<PAGE> 1
As filed with the Securities and Exchange Commission on May 13, 1996
Registration No.
================================================================================
U.S. Securities and Exchange Commission
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ Post-Effective Amendment No. ___
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
ARMADA FUNDS
Area Code and Telephone Number:
(800) 622-FUND(3863)
Address of Principal Executive Offices:
4400 Computer Drive
Westborough, Massachusetts 01581
Name and Address of Agent for Service:
HENRY S. HILLES, JR. ESQ.
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
copy to:
THOMAS F. HARVEY, ESQ.
National City Bank
National City Center
P.O. Box 5756
Cleveland, Ohio 44101-0756
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on June 12, 1996 pursuant
to Rule 488 under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No filing
fee is required because an indefinite number of shares have previously been
registered on Form N-1A (Registration Nos. 33-488, 811-4416) pursuant to Rule
24f-2 under the Investment Company Act of 1940. The Registrant is filing as an
exhibit to this Registration Statement a copy of its earlier declaration under
Rule 24f-2. Pursuant to Rule 429 under the Securities Act of 1933, this
Registration Statement relates to the aforesaid Registration Statement on Form
N-1A.
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ARMADA FUNDS
FORM N-14
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
<TABLE>
<CAPTION>
ITEM NO. HEADING
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<S> <C>
Part A
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1. Beginning of Registration Statement
and Outside Front Cover Page . . . . . . . . . . . Cover Page
2. Beginning and Outside
Back Cover Page . . . . . . . . . . . . . . . . . Table of Contents
3. Fee Table, Synopsis Information
and Risk Factors . . . . . . . . . . . . . . . . . Summary; Comparative Fee Tables; Risk Factors; Comparison of Investment
Policies and Risk Factors; Appendix III
4. Information About the Transaction . . . . . . . . Summary; Risk Factors; Information Relating to the Proposed
Reorganization; Comparison of Investment Policies and Risk Factors;
Appendix III
5. Information About the Registrant . . . . . . . . . Summary; Risk Factors; Comparison of Investment Policies and Risk
Factors; Additional Information About Armada; Additional Information
About Inventor; Appendix III
5A. Management's Discussion of
Fund Performance . . . . . . . . . . . . . . . . . Appendix II
6. Information About the Company
Being Acquired . . . . . . . . . . . . . . . . . . Summary; Risk Factors; Comparison of Investment Policies and Risk
Factors; Additional Information About Armada; Additional Information
About Inventor; Appendix III
7. Voting Information . . . . . . . . . . . . . . . . Summary; Information Relating to Voting Matters
8. Interest of Certain Persons
and Experts . . . . . . . . . . . . . . . . . . . Additional Information About Armada; Additional Information About
Inventor
9. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters . . . . . . . . . . . . . . . . Inapplicable
</TABLE>
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<TABLE>
<CAPTION>
Part B
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<S> <C> <C>
10. Cover Page . . . . . . . . . . . . . . . . . . . Statement of Additional Information Cover
Page
11. Table of Contents . . . . . . . . . . . . . . . Table of Contents
12. Additional Information
About the Registrant . . . . . . . . . . . . . . Statement of Additional Information of Armada Funds dated September 28,
1995*
13. Additional Information
About the Company Being
Acquired . . . . . . . . . . . . . . . . . . . . Statement of Additional Information of Inventor Funds dated August 28,
1995.*
14. Financial Statements . . . . . . . . . . . . . . . Financial Statements; Pro Forma Financial Statements
Part C
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Items 15-17. Information required to be included in Part C is set forth under the appropriate Item, so numbered, in Part C of this
Registration Statement.
</TABLE>
* Incorporated by reference thereto.
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INVENTOR FUNDS, INC.
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
June __, 1996
Dear Inventor Funds Shareholder:
On May 2, 1996, Inventor Funds shareholders approved the appointment of
National City Bank ("National City") as investment adviser. This change
occurred in conjunction with the merger of Integra Financial Corporation into
National City Corporation. National City and its affiliates also serve as the
investment advisers to ARMADA FUNDS, a mutual fund family of eleven
portfolios.
As the new investment advisor to Inventor Funds, National City has proposed
specific strategies to create one consolidated family of mutual funds under
the ARMADA FUNDS name with a goal to maximize opportunities for economies of
scale and to offer shareholders more investment options. There will be a
special meeting of the Inventor Funds shareholders on August 2, 1996 to vote on
these recommendations.
THE INVENTOR FUNDS BOARD OF DIRECTORS BELIEVES THAT THESE ACTIONS ARE IN THE
BEST INTERESTS OF THE INVENTOR FUNDS' SHAREHOLDERS. The Board has carefully
reviewed management's proposal which would combine each Inventor Funds
portfolio with an ARMADA FUNDS portfolio with similar investment objectives and
policies (the "Reorganization"). The Board has considered the probable effects
of the Reorganization with respect to investment performance, expense levels,
and shareholder service. In light of their consideration, the Board of Directors
unanimously recommends the approval of the Reorganization. As you evaluate the
proposal, please note the following points:
- The absolute dollar value of your investment in the Inventor Funds
before the Reorganization will NOT change and will be the same
immediately after the Reorganization although the portfolios you have
invested in, as well as the number of shares and the net asset value
of each share may be different.
- The Reorganization will be tax-free and will not involve any sales
loads, commissions or transaction charges.
- The investment objective and policies of your new portfolio will be
substantially similar to your portfolio's current objective and
policies, with certain differences as stated in the enclosures.
The enclosed package contains specific information regarding the reorganization
proposal. Please take a few minutes to read the proposal and cast your vote on
the enclosed proxy card(s). Please mark, sign and date the proxy card(s) and
return it in the enclosed postage paid envelope. We encourage you to
support the Directors' recommendations.
If you have questions about the proposals, please call 1-800-6INVENT
(1-800-646-8368). Your prompt response is very important. Without sufficient
response from shareholders, we must re-solicit shareholders at an added cost.
Thank you again for taking the time to consider and act upon these issues
pertaining to your investments.
Sincerely,
David G. Lee
President
<PAGE> 5
INVENTOR FUNDS, INC.
The document you hold in your hands contains your proxy statement and proxy
card. A proxy card is, in essence, a ballot. When you vote with your proxy
card, it tells us how to vote on your behalf on important issues relating to
Inventor Funds. If you simply sign the proxy card without specifying a vote,
your shares will be voted in accordance with the recommendations of the Board
of Directors. You will receive one proxy card for each portfolio in which you
own shares.
We urge you to read the proxy statement, fill out your proxy card, and return
it to us. Voting your proxy, and doing so promptly, ensures that Inventor will
not need to conduct additional mailings.
Please take a few moments to exercise your right to vote. Thank you.
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INVENTOR FUNDS, INC.
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on August 1, 1996
To the Shareholders of Inventor Funds:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Special Meeting") of the Inventor Funds, Inc. ("Inventor") and of each
portfolio of Inventor will be held on August 1, 1996 at 10:00 a.m. (Eastern
time) at the offices of SEI Financial Management Corporation, 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658, for the following purposes:
ITEM 1. With respect to the shareholders of each investment portfolio
of Inventor:
To consider and act upon a proposal to approve an Agreement
and Plan of Reorganization (the "Reorganization Agreement")
and the transactions contemplated thereby (the
"Reorganization"), including (a) the transfer of substantially
all of the assets and liabilities of each investment portfolio
of Inventor (each, an "Inventor Portfolio") to a corresponding
investment portfolio of Armada Funds in exchange for
Institutional class shares of the corresponding Armada
Portfolio; (b) the distribution of such shares of the
corresponding Armada Portfolio to the shareholders of the
Inventor Portfolio according to their respective interests;
and (c) the termination of Inventor under state law and the
Investment Company Act of 1940, as amended.
ITEM 2.
To transact such other business as may properly come before
the Special Meeting or any adjournment(s) thereof.
The proposed Reorganization and related matters are described in the
attached Combined Proxy Statement/Prospectus. Appendix I to the Combined Proxy
Statement/Prospectus is a copy of the Reorganization Agreement.
Shareholders of record as of the close of business on May 31, 1996
have the right to vote at the Special Meeting.
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SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY
INVENTOR'S BOARD OF DIRECTORS. IT IS IMPORTANT THAT WE RECEIVE ENOUGH VOTES TO
HOLD THE SPECIAL MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE
EXERCISED BY SUBMITTING TO INVENTOR A WRITTEN NOTICE OF REVOCATION OR A
SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN
PERSON.
WE ENCOURAGE YOU TO SUPPORT THE DIRECTORS' RECOMMENDATION TO APPROVE THIS
REORGANIZATION.
By Order Of The Board Of Directors
Richard W. Grant, Secretary
June __, 1996
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COMBINED PROXY STATEMENT/PROSPECTUS
DATED JUNE __, 1996
ARMADA FUNDS
4400 Computer Drive
Westborough, Massachusetts 01581
1-800-622-FUND(3863)
INVENTOR FUNDS, INC.
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
1-800-6INVENT(1-800-646-8368)
This Combined Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Directors of Inventor Funds,
Inc. ("Inventor") in connection with a Special Meeting (the "Special Meeting")
of Shareholders ("Shareholders") to be held on August 1, 1996 at 10:00 a.m.
(Eastern time) at the offices of SEI Financial Management Company, 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658, at which Shareholders will be
asked to consider and approve a proposed Agreement and Plan of Reorganization
dated __________, 1996 (the "Reorganization Agreement"), by and between
Inventor and Armada Funds ("Armada") and the matters contemplated therein. A
copy of the Reorganization Agreement is attached as Appendix I.
Inventor and Armada are both open-end, management investment
companies. As a result of the recent merger of Integra Financial Corporation
and National City Corporation (the "Holding Company Merger"), National City
Bank ("National City") is now providing investment advisory services to
Inventor. National City and certain of its affiliates, National City Bank,
Columbus; National City Bank, Kentucky; and National Asset Management
Corporation (collectively, the "Armada Advisers"), provide investment advisory
services to various portfolios of Armada. In reviewing the proposed
reorganization (the "Reorganization"), the Board of Directors of Inventor
considered the consummation of the Holding Company Merger, the recommendations
of National City and the Armada Advisers with respect to the proposed
consolidation of Inventor and Armada; the tax-free nature of the
Reorganization; and the fact that, based on representations made by management
of Armada with regard to the level of unrealized gains and losses in the
Inventor Equity Growth Fund, the Board of Directors has concluded that the
interests of Shareholders would not be diluted as a result of the
Reorganization.
The Reorganization Agreement provides that the Inventor Equity Growth
Fund, one of the investment portfolios of Inventor, will transfer substantially
all its known assets and known
<PAGE> 9
liabilities to an existing investment portfolio of Armada, the Armada Equity
Fund. The Reorganization Agreement also provides that each of the following
four investment portfolios of Inventor (collectively, the "Continuing
Portfolios") will transfer all their known assets and known liabilities to the
newly-organized Armada investment portfolios (collectively, the "New Armada
Portfolios") identified below opposite each name:
<TABLE>
<CAPTION>
CONTINUING PORTFOLIOS NEW ARMADA PORTFOLIOS
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<S> <C>
GNMA Securities Fund GNMA Fund
Intermediate Government Intermediate Government
Securities Fund Fund
Pennsylvania Municipal Bond Fund Pennsylvania Municipal Fund
Pennsylvania Tax-Exempt Money Pennsylvania Tax Exempt Fund
Market Fund
</TABLE>
In exchange for the transfers of these assets and liabilities, Armada
will simultaneously issue shares in the five Armada investment portfolios
discussed above (collectively, the "Armada Portfolios") to the corresponding
Inventor investment portfolios listed above (collectively, the "Inventor
Portfolios"). These transfers are expected to occur on or after August 2,
1996.
The Inventor Portfolios have one class of shares outstanding (Class A
Shares), and the Armada Portfolios have two classes of shares outstanding
(Institutional and Retail Shares). Holders of Class A shares of each Inventor
Portfolio will receive shares of the Institutional class of the corresponding
Armada Portfolio, as set forth in the table on page ___ under "Information
Relating to the Proposed Reorganization -- Description of the Reorganization
Agreement."
Immediately after the transfer of Inventor's assets and liabilities,
the Inventor Portfolios will make liquidating distributions of the Armada
Portfolios' shares to the shareholders of the Inventor Portfolios, so that a
holder of Class A shares in an Inventor Portfolio at the Effective Time of the
Reorganization (as hereinafter defined) will receive Institutional class shares
(as described herein) of the corresponding Armada Portfolio with the same
aggregate net asset value as the Shareholder had in the Inventor Portfolio
immediately before the Reorganization. Following the Reorganization,
shareholders of the Inventor Portfolios will be shareholders of the
corresponding Armada Portfolios, and Inventor will be terminated under state
law and the Investment Company Act of 1940, as amended (the "1940 Act").
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A small percentage of the outstanding shares of the Inventor
Portfolios are held by Shareholders who may wish to acquire Retail class shares
of the Armada Portfolios. Armada has been advised that promptly after the
Reorganization, these holders of Institutional shares of the Armada Equity Fund
and the New Armada Portfolios will be offered the opportunity to exchange their
Institutional class shares for Retail class shares of such portfolios without
incurring any sales charges.
This Combined Proxy Statement/Prospectus sets forth the information
that a Shareholder of Inventor should know before voting on the Reorganization
Agreement (and related transactions), and should be retained for future
reference. The Prospectus dated September 28, 1995 relating to the shares of
the Armada Equity Fund, which describes the operations of the Armada Equity
Fund, accompanies this Combined Proxy Statement/Prospectus, and is incorporated
herein by reference. Additional information is set forth in the Statement of
Additional Information dated September 28, 1995 relating to the Armada Equity
Fund and the Statement of Additional Information dated June __, 1996 relating
to this Combined Proxy Statement/Prospectus, and in the Prospectuses dated
August 28, 1995 (as supplemented May 2, 1996) and Statement of Additional
Information dated August 28, 1995 relating to Inventor. Each of these
documents is on file with the Securities and Exchange Commission (the "SEC"),
and is available without charge upon oral or written request by writing or
calling Inventor or Armada, as appropriate, at the respective addresses or
telephone numbers indicated above. The information contained in the Statement
of Additional Information dated September 28, 1995 relating to the Armada
Equity Fund, and the Prospectuses dated August 28, 1995 (as supplemented May 2,
1996) and Statement of Additional Information dated August 28, 1995 relating to
Inventor, is incorporated herein by reference.
This Combined Proxy Statement/Prospectus constitutes the Proxy
Statement of Inventor for the Special Meeting of its Shareholders, and Armada's
Prospectus for the shares of its Armada Equity Fund that have been registered
with the SEC and are to be issued in connection with the Reorganization. The
operations of the Continuing Portfolios will be continued by the New Armada
Portfolios and this Combined Proxy Statement/ Prospectus does not constitute a
prospectus (because none is required) for the shares that will be issued in the
Reorganization with respect to the Continuing Portfolios.
This Combined Proxy Statement/Prospectus is expected to first be sent
to Shareholders on or about June 14, 1996.
THE SECURITIES OF THE ARMADA PORTFOLIOS HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE
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COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS COMBINED PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY INVENTOR OR ARMADA.
SHARES OF THE ARMADA PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, NATIONAL CITY, NATIONAL CITY BANK, COLUMBUS,
NATIONAL CITY BANK, KENTUCKY, NATIONAL ASSET MANAGEMENT CORPORATION, THEIR
PARENT COMPANY OR ANY OF THEIR AFFILIATES. SHARES OF THE ARMADA PORTFOLIOS ARE
NOT FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL VARY AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO
THAT SHARES OF THE ARMADA PORTFOLIOS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST. AN INVESTMENT IN THE ARMADA PORTFOLIOS INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. THERE
IS NO ASSURANCE THAT THE ARMADA PENNSYLVANIA TAX-EXEMPT FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Proposed Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Reasons for the Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Overview of the Inventor Portfolios and Armada Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certain Arrangements with Service Providers -- Inventor Portfolios. . . . . . . . . . . . . . . . . . . . . 2
Certain Arrangements with Service Providers -- Armada Portfolios. . . . . . . . . . . . . . . . . . . . . . 4
Comparative Fee Tables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Expense Ratios -- Inventor Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Expense Ratios -- Armada Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Voting Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
INFORMATION RELATING TO THE PROPOSED REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Description of the Reorganization Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Federal Income Tax Consequences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Inventor Equity Growth Fund and Armada Equity Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Investment Policies and Risks -- General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Purchase and Redemption Information, Exchange Privileges, Distribution and Pricing. . . . . . . . . . . . . 30
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
INFORMATION RELATING TO VOTING MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Shareholder and Board Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Appraisal Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ADDITIONAL INFORMATION ABOUT ARMADA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ADDITIONAL INFORMATION ABOUT INVENTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Inventor Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Armada Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
SHAREHOLDER INQUIRIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 48
APPENDIX I AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
APPENDIX II FUND OVERVIEW - ARMADA EQUITY FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
APPENDIX III SHAREHOLDER TRANSACTIONS AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
</TABLE>
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<PAGE> 14
SUMMARY
The following is a summary of certain information relating to the
proposed Reorganization, the parties thereto and the related transactions, and
is qualified by reference to the more complete information contained elsewhere
in this Combined Proxy Statement/Prospectus, the prospectuses and statements of
additional information of Inventor and Armada, and the Reorganization Agreement
attached to this Combined Proxy Statement/Prospectus as Appendix I. Inventor's
Annual Report to Shareholders may be obtained free of charge by calling
1-800-6INVENT(1-800-646-8368) or writing 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658. Armada's Annual Report to Shareholders may be
obtained free of charge by calling 1-800-622-FUND(3863) or writing 4400
Computer Drive, Westborough, Massachusetts 01581.
PROPOSED REORGANIZATION. Based upon their evaluation of the relevant
information presented to them, and in light of their fiduciary duties under
federal and state law, Inventor's and Armada's Boards, including their members
who are not "interested persons" within the meaning of the 1940 Act, have
determined that the proposed Reorganization is in the best interests of
Inventor's and Armada's Shareholders, respectively, and that the interests of
existing Shareholders of Inventor and Armada, respectively, will not be diluted
as a result of such Reorganization.
The Cover Page and pages ___-___ hereof summarize the proposed
Reorganization.
REASONS FOR THE REORGANIZATION. The primary reason for the Reorganization is
the Holding Company Merger of Integra Financial Corporation and National City
Corporation. Consummation of the Holding Company Merger on May 2, 1996
resulted in the automatic termination of the existing investment advisory
agreement between the Inventor Portfolios and Integra Trust Company, a
wholly-owned subsidiary of Integra Financial Corporation, and of the existing
investment sub-advisory agreements between Integra Trust Company and Wellington
Management Company, STI Capital Management, N.A. and Weiss, Peck & Greer,
L.L.C., respectively. In anticipation of the Holding Company Merger and to
provide continuity in investment advisory services to the Inventor Portfolios,
shareholders of the Inventor Portfolios approved a new investment advisory
agreement with National City and new investment sub-advisory agreements with
Wellington Management Company, STI Capital Management, N.A. and Weiss, Peck &
Greer, L.L.C., respectively, effective May 2, 1996.
Both National City and the Armada Advisers have recommended that each
of the Inventor Portfolios be reorganized as described in this Combined Proxy
Statement/Prospectus. In light of this
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<PAGE> 15
recommendation, after consideration of the reasons therefor and the proposed
operations of the combined funds after the Reorganization, and in consideration
of the fact that the Reorganization will be tax-free and will not dilute the
interests of Inventor Shareholders, the Board of Directors of Inventor has
authorized the Agreement and Plan of Reorganization and recommended approval of
the Reorganization by Shareholders.
FEDERAL INCOME TAX CONSEQUENCES. Shareholders of the Inventor Portfolios will
recognize no gain or loss for federal income tax purposes on their receipt of
shares of the Armada Portfolios. Shareholders of the Armada Portfolios will
have no federal tax consequences from the Reorganization. The Armada
Portfolios will incur no federal tax consequences on their issuance of shares
in the Reorganization. See "Information Relating to the Proposed
Reorganization -- Federal Income Tax Consequences."
OVERVIEW OF THE INVENTOR PORTFOLIOS AND ARMADA PORTFOLIOS. There are no
material differences between the investment objectives and policies of the
Continuing Portfolios and the corresponding New Armada Portfolios. The
investment objectives and policies of the Inventor Equity Growth Fund are
similar to those of the Armada Equity Fund.
The Inventor Equity Growth Fund's investment objective is capital
appreciation. The Armada Equity Fund's investment objective is to seek a high
level of total return arising out of capital appreciation and income. Each
pursues its investment objective by investing in a diversified portfolio of
common stocks and convertible securities. There is no assurance that either
portfolio will achieve its investment objective.
See "Comparison of Investment Objectives and Risk Factors" below and
the Inventor and Armada prospectuses, which are incorporated by reference
herein, for a description of the similarities and differences between the
investment objectives and policies of the Inventor Equity Growth Fund and the
Armada Equity Fund.
CERTAIN ARRANGEMENTS WITH SERVICE PROVIDERS -- INVENTOR PORTFOLIOS. National
City serves as investment adviser for Inventor and is entitled to receive
advisory fees from it, computed daily and paid monthly, at the following annual
rates, expressed as a percentage of average daily net assets:
-2-
<PAGE> 16
<TABLE>
<CAPTION>
ACTUAL ADVISORY
FEE FOR YEAR
MAXIMUM ENDED APRIL 30,
INVENTOR PORTFOLIOS ADVISORY FEE 1995(AFTER WAIVERS)*
- ------------------- ------------ -------------------
<S> <C> <C>
Equity Growth Fund 0.85% 0.59%
GNMA Securities Fund 0.70% 0.45%
Intermediate Government
Securities Fund 0.70% 0.49%
Pennsylvania Municipal
Bond Fund 0.70% 0.53%
Pennsylvania Tax-Exempt
Money Market Fund 0.45% 0.22%
<FN>
________________________________
* Paid to Integra Trust Company pursuant to the investment advisory
agreement then in effect.
</TABLE>
Wellington Management Company ("Wellington") provides sub-advisory
services to the GNMA Securities Fund and the Intermediate Government Securities
Fund under a sub-advisory agreement among National City, Wellington and
Inventor. For these services, Wellington receives a fee from National City,
computed daily and paid monthly at an annual rate of .20% on the first $50
million, .15% on the next $50 million, .10% on the next $400 million and .075%
on the excess of $500 million of the average daily net assets for each of the
GNMA Securities Fund and Intermediate Government Securities Fund.
STI Capital Management, N.A. (formerly SunBank Capital Management,
N.A.) ("STI") provides sub-advisory services to the Equity Growth Fund under a
sub-advisory agreement by and between National City and STI. For these
services, STI receives a fee from National City accrued daily and payable
quarterly at an annual rate of .30% on the portfolio's aggregate net assets.
Weiss, Peck & Greer, L.L.C. ("WPG") provides sub-advisory services to
the Pennsylvania Municipal Bond Fund and Pennsylvania Tax-Exempt Money Market
Fund under a sub-advisory agreement by and between National City and WPG. For
these services, WPG receives a fee from National City accrued daily and payable
quarterly at an annual rate of .18% of the average daily net assets of the
Pennsylvania Municipal Bond Fund and .05% of the average daily net assets of
the Pennsylvania Tax-Exempt Money Market Fund.
After the Reorganization, it is expected that WPG will, but that
Wellington and STI will not, provide sub-advisory services to Armada.
-3-
<PAGE> 17
Administrative services are provided to Inventor by SEI Financial
Management Corporation ("SFM"), a wholly-owned subsidiary of SEI Corporation
("SEI"). The Administration Agreement was adopted August 1, 1994 and provides
for a three-year term. For its services, SFM receives a fee, calculated daily
and paid monthly. The annual rate of the fee payable by the Pennsylvania
Municipal Bond Fund is .18% of its average daily net assets. The annual rate
of the fee payable by the other portfolios is the higher of (a) .15% of the
average daily net assets of the Pennsylvania Tax-Exempt Money Market Fund and
.18% of the aggregate average daily net assets of each of the Equity Growth
Fund, GNMA Securities Fund and Intermediate Government Securities Fund, or (b)
an aggregate of $600,000 allocated pro-rata among the Pennsylvania Tax-Exempt
Money Market Fund, Equity Growth Fund, GNMA Securities Fund and Intermediate
Government Securities Fund based on each Portfolio's average daily net assets.
For the period August 1, 1994 through the end of Inventor's fiscal year (April
30, 1995), SFM received administration fees (after fee waivers) at the
effective annual rates of .18%, .18%, .18%, .10% and .15% of the average daily
net assets of the Equity Growth Fund, GNMA Securities Fund, Intermediate
Government Securities Fund, Pennsylvania Municipal Bond Fund, and Pennsylvania
Tax- Exempt Money Market Fund, respectively.
DST Systems, Inc. ("DST") serves as Inventor's transfer agent. For
these services, DST receives an annual fee equal to $15,000 for the first 400
accounts per portfolio and $24.00 per account in excess of 400 accounts; $25.00
per IRA plan; and out-of-pocket expenses including postage, printing, custom
programming, telephone and line charges, proxy production and tabulation, etc.
The Fifth Third Bank provides custodial services to each Inventor
Portfolio.
SEI Financial Services Company ("SFS") is the distributor for
Inventor. Under the distribution agreement, SFS acts as the agent of Inventor
in connection with the offering of shares of each Inventor Portfolio.
Inventor has adopted a Distribution and Services Plan pursuant to Rule
12b-1 under the 1940 Act (the "Inventor 12b-1 Plan"), but has not made any
payments thereunder. Under the Inventor 12b-1 Plan, each of the Inventor
Portfolios may bear the expense of distribution fees payable to SFS at an
annual rate of up to 0.25% of its average daily net asset value to finance
activities which are principally intended to result in the sale of Class A
shares.
CERTAIN ARRANGEMENTS WITH SERVICE PROVIDERS -- ARMADA PORTFOLIOS. The Armada
Advisers, wholly-owned subsidiaries of National City
-4-
<PAGE> 18
Corporation, serve as investment advisers to Armada and are entitled to receive
advisory fees from the Armada Portfolios computed daily and paid monthly, at
the following annual rates:
<TABLE>
<CAPTION>
ACTUAL ADVISORY
ADVISORY FEE FEE FOR YEAR ENDED
(% OF AVERAGE MAY 31, 1995
ARMADA PORTFOLIOS DAILY NET ASSETS) (AFTER WAIVERS)
----------------- ----------------- ----------------
<S> <C> <C>
Equity Fund 0.75% 0.75%
GNMA Fund 0.55% 0.00%*
Intermediate Government Fund 0.55% 0.00%*
Pennsylvania Municipal Fund 0.55% 0.00%*
Pennsylvania Tax-Exempt Fund 0.40% 0.00%*
<FN>
___________________________________
* The GNMA, Intermediate Government, Pennsylvania Municipal and
Pennsylvania Tax-Exempt Funds have not yet commenced operations.
</TABLE>
As investment advisers, the Armada Advisers manage the investments of
each Armada Portfolio, make decisions with respect to and place orders for all
purchases and sales of a Portfolio's securities, and maintain certain records
relating to such purchases and sales.
See "Management of the Trust -- Investment Advisers" in Armada's
Prospectus which accompanies this Combined Proxy Statement/Prospectus and which
is incorporated herein by reference, for additional information on the Armada
Advisers.
Administrative and accounting services are provided to Armada by PFPC,
Inc. ("PFPC"). For its services, PFPC is entitled to receive a fee from each
Armada Portfolio, calculated daily and paid monthly, as follows: .10% of the
first $200 million of net assets, .075% of the next $200 million of average
daily net assets, .05% of the next $200 million of net assets and .03% of net
assets in excess of $600 million.
For the fiscal year ended May 31, 1995, PFPC received administration
fees at the annual rate of 0.10% of the net assets of the Equity Fund. The
GNMA, Intermediate Government, Pennsylvania Municipal and Pennsylvania
Tax-Exempt Funds were not operational during this period.
See "Management of the Trust -- Administrator" in Armada's Prospectus
accompanying this Combined Proxy Statement/Prospectus, which are incorporated
herein by reference, for additional information on Armada's administrator.
-5-
<PAGE> 19
First Data Investor Services Group, Inc., formerly known as The
Shareholder Services Group, Inc. d/b/a 440 Financial ("FDISG") serves as
Armada's transfer agent. See "Management of the Trust -- Custodian Services
and Transfer Agency Agreement" in Armada's Prospectus accompanying this
Combined Proxy Statement/Prospectus, which is incorporated herein by reference,
for additional information about Armada's transfer agent.
Custodial services are provided to Armada by National City. See
"Advisory, Administration, Distribution, Custodian Services and Transfer Agency
Agreements -- Custodian Services and Transfer Agency Agreement" in Armada's
Statement of Additional Information, which is incorporated herein by reference,
for additional information about Armada's custodian.
440 Financial Distributors, Inc. ("440 Financial Distributors") serves
as distributor of the shares of Armada's portfolios. Armada has adopted a
Distribution Plan pursuant to Rule 12b-1 under the 1940 Act (the "Armada 12b-1
Plan"). Under the Armada 12b-1 Plan, the class of shares known as the Retail
shares of each of Armada's portfolios bears certain distribution expenses to
finance activities which are principally intended to result in the sale of such
shares. There is an aggregate annual distribution fee of $250,000 payable to
440 Financial Distributors, payable monthly and accrued daily among the
portfolios. In addition, each portfolio reimburses 440 Financial Distributors
monthly for its direct and indirect costs and expenses incurred in providing
the portfolio with advertising, marketing, printing and other distribution
services. The distribution fee and expense reimbursements may not exceed .10%
per annum of a portfolio's average net assets. For the fiscal year ended May
31, 1995, Armada paid 440 Financial Distributors $67,272 with respect to the
Equity Fund pursuant to the Distribution Plan, representing 0.06% of the Equity
Fund's average net assets during the year. The GNMA, Intermediate Government,
Pennsylvania Municipal and Pennsylvania Tax-Exempt Funds were not operational
during the period.
The Armada 12b-1 Plan is a "compensation" type plan as opposed to a
plan that is limited solely to "reimbursements." In the event that any future
payments by Retail shares under the Armada 12b-1 Plan are based on the
expressed fee rather than solely to reimburse the specific amounts expended by
440 Financial Distributors for distribution purposes, as they have been in the
past, 440 Financial Distributors may be able to earn a profit on the payments.
COMPARATIVE FEE TABLES. Set forth in the tables below is (i) information
regarding the fees and expenses paid by each Inventor Portfolio as of April 30,
1995 and the Retail and Institutional classes of shares of each Armada
Portfolio as of May 31, 1995, restated, in the case of the Armada Equity Fund,
to reflect
-6-
<PAGE> 20
current fees and expenses and (ii) pro forma information for each Armada
Portfolio assuming the Reorganization had taken place on May 31, 1995.
COMPARATIVE FEE TABLES
<TABLE>
<CAPTION>
Inventor
Equity Growth Armada Pro Forma
Fund Equity Fund Combined
------------- ------------------------ -------------------------
Retail Institutional Retail Institutional
Class A Shares Shares Shares Shares
------- ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases . . 4.00% 3.75% None 3.75% None
Sales Charge Imposed on
Reinvested Dividends . . None None None None None
Deferred Sales Charge . . . None None None None None
Redemption Fee . . . . . . $ 10(1) None None None None
Exchange Fee . . . . . . . None None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Advisory Fees (after fee
waivers) . . . . . . . . .57(2) .75 .75 .75 .75
12b-1 Fees (after fee
waivers) . . . . . . . . .00(3) .05(4) .05(4) .05(4) .05(4)
Other Expenses . . . . . . .38 .47(6) .22(6) .45(6) .20(6)
--- --- --- --- ---
Total Operating Expenses
(after fee waivers) . . . .95(5) 1.27%(6) 1.02%(6) 1.25(6) 1.00(6)
--- ----- ----- ---- ----
<FN>
_____________________________________
(1) For wire redemptions.
(2) The Adviser of the Inventor Equity Growth Fund has agreed to waive a
portion of its fees and reserves the right to terminate this waiver
at any time in its sole discretion. Absent this waiver, advisory fees
would be .85%.
(3) The Inventor Equity Growth Fund's distribution plan ("Class A Plan")
provides that shares will bear the costs of distribution expenses and
related service fees at the annual rate of .25% of the Fund's average
daily net assets. The Distributor has agreed to voluntarily waive any
fees payable pursuant to the Class A Plan and reserves the right to
terminate this waiver at any time at its sole discretion.
(4) As a result of the payment of sales charges and 12b-1 and certain
other related fees, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers, Inc. ("NASD"). The
NASD has adopted rules which generally limit the aggregate sales
charges and payments under Armada's Service and Distribution Plan and
Shareholder Services Plan to a certain percentage of total new gross
share sales, plus interest. Armada would stop accruing 12b-1 and
related fees if, to the extent, and for as long as, such limit would
otherwise be exceeded.
(5) Absent the advisory and distribution fee waivers afforded the Inventor
Equity Growth Fund, total operating expenses would be 1.48%.
(6) The expense table relating to the Armada Equity Fund has been restated
to reflect current fees.
</TABLE>
-7-
<PAGE> 21
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption
at the end of the following periods:
<TABLE>
<CAPTION>
1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Inventor Equity Growth Fund
Class A Shares $49 $69 $90 $152
Armada Equity Fund
Retail Shares 50 76 105 185
Institutional Shares 10 32 56 125
Pro Forma Combined
Retail Shares 50 76 104 183
Institutional Shares 10 32 55 122
</TABLE>
-8-
<PAGE> 22
<TABLE>
<CAPTION>
Inventor
GNMA Securities Armada Pro Forma
Fund GNMA Fund* Combined
------------- ---------------------------- -------------------------
Retail Institutional Retail Institutional
Class A Shares Shares Shares Shares
------- ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases . . 4.00% None None 3.75% None
Sales Charge Imposed on
Reinvested Dividends . . None None None None None
Deferred Sales Charge . . . None None None None None
Redemption Fee . . . . . . $ 10(1) None None None None
Exchange Fee . . . . . . . None None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Advisory Fees (after fee
waivers) . . . . . . . . .40(2) N/A N/A .55 .55
12b-1 Fees (after fee .05(4)
waivers) . . . . . . . . .00(5) N/A N/A .05(4)
Other Expenses . . . . . . .45 N/A N/A .49(3) .24
--- --- ---
Total Operating Expenses
(after fee waivers) . . . .85(6) N/A N/A 1.09 .84
--- ---- ---
<FN>
_____________________________________
* The Armada GNMA Fund has not yet commenced operations. The Armada GNMA
Fund will continue the operations of the Inventor GNMA Securities Fund
upon consummation of the Reorganization relating to the Fund.
(1) For wire redemptions.
(2) The maximum advisory fee for the Inventor GNMA Securities Fund is
.70%.
(3) Armada has implemented a Shareholder Services Plan (the "Services
Plan") with respect to Retail Shares in the Fund. Under the Services
Plan, Armada may enter into shareholder servicing agreements with
certain financial institutions pursuant to which they would agree to
provide shareholder administrative services to their customers who
beneficially own Retail shares in consideration for the payment of up
to .25% (on an annualized basis) of the net asset value of such
shares.
(4) As a result of the payment of sales charges and 12b-1 and certain
other related fees, long-term shareholders of the Armada Equity Fund
may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the National Association of Securities
Dealers, Inc. ("NASD"). The NASD has adopted rules which generally
limit the aggregate sales charges and payments under Armada's Service
and Distribution Plan and Shareholder Services Plan to a certain
percentage of total new gross share sales, plus interest. Armada
would stop accruing 12b-1 and related fees if, to the extent, and for
as long as, such limit would otherwise be exceeded.
(5) The Inventor GNMA Securities Fund provides that Class A shares will
bear the costs of distribution expenses and related service fees at
the annual rate of .25% of the Fund's average net assets. The
Distributor has agreed to voluntarily waive any fees payable and
reserves the right to terminate this waiver at any time in its sole
discretion.
(6) Absent the voluntary waivers by the investment adviser and
distributor, which can be terminated at any time, the total operating
expenses for the Inventor GNMA Securities Fund would be 1.40%.
</TABLE>
-9-
<PAGE> 23
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption
at the end of the following periods:
<TABLE>
<CAPTION>
1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Inventor GNMA Securities Fund
Class A Shares $48 $66 $85 $141
Armada GNMA Fund
Retail Shares N/A N/A N/A N/A
Institutional Shares N/A N/A N/A N/A
Pro Forma Combined
Retail Shares 48 71 95 165
Institutional Shares 9 27 47 104
</TABLE>
-10-
<PAGE> 24
<TABLE>
<CAPTION>
Inventor Armada
Intermediate Intermediate Pro Forma
Government Government Fund* Combined
Securities ---------------- --------------------------
Fund
------------
Retail Institutional Retail Institutional
Class A Shares Shares Shares Shares
------- ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases . . 4.00% None None 3.75% None
Sales Charge Imposed on
Reinvested Dividends . . None None None None None
Deferred Sales Charge . . . None None None None None
Redemption Fee . . . . . . $ 10(1) None None None None
Exchange Fee . . . . . . . None None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Advisory Fees (after fee
waivers) . . . . . . . . .47(2) N/A N/A .55 .55
12b-1 Fees (after fee
waivers) . . . . . . . . .00(5) N/A N/A .05(4) .05(4)
Other Expenses . . . . . . .38 N/A N/A .46(3) .21
--- --- ---
Total Operating Expenses
(after fee waivers) . . . .85(6) N/A N/A 1.06 .81
--- ---- ---
<FN>
_____________________________________
* The Armada Intermediate Government Fund has not yet commenced
operations. The Armada Intermediate Government Fund will continue the
operations of the Inventor Intermediate Government Securities Fund
upon consummation of the Reorganization relating to the Fund.
(1) For wire redemptions.
(2) The maximum advisory fees for the Inventor Intermediate Government
Securities Fund is .70%.
(3) Armada has implemented a Shareholder Services Plan (the "Services
Plan") with respect to Retail Shares in the Fund. Under the Services
Plan, Armada may enter into shareholder servicing agreements with
certain financial institutions pursuant to which they would agree to
provide shareholder administrative services to their customers who
beneficially own Retail shares in consideration for the payment of up
to .25% (on an annualized basis) of the net asset value of such
shares.
(4) As a result of the payment of sales charges and 12b-1 and certain
other related fees, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers, Inc. ("NASD"). The
NASD has adopted rules which generally limit the aggregate sales
charges and payments under Armada's Service and Distribution Plan and
Shareholder Services Plan to a certain percentage of total new gross
share sales, plus interest. Armada would stop accruing 12b-1 and
related fees if, to the extent, and for as long as, such limit would
otherwise be exceeded.
(5) The Inventor Intermediate Government Securities Fund provides that
Class A shares will bear the costs of distribution expenses and
related service fees at the annual rate of .25% of the Fund's average
net assets. The Distributor has agreed to voluntarily waive any fees
payable and reserves the right to terminate this waiver at any time in
its sole discretion.
(6) Absent the voluntary waivers by the investment adviser and
distributor, which can be terminated at any time, the total operating
expenses for the Inventor Intermediate Government Securities Fund
would be 1.33%.
</TABLE>
-11-
<PAGE> 25
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption
at the end of the following periods:
<TABLE>
<CAPTION>
1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Inventor Intermediate Government
Securities Fund
Class A Shares $48 $66 $85 $141
Armada Intermediate Government Fund
Retail Shares N/A N/A N/A N/A
Institutional Shares N/A N/A N/A N/A
Pro Forma Combined
Retail Shares 48 70 94 162
Institutional Shares 8 26 45 100
</TABLE>
-12-
<PAGE> 26
<TABLE>
<CAPTION>
Inventor Armada
Pennsylvania Pennsylvania Pro Forma
Tax-Exempt Money Tax-Exempt Fund* Combined
Market ---------------------------- -------------------------
Fund
-------------
Retail Institutional Retail Institutional
Class A Shares Shares Shares Shares
------- ------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases . . None None None None None
Sales Charge Imposed on
Reinvested Dividends . . None None None None None
Deferred Sales Charge . . . None None None None None
Redemption Fee . . . . . . $ 10(1) None None None None
Exchange Fee . . . . . . . None None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Advisory Fees (after fee
waivers)(2) . . . . . . . .21 N/A N/A .15% .15%
12b-1 Fees (after fee
waivers) . . . . . . . . .00(5) N/A N/A .05%(4) .05%(4)
Other Expenses . . . . . . .34 N/A N/A .24%(3) .14%
--- ---- ----
Total Operating Expenses
(after fee waivers) . . . .55(6) N/A N/A .44%(7) .34%(7)
--- ---- -----
<FN>
_____________________________________
* The Armada Pennsylvania Tax-Exempt Fund has not yet commenced
operations. The Armada Pennsylvania Tax-Exempt Fund will continue the
operations of the Inventor Pennsylvania Tax-Exempt Money Market Fund
upon consummation of the Reorganization relating to the Fund.
(1) For wire redemptions.
(2) The maximum advisory fees for the Inventor Pennsylvania Tax Exempt
Money Market Fund is .45%. The maximum advisory fee for the Armada
Pennsylvania Tax Exempt Fund is .40%.
(3) Armada has implemented a Shareholder Services Plan (the "Services
Plan") with respect to Retail Shares in the Fund. Under the Services
Plan, Armada may enter into shareholder servicing agreements with
certain financial institutions pursuant to which they would agree to
provide shareholder administrative services to their customers who
beneficially own Retail shares in consideration for the payment of up
to .10% (on an annualized basis) of the net asset value of such
shares.
(4) As a result of the payment of sales charges and 12b-1 and certain
other related fees, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers, Inc. ("NASD"). The
NASD has adopted rules which generally limit the aggregate sales
charges and payments under Armada's Service and Distribution Plan and
Shareholder Services Plan to a certain percentage of total new gross
share sales, plus interest. Armada would stop accruing 12b-1 and
related fees if, to the extent, and for as long as, such limit would
otherwise be exceeded.
(5) The Inventor Pennsylvania Tax Exempt Money Market Fund provides that
Class A shares will bear the costs of distribution expenses and
related service fees at the annual rate of .25% of the Fund's average
net assets. The Distributor has agreed to voluntarily waive any fees
payable and reserves the right to terminate this waiver at any time at
its sole discretion.
(6) Absent the voluntary waivers by the investment adviser and
distributor, which can be terminated at any time, the total operating
expenses for the Inventor Pennsylvania Tax Exempt Money Market Fund
would be 1.04%.
(7) The expense information in the table relating to the Armada
Pennsylvania Tax-Exempt Fund has been restated to reflect current
fees. Advisory fees before waivers would be .40%. Total Fund
Operating Expenses before waivers would be .69% for Retail shares and
.59% for Institutional shares.
</TABLE>
-13-
<PAGE> 27
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption
at the end of the following periods:
<TABLE>
<CAPTION>
1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Inventor Pennsylvania Tax Exempt
Money Market Fund
Class A Shares $ 6 $18 $31 $69
Armada Pennsylvania Tax-Exempt Fund
Retail Shares N/A N/A N/A N/A
Institutional Shares N/A N/A N/A N/A
Pro Forma Combined
Retail Shares 5 14 25 55
Institutional Shares 3 11 19 43
</TABLE>
-14-
<PAGE> 28
<TABLE>
<CAPTION>
Inventor
Pennsylvania Armada
Municipal Bond Pennsylvania Pro Forma
Fund Municipal Fund* Combined
------------- ---------------------------- -------------------------
Class A Retail Institutional Retail Institutional
------- Shares Shares Shares Shares
------ ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases . . 4.00% None None 3.00% None
Sales Charge Imposed on
Reinvested Dividends . . None None None None None
Deferred Sales Charge . . . None None None None None
Redemption Fee . . . . . . $ 10(1) None None None None
Exchange Fee . . . . . . . None None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average net assets)
Advisory Fees (after fee
waivers)(2) . . . . . . . .52 N/A N/A .54% .54%
12b-1 Fees (after fee
waivers) . . . . . . . . .00(5) N/A N/A .01%(4) .01%(4)
Other Expenses . . . . . . .33
---
Total Operating Expenses N/A N/A .39%(3) .29%
---- ----
(after fee waivers) . . . .85(6) N/A N/A .94%(7) .84%(7
--- ---- -----
<FN>
_____________________________________
* The Armada Pennsylvania Municipal Fund has not yet commenced
operations. The Armada Pennsylvania Municipal Fund will continue the
operations of the Inventor Pennsylvania Municipal Bond Fund upon
consummation of the Reorganization relating to the Fund.
(1) For wire redemptions.
(2) The maximum advisory fees for the Inventor Pennsylvania Municipal Bond
Fund is .70%. The maximum advisory fee for the Armada Pennsylvania
Municipal Fund is .55%.
(3) Armada has implemented a Shareholder Services Plan (the "Services
Plan") with respect to Retail Shares in the Fund. Under the Services
Plan, Armada may enter into shareholder servicing agreements with
certain financial institutions pursuant to which they would agree to
provide shareholder administrative services to their customers who
beneficially own Retail shares in consideration for the payment of up
to .10% (on an annualized basis) of the net asset value of such
shares.
(4) As a result of the payment of sales charges and 12b-1 and certain
other related fees, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers, Inc. ("NASD"). The
NASD has adopted rules which generally limit the aggregate sales
charges and payments under the Armada's Service and Distribution Plan
and Shareholder Services Plan to a certain percentage of total new
gross share sales, plus interest. Armada would stop accruing 12b-1
and related fees if, to the extent, and for as long as, such limit
would otherwise be exceeded.
(5) The Inventor Pennsylvania Municipal Bond Fund provides that Class A
shares will bear the costs of distribution expenses and related
service fees at the annual rate of .25% of the Fund's average net
assets. The Distributor has agreed to voluntarily waive any fees
payable and reserves the right to terminate this waiver at any time at
its sole discretion.
(6) Absent the voluntary waivers by the investment adviser and
distributor, which can be terminated at any time, the total operating
expenses for the Inventor Pennsylvania Municipal Bond Fund would be
1.36%.
(7) The expense information in the table relating to the Armada
Pennsylvnaia Municipal Fund has been restated to reflect current fees.
Advisory fees before waivers would be .55%. Total Fund Operating
Expenses before waivers would be .95% for Retail shares and .85% for
Institutional shares.
</TABLE>
-15-
<PAGE> 29
Example: An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return, and (2) redemption
at the end of the following periods:
<TABLE>
<CAPTION>
1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Inventor Pennsylvania Municipal
Bond Fund
Class A Shares $48 $66 $85 $141
Armada Pennsylvania Municipal Fund
Retail Shares N/A N/A N/A N/A
Institutional Shares N/A N/A N/A N/A
Pro Forma Combined
Retail Shares 39 59 80 142
Institutional Shares 9 27 47 104
</TABLE>
-16-
<PAGE> 30
EXPENSE RATIOS -- INVENTOR PORTFOLIOS. The following table sets forth (i) the
ratios of operating expenses to average net assets of the Inventor Portfolios
for the fiscal year ended April 30, 1995 (a) after fee waivers and (b) absent
fee waivers, and (ii) the annualized ratios of operating expenses to average
net assets of the Inventor Portfolios for the six-month period ended October
31, 1995 (a) after fee waivers and (b) absent fee waivers:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30, 1995
--------------------------------
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS(1) FEE WAIVERS(1)
------------------- -------------------
INVENTOR PORTFOLIOS
- -------------------
<S> <C> <C>
Inventor Equity Growth Fund 0.95% 1.48%
Inventor Intermediate Government
Securities Fund 0.85% 1.33%
Inventor GNMA Securities Fund 0.85% 1.40%
Inventor Pennsylvania Municipal
Bond Fund 0.85% 1.36%
Inventor Pennsylvania Tax-Exempt
Money Market Fund 0.55% 1.04%
<FN>
__________________________________
(1) Annualized for the period from commencement through April 30, 1995.
</TABLE>
-17-
<PAGE> 31
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED OCTOBER 31, 1995
---------------------------------------
ANNUALIZED ANNUALIZED
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS FEE WAIVERS
------------------- -------------------
INVENTOR PORTFOLIOS
- -------------------
<S> <C> <C>
Inventor Equity Growth Fund 0.95% 1.43%
Inventor Intermediate Government
Securities Fund 0.85% 1.27%
Inventor GNMA Securities Fund 0.85% 1.31%
Inventor Pennsylvania Municipal
Bond Fund 0.85% 1.25%
Inventor Pennsylvania Tax-Exempt
Money Market Fund 0.55% 0.95%
</TABLE>
EXPENSE RATIOS -- ARMADA PORTFOLIOS. The following tables set forth (i) the
ratios of operating expenses to average net assets of the Armada Portfolios for
the fiscal year ended May 31, 1995 (a) after fee waivers and (b) absent fee
waivers, and (ii) the annualized ratios of operating expenses to average net
assets of the Armada Portfolios for the six-month period ended November 30,
1995 (a) after fee waivers and (b) absent fee waivers:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31, 1995
------------------------------
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS FEE WAIVERS
------------------- -------------------
ARMADA PORTFOLIOS
- -----------------
<S> <C> <C>
Armada Equity Fund
Institutional Shares 1.01% 1.02%
Retail Shares 1.27% 1.28%
Armada GNMA Fund
Institutional Shares (1) (1)
Retail Shares (1) (1)
Armada Government Income Fund
Institutional Shares (1) (1)
Retail Shares (1) (1)
Armada Pennsylvania Municipal Fund
Institutional Shares (1) (1)
Retail Shares (1) (1)
Armada Pennsylvania Tax Exempt Fund
Institutional Shares (1) (1)
Retail Shares (1) (1)
<FN>
_________________________________
(1) Had not commenced operations as of May 31, 1995.
</TABLE>
-18-
<PAGE> 32
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED NOVEMBER 30, 1995
----------------------------------------
ANNUALIZED ANNUALIZED
RATIO OF OPERATING RATIO OF OPERATING
EXPENSES TO AVERAGE EXPENSES TO AVERAGE
NET ASSETS AFTER NET ASSETS ABSENT
FEE WAIVERS FEE WAIVERS
------------------- -------------------
ARMADA PORTFOLIOS
- -----------------
<S> <C> <C>
Armada Equity Fund
Institutional Shares 1.00% 1.03%
Retail Shares 1.25% 1.27%
Armada GNMA Fund
Institutional Shares (1) (1)
Retail Shares (1) (1)
Armada Government Income Fund
Institutional Shares (1) (1)
Retail Shares (1) (1)
Armada Pennsylvania Municipal Fund
Institutional Shares (1) (1)
Retail Shares (1) (1)
Armada Pennsylvania Tax Exempt Fund
Institutional Shares (1) (1)
Retail Shares (1) (1)
<FN>
_______________________________
(1) Had not commenced operations as of November 30, 1995.
VOTING INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by Inventor's Board of
Directors in connection with a Special Meeting of Shareholders to be held on
Thursday, August 1, 1996 at 10:00 a.m. (Eastern time), at 680 East Swedesford
Road, Wayne, Pennsylvania 19087-1658 (such meeting and any adjournments thereof
hereinafter referred to as the "Special Meeting"). Only shareholders of record
at the close of business on May 31, 1996 will be entitled to notice of and to
vote at the Special Meeting. Each share or fraction thereof is entitled to one
vote or fraction thereof and all shares will vote separately by portfolio.
Shares represented by a properly executed proxy will be voted in accordance
with the instructions thereon, or if no specification is made, the persons
named as proxies will vote in favor of each proposal set forth in the Notice of
Special Meeting. Proxies may be revoked at any time before they are exercised
by submitting to Inventor a written notice of revocation or a subsequently
executed proxy or by attending the Special Meeting and voting in person. For
additional information, including a description of the shareholder vote
required for approval of the Reorganization Agreement and related transactions
contemplated thereby, see "Information Relating to Voting Matters."
</TABLE>
-19-
<PAGE> 33
RISK FACTORS. The following discussion highlights the principal risk factors
associated with an investment in the Inventor Equity Growth Fund and the Armada
Equity Fund and is qualified in its entirety by the more extensive discussion
of risk factors in "Comparison of Investment Policies and Risk Factors."
Because of the similarities of the investment objectives and policies
of the Inventor Equity Growth Fund and the Armada Equity Fund, management
believes that an investment in the Armada Equity Fund involves risks that are
similar to those of the Inventor Equity Growth Fund. These investment risks
include those typically associated with investing in a portfolio of common
stocks and securities convertible into common stocks.
There are differences, however, between the Inventor Equity Growth
Fund and the Armada Equity Fund as described below under "Comparison of
Investment Policies and Risk Factors." These differences can result in
different risks.
For example, within specified limits, the Armada Equity Fund may seek
to achieve its investment objectives through investments directly in securities
of foreign issuers and reverse repurchase agreements. Investments in foreign
securities involve risks not typically associated with investments in
securities of U.S. issuers. Engaging in the use of reverse repurchase
agreements can cause the portfolio's net asset value to rise or fall faster
than it otherwise would. Reverse repurchase agreements involve the risk that
the market value of the securities sold by a portfolio may decline below the
price of the securities the portfolio is obligated to purchase.
The Inventor Equity Growth Fund cannot invest in these types of
investments; however, it may seek to achieve its investment objective through
investments, within specified limits, in certain options and futures and
Standard and Poor's Depository Receipts ("SPDRs"). When a portfolio purchases
an option, it runs the risk that it will lose its entire investment in the
option in a relatively short period of time, unless the portfolio exercises the
option or enters into a closing sale transaction with respect to the option
during the life of the option. SPDRs are interests in a unit investment trust
("UIT"). SPDRs are not individually redeemable, except upon termination of the
UIT. The liquidity of small holdings of SPDRs will depend upon the existence
of a secondary market. The Armada Equity Fund may not invest in options,
futures or SPDRs.
Further, the Inventor Equity Growth Fund may have higher portfolio
turnover rates (E.G., 110% for the fiscal year ended April 30, 1995), resulting
in higher portfolio costs, while the Armada Equity Fund's annual portfolio
turnover is not expected to exceed 100% under normal market conditions.
-20-
<PAGE> 34
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
Inventor has entered into an agreement whereby its investment
portfolios are to be acquired by portfolios of Armada. Significant provisions
of the Reorganization Agreement are summarized below; however, this summary is
qualified in its entirety by reference to the Reorganization Agreement, a copy
of which is attached as Appendix I to this Combined Proxy Statement/Prospectus.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. There are five separate
Inventor investment portfolios. The assets of one of these portfolios will be
acquired by a similar investment portfolio currently offered by Armada. The
remaining four portfolios will be acquired by four new Armada Portfolios which
have been organized to continue the operations of these Inventor Portfolios.
The Reorganization Agreement provides that at the Effective Time of
the Reorganization, substantially all of the known assets and known liabilities
of the Inventor Portfolios will be transferred to the corresponding Armada
Portfolios identified in the table below. The holders of Class A shares of an
Inventor Portfolio will receive Institutional class shares of the corresponding
Armada Portfolio identified in the table. The number of Institutional class
shares to be issued by each Armada Portfolio will have an aggregate net asset
value equal to the aggregate net asset value of the Class A shares of the
corresponding Inventor Portfolio as of the regular close of the New York Stock
Exchange, currently 4:00 p.m. New York time, at the Valuation Time.
<TABLE>
<CAPTION>
INVENTOR REORGANIZING PORTFOLIOS ARMADA PORTFOLIOS
- -------------------------------- -----------------
<S> <C>
Equity Growth Fund Equity Fund
GNMA Securities Fund GNMA Fund
Intermediate Government Intermediate Government Fund
Securities Fund
Pennsylvania Municipal Bond Pennsylvania Municipal Fund
Fund
Pennsylvania Tax-Exempt Pennsylvania Tax Exempt Fund
Money Market Fund
</TABLE>
The Reorganization Agreement provides that Inventor will declare a
dividend or dividends prior to the Valuation Time which, together with all
previous dividends, will have the effect of distributing to the shareholders of
the Inventor Equity Growth
-21-
<PAGE> 35
Fund all of such Fund's undistributed net investment company income, if any,
for the period up to and including the Effective Time of the Reorganization.
Inventor plans to declare similar dividends with respect to the other funds
involved in the Reorganization.
Following the transfers of assets and liabilities from the Inventor
Portfolios to the Armada Portfolios, and the issuances of shares by the Armada
Portfolios to the Inventor Portfolios, each of the Inventor Portfolios will
distribute Institutional class shares of the Armada Portfolios PRO RATA to the
holders of Class A shares of the Inventor Portfolios as described above in
liquidation of the Inventor Portfolios. Each holder of Class A shares of an
Inventor Portfolio at the Effective Time of the Reorganization will receive
Institutional class shares of the corresponding Armada Portfolio of equal
value, plus the right to receive any dividends or distributions which were
declared before the Effective Time of the Reorganization but which remained
unpaid at that time. Following the Reorganization, the registration of
Inventor as an investment company under the 1940 Act will be terminated, and
Inventor will be terminated under state law.
The stock transfer books of Inventor will be permanently closed at the
Effective Time of the Reorganization.
The Reorganization is subject to a number of conditions, including
approval by the shareholders of Inventor of the Reorganization Agreement and
the transactions contemplated thereby, as described in this Combined Proxy
Statement/Prospectus; the receipt of certain legal opinions described in the
Reorganization Agreement; the receipt of certain certificates from the parties
concerning the continuing accuracy of the representations and warranties in the
Reorganization Agreement and other matters; and the parties' performance in all
material respects of their agreements and undertakings in the Reorganization
Agreement. Assuming satisfaction of the conditions in the Reorganization
Agreement, the Effective Time of the Reorganization is expected to occur on
August 2, 1996 or such other date as is agreed to by the parties.
Section 15(f)(1) of the 1940 Act provides that when a change in the
control of an investment adviser of a registered investment company occurs, the
investment adviser or any of its affiliated persons may receive any amount or
benefit in connection therewith as long as, among other things, for a period of
three years after the time of such action, at least 75% of the members of the
board of directors of such registered investment company are not interested
persons of the investment adviser of such registered investment company or
interested persons of the predecessor investment adviser. Armada has
represented in the Reorganization Agreement that (i) its Board of Trustees
complied
-22-
<PAGE> 36
with the foregoing requirements as of the date thereof, and (ii) in the event
that its Board of Trustees ceases to comply with such requirements at any time
within three years after the Effective Time of the Reorganization, Armada will
take all necessary action to restore compliance as soon as is reasonably
practicable.
The Reorganization Agreement provides that, to the extent not borne by
their respective investment advisers, Armada and Inventor will each be
responsible for the payment of its own expenses incurred in connection with the
Reorganization. Armada estimates that it will bear approximately $130,000 of
the total costs of the Reorganization. Inventor does not expect to bear any of
such costs.
The Reorganization Agreement may be terminated at any time prior to
the Effective Time of the Reorganization by either Armada or Inventor if the
conditions specified in the Reorganization Agreement are not satisfied or by
the mutual consent of Armada and Inventor. The Reorganization Agreement
provides further that at any time prior to or (to the fullest extent permitted
by law) after approval of the Reorganization Agreement by the shareholders of
Inventor (i) the parties thereto may, by written agreement approved by their
respective Boards of Trustees or Directors, or authorized officers and with or
without the approval of their Shareholders, amend any of the provisions of the
Reorganization Agreement; and (ii) either party may waive any breach by the
other party or the failure to satisfy any of the conditions to its obligations
with or without the approval of such party's shareholders.
In its consideration and approval of the Reorganization at a meeting
on March 18, 1996, the Board of Directors of Inventor considered, primarily,
the Holding Company Merger of Integra Financial Corporation and National City
Corporation. Specifically, the Board of Directors of Inventor considered the
effect of the Holding Company Merger on Inventor; the recommendation of
National City and the Armada Advisers with respect to the proposed
consolidation of Inventor and Armada; the tax-free nature of the
Reorganization; and the fact that, based on representations made by management
of Armada with respect to the level of unrealized gains and losses in the
Inventor Equity Growth Fund, the interests of Shareholders would not be diluted
as a result of the Reorganization. Prior to the Holding Company Merger, new
advisory and sub-advisory agreements, including advisory and sub-advisory fees
charged thereunder which were the same in all material respects as those under
the prior advisory and sub-advisory agreements, were approved by the Board of
Directors and Shareholders of Inventor.
After consideration of all of the foregoing factors, together with
certain other factors and information considered to
-23-
<PAGE> 37
be relevant, Inventor's Directors unanimously approved the Reorganization
Agreement and directed that it be submitted to shareholders for approval.
INVENTOR'S BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE REORGANIZATION AGREEMENT.
The Board of Directors of Inventor has not determined what action it
will take in the event the shareholders of any Inventor Portfolio fail to
approve the Reorganization Agreement or for any reason the Reorganization is
not consummated. In either such event, the Directors may choose to consider
alternative dispositions of Inventor's assets, including the sale of assets to,
or merger with, another investment company, or the possible liquidation of any
of its portfolios.
At a meeting held on February 15, 1996, the Armada Board of Trustees
considered the proposed Reorganization. Based upon their evaluation of the
relevant information provided to them, and in light of their fiduciary duties
under federal and state law, the Board of Trustees unanimously determined that
the proposed Reorganization was in the best interests of Armada and its
respective shareholders and that the interests of existing shareholders of
Armada would not be diluted as a result of effecting the transaction.
CAPITALIZATION. Because the Inventor Equity Growth Fund will be
combined in the Reorganization with the Armada Equity Fund, the total
capitalization of the Armada Equity Fund after the Reorganization is expected
to be greater than the current capitalization of the Inventor Equity Growth
Fund. The following table sets forth: (i) the capitalization of the Armada
Equity Fund as of November 30, 1995, (ii) the capitalization of the Inventor
Equity Growth Fund as of October 31, 1995, and (iii) the pro forma
capitalization of the Armada Equity Fund as adjusted to give effect to the
Reorganization. If consummated, the capitalization of the Armada Equity Fund
is likely to be different at the Effective Time of the Reorganization as a
result of daily share purchase and redemption activity in the portfolio.
-24-
<PAGE> 38
CAPITALIZATION TABLE
<TABLE>
<CAPTION>
Inventor
Armada Equity Pro-Forma
Equity Growth Combined
------ ------ ---------
<S> <C> <C> <C>
Total Net Assets $146,948,215 $55,421,278 $202,369,493
Institutional Shares $141,084,467 $55,421,278 $196,505,745
Retail Shares $ 5,863,748 $ -- $ 5,863,748
Shares Outstanding
Institutional Shares $ 8,509,745 $ 4,612,149 $ 11,852,403
Retail Shares $ 353,139 $ -- $ 353,139
Net Asset Value per Share
Institutional Shares $16.58 $12.02 $16.58
Retail Shares $16.60 $ -- $16.60
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the Reorganization is subject
to the condition that Inventor and Armada receive an opinion from Drinker
Biddle & Reath to the effect that for federal income tax purposes: (i) the
transfer of all of the assets and liabilities of the Inventor Equity Growth
Fund and each of the Continuing Portfolios to the corresponding Armada
Portfolio in exchange for shares of the corresponding Armada Portfolio and
liquidating distributions to shareholders of the Inventor Portfolios of the
shares of the Armada Portfolios so received, as described in the Reorganization
Agreement, will constitute reorganizations within the meaning of Section
368(a)(1)(C), Section 368(a)(1)(D) or Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended (the "Code"), and with respect to the
Reorganization, each Inventor Portfolio and Armada Portfolio will be considered
"a party to a reorganization" within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by the Inventor Portfolios as a result
of such transactions; (iii) no gain or loss will be recognized by the Armada
Portfolios as a result of such transactions; (iv) no gain or loss will be
recognized by the shareholders of any Inventor Portfolio on the distribution to
them by Inventor of Institutional class shares of the corresponding Armada
Portfolio in exchange for their Class A shares of the Inventor Portfolio; (v)
the aggregate basis of the Armada shares received by a shareholder of an
Inventor Portfolio will be the same as the aggregate basis of the Shareholder's
Inventor shares immediately prior to the Reorganization; (vi) the basis of each
Armada Portfolio in the assets of the corresponding Inventor Portfolio received
pursuant to the Reorganization will be the same as the basis of the assets in
the hands of the Inventor Portfolio immediately before the Reorganization;
(vii) a shareholder's holding period for Armada shares will be determined by
including the period for which the shareholder held the Inventor shares
exchanged therefor, provided that the shareholder held such
-25-
<PAGE> 39
Inventor shares as a capital asset; (viii) each Armada Portfolio's holding
period with respect to the assets received in the Reorganization will include
the period for which such assets were held by the corresponding Inventor
Portfolio; and (ix) each Armada Portfolio will succeed to the tax attributes of
the corresponding Inventor Portfolio.
Armada and Inventor have not sought a tax ruling from the Internal
Revenue Service ("IRS"), but are acting in reliance upon the opinion of counsel
discussed in the previous paragraph. That opinion is not binding on the IRS
and does not preclude the IRS from adopting a contrary position. Shareholders
should consult their own advisers concerning the potential tax consequences to
them, including state and local income taxes.
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS
The investment objectives and policies of the Inventor Equity Growth
Fund are, in many respects, similar to those of the Armada Equity Fund. There
are, however, certain differences. The following discussion summarizes some of
the more significant similarities and differences in the investment policies
and risk factors of the Inventor Equity Growth Fund and Armada Equity Fund and
is qualified in its entirety by the discussion elsewhere herein, and in the
prospectuses and statements of additional information of the Inventor Equity
Growth Fund and the Armada Equity Fund incorporated herein by reference.
INVENTOR EQUITY GROWTH FUND AND ARMADA EQUITY FUND
The investment policies of both portfolios are similar. The principal
difference between the policies is that the Inventor Equity Growth Fund seeks
capital appreciation only, whereas the Armada Equity Fund seeks a high level of
total return arising out of capital appreciation and income. For the Inventor
Equity Growth Fund, dividend income is an incidental consideration compared to
growth of capital. Also, under normal market conditions, 80% of the Armada
Equity Fund's total assets will be invested in common stock and securities
convertible into common stocks, whereas the Inventor Equity Growth Fund is only
required to hold 65% of its total assets in common stocks and convertible
securities. Another difference is that the Inventor Equity Growth Fund may
invest up to 15% of its net assets in illiquid securities, whereas the Armada
Equity Fund may only invest up to 10% of its net assets in such securities.
Both Funds may invest in American Depository Receipts ("ADRs"), but
such holdings are limited to 20% of the Armada Equity Fund's total assets. The
Inventor Equity Growth Fund is not bound by this restriction. The Armada
Equity Fund may also invest in securities issued by foreign issuers.
-26-
<PAGE> 40
The Inventor Equity Growth Fund may purchase and sell put and call
options on securities for the purposes of hedging against market risks related
to its portfolio securities. The Armada Equity Fund is not permitted to engage
in options transactions.
In order to meet liquidity needs and for temporary defensive purposes,
the Inventor Equity Growth Fund may hold cash reserves and may invest up to
100% of its assets in money market instruments. The Inventor Equity Growth Fund
may also borrow money in amounts up to 33-1/3% of its net assets. As a matter
of fundamental policy, the Armada Equity Fund may not borrow money, except that
it may borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts not to exceed 10% of the value of its total
assets at the time of such borrowing. The Inventor Equity Growth Fund may not
engage in reverse repurchase agreements. During temporary defensive periods,
the Armada Equity Fund can invest in guaranteed investment contracts, in which
the Inventor Equity Growth Fund may not invest.
The Armada Equity Fund is permitted to invest in foreign currency
transactions and variable and floating rate obligations, whereas the Inventor
Equity Growth Fund may not invest in either type of investment.
INVESTMENT POLICIES AND RISKS -- GENERAL
The investment objectives of the Inventor Equity Growth Fund and the
Armada Equity Fund are fundamental, meaning that they may not be changed
without a vote of the holders of a majority of the respective portfolios'
outstanding shares, as defined by the 1940 Act. The investment policies
(except certain investment limitations) of the Inventor Portfolios and the
Armada Portfolios are not fundamental and may be changed by the respective
Boards of Directors and Trustees.
This section describes certain policies and risks that are common to
the Inventor Equity Growth Fund and the Armada Equity Fund. The Inventor
Equity Growth Fund and the Armada Equity Fund are permitted to: (i) purchase
when-issued and delayed delivery securities; (ii) lend portfolio securities;
(iii) invest in money market instruments such as certificates of deposit, time
deposits, bankers' acceptances and commercial paper; (iv) engage in repurchase
agreements; (v) purchase obligations of the U.S. Government, its agencies and
instrumentalities; and (vi) invest in securities of other investment companies.
-27-
<PAGE> 41
INVESTMENT LIMITATIONS
Neither the Inventor Equity Growth Fund nor the Armada Equity Fund may
change their fundamental investment limitations without the affirmative vote of
the holders of a majority of the respective Fund's outstanding shares (as
defined in the 1940 Act). The investment limitations of the Inventor Equity
Growth Fund and the Armada Equity Fund are similar, but not identical.
Both the Inventor Equity Growth Fund and the Armada Equity Fund are
"diversified" investment portfolios and, therefore, have fundamental policies
limiting investments in securities of any one issuer, other than securities
issued by the U.S. Government, its agencies and instrumentalities, and
repurchase agreements collateralized by such securities, to 5% of the value of
a portfolio's total assets, except that up to 25% of the value of a portfolio's
total assets may be invested without regard to this 5% limitation.
In addition, neither the Inventor Equity Growth Fund nor the Armada
Equity Fund may purchase any securities which would cause more than 25% of the
total assets of the respective Fund to be invested in the securities of one or
more issuers conducting their principal business activities in the same
industry, provided that this limitation does not apply to investments in
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities, and repurchase agreements involving such securities. The
Armada Equity Fund policy further provides: (i) wholly owned finance companies
will be considered to be in the industries of their parents if their activities
are primarily related to financing the activities of their parents, and (ii)
utilities will be classified according to their services, for example, gas, gas
transmission, electric and gas, electric, and telephone will each be considered
a separate industry.
Neither the Inventor Equity Growth Fund nor the Armada Equity Fund may
(i) borrow money or issue senior securities, except that the Armada Equity Fund
may borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts not in excess of 10% of the value of the Armada
Equity Fund's total assets and the Inventor Equity Growth Fund may borrow from
anyone for temporary purposes in an amount not exceeding 5% of total assets or
may borrow from a bank for non-temporary purposes in an amount not exceeding
33-1/3% of net assets; or (ii) mortgage, pledge, or hypothecate any assets
except in connection with any such borrowing and in amounts not in excess of,
for Armada, the lesser of the dollar amounts borrowed or 10% of the value of
the Armada Equity Fund's total assets and, for Inventor, 33-1/3% of the
Inventor Equity Growth Fund's total assets at the time of such borrowing. To
the extent that a bank borrowing exceeds 5% of the Inventor Equity Growth
-28-
<PAGE> 42
Fund's total assets, asset coverage of at least 300% is required. Neither Fund
will purchase securities while borrowings (including reverse repurchase
agreements, for Armada) are in excess of, for Armada, or are equal to or are in
excess of, for Inventor, 5% of its total assets.
The investment limitations described in the foregoing paragraphs
regarding diversification, borrowing and pledging of assets are fundamental
with respect to both Inventor and Armada.
Neither the Inventor Equity Growth Fund nor the Armada Equity Fund may
make loans, except that both Funds may purchase or hold debt instruments, lend
portfolio securities and enter into repurchase agreements in accordance with
their respective investment objective and policies.
Neither Fund may act as an underwriter of securities of other issuers
except as it may be deemed an underwriter in selling a portfolio security. Nor
may either Fund purchase or sell real estate, except that the Armada Equity
Fund may invest in securities secured by real estate or interests therein or
issued by companies or investment trusts which invest in real estate or
interests therein and the Inventor Equity Growth Fund may invest in companies
which invest in real estate.
The Inventor Equity Growth Fund and the Armada Equity Fund may not
invest in any issuer for the purpose of exercising control or management.
Neither Fund may purchase securities on margin, make short sales of securities,
or, for Armada, maintain a short position, except that both Funds may purchase
and sell futures contracts and options on futures contracts in accordance with
their investment objectives. The policies of the Armada Equity Fund do not
currently permit investments in futures and options thereon.
Neither the Inventor Equity Growth Fund nor the Armada Equity Fund may
purchase or sell commodity contracts, or invest in oil, gas or mineral
exploration or development programs or, in the case of Inventor, leases, except
that the Inventor Equity Growth Fund may invest in companies which invest in
financial commodities contracts and the Armada Equity Fund may to the extent
appropriate to its investment objective: (i) invest in securities issued by
companies which purchase or sell commodities or commodity contracts or which
invest in such programs; and (ii) purchase and sell futures contracts and
options on futures contracts. In addition, the Armada Equity Fund may enter
into forward currency contracts and other financial instruments in accordance
with its investment objective and policies.
The following fundamental investment limitation of the Armada Equity
Fund has no fundamental counterpart in the Inventor Equity Growth Fund: the
Armada Equity Fund may invest no more than 10%
-29-
<PAGE> 43
of the value of its net assets in illiquid securities, including repurchase
agreements with remaining maturities in excess of seven days, non- negotiable
time deposits, certificates of participation without corresponding remarketing
agreements, and other securities which are not readily marketable. The
Inventor Equity Growth Fund, however, has the following non-fundamental
investment limitation: the Inventor Equity Growth Fund may not invest in
illiquid securities in an amount exceeding, in the aggregate, 15% of its net
assets.
The Armada Equity Fund is prohibited from purchasing or retaining the
securities of any issuer if the officers or trustees of Armada or the officers
or directors of its investment advisers owning beneficially more than one-half
of 1% of the securities of such issuer together own beneficially more than 5%
of such securities.
So long as the Armada Equity Fund is offering and selling its shares
in the state of Texas, it may not: (i) invest more than 5% of its net assets in
warrants (included within that amount, but not to exceed 2%, may be warrants
which are not listed on the New York or American Stock Exchange), (ii) invest
in oil, gas or other mineral leases, or (iii) invest in real estate limited
partnership interests.
The Armada Equity Fund may not purchase or sell put options, call
options, straddles, spreads or any combination thereof, except that the Fund
may purchase and sell futures contracts and options on futures contracts in
accordance with its investment objective.
As a non-fundamental policy, the Inventor Equity Growth Fund may not
purchase securities of any company which has (with predecessors) a record of
less than three years of continuous operations, if as a result, more than 5% of
the Fund's total assets would be invested in such securities.
As a matter of fundamental policy, the Inventor Equity Growth Fund,
with respect to 75% of its net assets, will not acquire more than 10% of the
voting securities of any one issuer.
See "Risk Factors, Investment Objectives and Policies" in Armada's
Statement of Additional Information which is incorporated by reference herein
for additional investment limitations of the Armada Equity Fund.
PURCHASE AND REDEMPTION INFORMATION, EXCHANGE PRIVILEGES, DISTRIBUTION AND
PRICING. The purchase, redemption, exchange privileges and distribution
policies of the Inventor Portfolios and the Armada Portfolios are discussed
above under "Summary -- Overviews of the Inventor Portfolios and Armada
Portfolios" and below in Appendix III to this Combined Proxy
Statement/Prospectus.
-30-
<PAGE> 44
OTHER INFORMATION. Inventor and Armada are registered as open-end management
investment companies under the 1940 Act. Currently, Inventor offers five
investment portfolios and Armada offers eleven investment portfolios.
Inventor is organized as a Maryland corporation and is subject to the
provisions of its Articles of Incorporation and By-Laws. Armada is organized
as a Massachusetts business trust and is subject to the provisions of its
Declaration of Trust and Code of Regulations. Shares of both Inventor and
Armada: (i) are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held; (ii) will vote in
the aggregate and not by class except as otherwise expressly required by law
or, with respect to Armada only, when class voting is permitted by the Board of
Trustees; and (iii) are entitled to participate equally in the dividends and
distributions that are declared with respect to a particular investment
portfolio and in the net distributable assets of such portfolio on liquidation.
Shares of the Armada Portfolios have no par value while shares of the Inventor
Portfolios have a par value of $.0001. In addition, shares of the Inventor
Portfolios and Armada Portfolios have no preemptive rights and only such
conversion and exchange rights as the respective Boards of Directors or
Trustees may grant in their discretion. When issued for payment as described
in their prospectuses, Inventor shares and Armada shares are fully paid and
non-assessable by such entities except as required under Maryland law with
respect to Inventor. Armada is not required under the laws of Massachusetts to
hold annual meetings of shareholders and intends to do so only if required by
the 1940 Act or other applicable law. To the extent required by law, Armada
will assist in shareholder communications in such matters.
The foregoing is only a summary. Shareholders may obtain copies of
the Articles of Incorporation and By-laws of Inventor and the Declaration of
Trust and By-laws of Armada upon written request at the addresses shown on the
cover page of this Combined Proxy Statement/Prospectus.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by Inventor's Board of
Directors in connection with the Special Meeting. It is expected that the
solicitation of proxies will be primarily by mail. Officers and service
contractors of Inventor may also solicit proxies by telephone, telegraph,
facsimile or personal interview. Any shareholder giving a proxy may revoke it
at any time before it is exercised by submitting to Inventor a written notice
of revocation or a subsequently executed proxy or by attending the Special
Meeting and voting in person.
-31-
<PAGE> 45
Only shareholders of record at the close of business on May 31, 1996
will be entitled to vote at the Special Meeting. On that date there were
outstanding and entitled to be voted ____ shares of the Inventor Equity Growth
Fund, ____ shares of the Inventor GNMA Securities Fund, ____ shares of the
Inventor Intermediate Government Securities Fund, ____ shares of the Inventor
Pennsylvania Municipal Bond Fund and ____ shares of the Inventor Pennsylvania
Tax-Exempt Money Market Fund. Each share or fraction thereof is entitled to
one vote or fraction thereof, and all shares will vote separately by portfolio.
National City has advised Inventor and Armada that National City will
vote the shares of each Inventor Portfolio for which it is record owner as
follows: (i) for each account as to which there is an individual designated
both to vote proxies and to receive annual and semi-annual reports and other
disclosure documents, such individual shall be entitled to vote the shares
beneficially owned by such account; and (ii)(A) for each account as to which
there is an individual designated as aforesaid but such individual fails to
vote and as to which National City is a fiduciary, and (B) for each account as
to which National City is responsible to vote proxies, National City shall vote
such shares as advised by an independent third party unrelated to either
National City or the account.
If the accompanying proxy is executed and returned in time for the
Special Meeting, the shares covered thereby will be voted in accordance with
the proxy on all matters that may properly come before the Special Meeting or
any adjournment thereof. For information on adjournment of the meeting, see
"Quorum" below.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement (and the
transactions contemplated thereby) is being submitted for approval at the
Special Meeting by the holders of a majority of the outstanding shares of each
of the Inventor Equity Growth Fund, GNMA Securities Fund, Intermediate
Government Securities Fund, Pennsylvania Municipal Bond Fund and Pennsylvania
Tax-Exempt Money Market Fund, in accordance with the provisions of Inventor's
Articles of Incorporation and the requirements of the 1940 Act. The term
"majority of the outstanding shares" as used herein means more than 50% of the
outstanding shares.
In tallying shareholder votes, abstentions and broker non-votes (E.G.,
proxies sent in by brokers and other nominees that cannot be voted on a
proposal because instructions have not been received from the beneficial
owners) will be counted to determine whether or not a quorum is present for
purposes of convening the meeting. As to the Reorganization proposal,
abstentions and broker non-votes will be considered to be a vote against the
Reorganization proposal.
-32-
<PAGE> 46
The approval of the Reorganization by the shareholders of the Armada
Equity Fund is not being solicited because their approval or consent is not
necessary for the Reorganization to be consummated.
For purposes of the 1940 Act, any person who owns 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 and its affiliates may be deemed to be controlling persons of
both Armada and Inventor.
At May 31, 1996, National City, which has its principal place of
business at 1900 East Ninth Street, Cleveland, Ohio 44114, and its affiliates
held of record substantially all of the outstanding shares of each of the
Armada Funds and Inventor Funds on behalf of their customer accounts. At such
date, the name, address and share ownership of the persons who beneficially
owned 5% or more of the Inventor Funds are as follows:
[TO BE PROVIDED]
At May 31, 1996, the name, address, and share ownership of the persons
who beneficially owned 5% or more of the Armada Funds are as follows:
[TO BE PROVIDED]
At May 31, 1996, the directors and officers of Inventor, as a group,
owned less than 1% of the outstanding shares of each of the Inventor Funds. At
May 31, 1996, the trustees and officers of Armada owned less than 1% of the
outstanding shares of each of the Armada Funds.
APPRAISAL RIGHTS. Shareholders are not entitled to any rights of share
appraisal under Inventor's Articles of Incorporation or under the laws of the
State of Maryland in connection with the Reorganization. Shareholders have,
however, the right to redeem from Inventor their Inventor shares at net asset
value until the Effective Time of the Reorganization, and thereafter
shareholders may redeem from Armada the Armada shares acquired by them in the
Reorganization at net asset value.
QUORUM. In the event that a quorum is not present at the Special Meeting, or
in the event that a quorum is present at the Special Meeting but sufficient
votes to approve the Reorganization Agreement and the transactions contemplated
thereby are not received, the persons named as proxies may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies.
Any such adjournment will require the
-33-
<PAGE> 47
affirmative vote of a majority of those shares affected by the adjournment that
are represented at the Special 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 Reorganization Agreement, in favor of such
adjournments, and will vote those proxies required to be voted AGAINST such
proposals against any adjournment. A shareholder vote may be taken with
respect to one or more Inventor Portfolios prior to any such adjournment if
sufficient votes have been received for approval. A quorum is constituted with
respect to an Inventor Portfolio by the presence in person or by proxy of the
holders of one-third of the outstanding shares of the Portfolio entitled to
vote at the Special Meeting. Inventor proxies properly executed and marked
with a negative vote or an abstention will be considered to be present at the
Special Meeting for the purposes of determining the existence of a quorum for
the transaction of business.
ADDITIONAL INFORMATION ABOUT ARMADA
Information about the Armada Equity Fund is included in the Prospectus
accompanying this Combined Proxy Statement/Prospectus, which is incorporated by
reference herein. Additional information about the Armada Equity Fund is
included in its Statement of Additional Information dated September 28, 1995
which has been filed with the SEC and which is incorporated by reference
herein. A copy of the Statement of Additional Information may be obtained
without charge by writing or calling Armada at the address and telephone number
shown on the cover page of this Combined Proxy Statement/Prospectus. Armada is
subject to the informational requirements of the Securities Exchange Act of
1934 and the 1940 Act, as applicable, and, in accordance with such
requirements, files proxy materials, reports and other information with the
SEC. These materials can be inspected and copied at the Public Reference
Facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at Armada's address shown on the cover page of this Combined Proxy
Statement/Prospectus and at the SEC's Regional Offices at 7 World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can also be obtained from
the Public Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission, Washington, D.C. 20549, at
prescribed rates.
The current trustees and officers of Armada will continue as trustees
and officers following the Reorganization. The name of each trustee as well as
information concerning his principal occupations during the past five years are
set forth below.
-34-
<PAGE> 48
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION(S) HELD DURING PAST 5 YEARS
NAME AND ADDRESS WITH ARMADA AND OTHER AFFILIATIONS
---------------- ---------------- ----------------------
<S> <C> <C>
Richard B. Tullis Chairman of the Board Chairman Emeritus, Harris
5150 Three Village Drive Corporation (electronic
Lyndhurst, OH 44124 communication and information
processing equipment), since
October 1985; Director, NACCO
Materials Handling Group, Inc.
(manufacturer of industrial fork
lift trucks), since 1984; Director,
Hamilton Beach/Proctor-Silex, Inc.
(manufacturer of household
appliances), since 1990; Director,
Waste-Quip, Inc. (waste handling
equipment), since 1989.
Thomas R. Benua, Jr. Trustee Chairman, EBCO Manufacturing
564 Hackberry Drive Company and subsidiaries
Westerville, OH 43081 (manufacture, sale and financing of
water coolers and dehumidifiers),
since January 1996 and President,
January 1987 to January 1996; Vice
President and Executive Committee
Member of Ebtech Corp., since March
1991.
*Leigh Carter Trustee, Retired President and Chief
13901 Shaker Blvd., #6B President and Treasurer Operating Officer, BFGoodrich
Cleveland, OH 44120 Company, August 1986 to September
1990; Director, Adams Express
Company, since April 1982;
Director, Lamson & Sessions Co.,
since April 1991; Director,
Petroleum & Resources Corp., since
April 1987; Director, Morrison
Products, since April 1983.
</TABLE>
-35-
<PAGE> 49
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
POSITION(S) HELD DURING PAST 5 YEARS
NAME AND ADDRESS WITH ARMADA AND OTHER AFFILIATIONS
---------------- ---------------- ----------------------
<S> <C> <C>
John F. Durkott Trustee President and Chief Operating
8600 Allisonville Road Officer, Kittle's Home Furnishings
Indianapolis, IN 46250 Center, Inc., since January 1982;
partner, Kittles Bloomington
Property Company, since January
1981; partner, KK&D (Affiliated
Real Estate Companies of Kittle's
Home Furnishings Center), since
January 1989.
Richard W. Furst, Dean Trustee Professor of Finance and Dean,
Carol Martin Gatton College of Carol Martin Gatton College of
Business and Economics Business and Economics, University
University of Kentucky of Kentucky, since 1981; Director,
Lexington, KY 40506-0034 Studio Plus Hotels, Inc., since
1994.
Robert D. Neary Trustee Retired Co-Chairman, Ernst & Young,
32980 Creekside Drive April 1984 to September, 1993;
Pepper Pike, OH 44124 Director, Cold Metal Products,
Inc., since March 1994; Director,
Zurn Industries, Inc., since June
1995.
J. William Pullen Trustee President and Chief Executive
Whayne Supply Company Officer, Whayne Supply Co. (engine
1400 Cecil Avenue and heavy equipment distribution),
P.O. Box 35900 since 1986; President and Chief
Louisville, KY 40232-5900 Executive Officer, American
Contractors Rentals & Sales (rental
subsidiary of Whayne Supply Co.),
since 1988.
W. Bruce McConnel, III Secretary Partner of the law firm of Drinker
Philadelphia National Bank Biddle & Realth, Philadelphia,
Building Pennsylvania.
1345 Chestnut Street
Philadelphia, PA 19107
John J. Burke, III Assistant Treasurer Client Service Officer, First Data
First Data Investor Services Investor Services Group, Inc. since
Group, Inc. 1991; prior thereto, Management
4400 Computer Drive Associate, Fidelity Investments.
Westborough, MA 01581
<FN>
___________________________
* May be deemed to be an "interested person" of Armada as defined in the
1940 Act.
</TABLE>
-36-
<PAGE> 50
ADDITIONAL INFORMATION ABOUT INVENTOR
Information about Inventor is incorporated herein by reference from
its Prospectuses dated August 28, 1995 (as supplemented May 2, 1996) and
Statement of Additional Information dated August 28, 1995, copies of which may
be obtained without charge by writing or calling Inventor at the address and
telephone number shown on the cover page of this Combined Proxy
Statement/Prospectus. Reports and other information filed by Inventor can be
inspected and copied at the Public Reference Facilities maintained by the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such material
can be obtained from the Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.
The name and address of each director and officer of Inventor as well
as information concerning his or her principal occupations during the past five
years are as follows:
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH INVENTOR DURING PAST 5 YEARS
---------------- ---------------- ---------------------
<S> <C> <C>
*Robert A. Nesher Chairman and Director Retired; Executive Vice President of
680 East Swedesford Road SEI Financial Management 1986-1994;
Wayne, PA 19087-1658 Director and Executive Vice President
of SEI Financial Management 1981-1994.
John T. Cooney Director Retired; Former Vice Chairman of
573 N. Post Oak Lane Ameritrust Texas N.A. (1989-92); Vice
Houston, TX 77024 Chairman of MTrust Corp. (1985-1989).
*William M. Doran Director Partner, Morgan Lewis & Bockius, LLP;
2000 One Logan Square Counsel to Inventor, SEI Financial
Philadelphia, PA 19103 Management Corporation and SEI
Financial Services Company for past
five years; Director and Secretary of
SEI Financial Management.
Frank E. Morris Director Retired; Peter Drucker Professor of
105 Walpole Street Management, Boston College since 1989;
Dover, DE 02030 President, Federal Reserve Bank of
Boston (1968-1988).
</TABLE>
-37-
<PAGE> 51
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH INVENTOR DURING PAST 5 YEARS
---------------- ---------------- ---------------------
<S> <C> <C>
Robert A. Patterson Director Pennsylvania State University Senior
408 Old Main Vice President, Treasurer (Emeritus),
University Park, PA 16802 Financial and Investment Consultant,
Professor of Transportation (1984-
present); Vice President-Investments,
Treasurer, Senior Vice President
(Emeritus) 1982-1984); Director,
Pennsylvania Research Corp.; Member
and Treasurer, Board of Trustees of
Grove City College.
Gene Peters Director Private investor from 1987 to present.
943 Oblong Road Vice President and Chief Financial
Williamstown, MA 01267 Officer, Western Company of North
America (1980-1986); President of Gene
Peters and Associates (1978-1980);
President and Chief Financial Officer
of Jos. Schlitz Brewing Company before
1978.
James M. Storey Director Retired; formerly Partner in the law
Ten Post Office Square South firm of Dechert Price & Rhoads.
Boston, MA 02109
David G. Lee President, Chief Executive Held this position since 1993. Vice
680 East Swedesford Road Officer - Senior Vice President of SEI Financial (1991-
Wayne, PA 19087-1658 President 1993); President, GW Sierra Trust
Funds before 1991.
Carmen V. Romeo Treasurer, Assistant Director, Executive Vice President,
680 East Swedesford Road Secretary Chief Financial Officer and Treasurer
Wayne, PA 19087-1658 of SEI; Director and Treasurer of the
Administrator and the Distributor
since 1981.
Sandra K. Orlow Vice President, Assistant Vice President and Assistant Secretary
680 East Swedesford Road Secretary of the Administrator and Distributor
Wayne, PA 19087-1658 since 1981.
Kevin P. Robins Vice President, Assistant Senior Vice President and General
680 East Swedesford Road Secretary Counsel of SEI, the Administrator and
Wayne, PA 19087-1658 the Distributor since 1994; Vice
President of SEI, the Administrator
and the Distributor (1992-1994);
Associate, Morgan, Lewis & Bockius,
LLP (law firm) prior to 1992.
</TABLE>
-38-
<PAGE> 52
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATIONS
NAME AND ADDRESS WITH INVENTOR DURING PAST 5 YEARS
---------------- ---------------- ---------------------
<S> <C> <C>
Kathryn L. Stanton Vice President, Assistant Vice President, Assistant Secretary of
680 East Swedesford Road Secretary SEI, the Administrator and Distributor
Wayne, PA 19087-1658 since 1994; Associate, Morgan, Lewis &
Bockius, LLP (law firm) (1989-1994).
Todd Cipperman Vice President and Assistant Vice President, Assistant Secretary of
680 East Swedesford Road Secretary SEI, the Administrator and Distributor
Wayne, PA 19087-1658 since May 1995; Associate, Dewey
Ballantine (law firm) (1994-1995);
Associate, Winston & Strawn (law firm)
1991-1994.
Joseph Lydon Vice President, Assistant Director of Business Administration,
680 East Swedesford Road Secretary SEI Corporation since April 1995; Vice
Wayne, PA 19087-1658 President of Fund Group, Vice
President of the Adviser - Dreman
Value Management, LP; President of
Dreman Financial Services, Inc. from
1989 to 1994.
Jeffrey A. Cohen Controller, Chief Accounting CPA, Director, International and
680 East Swedesford Road Officer Domestic Funds Accounting, SEI
Wayne, PA 19087-1658 Corporation from 1991 to present;
Price Waterhouse, Audit Manager,
before 1991.
Richard W. Grant Secretary Partner of Morgan, Lewis & Bockius,
2000 One Logan Square LLP (law firm); Counsel to Inventor,
Philadelphia, PA 19103 Administrator and the Distributor.
Christine Trecroci Assistant Secretary Regulatory Manager, SEI Corporation
680 East Swedesford Road since March 1994.
Wayne, PA 19087-1658
<FN>
____________________
* May be deemed to be an "interested person" of Inventor as defined in
the 1940 Act. At the time of the approval of the Reorganization by
the Board of Directors of Inventor, and as of the date hereof, Robert
A. Nesher and William M. Doran were "interested" members of the
Inventor Board of Directors, because Mr. Nesher is a shareholder and a
former officer of the parent corporation of the distributor of
Inventor, and Mr. Doran is a partner in Morgan, Lewis & Bockius, LLP,
counsel to Inventor.
</TABLE>
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<PAGE> 53
LITIGATION
Neither Inventor nor Armada is involved in any litigation that would
have any material adverse financial effect upon either the Inventor Portfolios
or the Armada Portfolios.
FINANCIAL HIGHLIGHTS
INVENTOR FINANCIAL HIGHLIGHTS. The tables set forth below present financial
information for the Class A shares of the Inventor Equity Growth Fund, GNMA
Securities Fund, Intermediate Government Securities Fund, Pennsylvania
Municipal Bond Fund and Pennsylvania Tax-Exempt Money Market Fund. This
information is derived from the Inventor Portfolios' unaudited financial
statements for the six-month period ended October 31, 1995. The data should be
read in conjunction with the unaudited financial statements and related notes,
which are included in the Statement of Additional Information related to this
Combined Proxy Statement/Prospectus. The financial highlights for the Inventor
Portfolios for prior periods are contained in Inventor's Prospectuses dated
August 28, 1995 (as supplemented May 2, 1996) and the financial statements for
prior periods are included in Inventor's Statement of Additional Information
dated August 28, 1995, which Prospectuses and Statement of Additional
Information are incorporated herein by reference.
-40-
<PAGE> 54
Selected data for an Inventor Class A share of capital stock
outstanding throughout the period indicated:
EQUITY GROWTH FUND
------------------
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED
OCTOBER 31, 1995
(UNAUDITED)
-----------------
Class A Shares
--------------
<S> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . . . $10.69
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.08
Net Realized and Unrealized Gains on Securities . . . . . . . . . . . . . . 1.33
Distributions from Net Investment Income . . . . . . . . . . . . . . . . . (0.08)
Distributions from Realized Capital Gains . . . . . . . . . . . . . . . . . --
Net Asset Value, End of period . . . . . . . . . . . . . . . . . . . . . . $ 12.02
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.20%(1)(3)
Net Assets, End of Period (000) . . . . . . . . . . . . . . . . . . . . . . $55,421
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . . . . . . 0.95%(2)
Ratio of Net Investment Income to Average
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.34%(2)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.43%(2)
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers) . . . . . . . . . . . . . . . . . . . . . 0.86%(2)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 85%
<FN>
_______________________________
(1) Not Annualized.
(2) Annualized.
(3) Does not reflect sales charge.
</TABLE>
-41-
<PAGE> 55
Selected data for an Inventor Class A share of capital stock
outstanding throughout the period indicated:
GNMA SECURITIES FUND
--------------------
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED
OCTOBER 31, 1995
(UNAUDITED)
-----------------
Class A
Shares
------
<S> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . $ 10.16
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . 0.34
Net Realized and Unrealized Gains on Securities . . . . . . . . . . . . 0.30
Distributions from Net Investment Income . . . . . . . . . . . . . . . (0.34)
Distributions from Realized Capital Gains . . . . . . . . . . . . . . . --
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . $ 10.46
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.36%(1)(3)
Net Assets, End of Period (000 omitted) . . . . . . . . . . . . . . . . $54,130
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . . . . 0.85%(2)
Ratio of Net Investment Income to Average
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.47%(2)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) . . . . . . . . . . . . . . . . . . . . . . . . . 1.31%(2)
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers) . . . . . . . . . . . . . . . . . . . 6.01%(2)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . 103%
<FN>
_______________________________
(1) Not Annualized.
(2) Annualized.
(3) Does not reflect sales charge.
</TABLE>
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<PAGE> 56
Selected data for an Inventor Class A share of capital stock
outstanding throughout the period indicated:
INTERMEDIATE GOVERNMENT SECURITIES FUND
---------------------------------------
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED
OCTOBER 31, 1995
(UNAUDITED)
-----------------
Class A
Shares
------
<S> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . $ 10.02
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . 0.32
Net Realized and Unrealized Gains on Securities . . . . . . . . . . . . 0.29
Distributions from Net Investment Income . . . . . . . . . . . . . . . (0.32)
Distributions from Realized Capital Gains . . . . . . . . . . . . . . . --
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . $ 10.31
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.15%(1)(3)
Net Assets, End of Period (000 omitted) . . . . . . . . . . . . . . . . $91,429
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . . . . 0.85%(2)
Ratio of Net Investment Income to Average
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.20%(2)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) . . . . . . . . . . . . . . . . . . . . . . . . . 1.27%(2)
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers) . . . . . . . . . . . . . . . . . . . 5.78%(2)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . 53%
<FN>
_______________________________
(1) Not Annualized.
(2) Annualized.
(3) Does not reflect sales charge.
</TABLE>
-43-
<PAGE> 57
Selected data for an Inventor Class A share of capital stock
outstanding throughout the period indicated:
PENNSYLVANIA MUNICIPAL BOND FUND
--------------------------------
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED
OCTOBER 31, 1995
(UNAUDITED)
-----------------
Class A
Shares
------
<S> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . $ 10.04
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . 0.21
Net Realized and Unrealized Gains on Securities . . . . . . . . . . . . 0.21
Distributions from Net Investment Income . . . . . . . . . . . . . . . (0.21)
Distributions from Realized Capital Gains . . . . . . . . . . . . . . . --
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . $ 10.25
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.21%(1)(3)
Net Assets, End of Period (000 omitted) . . . . . . . . . . . . . . . . $38,556
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . . . . 0.85%(2)
Ratio of Net Investment Income to Average
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.08%(2)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) . . . . . . . . . . . . . . . . . . . . . . . . . 1.25%(2)
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers) . . . . . . . . . . . . . . . . . . . 3.68%(2)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . . . . . 4%
<FN>
_______________________________
(1) Not Annalized.
(2) Annualized.
(3) Does not reflect sales charge.
</TABLE>
-44-
<PAGE> 58
Selected data for an Inventor Class A share of capital stock
outstanding throughout the period indicated:
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
-----------------------------------------
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED
OCTOBER 31, 1995
(UNAUDITED)
-----------------
Class A
Shares
------
<S> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . . . . . $ 1.00
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . 0.02
Net Realized and Unrealized Gains on Securities . . . . . . . . . . . . --
Distributions from Net Investment Income . . . . . . . . . . . . . . . (0.02)
Distributions from Realized Capital Gains . . . . . . . . . . . . . . . --
Net Asset Value, End of Period . . . . . . . . . . . . . . . . . . . . $ 1.00
Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.75%(1)
Net Assets, End of Period (000 omitted) . . . . . . . . . . . . . . . . $62,157
Ratio of Expenses to Average Net Assets . . . . . . . . . . . . . . . . 0.55%(2)
Ratio of Net Investment Income to Average
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.44%(2)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) . . . . . . . . . . . . . . . . . . . . . . . . . 0.95%(2)
Ratio of Net Investment Income to Average
Net Assets (Excluding Waivers) . . . . . . . . . . . . . . . . . . . 3.04%(2)
<FN>
_______________________________
(1) Not Annualized.
(2) Annualized.
</TABLE>
-45-
<PAGE> 59
ARMADA FINANCIAL HIGHLIGHTS. The table set forth below presents financial
information for the Institutional Shares and Retail Shares of the Armada Equity
Fund. This information is derived from the Armada Equity Fund's unaudited
financial statements for the six-month period ended November 30, 1995. The
data should be read in conjunction with the unaudited financial statements and
related notes, which are included in the Statement of Additional Information
related to this Combined Proxy Statement/Prospectus. The financial highlights
for the Armada Equity Fund for prior periods are contained in the Fund's
Prospectus dated September 28, 1995 and the financial statements for prior
periods are contained in the Fund's Annual Report and are incorporated by
reference into the Fund's Statement of Additional Information dated September
28, 1995, which Prospectus and Statement of Additional Information are
incorporated herein by reference.
-46-
<PAGE> 60
Selected data for a Fund Share
outstanding throughout the period indicated:
ARMADA EQUITY FUND
------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
NOVEMBER 30, 1995
(UNAUDITED)
------------------------
INSTITUTIONAL RETAIL
------------- ------
<S> <C> <C>
Net asset value,
beginning of period . . . . . . . . . . . . . . . . . $14.77 $14.79
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income . . . . . . . . . . . . . . . . .07 .05
Net gains on securities (realized and
unrealized) . . . . . . . . . . . . . . . . . . . . 1.83 1.83
------ ------
Total from investment operations . . . . . . . . . 1.90 1.88
------ ------
LESS DISTRIBUTIONS
Dividends from net investment income . . . . . . . . (.07) (.05)
Dividends in excess of net investment
income . . . . . . . . . . . . . . . . . . . . . . (.02) (.02)
Dividends from net realized capital
gains . . . . . . . . . . . . . . . . . . . . . . . (.00) (.00)
Dividends in excess of net realized
capital gains . . . . . . . . . . . . . . . . . . . (.00) (.00)
----- -----
Total distributions . . . . . . . . . . . . . . . (.09) (.07)
----- ------
Net Asset value, end of period . . . . . . . . . . . . $16.58 $16.60
====== ======
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . 27.41% 3 27.05% 3,4
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) . . . . . . . . $141,084 $5,864
Ratio of expenses to average net
assets . . . . . . . . . . . . . . . . . . . . . . 1.00% 1,3 1.25% 2,3
Ratio of net investment income to
average net assets . . . . . . . . . . . . . . . . .89% 1,3 .64% 2,3
Portfolio turnover rate . . . . . . . . . . . . . . . 38% 38%
<FN>
_____________________________________
(1) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Institutional class for the period
ended November 30, 1995 would have been 1.03% and .86%, respectively.
(2) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Retail class for the period ended
November 30, 1995 would have been 1.27% and .62%, respectively.
(3) Annualized.
(4) Total return excludes sales load.
</TABLE>
-47-
<PAGE> 61
FINANCIAL STATEMENTS
The financial highlights for the Inventor Portfolios for the fiscal
year ended April 30, 1995 are included in Inventor's Prospectuses dated August
28, 1995 (as supplemented May 2, 1996) and the financial statements for the
Inventor Portfolios for the fiscal year ended April 30, 1995 are included in
Inventor's Statement of Additional Information dated September 28, 1995, which
Prospectuses and Statement of Additional Information are incorporated by
reference in this Combined Proxy Statement/Prospectus. Such financial
highlights and financial statements have been incorporated herein in reliance
on the reports of Coopers & Lybrand L.L.P., independent auditors, given on the
authority of that firm as experts in accounting and auditing.
The financial highlights of the Armada Equity Fund for the fiscal year
ended May 31, 1995 are included in the Prospectus for the Armada Equity Fund
dated September 28, 1995, and the financial statements for the Armada Equity
Fund for the fiscal year ended May 31, 1995 are included in Armada's Annual
Report and incorporated by reference in the Armada Equity Fund's Statement of
Additional Information dated September 28, 1995, which Prospectus and Statement
of Additional Information are incorporated by reference in this Combined Proxy
Statement/Prospectus. Such financial highlights and financial statements have
been incorporated herein in reliance on the reports of Ernst & Young LLP,
independent auditors, given on the authority of that firm as experts in
accounting and auditing.
OTHER BUSINESS
Inventor's Board knows of no other business to be brought before the
Special Meeting. However, if any other matters come before the Special
Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Inventor in writing at the
address on the cover page of this Combined Proxy Statement/Prospectus or by
telephoning 1-800-6INVENT(1-800-646-8368).
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING 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.
-48-
<PAGE> 62
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
ARMADA FUNDS
AND
INVENTOR FUNDS, INC.
_____________________, 1996
I-1
<PAGE> 63
CONTENTS
<TABLE>
<S> <C> <C>
I. Transfer of Assets of Inventor Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-3
II. Liquidating Distributions and Termination of Inventor. . . . . . . . . . . . . . . . . . I-7
III. Valuation Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
IV. Certain Representations, Warranties and Agreements of Inventor . . . . . . . . . . . . . . . . I-8
V. Certain Representations, Warranties and Agreements of Armada . . . . . . . . . . . . . . . . . I-16
VI. Shareholder Action on Behalf of the Acquired Funds . . . . . . . . . . . . . . . . . . . . . . I-20
VII. N-14 Registration Statement and Proxy Solicitation Materials . . . . . . . . . . . . . . . . . I-22
VIII. Effective Time of the Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-22
IX. Armada Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-23
X. Inventor Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-30
XI. Tax Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-35
XII. Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-35
XIII. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-35
XIV. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-35
XV. Termination of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . I-36
XVI. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-36
XVII. Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-37
XVIII. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-38
XIX. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-38
XX. Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-38
XXI. Armada Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-38
XXII. Inventor Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-39
XXIII. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-40
XXIV. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-41
XXV. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-41
XXVI. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-41
</TABLE>
I-2
<PAGE> 64
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") made as of
__________, 1996 between Armada Funds, a Massachusetts business trust
("Armada"), and Inventor Funds, Inc., a Maryland corporation ("Inventor").
WHEREAS, the parties intend that substantially all of the known assets
and liabilities of Inventor's portfolios as of the Effective Time of the
Reorganization (as defined in Article VIII) be transferred to, and be acquired
and assumed by, certain Armada portfolios in exchange for Institutional Shares
of the Armada portfolios which shall thereafter be distributed by Inventor to
the holders of its Class A shares of its portfolios, all as described in this
Agreement (the "Reorganization");
WHEREAS, the parties intend that four of the Armada portfolios, the
GNMA Fund, the Intermediate Government Fund, the Pennsylvania Tax Exempt Fund
and the Pennsylvania Municipal Fund, will have nominal assets and liabilities
before the Reorganization and will continue the investment operations of the
Inventor GNMA Securities Fund, the Intermediate Government Securities Fund, the
Pennsylvania Tax Exempt Money Market Fund and the Pennsylvania Municipal Bond
Fund (collectively, the "Continuing Funds"), respectively, after the
Reorganization;
I-1
<PAGE> 65
WHEREAS, the parties intend that substantially all of the known assets
and liabilities of the Inventor Equity Growth Fund (the Continuing Funds and
the Inventor Equity Growth Fund collectively, the "Acquired Funds") shall be
acquired and assumed by the Armada Equity Fund;
WHEREAS, the parties have been advised that the shareholders of the
Inventor Prime Obligations Money Market Fund and the Inventor Treasury
Securities Money Market Fund will redeem their shares in these funds prior to
the Effective Time of the Reorganization;
WHEREAS, the parties intend that the transfers of assets, assumptions
of liabilities, and distributions of Institutional Shares be treated as
tax-free reorganizations under Section 368(a)(1)(C), (D) or (F) of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the parties intend that in connection with the Reorganization
each of the Inventor portfolios shall be terminated and Inventor shall be
deregistered as an investment company and dissolved under state law as
described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and subject to the terms and
I-2
<PAGE> 66
conditions hereof, and intending to be legally bound hereby, Armada and
Inventor agree as follows:
I. TRANSFER OF ASSETS OF INVENTOR FUNDS.
-------------------------------------
1.01 (a) At the Effective Time of the Reorganization (as
defined in Article VIII), all property of every
description, and all interests, rights, privileges
and powers of each Acquired Fund other than cash in
an amount necessary to pay any unpaid dividends and
distributions as provided in Section 4.01(h) (such
assets, the "Acquired Fund Assets") shall be
transferred and conveyed by such Acquired Fund to
Armada on behalf of one of its portfolios as set
forth in Section 1.02 (each, an "Acquiring Fund"),
and shall be accepted by Armada on behalf of such
Acquiring Fund, and Armada, on behalf of such
Acquiring Fund, shall assume all known liabilities
whether accrued, absolute, contingent or otherwise,
of such Acquired Fund reflected in the calculation of
such Acquired Fund's net asset value (the "Acquired
Fund Liabilities"), so that at and after the
Effective Time of the Reorganization: (i) all assets
of such Acquired Fund shall become and be the assets
of its Acquiring Fund; and (ii) all known liabilities
of each Acquired Fund reflected as such in the
I-3
<PAGE> 67
calculation of the Acquired Fund's net asset value
shall attach to its Acquiring Fund as aforesaid and
may thenceforth be enforced against such Acquiring
Fund to the extent as if the same had been incurred
by it. Without limiting the generality of the
foregoing, the Acquired Fund Assets shall include all
property and assets of any nature whatsoever,
including, without limitation, all cash, cash
equivalents, securities, claims and receivables
(including dividend and interest receivables) owned
by an Acquired Fund, and (subject to Section 1.01(b))
any deferred or prepaid expenses shown as an asset on
an Acquired Fund's books, at the Effective Time of
the Reorganization, and all good will, all other
intangible property and all books and records
belonging to an Acquired Fund. Recourse by any
person for the Acquired Fund Liabilities assumed by
an Acquiring Fund shall, at and after the Effective
Time of the Reorganization, be limited to such
Acquiring Fund.
1.01 (b) Notwithstanding Section 1.01(a), unamortized
organizational expenses of the Inventor Equity Growth
Fund shall not be transferred or assumed hereunder.
The parties have been advised that
I-4
<PAGE> 68
such expenses will be paid to such Fund by the
investment adviser to one of the parties hereto and
will be eliminated from the balance sheet of such
Fund prior to the Effective Time of the
Reorganization.
1.02 The assets of each Acquired Fund shall be acquired by the
Acquiring Fund identified below opposite its name.
<TABLE>
<CAPTION>
Inventor Funds Armada Funds
- -------------- ------------
<S> <C>
Equity Growth Fund Equity Fund
GNMA Securities Fund GNMA Fund
Intermediate Government Securities Intermediate Government Fund
Fund
Pennsylvania Municipal Bond Fund Pennsylvania Municipal Fund
Pennsylvania Tax-Exempt Money Pennsylvania Tax-Exempt Fund
Market Fund
</TABLE>
1.03 In exchange for the transfer of the Acquired Fund Assets and the
assumption of the Acquired Fund Liabilities, Armada shall simultaneously issue
at the Effective Time of the Reorganization to each Acquired Fund a number of
full and fractional (to the third decimal place) Institutional Shares of the
Acquiring Fund specified in Section 1.02, all determined and adjusted as
provided in this Agreement. The number of Institutional Shares of each
Acquiring Fund so issued will have an aggregate net asset value equal to the
value of the Acquired Fund Assets that are represented by the Class A shares of
the Acquired Fund, the holders of which shall receive Institutional
I-5
<PAGE> 69
Shares of the Acquiring Fund, as specified in Section 1.02, all determined and
adjusted as provided in this Agreement.
1.04 The net asset value of the Institutional Shares of the Acquiring
Funds and the net asset value of the Class A shares of the Acquired Funds shall
be determined as of the Valuation Time specified in Article III.
1.05 The net asset value of the Institutional Shares of each
Acquiring Fund shall be computed in the manner set forth in such Acquiring
Fund's then current prospectus under the Securities Act of 1933, as amended
(the "1933 Act"). In determining the value of the securities transferred by
the Acquired Funds to the Acquiring Funds, each security shall be priced in
accordance with the policies and procedures (including amortized cost valuation
procedures in the case of the Pennsylvania Tax Exempt Fund) of Armada described
in its then current prospectuses and statements of additional information and
adopted by Armada's Board of Trustees. For such purposes, price quotations and
the security characteristics relating to establishing such quotations shall be
determined by Armada, such determination being subject to the approval of
Inventor, and shall be subject to adjustment by the amount, if any, agreed to
by the parties hereto.
I-6
<PAGE> 70
II. LIQUIDATING DISTRIBUTIONS AND TERMINATION OF INVENTOR.
Immediately after the Effective Time of the Reorganization, each Acquired Fund
shall distribute in complete liquidation pro rata to the shareholders of record
as of the Valuation Time of such Acquired Fund's Class A shares at the
Effective Time of the Reorganization the Institutional Shares of the Acquiring
Fund to be received by the record holders as of the Valuation Time of the Class
A shares of such Acquired Fund. In addition, each record holder of the
Valuation Time of an Acquired Fund shall have the right to receive any unpaid
dividends or other distributions which were declared before the Effective Time
of the Reorganization with respect to the shares of such Acquired Fund that are
held by the shareholder at the Effective Time of the Reorganization. In
accordance with instructions it receives from Inventor, Armada shall record on
its books the ownership of Institutional Shares of each Acquiring Fund by the
record holders of the Class A shares of the Acquired Fund identified in Section
1.02. All of the issued and outstanding Class A shares of each Acquired Fund
shall be cancelled on the books of Inventor at the Effective Time of the
Reorganization and shall thereafter represent only the right to receive the
Institutional Shares of the Acquiring Fund identified in Section 1.02, and the
Acquired Fund's transfer books shall be closed permanently. As soon as
practicable after the Effective Time of the Reorganization, Inventor shall make
all filings and take all other steps as shall be necessary and proper to effect
its complete dissolution, and
I-7
<PAGE> 71
shall file an application pursuant to Section 8(f) of the Investment Company
Act of 1940, as amended (the "1940 Act") for an order declaring that it has
ceased to be an investment company. After the Effective Time of the
Reorganization, Inventor shall not conduct any business except in connection
with its liquidation, dissolution, and deregistration.
III. VALUATION TIME. The Valuation Time shall be 4:00 p.m., Eastern
Time, on August 2, 1996, or on such other date as may be agreed in writing by
the duly authorized officers of both parties hereto.
IV. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF INVENTOR.
4.01 Inventor, on behalf of itself and each Acquired Fund, represents
and warrants to, and agrees with, Armada as follows:
4.01 (a) Inventor is a corporation duly organized and validly
existing under the laws of the State of Maryland. It
is registered with the Securities and Exchange
Commission (the "SEC") as an open-end, diversified
management investment company under the 1940 Act and
such registration is in full force and effect.
I-8
<PAGE> 72
4.01 (b) Inventor has power to own all of its properties and
assets and, subject to the approvals of shareholders
required by law and by the Inventor Articles of
Incorporation, as supplemented and amended, and
By-Laws, to carry out and consummate the transactions
contemplated herein, and has all necessary federal,
state and local authorizations to carry on its
business as now being conducted and to consummate the
transactions contemplated by this Agreement.
4.01 (c) This Agreement has been duly authorized, executed and
delivered by Inventor, and represents Inventor's
valid and binding contract, enforceable in accordance
with its terms. The execution and delivery of this
Agreement does not and will not, and the consummation
of the transactions contemplated by this Agreement
will not, violate Inventor's Articles of
Incorporation, as supplemented and amended, or
By-laws or any agreement or arrangement to which it
is a party or by which it is bound.
4.01 (d) Each Acquired Fund has elected to qualify and has
qualified as a regulated investment company under
Part I of Subchapter M of the Code, as of and
I-9
<PAGE> 73
since its first taxable year; has been a regulated
investment company under such Part of the Code at all
times since the end of its first taxable year when it
so qualified; and qualifies and shall continue to
qualify as a regulated investment company until the
Effective Time of the Reorganization.
4.01 (e) All federal, state, local and foreign income,
profits, franchise, sales, withholding, customs,
transfer and other taxes, including interest,
additions to tax and penalties (collectively,
"Taxes") relating to the Acquired Fund Assets due or
properly shown to be due on any return filed by any
Acquired Fund with respect to taxable periods ending
on or prior to, and the portion of any interim period
up to, the date hereof have been fully and timely
paid or provided for; and there are no levies, liens,
or other encumbrances relating to Taxes existing,
threatened or pending with respect to the Acquired
Fund Assets. At the Effective Time of the
Reorganization, all returns and reports of Inventor
and each Acquired Fund respecting Taxes required by
law to have been filed by such time shall have been
filed.
I-10
<PAGE> 74
4.01 (f) The financial statements of each Acquired Fund for
its fiscal year ended April 30, 1995, examined by
Coopers & Lybrand L.L.P., copies of which have been
previously furnished to Armada, present fairly the
financial position of each Acquired Fund as of such
date and the results of its operations for the
periods then ended, in conformity with generally
accepted accounting principles.
4.01 (g) The unaudited financial statements of each Acquired
Fund for the six-month period ended October 31, 1995,
copies of which have been previously furnished to
Armada, present fairly the financial position of each
Acquired Fund as of such date and the results of its
operations for the six-month period then ended, in
conformity with generally accepted accounting
principles.
4.01 (h) Prior to the Valuation Time, the Inventor Equity
Growth Fund shall have declared a dividend, with a
record date and ex-dividend date prior to the
Valuation Time, which, together with all previous
dividends, shall have the effect of distributing to
its shareholders all of its net investment company
income, if any, for the taxable period
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ended on April 30, 1995 and for the period from said
date to and including the Effective Time of the
Reorganization (computed without regard to any
deduction for dividends paid), and all of its net
capital gain, if any, realized in such taxable
periods.
4.01 (i) At both the Valuation Time and the Effective Time of
the Reorganization, there shall be no known
liabilities of any Acquired Fund, whether accrued,
absolute, contingent or otherwise, not reflected in
the net asset values per share of its outstanding
classes of shares.
4.01 (j) There are no legal, administrative or other
proceedings pending or, to Inventor's knowledge,
threatened against Inventor or an Acquired Fund which
could result in liability on the part of Inventor or
an Acquired Fund.
4.01 (k) Subject to the approvals of shareholders required by
law and by the Inventor Articles of Incorporation, as
supplemented and amended, and By-Laws, at both the
Valuation Time and the Effective Time of the
Reorganization, Inventor shall have full right, power
and authority to
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sell, assign, transfer and deliver the Acquired Fund
Assets and, upon delivery and payment for the
Acquired Fund Assets as contemplated herein, an
Acquiring Fund shall acquire good and marketable
title thereto, free and clear of all liens and
encumbrances, and subject to no restrictions on the
ownership or transfer thereof (except as imposed by
federal or state securities laws).
4.01 (l) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by Inventor of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the Securities Exchange
Act of 1934, as amended ("1934 Act"), the 1940 Act,
the rules and regulations under those Acts, and state
securities laws.
4.01 (m) Insofar as the following relate to Inventor, the
registration statement filed by Armada on Form N-14
relating to the shares of certain Acquiring Funds
that will be registered with the SEC pursuant to this
Agreement, which, without limitation, shall include a
proxy statement of Inventor and the prospectuses of
Inventor and
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Armada with respect to the transactions contemplated
by this Agreement, and any supplement or amendment
thereto or to the documents contained or incorporated
therein by reference (the "N-14 Registration
Statement"), on the effective date of the N-14
Registration Statement, at the time of any
shareholders' meeting referred to herein and at the
Effective Time of the Reorganization: (i) shall
comply in all material respects with the provisions
of the 1933 Act, the 1934 Act and the 1940 Act, the
rules and regulations thereunder, and state
securities laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state
a material fact required to be stated therein or
necessary to make the statements therein not
misleading.
4.01 (n) All of the issued and outstanding Class A shares of
each Acquired Fund have been duly and validly issued,
are fully paid and non-assessable, and were offered
for sale and sold in conformity with all applicable
federal and state securities laws, and no shareholder
of an Acquired Fund has any preemptive right of
subscription or purchase in respect of such shares.
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4.01 (o) Inventor shall not sell or otherwise dispose of any
shares of an Acquiring Fund to be received in the
transactions contemplated herein, except in
distribution to its shareholders as contemplated
herein.
4.01 (p) Inventor has valued, and will continue to value, its
portfolio securities and other assets in accordance
with applicable legal requirements.
4.01 (q) Each Acquired Fund shall provide a list of all
portfolio securities held by it to Armada at least 15
days before the Effective Time of the Reorganization
and shall immediately notify Armada of any portfolio
security thereafter acquired by any Acquired Fund.
Upon notice by Armada, the Inventor Equity Growth
shall, as promptly as practicable, but in any event
prior to the Valuation Time, sell any portfolio
security that Armada identifies as impermissible
under the investment policies, objectives and
limitations of the Armada Equity Fund.
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V. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF ARMADA
5.01 Armada, on behalf of itself and each Acquiring Fund, represents
and warrants to, and agrees with, Inventor as follows:
5.01 (a) Armada is a Massachusetts business trust duly created
pursuant to its Declaration of Trust for the purpose
of acting as a management investment company under
the 1940 Act and is validly existing under the laws
of, and duly authorized to transact business in, the
Commonwealth of Massachusetts. It is registered with
the SEC as an open-end management investment company
under the 1940 Act and such registration is in full
force and effect.
5.01 (b) Armada has power to own all of its properties and
assets and to carry out and consummate the
transactions contemplated herein, and has all
necessary federal, state and local authorizations to
carry on its business as now being conducted and to
consummate the transactions contemplated by this
Agreement.
5.01 (c) This Agreement has been duly authorized, executed and
delivered by Armada, and represents Armada's
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valid and binding contract, enforceable in accordance
with its terms. The execution and delivery of this
Agreement does not and will not, and the consummation
of the transactions contemplated by this Agreement
will not, violate Armada's Declaration of Trust or
Code of Regulations or any agreement or arrangement
to which it is a party or by which it is bound.
5.01 (d) Each Acquiring Fund has elected or will elect to
qualify as a regulated investment company under Part
I of Subchapter M of the Code, and the Armada Equity
Fund has so qualified as of and at all times since
its first taxable year and Armada intends that it
will continue to so qualify.
5.01 (e) The financial statements of the Armada Equity Fund
for its fiscal year ended May 31, 1995 examined by
Ernst & Young LLP, and for the six-month period ended
November 30, 1995, copies of which have been
previously furnished to Inventor, present fairly the
financial position of such Fund as of the dates
indicated and the results of its operations for the
periods indicated, in conformity with generally
accepted accounting principles.
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5.01 (f) At both the Valuation Time and the Effective Time of
the Reorganization, there shall be no known
liabilities applicable to the Institutional Shares of
any Acquiring Fund, whether accrued, absolute,
contingent or otherwise, not reflected in the net
asset values per share of such Institutional Shares.
5.01 (g) There are no legal, administrative or other
proceedings pending or, to Armada's knowledge,
threatened against Armada or an Acquiring Fund which
could result in liability on the part of Armada or an
Acquiring Fund.
5.01 (h) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by Armada of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act, the 1940
Act, the rules and regulations under those Acts, and
state securities laws.
5.01 (i) Insofar as the following relate to Armada, the N-14
Registration Statement on its effective date, at the
time of any shareholders' meetings referred to herein
and at the Effective Time of the
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Reorganization: (i) shall comply in all material
respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act, the rules and regulations
thereunder, and state securities laws, and (ii) shall
not contain any untrue statement of a material fact
or omit to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading.
5.01 (j) The Institutional Shares of each Acquiring Fund to be
issued and delivered to an Acquired Fund for the
account of record holders of shares of an Acquired
Fund, pursuant to the terms hereof, shall have been
duly authorized as of the Effective Time of the
Reorganization and, when so issued and delivered,
shall be registered under the 1933 Act and under
applicable state securities laws, duly and validly
issued, fully paid and non-assessable, and were
offered for sale and sold in conformity with all
applicable federal and state securities laws and no
shareholder of Armada shall have any preemptive right
of subscription or purchase in respect thereto.
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5.01 (k) Armada has valued, and will continue to value, its
portfolio securities and other assets in accordance
with applicable legal requirements.
5.01(l) The Board of Trustees of Armada complies with the requirements
of Section 15(f)(1)(A) of the 1940 Act as of the date hereof.
If its Board of Trustees ceases to comply with such
requirements at any time within three years after the
Effective Time of the Reorganization, Armada will take such
action as is necessary to restore such compliance as soon as
is reasonably practicable.
VI. SHAREHOLDER ACTION ON BEHALF OF THE ACQUIRED FUNDS.
6.01 As soon as practicable after the effective date of the N-14
Registration Statement, but in any event prior to the Effective Time of the
Reorganization and as a condition thereto, Inventor shall hold a meeting of its
shareholders for the purposes of considering and voting upon:
6.01 (a) Approval of this Agreement and the transactions
contemplated hereby, including, without limitation:
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(i) The transfer of the Acquired Fund Assets
belonging to each Acquired Fund to an
Acquiring Fund, and the assumption by such
Acquiring Fund of the Acquired Fund
Liabilities of such Acquired Fund, in
exchange for Institutional Shares of such
Acquiring Fund, as set forth in Section
1.02.
