SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. )
------
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ XX ]
Check the appropriate box:
[XX] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12
ARROW FUNDS
(Name of Registrant as Specified In Its Charter)
Federated Investors
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[XX] No fee required.
[ ] 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:
2.Aggregate number of securities to which transaction applies:
3.Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4.Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary proxy 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:
2)Form, Schedule or Registration Statement No.:
3)Filing Party:
4)Date Filed:
P R E L I M I N A R Y P R O X Y
ARROW FUNDS
ARROW EQUITY PORTFOLIO
ARROW FIXED INCOME PORTFOLIO
ARROW MUNICIPAL INCOME PORTFOLIO
ARROW GOVERNMENT MONEY MARKET PORTFOLIO
NOTICE OF JOINT MEETING OF SHAREHOLDERS
TO BE HELD APRIL 18, 1997
A joint meeting (together with any adjournments or postponements, the
"Meeting") of the shareholders of each Fund listed above (each such Fund
individually referred to as a "Portfolio" or collectively as the
"Portfolios") of ARROW FUNDS (the "Trust"), will be held on Friday, April
18, 1997. The meeting will be held at the offices of the Trust, Federated
Investors Tower, 19th Floor, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779 at 2:00 P.M., April 18, 1997, for the purpose of considering and
voting upon:
(1) A proposal, in connection with the pending merger (the "Merger")
of Mark Twain Bancshares, Inc., the parent company of Mark Twain Bank, the
Trust's current adviser, into Mercantile Bancorporation Inc. ("MBI"), to
approve a new Investment Advisory Contract (the "New Advisory Contract")
(which provides for no increase in advisory fees) on behalf of each
Portfolio between the Trust and Mississippi Valley Advisors Inc. (`MVA''),
a wholly-owned subsidiary of Mercantile Bank National Association
(`Mercantile''), the terms of which are substantially similar to the
existing investment advisory contract between the Trust and Mark Twain
Bank, subject to and effective upon the consummation of the Merger; and
(2) Such other matters as may properly come before the Meeting.
The Trustees have fixed March 7, 1997, as the record date for
determination of shareholders of each Portfolio entitled to vote at the
Meeting on all matters relating to each such Portfolio. The related Proxy
Statement describes the Merger, the New Advisory Contract and MVA.
A Proxy solicited by the Trustees is enclosed herewith. Please mark,
sign, date, and return the Proxy promptly in the enclosed business reply
envelope. If you attend the Meeting, you may, if you wish, withdraw your
Proxy and vote in person.
By Order of the Board of Trustees
John W. McGonigle
Dated: March 18, 1997 Secretary
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL
OF THE NEW ADVISORY CONTRACT.
IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN
THE ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE
MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
ARROW FUNDS
ARROW EQUITY PORTFOLIO
ARROW FIXED INCOME PORTFOLIO
ARROW MUNICIPAL INCOME PORTFOLIO
ARROW GOVERNMENT MONEY MARKET PORTFOLIO
FEDERATED INVESTORS TOWER, 19TH FLOOR
PITTSBURGH, PENNSYLVANIA 15222-3779
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of Proxies by the Board of Trustees of Arrow Funds (the "Trust") for use at
the joint meeting of shareholders of the funds listed above (each fund
individually referred to as a "Portfolio" or collectively as the
"Portfolios") to be held at the offices of the Trust, Federated Investors
Tower, 19th Floor, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779
at 2:00 P.M., on Friday, April 18, 1997, (together with any adjournments or
postponements thereof, the "Meeting"), for the purposes set forth in the
accompanying Notice of the Meeting. Proxy solicitations will be made
primarily by mail, but may also be made by telephone, telegraph, or
personal interview conducted by certain officers or employees of the Trust,
Mark Twain Bank (the Trust's investment adviser), Federated Services
Company (the Trust's transfer agent), and Federated Administrative Services
(the Trust's administrator). Copies of solicitation materials may be
furnished to banks, brokerage houses and other custodians, nominees and
fiduciaries for forwarding to beneficial owners of the Shares, and normal
handling charges may be paid for such forwarding services. THE COST OF
PREPARING AND MAILING THE NOTICE OF MEETING, PROXY CARDS, THIS PROXY
STATEMENT AND ANY ADDITIONAL PROXY MATERIALS HAS BEEN OR WILL BE BORNE BY
MARK TWAIN BANCSHARES, INC. (`BANCSHARES'') AND/OR MERCANTILE
BANCORPORATION INC. (`MBI'').
Mark Twain Bank, 8820 Ladue Road, St. Louis, Missouri 63124, presently
serves as the Trust's investment adviser (the "Adviser" or "Mark Twain").
Federated Administrative Services, Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 (the "Administrator") provides administrative
services for the Trust, and Federated Services Company, P.O. Box 8600,
Boston, Massachusetts 02266-8600 (the "Transfer Agent") serves as the
Trust's transfer agent and dividend disbursing agent and provides portfolio
accounting services. The Trust's distributor and principal underwriter is
Federated Securities Corp., Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 (the "Distributor"). The Administrator, Transfer
Agent, and Distributor are collectively referred to herein as the "Present
Administration."
Bancshares, the Adviser's parent company, has agreed to merge (the
"Merger") into MBI, the parent company of Mercantile, pursuant to which the
Adviser will be merged into MBI and its subsidiaries. It is presently
expected that the Merger will be effective on or about April 25, 1997 (the
"Effective Time"). Mercantile, a provider of financial services, conducts
its various investment advisory activities through its subsidiary,
Mississippi Valley Advisors Inc. ("MVA"). The principal office of MVA is
located at One Mercantile Center, St. Louis, Missouri 63166. As of
December 31, 1996, MVA managed, through its Investment Management Services,
approximately $7.9 billion of investment assets ($1.9 billion in Balanced
Funds, $2.4 billion in Equity Funds and $3.5 billion in Fixed Income Funds)
for a wide range of institutional tax-exempt clients, including corporate,
public, multi-employer, endowment/foundation portfolios and mutual funds.
Upon the approval of the proposed Investment Advisory Contract between the
Trust and MVA (the "New Advisory Contract"), MVA will become the Trust's
investment adviser. It is expected that the Present Administration will
continue to provide services to the Trust.
The vote required for the approval by each Portfolio of the New
Contract is (i) 67% or more of the shares of the Portfolio present at the
Meeting, if holders of more than 50% of the shares of such Portfolio
outstanding on the record date are present, in person or by proxy, or (ii)
more than 50% of the outstanding shares of such Portfolio on the record
date, whichever is less. Consequently, with respect to each proposal,
abstentions and broker non-votes (i.e., proxies sent in by brokers and
other nominees which cannot be voted on a proposal because instructions
have not been received from the beneficial owners) will be counted as part
of the base number of votes to be used in determining if the proposal has
received the requisite number of votes for approval. Thus, an abstention
or a broker non-vote will have the same effect as a vote "against" such
proposal. Mark Twain and its affiliates intend to vote in their fiduciary
capacity and discretion, sufficient shares of each Portfolio, to assure
approval of the New Contract.
Each shareholder of each Portfolio is entitled to one vote on each
proposal per share held as of the record date (the "Shares"). In
determining whether a quorum for any Portfolio exists at the Meeting for
purposes of all matters to be voted on, votes "for" or "against," as well
as all abstentions (including votes to withhold authority to vote in
certain cases) and broker non-votes, with respect to the proposal receiving
the most such votes (including abstentions and broker non-votes) of such
Portfolio, will be counted. A majority of the outstanding Shares of each
Portfolio, respectively, represented in person or by proxy, is required to
constitute a quorum for each such Portfolio at the Meeting.
Any Proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the Meeting and gives verbal notice of his or her
election to vote in person, without compliance with any other formalities.
In addition, any Proxy given pursuant to this solicitation may be revoked
prior to the Meeting by delivering an instrument revoking it or a duly
executed Proxy bearing a later date to the Secretary of the Trust. If the
Proxy is properly completed and returned by the shareholder and is not
revoked, it will be voted at the Meeting in the manner specified thereon.
If the Proxy is properly executed and returned, but no choice is specified
thereon, it will be voted in favor of the proposals described below.
