxes, the reduction of the rate of such taxes to rates less than those in effect on July 2, 1975, failure by the State to pay such aid revenues and the reduction of such aid revenues below a specified level are included among the events of default in the resolutions authorizing MAC's long-term debt. The occurrence of an event of default may result in the acceleration of the maturity of all or a portion of MAC's debt. MAC bonds and notes constitute general obligations of MAC and do not constitute an enforceable obligation or debt of either the State or the City. Since 1975, the City's financial condition has been subject to oversight and review by the New York State Financial Control Board (the "Control Board") and since 1978 the City's financial statements have been audited by independent accounting firms. To be eligible for guarantees and assistance, the City is required during a "control period" to submit annually for Control Board approval, and when a control period is not in effect for Control Board review, a financial plan for the next four fiscal years covering the City and certain agencies showing balanced budgets determined in accordance with GAAP. New York State also established the Office of the State Deputy Comptroller for New York City ("OSDC") to assist the Control Board in exercising its powers and responsibilities. On June 30, 1986, the City satisfied the statutory -34- requirements for termination of the control period. This means that the Control Board's powers of approval are suspended, but the Board continues to have oversight responsibilities. On June 10, 1997, the City submitted to the Control Board the Financial Plan (the "1998-2001 Financial Plan") for the 1998 through 2001 fiscal years, relating to the City, the Board of Education ("BOE") and CUNY and reflected the City's expense and capital budgets for the 1998 fiscal year, which were adopted on June 6, 1997. The 1998-2001 Financial Plan projected revenues and expenditures for the 1998 fiscal year balanced in accordance with GAAP. The 1998-99 Financial Plan projects General Fund receipts (including transfers from other funds) of $36.22 billion, an increase of $1.02 billion over the estimated 1997-1998 level. Recurring growth in the State General Fund tax base is projected to be approximately six percent during 1998-99, after adjusting for tax law and administrative changes. This growth rate is lower than the rates for 1996-97 or currently estimated for 1997-98, but roughly equivalent to the rate for 1995-96. The 1998-99 forecast for user taxes and fees also reflects the impact of scheduled tax reductions that will lower receipts by $38 million, as well as the impact of two Executive Budget proposals that are projected to lower receipts by an additional $79 million. The first proposal would divert $30 million in motor vehicle registration fees from the General Fund to the Dedicated Highway and Bridge Trust Fund; the second would reduce fees for motor vehicle registrations, which would further lower receipts by $49 million. The underlying growth of receipts in this category is projected at 4 percent, after adjusting for these scheduled and recommended changes. In comparison to the current fiscal year, business tax receipts are projected to decline slightly in 1998-99, falling from $4.98 million to $4.96 billion. The decline in this category is largely attributable to scheduled tax reductions. In total, collections for corporation and utility taxes and the petroleum business tax are projected to fall by $107 million from 1997-98. The decline in receipts in these categories is partially offset by growth in the corporation franchise, insurance and bank taxes, which are projected to grow by $88 million over the current fiscal year. The Financial Plan is projected to show a GAAP-basis surplus of $131 million for 1997-98 and a GAAP-basis deficit of $1.3 billion for 1998-99 in the General Fund, primarily as a result of the use of the 1997-98 cash surplus. In 1998-99, the General Fund GAAP Financial Plan shows total revenues of $34.68 billion, total expenditures of $35.94 billion, and net other financing sources and uses of $42 million. Although the City has maintained balanced budgets in each of its last eighteen fiscal years and is projected to achieve balanced operating results for the 1999 fiscal year, there can be no assurance that the gap-closing actions proposed in the 1998-2001 Financial Plan can be successfully implemented or that the City will maintain a balanced budget in future years without additional State aid, revenue increases or expenditure reductions. Additional tax increases and reductions in essential City services could adversely affect the City's economic base. -35- The projections set forth in the 1998-2001 Financial Plan were based on various assumptions and contingencies which are uncertain and which may not materialize. Changes in major assumptions could significantly affect the City's ability to balance its budget as required by State law and to meet its annual cash flow and financing requirements. Such assumptions and contingencies include the condition of the regional and local economies, the impact on real estate tax revenues of the real estate market, wage increases for City employees consistent with those assumed in the 1998-2001 Financial Plan, employment growth, the ability to implement proposed reductions in City personnel and other cost reduction initiatives, the ability of the Health and Hospitals Corporation and the BOE to take actions to offset reduced revenues, the ability to complete revenue generating transactions, provision of State and Federal aid and mandate relief and the impact on City revenues and expenditures of Federal and State welfare reform and any future legislation affecting Medicare or other entitlements. Implementation of the 1998-2001 Financial Plan is also dependent upon the City's ability to market its securities successfully. The City's financing program for fiscal years 1998 through 2001 contemplates the issuance of $5.7 billion of general obligation bonds and $5.7 billion of bonds to be issued by the proposed New York City Transitional Finance Authority (the "Finance Authority") to finance City capital projects. The Finance Authority, was created as part of the City's effort to assist in keeping the City's indebtedness within the forecast level of the constitutional restrictions on the amount of debt the City is authorized to incur. Despite this additional financing mechanism, the City currently projects that, if no further action is taken, it will reach its debt limit in City fiscal year 1999-2000. Indebtedness subject to the constitutional debt limit includes liability on capital contracts that are expected to be funded with general obligation bonds, as well as general obligation bonds. On June 2, 1997, an action was commenced seeking a declaratory judgment declaring the legislation establishing the Transitional Finance Authority to be unconstitutional. If such legislation were voided, projected contracts for the City capital projects would exceed the City's debt limit during fiscal year 1997-98. Future developments concerning the City or entities issuing debt for the benefit of the City, and public discussion of such developments, as well as prevailing market conditions and securities credit ratings, may affect the ability or cost to sell securities issued by the City or such entities and may also affect the market for their outstanding securities. The City Comptroller and other agencies and public officials have issued reports and made public statements which, among other things, state that projected revenues and expenditures may be different from those forecast in the City's financial plans. It is reasonable to expect that such reports and statements will continue to be issued and to engender public comment. The City since 1981 has fully satisfied its seasonal financing needs in the public credit markets, repaying all short-term obligations within their fiscal year of issuance. Although the City's 1998 fiscal year financial plan projected $2.4 billion of seasonal financing for the 1998 fiscal year, the City expected to undertake only approximately $1.4 billion of seasonal financing. The City issued $2.4 billion of short-term obligations in fiscal year 1997. Seasonal financing requirements for the 1996 fiscal year increased to $2.4 billion from $2.2 billion and -36- $1.75 billion in the 1995 and 1994 fiscal years, respectively. Seasonal financing requirements were $1.4 billion in the 1993 fiscal year. The delay in the adoption of the State's budget in certain past fiscal years has required the City to issue short-term notes in amounts exceeding those expected early in such fiscal years. Certain localities, in addition to the City, have experienced financial problems and have requested and received additional New York State assistance during the last several State fiscal years. The potential impact on the State of any future requests by localities for additional assistance is not included in the State's projections of its receipts and disbursements for the 1997-98 fiscal year. Fiscal difficulties experienced by the City of Yonkers ("Yonkers") resulted in the re-establishment of the Financial Control Board for the City of Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board is charged with oversight of the fiscal affairs of Yonkers. Future actions taken by the State to assist Yonkers could result in increased State expenditures for extraordinary local assistance. Beginning in 1990, the City of Troy experienced a series of budgetary deficits that resulted in the establishment of a Supervisory Board for the City of Troy in 1994. The Supervisory Board's powers were increased in 1995, when Troy MAC was created to help Troy avoid default on certain obligations. The legislation creating Troy MAC prohibits the city of Troy from seeking federal bankruptcy protection while Troy MAC bonds are outstanding. Troy MAC has issued bonds to effect a restructuring of the City of Troy's obligations. Eighteen municipalities received extraordinary assistance during the 1996 legislative session through $50 million in special appropriations targeted for distressed cities, and that was largely continued in 1997. Twenty-eight municipalities were scheduled to share in more than $32 million in targeted unrestricted aid allocated in the 1997-98 budget. An additional $21 million will be dispersed among all cities, towns and villages, a 3.97% increase in General Purpose State Aid. The 1998-99 budget includes an additional $29.4 million in unrestricted aid targeted to 57 municipalities across the State. Other assistance for municipalities with special needs totals more than $25.6 million. Twelve upstate cities will receive $24.2 million in one-time assistance from a cash flow acceleration of State aid. Municipalities and school districts have engaged in substantial short- term and long-term borrowings. In 1996, the total indebtedness of all localities in the State other than New York City was approximately $20.0 billion. A small portion (approximately $77.2 million) of that indebtedness represented borrowing to finance budgetary deficits and was issued pursuant to enabling State legislation. State law requires the Comptroller to review and make recommendations concerning the budgets of those local government units other than New York City that are authorized by State law to issue debt to finance deficits during the period that such deficit financing is outstanding. -37- From time to time, federal expenditure reductions could reduce, or in some cases eliminate, federal funding of some local programs and accordingly might impose substantial increased expenditure requirements on affected localities. If the State, the City or any of the Authorities were to suffer serious financial difficulties jeopardizing their respective access to the public credit markets, the marketability of notes and bonds issued by localities within the State could be adversely affected. Localities also face anticipated and potential problems resulting from certain pending litigation, judicial decisions and long-range economic trends. Long-range potential problems of declining urban population, increasing expenditures and other economic trends could adversely affect localities and require increasing the State assistance in the future. YEAR 2000 COMPLIANCE. The State is currently addressing "Year 2000" data processing compliance issues. The Year 2000 compliance issue ("Y2K") arises because most computer software programs allocate two digits to the data field for "year" on the assumption that the first two digits will be "19". Such programs will thus interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact both the ability to enter data into computer programs and the ability of such programs to correctly process data. The Office for Technology is monitoring compliance on a quarterly basis and is providing assistance and assigning resources to accelerate compliance for mission critical systems, with most compliance testing expected to be completed by mid-1999. There can be no guarantee, however, that all of the State's mission-critical and high-priority computer systems will be Year 2000 compliant and that there will not be an adverse impact upon State operations or State finances as a result. INVESTMENT LIMITATIONS The following is a complete list of investment limitations and policies applicable to each of the Funds or, as indicated below, to specific Funds, that may not changed without the affirmative votes of the holders of a majority of each Fund's outstanding shares (as defined below under "Miscellaneous"): 1. A Fund may not borrow money or issue senior securities except to the extent permitted under the 1940 Act. 2. A Fund may not act as an underwriter of securities. A Fund will not be an underwriter for purposes of this limitation if it purchases securities in transactions in which the Fund would not be deemed to be an underwriter for purposes of the Securities Act of 1933. 3. A Fund may not make loans. The purchase of debt obligations, the lending of portfolio securities and the entry into repurchase agreements are not treated as the making of loans for purposes of this limitation. -38- 4. A Fund may not purchase or sell real estate. The purchase of securities secured by real estate or interests therein are not considered to be a purchase of real estate for the purposes of the limitation. 5. A Fund may not purchase or sell commodities or commodities contracts. 6. A Fund may, notwithstanding any other fundamental investment limitations, invest all of its assets in a single open-end investment company or series thereof with substantially the same investment objectives, restrictions and policies as the Fund. 7. With respect to TempFund, TempCash, MuniFund and MuniCash only: A -------------------------------------------------------------- Fund may not purchase the securities of any issuer if as a result more than 5% of the value of the Fund's assets would be invested in the securities of such issuer except that up to 25% of the value of the Fund's assets may be invested without regard to this 5% limitation. 8. With respect to TempFund only. TempFund may not purchase any ----------------------------- securities which would cause 25% or more of the value of its total assets at the time of such purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that (a) there is no limitation with respect to investments in U.S. Treasury Bills, other obligations issued or guaranteed by the federal government, its agencies and instrumentalities, certificates of deposit, and bankers' acceptances and (b) neither all finance companies, as a group, nor all utility companies, as a group, are considered a single industry for purposes of this policy. The Fund interprets the exception for "certificates of deposit, and bankers' acceptances" in this fundamental policy to include other similar obligations of domestic banks. 9. With respect to TempCash only: TempCash may not purchase any ----------------------------- securities which would cause, at the time of purchase, less than 25% of the value of its total assets to be invested in obligations of issuers in the financial services industry or in obligations, such as repurchase agreements, secured by such obligations (unless the Fund is in a temporary defensive position) or which would cause, at the time of purchase, 25% or more of the value of its total assets to be invested in the obligations of issuers in any other industry, provided that (a) there is no limitation with respect to investments in U.S. Treasury Bills and other obligations issued or guaranteed by the federal government, its agencies and instrumentalities and (b) neither all finance companies, as a group, nor all utility companies, as a group, are considered a single industry for purposes of this policy. 10. With respect to California Money Fund and New York Money Fund ------------------------------------------------------------- only: Each of these Funds may not purchase any securities which would cause 25% - ---- or more of the Fund's total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that there is no limitation with respect to obligations issued or guaranteed by the U.S. government, any state or territory of the United States, or any of their agencies, instrumentalities or political subdivisions. -39- The following is a list of non-fundamental investment limitations applicable to each of the Funds or, as indicated below, to specific Funds. Unlike a fundamental limitation, a non-fundamental investment limitation may be changed without the approval of shareholders. 1. A Fund may not acquire any other investment company or investment company security except in connection with a merger, consolidation, reorganization or acquisition of assets or where otherwise permitted by the 1940 Act. 2. With Respect to MuniFund, MuniCash, Cal Money and NY Money only: --------------------------------------------------------------- The Fund may not invest more than 10% of the value of the Fund's total assets in illiquid securities which may be illiquid due to legal or contractual restrictions on resale or the absence of readily available market quotations. 3. MuniFund and MuniCash only: A Fund may not invest in industrial -------------------------- revenue bonds where the payment of principal and interest are the responsibility of a company (including its predecessors) with less than 3 years of continuous operations. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION IN GENERAL Information on how to purchase and redeem each Fund's shares is included in the applicable Prospectuses. The issuance of shares is recorded on a Fund's books, and share certificates are not issued unless expressly requested in writing. Certificates are not issued for fractional shares. The regulations of the Comptroller of the Currency provide that funds held in a fiduciary capacity by a national bank approved by the Comptroller to exercise fiduciary powers must be invested in accordance with the instrument establishing the fiduciary relationship and local law. The Company believes that the purchase of shares of the Funds by such national banks acting on behalf of their fiduciary accounts is not contrary to applicable regulations if consistent with the particular account and proper under the law governing the administration of the account. Prior to effecting a redemption of shares represented by certificates, PFPC, the Company's transfer agent, must have received such certificates at its principal office. All such certificates must be endorsed by the redeeming shareholder or accompanied by a signed stock power, in each instance the signature must be guaranteed. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Signature Program (MSP) and the New York Stock Exchange, Inc. Medallion Securities Program. Signature guarantees that are not part of -40- these programs will not be accepted. A Fund may require any additional information reasonably necessary to evidence that a redemption has been duly authorized. Under the 1940 Act, a Fund may suspend the right of redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange is closed, other than customary weekend and holiday closings, or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (A Fund may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.) In addition, if, in the opinion of the directors of the Company, ownership of shares has or may become concentrated to an extent which would cause a Fund to be deemed a personal holding company, a Fund may compel the redemption of, reject any order for or refuse to give effect on the books of a Fund to the transfer of a Fund's shares in an effort to prevent that consequence. A Fund may also redeem shares involuntarily if such redemption appears appropriate in light of a Fund's responsibilities under the 1940 Act or otherwise. If the Company's Board of Directors determines that conditions exist which make payment of redemption proceeds wholly in cash unwise or undesirable, a Fund may make payment wholly or partly in securities or other property. In certain instances, a Fund may redeem shares pro rata from each shareholder of record without payment of monetary consideration. Any institution purchasing shares on behalf of separate accounts will be required to hold the shares in a single nominee name (a "Master Account"). Institutions investing in more than one of the portfolios, or classes of shares, must maintain a separate Master Account for each Fund's class of shares. Institutions may also arrange with PFPC for certain sub-accounting services (such as purchase, redemption, and dividend recordkeeping). Sub-accounts may be established by name or number either when the Master Account is opened or later. NET ASSET VALUE Net asset value per share of each share in a particular Fund is calculated by adding the value of all portfolio securities and other assets belonging to a Fund, subtracting the Fund's liabilities, and dividing the result by the number of outstanding shares in the Fund. "Assets belonging to" a Fund consist of the consideration received upon the issuance of Fund shares together with all income, earnings, profits and proceeds derived from the investment thereof, including any proceeds from the sale of such investments, any funds or payments derived from any reinvestment of such proceeds, and a portion of any general assets not belonging to a particular portfolio. Assets belonging to a Fund are charged with the direct liabilities of that Fund and with a share of the general liabilities of the Company allocated on a daily basis in proportion to the relative net assets of each of the portfolios. Determinations made in good faith and in accordance with generally accepted accounting principles by the Board of Trustees as to the allocation of any assets or liabilities with respect to a Fund are conclusive. The expenses that are charged to a Fund are borne equally by each share of the Fund, and -41- payments to Service Organizations are borne solely by the Dollar Shares, Plus Shares, Administration Shares, Cash Reserve Shares and Cash Management Shares, respectively. In computing the net asset value of its shares for purposes of sales and redemptions, each Fund uses the amortized cost method of valuation pursuant to Rule 2a-7. Under this method, a Fund values each of its portfolio securities at cost on the date of purchase and thereafter assumes a constant proportionate amortization of any discount or premium until maturity of the security. As a result, the value of a portfolio security for purposes of determining net asset value normally does not change in response to fluctuating interest rates. While the amortized cost method seems to provide certainty in portfolio valuation, it may result in valuations of a Fund's securities which are higher or lower than the market value of such securities. In connection with its use of amortized cost valuation, each Fund limits the dollar-weighted average maturity of its portfolio to not more than 90 days and does not purchase any instrument with a remaining maturity of more than 13 months (with certain exceptions). The Board of Trustees has also established procedures, pursuant to rules promulgated by the SEC, that are intended to stabilize each Fund's net asset value per share for purposes of sales and redemptions at $1.00. Such procedures include the determination, at such intervals as the Board deems appropriate, of the extent, if any, to which a Fund's net asset value per share calculated by using available market quotations deviates from $1.00 per share. In the event such deviation exceeds 1/2 of 1%, the Board will promptly consider what action, if any, should be initiated. If the Board believes that the amount of any deviation from a Fund's $1.00 amortized cost price per share may result in material dilution or other unfair results to investors or existing shareholders, it will take such steps as it considers appropriate to eliminate or reduce to the extent reasonably practicable any such dilution or unfair results. These steps may include selling portfolio instruments prior to maturity to realize capital gains or losses or to shorten a Fund's average portfolio maturity, redeeming shares in kind, reducing or withholding dividends, or utilizing a net asset value per share determined by using available market quotations. MANAGEMENT OF THE FUNDS TRUSTEES AND OFFICERS The business and affairs of the Company are managed under the direction of the Board of Trustees. The Trustees and executive officers, their addresses, ages, principal occupations during the past five years and other affiliations are as follows: -42-
Position with Principal Occupation Name the Company Age During Past 5 Years - ---- ----------- --- ------------------- G. Nicholas Beckwith, III Trustee 53 President and Chief Executive Beckwith Machinery Company Officer, Beckwith Machinery 4565 William Penn Highway Company; First Vice Chairman of Murrysville, PA 15668 the Board of Directors, University of Pittsburgh Medical Center Shadyside/Presbyterian Hospitals; Second Vice Chairman of the Board of Directors, University of Pittsburgh Medical Center Health System; Board of Overseers, Brown University School of Medicine; Board of Trustees, Shady Side Academy; Trustee, Claude Worthington Benedum Foundation; Trustee, Chatham College; Director or Trustee of two other investment companies advised by BIMC. Jerrold B. Harris Trustee, 56 President and Chief Executive VWR Scientific Products Corp. President and Officer, VWR Scientific Products 1310 Goshen Parkway Treasurer Corp.; Director or Trustee of two West Chester, PA 19380 other investment companies advised by BIMC. Rodney D. Johnson* Trustee, 57 President, Fairmount Capital Fairmount Capital Advisors, Inc. President and Advisors, Inc.; Director or 1435 Walnut Street, Suite 300 Treasurer Trustee of five other investment Philadelphia, PA 19102-3222 companies advised by BIMC. Joseph P. Platt, Jr. Trustee 51 Partner, Amarna Partners (private Amarna Partners investment company); formerly, a One Oxford Centre, Suite 4260 Director and Executive Vice Pittsburgh, PA 15219 President of Johnson & Higgins.
-43-
Position with Principal Occupation Name the Company Age During Past 5 Years - ---- ----------- --- ------------------- Robert C. Robb, Jr.1 Trustee 53 Partner, Lewis, Eckert, Robb & Lewis, Eckert, Robb & Co. Company (management and financial 425 One Plymouth Meeting consulting firm); Trustee, EQK Plymouth Meeting, PA 19462 Realty Investors; Director, Tamaqua Cable Products Company; Director, Brynwood Partners; former Director, PNC Bank. Kenneth L. Urish Trustee 47 Managing Partner, Urish Popeck & Urish Popeck & Co. Co. LLC (certified public Three Gateway Center, Suite 2400 accountants and consultants). Pittsburgh, PA 15222 Frederick W. Winter Trustee 53 Dean, Joseph M. Katz School of Dean-Katz Graduate School of Business University of Business Pittsburgh; formerly, Dean, School University of Pittsburgh of Management - State University 372 Mervis Hall of New York at Buffalo Pittsburgh, PA 15260 (1994-1997); former Director, Rand Capital (1996-1997); former Director, Bell Sports (1991-1998); former Director, Alkon Corporation (1992-1998). W. Bruce McConnel, III Secretary 54 Partner of the law firm of Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP, 1345 Chestnut Street Philadelphia, Pennsylvania Phildelphia, PA 19107-3496
_____________________________ * Mr. Johnson is an "interested person" of Provident Institutional Funds, as that term is defined in the 1940 Act, because he is an officer of the Company. 1. From 1994 until April 14, 1998, Mr. Robb was a director of PNC Bank. -44- The following provides certain information about the fees received by the trustees/directors of the Predecessor Companies and/or the Company and as directors/trustees of the Fund Complex for the year ending December 31, 1998.
========================================================================================================================== PENSION OR TOTAL RETIREMENT COMPENSATION FROM AGGREGATE BENEFITS COMPANY AND/OR COMPENSATION ACCRUED AS PART PREDECESSOR FROM OF COMPANY AND/OR ESTIMATED COMPANIES AND COMPANY AND/OR PREDECESSOR ANNUAL FUND COMPLEX/1/ NAME OF PERSON, PREDECESSOR COMPANIES BENEFITS UPON PAID TO POSITION COMPANIES EXPENSES RETIREMENT TRUSTEES -------- --------- -------- ---------- -------- - ------------------------------------------------------------------------------------------------------------------------- G. Nicholas Beckwith, III, Trustee $44,000.00 n/a n/a $44,000.002 - ------------------------------------------------------------------------------------------------------------------------- Jerrold B. Harris, Trustee $44,000.00 n/a n/a $44,000.002 - ------------------------------------------------------------------------------------------------------------------------- Rodney D. Johnson*, Trustee, $56,500.00 n/a n/a $56,500.002 President and Treasurer - ------------------------------------------------------------------------------------------------------------------------- Joseph P. Platt, Jr., Trustee $ 0 n/a n/a $ 0 - ------------------------------------------------------------------------------------------------------------------------- Robert C. Robb, Jr., 1 Trustee $ 0 n/a n/a $ 0 - ------------------------------------------------------------------------------------------------------------------------- Kenneth L. Urish, Trust $ 0 n/a n/a $ 0 - ------------------------------------------------------------------------------------------------------------------------- Frederick W. Winter, Trustee $ 0 n/a n/a $ 0 ==========================================================================================================================
1. A Fund complex means two or more investment companies that hold themselves out to investors as related companies for purposes of investment and investor services, or have a common investment adviser or have an investment adviser that is an affiliated person of the investment adviser of any of the other investment companies. 2. Total number of such other investment companies a trustee served on within the Fund Complex. * This trustee is considered by the Company to be an "interested person" of the Company as defined by the 1940 Act. Until January 28, 1999, when the Predecessor Companies were reorganized into the Company, G. Willing Pepper was director/trustee and Chairman of the Board of Temp, Fed and Cal Muni. William R. Howell and Rudolph A. Peterson were each directors of Cal Muni. Anthony Santomero was a director of Cal Muni and NY Muni. Philip E. Coldwell and Robert F. Fortune were directors/trustees of Temp, Fed and Muni. Thomas A. Melfe and Francis E. Drake were each directors of NY Muni. Mr. Melfe was also Chairman of the Board of NY Muni. Drinker Biddle & Reath LLP, of which Mr. McConnel is a partner, receive legal fees as counsel to the Predecessor Companies and receives legal fees as counsel to the Company. No employee of PDI, BIMC, PFPC or PNC Bank receives any compensation from the Predecessor Companies for acting as an officer or director of the Predecessor Companies. The directors and officers of the Predecessor Companies as a group own less than 1% of the shares of each of the Predecessor Funds. -45- INVESTMENT ADVISER The advisory services provided by BIMC are described in the Funds' Prospectuses. For the advisory services provided and expenses assumed by it, BIMC is entitled to receive fees, computed daily and payable monthly, at the following annual rates: TEMPFUND: -------- ANNUAL FEE AVERAGE NET ASSETS ---------- ------------------ .175%......................... of the first $1 billion .150%......................... of the next $1 billion .125%......................... of the next $1 billion .100%......................... of the next $1 billion .095%......................... of the next $1 billion .090%......................... of the next $1 billion .080%......................... of the next $1 billion .075%......................... of the next $1 billion .070%......................... of amounts in excess of $8 billion. TEMPCASH, MUNIFUND AND MUNICASH: ------------------------------- ANNUAL FEE A FUND'S AVERAGE NET ASSETS ---------- --------------------------- .175%......................... of the first $1 billion .150%......................... of the next $1 billion .125%......................... of the next $1 billion .100%......................... of the next $1 billion .095%......................... of the next $1 billion .090%......................... of the next $1 billion .085%......................... of the next $1 billion .080%......................... of amounts in excess of $7 billion. -46- FED FUND, T FUND, FEDERAL TRUST FUND AND TREASURY TRUST FUND: ------------------------------------------------------------ THE FUNDS' COMBINED ANNUAL FEE AVERAGE NET ASSETS ---------- ------------------ .175%....................... of the first $1 billion .150%....................... of the next $1 billion .125%....................... of the next $1 billion .100%....................... of the next $1 billion .095%....................... of the next $1 billion .090%....................... of the next $1 billion .085%....................... of the next $1 billion .080%....................... of amounts in excess of $7 billion. CALIFORNIA MONEY FUND AND NEW YORK MONEY FUND: --------------------------------------------- ANNUAL FEE A FUND'S AVERAGE NET ASSETS ---------- --------------------------- .20%....................... of the total net assets PFPC, as described below under "Co-Administrators", and BIMC are co- administrators of the Fund. They may from time to time reduce their fees to ensure that the ordinary operating expenses (excluding interest, taxes, brokerage fees, fees paid to Service Organizations pursuant to Servicing Agreements, and extraordinary expenses) do not exceed a specified percentage of each Funds' average net assets. The following chart provides information with respect to the advisory fees paid (net of waivers) and advisory fees waived during the fiscal year of each Fund ended in 1996, 1997 and 1998: -47-
- --------------------------------------------------------------------------------------------------------------------------- FUND 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------------------- ADVISORY ADVISORY ADVISORY ADVISORY ADVISORY ADVISORY FEES FEES FEES FEES FEES FEES PAID WAIVED PAID WAIVED PAID WAIVED - -------------------------------------------------------------------------------------------------------------------------- TempFund $8,126,927 $2,315,278 $6,560,502 $2,576,521 $5,254,506 $2,765,282 - -------------------------------------------------------------------------------------------------------------------------- TempCash 2,388,597 2,096,653 2,176,446 2,041,599 2,170,845 2,106,346 - -------------------------------------------------------------------------------------------------------------------------- FedFund 955,784 478,660 1,161,493 669,760 1,092,318 764,599 - -------------------------------------------------------------------------------------------------------------------------- T-Fund 2,678,630 1,095,039 1,750,181 940,954 1,199,099 798,740 - -------------------------------------------------------------------------------------------------------------------------- Federal Trust Fund 227,374 136,957 203,068 156,965 203,379 170,171 - -------------------------------------------------------------------------------------------------------------------------- Treasury Trust Fund 1,093,223 499,881 1,002,514 587,865 907,460 653,409 - -------------------------------------------------------------------------------------------------------------------------- MuniFund 567,677 489,376 717,070 497,287 752,680 545,635 - -------------------------------------------------------------------------------------------------------------------------- MuniCash 367,734 615,881 268,834 534,948 238,520 488,851 - -------------------------------------------------------------------------------------------------------------------------- California 374,215 729,108 268,716 621,301 254,168 594,290 Money - -------------------------------------------------------------------------------------------------------------------------- New York Money 202,770 450,544 150,755 420,034 133,705 391,595 - --------------------------------------------------------------------------------------------------------------------------
________________________ The Funds' fiscal year ends were as follows: October 31: TempFund and TempCash September 30, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund October 31, MuniFund and MuniCash November 30, California Money Fund January 31 and New York Money Fund July 31. CO-ADMINISTRATORS BIMC and PFPC serve as the Fund's co-administrators. PFPC has its principal business address at 400 Bellevue Parkway, Wilmington, Delaware 19809 and is an indirect, wholly-owned subsidiary of PNC Bank Corp. and is an affiliate of BIMC As the Funds' co-administrators, BIMC and PFPC have agreed to provide the following services: (i) assist generally in supervising the Funds' operations, including providing a Wilmington, Delaware order-taking facility with toll-free IN-WATS telephone lines, providing for the preparing, supervising and mailing of purchase and redemption order confirmations to shareholders of record, providing and supervising the operation of an automated data processing system to process purchase and redemption orders, maintaining a back-up procedure to reconstruct lost purchase and redemption data, providing information concerning the Funds to their shareholders of record, handling shareholder problems, providing the services of employees to preserve and strengthen shareholder relations and monitoring the arrangements pertaining to the Funds' agreements with Service Organizations; (ii) assure that persons are available to receive and transmit purchase and redemption orders; (iii) participate in the periodic updating of the Funds' -48- prospectuses; (iv) assist in the Funds' Wilmington, Delaware office; (v) accumulate information for and coordinate the preparation of reports to the Funds' shareholders and the SEC; (vi) maintain the registration of the Funds' shares for sale under state securities laws; (vii) review and provide advice with respect to all sales literature of the Funds; and (viii) assist in the monitoring of regulatory and legislative developments which may affect the Company, participate in counseling and assisting the Company in relation to routine regulatory examinations and investigations, and work with the Company's counsel in connection with regulatory matters and litigation. For their administrative services, the co-administrators are entitled jointly to receive fees, computed daily and payable monthly, as described above determined in the same manner as BIMC's advisory fee set forth above. For information regarding the administrators' obligation to reimburse the Funds in the event their expenses exceed certain prescribed limits, see "Investment Adviser" above. Any fees waived by the administrators with respect to a particular fiscal year are not recoverable. The following chart provides information with respect to the administration fees (net of waivers) paid and administration fees waived during the fiscal years for each Fund ended in 1996, 1997 and 1998:
- ------------------------------------------------------------------------------------------------------------------ FUND 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------ ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION ADMINISTRATION FEES PAID FEES WAIVED FEES PAID FEES WAIVED FEES PAID FEES WAIVED - ------------------------------------------------------------------------------------------------------------------ TempFund $8,126,927 $2,315,278 $6,560,502 $2,576,521 $5,254,506 $2,765,282 - ------------------------------------------------------------------------------------------------------------------ TempCash 2,388,597 2,096,653 2,176,446 2,041,599 2,170,845 2,106,346 - ------------------------------------------------------------------------------------------------------------------ FedFund 955,784 478,660 1,161,493 669,760 1,092,318 764,599 - ------------------------------------------------------------------------------------------------------------------ T-Fund 2,678,630 1,095,039 1,750,181 940,954 1,199,099 798,740 - ------------------------------------------------------------------------------------------------------------------ Federal Trust Fund 227,374 136,957 203,068 156,965 203,379 170,171 - ------------------------------------------------------------------------------------------------------------------ Treasury Trust Fund 1,093,223 499,881 1,002,514 587,865 907,460 653,409 - ------------------------------------------------------------------------------------------------------------------ MuniFund 567,677 489,376 717,070 497,287 752,680 545,635 - ------------------------------------------------------------------------------------------------------------------ MuniCash 367,734 615,881 268,834 534,948 238,520 488,851 - ------------------------------------------------------------------------------------------------------------------ California 374,215 729,108 268,716 621,301 254,168 594,290 Money - ------------------------------------------------------------------------------------------------------------------ New York Money 202,770 450,544 150,755 420,034 133,705 391,595 - ------------------------------------------------------------------------------------------------------------------
