<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
The Arbor Fund
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(Exact name of registrant as specified in its charter)
The Arbor Fund
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 Filing fee paid previously with the PRELIMINARY FILING
on January 17, 1996 (File Nos. 33-50718 and 811-7102).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: /*/
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Dated Filed:
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- --------------------
/*/ Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
THE ARBOR FUND
California Tax Exempt Portfolio
Institutional Tax Free Portfolio
Dear Shareholder,
A Shareholder Meeting of the California Tax Exempt Portfolio and Institutional
Tax Free Portfolio (each a "Portfolio") of The Arbor Fund (the "Trust") has
been scheduled for Thursday, February 22, 1996. If you were a shareholder of
record as of the close of business on January 3, 1996, you are entitled to
vote at the meeting or any adjournment of the meeting.
While you are, of course, welcome to join us at the meeting, most shareholders
cast their votes by filling out and signing the enclosed proxy card. Whether
or not you plan to attend the meeting, we need your vote. Please mark, sign,
and date the enclosed proxy card and return it promptly in the enclosed
envelope so that the maximum number of shares may be voted. You may vote for
or against all Proposals that apply to your Portfolio by checking a single
box, or you may vote on each Proposal separately.
The attached proxy statement is designed to give you information relating to
each of the Proposals on which you will be asked to consider and vote. Please
note that although each Proposal is discussed in the proxy statement, not
every Portfolio is required nor permitted to vote on every Proposal. We
encourage you to support the Trustees' recommendations. The Proposals
described in the proxy statement relate to the following matters:
1. Proposal to approve the selection of PNC Institutional Management
Corporation ("PIMC") as the Investment Adviser for the California Tax
Exempt Portfolio, and to approve the Investment Advisory Agreement
relating to the Portfolio between the Trust and PIMC.
2. Proposal to approve the selection of PIMC as the Investment Adviser for
the Institutional Tax Free Portfolio, and to approve the Investment
Advisory Agreement relating to the Portfolio between the Trust and PIMC.
Your vote is important to us. Please do not hesitate to call 1-800-DIAL SEI
if you have any questions about the Proposals under consideration. Thank you
for taking the time to consider these important Proposals and for your
investment in The Arbor Fund.
Sincerely,
David G. Lee
President & Chief Executive Officer
The Arbor Fund
<PAGE>
CALIFORNIA TAX EXEMPT PORTFOLIO
INSTITUTIONAL TAX FREE PORTFOLIO
--------------------------------------------------------------------
IMPORTANT SHAREHOLDER INFORMATION
--------------------------------------------------------------------
The document you hold in your hands contains your proxy statement
and proxy card. A proxy card is, in essence, a ballot. When you
vote your proxy, it tells us how to vote on your behalf on
important issues relating to your Portfolio. Each proxy card may be
completed by checking a single box and voting for or against all of
the Proposals relating to your Portfolio, or you may vote on each
Proposal separately. If you simply sign the proxy without
specifying a vote, your shares will be voted in accordance with the
recommendations of the board of trustees.
We urge you to spend a few minutes with the proxy statement, fill
out your proxy card, and return it to us. Voting your proxy, and
doing so promptly, ensures that the Portfolios will not need to
conduct additional mailings. When shareholders do not return their
proxies in sufficient numbers, we have to incur the expense of
follow-up solicitations, which may cost your Portfolio money.
Please take a few moments to exercise your right to vote. Thank
you.
--------------------------------------------------------------------
THE ARBOR FUND
<PAGE>
THE ARBOR FUND
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
Notice of Special Meeting of Shareholders
February 22, 1996
Notice is hereby given that a Special Meeting of Shareholders of the
California Tax Exempt and Institutional Tax Free Portfolios of The Arbor Fund
(the "Trust"), will be held at the offices of SEI Financial Management
Corporation, 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658, on
Thursday, February 22, 1996, at 10:00 a.m., Eastern time to consider and act
on the following matters:
1. Proposal to approve the selection of PNC Institutional Management
Corporation ("PIMC") as the Investment Adviser for the California Tax
Exempt Portfolio, and to approve the Investment Advisory Agreement
relating to the Portfolio between the Trust and PIMC.
2. Proposal to approve the selection of PIMC as the Investment Adviser for
the Institutional Tax Free Portfolio, and to approve the Investment
Advisory Agreement relating to the Portfolio between the Trust and PIMC.
In accordance with their own discretion, the proxies are authorized to vote on
other such business as may properly come before the Meeting.
By Order of the Board of Trustees
Richard W. Grant, Secretary
Each shareholder is cordially invited to attend the meeting. However, if you
are unable to be present at the meeting, you are requested to mark, sign and
date the enclosed proxy and return it promptly in the enclosed envelope so
that the meeting may be held and a maximum number of shares may be voted.
Shareholders of record at the close of business on January 3, 1996 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
January 29, 1996
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD. A POSTAGE PAID ENVELOPE
IS ENCLOSED FOR YOUR CONVENIENCE SO THAT YOU MAY RETURN YOUR PROXY CARD AS
SOON AS POSSIBLE. IT IS MOST IMPORTANT AND IN YOUR INTEREST FOR YOU TO SIGN
YOUR PROXY CARD AND RETURN IT SO THAT A QUORUM WILL BE PRESENT AT THE MEETING
AND A MAXIMUM NUMBER OF SHARES MAY BE VOTED. THE PROXY IS REVOCABLE AT ANY
TIME PRIOR TO ITS USE.
<PAGE>
THE ARBOR FUND
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of The Arbor Fund (the "Trust") on behalf of
the California Tax Exempt and Institutional Tax Free Portfolios (the
"Portfolios," and individually, a "Portfolio") for use at the Special Meeting
of Shareholders to be held on February 22, 1996 at 10:00 a.m. Eastern time at
the offices of SEI Financial Management Corporation, 680 East Swedesford Road,
Wayne, Pennsylvania 19087-1658, and at any adjourned session thereof (such
meeting and any adjournment thereof are hereinafter referred to as the
"Meeting"). Shareholders of each Portfolio of record at the close of business
on January 3, 1996 (the "Shareholders") are entitled to vote at the Meeting.
As of January 3, 1996, the approximate number of units of beneficial interest
("shares") issued and outstanding for the California Tax Exempt Portfolio was
393,885,486 and for the Institutional Tax Free Portfolio was 98,322,713. Each
share is entitled to one vote and each fractional share is entitled to a
proportionate fractional vote on each matter to be acted upon at the Meeting.
In addition to the solicitation of proxies by mail, Trustees and officers of
the Trust and officers and employees of SEI Financial Management Corporation,
the Trust's administrator, may solicit proxies in person or by telephone.
Persons holding shares as nominees will, upon request, be reimbursed for their
reasonable expenses incurred in sending soliciting materials to their
principals. The cost of solicitation will be borne by each Portfolio. The
proxy and this Proxy Statement are being mailed to Shareholders on or about
January 29, 1996.
Shares represented by duly executed proxies will be voted in accordance with
the instructions given. Proxies may be revoked at any time before they are
exercised by a written revocation received by the President of the Trust at
680 East Swedesford Road, Wayne, Pennsylvania 19087-1658, by properly
executing a later-dated proxy, or by attending the Meeting and voting in
person.
