<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE
ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
[X] Definitive Proxy Statement (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
ARMADA FUNDS (FILE NOS. 33-488/811-4416)
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 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: ............................................................
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ARMADA FUNDS
One Freedom Valley Drive
Oaks, Pennsylvania 19456
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be Held on August 13, 1998
July 27, 1998
TO THE SHAREHOLDERS OF ARMADA FUNDS:
International Equity Fund
Small Cap Value Fund
Small Cap Growth Fund
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of the International Equity Fund, Small Cap Value Fund and Small Cap
Growth Fund (each, a "Fund" and collectively, the "Funds") of Armada Funds (the
"Trust") will be held on Thursday, August 13, 1998 at 11:00 a.m., Eastern Time,
at One Freedom Valley Drive, Boardroom B, Oaks, Pennsylvania 19456.
The Meeting will be held with respect to the Funds for the following
purposes:
Proposal 1. To approve a new Investment Advisory Agreement providing for
increased advisory fees between the Trust and National City Bank (the
"Adviser") with respect to the International Equity Fund, Small Cap Value
Fund and Small Cap Growth Fund.
Proposal 2. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
The Proposals stated above are discussed in detail in the attached Proxy
Statement. Shareholders of record as of the close of business on June 24, 1998
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
THE ARMADA FUNDS BOARD OF TRUSTEES RECOMMENDS THAT YOU APPROVE THESE
PROPOSALS. IT IS VERY IMPORTANT THAT YOU PUT FORTH YOUR VOTE REGARDING THESE
PROPOSITIONS.
IT IS HOPED THAT YOU WILL ATTEND THE MEETING, BUT IF YOU CANNOT DO SO,
PLEASE FILL IN AND SIGN THE ENCLOSED PROXY, AND RETURN IT IN THE ACCOMPANYING
ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY ALSO FAX YOUR VOTED BALLOT(S) TO
1-888-451-8683 TO REGISTER YOUR VOTE. ANY SHAREHOLDER ATTENDING CAN VOTE IN
PERSON EVEN THOUGH A PROXY HAS ALREADY BEEN RETURNED.
/s/ W. Bruce McConnel, III
W. Bruce McConnel, III
Secretary
Oaks, Pennsylvania
July 27, 1998
<PAGE> 3
ARMADA FUNDS
Oaks, Pennsylvania 19456
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board") of the International Equity Fund,
Small Cap Value Fund and Small Cap Growth Fund (each, a "Fund" and collectively,
the "Funds") of Armada Funds (the "Trust") for use at the Special Meeting of
Shareholders of the Trust and any adjournment(s) thereof (the "Meeting") to be
held on Thursday, August 13, 1998 at 11:00 a.m., Eastern Time, at One Freedom
Valley Drive, Boardroom B, Oaks, Pennsylvania 19456. This Proxy Statement and
accompanying proxy card or cards will first be mailed on or about July 27, 1998.
Only shareholders of record of the International Equity Fund, Small Cap
Value Fund and Small Cap Growth Fund at the close of business on June 24, 1998
will be entitled to vote at the Meeting. The Funds' shares are referred to
herein as "Shares." Each full Share is entitled to one vote and each fractional
Share to a proportionate fractional vote. The following table summarizes the
Proposals to be voted on at the Meeting and indicates those shareholders who are
being solicited with respect to the Proposals:
TABLE
<TABLE>
<CAPTION>
PROPOSAL SHAREHOLDERS SOLICITED
-------- ----------------------
<C> <S> <C>
1. To approve a new Investment Each Fund, voting separately on
Advisory Agreement providing for a Fund-by-Fund basis. All
increased advisory fees between classes of Shares of the same
the Trust and National City Bank Fund will vote together.
with respect to the
International Equity Fund, Small
Cap Value Fund and Small Cap
Growth Fund.
2. To transact such other business Each Fund, voting separately on
as may properly come before the a Fund-by-Fund basis. All
Meeting or any adjournment(s) classes of Shares of the same
thereof. Fund will vote together.
</TABLE>
1
<PAGE> 4
On June 24, 1998, the following Shares were outstanding and entitled to
vote at the Meeting:
<TABLE>
<CAPTION>
NAME OF FUND NUMBER OF SHARES
------------ ----------------
<S> <C>
International Equity Fund:......................... 12,699,290.223
Small Cap Value Fund:.............................. 18,903,509.408
Small Cap Growth Fund:............................. 4,858,181.437
</TABLE>
Proxy solicitations will be made primarily by mail, but proxy solicitations
also may be made by facsimile, telegraph or personal interview. If voting by
facsimile, shareholders should send their ballots to fax # 1-888-451-8683. The
Adviser will bear all proxy solicitation costs. Any shareholder submitting a
proxy may revoke it at any time before it is exercised by submitting to the
Trust a written notice of revocation or a subsequently executed proxy or by
attending the Meeting and voting in person.
THE TRUST WILL FURNISH TO SHAREHOLDERS UPON REQUEST, WITHOUT CHARGE, COPIES
OF ITS ANNUAL REPORTS TO SHAREHOLDERS CONTAINING AUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MAY 31, 1998. REQUESTS FOR COPIES OF THE ANNUAL
REPORTS SHOULD BE DIRECTED TO THE TRUST AT THE ADDRESS AT THE BEGINNING OF THIS
DOCUMENT OR BY TELEPHONE AT 1-800-622-FUND (3863). THE ANNUAL REPORTS ARE NOT TO
BE REGARDED AS PROXY SOLICITING MATERIAL.
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WISH YOUR SHARES TO
BE VOTED, PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD OR CARDS AND MAIL THE
SAME IN THE ENCLOSED REPLY ENVELOPE. YOU MAY ALSO FAX YOUR VOTED BALLOT(S) TO
1-888-451-8683 TO REGISTER YOUR VOTE. PLEASE ALLOW SUFFICIENT TIME FOR THE PROXY
CARD OR CARDS TO BE RECEIVED ON OR BEFORE 11:00 A.M., EASTERN TIME, ON AUGUST
12, 1998.