(ii) The liquidation of each Acquired Fund
through the distribution to its record
holders of Institutional Shares of an
Acquiring Fund as described in this
Agreement.
6.01 (b) Such other matters as may be determined by the
parties hereto.
6.02 Approval of this Agreement and the transactions contemplated
herein by the shareholders of the Acquired Funds shall constitute the waiver of
the application of any fundamental policy of such Acquired Funds that might be
deemed to prevent them from taking the actions necessary to effectuate the
Reorganization as described, and such policies, if any, shall be deemed to have
been amended accordingly.
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VII. N-14 REGISTRATION STATEMENT AND PROXY SOLICITATION MATERIALS.
Armada shall file the N-14 Registration Statement under the 1933 Act, which
shall include or incorporate by reference the proxy statement of the Acquired
Funds and the prospectuses of the Acquiring Funds, and any supplement or
amendment thereto or to the documents contained or incorporated by reference,
with the SEC as promptly as practicable. Each of Armada and Inventor has
cooperated and shall continue to cooperate with the other, and has furnished
and shall continue to furnish the other with the information relating to itself
that is required by the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under each of those Acts and state securities laws, to be included
in the N-14 Registration Statement.
VIII. EFFECTIVE TIME OF THE REORGANIZATION. Delivery of the Acquired
Fund Assets and the Institutional Shares of each Acquiring Fund to be issued
pursuant to Article I and the liquidation of Inventor pursuant to Article II
shall occur at the opening of business on the next business day following the
Valuation Time, or on such other date, and at such place and time and date,
agreed to by the Boards of Trustees and Directors or authorized officers of
Armada and Inventor, respectively. The date and time at which such actions are
taken are referred to herein as the "Effective Time of the Reorganization." To
the extent any Acquired Fund Assets are, for any reason, not transferred at the
Effective Time of the Reorganization, Inventor
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<PAGE> 86
shall cause such Acquired Fund Assets to be transferred in accordance with this
Agreement at the earliest practicable date thereafter.
IX. ARMADA CONDITIONS.
9.01 The obligations of Armada hereunder with respect to each
Acquired Fund shall be subject to the following conditions precedent:
9.01 (a) This Agreement and the transactions contemplated by
this Agreement shall have been approved by the
shareholders of each Acquired Fund, in the manner
required by law.
9.01 (b) Inventor shall have duly executed and delivered to
Armada such bills of sale, assignments, certificates
and other instruments of transfer ("Transfer
Documents") as may be necessary or desirable to
transfer all right, title and interest of Inventor
and such Acquired Fund in and to the Acquired Fund
Assets of such Acquired Fund. The Acquired Fund
Assets shall be accompanied by all necessary state
stock transfer stamps or cash for the appropriate
purchase price therefor.
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9.01 (c) All representations and warranties of Inventor made
in this Agreement shall be true and correct in all
material respects as if made at and as of the
Valuation Time and the Effective Time of the
Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization there shall have
been no material adverse change in the financial
condition of an Acquired Fund since October 31, 1995
other than those changes incurred in the ordinary
course of business as an investment company. No
action, suit or other proceeding shall be threatened
or pending before any court or governmental agency in
which it is sought to restrain or prohibit, or obtain
damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
9.01 (d) Armada shall have received an opinion of Morgan,
Lewis & Bockius LLP, addressed to Armada in form
reasonably satisfactory to Armada and dated the
Effective Time of the Reorganization, substantially
to the effect that: (i) Inventor is a corporation
duly organized and validly existing under the laws of
the State of Maryland; (ii) the shares of each
Acquired Fund outstanding at the Effective Time of
the Reorganization are duly
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authorized, validly issued, fully paid and
non-assessable by such Acquired Fund, and to such
counsel's knowledge no shareholder of such Acquired
Fund has any option, warrant or pre-emptive right to
subscription or purchase in respect thereof; (iii)
this Agreement and the Transfer Documents have been
duly authorized, executed and delivered by Inventor
and represent legal, valid and binding contracts or
instruments, enforceable in accordance with their
terms, subject to the effect of bankruptcy,
insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors'
rights generally, and court decisions with respect
thereto, and such counsel shall not be required to
express an opinion with respect to the application of
equitable principles in any proceeding, whether at
law or in equity, or with respect to the provisions
of this Agreement intended to limit liability for
particular matters to an Acquired Fund and its
assets; (iv) the execution and delivery of this
Agreement did not, and the consummation of the
transactions contemplated by this Agreement will not,
violate the Articles of Incorporation, as
supplemented and amended, or By-laws of Inventor or
any material agreement known
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<PAGE> 89
to such counsel to which Inventor is a party or by
which Inventor is bound; and (v) to such counsel's
knowledge, no consent, approval, authorization or
order of any court or governmental authority is
required for the consummation by Inventor of the
transactions contemplated by this Agreement, except
such as have been obtained under the 1933 Act, the
1934 Act, the 1940 Act, the rules and regulations
under those Acts, and such as may be required under
the state securities laws. Such opinion may rely on
the opinion of other counsel to the extent set forth
in such opinion, provided such other counsel is
reasonably acceptable to Armada.
9.01 (e) Armada shall have received an opinion of Drinker
Biddle & Reath, addressed to Armada and Inventor in
the form reasonably satisfactory to them and dated
the Effective Time of the Reorganization,
substantially to the effect that for federal income
tax purposes (i) the transfers by each Acquired Fund
of all of its Acquired Fund Assets and Acquired Fund
Liabilities to the corresponding Acquiring Fund, in
exchange for Institutional Shares of such Acquiring
Fund, and the distribution of said shares to the
shareholders of
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<PAGE> 90
such Acquired Fund, as provided in this Agreement,
will each constitute a reorganization within the
meaning of Section 368(a)(1)(C), (D) or (F) of the
Code and with respect to each reorganization, the
Acquired Fund and the Acquiring Fund will each be
considered "a party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) in
accordance with Sections 361(a), 361(c)(1) and 357(a)
of the Code, no gain or loss will be recognized by
any Acquired Fund as a result of such transactions;
(iii) in accordance with Section 1032(a) of the Code,
no gain or loss will be recognized by an Acquiring
Fund as a result of such transactions; (iv) in
accordance with Section 354(a)(1) of the Code, no
gain or loss will be recognized by the shareholders
of any Acquired Fund on the distribution to them by
such Acquired Fund of Institutional Shares of an
Acquiring Fund in exchange for their Class A Shares
of such Acquired Fund; (v) in accordance with Section
358(a)(1) of the Code, the aggregate basis of
Institutional Shares of an Acquiring Fund received by
each holder of Class A Shares of an Acquired Fund
will be the same as the aggregate basis of the
shareholder's Acquired Fund shares immediately prior
to the transactions; (vi) in accordance with
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Section 362(b) of the Code, the basis of the Acquired
Fund Assets to each Acquiring Fund will be the same
as the basis of such Acquired Fund Assets in the
hands of an Acquired Fund immediately prior to the
exchange; (vii) in accordance with Section 1223 of
the Code, a shareholder's holding period for
Acquiring Fund shares will be determined by including
the period for which the shareholder held the shares
of an Acquired Fund exchanged therefor, provided that
the shareholder held such shares of an Acquired Fund
as a capital asset; (viii) in accordance with Section
1223 of the Code, the holding period of an Acquiring
Fund with respect to the Acquired Fund Assets will
include the period for which such Acquired Fund
Assets were held by an Acquired Fund; and (ix) in
accordance with Section 381(a) of the Code, each
Acquiring Fund will succeed to the tax attributes of
the corresponding Acquired Fund described in Section
381(c) of the Code.
9.01 (f) The SEC shall not have issued any unfavorable
advisory report under Section 25(b) of the 1940 Act
nor instituted any proceeding seeking to enjoin
consummation of the transactions
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<PAGE> 92
contemplated by this Agreement under Section 25(c) of
the 1940 Act.
9.01 (g) The N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order
suspending such effectiveness shall have been
instituted or, to the knowledge of Armada,
contemplated by the SEC and the parties shall have
received all permits and other authorizations
necessary under state securities laws to consummate
the transactions contemplated by this Agreement.
9.01 (h) Inventor shall have delivered or caused to be
delivered to Armada each account, book, record or
other document of Inventor applicable to such
Acquired Fund which is required to be maintained by
Section 31(a) of the 1940 Act and Rule 31a-1 to 31a-3
thereunder (regardless of what person possesses the
same), and a copy of all agreements and instruments
to which Inventor is a party or signatory. Inventor
has instructed its service contractors to provide
Armada upon request with access to and copies of all
documents belonging to Inventor. Inventor shall have
delivered to Armada a list of the tax costs of the
securities of each
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<PAGE> 93
Acquired Fund by lot and the holding periods of such
securities, as of the Valuation Time.
9.01 (i) The President or any Vice President of Inventor shall
have certified that Inventor has performed and
complied in all material respects with each of its
agreements and covenants required by this Agreement
to be performed or complied with by it prior to or at
the Valuation Time and the Effective Time of the
Reorganization.
9.01 (j) The Bank Holding Company Merger shall have been
consummated.
9.01 (k) The Acquired Fund Assets to be transferred to an
Acquiring Fund under this Agreement shall include no
assets which such Acquiring Fund may not properly
acquire pursuant to its investment limitations or
objectives or may not otherwise lawfully acquire.
X. INVENTOR CONDITIONS.
10.01 The obligations of Inventor hereunder with respect to each
Acquired Fund shall be subject to the following conditions precedent:
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10.01 (a) This Agreement and the transactions contemplated by
this Agreement shall have been approved by the
shareholders of each Acquired Fund in the manner
required by law.
10.01 (b) All representations and warranties of Armada made in
this Agreement shall be true and correct in all
material respects as if made at and as of the
Valuation Time and the Effective Time of the
Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization there shall have
been no material adverse change in the financial
condition of the Armada Equity Fund since November
30, 1995 other than those changes incurred in the
ordinary course of business as an investment company.
No action, suit or other proceeding shall be
threatened or pending before any court or
governmental agency in which it is sought to restrain
or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions
contemplated herein.
10.01 (c) Inventor shall have received an opinion of Drinker
Biddle & Reath, addressed to Inventor in form
reasonably satisfactory to it and dated the Effective
Time of the Reorganization, substan-
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<PAGE> 95
tially to the effect that: (i) Armada is a
Massachusetts business trust duly organized and
validly existing under the laws of the Commonwealth
of Massachusetts; (ii) the Institutional Shares of
each Acquiring Fund to be delivered to an Acquired
Fund as provided for by this Agreement are duly
authorized and upon delivery will be validly issued,
fully paid and non-assessable by such Acquiring Fund,
and to such counsel's knowledge no shareholder of an
Acquiring Fund has any option, warrant or pre-emptive
right to subscription or purchase in respect thereof;
(iii) this Agreement has been duly authorized,
executed and delivered by Armada and represents a
legal, valid and binding contract, enforceable in
accordance with its terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with
respect thereto, and such counsel shall not be
required to express an opinion with respect to the
application of equitable principles in any
proceeding, whether at law or in equity, or with
respect to the provisions of this Agreement intended
to limit liability for particular matters to an
Acquiring Fund and its assets; (iv) the
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execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated by
this Agreement will not, violate the Declaration of
Trust or Code of Regulations of Armada, or any
material agreement known to such counsel to which
Armada is a party or by which Armada is bound; and
(v) to such counsel's knowledge no consent, approval,
authorization or order of any court or governmental
authority is required for the consummation by Armada
of the transactions contemplated by this Agreement,
except such as have been obtained under the 1933 Act,
the 1934 Act, the 1940 Act, the rules and regulations
under those Acts and such as may be required under
the state securities laws. Such opinion may rely on
the opinion of other counsel to the extent set forth
in such opinion, provided such other counsel is
reasonably acceptable to Inventor.
10.01 (d) Inventor shall have received an opinion of Drinker
Biddle & Reath, addressed to Armada and Inventor in
the form reasonably satisfactory to them and dated
the Effective Time of the Reorganization, with
respect to the matters specified in Section 9.01(e).
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10.01 (e) The N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order
suspending such effectiveness shall have been
instituted, or, to the knowledge of Armada,
contemplated by the SEC and the parties shall have
received all permits and other authorizations
necessary under state securities laws to consummate
the transactions contemplated by this Agreement.
10.01 (f) The SEC shall not have issued any unfavorable
advisory report under Section 25(b) of the 1940 Act
nor instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act.
10.01 (g) The President or any Vice President of Armada shall
have certified that Armada has performed and complied
in all material respects with each of its agreements
and covenants required by this Agreement to be
performed or complied with by it prior to or at the
Valuation Time and the Effective Time of the
Reorganization.
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10.01 (h) The Bank Holding Company Merger shall have been consummated.
XI. TAX DOCUMENTS. Inventor shall deliver to Armada at the Effective
Time of the Reorganization confirmations or other adequate evidence as to the
adjusted tax basis of the Acquired Fund Assets delivered to an Acquiring Fund
in accordance with the terms of this Agreement.
XII. FINDER'S FEES. Each party represents and warrants to each of
the other parties hereto that there is no person who is entitled to any
finder's or other similar fee or commission arising out of the transactions
contemplated by this Agreement.
XIII. ANNOUNCEMENTS. Any announcements or similar publicity with
respect to this Agreement or the transactions contemplated herein shall be at
such time and in such manner as the parties shall agree; PROVIDED, that nothing
herein shall prevent either party upon notice to the other party from making
such public announcements as such party's counsel may consider advisable in
order to satisfy the party's legal and contractual obligations.
XIV. FURTHER ASSURANCES. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take, or
cause to be taken, such action, to
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execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to consummate and make effective the transactions contemplated by this
Agreement.
XV. TERMINATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties set forth in this Agreement shall
terminate upon the delivery of the Acquired Fund Assets to the Acquiring Funds
and the issuance of the shares of the Acquiring Funds at the Effective Time of
the Reorganization.
XVI. TERMINATION OF AGREEMENT.
16.01 This Agreement may be terminated as to one or more investment
portfolios by a party at any time at or prior to the Effective Time of the
Reorganization by its Board of Trustees, in the case of Armada, or its Board of
Directors, in the case of Inventor, as provided below:
(a) By Armada if the conditions set forth in Article IX
are not satisfied as specified in said Section;
(b) By Inventor if the conditions set forth in Article X
are not satisfied as specified in said Section; or
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<PAGE> 100
(c) By the mutual consent of the parties.
16.02 If a party terminates this Agreement as to one or more
investment portfolios because one or more of the conditions precedent have not
been fulfilled, or if this Agreement is terminated by mutual consent, this
Agreement will become null and void without any liability of either party or
any of their investment portfolios to the other; provided, however, that if
such termination is by Armada pursuant to Section 16.01(a) as a result of a
breach by Inventor of any of its representations, warranties or covenants in
this Agreement, or such termination is by Inventor pursuant to Section 16.01(b)
as a result of a breach by Armada of any of its representations, warranties or
covenants in this Agreement, nothing herein shall affect the non-breaching
party's right to damages on account of such other party's breach.
XVII. AMENDMENT AND WAIVER. At any time prior to or (to the fullest
extent permitted by law) after approval of this Agreement by the shareholders
of Inventor, (a) the parties hereto may, by written agreement authorized by the
Board of Trustees of Armada and the Board of Directors of Inventor or their
authorized officers and with or without the approval of their shareholders,
amend any of the provisions of this Agreement, and (b) either party may waive
any breach by the other party or the failure to satisfy any of the conditions
to its obligations (such waiver to be in writing and authorized by the
President or any Vice
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President of the waiving party with or without the approval of such party's
shareholders).
XVIII. GOVERNING LAW. This Agreement and the transactions
contemplated hereby shall be governed, construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts, without giving effect to
the conflicts of law principles otherwise applicable therein.
XIX. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by either party without the consent of the other party.
XX. BENEFICIARIES. Nothing contained in this Agreement shall be
deemed to create rights in or eliminate liabilities of persons not parties
hereto, other than the successors and permitted assigns of the parties.
XXI. ARMADA LIABILITY.
21.01 The names "Armada Funds" and "Board of 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,
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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 at the
principal office of Armada. The obligations of Armada 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 Armada personally, but bind only
the trust property, and all persons dealing with any series of shares of Armada
must look solely to the trust property belonging to such series for the
enforcement of any claims against Armada.
21.02 Both parties specifically acknowledge and agree that any
liability of Armada under this Agreement with respect to an Acquiring Fund, or
in connection with the transactions contemplated herein with respect to an
Acquiring Fund, shall be discharged only out of the assets of that Acquiring
Fund and that no other fund of Armada shall be liable with respect thereto.
XXII. INVENTOR LIABILITY. Both parties specifically acknowledge and
agree that any liability of Inventor under this Agreement with respect to an
Acquired Fund, or in connection with the transactions contemplated herein with
respect to an Acquired Fund, shall be discharged only out of the assets of that
Acquired Fund and that no other portfolio of Inventor shall be liable with
respect thereto.
I-39
<PAGE> 103
XXIII. NOTICES. All notices required or permitted herein shall be in
writing and shall be deemed to be properly given when delivered personally or
by telecopier to the party entitled to receive the notice or when sent by
certified or registered mail, postage prepaid, or delivered to a nationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice at the address or telecopier number
stated below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:
If to Armada:
Richard B. Tullis
Chairman of the Board
Armada Funds
5150 Three Village Drive
Lyndhurst, OH 44124
Telecopier Number: (216) 461-3753
With a copy to:
W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107
Telecopier Number: (215) 988-2757
If to Inventor:
Inventor Funds, Inc.
c/o David G. Lee, President
680 East Swedesford Road
Wayne, PA 19087-1658
Telecopier Number: (610) 963-5299
I-40
<PAGE> 104
With copies to:
John H. Grady, Jr., Esq.
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
Telecopier Number: (202) 467-7176
and
Richard W. Grant, Esq.
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Telecopier Number: (215) 963-5299
XXIV. EXPENSES. To the extent not borne by their respective
investment advisers, each party shall be responsible for the payment of all
expenses incurred by such party in connection with this Agreement and the
transactions contemplated hereby.
XXV. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding of the parties hereto with respect to the subject matter
hereof and supersedes any and all prior agreements, arrangements and
understandings relating to matters provided for herein.
XXVI. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
I-41
<PAGE> 105
instrument to be executed by their duly authorized officers designated below as
of the date first written above.
ARMADA FUNDS
ATTEST:
___________________________ By: _______________________
INVENTOR FUNDS, INC.
ATTEST:
____________________________ By: ________________________
I-42
<PAGE> 106
APPENDIX II
FUND OVERVIEW - ARMADA EQUITY FUND
II-1
<PAGE> 107
FUND OVERVIEW
ARMADA EQUITY FUND
ASSET MANAGER:
GERALD H. GRAY,
VICE PRESIDENT,
NATIONAL CITY BANK
FUND'S DATE OF INCEPTION:
DECEMBER 20, 1989 (INSTITUTIONAL SHARES)
APRIL 15, 1991 (RETAIL SHARES)
ASSETS:
$ 119,633,506 (INSTITUTIONAL SHARES)
$ 5,974,356 (RETAIL SHARES)
INVESTMENT OBJECTIVE: SEEK A HIGH LEVEL OF TOTAL RETURN ARISING OUT OF CAPITAL
APPRECIATION AND INCOME. THE FUND INVESTS IN COMMON STOCKS AND SECURITIES
CONVERTIBLE INTO COMMON STOCKS.
As a result of the favorable economic environment during the past year, the
Armada Equity Fund was able to produce a total return of 10.62% to Institutional
shareholders and 10.35% to Retail shareholders before sales load for the year
ended May 31, 1995. Although solidly positive, these returns fell short of the
broader S&P 500, which returned 20.18% for the same period. For the six months
ended May 31, 1995, the Equity Fund had aggregate total returns of 11.94% and
11.78% (before sales load) to Institutional and Retail shareholders,
respectively.
Market leadership during the past year was very narrow and concentrated
primarily in the technology sector. While the Equity Fund did benefit from some
strong performers in the technology area, such as Motorola, AMP, and General
Motors Class E, the Fund did not have positions in turnaround situations like
IBM or the more cyclical companies like Micron Technology, which far outpaced
the sector. The Equity Fund emphasizes the higher quality, more consistent,
growth companies and, therefore, will tend to lag the market in periods when
advances are led by the most leveraged, volatile firms. Health care companies
returned to favor and the Fund enjoyed strong gains from Medtronic, Inc., as
well as several pharmaceutical firms such as Abbot Labs, Schering Plough and
Bristol Myers Squibb. However, retailers performed poorly as consumers spent
sparingly and mostly on durable good items such as electronics during this
period. Dillards Department Stores, Toys `R' Us and Nordstrom were particularly
hurt in this environment.
LOOKING FORWARD
We believe that stocks will continue to benefit from a positive economic
backdrop. However, with traditional market valuations at lofty levels, we feel
most of the good news is already in stock prices. While we do not expect a
significant market decline, we believe equity markets will not achieve the
double-digit gains produced over the prior period.
6
<PAGE> 108
FUND OVERVIEW (CONTINUED)
ARMADA EQUITY FUND
"THE STOCKS WHICH WILL
PERFORM BEST DURING THE
COMING YEAR WILL LIKELY
BE ONES THAT CAN ACHIEVE
GOOD EARNINGS GROWTH
WITHOUT A CONSISTENTLY
STRONG ECONOMY."
The stocks which will perform best during the coming year will likely be ones
that can achieve good earnings growth without a consistently strong economy.
Accordingly, companies with a high percentage of earnings coming from recurring
revenues should fare well. These firms include Pitney
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 5/31/95
- -----------------------------------------------------------------------------------------------
1-YEAR 3-YEARS(1) 5-YEARS(1) SINCE INCEPTION(1)*
------ ---------- ---------- -------------------
<S> <C> <C> <C> <C>
Armada Equity Fund
Institutional Shares+ 10.62% 6.34% 9.11% 9.96%
Armada Equity Fund
Retail Shares With Sales Load 6.24% 4.75% 8.04% 8.97%
Without Sales Load 10.35% 6.09% 8.87% 9.74%
</TABLE>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT*
<TABLE>
<CAPTION>
Dec.-1989 May-1990 May-1991 May-1992 May-1993 May-1994 May-1995
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500
Armanda Equity Fund (Institutional Shares +)
Armanda Equity Fund (Retail Shares)
</TABLE>
+ Institutional shares are sold primarily to Banks and clients of National Asset
Management Corporation (NAM), acting on behalf of their respective customers.
Certain account level charges may apply.
* The Armada Equity Fund's date of inception was December 20, 1989 for
Institutional shares and April 15, 1991 for Retail shares. The return and
principal value of an investment will fluctuate. When redeemed, shares may be
worth more or less than their original cost.
1 Annualized.
7
<PAGE> 109
FUND OVERVIEW (CONTINUED)
ARMADA EQUITY FUND
"OVERALL, OUR FOCUS CONTINUES TO BE TO INVEST IN HIGH-QUALITY, GROWTH
COMPANIES AT REASONABLE VALUATIONS. DESPITE PERIODS OF UNDERPERFORMANCE, WE
BELIEVE THIS STRATEGY SHOULD REAP LONG-TERM, ABOVE AVERAGE PERFORMANCE."
Bowes, Xerox Corp., Automatic Data Processing and Reuters Holdings. The
Fund's holdings in health care firms should also do well in this scenario. We
also believe a reasonably healthy U.S. economy combined with improving economies
overseas will help capital goods and technology companies produce good earnings
reports. Stocks that should benefit are Motorola, 3M, Intel Corp. and Hubbell,
Inc.
Overall, our focus continues to be to invest in high-quality, growth
companies at reasonable valuations. Despite periods of underperformance, we
believe this strategy should reap long-term, above average performance.
8
<PAGE> 110
APPENDIX III
SHAREHOLDER TRANSACTIONS AND SERVICES
This Appendix compares the shareholder transactions and services that
are available in connection with: (1) Institutional shares and Retail shares
of the Armada Portfolios, and (2) Class A shares of the Inventor Portfolios.
A. GENERAL
1. SALES CHARGES AND EXEMPTIONS
Armada Portfolios -- Institutional and Retail Shares
----------------------------------------------------
(a) Institutional shares of each Armada Portfolio are
sold without a sales charge.
(b) Retail shares of the Armada Equity, GNMA and
Intermediate Government Funds are sold with a maximum 3.75% front-end sales
charge. Retail shares of the Armada Pennsylvania Municipal Fund are sold with
a maximum 3.00% front-end sales charge. Retail shares of the Armada
Pennsylvania Tax Exempt Fund are sold without a sales charge.
(c) The Armada Portfolios offer sales charge exemptions
to the following classes of shareholders: (i) trustees and officers of Armada;
(ii) directors, employees and participants in employee benefit/retirement plans
(annuitants) of National City Corporation or any of its affiliates; (iii) the
spouses, children, grandchildren, and parents of individuals referred to in
clauses (i) and (ii) above; (iv) qualified retirement plans purchasing shares
through National City Investments Corporation or NatCity Investments, Inc.; (v)
individuals investing in a portfolio by way of a direct transfer or a rollover
from a qualified plan distribution and subsequent transactions into the same
account where affiliates of National City Corporation are serving as a trustee
or agent; and (vi) investors purchasing portfolio shares through a payroll
deduction plan; and (vii) individuals investing in a portfolio by way of an
asset allocation program sponsored by financial institutions, although certain
account level fees may apply.
There is no sales charge charged on shares acquired through
the reinvestment of dividends or distributions on such shares. The sales
charge also will not apply to exchanges between Armada portfolios to the extent
that a shareholder has credit for previously paid sales charges on purchases of
any of the Armada portfolios.
III-1
<PAGE> 111
(d) The Armada Portfolios also offer rights of
accumulation and letter of intent programs that can reduce the sales charge
payable on Retail share purchases.
Inventor Portfolios -- Class A Shares
-------------------------------------
(a) Class A shares of the Equity Growth, GNMA Securities,
Intermediate Government Securities, and Pennsylvania Municipal Bond Funds (the
"Equity and Fixed Income" portfolios) are sold with a 4.00% maximum front-end
sales charge.
(b) No sales charge is imposed on Class A shares of the
Equity and Fixed Income portfolios: (i) issued as dividends and capital gain
distributions; (ii) acquired through the exercise of exchange privileges
described in the prospectus; (iii) sold to officers, directors, employees, or
retirees of NCC, National City and its subsidiaries and affiliates; (iv) sold
to certain accounts for which National City or subsidiaries, affiliates and
correspondents of National City, serve in a fiduciary, agency or custodial
capacity; (v) issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which Inventor is a party; (vi) purchased
with the proceeds of distributions from employee benefit plans for which
National City or its affiliates act in a custodial or fiduciary capacity, (vii)
purchased within thirty days of a redemption of Class A shares of such
portfolios (only up to the amount of such redemption) or (viii) sold to
tax-exempt organizations enumerated in Section 501(c) of the Code or qualified
employee benefit plans created under Sections 401, 403(b)(7) or 457 of the Code
(but not IRAs or SEPs). Reduced sales charges are available on shares of the
portfolios sold to certain eligible customers of National City or its
affiliates.
(c) The Inventor Portfolios also offer rights of
accumulation and letter of intent programs that can reduce the sales charge
payable on Class A share purchases.
III-2
<PAGE> 112
2. PURCHASE POLICIES
<TABLE>
<CAPTION>
ARMADA PORTFOLIOS
- RETAIL AND INVENTOR PORTFOLIOS -
INSTITUTIONAL SHARES CLASS A SHARES
-------------------- --------------------
<S> <C> <C>
Minimum Initial Retail - $2,500 (except $500 ($250 for IRAs and $100 for
Investments $500 for purchases officers, directors, employees or
for an IRA or other retirees of National City or its
retirement plan and affiliates). The Distributor may
$50 for Automatic waive the minimum investment at its
Investment Plans). discretion.
Institutional - None.
Minimum Subsequent Retail - $250 ($50 for $25.
Investments Automatic Investment
Plan)
Institutional - None
(except $50 for
Automatic Investment
Plans).
</TABLE>
III-3
<PAGE> 113
<TABLE>
<CAPTION>
ARMADA PORTFOLIOS
- RETAIL AND INVENTOR PORTFOLIOS -
INSTITUTIONAL SHARES CLASS A SHARES
-------------------- ---------------------
<S> <C> <C>
Automatic Investment Plan Retail shares may be Periodic investments may be made
purchased on a monthly basis through automatic deductions by
through automatic deductions Automated Clearing House ("ACH")
from a shareholder's checking from a checking account. The
or savings account with a $50 minimum pre-authorized investment is
initial investment and a $50 $25 per month.
subsequent investment minimum.
Such investments are not
subject to minimum account
balance requirements.
Institutional
shareholders participating in
an Asset Diversification
Account may purchase
Institutional shares through an
Automatic Investment Plan with
a minimum monthly investment of
$50.
</TABLE>
III-4
<PAGE> 114
<TABLE>
<CAPTION>
ARMADA PORTFOLIOS
- RETAIL AND INVENTOR PORTFOLIOS -
INSTITUTIONAL SHARES CLASS A SHARES
-------------------- --------------------
<S> <C> <C>
Purchase Methods Retail shares are sold by National City Shares may be purchased directly by
Investments Corporation, NatCity mail, by wire or through an
Investments, Inc., and 440 Financial Automatic Investment Plan. Shares
Distributors directly and through may also be purchased through
financial institutions (some of which broker-dealers that have a dealer
may enter into shareholder servicing agreement with SEI Financial
agreements with Armada) by mail or by Services Company.
telephone. Institutional shares are
purchased by banks on behalf of their
trust customers.
Payment methods By check, federal funds, wire, By check (or other negotiable bank
certified check or cashier's check. instrument or money order), wire or
ACH.
</TABLE>
An Inventor shareholder who, at the Effective Time of the
Reorganization, meets the Inventor, but not the Armada, minimum investment
requirement, will not be required to redeem the Armada shares received in
connection with the Reorganization, unless voluntary redemptions occur and the
balance in the shareholder's account is thereafter below the Inventor minimum.
The Armada Portfolios and Inventor Portfolios each reserve the right
to reject any purchase order.
III-5
<PAGE> 115
3. REDEMPTION POLICIES
<TABLE>
<CAPTION>
ARMADA PORTFOLIOS
- RETAIL AND
INSTITUTIONAL INVENTOR PORTFOLIOS
SHARES - CLASS A SHARES
------------------ -------------------
<S> <C> <C>
Redemption Methods Retail - by mail, By mail, telephone, electronic
telephone, electronic funds transfer service or through
funds transfer service or a systematic withdrawal plan.
through a systematic
withdrawal plan.
Institutional - per
instructions and
limitations of investor's
account at his/her
financial institution.
Payment Methods Retail - by check By wire, check or automatic
or credited to investor's deductions by Automated Clearing
account with his/her House from a checking account (if
financial institution. purchased through an Automatic
Investment Plan).
Institutional - by
wire or other methods
available at investor's
financial institution.
Check Writing Privilege Yes, for the Pennsylvania Tax Yes, for the Pennsylvania Tax-
Exempt Fund ($250 minimum). Exempt Money Market Fund ($500
minimum).
Automatic Cash Withdrawal Plan No. Yes ($1,000 minimum balance/$100
minimum per transaction).
</TABLE>
III-6
<PAGE> 116
Armada reserves the right to redeem at net asset value shares in any
Armada Portfolio if the balance in the shareholder's account in that Portfolio
drops below $1,000 as the result of a redemption request and the shareholder
does not increase the balance to at least $1,000 upon sixty days' notice. The
Inventor Portfolios may redeem involuntarily, upon sixty days' notice, Class A
shares of a shareholder whose account decreases to a value of less than the
minimum initial purchase amount because of redemptions unless the shareholder
makes an additional investment during that period in an amount that will
increase the value of the account to at least the minimum amount. Armada
Portfolios and the Inventor Portfolios may also redeem shares involuntarily
when appropriate in light of their responsibilities under the 1940 Act, and may
make payment for redemptions in securities in lieu of cash.
4. SHARE EXCHANGES
<TABLE>
<CAPTION>
Armada Portfolios
- Retail and Inventor Portfolios
Institutional Shares - Class A Shares
-------------------- -------------------
<S> <C> <C>
By Mail Retail - Yes Yes.
Institutional - Yes.
By Telephone Retail - Yes Yes.
Institutional - Yes.
Minimum Any Retail shares exchanged must have a value N/A.
at least equal to the minimum initial
investment required by the particular
investment portfolio into which the exchange
is being made.
</TABLE>
Armada Retail shares may be exchanged for Retail shares in other
Armada portfolios. Shareholders who exchange into any Armada portfolio that
imposes a sales charge may be subject to such sales charge, if applicable and
not previously paid. Exchanges are only available in states where exchanges
can lawfully be made from one portfolio to another, and must satisfy the
requirements relating to the minimum initial investment in a portfolio. Armada
reserves the right to reject any telephone exchange request and to modify or
terminate exchange privileges at any time. Inventor reserves the right to
change the terms or conditions of the telephone exchange privilege upon sixty
days' notice.
III-7
<PAGE> 117
5. RESPONSIBILITY FOR TELEPHONE INSTRUCTIONS
The Armada Portfolios, Inventor Portfolios and their transfer agents
are not liable for any loss, liability, cost or expense for acting upon
telephone (or wire, in the case of Inventor) instructions that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions
are genuine, procedures are used that are considered reasonable, which may
include recording telephone instructions and requesting information as to
account registration such as the name in which an account is registered, the
shareholder account number and recent account transactions (in the case of
Armada) or requiring a form of personal identification prior to acting upon
instructions received by telephone and recording telephone instructions (in the
case of Inventor).
6. DIVIDEND REINVESTMENT PROGRAMS
The Armada Portfolios and Inventor Portfolios offer dividend
reinvestment programs.
B. DIVIDENDS AND DISTRIBUTIONS
All Armada Portfolios and Inventor Portfolios distribute their net
capital gains to shareholders at least annually. The following table shows the
policies concerning the declaration and payment of dividends from net
investment income.
1. DIVIDENDS DECLARED DAILY/PAID MONTHLY
<TABLE>
<CAPTION>
ARMADA PORTFOLIOS INVENTOR PORTFOLIOS
----------------- -------------------
<S> <C>
Intermediate Government Intermediate Government
Fund Securities Fund
GNMA Fund GNMA Securities Fund
Pennsylvania Tax-Exempt Pennsylvania Tax-Exempt
Fund Money Market Fund
Pennsylvania Municipal Pennsylvania Municipal Bond
Fund Fund
</TABLE>
III-8
<PAGE> 118
2. DIVIDENDS DECLARED MONTHLY/PAID MONTHLY
<TABLE>
<CAPTION>
ARMADA PORTFOLIOS INVENTOR PORTFOLIOS
----------------- -------------------
<S> <C>
None. Equity Growth Fund
</TABLE>
3. DIVIDENDS DECLARED QUARTERLY/PAID QUARTERLY
<TABLE>
<CAPTION>
ARMADA PORTFOLIOS INVENTOR PORTFOLIOS
----------------- -------------------
<S> <C>
Equity Fund None.
</TABLE>
III-9
<PAGE> 119
PART B
<PAGE> 120
INVENTOR FUNDS, INC.
C/O THE CORPORATION TRUST INCORPORATED
32 SOUTH STREET
BALTIMORE, MARYLAND 21202
ARMADA FUNDS
4400 COMPUTER DRIVE
WESTBOROUGH, MASSACHUSETTS 01581
STATEMENT OF ADDITIONAL INFORMATION
(SPECIAL MEETING OF SHAREHOLDERS OF INVENTOR FUNDS, INC.)
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Combined Proxy Statement/Prospectus
dated June __, 1996 for the Special Meeting of Shareholders of Inventor, to be
held on August 1, 1996. Copies of the Combined Proxy Statement/Prospectus may
be obtained at no charge by calling Inventor at 1-800-6INVENT(1-800-646-8368).
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement/Prospectus.
Further information about Institutional and Retail shares of the
Armada Equity Fund is contained in and incorporated by reference to said Fund's
Statement of Additional Information dated September 28, 1995, a copy of which
is included herewith. The audited financial statements and related independent
accountant's report for the Armada Equity Fund contained in the Annual Report
dated April 30, 1995, are hereby incorporated herein by reference. No other
parts of the Annual Report are incorporated by reference herein.
Further information about Class A shares of the Inventor Portfolios is
contained in and incorporated by reference to Inventor's Statement of
Additional Information dated August 28, 1995, a copy of which is included
herewith. The audited financial statements and related independent
accountant's report for the Inventor Portfolios contained in the 1995 Annual
Report to Shareholders dated April 30, 1995 are hereby incorporated herein by
reference. No other parts of the Annual Report are incorporated by reference
herein.
The date of this Statement of Additional Information is June __, 1996.
B-1
<PAGE> 121
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Pro Forma Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PFS-1
Unaudited Financial Statements for the
Armada Equity Fund for the six-months
ended November 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS-
Unaudited Financial Statements for the
Inventor Portfolios for the six months
ended October 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS-
</TABLE>
B-2
<PAGE> 122
GENERAL INFORMATION
The Shareholders of the Inventor Portfolios are being asked to approve
an Agreement and Plan of Reorganization (the "Reorganization Agreement") dated
as of ______________, 1996 between Inventor and Armada, and the transactions
contemplated thereby. The Reorganization Agreement contemplates the transfer
of substantially all of the known assets and known liabilities of Inventor's
Equity Growth Fund, GNMA Securities Fund, Intermediate Government Securities
Fund, Pennsylvania Municipal Bond Fund and Pennsylvania Tax-Exempt Money Market
Fund to corresponding Armada Portfolios in exchange for full and fractional
shares representing interests in such corresponding Armada Portfolios. The
shares issued by Armada will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the respective Inventor Portfolios
that are outstanding immediately before the Effective Time of the
Reorganization.
Following the exchange, the Inventor Portfolios will make a
liquidating distribution of the corresponding Armada Portfolios' shares to
their shareholders. Each shareholder owning shares of a particular Inventor
Portfolio at the Effective Time of the Reorganization will receive shares of
the corresponding Armada Portfolio of equal value, plus the right to receive
any unpaid dividends and distributions that were declared before the Effective
Time of the Reorganization on the Inventor Portfolio's shares. Upon completion
of the Reorganization, Inventor will be terminated under state law and
deregistered under the Investment Company Act of 1940.
The Special Meeting of Shareholders of Inventor to consider the
Reorganization Agreement and the related transactions will be held on August 1,
1996 at 10:00 a.m. (Eastern time), at 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658. For further information about the transaction, see
the Combined Proxy Statement/Prospectus.
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open- end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as shares of the Armada Portfolios, but do not prohibit such a bank holding
company or its affiliates or banks generally from acting as investment adviser,
transfer agent, or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of customers. The
Armada Advisers, their affiliates and financial intermediaries which agree to
provide shareholder support services that are banks or bank affiliates are
subject to such banking laws and regulations.
B-3
<PAGE> 123
Should legislative, judicial, or administrative action prohibit or restrict the
activities of such companies in connection with their services to the Armada
Portfolios, Armada might be required to alter materially or discontinue its
arrangement with such companies and change its method of operation. It is
anticipated, however, that any resulting change in Armada's method of operation
would not affect an Armada Portfolio's net asset value per share or result in
financial loss to any shareholder.
B-4
<PAGE> 124
INTRODUCTORY NOTE TO PRO FORMA
------------------------------
FINANCIAL INFORMATION
---------------------
The following unaudited pro forma financial information gives effect
to the proposed transfer of the known assets and known liabilities of the
Inventor Equity Growth Fund to the Armada Equity Fund.
Pro forma financial information giving effect to the proposed transfer of the
known assets and known liabilities of the other Inventor Portfolios to their
corresponding Armada Portfolios is not presented in this Statement of
Additional Information because such corresponding Armada Portfolios will not
commence operations prior to the Effective Time of the Reorganization and are
being organized for the purpose of continuing the investment operations of such
Inventor Portfolios. Each combination of Portfolios will be accounted for as a
tax-free reorganization. The pro forma financial information should be read in
conjunction with the historical financial statements and notes thereto of the
Inventor Equity Growth Fund and Armada Equity Fund included or incorporated by
reference in this Statement of Additional Information.
B-5
<PAGE> 125
ARMADA FUNDS
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
- -----------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Market Market Market
SHARES SHARES SHARES Security Description Value Value Value
- -------------------------------------------------------------------------------------------------------------------------------
Inventor Inventor
Armada Equity (PRO FORMA) Armada Equity (POR FORMA)
Equity Growth (Combined) Equity Growth (Combined)
- -------------------------------------------------------------------------------------------------------------------------------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCK 94.1%
ADVERTISING 1.6%
88,310 88,310 Interpublic Group, Inc. $3,389 $3,389
------------ ------------
AEROSPACE 1.0%
20,900 20,900 Allied Signal $888 888
3,700 3,700 Boeing 243 243
3,800 3,800 Textron 261 261
7,400 7,400 United Technologies 657 657
----------- ------------
2,049 2,049
----------- ------------
AUTOMOTIVE 1.9%
10,900 10,900 General Motors Corp. 477 477
51,540 11,600 63,140 General Motors Corp., Class E 2,603 547 3,150
6,000 6,000 Goodyear Tire & Rubber 228 228
------------ ----------- ------------
2,603 1,252 3,855
------------ ----------- ------------
BANKING 3.9%
4,000 4,000 Bank of Boston 178 178
1,700 1,700 BankAmerica 98 98
12,300 12,300 Chemical Banking 700 700
14,400 14,400 Mellon Bank 722 722
5,800 5,800 Midlantic 307 307
69,000 69,000 Norwest Corp. 2,277 2,277
5,000 5,000 Summit Bancorporation of NJ 142 142
18,000 18,000 Wells Fargo & Company 3,784 3,784
------------ ----------- ------------
6,061 2,147 8,208
------------ ----------- ------------
BUILDING & BUILDING SUPPLIES 2.1%
5,700 5,700 * American Standard 152 152
8,100 8,100 Foster Wheeler 304 304
63,666 27,700 91,366 Home Depot, Inc. 2,825 1,032 3,857
------------ ----------- ------------
2,825 1,488 4,313
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
1
<PAGE> 126
ARMADA FUNDS
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
- -----------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Market Market Market
SHARES SHARES SHARES Security Description Value Value Value
- -------------------------------------------------------------------------------------------------------------------------------
Inventor Inventor
Armada Equity (PRO FORMA) Armada Equity (POR FORMA)
Equity Growth (Combined) Equity Growth (Combined)
- -------------------------------------------------------------------------------------------------------------------------------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
BUSINESS SERVICES 1.0%
26,880 26,880 Automatic Data Processing $2,140 $2,140
----------- ----------
CHEMICALS 2.6%
35,000 8,200 43,200 Air Products & Chemicals, Inc. 1,943 423 2,366
28,320 28,320 Dow Chemical Co. 2,007 2,007
14,600 14,600 E.I. du Pont de Nemours 911 911
6,000 6,000 Praxair 162 162
----------- ---------- -----------
3,950 1,496 5,446
----------- ---------- -----------
DIVERSIFIED 1.5%
46,370 46,370 Minnesota Mining &
Manufacturing Co. 3,037 3,037
----------- ---------
ELECTRICAL EQUIPMENT 4.1%
19,000 16,800 35,800 AMP, Inc. 762 659 1,421
27,200 10,900 38,100 Emerson Electric Co. 2,122 777 2,899
16,000 16,000 General Electric 1,011 1,011
17,500 17,500 General Signal 558 558
42,920 42,920 Hubbell Inc., Class B 2,623 2,623
----------- ---------- -----------
5,507 3,005 8,512
----------- ---------- -----------
ELECTRONICS 1.2%
15,000 15,000 Honeywell 714 714
55,000 55,000 * MEMC Electronic Materials, Inc. 1,822 1,822
----------- -----------
2,536 2,536
----------- -----------
</TABLE>
2
<PAGE> 127
ARMADA FUNDS
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
- -----------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Market Market Market
SHARES SHARES SHARES Security Description Value Value Value
- -------------------------------------------------------------------------------------------------------------------------------
Inventor Inventor
Armada Equity (PRO FORMA) Armada Equity (POR FORMA)
Equity Growth (Combined) Equity Growth (Combined)
- -------------------------------------------------------------------------------------------------------------------------------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
ENERGY 3.7%
23,655 11,700 35,355 Amoco Corp. $1,603 $748 $2,351
2,900 2,900 Atlantic Richfield 310 310
6,400 6,400 Chevron 299 299
1,300 1,300 Duracell International 68 68
4,800 4,800 Halliburton 199 199
5,400 5,400 Mobil 544 544
48,495 4,600 53,095 Schlumberger Limited 3,079 286 3,365
900 900 Sonat 26 26
11,000 11,000 Union Texas Petroleum 198 198
15,500 15,500 Unocal 407 407
------------ ------------ ------------
4,682 3,085 7,767
------------ ------------ ------------
ENVIRNOMENT 0.8%
9,600 9,600 Browning Ferris Industries 280 280
14,000 14,000 * Molten Metal Technology 539 539
23,000 23,000 Wheelabrator Technologies 331 331
21,600 21,600 WMX Technologies 607 607
------------ ------------
1,757 1,757
------------ ------------
FINANCIAL SERVICES 2.7%
9,100 9,100 Federal Home Loan Mortgage 630 630
9,730 9,730 Federal National Mortgage
Association 1,065 1,065
65,000 65,000 Greenpoint Financial Corp. 1,698 1,698
50,000 50,000 State Street Boston Corp. 2,250 2,250
------------ ------------ ------------
5,013 630 5,643
------------ ------------ ------------
</TABLE>
3
<PAGE> 128
ARMADA FUNDS
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
- -----------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Market Market Market
SHARES SHARES SHARES Security Description Value Value Value
- -------------------------------------------------------------------------------------------------------------------------------
Inventor Inventor
Armada Equity (PRO FORMA) Armada Equity (POR FORMA)
Equity Growth (Combined) Equity Growth (Combined)
- -------------------------------------------------------------------------------------------------------------------------------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
FOOD, BEVERAGE, TOBACCO, & 12.1%
HOUSEHOLD PRODUCTS
30,000 30,000 Anheuser-Busch Companies, Inc. $1,988 $1,988
5,500 5,500 * Bush Boake Allen $151 151
58,000 7,300 65,300 Coca Cola Co. 4,394 525 4,919
4,200 4,200 CPC International 279 279
42,000 5,700 47,700 Gillette Co. 2,179 276 2,455
4,100 4,100 Kellogg 296 296
77,900 5,500 83,400 Pepsico, Inc. 4,304 290 4,594
44,000 14,900 58,900 Philip Morris Companies, Inc. 3,861 1,257 5,118
35,520 9,000 44,520 Procter & Gamble Co. 3,068 729 3,797
5,160 5,160 RJR Nabisco holdings 159 159
18,200 18,200 Sara Lee 535 535
15,200 15,200 Sunbeam-Oster 228 228
12,800 12,800 Sysco 389 389
11,500 11,500 UST 345 345
-------------- --------- --------------
19,794 5,459 25,253
-------------- --------- --------------
FOREIGN 1.8%
68,000 68,000 Reuters Holdings PLC, ADS 3,842 3,842
-------------- --------------
HOME FURNISHINGS/HOUSEWARES 0.7%
51,000 51,000 Masco Corp. 1,505 1,505
-------------- --------------
INSURANCE 4.5%
7,000 7,000 American General 230 230
44,083 7,350 51,433 American International Group 3,956 620 4,576
24,400 6,800 31,200 Chubb Corp. 2,373 611 2,984
4,900 4,900 General Re 710 710
16,000 16,000 Travelers 808 808
-------------- --------- --------------
6,329 2,979 9,308
-------------- --------- --------------
</TABLE>
4
<PAGE> 129
ARMADA FUNDS
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
- -----------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Market Market Market
SHARES SHARES SHARES Security Description Value Value Value
- -------------------------------------------------------------------------------------------------------------------------------
Inventor Inventor
Armada Equity (PRO FORMA) Armada Equity (POR FORMA)
Equity Growth (Combined) Equity Growth (Combined)
- -------------------------------------------------------------------------------------------------------------------------------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
LEISURE 1.7%
16,600 16,600 * Autotote, CIass A $50 $50
31,600 31,600 Carnival Cruise Lines, Class A 734 734
6,500 6,500 Marriott International 240 240
15,000 15,000 Mattel 431 431
28,055 6,100 34,155 Walt Disney Co. $1,687 352 2,039
-------------- ---------- -----------
1,687 1,807 3,494
-------------- ---------- -----------
MANUFACTURING 3.2%
90,000 90,000 * Wolverine Tube, Inc. 3,049 3,049
80,000 80,000 York International Corp. 3,580 3,580
-------------- -----------
6,629 6,629
-------------- -----------
MEDIA
5,000 5,000 American Greetings, Class A 1.0% 158 158
5,600 5,600 Capital Cities ABC 664 664
41,100 41,100 * Tele-Communications, Class A 699 699
13,300 13,300 Viacom, Class B Non-Voting 665 665
---------- -----------
2,186 2,186
---------- -----------
MEDICAL PRODUCTS &SERVICES 15.3%
50,860 16,400 67,260 Abbott Laboratories 2,066 652 2,718
20,620 2,000 22,620 American Home Products Corp. 1,882 177 2,059
4,100 4,100 * Amgen 197 197
29,950 4,700 34,650 Bristol Meyers Squibb Co. 2,403 358 2,761
22,620 22,620 Columbia/HCA Healthcare 1,111 1,111
29,000 29,000 Eli Lilly & Co. 2,886 2,886
4,400 4,400 Fisher Scientific 138 138
10,000 10,000 * Healthsouth Rehabilitation 261 261
15,000 7,400 22,400 Johnson & Johnson 1,299 603 1,902
64,000 64,000 Medtronic, Inc. 3,512 3,512
50,000 15,900 65,900 Merck & Company, Inc. 3,094 914 4,008
</TABLE>
5
<PAGE> 130
ARMADA FUNDS
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
- -----------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Market Market Market
SHARES SHARES SHARES Security Description Value Value Value
- -------------------------------------------------------------------------------------------------------------------------------
Inventor Inventor
Armada Equity (PRO FORMA) Armada Equity (POR FORMA)
Equity Growth (Combined) Equity Growth (Combined)
- -------------------------------------------------------------------------------------------------------------------------------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
MEDICAL PRODUCTS &SERVICES
(CONTINUED)
82,620 8,500 91,120 Pfizer, Inc. $4,792 $488 $5,280
2,400 2,400 Pharmacia AB ADR 84 84
56,304 6,600 62,904 Schering-Plough Corp. 3,230 354 3,584
20,000 20,000 Smith Kline Beecham PLC 1,038 1,038
18,500 18,500 * Tenet Healthcare 331 331
900 900 Warner Lambert 77 77
-------------- ---------- -------------
25,164 6,783 31,947
-------------- ---------- -------------
METALS & MINING 0.1%
600 600 * Alumax 18 18
15,000 15,000 Worthington Industries 249 249
---------- -------------
267 267
---------- -------------
MISCELLANEOUS 0.9%
8,000 8,000 ITT 980 980
13,800 13,800 Tyco International 838 838
---------- -------------
1,818 1,818
---------- -------------
OFFICE & BUSINESS EQUIPMENT 3.4%
78,050 78,050 Pitney Bowes, Inc. 3,493 3,493
22,000 4,900 26,900 Xerox Corp. 3,017 636 3,653
-------------- ---------- -------------
6,510 636 7,146
-------------- ---------- -------------
PAPER & FOREST PRODUCTS 1.9%
172,500 172,500 * Fort Howard Corp. 3,396 3,396
5,900 5,900 Georgia Pacific 487 487
-------------- ---------- -------------
3,396 487 3,883
-------------- ---------- -------------
</TABLE>
6
<PAGE> 131
ARMADA FUNDS
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
- -----------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Market Market Market
SHARES SHARES SHARES Security Description Value Value Value
- -------------------------------------------------------------------------------------------------------------------------------
Inventor Inventor
Armada Equity (PRO FORMA) Armada Equity (POR FORMA)
Equity Growth (Combined) Equity Growth (Combined)
- -------------------------------------------------------------------------------------------------------------------------------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
PAPER & PAPER PRODUCTS 0.1%
4,500 4,500 Willamette Industries $261 $261
---------- -------------
RAILROAD 0.3%
8,800 8,800 Union Pacific 575 575
---------- -------------
RETAIL 0.2%
10,500 10,500 * Intimate Brands, Class A 176 176
8,300 8,300 Newell 200 200
---------- -------------
376 376
---------- -------------
RETAIL FOOD CHAINS 1.8%
77,000 6,500 83,500 Albertson's, Inc. $2,368 216 2,584
17,500 17,500 McDonalds 718 718
18,000 18,000 Wendy's International 358 358
------------- ---------- -------------
2,368 1,292 3,660
------------- ---------- -------------
RETAIL MERCHANDISING 0.8%
40,000 30,900 70,900 Wal-Mart Stores, Inc. 960 668 1,628
------------- ---------- -------------
RETAIL STORES 2.6%
8,000 8,000 American Stores 239 239
29,800 29,800 * Federated Department Stores 756 756
82,500 82,500 Lowe's Companies, Inc. 2,599 2,599
12,800 12,800 * Office Depot, Inc. 366 366
50,000 50,000 Walgreen Co. 1,456 1,456
------------- ---------- -------------
4,055 1,361 5,416
------------- ---------- -------------
</TABLE>
7
<PAGE> 132
ARMADA FUNDS
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
- -----------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Market Market Market
SHARES SHARES SHARES Security Description Value Value Value
- -------------------------------------------------------------------------------------------------------------------------------
Inventor Inventor
Armada Equity (PRO FORMA) Armada Equity (POR FORMA)
Equity Growth (Combined) Equity Growth (Combined)
- -------------------------------------------------------------------------------------------------------------------------------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
TECHNOLOGY 6.7%
6,200 6,200 * Arrow Electronics $315 $315
4,500 4,500 Bell Howell 113 113
27,000 27,000 * Cisco Systems, Inc. $2,273 2,273
900 900 * DSC Communications 33 33
9,700 9,700 Eastman Kodak 607 607
43,000 43,000 Hewlett Packard Co. 3,564 3,564
59,000 12,200 71,200 Intel Corp. 3,588 852 4,440
8,400 8,400 International Business Machines 817 817
8,200 8,200 * Microsoft 820 820
14,500 14,500 * Oracle Systems 633 633
32,500 32,500 Scientific-Atlanta 402 402
-------------- ------------ -----------
9,425 4,592 14,017
-------------- ------------ -----------
TELECOMMUNICATIONS 6.0%
60,260 16,700 76,960 AT&T Corp. 3,977 1,069 5,046
90,000 90,000 MCI Communications Corp. 2,402 2,402
43,920 16,400 60,320 Motorola, Inc. 2,690 1,076 3,766
30,000 30,000 * Qualcomm, Inc. 1,245 1,245
-------------- ------------ -----------
10,314 2,145 12,459
-------------- ------------ -----------
UTILITIES - TELEPHONE 0.8%
43,300 43,300 BellSouth Corp. 1,683 1,683
-------------- -----------
- ------------------------------------------------------------------------------------------------------------------------------
2,772,928 1,161,130 3,934,058 TOTAL COMMON STOCK $145,404 $50,601 $196,005
- ------------------------------------------------------------------------------------------------------------------------------
(Cost $156,269,730)
PREFERRED STOCK 0.1%
6,000 6,000 Time Warner Financing 192 192
- ------------------------------------------------------------------------------------------------------------------------------
0 6,000 6,000 TOTAL PREFERRED STOCK $0 $192 $192
- ------------------------------------------------------------------------------------------------------------------------------
(Cost $186,000)
</TABLE>
8
<PAGE> 133
ARMADA FUNDS
PROFORMA COMBINED SCHEDULE OF INVESTMENTS
- -----------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Market Market Market
SHARES SHARES SHARES Security Description Value Value Value
- -----------------------------------------------------------------------------------------------------------------------------------
Inventor Inventor
Armada Equity (PRO FORMA) Armada Equity (POR FORMA)
Equity Growth (Combined) Equity Growth (Combined)
- -----------------------------------------------------------------------------------------------------------------------------------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
TEMPORARY INVESTMENT 2.9%
6,013,916 6,013,916 Fidelity Domestic Market Portfolio $6,014 $6,014
- -----------------------------------------------------------------------------------------------------------------------------------
6,013,916 0 6,013,916 TOTAL TEMPORARY INVESTMENT $6,014 $6,014
- ------------------------------------------------------------------------------------------------------------------------------------
(Cost $6,014,000)
(PAR) (PAR) REPURCHASE AGREEMENT 3.0%
$6,162,000 $6,162,000 Paine Webber, 5.88% dated 10/31/95, $6,162 6,162
matures 11/1/95, repurchase price $6,163,504
(collateralized by various U.S. Government
mortgage-backed securities, total par value
$17,930,362, 0.00% - 7.00%: total market
value $6,347,496)
- -----------------------------------------------------------------------------------------------------------------------------------
0 $6,162,000 $6,162,000 TOTAL REPURCHASE AGREEMENT 0 6,162 6,162
- -----------------------------------------------------------------------------------------------------------------------------------
(Cost $6,162,000)
===================================================================================
TOTAL INVESTMENTS 100.0% $151,418 $56,955 $208,373
===================================================================================
(Cost $168,631,730)
</TABLE>
The accompanying notes are an integral part of these financial statements.
* Non-income producing security.
9
<PAGE> 134
ARMADA FUNDS
<TABLE>
<CAPTION>
PRO FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES 11/30/95 10/31/95
(UNAUDITED) Armada Inventor Pro Forma
Equity Equity Growth Adjustments Combined
------ ------------- ----------- --------
<S> <C> <C> <C> <C>
Investments at Value $151,417,652 $56,955,219 $208,372,871
(Cost - $116,280,838 and $52,350,892, respectively)
Cash 0 9,457 9,457
Interest and Dividends Receivable 238,843 57,302 296,145
Receivable for Securities Sold 7,173,855 380,906 7,554,761
Other Receivable 12,662 (1) 12,662
Receivable for Fund shares sold 9,658 0 9,658
Prepaid Expenses 6,167 0 6,167
Other Assets 0 550 550
-------------- -------------- ---------- -------------
Total Assets 158,846,175 57,403,434 12,662 216,262,271
-------------- -------------- ---------- -------------
Liabilities
Payable for Securities Purchased 11,689,778 1,929,024 13,618,802
Payable for Fund Shares repurchased 64,099 0 64,099
Dividends Payable 0 16,134 16,134
Accrued Expenses 144,083 36,998 12,662 (1) 193,743
-------------- -------------- ---------- -------------
Total Liabilities 11,897,960 1,982,156 12,662 13,892,778
-------------- -------------- ---------- -------------
Net Assets
Paid in Capital 107,166,111 46,367,919 153,534,030
Undistributed net investment income 179,794 0 179,794
Undistributed net realized capital gains 4,465,148 4,449,032 8,914,180
Net unrealized appreciation 35,137,162 4,604,327 39,741,489
-------------- -------------- ---------- -------------
Net Assets $146,948,215 $55,421,278 $202,369,493
============== ============== ========== =============
Net Assets by Class of Shares
Institutional Class $141,084,467 $55,421,278 $196,505,745
Retail Class $5,863,748 $5,863,748
Shares
Institutional Class
Pre - Combination 8,509,745 4,612,149 N/A
Post - Combination (A) 11,852,403 0 11,852,403
Retail Class
Pre - Combination 353,139 0 353,139
Post - Combination 353,139 0 353,139
Nat Assets Value, Offering and Redemption Price Per Share
Institutional Class $16.58 $12.02 $16.58
Retail Class $16.60 $16.60
Maximum offering price per Retail Share $17.25 $17.25
<FN>
(A) Reduction in shares due to a 72.48% reverse stock split.
(1) To reclassify deferred organization costs included in Accrued Expenses to
Other Receivable.
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 135
ARMADA FUNDS
<TABLE>
<CAPTION>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED) Armada Inventor
Equity Equity Growth
Year Ended Year Ended Pro-Forma
11/30/95 10/31/95 Adjustments Combined
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Investment Income
Interest $ 351,963 $ 293,748 $ 645,711
Dividends 2,497,566 857,152 3,354,718
Less Foreign Taxes (15,163) 0 (15,163)
-------------- -------------- -------------
Total Investment Income 2,834,366 1,150,900 3,985,266
-------------- -------------- -------------
Expenses
Investment Advisory 950,669 412,916 (49,329)(2) 1,314,256
Administration 126,671 87,440 (39,213)(3) 174,898
Custody 34,309 15,996 (15,996)(6) 34,309
Transfer Agent 47,136 23,765 70,901
Professional Fees 9,630 9,106 (9,106)(7) 9,630
Printing 18,607 10,643 29,250
12b-1 and Distribution 71,540 121,443 (119,232)(4) 73,751
Shareholder Servicing Fees - Retail 15,025 0 15,025
Trustees' fees 4,158 2,115 (2,115)(5) 4,158
Registration and filing fees 12,819 10,412 23,231
Miscellaneous (11,644) 17,430 (3,354)(8) 2,432
Waivers (30,333) (250,024) 238,345 (9) (42,012)
-------------- -------------- ---------- -------------
Total Expenses 1,248,587 461,242 0 1,709,829
-------------- -------------- ---------- -------------
NET INVESTMENT INCOME 1,585,779 689,658 2,275,437
-------------- -------------- ---------- -------------
Realized and Unrealized Gain(Loss) on Investments
Net Realized Gain (Loss) 4,465,459 4,447,445 8,912,904
Net change in unrealized apprec (deprec) 23,719,136 4,051,808 27,770,944
-------------- -------------- ---------- -------------
Net gain (loss) on investments 28,184,595 8,499,253 36,683,848
-------------- -------------- ---------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $29,770,374 $9,188,911 $38,959,285
============== ============== ========== =============
<FN>
(2) To adjust Advisory fees to reflect Armada's fee structure for the combined
assets.
(3) To adjust Administration fees to reflect Armada's fee structure for the
combined assets.
(4) To adjust Distribution fees to reflect Armada's fee structure on combined
assets.
(5) To eliminate duplication of Trustees fees.
(6) To eliminate duplication of Custody fees.
(7) To eliminate duplication of Professional fees.
(8) To eliminate amortization of organization expenses for the pro-forma
period.
(9) To reflect elimination of Inventor Equity Growth Fund's expense cap
guarantee.
</TABLE>
The accompanying notes are an integral part of these financial statments.
1
<PAGE> 136
ARMADA EQUITY FUND
INVENTOR EQUITY GROWTH FUND
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF COMBINATION
The pro forma combined statement of assets and liabilities, including the pro
forma combined schedule of investments, and the related pro forma combined
statement of operations reflect the accounts of Armada Equity Fund as of
November 30, 1995 and the accounts of Inventor Equity Growth Fund as of October
31, 1995 and for each of the twelve month periods then ended. Each date
represents the most recent semi-annual report date for the combined funds.
The pro forma combined financial statements give effect to the proposed
transfer of the assets and liabilities of Inventor Equity Growth Fund in
exchange for shares of Armada Equity Fund. Under the terms of the Agreement
and Plan of Reorganization between Armada Funds and Inventor Funds, Inc.(the
"Plan"), the combination of the Armada Equity Fund and the Inventor Equity
Growth Fund will be treated as a tax-free business combination. Accordingly,
the historical cost of investment securities will be carried forward to the
surviving portfolio and the results of operations of the surviving portfolio
for the pre-combining periods will not be restated. The pro forma combined
financial statements do not reflect the expenses of Armada and Inventor Funds
in carrying out their obligations under the Plan as these expenses are
immaterial to the financial statements.
Each Fund has a similar investment objective which will remain unchanged as a
result of the combination.
The pro forma financial statements should be read in conjunction with the
historical financial statements of each fund incorporated by reference to the
respective prospectuses or statements of additional information. The pro forma
financial statements have been prepared as if the combination had taken place
at the commencement of the annual periods presented. Certain amounts have been
reclassified to conform to current presentation.
1
<PAGE> 137
The funds affected by the proposed merger are as follows:
<TABLE>
<CAPTION>
===========================================================================
Inventor Fund Armada Fund
- ---------------------------------------------------------------------------
<S> <C> <C>
Inventor Equity Growth Fund Armada Equity Fund
- ---------------------------------------------------------------------------
Inventor GNMA Securities Fund Armada GNMA Fund 1
- ---------------------------------------------------------------------------
Inventor Intermediate Armada Intermediate 1
Government Securities Fund Government Fund
- ---------------------------------------------------------------------------
Inventor Pennsylvania Tax- Armada Pennsylvania Tax 1
Exempt Money Market Fund Exempt Fund
- ---------------------------------------------------------------------------
Inventor Pennsylvania Armada Pennsylvania 1
Municipal Bond Fund Municipal Fund
===========================================================================
<FN>
1- Pro forma financial statements are not presented because the acquired fund
is being merged into a newly organized "shell" portfolio of Armada.
</TABLE>
2. SHARES OF BENEFICIAL INTEREST
The pro forma net asset values per share assume the issuance of additional
shares of Armada Equity Fund to the holders of Inventor Equity Growth Fund at
the end of the pro forma period.
3. PRO FORMA OPERATIONS
The Pro Forma Combined Statement of Operations assumes similar rates of gross
investment income from the investments of each fund. Accordingly, the combined
gross investment income is equal to the sum of the gross investment income of
each fund.
Pro forma operating expenses reflect the expected expenses of the Fund after
combination. As such, pro forma fees for investment advisory, administration,
distribution and custodian services were calculated based on the fee schedules
in effect at November 30, 1995 for the Armada Equity Fund.
2
<PAGE> 138
4. SURVIVING ENTITY
The Armada Equity Fund will be the surviving entity for accounting purposes.
This determination was based upon the relative size of each fund and that the
surviving fund will employ the Armada Equity Fund's investment objectives,
policies and restrictions.
3
<PAGE> 139
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA MID CAP REGIONAL FUND
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -----------
<S> <C> <C>
COMMON STOCK - 96.4%
AUTOMOTIVE PARTS - EQUIPMENT - 2.9%
Amcast Industrial Corp....... 49,900 $ 923,150
Borge-Warner Automotive,
Inc......................... 25,000 740,625
Douglas & Lomason Co......... 44,000 500,500
------------
2,164,275
------------
BANKING - 1.8%
First of America Bank
Corp........................ 10,000 448,750
Huntington Bancshares,
Inc......................... 36,750 893,484
------------
1,342,234
------------
BUILDING & BUILDING SUPPLIES - 5.0%
Interface, Inc............... 40,000 652,500
Pulte Corp................... 40,000 1,230,000
Ryland Group, Inc............ 100,000 1,237,500
Wolohan Lumber Co............ 65,000 580,937
------------
3,700,937
------------
BUSINESS SERVICES - 4.3%
Flightsafety International,
Inc......................... 27,300 1,433,250
Unifirst Corp................ 111,200 1,765,300
------------
3,198,550
------------
CHEMICALS - 2.3%
Arco Chemical Co............. 10,000 475,000
Geon Co...................... 50,000 1,237,500
------------
1,712,500
------------
CONSUMER-DURABLES - 0.2%
Baldwin Piano & Organ Co.+... 12,000 151,500
------------
DRUGS & HEALTH CARE - 4.2%
Amerisource Health Corp.+.... 40,000 1,150,000
Bergen Brunswig Corp., Class
A........................... 40,000 960,000
Bindley Western Industries,
Inc......................... 57,000 1,018,875
------------
3,128,875
------------
ELECTRONICS - 0.6%
Premier Industrial Corp...... 18,100 450,237
------------
FERTILIZER - 0.7%
Scotts Co., Class A+......... 24,600 496,612
------------
FINANCIAL SERVICES - 3.0%
U.S. Trust Corp.............. 47,100 2,237,250
------------
FOODS - 0.5%
Midwest Grain Products,
Inc......................... 5,000 59,687
Thorn Apple Valley, Inc...... 17,000 280,500
------------
340,187
------------
FREIGHT & SHIPPING - 3.1%
Airborne Freight Corp........ 83,200 2,340,000
------------
HEALTH CARE - 1.2%
Caremark International,
Inc......................... 45,000 883,125
------------
INSURANCE - 18.6%
Acordia, Inc................. 50,000 1,400,000
American Travellers Corp.+... 15,000 377,813
Amerin Corp. +............... 25,500 559,406
AON Corp..................... 30,000 1,413,750
Capitol American Financial
Corp........................ 30,000 615,000
Gallagher (Arthur J.) &
Co.......................... 20,000 655,000
</TABLE>
See Accompanying Notes
12
<PAGE> 140
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA MID CAP REGIONAL FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -----------
<S> <C> <C>
INSURANCE (CONT'D.)
Harleysville Group, Inc...... 65,400 $ 1,888,425
Horace Mann Educators
Corp........................ 163,300 4,735,700
John Alden Financial Corp.... 85,000 1,753,125
Kansas City Life Insurance
Co.......................... 9,000 474,750
------------
13,872,969
------------
MACHINERY & HEAVY EQUIPMENT - 0.5%
Cascade Corp................. 20,000 287,500
Johnstown America
Industries, Inc.+........... 22,500 119,531
------------
407,031
------------
METALS & MINING - 2.3%
Brush Wellman, Inc........... 17,500 306,250
Carbide Graphite Group,
Inc.+....................... 31,000 457,250
Commonwealth Aluminum
Corp. ...................... 30,000 511,875
Mine Safety Appliances
Co. ........................ 10,400 451,100
------------
1,726,475
------------
NATURAL RESOURCES - 1.7%
Florida Rock Industries,
Inc. ....................... 30,000 795,000
Nord Resources Corp.+........ 210,700 447,738
------------
1,242,738
------------
OIL & GAS - 1.2%
Ashland Oil, Inc. ........... 5,000 174,375
Belden & Blake Corp.+........ 45,400 732,075
------------
906,450
------------
PAPER & FOREST PRODUCTS - 5.3%
Caraustar Industries......... 75,000 1,500,000
Glatfelter (P.H.) Co. ....... 15,000 286,875
Mead Corp. .................. 25,000 1,428,125
Mosinee Paper Corp. ......... 30,000 727,500
------------
3,942,500
------------
PHOTO-EQUIPMENT & SUPPLIES - 0.1%
CPI Corp. ................... 3,100 64,713
------------
RETAIL FOOD CHAINS - 3.1%
Food Lion, Inc., Class B..... 180,000 1,063,125
Kroger Co.+.................. 20,000 670,000
Smiths Food & Drug Centers,
Inc. ....................... 26,000 627,250
------------
2,360,375
------------
RETAIL MERCHANDISING - 2.8%
Dillard Department Stores,
Inc. ....................... 40,000 1,155,000
Hi-Lo Automotive, Inc.+...... 76,400 429,750
Shoe Carnival, Inc.+......... 50,000 203,125
Sun T.V. & Appliances,
Inc. ....................... 55,000 309,375
------------
2,097,250
------------
SPECIALTY CHEMICALS - 6.9%
Adco Technologies, Inc. ..... 31,500 226,406
Blessings Corp. ............. 30,000 292,500
Ferro Corp. ................. 48,500 1,079,125
Fuller (H.B.) Co. ........... 40,000 1,295,000
O.M. Group, Inc. ............ 48,000 1,464,000
Schulman (A.), Inc. ......... 43,100 781,188
------------
5,138,219
------------
</TABLE>
See Accompanying Notes
13
<PAGE> 141
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA MID CAP REGIONAL FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -----------
<S> <C> <C>
STEEL - 6.8%
Huntco, Inc. ................ 45,000 $ 793,125
Insteel Industries, Inc. .... 184,900 1,224,963
Olympic Steel, Inc.+......... 90,500 808,844
Reliance Steel &
Aluminum Co. ............... 20,000 375,000
Rouge Steel Co. ............. 20,000 435,000
Shiloh Industries, Inc.+..... 21,200 238,500
Steel Technologies, Inc. .... 135,700 1,187,375
------------
5,062,807
------------
TECHNOLOGY - 3.3%
Apple Computer, Inc.......... 30,000 1,145,625
Stratus Computer, Inc.+...... 35,000 1,163,750
Government Technology
Services, Inc.+............. 30,000 120,000
------------
2,429,375
------------
TEXTILES - 1.0%
Oneita Industries, Inc.+..... 106,000 755,250
------------
TIRE & RUBBER - 2.0%
Bandag, Inc., Class A........ 30,000 1,477,500
------------
TOBACCO - 4.6%
Dimon, Inc. ................. 116,000 2,001,000
Universal Corp. ............. 63,300 1,503,375
------------
3,504,375
------------
TRUCKING - 3.4%
M.S. Carriers, Inc.+......... 105,000 $ 1,981,875
TNT Freightways Corp. ....... 30,000 588,750
------------
2,570,625
------------
UTILITIES - ELECTRIC - 3.0%
Cinergy Corp................. 30,000 885,000
Ohio Edison Co............... 60,000 1,365,000
------------
2,250,000
------------
TOTAL COMMON STOCK........... 71,954,934
(Cost $68,648,363) ------------
TEMPORARY INVESTMENT - 3.6%
Fidelity Domestic
Market Portfolio............ 2,711,407 2,711,407
(Cost $2,711,407) ------------
TOTAL INVESTMENTS - 100.0% $74,666,341
(Cost $71,359,770*) ============
+ Non-income producing.
Cost for Federal income tax
* purposes - $71,390,234
The gross unrealized appreciation (depreciation)
for Federal income tax purposes is as follows:
Gross appreciation................... $ 6,911,219
Gross depreciation................... (3,635,112)
-----------
$ 3,276,107
-----------
</TABLE>
See Accompanying Notes
14
<PAGE> 142
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA MID CAP REGIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $71,359,770)................... $74,666,341
Interest and dividends receivable.... 124,774
Receivable for Fund shares sold...... 42,643
Receivable for investments sold...... 679,312
Prepaid expenses..................... 18,902
----------
TOTAL ASSETS................ 75,531,972
- ------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed..... 10,573
Payable for investments purchased.... 332,250
Accrued expenses..................... 75,941
----------
TOTAL LIABILITIES........... 418,764
- ------------------------------------------------------
NET ASSETS (based on
6,137,391 shares of
beneficial interest
having no par value)........ $75,113,208
======================================================
NET ASSETS CONSIST OF:
Paid-in capital............. $65,885,511
Undistributed net investment
income...................... 556,548
Undistributed net realized
gain on investments sold.... 5,364,578
Net unrealized appreciation
on investments.............. 3,306,571
----------
$75,113,208
======================================================
NET ASSET VALUE,
OFFERING PRICE AND
REDEMPTION PRICE PER
SHARE -- Institutional class
($70,624,830 divided by 5,766,429
shares of beneficial
interest).................. $ 12.25
======================================================
NET ASSET VALUE AND
REDEMPTION PRICE
PER SHARE -- Retail class
($4,488,378 divided by 370,962 shares
of beneficial interest)..... $ 12.10
======================================================
MAXIMUM OFFERING
PRICE PER RETAIL SHARE
($12.10 divided by .9625)... $ 12.57
======================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................. $ 663,765
---------
EXPENSES:
Investment Advisory fees.............. 252,610
Administration fees................... 33,459
12b-1 fees............................ 25,858
Transfer Agent fees................... 14,395
Registration and filing fees.......... 9,377
Custodian fees........................ 8,520
Printing and shareholder reports...... 8,111
Shareholder servicing fees - Retail
class only.......................... 5,227
Legal fees............................ 4,698
Miscellaneous......................... 3,104
Distribution fees..................... 2,275
Amortization of organization costs.... 1,852
Audit fees............................ 1,561
Trustees' fees........................ 846
Insurance............................. 324
Fees waived by Custodian.............. (8,520)
---------
Total expenses............... 363,697
- ------------------------------------------------------
NET INVESTMENT INCOME.................... 300,068
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments sold............. 3,528,083
Net change in unrealized
appreciation on
investments.................. 865,177
---------
Net gain on investments...... 4,393,260
- ------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS.............. $4,693,328
======================================================
</TABLE>
See Accompanying Notes
15
<PAGE> 143
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA MID CAP REGIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED PERIOD ENDED
NOVEMBER 30, 1995 MAY 31, 1995
----------------- --------------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income.............................................. $ 300,068 $ 367,124
Net realized gain on investments sold.............................. 3,528,083 1,936,082
Net change in unrealized appreciation on investments............... 865,177 2,441,394
----------- -----------
Net increase in net assets resulting from operations............... 4,693,328 4,744,600
Distribution to shareholders from net investment income................ 0 (110,644)
Distribution to shareholders from net realized capital gains........... 0 (99,587)
Increase in net assets derived from capital share transactions......... 15,860,121 50,025,390
----------- -----------
Total increase in net assets........................................... 20,553,449 54,559,759
----------- -----------
NET ASSETS:
Beginning of period................................................ 54,559,759 0
----------- -----------
End of period...................................................... $75,113,208 $54,559,759
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, 1995 MAY 31, 1995
-------------------- --------------------
<S> <C> <C>
UNDISTRIBUTED NET INVESTMENT INCOME AS OF............................. $ 556,548 $ 256,480
=========== ===========
</TABLE>
See Accompanying Notes
16
<PAGE> 144
[ARROW LOGO] FINANCIAL HIGHLIGHTS
ARMADA MID CAP REGIONAL FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE PERIOD ENDED
NOVEMBER 30, 1995 MAY 31, 1995
------------------------- ---------------------------
(UNAUDITED)
INSTITUTIONAL RETAIL INSTITUTIONAL(3) RETAIL(3)
------------- ------ ---------------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 11.38 $11.26 $10.00 $10.16
------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................................... .04 .03 .10 .07
Net gains on securities (realized and unrealized)............. .83 .81 1.36 1.11
------- ------ ------- ------
Total from investment operations............................ .87 .84 1.46 1.18
------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net investment income.......................... .00 .00 (.04) (.04)
Dividends from net realized capital gains..................... .00 .00 (.04) (.04)
------- ------ ------- ------
Total distributions......................................... .00 .00 (.08) (.08)
------- ------ ------- ------
Net asset value, end of period.................................. $ 12.25 $12.10 $11.38 $11.26
======= ====== ======= ======
TOTAL RETURN.................................................... 15.83%(4) 15.43%(4,5) 17.42%(4) 14.80%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's).......................... $70,625 $4,488 $50,993 $3,567
Ratio of expenses to average net assets....................... 1.06%(1,4) 1.32%(2,4) 1.01%(1,4) 1.34%(2,4)
Ratio of net investment income to average net assets.......... .91%(1,4) .64%(2,4) 1.31%(1,4) 1.09%(2,4)
Portfolio turnover rate....................................... 63% 63% 69% 69%
</TABLE>
(1) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Institutional class for the period ended
November 30, 1995 would have been 1.09% and .88%, respectively.
The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, Administrator, and Custodian for the
Institutional class for the period ended May 31, 1995 would have been
1.15%, and 1.18%, respectively.
(2) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Retail class for the period ended November
30, 1995 would have been 1.34% and .62%, respectively. The operating expense
ratio and the net investment income ratio before fee waivers by the
Investment Advisers, Administrator, and Custodian for the Retail class for
the period ended May 31, 1995 would have been 1.38% and 1.05%, respectively.
(3) Institutional and Retail classes commenced operations on July 26, 1994, and
August 15, 1994 respectively.
(4) Annualized.
(5) Total Return excludes sales load.
See Accompanying Notes
17
<PAGE> 145
[ARROW LOGO]
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY FUND
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCK - 96.0%
ADVERTISING - 2.2%
Interpublic Group, Inc...... 88,310 $ 3,388,896
------------
BANKING - 4.0%
Norwest Corp. .............. 69,000 2,277,000
Wells Fargo & Company....... 18,000 3,784,500
------------
6,061,500
------------
BEVERAGES - 7.1%
Anheuser-Busch Companies,
Inc........................ 30,000 1,987,500
Coca-Cola Co................ 58,000 4,393,500
Pepsico, Inc................ 77,900 4,303,975
------------
10,684,975
------------
BUILDING & BUILDING SUPPLIES - 1.9%
Home Depot, Inc............. 63,666 2,825,179
------------
BUSINESS SERVICES - 3.1%
Automatic Data Processing... 26,880 2,140,320
General Motors Corp.,
Class E.................... 51,540 2,602,770
------------
4,743,090
------------
CHEMICALS - 2.6%
Air Products & Chemicals,
Inc........................ 35,000 1,942,500
Dow Chemical Co............. 28,320 2,007,180
------------
3,949,680
------------
COMPUTERS - 3.9%
Cisco Systems, Inc.+........ 27,000 2,273,063
Intel Corp. ................ 59,000 3,587,938
------------
5,861,001
------------
CONSUMER NON-DURABLES - 3.5%
Gillette Co................. 42,000 2,178,750
Procter & Gamble Co. ....... 35,520 3,068,040
------------
5,246,790
------------
DIVERSIFIED - 2.0%
Minnesota Mining &
Manufacturing Co........... 46,370 3,037,235
------------
DRUGS & HEALTH CARE - 13.4%
Abbott Laboratories......... 50,860 2,066,187
American Home Products
Corp....................... 20,620 1,881,575
Bristol Myers Squibb Co..... 29,950 2,403,487
Eli Lilly & Co.............. 29,000 2,885,500
Merck & Company, Inc........ 50,000 3,093,750
Pfizer, Inc. ............... 82,620 4,791,960
Schering-Plough Corp. ...... 56,304 3,230,442
------------
20,352,901
------------
ELECTRICAL EQUIPMENT - 3.6%
AMP, Inc. .................. 19,000 762,375
Emerson Electric Co. ....... 27,200 2,121,600
Hubbell, Inc., Class B...... 42,920 2,623,485
------------
5,507,460
------------
ELECTRONICS - 1.7%
Honeywell, Inc. ............ 15,000 714,375
MEMC Electronic
Materials, Inc.+........... 55,000 1,821,875
------------
2,536,250
------------
ENTERTAINMENT - 1.1%
Walt Disney Co. ............ 28,055 1,686,807
------------
</TABLE>
See Accompanying Notes
18
<PAGE> 146
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ------------
<S> <C> <C>
FINANCIAL SERVICES - 3.3%
Federal National Mortgage
Association................ 9,730 $ 1,065,435
Greenpoint Financial
Corp. ..................... 65,000 1,698,125
State Street Boston Corp.... 50,000 2,250,000
------------
5,013,560
------------
FOREIGN - 2.5%
Reuters Holdings PLC, ADS... 68,000 3,842,000
------------
HOME FURNISHINGS/HOUSEWARES - 1.0%
Masco Corp.................. 51,000 1,504,500
------------
INSURANCE - 4.2%
American International
Group...................... 44,083 3,956,449
Chubb Corp. ................ 24,400 2,372,900
------------
6,329,349
------------
MANUFACTURING - 4.4%
Wolverine Tube, Inc.+....... 90,000 3,048,750
York International Corp. ... 80,000 3,580,000
------------
6,628,750
------------
MEDICAL & MEDICAL
SERVICES - 2.3%
Medtronic, Inc. ............ 64,000 3,512,000
------------
OFFICE & BUSINESS EQUIPMENT - 4.3%
Pitney Bowes, Inc........... 78,050 3,492,738
Xerox Corp.................. 22,000 3,016,750
------------
6,509,488
------------
OIL & GAS - 1.1%
Amoco Corp.................. 23,655 1,602,626
------------
OIL EQUIPMENT &
SERVICES - 2.0%
Schlumberger Limited........ 48,495 3,079,433
------------
PAPER & FOREST PRODUCTS - 2.2%
Fort Howard Corp.+.......... 172,500 3,396,094
------------
PHARMACEUTICALS - 0.9%
Johnson & Johnson........... 15,000 1,299,375
------------
RETAIL FOOD CHAINS - 1.6%
Albertson's, Inc. .......... 77,000 2,367,750
------------
RETAIL MERCHANDISING - 0.6%
Wal-Mart Stores, Inc. ...... 40,000 960,000
------------
RETAIL STORES - 2.7%
Lowe's Companies, Inc. ..... 82,500 2,598,750
Walgreen Co................. 50,000 1,456,250
------------
4,055,000
------------
TECHNOLOGY - 2.4%
Hewlett Packard Co.......... 43,000 3,563,625
------------
TELECOMMUNICATIONS - 6.8%
AT&T Corp. ................. 60,260 3,977,160
MCI Communications Corp..... 90,000 2,401,875
Motorola, Inc............... 43,920 2,690,100
Qualcomm, Inc.+............. 30,000 1,245,000
------------
10,314,135
------------
</TABLE>
See Accompanying Notes
19
<PAGE> 147
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ------------
<S> <C> <C>
TOBACCO - 2.5%
Philip Morris Companies,
Inc........................ 44,000 $ 3,861,000
------------
UTILITIES - TELEPHONE - 1.1%
BellSouth Corp.............. 43,300 1,683,287
------------
TOTAL COMMON STOCK.......... 145,403,736
(Cost $110,266,574) ------------
TEMPORARY INVESTMENT - 4.0%
Fidelity Domestic
Market Portfolio........... 6,013,916 6,013,916
(Cost $6,013,916) ------------
TOTAL INVESTMENTS - 100.0% $151,417,652
(Cost $116,280,490*) ============
+ Non-income producing.
* Also cost for Federal income tax
purposes.
The gross unrealized appreciation (depreciation)
for Federal income tax purposes is as follows:
Gross appreciation.................. $ 35,644,281
Gross depreciation.................. (507,119)
------------
$ 35,137,162
============
</TABLE>
See Accompanying Notes
20
<PAGE> 148
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $116,280,490)................. $151,417,652
Interest and dividends receivable... 238,843
Receivable for Fund shares sold..... 9,658
Receivable for investments sold..... 7,173,855
Prepaid expenses.................... 6,167
-----------
TOTAL ASSETS............... 158,846,175
- ------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed.... 64,099
Payable for investments purchased... 11,689,778
Accrued expenses.................... 144,083
-----------
TOTAL LIABILITIES.......... 11,897,960
- ------------------------------------------------------
NET ASSETS (based on
8,862,884 shares of
beneficial interest having
no par value).............. $146,948,215
======================================================
NET ASSETS CONSIST OF:
Paid-in capital............ $107,166,111
Undistributed net
investment income.......... 179,794
Undistributed net realized
gain on investments sold... 4,465,148
Net unrealized appreciation
on investments............. 35,137,162
-----------
$146,948,215
======================================================
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
PER SHARE - Institutional
class
($141,084,467 divided by 8,509,745
shares of beneficial
interest).................. $ 16.58
======================================================
NET ASSET VALUE AND
REDEMPTION PRICE PER
SHARE - Retail class
($5,863,748 divided by 353,139
shares of beneficial
interest).................. $ 16.60
======================================================
MAXIMUM OFFERING
PRICE PER RETAIL SHARE
($16.60 divided by .9625).. $ 17.25
======================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................ $ 1,230,465
Interest............................. 87,203
Less foreign taxes withheld.......... (10,079)
----------
Total investment income.............. 1,307,589
----------
EXPENSES:
Investment Advisory fees............. 517,967
Administration fees.................. 69,062
12b-1 fees........................... 44,839
Transfer Agent fees.................. 26,203
Custodian fees....................... 17,266
Registration and filing fees......... 8,166
Shareholder servicing fees - Retail
class only......................... 7,434
Legal fees........................... 6,940
Printing and shareholder reports..... 6,220
Distribution fees.................... 5,360
Audit fees........................... 2,825
Miscellaneous........................ 2,345
Trustees' fees....................... 1,928
Insurance............................ 1,254
Fees waived by Custodian............. (17,266)
----------
Total expenses.............. 700,543
- ------------------------------------------------------
NET INVESTMENT INCOME................... 607,046
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments sold............ 5,546,896
Net change in unrealized
appreciation on
investments................. 10,345,097
----------
Net gain on investments..... 15,891,993
- ------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $16,499,039
======================================================
</TABLE>
See Accompanying Notes
21
<PAGE> 149
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1995 MAY 31, 1995
----------------- ------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income...................................................... $ 607,046 $ 1,640,942
Net realized gain/(loss) on investments sold............................... 5,546,896 (117,954)
Net change in unrealized appreciation on investments....................... 10,345,097 10,348,115
------------ ------------
Net increase in net assets resulting from operations....................... 16,499,039 11,871,103
Distributions to shareholders from net investment income....................... (607,046) (1,520,691)
Distributions to shareholders in excess of net investment income............... (178,961) 0
Distributions to shareholders in excess of net realized capital gains.......... 0 (888,715)
Increase in net assets derived from capital share transactions................. 5,627,321 18,179,790
------------ ------------
Total increase in net assets................................................... 21,340,353 27,641,487
------------ ------------
NET ASSETS:
Beginning of period........................................................ 125,607,862 97,966,375
------------ ------------
End of period.............................................................. $146,948,215 $125,607,862
============ ============
<CAPTION>
NOVEMBER 30, 1995 MAY 31, 1995
----------------- ------------
<S> <C> <C>
UNDISTRIBUTED NET INVESTMENT INCOME AS OF...................................... $ 179,794 $ 358,755
============= ===========
</TABLE>
See Accompanying Notes
22
<PAGE> 150
[ARROW LOGO] FINANCIAL HIGHLIGHTS
ARMADA EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE YEAR ENDED MAY 31
NOVEMBER 30, 1995 -----------------------------------------------------------
-----------------------
1995 1994
(UNAUDITED) --------------------- ------------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ------ ------------- ------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.............. $14.77 $14.79 $13.66 $13.68 $13.78 $13.80
-------- ------ ------ ------ ------ ------
INCOME FROM
INVESTMENT OPERATIONS
Net investment income............ .07 .05 .21 .18 .18 .15
Net gains on securities (realized
and unrealized)................ 1.83 1.83 1.21 1.21 .01 .00
-------- ------ ------ ------ ------- ------
Total from investment
operations.................. 1.90 1.88 1.42 1.39 .19 .15
-------- ------ ------ ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income.............. (.07) (.05) (.20) (.17) (.18) (.15)
Dividends in excess of net
investment income.............. (.02) (.02) (.00) (.00) (.01) (.00)
Dividends from net realized
capital gains.................. (.00) (.00) (.00) (.00) (.11) (.11)
Dividends in excess of net
realized capital gains......... (.00) (.00) (.11) (.11) (.01) (.01)
-------- ------ ------ ------ ------- ------
Total distributions........... (.09) (.07) (.31) (.28) (.31) (.27)
-------- ------ ------ ------ ------- ------
Net asset value, end of period.... $16.58 $16.60 $14.77 $14.79 $13.66 $13.68
======== ====== ====== ====== ======= ======
TOTAL RETURN...................... 27.41%(4) 27.05%(4,5) 10.62% 10.35%(5) 1.41% 1.12%(5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)..................... $141,084 $5,864 $119,634 $5,974 $90,446 $7,521
Ratio of expenses to average
net assets..................... 1.00%(1,4) 1.25%(2,4) 1.01%(1) 1.27%(2) 1.07% 1.32%
Ratio of net investment income to
average net assets............. .89%(1,4) .64%(2,4) 1.53%(1) 1.23%(2) 1.33% 1.08%
Portfolio turnover rate.......... 38% 38% 17% 17% 15% 15%
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
--------------------- --------------------- ----------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL(3)
------------- ------ ------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.............. $13.13 $13.13 $12.35 $12.35 $10.77 $12.04
------- ------ ------- ------ ------- ------
INCOME FROM
INVESTMENT OPERATIONS
Net investment income............ .27 .23 .30 .25 .31 .04
Net gains on securities (realized
and unrealized)................ .67 .68 .78 .78 1.58 .27
------- ------ ------- ------ ------- ------
Total from investment
operations.................. .94 .91 1.08 1.03 1.89 .31
------- ------ ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income.............. (.27) (.23) (.30) (.25) (.31) (.00)
Dividends in excess of net
investment income.............. (.02) (.01) (.00) (.00) (.00) (.00)
Dividends from net realized
capital gains.................. (.00) (.00) (.00) (.00) (.00) (.00)
Dividends in excess of net
realized capital gains......... (.00) (.00) (.00) (.00) (.00) (.00)
------- ------ ------- ------ ------- ------
Total distributions........... (.29) (.24) (.30) (.25) (.31) (.00)
------- ------ ------- ------ ------- ------
Net asset value, end of period.... $13.78 $13.80 $13.13 $13.13 $12.35 $12.35
======= ====== ======= ====== ======= ======
TOTAL RETURN...................... 7.20% 7.00%(5) 8.90% 8.48%(5) 18.10% 21.82%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)..................... 85,256 $7,707 $48,673 $2,767 $42,112 $1,389
Ratio of expenses to average
net assets..................... .34% .59%(2) .26%(1) .51%(2) .31%(1) .53%(2,4)
Ratio of net investment income to
average net assets............. 2.13% 1.88%(2) 2.36%(1) 2.15%(2) 2.90%(1) 2.94%(2,4)
Portfolio turnover rate.......... 15% 15% 9% 9% 11% 11%
</TABLE>
(1) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Institutional class for the period ended
November 30, 1995 and the year ended May 31, 1995 would have been 1.03%
and .86%, and 1.02% and 1.51%, respectively. The operating expense ratio
and the net investment income ratio before fee waivers by the Investment
Advisers for the Institutional class for the years ended May 31, 1993,
1992 and 1991 would have been 1.01% and 1.46%, 1.01% and 1.61%, and 1.06%
and 2.15%, respectively.
(2) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Retail class for the period ended
November 30, 1995 and the year ended May 31, 1995 would have been 1.27%
and .62%, and 1.28% and 1.22%, respectively. The operating expense ratio
and the net investment income ratio before fee waivers by the Investment
Advisers for the Retail class for the years ended May 31, 1993 and 1992
and for the period ended May 31, 1991 would have been 1.26% and 1.21%,
1.27% and 1.40%, and 1.28% and 2.19%, respectively.
(3) Retail class commenced operations on April 15, 1991.
(4) Annualized.
(5) Total return excludes sales load.
See Accompanying Notes
23
<PAGE> 151
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY INCOME FUND
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK - 93.4%
AEROSPACE - 1.7%
Boeing Co. .................. 6,500 $ 473,687
Raytheon Co. ................ 7,400 329,300
------------
802,987
------------
AUTOMOBILES - 1.6%
Ford Motor Co. .............. 27,000 762,750
------------
BANKING - 9.4%
Banc One Corp. .............. 12,000 457,500
Fleet Financial Group,
Inc. ....................... 18,700 780,725
Mellon Bank Corp. ........... 17,100 914,850
Morgan (J.P.) & Co., Inc. ... 10,200 800,700
PNC Bank Corp. .............. 25,800 754,650
Wachovia Corp. .............. 18,600 837,000
------------
4,545,425
------------
BEVERAGES - 0.5%
Anheuser-Busch
Companies, Inc. ............ 4,000 265,000
------------
BUSINESS SERVICES - 2.9%
Dun & Bradstreet Corp. ...... 13,900 867,012
H.& R. Block, Inc. .......... 12,000 534,000
------------
1,401,012
------------
CHEMICALS - 4.9%
Dow Chemical Co. ............ 12,200 864,675
E.I. duPont de
Nemours & Co. .............. 11,700 778,050
WD-40 Co. ................... 18,500 740,000
------------
2,382,725
------------
COMPUTERS - 1.0%
International Business
Machines Corp. ............. 5,000 483,125
------------
CONSUMER NON-DURABLES - 3.2%
Clorox Co. .................. 9,500 719,625
Tambrands, Inc. ............. 15,800 823,575
------------
1,543,200
------------
DIVERSIFIED - 2.0%
Minnesota Mining &
Manufacturing Co. .......... 14,700 962,850
------------
DRUGS & HEALTH CARE - 4.7%
American Home
Products Corp. ............. 7,400 675,250
Bristol Myers Squibb Co. .... 10,500 842,625
Pharmacia Upjohn, Inc. ...... 20,300 728,262
------------
2,246,137
------------
ELECTRICAL EQUIPMENT - 1.1%
General Electric Co.......... 8,000 538,000
------------
FINANCIAL SERVICES - 3.4%
Federal National Mortgage
Association................. 8,200 897,900
Norwest Corp................. 22,000 726,000
------------
1,623,900
------------
FOOD & BEVERAGE - 2.7%
General Mills, Inc........... 8,200 452,025
Heinz (H.J.) Co.............. 25,950 827,156
------------
1,279,181
------------
</TABLE>
See Accompanying Notes
24
<PAGE> 152
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY INCOME FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
HOUSEWARES - 0.4%
Procter & Gamble Co.......... 2,000 $ 172,750
------------
INSURANCE - 3.9%
American General Corp........ 21,000 711,375
Lincoln National Corp........ 9,000 420,750
Marsh & McLennan Cos.,
Inc......................... 8,900 772,075
------------
1,904,200
------------
MACHINERY & HEAVY EQUIPMENT - 2.1%
Caterpillar, Inc. ........... 9,000 552,375
Cooper Industries, Inc. ..... 13,000 474,500
------------
1,026,875
------------
NATURAL GAS - 1.8%
Consolidated Natural Gas
Co. ........................ 19,400 860,875
------------
OFFICE & BUSINESS EQUIPMENT - 1.6%
Pitney Bowes, Inc. .......... 8,500 380,375
Xerox Corp. ................. 2,700 370,237
------------
750,612
------------
OIL & GAS - 12.7%
Amoco Corp. ................. 18,400 1,246,600
Atlantic Richfield Co. ...... 4,900 531,037
Chevron Corp. ............... 15,300 755,437
Exxon Corp. ................. 17,500 1,354,063
Mobil Corp. ................. 13,900 1,450,813
Royal Dutch Petroleum Co. ... 6,300 808,763
------------
6,146,713
------------
OIL EQUIPMENT & SERVICES - 0.7%
Schlumberger Ltd., Curacao... 5,000 317,500
------------
PAPER & FOREST PRODUCTS - 2.5%
International Paper Co. ..... 7,000 266,875
Kimberly-Clark Corp. ........ 2,300 176,812
Weyerhaeuser Co. ............ 17,000 769,250
------------
1,212,937
------------
REAL ESTATE - 3.7%
Duke Realty Investments,
Inc. ....................... 17,500 485,625
Kimco Realty Corp. .......... 13,800 552,000
Sun Communities, Inc. ....... 29,000 725,000
------------
1,762,625
------------
RETAIL MERCHANDISING - 3.0%
Melville Corp. .............. 23,300 725,213
Penney (J.C.) Co., Inc. ..... 15,300 717,188
------------
1,442,401
------------
TELECOMMUNICATIONS - 1.6%
American Telephone and
Telegraph Co. .............. 11,500 759,000
------------
TOBACCO - 3.8%
American Brands, Inc. ....... 19,500 814,125
Philip Morris Cos., Inc. .... 8,400 737,100
UST, Inc. ................... 9,100 296,888
------------
1,848,113
------------
TRANSPORTATION - 1.1%
Norfolk Southern Corp. ...... 7,000 551,250
------------
UTILITIES - GAS &
ELECTRIC - 1.1%
LG&E Energy Corp. ........... 12,500 515,625
------------
</TABLE>
See Accompanying Notes
25
<PAGE> 153
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY INCOME FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
UTILITIES - ELECTRIC - 4.1%
American Electric Power
Co. ........................ 13,000 $ 489,125
Consolidated Edison Co. of
New York, Inc. ............. 21,300 615,038
Florida Progress Corp. ...... 6,000 206,250
FPL Group, Inc. ............. 10,000 433,750
Kansas City Power &
Light Co. .................. 10,000 250,000
------------
1,994,163
------------
UTILITIES - TELEPHONE - 8.8%
Bell Atlantic Corp........... 15,700 989,100
Bell South Corp.............. 19,400 754,175
GTE Corp..................... 28,800 1,227,600
Nynex Corp................... 25,700 1,275,363
------------
4,246,238
------------
MISCELLANEOUS - 1.4%
Ogden Corp................... 32,000 680,000
------------
TOTAL COMMON STOCK........... 45,028,169
(Cost $40,355,058) ------------
PREFERRED STOCK - 1.0%
General Motors Corp., Class
E, Preferred C.............. 6,400 459,200
(Cost $372,087) ------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ---------- -----------
<S> <C> <C> <C>
CORPORATE BONDS - 2.4%
INSURANCE - 1.0%
Chubb Corp. (Aa3, AA)
6.00%............. 05/15/98 $ 400 $ 461,500
------------
WASTE COLLECTION & DISPOSAL - 1.4%
Browning Ferris, Inc.
6.25%............. 08/15/12 700 702,625
------------
TOTAL CORPORATE
BONDS....................... 1,164,125
(Cost $1,108,388) ------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C> <C>
TEMPORARY INVESTMENT - 3.2%
Fidelity Domestic Market
Portfolio................... 1,557,751 1,557,751
------------
(Cost $1,557,751)
TOTAL INVESTMENTS - 100.0% $ 48,209,245
(Cost $43,393,284*) ============
* Also cost for Federal income tax purposes.
The gross unrealized appreciation (depreciation) for
Federal income tax purposes is as follows:
Gross appreciation.................... $5,029,463
Gross depreciation.................... (213,502)
------------
$4,815,961
------------
</TABLE>
See Accompanying Notes
26
<PAGE> 154
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $43,393,284)................... $48,209,245
Interest and dividends receivable.... 215,648
Receivable for Fund shares sold...... 302,931
Prepaid expenses..................... 20,755
----------
TOTAL ASSETS................ 48,748,579
- ------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed..... 53,286
Accrued expenses..................... 57,432
----------
TOTAL LIABILITIES........... 110,718
- ------------------------------------------------------
NET ASSETS (based on
4,078,750 shares of
beneficial interest
having no par value)........ $48,637,861
======================================================
NET ASSETS CONSIST OF:
Paid-in capital............. $42,244,332
Undistributed net
investment income........... 267,406
Undistributed net realized
gain on investments sold.... 1,310,161
Net unrealized appreciation
on investments.............. 4,815,962
----------
$48,637,861
======================================================
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
PER SHARE - Institutional
class
($48,424,746 divided by 4,060,865
shares of beneficial
interest)................... $ 11.92
======================================================
NET ASSET VALUE AND
REDEMPTION PRICE PER
SHARE - Retail class
($213,115 divided by 17,885 shares of
beneficial interest)........ $ 11.92
======================================================
MAXIMUM OFFERING
PRICE PER RETAIL SHARE
($11.92 divided by .9625)... $ 12.38
======================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................. $ 875,563
Interest.............................. 57,676
Less foreign taxes withheld........... (6,152)
---------
Total investment income............... 927,087
EXPENSES:
Investment Advisory fees.............. 159,043
Administration fees................... 21,206
Transfer Agent fees................... 17,666
Registration and filing fees.......... 8,879
12b-1 fees............................ 8,482
Custodian fees........................ 5,328
Printing and shareholder reports...... 4,092
Legal fees............................ 3,466
Amortization of organization costs.... 2,228
Distribution fees..................... 1,771
Audit fees............................ 897
Trustees' fees........................ 772
Miscellaneous......................... 649
Insurance............................. 302
Shareholder servicing fees - Retail
class only.......................... 197
Fees waived by Custodian.............. (5,328)
---------
Total expenses............... 229,650
- ------------------------------------------------------
NET INVESTMENT INCOME.................... 697,437
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments sold............. 1,403,399
Net change in unrealized
appreciation on
investments.................. 2,058,692
---------
Net gain on investments
sold......................... 3,462,091
- ------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.... $4,159,528
======================================================
</TABLE>
See Accompanying Notes
27
<PAGE> 155
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED PERIOD ENDED
NOVEMBER 30, 1995 MAY 31, 1995
----------------- -------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................................. $ 697,437 $ 878,326
Net realized gain/(loss) on investments sold...................... 1,403,399 (93,238)
Net change in unrealized appreciation on investments.............. 2,058,692 2,757,270
------------ ------------
Net increase in net assets resulting from operations.............. 4,159,528 3,542,358
Distributions to shareholders from net investment income.............. (662,322) (646,035)
Increase in net assets derived from capital share transactions........ 8,822,399 33,421,933
------------ ------------
Total increase in net assets.......................................... 12,319,605 36,318,256
------------ ------------
NET ASSETS:
Beginning of period............................................... 36,318,256 0
------------ ------------
End of period..................................................... $ 48,637,861 $ 36,318,256
============ ============
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, 1995 MAY 31, 1995
----------------- ------------
<S> <C> <C>
UNDISTRIBUTED NET INVESTMENT INCOME AS OF............................. $ 267,406 $ 232,291
============ ============
</TABLE>
See Accompanying Notes
28
<PAGE> 156
[ARROW LOGO]
FINANCIAL HIGHLIGHTS
ARMADA EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE PERIOD ENDED
NOVEMBER 30, 1995 MAY 31, 1995
------------------------- ---------------------------
(UNAUDITED)
INSTITUTIONAL RETAIL INSTITUTIONAL(3) RETAIL(3)
------------- ------ ---------------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $11.01 $11.01 $10.00 $10.26
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................................... .18 .17 .34 .26
Net gains on securities (realized and unrealized)............. .91 .91 .94 .75
------- ------- ------- -------
Total from investment operations............................ 1.09 1.08 1.28 1.01
------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income.......................... (.18) (.17) (.27) (.26)
------- ------- ------- -------
Total distributions......................................... (.18) (.17) (.27) (.26)
------- ------- ------- -------
Net asset value, end of period.................................. $11.92 $11.92 $11.01 $11.01
======= ======= ======= =======
TOTAL RETURN.................................................... 20.93%(4) 20.68%(4,5) 14.34%(4) 13.18%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's).......................... $48,425 $213 $36,194 $125
Ratio of expenses to average net assets....................... 1.08%(1,4) 1.33%(2,4) .99%(1,4) 1.41%(2,4)
Ratio of net investment income to average net assets.......... 3.29%(1,4) 3.06%(2,4) 3.87%(1,4) 3.45%(2,4)
Portfolio turnover rate....................................... 34% 34% 12% 12%
</TABLE>
(1) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Institutional class for the period ended
November 30, 1995 would have been 1.11% and 3.26%, respectively. The
operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, Administrator, and Custodian for the
Institutional class for the period ended May 31, 1995 would have been 1.21%
and 3.66%, respectively.
(2) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Retail class for the period ended
November 30, 1995 would have been 1.35% and 3.04%, respectively. The
operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, dministrator, and Custodian for
Retail class for the period ended May 31, 1995 would have been
% and 3.40%, respectively.
(3) Institutional and Retail classes commenced operations on July 1, 1994
and August 22, 1994, respectively.
(4) Annualized.
(5) Total return excludes sales load.
See Accompanying Notes
29
<PAGE> 157
[ARROW LOGO]
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Armada Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. Effective May
22, 1995, the Trust changed its name from NCC Funds to Armada Funds. The Trust
was organized as a Massachusetts business trust on January 28, 1986. The Trust
is a series fund which is authorized to issue twenty-four classes of shares of
beneficial interest, each of which evidences an interest in one of twelve
investment funds:
Money Market Fund (Class A "Institutional" shares and Class A-Special Series 1
"Retail" shares),
Government Fund (Class B "Institutional" shares and Class B-Special Series 1
"Retail" shares),
Treasury Fund (Class C "Institutional" shares and Class C-Special Series 1
"Retail" shares),
Tax Exempt Fund (Class D "Institutional" shares and Class D-Special Series 1
"Retail" shares),
Equity Fund (Class H "Institutional" shares and Class H-Special Series 1
"Retail" shares),
Fixed Income Fund, (Class I "Institutional" shares and Class I-Special Series
1 "Retail" shares),
Ohio Tax Exempt Fund (Class K "Institutional" shares and Class K-Special
Series 1 "Retail" shares),
National Tax Exempt Fund (Class L "Institutional" shares and Class L-Special
Series 1 "Retail" shares),
Equity Income Fund (Class M "Institutional" shares and Class M-Special Series
1 "Retail" Shares),
Mid Cap Regional Fund (Class N "Institutional" shares and Class N-Special
Series 1 "Retail" shares),
Enhanced Income Fund (Class O "Institutional" shares and Class O-Special
Series 1 "Retail" shares), and
Total Return Advantage Fund (Class P "Institutional" shares and Class
P-Special Series 1 "Retail" shares).
As of the date of this report, the National Tax Exempt Fund has not commenced
operations.
The following is a summary of significant accounting policies followed by the
Equity, Equity Income, and Mid Cap Regional Funds (the "Funds") in preparation
of their financial statements.
PORTFOLIO VALUATION: Investments in securities traded on an exchange are
valued at the last quoted sale price for a given day, or if a sale is not
reported for that day, at the mean between the most recent quoted bid and asked
prices. Unlisted securities for which market quotations are readily available
are valued at the mean between the most recent bid and asked prices. Securities
for which no quotations are readily available are valued at the fair value
determined in good faith pursuant to Board of Trustees guidelines.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on the trade date. Realized gains and losses on investments sold are
recorded on the identified cost basis. Interest income is accrued on a daily
basis. Dividends are recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income of the Equity and Equity Income Funds are declared and paid quarterly;
dividends from the net investment income of the Mid Cap Regional Fund are
declared and paid annually. With respect to each Fund, net income for dividend
purposes consists of dividends, interest income, and discount earned (including
both original issue and market discount), less amortization of any market
premium and accrued expenses. Any net realized capital gains will be distributed
at least annually.
31
<PAGE> 158
[ARROW LOGO] NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
FEDERAL INCOME TAXES: Each of the Funds is classified as a separate taxable
entity for Federal income tax purposes. Each of the Funds intends to qualify as
a separate "regulated investment company" under the Internal Revenue Code and
makes the requisite distributions to its shareholders that will be sufficient to
relieve it from Federal income tax and Federal excise tax. Therefore, no Federal
tax provision is required. To the extent distributions from net investment
income and realized net capital gains exceed amounts reported in the financial
statements, such amounts are reported separately.
As of May 31, 1995, the Equity and Equity Income Funds had available capital
loss carryforwards amounting to $117,954 and $93,238, respectively. If not
utilized such amounts will expire by the year 2002.
ORGANIZATIONAL COSTS: The Trust bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
shares for distribution under Federal and state securities regulations. All
organization expenses are being amortized on the straight-line method over a
period of five years from the date of commencement of operations.
2. INVESTMENT ADVISERS, DISTRIBUTION FEE AND OTHER RELATED PARTY TRANSACTIONS
Fees paid by the Trust pursuant to the Advisory Agreements with National City
Bank, National City Bank, Columbus and National City Bank, Kentucky
(collectively, the "Adviser" or "Advisers"), wholly-owned subsidiaries of
National City Corporation, are payable monthly based on the annual rate of .75%
of each Fund's average daily net assets. For the period ended November 30, 1995,
the Advisers have earned fees as follows:
<TABLE>
<S> <C>
Mid Cap Regional Fund........................ $252,610
Equity Fund.................................. 517,967
Equity Income Fund........................... 159,043
</TABLE>
At November 30, 1995, advisory fees accrued and unpaid amounted to:
<TABLE>
<S> <C>
Mid Cap Regional Fund......................... $45,571
Equity Fund................................... 89,168
Equity Income Fund............................ 58,168
</TABLE>
Fees paid by the Trust, under a Shareholder Servicing Plan (the "Plan") to
NatCity Investments, Inc. and National City Investments Corporation, both
wholly-owned subsidiaries of National City Corporation, are payable monthly,
based on an aggregate annual rate of up to .25% of the average daily net assets
of the Retail class of the Mid Cap Regional, Equity, and Equity Income Funds.
NatCity Investments, Inc. and National City Investments Corporation earned fees
for the period ended November 30, 1995 in the following amounts:
<TABLE>
<CAPTION>
NATCITY NATIONAL CITY
INVESTMENTS, INC. INVESTMENTS CORPORATION
----------------- -----------------------
<S> <C> <C>
Mid Cap Regional
Fund $261 $4,829
Equity Fund 190 7,093
Equity Income
Fund 2 188
</TABLE>
National City Bank, a wholly-owned subsidiary of National City Corporation,
serves as the Funds' Custodian. For the period ended November 30, 1995, National
City Bank has earned and waived custodian fees representing $8,520, $17,266, and
$5,328, for the Mid Cap Regional, Equity, and the Equity Income Funds,
respectively.
440 Financial Distributors, Inc., a wholly-owned subsidiary of The Shareholder
Services Group, Inc., and an indirect wholly-owned subsidiary of First
31
<PAGE> 159
[ARROW LOGO] NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Data Corp. ("Distributor"), serves as the Trust's Distributor. Under the Trust's
Distribution Agreement and related Distribution Plan adopted pursuant to Rule
12b-1 of the Investment Company Act of 1940, each Fund reimburses the
Distributor monthly for the direct and indirect expenses incurred by the
Distributor in providing Fund advertising, marketing, prospectus printing and
other distribution services up to a maximum of .10% per annum of the average
daily net assets of each Fund, inclusive of an annual distribution fee of
$250,000 which is payable monthly and accrued daily among the investment funds
with respect to which the Distributor is distributing shares.
Each Trustee receives an annual fee of $6,000 plus $2,000 for each Board
meeting attended and reimbursement of out-of-pocket expenses. The Chairman of
the Board receives an additional $2,000 per annum for services in such capacity.
Such fees are paid for services rendered to all of the Funds and are allocated
accordingly. No person who is an officer, director, trustee, or employee of the
Investment Advisers, Administrator, Distributor, or of any parent or subsidiary
thereof, who serves as an officer, trustee, or employee of the Trust receives
any compensation from the Trust.
Expenses for the period ended November 30, 1995 include legal fees paid to
Drinker Biddle & Reath. A partner of that firm is Secretary of the Trust.
3. PURCHASES AND SALES OF SECURITIES
During the period ended November 30, 1995, purchases and sales of securities,
other than short-term investments or U.S. Government obligations, aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C> <C>
Mid Cap Regional Fund $59,798,993 $39,944,877
Equity Fund 59,734,407 50,512,049
Equity Income Fund 23,492,602 14,267,587
</TABLE>
4. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Board of Trustees to issue an
unlimited number of shares of beneficial interest and to classify or reclassify
any unissued shares of the Trust into one or more additional classes of shares
and to classify or reclassify any class of shares into one or more series of
shares. Transactions in capital shares are summarized on the following page for
the Mid Cap Regional, Equity, and Equity Income Funds.
32
<PAGE> 160
[ARROW LOGO]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995
--------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
--------------- ----------
SHARES VALUE SHARES VALUE
--------- ----------- -------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
MID CAP REGIONAL FUND
Shares sold.................................................... 1,497,787 $17,743,564 95,122 $1,107,974
Shares reinvested.............................................. 0 0 0 0
Shares repurchased............................................. (210,433) (2,508,957) (40,900) (482,460)
--------- ----------- -------- ----------
Net increase................................................... 1,287,354 $15,234,607 54,222 $ 625,514
========= =========== ======== ==========
EQUITY FUND
Shares sold.................................................... 729,814 $11,539,882 7,836 $ 124,268
Shares reinvested.............................................. 23,396 366,984 1,738 27,283
Shares repurchased............................................. (345,807) (5,483,649) (60,461) (947,447)
--------- ----------- -------- ----------
Net increase (decrease)........................................ 407,403 $ 6,423,217 (50,887) $ (795,896)
========= =========== ======== ==========
EQUITY INCOME FUND
Shares sold.................................................... 849,652 $ 9,619,081 8,597 $ 97,766
Shares reinvested.............................................. 34,834 393,877 200 2,263
Shares repurchased............................................. (109,990) (1,265,402) (2,226) (25,186)
--------- ----------- -------- ----------
Net increase................................................... 774,496 $ 8,747,556 6,571 $ 74,843
========= =========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1995
----------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
--------------------------- -------------------------
SHARES VALUE SHARES VALUE
--------- ------------ -------- -----------
<S> <C> <C> <C> <C>
MID CAP REGIONAL FUND
Shares sold.................................................. 4,561,720 $ 47,581,271 365,213 $ 3,858,435
Shares reinvested............................................ 14,908 158,322 1,456 15,289
Shares repurchased........................................... (97,553) (1,057,490) (49,929) (530,437)
--------- ------------ -------- -----------
Net increase................................................. 4,479,075 $ 46,682,103 316,740 $ 3,343,287
========= ============ ======== ===========
EQUITY FUND
Shares sold.................................................. 2,204,373 $ 30,453,279 29,328 $ 408,345
Shares reinvested............................................ 95,010 1,289,744 9,835 133,458
Shares repurchased........................................... (818,100) (11,561,697) (184,733) (2,543,339)
--------- ------------ -------- -----------
Net increase (decrease)...................................... 1,481,283 $ 20,181,326 (145,570) $(2,001,536)
========= ============ ======== ===========
EQUITY INCOME FUND
Shares sold.................................................. 3,319,667 $ 33,658,233 11,161 $ 114,046
Shares reinvested............................................ 55,277 562,440 187 1,933
Shares repurchased........................................... (88,575) (914,369) (34) (350)
--------- ------------ -------- -----------
Net increase................................................. 3,286,369 $ 33,306,304 11,314 $ 115,629
========= ============ ======== ===========
</TABLE>
33
<PAGE> 161
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND SHARES (000)
======================================================
<S> <C> <C>
COMMON STOCK (91.4%)
- ------------------------------------------------------
AEROSPACE (3.7%)
Allied Signal 20,900 $ 888
Boeing 3,700 243
Textron 3,800 261
United Technologies 7,400 657
---------------------------------------------------
Total Aerospace 2,049
-------
AUTOMOTIVE (1.3%)
General Motors 10,900 477
Goodyear Tire & Rubber 6,000 228
---------------------------------------------------
Total Automotive 705
-------
BANKS (3.9%)
Bank of Boston 4,000 178
BankAmerica 1,700 98
Chemical Banking 12,300 700
Mellon Bank 14,400 722
Midlantic 5,800 307
Summit Bancorporation
of New Jersey 5,000 142
---------------------------------------------------
Total Banks 2,147
-------
BUILDING (0.8%)
American Standard* 5,700 152
Foster Wheeler 8,100 304
---------------------------------------------------
Total Building 456
-------
CHEMICALS (2.7%)
Air Products & Chemical 8,200 423
E.I. Du Pont de Nemours 14,600 911
Praxair 6,000 162
---------------------------------------------------
Total Chemicals 1,496
-------
ELECTRICAL EQUIPMENT (4.2%)
Emerson Electric 10,900 777
General Electric 16,000 1,011
General Signal 17,500 558
---------------------------------------------------
Total Electrical Equipment 2,346
-------
ENERGY (5.6%)
Amoco 11,700 748
Atlantic Richfield 2,900 310
Chevron 6,400 299
Duracell International 1,300 68
Halliburton 4,800 199
Mobil 5,400 544
Schlumberger 4,600 286
Sonat 900 26
Union Texas Petroleum 11,000 198
Unocal 15,500 407
---------------------------------------------------
Total Energy 3,085
-------
ENVIRONMENTAL SERVICES (3.2%)
Browning Ferris Industries 9,600 280
Molton Metal Technology* 14,000 539
Wheelabrator Technologies 23,000 331
WMX Technologies 21,600 607
---------------------------------------------------
Total Environmental Services 1,757
-------
FINANCIAL SERVICES (1.1%)
Federal Home Loan Mortgage 9,100 630
---------------------------------------------------
Total Financial Services 630
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 11
<PAGE> 162
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (cont'd) SHARES (000)
======================================================
<S> <C> <C>
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS (9.9%)
Bush Boake Allen* 5,500 $ 151
Coca Cola 7,300 525
CPC International 4,200 279
Gillette 5,700 276
Kellogg 4,100 296
PepsiCo 5,500 290
Philip Morris Companies 14,900 1,257
Procter & Gamble 9,000 729
RJR Nabisco Holdings 5,160 159
Sara Lee 18,200 535
Sunbeam-Oster 15,200 228
Sysco 12,800 389
UST 11,500 345
---------------------------------------------------
Total Food, Beverage,
Tobacco & Household Products 5,459
-------
INSURANCE (5.4%)
American General 7,000 230
American International Group 7,350 620
Chubb 6,800 611
General Re 4,900 710
Travelers 16,000 808
---------------------------------------------------
Total Insurance 2,979
-------
LEISURE (3.3%)
Autotote, Cl A* 16,600 50
Carnival Cruise Lines, Cl A 31,600 734
Disney 6,100 352
Marriott International 6,500 240
Mattel 15,000 431
---------------------------------------------------
Total Leisure 1,807
-------
MEDIA (3.9%)
American Greetings, Cl A 5,000 158
Capital Cities ABC 5,600 664
Tele-Communications, Cl A* 41,100 699
Viacom, Cl B Non-Voting* 13,300 665
---------------------------------------------------
Total Media 2,186
-------
MEDICAL PRODUCTS & SERVICES (12.2%)
Abbott Laboratories 16,400 652
American Home Products 2,000 177
Amgen* 4,100 197
Bristol Myers Squibb 4,700 358
Columbia/HCA Healthcare 22,620 1,111
Fisher Scientific 4,400 138
Healthsouth Rehabilitation* 10,000 261
Johnson & Johnson 7,400 603
Merck 15,900 914
Pfizer 8,500 488
Pharmacia AB ADR 2,400 84
Schering Plough 6,600 354
Smith Kline Beecham PLC 20,000 1,038
Tenet Healthcare* 18,500 331
Warner Lambert 900 77
---------------------------------------------------
Total Medical Products & Services 6,783
-------
METALS & MINING (0.5%)
Alumax* 600 18
Worthington Industries 15,000 249
---------------------------------------------------
Total Metals & Mining 267
-------
MISCELLANEOUS (3.3%)
ITT 8,000 980
Tyco International 13,800 838
---------------------------------------------------
Total Miscellaneous 1,818
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
12 October 31, 1995
<PAGE> 163
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (cont'd) SHARES (000)
======================================================
<S> <C> <C>
PAPER & FOREST PRODUCTS (0.9%)
Georgia Pacific 5,900 $ 487
---------------------------------------------------
Total Paper & Forest Products 487
-------
PAPER & PAPER PRODUCTS (0.5%)
Willamette Industries 4,500 261
---------------------------------------------------
Total Paper & Paper Products 261
-------
RAILROADS (1.0%)
Union Pacific 8,800 575
---------------------------------------------------
Total Railroads 575
-------
RETAIL (8.5%)
Albertson's 6,500 216
American Stores 8,000 239
Federated Department Stores* 29,800 756
Home Depot 27,700 1,032
Intimate Brands, Cl A* 10,500 176
McDonalds 17,500 718
Newell 8,300 200
Office Depot* 12,800 366
Wal-Mart Stores 30,900 668
Wendy's International 18,000 358
---------------------------------------------------
Total Retail 4,729
-------
TECHNOLOGY (13.6%)
AMP 16,800 659
Arrow Electronics* 6,200 315
Bell Howell* 4,500 113
DSC Communications* 900 33
Eastman Kodak 9,700 607
General Motors, Cl E 11,600 547
Intel 12,200 852
International Business Machines 8,400 817
Microsoft* 8,200 820
Motorola 16,400 1,076
</TABLE>
<TABLE>
<CAPTION>
SHARES/ MARKET
FACE AMOUNT VALUE
(000) (000)
======================================================
<S> <C> <C>
Oracle Systems* 14,500 $ 633
Scientific-Atlanta 32,500 402
Xerox 4,900 636
---------------------------------------------------
Total Technology 7,510
--------
TELEPHONES &
TELECOMMUNICATION (1.9%)
AT&T 16,700 1,069
---------------------------------------------------
Total Telephones &
Telecommunication 1,069
--------
- ------------------------------------------------------
TOTAL COMMON STOCK
(Cost $46,003) 50,601
- ------------------------------------------------------
PREFERRED STOCKS (0.3%)
- ------------------------------------------------------
PRINTING & PUBLISHING (0.3%)
Time Warner Financing,
Convertible to 1.0 Shares
of Hasbro 6,000 192
---------------------------------------------------
Total Printing & Publishing 192
--------
- ------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $186) 192
- ------------------------------------------------------
REPURCHASE AGREEMENT (11.1%)
- ------------------------------------------------------
Paine Webber
5.88%, dated 10/31/95,
matures 11/01/95,
repurchase price $6,163,504
(collateralized by various U.S.