The summary voting table below sets forth the action required by the
Shareholders of the Portfolios on each of the Proposals in this Proxy
Statement:
APPROVAL OF THE SELECTION OF PNC INSTITUTIONAL
MANAGEMENT CORPORATION AS INVESTMENT ADVISER AND APPROVAL OF THE
RELATED INVESTMENT ADVISORY AGREEMENT
<TABLE>
<CAPTION>
================================================================================
PROPOSAL NUMBER PORTFOLIO
- --------------------------------------------------------------------------------
<S> <C>
PROPOSAL 1 CALIFORNIA TAX EXEMPT PORTFOLIO
- --------------------------------------------------------------------------------
PROPOSAL 2 INSTITUTIONAL TAX FREE PORTFOLIO
================================================================================
</TABLE>
1
<PAGE>
INTRODUCTION
At a meeting held on November 13, 1995, the Board of Trustees of the Trust
accepted the resignation of Prudential Investment Corporation ("Prudential")
as the investment adviser to each Portfolio, effective as of the close of
business on November 30, 1995. In addition, the Board of Trustees, subject to
the approval of the Shareholders of each Portfolio, approved the appointment
of PNC Institutional Management Corporation ("PIMC" or the "Adviser") as the
investment adviser to each Portfolio, effective December 1, 1995, and approved
the form of the related Investment Advisory Agreements between the Trust and
PIMC with respect to each Portfolio. Except for compensation, the proposed
Investment Advisory Agreements between the Trust and PIMC are not materially
different from the former Investment Advisory Agreement between the Trust and
Prudential. For the interim period, PIMC has been acting as the investment
adviser to each Portfolio and receives a fee of .075% of the average daily net
assets of each Portfolio up to $300 million, .070% of the average daily net
assets of each Portfolio from $300 million to $500 million, and .050% of each
Portfolio's assets over $500 million, for its services during this period,
which is the same fee that Prudential had been receiving for its services.
The Portfolios are currently offered to institutional investors, including
customers of Wells Fargo Bank and its affiliates and correspondents. The
Portfolios are offered with one institutional class of shares ("Class A
shares"). The Class A shares are sold without a sales load or a 12b-1 fee.
PROPOSAL 1: APPROVAL OF THE SELECTION OF PNC INSTITUTIONAL MANAGEMENT
CORPORATION AS INVESTMENT ADVISER FOR THE CALIFORNIA TAX EXEMPT
PORTFOLIO AND APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT
RELATING TO THE PORTFOLIO BETWEEN THE TRUST AND PIMC
The Board of Trustees has determined that it would be in the best interest of
the Portfolio and its Shareholders to retain PIMC as the investment adviser of
the California Tax Exempt Portfolio and is recommending that Shareholders of
the Portfolio approve PIMC as the adviser of the Portfolio and approve the
investment advisory agreement between the Trust and PIMC with respect to the
California Tax Exempt Portfolio (the "California Tax Exempt Investment
Advisory Agreement"). The Trustees of the Trust, including all of the
Trustees who are not "interested persons" of the Trust, approved the
California Tax Exempt Investment Advisory Agreement with respect to the
Portfolio on November 13, 1995.
Description of Adviser.
----------------------
PIMC is a wholly owned subsidiary of PNC Asset Management Group, Inc., which
is in turn a wholly owned subsidiary of PNC Bank, National Association ("PNC
Bank"). PIMC was organized in 1977 by PNC Bank to perform advisory services
for investment companies and has its principal offices at 400 Bellevue
Parkway, Wilmington, Delaware 19809. PNC Asset Management Group, Inc.'s
principal business address is 1835 Market Street, Philadelphia, Pennsylvania
19102, and PNC Bank has principal offices at Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19102. PNC Bank and its predecessors have been in
the business of managing the investments of fiduciary and other accounts in
the Philadelphia area since 1847. PNC Bank is a wholly owned subsidiary of
PNC Bancorp, Inc., located at 3411 Silverside Road, Wilmington, Delaware
19810, and PNC Bancorp, Inc. is in turn a wholly owned subsidiary of PNC Bank
Corp. PNC Bank Corp. is a publicly owned multi-bank holding company.
PNC Bank Corp., headquartered in Pittsburgh, Pennsylvania, is the twelfth
largest bank holding company in the United States. Categorized as a super
regional bank holding company, PNC Bank Corp. operates over 600 branch offices
in six U.S. states.
PNC Financial Services Group is PNC Bank Corp.'s mutual fund complex,
headquartered in Wilmington, Delaware. This group includes PIMC, PFPC Inc. (a
wholly owned, indirect subsidiary of PNC Bank Corp.), and PNC Bank. In 1973,
Provident National Bank (predecessor to PNC Bank) commenced advising the first
institutional money market mutual fund offered in the United States.
The PNC Financial Services Group is one of the largest U.S. bank managers of
mutual funds, with assets currently under management in money market funds in
excess of $30 billion as of November 30, 1995 (including approximately
-2-
<PAGE>
$4 billion in tax-exempt money market funds). This group, through PFPC and
PFPC International Ltd., is also a leading mutual fund service provider,
having contractual relationships with approximately 370 mutual funds with 3.5
million shareholders and in excess of $101 billion in assets as of November
30, 1995. Additionally, this group, through PNC Bank's Institutional
Investment Service department, provides investment research to some 250
financial institutions located in the United States and abroad. PNC Bank
provides custodial services for approximately $210 billion in assets,
including approximately $160 billion in mutual fund assets as of November 30,
1995.
The following is a list of the directors and principal executive officers of
PIMC:
<TABLE>
<CAPTION>
Name Address Office or Title Principal Occupation
- ---- ------- --------------- --------------------
<S> <C> <C> <C>
J. Richard Carnall PIMC Director, Chairman & Financial Related Services,
400 Bellevue Parkway Chief Operating Investment Advisory Related
Wilmington DE 19809 Officer Services & Banking Related
Services
Thomas H. Nevin PIMC President & Chief Investment Advisory Related
400 Bellevue Parkway Investment Officer Services
Wilmington DE 19809
Charles B. Landreth PIMC Executive Vice Investment Advisory Related
400 Bellevue Parkway President Services
Wilmington DE 19809
Vincent J. Ciavardini PIMC Senior Vice Financial Related Services
400 Bellevue Parkway President
Wilmington DE 19809
Dushyant Pandit PIMC Senior Vice Investment Advisory Related
400 Bellevue Parkway President Services
Wilmington DE 19809
Scott F. Moss PIMC Senior Vice Investment Advisory Related
400 Bellevue Parkway President Services
Wilmington DE 19809
John N. Parthemore PIMC Senior Vice Investment Advisory Related
400 Bellevue Parkway President Services
Wilmington DE 19809
James R. Smith PIMC Senior Vice Investment Advisory Related
400 Bellevue Parkway President Services
Wilmington DE 19809
Nicholas M. Marsini, Jr. PIMC Director & Chief Banking Related Services
400 Bellevue Parkway Financial Officer
Wilmington DE 19809
Richard L. Smoot PIMC Director Banking Related Services
400 Bellevue Parkway
Wilmington DE 19809
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Richard C. Caldwell PIMC Director Investment Advisory Related
400 Bellevue Parkway Services and Banking Related
Wilmington DE 19809 Services
Laurence D. Fink PIMC Director Investment Advisory Related
400 Bellevue Parkway Services
Wilmington DE 19809
</TABLE>
PIMC currently provides investment advisory or sub-advisory services to the
following money market investment company portfolios pursuant to the fee
arrangements described below as of November 30, 1995. PIMC was waiving, as of
the date of this Proxy Statement, some or all of the fees payable by certain
of the portfolios listed below. These waivers are not reflected in the table.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name of Investment Company Amount of Assets Rate of Compensation
Under Management*
- -------------------------------------------------------------------------------
<S> <C> <C>
Municipal Fund for
California Investors, Inc.