PROPOSAL 1: TO APPROVE A NEW INVESTMENT ADVISORY AGREEMENT
Currently, National City Bank serves as the investment adviser to the
International Equity Fund and Small Cap Growth Fund under an Advisory Agreement,
dated July 31, 1997, and to the Small Cap Value Fund under an Advisory
Agreement, dated November 19, 1997 (each, an "Existing Advisory Agreement" and
collectively, the "Existing Advisory Agreements"). At the Meeting, shareholders
of the International Equity Fund, Small Cap Value Fund and
2
<PAGE> 5
Small Cap Growth Fund will be asked to vote on the approval of a new investment
advisory agreement (the "New Advisory Agreement") with National City Bank which
is summarized below. A copy of the New Advisory Agreement is attached to this
Proxy Statement as Exhibit A, and the description of the New Advisory Agreement
which follows is qualified in its entirety by reference to Exhibit A.
The Existing Advisory Agreements and the proposed New Advisory Agreement
are identical in all material substantive respects except that: (i) the New
Advisory Agreement provides for an increase in the compensation payable by each
Fund for investment advisory services; (ii) the New Advisory Agreement provides
the Adviser enhanced flexibility to negotiate portfolio brokerage commissions
for the International Equity and Small Cap Growth Funds to the extent permitted
by law (the Existing Advisory Agreement relating to the Small Cap Value Fund
contains identical provisions); and (iii) the effective and termination dates
contained in the agreements vary.
The International Equity and Small Cap Growth Funds commenced investment
operations on August 1, 1997 and the Small Cap Value Fund commenced investment
operations on July 26, 1994.
DESCRIPTION OF EXISTING ADVISORY AGREEMENTS
At meetings held on July 17, 1997 and September 17, 1997, the Existing
Advisory Agreements were approved both by the Board of Trustees and by a
majority of Trustees of the Trust who are not "interested persons"
("Disinterested Trustees") as defined in Section 2(a)(19) of the Investment
Company Act of 1940 ("1940 Act") of the Trust or the Adviser. SEI Investments
Distribution Co., as sole shareholder of the International Equity and Small Cap
Growth Funds, approved the Existing Advisory Agreements for such Funds. The
Existing Advisory Agreement relating to the Small Cap Value Fund, which included
new provisions intended to provide the Adviser additional flexibility to
negotiate, to the extent legally permitted, the amount of portfolio brokerage
commissions payable by the Fund in consideration for brokerage and research
services, was approved by the public shareholders of the Fund on November 19,
1997.
In each of the Existing Advisory Agreements, the Adviser has agreed,
subject to the general supervision of the Trust's Board of Trustees, to provide
a continuous investment program and to be responsible for, make decisions with
respect to, and place orders for, all purchases and sales of each Fund's
securities. These responsibilities are presently performed entirely by National
City Bank with respect to all of the Funds. The Small Cap Growth Fund, however,
is sub-advised and effectively managed by Wellington Management Company, LLP
pursuant to a Sub-Advisory Agreement dated July 31, 1997. As of August 1, 1998,
such Sub-Advisory
3
<PAGE> 6
Agreement will be terminated and National City Bank will manage the Small Cap
Growth Fund.
For the services provided and expenses assumed pursuant to the respective
Existing Advisory Agreements, National City Bank is entitled to a fee, computed
daily and payable monthly, at the annual rate of .75% of the average daily net
assets of each Fund. For the fiscal year ended May 31, 1998, the Trust paid the
Adviser $570,684, $1,989,606 and $209,152 in advisory fees on behalf of the
International Equity, Small Cap Value and Small Cap Growth Funds, respectively.
In addition, National City Bank receives compensation as the Trust's
custodian under a separate agreement and National City Bank and NatCity
Investments, Inc., an affiliate of National City Bank, receive fees as a
shareholder servicing agent under the Trust's Shareholder Services Plan relating
to Retail Shares. See "Information About the Adviser."
Unless sooner terminated, the Existing Advisory Agreement for each Fund
will continue in effect with respect to the Fund until September 30, 1998. Each
agreement will terminate automatically in the event of its assignment and is
terminable with respect to any Fund to which it relates at any time without
penalty by the Board of Trustees or by vote of a Majority of the Outstanding
Shares of such Fund (as defined below) and is terminable by the Adviser on 60
days' written notice to the Trust. Accordingly, the Existing Advisory Agreements
will terminate with respect to each Fund whose shareholders approve the New
Advisory Agreement at the Meeting.
DESCRIPTION OF NEW ADVISORY AGREEMENT
SIMILARITIES BETWEEN THE EXISTING ADVISORY AGREEMENTS AND THE NEW ADVISORY
AGREEMENT
As in the Existing Advisory Agreements, National City Bank agrees in the
New Advisory Agreement, subject to the general supervision of the Trust's Board
of Trustees, to provide a continuous investment program and to be responsible
for, make decisions with respect to, and place orders for, all purchases and
sales of each Fund's securities.
Portfolio securities purchased and sold for the Funds are generally
purchased directly from the issuer or from an underwriter making a market in the
securities. Purchases from an underwriter include a commission or concession
paid by the issuer to the underwriter and purchases from dealers serving as
market makers may include the spread between the bid and asked price.
Transactions on stock exchanges involve the payment of negotiated brokerage
commissions. There is generally no stated commission in the case of securities
traded in the over-the-counter market; the over-the-counter price includes an
undisclosed commission or
4
<PAGE> 7
mark-up. For the fiscal year ended May 31, 1998, the International Equity, Small
Cap Value and Small Cap Growth Funds paid $289,859, $841,965 and $51,366,
respectively, in brokerage commissions to non-affiliated brokers.
Each of the Existing Advisory Agreements and New Advisory Agreement
provides that the Adviser may not make loans for the purpose of carrying or
purchasing the Trust's shares or make loans to the Trust or the Funds. The
agreements also provide that the Adviser will 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 the agreements, 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 or duties.
Like the Existing Advisory Agreements, the New Advisory Agreement permits
National City Bank to aggregate purchase orders for securities on behalf of a
particular Fund with orders for the same securities placed for other advisory
clients. The aggregation of customer orders, sometimes known as "block" trading
or "bunching" of trades, may benefit the Funds by providing the Adviser the
ability to reduce brokerage expenses and otherwise obtain more favorable terms
of execution. The Securities and Exchange Commission requires that an adviser
that aggregates orders among different clients do so consistent with its duty to
seek best execution for its clients and consistent with the terms of the
adviser's advisory agreement with the participating clients. National City Bank
allocates orders among the Funds and other clients equitably and only in
accordance with written procedures that have been approved by the Board of
Trustees.
