UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to section 240.14a-12.
CHESTNUT STREET EXCHANGE FUND
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
CHESTNUT STREET EXCHANGE FUND
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
September 11, 2006
Dear Partner,
A Meeting of Partners of Chestnut Street Exchange Fund (the "Fund") will
be held on September 29, 2006 at 3:00 p.m. (Eastern Time) at the offices of
BlackRock Institutional Management Corporation, 100 Bellevue Parkway, 3rd Floor,
Wilmington, Delaware in the Board Room, for the following purposes:
(1) To approve or disapprove a new investment advisory agreement.
BlackRock, Inc. ("BlackRock"), the parent company of the Fund's current and
proposed advisers, and Merrill Lynch & Co., Inc. ("Merrill Lynch") announced on
February 15, 2006 that they had reached an agreement pursuant to which Merrill
Lynch will contribute its investment management business, Merrill Lynch
Investment Managers, to BlackRock, one of the largest publicly traded investment
management firms in the United States, to form a new asset management company
that will be one of the world's preeminent, diversified global money management
organizations with approximately $1 trillion in assets under management (the
"Transaction"). The new company will operate under the BlackRock name and be
governed by a board of directors with a majority of independent members.
Although BlackRock has informed the Board that it does not believe the
Transaction will be an assignment of the Fund's current investment advisory
agreement under the Investment Company Act of 1940, it is possible that the
Transaction could be determined to be such an assignment, which would result in
the automatic termination of the current agreement. Due to this uncertainty, the
Fund is submitting a new investment advisory agreement to its Partners to
prevent any potential disruption in the adviser's ability to provide services
after the Transaction is completed. THE FUND'S TOTAL FEES FOR ADVISORY SERVICES
WILL REMAIN THE SAME UNDER ITS NEW INVESTMENT ADVISORY AGREEMENT.
(2) To elect five (5) Managing General Partners.
(3) To ratify the selection by the Managing General Partners of Briggs,
Bunting & Dougherty, LLP as the Fund's independent accountants for its fiscal
year ending December 31, 2006.
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Managing General Partners unanimously recommend your approval of the
proposals described in the proxy statement. We value your relationship and look
forward to your vote in favor of the election of Managing General Partners,
ratification of the selection of independent accountants and approval of the new
investment advisory agreement.
Sincerely,
/s/ Edward J. Roach
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President
PLEASE REVIEW THE ENCLOSED MATERIALS AND COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD. IT IS IMPORTANT THAT YOU RETURN THE PROXY CARD OR
VOTE BY ONE OF THE OTHER METHODS DESCRIBED ON THE PROXY CARD TO ENSURE YOUR
SHARES WILL BE REPRESENTED AT THE PARTNER MEETING TO BE HELD ON SEPTEMBER
29, 2006.
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CHESTNUT STREET EXCHANGE FUND
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
NOTICE OF MEETING OF PARTNERS
TO BE HELD ON SEPTEMBER 29, 2006
September 11, 2006
To the Partners of
Chestnut Street Exchange Fund:
NOTICE IS HEREBY GIVEN that a Meeting of Partners (the "Meeting") of
Chestnut Street Exchange Fund (the "Fund") will be held on September 29, 2006 at
3:00 p.m. (Eastern time), at the offices of BlackRock Institutional Management
Corporation, 100 Bellevue Parkway, 3rd Floor, Wilmington, Delaware in the Board
Room.
The Meeting will be held for the following purposes:
1. To approve a new investment advisory agreement between the Fund and
BlackRock Capital Management, Inc.;
2. To elect five (5) Managing General Partners;
3. To ratify the selection of Briggs, Bunting & Dougherty, LLP as the
Fund's independent accountants for its fiscal year ending December
31, 2006; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The proposals stated above are discussed in detail in the attached proxy
statement. Partners of record as of the close of business on August 15, 2006 are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
YOUR MANAGING GENERAL PARTNERS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN
FAVOR OF APPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT, ELECTION OF EACH OF
THE MANAGING GENERAL PARTNER CANDIDATES AND THE RATIFICATION OF THE SELECTION OF
BRIGGS, BUNTING & DOUGHERTY, LLP AS THE FUND'S INDEPENDENT ACCOUNTANTS FOR ITS
FISCAL YEAR ENDING DECEMBER 31, 2006.
PARTNERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE FUND'S
MANAGING GENERAL PARTNERS. YOU MAY ALSO VOTE BY ONE OF THE OTHER METHODS
DESCRIBED ON THE PROXY CARD. THIS IS IMPORTANT FOR THE PURPOSE OF ENSURING A
QUORUM AT THE MEETING. A PROXY MAY BE REVOKED BY ANY PARTNER AT ANY TIME BEFORE
IT IS EXERCISED BY EXECUTING AND SUBMITTING A REVISED PROXY, BY GIVING WRITTEN
NOTICE OF REVOCATION TO THE FUND'S SECRETARY, OR BY WITHDRAWING THE PROXY AND
VOTING IN PERSON AT THE MEETING.
By Order of the Managing General Partners
Michael P. Malloy
Secretary
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CHESTNUT STREET EXCHANGE FUND
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Managing General Partners (the "Board") of
Chestnut Street Exchange Fund (the "Fund") in connection with a meeting (the
"Meeting") of Partners of the Fund. The Meeting will be held at the offices of
BlackRock Institutional Management Corporation, 100 Bellevue Parkway, 3rd Floor,
Wilmington, Delaware in the Board Room on September 29, 2006 at 3:00 p.m.
(Eastern time).
This Proxy Statement and accompanying proxy card will first be mailed on
or about September 11, 2006.
The following proposals will be voted on at the Meeting:
PROPOSAL PARTNERS SOLICITED
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(1) To approve a new investment advisory agreement between the All Partners of the Fund.
Fund and BlackRock Capital Management, Inc.
(2) To elect five (5) Managing General Partners. All Partners of the Fund.
(3) To ratify the selection of Briggs, Bunting & Dougherty, LLP All Partners of the Fund.
as the Fund's independent accountants for its fiscal year ending
December 31, 2006.
Only Partners of record of the Fund at the close of business on August 15,
2006, the record date for the Meeting ("Record Date"), will be entitled to
notice of and to vote at the Meeting. As of the Record Date, there were 778,006
outstanding units of partnership interest ("Shares") of the Fund.
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. Shares may
be voted in person, by proxy, by telephone or by internet voting.
Partners are requested to execute and return promptly in the enclosed
envelope the accompanying proxy card which is being solicited by the Board.
Also, please refer to your individual proxy card for other convenient voting
options that may be available to you, including telephone and internet voting.
If you have any questions, please call 1-888-791-6187 to speak to a
representative.
1
ADP has been retained to solicit proxies in connection with the Meeting for
fees and expenses of approximately $2,500 plus out of pocket expenses. The
Fund's officers and employees of certain of the Fund's service providers may
also solicit proxies personally or by telephone or telefax. Merrill Lynch &
Co., Inc. ("Merrill Lynch") will bear the portion of the proxy solicitation and
Meeting costs associated with Proposal (1). All other costs related to the proxy
solicitation and Meeting will be borne by the Fund. Any Partner submitting a
proxy may revoke it at any time before it is exercised by submitting to the Fund
a written notice of revocation or a subsequently executed proxy or by attending
the Meeting and voting in person.
Signed proxies received by the Fund in time for voting and not so revoked
will be voted in accordance with the directions specified therein. The Board
recommends a vote "FOR" approval of the new investment advisory agreement; "FOR"
election of each of the five (5) Managing General Partners; and "FOR"
ratification of the selection of Briggs, Bunting & Dougherty, LLP as the Fund's
independent accountants for its fiscal year ending December 31, 2006. If no
specifications are made, the proxy will be voted "FOR" approval of the new
investment advisory agreement; "FOR" election of each of the five (5) Managing
General Partners; and "FOR" ratification of the selection of Briggs, Bunting &
Dougherty, LLP as the Fund's independent accountants for its fiscal year ending
December 31, 2006.
THE FUND WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS ANNUAL AND
SEMI-ANNUAL REPORTS TO PARTNERS DATED DECEMBER 31, 2005 AND JUNE 30, 2006,
RESPECTIVELY, TO ANY PARTNER UPON REQUEST. THE ANNUAL AND SEMI-ANNUAL REPORTS
MAY BE OBTAINED BY WRITING TO: CHESTNUT STREET EXCHANGE FUND, 400 BELLEVUE
PARKWAY, WILMINGTON, DE 19809 OR BY CALLING (302) 792-2555.