California Money $ 426,364,933 .20% of net assets
- --------------------------------------------------------------------------------
Municipal Fund for New $ 236,665,806 .20% of net assets
York Investors, Inc.
- --------------------------------------------------------------------------------
Municipal Fund for
Temporary Investment
MuniFund $ 726,792,171 .175% of first
$1 billion;
.150% of next
$1 billion;
.125% of next
$1 billion;
.100% of next
$1 billion;
.095% of next
$1 billion;
.090% of next
$1 billion;
.085% of next
$1 billion;
.080% of net
assets over
$7 billion
- --------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name of Investment Company Amount of Assets Rate of Compensation
Under Management*
- -------------------------------------------------------------------------------
<S> <C> <C>
MuniCash $ 423,065,650 .175% of first
$1 billion;
.150% of next
$1 billion;
.125% of next
$1 billion;
.100% of next
$1 billion;
.095% of next
$1 billion;
.090% of next
$1 billion;
.085% of next
$1 billion;
.080% of net
assets over
$7 billion
- --------------------------------------------------------------------------------
The PNC Fund
Money Market $2,023,184,951 .45% of first
$1 billion;
Government Money Market $ 765,779,348 .40% of next
$1 billion;
North Carolina $ 65,758,056 .375% of next
Municipal Money $1 billion;
Market .35% of net
assets over
Ohio Municipal Money $ 71,116,425 $3 billion
Market
PA Municipal Money $ 406,436,537
Market
VA Municipal Money $ 31,655,225
Market
Municipal Money Market $ 307,369,529
- --------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name of Investment Company Amount of Assets Rate of Compensation
Under Management*
- -------------------------------------------------------------------------------
<S> <C> <C>
Plan Investment
Fund, Inc.
Money Market Portfolio $ 585,158,031 .20% of first
$250 million;
Repo Portfolio $ 106,849,251 .15% of next
$250 million;
.12% of next
$250 million;
.10% of next
$250 million;
.08% of net assets over
$1 billion
- --------------------------------------------------------------------------------
The RBB Fund, Inc.
Money Market $1,961,865,320 .45% of first
$250 million;
.40% of next
$250 million;
.35% of net
assets over
$500 million
Municipal Money Market $ 394,946,865 .35% of first
$250 million;
.30% of next
$250 million;
.25% of net
assets over
$500 million
Government Obligations $ 518,768,557 .45% of first
Money Market $250 million;
.40% of next
$250 million;
.35% of net
assets over
$500 million
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name of Investment Company Amount of Assets Rate of Compensation
Under Management*
- -------------------------------------------------------------------------------
<S> <C> <C>
New York Municipal $ 67,271,182 .35% of first
Money Market $250 million;
.30% of next
$250 million;
.25% of net
assets over
$500 million
- --------------------------------------------------------------------------------
Temporary Investment
Fund, Inc.
TempFund $6,160,201,261 .175% of first
$1 billion;
.150% of next
$1 billion;
.125% of next
$1 billion;
.100% of next
$1 billion;
.095% of next
$1 billion;
.090% of next
$1 billion;
.080% of next
$1 billion;
.075% of next
$1 billion;
.070% of net
assets over
$8 billion
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name of Investment Company Amount of Assets Rate of Compensation
Under Management*
- -------------------------------------------------------------------------------
<S> <C> <C>
TempCash $2,537,782,081 .175% of first
$1 billion;
.150% of next
$1 billion;
.125% of next
$1 billion;
.100% of next
$1 billion;
.095% of next
$1 billion;
.090% of next
$1 billion;
.085% of next
$1 billion;
.080% of net
assets over
$7 billion
- --------------------------------------------------------------------------------
Trust for Federal
Securities
FedFund $1,435,501,766 .175% of first
T-Fund $1,154,859,936 $1 billion;
Treasury Trust $1,187,730,422 .150% of next
Federal Trust $ 241,236,894 $1 billion;
Fed Cash $ 251,060,508 .125% of next
T-Cash $ 375,638,432 $1 billion;
.100% of next
$1 billion;
.095% of next
$1 billion;
.090% of next
$1 billion;
.085% of next
$1 billion;
.080% of net assets over
$7 billion
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Name of Investment Company Amount of Assets Rate of Compensation
Under Management*
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Alex Brown $ 613,049,685 .15% of first $250 million;
Cash Reserve .13% of next $250 million;
Tax Free Series .11% of next $250 million;
.09% of next $250 million;
.075% of next $3 billion;
.06% of net assets over
$4 billion
- --------------------------------------------------------------------------------------------
First Funds
US Treasury Money
Market $ 80,976,097 .08% of first $500 million;
.06% of next $500 million;
US Government Money .05% of net assets over
Market $ 98,619,966 $1 billion
Municipal Money Market $ 108,633,082
Cash Reserve $ 29,978,859
- --------------------------------------------------------------------------------------------
Warburg Pincus Cash Reserve Fund
$ 336,639,955 .25% of net assets
Warburg Pincus New York Tax-Exempt Fund $ 91,378,588 .25% of net assets
- -----------------------------------------------------------------------------------
</TABLE>
*As of November 30, 1995.
In the event Shareholders of the Portfolio do not approve the adoption of the
California Tax Exempt Investment Advisory Agreement at the Meeting to which
this Proxy Statement relates, or any adjournment thereof, the Trustees will
consider the appropriate course of action.
Adviser's Duties Under the Investment Advisory Agreement. A copy of the form
--------------------------------------------------------
of the California Tax Exempt Investment Advisory Agreement is attached as
Exhibit A to this Proxy Statement.
Under the California Tax Exempt Investment Advisory Agreement, the Adviser is
responsible for the investment decisions for the California Tax Exempt
Portfolio, and continuously reviews, supervises and manages the Portfolio's
investment program. The Adviser discharges its responsibilities subject to the
supervision of, and policies established by, the Trustees of the Trust.
Compensation. Under the California Tax Exempt Investment Advisory Agreement,
------------
the Trust will pay the Adviser a fee, which is calculated daily and paid
monthly, at an annual rate of .095% of the average daily net assets of the
California Tax Exempt Portfolio.