The Trust will provide, without charge and upon verbal or written
request, to each shareholder of a Portfolio, a copy of the Portfolio's
annual report for the fiscal year ended September 30, 1996. Written or
telephone requests for such documents should be directed to the Arrow
Funds, Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779,
telephone: 1-(800) 866-6040.
VOTING SECURITIES AND PRINCIPAL HOLDERS
On March 7, 1997, the following Portfolios of the Trust had
outstanding the following number of shares of beneficial interest (the
`Shares''), each Share being entitled to one vote and fractional shares
having proportionate voting rights. The total outstanding Shares consist
of:
Arrow Equity Portfolio Shares
--------------
Arrow Fixed Income Portfolio Shares
--------------
Arrow Municipal Income Portfolio Shares
--------------
Arrow Government Money Market Portfolio Shares
--------------
Only shareholders of record at the close of business on March 7,
1997, will be entitled to notice of and vote at the Special Meeting.
Shares may be represented in person or by proxy. The Board of Trustees
proposes to mail this Proxy Statement, the enclosed Notice of Meeting and
the Proxy Card on or about March 18, 1997.
The following list sets forth certain information concerning the only
"persons" (as that term is defined by the Securities and Exchange
Commission) who are known by the Trust to be the beneficial owners of more
than 5% of the Shares of any Trust Portfolio as of March 7, 1997.
NUMBER OF PERCENT
BENEFICIAL OWNER SHARES OF CLASS
BENEFICIALLY
OWNED
[TO BE INSERTED ON THE RECORD DATE]
Officers and Trustees own less than 1% of the outstanding shares of
each Portfolio of the Trust.
PROPOSAL 1
APPROVAL OF A NEW INVESTMENT ADVISORY CONTRACT
THE ACQUISITION OF BANCSHARES BY MBI
Mark Twain has served as Adviser to the Trust Portfolios pursuant to
an Investment Advisory Contract dated September 1, 1992 (the "Present
Contract"), a copy of which is attached to this Proxy Statement as Exhibit
A. The Board of Trustees renewed the Present Contract at its quarterly
meeting held on August 20, 1996. Mark Twain is a wholly-owned subsidiary
of Bancshares, a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"), with its main office
located 8820 Ladue Road, St. Louis, Missouri 63124. Bancshares conducts a
wide range of commercial and personal banking activities through Mark
Twain.
On October 27, 1996, Bancshares and MBI entered into a definitive
agreement whereby Bancshares would merge with MBI, a bank holding company
headquartered in St. Louis (the "Merger"). Consummation of the
transactions contemplated by the Merger, including the Merger, will cause
the Adviser to be merged with and into MBI and its subsidiaries. The
change in ownership of the Adviser, would automatically terminate the
Present Contract in accordance with its terms as required by the Investment
Company Act of 1940 (the "1940 Act"). Accordingly, the New Contract is
being proposed for approval by the shareholders of each Portfolio in order
to ensure continuity in the provision of investment advisory services to
the Trust.
There are various conditions precedent to the consummation of the
Merger including approval of federal and state regulatory authorities. The
Merger may be terminated and the Merger abandoned at any time prior to the
Effective Time by the mutual consent of Bancshares and MBI or upon the
occurrence of other events specified in the Merger agreement. Bancshares'
shareholders meeting will be held on April 22, 1997.
APPROVAL OF THE NEW ADVISORY CONTRACT
The Trustees are proposing that shareholders of each Portfolio approve
the New Advisory Contract with MVA, to become effective as of the Effective
Time of the Merger. A description of the New Advisory Contract, MVA, and
the services to be provided by MVA thereunder is set forth below. The
description of the New Advisory Contract is qualified in its entirety by
reference to the form of the New Advisory Contract attached to this Proxy
Statement as Exhibit B.
As more fully described below, the terms of the New Advisory Contract
are substantially similar in all material respects to the Present Contract.
Examples of differences between the Contracts include: (i) the change in
investment adviser, and (ii) the effective date which, in the case of the
New Advisory Contract, will be the date of the Effective Time of the Merger
of Bancshares into MBI. It is currently expected that the Effective Time
will occur on or before April 25, 1997. The New Advisory Contract provides
for no increase in advisory fees payable by any Portfolio.
At a meeting held on February 27, 1997, the Trustees, including a
majority of the Trustees who are not interested persons, as that term is
defined in the 1940 Act, of the Trust and who will not be interested
persons of MVA (the "Non-Interested Trustees"), approved the New Contract.
By approving the New Contract, the Trustees have acted in what they believe
to be the best interest of the shareholders of the Trust. In connection
with the approval of the New Contract, the Trustees considered the absence
of material changes in the overall form of the Present Contract, the
investment advisory fees, or any Portfolio's investment objectives or
policies. The Trustees also took into account the financial strength of
MBI, the management, personnel, experience and operations of MBI and its
affiliates, the commitment of MBI and its affiliates to the financial
services industry, and the fact that MVA is an affiliate of MBI. The
Trustees based their determinations in this regard on discussions with
representatives of MVA at the meeting and a review of materials presented
by MVA in connection with the meeting. These materials included MBI's
annual and quarterly reports, various documents outlining the history and
current operations of MBI and MVA, as well as opportunities for the
Portfolios within this structure and the experience of the MBI
organization, particularly MVA's Investment Management Services. Finally,
the Trustees considered the management, personnel, and operations
contemplated with respect to MVA following the Merger.
INFORMATION ABOUT THE PRESENT ADVISER AND THE NEW ADVISER
Mark Twain
Mark Twain Bank is a Missouri state chartered bank headquartered in
St. Louis, Missouri, that is a member of the Federal Reserve System. As of
September 30, 1996, Mark Twain managed approximately $1.4 billion on a
discretionary basis and provided custody services for additional assets in
excess of $1.4 billion. Mark Twain has served as Adviser to the Trust
since its inception in 1992, but was not previously an investment adviser
to a mutual fund.
The following employees of Mark Twain are principally responsible for
the day-to-day management of the Portfolios. Mr. Carl C. Enloe has managed
the Equity Portfolio since its inception, December 1992. Mr. Enloe joined
Mark Twain Bank, the Fund's adviser, in 1987, as head of investments.
Prior to joining Mark Twain, he was head of investments at another major
Missouri bank for 17 years. He served as senior portfolio manager at a
private investment company and an analyst at a member New York Stock
Exchange firm. He is a graduate of the University of Missouri.
Mr. Randy J. Schofield has managed the Fixed Income Portfolio and the
Government Money Market Portfolio since their inception, December 1992.
Mr. Schofield joined Mark Twain Bank in 1992, as Vice President of the
Fund's investment adviser. Prior to joining Mark Twain, he was head of the
investment department at a Missouri trust company for six years. Mr.
Schofield received his B.S. and B.A. from Central Missouri State
University.
Mr. Larry E. Kaestner has managed the Municipal Income Portfolio and
Government Money Market Portfolio since their inception, February 1, 1993.
Mr. Kaestner joined Mark Twain Bank in 1988 as Vice President. Mr.
Kaestner has in excess of 20 years of investment advisory and portfolio
management experience, including investment positions at two other major
financial institutions. Mr. Kaestner is a graduate of Southern Illinois
University.
It is presently anticipated that Messrs. Schofield and Kaestner will
not be involved in the day-to-day management of the Portfolios after
consummation of the Merger and execution of the New Contract. For a
description of the individuals who will be responsible for the day-to-day
management of the Portfolios under the New Advisory Contract, see
`Information About the Present Adviser and the New Adviser -MVA.''
The principal executive officers and directors of Mark Twain are
listed in the table below. The business address of each such individual is
Mark Twain Bank, 8820 Ladue Road, St. Louis, Missouri 63124.
Other Substantial
Position with Mark Business, Profession,
Name Twain Bank Vocation or Employment
Peter F. Benoist Chairman and Director Executive Vice
President, Mark Twain Bancshares, Inc.
(1984-Present); Chairman, Mark Twain
Kansas City Bank (1992-Present);
Formerly, President, Mark Twain Bank
(1986-1989); Director, President and
Member of the Executive Committee,
Ecumenical Housing Production Corp.;
Director and Vice Chairman, St. Louis
Priory; Trustee, Maryville University;
Director, St. Louis Equity Fund.
