1
Exhibit 5(b)
INTERIM ADVISORY AGREEMENT
ARMADA FUNDS
ENHANCED INCOME FUND
TOTAL RETURN ADVANTAGE FUND
ADVISORY AGREEMENT
AGREEMENT made as of March 6, 1998 between ARMADA FUNDS, a
Massachusetts business trust, located in Oaks, Pennsylvania (the "Trust") and
NATIONAL ASSET MANAGEMENT CORPORATION, located in Louisville, Kentucky (the
"Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Adviser as investment adviser
to the Enhanced Income and Total Return Advantage Funds (individually, a "Fund"
and collectively, the "Funds");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed among the parties hereto as follows:
1. DELIVERY OF DOCUMENTS. The Adviser acknowledges that
it has received copies of each of the following:
(a) The Trust's Declaration of Trust, as filed
with the State Secretary of the Commonwealth
of Massachusetts on January 29, 1986 and all
amendments thereto (such Declaration of
Trust, as presently in effect and as it
shall from time to time be amended, is
herein called the "Declaration of Trust");
(b) The Trust's Code of Regulations, and
amendments thereto (such Code of
Regulations, as presently in effect and as
it shall from time to time be amended, is
herein called the "Code of Regulations");
(c) Resolutions of the Trust's Board of Trustees
authorizing the appointment of the Adviser
and approving this Agreement;
(d) The Trust's Notification of Registration on
Form N-8A under the 1940 Act as filed with
the Securities and
2
Exchange Commission ("SEC") on September 26,
1985 and all amendments thereto;
(e) The Trust's Registration Statement on Form
N-1A under the Securities Act of 1933, as
amended ("1933 Act") (File No. 33-488) and
under the 1940 Act as filed with the SEC on
September 26, 1985 and all amendments
thereto; and
(f) The Trust's most recent prospectuses and
statements of additional information with
respect to the Funds (such prospectuses and
statements of additional information, as
presently in effect and all amendments and
supplements thereto are herein called
individually, a "Prospectus", and
collectively, the "Prospectuses").
The Trust will furnish the Adviser from time to time with
execution copies of all amendments of or supplements to the foregoing.
2. SERVICES. The Trust hereby appoints the Adviser to
act as investment adviser to the Funds for the period
and on the terms set forth in this Agreement.
Intending to be legally bound, the Adviser accepts
such appointment and agrees to furnish the services
required herein to the Funds for the compensation
hereinafter provided.
Subject to the supervision of the Trust's Board of Trustees,
the Adviser will provide a continuous investment program for each Fund,
including investment research and management with respect to all
securities and investments and cash equivalents in each Fund. The
Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by each Fund. The
Adviser will provide the services under this Agreement in accordance
with each Fund's investment objective, policies, and restrictions as
stated in the Prospectus and resolutions of the Trust's Board of
Trustees applicable to such Fund.
3. SUBCONTRACTORS. It is understood that the Adviser may
from time to time employ or associate with itself
such person or persons as the Adviser may believe to
be particularly fitted to assist in the performance
of this Agreement; provided, however, that the
compensation of such person or persons shall be paid
by the Adviser and that the Adviser shall be as fully
responsible to the Trust for the acts and omissions
of any subcontractor as it is for its own acts and
omissions. Without limiting the generality of the
foregoing, it is agreed that investment advisory
service to any Fund may be provided by a
subcontractor agreeable to the Adviser and approved
in accordance with the provision of the 1940 Act. Any
such sub-advisers are hereinafter referred to as the
"Sub-Advisers."
-2-
3
In the event that any Sub-Adviser appointed hereunder
is terminated, the Adviser may provide investment
advisory services pursuant to this Agreement to the
Fund without further shareholder approval.
