As filed with the Securities and
Exchange Commission on April 30, 1999.
File No. 811-2631
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
AMENDMENT No. 22
CHESTNUT STREET EXCHANGE FUND
(Exact Name of the Registrant as Specified in Charter)
400 Bellevue Parkway
Wilmington, Delaware 19809
(Address of Principal Executive Offices)
The Registrant's Telephone Number: (302) 792-2555
Edward J. Roach
400 Bellevue Parkway
Wilmington, Delaware 19809
(Name and Address of Agent for Service)
Copy to:
Vernon Stanton, Jr., Esq.
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
TABLE OF CONTENTS
PAGE
PART A. INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Front and Back Cover Pages..................................................................... 1
Item 2. Risk/Return Summary: Investments, Risks and Performance....................................... 1
Item 3. Risk/Return Summary: Fee Table................................................................ 1
Item 4. Investment Objectives, Principal Investment Strategies and Related Risks....................... 1
Item 5. Management's Discussion of Fund Performance.................................................... 2
Item 6. Management, Organization and Capital Structure................................................. 3
Item 7. Shareholder Information........................................................................ 4
Item 8. Distribution Arrangements...................................................................... 7
Item 9. Financial Highlights Information............................................................... 7
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page and Table of Contents............................................................... 8
Item 11. Fund History................................................................................... 8
Item 12. Description of the Fund and its Investments and Risks.......................................... 8
Item 13. Management of the Fund......................................................................... 12
Item 14. Control Persons and Principal Holders of Securities............................................ 14
Item 15. Investment Advisory and Other Services......................................................... 14
Item 16. Brokerage Allocation and Other Practices....................................................... 16
Item 17. Capital Stock and Other Securities............................................................. 17
Item 18. Purchase, Redemption, and Pricing of Shares.................................................... 17
Item 19. Taxation of the Fund........................................................................... 18
Item 20. Underwriters................................................................................... 18
Item 21. Calculation of Performance Data................................................................ 18
Item 22. Financial Statements........................................................................... 19
PART C. OTHER INFORMATION
Item 23. Exhibits....................................................................................... 20
Item 24. Persons Controlled by or Under Common Control with the Fund.................................... 21
Item 25. Indemnification................................................................................ 21
Item 26. Business and Other Connections of Investment Adviser........................................... 22
Item 27. Principal Underwriters......................................................................... 22
Item 28. Location of Accounts and Records............................................................... 22
Item 29. Management Services............................................................................ 23
Item 30. Undertakings................................................................................... 23
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PART A. INFORMATION REQUIRED IN A PROSPECTUS
ITEM 1. FRONT AND BACK COVER PAGES.
Inapplicable.
ITEM 2. RISK/RETURN SUMMARY: INVESTMENTS, RISKS AND PERFORMANCE.
Inapplicable.
ITEM 3. RISK/RETURN SUMMARY: FEE TABLE.
Inapplicable.
ITEM 4. INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS.
(a) The Fund's investment objectives are to seek long-term growth of capital and, secondarily, current income. The investment objectives stated above may be changed by the Board of Managing General Partners without the approval of a majority of Fund's outstanding voting securities.
(b) The Fund seeks to achieve its investment objectives by investing in a diversified portfolio of common stocks and securities convertible into common stocks of companies with large market capitalizations. The Fund may also invest in other types of securities for temporary or defensive purposes, including preferred stocks, investment grade bonds and money market obligations such as U.S. Government securities, certificates of deposit and commercial paper. To the extent that the Fund is in a temporary or defensive position, it may not be able to meet its investment objectives. Generally, because many of the Fund's portfolio securities have significant capital gains, the Fund does not sell its portfolio securities; however, sales of portfolio securities may be effected when the investment adviser believes a sale would be in the best interests of the Fund's partners even though capital gains will be realized. Portfolio securities are also disposed of in connection with the redemption of shares in the Fund.
Up to 10% of the value of the Fund's total assets may be invested in securities which are subject to legal or contractual restrictions on resale and which the Fund reasonably believes will be saleable after a two year holding period pursuant to Rule 144 under the Securities Act of 1933.
The Fund may write exchange-traded covered call options on portfolio securities up to 25% of the value of its assets and may loan portfolio securities. The Fund will not sell securities covered by outstanding options and will endeavor to liquidate its position as an option writer in a closing purchase transaction rather than deliver portfolio securities upon exercise of the option. The extent to which the Fund may be able to write such options will depend in part on state securities regulations as amended from time to time.
(c) Limited Partners generally are not personally liable for liabilities of the Fund. However, if the Fund were unable to pay its liabilities, recipients of distributions from the Fund could be liable to creditors of the Fund to the extent of such distributions, plus interest.
A Limited Partner has no right to take any part in the control of the Partnership business, and the exercise of such control would subject a Limited Partner to the personal liability of a General Partner for obligations of the Fund. Although no absolute assurance can be given due to the lack of specific statutory authority and the fact that there are no authoritative judicial decisions on the matter, the Fund received an opinion from California Counsel that the existence and exercise by the Limited Partners of the voting rights provided for in the Partnership Agreement do not subject the Limited Partners to liability as general partners under the California Act. It is possible, however, that the existence or exercise of such rights, might subject the Limited Partners to such liability under the laws of another state. In the event that a Limited Partner should be found to be liable as a general partner, then, to the extent the assets and insurance of the Fund and of the General Partners were insufficient to reimburse a Limited Partner, he would be required to personally satisfy claims of creditors against the Fund.
The net asset value of the Fund's shares on redemption or repurchase may be more or less than the purchase price of the shares depending upon the market value of the Fund's portfolio securities at the time of redemption or repurchase.
ITEM 5. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE.
Inapplicable.
ITEM 6. MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE.
(a)(1) Under the Advisory Agreement the Fund's investment advisers are PNC Bank, National Association ("PNC Bank"), which has banking offices at 1600 Market Street, Philadelphia, Pennsylvania 19103 and BlackRock Institutional Management Corporation ("BIMC"), formerly PNC Institutional Management Corporation, located at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. BIMC is a majority-owned, indirect subsidiary of PNC Bank. In June 1998, PNC Bank and BIMC restructured their operations and BlackRock Financial Management, Inc. ("BFM"), a majority-owned, indirect subsidiary of PNC Bank, assumed the rights and obligations of PNC Bank under the Advisory Agreement, and BFM effectively became a party to the Advisory Agreement in substitution for PNC Bank.
Subject to the supervision of the Fund's Managing General Partners, BIMC manages the Fund's portfolio and is responsible for, makes decisions with respect to, and places orders for, all purchases and sales of the Fund's portfolio securities. BIMC is also required to compute the Fund's net asset value and net income.
The Advisory Agreement also provides that, subject to the supervision of the Fund's Managing General Partners and without additional charge to the Fund, PNC Bank (now BFM pursuant to the assumption of rights and obligations referred to above), will on behalf of the Fund: (i) provide BIMC investment research and credit analysis concerning prospective and existing investments of the Fund, (ii) make recommendations to BIMC with respect to the Fund's continuous investment program, (iii) make recommendations to BIMC regarding the amount of the Fund's assets to be invested or held uninvested in cash or cash equivalents, (iv) supply BIMC with computer facilities and operating personnel, (v) provide BIMC with such statistical services as BIMC may reasonably request, and (vi) maintain or cause BIMC to maintain the Fund's financial accounts and records.
For the services provided by BIMC and BFM, and the expenses assumed by them under the Advisory Agreement, the Fund has agreed to pay a fee, computed daily and payable monthly, based on the Fund's average net assets. For the fiscal year ended December 31, 1998, the Fund paid an
investment advisory fee aggregating .33% of its average daily net assets.