-9-
<PAGE>
The table below sets forth information about the proposed level of fees payable
to PIMC as Adviser, assuming that the Shareholders of the California Tax Exempt
Portfolio approve the California Tax Exempt Investment Advisory Agreement:
<TABLE>
<CAPTION>
California Tax Exempt Portfolio Class A shares
---------------------------------------------- Under Current Pro Forma
------------- ---------
Shareholder Transaction Expenses Agreement Under Proposed Agreement
- -------------------------------- --------- ------------------------
<S> <C> <C>
Shareholder Transaction Fees ............................................. None None
<CAPTION>
Annual Fund Operating Expenses (as a percentage of average Under Current Pro Forma
- ---------------------------------------------------------- ------------- ---------
net assets) Agreement Under Proposed Agreement
- ---------- --------- ------------------------
<S> <C> <C>
Advisory Fees............................................................. .073% .095%
12b-1 Fees................................................................ None None
Other Expenses............................................................ .285% .285%
---- ----
Total Fund Operating Expenses............................................ .358% .380%
==== ====
</TABLE>
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
Under Current Pro Forma
------------- ---------
Agreement Under Proposed Agreement
--------- ------------------------
1 year...................... $ 4 $ 4
3 years..................... $ 12 $ 12
5 years..................... $ 20 $ 21
10 years.................... $ 45 $ 48
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For the fiscal year ended January 31, 1995, the aggregate fee paid by the
California Tax Exempt Portfolio to Prudential, the former investment adviser,
for services on behalf of the Portfolio was $305,360. If the proposed fee had
been in effect during the same fiscal year, the investment adviser would have
received $386,795, which equals a 27% increase.
Duration and Termination. Once approved by vote of a majority of the
- ------------------------
outstanding voting securities of the Portfolio in accordance with the
requirements of the Investment Company Act of 1940, as amended (the "Act"), and
unless sooner terminated, the California Tax Exempt Investment Advisory
Agreement will continue in effect for an initial period of two years from the
date of its execution. Thereafter, if not terminated, the California Tax Exempt
Investment Advisory Agreement will continue in effect for the Portfolio for
successive periods of 12 months, provided that such continuation is specifically
--------
approved at least annually (a) by the vote of a majority of those members of the
Trust's Board of Trustees who are not interested persons of the Trust, or the
Adviser, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of a majority of the Trust's Board of Trustees or
by the vote of a majority of the outstanding shares of the Portfolio. The
California Tax Exempt Investment Advisory Agreement may be terminated as to the
Portfolio at any time, without the payment of any penalty, on sixty (60) days'
written notice by the Trust or by the Adviser. The California Tax Exempt
Investment Advisory Agreement will immediately terminate in the event of its
assignment.
Trustees' Considerations. In recommending that the Shareholders approve the
- ------------------------
California Tax Exempt Investment Advisory Agreement, the Trustees carefully
reviewed and evaluated the experience of the Adviser and its key personnel
-10-
<PAGE>
and the nature and quality of services expected to be delivered to the
Portfolio by the Adviser. The factors considered by the Trustees included,
but were not limited to, the following: PIMC's depth of experience in
advising money market funds and complying with regulations applicable thereto,
PIMC's strong credit analysis team, the amount and nature of assets under
management, marketing considerations and performance. The Trustees also
reviewed the fees to be paid to the Adviser in comparison to those charged in
the relevant segment of the mutual fund business. The Trustees of the
Portfolio have no material interest in the appointment of PIMC.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 1.
---
PROPOSAL 2: APPROVAL OF THE SELECTION OF PIMC AS INVESTMENT ADVISER FOR THE
INSTITUTIONAL TAX FREE PORTFOLIO AND APPROVAL OF THE INVESTMENT
ADVISORY AGREEMENT RELATING TO THE PORTFOLIO BETWEEN THE TRUST
AND PIMC
The Board of Trustees has determined that it would be in the best interest of
the Institutional Tax Free Portfolio and its Shareholders to retain PIMC as
the investment adviser of the Portfolio and is recommending that Shareholders
of the Portfolio approve PIMC as the adviser of the Portfolio and approve the
investment advisory agreement between the Trust and PIMC with respect to the
Institutional Tax Free Portfolio (the "Institutional Tax Free Investment
Advisory Agreement"). The Trustees of the Trust, including all of the
Trustees who are not "interested persons" of the Trust, approved the
Institutional Tax Free Investment Advisory Agreement with respect to the
Portfolio on November 13, 1995.
Description of Adviser. For a description of the Adviser, please see
----------------------
"Description of Adviser" under Proposal 1.
Adviser's Duties Under the Investment Advisory Agreement. A copy of the form
--------------------------------------------------------
of the Institutional Tax Free Investment Advisory Agreement is attached as
Exhibit B to this Proxy Statement.
Under the Institutional Tax Free Investment Advisory Agreement, the Adviser is
responsible for the investment decisions for the Institutional Tax Free
Portfolio, and continuously reviews, supervises and manages the Portfolio's
investment program. The Adviser discharges its responsibilities subject to the
supervision of, and policies established by, the Trustees of the Trust.
Compensation. Under the Institutional Tax Free Investment Advisory Agreement,
------------
the Trust will pay the Adviser a fee, which is calculated daily and paid
monthly, at an annual rate of .095% of the average daily net assets of the
Institutional Tax Free Portfolio.
The table below sets forth information about the proposed level of fees
payable to PIMC as Adviser, assuming that the Shareholders of the
Institution Tax Free Portfolio approve the Institutional Tax Free Investment
Advisory Agreement:
<TABLE>
<CAPTION>
Institutional Tax Free Portfolio Class A shares
----------------------------------------------- Under Current Pro Forma
------------- ---------
Shareholder Transaction Expenses Agreement Under Proposed Agreement
- ------------------------------ --------- ------------------------
<S> <C> <C>
Shareholder Transaction Fees ........................... None None
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses (as a percentage of average Under Current Pro Forma
- ---------------------------------------------------------- ------------- ---------
net assets) Agreement Under Proposed Agreement
- ---------- --------- ------------------------
<S> <C> <C>
Advisory Fees............................................ .075% .095%
12b-1 Fees............................................... None None
Other Expenses/1/........................................ .225% .205%
---- ----
Total Fund Operating Expenses/2/......................... .300% .300%
==== ====
</TABLE>
____________________________
1 The Administrator has agreed to waive a portion of its fee in an amount that
operates to limit total operation expenses to not more than .30% of the
Institutional Tax Free Portfolio's average daily net assets. Absent voluntary
waivers of fees, administration fees, as a percentage of average daily net
assets, would be .300% under the current agreement and .300% under the
proposed agreement for the Institutional Tax Free Portfolio. Fee waivers by
the Administrator are voluntary and may be terminated at any time in its sole
discretion.
2 Absent the voluntary fee waivers described above, total operating expenses
would be .460% under the current agreement and .480% under the proposed
agreement for the Institutional Tax Free Portfolio.
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in the shares above would have paid
transaction and operating expenses at the end of each year as follows:
Under Current Pro Forma
------------- ---------
Agreement Under Proposed Agreement
--------- ---------------------------
1 year........................ $ 3 $ 3
3 years....................... $ 10 $ 10
5 years....................... $ 17 $ 17
10 years...................... $ 38 $ 38
This Example should not be considered a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
For the fiscal year ended January 31, 1995, the aggregate fee paid by the
Institutional Tax Free Portfolio to Prudential, the former investment adviser,
for services on behalf of the Portfolio was $94,405. If the proposed fee had
been in effect during the same fiscal year, the investment adviser would have
received $119,556, which equals a 27% increase.