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INTRODUCTION
The Fund is organized as a California limited partnership and is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act").
At the Meeting, Partners of the Fund are being asked to approve the
following: (1) a new investment advisory agreement (the "New Advisory
Agreement") between the Fund and BlackRock Capital Management, Inc. ("BCM"), a
subsidiary of BlackRock Institutional Management Corporation ("BIMC"), to
replace the current investment advisory agreement (the "Current Advisory
Agreement") by and among the Fund, BIMC and BlackRock Financial Management, Inc.
("BFM") for the reasons discussed below; (2) the election of five (5) Managing
General Partners for the Fund; and (3) the ratification of the selection of
Briggs, Bunting & Dougherty, LLP as the Fund's independent accountants for its
fiscal year ending December 31, 2006. The Board believes that each of these
proposals is in the best interests of the Partners. These proposals are
discussed in greater detail below.
PROPOSAL 1: APPROVAL OF NEW ADVISORY AGREEMENT
FOR THE FUND
The 1940 Act requires that an advisory agreement of an investment company
provide for its automatic termination in the event of its "assignment" (as
defined in the 1940 Act). A sale of a controlling block of an investment
adviser's voting securities generally is deemed to result in an assignment of an
investment adviser's advisory agreement. Although BlackRock, Inc. ("BlackRock"),
the parent company of BIMC, BFM and BCM, has informed the Board that it does not
believe the Transaction (as defined below) will be an assignment of the Current
Advisory Agreement under the 1940 Act, it is possible that the Transaction could
be determined to be such an assignment, which would result in the automatic
termination of the Current Advisory Agreement. Due to this uncertainty, the Fund
is submitting the New Advisory Agreement to its Partners to prevent any
potential disruption in investment advisory services after the Transaction is
completed. The New Advisory Agreement will be effective upon the closing of the
Transaction or, if the Transaction is not completed, at such time as the Board
of the Fund determines.
The Board approved an Interim Investment Advisory Agreement among BIMC,
BFM and the Fund (the "Interim Advisory Agreement"), to be effective in the
event that Partner approval of the New Advisory Agreement is not obtained by the
time of the consummation of the Transaction. Under applicable Securities and
Exchange Commission ("SEC") regulations, the Interim Advisory Agreement could
remain in effect for up to 150 days from the date of the consummation of the
Transaction until Partner approval of the New Advisory Agreement is obtained.
The scope and quality of services to be provided to the Fund under the Interim
Advisory Agreement will be at least equal to the scope and quality of services
provided under the Current Advisory Agreement. The Interim Advisory Agreement is
identical in all material respects to the Current Advisory Agreement (including
the contractual rate of the advisory fee of
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BIMC and BFM), except for: 1) dates of effectiveness and termination; and 2)
provisions in the Interim Advisory Agreement requiring the advisory fee of BIMC
and BFM to be held in escrow.
The Interim Advisory Agreement would take effect on the date of the change
of control of BIMC and BFM if Partner approval of the New Advisory Agreement
were not obtained by that time. The Interim Advisory Agreement would remain in
place only until Partner approval of the New Advisory Agreement is obtained (or
shortly thereafter). The Interim Advisory Agreement may be terminated at any
time without the payment of any penalty on 10 days' written notice to BIMC and
BFM by the Fund's Board or by vote of the Fund's Partners, or by BIMC or BFM on
90 days' written notice to the Fund. The compensation to be received by BIMC and
BFM during any interim period under the Interim Advisory Agreement is no greater
than that which BIMC and BFM receive under the Current Advisory Agreement. Under
the Interim Advisory Agreement, BIMC's and BFM's fees would be held in an
interest-bearing escrow account until Partner approval of the New Advisory
Agreement is obtained. If the Fund's Partners approve the New Advisory Agreement
within 150 days of the date of the Interim Advisory Agreement, the amount in the
escrow account, including interest earned, will be paid to BIMC and BFM. If
Partner approval is not obtained, BIMC and BFM would only be paid the lesser of
their fees in the escrow account plus interest earned or reimbursement for their
costs under the Interim Advisory Agreement during the interim period plus
interest earned on this amount while in escrow. The Interim Advisory Agreement
is not required to be approved by the Fund's Partners.
DESCRIPTION OF THE TRANSACTION
BlackRock and Merrill Lynch announced on February 15, 2006 that they had
reached an agreement pursuant to which Merrill Lynch will contribute its
investment management business, Merrill Lynch Investment Managers ("MLIM"), to
BlackRock, one of the largest publicly traded investment management firms in the
United States, to form a new asset management company that will be one of the
world's preeminent, diversified global money management organizations with
approximately $1 trillion in assets under management (the "Transaction"). Based
in New York, BlackRock currently manages assets for institutional and individual
investors worldwide through a variety of equity, fixed income, cash management
and alternative investment products. The new company will operate under the
BlackRock name and be governed by a board of directors with a majority of
independent members. The new company will offer a full range of equity, fixed
income, cash management and alternative investment products with strong
representation in both retail and institutional channels, in the United States
and in non-U.S. markets. It will have over 4,500 employees in 18 countries and a
major presence in most key markets, including the United States, the United
Kingdom, Asia, Australia, the Middle East and Europe. Merrill Lynch will have a
49.8% economic interest and a 45% voting interest in the combined company and
The PNC Financial Services Group, Inc. ("PNC"), which currently holds a majority
interest in BlackRock, will have approximately a 34% economic and voting
interest. Each of Merrill Lynch and PNC has agreed that it will vote all of its
shares on all matters in accordance with the recommendation of BlackRock's
board. Completion of the Transaction is subject to various regulatory approvals,
client consents, approval by BlackRock shareholders and customary conditions.
The Transaction has been approved by the boards of directors of Merrill Lynch,
BlackRock and PNC and is expected to close at the end of the third quarter of
2006.
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In anticipation of the Transaction, members of the Fund's Board met on
July 13, 2006 for purposes of, among other things, considering whether it would
be in the best interests of the Fund and its Partners to approve the New
Advisory Agreement between the Fund and BCM. The 1940 Act requires that the New
Advisory Agreement be approved by the Fund's Partners in order for it to become
effective with respect to the Fund. At that Board meeting, and for the reasons
discussed below (see "Board Considerations" below), the Board, including a
majority of the Managing General Partners who are not "interested persons" of
the Fund or BCM as defined in the 1940 Act (the "Independent Managing
Partners"), unanimously approved the New Advisory Agreement and unanimously
recommended its approval by Partners in order to assure continuity of investment
advisory services to the Fund after the Transaction. In the event Partners of
the Fund do not approve the New Advisory Agreement, the Board will take such
action as it deems to be in the best interests of the Fund and its Partners.
THE NEW ADVISORY AGREEMENT
At a meeting of the Managing General Partners held on July 13, 2006, the
Board, including a majority of the Independent Managing Partners, agreed to
approve, and to recommend that the Partners of the Fund approve, the New
Advisory Agreement, in the form attached to this Proxy Statement as Appendix A.
BFM and BIMC are co-investment advisers to the Fund pursuant to the
Current Advisory Agreement, dated January 1, 1998, and an Assumption Agreement
dated June 18, 1998. The Fund pays BIMC an investment advisory fee for services
provided by BIMC and BFM. The New Advisory Agreement will differ from the
Current Advisory Agreement in that, under the New Advisory Agreement, BCM, which
is a wholly-owned subsidiary of BIMC, will replace BIMC and BFM as sole
investment adviser to the Fund. However, the personnel responsible for managing
the Fund's investment operations will remain the same. BCM is being proposed to
replace BIMC and BFM as BlackRock attempts to better organize the division of
portfolio management responsibilities among its affiliates. As a result,
BlackRock has designated BCM as the entity to focus on management of equity
portfolios located in its Boston and Philadelphia offices. The Current Advisory
Agreement was last submitted to a vote of Partners of the Fund on December 18,
1997 in order to eliminate the requirements for a Non-Managing General Partner
and to reduce the investment advisory fees, which had been in place under the
Fund's previous investment advisory agreement.