(a)(2) Since January 1996, Mary Elizabeth C. Pfeil, C.F.A., has been primarily responsible for the day-to-day management of the Fund's portfolio. Ms. Pfeil is a Vice President and senior research analyst on the domestic equity growth team at BFM. Ms. Pfeil has been employed by PNC Bank and its affiliates since 1993. From 1990 to 1993, she was employed by Wellington Management Company as a generalist equity researcher. Prior to 1990, Ms. Pfeil worked first as a commercial lender and later as an equity analyst for PNC Bank. She is a member of the Financial Analysts of Philadelphia and is a Chartered Financial Analyst.
(a)(3) Inapplicable
(b) Inapplicable.
ITEM 7. SHAREHOLDER INFORMATION.
(a) Pricing of Fund Shares. The net asset value per share is determined by BIMC as of the close of business on each day. The net asset value per share is computed by taking the total value of all assets of the Fund less its liabilities and dividing by the number of Fund shares outstanding. Securities for which market quotations are readily available are valued at their current market value in the principal market in which such securities are normally traded. These values are normally determined by (i) the last sales price, if the principal market is on the New York Stock Exchange or other securities exchange (or the closing bid price, if there has been no sales on such exchange on that day), or (ii) the most recent bid price, if the principal market is other than an exchange. Securities and other assets for which market quotations are not readily available (including restricted securities) are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Managing General Partners. With respect to call options written on portfolio securities, the amount of the premium received is treated as an asset and amortized over the life of the option, and the price of an option to purchase identical securities upon the same terms and conditions is treated as a liability marked to the market daily. The price of options are normally determined by the last sales price on the principal exchange on which such options are normally traded (or the closing asked
price if there has been no sales on such exchange on that day).
(b) Inapplicable.
(c) Redemption of Fund Shares. Shares may be redeemed at the option of the investor at any time without charge at their net asset value next computed after receipt by PFPC Inc. ("PFPC"), the Fund's transfer agent and dividend disbursing agent, of a written request for redemption setting forth the name of the Fund and the investor's account number. The request must be accompanied by certificates (if issued) or if certificates have not been issued, by stock powers. The certificate or stock powers must be endorsed by the record owner(s) exactly as the shares are registered and the signature(s) must be guaranteed by an "eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. The Fund reserves the right to require that additional documents be furnished in the case of redemptions by other than the registered owner of the shares.
Except to the extent shares are redeemed for cash pursuant to the Systematic Withdrawal Plan, the Fund intends to distribute upon redemption securities from its portfolio in-kind, valued at the same value used for purposes of next determining the Fund's net asset value after the receipt of the request for redemption in proper form. The Fund may in its discretion pay part or all of redemption proceeds in cash. When received by the shareholder, the value of the securities from the portfolio may be greater or lesser than the value used in pricing the redemption
The proceeds of redemption will be paid as soon as possible but not later than seven days after the request for redemption is received with the required documentation. The Fund may suspend the right of redemption or delay payment during any period when the New York Stock Exchange is closed (other than customary weekend and holiday closings); when trading on that exchange is restricted or an emergency exists which makes disposal or valuation of portfolio securities impracticable; or during such other period as the Securities and Exchange Commission may by order permit.
Investors may, by notice in writing to the transfer agent, elect to participate in the Systematic Withdrawal Plan (the "Plan"). Participants in the Plan may elect to receive quarterly in cash as a partial redemption of their shares up to 3/4 of 1% of the net asset value of their shares as of the close of trading on the New York
Stock Exchange on the last trading day of each calendar quarter. The Fund does not intend to impose a charge upon investors for participating in the Plan. Participants may withdraw from the Plan at any time by written notice to the transfer agent.
The net asset value of the Fund's shares on redemption or repurchase may be more or less than the purchase price of the shares depending upon the market value of the Fund's portfolio securities at the time of redemption or repurchase.
(d) Dividends and Distributions. Effective January 1, 1998, the Fund is deemed a corporation, rather than a partnership, for federal tax purposes. In connection with this change in its federal tax status, the Fund has elected to be taxed as a regulated investment company (a "RIC"). To qualify as a RIC under the Internal Revenue Code (the "Code"), the Fund is required to meet certain income, diversification and distribution requirements. For example, to qualify as a RIC, the Fund must pay as dividends each year at least 90% of its investment company income which includes, but is not limited to, taxable interest, dividends and short-term capital gains less expenses. The Fund intends to continue its historic policy of regular and quarterly dividends and to pay an additional dividend at year end so that total distributions for each year equal 100% of its net investment income. The Fund intends to retain all of its net long-term capital gains.
(e) Tax Consequences. Under the publicly traded partnership rules of the Code, the Fund is treated as a corporation for federal income tax purposes as of January 1, 1998. However, the Fund intends to qualify as a RIC under the Code. The Code's RIC provisions provide pass-through treatment of taxable income similar to that provided under the Code's partnership rules. Therefore, to the extent that the Fund's earnings are distributed to its partners as required by the RIC provisions of the Code, the Fund itself will not be required to pay federal income tax.
Distributions of net investment income by the Fund as a RIC will be treated as ordinary income in determining a partner's gross income for tax purposes, whether the partner receives these dividends in cash or shares. The Fund intends to retain all of its net realized long-term capital gains as a RIC and pay the tax on the gain at the required corporate rate. Each partner will be required to report his allocable portion of the Fund's gain, but each partner will also receive a tax credit for his allocable portion of the tax paid by the Fund.
As a result, each partner should receive a federal income tax benefit equal to the difference between the corporate tax rate and the individual tax rate on long-term capital gains. In addition, any retained capital gains, net of tax, would generally increase a partner's investment (and tax basis) in the Fund. The Fund will inform each partner as to the amount and nature of such income or gains. Formerly the Fund, when it was taxed as a partnership, distributed approximately 30% of its net long-term capital gains to provide its partners, who were deemed to have been distributed all of such gains, with funds with which to pay the capital gains tax. The new policy is designed to achieve substantially the same result.
Each partner should consult with his tax adviser with specific references to his own tax situation.
(f) Inapplicable.
ITEM 8. DISTRIBUTION ARRANGEMENTS.
Inapplicable.
ITEM 9. FINANCIAL HIGHLIGHTS INFORMATION.
Inapplicable.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE AND TABLE OF CONTENTS.
(a) This Statement of Additional Information for Chestnut Street Exchange
Fund (the "Fund") is not a prospectus and should be read in conjunction
with the Fund's Part A dated April 30, 1999. The financial statements
and notes thereto included in the Fund's Annual Report are incorporated
by reference into this Statement of Additional Information. Copies of
the Annual Report may be obtained, without charge by writing the Fund
at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington,
Delaware 19809 or by calling toll free at (800) 852-4750. Capitalized
terms used but not defined herein have the same meanings as in the Part
A. The date of this Statement of Additional Information is April 30,
1999.
(b) Table of Contents Page No.
Fund History................................................. 8
Description of the Fund and its Investments and Risks........ 8
Management of the Fund....................................... 12
Control Persons and Principal Holders of Securities.......... 14
Investment Advisory and Other Services....................... 14
Brokerage Allocation and Other Practices..................... 16
Capital Stock and Other Securities........................... 17
Purchase, Redemption and Pricing of Shares .................. 17
Taxation of the Fund......................................... 18
Underwriters................................................. 18
Calculation of Performance Data.............................. 18
Financial Statements......................................... 19
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ITEM 11. FUND HISTORY.
The Fund is a limited partnership organized as of March 23, 1976 under the Uniform Limited Partnership Act of California.
ITEM 12. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS.
(a) The Fund is a diversified open-end, management investment company.