DIFFERENCES BETWEEN THE EXISTING ADVISORY AGREEMENTS AND THE NEW ADVISORY
AGREEMENT
The terms and conditions of the New Advisory Agreement, including the
advisory fees charged thereunder, differ in certain respects from those set
forth in the Existing Advisory Agreements.
Advisory Fees. For the services provided and assumed pursuant to the New
Advisory Agreement, National City Bank as Adviser is entitled to a fee, computed
daily and payable monthly, at the annual rate of 1.15% of the average daily net
assets of the International Equity Fund and 1.00% of the average daily net
assets of each of the Small Cap Value Fund and Small Cap Growth Fund. If the New
Advisory Agreement had been in effect with respect to the International Equity,
Small Cap Value and Small Cap Growth Funds for the fiscal year ended May 31,
1998, the respective advisory fees would have totalled $952,918, $2,652,808 and
$302,444.
5
<PAGE> 8
The following table compares the existing advisory and other fees payable
by each Fund under its Existing Advisory Agreement for the fiscal year ended May
31, 1998 (restated to reflect current fees) and the "pro forma" advisory and
other fees that each Fund would have paid if the New Advisory Agreement had been
in effect during the same period. The advisory fees that would have been payable
under the New Advisory Agreement for the fiscal year ended May 31, 1998 would
have been 53%, 33% and 33% higher than the advisory fees payable under the
Existing Advisory Agreement with respect to the International Equity, Small Cap
Value and Small Cap Growth Funds.
Annual Portfolio Operating Expenses
(as a percentage of net assets)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
-----------------------------------------------------------------
RETAIL SHARES B SHARES INSTITUTIONAL SHARES
------------------- ------------------- ---------------------
CURRENT PRO FORMA CURRENT PRO FORMA CURRENT PRO FORMA
------- --------- ------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees............... .75% 1.15% .75% 1.15% .75% 1.15%
Other Expenses....... .59% .59% 1.28% 1.28% .34% .34%
Total Fund Operating
Expenses........... 1.34% 1.74% 2.03% 2.43% 1.09% 1.49%
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND
-----------------------------------------------------------------
RETAIL SHARES B SHARES INSTITUTIONAL SHARES
------------------- ------------------- ---------------------
CURRENT PRO FORMA CURRENT PRO FORMA CURRENT PRO FORMA
------- --------- ------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees............... .75% 1.00% .75% 1.00% .75% 1.00%
Other Expenses....... .46% .46% 1.17% 1.17% .21% .21%
Total Fund Operating
Expenses........... 1.21% 1.46% 1.92% 2.17% .96% 1.21%
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP GROWTH FUND
-----------------------------------------------------------------
RETAIL SHARES B SHARES INSTITUTIONAL SHARES
------------------- ------------------- ---------------------
CURRENT PRO FORMA CURRENT PRO FORMA CURRENT PRO FORMA
------- --------- ------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Advisory
Fees............... .75% 1.00% .75% 1.00% .75% 1.00%
Other Expenses....... .46% .46% 1.17% 1.17% .21% .21%
Total Fund Operating
Expenses........... 1.21% 1.46% 1.92% 2.17% .96% 1.21%
</TABLE>
Example: The following illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods assuming (i) a 5% annual rate
of return and (ii) redemption at the end of each time period. Any fees that are
charged by affiliates of the Adviser or other institutions directly to their
customer accounts
6
<PAGE> 9
for services related to investments in shares of the Funds are in addition to
and not reflected in the fees and expenses described above.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Current International Equity Retail
Shares(1)............................... $68 $ 95 $124 $207
Pro Forma International Equity Retail
Shares(1)............................... $72 $107 $144 $249
Current International Equity B
Shares(2)............................... $71 $104 $129 $218(3)
Pro Forma International Equity B
Shares(2)............................... $75 $116 $150 $260(3)
Current International Equity Institutional
Shares.................................. $11 $ 35 $ 60 $133
Pro Forma International Equity
Institutional Shares.................... $15 $ 47 $ 81 $178
Current Small Cap Value Retail
Shares(1)............................... $67 $ 91 $118 $194
Pro Forma Small Cap Value Retail
Shares(1)............................... $69 $ 99 $130 $220
Current Small Cap Value B Shares(2)....... $69 $100 $124 $206(3)
Pro Forma Small Cap Value B Shares(2)..... $72 $108 $136 $232(3)
Current Small Cap Value Institutional
Shares.................................. $10 $ 31 $ 53 $118
Pro Forma Small Cap Value Institutional
Shares.................................. $12 $ 38 $ 66 $147
Current Small Cap Growth Retail
Shares(1)............................... $67 $ 91 $118 $194
Pro Forma Small Cap Growth Retail
Shares(1)............................... $69 $ 99 $130 $220
Current Small Cap Growth B Shares(2)...... $69 $100 $124 $206(3)
Pro Forma Small Cap Growth B Shares(2).... $72 $108 $136 $232(3)
Current Small Cap Growth Institutional
Shares.................................. $10 $ 31 $ 53 $118
Pro Forma Small Cap Growth Institutional
Shares.................................. $12 $ 38 $ 66 $147
</TABLE>
- ---------------
(1) Assumes deduction at time of purchase of maximum applicable front-end sales
charge.
(2) Assumes deduction of maximum applicable contingent deferred sales charge.
(3) Based on conversion of B shares to Retail shares after eight years.
7
<PAGE> 10
ENHANCED FLEXIBILITY FOR THE ADVISER TO NEGOTIATE PORTFOLIO BROKERAGE
COMMISSIONS. In placing portfolio transaction orders with brokers and dealers
for the Funds, National City Bank is required under the Existing Advisory
Agreements to "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 Existing Advisory Agreements and the New Advisory
Agreement require the Adviser to consider all factors deemed 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. Moreover, in evaluating the best overall terms available
and selecting brokers or dealers to execute portfolio transactions, the Existing
Advisory Agreements and the New Advisory Agreement provide that the Adviser may
consider brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
provided to any Fund and/or other accounts over which the Adviser or any of its
affiliates exercises investment discretion.
