<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1999
File No. 333-
-------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
STI CLASSIC FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (800) 342-5734
MARK NAGLE
C/O SEI INVESTMENTS COMPANY
ONE FREEDOM VALLEY ROAD
OAKS, PENNSYLVANIA 19456
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
RICHARD W. GRANT, ESQ. JOHN H. GRADY, JR., ESQ.
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
1701 MARKET STREET 1701 MARKET STREET
PHILADELPHIA, PA 19103 PHILADELPHIA, PA 19103
- --------------------------------------------------------------------------------
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940.
- --------------------------------------------------------------------------------
<PAGE>
STI CLASSIC FUNDS
Cross Reference Sheet
ITEMS REQUIRED BY FORM N-14
Part A. INFORMATION REQUIRED IN REGISTRATION STATEMENT HEADING
PROSPECTUS
Item 1. Beginning of Registration Cover Page of Registration Statement
Statement and outside Front
Cover Page of Prospectus
Item 2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
Item 3. Synopsis and Risk Factors Synopsis; Risks
Item 4. Information About the Synopsis; Reasons for the
Transaction Reorganization; Information Relating
to the Reorganization; Agreement and
Plan of Reorganization
Item 5. Information About the Prospectus Cover Page; Synopsis;
Registrant Shareholder Rights
Item 6. Information About the Prospectus Cover Page; Synopsis;
Company Being Acquired Reasons for the Reorganization;
Information Relating to the
Reorganization; Information About
the STI Funds and Arbor Funds;
Shareholder Rights
Item 7. Voting Information Prospectus Cover Page; Notice of
Special Meeting of Shareholders;
Synopsis; Agreement and Plan of
Reorganization
Item 8. Interest of Certain Persons Voting Matters
and Experts
Item 9. Additional Information Not applicable.
Required for Reoffering by
Persons Deemed to be
Underwriters
Part B. INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL
INFORMATION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
<PAGE>
Item 12. Additional Information Incorporated by Reference to the STI
About the Registrant Classic Funds' Prospectus and SAI
Item 13. Additional Information Incorporated by Reference to the
About the Company Being Arbor Funds' Prospectus and SAI
Acquired
Item 14. Financial Statements Financial Statements
Part C. OTHER INFORMATION
Item 15. Indemnification Indemnification
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
<PAGE>
To Shareholders of the Arbor U.S. Government Securities Money Fund and Arbor
Prime Obligations Fund (the "Arbor Funds"):
Enclosed with this letter is a proxy ballot, an N-14 combined
proxy/prospectus statement and related information concerning a special meeting
of Arbor Funds shareholders.
The purpose of this proxy package is to announce that a Shareholder Meeting
for the Arbor Funds has been scheduled for Friday, May 7, 1999. The purpose of
the meeting is to submit the Agreement and Plan of Reorganization between the
Arbor Funds and the STI Classic Funds to the shareholders for a vote.
The Trustees of the Arbor Funds approved the Agreement and Plan of
Reorganization at a meeting held on Monday, February 22, 1999. In coming to
this conclusion, the Trustees considered a variety of factors including:
the compatibility of the funds' objectives and policies
the expense ratios of the combined fund family
the potential economies of scale to be gained by the merger
the advantages of increased investment opportunities for Arbor Funds'
shareholders; and
the fact that the merger will be free from Federal income taxes.
The details of the proposed Agreement and Plan of Reorganization are set
forth in the combined prospectus and proxy statement that accompanies this
letter. We encourage you to read them thoroughly. In addition, we have
included a list of commonly asked questions and answers on the next page.
If you and the other shareholders of your fund approve the proposed
reorganization of your fund and certain other conditions are satisfied, you will
be able to continue your investment program through ownership in the STI Classic
Funds portfolio with similar objectives and policies.
Most shareholders cast their votes by filling out and signing the enclosed
proxy card. In order to conduct the Shareholder Meeting, a majority of shares
must be represented. YOUR VOTE IS VERY IMPORTANT. PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
We thank you for your continued confidence and support.
Sincerely,
Robert A. Nesher
CHAIRMAN OF THE BOARD
IMPORTANT PROXY INFORMATION ENCLOSED
-IMMEDIATE ACTION REQUIRED-
<PAGE>
THE ARBOR FUND
2 Oliver Street
Boston, MA 02109
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on May 7, 1999
Notice is hereby given that a Special Meeting of Shareholders The Arbor
Fund ("Arbor"), with respect to two of its series (each an "Arbor Fund" and
collectively, the "Arbor Funds"), will be held at the offices of SEI Investments
Company, One Freedom Valley Drive, Oaks, PA 19456, on Friday, May 7, 1999 at
4:00 p.m. (Eastern Time) for the purposes of considering the proposals set forth
below. Collectively, the proposals will, if approved, result in the transfer of
the assets and stated liabilities of each Arbor Fund to a corresponding series
of the STI Classic Funds (the "Trust") in return for shares of such series (each
a "STI Fund").
Proposal 1: Approval of an Agreement and Plan of Reorganization (the
"Reorganization Agreement") as it relates to (i) the
transfer of all of the assets and certain stated liabilities
of the Arbor U.S. Government Securities Money Fund to the
STI Classic Institutional U.S. Government Securities Money
Market Fund, in exchange for shares of that STI Fund; (ii)
the distribution of the STI Fund's shares so received to
shareholders of the corresponding Arbor Fund; and (iii) the
termination under state law of the Arbor Fund;
Proposal 2: Approval of the Reorganization Agreement as it relates to
(i) the transfer of all of the assets and certain stated
liabilities of the Arbor Prime Obligations Fund to the STI
Classic Institutional Cash Management Money Market Fund, in
exchange for shares of that STI Fund; (ii) the distribution
of the STI Fund's shares so received to shareholders of the
corresponding Arbor Fund; and (iii) the termination under
state law of the Arbor Fund;
Proposal 3: The transaction of such other business as may properly be
brought before the meeting.
Shareholders of record as of the close of business on March 5, 1999 are
entitled to notice of, and to vote at, this meeting or any adjournment thereof.
Shareholders of the respective Arbor Funds will vote separately, and the
proposed reorganizations and liquidation will be effected as to a particular
Arbor Fund only if that Fund's shareholders approve the proposal.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE BOARD OF
TRUSTEES OF THE ARBOR FUND. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE
<PAGE>
THEY ARE EXERCISED BY SUBMITTING A WRITTEN NOTICE OF REVOCATION OR A
SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
John H. Grady, Jr.
Secretary
The Arbor Funds
____________________, 1999
<PAGE>
QUESTIONS & ANSWERS
FOR THE
ARBOR FUNDS
SHAREHOLDER MEETING
Q. WHY IS THE BOARD OF TRUSTEES PROPOSING TO REORGANIZE THE ARBOR FUNDS
AND THE STI CLASSIC FUNDS?
A. As you are aware, Crestar Financial Corporation and SunTrust Banks,
Inc. merged on December 31, 1998. Before approving the integration of
the Arbor Funds and STI Classic Funds, the Arbor Funds Trustees
evaluated the expanded range of investment alternatives that would be
available to shareholders, the opportunities for increased economies
of scale, and the potential for improved shareholder service. After
careful consideration, they determined that the Agreement and Plan of
reorganization is in the best interest of the Arbor Funds
shareholders. Through this proxy, they are submitting the proposal
for reorganization to you - the Arbor Funds shareholders - for a vote.
Q. HOW WILL THIS AFFECT ME AS AN ARBOR FUNDS SHAREHOLDER?
A. You will become a shareholder of an STI Classic Fund portfolio with
similar investment objectives and policies as the Arbor Funds you
currently hold.
The reorganization provides for the transfer of all of the assets of each
of the Arbor Funds into its corresponding STI Classic Fund in exchange for
shares of the STI Classic Fund. Each Arbor Funds shareholder will receive
shares of STI Classic Funds equal in value to their Arbor Funds shares.
There will be NO CHANGE in the market value of your account as a result of
the merger.
Q. WILL THE REORGANIZATION RESULT IN ANY TAXES?
A. Neither the Arbor Funds nor their shareholders will incur any federal
income tax as a result of the reorganizations.
Q. WHAT FUND(S) WILL I HOLD FOLLOWING THE REORGANIZATION?
A. Arbor Funds shareholders will receive shares of the following
corresponding STI Classic Funds portfolios. Please refer to the STI
Classic Fund prospectus for more details. Listed below are the Arbor
Funds and the corresponding STI Classic Fund portfolio:
Arbor Funds STI Classic Funds
- ---------------------- -------------------------------------
Prime Obligations Fund Classic Institutional Cash Management
Money Market
U.S. Government Securities Money Fund Classic Institutional U.S. Government
Securities Money Market
<PAGE>
Q. HOW DOES THE ARBOR BOARD OF TRUSTEES RECOMMEND THAT I VOTE?
A. After careful consideration, the Arbor Board of Trustees unanimously
recommends that you vote "FOR" the proposed reorganizations. The
Board also wishes to remind you to vote and return ALL the proxy
ballot cards you receive. This means that if you receive multiple
proxies and ballot cards because you are invested in more than one
Arbor portfolio, please fill out and return each and every ballot card
you receive.
Q. WHO SHOULD I CALL WITH QUESTIONS ABOUT THIS PROXY?
A. If you have any questions regarding this proxy, please contact your
CAMCO Portfolio Manager or your Crestar Securities Financial
Consultant.
PLEASE VOTE THE ENCLOSED PROXY BALLOT CARD.
YOUR VOTE IS IMPORTANT!
<PAGE>
PROXY STATEMENT/PROSPECTUS
DATED ______________, 1998
RELATING TO THE ACQUISITION OF THE ASSETS OF CERTAIN PORTFOLIOS OF
THE ARBOR FUNDS
2 OLIVER STREET
BOSTON, MA 02109
1-800-342-5734
BY AND IN EXCHANGE FOR SHARES OF CERTAIN PORTFOLIOS OF
STI CLASSIC FUNDS
2 OLIVER STREET
BOSTON, MA 02109
1-800-XXX-XXXX
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Trustees of The Arbor Funds ("Arbor") in
connection with the Special Meeting of Shareholders (the "Meeting") of each of
Arbor's participating investment portfolios (the U.S. Government Securities
Money Fund and Prime Obligations Fund) (each, an "Arbor Fund" and collectively,
the "Arbor Funds") to be held on May 7, 1999 at 4:00 p.m. (Eastern Time) at the
offices of SEI Investments Company, One Freedom Valley Drive, Oaks, PA 19456.
At the meeting, shareholders of each Arbor Fund, voting separately, will be
asked to consider and approve a proposed Agreement and Plan of Reorganization
dated ________________, 1999 (the "Reorganization Agreement"), by and between
Arbor and STI Classic Funds (the "Trust") on behalf of one of the Trust's
existing investment portfolios, the Classic Institutional Cash Management Money
Market Fund (the "STI Cash Management Fund") and one new investment portfolio,
the Classic Institutional U.S. Government Securities Money Market Fund (the "STI
U.S. Government Fund" and together with the STI Cash Management Fund, the "STI
Funds"), and the matters contemplated therein. The Arbor Funds and STI Funds
are referred to collectively as the "Funds." Arbor and the Trust are referred
to collectively as the "Companies." A copy of the Reorganization Agreement is
attached as Exhibit A.
The Reorganization Agreement provides that each Arbor Fund will transfer
all of its assets and certain stated liabilities to the corresponding STI Fund
listed opposite its name in the following chart:
- --------------------------------------------------------------------------------
ARBOR ACQUIRED FUNDS STI ACQUIRING FUNDS
- --------------------------------------------------------------------------------
Prime Obligations Fund Classic Institutional Cash Management
Money Market Fund
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
U.S. Government Securities Classic Institutional U.S. Government
Money Fund Securities Money Market Fund
- --------------------------------------------------------------------------------
In exchange for the transfers of these assets and certain stated
liabilities, the Trust will simultaneously issue shares of each STI Fund to its
corresponding Arbor Fund listed above, in an amount equal in value to the net
asset value of each Arbor Fund's shares. These transfers are expected to occur
in two steps, on or about May 14 and May 21, 1999.
Immediately after the transfer of each Arbor Fund's assets and liabilities,
the Arbor Fund will make liquidating distributions of the STI Fund's shares
received to shareholders of the Arbor Fund, so that a holder of shares in an
Arbor Fund at the applicable Effective Time of the Reorganization (as
hereinafter defined) will receive Institutional Shares of the corresponding STI
Fund with the same aggregate net asset value as the shareholder had in the Arbor
Fund immediately before the Reorganization. Following the Reorganization,
shareholders of each Arbor Fund will be shareholders of each corresponding STI
Fund, and the Arbor Funds will be terminated under state law.
The Arbor Funds have one class of shares and the STI Funds have one class
of shares (Institutional Shares). Holders of each Arbor Fund will receive an
amount of Institutional Shares of the corresponding STI Fund equal in value to
their Arbor Fund shares.
The Companies are both open-end, management investment companies registered
under the Investment Company Act of 1940 (the "1940 Act"). Trusco Capital
Management, Inc. ("Trusco"), an indirect wholly-owned subsidiary of SunTrust
Banks, Inc., a Georgia corporation and a bank holding company ("SunTrust"), is
the investment adviser to the STI Funds.
Crestar Asset Management Company ("CAMCO") is a registered investment
adviser and is the investment adviser to the Arbor Funds. CAMCO is a
wholly-owned subsidiary of Crestar Bank ("Crestar Bank"), which itself is an
indirect wholly-owned subsidiary of SunTrust.
This Proxy Statement/Prospectus sets forth concisely the information that a
shareholder of each of the Arbor Funds should know before voting on the
Reorganization, and should be retained for future reference. Certain additional
relevant documents listed below, which have been filed with the Securities and
Exchange Commission ("SEC"), are incorporated in whole or in part by reference.
A Statement of Additional Information dated __________________, 1999, relating
to this Proxy Statement/Prospectus and the Reorganization and including certain
financial information about the Arbor Funds and the STI Funds, has been filed
with the SEC and is incorporated in its entirety into this Proxy
Statement/Prospectus. A copy of such Statement of Additional Information is
available upon request and without charge by writing to _____________ or by
calling toll-free 1-800-xxx-xxxx.
-2-
<PAGE>
For a more detailed discussion of the investment objectives, policies,
risks and restrictions of the Arbor Funds, see the registration statement or
prospectus contained in the registration statement for the Arbor Funds, dated
May 31, 1998, as supplemented through August 3, 1998, which has been filed with
the SEC and is incorporated by reference into this Proxy Statement/Prospectus
insofar as it relates to the participating Arbor Funds and not to any other
portfolio of Arbor described therein. A Statement of Additional Information for
the Arbor Funds dated May 31, 1998 has been filed with the SEC, and is
incorporated by reference into this Proxy Statement/Prospectus. The Arbor
Funds' prospectus and Statement of Additional Information are available without
charge by calling 1-800-xxx-xxxx.
For a more detailed discussion of the investment objectives, policies,
risks and restrictions of the participating STI Funds, see the registration
statement or the prospectus contained in the registration statement for the STI
Cash Management Fund dated September 28, 1998, as supplemented through October
27, 1998 and for the STI U.S. Government Fund dated January 26, 1999, which have
been filed with the SEC and are incorporated by reference into this Proxy
Statement/Prospectus insofar as they relate to the participating STI Funds, and
not to any other portfolio of STI Funds described therein. Copies of the
prospectuses for the participating STI Funds accompany this Proxy
Statement/Prospectus. Statements of Additional Information for the STI Cash
Management Fund dated September 28, 1998, as supplemented through October 27,
1998 and for the STI U.S. Government Fund dated January 6, 1999, have been filed
with the SEC, and are incorporated by reference into this Proxy
Statement/Prospectus. Copies are available upon request and without charge by
calling 1-800-xxx-xxxx.
This Proxy Statement/Prospectus constitutes the proxy statement of the
Arbor Funds for the Meeting and is expected to be sent to shareholders on or
about April 7, 1999.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-3-
<PAGE>
TABLE OF CONTENTS
PAGE
Synopsis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Objectives, Policies and Restrictions . . . . . . . . . . . .
The Funds' Purchase, Exchange and Redemption Procedures. . . . . . . . .
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reasons for the Reorganization. . . . . . . . . . . . . . . . . . . . . . . . .
Information Relating to the Reorganization. . . . . . . . . . . . . . . . . . .
Description of the Reorganization. . . . . . . . . . . . . . . . . . . .
Federal Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information About the STI Funds and Arbor Funds . . . . . . . . . . . . . . . .
Voting Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder Inquiries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit A - Form of Agreement and Plan of Reorganization . . . . . . . . . . .
-4-
<PAGE>
SYNOPSIS
This Synopsis is designed to allow you to compare the current fees,
investment objectives, policies, and restrictions, and distribution, purchases,
exchange and redemption procedures of each Arbor Fund with those of the
corresponding STI Fund. It is a summary of certain information contained
elsewhere in this Proxy Statement/Prospectus, or incorporated by reference into
this Proxy Statement/Prospectus. Shareholders should read this entire Proxy
Statement/Prospectus carefully. For more complete information, please read the
prospectus for each Fund.
THE REORGANIZATION
BACKGROUND. The Board of Trustees of The Arbor Fund, including the Trustees
who are not "interested persons" within the meaning of Section 2(a)(19) of the
1940 Act, has unanimously approved, subject to shareholder approval, entry into
an Agreement and Plan of Reorganization between the Companies on behalf of their
respective participating series. A copy of the form of Agreement and Plan of
Reorganization (the "Reorganization Agreement") is attached hereto as Exhibit A.
The Reorganization Agreement provides that each of the Arbor Funds will transfer
all of its assets and stated liabilities to its corresponding participating STI
Fund in exchange solely for shares of that STI Fund. Each of the Arbor Funds
will distribute the STI Fund shares that it receives to its shareholders in
liquidation. Each of the Arbor Funds will then be terminated under state law.
No front-end sales charges or contingent deferred sales charges will be imposed
in connection with these transactions.
The Board of Trustees of the Arbor Funds has concluded that the
Reorganization would be in the best interests of each of the Arbor Funds and
their shareholders, and that the interests of existing shareholders in the Arbor
Funds would not be diluted as a result of the transactions contemplated by the
Reorganization. The Board of Trustees of the Arbor Funds recommends that you
vote for approval of the Reorganization Agreement.
TAX CONSEQUENCES. The Reorganization is intended to qualify for federal
income tax purposes as a tax-free reorganization. If so, shareholders of the
Arbor Funds will not recognize gain or loss in the transaction.
SPECIAL CONSIDERATIONS AND RISK FACTORS. Although the investment
objectives and policies of the participating STI Funds and the corresponding
Arbor Funds are generally similar, there are certain differences, especially
where the Arbor Prime Obligations Fund would combine with the STI Classic
Institutional Cash Management Money Market Fund. Therefore, an investment in a
STI Fund may involve investment risks that are, in some respects, different from
those of the corresponding Arbor Fund. For a more complete discussion of the
risks associated with the respective Funds, see the "RISKS" section, below.
-5-
<PAGE>
THE FUNDS
BUSINESS OF THE FUNDS. Arbor is an open-end management investment company,
which offers redeemable shares in different series of investment portfolios. It
was organized as a Massachusetts business trust on June 24, 1992. Each
participating Arbor Fund offers one class of shares.
The Trust is an open-end, management investment company, which offers
redeemable shares of different series of investment portfolios. It was
organized as a Massachusetts business trust on April 17, 1995. Each
participating STI Fund offers one class of shares, Institutional Shares.
FEES AND EXPENSES
INVESTMENT ADVISERS AND ADVISORY FEES. Trusco is the investment adviser to
the two participating STI Funds. Trusco is registered under the Investment
Advisers Act of 1940 (the "Advisers Act"). Trusco had approximately $_____
billion of assets under management as of _________, 199_ and is located at 50
Hurt Plaza, Suite 1400, Atlanta, GA 30303.
Under an agreement with STI Funds, Trusco is entitled to receive a fee from
each STI Fund, calculated monthly, at the following annual percentage rates of
each Fund's net assets:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STI FUND PERCENTAGE RATE
- --------------------------------------------------------------------------------
<S> <C>
Classic Institutional Cash Management
Money Market Fund .20%
- --------------------------------------------------------------------------------
Classic Institutional U.S. Government
Securities Money Market Fund .20%
- --------------------------------------------------------------------------------
</TABLE>
For the fiscal year ending May 31, 1998, Trusco received the following as
compensation for its services:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STI FUND FEES (AS A PERCENTAGE OF NET ASSETS)
- --------------------------------------------------------------------------------
<S> <C>
Classic Institutional Cash Management
Money Market Fund .07%*
- --------------------------------------------------------------------------------
</TABLE>
* Trusco voluntarily agreed to waive a portion of its fee so that total
operating expenses of the Fund did not exceed .20%.
-6-
<PAGE>
The following table shows the estimated advisory fee for the STI U.S. Government
Fund:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STI FUND FEES (AS A PERCENTAGE OF NET ASSETS)
- --------------------------------------------------------------------------------
<S> <C>
Classic Institutional U.S. Government
Securities Money Market Fund .17%+
- --------------------------------------------------------------------------------
</TABLE>
+ Because this Fund was not yet operational as of the date of this
Prospectus/Proxy Statement, this fee is based on Trusco's anticipated
voluntary fee waivers.
CAMCO is a registered investment adviser and is the investment adviser to
the two participating Arbor Funds.(1) CAMCO is a wholly-owned subsidiary of
Crestar Bank ("Crestar Bank"), which itself is an indirect wholly-owned
subsidiary of SunTrust. As of ___________, 199_, CAMCO had approximately $____
billion in assets under management as an investment manager or as a named
fiduciary or fiduciary adviser. CAMCO is located at 919 East Main Street,
Richmond, VA 23219.
- -------------------------
(1) The remaining 11 investment series of the Arbor Funds are not advised by
CAMCO, or any of its affiliates, and are not participating in the
transactions described herein.
Under an agreement with Arbor, CAMCO is entitled to receive a fee from each
Arbor Fund, calculated monthly, at the following annual percentage rates:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ARBOR FUND PERCENTAGE RATE
- --------------------------------------------------------------------------------
<S> <C>
Prime Obligations Fund .20%
- --------------------------------------------------------------------------------
U.S. Government Securities Money Fund .20%
- --------------------------------------------------------------------------------
</TABLE>
For the year ending January 31, 1999, CAMCO received the following as
compensation for its services:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ARBOR FUND FEES (AS A PERCENTAGE OF NET ASSETS)
- --------------------------------------------------------------------------------
<S> <C>
Prime Obligations Fund .13%*
- --------------------------------------------------------------------------------
U.S. Government Securities Money Fund .12%*
- --------------------------------------------------------------------------------
</TABLE>
* CAMCO voluntarily agreed to waive a portion of its fee so that the total
operating expenses of the U.S. Government Securities Money Fund and Prime
Obligations Fund did not exceed 0.25% for each Fund.
The following comparative fee tables show the current fees for the
corresponding STI Funds and Arbor Funds.
-7-
<PAGE>
Shareholder Transaction Expenses
Neither STI Funds nor Arbor Funds impose fees on shareholder transactions.