Government mortgage-backed
securities, total par value
$17,930,362, 0.00% - 7.00%:
total market value $6,347,496) 6,162 6,162
- ------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $6,162) 6,162
- ------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 13
<PAGE> 164
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (cont'd) (000)
======================================================
<S> <C>
TOTAL INVESTMENTS (102.8%)
(Cost $52,351) $ 56,955
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-2.8%) (1,534)
- ------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001
par value - 2 billion authorized)
based on 4,612,149 outstanding
shares of beneficial interest 46,368
Accumulated net realized gain
on investments 4,449
Net unrealized appreciation on investments 4,604
- ------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $ 55,421
- ------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $ 12.02
Maximum Sales Charge of 4.00% 0.50
--------
OFFERING PRICE PER SHARE - CLASS A(+) $ 12.52
========
- ------------------------------------------------------
</TABLE>
- ----------
* Non-income producing security
+ The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
ADR American Depository Receipt
PLC Public Limited Corporation
<TABLE>
<CAPTION>
INTERMEDIATE FACE MARKET
GOVERNMENT AMOUNT VALUE
SECURITIES FUND (000) (000)
- ------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (47.0%)
- ------------------------------------------------------
<S> <C> <C>
FHLMC
5.200%, 11/15/99 $ 500 $ 497
5.250%, 09/15/06 798 782
5.750%, 05/15/07 2,243 2,120
7.500%, 08/01/07 10 10
6.000%, 08/15/07 400 391
6.500%, 12/01/09 TBA 1,000 992
9.000%, 07/15/20 108 110
6.000%, 05/15/21 1,000 972
9.250%, 06/01/23 162 169
7.000%, 05/01/24 1,272 1,263
7.000%, 07/01/25 1,984 1,969
6.500%, 09/01/25 696 677
7.000%, 09/01/25 3,977 3,949
7.000%, 10/01/25 1,990 1,976
FHLMC REMIC
8.000%, 11/15/99 2,000 2,089
5.200%, 09/15/05 500 489
8.000%, 01/15/06 500 518
4.750%, 07/25/11 500 489
6.000%, 06/15/19 500 489
8.700%, 02/15/20 500 515
8.500%, 10/15/20 2,000 2,062
FNMA
6.500%, 03/01/14 455 442
7.567%, 11/01/17 ARM 623 640
9.500%, 05/01/18 211 223
FNMA REMIC
7.000%, 01/25/99 1,250 1,266
6.000%, 03/25/07 1,000 977
7.500%, 08/25/07 1,000 1,054
6.500%, 05/25/15 945 949
6.000%, 11/25/17 400 393
6.000%, 11/25/19 500 495
8.125%, 01/25/20 1,086 1,108
8.250%, 10/25/20 168 170
GNMA
6.500%, 11/15/08 187 186
9.500%, 06/15/09 64 68
9.500%, 07/15/09 64 68
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
14 October 31, 1995
<PAGE> 165
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
INTERMEDIATE FACE MARKET
GOVERNMENT AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- ------------------------------------------------------
<S> <C> <C>
9.500%, 08/15/09 $ 10 $ 11
9.500%, 09/15/09 34 36
9.500%, 10/15/09 137 146
9.000%, 07/15/16 119 125
9.000%, 08/15/16 559 587
9.000%, 10/15/16 207 217
9.000%, 11/15/16 594 625
9.000%, 12/15/16 534 562
9.000%, 03/15/17 694 729
8.000%, 05/15/17 923 951
9.000%, 11/15/17 201 213
9.500%, 06/15/19 425 455
8.500%, 09/15/21 45 47
8.500%, 11/15/21 1,455 1,516
8.500%, 07/15/22 1,323 1,378
7.500%, 08/15/22 25 25
8.500%, 08/15/22 202 210
7.500%, 04/15/23 503 510
7.500%, 05/15/23 493 500
7.000%, 07/20/25 ARM 1,487 1,520
7.500%, 08/15/25 709 719
7.500%, 09/15/25 273 277
7.500%, 10/15/25 995 1,009
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $42,379) 42,935
- ------------------------------------------------------
U.S. TREASURY OBLIGATIONS (43.7%)
- ------------------------------------------------------
United States Treasury Bond
12.000%, 08/15/13 6,000 8,995
United States Treasury Notes
8.500%, 07/15/97 1,000 1,046
6.500%, 08/15/97 4,200 4,261
8.875%, 11/15/97 6,200 6,580
5.625%, 01/31/98 5,000 4,996
5.125%, 11/30/98 1,800 1,771
7.000%, 04/15/99 2,000 2,076
10.750%, 02/15/03 8,000 10,242
- ------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $38,780) 39,967
- ------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (6.4%)
- ------------------------------------------------------
FNMA
5.200%, 04/30/98 3,000 2,944
5.390%, 08/05/98 3,000 2,953
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $5,752) 5,897
- ------------------------------------------------------
REPURCHASE AGREEMENT (3.8%)
- ------------------------------------------------------
J.P. Morgan
5.87%, dated 10/31/95,
matures 11/01/95,
repurchase price $3,449,562
(collateralized by U.S. Treasury Note,
par value $3,387,000,
8.50%, matures 11/15/95:
market value $3,520,161) 3,449 3,449
- ------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $3,449) 3,449
- ------------------------------------------------------
TOTAL INVESTMENTS (100.9%)
(Cost $90,360) 92,248
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES,
NET (-0.9%) (819)
- ------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value - 2 billion
authorized) based on 8,865,082
outstanding shares of
beneficial interest 89,133
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 15
<PAGE> 166
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
INTERMEDIATE MARKET
GOVERNMENT VALUE
SECURITIES FUND (cont'd) (000)
- ------------------------------------------------------
<S> <C>
Accumulated net realized gain on
investments $ 408
Net unrealized appreciation on
investments 1,888
- ------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $ 91,429
- ------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $ 10.31
Maximum Sales Charge of 4.00% 0.43
--------
Offering Price per Share - Class A(+) $ 10.74
========
- ------------------------------------------------------
</TABLE>
- ----------
+ The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
ARM Adjustable Rate Mortgage
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
REMIC Real Estate Mortgage Investment Conduit
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (000) (000)
- ------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (87.8%)
- ------------------------------------------------------
<S> <C> <C>
FHLMC
7.500%, 04/01/00 $ 257 $ 263
7.500%, 10/01/01 79 80
8.000%, 01/15/06 500 518
7.000%, 12/01/09 TBA 1,200 1,210
7.000%, 06/01/23 440 437
7.000%, 03/01/24 223 221
7.000%, 07/01/25 329 327
7.000%, 09/01/25 502 499
FNMA IO
7.000%, 09/25/19 2,444 347
GNMA
7.000%, 10/15/07 339 343
7.000%, 05/15/08 324 328
7.000%, 01/15/09 24 24
7.000%, 02/15/09 171 174
7.000%, 03/15/09 281 284
9.000%, 05/15/09 GPM 982 1,026
6.500%, 06/15/09 49 49
9.000%, 06/15/09 GPM 108 113
9.500%, 07/15/09 206 219
9.500%, 08/15/09 518 550
9.500%, 09/15/09 33 35
9.500%, 10/15/09 6 7
6.500%, 11/01/09 TBA 1,000 997
9.500%, 11/15/09 54 58
10.000%, 11/15/09 383 416
10.000%, 12/15/09 32 35
11.500%, 01/15/13 35 39
11.500%, 02/15/13 71 81
11.500%, 03/15/13 29 33
11.500%, 05/15/13 90 102
7.500%, 06/15/13 314 319
11.500%, 06/15/13 92 104
11.500%, 07/15/13 23 26
11.500%, 08/15/13 12 13
11.500%, 06/15/15 58 65
11.250%, 08/15/15 257 282
11.500%, 10/15/15 44 50
9.500%, 12/15/15 12 13
11.500%, 01/15/16 18 21
9.500%, 03/15/16 172 184
9.000%, 06/15/16 2,336 2,455
9.000%, 07/15/16 18 19
9.500%, 07/15/16 7 7
9.000%, 08/15/16 19 20
9.500%, 08/15/16 171 182
9.000%, 08/20/16 2,300 2,394
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
16 October 31, 1995
<PAGE> 167
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- ------------------------------------------------------
<S> <C> <C>
10.250%, 08/20/16 GPM $ 31 $ 33
9.000%, 09/15/16 19 20
9.500%, 09/15/16 23 25
9.500%, 10/15/16 19 20
9.500%, 11/15/16 78 84
9.000%, 12/15/16 66 70
8.500%, 01/15/17 166 172
9.500%, 01/15/17 19 20
8.500%, 02/15/17 230 240
9.000%, 02/15/17 16 17
8.000%, 03/15/17 17 17
8.500%, 03/15/17 244 254
8.000%, 04/15/17 118 122
8.500%, 04/15/17 177 184
8.000%, 05/15/17 84 87
8.500%, 05/15/17 175 182
9.500%, 05/15/17 28 30
9.000%, 06/15/17 489 514
8.000%, 07/15/17 106 109
9.500%, 07/15/17 60 64
9.000%, 08/15/17 332 349
9.500%, 08/15/17 183 195
9.500%, 09/15/17 136 145
9.500%, 10/15/17 258 276
8.500%, 11/15/17 633 662
9.500%, 12/15/17 28 30
9.500%, 03/15/18 36 38
10.250%, 03/20/18 GPM 157 168
9.500%, 04/15/18 36 39
9.500%, 06/15/18 88 94
9.500%, 07/15/18 15 16
9.500%, 08/15/18 42 45
9.500%, 09/15/18 12 13
10.250%, 09/20/18 GPM 191 205
9.500%, 10/15/18 22 23
9.500%, 11/15/18 15 16
9.500%, 12/15/18 89 95
9.500%, 01/15/19 40 43
9.500%, 03/15/19 10 11
9.500%, 05/15/19 37 39
9.500%, 07/15/19 12 13
9.500%, 09/15/19 25 27
9.500%, 10/15/19 40 43
9.500%, 12/15/19 29 31
9.500%, 06/15/20 21 22
9.000%, 07/15/20 262 275
9.500%, 07/15/20 32 35
9.500%, 08/15/20 333 356
9.500%, 10/15/20 58 62
9.500%, 11/15/20 271 290
9.500%, 12/15/20 131 140
8.500%, 04/15/21 441 459
8.500%, 05/15/21 43 44
8.500%, 06/15/21 431 449
9.000%, 06/15/21 476 500
8.500%, 07/15/21 77 80
9.500%, 07/15/21 465 497
8.500%, 09/15/21 725 755
8.500%, 10/15/21 96 100
8.500%, 11/15/21 796 829
8.500%, 12/15/21 1,095 1,141
8.500%, 02/15/22 376 392
8.500%, 03/01/22 190 198
8.500%, 03/15/22 264 275
8.500%, 05/15/22 357 372
8.500%, 08/15/22 390 407
8.500%, 09/15/22 539 562
7.000%, 10/15/22 26 26
7.000%, 11/15/22 GPM 469 467
8.500%, 11/15/22 312 325
7.500%, 02/15/23 394 400
7.000%, 04/15/23 29 29
7.500%, 04/15/23 34 34
7.500%, 06/15/23 473 479
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 17
<PAGE> 168
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- ------------------------------------------------------
<S> <C> <C>
7.000%, 07/15/23 $ 497 $ 494
7.500%, 07/15/23 989 1,003
7.000%, 08/15/23 926 921
7.500%, 08/15/23 206 209
6.500%, 09/15/23 147 143
7.000%, 09/15/23 333 331
7.500%, 09/15/23 117 119
6.500%, 10/15/23 409 397
7.000%, 10/15/23 949 944
7.500%, 10/15/23 1,878 1,905
7.000%, 11/15/23 87 87
6.000%, 12/20/23 455 428
7.000%, 01/15/24 695 691
7.500%, 01/15/24 135 137
7.000%, 02/15/24 1,472 1,463
7.000%, 03/15/24 41 41
7.500%, 03/15/24 319 324
7.000%, 05/15/24 660 657
7.500%, 05/15/24 384 389
7.000%, 08/15/25 44 44
7.000%, 09/15/25 1,706 1,696
7.500%, 09/15/25 2,469 2,504
7.500%, 10/15/25 2,713 2,752
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS 47,528
(Cost $46,953)
- ------------------------------------------------------
U.S. TREASURY OBLIGATION (10.5%)
- ------------------------------------------------------
United States Treasury Bond
12.000%, 08/15/13 3,800 5,697
- ------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATION
(Cost $5,263) 5,697
- ------------------------------------------------------
REPURCHASE AGREEMENT (3.2%)
- ------------------------------------------------------
Aubrey G. Lanston
5.875%, dated 10/31/95,
matures 11/01/95,
repurchase price $1,739,284
(collateralized by U.S.
Treasury Bill, par value
$1,870,000, matures 10/17/96,
market value $1,773,275) 1,739 1,739
- ------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,739) 1,739
- ------------------------------------------------------
TOTAL INVESTMENTS (101.5%)
(Cost $53,955) 54,964
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES,
NET (-1.5%) (834)
- ------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value - 2 billion
authorized) based on 5,175,228
outstanding shares of
beneficial interest 52,052
Accumulated net realized
gain on investments 1,074
Net unrealized appreciation
on investments 1,009
Distributions in excess of net
investment income (5)
- ------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $54,130
- ------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $ 10.46
Maximum Sales Charge of 4.00% 0.44
----
OFFERING PRICE PER SHARE - CLASS A(+) $ 10.90
-------
- ------------------------------------------------------
</TABLE>
- ----------
+ The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
FHLMC Federal Home Loan Mortgage Association
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
GPM Graduated Payment Mortgage
IO Interest Only
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
The accompanying notes are an integral part of the financial statements.
================================================================================
18 October 31, 1995
<PAGE> 169
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (000) (000)
========================================================
MUNICIPAL BONDS (99.0%)
- --------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA (99.0%)
Allegheny County, Pennsylvania
Children's Hospital of Pittsburgh,
Ser 85B, MBIA, RB
3.900%, 11/07/95 (A) $ 200 $ 200
Allegheny County, Pennsylvania
Hospital Development Authority
Magee Woman's Hospital
Project, Ser O, RB
10.125%, 10/01/02 125 153
Bradford, Pennsylvania
School District, FGIC, GO
5.250%, 10/01/07 1,000 1,006
Bucks County, Pennsylvania
Middletown Township Special
Obligation, Escrowed to Maturity
6.100%, 10/01/00 385 411
Butler County, Pennsylvania
Sewer Authority, RB,
Prerefunded 01/01/04 at 100
7.250%, 07/01/12 100 111
Danville, Pennsylvania
School District, MBIA, GO
6.650%, 05/01/04 100 101
Dauphin County, Pennsylvania
General Authority Health
Center, RB
5.150%, 01/01/97 1,000 1,005
Delaware County, Pennsylvania
Industrial Development Authority
Airport Facilities United Parcel
Services Project, Ser 85, RB
3.800%, 11/07/95 (A) 300 300
Delaware County, Pennsylvania
Industrial Development Authority
BP Exploration & Oil Project, RB
4.000%, 11/07/95 (A) 100 100
Delaware County, Pennsylvania, GO
4.500%, 10/01/01 500 504
Delaware River, Pennsylvania
Port Authority PA & NJ
bridges, AMBAC, RB
7.375%, 01/01/07 1,500 1,665
Elizabeth Forward, Pennsylvania
School District, MBIA, GO,
Prerefunded 05/01/96 at 100
8.000%, 05/01/02 1,000 1,020
Erie County, Pennsylvania
Prison Authority, MBIA, RB,
Prerefunded 11/01/01 at 100
6.600%, 11/01/02 1,000 1,106
Hampton Township, Pennsylvania
School District, Ser A, FGIC, GO,
Prerefunded 02/15/01 at 100
6.900%, 02/15/10 1,000 1,109
Langhorne, Pennsylvania
Saint Mary's Hospital Authority
Franciscan Health Systems,
Ser C, RB
3.800%, 11/07/95 (A) (B) 800 800
Lehigh County, Pennsylvania,
Ser A, AMBAC, GO,
Prerefunded 10/15/99 at 100
6.000%, 10/15/11 1,250 1,323
Monroeville, Pennsylvania Hospital
Authority East Suburban
Health Center Project, RB,
Prerefunded 07/01/04 at 100
7.600%, 07/01/08 780 902
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 19
<PAGE> 170
STAEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (cont'd) (000) (000)
========================================================
<S> <C> <C>
Montgomery County, Pennsylvania
Hospital Authority Suburban
General Hospital Project, RB
7.750%, 05/01/02 $ 100 $ 112
Mount Lebanon, Pennsylvania
Hospital Authority, FGIC, RB,
Prerefunded 01/01/96 at 102
9.125%, 07/01/06 1,500 1,542
Northampton County, Pennsylvania
Higher Education Authority
Lehigh University Project, RB
5.500%, 09/01/98 1,030 1,063
Pennsylvania Infrastructure
Investment Authority Pennvest,
Ser 94, RB
3.900%, 11/07/95 (A) (B) 100 100
Pennsylvania Infrastructure
Investment Authority Pennvest,
Subser B, RB
6.450%, 09/01/04 1,500 1,665
Pennsylvania State Certificates
of Participation
4.000%, 12/01/95 450 450
Pennsylvania State Higher
Educational Facilities Authority
University of Pennsylvania Project,
Ser A, RB
6.500%, 09/01/04 250 281
5.550%, 09/01/09 1,300 1,326
Pennsylvania State Intergovern-
mental Co-op Authority
Special Tax City of Philadelphia
Funding Project, RB,
Prerefunded 06/15/02 at 100
6.800%, 06/15/22 1,500 1,684
Pennsylvania State Turnpike
Commission, Ser D, FGIC, RB,
Escrowed to Maturity
6.700%, 12/01/97 1,100 1,165
Pennsylvania State Turnpike
Commission, Ser K, RB,
Escrowed to Maturity
7.250%, 12/01/99 1,230 1,362
Pennsylvania State Turnpike
Commission, Ser O, FGIC, RB
5.250%, 12/01/01 1,010 1,049
Pennsylvania State, Ser 1, GO
6.200%, 09/15/04 900 974
Pennsylvania State, Ser 2, GO
4.750%, 06/15/98 565 571
Philadelphia, Pennsylvania Gas
Works, Ser 13, RB,
Prerefunded 06/15/01 at 102
7.700%, 06/15/11 460 538
Philadelphia, Pennsylvania Gas
Works, Ser 14, RB
6.250%, 07/01/08 300 319
Philadelphia, Pennsylvania
Graduate Hospital Project, RB
7.000%, 07/01/10 290 324
Philadelphia, Pennsylvania
Hospital & Higher Educational
Facilities Authority Children's
Hospital Project, Ser A, RB,
Prerefunded 07/01/97 at 100
7.000%, 07/01/15 1,000 1,046
Philadelphia, Pennsylvania
Hospital & Higher Educational
Facilities Authority Children's
Hospital Project, Ser A, RB,
Prerefunded 02/15/02 at 102
6.500%, 02/15/21 200 223
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
20 October 31, 1995
<PAGE> 171
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (cont'd) (000) (000)
=========================================================
<S> <C> <C>
Philadelphia, Pennsylvania Water
& Waste Authority, MBIA, RB
5.500%, 06/15/07 $ 1,500 $ 1,556
Pittsburgh & Allegheny County,
Pennsylvania Auditorium
Authority, RB
6.400%, 12/01/01 800 801
Pittsburgh, Pennsylvania Water
& Sewer Authority, Ser A,
FGIC, RB, Escrowed to Maturity
6.000%, 09/01/97 1,000 1,036
Pittsburgh, Pennsylvania,
Ser A, MBIA, GO
5.500%, 09/01/06 955 991
Schuylkill County, Pennsylvania
Industrial Development Authority
Northeastern Power Project, RB
4.000%, 11/07/95 (A) (B) 300 300
Schuylkill County, Pennsylvania
Industrial Development Authority
Westwood Energy Project, RB
4.200%, 11/07/95 (A) (B) 200 200
Scranton-Lackawanna, Pennsylvania
Health & Welfare Authority, RB,
Escrowed to Maturity
6.625%, 07/01/09 570 630
Seneca Valley, Pennsylvania School
District, Ser A, FGIC, GO
5.700%, 07/01/06 1,000 1,038
Southeastern Pennsylvania
Transportation Authority Lease
Project, RB
5.750%, 12/01/04 775 776
Swarthmore Borough, Pennsylvania
College Authority, RB
6.000%, 09/15/06 855 917
Tyrone, Pennsylvania School
District, MBIA, GO
5.700%, 09/15/08 1,250 1,269
Union City, Pennsylvania Higher
Educational Facilities Financing
Authority Bucknell University
Project, MBIA, RB
6.200%, 04/01/06 1,000 1,061
- ---------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $37,226) 38,185
- ---------------------------------------------------------
TOTAL INVESTMENTS (99.0%)
(Cost $37,226) 38,185
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (1.0%) 371
- ---------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value -- 2 billion
authorized) based on 3,762,329
outstanding shares of beneficial
interest 37,596
Net unrealized appreciation
on investments 959
Undistributed net
investment income 1
- ---------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $38,556
- ---------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 21
<PAGE> 172
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
PENNSYLVANIA VALUE
MUNICIPAL BOND FUND (cont'd) (000)
======================================================
<S> <C>
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.25
Maximum Sales Charge of 4.00% 0.43
------
OFFERING PRICE PER SHARE -- CLASS A(+) $10.68
- ------------------------------------------------------
</TABLE>
- ----------------
+ This offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
(A) Floating Rate Instrument with Demand Features. Rate reflected on the
Statement of Net Assets is the rate in effect on October 31, 1995. The
date shown is the longer of the reset date or the demand date.
(B) Security is backed by a letter of credit.
AMBAC American Municipal Bond Assurance Company
FGIC Financial Guaranty Insurance Company
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ------------------------------------------------------
COMMERCIAL PAPER (80.7%)
- ------------------------------------------------------
<S> <C> <C>
American Express Credit
5.700%, 12/11/95 $5,000 $4,968
5.640%, 03/13/96 5,000 4,896
American General Finance
5.690%, 01/30/96 3,000 2,957
5.650%, 02/09/96 5,000 4,922
American Home Products
5.740%, 11/09/95 3,000 2,996
5.720%, 01/30/96 5,000 4,929
5.720%, 02/09/96 1,000 984
Associates Corporation
of North America
5.710%, 11/15/95 4,000 3,991
5.680%, 02/12/96 5,000 4,919
Avco Financial Services
5.730%, 11/16/95 5,000 4,988
5.750%, 01/25/96 4,000 3,946
Bear Stearns Companies
5.700%, 11/13/95 3,000 2,994
5.720%, 11/20/95 5,000 4,985
Beneficial
5.650%, 12/12/95 8,000 7,949
Chase Manhattan
5.720%, 11/17/95 8,000 7,980
CIESCO
5.650%, 11/22/95 6,450 6,429
5.630%, 02/29/96 4,000 3,925
CIT Group Holdings
5.680%, 12/06/95 4,000 3,978
5.650%, 02/12/96 2,000 1,968
Clipper Receivables
5.750%, 11/06/95 5,000 4,996
Coca-Cola Enterprises
5.900%, 11/03/95 3,500 3,499
5.750%, 12/13/95 4,000 3,973
CSW Credit
5.710%, 11/15/95 3,000 2,993
Delaware Funding
5.660%, 11/20/95 5,056 5,041
Ford Motor Credit
5.700%, 11/20/95 8,000 7,976
5.680%, 02/09/96 2,000 1,968
General Electric Capital
5.590%, 03/01/96 4,000 3,925
General Motors Acceptance
5.760%, 01/23/96 5,000 4,934
5.750%, 02/16/96 4,000 3,932
Household Finance
5.700%, 01/31/96 8,000 7,885
ITT Hartford Group
5.660%, 12/06/95 2,699 2,684
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
22 October 31, 1995
<PAGE> 173
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- ------------------------------------------------------
<S> <C> <C>
John Deere Capital
5.680%, 11/21/95 $8,000 $ 7,975
Merrill Lynch
5.700%, 11/16/95 8,000 7,979
National Fuel Gas
5.770%, 01/22/96 5,000 4,934
Nationsbanc
5.635%, 04/03/96 4,000 3,904
New Center Asset Trust
5.780%, 11/30/95 4,000 3,981
Norwest Corporation
5.660%, 11/20/95 5,000 4,985
5.690%, 11/30/95 2,000 1,991
Philip Morris
5.730%, 11/09/95 5,000 4,994
PNC Funding
5.770%, 02/05/96 8,000 7,877
Preferred Receivables Funding
5.750%, 11/29/95 2,815 2,802
5.730%, 01/25/96 5,000 4,932
Prudential Funding
5.720%, 11/14/95 3,000 2,994
5.680%, 11/15/95 5,000 4,989
Puerto Rico Government
Development Bank
5.700%, 11/16/95 5,000 4,988
Riverwood Funding
5.730%, 11/07/95 5,000 4,995
5.730%, 11/14/95 3,495 3,488
Sears Roebuck Acceptance
5.720%, 11/10/95 4,000 3,994
5.700%, 02/13/96 2,000 1,967
Warner-Lambert
5.670%, 12/07/95 3,500 3,480
- ------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $225,759) 225,759
- ------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION (0.2%)
- ------------------------------------------------------
FNMA
5.945%, 11/13/95 665 664
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATION (Cost $664) 664
- ------------------------------------------------------
FLOATING RATE INSTRUMENTS (7.5%)
- ------------------------------------------------------
Corestates Capital
5.850%, 01/05/96 (A) 3,000 3,000
First Bank of South Dakota
5.855%, 05/06/96 (A) 6,000 5,999
SMM Trust, 1995-I
5.856%, 05/29/96 (A) 9,000 8,999
South Trust Bank of Alabama
5.855%, 04/19/96 (A) 3,000 3,000
- ------------------------------------------------------
TOTAL FLOATING RATE INSTRUMENTS
(Cost $20,998) 20,998
- ------------------------------------------------------
BANK NOTES (3.6%)
- ------------------------------------------------------
First National Bank, Chicago
6.150%, 08/26/96 5,000 5,000
Nationsbank of Texas
6.150%, 08/28/96 5,000 5,000
- ------------------------------------------------------
TOTAL BANK NOTES
(Cost $10,000) 10,000
- ------------------------------------------------------
CERTIFICATES OF DEPOSIT (2.7%)
- ------------------------------------------------------
Chase Manhattan
5.770%, 04/15/96 2,000 2,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 23
<PAGE> 174
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
First National Bank, Maryland
5.740%, 02/05/96 $3,000 $ 3,000
Society National Bank
6.000%, 04/25/96 2,500 2,502
- -------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $7,502) 7,502
- -------------------------------------------------------
BANKERS ACCEPTANCES (2.5%)
- -------------------------------------------------------
Corestates Bank
5.560%, 03/04/96 2,000 1,962
State Street Bank
5.680%, 11/17/95 5,147 5,134
- -------------------------------------------------------
TOTAL BANKERS ACCEPTANCES
(Cost $7,096) 7,096
- -------------------------------------------------------
REPURCHASE AGREEMENT (3.2%)
- -------------------------------------------------------
Lehman Brothers
5.860%, dated 10/31/95,
matures 11/01/95,
repurchase price $8,879,445
(collateralized by U.S.
Treasury Note, par value
$8,885,000, 6.625%,
matures 03/31/97:
market value $9,050,084) 8,878 8,878
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $8,878) 8,878
- -------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost $280,897) 280,897
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES,
NET(-0.4%) (1,201)
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value -- 2
billion authorized) based
on 279,698,405 outstanding
shares of beneficial
interest 279,698
Accumulated net realized
loss on investments (2)
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $279,696
- -------------------------------------------------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS A $ 1.00
- -------------------------------------------------------
</TABLE>
- ------------
(A) Floating Rate Instrument. The rate reflected on the Statement of Net
Assets is the rate in effect on October 31, 1995. The date shown is the
longer of the reset date or the demand date.
FNMA Federal National Mortgage Association
<TABLE>
<CAPTION>
FACE
TREASURY SECURITIES AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS (17.6%)
- -------------------------------------------------------
<S> <C> <C>
United States Treasury Bills
5.876%, 05/30/96 $ 7,000 $ 6,773
5.877%, 05/30/96 12,000 11,610
United States Treasury Note
4.375%, 08/15/96 5,000 4,947
- -------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $23,330) 23,330
- -------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
24 October 31, 1995
<PAGE> 175
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
TREASURY SECURITIES AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
REPURCHASE AGREEMENTS (82.8%)
- -------------------------------------------------------
<S> <C> <C>
Aubrey G. Lanston
5.875%, dated 10/31/95,
matures 11/01/95, repurchase
price $11,554,885
(collateralized by U.S.
Treasury Bill, par value
$12,420,000, matures
10/17/96: market
value $11,783,654) $11,553 $ 11,553
Donaldson, Lufkin & Jenrette
Securities 5.890%, dated
10/31/95, matures 11/01/95,
repurchase price $25,004,090
(collateralized by U.S.
Treasury Note, par value
$25,186,000, 6.50%, matures
04/30/97: market
value $25,500,825) (A) 25,000 25,000
J.P. Morgan
5.870%, dated 10/31/95,
matures 11/01/95, repurchase
price $11,501,875
(collateralized by U.S
Treasury Note, par value
$7,946,000, 12.00%, matures
05/15/05: market value
$11,741,079) 11,500 11,500
Lehman Brothers
5.860%, dated 10/31/95,
matures 11/01/95, repurchase
price $11,501,872
(collateralized by various
U.S. Treasury Notes, total
par value $11,400,000, 7.875%
- 8.50%, 11/15/95 - 02/15/96:
total market value $11,730,088) 11,500 11,500
Nomura Securities
5.900%, dated 10/31/95,
matures 11/01/95, repurchase
price $25,004,097
(collateralized by U.S.
Treasury Note, par value
$25,028,000, 6.125%, matures
07/31/96: market value
$25,500,931) (A) 25,000 25,000
Union Bank of Switzerland
5.900%, dated 10/31/95,
matures 11/01/95, repurchase
price $25,004,097
(collateralized by U.S.
Treasury Note, par value
$24,825,000, 6.875%, matures
02/28/97: market value
$25,500,612) (A) 25,000 25,000
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $109,553) 109,553
- -------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost $132,883) 132,883
- -------------------------------------------------------
OTHER ASSETS AND
LIABILITIES, NET (-0.4%) (540)
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value - 2
billion authorized) based on
132,326,052 outstanding
shares of beneficial
interest 132,326
Accumulated net realized gain
on investments 17
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $132,343
- -------------------------------------------------------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SHARE - CLASS A $ 1.00
- -------------------------------------------------------
</TABLE>
- -----------
(A) Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 25
<PAGE> 176
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- --------------------------------------------------------
MUNICIPAL BONDS (100.2%)
- --------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA (100.2%)
Allegheny County, Pennsylvania
Higher Education Building
Authority University of
Pittsburgh Project, Ser 85B,
RB 3.850%, 11/07/95 (A) (C) $ 650 $ 650
Allegheny County, Pennsylvania
Hospital Development Authority
Children's Hospital Project,
Ser B, MBIA, RB
3.900%, 11/07/95 (A) 1,300 1,300
Allegheny County, Pennsylvania,
Ser C-41, GO
3.850%, 11/07/95 (A) (C) 900 900
Allegheny County, Pennsylvania,
Ser C-44, FGIC, GO
4.000%, 06/01/96 685 685
Beaver County, Pennsylvania
Industrial Development
Authority Duquesne Light &
Power Project, TECP
3.700%, 12/08/95 (C) 1,500 1,500
Beaver County, Pennsylvania
Industrial Development
Authority Duquesne Light
Project, Ser C, TECP
3.750%, 12/14/95 (C) 1,500 1,500
Berks County, Pennsylvania
Industrial Development
Authority Elf Aquitaine, RB
4.075%, 11/07/95 (A) (C) 2,400 2,400
Bethlehem, Pennsylvania School
District, RB
6.150%, 11/01/95 (B) 355 355
Bucks County, Pennsylvania
Industrial Development
Authority CPC International
Project, Ser 85, RB
4.550%, 11/07/95 (A) 2,000 2,000
Bucks County, Pennsylvania
Industrial Development
Authority Edge Comb Metals
Project, RB
4.075%, 11/07/95 (A) (C) 1,830 1,830
Bucks County, Pennsylvania Water
& Sewer Authority Neshaminy
Interceptor Sewer System
Project, RB, Prerefunded at
100 7.700%, 12/01/95 (B) 400 401
Bucks County, Pennsylvania Water
& Sewer Authority Neshaminy
Sewer System Project, RB,
Prerefunded at 100
7.600%, 12/01/95 (B) 500 501
Chartiers Valley, Pennsylvania
Industrial Development
Authority Sycamore Creek
Project, RB
3.900%, 03/01/96 (A) (C) 1,805 1,805
Cumberland County, Pennsylvania
United Methodist Homes
Project, RB
3.950%, 07/01/96 (C) 500 500
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
26 October 31, 1995
<PAGE> 177
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- --------------------------------------------------------
<S> <C> <C>
Delaware County, Pennsylvania
Industrial Development
Authority Airport Facilities
United Parcel Services
Project, Ser 85, RB
3.800%, 11/01/95 (A) $1,300 $1,300
Delaware County, Pennsylvania
Industrial Development
Authority Henderson Radner
Joint Venture Project, RB
4.200%, 11/07/95 (C) 1,150 1,150
Delaware County, Pennsylvania
Philadelphia Industrial
Development Authority Electric
Company Project, FGIC, TECP
3.600%, 11/29/95 (C) 700 700
Delaware Valley, Pennsylvania
Regional Finance Authority
4.050%, 11/07/95 (A) (C) 2,200 2,200
Delaware Valley, Pennsylvania
Regional Finance Authority
Local Government, Ser D, RB
4.050%, 11/07/95 (A) (C) 800 800
Erie County, Pennsylvania Hospital
Authority Union City Memorial
Hospital Project, RB
4.150%, 11/07/95 (A) (C) 1,100 1,100
Lancaster, Pennsylvania Higher
Education Authority Franklin
& Marshall Project, RB
3.950%, 11/07/95 (A) 1,650 1,650
Langhorne, Pennsylvania Saint
Mary's Hospital Authority
Franciscan Health Systems,
Ser C, RB 3.800%,
11/07/95 (A) (C) 1,200 1,200
Lehigh County, Pennsylvania Sewer
Authority, Ser B, FGIC, RB
3.850%, 11/07/95 (A) 480 480
Montgomery County, Pennsylvania
Higher Education & Health
Authority Hospital Revenue,
AMBAC, RB 3.850%, 11/07/95 (A) 2,200 2,200
Montgomery County, Pennsylvania
Higher Education & Health
Authority United Hospitals
Project, Ser A, RB,
Prerefunded at 102
10.000%, 11/01/95 (B) 990 1,010
Montgomery County, Pennsylvania
Higher Education & Health
Authority United Hospitals
Project, Ser B, RB,
Prerefunded at 102
9.750%, 11/01/95 (B) 230 235
Montgomery County, Pennsylvania
Hospital Authority Abington
Memorial Hospital, RB,
Prerefunded at 103
8.000%, 06/01/96 (B) 2,300 2,418
Montgomery County, Pennsylvania
Industrial Development
Authority Ikea Property
Project, RB 4.000%,
11/07/95 (A) (C) 1,500 1,500
Montgomery County, Pennsylvania
Industrial Development
Authority Merck & Company, RB
4.450%, 11/07/95 (A) 1,000 1,000
Montgomery County Pennsylvania
Industrial Development
Authority Valley Square
Project, RB 3.950%,
11/07/95 (C) 1,400 1,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 27
<PAGE> 178
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- --------------------------------------------------------
<S> <C> <C>
Montgomery County, Pennsylvania
Philadelphia Electric Company
Project, TECP
3.750%, 11/21/95 (C) $ 500 $ 500
Moon Township, Pennsylvania
Industrial Development
Authority Executive Office
Project, RB
4.000%, 11/07/95 (A) (C) 1,500 1,500
Northumberland County,
Pennsylvania Industrial
Development Authority Atlas
Development Project, RB
4.000%, 11/07/95 (A) (C) 840 840
Pennsylvania Infrastructure
Investment Authority Pennvest,
Ser 94, RB
3.900%, 11/07/95 (A) (C) 600 600
Pennsylvania Intergovernmental
Co-op Authority Special Tax
Revenue City of Philadelphia
Funding Project, FGIC, RB
5.200%, 06/15/96 300 302
Pennsylvania State Higher
Education Facilities Authority
Thomas Jefferson University
Project, RB
3.900%, 02/26/96 (A) (C) 1,500 1,500
Pennsylvania State Public School
Building Authority Hazleton
Area School District Project,
RB 5.250%, 03/01/96 1,000 1,005
Pennsylvania State University
Project, Ser A
5.500%, 12/21/95 1,800 1,801
Pennsylvania State, Ser 2, GO,
Prerefunded at 101.50
7.250%, 05/01/96 (B) 250 257
Philadelphia, Pennsylvania Hospital
& Higher Educational
Facilities Authority, RB,
Prerefunded at 102
8.625%, 08/01/96 (B) 1,500 1,581
Philadelphia, Pennsylvania
Industrial Development
Authority Multi-Family Housing
Harbor View Towers Project, RB
4.000%, 11/07/95 (A) (C) 1,900 1,900
Philadelphia, Pennsylvania
Redevelopment Authority Penn
School for the Deaf Project,
RB 3.900%, 11/07/95 (C) 2,405 2,405
Philadelphia, Pennsylvania School
District, GO, TRAN
4.500%, 06/28/96 2,000 2,007
Philadelphia, Pennsylvania School
District, MBIA, GO,
Prerefunded at 100.50
7.400%, 11/01/95 (B) 150 151
Philadelphia, Pennsylvania
Updates, GO ,TECP
3.800%, 11/21/95 (C) 1,800 1,800
Philadelphia, Pennsylvania Water
& Sewer Authority, Ser 12,
MBIA, RB, Prerefunded at 101
7.250%, 07/01/96 (B) 200 206
Philadelphia, Pennsylvania Water
And Sewer Authority, Ser 11,
RB, Prerefunded at 102
8.800%, 12/01/95 (B) 110 113
Philadelphia, Pennsylvania,
Ser A, GO, TRAN
4.500%, 06/27/96 1,000 1,003
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
28 October 31, 1995
<PAGE> 179
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- --------------------------------------------------------
<S> <C> <C>
Pittsburgh, Pennsylvania
Equipment Leasing Authority,
AMBAC, RB
5.950%, 07/01/96 $ 300 $ 304
Pittsburgh, Pennsylvania Public
Parking Authority, RB,
Prerefunded at 102
9.500%, 12/01/95 (B) 150 154
Quakertown, Pennsylvania
Hospital Authority Group
Pooled Financing, RB
3.750%, 11/07/95 (A) (C) 1,800 1,800
Rose Tree Media, Pennsylvania
School District, Ser A, FGIC,
GO 5.150%, 03/15/96 500 503
Sayre, Pennsylvania Health Care
Facilities Authority Capital
Financing Project, Ser F,
AMBAC, RB
3.850%, 11/07/95 (A) 1,300 1,300
Schuylkill County, Pennsylvania
Industrial Development
Authority Gilberton Power
Project, RB
4.000%, 11/07/95 (A) (C) 1,000 1,000
Schuylkill County, Pennsylvania
Industrial Development
Authority Westwood Energy
Project, RB
4.200%, 11/01/95 (A) (C) 91 91
Wyoming Valley, Pennsylvania
Sanitation Authority, Ser 85,
RB, Prerefunded at 101
9.200%, 11/15/95 (B) 150 152
York County, Pennsylvania
Industrial Development
Authority Edgecomb Corporate
Project, Ser 84, RB
4.075%, 11/07/95 (A) (C) 850 850
- --------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $62,295) 62,295
- --------------------------------------------------------
TOTAL INVESTMENTS (100.2%)
(Cost $62,295) 62,295
- --------------------------------------------------------
OTHER ASSETS AND
LIABILITIES, NET (-0.2%) (138)
- --------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value - 2 billion
authorized) based on
62,157,108 outstanding shares
of beneficial interest 62,157
- --------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $62,157
- --------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 1.00
- --------------------------------------------------------
</TABLE>
- -----------
(A) Floating Rate Instrument with Demand Features. The rate reflected on
the Statement of Net Assets is the rate in effect on October 31, 1995.
The date shown is the longer of the reset date or the demand date.
(B) Prerefunded Security - the maturity date shown is the prerefunded date.
(C) Security is backed by a letter of credit.
AMBAC American Municipal Bond Assurance Company
FGIC Financial Guaranty Insurance Company
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
TECP Tax Exempt Commercial Paper
TRAN Tax And Revenue Anticipation Note
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 29
<PAGE> 180
STATEMENTS OF OPERATIONS INVENTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE
GROWTH GOVERNMENT
FUND SECURITIES FUND
(000) (000)
================================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................................... $ 448 $ --
Interest ..................................................... 143 2,968
------- -------
Total investment income ................................... 591 2,968
------- -------
EXPENSES:
Investment advisory fees ..................................... 220 295
12b-1 fees ................................................... 65 105
Administrative fees .......................................... 46 76
Transfer agent fees & expenses ............................... 12 14
Registration & filing fees ................................... 1 12
Custody fees ................................................. 12 9
Trustee fees ................................................. 1 2
Miscellaneous fees ........................................... 12 20
------- -------
Total expenses ............................................ 369 533
Less: Expenses waived ..................................... (124) (175)
------- -------
Total net expenses ........................................ 245 358
------- -------
NET INVESTMENT INCOME ........................................... 346 2,610
------- -------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gain (loss) on investments ......................... 3,978 770
Net change in unrealized appreciation of investments ............ 1,856 1,256
------- -------
Net realized and unrealized gain (loss) on investments .... 5,834 2,026
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $ 6,180 $ 4,636
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
30 October 31, 1995
<PAGE> 181
STATEMENTS OF OPERATIONS INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
GNMA PENNSYLVANIA OBLIGATIONS SECURITIES TAX-EXEMPT
SECURITIES MUNICIPAL BOND MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000)
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ........................ $ -- $ -- $ -- $ -- $ --
Interest ......................... 1,844 911 8,435 3,344 1,249
------ ------ ------ ------ ------
Total investment income ....... 1,844 911 8,435 3,344 1,249
------ ------ ------ ------ ------
EXPENSES:
Investment advisory fees ......... 176 129 633 253 141
12b-1 fees ....................... 63 46 351 141 78
Administrative fees .............. 45 34 211 85 47
Transfer agent fees & expenses ... 12 9 30 17 12
Registration & filing fees ....... 3 1 -- 12 1
Custody fees ..................... 18 3 14 15 4
Trustee fees ..................... 1 1 7 2 1
Miscellaneous fees ............... 12 8 48 32 14
------ ------ ------ ------ ------
Total expenses ................ 330 231 1,294 557 298
Less: Expenses waived ......... (116) (74) (520) (247) (126)
------ ------ ------ ------ ------
Total net expenses ............ 214 157 774 310 172
------ ------ ------ ------ ------
NET INVESTMENT INCOME ............... 1,630 754 7,661 3,034 1,077
------ ------ ------ ------ ------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain (loss) on
investments ...................... 994 -- (2) 3 --
Net change in unrealized appreciation
of investments ................... 371 755 -- -- --
------ ------ ------ ------ ------
Net realized and unrealized
gain (loss) on investments .. 1,365 755 (2) 3 --
------ ------ ------ ------ ------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........ $2,995 $1,509 $7,659 $3,037 $1,077
====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 31
<PAGE> 182
STATEMENTS OF CHANGES IN NET ASSETS INVENTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
EQUITY GROWTH FUND
5/1/95 8/10/94(1)
TO 10/31/95 TO 4/30/95
(000) (000)
=======================================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income ................................................ $ 346 $ 513
Net realized gain (loss) on investments .............................. 3,978 556
Net change in unrealized appreciation on investments ................. 1,856 2,748
------- -------
Net increase resulting from operations ............................ 6,180 3,817
------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ................................................ (346) (513)
Net realized gains ................................................... -- (85)
------- -------
Total dividends distributed ....................................... (346) (598)
------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued .......................................... 5,166 55,864
Shares issued in lieu of cash distributions .......................... 9 1
Cost of shares repurchased ........................................... (2,245) (12,427)
------- -------
Increase in net assets derived from capital share transactions .... 2,930 43,438
------- -------
Net increase in net assets .............................................. 8,764 46,657
------- -------
NET ASSETS:
Beginning of period .................................................. 46,657 --
------- -------
End of period ........................................................ $55,421 $46,657
======= =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period ....................... 4,363 --
Shares issued ..................................................... 447 5,577
Shares issued in lieu of cash distributions ....................... 1 --
Shares repurchased ................................................ (199) (1,214)
------- -------
Increase derived from capital share transactions .................. 249 4,363
------- -------
Capital shares outstanding at end of period ............................. 4,612 4,363
======= =======
</TABLE>
- ----------------------------
(1) Commenced operations on August 10, 1994.
The accompanying notes are an integral part of the financial statements.
================================================================================
32 October 31, 1995
<PAGE> 183
STATEMENTS OF CHANGES IN NET ASSETS INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT PENNSYLVANIA MUNICIPAL
SECURITIES FUND GNMA SECURITIES FUND BOND FUND
5/1/95 8/10/94(1) 5/1/95 8/10/94(1) 5/1/95 8/10/94(1)
TO 10/31/95 TO 4/30/95 TO 10/31/95 TO 4/30/95 TO 10/31/95 TO 4/30/95
(000) (000) (000) (000) (000) (000)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ....................... $ 2,610 $ 2,251 $ 1,630 $ 1,954 $ 754 $ 972
Net realized gain (loss) on investments ..... 770 (362) 994 80 -- --
Net change in unrealized appreciation
on investments ........................... 1,256 632 371 638 755 204
------- -------- ------- ------- ------- -------
Net increase resulting from operations ... 4,636 2,521 2,995 2,672 1,509 1,176
------- -------- ------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ....................... (2,610) (2,251) (1,635) (1,954) (753) (972)
Net realized gains .......................... -- -- -- -- -- --
------- -------- ------- ------- ------- -------
Total dividends distributed .............. (2,610) (2,251) (1,635) (1,954) (753) (972)
------- -------- ------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ................. 37,543 66,686 11,427 48,509 4,131 38,051
Shares issued in lieu of cash
distributions ............................ 22 2 24 1 1 --
Cost of shares repurchased .................. (1,478) (13,642) (893) (7,016) (970) (3,617)
------- -------- ------- ------- ------- -------
Increase in net assets derived from
capital share transactions ............. 36,087 53,046 10,558 41,494 3,162 34,434
------- -------- ------- ------- ------- -------
Net increase in net assets ..................... 38,113 53,316 11,918 42,212 3,918 34,638
------- -------- ------- ------- ------- -------
NET ASSETS:
Beginning of period ......................... 53,316 -- 42,212 -- 34,638 --
------- -------- ------- ------- ------- -------
End of period ............................... $91,429 $ 53,316 $54,130 $42,212 $38,556 $34,638
======= ======== ======= ======= ======= =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning
of period ................................... 5,319 -- 4,154 -- 3,451 --
Shares issued ............................ 3,688 6,685 1,105 4,855 406 3,816
Shares issued in lieu of cash
distributions .......................... 2 -- 2 -- -- --
Shares repurchased ....................... (144) (1,366) (86) (701) (95) (365)
------- -------- ------- ------- ------- -------
Increase derived from capital share
transactions ............................ 3,546 5,319 1,021 4,154 311 3,451
------- -------- ------- ------- ------- -------
Capital shares outstanding at end of period .... 8,865 5,319 5,175 4,154 3,762 3,451
======= ======== ======= ======= ======= =======
</TABLE>
- ----------------------------
(1) Commenced operations on August 10, 1994.
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 33
<PAGE> 184
STATEMENTS OF CHANGES IN NET ASSETS INVESTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
PRIME OBLIGATIONS
MONEY MARKET FUND
5/1/95 8/8/94(1)
to 10/31/95 to 4/30/95
(000) (000)
==================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income ........................... $ 7,661 $ 8,619
Net realized gain (loss) on investments ......... (2) --
--------- ---------
Net increase resulting from operations ....... 7,659 8,619
--------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ........................... (7,661) (8,619)
Net realized gains .............................. -- --
--------- ---------
Total dividends distributed .................. (7,661) 8,619
--------- ---------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Proceeds from shares issued ..................... 323,658 647,086
Shares issued in lieu of cash distributions ..... 198 52
Cost of shares repurchased ...................... (334,216) (357,179)
--------- ---------
Increase (decrease) in net assets derived
from capital share transactions ........... (10,360) 289,959
--------- ---------
Net increase (decrease) in net assets .............. (10,362) 289,959
--------- ---------
NET ASSETS:
Beginning of period ............................. 290,058 99
--------- ---------
End of period ................................... $ 279,696 $ 290,058
========= =========
</TABLE>
- ----------------------------
(1) Commenced operations on August 8, 1994.
The accompanying notes are an integral part of the financial statements.
================================================================================
34 October 31, 1995
<PAGE> 185
STATEMENTS OF CHANGES IN NET ASSETS INVENTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
TREASURY SECURITIES PENNSYLVANIA TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND
5/1/95 8/8/94(1) 5/1/95 8/8/94(1)
to 10/31/95 to 4/30/95 to 10/31/95 to 4/30/95
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................... $ 3,034 $ 2,151 $ 1,077 $ 1,145
Net realized gain (loss) on investments ......... 3 14 -- --
--------- --------- --------- ---------
Net increase resulting from operations ....... 3,037 2,165 1,077 1,145
--------- --------- --------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ........................... (3,034) (2,151) (1,077) (1,145)
Net realized gains .............................. -- -- -- --
--------- --------- --------- ---------
Total dividends distributed .................. (3,034) (2,151) (1,077) (1,145)
--------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Proceeds from shares issued ..................... 361,008 330,496 69,001 119,764
Shares issued in lieu of cash distributions ..... 83 71 29 11
Cost of shares repurchased ...................... (309,242) (250,090) (63,541) (63,107)
--------- --------- --------- ---------
Increase (decrease) in net assets derived
from capital share transactions ........... 51,849 80,477 5,489 56,668
--------- --------- --------- ---------
Net increase (decrease) in net assets .............. 51,852 80,491 5,489 56,668
--------- --------- --------- ---------
NET ASSETS:
Beginning of period ............................. 80,491 -- 56,668 --
--------- --------- --------- ---------
End of period ................................... $ 132,343 $ 80,491 $ 62,157 $ 56,668
========= ========= ========= =========
</TABLE>
- ----------
(1) Commenced operations on August 8, 1994.
The accompanying notes are on integral part of the financial statements.
================================================================================
October 31, 1995 35
<PAGE> 186
FINANCIAL HIGHLIGHTS INVENTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
NET ASSET AND DISTRIBUTIONS FROM
VALUE NET UNREALIZED FROM NET REALIZED
BEGINNING INVESTMENT GAINS INVESTMENT CAPITAL
For a Share Outstanding Throughout the Period OF PERIOD INCOME ON SECURITIES INCOME GAINS
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
EQUITY GROWTH
- -------------
Class A(3)
1996*.................................... $10.69 $0.08 $1.33 $(0.08) $ --
1995(1).................................. 10.00 0.12 0.71 (0.12) (0.02)
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A(3)
1996*.................................... 10.02 0.32 0.29 (0.32) --
1995(1).................................. 10.00 0.44 0.02 (0.44) --
- ---------------
GNMA SECURITIES
- ---------------
Class A(3)
1996*.................................... 10.16 0.34 0.30 (0.34) --
1995(1).................................. 10.00 0.48 0.16 (0.48) --
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A(3)
1996*.................................... 10.04 0.21 0.21 (0.21) --
1995(1).................................. 10.00 0.29 0.04 (0.29) --
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1996*.................................... 1.00 0.03 -- (0.03) --
1995(2).................................. 1.00 0.04 -- (0.04) --
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1996*.................................... 1.00 0.03 -- (0.03) --
1995(2).................................. 1.00 0.04 -- (0.04) --
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1996*.................................... 1.00 0.02 -- (0.02) --
1995(2).................................. 1.00 0.02 -- (0.02) --
</TABLE>
- ----------
* All ratios for the semi-annual period ended October 31, 1995 (unaudited)
have been annualized.
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on August 10, 1994. All ratios for the period have
been annualized.
(2) Commenced operations on August 8, 1994. All ratios for the period have been
annualized.
(3) Total Return does not reflect the sales charge.
The accompanying notes are an integral part of the financial statements.
================================================================================
36 October 31, 1995
<PAGE> 187
FINANCIAL HIGHLIGHTS INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
VALUE END EXPENSES INCOME TO
END TOTAL OF PERIOD TO AVERAGE AVERAGE
For a Share Outstanding Throughout the Period OF PERIOD RETURN (000) NET ASSETS NET ASSETS
===========================================================================================================
<S> <C> <C> <C> <C> <C>
EQUITY GROWTH
- -------------
Class A(3)
1996*................................... $12.02 13.20%+ $55,421 0.95% 1.34%
1995(1)................................. 10.69 8.33+ 46,657 0.95 1.57
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A(3)
1996*................................... 10.31 6.15+ 91,429 0.85 6.20
1995(1)................................. 10.02 4.75+ 53,316 0.85 6.17
- ---------------
GNMA SECURITIES
- ---------------
Class A(3)
1996*................................... 10.46 6.36+ 54,130 0.85 6.47
1995(1)................................. 10.16 6.61+ 42,212 0.85 6.68
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A(3)
1996*................................... 10.25 4.21+ 38,556 0.85 4.08
1995(1)................................. 10.04 3.38+ 34,638 0.85 4.05
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1996*................................... 1.00 2.78+ 279,696 0.55 5.45
1995(2)................................. 1.00 3.76+ 290,058 0.55 5.16
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1996*................................... 1.00 2.75+ 132,343 0.55 5.39
1995(2)................................. 1.00 3.60+ 80,491 0.55 5.00
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1996*................................... 1.00 1.75+ 62,157 0.55 3.44
1995(2)................................. 1.00 2.32+ 56,668 0.55 3.21
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
TO AVERAGE AVERAGE
NET ASSETS NET ASSETS PORTFOLIO
(EXCLUDING (EXCLUDING TURNOVER
For a Share Outstanding Throughout the Period WAIVERS) WAIVERS) RATE
=====================================================================================
<S> <C> <C> <C>
EQUITY GROWTH
- -------------
Class A(3)
1996*................................... 1.43% 0.86% 85%
1995(1)................................. 1.48 1.04 110
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A(3)
1996*................................... 1.27 5.78 53
1995(1)................................. 1.33 5.69 172
- ---------------
GNMA SECURITIES
- ---------------
Class A(3)
1996*................................... 1.31 6.01 103
1995(1)................................. 1.40 6.13 226
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A(3)
1996*................................... 1.25 3.68 4
1995(1)................................. 1.36 3.54 4
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1996*................................... 0.92 5.08 --
1995(2)................................. 1.01 4.70 --
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1996*................................... 0.99 4.95 --
1995(2)................................. 1.05 4.50 --
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1996*................................... 0.95 3.04 --
1995(2)................................. 1.04 2.72 --
</TABLE>
- ----------------------------
(*) All ratios for the semi-annual period ended October 31, 1995 (unaudited)
have been annualized.
(+) Returns are for the period indicated and have not been annualized.
(1) Commenced operations on August 10, 1994. All ratios for the period have
been annualized.
(2) Commenced operations on August 8, 1994. All ratios for the period have
been annualized.
(3) Total Return does not reflect the sales charge.
================================================================================
October 31, 1995 37
<PAGE> 188
NOTES TO FINANCIAL STATEMENTS INVENTOR FUNDS
================================================================================
October 31, 1995 (Unaudited)
1. ORGANIZATION
Inventor Funds, Inc. (the "Corporation") was organized as a Maryland
corporation under Articles of Incorporation dated April 22, 1994. The
Corporation is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company with seven funds:
Equity Growth Fund, Intermediate Government Securities Fund, GNMA Securities
Fund, Pennsylvania Municipal Bond Fund, Prime Obligations Money Market Fund,
Treasury Securities Money Market Fund, and Pennsylvania Tax-Exempt Money Market
Fund (referred to as a "Fund" or collectively as the "Funds"). The assets of
each Fund are segregated, and a shareholder's interest is limited to the Fund in
which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds.
Security Valuation -- Investment securities of the Prime Obligations Money
Market Fund, Treasury Securities Money Market Fund and the Pennsylvania
Tax-Exempt Money Market Fund (the "Money Market Funds") are stated at amortized
cost which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income. Investment securities of the Equity Growth Fund,
Intermediate Government Securities Fund, GNMA Securities Fund and the
Pennsylvania Municipal Bond Fund (the "Non-Money Market Funds") which are listed
on a securities exchange for which market quotations are available are valued by
an independent pricing service at the last quoted sales price for such
securities on each business day. If there is no such reported sale, these
securities and unlisted securities for which market quotations are readily
available are valued at the most recent quoted bid price.
Security Transactions and Investment Income -- Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period which is calculated using the effective interest method. Interest income
is recorded on the accrual basis. Dividend income is recorded on ex- dividend
date. Gains and losses from pay-downs of mortgage-backed securities are included
in net investment income.
Repurchase Agreements -- Securities pledged as collateral for Repurchase
Agreements are held by the custodian bank until maturity of the Repurchase
Agreements. Provisions of the Agreements and procedures adopted by Integra Trust
Company (the "Adviser") ensure that the market value of the collateral,
including interest thereon, is sufficient in the event of default by the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization of
the collateral by the Fund may be delayed or limited.
TBA Purchase Commitments -- The Intermediate Government Securities Fund and
the GNMA Securities Fund may enter into "TBA" (to be announced) purchase
commitments to purchase securities for a fixed price at a future date beyond
customary settlement time. TBA purchase commitments may be considered securities
in themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date, which risk is in addition to the
risk of decline in the value of the funds' other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying securities,
generally according to the procedures described under "Security Valuation"
above.
TBA Sale Commitments -- The Intermediate Government Securities Fund and the
GNMA Securities Fund may enter into sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
agreements. Proceeds of TBA sale commitments are not received until the contract
settlement date. Unsettled TBA sale commitments are valued at the current market
value of the underlying securities, generally according to the procedures
described under "Security
================================================================================
38 October 31, 1995
<PAGE> 189
NOTES TO FINANCIAL STATEMENTS CONTINUED INVENTOR FUNDS
================================================================================
Valuation" above. The contract is "marked to market" daily and the change in
value is recorded by the fund as unrealized gain or loss. If the TBA sale
commitment is closed through the acquisition of an offsetting purchase
commitment the fund realizes a gain or loss without regard to any unrealized
gain or loss on the underlying security. If securities are delivered under the
commitment, the fund realizes a gain or loss from the sale of the securities
based upon the unit price at the date the commitment was entered into.
Expenses -- Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Funds are
prorated to the Funds on the basis of relative net assets.
Distributions to Shareholders -- The Equity Growth Fund declares and pays
dividends from net investment income on a monthly basis. The Intermediate
Government Securities Fund, GNMA Securities Fund, Pennsylvania Municipal Bond
Fund, Prime Obligations Money Market Fund, Treasury Securities Money Market
Fund, and Pennsylvania Tax-Exempt Money Market Fund distributions from net
investment income are declared on a daily basis and are payable monthly. Any net
realized capital gains on sales of securities are distributed to shareholders at
least annually.
Federal Income Taxes -- It is each Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
Organization Costs -- Organizational costs have been capitalized by the Funds
and are being amortized over sixty months commencing with operations. In the
event any of the initial shares of the Funds are redeemed by any holder thereof
during the period that the Funds are amortizing their organizational costs, the
redemption proceeds payable to the holder thereof by the Funds will be reduced
by the unamortized organizational costs in the same ratio as the number of
initial shares being redeemed bears to the number of initial shares outstanding
at the time of redemption. These costs include legal fees of approximately
$53,415 for organizational work performed by a law firm of which an officer and
trustee of the Funds is a partner.
Other -- Certain officers of the Funds are also officers of the Administrator
and/or Distributor. Such officers are paid no fees by the Funds for serving as
officers of the Corporation.
3. FEES AND EXPENSES
The Funds and the Adviser have entered into an investment advisory agreement,
dated August 1, 1994, under which the Adviser will receive an annual fee equal
to 0.85% of the average daily net assets of the Equity Growth Fund; 0.70% of the
average daily net assets of the Intermediate Government Securities, GNMA
Securities and Pennsylvania Municipal Bond Funds; and 0.45% of the average daily
net assets of the Prime Obligations Money Market, Treasury Securities Money
Market and Pennsylvania Tax-Exempt Money Market Funds.
Sub-Advisory services are provided to the Adviser for the Equity Growth Fund
by STI Capital Management, N.A. (formerly Sun Bank Capital Management, N.A.);
for the Intermediate Government Securities, GNMA Securities, Prime Obligations
Money Market and Treasury Securities Money Market Funds by Wellington Management
Company; and for the Pennsylvania Municipal Bond and Pennsylvania Tax-Exempt
Money Market Funds by Weiss, Peck & Greer L.L.C. (the "Sub-Advisers") pursuant
to sub-advisory agreements dated August 1, 1994. Under the terms of such
agreements, the Sub-Advisers are entitled to receive a fee from the Adviser.
Such a fee is computed daily and paid monthly. The Adviser is responsible for
the supervision of, and payment of fees to, the Sub-Advisers in connection with
their services.
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary
of SEI Corporation ("SEI"), became the Fund's Distributor pursuant to an
agreement dated August 1, 1994. The Class A shares of the Funds have a Rule
12b-1 Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to 0.25%
of their average daily net assets.
================================================================================
October 31, 1995 39
<PAGE> 190
NOTES TO FINANCIAL STATEMENTS CONTINUED INVENTOR FUNDS
================================================================================
October 31, 1995 (Unaudited)
Pursuant to an administration agreement dated August 1, 1994, SEI Financial
Management Company (the "Administrator"), a wholly-owned subsidiary of SEI, acts
as the Fund's Administrator. Under the terms of the administration agreement,
the Administrator will receive an annual fee which is calculated daily and paid
monthly at a maximum annual rate of 0.18% of the average daily net assets of the
Equity Growth, Intermediate Government Securities, GNMA Securities, and
Pennsylvania Municipal Bond Funds, and 0.15% of the average daily net assets of
the Prime Obligations Money Market, Treasury Securities Money Market and
Pennsylvania Tax-Exempt Money Market Funds.
During the period ended October 31, 1995, the Adviser and other parties
waived a portion of their contractual fees in order to assist the Funds in
maintaining a competitive expense ratio. Expenses were waived as follows (in
thousands):
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
OBLIGATIONS SECURITIES TAX-EXEMPT
EQUITY INTERMEDIATE GNMA PENNSYLVANIA MONEY MONEY MONEY
GROWTH GOVERNMENT SECURITIES MUNICIPAL MARKET MARKET MARKET
FUND SECURITIES FUND FUND BOND FUND FUND FUND FUND
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Waiver of investment
advisory fees ............... $ 59 $ 70 $ 53 $18 $169 $106 $ 48
Waiver of administrative fee ... -- -- -- 10 -- -- --
Waiver of 12b-1 fees ........... 65 105 63 46 351 141 78
============================================================================================================================
Total Waivers ............. $124 $175 $116 $74 $520 $247 $126
============================================================================================================================
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period ended October 31, 1995, purchases of securities and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows (000):
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE GNMA PENNSYLVANIA
GROWTH GOVERNMENT SECURITIES MUNICIPAL
FUND SECURITIES FUND FUND BOND FUND
=====================================================================================
<S> <C> <C> <C> <C>
PURCHASES
U.S. Government .... $ -- $71,045 $61,811 $ --
Other .............. 42,674 -- -- 5,284
SALES
U.S. Government .... $ -- $39,464 $49,044 $ --
Other .............. 39,367 -- -- 1,045
</TABLE>
At October 31, 1995, the total cost of securities and net realized gains or
losses on securities sold for federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held at October
31, 1995 is as follows (000):
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE GNMA PENNSYLVANIA
GROWTH GOVERNMENT SECURITIES MUNICIPAL
FUND SECURITIES FUND FUND BOND FUND
==============================================================================================================
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation ..... $ 5,997 $ 1,948 $ 1,050 $959
Aggregate gross unrealized depreciation ..... (1,393) (60) (41) --
- --------------------------------------------------------------------------------------------------------------
Net unrealized appreciation ................. $ 4,604 $ 1,888 $ 1,009 $959
==============================================================================================================
</TABLE>
================================================================================
40 October 31, 1995
<PAGE> 191
PART C
<PAGE> 192
FORM N-14
---------
Part C - Other Information
--------------------------
Item 15. Indemnification
---------------
Indemnification of Registrant's principal underwriter, custodian and
transfer agent against certain losses is provided for, respectively in Section
1.14 of the Distribution Agreement, incorporated by reference as Exhibit (7)(g)
hereto, and Sections 12 and 17, respectively, of the Custodian Services and
Transfer Agency Agreements, incorporated by reference as Exhibits (9)(a) and
(13)(g) hereto. In Section 1.14 of the Distribution Agreement, Registrant
agrees to indemnify, defend and hold the Distributor, its several officers and
directors, and any person who controls the Distributor within the meaning of
Section 15 of the Securities Act of 1933, as amended, free and harmless from
and against any and all claims, demands, liabilities and expenses (including
the cost of investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) which the Distributor, its
officers and directors, or any such controlling person, may incur under the
Securities Act of 1933, as amended, or under common law or otherwise, arising
out of or based upon any untrue statement, or alleged untrue statement, of a
material fact contained in any registration statement or any prospectus or
arising out of or based upon any omission, or alleged omission, to state a
material fact required to be stated in either any registration statement or any
prospectus or necessary to make the statements in either thereof not
misleading; provided, however, that Registrant's agreement to indemnify the
Distributor, its officers or directors, and any such controlling person shall
not be deemed to cover any claims, demands, liabilities or expenses arising out
of an untrue statement or alleged untrue statement or omission or alleged
omission made in any registration statement or prospectus in reliance upon and
in conformity with written information furnished to Registrant or its counsel
by the Distributor and used in the preparation thereof.
In addition, Section 9.3 of Registrant's Declaration of Trust dated
January 28, 1986, incorporated by reference as Exhibit (1) hereto, provides as
follows:
9.3 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES AND EMPLOYEES. The
Trust shall indemnify each of its Trustees against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably
incurred by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which
he may be involved or with which he may be threatened, while as a
Trustee or thereafter, by reason of his being or
C-1
<PAGE> 193
having been such a Trustee EXCEPT with respect to any matter as to
which he shall have been adjudicated to have acted in bad faith,
willful misfeasance, gross negligence or reckless disregard of his
duties, PROVIDED that as to any matter disposed of by a compromise
payment by such person, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses
shall be provided unless Registrant shall have received a written
opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross
negligence or reckless disregard of duty, or the matter of bad faith
had been adjudicated, it would in the opinion of such counsel have
been adjudicated in favor of such person. The rights accruing to any
person under these provisions shall not exclude any other right to
which he may be lawfully entitled, PROVIDED that no person may satisfy
any right of indemnity or reimbursement hereunder except out of the
property of Registrant. The Trustees may make advance payments in
connection with the indemnification under this Section 9.3, PROVIDED
that the indemnified person shall have provided a secured written
undertaking to reimburse Registrant in the event it is subsequently
determined that he is not entitled to such indemnification.
The Trustees shall indemnify representatives and employees of the
Trust to the same extent that Trustees are entitled to indemnification
pursuant to this Section 9.3.
Section 12 of Registrant's Custodian Services Agreement provides as
follows:
12. INDEMNIFICATION. The Trust, on behalf of each of the Funds,
agrees to indemnify and hold harmless the Custodian and its nominees
from all taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the 1933
Act, the 1934 Act, the 1940 Act, the CEA, and any state and foreign
securities and blue sky laws, and amendments thereto), and expenses,
including (without limitation) reasonable attorneys' fees and
disbursements, arising directly or indirectly from any action which
the Custodian takes or does not take (i) at the request or on the
direction of or in reliance on the advice of the Fund or (ii) upon
Oral or Written Instructions. Neither the Custodian, nor any of its
nominees, shall be indemnified against any liability to the Trust or
to its shareholders (or any expenses incident to such liability)
arising out of the Custodian's or its nominees' own willful
misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under this Agreement.
C-2
<PAGE> 194
In the event of any advance of cash for any purpose made by the
Custodian resulting from Oral or Written Instructions of the Trust, or
in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in respect of the Trust or any Fund in connection with the
performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or
willful misconduct, any Property at any time held for the account of
the relevant Fund or the Trust shall be security therefor.
Section 17 of Registrant's Transfer Agency Agreement provides as
follows:
17. INDEMNIFICATION. The Trust agrees to indemnify and hold the
Transfer Agent harmless from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation,
liabilities arising under the 1933 Act, the Securities Exchange Act of
1934, the 1940 Act, and any state and foreign securities and blue sky
laws, all as or as to be amended from time to time) and expenses,
including (without limitation) attorneys' fees and disbursements,
arising directly or indirectly from any action or thing which the
Transfer Agent takes or does or omits to take or do at the request or
on the direction of or in reliance on the advice of the Fund, provided
that the Transfer Agent shall not be indemnified against any liability
to the Fund or to its Shareholders (or any expenses incident to such
liability) arising out of the Transfer Agent's negligent failure to
perform its duties under this Agreement.
Registrant has obtained from a major insurance carrier a directors'
and officers' liability policy covering certain types of errors and omissions.
In no event will Registrant indemnify any of its trustees, officers, employees
or agents against any liability to which such person would otherwise be subject
by reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties, or by reason of his reckless disregard of the duties
involved in the conduct of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act of 1933 and
Release No. 11330 under the Investment Company Act of 1940 in connection with
any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
C-3
<PAGE> 195
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer, or controlling person of
Registrant in the successful defense of any action, suit, or proceeding) is
asserted by such trustee, officer, or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 16. Exhibits
--------
(1) Declaration of Trust dated January 28, 1986 is incorporated herein by
reference to Exhibit (1) to Post-Effective Amendment No. 1 to
Registrant's Registration Statement filed on December 16, 1986.
(a) Amendment No. 1 to Declaration of Trust is incorporated herein
by reference to Exhibit (1)(a) to Post-Effective Amendment No.
6 to Registrant's Registration Statement filed on August 1,
1989.
(b) Amendment No. 2 to Declaration of Trust is incorporated herein
by reference to Exhibit (1)(b) to Post-Effective Amendment No.
23 to Registrant's Registration Statement filed on May 11,
1995.
(c) Certificate of Classification of Shares reflecting the
creation of the Tax Exempt Portfolio (Trust) as filed with the
Office of the Secretary of State of Massachusetts on October
16, 1989 is incorporated herein by reference to Exhibit (1)(b)
to Post-Effective Amendment No. 10 to Registrant's
Registration Statement filed April 17, 1990.
(d) Certificate of Classification of Shares reflecting the
creation of Special Series 1 in the Money Market, Government,
Treasury, Tax Exempt, Equity, Bond and Ohio Tax Exempt
Portfolios as filed with the Office of the Secretary of State
of Massachusetts on December 11, 1989 is incorporated herein
by reference to Exhibit (1)(c) to Post-Effective Amendment No.
13 to the Registrant's Registration Statement filed on July
27, 1990.
(e) Certificate of Classification of Shares reflecting the
creation of Special Series 1 in the Money Market, Government,
Treasury, Tax Exempt, Equity, Bond and Ohio Tax Exempt
Portfolios as filed with the Office of the Secretary of State
of Massachusetts on September 12,
C-4
<PAGE> 196
1990 is incorporated herein by reference to Exhibit (1)(d) to
Post-Effective Amendment No. 14 to the Registrant's
Registration Statement filed on September 5, 1991.
(f) Certificate of Classification of Shares reflecting the
creation of Class L and Class L-Special Series 1 shares, Class
M and Class M-Special Series 1 shares, Class N and Class
N-Special Series 1 shares, Class O and Class O-Special Series
1 shares, and Class P and Class P-Special Series 1 shares
representing interests in the National Tax Exempt Portfolio,
Equity Income Portfolio, Mid Cap Regional Equity Portfolio,
Enhanced Income Fund and Total Return Advantage Fund,
respectively, as filed with the Office of the Secretary of
State of Massachusetts on June 30, 1994 is incorporated herein
by reference to Exhibit (1)(e) to Post-Effective Amendment No.
21 to the Registrant's Registration Statement filed on August
31, 1994.
(2) Code of Regulations as approved and adopted by Registrant's Board of
Trustees on January 28, 1986 is incorporated herein by reference to
Exhibit (2) to Pre-Effective Amendment No. 2 to Registrant's
Registration Statement filed on January 30, 1986.
(a) Amendment No. 1 to Code of Regulations is incorporated herein
by reference to Exhibit (2)(a) to Post-Effective Amendment No.
6 to Registrant's Registration Statement filed on August 1,
1989.
(3) None.
(4) Agreement and Plan of Reorganization filed herewith as Appendix I to
the Combined Proxy Statement/Prospectus.
(5) (a) Specimen copy of share certificate for Class A units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(a) to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement filed on January 30, 1986.
(b) Specimen copy of share certificate for Class A - Special
Series 1 units of beneficial interest is incorporated herein
by reference to Exhibit (4)(b) to Post-Effective Amendment No.
13 to the Registrant's Registration Statement filed on July
27, 1990.
(c) Specimen copy of share certificate for Class B units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(b) to Pre-Effective Amendment No. 2 to
C-5
<PAGE> 197
Registrant's Registration Statement filed on January 30, 1986.
(d) Specimen copy of share certificate for Class B - Special
Series 1 units of beneficial interest is incorporated herein
by reference to Exhibit (4)(d) to Post-Effective Amendment No.
13 to the Registrant's Registration Statement filed on July
27, 1990.
(e) Specimen copy of share certificate for Class C units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(c) to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement filed on January 30, 1986.
(f) Specimen copy of share certificate for Class C - Special
Series 1 units of beneficial interest is incorporated herein
by reference to Exhibit (4)(f) to Post-Effective Amendment No.
13 to Registrant's Registration Statement filed July 27, 1990.
(g) Specimen copy of share certificates for Class D units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(d) to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement filed on January 30, 1986.
(h) Specimen copy of share certificate for Class D - Special
Series 1 units of beneficial interest is incorporated hereby
by reference to Exhibit (4)(h) to Post-Effective Amendment No.
13 to Registrant's Registration Statement filed July 27, 1990.
(i) Specimen copy of share certificate for Class E units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(e) to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement filed on January 30, 1986.
(j) Specimen copy of share certificate for Class F units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(f) to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement filed on January 30, 1986.
(k) Specimen copy of share certificate for Class G units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(g) to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement filed on January 30, 1986.
C-6
<PAGE> 198
(l) Specimen copy of share certificate for Class J units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(h) to Post-Effective Amendment No. 6 to
Registrant's Registration Statement filed on August 1, 1989.
(m) Specimen copy of share certificate for Class H units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(i) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement filed on April 17, 1990.
(n) Specimen copy of share certificate for Class H - Special
Series 1 units of beneficial interest is incorporated herein
by reference to Exhibit (4)(1) to Post-Effective Amendment No.
10 to Registrant's Registration Statement filed on April 17,
1990.
(o) Specimen copy of share certificate for Class I units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(k) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement filed on April 17, 1990.
(p) Specimen copy of share certificate for Class I - Special
Series 1 units of beneficial interest is incorporated herein
by reference to Exhibit (4)(l) to Post-Effective Amendment No.
10 to Registrant's Registration Statement filed on April 17,
1990.
(q) Specimen copy of share certificate for Class K units of
beneficial interest is incorporated herein by reference to
Exhibit (4)(m) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement filed on April 17, 1990.
(r) Specimen copy of share certificate for Class K - Special
Series 1 units of beneficial interest is incorporated herein
by reference to Exhibit (4)(n) to Post-Effective Amendment No.
10 to Registrant's Registration Statement filed on April 17,
1990.
(6) (a) Investment Advisory Agreement for the Money Market Portfolio,
Government Portfolio and Treasury Portfolio among Registrant
and National City Bank and BancOhio National Bank, dated June
17, 1986 is incorporated herein by reference to Exhibit (5)(a)
to Post-Effective Amendment No. 1 to Registrant's Registration
Statement filed on December 16, 1986.
(b) Investment Advisory Agreement for the Money Market Portfolio
(Trust), Government Portfolio (Trust) and
C-7
<PAGE> 199
Treasury Portfolio (Trust) among Registrant and National City
Bank and BancOhio National Bank, dated June 17, 1986 is
incorporated herein by reference to Exhibit (5)(b) to
Post-Effective Amendment No. 1 to Registrant's Registration
Statement filed on December 16, 1986.
(c) Investment Advisory Agreement for the Tax Exempt Portfolio
between Registrant and National City Bank, dated July 11,
1989, is incorporated herein by reference to Exhibit (5)(c) to
Post-Effective Amendment No. 7 to Registrant's Registration
Statement filed on September 28, 1989.
(d) Investment Advisory Agreement for the Tax Exempt Portfolio
(Trust) between Registrant and National City Bank, dated
October 17, 1989 is incorporated herein by reference to
Exhibit (5)(d) to Post-Effective Amendment No. 10 to
Registrant's Registration Statement filed April 17, 1990.
(e) Investment Advisory Agreement for the Bond Portfolio, Equity
Portfolio and Ohio Tax Exempt Portfolio among Registrant and
National City Bank and BancOhio National Bank, dated December
22, 1989 is incorporated herein by reference to Exhibit (5)(e)
to Post-Effective Amendment No. 10 to Registrant's
Registration Statement filed April 17, 1990.
(f) Investment Advisory Agreement for the Money Market Portfolio,
Government Portfolio, Treasury Portfolio, Tax Exempt
Portfolio, Equity Portfolio, Bond Portfolio and Ohio Tax
Exempt Portfolio among Registrant, National City Bank,
BancOhio National Bank and First National Bank of Louisville
dated September 26, 1990 is incorporated herein by reference
to Exhibit (5)(f) to Post-Effective Amendment No. 14 to
Registrant's Registration Statement filed on September 5,
1990.
(g) Investment Advisory Agreement for the Money Market Portfolio
(Trust), Government Portfolio (Trust), Treasury Portfolio
(Trust) and Tax Exempt Portfolio (Trust) among Registrant,
National City Bank, BancOhio National Bank and First National
Bank of Louisville dated September 26, 1990 is incorporated
herein by reference to Exhibit (5)(g) to Post-Effective
Amendment No. 14 to Registrant's Registration Statement filed
on September 5, 1990.
(h) Investment Advisory Agreement for the Enhanced Income Fund and
the Total Return Advantage Fund between Registrant and
National Asset Management Corporation
C-8
<PAGE> 200
dated July 5, 1994, is incorporated herein by reference to
Exhibit (5)(h) to Post-Effective Amendment No. 21 to
Registrant's Registration Statement filed on August 31, 1994.
(i) Investment Advisory Agreement for the Equity Income Portfolio
among Registrant, National City Bank, National City Bank,
Columbus and National City Bank, Kentucky dated June 30, 1994,
is incorporated herein by reference to Exhibit (5)(i) to Post-
Effective Amendment No. 21 to Registrant's Registration
Statement filed on August 31, 1994.
(j) Investment Advisory Agreement for the Mid Cap Regional Equity
Portfolio between Registrant and National City Bank dated July
25, 1994, is incorporated herein by reference to Exhibit
(5)(j) to Post-Effective Amendment No. 21 to Registrant's
Registration Statement filed on August 31, 1994.
(k) Investment Advisory Agreement for the National Tax Exempt
Portfolio among Registrant, National City Bank, National City
Bank, Columbus, National City Bank, Kentucky and National City
Bank, Indiana is incorporated herein by reference to Exhibit
(5)(l) to Post-Effective Amendment No. 20 to Registrant's
Registration Statement filed on February 11, 1994.
(7) (a) Distribution Agreement for the Money Market Portfolio (Trust),
Government Portfolio (Trust), Treasury Portfolio (Trust),
Money Market Portfolio, Government Portfolio and Treasury
Portfolio between Registrant and McDonald & Company
Securities, Inc., dated June 17, 1986 is incorporated herein
by reference to Exhibit (6)(a) to Post-Effective Amendment No.
1 to Registrant's Registration Statement filed on December 16,
1986.
(b) Distribution Agreement for the Tax Exempt Portfolio between
Registrant and McDonald & Company Securities, Inc. is
incorporated herein by reference to Exhibit (6)(b) to
Post-Effective Amendment No. 1 to Registrant's Registration
Statement filed on December 16, 1986.
(c) Distribution Agreement for the Tax Exempt Portfolio (Trust)
between Registrant and McDonald & Company Securities, Inc.,
dated October 17, 1989 is incorporated herein by reference to
Exhibit (6)(c) to Post-Effective Amendment No. 12 to
Registrant's Registration Statement filed on June 25, 1990.
C-9
<PAGE> 201
(d) Distribution Agreement for the Bond Portfolio, Equity
Portfolio and Ohio Tax Exempt Portfolio between Registrant and
McDonald & Company Securities, Inc., dated December 22, 1989
is incorporated herein by reference to Exhibit (6)(d) to
Post-Effective Amendment No. 12 to Registrant's Registration
Statement filed on June 25, 1990.
(e) Distribution Agreement for the Money Market, Government,
Treasury, Tax Exempt, Money Market (Trust), Government
(Trust), Treasury (Trust), Tax Exempt (Trust), Equity, Fixed
Income and Ohio Tax Exempt Portfolios of the Registrant among
Registrant, Allmerica Investments, Inc. and State Mutual Life
Assurance Company of America, dated March 1, 1993, is
incorporated herein by reference to Exhibit (6)(e) to
Post-Effective Amendment No. 16 to Registrant's Registration
Statement filed on March 1, 1993.
(f) Distribution Agreement among Registrant, Allmerica
Investments, Inc. and State Mutual Life Assurance Company of
America, dated April 11, 1994, is incorporated herein by
reference to Exhibit (6)(f) to Post-Effective Amendment No. 21
to Registrant's Registration Statement filed on August 31,
1994.
(g) Distribution Agreement among Registrant, The Shareholder
Services Group, Inc. d/b/a/ 440 Financial and 440 Financial
Distributors, Inc., dated March 31, 1995, is incorporated
herein by reference to Exhibit (6)(g) to Post-Effective
Amendment No. 23 to Registrant's Registration Statement filed
on May 11, 1995.
(8) None.
(9) (a) Custodian Services Agreement between Registrant and National
City Bank, dated November 7, 1994, is incorporated herein by
reference to Exhibit (8)(a) to Post-Effective Amendment No. 22
to Registrant's Registration Statement filed on December 30,
1994.
(b) Sub-Custodian Agreement between National City Bank and The
Bank of California, National Association, dated November 7,
1994, is incorporated herein by reference to Exhibit (8)(a) to
Post-Effective Amendment No. 22 to Registrant's Registration
Statement filed on December 30, 1994.
(10) (a) Registrant's 12b-1 Plan is incorporated herein by reference to
Exhibit (15) to Pre-Effective Amendment
C-10
<PAGE> 202
No. 1 to Registrant's Registration Statement filed on January
13, 1986.
(b) Registrant's Revised Service and Distribution Plan, dated
March 1, 1993 is incorporated herein by reference to Exhibit
(15)(b) to Post-Effective Amendment No. 16 to Registrant's
Registration Statement filed on March 1, 1993.
(c) Revised Plan Pursuant to Rule 18f-3 for Operation of a
Dual-Class System.
(11) Opinion of Drinker Biddle & Reath that shares will be validly issued,
fully paid and non-assessable (including consent of such firm).
(12) Opinion of Drinker Biddle & Reath as to tax matters and consequences
(including consent of such firm).
(13) (a) Administration and Accounting Services Agreement for the Money
Market Portfolio, Government Portfolio and Treasury Portfolio
between Registrant and Provident Financial Processing
Corporation, dated September 11, 1987 is incorporated herein
by reference to Exhibit (9)(a) to Post-Effective Amendment No.
13 to Registrant's Registration Statement filed on July 27,
1990.
(b) Administration and Accounting Services Agreement for the Money
Market Portfolio (Trust), Government Portfolio (Trust) and
Treasury Portfolio (Trust) between Registrant and Provident
Financial Processing Corporation, dated September 11, 1987 is
incorporated herein by reference to Exhibit (9)(b) to
Post-Effective Amendment No. 13 to Registrant's Registration
Statement filed on July 27, 1990.
(c) Administration and Accounting Services Agreement for Money
Market Portfolio, Government Portfolio, Treasury Portfolio,
Tax Exempt Portfolio, Money Market Portfolio (Trust),
Government Portfolio (Trust), Treasury Portfolio (Trust) and
Tax Exempt Portfolio (Trust) between Registrant and Provident
Financial Processing Corporation, dated October 17, 1989 is
incorporated herein by reference to Exhibit (9)(c) to
Post-Effective Amendment No. 12 to Registrant's Registration
Statement filed on June 25, 1990.
(d) Administration and Accounting Services Agreement for Equity
Portfolio, Bond Portfolio and Ohio Tax Exempt Portfolio
between Registrant and Provident Financial Processing
Corporation, dated December 22, 1989 is
C-11
<PAGE> 203
incorporated herein by reference to Exhibit (9)(d) to
Post-Effective Amendment No. 12 to Registrant's Registration
Statement filed on June 25, 1990.
(e) Administration and Accounting Services Agreement between
Registrant and PFPC Inc., dated March 1, 1993 is incorporated
by reference to Exhibit (9)(l) to Post-Effective Amendment No.
16 to Registrant's Registration Statement filed on March 1,
1993.
(f) Exhibit A to Administration and Accounting Services Agreement
dated March 1, 1993 between Registrant and PFPC, Inc., dated
June 1, 1994, is incorporated herein by reference to Exhibit
(9)(f) to Post-Effective Amendment No. 21 to Registrant's
Registration Statement filed on August 31, 1994.
(g) Transfer Agency Agreement between Registrant, 440 Financial
Group of Worcester, Inc. and State Mutual Life Assurance
Company of America, dated March 1, 1993 is incorporated by
reference to Exhibit (9)(m) to Post-Effective Amendment No. 16
to Registrant's Registration Statement filed on March 1, 1993.
(h) Transfer Agency Agreement between Registrant and The
Shareholder Services Group, Inc. d/b/a 440 Financial, dated
March 31, 1995, is incorporated herein by reference to Exhibit
(9)(h) to Post-Effective Amendment No. 23 to Registrant's
Registration Statement filed on May 11, 1995.
(i) Shareholder Services Plan and Form of Servicing Agreement is
incorporated herein by reference to Exhibit (9)(g) to Post-
Effective Amendment No. 7 to Registrant's Registration
Statement filed on September 28, 1989.
(j) Shareholder Services Plan and Form of Servicing Agreement
adopted by the Board of Trustees on January 9, 1990 is
incorporated herein by reference to Exhibit (9)(h) to
Post-Effective Amendment No. 10 to Registrant's Registration
Statement filed April 17, 1990.
(k) Shareholder Services Plan and Form of Servicing Agreement
adopted by the Board of Trustees on February 14, 1991 is
incorporated herein by reference to Exhibit (9)(k) to
Post-Effective Amendment No. 14 to Registrant's Registration
Statement filed September 5, 1991.
C-12
<PAGE> 204
(l) Shareholder Services Plan and Form of Servicing Agreement
adopted by the Board of Trustees on November 4, 1993 is
incorporated herein by reference to Exhibit (9)(o) to
Post-Effective Amendment No. 20 to Registrant's Registration
Statement filed February 8, 1994.
(m) Shareholder Services Plan and Servicing Agreement adopted by
the Board of Trustees on April 1, 1995, is incorporated herein
by reference to Exhibit (9)(m) to Post-Effective Amendment No.
23 to Registrant's Registration Statement filed on May 11,
1995.
(n) Shareholder Services Plan and Servicing Agreement adopted by
the Board of Trustees on February 15, 1996.
(14) (a) Consent of Drinker Biddle & Reath.
(b) Consent of Coopers & Lybrand L.L.P.
(c) Consent of Ernst & Young LLP.
(15) None.
(16) None.
(17) (a) Declaration of Registrant pursuant to Rule 24f-2 under the
Investment Company Act of 1940.
(b) Forms of Proxy.
(c) Prospectus for Registrant's Equity, Equity Income and Mid Cap
Regional Funds dated September 28, 1995.
(d) Statement of Additional Information for Registrant's Armada
Equity, Equity Income and Mid Cap Regional Funds dated
September 28, 1995.
(e) Prospectus for the Inventor Prime Obligations Money Market,
Treasury Securities Money Market, Intermediate Government
Securities, GNMA Securities and Equity Growth Funds dated
August 28, 1995 (as supplemented May 2, 1996).
(f) Prospectus for the Inventor Pennsylvania Municipal Bond and
Pennsylvania Tax-Exempt Money Market Funds dated August 28,
1995 (as supplemented May 2, 1996).
(g) Statement of Additional Information for the Inventor Prime
Obligations Money Market, Treasury Securities Money Market,
Intermediate Government Securities, GNMA Securities, Equity
Growth, Pennsylvania Municipal Bond
C-13
<PAGE> 205
and Pennsylvania Tax-Exempt Money Market Funds dated August
28, 1995.
(h) Annual Report dated May 31, 1995 for Registrant's Mid Cap
Regional, Equity and Equity Income Funds.
(i) Semi-Annual Report dated November 30, 1995 for Registrant's
Equity, Equity Income and Mid Cap Regional Funds.
(j) 1995 Annual Report to Shareholders dated April 30, 1995 for
Inventor Funds, Inc.
(k) 1995 Semi-Annual Report to Shareholders dated October 30, 1995
for Inventor Funds, Inc.
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act of 1933, as
amended, the reoffering prospectus will contain the
information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of
an amendment to the registration statement and will not be
used until the amendment is effective, and that, in
determining any liability under the 1933 Act, each
post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and
the offering of the securities at that time shall be deemed to
be the initial bona fide offering of them.
C-14
<PAGE> 206
SIGNATURES
----------
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed on behalf of the Registrant, in the City
of Cleveland, State of Ohio, on the 13th day of May, 1996.
ARMADA FUNDS
Registrant
/s/Leigh Carter
-------------------------
President
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard B. Tullis Chairman of the Board May 13, 1996
- ---------------------
Richard B. Tullis
/s/Thomas R. Benua, Jr. Trustee May 13, 1996
- -----------------------
Thomas R. Benua, Jr.
/s/Leigh Carter Trustee, President May 13, 1996
- --------------- and Treasurer
Leigh Carter (Principal Financial
and Accounting
Officer)
/s/John F. Durkott Trustee May 13, 1996
- ------------------
John F. Durkott
/s/Richard W. Furst Trustee May 13, 1996
- -------------------
Richard W. Furst
Trustee
- -------------------
Richard D. Neary
/s/J. William Pullen Trustee May 13, 1996
- --------------------
J. William Pullen
</TABLE>
<PAGE> 207
N-14
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
(10)(c) Revised Plan Pursuant to Rule
18f-3 for Operation of a Dual-
Class System.
(11) Opinion of Drinker Biddle &
Reath that shares will be
validly issued, fully paid and
non-assessable (including
consent of such firm).
(12) Opinion of Drinker Biddle &
Reath as to tax matters and
consequences (including consent
of such firm).
(13)(n) Shareholder Services Plan and
Servicing Agreement adopted by
the Board of Trustees on
February 15, 1996.
(14)(a) Consent of Drinker Biddle & Reath.
(14)(b) Consent of Coopers & Lybrand L.L.P.
(14)(c) Consent of Ernst & Young LLP.
(17)(a) Declaration of Registrant
pursuant to Rule 24f-2 under
the Investment Company Act of
1940.
(17)(b) Forms of Proxy.
(17)(c) Prospectus for Registrant's
Equity, Equity Income and Mid
Cap Regional Funds
dated September 28, 1995.
(17)(d) Statement of Additional
Information for Registrant's
Equity, Equity Income and Mid
Cap Regional Funds
dated September 28, 1995.
</TABLE>
<PAGE> 208
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
(17)(e) Prospectus for the Inventor
Prime Obligations Money Market,
Treasury Securities Money
Market, Intermediate Government
Securities, GNMA Securities and
Equity Growth Funds dated
August 28, 1995 (as
supplemented May 2, 1996).
(17)(f) Prospectus for the Inventor
Pennsylvania Municipal Bond and
Pennsylvania Tax-Exempt Money
Market Funds dated August 28,
1995 (as supplemented May 2,
1996).
(17)(g) Statement of Additional
Information for the Inventor
Prime Obligations Money Market,
Treasury Securities Money
Market, Intermediate Government
Securities, GNMA Securities,
Equity Growth, Pennsylvania
Municipal Bond and Pennsylvania
Tax-Exempt Money Market Funds
dated August 28, 1995.
(17)(h) Annual Report dated May 31,
1995 for Registrant's Mid Cap
Regional, Equity and Equity
Income Funds.
(17)(i) Semi-Annual Report dated
November 30, 1995 for
Registrant's Equity, Equity
Income and Mid Cap Regional
Funds.
(17)(j) 1995 Annual Report to
Shareholders dated April 30,
1995 for Inventor Funds, Inc.
(17)(k) 1995 Semi-Annual Report to
Shareholders dated October 30,
1995 for Inventor Funds, Inc.
</TABLE>
-2-
<PAGE> 1
Exhibit (10)(d)
ARMADA FUNDS
(THE "TRUST")
REVISED PLAN PURSUANT TO RULE 18F-3 FOR OPERATION OF
A DUAL-CLASS SYSTEM
----------------------------------------------------
I. INTRODUCTION
----------------
On February 23, 1995, the Securities and Exchange Commission (the
"Commission") promulgated Rule 18f-3 under the Investment Company Act of 1940,
as amended (the "1940 Act"), which permits the creation and operation of a
multi-class distribution structure without the need to obtain an exemptive
order under Section 18 of the 1940 Act. Rule 18f-3, which became effective on
April 3, 1995, requires an investment company to file with the Commission, a
written plan specifying all of the differences among the classes, including the
various services offered to shareholders, the different distribution
arrangements for each class, the methods for allocating expenses relating to
those differences and any conversion features or exchange privileges. On July
20, 1995, the Board of Trustees of the Trust authorized the Trust to operate
its current dual-class distribution structure in compliance with Rule 18f-3.
This Plan is pursuant to Rule 18f-3. This revised plan shall become effective
with respect to each of the National Tax Exempt, Pennsylvania Tax Exempt,
Intermediate Government, GNMA, and Pennsylvania Municipal Funds upon the
respective commencement of operations of each such Fund.
II. ATTRIBUTES OF CLASSES
--------------------------
A. Generally
---------
The Trust shall initially offer two classes of shares as follows:
Money Market Funds
------------------
Class A shares ("Institutional shares") and Class A-Special Series 1
shares ("Retail shares") in the Money Market Fund, Class B shares
("Institutional shares") and Class-B Special Series 1 shares ("Retail shares")
in the Government Fund, Class C shares ("Institutional shares") and Class
C-Special Series 1 shares ("Retail shares") in the Treasury Fund, Class D
shares ("Institutional shares") and Class D-Special Series 1 shares ("Retail
shares") in the Tax Exempt Fund, and Class Q shares ("Institutional Shares")
and Class Q-Special Series 1 shares ("Retail shares") in the Pennsylvania Tax
Exempt Fund.
<PAGE> 2
Fixed Income Funds
------------------
Class I shares ("Institutional shares") and Class I-Special Series 1
shares ("Retail shares") in the Fixed Income Fund, Class O Shares
("Institutional shares") and Class O-Special Series 1 shares ("Retail shares")
in the Enhanced Income Fund, and Class P shares ("Institutional shares"), Class
P-Special Series 1 shares ("Retail shares") in the Total Return Advantage Fund,
Class R shares ("Institutional shares") and Class R-Special Series 1 shares
("Retail shares") in the Intermediate Government Fund, and Class S shares
("Institutional shares") and Class S- Special Series 1 shares ("Retail shares")
in the GNMA Fund.
Equity Funds
------------
Class H shares ("Institutional shares") and Class H-Special Series 1
shares ("Retail shares") in the Equity Fund, Class M shares ("Institutional
shares") and Class M-Special Series 1 shares ("Retail shares") in the Equity
Income Fund, and Class N shares ("Retail shares") and Class N-Special Series 1
shares in the Mid Cap Regional Fund.
Ohio Tax Exempt Fund
--------------------
Class K shares ("Institutional shares") and Class K-Special Series 1
shares ("Retail shares"), in the Ohio Tax Exempt Fund.
National Tax Exempt Fund
------------------------
Class L shares ("Institutional shares") and Class L-Special Series 1
shares ("Retail shares"), in the National Tax Exempt Fund.
Pennsylvania Municipal Fund
---------------------------
Class T shares ("Institutional shares") and Class T-Special Series 1
shares ("Retail shares") in the Pennsylvania Municipal Fund.
In general, shares of each class shall be identical except for
different expense variables (which will result in different returns for each
class), certain related rights and certain shareholder services. More
particularly, the Institutional and Retail shares of each Fund shall represent
interests in the same portfolio of investments of the particular Fund, and
shall be identical in all respects, except for: (a) the impact of (i) expenses
assessed to a class pursuant to the Shareholder Services Plan adopted for the
class and (ii) any other incremental expenses identified from time to time that
should be properly allocated to one class so long as any changes in expense
allocations are reviewed and approved by a vote of the Board of Trustees,
including a majority of the independent trustees; (b)
-2-
<PAGE> 3
the fact that a class shall vote separately on any matter submitted to the
shareholders that pertains to (i) the Shareholder Services Plan adopted for
that class and (ii) the class expenses borne by the class; (c) the exchange
privileges of each class of shares; (d) the legal designation of each class of
shares; and (e) the different shareholder services relating to a class of
shares.
B. Shareholder Servicing Arrangements, Expenses and Sales
-------------------------------------------------------
Charges
-------
1. Money Market Funds
RETAIL SHARES
Retail shares of each money market fund shall be available for
purchase by the public, primarily through financial institutions such as banks,
brokers and dealers.
Retail shares of each money market fund shall not be subject
to a sales charge. Retail shares shall be subject to a fee payable pursuant to
the Shareholder Services Plan adopted for the class which shall not initially
exceed .10% (on an annualized basis) of the average daily net asset value of
those shares beneficially owned by customers of the financial institutions who
have entered into agreements with the Trust pursuant to the Shareholder
Services Plan adopted for the class.
Services provided under the Shareholder Services Plan adopted
for the class may include (i) segregating and processing purchase and
redemption orders; (ii) processing dividend payments; (iii) providing
information periodically to customers showing their position in Retail shares
and (iv) providing subaccounting services.
INSTITUTIONAL SHARES
Institutional shares of each money market fund shall be
available for purchase by banks and National Asset Management Corporation
customers.
Institutional shares of each money market fund shall not be
subject to a sales charge or to a shareholder servicing fee under a non-12b-1
Plan.
2. Fixed Income Funds
------------------
RETAIL SHARES
Retail shares of each fixed income fund shall be available for
purchase by the public, primarily through financial institutions such as banks,
brokers and dealers.
-3-
<PAGE> 4
Retail shares of the Fixed Income, Enhanced Income, Total
Return Advantage, Intermediate Government, and GNMA Funds shall be subject to a
sales charge which shall not initially exceed 3.75%, 2.75%, 3.75%, 3.75%, and
3.75%, respectively, of the offering price of those shares. Retail shares also
shall be subject to a fee payable pursuant to the Shareholder Services Plan
adopted for the class which shall not initially exceed .10% (on an annualized
basis) with respect to the Enhanced Income Fund and .25% (on an annualized
basis) with respect to the Fixed Income, Total Return Advantage, Intermediate
Government, and GNMA Funds of the average daily net asset value of those shares
beneficially owned by customers of the financial institutions who have entered
into agreements with the Trust pursuant to the Shareholder Services Plan
adopted for the class.
Services provided under the Shareholder Services Plan adopted
for the class may include: (i) segregating and processing purchase and
redemption orders; (ii) processing dividend payments; (iii) providing
information periodically to customers showing their position in Retail shares
and (iv) providing sub-transfer agent services.
INSTITUTIONAL SHARES
Institutional shares of each of the fixed income funds shall
be available for purchase by banks and National Asset Management Corporation
customers.
Institutional shares of each if the fixed income funds shall
not be subject to a sales charge or to a shareholder servicing fee under a
non-12b-1 Plan.
3. Equity Funds
------------
RETAIL SHARES
Retail shares of each equity fund shall be available for
purchase by the public, primarily through financial institutions such as banks,
brokers and dealers.
Retail shares of each equity fund shall be subject to a sales
charge which shall not initially exceed 3.75% of the offering price of those
shares. Retail shares of each equity fund also shall be subject to a fee
payable pursuant to the Shareholder Services Plan adopted for the class which
shall not initially exceed .25% (on an annualized basis) of the average daily
net asset value of those shares beneficially owned by customers of the
financial institutions who have entered into agreements with the Trust pursuant
to the Shareholder Services Plan adopted for the class.
-4-
<PAGE> 5
Services provided under the Shareholder Services Plan adopted
for the class may include (i) segregating and processing purchase and
redemption orders; (ii) processing dividend payments; (iii) providing
information periodically to customers showing their position in Retail shares
and (iv) providing sub-transfer agent services.
INSTITUTIONAL SHARES
Institutional shares of each equity fund shall be available
for purchase by banks and National Asset Management Corporation customers.
Institutional shares of each equity fund shall not be subject
to a sales charge or to a shareholder servicing fee under a non-12b-1 Plan.
4. Ohio Tax Exempt Fund
--------------------
RETAIL SHARES
Retail shares of the Ohio Tax Exempt Fund shall be available
for purchase by the public, primarily through financial institutions such as
banks, brokers and dealers.
Retail shares of the Ohio Tax Exempt Fund shall be subject to
a sales charge which shall not initially exceed 3.00% of the offering price of
those shares. Retail shares of the Ohio Tax Exempt Fund also shall be subject
to a fee payable pursuant to the Shareholder Services Plan adopted for the
class which shall not initially exceed .10% (on an annualized basis) of the
average daily net asset value of the Retail shares of the Ohio Tax Exempt Fund
beneficially owned by customers of the financial institutions who have entered
into agreements with the Trust pursuant to the Shareholder Services Plan
adopted for the class.
Services provided under the Shareholder Services Plan adopted
for the class may include (i) segregating and processing purchase and
redemption orders; (ii) processing dividend payments; (iii) providing
information periodically to customers showing their position in Retail shares
and (iv) providing sub-transfer agent services.
INSTITUTIONAL SHARES
Institutional shares of the Ohio Tax Exempt Fund shall be
available for purchase by banks and National Asset Management Corporation
customers.
Institutional shares of the Ohio Tax Exempt Fund shall not be
subject to a sales charge or a shareholder servicing fee under a non-12b-1
Plan.
-5-
<PAGE> 6
6. National Tax Exempt Fund
------------------------
RETAIL SHARES
Retail shares of the National Tax Exempt Fund shall be
available for purchase by the public, primarily through financial institutions
such as banks, brokers and dealers.
Retail shares of the National Tax Exempt Fund shall be subject
to a sales charge which shall not initially exceed 3.75% of the offering price
of those shares. Retail shares of the National Tax Exempt Fund also shall be
subject to a fee payable pursuant to the Shareholder Services Plan adopted for
the class which shall not initially exceed .25% (on an annualized basis) of the
average daily net asset value of the Retail shares of the National Tax Exempt
Fund beneficially owned by customers of the financial institutions who have
entered into agreements with the Trust pursuant to the Shareholder Services
Plan adopted for the class.
Services provided under the Shareholder Services Plan adopted
for the class may include (i) segregating and processing purchase and
redemption orders; (ii) processing dividend payments; (iii) providing
information periodically to customers showing their position in Retail shares
and (iv) providing sub-transfer agent services.
INSTITUTIONAL SHARES
Institutional shares of the National Tax Exempt Fund shall be
available for purchase by banks and National Asset Management Corporation
customers.
Institutional shares of the National Tax Exempt Fund shall not
be subject to a sales charge or a shareholder servicing fee under a non-12b-1
Plan.
7. Pennsylvania Municipal Fund
---------------------------
RETAIL SHARES
Retail shares of the Pennsylvania Municipal Fund shall be
available for purchase by the public, primarily through financial institutions
such as banks, brokers and dealers.
Retail shares of the Pennsylvania Municipal Fund shall be
subject to a sales charge which shall not initially exceed 3.00% of the
offering price of those shares. Retail shares of the Pennsylvania Municipal
Fund also shall be subject to a fee payable pursuant to the Shareholder
Services Plan adopted for the class which shall not initially exceed .10% (on
an annualized basis) of the average daily net asset value of the Retail shares
-6-
<PAGE> 7
of the Pennsylvania Municipal Fund beneficially owned by customers of the
financial institutions who have entered into agreements with the Trust pursuant
to the Shareholder Services Plan adopted for the class.
Services provided under the Shareholder Services Plan adopted
for the class may include (i) segregating and processing purchase and
redemption orders; (ii) processing dividend payments; (iii) providing
information periodically to customers showing their position in Retail shares
and (iv) providing sub-transfer agent services.
INSTITUTIONAL SHARES
Institutional shares of the Pennsylvania Municipal Fund shall
be available for purchase by banks and National Asset Management Corporation
customers.
Institutional shares of the Pennsylvania Municipal Fund shall
not be subject to a sales charge or a shareholder servicing fee under a
non-12b-1 Plan.
C. Exchange Privileges
-------------------
RETAIL SHARES
Holders of Retail shares who paid a sales charge to purchase Retail
shares of a Fund (each a "Load Fund") generally shall be permitted to exchange
those shares for shares of another Load Fund, or another investment fund
offered by the Trust without paying a sales charge (a "No Load Fund") at the
net asset value per share on the date of exchange. Holders of Retail shares of
a No Load Fund shall generally be permitted to exchange those shares for Retail
shares of another No Load Fund offered by the Trust. Holders of Retail shares
of a No Load Fund shall generally be permitted to exchange those shares for
Retail shares of a Load Fund but shall be subject to the sales load applicable
to the Load Fund. However, holders of Retail shares of a No Load Fund who
acquired those shares through a previous exchange involving shares on which a
load was paid, generally shall not be required to pay an additional sales
charge upon notification of the reinvestment of the equivalent amount into the
Retail shares of a Load Fund.
INSTITUTIONAL SHARES
Holders of Institutional shares generally shall be permitted to
exchange those shares for Institutional shares of another Fund of the Trust.
D. Methodology for Allocating Expenses Between Classes
---------------------------------------------------
-7-
<PAGE> 8
On a daily basis, expenses are attributable to each class of shares
depending on the nature of the expenditures. These fall into two categories:
(1) shareholder service payments attributable to only Retail shares; and (2)
other expenses which are attributable and allocated to both classes.
Prior to determining the day's net asset value or
dividends/distributions, the following expense items must be calculated as
indicated:
Money Market Funds
------------------
ADVISORY, CUSTODY AND ADMINISTRATION FEES
Using the current day's total Fund net assets, calculate the current
day's accrual and allocate to the respective classes based upon relative
settled shares outstanding.
SHAREHOLDER SERVICE PAYMENTS
Using the current day's Retail class net assets, calculate the current
day's accrual.
ALL OTHER EXPENSES
Determine the daily accrual from the Fund's expense budget and
allocate to each class based upon relative settled shares outstanding.
Daily Distribution Floating NAV Funds
-------------------------------------
ADVISORY, CUSTODY AND ADMINISTRATION FEES
Using the beginning of day total Fund net assets, calculate the
current day's accrual and allocate to the respective classes based upon the
relative value of settled shares.
SHAREHOLDER SERVICE PAYMENTS
Using the beginning of day Retail class net assets, calculate the
current day's accrual.
ALL OTHER EXPENSES
Determine the daily accrual from the Fund's expense budget and
allocate to each class based upon relative values of settled shares.
Periodic Distribution Floating NAV Funds
----------------------------------------
ADVISORY, CUSTODY AND ADMINISTRATION FEES
-8-
<PAGE> 9
Using the beginning of day total Fund net assets, calculate the
current day's accrual and allocate to the respective classes based upon
relative net assets.
SHAREHOLDER SERVICE PAYMENTS
Using the beginning of day Retail class net assets, calculate the
current day's accrual.
ALL OTHER EXPENSES
Determine the daily accrual from the Fund's expense budget and
allocate to each class based upon relative net assets.
Approved by the Board of Trustees
February 16, 1996
-9-
<PAGE> 1
Exhibit (11)
LAW OFFICES
DRINKER BIDDLE & REATH
PHILADELPHIA NATIONAL BANK BUILDING
1345 CHESTNUT STREET
PHILADELPHIA, PA 19107-3496
May 13, 1996
Armada Funds
4400 Computer Drive
Westborough, MA 01581
Re: Shares of Beneficial Interest ("Shares") of
Armada Funds
-------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Armada Funds, a Massachusetts
business trust (the "Trust"), in connection with the Agreement and Plan of
Reorganization contemplated by the Trust and Inventor Funds, Inc. ("Inventor"),
a Maryland corporation (the "Agreement"), providing for the transfer of
substantially all of the known assets and liabilities of the Inventor Equity
Growth, GNMA Securities, Intermediate Government Securities, Pennsylvania
Municipal Bond and Pennsylvania Tax Exempt Money Market Funds, each an
investment portfolio of Inventor (collectively, the "Inventor Funds"), in
exchange for Institutional Shares of the Trust's Equity, GNMA, Intermediate
Government, Pennsylvania Municipal and Pennsylvania Tax Exempt Funds,
respectively, each an investment portfolio of the Trust, which are to be
distributed by Inventor to holders of shares of the Inventor Funds (the
"Reorganization"). The Trust is authorized to issue an unlimited number of
shares in each class.
In rendering the opinions hereinafter expressed, we have
reviewed the Declaration of Trust, as amended, and Code of Regulations of the
Trust, the Trust's Registration Statement on Form N-14 (SEC File No.
33-488/811-4416) relating to the transaction contemplated by the Agreement, the
Combined Proxy Statement and Prospectus contained therein, the proceedings of
the Board of Trustees of the Trust approving the transactions contemplated by
the Agreement and other factual matters we deemed relevant.
As to questions of fact material to this opinion, we have
relied upon the accuracy of the representations and warranties of the parties
to the Agreement and other documents executed by officers and representatives
of the Trust, as the case may be, and upon certificates of public officials.
We have
<PAGE> 2
Armada Funds
May 13, 1996
Page 2
not undertaken any independent investigation or verification of factual
matters. Any change in any law, regulation or interpretation, or any change in
the facts, could cause a change in our opinion.
In our examination, we have assumed that: (i) all documents
submitted to us as originals are authentic, the signatures thereon are genuine
and the persons signing the same were of legal capacity; (ii) all documents
submitted to us as certified or photostatic copies conform to the original
documents and that such originals are authentic; and (iii) all certificates of
public officials upon which we have relied have been duly and properly given
and that any public records reviewed by us are complete.
We have made such examination of law as in our judgment is
necessary and appropriate for the purposes of this opinion. We do not purport
to be experts in the laws of any jurisdiction other than the federal laws of
the United States of America and the laws of the Commonwealth of Pennsylvania.
In rendering the opinions expressed herein, we have relied on an opinion of
Ropes & Gray to the extent that any matter which is the subject of this opinion
is governed by the laws of the Commonwealth of Massachusetts.
On the basis of and subject to the foregoing and such other
considerations as we deem relevant, we are of the opinion that the
Institutional Shares of the Trust's Equity, GNMA, Intermediate Government,
Pennsylvania Municipal and Pennsylvania Tax Exempt Funds to be issued and sold
in connection with the reorganization have been duly and validly authorized by
all appropriate action, and when delivered to the Inventor Funds in exchange
for the assets of the Inventor Funds as provided for in the Agreement, will be
validly issued, fully paid and non-assessable by the Trust.
Under Massachusetts law, shareholders of a Massachusetts
business trust could, under certain circumstances, be held personally liable
for the obligations of the Trust. However, the Trust's Declaration of Trust
disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each note, bond, contract,
order or other undertaking issued by or on behalf of the Trust or Trustees
relating to the Trust of any class of shares of
<PAGE> 3
Armada Funds
May 13, 1996
Page 3
beneficial interest of the Trust. The Trust's Declaration of Trust provides
for indemnification out of the assets of the particular portfolio of shares for
all loss and expense of any shareholder of that class held personally liable
solely by reason of his being or having been a shareholder. Thus, the risk of
a shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the assets of a portfolio would be
insufficient to meet that portfolio's obligations.
The opinions expressed in this letter are solely for the use
of Armada, and these opinions may not be referred to or used for any other
purpose or relied on by any other persons without our prior written approval.
The opinions expressed in this letter are limited to the matters set forth in
this letter, and no other opinions should be inferred beyond the matters
expressly stated.
We hereby consent to the inclusion of this opinion as an
exhibit to Armada's Registration Statement to be filed with the Securities and
Exchange Commission.
Very truly yours,
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
<PAGE> 1
Exhibit 12
LAW OFFICES
DRINKER BIDDLE & REATH
PHILADELPHIA NATIONAL BANK BUILDING
1345 CHESTNUT STREET
PHILADELPHIA, PA 19107-3496
May 13, 1996
Armada Funds
4400 Computer Drive
Westborough, Massachusetts 01581
Investor Funds, Inc.
680 East Swedesford Road
Wayne, Pennsylvania 19087-1658
Re: Agreement and Plan of Reorganization by and
between Armada Funds and Inventor Funds, Inc.
---------------------------------------------
Dear Sirs and Mesdames:
We have been asked to give our opinion, in accordance with the
above Agreement and Plan of Reorganization (the "Agreement"), as to certain
Federal income tax consequences of the transactions contemplated therein.
Background
- ----------
Armada Funds ("Armada") is a Massachusetts business trust
consisting of multiple investment portfolios, including the newly organized
GNMA Fund, Intermediate Government Fund, Pennsylvania Municipal Fund, and
Pennsylvania Tax Exempt Fund (the "New Armada Funds") and the Equity Fund
(together with the New Armada Funds, individually an "Acquiring Fund" and
collectively the "Acquiring Funds"). Inventor Funds, Inc. ("Inventor") is a
Maryland corporation consisting of multiple investment portfolios, including
the GNMA Securities Fund, Intermediate Government Securities Fund, Pennsylvania
Municipal Bond Fund, and Pennsylvania Tax-Exempt Money Market Fund
(individually, an "Acquired Fund" and collectively, the "Acquired Funds").
Armada and Inventor are both open-end management investment companies
registered with the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940, as amended (the "1940 Act").
<PAGE> 2
Armada Funds
Inventor Funds, Inc.
May 13, 1996
Page 2
At the Effective Time of the Reorganization (as defined in the
Agreement), it is contemplated that each Acquired Fund will transfer all of its
assets and liabilities to the corresponding Acquiring Fund in exchange for
shares of the Acquiring Fund. Inventor will then distribute the shares of each
Acquiring Fund to the shareholders of the corresponding Acquired Fund in
cancellation of all outstanding shares of the Acquired Fund, and the existence
of Inventor will be terminated. All of the above steps constitute the
"Reorganization." After the Reorganization, each Acquiring Fund will continue
the investment operations of the corresponding Acquired Fund.
Assumptions
- -----------
For purposes of this opinion, we have made certain
assumptions. Please advise us if you are aware of any facts inconsistent with
any of these assumptions:
First, each of the Acquired Funds and Armada's Equity Fund
qualified as a "regulated investment company" under Part I of Subchapter M of
Subtitle A, Chapter 1, of the Internal Revenue Code of 1986, as amended (the
"Code"), for its most recently ended fiscal year and each of the Acquired Funds
and each of the Acquiring Funds will so qualify for its current fiscal year.
Second, each Acquired Fund will tender for acquisition by the
corresponding Acquiring Fund assets consisting of at least 90% of the fair
market value of the net assets of the Acquired Fund and at least 70% of the
fair market value of its gross assets immediately prior to the Reorganization.
For purposes of this assumption, all of the following shall be considered as
assets of such Acquired Fund held immediately prior to the Reorganization: (a)
amounts used by the Acquired Fund to pay its expenses in connection with the
transactions contemplated hereby and (b) all amounts used to make redemptions
of or distributions on such Acquired Fund's shares (except for redemptions in
the ordinary course of its business, as required by section 22(e) of the 1940
Act pursuant to a demand for redemption by a shareholder of the Acquired Fund,
and distributions of net investment income and net capital gains, other than
net capital gains resulting from sales of assets for the purpose of satisfying
investment objectives of the Acquiring Fund, if any, that differ from the
existing investment objectives of the Acquired Fund).
<PAGE> 3
Armada Funds
Inventor Funds, Inc.
May 13, 1996
Page 3
Third, each Acquired Fund will distribute to its shareholders
in complete liquidation of the Acquired Fund the corresponding Acquiring Fund
shares that it will receive in the Reorganization as promptly as practicable
and having made such distributions will take all necessary steps to terminate
its existence.
Fourth, prior to the Reorganization, each Acquired Fund will
continue its historic business within the meaning of Treasury Regulations
section 1.368-1(d) and will not dispose of more than fifty percent (50%) of the
fair market value of its assets for the purpose of satisfying investment
objectives of the corresponding Acquiring Fund, if any, that differ from the
existing investment objectives of the Acquired Fund.
Fifth, following the Reorganization, each Acquiring Fund will
continue the historic business of the corresponding Acquired Fund or will use a
significant portion of the Acquired Fund's historic business assets in a
business.
Sixth, at the Effective Time of the Reorganization, the
adjusted income tax basis and the fair market value of the assets to be
transferred by each Acquired Fund to the corresponding Acquiring Fund will each
equal or exceed the sum of the liabilities to be assumed by the Acquiring Fund
or to which such transferred assets are subject.
Seventh, at the Effective Time of the Reorganization, there
will be no plan or intention by the shareholders of any Acquired Fund who own
five percent (5%) or more of the Acquired Fund's stock and, to the best of the
knowledge of the management of Inventor, no current plan or intention on the
part of the remaining shareholders of the Acquired Fund, to sell, exchange or
otherwise dispose of a number of shares of the corresponding Acquiring Fund's
stock to be received in the Reorganization that would reduce the Acquired Fund
shareholders' ownership of Acquiring Fund stock to a number of shares having a
value, as of the time of the Reorganization, of less than fifty percent (50%)
of the value of all of the formerly outstanding stock of the Acquired Fund
immediately prior to the Reorganization. For purposes of this assumption, (a)
shares of the Acquired Fund surrendered by dissenters will be treated as
outstanding Acquired Fund stock immediately prior to the Reorganization, and
(b) shares of the Acquired Fund and the Acquiring Fund held by
<PAGE> 4
Armada Funds
Inventor Funds, Inc.
May 13, 1996
Page 4
Acquired Fund shareholders and otherwise sold, redeemed or disposed of in
anticipation of the Reorganization, or subsequent to the Reorganization
pursuant to a plan or intention that existed at the time of the Reorganization,
also will be taken into account.
Eighth, at the Effective Time of the Reorganization, the
Acquiring Fund will have no plan or intention to reacquire any of its shares
issued in the Reorganization, except in the ordinary course of business.
Ninth, at the Effective Time of the Reorganization, no
Acquiring Fund will have any plan or intention to sell or otherwise to dispose
of any of the assets of the corresponding Acquired Fund acquired in the
Reorganization, except for dispositions made in the ordinary course of
business.
Tenth, there is and will be no intercorporate indebtedness
between any Acquiring Fund and its corresponding Acquired Fund that was issued,
acquired or will be settled at a discount.
Eleventh, no Acquiring Fund owns or will own, directly or
indirectly, nor has it owned during the past five years, directly or
indirectly, any stock of the corresponding Acquired Fund.
Twelfth, no Acquired Fund is or will be under the jurisdiction
of a court in a case under Title 11 of the United States Code or a
receivership, foreclosure or similar proceeding in any Federal or State court.
Thirteenth, the liabilities of each Acquired Fund that will be
assumed by the corresponding Acquiring Fund and the liabilities, if any, to
which the transferred assets will be subject were incurred by the Acquired Fund
in the ordinary course of its business.
Fourteenth, the Reorganization will be accomplished for the
purposes set forth in the Combined Proxy Statement/Prospectus (the "Proxy
Statement"), a draft of which is part of the Registration Statement (the
"Registration Statement") being filed this day with the SEC.
<PAGE> 5
Armada Funds
Inventor Funds, Inc.
May 13, 1996
Page 5
Fifteenth, the Agreement substantially in the form included as
an exhibit in the Proxy Statement will be duly authorized by the parties and
approved by the shareholders of each Acquired Fund, and the appropriate
documents will be filed with the appropriate government agencies.
Conclusions
- -----------
Based upon the Code, applicable Treasury Department
regulations in effect as of the date hereof, current published administrative
positions of the Internal Revenue Service contained in revenue rulings and
procedures, and judicial decisions, and upon the information, representations
and assumptions contained herein and in the documents provided to us by you
(including the Proxy Statement and the Agreement), it is our opinion for
Federal income tax purposes that:
(i) the transfer by each Acquired Fund of all of its assets
and liabilities to the corresponding Acquiring Fund in exchange for shares of
the corresponding Acquiring Fund, and the distribution of said shares to the
shareholders of the Acquired Fund, as provided in the Agreement, will
constitute a reorganization within the meaning of section 368(a)(1)(C),
368(a)(1)(D) or section 368(a)(1)(F) of the Code and each of the Acquiring
Funds and the Acquired Funds will be "a party to the reorganization" within the
meaning of section 368(b) of the Code;
(ii) in accordance with sections 361(a), 361(c)(1) and
357(a) of the Code, no gain or loss will be recognized by any Acquired Fund as
a result of the Reorganization;
(iii) in accordance with section 1032(a) of the Code, no gain
or loss will be recognized by any Acquiring Fund as a result of the
Reorganization;
(iv) in accordance with section 354(a)(1) of the Code, no gain
or loss will be recognized by the shareholders of any Acquired Fund on the
distribution to them by the Acquired Fund of shares of the corresponding
Acquiring Fund in exchange for their shares of the Acquired Fund;
(v) in accordance with section 358(a)(1) of the Code, the
aggregate basis of the Acquiring Fund shares received by each shareholder of an
Acquired Fund will be the same as the aggregate
<PAGE> 6
Armada Funds
Inventor Funds, Inc.
May 13, 1996
Page 6
basis of the shareholder's Acquired Fund shares exchanged therefor in the
Reorganization;
(vi) in accordance with section 362(b) of the Code, the
basis of the assets received by each Acquiring Fund in the Reorganization will
be the same as the basis of such assets in the hands of the corresponding
Acquired Fund immediately before the Reorganization;
(vii) in accordance with section 1223(1) of the Code, a
shareholder's holding period for Acquiring Fund shares will be determined by
including the period for which the shareholder held the shares of the Acquired
Fund exchanged therefor, provided that the shareholder held such shares of the
Acquired Fund as a capital asset;
(viii) in accordance with section 1223(2) of the Code, the
holding period of each Acquiring Fund with respect to the assets acquired in
the Reorganization will include the period for which such assets were held by
the corresponding Acquired Fund; and
(ix) in accordance with section 381(a) of the Code, each
Acquiring Fund will succeed to the tax attributes of the corresponding Acquired
Fund described in section 381(c) of the Code.
We express no opinion relating to any Federal income tax
matter except on the basis of the documents and assumptions described above.