The Funds' fiscal year ends were as follows: October 31: TempFund and TempCash September 30, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund October 31, MuniFund and MuniCash November 30, California Money Fund January 31, and New York Money Fund July 31. DISTRIBUTOR -49- Provident Distributos, Inc. ("PDI") acts as the distributor of the Fund's shares. PDI is a Delaware corporation and has its principal business address at Four Falls Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428. Each Fund's shares are sold on a continuous basis by the distributor as agent, although it is not obliged to sell any particular amount of shares. The distributor pays the cost of printing and distributing prospectuses to persons who are not shareholders of the Funds (excluding preparation and printing expenses necessary for the continued registration of the Fund shares). The distributor prepares or reviews, provides advice with respect to, and files with the federal and state agencies or other organizations as required by federal, state or other applicable laws and regulations, all sales literature (advertisements, brochures and shareholder communications) for each of the Funds and any class or subclass thereof. No compensation is payable by the Fund to the distributor for its distribution services. CUSTODIAN AND TRANSFER AGENT Pursuant to a Custodian Agreement, PNC Bank, an affiliate of the Adviser, serves as each Fund's custodian, holding a Fund's portfolio securities, cash and other property. PNC Bank has its principal offices at 1600 Market Street, Philadelphia, PA 19103. Under the Custodian Agreement, PNC Bank has agreed to provide the following services: (i) maintain a separate account or accounts in the name of a Fund; (ii) hold and disburse portfolio securities on account of a Fund; (iii) collect and make disbursements of money on behalf of a Fund; (iv) collect and receive all income and other payments and distributions on account of a Fund's portfolio securities; and (v) make periodic reports to the Board of Trustees concerning a Fund's operations. PNC Bank is also authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of a Fund, provided that PNC Bank shall remain responsible for the performance of all of its duties under the Custodian Agreement and shall hold each Fund harmless from the acts and omissions of any bank or trust company serving as sub-custodian chosen by PNC Bank. Under the Custodian Agreement, each Fund pays PNC Bank an annual fee equal to $.25 for each $1,000 of each Fund's average daily gross assets. With respect to TempFund, TempCash, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund, MuniFund and MuniCash, such fee declines as each such Fund's average daily gross assets increase. In addition, each Fund pays the custodian certain types of transaction charges, and reimburses the custodian for out-of-pocket expenses incurred on behalf of the Fund. PFPC also serves as transfer agent, registrar and dividend disbursing agent to each Fund pursuant to a Transfer Agency Agreement. Under the Agreement, PFPC has agreed to provide the following services: (i) maintain a separate account or accounts in the name of a Fund; (ii) issue, transfer and redeem Fund shares; (iii) transmit all communications by a Fund to its shareholders of record, including reports to shareholders, dividend and distribution notices and proxy material for its meetings of shareholders; (iv) respond to correspondence by -50- shareholders, security brokers and others relating to its duties; (v) maintain shareholder accounts and sub-accounts; (vi) provide installation and other services in connection with the Funds' computer access program maintained to facilitate shareholder access to a Fund; (vii) send each shareholder of record a monthly statement showing the total number of a Fund's shares owned as of the last business day of the month (as well as the dividends paid during the current month and year); and (viii) provide each shareholder of record with a daily transaction report for each day on which a transaction occurs in the shareholder's Master Account with a Fund. Further, an institution establishing sub-accounts with PFPC is provided with a daily transaction report for each day on which a transaction occurs in a sub-account and, as of the last calendar day of each month, a report which sets forth the share balances for the sub-accounts at the beginning and end of the month and income paid or reinvested during the month. Finally, PFPC provides each shareholder of record with copies of all information relating to dividends and distributions which is required to be filed with the Internal Revenue Service and other appropriate taxing authorities. For transfer agency and dividend disbursing services, each Fund pays PFPC fees at the annual rate of $12.00 per account and sub-account maintained by PFPC plus $1.00 for each purchase or redemption transaction by an account (other than a purchase transaction made in connection with the automatic reinvestment of dividends). Payments to PFPC for sub-accounting services provided by others are limited to the amount which PFPC pays to others for such services. In addition, each Fund reimburses PNC Bank and PFPC for out-of-pocket expenses related to such services. BANKING LAWS Banking laws and regulations presently prohibit a bank holding company registered under the Federal Bank Holding Company Act of 1956 or any bank or non-bank affiliate thereof from sponsoring, organizing or controlling a registered, open-end investment company engaged continuously in the issuance of its shares, and prohibit banks generally from issuing, underwriting, selling or distributing securities such as Fund shares. Such banking laws and regulations do not prohibit such a holding company or affiliate or banks generally from acting as investment adviser, transfer agent or custodian to such an investment company, or from purchasing shares of such a company for or upon the order of customers. BIMC, PNC Bank and PFPC believe that they may perform the services for the Funds contemplated by their respective agreements, Prospectuses and this Statement of Additional Information without violation of applicable banking laws or regulations. It should be noted, however, that future changes in legal requirements relating to the permissible activities of banks and their affiliates, as well as further interpretations of present requirements, could prevent BIMC and PFPC from continuing to perform such services for the Funds. If BIMC and PFPC were prohibited from continuing to perform such services, it is expected that the Company's Board of Trustees would recommend that the Funds enter into new agreements with other qualified firms. Any new advisory agreement would be subject to shareholder approval. -51- In addition, state securities laws on this issue may differ from the interpretations of federal law expressed herein and banks and financial institutions may be required to register as dealers pursuant to state law. SERVICE ORGANIZATIONS Each of the Funds enter into agreements with institutional investors ("Service Organizations") requiring them to provide support services to their customers who beneficially own Dollar Shares and, with respect to T-Fund, MuniFund, TempFund, NY Money Fund and California Money Fund, Plus Shares, in consideration of .25% (on an annualized basis) of the average daily net asset value of the Dollar and Plus Shares held by the Service Organizations for the benefit of their customers. Such services include: (i) aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with the transfer agent; (ii) providing customers with a service that invests the assets of their accounts in Dollar or Plus Shares; (iii) processing dividend payments from the Fund on behalf of customers; (iv) providing information periodically to customers showing their positions in Dollar and Plus Shares; (v) arranging for bank wires; (vi) responding to customer inquiries relating to the services performed by the Service Organizations; (vii) providing sub-accounting with respect to Dollar and Plus Shares beneficially owned by customers or the information necessary for sub- accounting; (viii) forwarding shareholder communications from the Fund (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers, if required by law; and (ix) other similar services if requested by the Fund. In addition, broker/dealers purchasing Plus Shares provide from time to time assistance (such as the forwarding of sales literature and advertising to customers) in connection with the distribution of Plus Shares. TempFund, T-Fund, MuniFund and California Money Fund may also enter into agreements with Service Organizations requiring them to provide support services to their customers who beneficially own Administration Shares, in consideration of .10% (on an annualized basis) of the average daily net asset value of the Administration Shares held by the Service Organization for the benefit of their customers. Such services include, but are not limited to: (i) answering shareholder inquiries regarding account status and history, the manner in which purchases, exchanges and redemptions of shares may be effected and certain other matters pertaining to the shareholders' investments; and (ii) assisting shareholders in designating and changing dividend options, account designations and addresses. TempFund, T-Fund, MuniFund and California Money Fund may also enter into agreements with Service Organizations requiring them to provide support services to their customers who beneficially own Cash Reserve Shares, in consideration of a total of .40% (on an annualized basis) of the average net asset value of the Cash Reserve Shares held by the Service Organization for the benefit of their customers. An initial.20% (on an annual basis) of the average daily net asset value of such Shares will be paid for service organizations for providing the following Services: (i) providing customers with a service that invests the assets of their account in Cash Reserve Shares, (ii) responding to customer inquiries related to the services performed by the Service Organization, (iii) answering shareholder inquiries regarding account -52- status and history, the manner in which purchases, exchanges and redemption of shares may be effected and certain other matters pertaining to the shareholders' investments, (iv) assisting shareholders in designating and changing dividend options, account designations and addresses and (v) providing software that aggregates the customers orders and establishes an order to purchase or redeem shares of a Series (a "Sweep Service") based on established target levels for the customer's demand deposit accounts. Another .20% (on an annual basis) of the average daily net asset value of such Shares will be paid to service organizations for providing the following Services: (vi) aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with the transfer agent, (vii) processing dividend payments from the particular portfolio on behalf of customers; (viii) providing information periodically to customers showing their position in Cash Reserve Shares, (ix) arranging for bank wires; (x) providing sub-accounting with respect to Cash Reserve Shares beneficially owned by customers or the information necessary for sub-accounting; (xi) forwarding shareholder communications from the particular portfolio (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers, if required by law; (xii) other similar services if requested by the particular portfolio, (xiii) providing the necessary computer hardware and software which links the service organization's DDA system to an account management system; (xiv) providing period statements showing a customer's account balance and, to the extent practicable, integrating such information with other customer transactions otherwise effected through or with a service organization; and (xv) furnishing (either separately or an integrated basis with other reports sent to a shareholder by a service organization) monthly and year-end statements and confirmations of purchases, exchanges and redemptions. TempFund, T-Fund, MuniFund and California Money Fund may also enter into agreements with Service Organizations requiring them to provide support services to their customers who beneficially own Cash Management Shares, in consideration of a total of .50% (on an annualized basis) of the average net asset value of the Cash Management Shares held by the Service Organization for the benefit of their customers. An initial.25% (on an annual basis) of the average daily net asset value of such Shares will be paid to service organizations for providing the following Services: (i) providing customers with a service that invests the assets of their account in Cash Management Shares, (ii) responding to customer inquiries related to the services performed by the service organization, (iii) answering shareholder inquiries regarding account status and history, the manner in which purchases, exchanges and redemption of shares may be effected and certain other matters pertaining to the shareholders' investments, (iv) assisting shareholders in designating and changing dividend options, account designations and addresses, (v) providing software that aggregates the customers orders and establishes an order to purchase or redeem shares of a Series (a "Sweep Service") based on established target levels for the customer's demand deposit accounts, (vi) marketing and activities, including direct mail promotions that promote sweep service, (vii) expenditures for other similar marketing support such as for telephone facilities and in-house telemarketing (viii) distribution of literature promoting sweep services, (ix) travel, equipment, printing, delivery and mailing costs overhead and other office expenses attributable to the marketing of sweep services. Another .25% (on an annual basis) of the average daily net asset value of such Shares will be paid to service organizations for providing the following services: (x) aggregating and processing -53- purchase and redemption requests from customers and placing net purchase and redemption orders with the transfer agent, (xi) processing dividend payments from the particular portfolio on behalf of customers; (xii) providing information periodically to customers showing their position in Cash Management Shares, (xiii) arranging for bank wires; (xiv) providing sub-accounting with respect to Cash Management Shares beneficially owned by customers or the information necessary for sub-accounting; (xv) forwarding shareholder communications from the particular portfolio (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers, if required by law; (xvi) other similar services if requested by the particular portfolio, (xvii) providing the necessary computer hardware and software which links the service organization's DDA system to an account management system; (xviii) providing period statements showing a customer's account balance and, to the extent practicable, integrating such information with other customer transactions otherwise effected through or with a service organization; and (ixx) furnishing (either separately or an integrated basis with other reports sent to a shareholder by a service organizations) monthly and year-end statements and confirmations of purchases, exchanges and redemptions. The Fund's agreements with Service Organizations are governed by Plans (called "Shareholder Services Plan" for the Dollar, Administration, Cash Reserves and Cash Management Shares and "Distribution and Services Plan" for the Plus shares), which have been adopted by the Fund's Board of Trustees pursuant to applicable rules and regulations of the SEC. Pursuant to the Plans, the Board of Trustees reviews, at least quarterly, a written report of the amounts expended under the Fund's agreements with Service Organizations and the purposes for which the expenditures were made. In addition, the Fund's arrangements with Service Organizations must be approved annually by a majority of the Fund's trustees, including a majority of the trustees who are not "interested persons" of the Fund as defined in the 1940 Act and have no direct or indirect financial interest in such arrangements. The Board of Trustees have approved the Funds' arrangements with Service Organizations based on information provided to the Boards that there is a reasonable likelihood that the arrangements will benefit the Class of Shares of the Fund charged with such fees and its shareholders. Any material amendment to the Funds' arrangements with Service Organizations must be made in a manner approved by a majority of the Funds' Board of Trustees (including a majority of the Non-Interested Trustees), and any amendment to increase materially the costs under the Distribution and Services Plan adopted by the Board with respect to Plus shares must be approved by the holders of a majority of the outstanding Plus shares. (It should be noted that while the annual service fee with respect to Plus shares is currently set at .25%, the Plans adopted by the Board of Trustees permits the Board to increase this fee to .40% without shareholder approval.) So long as the Funds' arrangements with Service Organizations are in effect, the selection and nomination of the members of the Funds' Board of Trustees who are not "interested persons" (as defined in the 1940 Act) of the Fund will be committed to the discretion of such non-interested directors. The following chart provides information with respect to the fees paid to Service Organizations, including the amounts paid to affiliates of BIMC during the fiscal year for each Fund ended in 1996, 1997 and 1998. -54-
- ----------------------------------------------------------------------------------------------------- FUND 1998 1997 1996 - ----------------------------------------------------------------------------------------------------- Total Fees/Fees to Total Fees/Fees to Total Fees/Fees to Affiliates Affiliates Affiliates - ----------------------------------------------------------------------------------------------------- TempFund Dollar $ 772,304/$104,448 $ 863,301/$617,378 $ 307,468/$215,093 - ----------------------------------------------------------------------------------------------------- TempCash Dollar 1,088,006/27,566 1,214,833/380,851 1,226,772/328,534 - ----------------------------------------------------------------------------------------------------- FedFund Dollar 125,091/1,900 189,582/12,793 274,229/45,165 - ----------------------------------------------------------------------------------------------------- T-Fund Dollar 1,483,848/1,020,059 1,066,632/664,865 492,530/421,267 - ----------------------------------------------------------------------------------------------------- Treasury Trust Dollar 1,007,664/206,583 895,799/281,300 647,320/147,014 - ----------------------------------------------------------------------------------------------------- Federal Trust Dollar 95,541/0 88,473/0 61,691/17,418 - ----------------------------------------------------------------------------------------------------- MuniFund Dollar 144,751/0 150,996/272 130,964/1,964 - ----------------------------------------------------------------------------------------------------- MuniCash Dollar 273,684/0 285,897/11,464 248,904/25,886 - ----------------------------------------------------------------------------------------------------- California Money Dollar 308,298/428 187,911/2,115 59,647/2,244 - ----------------------------------------------------------------------------------------------------- California Money Plus 0/0 0/0 0/0 - ----------------------------------------------------------------------------------------------------- New York Money Dollar 504/0 8,458/8,408 22/0 - ----------------------------------------------------------------------------------------------------- New York Money Plus 0/0 0/0 0/0 - -----------------------------------------------------------------------------------------------------
_________________ The Funds' fiscal year ends were as follows: October 31: TempFund and TempCash-September 30, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund-October 31, MuniFund and MuniCash-November 30, California Money Fund- January 31, and New York Money Fund-July 31. EXPENSES - -------- A Fund's expenses include taxes, interest, fees and salaries of the Company's Trustees and officers who are not Trustees, officers or employees of the Company's service contractors, SEC fees, state securities registration fees, costs of preparing and printing prospectuses for regulatory purposes and for distribution to shareholders, advisory and administration fees, charges of the custodian and of the transfer and dividend disbursing agent, Service Organization fees, costs of the Funds' computer access program, certain insurance premiums, outside auditing and legal expenses, costs of shareholder reports and shareholder meetings and any extraordinary expenses. A Fund also pays for brokerage fees and commissions (if any) in connection with the purchase and sale of portfolio securities. ADDITIONAL INFORMATION CONCERNING TAXES Each Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code, and to distribute out its income to shareholders each year, so that each Fund itself will be relieved of federal income and excise taxes. If a Fund were to fail to so qualify: (1) the Fund would be taxed at regular corporate rates without any -55- deduction for distributions to shareholders; and (2) shareholders would be taxed as if they received ordinary dividends, although corporate shareholders could be eligible for the dividends received deduction. A 4% nondeductible excise tax is imposed on regulated investment companies that fail currently to distribute an amount equal to specified percentages of their ordinary taxable income and capital gain net income (excess of capital gains over capital losses). Each Fund intends to make sufficient distributions or deemed distributions of its ordinary taxable income and any capital gain net income prior to the end of each calendar year to avoid liability for this excise tax. Each Fund will be required in certain cases to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of gross proceeds paid to a shareholder who has failed to provide a correct tax identification number in the manner required, is subject to withholding by the Internal Revenue Service for failure properly to include on his return payments of taxable interest or dividends, or has failed to certify to the Fund that he is not subject to backup withholding when required to do so or that it is an "exempt recipient." The following is applicable to MuniFund, MuniCash, California Money Fund and New York Money Fund only: As described above and in the Funds' Prospectuses, each Fund is designed to provide institutions with current tax-exempt interest income. Neither Fund is intended to constitute a balanced investment program nor is designed for investors seeking capital appreciation or maximum tax-exempt income irrespective of fluctuations in principal. Shares of a Fund would not be suitable for tax-exempt institutions and may not be suitable for retirement plans qualified under Section 401 of the Code, H.R. 10 plans and individual retirement accounts because such plans and accounts are generally tax-exempt and, therefore, not only would not gain any additional benefit from a Fund's dividends being tax-exempt but also such dividends would be taxable when distributed to the beneficiary. In addition, a Fund may not be an appropriate investment for entities which are "substantial users" of facilities financed by private activity bonds or "related persons" thereof. "Substantial user" is defined under U.S. Treasury Regulations to include a non-exempt person who regularly uses a part of such facilities in his or her trade or business and whose gross revenues derived with respect to the facilities financed by the issuance of bonds are more than 5% of the total revenues derived by all users of such facilities, or who occupies more than 5% of the usable area of such facilities or for whom such facilities or a part thereof were specifically constructed, reconstructed or acquired. "Related persons" include certain related natural persons, affiliated corporations, a partnership and its partners, and an S Corporation and its shareholders. In order for a Fund to pay exempt-interest dividends for any taxable year, at least 50% of the aggregate value of that Fund's assets must consist of exempt-interest obligations -56- DIVIDENDS GENERAL - ------- Each Fund's net investment income for dividend purposes consists of (i) interest accrued and original issue discount earned on that Fund's assets, (ii) plus the amortization of market discount and minus the amortization of market premium on such assets and (iii) less accrued expenses directly attributable to that Fund and the general expenses (e.g. legal, accounting and Trustees' fees) of the Company prorated to such Fund on the basis of its relative net assets. Any realized short-term capital gains may also be distributed as dividends to Fund shareholders. In addition, a Fund's Dollar Shares and/or Plus Shares bear exclusively the expense of fees paid to Service Organizations. (See "Management of the Funds -- Service Organizations.") As stated, the Company uses its best efforts to maintain the net asset value per share of each Fund at $1.00. As a result of a significant expense or realized or unrealized loss incurred by either Fund, it is possible that the Fund's net asset value per share may fall below $1.00. ADDITIONAL YIELD AND OTHER PERFORMANCE INFORMATION The "yields" and "effective yields" are calculated separately for each Fund. The seven-day yield for each class or sub-class of shares in a Fund is calculated by determining the net change in the value of a hypothetical pre- existing account in a Fund having a balance of one share of the class involved at the beginning of the period, dividing the net change by the value of the account at the beginning of the period to obtain the base period return, and multiplying the base period return by 365/7. The net change in the value of an account in a Fund includes the value of additional shares purchased with dividends from the original share and dividends declared on the original share and any such additional shares, net of all fees charged to all shareholder accounts in proportion to the length of the base period and the Fund's average account size, but does not include gains and losses or unrealized appreciation and depreciation. In addition, the effective annualized yield may be computed on a compounded basis (calculated as described above) by adding 1 to the base period return, raising the sum to a power equal to 365/7, and subtracting 1 from the result. Similarly, based on the calculations described above, 30-day (or one-month) yields and effective yields may also be calculated. -57- The following chart provides information with respect to the yields as of each Fund's most recent fiscal year or period.*
- --------------------------------------------------------------------------------------------------------------------- 7 DAY 30 DAY - --------------------------------------------------------------------------------------------------------------------- YIELD COMPOUNDED YIELD COMPOUNDED EFFECTIVE EFFECTIVE YIELD YIELD - --------------------------------------------------------------------------------------------------------------------- TempFund 5.43% 5.58% 5.45% 5.60% - --------------------------------------------------------------------------------------------------------------------- TempFund Dollar 5.18 5.31 5.20 5.33 - --------------------------------------------------------------------------------------------------------------------- TempCash 5.45 5.60 5.47 5.62 - --------------------------------------------------------------------------------------------------------------------- TempCash Dollar 5.20 5.33 5.22 5.36 - --------------------------------------------------------------------------------------------------------------------- FedFund 4.91 5.03 5.01 5.14 - --------------------------------------------------------------------------------------------------------------------- FedFund Dollar 4.66 4.77 4.76 4.87 - --------------------------------------------------------------------------------------------------------------------- T-Fund 4.80 4.91 4.91 5.03 - --------------------------------------------------------------------------------------------------------------------- T-Fund Dollar 4.55 4.65 4.66 4.77 - --------------------------------------------------------------------------------------------------------------------- Federal Trust Fund 4.88 5.00 5.01 5.14 - --------------------------------------------------------------------------------------------------------------------- Federal Trust Dollar 4.63 4.74 4.76 4.87 - --------------------------------------------------------------------------------------------------------------------- Treasury Trust Fund 4.59 4.69 4.63 4.74 - --------------------------------------------------------------------------------------------------------------------- Treasury Trust Dollar 4.34 4.43 4.38 4.48 - --------------------------------------------------------------------------------------------------------------------- MuniFund 3.06 3.11 3.06 3.11 - --------------------------------------------------------------------------------------------------------------------- MuniFund Dollar 3.81 2.85 2.81 2.85 - --------------------------------------------------------------------------------------------------------------------- MuniCash 3.22 3.27 3.19 3.24 - --------------------------------------------------------------------------------------------------------------------- MuniCash Dollar 2.97 3.01 2.94 2.98 - --------------------------------------------------------------------------------------------------------------------- California Money Fund 3.15 3.20 3.02 3.07 - --------------------------------------------------------------------------------------------------------------------- California Money Dollar 2.90 2.94 2.77 2.81 - --------------------------------------------------------------------------------------------------------------------- California Money Plus+ 2.90 2.94 2.77 2.81 - --------------------------------------------------------------------------------------------------------------------- New York Money Fund 3.32 3.37 3.15 3.20 - --------------------------------------------------------------------------------------------------------------------- New York Money Dollar+ 3.07 3.12 2.90 2.94 - --------------------------------------------------------------------------------------------------------------------- New York Money Plus+ 3.07 3.12 2.90 2.94 - ---------------------------------------------------------------------------------------------------------------------
The Funds' fiscal year ends were as follows: October 31: TempFund and TempCash-September 30, Fed Fund, T-Fund, Federal Trust Fund, Treasury Trust- Fund October 31, MuniFund and MuniCash-November 30, California Money Fund- January 31 and New York Money Fund-July 31. * No information is provided regarding the yields with respect to the Administration, Cash Reserves and Cash Management Classes of TempFund, MuniFund, T-Fund and California Money Fund and the Plus Shares of T-Fund, MuniFund and TempFund because such Classes had no Shares outstanding on December 31, 1998. + Estimated -58- From time to time, in reports to shareholders or otherwise, a Fund's yield or total return may be quoted and compared to that of other money market funds or accounts with similar investment objectives, to stock or other relevant indices and to other reports or analyses that relate to yields, interest rates, total return, market performance, etc. For example, the yield of the Fund may be compared to the IBC/Donoghue's Money Fund Average, which is an average ----- ---- ------- compiled by IBC/Donoghue's MONEY FUND REPORT(R) of Holliston, MA 01746, a widely recognized independent publication that monitors the performance of money market funds, or to the average yields reported by the Bank Rate Monitor from ---- ---- ------- money market deposit accounts offered by the 50 leading banks and thrift institutions in the top five standard metropolitan statistical areas. YIELD AND RETURN WILL FLUCTUATE, AND ANY QUOTATION OF YIELD OR RETURN SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE FUND. Since yields and returns fluctuate, performance data cannot necessarily be used to compare an investment in a Fund's shares with bank deposits, savings accounts, and similar investment alternatives which often provide an agreed or guaranteed fixed yield for a stated period of time. Shareholders should remember that performance and yield are generally functions of the kind and quality of the investments held in a fund, portfolio maturity, operating expenses and market conditions. Any fees charged by banks with respect to customer accounts in investing in shares of a Fund will not be included in yield or return calculations; such fees, if charged, would reduce the actual yield or return from that quoted. The Funds may also from time to time include in advertisements, sales literature, communications to shareholders and other materials ("Materials"), discussions or illustrations of the effects of compounding. "Compounding" refers to the fact that, if dividends or other distributions on an investment are reinvested by being paid in additional Portfolio shares, any future income or capital appreciation of a Fund would increase the value, not only of the original investment, but also of the additional shares received through reinvestment. As a result, the value of the Fund investment would increase more quickly than if dividends or other distributions had been paid in cash. In addition, the Funds may also include in Materials discussions and/or illustrations of the potential investment goals of a prospective investor (including materials that describe general principles of investing, questionnaires designed to help create a personal financial profile, worksheets used to project savings needs based on certain assumptions and action plans offering investment alternatives), investment management strategies, techniques, policies or investment suitability of a Fund, economic and political conditions, the relationship between sectors of the economy and the economy as a whole, various securities markets, the effects of inflation and historical performance of various asset classes, including but not limited to, stocks, bonds and Treasury securities, and hypothetical investment returns based on certain assumptions. From time to time, Materials may summarize the substance of information contained in shareholder reports (including the investment composition of a Fund), as well as the views of the advisers as to current market, economic, trade and interest rate trends, legislative, regulatory and monetary developments, investment strategies and related matters believed to be of relevance to a Fund. In addition, selected indices may be used to illustrate historical -59- performance of select asset classes. The Funds may also include in Materials charts, graphs or drawings which compare the investment objective, return potential, relative stability and/or growth possibilities of the Funds and/or other mutual funds, or illustrate the potential risks and rewards of investment in various investment vehicles, including but not limited to, stocks, bonds, Treasury securities and shares of a Fund and/or other mutual funds. Materials may include a discussion of certain attributes or benefits to be derived by an investment in a Fund and/or other mutual funds (such as value investing, market timing, dollar cost averaging, asset allocation, constant ratio transfer, automatic accounting rebalancing and the advantages and disadvantages of investing in tax-deferred and taxable investments), shareholder profiles and hypothetical investor scenarios, timely information on financial management, tax and retirement planning and investment alternatives to certificates of deposit and other financial instruments, designations assigned a Fund by various rating or ranking organizations, and Fund identifiers (such as CUSIP numbers or NASDAQ symbols). Such Materials may include symbols, headlines or other material which highlight or summarize the information discussed in more detail therein. Materials may include lists of representative clients of the Funds' investment adviser, may include discussions of other products or services, may contain information regarding average weighted maturity or other maturity characteristics, and may contain information regarding the background, expertise, etc. of the investment adviser or of a Fund's portfolio manager. From time to time in advertisements, sales literature and communications to shareholders, the Funds may compare their total returns to rankings prepared by independent services or other financial or industry publications that monitor the performance of mutual funds. For example, such data is found in IBC/Donoghue's Money Fund Report and reports prepared by Lipper Analytical Services, Inc. Total return is the change in value of an investment in a Fund over a particular period, assuming that all distributions have been reinvested. SUCH RANKINGS REPRESENT THE FUNDS' PAST PERFORMANCE AND SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE RESULTS. The following information has been provided by the Funds' distributor: In managing each Fund's portfolio, the investment adviser utilizes a "pure and simple" approach, which may include disciplined research, stringent credit standards and careful management of maturities. -60- ADDITIONAL DESCRIPTION CONCERNING SHARES The Company was organized as a Delaware business trust on October 21, 1998. The Company's Declaration of Trust authorizes the Board of Trustees to issue an unlimited number of full and fractional shares of beneficial interest in the Company and to classify or reclassify any unissued shares into one or more series of shares. Pursuant to such authority, the Board of Trustees has authorized the issuance of ten series of shares designated as TempFund, TempCash, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund, MuniFund, MuniCash, California Money Fund and New York Money Fund. The Declaration of Trust further authorizes the trustees to classify or reclassify any series of shares into one or more classes. Currently, the classes authorized are Dollar, Plus, Administration, Cash Reserves and Cash Management. The Company does not presently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. Upon the written request of shareholders owning at least 25% of the Company's shares, the Company will call for a meeting of shareholders to consider the removal of one or more Trustees and other certain matters. To the extent required by law, the Company will assist in shareholder communication in such matters. Holders of shares in a Fund in the Company will vote in the aggregate and not by class or sub-class on all matters, except as described above, and except that Fund's Dollar Plus, Administration, Cash Reserves and Cash Management Shares, as described in "Service Organizations" above, shall be entitled to vote on matters submitted to a vote of shareholders pertaining to that Fund's arrangements with its Service Organizations. Further, shareholders of each of the Company's portfolios will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Trustees determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding securities of an investment company such as the Company shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding shares of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule, the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent accountants, the approval of principal underwriting contracts, and the election of Trustees are not subject to the separate voting requirements and may be effectively acted upon by shareholders of the investment company voting without regard to portfolio. Notwithstanding any provision of Delaware law requiring a greater vote of shares of the Company's Common Stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above) -61- or by the Company's Charter, the Company may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio). COUNSEL Drinker Biddle & Reath LLP, Philadelphia National Bank Building, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107-3496, of which W. Bruce McConnel, III, Secretary of the