Duration and Termination. The provisions of the Institutional Tax Free
- ------------------------
Investment Advisory Agreement relating to the duration and termination of the
Institutional Tax Free Investment Advisory Agreement are similar in all material
respects to the provisions in the California Tax Exempt Investment Advisory
Agreement. Please see "Duration and Termination" under Proposal 1 for
additional information.
Trustee's Considerations. In recommending that the Shareholders approve the
- ------------------------
Institutional Tax Free Investment Advisory Agreement, the Trustees carefully
reviewed and evaluated the experience of the Adviser and its key personnel
and the nature and quality of services expected to be delivered to the
Portfolio by the Adviser. The factors considered by the Trustees included,
but were not limited to, the following: PIMC's depth of experience in
advising money market funds and complying with regulations applicable thereto,
PIMC's strong credit analysis team, the amount and nature of assets under
management, marketing considerations and performance. The Trustees also
reviewed the fees to be paid to the Adviser in comparison to those charged in
the relevant segment of the mutual fund business. The Trustees of the
Portfolio have no material interest in the appointment of PIMC.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 2.
---
GENERAL INFORMATION ABOUT THE TRUST AND OTHER MATTERS
-12-
<PAGE>
Distribution. SEI Financial Services Company ("SFS"), a wholly-owned
------------
subsidiary of SEI Corporation, 680 East Swedesford Road, Wayne, Pennsylvania
19087-1658 ("SEI"), serves as distributor of the Trust's shares pursuant to
a Distribution Agreement between the Trust and SFS.
Portfolio Transactions. For the fiscal year ended January 31, 1995, the
----------------------
Portfolios did not pay any brokerage commissions.
5% Shareholders. As of January 3, 1996, the following persons were the only
---------------
persons who were record owners, or to the knowledge of the Trust, beneficial
owners of 5% or more of shares of either Portfolio. The Trust believes that
most of the shares referred to above were held by the below persons in
accounts for their fiduciary, agency or custodial customers.
<TABLE>
<CAPTION>
Name and Address Number % of
of Beneficial Owner of Shares Portfolio's Shares
------------------- --------- ------------------
<S> <C> <C>
California Tax Exempt Portfolio:
Wells Fargo Bank NA 392,985,485 99.77%
c/o Quality Control Dept.
525 Market Street 17th fl.
San Francisco, CA 94105
Institutional Tax Free Portfolio:
Wells Fargo Bank NA 97,926,505 99.60%
c/o Quality Control Dept.
525 Market Street 17th fl.
San Francisco, CA 94105
</TABLE>
As of January 3, 1996, the Trustees and executive officers of the Trust owned
in the aggregate less than 1% of the shares of either Portfolio.
Adjournment. In the event that sufficient votes in favor of a particular
-----------
proposal 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 with respect to that proposal for a
period or periods of not more than 60 days in the aggregate to permit further
solicitation of proxies with respect to such proposal. 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 such proposals. They will
vote against any such adjournment those proxies required to be voted against
any such proposals. The costs of any such additional solicitation and of any
adjourned session will be borne by the relevant Portfolio(s).
Required Vote. Approval of each Proposal requires the affirmative vote of a
-------------
majority of the outstanding shares of the appropriate Portfolio. As defined
in the Act, "majority of the outstanding shares" means the vote of (i) 67% or
more of a Portfolio's outstanding shares present at a meeting, if the holders
of more than 50% of the outstanding shares of a Portfolio are present or
represented by proxy, or (ii) more than 50% of a Portfolio's outstanding
shares, whichever is less.
Abstentions and "broker non-votes" will not be counted for or against any
proposal to which they relate, but will be counted for purposes of determining
---- --
whether a quorum is present. Abstentions will be counted as votes present for
purposes of determining a "majority of the outstanding voting securities"
present at the Meeting, and will therefore have the effect of counting against
the Proposal to which they relate.
Shareholder Proposals. The Trust does not hold annual shareholder meetings.
---------------------
Shareholders wishing to submit proposals for inclusion in a proxy statement
for a subsequent meeting should send their written proposals to the Secretary
of the Trust c/o SEI Corporation, Legal Department, 680 East Swedesford Road,
Wayne, Pennsylvania 19087-1658.
Reports to Shareholders. The Trust will furnish, without charge, a copy of
-----------------------
the most recent Annual Report to Shareholders of the Trust and the most recent
Semi-Annual Report succeeding such Annual Report, if any, on request.
Requests should be directed to the Trust at 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658, or by calling 1-800-342-5734.
-13-
<PAGE>
Other Matters. The Trustees know of no other business to be brought before
-------------
the Meeting. However, if any other matters properly come before the meeting,
it is their 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.
Dated: January 29, 1996
_____________________________________
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT PROMPTLY.
-14-
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made as of December 1, 1995 between THE ARBOR FUND, a
Massachusetts business trust (the "Fund"), and PNC INSTITUTIONAL MANAGEMENT
CORPORATION, a Delaware corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund desires to retain Advisor to furnish investment advisory
services to the Fund and Advisor is willing to so furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
-----------
(a) The Fund hereby appoints Advisor to act as investment advisor to
the following investment portfolio of the Fund: California Tax Exempt Portfolio
(the "Portfolio"), for the period and on the terms set forth in this Agreement.
Advisor accepts such appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
(b) In the event that the Fund establishes one or more portfolios other
than the Portfolio with respect to which it desires to retain Advisor to act as
investment adviser hereunder, the Fund shall notify Advisor in writing. If
Advisor is willing to render such services under this Agreement it shall notify
the Fund in writing whereupon, subject to such shareholder approval as may be
required pursuant to Paragraph 10 hereof, such portfolio shall become a
portfolio hereunder and shall be subject to the provisions of this Agreement to
the same extent as the Portfolio named above in subparagraph (a) except to the
extent that said provisions (including those relating to the compensation
payable by the Fund to Advisor) are modified with respect to such portfolio in
writing by the Fund and Advisor at the time.
2. Sub-Contractors. It is understood that Advisor will from time to time
---------------
employ or associate with such person or persons as Advisor may believe to be
particularly fitted to assist it in the performance of this Agreement; provided,
however, that the compensation of such person or persons shall be paid by
Advisor and that Advisor shall be as fully responsible to the Fund for the acts
and omissions of any subcontractor as it is for its own acts and omissions.
Such person or persons shall be employed pursuant to sub-advisory agreements
agreeable to the Fund and approved in accordance with the provisions of the 1940
Act.
<PAGE>
3. Delivery of Documents. The Fund has furnished Advisor with copies,
---------------------
properly certified or authenticated, of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the
appointment of Advisor as the Portfolio's advisor and approving
this Agreement;
(b) The Fund's Declaration of Trust as filed with the State Secretary
of the Commonwealth of Massachusetts and the Boston City Clerk on
July 24, 1992;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission ("SEC") on
August 11, 1992;
(e) The Fund's Registration Statement on Form N-1A (the "Registration
Statement") under the Securities Act of 1933 and 1940 Act, as filed
with the SEC on August 11, 1992, and all amendments thereto; and
(f) The Fund's most recent prospectus(es) for the Portfolio (such
prospectus(es) together with the related statement(s) of additional
information, as currently in effect and all amendments and
supplements thereto, are herein called "Prospectus").