Robert F. Borchert President
Morton R. Bearman Director President, Bearman Properties.
Robert L. Boland Director President, Robert L. Boland,
Inc.
Edmund J. Boyce, Jr. Director Chairman and Chief Executive
Officer, Innsbrook Corp.
Charles S. Drew, Jr. Director Chairman and President, The
Daniel & Henry Company.
John P. Dubinsky Director President and Chief Executive
Officer, Mark Twain Bancshares, Inc.
(1986-Present); Member of the Executive
Committee, Washington University Medical
Center; Director, Barnes-Jewish Hospital
; Co-Chariman, Barnes-Jewish Hospital
Foundation; Director and Member of the
Executive Committee, Arts and Education
Council of Greater St. Louis; Trustee,
St. Louis Science Center; Director, BJC
Health System, Inc.; National Trustee,
National Symphony Orchestra, Washington,
D.C.; Director and Vice Chairman,
Regional Housing Alliance; Director,
Mark Twain Kansas City Bank.
Paul A. Koch Director President, Creative Management.
David W. Mason Director President, David Mason & Associates,
Inc.
MVA
MVA is a wholly-owned subsidiary of Mercantile Bank National
Association, which is a wholly-owned banking subsidiary of Mercantile
Bancorporation Inc. MVA has managed the portfolios of ARCH Funds, Inc.
since its inception in 1982. MBI, a bank holding company registered under
the BHC Act, is a financial services company headquartered in St. Louis,
Missouri. Through its related banking subsidiaries, MBI provides banking
and banking-related services, primarily throughout Missouri, Illinois,
Iowa, Arkansas and Kansas. On December 31, 1996, Mercantile had total
assets of approximately $19 billion.
Pursuant to the New Advisory Contract, MVA will succeed Mark Twain as
the investment adviser for the Trust Portfolios. MVA is registered as an
investment adviser under the Investment Advisers Act of 1940 (the "Advisers
Act"), and effective on or about April 25, 1997, will act as investment
adviser to the Arrow Funds. On December 31, 1996, MVA's Investment
Management Services, held approximately $7.9 billion of investment assets
($1.9 billion in Balanced Funds, $2.4 billion in Equity Funds and $3.5
billion in Fixed Income Funds) for a wide range of institutional tax-exempt
clients, including corporate, public, multi-employer, endowment/foundation
portfolios and mutual funds.
In the event the shareholders approve the New Advisory Contract, three
new individuals and one current portfolio manager would be principally
responsible for the day-to-day management of the Portfolios. Under the New
Advisory Contract, the Arrow Government Money Market Portfolio would be
managed by JoAnn Dotson, Senior Associate of MVA. Ms. Dotson is Portfolio
Manager in MVA's Fixed Income Division and is presently responsible for the
ARCH Money Market Portfolio and ARCH Treasury Money Market Portfolio. She
joined MVA in 1987. Ms. Dotson holds a B.A. from Webster University.
Under the New Advisory Contract, Carl C. Enloe would continue to be
responsible for the day-to-day management of the Equity Portfolio. A
description of Mr. Enloe's experience may be reviewed above - see
`Information About the Present Adviser and the New Adviser --Mark Twain.''
David A. Bethke, a Senior Associate with MVA, would be responsible for
the day-to-day management of the Fixed Income Portfolio under the New
Advisory Contract. Mr. Bethke has been the principal portfolio manager for
the ARCH Government & Corporate Bond Portfolio and ARCH U.S. Government
Securities Portfolio since their inception in 1988. Mr. Bethke joined MVA
in 1987. Mr. Bethke holds a B.A. from the Upper Iowa University and an
M.B.A. from University of Iowa. He is a Chartered Financial Analyst.
Under the New Advisory Contract, the Municipal Income Portfolio would
be managed by Peter C. Merzian, who has been principal portfolio manager
for ARCH Tax-Exempt Money Market Portfolio, ARCH Missouri Tax-Exempt Bond
Portfolio, ARCH Short-Intermediate Municipal Portfolio and ARCH National
Municipal Bond Portfolio since 1993. Mr. Merzian joined MVA in 1993 and
has over 8 years of investment experience. Prior to joining MVA he was
employed at another financial institution for four years, where he was a
portfolio manager. Mr. Merzian received a B.S. and M.B.A. from St. Louis
University.
The principal executive officers and directors of MVA are listed in
the table below. The business address of each such individual is One
Mercantile Center, St. Louis, Missouri 63166.
Other Substantial
Business, Profession,
Name Position with MBA Vocation or Employment
John H. Blixen, IIDirector and President Senior Vice President,
Mercantile Bank National
Association (1979-Present).
Ralph W. Webster, III Director and Executive Formerly,
Vice President, Mercantile
Associate Bank of St. Louis, National
Association (1983-1987).
Gene E. Gillespie Director and Executive Formerly, Vice President,
Mercantile
Associate Bank of St. Louis, National
Association (1972-1987).
William R. Adams, Jr. Director and Chairman Chairman
and Chief Executive Officer,
Mercantile Bank National
Association (1996-Present);
Chairman and Chief Executive
Officer, Mercantile Trust Company
(1993-Present); Formerly, Chairman
and Chief Executive Officer,
Mercantile Bank of St. Louis,
National Association (1995-1996);
Formerly, Senior Executive Vice
President/CFO, Mercantile
Bancorporation Inc. (1991-1995);
Formerly, Vice President/Partner,
Cresap, McCormick and Paget (1974-
1990).
David C. Higgins Director Legal Investigator (1990-Present);
Formerly, Business Representative,
Iron Workers Local Union #392
(1969-1989).
Charles C. Hager, Jr. Director Executive Vice President
and C.O.O., Hager Hinge Company
(1971-Present).
Carroll F. McMahonDirector President, Loy-Lange Box Company
(1952-Present).
The following schedule lists the net assets of each of the ARCH
portfolios and the contractual advisory fees, current waivers, and actual
advisory fees for such portfolios, as of December 31, 1996.
ASSETS OF ARCH FUNDS, INC. AND ADVISORY FEES PAID TO MVA
TYPE AND ASSETS AS OF CONTRACTUALCURRENT FEE ACTUAL ADVISORY
NAME OF FUND DECEMBER 31, 1996 ADVISORY FEE WAIVERS(1)
FEE
EQUITY FUNDS
ARCH Small Cap Equity$ 217,405,000 0.75% 0.00% 0.75%
ARCH International Equity61,193,000 1.00% 0.25% 0.75%
ARCH Balanced111,683,000 0.75% 0.00% 0.75%
ARCH Growth & Income372,771,000 0.55% 0.00% 0.55%
$ 763,052,000
FIXED INCOME
ARCH U.S. Gov't Securities69,755,000 0.45% 0.00% 0.45%
ARCH Gov't & Corp. Sec161,419,0000.45% 0.00% 0.45%
$231,174,000
TAX-EXEMPT FUNDS
ARCH Short-Intermediate28,892,0000.55% 0.55% 0.00%
ARCH Missouri Tax-Exempt83,419,000 0.45% 0.00% 0.45%
Bond
ARCh National Muni Bond309,770,000 0.55% 0.55% 0.00%
$422,081,000
MONEY MARKET
ARCH Money Market$831,798,000 0.40% 0.05% 0.35%
ARCH Treasury Money Mkt.139,089,000 0.40% 0.05% 0.35%
ARCH Tax-Exempt Money Mkt.121,880,000 0.40% 0.05% 0.35%
$1,092,767,000
TOTAL ARCH
FUNDS, Inc.$2,509,074,000
(1) Each current fee waiver represents a percentage of daily net assets of
each Fund calculated at an annualized rate.
The annual advisory fees which MVA will be entitled to receive for its
services to the Portfolios, and which will be payable to MVA following the
Merger, provided the New Advisory Contract is approved by the shareholders
of the Portfolios, are set forth below in the section entitled "Information
About the New Advisory Contract."