(b) Inapplicable.
(c) Fund Policies.
The Fund's fundamental policies which may not be changed without the approval of a majority of the Fund's outstanding voting securities are as follows:
(1) The Fund will not issue any senior securities (as defined in the Investment Company Act of 1940).
(2) The Fund will not purchase securities on margin or sell any securities short. The Fund will not purchase or write puts, calls, straddles or spreads with respect to any security except that (i) the Fund may write call options on securities constituting not more than 25% of the value of its assets if the option is listed on a national securities exchange and, at all times while the option is outstanding, the Fund owns the securities against which the option is written or owns securities convertible into such securities, and (ii) the Fund may purchase call options in closing purchase transactions to liquidate its position as an option writer.
(3) The Fund will not borrow money except from banks in amounts which in the aggregate do not exceed 10% of the value of its assets at the time of borrowing. This borrowing provision is not for purposes of leverage but is intended to facilitate the orderly sale of portfolio securities to accommodate abnormally heavy redemption requests, and to pay subscription fees due with respect to the exchange without having to sell portfolio securities. Securities may be purchased for the Fund's portfolio while borrowings are outstanding.
(4) The Fund will not act as an underwriter (except as it may be deemed such in a sale of restricted securities owned by it).
(5) It is not the policy of the Fund to concentrate its investments in any particular industry, but if it is deemed advisable in light of the Fund's investment objectives, up to 25% of the value of its assets may be invested in any one industry. The Fund will not be required to reduce holdings in a particular industry if, solely as a result of price changes, the value of such holdings exceeds 25% of the value of the Fund's total assets.
(6) The Fund will not purchase or sell real estate or real estate mortgage loans.
(7) The Fund will not purchase or sell commodities or commodity contracts.
(8) The Fund will not make loans except by (i) the purchase of debt securities in accordance with its investment objectives and (ii) the loaning of securities against collateral consisting of cash or securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, which is equal at all times to at least 100% of the value of the securities loaned. The Fund will lend portfolio securities only when its investment adviser believes that the net return to the Fund in consideration of the loan is reasonable, that any fee paid for placing the loan is reasonable and based solely upon services rendered, that the loan is consistent with the Fund's investment objectives, and that no affiliate of the Fund or of its investment adviser is involved in the lending transaction or is receiving any fees in connection therewith. The Fund will not have the right to vote securities loaned, but will have the right to terminate such a loan at any time and receive back equivalent securities and to receive amounts equivalent to all dividends and interest paid on the securities loaned.
(9) The Fund will not:
(A) Mortgage, pledge or hypothecate its assets except to secure borrowings described in policy 3 and in amounts not exceeding 10% of the value of its assets.
(B) Invest more than 5% of its assets at the time of purchase in the securities of any one issuer (exclusive of securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities).
(C) Purchase securities if such purchase would result in its owning more than 10% of the outstanding voting securities of any one issuer at the time of purchase.
(D) Invest in securities of companies which have a record, together with their predecessors, of less than five years of continuous operation.
(E) Purchase or hold securities of any company if, to its knowledge, those General Partners of the Fund and those directors and officers above the level of Senior Vice President of its investment adviser beneficially owning more than 1/2 of 1% of the securities of that
company, together own beneficially more than 5% of the securities of such company taken at market value.
(F) Purchase the securities of other investment companies except that the Fund has accepted for exchange shares of common stock of Coca-Cola International Corporation in accordance with the limitations imposed by the Investment Company Act of 1940.
(G) Purchase oil, gas or other mineral leases or partnership interests in oil, gas or other mineral exploration programs.
(H) Knowingly purchase or otherwise acquire any equity or debt securities which are subject to legal or contractual restrictions on resale if, as a result thereof, more than 10% of the value of its assets would be invested in such securities.
(I) Invest in companies for the purpose of exercising control or management.
Any investment policy or restriction in these policies (1)-(9) which involves a maximum percentage of securities or assets shall not be considered to be violated unless an excess over the percentage occurs immediately after an acquisition of securities or utilization of assets and results therefrom.
The Fund's investment policies which are not deemed fundamental and may be changed without shareholder approval are as follows:
The Fund does not intend to engage in any significant degree in short-term trading. Portfolio turnover is not expected to exceed 15%, although the Fund reserves the right to exceed this turnover rate. The tax consequences of a sale of portfolio securities will be considered prior to a sale, but sales will be effected when the investment adviser believes a sale would be in the best interests of the Fund's shareholders even though capital gains will be realized.
The Fund will not sell securities covered by outstanding options and will endeavor to liquidate its position as an option writer in a closing purchase transaction rather than by delivering portfolio securities upon exercise of the option.
(d) Inapplicable.
(e) Portfolio Turnover. For the fiscal years ended December 31, 1998 and 1997, the Fund's portfolio turnover rates were .76% and 1.26%, respectively.
ITEM 13. MANAGEMENT OF THE FUND.
(a) The business and affairs of the Fund are managed by its Managing General Partners.
(b) The Managing General Partners and officers of the Fund, their addresses, ages, principal occupations during the past five years and other affiliations are:
PRINCIPAL OCCUPATIONS
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS AGE WITH THE FUND AND CURRENT AFFILIATIONS
---------------- --- ------------- ------------------------
Richard C. Caldwell* 54 Managing President and Chief Executive
3305 Flamingo Drive General Officer, PNC Bank FSB since May, 1998;
Vero Beach, FL 32964 Partner former Executive Vice President,
PNC Bank from July 1990 to
April 1998; former Director of various
affiliates and subsidiaries of PNC Bank,
including BIMC from September 1994
until February 1998; Director, JLC, Inc.
since February, 1996 (investment
holding company); Director, DR Inc. since
April 1994 (investment holding company).
Robert R. Fortune* 82 President and Financial Consultant; Former
2920 Ritter Lane Chairman of the Chairman, President and Chief
Allentown, PA 18104 Managing General Executive Officer, Associated
Partners Electric & Gas Insurance
Services Limited from 1984 to 1993;
Member of the Financial Executives
Institute and American Institute
of Certified Pubic Accountants;
former Director or Trustee of 4
other investment companies
advised by BIMC.
G. Willing Pepper 90 Managing Retired; Chairman of the Board,
128 Springton Lake Rd. General Specialty Composites Corporation
Media, PA 19063 Partner until May 1984; Chairman of the
Board, The Institute for Cancer
Research until 1979; Director,
Philadelphia National Bank until
1978; President, Scott Paper
Company, 1971-1973; former
Director or Trustee of 5 other
investment companies advised by
BIMC.
Langhorne B. Smith 62 Managing President and Director, The
Suite 400 General Sandridge Corporation (private
Plymouth Meeting Partner investment company); Executive
Executive Campus Vice President and Director,
630 Germantown Pike Claneil Enterprises, Inc.
Plymouth Meeting, PA 19462 (private investment company);
Director or Trustee of 1
other investment company advised
by BIMC.
David R. Wilmerding, Jr. 63 Managing Chairman, Gee, Wilmerding &
Gee, Wilmerding & Associates General Associates (investment
Aldwyn Center Partner advisers) since February 1989;
Villanova, PA 19085 Director, Beaver Management Corporation;
Director, Mutual Fire Marine & Inland
Insurance Co., Inc; Director, US
Retirement Communities, Inc.; Director
or Trustee of 2 other investment
companies advised by BIMC.