Not-withstanding the employment of any Sub-Adviser,
the Adviser shall in all events: (a) establish and
monitor general investment criteria and policies for
the fund; (b) review investments in each fund on a
periodic basis for compliance with its fund's
investment objective, policies and restrictions as
stated in the Prospectus; (c) review periodically any
Sub-Adviser's policies with respect to the placement
of orders for the purchase and sale of portfolio
securities; (d) review, monitor, analyze and report
to the Board of Trustees on the performance of any
Sub-Adviser; (e) furnish to the Board of Trustees or
any Sub-Adviser, reports, statistics and economic
information as may be reasonably requested; and (f)
recommend, either in its sole discretion or in
conjunction with any Sub-Adviser, potential changes
in investment policy.
4. COVENANTS BY ADVISER. The Adviser agrees with respect
to the services provided to each Fund 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 use the same skill and care in
providing such services as it uses in
providing services to similar fiduciary
accounts for which it has investment
responsibilities;
(c) will not make loans to any person to
purchase or carry shares in the Funds, or
make interest-bearing loans to the Trust or
the Funds;
(d) will maintain a policy and practice of
conducting its investment management
activities independently of the Commercial
Departments of all banking affiliates. In
making investment recommendations for the
Funds, personnel will not inquire or take
into consideration whether the issuers (or
related supporting institutions) of
securities proposed for purchase or sale for
the Funds' accounts are customers of the
Commercial Department. In dealing with
commercial customers, the Commercial
Department will not inquire or take into
consideration whether securities of those
customers are held by the Funds;
-3-
4
(e) will place orders pursuant to its investment
determinations for the Funds either directly
with the issuer or with any broker or
dealer. In selecting brokers or dealers for
executing portfolio transactions, the
Adviser will use its best efforts to seek on
behalf of the Trust and each Fund the best
overall terms available. In assessing the
best overall terms available for any
transaction the Adviser shall consider all
factors it deems relevant, including the
breadth of the market in the security, the
price of the security, the financial
condition and execution capability of the
broker or dealer, and the reasonableness of
the commission, if any, both for the
specific transaction and on a continuing
basis. In evaluating the best overall terms
available, and in selecting the broker or
dealer to execute a particular transaction,
the Adviser may also consider the brokerage
and research services (as those terms are
defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended) provided
to any Fund and/or other accounts over which
the Adviser or any affiliate of the Adviser
exercises investment discretion. The Adviser
is authorized, subject to the prior approval
of the Board, to negotiate and pay to a
broker or dealer who provides such brokerage
and research services a commission for
executing a portfolio transaction for any
Fund which is in excess of the amount of
commission another broker or dealer would
have charged for effecting that transaction
if, but only if, the Adviser determines in
good faith that such commission was
reasonable in relation to the value of the
brokerage and research services provided by
such broker or dealer viewed in terms of
that particular transaction or in terms of
the overall responsibilities of the Adviser
with respect to the accounts as to which it
exercises investment discretion. In no
instance will fund securities be purchased
from or sold to the Adviser, any
Sub-Adviser, SEI Investments Distribution
Co. ("SEI") (or any other principal
underwriter to the Trust) or an affiliated
person of either the Trust, the Adviser,
Sub-Adviser, or SEI (or such other principal
underwriter) unless permitted by an order of
the SEC or applicable rules. In executing
portfolio transactions for any Fund, the
Adviser may, but shall not be obligated to,
to the extent permitted by applicable laws
and regulations, aggregate the securities to
be sold or purchased with those of other
Funds and its other clients where such
aggregation is not inconsistent with the
policies set forth in the Trust's
registration statement. In such event, the
Adviser will allocate the securities so
purchased or sold, and the expenses incurred
in the transaction, in the manner
-4-
5
it considers to be the most equitable and
consistent with its fiduciary obligations to
the Funds and such other clients;
(f) will maintain all books and records with
respect to the securities transactions for
the Funds and furnish the Trust's Board of
Trustees such periodic and special reports
as the Board may request; and
(g) will treat confidentially and as proprietary
information of the Trust all records and
other information relative to the Funds and
prior, present 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 Trust, which approval shall not be
unreasonably withheld and may not be
withheld and will be deemed granted where
the Adviser 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 Trust).