In issuing our opinion, we have relied solely upon existing provisions of the
Code, existing and proposed regulations thereunder, and current administrative
positions and judicial decisions. Such laws, regulations, administrative
positions and judicial decisions are subject to change at any time. Any such
change could affect the validity of the opinion set forth above.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the references to our firm under the
caption "Information Relating to the Proposed Reorganization -- Federal Income
Tax Consequences" in the Proxy Statement. This does not constitute a consent
under section 7 of the Securities Act of 1933, and in consenting to such
references to our firm we have not certified any part of the Registration
<PAGE> 7
Armada Funds
Inventor Funds, Inc.
May 13, 1996
Page 7
Statement and do not otherwise come within the categories of persons whose
consent is required under section 7 or under the rules and regulations of the
SEC issued thereunder.
Very truly yours,
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
SDDH:EMM:FRB
<PAGE> 1
Exhibit (13)(n)
ARMADA FUNDS
Shareholder Services Plan
-------------------------
SECTION 1. Armada Funds (the "Trust") has adopted this Shareholder
Services Plan (the "Plan") in order to enable the Trust to bear certain
shareholder service and administrative expenses relating to Retail Shares of
its Money Market, Government, Treasury, Tax Exempt, Equity, Fixed Income, Ohio
Tax Exempt, Equity Income, National Tax Exempt, Mid Cap Regional, Enhanced
Income, Total Return Advantage, Pennsylvania Tax Exempt, Intermediate
Government, GNMA and Pennsylvania Municipal Funds, and any other
non-discretionary investment portfolios hereinafter established (collectively,
"Retail Shares").
SECTION 2. Any officer of the Trust is authorized to execute and
deliver, in the name and on behalf of the Trust, written agreements in
substantially the form attached hereto or in any other form duly approved by
the Board of Trustees (as provided in Section 4 below) ("Servicing Agreements")
with financial institutions, broker-dealers, or other industry professionals,
such as investment advisers, accountants, and estate planning firms ("Service
Organizations"). Such Servicing Agreements are incorporated herein by
reference and shall require the Service Organizations to provide shareholder
administrative services as set forth therein to their clients who beneficially
own Retail Shares in consideration for a fee, computed daily and paid monthly
in the manner set forth in the Servicing Agreements, at the annual rate of up
to .10% (as defined in such Servicing Agreement) with respect to the Money
Market, Government, Treasury, Tax Exempt, Ohio Tax Exempt, Enhanced Income,
Pennsylvania Tax Exempt, and Pennsylvania Municipal Funds and up to .25% (as
defined in such Servicing Agreement) with respect to the Equity, Fixed Income,
National Tax Exempt, Equity Income, Mid Cap Regional, Total Return Advantage,
Intermediate Government, and GNMA Funds. All expenses incurred by the Trust in
connection with the Servicing Agreements and the implementation of this Plan
shall be borne entirely by shareholders of the Trust.
SECTION 3. The Trust's Transfer Agent shall monitor the arrangements
pertaining to the Trust's Servicing Agreements with Service Organizations as
required by the Trust's Board of Trustees. The Trust's Transfer Agent shall
not, however, be obliged by this Plan to recommend, and the Trust shall not be
obliged to execute, any Servicing Agreement with any qualifying Service
Organization.
SECTION 4. So long as this Plan is in effect, the Trust's Transfer
Agent shall provide to the Trust's Board of Trustees, and the Trustees shall
review, at least quarterly, a written report of the amounts expended pursuant
to this Plan and the purposes for which such expenditures were made.
<PAGE> 2
SECTION 5. This Plan shall become effective upon the date of its
adoption and following approval of the Plan (and the form of Servicing
Agreement attached hereto) by (i) vote of a majority (as defined in the
Investment Company Act of 1940 ("1940 Act")) of the Trust's outstanding Retail
Shares or by (ii) vote of a majority of the Board of Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust as
defined in the 1940 Act and have no direct or indirect financial interest in
the operation of this Plan or in any Servicing Agreements or other agreements
related to this Plan (the "Disinterested Trustees"), pursuant to a vote cast in
person at a meeting called for the purpose of voting on the approval of this
Plan (or form of Servicing Agreement).
SECTION 6. Unless sooner terminated, this Plan shall continue for one
year from the date of its adoption and thereafter shall continue automatically
for successive annual periods of twelve months each, provided such continuance
is approved at least annually in the manner set forth in Section 5.
SECTION 7. This Plan may be amended at any time by the Board of
Trustees, provided that any material amendments of the terms of this Plan shall
become effective only upon the approvals set forth in Section 5.
SECTION 8. This Plan is terminable at any time by vote of a majority
of the Disinterested Trustees or by vote of holders of a majority of the
Trust's Retail Shares (as defined in the Act).
SECTION 9. While this Plan is in effect, the selection and nomination
of Disinterested Trustees shall be committed to the discretion of the
Disinterested Trustees.
SECTION 10. 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.
Adopted by the Board of Trustees: January 9, 1990
Revised: February 14, 1991
November 4, 1993
July 22, 1994
February 15, 1996
<PAGE> 3
ARMADA FUNDS
4400 Computer Drive
Westborough, Massachusetts 01581
Shareholder Services Plan
Servicing Agreement
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of support services to your clients ("Clients") who may from time to
time beneficially own Retail shares of beneficial interest of the Portfolios
offered by Armada Funds (collectively, "Retail Shares") which are listed on
Appendix A.
The terms and conditions of this Servicing Agreement are as follows:
SECTION 1. You agree to provide support services to Clients who may
from time to time beneficially own Retail Shares which may include the
following:
(i) Aggregating and processing purchase and redemption requests
for Retail Shares from Clients and placing net purchase and redemption
orders with our distributor or transfer agent;
(ii) Providing Clients with a service that invests the assets of
their accounts in Retail Shares pursuant to specific or pre-
authorized instructions;
(iii) Processing dividend payments from us on behalf of Clients and
assisting Clients in changing dividend options, account designations
and addresses;
(iv) Providing information periodically to Clients showing their
positions in Retail Shares;
(v) Arranging for bank wires;
(vi) Responding to Client inquiries relating to the services
performed by you;
(vii) Providing subaccounting with respect to Retail Shares
beneficially owned by Clients or the information to us or our transfer
agent necessary for subaccounting;
(viii) If required by law, forwarding shareholder communications from
us (such as proxies, shareholder reports, annual and semi-annual
financial statements, and dividend, distribution, and tax notices) to
Clients; and
<PAGE> 4
(ix) Providing such other similar services as we may reasonably
request to the extent you are permitted to do under applicable
statutes, rules, or regulations. Upon request, you will provide to
Clients a schedule of any fees that you may charge to them relating to
the investment of their assets in Retail Shares.
SECTION 2. You will provide such office space and equipment, telephone
facilities, and personnel (which may be any part of the space, equipment, and
facilities currently used in your business, or any personnel employed by you)
as may be reasonably necessary or beneficial in order to provide the
aforementioned services to Clients.
SECTION 3. Neither you nor any of your officers, employees, or agents
are authorized to make any representations concerning us or Retail Shares
except those contained in our then current prospectus for such Retail Shares,
copies of which will be supplied by us to you, or in such supplemental
literature or advertising as may be authorized by us in writing. We agree to
indemnify, defend and hold harmless you, your officers, directors, employees,
agents, and affiliates free and harmless from and against any and all claims,
demands, liabilities and expenses, including legal expenses, which you, your
officers, directors, employees, agents, and affiliates may incur arising out of
or based upon any untrue statement, or alleged untrue statement, of material
fact contained in any registration statement, prospectus, statement of
additional information or sales material, or based upon any omission, or
alleged omission, to state a material fact required to be stated to make the
statements contained therein not misleading.
SECTION 4. For all purposes of this Agreement, you will be deemed to
be an independent contractor, and will have no authority to act as agent for us
in any matter or in any respect. By your written acceptance of this Agreement,
you agree to and do release, indemnify, and hold us harmless from and against
any and all direct or indirect liabilities or losses resulting from requests,
directions, actions, or inactions of or by you or your officers, employees, or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer, or registration of Shares by or on behalf of Clients, provided that
any such liabilities or losses are the result of willful misfeasance, bad faith
or gross negligence by you or your officers, directors or employees. You and
your employees will, upon request, be available during normal business hours to
consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
SECTION 5. In consideration of the services and facilities provided by
you hereunder, we will pay to you, and you will accept as full payment
therefor, a fee at the annual rate of up
<PAGE> 5
to (i) .10% of the daily net asset value of the Retail Shares of the Money
Market, Government, Treasury, Tax Exempt, Enhanced Income, Ohio Tax Exempt,
Pennsylvania Tax Exempt and Pennsylvania Municipal Funds; and (ii) .25% of the
daily net asset value of the Retail Shares of the Equity, Fixed Income, Equity
Income, Mid Cap Regional, National Tax Exempt, Total Return Advantage,
Intermediate Government and GNMA Funds owned by shareholders for whom you are
the dealer of record or holder of record and with whom you have a servicing
relationship pursuant to this Agreement (the "Clients' Shares"), which fee will
be computed daily and payable monthly. For purposes of determining the fees
payable under this Section 5, the daily net asset value of the Clients' Retail
Shares will be computed in the manner specified in our registration statement
(as the same is in effect from time to time) in connection with the computation
of the net asset value of Retail Shares for purposes of purchases and
redemptions. The fee rate stated above may be prospectively increased or
decreased by us within the foregoing percentage limitations, in our sole
discretion, at any time upon notice to you. Further, we may, in our discretion
and without notice, suspend or withdraw the sale of Retail Shares, including
the sale of such Retail Shares to you for the account of any Client or Clients.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by us pursuant to this Agreement will provide to our Board of
Trustees, and our Trustees will review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
In addition, you will furnish us or our designees with such information as we
or they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the Services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Trustees concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filings that may be required by law.
SECTION 7. We may enter into other similar Servicing Agreements with
any other person or persons without your consent.
SECTION 8. By your written acceptance of this Agreement, you
represent, warrant, and agree that: (i) to the best of your knowledge, no
services provided by you hereunder will be primarily intended to result in the
sale of any Retail Shares; (ii) the compensation payable to you hereunder,
together with any other compensation you receive from Clients for services
contemplated by this Agreement will be disclosed to clients who will authorize
such compensation and such compensation will be permitted by, and not excessive
or unreasonable under, the laws and instruments
<PAGE> 6
governing your relationship with Clients; (iii) in the event an issue
pertaining to the Plan is submitted for shareholder approval, you will vote any
shares held for your own account in the same proportion as the vote of those
shares held for your Clients' accounts; and (iv) with respect to the Money
Market, Government and Tax Exempt Portfolios, you agree to waive such portion
of any compensation otherwise payable to you under the Plan to the extent
necessary to assure that such compensation required to be accrued by Retail
Shares of such portfolios on any day does not exceed the income to be accrued
to such shares on that day.
SECTION 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless
sooner terminated, this Agreement will continue until September 30, 1996 and
thereafter will continue automatically for successive annual periods ending on
September 30, provided such continuance is specifically approved at least
annually by us in the manner described in Section 12 hereof. This Agreement is
terminable, without penalty, at any time by us (which termination may be by
vote of a majority of the Disinterested Trustees as defined in Section 12
hereof) or by you upon notice to the other party hereto. Termination of this
Agreement shall terminate our obligation to pay you any compensation hereunder.
SECTION 10. All notices and other communications will be duly given if
mailed, telegraphed, telexed, or transmitted by similar telecommunications
device to us at the address shown above and to you at the address shown below.
SECTION 11. This Agreement will be construed in accordance with the
laws of the State of Delaware and is non-assignable by the parties hereto.
SECTION 12. This Agreement has been approved by vote of majority of
(i) our Board of Trustees and (ii) those Trustees who are not "interested
persons" (as defined in the Investment Company Act of 1940) of us and have no
direct or indirect financial interest in the operation of the Shareholder
Services Plan adopted by us regarding the provision of support services to the
beneficial owners of Retail Shares or in any agreements related thereto
("Disinterested Trustees"), cast in person at a meeting called for the purpose
of voting on such approval.
SECTION 13. 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
<PAGE> 7
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,
representatives of the Trust personally, but bind only the Trust property, and
all person 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.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to us at the address shown above.
Very truly yours,
ARMADA FUNDS
Date_________________ By____________________________
Authorized Officer
Accepted and agreed to:
______________________________________
Name of Servicing Organization
Date_________________ By___________________________________
Authorized Officer
_____________________________________
Account Number
_____________________________________
Taxpayer Identification Number
_____________________________________
Dealer Code
Address: _____________________________________
_____________________________________
_____________________________________
<PAGE> 8
APPENDIX A
----------
Please check the appropriate boxes to indicate the Funds of Armada
Funds for which you wish to act as Service Organization:
/ / Money Market Fund
/ / Government Fund
/ / Treasury Fund
/ / Tax Exempt Fund
/ / Equity Fund
/ / Fixed Income Fund
/ / Ohio Tax Exempt Fund
/ / National Tax Exempt Fund
/ / Equity Income Fund
/ / Mid Cap Regional Fund
/ / Enhanced Income Fund
/ / Total Return Advantage Fund
/ / Pennsylvania Tax Exempt Fund
/ / Intermediate Government Fund
/ / GNMA Fund
/ / Pennsylvania Municipal Fund
<PAGE> 1
Exhibit 14(a)
CONSENT OF COUNSEL
------------------
We hereby consent to the use of our name and to the reference
to our Firm under the caption "Information Relating to the Proposed
Reorganization" in the combined Proxy Statement/Prospectus included in the
Registration Statement on Form N-14 under the Securities Act of 1933 of Armada
Funds. This consent does not constitute a consent under Section 7 of the
Securities Act of 1933, and in consenting to the use of our name and the
references to our Firm under such caption we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or the rules and regulations
of the Securities and Exchange Commission thereunder.
/s/ Drinker Biddle & Reath
--------------------------
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
May 13, 1996
<PAGE> 1
Exhibit 14(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the following with respect to the Registration Statement on Form
N-14 under the Securities Act of 1933 of the Armada Funds with respect to the
transfer of all assets and liabilities of the Inventor Equity Growth Fund,
Inventor GNMA Securites Fund, Inventor Intermediate Government Securities Fund,
Inventor Pennsylvania Tax-Exempt Money Market Fund, and the Inventor
Pennslyvania Municipal Bond Fund to the Armada Equity Fund, Armada GNMA Fund,
Armada Intermediate Government Fund, Armada Pennsylvania Tax-Exempt Fund, and
the Armada Pennsylvania Municipal Fund.
* The incorporation by reference of our report dated June
9, 1995, accompanying the financial statements and financial
highlights of the Inventor Funds into the Combined Proxy
Statement/Prospectus and the Statement of Additional Information
relating thereto.
* The reference to our Firm under the heading "Financial
Statements" in the Combined Proxy Statement/Prospectus for the
Inventor Funds.
* The reference to our Firm under the heading "Financial
Statements" in the Armada Funds Statements of Additional Information.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
May 9, 1996
<PAGE> 1
Exhibit 14(c)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Financial Statements"
in this Registration Statement (Form N-14) of the Armada Equity Fund and to the
incorporation by reference therein of our report dated July 5, 1995, with
respect to the Armada Equity Fund which is included in the May 31, 1995 Annual
Report to Shareholders of Armada Funds Equity Series.
Ernst & Young LLP
Philadelphia, Pennsylvania
May 9, 1996
<PAGE> 1
Exhibit 17(a)
As filed with the Securities and Exchange Commission on September 26, 1985
Registration No. _______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
NCC FUNDS
(Exact Name of Registrant as Specified in Charter)
2100 Central National Bank Building
Cleveland, Ohio 44114
(Address of Principal Executive Officers)
Registrant's Telephone Number:
[ ]
W. Bruce McConnel, III, Esq. Copy to:
DRINKER BIDDLE & REATH Lucille Huston, Esquire
1100 Philadelphia National Bank Building National City Bank
Broad and Chestnut Streets National City Center
Philadelphia, Pennsylvania 19107 P.O. Box 5756
(Name and Address of Agent for Service) Cleveland, Ohio 44101-0756
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
----------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Maximum
Amount Offering Amount of
Being Price Per Registration
Title of Securities Being Registered Registered Share Fee
- ------------------------------------ ---------- --------- ------------
<S> <C> <C> <C>
Class A Shares of beneficial interest Indefinite $1.00 $500*
($.001 par value)
Class B Shares of beneficial interest Indefinite $1.00 $500*
($.001 par value)
Class C Shares of beneficial interest Indefinite $1.00 $500*
($.001 par value)
Class D Shares of beneficial interest Indefinite $1.00 $500*
($.001 par value)
Class E Shares of beneficial interest Indefinite $1.00 $500*
($.001 par value)
Class F Shares of beneficial interest Indefinite $1.00 $500*
($.001 par value)
Class G Shares of beneficial interest Indefinite $1.00 $500*
($.001 par value)
</TABLE>
* Pursuant to the provisions of Rule 24f-2 under the Investment Company
Act of 1940, Registrant hereby elects to register an indefinite number
of shares of beneficial interest of the class designated.
<PAGE> 2
Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
As filed with the Securities and Exchange Commission on November 17, 1995
Registration No. 33-488/811-4416
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
POST-EFFECTIVE AMENDMENT NO. 25 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 26 [x]
Armada Funds (formerly known as "NCC Funds")
(Exact Name of Registrant as Specified in Charter)
290 Donald Lynch Boulevard
Marlboro, Massachusetts 01752
(Address of Principal Executive Officers)
Registrant's Telephone Number:
1-800-622-FUND
W. Bruce McConnel, III, Esq.
DRINKER BIDDLE & REATH
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
Copy to:
Thomas F. Harvey, Esq.
National City Bank
National City Center
P.O. Box 5756
Cleveland, Ohio 44101-0756
It is proposed that this filing will become effective (check appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (b)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
=============================
-3-
<PAGE> 4
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Aggregate Amount
Securities Amount of Offering Maximum of
Being Shares Being Price Per Offering Registration
Registered Registered Unit Price Fee
- ---------- ------------ --------- -------- ------------
<S> <C> <C> <C> <C>
Shares of
Beneficial
Interest,
Without Par Value 499,100,685 $1.25 $623,875,856(1) $124,775.17
_____________________________
<FN>
(1) The proposed maximum offering price per share has been calculated
based on the average of the prices of the Registrant's Funds as
determined on November 15, 1995 pursuant to Rule 457(d).
</TABLE>
The Registrant has previously registered an indefinite number of its shares of
beneficial interest under the Securities Act of 1933 pursuant to Rule 24f-2.
The Registrant filed a Rule 24f-2 Notice for its most recent fiscal year ended
May 31, 1995 on July 25, 1995. The Registrant continues its election to
register an indefinite number of securities pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended.
<PAGE> 1
EXHIBIT 17 (b)
[PRELIMINARY COPY]
PROXY
- -----
INVENTOR FUNDS, INC.
EACH FUND VOTING SEPARATELY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS of INVENTOR FUNDS,
INC. (the "Corporation") for use at a Special Meeting of Shareholders to be
held at the offices of SEI Financial Management Corporation, 680 East
Swedesford Road, Wayne, Pennsylvania 19087-1658 on August 1, 1996 at 10:00 a.m.
(Eastern time).
The undersigned hereby appoints Kevin P. Robins and Sandra Oechslin,
and each of them, with full power of substitution, as proxies of the undersigned
to vote at the above-stated Special Meeting, and at all adjournments or
postponements thereof, all shares of common stock, evidencing interests in the
Corporation's Pennsylvania Tax Exempt Money Market, Intermediate Government
Securities, GNMA Securities, Pennsylvania Municipal Bond and Equity Growth
Funds (the "Funds"), held of record by the undersigned on May 31, 1996, the
record date for the Special Meeting, upon the following matters AND UPON ANY
OTHER MATTER WHICH MAY COME BEFORE THE MEETING, IN THEIR DISCRETION:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
/ / / / / / 1. Proposal to approve an Agreement
and Plan of Reorganization and the
transactions contemplated thereby,
including (a) the transfer of
substantially all of the known
assets and liabilities of the
Corporation's Pennsylvania Tax
Exempt Money Market, Intermediate
Government Securities, GNMA
Securities, Pennsylvania Municipal
Bond and Equity Growth Funds (the
"Inventor Portfolios") to Armada
Fund's Pennsylvania Tax Exempt,
Intermediate Government, GNMA,
Pennsylvania Municipal and Equity
Funds, respectively, (the "Armada
Portfolios") in exchange for
Institutional class shares of the
respective Armada Portfolios; (b)
the distribution of the Armada
</TABLE>
<PAGE> 2
Portfolios' shares so received to
shareholders of the Inventor
Portfolios according to their
respective interests; and (c) the
termination of the Corporation
under state law and the Investment
Company Act of 1940, as amended.
2. In their discretion, the proxies
are authorized to vote upon such
other business as may properly come
before the meeting.
Every properly signed proxy will be voted in the manner specified
hereon and, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING
AUTHORITY TO VOTE FOR PROPOSAL 1.
PLEASE SIGN, DATE AND RETURN THE
PROXY CORD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name appears
hereon. When shares are held by
joint tenants, both should sign.
When signing as attorney or as
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation, please sign
in full corporate name by president
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated:
--------------------------------
X
--------------------------------------
Signature
X
--------------------------------------
Signature, if held jointly
<PAGE> 1
EXHIBIT 17(c)
-
-
-
-
-
-
-
-
-
-
-
-
-
---------------------------------------------------------------------------
PROSPECTUS
September 28, 1995
ARMADA EQUITY FUND
ARMADA EQUITY INCOME FUND
ARMADA MID CAP REGIONAL FUND
[LOGO]
ARMADA
FUNDS
EQUITY
SERIES
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Expense Table............................................................................. 2
Financial Highlights...................................................................... 4
Introduction.............................................................................. 6
Risk Factors, Investment Objectives and Policies.......................................... 7
Investment Limitations.................................................................... 13
Yield and Performance Information......................................................... 14
Pricing of Shares......................................................................... 15
How to Purchase and Redeem Shares......................................................... 15
Distribution Agreement.................................................................... 20
Shareholder Services Plan................................................................. 20
Dividends and Distributions............................................................... 21
Taxes..................................................................................... 21
Management of the Trust................................................................... 23
Description of the Trust and its Shares................................................... 26
Custodian and Transfer Agent.............................................................. 27
Expenses.................................................................................. 27
Miscellaneous............................................................................. 27
</TABLE>
------------------
- - SHARES OF THE ARMADA FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY BANK; NATIONAL
CITY BANK, COLUMBUS; NATIONAL CITY BANK, KENTUCKY; NATIONAL ASSET MANAGEMENT
CORPORATION, THEIR PARENT COMPANY OR ANY OF THEIR AFFILIATES OR ANY BANK.
- - SHARES OF THE ARMADA FUNDS ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, FDIC, OR ANY GOVERNMENTAL AGENCY OR STATE.
- - AN INVESTMENT IN THE ARMADA FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
National City Bank and certain of its affiliates serve as investment advisers to
Armada Funds for which they receive an investment advisory fee. Past performance
is not indicative of future performance, and the investment return will
fluctuate, so that you may have a gain or loss when you sell your shares.
------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE TRUST
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE> 3
ARMADA FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
290 Donald Lynch Boulevard If you purchased your shares through National City
Marlboro, Massachusetts 01752 Investments Corporation, please call your Investment
Consultant for information.
For current performance, fund information, and to purchase
shares, please call 1-800-622-FUND (3863).
For account redemption information, please call
1-800-628-0523.
</TABLE>
This Prospectus (formerly "NCC Funds"), describes shares in the following
three investment funds (the "Funds") of Armada Funds (the "Trust") each having
its own investment objective and policies:
EQUITY FUND'S investment objective is to seek a high level of total return
arising out of capital appreciation and income. The Fund invests in common
stocks and securities convertible into common stocks.
EQUITY INCOME FUND'S investment objective is to seek a competitive total
rate of return through investments in equity and equity equivalent securities
which carry premium current yields.
MID CAP REGIONAL FUND'S investment objective is to seek capital
appreciation by investing in a diversified fund of publicly traded equity
securities of issuers which are domiciled primarily in Ohio, Indiana and
Kentucky and contiguous states and other states in which National City
Corporation affiliates are located.
The net asset value per share of each Fund will fluctuate as the value of
its investment portfolio changes in response to changing market prices and other
factors.
National City Bank ("National City"), National City Bank, Columbus
("National City Columbus") and National City Bank, Kentucky ("National City
Kentucky") serve as investment advisers to the Equity Fund and the Equity Income
Fund; National City individually serves as investment adviser to the Mid Cap
Regional Fund (each, an "adviser" and collectively, the "advisers").
440 Financial Distributors, Inc., a wholly-owned subsidiary of First Data
Corp. (the "Distributor"), serves as the Trust's sponsor and distributor. Each
Fund pays a fee to the Distributor for distributing its shares. See
"Distribution Agreement."
This Prospectus sets forth concisely the information about the Funds that a
prospective investor should consider before investing. Investors should
carefully read this Prospectus and retain it for future reference. Additional
information about the Funds, contained in a Statement of Additional Information,
has been filed with the Securities and Exchange Commission ("SEC") and is
available upon request without charge by contacting the Trust at its telephone
number or address shown above. The Statement of Additional Information bears the
same date as this Prospectus and is incorporated by reference in its entirety
into this Prospectus.
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY BANK, NATIONAL CITY BANK,
COLUMBUS, NATIONAL CITY BANK, KENTUCKY, THEIR PARENT COMPANY OR ANY OF THEIR
AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY GOVERNMENTAL AGENCY OR STATE.
INVESTMENT IN THE TRUST INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
September 28, 1995
<PAGE> 4
The classes or series which represent interests in the Funds are described
in this Prospectus. Class H, Class M and Class N shares constitute the
Institutional class or series of shares (herein referred to as the
"Institutional shares") of the Equity Fund, Equity Income Fund and Mid Cap
Regional Fund, respectively. Class H -- Special Series 1, Class M -- Special
Series 1 and Class N -- Special Series 1 shares constitute the Retail class or
series of shares (herein referred to as the "Retail shares") of the Equity Fund,
Equity Income Fund and Mid Cap Regional Fund, respectively.
Institutional shares are sold primarily to Banks and National Asset
Management Corporation ("NAM") customers. Retail shares are sold to the public
primarily through financial institutions such as banks, brokers and dealers.
<TABLE>
EXPENSE TABLE
<CAPTION>
EQUITY MID CAP MID CAP
EQUITY EQUITY INCOME EQUITY INCOME REGIONAL REGIONAL
RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
SHARES(1) SHARES SHARES(1) SHARES SHARES(1) SHARES
------ ------------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases... 3.75% None 3.75% None 3.75% None
Sales Charge Imposed on Reinvested
Dividends................................. None None None None None None
Deferred Sales Charge....................... None None None None None None
Redemption Fee.............................. None None None None None None
Exchange Fee................................ None None None None None None
FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees............................. .75% .75% .75% .75% .75% .75%
12b-1 Fees(2)............................... .05%(2) .05%(2) .05%(2) .05%(2) .05%(2) .05%(2)
Other Expenses (after fee waivers)(3)....... .47%(3) .22%(3) .56%(3) .31%(3) .55%(3) .30%(3)
-------- ---------- ---------- ----------- ---------- ---------
TOTAL FUND OPERATING EXPENSES3........ 1.27%(3) 1.02%(3) 1.36%(3) 1.11%(3) 1.35%(3) 1.10%(3)
========= ========== ========== =========== ========== ==========
- ---------------
<FN>
(1) The Trust has implemented a Shareholder Services Plan (the "Services Plan")
with respect to Retail shares in each of the Funds. Pursuant to the Services
Plan, the Trust enters into shareholder servicing agreements with certain
financial institutions under which they agree to provide shareholder
administrative services to their customers who beneficially own Retail
shares in consideration for the payment of up to .25% (on an annualized
basis) of the net asset value of such shares. For further information
concerning the Services Plan, see "Shareholder Services Plan."
(2) As a result of the payment of sales charges and 12b-1 and certain other
related fees, long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. ("NASD"). The NASD has adopted rules
which generally limit the aggregate sales charges and payments under the
Trust's Service and Distribution Plan ("Distribution Plan") and Services
Plan to a certain percentage of total new gross share sales, plus interest.
The Trust would stop accruing 12b-1 and related fees if, to the extent, and
for as long as, such limit would otherwise be exceeded.
(3) The expense information in the table relating to each Fund has been restated
to reflect current fees. For the current fiscal year, the Custodian is
expected to discontinue its waiver of fees in the amount of approximately
.01% of the average daily net assets of each Fund on January 1, 1996.
Without such fee waivers, Total Fund Operating Expenses would be 1.03% and
1.28% for the Institutional and Retail shares of the Equity Fund,
respectively, 1.12% and 1.37% for the Institutional and Retail shares of the
Equity Income Fund, respectively, and 1.11% and 1.36% for the Institutional
and Retail shares of the Mid Cap Regional Fund, respectively.
</TABLE>
2
<PAGE> 5
- ---------------
For example, you would pay the following expenses on a hypothetical $1,000
investment, assuming: (1) a 5% annual return (a hypothetical return required by
SEC regulations); and (2) the redemption of your investment at the end of the
following time periods (none of the Funds charges a redemption fee):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Equity Retail Shares................................... $ 50 $ 76 $105 $185
Equity Institutional Shares............................ $ 10 $ 32 $ 56 $125
Equity Income Retail Shares............................ $ 51 $ 79 $109 $195
Equity Income Institutional Shares..................... $ 11 $ 35 $ 61 $135
Mid Cap Regional Retail Shares......................... $ 51 $ 79 $109 $194
Mid Cap Regional Institutional Shares.................. $ 11 $ 35 $ 61 $134
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER
OR LESS THAN THOSE SHOWN.
The purpose of this Expense Table is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly. For more complete descriptions of these costs and expenses, see
"Financial Highlights," "Management of the Trust" and "Distribution Agreement"
in this Prospectus and the financial statements and related notes incorporated
by reference into the Statement of Additional Information for the Funds.
3
<PAGE> 6
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
EQUITY FUND
The following table has been audited by Ernst & Young LLP, independent
auditors, whose report is incorporated by reference in the Statement of
Additional Information. It should be read in conjunction with the financial
statements and related notes which are incorporated by reference in the
Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR
YEAR ENDED YEAR YEAR YEAR YEAR YEAR YEAR
ENDED MAY ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1995 1995 1994 1994 1993 1993 1992 1992
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ------ ------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $ 13.66 $13.68 $ 13.78 $13.80 $ 13.13 $13.13 $ 12.35 $12.35
---------- -------- --------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income........ .21 .18 .18 .15 .27 .23 .30 .25
Net Realized and Unrealized
Gain (Loss) on
Securities................. 1.21 1.21 .01 .00 .67 .68 .78 .78
---------- -------- --------- -------- -------- -------- -------- --------
Total Income from Investment
Operations................... 1.42 1.39 .19 .15 .94 .91 1.08 1.03
---------- -------- --------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income..................... (.20) (.17) (.18) (.15) (.27) (.23) (.30) (.25)
Dividends in Excess of Net
Investment Income.......... (.00) (.00) (.01) (.00) (.02) (.01) (.00) (.00)
Dividends from Net Realized
Capital Gains.............. (.00) (.00) (.11) (.11) (.00) (.00) (.00) (.00)
Dividends in excess of Net
Realized Capital Gains..... (.11) (.11) (.01) (.01) (.00) (.00) (.00) (.00)
---------- -------- --------- -------- -------- -------- -------- --------
Total Distributions.......... (.31) (.28) (.31) (.27) (.29) (.24) (.30) (.25)
---------- -------- --------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period..................... $ 14.77 $14.79 $ 13.66 $13.68 $ 13.78 $13.80 $ 13.13 $13.13
========= ======== ========= ======== ======== ======== ======== ========
Total Return................. 10.62% 10.35%(5) 1.41% 1.12%(5) 7.20% 7.00%(5) 8.90% 8.48%(5)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s)..................... $ 119,634 $5,974 $90,446 $7,521 $85,256 $7,707 $48,673 $2,767
Ratio of Expenses to Average
Net Assets................. 1.01%(1) 1.27%(2) 1.07% 1.32% .34%(1) .59%(2) .26%(1) .51%(2)
Ratio of Net Investment
Income to Average Net
Assets..................... 1.53%(1) 1.23%(2) 1.33% 1.08% 2.13%(1) 1.88%(2) 2.36%(1) 2.15%(2)
Portfolio Turnover Rate...... 17% 17% 15% 15% 15% 15% 9% 9%
<CAPTION>
FOR THE PERIOD
YEAR YEAR DECEMBER 20,
ENDED ENDED 1989
MAY 31, MAY 31, (COMMENCEMENT OF
1991 1991 OPERATIONS) TO
INSTITUTIONAL RETAIL(3) MAY 31, 1990
------------- ------- ----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $ 10.77 $12.04 $ 10.00
-------- -------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income........ .31 .04 .13
Net Realized and Unrealized
Gain (Loss) on
Securities................. 1.58 .27 .71
-------- -------- ---------
Total Income from Investment
Operations................... 1.89 .31 .84
-------- -------- ---------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income..................... (.31) (.00) (.07)
Dividends in Excess of Net
Investment Income.......... (.00) (.00) (.00)
Dividends from Net Realized
Capital Gains.............. (.00) (.00) (.00)
Dividends in excess of Net
Realized Capital Gains..... (.00) (.00) (.00)
-------- -------- ---------
Total Distributions.......... (.31) (.00) (.07)
-------- -------- ---------
Net Asset Value, End of
Period..................... $ 12.35 $12.35 $ 10.77
======== ======== =========
Total Return................. 18.10% 21.82%(4,5) 20.09%(4)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s)..................... $42,112 $1,389 $ 34,034
Ratio of Expenses to Average
Net Assets................. .31%(1) .53%(2,4) .36%(1,4)
Ratio of Net Investment
Income to Average Net
Assets..................... 2.90%(1) 2.94%(2,4) 3.30%(1,4)
Portfolio Turnover Rate...... 11% 11% 5%
<FN>
- ---------------
(1) The operating expense ratio and the net investment income ratio before fee
waiver by the Custodian for the Institutional class for the year ended
May 31, 1995 would have been 1.02% and 1.51%. The operating expense ratio
and the net investment income ratio before fee waivers by the Investment
Advisers for the Institutional class for the years ended May 31, 1993, 1992
and 1991 would have been 1.01% and 1.46%, 1.01% and 1.61%, and 1.06% and
2.15%, respectively.
(2) The operating expense ratio and the net investment income ratio before fee
waiver by the Custodian for the Retail class for the year ended May 31,
1995 would have been 1.28% and 1.22%. The operating expense ratio and the
net investment income ratio before fee waivers by the Investment Advisers
for the Retail class for the years ended May 31, 1993 and 1992 and for the
period ended May 31, 1991 would have been 1.26% and 1.21%, 1.27% and 1.40%,
and 1.28% and 2.19%, respectively.
(3) Retail class commenced operations on April 15, 1991.
(4) Annualized.
(5) Total Return excludes sales load.
</TABLE>
4
<PAGE> 7
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
EQUITY INCOME FUND
The following table has been audited by Ernst & Young LLP, independent
auditors, whose report is incorporated by reference in the Statement of
Additional Information. It should be read in conjunction with the financial
statements and related notes which are incorporated by reference in the
Statement of Additional Information.
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1995
----------------------------
INSTITUTIONAL(3) RETAIL(3)
-------------- ---------
<S> <C> <C>
Net asset value beginning of period.................................. $ 10.00 $ 10.26
-------------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.............................................. .34 .26
Net gain on securities (realized and unrealized)................... .94 .75
-------------- ---------
Total from investment operations........................... 1.28 1.01
-------------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income............................ (.27) (.26)
-------------- ---------
Total distributions........................................ (.27) (.26)
-------------- ---------
Net asset value, end of period....................................... $ 11.01 $ 11.01
============ ========
TOTAL RETURN......................................................... 14.34%(4) 13.18%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)................................. $ 36,194 $ 125
Ratio of expenses to average net assets.............................. .99%(1,4) 1.41%(2,4)
Ratio of net investment income to average net assets................. 3.87%(1,4) 3.45%(2,4)
Portfolio Turnover Rate.............................................. 12% 12%
- ---------------
<FN>
(1) The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, Administrator, and Custodian for the
Institutional class for the period ended May 31, 1995 would have been 1.21%
and 3.66%, respectively.
(2) The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, Administrator, and Custodian for the
Retail class for the period ended May 31, 1995 would have been 1.45% and
3.40%, respectively.
(3) Institutional and Retail classes commenced operations on July 1, 1994 and
August 22, 1994, respectively.
(4) Annualized.
(5) Total Return excludes sales load.
</TABLE>
5
<PAGE> 8
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
MID CAP REGIONAL FUND
The following table has been audited by Ernst & Young LLP, independent
auditors, whose report is incorporated by reference in the Statement of
Additional Information. It should be read in conjunction with the financial
statements and related notes which are incorporated by reference in the
Statement of Additional Information.
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1995
----------------------------
INSTITUTIONAL(3) RETAIL(3)
-------------- ---------
<S> <C> <C>
Net asset value, beginning of period................................. $ 10.00 $ 10.16
-------------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income........................................... .10 .07
Net gains on securities (realized and unrealized)............... 1.36 1.11
-------------- ---------
Total from investment operations........................... 1.46 1.18
-------------- ---------
LESS DISTRIBUTIONS
Dividends from net investment income............................ (.04) (.04)
Dividends from net realized capital gains....................... (.04) (.04)
-------------- ---------
Total distributions........................................ (.08) (.08)
-------------- ---------
Net asset value, end of period....................................... $ 11.38 $ 11.26
============ ========
TOTAL RETURN......................................................... 17.42%(4) 14.80%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)................................. $ 50,993 $ 3,567
Ratio of expenses to average net assets.............................. 1.01%(1,4) 1.34%(2,4)
Ratio of net investment income to average net assets................. 1.31%(1,4) 1.09%(2,4)
Portfolio Turnover Rate.............................................. 69% 69%
- ---------------
<FN>
(1) The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser, Administrator, and Custodian for the
Institutional class for the period ended May 31, 1995 would have been 1.15%
and 1.17%, respectively.
(2) The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser, Administrator, and Custodian for the
Retail class for the period May 31, 1995 would have been 1.38% and 1.05%,
respectively.
(3) Institutional and Retail classes commenced operations on July 26, 1994 and
August 15, 1994, respectively.
(4) Annualized.
(5) Total Return excludes sales load.
</TABLE>
INTRODUCTION
The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended ("1940 Act"). Each Fund consists of a
separate pool of assets with separate investment objectives and policies, as
described below under "Investment Objectives and Policies." Each Fund is
classified as a diversified investment fund under the 1940 Act.
6
<PAGE> 9
Shares of each Fund have been classified into two separate classes --
Retail shares and Institutional shares. Retail shares and Institutional shares
represent equal pro rata interests in a Fund except that, as described more
fully below under "Shareholder Services Plan," the Trust has implemented the
Services Plan with respect to Retail shares in the Funds. Under the Services
Plan, only the beneficial owners of Retail shares bear the expenses of
shareholder administrative services which are provided by financial institutions
for their benefit (estimated not to exceed .25% annually). See "Shareholder
Services Plan," "Dividends and Distributions" and "Description of the Trust and
Its Shares" for a description of the impact that the Services Plan may have on
holders of Retail shares.
RISK FACTORS, INVESTMENT OBJECTIVES AND POLICIES
The Trust uses a range of different investments and investment techniques
in seeking to achieve a Fund's investment objective. The investments and
investment techniques utilized by the Funds are described below. Prior to making
an investment decision, an investor should consider which Fund or Funds best
meet an investor's investment objectives and review carefully the risks involved
in Fund investments as described below.
The investment objective of a Fund may not be changed without the vote of
the holders of a majority of its outstanding shares (as defined in
"Miscellaneous"). Except as noted below under "Investment Limitations," a Fund's
investment policies, however, may be changed without a vote of shareholders. In
addition, each Fund may sell portfolio securities shortly after they are
purchased, which may result in higher transaction costs and taxable gains for
the Fund. There can be no assurance that a Fund will achieve its objective.
EQUITY FUND
The investment objective of the Equity Fund is to seek a high level of
total return arising out of capital appreciation and income. The Fund seeks to
achieve its objective by investing substantially all of its assets in a
diversified portfolio of common stocks and securities convertible into common
stocks. Under normal conditions, at least 80% of the Fund's total assets will be
invested in common stocks and securities convertible into common stocks. The
Fund's advisers select common stocks based on a number of factors, including
historical and projected earnings growth, earnings quality and liquidity, each
in relation to the market price of the stock. Stocks purchased for the Fund
generally will be listed on a national securities exchange or will be unlisted
securities with an established over-the-counter market. The Fund may also invest
up to 20% of its total assets at the time of purchase in American Depository
Receipts ("ADRs") and securities issued by foreign issuers.
During temporary defensive periods the Fund may invest in various short
term obligations described below under "Common Investment Policies of the
Funds."
EQUITY INCOME FUND
The investment objective of the Equity Income Fund is to seek a competitive
total rate of return through investments in equity and equity equivalent
securities which carry premium current yields. Under normal conditions, at least
65% of the value of the Fund's total assets will be invested in common stocks
and securities convertible into common stocks.
The Fund's advisers will generally try to select securities that provide a
higher yield than the general market and will generally dispose of those
securities as their yield approaches a market yield or they no longer meet
purchase criteria in other respects.
Exchange Rate-Related Securities. The Equity Income Fund may invest in
securities for which the principal repayment at maturity, while paid in U.S.
dollars, is determined by reference to the exchange rate between the U.S. dollar
and the currency of one or more foreign countries ("Exchange Rate-Related
Securities"). The interest payable on these securities is denominated in U.S.
7
<PAGE> 10
dollars and is not subject to foreign currency risk and, in most cases, is paid
at rates higher than most other similarly rated securities in recognition of the
foreign currency risk component of Exchange Rate-Related Securities.
Investments in Exchange Rate-Related Securities entail certain risks. There
is the possibility of significant changes in rates of exchange between the U.S.
dollar and any foreign currency to which an Exchange Rate-Related Security is
linked. In addition, there is no assurance that sufficient trading interest to
create a liquid secondary market will exist for a particular Exchange
Rate-Related Security due to conditions in the debt and foreign currency
markets. Illiquidity in the forward foreign exchange market and the high
volatility of the foreign exchange market may from time to time combine to make
it difficult to sell an Exchange Rate-Related Security prior to maturity without
incurring a significant price loss.
Forward Currency Exchange Contracts. The Equity Income Fund may enter into
forward currency exchange contracts in an effort to reduce the level of
volatility caused by changes in foreign currency exchange rates or where such
transactions are economically appropriate for the reduction of risks inherent in
the ongoing management of the Fund. The Fund may not enter into such contracts
for speculative purposes. A forward currency exchange contract is an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of contract. Although such contracts tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of such currency increase. Consequently, the Fund may choose to refrain
from entering into such contracts. In connection with forward currency exchange
contracts, the Fund will create a segregated account of liquid assets, such as
cash, U.S. Government securities or other liquid high grade debt obligations, or
will otherwise cover its position in accordance with applicable requirements of
the SEC.
During temporary defensive periods the Fund may invest in various short
term obligations described below under "Common Investment Policies of the
Funds."
MID CAP REGIONAL FUND
The investment objective of the Mid Cap Regional Fund is to seek capital
appreciation by investing in a diversified portfolio of publicly traded equity
securities of issuers which are domiciled primarily in Ohio, Indiana and
Kentucky and contiguous states and other states in which National City
Corporation affiliates are located. Under normal conditions, at least 65% of the
value of the Fund's total assets will be invested in equity securities. In
addition, under normal conditions, the Fund will invest at least 60% of the
value of its total assets in equity securities of companies with market
capitalization ranging from $100 million to $2 billion.
Options. The Mid Cap Regional Fund may write covered call options, buy put
options, buy call options and sell or "write" secured put options on a national
securities exchange and issued by the Options Clearing Corporation for hedging
purposes. Such transactions may be effected on a principal basis with primary
reporting dealers in U.S. Government securities in an amount not exceeding 5% of
a Fund's net assets, as described further in the Statement of Additional
Information. Such options may relate to particular securities or to various
stock indices or bond indices. Purchasing options is a specialized investment
technique which entails a substantial risk of a complete loss of the amounts
paid as premiums to the writer of the option.
A call option for a particular security gives the purchaser of the option
the right to buy, and a writer the obligation to sell, the underlying security
at the stated exercise price at any time prior to the expiration of the option,
regardless of the market price of the security. The premium paid to the writer
is the consideration for undertaking the obligations under the option contract.
A put option for a particular security gives the purchaser the right to sell the
underlying security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security.
In
8
<PAGE> 11
contrast to an option on a particular security, an option on a securities index
provides the holder with the right to make or receive a cash settlement upon
exercise of the option.
The Mid Cap Regional Fund may purchase and sell put options on portfolio
securities at or about the same time that it purchases the underlying security
or at a later time. By buying a put, the Fund limits its risk of loss from a
decline in the market value of the security until the put expires. Any
appreciation in the value of and yield otherwise available from the underlying
security, however, will be partially offset by the amount of the premium paid
for the put option and any related transaction costs. Call options may be
purchased by the Fund in order to acquire the underlying security at a later
date at a price that avoids any additional cost that would result from an
increase in the market value of the security. The Fund may also purchase call
options to increase its return to investors at a time when the call is expected
to increase in value due to anticipated appreciation of the underlying security.
Prior to its expiration, a purchased put or call option may be sold in a closing
sale transaction (a sale by the Fund, prior to the exercise of an option that it
has purchased, of an option of the same series), and profit or loss from the
sale will depend on whether the amount received is more or less than the premium
paid for the option plus the related transaction costs.
In addition, the Mid Cap Regional Fund may write covered call and secured
put options. A covered call option means that the Fund owns or has the right to
acquire the underlying security subject to call at all times during the option
period. A secured put option means that the Fund maintains in a segregated
account with its custodian cash or U.S. Government securities in an amount not
less than the exercise price of the option at all times during the option
period. Such options will be listed on a national securities exchange and issued
by the Options Clearing Corporation and may be effected on a principal basis
with primary reporting dealers in U.S.
Government securities. The aggregate value of the securities subject to
options written by the Fund will not exceed 25% of the value of its net assets.
In order to close out an option position prior to maturity, the Fund may enter
into a "closing purchase transaction" by purchasing a call or put option
(depending upon the position being closed out) on the same security with the
same exercise price and expiration date as the option which it previously wrote.
Options trading is a highly specialized activity and carries greater than
ordinary investment risk. Purchasing options may result in the complete loss of
the amounts paid as premiums to the writer of the option. In writing a covered
call option, the Fund gives up the opportunity to profit from an increase in the
market price of the underlying security above the exercise price (except to the
extent the premium represents such a profit). Moreover, it will not be able to
sell the underlying security until the covered call option expires or is
exercised or the Fund closes out the option. In writing a secured put option,
the Fund assumes the risk that the market value of the security will decline
below the exercise price of the option. The use of covered call and secured put
options will not be a primary investment technique of the Fund.
Futures Contracts and Related Options. The Mid Cap Regional Fund may
invest in futures contracts and options on futures contracts for hedging
purposes or to maintain liquidity.
Futures contracts obligate the Fund, at maturity, to take or make delivery
of certain securities or the cash value of a securities index. The Fund may sell
a futures contract in order to offset a decrease in the market value of its
portfolio securities that might otherwise result from a market decline. The Fund
may do so either to hedge the value of its portfolio of securities as a whole or
to protect against declines occurring prior to sales of securities in the value
of the securities to be sold. Conversely, the Fund may purchase a futures
contract in anticipation of purchases of securities. In addition, the Fund may
utilize futures contracts in anticipation of changes in the composition of its
holdings.
The Fund may purchase and sell call and put options on futures contracts
traded on an exchange
9
<PAGE> 12
or board of trade. When the Fund purchases an option on a futures contract, it
has the right to assume a position as a purchaser or seller of a futures
contract at a specified exercise price at any time during the option period.
When the Fund sells an option on a futures contract, it becomes obligated to
purchase or sell a futures contract if the option is exercised. In anticipation
of a market advance, the Fund may purchase call options on futures contracts as
a substitute for the purchase of futures contracts to hedge against a possible
increase in the price of securities which the Fund intends to purchase.
Similarly, if the value of the Fund's securities is expected to decline, the
Fund might purchase put options or sell call options on futures contracts rather
than sell futures contracts.
The Fund intends to comply with the regulations of the Commodity Futures
Trading Commission ("CFTC") exempting it from registration as a "commodity pool
operator." The Fund's commodities transactions must constitute bona fide hedging
or other permissible transactions pursuant to such regulations. In addition, the
Fund may not engage in such transactions if the sum of the amount of initial
margin deposits and premiums paid for unexpired commodity options, other than
for bona fide hedging transactions, would exceed 5% of the liquidation value of
its assets, after taking into account unrealized profits and unrealized losses
on such contracts it has entered into; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded in calculating the percentage limitation. In connection with the
Fund's position in a futures contract or option thereon, it will create a
segregated account of liquid assets, such as cash, U.S. Government securities or
other liquid high grade debt obligations, or will otherwise cover its position
in accordance with applicable requirements of the SEC.
The primary risks associated with the use of futures contracts and options
are: (i) an imperfect correlation between the change in market value of the
securities held by the Fund and the price of the futures contracts and options;
(ii) possible lack of a liquid secondary market for a futures contract and the
resulting inability to close a futures contract when desired; (iii) losses due
to unanticipated market movements which are potentially unlimited; and (iv) the
adviser's ability to predict correctly the direction of securities prices,
interest rates and other economic factors. For further information, see "Risk
Factors, Investment Objectives and Policies -- Futures Contracts and Options"
and Appendix B in the Statement of Additional Information.
During temporary defensive periods the Fund may invest in various short
term obligations described below under "Common Investment Policies of the
Funds."
COMMON INVESTMENT POLICIES OF THE FUNDS
Foreign Securities and American Depository Receipts
Each Fund may invest in securities issued by foreign issuers either
directly or indirectly through investments in ADRs. ADRs are receipts issued by
an American bank or trust company evidencing ownership of underlying securities
issued by foreign issuers. ADRs may be listed on a national securities exchange
or may be traded in the over-the-counter market. ADR prices are denominated in
U.S. dollars; the underlying security may be denominated in a foreign currency.
Investments in foreign securities involve certain inherent risks, such as
political or economic instability of the issuer or the country of issue, the
difficulty of predicting international trade patterns, changes in exchange rates
of foreign currencies and the possibility of adverse changes in investment or
exchange control regulations. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies.
Further, foreign stock markets are generally not as developed or efficient as
those in the U.S., and in most foreign markets volume and liquidity are less
than in the U.S. Fixed commissions on foreign stock exchanges are generally
higher than the negotiated commissions on U.S. exchanges, and there is generally
less government supervision and regulation of foreign stock ex-
10
<PAGE> 13
changes, brokers and companies than in the U.S. With respect to certain foreign
countries, there is a possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, or diplomatic developments
that could affect investment within those countries. Because of these and other
factors, securities of foreign companies acquired by the Funds may be subject to
greater fluctuation in price than securities of domestic companies. For further
information, see "Risk Factors, Investment Objectives and Policies" in the
Statement of Additional Information.
When-Issued Securities
Each Fund may purchase securities on a "when-issued" or delayed delivery
basis. These transactions are arrangements in which a Fund purchases securities
with payment and delivery scheduled for a future time. These transactions
involve the risk that the price or yield obtained may be less favorable than the
price or yield available when delivery takes place. Each Fund expects that
commitments to purchase when-issued securities will not exceed 25% of the value
of its total assets under normal market conditions. The Funds do not intend to
purchase when-issued securities for speculative purposes but only for the
purpose of acquiring portfolio securities. In when-issued and delayed delivery
transactions, a Fund relies on the seller to complete the transaction; its
failure to do so may cause the Fund to miss a price or yield considered to be
attractive. For further information, see "Risk Factors, Investment Objectives
and Policies" in the Statement of Additional Information.
Short Term Obligations
During temporary defensive periods each Fund may hold some short term
obligations (with maturities of 18 months or less) such as domestic and foreign
commercial paper, bankers' acceptances, certificates of deposit and demand and
time deposits of domestic and foreign branches of U.S. banks and foreign banks,
U.S. Government securities, repurchase agreements, reverse repurchase agreements
and guaranteed investment contracts ("GICs"). In the case of repurchase
agreements, default or bankruptcy of the seller may expose a Fund to possible
loss because of adverse market action or delays connected with the disposition
of the underlying obligations. Further, it is uncertain whether the Fund would
be entitled, as against a claim by such seller or its receiver or trustee in
bankruptcy, to retain the underlying securities. Reverse repurchase agreements
involve the risk that the market value of the securities held by a Fund may
decline below the price of the securities it is obligated to repurchase. For
further information, see "Risk Factors, Investment Objectives and Policies" in
the Statement of Additional Information.
Lending Portfolio Securities
In order to generate additional income, each Fund may, from time to time,
lend its portfolio securities to broker-dealers, banks or other institutional
borrowers. A Fund must receive 100% collateral in the form of cash or U.S.
Government securities. This collateral must be valued daily by the Fund's
adviser or advisers and the borrower will be required to provide additional
collateral should the market value of the loaned securities increase. During the
time portfolio securities are on loan, the borrower pays the Fund involved any
dividends or interest paid on such securities. Loans are subject to termination
by the Fund or the borrower at any time. While a Fund does not have the right to
vote securities on loan, it intends to terminate the loan and regain the right
to vote if this is considered important with respect to the investment. A Fund
will only enter into loan arrangements with broker-dealers, banks or other
institutions which its adviser or advisers have determined are creditworthy
under guidelines established by the Trust's Board of Trustees.
Securities of Other Investment Companies
Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, each Fund may invest in securities issued by other investment
companies (including other investment companies advised by the advisers) which
invest in high quality, short-term debt securities and which determine their net
asset value per share based on the amortized cost or penny-rounding method. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of that company's expenses, including
11
<PAGE> 14
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
Investment companies in which a Fund may invest may also impose a sales or
distribution charge in connection with the purchase or redemption of their
shares and other types of commissions or charges. Such charges will be payable
by the Fund and, therefore, will be borne indirectly by its shareholders. For
further information, see "Risk Factors, Investment Objectives and Policies" in
the Statement of Additional Information.
Illiquid Securities
The Equity Fund will not knowingly invest more than 10% of its net assets
and the Equity Income and Mid Cap Regional Funds will not knowingly invest more
than 15% of their respective net assets in securities that are illiquid.
Illiquid securities would generally include repurchase agreements and GICs with
notice/termination dates in excess of seven days and certain securities which
are subject to trading restrictions because they are not registered under the
Securities Act of 1933, as amended (the "1933 Act").
Each Fund may purchase securities which are not registered under the 1933
Act but which can be sold to "qualified institutional buyers" in accordance with
Rule 144A under the 1933 Act. Any such security will not be considered illiquid
so long as it is determined by the Board of Trustees or the Fund's adviser or
advisers, acting under guidelines approved and monitored by the Board, that an
adequate trading market exists for that security. This investment practice could
have the effect of increasing the level of illiquidity in a Fund during any
period that qualified institutional buyers become uninterested in purchasing
these restricted securities. The ability to sell to qualified institutional
buyers under Rule 144A is a recent development, and it is not possible to
predict how this market will develop. The Board will carefully monitor any
investment by a Fund in these securities.
Risk Factors Associated with Derivative Instruments
The Mid Cap Regional Fund may purchase certain "derivative" instruments.
Derivative instruments are instruments that derive value from the performance of
underlying securities, interest or currency exchange rates, or indices, and
include (but are not limited to) futures contracts.
Like all investments, derivative instruments involve several basic types of
risks which must be managed in order to meet investment objectives. The specific
risks presented by derivatives include, to varying degrees, market risk in the
form of underperformance of the underlying securities, exchange rates or
indices; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the derivative
instrument will decline more than the securities, rates or indices on which it
is based; liquidity risk that the Fund will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument (such as an option) will
not correlate exactly to the value of the underlying securities, rates or
indices on which it is based; and operations risk that loss will occur as a
result of inadequate systems and controls, human error or otherwise. Some
derivative instruments are more complex than others, and for those instruments
that have been developed recently, data are lacking regarding their actual
performance over complete market cycles.
The adviser will evaluate the risks presented by the derivative instruments
purchased by the Fund, and will determine, in connection with its day-to-day
management of the Fund, how they will be used in furtherance of the Fund's
investment objective.
Portfolio Turnover
Portfolio turnover will tend to rise during periods of economic turbulence
and decline during periods of stable growth. Each Fund's annual port-
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<PAGE> 15
folio turnover is not expected to exceed 100% under normal market conditions.
For further information, see "Risk Factors, Investment Objective and Policies"
in the Statement of Additional Information.
INVESTMENT LIMITATIONS
Each Fund is subject to a number of investment limitations. The following
investment limitations are matters of fundamental policy and may not be changed
with respect to a particular Fund without the affirmative vote of the Fund's
outstanding shares (as defined under "Miscellaneous"). (Other investment
limitations that also cannot be changed without a vote of shareholders are
contained in the Statement of Additional Information under "Risk Factors,
Investment Objectives and Policies.")
No Fund may:
1. Make loans, except that each Fund may purchase or hold debt instruments,
lend portfolio securities and enter into repurchase agreements in accordance
with its investment objective and policies.
2. Borrow money or issue senior securities, except that each Fund may
borrow from banks and enter into reverse repurchase agreements for temporary
purposes in amounts not in excess of 10% of the value of its total assets at the
time of such borrowing; or mortgage, pledge, or hypothecate any assets except in
connection with any such borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's total assets at
the time of such borrowing. A Fund will not purchase securities while borrowings
(including reverse repurchase agreements) in excess of 5% of its total assets
are outstanding.
3. Purchase any securities which would cause 25% or more of the value of
its total assets at the time of such purchase to be invested in securities of
one or more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements secured by such obligations, (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents,
and (c) utilities will be classified according to their services, for example,
gas, gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
4. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in such issuer or the Fund would hold more than 10% of
any class of securities of the issuer or more than 10% of the outstanding voting
securities of the issuer, except that up to 25% of the value of the Fund's total
assets may be invested without regard to such limitations.
Additional investment limitations which are matters of fundamental policy
are as follows:
5. The Equity Fund may invest no more than 10% of the value of its net
assets in illiquid securities, including repurchase agreements with remaining
maturities in excess of seven days, non-negotiable time deposits, certificates
of participation without corresponding remarketing agreements, and other
securities which are not readily marketable.
6. Neither the Equity Income Fund nor the Mid Cap Regional Fund may invest
more than 15% of the value of its net assets in illiquid securities. See
"Illiquid Securities" under "Investment Objectives and Policies -- Common
Investment Policies of the Funds."
For purposes of investment limitation No. 4, a security is considered to be
issued by the government entity (or entities) whose assets and revenues back the
security.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in value of a
Fund's securities will not constitute a violation of such limitation for
purposes of the 1940 Act.
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<PAGE> 16
In order to permit the sale of the Funds' shares in certain states, the
Trust may make commitments more restrictive than the investment policies and
limitations described above. Should the Trust determine that any such commitment
is no longer in a Fund's best interests, it will revoke the commitment by
terminating sales of the Fund's shares to investors residing in the state
involved.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Trust may quote in advertisements or in reports to
shareholders each Fund's total return data for its Institutional shares and
Retail shares. The Funds calculate their total returns for each class of shares
on an "average annual total return" basis for various periods from the date they
commenced investment operations and for other periods as permitted under the
rules of the SEC. Average annual total return reflects the average annual
percentage change in value of an investment in the class over the measuring
period. Total returns for each class of shares may also be calculated on an
"aggregate total return" basis for various periods. Aggregate total return
reflects the total percentage change in value over the measuring period. Both
methods of calculating total return reflect changes in the price of the shares
and assume that any dividends and capital gain distributions made by a Fund with
respect to a class during the period are reinvested in shares of that class.
When considering average total return figures for periods longer than one year,
it is important to note that the annual total return of a class for any one year
in the period might have been greater or less than the average for the entire
period. The Funds may also advertise, from time to time, the total returns of
one or more classes of shares on a year-by-year or other basis for various
specified periods by means of quotations, charts, graphs or schedules.
The "yield" quoted in advertisements of the Equity Income Fund refers to
the income generated by an investment in a class of shares of over a 30-day
period identified in the advertisement. This income is then "annualized." The
amount of income so generated by the investment during the 30-day period is
assumed to be earned and reinvested at a constant rate and compounded
semi-annually; the annualized income is then shown as a percentage of the
investment.
Shareholders should note that the total return and yield of Retail shares
will be reduced by the amount of shareholder servicing fees that are payable
under the Services Plan. See "Shareholder Services Plan."
Investors may compare the performance of each class of shares of a Fund to
the performance of other mutual funds with comparable investment objectives, to
various mutual fund or market indices and to data or rankings prepared by
independent services such as Lipper Analytical Services, Inc. or other financial
or industry publications that monitor the performance of mutual funds.
Comparisons may also be made to indices or data published in Money Magazine,
Forbes, Barron's, The Wall Street Journal, The New York Times, Business Week,
U.S.A. Today, CDA/Weisenberger, The American Banker, Morningstar, Incorporated
and other publications of a local, regional or financial industry nature.
The performance of each class of shares of the Funds is based on historical
earnings and will fluctuate and is not intended to indicate future performance.
The investment return and principal value of an investment in a class will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Performance data may not provide a basis for
comparison with bank deposits and other investments which provide a fixed yield
for a stated period of time. Changes in net asset value of a class should be
considered in ascertaining the total return to shareholders for a given period.
Total return data should also be considered in light of the risks associated
with a Fund's composition, quality, maturity, operating expenses and market
conditions. Any fees charged by financial institutions (as described in "How to
Purchase and Redeem Shares") are not included in the computation of performance
data but will reduce a shareholder's net return on an investment in a Fund.
14
<PAGE> 17
Further information about the performance of the Funds is available in the
annual and semi-annual reports to shareholders. Shareholders may obtain these
materials from the Trust free of charge by calling 1-800-622-FUND(3863).
PRICING OF SHARES
For purposes of pricing purchase and redemption orders, the net asset value
per share of each Fund is calculated as of the close of trading on the New York
Stock Exchange (the "Exchange") (generally, 4:00 p.m., Eastern Time) on each
Business Day as described below. Net asset value per share is determined on each
Business Day, except those holidays which the Exchange, or banks and trust
companies which are affiliated with National City Corporation (the "Banks"),
observe (currently New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day, and Christmas Day) ("Business Day"). Net asset
value per share of a particular class in a Fund is calculated by dividing the
value of all securities and other assets belonging to the Fund allocable to such
class, less the liabilities charged to that class, by the number of the
outstanding shares of that class.
With respect to each Fund, investments in securities traded on an exchange
are valued at the last quoted sale price for a given day, or if a sale is not
reported for that day, at the mean between the most recent quoted bid and asked
prices. Unlisted securities for which market quotations are readily available
are valued at the mean between the most recent bid and asked prices. Securities
for which no quotations are readily available are valued at fair value as
determined in good faith by the Fund's administrator pursuant to Board of
Trustees guidelines. The net asset value per share of each class of shares of
each Fund will fluctuate as the value of its investment fund changes.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Funds are sold on a continuous basis by the Trust's sponsor
and distributor. The Distributor is a registered broker/dealer with principal
offices located at 290 Donald Lynch Boulevard, Marlboro, Massachusetts 01752.
From time to time, the Distributor, at its expense, may offer promotional
incentives to dealers. As of the date of this Prospectus, the Distributor
intends to offer certain promotional incentives, including trips and monetary
awards, to National City Investments Corporation.
PURCHASE OF RETAIL SHARES
Retail shares are sold to the public ("Investors") primarily through
financial institutions such as banks, brokers and dealers. Investors may
purchase Retail shares directly in accordance with the procedures set forth
below or through procedures established by their financial institutions in
connection with the requirements of their accounts.
Financial institutions may charge certain account fees depending on the
type of account the Investor has established with the institution. (For
information on such fees, the Investor should review his agreement with the
institution or contact it directly.) In addition, certain financial institutions
may enter into shareholder servicing agreements with the Trust whereby a
financial institution would perform various administrative support services for
its customers who are the beneficial owners of Retail shares and would receive
fees from the Funds for such services of up to .25% (on an annualized basis) of
the average daily net asset value of such shares. See "Shareholder Services
Plan." To purchase shares, Investors should call 1-800-622-FUND (3863) or visit
their local National City Investments Corporation office: Cleveland (1-800-
15
<PAGE> 18
624-6450), Columbus (1-800-345-0278), Dayton (1-800-755-8723), Akron
(1-800-229-0295), Louisville (1-800-727-5656), Indianapolis (1-800-826-2868),
Toledo (1-800-331-8275), or Youngstown (1-800-742-4098).
Shares may be purchased in conjunction with an individual retirement
account ("IRA") and roll-over IRAs where a designated custodian acts as
custodian. Investors should contact National City Investments Corporation, the
Distributor or their financial institutions for information as to applications
and annual fees. Investors should also consult their tax advisers to determine
whether the benefits of an IRA are available or appropriate.
The minimum investment is $2,500 for the initial purchase of Retail shares
in a Fund, except for purchases for an IRA or other retirement plan in which
event the minimum initial investment is $500. All subsequent investments for
Retail shares and IRAs are subject to a minimum investment of $250. Investments
made in Retail shares through a monthly savings program described below are not
subject to the minimum initial and subsequent investment requirements or any
minimum account balance requirements described in "Other Redemption Information"
below. Purchases for an IRA through the monthly savings program will be
considered as contributions for the year in which the purchases are made.
Under a monthly savings program, Investors may add to their investment in
the Retail shares of a Fund, in a consistent manner each month, with a minimum
amount of $50. Monies may be automatically withdrawn from a shareholder's
checking or savings account available through an investor's financial
institution and invested in additional Retail shares at the Public Offering
Price next determined after an order is received by the Trust. An Investor may
apply for participation in a monthly program through a financial institution,
such as banks, brokers, or dealers selling Retail shares of the Funds, by
completing an application. The program may be modified or terminated by an
Investor on 30 days written notice or by the Trust at any time.
All shareholders of record will receive confirmations of share purchases
and redemptions. Financial institutions will be responsible for transmitting
purchase and redemption orders to the Trust's transfer agent, The Shareholder
Services Group, Inc., d/b/a 440 Financial (the "Transfer Agent"), on a timely
basis.
The Trust reserves the right to reject any purchase order.
SALES CHARGES APPLICABLE TO PURCHASES OF RETAIL SHARES
The Public Offering Price for Retail shares of each Fund is the sum of the
net asset value of the shares being purchased plus any applicable sales charge
per account, per Fund, which is assessed as follows:
<TABLE>
<CAPTION>
AS A % AS A % DEALERS'
OF OFFERING OF NET REALLOWANCE
PRICE PER ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION SHARE PER SHARE OFFERING PRICE
- --------------------- ----------- ----------- --------------
<S> <C> <C> <C>
Less than $100,000... 3.75 3.90 3.75
$100,000 but less
than $250,000...... 2.75 2.83 2.75
$250,000 but less
than $500,000...... 2.00 2.04 2.00
$500,000 but less
than $1,000,000.... 1.25 1.27 1.25
$1,000,000 or more... 0.00 0.00 0.00
</TABLE>
Under the 1933 Act, the term "underwriter" includes persons who offer or sell
for an issuer in connection with the distribution of a security or have a direct
or indirect participation in such undertaking, but excludes persons whose
interest is limited to a commission from an underwriter or dealer not in excess
of the usual and customary distributors' or sellers' commission. The Staff of
the SEC has expressed the view that persons who receive 90% or more of a sales
load may be deemed to be underwriters within the meaning of this definition. The
Dealers' Reallowance may be changed from time to time.
No sales charge will be assessed on purchases of Retail shares made by: (a)
trustees and officers of the Trust; (b) directors, employees and participants in
employee benefit/retirement plans (annuitants) of National City Corporation or
any of its
16
<PAGE> 19
affiliates; (c) the spouses, children, grandchildren, and parents of individuals
referred to in clauses (a) and (b) above; (d) qualified retirement plans
purchasing shares through National City Investments Corporation or NatCity
Investments, Inc.; (e) individuals investing in a Fund by way of a direct
transfer or a rollover from a qualified plan distribution and subsequent
transactions into the same account where affiliates of National City Corporation
are serving as a trustee or agent; and (f) investors purchasing Fund shares
through a payroll deduction plan.
REDUCED SALES CHARGES APPLICABLE TO PURCHASES OF RETAIL SHARES
The applicable sales charge may be reduced on purchases of Retail shares of
each Fund made under the Right of Accumulation or Letter of Intent, as described
below. To qualify for a reduced sales charge, Investors must so notify their
financial institutions at the time of purchase. Reduced sales charges may be
modified or terminated at any time and are subject to confirmation of an
Investor's holdings.
Right of Accumulation. Investors may use their aggregate investments in
Retail shares in determining the applicable sales charge. An Investor's
aggregate investment in Retail shares is the total value (based on the higher of
current net asset value or any Public Offering Price originally paid) of: (a)
current purchases; (b) Retail shares that are already beneficially owned by the
Investor for which a sales charge has been paid; (c) Retail shares that are
already beneficially owned by the Investor which were purchased prior to July
22, 1990; and (d) Retail shares purchased by dividends or capital gains that are
reinvested. If, for example, an Investor beneficially owns Retail shares of a
Fund with an aggregate current value of $90,000 and subsequently purchases
Retail shares of that Fund having a current value of $10,000, the sales charge
applicable to the subsequent purchase would be reduced to 2.75% of the Public
Offering Price.
Letter of Intent. An Investor may qualify for a reduced sales charge
immediately upon signing a nonbinding Letter of Intent stating the Investor's
intention to invest during the next 13 months a specified amount which, if made
at one time, would qualify for a reduced sales charge. A Letter of Intent form
may be obtained from the Investor's financial institution. If an Investor so
elects, the 13 month period may begin up to 30 days prior to the Investor's
signing the Letter of Intent. The initial investment under the Letter of Intent
must be equal to at least 4.0% of the amount indicated in the Letter of Intent.
During the term of a Letter of Intent, the Transfer Agent will hold Retail
shares representing 4.0% of the amount indicated in the Letter of Intent in
escrow for payment of a higher sales charge if the entire amount is not
purchased. Upon completing the purchase of the entire amount indicated in the
Letter of Intent, the escrowed shares will be released. If the entire amount is
not purchased within the 13 month period, the Investor will be required to pay
an amount equal to the difference in the dollar amount of sales charge actually
paid and the amount of sales charge the Investor would have had to pay on the
aggregate purchases if the total of such purchases had been made at a single
time.
PURCHASE OF INSTITUTIONAL SHARES
Institutional shares are sold primarily to Banks and NAM customers
("Customers"). Institutional shares are sold without a sales charge imposed by
the Trust or the Distributor. However, depending on the terms governing the
particular account, the Banks may impose account charges such as account
maintenance fees, compensating balance requirements or other charges based upon
account transactions, assets or income which will have the effect of reducing
the shareholder's net return on his investment in a Fund. There is no minimum
investment.
Customers may purchase Institutional shares through procedures established
by the Banks in connection with the requirements of their Customer accounts.
These procedures may include instructions under which a Bank may automatically
"sweep" a Customer's account not less frequently than weekly and invest amounts
in excess of a minimum balance agreed to by the Bank and the Customer in
additional Institutional shares of a Fund. Customers should obtain information
relating
17
<PAGE> 20
to the requirements of such accounts from their Banks.
If participating in an Asset Diversification Account, Customers may
purchase Institutional shares under a monthly savings program. Customers may add
to their investment in the Institutional shares of a Fund, in a consistent
manner each month, with a minimum amount of $50. Monies may be automatically
withdrawn from a shareholder's checking or savings account available through a
Customer's financial institution and invested in additional shares at the net
asset value per share next determined after an order is received by the Trust. A
Customer may apply for participation in a monthly program through a financial
institution, such as banks or brokers, by completing an application. The program
may be modified or terminated by an Investor on 30 days written notice or by the
Trust at any time.
It is the responsibility of the Banks to transmit their Customers' purchase
orders to the Transfer Agent and to deliver required funds on a timely basis, in
accordance with the procedures stated above. Institutional shares will normally
be held of record by the Banks. Confirmations of share purchases and redemptions
will be sent to the Banks. Beneficial ownership of Institutional shares will be
recorded by the Banks and reflected in the account statements provided by them
to their Customers.
The Trust reserves the right to reject any purchase order.
EFFECTIVE TIME OF PURCHASES
Purchase orders for shares of the Funds which are received by the Transfer
Agent prior to 4:00 p.m. (Eastern Time) on any Business Day are priced according
to the net asset value per share determined on that day plus any applicable
sales charge (the "Public Offering Price"). Immediately available funds must be
received by the Trust's custodian prior to 2:00 p.m. (Eastern Time) on the third
Business Day following the receipt of such order, at which time the order will
be executed. If funds are not received by such date, the order will not be
accepted and notice thereof will be given to the Bank or financial institution
placing the order. Purchase orders for which payment has not been received or
accepted will be returned after prompt inquiry to the sending Bank or
institution.
REDEMPTION OF RETAIL SHARES
Redemption orders must be placed in writing or by telephone to the same
financial institution that placed the original purchase order. It is the
responsibility of the financial institutions to transmit redemption orders to
the Transfer Agent. Investors who purchased shares directly from the Trust may
redeem shares in any amount by calling 1-800-628-0523. Redemption proceeds are
paid by check or credited to the Investor's account with his financial
institution.
REDEMPTION OF INSTITUTIONAL SHARES
Customers may redeem all or part of their Institutional shares in
accordance with instructions and limitations pertaining to their accounts at the
Banks. It is the responsibility of the Banks to transmit redemption orders to
the Transfer Agent and credit their Customers' accounts with the redemption
proceeds on a timely basis. Redemption orders are effected at the net asset
value per share next determined after receipt of the order by the Transfer
Agent. No charge for wiring redemption payments is imposed by the Trust,
although Banks may charge their Customers' accounts for services. Information
relating to such services and charges, if any, is available from the Banks.
If a Customer has agreed with a particular Bank to maintain a minimum
balance in his account at the Bank and the balance in such account falls below
that minimum, the Customer may be obliged to redeem all or part of his
Institutional shares to the extent necessary to maintain the required minimum
balance. Customers who have instructed that automatic purchases and redemptions
be made for their accounts receive monthly confirmations of share transactions.
TELEPHONE REDEMPTION PROCEDURES
A shareholder of record may redeem shares in any amount by calling
1-800-628-0523 (provided he has made the appropriate election in his account
18
<PAGE> 21
application) or by sending a written request to Armada Funds, P.O. Box 5109,
Westborough, Massachusetts 01581-5109. Redemption requests must be signed by
each shareholder, including each joint owner on redemption requests for joint
accounts, in the exact manner as the Fund account is registered, and must state
the number of shares or the amount to be redeemed and identify the shareholder
account number and tax identification number. For a redemption amount of $5,000
or more, each signature on the written request must be guaranteed by a
commercial bank or trust company which is a member of the Federal Reserve System
or FDIC, a member firm of a national securities exchange or a savings and loan
association. A signature guaranteed by a savings bank or notarized by a notary
public is not acceptable. For a redemption amount less than $5,000, no signature
guarantee is needed. The Trust may require additional supporting documents for
redemptions made by corporations, fiduciaries, executors, administrators,
trustees, guardians and institutional investors.
During periods of unusual economic or market changes, telephone redemptions
may be difficult to implement. In such event, shareholders should mail their
redemption requests to their financial institutions or Armada Funds at the
address shown above. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that are
reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Trust and its Transfer Agent will use such
procedures as are considered reasonable, including recording those instructions
and requesting information as to account registration (such as the name in which
an account is registered, the account number and recent transactions in the
account). To the extent that the Trust and its Transfer Agent fail to use
reasonable procedures to verify the genuineness of telephone instructions, they
may be liable for such instructions that prove to be fraudulent and
unauthorized. In all other cases, shareholders will bear the risk of loss for
fraudulent telephone transactions. The Trust reserves the right to refuse a wire
or telephone redemption if it believes it is advisable to do so. Procedures for
redeeming Retail Shares by wire or telephone may be modified or terminated at
any time by the Trust or the Transfer Agent.
OPTION TO MAKE SYSTEMATIC WITHDRAWALS
The Trust has available a Systematic Withdrawal Plan (the "Plan") for a
shareholder who owns shares of any Fund held on the Fund transfer agent's
system. The Plan allows the shareholder to have a fixed minimum sum of $250
distributed at regular intervals. The shareholder's account must have a minimum
value of $5,000 to be eligible for the Plan. Additional information regarding
this service may be obtained from an investor's financial institution or the
Transfer Agent at 1-800-622-FUND(3863).
OTHER REDEMPTION INFORMATION
Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem, at net asset value, any account maintained by a
shareholder that has a value of less than $1,000 due to redemptions where the
shareholder does not increase the amount in the account to at least $1,000 upon
60 days' notice.
If any portion of the shares to be redeemed represents an investment made
by personal check, the Trust reserves the right to delay payment of the
redemption proceeds until the Transfer Agent is reasonably satisfied that the
check has been collected, which could take up to 10 days from the date of
purchase. A shareholder who anticipates the need for more immediate access to
his investment should purchase shares by Federal funds, bank wire, certified or
cashier's check. Financial institutions normally impose a charge in connection
with the use of bank wires, as well as certified checks, cashier's checks and
Federal funds.
Payment to Shareholders for shares redeemed will be made within the time
period prescribed by the settlement requirements of the Securities Exchange Act
of 1934, after receipt of the request for redemption.
19
<PAGE> 22
EXCHANGE PRIVILEGE APPLICABLE TO RETAIL SHARES
The Trust offers an exchange program whereby Investors who have paid a
sales charge to purchase Retail shares of one or more of the Funds (each a "load
Fund") may exchange those Retail shares for Retail shares of another load Fund,
or another investment fund offered by the Trust without the imposition of a
sales charge (each a "no load Fund") at the net asset value per share on the
date of exchange, provided that such other Retail shares may be legally sold in
the state of the shareholder's residence. As a result, no additional sales
charge will be incurred with respect to such an exchange. Shareholders may also
exchange Retail shares of a no load Fund for Retail shares of another no load
Fund at the net asset value per share without payment of a sales charge. In
addition, shareholders of a no load Fund may exchange Retail shares for Retail
shares of a load Fund subject to payment of the applicable sales load. However,
shareholders exchanging Retail shares of a no load Fund which were received in a
previous exchange transaction involving Retail shares of a load Fund will not be
required to pay an additional sales charge upon notification of the reinvestment
of the equivalent amount into the Retail shares of a load Fund. Shareholders
contemplating an exchange should carefully review the Prospectus of the Fund
into which the exchange is being considered. An Armada Funds Prospectus may be
obtained from National City Investments Corporation or an Investor's financial
institution or by calling 1-800-628-0523.
Any Retail shares exchanged must have a value at least equal to the minimum
initial investment required by the particular investment fund into which the
exchange is being made. Investors should make their exchange requests in writing
or by telephone to the financial institutions through which they purchased their
original Retail shares. It is the responsibility of financial institutions to
transmit exchange requests to the Transfer Agent. Investors who purchased shares
directly from the Trust should transmit exchange requests directly to the
Transfer Agent. Exchange requests received by the Transfer Agent prior to 4:00
p.m. (Eastern Time) will be processed as of the close of business on the day of
receipt; requests received by the Transfer Agent after 4:00 p.m. (Eastern Time)
will be processed on the next Business Day. The Trust reserves the right to
reject any exchange request. During periods of unusual economic or market
changes, telephone exchanges may be difficult to implement. In such event, an
Investor should mail the exchange request to his financial institution, and an
Investor who directly purchased shares from the Trust should mail the exchange
request to the Transfer Agent. The exchange privilege may be modified or
terminated at any time upon 60 days' notice to shareholders.
DISTRIBUTION AGREEMENT
Under the Trust's Distribution Agreement and related Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act, each investment fund of the
Trust reimburses the Distributor monthly for the direct and indirect expenses
incurred by the Distributor in providing such fund advertising, marketing,
prospectus printing and other distribution services up to a maximum of .10% per
annum of the average net assets of the fund, inclusive of an annual distribution
fee of $250,000 payable monthly and accrued daily among the investment Funds
with respect to which the Distributor is distributing shares.
SHAREHOLDER SERVICES PLAN
The Trust has implemented the Services Plan with respect to Retail shares
in each of the Funds. Pursuant to the Services Plan, the Trust enters into
shareholder servicing agreements with certain financial institutions pursuant to
which the institutions render shareholder administrative services to their
customers who are the beneficial owners of Retail shares in consideration for
the payment of up to .25% (on an annualized basis) of the average daily net
asset value of such shares. Persons entitled to receive compensation for
servicing Retail shares may receive different compensation with respect to those
shares than with respect to Institutional shares in the same Fund. Shareholder
administrative services may include aggregating and processing purchase and
redemption orders, processing dividend payments from the Fund on behalf of
custom-
20
<PAGE> 23
ers, providing information periodically to customers showing their position in
Retail shares, and providing sub-transfer agent services or the information
necessary for sub-transfer agent services, with respect to Retail shares
beneficially owned by customers. Since financial institutions may charge their
customers fees depending on the type of customer account the Investor has
established, beneficial owners of Retail shares should read this Prospectus in
light of the terms and fees governing their accounts with financial
institutions.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the net investment income of the Equity and Equity Income
Funds are declared and paid quarterly; dividends from the net investment income
of the Mid Cap Regional Fund are declared and paid annually. With respect to
each Fund, net income for dividend purposes consists of dividends, distributions
and other income on the Fund's assets, less the accrued expenses of the Fund.
Any net realized capital gains will be distributed at least annually. Dividends
and distributions will reduce the Funds' net asset value per share by the per
share amount thereof.
Shareholders may elect to have their dividends reinvested in additional
full and fractional Fund shares of the same class or series at the net asset
value of such shares on the payment date. Shareholders must make such election,
or any revocation thereof, in writing to his Bank or financial institution. The
election will become effective with respect to dividends and distributions paid
after its receipt.
Under the Services Plan, the amount of each Fund's net investment income
available for distribution to the holders of Retail shares is reduced by the
amount of shareholder servicing fees payable to financial institutions under the
Services Plan.
TAXES
Each of the Funds intends to qualify as a separate "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Fund of liability for federal income taxes to the
extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that a Fund distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its tax-exempt interest income (if any) net of
certain deductions for such year. In general, a Fund's investment company
taxable income will be its taxable income (including dividends, interest and
short-term capital gains) subject to certain adjustments and excluding the
excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. Each Fund intends to distribute
substantially all of its investment company taxable income and net tax-exempt
income each taxable year. Such distributions by the Fund will be taxable as
ordinary income to their respective shareholders who are not currently exempt
from federal income taxes, whether such income is received in cash or reinvested
in additional shares. (Federal income taxes for distributions to an IRA or to a
qualified retirement plan are deferred under the Code.) The dividends received
deduction for corporations will apply to such distributions to the extent of the
total qualifying dividends received by the distributing Fund from domestic
corporations for the taxable year.
Substantially all of each Fund's net realized long-term capital gains, if
any, will be distributed at least annually to Fund shareholders. A Fund will
generally have no tax liability with respect to such gains and the distributions
will be taxable to Fund shareholders who are not currently exempt from federal
income taxes as long-term capital gains, regardless of how long the shareholders
have held Fund shares and whether such gains are received in cash or reinvested
in additional shares.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by a Fund on December 31 of such year in
the event such dividends are actually paid during January of the following year.
21
<PAGE> 24
Prior to purchasing Fund shares, the impact of dividends or distributions
which are expected to be declared or have been declared, but not paid, should be
carefully considered. Any dividend or distribution declared shortly after a
purchase of shares prior to the record date will have the effect of reducing the
per share net asset value by the per share amount of the dividend or
distribution. All or a portion of such dividend or distribution, although in
effect a return of capital, may be subject to tax.
A taxable gain or loss may be realized by a shareholder upon his
redemption, transfer or exchange of Fund shares depending upon the tax basis of
such shares and their price at the time of redemption, transfer or exchange. If
a shareholder has held shares for six months or less and during that time
received a distribution taxable as a long-term capital gain, then any loss the
shareholder might realize on the sale of those shares will be treated as a long-
term loss to the extent of the earlier capital gain distribution. Generally, a
shareholder may include sales charges incurred upon the purchase of Fund shares
in his tax basis for such shares for the purpose of determining gain or loss on
a redemption, transfer or exchange of such shares. However, if the shareholder
effects an exchange of such shares for shares of another Fund within 90 days of
the purchase and is able to reduce the sales charges applicable to the new
shares (by virtue of the Trust's exchange privilege), the amount equal to such
reduction may not be included in the tax basis of the shareholder's exchanged
shares but may be included (subject to this limitation) in the tax basis of the
new shares.
Shareholders of the Funds will be advised at least annually as to the
federal income tax consequences of distributions made to them each year.
Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes which may differ from federal tax
consequences described above.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus; such laws and regulations may be
changed by legislative or administrative actions. The foregoing summarizes some
of the important tax considerations generally affecting the Funds and their
shareholders and is not intended as a substitute for careful tax planning.
Accordingly, potential investors should consult their tax advisers with specific
reference to their own tax situation.
22
<PAGE> 25
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the direction of
the Trust's Board of Trustees. The trustees of the Trust, their addresses,
principal occupations during the past five years, and other affiliations are as
follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------------------------------------------------- ---------------------------------------
<S> <C> <C>
Richard B. Tullis* Chairman of the Board, Chairman Emeritus, Harris
5150 Three Village Drive President and Treasurer Corporation (electronic
Lyndhurst, Ohio 44124 communication and information
processing equipment), since October
1985; Director, NACCO Materials
Handling Group, Inc. (manufacturer of
industrial fork lift trucks), since
1984; Director, Hamilton
Beach/Proctor-Silex, Inc. (manufacturer
of household appliances), since 1990;
Director, Waste-Quip, Inc. (waste
handling equipment), since 1989.
Thomas R. Benua, Jr.* Trustee President, EBCO Manufacturing
564 Hackberry Drive Company and subsidiaries
Westerville, OH 43081 (manufacture, sale and financing of
water coolers and dehumidifiers), since
January 1987; Vice President and
Executive Committee Member of Ebtech
Corp., since March 1991.
Leigh Carter* Trustee Retired President and Chief
Renaissance on Playhouse Square Operating Officer, BFGoodrich
1350 Euclid Avenue Company, August 1986 to September
Suite 1060 1990; Director, Adams Express
Cleveland, OH 44115 Company, since April 1982; Director,
Centerior Energy Corp, since April
1986; Director, Lamson & Sessions Co.,
since April 1991; Director, Petroleum &
Resources Corp., since April 1987;
Director, Sherwin-Williams Co., since
April 1985; Director, Morrison
Products, since April 1983; Director,
Patriot Packaging, since May 1993;
Director, Western Reserve Controls,
since April 1991.
John F. Durkott Trustee President and Chief Operating
8600 Allisonville Road Officer, Kittle's Home Furnishings
Indianapolis, IN 46250 Center, Inc., since January 1982;
partner, Kittles Bloomington Property
Company, since January 1981; partner,
KK&D (Affiliated Real Estate Companies
of Kittles Home Furnishing Center),
since January 1989.
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------------------------------------------------- ---------------------------------------
<S> <C> <C>
Richard W. Furst, Dean Trustee Professor of Finance and Dean,
College of Business and College of Business and Economics,
Economics University of Kentucky, since 1981;
University of Kentucky Director, Studio Plus Hotels, Inc.,
Lexington, KY 40506-0034 since 1994.
J. William Pullen Trustee President and Chief Executive
Whayne Supply Company Officer, Whayne Supply Co. (engine
1400 Cecil Avenue and heavy equipment distribution),
P.O. Box 35900 since 1986; President and Chief
Louisville, KY 40232-5900 Executive Officer, American Contractors
Rentals & Sales (rental subsidiary of
Whayne Supply Co.), since 1988.
</TABLE>
- ---------------
* Messrs. Tullis, Benua and Carter are considered by the Trust to be "interested
persons" of the Trust as defined in the 1940 Act.
The trustees of the Trust receive fees and are reimbursed for their
expenses in connection with each meeting of the Board of Trustees they attend.
Additional information on the compensation paid by the Trust to its trustees and
officers and their background is included in the Statement of Additional
Information.
INVESTMENT ADVISERS
National City, National City Columbus and National City Kentucky serve as
investment advisers to the Equity and Equity Income Funds and National City
serves as the investment adviser to the Mid Cap Regional Fund. The advisers are
wholly owned subsidiaries of National City Corporation. The advisers provide
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. The advisers are member banks of the Federal
Reserve System and the Federal Deposit Insurance Corporation.
On June 30, 1995, the Trust Departments of National City, National City
Columbus and National City Kentucky had approximately $7.6 billion, $1.5 billion
and $5.0 billion, respectively, in assets under management, and National City,
National City Columbus and National City Kentucky had approximately $15.5
billion, $10.7 billion and $8.9 billion, respectively, in total assets. National
City has its principal offices at 1900 East Ninth Street, Cleveland, Ohio 44114;
National City Columbus has its principal offices at 155 East Broad Street,
Columbus, Ohio 43251; and National City Kentucky has its principal offices at
National City Tower, 101 South Fifth Street, Louisville, Kentucky 40202.
Subject to the general supervision of the Trust's Board of Trustees and in
accordance with the Equity, Equity Income and Mid Cap Regional Funds' investment
policies, the advisers have agreed to manage such Funds, make decisions with
respect to and place orders for all purchases and sales of such Funds'
securities, and maintain such Funds' records relating to such purchases and
sales. Robert M. Leggett is the person primarily responsible for the day to day
management of the Equity Fund. Mr. Leggett has been employed by National City as
Vice President and Equity Team Leader since September 1995. Previously, Mr.
Leggett was the Director of Investments at the Ohio Bureau of Workers
Compensation and the head of equities at The State Teachers Retirement System of
Ohio. Mr. Leggett has been the Asset Manager of the Equity Fund since September
28, 1995. James R. Kirk is the person primarily responsible for the day to day
management of the Equity Income Fund. Mr. Kirk has been employed by National
City as
24
<PAGE> 27
Vice President and Investment Strategist since August 1995. Mr. Kirk has been
the Asset Manager of the Equity Income Fund since September 28, 1995.
Previously, Mr. Kirk was employed by KeyCorp and served in various capacities
including chief investment officer, head of equity investments and director of
research. Lawrence E. Baumgartner is the person primarily responsible for the
day to day management of the Mid Cap Regional Fund. Mr. Baumgartner employed by
National City as President of Broad Street Asset Management Co. since July 1994,
had been managing assets for The State Teachers Retirement System of Ohio since
1987 and has been the Asset Manager of the Mid Cap Regional Fund since its
inception.
For the services provided and expenses assumed pursuant to the Advisory
Agreements relating to the Equity, Equity Income and Mid Cap Regional Funds, the
advisers are entitled to receive an advisory fee, computed daily and payable
monthly, at the annual rate of .75% of the average net assets of each of these
Funds. Shareholders should note that these fees are higher than those payable by
other investment companies. However, the Trust believes that the fees are within
the range of fees payable by investment funds with comparable investment
objectives and policies. The advisers may from time to time waive all or a
portion of their advisory fees to increase the net income of the Funds available
for distribution as dividends.
AUTHORITY TO ACT AS INVESTMENT ADVISERS
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 advisers believe that they may perform the
services for the Funds contemplated by their Advisory Agreements with the Trust
as described in such agreements and this Prospectus 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 requirements, could prevent the advisers from
continuing to perform services for the Trust. If the advisers were prohibited
from providing services to the Funds, 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 advisers, or their affiliated and
correspondent banks in connection with shareholder purchases of Fund shares, the
advisers and their 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 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 advisers, or an affiliate of the advisers, would
consider the possibility of offering to perform additional services for the
Trust. Legislation modifying such restrictions has been proposed in past
sessions in 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
advisers, or such an affiliate, might offer to provide such services.
ADMINISTRATOR
PFPC Inc. ("PFPC"), located at 400 Bellevue Parkway, Wilmington, Delaware
19809, serves as the administrator to the Funds. PFPC is an indirect,
wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding company.
Under its Administration and Accounting Services Agreement with the Trust,
PFPC has agreed to provide the following services with respect to the
25
<PAGE> 28
Funds: statistical data, data processing services and accounting and bookkeeping
services; prepare tax returns and certain reports filed with the SEC; assist in
the preparation of reports to shareholders and the preparation of the Trust's
registration statement; maintain the required fidelity bond coverage; calculate
each Fund's net asset value per share, net income, and realized capital gains
(losses); and generally assist the Funds with respect to all aspects of their
administration and operation. PFPC is entitled to receive with respect to each
Fund an administrative fee, computed daily and paid monthly, at the annual rate
of .10% of the first $200,000,000 of its net assets, .075% of the next
$200,000,000 of its net assets, .05% of the next $200,000,000 of its net assets
and .03% of its net assets over $600,000,000 and is entitled to be reimbursed
for its out-of-pocket expenses incurred on behalf of each Fund.
DESCRIPTION OF THE TRUST AND ITS SHARES
The Trust was organized as a Massachusetts business trust on January 28,
1986. The Trust is a series fund authorized to issue 24 separate classes or
series of shares of beneficial interest ("shares"). Six of these classes or
series, which represent interests in the Equity Fund (Class H and Class H --
Special Series 1), Equity Income Fund (Class M and Class M -- Special Series 1)
and Mid Cap Regional Fund (Class N and Class N -- Special Series 1) are
described in this Prospectus. Class H, Class M, and Class N shares constitute
the Institutional class or series of shares; and Class H -- Special Series 1,
Class M -- Special Series 1, and Class N -- Special Series 1 shares constitute
the Retail class or series of shares. The other Funds of the Trust are: Money
Market Fund (Class A and Class A -- Special Series 1), Government Fund (Class B
and Class B -- Special Series 1), Treasury Fund (Class C and Class C -- Special
Series 1), Tax Exempt Fund (Class D and Class D -- Special Series 1), Fixed
Income Fund (Class I and Class I -- Special Series 1), Ohio Tax Exempt Fund
(Class K and Class K -- Special Series 1), National Tax Exempt Fund (Class L and
Class L -- Special Series 1), Enhanced Income Fund (Class O and Class
O -- Special Series 1), and Total Return Advantage Fund (Class P and Class
P -- Special Series 1). Each share has no par value, represents an equal
proportionate interest in the investment fund with other shares of the same
class or series outstanding, and is entitled to such dividends and distributions
out of the income earned on the assets belonging to such Fund as are declared in
the discretion of the Trust's Board of Trustees. The Trust's Declaration of
Trust authorizes the Board of Trustees to classify or reclassify any unissued
shares into any number of additional classes of shares and to classify or
reclassify any class of shares into one or more series of shares.
Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional share held. Shareholders will
vote in the aggregate and not by investment Fund, except as otherwise expressly
required by law or when the Board of Trustees determines that the matter to be
voted on affects only the interests of shareholders of a particular investment
Fund. The Statement of Additional Information gives examples of situations in
which the law requires voting by investment Fund. In addition, shareholders of
each of the investment Funds will vote in the aggregate and not by class or
series, except as otherwise expressly required by law or when the Board of
Trustees determines the matter to be voted on affects only the interests of the
holders of a particular class or series of shares. Under the Services Plan, only
the holders of Retail shares in an investment Fund are, or would be entitled to
vote on matters submitted to a vote of shareholders (if any) concerning the
Services Plan. Voting rights are not cumulative, and accordingly, the holders of
more than 50% of the aggregate shares of the Trust may elect all of the trustees
irrespective of the vote of the other shareholders.
As stated above, the Trust is organized as a trust under the laws of
Massachusetts. Shareholders of such a trust may, under certain circumstances, be
held personally liable (as if they were partners) for the obligations of the
trust. The Declaration of Trust of the Trust provides for indemnification >out
of the trust property for any shareholder held personally liable solely by
reason of his being or having
26
<PAGE> 29
been a shareholder and not because of his acts or omissions or some other
reason.
The Trust does not presently 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 shall be called at
the written request of shareholders entitled to cast at least 10% of the votes
entitled to be cast at such meeting. Such meeting may be called by shareholders
to consider the removal of one or more trustees. Shareholders will receive
shareholder communication assistance with respect to such matter as required by
the 1940 Act.
As of August 21, 1995, National City, National City Columbus, and National
City Kentucky held beneficially or of record approximately 60.42%, 19.25% and
4.09%, respectively, of the outstanding Institutional shares of the Equity Fund.
As of the same date, National City, National City Columbus and National City
Kentucky held beneficially or of record approximately 76.50%, 4.05% and 2.10%,
respectively, of the outstanding Institutional shares of the Equity Income Fund
and approximately 72.48%, 3.97% and 11.17%, respectively, of the outstanding
Institutional shares of the Mid Cap Regional Fund.
CUSTODIAN AND TRANSFER AGENT
National City Bank serves as the custodian of the Trust's assets. The
Shareholder Services Group, Inc., d/b/a 440 Financial, a wholly-owned subsidiary
of First Data Corp., serves as the Trust's transfer and dividend disbursing
agent. Communications to the Transfer Agent should be directed to P.O. Box 5109,
Westborough, Massachusetts 01581-5109. The fees payable by the Trust for these
services are described in the Statement of Additional Information.
EXPENSES
Except as noted below, the Trust's advisers bear all expenses in connection
with the performance of their services. Each Fund of the Trust bears its own
expenses incurred in its operations including: taxes; interest; fees (including
fees paid to its trustees and officers); SEC fees; state securities
qualification fees; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; expenses related to the
Distribution Plan; advisory fees; administration fees and expenses; charges of
the custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholders' reports and shareholder meetings; and
any extraordinary expenses. Each Fund also pays for brokerage fees and
commissions in connection with the purchase of its portfolio securities. Under
the Services Plan, the Retail shares in the Funds also bear the expense of
shareholder servicing fees.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual
financial statements audited by independent accountants.
Pursuant to Rule 17f-2, as National City Bank serves the Trust as both the
custodian and an investment adviser, a procedure has been established requiring
three annual verifications, two of which are to be unannounced, of all
investments held pursuant to the Custodian Services Agreement, to be conducted
by the Trust's independent auditors.
As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of the Trust or a particular investment fund means, with
respect to the approval of an investment advisory agreement, a distribution plan
or a change in a fundamental investment policy, the affirmative vote of the
lesser of (a) 50% or more of the outstanding shares of the Trust or such fund or
(b) 67% or more of the shares of the Trust or such fund present at a meeting if
more than 50% of the outstanding shares of the Trust or such fund are
represented at the meeting in person or by proxy.
Inquiries regarding the Trust or any of its investment funds may be
directed to 1-800-622-FUND(3863).
27
<PAGE> 30
NOTES
<PAGE> 31
[Armada Logo]
290 Donald Lynch
Boulevard
Marlboro, MA 01752
ARMADA FUNDS
INVESTMENT ADVISERS
AFFILIATES OF
NATIONAL CITY
CORPORATION
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
National City Bank, Columbus
155 East Broad Street
Columbus, Ohio 43251
National City Bank, Kentucky
101 South Fifth Street
Louisville, Kentucky 40202
NC-056 (9/95)
BULK RATE
U.S. POSTAGE
PAID
BOSTON, MA
PERMIT NO. 54201
<PAGE> 1
EXHIBIT 17(d)
ARMADA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 28, 1995
EQUITY FUND
EQUITY INCOME FUND
MID CAP REGIONAL FUND
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current Prospectus for the above Funds of Armada Funds
(formerly "NCC Funds") (the "Trust"), dated September 28, 1995 (the
"Prospectus"). A copy of the Prospectus may be obtained by calling or writing
the Trust at 1-800-622-FUND, 290 Donald Lynch Boulevard, Marlboro,
Massachusetts 01752.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RISK FACTORS, INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DESCRIPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ADDITIONAL INFORMATION CONCERNING TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN SERVICES AND
TRANSFER AGENCY AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SHAREHOLDER SERVICES PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
YIELD AND PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
-i-
<PAGE> 3
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read in
conjunction with the Prospectus of Armada Funds (the "Trust") that describes
the Equity, Equity Income and Mid Cap Regional Funds. The information
contained in this Statement of Additional Information expands upon matters
discussed in the Prospectus. No investment in shares of a Fund should be made
without first reading the Prospectus.
RISK FACTORS, INVESTMENT OBJECTIVES AND POLICIES
ADDITIONAL INFORMATION ON FUND MANAGEMENT
Further information on the advisers' investment management
strategies, techniques, policies and related matters may be included from time
to time in advertisements, sales literature, communications to shareholders and
other materials. See also, "Performance Information" below.
Attached to this Statement of Additional Information is
Appendix A which contains descriptions of the rating symbols used by S&P,
Fitch, Duff, IBCA and Moody's for securities which may be held by the Funds.
FOREIGN CURRENCY TRANSACTIONS
In order to protect against a possible loss on investments
resulting from a decline or appreciation in the value of a particular foreign
currency against the U.S. dollar or another foreign currency or for other
reasons, the Equity Income Fund is authorized to enter into forward currency
exchange contracts. These contracts involve an obligation to purchase or sell
a specified currency at a future date at a price set at the time of the
contract. Forward currency contracts do not eliminate fluctuations in the
values of portfolio securities but rather allow the Fund to establish a rate of
exchange for a future point in time.
When entering into a contract for the purchase or sale of a
security, the Fund may enter into a forward foreign currency exchange contract
for the amount of the purchase or sale price to protect against variations,
between the date the security is purchased or sold and the date on which
payment is made or received, in the value of the foreign currency relative to
the U.S. dollar or other foreign currency.
When the advisers anticipate that a particular foreign
currency may decline substantially relative to the U.S. dollar or other leading
currencies, in order to reduce risk, the Equity Income Fund may enter into a
forward contract to sell, for a fixed
-1-
<PAGE> 4
amount, the amount of foreign currency approximating the value of some or all
of the Fund's securities denominated in such foreign currency. Similarly, when
the obligations held by the Fund create a short position in a foreign currency,
the Fund may enter into a forward contract to buy, for a fixed amount, an
amount of foreign currency approximating the short position. With respect to
any forward foreign currency contract, it will not generally be possible to
match precisely the amount covered by that contract and the value of the
securities involved due to the changes in the values of such securities
resulting from market movements between the date the forward contract is
entered into and the date it matures. In addition, while forward contracts may
offer protection from losses resulting from declines or appreciation in the
value of a particular foreign currency, they also limit potential gains which
might result from changes in the value of such currency. The Fund will also
incur costs in connection with forward foreign currency exchange contracts and
conversions of foreign currencies and U.S. dollars.
A separate account consisting of liquid assets, such as cash,
U.S. Government securities or other liquid high grade debt obligations equal to
the amount of the Equity Income Fund's assets that could be required to
consummate forward contracts will be established with the Fund's custodian
except to the extent the contracts are otherwise "covered." For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market or fair value. If the market or fair value
of such securities declines, additional liquid securities will be placed in the
account daily so that the value of the account will equal the amount of such
commitments by the Fund. A forward contract to sell a foreign currency is
"covered" if the Fund owns the currency (or securities denominated in the
currency) underlying the contract, or holds a forward contract (or call option)
permitting the Fund to buy the same currency at a price no higher than the
Fund's price to sell the currency. A forward contract to buy a foreign
currency is "covered" if the Fund holds a forward contract (or call option)
permitting the Fund to sell the same currency at a price as high as or higher
than the Fund's price to buy the currency.
WHEN-ISSUED SECURITIES
Each Fund may purchase securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). When a Fund agrees to purchase when-issued securities, the custodian
sets aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case a
Fund may be required subsequently to place additional assets in the separate
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment, marked to
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<PAGE> 5
market daily. It is likely that a Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Because a Fund will set aside cash
or liquid assets to satisfy its purchase commitments in the manner described,
the Fund's liquidity and ability to manage its fund might be affected in the
event its commitments to purchase when- issued securities ever exceeded 25% of
the value of its total assets.
When a Fund engages in when-issued transactions, it relies on
the seller to consummate the trade. Failure of the seller to do so may result
in the Fund's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
VARIABLE AND FLOATING RATE OBLIGATIONS
Each Fund may purchase variable and floating rate obligations
(including variable amount master demand notes) which are unsecured instruments
that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate. Because variable and floating rate
obligations are direct lending arrangements between the Fund and the issuer,
they are not normally traded although certain variable and floating rate
obligations, such as Student Loan Marketing Association variable rate
obligations, may have a more active secondary market because they are issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. Even
though there may be no active secondary market in such instruments, a Fund may
demand payment of principal and accrued interest at a time specified in the
instrument or may resell them to a third party. Such obligations may be backed
by bank letters of credit or guarantees issued by banks, other financial
institutions or the U.S. Government, its agencies or instrumentalities. The
quality of any letter of credit or guarantee will be rated high quality or, if
unrated, will be determined to be of comparable quality by the advisers. In
the event an issuer of a variable or floating rate obligation defaulted on its
payment obligation, a Fund might be unable to dispose of the instrument because
of the absence of a secondary market and could, for this or other reasons,
suffer a loss to the extent of the default.
SHORT TERM OBLIGATIONS
Each Fund may invest in various short term obligations
including those described below.
Investments include commercial paper and other short term
promissory notes issued by corporations (including variable and floating rate
instruments). In addition, each Fund may invest in Canadian Commercial Paper
("CCP"), which is commercial paper issued by a Canadian corporation or a
Canadian counterpart of a U.S.
-3-
<PAGE> 6
corporation, and in Europaper, which is U.S. dollar denominated commercial
paper of a foreign issuer. Each Fund may also acquire zero coupon obligations,
which have greater price volatility than coupon obligations and which will not
result in the payment of interest until maturity.
Bank obligations include bankers' acceptances, negotiable
certificates of deposit, and non-negotiable demand and time deposits issued for
a definite period of time and earning a specified return by a U.S. bank which
is a member of the Federal Reserve System. Bank obligations also include U.S.
dollar denominated bankers' acceptances, certificates of deposit and time
deposits issued by foreign branches of U.S. banks or foreign banks. Investment
in bank obligations is limited to the obligations of financial institutions
having more than $1 billion in total assets at the time of purchase. Each Fund
may also make interest bearing savings deposits in commercial and savings banks
not in excess of 5% of its total assets. Investment in non-negotiable time
deposits is limited to no more than 5% of a Fund's total assets at the time of
purchase.
Each Fund may also make limited investments in "GICs" issued
by U.S. insurance companies. When investing in GICs, a Fund makes cash
contributions to a deposit fund or an insurance company's general account. The
insurance company then credits to the Fund monthly a guaranteed minimum
interest which is based on an index. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it, and the
charges will be deducted from the value of the deposit fund. A Fund will
purchase a GIC only when its advisers have determined, under guidelines
established by the Board of Trustees, that the GIC presents minimal credit
risks to the Fund and is of comparable quality to instruments that are rated
high quality by one or more rating agencies.
REPURCHASE AGREEMENTS
Securities held by the Funds may be subject to repurchase
agreements. Under the terms of a repurchase agreement, a Fund purchases
securities from financial institutions such as banks and broker-dealers which
the Fund's advisers deem creditworthy under guidelines approved by the Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price generally equals the
price paid by the Fund plus interest negotiated on the basis of current short
term rates, which may be more or less than the rate on the underlying portfolio
securities. The seller under a repurchase agreement will be required to
maintain the value of collateral held pursuant to the agreement at not less
than the repurchase price (including accrued interest). If the seller were to
default on its repurchase obligation or become insolvent, the Fund holding such
obligation would suffer a loss to the extent that
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<PAGE> 7
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by the Fund were delayed pending court action. Although
there is no controlling legal precedent confirming that a Fund would be
entitled, as against a claim by such seller or its receiver or trustee in
bankruptcy, to retain the underlying securities, the Board of Trustees of the
Trust believes that, under the regular procedures normally in effect for
custody of a Fund's securities subject to repurchase agreements and under
Federal laws, a court of competent jurisdiction would rule in favor of the
Trust if presented with the question. Securities subject to repurchase
agreements will be held by the Trust's custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system. Repurchase agreements
are considered to be loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS
Each Fund may borrow funds for temporary purposes by entering
into reverse repurchase agreements in accordance with its investment
restrictions. Pursuant to such agreements, a Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers, and
agree to repurchase them at a mutually agreed-upon date and price. A Fund
intends to enter into reverse repurchase agreements only to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions.
At the time a Fund enters into a reverse repurchase agreement, it will place in
a segregated custodial account assets such as U.S. Government securities or
other liquid, high grade debt securities consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which it is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by the Fund under the
Investment Company Act of 1940.
U.S. GOVERNMENT OBLIGATIONS
Each Fund may purchase obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. Some of these obligations
are supported by the full faith and credit of the U.S. Treasury, such as
obligations issued by the Government National Mortgage Association. Others,
such as those of the Export-Import Bank of the United States, are supported by
the right of the issuer to borrow from the U.S. Treasury; others, such as those
of the Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; and still others, such as those of the Student Loan Marketing
Association, are supported only by the
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<PAGE> 8
credit of the agency or instrumentality issuing the obligation. No assurance
can be given that the U.S. Government would provide financial support to U.S.
Government-sponsored agencies or instrumentalities if it is not obligated to do
so by law. The Funds will invest in the obligations of such agencies or
instrumentalities only when the advisers believe that the credit risk with
respect thereto is minimal.
SECURITIES OF OTHER INVESTMENT COMPANIES
Each Fund currently intends to limit its investments in
securities issued by other investment companies so that, as determined
immediately after a purchase of such securities is made: (i) not more than 5%
of the value of the Fund's total assets will be invested in the securities of
any one investment company; (ii) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment companies
as a group; and (iii) not more than 3% of the outstanding voting stock of any
one investment company will be owned by the Fund or by the Trust as a whole.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of the portfolio securities. The calculation
excludes U.S. Government securities and all securities whose maturities at the
time of acquisition were one year or less. Portfolio turnover may vary greatly
from year to year as well as within a particular year, and may also be affected
by cash requirements for redemptions of shares and by requirements which enable
the Fund to receive certain favorable tax treatment. Portfolio turnover will
not be a limiting factor in making fund decisions.
ADDITIONAL INVESTMENT LIMITATIONS
In addition to the investment limitations disclosed in the
Prospectus, the Funds are subject to the following investment limitations which
may be changed with respect to a particular Fund only by a vote of the holders
of a majority of such Fund's outstanding shares (as defined under
"Miscellaneous" in the Prospectus).
No Fund may:
1. Purchase securities on margin, make short sales of
securities, or maintain a short position, except that each Fund may purchase
and sell futures contracts and options on futures contracts in accordance with
its investment objective.
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<PAGE> 9
2. Act as an underwriter of securities within the
meaning of the Securities Act of 1933 except insofar as it might be deemed to
be an underwriter upon disposition of certain portfolio securities acquired
within the limitation on purchases of restricted securities.
3. Purchase or sell real estate, except that each Fund
may invest in securities secured by real estate or interests therein or issued
by companies or investment trusts which invest in real estate or interests
therein.
4. Purchase or sell commodities or commodity contracts
or invest in oil, gas, or other mineral exploration or development programs,
except that a Fund may: (a) to the extent appropriate to its investment
objective, invest in securities issued by companies which purchase or sell
commodities or commodity contracts or which invest in such programs; and (b)
purchase and sell futures contracts and options on futures contracts in
accordance with its investment objective. In addition, each Fund may enter
into forward currency contracts and other financial instruments in accordance
with its investment objective and policies.
5. Invest in any issuer for the purpose of exercising
control or management.
6. Purchase or retain securities of any issuer if the
officers or trustees of the Trust or the officers or directors of its
investment advisers owning beneficially more than one-half of 1% of the
securities of such issuer together own beneficially more than 5% of such
securities.
In addition, the Equity Fund may not write or purchase put
options, call options, straddles, spreads, or any combination thereof, except
that the Fund may purchase and sell futures contracts and options on futures
contracts in accordance with its investment objective.
The Equity Income Fund and Mid Cap Regional Fund may not write
puts, calls or combinations thereof, except for transactions in: options on
securities, financial instruments, currencies and indices of securities;
futures contracts; options on futures contracts; forward currency contracts;
interest rate swaps; and similar instruments.
* * * * *
In addition, so long as a Fund is offering and selling its
shares in the state of Texas the Fund may not (i) invest more than 5% of its
net assets in warrants (included within that amount, but not to exceed 2%, may
be warrants which are not listed on the New York or American Stock Exchange),
(ii) invest in oil, gas or
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<PAGE> 10
other mineral leases, or (iii) invest in real estate limited partnership
interests.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in the Trust are sold on a continuous basis by 440
Financial Distributors, Inc. (the "Distributor"), which has agreed to use
appropriate efforts to solicit all purchase orders. The issuance of shares is
recorded on the books of the Trust. To change the commercial bank or account
designated to receive redemption proceeds, a written request must be sent to an
investor's financial institution at its principal office. Such requests must
be signed by each shareholder, with each signature guaranteed by a U.S.
commercial bank or trust company or by a member firm of a national securities
exchange. Guarantees must be signed by an authorized signatory and "Signature
Guaranteed" must appear with the signature. An investor's financial
institution may request further documentation from corporations, executors,
administrators, trustees or guardians, and will accept other suitable
verification arrangements from foreign investors, such as consular
verification.
The Trust may suspend the right of redemption or postpone the
date of payment for more than seven days for shares during any period when (a)
trading on the Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and
holiday closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.
There is no sales load charged on shares acquired through the
reinvestment of dividends or distributions on such shares.
For the fiscal year ended May 31, 1995, sales loads paid by
shareholders of the Equity, Equity Income and Mid Cap Regional Funds totalled
$7,924, $1,269 and $19,448, respectively.
Automatic investment programs such as the monthly savings
program ("Program") described in the Prospectus offered by the Funds permit an
investor to use "dollar cost averaging" in making investments. Under this
Program, an agreed upon fixed dollar amount is invested in Fund shares at
predetermined intervals. This may help investors to reduce their average cost
per share because the Program results in more shares being purchased during
periods of lower share prices and fewer shares during periods of higher share
prices. In order to be effective, dollar cost averaging should usually be
followed on a sustained, consistent basis. Investors should be aware, however,
that dollar cost averaging results in purchases of shares regardless of their
price on the day of investment or market trends and does not ensure a profit,
protect against losses in a declining market, or prevent a loss if
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<PAGE> 11
an investor ultimately redeems his shares at a price which is lower than their
purchase price. An investor may want to consider his financial ability to
continue purchases through periods of low price levels. From time to time, in
advertisements, sales literature, communications to shareholders and other
materials ("Materials"), the Trust may illustrate the effects of dollar cost
averaging through use of or comparison to an index such as the S&P 500 Index.
OFFERING PRICE PER RETAIL SHARE OF THE FUNDS
Illustrations of the computation of the offering price per
Retail share of the Funds, based on the value of the Funds' net assets and
number of outstanding shares on May 31, 1995 are as follows:
<TABLE>
TABLE
<CAPTION> -----
EQUITY FUND
-----------
<S> <C>
Net Assets of Retail Shares . . . . . . . . . . . . . . . . . . . . . . . . . . $5,974,356
Outstanding Retail Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 404,026
Net Asset Value Per Share
($5,974,356 / 404,026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14.79
Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share) . . . . . . . . . . . . . . . . . . . . . . . . . . $.58
Offering to Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15.37
<CAPTION>
EQUITY INCOME FUND
------------------
<S> <C>
Net Assets of Retail Shares . . . . . . . . . . . . . . . . . . . . . . . . . . $124,518
Outstanding Retail Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,314
Net Asset Value Per Share
($124,518 / 11,314) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.01
Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share) . . . . . . . . . . . . . . . . . . . . . . . . . . $.43
Offering to Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.44
</TABLE>
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<PAGE> 12
<TABLE>
MID CAP REGIONAL FUND
<CAPTION>
<S> <C>
Net Assets of Retail Shares . . . . . . . . . . . . . . . . . . . . . . . . . . $3,566,829
Outstanding Retail Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 316,740
Net Asset Value Per Share
($3,566,829 / 316,740) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.26
Sales Charge, 3.75% of
offering price (3.90% of
net asset value per share) . . . . . . . . . . . . . . . . . . . . . . . . . . $.44
Offering to Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.70
</TABLE>
EXCHANGE PRIVILEGE
Investors may exchange all or part of their Retail shares as
described in the Prospectus. Any rights an Investor may have (or have waived)
to reduce the sales load applicable to an exchange, as may be provided in a
Fund Prospectus, will apply in connection with any such exchange. The exchange
privilege may be modified or terminated at any time upon 60 days' notice to
shareholders.
By use of the exchange privilege, the Investor authorizes the
Trust's Transfer Agent or his financial institution to act on telephonic or
written instructions from any person representing himself or herself to be the
shareholder and believed by the Transfer Agent or the financial institution to
be genuine. The Investor or his financial institution must notify the Transfer
Agent of his prior ownership of Retail shares and account number. The Transfer
Agent's records of such instructions are binding.
DESCRIPTION OF SHARES
The Trust is a Massachusetts business trust. The Trust's
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of shares of beneficial interest and to classify or reclassify any
unissued shares of the Trust into one or more additional classes or series by
setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. Pursuant to
such authority, the Board of Trustees has authorized the issuance of 28 classes
or series of shares. Six of these classes or series, which represent interests
in the Equity Fund (Class H and Class H - Special Series 1), Equity Income Fund
(Class M and Class M - Special Series 1) and Mid Cap Regional Fund (Class N and
Class N - Special Series 1), are described in this Statement of Additional
Information and the related Prospectus.
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<PAGE> 13
Shares have no preemptive rights and only such conversion or
exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectus, the Trust's shares will be
fully paid and non-assessable. In the event of a liquidation or dissolution of
the Trust or an individual Fund, shareholders of a Fund are entitled to receive
the assets available for distribution belonging to the particular Fund, and a
proportionate distribution, based upon the relative asset values of the
respective Funds, of any general assets of the Trust not belonging to any
particular Fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter
required by the 1940 Act, applicable state law, or otherwise, to be submitted
to the holders of the outstanding voting securities of an investment company
such as the Trust shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares of each
investment fund affected by such matter. Rule 18f-2 further provides that an
investment fund is affected by a matter unless the interests of each fund in
the matter are substantially identical or the matter does not affect any
interest of the fund. Under the Rule, the approval of an investment advisory
agreement or any change in a fundamental investment policy would be effectively
acted upon with respect to an investment fund only if approved by a majority of
the outstanding shares of such fund. However, the Rule also provides that the
ratification of the appointment of independent public accountants, the approval
of principal underwriting contracts, and the election of trustees may be
effectively acted upon by shareholders of the Trust voting together in the
aggregate without regard to a particular fund. In addition, shareholders of
each class in a particular investment fund have equal voting rights except that
only Retail shares of an investment fund will be entitled to vote on matters
submitted to a vote of shareholders (if any) relating to shareholder servicing
fees that are allocable to such shares.
Although the following types of transactions are normally
subject to shareholder approval, the Board of Trustees may, under certain
limited circumstances, (a) sell and convey the assets of an investment fund to
another management investment company for consideration which may include
securities issued by the purchaser and, in connection therewith, to cause all
outstanding shares of such fund involved to be redeemed at a price which is
equal to their net asset value and which may be paid in cash or by distribution
of the securities or other consideration received from the sale and conveyance;
(b) sell and convert an investment fund's assets into money and, in connection
therewith, to cause all outstanding shares of such fund involved to be redeemed
at their net asset value; or (c) combine the assets belonging to an investment
fund with the assets belonging to another investment fund of the Trust, if the
Board of Trustees reasonably determines
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<PAGE> 14
that such combination will not have a material adverse effect on shareholders
of any fund participating in such combination, and, in connection therewith, to
cause all outstanding shares of any fund to be redeemed at their net asset
value or converted into shares of another class of the Trust shares at net
asset value. In the event that shares are redeemed in cash at their net asset
value, a shareholder may receive in payment for such shares an amount that is
more or less than his original investment due to changes in the market prices
of the fund's securities. The exercise of such authority by the Board of
Trustees will be subject to the provisions of the 1940 Act, and the Board of
Trustees will not take any action described in this paragraph unless the
proposed action has been disclosed in writing to the fund's shareholders at
least 30 days prior thereto.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting the Trust and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Trust or its shareholders or possible legislative changes,
and the discussion here and in the Prospectus is not intended as a substitute
for careful tax planning. Potential investors should consult their tax
advisers with specific reference to their own tax situation.
Each Fund of the Trust will be treated as a separate corporate
entity under the Code and intends to qualify as a regulated investment company.
In order to qualify for tax treatment as a regulated investment company under
the Code, each Fund must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source of
its income during a taxable year. At least 90% of the gross income of each
Fund must be derived from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stocks,
securities or foreign currencies, and other income (including but not limited
to gains from options, futures, or forward contracts) derived with respect to
the Fund's business of investing in such stock, securities or currencies. The
Treasury Department may by regulation exclude from qualifying income foreign
currency gains which are not directly related to the Fund's principal business
of investing in stock or securities, or options and futures with respect to
stock or securities. Any income derived by a Fund from a partnership or trust
is treated as derived with respect to the Fund's business of investing in
stock, securities or currencies only to the extent that such income is
attributable to items of income which would have been qualifying income if
realized by the Fund in the same manner as by the partnership or trust.
-12-
<PAGE> 15
Another requirement for qualification as a regulated
investment company under the Code is that less than 30% of a Fund's gross
income for a taxable year must be derived from gains realized on the sale or
other disposition of the following investments held for less than three months:
(1) stock and securities (as defined in Section 2(a)(36) of the 1940 Act; (2)
options, futures and forward contracts other than those on foreign currencies;
and (3) foreign currencies (and options, futures and forward contracts on
foreign currencies) that are not directly related to a Fund's principal
business of investing in stock and securities (and options and futures with
respect to stocks and securities). Interest (including original issue discount
and, with respect to taxable debt securities and non taxable debt securities
acquired after April 30, 1993, accrued market discount) received by a Fund upon
maturity or disposition of a security held for less than three months will not
be treated as gross income derived from the sale or other disposition of such
security within the meaning of this requirement. However, any other income
which is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.
Some investments held by a Fund may be subject to special
rules which govern the federal income tax treatment of certain transactions
denominated in terms of a currency other than the U.S. dollar or determined by
reference to the value of one or more currencies other than the U.S. dollar.
The types of transactions covered by the special rules include the following:
(1) the acquisition of, or becoming the obligor under, a bond or other debt
instrument (including, to the extent provided in Treasury regulations,
preferred stock); (2) the accruing of certain trade receivables and payables;
and (3) the entering into or acquisition of any forward contract, futures
contract, option and similar financial instrument. The disposition of a
currency other than the U.S. dollar by a U.S. taxpayer is also treated as a
transaction subject to the special currency rules. With respect to
transactions covered by the special rules, foreign currency gain or loss is
calculated separately from any gain or loss on the underlying transaction and
is normally taxable as ordinary gain or loss. The Treasury Department has
issued regulations under which certain transactions subject to the special
currency rules that are part of a "section 988 hedging transaction" are not
subject to the mark-to-market or loss deferral rules under the Code. Gain or
loss attributable to the foreign currency component of transactions engaged in
by a Fund which are not subject to the special currency rules (such as foreign
equity investments other than certain preferred stocks) will be treated as
capital gain or loss and will not be segregated from the gain or loss on the
underlying transaction.
The Trust will designate any distribution of long-term capital
gains of a Fund as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the
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<PAGE> 16
Trust's taxable year. Shareholders should note that, upon the sale or exchange
of Fund shares, if the shareholder has not held such shares for at least six
months, any loss on the sale or exchange of those shares will be treated as
long-term capital loss to the extent of the capital gain dividends received
with respect to the shares.
A 4% non-deductible excise tax is imposed on regulated
investment companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). Each Fund intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and capital gain net income each calendar year to avoid liability for
this excise tax.