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PRINCIPAL OCCUPATIONS
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS AGE WITH THE FUND AND CURRENT AFFILIATIONS
---------------- --- ------------- ------------------------
Edward J. Roach 74 Treasurer Certified Public Accountant; Partner
400 Bellevue Parkway of the accounting firm of Main
Wilmington, DE 19809 Hurdman until 1981; Vice Chairman of the
Board, Fox Chase Cancer Center; Trustee
Emeritus, Pennsylvania School for the Deaf;
Trustee Emeritus, Immaculata College;
Former Director, Biotrol USA, Inc.;
President, Vice President and/or
Treasurer of 2 other investment
companies advised by BIMC; Director,
The Bradford Funds, Inc.; former
Treasurer and/or Vice President of 6
other investment companies advised
by BIMC until 1998.
Morgan R. Jones 59 Secretary Partner of the law firm of
PNB Building Drinker Biddle & Reath LLP,
1345 Chestnut Street Philadelphia, Pennsylvania.
Philadelphia, PA 19107-3496
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(c) Inapplicable.
(d) For the period January 1, 1998 through May 31, 1998, the Fund paid each Managing General Partner, except for Mr. Caldwell, at the rate of $6,000 annually, and paid the Chairman an additional $4,000 annually. Effective June 1, 1998, the basis of the Managing General Partners' compensation was amended so that the Fund pays each Managing General Partner, except for Mr. Caldwell, at the rate of $10,000 annually, and pays the Chairman an additional $8,000 annually. The adjustment to the Managing General Partners' compensation was made on a pro-rata annual basis. The Fund expects that the basis of such compensation for 1999 will that the Fund pays each Managing General Partner, except for Mr. Caldwell, at the rate of $10,000 annually, and pays the Chairman an additional $8,000 annually. The following table provides information concerning the compensation of each of the Fund's Managing General Partners for services rendered during the Fund's last fiscal year ended December 31, 1998:
PENSION OR ESTIMATED TOTAL
AGGREGATE RETIREMENT BENEFITS ANNUAL COMPENSATION FROM
NAME OF PERSON/ COMPENSATION ACCRUED AS PART BENEFITS UPON THE FUND AND
POSITION FROM THE FUND OF FUND EXPENSES RETIREMENT FUND COMPLEX (1)
--------------- ------------- ------------------- ------------- -------------------
Richard C. Caldwell $ 0 None None $ 0
Managing General Partner
Robert R. Fortune $16,000 None None $67,300(5) (2)
President and Chairman
of the Managing General
Partners
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PENSION OR ESTIMATED TOTAL
AGGREGATE RETIREMENT BENEFITS ANNUAL COMPENSATION FROM
NAME OF PERSON/ COMPENSATION ACCRUED AS PART BENEFITS UPON THE FUND AND
POSITION FROM THE FUND OF FUND EXPENSES RETIREMENT FUND COMPLEX (1)
--------------- ------------- ------------------- ------------- -------------------
G. Willing Pepper $9,000 None None $94,300(6) (2)
Managing General Partner
Langhorne B. Smith $9,000 None None $15,000(2) (2)
Managing General Partner
David R. Wilmerding, Jr. $9,000 None None $77,675(3) (2)
Managing General Partner
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2. Total number of investment companies within the Fund Complex of which the Managing General Partners served as director, trustee or managing general partner during the fiscal year ended December 31, 1998.
The Fund has a retirement plan for eligible employees. For the fiscal year ended December 31, 1998, the Fund contributed a total of $2,026 to the retirement plan, and, based upon prior practice, it may be anticipated that the Fund will contribute to the retirement plan during the current fiscal year an amount equal to 10% of the compensation of retirement plan participants for the year. Such contribution, based upon annual rates of compensation now in effect, would approximate $2,300. Under the retirement plan, each participant is entitled to his or her vested portion of the contributions made by the Fund based upon his or her compensation.
(e) Inapplicable.
ITEM 14. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
(a) As of April 30, 1999, no investor owned beneficially more than 5% of the Fund's outstanding equity securities.
(b) As of April 30, 1999, no investor owned of record or beneficially more than 5% of the Fund's outstanding equity securities.
(c) As of April 30, 1999, all officers and Managing General Partners of the Fund as a group beneficially owned less than 1% of the Fund's outstanding equity securities.
ITEM 15. INVESTMENT ADVISORY AND OTHER SERVICES.
(a) BIMC's offices are located at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. BFM's offices are located at 345 Park Avenue,
New York, New York 10154. All of the capital stock of BIMC and BFM is owned by BlackRock Advisors, Inc. (formerly, PNC Asset Management Group, Inc.). All of the capital stock of BlackRock Advisors, Inc., which has offices at 345 Park Avenue, New York, New York 10154, is owned by BlackRock, Inc. A majority of the capital stock of BlackRock, Inc., which has offices at 345 Park Avenue, New York, New York 10154 is owned by PNC Asset Management, Inc. PNC Asset Management, Inc. is under the control of PNC Bank. All of the capital stock of PNC Bank, which has banking offices at 1600 Market Street, Philadelphia, Pennsylvania 19103, is owned by PNC Bancorp, Inc., which has offices at 5th and Wood Streets, Pittsburgh, Pennsylvania 15265. All of the capital stock of PNC Bancorp, Inc. is owned by PNC Bank Corp., a publicly-held corporation with principal offices in Pittsburgh, Pennsylvania.
For the services provided by BFM and BIMC and the expenses assumed by them under the Advisory Agreement, the Fund has agreed to pay BIMC a fee, computed daily and payable monthly, at the annual rate of 4/10ths of 1% of the first $100,000,000 of the Fund's net assets, plus 3/10ths of 1% of the net assets exceeding $100,000,000.
The Fund paid $1,194,793, $1,463,053 and $1,230,253 for investment advisory services for the years ended December 31, 1996, 1997 and 1998, respectively.
(b) Inapplicable.
(c) BFM and BIMC have agreed to bear all expenses incurred by them in connection with their activities other than the cost of securities (including brokerage commissions, if any) purchased for the Fund.
(d) Inapplicable.
(e) Inapplicable.
(f) Inapplicable.
(g) Inapplicable.
(h) Other Service Providers.
The custodian of the Fund's portfolio securities is the Wilmington Trust Company, located at Wilmington Trust Center, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890. The custodian has agreed to provide certain services as depository and custodian for the Fund.
The Fund's transfer agent and dividend disbursing agent is PFPC, located at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PFPC is an affiliate of PNC Bank. For its services, the Fund pays PFPC monthly fees equal to $12,500 per year plus out-of-pocket expenses.
The Fund's independent accountants are PricewaterhouseCoopers LLP, located at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103. The following is a general description of the services performed by PricewaterhouseCoopers LLP: auditing and reporting upon financial statements; reviewing semi-annual report; and reporting on internal control structure for inclusion in Form N-SAR.
ITEM 16. BROKERAGE ALLOCATION AND OTHER PRACTICES.
(a) The Fund effects transactions in portfolio securities through brokers and dealers. The Fund paid aggregate brokerage commissions of $19,505, $5,850 and $0 for the years ended December 31, 1996, 1997 and 1998, respectively.
(b) Inapplicable.
(c) In placing orders with brokers and dealers for purchases and sales of securities, BIMC attempts to obtain the best net price and the most favorable execution of its orders. In seeking best execution, BIMC uses its best judgment to evaluate the terms of a transaction, giving consideration to all relevant factors including the nature of the transaction and of the markets for the security, the financial condition and execution and settlement capabilities of the broker-dealer, and the reasonableness of any brokerage commission. Where the terms of a transaction are comparable, BIMC may give consideration to firms which supply investment research, statistical and other services to the Fund or to BFM, although there are no agreements to that effect with any such firm. Research and statistical material furnished by brokers without cost to BFM and BIMC may tend to benefit the Fund or other clients of BFM and BIMC by improving the quality of advice given.
(d) Inapplicable.
(e) Inapplicable.