The Fund will furnish Advisor from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
4. Services. Subject to the supervision of the Fund's Board of Trustees,
--------
Advisor will (either directly or through the sub-advisors and other sub-
contractors employed by it in accordance with Section 2 hereof) provide a
continuous investment program for the Portfolio, including investment research
and management with respect to all securities, investments, cash and cash
equivalents in the Portfolio. Advisor will (either directly or through the sub-
advisors and other sub-contractors employed by it in accordance with Paragraph 2
hereof) determine from time to time what securities and other investments will
be purchased, retained or sold by the Portfolio and will place the daily orders
for the purchase or sale of securities. Advisor will provide the services
rendered by it under this Agreement in accordance with the Portfolio's
investment objective, policies and restrictions as stated in the Portfolio's
Prospectus (as currently in effect and
2
<PAGE>
as it may be amended or supplemented from time to time) and the resolutions of
the Fund's Board of Trustees. Advisor further agrees that it:
(a) will comply with all applicable rules and regulations of the SEC
and will in addition conduct its activities under this Agreement in
accordance with other applicable law;
(b) will place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this
paragraph, in placing orders with brokers and dealers, Advisor will
attempt to obtain the best price and the most favorable execution
of its orders. In placing orders, Advisor will consider the
experience and skill of the firm's securities traders as well as
the firm's financial responsibility and administrative efficiency.
In addition, Advisor is authorized to take into account the sale of
shares of the Fund in allocating purchase and sale orders for
portfolio securities to brokers or dealers (including brokers and
dealers that are affiliated with Advisor, the sub-advisors or the
Fund's distributor) in compliance with applicable law. In no
instance, however, will the Portfolio's securities be purchased
from or sold to Advisor, any sub-advisor, the Fund's distributor or
any affiliated person thereof, except to the extent permitted by
the SEC or by applicable law;
(c) will maintain books and records with respect to the Portfolio's
securities transactions and will furnish the Fund's Board of
Trustees such periodic and special reports as the Board may
request;
(d) will maintain a policy and practice of conducting its investment
advisory services hereunder independently of the commercial banking
operations of its affiliates. When Advisor makes investment
recommendations for the Portfolio, its investment advisory
personnel will not inquire or take into consideration whether the
issuer of securities proposed for purchase or sale for the
Portfolio's account are customers of the commercial departments of
its affiliates. In dealing with commercial customers, Advisor and
the sub-advisors will not inquire or take into consideration
whether securities of those customers are held by the Fund; and
3
<PAGE>
(e) will treat confidentially and as proprietary information of the
Fund all records and other information relative to the Fund, the
Portfolio and the Fund's prior, current or potential shareholders,
and will not use such records and information for any purpose other
than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the
Fund, which approval shall not be unreasonably withheld and may not
be withheld where Advisor may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when
so requested by the Fund.
5. Services Not Exclusive. Advisor's services hereunder are not deemed to
----------------------
be exclusive, and Advisor shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
6. Books and Records. In compliance with the requirements of Rule 31a-3
-----------------
under the 1940 Act, Advisor hereby agrees that all records which it maintains
for the Portfolio are the property of the Fund and further agrees to surrender
promptly to the Fund any of such records upon the Fund's request. Advisor
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
7. Expenses. During the term of this Agreement, Advisor will pay all
--------
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities and other investments (including
brokerage commissions and other transaction charges, if any) purchased or sold
for the Portfolio.
8. Compensation.
------------
(a) For the services provided and the expenses assumed pursuant to this
Agreement the Fund will pay Advisor and Advisor will accept as full compensation
therefor a fee, computed daily and payable monthly, at the following annual
rate: .095% of the Portfolio's average daily net assets. Prior to the requisite
approval of this Agreement by the shareholders of the California Tax Exempt
Portfolio, Advisor agrees to accept a fee from the Fund for its services
hereunder with respect to the Portfolio at the level the Portfolio was required
to compensate its previous investment adviser pursuant to its most recent
investment advisory agreement. Such fee as is attributable to the Portfolio
shall be a separate charge to the Portfolio and shall be the several (and not
joint or joint and several) obligation of the Portfolio.
4
<PAGE>
(b) If in any fiscal year the aggregate expenses of the Portfolio (as
defined under the securities regulations of any state having jurisdiction over
the Portfolio) exceeds the expense limitations of any such state, Advisor will
bear its share of the amount of such excess in proportion to the aggregate fees
otherwise payable to it hereunder and to the Fund's administrator under its
administration agreement with the Fund. The obligation of Advisor to reimburse
the Fund under this Paragraph 8(b) is limited in any fiscal year to the amount
of its fees otherwise payable hereunder attributable to the Portfolio for such
fiscal year, provided, however, that notwithstanding the foregoing, Advisor
shall reimburse the Fund for the full amount of its share of any such excess
expenses regardless of the amount of fees otherwise payable to it during such
fiscal year to the extent that the securities regulations of any state having
jurisdiction over the Portfolio so require. Such expense reimbursement, if any,
will be estimated, reconciled and paid on a monthly basis.
9. Limitation of Liability. Advisor shall not be liable for any error of
-----------------------
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations or duties under this Agreement.
10. Duration and Termination. This Agreement will become effective as of
------------------------
the date hereof with respect to the Portfolio listed in Section 1(a) hereof and,
with respect to any additional portfolio, on the date of receipt by the Fund of
notice from Advisor in accordance with Section 1(b) hereof that Advisor is
willing to serve as investment advisor with respect to such portfolio, provided
that this Agreement (as supplemented by the terms specified in any notice and
agreement pursuant to Section 1(b) hereof) shall have been approved by the
shareholders of such portfolio(s) in accordance with the requirements of the
1940 Act, and, unless sooner terminated as provided herein, shall continue in
effect with respect to the Portfolio until December 1, 1997. Thereafter, if not
terminated, this Agreement shall continue in effect with respect to the
Portfolio for successive annual periods ending on December 1, provided such
--------
continuance is specifically approved at least annually (a) by vote of a majority
of those members of the Fund's Board of Trustees who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Funds's Board of Trustees or
by vote of a majority of the outstanding voting securities of the Portfolio.
Notwithstanding the foregoing, this Agreement may be terminated at any time,
without the payment of any penalty, by the Fund (by vote of the Fund's Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Portfolio), or by Advisor on
5
<PAGE>
sixty days' written notice. This Agreement will immediately terminate in the
event of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall have
the same meaning as such terms in the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may be
---------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the 1940 Act.
12. Release. The names "The Arbor Fund" and "Trustees of The Arbor Fund"
-------
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated _____________ which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Arbor Fund"
entered into in the name or on behalf thereof by any of the Trustees, officers,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders, officers,
representatives or agents of the Trust personally, but bind only the Trust
Property (as defined in the Declaration of Trust), and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
13. Miscellaneous. This Agreement replaces any prior or contemporaneous
-------------
agreements between the parties hereto regarding the California Tax Exempt
Portfolio with respect to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto and their respective successors and
shall be governed by Delaware law.