Company, is a partner, will pass upon the legality of the shares offered hereby. Wilkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022, acts as special New York Counsel for the Company and has reviewed the portions of this Statement of Additional Information and the New York Money Fund's Prospectus concerning New York taxes and the description of special considerations relating to New York Municipal Obligations. O'Melveny & Myers LLP, 400 South Hope Street, Los Angeles, California 90071, acts as special California Counsel and has reviewed the portions of this Statement of Additional Information and the California Money Fund's Prospectus concerning California taxes and the description of special considerations relating to California Municipal Obligations. AUDITORS PricewaterhouseCoopers LLP, with offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103 has been selected as the independent accountants of each Fund for the fiscal year ended October 31, 1999. FINANCIAL STATEMENTS The Annual Reports to Shareholders of Temp, Fed, Muni, Cal Muni and NY Muni for their respective fiscal year ended September 30, 1998, October 31, 1998, November 30, 1998, January 31, 1998 and July 31, 1998 have been filed with the Securities and Exchange Commission. The financial statements in such Annual Reports ("the Financial Statements") are incorporated by reference into this Statement of Additional Information by reference. The Financial Statements for Temp, Fed, Cal Muni and NY Muni have been audited by such Companies independent accountant, PricewaterhouseCoopers LLP, whose reports thereon also appears in the applicable Annual Reports and is incorporated herein by reference. The Financial Statement for Muni has been audited by Muni's independent accountant, KPMG, whose report thereon also appears in Muni's Annual Report and is incorporated by reference. The Financial Statements in the Annual Reports have been incorporated herein in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. -62- MISCELLANEOUS SHAREHOLDER VOTE As used in this Statement of Additional Information, a "majority of the outstanding shares" of a Fund or of a particular portfolio means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment policy, the lesser of (1) 67% of that Fund's shares (irrespective of class or subclass) or of the portfolio represented at a meeting at which the holders of more than 50% of the outstanding shares of that Fund or portfolio are present in person or by proxy, or (2) more than 50% of the outstanding shares of a Fund (irrespective of class or subclass) or of the portfolio. SECURITIES HOLDINGS OF BROKERS As of September 30, 1998, the value of TempFund's aggregate holdings of the securities of each of its regular brokers or dealers or their parents was: Morgan Stanley & Co., $1,398,136,000; Goldman Sachs & Co., $790,000,000; Merrill Lynch; $558,685,000; Bear Stearns & Co., $45,000,000; GE Capital Corp., $442,685,000; SBC Warburg Dillon Read, Inc., $302,000,000; Lehman Brothers Holding, Inc., $200,000,000 and Credit Suisse First Boston Corp., $147,094,000 As of September 30, 1998, the value of TempCash's aggregate holdings of the securities of each of its regular brokers or dealers or their parent was: Lehman Brothers Holding, Inc., $153,106,000; Bear Stearns & Co., $150,000,000; GE Capital Corp., $123,471,000 and Merrill Lynch, $98,300,000. CERTAIN RECORD HOLDERS As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of Federal Trust Fund were as follows: WESTCO Park West Bank & Trust Co. Elaine Bourbonnais/Trust Dept. Westbank Annex 229 Park Avenue W. Springfield, MA 01089 (7.350%); Administrative Services (IFG) Chase Manhattan Bank Client Service Dept. Attn: Sevan Marinos, 16th Fl. 1Chase Manhattan Plaza New York, NY 10017 (13.470%); Green Mountain Bank Trust Operations Department P.O. Box 669 Rutland, VT 05702 (7.840%); Peoples Two Ten Company Summit Bank FBO BSB Bank & Trust ATTN: Trust Operations-7th Fl. P.O. Box 821 Hackensack, NJ 47602 (9.850%); Payroll People Partnership II Attn: Ms. Robynne Whetton 1922 N. Helm Street Fresno, CA 93727 (5.580%); Obie & Co. Chase Bank of Texas Attn: STIF Unit Mail Code 18HCB340 P.O. Box 2558 Houston, TX 77252 (23.420%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of Federal Trust Fund Dollar Shares were as follows: Sanbarco, Santa Barbara Bank & Trust, Attn: Trust Div./Money Mkt. Desk, P.O. Box 2340, Santa Barbara, CA 93120 (74.620%); TTEE/KES L C -63- Collateral Acct., Bank of Tokyo Trust Co., Attn: Kristy Yee, Corporate Trust Dept. 10th Fl., 1251 Avenue of the Americas, New York, NY 10020 (10.090%); County/Highview Trust & Co., Commercial Natl. Westmoreland, HUT Partners/Corp. Cash Sweep, Attn: James Harris, 19 N. Main Street Greensburg, PA 15601 (7.840%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of TempFund were as follows: Saxon & Company, PNC Bank, Attn: Income Collect, Airport Bus, Ctr./Intl.Court 2, 200 Stevens Dr. F3-F076-02-2, Lester, PA 19115 (5.140%); Worldcom Inc., Attn: General Accounting, 515 East Amite, Jackson, MS 39201 (8.060%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of TempFund Dollar Shares were as follows: Hershey Trust Co., Attn: Rob Vowler, P.O. Box 445, Hershey, PA 17033, (5.900%); Sanbarco, Santa Barbara Bank & Trust, Attn: Trust Div./Money Mkt. Desk, P.O. Box 2340, Santa Barbara, CA 93120 (11.310%); Cash Management Temp Fund, Broadway National Bank, Sweep Omnibus Account, Attn: Eleanor Thomas, P.O. Box 17001, San Antonio, TX 78217 (12.140%); D & N Bank, Attn: Duane Aho, 400 Quincy Street, Hancock, MI 49930, (5.920); Mutual Partner/Corp. Cash Sweep, PNCBank New England, 125 High Street, Boston, MA 02110 (11.090%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of TempCash were as follows: Saxon & Company, PNC Bank, Attn: Income College, Airport Bus. Ctr./Intl. Court 2, 200 Stevens Dr. F3-F076-02-2, Lester, PA 19113 (11.110%); SLAM, Chase Manhattan, Steve Yonkers/SEC Lending, 4 New York Plaza - 11th Fl., New York, NY 10004 (5.100%); Wellnik & Co., BZN Barclays Global Investors, Attn: Peter Mandis, 45 Fremont Street - 16th Fl., San Francisco, CA 94105 (9.340%); USAA Brokerage Services, Attn: Karl Borgerding, BSB/Brokerage OPS/A03S, 9800 Fredericksburg Road, San Antonio, TX 78230 (5.340%); AT&T Capital Corporation, Attn: Chris Grimes, 44 Whippany Road, Morristown, NJ 07962, (5.450%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of TempCash Dollar Shares were as follows: Cash Balance Sweeps, BHC Securities Inc., Attn: Jeanmarie Beukers, 2005 Market Street, One Commerce Square - 11th Fl., Philadelphia, PA 19103 (50.790%); Citibank NA, ICBD Cash Management, Attn: Denise Stanley, 3800 Citibank Center Tampa, Tampa, FL 33610 (19.550%); Norwest Investment Services, Inc., Attn: Pamela Siner, 608 2nd, Avenue South - 8/th/ Fl., Minneapolis, MN 55479 (9.130%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of FedFund were as follows: Marine Midland Gen. Acct. #10, Marine Midland Bank NA, Collective TR Funds - 17/th/ Floor, Attn: Christine Hencel, 1 Marine Midland Center, Buffalo, NY 14203 -64- (6.720%); Merchantile Bank, NA, Trust Securities Unit 17-1, Attn: Cash Management, P.O. Box 387, Main Post Office, St. Louis, MO 63166 (7.700%); Saxon & Company/Custody PNC Bank, Income Collections 76-A-260, Airport Bus Ctr./Intl. Court 2, 200 Stevens Drive Lester, PA 19113 (6.070%); Administrative Services (IFG), Chase Manhattan Bank, Client Service Dept., Attn: Sevan Marinds - 16/th/ Fl., 1 Chase Manhattan Plaza, New York, NY 10017 (6.440%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of FedFund Dollar Shares were as follows: First Nat'l Bank of Cortland, Attn: Trust Dept., P.O. Box 5430, Cortland, NV 33045 (10.850%); Straco, Bank of Lancaster County NA, Attn: Trust Technical Services, P.O. Box 38, 1097 Commercial Avenue, East Petersburg, PA 17520 (8.310%); Rogers & Company, C/O Advest Bank, 90 State House Square, Hartford, CT 06103 (5.270%); Norwest Investment Services, Inc., Attn: Pamela Siner, 608 2nd Avenue South - 8th Fl., Minneapolis, MN 55479 (29.730%); GSB & Co, Glenview State Bank, Mut. Partners/Corp. Cash Sweep, Attn: Trust Department, 800 Waukegan Road, Glenview, IL 60025 (32.730%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of MuniFund were as follows: Saxon & Company, PNC Bank, Attn: Income Collect, Airport Bus. Ctr/Intl. Court 2, 200 Stevens Dr., F3-F076-02-2, Lester, PA 19113 (5.020%); Norwest Bank of Minneapolis NA, Attn: Cash Sweep Processing, 733 Marquette Avenue, Minneapolis, MN 55479 (9.480%); Administrative Services (IFG), Chase Manhattan Bank, Client Service Dept., Attn: Sevan Marinos - 36/th/ Fl., 1 Chase Manhattan Plaza, New York, NY 10017 (20.410%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of MuniFund Dollar Shares were as follows: Sunshine State Govt. Commission, Bankers Trust Company, Dade County Fl/Ins Reserve, 4 Albany Street - 4th Floor, New York, NY 10006 (77.980%); Sunshine State Govt. Commission, Bankers Trust Company, Tax Exempt/Initial Excess Int., 4 Albany Street - 4/th/ Floor, New York, NY 10006 (7.790%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of MuniCash were as follows: Laird Norton Trust Company, Norton Building 11th Fl., 801 2nd Avenue Seattle, WA 98104 (10.490%); Transco & Company, Intrust Bank, NA, Attn: Trust Operations P.O. Box 1, Wichita, KS 67201 (7.510%); Saxon & Company/Cash Advisor, PNC Bank Attn: Income Collect 76-A-260, Airport Bus Ctr./Intl. Court 2, 200 Stevens Drive, Lester, PA 19113 (11.330%); Patterson Dental Company, Attn: Thomas E. Alderman, 1031 Mendota Heights Road, St. Paul, MN 55120 (6.800%); Tax-Exempt Money Market Fund, Cash Resource Trust, c/o IFTC A/C 74-9425-005, P.O. Box 419847, Kansas City, MO 64141 (5.910%); Electronics Boutique Inc., Attn: Pedro Alvarez, 931 S. Matlack Street, West Chester, PA 19382 (5.490%); USAA Brokerage Services, Attn: Karl Borgerding, BSB/Brokerage OPS/A03S, 9800 Fredericksburg Road, San Antonio, TX 78230 (20.440%) -65- As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of MuniCash Dollar Shares were as follows: Cash Balance Sweeps, BMC Securities Inc., Attn: Jeanmarie Beukers, 2005 Market Street, One Commerce Square 11th Fl., Philadelphia, PA 19103 (38.250%); Laird Norton Trust Company, Attn: Mutual Funds Cashier, Norton Building 11/th/ Floor, b801 2nd Avenue, Seattle, WA 98104 (43.600%); Capital Network Services, Attn: Jena Ruhland, One Bush Street 11/th/ Fl., San Francisco, CA 94104 (8.250%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of California Money Fund were as follows: GSS as Agent, Chase Manhattan Bank, N.A., Ray DeJesus/Bk Coding/Money Fd, 4 New York Plaza 9th Floor, New York, NY 10004 (25.160%); Sanbarco Santa Barbara Bank & Trust, Attn: Trust Div./Money Mkt. Desk, P.O. Box 2340, Santa Barbara, CA 93120 (8.990%); City National Bank, Attn: Nina Concio, P.O. Box 60520, Los Angeles, CA 90066 (17.380%); The Whittaker Trust Company, Attn: Renee McQueen, 1600 Huntington Drive, South Pasadena, CA 91030 (7.990%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of California Money Fund Dollar Shares were as follows: Morgan Guaranty Trust Co. of NY, Funds Transfer Agency Group, Attn: Kenneth A. Faith 2/OPS3, 500 Stanton Christiana Rd., Newark, DE 19713 (89.060%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of New York Money Fund were as follows: Trulin & Co., Chase Manhattan Bank N.A., Attn: Pooled Funds, P.O. Box 1412, Rochester, NY 14603 (20.670%); Fleet New York, Fleet Investment Services, Attn: Barbara Lumba, 159 East Main St., NV/RO/T03C, Rochester, NY 14638 (13.980%); GSS As Agent, Chase Manhattan Bank N/A, Ray DeJesus/Bk Coding/Money FD, 4 New York Plaza - 9/th/ Floor, New York, NY 10004 (7.130%); Administrative Services (IFG), Chase Manhattan Bank, Client Service Dept., Attn: Sevan Marions - 16/th/ Fl., 3 Chase Manhattan Plaza New York, NY 10017 (28.760%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of T-Fund were as follows: PNC Mortgage Securities Corp., Attn: Master Servicing-TR Cash, 75 N. Fairway Drive, Vernon Hills, IL 60061 (14.460%); Union Bank, Jeanne Chizek/Tr Fund Acctg., P.O. Box 85602, San Diego, CA 92186 (10.450%); Obie & Co., Chase Bank of Texas, Attn: STIF Unit, P.O. Box 2558, Houston, TX 77252 (7.250%); Midland Loan Services Inc., Attn: Laurie Degraaf, 210 W. 10th Street, Kansas City, MD 64105 (12.500%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of T-Fund Dollar Shares were as follows: Saxon & Company, PNC Bank, Attn: Income Collect, Airport Bus Ctr./Intl. Court 2, 200 Stevens Dr., F3-F076-02-2, Lester, PA 19113 (5.740%); Obie & Co. -66- Chase Bank of Texas, Attn: STIF Unit, Mail Code 18HCB340, P.O. Box 2558, Houston, TX 77252 (61.900%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of Treasury Trust Fund were as follows: Saxon & Company, PNC Bank, Attn: Income Collect, Airport Bus. Ctr./Intl. Court 2, 200 Stevens Dr., F3-F076-02-2, Lester, PA 19113 (5.850%); C/O M & I National Trust Co., Finweb Co., Attn: Mark & Kandel, P.O. Box 1980, West Bend, WI 53095 (5.510%); Trust Department, Zions First National Bank, Attn: Trust Department, P.O. Box 30880, Salt Lake City, UT 84130 (7.660%); Administrative Services (IFG), Chase Manhattan Bank, Client Service Dept., Attn: Sevan Marinos 16/th/ Fl., 1 Chase Manhattan Plaza, New York, NY 10017 (5.440%); FBO Omnibus Accounts, PNC Bank/Saxon & Co., Mutual Fund Processing/2nd Fl., P.O. Box 7760 1888, Philadelphia, PA 19182 (6.600%); General Fund County of Alleghney, Mary Alice McDonough - Treasurer, Attn: Joe Gurcak, Room 109, Courthouse Grant St., Pittsburgh, PA 15219 (6.660%). As of January 11, 1999, the name, address and percentage of ownership of each institutional investor that owned of record 5% or more of the outstanding shares of Treasury Trust Fund Dollar Shares were as follows: Bankers Trust Company, Attn: Mike Joseph, 1 South Street 18th Floor, Baltimore, MD 21202 (41.750%); Obie & Co., Chase Bank of Texas, Attn: STIF Unit, Mail Code 18HCB340, P.O. Box 2558, Houston, TX 77252 (13.750%); NMAC Collection Account #2, Bank of Tokyo Trust Co., Attn: Kristy YEE, Corporate Trust Dept. 10/th/ Fl., 1251 Avenue of the Americas, New York, NY 10020 (12.360%). -67- APPENDIX A ---------- COMMERCIAL PAPER RATINGS - ------------------------ A Standard & Poor's ("S&P") commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. The following summarizes the applicable rating categories used by Standard and Poor's for commercial paper: "A-1" - Obligations are rated in the highest category indicating that the obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong. "A-2" - Obligations are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory. Moody's commercial paper ratings are opinions of the ability of issuers to repay punctually senior debt obligations not having an original maturity in excess of one year, unless explicitly noted. The following summarizes the applicable rating categories used by Moody's for commercial paper: "Prime-1" - Issuers (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structure with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity. "Prime-2" - Issuers (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. The applicable rating categories of Duff & Phelps for commercial paper and short-term debt are "D-1" and "D-2." Duff & Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating category. The following summarizes the rating categories used by Duff & Phelps for commercial paper: A-1 "D-1+" - Debt possesses the highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is outstanding, and safety is just below risk-free U.S. Treasury short-term obligations. "D-1" - Debt possesses very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. "D-1-" - Debt possesses high certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. "D-2" - Debt possesses good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. Thomson BankWatch short-term ratings assess the likelihood of an untimely payment of principal and interest of debt instruments with original maturities of one year or less. The following summarizes the applicable ratings used by Thomson BankWatch: "TBW-1" - This designation represents Thomson BankWatch's highest category and indicates a very high likelihood that principal and interest will be paid on a timely basis. "TBW-2" - This designation represents Thomson BankWatch's second- highest category and indicates that while the degree of safety regarding timely repayment of principal and interest is strong, the relative degree of safety is not as high as for issues rated "TBW-1." CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS - ---------------------------------------------- The following summarizes the applicable ratings used by Standard & Poor's for corporate and municipal debt: "AAA" - An obligation rated "AAA" has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. "AA" - An obligation rated "AA" differs from the highest rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. PLUS (+) OR MINUS (-) - The rating "AA" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. The following summarizes the applicable ratings used by Moody's for corporate and municipal long-term debt: A-2 "Aaa" - Bonds are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. "Aa" - Bonds are judged to be of high quality by all standards. Together with the "Aaa" group they comprise what are generally known as high- grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the "Aaa" securities. Note: Moody's applies numerical modifiers 1, 2, and 3 in the generic rating classification "Aa". The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of its generic rating category. The following summarizes the long-term debt ratings used by Duff & Phelps for corporate and municipal long-term debt: "AAA" - Debt is considered to be of the highest credit quality. The risk factors are negligible, being only slightly more than for risk-free U.S. Treasury debt. "AA" - Debt is considered to be of high credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. To provide more detailed indications of credit quality, the "AA," and "A," ratings may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within these major categories. The following summarizes the applicable ratings used by Fitch IBCA for corporate and municipal bonds: "AAA" - Bonds considered to be investment grade and of the highest credit quality. These ratings denote the lowest expectation of credit risk and are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. "AA" - Bonds considered to be investment grade and of very high credit quality. These ratings denote a very low expectation of credit risk and indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A-3 To provide more detailed indications of credit quality, the Fitch IBCA ratings "AA" may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within these major rating categories. Thomson BankWatch assesses the likelihood of an untimely repayment of principal or interest over the term to maturity of long term debt and preferred stock which are issued by United States commercial banks, thrifts and non-bank banks; non-United States banks; and broker-dealers. The following summarizes the rating categories used by Thomson BankWatch for long-term debt ratings: "AAA" - This designation indicates that the ability to repay principal and interest on a timely basis is extremely high. "AA" - This designation indicates a very strong ability to repay principal and interest on a timely basis, with limited incremental risk compared to issues rated in the highest category. PLUS (+) OR MINUS (-) - The ratings may include a plus or minus sign designation which indicates where within the respective category the issue is placed. MUNICIPAL NOTE RATINGS - ---------------------- A Standard and Poor's rating reflects the liquidity concerns and market access risks unique to notes due in three years or less. The following summarizes the ratings used by Standard & Poor's Ratings Group for municipal notes: "SP-1" - The issuers of these municipal notes exhibit a strong capacity to pay principal and interest. Those issues determined to possess very strong characteristics are given a plus (+) designation. "SP-2" - The issuers of these municipal notes exhibit satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes. Moody's ratings for state and municipal notes and other short-term loans are designated Moody's Investment Grade ("MIG") and variable rate demand obligations are designated Variable Moody's Investment Grade ("VMIG"). Such ratings recognize the differences between short-term credit risk and long-term risk. The following summarizes the ratings by Moody's Investors Service, Inc. for short-term notes: "MIG-1"/"VMIG-1" - This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. A-4 "MIG-2"/"VMIG-2" - This designation denotes high quality, with margins of protection that are ample although not so large as in the preceding group. Fitch IBCA and Duff & Phelps use the short-term ratings described under Commercial Paper Ratings for municipal notes. A-5 PROVIDENT INSTITUTIONAL FUNDS, INC. PART C OTHER INFORMATION Item 23. EXHIBITS: (a) (1) Certificate of Trust dated October 21, 1998. (2) Registrant's Agreement and Declaration of Trust dated October 21, 1998. (b) Registrant's By-Laws dated October 22, 1998. (c) See Article II, Section 2.6, Section 2.7, Section 2.8, Section 2.9, Section 2.10, Section 2.11 and Section 2.12; Article III, Section 3.7; Article VI; Article VII; Article VIII, Section 8.5 and Article IX of the Registrant's Declaration of Trust dated October 21, 1998, included herewith, and Article IV, Article V and Article VI of the Registrant's By-Laws dated October 22, 1998, included herewith. (d) Form of Investment Advisory Agreement between Registrant and BlackRock Institutional Management Corporation ("BIMC") dated February __, 1999. (e) Form of Distribution Agreement between Registrant and Provident Distributors, Inc. ("PDI"). (f) None. (g) Custodian Services Agreement to be filed by amendment. (h) (1) Co-Administration Agreement to be filed by amendment. (2) Transfer Agency Agreement to be filed by amendment. (3) Form of Share Purchase Agreements. (i) Opinion and Consent of Drinker Biddle & Reath LLP. (j) (1) Consent of PricewaterhouseCoopers LLP. (2) Consent of KPMG LLP. (3) Consent of Willkie Farr & Gallagher. (4) Consent of O'Melveny & Myers. (k) None. (l) None. (m) (1) Registrant's Form of Amended Distribution Plan with respect to Plus Shares and Form of Distribution Agreement. (2) Registrant's Shareholder Services Plan with respect to Dollar Shares. (3) Registrant's Form of Shareholder Service Plan with respect to Administration Shares. (4) Registrant's Form of Shareholder Service Plan with respect to Cash Reserve Shares. (5) Registrant's Form of Shareholder Service Plan with Respect to Cash Management Shares. (6) Form of Shareholder Services Agreement. (n) Financial Data Schedules. (o) Form of Amended Rule 18f-3 Plan for Multi-Class System. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT Registrant is controlled by its Board of Trustees. ITEM 25. INDEMNIFICATION Indemnification of Registrant's Co-Administrators, Principal Underwriter, Custodian and Transfer Agent against certain stated liabilities is provided for in Section 11 of the Co-Administration Agreement, Section 5 of the Distribution Agreement, Section 12 of the Custodian Services Agreement and Section 12 of the Transfer Agency Agreement, respectively, which Agreements are included herewith. Registrant has obtained from a major insurance carrier a directors' and officers' liability policy covering certain types of errors and omissions. Article VIII of Registrant's Agreement and Declaration of Trust, included herewith, provides for the indemnification of Registrant's trustees and officers. -2- Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER BIMC performs investment advisory services for Registrant and certain other investment companies and accounts. The information required by this Item 26 with respect to each director, officer and partner of BIMC is incorporated by reference to Schedules A and D of Form ADV filed by BIMC with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-13304). ITEM 27. PRINCIPAL UNDERWRITER (a) PDI currently acts as principal underwriter for, in addition to the Registrant, the following funds: Pacific Horizon Funds, Inc., Time Horizon Funds, World Horizon Funds, Inc., Pacific Innovations Trust, International Dollar Reserve Fund I, Ltd, Columbia Common Stock Fund, Inc., Columbia Growth Fund, Inc., Columbia International Stock Fund, Inc., Columbia Special Fund, Inc., Columbia Small Cap Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia Balanced Fund, Inc., Columbia Daily Income Company, Columbia U.S. Government Securities Fund, Inc., Columbia Fixed Income Securities Fund, Inc., Columbia Municipal Bond Fund, Inc., Columbia High Yield Fund, Inc., Kiewit Mutual Fund, Kalmar Pooled Investment Trust, The RBB Fund, Inc., Robertson Stephenson Investment Trust, Hilliard-Lyons Government Fund, Inc., Hilliard-Lyons Growth Fund, Inc., The Rodney Square Fund, Inc., The Rodney Square Tax-Exempt Fund, Inc., The Rodney Square Strategic Equity Fund, Inc. and The Rodney Square Strategic Fixed- Income Fund, Inc. (b) The information required by this Item 27 with respect to each director, officer or partner of PDI is incorporated by reference to Schedule A of Form BD filed by PDI with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 (SEC File No. 8-46564). -3- (c) The following represents all commissions and other compensation received by each principal underwriter who is not an affiliated person of the registrant:
NAME OF NET UNDERWRITING COMPENSATION ON PRINCIPAL DISCOUNTS AND REDEMPTION AND BROKERAGE OTHER Underwriter COMMISSIONS REPURCHASE COMMISSIONS COMPENSATION - ----------- ---------------- --------------- ----------- ------------ Provident Distributors, Inc. $0 $0 $0 $0
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS (1) PNC Bank, National Association, 200 Stevens Drive, Lester, Pennsylvania 19113 (records relating to its function as custodian). (2) Provident Distributors, Inc., Four Falls Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428 (records relating to its function as distributor). (3) BlackRock Institutional Management Corporation, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809 (records relating to its functions as investment adviser and co-administrator). (4) PFPC Inc., 400 Bellevue Parkway, Bellevue Park Corporate Center, Wilmington, Delaware 19809 (records relating to its functions as co-administrator, transfer agent, registrar and dividend disbursing agent). (5) Drinker Biddle & Reath LLP, Philadelphia National Bank Building, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107 (Registrant's Charter, By-Laws, and Minutes Books). -4- ITEM 29. MANAGEMENT SERVICES None. ITEM 30. UNDERTAKINGS Registrant hereby undertakes to furnish its Annual Report to Shareholders upon request and without charge to any person to whom a prospectus is delivered. -5- SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, Provident Institutional Funds has duly caused this Post Effective Amendment No. 61 to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Philadelphia, and State of Pennsylvania, on February 1, 1999. PROVIDENT INSTITUTIONAL FUNDS /s/ Rodney D. Johnson ----------------------------- Rodney D. Johnson President Pursuant to the requirements of the Securities Act of 1933, this Post- Effective Amendment No. 61 to Registrant's Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE - --------- ----- ---- *G. Nicholas Beckwith, III Trustee February 1, 1999 - ---------------------------- G. Nicholas Beckwith, III *Jerrold B. Harris Trustee February 1, 1999 - ---------------------------- Jerrold B. Harris *Joseph P. Platt Trustee February 1, 1999 - ---------------------------- Joseph P. Platt *Robert C. Robb, Jr. Trustee February 1, 1999 - ---------------------------- Robert C. Robb, Jr. *Kenneth L. Urish Trustee February 1, 1999 - ---------------------------- Kenneth L. Urish *Frederick W. Winter Trustee February 1, 1999 - ---------------------------- Frederick W. Winter /s/ Rodney D. Johnson Chairman of the Board February 1, 1999 - ---------------------------- Rodney D. Johnson of Trustees, President and Treasurer (Chief Executive Officer and Principal Financial and Accounting Officer) *By: /s/ W. Bruce McConnel, III -------------------------- W. Bruce McConnel, III Attorney-in-Fact PROVIDENT INSTITUTIONAL FUNDS Power of Attorney I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney for me, with full power of substitution, and in my name and on my behalf as a trustee to sign any Registration Statement or Amendment thereto of PROVIDENT INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities and Exchange Commission under the Securities Act of 1933, and generally to do and perform all things necessary to be done in that connection. I have signed this Power of Attorney on January 21, 1999. /s/ G. Nicholas Beckwith, III ------------------------------------------ G. Nicholas Beckwith, III PROVIDENT INSTITUTIONAL FUNDS Power of Attorney I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney for me, with full power of substitution, and in my name and on my behalf as a trustee to sign any Registration Statement or Amendment thereto of PROVIDENT INSTITUTIONAL FUNDS. (Registration No. 2-47015) to be filed with the Securities and Exchange Commission under the Securities Act of 1933, and generally to do and perform all things necessary to be done in that connection. I have signed this Power of Attorney on January 21, 1999. /s/ Joseph P. Platt, Jr. ----------------------------------------- Joseph P. Platt, Jr. PROVIDENT INSTITUTIONAL FUNDS POWER OF ATTORNEY I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney for me, with full power of substitution, and in my name and on my behalf as a trustee to sign any Registration Statement or Amendment thereto of PROVIDENT INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities and Exchange Commission under the Securities Act of 1933, and generally to do and perform all things necessary to be done in that connection. I have signed this Power of Attorney on January 21, 1999. /s/ Jerrold B. Harris ----------------------------------- Jerrold B. Harris PROVIDENT INSTITUTIONAL FUNDS POWER OF ATTORNEY I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney for me, with full power of substitution, and in my name and on my behalf as a trustee to sign any Registration Statement or Amendment thereto of PROVIDENT INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities and Exchange Commission under the Securities Act of 1933, and generally to do and perform all things necessary to be done in that connection. I have signed this Power of Attorney on January 21, 1999. /s/ Robert C. Robb, Jr. ---------------------------------- Robert C. Robb, Jr. PROVIDENT INSTITUTIONAL FUNDS POWER OF ATTORNEY I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney for me, with full power of substitution, and in my name and on my behalf as a trustee to sign any Registration Statement or Amendment thereto of PROVIDENT INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities and Exchange Commission under the Securities Act of 1933, and generally to do and perform all things necessary to be done in that connection. I have signed this Power of Attorney on January 21, 1999. /s/ Kenneth L. Urish --------------------------------------- Kenneth L. Urish PROVIDENT INSTITUTIONAL FUNDS POWER OF ATTORNEY I hereby appoint W. Bruce McConnel, III and Rodney D. Johnson attorney for me, with full power of substitution, and in my name and on my behalf as a trustee to sign any Registration Statement or Amendment thereto of PROVIDENT INSTITUTIONAL FUNDS (Registration No. 2-47015) to be filed with the Securities and Exchange Commission under the Securities Act of 1933, and generally to do and perform all things necessary to be done in that connection. I have signed this Power of Attorney on January 20, 1999. /s/ Frederick W. Winter ------------------------------------ Frederick W. Winter Exhibit Index ------- ----- (a) (1) Certificate of Trust. (2) Agreement and Declaration of Trust. (b) By-laws. (d) Form of Investment Advisory Agreement. (e) Form of Distribution Agreement. (h) (3) Form of Share Purchase Agreements. (i) Opinion and Consent of Drinker Biddle & Reath LLP. (j) (1) Consent of PricewaterhouseCoopers LLP. (2) Consent of KPMG LLP. (3) Consent of Willkie Farr & Gallagher. (4) Consent of O'Melveney & Myers. (m) (1) Registrant's Form of Amended Distribution Plan with respect to Plus Shares and Form of Distribution Agreement. (2) Registrant's Shareholder Services Plan with respect to Dollar Shares. (3) Registrant's Form of Shareholder Service Plan with respect to Administration Shares. (4) Registrant's Form of Shareholder Service Plan with respect to Cash Reserve Shares. (5) Registrant's Form of Shareholder Service Plan with respect to Cash Management Shares. (6) Form of Shareholder Services Agreement. (n) Financial Data Schedules. (o) Form of Amended Rule 18f-3 Plan for Multi-Class System. EX-99.A1 2 CERTIFICATE OF TRUST CERTIFICATE OF TRUST OF PROVIDENT INSTITUTIONAL FUNDS This Certificate of Trust is being executed as of October 21, 1998 for the purpose of organizing a business trust pursuant to the Delaware Business Trust Act, 12 Del. C. (S)(S) 3801 et seq. (the "Act"). --- - -- --- The undersigned hereby certifies as follows: 1. Name. The name of the business trust is Provident Institutional ---- Funds (the "Trust"). 2. Registered Investment Company. The Trust is or will become a ----------------------------- registered investment company under the Investment Company Act of 1940, as amended. 3. Effective Date. This Certificate of Trust shall be effective upon -------------- the date and time of filing. 4. Registered Office and Registered Agent. The registered office of -------------------------------------- the Trust in the State of Delaware is located at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, New Castle County, Delaware 19809. The name of the registered agent of the Trust for service of process at such location is Lisa M. Buono. 5. Notice of Limitation of Liabilities of Series. Notice is hereby --------------------------------------------- given that pursuant to Section 3804 of the Act the Trust is or may hereafter be constituted a series trust. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to any particular series shall be enforceable against the assets of such series only, and not against the assets of the Trust generally or any other series of the Trust, and none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Trust generally or any other series of the Trust shall be enforceable against the assets of such series. IN WITNESS WHEREOF, the undersigned, being the sole initial trustee of the Trust, has duly executed this Certificate of Trust as of the day and year first above written. TRUSTEE /s/ Rodney D. Johnson _______________________________ as Trustee and not individually EX-99.A2 3 DECLARATION OF TRUST ---------------------- PROVIDENT INSTITUTIONAL FUNDS AGREEMENT AND DECLARATION OF TRUST Dated: October 21, 1998 TABLE OF CONTENTS
Page ---- ARTICLE I NAME AND DEFINITIONS......................................... 1 Section 1.1 Name 1 Section 1.2 Definitions.................................................. 1 ARTICLE II BENEFICIAL INTEREST.......................................... 2 Section 2.1 Shares of Beneficial Interest................................ 2 Section 2.2 Issuance of Shares........................................... 3 Section 2.3 Register of Shares and Share Certificates.................... 3 Section 2.4 Transfer of Shares........................................... 3 Section 2.5 Treasury Shares.............................................. 4 Section 2.6 Establishment of Series and Classes.......................... 4 Section 2.7 Investment in the Trust...................................... 5 Section 2.8 Assets and Liabilities Belonging to Series, etc.............. 5 Section 2.9 No Preemptive Rights......................................... 6 Section 2.10 Conversion Rights............................................ 6 Section 2.11 Legal Proceedings............................................ 7 Section 2.12 Status of Shares............................................. 7 ARTICLE III THE TRUSTEES................................................. 8 Section 3.1 Management of the Trust...................................... 8 Section 3.2 Term of Office of Trustees................................... 8 Section 3.3 Vacancies and Appointment of Trustees........................ 8 Section 3.4 Temporary Absence of Trustee................................. 9 Section 3.5 Number of Trustees........................................... 9 Section 3.6 Effect of Death, Resignation, Etc. of a Trustee.............. 9 Section 3.7 Ownership of Assets of the Trust............................. 9 Section 3.8 Series Trustees.............................................. 10 Section 3.9 No Accounting................................................ 10 ARTICLE IV POWERS OF THE TRUSTEES....................................... 10 Section 4.1 Powers....................................................... 10 Section 4.2 Issuance and Repurchase of Shares............................ 14 Section 4.3 Trustees and Officers as Shareholders........................ 14 Section 4.4 Action by the Trustees and Committees........................ 14 Section 4.5 Chairman of the Trustees..................................... 15 Section 4.6 Principal Transactions....................................... 15 ARTICLE V INVESTMENT ADVISOR, INVESTMENT SUB-ADVISOR, PRINCIPAL UNDERWRITER, ADMINISTRATOR, TRANSFER AGENT, CUSTODIAN AND OTHER CONTRACTORS.................................................. 15 Section 5.1 Certain Contracts............................................ 15 ARTICLE VI SHAREHOLDER VOTING POWERS AND MEETINGS....................... 17 Section 6.1 Voting....................................................... 17 Section 6.2 Meetings..................................................... 18 Section 6.3 Quorum and Required Vote..................................... 18 Section 6.4 Action by Written Consent.................................... 19