INFORMATION ABOUT THE NEW ADVISORY CONTRACT
The form of the New Advisory Contract is attached to this Proxy
Statement as Exhibit B. Under the New Advisory Contract, MVA will manage
the Portfolios' investments, provide various administrative services,
investment research, advice, management, and supervision of the investments
of the Trust, and conduct a continuous program of investment evaluation and
appropriate sale or other disposition and reinvestment of the Trust's
assets, subject to the supervision of the Trustees and in conformity with
the stated investment objectives and policies of each Portfolio.
Specifically, MVA will furnish reports, statistical and research
services and make investment decisions with respect to each Portfolio.
Each Portfolio will pay the cost of all of its expenses and liabilities,
including expenses and liabilities incurred in connection with maintaining
its registration under the Securities Act of 1933, as amended, the 1940
Act, and the securities laws of the states in which its shares are
registered or qualified for sale, printing prospectuses as they are
updated, share certificates, mailings, brokerage charges, issue and
transfer taxes on the sale of Portfolio securities, custodian and stock
transfer charges, printing, legal and auditing expenses, and expenses of
any shareholder meetings and reports to shareholders. Notwithstanding the
foregoing, it is presently anticipated that the Present Administration will
continue to provide services to the Trust. The Trust's expenses will
continue to include expenses of administrative personnel and services
provided to the Trust by the Administrator at an annual rate as described
in the prospectuses for the various Portfolios.
The New Advisory Contract provides that the advisory fees payable to
MVA by the Portfolios will be the same as those charged by Mark Twain under
the Present Contract. The advisory fees payable under the New Advisory
Contract by the Portfolios are equal to a fixed percentage of daily net
assets of each Portfolio calculated at an annualized rate, payable on a
monthly basis. From time to time, MVA, consistent with Mark Twain's
current practice, may waive its fee or reimburse a Portfolio for certain of
its expenses in order to reduce the Portfolio's expense ratio. As a
result, the Portfolio's return and yield would be higher than it would be
if the fees and such expenses had been paid by the Portfolio.
The following table sets forth the annual advisory fees with respect
to each Portfolio under the Present and New Advisory Contracts. In
addition, the table indicates the aggregate amount of advisory fees paid by
each Portfolio under the Present Contract, net of any advisory fee waiver,
during its most recent fiscal year.
ADVISORY FEES AND EXPENSE LIMITATIONS UNDER THE
NEW AND PRESENT ADVISORY CONTRACTS
NET ASSETS ON CONTRACTUALCURRENT FEE ACTUAL
PORTFOLIO SEPTEMBER 30, 1996 ADVISORY FEE WAIVER(1)
ADVISORY FEE
Arrow Equity Portfolio$ 55,572,752 0.75% 0.00% 0.75%
Arrow Fixed Income Portfolio28,708,331 0.60% 0.00% 0.60%
Arrow Municipal Income
Portfolio 14,946,961 0.70% 0.59% 0.11%
Arrow Government
Money Market Portfolio213,242,398 0.50% 0.00% 0.50%
(1) The current voluntary fee waivers and reimbursement may be modified or
terminated by the Adviser at any time in its sole discretion. Similarly,
under the New Advisory Contract, MVA would be able to modify or terminate
the voluntary fee waivers and reimbursement in its sole discretion.
For the fiscal year ended September 30, 1996, the Trust paid Mark
Twain the following investment advisory fees:
PORTFOLIO ADVISORY FEES
Arrow Equity Portfolio $368,254, of which $13,853 was
waived.
Arrow Fixed Income Portfolio $175,494, of which $3,239 was waived.
Arrow Municipal Income Portfolio $119,078, of which $100,366 was
waived.
Arrow Government Money Market Portfolio $1,083,949, of which $303
was waived.
The terms of the New Advisory Contract are substantially similar in
all material respects to the Present Contract with Mark Twain. However,
the New Advisory Contract differs from the Present Contract in (i) the
identity and ultimate ownership of the investment adviser, and (ii) the
effective date which, in the case of the New Advisory Contract, will be the
date of the Effective Time of the Merger. As indicated above, it is
currently expected that the Effective Time will occur on or about April
25, 1997.
Similar to the Present Contract, the New Advisory Contract provides
that in the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties of MVA under the New
Advisory Contract, MVA and its affiliates shall not be liable to the Trust
or to any shareholder for any act or omission in the course of, or
connected in any way with, rendering services or for any losses that may be
sustained in the purchase, holding, or sale of any security.
If approved by shareholders at this Meeting, the New Advisory Contract
will continue for two years after it takes effect, unless terminated, and
may be continued from year to year thereafter by the Board of Trustees.
The continuation of the New Advisory Contract must be approved by a
majority vote of the Trustees, including a majority of the Non-Interested
Trustees, cast in person at a meeting called for that purpose. MVA will
have the right, in any year, to notify the Trust in writing at least 60
days before the New Advisory Contract anniversary date that it does not
desire a renewal of the New Advisory Contract. The Trustees, or a majority
of the outstanding voting shares of the Trust, may terminate the New
Advisory Contract at any time without penalty by giving MVA 60 days'
written notice. The New Advisory Contract may not be assigned by MVA and
will terminate automatically in the event of an assignment. The New
Advisory Contract provides that it may be amended by a vote of both a
majority of the Trustees, including a majority of the Non-Interested
Trustees, and on behalf of a Portfolio by the holders of a majority of the
outstanding voting shares of such Portfolio. If the New Advisory Contract
is approved by shareholders of one or more Portfolios and the Merger is
consummated, the New Advisory Contract will be executed and become
effective with respect to such Portfolio(s) on the Effective Date.
SECTION 15(F) OF THE 1940 ACT
Section 15(f) of the 1940 Act provides that in connection with the
sale of any interest in an investment adviser (such as Mark Twain) which
results in the "assignment" of an investment advisory contract, an
investment adviser (such as MVA) of a registered investment company (such
as the Trust), or an affiliated person of such investment adviser, may
receive any amount or benefit if (i) for a period of three years after the
sale, at least 75% of the members of the Board of Trustees of the
investment company are not interested persons of the investment adviser or
the predecessor adviser, and (ii) there is no "unfair burden" imposed on
the investment company as a result of such sale or any express or implied
terms, conditions or understanding applicable thereto. For this purpose,
"unfair burden" is defined to include any arrangement during the two-year
period after the transaction, whereby the investment adviser or its
predecessor or successor investment advisers, or any interested persons of
any such adviser, receives or is entitled to receive any compensation
directly or indirectly (i) from any person in connection with the purchase
or sale of securities or other property to, from or on behalf of the
investment company other than bona fide ordinary compensation as principal
underwriter for such company, or (ii) from the investment company or its
security holders for other than bona fide investment advisory or other
services. This provision of the 1940 Act was enacted by Congress in 1975
to make it clear that an investment adviser (or an affiliated person of the
adviser) can realize a profit on the sale of the adviser's business subject
to the two safeguards described above. The Board of Trustees of the Trust
has requested and received assurances from MBI and Bancshares that no
"unfair burden" will be imposed on the Trust as a result of the proposed
transactions.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Under the New Advisory Contract, decisions regarding each Portfolio
will be made by MVA subject to the supervision and control of the Trustees.
All Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. Subject to review by the Board
of Trustees, the adviser makes decisions on and selects brokers or dealers
for portfolio transactions. In selecting firms to effect securities
transactions, the primary consideration of the Trust is prompt execution at
the most favorable price. The Trust will also consider such factors as the
price of the securities and the size and difficulty of execution of the
order. If these objectives may be met with more than one firm, the Trust
will also consider the availability of statistical and investment data and
economic facts and opinions helpful to the Trust.
Under the New Advisory Contract, MVA may select brokers and dealers
who, in addition to meeting the above requirements, also furnish brokerage
and research services. These services may include advice as to the
advisability of investing in securities, security analyses and reports,
economic studies, industry studies, receipt of quotations for portfolio
valuations and similar services. These services may be furnished either
directly to the Trust, to MVA, to advisers who are affiliates of MVA or to
accounts advised by those companies. The brokers and dealers who execute
portfolio transactions selected for the above reasons may also sell shares
of the Trust and certain other affiliated funds. The fact that a broker or
dealer may sell shares of the Trust or any other fund is not a criterion
that MVA will use in selecting a broker or dealer to execute portfolio
transactions on behalf of the Trust.