In addition, subject to the prior approval of the Trust's Board of
Trustees, the Existing Advisory Agreements and the New Advisory Agreement
authorize the Adviser to negotiate and pay to a broker or dealer providing such
brokerage and research services a commission for executing a portfolio
transaction which is higher than the amount of commission another broker or
dealer would have charged for effecting the same transaction if, but only if,
National City Bank determines in good faith that such commission is reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer. The Adviser makes this determination "viewed in terms of that
particular transaction or in terms of the overall responsibilities of the
Adviser to the particular Fund and to the Trust" under the Existing Advisory
Agreement relating to the International Equity and Small Cap Growth Funds and
"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" under the Existing Advisory Agreement relating
to the Small Cap Value Fund. The New Advisory Agreement would adopt this
provision, as set forth in the Existing Advisory Agreement relating to the Small
Cap Value Fund, for all Funds of the Trust including the International Equity
and Small Cap Growth Funds.
This new provision relating to the International Equity and Small Cap
Growth Funds is intended to provide the Adviser additional flexibility to
negotiate, to the extent legally permitted, the amount of brokerage commissions
payable by a Fund in consideration for brokerage and research services. Approval
of the New Advisory Agreement would conform in this regard the provisions of the
various
8
<PAGE> 11
agreements under which National City Bank provides advisory services to the
Trust.
The Adviser has advised the Board of Trustees that it does not presently
intend to change its current policies governing the allocation of portfolio
brokerage for the Trust but will continue to seek "best execution" with respect
to all transactions. The Adviser will therefore consider the full range and
quality of a broker's services in placing brokerage for the Trust including,
among other things, the value of research provided as well as the firm's
execution capability, commission rate, financial responsibility and
responsiveness to the requirements of the particular transaction. Obtaining
lowest possible commission cost has not been in the past, nor will it be in the
future, the determinative factor in placing orders for portfolio transactions.
Rather, the Adviser continues to assess whether any given portfolio transaction
represents the best qualitative execution for the Fund.
EFFECTIVE AND TERMINATION DATES. The New Advisory Agreement will take
effect with respect to a particular Fund when approved by the holders of a
Majority of the Outstanding Shares of the Fund and, unless sooner terminated,
will continue in effect until September 30, 1999. Thereafter, if not terminated,
the New Advisory Agreement will continue in effect with respect to a Fund for
successive twelve month periods ending on September 30, provided its continuance
with respect to such Fund is specifically approved at least annually (a) by the
vote of a majority of the Disinterested Trustees, 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 a vote of a majority of the outstanding shares of that Fund.
The term "a Majority of the Outstanding Shares" of a Fund means the lesser of
(i) 67% of the Shares of the Fund present at the Meeting if the holders of more
than 50% of the outstanding Shares of such Fund are present in person or by
proxy, or (ii) more than 50% of the outstanding Shares of such Fund.
If the New Advisory Agreement is not approved by the holders of a Majority
of the Outstanding Shares of a Fund to which it relates, the Board of Trustees
will reconsider its terms and the Existing Advisory Agreement will remain in
effect with respect to such Fund pending a further decision by the Board.
BOARD CONSIDERATIONS
At a regular meeting of the Board of Trustees held on February 17, 1998,
the Board of Trustees considered the New Advisory Agreement with respect to each
Fund and whether to recommend it for approval by each Fund's shareholders.
In proposing that the contractual advisory fees be increased from .75% to
1.15% for the International Equity Fund and from .75% to 1.00% for the Small Cap
9
<PAGE> 12
Value Fund and Small Cap Growth Fund, representatives of National City Bank
stated at the Board meeting that they did not believe that the compensation
payable under the Existing Advisory Agreements fairly reflected the complexity
and related costs of managing these Funds. At the same time, they emphasized the
importance of maintaining an overall expense ratio for each Fund that was
competitive and noted that the proposed advisory fee would be comparable with
advisory fees paid by other funds having similar investment objectives. The
Adviser further noted that the current advisory fee for the International Equity
Fund was the same as the advisory fee of the domestic equity funds and did not,
in the view of the Adviser, adequately compensate it for the complexity of
managing an international portfolio. According to National City Bank,
international funds involve additional analysis of currency, international,
political and economic risks and the added demands of providing daily pricing
for a global multi-currency portfolio. As such, the Adviser believed that the
advisory fee payable by an international fund should be higher than that payable
by a domestic fund.
The Board of Trustees reviewed National City Bank's proposal and reasons
for recommending the proposed advisory fee increases, as summarized above. The
Board in particular took into account (i) the nature and quality of the advisory
services rendered, giving due consideration to the likely impact of the proposed
fee on each Fund's relative performance, and (ii) the relationship of the
proposed advisory fee to the fees payable by comparable investment company
portfolios. The Board determined, after evaluating the information and
documentation provided and considering such other information as it deemed
necessary, that the increase in the advisory fee payable with respect to each of
the International Equity, Small Cap Value and Small Cap Growth Funds was
reasonable, fair and in the best interests of the shareholders of the Funds. All
of the members of the Board, including its Disinterested Trustees, approved the
New Advisory Agreement with respect to each Fund and directed that it be
submitted to shareholders for approval.
INFORMATION ABOUT THE ADVISER
National City Bank is a wholly-owned subsidiary of National City
Corporation, a publicly-owned bank holding company, whose offices are located at
1900 East Ninth Street, Cleveland, Ohio 44114. As of May 31, 1998, to the
Trust's knowledge, as of such date, no person owned more than 10% of the issued
and outstanding shares of any class of the Corporation's stock.
National City Bank provides trust and banking services to individuals,
corporations, and institutions both nationally and internationally, including
investment management, estate and trust administration, financial planning,
corporate trust and agency, and personal and corporate banking. As of April 30,
1998,
10
<PAGE> 13
National City Bank's Trust Department had approximately $18.3 billion in assets
under management and National City Bank had approximately $25.5 billion in total
trust assets. National City Bank is a member bank of the Federal Reserve System
and the Federal Deposit Insurance Corporation.
The Adviser also acts as investment adviser to various other registered
investment company portfolios of Armada. The table below sets forth certain
information with respect to the equity investment company portfolios that the
Adviser advises with similar investment objectives to those of the Funds:
FOR THE FISCAL YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
RATE OF GROSS AMOUNT
NAME OF FUND NET ASSETS ADVISORY FEES ADVISORY FEES WAIVED
------------ ---------- ------------- ------------- --------
<S> <C> <C> <C> <C>
International Equity
Fund............... $136,219,187 .75% $ 621,468 (50,784)
Small Cap Value
Fund............... $294,990,214 .75% $1,989,606 --
Small Cap Growth
Fund............... $ 54,807,693 75% $ 226,833 (17,681)
Equity Growth Fund... $364,817,175 .75% $2,395,579 --
Equity Income Fund... $196,076,817 .75% $1,237,195 --
Core Equity Fund..... $110,913,770 .75% $ 672,905 (64,683)
Tax Managed Equity
Fund............... $158,962,639 .75% $ 173,851 (173,851)
</TABLE>
The International Equity, Small Cap Growth and Core Equity Funds commenced
investment operations on August 1, 1997. The Tax Managed Equity Fund commenced
investment operations on April 9, 1998.