If for any taxable year a Fund does not qualify for federal
tax treatment as a regulated investment company, all of such Fund's taxable
income will be subject to federal income tax at regular corporate rates without
any deduction for distributions to its shareholders. In such event, dividend
distributions (including amounts derived from interest on Municipal Bonds)
would be taxable as ordinary income to the Fund's shareholders to the extent of
the Fund's current and accumulated earnings and profits, and would be eligible
for the dividends received deduction for corporations.
Each Fund may be required in certain cases to withhold and
remit to the U.S. Treasury 31% of taxable dividends or gross proceeds realized
upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, or who are subject to withholding
by the Internal Revenue Service for failure to properly include on their return
payments of taxable interest or dividends, or who have failed to certify to the
Fund that they are not subject to backup withholding when required to do so or
that they are "exempt recipients."
TRUSTEES AND OFFICERS
The Prospectus includes a description of the trustees and
certain executive officers of the Trust, their addresses, principal occupations
during the past five years, and other affiliations. Mr. W. Bruce McConnel,
III, Secretary of the Trust, is a partner of the law firm of Drinker Biddle &
Reath, which receives fees as counsel to the Trust. Mr. Louis J. Russo,
Assistant Treasurer of the Trust, is employed by The Shareholder Services
Group, Inc., d/b/a 440 Financial which receives fees as Transfer Agent to the
Trust.
Each trustee receives an annual fee of $6,000 plus $2,000 for
each Board meeting attended and reimbursement of expenses incurred in attending
meetings. The Chairman of the Board is
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<PAGE> 17
entitled to receive an additional $2,000 per annum for services in such
capacity. For the year ended May 31, 1995, the Trust's trustees and officers
as a group received aggregate fees of $74,500. The trustees and officers of
the Trust own less than 1% of the shares of the Trust.
The following table summarizes the compensation for each of
the Trustees of the Trust for the fiscal year ended May 31, 1995:
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Accrued Total
Aggregate as Part of Estimated Compensation
Name of Compensation the Trust's Approval Benefits from the
Person, Position from the Trust Expenses Upon Retirement Trust
---------------- -------------- -------- --------------- -----
<S> <C> <C> <C> <C>
Richard B. Tullis, Chairman 14,000 $0 $0 14,000
Thomas R. Benua, Jr., Trustee 12,500 $0 $0 12,500
Leigh Carter, Trustee 12,500 $0 $0 12,500
John F. Durkott, Trustee 12,500 $0 $0 12,500
Richard W. Furst, Trustee 10,500 $0 $0 10,500
J. William Pullen, Trustee 12,500 $0 $0 12,500
</TABLE>
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a business trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. However, the Trust's Declaration of Trust provides
that shareholders shall not be subject to any personal liability for the acts
or obligations of the Trust, and that every note, bond, contract, order, or
other undertaking made by the Trust shall contain a provision to the effect
that the shareholders are not personally liable thereunder. The Declaration of
Trust provides for indemnification out of the trust property of any shareholder
held personally liable solely by reason of his being or having been a
shareholder and not because of his acts or omissions or some other reason. The
Declaration of Trust also provides that the Trust shall, upon request, assume
the defense of any claim made against any shareholder for any act or obligation
of the Trust, and shall satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations.
-15-
<PAGE> 18
The Declaration of Trust states further that no trustee,
officer, or agent of the Trust shall be personally liable for or on account of
any contract, debt, tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the trust estate or the
conduct of any business of the Trust; nor shall any trustee be personally
liable to any person for any action or failure to act except by reason of his
own bad faith, willful misfeasance, gross negligence, or reckless disregard of
his duties as trustee. The Declaration of Trust also provides that all persons
having any claim against the trustees or the Trust shall look solely to the
trust property for payment. With the exceptions stated, the Declaration of
Trust provides that a trustee is entitled to be indemnified against all
liabilities and expense, reasonably incurred by him in connection with the
defense or disposition of any proceeding in which he may be involved or with
which he may be threatened by reason of his being or having been a trustee, and
that the trustees, have the power, but not the duty, to indemnify officers and
employees of the Trust unless any such person would not be entitled to
indemnification had he been a trustee.
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS
ADVISORY AGREEMENTS
As described in the Prospectus, National City, National City
Columbus and National City Kentucky serve as investment advisers to the Equity
Fund, Equity Income Fund, and National City Bank alone serves as investment
adviser to the Mid Cap Regional Fund. Prior to September 26, 1990, only
National City and National City Columbus served as advisers to the Equity Fund.
The advisers are affiliates of National City Corporation, a bank holding
company with $32 billion in assets, and headquarters in Cleveland, Ohio and
nearly 600 branch offices in three states. Through its subsidiaries, National
City Corporation has been managing investments for individuals, pension and
profit-sharing plans and other institutional investors for over 75 years and
currently manages over $28 billion in assets. From time to time, the advisers
may voluntarily waive fees or reimburse the Trust for expenses.
Pursuant to the Advisory Agreement, the Trust incurred
advisory fees in the following amounts for (i) the fiscal years ended May 31,
1995, 1994 and 1993: $814,885, $724,220 and $58,648 (after waivers of $482,424)
respectively, for the Equity Fund; (ii) the fiscal year ended May 31, 1995:
$131,109 (after waivers of $39,122) with respect to the Equity Income Fund; and
(iii) the fiscal year ended May 31, 1995: $183,900 (after waivers of $27,051)
with respect to the Mid Cap Regional Fund.
-16-
<PAGE> 19
Each Advisory Agreement provides that the advisers 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 the Advisory 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 advisers in the
performance of their duties or from reckless disregard by them of their duties
and obligations thereunder. In addition, the advisers have undertaken in the
Advisory Agreements to maintain their policy and practice of conducting their
Trust Departments independently of their Commercial Departments.
The Advisory Agreement relating to the Equity Fund was
approved by the shareholders of such Fund on September 26, 1990. The Advisory
Agreements relating to the Equity Income and Mid Cap Regional Funds were
approved by their sole shareholder prior to the Funds' commencement of
investment operations. Unless sooner terminated, the Advisory Agreements will
continue in effect with respect to a particular Fund until September 30, 1996
and from year to year thereafter, subject to annual approval by the Trust's
Board of Trustees, or by a vote of a majority of the outstanding shares of such
Fund (as defined in the Funds' Prospectus) and a majority of the trustees who
are not parties to the Agreement or interested persons (as defined in the 1940
Act) of any party by votes cast in person at a meeting called for such purpose.
The Advisory Agreements may be terminated by the Trust or the advisers on 60
days written notice, and will terminate immediately in the event of its
assignment.
If expenses borne by a Fund in any fiscal year exceed expense
limitations imposed by applicable state securities regulations, the advisers
will reimburse the Trust for any such excess with respect to the Funds to the
extent described in any written undertaking provided by the advisers to such
state. To the Trust's knowledge, as of the date of this Statement of
Additional Information, the most restrictive expense limitation applicable to
the Trust provides that annual expenses (as defined by statute) may not exceed
2.5% of the first $30 million, 2% of the next $70 million and 1.5% of the
remaining average net assets of a particular Fund. Such amount, if any, will
be estimated, reconciled and paid on a monthly basis. The fees Banks may
charge to Customers for services provided in connection with their investments
in the Trust are not covered by the state securities expense limitations
described above.
ADMINISTRATION AND ACCOUNTING SERVICE AGREEMENT
PFPC serves as the administrator and accounting agent to the
Trust. The services provided as administrator and accounting agent and current
fees are described in the Prospectus. Pursuant to the Administration and
Accounting Services Agreement, the Trust
-17-
<PAGE> 20
incurred the following fees to PFPC for (i) the fiscal years ended May 31,
1995, 1994 and 1993: $108,651, $96,563 and $72,143 respectively, for the Equity
Fund; (ii) the fiscal year ended May 31, 1995: $17,597 (after waivers of
$5,100) with respect to the Equity Income Fund; and (iii) the fiscal year ended
May 31, 1995: $23,006 (after waivers of $5,121) with respect to the Mid Cap
Regional Fund.
DISTRIBUTION PLAN AND RELATED AGREEMENT
The Distributor acts as distributor of the Funds' shares
pursuant to its Distribution Agreement with the Trust as described in the
Prospectus. Shares are sold on a continuous basis.
Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted
a Distribution Plan (the "Plan") which permits the Trust to bear certain
expenses in connection with the distribution of its shares. As required by
Rule 12b-1, the Trust's 12b-1 Plan and related distribution agreement have been
approved, and are subject to annual approval by, a majority of the Trust's
Board of Trustees, and by a majority of the trustees who are not interested
persons of the Trust and have no direct or indirect interest in the operation
of the Plan or any agreement relating to the Plan, by vote cast in person at a
meeting called for the purpose of voting on the Plan and related agreement. In
compliance with the Rule, the trustees requested and evaluated information they
thought necessary to an informed determination of whether the Plan and related
agreement should be implemented, and concluded, in the exercise of reasonable
business judgment and in light of their fiduciary duties, that there is a
reasonable likelihood that the Plan and related agreement will benefit the
Trust and its shareholders.
Rule 12b-1 also requires that persons authorized to direct the
disposition of monies payable by a fund (in the Trust's case, the Distributor)
provide for the trustees' review of quarterly reports on the amounts expended
and the purposes for the expenditures.
Any change in the Plan that would materially increase the
distribution expenses of a Fund requires approval by its shareholders, but
otherwise, the Plan may be amended by the trustees, including a majority of the
disinterested trustees who do not have any direct or indirect financial
interest in the Plan or related agreement. The Plan and related agreement may
be terminated as to a particular Fund by a vote of the Trust's disinterested
trustees or by vote of the shareholders of the Fund, on not more than 60 days
written notice. The selection and nomination of disinterested trustees has
been committed to the discretion of such disinterested trustees as required by
the Rule.
The Trusts' Plan provides that each Fund will reimburse the
Distributor for distribution expenses in an amount not to
-18-
<PAGE> 21
exceed .10% of such fund's average net assets. Distribution expenses payable
by the Distributor pursuant to the Plan include direct and indirect costs and
expenses incurred in connection with advertising and marketing a fund's shares,
and direct and indirect costs and expenses of preparing, printing and
distributing its prospectuses to other than current shareholders. In addition,
the Plan provides that the Trust will pay the Distributor an annual
distribution fee of $250,000 payable monthly and accrued daily by all of the
Trust's investment funds with respect to which the Distributor is distributing
shares. For the fiscal year ended May 31, 1995, the Trust paid the Distributor
$67,272 with respect to the Equity Fund, $10,408 with respect to the Equity
Income Fund and $31,486 with respect to the Mid Cap Regional Fund. Of the
aggregate amount paid to the Distributor by the Trust with respect to the
Equity Fund approximately $959 was attributable to postage, $3,919 was
attributable to communications with shareholders, $51,233 was attributable to
advertisement/promotions and $11,161 was attributable to general compensation
to the Distributor. Of the aggregate amount paid to the Distributor by the
Trust with respect to the Equity Income Fund approximately $119 was
attributable to postage, $4,192 was attributable to communications with
shareholders, $4,256 was attributable to advertisement/ promotions and $1,842
was attributable to general compensation to the Distributor. Of the aggregate
amount paid to the Distributor by the Trust with respect to the Mid Cap
Regional Fund approximately $222 was attributable to postage, $7,132 was
attributable to communications with shareholders, $22,263 was attributable to
advertisement/promotions and $1,869 was attributable to general compensation to
the Distributor.
The Plan has been approved, and will continue in effect for
successive one year periods provided that such continuance is specifically
approved by (1) the vote of a majority of the trustees who are not parties to
the Plan or interested persons of any such party and who have no direct or
indirect financial interest in the Plan and (2) the vote of a majority of the
entire Board of Trustees.
CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS
National City Bank serves as the Trust's custodian with
respect to the Funds. Under its Custodian Services Agreement, National City
Bank has agreed to: (i) maintain a separate account or accounts in the name of
each Fund; (ii) hold and disburse portfolio securities on account of each Fund;
(iii) collect and make disbursements of money on behalf of each Fund; (iv)
collect and receive all income and other payments and distributions on account
of each Fund's portfolio securities; (v) respond to correspondence by security
brokers and others relating to its duties; and (vi) make periodic reports to
the Board of Trustees concerning the Funds' operations. National City Bank is
authorized to select one or more banks or trust companies to serve as sub-
-19-
<PAGE> 22
custodian on behalf of the Funds, provided that it shall remain responsible for
the performance of all of its duties under the Custodian Services Agreement and
shall hold the Funds harmless from the acts and omissions of any bank or trust
company serving as sub-custodian. The Funds reimburse National City Bank for
its direct and indirect costs and expenses incurred in rendering custodial
services, except that the costs and expenses borne by each Fund in any year may
not exceed $.225 for each $1,000 of average gross assets of such Fund.
The Shareholder Services Group, Inc., d/b/a 440 Financial (the
"Transfer Agent") serves as the Trust's transfer agent and dividend disbursing
agent with respect to the Funds. Under its Transfer Agency Agreement, it has
agreed to: (i) issue and redeem shares of each Fund; (ii) transmit all
communications by each Fund to its shareholders of record, including reports to
shareholders, dividend and distribution notices and proxy materials for
meetings of shareholders; (iii) respond to correspondence by security brokers
and others relating to its duties; (iv) maintain shareholder accounts; and (v)
make periodic reports to the Board of Trustees concerning the Funds'
operations. The Transfer Agent sends each shareholder of record a monthly
statement showing the total number of shares owned as of the last business day
of the month (as well as the dividends paid during the current month and year),
and provides each shareholder of record with a daily transaction report for
each day on which a transaction occurs in the shareholder's account with each
Fund.
SHAREHOLDER SERVICES PLAN
As stated in the Prospectus, the Trust has implemented the
Services Plan with respect to Retail shares in each of the Funds. Pursuant to
the Services Plan, the Trust may enter into agreements with financial
institutions pertaining to the provision of administrative services to their
customers who are the beneficial owners of Retail shares in consideration for
the payment of up to .25% (on an annualized basis) of the net asset value of
such shares. Such services may include: (i) aggregating and processing
purchase and redemption requests from customers; (ii) providing customers with
a service that invests the assets of their accounts in Retail shares; (iii)
processing dividend payments from the Funds; (iv) providing information
periodically to customers showing their position in Retail shares; (v)
arranging for bank wires; (vi) responding to customer inquiries relating to the
services performed with respect to Retail shares beneficially owned by
customers; (vii) forwarding shareholder communications; and (viii) other
similar services requested by the Trust. Agreements between the Trust and
financial institutions will be terminable at any time by the Trust without
penalty.
-20-
<PAGE> 23
PORTFOLIO TRANSACTIONS
Pursuant to their Advisory Agreements with the Trust, National
City, National City Columbus and National City Kentucky are responsible for
making decisions with respect to and placing orders for all purchases and sales
of portfolio securities for the Funds. The advisers purchase portfolio
securities either directly from the issuer or from an underwriter or dealer
making a market in the securities involved. Purchases from an underwriter of
portfolio securities 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, but the price includes an undisclosed commission or mark-up.
For the fiscal year ended May 31, 1995, the Equity, Equity
Income and Mid Cap Regional Funds paid $80,991, $68,108 and $217,900 in
brokerage commissions, respectively.
While the advisers generally seek competitive spreads or
commissions, they may not necessarily allocate each transaction to the
underwriter or dealer charging the lowest spread or commission available on the
transaction. Allocation of transactions, including their frequency, to various
dealers is determined by the advisers in their best judgment and in a manner
deemed fair and reasonable to shareholders. The primary consideration is
prompt execution of orders in an effective manner at the most favorable price.
Subject to this consideration, dealers who provide supplemental investment
research to the advisers may receive orders for transactions by a Fund.
Information so received is in addition to and not in lieu of services required
to be performed by the advisers and does not reduce the fees payable to the
advisers by the Fund. Such information may be useful to the advisers in
serving both the Trust and other clients, and, similarly, supplemental
information obtained by the placement of business of other clients may be
useful to the advisers in carrying out their obligations to the Trust.
Portfolio securities will not be purchased from or sold to the
Fund's advisers, the Distributor, or any "affiliated person" (as such term is
defined under the 1940 Act) of any of them acting as principal, except to the
extent permitted by the SEC. In addition, a Fund will not give preference to
its advisers' correspondents with respect to such transactions, securities,
savings deposits, repurchase agreements and reverse repurchase agreements.
While serving as advisers to the Fund, National City, National
City Columbus and National City Kentucky have agreed to
-21-
<PAGE> 24
maintain their policy and practice of conducting their Trust departments
independently of their Commercial Departments. In making investment
recommendations for the Trust, Trust Department personnel will not inquire or
take into consideration whether the issuer of securities proposed for purchase
or sale for the Trust's account 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 Trust.
Investment decisions for each Fund are made independently from
those for the other Funds and for other investment companies and accounts
advised or managed by the advisers. Such other Funds, investment companies and
accounts may also invest in the same securities as such Fund. When a purchase
or sale of the same security is made at substantially the same time on behalf
of a Fund and another investment company or account, the transaction will be
averaged as to price, and available investments allocated as to amount, in a
manner which the advisers believe to be equitable to the Fund and such other
investment company or account. In some instances, this investment procedure
may adversely affect the price paid or received by a Fund or the size of the
position obtained or sold by such Fund. To the extent permitted by law, the
advisers may aggregate the securities to be sold or purchased for a Fund with
those to be sold or purchased for other investment companies or accounts in
order to obtain best execution.
AUDITORS
Ernst & Young LLP, independent auditors, with offices at Two
Commerce Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania
19103, serve as independent auditors of the Trust. The financial statements,
as of and for the period ended May 31, 1995, which are incorporated by
reference in this Statement of Additional Information, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report referred
to elsewhere herein, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
COUNSEL
Drinker Biddle & Reath (of which Mr. McConnel, Secretary of
the Trust, is a partner), with offices at 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107, are counsel to the Trust and will pass upon the legality of
the shares offered hereby.
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<PAGE> 25
YIELD AND PERFORMANCE INFORMATION
The Equity Income Fund's "yield" described in the Prospectus
is calculated by dividing each Fund's net investment income per share earned
during a 30-day period (or another period permitted by the rules of the SEC) by
the net asset value per share on the last day of the period and annualizing the
result on a semi-annual basis by adding one to the quotient, raising the sum to
the power of six, subtracting one from the result and then doubling the
difference. The Fund's net investment income per share earned during the
period is based on the average daily number of shares outstanding during the
period entitled to receive dividends and includes dividends and interest earned
during the period minus expenses accrued for the period, net of reimbursements.
This calculation can be expressed as follows:
<TABLE>
<S> <C>
a-b 6
Yield = 2 [(------) - 1]
cd + 1
</TABLE>
Where: a = dividends and interest earned during the
period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends.
d = maximum offering price per share on the last
day of the period.
The Equity Income Fund calculates interest earned on debt
obligations held in its fund by computing the yield to maturity of each
obligation held by it based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day of
each 30-day period, or, with respect to obligations purchased during the 30-day
period, the purchase price (plus actual accrued interest) and dividing the
result by 360 and multiplying the quotient by the market value of the
obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent 30-day period
that the obligation is in the Fund. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased by a Fund at a discount or premium, the formula generally
calls for amortization of the discount or premium. The amortization schedule
will be adjusted monthly to reflect changes in the market values of such debt
obligations.
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<PAGE> 26
Expenses accrued for the period (variable "b" in the formula)
include all recurring fees charged by a Fund to all shareholder accounts in
proportion to the length of the base period and the Fund's mean (or median)
account size. Undeclared earned income will be subtracted from the net asset
value per share (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the 30-day base period, has not been
declared as a dividend, but is reasonably expected to be and is declared as a
dividend shortly thereafter. For applicable sales charges, see "How to
Purchase and Redeem Shares -- Sales Charges Applicable to Purchases of Retail
Shares" in the Prospectus.
For the 30-day period ended May 31, 1995, the yields of the
Retail and Institutional shares of the Equity Income Fund were 3.00% and 3.36%.
Each Fund computes its "average annual total return" by
determining the average annual compounded rate of return during specified
periods that would equate the initial amount invested to the ending redeemable
value of such investment by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
<TABLE>
<S> <C>
ERV 1/n
T = [(-----) - 1]
P
</TABLE>
Where: T = average annual total return
ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed
in terms of years
Each Fund computes its aggregate total returns by determining
the aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
-24-
<PAGE> 27
<TABLE>
<S> <C>
ERV
T = (---) - 1
P
</TABLE>
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period and include all
recurring fees charged to all shareholder accounts, assuming an account size
equal to such Funds' mean (or median) account size for any fees that vary with
the size of the account. The maximum sales load and other charges deducted
from payments are deducted from the initial $1,000 payment (variable "P" in the
formula). The ending redeemable value (variable "ERV" in the formula) is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the measuring period
covered by the computation.
The average annual total returns for the one year period
ending May 31, 1995 were 6.24% (after taking the sales load into account) and
10.35% (without taking into account any sales load), for the Equity Fund's
Retail Shares and 10.62% for the Equity Fund's Institutional shares. The
average annual total returns since the Equity Fund's commencement of operations
through May 31, 1995 were 8.97% (after taking into account the sales load) and
9.74% (without taking into account any sales load), for its Retail shares and
9.96% for the Institutional shares.
The average annual total returns for the one year period ended
May 31, 1995 were 7.74% (after taking the sales load into account) and 13.18%
(without taking into account any sales load), for the Equity Income Fund's
Retail shares and 14.34% for the Equity Income Fund's Institutional shares.
The average annual total returns since the Equity Income Fund's commencement of
operations through May 31, 1995 were 7.74% (after taking into account the sales
load) and 13.18% (without taking into account any sales load), for its Retail
shares and 14.34% for the Institutional shares.
The average annual total returns for the period ended May 31,
1995 were 9.35% (after taking the sales load into account) and 14.80% (without
taking into account any sales load), for the Mid Cap Regional Fund's Retail
shares 17.42% for the Mid Cap Regional Fund's Institutional shares. The
average annual total returns since the Mid Cap Regional Fund's commencement of
operations through May 31, 1995 were 9.35% (after taking into account the sales
load) and 14.80% (without taking into account any sales load), for its Retail
shares and 17.42% for the Institutional shares.
The Funds may also from time to time include in Materials a
total return figure that is not calculated according to the
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<PAGE> 28
formulas set forth above in order to compare more accurately a Fund's
performance with other measures of investment return. For example, in
comparing a Fund's total return with data published by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc. or Weisenberger Investment
Company Service, or with the performance of an index, a Fund may calculate its
aggregate total return for the period of time specified in the advertisement or
communication by assuming the investment of $10,000 in shares and assuming the
reinvestment of each dividend or other distribution at net asset value on the
reinvestment date. Percentage increases are determined by subtracting the
initial value of the investment from the ending value and by dividing the
remainder by the beginning value. A Fund does not, for these purposes, deduct
from the initial value invested any amount representing sales charges. A Fund
will, however, disclose the maximum sales charge and will also disclose that
the performance data do not reflect sales charges and that inclusion of sale
charges would reduce the performance quoted.
The Funds may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on a Fund investment are
reinvested by being paid in additional Fund shares, any future income or
capital appreciation of a Fund would increase the value, not only of the
original Fund investment, but also of the additional Fund shares received
through reinvestment. As a result, the value of the Fund investment would
increase more quickly than if dividends or other distributions had been paid in
cash.
In addition, the Funds may also include in Materials
discussions and/or illustrations of the potential investment goals of a
prospective investor, investment management strategies, techniques, policies or
investment suitability of a Fund, high-quality investments (with respect to the
Equity and Equity Income Funds), economic conditions, the relationship between
sectors of the economy and the economy as a whole, various securities markets,
the effects of inflation and historical performance of various asset classes,
including but not limited to, stocks, bonds and Treasury securities. From time
to time, Materials may summarize the substance of information contained in
shareholder reports (including the investment composition of a Fund), as well
as the views of the advisers as to current market, economic, trade and interest
rate trends, legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to a Fund. The
Funds may also include in Materials charts, graphs or drawings which compare
the investment objective, return potential, relative stability and/or growth
possibilities of the Funds and/or other mutual funds, or illustrate the
potential risks and rewards of investment in various investment vehicles,
including but not limited to, stocks, bonds, Treasury securities and shares of
a Fund and/or other mutual funds. Materials may include a discussion of
certain attributes or benefits to be
-26-
<PAGE> 29
derived by an investment in a Fund and/or other mutual funds (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic accounting rebalancing, the advantages and
disadvantages of investing in tax-deferred and taxable investments),
shareholder profiles and hypothetical investor scenarios, timely information on
financial management, tax and retirement planning and investment alternatives
to certificates of deposit and other financial instruments. Such Materials may
include symbols, headlines or other material which highlight or summarize the
information discussed in more detail therein.
MISCELLANEOUS
The Trust bears all costs in connection with its organization,
including the fees and expenses of registering and qualifying its shares for
distribution under federal and state securities regulations. All organization
expenses are being amortized on the straight-line method over a period of five
years from the date of commencement of operations.
As used in the Prospectus, "assets belonging to a Fund" means
the consideration received by the Trust upon the issuance of shares in that
particular Fund, together with all income, earnings, profits, and proceeds
derived from the investment thereof, including any proceeds from the sale of
such investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Trust not belonging to a
particular Fund. In determining a Fund's net asset value, assets belonging to
a particular Fund are charged with the liabilities in respect of that Fund.
The following shareholders beneficially owned 5% or more of
the outstanding Institutional shares of the Equity Fund as of August 28, 1995:
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Equity Fund Shares Shares
- ----------- ------------- -------------
<S> <C> <C>
National City Bank Trustee 3,325,514 .908 39.96%
For Non-Contributory
Retirement Trust
P.O. Box 5756
Cleveland, Ohio 44101-0756
The Columbus Foundation 525,397.873 6.31%
Unrestricted
1234 East Broad Street
Columbus, Ohio 43205
</TABLE>
-27-
<PAGE> 30
<TABLE>
<S> <C> <C>
The Columbus Foundation 430,521.501 5.17%
Endowment Funds
1234 East Broad Street
Columbus, Ohio 43205
</TABLE>
The following shareholders beneficially owned 5% or more of
the outstanding Institutional shares of the Equity Income Fund as of August 28,
1995:
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Equity Income Fund Shares Shares
- ------------------- ------------- ------------
<S> <C> <C>
National City Corporation 2,071,114 .15 55.71%
Attn: Karl A. Johns
Secretary, Pension Committee
1900 E. Ninth Street
Cleveland, Ohio 44114
National City Corporation 198,995 .87 5.35%
Savings and Investment Plan
P.O. Box 5756
Cleveland, Ohio 44101
</TABLE>
The following shareholders beneficially owned 5% or more of
the outstanding Institutional shares of the Mid Cap Regional Fund as of August
28, 1995:
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Institutional Institutional
Mid Cap Regional Fund Shares Shares
- --------------------- ------------- -------------
<S> <C> <C>
National City Bank Trustee 2,013,061.35 37.33%
For Non-Contributory
Retirement Trust
P.O. Box 5756
Cleveland, Ohio 44101-0756
NCS&I Plan 328,438.79 6.09%
Attn: Kent Ludwig
P.O. Box 5756
Cleveland, OH 44101
</TABLE>
-28-
<PAGE> 31
The following shareholders beneficially owned 5% or more of
the outstanding Retail shares of the Equity Income Fund as of August 28, 1995:
<TABLE>
<CAPTION>
Percentage of
Number of Retail Outstanding
Equity Income Fund Shares Retail Shares
------------------ ---------------- -------------
<S> <C> <C>
Alexander Bodo 3,020.453 26.70%
7771 Knickerbocker Drive
Warren, OH 44484
Lawanah Harris 1,939.548 17.15%
244 Natale Drive
Cortland, OH 44410
Richard W. Mack 1,001.119 8.85%
31802 Bayview Drive
Avon Lake, OH 44012
Stella Waser 10,907.77 8.65%
Annette Campbell
3411 GP Easterly Road
W. Farmington, OH 44491
Mary Ann Aman 952.328 8.42%
2208 Stahlwood
Sandusky, OH 44870
</TABLE>
To the Trust's knowledge, no shareholder beneficially owned 5%
or more of the outstanding Retail Shares of the Equity and Mid Cap Regional
Funds as of August 28, 1995.
FINANCIAL STATEMENTS
The audited financial statements contained in the annual report for the fiscal
year ended May 31, 1995 are hereby incorporated herein by reference. Copies of
the annual report may be obtained by calling the Trust at 1-800-622-FUND or by
writing to the Trust at 290 Donald Lynch Boulevard, Marlboro, Massachusetts
01752.
-29-
<PAGE> 32
APPENDIX A
----------
DESCRIPTION OF RATINGS
Corporate Long-Term Debt
- ------------------------
The following summarizes the four highest rating categories
used by Standard & Poor's Ratings Group ("S&P") for corporate debt:
"AAA" - This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay
interest and repay principal.
"AA" - Debt rated "AA" is considered to have a very strong
capacity to pay interest and repay principal and differs from
"AAA" issues only to a small degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are somewhat
more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in
higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally
exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "BBB"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
The following summarizes the four highest rating categories
used by Moody's Investors Service, Inc. ("Moody's) for corporate debt:
"Aaa" - Bonds that are rated "Aaa" are judged to be of the
best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally
strong position of such issues.
A-1
<PAGE> 33
"Aa" - Bonds that are rated "Aa" are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are
considered adequate but elements may be present which suggest
a susceptibility to impairment sometime in the future.
"Baa" - Bonds considered medium-grade obligations (i.e., they
are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the
present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition
are rated conditionally. These are bonds secured by (a)
earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which
begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating
denotes probable credit stature upon completion of
construction or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" through "Baa" in its bond rating system. The modifier
1 indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid- range ranking; and the modifier 3
indicates that the issue ranks at the lower end of its generic rating category.
The following summarizes the four highest rating categories
used by Duff & Phelps Credit Rating Co. ("Duff & Phelps") for corporate debt:
"AAA" - Bonds that are rated "AAA" are of the highest credit
quality. The risk factors are considered to be
A-2
<PAGE> 34
negligible, being only slightly more than for risk-free
U.S. Treasury debt.
"AA" - Bonds that are rated "AA" are of high credit quality.
Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater
in periods of economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for
prudent investment. Considerable variability in risk is
present during economic cycles.
To provide more detailed indications of credit quality, the
"AA," "A" and "BBB" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the four highest rating categories
used by Fitch Investors Service, Inc. ("Fitch") for corporate bonds:
"AAA" - Bonds are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
"AA" - Bonds are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest
and repay principal is very strong, although not quite as
strong as bonds rated "AAA." Because bonds rated in the "AAA"
and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be
A-3
<PAGE> 35
adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse
impact on these bonds, and therefore, impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "BBB" may be modified by the addition
of a plus (+) or minus (-) sign to show relative standing within these major
rating categories.
The following summarizes the four highest rating categories
used by IBCA Inc. ("IBCA") for bonds:
"AAA" - Bonds rated "AAA" are considered to have an extremely
strong capacity for repayment of debt obligations.
"AA" - Bonds rated "AA" are considered to have a very strong
capacity for timely repayment of debt, although margins of
protection may not be as large as for "AAA" issues, or
protection elements may be subject to greater fluctuation.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal
and interest is strong, although adverse changes in business,
economic or financial conditions may lead to increased
investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment
of principal and interest is adequate, although adverse
changes in business, economic or financial conditions are more
likely to lead to increased investment risk than for
obligations in higher categories.
IBCA may append a rating of plus (+) or minus (-) to a rating
to denote relative status within major rating categories.
Commercial Paper Ratings
- ------------------------
A S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the highest rating category used by S&P for
commercial paper:
A-4
<PAGE> 36
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the highest rating
category used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term promissory
obligations. Principal repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial charges and high internal cash
generation; and well established access to a range of financial markets and
assured sources of alternate liquidity.
The following summarizes the highest rating category used by
Duff & Phelps for commercial paper:
"Duff 1+" - Debt possesses highest certainty of timely
payment. Short-term liquidity, including internal operating
factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
"Duff 1" - Debt possesses very high certainty of timely
payment. Liquidity factors are excellent and supported by
good fundamental protection factors. Risk factors are minor.
"Duff 1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small.
The following summarizes the highest rating category used by
Fitch for short-term notes, municipal notes, variable rate demand instruments
and commercial paper:
"F-1+" - Instruments assigned this rating are regarded as
having the strongest degree of assurance for timely payment.
A-5
<PAGE> 37
"F-1" - Instruments assigned this rating reflect an assurance
of timely payment only slightly less in degree than issues
rated 'F-1+."
IBCA uses the following highest rating category for short term
notes including commercial paper:
"A1+" - These issues display the very highest quality
borrowing characteristics and are of undoubted or prime
creditworthiness.
"A1" - These issues display very strong borrowing
characteristics.
A-6
<PAGE> 38
APPENDIX B
As stated in the Prospectus, the Mid Cap Regional Fund (the
"Fund") may enter into certain futures transactions and options for hedging
purposes. Such transactions are described in this Appendix.
I. Index Futures Contracts
-----------------------
GENERAL. A stock index assigns relative values to the stocks
included in the index and the index fluctuates with changes in the market
values of the stocks included. Some stock index futures contracts are based on
broad market indexes, such as the Standard & Poor's Ratings Group 500 or the
New York Stock Exchange Composite Index. In contrast, certain exchanges offer
futures contracts on narrower market indexes or indexes based on an industry or
market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated
by the Commodity Futures Trading Commission. Transactions on such exchanges
are cleared through a clearing corporation, which guarantees the performance of
the parties to each contract.
The Fund may sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that might otherwise
result from a market decline. The Fund may do so either to hedge the value of
its Fund as a whole, or to protect against declines, occurring prior to sales
of securities, in the value of the securities to be sold. Conversely, the Fund
will purchase index futures contracts in anticipation of purchases of
securities. A long futures position may be terminated without a corresponding
purchase of securities.
In addition, the Fund may utilize index futures contracts in
anticipation of changes in the composition of its Fund holdings. For example,
in the event that the Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. The
Fund may also sell futures contracts in connection with this strategy, in order
to protect against the possibility that the value of the securities to be sold
as part of the restructuring of the Fund will decline prior to the time of
sale.
B-1
<PAGE> 39
II. Margin Payments
---------------
Unlike purchases or sales of portfolio securities, no price is
paid or received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the broker or in a
segregated account with the Custodian an amount of cash or cash equivalents,
known as initial margin, based on the value of the contract. The nature of
initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For example, when a particular Fund
has purchased a futures contract and the price of the contract has risen in
response to a rise in the underlying instruments, that position will have
increased in value and the Fund will be entitled to receive from the broker a
variation margin payment equal to that increase in value. Conversely, where
the Fund has purchased a futures contract and the price of the future contract
has declined in response to a decrease in the underlying instruments, the
position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
futures contract, the advisers may elect to close the position by taking an
opposite position, subject to the availability of a secondary market, which
will operate to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Fund, and the Fund realizes a loss or gain.
III. Risks of Transactions in Futures Contracts
------------------------------------------
There are several risks in connection with the use of futures
by the Fund as a hedging device. One risk arises because of the imperfect
correlation between movements in the price of the futures and movements in the
price of the instruments which are the subject of the hedge. The price of the
future may move more than or less than the price of the instruments being
hedged. If the price of the futures moves less than the price of the
instruments which are the subject of the hedge, the hedge will not be fully
effective but, if the price of the instruments being hedged has moved in an
unfavorable direction, the Fund would be in a better position than if it had
not hedged at all. If the price of the instruments being hedged has moved in a
favorable direction, this advantage will be partially offset by the loss on the
futures. If
B-2
<PAGE> 40
the price of the futures moves more than the price of the hedged instruments,
the Fund involved will experience either a loss or gain on the futures which
will not be completely offset by movements in the price of the instruments
which are the subject of the hedge. To compensate for the imperfect
correlation of movements in the price of instruments being hedged and movements
in the price of futures contracts, the Fund may buy or sell futures contracts
in a greater dollar amount than the dollar amount of instruments being hedged
if the volatility over a particular time period of the prices of such
instruments has been greater than the volatility over such time period of the
futures, or if otherwise deemed to be appropriate by the advisers. Conversely,
the Fund may buy or sell fewer futures contracts if the volatility over a
particular time period of the prices of the instruments being hedged is less
than the volatility over such time period of the futures contract being used,
or if otherwise deemed to be appropriate by the advisers. It is also possible
that, where the Fund has sold futures to hedge its Fund against a decline in
the market, the market may advance and the value of instruments held in the
Fund may decline. If this occurred, the Fund would lose money on the futures
and also experience a decline in value in its portfolio securities.
When futures are purchased to hedge against a possible
increase in the price of securities before the Fund is able to invest its cash
(or cash equivalents) in an orderly fashion, it is possible that the market may
decline instead; if the Fund then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Fund will realize a loss on the futures contract that is not offset by a
reduction in the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced thus producing distortions.
Third, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures
market may also cause temporary price distortions. Due to the possibility of
price distortion in the futures market, and because of the imperfect
correlation between
B-3
<PAGE> 41
the movements in the cash market and movements in the price of futures, a
correct forecast of general market trends or interest rate movements by the
adviser may still not result in a successful hedging transaction over a short
time frame.
Positions in futures may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. Although
the Fund intends to purchase or sell futures only on exchanges or boards of
trade where there appear to be active secondary markets, there is no assurance
that a liquid secondary market on any exchange or board of trade will exist for
any particular contract or at any particular time. In such event, it may not
be possible to close a futures investment position, and in the event of adverse
price movements, the Fund will continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have
been used to hedge portfolio securities, such securities will not be sold until
the futures contract can be terminated. In such circumstances, an increase in
the price of the securities, if any, may partially or completely offset losses
on the futures contract. However, as described above, there is no guarantee
that the price of the securities will in fact correlate with the price
movements in the futures contract and thus provide an offset on a futures
contract.
Further, it should be noted that the liquidity of a secondary
market in a futures contract may be adversely affected by "daily price
fluctuation limits" established by commodity exchanges which limit the amount
of fluctuation in a futures contract price during a single trading day. Once
the daily limit has been reached in the contract, no trades may be entered into
at a price beyond the limit, thus preventing the liquidation of open futures
positions. The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation
margin payments.
Successful use of futures by the Fund is also subject to the
advisers ability to predict correctly movements in the direction of the market.
For example, if the Fund has hedged against the possibility of a decline in the
market adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit to the increased value
of its securities which it has hedged because it will have offsetting losses in
its futures positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. The Fund may
B-4
<PAGE> 42
have to sell securities at a time when it may be disadvantageous to do so.
IV. Options on Futures Contracts
----------------------------
The Fund may purchase and write options on the futures
contracts described above. A futures option gives the holder, in return for
the premium paid, the right to buy (call) from or sell (put) to the writer of
the option a futures contract at a specified price at any time during the
period of the option. Upon exercise, the writer of the option is obligated to
pay the difference between the cash value of the futures contract and the
exercise price. Like the buyer or seller of a futures contract, the holder, or
writer, of an option has the right to terminate its position prior to the
scheduled expiration of the option by selling, or purchasing an option of the
same series, at which time the person entering into the closing transaction
will realize a gain or loss. The Fund will be required to deposit initial
margin and variation margin with respect to put and call options on futures
contracts written by it pursuant to brokers' requirements similar to those
described above. Net option premiums received will be included as initial
margin deposits.
Investments in futures options involve some of the same
considerations that are involved in connection with investments in futures
contracts (for example, the existence of a liquid secondary market). In
addition, the purchase or sale of an option also entails the risk that changes
in the value of the underlying futures contract will not correspond to changes
in the value of the option purchased. Depending on the pricing of the option
compared to either the futures contract upon which it is based, or upon the
price of the securities being hedged, an option may or may not be less risky
than ownership of the futures contract or such securities. In general, the
market prices of options can be expected to be more volatile than the market
prices on the underlying futures contract. Compared to the purchase or sale of
futures contracts, however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to the Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). The writing of an option on a futures contract involves risks similar
to those risks relating to the sale of futures contracts.
V. Other Matters
-------------
Accounting for futures contracts will be in accordance with
generally accepted accounting principles.
B-5
<PAGE> 1
EXHIBIT 17(e)
[INVENTOR FUNDS LOGO]
- ---------------------
INVENTOR FUNDS
INVESTMENT ADVISER
Integra Trust Company
SUB ADVISERS
Wellington Management Company
SunBank Capital Management, N.A.
ADMINISTRATOR
SEI Financial Management Corporation
TRANSFER AGENT
DST Systems, Inc.
DISTRIBUTOR
SEI Financial Services Company
COUNSEL
Morgan, Lewis & Bockius
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
INT-F-252-02
PROSPECTUS
PRIME OBLIGATIONS MONEY
MARKET FUND
TREASURY SECURITIES MONEY
MARKET FUND
INTERMEDIATE GOVERNMENT
SECURITIES FUND
GNMA SECURITIES FUND
EQUITY GROWTH FUND
AUGUST 28, 1995
<PAGE> 2
- -------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary...................... 2
Expense Summary.............. 4
Financial Highlights......... 6
The Corporation.............. 7
Investment Objectives and
Policies ................. 7
General Investment
Policies.................. 8
Investment Limitations....... 9
Fundamental Policies......... 9
The Adviser.................. 9
The Sub-Advisers............. 10
The Administrator............ 11
The Transfer Agent........... 11
The Distributor.............. 11
How to Purchase Shares....... 12
Exchanges.................... 15
Redemption of Shares......... 15
Performance.................. 17
Taxes........................ 18
General Information.......... 20
Description of Permitted
Investments
and Risk Factors............. 21
</TABLE>
<PAGE> 3
PROSPECTUS
[INVENTOR FUNDS LOGO]
Investment Adviser:
INTEGRA TRUST COMPANY, NATIONAL ASSOCIATION
Inventor Funds, Inc. (the "Corporation") is a mutual fund that seeks to provide
a convenient means of investing in one or more professionally managed portfolios
of securities. This Prospectus relates to the following Funds:
PRIME OBLIGATIONS MONEY MARKET FUND
TREASURY SECURITIES MONEY MARKET FUND
INTERMEDIATE GOVERNMENT SECURITIES FUND
GNMA SECURITIES FUND
EQUITY GROWTH FUND
CLASS A
Class A Shares of the Funds are offered to individuals and institutional
investors, including customers of affiliates and correspondents of Integra
Financial Corporation. Class A shares are sold with a front-end sales load that
will be reduced or waived in certain circumstances. Integra Trust Company,
National Association, the Funds' investment adviser, is an affiliate of Integra
Financial Corporation.
THE CORPORATION'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING INTEGRA TRUST COMPANY, OR ITS AFFILIATES. THE
CORPORATION'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
AS WITH ANY MUTUAL FUND, AN INVESTMENT IN THE PRIME OBLIGATIONS MONEY MARKET
FUND OR THE TREASURY SECURITIES MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT EITHER FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the basic information about the Funds and
the Corporation that a prospective investor should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated August 28, 1995, has been
filed with the Securities and Exchange Commission and is available without
charge through the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087-1658, or by calling 1-800-6INVENT
(1-800-646-8368). The Statement of Additional Information is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
AUGUST 28, 1995
<PAGE> 4
SUMMARY
Inventor Funds, Inc. (the "Corporation") is an open-end management investment
company which provides a convenient way to invest in professionally managed
portfolios of securities. This Summary provides basic information about the
Class A shares of the Corporation's Prime Obligations Money Market Fund,
Treasury Securities Money Market Fund, Intermediate Government Securities Fund,
GNMA Securities Fund and Equity Growth Fund (each a "Fund" and, together, the
"Funds").
What are the Investment Objectives and Policies of each Fund? The PRIME
OBLIGATIONS MONEY MARKET FUND seeks to preserve principal value and maintain a
high degree of liquidity while providing current income by investing in high
quality money market instruments. The TREASURY SECURITIES MONEY MARKET FUND
seeks to preserve principal value and maintain a high degree of liquidity while
providing current income by investing in U.S. Treasury obligations. The
INTERMEDIATE GOVERNMENT SECURITIES FUND seeks preservation of capital and a high
degree of liquidity while providing current income by investing primarily in
obligations issued or guaranteed as to principal and interest by the U.S.
Government and its agencies and instrumentalities. The GNMA SECURITIES FUND
seeks the highest level of current income consistent with preservation of
capital and a high degree of liquidity by investing primarily in mortgage
pass-through securities guaranteed by the Government National Mortgage
Corporation. The EQUITY GROWTH FUND seeks capital appreciation by investing
primarily in common stocks and securities convertible into common stocks. There
is no assurance that any Fund will meet its investment objective. See
"Investment Objectives and Policies" and "Description of Permitted Investments
and Risk Factors."
What are the Risks involved with an Investment in the Funds? The PRIME
OBLIGATIONS AND TREASURY SECURITIES MONEY MARKET FUNDS seek to maintain a net
asset value of $1.00 per share. There can be no assurance that these Funds will
be able to maintain a net asset value of $1.00. Shares of the INTERMEDIATE
GOVERNMENT SECURITIES, GNMA SECURITIES AND EQUITY GROWTH FUNDS will fluctuate in
value with the value of their underlying portfolio securities. Values of fixed
income securities and, correspondingly, share prices of Funds invested in such
securities tend to vary inversely with interest rates and may be affected by
other market and economic factors as well. Common stocks in which the Equity
Growth Fund may invest may be more volatile and may fluctuate in value more than
other types of investments.
Who is the Adviser? Integra Trust Company serves as the Adviser of the Funds.
See "Expense Summary" and "The Adviser."
Who are the Sub-Advisers? Wellington Management Company serves as Sub-Adviser
to the Prime Obligations Money Market Fund, Treasury Securities Money Market
Fund, Intermediate Government Securities Fund and GNMA Securities Fund. SunBank
Capital Management, N.A. serves as Sub-Adviser to the Equity Growth Fund. See
"The Sub-Advisers."
Who is the Administrator? SEI Financial Management Corporation serves as the
Administrator and shareholder servicing agent of the Corporation. See "Expense
Summary" and "The Administrator."
Who is the Transfer Agent? DST Systems, Inc. serves as transfer agent and
dividend disbursing agent for the Corporation. See "The Transfer Agent."
2
<PAGE> 5
Who is the Distributor? SEI Financial Services Company serves as distributor of
the Corporation's shares. See "The Distributor."
How do I Purchase and Redeem Shares? Purchases and redemptions of shares may be
made on any day on which both the New York Stock Exchange and Federal Reserve
wire system are open for business ("Business Days"). A purchase order for shares
will be executed at a per share price equal to the net asset value per share
next determined after the receipt of the purchase order plus any applicable
sales charges. The minimum initial investment is $500 ($250 for IRAs and $100
for officers, directors, employees, or retirees of Integra Trust Company, and
its affiliates). Net asset value for the Intermediate Government Securities,
GNMA Securities and Equity Growth Funds is determined as of the close of
business of the New York Stock Exchange (currently 4:00 p.m., Eastern Time), on
any Business Day. Net asset value for the Prime Obligations Money Market and
Treasury Securities Money Market Funds is determined as of 2:00 p.m., Eastern
Time, on any Business Day. Redemption orders for the Intermediate Government
Securities, GNMA Securities and Equity Growth Funds must be placed prior to 4:00
p.m., Eastern Time, on any Business Day for the order to be effective that day.
Redemption orders for the Prime Obligations Money Market and Treasury Securities
Money Market Funds must be placed prior to 2:00 p.m., Eastern Time, on any
Business Day for the order to be effective that day. See "Purchase of Shares"
and "Redemption of Shares."
How are Dividends Paid? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is distributed in the form of periodic
dividends. Any capital gain is distributed at least annually. Distributions are
paid in additional shares unless the Shareholder elects to take the payment in
cash. See "Dividends."
3
<PAGE> 6
EXPENSE SUMMARY
CLASS A
<TABLE>
<CAPTION>
PRIME TREASURY
OBLIGATIONS SECURITIES INTERMEDIATE
MONEY MONEY GOVERNMENT GNMA EQUITY
SHAREHOLDER TRANSACTION MARKET MARKET SECURITIES SECURITIES GROWTH
EXPENSES FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Load Imposed
on Purchases (as a
percentage of offering price) None None 4.00% 4.00% 4.00%
Maximum Sales Load Imposed
on Reinvested Dividends (as a
percentage of offering price) None None None None None
Maximum Contingent Deferred
Sales Charge None None None None None
Exchange Fee None None None None None
Wire Redemption Fee $10 $10 $10 $10 $10
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees
(after fee waivers) (1) .24% .20% .47% .40% .57%
Rule 12b-1 Fees (after fee
waivers) (2) .00% .00% .00% .00% .00%
Other Expenses .31% .35% .38% .45% .38%
Total Operating Expenses
(after fee waivers) (3) .55% .55% .85% .85% .95%
</TABLE>
(1) The Adviser has agreed to waive a portion of its fees. The Adviser reserves
the right to terminate the waiver at any time in its sole discretion. Absent
such fee waivers, advisory fees would be .45% for the Prime Obligations
Money Market Fund, .45% for the Treasury Securities Money Market Fund, .70%
for the Intermediate Government Securities Fund, .70% for the GNMA
Securities Fund, and .85% for the Equity Growth Fund.
(2) The Class A Plan provides that Class A shares will bear the costs of
distribution expenses and related service fees at the annual rate of .25% of
each Fund's average daily net assets. The Distributor has agreed to
voluntarily waive any fees payable pursuant to the Plan. The Distributor
reserves the right to terminate this waiver at any time in its sole
discretion.
(3) Absent the Adviser's voluntary fee waivers and the Distributor's waiver of
12b-1 fees, total operating expenses would be 1.01% for the Prime
Obligations Money Market Fund, 1.05% for the Treasury Securities Money
Market Fund, 1.33% for the Intermediate Government Securities Fund, 1.40%
for the GNMA Securities Fund, and 1.48% for the Equity Growth Fund.
4
<PAGE> 7
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
- ----------------------------------------------------------------------------------------------------
An investor in a Fund would pay the following expenses on a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each time period:
<S> <C> <C> <C> <C>
Prime Obligations Money Market Fund $ 6 $18 $31 $ 69
Treasury Securities Money Market Fund $ 6 $18 $31 $ 69
Intermediate Government Securities Fund $48 $66 $85 $141
GNMA Securities Fund $48 $66 $85 $141
Equity Growth Fund $49 $69 $90 $152
</TABLE>
- --------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Funds. A person who purchases shares through a financial institution may
be charged separate fees by that institution. The information set forth in the
foregoing table and example relates only to Class A shares. The Funds also offer
Class B shares, which are subject to the same expenses as Class A shares except
that Class B shares bear no distribution costs or sales loads. Class B shares
are currently not being offered for any Fund.
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "How to Purchase Shares."
Long-term investors may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the Rules of the National Association of
Securities Dealers, Inc. ("NASD").
5
<PAGE> 8
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand L.L.P., the
Corporation's independent accountants, as indicated in their report dated June
9, 1995, on the Corporation's financial statements as of April 30, 1995,
included in the Corporation's Statement of Additional Information under
"Financial Information." This table should be read in conjunction with the
Corporation's financial statements and notes thereto. Additional information is
set forth in the 1995 Annual Report to Shareholders and is available without
charge by calling 1-800-6INVENT.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ------------------- NET NET
ASSET NET REALIZED FROM FROM ASSET ASSETS RATIO OF
VALUE NET AND UNREALIZED NET REALIZED VALUE END EXPENSES
BEGINNING INVESTMENT GAINS INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN (000) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------
EQUITY GROWTH
- ---------------
CLASS A
1995(1)(3) $ 10.00 $ 0.12 $ 0.71 $(0.12) $ (0.02) $ 10.69 8.33%+ $ 46,657 0.95%
- --------------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- --------------------------------------
CLASS A
1995(1)(3) 10.00 0.44 0.02 (0.44) -- 10.02 4.75+ 53,316 0.85
- ------------------
GNMA SECURITIES
- ------------------
CLASS A
1995(1)(3) 10.00 0.48 0.16 (0.48) -- 10.16 6.61+ 42,212 0.85
- -----------------------------------
PRIME OBLIGATIONS MONEY MARKET
- -----------------------------------
CLASS A
1995(2) 1.00 0.04 -- (0.04) -- 1.00 3.76+ 290,058 0.55
- ------------------------------------
TREASURY SECURITIES MONEY MARKET
- ------------------------------------
CLASS A
1995(2) 1.00 0.04 -- (0.04) -- 1.00 3.60+ 80,491 0.55
<CAPTION>
RATIO OF NET
NET EXPENSES INCOME
INVESTMENT TO AVERAGE TO AVERAGE
INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS WAIVERS) WAIVERS) RATE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------
EQUITY GROWTH
- ---------------
CLASS A
1995(1)(3) 1.57% 1.48% 1.04% 110%
- --------------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- --------------------------------------
CLASS A
1995(1)(3) 6.17 1.33 5.69 172
- ------------------
GNMA SECURITIES
- ------------------
CLASS A
1995(1)(3) 6.68 1.40 6.13 226
- -----------------------------------
PRIME OBLIGATIONS MONEY MARKET
- -----------------------------------
CLASS A
1995(2) 5.16 1.01 4.70 --
- ------------------------------------
TREASURY SECURITIES MONEY MARKET
- ------------------------------------
CLASS A
1995(2) 5.00 1.05 4.50 --
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on August 10, 1994. All ratios for the period have been
annualized.
(2) Commenced operations on August 8, 1994. All ratios for the period have been
annualized.
(3) Total Return does not reflect the sales charge.
6
<PAGE> 9
THE CORPORATION
INVENTOR FUNDS, INC. (the "Corporation") is an open-end management investment
company that offers common stock ("shares") in the Funds through separate
Classes (Class A and Class B), which provide for variations in sales charges,
distribution costs, voting rights and dividends. This Prospectus offers Class A
shares of the Corporation's Prime Obligations Money Market Fund ("Prime
Obligations Fund"), and Treasury Securities Money Market Fund ("Treasury
Securities Fund") (collectively the "Money Market Funds"), and the Corporation's
Intermediate Government Securities Fund ("Intermediate Government Fund"), GNMA
Securities Fund and Equity Growth Fund (collectively the "Non-Money Market
Funds") (each a "Fund" and, together, the "Funds"). Additional information
pertaining to the Corporation may be obtained in writing from SEI Financial
Services Company, 680 East Swedesford Road, Wayne, Pennsylvania 19087-1658, or
by calling 1-800-6INVENT (1-800-646-8368).
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objectives and policies. There is no assurance
that the investment objective of a Fund will be met.
PRIME OBLIGATIONS MONEY MARKET FUND
The investment objective of the Fund is to preserve principal value and maintain
a high degree of liquidity while providing current income. It is a fundamental
policy of the Fund to use its best efforts to maintain a constant net asset
value of $1.00 per share.
The Fund invests exclusively in the following short-term debt instruments: (i)
commercial paper rated in the top two short-term rating categories by two or
more nationally recognized security rating organizations ("NRSROs"), or one
NRSRO if only one NRSRO has rated the security, or, if not rated, determined by
the Sub-Adviser to be of comparable quality; (ii) certificates of deposit, time
deposits, bank notes and bankers' acceptances that are rated in the top two
short-term rating categories by two or more NRSROs or that are of comparable
quality of banks and savings and loan institutions; (iii) corporate obligations
rated AAA or AA by Standard & Poor's Corporation ("S&P") or Aaa or Aa by Moody's
Investors Service, Inc. ("Moody's") or, if not rated, determined by the
Sub-Adviser to be of comparable quality; (iv) U.S. Treasury obligations; (v)
obligations issued or guaranteed as to principal and interest by the agencies
and instrumentalities of the U.S. Government; (vi) repurchase agreements
involving any of such obligations; and (vii) commercial paper issued by state
and local governmental issuers, rated by at least two NRSROs in one of the two
highest municipal bond rating categories, and provides yields competitive with
other types of money market instruments of comparable quality. (The securities
the Fund may invest in are sometimes referred to herein as Money Market
Instruments.) The purchase of single-rated and unrated securities by the
Sub-Adviser is subject to ratification by the Corporation's Board of Directors.
TREASURY SECURITIES MONEY MARKET FUND
The investment objective of the Fund is to preserve principal value and maintain
a high degree of liquidity while providing current income. It is a fundamental
policy of the Fund to use its best efforts to maintain a constant net asset
value of $1.00 per share.
The Treasury Securities Fund invests exclusively in U.S. Treasury obligations
(including STRIPS) and repurchase agreements involving such obligations.
To the extent permitted by state and local law, in addition to being suitable
for many individuals and institutional investors, the Treasury Securities Fund
may be an appropriate investment for school districts and municipalities.
7
<PAGE> 10
INTERMEDIATE GOVERNMENT SECURITIES FUND
The investment objective of the Fund is to preserve capital and maintain a high
degree of liquidity while providing current income.
The Fund invests in U.S. Treasury obligations, futures on U.S. Treasury
obligations and obligations issued or guaranteed as to principal and interest by
the agencies and instrumentalities of the U.S. Government. The Fund's
dollar-weighted average maturity will ordinarily be approximately five years;
however, the Sub-Adviser may vary this average maturity substantially in
anticipation of a change in the interest rate environment. Nevertheless, under
normal circumstances, the Fund will maintain a dollar-weighted average maturity
of between three and ten years.
GNMA SECURITIES FUND
The investment objective of the Fund is to provide the highest level of current
income consistent with preservation of capital and a high degree of liquidity.
The Fund invests primarily (at least 65% of its total assets under normal
conditions) in mortgage pass-through securities guaranteed by the Government
National Mortgage Association ("GNMA"). Any remaining assets may consist of: (i)
obligations of the U.S. Treasury; (ii) obligations issued or guaranteed as to
principal and interest by agencies and instrumentalities of the U.S. Government;
(iii) mortgage-backed securities issued by other government agencies and
privately issued mortgage-backed securities rated at least A by an NRSRO; (iv)
repurchase agreements involving any of such obligations; (v) shares of money
market investment companies investing exclusively in such obligations; and (vi)
futures on U.S. Treasury obligations. The Fund intends to maintain a position in
Money Market instruments sufficient to provide a high degree of liquidity. The
Fund may also engage in dollar rolls, short sales and interest rate swaps.
Under normal market conditions, the estimated average life of the Fund's
holdings of mortgage pass-through and mortgage-backed securities will range
between 4 and 10 years.
EQUITY GROWTH FUND
The investment objective of the Equity Growth Fund is capital appreciation.
The Fund invests primarily in a diversified portfolio of common stocks and
convertible securities which are deemed to be undervalued in the marketplace at
the time of purchase. Dividend income is an incidental consideration compared to
growth of capital. In selecting securities for the Fund, factors that are likely
to affect long-term capital appreciation will be evaluated. Such factors will
include the issuer's background, industry position, historical returns on equity
and the experience and qualifications of the management team. Holdings will be
rotated between various market sectors based on economic analysis of the overall
business cycle. The Fund invests primarily (normally at least 65% of its total
assets under normal market conditions) in common stocks and convertible
securities. The Fund may also invest in American Depositary Receipts ("ADRs")
the underlying foreign issuers of which are located in developed countries and
may buy and sell options and futures and options on futures.
GENERAL INVESTMENT POLICIES
The Prime Obligations and Treasury Securities Funds intend to comply with
regulations of the Securities and Exchange Commission ("SEC") applicable to
money market funds. These regulations impose certain quality, maturity and
diversification restraints on investments by the Funds. Under these regulations,
the Funds will maintain a dollar-weighted average maturity of
8
<PAGE> 11
90 days or less and will acquire only "eligible securities" maturing in 397 days
or less.
In order to meet liquidity needs and for temporary defensive purposes, each of
the Intermediate Government, GNMA Securities and Equity Growth Funds may hold
cash reserves, and may invest up to 100% of its assets in Money Market
Instruments.
Debt rated BBB or Baa is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories. Such bonds lack
outstanding investment characteristics and have speculative characteristics as
well.
Each Fund may purchase securities on a when-issued basis.
Each Fund reserves the right to engage in securities lending, although no Fund
has the present intent of doing so. Each such Fund may also borrow money in
amounts up to 33 1/3% of its net assets.
For additional information regarding permitted investments see "Description of
Permitted Investments and Risk Factors" in this Prospectus and the Statement of
Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rates for the fiscal year ended April 30, 1995, for the
Intermediate Government Fund, GNMA Securities Fund, and the Equity Fund were
172%, 226% and 110%, respectively. Such turnover rates will likely result in
higher brokerage commissions and higher levels of realized capital gains than if
the turnover rates were lower.
INVESTMENT LIMITATIONS
Each Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities, and repurchase
agreements involving such securities) if, as a result, more than 5% of total
assets of the Fund would be invested in the securities of such issuer. With
respect to the Intermediate Government, GNMA Securities and Equity Growth Funds,
this restriction applies only to 75% of each Fund's assets.
2. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. Government or its agencies and instrumentalities, and repurchase
agreements involving such securities.
The foregoing percentage limitations will apply at the time of the purchase of a
security. Additional investment limitations are set forth in the Statement of
Additional Information.
FUNDAMENTAL POLICIES
Each Fund's investment objective and investment limitations are fundamental
policies. Fundamental policies cannot be changed with respect to a Fund without
the consent of the holders of a majority of that Fund's outstanding voting
securities.
THE ADVISER
Integra Trust Company (the "Adviser"), serves as the investment adviser for the
Funds. The Adviser sets investment policies, and continuously reviews,
supervises and administers each Fund's investment program. The Adviser
9
<PAGE> 12
discharges its responsibilities subject to the supervision of, and policies set
by, the Directors of the Corporation.
Integra Trust Company, 300 Fourth Avenue, Pittsburgh, Pennsylvania 15278, is a
wholly-owned subsidiary of Integra Financial Corporation. Prior to August, 1994,
the Adviser had not previously served as the investment adviser to a mutual
fund. However, the Adviser or its predecessor organizations have provided trust
and asset management services for over 70 years. As of May 31, 1995, the Adviser
had assets under management of approximately $8.9 billion.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of 0.45%, for the Prime Obligations and Treasury Securities
Funds, 0.70% for the Intermediate Government and GNMA Securities Funds and 0.85%
for the Equity Growth Fund, based on each Fund's average daily net assets. The
Adviser may from time to time waive all or a portion of its fee in order to
limit the operating expenses of a Fund. Any such waiver is voluntary and may be
terminated at any time in the Adviser's sole discretion. For the fiscal year
ended April 30, 1995, the Adviser received an advisory fee of .24%, .20%, .49%,
.45% and .59% for the Prime Obligations, Treasury Securities, Intermediate
Government, GNMA Securities, and Equity Growth Funds, respectively, based on
each Fund's average daily net assets.
The Glass-Steagall Act restricts the securities activities of banks such as
Integra Trust Company, but federal regulatory authorities permit such banks to
provide investment advisory and other services to mutual funds. Should this
position be challenged successfully in court or reversed by legislation, the
Corporation might have to make other investment advisory arrangements.
THE SUB-ADVISERS
The Prime Obligations, Treasury Securities, Intermediate Government and GNMA
Securities Funds are managed on a day-to-day basis by Wellington Management
Company ("WMC"). SunBank Capital Management N.A. ("SunBank," and together with
WMC, the "Sub-Advisers") manages the Equity Growth Fund on a day-to-day basis.
The Sub-Advisers make investment decisions for these Funds and continuously
review, supervise and administer the Funds' investment program, subject to the
supervision of, and policies set by, the Adviser and the Directors.
WMC is a professional investment counseling firm which provides investment
services to investment companies, employee benefit plans, endowments,
foundations, and other institutions and individuals. As of May 31, 1995, WMC had
discretionary management authority with respect to approximately $94 billion of
assets. WMC and its predecessor organizations have provided investment advisory
services to investment companies since 1933 and to investment counseling clients
since 1960. Wellington Management Company, 75 State Street, Boston,
Massachusetts 02109, is a Massachusetts general partnership, of which the
following persons are managing partners: Robert W. Doran, Duncan M. McFarland
and John B. Neff.
As Sub-Adviser, WMC is entitled to a fee, calculated daily and paid monthly, at
an annual rate of .075% of the aggregate average daily net assets of the Prime
Obligations and Treasury Securities Funds up to $500 million, and .020% on such
Funds' aggregate net assets in excess of $500 million, pro rated between each
Fund based on their respective average daily net assets, and .18% on the first
$50 million of the Intermediate Government and GNMA Securities Funds aggregate
net assets, .15% on the next $50 million, .10% on the next $400 million and
.075% on such
10
<PAGE> 13
Fund's aggregate net assets in excess of $500 million, pro rated between each
Fund based on their respective average daily net assets. WMC may from time to
time waive all or a portion of its fee from the Adviser. For the fiscal year
ended April 30, 1995, WMC received a fee from the Adviser of .075% for the Prime
Obligations and the Treasury Securities Funds, and .15% for the Intermediate
Government and GNMA Securities Funds, based on each Fund's average daily net
assets.
PRIME OBLIGATIONS MONEY MARKET FUND AND TREASURY SECURITIES MONEY MARKET FUND
John Keogh, Senior Vice President of Wellington Management Company, has served
as portfolio manager to the Prime Obligations and Treasury Securities Funds
since their inception. Mr. Keogh has been an investment professional with
Wellington Management Company since 1983.
INTERMEDIATE GOVERNMENT SECURITIES FUND AND GNMA SECURITIES FUND
Thomas L. Pappas, Vice President of Wellington Management Company, has served as
portfolio manager to the Intermediate Government Securities and GNMA Securities
Funds since their inception. Mr. Pappas has been an investment professional with
Wellington Management Company since 1987.
EQUITY GROWTH FUND
As of May 31, 1995, SunBank had discretionary management authority with respect
to approximately $42 billion of assets. The principal business address of
SunBank is P.O. Box 3808, Orlando, Florida 32802. SunBank is entitled to a fee,
calculated daily and paid monthly, at an annual rate of .30% of the average
daily net assets of the Equity Growth Fund. SunBank may from time to time waive
all or a portion of its fee from the Adviser. For the fiscal year ended April
30, 1995, the Sub-Adviser received from the Adviser an advisory fee of .30% for
the Equity Growth Fund based on the Fund's average daily net assets.
Anthony Gray, Chief Investment Officer of SunBank has served as portfolio
manager to the Equity Growth Fund since its inception. Mr. Gray has been with
SunBank since 1979.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), provides the Corporation with
administrative services, including fund accounting, regulatory reporting,
necessary office space, equipment, personnel, and facilities. The Administrator
also serves as shareholder servicing agent of the Funds.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at a maximum annual rate of 0.18% of the average daily net assets of
the Intermediate Government, GNMA Securities and Equity Growth Funds, and 0.15%
of the average daily net assets of the Prime Obligations and Treasury Securities
Funds.
THE TRANSFER AGENT
DST Systems, Inc. ("DST" or the "Transfer Agent"), 210 W. 10th Street, Kansas
City, Missouri 64105, serves as the transfer agent and dividend disbursing agent
for the Corporation.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as distributor. The Class A shares of the Corporation have a Rule
12b-1 Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to .25%
of their average daily net assets. Financial institutions that are the record
owner of shares for the account of
11
<PAGE> 14
their customers may impose separate fees for account services to their
customers.
The Funds may execute brokerage or other agency transactions through the
Distributor, for which the Distributor receives compensation.
HOW TO PURCHASE SHARES
Shares of the Funds may be purchased directly by mail, by wire or through an
automatic investment plan ("AIP"). Shares may also be purchased through
broker-dealers, including Integra Brokerage Services Company and Personal
Investment Services, Inc., that have established a dealer agreement with the
Distributor.
HOW TO PURCHASE BY MAIL
You may purchase Class A shares of a Fund by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) payable to "Inventor Funds (Fund Name)," P.O. Box
419320, Kansas City, Missouri 64141-6320. You may purchase more shares at any
time by mailing payment also to DST at the above address. Orders placed by mail
will be executed on receipt of your payment. If your check does not clear, your
purchase will be canceled and you could be liable for any losses or fees
incurred.
You may obtain account application forms by calling the Fund at 1-800-6INVENT
(1-800-646-8368).
HOW TO PURCHASE BY WIRE
You may purchase shares by wiring Federal funds, provided that your Account
Application has been previously received. You must wire funds to DST and the
wire instructions must include your account number. You must call the Fund at
1-800-6INVENT (1-800-646-8368) before wiring any funds. An order to purchase
shares by Federal funds wire will be deemed to have been received by the Fund on
the Business Day (defined below) of the wire; provided that the Federal funds
wire is received by DST prior to 4:00 p.m., Eastern time for the Non-Money
Market Funds and prior to 2:00 p.m., Eastern Time for the Money Market Funds. If
DST does not receive notice by 4:00 p.m., Eastern time for the Non-Money Market
Funds and prior to 2:00 p.m., Eastern Time for the Money Market Funds, on the
Business Day of the wire, the order will be executed on the next Business Day.
HOW TO PURCHASE THROUGH AN AUTOMATIC INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Funds through
automatic deductions by Automated Clearing House ("ACH") from a checking account
by completing an AIP Application Form. The minimum pre-authorized investment
amount is $25 per month. An AIP Application Form may be obtained by contacting
the Fund at 1-800-6INVENT (1-800-646-8368). The AIP is available only for
additional investments for an existing account.
GENERAL INFORMATION
You may purchase shares of the Funds on any day on which both the New York Stock
Exchange and Federal Reserve wire system are open for business ("Business
Days"). However, shares of the Funds cannot be purchased by Federal Reserve wire
on Federal holidays restricting wire transfers. The minimum initial investment
in any Fund is $500 ($250 for IRAs and $100 for officers, directors, employees,
or retirees of Integra Trust Company, or its affiliates). The Distributor may
waive the minimum investment at its discretion. Subsequent purchases of shares
must be at least $25.
A purchase order for shares will be effective as of the Business Day received by
the Transfer Agent if the Transfer Agent receives the order
12
<PAGE> 15
and payment before 4:00 p.m., Eastern Time for the Non-Money Market Funds and
2:00 p.m., Eastern Time for the Money Market Funds. The purchase price (the
"Offering Price") of Class A shares is the net asset value next determined after
the purchase order is effective plus any applicable sales charge.
The net asset value per share is determined as of the close of business of the
New York Stock Exchange (currently 4:00 p.m., Eastern Time) for the Non-Money
Market Funds and as of 2:00 p.m., Eastern Time for the Money Market Funds on
each Business Day by dividing the total market value of that Fund's investments
and other assets, less any liabilities, by the total outstanding shares of the
Fund. Purchases will be made in full and fractional shares calculated to three
decimal places. The Prime Obligations and Treasury Securities Funds value their
portfolio securities using the amortized cost method of valuation, which
approximates market value. Pursuant to guidelines adopted and monitored by the
Directors of the Corporation, each Fund may use a pricing service to provide
market quotations or fair market valuations. A pricing service may derive such
valuations through the use of a matrix system to value fixed income securities
which considers factors such as securities prices, yield features, ratings, and
developments related to a specific security. Although the methodology and
procedures for determining net asset value are identical for both classes of a
Fund, the net asset value per share of such classes may differ because of the
distribution expenses charged to Class A shares.
The Corporation reserves the right to reject a purchase order for shares when
the Distributor determines that it is not in the best interest of the
Corporation and/or its shareholders to accept such order.
Shareholders who own their shares of record and who desire to transfer
registration of their shares should contact the Fund at 1-800-6INVENT
(1-800-646-8368).
HOW TO PURCHASE THROUGH FINANCIAL
INSTITUTIONS
Shares may be purchased through financial institutions, including the Adviser,
that provide distribution assistance or shareholder services. Shares purchased
by persons ("Customers") through financial institutions may be held of record by
the financial institution. Financial institutions may impose an earlier cut-off
time for receipt of purchase orders directed through them to allow for
processing and transmittal of these orders to the Distributor for effectiveness
the same day. Customers should contact their financial institution for
information as to that institution's procedures for transmitting purchase,
exchange or redemption orders to the Corporation.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
SALES LOAD
The following table shows the regular sales charge on Class A shares of the
Intermediate Government, GNMA Securities and Equity Growth Funds to a "single
purchaser" (defined below) together with the sales charge that is reallowed to
certain financial intermediaries (the "reallowance").
13
<PAGE> 16
<TABLE>
<CAPTION>
SALES
CHARGE SALES REALLOWANCE
AS A CHARGE AS
PERCENTAGE AS A PERCENTAGE
OF PERCENTAGE OF
AMOUNT OFFERING OF NET OFFERING
OF PRICE PER AMOUNT PRICE PER
PURCHASE SHARE INVESTED SHARE
- ------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than
$100,000 4.00% 4.17% 3.60%
$100,000 but
less than
$250,000 3.00% 3.09% 2.70%
$250,000 but
less than
$500,000 2.00% 2.04% 1.80%
$500,000 but
less than
$1,000,000 1.00% 1.01% .90%
$1,000,000
and above none none none
</TABLE>
The sales charge shown in the table is the maximum sales charge that applies to
sales of Class A shares of the Funds. Under certain circumstances, the
Distributor may use its own funds to compensate financial institutions and
intermediaries in amounts additional to the commissions shown above. In
addition, the Distributor may, from time to time in its sole discretion,
institute one or more promotional incentive programs, which will be paid by the
Distributor from the sales charge it receives or from any other source available
to it. Under any such program, the Distributor will provide promotional
incentives, in the form of cash or other compensation, including merchandise,
airline vouchers, trips and vacation packages, to all dealers selling shares of
the Funds. Ordinarily, such promotional incentives will be offered uniformly to
all dealers and will be predicated upon the amount of shares of the Funds sold
by the dealer.
Under certain circumstances, reallowances of up to the entire sales charge may
be paid to certain financial institutions, who might then be deemed to be
"underwriters" under the Securities Act of 1933.
Reduced Sales Charge:
Rights of Accumulation
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current market value of previously purchased Class A shares of the Funds sold
subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Funds for their own account or for trust or
custodial accounts for their minor children, and (iii) a fiduciary purchasing
for any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended (the "Code") including related plans of the same employer.
To exercise your right of accumulation based upon shares you already own, you
must ask the Distributor for this reduced sales charge at the time of your
additional purchase and provide the account number(s) of the investor, as
applicable, the investor and spouse, and their minor children. The Funds may
amend or terminate this right of accumulation at any time as to subsequent
purchases.
Reduced Sales Charge: Letter of Intent
By submitting a Letter of Intent (the "Letter") to the Distributor, a "single
purchaser" may purchase shares of the Funds during a 13-month period at the
reduced sales charge rates applying to the aggregate amount of the intended
purchases stated in the Letter. The Letter may apply to purchases made up to 90
days before the date of the Letter. To receive
14
<PAGE> 17
credit for such prior purchases and later purchases benefitting from the Letter,
you must notify the Transfer Agent at the time the Letter is submitted that
there are prior purchases that may apply, and notify the Transfer Agent again at
the time of later purchases that such purchases are applicable under the Letter.
Waiver of Sales Load
No sales charge is imposed on shares of the Funds: (i) issued as dividends and
capital gain distributions; (ii) acquired through the exercise of exchange
privileges described below; (iii) sold to officers, directors, employees, or
retirees of the Corporation, Integra Financial Corporation and its subsidiaries
and affiliates; (iv) sold to certain accounts for which the Adviser or
subsidiaries, affiliates and correspondents of Integra Trust Company, serve in a
fiduciary, agency or custodial capacity; (v) issued in plans of reorganization,
such as mergers, asset acquisitions and exchange offers, to which the
Corporation is a party; (vi) purchased with the proceeds of distributions from
employee benefit plans for which the Adviser or its affiliates act in a
custodial or fiduciary capacity, (vii) purchased within thirty days of a
redemption of Class A shares of such Funds (only up to the amount of such
redemption) or (viii) sold to tax-exempt organizations enumerated in Section
501(c) of the Code or qualified employee benefit plans created under Sections
401, 403(b)(7) or 457 of the Code (but not IRAs or SEPs). Reduced sales charges
are available on shares of the Funds sold to certain eligible customers of the
Adviser or its affiliates. Please see the Statement of Additional Information
for further information on reduced sales charges. You must notify the Transfer
Agent at the time of your purchase if you are eligible for a waiver of the sales
load.
An investor relying upon any of the categories of waivers of the sales charge
must qualify such waiver in advance of the purchase with the Distributor or the
financial institution or intermediary through which shares are purchased by the
investor.
EXCHANGES
You may exchange Class A shares of any Fund for Class A shares of any other Fund
at net asset value, plus any applicable sales charge. Shareholders that meet the
investment criteria established for Class B shares may exchange Class A shares
of any Fund for Class B shares of that Fund once Class B shares are made
available by the Corporation.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received by the Transfer Agent. If an Exchange Request
in good order is received by the Transfer Agent by 4:00 p.m., Eastern Time for
the Non-Money Market Funds and 2:00 p.m., Eastern Time for the Money Market
Funds, on any Business Day, the exchange will occur on that day. The exchange
privilege may be exercised only in those states where the class or shares of the
"new" fund may legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The institution
will contact the Transfer Agent and effect the exchange on behalf of the
Customer.
The Corporation reserves the right to change the terms or conditions of the
exchange privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $10 charge for wiring redemption proceeds to a shareholder's
designated account. Shares may be redeemed by mail, by telephone or through a
systematic withdrawal plan. Investors who own shares held of record by a finan-
15
<PAGE> 18
cial institution should contact that institution for information on how to
redeem shares.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid redemption request.
If the redemption request exceeds $5,000, or if the request directs the proceeds
to be sent or wired to an address different from that of record, DST may require
that the signature on the written redemption request be guaranteed. You should
be able to obtain a signature guarantee from a bank, broker dealer, credit
union, securities exchange or association, clearing agency or savings
association. Notaries public cannot guarantee signatures. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption is for not more than $5,000 worth of shares, (2) the
redemption check is payable to the shareholder(s) of record, and (3) the
redemption check is mailed to the shareholder(s) at his or her address of
record.
BY TELEPHONE
You may redeem your shares by telephone if you have elected that option on the
Account Application. Under most circumstances, payments will be transmitted on
the next Business Day following receipt of a valid request for redemption. You
may have the proceeds mailed to your address or wired to a commercial bank
account previously designated on your Account Application. There is no charge
for having redemption proceeds mailed to you, but there is a $10 charge for
wiring redemption proceeds.
You may request a wire redemption by calling the Fund at 1-800-6INVENT
(1-800-646-8368), who will add a wire charge of $10 to the amount of the
redemption. Shares cannot be redeemed by Federal Reserve wire on Federal
holidays restricting wire transfers.
Neither the Transfer Agent nor the Corporation will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. The Corporation and Transfer Agent will
each employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. The Corporation or Transfer Agent may be liable for losses due to
unauthorized or fraudulent instructions if it does not employ these procedures.
Such procedures may include taping of telephone conversations.
ELECTRONIC FUNDS TRANSFER SERVICE
Electronic Funds Transfer Service lets you authorize electronic transfers of
money to buy or sell shares of a Fund or move money between your bank account
and your Fund account with one phone call. Allow two to three business days
after the call for the transfer to take place. For money recently invested,
allow normal check-clearing time (up to seven days) before redemption proceeds
are sent to your bank. If you redeem by telephone and specifically request this
service, you will not be charged the $10 wire fee applicable to same day wire
redemptions.
SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Funds offer a Systematic Withdrawal Plan ("SWP"), which you may use to
receive regular distributions from your account. Upon commencement of the SWP,
your account must have a current value of $1,000 or more. You may elect to
receive automatic payments via check or ACH of $100 or more on a monthly,
quarterly, semi-annual or annual basis. You may obtain an SWP Application Form
by
16
<PAGE> 19
contacting the Fund at 1-800-6INVENT (1-800-646-8368).
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could be
exhausted entirely. You may change or cancel the SWP at any time on written
notice to DST.
It is generally not in your best interest to be participating in the SWP at the
same time that you are purchasing additional shares if you have to pay a sales
load in connection with such purchases.
CHECKWRITING SERVICE
You may redeem Shares by writing checks on your Money Market Fund account for
$500 or more per check. Once you have signed and returned a signature card, you
will receive a supply of checks. The check may be made payable to any person,
and your account will continue to earn dividends until the check clears. Because
of the difficulty of determining in advance the exact value of a Fund account,
you may not use a check to close your account. These checks are free, but your
account will be charged a fee of $10 on stopping payment of a check upon your
request or if the check cannot be honored because of insufficient funds or other
valid reasons.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. Net asset value per
share is determined as of the close of business of the New York Stock Exchange
(currently 4:00 p.m., Eastern Time) for the Non-Money Market Funds and 2:00
p.m., Eastern Time for the Money Market Funds, on any Business Day.
Payment to shareholders for shares redeemed will be made within seven days after
the Transfer Agent receives the valid redemption request. At various times,
however, a Fund may be requested to redeem shares for which it has not yet
received good payment; collection of payment may take ten or more days. In such
circumstances, the redemption request will be rejected by a Fund. Once a Fund
has received good payment for the shares, a shareholder may submit another
request for redemption.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem your shares at net asset value, if, because of
redemptions, your account in any Fund has a value of less than the minimum
initial purchase amount ($500; $250 for individual retirement accounts and $100
for directors, officers, employees, or retirees of the Adviser or its
affiliates). Accordingly, if you purchase shares of any Fund in only the minimum
investment amount, you may be subject to involuntary redemption if you redeem
any shares. Before any Fund exercises its right to redeem such shares, you will
be given notice that the value of the shares in your account is less than the
minimum amount and will be allowed 60 days to make an additional investment in
such Fund in an amount which will increase the value of the account to at least
the minimum amount.
If market conditions are extraordinarily active or other extraordinary
circumstances exist and you experience difficulties placing redemption orders by
telephone, you may consider placing your order by mail or other means.
PERFORMANCE
From time to time, each of the Intermediate Government, GNMA Securities and
Equity Growth Funds may advertise yield and total
17
<PAGE> 20
return. In addition, the Prime Obligations and Treasury Securities Funds may
advertise their current 7 day and effective yields. These figures are based on
historical earnings and are not intended to indicate future performance. No
representation can be made concerning actual future yields or returns.
The "current yield" of the Prime Obligations and Treasury Securities Funds
refers to the income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" (also called
"effective compound yield") is calculated similarly but, when annualized, the
income earned by an investment in the Fund is assumed to be reinvested. The
effective yield will be slightly higher than the current yield because of the
compounding effect of this assumed reinvestment.
The "yield" of a Fund refers to the income generated by a hypothetical
investment, net of any sales charge imposed in such Fund over a thirty day
period. This income is then "annualized," i.e., the income over thirty days is
assumed to be generated over one year and is shown as a percentage of the
investment.
The "total return" of a Fund refers to the average compounded rate of return on
a hypothetical investment for designated time periods, assuming that the entire
investment is redeemed at the end of each period and assuming the reinvestment
of all dividend and capital gain distributions.
For any Fund, the performance on Class B shares will normally be higher than
that on Class A shares because of the sales load (when applicable) and
distribution expenses charged to Class A shares.
Each Fund may periodically compare its performance to the performance of: other
mutual funds tracked by mutual funds rating services (such as Lipper
Analytical); financial and business publications and periodicals; broad groups
of comparable mutual funds; unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or other investment alternatives. The Funds may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of risk-
adjusted performance. The Funds may use long-term performance of these capital
market indices to demonstrate general long-term risk versus reward scenarios and
could include the value of a hypothetical investment in any of the capital
markets. The Funds may also quote financial and business publications and
periodicals as they relate to fund management, investment philosophy, and
investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of the Funds or
their Shareholders. In addition, state and local tax consequences of an
investment in the Fund may differ from the federal income tax conse-
18
<PAGE> 21
quences described below. Accordingly, Shareholders are urged to consult their
tax advisers regarding specific questions as to federal, state and local income
taxes. Additional information concerning taxes is set forth in the Statement of
Additional Information.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Corporation's other portfolios. Each Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Internal Revenue Code of 1986, as
amended, so as to be relieved of federal income tax on net investment company
taxable income and net capital gains (the excess of net long-term capital gains
over net short-term capital losses) distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund distributes substantially all of its net investment income (including
net short-term capital gains) and net capital gains to Shareholders. Dividends
from a Fund's net investment company taxable income are taxable to its
Shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Dividends paid by a
Fund to corporate Shareholders will qualify for the deduction for dividends
received by corporations to the extent attributable to dividends received by the
Fund from domestic corporations. A portion of such dividends received may be
subject to the alternative minimum tax. Distributions of net capital gains do
not qualify for the dividends-received deduction and are taxable to Shareholders
as long-term capital gains, regardless of how long Shareholders have held their
shares and regardless of whether the distributions are received in cash or in
additional shares. Each Fund will provide annual reports to Shareholders of the
federal income tax status of all distributions.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month, will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 of
the year declared if paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions prior to the end of the
calendar year to avoid liability for federal excise tax.
With respect to investments which are sold at original issue discount and thus
do not make periodic cash interest payments, each Fund will be required to
include as part of its current income the imputed interest on such obligations
even though the Fund has not received any interest payments on such obligations
during that period. Because each Fund distributes all of its net investment
income to its Shareholders, a Fund may have to sell portfolio securities to
distribute such imputed income which may occur at a time when the Adviser would
not have chosen to sell such securities and which may result in a taxable gain
or loss.
Shareholders should consult their tax advisers to determine whether any portion
of the income dividends received from a Fund is considered tax exempt in their
particular state. Each Fund will inform Shareholders annually of the percentage
of income and distributions derived from direct U.S. Treasury obligations.
A sale, exchange or redemption of Fund Shares is generally a taxable transaction
to the Shareholder; however, an exchange of Class A shares for Class B shares in
the same Fund is not a taxable transaction.
19
<PAGE> 22
GENERAL INFORMATION
THE CORPORATION
The Corporation was organized as a Maryland corporation under Articles of
Incorporation dated April 22, 1994. The Articles of Incorporation permit the
Corporation to offer separate portfolios of shares and different classes of each
portfolio. In addition to the Funds, the Corporation consists of the following
portfolios: Pennsylvania Tax-Exempt Money Market Fund and Pennsylvania Municipal
Bond Fund. All consideration received by the Corporation for shares of any Fund
and all assets of such Fund belong to that Fund and would be subject to the
liabilities related thereto.
The Corporation pays its expenses, including fees of its service providers,
audit and legal expenses, expenses of preparing prospectuses, proxy solicitation
materials and reports to Shareholders, costs of custodial services and
registering the shares under federal and state securities laws, pricing,
insurance expenses, litigation and other extraordinary expenses, brokerage
costs, interest charges, taxes and organization expenses.
DIRECTORS OF THE CORPORATION
The management and affairs of the Corporation are supervised by the Directors
under the laws of the State of Maryland. The Directors have approved contracts
under which, as described above, certain companies provide essential management
services to the Corporation.
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. The Shareholders
of each Fund will vote separately on matters pertaining solely to that Fund. The
Shareholders of each class of each Fund will vote separately on matters
pertaining to its distribution plan. As a Maryland corporation, the Corporation
is not required to hold annual meetings of Shareholders but approval will be
sought for certain changes in the operation of the Corporation and for the
election of Directors under certain circumstances.
In addition, a Director may be removed by the remaining Directors or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Corporation. In the event
that such a meeting is requested the Corporation will provide appropriate
assistance and information to the Shareholders requesting the meeting.
REPORTING
The Corporation issues unaudited financial information semi-annually and audited
financial statements annually. The Corporation furnishes proxy statements and
other reports to Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders should direct inquiries to the Inventor Funds, Inc., P.O. Box
419320 Kansas City, Missouri 64141-6320, or by calling 1-800-6INVENT
(1-800-646-8368).
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) is
declared daily and paid monthly for each of the Money Market Funds, Intermediate
Government and GNMA Securities Funds and is declared and paid monthly for the
Equity Growth Fund. Shareholders of record on the last Business Day of each
month will be entitled to receive the monthly dividend distribution, which is
generally paid on the first Business Day of the following month. If any net
capital gains are realized, they will be distributed by each Fund at least
annually.
20
<PAGE> 23
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares at the net asset value next determined on the
payable date, unless the Shareholder has elected to take such payment in cash.
Shareholders may change their election by providing written notice to the
Administrator at least 15 days prior to the change.
Dividends and distributions of a Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of any such payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
The dividends on Class A Shares of the Funds will normally be lower than those
on Class B Shares because of the distribution expenses charged to Class A
Shares.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius serves as counsel to the Corporation. Coopers & Lybrand
L.L.P. serves as the independent accountants of the Corporation.
CUSTODIAN
Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263 (the
"Custodian"), acts as custodian of the Corporation's assets. The Custodian holds
cash, securities and other assets of the Corporation as required by the 1940
Act.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of the permitted investments for the various
Funds and the various risk factors associated therewith:
AMERICAN DEPOSITARY RECEIPTS ("ADRs")-- ADRs are typically issued by a U.S.
financial institution that evidence ownership of underlying securities issued by
a foreign issuer. While the Funds expect to invest primarily in sponsored ADRs,
a joint arrangement between the foreign issuer and the depositary, some ADRs may
be unsponsored. Unlike sponsored ADRs the holders of unsponsored ADRs bear all
expenses and the depositary may not be obligated to distribute Shareholder
communications or to pass-through the voting rights on the deposited securities.
There may be less information available about a foreign issuer underlying an
unsponsored ADR than a foreign issuer underlying a sponsored ADR.
BANKERS' ACCEPTANCES--bills of exchange or time drafts drawn on and accepted by
a commercial bank. Bankers' acceptances are used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT--interest bearing instruments with a specific maturity.
Certificates of deposit are issued by banks and savings and loan institutions in
exchange for the deposit of funds and normally can be traded in the secondary
market prior to maturity. Certificates of deposit have penalties for early
withdrawal.
COMMERCIAL PAPER--the term used to designate unsecured short-term promissory
notes issued by municipalities, corporations and other entities. Maturities on
these issues vary, generally from a few days to nine months.
CONVERTIBLE SECURITIES--are debt securities and preferred stock convertible into
common stock. Convertible securities have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of convertible securities tends to move together with the market
21
<PAGE> 24
value of the underlying stock. As a result, the Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer and any call provisions.
COMMON STOCKS--Investments in common stocks are subject to market risks which
may cause their prices to fluctuate over time. Changes in the value of portfolio
securities will not necessarily affect cash income derived from these securities
but will affect a Fund's net asset value.
DOLLAR ROLLS--Dollar Rolls are transactions in which securities are sold for
delivery in the current month and the seller simultaneously contracts to
repurchase substantially similar securities on a specified future date. Any
difference between the sale price and the purchase price is netted against the
interest income foregone on the securities sold to arrive at an implied
borrowing rate. Alternatively, the sale and purchase transactions can be
executed at the same price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar Rolls may be renewed prior to
cash settlement and initially may involve only a firm commitment agreement by
the Fund to buy a security. If the broker-dealer to whom the Fund sells the
security becomes insolvent, the Fund's right to repurchase the security may be
restricted. Other risks involved in entering into Dollar Rolls include the risk
that the value of the security may change adversely over the term of the Dollar
Roll and that the security the Fund is required to repurchase may be worth less
than the security that the Fund originally held.
To avoid any leveraging concerns, the Fund will place U.S. Government or other
liquid, high grade assets in a segregated account in an amount sufficient to
cover its repurchase obligation.
FIXED INCOME SECURITIES--The market value of fixed income investments will
change in response to interest rate changes and other factors. During periods of
falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal will also affect the value of these investments. Changes
in the value of portfolio securities will not affect cash income derived from
these securities but will affect a Fund's net asset value.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS--Futures contracts provide
for the future sale by one party and purchase by another party of a specified
amount of a specific security at a specified future time and at a specified
price. An option on a futures contract gives the purchaser the right, in
exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. A Fund may use futures
contracts and related options for bona fide hedging purposes, to offset changes
in the value of securities held or expected to be acquired, to minimize
fluctuations in foreign currencies, or to gain exposure to a particular market
or instrument. A Fund will minimize the risk that it will be unable to close out
a futures contract by only entering into futures contracts which are traded on
national futures exchanges.
Stock index futures are futures contracts for various stock indices that are
traded on regis-
22
<PAGE> 25
tered securities exchanges. A stock index futures contract obligates the seller
to deliver (and the purchaser to take) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific stock index
at the close of the last trading day of the contract and the price at which the
agreement is made.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates, (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures, (3) there may not be a liquid secondary market
for a futures contract or option, (4) trading restrictions or limitations may be
imposed by an exchange, and (5) government regulations may restrict trading in
futures contracts and futures options.
INTEREST RATE SWAP TRANSACTIONS--Interest rate swaps are designed to permit the
purchaser to preserve a return or spread on a particular investment or portion
of its portfolio, and to protect against any increase in the price of securities
a Fund anticipates purchasing at a later date. In a typical interest rate swap,
one party agrees to make regular payments equal to a floating interest rate
times a "notional principal amount," in return for payments equal to a fixed
rate times the same amount for a specified period of time.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on a Fund's
performance. Swap Agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. A Fund may also suffer losses if it is unable to
terminate outstanding swap agreements or reduce its exposure through offsetting
transactions. A Fund will enter into swaps only with counterparties believed to
be creditworthy and any such obligation a Fund may have under such an
arrangement will be covered by setting aside liquid high grade securities in a
segregated account.
MORTGAGE-BACKED SECURITIES--Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The mortgages backing these securities
include conventional thirty-year fixed rate mortgages, graduated payment
mortgages, and adjustable rate mortgages. During periods of declining interest
rates, prepayment of mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which underlie se-
curities purchased at a premium often results in capital losses, while
prepayment of mortgages purchased at a discount often results in capital gains.
Because of these unpredictable prepayment characteristics, it is often not
possible to predict accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, FNMA and FHLMC. FNMA and FHLMC obligations are not backed
by the full faith and credit of the U.S. Government as GNMA certificates are,
but FNMA and FHLMC securities are supported by the instrumentalities' right to
borrow from the U.S. Treasury. GNMA, FNMA and FHLMC each guarantees timely
distributions of interest to certificate holders. GNMA and FNMA also each
guarantees timely distributions of scheduled principal. FHLMC has in the past
guaranteed only the ultimate collection of principal of
23
<PAGE> 26
the underlying mortgage loan; however, FHLMC now issues mortgage-backed
securities (FHLMC Gold PCs) which also guarantee timely payment of monthly
principal reductions. Government and private guarantees do not extend to the
securities' value, which is likely to vary inversely with fluctuations in
interest rates.
Private Pass-Through Securities: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two rating categories.
While they are generally structured with one or more types of credit
enhancement, private pass-through securities typically lack a guarantee by an
entity having the credit status of a governmental agency or instrumentality.
Collateralized Mortgage Obligations ("CMOs"): CMOs are debt obligations or
multiclass pass-through certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators or investors in mortgage loans. In
a CMO, series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
REMICs: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by FNMA
or FHLMC represent beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or FNMA, FHLMC or GNMA-guaranteed mortgage
pass-through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates. FNMA REMIC Certificates are issued and guaranteed as to timely
distribution of principal and interest by FNMA.
Parallel Pay Securities; PAC Bonds: Parallel pay CMOs and REMICs are structured
to provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which must be retired by
its stated maturity date or final distribution date, but may be retired earlier.
Planned Amortization Class CMOs ("PAC Bonds") generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.
REITs: REITs are trusts that invest primarily in commercial real estate or real
estate-related loans. The value of interests in REITs may be affected by the
value of the property owned or the quality of the mortgages held by the trust.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an interest-only class ("IO"), while
the other class may receive all of the
24
<PAGE> 27
principal payments and is thus termed the principal-only class ("PO"). The value
of IOs tends to increase as rates rise and decrease as rates fall; the opposite
is true of POs. SMBs are extremely sensitive to changes in interest rates
because of the impact thereon of prepayment of principal on the underlying
mortgage securities. The market for SMBs is not as fully developed as other
markets; SMBs therefore may be illiquid.
Risk Factors: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market participants generally refer to an
estimated average life. An average life estimate is a function of an assumption
regarding anticipated prepayment patterns, based upon current interest rates,
current conditions in the relevant housing markets and other factors. The
assumption is necessarily subjective, and thus different market participants can
produce different average life estimates with regard to the same security. There
can be no assurance that estimated average life will be a security's actual
average life.
OPTIONS--Under a call option the purchaser of the option has the right to
purchase, and the writer the obligation to sell, the underlying security at the
exercise price during the option period. Options written on individual
securities are written solely as covered call options (options on securities
owned by a Fund) and will not be engaged for speculative purposes. Such options
will be listed on a national securities exchange. In order to close out an
option position, a Fund may enter into a "closing purchase transaction"--the
purchase of an option on the same security with the same exercise price and
expiration date as the option previously written on any particular security. If
the Fund is unable to effect a closing purchase transaction, it will not be able
to sell the underlying security until the option expires or the Fund delivers
the underlying security upon exercise. There are risks associated with options
investments, including the following: (1) the success of a hedging strategy may
depend on an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in interest rates; (2) there
may be an imperfect correlation between the movement in prices of securities
held by the Fund and the price of options; (3) there may not be liquid secondary
market for options; and (4) while the Fund will receive a premium when it writes
covered call options, it may not participate fully in any rise in the market
value of the underlying security.
RECEIPTS--Separately traded interest and principal component parts of U.S.
Treasury obligations that are issued by banks or brokerage firms and are created
by depositing U.S. Treasury obligations into a special account at a custodian
bank. The custodian holds the interest and principal payments for the benefit of
the registered owners of the certificates of receipts. The custodian arranges
for the issuance of the certificates or receipts evidencing ownership and
maintains the register. Receipts include "Treasury Receipts" ("TR's"), "Treasury
Investment Growth Receipts" ("TIGR's"), "Liquid Yield Option Notes" ("LYON's"),
and "Certificates of Accrual on Treasury Securities" ("CATS"). TIGR's, LYON's
and CATS are interests in private proprietary accounts while TR's are interests
in accounts sponsored by the U.S. Treasury.
Securities denominated as TR's, TIGR's, LYON's and CATS are sold as zero coupon
securities which means that they are sold at a substantial discount and redeemed
at face value at their maturity date without interim cash payments of interest
or principal. This discount is accreted over the life of the security, and such
accretion will constitute the income earned on the security for both accounting
and tax purposes. Because of these features, such securities may be subject to
greater interest
25
<PAGE> 28
rate volatility than interest paying Permitted Investments.
REPURCHASE AGREEMENTS--Agreements by which a financial institution agrees to
sell a security to a Fund and commits to repurchase the security at an agreed
upon price (including principal and interest) on an agreed upon date within a
number of days from the date of purchase. The securities purchased by a Fund
will be held as collateral by the Custodian and will be equal to at least 102%
of the repurchase price. Repurchase agreements are considered to be loans by a
Fund. The Corporation bears a risk of loss in the event the other party defaults
on its obligations and the Corporation is delayed or prevented from its right to
dispose of the collateral securities or if the Corporation realizes a loss on
the sale of the collateral securities. A Sub-Adviser will enter into repurchase
agreements on behalf of the Corporation only with financial institutions deemed
to present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Directors. Repurchase
agreements are considered loans under the Investment Company Act of 1940, as
amended.
RESTRICTED AND ILLIQUID SECURITIES--Restricted securities are securities that
may not be sold freely to the public absent registration under the Securities
Act of 1933, as amended (the "Act"), or an exemption from registration. Illiquid
Securities are securities that may not be sold within 7 days or less for
approximately their carrying value. The Prime Obligations and Treasury
Securities Funds may invest up to 10% of their net assets in illiquid
securities. The Intermediate Government, GNMA and Equity Growth Funds are
limited to 15% of their net assets in illiquid securities. Restricted securities
eligible for resale pursuant to Rule 144A under the Act and privately placed
commercial paper that have a readily available market are not considered
illiquid for the purposes of this limitation. The Sub-Adviser will monitor the
liquidity of such restricted securities under the supervision of the Board of
Directors of the Corporation.
Rule 144A Securities are restricted securities that have not been registered
under the Securities Act of 1933 but which may be traded between certain
qualified institutional investors, including investment companies. The absence
of a secondary market may affect the value of Rule 144A Securities.
Section 4(2) commercial paper is issued in reliance on an exemption from
registration under Section 4(2) of the Act and is generally sold to
institutional investors who purchase for investment. Any resale of such
commercial paper must be in an exempt transaction, usually to an institutional
investor through the issuer or investment dealers who make a market on such
commercial paper.
SECURITIES LENDING--A Fund may lend the securities in which it is invested, in
order to generate additional income, pursuant to agreements requiring that the
loan be continuously secured by cash, securities of the U.S. Government or its
agencies or any combination of cash and such securities as collateral equal to
100% of the market value at all times of the securities lent. The Fund will
continue to receive interest on the securities lent while simultaneously earning
interest on the investment of cash collateral in U.S. Government securities.
Collateral is marked to market daily to provide a level of collateral at least
equal to the value of the securities lent. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially.
SHORT SALES--Selling securities short involves selling securities the seller
does not own (but has borrowed) in anticipation of a decline in the market price
of such securities. To deliver the securities to the buyer, the seller
26
<PAGE> 29
must arrange through a broker to borrow the securities and, in so doing, the
seller becomes obligated to replace the securities borrowed at their market
price at the time of replacement. In a short sale, the proceeds the seller
receives from the sale are retained by a broker until the seller replaces the
borrowed securities. The seller may have to pay a premium to borrow the
securities and must pay any dividends or interest payable on the securities
until they are replaced.
A Fund may only sell securities short "against the box." A short sale is
"against the box" if, at all times during which the short position is open, the
Fund owns at least an equal amount of the securities or securities convertible
into, or exchangeable without further consideration for, securities of the same
issuer as the securities that are sold short.
A Fund may also maintain short positions in forward currency exchange
transactions, which involve the Fund's agreeing to exchange currency that it
does not own at the time of such agreement for another currency at a future date
and specified price in anticipation of a decline in the value of the currency
sold short relative to the currency that the Fund has contracted to receive in
the exchange. To ensure that any short position of a Fund is not used to achieve
leverage, a Fund establishes with its custodian a segregated account consisting
of cash or liquid, high grade debt securities equal to the fluctuating market
value of the currency as to which any short position is being maintained.
U.S. GOVERNMENT AGENCY OBLIGATIONS-- certain federal agencies such as the
Government National Mortgage Association ("GNMA") have been established as
instrumentalities of the United States Government to supervise and finance
certain types of activities. Issues of these agencies, while not direct
obligations of the United States Government, are either backed by the full faith
and credit of the United States (e.g., GNMA) or supported by the issuing
agencies' right to borrow from the Treasury. The issues of other agencies are
supported by the credit of the instrumentality (e.g., Federal National Mortgage
Association).
U.S. TREASURY OBLIGATIONS--bills, notes and bonds issued by the U.S. Treasury,
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS").
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Funds will maintain with the custodian a separate account with liquid high
grade debt securities or cash in an amount at least equal to these commitments.
The interest rate realized on these securities is fixed as of the purchase date
and no interest accrues to the Fund before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. Although a Fund generally purchases securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities for
its portfolio, a Fund may dispose of a when-issued security or forward
commitment prior to settlement if it deems appropriate. One form of when-issued
or delayed delivery security that the GNMA Fund may purchase is a "to be
announced" ("TBA") mortgage-backed security. A TBA transaction arises when a
mortgage-backed security, such as a GNMA pass-through security, is purchased or
sold with the specific pools that will
27
<PAGE> 30
constitute that GNMA pass-through security to be announced on a future
settlement date.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments by money market
funds are subject to limitations imposed under regulations adopted by the SEC.
These regulations generally require money market funds to acquire only U.S.
dollar obligations maturing in 397 days or less and to maintain a
dollar-weighted average portfolio maturity of 90 days or less. In addition, the
funds may acquire only obligations that present minimal credit risks and that
are "eligible securities" which means they are (i) rated, at the time of
investment, by at least two nationally recognized security rating organizations
(one if it is the only organization rating such obligation) in the highest
short-term rating category or, if unrated, determined to be of comparable
quality (a "first tier security"), or (ii) rated according to the foregoing
criteria in the second highest short-term rating category or, if unrated,
determined to be of comparable quality ("second tier security"). A security is
not considered to be unrated if its issuer has outstanding obligations of
comparable priority and security that have a short-term-rating. In determining
whether obligations are eligible securities, the rating of the issuer's
commercial paper, if any, is used for the above tests. In addition, investments
in second tier securities are subject to further constraints that (i) no more
than 5% of a fund's assets may be invested in such securities in the aggregate,
and (ii) any investment in such securities of one issuer is limited to the
greater of 1% of each fund's total assets or $1 million. Each fund may invest up
to 25% of its total assets in first tier securities of a single issuer for three
business days.
28
<PAGE> 31
INVENTOR FUNDS, INC.
PRIME OBLIGATIONS MONEY MARKET FUND
TREASURY SECURITIES MONEY MARKET FUND
INTERMEDIATE GOVERNMENT SECURITIES FUND
GNMA SECURITIES FUND
EQUITY GROWTH FUND
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
PENNSYLVANIA MUNICIPAL BOND FUND
SUPPLEMENT DATED MAY 2, 1996 TO THE PROSPECTUSES DATED AUGUST 28, 1995.
This Supplement to the Prospectuses provides new and additional
information beyond that contained in the Prospectuses and should be read in
conjunction with the Prospectuses. This Supplement supersedes and replaces any
existing supplements to the Prospectuses.
On May 2, 1996, Integra Financial Corporation, the parent corporation
of Integra Trust Company ("Integra"), the investment adviser to Inventor Funds,
Inc. (the "Corporation"), merged (the "Merger") with National City Corporation
("NCC"). Consummation of the Merger resulted in the automatic termination of
(1) the investment advisory agreement under which Integra provides investment
advisory services to the Corporation, and (2) the investment sub-advisory
agreements under which Wellington Management Company, STI Capital Management,
N.A. and Weiss, Peck & Greer, L.L.C. provide investment sub-advisory services
to the portfolios of the Corporation.
In anticipation of the Merger and to provide continuity in investment
advisory services to the Corporation, the Board of Directors of the Corporation
approved, and voted on February 12, 1996 to recommend that the shareholders of
the Corporation approve, new Investment Advisory and Sub-Advisory Agreements.
At a Special Meeting of Shareholders of the Corporation held on May 2, 1996,
shareholders of the Corporation approved a new investment advisory agreement
between the Corporation and National City Bank, a wholly-owned subsidiary of
NCC. In addition, shareholders of the Prime Obligations Money Market Fund,
Treasury Securities Money Market Fund, GNMA Securities Fund, and Intermediate
Government Securities Fund approved a new investment sub-advisory agreement
between Integra and Wellington Management Company; shareholders of the Equity
Growth Fund approved a new investment sub-advisory agreement between Integra
and STI Capital Management, N.A.; and shareholders of the Pennsylvania
Tax-Exempt Money Market Fund and Pennsylvania Municipal Bond Fund approved a
new investment sub-advisory agreement between Integra and Weiss, Peck & Greer,
L.L.C.
In addition, at a meeting held on March 18, 1996, the Board of
Directors of the Corporation considered the merger of certain portfolios of the
Corporation with certain portfolios of the Armada Funds. The Armada Funds are
advised by affiliates of NCC. The Directors voted to approve an Agreement and
Plan of Reorganization (the "Reorganization Agreement") pursuant to which the
Inventor Equity Growth Fund would be reorganized into the Armada Equity Fund,
the Inventor GNMA Securities Fund would be reorganized into the Armada GNMA
Fund, the Inventor Intermediate Government Securities Fund would be reorganized
into the Armada Intermediate Government Fund, the Inventor Pennsylvania
Municipal Bond Fund would be reorganized into the Armada Pennsylvania Municipal
Fund, and the Inventor Pennsylvania Tax-Exempt Money Market Fund would be
reorganized into the Armada Pennsylvania Tax Exempt Fund. The reorganization
of each portfolio would be accomplished by transferring the portfolio's assets
and liabilities to its corresponding Armada portfolio in exchange for
Institutional class shares of the Armada portfolio. These Armada shares would
then be distributed to the shareholders of each portfolio of the Corporation in
liquidation of the Corporation's portfolios. The Prime Obligations Money
Market Fund and Treasury Securities Money Market Fund will be liquidated prior
to these reorganizations. Shareholders of the Corporation's Intermediate
Government Securities Fund, GNMA Securities Fund, Equity Growth Fund,
Pennsylvania Tax-Exempt Money Market Fund, and Pennsylvania Municipal Bond Fund
will be asked to approve the Reorganization Agreement at a Special Meeting of
Shareholders scheduled for August 1, 1996.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
INT-A-251-02
INT-A-252-03
<PAGE> 1
EXHIBIT 17(f)
[INVENTOR FUNDS LOGO]
- ---------------------
INVENTOR FUNDS
INVESTMENT ADVISER
Integra Trust Company
SUB ADVISER
Weiss, Peck & Greer, L.L.C.
ADMINISTRATOR
SEI Financial Management Corporation
TRANSFER AGENT
DST Systems, Inc.
DISTRIBUTOR
SEI Financial Services Company
COUNSEL
Morgan, Lewis & Bockius
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
INT-F-251-02
PROSPECTUS
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET FUND
PENNSYLVANIA MUNICIPAL
BOND FUND
AUGUST 28, 1995
<PAGE> 2
- -------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary...................... 2
Expense Summary.............. 4
Financial Highlights......... 6
The Corporation.............. 7
Investment Objectives and
Policies ................. 7
Risk Factors................. 8
Investment Limitations....... 9
Fundamental Policies......... 9
The Adviser.................. 9
The Sub-Adviser.............. 10
The Administrator............ 10
The Transfer Agent........... 10
The Distributor.............. 11
How to Purchase Shares....... 11
Exchanges.................... 14
Redemption of Shares......... 15
Performance.................. 17
Taxes........................ 18
General Information.......... 19
Description of Permitted
Investments
and Risk Factors............. 20
</TABLE>
<PAGE> 3
PROSPECTUS
[INVENTOR FUNDS LOGO]
Investment Adviser:
INTEGRA TRUST COMPANY, NATIONAL ASSOCIATION
Inventor Funds, Inc. (the "Corporation") is a mutual fund that seeks to provide
a convenient means of investing in one or more professionally managed portfolios
of securities. This Prospectus relates to the following Funds:
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
PENNSYLVANIA MUNICIPAL BOND FUND
CLASS A
Class A Shares of the Funds are offered to individuals and institutional
investors, including customers of affiliates and correspondents of Integra
Financial Corporation. Class A shares are sold with a front-end sales load that
will be reduced or waived in certain circumstances. Integra Trust Company,
National Association, the Funds' investment adviser, is an affiliate of Integra
Financial Corporation.
THE CORPORATION'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, INCLUDING INTEGRA TRUST COMPANY, OR ITS AFFILIATES. THE
CORPORATION'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THE SHARES INVOLVES RISK, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED.
AS WITH ANY MUTUAL FUND, AN INVESTMENT IN THE PENNSYLVANIA TAX-EXEMPT MONEY
MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN
BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE.
This Prospectus sets forth concisely the basic information about the Funds and
the Corporation that a prospective investor should know before investing.
Investors are advised to read this Prospectus and retain it for future
reference. A Statement of Additional Information dated August 28, 1995, has been
filed with the Securities and Exchange Commission and is available without
charge through the Distributor, SEI Financial Services Company, 680 East
Swedesford Road, Wayne, PA 19087-1658, or by calling 1-800-6INVENT
(1-800-646-8368). The Statement of Additional Information is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
AUGUST 28, 1995
<PAGE> 4
SUMMARY
Inventor Funds, Inc. (the "Corporation") is an open-end management investment
company which provides a convenient way to invest in professionally managed
portfolios of securities. This Summary provides basic information about the
Class A shares of the Corporation's Pennsylvania Tax-Exempt Money Market Fund
and Pennsylvania Municipal Bond Fund (each a "Fund" and, together, the "Funds").
What are the Investment Objectives and Policies of each of Fund? THE
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND seeks to provide current income exempt
from regular federal income and Pennsylvania personal income taxes, consistent
with stability of principal by investing in high quality debt obligations issued
by or on behalf of the Commonwealth of Pennsylvania and its political
subdivisions and financing authorities ("Pennsylvania Municipal Securities").
THE PENNSYLVANIA MUNICIPAL BOND FUND seeks to provide current income exempt from
both regular federal income and Pennsylvania personal income taxes while
preserving capital by investing in investment grade Pennsylvania Municipal
Securities. See "Investment Objectives and Policies" and "Description of
Permitted Investments and Risk Factors." There is no assurance that a Fund will
meet its investment objective.
What are the Risks Involved with an Investment in the Funds? THE PENNSYLVANIA
TAX-EXEMPT MONEY MARKET FUND seeks to maintain a net asset value of $1.00 per
share. There can be no assurance that the Fund will be able to maintain a net
asset value of $1.00 per share on a continuous basis. Shares of the PENNSYLVANIA
MUNICIPAL BOND FUND will fluctuate in value with the value of its underlying
portfolio securities. Values of fixed income securities in which the
Pennsylvania Municipal Bond Fund invests tend to vary inversely with interest
rates and be affected by other market and economic factors as well. Both Funds
are non-diversified portfolios that invest in Pennsylvania Municipal Securities,
which entail certain risks involved in investing in municipal securities.
Who is the Adviser? Integra Trust Company serves as the Adviser of the
Corporation. See "Expense Summary" and "The Adviser."
Who is the Sub-Adviser? Weiss, Peck & Greer, L.L.C. serves as Sub-Adviser to
the Funds. See "The Sub-Adviser."
Who is the Administrator? SEI Financial Management Corporation serves as the
Administrator and shareholder servicing agent of the Corporation. See "Expense
Summary" and "The Administrator."
Who is the Transfer Agent? DST Systems, Inc. serves as transfer agent and
dividend disbursing agent for the Corporation. See "The Transfer Agent."
Who is the Distributor? SEI Financial Services Company serves as distributor of
the Corporation's shares. See "The Distributor."
How do I Purchase and Redeem Shares? Purchases and redemptions of shares may be
made on any day on which both the New York Stock Exchange and the Federal
Reserve wire systems are open for business ("Business Days"). A purchase order
for shares will be executed at a per share price equal to the net asset value
per share next determined after the receipt of the purchase order plus any
2
<PAGE> 5
applicable sales charges. The minimum initial investment is $500 ($100 for
officers, directors, employees, or retirees of Integra Trust Company, and its
affiliates). Net asset value is determined as of the close of business of the
New York Stock Exchange (currently 4:00 p.m., Eastern Time) for the Pennsylvania
Municipal Bond Fund on any Business Day and 2:00 p.m., Eastern Time for the
Pennsylvania Tax-Exempt Money Market Fund, on any Business Day. Redemption
orders must be placed prior to 4:00 p.m., Eastern Time for the Pennsylvania
Municipal Bond Fund and 2:00 p.m., Eastern Time for the Pennsylvania Tax-Exempt
Money Market Fund, on any Business Day for the order to be effective that day.
See "Purchase of Shares" and "Redemption of Shares."
How are Dividends Paid? Substantially all of the net investment income
(exclusive of capital gains) of each Fund is distributed in the form of periodic
dividends. Any capital gain is distributed at least annually. Distributions are
paid in additional shares unless the Shareholder elects to take the payment in
cash. See "Dividends."
3
<PAGE> 6
EXPENSE SUMMARY
CLASS A
<TABLE>
<CAPTION>
PENNSYLVANIA
TAX-EXEMPT PENNSYLVANIA
MONEY MARKET MUNICIPAL BOND
SHAREHOLDER TRANSACTION EXPENSES FUND FUND
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Load Imposed on
Purchases (as a percentage of offering price) None 4.00%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None None
Maximum Contingent Deferred Sales Charge None None
Exchange Fee None None
Wire Redemption Fee $10 $10
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees
(after fee waivers) (1) .21% .52%
Rule 12b-1 Fees (after fee waivers) (2) .00% .00%
Other Expenses .34% .33%
Total Operating Expenses
(after fee waivers) (3) .55% .85%
</TABLE>
(1) The Adviser has agreed to waive a portion of its fees. The Adviser
reserves the right to terminate the waiver at any time in its sole
discretion. Absent such fee waivers, advisory fees would be .45% for the
Pennsylvania Tax-Exempt Money Market Fund, and .70% for the Pennsylvania
Municipal Bond Fund.
(2) The Class A Plan provides that Class A shares will bear the costs of
distribution expenses and related service fees at the annual rate of
.25% of each Fund's average daily net assets. The Distributor has agreed
to voluntarily waive any fees payable pursuant to the Plan. The
Distributor reserves the right to terminate this waiver at anytime in
its sole discretion.
(3) Absent the Adviser's voluntary fee waivers and the Distributor's waiver
of 12b-1 fees, total operating expenses would be 1.04% for the
Pennsylvania Tax-Exempt Money Market Fund, and 1.36% for the
Pennsylvania Municipal Bond Fund.
4
<PAGE> 7
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 yr. 3 yrs. 5 yrs. 10 yrs.
- ---------------------------------------------------------------------------------------------------
An investor in a Fund would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of each time period:
<S> <C> <C> <C> <C>
Pennsylvania Tax-Exempt Money Market Fund $ 6 $18 $31 $ 69
Pennsylvania Municipal Bond Fund $ 48 $66 $85 $141
</TABLE>
- --------------------------------------------------------------------------------
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the expense table and example is to assist the investor in understanding the
various costs and expenses that may be directly or indirectly borne by investors
in the Funds. A person who purchases shares through a financial institution may
be charged separate fees by that institution. The information set forth in the
foregoing table and example relates only to Class A shares. The Funds also offer
Class B shares, which are subject to the same expenses as Class A shares except
that Class B shares bear no distribution costs or sales loads. Class B shares
are currently not being offered for any Fund.
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "How to Purchase Shares."
Long-term investors may pay more than the equivalent of the maximum front-end
sales charges otherwise permitted by the Rules of the National Association of
Securities Dealers, Inc. ("NASD").
5
<PAGE> 8
FINANCIAL HIGHLIGHTS
The following information has been audited by Coopers & Lybrand L.L.P., the
Trust's independent accountants, as indicated in their report dated June 9,
1995, on the Corporation's financial statements as of April 30, 1995, included
in the Corporation's Statement of Additional Information under "Financial
Information." This table should be read in conjunction with the Corporation's
financial statements and notes thereto. Additional information is set forth in
the 1995 Annual Report to Shareholders and is available without charge by
calling 1-800-6INVENT.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
NET ASSET AND DISTRIBUTIONS FROM NET ASSET NET ASSETS
VALUE NET UNREALIZED FROM NET REALIZED VALUE END
BEGINNING INVESTMENT SALES INVESTMENT CAPITAL END TOTAL OF PERIOD
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD RETURN (000)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------
PENNSYLVANIA MUNICIPAL BOND
- -------------------------------
Class A
1995(1)(3)................ $ 10.00 $ 0.29 $0.04 $ (0.29) -- $ 10.04 3.38%+ $ 34,638
- -------------------------------------------
PENNSYLVANIA TAX-EXEMPT MONEY MARKET
- -------------------------------------------
Class A
1995(2)................... 1.00 0.02 -- (0.02) -- 1.00 2.32+ 56,668
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT TO AVERAGE TO AVERAGE
EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO
TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
- ---------------------------
<S> <C> <C> <C>
- --------------------------------
PENNSYLVANIA MUNICIPAL BOND
- --------------------------------
Class A
1995(1)(3)................ 0.85% 4.05% 1.36% 3.54% 4%
- -------------------------------------------
PENNSYLVANIA TAX-EXEMPT MONEY MARKET
- -------------------------------------------
Class A
1995(2)................... 0.55 3.21 1.04 2.72 --
</TABLE>
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on August 10, 1994. All ratios for the period have been
annualized.
(2) Commenced operations on August 8, 1994. All ratios for the period have been
annualized.
(3) Total Return does not reflect the sales charge.
6
<PAGE> 9
THE CORPORATION
Inventor Funds, Inc. (the "Corporation") is an open-end management investment
company that offers common stock ("shares") in the Funds through separate
Classes (Class A and Class B), which provide for variations in sales charges,
distribution costs, voting rights and dividends. This Prospectus offers Class A
shares of the Corporation's Pennsylvania Tax-Exempt Money Market Fund and
Pennsylvania Municipal Bond Fund (each a "Fund" and, together, the "Funds").
Additional information pertaining to the Corporation may be obtained in writing
from SEI Financial Services Company, 680 East Swedesford Road, Wayne,
Pennsylvania 19087-1658 or by calling 1-800-6INVENT (1-800-646-8368).
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has its own investment objectives and policies. There is no assurance
that the investment objective of a Fund will be met.
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
The investment objective of the Fund is to provide current income exempt from
regular federal income tax and Pennsylvania personal income taxes, consistent
with stability of principal. It is a fundamental policy of the Fund to use its
best efforts to maintain a constant net asset value of $1.00 per share.
The Fund intends to comply with regulations of the Securities and Exchange
Commission ("SEC") applicable to money market funds. These regulations impose
certain quality, maturity and diversification restraints on investments by the
Fund.
The Fund invests primarily in Pennsylvania Municipal Securities (as defined
below) with remaining maturities of 397 days or less. As a matter of fundamental
policy, the Fund invests its assets so that at least 80% of its annual interest
income is not only exempt from regular federal income tax and Pennsylvania
personal income taxes, but is not considered a preference item for purposes of
the alternative minimum tax. Pennsylvania Municipal Securities are debt
obligations issued by or on behalf of the Commonwealth of Pennsylvania and its
political subdivisions and financing authorities, and obligations of the United
States, including territories and possessions of the United States, the income
from which is, in the opinion of qualified legal counsel, exempt from federal
regular income tax and Pennsylvania state income tax imposed upon non-corporate
taxpayers.
Pennsylvania Municipal Securities in which the Fund invests must either be rated
in one of the two highest short-term rating categories by one or more nationally
recognized statistical rating organizations ("NRSROs") or be of comparable
quality as determined by the Sub-Adviser to securities having such rating.
Certain of the Fund's acceptable investments may have been credit enhanced by a
guaranty, letter of credit or insurance. The Fund typically evaluates the credit
quality and ratings of credit enhanced securities based upon the financial
condition and ratings of the party providing the credit enhancement (the "credit
enhancer"), rather than the issuer. The bankruptcy, receivership or default of
the credit enhancer will adversely affect the quality and marketability of the
underlying security.
The Fund may invest in variable and floating rate obligations, may purchase
securities on a "when-issued" basis and reserves the right to engage in
transactions involving standby commitments and repurchase agreements.
For temporary defensive purposes when, in the opinion of the Sub-Adviser,
Pennsylvania Municipal Securities of sufficient quality are not readily
available, the Fund can invest up to 100% of its assets in securities which pay
interest exempt only from federal income taxes and in taxable securities.
7
<PAGE> 10
PENNSYLVANIA MUNICIPAL BOND FUND
The Pennsylvania Municipal Bond Fund seeks to provide current income exempt from
both regular federal income and Pennsylvania personal income tax while
preserving capital.
The Pennsylvania Municipal Bond Fund invests primarily in investment grade
Pennsylvania Municipal Securities that are bonds and municipal lease
obligations. For these purposes, bonds include bonds, notes and debentures. The
Fund has a fundamental policy to be fully invested under normal conditions in
Pennsylvania Municipal Securities that produce interest exempt from both regular
federal and Pennsylvania personal income tax. The Fund may invest up to 10% of
its assets in Pennsylvania Municipal Securities the interest on which is a
preference item for purposes of the alternative minimum tax.
Pennsylvania Municipal Securities in which the Fund invests either have the
rating set forth below or, if not rated, are of comparable quality as determined
by the Sub-Adviser: (i) bonds rated BBB or better by S&P or Baa or better by
Moody's; (ii) notes rated at least SP-1 by S&P or MIG-1 or VMIG-1 by Moody's;
and (iii) tax-exempt commercial paper rated at least A-1 by S&P or Baa by
Moody's. Pennsylvania Municipal Securities owned by the Fund which become less
than the prescribed investment quality shall be sold at a time when, in the
Adviser's judgment, it does not substantially impact the market value of the
Fund.
Debt rated BBB or Baa is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
The Fund may invest in variable and floating rate obligations, may purchase
securities on a "when-issued" basis, and reserves the right to engage in
transactions involving standby commitments and repurchase agreements.