MVA, in selecting brokers or dealers to execute portfolio
transactions, will exercise reasonable business judgment and determine in
good faith that commissions charged by such persons are reasonable in
relationship to the value of the brokerage and research services provided
by such persons, viewed in terms of the overall responsibilities of the
adviser and its affiliated companies with respect to the Trust itself and
the other accounts to which they render investment advice. As a practical
matter, the benefits inuring to these companies or accounts are not
divisible. To the extent that the receipt of the above-described services
may supplant services for which MVA might otherwise have paid, it would, of
course, tend to reduce its expenses. The same is true of services
furnished to the Trust and in turn made available by the Trust to MVA, or
its affiliates. MVA generally will not lower its fee, however, as a
consequence of receiving such services.
The Trust will not effect brokerage transactions with any broker or
dealer affiliated directly or indirectly with MVA, unless such transactions
are fair and reasonable, under the circumstances, to the relevant
Portfolio's shareholders and comply with the requirements of the 1940 Act.
Circumstances that may indicate that such transactions are fair and
reasonable include the frequency of such transactions, the selection
process, and the commissions payable in connection with such transactions.
With respect to the portion of any Portfolio invested in municipal
securities or United States Government securities, it is anticipated that
most purchase and sale transactions will be with the issuer or an
underwriter or with major dealers in debt instruments acting as principals.
Such transactions are normally on a net basis and generally do not involve
payment of brokerage commissions. However, the cost of securities
purchased from an underwriter usually includes a commission paid by the
issuer to the underwriter. Purchases or sales from dealers will normally
reflect the spread between bid and ask prices.
With respect to any Portfolio investing in domestic and/or foreign
equity securities, it is anticipated that most transactions in such
securities will occur on domestic and/or foreign stock exchanges.
Transactions on stock exchanges involve the payment of brokerage
commissions. In transactions on stock exchanges in the United States,
these commissions are negotiated, whereas on many foreign stock exchanges
these commissions are fixed. In the case of securities traded in the
foreign and domestic over-the-counter markets, there is generally no stated
commission, but the price usually includes an undisclosed commission or
markup. Over-the-counter transactions will generally be placed directly
with a principal market maker, although the Trust may place an over-the-
counter order with a broker-dealer if a better price (including commission)
and execution are available.
With respect to any Portfolio investing in money market instruments,
it is anticipated that most transactions in such securities will be made
with recognized dealers in such instruments except when a better price
(including commission) and execution are available elsewhere.
RECOMMENDATION OF THE BOARD OF TRUSTEES
Based upon the considerations set forth under "Approval of the New
Advisory Contract" above, the Trustees have determined that the New
Advisory Contract is in the best interest of each Portfolio and its
shareholders. In addition, MVA expects that there will be no diminution in
the scope and quality of services provided to the Trust as a result of
these transactions. In fact, except as described above, the New Advisory
Contract is the same in all material respects as the Present Contract under
which the Trust is currently operating and which have been approved
previously by the initial shareholders of each respective Portfolio. The
Board of Trustees believes that the Portfolios will receive investment
management services under the New Advisory Contract at least equivalent to
those that they receive under the Present Contract, and at the same fee and
expense levels.
In the event the Merger is not consummated, the Present Contract will
continue in accordance with its terms. If the Merger is consummated and if
the New Advisory Contract is not approved by the shareholders of any
Portfolio, the Present Contract will terminate and the Board of Trustees
will consider what actions should be taken, including but not limited to
requesting that MVA perform investment advisory services at cost until a
new investment advisory contract is approved by the shareholders of that
Portfolio.
THE TRUSTEES RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL
OF THE NEW ADVISORY CONTRACT.
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
While the Meeting is called to act upon any other business that may
properly come before it, at the date of this Proxy Statement the only
business which the management intends to present or knows that others will
present is the business mentioned in the Notice of Meeting. If any other
matters lawfully come before the Meeting, and in all procedural matters at
said Meeting, it is the intention that the enclosed Proxy shall be voted in
accordance with the best judgment of the attorneys named therein, or their
substitutes, present and acting at the Meeting.
If at the time any session of the Meeting is called to order, a quorum
is not present in person or by proxy, the persons named as proxies may vote
those Proxies which have been received to adjourn the Meeting to a later
date. In the event that a quorum is present but sufficient votes in favor
of one or more of the proposals have not been received, the persons named
as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of Proxies with respect to any such proposal. All
such adjournments will require the affirmative vote of a majority of the
Shares present in person or by proxy at the session of the Meeting to be
adjourned. The persons named as proxies will vote those Proxies which they
are entitled to vote in favor of the proposal, in favor of such an
adjournment, and will vote those Proxies required to be voted against the
proposal, against any such adjournment. A vote may be taken on one or more
of the proposals in this Proxy Statement prior to any such adjournment if
sufficient votes for its approval have been received and it is otherwise
appropriate.
NEXT MEETING OF SHAREHOLDERS
NO PORTFOLIO IS REQUIRED TO, AND NONE INTEND TO HOLD ANNUAL OR OTHER
PERIODIC MEETINGS OF SHAREHOLDERS, EXCEPT AS REQUIRED BY THE 1940 ACT. THE
NEXT MEETING OF THE SHAREHOLDERS OF EACH PORTFOLIO WILL BE HELD AT SUCH
TIME AS THE BOARD OF TRUSTEES MAY DETERMINE OR AT SUCH TIME AS MAY BE
LEGALLY REQUIRED. ANY SHAREHOLDER PROPOSAL INTENDED TO BE PRESENTED AT
SUCH MEETING MUST BE RECEIVED BY THE TRUST AT ITS OFFICE A REASONABLE TIME
PRIOR TO THE MEETING, AS DETERMINED BY THE BOARD OF TRUSTEES, TO BE
INCLUDED IN THE PORTFOLIO'S PROXY STATEMENT AND FORM OF PROXY RELATING TO
SUCH MEETING, AND MUST SATISFY ALL OTHER LEGAL REQUIREMENTS. UPON
CONSUMMATION OF THE MERGER AND EXECUTION OF THE NEW ADVISORY CONTRACT, THE
PRINCIPAL OFFICES OF THE TRUST WILL CONTINUE TO BE LOCATED AT FEDERATED
INVESTORS TOWER, PITTSBURGH, PENNSYLVANIA 15222-3779.
PLEASE COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY CARD AND RETURN
SUCH CARD PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
By Order of the Board of Trustees
John W. McGonigle
Secretary
March 18, 1997
G01449-01
EXHIBIT A
("PRESENT CONTRACT")
MARK TWAIN FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this 1st day of September, 1992, between MARK
TWAIN BANK, a state chartered bank having its principal place of business
in St. Louis, Missouri (the "Adviser"), and MARK TWAIN FUNDS, a
Massachusetts business trust having its principal place of business in
Pittsburgh, Pennsylvania (the "Trust").
WHEREAS the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940 and is registered as
such with the Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each
of the portfolios ("Funds") of the Trust which executes an exhibit to this
Contract, and Adviser accepts the appointments. Subject to the direction
of the Trustees of the Trust, Adviser shall provide investment research and
supervision of the investments of the Funds and conduct a continuous
program of investment evaluation and of appropriate sale or other
disposition and reinvestment of each Fund's assets.
2. Adviser, in its supervision of the investments of each of the
Funds will be guided by each of the Fund's investment objective and
policies and the provisions and restrictions contained in the Declaration
of Trust and By-Laws of the Trust and as set forth in the Registration
Statements and exhibits as may be on file with the Securities and Exchange
Commission.