COMPARISON OF ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
NET OF FEE WAIVERS AND/OR REIMBURSEMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISORY
FEES (NET OF FEE TOTAL OPERATING EXPENSES (NET
WAIVERS AND EXPENSE 12b-1 OTHER OF FEE WAIVERS AND EXPENSE
FUND REIMBURSEMENTS) FEES EXPENSES REIMBURSEMENTS)(1)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic Institutional
U.S. Government NA NA NA NA
Securities Money Market
Fund
- -------------------------------------------------------------------------------------------------------------
Arbor U.S. Government
Securities Money Fund 0.12% 0% 0.13% 0.25%
- -------------------------------------------------------------------------------------------------------------
STI Classic Institutional
Cash Management 0.11% 0% 0.09% 0.20%
Money Market Fund
- -------------------------------------------------------------------------------------------------------------
Arbor Prime Obligations
Fund 0.13% 0% 0.12% 0.25%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Trusco has voluntarily agreed to waive its advisory fees and/or reimburse
certain expenses to the extent necessary to keep Total Operating Expenses for
the Classic Institutional Cash Management Money Market Fund from exceeding 0.20%
of the Fund's average daily net assets. Absent such waivers and reimbursements,
investment advisory fees for the Classic Institutional Cash Management Money
Market Fund would be 0.20% and total operating expenses would be 0.31% of the
Fund's average daily net assets.
CAMCO has voluntarily agreed to waive a portion of its fee so that the
total operating expenses of the Arbor U.S. Government Securities Money Fund and
Prime Obligations Fund do not exceed 0.25% for each Fund. Absent such waivers
and reimbursements, investment advisory fees would be 0.20% of each Fund's
average daily net assets. Absent waivers or reimbursements, the Total Operating
Expenses, as a percentage of the average daily net assets of the U.S.
Government Securities Money Fund and Prime Obligations Fund would be 0.37% and
0.36%, respectively.
-8-
<PAGE>
PRO FORMA ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
NET OF FEE WAIVERS AND/OR REIMBURSEMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISORY
FEES (NET OF FEE TOTAL OPERATING EXPENSES (NET
WAIVERS AND EXPENSE 12b-1 OTHER OF FEE WAIVERS AND EXPENSE
FUND REIMBURSEMENTS) FEES EXPENSES REIMBURSEMENTS)*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI Classic Institutional
U.S. Government
Securities Money Market
Fund 0.17% 0% 0.08% 0.25%
- -------------------------------------------------------------------------------------------------------------
STI Classic Institutional
Cash Management
Money Market Fund 0.17% 0% 0.08% 0.25%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Trusco has voluntarily agreed to waive its advisory fees and/or reimburse
certain expenses to the extent necessary to keep Total Operating Expenses for
the Classic Institutional U.S. Government Securities Money Market Fund and
Classic Institutional Cash Management Money Market Fund from exceeding 0.25% of
each Funds' average daily net assets. Absent such waivers and reimbursements,
investment advisory fees for the Classic Institutional U.S. Government
Securities Money Market Fund and Classic Institutional Cash Management Money
Market Fund would be 0.20% and total operating expenses would be 0.30% of each
Funds' average daily net assets.
EXAMPLES
The purpose of these tables is to assist investors in understanding the
various expenses that a shareholder in a Fund will bear directly or indirectly.
The following illustrates the expenses on a $1,000 investment under the existing
and proposed fees and the expenses stated above, assuming (1) a 5% annual return
and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI CLASSIC INSTITUTIONAL U.S.
GOVERNMENT SECURITIES MONEY
MARKET FUND NA NA NA NA
- ------------------------------------------------------------------------------------------------
ARBOR U.S. GOVERNMENT SECURITIES
MONEY FUND $3 $8 $14 $32
- ------------------------------------------------------------------------------------------------
STI CLASSIC INSTITUTIONAL CASH
MANAGEMENT MONEY MARKET FUND $2 $6 $11 $26
- ------------------------------------------------------------------------------------------------
ARBOR PRIME OBLIGATIONS FUND $3 $8 $14 $32
- ------------------------------------------------------------------------------------------------
</TABLE>
PRO FORMA EXAMPLE
-9-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STI CLASSIC INSTITUTIONAL U.S.
GOVERNMENT SECURITIES MONEY
MARKET FUND $3 $8 $14 $32
- ------------------------------------------------------------------------------------------------
STI CLASSIC INSTITUTIONAL CASH
MANAGEMENT MONEY MARKET FUND $3 $8 NA NA
- ------------------------------------------------------------------------------------------------
</TABLE>
The Examples above should not be considered a representation of future
expenses of the Funds. Actual expenses may be greater or less than those shown.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS.
The STI CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY MARKET FUND seeks to
provide as high a level of current income as is consistent with preservation of
capital and liquidity by investing exclusively in high quality money market
instruments issued by corporations and the U.S. Government. The Fund seeks to
maintain a constant net asset value of $1.00 per share.
The ARBOR PRIME OBLIGATIONS FUND seeks to provide high current income to
the extent consistent with the preservation of capital and the maintenance of
liquidity. The Fund seeks to maintain a constant net asset value of $1.00 per
share.
Because the STI CLASSIC INSTITUTIONAL U.S. GOVERNMENT SECURITIES MONEY
MARKET FUND was not yet operational as of the date of this Prospectus/Proxy
Statement, the Fund will have the same investment objectives and policies as
the ARBOR U.S. GOVERNMENT SECURITIES MONEY FUND, which seeks to provide high
current income to the extent consistent with the preservation of capital and
the maintenance of liquidity. The Fund seeks to maintain a constant net
asset value of $1.00 per share.
THE FUNDS' PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES
PURCHASE PROCEDURES.
STI FUNDS. Shares of the Funds are sold primarily to various types of
institutional investors, including subsidiaries of SunTrust, for the investment
of funds for which they act in a fiduciary, agency, investment advisory or
custodial capacity. Shares are sold without a sales charge, although the
institutional investors may charge their customer accounts for services provided
in connection, with the purchase of shares. The minimum initial investment is
$10,000,000. Shares may be purchased on days on which the New York Stock
Exchange ("NYSE") is open for business (a "Business Day"). However, shares
cannot be purchased or redeemed for same day settlement on days the Federal
Reserve is closed.
Purchase orders for the Funds will be effective as of the Business Day
received by the Funds' transfer agent and eligible to receive dividends declared
the same day if the transfer agent receives
-10-
<PAGE>
the order before 1:00 p.m, Eastern Time, and the Funds' custodian receives
federal funds before 4:00 p.m. Eastern time on such day. Otherwise, purchase
orders for the Funds will be effective the next Business Day provided the Funds'
custodian receives readily available funds before 4:00 p.m. Eastern Time on the
next such Business Day. The purchase price is the net asset value per share
next computed after the order is received and accepted by the Trust. The net
asset value per share is calculated as of the regularly scheduled close of
normal trading on the NYSE (currently 4:00 p.m. Eastern time) each Business Day
based on the amortized cost method described in the Funds' Statement of
Additional Information, incorporated herein by reference, and is expected to
remain constant at $1.00 per share. The Trust reserves the right to reject a
purchase order when the Distributor determines that it is not in the best
interest of the Trust and/or Shareholder(s).
THE ARBOR FUNDS. Each Fund is offered to qualified individuals or
institutional customers that have a Cash Advantage Portfolio or Liquid Asset
Manager account with CAMCO or Crestar Bank or other institutions having a
selling agreement with the Funds' distributor. Financial institutions that are
the record owner of shares for the account of their customers may impose
separate fees for account services to their customers. An institution may
arrange with the Funds' transfer agent for sub-accounting services and will be
charged directly for the cost of such services.
Shares of each Fund may be purchased or redeemed on any Business Day.
Shares of a Fund may not be purchased by wire on federal holidays restricting
wire transfers. The minimum initial investment is $10,000,000, unless the
shareholder has, in the opinion of a Fund, adequate intent and availability of
funds to reach a future level of investment of $10,000,000. There is no minimum
for subsequent purchases. Each Fund reserves the right to reject any purchase
order.
EXCHANGE PROCEDURES. The Trust and Arbor have no Exchange Procedures.
REDEMPTION PROCEDURES
STI FUNDS. An order to redeem shares must be transmitted to the Funds'
transfer agent by the institutional investor as the record owner of shares.
Redemption orders must be received by the Funds' transfer agent on a Business
Day before 1:00 p.m. Eastern Time. Redemption orders received after the time
noted above will be executed the following day. The Trust reserves the right to
wire redemption proceeds within five Business Days after receiving the
redemption orders if, in Trusco's judgment, an earlier payment could adversely
impact a Fund.
ARBOR FUNDS. Shareholders may redeem their shares without charge on any
Business Day by contacting the Fund by wire or by telephone. Shares may not be
redeemed by wire on federal holidays restricting wire transfers. Telephone
redemption orders must be placed prior to 3:00 p.m. Eastern Time, on any
Business Day in order to be effective on such day. If transfer by wire is
requested and the order is placed prior to 3:00 p.m. Eastern Time, the proceeds
of the redemption ordinarily will be transmitted in federal funds on the same
day and the shares will not receive the dividend declared on that day. If the
request is received later than 3:00 P.M. Eastern Time, the shares will receive
the dividend on a Fund's shares declared on that day and the proceeds of
-11-
<PAGE>
redemption, if wire transfer is requested, ordinarily will be transmitted in
federal funds on the next Business Day. The Funds reserves the right to refuse
any request made by telephone and may limit the amount involved or the number of
telephone redemptions. This procedure may be modified or terminated at any time
by the Funds.
IN-KIND REDEMPTIONS
The Trust and Arbor intend to pay cash for all shares redeemed, but under
abnormal conditions which make payment in cash unwise, payment may be made
wholly or partly in portfolio securities with a market value equal to the
redemption price. In such circumstances, an investor may incur brokerage costs
in converting such securities to cash.
DIVIDEND POLICIES
Dividends from the net investment income of each of the Arbor Funds and the
STI Funds are declared daily and paid to shareholders monthly. Capital gains,
if any, are distributed at least annually.
RISKS
The following is a description of investment practices in which both the
Arbor Funds and the STI Funds may invest, and associated risk factors:
BANKERS' ACCEPTANCES - Bankers acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank. Bankers' acceptances are used by
corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT - Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER - Commercial paper is a term used to describe unsecured short-
term promissory notes issued by banks, municipalities, corporations and other
entities. Maturities on these issues vary from a few days to 270 days.
EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS - Eurodollar bank obligations are U.S.
dollar denominated certificates of deposit or time deposits issued outside the
United States by foreign branches of U.S. banks or by foreign banks. Yankee
dollar obligations are U.S. dollar denominated obligations issued in the United
States by foreign banks.
ILLIQUID SECURITIES - Illiquid securities are securities that cannot be disposed
of within seven business days at approximately the price at which they are being
carried on a Fund's books. An
-12-
<PAGE>
illiquid security includes a demand instrument with a demand notice period
exceeding seven days, where there is no secondary market for such security, and
repurchase agreements with maturities over seven days in length.
OBLIGATIONS OF SUPRANATIONAL ENTITIES - Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, the Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank.
RECEIPTS - Receipts are sold as zero coupon securities which means that they are
sold at a substantial discount and redeemed at face value at their maturity date
without interim cash payments of interest or principal. This discount is
accreted over the life of the security, and such accretion will constitute the
income earned on the security for both accounting and tax purposes. Because of
these features, such securities may be subject to greater interest rate
volatility than interest paying investments.
REPURCHASE AGREEMENTS - Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The Fund will have actual or constructive possession
of the security as collateral for the repurchase agreement. A Fund bears a risk
of loss in the event that the other party defaults on its obligations and the
Fund is delayed or prevented from exercising its right to dispose of the
collateral or if the Fund realizes a loss on the sale of the collateral. A Fund
will enter into repurchase agreements only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
established guidelines. Repurchase agreements are considered loans under the
1940 Act.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS - Investments by a money market
fund are subject to limitations imposed under regulations adopted by the SEC.
Under these regulations, money market funds may only acquire obligations that
present minimal credit risk and that are "eligible securities," which means they
are (i) rated, at the time of investment by at least two NRSROs (one if it is
the only organization rating such obligation) in the highest rating category or,
if unrated, determined to be of comparable quality (a "first security"); or (ii)
rated according to the foregoing criteria in the second highest rating category
or, if unrated, determined to be of comparable quality ("second tier security").
A security is not considered to be unrated if its issuer has outstanding
obligations of comparable priority and security that have a short-term rating.
A money market fund may invest up to 25% of its assets in "first tier"
securities of a single issuer for a period of up to three business days. The
securities that money market funds may acquire may be supported by credit
enhancements, such as demand features or guarantees. SEC regulations limit the
percentage of securities that a money market fund may hold for which a single
issuer provides credit enhancements.
-13-
<PAGE>
RESTRICTED SECURITIES - Restricted securities are securities that may not be
sold freely to the public absent registration under the Securities Act of 1933,
as amended, or an exemption from registration.
REVERSE REPURCHASE AGREEMENTS - Reverse repurchase agreements are agreements by
which a Fund sells securities to financial institutions and simultaneously
agrees to repurchase those securities at a mutually agreed-upon date and price.
At the time a Fund enters into a reverse repurchase agreement, the Fund will
place liquid assets having a value equal to the repurchase price in a segregated
custodial account and monitor this account to ensure equivalent value is
maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by a Fund may decline below the price at which the
Fund is obligated to repurchase the securities. Reverse repurchase agreements
are considered to be borrowings by a Fund under the 1940 Act.
SECURITIES LENDING - In order to generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 102% of the market value of the
securities lent. A Fund continues to receive interest on the securities lent
while simultaneously earning interest on the investment of cash collateral.
Collateral is marked to market daily. There may be risks of delay in recovery
of the securities or even loss of rights in the collateral should the borrower
of the securities fail financially or become insolvent.
SECURITIES OF FOREIGN ISSUERS - There are certain risks connected with investing
in foreign securities. These include risks of adverse political and economic
developments (including possible governmental seizure or nationalization of
assets), the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, the
possibility that there will be less information on such securities and their
issuers available to the public, the difficulty of obtaining or enforcing court
judgments abroad, restrictions on foreign investments in other jurisdictions,
difficulties in effecting repatriation of capital invested abroad, and
difficulties in transaction settlements and the effect of delay on shareholder
equity. Foreign securities may be subject to foreign taxes, and may be less
marketable than comparable U.S. securities.
STANDBY COMMITMENTS AND PUTS - Securities subject to standby commitments or puts
permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable. Therefore, the standby commitment or put would only
have value to a Fund owning the security to which it relates. In certain cases,
a premium may be paid for a standby commitment or put, which premium will have
the effect of reducing the yield otherwise payable on the underlying security.
A Fund will limit standby commitment or put transactions to institutions
believed to present minimal credit risk.
-14-
<PAGE>
TIME DEPOSITS - Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earn a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market Time Deposits with a withdrawal penalty or that
mature in more than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCIES - Obligations issued or guaranteed by agencies of the
U.S. Government and obligations issued or guaranteed by instrumentalities of the
U.S. Government. Some of these securities are supported by the full faith and
credit of the U.S. Treasury, others are supported by the right of the issuer to
borrow from the Treasury, while still others are supported only by the credit of
the instrumentality. Guarantees of principal by agencies or instrumentalities
of the U.S. Government may be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to maturity there might not
be a market and thus no means of realizing on the obligation prior to maturity.
Guarantees as to the timely payment of principal and interest do not extend to
the value or yield of these securities nor to the value of a Fund's shares.
U.S. TREASURY OBLIGATIONS - U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as STRIPS.
VARIABLE AND FLOATING RATE INSTRUMENTS - Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed,
but which vary with changes in specified market rates or indices. The interest
rates on these securities may be reset daily, weekly, quarterly or some other
reset period, and may have a floor or ceiling on interest rate changes. There is
a risk that the current interest rate on such, obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand
notice exceeding seven days may be considered illiquid if there is no secondary
market for such security.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES - When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. A Fund will maintain with the custodian a
separate account with liquid assets in an amount at least equal to these
commitments. The interest rate realized on these securities is fixed as of the
purchase date and no interest accrues to a Fund before settlement. These
securities are subject to market fluctuation due to changes in market interest
rates and it is possible that the market value at the time of settlement could
be higher or lower than the purchase price if the general level of interest
rates has changed. Although a Fund generally purchases securities on a when-
issued or forward commitment basis with the intention of actually acquiring
securities for its portfolio, a Fund may dispose of a when-issued security or
forward commitment prior to settlement if it deems appropriate.
ONLY THE ARBOR FUNDS MAY INVEST IN THE FOLLOWING INVESTMENT INSTRUMENTS.
ONCE THE REORGANIZATION IS COMPLETED, THE RESULTING STI FUNDS WILL BE PROHIBITED
FROM USING THESE INVESTMENT INSTRUMENTS:
-15-
<PAGE>
BANK INVESTMENT CONTRACTS ("BICs") - BICs are contracts issued by U.S. banks and
savings and loans institutions. Pursuant to such contracts, the Arbor Prime
Obligations Fund makes cash contributions to a deposit fund of the general
account of the bank or savings and loan institution. The bank or savings and
loan institution then credits to the Fund on a monthly basis guaranteed interest
at either a fixed, variable or floating rate. A BIC provides that this
guaranteed interest will not be less than a certain minimum rate. A BIC is a
general obligation of the issuing bank or savings and loan institution and not a
separate account. The purchase price paid for a BIC becomes part of the general
assets of the issuer, and the contract is paid at maturity from the general
assets of the issuer.
BICs are generally not assignable or transferable without the permission of the
issuing bank or savings and loan institution. For this reason, an active
secondary market in BICs currently does not exist. Therefore, BICs are
considered to be illiquid investments. The Fund may invest up to an aggregate
amount of 5% of its total assets in BICs.
GUARANTEED INVESTMENT CONTRACTS ("GICs") - GICs are contracts issued by U.S.
insurance companies. Pursuant to such contracts, the Arbor Prime Obligations
Fund makes cash contributions to a deposit fund of the insurance company's
general account. The insurance company then credits to the Fund on a monthly
basis guaranteed interest at either a fixed, variable or floating rate. A GIC
provides that this guaranteed interest will not be less than a certain minimum
rate. A GIC is a general obligation of the issuing insurance company and not a
separate account. The purchase price paid for a GIC becomes part of the general
assets of the issuer, and the contract is paid at maturity from the general
assets of the issuer.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance company. For this reason, an active secondary market in GICs
does not currently exist and GICS are generally considered to be illiquid
investments. However, the Fund will treat GICs with seven-day unconditional
demand features as liquid investments.
REASONS FOR THE REORGANIZATION
At a meeting held on February 22, 1999, the Arbor Board of Trustees
reviewed the proposed Reorganization. They received detailed information,
including materials describing the Reorganization on a Fund-by-Fund in terms of
relative net assets, current and pro forma expenses, performance and comparative
investment objectives, and policies and restrictions. The Board also reviewed
the draft Reorganization Agreement and memoranda of counsel.
After thorough consideration, the Board approved submission of the proposed
Reorganization to shareholders, concluding that participation on the
Reorganization is in the best interests of the Arbor Funds and that the
interests of existing shareholders of the participating Arbor Funds will not be
diluted as a result of the Reorganization.
-16-
<PAGE>
In particular, the Board reached the following conclusions:
THE TERMS AND CONDITIONS OF THE REORGANIZATION. The Board approved the terms of
the Reorganization Agreement, and in particular, requirements that the transfer
of assets in exchange for shares of STI Classic Funds will be at relative net
asset value. In this regard, the Board concluded that the terms of the
Reorganization do not involve overreaching on the part of any person concerned
and that the conditions and policies of Rule 17a-8 under the 1940 Act will, to
the extent possible, be followed. The Board also took note of the fact that no
sales charges would be imposed in connection with the Reorganization. The Board
also noted that the Reorganization would be submitted to the Arbor Funds'
shareholders.
LACK OF DILUTION TO SHAREHOLDER INTEREST. The Board noted that the Arbor Funds
would not bear any expenses in connection with the Reorganization.
RELATIVE EXPENSE RATIOS. The Board carefully reviewed information regarding
comparative expense ratios (respective current and pro forma expense ratios are
set forth in the "Fees and Expenses" section, above.) The Board concluded that
expense ratios will generally be comparable.
THE COMPARATIVE PERFORMANCE RECORDS. The Board of Trustees reviewed detailed
comparative performance information, taking into account performance over both
the short-term and the longer term. The Board determined that the performance
of the STI Cash Management Fund is generally comparable to its corresponding
Arbor Fund.
COMPATIBILITY OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The Board
concluded that the investment objectives, policies and restrictions of the
respective Funds are generally substantially identical or similar.
THE EXPERIENCE AND EXPERTISE OF THE INVESTMENT ADVISERS. The Board noted that
Trusco will engage as "dual employees" employees of CAMCO who have been involved
in managing the Arbor Funds. The Board determined that the experience of
Trusco and CAMCO is comparable.
SERVICE FEATURES. The Board noted, in particular, that the STI Funds receive
administration and distribution services from the same entities that provide
those services to Arbor Funds.
ASSUMPTION OF LIABILITIES. The Board took note of the fact that, under the
Reorganization Agreement, the STI Funds expect to acquire substantially all of
the liabilities of the corresponding Arbor Funds, other than those for which
specific reserves have been set aside.
TAX CONSEQUENCES. The Board concluded that the Reorganization is expected to be
free from Federal income taxes.
SHAREHOLDER LIABILITIES AND RIGHTS. The Board concluded that there would be no
substantial change in potential shareholder liability or in shareholder rights.
-17-
<PAGE>
MANAGEMENT, SUPERVISION AND TRUSTEE OVERSIGHT. The Board received information
about the trustees of the STI Funds and their respective roles. The Board had
noted the fact that the trustees are experienced and have responsibilities under
state and Federal law similar to those of the Arbor Board of Trustees.
INFORMATION RELATING TO THE REORGANIZATION
DESCRIPTION OF THE REORGANIZATION. The following summary is qualified in
its entirety by reference to the Reorganization Agreement found in Exhibit A.
The Reorganization Agreement provides that substantially all of the assets
and liabilities of each Arbor Fund will be transferred to the corresponding STI
Fund at the applicable Effective Time of the Reorganization. In exchange for
the transfer of these assets, STI will simultaneously issue at the applicable
Effective Time of the Reorganization a number of full and fractional
Institutional Shares of each STI Fund to the corresponding Arbor Fund equal in
value to the respective net asset values of each Arbor Fund immediately prior to
the applicable Effective Time of the Reorganization.
Following the transfer of assets and liabilities in exchange for STI Fund
shares, each Arbor Fund will distribute pro rata the shares of the corresponding
STI Funds so received to its shareholders in liquidation. Each shareholder of
the Arbor Funds owning shares at the applicable Effective Time of the
Reorganization will receive corresponding STI Fund shares of equal value. Such
liquidation and distribution will be accomplished by the establishment of
accounts in the names of the shareholders of the Arbor Funds' shareholders on
the share records of STI Funds' transfer agent. Each account will represent
the respective pro rata number of full and fractional shares of the STI Funds
due to the shareholders of the corresponding Arbor Funds. The STI Funds do not
issue share certificates to shareholders. Shares of the STI Funds to be issued
will have no preemptive or conversion rights. No front-end sales loads or
contingent deferred sales charges will be imposed in connection with the receipt
of such shares by the Arbor Funds' shareholders. The Arbor Funds then will be
terminated under state law.
The Reorganization is subject to a number of conditions, including approval
of the Reorganization Agreement by shareholders of the Arbor Funds; the receipt
of certain legal opinions described in the Reorganization Agreement (including
an opinion of counsel that the STI Funds' shares issued in accordance with the
terms of the Reorganization Agreement are validly issued, fully paid and non-
assessable); the receipt of certain certificates from the parties concerning
aggregate asset values; and the parties' performance in all material respects of
the agreements and undertakings in the Reorganization Agreement. The
Reorganization will occur in two steps: (i) the first step will include the STI
Cash Management Fund and its corresponding Arbor Fund, and (ii) the second step
will include the STI U.S. Government Fund and its corresponding Arbor Fund.