The terms and conditions of the New Advisory Agreement are the same in all
material respects as the Current Advisory Agreement except (1) that BCM will
serve as investment adviser as described above and (2) that the New Advisory
Agreement allows BCM to appoint one or more sub-advisers, as described below. A
copy of the Current Advisory Agreement and related Assumption Agreement is
attached as Appendix B. Set forth below is a discussion of similarities and
differences between the Current Advisory Agreement and the New Advisory
Agreement.
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SERVICES PROVIDED
As is the case with respect to BIMC and BFM under the Current Advisory
Agreement, BCM under the New Advisory Agreement, subject to the supervision of
the Board, will provide a continuous investment program for the Fund's
portfolio, including investment research and management with respect to all
securities and investments and cash and cash equivalents in the portfolio. BCM
will determine from time to time what securities and other investments will be
purchased, retained or sold by the Fund, and what portion of its assets will be
invested or held uninvested in cash or cash equivalents. Further, it is the
responsibility of BCM to: (1) place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with any broker
or dealer; (2) conform with all applicable laws, rules and regulations; (3) not
invest its assets or the assets of any accounts advised by it in Shares of the
Fund, make loans for the purpose of purchasing or carrying Shares, or make loans
to the Fund; and (4) compute the net asset value and the net income of the Fund
on each business day as described in the Fund's Prospectus or as more frequently
requested by the Fund.
Under the New Advisory Agreement, BCM may from time to time, in its sole
discretion to the extent permitted by applicable law, appoint one or more
sub-advisers, including, without limitation, affiliates of BCM, to perform
investment advisory services with respect to the Fund; provided, however, that
the compensation of such person or persons shall be paid by BCM and that BCM
shall be as fully responsible to the Fund for the acts and omissions of any
sub-adviser as it is for its own acts and omissions. BCM may terminate any or
all sub-advisers in its sole discretion at any time to the extent permitted by
applicable law.
FEES AND EXPENSES
BCM has agreed to bear all expenses incurred by it in connection with its
activities other than the cost of securities (including brokerage commissions,
if any) purchased for the Fund.
For the services provided by BCM and the expenses assumed by it under the
New Advisory Agreement, the Fund has agreed to pay BCM a fee, computed daily and
payable monthly, at the annual rate of 4/10 of 1% of the first $100,000,000 of
the Fund's net assets, plus 3/10 of 1% of the net assets exceeding $100,000,000.
The Fund paid $929,685, $974,813 and $934,843 for investment advisory
services for the years ended December 31, 2003, 2004 and 2005, respectively.
PARTNER APPROVAL OF THE NEW ADVISORY AGREEMENT WILL NOT RESULT IN ANY INCREASE
IN TOTAL ADVISORY FEES PAYABLE.
STANDARD OF LIABILITY
As is the case with respect to BIMC and BFM under the Current Advisory
Agreement, BCM may not invest its assets or the assets of any accounts under its
management in Shares of the Fund, nor may it make loans to the Fund, or to any
person for the purpose of enabling such person to purchase or carry Fund Shares.
The New Advisory Agreement also provides that BCM shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund except
for 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
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negligence on the part of it in the performance of its duties or from reckless
disregard by it of its obligations and duties thereunder.
TERM AND TERMINATION
Continuance of each of the Current Advisory Agreement and the New Advisory
Agreement for successive one-year terms must be specifically approved at least
annually (i) by the vote of a majority of the Managing General Partners who are
not parties to such advisory agreement or "interested persons" (as that term is
defined in the 1940 Act) of any such party, and (ii) by a majority of Managing
General Partners or by a vote of a majority of the outstanding Shares of the
Fund. Each agreement provides for termination automatically upon assignment and
is terminable at any time without penalty by the Managing General Partners or by
a vote of a majority of the Fund's outstanding Shares, on 60 days' written
notice to the advisers or by the advisers on 90 days' written notice to the
Fund.
If Partners approve the New Advisory Agreement, the Current Advisory
Agreement will be terminated. The Board has determined that approving the New
Advisory Agreement for these purposes is appropriate and beneficial to the Fund.
BOARD CONSIDERATIONS
At a meeting held on July 13, 2006, the Board, including the Independent
Managing Partners, approved the New Advisory Agreement with BCM with respect to
the Fund for an initial two-year period. In connection with their approval, the
Managing General Partners considered, with the assistance of independent
counsel, their legal responsibilities and reviewed the nature and quality of
services provided to the Fund and BCM's experience and qualifications.
Representatives of BlackRock addressed and answered the Board's questions
about the New Advisory Agreement. The BlackRock representatives informed the
Board that the combination of BlackRock and Merrill Lynch will have no effect on
the Fund, including the Fund's portfolio management team. The Board reviewed
materials relating to the New Advisory Agreement, including descriptions of the
Current Advisory Agreement and New Advisory Agreement, a comparison of the
Fund's advisory fees to fees paid by similar investment companies, an overview
of the investment advisory and other services provided by BIMC and BFM under the
Current Advisory Agreement and by BCM under the New Advisory Agreement
(including a description of their equity portfolio capabilities and brokerage
policies), a review of the fees paid by the Fund to affiliates of PNC for
custodian services and transfer agency services, performance and expense data of
the Fund and comparable competitors and indices, and information concerning the
personnel rendering services to the Fund. The Board also discussed the
profitability of BIMC, BFM and BCM and reviewed a comparison of management fees
paid by other mutual funds. The Board discussed the various information provided
by BlackRock and reviewed the terms of the New Advisory Agreement.
Among other items, the Board reviewed and considered: (1) a report
comparing the advisory fees and total expense ratio of shares of the Fund to
those of its peer group and to the peer group averages; (2) a report on the
assets and advisory fees for the Fund; (3) a report
- 7 -
comparing the performance of the Fund to its benchmarks, its peer group and the
performance universe (e.g., all large cap core equity funds) average; (4) a
report on BCM's profitability related to providing advisory services to the Fund
after taking into account (i) advisory fees and any other benefits realized by
BCM or any of its affiliates as a result of its role as service provider to the
Fund, (ii) the direct and indirect expenses incurred by BCM in providing
investment advice to the Fund, and (iii) other considerations; (5) possible
economies of scale; (6) compensation or possible benefits to BCM arising from
its relationship with the Fund; and (7) a report describing the resources,
personnel, capabilities, overall nature and quality of the services of BCM.
The Board also considered the commitment BCM has made to address new
regulatory compliance requirements applicable to the Fund and the adviser.
Included in the report provided by BCM for the Board's consideration were
materials showing the structure of BlackRock prior to and after the combination
with Merrill Lynch. BCM informed the Board that the services provided to the
Fund by BCM under the New Advisory Agreement would be identical to those
provided by BIMC and BFM under the Current Advisory Agreement. BCM informed the
Board that the individuals who provided investment advisory services under the
Current Advisory Agreement would continue to provide such services under the New
Advisory Agreement.
The materials provided to the Board by BCM showed the corporate
organization of BlackRock, and specifically how BCM, BIMC and BFM fit into
BlackRock's overall corporate structure. The Board reviewed lists of portfolio
managers for the various BlackRock portfolio management platforms after the
combination of BlackRock and Merrill Lynch in order to determine that the Fund's
portfolio managers would remain the same after the combination. The Board
further reviewed the investment philosophies of the portfolio managers after the
combination to ensure that there would be no change in advisory services
provided to the Fund.
The Board considered the various reasons provided by BlackRock for
combining with Merrill Lynch, including (i) achieving economies of scale in
their products and markets; (ii) combining two strong, complementary businesses;
(iii) having a strong presence outside the United States; and (iv) becoming a
more diversified entity.
Representatives of BlackRock informed the Board that BlackRock's rationale
behind changing from BIMC and BFM as the Fund's investment adviser to BCM was to
improve BlackRock's organization after its combination with Merrill Lynch.
BlackRock informed the Board that BCM is a relatively new entity, which is
assigned for equity portfolios managed in its Boston and Philadelphia offices.
BlackRock further explained to the Board that there would be no change in
services provided to the Fund or to any of the individuals or teams responsible
for making investment decisions for the Fund as a result of the change in
investment adviser.