5. SERVICES NOT EXCLUSIVE. The services furnished by the
Adviser hereunder are deemed not to be exclusive, and
the Adviser shall be free to furnish similar services
to others so long as its services under this
Agreement are not impaired thereby.
6. BOOKS AND RECORDS. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the
Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust
and further agrees to surrender promptly to the Trust
any of such records upon the Trust's request. The
Adviser 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, the
Adviser will pay all expenses incurred by it in
connection with its activities under this Agreement
other than the cost of securities (including
brokerage commissions, if any) purchased for the
Funds.
8. COMPENSATION. For the services provided and the
expenses assumed pursuant to this Agreement, the
Trust will pay the Adviser from the assets belonging
to the Funds and the Adviser will accept as full
compensation therefor fees, computed daily and paid
monthly, at the following annual rates: .45% of the
average daily
-5-
6
net assets of the Enhanced Income Fund; and .55% of
the average daily net assets of the Total Return
Advantage Fund.
The fee attributable to each Fund shall be the several (and
not joint or joint and several) obligations of each Fund.
The fees payable under this Section 8 shall be maintained in
an interest-bearing escrow account until such Fund's shareholders'
approve the payment of such fees to the Adviser. If a Fund's
shareholders do not approve the payment to the Adviser of such fees for
such period, on or before July 6, 1998, the balance in the escrow
account shall be paid to such Fund.
The Funds will not pay the Adviser any fees other than
compensation permitted by the Order issued to the Trust and the Adviser
from the Securities and Exchange Commission related to such
compensation.
9. LIMITATION OF LIABILITY. The Adviser shall not be
liable for any error of judgment or mistake of law or
for any loss suffered by the Trust 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 the part of the Adviser
in the performance of its duties or from reckless
disregard by it of its obligations and duties under
this Agreement.
10. DURATION AND TERMINATION. This Agreement will become
effective with respect to each Fund on March 6, 1998,
subject to approval of this Agreement by vote of a
majority of the outstanding voting securities of each
such Fund, and, unless sooner terminated as provided
herein, shall continue in effect until June 29, 1998.
Thereafter, if not terminated, this Agreement shall
continue in effect with respect to a particular Fund
for successive twelve month periods ending on June
29, PROVIDED such continuance is specifically
approved at least annually (a) by the vote of a
majority of those members of the Trust's Board of
Trustees who are not interested persons of any party
to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval, and (b)
by the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of the
Fund. Notwithstanding the foregoing, this Agreement
may be terminated as to any Fund at any time, without
the payment of any penalty, by the Trust (by the
Trust's Board of Trustees or by vote of a majority of
the outstanding voting securities of the particular
Fund), or by the Adviser on 60 days' written notice.
This Agreement will immediately terminate in the
event of its assignment. (As used in this Agreement,
the terms "majority of the
-6-
7
outstanding voting securities", "interested persons"
and "assignment" shall have the same meaning of 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. No amendment of this Agreement shall be
effective with respect to a Fund until approved by
vote of a majority of the outstanding voting
securities of that Fund.
12. MISCELLANEOUS. The Adviser expressly agrees that
notwithstanding the termination of or failure to
continue this Agreement with respect to a particular
Fund, the Adviser shall continue to be legally bound
to provide the services required herein for the other
Funds for the period and on the terms set forth in
this Agreement. The captions in this Agreement are
included for convenience of reference only and in no
way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not
be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be
governed by Delaware law.
13. NAMES. The names "ARMADA FUNDS" and "Trustees of
ARMADA FUNDS" 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 January 28, 1986 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 the principal office of the
Trust. The obligations of "ARMADA FUNDS" entered into
in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not
individually, but in such capacities, and are not
binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind
only the Trust property, 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.
-7-
8
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.
SIGNATURES OMITTED
-8-