Assuming satisfaction of the conditions in the Reorganization Agreement, the
Effective Time for the first step of the Reorganization will be May 14, 1999 or
such later date as is agreed to by the parties, and the Effective time for the
second step of the Reorganization will be May 21, 1999 or such later date as is
agreed to by the parties (collectively, the "Effective Times").
-18-
<PAGE>
The Reorganization Agreement and the Reorganization may be terminated by
the mutual agreement of the Companies as it relates to any Selling Fund and
Acquiring Fund. In addition, the plan of reorganization may be terminated by
the Companies, with respect to either a Selling Fund or Acquiring Fund, at or
prior to the Closing Dates, if (i) the other party breaches any provision of the
plan of reorganization that was to be performed and the breach is not cured
within 30 days, or (ii) a condition precedent to the terminating party's
obligations has not been met and it appears that the condition precedent will
not or cannot be met.
FEDERAL INCOME TAXES. The Reorganization is intended to qualify for
federal income tax purposes as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended. If so qualified, shareholders of
the Arbor Funds will not recognize gain or loss in the transaction; the tax
basis of the STI Funds shares received will be the same as the basis of the
Arbor Funds shares surrendered; and the holding period of the STI Funds shares
received will include the holding period of the Arbor Funds shares surrendered,
provided that the shares surrendered were capital assets in the hands of the
Arbor Funds' shareholders at the time of the transaction. As a condition to the
closing of the Reorganization, Arbor and the Trust will receive an opinion from
counsel to that effect. Arbor, on behalf of the Arbor Funds, has not sought a
tax ruling from the Internal Revenue Service. The opinion of counsel is not
binding on the Internal Revenue Service and does not preclude the Internal
Revenue Service from adopting a contrary position. Shareholders should consult
their own tax advisers concerning the potential tax consequences of the
Reorganization to them, including state and local tax consequences.
CAPITALIZATION. The following table sets forth as of November 30, 1998 (i)
the capitalization of each of the STI Funds; (ii) the capitalization of each of
the Arbor Funds; and (iii) the pro forma combined capitalization of the Funds
assuming the Reorganization has been approved.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
FUND NET ASSETS (000) NET ASSET VALUE PER SHARE SHARES OUTSTANDING(000)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STI Classic Institutional U.S.
Government Securities Money
Market Fund NA NA NA
- -------------------------------------------------------------------------------------------------------------
Arbor U.S. Government
Securities Money Fund $652,986 $1.00 653,741
- -------------------------------------------------------------------------------------------------------------
Combined Funds* $652,986 $1.00 653,741
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
STI Classic Institutional Cash
Management Money Market Fund $587,450 $1.00 587,451
- -------------------------------------------------------------------------------------------------------------
Arbor Prime Obligations Fund $844,043 $1.00 844,046
- -------------------------------------------------------------------------------------------------------------
Combined Funds $1,431,493 $1.00 1,431,497
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Because the STI Classic Institutional U.S. Government Securities Money
Market Fund was not yet operational as of the date of this Prospectus/Proxy
Statement, the pro forma combined capitalization figures are identical to the
capitalization figures for the Arbor U.S. Government Securities Money Fund.
-19-
<PAGE>
SHAREHOLDER RIGHTS
STI FUNDS
GENERAL. The Trust was established as a business trust under Massachusetts
law by a Declaration of Trust dated January 15, 1992. The Trust is also
governed by its Bylaws and by applicable Massachusetts law.
SHARES. STI Funds is authorized to issue an unlimited number of shares of
beneficial interest, without par value, from an unlimited number of series of
shares. Currently, STI Funds consists of 33 separate investment series (ten of
which will be newly established series) offering up to four classes of shares,
Trust Share, Investor Shares, Flex Shares and Institutional Shares. The four
classes differ with respect to minimum investment requirements, fund expenses,
administrative and distribution costs, front-end sales loads and contingent
deferred sales charges, as set forth in the STI Funds prospectuses. The shares
of each STI Fund have no preference as to conversion, exchange, dividends,
retirement or other features, and have no preemptive rights.
VOTING REQUIREMENTS. Shareholders of STI Funds shares are entitled to one
vote for each full share held and fractional votes for fractional shares. On
any matter submitted to a vote of shareholders, all shares of the Trust entitled
to vote shall be voted on by individual series or class, except that (i) when so
required by the 1940 Act, then shares shall be voted in the aggregate and not by
individual series or class, and (ii) when the trustees of the Trust (the
"Trustees") have determined that the matter only affects the interest of one or
more series or class, then only shareholders of such series or class(es) shall
be entitled to vote.
SHAREHOLDER MEETINGS. Annual meetings of shareholders will not be held,
but special meetings of shareholders may be held under certain circumstances. A
special meeting of the shareholders may be called at any time by the Trustees,
by the president or, if the Trustees and the president shall fail to call any
meeting of shareholders for a period of 30 days after written application of one
or more shareholders who hold at least 10% of all shares issued and outstanding
and entitled to vote at the meeting, then such shareholders may call the
meeting.
ELECTION AND TERM OF TRUSTEES. Trustees of the Trust are elected by
shareholders holding a majority of shares entitled to vote. Trustees hold
office until their successors are duly elected and qualified or until their
death, removal or resignation. Shareholders may remove a Trustee by vote of a
majority of the votes entitled to vote, with or without cause. A Trustee
elected thereby serves for the balance of the term of the removed Trustee.
SHAREHOLDER LIABILITY. Pursuant to the Trust's Declaration of Trust, the
shareholders of the STI Funds generally are not personally liable for the acts,
omissions or obligations of the Trustees or the Trust.
-20-
<PAGE>
LIABILITY OF TRUSTEES. The Trustees shall not be personally liable for any
obligation of the Trust. The Trust will indemnify its Trustees and officers
against all liabilities and expenses except for liabilities arising from such
person's willful misfeasance, bad faith, gross negligence or reckless disregard
of that person's duties.
THE ARBOR FUNDS
GENERAL. Arbor was organized as a Massachusetts business trust on July 24,
1992. Arbor is governed by its Declaration of Trust, dated July 24, 1992, its
By-Laws, and applicable Massachusetts law.
SHARES. Arbor is authorized to issue an unlimited number of shares with no
par value. The Board of Trustees may increase the number of shares Arbor is
authorized to issue without the approval of the shareholders of Arbor. The
shares of common stock of each of the participating Arbor Funds have one class
of shares. The shares have no preference as to conversion, exchange, dividends,
retirement or other features and have no preemptive rights.
VOTING REQUIREMENTS. Shareholders of the Arbor Funds are entitled to one
vote for each full share held and fractional votes for fractional shares. A
majority of shareholders will be considered a quorum for the transaction of
business as a shareholder's meeting, except where Arbor's Declaration of Trust
or a provision of law requires that shareholders of any series shall vote as a
series. In such an instance, a majority of the aggregate number of shares of
that series entitled to vote is necessary to constitute a quorum for the
transaction of business by that series.
SHAREHOLDER MEETINGS. Annual meetings of shareholders will not be held,
but special meetings of shareholders may be held under certain circumstances. A
special meeting of the shareholders may be called at any time by the Trustees,
by the president. Any shareholder or shareholders holding at least 25% of all
share issued and outstanding and entitled to vote at a meeting may call a
special meeting if the Trustees and the president fail to call a meeting 30 days
after written application by such shareholder or shareholders.
ELECTION AND TERM OF TRUSTEES. Pursuant to Arbor's Declaration of Trust,
Trustees of Arbor may be elected by the Trustees or the shareholders, subject to
the limitations of the 1940 Act. Trustees hold office during the lifetime of
Arbor, or until their successors are duly elected and qualified, or until their
death, removal or resignation. Shareholders may remove a Trustee, with or
without cause, by vote of a majority of the shares entitled to vote. The Board
of Trustees may remove any Trustee by a majority vote of the Trustees then in
office.
SHAREHOLDER LIABILITY. Pursuant to Arbor's Declaration of Trust, neither
Arbor, the Trustees, any officer, employee or agent of Arbor have the power to
bind any shareholder personally.
LIABILITY OF TRUSTEES. The Trustees shall not be responsible or liable for
any neglect or wrongdoing of any officer, agent, employee, investment adviser,
administrator, principal underwriter
-21-
<PAGE>
or custodian. Trustees shall not be responsible for the act or omission of any
other Trustee. Trustees will not be protected from any liability that such
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such Trustee's office. Arbor will indemnify their Trustees and officers to the
fullest extent permitted under Massachusetts law and the 1940 Act.
The foregoing is only a summary of certain rights of shareholders of the
STI Funds and the Arbor Funds under their respective trust's governing charter
documents and By-Laws, state law and the 1940 Act and is not a complete
description of provisions contained in those sources. Shareholders should refer
to the provisions of state law, the 1940 Act and rules thereunder directly for a
more thorough description.
INFORMATION ABOUT THE STI AND ARBOR FUNDS
Information concerning the operation and management of the STI Funds is
incorporated herein by reference to the current prospectuses relating to the STI
Cash Management Fund dated September 28, 1998, as supplemented through October
27, 1998, and to the STI U.S. Government Fund dated January 26, 1999, which are
incorporated by reference herein solely with respect to those participating
Funds and copies of which accompany this Proxy Statement/Prospectus. Additional
information about the STI Funds is included in the STI Cash Management Fund's
Statement of Additional Information dated September 28, 1998, and the STI U.S.
Government Fund's Statement of Additional Information dated January 26, 1999,
which are available upon request and without charge by calling 1-800-xxx-xxxx.
Information about the Arbor Funds is included in the current prospectus
relating to those Funds dated May 31, 1998, as supplemented through August 3,
1998, which is incorporated by reference herein solely with respect to those
Funds and is available upon request and without charge by calling 1-800-xxx-
xxxx. Additional information is included in the Statement of Additional
Information of the participating Arbor Funds dated May 31, 1998 as supplemented
through August 3, 1998, which is available upon request and without charge by
calling 1-800-xxx-xxxx. Each Statement of Additional Information has been filed
with the SEC. The STI Funds and Arbor Funds are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information, including
proxy material and charter documents, with the SEC. These items may be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's Regional Offices
located at Northwest Atrium Center, 500 West Madison St., Chicago, IL 60661-2511
and Seven World Trade Center, Suite 1300, New York, NY 10048.
INTEREST OF CERTAIN PERSONS IN THE TRANSACTIONS. SunTrust may be deemed to have
an interest in the Reorganization because certain of its subsidiaries provide
investment advisory services to the STI Funds and the Arbor Funds pursuant to
advisory agreements with the Funds. Future growth of the STI Funds can be
expected to increase the total amount of fees payable to these subsidiaries
-22-
<PAGE>
and to reduce the number of fees required to be waived to maintain total fees of
the Funds at agreed upon levels.
FINANCIAL STATEMENTS. The financial statements of the STI Cash
Management Fund contained in the STI Funds annual report to shareholders for
the fiscal year ended May 31, 1998 have been audited by Arthur Andersen, LLP,
its independent accountants. These financial statements, as well as
unaudited interim financial statements for this STI Fund dated as of November
30, 1998 and unaudited pro forma financial statements reflecting the
participating STI Funds after the Reorganization, are incorporated by
reference into this Proxy Statement/Prospectus insofar as such financial
statements relate to the participating STI Funds, and not to any other Funds
that are part of the STI Fund families and described therein. The financial
statements of the Arbor Funds contained in Arbor Funds's annual report to
shareholders for the fiscal year ended January 31, 1998, have been audited by
PricewaterhouseCoopers LLP, its independent accountants. These financial
statements, as well as unaudited interim financial statements for the Arbor
Funds dated as of July 31, 1998, and unaudited pro forma financial statements
reflecting the STI Funds after the Reorganization, are incorporated by
reference into this Proxy Statement/Prospectus insofar as such financial
statements relate to the participating Arbor Funds, and not to any other
portfolios that are part of the Arbor Funds families and described therein.
A copy of STI Funds' and Arbor Funds' Annual Reports, which include
discussions of the performance of the STI Funds and the Arbor Funds,
respectively, accompanies this Proxy Statement/Prospectus. The STI Funds and
the Arbor Funds each will furnish, without charge, a copy of its most recent
Semi-Annual Report succeeding such Annual Report, if any, on request.
Requests should be directed to the STI Classic Funds at 2 Oliver Street,
Boston, MA 02109, or by calling 1-800-xxx-xxxx and to The Arbor Fund at 2
Oliver Street, Boston, MA 02109, or by calling 1-800-xxx-xxxx.
LEGAL MATTERS. Morgan, Lewis & Bockius LLP, 1800 M Street, N.W.,
Washington, D.C. 20036, serves as counsel both to the Trust and Arbor. Morgan,
Lewis & Bockius LLP will render opinions concerning the issuance of STI
Institutional Shares, the validity of actions taken by Arbor with respect to the
Reorganization and the outstanding shares of the Arbor Funds and certain federal
tax matters described above. Neither Arbor nor the Trust is involved in any
litigation.
THE BOARD OF TRUSTEES OF THE ARBOR FUND RECOMMEND THAT YOU VOTE FOR APPROVAL OF
THE REORGANIZATION AGREEMENT.
VOTING MATTERS
GENERAL INFORMATION. This Proxy Statement/Prospectus is being furnished in
connection with the solicitation of proxies by the Boards of Trustees of Arbor
in connection with the Meeting. It is expected that the solicitation of proxies
will be primarily by mail. Officers and service contractors of the STI Funds
and the Arbor Funds may also solicit proxies by telephone, telegraph or in
person. The costs of solicitation will be borne in part, directly or indirectly,
by the Trust.
-23-
<PAGE>
VOTING RIGHTS AND REQUIRED VOTE. Each share of the Arbor Funds is entitled
to one vote. Approval of the Reorganization Agreement with respect to each
Arbor Fund requires the affirmative vote of a majority of the outstanding voting
securities of that Fund present at the meeting in person or by proxy. The vote
of a "majority of the outstanding securities" means the vote of 67% or more of
the voting securities present, if the holders of more than 50% of the
outstanding voting securities are present in person or by proxy or the vote of
more than 50% of the outstanding voting securities, whichever is less. Any
shareholder giving a proxy may revoke it at any time before it is exercised by
submitting to Arbor a written notice of revocation or a subsequently executed
proxy or by attending the Meeting and voting in person. The proposed
Reorganization of the Arbor Funds will be voted upon separately by the
shareholders of the respective Funds. The consummation of each Fund's
Reorganization is not conditioned on the approval of the other.
Shares represented by a properly executed proxy will be voted in accordance
with the instructions thereon, or if no specification is made, the shares will
be voted "FOR" the approval of the Reorganization Agreement. It is not
anticipated that any matters other than the adoption of the Reorganization
Agreement will be brought before the Meeting. Should other business properly be
brought before the Meeting, it is intended that the accompanying proxies will be
voted in accordance with the judgment of the persons named as such proxies. For
the purposes of determining the presence of a quorum for transacting business at
the Meeting, abstentions and broker "non-votes" (that is, proxies from brokers
or nominees indicating that such persons have not received instructions from the
beneficial owners 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 treated as shares that are present but which have not been voted.
For this reason, abstentions and broker non-votes will have the effect of a "no"
vote for purposes of obtaining the requisite approval of the Reorganization
Agreement.
If sufficient votes in favor of the proposals set forth in the Notice of
the Special Meeting are not received by the time scheduled for the meeting, the
persons named as proxies may propose one or more adjournments of the Meeting for
a reasonable period of time to permit further solicitation of proxies with
respect to the proposals. Any such adjournment will require the affirmative
vote of a majority of the votes cast on the question in person or by proxy at
the session of the Meeting to be adjourned. The persons named as proxies will
vote in favor of such adjournment those proxies which they are entitled to vote
in favor of the proposals. They will vote against any such adjournment those
proxies required to be voted against the proposals. The costs of any additional
solicitation and of any adjourned session will be borne by the Trust or Trusco.
RECORD DATE AND OUTSTANDING SHARES. Only shareholders of record of the
Arbor Funds at the close of business on March 5, 1999 (the "Record Date") are
entitled to notice of and to vote at the Meeting and any postponement or
adjournment thereof. At the close of business on the Record Date there were
outstanding and entitled to vote:
______________ shares of common stock of the Arbor Prime Obligations Fund
-24-
<PAGE>
______________ shares of common stock of the Arbor U.S. Government
Securities Money Fund.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ARBOR FUNDS. The following persons owned of record or beneficially 5% or
more of the Arbor Funds' outstanding shares as of the Record Date:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NAME AND ADDRESS FUND PERCENTAGE OWNERSHIP TYPE OF OWNERSHIP
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
* Record and Beneficial Ownership.
** Record Ownership Only.
+ Beneficial Owner Only.
As of the Record Date, the Trustees and officers of Arbor as a group owned
less than 1% of the total outstanding shares of either Arbor Fund.
STI FUNDS. The following persons owned of record or beneficially 5% or more
of the STI Funds' outstanding shares as of the Record Date:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NAME AND ADDRESS FUND PERCENTAGE OWNERSHIP TYPE OF OWNERSHIP
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NAME AND ADDRESS FUND PERCENTAGE OWNERSHIP TYPE OF OWNERSHIP
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
* Record and Beneficial Ownership.
** Record Ownership Only.
+ Beneficial Owner Only.
As of the Record Date, 1999, the Trustees and officers of the STI Funds as
a group owned less than 1% of the total outstanding Institutional, Investment,
or Adviser Class Shares of either STI Fund.
EXPENSES. In order to obtain the necessary quorum at the Meeting,
additional solicitation may be made by mail, telephone, telegraph, facsimile or
personal interview by representatives of CAMCO, Trusco or SEI Investments
Company at an estimated cost of approximately $_____. All costs of solicitation
(including the printing and mailing of this proxy statement, meeting notice and
form of proxy, as well as any necessary supplementary solicitations) will be
paid by the Trust or its affiliates. Persons holding shares as nominees will,
upon request, be reimbursed for their reasonable expenses in sending soliciting
material to their principals.
OTHER BUSINESS
The Board of Trustees of Arbor knows of no other business to be brought
before the Meeting. However, if any other matters come before the Meeting, it
is the intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
THE ARBOR FUNDS. Shareholder inquiries may be addressed to The Arbor Fund
in writing at 2 Oliver Street, Boston, MA 02109 or by telephoning 1-800-xxx-
xxxx.
THE STI FUNDS. Shareholder inquiries may be addressed to STI in writing at
2 Oliver Street, Boston, MA 02109 or by telephoning 1-800-xxx-xxxx.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING 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.
By the Order of the Board of Trustees,
-26-
<PAGE>
[name]
Secretary
The Arbor Funds
-27-
<PAGE>
THE ARBOR FUND
U.S. GOVERNMENT SECURITIES MONEY FUND
SPECIAL MEETING OF THE SHAREHOLDERS
PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MAY 7, 1999
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints _____________, ______________ and
______________ as proxies and each of them, each with full power of
substitution, to vote at the Special Meeting of Shareholders of the U.S.
Government Securities Money Fund (the "Fund") of The Arbor Fund ("Arbor") to be
held in the offices of SEI Investments, One Freedom Valley Drive, Oaks,
Pennsylvania 19456, on Friday, May 7, 1998, at 4:00 p.m. (Eastern Time), and
any adjournments or postponements thereof (the "Meeting") all shares of
beneficial interest of the Fund that the undersigned would be entitled to vote
if personally present at the Meeting ("Shares") on the proposal(s) set forth
below respecting the proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement") between Arbor, on behalf of the Fund, and STI
Classic Funds (the "Trust"), on behalf of the corresponding series of the Trust
set forth below, and on any other matters properly brought before the Meeting.
THE BOARD OF DIRECTORS OF ARBOR RECOMMENDS A VOTE "FOR" THE PROPOSAL TO:
( X PLEASE MARK YOUR CHOICES LIKE THIS ON THE PROPOSAL )
---
Proposal: Approval of the Reorganization Agreement as it relates to
the Arbor U.S. Government Securities Money Fund and the
STI Classic Institutional U.S. Government Money Market Fund.
____For ____Against ____Abstain
<PAGE>
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED HEREIN BY THE
SIGNING SHAREHOLDER. IF NO CONTRARY DIRECTION IS GIVEN WHEN THE DULY EXECUTED
PROXY IS RETURNED, THIS PROXY WILL BE VOTED FOR THE FOREGOING PROPOSALS AND WILL
BE VOTED IN THE APPOINTED PROXIES' DISCRETION UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement of the Board of Trustees.
Your signature(s) on this Proxy should be exactly as your name(s) appear on this
Proxy. If the shares are held jointly, each holder should sign this Proxy.
Attorneys-in-fact, executors, administrators, trustees or guardians should
indicate the full title and capacity in which they are signing.
Dated: , 1999
-------------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
PLEASE DATE, SIGN AND RETURN PROMPTLY USING THE ENCLOSED, POSTAGE-PAID ENVELOPE
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING; YOU MAY, NEVERTHELESS, VOTE IN
PERSON IF YOU DO ATTEND.
<PAGE>
THE ARBOR FUND
PRIME OBLIGATIONS FUND
SPECIAL MEETING OF THE SHAREHOLDERS
PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR
THE SPECIAL MEETING OF SHAREHOLDERS, MAY 7, 1999
The undersigned, revoking previous proxies with respect to the Shares
(defined below), hereby appoints _____________, ______________ and
______________ as proxies and each of them, each with full power of
substitution, to vote at the Special Meeting of Shareholders of the Prime
Obligations Fund (the "Fund") of The Arbor Fund ("Arbor") to be held in the
offices of SEI Investments, One Freedom Valley Drive, Oaks, Pennsylvania
19456, on Friday, May 7, 1998, at 4:00 p.m. (Eastern Time), and any
adjournments or postponements thereof (the "Meeting") all shares of
beneficial interest of the Fund that the undersigned would be entitled to
vote if personally present at the Meeting ("Shares") on the proposal(s) set
forth below respecting the proposed Agreement and Plan of Reorganization
("the Reorganization Agreement") between Arbor, on behalf of the Fund, and
STI Classic Funds (the "Trust"), on behalf of the corresponding series of the
Trust set forth below, and on any other matters properly brought before the
Meeting.
THE BOARD OF DIRECTORS OF ARBOR RECOMMENDS A VOTE "FOR" THE PROPOSAL TO:
( X PLEASE MARK YOUR CHOICES LIKE THIS ON THE PROPOSAL )
---
Proposal: Approval of the Reorganization Agreement as it relates to
the Arbor Prime Obligations Fund and the STI Classic
Institutional Cash Management Money Market Fund.
____For ____Against ____Abstain
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED HEREIN BY
THE SIGNING SHAREHOLDER. IF NO CONTRARY DIRECTION IS GIVEN WHEN THE DULY
EXECUTED PROXY IS RETURNED, THIS PROXY WILL BE VOTED FOR THE FOREGOING
PROPOSALS AND WILL BE VOTED IN THE APPOINTED PROXIES' DISCRETION UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
<PAGE>
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Special Meeting and the Proxy Statement of the Board of Trustees.
Your signature(s) on this Proxy should be exactly as your name(s) appear on
this Proxy. If the shares are held jointly, each holder should sign this
Proxy. Attorneys-in-fact, executors, administrators, trustees or guardians
should indicate the full title and capacity in which they are signing.
Dated: , 1999
-----------
--------------------------------
Signature of Shareholder
--------------------------------
Signature (Joint owners)
PLEASE DATE, SIGN AND RETURN PROMPTLY USING THE ENCLOSED, POSTAGE-PAID
ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING; YOU MAY,
NEVERTHELESS, VOTE IN PERSON IF YOU DO ATTEND.