National City Bank also serves as custodian of the Trust's assets. As the
Trust's custodian, National City Bank earned fees in the amount of $877,333 for
the fiscal year ended May 31, 1998. NatCity Investments, Inc. earned shareholder
servicing fees in the amount of $528,307 for the Trust's fiscal year ended May
31, 1998. The table below sets forth the custodian fees paid by the equity
investment
11
<PAGE> 14
portfolios that the Adviser advises and the shareholder servicing fees paid with
respect to the Retail shares of such portfolios:
FOR THE FISCAL YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
SHAREHOLDER CUSTODIAN
NAME OF FUND SERVICING FEES FEES
------------ -------------- ---------
<S> <C> <C>
International Equity Fund................... $ 16 $172,207
Small Cap Value Fund........................ $15,973 $ 38,494
Small Cap Growth Fund....................... 25 $ 6,151
Equity Growth Fund.......................... $20,066 $ 44,831
Equity Income Fund.......................... $ 1,485 $ 27,409
Core Equity Fund............................ $ 215 $ 17,481
Tax Managed Equity Fund..................... $ 0 $ 4,632
</TABLE>
AUTHORITY TO ACT AS INVESTMENT ADVISER
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, (a)
prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 or any affiliate thereof from sponsoring, organizing, or
controlling a registered, open-end investment company continuously engaged in
the issuance of its shares, but (b) do not prohibit such a bank holding company
or affiliate from acting as investment adviser, transfer agent, or custodian to
such an investment company. The Adviser believes that it may perform the
services contemplated by the New Advisory Agreement with the Trust as described
therein and in the Trust's Prospectuses for the respective Funds without
violation of applicable banking laws or regulations. However, there are no
controlling judicial precedents and future changes in legal requirements
relating to the permissible activities of banks and their affiliates, as well as
future interpretations of present and future requirements, could prevent the
Adviser from performing services for the Trust. If the Adviser were prohibited
from providing services to the Trust, the Board of Trustees would consider
selecting another qualified firm. Any new investment advisory agreement would be
subject to shareholder approval.
Should future legislative, judicial, or administrative action prohibit or
restrict the proposed activities of the Adviser, or its affiliated and
correspondent banks in connection with shareholder purchases of Trust shares,
the Adviser and its affiliated and correspondent banks might be required to
alter materially or discontinue the services offered by them to shareholders. It
is not anticipated, however, that any
12
<PAGE> 15
resulting change in the Trust's method of operations would affect its net asset
value per share or result in financial losses to any shareholder.
If current restrictions preventing a bank or its affiliates from legally
sponsoring, organizing, controlling, or distributing shares of an investment
company were relaxed, the Adviser, or an affiliate of the Adviser, would
consider the possibility of offering to perform additional services for the
Trust. Legislation modifying such restrictions has been proposed in past
Sessions of Congress. It is not possible, of course, to predict whether or in
what form such legislation might be enacted or the terms upon which the Adviser,
or such an affiliate, might offer to provide such services.
APPROVAL OF PROPOSAL 1
In order for Proposal 1 to be adopted with respect to a particular Fund, it
must be approved by a Majority of the Outstanding Shares of that Fund. Shares of
each Fund affected will be voted separately on a Fund-by-Fund basis on Proposal
1.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE NEW ADVISORY AGREEMENT.
ADDITIONAL INFORMATION
INVESTMENT ADVISER
The names and principal occupations of the principal executive officers and
each director of National City Bank as of April 30, 1998 are set forth below.
Unless otherwise noted, the address of each such officer and director is 1900
East Ninth Street, Cleveland, Ohio 44114.:
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
NAME NATIONAL CITY BANK CONNECTIONS BUSINESS
---- ------------------ -------------- --------
<S> <C> <C> <C>
George R. Berlin Director President and Chief
Executive Officer,
Berco, Inc.
Thomas G. Breitenbach Director President and Chief Health care
Executive Officer,
Premier Health
Partners
Steve D. Bullock Director Chief Executive Non-Profit
Officer and Chapter organization
Manager, American Red
Cross
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
NAME NATIONAL CITY BANK CONNECTIONS BUSINESS
- ---- ------------------ -------------- --------
<S> <C> <C> <C>
David A. Daberko Director Chairman and Chief Bank holding company
Executive Officer,
National City
Corporation
Director: Banks
National City Bank
of Indiana
National City Bank
of Kentucky
National City Bank
of Pennsylvania
First of America Bank
N.A.
Federal Reserve Bank
of Cleveland
Trustee: Civic organizations
Cleveland Tomorrow
Greater Cleveland
Council of the Boy
Scouts of America
Case Western Reserve
University
Hawken School
Neighborhood Progress
Ohio Foundation of
Independent Colleges
University Circle
Incorporated
University Hospital
Health System Board
Member, Greater
Cleveland Growth
Association
Member, The Bankers
Roundtable
Vincent A. DiGirolamo Director Vice Chairman, Bank holding company
National City
Corporation
Daniel W. Duval Director President and Chief
Executive Officer,
Robbins & Myers, Inc.
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
NAME NATIONAL CITY BANK CONNECTIONS BUSINESS
- ---- ------------------ -------------- --------
<S> <C> <C> <C>
Thomas J. Fitzpatrick Director Chairman and Chief
Executive Officer,
Elford, Inc.
Gary A. Glaser Chairman Executive Vice Bank holding company
President National
City Corporation
Gordon D. Harnett Director President, Chairman Manufacturer of
and Chief Executive engineering material
Officer, Brush
Wellman, Inc.
Donald V. Kellermeyer Director President,
Kellermeyer Co.
William G. Kelley Director Chairman and Chief
Executive Officer,
Consolidated Stores
Corporation
J. Peter Kelly Director President and Chief Manufacturer of steel
Operating Officer,
LTV Corp.