-i- PROVIDENT INSTITUTIONAL FUNDS AGREEMENT AND -------------------------------------------- DECLARATION OF TRUST -------------------- AGREEMENT AND DECLARATION OF TRUST of Provident Institutional Funds, a Delaware statutory business trust, made as of October 21, 1998, by the undersigned Trustee. WHEREAS, the undersigned Trustee desires to establish a trust for the investment and reinvestment of funds contributed thereto; WHEREAS, the Trustee desires that the beneficial interest in the trust assets be divided into transferable shares of beneficial interest, as hereinafter provided; WHEREAS, the Trustee declares that all money and property contributed to the trust established hereunder shall be held and managed in trust for the benefit of the holders of the shares of beneficial interest issued hereunder and subject to the provisions hereof; NOW, THEREFORE, in consideration of the foregoing, the undersigned Trustee hereby declares that all money and property contributed to the trust hereunder shall be held and managed in trust under this Declaration of Trust ("Trust Instrument") as herein set forth below. ARTICLE I --------- NAME AND DEFINITIONS -------------------- Section 1.1 Name. The name of the trust established hereby is the "Provident ---- Institutional Funds." Section 1.2 Definitions. Wherever used herein, unless otherwise required by ----------- the context or specifically provided: (a) "Act" means the Delaware Business Trust Act, 12 Del. C. (S)(S) ---- -- 3801 et seq., as from time to time amended; -- --- (b) "By-laws" means the By-laws referred to in Section 4.1(e) hereof, as from time to time amended; (c) The terms "Affiliated Person," "Assignment," "Commission," "Interested Person" and "Principal Underwriter" shall have the meanings given them in the 1940 Act. "Majority Shareholder Vote" shall have the same meaning as the term "vote of a majority of the outstanding voting securities" is given in the 1940 Act; (d) "Class" means any division of Shares within a Series, which Class is or has been established in accordance with the provisions of Article II. (e) "Net Asset Value" means the net asset value of each Series or Class of the Trust determined in the manner provided in Section 7.4 hereof; (f) "Outstanding Shares" means those Shares recorded from time to time in the books of the Trust or its transfer agent as then issued and outstanding, but shall not include Shares which have been redeemed or repurchased by the Trust and which are at the time held in the treasury of the Trust; (g) "Series" means a series of Shares of the Trust established in accordance with the provisions of Section 2.6 hereof; (h) "Shareholder" means a record owner of Outstanding Shares of the Trust; (i) "Shares" means the equal proportionate transferable units of beneficial interest into which the beneficial interest of each Series of the Trust or Class thereof shall be divided and may include fractions of Shares as well as whole Shares; (j) "Trust" refers to Provident Institutional Funds and reference to the Trust, when applicable to one or more Series of the Trust, shall refer to any such Series; (k) "Trustee" or "Trustees" means the person or persons who has or have signed this Trust Instrument, so long as such person or persons shall continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly qualified and serving as Trustees in accordance with the provisions of Article III hereof, and reference herein to a Trustee or to the Trustees shall refer to the individual Trustees in their capacity as Trustees hereunder; (l) "Trust Property" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of one or more of the Trust or any Series, or the Trustees on behalf of the Trust or any Series. (m) The "1940 Act" refers to the Investment Company Act of 1940 and the Rules and Regulations thereunder, all as may be amended from time to time. ARTICLE II ---------- BENEFICIAL INTEREST Section 2.1 Shares of Beneficial Interest. The beneficial interest in the ----------------------------- Trust shall be divided into such transferable Shares of one or more separate and distinct Series and Classes within a Series as the Trustees shall from time to time create and establish. The number of Shares of each Series and Class authorized hereunder is unlimited. Each Share shall have no par value, unless otherwise determined by the Trustees in connection with the creation and establishment of a Series or Class. All Shares issued hereunder, including without limitation, -2- Class Shares issued in connection with a dividend in Shares or a split or reverse split of Shares, shall be fully paid and nonassessable. Section 2.2 Issuance of Shares. The Trustees in their discretion may, from ------------------ time to time, without vote of the Shareholders, issue Shares of each Series and Class to such party or parties and for such amount and type of consideration (or for no consideration if pursuant to a Share dividend or split-up), subject to applicable law, including cash or securities (including Shares of a different Series or Class), at such time or times and on such terms as the Trustees may deem appropriate, and may in such manner acquire other assets (including the acquisitions of assets subject to, and in connection with, the assumption of liabilities) and businesses. In connection with any issuance of Shares, the Trustees may issue fractional Shares and Shares held in the treasury. The Trustees may from time to time divide or combine the Shares into a greater or lesser number without thereby changing the proportionate beneficial interests in the Trust. The Trustees may classify or reclassify any unissued Shares or any Shares previously issued and reacquired of any Series or Class into one or more Series or Classes that may be established and designated from time to time. Any Trustee, officer or other agent of the Trust, and any organization in which any such person is interested, may acquire, own, hold and dispose of Shares of any Series or Class of the Trust to the same extent as if such person were not a Trustee, officer or other agent of the Trust; and the Trust may issue and sell or cause to be issued and sold and may purchase Shares of any Series or Class from any such person or any such organization subject only to the general limitations, restrictions or other provisions applicable to the sale or purchase of Shares of such Series or Class generally. Section 2.3 Register of Shares and Share Certificates. A register shall be ----------------------------------------- kept at the principal office of the Trust or an office of the Trust's transfer agent which shall contain the names and addresses of the Shareholders of each Series and Class, the number of Shares of that Series and Class thereof held by them respectively and a record of all transfers thereof. As to Shares for which no certificate has been issued, such register shall be conclusive as to who are the holders of the Shares and who shall be entitled to receive dividends or other distributions or otherwise to exercise or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or other distribution, nor to have notice given to him as herein or in the By-laws provided, until he has given his address to the transfer agent or such other officer or agent of the Trust as shall keep the said register for entry thereon. The Trustees, in their discretion, may authorize the issuance of share certificates and promulgate appropriate rules and regulations as to their use. In the event that one or more certificates are issued, whether in the name of a Shareholder or a nominee, such certificate or certificates shall constitute evidence of ownership of Shares for all purposes, including transfer, assignment or sale of such Shares, subject to such limitations as the Trustees may, in their discretion, prescribe. Section 2.4 Transfer of Shares. Except as otherwise provided by the ------------------ Trustees, Shares shall be transferable on the records of the Trust only by the record holder thereof or by his agent thereunto duly authorized in writing, upon delivery to the Trustees or the Trust's -3- transfer agent of a duly executed instrument of transfer, together with a Share certificate, if one is outstanding, and such evidence of the genuineness of each such execution and authorization and of such other matters as may be required by the Trustees. Upon such delivery the transfer shall be recorded on the register of the Trust. Until such record is made, the Shareholder of record shall be deemed to be the holder of such Shares for all purposes hereunder and neither the Trustees nor the Trust, nor any transfer agent or registrar nor any officer, employee or agent of the Trust shall be affected by any notice of the proposed transfer. Section 2.5 Treasury Shares. Shares held in the treasury shall, until --------------- reissued pursuant to Section 2.2 hereof, not confer any voting rights on the Trustees, nor shall such Shares be entitled to any dividends or other distributions declared with respect to the Shares. Section 2.6 Establishment of Series and Classes. The Trust shall consist of ----------------------------------- one or more Series and Classes and separate and distinct records shall be maintained by the Trust for each Series and Class. The Trustees shall have full power and authority, in their sole discretion, and without obtaining any prior authorization or vote of the Shareholders of any Series or Class of the Trust, to establish and designate and to change in any manner any initial or additional Series or Classes and to fix such preferences, voting powers, rights and privileges of such Series or Classes as the Trustees may from time to time determine, to divide or combine the Shares or any Series or Classes into a greater or lesser number, to classify or reclassify any issued Shares or any Series or Classes into one or more Series or Classes of Shares, and to take such other action with respect to the Shares as the Trustees may deem desirable. Unless another time is specified by the Trustees, the establishment and designation of any Series or Class shall be effective upon the adoption of a resolution by the Trustees setting forth such establishment and designation and the preferences, powers, rights and privileges of the Shares of such Series or Class, whether directly in such resolution or by reference to, or approval of, another document that sets forth such relative rights and preferences of such Series (or Class) including, without limitation, any registration statemet of the Trust, or as otherwise provided in such resolution. The Trust may issue any number of Shares of each Series or Class and need not issue certificates for any Shares. All references to Shares in this Trust Instrument shall be deemed to be Shares of any or all Series or Classes as the context may require. All provisions herein relating to the Trust shall apply equally to each Series and Class of the Trust except as the context otherwise requires. All Shares of each Class of a particular Series shall represent an equal proportionate interest in the assets belonging to that Series (subject to the liabilities belonging to the Series, and, in the case of each Class, to the liabilities belonging to that Class), and each Share of any Class of a particular Series shall be equal to each other Share of that Class; but the provisions of this sentence shall not restrict any distinctions permissible under this Section 2.6. -4- Section 2.7 Investment in the Trust. The Trustees shall accept investments ----------------------- in any Series of the Trust or Class, if the Series has been divided into Classes, from such persons and on such terms as they may from time to time authorize. At the Trustees' discretion, such investments, subject to applicable law, may be in the form of cash or securities in which the affected Series is authorized to invest, valued as provided in Section 7.4 hereof. Unless the Trustees otherwise determine, investments in a Series shall be credited to each Shareholder's account in the form of full Shares at the Net Asset Value per Share next determined after the investment is received. Without limiting the generality of the foregoing, the Trustees may, in their sole discretion, (a) fix the Net Asset Value per Share of the initial capital contribution, (b) impose sales or other charges upon investments in the Trust or (c) issue fractional Shares. Section 2.8 Assets and Liabilities Belonging to Series, etc. All ------------------------------------------------ consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall be held and accounted for separately from the other assets of the Trust and of every other Series and may be referred to herein as "assets belonging to" that Series. The assets belonging to a particular Series shall belong to that Series for all purposes, and to no other Series, subject only to the rights of creditors of that Series. In addition, any assets, income, earnings, profits or funds, or payments and proceeds with respect thereto, which are not readily identifiable as belonging to any particular Series shall be allocated by the Trustees between and among one or more of the Series in such manner as the Trustees, in their sole discretion, deem fair and equitable. If there are classes of Shares within a Series, the assets belonging to the Series shall be further allocated to each Class in the proportion that the "assets belonging to" the Class (calculated in the same manner as with determination of assets "belonging to" the Series) bears to the assets of all Classes within the Series. Each such allocation shall be conclusive and binding upon the Shareholders of all Series and Classes for all purposes, and such assets, income, earnings, profits or funds, or payments and proceeds with respect thereto shall be assets belonging to that Series or Class, as the case may be. The assets belonging to a particular Series and Class shall be so recorded upon the books of the Trust, and shall be held by the Trustees in trust for the benefit of the holders of Shares of that Series or Class, as the case may be. The assets belonging to each Series shall be charged with the liabilities of that Series and all expenses, costs, charges and reserves attributable to that Series. Any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular Series shall be allocated and charged by the Trustees between or among any one or more of the Series in such manner as the Trustees in their sole discretion deem fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes. The liabilities, expenses, costs, charges and reserves allocated and so charged to a Series are herein referred to as "liabilities belonging to" that Series. Except as provided in the next sentence or otherwise required or permitted by applicable law or any rule or order of the Commission, the "liabilities belonging to" such -5- Series shall be allocated to each Class of a Series in the proportion that the assets belonging to such Class bear to the assets belonging to all Classes in the Series. To the extent permitted by rule or order of the Commission, the Trustees may allocate all or a portion of any liabilities belonging to a Series to a particular Class or Classes (collectively, "Class Expenses") as the Trustees may from time to time determine is appropriate. In addition, all liabilities, expenses, costs, charges and reserves belonging to a Class shall be allocated to such Class. Without limitation of the foregoing provisions of this Section 2.8, but subject to the right of the Trustees in their discretion to allocate general liabilities, expenses, costs, charges or reserves as herein provided, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series shall be enforceable against the assets belonging to such Series only, and not against the assets of the Trust generally or any other Series. Notice of this limitation on inter-Series liabilities shall be set forth in the certificate of trust of the Trust (whether originally or by amendment) as filed or to be filed in the Office of the Secretary of State of the State of Delaware pursuant to the Act, and upon the giving of such notice in the certificate of trust, the statutory provisions of Section 3804 of the Act relating to limitations on inter-Series liabilities (and the statutory effect under Section 3804 of setting forth such notice in the certificate of trust) shall become applicable to the Trust and each Series. Any person extending credit to, contracting with or having any claim against any Series may satisfy or enforce any debt, liability, obligation or expense incurred, contracted for or otherwise existing with respect to that Series from the assets of that Series only. No Shareholder or former Shareholder of any Series shall have a claim on or any right to any assets allocated or belonging to any other Series. Similarly, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Class shall be enforceable against the assets belonging to such Class only, and not against the assets of the Series or the Trust generally or any other Class. Each contract entered into by the Trust which is or may be an obligation of a Class within a Series shall contain a provision to the effect that the parties to the contract will look only to the assets belonging to the Class for the satisfaction of any liability, and not to any extent to the assets of any other Class or Series or the Trust generally. If, notwithstanding the preceding sentence, any liability properly charged to a Class is paid from the assets of another Class, the Class from whose assets the liability was paid shall be reimbursed from the assets of the Class to which such liability belonged. Section 2.9 No Preemptive Rights. Shareholders shall have no preemptive or -------------------- other similar rights to subscribe to any additional Shares or other securities issued by the Trust or the Trustees, whether of the same or another Series or Class. Section 2.10 Conversion Rights. The Trustees shall have the authority to ----------------- provide from time to time that the holders of Shares of any Series or Class shall have the right to convert or exchange said Shares for or into Shares of one or more other Series or Classes in accordance with such requirements and procedures as may be established from time to time by the Trustees. -6- Section 2.11 Legal Proceedings. No person, other than a Trustee, who is not ----------------- a Shareholder of a particular Series or Class shall be entitled to bring any derivative action, suit or other proceeding on behalf of or with respect to such Series or Class. No Shareholder of a Series or a Class may maintain a derivative action with respect to such Series or Class unless holders of a least ten percent (10%) of the outstanding Shares of such Series or Class join in the bringing of such action. Except as otherwise provided in Section 3816 of the Act and the foregoing provisions of this Section 2.11, all matters relating to the bringing of derivative actions in the right of the Trust shall be governed by the General Corporation Law of the State of Delaware relating to derivative actions, and judicial interpretations thereunder, as if the Trust were a Delaware Corporation and the Shareholders were shareholders of a Delaware corporation. In addition to the requirements set forth in Section 3816 of the Act, a Shareholder may bring a derivative action on behalf of the Trust with respect to a Series or Class only if the following conditions are met: (a) the Shareholder or Shareholders must make a pre-suit demand upon the Trustees to bring the subject action unless an effort to cause the Trustees to bring such an action is not likely to succeed; and a demand on the Trustees shall only be deemed not likely to succeed and therefore excused if a majority of the Trustees, or a majority of any committee established to consider the merits of such action, has a personal financial interest in the transaction at issue, and a Trustee shall not be deemed interested in a transaction or otherwise disqualified from ruling on the merits of a Shareholder demand by virtue of the fact that such Trustee receives remuneration for his service as a Trustee of the Trust or as a trustee or director of one or more investment companies that are under common management with or otherwise affiliated with the Trust; and (b) unless a demand is not required under clause (a) of this paragraph, the Trustees must be afforded a reasonable amount of time to consider such shareholder request and to investigate the basis of such claim; and the Trustees shall be entitled to retain counsel or other advisors in considering the merits of the request and shall require an undertaking by the Shareholders making such request to reimburse the Trust for the expense of any such advisors in the event that the Trustees determine not to bring such action. For purposes of this Section 2.11, the Trustees may designate a committee of one Trustee to consider a Shareholder demand if necessary to create a committee with a majority of Trustees who do not have a personal financial interest in the transaction at issue. Section 2.12 Status of Shares. Shares shall be deemed to be personal ---------------- property giving only the rights provided in this instrument. Every Shareholder by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms hereof. The death of a Shareholder during the continuance of the Trust shall not operate to terminate the Trust nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but only to the rights of said decedent under this Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders partners. -7- ARTICLE III ----------- THE TRUSTEES ------------ Section 3.1 Management of the Trust. The Trustees shall have exclusive and ----------------------- absolute control over the Trust Property and over the business of the Trust to the same extent as if the Trustees were the sole owners of the Trust Property and business in their own right, but with such powers of delegation as may be permitted by this Trust Instrument. The Trustees shall have power to conduct the business of the Trust and carry on its operations in any and all of its branches and maintain offices both within and without the State of Delaware, in any and all states of the United States of America, in the District of Columbia, in any and all commonwealths, territories, dependencies, colonies, or possessions of the United States of America, and in any foreign jurisdiction and to do all such other things and execute all such instruments as they deem necessary, proper or desirable in order to promote the interests of the Trust although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Trust Instrument, the presumption shall be in favor of a grant of power to the Trustees. The enumeration of any specific power in this Trust Instrument shall not be construed as limiting the aforesaid power. The powers of the Trustees may be exercised without order of or resort to any court. Except for the Trustees named herein or appointed pursuant to Section 3.8, or Trustees appointed to fill vacancies pursuant to Section 3.3 hereof, the Trustees shall be elected by the Shareholders owning of record a plurality of the Shares voting at a meeting of Shareholders. The initial Trustee of the Trust shall be Rodney Johnson. Section 3.2 Term of Office of Trustees. Each Trustee shall hold office -------------------------- during the existence of this Trust, and until its termination as herein provided; except: (a) that any Trustee may resign his trust by written instrument signed by him and delivered to the Chairman, President, Secretary, or other Trustee of the Trust, which shall take effect upon such delivery or upon such later date as is specified therein; (b) that any Trustee may be removed at any time by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal, specifying the date when such removal shall become effective; (c) that any Trustee who requests in writing to be retired or who has died, become physically or mentally incapacitated by reason of disease or otherwise, or is otherwise unable to serve, may be retired by written instrument signed by a majority of the other Trustees, specifying the date of his retirement; and (d) that a Trustee may be removed at any meeting of the Shareholders of the Trust by a vote of Shareholders owning at least two-thirds of the outstanding Shares of all Series. Section 3.3 Vacancies and Appointment of Trustees. In case of the ------------------------------------- declination to serve, death, resignation, retirement, removal, physical or mental incapacity by reason of disease or otherwise of a Trustee, or a Trustee is otherwise unable to serve, or an increase in -8- the number of Trustees, a vacancy shall occur. Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is filled, the other Trustees shall have all the powers hereunder and the certificate of the other Trustees of such vacancy shall be conclusive. In the case of an existing vacancy, the remaining Trustee or Trustees shall fill such vacancy by appointing such other person as such Trustee or Trustees in their discretion shall see fit consistent with the limitations under the 1940 Act, unless such Trustee or Trustees determine, in accordance with Section 3.5, to decrease the size of the Board to the number of remaining Trustees. An appointment of a Trustee may be made by the Trustees then in office in anticipation of a vacancy to occur by reason of retirement, resignation or increase in number of Trustees effective at a later date, provided that said appointment shall become effective only at or after the effective date of said retirement, resignation or increase in number of Trustees. An appointment of a Trustee shall be effective upon the acceptance of the person so appointed to serve as trustee, except that any such appointment in anticipation of a vacancy shall become effective at or after the date such vacancy occurs. Section 3.4 Temporary Absence of Trustee. Any Trustee may, by power of ---------------------------- attorney, delegate his power for a period not exceeding six months at any one time to any other Trustee or Trustees, provided that in no case shall less than two Trustees personally exercise the other powers hereunder except as herein otherwise expressly provided or unless there is only one or two Trustees. Section 3.5 Number of Trustees. The number of Trustees shall be one, or such ------------------ other number as shall be fixed from time to time by the Trustees. Section 3.6 Effect of Death, Resignation, Etc. of a Trustee. The declination ----------------------------------------------- to serve, death, resignation, retirement, removal, incapacity, or inability of the Trustees, or any one of them, shall not operate to terminate the Trust or to revoke any existing agency created pursuant to the terms of this Trust Instrument. Section 3.7 Ownership of Assets of the Trust. Legal title in and beneficial -------------------------------- ownership of all of the assets of the Trust shall at all times be considered as vested in the Trust, except that the Trustees may cause legal title in and beneficial ownership of any Trust Property to be held by, or in the name of one or more of the Trustees acting for and on behalf of the Trust, or in the name of any person as nominee acting for and on behalf of the Trust. No Shareholder shall be deemed to have a severable ownership interest in any individual asset of the Trust or of any Series or Class, or any right of partition or possession thereof, but each Shareholder shall have, except as otherwise provided for herein, a proportionate undivided beneficial interest in each Series or Class the Shares of which are owned by such Shareholders. The Shares shall be personal property giving only the rights specifically set forth in this Trust Instrument. The Trust, or at the determination of the Trustees, one or more of the Trustees or a nominee acting for and on behalf of the Trust, shall be deemed to hold legal title and beneficial ownership of any income earned on securities of the Trust issued by any business entities formed, organized, or existing under the laws of any jurisdiction, including the laws of any foreign country. -9- Section 3.8 Series Trustees. In connection with the establishment of one or --------------- more Series or Classes, the Trustees establishing such Series or Class may appoint, to the extent permitted by the 1940 Act, separate Trustees with respect to such Series or Classes (the "Series Trustees"). Series Trustees may, but are not required to, serve as Trustees of the Trust of any other Series or Class of the Trust. To the extent provided by the Trustees in the appointment of Series Trustees, the Series Trustees may have, to the exclusion of any other Trustee of the Trust, all the powers and authorities of Trustees hereunder with respect to such Series or Class, but may have no power or authority with respect to any other Series or Class. Any provision of this Trust Instrument relating to election of Trustees by Shareholders only shall entitle the Shareholders of a Series or Class for which Series Trustees have been appointed to vote with respect to the election of such Series Trustees and the Shareholders of any other Series or Class shall not be entitled to participate in such vote. In the event that Series Trustees are appointed, the Trustees initially appointing such Series Trustees shall, without the approval of any Outstanding Shares, amend either this Trust Instrument or the By-laws to provide for the respective responsibilities of the Trustees and the Series Trustees in circumstances where an action of the Trustees or Series Trustees affects all Series of the Trust or two or more Series represented by different Trustees. Section 3.9 No Accounting. Except to the extent required by the 1940 Act or, ------------- if determined to be necessary or appropriate by the other Trustees under circumstances which would justify his or her removal for cause, no person ceasing to be a Trustee for reasons including, but not limited to, death, resignation, retirement, removal or incapacity (nor the estate of any such person) shall be required to make an accounting to the Shareholders or remaining Trustees upon such cessation. ARTICLE IV ---------- POWERS OF THE TRUSTEES ---------------------- Section 4.1 Powers. The Trustees in all instances shall act as principals, ------ and are and shall be free from the control of the Shareholders. The Trustees shall have full power and authority to do any and all acts and to make and execute any and all contracts and instruments that they may consider necessary or appropriate in connection with the management of the Trust. The Trustees shall have full authority and power to make any and all investments which they, in their sole discretion, shall deem proper to accomplish the purpose of this Trust. Subject to any applicable limitation in this Trust Instrument, the Trustees shall have power and authority: (a) To invest and reinvest cash and other property, and to hold cash or other property uninvested, and to sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the assets of the Trust; (b) To operate as and carry on the business of an investment company, and exercise all the powers necessary and appropriate to the conduct of such operators, including the power to invest all or any part of its assets in the securities of another investment company; -10- (c) To borrow money and in this connection issue notes or other evidence of indebtedness; to secure borrowings by mortgaging, pledging or otherwise subjecting as security the Trust Property; to endorse, guarantee, or undertake the performance of an obligation, liability or engagement of any person and to lend Trust Property; (d) To provide for the distribution of interests of the Trust either through a Principal Underwriter in the manner hereinafter provided for or by the Trust itself, or both, or otherwise pursuant to a plan of distribution of any kind; (e) To adopt By-laws not inconsistent with this Trust Instrument providing for the conduct of the business of the Trust and to amend and repeal them to the extent that they do not reserve that right to the Shareholders, which By-laws shall be deemed a part of this Trust Instrument and are incorporated herein by reference; (f) To elect and remove such officers and appoint and terminate such agents and contractors as they consider appropriate, any of whom may be a Trustee, and may provide for the compensation of all of the foregoing; (g) To employ one or more banks, trust companies or companies that are members of a national securities exchange or such other entities as custodians of any assets of the Trust, subject to the 1940 Act and to any conditions set forth in this Trust Instrument; (h) To retain one or more transfer agents and shareholder servicing agents, or both; (i) To set record dates in the manner provided herein or in the By- laws; (j) To delegate such authority (which delegation may include the power to subdelegate) as they consider desirable to any officers of the Trust and to any investment adviser, manager, administrator, custodian, underwriter or other agent or independent contractor; (k) To join with other holders of any securities or debt instruments in acting through a committee, depository, voting trustee or otherwise, and in that connection to deposit any security or debt instrument with, or transfer any security or debt instrument to, any such committee, depository or trustee, and to delegate to them such power and authority with relation to any security or debt instrument (whether or not so deposited or transferred) as the Trustees shall deem proper and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depository or trustee as the Trustees shall deem proper; (l) To enter into joint ventures, general or limited partnerships and any other combinations or associations; (m) To pay pensions for faithful service, as deemed appropriate by the Trustees, and to adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and -11- provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust; (n) To the extent permitted by law, indemnify any person with whom the Trust or any Series or Class has dealings; (o) To engage in and to prosecute, defend, compromise, abandon, or adjust by arbitration, or otherwise, any actions, suits, proceedings, disputes, claims and demands relating to the Trust, and out of the assets of the Trust or any Series or Class thereof to pay or to satisfy any debts, claims or expenses incurred in connection therewith, including those of litigation, and such power shall include without limitation the power of the Trustees or any appropriate committee thereof, in the exercise of their or its good faith business judgment, to dismiss any action, suit, proceeding, dispute, claim or demand, derivative or otherwise, brought by any person, including a Shareholder in its own name or the name of the Trust, whether or not the Trust or any of the Trustees may be named individually therein or the subject matter arises by reason of business for or on behalf of the Trust; (p) To purchase and pay for entirely out of Trust Property such insurance as they may deem necessary or appropriate for the conduct of the business of the Trust, including, without limitation, insurance policies insuring the Trust Property and payment of distributions and principal on its investments, and insurance policies insuring the Shareholders, Trustees, officers, representatives, employees, agents, investment advisers, managers, administrators, custodians, underwriters, or independent contractors of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person in such capacity, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such person against such liability; (q) To sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease any or all of the assets of the Trust, subject to the provisions of Section 9.4(b) hereof; (r) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities, debt instruments or property; and to execute and deliver powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities, debt instruments or property as the Trustees shall deem proper; (s) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities or debt instruments; (t) To hold any security or property in a form not indicating any trust, whether in bearer, book entry, unregistered or other negotiable form; or either in the name of -12- the Trustees or of the Trust or in the name of a custodian, subcustodian or other depository or a nominee or nominees or otherwise; (u) To establish separate and distinct Series with separately defined investment objectives and policies and distinct investment purposes in accordance with the provisions of Article II hereof and to establish Classes thereof having relative rights, powers and duties as they may provide consistent with applicable law; (v) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation, issuer or concern, any security or debt instrument of which is held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation, issuer or concern, and to pay calls or subscriptions with respect to any security or debt instrument held in the Trust; (w) To compromise, arbitrate, or otherwise adjust claims in favor of or against the Trust or any matter in controversy including, but not limited to, claims for taxes; (x) To make distributions of income and of capital gains to Shareholders in the manner herein provided; (y) To establish, from time to time, a minimum investment for Shareholders in the Trust or in one or more Series or Classes, and to require the redemption of the Shares of any Shareholders whose investment is less than such minimum upon giving notice to such Shareholder; (z) To cause each Shareholder, or each Shareholder of any particular Series of Class, to pay directly, in advance or arrears, for charges of the Trust's custodian or transfer, shareholder servicing or similar agent, an amount fixed from time to time by the Trustees, by setting off such charges due from such Shareholder from declared but unpaid dividends owed such Shareholder and/or by reducing the number of Shares in the account of such Shareholder by that number of full and/or fractional Shares which represents the outstanding amount of such charges due from such Shareholder; (aa) To establish one or more committees comprised of one or more of the Trustees, and to delegate any of the powers of the Trustees to said committees; (bb) To interpret the investment policies, practices or limitations of any Series or Class; (cc) To establish a registered office and have a registered agent in the State of Delaware; (dd) To compensate or provide for the compensation of the Trustees, officers, advisers, administrators, custodians, other agents, consultants, contractors and employees of the Trust or the Trustees on such terms as they deem appropriate; -13- (ee) To invest part or all of the Trust Property (or part or all of the assets of any Series), or to dispose of part or all of the Trust Property (or part or all of the assets of any Series) and invest the proceeds of such disposition, in interests issued by one or more other investment companies or pooled portfolios (including investment by means of transfer of part or all of the Trust Property in exchange for an interest or interests in such one or more investment companies or pooled portfolios) all without any requirement of approval by Shareholders. Any such other investment company or pooled portfolio may (but need not) be a trust (formed under the laws of any state or jurisdiction) which is classified as a partnership for federal income tax purposes; and (ff) In general, to carry on any other business in connection with or incidental to any of the foregoing powers, to do everything necessary, suitable or proper for the accomplishment of any purpose or the attainment of any object or the furtherance of any power herein set forth, either alone or in association with others, and to do every other act or thing incidental or appurtenant to or growing out of or connected with the aforesaid business or purposes, objects or powers. The foregoing clauses shall be construed both as objects and powers, and the foregoing enumeration of specific powers shall not be held to limit or restrict in any manner the general powers of the Trustees. Any action by one or more of the Trustees in their capacity as such hereunder shall be deemed an action on behalf of the Trust or the applicable Series or Class, and not an action in an individual capacity. No one dealing with the Trustees shall be under any obligation to make any inquiry concerning the authority of the Trustees, or to see to the application of any payments made or property transferred to the Trustees or upon their order. Section 4.2 Issuance and Repurchase of Shares. The Trustees shall have --------------------------------- the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell, reissue, dispose of, exchange, and otherwise deal in Shares and, subject to the provisions set forth in Article II and Article VII, to apply to any such repurchase, redemption, retirement, cancellation or acquisition of Shares any funds or property of the Trust, or the particular Series or Class of the Trust, with respect to which such Shares are issued. Section 4.3 Trustees and Officers as Shareholders. Any Trustee, officer ------------------------------------- or other agent of the Trust may acquire, own and dispose of Shares to the same extent as if such person were not a Trustee, officer or agent; and the Trustees may issue and sell or cause to be issued and sold Shares to and buy such Shares from any such person or any firm or company in which such person invested, subject to the general limitations herein contained as to the sale and purchase of such Shares. Section 4.4 Action by the Trustees and Committees. The Trustees (and any ------------------------------------- committee thereof) may act at a meeting held in person or in whole or in part by conference telecommunications equipment. One-third, but not less than two, of the Trustees shall constitute a quorum at any meeting unless there is only one Trustee. Except as the Trustees may otherwise determine, one-third of the members of any committee shall constitute a quorum at any meeting. The vote of a majority of the Trustees (or committee members) -14- present at a meeting at which a quorum is present shall be the act of the Trustees (or any committee thereof). The Trustees (and any committee thereof) may also act by written consent signed by a majority of the Trustees (or committee members). Regular meetings of the Trustees may be held at such places and at such times as the Trustees may from time to time determine. Special meetings of the Trustees (and meetings of any committee thereof) may be called orally or in writing by the Chairman of the Board of Trustees (or the chairman of any committee thereof) or by any two other Trustees. Notice of the time, date and place of all meetings of the Trustees (or any committee thereof) shall be given by the party calling the meeting to each Trustee (or committee member) by telephone, telefax, or telegram sent to the person's home or business address at least twenty-four hours in advance of the meeting or by written notice mailed to the person's home or business address at least seventy-two hours in advance of the meeting. Notice of all proposed written consents of Trustees (or committees thereof) shall be given to each Trustee (or committee member) by telephone, telefax, telegram, or first class mail sent to the person's home or business address. Notice need not be given to any person who attends a meeting without objecting to the lack of notice or who executes a written consent or a written waiver of notice with respect to a meeting. Written consents or waivers may be executed in one or more counterparts. Execution of a written consent or waiver and delivery thereof may be accomplished by telefax or other electronic means approved by the Trustees. Section 4.5 Chairman of the Trustees. The Trustees may appoint one of ------------------------ their number to be Chairman of the Board of Trustees. The Chairman shall preside at all meetings of the Trustees at which he is present and may be (but is not required to be) the chief executive officer of the Trust. Section 4.6 Principal Transactions. Except to the extent prohibited by ---------------------- applicable law, the Trustees may, on behalf of the Trust, buy any securities from or sell any securities to, or lend any assets of the Trust to, any Trustee or officer of the Trust or any firm of which any such Trustee or officer is a member acting as principal, or have any such dealings with any Affiliated Person of the Trust, investment adviser, investment sub-adviser, distributor or transfer agent for the Trust or with any Interested Person of such Affiliated Person or other person; and the Trust may employ any such Affiliated Person or other person, or firm or company