<PAGE>
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this __ day of _____, 1999, by and between STI Classic Funds, a
Massachusetts business trust with its principal place of business at 2 Oliver
Street, Boston, MA 02109 (the "Trust"), with respect to its Classic
Institutional Cash Management Money Market Fund and Classic Institutional
U.S. Government Securities Money Market Fund, each a separate investment
portfolio of the Trust (each an "Acquiring Fund" and, together, the
"Acquiring Funds"), and The Arbor Fund, a Massachusetts business trust, with
its principal place of business at 2 Oliver Street, Boston, MA 02109
("Arbor"), with respect to its Prime Obligations Fund and U.S. Government
Securities Money Fund, each a separate investment portfolio of Arbor (each a
"Selling Fund" and, together the "Selling Funds" and, collectively with the
Acquiring Funds, the "Funds").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization will consist of (i) the transfer of all of the assets of each
Selling Fund in exchange for shares of beneficial interest, no par value per
share, of its respective Acquiring Fund ("Acquiring Fund Shares") as set
forth on Schedule A attached hereto; (ii) the assumption by each Acquiring
Fund of the identified liabilities of each Selling Fund; and (iii) the
distribution, after the Closing Dates hereinafter referred to, of the
Acquiring Fund Shares to the shareholders of each Selling Fund and the
liquidation of each Selling Fund as provided herein, all upon the terms and
conditions set forth in this Agreement (the "Reorganization").
WHEREAS, each Acquiring Fund and each Selling Fund is a separate
investment series of the Trust and Arbor, respectively, and the Trust and
Arbor are open-end, registered management investment companies and each
Selling Fund owns securities that generally are assets of the character in
which its respective Acquiring Fund is permitted to invest;
WHEREAS, each Fund is authorized to issue its shares of beneficial
interest or shares of common stock, as the case may be;
WHEREAS, the Trustees of the Trust have determined that the
Reorganization in the best interests of each Acquiring Fund's shareholders;
WHEREAS, the Trustees of Arbor have determined that the Reorganization
with respect to each Selling fund is in the best interests of the Selling
Fund's shareholders and that the interests of the existing shareholders of
the Selling Fund will not be diluted as a result of the Reorganization;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree
as follows; <PAGE>
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUNDS IN EXCHANGE FOR ACQUIRING
FUNDS SHARES AND THE ASSUMPTION OF SELLING FUNDS' LIABILITIES AND
LIQUIDATION OF THE SELLING FUNDS
1.1 THE EXCHANGE. Subject to the terms and conditions contained
herein and on the basis of the representations and warranties contained
herein, each Selling Fund agrees to transfer all of its assets, as set forth
in paragraph 1.2, to its respective Acquiring Fund. In exchange, each
Acquiring Fund agrees: (i) to deliver to its respective Selling Funds the
number of full and fractional shares of the Acquiring Fund Shares, determined
by (a) multiplying the shares outstanding of each class of the Selling Fund
by (b) the ratio computed by dividing (x) the net asset value per share of
each such class of the Selling Fund by (y) the net asset value per share of
the corresponding class of Acquiring Fund Shares computed in the manner and
as of the time and date set forth in paragraph 2.2; and (ii) to assume the
identified liabilities of the Selling Fund, as set forth in paragraph 1.3.
Such transactions shall take place at the closing provided for in paragraph
3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of each Selling Fund to be
acquired by its respective Acquiring Fund shall consist of all property,
including, without limitation, all cash, securities, commodities, interests
in futures and dividends or interest receivables, owned by the Selling Fund
and any deferred or prepaid expenses shown as an asset on the books of the
Selling Fund on its Closing Date.
Each Selling Fund has provided its respective Acquiring Fund with its
most recent audited financial statements, which contain a list of all of the
Selling Fund's assets as of the date of such statements. Each Selling Fund
hereby represents that as of the date of the execution of this Agreement,
there have been no changes in its financial position as reflected in said
financial statements other than those occurring in the ordinary course of
business in connection with the purchase and sale of securities and the
payment of normal operating expenses and the payment of dividends, capital
gains distributions and redemption proceeds to shareholders.
Each Selling Fund will, within a reasonable period of time prior to the
Closing Date, furnish each Acquiring Fund with a list of the Selling Fund's
portfolio securities and other investments. Each Acquiring Fund will, within a
reasonable time prior to the Closing Dates, furnish its respective Selling Funds
with a list of the securities, if any, on the Selling Fund's list referred to
above that do not conform to the Acquiring Fund's investment objectives,
policies, and restrictions. A Selling Fund, if requested by its Acquiring
Funds, will dispose of securities on the Acquiring Fund's list prior to the
Closing Date. In addition, if it is determined that the portfolios of a Selling
Fund and its Acquiring Fund, when aggregated, would contain investments
exceeding certain percentage limitations imposed upon the Acquiring Fund with
respect to such investments, the Selling Fund, if requested by the Acquiring
Fund, will dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations
2
<PAGE>
as of the Closing Date. Notwithstanding the foregoing, nothing herein will
require a Selling Fund to dispose of any investments or securities if, in the
reasonable judgment of the Selling Fund's trustees or adviser, such
disposition would adversely affect the tax-free nature of the Reorganization
or would violate their fiduciary duties to the Selling Fund's shareholders.
1.3 LIABILITIES TO BE ASSUMED. Each Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. Each Acquiring Fund shall assume only those liabilities, expenses,
costs, charges and reserves reflected on a Statement of Assets and
Liabilities of its respective Selling Fund prepared on behalf of the Selling
Fund, as of the Valuation Date (as defined in paragraph 2.1), in accordance
with generally accepted accounting principles consistently applied from the
prior audited period. Each Acquiring Fund shall assume only those
liabilities of its respective Selling Fund reflected in its Statement of
Assets and Liabilities and shall not assume any other liabilities, whether
absolute or contingent, known or unknown, accrued or unaccrued, all of which
shall remain the obligation of the Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by an Acquiring Fund under the National
Association of Securities Dealers, Inc. ("NASD") Conduct Rule 2830 (the
"Maximum Amount"), each Acquiring Fund will add to the Maximum Amount
immediately prior to the Reorganization, the Maximum Amount of each Selling
Fund immediately prior to the Reorganization, calculated in accordance with
NASD Conduct Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after its Closing
Date as is conveniently practicable (the "Liquidation Date"): (a) each
Selling Fund will distribute in complete liquidation of the Selling Fund, pro
rata to its shareholders of record, determined as of the close of business on
the Valuation Date (the "Selling Fund Shareholders"), Acquiring Fund Shares
received by the Selling Fund pursuant to paragraph 1.1; and (b) the Selling
Fund will thereupon proceed to dissolve and terminate as set forth in
paragraph 1.8 below. Such distribution will be accomplished by the transfer
of Acquiring Fund Shares credited to the account of the Selling Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the name of the Selling Fund Shareholders, and representing
the respective pro rata number of Acquiring Fund Shares due such
shareholders. All issued and outstanding shares of the Selling Fund will
simultaneously be canceled on the books of the Selling Fund. The Acquiring
Fund shall not issue certificates representing Acquiring Fund Shares in
connection with such transfer. Each Selling Fund Shareholder shall have the
right to receive any unpaid dividends or other distributions that were
declared by the Selling Fund before the Effective Time with respect to
Selling Fund shares that are held of record by a Selling Fund Shareholder at
the Effective Time on the Closing Date.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of each Acquiring Fund's transfer agent. Shares of each
Acquiring Fund will be
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issued simultaneously to its corresponding Selling Fund, in an amount equal
in value to the net asset value of each Selling Fund's shares, to be
distributed to shareholders of each Selling Fund.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the issuance of
Acquiring Fund Shares in a name other than the registered holder of the
Selling Fund shares on the books of the Selling Fund as of that time shall,
as a condition of such issuance and transfer, be paid by the person to whom
such Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of each
Selling Fund is and shall remain the responsibility of the Selling Fund, up
to and including the Closing Date, and such later date on which the Selling
Fund is terminated.
1.8 TERMINATION. Each Selling Fund shall be terminated promptly
following its Closing Date and the making of all distributions pursuant to
paragraph 1.4.
1.9 Subject to the conditions set forth in this Agreement, the
failure of one of the Selling Funds to consummate the transactions
contemplated hereby shall not affect the consummation or validity of a
Reorganization with respect to any other Selling Fund, and the provisions of
this Agreement shall be construed to effect this intent, including, without
limitation, as the context requires, construing the terms "Acquiring Fund"
and "Selling Fund" as meaning only those series of the Trust and Arbor,
respectively, which are involved in a Reorganization as of the Closing Dates.
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ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of a Selling Fund's assets to be
acquired by its respective Acquiring Fund hereunder shall be the value of
such assets computed as of the close of normal trading on the New York Stock
Exchange ("NYSE") on the business day immediately prior to each respective
Closing Date (such time and date being hereinafter called a "Valuation
Date"), using the valuation procedures set forth in the Trust's Declaration
of Trust and each Acquiring Fund's then current prospectuses and statements
of additional information or such other valuation procedures as shall be
mutually agreed upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of Acquiring
Fund Shares shall be the net asset value per share computed as of the close
of normal trading on the NYSE on the Valuation Date, using the valuation
procedures set forth in the Trust's Declaration of Trust and each Acquiring
Fund's then current prospectuses and statements of additional information.
2.3 SHARES TO BE ISSUED. The number of each Acquiring Fund's shares
to be issued (including fractional shares, if any) in exchange for its
respective Selling Fund's assets, shall be determined by (a) multiplying the
shares outstanding of the Selling Fund by (b) the ratio computed by (x)
dividing the net asset value per share of the Selling Fund by (y) the net
asset value per share of the corresponding Acquiring Fund determined in
accordance with paragraph 2.2 [(a) x (b), where (b)=(x)DIVIDED BY(y)].
2.4 DETERMINATION OF VALUE. All computations of value shall be made
by SunTrust Bank, Atlanta in accordance with its regular practice in pricing
the shares and assets of each Acquiring Fund. Each Acquiring Fund and
Selling Fund agrees, however, to use all commercially reasonable efforts to
resolve any material pricing differences between the prices of portfolio
securities determined in accordance with the pricing policies and procedures
of a Selling Fund and those determined in accordance with the pricing
policies and procedures of its respective Acquiring Fund.
2.5 MONEY MARKET FUND VALUE. It is understood and agreed that the
value of the assets of the Prime Obligations Fund and the value of shares of
the corresponding Acquiring Fund, the Classic Institutional Cash Management
Money Market Fund, for purposes of sales and redemptions shall be based on
the amortized cost valuation procedures that have been adopted by the Board
of Trustees of Arbor and the Board of Trustees of the Trust, respectively;
PROVIDED that if the difference between the per share net asset values of the
Arbor Prime Obligations Fund and the STI Classic Institutional Cash
Management Money Market Fund equals or exceeds $.0025 as next regularly
computed immediately prior to the Valuation Date by using such market values
in accordance with the policies and procedures established by the Trust (or
as otherwise mutually determined by the Board of Trustees of Arbor and the
Board of Trustees of the Trust, either the
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Board of Trustees of Arbor or the Board of Trustees of the Trust shall have
the right to postpone the Valuation Date and the Closing Date of the
Reorganization with respect to such Prime Obligations Fund until such time as
the per share difference is less than $.0025.
ARTICLE III
CLOSING AND CLOSING DATES
3.1 CLOSING DATES. The closing (the "Closing") shall occur in two
steps on or about May 15, 1999 for the Arbor Prime Obligations Fund and May
22, 1999 for the Arbor U.S. Government Securities Money Fund, or such other
date(s) as the parties may agree to in writing (the "Closing Dates"). All
acts taking place at the Closing shall be deemed to take place immediately
prior to the Closing Dates unless otherwise provided. The Closing shall be
held as of 9:00 a.m. (the "Effective Time") at the offices of the SEI
Investments, One Freedom Valley Drive, Oaks, PA 19456, or at such other time
and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. Crestar Bank, as custodian for each
Selling Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) each Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to its
respective Acquiring Fund on the Closing Dates; and (b) all necessary taxes
including all applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in conjunction
with the delivery of portfolio securities by the Selling Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the
Valuation Date, either: (a) the NYSE or another primary exchange on which the
portfolio securities of an Acquiring Fund or a Selling Fund are purchased or
sold, shall be closed to trading or trading on such exchange shall be
restricted; or (b) trading or the reporting of trading on the NYSE or
elsewhere shall be disrupted so that accurate appraisal of the value of the
net assets of an Acquiring Fund or a Selling Fund is impracticable, the
Valuation Date shall be postponed until the first business day after the day
when trading is fully resumed and reporting is restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Crestar Bank, as transfer agent
for each Selling Fund as of the Closing Dates, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the
names and addresses of Selling Fund Shareholders, and the number and
percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. Each Acquiring Fund shall issue and
deliver or cause Federated Services Company, its transfer agent, to issue and
deliver a confirmation evidencing Acquiring Fund Shares to be credited on the
Closing Dates to the Secretary of Arbor or provide evidence satisfactory to
the Selling Fund that such Acquiring Fund Shares have been credited to the
Selling Fund's account on the books of the Acquiring Fund. At the Closing,
each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, receipts and other documents, if any, as
such other party or its counsel may reasonably request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUNDS. Each Selling Fund
represents and warrants to its respective Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts.
(b) The Selling Fund is a separate investment series of a
Massachusetts business trust that is registered as an open-end management
investment company, and its registration with the Securities and Exchange
Commission (the "Commission") as an investment company under the Investment
Company Act of 1940 (the "1940 Act"), is in full force and effect.
(c) The current prospectuses and statements of additional
information of the Selling Fund conform in all material respects to the
applicable requirements of the Securities Act of 1933 (the "1933 Act") and
the 1940 Act, and the rules and regulations thereunder, and do not include
any untrue statement of a material fact or omit to state any material fact
required to be stated or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not
result, in violation of any provision of Arbor's Declaration of Trust or
By-Laws or of any material agreement, indenture, instrument, contract, lease,
or other undertaking to which the Selling Fund is a party or by which it is
bound.
(e) The Selling Fund has no material contracts or other
commitments (other than this Agreement) that will be terminated with
liability to them prior to the Closing Date, except for liabilities, if any,
to be discharged or reflected in the Statement of Assets and Liabilities as
provided in paragraph 1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted by
the Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Selling Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect its financial condition, the conduct of its business, or the
ability of the Selling Fund to carry out the transaction contemplated by this
Agreement. The Selling Fund knows of no facts that might form the basis for
the institution of such proceedings and are not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that
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materially and adversely affects the Selling Fund's business or its ability to
consummate the transaction contemplated herein.
(g) The financial statements of the Selling Fund are in
accordance with generally accepted accounting principles, and such statements
(copies of which have been furnished to the Acquiring Funds) fairly reflect
the financial condition of the Selling Fund as of July 31, 1998, and there
are no known contingent liabilities of the Selling Fund as of that date not
disclosed in such statements.
(h) Since July 31, 1998, there have been no material adverse
changes in the Selling Fund's financial condition, assets, liabilities for
business (other than changes occurring in the ordinary course of business),
or any incurrence by the Selling Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquiring Fund. For the purposes of this
subparagraph (h), a decline in the value of the net assets of the Selling
Fund shall not constitute a material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to be filed by such date, or
reasonably thereafter, shall have been filed, and all federal and other taxes
shown due on such returns and reports shall have been paid, or provision
shall have been made for the payment thereof. To the best of the Selling
Fund's knowledge, no such return is currently under audit, and no assessment
has been asserted with respect to such returns.
(j) For each fiscal year of their operation, the Selling Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed in each such
year all net investment income and realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are,
and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable by the Selling Fund. All of the issued and
outstanding shares of the Selling Fund will, at the time of the Closing Date,
be held by the persons and in the amounts set forth in the records of the
Selling Fund's transfer agent as provided in paragraph 3.4. The Selling Fund
has no outstanding options, warrants, or other rights to subscribe for or
purchase any of the Selling Fund shares, and have no outstanding securities
convertible into any of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the
Acquiring Fund pursuant to paragraph 1.2, and full right, power, and
authority to sell, assign, transfer, and deliver such assets hereunder, and,
upon delivery and payment for such assets the Acquiring Fund will acquire
good and marketable title, subject to no restrictions on the full transfer of
such assets, including such restrictions as might arise under the 1933 Act,
other than as disclosed to and accepted by the Acquiring Fund.
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(m) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the Selling
Fund. Subject to approval by the Selling Fund Shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable
in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium, and other laws relating to or
affecting creditors' rights and to general equity principles.
(n) The information to be furnished by the Selling Fund for use
in no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated herein shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations.
(o) From the effective date of the Registration Statement (as
defined in paragraph 5.7), through the time of the meeting of the Selling
Fund Shareholders and on the Closing Date, any written information furnished
by the Selling Funds with respect to a Selling Fund for use in the
Prospectus/Proxy Statement (as defined in paragraph 5.7), the Registration
Statement or any other materials provided in connection with the
Reorganization does not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated or
necessary to make the statements, in light of the circumstances under which
such statements were made, not misleading.
(p) The Selling Fund has elected to qualify and has qualified as
a "regulated investment company" under the Code, as of and since its first
taxable year; has been a "regulated investment company" under the Code at all
times since the end of its first taxable year when it so qualified; and
qualifies and shall continue to qualify as a "regulated investment company"
under the Code for its taxable year ending upon its liquidation.
(q) No governmental consents, approvals, authorizations or
filings are required under the 1933 Act, the Securities Exchange Act of 1934
(the "1934 Act"), the 1940 Act or Massachusetts law for the execution of this
Agreement by Arbor, for itself and on behalf of the Selling Fund, except for
the effectiveness of the Registration Statement, the necessary exemptive
relief requested from the Commission or its staff with respect to Sections
17(a) and 17(b) of the 1940 Act, and except for such other consents,
approvals, authorizations and filings as have been made or received, and such
consents, approvals, authorizations and filings as may be required subsequent
to the Closing Date, it being understood, however, that this Agreement and
the transactions contemplated herein must be approved by the shareholders of
the Selling Fund as described in paragraph 5.2.
4.2 REPRESENTATIONS OF THE ACQUIRING FUNDS. Each Acquiring Fund
represents and warrants to its respective Selling Fund as follows:
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(a) The Acquiring Funds is a separate investment series of a
Massachusetts business trust, duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts.
(b) The Acquiring Funds is a separate investment series of a
Massachusetts business trust that is registered as open-end management
investment company, and its registration with the Commission as an investment
company under the 1940 Act is in full force and effect.
(c) The current prospectuses and statements of additional
information of the Acquiring Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations thereunder, and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated or necessary to
make such statements therein, in light of the circumstances under which they
were made, not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund
is a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling Fund
and accepted by the Selling Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is presently
pending, or to its knowledge, threatened against the Acquiring Fund or any of
its properties or assets, which, if adversely determined, would materially
and adversely affect their financial condition and the conduct of its
business or the ability of the Acquiring Fund to carry out the transaction
contemplated by this Agreement. The Acquiring Fund knows of no facts that
might form the basis for the institution of such proceedings and they are not
a party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially and adversely affects its
business or its ability to consummate the transaction contemplated herein.
(f) The financial statements of the Acquiring Fund are in
accordance with generally accepted accounting principles, and such statements
(copies of which have been furnished to the Selling Funds) fairly reflect the
financial condition of the Acquiring Fund as of November 30, 1998, and there
are no known contingent liabilities of the Acquiring Fund as of such date
which are not disclosed in such statements.
(g) Since November 30, 1998 there have been no material adverse
changes in the Acquiring Fund's financial condition, assets, liabilities, or
business (other than changes occurring in the ordinary course of business),
or any incurrence by the Acquiring Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Selling Fund. For the purposes of this
subparagraph (g),
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a decline in the value of the net assets of the Acquiring Fund shall not
constitute a material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Funds required by law to be filed by such date shall
have been filed. All federal and other taxes shown due on such returns and
reports shall have been paid or provision shall have been made for their
payment. To the best of the Acquiring Funds' knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to
such returns.
(i) For each fiscal year of their operation, the Acquiring Fund
has met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and has distributed all net
investment income and realized capital gains.
(j) All issued and outstanding Acquiring Fund Shares are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Acquiring Fund. The Acquiring Fund has no
outstanding options, warrants, or other rights to subscribe for or purchase
any Acquiring Funds Share, and there are no outstanding securities
convertible into any Acquiring Fund Shares.
(k) The execution, delivery, and performance of this Agreement
have been duly authorized by all necessary action on the part of the
Acquiring Fund, and this Agreement constitutes a valid and binding obligation
of the Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors' rights and to general equity
principles.
(l) Acquiring Fund Shares to be issued and delivered to the
Selling Fund for the account of the Selling Fund Shareholders pursuant to the
terms of this Agreement will, at the Closing Date, have been duly authorized.
When so issued and delivered, such shares will be duly and validly issued
Acquiring Fund Shares, and will be fully paid and non-assessable.
(m) The information to be furnished by the Acquiring Fund for
use in no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in connection with
the transactions contemplated herein shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations.
(n) From the effective date of the Registration Statement (as
defined in paragraph 5.7), through the time of the meeting of the Selling
Fund shareholders and on the Closing Dates, any written information furnished
by the Trust with respect to an Acquiring Fund for use in the
Prospectus/Proxy Statement (as defined paragraph 5.7), the Registration
Statement or any other materials provided in connection with the
Reorganization does not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated or
necessary to make the statements, in light of the circumstances under which
such statements were made, not misleading.
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(o) The Acquiring Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the 1940
Act, and any state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
(p) No governmental consents, approvals, authorizations or
filings are required under the 1933 Act, the 1934 Act, the 1940 Act or
Massachusetts law for the execution of this Agreement by the Trust, for
itself and on behalf of the Acquiring Fund, or the performance of the
Agreement by the Trust, for itself and on behalf of the Acquiring Fund,
except for the effectiveness of the Registration Statement, the necessary
exemptive relief requested from the Commission or its staff with respect to
Sections 17(a) and 17(b) of the 1940 Act, and such other consents, approvals,
authorizations and filings as have been made or received, and except for such
consents, approvals, authorizations and filings as may be required subsequent
to the Closing Date.
(q) The Acquiring Fund intends to qualify as "regulated
investment company" under the Code, and with respect to each Acquiring Fund
that has conducted material investment operations prior to the Closing Date,
the Acquiring Fund has elected to qualify and has qualified as a "regulated
investment company" under the Code as of and since its first taxable year;
has been a "regulated investment company" under the Code at all times since
the end of its first taxable year when it so qualified; and qualifies and
shall continue to qualify as a "regulated investment company" under the Code
for its current taxable year.
ARTICLE V
COVENANTS OF EACH ACQUIRING FUND AND EACH SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. Subject to paragraph 8.5 each
Acquiring Fund and Selling Fund will operate their respective business in the
ordinary course between the date of this Agreement and the respective Closing
Date, it being understood that such ordinary course of business will include
customary dividends and distributions and shareholder redemptions.
5.2 APPROVAL OF SHAREHOLDERS. Arbor will call a meeting of Selling Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. Each Selling Fund covenants that the
Acquiring Fund Shares to be issued pursuant to this Agreement are not being
acquired for the purpose of making any distribution, other than in connection
with the Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. Each Selling Fund will assist its
respective Acquiring Fund in obtaining such information as the Acquiring Fund
reasonably requests concerning the beneficial ownership of the Selling Fund's
shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, each
Acquiring Fund and its respective Selling Fund will each take or cause to be
taken, all action, and do or cause
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to be done, all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated by this Agreement, including
any actions required to be taken after the applicable Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but
in any case within sixty days after the applicable Closing Date, each Selling
Fund shall furnish its respective Acquiring Fund, in such form as is reasonably
satisfactory to the Acquiring Fund, a statement of the earnings and profits of
the Selling Fund for federal income tax purposes that will be carried over by
the Acquiring Fund as a result of Section 381 of the Code, and which will be
reviewed by PricewaterhouseCoopers LLP and certified by Arbor's Treasurer.