After discussion, the Board concluded that BCM had the capabilities,
resources and personnel necessary to manage the Fund. The Board also concluded
that, based on the services that BCM would provide to the Fund under the New
Advisory Agreement, the fee was fair and equitable with respect to the Fund. The
Board considered the fees paid by the Fund in relation to its peer group, as
well as the Fund's performance. After evaluating the amounts paid by the Fund
and the Fund's total operating expenses compared to similar information for the
Fund's peer group, the Board concluded that the advisory fees paid by the Fund
were reasonable.
- 8 -
The Board concluded that BCM had allocated sufficient resources and
personnel to the investment management operations of the Fund and was able to
provide quality services to the Fund. Based on the foregoing and upon such other
information as it considered necessary to the exercise of its reasonable
business judgment, the Board concluded unanimously that it was in the best
interests of the Fund to approve the New Advisory Agreement with BCM for an
initial two-year period.
INFORMATION ON BCM
BCM was organized in 1999 to perform advisory services for investment
companies, institutional clients and other accounts and has its principal
offices at 100 Bellevue Parkway, Wilmington, Delaware 19809. BCM is a subsidiary
of BlackRock, one of the largest publicly traded investment management firms in
the United States with $464 billion of assets under management as of June 30,
2006. Following the Transaction, BlackRock expects to have approximately $1
trillion of assets under management. As of the date of this Proxy Statement,
BlackRock is a majority-owned, indirect subsidiary of PNC, one of the largest
diversified financial services companies in the United States. BIMC, with
offices at 100 Bellevue Parkway, Wilmington, Delaware 19809, is the immediate
parent of BCM and owns 100% of BCM's stock.
The names, addresses and principal occupations of the principal executive
officer and directors of BCM are as follows:
NAME AND ADDRESS* POSITION WITH BCM PRINCIPAL OCCUPATION
- ---------------------- --------------------------- ------------------------------------------------------
Laurence D. Fink Chairman and Chief Chairman and Chief Executive Officer, BlackRock, Inc.
Executive Officer
Ralph L. Schlosstein President and Director President and Director, BlackRock, Inc.
Robert S. Kapito Vice Chairman and Director Vice Chairman and Director, BlackRock, Inc.
- -------------
* The address for these individuals is 100 Bellevue Parkway, Wilmington,
Delaware 19809.
- 9 -
SERVICES TO THE FUND BY AFFILIATED PARTIES
PFPC Inc., an affiliate of BCM, serves as transfer and dividend disbursing
agent to the Fund pursuant to a Transfer Agency Agreement. During the fiscal
year ended December 31, 2005, the Fund paid PFPC Inc. transfer agent fees and
expenses in the amount of $16,635.
Pursuant to a Custodian Services Agreement, PFPC Trust Company, an
affiliate of BCM, serves as the Fund's custodian, holding its portfolio
securities, cash and other property. For the year ended December 31, 2005, the
Fund paid PFPC Trust Company custodian fees in the amount of $26,289.
Services provided to the Fund pursuant to the existing Transfer Agency
Agreement and Custodian Services Agreement will continue to be provided after
Partner approval of the New Advisory Agreement.
THE BOARD, INCLUDING THE INDEPENDENT MANAGING PARTNERS, UNANIMOUSLY
RECOMMENDS THAT PARTNERS VOTE "FOR" THE APPROVAL OF THE NEW
ADVISORY AGREEMENT.
PROPOSAL 2: ELECTION OF MANAGING GENERAL PARTNERS
At the Meeting, Partners will be asked to elect five Managing General
Partners. Each Managing General Partner so elected will serve until the next
annual meeting of Partners, or special meeting in lieu thereof, and until the
election and qualification of the Managing General Partner's successor, or until
the Partner's status as a Managing General Partner is sooner terminated as
provided in the Fund's Partnership Agreement. Normally, there will be no annual
meeting of Partners for the purpose of electing Managing General Partners except
as required by the 1940 Act.
The persons named as proxies in the accompanying proxy have been
designated by the Managing General Partners and intend to vote for the nominees
named below. All Shares represented by valid proxies will be voted in the
election for all of the nominees named below unless authority to vote for all of
the nominees or a particular nominee is withheld. Each nominee has consented to
being named in this Proxy Statement and to serve if selected. In the event any
nominee should withdraw from the election or otherwise be unable to serve, the
named proxies will vote for the election of such substitute nominee as the
Managing General Partners may recommend unless a decision is made to reduce the
number of Managing General Partners.
The following table sets forth the nominees, their ages, principal
occupations for the past five or more years, and any other directorships they
hold in companies which are subject to the reporting requirements of the
Securities Exchange Act of 1934 or are registered as investment companies under
the 1940 Act.
Except for Gordon L. Keen, Jr., each nominee currently serves as a
Managing General Partner. The Board appointed Mr. Keen to serve as a Managing
General Partner at a meeting held on July 20, 2006, subject to approval by the
Partners at the Meeting.
- 10 -
Number
of
Portfolios
in Fund
Complex(1)
Overseen
Position with by Other
the Fund and Principal Occupations During Managing Directorships(2)
Length of Past 5 General Held by Managing
Name, Address and Age Time Served Years and Current Affiliations Partners General Partner
- ---------------------------- --------------- --------------------------------- ---------- -----------------
Interested Managing General
Partner
Richard C. Caldwell* Managing Advisory Director, PNC Florida, 1 None
c/o Edward J. Roach General FSB; Advisory Director in
400 Bellevue Parkway Partner since Philadelphia and Southern New
Wilmington, DE 19809 1997 Jersey region for PNC Bank;
Age: 62 Consultant for PNC Florida;
Chairman, Florida Advisory
Council; formerly, President and
Chief Executive Officer, PNC
Bank FSB from May 1998 until
July 1999; Director, JLC, Inc.
since February 1996 (investment
holding company); Director, DR
Inc. since April 1994
(investment holding company).
Edward J. Roach* Managing Certified Public Accountant; 1 None
400 Bellevue Parkway General Vice Chairman of the Board,
Wilmington, DE 19809 Partner since Fox Chase Cancer Center;
Age: 82 2000; Chief President and Treasurer of one
Compliance other investment company
Officer since advised by BIMC; Director, The
2004; Bradford Funds, Inc. until 2000.
President
since 2002;
Treasurer
since 1981
Disinterested Managing
General Partner
Gordon L. Keen, Jr. N/A Senior Vice President, Law & N/A None
c/o Edward J. Roach Corporate Department, Airgas,
400 Bellevue Parkway Inc. (Radnor, PA-based
Wilmington, DE 19809 distributor of industrial,
Age: 61 medical and specialty gases, and
welding and safety equipment and
supplies) from January 1992 to
January 2006.
Langhorne B. Smith Managing Retired. President and Director, 1 None
c/o Edward J. Roach General The Sandridge Corporation
400 Bellevue Parkway Partner since (private investment company);
Wilmington, DE 19809 1997 Director, Claneil Enterprises,
Age: 70 Inc. (private investment
company).
- 11 -
Number
of
Portfolios
in Fund
Complex(1)
Overseen
Position with by Other
the Fund and Principal Occupations During Managing Directorships(2)
Length of Past 5 General Held by Managing
Name, Address and Age Time Served Years and Current Affiliations Partners General Partner
- ---------------------------- --------------- --------------------------------- ---------- -----------------
David R. Wilmerding, Jr. Managing Chairman, Wilmerding & 57 BlackRock Funds;
c/o Edward J. Roach General Associates (investment advisers); BlackRock Bond
400 Bellevue Parkway Partner since Director, Beaver Management Allocation Target
Wilmington, DE 19809 1976; Corporation (land management Shares
Age: 71 Chairman of corporation); Director, Mutual
the Managing Fire Marine & Inland Insurance
General Co., Inc; Director, People First,
Partners since Inc. (bank holding company);
2006 Chairman and Trustee of one
other investment company
advised by BIMC or its
affiliates; Chairman, Coho Partners,
Ltd. (investment advisers).
- -----------------
* Messrs. Caldwell and Roach are "interested persons" of the Fund as that
term is defined in the 1940 Act. Mr. Caldwell owns stock of an affiliate
of the adviser and Mr. Roach is an officer and employee of the Fund.
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. Mr. Wilmerding also serves as
Chairman of the BlackRock Funds(sm) and BlackRock Bond Allocation Target
Shares, and Mr. Roach serves as President and Treasurer of The RBB Fund,
Inc.