in which such Affiliated Person or other person is an Interested Person, as broker, legal counsel, registrar, investment advisor, investment sub-advisor, distributor, transfer agent, dividend disbursing agent, custodian or in any other capacity upon customary terms. ARTICLE V --------- INVESTMENT ADVISOR, INVESTMENT SUB-ADVISOR, PRINCIPAL UNDERWRITER, ADMINISTRATOR, TRANSFER AGENT, CUSTODIAN AND OTHER CONTRACTORS ------------------------------- Section 5.1 Certain Contracts. Subject to compliance with the provisions ----------------- of the 1940 Act, but notwithstanding any limitations of present and future law or custom in regard to delegation of powers by trustees generally, the Trustees may, at any time and from time to -15- time and without limiting the generality of their powers and authority otherwise set forth herein, enter into one or more contracts with any one or more corporations, trusts, associations, partnerships, limited partnerships, other type of organizations, or individuals to provide for the performance and assumption of some or all of the following services, duties and responsibilities to, for or of the Trust and/or the Trustees, and to provide for the performance and assumption of such other services, duties and responsibilities in addition to those set forth below as the Trustees may determine to be appropriate: (a) Investment Adviser and Investment Sub-Adviser. The Trustees may --------------------------------------------- in their discretion, from time to time, enter into an investment advisory or management contract or contracts with respect to the Trust or any Series whereby the other party or parties to such contract or contracts shall undertake to furnish the Trust with such management, investment advisory, statistical and research facilities and services and such other facilities and services, if any, and all upon such terms and conditions, as the Trustees may in their discretion determine. Notwithstanding any other provision of this Trust Instrument, the Trustees may authorize any investment adviser (subject to such general or specific instructions as the Trustees may from time to time adopt) to effect purchases, sales or exchanges of portfolio securities, other investment instruments of the Trust, or other Trust Property on behalf of the Trustees, or may authorize any officer, agent, or Trustee to effect such purchases, sales or exchanges pursuant to recommendations of the investment adviser (and all without further action by the Trustees). Any such purchases, sales and exchanges shall be deemed to have been authorized by the Trustees. The Trustees may authorize, subject to applicable requirements of the 1940 Act, the investment adviser to employ, from time to time, one or more sub- advisers to perform such of the acts and services of the investment adviser, and upon such terms and conditions, as may be agreed upon between the investment adviser and sub-adviser. Any reference in this Trust Instrument to the investment adviser shall be deemed to include such sub-advisers, unless the context otherwise requires. (b) Principal Underwriter. The Trustees may in their discretion from --------------------- time to time enter into an exclusive or non-exclusive underwriting contract or contracts providing for the sale of Shares, whereby the Trust may either agree to sell Shares to the other party to the contract or appoint such other party its sales agent for such Shares. In either case, the contract may also provide for the repurchase or sale of Shares by such other party as principal or as agent of the Trust. (c) Administrator. The Trustees may in their discretion from time to ------------- time enter into one or more contracts whereby the other party or parties shall undertake to furnish the Trust with administrative services. The contract or contracts shall be on such terms and conditions as the Trustees may in their discretion determine. (d) Transfer Agent. The Trustees may in their discretion from time -------------- to time enter into one or more transfer agency and Shareholder service contracts whereby the other party or parties shall undertake to furnish the Trustees with transfer agency and Shareholder -16- services. The contract or contracts shall be on such terms and conditions as the Trustees may in their discretion determine. (e) Administrative Service and Distribution Plans. The Trustees may, --------------------------------------------- on such terms and conditions as they may in their discretion determine, adopt one or more plans pursuant to which compensation may be paid directly or indirectly by the Trust for Shareholder servicing, administration and/or distribution services with respect to one or more Series or Classes including without limitation, plans subject to Rule 12b-1 under the 1940 Act, and the Trustees may enter into agreements pursuant to such plans. (f) Fund Accounting. The Trustees may in their discretion from time --------------- to time enter into one or more contracts whereby the other party or parties undertakes to handle all or any part of the Trust's accounting responsibilities, whether with respect to the Trust's properties, Shareholders or otherwise. (g) Custodian and Depository. The Trustees may in their discretion ------------------------ from time to time enter into one or more contracts whereby the other party or parties undertakes to act as depository for and to maintain custody of the property of the Trust or any Series or Class and accounting records in connection therewith. (h) Parties to Contract. Any contract described in this Article V ------------------- hereof may be entered into with any corporation, firm, partnership, trust or association, although one or more of the Trustees or officers of the Trust may be an officer, director, trustee, shareholder, or member of such other party to the contract, and no such contract shall be invalidated or rendered void or voidable by reason of the existence of any relationship, nor shall any person holding such relationship be disqualified from voting on or executing the same in his capacity as Shareholder and/or Trustee, nor shall any person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was not inconsistent with the provisions of this Article V. The same person (including a firm, corporation, partnership, trust, or association) may be the other party to contracts entered into pursuant to this Article V, and any individual may be financially interested or otherwise affiliated with persons who are parties to any or all of the contracts mentioned in this Section 5.1. ARTICLE VI ---------- SHAREHOLDER VOTING POWERS AND MEETINGS -------------------------------------- Section 6.1 Voting. The Shareholders shall have power to vote only: (a) ------ for the election of one or more Trustees in order to comply with the provisions of the 1940 Act (including Section 16(a) thereof); (b) with respect to any contract entered into pursuant to Article V to the extent required by the 1940 Act; (c) with respect to termination of the Trust or a Series or Class thereof to the extent required by applicable law; (d) with respect to any plan adopted pursuant to Rule 12b-1 (or any successor rule) under the 1940 Act, and related -17- matters, to the extent required under the 1940 Act; and (e) with respect to such additional matters relating to the Trust as may be required by this Trust Instrument, the By-laws or any registration of the Trust or Series as an investment company under the 1940 Act with the Commission (or any successor agency) or as the Trustees may consider necessary or desirable. On each matter submitted to a vote of Shareholders, unless the Trustees determine otherwise, all Shares of all Series and Classes shall vote as a single class; provided, however, that: (a) as to any matter with respect to which a separate vote of any Series or Class is required by the 1940 Act or other applicable law or is required by attributes applicable to any Series or Class, such requirements as to a separate vote by that Series or Class shall apply; (b) unless the Trustees determine that this clause (b) shall not apply in a particular case, to the extent that a matter referred to in clause (a) above affects more than one Series or Class and the interests of each such Series or Class in the matter are identical, then the Shares of all such affected Series or Classes shall vote as a single class; and (c) as to any matter which does not affect the interests of a particular Series or Class, only the holders of Shares of the one or more affected Series or Classes shall be entitled to vote. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote, and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy or in any manner provided for in the By-laws. A proxy may be given in writing, by telefax, or in any other manner provided for in the By-laws. Anything in this Trust Instrument to the contrary notwithstanding, in the event a proposal by anyone other than the officers or Trustees of the Trust is submitted to a vote of the Shareholders of the Trust or one or more Series or Classes thereof, or in the event of any proxy contest or proxy solicitation or proposal in opposition to any proposal by the officers or Trustees of the Trust, Shares may be voted only in person or by written proxy. Until Shares are issued, the Trustees may exercise all rights of Shareholders and may take any action required or permitted by law, this Trust Instrument or any of the By-laws of the Trust to be taken by Shareholders. Section 6.2 Meetings. Meetings of Shareholders (including meetings -------- involving only the holders of Shares of one or more but less than all Series or Classes) may be called by the Trustees from time to time to be held at such place within or without the State of Delaware, and on such date as may be designated in the call thereof for the purpose of taking action upon any matter as to which the vote or authority of the Shareholders is required or permitted as provided in Section 6.1. Special meetings of the Shareholders of any Series may be called by the Trustees and shall be called by the Trustees upon the written request of Shareholders owning at least twenty-five percent (25%) of the Outstanding Shares entitled to vote, except to the extent that a lesser percentage is prescribed by the 1940 Act. Notice shall be sent, postage prepaid, by mail or such other means determined by the Trustees, at least 7 days prior to any such meeting. Section 6.3 Quorum and Required Vote. Unless a larger percentage is ------------------------ required by law, by any provision of this Trust Instrument or by the Trustees, one-third of the Shares entitled to vote in person or by proxy on a particular matter shall be a quorum for the transaction of business at a Shareholders' meeting with respect to that matter. Any lesser -18- number shall be sufficient for adjournments. Any adjourned session or sessions may be held without the necessity of further notice. Except when a larger vote is required by law, by any provision of this Trust Instrument or by the Trustees, a majority of the Shares voted in person or by proxy on a particular matter at a meeting at which a quorum is present shall decide any questions with respect to that matter and a plurality shall elect a Trustee. Section 6.4 Action by Written Consent. Subject to the provisions of the ------------------------- 1940 Act and other applicable law, any action taken by Shareholders may be taken without a meeting if a majority of the Shares entitled to vote on the matter (or such larger proportion thereof as shall be required by law, by any provision of this Trust Instrument or by the Trustees) consent to the action in writing. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. The Trustees may adopt additional rules and procedures regarding the taking of Shareholder action by written consents. ARTICLE VII ----------- DISTRIBUTIONS AND REDEMPTIONS ----------------------------- Section 7.1 Distributions. ------------- (a) The Trustees may from time to time declare and pay dividends or other distributions with respect to any Series or Class. The amount of such dividends or distributions and the payment of them and whether they are in cash or any other Trust Property shall be wholly in the discretion of the Trustees. (b) Dividends and other distributions may be paid or made to the Shareholders of record at the time of declaring a dividend or other distribution or among the Shareholders of record at such other date or time or dates or times as the Trustees shall determine, which dividends or distributions, at the election of the Trustees, may be paid pursuant to a standing resolution or resolutions adopted only once or with such frequency as the Trustees may determine. All dividends and other distributions on Shares of a particular Class shall be distributed pro rata to the Shareholders of that Series or Class in proportion to the number of Shares of that Series or Class they held on the record date established for such payment, except that in connection with any dividend or distribution program or procedure the Trustees may determine that no dividend or distribution shall be payable on Shares as to which the Shareholder's purchase order and/or payment in the prescribed form has not been received by the time or times established by the Trustees under such program or procedure. The Trustees may adopt and offer to Shareholders such dividend reinvestment plans, cash dividend payout plans or related plans as the Trustees shall deem appropriate. (c) Anything in this Trust Instrument to the contrary notwithstanding, the Trustees may at any time declare and distribute a stock dividend pro rata among the Shareholders of a particular Series, or Class thereof, as of the record date of that Series or Class fixed as provided in Section (b) hereof. The Trustees shall have full discretion, to the extent not inconsistent with the 1940 Act, to determine which items shall be treated as income -19- and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders. Section 7.2 Redemption by Shareholder. ------------------------- (a) Unless the Trustees otherwise determine with respect to a particular Series or Class at the time of establishing and designating the same, each holder of Shares of a particular Series or Class thereof shall have the right at such times as may be permitted by the Trust, but no less frequently than once each week, to require the Trust to redeem (out of the assets belonging to the applicable Series or Class) all or any part of his Shares at a redemption price equal to the Net Asset Value per Share of that Series or Class next determined in accordance with Section 7.4 after the Shares are properly tendered for redemption, less such redemption fee or other charge, if any, as may be fixed by the Trustees. Except as otherwise provided in this Trust Instrument, payment of the redemption price shall be in cash; provided, however, that to the extent permitted by applicable law, the Trustees may authorize the Trust to make payment wholly or partly in securities or other assets belonging to the applicable Series at the value of such securities or assets used in such determination of Net Asset Value. (b) Notwithstanding the foregoing, the Trust may postpone payment of the redemption price and may suspend the right of the holders of Shares of any Series or Class to require the Trust to redeem Shares of that Series or Class during any period or at any time when and to the extent permissible under the 1940 Act. (c) In the event that a Shareholder shall submit a request for the redemption of a greater number of Shares than are then allocated to such Shareholder, such request shall not be honored. Section 7.3 Redemption by Trust. Unless the Trustees otherwise determine ------------------- with respect to a particular Series or Class at the time of establishing and designating the same, each Share of each Series or Class thereof that has been established and designated is subject to redemption (out of the assets belonging to the applicable Series or Class) by the Trust at the redemption price which would be applicable if such Share was then being redeemed by the Shareholder pursuant to Section 7.2 at any time if the Trustees determine in their sole discretion that failure to so redeem may have materially adverse consequences to the holders of the Shares, or any Series or Class of the Trust, and upon such redemption the holders of the Shares so redeemed shall have no further right with respect thereto other than to receive payment of such redemption price. In addition, the Trustees, in their sole discretion, may cause the Trust to redeem (out of the assets belonging to the applicable Series or Class) all of the Shares of one or more Series or Classes held by (a) any Shareholder if the value of such Shares held by such Shareholder is less than the minimum amount established from time to time by the Trustees, (b) all Shareholders of one or more Series or Classes if the value of such Shares held by all Shareholders is less than the minimum amount established from time to time by the Trustees or (c) any Shareholder to reimburse the Trust for any loss or expense it has sustained or incurred by reason of the failure of such Shareholder to make full payment for Shares purchased by such Shareholder, or by reason of any defective redemption request, or by reason of indebtedness incurred because of such Shareholder as described in Section 9.11 or to -20- collect any charge relating to a transaction effected for the benefit of such Shareholder or as provided in the prospectus relating to such Shares. Section 7.4 Net Asset Value. The Net Asset Value per Share of any Series --------------- or Class thereof shall be the quotient obtained by dividing the value of the net assets of that Series or Class (being the value of the assets belonging to that Series or Class less the liabilities belonging to that Series or Class) by the total number of Shares of that Series or Class outstanding, all determined in accordance with the methods and procedures, including without limitation those with respect to rounding, established by the Trustees from time to time. The Trustees may determine to maintain the Net Asset Value per Share of any Series at a designated constant dollar amount and in connection therewith may adopt procedures not inconsistent with the 1940 Act for the continuing declarations of income attributable to that Series or Class thereof as dividends payable in additional Shares of that Series or Class thereof at the designated constant dollar amount and for the handling of any losses attributable to that Series or Class thereof. Such procedures may, among other things, provide that in the event of any loss each Shareholder of a Series or Class thereof shall be deemed to have contributed to the capital of the Trust attributable to that Series or Class thereof his pro rata portion of the total number of Shares required to be cancelled in order to permit the Net Asset Value per Share of that Series or Class thereof to be maintained, after reflecting such loss, at the designated constant dollar amount. Each Shareholder of the Trust shall be deemed to have agreed, by his investment in the Trust, to make the contribution referred to in the preceding sentence in the event of any such loss. ARTICLE VIII ------------ LIMITATION OF LIABILITY AND INDEMNIFICATION ------------------------------------------- Section 8.1 Limitation of Liability. Neither a Trustee nor an officer of ----------------------- the Trust, when acting in such capacity, shall be personally liable to any person other than the Trust or a beneficial owner for any act, omission or obligation of the Trust, any Trustee or any officer of the Trust. Neither a Trustee nor an officer of the Trust shall be liable for any act or omission in his capacity as Trustee or as an officer of the Trust, or for any act or omission of any other officer or any employee of the Trust or of any other person or party, provided that nothing contained herein or in the Act shall protect any Trustee or officer against any liability to the Trust or to Shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee or the duties of such officer hereunder. Section 8.2 Indemnification. The Trust shall indemnify each of its --------------- Trustees and officers and persons who serve at the Trust's request as directors, officers or trustees of another organization in which the Trust has any interest as a shareholder, creditor, or otherwise, and may indemnify any trustee, director or officer of a predecessor organization (each a "Covered Person"), against all liabilities and expenses (including amounts paid in satisfaction of judgments, in compromise, as fines and penalties, and expenses including -21- reasonable accountants' and counsel fees) reasonably incurred in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which he may be involved or with which he may be threatened, while as a Covered Person or thereafter, by reason of being or having been such a Covered Person, except that no Covered Person shall be indemnified against any liability to the Trust or its Shareholders to which such Covered Person would otherwise be subject by reason of bad faith, willful misfeasance, gross negligence or reckless disregard of his duties involved in the conduct of such Covered Person's office (such willful misfeasance, bad faith, gross negligence or reckless disregard being referred to herein as "Disabling Conduct"). Expenses, including accountants' and counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), may be paid from time to time by the Trust in advance of the final disposition of any such action, suit or proceeding upon receipt of (a) an undertaking by or on behalf of such Covered Person to repay amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under this Article VIII and either (b) such Covered Person provides security for such undertaking, (c) the Trust is insured against losses arising by reason of such payment, or (d) a majority of a quorum of disinterested, non-party Trustees, or independent legal counsel in a written opinion, determines, based on a review of readily available facts, that there is reason to believe that such Covered Person ultimately will be found entitled to indemnification. Section 8.3 Indemnification Determinations. Indemnification of a Covered ------------------------------ Person pursuant to Section 8.2 shall be made if (a) the court or body before whom the proceeding is brought determines, in a final decision on the merits, that such Covered Person was not liable by reason of Disabling Conduct or (b) in the absence of such a determination, a majority of a quorum of disinterested, non-party Trustees or independent legal counsel in a written opinion make a reasonable determination, based upon a review of the facts, that such Covered Person was not liable by reason of Disabling Conduct. Section 8.4 Indemnification Not Exclusive. The right of indemnification ----------------------------- provided by this Article VIII shall not be exclusive of or affect any other rights to which any such Covered Person may be entitled. As used in this Article VIII, "Covered Person" shall include such person's heirs, executors and administrators, and a "disinterested, non-party Trustee" is a Trustee who is neither an Interested Person of the Trust nor a party to the proceeding in question. Section 8.5 Shareholders. Each Shareholder of the Trust and of each Series ------------ or Class shall not be personally liable for the debts, liabilities, obligations and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or by or on behalf of any Series or Class. The Trustees shall have no power to bind any Shareholder personally or to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay pursuant to terms hereof or by way of subscription for any Shares or otherwise. In case any Shareholder or former Shareholder of any Series or Class shall be held to be personally liable solely by reason of his being or having been a Shareholder of such Series -22- or Class and not because of his acts or omissions or for some other reason, the Shareholder or former Shareholder (or his heirs, executors, administrators or other legal representatives, or, in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets belonging to the applicable Series or Class to be held harmless from and indemnified against all loss and expense arising from such liability. The Trust, on behalf of the affected Series, shall, upon request by the Shareholder, assume the defense of any claim made against the Shareholder for any act or obligation of the Series or Class and satisfy any judgment thereon from the assets of the Series or Class. The indemnification and reimbursement required by the preceding sentence shall be made only out of assets of the one or more Series or Classes whose Shares were held by said Shareholder at the time the act or event occurred which gave rise to the claim against or liability of said Shareholder. The rights accruing to a Shareholder under this Section shall not impair any other right to which such Shareholder may be lawfully entitled, nor shall anything herein contained restrict the right of the Trust or any Series or Class thereof to indemnify or reimburse a Shareholder in any appropriate situation even though not specifically provided herein. ARTICLE IX ---------- MISCELLANEOUS ------------- Section 9.1 Trust Not a Partnership. It is hereby expressly declared that ----------------------- a trust and not a partnership is created hereby. All persons extending credit to, contracting with or having any claim against any Series of the Trust or any Class within any Series shall look only to the assets of such Series or Class for payment under such credit, contract or claim; and neither the Shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Every note, bond, contract or other undertaking issued by or on behalf of the Trust or the Trustees relating to the Trust or to a Series or Class shall include a recitation limiting the obligations represented thereby to the Trust or to one or more Series or Classes and its or their assets (but the omission of such a recitation shall not operate to bind any Shareholder, Trustee, officer, employee or agent of the Trust). Section 9.2 Trustees' Good Faith Action, Expert Advice, No Bond or Surety. ------------------------------------------------------------- The exercise by the Trustees of their powers and discretions hereunder shall be binding upon everyone interested. Subject to the provisions of Article VIII: (i) the Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, consultant, adviser, administrator, distributor or principal underwriter, custodian or transfer, dividend disbursing, Shareholder servicing or accounting agent of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee; (ii) the Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Trust Instrument and their duties as Trustees, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice; and (iii) in discharging -23- their duties, the Trustees, when acting in good faith, shall be entitled to rely upon the books of account of the Trust and upon written reports made to the Trustees by any officer appointed by them, any independent public accountant, and (with respect to the subject matter of the contract involved) any officer, partner or responsible employee of a contracting party appointed by the Trustees. The Trustees as such shall not be required to give any bond or surety or any other security for the performance of their duties. Section 9.3 Establishment of Record Dates. The Trustees may close the ----------------------------- Share transfer books of the Trust for a period not exceeding one hundred twenty (120) days preceding the date of any meeting of Shareholders, or the date for the payment of any dividends or other distributions, or the date for the allotment of rights, or the date when any change or conversion or exchange of Shares shall go into effect; or in lieu of closing the stock transfer books as aforesaid, the Trustees may fix in advance a date, not exceeding one hundred twenty (120) days preceding the date of any meeting of Shareholders, or the date for payment of any dividend or other distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of Shares shall go into effect, as a record date for the determination of the Shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or other distribution, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of Shares, and in such case such Shareholders and only such Shareholders as shall be Shareholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend or other distribution, or to receive such allotment or rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any Shares on the books of the Trust after any such record date fixed as aforesaid. Section 9.4 Dissolution and Termination of Trust or Series. ---------------------------------------------- (a) This Trust shall continue without limitation of time but subject to the provisions of sub-sections (b) and (c) of this Section 9.4. (b) Notwithstanding anything in Section 9.5 to the contrary, the Trustees may without Shareholder approval (unless such approval is required by the 1940 Act) in dissolution of the Trust or an applicable Series or Class, (i) sell and convey all or substantially all of the assets of the Trust or any Series or Class to another trust, partnership, limited liability company, association or corporation, or to a separate Series or Class of shares thereof, organized under the laws of any state or jurisdiction, for adequate consideration which may include the assumption of all outstanding obligations, taxes and other liabilities, accrued or contingent, of the Trust or any Series or Class, and which may include shares of beneficial interest, stock or other ownership interests of such trust, partnership, limited liability company, association or corporation or of a series thereof; or -24- (ii) at any time sell and convert into money all of the assets of the Trust or any Series or Class. Following a sale or conversion in accordance with the foregoing sub-section 9.4(b)(i) or (ii), and upon making reasonable provision, in the determination of the Trustees, for the payment of all liabilities of the Trust or the affected Series or Class as required by applicable law, by such assumption or otherwise, the Shareholders of each Class of a Series involved in such sale or conversion shall be entitled to receive, as a Class, when and as declared by the Trustees, the excess of the assets belonging to that Series that are allocated to such Class over the liabilities belonging to that Series that are allocated to such Class. The assets so distributable to the Shareholders of any particular Class of a Series shall be distributed among such Shareholders in proportion to the number of Shares of that Class held by them and recorded on the books of the Trust. In the event a Series is not divided into Classes, the foregoing provisions shall be applied on a Series by Series basis. (c) Upon completion of the distribution of the remaining proceeds or the remaining assets as provided in sub-section (b), the Trust (in the case of a sale or conversion with respect to the Trust as a whole or the last remaining Series) or any affected Series or Class shall terminate and the Trustees and the Trust or any affected Series or Class shall be discharged of any and all further liabilities and duties hereunder and the right, title and interest of all parties with respect to the Trust or such affected Series or Class shall be cancelled and discharged. Upon termination of the Trust, following completion of winding up of its business, the Trustees shall cause a certificate of cancellation of the Trust's certificate of trust to be filed in accordance with the Act, which certificate of cancellation may be signed by any one Trustee. Section 9.5 Merger, Consolidation, Incorporation. Anything in this Trust ------------------------------------ Instrument to the contrary notwithstanding, the Trustees, in order to change the form of organization and/or domicile of the Trust, may, without prior Shareholder approval, (i) cause the Trust to merge or consolidate with or into one or more trusts, partnerships, limited liability companies, associations or corporations which is or are formed, organized or existing under the laws of a state, commonwealth possession or colony of the United States, or (ii) cause the Trust to incorporate under the laws of Delaware. Any agreement of merger or consolidation or certificate of merger may be signed by a majority of the Trustees. Pursuant to and in accordance with the provisions of Section 3815(f) of the Act, and notwithstanding anything to the contrary contained in this Trust Instrument, an agreement of any merger or consolidation approved in accordance with this Section 9.5 may effect any amendment to the Trust Instrument or effect the adoption of a new trust instrument of the Trust if it is the surviving or resulting trust in the merger or consolidation. Any merger or consolidation of the Trust other than as described in the foregoing provisions of this Section 9.5 shall, in addition to the approval of the Trustees, require a Majority Shareholder Vote. Nothing in this Section 9.5 shall require, however, Shareholder approval of any transaction whereby the Trust or any Series thereof acquires or assumes all or any part of the assets and liabilities of any other entity. -25- Section 9.6 Filing of Copies, References, Headings. The original or a copy -------------------------------------- of this Trust Instrument and of each amendment hereof or Trust Instrument supplemental hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by an officer or Trustee of the Trust as to whether or not any such amendments or supplements have been made and as to any matters in connection with the Trust hereunder, and with the same effect as if it were the original, may rely on a copy certified by an officer or Trustee of the Trust to be a copy of this Trust Instrument or of any such amendment or supplemental Trust Instrument. In this Trust Instrument or in any such amendment or supplemental Trust Instrument, references to this Trust Instrument, and all expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to this Trust Instrument as amended or affected by any such supplemental Trust Instrument. All expressions like "his", "he" and "him", shall be deemed to include the feminine and neuter, as well as masculine, genders. Headings are placed herein for convenience of reference only and in case of any conflict, the text of this Trust Instrument rather than the headings, shall control. This Trust Instrument may be executed in any number of counterparts each of which shall be deemed an original. Section 9.7 Applicable Law. The trust set forth in this instrument is made -------------- in the State of Delaware, and the Trust and this Trust Instrument, and the rights and obligations of the Trustees and Shareholders hereunder, are to be governed by and construed and administered according to the Act and the laws of said State; provided, however, that there shall not be applicable to the Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540 of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or common) of the State of Delaware (other than the Act) pertaining to trusts which relate to or regulate: (i) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (ii) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (iii) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (iv) fees or other sums payable to trustees, officers, agents or employees of a trust, (v) the allocation of receipts and expenditures to income or principal, (vi) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding of trust assets, or (vii) the establishment of fiduciary or other standards or responsibilities or limitations on the acts or powers of trustees, which are inconsistent with the limitations or liabilities or authorities and powers of the Trustees set forth or referenced in this Trust Instrument. The Trust shall be of the type commonly called a "business trust", and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust under Delaware law. The Trust specifically reserves the right to exercise any of the powers or privileges afforded to trusts or actions that may be engaged in by trusts under the Act, and the absence of a specific reference herein to any such power, privilege or action shall not imply that the Trust may not exercise such power or privilege or take such actions. Section 9.8 Amendments. Except as specifically provided herein, the ---------- Trustees may, without Shareholder vote, amend or otherwise supplement this Trust Instrument by making an amendment, a Trust Instrument supplemental hereto or an amended and restated trust -26- instrument. Shareholders shall have the right to vote: (i) on any amendment which would affect their right to vote granted in Section 6.1, (ii) on any amendment to this Section 9.8, (iii) on any amendment for which such vote is required by law and (iv) on any amendment submitted to them by the Trustees. Any amendment required or permitted to be submitted to Shareholders which, as the Trustees determine, shall affect the Shareholders of one or more Series or Classes shall be authorized by vote of the Shareholders of each Series or Class affected and no vote of shareholders of a Series or Class not affected shall be required. Anything in this Trust Instrument to the contrary notwithstanding, any amendment to Article VIII hereof shall not limit the rights to indemnification or insurance provided therein with respect to action or omission of any persons protected thereby prior to such amendment. Section 9.9 Fiscal Year. The fiscal year of the Trust shall end on a ----------- specified date as determined from time to time by the Trustees. Section 9.10 Provisions in Conflict with Law. The provisions of this Trust ------------------------------- Instrument are severable, and if the Trustees shall determine, with the advice of counsel, that any of such provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Trust Instrument; provided, however, that such determination shall not affect any of the remaining provisions of this Trust Instrument or render invalid or improper any action taken or omitted prior to such determination. If any provision of this Trust Instrument shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provisions in any other jurisdiction or any other provision of this Trust Instrument in any jurisdiction. Section 9.11 Allocation of Certain Expenses. Each Shareholder will, at the ------------------------------ discretion of the Trustees, indemnify the Trust against all expenses and losses resulting from indebtedness incurred in connection with facilitating (i) requests pending receipt of the collected funds from investments sold on the date of such Shareholder's redemption request; (ii) redemption requests from such Shareholder who has also notified the Trust of its intention to deposit funds in its accounts on the date of said redemption request; or (iii) the purchase of investments pending receipt of collected funds from such Shareholder who has notified the Trust of its intention to deposit funds in its accounts on the date of the purchase of the investments. IN WITNESS WHEREOF, the undersigned, being the Trustee of the Trust, has executed this Declaration of Trust as of the 21st day of October, 1998. /s/ Rodney D. Johnson -27- EX-99.B 4 BY-LAWS PROVIDENT INSTITUTIONAL FUNDS BY-LAWS These By-laws (the "By-laws") of Provident Institutional Funds (the "Trust"), a Delaware business trust, are subject to the Provident Institutional Funds Declaration of Trust dated October 21, 1998, as from time to time amended, supplemented or restated (the "Trust Instrument"). Capitalized terms used herein which are defined in the Trust Instrument are used as therein defined. ARTICLE I --------- PRINCIPAL OFFICE ---------------- The principal office of the Trust shall be located in such location as the Trustees may from time to time determine. The Trust may establish and maintain such other offices and places of business as the Trustees may from time to time determine. ARTICLE II ---------- OFFICERS AND THEIR ELECTION --------------------------- SECTION 2.1 OFFICERS. The officers of the Trust shall be a -------- President, a Treasurer, a Secretary, and such other officers as the Trustees may from time to time elect. It shall not be necessary for any Trustee or other officer to be a holder of Shares in the Trust. SECTION 2.2 ELECTION OF OFFICERS. Two or more offices may be held -------------------- by a single person. Subject to the provisions of Section 2.3 hereof, the officers shall hold office until their successors are chosen and qualified and serve at the pleasure of the Trustees. SECTION 2.3 RESIGNATIONS. Any officer of the Trust may resign by ------------ filing a written resignation with the President, the Secretary or the Trustees, which resignation shall take effect on being so filed or at such later time as may be therein specified. ARTICLE III ----------- POWERS AND DUTIES OF OFFICERS AND TRUSTEES ------------------------------------------ SECTION 3.1 CHIEF EXECUTIVE OFFICER. Unless the Trustees have ----------------------- designated the Chairman as the chief executive officer of the Trust, the President shall be the chief executive officer of the Trust and shall preside at all meetings of the Shareholders. SECTION 3.2 TREASURER. The Treasurer shall be the principal --------- financial and accounting officer of the Trust. He shall deliver all funds and securities of the Trust which may come into his hands to such company as the Trustees shall employ as Custodian in accordance with the Trust Instrument and applicable provisions of law. He shall make annual reports regarding the business and condition of the Trust, which reports shall be preserved in Trust records, and he shall furnish such other reports regarding the business and condition of the Trust as the Trustees may from time to time require. The Treasurer shall perform such additional duties as the Trustees or the chief executive officer may from time to time designate. SECTION 3.3 SECRETARY. The Secretary shall record in books kept --------- for the purpose all votes and proceedings of the Trustees and the Shareholders at their respective meetings. He shall have the custody of the seal of the Trust. The Secretary shall perform such additional duties as the Trustees or the chief executive officer may from time to time designate. SECTION 3.4 VICE PRESIDENT. Any Vice President of the Trust shall -------------- perform such duties as the Trustees or the chief executive officer may from time to time designate. At the request or in the absence or disability of the President, the most senior Vice President present and able to act may perform all the duties of the President and, when so acting, shall have all the powers of and be subject to all the restrictions upon the President. SECTION 3.5 ASSISTANT TREASURER. Any Assistant Treasurer of the ------------------- Trust shall perform such duties as the Trustees or the Treasurer may from time to time designate, and, in the absence of the Treasurer, the most senior Assistant Treasurer present and able to act may perform all the duties of the Treasurer. SECTION 3.6 ASSISTANT SECRETARY. Any Assistant Secretary of the ------------------- Trust shall perform such duties as the Trustees or the Secretary may from time to time designate, and, in the absence of the Secretary, the most senior Assistant Secretary present and able to act may perform all the duties of the Secretary. -2- SECTION 3.7 ADDITIONAL OFFICERS. The Trustees from time to time ------------------- may appoint such other officers or agents as they may deem advisable, each of whom shall have such title, hold office for such period, have such authority and perform such duties as the Trustees may determine. SECTION 3.8 SURETY BONDS. The Trustees may require any officer or ------------ agent of the Trust to execute a bond (including, without limitation, any bond required by the Investment Company Act of 1940 (the "1940 Act")) in such sum and with such surety or sureties as the Trustees may determine, conditioned upon the faithful performance of his duties to the Trust including responsibility for negligence and for the accounting of any of the Trust's property, funds or securities that may come into his hands. SECTION 3.9 REMOVAL. Any officer may be removed from office at any ------- time by the Trustees. SECTION 3.10 REMUNERATION. The salaries or other compensation, if ------------ any, of the officers of the Trust shall be fixed from time to time by resolution of the Trustees. SECTION 3.11 QUALIFICATIONS OF DIRECTORS. No person over the age of --------------------------- 75 shall be eligible to serve as a trustee of the Trust. Trustees of the Trust shall retire as trustees when they attain the age of 72. ARTICLE IV ---------- SHAREHOLDERS' MEETINGS ---------------------- SECTION 4.1 NOTICES. Notices of any meeting of the Shareholders ------- shall be given by the Secretary by delivering or mailing, postage prepaid, to each Shareholder entitled to vote at said meeting, written or printed notification of such meeting at least seven days before the meeting, to such address as may be registered with the Trust by the Shareholder. Notice of any Shareholder meeting need not be given to any Shareholder if a written waiver of notice, executed before or after such meeting, is filed with the record of such meeting, or to any Shareholder who shall attend such meeting in person or by proxy. Notice of adjournment of a Shareholders' meeting to another time or place need not be given, if such time and place are announced at the meeting or reasonable notice is given to persons present at the meeting. SECTION 4.2 VOTING-PROXIES. Subject to the provisions of the Trust -------------- Instrument, Shareholders entitled to vote may vote either in person or by proxy, provided that either (i) an instrument authorizing such proxy to act is executed by the -3- Shareholder in writing and dated not more than eleven months before the meeting, unless the instrument specifically provides for a longer period or (ii) the Trustees adopt by resolution an electronic, telephonic, computerized or other alternative to execution of a written instrument authorizing the proxy to act, which authorization is received not more than eleven months before the meeting. Proxies shall be delivered to the Secretary of the Trust or other person responsible for recording the proceedings before being voted. