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.
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 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
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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
(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 3la-3
under the
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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.
(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
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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 Fund'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 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.
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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.
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: /s/ Xxxx Xxxxxxxxx
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Title: Vice President
PNC INSTITUTIONAL
MANAGEMENT CORPORATION
By: /s/ Xxxxxx X. Xxxxx
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Title: President
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