2. Directorships of companies required to report to the SEC under the
Securities Exchange Act of 1934, as amended (i.e., "public companies") or
other investment companies registered under the 1940 Act.
Messrs. Caldwell, Smith and Wilmerding were most recently elected by the
Partners at the Annual Meeting of the Fund held on December 18, 1997. Mr. Roach
was appointed by the Board at a meeting of the Fund's Managing General Partners
held on September 14, 2000.
During 2005, no Managing General Partner or officer of the Fund was also a
director, officer, or employee of the Fund's advisers or any of their parents.
Drinker Biddle & Reath LLP, of which Michael P. Malloy, Secretary of the Fund,
is a partner, received fees during the year ended December 31, 2005 for services
rendered as the Fund's legal counsel. The Fund has a retirement plan for
eligible employees. For the fiscal year ended December 31, 2005, the Fund
contributed a total of $3,000 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
- 12 -
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 $3,000. 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.
The Fund pays each Managing General Partner $10,000 annually, and pays the
Chairman an additional $8,000 annually. The Fund pays the President and
Treasurer of the Fund at the rate of $24,000 per year, payable monthly. The Fund
pays the Chief Compliance Officer an additional $6,000 annually. Prior to August
1, 1999, Mr. Caldwell, was an employee of PNC Bank and its affiliates, and did
not receive fees as a Managing General Partner. Effective January 1, 2000, Mr.
Caldwell was compensated at the same level as the other Managing General
Partners. In addition to the compensation he receives as a Managing General
Partner, Mr. Roach receives $30,000 annually as compensation for his duties as
President, Treasurer and Chief Compliance Officer and is eligible for retirement
benefits. 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, 2005:
Aggregate Pension or Retirement Estimated Total Compensation
Compensation Benefits Accrued as Part Annual Benefits from the Fund
Name of Person/Position From the Fund of Fund Expenses Upon Retirement and Fund Complex(1)
- ---------------------------- ------------- ------------------------ ---------------- -------------------
Interested Managing General
Partner
Richard C. Caldwell, $10,000 N/A N/A $10,000
Managing General Partner
Edward J. Roach, $40,000 N/A N/A $77,975
President, Treasurer,
Chief Compliance Officer and
Managing General Partner
Disinterested Managing
General Partner
Langhorne B. Smith, $10,000 N/A N/A $10,000
Managing General Partner
David R. Wilmerding, Jr., $10,000 N/A N/A $143,200
Chairman of the Managing
General Partners
- -------------
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. Mr. Wilmerding also serves as a
Trustee to the BlackRock Funds(sm) and BlackRock Bond Allocation Target
Shares, and Mr. Roach serves as President and Treasurer of The RBB Fund,
Inc.
The following table sets forth, as of the Record Date, beneficial
ownership of the Fund's shares by each Managing General Partner.
- 13 -
Aggregate Dollar Range of Equity
Securities in All Registered
Investment Companies Overseen
By Managing General Partner in
Dollar Range of Equity Family of
Name of Managing General Partner Securities in the Fund Investment Companies(1)
- ----------------------------------------- ---------------------- ----------------------------------
Interested Managing General Partner
Richard C. Caldwell $1 - $10,000 $1 - $10,000
Edward J. Roach $10,001 - $50,000 $10,001 - $50,000
Disinterested Managing General Partner
Gordon L. Keen, Jr. $1 - $10,000 $1 - $10,000
Langhorne B. Smith $10,001 - $50,000 $10,001 - $50,000
David R. Wilmerding, Jr. $1 - $10,000 $1 - $10,000
- ------------
1. A Family of Investment Companies means two or more investment companies
that hold themselves out to investors as related companies for purposes of
investment and investor services and 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. The Chestnut Street
Exchange Fund is not a member of a Family of Investment Companies.
As of the Record Date, the Managing General Partners and officers of the
Fund owned beneficially less than 1% of the Fund's issued and outstanding
Shares.
The Managing General Partners met four times during the last fiscal year.
All Managing General Partners attended at least 75% of the meetings. The Fund
does not have a standing nominating committee. The Board, including the
Independent Managing Partners, participates in the nomination and consideration
of Managing General Partner nominees. Because all Managing General Partners have
an opportunity to consider Managing General Partner nominees, the Board does not
believe it is necessary to have a nominating committee. The Board has not
adopted a formal process for identifying and evaluating nominees. Mr. Keen,
recently appointed to serve as a Managing General Partner at a meeting held on
July 13, 2006, was recommended to the Board for consideration by Mr. Caldwell.
The Board does not have at this time specific, minimum qualifications for
nominees and has not established formal specific qualities or skills that it
regards as necessary for Managing Partners to possess (other than any qualities
or skills that may be required by applicable law). However, in identifying and
evaluating nominees, the Board considers factors it deems relevant, which may
include: whether the person is an "interested person" as defined under the 1940
Act and whether the person is otherwise qualified under applicable laws and
regulations to serve on the Fund's Board; whether the person has any
relationships that may impair his or her independence, such as any business,
financial or family relationships with the Fund's management, the investment
adviser of the Fund, the Fund's service providers or their affiliates; whether
the person is willing to serve and willing and able to commit the time necessary
for the performance of duties of a Managing General Partner of the Fund; and the
contribution which the person can make to the Board and the Fund, with
consideration being given to the person's business acumen, professional
experience, education and such other factors as the Board may consider relevant.
The Fund has established an Audit Committee, consisting of Mr. Smith and
Mr. Wilmerding, the Independent Managing Partners. The Audit Committee annually
considers the
- 14 -
engagement and compensation of the Fund's independent registered public
accounting firm, oversees the audit process and reviews with the auditors the
scope and results of the audit of the Fund's financial statements. The Audit
Committee held two meetings in 2005.
THE BOARD RECOMMENDS THAT PARTNERS VOTE "FOR" THE ELECTION OF THE FIVE
MANAGING GENERAL PARTNER CANDIDATES LISTED HEREIN, TO SERVE UNTIL
THE NEXT ANNUAL MEETING OF PARTNERS, OR SPECIAL MEETING IN LIEU THEREOF,
AND UNTIL THE ELECTION AND QUALIFICATION OF THE MANAGING GENERAL PARTNER'S
SUCCESSOR, OR UNTIL THE PARTNER'S STATUS AS A MANAGING GENERAL PARTNER
IS SOONER TERMINATED AS PROVIDED IN THE FUND'S PARTNERSHIP AGREEMENT.
PROPOSAL 3: RATIFICATION OF SELECTION OF
INDEPENDENT ACCOUNTANTS
A majority of the Managing General Partners who are not "interested
persons" of the Fund have selected Briggs, Bunting & Dougherty, LLP as
independent accountants for the Fund for the fiscal year ending December 31,
2006. The ratification of the selection of independent accountants is to be
voted on at the Meeting and it is intended that the persons named in the
accompanying proxy will vote to ratify the selection of Briggs, Bunting &
Dougherty, LLP ("Briggs, Bunting & Dougherty") unless contrary instructions are
given. Briggs, Bunting & Dougherty has served as the Fund's independent auditors
since the fiscal year ended December 31, 2003. A representative of Briggs,
Bunting & Dougherty, LLP is expected to be available by telephone at the Meeting
to make a statement if desired and to be available to respond to appropriate
questions.
INDEPENDENT AUDITOR'S FEES
Audit Fees: For the Fund's fiscal years ended December 31, 2005 and
December 31, 2004, the aggregate fees billed for professional services rendered
by Briggs, Bunting & Dougherty for the audit of the Fund's annual financial
statements were $21,000 and $20,400, respectively.
Audit-Related Fees: In Fund's fiscal years ended December 31, 2005 and
December 31, 2004, no fees were billed for assurance and related services by
Briggs, Bunting & Dougherty that were reasonably related to the performance of
the audit of the Fund's financial statements and are not reported under "Audit
Fees" above.
Tax Fees: For the Fund's fiscal years ended December 31, 2005 and December
31, 2004, no fees were billed for professional services rendered by Briggs,
Bunting & Dougherty for tax compliance, tax advice, and tax planning.
All Other Fees: For the Fund's fiscal years ended December 31, 2005 and
December 31, 2004, no fees were billed to the Fund by Briggs, Bunting &
Dougherty for services other than the services reported under the captions
"Audit Fees" and "Tax Fees" above.