3. Each Fund shall pay or cause to be paid all of its own expenses
and its allocable share of Trust expenses, including, without limitation,
the expenses of organizing the Trust and continuing its existence; fees and
expenses of Trustees and officers of the Trust; fees for investment
advisory services and administrative personnel and services; fees and
expenses of preparing and printing its Registration Statements under the
Securities Act of 1933 and the Investment Company Act of 1940 and any
amendments thereto; expenses of registering and qualifying the Trust, the
Funds, and shares ("Shares") of the Funds under federal and state laws and
regulations; expenses of preparing, printing, and distributing prospectuses
(and any amendments thereto) to shareholders; interest expense, taxes,
fees, and commissions of every kind; expenses of issue (including cost of
Share certificates), purchase, repurchase, and redemption of Shares,
including expenses attributable to a program of periodic issue; charges and
expenses of custodians, transfer agents, dividend disbursing agents,
shareholder servicing agents, and registrars; printing and mailing costs,
auditing, accounting, and legal expenses; reports to shareholders and
governmental officers and commissions; expenses of meetings of Trustees and
shareholders and proxy solicitations therefor; insurance expenses;
association membership dues and such nonrecurring items as may arise,
including all losses and liabilities incurred in administering the Trust
and the Funds. Each Fund will also pay its allocable share of such
extraordinary expenses as may arise including expenses incurred in
connection with litigation, proceedings, and claims and the legal
obligations of the Trust to indemnify its officers and Trustees and agents
with respect thereto.
4. Each of the Funds shall pay to Adviser, for all services rendered
to each Fund by Adviser hereunder, the fees set forth in the exhibits
attached hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses
of one or more of the Funds) to the extent that any Fund's expenses exceed
such lower expense limitation as the Adviser may, by notice to the Fund,
voluntarily declare to be effective.
7. This contract shall begin for each Fund as of the date of
execution of the applicable exhibit and shall continue in effect with
respect to each Fund presently set forth on an exhibit (and any subsequent
Funds added pursuant to an exhibit during the initial term of this
contract) for two years from the date of this contract set forth above and
thereafter for successive periods of one year, subject to the provisions
for termination and all of the other terms and conditions hereof if: (a)
such continuation shall be specifically approved at least annually by the
vote of a majority of the Trustees of the Trust, including a majority of
the Trustees who are not parties to this Contract or interested persons of
any such party (other than as Trustees of the Trust), cast in person at a
meeting called for that purpose; and (b) Adviser shall not have notified a
Fund in writing at least sixty (60) days prior to the anniversary date of
this Contract in any year thereafter that it does not desire such
continuation with respect to that Fund. If a Fund is added after the first
approval by the Trustees as described above, this Contract will be
effective as to that Fund upon execution of the applicable exhibit and will
continue in effect until the next annual approval of this Contract by the
Trustees and thereafter for successive periods of one year, subject to
approval as described above.
8. Notwithstanding any provision in this Contract, it may be
terminated at any time with respect to any Fund, without the payment of any
penalty, by the Trustees of the Trust or by a vote of the shareholders of
that Fund on sixty (60) days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser may employ
or contract with such other person, persons, corporation, or corporations
at its own cost and expense as it shall determine in order to assist it in
carrying out this Contract.
10. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties under this
Contract on the part of Adviser, Adviser shall not be liable to the Trust
or to any of the Funds or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or for any losses
that may be sustained in the purchase, holding, or sale of any security.
11. This Contract may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of the Trustees
who are not parties to this Contract or interested persons of any such
party to this Contract (other than as Trustees of the Trust) cast in person
at a meeting called for that purpose, and on behalf of a Fund by a majority
of the outstanding voting securities of such Fund.
12. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight.
The Adviser agrees to submit any proposed sales literature for the Trust
(or any Fund) or for itself or its affiliates which mentions the Trust (or
any Fund) to the Trust's distributor for review and filing with the
appropriate regulatory authorities prior to the public release of any such
sales literature, provided, however, that nothing herein shall be construed
so as to create any obligation or duty on the part of the Adviser to
produce sales literature for the Trust (or any Fund). The Trust agrees to
cause its distributor to promptly review all such sales literature to
ensure compliance with relevant requirements, to promptly advise Adviser of
any deficiencies contained in such sales literature, to promptly file
complying sales literature with the relevant authorities, and to cause such
sales literature to be distributed to prospective investors in the Trust.
13. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees
that the obligations pursuant to this Contract of a particular Fund and of
the Trust with respect to that particular Fund be limited solely to the
assets of that particular Fund, and Adviser shall not seek satisfaction of
any such obligation from any other Fund, the shareholders of any Fund, the
Trustees, officers, employees or agents of the Trust, or any of them.
14. This Contract shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.
15. This Contract will become binding on the parties hereto upon
their execution of the attached exhibits to this Contract.
16. The parties hereto acknowledge that Mark Twain Bank has reserved
the right to grant the non-exclusive use of the name "Mark Twain" or any
derivative thereof to any other investment company, investment company
portfolio, investment adviser, distributor or other business enterprise,
and to withdraw from the Trust and one or more of the Funds the use of the
name "Mark Twain." The name "Mark Twain" will continue to be used by the
Trust and each Fund so long as such use is mutually agreeable to Mark Twain
Bank and the Trust.
EXHIBIT A
to the
Investment Advisory Contract
MARK TWAIN EQUITY PORTFOLIO
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.75 of 1% of the average daily net assets of the
Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of 0.75 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 1st day of September, 1992.
Attest: Mark Twain Bank
/s/ Michele S. Kopolow By:/s/ Stanley Miller
Secretary President
Attest: Mark Twain Funds
/s/ C. Grant Anderson By:/s/ J. C. Donahue
Assistant Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
MARK TWAIN FIXED INCOME PORTFOLIO
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.60 of 1% of the average daily net assets of the
Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of 0.60 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 1st day of September, 1992.
Attest: Mark Twain Bank
/s/ Michele S. Kopolow By:/s/ Stanley Miller
Secretary President
Attest: Mark Twain Funds
/s/ C. Grant Anderson By:/s/ J. C. Donahue
Assistant Secretary Vice President
EXHIBIT C
to the
Investment Advisory Contract
MARK TWAIN GOVERNMENT MONEY MARKET PORTFOLIO
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.50 of 1% of the average daily net assets of the
Funds.
The portion of the fee based upon the average daily net assets of the
Funds shall be accrued daily at the rate of 1/365th of 0.50 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 1st day of September, 1992.
Attest: Mark Twain Bank
/s/ Michele S. Kopolow By:/s/ Stanley Miller
Secretary President
Attest: Mark Twain Funds
/s/ C. Grant Anderson By:/s/ J. C. Donahue
Assistant Secretary Vice President
EXHIBIT D
to the
Investment Advisory Contract
MARK TWAIN MUNICIPAL INCOME PORTFOLIO
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.70 of 1% of the average daily net assets of the
Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of 0.70 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 1st day of September, 1992.
Attest: Mark Twain Bank
/s/ Michele S. Kopolow By:/s/ Stanley Miller
Secretary President
Attest: Mark Twain Funds
/s/ C. Grant Anderson By:/s/ J. C. Donahue
Assistant Secretary Vice President
EXHIBIT B
("NEW ADVISORY CONTRACT")
ARROW FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this day of April, 1997, between MISSISSIPPI
---
VALLEY ADVISORS INC., a registered investment adviser having its principal
place of business in St. Louis, Missouri (the "Adviser"), and ARROW FUNDS,
a Massachusetts business trust having its principal place of business in
Pittsburgh, Pennsylvania (the "Trust").
WHEREAS the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940 and is registered as
such with the Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each
of the portfolios ("Funds") of the Trust which executes an exhibit to this
Contract, and Adviser accepts the appointments. Subject to the direction
of the Trustees of the Trust, Adviser shall provide investment research and
supervision of the investments of the Funds and conduct a continuous
program of investment evaluation and of appropriate sale or other
disposition and reinvestment of each Fund's assets.
2. Adviser, in its supervision of the investments of each of the
Funds will be guided by each of the Fund's investment objective and
policies and the provisions and restrictions contained in the Declaration
of Trust and By-Laws of the Trust and as set forth in the Registration
Statements and exhibits as may be on file with the Securities and Exchange
Commission.