5.7 PREPARATION OF FORM N-14 REGISTRATION STATEMENT. The Trust will
prepare and file with the Commission a registration statement on Form N-14 under
the 1933 Act (the "Registration Statement"), relating to the Acquiring Fund
Shares, which, without limitation, shall include a proxy statement of each
Selling Fund and the prospectus of each Acquiring Fund relating to the
transaction contemplated by this Agreement (the "Prospectus/Proxy Statement").
The Registration Statement shall be in compliance with the 1933 Act, the 1934
Act and the 1940 Act. Each Selling Fund will provide its respective Acquiring
Funds with the materials and information necessary to prepare the
Prospectus/Proxy Statement for inclusion in the Registration Statement, in
connection with the meeting of the Selling Funds Shareholders to consider the
approval of this Agreement and the transactions contemplated herein.
5.8 INDEMNIFICATION OF TRUSTEES. The Trust will assume all liabilities
and obligations of Arbor relating to any obligation of Arbor to indemnify its
current and former Trustees and officers, acting in their capacities as such, to
the fullest extent permitted by law and Arbor's Agreement and Declaration of
Trust, as in effect as of the date of this Agreement. Without limiting the
foregoing, the Trust agrees that all rights to indemnification and all
limitations of liability existing in favor of the current and former Trustees
and officers, acting in their capacities as such, under Arbor's Agreement and
Declaration of Trust as in effect as of the date of this Agreement shall survive
the Reorganization and shall continue in full force and effect, without any
amendment thereto, and shall constitute rights which may be asserted against the
Trust, its successors or assigns.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH SELLING FUND
The obligations of each Selling Fund to consummate the transactions
provided for herein shall be subject, at their election, to the performance by
its respective Acquiring Fund of all the obligations to be performed by it
pursuant to this Agreement on or before the applicable Closing Date, and, in
addition subject to the following conditions:
6.1 All representations, covenants, and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Dates, with the same force and effect as if made on and as of
the Closing Dates. Each Acquiring Fund shall have delivered to its respective
Selling Fund a certificate executed in the Acquiring Fund's name by the
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Trust's President or Vice President and its Treasurer or Assistant Treasurer, in
form and substance satisfactory to the Selling Fund and dated as of the
applicable Closing Date, to such effect and as to such other matters as the
Selling Fund shall reasonably request.
6.2 Each Selling Funds shall have received on the applicable Closing
Date an opinion from Morgan, Lewis & Bockius LLP, counsel to the Trust, dated as
of the Closing Date, in a form reasonably satisfactory to the Selling Fund,
covering the following points:
(a) Each Acquiring Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts, and has the
power to own all of its properties and assets and to carry on its business as
presently conducted.
(b) Each Acquiring Funds is a separate investment series of a
Massachusetts business trust registered as an investment company under the
1940 Act, and, to such counsel's knowledge, such registration with the
Commission is in full force and effect.
(c) This Agreement has been duly authorized, executed, and
delivered by the Trust on behalf of each Acquiring Fund and, assuming due
authorization, execution and delivery of this Agreement by the Selling Funds,
is a valid and binding obligation of the Acquiring Funds enforceable against
each Acquiring Funds in accordance with its terms, subject as to enforcement,
to bankruptcy, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights generally and to general equity
principles.
(d) Assuming that a consideration of not less than the net asset
value of Acquiring Fund Shares has been paid, Acquiring Funds Shares to be
issued and delivered to each Selling Fund on behalf of the Selling Fund
Shareholders, as provided by this Agreement, are duly authorized and upon
such delivery will be legally issued and outstanding and fully paid and
non-assessable, and no shareholder of an Acquiring Fund has any preemptive
rights with respect to Acquiring Fund Shares.
(e) The Registration Statement, has been declared effective by
the Commission and to such counsel's knowledge, no stop order under the 1933
Act pertaining thereto has been issued, and to the knowledge of such counsel,
no consent, approval, authorization or order of any court or governmental
authority of the United States or the Commonwealth of Massachusetts is
required for consummation by the Acquiring Funds of the transactions
contemplated herein, except as have been obtained under the 1933 Act, the
1934 Act and the 1940 Act, and as may be required under state securities laws.
(f) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated herein will not, result in
a violation of the Trust's Declaration of Trust or By-Laws or any provision
of any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which an Acquiring Fund
is a party or by which an Acquiring Fund or any of its properties may be
bound or, to the knowledge of such
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counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which an Acquiring Fund is
a party or by which it is bound.
(g) The descriptions in the Prospectus/Proxy Statement of
statutes, legal and governmental proceedings and material contracts, if any
(only insofar as they relate to an Acquiring Fund), are accurate and fairly
present the information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings (only insofar as they relate to an Acquiring Fund) existing on or
before the effective date of the Registration Statement or the Closing Dates
which are required to be described in the Registration Statement or to be
filed as exhibits to the Registration Statement which are not described or
filed as required.
(i) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to an Acquiring Fund
or any of its properties or assets. The Acquiring Funds are not a party to
or subject to the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects the Acquiring
Funds' business, other than as previously disclosed in the Registration
Statement.
Such counsel shall also state that they have participated in conferences
with officers and other representatives of each Acquiring Fund at which the
contents of the Prospectus/Proxy Statement and related matters were discussed.
Although such counsel are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Prospectus/Proxy Statement (except to the extent indicated in their opinion in
paragraph (g), above), on the basis of the foregoing (relying as to materiality
to a large extent upon the opinions of the Trust's officers and other
representatives of each Acquiring Fund), no facts have come to their attention
that lead them to believe that the Prospectus/Proxy Statement as of its date, as
of the date of each Selling Fund Shareholders' meeting, and as of the applicable
Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated regarding an Acquiring Fund or
necessary, in the light of the circumstances under which they were made, to make
the such statements regarding an Acquiring Fund not misleading. Such opinion
may state that such counsel does not express any opinion or belief as to the
financial statements or any financial or statistical data, or as to the
information relating to each Selling Fund, contained in the Prospectus/Proxy
Statement or the Registration Statement, and that such opinion is solely for the
benefit of Arbor and each Selling Fund. Such opinion shall contain such other
assumptions and limitations as shall be in the opinion of Morgan, Lewis &
Bockius LLP appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to the Prospectus/Proxy Statement include
and relate to only the text of such Prospectus/Proxy Statement and not to any
exhibits or attachments thereto or to any documents incorporated by reference
therein.
6.3 As of the Closing Date with respect to the Reorganization of each
Selling Fund, there shall have been no material change in the investment
objective, policies and restrictions nor any
15
<PAGE>
material change in the investment management fees, other fees payable for
services provided to each Acquiring Fund, fee waiver or expense reimbursement
undertakings of the Acquiring Funds from those fee amounts and undertakings of
the Acquiring Fund described in the Prospectus/Proxy Statement.
6.4 For the period beginning at the applicable Closing Date and ending
not less than six years thereafter, the Trust, its successor or assigns shall
provide, or cause to be provided, liability coverage at least as comparable to
the liability coverage currently applicable to both former and current Trustees
and officers of Arbor, covering the actions of such Trustees and officers of
Arbor for the period they served as such.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH ACQUIRING FUND
The obligations of each Acquiring Fund to consummate the transactions
provided for herein shall be subject, at their election, to the performance by
the Selling Fund of all the obligations to be performed by the Selling Funds
pursuant to this Agreement, on or before the applicable Closing Date and, in
addition, shall be subject to the following conditions:
7.1 All representations, covenants, and warranties of a Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the applicable Closing Date, with the same force and effect as if made on
and as of the Closing Date. Each Selling Fund shall have delivered to its
respective Acquiring Funds on the Closing Date a certificate executed in the
Selling Fund's name by Arbor's President or Vice President and the Treasurer or
Assistant Treasurer, in form and substance satisfactory to the Acquiring Fund
and dated as of the Closing Dates, to such effect and as to such other matters
as the Acquiring Fund shall reasonably request.
7.2 Each Selling Fund shall have delivered to its respective Acquiring
Fund a statement of the Selling Fund's assets and liabilities, together with a
list of the selling Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the Closing
Dates, certified by the Treasurer of Arbor.
7.3 Each Acquiring Fund shall have received on the applicable Closing
Date an opinion of Morgan, Lewis & Bockius LLP, counsel to each Selling Fund,
dated as of the Closing Date in a form satisfactory to the Acquiring Fund
covering the following points:
(a) The Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and each has the
power to own all of its properties and assets and to carry on its business as
presently conducted.
(b) The Selling Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the
1940 Act, and, to such counsel's knowledge, such registration with the
Commission is in full force and effect.
16
<PAGE>
(c) This Agreement has been duly authorized, executed and
delivered by Arbor on behalf of each Selling Fund and, assuming due
authorization, execution and delivery of this Agreement by the Trust on
behalf of each Acquiring Fund is a valid and binding obligation of the
Selling Fund enforceable against the Selling Fund in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights
generally and to general equity principles.
(d) To the knowledge of such counsel, except for the filing of
Articles of Transfer pursuant to Massachusetts law, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the Commonwealth of Massachusetts is required for consummation by a
Selling Fund of the transactions contemplated herein, except as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(e) The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not, result in
a violation of Arbor's Declaration of Trust or By-laws, or any provision of
any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which a Selling Fund is a
party or by which it or any of its properties may be bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or
the imposition of any penalty, under any agreement, judgment, or decree to
which the Selling Fund is a party or by which it is bound.
(f) The descriptions in the Prospectus/Proxy Statement of
statutes, legal and government proceedings and material contracts, if any
(only insofar as they relate to a Selling Fund), are accurate and fairly
present the information required to be shown.
(g) Such counsel does not know of any legal or governmental
proceedings (insofar as they relate to a Selling Fund) existing on or before
the date of mailing of the Prospectus/Proxy Statement and the applicable
Closing Date, which are required to be described in the Prospectus/Proxy
Statement or to be filed as an exhibit to the Registration Statement which
are not described or filed as required.
(h) To the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to a Selling Fund or
any of its respective properties or assets. To the knowledge of such
counsel, no Selling Fund is a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body, which materially
and adversely affects the Selling Fund's business other than as previously
disclosed in the Prospectus/Proxy Statement.
(i) Assuming that a consideration of not less than the net asset
value of Selling Fund Shares has been paid, and assuming that such shares
were issued in accordance with the terms of each Selling Fund's registration
statement, or any amendment thereto, in effect at the time of such issuance,
all issued and outstanding shares of the Selling Fund are legally issued and
fully paid and non-assessable.
17
<PAGE>
Such counsel shall also state that they have participated in conferences
with officers and other representatives of each Selling Fund at which the
contents of the Prospectus/Proxy Statement and related matters were discussed.
Although such counsel are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Prospectus/Proxy Statement (except to the extent indicated in their opinion at
paragraph (f), above), on the basis of the foregoing (relying as to materiality
to a large extent upon the opinions of Arbor's officers and other
representatives of each Selling Fund), no facts have come to their attention
that lead them to believe that the Prospectus/Proxy Statement as of its date, as
of the date of each Selling Fund Shareholders' meeting, and as of the applicable
Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding a Selling Fund or
necessary, in the light of the circumstances under which they were made, to make
the statements therein regarding the Selling Fund not misleading. Such opinion
may state that such counsel do not express any opinion or belief as to the
financial statements or any financial or statistical data, or as to the
information relating to each Acquiring Fund contained in the Prospectus/Proxy
Statement or Registration Statement, and that such opinion is solely for the
benefit of the Trust and each Acquiring Fund. Such opinion shall contain such
other assumptions and limitations as shall be in the opinion of Morgan, Lewis &
Bockius LLP appropriate to render the opinions expressed therein.
In this paragraph 7.3, references to the Prospectus/Proxy Statement include
and relate to only the text of such Prospectus/Proxy Statement and not to any
exhibits or attachments thereto or to any documents incorporated by reference
therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH
ACQUIRING FUND AND SELLING FUND
If any of the conditions set forth below do not exist on or before the
applicable Closing Date with respect to each Selling Fund or its respective
Acquiring Fund, the other party to this Agreement shall, at its option, not be
required to consummate the transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
each Selling Fund in accordance with Massachusetts law and the provisions of
Arbor's Declaration of Trust and By-Laws. Certified copies of the resolutions
evidencing such approval shall have been delivered to the respective Acquiring
Fund. Notwithstanding anything herein to the contrary, neither an Acquiring
Fund nor a Selling Fund may waive the conditions set forth in this paragraph
8.1.
8.2 On each Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, or instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act. Furthermore, no action,
suit or other proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or prohibit, or obtain
damages or other relief in connection with this Agreement or the transactions
contemplated herein.
18
<PAGE>
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of State Blue Sky securities authorities,
including any necessary "no-action" positions and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated herein shall have been obtained, except where failure to obtain any
such consent, order, or permit would not involve a risk of a material adverse
effect on the assets or properties of an Acquiring Fund or a Selling Fund,
provided that either party hereto may waive any such conditions for itself.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued. To the best knowledge of the parties to this Agreement, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5 Each Selling Fund shall have declared and paid a dividend or
dividends which, together with all previous such dividends, shall have the
effect of distributing to the Selling Fund Shareholders all of the Selling
Fund's net investment company taxable income for all taxable periods ending on
or prior to the applicable Closing Dates (computed without regard to any
deduction for dividends paid) and all of its net capital gains realized in all
taxable periods ending on or prior to the Closing Dates (after reduction for any
capital loss carry forward).
8.6 The parties shall have received a favorable opinion of Morgan, Lewis
& Bockius LLP addressed to each Acquiring Fund and Selling Fund substantially to
the effect that for federal income tax purposes with respect to each Selling
Fund:
(a) The transfer of all of the Selling Fund's assets in exchange
for Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund (followed by the distribution of
Acquiring Fund Shares to the Selling Fund shareholders in dissolution and
liquidation of the Selling Fund) will constitute a "reorganization" within
the meaning of Section 368(a) of the Code and the Acquiring Fund and the
Selling Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code.
(b) No gain or loss will be recognized by the Acquiring Fund
upon the receipt of the assets of the Selling Fund solely in exchange for
Acquiring Funds Share and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund upon
the transfer of the Selling Fund's assets to the Acquiring Fund in exchange
for Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund or upon the distribution (whether
actual or constructive) of Acquiring Funds Shares to Selling Fund
Shareholders in exchange for such shareholders' shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for Acquiring
Fund Shares in the Reorganization.
19
<PAGE>
(e) The aggregate tax basis for Acquiring Funds Share received
by each Selling Fund Shareholder pursuant to the Reorganization will be the
same as the aggregate tax basis of the Selling Fund shares exchanged therefor
by such shareholder. The holding period of Acquiring Funds Share to be
received by each Selling Fund Shareholder will include the period during
which the Selling Fund shares exchanged therefore were held by such
shareholder provided the Selling Fund shares are held as capital assets at
the time of the Reorganization).
(f) The tax basis of the Selling Fund's assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the
Selling Fund immediately prior to the Reorganization. The holding period of
the assets of the Selling Fund in the hands of the Acquiring Fund will
include the period during which those assets were held by the Selling Fund.
Such opinion shall be based on customary assumptions and such
representations as Morgan, Lewis & Bockius LLP may reasonably request, and each
Selling Fund and Acquiring Fund will cooperate to make and certify the accuracy
of such representations. Notwithstanding anything herein to the contrary,
neither an Acquiring Fund nor a Selling Fund may waive the conditions set forth
in this paragraph 8.6.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses solely and
directly related to the transactions contemplated by this Agreement incurred by
a Selling Fund will be borne by SunTrust Banks, Inc. Such expenses include,
without limitation, (a) expenses associated with the preparation and filing of
the Registration Statement/Proxy Statement on Form N-14 under the 1933 Act
covering Acquiring Fund Shares to be issued pursuant to the provisions of this
Agreement; (b) postage; (c) printing; (d) accounting fees, (e) legal fees
incurred by each Selling Funds; and (f) solicitation costs of the transaction.
Notwithstanding the foregoing, the Trust shall pay (a) expenses incurred in
connection with the entering into and the carrying out of the provisions of this
Agreement (b) registration or qualification fees and expenses of preparing and
filing such forms as are necessary under applicable state securities laws to
qualify Acquiring Fund Shares to be issued in connection herewith in each state
in which the Selling Fund Shareholders are resident as of the date of the
mailing of the Prospectus/Proxy Statement to such shareholders; and (c) their
own federal and state registration fees.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust on behalf of each Acquiring Fund and Arbor on behalf of
each Selling Fund agrees that neither party has made to the other party any
representation, warranty and/or covenant not set forth herein, and that this
Agreement constitutes the entire agreement between the parties.
20
<PAGE>
10.2 Except as specified in the next sentence set forth in this section
10.2, the representations, warranties, and covenants contained in this Agreement
or in any document delivered pursuant to or in connection with this Agreement,
shall not survive the consummation of the transactions contemplated hereunder.
The covenants to be performed after each Closing and the obligations of each of
the Acquiring Funds in sections 5.9 and 6.4, shall continue in effect beyond the
consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
Trust and Arbor. In addition, either the Trust or Arbor may at their option
terminate this Agreement at or prior to either Closing Date due to:
(a) a breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to each Closing Date,
if not cured within 30 days; or
(b) a condition herein expressed to be precedent to the
obligations of the terminating party that has not been met and it reasonably
appears that it will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either an
Acquiring Fund, a Selling Funds, the Trust, Arbor, the respective Trustees or
officers, to the other party or its Trustees or officers. Each, however, shall
bear the expenses incurred by it incidental to the preparation and carrying out
of this Agreement as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
each Selling Funds and the Acquiring Fund; provided, however, that following the
meeting of the Selling Fund Shareholders called by a Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of Acquiring Fund Shares to
be issued to the Selling Fund Shareholders under this Agreement to the detriment
of such shareholders without their further approval.
21
<PAGE>
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without giving effect to the
conflicts of laws provisions thereof; provided, however, that the due
authorization, execution and delivery of this Agreement, in the case of each
Selling Fund, shall be governed and construed in accordance with the laws of the
Commonwealth of Massachusetts, without giving effect to the conflicts of laws
provisions thereof.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of each Acquiring Fund
and each Selling Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Trust or Arbor
personally, as the case may be, but shall bind only the trust property of the
Acquiring Fund or the Selling Fund, as the case may be, as provided in the
respective Declarations of Trust of Arbor and the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust and
Arbor, on behalf of each Acquiring Fund and Selling Fund, respectively, and
signed by authorized officers of each Trust, acting as such. Such authorization
by such Trustees nor such execution and delivery by such officers shall not be
deemed to have been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property of each
Acquiring Fund and each Selling Fund as provided in the Declarations of Trust of
Arbor and the Trust, respectively.
22
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as
of the date first written above.
STI CLASSIC FUNDS
By:
---------------------------
Name:
Title:
THE ARBOR FUND
By:
---------------------------
Name:
Title:
23
<PAGE>
SCHEDULE A
SUMMARY OF THE REORGANIZATION
(shareholders of each Selling Fund will receive shares of the
class of the Acquiring Fund opposite their current class)
THE ARBOR FUND/STI CLASSIC FUNDS
- --------------------------------------------------------------------------------
EXISTING ARBOR FUND EXISTING STI CLASSIC FUND
(SELLING FUND) (ACQUIRING FUND)
- --------------------------------------------------------------------------------
Prime Obligations Fund Classic Institutional Cash Management
Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXISTING ARBOR FUND NEW (SHELL) STI CLASSIC FUND
(SELLING FUND) (ACQUIRING FUND)
- --------------------------------------------------------------------------------
U.S. Government Securities Money Fund Classic Institutional U.S. Government
Securities Money Market Fund
- --------------------------------------------------------------------------------
24
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
________________________, 1999
THE ARBOR FUNDS
2 OLIVER STREET
BOSTON, MA 02109
1-800-XXX-XXXX
STI CLASSIC FUNDS
2 OLIVER STREET
BOSTON, MA 02109
1-800-XXX-XXXX
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement/Prospectus dated
___________, 1999 for the Special Meeting of Shareholders of two series of The
Arbor Fund (the "Arbor Funds"), to be held on May 7, 1999. Copies of the
Combined Proxy Statement/Prospectus may be obtained at no charge by calling the
Arbor Funds at 1-800-xxx-xxxx.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the combined Proxy
Statement/Prospectus.
Further information about the two participating series of the STI Classic
Funds (the "STI Funds") is contained in and incorporated by reference to the STI
Classic Institutional Cash Management Funds' Statement of Additional Information
dated September 28, 1998, as supplemented through October 27, 1998, and the STI
Classic Institutional U.S. Government Funds' Statement of Additional Information
dated January 26, 1999, copies of which are available upon request for no charge
by calling 1-800-xxx-xxxx. The audited financial statements and related
independent accountant's report for the STI Funds contained in the Annual Report
dated May 31, 1998 are incorporated herein by reference insofar as they relate
to the participating STI Funds. No other parts of the Annual Report are
incorporated by reference herein.
Further information about the Arbor Funds is contained in and incorporated
by reference to the Arbor Funds' Statement of Additional Information dated May
31, 1998 a copy of which is available upon request for no charge by calling
1-800-xxx-xxxx. The audited financial statements and related independent
accountant's report for the participating Arbor Funds contained in the 1998
Annual Report to Shareholders dated January 31, 1998 are hereby incorporated
herein by reference. The unaudited financial statements for the Arbor Funds
contained in the 1998 Semi-Annual Report to Shareholders dated July 31, 1998
also are incorporated herein by reference. No other parts of the Annual Report
or the subsequent Semi-Annual Report are incorporated by reference herein.
<PAGE>
STI CLASSIC FUNDS
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FORM N-14
PART C
OTHER INFORMATION
Item 15. INDEMNIFICATION.
Article VIII of the Agreement and Declaration of Trust filed as Exhibit (a) to
the Registration Statement is incorporated by reference. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to trustees, directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 16. EXHIBITS
(1) Agreement and Declaration of Trust -- originally filed
with Registrant's Registration Statement on Form N-1A
filed February 12, 1992 and incorporated by reference
to Exhibit 1 of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed on Form N-1A
with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(2)(a) By-Laws -- originally filed with Registrant's
Pre-Effective Amendment No. 1 filed on Form N-1A April
23, 1992 and incorporated by reference to Exhibit 2 of
Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed on Form N-1A with the SEC
via EDGAR Accession No. 0000912057-96-015938 on July
31, 1996.
(2)(b) Amended By-Laws -- incorporated by reference to Exhibit
(b)(2) of Post-Effective Amendment No. 23 to the
Registrant's Registration Statement filed on Form N-1A
with the SEC via EDGAR Accession No.
0001047469-98-027407 on July 15, 1998.
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization is filed
herewith.
(5) Not applicable.
(6)(a) Revised Investment Advisory Agreement with Trusco
Capital Management, Inc. -- as originally filed with
Registrant's Post-Effective Amendment No. 5 filed
August 2, 1993 on Form N-1A and incorporated by
reference to Exhibit 5(c) of Post-Effective Amendment
No. 15 to the Registrant's Registration Statement filed
on Form N-1A with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
4
<PAGE>
(6)(b) Investment Advisory Agreement with American National
Bank and Trust Company -- as originally filed with
Registrant's Post-Effective Amendment No. 6 filed on
Form N-1A October 22, 1993 and as Exhibit 5(d) of
Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed with the SEC on Form N-1A
via EDGAR Accession No. 0000912057-96-015938 on July
31, 1996.