ITEM 17. CAPITAL STOCK AND OTHER SECURITIES.
(a) The Fund has one class of partnership interest, no par value (the "Shares"). All Shares are entitled to participate equally in distributions declared by the Board of Managing General Partners. Each full Share entitles the record holder thereof to one full vote, and each fractional Share to a fractional vote, on all matters submitted to the shareholders. Partners are not entitled to cumulative voting in elections for the Managing General Partners. Each Share has equal liquidation rights. There are no pre-emptive rights or conversion rights.
The Fund is a limited partnership formed under The Uniform Limited Partnership Act of California. Limited Partners generally are not personally liable for liabilities of the Fund. However, if the Fund were unable to pay its liabilities, recipients of distributions from the Fund could be liable to certain creditors of the Fund to the extent of such distributions, plus interest. The Fund believes that, because of the nature of the Fund's business, the assets and insurance of the Fund and of the General Partners, and the Fund's ability to contract with third parties to prevent recourse by the party against a Limited Partner, it is unlikely that Limited Partners will receive distributions which have to be returned or that they will be subject to liability as General Partners. In the event that a Limited Partner should be found to be liable as a General Partner, then, to the extent the assets and insurance of the Fund and of the General Partners were insufficient to reimburse a Limited Partner, he would be required to personally satisfy claims of creditors against the Fund. The rights of the holders of Shares may not be modified otherwise than by the vote of a majority of outstanding shares.
(b) Inapplicable.
ITEM 18. PURCHASE, REDEMPTION, AND PRICING OF SHARES.
(a) Inapplicable.
(b) Inapplicable.
(c) See Item 7(a).
(d) Inapplicable.
ITEM 19. TAXATION OF THE FUND.
The Revenue Act of 1987 added section 7704 to the Code. Section 7704, which is also known as the publicly traded partnership rules, provides that a publicly traded partnership is to be treated as a corporation for federal tax purposes. A publicly traded partnership is defined to include any partnership whose interests are (1) traded on an established securities market, or (2) readily tradable on a secondary market (or the substantial equivalent thereof). A transitional rule postponed the application of section 7704 to a partnership which was a publicly traded partnership on December 17, 1987 until its first taxable year beginning after December 31, 1997 provided that the partnership does not add a substantial new line of business. The Fund was within the definition of a publicly traded partnership and was eligible for the transitional rule.
In connection with its deemed incorporation for federal income tax purposes on January 1, 1998, the Fund has elected to be taxed federally as a RIC. This election permits the Fund to receive pass through tax treatment similar to that of a regular partnership. In order to qualify as a RIC, the Fund will have to comply with certain income, diversification and distribution requirements set forth in Subchapter M of the Code. If the Fund elected not to be a RIC or failed to meet the RIC requirements of Subchapter M of the Code, it would be taxed as a regular corporation and any distributions to its partners would be taxed as ordinary dividend income to the extent of the Fund's earnings and profits; unless the Fund elected pursuant to section 7704(g) of the Code to retain partnership status and become subject to the applicable partnership-level tax.
Although the Fund is deemed a corporation for federal income tax purposes as of January 1, 1998 and intends to qualify as a RIC thereafter, the Fund expects that it will continue to be organized for all other purposes as a California Limited Partnership.
ITEM 20. UNDERWRITERS.
Inapplicable.
ITEM 21. CALCULATION OF PERFORMANCE DATA.
Inapplicable.
ITEM 22. FINANCIAL STATEMENTS.
The audited financial statements, notes and related report of PricewaterhouseCoopers LLP, independent accountants, contained in the Annual Report to partners for the fiscal year ended December 31, 1998 are incorporated herein by reference. No other parts of the Fund's Annual Report are incorporated herein by reference. The financial statements and notes thereto included in the Fund's Annual Report have been incorporated herein in reliance upon the report of PricewaterhouseCoopers LLP given on the authority of said firm as experts in accounting and auditing. A copy of the Fund's Annual Report may be obtained by writing to the Fund or by calling (302) 792-2555.
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Amended and Restated Certificate and Agreement of Limited Partnership is incorporated herein by reference to Exhibit No. 1 of Amendment No. 21 to the Fund's Registration Statement on Form N-1A (File No. 811-2631) as filed with the Securities and Exchange Commission (the "SEC") on April 22, 1998 ("Amendment #21").
(b)(1) Code of Regulations is incorporated herein by reference to Exhibit No. 2(a) of Amendment No. 19 to the Fund's Registration Statement on Form N-1A (File No. 811-2631) as filed with the SEC on April 26, 1996 ("Amendment #19").
(b)(2) Amendment No. 1 to the Code of Regulations is incorporated herein by reference to Exhibit No. 2(b) of Amendment #19.
(c) See Articles IV, V, VI, VII and VIII of the Amended and Restated Certificate and Agreement of Limited Partnership, which is incorporated herein by reference to Exhibit No. 1 of Amendment #21, and Articles II, V and VI of the Code of Regulations, which is incorporated herein by reference to Exhibit No. 2(a) of Amendment #19.
(d)(1) Advisory Agreement dated January 1, 1998 is incorporated herein by reference to Exhibit No. 5 of Amendment #21.
(d)(2) Assumption Agreement dated June 18, 1998.
(e) Inapplicable.
(f) Amended and Restated Fund Office Retirement Profit-Sharing Plan and Trust Agreement dated January 1, 1998 is incorporated herein by reference to Exhibit No. 7 of Amendment #21.
(g) Amended and Restated Custodian Agreement dated October 15, 1983 is incorporated herein by reference to Exhibit No. 8 of Amendment #19.
(h)(1) Transfer Agency Agreement dated August 1, 1984.
(h)(2) Amendment No. 1 dated July 31, 1986 to the Transfer Agency Agreement.
(i) Inapplicable.
(j) Consent of Pricewaterhouse Coopers LLP.
(k) Inapplicable.
(l)(1) Agreement dated September 15, 1976 relating to Initial Capitalization is incorporated herein by reference to Exhibit No. 13(a) of Amendment #19.
(l)(2) Amendment No. 1 to Agreement dated September 15, 1976 relating to Initial Capitalization is incorporated herein by reference to Exhibit No. 13(b) of Amendment #19.
(m) Inapplicable.
(n) Financial Data Schedule.
(o) Inapplicable.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
Inapplicable.
ITEM 25. INDEMNIFICATION.
Indemnification of the Fund's Transfer Agent against certain stated liabilities is provided for in Section 16 of the Transfer Agency Agreement, which is filed herewith as Exhibit h(1).
The Fund has obtained from a major insurance carrier a director's and officers' liability policy covering certain types of errors and omissions.
Section 3.6 of Article III of the Fund's Amended and Restated Certificate and Agreement of Limited Partnership, which is incorporated herein by reference to Exhibit No. 1 of Amendment #21, and Section 3.13 of Article III of the Fund's Code of Regulations, which is incorporated herein by reference to Exhibit No. 2(a) of Amendment #19, each provide for the indemnification of the Fund's Managing General Partners and officers.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
(a) 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 SEC pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-13304).
(b) Pursuant to an Assumption Agreement between the Fund, BIMC, PNC Bank and BFM, BFM has assumed PNC Bank's rights and obligation related to the management of the investments of the Fund, and became a party to the Advisory Agreement in substitution for PNC Bank. The information required by this Item 26 with respect to each director, officer and partner of BFM is incorporated by reference to Schedules A and D of Form ADV filed by BFM with the SEC pursuant to the Investment Advisers Act of 1940 (SEC File No. 801-48433).
ITEM 27. PRINCIPAL UNDERWRITERS.
Inapplicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
(1) BlackRock Institutional Management Corporation, Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809 (records) relating to its function as co-investment adviser).