14. Counterparts. This Agreement may be executed in counterparts by the
------------
parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE ARBOR FUND
By:
--------------------------
Title:
PNC INSTITUTIONAL
MANAGEMENT CORPORATION
By:
--------------------------
Title:
7
<PAGE>
EXHIBIT B
INVESTMENT ADVISORY AGREEMENT
-----------------------------
AGREEMENT made as of December 1, 1995 between THE ARBOR FUND, a
Massachusetts business trust (the "Fund"), and PNC INSTITUTIONAL MANAGEMENT
CORPORATION, a Delaware corporation (the "Advisor").
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund desires to retain Advisor to furnish investment advisory
services to the Fund and Advisor is willing to so furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
-----------
(a) The Fund hereby appoints Advisor to act as investment advisor to
the following investment portfolio of the Fund: Institutional Tax Free Portfolio
(the "Portfolio"), for the period and on the terms set forth in this Agreement.
Advisor accepts such appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
(b) In the event that the Fund establishes one or more portfolios other
than the Portfolio with respect to which it desires to retain Advisor to act as
investment adviser hereunder, the Fund shall notify Advisor in writing. If
Advisor is willing to render such services under this Agreement it shall notify
the Fund in writing whereupon, subject to such shareholder approval as may be
required pursuant to Paragraph 10 hereof, such portfolio shall become a
portfolio hereunder and shall be subject to the provisions of this Agreement to
the same extent as the Portfolio named above in subparagraph (a) except to the
extent that said provisions (including those relating to the compensation
payable by the Fund to Advisor) are modified with respect to such portfolio in
writing by the Fund and Advisor at the time.
2. Sub-Contractors. It is understood that Advisor will from time to time
---------------
employ or associate with such person or persons as Advisor may believe to be
particularly fitted to assist it in the performance of this Agreement; provided,
however, that the compensation of such person or persons shall be paid by
Advisor and that Advisor shall be as fully responsible to the Fund for the acts
and omissions of any subcontractor as it is for its own acts and omissions.
Such person or persons shall be employed pursuant to sub-advisory agreements
agreeable to the Fund and approved in accordance with the provisions of the 1940
Act.
<PAGE>
3. Delivery of Documents. The Fund has furnished Advisor with copies,
---------------------
properly certified or authenticated, of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the
appointment of Advisor as the Portfolio's advisor and approving
this Agreement;
(b) The Fund's Declaration of Trust as filed with the State Secretary
of the Commonwealth of Massachusetts and the Boston City Clerk on
July 24, 1992;
(c) The Fund's By-Laws;
(d) The Fund's Notification of Registration on Form N-8A under the 1940
Act as filed with the Securities and Exchange Commission ("SEC") on
August 11, 1992;
(e) The Fund's Registration Statement on Form N-1A (the "Registration
Statement") under the Securities Act of 1933 and 1940 Act, as filed
with the SEC on August 11, 1992, and all amendments thereto; and
(f) The Fund's most recent prospectus(es) for the Portfolio (such
prospectus(es) together with the related statement(s) of additional
information, as currently in effect and all amendments and
supplements thereto, are herein called "Prospectus").
The Fund will furnish Advisor from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
4. Services. Subject to the supervision of the Fund's Board of Trustees,
--------
Advisor will (either directly or through the sub-advisors and other sub-
contractors employed by it in accordance with Section 2 hereof) provide a
continuous investment program for the Portfolio, including investment research
and management with respect to all securities, investments, cash and cash
equivalents in the Portfolio. Advisor will (either directly or through the sub-
advisors and other sub-contractors employed by it in accordance with Paragraph 2
hereof) determine from time to time what securities and other investments will
be purchased, retained or sold by the Portfolio and will place the daily orders
for the purchase or sale of securities. Advisor will provide the services
rendered by it under this Agreement in accordance with the Portfolio's
investment objective, policies and restrictions as stated in the Portfolio's
Prospectus (as currently in effect and
2
<PAGE>
as it may be amended or supplemented from time to time) and the resolutions of
the Fund's Board of Trustees. Advisor further agrees that it:
(a) will comply with all applicable rules and regulations of the SEC
and will in addition conduct its activities under this Agreement in
accordance with other applicable law;
(b) will place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this
paragraph, in placing orders with brokers and dealers, Advisor will
attempt to obtain the best price and the most favorable execution
of its orders. In placing orders, Advisor will consider the
experience and skill of the firm's securities traders as well as
the firm's financial responsibility and administrative efficiency.
In addition, Advisor is authorized to take into account the sale of
shares of the Fund in allocating purchase and sale orders for
portfolio securities to brokers or dealers (including brokers and
dealers that are affiliated with Advisor, the sub-advisors or the
Fund's distributor) in compliance with applicable law. In no
instance, however, will the Portfolio's securities be purchased
from or sold to Advisor, any sub-advisor, the Fund's distributor or
any affiliated person thereof, except to the extent permitted by
the SEC or by applicable law;
(c) will maintain books and records with respect to the Portfolio's
securities transactions and will furnish the Fund's Board of
Trustees such periodic and special reports as the Board may
request;
(d) will maintain a policy and practice of conducting its investment
advisory services hereunder independently of the commercial banking
operations of its affiliates. When Advisor makes investment
recommendations for the Portfolio, its investment advisory
personnel will not inquire or take into consideration whether the
issuer of securities proposed for purchase or sale for the
Portfolio's account are customers of the commercial departments of
its affiliates. In dealing with commercial customers, Advisor and
the sub-advisors will not inquire or take into consideration
whether securities of those customers are held by the Fund; and
3
<PAGE>
(e) will treat confidentially and as proprietary information of the
Fund all records and other information relative to the Fund, the
Portfolio and the Fund's prior, current or potential shareholders,
and will not use such records and information for any purpose other
than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the
Fund, which approval shall not be unreasonably withheld and may not
be withheld where Advisor may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when
so requested by the Fund.
5. Services Not Exclusive. Advisor's services hereunder are not deemed to
----------------------
be exclusive, and Advisor shall be free to render similar services to others so
long as its services under this Agreement are not impaired thereby.
6. Books and Records. In compliance with the requirements of Rule 31a-3
-----------------
under the 1940 Act, Advisor hereby agrees that all records which it maintains
for the Portfolio are the property of the Fund and further agrees to surrender
promptly to the Fund any of such records upon the Fund's request. Advisor
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
7. Expenses. During the term of this Agreement, Advisor will pay all
--------
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities and other investments (including
brokerage commissions and other transaction charges, if any) purchased or sold
for the Portfolio.
8. Compensation.
------------
(a) For the services provided and the expenses assumed pursuant to this
Agreement the Fund will pay Advisor and Advisor will accept as full compensation
therefor a fee, computed daily and payable monthly, at the following annual
rate: .095% of the Portfolio's average daily net assets. Prior to the requisite
approval of this Agreement by the shareholders of the Institutional
Tax Free Portfolio, Advisor agrees to accept a fee from the Fund for its
services hereunder with respect to the Portfolio at the level the Portfolio was
required to compensate its previous investment adviser pursuant to its most
recent investment advisory agreement. Such fee as is attributable to the
Portfolio shall be a separate charge to the Portfolio and shall be the several
(and not joint or joint and several) obligation of the Portfolio.