William E. MacDonald III President, Chief Executive Vice Bank holding company
Executive Officer President, National
and Director City Corporation
William P. Madar Director Chairman, Nordson Manufacturer of
Corporation machinery
Paul A. Ormond Director Chairman, President
and Chief Executive
Officer, Health Care
& Retirement Corp.
William F. Patient Director Chairman, President PVC manufacturer
and Chief Executive
Officer, The Geon
Company
Shelley B. Roth Director President, Pierre's Ice cream
French Ice Cream
Company
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
NAME NATIONAL CITY BANK CONNECTIONS BUSINESS
- ---- ------------------ -------------- --------
<S> <C> <C> <C>
Dr. K. Wayne Smith Director President and Chief
Executive Officer,
OCLC Online Computer
Library, Inc.
Thomas C. Sullivan Director Chairman of the Board Manufacturer of
and Chief Executive protective coatings,
Officer, RPM, Inc. roofing material and
paint
Dr. Jerry S. Thornton Director President, Cuyahoga Education
Community College
John R. Werren, Esq. Director Partner, Day, Law firm
Ketterer, Raley,
Wright & Rybollt
W. Douglas Bannerman Senior Executive Senior Vice Bank holding company
vice President, President, National
Corporate Banking City Corporation
Jeffrey M. Biggar Executive Vice Senior Vice Bank holding company
President, Private President, National
Client Group City Corporation
Timothy R. Fitzwater President and None
Chief Executive
Officer, Northeast
Region
Salvatore F. Gianino President and None
Chief Executive
Officer, Northwest
Region
James H. Gilmore Executive Vice None
President, NCCS
Group
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
NAME NATIONAL CITY BANK CONNECTIONS BUSINESS
- ---- ------------------ -------------- --------
<S> <C> <C> <C>
Kenneth M. Goetz Executive Vice None
President,
Corporate Banking
Jane Grebenc Executive Vice None
President, Retail
Banking
Robert K. Healey, Jr. Executive Vice None
President, Retail
Banking
Katherine B. Hollingsworth Executive Vice None
President,
Southwest Region
Dorothy M. Horvath Executive Vice None
President, Central
Region
James Hughes Executive Vice Senior Vice Bank holding company
President, President, National
Northcoast Region City Corporation
Jeffrey D. Kelly Executive Vice Executive Vice Bank holding company
President, Bank President, National
Investment Group City Corporation
Timothy J. Lathe Executive Vice None
President, Multi-
national
Stephen McLane Executive Vice None
President, Central
Region
Bruce T. Muddell Executive Vice None
President, Credit
Administration
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
POSITION WITH OTHER BUSINESS TYPE OF
NAME NATIONAL CITY BANK CONNECTIONS BUSINESS
- ---- ------------------ -------------- --------
<S> <C> <C> <C>
Richard A. Ray Executive Vice None
President, Central
Region
Philip L. Rice Executive Vice None
President,
Northcoast Region
David W. Ridenour Executive Vice None
President,
Northwest Region
Robert A. Robinson Executive Vice None
President,
Northwest Region
Frederick W. Schantz President and None
Chief Executive
Officer, Southwest
Region
Jeffrey T. Siler Executive Vice None
President,
Southwest Region
William F. Smith Executive Vice None
President, Central
Region
Harold B. Todd, Jr. Executive Vice Executive Vice Bank holding company
President, President, National
Institutional City Corporation
Trust and Asset
Management
Gregory L. Tunis Senior Executive None
Vice President,
Retail Banking
</TABLE>
Herbert R. Martens, Jr., an officer of National City Corporation, also
serves as an officer and director of the Trust. See "Additional
Information -- Officers."
18
<PAGE> 21
BENEFICIAL OWNERS OF THE TRUST
As of June 24, 1998, the following persons owned of record 5 percent or
more of the shares of the Funds:
<TABLE>
<CAPTION>
# OF % OF
OUTSTANDING OUTSTANDING
SHARES SHARES
-------------- -----------
<S> <C> <C> <C>
International Equity Fund National City Trust Mutual Funds 9,459,134.3040 74.71%
(Institutional) P. O. Box 94777
Cleveland, OH 44101-4777
International Equity Fund Wheat, First Securities, Inc. 2,563.2480 7.27%
(Retail) 9912 Young Road
Wattsburg, PA 16442-9529
Wheat, First Securities, Inc. 2,292.0670 6.47%
James R. Luke
62 North Lake Street
North East, PA 16428-1321
International Equity Fund Wheat, First Securities, Inc. 1,845.6990 90.29%
(B) 1190 Parkside Drive
Limestone, NY 14753-9704
SEI Investments Co. 107.5273 9.28%
ATTN: Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
Small Cap Value Fund National City Trust Mutual Funds 16,894,905.6206 93.90%
(Institutional) P. O. Box 94777
Cleveland, OH 44101-4777
Small Cap Value Fund No shareholders owned 5% or more of the outstanding shares of
(Retail) this class.
Small Cap Value Fund (B) John K. Wojohowski IRA 2,262.5880 36.89%
Wheat, First Securities as Custodian
Box 48 West Street
Mt. Pleasant, OH 43939-0848
Daniel P. Schulz IRA 873.3290 24.24%
Wheat, First Securities as Custodian
7917 Conifer Drive
Louisville, KY 40258-2236
Wheat, First Securities, Inc. 757.3520 12.35%
1190 Parkside Drive
Limestone, NY 14753-9704
Wheat, First Securities, Inc. 743.7460 12.13%
1016 Westgate Pl.
Louisville, KY 40207-2327
Wheat, First Securities, Inc. 562.8520 9.18%
Linda D. Musick
Lisa A. Skaggs
2779 Stuart Road
Rockbridge, OH 43149
</TABLE>
19
<PAGE> 22
<TABLE>
<CAPTION>
# OF % OF
OUTSTANDING OUTSTANDING
SHARES SHARES
-------------- -----------
<S> <C> <C> <C>
Small Cap Growth Fund National City Trust Mutual Funds 3,395,636.9120 70.44%
(Institutional) P.O. Box 94777
Cleveland, OH 44101-4777
Small Cap Growth Fund Capital Network Services 5,863.9560 15.47%
(Retail) One Bush Street, 11th Floor
San Francisco, CA 94104-4425
Schweizer Dipple Inc. 401K Plan 2,486.4570 6.56%
James G. Dwyer
7227 Division Street
Oakwood Village, OH 44146-5405
Schweizer Dipple Inc. 401K Plan 2,368.4310 6.25%
Lynn E. Ulrich
7227 Division Street
Oakwood Village, OH 44146-5405
Small Cap Growth Fund (B) SEI Investments Co. 93.8090 95.66%
ATTN: Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>
All of these Shares were beneficially owned by the record owners named
above because they possessed or shared investment or voting power with respect
to them while owning the Shares or while acting in a fiduciary, advisory,
custodial, or other similar capacity on behalf of their customers.