- 15 -
Audit Committee Pre-Approval Policies and Procedures: The Fund's Audit
Committee has not adopted pre-approval policies and procedures. Instead, the
Audit Committee approves on a case-by-case basis each audit or non-audit service
before the engagement.
The aggregate non-audit fees billed by Briggs, Bunting & Dougherty for
services rendered to the Fund, and rendered to the Fund's investment adviser
(not including any sub-adviser whose role is primarily portfolio management and
is subcontracted with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the Fund for each of the last two fiscal years of
the Fund was $0 for 2005 and $0 for 2004.
THE BOARD RECOMMENDS THAT PARTNERS VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF BRIGGS, BUNTING & DOUGHERTY AS THE FUND'S INDEPENDENT
AUDITORS FOR ITS FISCAL YEAR ENDING DECEMBER 31, 2006.
ADDITIONAL INFORMATION
MANAGEMENT
Officers of the Fund are elected and appointed by the Managing General
Partners and hold office until they resign or are removed. The following table
sets forth certain information about the Fund's Secretary. Information
concerning Mr. Roach, the President, Treasurer and Chief Compliance Officer of
the Fund, is provided on page 11.
Position
Officer with the Business Experience During
Name Age Since Fund Past Five Years
- --------------------------------------------------------------------------------------------------------------------------------
Michael P. Malloy.......... 47 2001 Secretary Partner of the law firm of Drinker Biddle & Reath
LLP, Philadelphia, Pennsylvania.
THE INVESTMENT ADVISERS
BFM and BIMC currently serve as the Fund's investment advisers under the
Current Advisory Agreement. BIMC's offices are located at Bellevue Park
Corporate Center, 100 Bellevue Parkway, Wilmington, Delaware 19809. BFM's
offices are located at 40 East 52nd Street, New York, New York 10022. BCM will
serve as investment adviser under the New Advisory Agreement. BCM's offices are
located at Bellevue Park Corporate Center, 100 Bellevue Parkway, Wilmington,
Delaware 19809. BIMC, BFM and BCM are subsidiaries of PNC.
- 16 -
OTHER MATTERS
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of Partners
arise, including any question as to adjournment of the Meeting, the persons
named as proxies will vote thereon according to their best judgment in the
interests of the Fund and its Partners.
VOTING INFORMATION
A quorum for the transaction of business at the Meeting is constituted by
the presence in person or by proxy of holders of a majority of the outstanding
Shares of the Fund. If a Proxy is properly executed and returned accompanied by
instructions to withhold authority, or is marked with an abstention, the Shares
represented thereby will be considered to be present at the Meeting for purposes
of determining the existence of a quorum for the transaction of business. Any
number of Shares less than a quorum present at the Meeting in person or by proxy
shall be sufficient for an adjournment. Each Partner shall have one vote for
each Share standing of record in such Partner's name as of the record date set
forth in the notice of Meeting. All proxies shall be filed with the Fund before
or at the Meeting. No such proxy shall be valid after eleven months from the
date of its execution.
Approval of Proposal No. 1, approval of the New Advisory Agreement,
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Fund which, for purposes of Proposal No. 1, is defined as the
affirmative vote of the holders of the lesser of: (i) 67% of the Shares of the
Fund present in person or by proxy at the meeting and entitled to vote if the
holders of more than 50% of the outstanding Shares are present in person or by
proxy; or (ii) more than 50% of the outstanding Shares of the Fund.
With respect to Proposal No. 2, the election of Managing General Partners,
the nominees receiving the highest number of votes cast at a meeting of Partners
at which a quorum is present, up to the number of Managing General Partners to
be elected, shall be elected as Managing General Partners of the Fund. There is
no cumulative voting in the election of Managing General Partners.
Approval of Proposal No. 3, the ratification of the selection of
independent accountants, requires the approval of a majority of the outstanding
Shares.
Broker "non-votes" (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be deemed to be
present at a meeting for purposes of a quorum but otherwise as abstentions.
- 17 -
BENEFICIAL OWNERS OF THE FUND
As of the Record Date, the following entity owned of record more than 5%
of the Fund's outstanding equity securities: Cede & Co. (28.92%).
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. As of the Record Date, to the Fund's
knowledge, no investor owned beneficially more than 5% or 25% of the Fund's
outstanding equity securities.
PROCEDURES FOR PARTNER COMMUNICATIONS WITH BOARD
The Fund's Board will receive and review written correspondence from
Partners. Partners may address correspondence to individual Managing General
Partners or to the full Board at the Fund's principal business address. The
Board or an individual Managing General Partner will respond to Partner
correspondence in a manner that the Board or Managing General Partner deems
appropriate given the subject matter of the particular correspondence.
The investment adviser maintains copies of all correspondence addressed to
individual Managing General Partners or the Board. Copies of all such
correspondence are forwarded promptly to an individual Managing General Partner
or the Board, as applicable. The investment adviser responds to any
correspondence in the nature of routine operational matters, such as routine
account inquiries, on a timely basis, notwithstanding that the correspondence is
addressed to an individual Managing General Partner or the Board, and
communicates such response to the Board or Managing General Partner to whom the
correspondence was addressed.
PARTNER PROPOSALS
The Fund does not intend to hold meetings of Partners except to the extent
that such meetings may be required under the 1940 Act or state law. Because the
Fund does not hold regular meetings of Partners, the anticipated date of the
next Partner meeting cannot be provided. Any proposal by a partner for
consideration at a subsequent meeting of Partners should be sent in writing
within a reasonable time before the proxy statement for that meeting is provided
to Edward J. Roach, Chestnut Street Exchange Fund, 400 Bellevue Parkway,
Wilmington, Delaware 19809. Whether a proposal is included in the proxy
statement will be determined in accordance with applicable federal and state
laws. The timely submission of a proposal does not guarantee its inclusion.
Dated: September 11, 2006
PARTNERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. PLEASE REFER TO YOUR INDIVIDUAL PROXY CARD FOR INFORMATION ABOUT
OTHER CONVENIENT VOTING OPTIONS THAT MAY BE AVAILABLE TO YOU, SUCH AS TELEPHONE
AND INTERNET VOTING.
- 18 -
APPENDIX A
ADVISORY AGREEMENT
AGREEMENT, dated ______________, 2006 between CHESTNUT STREET
EXCHANGE FUND ("Fund"), and BLACKROCK CAPITAL MANAGEMENT, INC. ("BlackRock").
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940 (the
"Act"); and
WHEREAS, the Fund desires to retain BlackRock to render investment
advisory and administrative services to the Fund, and BlackRock is willing to
render such services;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DELIVERY OF DOCUMENTS. The Fund has previously furnished
BlackRock with copies properly certified or authenticated of each of the
following:
(a) The Fund's Restated Certificate and Agreement of Limited
Partnership dated August 16, 1976 and recorded in California on August 16,
1976 and all subsequent restatements and amendments thereto. Such Restated
Certificates and Agreement of Limited Partnership, as presently in effect
and as it may hereinafter from time to time be restated or further
amended, is hereinafter referred to as the "Certificate of Limited
Partnership";
(b) The Fund's Code of Regulations, as amended (such Code, as
presently in effect and as it may hereinafter from time to time be
amended, is hereinafter referred to as the "Code");
(c) Resolutions of the Managing General Partners of the Fund
authorizing the appointment of the Adviser and approving this Agreement;
and
(d) An Order of the Securities and Exchange Commission, dated
November 9, 1976, exempting the Fund from certain provisions of Sections
2(a)(3), 2(a)(19), 18(f) and 22(e) of the Act, and exempting the
Non-Managing General Partner of the Fund from certain provisions of
Section 17(a) of the Act.
The Fund agrees to furnish BlackRock from time to time with copies,
properly certified or authenticated, of any amendments or supplements to the
foregoing.
2. APPOINTMENT. The Fund hereby appoints BlackRock to act as
investment adviser to the Fund for the period and on the terms set forth in this
Agreement. BlackRock is
A-1
sometimes hereinafter referred to as "the Adviser." The Adviser accepts such
appointment and agrees that the services herein set forth shall be rendered for
the compensation herein provided.