3. Each Fund shall pay or cause to be paid all of its own expenses
and its allocable share of Trust expenses, including, without limitation,
the expenses of organizing the Trust and continuing its existence; fees and
expenses of Trustees and officers of the Trust; fees for investment
advisory services and administrative personnel and services; fees and
expenses of preparing and printing its Registration Statements under the
Securities Act of 1933 and the Investment Company Act of 1940 and any
amendments thereto; expenses of registering and qualifying the Trust, the
Funds, and shares ("Shares") of the Funds under federal and state laws and
regulations; expenses of preparing, printing, and distributing prospectuses
(and any amendments thereto) to shareholders; interest expense, taxes,
fees, and commissions of every kind; expenses of issue (including cost of
Share certificates), purchase, repurchase, and redemption of Shares,
including expenses attributable to a program of periodic issue; charges and
expenses of custodians, transfer agents, dividend disbursing agents,
shareholder servicing agents, and registrars; printing and mailing costs,
auditing, accounting, and legal expenses; reports to shareholders and
governmental officers and commissions; expenses of meetings of Trustees and
shareholders and proxy solicitations therefor; insurance expenses;
association membership dues and such nonrecurring items as may arise,
including all losses and liabilities incurred in administering the Trust
and the Funds. Each Fund will also pay its allocable share of such
extraordinary expenses as may arise including expenses incurred in
connection with litigation, proceedings, and claims and the legal
obligations of the Trust to indemnify its officers and Trustees and agents
with respect thereto.
4. Each of the Funds shall pay to Adviser, for all services rendered
to each Fund by Adviser hereunder, the fees set forth in the exhibits
attached hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses
of one or more of the Funds) to the extent that any Fund's expenses exceed
such lower expense limitation as the Adviser may, by notice to the Fund,
voluntarily declare to be effective.
7. This contract shall begin for each Fund as of the date of
execution of the applicable exhibit and shall continue in effect with
respect to each Fund presently set forth on an exhibit (and any subsequent
Funds added pursuant to an exhibit during the initial term of this
contract) for two years from the date of this contract set forth above and
thereafter for successive periods of one year, subject to the provisions
for termination and all of the other terms and conditions hereof if: (a)
such continuation shall be specifically approved at least annually by the
vote of a majority of the Trustees of the Trust, including a majority of
the Trustees who are not parties to this Contract or interested persons of
any such party (other than as Trustees of the Trust), cast in person at a
meeting called for that purpose; and (b) Adviser shall not have notified a
Fund in writing at least sixty (60) days prior to the anniversary date of
this Contract in any year thereafter that it does not desire such
continuation with respect to that Fund. If a Fund is added after the first
approval by the Trustees as described above, this Contract will be
effective as to that Fund upon execution of the applicable exhibit and will
continue in effect until the next annual approval of this Contract by the
Trustees and thereafter for successive periods of one year, subject to
approval as described above.
8. Notwithstanding any provision in this Contract, it may be
terminated at any time with respect to any Fund, without the payment of any
penalty, by the Trustees of the Trust or by a vote of the shareholders of
that Fund on sixty (60) days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser may employ
or contract with such other person, persons, corporation, or corporations
at its own cost and expense as it shall determine in order to assist it in
carrying out this Contract.
10. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties under this
Contract on the part of Adviser, Adviser shall not be liable to the Trust
or to any of the Funds or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or for any losses
that may be sustained in the purchase, holding, or sale of any security.
11. This Contract may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of the Trustees
who are not parties to this Contract or interested persons of any such
party to this Contract (other than as Trustees of the Trust) cast in person
at a meeting called for that purpose, and on behalf of a Fund by a majority
of the outstanding voting securities of such Fund.
12. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight.
The Adviser agrees to submit any proposed sales literature for the Trust
(or any Fund) or for itself or its affiliates which mentions the Trust (or
any Fund) to the Trust's distributor for review and filing with the
appropriate regulatory authorities prior to the public release of any such
sales literature, provided, however, that nothing herein shall be construed
so as to create any obligation or duty on the part of the Adviser to
produce sales literature for the Trust (or any Fund). The Trust agrees to
cause its distributor to promptly review all such sales literature to
ensure compliance with relevant requirements, to promptly advise Adviser of
any deficiencies contained in such sales literature, to promptly file
complying sales literature with the relevant authorities, and to cause such
sales literature to be distributed to prospective investors in the Trust.
13. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees
that the obligations pursuant to this Contract of a particular Fund and of
the Trust with respect to that particular Fund be limited solely to the
assets of that particular Fund, and Adviser shall not seek satisfaction of
any such obligation from any other Fund, the shareholders of any Fund, the
Trustees, officers, employees or agents of the Trust, or any of them.
14. This Contract shall be construed in accordance with and governed
by the laws of the State of Missouri.
15. This Contract will become binding on the parties hereto upon
their execution of the attached exhibits to this Contract.
EXHIBIT A
to the
Investment Advisory Contract
ARROW EQUITY PORTFOLIO
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.75 of 1% of the average daily net assets of the
Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of 0.75 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 25th day of April, 1997.
Attest: Mississippi Valley Advisors Inc.
By:
Name: Name:
Its: Its:
Attest: Arrow Funds
By:
Gail Cagney Charles L. Davis, Jr.
Assistant Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
ARROW FIXED INCOME PORTFOLIO
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.60 of 1% of the average daily net assets of the
Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of 0.60 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 25th day of April, 1997.
Attest: Mississippi Valley Advisors Inc.
By:
Name: Name:
Its: Its:
Attest: Arrow Funds
By:
Gail Cagney Charles L. Davis, Jr.
Assistant Secretary Vice President
EXHIBIT C
to the
Investment Advisory Contract
ARROW GOVERNMENT MONEY MARKET PORTFOLIO
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.50 of 1% of the average daily net assets of the
Funds.
The portion of the fee based upon the average daily net assets of the
Funds shall be accrued daily at the rate of 1/365th of 0.50 of 1% applied
to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 25th day of April, 1997.
Attest: Mississippi Valley Advisors Inc.
By:
Name: Name:
Its: Its:
Attest: Arrow Funds
By:
Gail Cagney Charles L. Davis, Jr.
Assistant Secretary Vice President
EXHIBIT D
to the
Investment Advisory Contract
ARROW MUNICIPAL INCOME PORTFOLIO
For all services rendered by Adviser hereunder, the above-named Fund
of the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.70 of 1% of the average daily net assets of the
Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of 0.70 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 25th day of April, 1997.
Attest: Mississippi Valley Advisors Inc.
By:
Name: Name:
Its: Its:
Attest: Arrow Funds
By:
Gail Cagney Charles L. Davis, Jr.
Assistant Secretary Vice President
[LOGO]
[Account Number]
ARROW EQUITY PORTFOLIO
Proxy for Special Meeting of Shareholders - April 18, 1997
The undersigned hereby appoints Gail Cagney, Antoinette D. Brkovich,
Patricia F. Conner, Amanda J. Reed and Suzanne W. Land as proxies to vote
and act at the Special Meeting of Shareholders of the Arrow Equity
Portfolio (the `Portfolio''), a portfolio of Arrow Funds, to be held at
the Portfolio's principal office, Federated Investors Tower, 19th Floor,
1001 Liberty Avenue, Pittsburgh, PA 15222-3779 at 2:00 p.m. on April 18,
1997 and at all adjournments thereof, in respect of all Shares of the
Portfolio as to which the undersigned may be entitled to vote or act. Each
proxy shall have power of substitution and a majority of said proxies or
their substitutes, or any one if only one be present and acting, shall have
all powers hereby granted.
The proxies are hereby authorized and instructed to vote upon the
matters specified in the notice of meeting as set forth on this side of
this proxy. If no choice is indicated as to a proposal, the proxies shall
vote FOR such proposal. Each of the matters is proposed by the Portfolio,
and none of the matters are related to or conditioned on the approval of
any other matter. The proxies may vote in their discretion on any other
matter which may properly come before the meeting.
Please sign and return.
The proxies are hereby instructed to vote as specified.
NOTE: Signature(s) should agree with name(s) as printed hereon. All
joint owners should sign. Fiduciaries please indicate their titles.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE
TRUST. Please sign and return promptly in the enclosed envelope.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS.