The Fund will maintain a dollar-weighted average portfolio maturity of seven
years or less. Each security purchased will have a maximum maturity of fifteen
years.
For temporary defensive purposes when, in the opinion of the Sub-Adviser,
Pennsylvania Municipal Securities of sufficient quality are not readily
available, the Fund can invest up to 100% of its assets in securities which pay
interest exempt only from federal income taxes and in taxable securities.
RISK FACTORS
Since each Fund invests primarily in Pennsylvania Municipal Securities, the
value of its shares may be especially affected by factors pertaining to the
Pennsylvania economy and other factors specifically affecting the ability of
issuers of Pennsylvania Municipal Securities to meet their obligations. As a
result, the value of each Fund's shares may fluctuate more widely than the value
of shares of a portfolio investing in securities relating to a number of
different states. The ability of state, county and local governments to meet
their obligations will depend primarily on the availability of tax and other
revenues to those governments and on their fiscal conditions generally. The
amounts of tax and other revenues available to governmental issuers of
Pennsylvania Municipal Securities may be affected from time to time by economic,
political and demographic conditions within the state. In addition,
constitutional or statutory restrictions may limit a government's power to raise
revenues or increase taxes. Further, payments of principal and
8
<PAGE> 11
interest on limited obligation securities will depend on the economic condition
of the facility or specific revenue source from whose revenues the payments will
be made, which in turn could be affected by economic, political and demographic
conditions in the state. Moreover, each Fund is classified as "non-diversified"
because it may invest in obligations of a relatively limited number of issuers.
For additional information regarding permitted investments see "Description of
Permitted Investments and Risk Factors" in this Prospectus and the Statement of
Additional Information.
INVESTMENT LIMITATIONS
Each Fund may not:
1. Purchase any securities which would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the United States Government or its agencies and instrumentalities and
securities issued by state and local governments.
The foregoing percentage limitation will apply at the time of the purchase of a
security. Additional investment limitations are set forth in the Statement of
Additional Information.
FUNDAMENTAL POLICIES
Each Fund's investment objective and investment limitations are fundamental
policies. Fundamental policies cannot be changed with respect to a Fund without
the consent of the holders of a majority of that Fund's outstanding voting
securities.
THE ADVISER
Integra Trust Company (the "Adviser"), serves as the investment adviser for the
Funds. The Adviser sets investment policies, and continuously reviews,
supervises and administers each Fund's investment program. The Adviser
discharges its responsibilities subject to the supervision of, and policies set
by, the Directors of the Corporation.
Integra Trust Company, 300 Fourth Avenue, Pittsburgh, Pennsylvania 15278, is a
wholly-owned subsidiary of Integra Financial Corporation. Prior to August, 1994,
the Adviser had not previously served as the investment adviser to a mutual
fund. However, the Adviser or its predecessor organizations have provided trust
and asset management services for over 70 years. As of May 31, 1995, the Adviser
had assets under management of approximately $8.9 billion.
The Adviser is entitled to a fee, which is calculated daily and paid monthly, at
an annual rate of .45% and .70% of the average daily net assets of the
Pennsylvania Tax-Exempt Money Market Fund and the Pennsylvania Municipal Bond
Fund, respectively. The Adviser may from time to time waive all or a portion of
its fee in order to limit the operating expenses of a Fund. Any such waiver is
voluntary and may be terminated at any time in the Adviser's sole discretion.
For the fiscal year ended April 30, 1995, the Adviser received an advisory fee
of .22% and .53% from the Pennsylvania Tax-Exempt Money Market and the
Pennsylvania Municipal Bond Funds, respectively, based on each Fund's average
net assets.
The Glass-Steagall Act restricts the securities activities of banks such as
Integra Trust Company, but federal regulatory authorities permit such banks to
provide investment advisory and other services to mutual funds. Should this
position be challenged successfully in court or reversed by legislation, the
Corporation might
9
<PAGE> 12
have to make other investment advisory arrangements.
THE SUB-ADVISER
Weiss, Peck & Greer, L.L.C. ("WPG" or the "Sub-Adviser") serves as the
Pennsylvania Tax-Exempt Money Market and the Pennsylvania Municipal Bond Funds'
investment sub-adviser under a sub-advisory agreement (the "Sub-Advisory
Agreement") with the Adviser. Under the Sub-Advisory Agreement, WPG makes the
investment decisions for the assets of the Funds, and continuously reviews,
supervises and administers the Funds' investment program. WPG is independent of
the Adviser and discharges its responsibilities subject to the supervision of,
and policies set by, the Adviser and the Directors of the Corporation.
For its services, WPG is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .05% of the average daily net assets of the
Pennsylvania Tax-Exempt Money Market Fund and .18% of the average daily net
assets of the Pennsylvania Municipal Bond Fund. The Sub-Adviser may from time to
time waive all or a portion of its fee from the Adviser. For the fiscal year
ended April 30, 1995, WPG received a fee from the Adviser of .05% for the
Pennsylvania Tax-Exempt Money Market Fund and .18% for the Pennsylvania
Municipal Bond Fund based on each Fund's average daily net assets.
WPG is a limited liability company founded in 1970, and engages in investment
management, venture capital management and management buyouts. WPG has been
active since its founding in managing portfolios of tax exempt securities. At
December 31, 1994, total assets under management were approximately $13 billion.
The principal business address of WPG is One New York Plaza, New York, New York
10004.
Janet A. Fiorenza has served as the portfolio manager for the Pennsylvania
Tax-Exempt Money Market Fund since its inception. Ms. Fiorenza, Principal and
Senior Portfolio Manager, has been a member of WPG or its predecessor since
1980.
S. Blake Miller, CFA, has served as portfolio manager to the Pennsylvania
Municipal Bond Fund. Mr. Miller is an associate Principal of the Tax-Exempt
Fixed Income Management Department for the Sub-Adviser and has been a portfolio
manager with the Sub-Adviser or its predecessor since 1986.
THE ADMINISTRATOR
SEI Financial Management Corporation (the "Administrator"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), provides the Corporation with
administrative services, including all fund accounting, regulatory reporting,
necessary office space, equipment, personnel, and facilities. The Administrator
also serves as shareholder servicing agent of the Funds.
The Administrator is entitled to a fee, calculated daily and paid monthly, at a
maximum annual rate of .18% of the average daily net assets of the Pennsylvania
Municipal Bond Fund, and .15% of the average daily net assets of the
Pennsylvania Tax-Exempt Money Market Fund. The Administrator may from time to
time waive all or a portion of its fee in order to limit the operating expenses
of the Pennsylvania Municipal Bond Fund.
THE TRANSFER AGENT
DST Systems, Inc. ("DST" or "Transfer Agent"), 210 W. 10th Street, Kansas City,
Missouri 64105, serves as transfer agent and dividend disbursing agent for the
Corporation.
10
<PAGE> 13
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, serves as distributor. Class A shares of the Corporation have a Rule 12b-1
Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to .25%
of their average daily net assets. Financial institutions that are the record
owner of shares for the account of their customers may impose separate fees for
account services to their customers.
The Funds may execute brokerage or other agency transactions through the
Distributor for which the affiliate or the Distributor receives compensation.
HOW TO PURCHASE SHARES
Class A shares of the Funds may be purchased by mail, by wire or through an
automatic investment plan ("AIP"). Shares may also be purchased through
broker-dealers, including Integra Brokerage Services Company and Personal
Investment Services, Inc., that have established a dealer agreement with the
Distributor.
HOW TO PURCHASE BY MAIL
You may purchase Class A shares of a Fund by completing and signing an Account
Application form and mailing it, along with a check (or other negotiable bank
instrument or money order) payable to "Inventor Funds (Fund Name)," P.O. Box
419320, Kansas City, Missouri 64141-6320. You may purchase more shares at any
time by mailing payment to DST at the above address. Orders placed by mail will
be executed on receipt of your payment. If your check does not clear, your
purchase will be canceled and you could be liable for any losses or fees
incurred.
You may obtain Account Application forms by calling the Fund at 1-800-6INVENT
(1-800-646-8368).
HOW TO PURCHASE BY WIRE
You may purchase shares by wiring Federal funds, provided that your Account
Application has been previously received. You must wire funds to DST and the
wire instructions must include your account number. You must call the Fund at
1-800-6INVENT (1-800-646-8368) before wiring any funds. An order to purchase
shares by Federal funds wire will be deemed to have been received by the Fund on
the Business Day (defined below) of the wire; provided that the Federal funds
wire is received by DST prior to 4:00 p.m., Eastern Time for the Pennsylvania
Municipal Bond Fund and 2:00 p.m., Eastern Time for the Pennsylvania Tax-Exempt
Money Market Fund. If DST does not receive notice by 4:00 p.m., Eastern Time for
the Pennsylvania Municipal Bond Fund and 2:00 p.m., Eastern Time for the
Pennsylvania Tax-Exempt Money Market Fund, on the Business Day of the wire, the
order will be executed on the next Business Day.
HOW TO PURCHASE THROUGH AN
AUTOMATIC INVESTMENT PLAN ("AIP")
You may arrange for periodic additional investments in the Funds through
automatic deductions by Automated Clearing House ("ACH") from a checking account
by completing an AIP Application Form. The minimum pre-authorized investment
amount is $25 per month. An AIP Application Form may be obtained by contacting
the Fund at 1-800-6INVENT (1-800-646-8368). The AIP is available only for
additional investments for an existing account.
GENERAL INFORMATION
You may purchase Class A shares of the Funds on any day on which both the New
York Stock
11
<PAGE> 14
Exchange and Federal Reserve wire systems are open for business ("Business
Days"). The minimum initial investment in any Fund is $500 ($100 for officers,
directors, employees, or retirees of Integra Trust Company, or its affiliates).
The Distributor may waive the minimum investment at its discretion. Subsequent
purchases of shares must be at least $25.
A purchase order for shares will be effective as of the Business Day received by
the Transfer Agent if the Transfer Agent receives the order and payment before
4:00 p.m., Eastern Time for the Pennsylvania Municipal Bond Fund and 2:00 p.m.,
Eastern Time for the Pennsylvania Tax-Exempt Money Market Fund. The purchase
price (the "Offering Price") of Class A shares is the net asset value next
determined after the purchase order is effective plus any applicable sales
charge.
The net asset value per share is determined as of the close of business of the
New York Stock Exchange (currently 4:00 p.m., Eastern Time) for the Pennsylvania
Municipal Bond Fund and as of 2:00 p.m., Eastern Time for the Pennsylvania
Tax-Exempt Money Market Fund on each Business Day by dividing the total market
value of that Fund's investments and other assets, less any liabilities, by the
total outstanding shares of the Fund. Purchases will be made in full and
fractional shares calculated to three decimal places. Pursuant to guidelines
adopted and monitored by the Directors of the Corporation, each Fund may use a
pricing service to provide market quotations or fair market valuations. A
pricing service may derive such valuations through the use of a matrix system to
value fixed income securities which considers factors such as securities prices,
yield features, ratings, and developments related to a specific security.
Although the methodology and procedures for determining net asset value are
identical for both classes of a Fund, the net asset value per share of such
classes may differ because of the distribution expenses charged to Class A
shares.
The Corporation reserves the right to reject a purchase order for shares when
the Distributor determines that it is not in the best interest of the
Corporation and/or its shareholders to accept such order.
Shareholders who own their shares of record and who desire to transfer
registration of their shares should contact the Fund at 1-800-6INVENT
(1-800-646-8368).
HOW TO PURCHASE THROUGH FINANCIAL
INSTITUTIONS
Shares may be purchased through financial institutions, including the Adviser,
that provide distribution assistance or shareholder services. Shares purchased
by persons ("Customers") through financial institutions may be held of record by
the financial institution. Financial institutions may impose an earlier cut-off
time for receipt of purchase orders directed through them to allow for
processing and transmittal of these orders to the Distributor for effectiveness
the same day. Customers should contact their financial institution for
information as to that institution's procedures for transmitting purchase,
exchange or redemption orders to the Corporation.
Customers who desire to transfer the registration of shares beneficially owned
by them but held of record by a financial institution should contact the
institution to accomplish such change.
Depending upon the terms of a particular Customer account, a financial
institution may charge a Customer account fees. Information concerning these
services and any charges will be provided to the Customer by the financial
institution.
12
<PAGE> 15
SALES LOAD
The following table shows the regular sales charge on Class A shares of the
Pennsylvania Municipal Bond Fund to a "single purchaser" (defined below)
together with the sales charge that is reallowed to certain financial
intermediaries (the "reallowance").
<TABLE>
<CAPTION>
SALES
CHARGE SALES REALLOWANCE
AS A CHARGE AS
PERCENTAGE AS A PERCENTAGE
OF PERCENTAGE OF
AMOUNT OFFERING OF NET OFFERING
OF PRICE PER AMOUNT PRICE PER
PURCHASE SHARE INVESTED SHARE
- ------------- ---------- ---------- ----------
<S> <C> <C> <C>
Less than
$100,000 4.00% 4.17% 3.60%
$100,000 but
less than
$250,000 3.00% 3.09% 2.70%
$250,000 but
less than
$500,000 2.00% 2.04% 1.80%
$500,000 but
less than
$1,000,000 1.00% 1.01% .90%
$1,000,000
and above none none none
</TABLE>
The sales charge shown in the table is the maximum sales charge that applies to
sales of Class A shares of the Funds. Under certain circumstances, the
Distributor may use its own funds to compensate financial institutions and
intermediaries in amounts additional to the commissions shown above. In
addition, the Distributor may, from time to time in its sole discretion,
institute one or more promotional incentive programs, which will be paid by the
Distributor from the sales charge it receives or from any other source available
to it. Under any such program, the Distributor will provide promotional
incentives, in the form of cash or other compensation, including merchandise,
airline vouchers, trips and vacation packages, to all dealers selling shares of
the Funds. Ordinarily, such promotional incentives will be offered uniformly to
all dealers and will be predicated upon the amount of shares of the Funds sold
by the dealer. Under certain circumstances, reallowances of up to the entire
sales charge may be paid to certain financial institutions, who might then be
deemed to be "underwriters" under the Securities Act of 1933.
Reduced Sales Charge:
Rights of Accumulation
In calculating the sales charge rates applicable to current purchases of Class A
shares, a "single purchaser" is entitled to cumulate current purchases with the
current market value of previously purchased Class A shares of the Funds sold
subject to a comparable sales charge.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Funds for their own account or for trust or
custodial accounts for their minor children, and (iii) a fiduciary purchasing
for any one trust, estate or fiduciary account, including employee benefit plans
created under Sections 401 or 457 of the Internal Revenue Code of 1986, as
amended (the "Code") including related plans of the same employer.
To exercise your right of accumulation based upon shares you already own, you
must ask the Distributor for this reduced sales charge at the time of your
additional purchase and provide the account number(s) of the investor, as
applicable, the investor and spouse, and their minor children. The Funds may
amend or terminate this right of accumulation at any time as to subsequent
purchases.
13
<PAGE> 16
Reduced Sales Charge: Letter of Intent
By submitting a Letter of Intent (the "Letter") to the Distributor, a "single
purchaser" may purchase shares of the Funds during a 13-month period at the
reduced sales charge rates applying to the aggregate amount of the intended
purchases stated in the Letter. The Letter may apply to purchases made up to 90
days before the date of the Letter. To receive credit for such prior purchases
and later purchases benefitting from the Letter, you must notify the Transfer
Agent at the time the Letter is submitted that there are prior purchases that
may apply, and notify the Transfer Agent again at the time of later purchases
that such purchases are applicable under the Letter.
Waiver of Sales Load
No sales charge is imposed on shares of the Funds: (i) issued as dividends and
capital gain distributions; (ii) acquired through the exercise of exchange
privileges described below; (iii) sold to officers, directors, employees, or
retirees of the Corporation, Integra Financial Corporation and its subsidiaries
and affiliates; (iv) sold to certain accounts for which the Adviser or
subsidiaries, affiliates and correspondents of Integra Trust Company, serve in a
fiduciary, agency or custodial capacity; (v) issued in plans of reorganization,
such as mergers, asset acquisitions and exchange offers, to which the
Corporation is a party; (vi) purchased with the proceeds of distributions from
employee benefit plans for which the Adviser or its affiliates act in a
custodial or fiduciary capacity; (vii) purchased within thirty days of a
redemption of Class A shares of such Funds (only up to the amount of such
redemption) or (viii) sold to tax-exempt organizations enumerated in Section
501(c) of the Code, or qualified employee benefit plans created under Sections
401, 403(b)(7) or 457 of the Code (but not IRAs or SEPs). Reduced sales charges
are available on shares of the Funds sold to certain eligible customers. Please
see the Statement of Additional Information for further information on reduced
sales charges. You must notify the Transfer Agent at the time of your purchase
if you are eligible for a waiver of the sales load.
An investor relying upon any of the categories of waivers of the sales charge
must qualify such waiver in advance of the purchase with the Distributor or the
financial institution or intermediary through which shares are purchased by the
investor.
EXCHANGES
You may exchange Class A shares of any Fund for Class A shares of any other Fund
at net asset value, plus any applicable sales charge. Shareholders that meet the
investment criteria established for Class B shares may exchange Class A shares
of any Fund for Class B shares of that Fund once Class B shares are made
available by the Corporation.
Exchanges will be made only after instructions in writing or by telephone (an
"Exchange Request") are received by the Transfer Agent. If an Exchange Request
in good order is received by the Transfer Agent by 4:00 p.m., Eastern Time for
the Pennsylvania Municipal Bond Fund and 2:00 p.m., Eastern Time for the
Pennsylvania Tax-Exempt Money Market Fund, on any Business Day, the exchange
will occur on that day. The exchange privilege may be exercised only in those
states where the class or shares of the "new" fund may legally be sold.
Customers who beneficially own shares held of record by a financial institution
should contact that institution if they wish to exchange shares. The institution
will contact the Transfer Agent and effect the exchange on behalf of the
Customer.
14
<PAGE> 17
The Corporation reserves the right to change the terms or conditions of the
exchange privilege discussed herein upon sixty days' notice.
REDEMPTION OF SHARES
You may redeem your shares without charge on any Business Day. There is,
however, a $10 charge for wiring redemption proceeds to a shareholder's
designated account. Shares may be redeemed by mail, by telephone or through a
systematic withdrawal plan. Investors who own shares held of record by a
financial institution should contact that institution for information on how to
redeem shares.
BY MAIL
A written request for redemption must be received by the Transfer Agent in order
to constitute a valid redemption request.
If the redemption request exceeds $5,000, or if the request directs the proceeds
to be sent or wired to an address different from that of record, DST may require
that the signature on the written redemption request be guaranteed. You should
be able to obtain a signature guarantee from a bank, broker dealer, credit
union, securities exchange or association, clearing agency or savings
association. Notaries public cannot guarantee signatures. The signature
guarantee requirement will be waived if all of the following conditions apply:
(1) the redemption is for not more than $5,000 worth of shares, (2) the
redemption check is payable to the shareholder(s) of record, and (3) the
redemption check is mailed to the shareholder(s) at his or her address of
record.
BY TELEPHONE
You may redeem your shares by telephone if you have elected that option on the
Account Application. Under most circumstances, payments will be transmitted on
the next Business Day following receipt of a valid request for redemption. You
may have the proceeds mailed to your address or wired to a commercial bank
account previously designated on your Account Application. There is no charge
for having redemption proceeds mailed to you, but there is a $10 charge for
wiring redemption proceeds.
You may request a wire redemption by calling the Fund at 1-800-6INVENT
(1-800-646-8368), who will deduct a wire charge of $10 from the amount of the
wire redemption. Shares cannot be redeemed by Federal Reserve wire on Federal
holidays restricting wire transfers.
Neither the Transfer Agent nor the Corporation will be responsible for any loss,
liability, cost or expense for acting upon wire or telephone instructions that
it reasonably believes to be genuine. The Corporation and Transfer Agent will
each employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions. The Corporation or the Transfer Agent may be liable for losses due
to unauthorized or fraudulent instructions if it does not employ these
procedures. Such procedures may include taping of telephone conversations.
ELECTRONIC FUNDS TRANSFER SERVICE
Electronic Funds Transfer Service lets you authorize electronic transfers of
money to buy or sell shares of a Fund or move money between your bank account
and your Fund account with one phone call. Allow two to three business days
after the call for the transfer to take place. For money recently invested,
allow normal check-clearing time (up to seven days) before redemption proceeds
are sent to your bank. If you redeem by telephone and, specifically request this
service, you will not be charged the $10 wire fee applicable to same day wire
redemptions.
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SYSTEMATIC WITHDRAWAL PLAN ("SWP")
The Funds offer a Systematic Withdrawal Plan ("SWP"), which you may use to
receive regular distributions from your account. Upon commencement of the SWP,
your account must have a current value of $1,000 or more. You may elect to
receive automatic payments via check or ACH of $100 or more on a monthly,
quarterly, semi-annual or annual basis. You may obtain an SWP Application Form
by contacting the Fund at 1-800-6INVENT (1-800-646-8368).
To participate in the SWP, you must have your dividends automatically
reinvested. You should realize that if your automatic withdrawals exceed income
dividends, your invested principal in the account will be depleted. Thus,
depending on the frequency and amounts of the withdrawal payments and/or any
fluctuations in the net asset value per share, your original investment could be
exhausted entirely. You may change or cancel the SWP at any time on written
notice to DST.
It is generally not in your best interest to be participating in the SWP at the
same time that you are purchasing additional shares if you have to pay a sales
load in connection with such purchases.
CHECKWRITING SERVICE
You may redeem Shares by writing checks on your Pennsylvania Tax-Exempt Money
Market Fund account for $500 or more per check. Once you have signed and
returned a signature card, you will receive a supply of checks. The check may be
made payable to any person, and your account will continue to earn dividends
until the check clears. Because of the difficulty of determining in advance the
exact value of a Fund account, you may not use a check to close your account.
These checks are free, but your account will be charged a fee of $10 on stopping
payment of a check upon your request or if the check cannot be honored because
of insufficient funds or other valid reasons.
OTHER INFORMATION REGARDING REDEMPTIONS
All redemption orders are effected at the net asset value per share next
determined after receipt of a valid request for redemption. Net asset value per
share is determined as of the close of business of the New York Stock Exchange
(currently 4:00 p.m., Eastern Time) for the Pennsylvania Municipal Bond Fund and
2:00 p.m., Eastern Time for the Pennsylvania Tax-Exempt Money Market Fund, on
any Business Day.
Payment to shareholders for shares redeemed will be made within seven days after
the Transfer Agent receives the valid redemption request. At various times,
however, a Fund may be requested to redeem shares for which it has not yet
received good payment; collection of payment may take ten or more days. In such
circumstances, the redemption request will be rejected by a Fund. Once a Fund
has received good payment for the shares, a shareholder may submit another
request for redemption.
Due to the relatively high costs of handling small investments, each Fund
reserves the right to redeem your shares at net asset value, if, because of
redemptions, your account in any Fund has a value of less than the minimum
initial purchase amount (normally $500; and $100 for directors, officers,
employees, or retirees of the Adviser or its affiliates). Accordingly, if you
purchase shares of any Fund in only the minimum investment amount, you may be
subject to involuntary redemption if you redeem any shares. Before any Fund
exercises its right to redeem such shares, you will be given notice that the
value of the shares in your account is less than the minimum amount and will be
allowed 60 days to make an additional investment in such Fund in an amount which
will increase the value of the account to at least the minimum amount.
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<PAGE> 19
If market conditions are extraordinarily active or other extraordinary
circumstances exist and you experience difficulties placing redemption orders by
telephone, you may consider placing your order by mail or other means.
PERFORMANCE
From time to time, the Pennsylvania Municipal Bond Fund may advertise yield and
total return. The Pennsylvania Tax-Exempt Money Market Fund may advertise its
current yield and effective yield. Both Funds may advertise
a tax-equivalent yield. These figures are
based on historical earnings and are not
intended to indicate future performance. No representation can be made
concerning actual future yields or returns.
The "current yield" of the Pennsylvania Tax-Exempt Money Market Fund refers to
the income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then "annualized."
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The "effective yield" (also called "effective
compound yield") is calculated similarly but, when annualized, the income earned
by an investment in the Fund is assumed to be reinvested. The effective yield
will be slightly higher than the current yield because of the compounding effect
of this assumed reinvestment.
The "yield" of the Pennsylvania Municipal Bond Fund refers to the income
generated by a hypothetical investment, net of any sales charge imposed in the
Fund over a thirty day period. This income is then "annualized," i.e., the
income over thirty days is assumed to be generated over one year and is shown as
a percentage of the investment.
"Tax-equivalent yield" is calculated by determining the rate of return that
would have to be achieved on a fully taxable investment to produce the aftertax
equivalent of a Fund's yield assuming certain tax brackets for the shareholder.
The "total return" of the Pennsylvania Municipal Bond Fund refers to the average
compounded rate of return on a hypothetical investment for designated time
periods, assuming that the entire investment is redeemed at the end of each
period and assuming the reinvestment of all dividend and capital gain
distributions.
For the Funds, the performance on Class B shares will normally be higher than
that on Class A shares because of the sales load (when applicable) and
distribution expenses charged to Class A shares.
Each Fund may periodically compare its performance to the performance of: other
mutual funds tracked by mutual funds rating services (such as Lipper
Analytical); financial and business publications and periodicals; broad groups
of comparable mutual funds; unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs; or other investment alternatives. The Funds may quote
Morningstar, Inc., a service that ranks mutual funds on the basis of risk-
adjusted performance. The Funds may use long-term performance of these capital
market indices to demonstrate general long-term risk versus reward scenarios and
may include the value of a hypothetical investment in any of the capital
markets. The Funds may also quote financial and business publications and
periodicals as they relate to fund management, investment philosophy, and
investment techniques.
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<PAGE> 20
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures of
volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state, or local income tax treatment of the Funds or
their Shareholders. In addition, state and local tax consequences of an
investment in the Fund may differ from the federal income tax consequences
described below. Accordingly, Shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state and local income
taxes. Additional information concerning taxes is set forth in the Statement of
Additional Information.
TAX STATUS OF THE FUNDS
Each Fund is treated as a separate entity for federal income tax purposes and is
not combined with the Corporation's other portfolios. Each Fund intends to
continue to qualify for the special tax treatment afforded regulated investment
companies ("RICs") under Subchapter M of the Internal Revenue Code of 1986, as
amended, so as to be relieved of federal income tax on net investment company
taxable income and net capital gains (the excess of net long-term capital gains
over net short-term capital losses) distributed to Shareholders.
TAX STATUS OF DISTRIBUTIONS
Each Fund will distribute all of its net investment income (including net
short-term capital gain) to its respective Shareholders. If, at the close of
each quarter of its taxable year, at least 50% of the value of a Fund's assets
consist of obligations the interest on which is excludable from gross income,
the Fund may pay "exempt-interest dividends" to its Shareholders. Those
dividends constitute the portion of the aggregate dividends as designated by the
Fund, equal to the excess of the excludable interest over certain amounts
disallowed as deductions. Exempt-interest dividends are excludable from a
Shareholder's gross income for Federal income tax purposes, but may have certain
collateral federal income tax consequences, including alternative minimum tax.
See the Statement of Additional Information.
Dividends from a Fund's net investment company taxable income are taxable to its
Shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Distributions of net
capital gains, if any, are taxable to Shareholders as long-term capital gains,
regardless of how long Shareholders have held their shares and regardless of
whether the distributions are received in cash or in additional shares. Neither
of these distributions qualify for the dividends-received deduction. Each Fund
will provide annual reports to Shareholders of the federal income tax status of
all distributions.
Dividends declared by a Fund in October, November or December of any year and
payable to Shareholders of record on a date in such a month, will be deemed to
have been paid by the Fund and received by the Shareholders on December 31 of
the year declared if paid by the Fund at any time during the following January.
Each Fund intends to make sufficient distributions to avoid liability for the
federal excise tax.
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<PAGE> 21
A sale, exchange or redemption of Fund Shares is generally a taxable transaction
to the Shareholder; however, an exchange of Class A shares for Class B shares in
the same Fund is not a taxable transaction.
ADDITIONAL CONSIDERATIONS
The Funds may not be appropriate investments for persons (including corporations
and other business entities) who are "substantial users" (or persons related to
"substantial users") of facilities financed by industrial development private
activity bonds. Such persons should consult their tax advisers before purchasing
shares. A "substantial user" is defined generally to include "certain persons"
who regularly use in their trade or business a part of a facility financed from
the proceeds of such bonds.
Shares of the Funds are not taxable for purposes of the Philadelphia School
District Investment Net Income Tax (Philadelphia School District Tax) or the
personal property tax imposed by Pennsylvania Counties, the City of Pittsburgh
and the Pittsburgh School District to the extent that the Funds' investments
consist of obligations which are themselves exempt from taxation in
Pennsylvania. See the Statement of Additional Information.
While the Funds intend to invest primarily in obligations which produce interest
exempt from Federal and Pennsylvania taxes, if a Fund invests in obligations
that are not exempt for Federal and/or Pennsylvania purposes, a portion of the
Fund's distributions will be subject to Pennsylvania personal income tax.
GENERAL INFORMATION
THE CORPORATION
The Corporation was organized as a Maryland corporation under Articles of
Incorporation dated April 22, 1994. The Articles of Incorporation permit the
Corporation to offer separate portfolios of shares and different classes of each
portfolio. In addition to the Funds, the Corporation consists of the following
portfolios: Prime Obligations Money Market Fund, Treasury Securities Money
Market Fund, Intermediate Government Securities Fund, GNMA Securities Fund, and
Equity Growth Fund. All consideration received by the Corporation for shares of
any Fund and all assets of such Fund belong to that Fund and would be subject to
the liabilities related thereto.
The Corporation pays its expenses, including fees of its service
providers, audit and legal expenses, expenses of preparing prospectuses, proxy
solicitation materials and reports to Shareholders, costs of custodial
services and registering the shares under federal and state securities laws,
pricing, insurance expenses, litigation and other extraordinary expenses,
brokerage costs, interest charges, taxes and organization expenses.
DIRECTORS OF THE CORPORATION
The management and affairs of the Corporation are supervised by the Directors
under the laws of Maryland. The Directors have approved contracts under which,
as described above, certain companies provide essential management services to
the Corporation.
VOTING RIGHTS
Each share held entitles the Shareholder of record to one vote. The Shareholders
of each Fund will vote separately on matters pertaining solely to that Fund. The
Shareholders of each class of each Fund will vote separately on matters
pertaining to its distribution plan. As a Maryland corporation, the Corporation
is not required to hold annual meetings of Shareholders but approval will be
sought for certain changes in the operation of the Corporation and for the
election of Directors under certain circumstances.
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<PAGE> 22
In addition, a Director may be removed by the remaining Directors or by
Shareholders at a special meeting called upon written request of Shareholders
owning at least 10% of the outstanding shares of the Corporation. In the event
that such a meeting is requested the Corporation will provide appropriate
assistance and information to the Shareholders requesting the meeting.
REPORTING
The Corporation issues unaudited financial information semi-annually and audited
financial statements annually. The Corporation furnishes proxy statements and
other reports to Shareholders of record.
SHAREHOLDER INQUIRIES
Shareholders should direct inquiries to the Inventor Funds, Inc., P.O. Box
419320, Kansas City, Missouri 64141-6320, or by calling 1-800-6INVENT
(1-800-646-8368).
DIVIDENDS
Substantially all of the net investment income (exclusive of capital gains) is
declared daily and paid monthly for each Fund. Shareholders of record on the
last Business Day of each month will be entitled to receive the monthly dividend
distribution, which is generally paid on the first Business Day of the following
month. If any net capital gains are realized, they will be distributed by each
Fund at least annually.
Shareholders automatically receive all income dividends and capital gains
distributions in additional shares at the net asset value next determined on the
payable date, unless the Shareholder has elected to take such payment in cash.
Shareholders may change their election by providing written notice to the
Administrator at least 15 days prior to the change.
Dividends and distributions of a Fund are paid on a per-share basis. The value
of each share will be reduced by the amount of any such payment. If shares are
purchased shortly before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the shares and receive
some portion of the price back as a taxable dividend or distribution.
The dividends on Class A shares of the Fund will normally be lower than those on
Class B shares because of the distribution expenses charged to Class A shares.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Morgan, Lewis & Bockius serves as counsel to the Corporation. Coopers & Lybrand
L.L.P. serves as the independent accountants of the Corporation.
CUSTODIAN
Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263 (the
"Custodian"), acts as custodian of the Corporation's assets. The Custodian holds
cash, securities and other assets of the Corporation as required by the 1940
Act.
DESCRIPTION OF PERMITTED INVEST-
MENTS AND RISK FACTORS
The following is a description of the permitted investments for the Funds and
the various risks associated therewith:
BANKERS' ACCEPTANCES--bills of exchange or time drafts drawn on and accepted by
a commercial bank. Bankers' acceptances are used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
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CERTIFICATES OF DEPOSIT--negotiable interest bearing instruments with a specific
maturity. Certificates of deposit are issued by banks and savings and loan
institutions in exchange for the deposit of funds and normally can be traded in
the secondary market prior to maturity. Certificates of deposit have penalties
for early withdrawal.
COMMERCIAL PAPER--unsecured short-term promissory notes issued by
municipalities, corporations and other entities. Maturities on these issues
vary, generally from a few days to nine months.
DEMAND FEATURES--The Funds may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
FIXED INCOME SECURITIES--The market value of fixed income investments will
change in response to interest rate changes and other factors. During periods of
falling interest rates, the values of outstanding fixed income securities
generally rise. Conversely, during periods of rising interest rates, the values
of such securities generally decline. Moreover, while securities with longer
maturities tend to produce higher yields, the prices of longer maturity
securities are also subject to greater market fluctuations as a result of
changes in interest rates. Changes by recognized agencies in the rating of any
fixed income security and in the ability of an issuer to make payments of
interest and principal will also affect the value of these investments. Changes
in the value of portfolio securities will not affect cash income derived from
these securities but will affect a Fund's net asset value.
MUNICIPAL LEASES--Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate in any of the above.
Municipal lease obligations typically are not backed by the municipality's
credit, and their interest may become taxable if the lease is assigned. If funds
are not appropriated for the following year's lease payments, a lease may
terminate, with a possibility of default on the lease obligation and significant
loss to the Fund. Under guidelines established by the Board of Directors, the
credit quality of municipal leases will be determined on an ongoing basis,
including an assessment of the likelihood that a lease will be canceled.
MUNICIPAL SECURITIES--Municipal Securities are generally issued to finance
public works, such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
Municipal Securities include industrial development bonds issued by or on behalf
of public
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<PAGE> 24
authorities to provide financing aid to acquire sites or construct and equip
facilities for privately or publicly owned corporations. The availability of
this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
PARTICIPATION INTERESTS--Participation interests are interests in Municipal
Securities from financial institutions such as commercial and investment banks,
savings and loan associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust, partnership
interests or any other form of indirect ownership that allows the Fund to treat
the income from the investment as exempt from federal income tax. The Fund
invests in these participation interests in order to obtain credit enhancement
or demand features that would not be available through direct ownership of the
underlying Municipal Securities.
REPURCHASE AGREEMENTS--agreements by which a financial institution agrees to
sell a security to a Fund and commits to repurchase the security at an agreed
upon price (including principal and interest) on an agreed upon date within a
number of days from the date of purchase. The securities purchased by a Fund
will be held as collateral by the Custodian and will be equal to at least 102%
of the repurchase price. Repurchase agreements are considered to be loans by a
Fund. The Corporation bears a risk of loss in the event the other party defaults
on its obligations and the Corporation is delayed or prevented from its right to
dispose of the collateral securities or if the Corporation realizes a loss on
the sale of the collateral securities. The Adviser will enter into repurchase
agreements on behalf of the Corporation only with financial institutions deemed
to present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Directors or dealers
recognized by the Federal Reserve. Repurchase agreements are considered loans
under the Investment Company Act of 1940, as amended.
RESTRICTED AND ILLIQUID SECURITIES--Restricted securities are securities that
may not be sold freely to the public absent registration under the Securities
Act of 1933, as amended (the "Act"), or an exemption from registration. Illiquid
securities are securities that may not be sold within 7 days or less for
approximately their carrying value. The Pennsylvania Municipal Bond Fund and the
Pennsylvania Tax-Exempt Money Market Fund may invest up to 15% and 10% of their
net assets in illiquid securities, respectively. Restricted securities eligible
for resale pursuant to Rule 144A under the Act and privately placed commercial
paper that have a readily available market are not considered illiquid for the
purposes of this limitation. The Sub-Adviser will monitor the liquidity of such
restricted securities under the supervision of the Board of Directors of the
Corporation.
Rule 144A Securities are restricted securities that have not been registered
under the Securities Act of 1933 but which may be traded between certain
qualified institutional investors, including investment companies. The ab-
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<PAGE> 25
sence of a secondary market may affect the value of Rule 144A Securities.
Section 4(2) commercial paper is issued in reliance on an exemption from
registration under Section 4(2) of the Act and is generally sold to
institutional investors who purchase for investment. Any resale of such
commercial paper must be in an exempt transaction, usually to an institutional
investor through the issuer or investment dealers who make a market on such
commercial paper.
STANDBY COMMITMENTS--Some securities dealers are willing to sell Municipal
Securities to the Fund accompanied by their commitments to repurchase the
Municipal Securities prior to maturity, at the Fund's option, for the amortized
cost of the Municipal Securities at the time of repurchase. These arrangements
are not used to protect against changes in the market value of Municipal
Securities. They permit the Fund, however, to remain fully invested and still
provide liquidity to satisfy redemptions. The cost of Pennsylvania Municipal
Securities accompanied by these "standby" commitments could be greater than the
cost of Municipal Securities without such commitments. Standby commitments are
not marketable or otherwise assignable and have value only to the Fund. The
default or bankruptcy of a securities dealer giving such a commitment would not
affect the quality of the Pennsylvania Municipal Securities purchased. However,
without a standby commitment, these securities could be more difficult to sell.
The Fund enters into standby commitments only with those dealers whose credit
the investment adviser believes to be of high quality.
VARIABLE AND FLOATING RATE SECURITIES--Certain of the obligations purchased by a
Fund may carry variable or floating rates of interest, may involve a conditional
or unconditional demand feature and may include variable amount master demand
notes. The interest rates on these securities may be reset daily, weekly,
quarterly or some other reset period, and may have a floor or ceiling on
interest rate charges. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. A demand
instrument with a demand notice period exceeding seven days may be considered
illiquid if there is no secondary market for such securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES--When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Funds will maintain with the custodian a separate account with liquid high
grade debt securities or cash in an amount at least equal to these commitments.
The interest rate realized on these securities is fixed as of the purchase date
and no interest accrues to the Fund before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. Although a Fund generally purchases securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities for
its portfolio, a Fund may dispose of a when-issued security or forward
commitment prior to settlement if it deems appropriate.
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS--Investments money market funds
are subject to limitations imposed under regulations adopted by the SEC. These
regulations generally require money market funds to acquire only U.S. dollar
obligations maturing in 397 days or less and to maintain a dollarweighted
average portfolio maturity of 90 days or less. In addition, the funds may
acquire only obligations that present minimal
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<PAGE> 26
credit risks and that are "eligible securities" which means they are (i) rated,
at the time of investment, by at least two nationally recognized security rating
organizations (one if it is the only organization rating such obligation) in the
highest short-term rating category or, if unrated, determined to be of
comparable quality (a "first tier security"), or (ii) rated according to the
foregoing criteria in the second highest short-term rating category or, if
unrated, determined to be of comparable quality ("second tier security"). A
security is not considered to be unrated if its issuer has outstanding
obligations of comparable priority and security that have a short-term-rating.
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<PAGE> 27
INVENTOR FUNDS, INC.
PRIME OBLIGATIONS MONEY MARKET FUND
TREASURY SECURITIES MONEY MARKET FUND
INTERMEDIATE GOVERNMENT SECURITIES FUND
GNMA SECURITIES FUND
EQUITY GROWTH FUND
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
PENNSYLVANIA MUNICIPAL BOND FUND
SUPPLEMENT DATED MAY 2, 1996 TO THE PROSPECTUSES DATED AUGUST 28, 1995.
This Supplement to the Prospectuses provides new and additional
information beyond that contained in the Prospectuses and should be read in
conjunction with the Prospectuses. This Supplement supersedes and replaces any
existing supplements to the Prospectuses.
On May 2, 1996, Integra Financial Corporation, the parent corporation
of Integra Trust Company ("Integra"), the investment adviser to Inventor Funds,
Inc. (the "Corporation"), merged (the "Merger") with National City Corporation
("NCC"). Consummation of the Merger resulted in the automatic termination of
(1) the investment advisory agreement under which Integra provides investment
advisory services to the Corporation, and (2) the investment sub-advisory
agreements under which Wellington Management Company, STI Capital Management,
N.A. and Weiss, Peck & Greer, L.L.C. provide investment sub-advisory services
to the portfolios of the Corporation.
In anticipation of the Merger and to provide continuity in investment
advisory services to the Corporation, the Board of Directors of the Corporation
approved, and voted on February 12, 1996 to recommend that the shareholders of
the Corporation approve, new Investment Advisory and Sub-Advisory Agreements.
At a Special Meeting of Shareholders of the Corporation held on May 2, 1996,
shareholders of the Corporation approved a new investment advisory agreement
between the Corporation and National City Bank, a wholly-owned subsidiary of
NCC. In addition, shareholders of the Prime Obligations Money Market Fund,
Treasury Securities Money Market Fund, GNMA Securities Fund, and Intermediate
Government Securities Fund approved a new investment sub-advisory agreement
between Integra and Wellington Management Company; shareholders of the Equity
Growth Fund approved a new investment sub-advisory agreement between Integra
and STI Capital Management, N.A.; and shareholders of the Pennsylvania
Tax-Exempt Money Market Fund and Pennsylvania Municipal Bond Fund approved a
new investment sub-advisory agreement between Integra and Weiss, Peck & Greer,
L.L.C.
In addition, at a meeting held on March 18, 1996, the Board of
Directors of the Corporation considered the merger of certain portfolios of the
Corporation with certain portfolios of the Armada Funds. The Armada Funds are
advised by affiliates of NCC. The Directors voted to approve an Agreement and
Plan of Reorganization (the "Reorganization Agreement") pursuant to which the
Inventor Equity Growth Fund would be reorganized into the Armada Equity Fund,
the Inventor GNMA Securities Fund would be reorganized into the Armada GNMA
Fund, the Inventor Intermediate Government Securities Fund would be reorganized
into the Armada Intermediate Government Fund, the Inventor Pennsylvania
Municipal Bond Fund would be reorganized into the Armada Pennsylvania Municipal
Fund, and the Inventor Pennsylvania Tax-Exempt Money Market Fund would be
reorganized into the Armada Pennsylvania Tax Exempt Fund. The reorganization
of each portfolio would be accomplished by transferring the portfolio's assets
and liabilities to its corresponding Armada portfolio in exchange for
Institutional class shares of the Armada portfolio. These Armada shares would
then be distributed to the shareholders of each portfolio of the Corporation in
liquidation of the Corporation's portfolios. The Prime Obligations Money
Market Fund and Treasury Securities Money Market Fund will be liquidated prior
to these reorganizations. Shareholders of the Corporation's Intermediate
Government Securities Fund, GNMA Securities Fund, Equity Growth Fund,
Pennsylvania Tax-Exempt Money Market Fund, and Pennsylvania Municipal Bond Fund
will be asked to approve the Reorganization Agreement at a Special Meeting of
Shareholders scheduled for August 1, 1996.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
INT-A-251-02
INT-A-252-03
<PAGE> 1
Exhibit 17(g)
INVENTOR FUNDS, INC.
A FAMILY OF MUTUAL FUNDS
INVESTMENT ADVISER:
INTEGRA TRUST COMPANY, NATIONAL ASSOCIATION
This Statement of Additional Information is not a prospectus. It is intended
to provide additional information regarding the activities and operations of
the Corporation and should be read in conjunction with the Corporation's
prospectuses dated August 28, 1995. Prospectuses may be obtained through the
Distributor, SEI Financial Services Company, 680 E. Swedesford Road, Wayne, PA
19087-1658.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
DESCRIPTION OF PERMITTED INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-28
THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-30
THE SUB-ADVISERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-31
THE ADMINISTRATOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-31
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-32
DIRECTORS AND OFFICERS OF THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
PURCHASE AND REDEMPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-41
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
FUND TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-48
DESCRIPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-50
SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-50
5% SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-50
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-52
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-53
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-102
</TABLE>
<PAGE> 2
THE CORPORATION
Inventor Funds, Inc. (the "Corporation") is an open-end management
investment company organized under Maryland law as a Maryland Corporation under
Articles of Incorporation dated April 22, 1994. The Articles of Incorporation
permit the Corporation to offer separate series of shares of beneficial
interest ("shares") and different classes of shares of each Fund. Shareholders
may purchase shares through two separate classes (Class A and Class B) which
provide for variations in distribution costs, voting rights and dividends.
Except for these differences between Class A and Class B shares, each share of
each Fund represents an equal proportionate interest in that Fund. See
"Description of Shares." This Statement of Additional Information relates to
the Class A and Class B shares of the Corporation's Prime Obligations Money
Market Fund, Treasury Securities Money Market Fund, Pennsylvania Tax-Exempt
Money Market Fund (collectively the "Money Market Funds"), Intermediate
Government Securities Fund, GNMA Securities Fund, Equity Growth Fund, and
Pennsylvania Municipal Bond Fund (collectively the "Non-Money Market Funds"),
and together with the Money Market Funds (the "Funds").
DESCRIPTION OF PERMITTED INVESTMENTS
The following information supplements the information about permitted
investments set forth in the Prospectus for the relevant Fund.
Variable amount master demand notes. Certain of the Funds may purchase
VARIABLE AMOUNT MASTER DEMAND NOTES which may or may not be backed by bank
letters of credit. These notes permit the investment of fluctuating amounts at
varying market rates of interest pursuant to direct arrangements between the
Corporation, as lender, and the borrower. Such notes provide that the interest
rate on the amount outstanding varies on a daily, weekly or monthly basis
depending upon a stated short-term interest rate index. Both the lender and
the borrower have the right to reduce the amount of outstanding indebtedness at
any time. There is no secondary market for the notes. It is not generally
contemplated that such instruments will be traded.
GNMA securities. The GNMA Securities and Intermediate Government Securities
Funds may invest in SECURITIES THE TIMELY PAYMENT OF PRINCIPAL AND INTEREST ON
WHICH ARE GUARANTEED BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") a
wholly-owned U.S. Government corporation. The market value and interest yield
of these instruments can vary due to market interest rate fluctuations and
early prepayments of underlying mortgages. These securities represent
ownership in a pool of federally insured mortgage loans. GNMA certificates
consist of underlying mortgages with a maximum maturity of 30 years. However,
due to
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scheduled and unscheduled principal payments, GNMA certificates have a shorter
average maturity and, therefore, less principal volatility than a comparable
30-year bond. Since prepayment rates vary widely, it is not possible to
predict accurately the average maturity of a particular GNMA pool. GNMA
securities differ from conventional bonds in that principal is paid back to the
certificate holders over the life of the loan rather than at maturity. The
scheduled monthly interest and principal payments relating to mortgages in the
pool are "passed through" to investors. In addition, there may be unscheduled
principal payments representing prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available from
other types of U.S. Government securities, GNMA certificates may be less
effective than other types of securities as a means of "locking in" attractive
long-term rates because of the prepayment feature. For instance, when interest
rates decline, the value of a GNMA certificate likely will not rise as much as
comparable debt securities due to the prepayment feature. In addition, these
prepayments can cause the price of a GNMA certificate originally purchased at a
premium to decline in price to its par value, which may result in a loss.
Mortgage-backed securities. The GNMA Securities and Intermediate Government
Securities Funds may invest in MORTGAGE-BACKED SECURITIES. Two principal types
of mortgage-backed securities are collateralized mortgage obligations ("CMOs")
and real estate mortgage investment conduits ("REMICS"). CMOs are securities
collateralized by mortgages, mortgage pass-through certificates, mortgage
pay-through bonds (bonds representing an interest in a pool of mortgages where
the cash flow generated from the mortgage collateral pool is dedicated to bond
repayment), and mortgagebacked bonds (general obligations of issuers payable
out of the issuers' general funds and additionally secured by a first lien on a
pool of single family properties).
Many CMOs are issued with a number of classes or series which have different
maturities and are retired in sequence. Investors purchasing CMOs in the
shortest maturities receive or are credited with their pro rata portion of the
scheduled payments of interest and principal on the underlying mortgages plus
all unscheduled prepayments of principal up to a predetermined portion of the
total CMO obligation. Until that portion of such CMO obligation is repaid,
investors in the longer maturities receive interest only. Accordingly, CMOs in
longer maturity series are less likely than other mortgage pass-throughs to be
prepaid prior to their stated maturity. Although some of the mortgages
underlying CMOs may be supported by various types of insurance, and while some
CMOs may be backed by GNMA certificates or other mortgage pass- throughs issued
or guaranteed by U.S. Government agencies or instrumentalities, CMOs themselves
are not generally guaranteed by the U.S. Government or any other entity.
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REMICS, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
Repurchase Agreements. REPURCHASE AGREEMENTS are agreements by which a person
(e.g., a Fund) obtains a security and simultaneously commits to return the
security to the seller (a member bank of the Federal Reserve System or
recognized securities dealer) at an agreed upon price (including principal and
interest) on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity date of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
Repurchase agreements are considered to be loans by the participating Fund for
purposes of its investment limitations. Repurchase agreements entered into by
the Funds will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement (the
Sub-Adviser monitors compliance with this requirement). Under all repurchase
agreements entered into by the Funds, the Custodian or its agent must take
possession of the underlying collateral. However, if the seller defaults, the
Funds could realize a loss on the sale of the underlying security to the extent
that the proceeds of sale including accrued interest are less than the resale
price provided in the agreement including interest. In addition, even though
the Bankruptcy Code provides protection for most repurchase agreements, if the
seller should be involved in bankruptcy or insolvency proceedings, the Funds
may incur delay and costs in selling the underlying security or may suffer a
loss of principal and interest if the Funds are treated as an unsecured
creditor and required to return the underlying security to the seller's estate.
Municipal Securities. MUNICIPAL NOTES in which the Pennsylvania Tax-Exempt
Money Market and Pennsylvania Municipal Bond Funds may invest include, but are
not limited to, general obligation notes, tax anticipation notes (notes sold to
finance working capital needs of the issuer in anticipation of receiving taxes
on a future date), revenue anticipation notes (notes sold to provide needed
cash prior to receipt of expected non-tax revenues from a specific source),
bond anticipation notes, certificates of indebtedness, demand notes and
construction loan notes. Pennsylvania Tax-Exempt Money Market Fund's
investments in any of the notes described above will be limited to those
obligations (i) where both principal and interest are backed by the full
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faith and credit of the United States, (ii) which are rated MIG-2 or V-MIG-2 or
better at the time of investment by Moody's Investors Service ("Moody's"),
(iii) which are rated SP-2 or better at the time of investment by Standard and
Poor's Corporation ("S&P"), (iv) which are rated F-1 at the time of investment
by Fitch Investors Service, Inc. ("Fitch") or (v) which, if not rated, are of
equivalent quality in the Adviser's or Sub-Adviser's judgment.
MUNICIPAL BONDS in which the Pennsylvania Tax-Exempt Money Market and
Pennsylvania Municipal Bond Funds may invest, must be rated AA or better by S&P
or Fitch or Aa or better by Moody's at the time of investment for the
Pennsylvania Tax-Exempt Money Market Fund or, if purchased for the Pennsylvania
Municipal Bond Fund, rated BBB or better by S&P or Fitch or Baa or better by
Moody's, or, if unrated must be deemed by the Adviser to have essentially the
same characteristics and quality as bonds having the above ratings. The
Sub-Adviser may purchase private activity bonds if the interest paid is
excludable from Federal income tax. Private activity bonds are issued by or on
behalf of States or political subdivisions thereof to finance privately owned
or operated facilities for business and manufacturing, housing, sports, and
pollution control and to finance activities of and facilities for charitable
institutions. Private activity bonds are also used to finance public
facilities such as airports, mass transit systems, ports, parking and low
income housing. The payment of the principal and interest on private activity
bonds is dependent solely on the ability of the facility's user to meet its
financial obligations and may be secured by a pledge of real and personal
property so financed.
Pennsylvania Municipal Securities which are payable only from the revenues
derived from a particular facility may be adversely affected by Pennsylvania
laws or regulations which make it more difficult for the particular facility to
generate revenues sufficient to pay such interest and principal, including,
among others, laws and regulations which limit the amount of fees, rates or
other charges which may be imposed for use of the facility or which increase
competition among facilities of that type or which limit or otherwise have the
effect of reducing the use of such facilities generally, thereby reducing the
revenues generated by the particular facility. Pennsylvania Municipal
Securities, the payment of interest and principal on which is insured in whole
or in part by a Pennsylvania governmentally created fund, may be adversely
affected by Pennsylvania laws or regulations which restrict the aggregate
proceeds available for payment of principal and interest in the event of a
default on such municipal securities. Similarly, Pennsylvania Municipal
Securities, the payment of interest and principal on which is secured, in whole
or in part, by an interest in real property may be adversely affected by
Pennsylvania laws which limit the availability of remedies or the scope of
remedies available in
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the event of a default on such municipal securities. Because of the diverse
nature of such laws and regulations and the impossibility of either predicting
in which specific Pennsylvania Municipal Securities the Funds will invest from
time to time or predicting the nature or extent of future changes in existing
laws or regulations or the future enactment or adoption of additional laws or
regulations, it is not presently possible to determine the impact of such laws
and regulations on the securities in which the Funds may invest and, therefore,
on the shares of the Funds.
TAX-EXEMPT COMMERCIAL PAPER will be limited to investments in obligations which
are rated at least A-2 by S&P, F-2 by Fitch or Prime-2 by Moody's at the time
of investment or which are of equivalent quality as determined by the
Sub-Adviser.
Other types of TAX-EXEMPT INSTRUMENTS which are permissible investments for the
Pennsylvania Tax-Exempt Money Market and Pennsylvania Municipal Bond Funds
include floating rate notes. Investments in such floating rate instruments
will normally involve industrial development or revenue bonds which provide
that the rate of interest is set as a specific percentage of a designated base
rate (such as the prime rate) at a major commercial bank, and that a Fund can
demand payment of the obligation at all times or at stipulated dates on short
notice (not to exceed 30 days) at par plus accrued interest. The Funds must
use the shorter of the period required before a Fund is entitled to prepayment
under such obligations or the period remaining until the next interest rate
adjustment date for purposes of determining the maturity. Such obligations are
frequently secured by letters of credit or other credit support arrangements
provided by banks. The quality of the underlying credit or of the bank, as the
case may be, must, in the Sub-Adviser's opinion be equivalent to the long-term
bond or commercial paper ratings stated above. The Adviser will monitor the
earning power, cash flow and liquidity ratios of the issuers of such
instruments and the ability of an issuer of a demand instrument to pay
principal and interest on demand. The Sub-Adviser may purchase other types of
tax-exempt instruments as long as they are of a quality equivalent to the bond
or commercial paper ratings stated above.
The Sub-Adviser has the authority to purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller
at the time of purchase when they can simultaneously acquire the right to sell
the securities back to the seller, the issuer, or a third party (the "writer")
at an agreed-upon price at any time during a stated period or on a certain
date. Such a right is generally denoted as a "standby commitment" or a "put."
The purpose of engaging in transactions involving puts is to maintain
flexibility and liquidity to permit the Pennsylvania Tax-Exempt Money Market
and Pennsylvania
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Municipal Bond Funds to meet redemptions and remain as fully invested as
possible in municipal securities. The Funds reserve the right to engage in put
transactions. The right to put the securities depends on the writer's ability
to pay for the securities at the time the put is exercised. The Funds limit
their put transactions to those with institutions which the Sub-Adviser
believes present credit risks, and the Sub-Adviser uses its best efforts to
initially determine and continue to monitor the financial strength of the
sellers of the options by evaluating their financial statements and such other
information as is available in the marketplace. It may, however, be difficult
to monitor the financial strength of the writers where adequate current
financial information is not available. In the event that any writer is unable
to honor a put for financial reasons, the affected Fund would be a general
creditor (i.e., on a parity with all other unsecured creditors) of the writer.
Furthermore, particular provisions of the contract between a Fund and the
writer may excuse the writer from repurchasing the securities; for example, a
change in the published rating of the underlying municipal securities or any
similar event that has an adverse effect on the issuer's credit or a provision
in the contract that the put will not be exercised except in certain special
cases, for example, to maintain portfolio liquidity. A Fund could, however, at
any time sell the underlying portfolio security in the open market or wait
until the portfolio security matures, at which time it should realize the full
par value of the security.
Municipal Securities purchased subject to a put may be sold to third persons at
any time, even though the put is outstanding, but the put itself, unless it is
an integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to a Fund.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, a Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to a Fund, such Fund could, of course, sell the portfolio
security. The maturity of the underlying security will generally be different
from that of the put. There will be no limit to the percentage of portfolio
securities that the Funds may purchase subject to a put. For the purpose of
determining the "maturity" of securities purchased subject to an option to put,
and for the purpose of determining the dollar-weighted average maturity of the
Funds including such securities, the Corporation will consider "maturity" to be
the first date on which it has the right to demand payment from the writer of
the put although the final maturity of the security is later than such date.
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SPECIAL CONSIDERATIONS RELATING TO PENNSYLVANIA MUNICIPAL SECURITIES
The concentration of investments in Pennsylvania Municipal Securities
by the Pennsylvania Money Market Fund and the Pennsylvania Tax-Exempt Bond
Fund raises special investment considerations. In particular, changes in the
economic condition and governmental policies of the Commonwealth of
Pennsylvania and its municipalities could adversely affect the value of the
Funds and the portfolio securities held by them. This section briefly
describes current economic trends in Pennsylvania.
General. Pennsylvania has historically been dependent on heavy industry
although recent declines in the coal, steel and railroad industries have led to
diversification of the Commonwealth's economy. Recent sources of economic
growth in Pennsylvania are in the service sector, including trade, medical and
health services, education and financial institutions. Agriculture continues
to be an important component of the Commonwealth's economic structure, with
nearly one-fourth of the Commonwealth's total land area devoted to cropland,
pasture and farm woodlands.
In 1994, the population of Pennsylvania was 12.1 million people.
According to the U.S. Bureau of the Census, Pennsylvania experienced a slight
increase from the 1984 estimate of 11.8 million. Pennsylvania has a high
proportion of persons 65 or older. The Commonwealth is highly urbanized, with
almost 85% of the 1990 census population residing in metropolitan statistical
areas. The cities of Philadelphia and Pittsburgh, the Commonwealth's largest
metropolitan statistical areas, together comprise approximately 50% of the
Commonwealth's total population.
Pennsylvania's average annual unemployment rate remained below the
national average between 1986 and 1990. Slower economic growth caused the rate
to rise to 6.9% in 1991 and 7.5% in 1992. The resumption of faster economic
growth resulted in a decrease in the Commonwealth's unemployment rate to 7.1
percent in 1993. Seasonally adjusted data for March 1995 shows an unemployment
rate of 6.0% compared to an unemployment rate of 5.5% for the United States as
a whole.
Financial Accounting. Pennsylvania utilizes the fund method of accounting and
over 150 funds have been established for the purpose of recording receipts and
disbursements, of which the General Fund is the largest. Most of the operating
and administrative expenses are payable from the General Fund. The Motor
License Fund is a special revenue fund that receives tax and fee revenues
relating to motor fuels and vehicles (except one-half cent per gallon of the
liquid fuels tax which is deposited in the Liquid Fuels Tax Fund for
distribution to local municipalities) and all such revenues are required to be
used for
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highway purposes. Other special revenue funds have been established to receive
specified revenues appropriated to specific departments, boards and/or
commissions. Such funds include the Game, Fish, Boat, Banking Department, Milk
Marketing, State Farm Products Show, State Racing and State Lottery Funds. The
General Fund, all special revenue funds, the Debt Service Funds and the Capital
Project Funds combine to form the Governmental Fund Types.
Enterprise funds are maintained for departments or programs operated
like private enterprises. The largest of the Enterprise funds is the State
Stores Fund, which is used for the receipts and disbursements of the
Commonwealth's liquor store system. Sale and distribution of all liquor within
Pennsylvania is a government enterprise.
Financial information for the funds is maintained on a budgetary basis
of accounting ("Budgetary"). Since 1984, the Commonwealth has also prepared
financial statements in accordance with generally accepted accounting
principles ("GAAP"). The GAAP statements have been audited jointly by the
Auditor General of the Commonwealth and an independent public accounting firm.
The Budgetary information is adjusted at fiscal year end to reflect appropriate
accruals for financial reporting in conformity with GAAP. The Commonwealth
maintains a June 30th fiscal year end.
The Constitution of Pennsylvania provides that operating budget
appropriations may not exceed the actual and estimated revenues and available
surplus in the fiscal year for which funds are appropriated. Annual budgets
are enacted for the General Fund and for certain special revenue funds which
represent the majority of expenditures of the Commonwealth.
Revenues and Expenditures. Pennsylvania's Governmental Fund Types receive over
57% of their revenues from taxes levied by the Commonwealth. Interest
earnings, licenses and fees, lottery ticket sales, liquor store profits,
miscellaneous revenues, augmentations and federal government grants supply the
balance of the receipts to these funds. Revenues not required to be deposited
in another fund are deposited in the General Fund. The major tax sources for
the General Fund are the 6% sales and use tax (33.7% of General Fund revenues
in fiscal 1994), the 2.8% personal income tax (32.0% of General Fund revenues
in fiscal 1994) and the 10.99% corporate net income tax (10.2% of General Fund
revenues in fiscal 1994). Tax and fee proceeds relating to motor fuels and
vehicles are constitutionally dedicated to highway purposes and are deposited
into the Motor License Fund. The major sources of revenues for the Motor
License Fund include the liquid fuels tax, the oil company franchise tax,
aviation taxes and revenues from fees levied on heavy trucks. These revenues
are restricted to the repair and construction of highway bridges and aviation
programs. Revenues from lottery ticket
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sales are deposited in the State Lottery Fund and are reserved by statute for
programs to benefit senior citizens.
Pennsylvania's major expenditures include funding for education ($6.4
billion of the fiscal 1994 expenditures and $6.9 billion of the fiscal 1995
budget) and public health and human services ($11.7 billion of the fiscal 1994
expenditures and $12.8 billion of the fiscal 1995 budget).
Governmental Fund Types: Financial Condition/Results of Operations (GAAP
Basis). Reduced revenue growth and increased expenses contributed to negative
unreserved-undesignated fund balances of the Governmental Fund Types at the end
of the 1990 and 1991 fiscal years, largely due to operating deficits in the
General Fund and State Lottery Fund during those years. Actions taken during
fiscal 1992 to bring the General Fund back into balance, including tax
increases and expenditure restraints, resulted in a $ 1.1 billion reduction to
the unreserved-undesignated fund deficit for combined Governmental Fund Types
and a return to a positive fund balance. Financial performance continued to
improve during the 1993 and 1994 fiscal years resulting in a positive
unreserved-undesignated balance for combined Governmental Fund Types at June
30, 1993 and June 30, 1994. These gains were produced by continued efforts to
control expenditure growth. At the end of fiscal 1993, the total (restated)
fund balance and other credits for all the Governmental Fund Types was $1,692.8
million.
GENERAL FUND: FINANCIAL CONDITION/RESULTS OF OPERATIONS.
Five Year Overview (GAAP Basis). The five year period from fiscal 1990 through
fiscal 1994 was marked by public health and welfare costs growing at a rate
double the growth rate for all the state expenditures. Rising caseloads,
increased utilization of services and rising prices joined to produce the rapid
rise of public health and welfare costs at a time when a national recession
caused tax revenues to stagnate and even decline. During the period from
fiscal 1990 through fiscal 1994, public health and welfare costs rose by an
average annual rate of 9.4% while tax revenues were growing at an average
annual rate of 5.8%. Consequently, spending on other budget programs was
restrained to a growth rate below 4.7% and sources of revenues other than taxes
became larger components of fund revenues. Among those sources are transfers
from other funds and hospital and nursing home pooling of contributions to use
as federal matching funds.
Tax revenues declined in fiscal 1991 as a result of the recession in
the economy. A $2.7 billion tax increase enacted for fiscal 1992 brought
financial stability to the General Fund. That tax increase included several
taxes with retroactive effective dates which generated some one-time revenues
during
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fiscal 1992. The absence of those revenues in fiscal 1993 contributed to the
decline in tax revenues for fiscal 1993.
During fiscal 1992 enactment of over $2.7 billion in General Fund tax
increases and implementation of expenditure control initiatives helped the
General Fund balance return to a surplus at June 30, 1992, of $87.5 million.
The actions taken to increase revenues and restrain expenditure growth were
necessary to offset the effects on General Fund finances of a period of slow
economic growth including a national economic recession. The recession caused
tax revenues during fiscal 1991 to be below the amount received during fiscal
1990 while spending, particularly for public health and welfare programs to
support needy individuals, increased.
Fiscal 1993 Financial Results (GAAP Basis). The fund balance of the General
Fund increased by $611.4 million during the fiscal year, led by an increase in
the unreserved balance of $576.8 million over the prior fiscal year balance.
At June 30, 1993, the fund balance totaled $698.9 million and the
unreserved-undesignated balance totaled $64.4 million. A continuing recovery
of the Commonwealth's financial condition from the effects of the national
economic recession of 1990 and 1991 is demonstrated by this increase in the
balance and a return to a positive unreserved-undesignated balance. The
previous positive unreserved-undesignated balance was recorded in fiscal 1987.
Fiscal 1994 Financial Results (Budgetary Basis). Commonwealth revenues during
the 1994 fiscal year totaled $15,210.7 million, $38.6 million above the fiscal
year estimate, and 3.9 percent over commonwealth revenues during the previous
fiscal year. The sales tax was an important contributor to the higher than
estimated revenues. The strength of collections from the sales tax offset the
lower than budgeted performance of the personal income tax which ended the
fiscal year $74.4 million below estimate. The shortfall in the personal income
tax was largely due to shortfalls in income not subject to withholding such as
interest, dividends and other income. Tax refunds in fiscal 1994 were reduced
substantially below the amount provided in fiscal 1993. Expenditures,
excluding pooled financing expenditures, increased by 7.2% over fiscal 1993
expenditures. Medical assistance and corrections spending contributed to the
rate of spending growth for the fiscal year. The Commonwealth maintained an
operating balance on a budgetary basis for fiscal 1994 producing a fiscal year
ending unappropriated surplus of $335.8 million. By state statute, ten percent
($33.6 million) of that surplus transferred to the Tax Stabilization Reserve
Fund and the remaining balance was carried over into the 1995 fiscal year.
The balance in the Tax Stabilization Reserve Fund as of March 31, 1995, was
$65.3 million.
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Fiscal 1995 Budget. The fiscal 1994-95 budget was approved by the Governor in
June 1994 and provided for $15,665.7 million of appropriations from
commonwealth funds, an increase of 4.0% over appropriations, including
supplemental appropriations, for fiscal 1994. Medical assistance expenditures
represent the largest single increase in the budget ($221 million) representing
a 9.0% increase over the prior fiscal year. Education subsidies to local
school districts were increased by $132.2 million to continue the increased
funding for the poorest school districts in the state.
The budget also includes tax reductions totaling an estimated $166.4
million. A reduction to the corporate net income tax rate from 12.25% to 9.99%
to be phased in over a period of four years was enacted. Several other tax
changes to the sales tax, the inheritance tax and the capital stock and
franchise tax were also enacted.
The fiscal 1994-95 budget projects a $4 million fiscal year-end
unappropriated surplus based on estimates for fiscal 1994 and the adopted
budget. However, as of April 30, 1995, the General Fund had a surplus of
$442.9 million, or 3.4% above the official estimate. The fiscal 1995-96 budget
is currently the subject of discussion and negotiations between the Governor
and the General Assembly.
Commonwealth Debt. Current constitutional provisions permit Pennsylvania to
issue the following types of debt: (i) debt to suppress insurrection or
rehabilitate areas affected by disaster, (ii) electorate approved debt, (iii)
debt for capital projects subject to an aggregate debt limit of 1.75 times the
annual average tax revenues of the preceding five fiscal years, (iv) tax
anticipation notes payable in the fiscal year of issuance. All debt except tax
anticipation notes must be amortized in substantial and regular amounts.
General obligation debt totaled $5,075.8 million at June 30, 1994.
Over the 10-year period ended June 30, 1994, total outstanding general
obligation debt increased at an annual rate of 1.3% and for the five years
ended June 30, 1994, at an annual rate of 1.5%. All outstanding general
obligation bonds of the Commonwealth are rated AA-by Standard and Poor's
Corporation, A1 by Moody's Investors Service, and AA-by Fitch Investors
Service. The ratings reflect only the views of the rating agencies.
Pennsylvania engages in short-term borrowing to fund expenses within a
fiscal year through the sale of tax anticipation notes which must mature within
the fiscal year of issuance. The principal amount issued, when added to that
already outstanding, may not exceed in aggregate 20% of the revenues estimated
to accrue to the appropriate fund in the fiscal year. The Commonwealth is not
permitted to fund deficits
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between fiscal years with any form of debt. All year-end deficit balances must
be funded within the succeeding fiscal year's budget. Pennsylvania issued a
total of $600.0 million of tax anticipation notes for the account of the
General Fund in fiscal 1995, all of which will mature on June 30, 1995, and
will be paid from fiscal 1995 General Fund receipts.
Pending the issuance of bonds, Pennsylvania may issue bond
anticipation notes subject to the applicable statutory and constitutional
limitations generally imposed on bonds. The term of such borrowings may not
exceed three years. Currently, there are no bond anticipation notes
outstanding.
State-related Obligations. Certain state-created agencies have statutory
authorization to incur debt for which no legislation providing for state
appropriations to pay debt service thereon is required. The debt of these
agencies is supported by assets of, or revenues derived from, the various
projects financed and the debt of such agencies is not an obligation of
Pennsylvania although some of the agencies are indirectly dependent on
Commonwealth appropriations. The following agencies had debt currently
outstanding as of December 31, 1994: Delaware River Joint Toll Bridge
Commission ($56.3 million), Delaware River Port Authority ($233.9 million),
Pennsylvania Economic Development Financing Authority ($659.9 million),
Pennsylvania Energy Development Authority ($162.1 million), Pennsylvania Higher
Education Assistance Agency ($1,283.8 million), Pennsylvania Higher Educational
Facilities Authority ($1,965.8 million), Pennsylvania Industrial Development
Authority ($357.3 million), Pennsylvania Infrastructure Investment Authority
($227.5 million), Pennsylvania Turnpike Commission ($1,252.6 million),
Philadelphia Regional Port Authority ($63.9 million) and the State Public
School Building Authority ($286.8 million). In addition, the Governor is
statutorily required to place in the budget of the Commonwealth an amount
sufficient to make up any deficiency in the capital reserve fund created for,
or to avoid default on, bonds issued by the Pennsylvania Housing Finance Agency
($2,060.0 million of revenue bonds and $240.0 million of notes outstanding as
of December 31, 1994), and an amount of funds sufficient to alleviate any
deficiency that may arise in the debt service reserve fund for bonds issued by
The Hospitals and Higher Education Facilities Authority of Philadelphia ($1.64
million of the loan principal was outstanding as of December 31, 1994).
Litigation. Certain litigation is pending against the Commonwealth that could
adversely affect the ability of the Commonwealth to pay debt service on its
obligations, including suits relating to the following matters: (a)
Approximately 3,500 tort suits are pending against the Commonwealth pursuant to
the General Assembly's 1978 approval of a limited waiver of sovereign immunity
which permits recovery of damages for any loss up to
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$250,000 per person and $ 1,000,000 per accident ($27 million was appropriated
from the Motor License Fund for fiscal 1995); (b) The ACLU filed suit in April
1990 in federal court demanding additional funding for child welfare services
(no available estimates of potential liability),which the Commonwealth is
seeking to have dismissed based on, among other things, the settlement in a
similar Commonwealth court action that provided for more funding in fiscal 1991
as well as a commitment to pay to counties $30.0 million over 5 years. Upon
reversal by the Third Circuit in December 1994, the district court recently
certified the ACLU's proposed class and the parties have resumed discovery; (c)
In 1987, the Supreme Court of Pennsylvania held that the statutory scheme for
county funding of the judicial system was in conflict with the Pennsylvania
Constitution but stayed judgment pending enactment by the legislature of
funding consistent with the opinion. The legislature has yet to consider
legislation implementing the judgment; (d) In 1991, a consortium of public
interest law firms filed a class action suit alleging that the Commonwealth had
failed to comply with the 1989 federal mandate with respect to certain services
for Medicaid-eligible children under the age of 21. The parties have reached a
tentative settlement which has been submitted to the court for approval; (e)
Actions have been filed in both state and federal court by an association of
rural and small schools and several individual school districts and parents
challenging the constitutionality of the Commonwealth's system for funding
local school districts. The federal case has been stayed pending resolution of
the state case and the state case is in the pre-trial discovery stage. The
trial has not yet been scheduled, and there is no available estimate of
potential liability; (f) The Pennsylvania Medical Society has challenged the
state's reimbursement rates for outpatient services provided to needy citizens
under the Medical Assistance Program. The favorable District Court decision
received by the Commonwealth was reversed by the U.S. Third Circuit Court and
an appeal is under consideration. Estimated potential costs to the
Commonwealth approximate $50 million per year; and (g) In November 1993, the
Commonwealth and Envirotest/Synterra Partners ("Envirotest"), entered into a
"Contract of Centralized Emissions Inspection Facilities." Thereafter,
Envirotest acquired certain land and constructed approximately 85 automobile
emissions inspection facilities throughout various regions of the Commonwealth.
By Act of the General Assembly in October 1994 (Act No. 1994-95), the emissions
testing program was suspended and the Department of Transportation was directed
to consider other alternatives to the centralized testing program and was
prohibited from expending funds to implement the program. Revised regulations
from the Environmental Protection Agency are expected in August 1995. In April
1995, the parties entered into a Standstill Agreement which authorizes
Envirotest to file a Statement of Claim with the Pennsylvania Board of Claims
to preserve its position. Although a formal demand has not been submitted,
Envirotest estimates that
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it has expended approximately $200 million to date to acquire land and
construct and maintain the inspection facilities. The Office of General
Counsel believes it is premature at this time to estimate the nature and size
of Envirotest's potential claim in this matter.
Philadelphia. The City of Philadelphia is the largest city in the
Commonwealth, with an estimated population of 1,585,577 people according to the
1990 Census. Philadelphia functions both as a city of the first class and a
county for the purpose of administering various governmental programs.
Legislation providing for the establishment of the Pennsylvania
Intergovernmental Cooperation Authority ("PICA") to assist first class cities
in remedying fiscal emergencies was enacted by the General Assembly and
approved by the Governor in June 1991. PICA is designed to provide assistance
through the issuance of funding debt and to make factual findings and
recommendations to Philadelphia concerning its budgetary and fiscal affairs.
An intergovernmental cooperation agreement between Philadelphia and PICA was
approved by City Council and the PICA Board and signed by the Mayor in January
1992. At this time, Philadelphia is operating under a five year fiscal plan
approved by PICA on May 2, 1994. The most recent amended five year plan was
presented to PICA by the Mayor in March 1995 and is awaiting approval.
To date, PICA had issued $1,418,680,000 of its Special Tax Revenue
Bonds. This financial assistance has included the refunding of certain general
obligation bonds to fund capital projects and to liquidate the Cumulative
General Fund balance deficit as of June 30, 1992, of $224.9 million. The
audited General Fund balance as of June 30, 1994, showed a surplus of
approximately $15.4 million, up from the $3 million surplus as of June 30,
1993. No further bonds are to be issued by PICA for the purpose of financing a
capital project as the authority for such bond sales expired December 31, 1994.
PICA's authority to issue debt for the purpose of financing a cash flow deficit
expires on December 31, 1996.
The foregoing information as to certain Pennsylvania risk factors has
been provided in view of the Fund's policy of concentrating in Pennsylvania
Municipal Securities. This information constitutes only a brief summary, does
not purport to be a complete description of Pennsylvania risk factors and is
principally drawn from official statements relating to securities offerings of
the Commonwealth of Pennsylvania that have come to the Fund's attention and
were available as of the date of this Statement of Additional Information.
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OPTIONS. The Equity Growth Fund may write CALL OPTIONS on a covered basis
only, and will not engage in option writing strategies for speculative
purposes.
Covered Call Writing. The Equity Growth Fund may write COVERED CALL OPTIONS
from time to time on such portion of its assets, without limit, as the
Sub-Adviser determines is appropriate in seeking to obtain the Fund's
investment objective. A call option gives the purchaser of such option the
right to buy, and the writer (the Fund) has the obligation to sell, the
underlying security at the exercise price during the option period. The
advantage to the Fund of writing covered calls is that the Fund receives a
premium which is additional income. However, if the security rises in value,
the Fund may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the
option period or at such earlier time in which the writer effects a closing
purchase transaction. A closing purchase transaction is one in which the Fund,
when obligated as a writer of an option, terminates its obligation by
purchasing an option of the same series as the option previously written. A
closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit
on an outstanding call option, to prevent an underlying security from being
called, to permit the sale of the underlying security or to enable the Fund to
write another call option on the underlying security with either a different
exercise price or expiration date or both. The Fund may realize a net gain or
loss from a closing purchase transaction depending upon whether the net amount
of the original premium received on the call option is more or less than the
cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a different call option on the same underlying
security. Such a loss may also be wholly or partially offset by unrealized
appreciation in the market value of the underlying security. Conversely, a
gain resulting from a closing purchase transaction could be offset in whole or
in part by a decline in the market value of the underlying security.
If a call option expires unexercised, the Fund will realize a short term
capital gain in the amount of the premium on the option, less the commission
paid. Such a gain, however, may be offset by depreciation in the market value
of the underlying security during the option period. If a call option is
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exercised, the Fund will realize a gain or loss from the sale of the underlying
security equal to the difference between the cost of the underlying security,
and the proceeds of the sale of the security plus the amount of the premium on
the option, less the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date. The Fund will write
call options only on a covered basis, which means that the Fund will own the
underlying security subject to a call option at all times during the option
period. Unless a closing purchase transaction is effected the Fund would be
required to continue to hold a security which it might otherwise wish to sell,
or deliver a security it would want to hold. Options written by the Fund will
normally have expiration dates between one and nine months from the date
written. The exercise price of a call option may be below, equal to or above
the current market value of the underlying security at the time the option is
written.
The Equity Growth Fund may purchase OPTIONS ON STOCK INDICES. A stock index
assigns relative values to the common stocks included in the index with the
index fluctuating with changes in the market values of the underlying common
stock.
Options on stock indices are similar to options on stocks but have different
delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the
option. The amount of cash received will be equal to such difference between
the closing price of the index and exercise price of the option expressed in
dollars times a specified multiple. The writer of the option is obligated, in
return for the premium received, to make delivery of this amount. Gain or loss
to the Fund on transactions in stock index options will depend on price
movements in the stock market generally (or in a particular industry or segment
of the market) rather than price movements of individual securities.
As with stock options, the Fund may offset its position in stock index options
prior to expiration by entering into a closing
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transaction on an Exchange or it may let the option expire unexercised.
A stock index fluctuates with changes in the market values of the stock so
included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500 or the New York Stock Exchange Composite Index, or a
narrower market index such as the Standard & Poor's 100. Indices are also
based on an industry or market segment such as the AMEX Oil and Gas Index or
the Computer and Business Equipment Index. Options on stock indices are
currently traded on the following Exchanges among others: The Chicago Board
Options Exchange, New York Stock Exchange and American Stock Exchange.
The Fund's ability to hedge effectively all or a portion of its securities
through transactions in options on stock indices depends on the degree to which
price movements in the underlying index correlate with price movements in the
Fund's portfolio securities. Since the Fund's portfolio will not duplicate the
components of an index, the correlation will not be exact. Consequently, the
Fund bears the risk that the prices of the securities being hedged will not
move in the same amount as the hedging instrument. It is also possible that
there may be a negative correlation between the index or other securities
underlying the hedging instrument and the hedged securities which would result
in a loss on both such securities and the hedging instrument.
Positions in stock index options may be closed out only on an Exchange which
provides a secondary market. There can be no assurance that a liquid secondary
market will exist for any particular stock index option. Thus, it may not be
possible to close such an option. The inability to close options positions
could have an adverse impact on the Fund's ability to hedge effectively its
securities. The Fund will enter into an option position only if there appears
to be a liquid secondary market for such options.
The Fund will not engage in transactions in options on stock indices for
speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets. The aggregate premium paid on all options on stock indices will not
exceed 5% of the Fund's total assets.
Purchasing Put Options. The Equity Growth Fund may purchase PUT
OPTIONS to protect its portfolio holdings in an underlying security against a
decline in market value. Such hedge protection is provided during the life of
the put option since the Fund, as holder of the put option, is able to sell the
underlying security at the put exercise price regardless of any decline in the
underlying security's market price. For a put
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option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, the Fund will reduce
any profit it might otherwise have realized from appreciation of the underlying
security by the premium paid for the put option and by transaction costs.
Purchasing Call Options. The Equity Growth Fund may purchase CALL
OPTIONS to hedge against an increase in the price of securities that the Fund
wants ultimately to buy. Such hedge protection is provided during the life of
the call option since the Fund, as holder of the call option, is able to buy
the underlying security at the exercise price regardless of any increase in the
underlying security's market price. In order for a call option to be
profitable, the market price of the underlying security must rise sufficiently
above the exercise price to cover the premium and transaction costs. These
costs will reduce any profit the Fund might have realized had it bought the
underlying security at the time it purchased the call option.
Risk Factors in Options Transactions. The successful use of options
strategies depends on the ability of the Sub-Adviser to forecast interest rate
and market movements correctly.
When it purchases an option, the Fund and the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing sale transaction with respect to
the option during the life of the option. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a put)
to an extent sufficient to cover the option premium and transaction costs, a
Fund will lose part or all of its investment in the option. This contrasts
with an investment by a Fund in the underlying securities, since the Fund may
continue to hold its investment in those securities notwithstanding the lack of
a change in price of those securities.
The effective use of options also depends on the Fund's ability to terminate
option positions at times when the Sub-Adviser, deems it desirable to do so.
Although a Fund will take an option position only if its Sub-Adviser believes
there is a liquid secondary market for the option, there is no assurance that a
Fund will be able to effect closing transactions at any particular time or at
an acceptable price.
If a secondary trading market in options were to become unavailable, a Fund
could no longer engage in closing transactions. Lack of investor interest
might adversely affect the liquidity of the market for particular options or
series of options. A marketplace may discontinue trading of a particular
option or options generally. In addition, a market could become temporarily
unavailable if unusual events, such as volume in
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excess of trading or clearing capability, were to interrupt normal market
operations. A marketplace may at times find it necessary to impose
restrictions on particular types of options transactions, which may limit a
Fund's ability to realize its profits or limit its losses.
Disruptions in the markets for the securities underlying options purchased or
sold by a Fund could result in losses on the options. If trading is
interrupted in an underlying security, trading of options on that security is
normally halted as well. As a result, a Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with losses if trading in the security reopens at a
substantially different price. In addition, the Options Clearing Corporation
(OCC) or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, a Fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If a
prohibition on exercise remains in effect until an option owned by a Fund has
expired, the Fund could lose the entire value of its option.
Special risks are presented by internationally-traded options. Because of time
differences between the United States and the various foreign countries, and
because different holidays are observed in different countries, foreign options
markets may be open for trading during hours or on days when U.S. markets are
closed. As a result, option premiums may not reflect the current prices of the
underlying interest in the United States.
Futures Contracts on Securities and Related Options
---------------------------------------------------
Futures Contracts on Securities. The Equity Growth, Intermediate
Government Securities, and GNMA Securities Funds will enter into FUTURES
CONTRACTS ON SECURITIES only when, in compliance with the SEC's requirements,
cash or equivalents equal in value to the securities' value (less any
applicable margin deposits) have been deposited in a segregated account of the
Fund's custodian.
A futures contract sale creates an obligation by the seller to deliver the type
of instrument called for in the contract in a specified delivery month for a
stated price. A futures contract purchase creates an obligation by the
purchaser to take delivery of the type of instrument called for in the contract
in a specified delivery month at a stated price. The specific instruments
delivered or taken at settlement date are not determined until on or near that
date. The determination is made in accordance with the rules of the exchanges
or which the futures contract was made. Futures contracts are traded in the
United States only on commodity exchange or boards of trade,
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known as "contract markets," approved for such trading by the Commodity Futures
Trading Commission (CFTC), and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant contract market.
Although futures contracts by their terms call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Closing out a
futures contract sale is effected by purchasing a futures contract for the same
aggregate amount of the specific type of financial instrument with the same
delivery date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid the difference
and realizes a gain. Similarly, the closing out of a futures contract purchase
is effected by the purchaser's entering into a futures contract sale. If the
offsetting sale price exceeds the purchase price, the purchaser realizes a
gain, and if the purchase price exceeds the offsetting sale price, the
purchaser realizes a loss.
Unlike when the Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract, although
the Fund is required to deposit with the custodian in a segregated account in
the name of the futures broker an amount of cash and/or U.S. Government
securities. This amount is known as "initial margin." The nature of initial
margin in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the Fund to finance the transactions. Rather, initial margin is in
the nature of a performance bond or good faith deposit on the contract that is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts also involve
brokerage costs.
Subsequent payments, called "variation margin," to and from the broker (or the
custodian) are made on a daily basis as the price of the underlying security
fluctuates, making the long and short positions in the futures contract more or
less valuable, a process known as "marking to market."
Each Fund may elect to close some or all of its futures positions at any time
prior to their expiration. The purpose of making such a move would be to
reduce or eliminate the hedge position then currently held by the Fund. Each
Fund may close its positions by taking opposite positions which will operate to
terminate the Fund's position in the futures contracts. Final determinations
of variation margin are then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain. Such closing
transactions involve additional commission costs.
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Options on Securities' Futures Contracts. A Fund will enter into
written OPTIONS ON SECURITIES' FUTURES CONTRACTS only when, in compliance with
the SEC's requirements, cash or equivalents equal in value to the securities'
value (less any applicable margin deposits) have been deposited in a segregated
account of the custodian. The Fund may purchase and write call and put options
on the futures contracts it may buy or sell and enter into closing transactions
with respect to such options to terminate existing positions. The Fund may use
such options on futures contracts in lieu of writing options directly on the
underlying securities or purchasing and selling the underlying futures
contracts. Such options generally operate in the same manner as options
purchased or written directly on the underlying investments.
As with options on securities, the holder or writer of an option may terminate
his position by selling or purchasing an offsetting option. There is no
guarantee that such closing transactions can be effected.
The Fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above.
Aggregate initial margin deposits for futures contracts (including futures
contracts on securities, indices and currency) and premiums paid for related
options, may not exceed 5% of a Fund's total assets.
Risk of Transactions in Futures Contracts and Related Options.
Successful use of securities' futures contracts by a Fund is subject to the
ability of the Sub-Adviser, to predict correctly movements in the direction of
interest rates and other factors affecting securities markets.
Compared to the purchase or sale of futures contracts, the purchase of call or
put options on futures contracts involves less risk to the Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of a call or put
option on a futures contract would result in a loss to the Fund when the
purchase or sale of a futures contract would not, such as when there is no
movement in the price of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale of
futures contracts.
There is no assurance that higher than anticipated trading activity or other
unforeseen events will not, at times, render certain market clearing facilities
inadequate, and thereby result
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in the institution by exchanges of special procedures which may interfere with
the timely execution of customer orders.
To reduce or eliminate a hedge position held by the Fund, the Fund may seek to
close out a position. The ability to establish and close out positions will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist for a particular
futures contract. Reasons for the absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain contracts or options; (ii) restrictions may be imposed by an
exchange on opening transactions or closing transactions or both; (iii) trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of contracts or options, or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not
at all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market
on that exchange (or in the class or series of contracts or options) would
cease to exist, although outstanding contracts or options on the exchange that
had been issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
Futures Contracts Indices and Related Options
---------------------------------------------
Index Futures Contracts. The Equity Growth Fund may enter into stock
index futures contracts, debt index futures contracts, or other index futures
contracts appropriate to its objective, and may purchase and sell options on
such index futures contracts. The Fund will not enter into any index futures
contract for the purpose of speculation, and will only enter into contracts
traded on national securities exchanges with standardized maturity dates.
An index futures contract is a bilateral agreement pursuant to which two
parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the index value at the
close of trading of the contracts and the price at which the futures contract
is originally struck. No physical delivery of the securities comprising the
index is made; generally contracts are closed out prior to the expiration date
of the contract. No price is paid upon entering into index futures contracts.
When the Fund purchases or sells an index futures contract, it is required to
make an initial margin deposit in the name of the futures broker and to make
variation margin deposits as the value of the contract fluctuates, similar
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to the deposits made with respect to futures contracts on securities.
Positions in index futures contracts may be closed only on an exchange or board
of trade providing a secondary market for such index futures contracts. The
value of the contract usually will vary in direct proportion to the total face
value.
The Fund's ability to effectively utilize index futures contracts depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the index futures contracts and their underlying index.
Second, it is possible that a lack of liquidity for index futures contracts
could exist in the secondary market, resulting in the Fund's inability to close
a futures position prior to its maturity date. Third, the purchase of an index
futures contract involves the risk that the Fund could lose more than the
original margin deposit required to initiate a futures transaction. In order
to avoid leveraging and related risks, when the Fund purchases an index futures
contract, it will collateralize its position by depositing an amount of cash or
cash equivalents, equal to the market value of the index futures positions
held, less margin deposits, in a segregated account with the Fund's custodian.
Collateral equal to the current market value of the index futures position will
be maintained on a daily basis.
The extent to which the Fund may enter into transactions involving index
futures contracts may be limited by the Internal Revenue Code's requirements
for qualification as a regulated investment company and the Fund's intention to
qualify as such.
Options on Index Futures Contracts. OPTIONS ON INDEX FUTURES
contracts are similar to options on securities except that options on index
futures contracts gives the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long position if the
option is a call and a short position if the option is a put), at a specified
exercise price at any time during the period of the option. Upon exercise of
the option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account which represents the amount by
which the market price of the index futures contract, at exercise, exceeds (in
the case of a call) or is less than (in the case of a put) the exercise price
of the option on the index futures contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise
price of the option and the closing level of the index on which the future is
based on the expiration date. Purchasers of options who fail to exercise their
options prior to the exercise date suffer a loss of the premium paid.
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FOREIGN SECURITIES. The Equity Growth Fund may invest in American Depositary
Receipts. These instruments may subject the Fund to investment risks that
differ in some respects from those related to investments in obligations of
U.S. domestic issuers. Such risks include future adverse political and
economic developments, the possible imposition of withholding taxes on interest
or other income, possible seizure, nationalization, or expropriation of foreign
deposits, the possible establishment of exchange controls or taxation at the
source, greater fluctuations in value due to changes in exchange rates, or the
adoption of other foreign governmental restrictions which might adversely
affect the payment of principal and interest on such obligations. Such
investments may also entail higher custodial fees and sales commissions than
domestic investments. Foreign issuers of securities or obligations are often
subject to accounting treatment and engage in business practices different from
those respecting domestic issuers of similar securities or obligations.
Foreign branches of U.S. banks and foreign banks may be subject to less
stringent reserve requirements than those applicable to domestic branches of
U.S. banks.
WHEN-ISSUED SECURITIES. Certain of the Funds may invest in WHEN-ISSUED
SECURITIES. These securities involve the purchase of debt obligations on a
when-issued basis, in which case delivery and payment normally take place at a
future date. The Funds will only make commitments to purchase obligations on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date. The when-issued securities are
subject to market fluctuation, and no interest accrues on the security to the
purchaser during this period. The payment obligation and the interest rate
that will be received on the securities are each fixed at the time the
purchaser enters into the commitment. Purchasing obligations on a when-issued
basis is a form of leveraging and can involve a risk that the yields available
in the market when the delivery takes place may actually be higher than those
obtained in the transaction itself. In that case there could be an unrealized
loss at the time of delivery.
Segregated accounts will be established with the Custodian, and the Funds will
maintain liquid assets in an amount at least equal in value to the Funds'
commitments to purchase when-issued securities. If the value of these assets
declines, the Funds will place additional liquid assets in the account on a
daily basis so that the value of the assets in the account is equal to the
amount of such commitments.
RESTRICTED SECURITIES. RESTRICTED SECURITIES are securities that may not be
sold to the public without registration under the Securities Act of 1933 (the
"1933 Act") absent an exemption from registration. All of the Funds may invest
in restricted securities and may be invested up to 15% (10% in the case of
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<PAGE> 26
money market funds) of the total assets of a Fund in restricted securities,
provided that at the time of investment such securities are not illiquid
(generally, an illiquid security cannot be disposed of within seven days in the
ordinary course of business or near the current valuation on the Portfolio's
books) based on guidelines established by the Board of Directors. Under these
guidelines, the following will be considered: the frequency of trades and
quotes for the security, the number of dealers in, and potential purchasers
for, the securities, dealer undertakings to make a market in the security, and
the nature of the security and of the marketplace trades. Such restricted
securities, will be purchased in reliance upon the exemption from registration
provided by Rule 144A and Section 4(2) of the 1933 Act. Although not a matter
controlled by their fundamental investment policies and restrictions (and
therefore subject to change without Shareholder approval), none of the Funds
may invest more than 15% of its total assets in such restricted securities as
long as their shares are registered for sale under the securities laws in the
State of Ohio.
LENDING OF PORTFOLIO SECURITIES. Each of the Funds except the Pennsylvania
Tax-Exempt Money Market Fund and the Pennsylvania Municipal Bond Fund may LEND
SECURITIES pursuant to agreements requiring that the loans be continuously
secured by cash, securities of the U.S. government or its agencies, or any
combination of cash and such securities, as collateral equal to 100% of the
market value at all times of the securities lent. Such loans will not be made
if, as a result, the aggregate amount of all outstanding securities loans for a
Fund exceed one-third of the value of its total assets taken at fair market
value. A Fund will continue to receive interest on the securities lent while
simultaneously earning interest on the investment of the cash collateral in
U.S. government securities. However, a Fund will normally pay lending fees to
such broker-dealers and related expenses from the interest earned on invested
collateral. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Sub-Adviser to be of good
standing and when, in the judgment of the Sub-Adviser, the consideration which
can be earned currently from such securities loans justifies the attendant
risk. Any loan may be terminated by either party upon reasonable notice to the
other party.
STANDARD & POOR'S DEPOSITARY RECEIPTS ("SPDRS"). The Equity Growth Fund may
invest in SPDRs. SPDRs are interests in a unit investment trust ("UIT") that
may be obtained from the UIT or purchased in the secondary market (SPDRs are
listed on the American Stock Exchange).
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<PAGE> 27
The UIT will issue SPDRs in aggregations of 50,000 known as "Creation Units" in
exchange for a "Portfolio Deposit" consisting of (a) a portfolio of securities
substantially similar to the component securities ("Index Securities") of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P Index"), (b) a cash
payment equal to a pro rata portion of the dividends accrued on the UIT's
portfolio securities since the last dividend payment by the UIT, net of
expenses and liabilities, and (c) a cash payment or credit ("Balancing Amount")
designed to equalize the net asset value of the S&P Index and the net asset
value of a Portfolio Deposit.
SPDRs are not individually redeemable, except upon termination of the UIT. To
redeem, the Portfolio must accumulate enough SPDRs to reconstitute a Creation
Unit. The liquidity of small holdings of SPDRs, therefore, will depend upon
the existence of a secondary market. Upon redemption of a Creation Unit, the
Portfolio will receive Index Securities and cash identical to the Portfolio
Deposit required of an investor wishing to purchase a Creation Unit that day.
The price of SPDRs is derived from and based upon the securities held by the
UIT. Accordingly, the level of risk involved in the purchase or sale of a SPDR
is similar to the risk involved in the purchase or sale of traditional common
stock, with the exception that the pricing mechanism for SPDRs is based on a
basket of stocks. Disruptions in the markets for the securities underlying
SPDRs purchased or sold by the Funds could result in losses on SPDRs. Trading
in SPDRs involves risks similar to those risks, described above under
"Options," involved in the writing of options on securities.
OTHER INVESTMENTS
The Corporation is not prohibited from investing in obligations of banks which
are clients of SEI Corporation ("SEI"). However, the purchase of shares of the
Corporation by them or by their customers will not be a consideration in
determining which bank obligations the Corporation will purchase. The
Corporation will not purchase obligations of the Adviser or a Sub-Adviser.
The Funds may purchase securities of funds as permitted by the Investment
Company Act of 1940. Under these rules and regulations, the Funds are
prohibited from acquiring the securities of other investment companies if, as a
result of such acquisition, the Funds own more than 3% of the total voting
stock of the company; securities issued by any one investment company represent
more than 5% of the total Funds' assets; or securities (other than treasury
stock) issued by all investment companies represent more than 10% of the total
assets of the Funds. These investment companies typically incur fees that are
separate from those fees incurred directly by the Fund. A Fund's purchase of
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<PAGE> 28
such investment company securities results in the layering of expenses, such
that Shareholders would indirectly bear a proportionate share of the operating
expenses of such investment companies, including advisory fees.
It is the position of the Securities and Exchange Commission's Staff that
certain nongovernmental issuers of CMOS and REMICs constitute investment
companies pursuant to the Investment Company Act of 1940 and either (a)
investments in such instruments are subject to the limitations set forth above
or (b) the issuers of such instruments have received orders from the Securities
and Exchange Commission exempting such instruments from the definition of
investment company.
INVESTMENT LIMITATIONS
A Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer,
provided that this limitation shall apply only as to 75% of the Fund's
net assets.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except that (1) a fund may borrow money from anyone for
temporary purposes and then only in an amount not exceeding 5% of the
value of its total assets, or (2) a Fund may borrow money from a bank,
for non-temporary purposes, provided that the borrowing does not
exceed 33 1/3% of the Fund's net assets. To the extent that a bank
borrowing exceeds 5% of the borrowing funds assets, asset coverage of
at least 300% is required. No investments will be made by a Fund
where borrowings equal or exceed 5%.
4. Make loans, except that (a) each Fund may purchase or hold debt
instruments in accordance with its investment objective and policies;
(b) each Fund may enter into repurchase agreements, and (c) each Fund,
except the Pennsylvania Tax-Exempt Money Market Fund and Pennsylvania
Municipal Bond Fund, may engage in securities lending.
5. Pledge, mortgage or hypothecate assets except to secure borrowings
permitted by (3) above in aggregate amounts not to exceed 33 1/3% of
total assets taken at current value at the time of the incurrence of
such loan.
6. Purchase or sell real estate, real estate limited partnership
interests, commodities or commodities contracts. However, the Funds
may invest in companies which invest in real estate, and in financial
commodities contracts.
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<PAGE> 29
7. Make short sales of securities or purchase securities on margin,
except that the Corporation may obtain short-term credits as necessary
for the clearance of security transactions, except GNMA Securities
Fund may make short sales "against the box" as described in the
Prospectus.
8. Act as an underwriter of securities of other issuers except as it may
be deemed an underwriter in selling a portfolio security.
9. Purchase securities of other investment companies, except as permitted
by the Investment Company Act of 1940 and the rules and regulations
thereunder.
10. Issue senior securities (as defined in the Investment Company Act of
1940) except in connection with permitted borrowings as described
above or as permitted by rule, regulation or order of the Securities
and Exchange Commission.
11. Invest in interests in oil, gas or other mineral exploration or
development programs and oil, gas or mineral leases.
NON-FUNDAMENTAL POLICIES
The following limitations are considered non-fundamental and therefore may be
changed without a shareholder vote.
No Fund may write or purchase puts, calls, options or combinations thereof,
except that the Equity Growth Fund may write covered call options with respect
to any or all parts of its securities, and may purchase call and purchase and
sell put options listed on national exchanges. The Pennsylvania Tax-Exempt
Money Market Fund and Pennsylvania Municipal Bond Fund may purchase puts as
described in the Prospectus. The Equity Growth Fund may sell options
previously purchased and enter into closing transactions with respect to
covered call options. In addition, the Equity Growth Fund may engage in
options on stock indices to invest cash on an interim basis.
No Fund may invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of its net assets, except that the Prime Obligations Money
Market, Treasury Securities Money Market, and Pennsylvania Tax-Exempt Money
Market Funds may not invest more than 10% of their net assets in illiquid
securities.
No Fund may purchase securities of any company which has (with predecessors) a
record of less than three years continuing operations, if, as a result, more
than 5% the total assets of the Fund (taken at current value) would be invested
in such securities.
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<PAGE> 30
The foregoing percentages will apply at the time of the purchase of a security.
THE ADVISER
The Corporation and Integra Trust Company (the "Adviser") have entered into an
advisory agreement (the "Advisory Agreement") dated August 1, 1994. The
Advisory Agreement provides that the Adviser shall not be protected against any
liability to the Corporation or its Shareholders by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or from reckless disregard of its obligations or duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Adviser but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by any state, the Adviser will bear the amount
of such excess. The Adviser will not be required to bear expenses of the
Corporation to an extent which would result in a Fund's inability to qualify as
a regulated investment company under provisions of the Internal Revenue Code.
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of a majority of the
Directors who are not parties to the Agreement or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of voting on
such approval, and (ii) by the vote of the Directors or a majority of
outstanding shares of the Funds, as defined in the 1940 Act. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Directors of the Corporation or,
with respect to the Funds by a majority of the outstanding shares of the Funds,
on not less than 30 days' nor more than 60 days' written notice to the Adviser,
or by the Adviser on 90 days' written notice to the Corporation.
The Adviser is entitled to a fee which is calculated daily and paid monthly at
an annual rate of .45% of the daily average net assets of the Prime Obligations
Money Market Fund, the Treasury Securities Money Market Fund, and the
Pennsylvania Tax-Exempt Money Market Fund, .70% of the daily average net assets
of the Intermediate Government Securities Fund, the GNMA Securities Fund and
the Pennsylvania Municipal Bond Fund, and .85% of the daily average net assets
of the Equity Growth Fund.
For the fiscal year ended April 30, 1995, the Prime Obligations Money Market
Fund, Treasury Securities Money Market Fund, Intermediate Government Securities
Fund, GNMA Securities Fund, Equity Growth Fund, Pennsylvania Tax Exempt Money
Market Fund and
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<PAGE> 31
the Pennsylvania Municipal Bond Fund paid $395,956, $84,917, $178,282,
$132,372, $193,246, $76,582, and $128,093, respectively in advisory fees, and
the Adviser waived advisory fees in the amount of $355,644, $108,649, $76,919,
$72,352, $85,038, $84,075, and $39,805, respectively.
THE SUB-ADVISERS
The Adviser has entered into sub-advisory agreements with Weiss, Peck & Greer,
L.L.C. ("WPG") relating to the Pennsylvania Tax-Exempt Money Market and
Pennsylvania Municipal Bond Funds, with Wellington Management Company ("WMC")
relating to the Prime Obligations Money Market, Treasury Securities Money
Market, Intermediate Government Securities and GNMA Securities Funds, and with
SunBank Capital Management, N.A. ("SunBank") relating to the Equity Growth
Fund (collectively, the "Sub-Advisers"). Under these agreements, the
Sub-Advisers are entitled to fees which are calculated daily and paid monthly
at an annual rate of .075% of the aggregate average daily net assets of the
Prime Obligations and Treasury Securities Money Market Funds, .178% on the
first $50 million of the Intermediate Government Securities and GNMA Securities
Funds' aggregate net assets, .10% on the next $400 million and .075 % on such
Fund's aggregate net assets in excess of $500 million, prorated between each
such Fund based on their respective net assets, .30% of the average daily net
assets of the Equity Growth Fund, .05% of the average daily net assets of the
Pennsylvania Tax-Exempt Money Market Fund and .18% of the average daily net
assets of the Pennsylvania Municipal Bond Fund. Such fees are paid by the
Adviser and the Sub-Advisers receive no fees directly from the Funds.
For the fiscal year ended April 30, 1995, the Adviser paid sub-advisory fees in
the amounts of $125,267, $32,261, $54,686, $43,869, $98,218, $17,747 and
$43,174, respectively, for the Prime Obligations Money Market Fund, Treasury
Securities Money Market Fund, Intermediate Government Securities Fund, GNMA
Securities Fund, Equity Growth Fund, Pennsylvania Tax-Exempt Money Market Fund
and the Pennsylvania Municipal Bond Fund, respectively.
THE ADMINISTRATOR
The Administration Agreement provides that the Administrator shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Corporation in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Administrator in the performance of its
duties or from reckless disregard by it of its duties and obligations
thereunder.
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<PAGE> 32
The Administrator, a wholly-owned subsidiary of SEI Corporation ("SEI"), was
organized as a Delaware corporation in 1969 and has its principal business
offices at 680 East Swedesford Road, Wayne, PA 19087-1658. Alfred P. West,
Jr., Henry H. Greer, Carmen V. Romeo, and Richard B. Lieb constitute the Board
of Directors of the Administrator and the Distributor. Mr. West is the
Chairman of the Board and Chief Executive Officer of SEI, the Administrator and
the Distributor. Mr. Greer serves as the President and Chief Operating Officer
of SEI, the Administrator and the Distributor. SEI and its subsidiaries are
leading providers of funds evaluation services, trust accounting systems, and
brokerage and information services to financial institutions, institutional
investors and money managers. The Administrator also serves as administrator
to the following other mutual funds: SEI Liquid Asset Trust; SEI Tax Exempt
Trust; SEI Index Funds; SEI Institutional Managed Trust; SEI Daily Income
Trust; SEI International Trust; The Compass Capital Group; FFB Lexicon Funds;
The Advisers' Inner Circle Fund; the PBHG Funds, Inc.; Pillar Funds; CUFUND;
STI Classic Funds; CoreFunds, Inc.; First American Funds, Inc.; First American
Investment Funds Inc.; Rembrandt Funds(R), The Arbor Fund; The Stepstone Funds;
1784 Funds; Marquis Funds(sm); Morgan Grenfell Investment Trust; Insurance
Investment Products Trust; Bishop Street Funds; Conestoga Family of Funds; The
Achievement Funds Trust; and CrestFunds, Inc.
The Administrator is entitled to a fee which is calculated daily and paid
monthly at an annual rate of .18% of average daily net assets of each of the
Non-Money Market Funds and .15% of average daily net assets of each of the
Money Market Funds.
For the fiscal year ended April 30, 1995, the Prime Obligations Money Market
Fund, Treasury Securities Money Market Fund, Intermediate Government Securities
Fund, GNMA Securities Fund, Equity Growth Fund, Pennsylvania Tax Exempt Money
Market Fund and the Pennsylvania Municipal Bond Fund paid $250,553, $64,522,
$65,623, $52,643, $58,931, $53,552, and $23,985, respectively, in
administration fees. For the fiscal year ended April 30, 1995, the
Administrator waived administration fees for the Pennsylvania Municipal Bond
Fund in the amount of $19,188.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary
of SEI, and the Corporation are parties to a distribution agreement
("Distribution Agreement") dated August 1, 1994 which applies to both Class A
and Class B shares of the Funds. The Distributor receives no compensation for
distribution of Class B shares. Class A has a distribution plan dated August
1, 1994 ("Class A Distribution Plan").
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<PAGE> 33
CLASS A DISTRIBUTION PLAN
The Class A Distribution Plan adopted by the Class A Shareholders provides that
each Class A Fund will bear the cost of its distribution expenses as provided
in a budget approved annually and reviewed quarterly by the Directors of the
Corporation who are not interested persons and have no financial interest in
the Plan or any related agreement ("Qualified Directors"). The budget includes
(1) the cost of prospectuses, reports to Shareholders, sales literature and
other materials for potential investors; (2) advertising; (3) expenses incurred
in connection with the promotion and sale of the Corporation's shares including
the Distributor's expenses for travel, communication, and compensation and
benefits for sales personnel; (4) any other expenses reasonably incurred in
connection with the distribution and marketing of the Class A shares subject to
approval of a majority of the Qualified Directors. The Corporation is not
obligated to reimburse the Distributor for any expenditures in excess of the
approved budget.
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the Qualified Directors, or by a majority vote of the outstanding
securities of the Corporation upon not more than 60 days' written notice by
either party.
The Corporation has adopted the Class A Distribution Plan in accordance with
the provisions of Rule 12b-1 under the Investment Company Act of 1940 which
regulates circumstances under which an investment company may directly or
indirectly bear expenses relating to the distribution of its shares.
Continuance of the Class A Distribution Plan must be approved annually by a
majority of the Directors of the Corporation and by a majority of the Qualified
Directors. The Class A Distribution Plan requires that quarterly written
reports of amounts spent under the Class A Distribution Plan and the purposes
of such expenditures be furnished to and reviewed by the Directors. The Class
A Distribution Plan may not be amended to increase materially the amount which
may be spent thereunder without approval by a majority of the outstanding
shares of the Corporation. All material amendments of the Plan will require
approval by a majority of the Directors of the Corporation and of the Qualified
Directors.
For the fiscal year ended April 30, 1995, no distribution fees were paid.
REDUCED SALES CHARGES
Persons maintaining the following accounts with the Adviser or its affiliates
may be eligible for reduced sales charges:
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<PAGE> 34
Classic Choice(sm), Integra Max(sm) and Benefit Banking. Please contact the
Distributor for further details.
DIRECTORS AND OFFICERS OF THE CORPORATION
The management and affairs of the Corporation are supervised by the Directors
under the laws governing Maryland corporations. The Directors and executive
officers of the Corporation and their principal occupations for the last five
years are set forth below.
Certain officers of the Trust also serve as Trustees and/or officers of SEI
Daily Income Trust; SEI Liquid Asset Trust; SEI Tax Exempt Trust; SEI Index
Funds; SEI Institutional Managed Trust; SEI Daily Income Trust; SEI
International Trust; Stepstone Funds; The Compass Capital Group; FFB Lexicon
Funds; The Advisors' Inner Circle Fund; The Pillar Funds; CUFund; STI Classic
Funds; CoreFunds, Inc.; First American Funds, Inc.; First American Investment
Funds, Inc.; Rembrandt Funds(R); 1784 Funds; The PBHG Funds, Inc.; The Arbor
Fund; Insurance Investment Products Trust; Bishop Street Funds; Conestoga
Family of Funds; Morgan Grenfell Investment Trust; The Achievement Funds Trust;
CrestFunds, Inc.; and Marquis Funds(sm), open-end management investment
companies that are managed by the Administrator and distributed by the
Distributor.
ROBERT A. NESHER - Chairman of the Board of Directors* - Retired since 1994.
Executive Vice President of SEI 1986-1994, Director and Executive Vice
President of the Administrator and the Distributor 1981-1994.
JOHN T. COONEY - Director** - 573 N. Post Oak Lane, Houston, TX 77024. Retired
since 1992. Formerly Vice Chairman of Ameritrust Texas N.A. (1989-1992), and
MTrust Corp. (1985-1989).
WILLIAM M. DORAN - Director* - 2000 One Logan Square, Philadelphia, PA 19103.
Partner of Morgan, Lewis & Bockius (law firm). Counsel to the Trust,
Administrator and Distributor for the past five years. Director and Secretary
of SEI.
FRANK E. MORRIS - Director** - 105 Walpole Street, Dover, MA 02030. Retired
since 1990. Peter Drucker Professor of Management, Boston College since 1989.
President, Federal Reserve Bank of Boston (1968-1988).
ROBERT A. PATTERSON - Director** - 408 Old Main, University Park, PA 16802.
Pennsylvania State University Senior Vice President, Treasurer (Emeritus).
Financial and Investment Consultant, Professor of Transportation
(1984-present). Vice President-Investments, Treasurer, Senior Vice President
(Emeritus) (1982-
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<PAGE> 35
1984). Director, Pennsylvania Research Corp. Member and Treasurer, Board of
Trustees of Grove City College.
GENE PETERS - Director** - 943 Oblong Road, Williamstown, MA 01267. Private
investor from 1987 to present. Vice President and Chief Financial Officer,
Western Company of North America (petroleum service company) (1980-1986).
President of Gene Peters and Associates (import company) (1978-1980).
President and Chief Executive Officer of Jos. Schlitz Brewing Company before
1978.
JAMES M. STOREY - Director** - Ten Post Office Square South, Boston, MA 02109.
Retired since 1993. Formerly Partner of Dechert Price & Rhoads (law firm).
DAVID G. LEE - President, Chief Executive Officer - Senior Vice President of
the Administrator and Distributor since 1993. Vice President of the
Administrator and Distributor (1991-1993). President, GW Sierra Trust Funds
before 1991.
CARMEN V. ROMEO - Treasurer, Assistant Secretary - Director, Executive Vice
President, Chief Financial Officer and Treasurer of SEI. Director and
Treasurer of the Administrator and the Distributor since 1981.
SANDRA K. ORLOW - Vice President, Assistant Secretary - Vice President and
Assistant Secretary of the Administrator and Distributor since 1983.
KEVIN P. ROBINS - Vice President, Assistant Secretary - Senior Vice President &
General Counsel of SEI, the Administrator and the Distributor since 1994. Vice
President of SEI, the Administrator and the Distributor 1992-1994. Associate,
Morgan, Lewis & Bockius (law firm) prior to 1992.
KATHRYN L. STANTON - Vice President, Assistant Secretary - Vice President,
Assistant Secretary of SEI, the Administrator and Distributor since 1994.
Associate, Morgan, Lewis & Bockius (law firm) 1989-1994.
ROBERT B. CARROLL - Vice President, Assistant Secretary - Vice President,
Assistant Secretary of SEI, the Administrator and Distributor since 1994.
United States Securities and Exchange Commission, Division of Investment
Management, 1990-1994. Associate, McGuire, Woods, Battle & Boothe (law firm)
before 1990.
TODD CIPPERMAN - Vice President, Assistant Secretary - Vice President,
Assistant Secretary of SEI, the Administrator and Distributor since May, 1995,
Associate, Dewey Ballantine (law firm) 1994-1995, Associate, Winston & Strawn
(law firm) 1991-1995.
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<PAGE> 36
JOSEPH LYDON - Vice President, Assistant Secretary - Director of Business
Administration, SEI Corporation since April, 1995; Vice President of Fund
Group, Vice President of the Advisor - Dreman Value Management, LP, President
of Dreman Financial Services, Inc. from 1989 to 1995.
JEFFREY A. COHEN - Controller, Chief Accounting Officer - CPA, Director,
International and Domestic Funds Accounting - SEI Corporation from 1991 to
present; Price Waterhouse, Audit Manager - before 1991.
RICHARD W. GRANT - Secretary - 2000 One Logan Square, Philadelphia, PA 19103,
Partner of Morgan, Lewis & Bockius, (law firm), Counsel to the Trust,
Administrator and the Distributor.
ALLISON KOEBIG - Assistant Secretary - Regulatory Manager, SEI Corporation
since October, 1993.
CHRISTINE TRECROCI - Assistant Secretary - Regulatory Manager, SEI Corporation
since March, 1994.
____________________
*Messrs. Nesher and Doran are Directors who may be deemed to be "interested"
persons of the Corporation as the term is defined in the Investment Company Act
of 1940.
**Messrs. Cooney, Morris, Patterson, Peters and Storey serve as members of the
Audit Committee of the Corporation.
The Directors and officers of the Corporation own less than 1% of the
outstanding shares of the Corporation.
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<PAGE> 37
<TABLE>
===================================================================================================================================
<CAPTION>
Total
Aggregate Pension or Compensation
Name of Person Compensation Retirement Estimated Annual From Registrant
and Position From Registrant Benefits Accrued Benefits Upon and Fund
for FYE 4/30/95 as Part of the Retirement Complex Paid to
Fund Expenses Directors for FYE
4/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert A. Nesher* 0 N/A N/A $0 for services on 1
Board
- ------------------------------------------------------------------------------------------------------------------------------------
John T. Cooney $1,900 N/A N/A $1,900 for services on
1 Board
- ------------------------------------------------------------------------------------------------------------------------------------
William M. Doran* 0 N/A N/A $0 for services on 1
Board
- ------------------------------------------------------------------------------------------------------------------------------------
Frank E. Morris $1,900 N/A N/A $1,900 for services on
1 Board
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Patterson $1,900 N/A N/A $1,900 for services on
1 Board
- ------------------------------------------------------------------------------------------------------------------------------------
Gene Peters $1,900 N/A N/A $1,900 for services on
1 Board
- ------------------------------------------------------------------------------------------------------------------------------------
James M. Storey $1,900 N/A N/A $1,900 for services on
1 Board
===================================================================================================================================
<FN>
*Messrs. Nesher and Doran are Directors who may be deemed to be "interested"
persons of the Corporation as the term is defined in the Investment Company Act
of 1940.
</TABLE>
REPORTING
The Corporation issues unaudited financial information semi-annually and
audited financial statements annually. The Corporation furnishes proxy
statements and other Shareholder reports to Shareholders of record.
PERFORMANCE
Yields. Yields are one basis upon which investors may compare the Funds with
other funds; however, yields of other funds and other investment vehicles may
not be comparable because of the factors set forth below and differences in the
methods used in valuing portfolio instruments.
The yields of the money market funds fluctuate, and the annualization of a
week's dividend is not a representation by the Corporation as to what an
investment in a money market fund will actually yield in the future. Actual
yields will depend on such variables as asset quality, average asset maturity,
the type of
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<PAGE> 38
instruments the Fund invests in, changes in interest rates on money market
instruments, changes in the expenses of the Fund and other factors.
Money Market Fund Yields. From time to time the Prime Obligations Money
Market, Treasury Securities Money Market, and Pennsylvania Tax-Exempt Money
Market Funds (the "Money Market Funds") advertise their "current yield" and
"effective compound yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "current
yield" of the Money Market Funds refers to the income generated by an
investment in a Fund over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in a Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment.
The current yield of the Money Market Funds will be calculated daily based upon
the seven days ending on the date of calculation ("base period"). The yield is
computed by determining the net change (exclusive of capital changes) in the
value of a hypothetical pre-existing shareholder account having a balance of
one share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing such net change
by the value of the account at the beginning of the same period to obtain the
base period return and multiplying the result by (365/7). Realized and
unrealized gains and losses are not included in the calculation of the yield.
The effective compound yield of the Funds is determined by computing the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account
at the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = (Base Period Return + 1) 365/7) - 1. The
current and the effective yields reflect the reinvestment of net income earned
daily on portfolio assets.
The Pennsylvania Tax Exempt Money Market Fund may also calculate tax-equivalent
yields. Tax equivalent yields are computed by dividing that portion of the
Fund's yield which is tax-exempt by one minus a stated federal and state income
tax rate and adding the product to that portion, if any, of the Fund's yield
that is
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<PAGE> 39
not tax-exempt. (Tax equivalent yields assume the payment of Federal income
taxes at a rate of 31% and Pennsylvania income taxes at a rate of 3%.)
For the 7-day period ended April 30, 1995, the Money Market Funds' current,
effective and tax-equivalent yields were as follows:
<TABLE>
===========================================================================================================
<CAPTION>
7-Day
7-Day Tax-
7-Day Tax- Equivalent
Effective Equivalent Effective
Portfolio 7-Day Yield Yield Yield Yield
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania Tax Exempt Money 3.96% 4.04% 5.98% 6.10%
Market Fund
- -----------------------------------------------------------------------------------------------------------
Prime Obligations Money Market 5.68% 5.84% N/A N/A
Fund
- -----------------------------------------------------------------------------------------------------------
Treasury Securities Money Market 5.53% 5.68% N/A N/A
Fund
===========================================================================================================
</TABLE>
Other Yields. From time to time, GNMA Securities and Intermediate Government
Securities Funds may advertise a 30-day yield, and the Pennsylvania Municipal
Bond Fund may advertise a 30-day yield and a 30-day tax equivalent yield. These
figures will be based on historical earnings and are not intended to indicate
future performance. The 30-day yield of these Funds refers to the annualized
income generated by an investment in the Funds over a specified 30-day period.
The yield is calculated by assuming that the income generated by the investment
during that period generated each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:
Yield = (2(a-b/cd + 1)(6) - 1) where a = dividends and interest earned
during the period; b = expenses accrued for the period (net of reimbursement);
c = the current daily number of shares outstanding during the period that were
entitled to receive dividends; and d = the maximum offering price per share on
the last day of the period.
Tax equivalent yields are computed by dividing that portion of a Fund's yield
which is tax-exempt by one minus a stated federal and/or state income tax rate
and adding the product to that portion, if any, of the Fund's yield that is not
tax-exempt. (Tax equivalent yields assume the payment of Federal income taxes
at a rate of 31% and Pennsylvania income taxes at a rate of 3%.)
For the 30 day period ended April 30, 1995, the yields on the Funds, other than
the Money Market Funds, were as follows:
S-39
<PAGE> 40
<TABLE>
============================================================================================================
<CAPTION>
30 day 30-day
Portfolio Yield Tax-Equivalent
Yield
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pennsylvania Municipal Bond Fund 3.99% 6.03%
- ------------------------------------------------------------------------------------------------------------
Intermediate Government Securities Fund 6.08% N/A
- ------------------------------------------------------------------------------------------------------------
GNMA Securities Fund 6.74% N/A
- ------------------------------------------------------------------------------------------------------------
Equity Growth Fund 1.40% N/A
============================================================================================================
</TABLE>
Total Return. From time to time, the non-Money Market Funds may advertise
total return on an "average annual total return" basis and on an "aggregate
total return" basis for various periods. Average annual total return reflects
the average annual percentage change in the value of an investment in a Fund
over a particular measuring period. Aggregate total return reflects the
cumulative percentage change in value over the measuring period. Aggregate
total return is computed according to a formula prescribed by the SEC. The
formula can be expressed as follows: P(1 + T)n = ERV, where P = a hypothetical
initial payment of $1,000; T = average annual total return; n = number of
years; and ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the designated time period as of the end of such period or
the life of the fund. The formula for calculating aggregate total return can
be expressed as (ERV/P)-1.
The calculation of total return assumes reinvestment of all dividends and
capital gain distribution on the reinvestment dates during the period and that
the entire investment is redeemed at the end of the period. In addition the
maximum sales charge for each Fund is deducted from the initial $1,000 payment.
Total return may also be shown without giving effect to any sales charges.
Based on the foregoing, the aggregate total returns for the Funds from
inception through April 30, 1995, were as follows:
<TABLE>
============================================================================================================
<CAPTION>
Aggregate Annual Total Return
Class/Without Load --------------------------------------
Portfolio With Load Since
One Year Inception
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pennsylvania Without Load N/A 3.38%
Municipal Bond ---------------------------------------------------------------------------------
Fund With Load N/A (0.76%)
- ------------------------------------------------------------------------------------------------------------
Intermediate Without Load N/A 4.75%
Government ---------------------------------------------------------------------------------
Securities Fund With Load N/A 0.56%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
S-40
<PAGE> 41
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GNMA Securities Without Load N/A 6.61%
Fund ---------------------------------------------------------------------------------
With Load N/A 2.31%
- ------------------------------------------------------------------------------------------------------------
Equity Growth Without Load N/A 8.33%
Fund ---------------------------------------------------------------------------------
With Load N/A 3.96%
============================================================================================================
</TABLE>
The Funds' performance may from time to time be compared to other mutual funds
tracked by mutual fund rating services (such as Lipper Analytical Services),
financial and business publications and periodicals, to broad groups of
comparable mutual funds or to unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs. The Funds may quote Morningstar, Inc., a service that ranks
mutual funds on the basis of risk-adjusted performance. The Funds may quote
lbbotson Associates of Chicago, Illinois, which provides historical returns of
the capitals markets in the U.S. The Funds may use long term performance of
these capital markets to demonstrate general long-term risk vs. reward
scenarios and could include the value of a hypothetical investment in any of
the capital markets. The Funds may also quote financial and business
publications and periodicals as they relate to fund management, investment
philosophy, and investment techniques.