(6)(c) Investment Advisory Agreement with Sun Bank
CapitalManagement, National Association (now STI
Capital Management, N.A. -- as originally filed
with Registrant's Post-Effective Amendment No. 6
on Form N-1A filed October 22, 1993 and
incorporated by reference to Exhibit 5(e) of
Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed with the
SEC on Form N-1A via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(6)(d) Investment Advisory Agreement with Trust Company
Bank (now SunTrust Bank, Atlanta) -- as originally
filed with Registrant's Post-Effective Amendment
No. 6 on Form N-1A filed October 22, 1993 and
filed herewith.
(7)(a) Distribution Agreement -- incorporated by reference to
Exhibit 6 of Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A filed
with the SEC via EDGAR Accession No.
0000912057-96-021336 on September 27, 1996.
(8) Not applicable.
(9)(a) Custodian Agreement with Trust Company Bank dated
February 1, 1994 -- originally filed with Registrant's
Post-Effective Amendment No. 13 on Form N-1A filed
September 28, 1995 and incorporated by reference to
Exhibit 8(b) of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed on Form N-1A
with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
(9)(b) Custodian Agreement with the Bank of California --
incorporated by reference to Exhibit 8(a) of
Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed on Form N-1A with the SEC
via EDGAR Accession No. 0000912057-96-015938 on July
31, 1996.
(9)(c) Fourth Amendment to Custodian Agreement by and between
STI Trust & Investment Operations, Inc. and The Bank of
New York dated May 6, 1997 -- incorporated by reference
to Exhibit 8(d) of Post-Effective Amendment No. 21 to
the Registrant's Registration Statement filed on Form
N-1A with the SEC via EDGAR Accession No. 0000912057-97
-032207 on September 30, 1997.
(10) Not applicable.
(11) Opinion and Consent of Morgan, Lewis & Bockius LLP that
shares will be validly issued, fully paid and
non-assessable is filed herewith.
(12) Opinion and Consent of Morgan, Lewis & Bockius LLP as
to tax matters and consequences is filed herewith.
(13)(a) Transfer Agent Agreement with Federated Services
Company dated May 14, 1994 -- originally filed with
Post-Effective Amendment No. 9 on Form N-1A filed
September 22, 1994 and incorporated by reference to
Exhibit 8(c) of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A filed
with the SEC via EDGAR Accession No.
0000912057-96-015938 on July 31, 1996.
5
<PAGE>
(13)(b) Administration Agreement with SEI Financial Management
Corporation dated May 29, 1995 -- originally filed with
Post-Effective Amendment No. 12 on Form N-1A filed
August 17, 1995 and incorporated by reference to
Exhibit 9(a) of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed with the
SEC via EDGAR Accession No. 0000912057-96-015938 on
July 31, 1996.
(13)(c) Consent to Assignment and Assumption of the
Administration Agreement between STI Classic Funds
and SEI Financial Management Corporation --
incorporated by reference to Exhibit 9(b) of
Post-Effective Amendment No. 21 to the
Registrant's Registration Statement filed on Form
N-1A with the SEC via EDGAR Assession No.
0000912057-97-032207 on September 30, 1997.
(14)(a) Consent of Arthur Andersen LLP is filed herewith.
(14)(b) Consent of PricewaterhouseCoopers LLP is filed
herewith.
(15) Not applicable.
(16) Not applicable.
(17)(a) Prospectuses and SAIs for the Trust Class, Investor
Class, Flex Class, and Institutional Class Shares of
STI Classic Funds dated October 1, 1998 -- incorporated
by reference to the Rule 497(e) filing on Form N-1A
with the SEC via EDGAR accession number
0001047469-98-036330 as filed October 2, 1998.
(17)(b) Prospectus and SAI for the U.S. Goverment Securities
Money Fund and the Prime Obligations Fund of the Arbor
Fund dated May 31, 1998 -- incorporated by reference to
the Rule 485(b) filing on Form N-1A with the SEC via
EDGAR accession number 0001047469-98-022302 as filed
May 29, 1998.
(17)(c) Audited Financial Statements dated May 31, 1998 for the
STI Classic Institutional Money Market Funds --
incorporated by reference to the N-30D filing with the
SEC via EDGAR accession number 0000935069-98-000124 as
filed July 30, 1998.
(17)(d) Semi-Annual Financial Report for the STI Classic
Institutional Money Market Funds dated November 30,
1998 -- incorporated by reference to the N-30D filing
with the SEC via EDGAR accession number
0000935069-99-000010 as filed on January 28, 1999.
(17)(e) Audited Financial Statements for the Arbor Fund dated
January 31, 1998 -- incorporated by reference to the
N-30D filing with the SEC via EDGAR accession number
0001041062-98-000095 as filed on March 30, 1998.
(17)(f) Semi-Annual Financial Report for the Arbor Fund dated
July 31, 1998 -- incorporated by reference to the
N-30D filing with the SEC via EDGAR accession number
0000935069-98-000147 filed on August 28, 1998.
Item 17. UNDERTAKINGS.
The registrant agrees that prior to any public reoffering of the securities
registered through the use of a prospectus which is a part of this registration
statement by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering prospectus will
contain the information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability
6
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under the 1933 Act, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the offering of
the securities at that time shall be deemed to be the initial bona fide offering
of them.
SIGNATURES
As required by the Securities Act of 1933 this Registration Statement has
been signed on behalf of STI Classic Funds in the city of Oaks, and state of,
Pennsylvania on the 22nd of February, 1999.
STI Classic Funds
By: /S/ MARK NAGLE
-------------------------------
Mark Nagle, President and Chief
Executive Officer
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated:
*
-------------------- Trustee February 22, 1999
F. Wendell Gooch
*
-------------------- Trustee February 22, 1999
Daniel S. Goodrum
*
-------------------- Trustee February 22, 1999
Jesse S. Hall
*
-------------------- Trustee February 22, 1999
Wilton Looney
*
-------------------- Trustee February 22, 1999
Champney A. McNair
*
-------------------- Trustee February 22, 1999
T. Gordy Germany
*
-------------------- Trustee February 22, 1999
Bernard F. Sliger
*
-------------------- Trustee February 22, 1999
Jonathan T. Walton
*
-------------------- Trustee February 22, 1999
William H. Cammack
*
-------------------- Controller, Treasurer & February 22, 1999
Carol Rooney Chief Financial Officer
/s/ Mark Nagle President & Chief February 22, 1999
-------------------- Executive Officer
Mark Nagle
* By: /s/ Mark Nagle
----------------------------------
Mark Nagle, With Power of Attorney
previously filed
7
<PAGE>
Exhibit Index
(1) Agreement and Declaration of Trust -- originally filed with
Registrant's Registration Statement on Form N-1A filed February
12, 1992 and incorporated by reference to Exhibit 1 of Post-Effective
Amendment No. 15 on to the Registrant's Registration Statement filed
on Form N-1A with the SEC via EDGAR Accession No. 0000912057-96-015938
on July 31, 1996.
(2)(a) By-Laws -- originally filed with Registrant's Pre-Effective Amendment
No. 1 on Form N-1A filed April 23, 1992 and incorporated by
reference to Exhibit 2 of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed on Form N-1A with the
SEC via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996.
(2)(b) Amended By-Laws -- incorporated by reference to Exhibit (b)(2) of
Post-Effective Amendment No. 23 on Form N-1A to the
Registrant's Registration Statement filed with the SEC via EDGAR
Accession No. 0001047469-98-027407 on July 15, 1998.
(3) Not applicable.
(4) Form of Agreement and Plan of Reorganization is filed herewith.
(5) Not applicable.
(6)(a) Revised Investment Advisory Agreement with Trusco Capital Management,
Inc. as originally filed with Registrant's Post-Effective Amendment
No. 5 on Form N-1A filed August 2, 1993 and incorporated by reference
to Exhibit 5(c) of Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed on Form N-1A with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
(6)(b) Investment Advisory Agreement with American National Bank and Trust
Company -- as originally filed with Registrant's Post-Effective
Amendment No. 6 filed on Form N-1A October 22, 1993 and as Exhibit
5(d) of Post-Effective Amendment No. 15 to the Registrant's
Registration Statement filed on Form N-1A with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
(6)(c) Investment Advisory Agreement with Sun Bank Capital Management,
National Association (now STI Capital Management, N.A. -- as
originally filed with Registrant's Post-Effective Amendment No. 6
on Form N-1A filed October 22, 1993 and incorporated by reference
to Exhibit 5(e) of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement filed on Form N-1A with the
SEC via EDGAR Accession No. 0000912057-96-015938 on July 31,
1996.
(6)(d) Investment Advisory Agreement with Trust Company Bank (now
SunTrust Bank, Atlanta) -- as originally filed with Registrant's
Post-Effective Amendment No. 6 on Form N-1A filed October 22,
1993 and incorporated by reference to Exhibit D(4) of
Post-Effective Amendment No. 24 to the Registrant's Statement on
Form N-1A filed with the SEC via EDGAR Accession No.
0001047469-98-028802 on July 30, 1998.
(7)(a) Distribution Agreement -- incorporated by reference to Exhibit 6 of
Post-Effective Amendment No. 16 to the Registrant's Registration
Statement on Form N-1A filed with the SEC via EDGAR Accession No.
0000912057-96-021336 on September 27, 1996.
(8) Not applicable.
(9)(a) Custodian Agreement with Trust Company Bank dated February 1, 1994 --
originally filed with Registrant's Post-Effective Amendment No. 13 on
Form N-1A filed September 28, 1995 and incorporated by reference to
Exhibit 8(b) of Post-Effective Amendment No. 15 to the Registrant's
Registration Statement on Form N-1A filed with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
8
<PAGE>
(9)(b) Custodian Agreement with the Bank of California -- incorporated by
reference to Exhibit 8(a) of Post- Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A filed with the SEC
via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996.
(9)(c) Fourth Amendment to Custodian Agreement by and between STI Trust &
Investment Operations, Inc. and The Bank of New York dated May 6, 1997
-- incorporated by reference to Exhibit 8(d) of Post-Effective
Amendment No. 21 to the Registrant's Registration Statement on Form
N-1A filed with the SEC via EDGAR Accession No. 0000912057-97-032207
on September 30, 1997.
(10) Not applicable.
(11) Opinion and Consent of Morgan, Lewis & Bockius LLP that shares will be
validly issued, fully paid and non-assessable is filed herewith.
(12) Opinion and Consent of Morgan, Lewis & Bockius LLP as to tax matters
and consequences is filed herewith.
(13)(a) Transfer Agent Agreement with Federated Services Company dated May 14,
1994 -- originally filed with Post-Effective Amendment No. 9 on Form
N-1A filed September 22, 1994 and incorporated by reference to Exhibit
8(c) of Post-Effective Amendment No. 15 to the Registrant's
Registration Statement on Form N-1A filed with the SEC via EDGAR
Accession No. 0000912057-96-015938 on July 31, 1996.
(13)(b) Administration Agreement with SEI Financial Management Corporation
dated May 29, 1995 -- originally filed with Post-Effective Amendment
No. 12 on Form N-1A filed August 17, 1995 and incorporated by
reference to Exhibit 9(a) of Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A filed with the SEC
via EDGAR Accession No. 0000912057-96-015938 on July 31, 1996.
(13)(c) Consent to Assignment and Assumption of the Administration
Agreement between STI Classic Funds and SEI Financial Management
Corporation -- incorporated by reference to Exhibit 9(b) of
Post-Effective Amendment No. 21 to the Registrant's Registration
Statement on Form N-1A filed with the SEC via EDGAR Assession No.
0000912057-97-032207 on September 30, 1997.
(14)(a) Consent of Arthur Andersen LLP is filed herewith.
(14)(b) Consent of PricewaterhouseCoopers LLP is filed herewith.
(15) Not applicable.
(16) Not applicable.
(17)(a) Prospectuses and SAIs for the Trust Shares, Investor Shares, Flex
Shares, and Institutional Shares of STI Classic Funds dated October 1,
1998 -- incorporated by reference to the Rule 497(e) filing on Form
N-1A with the SEC via EDGAR accession number 0001047469-98-036330 as
filed October 2, 1998.
(17)(b) Prospectus and SAI for the U.S. Government Securities Money Fund and
the Prime Obligations Fund of the Arbor Fund dated May 31, 1998 --
incorporated by reference to the Rule 485(b) filing on Form N-1A with
the SEC via EDGAR accession number 0001047469-98-022302 as filed
May 29, 1998.
(17)(c) Audited Financial Statements for the STI Classic Institutional Money
Market Funds dated May 31, 1998 -- incorporated by reference to the
N-30D filing with the SEC via EDGAR accession number
0000935069-98-000124 as filed July 30, 1998.
(17)(d) Semi-Annual Financial Report for the STI Classic Institutional Money
Market Funds of the STI Classic Funds dated November 30, 1998 --
incorporated by reference to the N-30D filing with the SEC via EDGAR
accession number 0000935069-99-000010 filed on January 28, 1999.
9
<PAGE>
(17)(e) Audited Financial Statements for the Arbor Fund dated January 31, 1998
-- incorporated by reference to the N-30D filing with the SEC via
EDGAR accession number 0001041062-98-000095 filed on March 30, 1998.
(17)(f) Semi-Annual Financial Report for the Arbor Fund dated July 31, 1998
-- incorporated by reference to the N-30D filing with the SEC via
EDGAR accession number 0000935069-98-000147 filed on August 28, 1998.
10
<PAGE>
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this __ day of _____, 1999, by and between STI Classic Funds, a Massachusetts
business trust with its principal place of business at 2 Oliver Street, Boston,
MA 02109 (the "Trust"), with respect to its Classic Institutional Cash
Management Money Market Fund and Classic Institutional U.S. Government
Securities Money Market Fund, each a separate investment portfolio of the Trust
(each an "Acquiring Fund" and, together, the "Acquiring Funds"), and The Arbor
Fund, a Massachusetts business trust, with its principal place of business at 2
Oliver Street, Boston, MA 02109 ("Arbor"), with respect to its Prime Obligations
Fund and U.S. Government Securities Money Fund, each a separate investment
portfolio of Arbor (each a "Selling Fund" and, together the "Selling Funds" and,
collectively with the Acquiring Funds, the "Funds").
This Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization will consist of (i) the transfer of all of the assets of each
Selling Fund in exchange for shares of beneficial interest, no par value per
share, of its respective Acquiring Fund ("Acquiring Fund Shares") as set forth
on Schedule A attached hereto; (ii) the assumption by each Acquiring Fund of the
identified liabilities of each Selling Fund; and (iii) the distribution, after
the Closing Dates hereinafter referred to, of the Acquiring Fund Shares to the
shareholders of each Selling Fund and the liquidation of each Selling Fund as
provided herein, all upon the terms and conditions set forth in this Agreement
(the "Reorganization").
WHEREAS, each Acquiring Fund and each Selling Fund is a separate investment
series of the Trust and Arbor, respectively, and the Trust and Arbor are
open-end, registered management investment companies and each Selling Fund owns
securities that generally are assets of the character in which its respective
Acquiring Fund is permitted to invest;
WHEREAS, each Fund is authorized to issue its shares of beneficial interest
or shares of common stock, as the case may be;
WHEREAS, the Trustees of the Trust have determined that the Reorganization
in the best interests of each Acquiring Fund's shareholders;
WHEREAS, the Trustees of Arbor have determined that the Reorganization with
respect to each Selling fund is in the best interests of the Selling Fund's
shareholders and that the interests of the existing shareholders of the Selling
Fund will not be diluted as a result of the Reorganization;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows;
<PAGE>
ARTICLE I
TRANSFER OF ASSETS OF THE SELLING FUNDS IN EXCHANGE FOR ACQUIRING FUNDS SHARES
AND THE ASSUMPTION OF SELLING FUNDS' LIABILITIES AND LIQUIDATION OF THE SELLING
FUNDS
1.1 THE EXCHANGE. Subject to the terms and conditions contained herein
and on the basis of the representations and warranties contained herein, each
Selling Fund agrees to transfer all of its assets, as set forth in paragraph
1.2, to its respective Acquiring Fund. In exchange, each Acquiring Fund agrees:
(i) to deliver to its respective Selling Funds the number of full and fractional
shares of the Acquiring Fund Shares, determined by (a) multiplying the shares
outstanding of each class of the Selling Fund by (b) the ratio computed by
dividing (x) the net asset value per share of each such class of the Selling
Fund by (y) the net asset value per share of the corresponding class of
Acquiring Fund Shares computed in the manner and as of the time and date set
forth in paragraph 2.2; and (ii) to assume the identified liabilities of the
Selling Fund, as set forth in paragraph 1.3. Such transactions shall take place
at the closing provided for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of each Selling Fund to be acquired
by its respective Acquiring Fund shall consist of all property, including,
without limitation, all cash, securities, commodities, interests in futures and
dividends or interest receivables, owned by the Selling Fund and any deferred or
prepaid expenses shown as an asset on the books of the Selling Fund on its
Closing Date.
Each Selling Fund has provided its respective Acquiring Fund with its most
recent audited financial statements, which contain a list of all of the Selling
Fund's assets as of the date of such statements. Each Selling Fund hereby
represents that as of the date of the execution of this Agreement, there have
been no changes in its financial position as reflected in said financial
statements other than those occurring in the ordinary course of business in
connection with the purchase and sale of securities and the payment of normal
operating expenses and the payment of dividends, capital gains distributions and
redemption proceeds to shareholders.
Each Selling Fund will, within a reasonable period of time prior to the
Closing Date, furnish each Acquiring Fund with a list of the Selling Fund's
portfolio securities and other investments. Each Acquiring Fund will, within a
reasonable time prior to the Closing Dates, furnish its respective Selling Funds
with a list of the securities, if any, on the Selling Fund's list referred to
above that do not conform to the Acquiring Fund's investment objectives,
policies, and restrictions. A Selling Fund, if requested by its Acquiring
Funds, will dispose of securities on the Acquiring Fund's list prior to the
Closing Date. In addition, if it is determined that the portfolios of a Selling
Fund and its Acquiring Fund, when aggregated, would contain investments
exceeding certain percentage limitations imposed upon the Acquiring Fund with
respect to such investments, the Selling Fund, if requested by the Acquiring
Fund, will dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations
2
<PAGE>
as of the Closing Date. Notwithstanding the foregoing, nothing herein will
require a Selling Fund to dispose of any investments or securities if, in the
reasonable judgment of the Selling Fund's trustees or adviser, such disposition
would adversely affect the tax-free nature of the Reorganization or would
violate their fiduciary duties to the Selling Fund's shareholders.
1.3 LIABILITIES TO BE ASSUMED. Each Selling Fund will endeavor to
discharge all of its known liabilities and obligations prior to the Closing
Date. Each Acquiring Fund shall assume only those liabilities, expenses, costs,
charges and reserves reflected on a Statement of Assets and Liabilities of its
respective Selling Fund prepared on behalf of the Selling Fund, as of the
Valuation Date (as defined in paragraph 2.1), in accordance with generally
accepted accounting principles consistently applied from the prior audited
period. Each Acquiring Fund shall assume only those liabilities of its
respective Selling Fund reflected in its Statement of Assets and Liabilities and
shall not assume any other liabilities, whether absolute or contingent, known or
unknown, accrued or unaccrued, all of which shall remain the obligation of the
Selling Fund.
In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by an Acquiring Fund under the National
Association of Securities Dealers, Inc. ("NASD") Conduct Rule 2830 (the "Maximum
Amount"), each Acquiring Fund will add to the Maximum Amount immediately prior
to the Reorganization, the Maximum Amount of each Selling Fund immediately prior
to the Reorganization, calculated in accordance with NASD Conduct Rule 2830.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after its Closing Date as
is conveniently practicable (the "Liquidation Date"): (a) each Selling Fund will
distribute in complete liquidation of the Selling Fund, pro rata to its
shareholders of record, determined as of the close of business on the Valuation
Date (the "Selling Fund Shareholders"), Acquiring Fund Shares received by the
Selling Fund pursuant to paragraph 1.1; and (b) the Selling Fund will thereupon
proceed to dissolve and terminate as set forth in paragraph 1.8 below. Such
distribution will be accomplished by the transfer of Acquiring Fund Shares
credited to the account of the Selling Fund on the books of the Acquiring Fund
to open accounts on the share records of the Acquiring Fund in the name of the
Selling Fund Shareholders, and representing the respective pro rata number of
Acquiring Fund Shares due such shareholders. All issued and outstanding shares
of the Selling Fund will simultaneously be canceled on the books of the Selling
Fund. The Acquiring Fund shall not issue certificates representing Acquiring
Fund Shares in connection with such transfer. Each Selling Fund Shareholder
shall have the right to receive any unpaid dividends or other distributions that
were declared by the Selling Fund before the Effective Time with respect to
Selling Fund shares that are held of record by a Selling Fund Shareholder at the
Effective Time on the Closing Date.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be shown
on the books of each Acquiring Fund's transfer agent. Shares of each Acquiring
Fund will be
3
<PAGE>
issued simultaneously to its corresponding Selling Fund, in an amount equal in
value to the net asset value of each Selling Fund's shares, to be distributed to
shareholders of each Selling Fund.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the issuance of
Acquiring Fund Shares in a name other than the registered holder of the Selling
Fund shares on the books of the Selling Fund as of that time shall, as a
condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of each Selling
Fund is and shall remain the responsibility of the Selling Fund, up to and
including the Closing Date, and such later date on which the Selling Fund is
terminated.
1.8 TERMINATION. Each Selling Fund shall be terminated promptly following
its Closing Date and the making of all distributions pursuant to paragraph 1.4.
1.9 Subject to the conditions set forth in this Agreement, the failure of
one of the Selling Funds to consummate the transactions contemplated hereby
shall not affect the consummation or validity of a Reorganization with respect
to any other Selling Fund, and the provisions of this Agreement shall be
construed to effect this intent, including, without limitation, as the context
requires, construing the terms "Acquiring Fund" and "Selling Fund" as meaning
only those series of the Trust and Arbor, respectively, which are involved in a
Reorganization as of the Closing Dates.
4
<PAGE>
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of a Selling Fund's assets to be
acquired by its respective Acquiring Fund hereunder shall be the value of such
assets computed as of the close of normal trading on the New York Stock Exchange
("NYSE") on the business day immediately prior to each respective Closing Date
(such time and date being hereinafter called a "Valuation Date"), using the
valuation procedures set forth in the Trust's Declaration of Trust and each
Acquiring Fund's then current prospectuses and statements of additional
information or such other valuation procedures as shall be mutually agreed upon
by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of Acquiring Fund
Shares shall be the net asset value per share computed as of the close of normal
trading on the NYSE on the Valuation Date, using the valuation procedures set
forth in the Trust's Declaration of Trust and each Acquiring Fund's then current
prospectuses and statements of additional information.
2.3 SHARES TO BE ISSUED. The number of each Acquiring Fund's shares to be
issued (including fractional shares, if any) in exchange for its respective
Selling Fund's assets, shall be determined by (a) multiplying the shares
outstanding of the Selling Fund by (b) the ratio computed by (x) dividing the
net asset value per share of the Selling Fund by (y) the net asset value per
share of the corresponding Acquiring Fund determined in accordance with
paragraph 2.2 [(a) x (b), where (b)=(x)DIVIDED BY(y)].
2.4 DETERMINATION OF VALUE. All computations of value shall be made by
SunTrust Bank, Atlanta in accordance with its regular practice in pricing the
shares and assets of each Acquiring Fund. Each Acquiring Fund and Selling Fund
agrees, however, to use all commercially reasonable efforts to resolve any
material pricing differences between the prices of portfolio securities
determined in accordance with the pricing policies and procedures of a Selling
Fund and those determined in accordance with the pricing policies and procedures
of its respective Acquiring Fund.