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of such proxy the Trust receives a specific written notice to the contrary from any one of them. Unless otherwise specifically limited by their terms, proxies shall entitle the holder thereof to vote at any adjournment of a meeting. A proxy purporting to be exercised by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. At all meetings of the Shareholders, unless the voting is conducted by inspectors, all questions relating to the qualifications of voters, the validity of proxies, and the acceptance or rejection of votes shall be decided by the Chairman of the meeting. Except as otherwise provided herein or in the Trust Instrument, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Shareholders were shareholders of a Delaware corporation. SECTION 4.3 PLACE OF MEETING. All meetings of the Shareholders ---------------- shall be held at such places as the Trustees may designate. ARTICLE V --------- SHARES OF BENEFICIAL INTEREST ----------------------------- SECTION 5.1 SHARE CERTIFICATE. No certificates certifying the ----------------- ownership of Shares shall be issued except as the Trustees may otherwise authorize. The Trustees may issue certificates to a Shareholder of any Series or Class thereof for any purpose and the issuance of a certificate to one or more Shareholders shall not require the issuance of certificates generally. In the event that the Trustees authorize the issuance of Share certificates, such certificate shall be in the form prescribed from time to time by the Trustees and shall be signed by the President or a Vice President and by the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary. Such signatures may be facsimiles if the certificate is signed by a transfer or shareholder services agent or by a registrar, other than a Trustee, officer or employee of the Trust. In case any -4- officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Trust with the same effect as if he or she were such officer at the time of its issue. SECTION 5.2 LOSS OF CERTIFICATE. In case of the alleged loss or ------------------- destruction or the mutilation of a Share certificate, a duplicate certificate may be issued in place thereof, upon such terms as the Trustees may prescribe. SECTION 5.3 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The ------------------------------------------ Trustees may at any time discontinue the issuance of Share certificates and may, by written notice to each Shareholder, require the surrender of Share certificates to the Trust for cancellation. Such surrender and cancellation shall not affect the ownership of Shares in the Trust. ARTICLE VI ---------- INSPECTION OF BOOKS ------------------- The Trustees shall from time to time determine whether and to what extent, and at what times and places, and under what conditions and regulations the accounts and books of the Trust or any of them shall be open to the inspection of the Shareholders; and no Shareholder shall have any right to inspect any account or book or document of the Trust except as conferred by law or otherwise by the Trustees. ARTICLE VII ----------- AMENDMENTS ---------- These By-laws may be amended from time to time by the Trustees. ARTICLE VIII ------------ HEADINGS -------- Headings are placed in these By-laws for convenience of reference only and, in case of any conflict, the text of these By-laws rather than the headings shall control. -5- EX-99.D 5 ADVISORY AGREEMENT ADVISORY AGREEMENT AGREEMENT made as of February __, 1999 between PROVIDENT INSTITUTIONAL FUNDS, a Delaware business trust (the "Trust"), and BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION, a Delaware corporation (the "Investment Adviser"), registered as an investment adviser under the Investment Advisers Act of 1940. WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940 (the "1940 Act") and presently offers shares representing interests in ten separate investment portfolios; and WHEREAS, the Trust desires to retain the Investment Adviser to render investment advisory services to the Trust, and the Investment Adviser is willing to so render such services; NOW, THEREFORE, this Agreement WITNESSETH: In consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. APPOINTMENT. ----------- (a) The Trust hereby appoints the Investment Adviser to act as investment adviser to the following portfolios of the Trust: TempFund, TempCash, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund, MuniFund, MuniCash, California Money Fund and New York Money Fund (each a "Portfolio," and collectively, the "Portfolios") for the period and on the terms set forth in this Agreement. The Investment Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. (b) In the event that the Trust establishes one or more portfolios other than the Portfolios with respect to which it desires to retain the Investment Adviser to act as investment adviser hereunder, the Trust shall notify the Investment Adviser in writing. If the Investment Adviser is willing to render such services it shall notify the Trust in writing whereupon, subject to such shareholder approval as may be required pursuant to Paragraph 9 hereof, such portfolio shall become a Portfolio hereunder and the compensation payable by such new Portfolio to the Investment Adviser will be as agreed in writing at the time. 2. MANAGEMENT. Subject to the supervision of the Board of Trustees ---------- of the Trust, the Investment Adviser will provide a continuous investment program for each of the Portfolios, including investment research and management with respect to all securities, investments, cash and cash equivalents in the Portfolios. The Investment Adviser will determine from time to time what securities and other investments will be purchased, retained or sold by the Trust for each of its Portfolios. The Investment Adviser will provide the services rendered by it hereunder in accordance with the investment objective and policies of each of the Portfolios as stated in their respective Prospectuses. The Investment Adviser further agrees that it: (a) will conform with all applicable Rules and Regulations of the Securities and Exchange Commission (herein called the "Rules"), and will in addition conduct its activities under this Agreement in accordance with all other applicable laws; (b) will maintain all books and records with respect to the securities transactions of the Portfolios, keep their respective books of account and will render to the Trust's Board of Trustees such periodic and special reports as the Board may request; and (c) will treat confidentiality and as proprietary information of the Trust all records and other information relative to the Trust and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Trust which approval shall not be unreasonably withheld and may not be withheld where the Investment Adviser may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Trust. 3. SERVICES NOT EXCLUSIVE. The investment management services ---------------------- rendered by the Investment Adviser hereunder are not to be deemed exclusive, and the Investment Adviser shall be free to render similar services to others so long as its services under this Agreement are not impaired thereby. 4. SUB-ADVISER. It is understood that the Investment Adviser may, ----------- if it deems it desirable, from time to time employ such person or persons as the Investment Adviser believes to be capable of assisting in the performance of its obligations under this Agreement (each a "Sub-Adviser") and to terminate the services of any such person; provided, however, that the compensation of such person or persons shall be paid by the Investment Adviser and that the Investment Adviser shall be as fully responsible to the Trust for the acts and omissions of any -2- such person as it is for its own acts and omissions; and provided further, that the retention of any Sub-Adviser shall be approved by the trustees and shareholders to the extent required by the 1940 Act. 5. BOOKS AND RECORDS. In compliance with the requirements of Rule ----------------- 31a-3 of the Rules, the Investment Adviser hereby agrees that all records which it maintains for each Portfolio are the property of the Trust and further agrees to surrender promptly to the Trust any of such records upon the Trust's request. The Investment Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 the records required to be maintained by Rule 31a-1 of the Rules. 6. EXPENSES. During the term of this Agreement, the Investment -------- Adviser will pay all expenses incurred by it in connection with its activities under this Agreement other than the cost of (including brokerage commissions, if any) securities purchased for the Portfolios. In addition, if the expenses borne by any Portfolio in any fiscal year exceed the applicable expense limitations imposed by the securities regulations of any state in which the Shares are registered or qualified for sale to the public, the Investment Adviser shall reimburse such Portfolio for one-half of any excess up to the amount of the fees payable by the particular Portfolio to it during such fiscal year pursuant to Paragraph 7 hereof; provided, however, -------- ------- that notwithstanding the foregoing, the Investment Adviser shall reimburse such Portfolio for one-half of such excess expenses regardless of the amount of such fees payable to it during such fiscal year to the extent that the securities regulations of any state in which the Shares are registered or qualified for sale so require. 7. COMPENSATION. For the services provided and the expenses assumed ------------ pursuant to this Agreement, the Trust, on behalf of each Portfolio, will pay the Investment Adviser and the Investment Adviser will accept as full compensation therefor a fee, computed daily and payable monthly, as described in the fee schedule attached as Appendix A. The fee attributable to each Portfolio shall be the several (and not joint or joint and several) obligation of each such Portfolio. 8. LIMITATION OF LIABILITY OF THE INVESTMENT ADVISER. The ------------------------------------------------- Investment Adviser shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which this Agreement relates, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Adviser in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. -3- 9. DURATION AND TERMINATION. This Agreement shall become effective ------------------------ with respect to a Portfolio upon approval of this Agreement by vote of a majority of the outstanding voting securities of such Portfolio and, unless sooner terminated as provided herein, shall continue with respect to such Portfolio until March 31, 2000. Thereafter, if not terminated, this Agreement shall continue with respect to a Portfolio for successive annual periods ending on March 31, provided such continuance is specifically approved at least -------- annually (a) by the vote of a majority of those members of the Board of Trustees of the Trust who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of such Portfolio; provided, however, that -------- ------- this Agreement may be terminated with respect to a Portfolio by the Trust at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by vote of a majority of the outstanding voting securities of such Portfolio, on 60 days' written notice to the Investment Adviser, or by the Investment Adviser at any time, without payment of any penalty, on 90 days' written notice to the Trust. This Agreement will immediately terminate in the event of its assignment. (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meaning as such terms have in the 1940 Act.) 10. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may --------------------------- be changed, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought, and no amendment of this Agreement affecting a Portfolio shall be effective until approved by vote of the holders of a majority of the outstanding voting securities of such Portfolio. 11. MISCELLANEOUS. The captions in this Agreement are included for ------------- convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and shall be governed by Delaware law. 12. LIMITATION OF LIABILITY. Reference is hereby made to the ----------------------- Declaration of Trust which contains certain provisions limiting the liability of the Board of Trustees, shareholders, officers, employees and agents of the Trust. The obligations of the Trust created hereunder are not personally binding upon, nor shall resort be had to the property of, any of the Board of Trustees, shareholders, officers, employees or agents of the -4- Trust. In addition, only the Trust property included in the Portfolio which incurs any liability shall be used to pay such liability. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written. PROVIDENT INSTITUTIONAL FUNDS Attest: __________________________________ _________________________________ By: By: Title: Title: BLACKROCK INSTITUTIONAL MANAGEMENT CORPORATION Attest: __________________________________ _________________________________ By: By: Title: Title: -5- APPENDIX A FEE SCHEDULE TEMPFUND. - -------- For the services provided and the expenses assumed pursuant to this Advisory Agreement with respect to TempFund, the Trust will pay the Investment Adviser from the assets of TempFund and the Investment Adviser will accept as full compensation therefor a fee, computed daily and payable monthly at the following annual rate: .175% of the first $1 billion of TempFund's average net assets, plus .15% of its next $1 billion of its average net assets, plus .125% of its next $1 billion of its average net assets, plus .1% of its next $1 billion of average net assets, plus .095% of its next $1 billion of average its average net assets, plus .09% of the next $1 billion of its average net assets, plus .08% of its next $1 billion of its average net assets, plus .075% of the next $1 billion of its average net assets, plus .07% of its average net assets over $8 billion. The fee will be reduced by one-half of the amount necessary to ensure that the ordinary operating expenses (excluding interest, taxes, brokerage, payments to Service Organizations pursuant to Servicing Agreements and extraordinary expenses) of TempFund do not exceed .45% of TempFund's average net assets for any fiscal year. TEMPCASH AND MUNICASH. - --------------------- For the services provided and the expenses assumed pursuant to this Advisory Agreement with respect to TempCash and MuniCash, the Trust will pay the Investment Adviser from the assets belonging to either TempCash or MuniCash, as applicable, and the Investment Adviser will accept as full compensation therefor a fee, computed daily and payable monthly, at the following rate: .175% of the first $1 billion of such Portfolio's average net assets, plus .15% of its next $1 billion of average net assets, plus .125% of its next $1 billion of average net assets, plus .1% of its next $1 billion of average net assets, plus .095% of its next $1 billion of average net assets, plus .09% of its next $1 billion of average net assets, plus .085% of its next $1 billion of average net assets, plus .08% of its average net assets over $7 billion. FEDFUND, T-FUND, FEDERAL TRUST FUND AND TREASURY TRUST FUND. - ----------------------------------------------------------- For the services provided and the expenses assumed pursuant to the Advisory Agreement with respect to FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund, the Trust will pay the Investment Adviser from the assets belonging to FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund (in proportion to each such Portfolio's average net assets) and the Investment Adviser will accept as full compensation therefor a fee, computed -6- daily and payable monthly, at the following annual rate: .175% of the first $1 billion of the combined average net assets of FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund; plus .150% of its next $1 billion of their combined average net assets, plus .125% of its next $1 billion of their combined average net assets, plus .100% of the next $1 billion of their combined average net assets, plus .095% of the next $1 billion of their combined average net assets, plus .090% of the next $1 billion of their combined average net assets, plus .085% of the next $1 billion of their combined average net assets, plus .080% of their combined average net assets over $7 billion. The fee will be reduced by one-half of the amount necessary to ensure that the ordinary operating expenses (excluding interest, taxes, brokerage, payments to Service Organizations pursuant to Servicing Agreements and extraordinary expenses) of FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund do not exceed .45% of each such Portfolio's average net assets for any fiscal year. MUNI FUND. - --------- For the services provided and the expenses assumed pursuant to this Advisory Agreement with respect to MuniFund, the Trust will pay the Investment Adviser from the assets belonging to MuniFund and the Investment Adviser will accept as full compensation therefor a fee, computed daily and payable monthly, at the following annual rate: .175% of the first $1 billion of MuniFund's average net assets, plus .15% of its next $1 billion of average net assets, plus .125% of its next $1 billion of average net assets, plus .1% of its next $1 billion of average net assets, plus .095% of its next $1 billion of average net assets, plus .09% of its next $1 billion of average net assets, plus .085% of its next $1 billion of average net assets, plus .08% of its average net assets over $7 billion. The fee will be reduced by one-half of the amount necessary to ensure that the ordinary operating expenses (excluding interest, taxes, brokerage, payments to Service Organizations pursuant to Servicing Agreements and extraordinary expenses) of MuniFund do not exceed .45% of MuniFund's average net assets for any fiscal year. CALIFORNIA MONEY FUND AND NEW YORK MONEY FUND. - --------------------------------------------- For the services provided and the expenses assumed pursuant to this Advisory Agreement, California Money Fund and New York Money Fund, as applicable, will pay the Investment Adviser and the Investment Adviser will accept as full compensation therefor a fee, computed daily and payable monthly, at an annual rate of .20% of such Portfolio's average net assets. -7- EX-99.E 6 DISTRIBUTION AGREEMENT PROVIDENT INSTITUTIONAL FUNDS DISTRIBUTION AGREEMENT ---------------------- Agreement dated February __, 1999 between PROVIDENT INSTITUTIONAL FUNDS, a Delaware business trust, (the "Company"), and PROVIDENT DISTRIBUTORS, INC., a Delaware corporation (the "Distributor"). WHEREAS, the Company is an open-end, diversified management investment company and is so registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Company desires to retain the Distributor as its distributor to provide for the sale and distribution of each class and series of shares ("shares") in each of the Company's investment portfolios (individually, a "Fund," collectively, the "Funds") as listed on Appendix A (as such Appendix may, from time to time, be supplemented (or amended)), and the Distributor is willing to render such services; NOW, THEREFORE, in consideration of the premises and mutual covenants set forth and intending to be legally bound, the parties hereto agree as follows: 1. APPOINTMENT OF DISTRIBUTOR. The Company hereby appoints the -------------------------- Distributor as distributor of each class and series of shares in each of the Company's Funds on the terms and for the period set forth in this Agreement. The Distributor hereby accepts such appointment and agrees to render the services and duties set forth in Section 2 below. In the event that the Company establishes additional classes or investment portfolios other than the Funds listed on Appendix A with respect to which it desires to retain the Distributor to act as distributor hereunder, the Company shall notify the Distributor, whereupon such Appendix A shall be supplemented (or amended) and such portfolio shall become a Fund hereunder and shall be subject to the provisions of this Agreement to the same extent as the Funds (except to the extent that said provisions may be modified in writing by the Company and Distributor at the time). 2. SERVICES AND DUTIES. The Distributor enters into the following ------------------- covenants with respect to its services and duties: a. The Distributor agrees to sell, as agent, from time to time during the term of this Agreement, shares upon the terms and at the current offering price as described in the Prospectuses. The Distributor will act only in its own behalf as principal in making agreements with selected dealers. No brokerdealer or other person which enters into a selling or servicing agreement with the Distributor shall be authorized to act as agent for the Company or its Funds in connection with the offering or sale of shares to the public or otherwise. The Distributor shall use its best efforts to sell shares of each class or series of each of the Funds but shall not be obligated to sell any certain number of shares. b. The Distributor shall prepare or review, provide advice with respect to, and file with the federal and state agencies or other organization as required by federal, state, or other applicable laws and regulations, all sales literature (advertisements, brochures and shareholder communications) for each of the Funds and any class or series thereof. c. In performing all of its services and duties as Distributor, the Distributor will act in conformity with the Declaration of Trust, By-Laws, Prospectuses and resolutions and other instructions of the Company's Board of Trustees and will comply with the requirements of the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, the 1940 Act and all other applicable federal or state law. d. The Distributor will bear the cost of (i) printing and distributing any Prospectus (including any supplement thereto) to persons who are not shareholders, and (ii) preparing, printing and distributing any literature, advertisement or material which is primarily intended to result in the sale of shares; provided, however, that the Distributor shall not be -------- ------- obligated to bear the expenses incurred by the Company in connection with the preparation and printing of any amendment to any Registration Statement or Prospectus necessary for the continued effective registration of the shares under the 1933 Act and state securities laws and the distribution of any such document to existing shareholders of the Company's Funds. e. The Company shall have the right to suspend the sale of shares at any time in response to conditions in the securities markets or otherwise, and to suspend the redemption of shares of any Fund at any time permitted by the 1940 Act or the rules and regulations of the Commission ("Rules"). f. The Company reserves the right to reject any order for shares but will not do so arbitrarily, or without reasonable cause. 3. LIMITATIONS OF LIABILITY. The Distributor shall not be liable for ------------------------ any error of judgment or mistake of law or for any loss suffered by the Company in connection with the matters to which this Agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard by it of its obligations and duties under this Agreement. 4. PROPRIETARY AND CONFIDENTIAL INFORMATION. The Distributor agrees ---------------------------------------- on behalf of itself and its employees to treat confidentially and as proprietary information of the Company all -2- records and other information relative to the Company and its Funds and prior, present or potential shareholders, and not to use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where the Distributor may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Company. 5. INDEMNIFICATION. --------------- a. The Company represents and warrants to the Distributor that the Registration Statement contains, and that the Prospectuses at all times will contain, all statements required by the 1933 Act and the Rules of the Commission, will in all material respects conform to the applicable requirements of the 1933 Act and the Rules and will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty in this Section 5 shall apply to statements or omissions made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Distributor or either of the Company's co-administrators expressly for use in the Registration Statement or Prospectuses. b. The Company on behalf of each Fund agrees that each Fund will indemnify, defend and hold harmless the Distributor, its several officers, and directors, and any person who controls the Distributor within the meaning of Section 15 of the 1933 Act, from and against any losses, claims, damages or liabilities, joint or several, to which the Distributor, its several officers, and directors, and any person who controls the Distributor within the meaning of Section 15 of the 1933 Act, may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Prospectuses or in any application or other document executed by or on behalf of the Company with respect to such Fund or are based upon information furnished by or on behalf of the Company with respect to such Fund filed in any state in order to qualify the shares under the securities or blue sky laws thereof ("Blue Sky application") or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Distributor, its several officers, and directors, and any person who controls the Distributor within the meaning of Section 15 of the 1933 Act, for any legal or other expenses -3- reasonably incurred by the Distributor, its several officers, and directors, and any person who controls the Distributor within the meaning of Section 15 of the 1933 Act, in investigating, defending or preparing to defend any such action, proceeding or claim; provided, however, that the Company shall not be liable in -------- ------- any case to the extent that such loss, claim, damage or liability arises out of, or is based upon, any untrue statement, alleged untrue statement, or omission or alleged omission made in the Registration Statement, the Prospectus or any Blue Sky application with respect to such Fund in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Distributor or either of the Company's coadministrators specifically for inclusion therein or arising out of the failure of the Distributor to deliver a current Prospectus. c. The Company on behalf of each Fund shall not indemnify any person pursuant to this Section 5 unless the court or other body before which the proceeding was brought has rendered a final decision on the merits that such person was not liable by reason of his or her willful misfeasance, bad faith or gross negligence in the performance of his or her duties, or his or her reckless disregard of any obligations and duties, under this Agreement ("disabling conduct") or, in the absence of such a decision, a reasonable determination (based upon a review of the facts) that such person was not liable by reason of disabling conduct has been made by the vote of a majority of a quorum of the trustees of the Company who are neither "interested parties" (as defined in the 1940 Act) nor parties to the proceeding, or by independent legal counsel in a written opinion. d. The Distributor will indemnify and hold harmless the Company and each of its Funds and its several officers and trustees, and any person who controls the Company within the meaning of Section 15 of the 1933 Act, from and against any losses, claims, damages or liabilities, joint or several, to which any of them may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus or any Blue Sky application, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, which statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company or any of its several officers and trustees by or on behalf of the Distributor or either of the Company's co- administrators specifically for inclusion therein, and will reimburse the Company and its several officers, trustees and such controlling persons for any legal or other expenses reasonably incurred by -4- any of them in investigating, defending or preparing to defend any such action, proceeding or claim. e. The obligations of each Fund under this Section 5 shall be the several (and not the joint or joint and several) obligation of each Fund. 6. DURATION AND TERMINATION. This Agreement shall become effective ------------------------ upon its execution as of the date first written above and, unless sooner terminated as provided herein, shall continue until ____________________, 2000. Thereafter, if not terminated, this Agreement shall continue automatically for successive terms of one year, provided that such continuance is specifically approved at least annually (a) by a vote of a majority of those members of the Company's Board of Trustees who are not parties to this Agreement or "interested persons" of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Company's Board of Trustees or by vote of a "majority of the outstanding voting securities" of the Company; provided, however, that this Agreement may be terminated by the Company at any - -------- time, without the payment of any penalty, by vote of a majority of the entire Board of Trustees or by a vote of a "majority of the outstanding voting securities" of the Company on 60-days' written notice to the Distributor, or by the Distributor at any time, without the payment of any penalty, on 90-days' written notice to the Company. This Agreement will automatically and immediately terminate in the event of its "assignment." (As used in this Agreement, the terms "majority of the outstanding voting securities," "interested person" and "assignment" shall have the same meanings as such terms have in the 1940 Act.) 7. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may --------------------------- be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the patty against which an enforcement of the change, waiver, discharge or termination is sought. 8. NOTICES. Notices of any kind to be given to the Company hereunder ------- by the Distributor shall be in writing and shall be duly given if mailed or delivered to the Company at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, Attention: ________________________, with a copy to Philadelphia National Bank Building, 1345 Chestnut Street, Philadelphia Pennsylvania 19107-3496, Attention: W. Bruce McConnel, III, Secretary, or at such other address or to such individual as shall be so specified by the Company to the Distributor. Notices of any kind to be given to the Distributor hereunder by the Company shall be in writing and shall be duly given if mailed or delivered to Provident Distributors, Inc., Four Falls Corporate Center, 6/th/ Floor, West Conshohocken, PA 19428, Attention: Monroe J. Haegele or at such other address or -5- to such other individual as shall be so specified by the Distributor to the Company. 9. MISCELLANEOUS. The captions in this Agreement are included for ------------- convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. 10. COUNTERPARTS. This Agreement may be executed in counterparts, ------------ all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written. PROVIDENT INSTITUTIONAL FUNDS _______________________________ By: Title: PROVIDENT DISTRIBUTORS, INC. _______________________________ By: Title: -6- APPENDIX A TO THE DISTRIBUTION AGREEMENT BETWEEN PROVIDENT INSTITUTIONAL FUNDS AND PROVIDENT DISTRIBUTORS, INC. _______________________________________________________________________ TempFund TempCash FedFund T-Fund Federal Trust Fund Treasury Trust Fund MuniFund MuniCash California Money Fund New York Money Fund -7- EX-99.H3 7 FORM OF SHARE PURCHASE AGREEMENT FORM OF SHARE PURCHASE AGREEMENT Provident Institutional Funds, a Delaware business trust (the "Trust") and Temporary Investment Fund, Inc., a Maryland corporation (the "Company") hereby agree with each other as follows: 1. The Trust hereby offers the Company and the Company hereby purchases one share (the "Share") each of the Trust's TempFund and TempCash portfolios for $1 per share. The Trust hereby acknowledges receipt from the Company of funds in the total amount of $2 in full payment for such Shares. 2. The Company represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Agreement as of the ______ day of February, 1999. PROVIDENT INSTITUTIONAL FUNDS ------------------------------------------------ By: Title: TEMPORARY INVESTMENT FUND, INC. ------------------------------------------------ By: Title: FORM OF SHARE PURCHASE AGREEMENT Provident Institutional Funds, a Delaware business trust (the "Trust") and Trust for Federal Securities, a Pennsylvania business trust(the "Company") hereby agree with each other as follows: 1. The Trust hereby offers the Company and the Company hereby purchases one share (the "Share") each of the Trust's FedFund, T-Fund, Federal Trust Fund and Treasury Trust Fund portfolios for $1 per share. The Trust hereby acknowledges receipt from the Company of funds in the total amount of $4 in full payment for such Shares. 2. The Company represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Agreement as of the ______ day of February, 1999. PROVIDENT INSTITUTIONAL FUNDS ------------------------------------------- By: Title: TRUST FOR FEDERAL SECURITIES ------------------------------------------- By: Title: FORM OF SHARE PURCHASE AGREEMENT Provident Institutional Funds, a Delaware business trust (the "Trust") and Municipal Fund for Temporary Investment, a Pennsylvania common law trust (the "Company") hereby agree with each other as follows: 1. The Trust hereby offers the Company and the Company hereby purchases one share (the "Share") each of the Trust's MuniFund and MuniCash portfolios for $1 per share. The Trust hereby acknowledges receipt from the Company of funds in the total amount of $2 in full payment for such Shares. 2. The Company represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Agreement as of the ______ day of February, 1999. PROVIDENT INSTITUTIONAL FUNDS ------------------------------------------ By: Title: MUNICIPAL FUND FOR TEMPORARY INVESTMENT ------------------------------------------ By: Title: FORM OF SHARE PURCHASE AGREEMENT Provident Institutional Funds, a Delaware business trust (the "Trust") and Municipal Fund for California Investors, Inc., a Maryland corporation (the "Company") hereby agree with each other as follows: 1. The Trust hereby offers the Company and the Company hereby purchases one share (the "Share") of the Trust's California Money Fund portfolio for $1 per share. The Trust hereby acknowledges receipt from the Company of funds in the total amount of $1 in full payment for such Shares. 2. The Company represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Agreement as of the ______ day of February, 1999. PROVIDENT INSTITUTIONAL FUNDS ------------------------------------------ By: Title: MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC. ------------------------------------------ By: Title: FORM OF SHARE PURCHASE AGREEMENT Provident Institutional Funds, a Delaware business trust (the "Trust") and Municipal Fund for New York Investors, Inc., a Maryland corporation (the "Company") hereby agree with each other as follows: 1. The Trust hereby offers the Company and the Company hereby purchases one share (the "Share") each of the Trust's New York Money Fund portfolio for $1 per share. The Trust hereby acknowledges receipt from the Company of funds in the total amount of $1 in full payment for such Shares. 