3. SERVICES PROVIDED BY BLACKROCK. Subject to the supervision of the
Managing General Partners of the Fund, BlackRock will provide a continuous
investment program for the Fund's portfolio, including investment research and
management with respect to all securities and investments and cash and cash
equivalents in the portfolio. BlackRock will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Fund, and what portion of its assets will be invested or held uninvested in cash
or cash equivalents. BlackRock will provide the services rendered by it
hereunder in accordance with the Fund's investment objectives, policies and
restrictions as stated in the Prospectus and as they may hereafter be amended.
BlackRock further agrees that it:
(a) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, BlackRock will attempt to obtain
the best net price and the most favorable execution of its orders.
Consistent with this obligation, when the execution and price offered by
two or more brokers or dealers are comparable, BlackRock may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide the Fund with research advice and other services. In
no instance will portfolio securities be purchased from or sold to
BlackRock or any affiliated person thereof;
(b) will conform with all applicable laws, rules and regulations
("Rules");
(c) will not invest its assets or the assets of any accounts advised
by it in Shares of the Fund, make loans for the purpose of purchasing or
carrying Shares, or make loans to the Fund; and
(d) will compute the net asset value and the net income of the Fund
on each business day as described in the Fund's Prospectus or as more
frequently requested by the Fund.
BlackRock may from time to time, in its sole discretion to the
extent permitted by applicable law, appoint one or more sub-advisers, including,
without limitation, affiliates of BlackRock, to perform investment advisory
services with respect to the Fund; provided, however, that the compensation of
such person or persons shall be paid by BlackRock and that BlackRock shall be as
fully responsible to the Fund for the acts and omissions of any sub-adviser as
it is for its own acts and omissions. BlackRock may terminate any or all
sub-advisers in its sole discretion at any time to the extent permitted by
applicable law.
4. SERVICES NOT EXCLUSIVE. The investment advisory services rendered
by BlackRock hereunder are not to be deemed exclusive, and BlackRock shall be
free to render similar services to others so long as its services under this
Agreement are not impaired thereby.
A-2
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the Act, the Adviser hereby agrees that all records which it maintains for
the Fund are property of the Fund and further agrees to surrender promptly to
the Fund any of such records upon the Fund's request. The Adviser further agrees
to preserve for the periods prescribed by Rule 31a-2 the records required to be
maintained by Rule 31a-1 under the Act.
6. EXPENSES. During the term of this Agreement, the 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 Fund.
7. COMPENSATION. For the services provided hereunder by BlackRock and the
expenses assumed pursuant to this Agreement, the Fund will pay BlackRock, and
BlackRock will accept as full compensation therefor, a fee computed daily and
paid monthly at the annual rate of 4/10 of 1% of the first $100,000,000 of the
Fund's net assets, plus 3/10 of 1% of net assets exceeding $100,000,000.
8. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
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 by it in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
9. DURATION AND TERMINATION. This Agreement shall become effective on
_______________, 2006 or the date upon which it is approved by a majority of the
outstanding voting securities of the Fund at a meeting of Partners, whichever is
later. Unless sooner terminated as provided herein, this Agreement shall
continue for an initial two year period. Thereafter, if not terminated, this
Agreement shall continue for successive annual periods, provided, such
continuance for successive annual periods is specifically approved at least
annually (a) by the vote of a majority of those members of the Board of Managing
General Partners of the Fund 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 Managing General Partners of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, provided however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Managing General Partners of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, on 60 days' written notice to the Adviser, or the Adviser at any time,
without payment of any penalty, on 90 days' written notice to the Fund. This
Agreement will terminate automatically 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 Act.)
10. 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 party against which enforcement of the change, waiver,
discharge or termination is sought,
A-3
and no amendment of this Agreement shall be effective until approved by vote of
the holders of a majority of the Fund's outstanding voting securities.
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. NO PERSONAL 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.
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.
Attest: BLACKROCK CAPITAL MANAGEMENT, INC.
________________________________ By:________________________________
Attest: CHESTNUT STREET EXCHANGE FUND
_________________________________ By:________________________________
A-4
APPENDIX B
ADVISORY AGREEMENT
AGREEMENT, dated January 1, 1998 between CHESTNUT STREET EXCHANGE
FUND, a California Limited Partnership ("Fund"), and PNC BANK, N.A., a national
banking association ("PNC"), and PROVIDENT INSTITUTIONAL MANAGEMENT CORPORATION
("PIMC"), a Delaware corporation registered as an investment adviser under the
Investment Advisers Act of 1940 and wholly-owned by PNC.
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain PNC and PIMC to render
investment advisory and administrative services to the Fund, and PNC and PIMC
are willing to render such services;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DELIVERY OF DOCUMENTS. The Fund has previously furnished PNC with
copies properly certified or authenticated of each of the following:
(a) The Fund's Restated Certificate and Agreement of Limited
Partnership dated August 16, 1976 and recorded in California on August 16,
1976 and all subsequent restatements and amendments thereto. Such Restated
Certificates and Agreement of Limited Partnership, as presently in effect
and as it may hereinafter from time to time be restated or further
amended, is hereinafter referred to as the "Certificate of Limited
Partnership";
(b) The Fund's Code of Regulations, as amended, (such Code, as
presently in effect and as it may hereinafter from time to time be
amended, is hereinafter referred to as the "Code");
(c) Resolutions of the Managing General Partners of the Fund
authorizing the appointment of the Advisers and approving this Agreement;
and
(d) An Order of the Securities and Exchange Commission, dated
November 9, 1976, exempting the Fund from certain provisions of Sections
2(a)(3), 2(a)(19), 18(f) and 22(e) of the Investment Company Act of 1940,
and exempting the Non-Managing General Partner of the Fund from certain
provisions of Section 17(a) of the Act.
B-1
The Fund agrees to furnish PIMC from time to time with copies,
properly certified or authenticated, of any amendments or supplements to the
foregoing.
2. APPOINTMENT. The Fund hereby appoints PNC and PIMC to act an
investment advisers to the Fund for the period and on the terms set forth in
this Agreement. The PNC and PIMC are sometimes hereinafter referred to
collectively as "the Advisers." The Advisers accept such appointment and agree
that the services herein set forth shall be rendered for the compensation herein
provided.
3. SERVICES RENDERED BY PNC. Subject to the supervision of the
Managing General Partners of the Fund, PNC, through its Trust Division and on
behalf of the Fund, will provide PIMC investment research and credit analysis
concerning prospective and existing Fund investments, make recommendations to
PIMC with respect to the Fund's continuous investment program, recommend to PIMC
the portion of the Fund's assets to be invested or held uninvested in cash or
cash equivalents, supply PIMC computer facilities and operating personnel, and
provide certain statistical services as PIMC may from time to time reasonably
request. PNC will provide the services rendered by it hereunder in accordance
with the Fund's investment objectives, policies and restrictions as stated in
the Prospectus and as they may hereafter be amended. PNC further agrees that it:
(a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (hereinafter called the "Rules"), and
will in addition conduct its activities under this Agreement in accordance
with the regulations of the Board of Governors of the Federal Reserve
System pertaining to the investment advisory activities of bank holding
companies to the same extent as if such regulations were by their terms
applicable to its activities hereunder;
(c) will not invest its assets or assets of any fiduciary account
managed by it in Shares of the Fund, make loans for purposes of purchasing
or carrying such Shares or make loans to the Fund;
(d) will maintain or cause PIMC to maintain all books and records
with respect to the Fund's securities transactions and shall keep or shall
cause PIMC to keep the Fund's books of account;
B-2
(e) will render to the Fund's Managing General Partners such
periodic and special reports as the Board may request;
(f) will maintain its policy and practice of conducting its Trust
Division independently of its Commercial Division. In making investment
recommendations for the Fund, Trust Division personnel will not inquire or
take into consideration whether the issuer of securities proposed for
purchase or sale for the Fund's account are customers of the Commercial
Division. In dealing with commercial customers, the Commercial Division
will not inquire or take into consideration whether securities of those
customers are held by the Fund; and
4. SERVICES PROVIDED BY PIMC. Subject to the supervision of the
Managing General Partners of the Fund, PIMC will provide a continuous investment
program for the Fund's portfolio, including investment research and management
with respect to all securities and investments and cash and cash equivalents in
the portfolio. PIMC will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund, and what portion of
its assets will be invested or held uninvested in cash or cash equivalents. PIMC
will provide the services rendered by it hereunder in accordance with the Fund's
investment objectives, policies and restrictions as stated in the Prospectus and
as they may hereafter be amended. PIMC further agrees that it:
(a) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, PIMC will attempt to obtain the
best net price and the most favorable execution of its orders. Consistent
with this obligation, when the execution and price offered by two or more
brokers or dealers are comparable, PIMC may, in its discretion, purchase
and sell portfolio securities to and from brokers and dealers who provide
the Fund with research advice and other services. In no instance will
portfolio securities be purchased from or sold to PNC, PIMC or any
affiliated person thereof;
(b) will conform with all applicable Rules, and will in addition
conduct its activities under this Agreement in accordance with the
regulations of the Board of Governors of the Federal Reserve System
pertaining to the investment advisory activities of bank holding companies
to the same extent as if such regulations were by their terms applicable
to the activities of PIMC;
B-3
(c) will not invest its assets or the assets of any accounts advised
by it in Shares of the Fund, make loans for the purpose of purchasing or
carrying Shares, or make loans to the Fund; and
(d) will compute the net asset value and the net income of the Fund
on each business day as described in the Prospectus or as more frequently
requested by the Fund.