2.5 MONEY MARKET FUND VALUE. It is understood and agreed that the value
of the assets of the Prime Obligations Fund and the value of shares of the
corresponding Acquiring Fund, the Classic Institutional Cash Management Money
Market Fund, for purposes of sales and redemptions shall be based on the
amortized cost valuation procedures that have been adopted by the Board of
Trustees of Arbor and the Board of Trustees of the Trust, respectively; PROVIDED
that if the difference between the per share net asset values of the Arbor Prime
Obligations Fund and the STI Classic Institutional Cash Management Money Market
Fund equals or exceeds $.0025 as next regularly computed immediately prior to
the Valuation Date by using such market values in accordance with the policies
and procedures established by the Trust (or as otherwise mutually determined by
the Board of Trustees of Arbor and the Board of Trustees of the Trust, either
the
5
<PAGE>
Board of Trustees of Arbor or the Board of Trustees of the Trust shall have the
right to postpone the Valuation Date and the Closing Date of the Reorganization
with respect to such Prime Obligations Fund until such time as the per share
difference is less than $.0025.
ARTICLE III
CLOSING AND CLOSING DATES
3.1 CLOSING DATES. The closing (the "Closing") shall occur in two steps
on or about May 15, 1999 for the Arbor Prime Obligations Fund and May 22, 1999
for the Arbor U.S. Government Securities Money Fund, or such other date(s) as
the parties may agree to in writing (the "Closing Dates"). All acts taking place
at the Closing shall be deemed to take place immediately prior to the Closing
Dates unless otherwise provided. The Closing shall be held as of 9:00 a.m. (the
"Effective Time") at the offices of the SEI Investments, One Freedom Valley
Drive, Oaks, PA 19456, or at such other time and/or place as the parties may
agree.
3.2 CUSTODIAN'S CERTIFICATE. Crestar Bank, as custodian for each Selling
Fund (the "Custodian"), shall deliver at the Closing a certificate of an
authorized officer stating that: (a) each Selling Fund's portfolio securities,
cash, and any other assets shall have been delivered in proper form to its
respective Acquiring Fund on the Closing Dates; and (b) all necessary taxes
including all applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in conjunction
with the delivery of portfolio securities by the Selling Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation
Date, either: (a) the NYSE or another primary exchange on which the portfolio
securities of an Acquiring Fund or a Selling Fund are purchased or sold, shall
be closed to trading or trading on such exchange shall be restricted; or (b)
trading or the reporting of trading on the NYSE or elsewhere shall be disrupted
so that accurate appraisal of the value of the net assets of an Acquiring Fund
or a Selling Fund is impracticable, the Valuation Date shall be postponed until
the first business day after the day when trading is fully resumed and reporting
is restored.
3.4 TRANSFER AGENT'S CERTIFICATE. Crestar Bank, as transfer agent for
each Selling Fund as of the Closing Dates, shall deliver at the Closing a
certificate of an authorized officer stating that its records contain the names
and addresses of Selling Fund Shareholders, and the number and percentage
ownership of outstanding shares owned by each such shareholder immediately prior
to the Closing. Each Acquiring Fund shall issue and deliver or cause Federated
Services Company, its transfer agent, to issue and deliver a confirmation
evidencing Acquiring Fund Shares to be credited on the Closing Dates to the
Secretary of Arbor or provide evidence satisfactory to the Selling Fund that
such Acquiring Fund Shares have been credited to the Selling Fund's account on
the books of the Acquiring Fund. At the Closing, each party shall deliver to
the other such bills of sale, checks, assignments, share certificates, receipts
and other documents, if any, as such other party or its counsel may reasonably
request.
6
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE SELLING FUNDS. Each Selling Fund represents
and warrants to its respective Acquiring Fund as follows:
(a) The Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts.
(b) The Selling Fund is a separate investment series of a
Massachusetts business trust that is registered as an open-end management
investment company, and its registration with the Securities and Exchange
Commission (the "Commission") as an investment company under the Investment
Company Act of 1940 (the "1940 Act"), is in full force and effect.
(c) The current prospectuses and statements of additional information
of the Selling Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the 1940 Act,
and the rules and regulations thereunder, and do not include any untrue
statement of a material fact or omit to state any material fact required to be
stated or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) The Selling Fund is not, and the execution, delivery, and
performance of this Agreement (subject to shareholder approval) will not result,
in violation of any provision of Arbor's Declaration of Trust or By-Laws or of
any material agreement, indenture, instrument, contract, lease, or other
undertaking to which the Selling Fund is a party or by which it is bound.
(e) The Selling Fund has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability to them prior
to the Closing Date, except for liabilities, if any, to be discharged or
reflected in the Statement of Assets and Liabilities as provided in paragraph
1.3 hereof.
(f) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or to its knowledge
threatened against the Selling Fund or any of its properties or assets, which,
if adversely determined, would materially and adversely affect its financial
condition, the conduct of its business, or the ability of the Selling Fund to
carry out the transaction contemplated by this Agreement. The Selling Fund
knows of no facts that might form the basis for the institution of such
proceedings and are not a party to or subject to the provisions of any order,
decree, or judgment of any court or governmental body that
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materially and adversely affects the Selling Fund's business or its ability to
consummate the transaction contemplated herein.
(g) The financial statements of the Selling Fund are in accordance
with generally accepted accounting principles, and such statements (copies of
which have been furnished to the Acquiring Funds) fairly reflect the financial
condition of the Selling Fund as of July 31, 1998, and there are no known
contingent liabilities of the Selling Fund as of that date not disclosed in such
statements.
(h) Since July 31, 1998, there have been no material adverse changes
in the Selling Fund's financial condition, assets, liabilities for business
(other than changes occurring in the ordinary course of business), or any
incurrence by the Selling Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this subparagraph (h), a
decline in the value of the net assets of the Selling Fund shall not constitute
a material adverse change.
(i) At the Closing Date, all federal and other tax returns and
reports of the Selling Fund required by law to be filed by such date, or
reasonably thereafter, shall have been filed, and all federal and other taxes
shown due on such returns and reports shall have been paid, or provision shall
have been made for the payment thereof. To the best of the Selling Fund's
knowledge, no such return is currently under audit, and no assessment has been
asserted with respect to such returns.
(j) For each fiscal year of their operation, the Selling Fund has met
the requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and has distributed in each such year all net
investment income and realized capital gains.
(k) All issued and outstanding shares of the Selling Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the Selling Fund's
transfer agent as provided in paragraph 3.4. The Selling Fund has no
outstanding options, warrants, or other rights to subscribe for or purchase any
of the Selling Fund shares, and have no outstanding securities convertible into
any of the Selling Fund shares.
(l) At the Closing Date, the Selling Fund will have good and
marketable title to the Selling Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2, and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets the Acquiring Fund will acquire good and marketable
title, subject to no restrictions on the full transfer of such assets, including
such restrictions as might arise under the 1933 Act, other than as disclosed to
and accepted by the Acquiring Fund.
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(m) The execution, delivery, and performance of this Agreement have
been duly authorized by all necessary action on the part of the Selling Fund.
Subject to approval by the Selling Fund Shareholders, this Agreement constitutes
a valid and binding obligation of the Selling Fund, enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors'
rights and to general equity principles.
(n) The information to be furnished by the Selling Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated herein shall be accurate and complete in all material
respects and shall comply in all material respects with federal securities and
other laws and regulations.
(o) From the effective date of the Registration Statement (as defined
in paragraph 5.7), through the time of the meeting of the Selling Fund
Shareholders and on the Closing Date, any written information furnished by the
Selling Funds with respect to a Selling Fund for use in the Prospectus/Proxy
Statement (as defined in paragraph 5.7), the Registration Statement or any other
materials provided in connection with the Reorganization does not and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated or necessary to make the statements, in light of the
circumstances under which such statements were made, not misleading.
(p) The Selling Fund has elected to qualify and has qualified as a
"regulated investment company" under the Code, as of and since its first taxable
year; has been a "regulated investment company" under the Code at all times
since the end of its first taxable year when it so qualified; and qualifies and
shall continue to qualify as a "regulated investment company" under the Code for
its taxable year ending upon its liquidation.
(q) No governmental consents, approvals, authorizations or filings
are required under the 1933 Act, the Securities Exchange Act of 1934 (the "1934
Act"), the 1940 Act or Massachusetts law for the execution of this Agreement by
Arbor, for itself and on behalf of the Selling Fund, except for the
effectiveness of the Registration Statement, the necessary exemptive relief
requested from the Commission or its staff with respect to Sections 17(a) and
17(b) of the 1940 Act, and except for such other consents, approvals,
authorizations and filings as have been made or received, and such consents,
approvals, authorizations and filings as may be required subsequent to the
Closing Date, it being understood, however, that this Agreement and the
transactions contemplated herein must be approved by the shareholders of the
Selling Fund as described in paragraph 5.2.
4.2 REPRESENTATIONS OF THE ACQUIRING FUNDS. Each Acquiring Fund
represents and warrants to its respective Selling Fund as follows:
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(a) The Acquiring Funds is a separate investment series of a
Massachusetts business trust, duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts.
(b) The Acquiring Funds is a separate investment series of a
Massachusetts business trust that is registered as open-end management
investment company, and its registration with the Commission as an investment
company under the 1940 Act is in full force and effect.
(c) The current prospectuses and statements of additional information
of the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
thereunder, and do not include any untrue statement of a material fact or omit
to state any material fact required to be stated or necessary to make such
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring Fund is
a party or by which it is bound.
(e) Except as otherwise disclosed in writing to the Selling Fund and
accepted by the Selling Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is presently pending,
or to its knowledge, threatened against the Acquiring Fund or any of its
properties or assets, which, if adversely determined, would materially and
adversely affect their financial condition and the conduct of its business or
the ability of the Acquiring Fund to carry out the transaction contemplated by
this Agreement. The Acquiring Fund knows of no facts that might form the basis
for the institution of such proceedings and they are not a party to or subject
to the provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects its business or its ability to
consummate the transaction contemplated herein.
(f) The financial statements of the Acquiring Fund are in accordance
with generally accepted accounting principles, and such statements (copies of
which have been furnished to the Selling Funds) fairly reflect the financial
condition of the Acquiring Fund as of November 30, 1998, and there are no known
contingent liabilities of the Acquiring Fund as of such date which are not
disclosed in such statements.
(g) Since November 30, 1998 there have been no material adverse
changes in the Acquiring Fund's financial condition, assets, liabilities, or
business (other than changes occurring in the ordinary course of business), or
any incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed to
and accepted by the Selling Fund. For the purposes of this subparagraph (g),
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a decline in the value of the net assets of the Acquiring Fund shall not
constitute a material adverse change.
(h) At the Closing Date, all federal and other tax returns and
reports of the Acquiring Funds required by law to be filed by such date shall
have been filed. All federal and other taxes shown due on such returns and
reports shall have been paid or provision shall have been made for their
payment. To the best of the Acquiring Funds' knowledge, no such return is
currently under audit, and no assessment has been asserted with respect to such
returns.
(i) For each fiscal year of their operation, the Acquiring Fund has
met the requirements of Subchapter M of the Code for qualification and treatment
as a regulated investment company and has distributed all net investment income
and realized capital gains.
(j) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid and
non-assessable by the Acquiring Fund. The Acquiring Fund has no outstanding
options, warrants, or other rights to subscribe for or purchase any Acquiring
Funds Share, and there are no outstanding securities convertible into any
Acquiring Fund Shares.
(k) The execution, delivery, and performance of this Agreement have
been duly authorized by all necessary action on the part of the Acquiring Fund,
and this Agreement constitutes a valid and binding obligation of the Acquiring
Fund enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights and to general equity principles.
(1) Acquiring Fund Shares to be issued and delivered to the Selling
Fund for the account of the Selling Fund Shareholders pursuant to the terms of
this Agreement will, at the Closing Date, have been duly authorized. When so
issued and delivered, such shares will be duly and validly issued Acquiring Fund
Shares, and will be fully paid and non-assessable.
(m) The information to be furnished by the Acquiring Fund for use in
no-action letters, applications for orders, registration statements, proxy
materials, and other documents that may be necessary in connection with the
transactions contemplated herein shall be accurate and complete in all material
respects and shall comply in all material respects with federal securities and
other laws and regulations.
(n) From the effective date of the Registration Statement (as defined
in paragraph 5.7), through the time of the meeting of the Selling Fund
shareholders and on the Closing Dates, any written information furnished by the
Trust with respect to an Acquiring Fund for use in the Prospectus/Proxy
Statement (as defined paragraph 5.7), the Registration Statement or any other
materials provided in connection with the Reorganization does not and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated or necessary to make the statements, in light of the
circumstances under which such statements were made, not misleading.
11
<PAGE>
(o) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act, and any
state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
(p) No governmental consents, approvals, authorizations or filings
are required under the 1933 Act, the 1934 Act, the 1940 Act or Massachusetts law
for the execution of this Agreement by the Trust, for itself and on behalf of
the Acquiring Fund, or the performance of the Agreement by the Trust, for itself
and on behalf of the Acquiring Fund, except for the effectiveness of the
Registration Statement, the necessary exemptive relief requested from the
Commission or its staff with respect to Sections 17(a) and 17(b) of the 1940
Act, and such other consents, approvals, authorizations and filings as have been
made or received, and except for such consents, approvals, authorizations and
filings as may be required subsequent to the Closing Date.
(q) The Acquiring Fund intends to qualify as "regulated investment
company" under the Code, and with respect to each Acquiring Fund that has
conducted material investment operations prior to the Closing Date, the
Acquiring Fund has elected to qualify and has qualified as a "regulated
investment company" under the Code as of and since its first taxable year; has
been a "regulated investment company" under the Code at all times since the end
of its first taxable year when it so qualified; and qualifies and shall continue
to qualify as a "regulated investment company" under the Code for its current
taxable year.
ARTICLE V
COVENANTS OF EACH ACQUIRING FUND AND EACH SELLING FUND
5.1 OPERATION IN ORDINARY COURSE. Subject to paragraph 8.5 each Acquiring
Fund and Selling Fund will operate their respective business in the ordinary
course between the date of this Agreement and the respective Closing Date, it
being understood that such ordinary course of business will include customary
dividends and distributions and shareholder redemptions.
5.2 APPROVAL OF SHAREHOLDERS. Arbor will call a meeting of Selling Fund
Shareholders to consider and act upon this Agreement and to take all other
action necessary to obtain approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. Each Selling Fund covenants that the
Acquiring Fund Shares to be issued pursuant to this Agreement are not being
acquired for the purpose of making any distribution, other than in connection
with the Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. Each Selling Fund will assist its respective
Acquiring Fund in obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of the Selling Fund's shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, each
Acquiring Fund and its respective Selling Fund will each take or cause
to be taken, all action, and do or cause
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<PAGE>
to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this
Agreement, including any actions required to be taken after the applicable
Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but in
any case within sixty days after the applicable Closing Date, each Selling Fund
shall furnish its respective Acquiring Fund, in such form as is reasonably
satisfactory to the Acquiring Fund, a statement of the earnings and profits of
the Selling Fund for federal income tax purposes that will be carried over by
the Acquiring Fund as a result of Section 381 of the Code, and which will be
reviewed by PricewaterhouseCoopers LLP and certified by Arbor's Treasurer.
5.7 PREPARATION OF FORM N-14 REGISTRATION STATEMENT. The Trust will
prepare and file with the Commission a registration statement on Form N-14 under
the 1933 Act (the "Registration Statement"), relating to the Acquiring Fund
Shares, which, without limitation, shall include a proxy statement of each
Selling Fund and the prospectus of each Acquiring Fund relating to the
transaction contemplated by this Agreement (the "Prospectus/Proxy Statement").
The Registration Statement shall be in compliance with the 1933 Act, the 1934
Act and the 1940 Act. Each Selling Fund will provide its respective Acquiring
Funds with the materials and information necessary to prepare the
Prospectus/Proxy Statement for inclusion in the Registration Statement, in
connection with the meeting of the Selling Funds Shareholders to consider the
approval of this Agreement and the transactions contemplated herein.
5.8 INDEMNIFICATION OF TRUSTEES. The Trust will assume all liabilities
and obligations of Arbor relating to any obligation of Arbor to indemnify its
current and former Trustees and officers, acting in their capacities as such, to
the fullest extent permitted by law and Arbor's Agreement and Declaration of
Trust, as in effect as of the date of this Agreement. Without limiting the
foregoing, the Trust agrees that all rights to indemnification and all
limitations of liability existing in favor of the current and former Trustees
and officers, acting in their capacities as such, under Arbor's Agreement and
Declaration of Trust as in effect as of the date of this Agreement shall survive
the Reorganization and shall continue in full force and effect, without any
amendment thereto, and shall constitute rights which may be asserted against the
Trust, its successors or assigns.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH SELLING FUND
The obligations of each Selling Fund to consummate the transactions
provided for herein shall be subject, at their election, to the performance by
its respective Acquiring Fund of all the obligations to be performed by it
pursuant to this Agreement on or before the applicable Closing Date, and, in
addition subject to the following conditions:
6.1 All representations, covenants, and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Dates, with the same force and effect as if made on and as of
the Closing Dates. Each Acquiring Fund shall have delivered to its respective
Selling Fund a certificate executed in the Acquiring Fund's name by the
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<PAGE>
Trust's President or Vice President and its Treasurer or Assistant Treasurer, in
form and substance satisfactory to the Selling Fund and dated as of the
applicable Closing Date, to such effect and as to such other matters as the
Selling Fund shall reasonably request.
6.2 Each Selling Funds shall have received on the applicable Closing Date
an opinion from Morgan, Lewis & Bockius LLP, counsel to the Trust, dated as of
the Closing Date, in a form reasonably satisfactory to the Selling Fund,
covering the following points:
(a) Each Acquiring Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts, and has the power
to own all of its properties and assets and to carry on its business as
presently conducted.
(b) Each Acquiring Funds is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act, and, to such counsel's knowledge, such registration with the Commission is
in full force and effect.
(c) This Agreement has been duly authorized, executed, and delivered
by the Trust on behalf of each Acquiring Fund and, assuming due authorization,
execution and delivery of this Agreement by the Selling Funds, is a valid and
binding obligation of the Acquiring Funds enforceable against each Acquiring
Funds in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and to general equity principles.
(d) Assuming that a consideration of not less than the net asset
value of Acquiring Fund Shares has been paid, Acquiring Funds Shares to be
issued and delivered to each Selling Fund on behalf of the Selling Fund
Shareholders, as provided by this Agreement, are duly authorized and upon such
delivery will be legally issued and outstanding and fully paid and non-
assessable, and no shareholder of an Acquiring Fund has any preemptive rights
with respect to Acquiring Fund Shares.
(e) The Registration Statement, has been declared effective by the
Commission and to such counsel's knowledge, no stop order under the 1933 Act
pertaining thereto has been issued, and to the knowledge of such counsel, no
consent, approval, authorization or order of any court or governmental authority
of the United States or the Commonwealth of Massachusetts is required for
consummation by the Acquiring Funds of the transactions contemplated herein,
except as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act,
and as may be required under state securities laws.
(f) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated herein will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which an Acquiring Fund is a party or by
which an Acquiring Fund or any of its properties may be bound or, to the
knowledge of such
14
<PAGE>
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which an Acquiring Fund is
a party or by which it is bound.
(g) The descriptions in the Prospectus/Proxy Statement of statutes,
legal and governmental proceedings and material contracts, if any (only insofar
as they relate to an Acquiring Fund), are accurate and fairly present the
information required to be shown.
(h) Such counsel does not know of any legal or governmental
proceedings (only insofar as they relate to an Acquiring Fund) existing on or
before the effective date of the Registration Statement or the Closing Dates
which are required to be described in the Registration Statement or to be filed
as exhibits to the Registration Statement which are not described or filed as
required.
(i) To the knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or threatened as to an Acquiring Fund or any of its properties
or assets. The Acquiring Funds are not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body, which
materially and adversely affects the Acquiring Funds' business, other than as
previously disclosed in the Registration Statement.
Such counsel shall also state that they have participated in conferences
with officers and other representatives of each Acquiring Fund at which the
contents of the Prospectus/Proxy Statement and related matters were discussed.
Although such counsel are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Prospectus/Proxy Statement (except to the extent indicated in their opinion in
paragraph (g), above), on the basis of the foregoing (relying as to materiality
to a large extent upon the opinions of the Trust's officers and other
representatives of each Acquiring Fund), no facts have come to their attention
that lead them to believe that the Prospectus/Proxy Statement as of its date, as
of the date of each Selling Fund Shareholders' meeting, and as of the applicable
Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated regarding an Acquiring Fund or
necessary, in the light of the circumstances under which they were made, to make
the such statements regarding an Acquiring Fund not misleading. Such opinion
may state that such counsel does not express any opinion or belief as to the
financial statements or any financial or statistical data, or as to the
information relating to each Selling Fund, contained in the Prospectus/Proxy
Statement or the Registration Statement, and that such opinion is solely for the
benefit of Arbor and each Selling Fund. Such opinion shall contain such other
assumptions and limitations as shall be in the opinion of Morgan, Lewis &
Bockius LLP appropriate to render the opinions expressed therein.
In this paragraph 6.2, references to the Prospectus/Proxy Statement include
and relate to only the text of such Prospectus/Proxy Statement and not to any
exhibits or attachments thereto or to any documents incorporated by reference
therein.
6.3 As of the Closing Date with respect to the Reorganization of each
Selling Fund, there shall have been no material change in the investment
objective, policies and restrictions nor any
15
<PAGE>
material change in the investment management fees, other fees payable for
services provided to each Acquiring Fund, fee waiver or expense reimbursement
undertakings of the Acquiring Funds from those fee amounts and undertakings of
the Acquiring Fund described in the Prospectus/Proxy Statement.
6.4 For the period beginning at the applicable Closing Date and ending not
less than six years thereafter, the Trust, its successor or assigns shall
provide, or cause to be provided, liability coverage at least as comparable to
the liability coverage currently applicable to both former and current Trustees
and officers of Arbor, covering the actions of such Trustees and officers of
Arbor for the period they served as such.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH ACQUIRING FUND
The obligations of each Acquiring Fund to consummate the transactions
provided for herein shall be subject, at their election, to the performance by
the Selling Fund of all the obligations to be performed by the Selling Funds
pursuant to this Agreement, on or before the applicable Closing Date and, in
addition, shall be subject to the following conditions:
7.1 All representations, covenants, and warranties of a Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the applicable Closing Date, with the same force and effect as if made on
and as of the Closing Date. Each Selling Fund shall have delivered to its
respective Acquiring Funds on the Closing Date a certificate executed in the
Selling Fund's name by Arbor's President or Vice President and the Treasurer or
Assistant Treasurer, in form and substance satisfactory to the Acquiring Fund
and dated as of the Closing Dates, to such effect and as to such other matters
as the Acquiring Fund shall reasonably request.
7.2 Each Selling Fund shall have delivered to its respective Acquiring
Fund a statement of the Selling Fund's assets and liabilities, together with a
list of the selling Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the Closing
Dates, certified by the Treasurer of Arbor.
7.3 Each Acquiring Fund shall have received on the applicable Closing Date
an opinion of Morgan, Lewis & Bockius LLP, counsel to each Selling Fund, dated
as of the Closing Date in a form satisfactory to the Acquiring Fund covering the
following points:
(a) The Selling Fund is a separate investment series of a
Massachusetts business trust duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and each has the
power to own all of its properties and assets and to carry on its business as
presently conducted.