(2) BlackRock Financial Management, Inc., 345 Park Avenue, New York, New York 101054 (records relating to its function as co-investment adviser).
(3) PFPC Inc., Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809 (records relating to its functions as transfer agent and dividend disbursing agent).
(4) Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890 (records relating to its function as custodian).
(5) Drinker Biddle & Reath LLP, Philadelphia National Bank Building, 1345 Chestnut Street, Philadelphia, Pennsylvania 19107 (charter, by-laws and minute books).
ITEM 29. MANAGEMENT SERVICES.
Inapplicable.
ITEM 30. UNDERTAKINGS.
Inapplicable.
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the Fund has duly caused this Amendment No. 22 to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wilmington, and State of Delaware, on the 26th day of April, 1999.
CHESTNUT STREET EXCHANGE FUND
By: /s/ Edward J. Roach __________________________ Edward J. Roach Treasurer |
EXHIBIT INDEX
EXHIBIT DESCRIPTION
(d)(2) Assumption Agreement.
(h)(1) Transfer Agency Agreement dated August 1, 1984.
(h)(2) Amendment No. 1 dated July 31, 1986 to the Transfer Agency
Agreement.
(j) Consent of Pricewaterhouse Coopers LLP.
(n) Financial Data Schedule.
|
Exhibit (d)(2)
AGREEMENT
AGREEMENT made as of June 18, 1998 among PNC Bank, N.A., a national banking association ("PNC Bank"), BlackRock Institutional Management Corporation, a Delaware corporation ("BIMC"), BlackRock Financial Management, Inc., a Delaware corporation ("BFM") and Chestnut Street Exchange Fund (the "Fund").
WHEREAS, the Fund is registered as an open-end management investment company under the Investment Company Act of 1940;
WHEREAS, PNC Bank and BIMC are co-investment advisers pursuant to an Advisory Agreement dated January 1, 1998 among PNC Bank, BIMC and the Fund ("Advisory Agreement");
WHEREAS, PNC Bank, as well as BIMC and BFM, each a majority-owned, indirect subsidiary of PNC Bank, are restructuring their operations;
WHEREAS, PNC Bank, BIMC and BFM desire to have BFM assume the rights and obligations of PNC Bank under the Advisory Agreement;
NOW THEREFORE, the parties hereto, intending to be legally bound, agree as follows:
1. PNC Bank, BIMC and BFM represent and warrant to the Fund that the changes provided for in this Agreement do not constitute a change of control or an "assignment" of the Advisory Agreement within the meaning of Section 2a(9) of the Investment Company Act of 1940, in that the portfolio manager and advisory personnel, and the ultimate control of the services to be rendered to the Fund will remain unchanged after this Agreement is effective.
2. BFM hereby assumes the rights and obligations of PNC Bank under the Advisory Agreement, including all of the rights and obligations related to the management of the investments of the Fund, and becomes a party to the Advisory Agreement in substitution for PNC Bank.
3. PNC Bank acknowledges that any compensation by BIMC to it provided in Section 8 of the Advisory Agreement shall terminate as the date hereof, and the advisory fee paid by the Fund pursuant to Section 8 shall be paid to BIMC for the services of BIMC and BFM;
4. By reason of the assumption of all of its rights and obligations hereunder by BFM, PNC Bank shall cease to be a party to the Advisory Agreement effective on the date hereof.
5. BFM shall indemnify, defend and hold PNC Bank harmless from and against any loss, damages or expense (including legal fees and expenses), relating to the performance or nonperformance by BFM of the obligations of PNC Bank under the Advisory Agreement that are being assumed by BFM pursuant to this Assumption Agreement, that pertain to the period beginning with the date of this Assumption Agreement.
6. PNC Bank shall indemnify, defend and hold BFM harmless from and against any loss, damages, expense or interest (including legal fees and expenses) relating to the performance or nonperformance by PNC Bank of the obligations of PNC Bank contained in the Advisory Agreement that pertain to the period ending on the date immediately preceding the date of this Assumption Agreement.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
BLACKROCK INSTITUTIONAL MANAGEMENT
CORPORATION
By: ______________________________
(Authorized Officer)
PNC BANK, N.A.
By: ______________________________
(Authorized Officer)
BLACKROCK FINANCIAL MANAGEMENT, INC.
By: ______________________________
(Authorized Officer)
CHESTNUT STREET EXCHANGE FUND
By:______________________________
(Authorized Officer)
Exhibit (h)(1)
TRANSFER AGENCY AGREEMENT
AGREEMENT made as of August 1, 1984, by and between CHESTNUT STREET EXCHANGE FUND, a California Limited Partnership (the "Fund"), and PROVIDENT FINANCIAL PROCESSING CORPORATION, a Delaware corporation ("PFPC"), which is an indirect, wholly-owned subsidiary of PNC Financial Corp.
R E C I T A L
WHEREAS, the Fund desires to retain PFPC to serve as the Fund's transfer agent and dividend disbursing agent, and PFPC is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints PFPC to serve as transfer agent and dividend disbursing agent for the Fund with respect to the units of limited partnership interest of the Fund ("Shares"), for the period and on the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Paragraph 15 of this Agreement.
2. Delivery of Documents. The Fund has furnished PFPC with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Managing General Partners authorizing the appointment of PFPC as transfer agent and dividend disbursing agent for the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Fund's officers and/or other persons authorized to sign Written Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Restated Certificate and Agreement of Limited Partnership recorded with the office of the County Recorder of Los Angeles County, California and all restatements and amendments thereto (such Restated Certificate and Agreement of Limited Partnership, as presently in effect and as it may hereinafter be restated or amended, is herein called the "Certificate"); and
(d) The Fund's most recent prospectus (such prospectus, as presently in effect and all amendments and supplements thereto are herein called the "Prospectus").
The Fund will furnish PFPC from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term "Authorized Person" means any person duly authorized to give Oral and Written Instructions on behalf of the Fund and listed on the Certificate annexed hereto as Appendix A or any amendment thereto as may be received by PFPC from time to time.
(b) "Oral Instructions". As used in this Agreement, the term "Oral Instructions" means verbal instructions actually received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized Person. The Fund agrees to deliver to PFPC, at the time and in the manner specified in Paragraph 4(b) of this Agreement, Written Instructions confirming Oral Instructions.
(c) "Written Instructions". As used in this Agreement, the term "Written Instructions" means written instructions delivered by mail, tested telegram, cable, telex or facsimile sending device, and received by PFPC and signed by an Authorized Person unless otherwise required by a resolution of the Managing General Partners furnished to Provident pursuant to Section 2 hereof.
4. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon Oral or Written Instructions. PFPC may assume that any Oral or Written Instructions received hereunder are not in any way inconsistent with any provisions of the Fund's Agreement of Limited Partnership or any resolution of the Managing General Partners.
(b) PFPC shall be entitled to rely upon any Oral Instructions and any Written Instructions actually received by PFPC pursuant to this Agreement. The Fund agrees to forward to PFPC Written Instructions confirming Oral Instructions in such manner that the Written Instructions are received by PFPC, whether by hand delivery, telex, facsimile sending device or otherwise, by the close of business of the same day that such Oral Instructions are given to PFPC. The Fund agrees that the fact that such confirming Written Instructions are not received by PFPC shall in no way affect the validity of the transactions or enforceability of the transactions authorized by the Fund by giving Oral Instructions. The Fund agrees that PFPC shall incur no liability to the Fund in acting upon Oral Instructions given to PFPC hereunder concerning such transactions provided such instructions reasonably appear to have been received from an Authorized Person.