2. The Company represents and warrants to the Trust that the Shares are being acquired for investment purposes and not with a view to the distribution thereof. IN AGREEMENT WHEREOF, and intending to be legally bound hereby, the parties hereto have executed this Agreement as of the ______ day of February, 1999. PROVIDENT INSTITUTIONAL FUNDS ------------------------------------------- By: Title: MUNICIPAL FUND FOR NEW YORK INVESTORS, INC. ------------------------------------------- By: Title: EX-99.I 8 OPINION AND CONSENT OF DRINKER BIDDEL & REATH LLP LAW OFFICES DRINKER BIDDLE & REATH LLP PHILADELPHIA NATIONAL BANK BUILDING 1345 CHESTNUT STREET PHILADELPHIA, PA 19107-3196 TELEPHONE: (215) 988-2700 FAX: (215) 988-2757 February 2, 1999 Provident Institutional Funds Bellevue Park Corporate Center 400 Bellevue Parkway Wilmington, DE 19809 Re: Post-Effective Amendment No. 61 to Registration Statement on Form ----------------------------------------------------------------- N-1A for Prudential Institutional Funds (Registration Nos. ---------------------------------------------------------- 2-47015; 811-2354) ------------------ Ladies and Gentlemen: We have acted as counsel to Provident Institutional Funds, a Delaware business trust (the "Trust"), in connection with the preparation and filing with the Securities and Exchange Commission of the Post-Effective Amendment No. 61 to the Trust's Registration Statement on Form N-1A under the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended. The Trust is authorized to issue an unlimited number of shares of beneficial interest (the "Shares"), with no par value. The Board of Trustees of the Trust has the power to create and establish one or more series of Shares and one or more classes of Shares within such series and to classify or reclassify any unissued Shares with respect to such series and classes. We have reviewed the Trust's Agreement and Declaration of Trust, By-Laws, and resolutions adopted by Board of Trustees of the Trust and such other legal and factual matters as we have deemed appropriate. We have assumed that the Shares will be issued against payment therefor as described in the Trust's Prospectuses. This opinion is based exclusively on the Delaware Business Trust Act and the federal law of the United States of America. Currently, the Trust is authorized to offer Shares of the following series and classes within such series: Series and Classes Series and Classes - ------------------ ------------------ Series A (TempFund) Series F (Treasury Trust Fund) Class A Fund Shares Class A Fund Shares Class B Dollar Shares Class B Dollar Shares Series B (TempCash) Series G (MuniFund) Class A Fund Shares Class A Fund Shares Class B Fund Shares Class B Dollar Shares Series C (FedFund) Series H (MuniCash) Class A Fund Shares Class A Fund Shares Class B Dollar Shares Class B Dollar Shares Series D (T-Fund) Series I (California Money Fund) Class A Fund Shares Class A Fund Shares Class B Dollar Shares Class B Dollar Shares Class C Plus Shares Class C Plus Shares Series E (Federal Trust Fund) Series J (New York Money Fund) Class A Fund Shares Class A Fund Shares Class B Dollar Shares Class B Dollar Shares Class C Plus Shares Based on the foregoing, it is our opinion that the Shares of the Trust will be validly issued, fully paid and non-assessable by the Trust, and that the holders of the Shares of the Trust will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the general corporation law of the State of Delaware (except that we express no opinion as to such holders who are also trustees of the Trust). We hereby consent to the filing of this opinion as an exhibit to the Trust's Post-Effective Amendment No. 61 to Registration Statement on Form N-1A. Very truly yours, /S/ Drinker Biddle & Reath -------------------------- DRINKER BIDDLE & REATH LLP -2- EX-99.J1 9 CONSENT OF PRICEWATERHOUSECOOPERS LLP CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference of the following reports in this Post-Effective Amendment No. 61 under the Securities Act of 1933, as amended, to this Registration Statement on Form N-1A (No.2-47015) of the Provident Institutional Funds, Inc.: . Our report dated October 30, 1998 for Temporary Investment Fund, Inc. . Our report dated December 5, 1998 for Trust for Federal Securities . Our report dated March 6, 1998 for Municipal Fund for California Investors, Inc. . Our report dated August 28, 1998 for Municipal Fund for New York Investors, Inc. We also consent to the reference to our Firm under the headings "Auditors" and "Financial Statements" in the Statement of Additional Information. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Philadelphia, Pennsylvania February 1, 1999 EX-99.J2 10 CONSENT OF KPMG LLP INDEPENDENT AUDITORS' CONSENT ----------------------------- To the Trustees Municipal Fund for Temporary Investment: We consent to the use of our report dated January 8, 1999 incorporated by reference herein and to the references to our firm under the heading "Financial Highlights" in the MuniFund and MuniCash Prospectuses and under the heading "Financial Statements" in the Statement of Additional Information in the Registration Statement. /s/ KPMG LLP KPMG LLP Philadelphia, PA February 1, 1999 EX-99.J3 11 CONSENT OF WILLKIE FARR & GALLAGHER CONSENT OF COUNSEL We hereby consent to the use of our name and to the references to our Firm under the caption "Counsel" included in the Statement of Additional Information that is included in Post-Effective Amendment No. 61 to the Registration Statement on Form N-1A under the Securities Act of 1933, as amended, and under the Investment Company Act of 1940, as amended (Nos. 2-47015/811-2354) of Provident Institutional Funds. /s/ Willkie Farr & Gallagher ---------------------------- Willkie Farr & Gallagher January 29, 1999 New York, New York EX-99.J4 12 CONSENT OF O'MEVENY & MEYERS CONSENT OF COUNSEL We hereby consent to the use of our name and to the reference to our firm under the caption "Counsel" in the Statement of Additional Information included in this Post-Effective Amendment No. 61 to the Registration Statement (No. 2-47015) on Form N-1A of Provident Institutional Funds under the Securities Act of 1933 and the Investment Company Act of 1940, respectively. /s/ O'Melveny & Myers LLP ------------------------- O'MELVENY & MYERS LLP Los Angeles, California February 1, 1999 EX-99.M6 13 SHAREHOLDERS SERVICES PLAN PROVIDENT INSTITUTIONAL FUNDS (DOLLAR SHARES) SHAREHOLDERS SERVICES PLAN Section 1. Upon the recommendation of PFPC Inc. ("PFPC" or the ---------- "Administrator"), a co-administrator of Provident Institutional Funds (the "Company"), any officer of the Company is authorized to execute and deliver, in the name and on behalf of the Company, written agreements in substantially the form attached hereto or in any other form duly approved by the Board of Trustees ("Servicing Agreements") with institutional shareholders of record ("Service Organizations") of a series of the Company's shares of beneficial interest ("Dollar Shares") of the TempFund, TempCash, FedFund, T-Fund, Federal Trust Fund, Treasury Trust Fund, MuniFund, MuniCash, California Money Fund and New York Money Fund. Such Servicing Agreements shall require the Service Organizations to provide support services as set forth therein to their customers who beneficially own such Dollar Shares (as described in the Company's respective Prospectuses) in consideration for a fee, computed daily and paid monthly in the manner set forth in the Servicing Agreements, at the annual rate of .25% of the average daily net asset value of the Dollar Shares held by the Service Organizations on behalf of their customers. All expenses incurred by the Company with respect to Dollar Shares of a particular investment portfolio in connection with the Servicing Agreements and the implementation of this Plan shall be borne entirely by the holders of such portfolio's Dollar Shares. Section 2. The Administrator shall monitor the arrangements ---------- pertaining to the Company's Servicing Agreements with Service Organizations in accordance with the terms of the administration agreement with the Company. The Administrator shall not, however, be obliged by this Plan to recommend, and the Company shall not be obliged to execute, any Servicing Agreement with any qualifying Service Organization. Section 3. So long as this Plan is in effect, the Administrator shall ---------- provide to the Company's Board of Trustees, and the trustees shall review, at least quarterly, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made. Section 4. This Plan shall become effective as of January 31, 1999 ---------- upon the approval of the Plan (and the form of Servicing Agreement attached hereto) by a majority of the Board of Trustees, including a majority of the trustees who are not "interested persons" as defined in the Investment Company Act of 1940 (the "Act") of the Company and have no direct or indirect financial interest in the operation of this Plan or in any Servicing Agreements or other agreements related to this Plan (the "Disinterested Trustees"), pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of this Plan (and form of Servicing Agreement). Section 5. Unless sooner terminated, this Plan shall continue until ---------- __________________, 2000, and thereafter shall continue automatically for successive annual periods provided such continuance is approved at least annually in the manner set forth in Section 4. Section 6. This Plan may be amended at any time by the Board of ---------- Trustees, provided that any material amendments of the terms of this Plan shall become effective only upon the approvals set forth in Section 4. Section 7. This Plan is terminable at any time by vote of a majority ---------- of the Disinterested Trustees. Section 8. While this Plan is in effect, the selection and nomination ---------- of those trustees who are not "interested person" (as defined in the Act) of the Company shall be committed to the discretion of the Disinterested Trustees. Section 9. All persons dealing with the Company or the "Trustees" of ---------- the Company must look solely to the Company's property for the enforcement of any claims against the Company, as neither the trustees, officers, agents nor shareholders assume any personal liability for obligations entered into on the Company's behalf. -2- EX-99.M1 14 AMENDED DISTRIBUTION PLAN PROVIDENT INSTITUTIONAL FUNDS (the "Trust") AMENDED DISTRIBUTION PLAN ------------------------- This Distribution Plan (the "Plan") is adopted in accordance with Rule 12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the "1940 Act"), by the Trust, with respect to the Plus Shares (the "Shares") of TempFund, T-Fund, MuniFund, California Money Fund and New York Money Fund (each a "Series") of the Trust as amended from time to time, subject to the terms and conditions set forth herein. Section 1. Distribution Fees ----------------- (a) Pursuant to the Plan, the Trust may pay to the Distributor of its shares, Provident Distributors, Inc., or any entity that may in the future act as a distributor for its shares (collectively, the "Distributor"), with respect to and at the expense of the Shares of a Series, a fee for distribution and sales support services, as applicable, and as more fully described in Section 1(b) hereof (the "Distribution Fee"), such fee in the aggregate to be at the annual rate of .25% of the Plus Shares of TempFund, T-Fund and MuniFund, and in the aggregate to be at the annual rate of up to .40% of the Plus Shares of California Money Fund and New York Money Fund. (b) Payments of the Distribution Fee under the Plan shall be used primarily to compensate the Distributor for distribution services and sales support services provided in connection with the offering and sale of the Shares of a Series, and to reimburse the Distributor for related expenses incurred, including payments by the Distributor to compensate or reimburse brokers, dealers, other financial institutions or other industry professionals (collectively, "Selling Agents"), for sales support services provided and related expenses incurred by such Selling Agents. The services and expenses described in this Section l(b) may include, but are not limited to, the following: (i) the development, formulation and implementation of marketing and promotional activities, including direct mail promotions and television, radio, magazine, newspaper, electronic and other mass media advertising; (ii) the preparation, printing and distribution of prospectuses and reports (other than prospectuses or reports used for regulatory purposes or for distribution to existing shareholders); (iii) the preparation, printing and distribution of sales literature; (iv) expenditures for sales or distribution support services such as for telephone facilities and in-house telemarketing; (v) preparation of information, analyses and opinions with respect to marketing and promotional activities; (vi) commissions, incentive compensation or other compensation to, and expenses of, account executives or other employees of the Distributor or Selling Agents, attributable to distribution or sales support activities, as applicable, including interest expenses and other costs associated with financing of such commissions, compensation and expenses; (vii) travel, equipment, printing, delivery and mailing costs, overhead and other office expenses of the Distributor or Selling Agents, attributable to distribution or sales support activities, as applicable; (viii) the costs of administering the Plan; (ix) expenses of organizing and conducting sales seminars; and (x) any other costs and expenses relating to distribution or sales support activities. (c) Payments of the Distribution Fee on behalf of a Series must be in consideration of services rendered for or on behalf of a Series. However, joint distribution or sales support financing with respect to the Shares of a Series (which financing may also involve other investment portfolios or companies that are affiliated persons of such a person, or affiliated persons of the Distributor) shall be permitted in accordance with applicable law. Payments of the Distribution Fee under Section 1 of the Plan may be made without regard to expenses actually incurred. (d) It is acknowledged that the Distributor and other parties that receive fees from the Trust may each make payments without limitation as to amount relating to distribution or sales support activities, as applicable, in connection with the Shares of a Series out of its past profits or any additional sources other than the Distribution Fee which are available to it. Section 2. Calculation and Payment of Fees ------------------------------- The amount of the Distribution Fee payable with respect to the Shares of a Series shall be calculated daily and paid monthly, at the applicable annual rates of .25% of TempFund, T-Fund and MuniFund, and up to .40% for California Money Fund and New York Money Fund. The Distribution Fee shall be calculated and paid separately for the Shares of each Series. Section 3. Approval of Plan ---------------- The Plan will become effective immediately upon its approval by (a) a majority of the Board of Trustees, including a majority of the trustees who are not "interested persons" (as defined in the Act) of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements entered into in connection with the Plan, pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of the Plan, and (b) a majority of the outstanding Shares of a Series. -2- Section 4. Continuance of the Plan ----------------------- The Plan will continue in effect for so long as its continuance is specifically approved at least annually by the Trust's Board of Trustees in the manner described in Section 3 above. Section 5. Additional Classes and Funds ---------------------------- The Plan shall become effective with respect to classes of shares of other Series of the Trust upon obtaining the requisite approvals with respect to such classes of a Series in accordance with Section 3 above. Section 6. Termination ----------- The Plan may be terminated at any time without penalty at any time by (a) a vote of a majority of the Trustees who are not "interested persons" (as defined in the Act) of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements entered into in connection with the Plan, or (b) a vote of a majority of the outstanding Shares of a Series. Section 7. Amendments ---------- The Plan may not be amended so as to increase materially the amount of the Distribution Fee described in Section 1 above unless the amendment is approved by a vote of at least a majority of the outstanding Shares of a Series and otherwise complies with Rule 18f-3(e)(2) under the Act or any successor provision as in effect at the time of such amendment. In addition, no material amendment to the Plan may be made unless approved by the Trust's Board of Trustees in the manner described in Section 3 above. Section 8. Selection of Certain Trustees ----------------------------- While the Plan is in effect, the selection and nomination of the Trust's Trustees who are not "interested persons" of the Trust (as defined in the Act) will be committed to the discretion of the Trustees then in office who are not "interested persons" (as so defined) of the Trust. Section 9. Written Reports --------------- While the Plan is in effect, the Trust's Board of Trustees shall receive, and the Trustees shall review, at least quarterly, written reports complying with the requirements of the Rule, which set out the amounts expended under the Plan and the purposes for which those expenditures were made. -3- Section 10. Preservation of Materials ------------------------- The Trust will preserve copies of the Plan, any agreement relating to the Plan and any report made pursuant to Section 9 above, for a period of not less than six years (the first two years in an easily accessible place) from the date of the Plan, agreement or report. Section 11. Limitation of Liability ----------------------- The names "Provident Institutional Funds" and "Trustees of Provident Institutional Funds" refer respectively to the trust created and the Trustees, as trustees but not individually or personally, acting from time to time under a Declaration of Trust dated October 21, 1998, which is hereby referred to and a copy of which is on file at the principal office of the Trust. The obligations of "Provident Institutional Funds" entered into in the name or on behalf thereof by any of the Trustees, officers, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders, officers, representatives or agents of the Trust personally, but bind only the Trust Property (as defined in the Declaration of Trust), and all persons dealing with any class of shares of the Trust must look solely to the Trust Property allocated to such shares for the enforcement of any claims against the Trust. Section 12. Miscellaneous ------------- The captions in the Plan are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. -4- DISTRIBUTION AGREEMENT Gentlemen: We wish to enter into this Distribution Agreement ("Agreement") with you concerning the provision of distribution services (and, to the extent provided below, support services) to your Customers ("Customers") who may from time to time beneficially own Plus Shares ("Shares") of TempFund, T-Fund, MuniFund, California Money Fund and/or New York Money Fund offered by Provident Institutional Funds (the "Trust"), of which we are or will be the principal underwriter as defined in the Investment Company Act of 1940 (the "Act") and the exclusive agent for the continuous distribution of said Shares. The terms and conditions of this Agreement are as follows: Section 1. You agree to provide1: (a) reasonable assistance in connection with the distribution of Shares to Customers as requested from time to time by us, which assistance may include forwarding sales literature and advertising provided by us for Customers; and (b) the following support services to Customer who may from time to time acquire and beneficially own Shares: (i) establishing and maintaining accounts and records relating to Customers that invest in Shares; (ii) processing dividend and distribution payments from a Series on behalf of Customers; (iii) providing information periodically to Customers showing their positions in Shares; (iv) arranging for bank wires; (v) responding to Customer inquiries relating to the services performed by you; (vi) responding to routine inquiries from Customers concerning their investments in Shares; (vii) providing subaccounting with respect to Shares beneficially owned by Customers or the information to the Trust necessary for subaccounting; (viii) if required by law, forwarding shareholder communications from a Series (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to Customers; (ix) assisting in processing purchase, exchange and redemption requests from Customers and in placing such orders with our service contractors; (x) assisting Customers in changing dividend options, account designations and addresses; (xi) providing Customers with a service that invests the assets of their accounts in Shares pursuant to specific or pre-authorized instructions; and (xii) providing such other similar services as we may reasonably request to the extent you are permitted to do so under applicable statutes, rules and regulations. - ------------------- 1 Services may be modified or omitted in the particular case and items relettered or renumbered. Section 2. You will provide such office space and equipment, telephone facilities and personnel (which may be any part of the space, equipment and facilities currently used in your business, or any personnel employed by you) as may be reasonably necessary or beneficial in order to provide the aforementioned services and assistance to Customers. Section 3. Neither you nor any of your officers, employees or agents are authorized to make any representations concerning us or the Shares except those contained in a Series's applicable prospectuses and statements of additional information for the Shares, copies of which will be supplied by us to you, or in such supplemental literature or advertising as may be authorized by us in writing. Section 4. For all purposes of this Agreement you will be deemed to be an independent contractor, and will have no authority to act as agent for us or a Series in any matter or in any respect. By your written acceptance of this Agreement, you agree to and do release, indemnify and hold us harmless and a Series harmless from and against any and all direct or indirect liabilities or losses resulting from requests, directions, actions or inactions of or by you or your officers, employees or agents regarding your responsibilities hereunder or the purchase, redemption, transfer or registration of Shares (or orders relating to the same) by or on behalf of Customers. You and your employees will, upon request, be available during normal business hours to consult with us or our designees concerning the performance of your responsibilities under this Agreement. Section 5. In consideration of the services and facilities provided by you hereunder, we will pay to you, and you will accept as full payment therefor, a fee at the annual rate of .___ of 1% of the average daily net asset value of the Shares beneficially owned by your Customers for whom you are the dealer of record or holder of record or with whom you have a servicing relationship (the "Customers' Shares"), which fee will be computed daily and payable monthly. For purposes of determining the fees payable under this Section 5, the average daily net asset value of the Customers' Shares will be computed in the manner specified in the Trust's Registration Statement (as the same is in effect from time to time) in connection with the computation of the net asset value of the particular Shares involved for purposes of purchases and redemptions. By your acceptance of this Agreement, you agree to and do waive such portion of any fee payable to you hereunder to the extent necessary to assure that such fee and other expenses required to be accrued hereunder on any day with respect to the Customers' Shares in any Series that declares its net investment income as a dividend to shareholders on a daily basis do not exceed the income to be accrued by the Series to such Shares on that day. The fee rate stated above may be prospectively increased or -2- decreased by us, in our sole discretion, at any time upon notice to you. Further, we may, in our discretion and without notice, suspend or withdraw the sale of Shares, including the sale of Shares for the account of any Customer or Customers. Section 6. Any person authorized to direct the disposition of monies paid or payable by us pursuant to this Agreement will provide to us and the Trust, and the Trust's trustees will review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. In addition, you will furnish us or our designees with such information as we or they may reasonably request (including, without limitation, periodic certifications confirming the provision to Customers of the services described herein), and will otherwise cooperate with us and our designees (including, without limitation, any auditors designated by us), in connection with the preparation of reports to the Trust's Board of Trustees concerning this Agreement and the monies paid or payable by us pursuant hereto, as well as any other reports or filings that may be required by law. Section 7. We may enter into other similar Agreements with any other person or persons without your consent. Section 8. By your written acceptance of this Agreement, you represent, warrant and agree that the compensation payable to you hereunder, together with any other compensation you receive from Customers for services contemplated by this Agreement, will be disclosed by you to your Customers, will be authorized by your Customers and will not be excessive or unreasonable under the laws and instruments governing your relationships with Customers. In addition, you understand that this Agreement has been entered into pursuant to Rule 12b-1 under the Act, and is subject to the provisions of said Rule, as well as any other applicable rules or regulations promulgated by the Securities and Exchange Commission. Section 9. This Agreement will become effective on the date a fully executed copy of this Agreement is received by us or our designee. Unless sooner terminated, this Agreement will continue for a period of one year, and thereafter will continue automatically for successive annual periods provided such continuance is specifically approved at least annually by the Trust in the manner described in Section 12. This Agreement is terminable with respect to Shares, without penalty, at any time by the Trust (which termination may be by a vote of a majority of the Disinterested Trustees as defined in Section 12 or by vote of the holders of a majority of the outstanding Shares of such Class) or by us or you upon notice to the other party hereto. This Agreement will also terminate automatically in the event of its assignment (as defined in the Act). -3- Section 10. All notices and other communications to either you or us will be duly given if mailed, telegraphed, telexed or transmitted by similar telecommunications device to the appropriate address stated herein, or to such other address as either party shall so provide the other. Section 11. This Agreement will be construed in accordance with the laws of the State of Delaware. Section 12. This Agreement has been approved by vote of a majority of (i) the Trust's Board of Trustees and (ii) those Trustees of the Trust who are not "interested persons" (as defined in the Act) of the Trust and have no direct or indirect financial interest in the operation of the Distribution Plan adopted by the Trust regarding the provision of distribution and support services in connection with the Shares or in any agreement related thereto cast in person at a meeting called for the purpose of voting on such approval ("Disinterested Trustees"). If you agree to be legally bound by the provisions of this Agreement, please sign a copy of this letter where indicated below and promptly return it to us, at the following address: ______________________________________________________________________________ ___________. Very truly yours, PROVIDENT DISTRIBUTORS, INC. Date: ____________________ By:________________________________ (Authorized Officer) Accepted and Agreed to: [Service Organization] Date: ____________________ By:________________________________ (Authorized Officer) Address of Service Organization: ------------------------------------------------ ------------------------------------------------ ------------------------------------------------ -4- EX-99.M3 15 ADMINISTRATION SHAREHOLDER SERVICES PLAN PROVIDENT INSTITUTIONAL FUNDS ADMINISTRATION SHAREHOLDER SERVICES PLAN ---------------------------------------- This Shareholder Services Plan ("the Plan") is adopted by the Trust with respect to the Administration Shares of TempFund, T-Fund, MuniFund and California Money Fund (each "a Series") of the Trust, as amended from time to time, subject to the terms and conditions set forth herein. Section 1. Upon the recommendation of PFPC Inc. ("PFPC" or the --------- "Co-Administrator"), a co-administrator of Provident Institutional Funds (the "Trust"), any officer of the Trust is authorized to execute and deliver, in the name and on behalf of the Trust, written agreements in substantially the form attached hereto or in any other form duly approved by the Board of Trustees ("Administration Servicing Agreements") with institutional shareholders of record ("Service Organizations") of Administration Shares of a Series of the Trust's shares of beneficial interest, including TempFund, T-Fund, MuniFund, and California Money Fund. Such Servicing Agreements shall require the Service Organizations to provide support services as set forth therein to their customers who beneficially own such Administration Shares (as described in the Trust's respective Prospectuses) in consideration for a fee, computed daily and paid monthly in the manner set forth in the Servicing Agreements, at the annual rate of .10% of the average daily net asset value of the Administration Shares held by the Service Organizations on behalf of their customers. All expenses incurred by the Trust with respect to Administration Shares of a particular investment portfolio in connection with the Servicing Agreements and the implementation of this Plan shall be an expense of the Administration Class of Shares. Section 2. The Co-Administrator shall monitor the arrangements --------- pertaining to the Trust's Administration Servicing Agreements with Service Organizations in accordance with the terms of the Administration Agreement with the Trust. The Co-Administrator shall not, however, be obliged by this Plan to recommend, and the Trust shall not be obliged to execute, any Administration Servicing Agreement with any qualifying Service Organization. Section 3. So long as this Plan is in effect, the --------- Co-Administrator shall provide to the Trust's Board of Trustees, and the trustees shall review, at least quarterly, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made. Section 4. This Plan shall become effective as of January 31, --------- 1999 subject to the approval of the Plan (and the form of Administration Servicing Agreement attached hereto) by a majority of the Board of Trustees, including a majority of the trustees who are not "interested persons" as defined in the Investment Company Act of 1940 (the "Act") of the Trust and have no direct or indirect financial interest in the operation of this Plan or in any Administration Servicing Agreements or other agreements related to this Plan (the "Disinterested Trustees"), pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of this Plan (and form of Servicing Agreement). Section 5. Unless sooner terminated, this Plan shall continue --------- so long as its continuance is specifically approved at least annually in the manner set forth in Section 4. Section 6. This Plan may be amended at any time by the Board --------- of Trustees, provided that any material amendments of the terms of this Plan shall become effective only upon the approvals set forth in Section 4. Section 7. This Plan is terminable at any time by vote of a --------- majority of the Disinterested Trustees. Section 8. The names "Provident Institutional Funds" and --------- "Trustees of Provident Institutional Funds" refer respectively to the trust created and the Trustees, as trustees but not individually or personally, acting from time to time under a Declaration of Trust dated October 21, 1998, which is hereby referred to and a copy of which is on file at the principal office of the Trust. The obligations of "Provident Institutional Funds" entered into in the name or on behalf thereof by any of the Trustees, officers, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders, officers, representatives or agents of the Trust personally, but bind only the Trust Property (as defined in the Declaration of Trust), and all persons dealing with any class of shares of the Trust must look solely to the Trust Property allocated to such shares for the enforcement of any claims against the Trust. -2- EX-99.M4 16 CASH RESERVE SHAREHOLDER SERVICES PLAN PROVIDENT INSTITUTIONAL FUNDS CASH RESERVE SHAREHOLDER SERVICES PLAN This Shareholder Services Plan ("the Plan") is adopted by the Trust with respect to the Cash Reserve Shares of TempFund, T-Fund, MuniFund and California Money Fund (each "a Series") of the Trust, as amended from time to time, subject to the terms and conditions set forth herein. Section 1. Upon the recommendation of PFPC Inc. ("PFPC" or the --------- "Co-Administrator"), a co-administrator of Provident Institutional Funds (the "Trust"), any officer of the Trust is authorized to execute and deliver, in the name and on behalf of the Trust, written agreements in substantially the form attached hereto or in any other form duly approved by the Board of Trustees ("Cash Reserve Servicing Agreements") with institutional shareholders of record ("Service Organizations") of Cash Reserve Shares of a Series of the Trust's shares of beneficial interest, including TempFund, T-Fund, MuniFund, and California Money Fund. Such Cash Reserve Servicing Agreements shall require the Service Organizations to provide support services as set forth therein to their customers who beneficially own such Cash Reserve Shares (as described in the Trust's respective Prospectuses) in consideration for a fee, computed daily and paid monthly in the manner, and pursuant to the allocation, set forth in the Cash Reserve Servicing Agreements, at the annual rate of .40% of the average daily net asset value of the Cash Reserve Shares held by the Service Organization on behalf of their customers. All expenses incurred by the Trust with respect to Cash Reserve Shares of a particular investment portfolio in connection with the Cash Reserve Servicing Agreements and the implementation of this Plan shall be expenses of the Cash Reserve Class of Shares. Section 2. The Co-Administrator shall monitor the arrangements --------- pertaining to the Trust's Cash Reserve Servicing Agreements with Service Organizations in accordance with the terms of the Administration Agreement with the Trust. The Co-Administrator shall not, however, be obliged by this Plan to recommend, and the Trust shall not be obliged to execute, any Cash Reserve Servicing Agreement with any qualifying Service Organization. Section 3. So long as this Plan is in effect, the --------- Co-Administrator shall provide to the Trust's Board of Trustees, and the trustees shall review, at least quarterly, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made. Section 4. This Plan shall become effective as of January 31, --------- 1999 subject to the approval of the Plan (and the form of Cash Reserve Servicing Agreement attached hereto) by a majority of the Board of Trustees, including a majority of the trustees who are not "interested persons" as defined in the Investment Company Act of 1940 (the "Act") of the Trust and have no direct or indirect financial interest in the operation of this Plan or in any Cash Reserve Servicing Agreements or other agreements related to this Plan (the "Disinterested Trustees"), pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of this Plan (and form of Servicing Agreement). Section 5. Unless sooner terminated, this Plan shall continue --------- so long as its continuances is specifically approved at least annually in the manner set forth in Section 4. Section 6. This Plan may be amended at any time by the Board --------- of Trustees, provided that any material amendments of the terms of this Plan shall become effective only upon the approvals set forth in Section 4. Section 7. This Plan is terminable at any time by vote of a --------- majority of the Disinterested Trustees. Section 8. The names "Provident Institutional Funds" and --------- "Trustees of Provident Institutional Funds" refer respectively to the trust created and the Trustees, as trustees but not individually or personally, acting from time to time under a Declaration of Trust dated October 21, 1998, which is hereby referred to and a copy of which is on file at the principal office of the Trust. The obligations of "Provident Institutional Funds" entered into in the name or on behalf thereof by any of the Trustees, officers, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders, officers, representatives or agents of the Trust personally, but bind only the Trust Property (as defined in the Declaration of Trust), and all persons dealing with any class of shares of the Trust must look solely to the Trust Property allocated to such shares for the enforcement of any claims against the Trust. -2- EX-99.M5 17 CASH MANAGEMENT SHAREHOLDER SERVICES PLAN PROVIDENT INSTITUTIONAL FUNDS CASH MANAGEMENT SHAREHOLDER SERVICES PLAN ----------------------------------------- This Shareholder Services Plan ("the Plan") is adopted by the Trust with respect to the Cash Reserve Shares of TempFund, T-Fund, MuniFund and California Money Fund (each "a Series") of the Trust as amended from time to time, subject to the terms and conditions set forth herein. Section 1. Upon the recommendation of PFPC Inc. ("PFPC" or the ---------- "Co-Administrator"), a co-administrator of Provident Institutional Funds (the "Trust"), any officer of the Trust is authorized to execute and deliver, in the name and on behalf of the Trust, written agreements in substantially the form attached hereto or in any other form duly approved by the Board of Trustees ("Cash Management Servicing Agreements") with institutional shareholders of record ("Service Organizations") of Cash Management Shares of a Series of the Trust's shares of beneficial interest, including TempFund, T-Fund, MuniFund, and California Money Fund. Such Servicing Agreements shall require the Service Organizations to provide support services as set forth therein to their customers who beneficially own such Cash Management Shares (as described in the Trust's respective Prospectuses) in consideration for a fee, computed daily and paid monthly in the manner, and pursuant to the allocation, set forth in the Servicing Agreements, at the annual rate of .50% of the average daily net asset value of the Cash Management Shares held by the Service Organizations on behalf of their customers. All expenses incurred by the Trust with respect to Cash Management Shares of a particular investment portfolio in connection with the Cash Management Servicing Agreements and the implementation of this Plan shall be expenses of the Cash Management Class of Shares. Section 2. The Co-Administrator shall monitor the arrangements --------- pertaining to the Trust's Servicing Agreements with Service Organizations in accordance with the terms of the Administration agreement with the Trust. The Co-Administrator shall not, however, be obliged by this Plan to recommend, and the Trust shall not be obliged to execute, any Cash Management Shareholder Servicing Agreement with any qualifying Service Organization. Section 3. So long as this Plan is in effect, the --------- Co-Administrator shall provide to the Trust's Board of Trustees, and the trustees shall review, at least quarterly, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made. Section 4. This Plan shall become effective as of January 31, --------- 1999 subject to the approval of the Plan (and the form of Servicing Agreement attached hereto) by a majority of the Board of Trustees, including a majority of the trustees who are not "interested persons" as defined in the Investment Company Act of 1940 (the "Act") of the Trust and have no direct or indirect financial interest in the operation of this Plan or in any Cash Management Servicing Agreements or other agreements related to this Plan (the "Disinterested Trustees"), pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of this Plan (and form of Servicing Agreement). Section 5. Unless sooner terminated, this Plan shall continue --------- so long as its continuance is specifically approved at least annually in the manner set forth in Section 4. Section 6. This Plan may be amended at any time by the Board --------- of Trustees, provided that any material amendments of the terms of this Plan shall become effective only upon the approvals set forth in Section 4. Section 7. This Plan is terminable at any time by vote of a ---------- majority of the Disinterested Trustees. Section 8. The names "Provident Institutional Funds" and --------- "Trustees of Provident Institutional Funds" refer respectively to the trust created and the Trustees, as trustees but not individually or personally, acting from time to time under a Declaration of Trust dated October 21, 1998, which is hereby referred to and a copy of which is on file at the principal office of the Trust. The obligations of "Provident Institutional Funds" entered into in the name or on behalf thereof by any of the Trustees, officers, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders, officers, representatives or agents of the Trust personally, but bind only the Trust Property (as defined in the Declaration of Trust), and all persons dealing with any class of shares of the Trust must look solely to the Trust Property allocated to such shares for the enforcement of any claims against the Trust. -2- EX-99.M 18 SERVICING AGREEMENT PROVIDENT INSTITUTIONAL FUNDS (the "Trust") Bellevue Park Corporate Center 400 Bellevue Parkway Wilmington, Delaware 19809 SERVICING AGREEMENT Ladies and Gentlemen: This is a Servicing Agreement between the Trust and you as the Servicer named below concerning the provision of support services to your customers and customers of affiliated banks (collectively, "customers") who may from time to time beneficially own Administration Shares, Dollar Shares, Cash Reserve Shares and/or Cash Management Shares of one or more of the Trust's investment portfolios. Each Series and Class which are currently being offered are listed on Appendix A and the Class of Shares to which the Agreement (and the related fees) applies are identified by you on Appendix A. As used herein, "you" means the Servicer which has executed this Agreement and "we" (or "us") means the Trust. The terms and conditions of this Servicing Agreement are as follows: Section 1. - ---------- 1(a) Administration Shares. --------------------------- You agree to provide the support services to customers, who may from time to time beneficially own a Series' Administration Shares for a fee, which will not exceed .10% (on an annual basis) of the average daily net asset value of a Series' Administration Shares held by you for the benefit of customers. Such support services may include the following: (i) answering client inquiries regarding account status and history, the manner in which purchases, exchanges and redemptions of shares may be effected and certain other matters pertaining to the clients' investments; and (ii) assisting clients in designating and changing dividend options, account designations and addresses. You will provide to customers a schedule of all fees that you may charge to them relating to the investment of their assets in a Series Administration Shares. 