(b) The Selling Fund is a separate investment series of a
Massachusetts business trust registered as an investment company under the 1940
Act, and, to such counsel's knowledge, such registration with the Commission is
in full force and effect.
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(c) This Agreement has been duly authorized, executed and delivered
by Arbor on behalf of each Selling Fund and, assuming due authorization,
execution and delivery of this Agreement by the Trust on behalf of each
Acquiring Fund is a valid and binding obligation of the Selling Fund enforceable
against the Selling Fund in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and to general equity
principles.
(d) To the knowledge of such counsel, except for the filing of
Articles of Transfer pursuant to Massachusetts law, no consent, approval,
authorization or order of any court or governmental authority of the United
States or the Commonwealth of Massachusetts is required for consummation by a
Selling Fund of the transactions contemplated herein, except as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act, and as may be
required under state securities laws.
(e) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
violation of Arbor's Declaration of Trust or By-laws, or any provision of any
material agreement, indenture, instrument, contract, lease or other undertaking
(in each case known to such counsel) to which a Selling Fund is a party or by
which it or any of its properties may be bound or, to the knowledge of such
counsel, result in the acceleration of any obligation or the imposition of any
penalty, under any agreement, judgment, or decree to which the Selling Fund is a
party or by which it is bound.
(f) The descriptions in the Prospectus/Proxy Statement of statutes,
legal and government proceedings and material contracts, if any (only insofar as
they relate to a Selling Fund), are accurate and fairly present the information
required to be shown.
(g) Such counsel does not know of any legal or governmental
proceedings (insofar as they relate to a Selling Fund) existing on or before the
date of mailing of the Prospectus/Proxy Statement and the applicable Closing
Date, which are required to be described in the Prospectus/Proxy Statement or to
be filed as an exhibit to the Registration Statement which are not described or
filed as required.
(h) To the knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or threatened as to a Selling Fund or any of its respective
properties or assets. To the knowledge of such counsel, no Selling Fund is a
party to or subject to the provisions of any order, decree or judgment of any
court or governmental body, which materially and adversely affects the Selling
Fund's business other than as previously disclosed in the Prospectus/Proxy
Statement.
(i) Assuming that a consideration of not less than the net asset
value of Selling Fund Shares has been paid, and assuming that such shares were
issued in accordance with the terms of each Selling Fund's registration
statement, or any amendment thereto, in effect at the time of such issuance, all
issued and outstanding shares of the Selling Fund are legally issued and fully
paid and non-assessable.
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Such counsel shall also state that they have participated in conferences
with officers and other representatives of each Selling Fund at which the
contents of the Prospectus/Proxy Statement and related matters were discussed.
Although such counsel are not passing upon and do not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Prospectus/Proxy Statement (except to the extent indicated in their opinion at
paragraph (f), above), on the basis of the foregoing (relying as to materiality
to a large extent upon the opinions of Arbor's officers and other
representatives of each Selling Fund), no facts have come to their attention
that lead them to believe that the Prospectus/Proxy Statement as of its date, as
of the date of each Selling Fund Shareholders' meeting, and as of the applicable
Closing Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein regarding a Selling Fund or
necessary, in the light of the circumstances under which they were made, to make
the statements therein regarding the Selling Fund not misleading. Such opinion
may state that such counsel do not express any opinion or belief as to the
financial statements or any financial or statistical data, or as to the
information relating to each Acquiring Fund contained in the Prospectus/Proxy
Statement or Registration Statement, and that such opinion is solely for the
benefit of the Trust and each Acquiring Fund. Such opinion shall contain such
other assumptions and limitations as shall be in the opinion of Morgan, Lewis &
Bockius LLP appropriate to render the opinions expressed therein.
In this paragraph 7.3, references to the Prospectus/Proxy Statement include
and relate to only the text of such Prospectus/Proxy Statement and not to any
exhibits or attachments thereto or to any documents incorporated by reference
therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH
ACQUIRING FUND AND SELLING FUND
If any of the conditions set forth below do not exist on or before the
applicable Closing Date with respect to each Selling Fund or its respective
Acquiring Fund, the other party to this Agreement shall, at its option, not be
required to consummate the transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
each Selling Fund in accordance with Massachusetts law and the provisions of
Arbor's Declaration of Trust and By-Laws. Certified copies of the resolutions
evidencing such approval shall have been delivered to the respective Acquiring
Fund. Notwithstanding anything herein to the contrary, neither an Acquiring
Fund nor a Selling Fund may waive the conditions set forth in this paragraph
8.1.
8.2 On each Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, or instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act. Furthermore, no action,
suit or other proceeding shall be threatened or pending before any court or
governmental agency in which it is sought to restrain or prohibit, or obtain
damages or other relief in connection with this Agreement or the transactions
contemplated herein.
18
<PAGE>
8.3 All required consents of other parties and all other consents, orders,
and permits of federal, state and local regulatory authorities (including those
of the Commission and of State Blue Sky securities authorities, including any
necessary "no-action" positions and exemptive orders from such federal and state
authorities) to permit consummation of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such consent,
order, or permit would not involve a risk of a material adverse effect on the
assets or properties of an Acquiring Fund or a Selling Fund, provided that
either party hereto may waive any such conditions for itself.
8.4 The Registration Statement shall have become effective under the 1933
Act, and no stop orders suspending the effectiveness thereof shall have been
issued. To the best knowledge of the parties to this Agreement, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5 Each Selling Fund shall have declared and paid a dividend or dividends
which, together with all previous such dividends, shall have the effect of
distributing to the Selling Fund Shareholders all of the Selling Fund's net
investment company taxable income for all taxable periods ending on or prior to
the applicable Closing Dates (computed without regard to any deduction for
dividends paid) and all of its net capital gains realized in all taxable periods
ending on or prior to the Closing Dates (after reduction for any capital loss
carry forward).
8.6 The parties shall have received a favorable opinion of Morgan, Lewis &
Bockius LLP addressed to each Acquiring Fund and Selling Fund substantially to
the effect that for federal income tax purposes with respect to each Selling
Fund:
(a) The transfer of all of the Selling Fund's assets in exchange for
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Selling Fund (followed by the distribution of Acquiring Fund
Shares to the Selling Fund shareholders in dissolution and liquidation of the
Selling Fund) will constitute a "reorganization" within the meaning of Section
368(a) of the Code and the Acquiring Fund and the Selling Fund will each be a
"party to a reorganization" within the meaning of Section 368(b) of the Code.
(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Selling Fund solely in exchange for Acquiring Funds
Share and the assumption by the Acquiring Fund of the identified liabilities of
the Selling Fund.
(c) No gain or loss will be recognized by the Selling Fund upon the
transfer of the Selling Fund's assets to the Acquiring Fund in exchange for
Acquiring Fund Shares and the assumption by the Acquiring Fund of the identified
liabilities of the Selling Fund or upon the distribution (whether actual or
constructive) of Acquiring Funds Shares to Selling Fund Shareholders in exchange
for such shareholders' shares of the Selling Fund.
(d) No gain or loss will be recognized by the Selling Fund
Shareholders upon the exchange of their Selling Fund shares for Acquiring Fund
Shares in the Reorganization.
19
<PAGE>
(e) The aggregate tax basis for Acquiring Funds Share received by
each Selling Fund Shareholder pursuant to the Reorganization will be the same as
the aggregate tax basis of the Selling Fund shares exchanged therefor by such
shareholder. The holding period of Acquiring Funds Share to be received by each
Selling Fund Shareholder will include the period during which the Selling Fund
shares exchanged therefore were held by such shareholder provided the Selling
Fund shares are held as capital assets at the time of the Reorganization).
(f) The tax basis of the Selling Fund's assets acquired by the
Acquiring Fund will be the same as the tax basis of such assets to the Selling
Fund immediately prior to the Reorganization. The holding period of the assets
of the Selling Fund in the hands of the Acquiring Fund will include the period
during which those assets were held by the Selling Fund.
Such opinion shall be based on customary assumptions and such
representations as Morgan, Lewis & Bockius LLP may reasonably request, and each
Selling Fund and Acquiring Fund will cooperate to make and certify the accuracy
of such representations. Notwithstanding anything herein to the contrary,
neither an Acquiring Fund nor a Selling Fund may waive the conditions set forth
in this paragraph 8.6.
ARTICLE IX
EXPENSES
9.1 Except as otherwise provided for herein, all expenses solely and
directly related to the transactions contemplated by this Agreement incurred by
a Selling Fund will be borne by SunTrust Banks, Inc. Such expenses include,
without limitation, (a) expenses associated with the preparation and filing of
the Registration Statement/Proxy Statement on Form N-14 under the 1933 Act
covering Acquiring Fund Shares to be issued pursuant to the provisions of this
Agreement; (b) postage; (c) printing; (d) accounting fees, (e) legal fees
incurred by each Selling Funds; and (f) solicitation costs of the transaction.
Notwithstanding the foregoing, the Trust shall pay (a) expenses incurred in
connection with the entering into and the carrying out of the provisions of this
Agreement (b) registration or qualification fees and expenses of preparing and
filing such forms as are necessary under applicable state securities laws to
qualify Acquiring Fund Shares to be issued in connection herewith in each state
in which the Selling Fund Shareholders are resident as of the date of the
mailing of the Prospectus/Proxy Statement to such shareholders; and (c) their
own federal and state registration fees.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Trust on behalf of each Acquiring Fund and Arbor on behalf of each
Selling Fund agrees that neither party has made to the other party any
representation, warranty and/or covenant not set forth herein, and that this
Agreement constitutes the entire agreement between the parties.
20
<PAGE>
10.2 Except as specified in the next sentence set forth in this section
10.2, the representations, warranties, and covenants contained in this Agreement
or in any document delivered pursuant to or in connection with this Agreement,
shall not survive the consummation of the transactions contemplated hereunder.
The covenants to be performed after each Closing and the obligations of each of
the Acquiring Funds in sections 5.9 and 6.4, shall continue in effect beyond the
consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the Trust
and Arbor. In addition, either the Trust or Arbor may at their option terminate
this Agreement at or prior to either Closing Date due to:
(a) a breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to each Closing Date, if
not cured within 30 days; or
(b) a condition herein expressed to be precedent to the obligations
of the terminating party that has not been met and it reasonably appears that it
will not or cannot be met.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either an
Acquiring Fund, a Selling Funds, the Trust, Arbor, the respective Trustees or
officers, to the other party or its Trustees or officers. Each, however, shall
bear the expenses incurred by it incidental to the preparation and carrying out
of this Agreement as provided in paragraph 9.1.
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
each Selling Funds and the Acquiring Fund; provided, however, that following the
meeting of the Selling Fund Shareholders called by a Selling Fund pursuant to
paragraph 5.2 of this Agreement, no such amendment may have the effect of
changing the provisions for determining the number of Acquiring Fund Shares to
be issued to the Selling Fund Shareholders under this Agreement to the detriment
of such shareholders without their further approval.
21
<PAGE>
ARTICLE XIII
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
13.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts, without giving effect to the
conflicts of laws provisions thereof; provided, however, that the due
authorization, execution and delivery of this Agreement, in the case of each
Selling Fund, shall be governed and construed in accordance with the laws of the
Commonwealth of Massachusetts, without giving effect to the conflicts of laws
provisions thereof.
13.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided in
this paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies under
or by reason of this Agreement.
13.5 It is expressly agreed that the obligations of each Acquiring Fund and
each Selling Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Trust or Arbor
personally, as the case may be, but shall bind only the trust property of the
Acquiring Fund or the Selling Fund, as the case may be, as provided in the
respective Declarations of Trust of Arbor and the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust and
Arbor, on behalf of each Acquiring Fund and Selling Fund, respectively, and
signed by authorized officers of each Trust, acting as such. Such authorization
by such Trustees nor such execution and delivery by such officers shall not be
deemed to have been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the trust property of each
Acquiring Fund and each Selling Fund as provided in the Declarations of Trust of
Arbor and the Trust, respectively.
22
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as
of the date first written above.
STI CLASSIC FUNDS
By:
---------------------------
Name:
Title:
THE ARBOR FUND
By:
---------------------------
Name:
Title:
23
<PAGE>
SCHEDULE A
SUMMARY OF THE REORGANIZATION
----------------------------------
(shareholders of each Selling Fund will receive shares of the
class of the Acquiring Fund opposite their current class)
THE ARBOR FUND/STI CLASSIC FUNDS
- --------------------------------------------------------------------------------
EXISTING ARBOR FUND EXISTING STI CLASSIC FUND
(SELLING FUND) (ACQUIRING FUND)
- --------------------------------------------------------------------------------
Prime Obligations Fund Classic Institutional Cash Management
Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXISTING ARBOR FUND NEW (SHELL) STI CLASSIC FUND
(SELLING FUND) (ACQUIRING FUND)
- --------------------------------------------------------------------------------
U.S. Government Securities Money Fund Classic Institutional U.S. Government
Securities Money Market Fund
- --------------------------------------------------------------------------------
24
<PAGE>
[MORGAN, LEWIS & BOCKIUS LLP LOGO APPEARS HERE]
February 23, 1999
STI Classic Funds
2 Oliver Street
Boston, Massachusetts 02109
RE: The STI Classic Funds - Form N-14 Opinion
-----------------------------------------
Ladies and Gentlemen:
We refer to the Registration Statement on Form N-14 (the "Registration
Statement") of the STI Classic Funds (the "Trust") relating to the transfer of
all the assets and liabilities of the Arbor Fund (the "Acquired Fund"), in
exchange for shares of the Trust's Classic Institutional Cash Management Fund
and Classic Institutional U.S. Government Securities Money Market Fund (the
"Acquiring Funds"), followed by the distribution of such Shares (the "Acquiring
Funds' Shares"), in exchange for such Acquired Fund's Shares in complete
liquidation of the Acquired Fund (the "Reorganization"), pursuant to the
Agreement.
We have been requested by the Trust to furnish this opinion as Exhibit 11 to the
Registration Statement.
We have examined such records, documents, instruments, certificates of public
officials and of the Trust, made such inquiries of the Trust, and examined such
questions of law as we have deemed necessary for the purpose of rendering the
opinion set forth herein. We have assumed the genuineness of all signatures and
the authenticity of all items submitted to us as originals and the conformity
with originals of all items submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance of the Shares by the Trust has been duly and validly
authorized by all appropriate action and, upon delivery thereof and payment
therefor in accordance with the Registration Statement, the Shares, when
issued, will be duly authorized, validly issued, fully paid and
nonassessable by the Trust.
<PAGE>
STI Classic Funds
February 23, 1999
Page 2
We have not reviewed the securities laws of any state or territory in connection
with the proposed offering of Shares and we express no opinion as to the
legality of any offer of sale of Shares under any such state or territorial
securities laws.
This opinion is intended only for your use in connection with the offering of
Shares and may not be relied upon by any other person.
We hereby consent to the inclusion of this opinion as an exhibit to the Trust's
Registration Statement to be filed with the Securities and Exchange Commission.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
Morgan, Lewis & Bockius LLP
<PAGE>
[MORGAN, LEWIS & BOCKIUS LLP LOGO APPEARS HERE]
February 26, 1999
The Arbor Fund
2 Oliver Street
Boston, MA 02109
Re: AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN THE ARBOR FUND ON BEHALF OF THE PRIME
OBLIGATION FUND AND THE U.S. GOVERNMENT
SECURITIES MONEY FUND, AND STI CLASSIC FUNDS, ON BEHALF
OF ITS CLASSIC INSTITUTIONAL CASH MANAGEMENT MONEY
MARKET FUND AND THE CLASSIC INSTITUTIONAL U.S. GOVERNMENT
SECURITIES MONEY MARKET FUND
Ladies and Gentlemen:
We have acted as counsel to the Arbor Fund, a Massachussetts business trust,
in connection with the execution and delivery of the Agreement and Plan of
Reorganization (the "Agreement"), dated as of February 22, 1999, by STI
Classic Funds, on behalf of its Classic Institutional Cash Management Money
Market Fund and Classic Institutional U.S. Government Securities Money Market
Fund (the "Acquiring Funds") relating to the transfer of all the assets and
liabilities of the Arbor Prime Obligations Fund and U.S. Government
Securities Money Fund (the "Selling Funds"), in exchange for shares of each
corresponding Acquiring Fund, followed by the distribution of such Shares
(the "Acquiring Fund's Shares") to the holders of shares of the Selling Fund
("Selling Fund's Shares") in exchange for such Selling Fund's Shares in
complete liquidation of the Selling Fund (the "Reorganization"), pursuant to
the Agreement. This opinion letter is delivered to you pursuant to Section
8.6 of the Agreement. Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Agreement.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Agreement, and (ii) such other
<PAGE>
STI Classic Funds
February 26, 1999
Page 2
documents as we have deemed necessary or appropriate in order to enable us to
render the opinion below. In our examination, we have assumed the genuineness
of all signatures, the legal capacity of all natural persons, the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such copies. Our
opinion is based in part on the facts set forth below. We have not undertaken
an independent investigation or verification of these facts or of the
information set forth either in the aforementioned documents or in other
documents that we have reviewed.
1. The Reorganization will be consummated in compliance with the material
terms of the Agreement, and none of the material terms and conditions
therein have been waived or modified and neither party has any plan or
intention to waive or modify any such material condition.
2. The fair market value of each Acquiring Fund's Shares to be received
by each Selling Fund shareholder in the Reorganization will be
approximately equal to the fair market value of the shares in each
Selling Fund surrendered and exchanged therefor.
3. No consideration other than the Acquiring Fund's Shares and the
assumption by each Acquiring Fund of the stated liabilities of its
corresponding Selling Fund will be issued in exchange for the
assets of each Selling Fund in the Reorganization.
4. Neither Acquiring Fund has any plan or intention to sell additional
shares of its beneficial interest or to redeem or otherwise
reacquire any of its shares issued in the Reorganization other than
in the ordinary course of its business as a regulated investment
company.
5. Neither Acquiring Fund has any plan or intention to sell or otherwise
dispose of any of its corresponding Selling Fund's assets to be
acquired by it in the Reorganization except for dispositions made in
the ordinary course of its business as a regulated investment company.
6. Following the Reorganization, each Acquiring Fund will continue the
historic business of its corresponding Selling Fund or use a
significant portion of its corresponding Selling Fund's assets in its
business.
7. Immediately following consummation of the Reorganization, each
Acquiring
<PAGE>
STI Classic Funds
February 26, 1999
Page 3
Fund will possess the same liabilities as those possessed by its
corresponding Selling Fund immediately prior to the Reorganization.
The fair market value of the assets of each Selling Fund acquired by
its corresponding Acquiring Fund will exceed the liabilities of each
Selling Fund assumed by its corresponding Acquiring Fund plus the
amount of liabilities, if any, to which the acquired assets are
subject.
8. There is no intercorporate indebtedness existing between each
Acquiring Fund and its corresponding Selling Fund that was issued,
acquired, or will be settled at a discount.
9. Each Acquiring Fund will meet the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended, (the "Code") for
qualification and treatment as a regulated investment company.
10. Neither Acquiring Fund does not own nor will acquire prior to the
consummation of the Reorganization any shares of beneficial interest
in its corresponding Selling Fund.
11. Not more than 25 percent of the value of the total assets of each
Selling Fund or its corresponding Acquiring Fund is invested in the
stock and securities of any one issuer, and not more than 50 percent
of the value of each Fund's assets is invested in the stock and
securities of five or fewer issuers.
Our opinion summarizes certain Federal income tax consequences of the
Reorganization to holders of shares in the Selling Fund (individually, a
"Shareholder" and, collectively, the "Shareholders"). Our opinion does not
address all aspects of Federal income taxation that may be relevant to
particular Shareholders and may not be applicable to Shareholders who are not
citizens or residents of the United States. Further, our opinion does not
address the effect of any applicable foreign, state, local or other tax laws.
In rendering our opinion, we have considered the applicable provisions of the
Code, Treasury Regulations, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant.
Based upon and subject to the foregoing, we are of the opinion that the
Reorganization will, under current law, constitute tax-free reorganizations
under Section 368(a) of the Code, and that the Selling Funds and Acquiring Funds
will each be a party to the reorganizations within the meaning of Section 368(b)
of the Code.
<PAGE>
STI Classic Funds
February 26, 1999
Page 4
The Reorganization, constituting tax-free reorganizations, will have the
following Federal income tax consequences for the Shareholders, each Selling
Fund and its corresponding Acquiring Fund:
1. No gain or loss will be recognized by a Selling Fund upon the
transfer of its assets in exchange solely for its corresponding
Acquiring Fund's Shares and the assumption by the Acquiring Fund
of the Selling Fund's stated liabilities;
2. No gain or loss will be recognized by an Acquiring Fund on its
receipt of its corresponding Selling Fund's assets in exchange for
the Acquiring Fund's Shares and the assumption by the Acquiring
Fund of the Selling Fund's stated liabilities;
3. The basis of a Selling Fund's assets in its corresponding Acquiring
Fund's hands will be the same as the basis of those assets in the
Selling Fund's hands immediately before the Reorganization;
4. An Acquiring Fund's holding period for the assets transferred to
that Acquiring Fund by its corresponding Selling Fund will include
the holding period of those assets in the Selling Fund's hands
immediately before the Reorganization;
5. No gain or loss will be recognized by a Selling Fund on the
distribution of its corresponding Acquiring Fund's Shares to the
Selling Fund's Shareholders in exchange for such Selling Fund's
Shares;
6. No gain or loss will be recognized by a Selling Fund's
shareholders as a result of the Selling Fund's distribution of its
corresponding Acquiring Fund's Shares to the Acquired Fund's
Shareholders in exchange for that Selling Fund's Shareholders'
Selling Fund's Shares;
7. The basis of an Acquiring Fund's Shares received by its corresponding
Selling Fund's shareholders will be the same as the adjusted basis of
that Selling Fund's Shareholders' Selling Fund's Shares surrendered
in exchange therefor; and
8. The holding period of an Acquiring Fund's Shares received by that
Acquired Fund's Shareholders will include its corresponding Selling
Fund's Shareholders' holding period for that Selling Fund's
Shareholders' Selling
<PAGE>
STI Classic Funds
February 26, 1999
Page 5
Fund's Shares surrendered in exchange therefor, provided that such
Selling Fund's Shares were held as capital assets on the date of the
Reorganization.
Except as set forth above, we express no opinion as to the tax consequences
to any party, whether Federal, state, local or foreign, of the Reorganization
or the Agreement or of any transactions related to the Reorganization or the
Agreement or contemplated by the Reorganization or the Agreement. This
opinion is being furnished to you connection with the Reorganization and the
Agreement and solely for your benefit in connection therewith and may not be
used or relied upon for any other purpose and may not be circulated, quoted
or otherwise referred to for any other purpose without our express written
consent.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
Morgan, Lewis & Bockius LLP
<PAGE>
[ARTHUR ANDERSEN LLP LOGO APPEARS HERE]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated July 24, 1998 on
the May 31, 1998 financial statements of STI Classic Funds, included in
Post-Effective Amendment No. 25 to the Registration Statement on Form N-1A dated
September 28, 1998, and to all references to our firm included in this Form N-14
Registration Statement.
/s/ Arthur Andersen LLP
Philadelphia, PA
February 26, 1999
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the initial filing of the
Registration Statement of the STI Classic Funds on Form N-14 of our report dated
March 13, 1998 on our audit of the financial statements and financial highlights
of the U.S. Government Securities Money Fund and the Prime Obligation Fund of
The Arbor Fund, which report is included in the Annual Report to Shareholders
for the year ended January 31, 1998, which is incorporated by reference in the
Registration Statement. We also consent to the reference to our Firm under the
heading "Financial Statements" and "Experts" in the Statement of Additional
Information of the Arbor Fund.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 26, 1999