4
<PAGE>
(b) If in any fiscal year the aggregate expenses of the Portfolio (as
defined under the securities regulations of any state having jurisdiction over
the Portfolio) exceeds the expense limitations of any such state, Advisor will
bear its share of the amount of such excess in proportion to the aggregate fees
otherwise payable to it hereunder and to the Fund's administrator under its
administration agreement with the Fund. The obligation of Advisor to reimburse
the Fund under this Paragraph 8(b) is limited in any fiscal year to the amount
of its fees otherwise payable hereunder attributable to the Portfolio for such
fiscal year, provided, however, that notwithstanding the foregoing, Advisor
shall reimburse the Fund for the full amount of its share of any such excess
expenses regardless of the amount of fees otherwise payable to it during such
fiscal year to the extent that the securities regulations of any state having
jurisdiction over the Portfolio so require. Such expense reimbursement, if any,
will be estimated, reconciled and paid on a monthly basis.
9. Limitation of Liability. Advisor shall not be liable for any error of
-----------------------
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations or duties under this Agreement.
10. Duration and Termination. This Agreement will become effective as of
------------------------
the date hereof with respect to the Portfolio listed in Section 1(a) hereof and,
with respect to any additional portfolio, on the date of receipt by the Fund of
notice from Advisor in accordance with Section 1(b) hereof that Advisor is
willing to serve as investment advisor with respect to such portfolio, provided
that this Agreement (as supplemented by the terms specified in any notice and
agreement pursuant to Section 1(b) hereof) shall have been approved by the
shareholders of such portfolio(s) in accordance with the requirements of the
1940 Act, and, unless sooner terminated as provided herein, shall continue in
effect with respect to the Portfolio until December 1, 1997. Thereafter, if not
terminated, this Agreement shall continue in effect with respect to the
Portfolio for successive annual periods ending on December 1, provided such
--------
continuance is specifically approved at least annually (a) by vote of a majority
of those members of the Fund's Board of Trustees who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Funds's Board of Trustees or
by vote of a majority of the outstanding voting securities of the Portfolio.
Notwithstanding the foregoing, this Agreement may be terminated at any time,
without the payment of any penalty, by the Fund (by vote of the Fund's Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Portfolio), or by Advisor on
5
<PAGE>
sixty days' written notice. This Agreement will immediately terminate in the
event of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall have
the same meaning as such terms in the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may be
---------------------------
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the 1940 Act.
12. Release. The names "The Arbor Fund" and "Trustees of The Arbor Fund"
-------
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated _____________ which is hereby referred to and a copy of which is on
file at the office of the State Secretary of the Commonwealth of Massachusetts
and at the principal office of the Trust. The obligations of "The Arbor Fund"
entered into in the name or on behalf thereof by any of the Trustees, officers,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, Shareholders, officers,
representatives or agents of the Trust personally, but bind only the Trust
Property (as defined in the Declaration of Trust), and all persons dealing with
any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
13. Miscellaneous. This Agreement replaces any prior or contemporaneous
-------------
agreements between the parties hereto regarding the Institutional Tax Free
Portfolio with respect to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto and their respective successors and
shall be governed by Delaware law.
14. Counterparts. This Agreement may be executed in counterparts by the
------------
parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE ARBOR FUND
By:
--------------------------
Title:
PNC INSTITUTIONAL
MANAGEMENT CORPORATION
By:
--------------------------
Title:
7
<PAGE>
THE ARBOR FUND
California Tax Exempt Portfolio
Proxy for Special Meeting of Shareholders, February 22, 1996
The undersigned Shareholder(s) of the California Tax Exempt
Portfolio (the "Portfolio") of The Arbor Fund (the "Trust") hereby appoint(s)
David G. Lee and Todd B. Cipperman and each of them (with full power of
substitution), the proxy or proxies of the undersigned to attend the Special
Meeting of Shareholders of the Portfolio to be held on February 22, 1996, and
any adjournments thereof, to vote all of the shares of the Portfolio that the
signer would be entitled to vote if personally present at the Special Meeting
of Shareholders and on any other matters brought before the Meeting, all as
set forth in the Notice of Special Meeting of Shareholders. Said proxies are
directed to vote or refrain from voting pursuant to the Proxy Statement as
checked below upon the following matters:
This proxy is solicited on behalf of the Board of Trustees of the Trust
and will be voted "FOR" the proposal unless otherwise indicated.
Proposal 1: Proposal to approve the selection of PNC Institutional Management
Corporation ("PIMC") as the Investment Adviser for the California
Tax Exempt Portfolio, and to approve a new Investment Advisory
Agreement relating to the Portfolio between the Trust and PIMC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In accordance with their own discretion, the proxies are authorized to
vote on other such business as may properly come before the Meeting.
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Special Meeting of Shareholders and the Proxy Statement of the Board
of Trustees.
Your signature(s) on this proxy should be exactly as your name or names
appear on this proxy. If the shares are held jointly, each holder should
sign. If signing is by attorney, executor, administrator, trustee or
guardian, please print your full title below your signature.
Dated: _____________1996
_________________________________________
Signature
_________________________________________
Signature
All properly executed proxies will be voted as directed herein by the signing
Shareholder. If no direction is given when the duly executed proxy is
returned, such shares will be voted in accordance with the recommendations of
the Board of Trustees FOR Proposal 1.
Please date, sign and return promptly.
<PAGE>
THE ARBOR FUND
Institutional Tax Free Portfolio
Proxy for Special Meeting of Shareholders, February 22, 1996
The undersigned Shareholder(s) of the Institutional Tax Free Portfolio
(the "Portfolio") of The Arbor Fund (the "Trust") hereby appoint(s) David G.
Lee and Todd B. Cipperman and each of them (with full power of substitution),
the proxy or proxies of the undersigned to attend the Special Meeting of
Shareholders of the Portfolio to be held on February 22, 1996, and any
adjournments thereof, to vote all of the shares of the Portfolio that the
signer would be entitled to vote if personally present at the Special Meeting
of Shareholders and on any other matters brought before the Meeting, all as
set forth in the Notice of Special Meeting of Shareholders. Said proxies are
directed to vote or refrain from voting pursuant to the Proxy Statement as
checked below upon the following matters:
This proxy is solicited on behalf of the Board of Trustees of the Trust
and will be voted "FOR" the proposal unless otherwise indicated.
Proposal 2: Proposal to approve the selection of PNC Institutional Management
Corporation ("PIMC") as the Investment Adviser for the
Institutional Tax Free Portfolio, and to approve a new Investment
Advisory Agreement relating to the Portfolio between the Trust and
PIMC.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In accordance with their own discretion, the proxies are authorized to
vote on other such business as may properly come before the Meeting.
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Special Meeting of Shareholders and the Proxy Statement of the Board
of Trustees.
Your signature(s) on this proxy should be exactly as your name or names
appear on this proxy. If the shares are held jointly, each holder should
sign. If signing is by attorney, executor, administrator, trustee or
guardian, please print your full title below your signature.
Dated: _____________1996
_________________________________________
Signature
_________________________________________
Signature
All properly executed proxies will be voted as directed herein by the signing
Shareholder. If no direction is given when the duly executed proxy is
returned, such shares will be voted in accordance with the recommendations of
the Board of Trustees FOR Proposal 2.
Please date, sign and return promptly.