KEEP THIS PORTION FOR YOUR RECORDS
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
ARROW EQUITY PORTFOLIO
APPROVAL OF NEW INVESTMENT ADVISORY CONTRACT
(1) Proposal to approve a New Investment Advisory
Contract (the `New Advisory Contract'') on behalf of
each Portfolio between the Trust and Mississippi Valley
Advisors Inc. (`MVA''), the terms of which are substantially
similar to the existing investment advisory contract
between the Trust and Mark Twain Bank, subject to
and effective upon the consummation of the
acquisition of Mark Twain Bancshares, Inc. by
Mercantile Bancorporation Inc. FOR AGAINST ABSTAIN
(2) Transaction of such other business as FOR AGAINST ABSTAIN
may properly come before the meeting or
--- --- ---
any adjournment thereof.
x x x
----=============== ---------------- ------------------------
Signature (Sign here exactly as name(s) appear above.) Signature (Joint
Owners) Date
[LOGO]
[Account Number]
ARROW FIXED INCOME PORTFOLIO
Proxy for Special Meeting of Shareholders - April 18, 1997
The undersigned hereby appoints Gail Cagney, Antoinette D. Brkovich,
Patricia F. Conner, Amanda J. Reed and Suzanne W. Land as proxies to vote
and act at the Special Meeting of Shareholders of the Arrow Fixed Income
Portfolio (the `Portfolio''), a portfolio of Arrow Funds, to be held at
the Portfolio's principal office, Federated Investors Tower, 19th Floor,
1001 Liberty Avenue, Pittsburgh, PA 15222-3779 at 2:00 p.m. on April 18,
1997 and at all adjournments thereof, in respect of all Shares of the
Portfolio as to which the undersigned may be entitled to vote or act. Each
proxy shall have power of substitution and a majority of said proxies or
their substitutes, or any one if only one be present and acting, shall have
all powers hereby granted.
The proxies are hereby authorized and instructed to vote upon the
matters specified in the notice of meeting as set forth on this side of
this proxy. If no choice is indicated as to a proposal, the proxies shall
vote FOR such proposal. Each of the matters is proposed by the Portfolio,
and none of the matters are related to or conditioned on the approval of
any other matter. The proxies may vote in their discretion on any other
matter which may properly come before the meeting.
Please sign and return.
The proxies are hereby instructed to vote as specified.
NOTE: Signature(s) should agree with name(s) as printed hereon. All
joint owners should sign. Fiduciaries please indicate their titles.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE
TRUST. Please sign and return promptly in the enclosed envelope.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS.
KEEP THIS PORTION FOR YOUR RECORDS
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
ARROW FIXED INCOME PORTFOLIO
APPROVAL OF NEW INVESTMENT ADVISORY CONTRACT
(1) Proposal to approve a New Investment Advisory
Contract (the `New Advisory Contract'') on behalf of
each Portfolio between the Trust and Mississippi Valley
Advisors Inc. (`MVA''), the terms of which are substantially
similar to the existing investment advisory contract
between the Trust and Mark Twain Bank, subject to
and effective upon the consummation of the
acquisition of Mark Twain Bancshares, Inc. by
Mercantile Bancorporation Inc. FOR AGAINST ABSTAIN
(2) Transaction of such other business as FOR AGAINST ABSTAIN
may properly come before the meeting or
--- --- ---
any adjournment thereof.
x x x
----=============== ---------------- ------------------------
Signature (Sign here exactly as name(s) appear above.) Signature (Joint
Owners) Date
[LOGO]
[Account Number]
ARROW MUNICIPAL INCOME PORTFOLIO
Proxy for Special Meeting of Shareholders - April 18, 1997
The undersigned hereby appoints Gail Cagney, Antoinette D. Brkovich,
Patricia F. Conner, Amanda J. Reed and Suzanne W. Land as proxies to vote
and act at the Special Meeting of Shareholders of the Arrow Municipal
Income Portfolio (the `Portfolio''), a portfolio of Arrow Funds, to be
held at the Portfolio's principal office, Federated Investors Tower, 19th
Floor, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779 at 2:00 p.m. on
April 18, 1997 and at all adjournments thereof, in respect of all Shares of
the Portfolio as to which the undersigned may be entitled to vote or act.
Each proxy shall have power of substitution and a majority of said proxies
or their substitutes, or any one if only one be present and acting, shall
have all powers hereby granted.
The proxies are hereby authorized and instructed to vote upon the
matters specified in the notice of meeting as set forth on this side of
this proxy. If no choice is indicated as to a proposal, the proxies shall
vote FOR such proposal. Each of the matters is proposed by the Portfolio,
and none of the matters are related to or conditioned on the approval of
any other matter. The proxies may vote in their discretion on any other
matter which may properly come before the meeting.
Please sign and return.
The proxies are hereby instructed to vote as specified.
NOTE: Signature(s) should agree with name(s) as printed hereon. All
joint owners should sign. Fiduciaries please indicate their titles.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE
TRUST. Please sign and return promptly in the enclosed envelope.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS.
KEEP THIS PORTION FOR YOUR RECORDS
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
ARROW MUNICIPAL INCOME PORTFOLIO
APPROVAL OF NEW INVESTMENT ADVISORY CONTRACT
(1) Proposal to approve a New Investment Advisory
Contract (the `New Advisory Contract'') on behalf of
each Portfolio between the Trust and Mississippi Valley
Advisors Inc. (`MVA''), the terms of which are substantially
similar to the existing investment advisory contract
between the Trust and Mark Twain Bank, subject to
and effective upon the consummation of the
acquisition of Mark Twain Bancshares, Inc. by
Mercantile Bancorporation Inc. FOR AGAINST ABSTAIN
(2) Transaction of such other business as FOR AGAINST ABSTAIN
may properly come before the meeting or
--- --- ---
any adjournment thereof.
x x x
----=============== ---------------- ------------------------
Signature (Sign here exactly as name(s) appear above.) Signature (Joint
Owners) Date
[LOGO]
[Account Number]
ARROW GOVERNMENT MONEY MARKET PORTFOLIO
Proxy for Special Meeting of Shareholders - April 18, 1997
The undersigned hereby appoints Gail Cagney, Antoinette D. Brkovich,
Patricia F. Conner, Amanda J. Reed and Suzanne W. Land as proxies to vote
and act at the Special Meeting of Shareholders of the Arrow Government
Money Market Portfolio (the `Portfolio''), a portfolio of Arrow Funds, to
be held at the Portfolio's principal office, Federated Investors Tower,
19th Floor, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779 at 2:00 p.m. on
April 18, 1997 and at all adjournments thereof, in respect of all Shares of
the Portfolio as to which the undersigned may be entitled to vote or act.
Each proxy shall have power of substitution and a majority of said proxies
or their substitutes, or any one if only one be present and acting, shall
have all powers hereby granted.
The proxies are hereby authorized and instructed to vote upon the
matters specified in the notice of meeting as set forth on this side of
this proxy. If no choice is indicated as to a proposal, the proxies shall
vote FOR such proposal. Each of the matters is proposed by the Portfolio,
and none of the matters are related to or conditioned on the approval of
any other matter. The proxies may vote in their discretion on any other
matter which may properly come before the meeting.
Please sign and return.
The proxies are hereby instructed to vote as specified.
NOTE: Signature(s) should agree with name(s) as printed hereon. All
joint owners should sign. Fiduciaries please indicate their titles.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE
TRUST. Please sign and return promptly in the enclosed envelope.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS.
KEEP THIS PORTION FOR YOUR RECORDS
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
ARROW GOVERNMENT MONEY MARKET PORTFOLIO
APPROVAL OF NEW INVESTMENT ADVISORY CONTRACT
(1) Proposal to approve a New Investment Advisory
Contract (the `New Advisory Contract'') on behalf of
each Portfolio between the Trust and Mississippi Valley
Advisors Inc. (`MVA''), the terms of which are substantially
similar to the existing investment advisory contract
between the Trust and Mark Twain Bank, subject to
and effective upon the consummation of the
acquisition of Mark Twain Bancshares, Inc. by
Mercantile Bancorporation Inc. FOR AGAINST ABSTAIN
(2) Transaction of such other business as FOR AGAINST ABSTAIN
may properly come before the meeting or
--- --- ---
any adjournment thereof.
x x x
----=============== ---------------- ------------------------
Signature (Sign here exactly as name(s) appear above.) Signature (Joint Owners)
Date