For purposes of the 1940 Act, any person who owns beneficially, either
directly or through one or more controlled companies, more than 25 percent of
the voting securities of a company is presumed to "control" such company. Under
this definition, National City Corporation and its affiliates may be deemed to
be controlling persons of the Trust.
As of June 24, 1998, the Trust's Trustees and officers, as a group,
beneficially owned less than 1 percent of the Shares of each Fund of the Trust.
SHAREHOLDER MEETINGS
The Trust is organized as a Massachusetts business trust. The Trust's
Declaration of Trust does not require that an annual meeting of shareholders be
held each year. The Trust does not intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Trust's Code of Regulations provides that special meetings of shareholders,
including meetings to consider the removal of trustees, shall be called at the
written request of the shareholders entitled to vote at least 10% of the
outstanding shares of the Trust entitled to be voted at such meetings.
20
<PAGE> 23
Shareholders wishing to submit proposals for inclusion in a proxy statement
for a subsequent meeting of shareholders should send their written proposals to
the Trust's Secretary, W. Bruce McConnel, III, 1345 Chestnut Street, Suite 1300,
Philadelphia, PA, 19107. Mere submission of a shareholder proposal does not
guarantee inclusion of the proposal in the proxy statement or presentation of
the proposal at the meeting since such inclusion and presentation are subject to
compliance with certain federal regulations.
QUORUM AND VOTING MATTERS
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Trust's Board of Trustees in connection with the Meeting. It
is expected that the solicitation of proxies will be primarily by mail. Officers
and service contractors of the Trust may also solicit proxies by telegraph,
facsimile or personal interview. Shareholders requiring further information with
respect to electronically transmitted voting instructions or the proxy generally
should contact 1-800-622-FUND (3863). If voting by facsimile, shareholders
should send their ballots to FAX # 1-888-451-8683. Any shareholder giving a
proxy may revoke it at any time before it is exercised by submitting to the
Trust a written notice of revocation or a subsequently executed proxy or by
attending the Meeting and voting in person.
In the event that a quorum is not present at the Meeting, or in the event
that a quorum is present at the Meeting but sufficient votes to approve a
particular Proposal are not received, the persons named as proxies, or their
substitutes, may propose one or more adjournments of the Meeting to permit
further solicitation of the proxies. Any such adjournment will require the
affirmative vote of a majority of those Shares affected by the adjournment that
are represented at the Meeting in person or by proxy. If a quorum is present,
the persons named as proxies will vote those proxies which they are entitled to
vote FOR the Proposal in favor of such adjournments, and will vote those proxies
required to be voted AGAINST such Proposal against any adjournment. A
shareholder vote may be taken with respect to one or more of the Funds on any of
the (but not all) Proposals prior to any such adjournment as to which sufficient
votes have been received for approval. A quorum is constituted with respect to
each of the Funds by the presence in person or by proxy of the holders of more
than 50% of the outstanding Shares thereof entitled to vote at the Meeting. For
purposes of determining the presence of a quorum for transacting business at the
Meeting, abstentions, but not broker "non-votes' (that is, proxies from brokers
or nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote Shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power),
will be treated as Shares that are present at the Meeting
21
<PAGE> 24
but which have not been voted. Abstentions and broker "non-votes" will have the
effect of a "no" vote for purposes of obtaining the requisite approval of each
Proposal.
National City Corporation and its bank subsidiaries hold shares for the
benefit of their customers and may be considered controlling persons of the
Trust for purposes of certain federal securities laws. National City Corporation
and its subsidiaries intend to vote Shares over which they have voting authority
pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA") in the
best interests of the plan participants. With respect to Shares over which
National City Corporation and its subsidiaries possess voting authority, but
which are not subject to ERISA, National City Corporation and its subsidiaries
will vote such Shares in the same proportion as the votes cast by other
non-affiliated shareholders.
DISTRIBUTOR AND TRANSFER AGENT
Shares of the Funds are distributed on a continuous basis by the Trust's
sponsor and distributor, SEI Investments Distribution Co. ("SEI"). SEI's
principal offices are located at One Freedom Valley Drive, Oaks, Pennsylvania
19456. State Street Bank and Trust Company serves as the Trust's transfer and
dividend disbursing agent.
ADMINISTRATOR
SEI Fund Resources, located at One Freedom Valley Drive, Oaks, Pennsylvania
19456, serves as the Trust's administrator.
INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, with offices at Two Commerce
Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania 19103, serves
as independent auditors of the Trust and audited the Trust's operations for the
fiscal year ended May 31, 1998. The Board of Trustees selected Ernst & Young LLP
at its meeting on May 29, 1998 to serve in such capacity for the fiscal year
ending May 31, 1999. Shareholders are not herein requested to approve the
selection of Ernst & Young LLP. Nevertheless, a representative of Ernst & Young
LLP is expected to be available by telephone at the Meeting should any matter
arise requiring consultation with the auditors, and Ernst & Young LLP will be
given the opportunity to make a statement if it chooses.
22
<PAGE> 25
OFFICERS
Officers of the Trust are elected by, and serve at the pleasure of, the
Board. Officers of the Trust receive no remuneration from the Trust for their
services in such capacities. The following table sets forth certain information
about the Trust's officers:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS OFFICER SINCE THE TRUST AND OTHER AFFILIATIONS
---------------- ------------- ----------------- ----------------------
<S> <C> <C> <C>
Herbert R. Martens, July, 1997 President and Executive Vice
Jr. Trustee President, National
c/o NatCity City Corporation (bank
Investments, Inc. holding company),
1965 East Sixth since July 1997;
Street Chairman, President
Cleveland, OH 44114 and Chief Executive
Age 45 Officer, NatCity
Investments, Inc.
(investment banking),
since July 1995;
President and Chief
Executive Officer,
Raffensberger, Hughes
& Co. (broker-dealer),
from 1993 until 1995;
President, Reserve
Capital Group, from
1990 until 1993.
Carol L. Rooney May, 1998 Treasurer Director of SEI Fund
c/o SEI Fund Resources since 1992.