5. Transactions Not Requiring Instructions. In the absence of contrary Written Instructions, PFPC is authorized to take the following actions:
(a) Issuance of Shares. PFPC shall issue and credit the account of an investor with Fund Shares in the manner described in the Prospectus.
(b) Redemptions. Upon receipt of a redemption order, PFPC shall redeem Fund Shares in the manner described in the Prospectus.
6. Dividends and Distributions. The Fund shall furnish PFPC with appropriate evidence of action by the Fund's Managing General Partners authorizing the declaration of dividends and distributions as described in the Prospectus. After deducting any amount required to be withheld by any applicable tax laws, rules and regulations or other applicable laws, rules and regulations, PFPC shall, as agent for each Shareholder and in accordance with the provisions of the Fund's Prospectus, pay dividends in cash, or, if requested in proper form by a Shareholder, invest dividends in Shares, in the manner described in the Prospectus.
PFPC shall prepare, file with the Internal Revenue Service, and address and mail to Shareholders such returns and information relating to dividends and distributions paid by the Fund as are required to be so prepared, filed and mailed by applicable laws, rules and regulations, or such substitute form of notice as may from time to time be permitted or required by the Internal Revenue Service. On behalf of the Fund, PFPC shall pay on a timely basis to the appropriate Federal authorities any taxes required by applicable Federal tax laws to be withheld on dividends and distributions paid by the Fund.
7. Communications with Shareholders.
(a) Communications to Shareholders. PFPC will address and mail all communications by the Fund to its Shareholders, including reports to Shareholders, confirmations of purchases and redemptions of Fund Shares, dividend and distribution notices
and proxy material for its annual meetings of partners. PFPC will receive and tabulate the proxy cards for the annual meetings of the Fund's partners.
(b) Correspondence. PFPC will answer such correspondence from Shareholders, securities brokers and others relating to its duties hereunder and such other correspondence as may from time to time be mutually agreed upon between PFPC and the Fund.
8. Records. PFPC shall maintain records of the accounts for each Shareholder showing the following information:
(i) name, address and United States Tax Identification or Social Security number;
(ii) number of Shares held and number of Shares for which certificates, if any, have been issued, including certificate numbers and denominations;
(iii) historical information regarding the account of each Shareholder, including dividends and distributions paid and the date and price for all transactions on a Shareholder's account;
(iv) any stop or restraining order placed against a Shareholder's account;
(v) any correspondence relating to the current maintenance of a Shareholder's account;
(vi) information with respect to withholdings; and
(vii) any information required in order for PFPC to perform any calculations contemplated or required by this Agreement.
The books and records pertaining to the Fund which are in the possession of PFPC shall be the property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities laws and rules and regulations. The Fund, or the Fund's authorized representatives, shall have access to such books and records at all times during PFPC's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC to the Fund or the Fund's authorized representative at the Fund's expense.
9. Reports. PFPC shall furnish the Fund with the following reports:
(a) such periodic and special reports as the Fund may reasonably request; and
(b) such other information, including Shareholder lists and statistical information concerning accounts as may be agreed upon from time to time between the Fund and PFPC.
In addition, PFPC shall prepare and submit for recording, in accordance with the requirements of any applicable jurisdiction, amendments to the Fund's Certificate as shall be required from time to time.
10. Cooperation With Accountants. PFPC shall cooperate with the Fund's independent public accountants and shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their unqualified opinion, including but not limited to the opinion included in the Fund's annual report on Form N-lR or such substitute report as may be in effect from time to time.
11. Confidentiality. PFPC agrees on behalf of itself and its employees to treat confidentially all records and other information relative to the Fund and its prior, present or potential Shareholders except, after prior notification to and approval in writing by the Fund,
which approval shall not be unreasonably withheld and may not be withheld where PFPC 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 Fund.
12. Equipment Failures. In the event of equipment failures beyond PFPC's control, PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall have no liability with respect thereto. The foregoing obligation shall not extend to computer terminals located outside of premises maintained by PFPC. PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available.
13. Right to Receive Advice.
(a) Advice of Fund. If PFPC shall be in doubt as to any action to be taken or omitted by it, it may request, and shall receive, from the Fund directions or advice, including Oral or Written Instructions where appropriate.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question of law involved in any action to be taken or omitted by PFPC, it may request advice at its own cost from counsel of its own choosing (who may be counsel for the Fund or PFPC, at the option of PFPC).
(c) Conflicting Advice. In case of conflict between directions, advice or Oral or Written Instructions received by PFPC pursuant to subparagraph (a) of this paragraph and advice received by PFPC pursuant to subparagraph (b) of this paragraph, PFPC shall be entitled to rely on and follow the advice received pursuant to the latter provision alone.
(d) Protection of PFPC. PFPC shall be protected in any action or inaction which it takes in reliance on any directions, advice or Oral or Written Instructions received pursuant to subparagraphs (a) or (b) of this paragraph which PFPC, after receipt of any such directions, advice or Oral or Written Instructions, in good faith believes to be consistent with such directions, advice or Oral or Written Instructions, as the case may be. However, nothing in this paragraph shall be construed as imposing upon PFPC any obligation (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions when received, unless, under the terms of another provision of this Agreement, the same is a condition to PFPC's properly taking or omitting to take such action. Nothing in this subsection shall excuse PFPC when an action or omission on the part of PFPC constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC of any duties, obligations or responsibilities not expressly provided for in this Agreement or PFPC's negligent failure to perform its duties expressly provided for in this Agreement.
14. Compliance with Governmental Rules and Regulations. The Fund assumes full responsibility for insuring that the contents of each prospectus of the Fund complies with all applicable requirements of the Securities Act of 1933 (the "1933 Act"), the Investment Company Act of 1940 (the "1940 Act") and any laws, rules and regulations of governmental authorities having jurisdiction.
15. Compensation. As compensation for the services rendered by PFPC from the date of this Agreement to July 31, 1986, the Fund will pay to PFPC monthly, fees equal to $12,500 per year and PFPC's out-of-pocket expenses relating to such services, including, but not limited to, expenses of postage, telephone, TWX rental and line charges, communications forms,
proxy forms and Shareholder consultation expenses. In addition, the Fund shall pay PFPC $2,500 representing payments made by PFPC for tax accounting services from the period January 1, 1984 through July 31, 1984. The compensation to be paid to PFPC after July 31, 1986 shall be agreed upon by the parties hereto and included as an amendment hereto.
16. Indemnification. The Fund agrees to indemnify and hold harmless PFPC and its nominees from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the 1933 Act, the Securities Exchange Act of 1934, the 1940 Act, and any state and foreign securities and blue sky laws, all as or to be amended from time to time) and expenses, including (without limitation) attorneys' fees and disbursements, arising directly or indirectly from any action or thing which PFPC takes or does or omits to take or do (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon Oral or Written Instructions, provided, that neither PFPC nor any of its nominees shall be indemnified against any liability to the Fund or to its Shareholders (or any expenses incident to such liability) arising out of (x) PFPC's or such nominee's own willful misfeasance, bad faith or gross negligence or reckless disregard of its duties in connection with the performance of any duties, obligations or responsibilities not expressly provided for in this Agreement or (y) PFPC's or such nominee's own negligent failure to perform its duties expressly provided for in this Agreement or otherwise agreed to by PFPC in writing.
17. Responsibility of PFPC. PFPC shall be under no duty to take any action on behalf of the Fund except as specifically set forth herein or as may be specifically agreed to by PFPC in writing. In the performance of its duties hereunder, PFPC shall be obligated to exercise care and diligence and to act in good faith and to use its best efforts within reasonable limits to ensure the accuracy and completeness of all services performed under this Agreement.