The Funds may quote various measures of volatility and benchmark correlation in
advertising and may compare these measures to those of other funds. Measures
of volatility attempt to compare historical share price fluctuations or total
returns to a benchmark while measures of benchmark correlation indicate how
valid a comparative benchmark might be. Measures of volatility and correlation
are calculated using averages of historical data and cannot be calculated
precisely.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange and the Federal Reserve wire system are open for business.
Currently, the following holidays are observed by the Corporation: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day.
It is the Corporation's policy to pay for redemptions in cash. The Corporation
retains the right, however, to provide for redemptions in whole or in part by a
distribution in kind of securities held by the Funds in lieu of cash.
Shareholders may incur brokerage charges on the sale of any such securities so
received in payment of redemptions. A Shareholder will at all times be
entitled to aggregate cash redemptions from all Funds of
S-41
<PAGE> 42
the Corporation during any 90-day period of up to the lesser of $250,000 or 1%
of the Corporation's net assets.
The Corporation reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the Securities and Exchange Commission by rule or
regulation) as a result of disposal or valuation of the Fund's securities is
not reasonably practicable, or for such other periods as the Securities and
Exchange Commission has by order permitted. The Corporation also reserves the
right to suspend sales of shares of the Funds for any period during which the
New York Stock Exchange, the Adviser, the Sub-Advisers, the Administrator
and/or the Custodian are not open for business.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each of the Prime Obligations Money Market,
Treasury Securities Money Market, and Pennsylvania Tax-Exempt Money Market
Funds is calculated by adding the value of securities and other assets,
subtracting liabilities and dividing by the number of outstanding shares.
Securities will be valued by the amortized cost method which involves valuing a
security at its cost on the date of purchase and thereafter (absent unusual
circumstances) assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuations in general market rates of
interest on the value of the instrument. While this method provides certainty
in valuation, it may result in periods during which a security's value, as
determined by this method, is higher or lower than the price the Fund would
receive if it sold the instrument. During periods of declining interest rates,
the daily yield of the Funds may tend to be higher than a like computation made
by a company with identical investments utilizing a method of valuation based
upon market prices and estimates of market prices for all of its portfolio
securities. Thus, if the use of amortized cost by the Funds resulted in a
lower aggregate portfolio value on a particular day, a prospective investor in
the Funds would be able to obtain a somewhat higher yield than would result
from investment in a company utilizing solely market values, and existing
investors in the Fund would experience a lower yield. The converse would apply
in a period of rising interest rates.
The Money Market Funds' use of amortized cost and the maintenance of the Funds'
net asset value at $1.00 are permitted by regulations promulgated by Rule 2a-7
under the Investment Company Act of 1940, provided that certain conditions are
met. These conditions currently require that the Funds maintain a
dollar-weighted average maturity of 90 days or less, not purchase any
instrument having a remaining maturity of more than 397 days and will limit its
investments to those U.S. dollar-denominated
S-42
<PAGE> 43
instruments which the Directors determine to present minimal credit risks and
which are of "high quality" as determined by any major rating service or, if
not rated, are determined by the Directors to be of comparable quality. The
regulations also require the Directors to establish procedures which are
reasonably designed to stabilize the net asset value per share at $1.00 for the
Funds. Such procedures include the determination of the extent of deviation,
if any, of the Funds' current net asset value per share calculated using
available market quotations from the Funds' amortized cost price per share at
such intervals as the Directors deem appropriate and reasonable in light of
market conditions and periodic reviews of the amount of the deviation and the
methods used to calculate such deviation. In the event that such deviation
exceeds 1/2 of 1%, the Directors are required to consider promptly what action,
if any, should be initiated, and, if the Directors believe that the extent of
any deviation may result in material dilution or other unfair results to
Shareholders, the Directors are required to take such corrective action as they
deem appropriate to eliminate or reduce such dilution or unfair results to the
extent reasonably practicable. Such actions may include the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding dividends; redeeming shares in kind; or
establishing a net asset value per share by using available market quotations.
In addition, if the Funds incur a significant loss or liability, the Directors
have the authority to reduce pro rata the number of shares of the Funds in each
Shareholder's account and to offset each Shareholder's pro rata portion of such
loss or liability from the Shareholder's accrued but unpaid dividends or from
future dividends while each other Fund must annually distribute at least 90% of
its investment company taxable income.
The securities of the non-Money Market Funds are valued by the Administrator
pursuant to prices and valuations provided by an independent pricing service.
The pricing service relies primarily on prices of actual market transactions as
well as trader quotations. However, the service may also use a matrix system
to determine valuations, which system considers such factors as security
prices, yields, maturities, call features, ratings and developments relating to
specific securities in arriving at valuations. The procedures of the pricing
service and its valuations are reviewed by the officers of the Corporation
under the general supervision of the Directors. Although the methodology and
procedures are identical, the net asset value per share of Class A and Class B
shares of Funds other than the Money Market Funds may differ because of the
distribution expenses charged to Class A shares.
S-43
<PAGE> 44
TAXES
The following is only a summary of certain income tax considerations generally
affecting a Fund and its shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisers
with specific reference to their own tax situations, including their state and
local income tax liabilities.
FEDERAL INCOME TAX
ALL FUNDS
In order to qualify for treatment as a regulated investment company
("RIC")under the Internal Revenue Code of 1986, as amended (the "Code"), each
Fund must distribute annually to its Shareholders at least the sum of 90% of
its net interest income excludable from gross income plus 90% of its investment
company taxable income (generally, net investment income plus net short-term
capital gain) (the "Distribution Requirement") and also must meet several
additional requirements. Among these requirements are the following: (i) at
least 90% of the Fund's gross income each taxable year must be derived from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock or securities, or certain other income;
(ii)the Fund must derive less than 30% of its gross income each taxable year
from the sale or other disposition of stocks, securities or certain other
investments held for less than three months; (iii) at the close of each quarter
of the Fund's taxable year, at least 50% of the value of its total assets must
be represented by cash and cash items, U.S. Government securities, securities
of other RICs and other securities, with such other securities limited, in
respect to any one issuer, to an amount that does not exceed 5% of the value of
the Fund's assets and that does not represent more than 10% of the outstanding
voting securities of such issuer; and (iv) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its assets may be
invested in securities (other than U.S. Government securities or the securities
of other RICs) of any one issuer, or of two or more issuers which are engaged
in the same, similar or related trades or businesses if the Fund owns at least
20% of the voting power of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital
gain (the excess of net longterm capital gain over net short-term capital
loss), a Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year 98% of its ordinary income
for that year and 98% of its capital gain net
S-44
<PAGE> 45
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
A dividends received deduction is available to corporations that receive
dividends from domestic corporations. Dividends paid by an equity fund will be
eligible for the dividends received deduction for corporate shareholders to the
extent they are derived from dividends from domestic corporations and to the
extent that the respective security has been held for at least three months.
Equity Growth Fund Shareholders will be advised each year of the portion of
ordinary income dividends eligible for the deduction.
Dividends received from other funds, e.g., money market or fixed income funds,
will not be eligible for the dividends received deduction. Individual
shareholders are not entitled to the dividends received deduction regardless of
which fund paid the dividend.
ADDITIONAL CONSIDERATION FOR PENNSYLVANIA TAX EXEMPT MONEY MARKET AND MUNICIPAL
BOND FUNDS
As noted in the Prospectuses, exempt interest dividends are generally
excludable from a Shareholder's gross income for regular federal income tax
purposes. Exempt-interest dividends may nevertheless be subject to the
alternative minimum tax (the "Alternative Minimum Tax") imposed by Section 55
of the Code or the environmental tax (the "Environmental Tax") imposed by
Section 59A of the Code. The Alternative Minimum Tax is imposed at the rate of
26-28% in the case of non-corporate taxpayers and at the rate of 20% in the
case of corporate taxpayers, to the extent it exceeds the taxpayer's regular
tax liability. The Environmental Tax is imposed at the rate of 0.12% and
applies only to corporate taxpayers. The Alternative Minimum Tax and the
Environmental Tax may be imposed in two circumstances. First, exempt-interest
dividends derived from certain "private activity bonds" issued after August 7,
1986, will generally be an item of tax preference (and therefore potentially
subject to the Alternative Minimum Tax for both corporate and non-corporate
taxpayers, and the Environmental Tax for corporate taxpayers only). Second, in
the case of exempt-interest dividends received by corporate Shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they are derived from private activity bonds,
will be included in the corporation's "adjusted current earnings," as defined
in Section 56(g) of the Code, in calculating the corporation's alternative
minimum taxable income for purposes of determining the Alternative Minimum Tax
and the Environmental Tax.
Any gain or loss recognized on a sale or redemption of shares of either Fund by
a Shareholder who is not a dealer in securities
S-45
<PAGE> 46
will generally be treated as a long-term capital gain or loss if the shares
have been held for more than twelve months and otherwise would be generally
treated as a short-term capital gain or loss. Any loss recognized by a
Shareholder upon the sale or redemption of shares of either Fund held for six
months or less, however, will be disallowed to the extent of any
exempt-interest dividends received by the Shareholder with respect to such
shares. If shares on which a net capital gain distribution has been received
are subsequently sold or redeemed and such shares have been held for six months
or less, any loss recognized will be treated as a long-term capital loss to the
extent of the long-term capital gain distribution.
Interest on indebtedness incurred by Shareholders to purchase or carry shares
of the fund will not be deductible for federal income tax purposes to the
extent that the Fund distributes exempt-interest dividends during the taxable
year. The deduction otherwise, allowable to property and casualty insurance
companies for "losses incurred" will be reduced by an amount equal to a portion
of exempt-interest dividends received or accrued during any taxable year.
Foreign corporations engaged in a trade or business in the United States will
be subject to a "branch profits tax" on their "dividend equivalent amount" for
the taxable year, which will include exempt-interest dividends. Certain
Subchapter S corporations may also be subject to taxes on their "passive
investment income," which could include exempt-interest dividends. [Up to 85
percent of the Social Security benefits or railroad retirement benefits
received by an individual during any taxable year will be included in the gross
income of such individual if the individual's "modified adjusted gross income"
(which includes exempt-interest dividends) plus one-half of the Social Security
benefits or railroad retirement benefits received by such individual during
that taxable year exceeds the base amount described in Section 86 of the Code.]
The Funds may not be an appropriate investment for persons (including
corporations and other business entities) who are "substantial users" (or
persons related to such users) of facilities financed by industrial development
bonds or private activity bonds. A "substantial user" is defined generally to
include certain persons who regularly use a facility financed by the proceeds
of such bonds in their trade or business. Such entities or persons should
consult their tax advisors before purchasing shares of either Fund.
Issuers of bonds purchased by the Fund (or the beneficiary of such bonds) may
have made certain representations or covenants in connection with the issuance
of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
federal income taxation retroactively to the date of issuance of
S-46
<PAGE> 47
the bonds to which such dividends are attributable if such representations are
determined to have been inaccurate or if the issuer of such bonds (or the
beneficiary of such bonds) fails to comply with such covenants.
If a Fund should fail to qualify as a regulated investment company for any
taxable year, the Fund would pay tax on its taxable investment income and
capital gains at regular corporate rates without any deductions for amounts
distributed to Shareholders. In addition, all of the Fund's distributions to
Shareholders would be taxable as ordinary income and would qualify for the
corporate dividends-received deduction in the case of corporate shareholders.
STATE TAXES
A Fund is generally not liable for any income or franchise tax in Maryland if
it qualifies as a RIC for federal income tax purposes. Depending upon
applicable state and local law, distributions by the Funds to Shareholders and
the ownership of shares may be subject to state and local taxes.
Many states allow income received from certain United States Government
obligations that is tax exempt when received directly to be tax exempt when
received as income dividends from an investment company. Not all states permit
such income dividends to be tax exempt and some require that a certain minimum
percentage of an investment company's income dividend be derived from state
tax-exempt interest before any portion of the income dividends may be exempt.
The Funds will inform Shareholders annually of the percentage of income that is
derived from direct United States Government obligations. Shareholders should
consult their tax advisors to determine whether any portion of the income
dividends received from a Fund is considered tax exempt in their particular
states.
PENNSYLVANIA TAXATION
Dividends paid by a Fund will not be subject to the Pennsylvania personal
income tax or to the Philadelphia School District investment net income tax to
the extent that the dividends are attributable to interest received by such
Fund from its investments in obligations issued by the Commonwealth of
Pennsylvania, any public authority, commission, board or other agency created
by the Commonwealth, any political subdivision of the Commonwealth or any
public authority created by any such political subdivision (referred to as
"Pennsylvania Municipal Obligations"), and obligations issued by the U.S.
Government, including obligations issued by U.S. possessions (referred to as
"U.S. Obligations"). Dividends or distributions by the Fund to a Pennsylvania
resident that are attributable to other sources may be subject to the
Pennsylvania personal income tax and (for
S-47
<PAGE> 48
residents of Philadelphia) to the Philadelphia School District investment net
income tax.
Dividends paid by a Fund which are excludable as exempt income for federal tax
purposes are not subject to the Pennsylvania corporate net income tax. An
additional deduction from Pennsylvania taxable income is permitted for the
amount of dividends paid by a Fund attributable to interest received by the
Fund from its investments in Pennsylvania Municipal Obligations and U.S.
Obligations to the extent included in federal taxable income, but such a
deduction is reduced by any interest on indebtedness incurred to carry the
securities and other expenses incurred in the production of such interest
income, including expenses deducted on the federal income tax return that would
not have been allowed under the Internal Revenue Code if the interest were
exempt from federal income tax. Dividends or distributions by a Fund
attributable to other sources may be subject to the Pennsylvania corporate net
income tax. It is the current position of the Pennsylvania Department of
Revenue that shares of a Fund are considered exempt assets (with a PRO RATA
exclusion based on the value of the Fund attributable to its investments in
Pennsylvania Municipal Obligations and U.S. Obligations) for purposes of
determining a corporation's capital stock value subject to the Pennsylvania
capital stock/franchise tax.
Shares of a Fund are exempt from personal property taxes imposed by some
counties in Pennsylvania to the extent that the Fund's portfolio consists of
Pennsylvania Municipal Obligations and U.S. Obligations.
FUND TRANSACTIONS
Subject to policies established by the Directors, the Adviser and Sub-Advisers
are responsible for placing the orders to execute transactions for the Funds.
In placing orders, it is the policy of the Adviser and Sub-Adviser to seek to
obtain the best net results taking into account such factors as price
(including the applicable dealer spread), the size, type and difficulty of the
transaction involved, the firm's general execution and operational facilities,
and the firm's risk in positioning the securities involved. While the Adviser
and Sub-Adviser generally seeks reasonably competitive spreads or commissions,
the Corporation will not necessarily be paying the lowest spread or commission
available. The Corporation will not purchase portfolio securities from any
affiliated person acting as principal except in conformity with the regulations
of the Securities and Exchange Commission (the "SEC").
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the
Adviser and Sub-Adviser will deal
S-48
<PAGE> 49
directly with the dealers who make a market in the securities involved except
in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money
market securities are generally traded on a net basis and do not normally
involve either brokerage commissions or transfer taxes. The cost of executing
portfolio securities transactions of the Corporation will primarily consist of
dealer spreads and underwriting commissions.
The Corporation does not expect to use one particular dealer, but subject to
the Corporation's policy of seeking the best net results, dealers who provide
supplemental investment research to the Adviser and Sub-Advisers may receive
orders for transactions by the Corporation. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Adviser and Sub-Advisers under their Advisory Agreements, and the expenses of
the Adviser and Sub-Advisers will not necessarily be reduced as a result of the
receipt of such supplemental information.
It is expected that the Funds may execute brokerage or other agency
transactions through the Distributor which is a registered broker-dealer in
conformity with the 1940 Act, the Securities Exchange Act of 1934 and rules
promulgated by the SEC. Under these provisions, the Distributor (or an
affiliate of the Adviser) is permitted to receive and retain compensation for
effecting portfolio transactions for the Funds on an exchange if a written
contract is in effect between the Distributor and the Corporation expressly
permitting the Distributor to receive and retain such compensation.
These rules further require that commissions paid to the Distributor by the
Corporation for exchange transactions not exceed "usual and customary"
brokerage commissions. The rules define "usual and customary" commissions to
include amounts which are "reasonable and fair compared to the commission, fee
or other renumeration received or to be received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time." In
addition, the Funds may direct commission business to one more designated
broker/dealers, including the Distributor, in connection with such
broker/dealer's payment of certain of the Funds' expenses. The Directors,
including those who are not "interested persons" of the Corporation, have
adopted procedures for evaluating the reasonableness of commissions paid to the
Distributor and will review these procedures periodically.
Since the Corporation does not market its shares through intermediary
broker-dealers, it is not the Corporation's practice
S-49
<PAGE> 50
to allocate brokerage business on the basis of sales of its shares which may be
made through such firms. However, the Adviser may place Fund orders with
qualified broker-dealers who recommend the Corporation to clients, and may,
when a number of brokers and dealers can provide best price and execution on a
particular transaction, consider such recommendations by a broker or dealer in
selecting among broker-dealers.
The Portfolio turnover rate for each Non-Money Market Fund for the fiscal year
ended April 30, 1995, was 4%, 172%, 226% and 110% for the Pennsylvania
Municipal Bond, Intermediate Government Securities, GNMA Securities, and Equity
Growth Funds, respectively.
For the Fiscal Year ended April 30, 1995 the Equity Growth paid $143,000,
$2,557, and $57,200 in total dollar amount of brokerage commissions, total
brokerage commissions paid to SFS in connection with Repurchase Agreement
transactions, and total dollar amount of brokerage commissions paid for
research. No other Brokerage Transactions or Commissions were paid by this or
any other Fund for the Fiscal Year ended April 30, 1995.
DESCRIPTION OF SHARES
The Articles of Incorporation authorize the issuance of an unlimited number of
shares of each series and of each class of shares thereof. Each Class A and
Class B share of that Fund represents an equal proportionate interest in that
Fund with each other Class A and Class B shares of that Fund. Shareholders are
entitled upon liquidation to a pro rata share in the net assets of the Funds,
Shareholders have no preemptive rights. The Articles of Incorporation provide
that the Directors of the Corporation may create additional series of shares.
All consideration received by the Corporation for shares of any additional
series and all assets in which such consideration is invested would belong to
that series and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Corporation is a Maryland corporation.
5% SHAREHOLDERS
As of August 1, 1995, the following persons were the only persons who were
record owners (or to the knowledge of the Corporation, beneficial owners) of 5%
or more of the shares of the Portfolios.
S-50
<PAGE> 51
PENNSYLVANIA TAX-EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>
Name and Address Percent of Fund
- ---------------- ---------------
<S> <C>
Integra Trust Co., N.A. 89.86%
300 Fourth Avenue
Pittsburgh, PA 15278
Integra Financial Corporation 8.21%
Omnibus Account for Integra
Bank Pittsburgh
300 Fourth Avenue, 2-191
Pittsburgh, PA 15278
</TABLE>
PENNSYLVANIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Name and Address Percent of Fund
- ---------------- ---------------
<S> <C>
Integra Trust Co., N.A. 99.67%
300 Fourth Avenue
Pittsburgh, PA 15278
</TABLE>
PRIME OBLIGATIONS MONEY MARKET FUND
<TABLE>
<CAPTION>
Name and Address Percent of Fund
- ---------------- ---------------
<S> <C>
Integra Trust Co., N.A. 88.26%
Omnibus Account for Integra
Bank Pittsburgh
300 Fourth Avenue
Pittsburgh, PA 15278
Integra Financial Corporation 8.95%
300 Fourth Avenue
Pittsburgh, PA 15278
</TABLE>
TREASURY SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
Name and Address Percent of Fund
- ---------------- ---------------
<S> <C>
Integra Trust Co., N.A. 55.36%
300 Fourth Avenue
Pittsburgh, PA 15278
Integra Financial Corporation 42.36%
Omnibus Account for Integra
Bank Pittsburgh
300 Fourth Avenue
Pittsburgh, PA 15278
</TABLE>
S-51
<PAGE> 52
INTERMEDIATE GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Name and Address Percent of Fund
- ---------------- ---------------
<S> <C>
Integra Trust Co., N.A. 99.34%
300 Fourth Avenue
Pittsburgh, PA 15278
</TABLE>
GNMA SECURITIES FUND
<TABLE>
<CAPTION>
Name and Address Percent of Fund
- ---------------- ---------------
<S> <C>
Integra Trust Co., N.A. 98.84%
300 Fourth Avenue
Pittsburgh, PA 15278
</TABLE>
EQUITY GROWTH FUND
<TABLE>
<CAPTION>
Name and Address Percent of Fund
- ---------------- ---------------
<S> <C>
Integra Trust Co., N.A. 97.75%
300 Fourth Avenue
Pittsburgh, PA 15278
</TABLE>
EXPERTS
The financial statements included in this Statement of Additional Information
and the Selected Per Share Data and Ratios included in the Prospectuses have
been audited by Coopers & Lybrand L.L.P. independent public accountants, as
indicated in their report, with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving the report.
S-52
<PAGE> 53
STATEMENT OF NET ASSETS
----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND SHARES (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK (89.3%)
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE (4.6%)
Allied Signal . . . . . . . . . . . . . . . . . . . . 12,300 $ 487
Boeing . . . . . . . . . . . . . . . . . . . . . . . 3,000 165
General Dynamics . . . . . . . . . . . . . . . . . . 16,900 784
Textron . . . . . . . . . . . . . . . . . . . . . . . 4,000 228
United Technologies . . . . . . . . . . . . . . . . . 6,500 475
---------------------------------------------------------------------------------------------------------------
Total Aerospace . . . . . . . . . . . . . . . . 2,139
-----
AIR COURIER SERVICES (0.4%)
Federal Express* . . . . . . . . . . . . . . . . . . 3,000 204
---------------------------------------------------------------------------------------------------------------
Total Air Courier Services . . . . . . . . . . . 204
---
AUTOMOTIVE (1.2%)
Goodyear Tire & Rubber . . . . . . . . . . . . . . . 14,900 566
---------------------------------------------------------------------------------------------------------------
Total Automotive . . . . . . . . . . . . . . . . 566
---
BANKS (2.7%)
Bank of New York . . . . . . . . . . . . . . . . . . 1,500 49
Chemical Banking . . . . . . . . . . . . . . . . . . 18,000 752
First Chicago . . . . . . . . . . . . . . . . . . . . 4,600 254
Midlantic . . . . . . . . . . . . . . . . . . . . . . 5,400 197
---------------------------------------------------------------------------------------------------------------
Total Banks . . . . . . . . . . . . . . . . . . 1,252
-----
CHEMICALS (3.0%)
Air Products & Chemical . . . . . . . . . . . . . . . 2,200 $ 111
Dow Chemical . . . . . . . . . . . . . . . . . . . . 1,000 70
E.I. Du Pont de Nemours . . . . . . . . . . . . . . . 5,800 382
Eastman Chemical . . . . . . . . . . . . . . . . . . 9,500 538
Ethyl . . . . . . . . . . . . . . . . . . . . . . . . 11,900 128
Witco . . . . . . . . . . . . . . . . . . . . . . . . 6,000 172
---------------------------------------------------------------------------------------------------------------
Total Chemicals . . . . . . . . . . . . . . . . 1,401
-----
ENERGY (3.6%)
Amoco . . . . . . . . . . . . . . . . . . . . . . . . 6,000 394
Chevron . . . . . . . . . . . . . . . . . . . . . . . 6,300 298
Mobil . . . . . . . . . . . . . . . . . . . . . . . . 2,500 237
Royal Dutch Petroleum ADR . . . . . . . . . . . . . . 4,200 520
Unocal . . . . . . . . . . . . . . . . . . . . . . . 6,000 173
YPF Sociedad Anonima ADR . . . . . . . . . . . . . . 2,800 57
---------------------------------------------------------------------------------------------------------------
Total Energy . . . . . . . . . . . . . . . . . . 1,679
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-53
<PAGE> 54
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND SHARES (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ENVIRONMENTAL SERVICES (2.0%)
Malton Metal Technology* . . . . . . . . . . . . . . 14,000 243
Wheelabrator Technologies . . . . . . . . . . . . . . 23,000 334
WMX Technologies . . . . . . . . . . . . . . . . . . 13,500 368
---------------------------------------------------------------------------------------------------------------
Total Environmental
Services . . . . . . . . . . . . . . . . . . . 945
---
FINANCIAL SERVICES (2.7%)
Dean Witter Discover . . . . . . . . . . . . . . . . 5,900 250
Federal Home Loan
Mortgage Corporation . . . . . . . . . . . . . . . 7,000 457
Providian . . . . . . . . . . . . . . . . . . . . . . 16,200 553
---------------------------------------------------------------------------------------------------------------
Total Financial Services . . . . . . . . . . . . 1,260
-----
FOOD, BEVERAGE, TABACCO & HOUSEHOLD (8.5%)
Archer Daniels Midland . . . . . . . . . . . . . . . 5,150 $ 94
Coca Cola . . . . . . . . . . . . . . . . . . . . . . 6,000 349
Conagra . . . . . . . . . . . . . . . . . . . . . . . 8,000 266
Duracell International . . . . . . . . . . . . . . . 6,700 295
Newell . . . . . . . . . . . . . . . . . . . . . . . 5,600 132
Philip Morris . . . . . . . . . . . . . . . . . . . . 22,000 1,491
Premark International . . . . . . . . . . . . . . . . 2,600 125
RJR Nabisco Holdings* . . . . . . . . . . . . . . . . 20,560 563
Sysco . . . . . . . . . . . . . . . . . . . . . . . . 12,300 344
UST . . . . . . . . . . . . . . . . . . . . . . . . 10,000 281
---------------------------------------------------------------------------------------------------------------
Total Food, Beverage,
Tobacco & Household . . . . . . . . . . . . . 3,940
-----
HOUSEHOLD PRODUCTS (5.1%)
Colgate Palmolive . . . . . . . . . . . . . . . . . . 6,000 422
Illinois Tool Works . . . . . . . . . . . . . . . . . 10,000 501
Libbey . . . . . . . . . . . . . . . . . . . . . . . 15,000 291
Procter & Gamble . . . . . . . . . . . . . . . . . . 13,000 908
Sunbeam-Oster . . . . . . . . . . . . . . . . . . . . 11,600 251
---------------------------------------------------------------------------------------------------------------
Total Household Products . . . . . . . . . . . . 2,373
-----
INSURANCE (3.2%)
American International Group . . . . . . . . . . . . 3,200 342
Chubb . . . . . . . . . . . . . . . . . . . . . . . . 5,000 400
MGIC Investment . . . . . . . . . . . . . . . . . . . 6,000 254
Travelers . . . . . . . . . . . . . . . . . . . . . . 12,300 509
---------------------------------------------------------------------------------------------------------------
Total Insurance . . . . . . . . . . . . . . . . 1,505
-----
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-54
<PAGE> 55
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND SHARES (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LEISURE (4.0%)
Autotate, CI A* . . . . . . . . . . . . . . . . . . . 27,000 $ 118
Carnival Cruise Lines, CI A . . . . . . . . . . . . . 38,600 960
Circus Circus Enterprises* . . . . . . . . . . . . . 5,300 176
Disney . . . . . . . . . . . . . . . . . . . . . . . 5,000 277
Mattel . . . . . . . . . . . . . . . . . . . . . . . 15,000 356
---------------------------------------------------------------------------------------------------------------
Total Leisure . . . . . . . . . . . . . . . . . 1,887
-----
MACHINERY (5.6%)
Emerson Electric . . . . . . . . . . . . . . . . . . 5,300 356
Foster Wheeler . . . . . . . . . . . . . . . . . . . 15,000 555
General Electric . . . . . . . . . . . . . . . . . . 21,800 1,221
General Signal . . . . . . . . . . . . . . . . . . . 10,000 371
Tyco International . . . . . . . . . . . . . . . . . 2,000 105
---------------------------------------------------------------------------------------------------------------
Total Machinery . . . . . . . . . . . . . . . . 2,608
-----
MEDIA (4.5%)
American Greetings, CI A . . . . . . . . . . . . . . 15,000 409
British Sky
Broadcasting Group* . . . . . . . . . . . . . . . . 1,000 24
Capital Cities ABC . . . . . . . . . . . . . . . . . 5,000 423
Scripps E.W. . . . . . . . . . . . . . . . . . . . . 13,000 372
Tele-Communications, CI A* . . . . . . . . . . . . . 41,100 785
Viacom, CI B Non-Voting* . . . . . . . . . . . . . . 1,300 60
---------------------------------------------------------------------------------------------------------------
Total Media . . . . . . . . . . . . . . . . . . 2,073
-----
MEDICAL PRODUCTS & SERVICES (9.2%)
Allergan . . . . . . . . . . . . . . . . . . . . . . 18,900 513
Beverly Enterprises* . . . . . . . . . . . . . . . . 10,000 144
Boston Scientific* . . . . . . . . . . . . . . . . . 12,977 354
Bristol Myers Squibb . . . . . . . . . . . . . . . . 4,000 261
Columbia/HCA Healthcare . . . . . . . . . . . . . . . 14,620 614
Fisher Scientific . . . . . . . . . . . . . . . . . . 11,400 355
Humana* . . . . . . . . . . . . . . . . . . . . . . . 5,600 $ 109
Merck . . . . . . . . . . . . . . . . . . . . . . . . 19,100 817
Schering Plough . . . . . . . . . . . . . . . . . . . 3,800 286
Smith Kline Beecham PLC . . . . . . . . . . . . . . . 16,400 638
United Healthcare . . . . . . . . . . . . . . . . . . 1,900 69
Warner Lambert . . . . . . . . . . . . . . . . . . . 1,700 136
---------------------------------------------------------------------------------------------------------------
Total Medical Products
& Services . . . . . . . . . . . . . . . . . . 4,296
-----
MISCELLANEOUS (1.1%)
ITT . . . . . . . . . . . . . . . . . . . . . . . . 4,900 512
---------------------------------------------------------------------------------------------------------------
Total Miscellaneous . . . . . . . . . . . . . . 512
---
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-55
<PAGE> 56
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND SHARES (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PAPER (0.9%)
Fort Howard* . . . . . . . . . . . . . . . . . . . . 10,000 128
International Paper . . . . . . . . . . . . . . . . . 700 54
Union Camp . . . . . . . . . . . . . . . . . . . . . 5,000 250
---------------------------------------------------------------------------------------------------------------
Total Paper . . . . . . . . . . . . . . . . . . 432
---
RETAIL (9.0%)
Albertsons . . . . . . . . . . . . . . . . . . . . . 4,200 133
American Stores . . . . . . . . . . . . . . . . . . . 6,600 169
Barnes & Noble* . . . . . . . . . . . . . . . . . . . 4,300 123
Federated Department Stores* . . . . . . . . . . . . 13,500 285
Home Depot . . . . . . . . . . . . . . . . . . . . . 36,100 1,507
Limited . . . . . . . . . . . . . . . . . . . . . . . 8,000 171
McDonalds . . . . . . . . . . . . . . . . . . . . . . 23,500 823
Wal-Mart Stores . . . . . . . . . . . . . . . . . . . 26,900 639
Wendy's International . . . . . . . . . . . . . . . . 21,000 357
---------------------------------------------------------------------------------------------------------------
Total Retail . . . . . . . . . . . . . . . . . . 4,207
-----
STEEL & STEEL WORKS (0.5%)
Nucor . . . . . . . . . . . . . . . . . . . . . . . . 4,900 $ 235
---------------------------------------------------------------------------------------------------------------
Total Steel & Steel Works . . . . . . . . . . . 235
---
TECHNOLOGY (12.9%)
AMP . . . . . . . . . . . . . . . . . . . . . . . . 20,000 855
Automatic Data Processing . . . . . . . . . . . . . . 3,900 251
Avnet . . . . . . . . . . . . . . . . . . . . . . . . 5,400 240
Eastman Kodak . . . . . . . . . . . . . . . . . . . . 1,000 58
General Motors, CI E . . . . . . . . . . . . . . . . 1,500 65
Intel . . . . . . . . . . . . . . . . . . . . . . . . 5,000 512
Microsoft* . . . . . . . . . . . . . . . . . . . . . 3,700 303
Motorola . . . . . . . . . . . . . . . . . . . . . . 25,300 1,437
Oracle Systems* . . . . . . . . . . . . . . . . . . . 9,200 281
Scientific-Atlanta . . . . . . . . . . . . . . . . . 32,500 739
Sensormatic Electors . . . . . . . . . . . . . . . . 10,000 298
Texas Instruments . . . . . . . . . . . . . . . . . . 2,100 223
Xerox . . . . . . . . . . . . . . . . . . . . . . . . 6,000 739
---------------------------------------------------------------------------------------------------------------
Total Technology . . . . . . . . . . . . . . . . 6,001
-----
TELEPHONES & TELECOMMUNICATION (4.6%)
Alltel . . . . . . . . . . . . . . . . . . . . . . . 7,300 181
AT&T . . . . . . . . . . . . . . . . . . . . . . . . 35,500 1,801
LDDS Communication* . . . . . . . . . . . . . . . . . 6,400 154
---------------------------------------------------------------------------------------------------------------
Total Telephones
& Telecommunication . . . . . . . . . . . . . 2,136
-----
TOTAL COMMON STOCK
(Cost $38,903) . . . . . . . . . . . . . . . . . . . 41,651
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-56
<PAGE> 57
STATEMENT OF NET ASSETS
----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
MARKET
VALUE
(000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (11.8%)
- --------------------------------------------------------------------------------------------------------------------
Paine Webber
5.93%, dated 4/28/95, matures 5/1/95,
repurchase price $5,549,608
(collateralized by FNMA REMIC,
par value $20,670,000, matures
11/25/19, market value
$5,535,348 FNMA REMIC,
par value $5,345,000, matures
2/25/17, market value
$178,031) . . . . . . . . . . . . . . . . . . . $5,526
- --------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $5,526) . . . . . . . . . . . . . . . . . . . . 5,526
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.1%)
(Cost $44,429) . . . . . . . . . . . . . . . . . . . 47,177
- --------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-1.1%) . . . . . . . . . (520)
- --------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A ($.00001 par value --
2 billion authorized) based on 4,363,371 outstanding
shares of beneficial interest . . . . . . . . . . . . 43,438
Accumulated net Realized Gain
on investments . . . . . . . . . . . . . . . . . . . 471
Net Unrealized Appreciation
on investments . . . . . . . . . . . . . . . . . . . 2,748
- --------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS: (100.0%) . . . . . . . . . . . . . . . . $46,657
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A . . . . . . . . . . . . . . . $ 10.69
Maximum Sales Charge of 4.00% . . . . . . . . . . . . . . . 0.45
----
OFFERING PRICE PER SHARE -- CLASS A+ . . . . . . . . . . . $ 11.14
=====
- --------------------------------------------------------------------------------------------------------------------
<FN>
____________________
* Non-income producing securities.
+ The offering price is calculated by dividing the net asset value by 1
minus the maximum sales charge of 4.00%.
ADR American Depository Receipt
FNMA Federal National Mortgage Association
PLC Public Limited Corporation
REMIC Real Estate Mortgage Investment Conduit
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-57
<PAGE> 58
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (0000) (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (99.0%)
- --------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA (99.0%)
Dauphin County, Pennsylvania
General Authority
Health Center, RB
5.150%, 01/01/97 . . . . . . . . . . . . . . . . $1,000 $ 998
Delaware Valley, Pennsylvania
Regional Finance Authority
Local Government, Ser D, RB
4.700%, 05/07/95 (A) (B) . . . . . . . . . . . . 900 900
Elizabeth Forward, Pennsylvania
School District, MBIA, GO,
Prerefunded 05/01/96 at 100
8.000%, 05/01/02 . . . . . . . . . . . . . . . . 1,000 1,034
Erie County, Pennsylvania Prison
Authority, MBIA, RB,
Prerefunded 11/01/01 at 100
6.600%, 11/01/02 . . . . . . . . . . . . . . . . 1,000 1,085
Hampton Township, Pennsylvania
School District, Ser A, FGIC,
GO, Prerefunded
02/15/01 at 100
6.900%, 02/15/10 . . . . . . . . . . . . . . . . 1,000 1,091
Langhorne, Pennsylvania, Saint
Mary's Hospital Authority
Franciscan Health Systems,
Ser C, RB
5.150%, 05/07/95 (A)(B) . . . . . . . . . . . . 400 400
Lehigh County, Pennsylvania,
Ser A, AMBAC, GO,
Prerefunded 10/15/99 at 100
6.000%, 10/15/11 . . . . . . . . . . . . . . . . 1,250 1,302
Monroeville, Pennsylvania Hospital
Authority East Suburban Health
Center Project, RB, Prerefunded
07/01/04 at 100
7.600%, 07/01/08 . . . . . . . . . . . . . . . . 325 366
Montgomery County, Pennsylvania
Higher Educational & Health
Authority Hospital Revenue,
AMBAC, RB
4.500%, 05/07/95 (A) . . . . . . . . . . . . . . $ 500 $ 500
Mount Lebanon, Pennsylvania
Hospital Authority, FGIC, RB,
Prerefunded 01/01/96
at 102
9.125%, 07/01/06 . . . . . . . . . . . . . . . . 1,400 1,470
Northampton County, Pennsylvania
Higher Education Authority
Lehigh University Project, RB
5.500%, 09/01/98 . . . . . . . . . . . . . . . . 1,030 1,048
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-58
<PAGE> 59
STATEMENT OF NET ASSETS
INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pennsylvania Infrastructure
Investment Authority Pennvest,
Subser B, RB
6.450%, 09/01/04 . . . . . . . . . . . . . . . . 1,500 1,613
Pennsylvania Intergovernmental
Co-op Authority Special Tax
City of Philadelphia Funding
Project, RB, Prerefunded
06/15/02 at 100
6.800%, 06/15/22 . . . . . . . . . . . . . . . . 1,500 1,647
Pennsylvania State Higher
Educational Facilities Authority
University of Pennsylvania
Project, Ser A, RB
6.500%, 09/01/04 . . . . . . . . . . . . . . . . 250 271
5.550%, 09/01/09 . . . . . . . . . . . . . . . . 1,300 1,263
Pennsylvania State Turnpike
Commission, FGIC, RB,
Escrowed to maturity
6.700%, 12/01/97 . . . . . . . . . . . . . . . . 1,100 1,159
Pennsylvania State Turnpike
Commission, Ser K, RB,
Escrowed to Maturity
7.250%, 12/01/99 . . . . . . . . . . . . . . . . 1,230 1,347
Pennsylvania State Turnpike
Commission, Ser O, FGIC, RB
5.250%, 12/01/01 . . . . . . . . . . . . . . . . 1,010 1,014
Pennsylvania State, Ser 1, GO
6.200%, 09/15/04 . . . . . . . . . . . . . . . . $ 900 $ 954
Pennsylvania State, Ser 2, GO
4.750%, 06/15/98 . . . . . . . . . . . . . . . . 565 559
Pennsylvania State, Ser 3, GO,
Prerefunded 10/15/95 at 102
8.700%, 04/15/05 . . . . . . . . . . . . . . . . 1,000 1,039
Philadelphia, Pennsylvania Gas
Works, Ser 13, RB, Prerefunded
06/15/01 at 102
7.700%, 06/15/11 . . . . . . . . . . . . . . . . 460 530
Philadelphia, Pennsylvania
Hospital & Higher Educational
Facilities Authority Children's
Hospital Project, Ser A, RB,
Prerefunded 07/01/97 at 100
7.000%, 07/01/15 . . . . . . . . . . . . . . . . 1,000 1,049
Philadelphia, Pennsylvania School
District GO, TRAN
4.750%, 06/30/95 . . . . . . . . . . . . . . . . 1,400 1,400
Philadelphia, Pennsylvania Water
& Waste Authority, MBIA, RB
5.500%, 06/15/07 . . . . . . . . . . . . . . . . 1,500 1,485
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-59
<PAGE> 60
STATEMENT OF NET ASSETS
INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (000) (000)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pittsburgh & Allegheny County,
Pennsylvania Auditorium
Authority, RB
6.400%, 12/01/01 . . . . . . . . . . . . . . . . 700 720
Pittsburgh, Pennsylvania Water &
Sewer Authority, Ser A, FGIC,
Escrowed to Maturity
6.000%, 09/01/97 . . . . . . . . . . . . . . . . 1,000 1,030
Pittsburgh, Pennsylvania
Ser A, MBIA, GO
5.500%, 09/01/06 . . . . . . . . . . . . . . . . 955 944
Schuylkill County, Pennsylvania
Industrial Development
Authority Northeastern
Power Project, RB
5.100%, 05/07/95 (A)(B) . . . . . . . . . . . . 500 500
Scranton-Lackawanna,
Pennsylvania Health &
Welfare Authority, RB,
Escrowed to Maturity
6.625%, 07/01/09 . . . . . . . . . . . . . . . . $ 595 $ 652
Seneca Valley, Pennsylvania
School District, Ser A,
FGIC, GO
5.700%, 07/01/06 . . . . . . . . . . . . . . . . 1,000 1,000
Southeastern Pennsylvania
Transportation Authority
Lease Project, RB
5.750%, 12/01/04 . . . . . . . . . . . . . . . . 775 776
Swarthmore Borough, Pennsylvania
College Authority, RB
6.000%, 09/15/06 . . . . . . . . . . . . . . . . 855 880
Tyrone, Pennsylvania School
District, MBIA, GO
5.700%, 09/15/08 . . . . . . . . . . . . . . . . 1,250 1,228
Union City, Pennsylvania Higher
Educational Facilities
Financing Authority Bucknell
University Project, MBIA, RB
6.200%, 04/01/06 . . . . . . . . . . . . . . . . 1,000 1,053
--------------------------------------------------------------------------------------------------------------
Total Pennsylvania . . . . . . . . . . . . . 34,302
------
- -------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $34,098) . . . . . . . . . . . . . . . . . . . 34,302
TOTAL INVESTMENTS (99.0%)
(Cost $34,098) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,302
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (1.0%) . . . . . . . . . . . . . . . . . . . . . 336
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-60
<PAGE> 61
STATEMENT OF NET ASSETS
INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
PENNSYLVANIA VALUE
MUNICIPAL BOND FUND (000)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSETS:
Portfolio shares of Class A
($.00001 par value --
2 billion authorized) based on
3,451,068 outstanding shares
of beneficial interest . . . . . . . . . . . . . . . 34,434
Net Unrealized Appreciation
on investments . . . . . . . . . . . . . . . . . . . 204
- -------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS: (100.0%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34,638
- -------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.04
Maximum Sales Charge of 4.00% . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.42
----
OFFERING PRICE PER SHARE -- CLASS A+ . . . . . . . . . . . . . . . . . . . . . . . $ 10.46
=====
- -------------------------------------------------------------------------------------------------------------------------
<FN>
___________
* The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 4.00%.
(A) Floating Rate instrument with Demand Features. Rate reflected on the Statement of Net Assets is the rate in
effect on April 30, 1995. The date shown is the longer of the reset date or the demand date.
(B) Security is backed by a letter of credit.
AMBAC American Municipal Bond Assurance Company
FGIC Financial Guaranty Insurance Company
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
TRAN Tax and Revenue Anticipation Note
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-61
<PAGE> 62
STATEMENT OF NET ASSETS
INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER (80.5%)
- -----------------------------------------------------------------------------------------------------------------
American Express Credit
6.030%, 07/17/95 . . . . . . . . . . . . . . . . . . $ 4,000 $ 3,948
6.100%, 07/21/95 . . . . . . . . . . . . . . . . . . 5,000 4,931
American General Finance
6.200%, 05/26/95 . . . . . . . . . . . . . . . . . . 5,000 4,978
American Home Products
6.050%, 06/12/95 . . . . . . . . . . . . . . . . . . 5,000 4,965
Associates Corporation of
North America
6.030%, 05/24/95 . . . . . . . . . . . . . . . . . . 5,000 4,981
Bear Stearns
6.070%, 05/08/95 . . . . . . . . . . . . . . . . . . 6,000 5,993
6.030%, 05/12/95 . . . . . . . . . . . . . . . . . . 3,000 2,994
Beneficial
6.150%, 05/15/95 . . . . . . . . . . . . . . . . . . 4,000 3,990
Chrysler Financial
6.080%, 05/08/95 . . . . . . . . . . . . . . . . . . 3,000 2,996
CIESCO
6.030%, 06/20/95 . . . . . . . . . . . . . . . . . . 9,000 8,925
CIT Group Holdings
6.030%, 05/25/95 . . . . . . . . . . . . . . . . . . 3,000 2,988
6.100%, 07/05/95 . . . . . . . . . . . . . . . . . . 5,000 4,945
Coca-Cola Enterprises
6.010%, 06/13/95 (B) . . . . . . . . . . . . . . . . 3,000 2,978
Commercial Credit
6.020%, 05/16/95 . . . . . . . . . . . . . . . . . . 3,000 2,992
Corporate Asset Funding
6.000%, 05/25/95 . . . . . . . . . . . . . . . . . . 7,000 6,972
Corporate Receivable
6.050%, 05/15/95 . . . . . . . . . . . . . . . . . . 7,000 6,984
6.000%, 06/08/95 . . . . . . . . . . . . . . . . . . 3,000 2,981
CSW Credit
6.020%, 06/02/95 . . . . . . . . . . . . . . . . . . 5,000 4,973
6.000%, 06/14/95 . . . . . . . . . . . . . . . . . . 5,000 4,963
Dean Witter Discover
6.020%, 06/01/95 . . . . . . . . . . . . . . . . . . 9,000 8,954
Falcon Asset Securitization
6.000%, 06/20/95 (B) . . . . . . . . . . . . . . . . 6,500 6,446
General Electric Capital
6.150%, 05/10/95 . . . . . . . . . . . . . . . . . . $3,000 $2,995
6.170%, 05/17/95 . . . . . . . . . . . . . . . . . . 2,000 1,995
General Motors Acceptance
6.300%, 05/01/95 . . . . . . . . . . . . . . . . . . 4,000 4,000
6.180%, 06/21/95 . . . . . . . . . . . . . . . . . . 5,000 4,956
Household Finance
6.050%, 06/12/95 . . . . . . . . . . . . . . . . . . 5,000 4,965
6.000%, 06/19/95 . . . . . . . . . . . . . . . . . . 3,000 2,976
IBM Credit
6.000%, 07/26/95 . . . . . . . . . . . . . . . . . . 8,000 7,885
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-62
<PAGE> 63
STATEMENT OF NET ASSETS
INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Lease Finance
6.000%, 05/08/95 . . . . . . . . . . . . . . . . . . 4,000 3,995
6.020%, 05/30/95 . . . . . . . . . . . . . . . . . . 5,000 4,976
Matterhorn Capital
6.000%, 05/12/95 . . . . . . . . . . . . . . . . . . 3,919 3,912
McKenna Triangle
6.020%, 06/05/95 (B) . . . . . . . . . . . . . . . . 2,836 2,819
6.030%, 07/13/95 (B) . . . . . . . . . . . . . . . . 6,000 5,927
Merrill Lynch
6.070%, 05/08/95 . . . . . . . . . . . . . . . . . . 7,000 6,992
Norwest Corporation
6.150%, 05/01/95 . . . . . . . . . . . . . . . . . . 5,000 5,000
6.000%, 07/24/95 . . . . . . . . . . . . . . . . . . 5,000 4,930
Pepsico
6.150%, 05/18/95 . . . . . . . . . . . . . . . . . . 7,000 6,980
Philip Morris
6.020%, 06/06/95 . . . . . . . . . . . . . . . . . . 5,000 4,970
Preferred Receivables
6.000%, 05/03/95 . . . . . . . . . . . . . . . . . . 1,750 1,749
6.020%, 06/13/95 . . . . . . . . . . . . . . . . . . 3,000 2,978
Prudential Funding
6.250%, 05/18/95 . . . . . . . . . . . . . . . . . . 3,000 2,991
6.020%, 05/30/95 . . . . . . . . . . . . . . . . . . 5,000 4,976
Puerto Rico Development Bank
6.020%, 07/19/95 . . . . . . . . . . . . . . . . . . 5,000 4,934
Riverwood Funding
6.020%, 06/01/95 . . . . . . . . . . . . . . . . . . 7,000 6,964
Sears Roebuck Acceptance
6.020%, 05/22/95 . . . . . . . . . . . . . . . . . . 4,000 3,986
6.030%, 07/24/95 . . . . . . . . . . . . . . . . . . 5,000 4,930
Transamerica Finance
6.100%, 07/10/95 . . . . . . . . . . . . . . . . . . 7,000 6,917
Whirlpool Corporation
6.050%, 06/08/95 . . . . . . . . . . . . . . . . . . 5,000 4,968
6.030%, 06/09/95 . . . . . . . . . . . . . . . . . . 3,100 3,080
- -----------------------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $233,623) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,623
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (13.4%)
- -----------------------------------------------------------------------------------------------------------------
FHLMC
6.185%, 06/21/95 . . . . . . . . . . . . . . . . . . 6,000 5,949
6.235%, 07/07/95 . . . . . . . . . . . . . . . . . . 7,000 6,921
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-63
<PAGE> 64
STATEMENT OF NET ASSETS
INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FNMA
6.282%, 05/03/95 . . . . . . . . . . . . . . . . . . 8,000 7,998
6.438%, 06/12/95 . . . . . . . . . . . . . . . . . . 4,000 3,971
6.673%, 07/25/95 . . . . . . . . . . . . . . . . . . 3,825 3,767
6.706%, 07/26/95 . . . . . . . . . . . . . . . . . . 5,500 5,416
6.098%, 08/02/95 . . . . . . . . . . . . . . . . . . 5,000 4,924
- -----------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $38,946) . . . . . . . . . . . . . . . . . . . . . . . . . 38,946
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (5.2%)
- -----------------------------------------------------------------------------------------------------------------
First Alabama Bank
6.120%, 07/21/95 . . . . . . . . . . . . . . . . . . 6,000 6,000
West One Bank
6.050%, 05/11/95 . . . . . . . . . . . . . . . . . . $5,000 $5,000
6.100%, 06/13/95 . . . . . . . . . . . . . . . . . . 4,000 4,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $15,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
- -----------------------------------------------------------------------------------------------------------------
FLOATING RATE INSTRUMENT (1.0%)
- -----------------------------------------------------------------------------------------------------------------
Corestates Capital
6.080%, 05/10/95 (A) . . . . . . . . . . . . . . . . 3,000 3,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL FLOATING RATE INSTRUMENT
(Cost $3,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
- -----------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.4%)
- -----------------------------------------------------------------------------------------------------------------
Aubrey G. Lanston
5.90% dated 4/28/95, matures
05/01/95, repurchase price
$1,020,502 (collateralized by
U.S. Treasury Note, par value
$1,035,000, 6.875%, matures
02/28/97, market value $1,051,098) . . . . . . . . . . . . . . . . . . . . . 1,020
- -----------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,020
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%)
(Cost $291,589) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291,589
- -----------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.5%) . . . . . . . . . . . . . . . . . . . . . (1,531)
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value--2 billion
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-64
<PAGE> 65
STATEMENT OF NET ASSETS
INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
authorized) based on
290,057,695 outstanding shares
of beneficial interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $290,058
- -----------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS: (100.0%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $290,058
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- CLASS A . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
- -----------------------------------------------------------------------------------------------------------------
<FN>
(A) Floating Rate instrument with Demand Features. The rate reflected on the Statement of
Net Assets is the rate in effect on April 30, 1995. The date shown is the longer of the
reset date or the demand date.
(B) Securities sold within the terms of a private placement memorandum, exempt from registration
under Section 4(2) or 144A of the Securities Act of 1933, as amended, and may be sold only to
dealers in that program or other "accredited investors."
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-65
<PAGE> 66
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
FACE MARKET
TREASURY SECURITIES AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (41.4%)
- ----------------------------------------------------------------------------------------------------------------------------
United States Treasury Bills
6.380%, 08/10/95 . . . . . . . . . . . . . . . . . . $12,000 $ 11,794
5.870%, 09/14/95 . . . . . . . . . . . . . . . . . . 3,000 2,933
6.133%, 09/14/95 . . . . . . . . . . . . . . . . . . 5,000 4,889
5.750%, 10/05/95 . . . . . . . . . . . . . . . . . . 3,000 2,925
6.068%, 10/26/95 . . . . . . . . . . . . . . . . . . 6,000 5,828
United States Treasury Note
4.125%, 05/31/95 . . . . . . . . . . . . . . . . . . 5,000 4,992
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $33,361) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,361
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
VALUE
REPURCHASE AGREEMENTS (58.9%) (000)
- ----------------------------------------------------------------------------------------------------------------------------
Aubrey G. Lanston
5.90%, dated 04/28/95, matures
05/01/95, repurchase price
$12,005,900 (collateralized by
U.S. Treasury Note, par value
$12,210,000, 6.625%, matures
03/31/97, market value $12,271,903) . . . . . . . . . . . . . . . . . . . . . 12,000
Donaldson, Lufkin & Jenrette Securities
5.875%, dated 04/28/95, matures
05/01/95, repurchase price
$10,004,886 (collateralized by
U.S. Treasury Note, par value
$10,508,000, 5.875%, matures
03/31/99, market value $10,213,815) . . . . . . . . . . . . . . . . . . . . . 10,000
J.P. Morgan
5.90%, dated 04/28/95, matures
05/01/95, repurchase price
$13,397,584 (collateralized by
U.S. Treasury Note, par value
$10,755,000, 11.125%, matures
08/15/03, market value $13,668,408) . . . . . . . . . . . . . . . . . . . . . $13,391
Lehman Brothers
5.92%, dated 04/28/95, matures
05/01/95, repurchase price
$12,005,920 (collateralized by
U.S. Treasury Note, par value
$11,825,000, 7.875%, matures
07/31/96, market value $12,244,653) . . . . . . . . . . . . . . . . . . . . . 12,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $47,391) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,391
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(Cost $80,752) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,752
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-66
<PAGE> 67
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
FACE MARKET
TREASURY SECURITIES AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES, NET (-0.3%) . . . . . . . . . . . . . . . . . . . . . (261)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001
par value--2 billion authorized)
based on 80,476,836 outstanding
shares of beneficial interest . . . . . . . . . . . . . . . . . . . . . . . . 80,477
Accumulated Net Realized Gain on
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS: (100.0%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,491
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - CLASS A . . . . . . . . . . . . . . . . . . . . . . . . . . $1.00
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-67
<PAGE> 68
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
PENNSYLVANIA FACE
TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL BONDS (99.5%)
- ----------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA (94.7%)
Allegheny County, Pennsylvania
Higher Education Building
Authority University of Pittsburgh
Project, Ser 85B, RB
4.600%, 05/07/95 (A) (C) . . . . . . . . . . . . . . $ 600 $ 600
Allegheny County, Pennsylvania
Higher Education Building
Authority University of Pittsburgh
Project, Ser D, RB
4.600%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 570 570
Allentown, Pennsylvania Water
Authority, RB, Prerefunded at 100
8.875%, 05/15/95 (B) . . . . . . . . . . . . . . . . 250 250
Beaver County, Pennsylvania
Industrial Development Authority
Beaver Valley Project, TECP
3.850%, 05/12/95 (C) . . . . . . . . . . . . . . . . 1,500 1,500
Berks County, Pennsylvania Industrial
Development Authority ELF
Aquitaine, RB
4.825%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,800 1,800
Bethlehem, Pennsylvania School District
6.150%, 11/01/95 . . . . . . . . . . . . . . . . . . 355 357
Bucks County, Pennsylvania Industrial
Development Authority CPC
International Project, Ser 85, RB
4.410%, 05/07/95 (A) . . . . . . . . . . . . . . . . 2,000 2,000
Bucks County, Pennsylvania Industrial
Development Authority Edge Comb
Metals Project
4.825%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,830 1,830
Chartiers Valley, Pennsylvania
Industrial Development Authority
Sycamore Creek Project, RB
4.550%, 09/01/95 (A) (C) . . . . . . . . . . . . . . 1,830 1,830
Delaware County, Pennsylvania
Industrial Development Authority
Airport Facilities Revenue United
Parcel Services Project, RB
5.150%, 05/01/95 (A) . . . . . . . . . . . . . . . . $1,900 $1,900
Delaware County, Pennsylvania
Industrial Development Authority
BP Exploration & Oil Project, RB
4.850%, 05/01/95 (A) . . . . . . . . . . . . . . . . 800 800
Delaware County, Pennsylvania
Industrial Development Authority
Henderson Radnor Joint
Venture Project, RB
5.075%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 550 550
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-68
<PAGE> 69
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
PENNSYLVANIA FACE
TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware County, Pennsylvania
Industrial Development Authority
Philadelphia Electric Project,
FGIC, Ser B, RB, TECP
4.250%, 08/25/95 . . . . . . . . . . . . . . . . . . 500 500
Delaware County, Pennsylvania
Industrial Development Authority
Philadelphia Electric Project, TECP
4.050%, 05/05/95 . . . . . . . . . . . . . . . . . . 700 700
Delaware Valley, Pennsylvania
Regional Finance Authority
4.700%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,200 1,200
Delaware Valley, Pennsylvania
Regional Finance Authority Local
Government, Ser C, RB
4.700%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,000 1,000
Erie County, Pennsylvania Hospital
Authority Union City Memorial
Hospital Project, RB
5.050%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,200 1,200
Lancaster, Pennsylvania Higher
Education Authority Franklin &
Marshall Project, RB
4.625%, 05/07/95 (A) . . . . . . . . . . . . . . . . 1,650 1,650
Lehigh County, Pennsylvania General
Purpose Hospital Authority, TECP
4.250%, 07/14/95 (A) (C) . . . . . . . . . . . . . . 500 500
Lehigh County, Pennsylvania Sewer
Authority, Ser B, RB
4.500%, 05/07/95 (A) (C) . . . . . . . . . . . . . . $ 480 $ 480
Lehigh County, Pennsylvania Water
Authority, RB
4.500%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 885 885
Montgomery County, Pennsylvania
Higher Education & Health
Authority Hospital Revenue, RB
4.500%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 200 200
Montgomery County, Pennsylvania
Higher Education & Health
Authority United Hospitals Project,
Ser A, Prerefunded at 102
10.000%, 11/01/95 (B) . . . . . . . . . . . . . . . . 600 628
Montgomery County, Pennsylvania
Higher Education & Health
Authority United Hospitals Project,
Ser B, RB, Prerefunded at 102
9.750%, 11/01/95 (B) . . . . . . . . . . . . . . . . 230 241
Montgomery County, Pennsylvania
Industrial Development Authority
Ikea Property Project, RB
4.750%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,500 1,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-69
<PAGE> 70
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
PENNSYLVANIA FACE
TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Montgomery County, Pennsylvania
Industrial Development Authority
Merck & Company, RB
5.200%, 05/07/95 (A) . . . . . . . . . . . . . . . . 1,000 1,000
Montgomery County, Pennsylvania
Industrial Development Authority
Valley Square Project, RB
4.600%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 600 600
Montgomery County, Pennsylvania
Industrial Development Authority
Valley Square Project, Ser A
4.400%, 05/07/95 (A) . . . . . . . . . . . . . . . . 1,800 1,800
Moon Township, Pennsylvania
Industrial Development Authority
Executive Office Project, RB
4.750%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,500 1,500
Northumberland County, Pennsylvania
Industrial Development Authority
Atlas Development Project
4.850%, 05/07/95 (A) (C) . . . . . . . . . . . . . . $ 900 $ 900
Pennsbury, Pennsylvania School
District, FGIC, GO
4.400%, 08/15/95 . . . . . . . . . . . . . . . . . . 500 500
Pennsylvania Intergovernmental Co-op
Authority Special Tax Revenue City
of Philadelphia Funding Project, RB
9.000%, 06/15/95 . . . . . . . . . . . . . . . . . . 2,000 2,011
Pennsylvania State Higher Education
College & University Revenue,
Ser A, RB, Prerefunded at 100
9.125%, 06/01/95 (B) . . . . . . . . . . . . . . . . 1,800 1,807
Pennsylvania State Higher
Education Facility Authority
Temple University Project, RB
4.850%, 05/01/95 (A) (C) . . . . . . . . . . . . . . 2,200 2,201
Pennsylvania State Higher
Education, Ser D, MBIA, RB
6.600%, 06/15/95 . . . . . . . . . . . . . . . . . . 420 421
Pennsylvania State University
Project, Ser A
5.500%, 12/21/95 . . . . . . . . . . . . . . . . . . 1,800 1,804
Pennsylvania State, TAN
4.750%, 06/30/95 . . . . . . . . . . . . . . . . . . 1,500 1,502
Philadelphia, Pennsylvania Hospital
& Higher Education Facilities
Authority, Ser B, RB
4.750%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,800 1,800
Philadelphia, Pennsylvania
Industrial Development Authority
Multi-Family Housing Harbor
View Towers Project, RB
5.150%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,500 1,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-70
<PAGE> 71
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
PENNSYLVANIA FACE
TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Philadelphia, Pennsylvania School
District, GO, TRAN
4.750%, 06/30/95 . . . . . . . . . . . . . . . . . . 2,000 2,002
Philadelphia, Pennsylvania Updates,
GO, TECP
4.200%, 05/21/95 (A) (C) . . . . . . . . . . . . . . 1,800 1,800
Philadelphia, Pennsylvania, Ser E,
TRAN, GO
4.750%, 06/15/95 (C) . . . . . . . . . . . . . . . . $ 500 $ 500
Quakertown, Pennsylvania Hospital
Authority Group Pooled Financing, RB
4.550%, 05/07/95 (A) (C) . . . . . . . . . . . . . . 1,800 1,800
Sayre, Pennsylvania Health Care
Facilities Authority Capital
Financing Project, Ser F,
AMBAC, RB
4.750%, 05/07/95 (A) . . . . . . . . . . . . . . . . 1,300 1,300
Sayre, Pennsylvania Health Care
Facilities Authority Capital
Financing Project, Ser I,
AMBAC, RB
4.750%, 05/07/95 (A) . . . . . . . . . . . . . . . . 700 700
Schuylkill County, Pennsylvania
Industrial Development Authority
Westwood Energy Project, RB
5.200%, 05/01/95 (A) (C) . . . . . . . . . . . . . . 1,240 1,240
Woodland Hills, Pennsylvania
School District, FGIC, GO
8.100%, 08/15/95 . . . . . . . . . . . . . . . . . . 300 303
- ----------------------------------------------------------------------------------------------------------------------------
Total Pennsylvania . . . . . . . . . . . . . . . . . 53,662
------
PUERTO RICO (4.8%)
Puerto Rico Commonwealth Public
Improvement Bonds, FGIC, GO
6.400%, 07/01/95 . . . . . . . . . . . . . . . . . . 290 291
Puerto Rico Commonwealth, GO,
Prerefunded at 104
9.375%, 07/01/95 (B) . . . . . . . . . . . . . . . . 330 346
Puerto Rico Electric Power
Authority, Ser J, RB,
Prerefunded at 103
9.000%, 07/01/95 (B) . . . . . . . . . . . . . . . . 1,500 1,557
Puerto Rico Public Finance, Ser 85B
6.350%, 07/01/95 . . . . . . . . . . . . . . . . . . $ 510 $ 512
- ----------------------------------------------------------------------------------------------------------------------------
Total Puerto Rico . . . . . . . . . . . . . . . . . . 2,706
-----
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $56,368) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,368
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.5%)
(Cost $56,368) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,368
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-71
<PAGE> 72
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
PENNSYLVANIA FACE
TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES, NET (0.5%) . . . . . . . . . . . . . . . . . . . . . 300
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value--
2 billion authorized) based on
56,668,207 outstanding shares
of beneficial interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,668
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS: (100.0%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,668
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - CLASS A . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.00
<FN>
___________
(A) Floating Rate Instrument with Demand Features. The rate reflected on the
Statement of Net Assets is the rate in effect on April 30, 1995. The date
shown is the longer of the reset date or the demand date.
(B) Prerefunded Security - the maturity date shown is the prerefunded date.
(C) Security is backed by a letter of credit
AMBAC American Municipal Bond Assurance Company
FGIC Financial Guaranty Insurance Company
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
TAN Tax Anticipation Note
TECP Tax Exempt Commercial Paper
TRAN Tax and Revenue Anticipation Note
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-72
<PAGE> 73
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
FACE MARKET
INTERMEDIATE GOVERNMENT AMOUNT VALUE
SECURITIES FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (62.1%)
- ----------------------------------------------------------------------------------------------------------------------------
FHLMC
5.200%, 11/15/99 . . . . . . . . . . . . . . . . . . $ 500 $ 491
8.000%, 11/15/99 . . . . . . . . . . . . . . . . . . 2,000 2,043
5.250%, 09/15/06 . . . . . . . . . . . . . . . . . . 874 831
7.500%, 08/01/07 . . . . . . . . . . . . . . . . . . 10 10
6.000%, 05/15/21 . . . . . . . . . . . . . . . . . . 1,000 912
9.250%, 06/01/23 . . . . . . . . . . . . . . . . . . 169 173
FHLMC REMIC
5.200%, 09/15/05 . . . . . . . . . . . . . . . . . . 500 471
FNMA
5.390%, 08/05/98 . . . . . . . . . . . . . . . . . . 3,000 2,856
7.000%, 01/25/99 . . . . . . . . . . . . . . . . . . 1,250 1,243
7.000%, 12/17/06 . . . . . . . . . . . . . . . . . . 1,000 996
6.000%, 03/25/07 . . . . . . . . . . . . . . . . . . 1,000 924
6.500%, 05/25/15 . . . . . . . . . . . . . . . . . . 945 921
7.350%, 08/17/15 . . . . . . . . . . . . . . . . . . 2,000 2,004
7.464%, 11/01/17 . . . . . . . . . . . . . . . . . . 660 678
9.500%, 05/01/18 . . . . . . . . . . . . . . . . . . 215 225
GNMA
8.000%, 04/15/04 . . . . . . . . . . . . . . . . . . 281 281
8.000%, 08/15/06 . . . . . . . . . . . . . . . . . . 138 138
8.000%, 09/15/06 . . . . . . . . . . . . . . . . . . 37 37
8.000%, 12/15/06 . . . . . . . . . . . . . . . . . . 14 14
8.000%, 11/15/07 . . . . . . . . . . . . . . . . . . 148 148
8.000%, 12/15/07 . . . . . . . . . . . . . . . . . . 224 224
8.000%, 02/15/08 . . . . . . . . . . . . . . . . . . 141 141
8.000%, 05/15/08 . . . . . . . . . . . . . . . . . . 198 198
6.500%, 06/15/08 . . . . . . . . . . . . . . . . . . 309 297
6.500%, 08/15/08 . . . . . . . . . . . . . . . . . . 371 356
6.500%, 09/15/08 . . . . . . . . . . . . . . . . . . 699 671
6.500%, 10/15/08 . . . . . . . . . . . . . . . . . . 545 523
6.500%, 11/15/08 . . . . . . . . . . . . . . . . . . 970 931
6.500%, 12/15/08 . . . . . . . . . . . . . . . . . . 1,586 1,522
6.500%, 02/15/09 . . . . . . . . . . . . . . . . . . 507 486
6.500%, 03/15/09 . . . . . . . . . . . . . . . . . . 420 403
6.500%, 05/15/09 . . . . . . . . . . . . . . . . . . 72 69
6.500%, 06/15/09 . . . . . . . . . . . . . . . . . . 383 367
9.500%, 06/15/09 . . . . . . . . . . . . . . . . . . 88 92
9.500%, 07/15/09 . . . . . . . . . . . . . . . . . . 65 68
9.500%, 08/15/09 . . . . . . . . . . . . . . . . . . $ 12 $ 13
9.500%, 09/15/09 . . . . . . . . . . . . . . . . . . 39 41
9.500%, 10/15/09 . . . . . . . . . . . . . . . . . . 173 181
9.500%, 06/15/19 . . . . . . . . . . . . . . . . . . 498 524
8.000%, 02/15/22 . . . . . . . . . . . . . . . . . . 99 99
8.000%, 07/15/22 . . . . . . . . . . . . . . . . . . 1,033 1,033
8.500%, 07/15/22 . . . . . . . . . . . . . . . . . . 386 395
7.500%, 08/15/22 . . . . . . . . . . . . . . . . . . 25 24
8.000%, 11/15/22 . . . . . . . . . . . . . . . . . . 356 356
8.500%, 08/15/23 . . . . . . . . . . . . . . . . . . 60 61
7.000%, 09/15/23 . . . . . . . . . . . . . . . . . . 471 447
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-73
<PAGE> 74
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
FACE MARKET
INTERMEDIATE GOVERNMENT AMOUNT VALUE
SECURITIES FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7.000%, 04/15/24 . . . . . . . . . . . . . . . . . . 655 620
7.000%, 05/15/24 . . . . . . . . . . . . . . . . . . 513 486
9.000%, 11/01/24 (TBA) . . . . . . . . . . . . . . . 5,350 5,555
8.000%, 01/01/25 (TBA) . . . . . . . . . . . . . . . 1,520 1,524
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $32,788) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,103
- ----------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (46.5%)
- ----------------------------------------------------------------------------------------------------------------------------
United States Treasury Bond
12.000%, 08/15/13 . . . . . . . . . . . . . . . . . . 3,000 4,174
United States Treasury Notes
6.500%, 05/15/97 . . . . . . . . . . . . . . . . . . 1,500 1,497
8.500%, 07/15/97 . . . . . . . . . . . . . . . . . . 1,850 1,919
6.500%, 08/15/97 . . . . . . . . . . . . . . . . . . 7,500 7,477
8.875%, 11/15/97 . . . . . . . . . . . . . . . . . . 6,200 6,508
5.125%, 06/30/98 . . . . . . . . . . . . . . . . . . 1,000 954
5.125%, 11/30/98 . . . . . . . . . . . . . . . . . . 1,800 1,704
6.375%, 08/15/02 . . . . . . . . . . . . . . . . . . 600 579
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $24,520) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,812
- ----------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.8%)
- ----------------------------------------------------------------------------------------------------------------------------
Aubrey G. Lanston
5.90%, dated 04/28/95,
matures 05/01/95,
repurchase price $1,472,724
(collateralized by U.S. Treasury
Note, par value $1,525,000,
5.50%, matures 07/31/97,
market value $1,499,496) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,472
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,472) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,472
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (111.4% OF NET ASSETS)
(Cost $58,780) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59,387
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
____________
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
REMIC Real Estate Mortgage Investment Conduit
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-74
<PAGE> 75
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (116.7%)
- ----------------------------------------------------------------------------------------------------------------------------
FHLMC
7.500%, 04/01/00 . . . . . . . . . . . . . . . . . . $ 349 $ 351
7.500%, 10/01/01 . . . . . . . . . . . . . . . . . . 79 80
FNMA
7.350%, 08/17/15 . . . . . . . . . . . . . . . . . . 2,000 2,004
GNMA
8.000%, 01/15/06 . . . . . . . . . . . . . . . . . . 174 174
8.000%, 06/15/06 . . . . . . . . . . . . . . . . . . 129 129
8.000%, 07/15/06 . . . . . . . . . . . . . . . . . . 64 64
8.000%, 08/15/06 . . . . . . . . . . . . . . . . . . 601 601
8.000%, 12/15/06 . . . . . . . . . . . . . . . . . . 159 159
8.000%, 01/15/08 . . . . . . . . . . . . . . . . . . 59 59
8.000%, 02/15/08 . . . . . . . . . . . . . . . . . . 29 29
7.000%, 01/15/09 . . . . . . . . . . . . . . . . . . 25 24
6.500%, 02/15/09 . . . . . . . . . . . . . . . . . . 392 376
7.000%, 02/15/09 . . . . . . . . . . . . . . . . . . 184 180
6.500%, 03/15/09 . . . . . . . . . . . . . . . . . . 226 217
6.500%, 04/15/09 . . . . . . . . . . . . . . . . . . 367 352
9.000%, 05/15/09 . . . . . . . . . . . . . . . . . . 1,089 1,124
6.500%, 06/15/09 . . . . . . . . . . . . . . . . . . 465 446
9.000%, 06/15/09 . . . . . . . . . . . . . . . . . . 111 115
9.500%, 06/15/09 . . . . . . . . . . . . . . . . . . 64 68
9.500%, 07/15/09 . . . . . . . . . . . . . . . . . . 389 408
9.500%, 08/15/09 . . . . . . . . . . . . . . . . . . 687 721
9.500%, 09/15/09 . . . . . . . . . . . . . . . . . . 177 186
9.500%, 10/15/09 . . . . . . . . . . . . . . . . . . 149 157
9.500%, 11/15/09 . . . . . . . . . . . . . . . . . . 112 117
10.000%, 11/15/09 . . . . . . . . . . . . . . . . . . . 478 512
10.000%, 12/15/09 . . . . . . . . . . . . . . . . . . . 33 35
10.000%, 10/15/10 . . . . . . . . . . . . . . . . . . . 97 104
11.500%, 01/15/13 . . . . . . . . . . . . . . . . . . . 35 39
11.500%, 02/15/13 . . . . . . . . . . . . . . . . . . . 72 80
11.500%, 03/15/13 . . . . . . . . . . . . . . . . . . . 29 33
11.500%, 05/15/13 . . . . . . . . . . . . . . . . . . . 99 111
7.500%, 06/15/13 . . . . . . . . . . . . . . . . . . . 353 345
11.500%, 06/15/13 . . . . . . . . . . . . . . . . . . . 106 118
11.500%, 07/15/13 . . . . . . . . . . . . . . . . . . . 23 26
11.500%, 08/15/13 . . . . . . . . . . . . . . . . . . . 12 13
11.500%, 06/15/15 . . . . . . . . . . . . . . . . . . . 58 65
11.250%, 08/15/15 . . . . . . . . . . . . . . . . . . . 266 291
11.500%, 10/15/15 . . . . . . . . . . . . . . . . . . . 44 50
9.500%, 12/15/15 . . . . . . . . . . . . . . . . . . . 12 13
11.500%, 01/15/16 . . . . . . . . . . . . . . . . . . . 25 28
9.500%, 03/15/16 . . . . . . . . . . . . . . . . . . 198 209
9.000%, 06/15/16 . . . . . . . . . . . . . . . . . . 2,515 2,612
8.500%, 07/15/16 . . . . . . . . . . . . . . . . . . 19 19
9.000%, 07/15/16 . . . . . . . . . . . . . . . . . . 20 21
9.500%, 07/15/16 . . . . . . . . . . . . . . . . . . 7 8
9.000%, 08/15/16 . . . . . . . . . . . . . . . . . . 22 22
9.500%, 08/15/16 . . . . . . . . . . . . . . . . . . 184 194
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-75
<PAGE> 76
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.250%, 08/20/16 . . . . . . . . . . . . . . . . . . . . 44 47
8.500%, 09/15/16 . . . . . . . . . . . . . . . . . . 29 29
9.000%, 09/15/16 . . . . . . . . . . . . . . . . . . 21 22
9.500%, 09/15/16 . . . . . . . . . . . . . . . . . . 23 24
8.500%, 10/15/16 . . . . . . . . . . . . . . . . . . 69 70
9.500%, 10/15/16 . . . . . . . . . . . . . . . . . . 19 20
9.500%, 11/15/16 . . . . . . . . . . . . . . . . . . 87 92
9.000%, 12/15/16 . . . . . . . . . . . . . . . . . . 77 80
8.500%, 01/15/17 . . . . . . . . . . . . . . . . . . 301 308
9.500%, 01/15/17 . . . . . . . . . . . . . . . . . . 19 20
8.500%, 02/15/17 . . . . . . . . . . . . . . . . . . 501 511
9.000%, 02/15/17 . . . . . . . . . . . . . . . . . . 20 21
8.000%, 03/15/17 . . . . . . . . . . . . . . . . . . 17 17
8.500%, 03/15/17 . . . . . . . . . . . . . . . . . . 466 476
8.000%, 04/15/17 . . . . . . . . . . . . . . . . . . 126 126
8.000%, 05/15/17 . . . . . . . . . . . . . . . . . . 88 88
8.500%, 05/15/17 . . . . . . . . . . . . . . . . . . 224 229
9.500%, 05/15/17 . . . . . . . . . . . . . . . . . . 30 32
8.500%, 06/15/17 . . . . . . . . . . . . . . . . . . 262 267
9.000%, 06/15/17 . . . . . . . . . . . . . . . . . . 513 533
8.000%, 07/15/17 . . . . . . . . . . . . . . . . . . 107 107
8.500%, 07/15/17 . . . . . . . . . . . . . . . . . . 188 192
9.500%, 07/15/17 . . . . . . . . . . . . . . . . . . 63 67
8.500%, 08/15/17 . . . . . . . . . . . . . . . . . . 47 48
9.000%, 08/15/17 . . . . . . . . . . . . . . . . . . 382 397
9.500%, 08/15/17 . . . . . . . . . . . . . . . . . . 186 196
8.500%, 09/15/17 . . . . . . . . . . . . . . . . . . 72 73
9.500%, 09/15/17 . . . . . . . . . . . . . . . . . . 142 150
8.500%, 10/15/17 . . . . . . . . . . . . . . . . . . 19 19
9.500%, 10/15/17 . . . . . . . . . . . . . . . . . . 303 319
8.500%, 11/15/17 . . . . . . . . . . . . . . . . . . 69 71
8.500%, 12/15/17 . . . . . . . . . . . . . . . . . . 44 44
9.500%, 12/15/17 . . . . . . . . . . . . . . . . . . 31 33
9.500%, 03/15/18 . . . . . . . . . . . . . . . . . . 36 38
10.250%, 03/20/18 . . . . . . . . . . . . . . . . . . . . 162 171
9.500%, 04/15/18 . . . . . . . . . . . . . . . . . . 39 42
9.500%, 06/15/18 . . . . . . . . . . . . . . . . . . 98 103
9.500%, 07/15/18 . . . . . . . . . . . . . . . . . . 27 28
9.500%, 08/15/18 . . . . . . . . . . . . . . . . . . 48 50
9.500%, 09/15/18 . . . . . . . . . . . . . . . . . . 13 14
10.250%, 09/20/18 . . . . . . . . . . . . . . . . . . . . 192 203
9.500%, 10/15/18 . . . . . . . . . . . . . . . . . . 22 23
9.500%, 11/15/18 . . . . . . . . . . . . . . . . . . 17 18
8.500%, 12/15/18 . . . . . . . . . . . . . . . . . . 39 40
9.500%, 12/15/18 . . . . . . . . . . . . . . . . . . 100 106
9.500%, 01/15/19 . . . . . . . . . . . . . . . . . . 45 47
9.500%, 03/15/19 . . . . . . . . . . . . . . . . . . 12 13
9.500%, 05/15/19 . . . . . . . . . . . . . . . . . . 37 39
9.500%, 07/15/19 . . . . . . . . . . . . . . . . . . 12 13
9.500%, 09/15/19 . . . . . . . . . . . . . . . . . . 35 37
9.500%, 10/15/19 . . . . . . . . . . . . . . . . . . 44 46
9.500%, 12/15/19 . . . . . . . . . . . . . . . . . . 29 30
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-76
<PAGE> 77
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
9.500%, 06/15/20 . . . . . . . . . . . . . . . . . . 23 24
9.000%, 07/15/20 . . . . . . . . . . . . . . . . . . 330 343
9.500%, 07/15/20 . . . . . . . . . . . . . . . . . . 33 34
9.500%, 08/15/20 . . . . . . . . . . . . . . . . . . 48 50
9.500%, 10/15/20 . . . . . . . . . . . . . . . . . . 64 67
9.500%, 11/15/20 . . . . . . . . . . . . . . . . . . 110 116
9.500%, 12/15/20 . . . . . . . . . . . . . . . . . . 166 175
9.500%, 07/15/21 . . . . . . . . . . . . . . . . . . 45 47
8.000%, 11/15/21 . . . . . . . . . . . . . . . . . . 27 27
8.000%, 02/15/22 . . . . . . . . . . . . . . . . . . 737 737
8.000%, 05/15/22 . . . . . . . . . . . . . . . . . . 97 97
8.000%, 06/15/22 . . . . . . . . . . . . . . . . . . 459 459
7.000%, 11/15/22 . . . . . . . . . . . . . . . . . . 497 470
7.000%, 01/15/23 . . . . . . . . . . . . . . . . . . 447 423
7.000%, 04/15/23 . . . . . . . . . . . . . . . . . . 22 21
7.500%, 04/15/23 . . . . . . . . . . . . . . . . . . 35 34
7.500%, 06/15/23 . . . . . . . . . . . . . . . . . . 84 82
8.000%, 06/15/23 . . . . . . . . . . . . . . . . . . 536 536
7.000%, 07/15/23 . . . . . . . . . . . . . . . . . . 947 896
7.000%, 08/15/23 . . . . . . . . . . . . . . . . . . 945 895
7.000%, 09/15/23 . . . . . . . . . . . . . . . . . . 413 391
7.500%, 09/15/23 . . . . . . . . . . . . . . . . . . 33 32
7.500%, 10/15/23 . . . . . . . . . . . . . . . . . . 49 48
7.000%, 12/15/23 . . . . . . . . . . . . . . . . . . 1,698 1,608
7.000%, 01/15/24 . . . . . . . . . . . . . . . . . . 2,152 2,039
7.000%, 02/15/24 . . . . . . . . . . . . . . . . . . 1,801 1,705
7.000%, 03/15/24 . . . . . . . . . . . . . . . . . . 1,075 1,018
7.000%, 04/15/24 . . . . . . . . . . . . . . . . . . 846 801
7.000%, 05/15/24 . . . . . . . . . . . . . . . . . . 1,046 992
8.000%, 05/15/24 . . . . . . . . . . . . . . . . . . 104 104
7.000%, 06/15/24 . . . . . . . . . . . . . . . . . . 25 23
8.000%, 06/15/24 . . . . . . . . . . . . . . . . . . 396 396
8.000%, 08/15/24 . . . . . . . . . . . . . . . . . . 922 922
8.000%, 09/15/24 . . . . . . . . . . . . . . . . . . 406 406
9.000%, 11/01/24 (TBA) . . . . . . . . . . . . . . . 1,320 1,371
8.000%, 11/15/24 . . . . . . . . . . . . . . . . . . 102 104
9.000%, 11/15/24 . . . . . . . . . . . . . . . . . . 379 394
8.000%, 01/01/25 (TBA) . . . . . . . . . . . . . . . 10,640 10,666
9.000%, 01/15/25 . . . . . . . . . . . . . . . . . . 37 38
8.000%, 03/15/25 . . . . . . . . . . . . . . . . . . 485 486
9.000%, 03/15/25 . . . . . . . . . . . . . . . . . . 489 508
9.000%, 04/15/25 . . . . . . . . . . . . . . . . . . 768 798
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $48,814) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,261
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-77
<PAGE> 78
STATEMENT OF NET ASSETS
-----------------------
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (8.7%)
- ----------------------------------------------------------------------------------------------------------------------------
United States Treasury Bonds
12.000%, 08/15/13 . . . . . . . . . . . . . . . . . . . . $1,950 $2,714
9.250%, 02/15/16 . . . . . . . . . . . . . . . . . . 800 950
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $3,515) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,664
- ----------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.0%)
- ----------------------------------------------------------------------------------------------------------------------------
Aubrey G. Lanston 5.90%, dated
04/28/95, matures 05/01/95,
repurchase price $855,422,
(collateralized by U.S. Treasury
Note, par value $610,000,
11.75%, matures 11/15/14,
market value $874,290) . . . . . . . . . . . . . . . . . . . . . . . . . . . 855
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $855) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 855
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (127.4% OF NET ASSETS)
(Cost $53,182) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,780
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
[FN]
____________
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
The accompanying notes are an integral part of the financial statements.
S-78
<PAGE> 79
STATEMENTS OF ASSETS AND LIABILITIES
INVENTOR FUNDS
<TABLE>
<CAPTION>
INTERMEDIATE GNMA
GOVERNMENT SECURITIES
SECURITIES FUND(1) FUND
(000) (000)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments at market value (cost of $58,780 and
$53,182; respectively . . . . . . . . . . . . . . . . . . . . . . . . . . $59,387 $53,780
Receivable for investment securities sold . . . . . . . . . . . . . . . . . . 7,706 12,521
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785 336
------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,878 66,637
------- -------
LIABILITIES:
Payable for investment securities purchased . . . . . . . . . . . . . . . . 7,135 12,159
TBA sale commitment at value (proceeds
receivable of $7,087 and $12,049,
respectively) (See Note 2) . . . . . . . . . . . . . . . . . . . . . . . 7,041 11,971
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 295
------- -------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,562 24,425
------- -------
NET ASSETS:
Portfolio shares of Class A ($.00001 par value--2
billion authorized) based on 5,319,466 and
4,154,215 outstanding shares of beneficial
interest, respectively . . . . . . . . . . . . . . . . . . . . . . . . . 53,046 41,494
Accumulated net realized gain (loss) on
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (362) 80
Net unrealized appreciation on investments and
TBA sale commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 632 638
------- -------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $53,316 $42,212
======= =======
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE -
CLASS A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.02 $ 10.16
Maximum Sales Charge of 4.00% . . . . . . . . . . . . . . . . . . . . . . . . 0.42 0.42
------- -------
OFFERING PRICE PER SHARE - CLASS A+ . . . . . . . . . . . . . . . . . . . . . $ 10.44 $ 10.58
======= =======
<FN>
- ------------------
+ The offering price is calculated by dividing the net asset value by 1 minus the maximum sales charge of 4.00%.
(1) Commenced operations on August 10, 1994.
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-79
<PAGE> 80
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE
GROWTH GOVERNMENT
FUND(1) SECURITIES FUND(1)
(000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 549 $ --
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 2,561
------- -------
Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 824 2,561
------- -------
EXPENSES:
Investment advisory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278 255
12b-1 fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 91
Administrative fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 66
Transfer agent fees & expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 17
Registration & filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 18
Custody fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14
Trustee fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1
Miscellaneous fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 23
------- -------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485 485
------- -------
Less: Expenses waived . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (174) (175)
------- -------
Total net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 310
------- -------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 2,251
------- -------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . . . 556 (362)
Net change in unrealized appreciation of investments . . . . . . . . . . . . . . . . . . . 2,748 632
------- -------
Net realized and unrealized gain on investments . . . . . . . . . . . . . . . . . . . . . . 3,304 270
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . $ 3,817 $ 2,521
====== =======
<FN>
- --------------------
(1) Commenced operations on August 10, 1994.
(2) Commenced operations on August 8, 1994.
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-80
<PAGE> 81
INVENTOR FUNDS
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
GNMA PENNSYLVANIA OBLIGATIONS SECURITIES TAX-EXEMPT
SECURITIES MUNICIPAL BOND MONEY MARKET MONEY MARKET MONEY MARKET
FUND(1) FUND(1) FUND(2) FUND(2) FUND(2)
(000) (000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ -- $ -- $ -- $ -- $ --
2,203 1,176 9,538 2,388 1,341
------ ------ ------ ------ ------
2,203 1,176 9,538 2,388 1,341
------ ------ ------ ------ ------
205 168 752 194 161
73 60 418 108 89
53 43 251 65 54
15 17 36 17 17
14 12 105 25 20
29 5 19 21 4
1 1 5 1 1
19 20 107 22 23
------ ------ ------ ------ ------
409 326 1,693 453 369
------ ------ ------ ------ ------
(160) (122) (774) (216) (173)
------ ------ ------ ------ ------
249 204 919 237 196
------ ------ ------ ------ ------
1,954 972 8,619 2,151 1,145
------ ------ ------ ------ ------
80 -- -- 14 --
638 204 -- -- --
------ ------ ------ ------ ------
718 204 -- 14 --
------ ------ ------ ------ ------
$2,672 $1,176 $8,619 $2,165 $1,145
====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-81
<PAGE> 82
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE
GROWTH GOVERNMENT
FUND SECURITIES FUND
8/10/94(1) 8/10/94(1)
50 4/30/95 TO 4/30/95
(000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . $ 513 $ 2,251
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . 556 (362)
Net change in unrealized appreciation on
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,748 632
------- -------
Net increase resulting from operations . . . . . . . . . . . . . . . 3,817 2,521
------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . (513) (2,251)
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . (85) --
------- -------
Total dividends distributed . . . . . . . . . . . . . . . . . . . . . (598) (2,251)
------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued . . . . . . . . . . . . . . . . . . . . . . 55,864 66,686
Shares issued in lieu of cash distributions . . . . . . . . . . . . . . 1 2
Cost of shares repurchased . . . . . . . . . . . . . . . . . . . . . . (12,427) (13,642)
------- -------
Increase in net assets derived from capital
share transactions . . . . . . . . . . . . . . . . . . . . . . . . 43,438 53,046
------- -------
Net increase in net assets . . . . . . . . . . . . . . . . . . . . . . . 46,657 53,316
------- -------
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
------- -------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $46,657 $53,316
======= =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Shares issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,577 6,685
Shares issued in lieu of cash distributions . . . . . . . . . . . . . . -- --
Shares repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . (1,214) (1,366)
------- -------
Increase derived from capital share
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,363 5,319
------- -------
Capital shares outstanding at end of period . . . . . . . . . . . . . . . 4,363 5,319
======= =======
<FN>
- ------------------
(1) Commenced operations on August 10, 1994.
(2) Commenced operations on August 8, 1994.
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-82
<PAGE> 83
INVENTOR FUNDS
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
GNMA PENNSYLVANIA OBLIGATIONS SECURITIES TAX-EXEMPT
SECURITIES MUNICIPAL BOND MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND FUND
8/10/94(1) 8/10/94(1) 8/8/94(2) 8/8/94(2) 8/8/94(2)
TO 4/30/95 TO 4/30/95 TO 4/30/95 TO 4/30/95 TO 4/30/95
(000) (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 1,954 $ 972 $ 8,619 $ 2,151 $ 1,145
80 -- -- 14 --
638 204 -- -- --
------- ------- -------- -------- --------
2,672 1,176 8,619 2,165 1,145
------- ------- -------- -------- --------
(1,954) (972) (8,619) (2,151) (1,145)
-- -- -- -- --
------- ------- -------- -------- --------
(1,954) (972) (8,619) (2,151) (1,145)
-------- ------- -------- -------- --------
48,509 38,051 647,086 330,496 119,764
1 -- 52 71 11
(7,016) (3,617) (357,179) (250,090) (63,107)
-------- ------- -------- -------- --------
41,494 34,434 289,959 80,491 56,668
-------- ------- -------- -------- --------
42,212 34,638 289,959 80,491 56,668
-------- ------- -------- -------- --------
-- -- 99 -- --
------- ------- -------- -------- --------
$42,212 $34,638 $290,058 $ 80,491 $ 56,668
======= ======= ======== ======== ========
-- -- 99 -- --
4,855 3,816 647,086 330,496 119,764
-- -- 52 71 11
(701) (365) (357,179) (250,090) (63,107)
------- ------- -------- -------- --------
4,154 3,451 289,959 80,477 56,668
------- ------- -------- -------- --------
4,154 3,451 290,058 80,477 56,668
======= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-83
<PAGE> 84
FINANCIAL HIGHLIGHTS
For the period ended April 30, 1995
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
NET ASSET AND DISTRIBUTIONS FROM
VALUE NET UNREALIZED FROM NET REALIZED
BEGINNING INVESTMENT GAINS INVESTMENT CAPITAL
OF PERIOD INCOME ON SECURITIES INCOME GAINS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EQUITY GROWTH
- -------------
Class A
1995(1)(3) . . . . . . . . . . . . $10.00 $0.12 $0.71 $(0.12) $(0.02)
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A
1995(1)(3) . . . . . . . . . . . . 10.00 0.44 0.02 (0.44) --
GNMA SECURITIES
- ---------------
Class A
1995(1)(3) . . . . . . . . . . . . 10.00 0.48 0.16 (0.48) --
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A
1995(1)(3) . . . . . . . . . . . . 10.00 0.29 0.04 (0.29) --
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1995(2) . . . . . . . . . . . . . 1.00 0.04 -- (0.04) --
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1995(2) . . . . . . . . . . . . . 1.00 0.04 -- (0.04) --
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1995(2) . . . . . . . . . . . . . 1.00 0.02 -- (0.02) --
<FN>
- ---------------------
+ Returns are for the period indicated and have not been annualized.
1 Commenced operations on August 10, 1994. All ratios for the period have been annualized.
2 Commenced operations on August 8, 1994. All ratios for the period have been annualized.
3 Total Return does not reflect the sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
S-84
<PAGE> 85
INVENTOR FUNDS
--------------
<TABLE>
<CAPTION>
Ratio of Net
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME
NET ASSET NET ASSETS RATIO OF INVESTMENT TO AVERAGE TO AVERAGE
VALUE END EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO
END TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
OF PERIOD RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.69 8.33%+ $46,657 0.95% 1.57% 1.48% 1.04% 110%
10.02 4.75+ 53,316 0.85 6.17 1.33 5.69 172
10.16 6.61+ 42,212 0.85 6.68 1.40 6.13 226
10.04 3.38+ 34,638 0.85 4.05 1.36 3.5 4
1.00 3.76+ 290,058 0.55 5.16 1.01 4.70 --
1.00 3.60+ 80,491 0.55 5.00 1.05 4.50 --
1.00 2.32+ 56,668 0.55 3.21 1.04 2.72 --
</TABLE>
-85-
<PAGE> 86
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
1. ORGANIZATION
Inventor Funds, Inc. (the "Corporation") was organized as a Maryland
corporation under Articles of Incorporation dated April 22, 1994. The
Corporation is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company with seven funds:
Equity Growth Fund, Intermediate Government Securities Fund, GNMA Securities
Fund, Pennsylvania Municipal Bond Fund, Prime Obligations Money Market Fund,
Treasury Securities Money Market Fund, and Pennsylvania Tax-Exempt Money Market
Fund (referred to as a "Fund," or collectively as the "Funds"). The assets of
each Fund are segregated, and a shareholder's interest is limited to the Fund
in which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
followed by the Funds.
Security Valuation - Investment securities of the Prime Obligations
Money Market Fund, Treasury Securities Money Market Fund and the Pennsylvania
Tax-Exempt Money Market Fund (the "Money Market Funds") are stated at amortized
cost which approximates market value. Under this valuation method, purchase
discounts and premiums are accredited and amortized ratably to maturity and are
included in interest income. Investment securities of the Equity Growth Fund,
Intermediate Government Securities Fund, GNMA Securities Fund and the
Pennsylvania Municipal Bond Fund (the "Non-Money Market Funds") which are
listed on a securities exchange for which market quotations are available are
valued by an independent pricing service at the last quoted sales price for
such securities on each business day. If were is no such reported sale, these
securities and unlisted securities for which market quotations are readily
available are valued at the most recent quoted bid price.
Security Transactions and Investment Income - Security transactions
are accounted for on the trade date of the security purchase or sale. Cost
used in determining net realized capital gains on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period which is calculated using the effective interest method. Interest
income is recorded on the accruci basis. Dividend income is recorded on
ex-dividend date. Gains and losses from pay-downs of mortgage-backed
securities are included in net investment income.
-86-
<PAGE> 87
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
Repurchase Agreements - Securities pledged as collateral for
Repurchase Agreements are held by the custodian bank until maturity of the
Repurchase Agreements. Provisions of the Agreements and procedures adopted by
Integra Trust Company (the "Adviser") ensure that the market value of the
collateral, including interest thereon, is sufficient in the event of default
by the counterparty. If the counter party defaults and the value of the
collateral declines or if the counterparty enters an insolvency proceeding,
realization of the collateral by the Fund may be delayed or limited.
TBA Purchase Commitments - The Intermediate Government Securities Fund
and the GNMA Securities Fund may enter into "TBA" (to be announced) purchase
commitments to purchase securities for a fixed price at a Future date beyond
customary settlement time. TBA purchase commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to settlement date, which risk is in
addition to the risk of decline in the value of the fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Security Valuation" above.
TBA Sale Commitments - The Intermediate Government Securities Fund and
the GNMA Securities Fund may enter into sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
arrangements. Proceeds of TBA sale commitments are not received until the
contract settlement date. Unsettled TBA sole commitments are valued at the
current market value of the underlying securities, generally according to the
procedures described under "Security Valuation" above. The contract is "marked
to market" daily and the change in value is recorded by the fund as unrealized
gain or loss. If the TBA sale commitment is closed through the acquisition of
an offsetting purchase commitment the fund realizes a gain or loss without
regard to any unrealized gain or loss on the underlying security. If
securities are delivered under the commitment, the fund realizes a gain or loss
from the sale of the securities based upon the unit price established at the
date the commitment was entered into.
Expenses - Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Funds are
prorated to the Funds on the basis of relative net assets.
-87-
<PAGE> 88
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
Distributions to Shareholders - The Equity Growth Fund declares and
pays dividends from net investment income on a monthly basis. The intermediate
Government Securities Fund, GNMA Securities Fund, Pennsylvania Municipal Bond
Fund, Prime Obligations Money Market Fund, Treasury Securities Money Market
Fund, and Pennsylvania Tax-Exempt Money market Fund distributions from net
investment income are declared an a daily basis and are payable monthly. Any
net realized capital gains on sales of securities are distributed to its
shareholders at least annually.
Federal Income Taxes - It is each Fund's intention to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
Organizational Costs - Organizational costs have been capitalized by
the Funds and are being amortized over sixty months commencing with operations.
In the event any of the initial shares of the Funds are redeemed by any holder
thereof during the period that the Funds are amortizing its organizational
costs, the redemption proceeds payable to the holder thereof by the Funds will
be reduced by the unamortized organizational costs in the same ratio as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of redemption. These costs include legal fees of
approximately $53,415 for organizational work performed by a law firm of which
an officer and trustee of the Funds is a partner.
Other - Certain officers of the Funds are also officers of the
Administrator and/or Distributor. Such officers are paid no fees by the Funds
for serving as officers of the Corporation.
3. FEES AND EXPENSES
The Funds and the Adviser have entered into an investment advisory
agreement, dated August 1, 1994, under which the Adviser will receive an annual
fee equal to 0.85% of the average daily net assets of the Equity Growth Fund;
0.70% of the average daily net assets of the Intermediate Government
Securities, GNMA Securities and Pennsylvania Municipal Bond Funds; and 0.45% of
the average daily net assets of the Prime Obligations Money Market, Treasury
Securities Money Market and Pennsylvania Tax-Exempt Money Market Funds.
Sub-Advisory services are provided to the Adviser for the Equity
Growth Fund by Sun Bank Capital Management, N.A. for the Intermediate
Government Securities, GNMA Securities, Prime
-88-
<PAGE> 89
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
Obligations Money Market and Treasury Securities Money Market Funds by
Wellington Management Company; and for the Pennsylvania Municipal Bond and
Pennsylvania Tax-Exempt Money Market Funds by Weiss, Peck & Greer (the
"Sub-Advisers") pursuant to sub-advisory agreements dated August 1, 1994.
Under the terms of such agreements, the Sub-Advisers are entitled to receive
such a fee from the Adviser. Such fee is computed daily and paid monthly. The
Adviser is responsible for the supervision of, and payment of fees to, the
Sub-Advisers in connection with their services.
SEI Financial Services Company (the "Distributor"), a wholly-owned
subsidiary of SEI Corporation ("SEI"), became the Fund's Distributor pursuant
to an agreement dated August 1, 1994. The Class A shares of the Funds have a
Rule 12b-1 Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to
0.25% of their average daily net assets.
Pursuant to an administration agreement dated August 1, 1994, SEI
Financial Management Company (the "Administrator") a wholly-owned subsidiary of
SEI, acts as the Fund's Administrator. Under the terms of the administration
agreement, the Administrator will receive an annual Fee which is calculated
daily and paid monthly at a maximum annual rate of 0.18% of the daily net
assets of the Equity Grow, Intermediate Government Securities, GNMA Securities,
and Pennsylvania Municipal Bond Funds, and 0.15% of the average daily net
assets of the Prime Obligations Money Market, Treasury Securities Money Market
and Pennsylvania Tax-Exempt Money Market Funds.
-89-
<PAGE> 90
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
NOTES TO FINANCIAL STATEMENTS CONCLUDED INVENTOR FUNDS
During the period ended April 30, 1995, the Adviser and other parties
waived a portion of their contractual fees in order to assist the Funds in
maintaining competitive expense ratios. Expenses were waived as follows (in
thousands):
<TABLE>
<CAPTION>
Prime Treasury Pennsylvania
Obligations Securities Tax-Exempt
Equity Intermediate GNMA Pennsylvania Money Money Money
Growth Government Securities Municipal Market Market Market
Fund Securities Fund Fund Bond Fund Fund Fund Fund
----- --------------- ------ ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Waiver of investment
advisory fees . . . . . . . $ 85 $ 77 $ 72 $ 40 $356 $108 $ 84
Waiver of administrative fee --- --- --- 19 --- --- ---
Waiver of 12b-1 fees . . . . 82 91 73 60 418 108 89
Waiver of custodian fees . . 7 7 15 3 --- --- ---
---- ---- ----- ---- ---- ---- ----
Total Waivers . . . . . . . $174 $175 $160 $122 $774 $126 $173
---- ---- ----- ---- ---- ---- ----
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period ended April 30, 1995, purchases of securities and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows (000):
<TABLE>
<CAPTION>
Equity Intermediate GNMA Pennsylvania
Growth Government Securities Municipal
Fund Securities Fund Bond Fund
------ ------------ ------ -----------
<S> <C> <C> <C> <C>
PURCHASES
U.S. Government . . . . . . $ --- $132,818 $130,969 $ ---
Other . . . . . . . . . . . 82,220 --- --- 31,638
SALES
U.S. Government . . . . . . $ --- $ 82,887 $ 90,719 $ ---
Other . . . . . . . . . . . 43,879 --- --- 1,043
</TABLE>
At April 30, 1995,the total cost of securities and net realized gains
or losses on securities sold for federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The
aggregate gross unrealized appreciation and depreciation for securities held at
April 30, 1995 is as follows (000):
<TABLE>
<CAPTION>
Equity Intermediate GNMA Pennsylvania
Growth Government Securities Municipal
Fund Securities Fund Bond Fund
------ ---------- ----- ---------
<S> <C> <C> <C> <C>
Aggregate gross unrealized
appreciation . . . . . . . $3,690 $ 660 $ 663 $ 246
Aggregate gross unrealized
depreciation . . . . . . . (942) (28) (25) (42)
------ ----- ----- -----
Net unrealized appreciation . $2,748 $ 632 $ 638 $ 204
</TABLE>
At April 30, 1995, the Intermediate Government Securities Fund had
available $198,912 in realized capital losses to offset future net gains
through the fiscal year ended 2003.
-90-
<PAGE> 91
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF THE
INVENTOR FUNDS, INC.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of the Intermediate Government
Securities and GNMA Securities Funds of the Inventor Funds, Inc. and the
statements of net assets of the Equity Growth, Pennsylvania Municipal Bond,
Prime Obligations Money Market, Treasury Securities Money Market and
Pennsylvania Tax-Exempt Money Market Funds of the Inventor Funds, Inc. as of
April 30, 1995, and the related statements of operations, changes in net assets
and the financial highlights for each of the respective periods then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of April 30, 1995, by correspondence with custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
the Inventor Funds, Inc. (Equity Growth, Intermediate Government Securities,
GNMA Securities, Pennsylvania Municipal Bond, Prime Obligations Money Market,
Treasury Securities Money Market and Pennsylvania Tax-Exempt Money Market
Funds) as of April 30, 1995, and the results of their operations, the changes
in their net assets and their financial highlights for each of the respective
periods then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
June 9, 1995
-91-
<PAGE> 92
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Services, Inc.
("Moody's" Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc.
("Duff") and IBCA Limited and IBCA, Inc. (together, "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1, 1+ and 2, to indicate the relative degree of safety. Issues rated
A-1+ are those with an "overwhelming degree" of credit protection. Those rated
A-1 reflect a "very strong" degree of safety regarding timely payment. Those
rated A-2 reflect a safety regarding timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of the "highest" quality and "higher" quality respectively on the
basis of relative repayment capacity.
The rating Fitch-1 (Highest Grade) is the highest commercial rating assigned by
Fitch. Paper rated Fitch-1 is regarded as having the strongest degree of
assurance for timely payment. The rating Fitch-2 (Very Good Grade) is the
second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by good fundamental
protection factors. Risk factors are minor. Ratings of Duff-1 are further
refined by the gradations of "1+" and "1-." Issues rated Duff-1+ have the
highest certainty of timely payment, outstanding short term liquidity, and
safety just below risk-free U.S. Treasury shortterm obligations. Issues rated
Duff-1- have high certainty of timely payment, strong liquidity factors
supported by good fundamental protection factors, and small risk factors.
Paper rated Duff-2 is regarded as having good certainty of timely payment, good
access to capital markets and sound liquidity factors and company fundamentals.
Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for
-92-
<PAGE> 93
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
timely repayment. Obligations rated A2 are supported by a strong capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or fiscal conditions.
-93-
<PAGE> 94
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
DESCRIPTION OF CORPORATE BOND RATINGS
The following descriptions of corporate bond ratings have been published by
S&P, Moody's, Fitch, Duff and IBCA.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such
a rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA by S&P also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree. Debt rated A by S&P has a
strong capacity to pay interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
Bonds which are rated BBB by S&P are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Bonds which are rated Aaa by Moody's are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge.' Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower in the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Debt rated Baa by Moody's is regarded as having an adequate capacity to pay
interest and repay principal. Whereas
-94-
<PAGE> 95
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions
liable to but slight market fluctuation other than through changes in the money
rate. The prime feature of an AAA bond is a showing of earnings several times
or many times interest requirements, with such stability of applicable earnings
that safety is beyond reasonable question whatever changes occur in conditions.
Bonds rated AA by Fitch are judged by Fitch to be of safety virtually beyond
question and are readily salable, whose merits are not unlike those of the AAA
class, but whose margin of safety is less broad. The issue may be the
obligation of a small company, strongly secured but influenced as to rating by
the lesser financial power of the enterprise and more local type market. Bonds
rated A by Fitch are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances in bonds with higher ratings. Bonds
rated BBB by Fitch are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher in for bonds with higher
ratings.
Bonds rated AAA by Duff are judged by Duff to be of the highest credit quality,
with negligible risk factors being only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA by Duff are judged by Duff to be of high credit
quality with strong protection factors and risk that is modest but that may
vary slightly from time to time because of economic conditions. Bonds rated A
by Duff are judged by Duff to have average but adequate protection factors.
However, risk factors are more variable and greater in periods of economic
stress. Bonds rated BBB by Duff are judged by Duff as having below average
protection factors but still considered sufficient for prudent investment, with
considerable variability in risk during economic cycles.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and
-95-
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS
INVENTOR FUNDS
interest is substantial, such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk significantly.
Obligations for which there is a very low expectation of investment risk are
rated AA by IBCA. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly. Obligations for which
there is a low expectation on investment risk are rated A by IBCA. Capacity
for timely repayment of principal and interest is strong, although adverse
changes in business, economic or financial conditions may lead to increased
investment risk. Obligations for which there is currently a low expectation of
investment risk are rated BBB by IBCA. Capacity for timely repayment of
principal and interest is adequate, although adverse changes in business,
economic or financial conditions are more likely to lead to increased
investment risk than for obligations in higher categories.
-96-
<PAGE> 1
Exhibit 17(h)
ANNUAL REPORT
MAY 31, 1995
ARMADA FUNDS EQUITY SERIES
ARMADA EQUITY FUND
ARMADA EQUITY INCOME FUND
ARMADA MID CAP REGIONAL FUND
[ARMADA FUNDS LOGO]
FINANCIAL POWER CLOSE AT HAND
<PAGE> 2
ARMADA FUNDS
(FORMERLY NCC FUNDS)
EQUITY SERIES
ANNUAL REPORT - MAY 31, 1995
Armada
Equity Fund
Armada
Equity Income
Fund
Armada
Mid Cap Regional Fund
TABLE OF CONTENTS
Chairman's Message.........................................................2
Equity Series Overview.....................................................4
FUND OVERVIEWS
Armada Equity Fund
(formerly NCC Funds Equity Portfolio)...................................6
Armada Equity Income Fund
(formerly NCC Funds Equity Income Portfolio)............................9
Armada Mid Cap Regional Fund
(formerly NCC Funds Mid Cap Regional Equity Portfolio).................12
PORTFOLIOS OF INVESTMENTS AND FINANCIAL STATEMENTS
Armada Equity Fund........................................................15
Armada Equity Income Fund.................................................21
Armada Mid Cap Regional Fund..............................................27
NOTES TO FINANCIAL STATEMENTS.............................................33
REPORT OF INDEPENDENT AUDITORS............................................37
- SHARES OF THE ARMADA FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY BANK;
NATIONAL CITY BANK, COLUMBUS; NATIONAL CITY BANK, KENTUCKY; NATIONAL ASSET
MANAGEMENT CORPORATION, THEIR PARENT COMPANY OR ANY OF THEIR AFFILIATES OR
ANY BANK.
- SHARES OF THE ARMADA FUNDS ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, FDIC, OR ANY GOVERNMENTAL AGENCY OR STATE.
- AN INVESTMENT IN THE ARMADA FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
- PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE, AND THE
INVESTMENT RETURN WILL FLUCTUATE.
National City Bank and certain of its affiliates serve as investment advisers
to Armada Funds for which they receive an investment advisory fee. For more
complete information about the Armada Funds, including charges and expenses,
please contact your investment specialist or call 1-800-622-FUND (3863) for a
prospectus. Read it carefully before you invest or send money. Armada Funds
are distributed by 440 Financial Distributors, Inc., 290 Donald Lynch
Boulevard, Marlboro, MA, 01752. 440 Financial Distributors, Inc. is not
affiliated with National City Bank and is not a bank.
<PAGE> 3
ARMADA FUNDS ANNUAL REPORT
CHAIRMAN'S MESSAGE
Dear Shareholder:
During the past year, Armada Funds has implemented many changes to enhance
the investment options and support provided to our shareholders. We believe that
these enhancements are consistent with our objective to help you meet today's
investment challenges and help achieve your financial goals.
NEW NAME, NEW FUNDS, MORE INFORMATION
Recently, we announced our name change to Armada Funds. We believe the new
name reflects our strong commitment to giving shareholders solid information and
personalized service - as well as a commanding array of investment products.
This commitment is underscored by the Armada Funds' new tag line, "Financial
Power Close at Hand."
During the year, we also introduced four new funds -- significantly expanding
your investment opportunities. If your objective is capital appreciation, you
can now choose the Armada Equity Income Fund or the Armada Mid Cap Regional
Fund, in addition to the Armada Equity Fund. If your focus is fixed income, you
can select the Armada Total Return Advantage Fund or the Armada Enhanced Income
Fund, in addition to the Armada Fixed Income Fund. With these four new funds,
you now have eleven investment options to match to your different financial
needs.
To receive information on any of the Armada Funds, call 1-800-622-FUND
(3863). Brochures for the Armada Equity, Income, Tax Exempt and Money Market
Series explore the different roles these investments can play in your portfolio
and help match individual fund objectives with your specific investing needs.
Quarterly fund updates provide interviews with asset managers, current
breakdowns of fund holdings and recent reviews of fund performance.
2
<PAGE> 4
ARMADA FUNDS ANNUAL REPORT (CONTINUED)
CHAIRMAN'S MESSAGE
IMPROVED PERFORMANCE
Armada Funds witnessed a dramatic performance rebound in 1995, following the
difficult investment environment of 1994, in which a growing economy fostered
fears of inflation. Both the Armada stock and the fixed income funds generated
positive returns and rewarded investors who maintained a long-term view of their
investments. Two of the factors contributing to these returns were falling
interest rates and investor optimism about a "soft landing" for the economy.
The report that follows describes the major economic and market events of the
12 months ending May 31, 1995. The report reviews investment strategies used by
Armada Funds to take advantage of this environment and looks at market
conditions that may lie ahead. If you would like more information about your
investment, please call Armada Funds at 1-800-622-FUND (3863).
Sincerely,
/s/ Richard B. Tullis
- ---------------------
Richard B. Tullis
Chairman
Armada Funds Board of Trustees
3
<PAGE> 5
ARMADA FUNDS ANNUAL REPORT
EQUITY SERIES OVERVIEW
"DURING THE FINAL HALF OF THE FUNDS' FISCAL YEAR, THE FINANCIAL MARKETS BEGAN
TO BELIEVE THAT THE MASSIVE INTEREST RATE INCREASES OF MORE THAN 250 BASIS
POINTS IN 1994, WOULD, IN FACT, PROVIDE THE MUCH CALLED FOR ECONOMIC "SOFT
LANDING" REQUIRED TO SLOW ECONOMIC GROWTH WITHOUT CAUSING RECESSION."
As the Armada Funds closed the fiscal year ending May 31, 1995, dramatic
shifts in market perceptions and expectations were clearly visible.
Specifically, shifts in market perception pertained to the future direction of
interest rates and the strength evident in corporate profits. Taken together,
these factors helped push the equity markets to all-time highs with the market
continuing to focus on the larger cap issues. The Standard and Poor's 500 Stock
Index generated an impressive 19.17% rate of total return for the last six
months of the Funds' fiscal year.
During the final half of the Funds' fiscal year, the financial markets began
to believe that the massive interest rate increases of more than 250 basis
points in 1994, would, in fact, provide the much called for economic "soft
landing" required to slow economic growth without causing recession. If this
were to prove true, future interest rate increases would not be required to cool
an already cooling economy. However, as the period progressed, the market was
confronted with economic data that implied the economy was slowing too quickly.
Auto production, housing starts, and retail sales all produced data below market
expectation. As a result, the market began to entertain the possibility of a
recession for the first time in years. This added more fuel to the falling
interest rate fire. The equity markets responded to this dramatic interest rate
activity by mounting a strong advance, choosing to focus on falling interest
rate activity instead of the surfacing recession scenarios.
The equity market also found encouragement in corporate profit reporting
during the final half of the Funds' fiscal year. While impressive gains were
both expected and delivered in such industries as computers and technology, even
market segments long written off as probable poor performers registered
surprisingly strong earnings gains. Evidence of this was found in the much
maligned food/beverage and pharmaceutical groups, where, for example, PepsiCo
reported quarterly earnings up 14% and Bristol Myers Squibb reported quarterly
earnings up 13%. With this added factor of strong corporate profit growth tied
to the falling interest rate environment, the stock market was free to mount an
impressive rally.
4
<PAGE> 6
ARMADA FUNDS ANNUAL REPORT (CONTINUED)
EQUITY SERIES OVERVIEW
"THROUGHOUT THE PERIOD, WE KEPT THE FUNDS AS FULLY INVESTED AS POSSIBLE AND MADE
THE MOST OF NEW INVESTMENT OPPORTUNITIES AS THEY AROSE."
INVESTMENT STRATEGIES
While the stock market rally through the final half of the Funds' fiscal year
was impressive, it also provided opportunity for stock investors. Perhaps the
most significant theme the Funds' asset managers addressed was the shift in
focus to more capital goods/capital spending-oriented issues and away from the
consumer non-durable areas. As the capital goods component of the market began
to reflect the effect of the slowing economic growth rate, these issues began to
provide attractive opportunities. In addition, positions in technology issues
were strengthened over the period. Throughout the period, we kept the Funds as
fully invested as possible and made the most of new investment opportunities as
they arose.
LOOKING AHEAD
The financial market rally through the second half of the Armada Funds'
fiscal year has no doubt been impressive with its steady march off a December
12, 1994 low. Perhaps a little too impressive. While the threat of another
Federal Reserve-inspired rate increase has faded for the time being and, in
fact, the probability of an interest rate cut has increased, we do not expect
the recession scenario to materialize. It is this scenario which has been
fueling the latest round of interest rate speculation. Instead, we anticipate
the economy to continue to grow, albeit at a slower pace from that experienced
in late 1994, with an inflation factor below 4%. The key issue with respect to
the magnitude of this economic growth rests with the consumer. Simply stated,
why have consumers suddenly stopped spending and started saving more than 5% of
their disposable incomes as opposed to the more normal levels of slightly more
than 4%? As the answer to this critical question unfolds, we continue to expect
dramatic market adjustment.
5
<PAGE> 7
FUND OVERVIEW
ARMADA EQUITY FUND
ASSET MANAGER:
GERALD H. GRAY,
VICE PRESIDENT,
NATIONAL CITY BANK
FUND'S DATE OF INCEPTION:
DECEMBER 20, 1989 (INSTITUTIONAL SHARES)
APRIL 15, 1991 (RETAIL SHARES)
ASSETS:
$ 119,633,506 (INSTITUTIONAL SHARES)
$ 5,974,356 (RETAIL SHARES)
INVESTMENT OBJECTIVE: SEEK A HIGH LEVEL OF TOTAL RETURN ARISING OUT OF CAPITAL
APPRECIATION AND INCOME. THE FUND INVESTS IN COMMON STOCKS AND SECURITIES
CONVERTIBLE INTO COMMON STOCKS.
As a result of the favorable economic environment during the past year, the
Armada Equity Fund was able to produce a total return of 10.62% to Institutional
shareholders and 10.35% to Retail shareholders before sales load for the year
ended May 31, 1995. Although solidly positive, these returns fell short of the
broader S&P 500, which returned 20.18% for the same period. For the six months
ended May 31, 1995, the Equity Fund had aggregate total returns of 11.94% and
11.78% (before sales load) to Institutional and Retail shareholders,
respectively.
Market leadership during the past year was very narrow and concentrated
primarily in the technology sector. While the Equity Fund did benefit from some
strong performers in the technology area, such as Motorola, AMP, and General
Motors Class E, the Fund did not have positions in turnaround situations like
IBM or the more cyclical companies like Micron Technology, which far outpaced
the sector. The Equity Fund emphasizes the higher quality, more consistent,
growth companies and, therefore, will tend to lag the market in periods when
advances are led by the most leveraged, volatile firms. Health care companies
returned to favor and the Fund enjoyed strong gains from Medtronic, Inc., as
well as several pharmaceutical firms such as Abbot Labs, Schering Plough and
Bristol Myers Squibb. However, retailers performed poorly as consumers spent
sparingly and mostly on durable good items such as electronics during this
period. Dillards Department Stores, Toys `R' Us and Nordstrom were particularly
hurt in this environment.
LOOKING FORWARD
We believe that stocks will continue to benefit from a positive economic
backdrop. However, with traditional market valuations at lofty levels, we feel
most of the good news is already in stock prices. While we do not expect a
significant market decline, we believe equity markets will not achieve the
double-digit gains produced over the prior period.
6
<PAGE> 8
FUND OVERVIEW (CONTINUED)
ARMADA EQUITY FUND
"THE STOCKS WHICH WILL
PERFORM BEST DURING THE
COMING YEAR WILL LIKELY
BE ONES THAT CAN ACHIEVE
GOOD EARNINGS GROWTH
WITHOUT A CONSISTENTLY
STRONG ECONOMY."
The stocks which will perform best during the coming year will likely be ones
that can achieve good earnings growth without a consistently strong economy.
Accordingly, companies with a high percentage of earnings coming from recurring
revenues should fare well. These firms include Pitney
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 5/31/95
- -----------------------------------------------------------------------------------------------
1-YEAR 3-YEARS(1) 5-YEARS(1) SINCE INCEPTION(1)*
------ ---------- ---------- -------------------
<S> <C> <C> <C> <C>
Armada Equity Fund
Institutional Shares+ 10.62% 6.34% 9.11% 9.96%
Armada Equity Fund
Retail Shares With Sales Load 6.24% 4.75% 8.04% 8.97%
Without Sales Load 10.35% 6.09% 8.87% 9.74%
</TABLE>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT*
<TABLE>
<CAPTION>
Dec.-1989 May-1990 May-1991 May-1992 May-1993 May-1994 May-1995
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500
Armanda Equity Fund (Institutional Shares +)
Armanda Equity Fund (Retail Shares)
</TABLE>
+ Institutional shares are sold primarily to Banks and clients of National Asset
Management Corporation (NAM), acting on behalf of their respective customers.
Certain account level charges may apply.
* The Armada Equity Fund's date of inception was December 20, 1989 for
Institutional shares and April 15, 1991 for Retail shares. The return and
principal value of an investment will fluctuate. When redeemed, shares may be
worth more or less than their original cost.
1 Annualized.
7
<PAGE> 9
FUND OVERVIEW (CONTINUED)
ARMADA EQUITY FUND
"OVERALL, OUR FOCUS CONTINUES TO BE TO INVEST IN HIGH-QUALITY, GROWTH
COMPANIES AT REASONABLE VALUATIONS. DESPITE PERIODS OF UNDERPERFORMANCE, WE
BELIEVE THIS STRATEGY SHOULD REAP LONG-TERM, ABOVE AVERAGE PERFORMANCE."
Bowes, Xerox Corp., Automatic Data Processing and Reuters Holdings. The
Fund's holdings in health care firms should also do well in this scenario. We
also believe a reasonably healthy U.S. economy combined with improving economies
overseas will help capital goods and technology companies produce good earnings
reports. Stocks that should benefit are Motorola, 3M, Intel Corp. and Hubbell,
Inc.
Overall, our focus continues to be to invest in high-quality, growth
companies at reasonable valuations. Despite periods of underperformance, we
believe this strategy should reap long-term, above average performance.
8
<PAGE> 10
FUND OVERVIEW
ARMADA EQUITY INCOME FUND
ASSET MANAGER:
ANTHONY ZIMMERER, JR.,
SENIOR VICE PRESIDENT,
NATIONAL CITY BANK, KENTUCKY
FUND'S DATE OF INCEPTION:
JULY 1, 1994 (INSTITUTIONAL SHARES)
AUGUST 22, 1994 (RETAIL SHARES)
ASSETS:
$ 36,193,738 (INSTITUTIONAL SHARES)
$ 124,518 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
SEEK A COMPETITIVE TOTAL RATE OF
RETURN THROUGH INVESTMENTS IN EQUITY AND
EQUITY EQUIVALENT SECURITIES WHICH
CARRY PREMIUM CURRENT YIELDS.
For the 11 months since the Fund's inception on July 1, 1994, the Equity
Income Fund has produced an annualized total return of 14.34% to its
Institutional shareholders. The Standard & Poor's 500 Composite Stock Index had
a total return of 23.23% for the same period. The Fund's Retail class which
commenced operations on August 22, 1994 produced an annualized total return of
13.18% (before sales load) for the period ended May 31, 1995. For the six months
ended May 31, 1995, the Equity Income Fund had aggregate total returns of 13.55%
and 13.47% (before sales load) to Institutional and Retail shareholders,
respectively.
Since its inception, the Equity Income Fund has performed as we would
anticipate based on historical data. In analyzing security market performance
during the past ten years, we have found that high-yielding equity portfolios
such as the Equity Income Fund perform relatively well in uncertain market
periods and outpace declining markets approximately 80% of the time. In strong,
overall market surges, which was our environment for the 11-month period ended
May 31, 1995, high-yield equity portfolios tend to lag the market indices.
Since inception, we purchased securities with a minimum current dividend
yield premium of at least 25% more than the dividend yield of the S&P 500 Stock
Index. Initially, we emphasized securities from the financial, utility, and
petroleum sectors, which traditionally present high current dividend yields, as
well as selected drug, tobacco, cyclical, and retail sector securities. With
more than 50 individual holdings by the end of September 1994, the Fund was
quickly diversified in its third month to help balance portfolio performance.
Its holdings in cyclical companies, including chemical concerns such as Dow,
DuPont, and Arco Chemical, performed well during this period along with some
consumer stocks like Heinz, Philip Morris, and U.S. Tobacco. Its positions in
finance, electric utilities, and telephone companies underperformed during this
period as interest rates increased.
9
<PAGE> 11
FUND OVERVIEW (CONTINUED)
ARMADA EQUITY INCOME FUND
"MAJOR STOCK INDICES HAVE SET
NEW HIGHS DURING THE FIRST FIVE
MONTHS OF 1995."