Resources
One Freedom Valley
Road
Oaks, PA 19456
Age 34
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS OFFICER SINCE THE TRUST AND OTHER AFFILIATIONS
---------------- ------------- ----------------- ----------------------
<S> <C> <C> <C>
Kathryn L. Stanton May, 1998 Assistant Vice President and
c/o SEI Fund Treasurer Assistant Secretary of
Resources SEI Fund Resources and
One Freedom Valley SEI Investments
Road Distribution Co. since
Oaks, PA 19456 1994; Associate,
Age 39 Morgan Lewis & Bockius
LLP (law firm).
W. Bruce McConnel, August, 1985 Secretary Partner of the law
III firm Drinker Biddle &
1345 Chestnut Street Reath LLP
Suite 1100 Philadelphia,
Philadelphia, PA Pennsylvania
19107
Age 55
</TABLE>
Herbert R. Martens, Jr. is employed by National City Corporation, the
parent corporation to National City Bank, which receives fees as investment
adviser to the Trust. Mmes. Rooney and Stanton are employed by SEI Fund
Resources, which receives fees as Administrator to the Trust. Ms. Stanton is
also employed by SEI Investments Distribution Co., which receives fees as
Distributor to the Trust. Mr. McConnel is a partner of the law firm, Drinker
Biddle & Reath LLP, which receives fees as counsel to the Trust.
OTHER MATTERS
No business other than the Proposal described above is expected to come
before the Meeting, but should any other matter requiring a vote of shareholders
arise, including any questions as to an adjournment of the Meeting, the persons
named in the enclosed proxy will vote thereon according to their best judgment
in the interests of the Trust.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
DATED: JULY 27, 1998
24
<PAGE> 27
EXHIBIT A
ARMADA FUNDS
ADVISORY AGREEMENT
AGREEMENT made as of April 9, 1998 between ARMADA FUNDS, a Massachusetts
business trust, located in Oaks, Pennsylvania (the "Trust") and NATIONAL CITY
BANK, located in Cleveland, Ohio (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 International Equity, Small Cap Value, Small Cap Growth, Equity Index, Real
Return Advantage, Tax Managed Equity, Balanced Allocation, and Ohio Municipal
Money Market 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 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
A-1
<PAGE> 28
(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 or 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." 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. Notwithstanding
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
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
A-2
<PAGE> 29
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. Pursuant to this paragraph, on the date hereof, the
Adviser has entered into a Sub-Advisory Agreement with Wellington Management
Company, LLP with respect to the Small Cap Growth Fund.
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;
(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
A-3
<PAGE> 30
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 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
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<PAGE> 31
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: 1.15% of
the average daily net assets of the International Equity Fund; 1.00% of the
average daily net assets of the Small Cap Value Fund; 1.00% of the average daily
net assets of the Small Cap Growth Fund; .35% of the average daily net assets of
the Equity Index Fund; .35% of the average daily net assets of the Real Return
Advantage Fund; and .35% of the average daily net assets of the Ohio Municipal
Money Market Fund.
The fee attributable to each Fund shall be the several (and not joint or
joint and several) obligation of each Fund.
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.
A-5
<PAGE> 32
10. DURATION AND TERMINATION. This Agreement will become effective with
respect to each Fund upon 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 September 30,
1999. Thereafter, if not terminated, this Agreement shall continue in effect
with respect to a particular Fund for successive twelve month periods ending on
September 30, 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
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
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<PAGE> 33
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.
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.
ARMADA FUNDS
[SIGNATURE OMITTED]
NATIONAL CITY BANK
[SIGNATURE OMITTED]
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<PAGE> 34
VOTE THIS PROXY CARD TODAY!
-----
ARMADA FUNDS
OAKS, PENNSYLVANIA 19456
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE ARMADA FUNDS (THE
"TRUST") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS OF THE BELOW-REFERENCED
FUND OF THE TRUST TO BE HELD ON AUGUST 13, 1998 AT 11:00 A.M. (EASTERN TIME) IN
BOARD ROOM B, ONE FREEDOM VALLEY DRIVE, OAKS, PENNSYLVANIA 19456.
Please fold and detach card at perforation before mailing
SPECIAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints KATHRYN STANTON and MICHAEL BELLOPEDE and each
of them, attorneys and proxies of the undersigned each with the power of
substitution and resubstitution, to attend, vote and act for the undersigned at
the above-referenced Special Meeting of Shareholders, and at any adjournment or
adjournments thereof, casting votes according to the number of shares of the
Fund which the undersigned may be entitled to vote with respect to the proposals
set forth on the reverse side, in accordance with the specification indicated,
if any, and with all the powers which the undersigned would possess if
personally present, hereby revoking any prior proxy to vote at such Special
Meeting, and hereby ratifying and confirming all that said attorneys and
proxies, or each of them, may lawfully do by virtue hereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS OF THE FUNDS OF THE TRUST AND THE PROXY STATEMENT DATED JULY 27,
1998.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
----------------------------------------
----------------------------------------
Signature(s), (Title(s), if applicable)
Please sign above exactly as name(s)
appear(s) hereon. Corporate or
partnership proxies should be signed in
full corporate or partnership name by an
authorized officer. Each joint owner
should sign personally. When signing as
a fiduciary, please give full title as
such.
DATE:__________________, 1998
<PAGE> 35
Please fold and detach card at perforation before mailing
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW USING BLUE OR BLACK INK. DO
NOT USE RED INK OR PENCIL.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE TRUST ON BEHALF OF THE
FUND. THE MEETING WILL BE HELD ON AUGUST 13,1998 AT 11:00 A.M. (EASTERN TIME) IN
BOARD ROOM B, ONE FREEDOM VALLEY DRIVE, OAKS, PENNSYLVANIA 19456. PLEASE MARK,
SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY SPECIFICATION, THIS
PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS. THE NUMBERING OF THE PROPOSALS
BELOW FOLLOWS THE PRESENTATION OF THE PROPOSALS IN THE NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS AND THE PROXY STATEMENT DATED JULY 27, 1998.
PROPOSAL
FOR AGAINST ABSTAIN
1. To approve a new Investment Advisory Agreement [ ] [ ] [ ]
providing for increased advisory fees between
the Trust and National City Bank (the "Adviser")
with respect to each Fund.
2. To transact such other business as may properly
come before the Special Meeting or any adjournment
thereof.