PFPC shall be responsible for its own negligent failure to perform its duties under this Agreement, but to the extent that duties, obligations and responsibilities are not expressly set forth in this Agreement, PFPC shall not be liable for any act or omission which does not constitute willful misfeasance, bad faith or gross negligence on the part of PFPC or reckless disregard of such duties, obligations and responsibilities. Without limiting the generality of the foregoing or of any other provision of this Agreement, PFPC in connection with its duties under this Agreement shall not be under any duty or obligation to inquire into and shall not be liable for or in respect of (a) the validity or invalidity or authority or lack thereof of any Oral or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, if any, and which PFPC reasonably believes to be genuine, or (b) delays or errors or loss of data occurring by reason of circumstances beyond PFPC's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown (except as provided in Paragraph 12 hereof), flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply.
18. Fund Liability. The persons executing this Agreement on behalf of the Fund have executed the Agreement as Managing General Partners or officers of the Fund and not individually. The obligations of the Fund hereunder and any liabilities or claims in connection therewith are not binding upon any of the Limited Partners of the Fund individually, but are binding only upon the assets and property of the Fund.
19. Duration and Termination. This Agreement shall continue until
termination by the Fund on sixty (60) days' written notice or by PFPC on ninety
(90) days' written notice.
20. Notices. All notices and other communications, including Written Instructions (collectively referred to as "Notice" or "Notices" in this paragraph), hereunder shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notices shall be addressed (a) if to PFPC at PFPC's address, P.O. Box 8950, Wilmington, Delaware 19899; (b) if to the Fund, at the address of the Fund; or (c) if to neither of the foregoing, at such other address as shall have been notified to the sender of any such Notice or other communication. If the location of the sender of a Notice and the address of the addressee thereof are, at the time of sending, more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given five days after it is sent, or if sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately, and, if the location of the sender of a Notice and the address of the addressee thereof are, at the time of sending, not more than 100 miles apart, the Notice may be sent by first-class mail, in which case it shall be deemed to have been given three days after it is sent, or if sent by messenger, it shall be deemed to have been given on the day it is delivered, or if sent by confirming telegram, cable, telex or facsimile sending device, it shall be deemed to have been given immediately. All postage, cable, telegram, telex and facsimile sending device charges arising from the sending of a Notice hereunder shall be paid by the sender.
21. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
22. Amendments. This Agreement or any part hereof may be changed or waived only by an instrument in writing signed by the party against which enforcement of such change or waiver is sought.
23. Assignment. This Agreement may not be assigned by PFPC without the Fund's consent. PFPC may sub-contract to qualified entities certain of its duties hereunder, provided, however, that PFPC shall remain responsible for the performance of all of its duties hereunder notwithstanding any such sub-contracting arrangement.
24. Miscellaneous. This Agreement embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties hereto may embody in one or more separate documents their agreement, if any, with respect to Oral Instructions. 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. This Agreement shall be deemed to be a contract made in Delaware and governed by Delaware law. 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 and shall inure to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below on the day and year first above written.
CHESTNUT STREET EXCHANGE FUND
Attest: /s/ Morgan R. Jones By /s/ Edward J. Roach
--------------------------
[SEAL] PROVIDENT FINANCIAL PROCESSING
CORPORATION
Attest: /s/ John D. Silcox, Jr. By /s/ John W. McLaughlin
--------------------------
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Exhibit (h)(2)
AMENDMENT NO. 1 TO TRANSFER AGENCY AGREEMENT
This Agreement, dated as of the 31st day of July, 1986, is made between Chestnut Street Exchange Fund (the "Fund"), a California limited partnership, and Provident Financial Processing Corporation ("PFPC"), a Delaware corporation.
WITNESSETH:
WHEREAS, PFPC and the Fund wish to amend the Transfer Agency Agreement between them made as of August 1, 1984 (the "Transfer Agency Agreement"); and
WHEREAS, the Fund's Managing General Partners have approved the amendment effected by this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in the Transfer Agency Agreement, and intending to be legally bound hereby, the Fund and PFPC hereby agree that Paragraph 15 of the Transfer Agency Agreement shall be amended and restated to read in full as follows:
15. Compensation. As compensation for the services rendered by PFPC from the date of this Agreement, the Fund will pay to PFPC monthly fees equal to $12,500 per year and PFPC's out-of-pocket expenses relating to such services, including, but not limited to, expenses for postage, Federal Express, telephone, TWX rental and line charges, communications forms, proxy forms and Shareholder consultation expenses.
IN WITNESS WHEREOF, the Fund and PFPC have caused this Agreement to be executed by duly authorized officers of each, as of the date first above written.
CHESTNUT STREET EXCHANGE FUND
Attest: /s/ Morgan R. Jones By: /s/ Edward J. Roach
----------------------- -----------------------
Title: Vice President: Title: Vice President
--------------- --------------
Assistant Secretary
PROVIDENT FINANCIAL
PROCESSING CORPORATION
Attest: /s/ By: /s/ Robert J. Perlswig
----------------------- -----------------------
Title: Vice President: Title: Vice President
--------------- --------------
Assistant Secretary
|
Exhibit (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment No. 22 to the Registration Statement on Form N-1A (File No. 811-2631) under the Investment Company Act of 1940, of our report dated January 29, 1999 on our audit of the financial statements and financial highlights of Chestnut Street Exchange Fund, which report is included in the Annual Report to Shareholders for the year ended December 31, 1998, which is incorporated by reference in the Post-Effective Amendment to the Registration Statement. We also consent to the reference to our Firm under the headings "Investment Advisory and Other Services," and "Financial Statements" in the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP |
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 29, 1999
[ARTICLE] 6
[CIK] 0000019780
[NAME] CHESTNUT STREET EXCHANGE FUND
[PERIOD-TYPE] YEAR [FISCAL-YEAR-END] DEC-31-1998 [PERIOD-END] DEC-31-1998 [INVESTMENTS-AT-COST] 59818164 [INVESTMENTS-AT-VALUE] 411589571 [RECEIVABLES] 530742 [ASSETS-OTHER] 33042 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 412153355 [PAYABLE-FOR-SECURITIES] 0 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 3134490 [TOTAL-LIABILITIES] 3134490 [SENIOR-EQUITY] 0 [PAID-IN-CAPITAL-COMMON] 85545567 [SHARES-COMMON-STOCK] 1176990 [SHARES-COMMON-PRIOR] 1199810 [ACCUMULATED-NII-CURRENT] 5721 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] 3474553 [OVERDISTRIBUTION-GAINS] 0 [ACCUM-APPREC-OR-DEPREC] 351771407 [NET-ASSETS] 409018865 [DIVIDEND-INCOME] 5557888 [INTEREST-INCOME] 303071 [OTHER-INCOME] 0 [EXPENSES-NET] (1420401) [NET-INVESTMENT-INCOME] 4440558 [REALIZED-GAINS-CURRENT] 3474553 [APPREC-INCREASE-CURRENT] 57201296 [NET-CHANGE-FROM-OPS] 69182109 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] (4453148) [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 0 [NUMBER-OF-SHARES-REDEEMED] (24026) [SHARES-REINVESTED] 1206 [NET-CHANGE-IN-ASSETS] 57436453 [ACCUMULATED-NII-PRIOR] 18312 [ACCUMULATED-GAINS-PRIOR] 443823 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] 0 [GROSS-ADVISORY-FEES] 1230253 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 1420401 [AVERAGE-NET-ASSETS] 376750899 [PER-SHARE-NAV-BEGIN] 293.03 [PER-SHARE-NII] 3.76 [PER-SHARE-GAIN-APPREC] 54.49 [PER-SHARE-DIVIDEND] (3.77) [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 347.51 [EXPENSE-RATIO] .004 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0 |