1(b) Dollar Shares. ------------------- You agree to provide the support services to customers who may from time to time beneficially own a Series' Dollar Shares for a fee which will not exceed .25% (on an annual basis) of the average daily net asset value of such Series' Dollar Shares held by you for the benefit of customers. Such support services may include the following: (i) the services listed above under Section 1(a) with respect to Administration Shares, (ii) aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with our distributor; (iii) providing customers with a service that invests the assets of their accounts in shares pursuant to specific or pre-authorized instructions; (iv) processing dividend payment from us on behalf of customers; (v) providing information periodically to customers showing their positions in a Series' shares; (vi) arranging for bank wires; (vii) responding to customer inquires relating to the Series or the services performed by you; (viii) providing sub-accounting with respect to a Series' shares beneficially owned by customers or the information to us necessary for sub-accounting; (ix) if required by law forwarding shareholder communications from us (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers; and (x) providing such other similar services as we may reasonable request to the extent you are permitted to do so under applicable statutes, rules or regulations. You will provide to customers a schedule of all fees that you may charge to them relating to the investment of their assets in a Series' Dollar Shares. 1(c) Cash Reserve Shares. ------------------------- You agree to provide the support services to customers, who may from time to time beneficially own a Series' Cash Reserve Shares, for a fee which will not exceed .40% (on an annual basis) of the average daily net asset value of a Series' Cash Reserve Shares held by you for the benefit of customers. An initial .20% (on an annual basis) of the average daily net asset value of such Shares will be paid to you for providing the following Services: (i) providing customers with a service that invests the assets of their account in Cash Reserve Shares, (ii) responding to customer inquiries related to the services performed by you, (iii) answering shareholder inquiries regarding account status and history, the manner in which purchases, exchanges and redemption of shares may be effected and certain other matters pertaining to the shareholders' investments, (iv) assisting shareholders in designating and changing dividend options, account designations and addresses and (v) providing software that aggregates the customers orders and establishes an order to purchase or redeem shares of a Series (a "Sweep Service") based on established target levels for the customer's demand deposit accounts. Another .20% (on an annual basis) of the average daily net asset value of such Shares will be paid to you for providing the following Services: (vi) aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with the transfer agent, (vii) processing dividend payments from the particular portfolio on behalf of customers; (viii) providing information periodically to customers showing their position in Cash Reserve Shares, (ix) arranging for 2 bank wires; (x) providing sub-accounting with respect to Cash Reserve Shares beneficially owned by customers or the information necessary for sub-accounting; (xi) forwarding shareholder communications from the particular portfolio (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers, if required by law; (xii) other similar services if requested by the particular portfolio, (xiii) providing the necessary computer hardware and software which links your DDA system to an account management system; (xiv) providing period statements showing a customer's account balance and, to the extent practicable, integrating such information with other customer transactions otherwise effected through or with you; and (xv) furnishing (either separately or an integrated basis with other reports sent to a shareholder by a service organization) monthly and year-end statements and confirmations of purchases, exchanges and redemptions. You will provide to customers a schedule of all fees that you may charge to them relating to the investment of their assets in a Series' Cash Reserve Shares. 1 (d) Cash Management Shares. ----------------------------- You agree to provide the support services to customers, who may from time to time beneficially own a Series' Cash Management Shares, for a fee which will not exceed .50% (on an annual basis) of the average daily net asset value of a Series' Cash Management Shares held by you for the benefit of customers. An initial .25% (on an annual basis) of the average daily net asset value of such Shares will be paid to you for providing the following Services: (i) providing customers with a service that invests the assets of their account in Cash Management Shares, (ii) responding to customer inquiries related to the services performed by you, (iii) answering shareholder inquiries regarding account status and history, the manner in which purchases, exchanges and redemption of shares may be effected and certain other matters pertaining to the shareholders' investments, (iv) assisting shareholders in designating and changing dividend options, account designations and addresses, (v) providing software that aggregates the customers orders and establishes an order to purchase or redeem shares of a Series (a "Sweep Service") based on established target levels for the customer's demand deposit accounts, (vi) marketing and activities, including direct mail promotions that promote sweep service, (vii) expenditures for other similar marketing support such as for telephone facilities and in-house telemarketing (viii) distribution of literature promoting sweep services, (ix) travel, equipment, printing, delivery and mailing costs overhead and other office expenses attributable to the marketing of sweep services. Another .25% (on an annual basis) of the average daily net asset value of such Shares will be paid to you for providing the following services: (x) aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with the transfer agent, (xi) processing 3 dividend payments from the particular portfolio on behalf of customers; (xii) providing information periodically to customers showing their position in Cash Management Shares, (xiii) arranging for bank wires; (xiv) providing sub-accounting with respect to Cash Management Shares beneficially owned by customers or the information necessary for sub-accounting; (xv) forwarding shareholder communications from the particular portfolio (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers, if required by law; (xvi) other similar services if requested by the particular portfolio, (xvii) providing the necessary computer hardware and software which links your DDA system to an account management system; (xviii) providing period statements showing a customer's account balance and, to the extent practicable, integrating such information with other customer transactions otherwise effected through or with you; and (ixx) furnishing (either separately or an integrated basis with other reports sent to a shareholder by you) monthly and year-end statements and confirmations of purchases, exchanges and redemptions. You will provide to customers a schedule of all fees that you may charge to them relating to the investment of their assets in a Series' Cash Management Shares. Section 2. You will provide such office space and equipment, telephone and - ---------- personnel (which may be any part of the space, equipment and facilities currently used in your business, or any personnel employed by you) as may be reasonably necessary or beneficial in order to provide the aforementioned services to customers. Section 3. Neither you nor any of your officers, employees or agents are - ---------- authorized to make any representations concerning us or a Series' shares except those contained in our then current prospectus for such class of shares, copies of which will be supplied by us to you, or in such supplemental literature or advertising as may be authorized by us in writing. Section 4. For all purposes of this Agreement you will be deemed to be an - ---------- independent contractor, and will have no authority to act as agent for us in any matter or in any respect. By your written acceptance of this Agreement, you agree to and do release, indemnify and hold us harmless from and against any and all direct liabilities or losses resulting from requests, directions, actions or inactions of or by you or your officers, employees or agents regarding your responsibilities hereunder or the purchase, redemption, transfer or registration of shares by or on behalf of customers. You and your employees will, upon request, be available during normal business hours to consult with us or our designees concerning the performance of your responsibilities under this Agreement. Section 5. In consideration of the services and facilities provided by you - ---------- hereunder, we will pay to you, and you will 4 accept as full payment, a fee as described above. Such fee will be computed daily and payable monthly. The fee rate payable to you may be prospectively increased or decreased by us, in our sole discretion, at any time upon notice to you. Further, we may, in our discretion and without notice, suspend or withdraw the sale of any class of shares, including the sale of such shares to you for the account of any customer(s). Section 6. Any person authorized to direct the disposition of monies paid or - ---------- payable by us pursuant to this Agreement will provide to the Board of Trustees, and the Trustees will review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. In addition, you will furnish us or our designees with such information as we or they may reasonably request (including, without limitation, periodic certifications confirming the provision to customers of the services described herein), and will otherwise cooperate with us and our designees (including, without limitation, any auditors designated by us), in connection with the preparation of reports to our Board of Trustees concerning this Agreement and the monies paid or payable by us pursuant hereto, as well as any other reports or filings that may be required by law. Section 7. We may enter into other similar Servicing Agreements with any other - ---------- person or persons without your consent. Section 8. By your written acceptance of this Agreement, you represent, warrant - ---------- and agree that (i) in no event will any of the services provided by you hereunder be primarily intended to result in the sale of any shares issued by us; and (ii) the compensation payable to you hereunder, together with any other compensation you receive from customers for services contemplated by this Agreement, will not be excessive or unreasonable under the laws and instruments governing your relationships with customers. Section 9. This Agreement will become effective on the date a fully executed - ---------- copy of this Agreement is received by us or our designee. Unless sooner terminated, this Agreement will continue for a period of one year and thereafter will continue automatically for successive annual periods. This Agreement is terminable, without penalty, at any time by us or by you upon notice to us. Section 10. All notices and other communications to either you or us will be - ---------- duly given if mailed, telegraphed, telexed or transmitted by similar telecommunications device to the appropriate address shown above. Section 11. This Agreement will be construed in accordance with the laws of the - ---------- State of Delaware and is non-assignable by the parties hereto. 5 Section 12. The names "Provident Institutional Funds" and "Trustees of Provident - ----------- Institutional Funds" refer respectively to the trust created and the Trustees, as trustees but not individually or personally, acting from time to time under a Declaration of Trust dated October 21, 1998, which is hereby referred to and a copy of which is on file at the principal office of the Trust. The obligations of "Provident Institutional Funds" entered into in the name or on behalf thereof by any of the Trustees, officers, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders, officers, representatives or agents of the Trust personally, but bind only the Trust Property (as defined in the Declaration of Trust), and all persons dealing with any class of shares of the Trust must look solely to the Trust Property allocated to such shares for the enforcement of any claims against the Trust. If you agree to be legally bound by the provisions of this Agreement, please sign a copy of this letter where indicated below and promptly return it to us, PFPC Inc., c/o Rhonda Stanford at Bellevue Corporate Center, 400 Bellevue Parkway, W3-F400-01-3 Wilmington, DE 19809. Very truly yours, Provident Institutional Funds __________________________________ Authorized Officer Date:_____________________________ Accepted and Agreed to: By:_______________________________ Date:_____________________________ 6 APPENDIX A Please check the appropriate boxes to indicate both the Class of Shares and the respective Fund(s) for which you wish to act as a Service Organization: ADMINISTRATION SHARES = 10% TOTAL ANNUAL FEE -------------------------------------------- [_] TempFund [_] T-Fund [_] MuniFund [_] California Money Fund DOLLAR SHARES = .25% TOTAL ANNUAL FEE ------------------------------------- [_] TempFund [_] TempCash [_] FedFund [_] T-Fund [_] Federal Trust Fund [_] Treasury Trust Fund [_] MuniFund [_] MuniCash Fund [_] California Money Fund [_] New York Money Fund CASH RESERVE SHARES = .40% TOTAL ANNUAL FEE -------------------------------------------- [_] TempFund [_] T-Fund [_] MuniFund [_] California Money Fund CASH MANAGEMENT SHARES = .50% TOTAL ANNUAL FEE ---------------------------------------------- [_] TempFund [_] T-Fund [_] MuniFund [_] California Money Fund 7 EX-99.O 19 AMENDED PLAN PURSUANT TO RULE 18F-3 PROVIDENT INSTITUTIONAL FUNDS (the "Trust") AMENDED PLAN PURSUANT TO RULE 18f-3 FOR OPERATION OF A MULTI-CLASS SYSTEM I. INTRODUCTION Rule 18f-3, which became effective on April 3, 1995, requires an investment company to file with the Commission a written plan specifying all of the differences among classes, including the various services offered to shareholders, different distribution arrangements for each class, methods for allocating expenses relating to those differences and any conversion features or exchange privileges. This Amended Plan shall become effective when filed with the Securities and Exchange Commission. II. ATTRIBUTES OF CLASSES A. Generally. --------- Pursuant to this Plan, each Series of the Trust will offer up to six classes of shares - Fund Shares, Dollar Shares, Plus Shares, Administration Shares, Cash Reserve Shares and Cash Management Shares - as indicated in Appendix A attached hereto. In general, shares of each class will be identical except for different expense variables (which will result in different returns for each class), certain related rights and certain shareholder services. More particularly, Fund Shares, Dollar Shares, Plus Shares, Administration Shares, Cash Reserve Shares and Cash Management Shares will represent interests in the same portfolio of investments of a particular Series, and will be identical in all respects, except for: (a) the impact of (i) expenses assessed pursuant, as applicable, to the Fund Shareholder Services Plan, Dollar Shareholder Services Plan, Plus Distribution Plan, Administration Shareholder Services Plan, Cash Reserve Shareholders Services Plan and Cash Management Shareholder Services Plan, and the related Agreements entered into pursuant to such Plans (collectively "Plans and Related Agreements") and (ii) any other incremental expenses identified that should be properly allocated to one class, approved by the Board of Trustees, including a majority of the trustees who are not interested persons of the Trust; and (b) the fact that (i) a class will vote separately on matters which pertain to the Plans and Agreements and(ii) each class will vote separately on any matter submitted to shareholders relating to class expenses; (c) the designation of each class of shares of a Series; and (d) the different shareholder services relating to a class of shares and (e) the dividends that may be paid to the holders of shares of each class. B. Distribution Arrangements, Expenses and Sales Charges. ----------------------------------------------------- 1. Fund Shares ----------- Fund Shares will be available for purchase by institutional investors and will be offered without a sales charge. Fund Shares will not be subject to a fee payable pursuant to Plans and Agreements. 2. Dollar Shares. ------------- Dollar Shares will be available for purchase by institutional investors and will be offered without a sales charge. Dollar Shares will be subject to a fee payable pursuant to a Dollar Shareholder Plan and related Shareholders Service Agreement which will not exceed 0.25% (on an annual basis) of the average daily net asset value of a particular Series' Dollar Shares held by a service organization for the benefit of its customers. Services provided by a service organization under the Shareholder Service Agreement may include (i) answering shareholder inquiries regarding account status and history, the manner in which purchases, exchanges and redemption of shares may be effected and certain other matters pertaining to the shareholders' investments; and (ii) assisting shareholders in designating and changing dividend options, account designations and addresses;(iii) aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with the transfer agent; (iv) providing customers with a service that invests the assets of their accounts in Dollar Shares; (v) processing dividend payments from the particular portfolio on behalf of customers; (vi) providing information periodically to customers showing their positions in Dollar Shares; (vii) arranging for bank wires; (viii) responding to customer inquiries relating to the services performed by the Service Organization; (ix) providing sub-accounting with respect to Dollar Shares beneficially owned by customers or the information necessary for sub-accounting; (x) forwarding shareholder communications from the particular portfolio (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers, if required by law; and (xi) other similar services if requested by the particular portfolio. 3. Plus Shares. ----------- Plus Shares will be available for purchase by institutional investors and will be offered without a sales charge. Plus Shares will be subject to a distribution fee payable pursuant to a Distribution Plan and related Agreement which will not exceed 0.25% (on an annual basis) of the average daily net asset value of TempFund's, T-Fund's and MuniFund's Plus Shares and will not exceed 0.40% of the California Money Fund's -2- and New York Money Fund's Plus Shares held by the particular service organization for the benefit of its customers. Sales and support services provided by a service organization under a Distribution Plan and related Agreement may include: (a) reasonable assistance in connection with the distribution of Plus Shares to Shareholders as requested from time to time by the Distributor, which assistance may include forwarding sales literature and advertising provided by the Distributor for Customers; and (b) the following support services to Customers who may from time to time acquire and beneficially own Plus Shares: (i) establishing and maintaining accounts and records relating to Customers that invest in Plus Shares; (ii) processing dividend and distribution payments from a particular Series on behalf of Customers; (iii) providing information periodically to Customers showing their positions in Plus Shares; (iv) arranging for bank wires; (v) responding to Client inquiries relating to the services performed by the Service Organization; (vi) responding to routine inquiries from Customers concerning their investments in Plus Shares; (vii) providing subaccounting with respect to Plus Shares beneficially owned by Customers or the information to the Trust necessary for subaccounting; (viii) if required by law, forwarding shareholder communications from a particular Series (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to Customers; (ix) assisting in processing purchase, exchange and redemption requests from Customers and in placing such orders with service contractors; (x) assisting Customers in changing dividend options, account designations and addresses; (xi) providing Customers with a service that invests the assets of their accounts in Plus Shares pursuant to specific or pre-authorized instructions; and (xii) providing such other similar services as the Distributor may reasonably request to the extent the Service Organization is permitted to do so under applicable statutes, rules and regulations. 4. Administration Shares. --------------------- Administration Shares will be available for purchase by institutional investors and will be offered without a sales charge. Administration Shares will be subject to a fee payable pursuant to the Administration Shareholder Service Plan and related Agreement which will not exceed 0.10% (on an annual basis) of the average daily net asset value of a Series' Administration Shares held by the particular service organization for the benefit of its customers. Services provided by a service organization under the Administration Shareholder Service Plan and related Agreement may include (i) answering shareholder inquiries regarding account status and history, the manner in which purchases, exchanges and redemption of shares may be effected and certain other matters pertaining to the shareholders' investments; and (ii) assisting shareholders in designating and changing dividend options, account designations and addresses. -3- 5. Cash Reserve Shares. ------------------- Cash Reserve Shares will be available to institutional investors and will be offered without a sales charge. Cash Reserve Shares will be subject to a fee payable pursuant to a Cash Reserve Shareholder Service Plan and related Agreement which will not exceed a specified percentage (on an annual basis) of the average daily net asset value of a particular Series' Cash Reserve Shares held by the service organization for the benefit of its customers. An initial.20% (on an annual basis) of the average daily net asset value of such Shares will be paid for service organizations for providing the following Services: (i) providing customers with a service that invests the assets of their account in Cash Reserve Shares, (ii) responding to customer inquiries related to the services performed by the Service Organization, (iii) answering shareholder inquiries regarding account status and history, the manner in which purchases, exchanges and redemption of shares may be effected and certain other matters pertaining to the shareholders' investments, (iv) assisting shareholders in designating and changing dividend options, account designations and addresses and (v) providing software that aggregates the customers orders and establishes an order to purchase or redeem shares of a Series (a "Sweep Service") based on established target levels for the customer's demand deposit accounts. Another .20% (on an annual basis) of the average daily net asset value of such Shares will be paid to service organizations for providing the following Services: (vi) aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with the transfer agent, (vii) processing dividend payments from the particular portfolio on behalf of customers; (viii) providing information periodically to customers showing their position in Cash Reserve Shares, (ix) arranging for bank wires; (x) providing sub-accounting with respect to Cash Reserve Shares beneficially owned by customers or the information necessary for sub-accounting; (xi) forwarding shareholder communications from the particular portfolio (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers, if required by law; (xii) other similar services if requested by the particular portfolio, (xiii) providing the necessary computer hardware and software which links the service organization's DDA system to an account management system; (xiv) providing period statements showing a customer's account balance and, to the extent practicable, integrating such information with other customer transactions otherwise effected through or with a service organization; and (xv) furnishing (either separately or an integrated basis with other reports sent to a shareholder by a service organization) monthly and year-end statements and confirmations of purchases, exchanges and redemptions. -4- 6. Cash Management Shares. ---------------------- Cash Management Shares will be available for purchase by institutional investors and will be offered without a sales charge. Cash Management Shares will be subject to a fee payable pursuant to a Cash Management Shareholder Service Plan and related Agreement which will not exceed a specified percentage (on an annual basis) of the average daily net asset value of a particular Series' Cash Management Shares held by the service organization for the benefit of its customers. An initial.25% (on an annual basis) of the average daily net asset value of such Shares will be paid to service organizations for providing the following Services: (i) providing customers with a service that invests the assets of their account in Cash Management Shares, (ii) responding to customer inquiries related to the services performed by the service organization, (iii) answering shareholder inquiries regarding account status and history, the manner in which purchases, exchanges and redemption of shares may be effected and certain other matters pertaining to the shareholders' investments, (iv) assisting shareholders in designating and changing dividend options, account designations and addresses, (v) providing software that aggregates the customers orders and establishes an order to purchase or redeem shares of a Series (a "Sweep Service") based on established target levels for the customer's demand deposit accounts, (vi) marketing and activities, including direct mail promotions that promote sweep service, (vii) expenditures for other similar marketing support such as for telephone facilities and in-house telemarketing (viii) distribution of literature promoting sweep services, (ix) travel, equipment, printing, delivery and mailing costs overhead and other office expenses attributable to the marketing of sweep services. Another .25% (on an annual basis) of the average daily net asset value of such Shares will be paid to service organizations for providing the following services: (x) aggregating and processing purchase and redemption requests from customers and placing net purchase and redemption orders with the transfer agent, (xi) processing dividend payments from the particular portfolio on behalf of customers; (xii) providing information periodically to customers showing their position in Cash Management Shares, (xiii) arranging for bank wires; (xiv) providing sub-accounting with respect to Cash Management Shares beneficially owned by customers or the information necessary for sub-accounting; (xv) forwarding shareholder communications from the particular portfolio (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers, if required by law; (xvi) other similar services if requested by the particular portfolio, (xvii) providing the necessary computer hardware and software which links the service organization's DDA system to an account management system; (xviii) providing period statements showing a customer's account balance and, to the extent practicable, integrating such information with other customer transactions otherwise effected through or with a service organization; and (ixx) furnishing (either separately or -5- an integrated basis with other reports sent to a shareholder by a service organizations) monthly and year-end statements and confirmations of purchases, exchanges and redemptions. C. Methods for Allocating Expenses Among Classes. --------------------------------------------- Class expenses are allocated to the specific class of shares of the particular portfolio. All other expenses are allocated in accordance with Rule 18f-3(c). -6- Appendix A Series and Classes ------------------ Series A (TempFund) Class A Fund Shares Class B Dollar Shares Class C Plus Shares Class D Administration Shares Class E Cash Reserve Shares Class F Cash Management Shares Series B (TempCash) Class A Fund Shares Class B Dollar Shares Series C (FedFund) Class A Fund Shares Class B Dollar Shares Series D (T-Fund) Class A Fund Shares Class B Dollar Shares Class C Plus Shares Class D Administration Shares Class E Cash Reserve Shares Class F Cash Management Shares Series E (Federal Trust Fund) Class A Fund Shares Class B Dollar Shares Series F (Treasury Trust Fund) Class A Fund Shares Class B Dollar Shares -7- Series and Classes ------------------ Series G (MuniFund) Class A Fund Shares Class B Dollar Shares Class C Plus Shares Class D Administration Shares Class E Cash Reserve Shares Class F Cash Management Shares Series H (MuniCash) Class A Fund Shares Class B Dollar Shares Series I (California Money Fund) Class A Fund Shares Class B Dollar Shares Class C Plus Shares Class D Administration Shares Class E Cash Reserve Shares Class F Cash Management Shares Series J (New York Money Fund) Class A Fund Shares Class B Dollar Shares Class C Plus Shares -8- EX-27.1 20 FINANCIAL DATA SCHEDULE
6 0000097098 TRUST FOR FEDERAL SECURITIES 011 FED FUND-MAIN CLASS YEAR OCT-31-1998 OCT-31-1998 1,145,881,100 1,145,881,100 6,580,045 105,054 0 1,152,569,199 0 0 5,131,534 5,131,534 0 1,147,683,099 1,147,683,099 1,087,297,470 0 0 (245,434) 0 0 1,147,437,665 0 64,254,381 0 (2,439,345) 61,815,036 59,739 0 61,874,775 0 (61,815,036) 0 0 6,842,819,441 (7,045,960,017) 13,345,715 189,794,861 0 0 0 0 1,434,444 0 3,396,664 1,158,043,193 1.00 .535 0 (.535) 0 0 1.00 .20 0 0
EX-27.2 21 FINANCIAL DATA SCHEDULE
6 0000097098 TRUST FOR FEDERAL SECURITIES 012 FED FUND-DOLLAR CLASS YEAR OCT-31-1998 OCT-31-1998 1,145,881,100 1,145,881,100 6,580,045 105,054 0 1,152,569,199 0 0 5,131,534 5,131,534 0 1,147,683,099 1,147,683,099 1,087,297,470 0 0 (245,434) 0 0 1,147,437,665 0 64,254,381 0 (2,439,345) 61,815,036 59,739 0 61,874,775 0 (61,815,036) 0 0 6,842,819,441 (7,045,960,017) 13,345,715 189,794,861 0 0 0 0 1,434,444 0 3,396,664 1,158,043,193 1.00 .51 0 (.51) 0 0 1.00 .45 0 0
EX-27.3 22 FINANCIAL DATA SCHEDULE
6 0000097098 TRUST FOR FEDERAL SECURITIES 021 T-FUND-MAIN CLASS YEAR OCT-31-1998 OCT-31-1998 3,286,903,159 3,286,903,159 49,968,896 73,224 0 3,336,945,279 0 0 15,558,863 15,558,863 0 3,321,395,314 3,321,395,314 2,828,464,632 0 0 (8,898) 0 0 3,321,386,416 0 168,379,686 0 (7,583,279) 160,796,407 56,588 0 160,852,995 0 (160,796,407) 0 0 30,459,048,928 (29,459,596,681) 40,453,713 1,039,905,960 0 0 0 0 3,773,669 0 9,773,356 3,059,131,107 1.00 .053 0 (.053) 0 0 1.00 .20 0 0
EX-27.4 23 FINANCIAL DATA SCHEDULE
6 0000097098 TRUST FOR FEDERAL SECURITIES 022 T-FUND - DOLLAR CLASS YEAR OCT-31-1998 OCT-31-1998 3,286,903,159 3,286,903,159 49,968,896 73,224 0 3,336,945,279 0 0 15,558,863 15,558,863 0 3,321,395,314 3,321,395,314 2,828,464,632 0 0 (8,898) 0 0 3,321,386,416 0 168,379,686 0 (7,583,279) 160,796,407 56,588 0 160,852,995 0 (160,796,407) 0 0 30,459,048,928 (29,459,596,681) 40,453,713 1,039,905,960 0 0 0 0 3,773,669 0 9,773,356 3,059,131,107 1.00 .051 0 (.051) 0 0 1.00 .45 0 0
EX-27.5 24 FINANCIAL DATA SCHEDULE
6 0000097098 TRUST FOR FEDERAL SECURITIES 071 TREASURY TRUST FUND - CLASS YEAR OCT-31-1998 OCT-31-1998 904,576,978 904,576,978 664,618,458 (17,116) 0 1,569,178,320 0 0 6,045,612 6,045,612 0 1,563,295,672 1,563,295,672 1,118,296,415 0 0 (162,964) 0 0 1,563,132,708 0 67,305,552 0 3,588,563 63,716,989 79,106 0 63,796,095 0 (63,716,989) 0 0 9,002,283,228 8,576,956,809 19,672,838 444,999,257 0 0 0 0 1,593,104 0 4,588,325 1,289,056,354 1.00 .05 0 (.05) 0 0 1.00 .20 0 0
EX-27.6 25 FINANCIAL DATA SCHEDULE
6 0000097098 TRUST FOR FEDERAL SECURITIES 072 TREASURY TRUST FUND - DOLLAR CLASS YEAR OCT-31-1998 OCT-31-1998 904,576,978 904,576,978 664,618,458 (17,116) 0 1,569,178,320 0 0 6,045,612 6,045,612 0 1,563,295,672 1,563,295,672 1,118,296,415 0 0 (162,964) 0 0 1,563,132,708 0 67,305,552 0 (3,588,563) 63,716,989 79,106 0 63,796,095 0 (63,716,989) 0 0 9,002,283,228 (8,576,956,809) 19,672,838 444,999,257 0 0 0 0 1,593,104 0 4,588,325 1,289,056,354 1.00 .048 0 (.048) 0 0 1.00 .45 0 0
EX-27.7 26 FINANCIAL DATA SCHEDULE
6 0000097098 TRUST FOR FEDERAL SECURITIES 081 FED TRUST FUND - MAIN CLASS YEAR OCT-31-1998 OCT-31-1998 319,716,082 319,716,082 1,006,851 63,464 0 320,786,397 0 0 1,573,331 1,573,331 0 319,362,904 319,362,904 294,825,439 0 0 (149,838) 0 0 319,213,066 0 16,183,890 0 (685,466) 15,498,424 61,366 0 15,559,790 0 (15,498,424) 0 0 1,408,226,011 (1,358,933,899) 1,867,261 51,159,373 0 0 0 0 364,331 0 959,379 294,834,723 1.00 .053 0 (.053) 0 0 1.00 .20 0 0
EX-27.8 27 FINANCIAL DATA SCHEDULE
6 0000097098 TRUST FOR FEDERAL SECURITIES 082 FED TRUST FUND - DOLLAR CLASS YEAR OCT-31-1998 OCT-31-1998 319,716,082 319,716,082 1,006,851 63,464 0 320,786,397 0 0 1,573,331 1,573,331 0 319,362,904 319,362,904 294,825,439 0 0 (149,838) 0 0 319,213,066 0 16,183,890 0 (685,466) 15,498,424 61,366 0 15,559,790 0 (15,498,424) 0 0 1,408,226,011 (1,358,933,899) 1,867,261 51,159,373 0 0 0 0 364,331 0 959,379 294,834,723 1.00 .05 0 (.05) 0 0 1.00 .45 0 0
EX-27.9 28 FINANCIAL DATA SCHEDULE
6 000097098 MUNICIPAL FUND FOR TEMPORARY INVESTMENT 011 MUNI FUND - MAIN CLASS YEAR NOV-30-1998 NOV-30-1998 517,558,534 517,558,534 3,449,503 6,027 0 521,014,064 0 0 1,517,658 1,517,658 0 519,608,322 467,863,098 452,865,549 0 0 (111,916) 0 0 519,496,406 0 21,174,463 0 (1,631,290) 19,543,173 (28,931) 0 19,514,242 0 (17,790,533) 0 0 6,507,334,293 (6,579,088,822) 2,746,208 84,655,277 0 0 0 0 1,057,053 0 2,610,041 602,713,895 1.00 .033 0 (.033) 0 0 1.00 .25 0 0
EX-27.10 29 FINANCIAL DATA SCHEDULE
6 0000097098 MUNICIPAL FUND FOR TEMPORARY INVESTMENT 012 MUNI FUND - DOLLAR CLASS YEAR NOV-30-1998 NOV-30-1998 517,558,534 517,558,534 3,449,503 6,027 0 521,014,064 0 0 1,517,658 1,517,658 0 519,608,322 51,745,224 64,167,646 0 0 (111,916) 0 0 519,496,406 0 21,174,463 0 (1,631,290) 19,543,173 (28,931) 0 19,514,242 0 (1,752,640) 0 0 166,484,152 (183,775,067) 1,643,959 84,655,277 0 0 0 0 1,057,053 0 2,610,041 602,713,895 1.00 .03 0 (.03) 0 0 1.00 .50 0 0
EX-27.11 30 FINANCIAL DATA SCHEDULE
6 000097098 MUNICIPAL FUND FOR TEMPORARY INVESTMENT 021 MUNI CASH - MAIN CLASS YEAR NOV-30-1998 NOV-30-1998 590,314,814 590,314,814 4,808,636 0 0 595,123,450 1,804,234 0 1,660,968 3,465,202 0 591,784,571 500,356,378 545,195,257 0 0 (126,323) 0 0 591,658,248 0 20,503,879 0 (1,305,789) 19,198,090 22,258 0 19,220,348 0 (15,680,768) 0 0 7,022,119,234 (6,925,371,487) 5,807,076 43,865,954 0 0 0 0 983,615 0 2,537,550 562,065,580 1.00 .035 0 (.035) 0 0 1.00 .20 0 0
EX-27.12 31 FINANCIAL DATA SCHEDULE
6 000097098 MUNICIPAL FUND FOR TEMPORARY INVESTMENT 022 MUNI CASH - DOLLAR CLASS YEAR NOV-30-1998 NOV-30-1998 590,314,814 590,314,814 4,808,636 0 0 595,123,450 1,804,234 0 1,660,968 3,465,202 0 591,784,571 91,428,193 98,425,517 0 0 (126,323) 0 0 591,658,248 0 20,503,879 0 (1,305,789) 19,198,090 22,258 0 19,220,348 0 (3,517,322) 0 0 288,017,712 (349,516,165) 2,809,584 43,865,954 0 0 0 0 983,615 0 2,537,550 562,065,580 1.00 .032 0 (.032) 0 0 1.00 .45 0 0
EX-27.13 32 FINANCIAL DATA SCHEDULE
6 0000097098 MUNICIPAL FUND FOR NEW YORK INVESTORS, INC. 001 MAIN CLASS YEAR JUL-31-1998 JUL-31-1998 317,246,928 317,246,928 1,688,050 102,095 0 319,037,073 0 0 946,229 946,229 0 318,110,603 318,112,040 373,447,657 0 0 (19,759) 0 0 318,090,844 0 11,601,677 0 (653,816) 10,947,861 3,904 0 10,951,765 0 (10,947,861) 0 0 1,537,289,169 (1,490,893,966) 722,411 47,117,614 0 0 0 0 653,314 0 1,554,903 326,455,081 1.00 .034 0 (.034) 0 0 1.00 .20 0 0
EX-27.14 33 FINANCIAL DATA SCHEDULE
6 0000097098 MUNICIPAL FUND FOR NEW YORK INVESTORS, INC. 002 DOLLAR CLASS YEAR JUL-31-1998 JUL-31-1998 317,246,928 317,246,928 1,688,050 102,095 0 319,037,073 0 0 946,229 946,229 0 318,110,603 318,112,040 373,447,657 0 0 (19,759) 0 0 318,090,844 0 11,601,677 0 (653,816) 10,947,861 3,904 0 10,951,765 0 (10,947,861) 0 0 1,537,289,169 (1,490,893,966) 722,411 47,117,614 0 0 0 0 653,314 0 1,554,903 207,374 1.00 .03 0 (.03) 0 0 1.00 .45 0 0
EX-27.15 34 FINANCIAL DATA SCHEDULE
6 0000097098 MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC. 001 MAIN CLASS 6-MOS JAN-31-1999 JUL-31-1998 621,585,208 621,585,208 2,199,780 9,632 973 624,795,593 0 0 1,777,206 1,777,206 0 622,153,926 622,153,926 591,035,401 0 0 (135,539) 0 0 622,018,387 0 10,494,524 0 (756,799) 9,737,725 13,414 0 9,751,139 0 (9,737,725) 0 0 2,252,130,273 (2,221,398,477) 386,729 31,118,525 0 0 0 0 618,462 0 1,519,337 511,999,065 1.00 .016 0 (.016) 0 0 1.00 .20 0 0
EX-27.16 35 FINANCIAL DATA SCHEDULE
6 0000097098 MUNICIPAL FUND FOR CALIFORNIA INVESTORS, INC. 002 DOLLAR CLASS 6-MOS JAN-31-1999 JUL-31-1998 621,585,208 621,585,208 2,199,780 9,632 973 624,795,593 0 0 1,777,206 1,777,206 0 622,153,926 622,153,926 591,035,401 0 0 (135,539) 0 0 622,018,387 0 10,494,524 0 (756,799) 9,737,725 13,414 0 9,751,139 0 (9,737,725) 0 0 2,252,130,273 (2,221,398,477) 386,729 31,118,525 0 0 0 0 618,462 0 1,519,337 111,587,913 1.00 .015 0 (.015) 0 0 1.00 .45 0 0
EX-27.17 36 FINANCIAL DATA SCHEDULE
6 0000097098 TEMPORARY INVESTMENT FUND, INC. 011 TEMP FUND PORTFOLIO - MAIN SHARES YEAR SEP-30-1998 SEP-30-1998 10,005,358,149 10,005,358,149 31,333,322 28,232 0 10,036,719,703 0 0 (47,752,372) (47,752,372) 0 9,989,171,033 9,989,171,033 8,728,530,666 0 0 (203,702) 0 0 9,988,967,331 0 579,702,110 0 (19,137,971) 560,564,139 (203,702) 0 560,360,437 0 (560,564,139) (24,187) 0 163,267,203,408 (161,888,500,360) 194,706,744 1,573,409,792 0 24,187 0 0 10,442,205 0 23,768,527 9,894,227,645 1.00 .055 0 (.055) 0 0 1.00 .18 0 0
EX-27.18 37 FINANCIAL DATA SCHEDULE
6 0000097098 TEMPORARY INVESTMENT FUND, INC. 012 TEMP FUND PORTFOLIO - DOLLAR SHARES YEAR SEP-30-1998 SEP-30-1998 10,005,358,149 10,005,358,149 31,333,322 28,232 0 10,036,719,703 0 0 (47,752,372) (47,752,372) 0 9,989,171,033 9,989,171,033 8,728,530,666 0 0 (203,702) 0 0 9,988,967,331 0 579,702,110 0 (19,137,971) 560,564,139 (203,702) 0 560,360,437 0 (560,564,139) (24,187) 0 163,267,203,408 (161,888,500,360) 194,706,744 1,573,409,792 0 24,187 0 0 10,442,205 0 23,768,527 308,921,404 1.00 .052 0 (.052) 0 0 1.00 .43 0 0
EX-27.19 38 FINANCIAL DATA SCHEDULE
6 0000097098 TEMPORARY INVESTMENT FUND, INC. 021 TEMP CASH PORTFOLIO - MAIN SHARES YEAR SEP-30-1998 SEP-30-1998 3,010,855,079 3,010,855,079 8,018,974 261,643 0 3,019,135,696 0 0 16,212,963 16,212,963 0 3,002,934,991 3,002,934,991 2,567,573,925 0 0 (12,258) 0 0 3,002,922,733 0 171,972,729 0 (6,519,150) 165,453,579 491,505 0 165,945,084 0 (165,453,579) 0 0 55,035,173,158 (54,502,812,282) 77,504,373 609,865,249 0 0 0 0 4,485,250 0 10,712,456 2,582,100,271 1.00 .055 0 0 (.055) 0 1.00 .18 0 0
EX-27.20 39 FINANCIAL DATA SCHEDULE
6 0000097098 TEMPORARY INVESTMENT FUND, INC. 022 TEMP CASH PERTFOLIO - DOLLAR SHARES YEAR SEP-30-1998 SEP-30-1998 3,010,855,079 3,010,855,079 8,018,974 261,643 0 3,019,135,696 0 0 16,212,963 16,212,963 0 3,002,934,991 3,002,934,991 2,567,573,925 0 0 (12,258) 0 0 3,002,922,733 0 171,972,729 0 (6,519,150) 165,453,579 491,505 0 165,945,084 0 (165,453,579) 0 0 55,035,173,158 (54,502,812,282) 77,504,373 609,865,249 0 0 0 0 4,485,250 0 10,712,456 435,198,796 1.00 .052 0 0 (.052) 0 1.00 .43 0 0
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