5. SERVICES NOT EXCLUSIVE. The investment advisory services rendered
by PNC and PIMC hereunder are not to be deemed exclusive, and PNC and PIMC shall
be free to render similar services to others so long as their services under
this Agreement are not impaired thereby.
6. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 of the Rules, the Advisers hereby agree that all records which they
maintain for the Fund are property of the Fund and further agree to surrender
promptly to the Fund any of such records upon the Fund's request. The Advisers
further agree to preserve for the periods prescribed by Rule 31a-2 the records
required to be maintained by Rule 31a-1 of the Rules.
7. EXPENSES. During the term of this Agreement, the Advisers will
pay all expenses incurred by them in connection with their activities under this
Agreement other than the cost of (including brokerage commissions, if any)
securities purchased for the Fund.
In addition, if the expenses borne by the Fund 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 Advisers shall reimburse the Fund for any excess up to the amount of
the fees payable to PIMC during such fiscal year pursuant to paragraph 8 hereof.
8. COMPENSATION. For the services provided hereunder by PNC and PIMC
and the expenses assumed pursuant to this Agreement, the Fund will pay PIMC, and
PNC and PIMC will accept as full compensation therefor, a fee computed daily and
paid monthly at the annual rate of 4/10 of 1% of the first $100,000,000 of the
Fund's net assets, plus 3/10 of 1% of net assets exceeding $100,000,000.
9. LIMITATION OF LIABILITY OF THE ADVISORS. The Advisers shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the matters to which this Agreement relates,
except a loss resulting from a breach of fiduciary duty with respect to the
B-4
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence by either of them in the performance
of their duties or from reckless disregard by either of them of their
obligations and duties under this Agreement.
10. DURATION AND TERMINATION. This Agreement shall become effective on
January 1, 1998 or the date upon which it is approved by a majority of the
outstanding voting securities of the Fund at a meeting of Partners, whichever is
later. Unless sooner terminated as provided herein, this Agreement shall
continue until March 31, 1999. Thereafter, if not terminated, this Agreement
shall continue for successive annual periods ending on March 31, provided, such
continuance for successive annual periods is specifically approved at least
annually (a) by the vote of a majority of those members of the Board of Managing
General Partners of the Fund 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 Managing General Partners of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, provided however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Managing General Partners of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, on 60 days' written notice to the Advisers, or the Advisers at any time,
without payment of any penalty, on 90 days' written notice to the Fund. This
Agreement will terminate automatically 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 Investment Company Act of 1940.)
11. 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 party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by vote of the holders of a majority of the Fund's
outstanding voting securities.
12. 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.
B-5
13. NO PERSONAL 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.
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.
Attest: PNC BANK, N.A.
/s/ Gary M. Gardner By: /s/ Joseph Gramlich
- ------------------------------- ----------------------------------
[corporate seal]
PROVIDENT INSTITUTIONAL
Attest: MANAGEMENT CORPORATION
/s/ Gary M. Gardner By: /s/ Lisa M. Buono
- ------------------------------- ----------------------------------
[corporate seal]
Attest: CHESTNUT STREET EXCHANGE FUND
/s/ Terrance James Reilly By: /s/ Robert R. Fortune
- ------------------------------- ----------------------------------
B-6
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.
B-7
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: signature illegible
__________________________________________
(Authorized Officer)
PNC BANK, N.A.
By: signature illegible
__________________________________________
(Authorized Officer)
BLACKROCK FINANCIAL MANAGEMENT, INC.
By: signature illegible
__________________________________________
(Authorized Officer)
CHESTNUT STREET EXCHANGE FUND
By: /s/ Robert R. Fortune
__________________________________________
(Authorized Officer)
B-8
PROXY TABULATOR
P.O. BOX 9112
FARMINGDALE,NY 11735
PLEASE VOTE THIS PROXY CARD TODAY
YOUR PROMPT RESPONSE WILL SAVE YOUR FUND THE EXPENSE OF ADDITIONAL MAILINGS
- --------------------------------------------------------------------------------
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card on reverse at hand.
2) Call 1-888-221-0697
3) Follow the simple instructions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the proxy card on reverse at hand.
2) Go to Website www.proxyweb.com
3) Follow the simple instructions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate box on the proxy card on the reverse side.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
- --------------------------------------------------------------------------------
24 HOURS A DAY, 7 DAYS A WEEK
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
PROXY CARD
CHESTNUT STREET EXCHANGE FUND
999 999 999 999 99 (ARROW GRAPHIC)
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGING GENERAL PARTNERS OF CHESTNUT
STREET EXCHANGE FUND (THE "FUND") FOR USE AT THE MEETING OF PARTNERS TO BE HELD
ON SEPTEMBER 29, 2006 AT 3:00 P.M. (EASTERN TIME) IN THE THIRD FLOOR CONFERENCE
ROOM, BELLEVUE PARK CORPORATE CENTER, 100 BELLEVUE PARKWAY, WILMINGTON,
DELAWARE.
The undersigned hereby appoints Edward J. Roach and Michael P. Malloy, and each
of them, with full power of substitution, as proxies of the undersigned to vote
at the above-stated Meeting, and all adjournments thereof, all units of
partnership interest held of record by the undersigned on the record date for
the Meeting, upon the following matters, and upon any other matter which may
properly come before the Meeting, at their discretion.
PLEASE VOTE, DATE AND SIGN, AND
PROMPTLY RETURN THIS PROXY CARD
(ARROW GRAPHIC) IN THE ENCLOSED ENVELOPE.
RECEIPT OF NOTICE OF MEETING AND PROXY
STATEMENT IS HEREBY ACKNOWLEDGED.
Dated:
----------------
----------------------------------------
----------------------------------------
Signature(s) (if joint owners)
(SIGN IN THE BOX)
NOTE: Please sign exactly as shareholder
name appears hereon. When shares are
held by joint tenants, both should sign.
When signing as attorney or executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
(ARROW GRAPHIC) (ARROW GRAPHIC) CHESTNUT RO 06
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON AND, IN
THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING AUTHORITY TO VOTE FOR
THE ELECTION OF MANAGING GENERAL PARTNERS AND FOR PROPOSALS 1 AND 3 BELOW.
PLEASE FILL IN BOX(ES) AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. [X]
PLEASE DO NOT USE FINE POINT PENS.
FOR AGAINST ABSTAIN
1. Proposal to approve a New Investment Advisory Agreement. [ ] [ ] [ ]
FOR WITHHOLD
all nominees authority
listed to vote for
(except as all nominees
noted in listed
2. Election of Managing General Partners: space
provided)
(01) Richard C. Caldwell (03) Edward J. Roach (05) David R. Wilmerding, Jr.
(02) Gordon L. Keen, Jr. (04) Langhorne B. Smith [ ] [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE OR NOMINEES,
WRITE THE NAME OR NAMES ON THE LINE PROVIDED BELOW.)
_________________________________________________________________________________________
FOR AGAINST ABSTAIN
3. Proposal to ratify the selection by the Managing General Partners of Briggs,
Bunting & Dougherty, LLP as the Fund's independent accountants for its fiscal
year ending December 31, 2006. [ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other business as
may properly come before the Meeting.
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
(ARROW GRAPHIC) (ARROW GRAPHIC) CHESTNUT RO 06