Stocks have rallied strongly in the first part of 1995 as interest rates
moved sharply lower. Rates declined on expectations that economic growth would
moderate. Investors became more confident that inflation would not escalate
during 1995. Major stock indices have set new highs during the first five months
of 1995. Most of the Fund's total return for the fiscal year
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 5/31/95
---------------------------
SINCE INCEPTION(1)*
-----------------
<S> <C>
Armada Equity Income Fund
Institutional Shares+ 14.34%
Armada Equity Income Fund
Retail Shares With Sales Load 7.74%
Without Sales Load 13.18%
</TABLE>
Past performance is not predictive of future performance.
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT*
Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May-
1994 1994 1994 1994 1994 1994 1995 1995 1995 1995 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P 500
Armada Equity Income Fund (Institutional Shares+)
Armada Equity Income Fund (Retail Shares)
</TABLE>
+ Institutional shares are sold primarily to Banks and clients of National Asset
Management Corporation (NAM), acting on behalf of their respective customers.
Certain account level charges may apply.
* The Armada Equity Income Fund's date of inception was July 1, 1994 for
Institutional shares and August 22, 1994, for Retail shares. The return and
principal value of an investment will fluctuate. When redeemed, shares may be
worth more or less than their original cost.
1 Annualized.
10
<PAGE> 12
FUND OVERVIEW (CONTINUED)
ARMADA EQUITY INCOME FUND
"OUR FUND REMAINS POSITIONED FOR MODERATE, SUSTAINABLE ECONOMIC GROWTH THAT
COULD BRING FURTHER INCREASES IN STOCK PRICES."
has been realized since January 1995 with major contributions from its
holdings in utilities, finance, and energy securities. A noticeable lagging
sector in the fund is its holdings in real estate investment trusts, which are
behind the market's performance so far in 1995.
LOOKING FORWARD
The Equity Income Fund remains positioned for moderate, sustainable economic
growth that could bring further increases in stock prices. If economic growth
remains strong, causing higher interest rate levels and volatility in stock
prices, the high relative yields of Fund holdings should help them hold their
value better than the stock markets as a whole. We continue to hold positions in
sectors which would benefit if economic growth moderates and interest rates
stabilize at current levels. These sectors include our chemical concerns (7.5%)
mentioned above, finance (6.8%) and energy sector (9.3%). We believe the Fund is
well-diversified, and we anticipate that new money entering the Fund will be
used to expand and add to existing commitments. If the remainder of 1995 brings
a correction in stock prices, we would look to commit to new investment
opportunities that could provide the Fund with both above-average current yield
and potential for capital appreciation. Strategically, we have "locked" a
portion of our market value increase with some security sales during the past
three months. However, most sale proceeds have been recommitted and our cash
position remains at approximately 2%.
11
<PAGE> 13
FUND OVERVIEW
ARMADA MID CAP REGIONAL FUND
ASSET MANAGER:
LAWRENCE E. BAUMGARTNER,
PRESIDENT,
BROAD STREET
ASSET MANAGEMENT
FUND'S DATE OF INCEPTION:
JULY 26, 1994 (INSTITUTIONAL SHARES)
AUGUST 15, 1994 (RETAIL SHARES)
ASSETS:
$ 50,992,930 (INSTITUTIONAL SHARES)
$ 3,566,829 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
SEEK CAPITAL APPRECIATION BY INVESTING IN A DIVERSIFED FUND OF PUBLICLY
TRADED EQUITY SECURITIES OF ISSUERS WHICH ARE DOMICILED PRIMARILY IN OHIO,
INDIANA AND KENTUCKY AND CONTIGUOUS STATES AND OTHER STATES IN WHICH NATIONAL
CITY CORPORATION AFFILIATES ARE LOCATED.
As of May 31, 1995, the Mid Cap Regional Fund's Institutional shares had an
annualized total return of 17.42% since the Fund's inception on July 26, 1994.
The Fund's Retail shares have had an annualized total return of 14.80% (before
sales load) since its inception date of August 15, 1994. By comparison, the S&P
400 Mid Cap Index and the Russell 2000 Index, the most widely recognized
benchmark indices for the stocks of mid- and small-sized companies, had
annualized total returns of 17.81% and 13.39%, respectively, for the period from
August 1, 1994 to May 31, 1995. For the six months ended May 31, 1995, the
Armada Mid Cap Regional Fund had aggregate total returns of 9.26%
(Institutional) and 9.12% (Retail), before sales load.
Investments in interest-sensitive stocks, such as home builders and insurance
stocks, helped Fund performance during the last six months of the fiscal year.
These include names such as Michigan-based Pulte Homes and Fort Wayne,
Indiana-based Lincoln National Corp. Additionally, several of our late-cycle,
economically-sensitive companies, such as O.M. Group, Federal Paper Board,
Duriron, and Mead Corp., showed exceptional gains. We continue to hold sizable
weightings in the basic product sector as we believe that capital spending in
the basic paper and chemical industries will be somewhat subdued this cycle,
supporting a longer lasting and more potent earnings picture going forward. We
have begun to cut our weighting in insurance holdings as the interest rate rally
we envisioned has come to fruition.
12
<PAGE> 14
FUND OVERVIEW (CONTINUED)
ARMADA MID CAP REGIONAL FUND
"WE BELIEVE THE MID CAP REGIONAL FUND IS WELL SITUATED TO TAKE ADVANTAGE OF
RENEWED DOMESTIC ECONOMIC GROWTH LATER THIS YEAR."
LOOKING FORWARD
We believe the Mid Cap Regional Fund is well situated to take advantage of
renewed domestic economic growth later this year. While the market is currently
worried about recession, we believe that even if a recession were to develop, it
would be shallow and short. Additionally, because historically small cap stocks
have led the market out of recession, we are con-
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 5/31/95
---------------------------
SINCE INCEPTION(1)*
-------------------
<S> <C>
Armada Mid Cap Regional Fund
Institutional Shares+ 17.42%
Armada Mid Cap Regional Fund
Retail Shares With Sales Load 9.35%
Without Sales Load 14.80%
</TABLE>
<TABLE>
<CAPTION>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT
Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May-
1994 1994 1994 1994 1994 1994 1995 1995 1995 1995 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P
Russel 200 Index
Armada Mid Cap Regional Fund
(Institutional Shares+)
Armada Mid Cap Regional Fund
(Retail Shares)
</TABLE>
+ Institutional shares are sold primarily to Banks and clients of National Asset
Management Corporation (NAM), acting on behalf of their respective customers.
Certain account level charges may apply.
* The Armada Mid Cap Regional Fund's date of inception was July 26, 1994 for
Institutional shares and August 15, 1994 for Retail shares. The return and
principal value of an investment will fluctuate. When redeemed, shares may be
worth more or less than their original cost.
1 Annualized.
13
<PAGE> 15
FUND OVERVIEW (CONTINUED)
ARMADA MID CAP REGIONAL FUND
"WE CONTINUE TO EMPHASIZE CLASSIC `EARLY CYCLE' STOCKS SUCH AS HOME BUILDERS AND
RETAIL, WITH ADDITIONAL EMPHASIS ON SPECIALTY CHEMICAL AND PAPER PRODUCERS."
fident that we will participate when the current fears abate. We continue
to emphasize classic "early cycle" stocks, such as home builders and retail,
with additional emphasis on specialty chemical and paper producers. We've also
taken small positions in certain steel company issues as these shares have been
pummeled over the past 18 months. We have essentially exited the technology
group due to what we believe are substantial price risks in these stocks. Over
the years, we've seen the tech group come and go in popularity, and the current
euphoria and high expectations surrounding these stocks leave little room for
error. We believe shareholder money, including our own, is better spent
elsewhere.
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS
MAY 31, 1995 ARMADA EQUITY FUND
<TABLE>
<CAPTION>
Number of
Shares Value
------ -----
<S> <C> <C>
COMMON STOCK - 96.1%
ADVERTISING - 1.3%
Interpublic Group, Inc. 45,310 $1,670,806
----------
BANKING - 2.6%
Norwest Corp. 69,000 1,957,875
Wells Fargo & Company 8,000 1,472,000
----------
3,429,875
----------
BEVERAGES - 4.6%
Anheuser-Busch Companies, Inc. 37,000 2,187,625
Pepsico, Inc. 77,900 3,817,100
----------
6,004,725
----------
BUILDING & BUILDING SUPPLIES - 0.9%
Home Depot, Inc. 28,666 1,193,222
----------
BUSINESS SERVICES - 2.7%
Automatic Data Processing 26,880 1,673,280
Dun & Bradstreet Corp. 15,000 795,000
General Motors Corp., Class E 26,540 1,127,950
----------
3,596,230
----------
CHEMICALS - 2.5%
Dow Chemical Co. 28,320 2,077,980
Loctite Corp. 25,000 1,246,875
----------
3,324,855
----------
COMPUTERS - 1.5%
Intel Corp. 17,000 1,907,188
Nexgen, Inc. 2,500 59,375
----------
1,966,563
----------
CONSUMER NON-DURABLES - 2.3%
Gillette Co. 17,690 1,492,594
Procter & Gamble Co. 20,520 1,474,875
----------
2,967,469
----------
DIVERSIFIED - 2.1%
Minnesota Mining &
Manufacturing Co. 46,370 $2,776,404
----------
DRUGS & HEALTH CARE - 7.3%
Abbott Laboratories 50,860 2,034,400
American Home Products Corp. 20,620 1,518,147
Bristol Myers Squibb Co. 29,950 1,987,931
Pfizer, Inc. 19,810 1,745,756
Schering-Plough Corp. 28,152 2,216,970
----------
9,503,204
----------
ELECTRICAL EQUIPMENT - 4.1%
AMP, Inc. 24,000 1,023,000
Emerson Electric Co. 27,200 1,870,000
Hubbell Inc., Class B 42,920 2,441,075
----------
5,334,075
----------
ENTERTAINMENT - 2.3%
GTECH Holdings Corp. + 60,000 1,447,500
Walt Disney Co. 28,055 1,560,559
----------
3,008,059
----------
FINANCIAL SERVICES - 4.2%
Federal National Mortgage
Association 11,730 1,090,890
Greenpoint Financial Corp. 105,000 2,349,375
State Street Boston Corp. 60,000 2,017,500
----------
5,457,765
----------
FOREIGN - 4.0%
Nestle Registered, ADR 27,000 1,339,875
Reuters Holdings PLC, ADS 46,000 2,064,250
Singer Co. N.V 76,700 1,812,038
----------
5,216,163
----------
HOME FURNISHINGS/HOUSEWARES - 1.1%
Masco Corp. 51,000 1,472,625
----------
</TABLE>
See Accompanying Notes
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 1995 ARMADA EQUITY FUND
<TABLE>
<CAPTION>
Number of
Shares Value
------ -----
<S> <C> <C>
INSURANCE - 9.0%
American International Group 29,389 $ 3,342,999
Chubb Corp. 24,400 2,009,950
Cincinnati Financial Corp. 35,700 1,967,962
General Re Corp. 9,030 1,222,436
Marsh & McLennan Co., Inc. 19,000 1,512,875
Providian Corp. 46,000 1,673,250
----------
11,729,472
----------
MANUFACTURING - 4.7%
Wolverine Tube, Inc. + 90,000 2,902,500
York International Corp. 80,000 3,320,000
----------
6,222,500
----------
MEDICAL & MEDICAL SERVICES - 1.8%
Medtronic, Inc. 32,000 2,408,000
----------
OFFICE & BUSINESS EQUIPMENT - 4.1%
Pitney Bowes, Inc. 78,050 2,887,850
Xerox Corp. 22,000 2,494,250
----------
5,382,100
----------
OIL & GAS - 4.2%
Amoco Corp. 30,655 2,096,036
Exxon Corp. 27,000 1,927,125
Royal Dutch Petroleum 11,100 1,406,925
----------
5,430,086
----------
OIL EQUIPMENT & SERVICES - 1.4%
Schlumberger Limited 28,495 1,852,175
----------
PAPER & FOREST PRODUCTS - 1.4%
Fort Howard Corp. 130,000 1,860,625
----------
POLLUTION CONTROL - 4.7%
Browning-Ferris Industries 90,000 3,206,250
WMX Technologies, Inc. 106,435 2,900,354
----------
6,106,604
----------
PRINTING & PUBLISHING - 0.2%
Houghton Mifflin Co. 5,000 $ 256,875
----------
REAL ESTATE - 2.0%
Avalon Properties, Inc. 78,000 1,540,500
Developers Diversified Realty Corp. 40,000 1,130,000
----------
2,670,500
----------
RETAIL FOOD CHAINS - 1.4%
Albertson's, Inc. 63,594 1,780,632
----------
RETAIL MERCHANDISING - 5.2%
Dillard Dept. Stores, Class A 68,000 1,955,000
Kmart Corp. 120,000 1,530,000
Nordstrom, Inc. 42,000 1,737,750
Wal-Mart Stores, Inc. 65,000 1,625,000
----------
6,847,750
----------
RETAIL STORES - 1.9%
Borders Group, Inc. 15,000 219,375
Lowe's Companies, Inc. 82,500 2,248,125
----------
2,467,500
----------
TELECOMMUNICATIONS - 6.2%
Alltel Corp. 35,000 861,875
AT&T Corp. 30,260 1,535,695
MCI Communications Corp. 90,000 1,816,875
Motorola, Inc. 43,920 2,629,710
Qualcomm, Inc. + 50,000 1,281,250
----------
8,125,405
----------
TRANSPORTATION - 2.3%
Harley-Davidson, Inc. 123,000 2,998,125
----------
</TABLE>
See Accompanying Notes
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 1995 ARMADA EQUITY FUND
<TABLE>
<CAPTION>
Number of
Shares Value
------ -----
<S> <C> <C>
UTILITIES-TELEPHONE - 2.1% 16,015 $ 892,836
Bell Atlantic Corp. 21,650 1,328,769
Bellsouth Corp. 20,721 554,287
Pacific Telesis Group -----------
2,775,892
-----------
125,836,281
TOTAL COMMON STOCK -----------
(Cost $101,044,216)
TEMPORARY INVESTMENT - 3.9%
Fidelity Domestic Market Portfolio 5,041,694 5,041,694
(Cost $5,041,694)
TOTAL INVESTMENTS - 100.0% $130,877,975
============
(Cost $106,085,910*)
+ Non-income producing security.
* Also cost for Federal income tax purposes.
The gross unrealized appreciation (depreciation) on a tax basis is as
follows:
Gross appreciation $ 27,485,348
Gross depreciation. (2,693,283)
-----------
$ 24,792,065
-----------
</TABLE>
See Accompanying Notes
17
<PAGE> 19
FINANCIAL STATEMENTS
ARMADA EQUITY FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
<S> <C>
ASSETS
Investments at value (Cost $106,085,910) $ 130,877,975
Interest and dividends receivable 324,062
Receivable for Fund shares sold 102,348
Receivable for investments sold 546,250
Prepaid expenses 7,928
-------------
TOTAL ASSETS 131,858,563
------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed 3,802,473
Payable for investments purchased 2,339,648
Accrued expenses 108,580
TOTAL LIABILITIES 6,250,701
------------------------------------------------------
NET ASSETS (based on 8,506,368
shares of beneficial interest having
no par value) $ 125,607,862
======================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 101,538,790
Undistributed net investment
income 358,755
Accumulated net realized loss on
investments sold (123,864)
Distributions in excess of
net realized gains (957,884)
Net unrealized appreciation
on investments 24,792,065
-------------
$ 125,607,862
======================================================
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PRICE PER SHARE - Institutional class
($119,633,506 divided by 8,102,342
shares of beneficial interest) $ 14.77
======================================================
NET ASSET VALUE AND
REDEMPTION PRICE
PER SHARE - Retail class
($5,974,356 divided by 404,026
shares of beneficial interest) $ 14.79
======================================================
MAXIMUM OFFERING PRICE
PER RETAIL SHARE
($14.79 divided by 625) $ 15.37
======================================================
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1995
INVESTMENT INCOME:
Dividends $ 2,409,278
Interest 361,859
Less foreign taxes withheld (19,190)
Total investment income 2,751,947
------------------------------------------------------
EXPENSES:
Investment Advisory fees 814,885
Administration fees 108,651
Transfer agent fees 39,985
12b-1 fees 37,431
Custodian fees 27,718
Printing and shareholder reports 17,640
Legal fees 17,601
Shareholder servicing fees - Retail class only 16,462
Registration and filing fees 11,574
Distribution fees 9,809
Miscellaneous 6,685
Trustees' fees 6,529
Insurance 6,260
Audit fees 4,713
Amortization of organization costs 3,856
Fees waived by Custodian (18,794)
-------------
Total expenses 1,111,005
------------------------------------------------------
NET INVESTMENT INCOME 1,640,942
- -----------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments sold (117,954)
Net change in unrealized appreciation
on investments 10,348,115
------------
Net gain on investments 10,230,161
------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $ 11,871,103
======================================================
</TABLE>
See Accompanying Notes
18
<PAGE> 20
FINANCIAL STATEMENTS
ARMADA EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
MAY 31, 1995 MAY 31, 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,640,942 $ 1,264,809
Net realized gain (loss) on investments sold (117,954) 771,035
Net change in unrealized appreciation (depreciation) on investments 10,348,115 (683,345)
------------- ------------
Net increase in net assets resulting from operations 11,871,103 1,352,499
Distributions to shareholders from net investment income (1,520,691) (1,264,809)
Distributions to shareholders in excess of net investment income 0 (61,628)
Distributions to shareholders from net realized capital gains 0 (771,035)
Distributions to shareholders in excess of net realized capital gains (888,715) (69,169)
Increase in net assets derived from capital share transactions 18,179,790 5,817,132
------------- ------------
Total increase in net assets 27,641,487 5,002,990
------------- ------------
NET ASSETS:
Beginning of year 97,966,375 92,963,385
------------- ------------
End of year $ 125,607,862 $ 97,966,375
============= ============
MAY 31, 1995 MAY 31, 1994
------------ ------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 358,755 $ 238,504
============= ============
</TABLE>
See Accompanying Notes
19
<PAGE> 21
FINANCIAL STATEMENTS
ARMADA EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31
--------------------------------------------------------------------------
1995 1994 1993
---------------------- ---------------------- ---------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 13.66 $13.68 $ 13.78 $ 13.80 $ 13.13 $ 13.13
-------- ------ -------- ------- --------- --------
INCOME FROM
INVESTMENT OPERATIONS
Net investment income .21 .18 .18 .15 .27 .23
Net gains on securities
(realized and unrealized) 1.21 1.21 .01 .00 .67 .68
-------- ------ -------- ------- --------- --------
Total from investment
operations 1.42 1.39 .19 .15 .94 .91
-------- ------ -------- ------- --------- --------
LESS DISTRIBUTIONS
Dividends from net
investment income (.20) (.17) (.18) (.15) (.27) (.23)
Dividends in excess
of net investment income (.00) (.00) (.01) (.00) (.02) (.01)
Dividends from
net realized capital gains (.00) (.00) (.11) (.11) (.00) (.00)
Dividends in excess
of net capital gains (.11) (.11) (.01) (.01) (.00) (.00)
-------- ------ -------- ------- --------- --------
Total distributions (.31) (.28) (.31) (.27) (.29) (.24)
-------- ------ -------- ------- --------- --------
Net asset value,
end of year $ 14.77 $ 14.79 $ 13.66 $ 13.68 $ 13.78 $ 13.80
======== ======= ======== ======= ========= ========
TOTAL RETURN 10.62% 10.35%(5) 1.41% 1.12%(5) 7.20% 7.00%(5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(in 000's) $119,634 $ 5,974 $ 90,446 $ 7,521 $ 85,256 $ 7,707
Ratio of expenses
to average net assets 1.01%(1) 1.27%(2) 1.07% 1.32% .34%(1) .59%(2)
Ratio of net investment income
to average net assets 1.53%(1) 1.23%(2) 1.33% 1.08% 2.13%(1) 1.88%(2)
Portfolio turnover rate 17% 17% 15% 15% 15% 15%
FOR THE YEAR ENDED MAY 31
-------------------------------------------------------
1992 1991
----------------------- ----------------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL(3)
<S> <C> <C> <C> <C>
Net asset value,
beginning of year $ 12.35 $ 12.35 $ 10.77 $ 12.04
--------- ------------- ------------- -------------
INCOME FROM
INVESTMENT OPERATIONS
Net investment income .30 .25 .31 .04
Net gains on securities
(realized and unrealized) .78 .78 1.58 .27
--------- ------------- ------------- -------------
Total from investment
operations 1.08 1.03 1.89 .31
--------- ------------- ------------- -------------
LESS DISTRIBUTIONS
Dividends from net
investment income (.30) (.25) (.31) (.00)
Dividends in excess
of net investment income (.00) (.00) (.00) (.00)
Dividends from
net realized capital gains (.00) (.00) (.00) (.00)
Dividends in excess
of net capital gains (.00) (.00) (.00) (.00)
--------- ------------- ------------- -------------
Total distributions (.30) (.25) (.31) (.00)
--------- ------------- ------------- -------------
Net asset value,
end of year $ 13.13 $ 13.13 $ 12.35 $ 12.35
========= ============= ============= =============
TOTAL RETURN 8.90% 8.48%(5) 18.10% 21.82%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(in 000's) $ 48,673 $ 2,767 $ 42,112 $ 1,389
Ratio of expenses
to average net assets .26%(1) .51%(2) .31%(1) .53%(2,4)
Ratio of net investment income
to average net assets 2.36%(1) 2.15%(2) 2.90% 2.94%(2,4)
Portfolio turnover rate 9% 9% 11% 11%
</TABLE>
1 The operating expense ratio and net investment income ratio before fee waiver
by the Custodian for the Institutional class for the year ended May 31,
1995 would have been 1.02% and 1.51%. The operating expense ratio and the
net investment income ratio before fee waivers by the Investment
Advisers for the Institutional class for the years ended May 31, 1993, 1992
and 1991 would have been 1.01% and 1.46%, 1.01% and 1.61%, and 1.06% and
2.15%, respectively.
2 The operating expense ratio and net investment income ratio before fee waiver
by the Custodian for the Retail class for the year ended May 31, 1995
would have been 1.28% and 1.22%. The operating expense ratio and the net
investment income ratio before fee waivers by the Investment Advisers
for the Retail class for the years ended May 31, 1993 and 1992 and for the
period ended May 31, 1991 would have been 1.26% and 1.21%, 1.27%
and 1.40%, and 1.28% and 2.19%, respectively.
3 Retail class commenced operations on April 15, 1991.
4 Annualized.
5 Total return excludes sales load.
See Accompanying Notes
20
<PAGE> 22
PORTFOLIO OF INVESTMENTS
MAY 31, 1995 ARMADA EQUITY INCOME FUND
<TABLE>
<CAPTION>
Number of
Shares Value
------ -----
<S> <C> <C>
COMMON STOCK - 93.0%
AUTOMOBILES - 1.9%
Ford Motor Co. 24,000 $702,000
---------
BANKING - 6.8%
Mellon Bank Corp. 17,100 731,025
Morgan (J.P.) & Co., Inc. 7,400 524,475
PNC Bank Corp. 22,000 594,000
Wachovia Corp. 15,900 602,213
---------
2,451,713
---------
BUSINESS SERVICES - 4.0%
Dun & Bradstreet Corp. 12,900 683,700
Moore Corp. Ltd. 35,000 765,625
---------
1,449,325
---------
CHEMICALS - 7.5%
Arco Chemical Co. 15,500 716,875
Dow Chemical Co. 10,000 733,750
E.I. duPont de Nemours & Co. 8,500 576,938
WD-40 Co. 16,000 680,000
---------
2,707,563
---------
CONSUMER NON-DURABLES - 4.2%
Clorox Co. 8,000 479,000
Kimberly-Clark Corp. 7,500 450,000
Tambrands, Inc. 13,300 570,238
---------
1,499,238
---------
CONSUMER & SERVICE MFG. CO. - 1.7%
Sturm Ruger & Co., Inc 21,000 611,625
---------
DIVERSIFIED - 1.8%
Minnesota Mining
& Manufacturing Co. 11,000 658,625
---------
DRUGS & HEALTH CARE - 5.5%
American Home Products Corp. 9,000 $662,625
Bristol Myers Squibb Co. 10,500 696,938
Eli Lilly & Co. 8,600 641,775
---------
2,001,338
---------
ELECTRICAL EQUIPMENT - 1.5%
Joslyn Corp. 21,000 538,125
---------
FINANCE - 1.5%
Fleet Financial Group, Inc. 16,000 558,000
---------
FOOD & BEVERAGE - 2.8%
General Mills, Inc. 8,000 415,000
Heinz (H.J.) Co. 12,500 565,625
---------
980,625
INSURANCE - 3.7%
American General Corp. 18,000 621,000
Marsh & McLennan Cos., Inc. 8,900 708,663
---------
1,329,663
NATURAL GAS - 1.8%
Consolidated Natural Gas Co. 16,700 665,913
---------
OFFICE & BUSINESS EQUIPMENT - 1.7%
Pitney Bowes, Inc. 17,000 629,000
---------
OIL & GAS - 9.3%
Amoco Corp. 9,800 670,075
Atlantic Richfield Co. 5,900 685,138
Chevron Corp. 13,300 653,363
Royal Dutch Petroleum 5,500 697,125
Texaco, Inc. 9,500 650,750
---------
3,356,451
---------
</TABLE>
See Accompanying Notes
21
<PAGE> 23
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 1995 ARMADA EQUITY INCOME FUND
<TABLE>
<CAPTION>
Number of
Shares Value
------ -----
<S> <C> <C>
OIL EQUIPMENT & SERVICES - 1.8%
McDermott International, Inc. 24,600 $ 645,750
----------
PRINTING & PUBLISHING - 6.2%
Commerce Clearing House, Inc.,
Class A 34,800 578,550
Deluxe Corp. 17,000 541,875
Harland Co., John H 22,000 519,750
McGraw Hill, Inc. 8,000 592,000
----------
2,232,175
----------
REAL ESTATE - 5.3%
Developers Diversified Realty
Corp 23,700 669,525
Kimco Realty Corp. 16,300 629,588
Sun Communities, Inc. 25,000 596,875
----------
1,895,988
----------
RESTAURANTS - 0.2%
Darden Restaurants, Inc. 8,000 88,000
----------
RETAIL MERCHANDISING - 5.5%
Fleming Companies, Inc. 22,000 569,250
Melville Corp. 17,500 695,625
Penney (J.C.) Co., Inc. 15,300 721,013
----------
1,985,888
----------
TELECOMMUNICATIONS - 1.7%
Bell South Corp. 9,700 595,338
----------
TOBACCO - 5.8%
American Brands, Inc. 19,500 787,313
Philip Morris Co., Inc. 9,100 663,163
UST, Inc. 21,200 633,350
----------
2,083,826
----------
UTILITIES-GAS & ELECTRIC - 1.4%
LG&E Energy Corp. 12,600 $ 500,850
----------
UTILITIES-ELECTRIC - 3.0%
Consolidated Edison Co.
of New York, Inc. 17,600 525,800
Southern Co. 24,700 546,488
----------
1,072,288
----------
UTILITIES-TELEPHONE - 4.8%
Bell Atlantic Corp. 11,000 613,250
GTE Corp. 16,000 534,000
Nynex Corp. 14,100 588,675
----------
1,735,925
MISCELLANEOUS - 1.6% ----------
Ogden Corp. 27,000 594,000
----------
TOTAL COMMON STOCK 33,569,232
----------
(Cost $30,891,897)
PREFERRED STOCK - 1.9%
BUSINESS SERVICES - 1.9%
General Motors Corp. Class E,
Preferred C 10,800 669,600
----------
(Cost $ 610,239)
</TABLE>
See Accompanying Notes
22
<PAGE> 24
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 1995 ARMADA EQUITY INCOME FUND
<TABLE>
<CAPTION>
Par
Maturity (000) Value
-------- ----- -----
<S> <C> <C> <C>
CORPORATE BONDS - 3.1%
INSURANCE - 1.1%
Chubb Corp. (Aa3, AA)
6.00% 05/15/98 $400 $ 415,000
WASTE MANAGEMENT - 2.0%
Browning Ferris, Inc.
6.25% 08/15/12 700 715,750
---------
TOTAL CORPORATE BONDS 1,130,750
=========
(Cost $1,110,176)
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares
--------
<S> <C> <C>
TEMPORARY INVESTMENT - 2.0%
Fidelity Domestic Market Portfolio 707,626 707,626
-----------
(Cost $707,626)
TOTAL INVESTMENTS - 100.0% $36,077,208
===========
(Cost $33,319,938*)
* Also cost for Federal income tax purposes.
The gross unrealized appreciation (depreciation) for Federal income tax
purposes is as follows:
Gross appreciation................. $ 2,872,785
Gross depreciation (115,515)
------------
$ 2,757,270
============
</TABLE>
See Accompanying Notes
23
<PAGE> 25
FINANCIAL STATEMENTS
ARMADA EQUITY INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
<S> <C>
ASSETS
Investments at value (Cost $33,319,938) $ 36,077,208
Interest and dividends receivable 214,645
Receivable for Fund shares sold 359,400
Receivable for investments sold 289,279
Prepaid expenses 22,997
------------
TOTAL ASSETS 36,963,529
-----------------------------------------------
LIABILITIES
Payable for investments purchased 601,000
Accrued expenses 44,273
------------
TOTAL LIABILITIES 645,273
-----------------------------------------------
NET ASSETS (based on
3,297,683 shares of beneficial
interest having no par value) $ 36,318,256
===============================================
NET ASSETS CONSIST OF:
Paid-in capital $ 33,421,933
Undistributed net investment
income 232,291
Accumulated net realized loss
on investments sold (93,238)
Net unrealized appreciation on
investments 2,757,270
------------
$ 36,318,256
===============================================
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PRICE PER SHARE - Institutional
class ($36,193,738 divided by 3,286,369
shares of beneficial interest) $ 11.01
===============================================
NET ASSET VALUE AND
REDEMPTION PRICE
PER SHARE - Retail class
($124,518 divided by 11,314
shares of beneficial interest) $ 11.01
===============================================
MAXIMUM OFFERING PRICE
PER RETAIL SHARE
($11.01 divided by .9625) $ 11.44
===============================================
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MAY 31, 1995
<S> <C>
INVESTMENT INCOME:
Dividends $ 1,026,369
Interest 79,709
Less foreign tax withheld (1,705)
-----------
Total investment income 1,104,373
-------------------------------------------------
EXPENSES:
Investment Advisory fees 170,231
Registration and filing fees 24,584
Administration fees 22,697
Transfer agent fees 14,919
12b-1 fees 8,209
Printing and shareholder reports 7,550
Custodian fees 5,372
Miscellaneous 4,809
Trustees' fees 4,509
Legal fees 4,091
Amortization of organization costs 3,039
Distribution fees 2,402
Audit fees 1,234
Insurance 292
Shareholder servicing fees - Retail class only 152
Fees waived by Investment Advisers (39,122)
Fees waived by Administrator (5,100)
Fees waived by Custodian (3,821)
-----------
Total expenses 226,047
-------------------------------------------------
NET INVESTMENT INCOME 878,326
- ---------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments sold (93,238)
Net change in unrealized
appreciation on investments 2,757,270
-----------
Net gain on investments sold 2,664,032
-----------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $ 3,542,358
=================================================
</TABLE>
See Accompanying Notes
24
<PAGE> 26
FINANCIAL STATEMENTS
ARMADA EQUITY INCOME FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE
PERIOD ENDED
MAY 31, 1995
------------
<S> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 878,326
Net realized loss on investments sold (93,238)
Net change in unrealized appreciation on investments 2,757,270
------------
Net increase in net assets resulting from operations 3,542,358
Distributions to shareholders from net investment income (646,035)
Increase in net assets derived from capital share transactions 33,421,933
------------
Total increase in net assets 36,318,256
------------
NET ASSETS:
Beginning of period 0
End of period $ 36,318,256
============
MAY 31, 1995
------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 232,291
============
</TABLE>
See Accompanying Notes
25
<PAGE> 27
FINANCIAL STATEMENTS
ARMADA EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
MAY 31, 1995
--------------------
INSTITUTIONAL(3) RETAIL(3)
---------------- ---------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.26
--------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .34 .26
Net gains on securities (realized and unrealized) .94 .75
--------- ----------
Total from investment operations 1.28 1.01
--------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income (.27) (.26)
--------- ----------
Total distributions (.27) (.26)
--------- ----------
Net asset value, end of period $ 11.01 $ 11.01
========= ==========
TOTAL RETURN 14.34%(4) 13.18%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 36,194 $ 125
Ratio of expenses to average net assets .99%(1,4) 1.41%(2,4)
Ratio of net investment income to average net assets 3.87%(1,4) 3.45%(2,4)
Portfolio turnover rate 12% 12%
</TABLE>
1 The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, Administrator, and Custodian for the
Institutional class for the period ended May 31, 1995 would have been 1.21%
and 3.66%, respectively.
2 The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, Administrator, and Custodian for the
Retail class for the period ended May 31, 1995 would have been 1.45% and
3.40%, respectively.
3 Institutional and Retail classes commenced operations on July 1, 1994 and
August 22, 1994, respectively.
4 Annualized.
5 Total return excludes sales load.
See Accompanying Notes
26
<PAGE> 28
PORTFOLIO OF INVESTMENTS
MAY 31, 1995 ARMADA MID CAP REGIONAL FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCK - 93.3%
AUTOMOTIVE PARTS-EQUIPMENT - 0.8% 20,000 $ 432,500
Standard Products Co.
----------
BANKING - 4.1%
Signet Banking Corp. 30,000 678,750
U.S. Trust Corp. 22,600 1,565,050
----------
2,243,800
----------
BROADCASTING - 1.3%
TCA Cable T.V., Inc. 27,600 700,350
----------
BUILDING & BUILDING SUPPLIES - 5.2%
Pulte Corp. 60,000 1,642,500
Ryland Group, Inc. 62,500 992,188
Wolohan Lumber Co. 15,000 208,125
----------
2,842,813
----------
BUSINESS SERVICES - 3.9%
Bell & Howell Holdings Co. 25,000 462,500
Flightsafety International, Inc 21,000 984,375
Unifirst Corp. 56,000 679,000
----------
2,125,875
----------
CHEMICALS - 12.4%
Adco Technologies, Inc. 40,000 297,500
Arco Chemical Co. 20,000 925,000
Ferro Corp. 72,200 1,985,500
M.A. Hanna Co. 20,000 495,000
Nalco Chemical Co. 25,000 943,750
O.M. Group, Inc. 42,000 1,050,000
RPM, Inc. (OH) 18,100 362,000
Schulman (A.), Inc. 25,000 743,750
----------
6,802,500
----------
CONSUMER-DURABLES - 1.2%
Baldwin Piano & Organ Co.+ 12,000 154,500
Ladd Furniture, Inc. 36,667 504,171
----------
658,671
----------
CONSUMER NON-DURABLES - 0.8%
Rocky Shoes and Boots, Inc. + 30,000 $ 253,125
Shoe Carnival, Inc. + 25,000 170,313
----------
423,438
----------
DRUGS & HEALTH CARE - 3.0%
AmeriSource Health Corp. + 35,000 794,063
Bindley Western Industries, Inc. 55,000 862,813
----------
1,656,876
----------
ELECTRICAL EQUIPMENT - 1.0%
Raychem Corp. (Del) 10,000 363,750
Rexel, Inc. + 20,000 167,500
----------
531,250
----------
ELECTRONICS - 1.6%
Premier Industrial Corp. 35,000 879,375
----------
FERTILIZER - 2.0%
IMC Global, Inc. 16,350 735,750
Scotts Co., Class A + 16,400 358,750
1,094,500
FOODS - 1.5%
Stokely USA, Inc. + 44,100 239,794
Tootsie Roll Industries, Inc. 9,270 600,233
----------
840,027
----------
FREIGHT & SHIPPING - 2.5%
Airborne Freight Corp. 71,500 1,349,563
----------
HEALTH CARE - 2.0%
Heart Technology, Inc. + 30,000 600,000
Medex, Inc. 45,000 486,563
----------
1,086,563
----------
INSURANCE - 11.1%
AON Corp. 37,500 1,368,750
Gallagher (Arthur J.) & Co. 10,000 348,750
</TABLE>
See Accompanying Notes
27
<PAGE> 29
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 1995 ARMADA MID CAP REGIONAL FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------ -----
<S> <C> <C>
INSURANCE (CONT'D.)
Harleysville Group, Inc. 60,400 $1,479,800
Hilb, Rogal & Hamilton Co. 15,000 187,500
Horace Mann Educators Corp. 119,000 2,737,000
----------
6,121,800
----------
MACHINERY (ELECTRIC) - 0.6%
Duriron Co., Inc. 16,000 333,000
----------
MACHINERY & HEAVY EQUIPMENT - 4.5%
Cascade Corp. 31,800 536,625
Johnstown America
Industries, Inc. + 45,000 511,875
Nacco Industries, Inc. Class A 17,200 1,032,000
Tennant Co. 14,800 399,600
----------
2,480,100
----------
METALS & MINING - 1.4%
Brush Wellman, Inc. 12,500 271,875
Mine Safety Appliances Co. 10,900 512,300
----------
784,175
----------
NATURAL RESOURCES - 2.1%
Florida Rock Industries, Inc. 24,000 687,000
Nord Resources Corp. + 130,000 455,000
----------
1,142,000
----------
OIL & GAS - 4.6%
Ashland Oil, Inc. 30,000 1,113,750
Belden & Blake Corp. + 15,400 250,250
Cabot Oil & Gas, Inc. 40,000 630,000
Diamond Shamrock, Inc. 20,000 542,500
----------
2,536,500
----------
PAPER & FOREST PRODUCTS - 4.2%
Federal Paper Board Co., Inc. 45,000 1,462,500
Mead Corp. 16,000 862,000
----------
2,324,500
----------
RESTAURANTS - 0.9%
Quality Dining, Inc. + 41,500 521,344
----------
RETAIL FOOD CHAINS - 2.4%
Food Lion, Inc. Class B 145,000 $ 924,375
Kroger Co. + 15,000 390,000
----------
1,314,375
----------
RETAIL MERCHANDISING - 4.3%
Blair Corp. 16,500 532,125
Borders Group, Inc. 19,400 283,725
Drug Emporium, Inc.+ 129,000 532,125
Hi-Lo Automotive, Inc.+ 86,400 766,800
Sun T.V. & Appliances, Inc. 30,000 236,250
----------
2,351,025
----------
RETAIL STORES - 1.2%
Meyer (Fred), Inc. + 25,000 668,750
----------
SPECIALTY CHEMICALS - 0.2%
Blessings Corp. 11,000 133,375
----------
STEEL - 2.1%
Insteel Industries, Inc. 125,000 937,500
Steel Technologies, Inc. 20,000 237,500
----------
1,175,000
----------
TECHNOLOGY - 3.1%
Cray Research, Inc. + 50,000 1,143,750
Government Technology
Services, Inc. + 51,000 357,000
Tseng Laboratories, Inc. 30,000 200,625
----------
1,701,375
----------
TELECOMMUNICATIONS - 1.5%
Octel Communications Corp. + 29,000 677,875
Page America Group, Inc. + 72,400 117,650
----------
795,525
----------
TEXTILES - 1.0%
Oneita Industries, Inc. + 51,000 548,250
----------
</TABLE>
See Accompanying Notes
28
<PAGE> 30
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 1995 ARMADA MID CAP REGIONAL FUND
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------ -----
<S> <C> <C>
TIRE & RUBBER - 0.5%
Bandag, Inc. Class A 5,000 $ 282,500
-----------
TOBACCO - 4.3%
Dimon, Inc. 78,100 1,347,225
Universal Corp. 43,300 1,006,725
-----------
2,353,950
-----------
TOTAL COMMON STOCK 51,235,645
-----------
(Cost $48,794,251)
TEMPORARY INVESTMENTS - 6.7%
Federated Investors Prime
Obligations Fund 853,138 853,138
Fidelity Domestic Market
Portfolio 2,829,201 2,829,201
-----------
TOTAL TEMPORARY
INVESTMENTS 3,682,339
-----------
(Cost $3,682,339)
TOTAL INVESTMENTS - 100.0% $54,917,984
===========
(Cost $52,476,590*)
+ Non-income producing security.
* Cost for Federal income tax purposes - $52,480,339
The gross unrealized appreciation (depreciation) for Federal income
tax purposes is as follows:
Gross appreciation $ 4,200,671
Gross depreciation (1,763,026)
-----------
$ 2,437,645
-----------
</TABLE>
See Accompanying Notes
29
<PAGE> 31
FINANCIAL STATEMENTS
ARMADA MID CAP REGIONAL FUND
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
<S> <C>
ASSETS
Investments at value (Cost $52,476,590) $54,917,984
Interest and dividends receivable 112,467
Receivable for Fund shares sold 129,340
Receivable for investments sold 1,936,889
Prepaid expenses 20,291
----------
TOTAL ASSETS 57,116,971
------------------------------------------------
LIABILITIES
Payable for Fund share redeemed 12,925
Payable for investments purchased 2,505,895
Accrued expenses 38,392
----------
TOTAL LIABILITIES 2,557,212
------------------------------------------------
NET ASSETS (based on
4,795,815 shares of
beneficial interest having
no par value) $54,559,759
================================================
NET ASSETS CONSIST OF:
Paid-in capital $50,025,390
Undistributed net investment
income 256,480
Undistributed net realized gain on
investments sold 1,836,495
Net unrealized appreciation on
investments 2,441,394
----------
$54,559,759
================================================
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PRICE PER SHARE - Institutional
class ($50,992,930 divided by 4,479,075
shares of beneficial interest) $ 11.38
================================================
NET ASSET VALUE AND
REDEMPTION PRICE
PER SHARE - Retail class
($3,566,829 divided by 316,740
shares of beneficial interest) $ 11.26
================================================
MAXIMUM OFFERING PRICE
PER RETAIL SHARE
($11.26 divided by .9625) $ 11.70
================================================
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MAY 31, 1995
INVESTMENT INCOME:
Dividends $ 657,068
-----------
EXPENSES:
Investment Advisory fees 210,951
Administration fees 28,127
Registration and filing fees 26,330
Transfer agent fees 14,898
12b-1 fees 10,715
Printing and shareholder reports 7,246
Custodian fees 7,165
Trustees' fees 4,673
Shareholder servicing fees - Retail class only 4,061
Miscellaneous 3,735
Legal fees 3,682
Amortization of organization costs 2,425
Distribution fees 2,169
Audit fees 1,196
Insurance 287
Fees waived by Investment Adviser (27,051)
Fees waived by Administrator (5,121)
Fees waived by Custodian (5,544)
-----------
Total expenses 289,944
----------------------------------------------------
NET INVESTMENT INCOME 367,124
- ---------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments sold 1,936,082
Net change in unrealized appreciation
on investments 2,441,394
---------
Net gain on investments 4,377,476
---------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS $ 4,744,600
====================================================
</TABLE>
See Accompanying Notes
30
<PAGE> 32
FINANCIAL STATEMENTS
ARMADA MID CAP REGIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
MAY 31, 1995
------------
<S> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 367,124
Net realized gain on investments sold 1,936,082
Net change in unrealized appreciation on investments 2,441,394
------------
Net increase in net assets resulting from operations 4,744,600
Distribution to shareholders from net investment income (110,644)
Distribution to shareholders from net realized capital gains (99,587)
Increase in net assets derived from capital share transactions 50,025,390
------------
Total increase in net assets 54,559,759
------------
NET ASSETS:
Beginning of period 0
End of period $ 54,559,759
============
MAY 31, 1995
------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 256,480
============
</TABLE>
See Accompanying Notes
31
<PAGE> 33
FINANCIAL STATEMENTS
ARMADA MID CAP REGIONAL FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
MAY 31, 1995
--------------------------
INSTITUTIONAL(3) RETAIL(3)
---------------- ---------
<S> <C> <C>
Net asset value, beginning of period $10.00 $10.16
------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .10 .07
Net gains on securities (realized and unrealized) 1.36 1.11
------ ------
Total from investment operations 1.46 1.18
------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (.04) (.04)
Dividends from net realized capital gains (.04) (.04)
------ ------
Total distributions (.08) (.08)
------ ------
Net asset value, end of period $11.38 $11.26
====== ======
TOTAL RETURN 17.42%(4) 14.80%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $50,993 $3,567
Ratio of expenses to average net assets 1.01%(1,4) 1.34%(2,4)
Ratio of net investment income to average net assets 1.31%(1,4) 1.09%(2,4)
Portfolio turnover rate 69% 69%
</TABLE>
1 The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser, Administrator, and Custodian for the
Institutional class for the period ended May 31, 1995 would have been 1.15%,
and 1.17%, respectively.
2 The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Adviser, Administrator, and Custodian for the Retail
class for the period ended May 31, 1995 would have been 1.38% and 1.05%,
respectively.
3 Institutional and Retail classes
commenced operations on July 26, 1994 and August 15, 1994, respectively.
4 Annualized.
5 Total return excludes sales load.
See Accompanying Notes
32
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Armada Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. Effective May
22, 1995, the Trust changed its name from NCC Funds to Armada Funds. The Trust
was organized as a Massachusetts business trust on January 28, 1986. The Trust
is a series fund which is authorized to issue twenty-four classes of shares of
beneficial interest, each of which evidences an interest in one of twelve
investment funds:
Money Market Fund (Class A "Institutional" shares and Class A-Special
Series 1 "Retail" shares),
Government Fund (Class B "Institutional" shares and Class
B-Special Series 1 "Retail" shares),
Treasury Fund (Class C "Institutional"shares and Class C-Special Series 1
"Retail" shares),
Tax Exempt Fund (Class D "Institutional" shares and Class D-Special Series
1 "Retail" shares),
Equity Fund (Class H "Institutional" shares and Class H-Special Series 1
"Retail" shares),
Fixed Income Fund, (Class I "Institutional" shares and Class I-Special
Series 1 "Retail" shares),
Ohio Tax Exempt Fund (Class K "Institutional" shares and Class K-Special
Series 1 "Retail" shares),
National Tax Exempt Fund (Class L "Institutional" shares and Class L-
Special Series 1 "Retail" shares),
Equity Income Fund (Class M "Institutional" shares and Class M-Special
Series 1 "Retail" shares),
Mid Cap Regional Fund (Class N "Institutional shares and Class N-Special
Series 1 "Retail" shares),
Enhanced Income Fund (Class O "Institutional" shares and Class O-Special
Series 1 "Retail" shares),
Total Return Advantage Fund (Class P "Institutional" shares and Class P-
Special Series 1 "Retail" shares)
As of the date of this report, the National Tax Exempt Fund has not
commenced operations.
The following is a summary of significant accounting policies followed by the
Equity, Equity Income, and Mid Cap Regional Funds (the "Funds") in the
preparation of their financial statements.
PORTFOLIO VALUATION: Investments in securities traded on an exchange are
valued at the last quoted sale price for a given day, or if a sale is not
reported for that day, at the mean between the most recent quoted bid and asked
prices. Unlisted securities for which market quotations are readily available
are valued at the mean between the most recent bid and asked prices. Securities
for which no quotations are readily available are valued at the fair value
determined in good faith pursuant to Board of Trustees guidelines.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on the trade date. Realized gains and losses on investments sold are
recorded on the identified cost basis. Interest income is accrued on a daily
basis. Dividends are recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income of the Equity and Equity Income Funds are declared and paid quarterly;
dividends from the net investment income of the Mid Cap Regional Fund are
declared and paid annually. With respect to each Fund, net income for dividend
purposes consists of dividends, interest income, and discount earned (including
both original issue and market discount), less amortization of any market
premium and accrued expenses. Any net realized capital gains will be distributed
at least annually.
FEDERAL INCOME TAXES: Each of the Funds is classified as a separate
taxable entity for Federal income tax purposes. Each of the Funds intends
to qualify as a
33
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
separate "regulated investment company" under the Internal Revenue Code and
makes the requisite distributions to its shareholders that will be sufficient to
relieve it from Federal income tax and Federal excise tax. Therefore, no Federal
tax provision is required. To the extent distributions from net investment
income and realized net capital gains exceed amounts reported in the financial
statements, such amounts are reported separately.
As of May 31, 1995 the Equity and Equity Income Funds realized capital losses
of $117,954 and $93,238, respectively. Such losses may be carried forward and
offset against future capital gains.
ORGANIZATIONAL COSTS: The Trust bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
shares for distribution under Federal and State securities regulations. All
organization expenses are being amortized on the straight-line method over a
period of five years from the date of commencement of operations.
2. INVESTMENT ADVISERS, ADMINISTRATION FEE,
DISTRIBUTION FEE AND OTHER RELATED PARTY
TRANSACTIONS
Fees paid by the Trust pursuant to the Advisory Agreements with National City
Bank, National City Bank, Columbus and National City Bank, Kentucky
(collectively, the "Adviser" or "Advisers"), wholly-owned subsidiaries of
National City Corporation, are payable monthly based on the annual rate of .75%
of each Fund's average daily net assets. The Advisers may from time to time
waive their fees payable by the Funds. For the period ended May 31, 1995, the
Advisers have earned and waived fees as follows:
<TABLE>
<CAPTION>
EARNED WAIVED
------ ------
<S> <C> <C> <C>
Equity Fund $ 814,885 $ 0
Equity Income Fund 170,231 39,122
Mid Cap Regional Fund 210,951 27,051
At May 31, 1995, advisory fees accrued and unpaid were:
Equity Fund $89,207
Equity Income Fund 22,145
Mid Cap Regional Fund 32,640
</TABLE>
Fees paid by the Funds under a Shareholder Servicing Plan (the "Plan") to
National City Investments Corporation, a wholly-owned subsidiary of National
City Corporation, are payable monthly based on an aggregate annual rate of .25%
of the average daily net assets of the Retail class of the Equity, Equity Income
and Mid Cap Regional Funds. National City Investments Corporation has earned
fees from the Equity and Mid Cap Regional Funds in the amount of $292 and $180,
respectively, for the period ended May 31, 1995.
Fees paid by the Fund pursuant to the Administration and Accounting Services
Agreement with PFPC Inc. (the "Administrator"), an indirect wholly-owned
subsidiary of PNC Bank Corp., are payable monthly. PNC Bank, N.A., a
wholly-owned subsidiary of PNC Bank Corp., acted as the Trust's Custodian until
November 7, 1994, at which time National City Bank became the Trust's Custodian.
National City Bank has earned and waived custodian fees through May 31, 1995,
representing $18,794, $3,821, and $5,544, for the Equity, Equity Income, and the
Mid Cap Regional Funds, respectively.
440 Financial Distributors, Inc., a wholly-owned subsidiary of the
Shareholders Services Group, Inc. and an indirect wholly-owned subsidiary of
First Data
34
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
Corp. ("Distributor"), serves as the Trust's Distributor. Under the Trust's
Distribution Agreement and related Distribution Plan adopted pursuant to Rule
12b-1 of the Investment Company Act of 1940, each Fund reimburses the
Distributor monthly for the direct and indirect expenses incurred by the
Distributor in providing Trust advertising, marketing, prospectus printing and
other distribution services up to a maximum of .10% per annum of the average net
assets of each Fund, inclusive of an annual distribution fee of $250,000, which
is payable monthly and accrued daily among the investment funds with respect to
which the Distributor is distributing shares.
Each Trustee receives an annual fee of $6,000 plus $2,000 for each Board
Meeting attended and reimbursement of out-of-pocket expenses. The Chairman of
the Board receives an additional $2,000 per annum for services in such capacity.
Such fees are paid for services rendered to all of the Funds and are allocated
accordingly. No person who is an officer, director, trustee, or employee of the
Investment Advisers, Administrator, Distributor, or of any parent or subsidiary
thereof, who serves as an officer, trustee, or employee of the Trust receives
any compensation from the Trust.
Expenses for the year ended May 31, 1995 include
legal fees paid to Drinker Biddle & Reath. A partner of that firm is
Secretary of the Trust.
3. PURCHASES AND SALES OF SECURITIES
During the period ended May 31, 1995, purchases and sales of securities,
other than short-term investments or U.S. Government obligations, aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
Equity Fund $ 37,943,449 $ 17,374,280
Equity Income Fund 35,740,947 3,041,838
Mid Cap Regional Fund 68,444,372 21,610,088
</TABLE>
4. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Board of Trustees to issue an
unlimited number of shares of beneficial interest and to classify or reclassify
any unissued shares of the Trust into one or more additional classes of shares
and to classify or reclassify any class of shares into one or more series of
shares. The Trust has received an exemptive order from the Securities and
Exchange Commission which allows the Trust to allocate fees payable under a
Shareholder Servicing Plan (the "Plan") which is applicable only to the Retail
class. Transactions in capital shares are summarized below for the Equity,
Equity Income, and Mid Cap Regional Funds.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
MAY 31, 1995
------------------
INSTITUTIONAL CLASS RETAIL CLASS
SHARES VALUE SHARES VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
EQUITY FUND
Shares sold.......................................... 2,204,373 $ 30,453,279 29,328 $ 408,345
Shares reinvested.................................... 95,010 1,289,744 9,835 133,458
Shares repurchased................................... (818,100) (11,561,697) (184,733) (2,543,339)
--------- ------------- -------- --------------
Net increase (decrease).............................. 1,481,283 $ 20,181,326 (145,570) $ (2,001,536)
========= ============= ======== ==============
</TABLE>
35
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 1995
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
MAY 31, 1995
--------------------
INSTITUTIONAL CLASS RETAIL CLASS
--------------------- ---------------------
SHARES VALUE SHARES VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
EQUITY INCOME FUND
Shares sold.......................................... 3,319,667 $ 33,658,233 11,161 $ 114,046
Shares reinvested.................................... 55,277 562,440 187 1,933
Shares repurchased................................... (88,575) (914,369) (34) (350)
--------- -------------- ------ --------------
Net increase......................................... 3,286,369 $ 33,306,304 11,314 $ 115,629
========= ============== ====== ==============
INSTITUTIONAL CLASS RETAIL CLASS
------------------------ ---------------------
SHARES VALUE SHARES VALUE
------ ----- ------ -----
MID CAP REGIONAL FUND
Shares sold.......................................... 4,561,720 $ 47,581,271 365,213 $ 3,858,435
Shares reinvested.................................... 14,908 158,322 1,456 15,289
Shares repurchased................................... (97,553) (1,057,490) (49,929) (530,437)
Net increase......................................... 4,479,075 $ 46,682,103 316,740 $ 3,343,287
========= ============== ======= ==============
FOR THE YEAR ENDED
MAY 31, 1994
------------------
INSTITUTIONAL CLASS RETAIL CLASS
------------------------ ---------------------
SHARES VALUE SHARES VALUE
------ ----- ------ -----
EQUITY FUND
Shares sold.......................................... 1,638,110 $ 22,334,880 154,545 $ 2,102,713
Shares reinvested.................................... 66,124 897,387 11,938 163,044
Shares repurchased................................... (1,269,120) (17,283,914) (175,409) (2,396,978)
---------- -------------- -------- --------------
Net increase (decrease).............................. 435,114 $ 5,948,353 (8,926)$ (131,221)
========== =============== ======= ===============
</TABLE>
36
<PAGE> 38
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and
Shareholders of Armada Funds:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Armada Equity Fund, the Armada
Equity Income Fund, and the Armada Mid Cap Regional Fund (the "Funds") as of May
31, 1995, and the related statements of operations for the period then ended,
the statements of changes in net assets, and the financial highlights for each
of the periods presented herein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Armada Equity Fund, the Armada Equity Income Fund, and the
Armada Mid Cap Regional Fund at May 31, 1995, the results of their operations
for the period then ended, the changes in their net assets, and the financial
highlights for each of the periods presented herein, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
- ---------------------
Philadelphia, Pennsylvania
July 5, 1995
37
<PAGE> 39
ARMADA FUNDS
BOARD OF TRUSTEES Richard B. Tullis
Chairman of the Board, President and Treasurer
Chairman Emeritus, Harris
Corporation
Director, NACCO Materials
Handling Group, Inc.
Director, Hamilton Beach/Proctor-
Silex, Inc.
Director, Waste-Quip, Inc.
Thomas R. Benua, Jr.
Trustee
President, Treasurer and
Director, EBCO Manufacturing Company
and Subsidiaries
Leigh Carter
Trustee
Retired President and Chief
Operating Officer,
B.F. Goodrich Company
John F. Durkott
Trustee
President and Chief
Operating Officer, Kittles Home
Furnishing Center, Inc.
Richard W. Furst, Dean
Trustee
Professor of Finance and Dean,
College of Business and Economics,
University of Kentucky
J. William Pullen
Trustee
President and Chief Executive Officer,
Whayne Supply Company
<PAGE> 40
[LOGO] BULK RATE
U.S. POSTAGE
290 Donald Lynch Boulevard PAID
Marlboro, Massachusetts 01752 BOSTON, MA
PERMIT NO. 54201
INVESTMENT ADVISERS
AFFILIATES OF
NATIONAL CITY
CORPORATION
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
National City Bank, Columbus
155 East Broad Street
Columbus, Ohio 43251
National City Bank, Kentucky
101 South Fifth Street
Louisville, Kentucky 40202
NC-139
<PAGE> 1
EXHIBIT 17(i)
[ARROW LOGO]
ARMADA FUNDS
EQUITY SERIES
SEMI-ANNUAL REPORT - NOVEMBER 30, 1995
(UNAUDITED)
<TABLE>
<S> <C>
ARMADA TABLE OF CONTENTS
MID CAP
REGIONAL Chairman's Message ......................................... 1
FUND
ARMADA Equity Series Overview .................................... 3
EQUITY
FUND FUND OVERVIEWS
ARMADA
EQUITY INCOME Armada Mid Cap Regional Fund ............................... 6
FUND
Armada Equity Fund ......................................... 8
Armada Equity Income Fund .................................. 10
PORTFOLIOS OF INVESTMENTS AND FINANCIAL STATEMENTS
Armada Mid Cap Regional Fund ............................... 12
Armada Equity Fund ........................................ 18
Armada Equity Income Fund ................................. 24
NOTES TO FINANCIAL STATEMENTS .............................. 30
</TABLE>
- - SHARES OF THE ARMADA FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY NATIONAL CITY BANK, ITS
AFFILIATES OR ANY BANK.
- - SHARES OF THE ARMADA FUNDS ARE NOT INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, FDIC, OR ANY GOVERNMENTAL AGENCY OR STATE.
- - AN INVESTMENT IN THE ARMADA FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
- - PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE, AND THE INVESTMENT
RETURN WILL FLUCTUATE.
National City Bank and certain of its affiliates serve as investment advisers to
Armada Funds for which they receive an investment advisory fee. For more
complete information about the Armada Funds, including charges and expenses,
please contact your investment specialist or call 1-800-622-FUND (3863) for a
prospectus. Read it carefully before you invest or send money. Armada Funds are
distributed by 440 Financial Distributors, Inc., 290 Donald Lynch Boulevard,
Marlborough, MA, 01752. 440 Financial Distributors, Inc. is not affiliated with
National City Bank and is not a bank.
<PAGE> 2
[ARROW LOGO]
ARMADA FUNDS SEMI-ANNUAL REPORT
CHAIRMAN'S MESSAGE
Dear Armada Shareholders:
For the six months ended November 30, 1995, the
equity and bond markets continued to flourish beyond
many expectations. Armada Funds investment advisers
responded in kind, producing decided gains for our
shareholders during this period.
While we are always pleased to see the markets
perform well in the short term, we continue to
stress to our shareholders the value of following a
disciplined and diversified, long-term investment
strategy. Over the years, a long-term investment
perspective has helped investors attain financial
goals such as providing a college education for
children, purchasing a new home or meeting
retirement needs.
ARMADA NEWS
I am pleased to announce two significant events
which have taken place during these past six months
with respect to the Armada Family of Funds:
TWO ASSET MANAGERS JOIN ARMADA
On September 28, 1995, Robert M. Leggett and James
R. Kirk joined Armada Funds as asset managers for
the Equity Fund and Equity Income Fund,
respectively. Both have significant investment
management expertise and have successfully managed
large institutional funds over the past two decades.
Mr. Leggett has held equity-related positions
including chief investment officer, director of
equity investments, and director of research. Mr.
Kirk is well-known in the Cleveland investment
community and comes to National City after holding
the investment management positions of chief
investment officer, head of equity asset management
and director of research.
TREASURY FUND RECOGNIZED FOR QUALITY
Armada Treasury Fund, one of the four money market
funds offered by Armada Funds, was recently rated
"AAAm-G" by Standard & Poor's, based on an analysis
of the Fund's credit quality, investment policies
and management and market price exposure. This
rating indicates that the
1
<PAGE> 3
[ARROW LOGO]
ARMADA FUNDS SEMI-ANNUAL REPORT
CHAIRMAN'S MESSAGE (CONTINUED)
Fund's safety of invested principal is excellent and
reflects its superior capacity to maintain a $1 per
share net asset value at all times.
As you read ahead, you will find commentaries
which discuss market and fund activities during the
past six months for the Armada Equity Series. Please
remember that the Armada Family of Funds offers a
full range of investment products. Each fund offers
a distinctive investment style and position along
the risk/reward spectrum. As always, Armada is
committed to providing our shareholders with quality
investment products and services. For more
information about Armada Funds, please contact your
investment specialist or call 1-800-622-FUND (3863).
Sincerely,
[SIGNATURE]
Richard B. Tullis
Chairman
Armada Funds Board of Trustees
2
<PAGE> 4
[ARROW LOGO] ARMADA FUNDS SEMI-ANNUAL REPORT
EQUITY SERIES OVERVIEW
"THE CATALYSTS FOR BOTH THE
STRENGTH AND CONSISTENCY OF
THIS STOCK MARKET ADVANCE CAN
BE FOUND IN THE CONTINUING
DOWNWARD TREND OF INTEREST
RATES, BETTER-THAN-EXPECTED
CORPORATE PROFIT GROWTH AND
STRONG CASH FLOWS INTO THE
EQUITY MARKETS FROM BOTH
INDIVIDUAL INVESTORS AND
CORPORATIONS." As Armada Funds reached the November 30, 1995,
mid-point of fiscal year 1996, the powerful
financial market advance born in the early months of
calendar year 1995 remained fully intact. The power
and consistency of this stock market rally is
evidenced not only in the fiscal year to date 14.98%
total return for the Standard and Poor's 500 Stock
Index (the "S&P 500"), but also in the fact that the
S&P 500 suffered only one month of negative returns
thus far in the calendar year. The catalysts for
both the strength and consistency of this stock
market advance can be found in the continuing
downward trend of interest rates,
better-than-expected corporate profit growth and
strong cash flows into the equity markets from both
individual investors and corporations.
As the first half of fiscal year 1996 progressed,
market leadership was squarely centered on large
capitalization, high beta (price volatility) and
high-earnings growth stocks. As a result, technology
stock groups (including computer software and
hardware, aerospace, instrumentation and
telecommunication equipment companies) were among
the best performing areas. Investor focus on themes
closely associated with technology issues such as
capital spending, productivity and global
competitiveness engendered heavy flows of funds into
these issues. Healthcare stocks - particularly HMOs,
drugs and medical products - turned in very strong
performances as they came roaring back from the
ashes of the healthcare reform scare of 1993-94.
Financial stocks, both banks and brokerage issues,
also delivered impressive performances. Downward
trending interest rates and the rapidly escalating
consolidation within the banking industry were two
themes associated with financial stocks which
investors found hard to resist. Consumer staples
groups such as household products, beverages,
tobacco and cosmetics reported steady earnings gains
as they continued their emphasis on international
expansion.
The market environment was much more difficult for
the energy, basic materials, consumer cyclical and
industrial cyclical industries. The earnings
prospects for these sectors depend on improving
economic growth and the consensus outlook for the
economy was tepid, at best, during the past several
months. We have seen no reason to disagree with that
outlook. More importantly, the Federal Reserve also
seemed to agree with it, as reflected in the July
reduction of the Fed discount rate. However, the
Fed's reluctance to ease further has caused the
yield curve to become virtually flat.
3
<PAGE> 5
[ARROW LOGO] ARMADA FUNDS SEMI-ANNUAL REPORT
EQUITY SERIES OVERVIEW (CONTINUED)
"THE HIGHER EXPECTED GROWTH
AND BETTER RETURNS ON EQUITY
OF THE SPBGROWTH COMPANIES IS
ACCOMPANIED BY HIGHER
VALUATIONS, WHETHER MEASURED
AS THE HIGHER PRICE-EARNINGS
RATIO OR LOWER DIVIDEND YIELD.
THE HIGHER BETA OF THE SPBGROWTH
SHOWS THAT ONE SHOULD ALSO EXPECT
GREATER PRICE VOLATILITY FROM
A FUND THAT IS BENCHMARKED TO
THE SPBGROWTH." While still lagging for the calendar year, the
smaller capitalization stock indices kept up with
the S&P 500 during the most recent six months. The
Standard & Poor's Midcap 400 Index (the "S&P Midcap
400") returned 16.16% and the Russell 2000 was up
15.05%. The smaller capitalization end of the stock
market was also led by the high beta technology
group as well as banks and specialty financials. For
further elaboration on this area, please see the
Armada Mid Cap Regional Fund commentary.
With this commentary, we are introducing
additional "style" benchmarks for Armada Equity Fund
and Armada Equity Income Fund. Style benchmarks are
useful for making comparisons of the portfolio
characteristics (growth rates, yields, betas,
profitability, etc.), industry sector weightings and
investment returns of each fund to the most
appropriate market index. The Armada Equity Fund
will be compared to the Standard and Poor's BARRA
Growth Index ("SPBGrowth"), as the SPBGrowth is the
industry standard benchmark for large capitalization
growth funds.
Likewise, we have identified the Standard and
Poor's BARRA Value Index ("SPBValue") as the
benchmark for the Equity Income Fund. Data as of
November 30, 1995, shown in the table below,
indicates that the higher expected growth and better
return on equity of the SPBGrowth companies is
accompanied by higher valuations, whether measured
as the higher price-earnings ratio or lower dividend
yield. The higher beta of the SPBGrowth shows that
one should also expect greater price volatility from
a fund that is benchmarked to the SPBGrowth.
----------------------------------------------------
<TABLE>
<CAPTION>
5 YR. PRICE/ RETURN
EPS EARNINGS DIVIDEND ON
GROWTH RATIO YIELD EQUITY BETA
------- --------- --------- ------- -----
<S> <C> <C> <C> <C> <C>
S&P 500 +12% 15x 2.3% 16% 1.00
SPBGrowth +14% 17x 1.7% 23% 1.06
SPBValue + 9% 12x 3.0% 14% 0.94
</TABLE>
----------------------------------------------------
As would be expected in the market environment
described in this report, the SPBGrowth gained
17.03% over the past six months while the SPBValue
was up only 12.69%.
4
<PAGE> 6
[ARROW LOGO] ARMADA FUNDS SEMI-ANNUAL REPORT
EQUITY SERIES OVERVIEW (CONTINUED)
"WITHOUT A DOUBT,
THE STOCK MARKET HAS
BEEN A MOST REWARDING
USE OF INVESTOR FUNDS
THIS YEAR."
INVESTMENT OUTLOOK
During the first half of the Armada Funds fiscal
year 1996, the stock market set a series of all time
high levels. The S&P 500 shot past the 600 level and
the Dow Jones Industrial Average rocketed through
the 5000 level in November. Incredibly, these
"century marks" were reached only nine months after
the indices first surpassed the 500 and 4000 levels.
Without a doubt, the stock market has been a most
rewarding use of investor funds this year. After
these huge gains, the stock market currently does
seem rather expensive, but we see no immediate
danger of a serious reversal in prices.
The reason for that posture is that the key
factors behind the great bull market that began over
a decade ago remain firmly in place. Those factors
are disinflation and demographics. "Disinflation"
means stable, moderate levels of inflation (the
Consumer Price Index increases at a 2-3% annual
rate) which provides enough pricing "grease" to keep
the wheels of the economy moving smoothly, but not
so much as to cause deterioration of profit margins.
Historically, such eras have been very good periods
to own financial assets such as stocks and bonds.
The 1980s - 1990s have certainly proven that. The
demographics factor arises from the fact that the
Baby Boomer generation is now in the midst of the
peak earning and saving segment of its life cycle.
This creates an enormous flow of funds that not only
helps keep the economy growing, but also must be
invested somewhere. Surveys show that most Boomers
do not believe they can count on Social Security to
provide for them in their old age, so they have an
added incentive to save - and invest. We believe
that stocks will continue to be the asset class of
choice over the next few years.
Clearly, the stock market will not rise forever
without cyclical setbacks, so we are constantly on
the lookout for signs of trouble. We would become
concerned if the bond market experienced a major
reversal, if earnings growth slowed dramatically, or
if investor sentiment became extremely bullish. As
of this writing, none of these factors are in place.
5
<PAGE> 7
[ARROW LOGO] FUND OVERVIEW
ARMADA MID CAP REGIONAL FUND
ASSET MANAGER:
LAWRENCE E. BAUMGARTNER,
PRESIDENT
BROAD STREET
ASSET MANAGEMENT
FUND'S DATE OF INCEPTION:
JULY 26, 1994 (INSTITUTIONAL SHARES)
AUGUST 15, 1994 (RETAIL SHARES)
ASSETS:
$70,624,830 (INSTITUTIONALSHARES)
$ 4,488,378 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
SEEK CAPITAL APPRECIATION BY
INVESTING IN A DIVERSIFIED
FUND OF PUBLICLY TRADED EQUITY
SECURITIES OF ISSUERS WHICH ARE
DOMICILED PRIMARILY IN OHIO, INDIANA
AND KENTUCKY AND CONTIGUOUS
STATES AND OTHER STATES IN WHICH
NATIONAL CITY CORPORATION
AFFILIATES ARE LOCATED.
The small/mid cap markets followed the cue of the
large cap Standard and Poor's 500 Stock Index (the
"S&P 500") during the six months ending November 30,
1995, showing 15.05% appreciation for the small cap
Russell 2000, and 16.16% for the Standard & Poor's
Midcap 400 Stock Index (the "S&P Midcap 400"). These
two indices are the most widely recognized benchmark
indices for the stocks of mid- and small-sized
companies and will jointly serve as the performance
benchmarks for this fund, henceforth. By comparison,
the Armada Mid Cap Regional Fund (the "Fund") had
total returns of 7.64% and 7.46% (before sales load)
for Institutional and Retail shareholders,
respectively, during the same time frame. Since
inception in July 1994, annualized return of 16.83%
for the Mid Cap Regional Fund Institutional shares
and 15.04% for Retail shares (before sales load)
compare to 19.8% annualized for the Russell 2000 and
23.2% for the S&P Midcap 400.
The technology and financial services stocks
continue to lead the charge in this latest market
advance, as any stock remotely tied to a rapidly-
evolving Internet, semiconductor or software theme
moved sharply (or even explosively) ahead. In the
finance sector, brokers, banks and most any company
related to consumer lending were the leaders during
this fiscal period.
On the flip side, most any small company tied to
the goods producing sectors (steel, autos and
chemicals) underperformed the averages, while retail
stocks were in a general free fall over the summer
months. It is readily apparent there is too much
retail space in America and this is leading to a
severe shake out of marginal players.
The Fund was largely on the sidelines during this
techno-mania due to our value discipline and
regional bias. We owned several stocks which showed
very strong performance during the last six months.
These include Wilmington, Ohio-based Airborne
Freight (+49%), Mansfield, Ohio-based Shiloh
Industries (+33%), Bensalem, Pa.-based American
Travelers (+39%) and Malvern, Pa.-based Amerisource
Health (+38%). Holding back the Fund's performance
were several consumer-related and basic products
companies which were feeling the brunt of a sharp
slowing in goods producing and consumer end markets.
The earnings picture in smaller companies turned
sharply negative as 1995 progressed, with more than
40% of the small cap Russell 2000 companies now
reporting negative year-to-year earnings
comparisons. As 1996 unfolds, we believe the slower
earnings trend will shift to the technology sector
as capital spending slows and to the credit
cyclicals as delinquencies and credit quality
questions begin to emerge.
6
<PAGE> 8
[ARROW LOGO] FUND OVERVIEW
ARMADA MID CAP REGIONAL FUND (CONTINUED)
"AS 1996 UNFOLDS, WE BELIEVE
THE SLOWER EARNINGS TREND
WILL SHIFT TO THE TECHNOLOGY
SECTOR AS CAPITAL SPENDING SLOWS AND TO
THE CREDIT CYCLICALS AS
DELINQUENCIES AND CREDIT
QUALITY QUESTIONS BEGIN TO EMERGE."
LOOKING FORWARD
As noted, we are largely onlookers when it comes
to the tech sectors, as valuations appear excessive
and holes are beginning to show in the earnings
outlook. Our overweighting in the basic products
sector reflects a group with low expectations,
inexpensive valuations, and high potential returns.
As usual, we continue our value-oriented discipline,
maintaining a portfolio of stocks with low
price-earnings, price-book, and price-cash flow
ratios. We believe that an aggressive Federal
Reserve easing in interest rates during 1996 will
have a positive effect on our Midwest economy, and
our outlook for each stock in this Fund is positive.
TOTAL RETURNS as of 11/30/95
<TABLE>
<CAPTION>
Six Months 1-Year Since Inception(2)(4)
<S> <C> <C> <C>
Armada Mid Cap Regional Fund
Institutional Shares(1) 7.64% 17.62% 16.83%
Armada Mid Cap Regional Fund
Retail Shares With Sales Load 3.42% 12.91% 11.66%
Without Sales Load 7.46% 17.26% 15.04%
</TABLE>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT (BEGINNING 7/26/94)(3)
<TABLE>
<CAPTION>
Armada Mid Armada Mid
Cap Regional Cap Regional
Fund (Instit- Fund (Retail
Measurement Period S&P Midcap Russell 2000 utional Shares with
(Fiscal Year Covered) 400 Index Index Shares)(1) sales load)
<S> <C> <C> <C> <C>
June-1994 $10000 $10000 $10000 $10000
Aug-1994 10524 10557 10590 9934
Oct-1994 10440 10479 10700 10028
Dec-1994 10061 10325 10736 10059
Feb-1995 10699 10619 10887 10202
Apr-1995 11104 11041 11180 10478
June-1995 11834 11786 11653 10908
Aug-1995 12662 12723 12036 11260
Oct-1995 12667 12372 11814 11051
Nov-1995 13209 12892 12338 11537
</TABLE>
(1) Institutional shares are sold primarily to Banks and
clients of National Asset Management Corporation
(NAM) customers. Certain account level charges may
apply.
(2) The Armada Mid Cap Regional Fund's date of inception
was July 26, 1994 for Institutional shares and
August 15, 1994 for Retail shares.
(3) The return and principal value of an investment will
fluctuate. When redeemed, shares may be worth more
or less than their original cost.
(4) Annualized.
7
<PAGE> 9
[ARROW LOGO]
FUND OVERVIEW
ARMADA EQUITY FUND
ASSET MANAGER:
ROBERT M. LEGGETT,
VICE PRESIDENT
NATIONAL CITY
ASSET MANAGEMENT GROUP --
DIRECTOR OF EQUITIES
FUND'S DATE OF INCEPTION:
DECEMBER 20, 1989
(INSTITUTIONAL SHARES)
APRIL 15, 1991 (RETAIL SHARES)
ASSETS:
$141,084,467 (INSTITUTIONAL SHARES)
$ 5,863,748 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
SEEK A HIGH LEVEL OF TOTAL
RETURN ARISING OUT OF CAPITAL
APPRECIATION AND INCOME. THE
FUND INVESTS IN COMMON STOCKS
AND SECURITIES CONVERTIBLE
INTO COMMON STOCKS. The Armada Equity Fund (the "Fund") produced a
very solid 12.91% return for Institutional
shareholders and 12.75% (before sales load) for
Retail shareholders in the first six months of
Fiscal 1996 which ended November 30, 1995. We are
disappointed to report that we nonetheless lost
ground to our primary benchmark over that timeframe,
as the Standard & Poor's 500 Stock Index (the "S&P
500") was up 14.98%. Likewise, during this six-month
period, Standard and Poor's/BARRA Growth Index
appreciated 17.03%. Market leadership was very
narrow during these six months which made it a
difficult period for active managers in the stock
market. This was compounded by the fact that most
stocks which performed well ran up very rapidly. The
lack of price pullbacks made it very hard to find
reasonable levels at which to buy the leadership,
which kept us out of most of the technology
leadership stocks.
Fortunately, our holdings in the healthcare and
financial sectors were at the forefront of market
leadership. Medtronic, Schering Plough, Pfizer and
American Home Products were the featured stocks in
our healthcare overweight and each of them
outperformed the S&P 500 by more than 10% for the
past six months. Likewise, we were well overweighted
in financials and earned very strong returns from a
diversified group of stocks that included State
Street Bank, Fannie Mae and Chubb. While we were
only market weighted in technology, our stock picks
helped Fund performance, as Qualcomm (a wireless
communications equipment company), Automatic Data
Processing and Xerox all had very strong returns.
The Fund's overweight in long distance telephones
also worked out well; both AT&T and MCI
Communications outgained the S&P 500 by over 15%!
Our large holdings in the capital goods and consumer
cyclicals groups were the primary negative for the
Fund's six-month performance. Pollution control
stocks (Browning-Ferris) building-related companies
(Masco and York International), and retailers (Kmart
and Dillard's) were all weak as fears of an economic
slowdown grew.
LOOKING FORWARD
In examining the Fund's performance, we concluded
that a stronger focus on our large capitalization
growth stock portfolio style should lead to improved
performance over the longer term. Within that
context, we have introduced the Standard and
Poor's/BARRA Growth Index as a more suitable
benchmark for the Fund. While the Fund has always
been managed as a large cap growth fund, in recent
years, the stock selection methodology emphasized
diversification and de-emphasized higher
price/earnings ratio, high-quality, longer term
growth companies. After a
8
<PAGE> 10
[ARROW LOGO] FUND OVERVIEW
ARMADA EQUITY FUND (CONTINUED)
"WE WERE WELL OVERWEIGHTED IN
FINANCIALS AND EARNED VERY
STRONG RETURNS FROM A
DIVERSIFIED GROUP OF STOCKS
THAT INCLUDED STATE STREET
BANK, FANNIE MAE AND
CHUBB." portfolio restructuring, which was basically
completed in November, the majority of the Fund's
holdings will henceforth consist of high-quality
companies with longer term earnings growth rates
projected at well above the S&P 500 growth rate. We
will still search out, and invest in, cyclical
growth companies which are in the "sweet spot" of
their earnings cycle.
In summary, we foresee an environment of continued
moderate economic growth, low interest rates,
virtually non-existent inflation and slowing overall
earnings growth. Until these factors reverse or
weaken to the point of recession, the outlook for
growth stock investing should remain positive. We
are optimistic that the remainder of the fiscal year
will show favorable returns for the Fund.
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 11/30/95
------------------------------------------------------------------------
Six Months 1-Year 3-Years(4) 5-Years(4) Since Inception(2,4)
---------- ------ ---------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
Amanda Equity Fund
Institutional Shares(1) 12.91% 26.39% 7.70% 13.45% 11.33%
Amanda Equity Fund
Retail Shares With Sales Load 8.50% 21.33% 6.08% 12.32% 10.39%
Without Sales Load 12.75% 26.03% 7.44% 13.17% 11.10%
</TABLE>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT (BEGINNING 12/30/89)(3)
<TABLE>
<CAPTION>
Armada Equity Armada Equity
Fund Fund (Retail
Measurement Period S&P BARRA (Institutional Shares with
(Fiscal Year Covered) Growth Index S&P 500 Index Shares)(1) sales load)
<S> <C> <C> <C> <C>
Nov-1989 $10000.00 $10000.00 $10000.00 $10000.00
May-1990 10599.00 10628.52 10846.50 10439.30
Nov-1990 9710.80 9653.18 10073.90 9695.70
May-1991 12088.60 11881.79 12809.70 12328.80
Nov-1991 12152.40 11616.65 12578.90 12071.50
May-1992 13387.70 13052.42 13950.10 13374.30
Nov-1992 14471.70 13762.47 15163.90 14519.20
May-1993 14318.30 14567.84 14954.90 14311.00
Nov-1993 14708.70 15152.34 14911.80 14246.00
May-1994 14467.90 15188.35 15165.60 14470.70
Nov-1994 15016.20 15310.27 14986.60 14286.70
May-1995 17827.90 18246.43 16776.10 15969.10
Nov-1995 20863.40 19649.22 18942.30 18005.70
</TABLE>
(1) Institutional shares are sold primarily to Banks and
National Asset Management Corporation (NAM)
customers. Certain account level charges may apply.
(2) The Armada Equity Fund's date of inception was
December 20, 1989 for Institutional shares and April
15, 1991 for Retail shares.
(3) The return and principal value of an investment will
fluctuate. When redeemed, shares may be worth more
or less than their original cost.
(4) Annualized.
9
<PAGE> 11
[ARROW LOGO]
FUND OVERVIEW
ARMADA EQUITY INCOME FUND
ASSET MANAGER:
JAMES R. KIRK,
VICE PRESIDENT
NATIONAL CITY
ASSET MANAGEMENT GROUP --
INVESTMENT STRATEGIST
FUND'S DATE OF INCEPTION:
JULY 1, 1994 (INSTITUTIONAL SHARES)
AUGUST 22, 1994 (RETAIL SHARES)
ASSETS:
$48,424,746 (INSTITUTIONAL SHARES)
$ 213,115 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
SEEK A COMPETITIVE TOTAL RATE
OF RETURN THROUGH INVESTMENTS IN
EQUITY AND EQUITY EQUIVALENT
SECURITIES WHICH CARRY
PREMIUM YIELDS. The Armada Equity Income Fund (the "Fund")
returned 10.0% for Institutional shareholders and
9.88% (before sales load) for Retail shareholders in
the first six months of Fiscal 1996 (period ending
November 30, 1995). This compares with 14.98% for
the Standard and Poor's 500 Stock Index (the "S&P
500"). During this six-month period, there was a
large difference between the performance of growth
and value stocks, as indicated by the return of
12.69% for Standard and Poor's/BARRA Value Index
(the "SPBValue").
This was a market in which high growth, low yield,
and high beta stocks outperformed. Because of its
emphasis on income, the Fund is concentrated in
lower growth, higher yield, lower beta stocks. From
a sector perspective, the Fund's performance was
hurt by its overweighting in consumer cyclical
stocks, by its slight overweighting in energy and
utilities stocks and by its underweighting in
technology. The Fund was helped by its moderate
overweight in financial stocks, the best performing
sector during this period.
During the last two months, the Fund's positions
in oil, telephone, electric utility, banking and
insurance stocks have increased. Positions in
publishing and printing stocks, tobacco, drug and
food stocks have been reduced. Relative to the S&P
500, the Fund is now overweighted in the energy,
financial and utilities sectors and underweighted in
the technology, consumer non-durables, consumer
cyclicals and capital goods sectors. Relative to the
SPBValue, the Fund is overweighted in consumer
staples, moderately overweighted in utilities and
underweighted in consumer cyclicals and financial
stocks. The weighted average market capitalization
of the Fund has increased over the last two months
from about $15 billion to about $20 billion. This
compares with $29 billion for the S&P 500 and $20
billion for the SPBValue. The Fund has an SEC 30-Day
Yield of 3.1% (Institutional Shares) and 2.7%
(Retail Shares). The beta is .85, compared with a
beta of 1.00 for the S&P 500 and .94 for the
SPBValue.
LOOKING FORWARD
As to future direction, we will be looking for
additional opportunities to lighten up on consumer
staples, particularly drug stocks and tobacco
stocks, which have performed very well this year and
in which the Fund is overweighted relative to the
SPBValue. Going forward, the Fund will be using
S&P/BARRA Value Index as the Fund's performance
benchmark rather than the S&P 500 Index because its
characteristics more closely
10
<PAGE> 12
[ARROW LOGO] FUND OVERVIEW
ARMADA EQUITY INCOME FUND (CONTINUED)
"THE FUND WAS HELPED BY
ITS MODERATE OVERWEIGHT
IN FINANCIAL STOCKS, THE
BEST PERFORMING SECTOR
DURING THIS PERIOD." match those of the Fund. These characteristics
include yield, beta, market capitalization and
industry weightings. We will also be looking for
opportunities to increase the Fund's position in
auto and retail stocks, which have lagged the market
this year and look increasingly interesting.
<TABLE>
<CAPTION>
TOTAL RETURNS as of 11/30/95
- -------------------------------------------------------------------------------------------
Six Months 1-Year Since Inception(2,4)
<S> <C> <C> <C>
Armada Equity Income Fund 10.00% 24.91% 16.63%
Institutional Shares(1)
- -------------------------------------------------------------------------------------------
Armada Equity Income Fund
Retail Shares With Sales Load 5.75% 19.97% 12.64%
Without Sales Load 9.88% 24.69% 16.07%
- -------------------------------------------------------------------------------------------
Past performance is not predictive of future performance.
</TABLE>
GROWTH OF A $10,000 INVESTMENT (BEGINNING 7/7/94)(3)
<TABLE>
<CAPTION>
Armada Equity Armada Equity
Income Fund Income Fund
(Institu- (Retail
Measurement Period S&P/BARRA S&P 500 Stock tional Shares with
(Fiscal Year Covered) Value Index Index Shares)(1) sales load)
<S> <C> <C> <C> <C>
June-1994 $10000.00 $10000.00 $10000.00 $10000.00
Aug-1994 10630.30 10751.45 10450.00 9821.80
Oct-1994 10479.70 10725.12 10283.20 9647.50
Dec-1994 10178.70 10467.68 10073.20 9438.30
Feb-1995 10860.20 11178.92 10562.50 9893.60
Apr-1995 11527.10 11847.06 10959.90 10267.60
Jun-1995 12131.60 12606.75 11350.20 10623.70
Aug-1995 12656.80 13057.89 11701.80 10946.30
Oct-1995 12892.90 13010.88 11980.60 11202.30
Nov-1995 13568.50 13583.36 12439.80 11641.80
</TABLE>
(1) Institutional shares are sold primarily to Banks and
National Asset Management Corporation (NAM)
customers. Certain account level charges may apply.
(2) The Armada Equity Income Fund's date of inception
was July 1, 1994 for Institutional shares and August
22, 1994 for Retail shares.
(3) The return and principal value of an investment will
fluctuate. When redeemed, shares may be worth more
or less than their original cost.
(4) Annualized.
11
<PAGE> 13
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA MID CAP REGIONAL FUND
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -----------
<S> <C> <C>
COMMON STOCK - 96.4%
AUTOMOTIVE PARTS - EQUIPMENT - 2.9%
Amcast Industrial Corp....... 49,900 $ 923,150
Borge-Warner Automotive,
Inc......................... 25,000 740,625
Douglas & Lomason Co......... 44,000 500,500
------------
2,164,275
------------
BANKING - 1.8%
First of America Bank
Corp........................ 10,000 448,750
Huntington Bancshares,
Inc......................... 36,750 893,484
------------
1,342,234
------------
BUILDING & BUILDING SUPPLIES - 5.0%
Interface, Inc............... 40,000 652,500
Pulte Corp................... 40,000 1,230,000
Ryland Group, Inc............ 100,000 1,237,500
Wolohan Lumber Co............ 65,000 580,937
------------
3,700,937
------------
BUSINESS SERVICES - 4.3%
Flightsafety International,
Inc......................... 27,300 1,433,250
Unifirst Corp................ 111,200 1,765,300
------------
3,198,550
------------
CHEMICALS - 2.3%
Arco Chemical Co............. 10,000 475,000
Geon Co...................... 50,000 1,237,500
------------
1,712,500
------------
CONSUMER-DURABLES - 0.2%
Baldwin Piano & Organ Co.+... 12,000 151,500
------------
DRUGS & HEALTH CARE - 4.2%
Amerisource Health Corp.+.... 40,000 1,150,000
Bergen Brunswig Corp., Class
A........................... 40,000 960,000
Bindley Western Industries,
Inc......................... 57,000 1,018,875
------------
3,128,875
------------
ELECTRONICS - 0.6%
Premier Industrial Corp...... 18,100 450,237
------------
FERTILIZER - 0.7%
Scotts Co., Class A+......... 24,600 496,612
------------
FINANCIAL SERVICES - 3.0%
U.S. Trust Corp.............. 47,100 2,237,250
------------
FOODS - 0.5%
Midwest Grain Products,
Inc......................... 5,000 59,687
Thorn Apple Valley, Inc...... 17,000 280,500
------------
340,187
------------
FREIGHT & SHIPPING - 3.1%
Airborne Freight Corp........ 83,200 2,340,000
------------
HEALTH CARE - 1.2%
Caremark International,
Inc......................... 45,000 883,125
------------
INSURANCE - 18.6%
Acordia, Inc................. 50,000 1,400,000
American Travellers Corp.+... 15,000 377,813
Amerin Corp. +............... 25,500 559,406
AON Corp..................... 30,000 1,413,750
Capitol American Financial
Corp........................ 30,000 615,000
Gallagher (Arthur J.) &
Co.......................... 20,000 655,000
</TABLE>
See Accompanying Notes
12
<PAGE> 14
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA MID CAP REGIONAL FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -----------
<S> <C> <C>
INSURANCE (CONT'D.)
Harleysville Group, Inc...... 65,400 $ 1,888,425
Horace Mann Educators
Corp........................ 163,300 4,735,700
John Alden Financial Corp.... 85,000 1,753,125
Kansas City Life Insurance
Co.......................... 9,000 474,750
------------
13,872,969
------------
MACHINERY & HEAVY EQUIPMENT - 0.5%
Cascade Corp................. 20,000 287,500
Johnstown America
Industries, Inc.+........... 22,500 119,531
------------
407,031
------------
METALS & MINING - 2.3%
Brush Wellman, Inc........... 17,500 306,250
Carbide Graphite Group,
Inc.+....................... 31,000 457,250
Commonwealth Aluminum
Corp. ...................... 30,000 511,875
Mine Safety Appliances
Co. ........................ 10,400 451,100
------------
1,726,475
------------
NATURAL RESOURCES - 1.7%
Florida Rock Industries,
Inc. ....................... 30,000 795,000
Nord Resources Corp.+........ 210,700 447,738
------------
1,242,738
------------
OIL & GAS - 1.2%
Ashland Oil, Inc. ........... 5,000 174,375
Belden & Blake Corp.+........ 45,400 732,075
------------
906,450
------------
PAPER & FOREST PRODUCTS - 5.3%
Caraustar Industries......... 75,000 1,500,000
Glatfelter (P.H.) Co. ....... 15,000 286,875
Mead Corp. .................. 25,000 1,428,125
Mosinee Paper Corp. ......... 30,000 727,500
------------
3,942,500
------------
PHOTO-EQUIPMENT & SUPPLIES - 0.1%
CPI Corp. ................... 3,100 64,713
------------
RETAIL FOOD CHAINS - 3.1%
Food Lion, Inc., Class B..... 180,000 1,063,125
Kroger Co.+.................. 20,000 670,000
Smiths Food & Drug Centers,
Inc. ....................... 26,000 627,250
------------
2,360,375
------------
RETAIL MERCHANDISING - 2.8%
Dillard Department Stores,
Inc. ....................... 40,000 1,155,000
Hi-Lo Automotive, Inc.+...... 76,400 429,750
Shoe Carnival, Inc.+......... 50,000 203,125
Sun T.V. & Appliances,
Inc. ....................... 55,000 309,375
------------
2,097,250
------------
SPECIALTY CHEMICALS - 6.9%
Adco Technologies, Inc. ..... 31,500 226,406
Blessings Corp. ............. 30,000 292,500
Ferro Corp. ................. 48,500 1,079,125
Fuller (H.B.) Co. ........... 40,000 1,295,000
O.M. Group, Inc. ............ 48,000 1,464,000
Schulman (A.), Inc. ......... 43,100 781,188
------------
5,138,219
------------
</TABLE>
See Accompanying Notes
13
<PAGE> 15
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA MID CAP REGIONAL FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -----------
<S> <C> <C>
STEEL - 6.8%
Huntco, Inc. ................ 45,000 $ 793,125
Insteel Industries, Inc. .... 184,900 1,224,963
Olympic Steel, Inc.+......... 90,500 808,844
Reliance Steel &
Aluminum Co. ............... 20,000 375,000
Rouge Steel Co. ............. 20,000 435,000
Shiloh Industries, Inc.+..... 21,200 238,500
Steel Technologies, Inc. .... 135,700 1,187,375
------------
5,062,807
------------
TECHNOLOGY - 3.3%
Apple Computer, Inc.......... 30,000 1,145,625
Stratus Computer, Inc.+...... 35,000 1,163,750
Government Technology
Services, Inc.+............. 30,000 120,000
------------
2,429,375
------------
TEXTILES - 1.0%
Oneita Industries, Inc.+..... 106,000 755,250
------------
TIRE & RUBBER - 2.0%
Bandag, Inc., Class A........ 30,000 1,477,500
------------
TOBACCO - 4.6%
Dimon, Inc. ................. 116,000 2,001,000
Universal Corp. ............. 63,300 1,503,375
------------
3,504,375
------------
TRUCKING - 3.4%
M.S. Carriers, Inc.+......... 105,000 $ 1,981,875
TNT Freightways Corp. ....... 30,000 588,750
------------
2,570,625
------------
UTILITIES - ELECTRIC - 3.0%
Cinergy Corp................. 30,000 885,000
Ohio Edison Co............... 60,000 1,365,000
------------
2,250,000
------------
TOTAL COMMON STOCK........... 71,954,934
(Cost $68,648,363) ------------
TEMPORARY INVESTMENT - 3.6%
Fidelity Domestic
Market Portfolio............ 2,711,407 2,711,407
(Cost $2,711,407) ------------
TOTAL INVESTMENTS - 100.0% $74,666,341
(Cost $71,359,770*) ============
+ Non-income producing.
Cost for Federal income tax
* purposes - $71,390,234
The gross unrealized appreciation (depreciation)
for Federal income tax purposes is as follows:
Gross appreciation................... $ 6,911,219
Gross depreciation................... (3,635,112)
-----------
$ 3,276,107
-----------
</TABLE>
See Accompanying Notes
14
<PAGE> 16
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA MID CAP REGIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $71,359,770)................... $74,666,341
Interest and dividends receivable.... 124,774
Receivable for Fund shares sold...... 42,643
Receivable for investments sold...... 679,312
Prepaid expenses..................... 18,902
----------
TOTAL ASSETS................ 75,531,972
- ------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed..... 10,573
Payable for investments purchased.... 332,250
Accrued expenses..................... 75,941
----------
TOTAL LIABILITIES........... 418,764
- ------------------------------------------------------
NET ASSETS (based on
6,137,391 shares of
beneficial interest
having no par value)........ $75,113,208
======================================================
NET ASSETS CONSIST OF:
Paid-in capital............. $65,885,511
Undistributed net investment
income...................... 556,548
Undistributed net realized
gain on investments sold.... 5,364,578
Net unrealized appreciation
on investments.............. 3,306,571
----------
$75,113,208
======================================================
NET ASSET VALUE,
OFFERING PRICE AND
REDEMPTION PRICE PER
SHARE -- Institutional class
($70,624,830 divided by 5,766,429
shares of beneficial
interest).................. $ 12.25
======================================================
NET ASSET VALUE AND
REDEMPTION PRICE
PER SHARE -- Retail class
($4,488,378 divided by 370,962 shares
of beneficial interest)..... $ 12.10
======================================================
MAXIMUM OFFERING
PRICE PER RETAIL SHARE
($12.10 divided by .9625)... $ 12.57
======================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................. $ 663,765
---------
EXPENSES:
Investment Advisory fees.............. 252,610
Administration fees................... 33,459
12b-1 fees............................ 25,858
Transfer Agent fees................... 14,395
Registration and filing fees.......... 9,377
Custodian fees........................ 8,520
Printing and shareholder reports...... 8,111
Shareholder servicing fees - Retail
class only.......................... 5,227
Legal fees............................ 4,698
Miscellaneous......................... 3,104
Distribution fees..................... 2,275
Amortization of organization costs.... 1,852
Audit fees............................ 1,561
Trustees' fees........................ 846
Insurance............................. 324
Fees waived by Custodian.............. (8,520)
---------
Total expenses............... 363,697
- ------------------------------------------------------
NET INVESTMENT INCOME.................... 300,068
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments sold............. 3,528,083
Net change in unrealized
appreciation on
investments.................. 865,177
---------
Net gain on investments...... 4,393,260
- ------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS.............. $4,693,328
======================================================
</TABLE>
See Accompanying Notes
15
<PAGE> 17
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA MID CAP REGIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED PERIOD ENDED
NOVEMBER 30, 1995 MAY 31, 1995
----------------- --------------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income.............................................. $ 300,068 $ 367,124
Net realized gain on investments sold.............................. 3,528,083 1,936,082
Net change in unrealized appreciation on investments............... 865,177 2,441,394
----------- -----------
Net increase in net assets resulting from operations............... 4,693,328 4,744,600
Distribution to shareholders from net investment income................ 0 (110,644)
Distribution to shareholders from net realized capital gains........... 0 (99,587)
Increase in net assets derived from capital share transactions......... 15,860,121 50,025,390
----------- -----------
Total increase in net assets........................................... 20,553,449 54,559,759
----------- -----------
NET ASSETS:
Beginning of period................................................ 54,559,759 0
----------- -----------
End of period...................................................... $75,113,208 $54,559,759
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, 1995 MAY 31, 1995
-------------------- --------------------
<S> <C> <C>
UNDISTRIBUTED NET INVESTMENT INCOME AS OF............................. $ 556,548 $ 256,480
=========== ===========
</TABLE>
See Accompanying Notes
16
<PAGE> 18
[ARROW LOGO] FINANCIAL HIGHLIGHTS
ARMADA MID CAP REGIONAL FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE PERIOD ENDED
NOVEMBER 30, 1995 MAY 31, 1995
------------------------- ---------------------------
(UNAUDITED)
INSTITUTIONAL RETAIL INSTITUTIONAL(3) RETAIL(3)
------------- ------ ---------------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 11.38 $11.26 $10.00 $10.16
------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................................... .04 .03 .10 .07
Net gains on securities (realized and unrealized)............. .83 .81 1.36 1.11
------- ------ ------- ------
Total from investment operations............................ .87 .84 1.46 1.18
------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net investment income.......................... .00 .00 (.04) (.04)
Dividends from net realized capital gains..................... .00 .00 (.04) (.04)
------- ------ ------- ------
Total distributions......................................... .00 .00 (.08) (.08)
------- ------ ------- ------
Net asset value, end of period.................................. $ 12.25 $12.10 $11.38 $11.26
======= ====== ======= ======
TOTAL RETURN.................................................... 15.83%(4) 15.43%(4,5) 17.42%(4) 14.80%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's).......................... $70,625 $4,488 $50,993 $3,567
Ratio of expenses to average net assets....................... 1.06%(1,4) 1.32%(2,4) 1.01%(1,4) 1.34%(2,4)
Ratio of net investment income to average net assets.......... .91%(1,4) .64%(2,4) 1.31%(1,4) 1.09%(2,4)
Portfolio turnover rate....................................... 63% 63% 69% 69%
</TABLE>
(1) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Institutional class for the period ended
November 30, 1995 would have been 1.09% and .88%, respectively.
The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, Administrator, and Custodian for the
Institutional class for the period ended May 31, 1995 would have been
1.15%, and 1.18%, respectively.
(2) The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Retail class for the period ended November
30, 1995 would have been 1.34% and .62%, respectively. The operating expense
ratio and the net investment income ratio before fee waivers by the
Investment Advisers, Administrator, and Custodian for the Retail class for
the period ended May 31, 1995 would have been 1.38% and 1.05%, respectively.
(3) Institutional and Retail classes commenced operations on July 26, 1994, and
August 15, 1994 respectively.
(4) Annualized.
(5) Total Return excludes sales load.
See Accompanying Notes
17
<PAGE> 19
[ARROW LOGO]
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY FUND
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCK - 96.0%
ADVERTISING - 2.2%
Interpublic Group, Inc...... 88,310 $ 3,388,896
------------
BANKING - 4.0%
Norwest Corp. .............. 69,000 2,277,000
Wells Fargo & Company....... 18,000 3,784,500
------------
6,061,500
------------
BEVERAGES - 7.1%
Anheuser-Busch Companies,
Inc........................ 30,000 1,987,500
Coca-Cola Co................ 58,000 4,393,500
Pepsico, Inc................ 77,900 4,303,975
------------
10,684,975
------------
BUILDING & BUILDING SUPPLIES - 1.9%
Home Depot, Inc............. 63,666 2,825,179
------------
BUSINESS SERVICES - 3.1%
Automatic Data Processing... 26,880 2,140,320
General Motors Corp.,
Class E.................... 51,540 2,602,770
------------
4,743,090
------------
CHEMICALS - 2.6%
Air Products & Chemicals,
Inc........................ 35,000 1,942,500
Dow Chemical Co............. 28,320 2,007,180
------------
3,949,680
------------
COMPUTERS - 3.9%
Cisco Systems, Inc.+........ 27,000 2,273,063
Intel Corp. ................ 59,000 3,587,938
------------
5,861,001
------------
CONSUMER NON-DURABLES - 3.5%
Gillette Co................. 42,000 2,178,750
Procter & Gamble Co. ....... 35,520 3,068,040
------------
5,246,790
------------
DIVERSIFIED - 2.0%
Minnesota Mining &
Manufacturing Co........... 46,370 3,037,235
------------
DRUGS & HEALTH CARE - 13.4%
Abbott Laboratories......... 50,860 2,066,187
American Home Products
Corp....................... 20,620 1,881,575
Bristol Myers Squibb Co..... 29,950 2,403,487
Eli Lilly & Co.............. 29,000 2,885,500
Merck & Company, Inc........ 50,000 3,093,750
Pfizer, Inc. ............... 82,620 4,791,960
Schering-Plough Corp. ...... 56,304 3,230,442
------------
20,352,901
------------
ELECTRICAL EQUIPMENT - 3.6%
AMP, Inc. .................. 19,000 762,375
Emerson Electric Co. ....... 27,200 2,121,600
Hubbell, Inc., Class B...... 42,920 2,623,485
------------
5,507,460
------------
ELECTRONICS - 1.7%
Honeywell, Inc. ............ 15,000 714,375
MEMC Electronic
Materials, Inc.+........... 55,000 1,821,875
------------
2,536,250
------------
ENTERTAINMENT - 1.1%
Walt Disney Co. ............ 28,055 1,686,807
------------
</TABLE>
See Accompanying Notes
18
<PAGE> 20
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ------------
<S> <C> <C>
FINANCIAL SERVICES - 3.3%
Federal National Mortgage
Association................ 9,730 $ 1,065,435
Greenpoint Financial
Corp. ..................... 65,000 1,698,125
State Street Boston Corp.... 50,000 2,250,000
------------
5,013,560
------------
FOREIGN - 2.5%
Reuters Holdings PLC, ADS... 68,000 3,842,000
------------
HOME FURNISHINGS/HOUSEWARES - 1.0%
Masco Corp.................. 51,000 1,504,500
------------
INSURANCE - 4.2%
American International
Group...................... 44,083 3,956,449
Chubb Corp. ................ 24,400 2,372,900
------------
6,329,349
------------
MANUFACTURING - 4.4%
Wolverine Tube, Inc.+....... 90,000 3,048,750
York International Corp. ... 80,000 3,580,000
------------
6,628,750
------------
MEDICAL & MEDICAL
SERVICES - 2.3%
Medtronic, Inc. ............ 64,000 3,512,000
------------
OFFICE & BUSINESS EQUIPMENT - 4.3%
Pitney Bowes, Inc........... 78,050 3,492,738
Xerox Corp.................. 22,000 3,016,750
------------
6,509,488
------------
OIL & GAS - 1.1%
Amoco Corp.................. 23,655 1,602,626
------------
OIL EQUIPMENT &
SERVICES - 2.0%
Schlumberger Limited........ 48,495 3,079,433
------------
PAPER & FOREST PRODUCTS - 2.2%
Fort Howard Corp.+.......... 172,500 3,396,094
------------
PHARMACEUTICALS - 0.9%
Johnson & Johnson........... 15,000 1,299,375
------------
RETAIL FOOD CHAINS - 1.6%
Albertson's, Inc. .......... 77,000 2,367,750
------------
RETAIL MERCHANDISING - 0.6%
Wal-Mart Stores, Inc. ...... 40,000 960,000
------------
RETAIL STORES - 2.7%
Lowe's Companies, Inc. ..... 82,500 2,598,750
Walgreen Co................. 50,000 1,456,250
------------
4,055,000
------------
TECHNOLOGY - 2.4%
Hewlett Packard Co.......... 43,000 3,563,625
------------
TELECOMMUNICATIONS - 6.8%
AT&T Corp. ................. 60,260 3,977,160
MCI Communications Corp..... 90,000 2,401,875
Motorola, Inc............... 43,920 2,690,100
Qualcomm, Inc.+............. 30,000 1,245,000
------------
10,314,135
------------
</TABLE>
See Accompanying Notes
19
<PAGE> 21
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ------------
<S> <C> <C>
TOBACCO - 2.5%
Philip Morris Companies,
Inc........................ 44,000 $ 3,861,000
------------
UTILITIES - TELEPHONE - 1.1%
BellSouth Corp.............. 43,300 1,683,287
------------
TOTAL COMMON STOCK.......... 145,403,736
(Cost $110,266,574) ------------
TEMPORARY INVESTMENT - 4.0%
Fidelity Domestic
Market Portfolio........... 6,013,916 6,013,916
(Cost $6,013,916) ------------
TOTAL INVESTMENTS - 100.0% $151,417,652
(Cost $116,280,490*) ============
+ Non-income producing.
* Also cost for Federal income tax
purposes.
The gross unrealized appreciation (depreciation)
for Federal income tax purposes is as follows:
Gross appreciation.................. $ 35,644,281
Gross depreciation.................. (507,119)
------------
$ 35,137,162
============
</TABLE>
See Accompanying Notes
20
<PAGE> 22
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $116,280,490)................. $151,417,652
Interest and dividends receivable... 238,843
Receivable for Fund shares sold..... 9,658
Receivable for investments sold..... 7,173,855
Prepaid expenses.................... 6,167
-----------
TOTAL ASSETS............... 158,846,175
- ------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed.... 64,099
Payable for investments purchased... 11,689,778
Accrued expenses.................... 144,083
-----------
TOTAL LIABILITIES.......... 11,897,960
- ------------------------------------------------------
NET ASSETS (based on
8,862,884 shares of
beneficial interest having
no par value).............. $146,948,215
======================================================
NET ASSETS CONSIST OF:
Paid-in capital............ $107,166,111
Undistributed net
investment income.......... 179,794
Undistributed net realized
gain on investments sold... 4,465,148
Net unrealized appreciation
on investments............. 35,137,162
-----------
$146,948,215
======================================================
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
PER SHARE - Institutional
class
($141,084,467 divided by 8,509,745
shares of beneficial
interest).................. $ 16.58
======================================================
NET ASSET VALUE AND
REDEMPTION PRICE PER
SHARE - Retail class
($5,863,748 divided by 353,139
shares of beneficial
interest).................. $ 16.60
======================================================
MAXIMUM OFFERING
PRICE PER RETAIL SHARE
($16.60 divided by .9625).. $ 17.25
======================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................ $ 1,230,465
Interest............................. 87,203
Less foreign taxes withheld.......... (10,079)
----------
Total investment income.............. 1,307,589
----------
EXPENSES:
Investment Advisory fees............. 517,967
Administration fees.................. 69,062
12b-1 fees........................... 44,839
Transfer Agent fees.................. 26,203
Custodian fees....................... 17,266
Registration and filing fees......... 8,166
Shareholder servicing fees - Retail
class only......................... 7,434
Legal fees........................... 6,940
Printing and shareholder reports..... 6,220
Distribution fees.................... 5,360
Audit fees........................... 2,825
Miscellaneous........................ 2,345
Trustees' fees....................... 1,928
Insurance............................ 1,254
Fees waived by Custodian............. (17,266)
----------
Total expenses.............. 700,543
- ------------------------------------------------------
NET INVESTMENT INCOME................... 607,046
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments sold............ 5,546,896
Net change in unrealized
appreciation on
investments................. 10,345,097
----------
Net gain on investments..... 15,891,993
- ------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $16,499,039
======================================================
</TABLE>
See Accompanying Notes
21
<PAGE> 23
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1995 MAY 31, 1995
----------------- ------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income...................................................... $ 607,046 $ 1,640,942
Net realized gain/(loss) on investments sold............................... 5,546,896 (117,954)
Net change in unrealized appreciation on investments....................... 10,345,097 10,348,115
------------ ------------
Net increase in net assets resulting from operations....................... 16,499,039 11,871,103
Distributions to shareholders from net investment income....................... (607,046) (1,520,691)
Distributions to shareholders in excess of net investment income............... (178,961) 0
Distributions to shareholders in excess of net realized capital gains.......... 0 (888,715)
Increase in net assets derived from capital share transactions................. 5,627,321 18,179,790
------------ ------------
Total increase in net assets................................................... 21,340,353 27,641,487
------------ ------------
NET ASSETS:
Beginning of period........................................................ 125,607,862 97,966,375
------------ ------------
End of period.............................................................. $146,948,215 $125,607,862
============ ============
<CAPTION>
NOVEMBER 30, 1995 MAY 31, 1995
----------------- ------------
<S> <C> <C>
UNDISTRIBUTED NET INVESTMENT INCOME AS OF...................................... $ 179,794 $ 358,755
============= ===========
</TABLE>
See Accompanying Notes
22
<PAGE> 24
[ARROW LOGO] FINANCIAL HIGHLIGHTS
ARMADA EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED FOR THE YEAR ENDED MAY 31
NOVEMBER 30, 1995 -----------------------------------------------------------
-----------------------
1995 1994
(UNAUDITED) --------------------- ------------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ------ ------------- ------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.............. $14.77 $14.79 $13.66 $13.68 $13.78 $13.80
-------- ------ ------ ------ ------ ------
INCOME FROM
INVESTMENT OPERATIONS
Net investment income............ .07 .05 .21 .18 .18 .15
Net gains on securities (realized
and unrealized)................ 1.83 1.83 1.21 1.21 .01 .00
-------- ------ ------ ------ ------- ------
Total from investment
operations.................. 1.90 1.88 1.42 1.39 .19 .15
-------- ------ ------ ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income.............. (.07) (.05) (.20) (.17) (.18) (.15)
Dividends in excess of net
investment income.............. (.02) (.02) (.00) (.00) (.01) (.00)
Dividends from net realized
capital gains.................. (.00) (.00) (.00) (.00) (.11) (.11)
Dividends in excess of net
realized capital gains......... (.00) (.00) (.11) (.11) (.01) (.01)
-------- ------ ------ ------ ------- ------
Total distributions........... (.09) (.07) (.31) (.28) (.31) (.27)
-------- ------ ------ ------ ------- ------
Net asset value, end of period.... $16.58 $16.60 $14.77 $14.79 $13.66 $13.68
======== ====== ====== ====== ======= ======
TOTAL RETURN...................... 27.41%(4) 27.05%(4,5) 10.62% 10.35%(5) 1.41% 1.12%(5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)..................... $141,084 $5,864 $119,634 $5,974 $90,446 $7,521
Ratio of expenses to average
net assets..................... 1.00%(1,4) 1.25%(2,4) 1.01%(1) 1.27%(2) 1.07% 1.32%
Ratio of net investment income to
average net assets............. .89%(1,4) .64%(2,4) 1.53%(1) 1.23%(2) 1.33% 1.08%
Portfolio turnover rate.......... 38% 38% 17% 17% 15% 15%
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
--------------------- --------------------- ----------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL(3)
------------- ------ ------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.............. $13.13 $13.13 $12.35 $12.35 $10.77 $12.04
------- ------ ------- ------ ------- ------
INCOME FROM
INVESTMENT OPERATIONS
Net investment income............ .27 .23 .30 .25 .31 .04
Net gains on securities (realized
and unrealized)................ .67 .68 .78 .78 1.58 .27
------- ------ ------- ------ ------- ------
Total from investment
operations.................. .94 .91 1.08 1.03 1.89 .31
------- ------ ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income.............. (.27) (.23) (.30) (.25) (.31) (.00)
Dividends in excess of net
investment income.............. (.02) (.01) (.00) (.00) (.00) (.00)
Dividends from net realized
capital gains.................. (.00) (.00) (.00) (.00) (.00) (.00)
Dividends in excess of net
realized capital gains......... (.00) (.00) (.00) (.00) (.00) (.00)
------- ------ ------- ------ ------- ------
Total distributions........... (.29) (.24) (.30) (.25) (.31) (.00)
------- ------ ------- ------ ------- ------
Net asset value, end of period.... $13.78 $13.80 $13.13 $13.13 $12.35 $12.35
======= ====== ======= ====== ======= ======
TOTAL RETURN...................... 7.20% 7.00%(5) 8.90% 8.48%(5) 18.10% 21.82%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)..................... 5,256 $7,707 $48,673 $2,767 $42,112 $1,389
Ratio of expenses to average
net assets..................... .34% .59%(2) .26%(1) .51%(2) .31%(1) .53%(2,4)
Ratio of net investment income to
average net assets............. 2.13% 1.88%(2) 2.36%(1) 2.15%(2) 2.90%(1) 2.94%(2,4)
Portfolio turnover rate.......... 15% 15% 9% 9% 11% 11%
</TABLE>
(1) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Institutional class for the period ended
November 30, 1995 and the year ended May 31, 1995 would have been 1.03%
and .86%, and 1.02% and 1.51%, respectively. The operating expense ratio
and the net investment income ratio before fee waivers by the Investment
Advisers for the Institutional class for the years ended May 31, 1993,
1992 and 1991 would have been 1.01% and 1.46%, 1.01% and 1.61%, and 1.06%
and 2.15%, respectively.
(2) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Retail class for the period ended
November 30, 1995 and the year ended May 31, 1995 would have been 1.27%
and .62%, and 1.28% and 1.22%, respectively. The operating expense ratio
and the net investment income ratio before fee waivers by the Investment
Advisers for the Retail class for the years ended May 31, 1993 and 1992
and for the period ended May 31, 1991 would have been 1.26% and 1.21%,
1.27% and 1.40%, and 1.28% and 2.19%, respectively.
(3) Retail class commenced operations on April 15, 1991.
(4) Annualized.
(5) Total return excludes sales load.
See Accompanying Notes
23
<PAGE> 25
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY INCOME FUND
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK - 93.4%
AEROSPACE - 1.7%
Boeing Co. .................. 6,500 $ 473,687
Raytheon Co. ................ 7,400 329,300
------------
802,987
------------
AUTOMOBILES - 1.6%
Ford Motor Co. .............. 27,000 762,750
------------
BANKING - 9.4%
Banc One Corp. .............. 12,000 457,500
Fleet Financial Group,
Inc. ....................... 18,700 780,725
Mellon Bank Corp. ........... 17,100 914,850
Morgan (J.P.) & Co., Inc. ... 10,200 800,700
PNC Bank Corp. .............. 25,800 754,650
Wachovia Corp. .............. 18,600 837,000
------------
4,545,425
------------
BEVERAGES - 0.5%
Anheuser-Busch
Companies, Inc. ............ 4,000 265,000
------------
BUSINESS SERVICES - 2.9%
Dun & Bradstreet Corp. ...... 13,900 867,012
H.& R. Block, Inc. .......... 12,000 534,000
------------
1,401,012
------------
CHEMICALS - 4.9%
Dow Chemical Co. ............ 12,200 864,675
E.I. duPont de
Nemours & Co. .............. 11,700 778,050
WD-40 Co. ................... 18,500 740,000
------------
2,382,725
------------
COMPUTERS - 1.0%
International Business
Machines Corp. ............. 5,000 483,125
------------
CONSUMER NON-DURABLES - 3.2%
Clorox Co. .................. 9,500 719,625
Tambrands, Inc. ............. 15,800 823,575
------------
1,543,200
------------
DIVERSIFIED - 2.0%
Minnesota Mining &
Manufacturing Co. .......... 14,700 962,850
------------
DRUGS & HEALTH CARE - 4.7%
American Home
Products Corp. ............. 7,400 675,250
Bristol Myers Squibb Co. .... 10,500 842,625
Pharmacia Upjohn, Inc. ...... 20,300 728,262
------------
2,246,137
------------
ELECTRICAL EQUIPMENT - 1.1%
General Electric Co.......... 8,000 538,000
------------
FINANCIAL SERVICES - 3.4%
Federal National Mortgage
Association................. 8,200 897,900
Norwest Corp................. 22,000 726,000
------------
1,623,900
------------
FOOD & BEVERAGE - 2.7%
General Mills, Inc........... 8,200 452,025
Heinz (H.J.) Co.............. 25,950 827,156
------------
1,279,181
------------
</TABLE>
See Accompanying Notes
24
<PAGE> 26
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY INCOME FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
HOUSEWARES - 0.4%
Procter & Gamble Co.......... 2,000 $ 172,750
------------
INSURANCE - 3.9%
American General Corp........ 21,000 711,375
Lincoln National Corp........ 9,000 420,750
Marsh & McLennan Cos.,
Inc......................... 8,900 772,075
------------
1,904,200
------------
MACHINERY & HEAVY EQUIPMENT - 2.1%
Caterpillar, Inc. ........... 9,000 552,375
Cooper Industries, Inc. ..... 13,000 474,500
------------
1,026,875
------------
NATURAL GAS - 1.8%
Consolidated Natural Gas
Co. ........................ 19,400 860,875
------------
OFFICE & BUSINESS EQUIPMENT - 1.6%
Pitney Bowes, Inc. .......... 8,500 380,375
Xerox Corp. ................. 2,700 370,237
------------
750,612
------------
OIL & GAS - 12.7%
Amoco Corp. ................. 18,400 1,246,600
Atlantic Richfield Co. ...... 4,900 531,037
Chevron Corp. ............... 15,300 755,437
Exxon Corp. ................. 17,500 1,354,063
Mobil Corp. ................. 13,900 1,450,813
Royal Dutch Petroleum Co. ... 6,300 808,763
------------
6,146,713
------------
OIL EQUIPMENT & SERVICES - 0.7%
Schlumberger Ltd., Curacao... 5,000 317,500
------------
PAPER & FOREST PRODUCTS - 2.5%
International Paper Co. ..... 7,000 266,875
Kimberly-Clark Corp. ........ 2,300 176,812
Weyerhaeuser Co. ............ 17,000 769,250
------------
1,212,937
------------
REAL ESTATE - 3.7%
Duke Realty Investments,
Inc. ....................... 17,500 485,625
Kimco Realty Corp. .......... 13,800 552,000
Sun Communities, Inc. ....... 29,000 725,000
------------
1,762,625
------------
RETAIL MERCHANDISING - 3.0%
Melville Corp. .............. 23,300 725,213
Penney (J.C.) Co., Inc. ..... 15,300 717,188
------------
1,442,401
------------
TELECOMMUNICATIONS - 1.6%
American Telephone and
Telegraph Co. .............. 11,500 759,000
------------
TOBACCO - 3.8%
American Brands, Inc. ....... 19,500 814,125
Philip Morris Cos., Inc. .... 8,400 737,100
UST, Inc. ................... 9,100 296,888
------------
1,848,113
------------
TRANSPORTATION - 1.1%
Norfolk Southern Corp. ...... 7,000 551,250
------------
UTILITIES - GAS &
ELECTRIC - 1.1%
LG&E Energy Corp. ........... 12,500 515,625
------------
</TABLE>
See Accompanying Notes
25
<PAGE> 27
[ARROW LOGO] PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995 ARMADA EQUITY INCOME FUND (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
UTILITIES - ELECTRIC - 4.1%
American Electric Power
Co. ........................ 13,000 $ 489,125
Consolidated Edison Co. of
New York, Inc. ............. 21,300 615,038
Florida Progress Corp. ...... 6,000 206,250
FPL Group, Inc. ............. 10,000 433,750
Kansas City Power &
Light Co. .................. 10,000 250,000
------------
1,994,163
------------
UTILITIES - TELEPHONE - 8.8%
Bell Atlantic Corp........... 15,700 989,100
Bell South Corp.............. 19,400 754,175
GTE Corp..................... 28,800 1,227,600
Nynex Corp................... 25,700 1,275,363
------------
4,246,238
------------
MISCELLANEOUS - 1.4%
Ogden Corp................... 32,000 680,000
------------
TOTAL COMMON STOCK........... 45,028,169
(Cost $40,355,058) ------------
PREFERRED STOCK - 1.0%
General Motors Corp., Class
E, Preferred C.............. 6,400 459,200
(Cost $372,087) ------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ---------- -----------
<S> <C> <C> <C>
CORPORATE BONDS - 2.4%
INSURANCE - 1.0%
Chubb Corp. (Aa3, AA)
6.00%............. 05/15/98 $ 400 $ 461,500
------------
WASTE COLLECTION & DISPOSAL - 1.4%
Browning Ferris, Inc.
6.25%............. 08/15/12 700 702,625
------------
TOTAL CORPORATE
BONDS....................... 1,164,125
(Cost $1,108,388) ------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C> <C>
TEMPORARY INVESTMENT - 3.2%
Fidelity Domestic Market
Portfolio................... 1,557,751 1,557,751
------------
(Cost $1,557,751)
TOTAL INVESTMENTS - 100.0% $ 48,209,245
(Cost $43,393,284*) ============
* Also cost for Federal income tax purposes.
The gross unrealized appreciation (depreciation) for
Federal income tax purposes is as follows:
Gross appreciation.................... $5,029,463
Gross depreciation.................... (213,502)
------------
$4,815,961
------------
</TABLE>
See Accompanying Notes
26
<PAGE> 28
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $43,393,284)................... $48,209,245
Interest and dividends receivable.... 215,648
Receivable for Fund shares sold...... 302,931
Prepaid expenses..................... 20,755
----------
TOTAL ASSETS................ 48,748,579
- ------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed..... 53,286
Accrued expenses..................... 57,432
----------
TOTAL LIABILITIES........... 110,718
- ------------------------------------------------------
NET ASSETS (based on
4,078,750 shares of
beneficial interest
having no par value)........ $48,637,861
======================================================
NET ASSETS CONSIST OF:
Paid-in capital............. $42,244,332
Undistributed net
investment income........... 267,406
Undistributed net realized
gain on investments sold.... 1,310,161
Net unrealized appreciation
on investments.............. 4,815,962
----------
$48,637,861
======================================================
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
PER SHARE - Institutional
class
($48,424,746 divided by 4,060,865
shares of beneficial
interest)................... $ 11.92
======================================================
NET ASSET VALUE AND
REDEMPTION PRICE PER
SHARE - Retail class
($213,115 divided by 17,885 shares of
beneficial interest)........ $ 11.92
======================================================
MAXIMUM OFFERING
PRICE PER RETAIL SHARE
($11.92 divided by .9625)... $ 12.38
======================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................. $ 875,563
Interest.............................. 57,676
Less foreign taxes withheld........... (6,152)
---------
Total investment income............... 927,087
EXPENSES:
Investment Advisory fees.............. 159,043
Administration fees................... 21,206
Transfer Agent fees................... 17,666
Registration and filing fees.......... 8,879
12b-1 fees............................ 8,482
Custodian fees........................ 5,328
Printing and shareholder reports...... 4,092
Legal fees............................ 3,466
Amortization of organization costs.... 2,228
Distribution fees..................... 1,771
Audit fees............................ 897
Trustees' fees........................ 772
Miscellaneous......................... 649
Insurance............................. 302
Shareholder servicing fees - Retail
class only.......................... 197
Fees waived by Custodian.............. (5,328)
---------
Total expenses............... 229,650
- ------------------------------------------------------
NET INVESTMENT INCOME.................... 697,437
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments sold............. 1,403,399
Net change in unrealized
appreciation on
investments.................. 2,058,692
---------
Net gain on investments
sold......................... 3,462,091
- ------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.... $4,159,528
======================================================
</TABLE>
See Accompanying Notes
27
<PAGE> 29
[ARROW LOGO]
FINANCIAL STATEMENTS
ARMADA EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED PERIOD ENDED
NOVEMBER 30, 1995 MAY 31, 1995
----------------- -------------
(UNAUDITED)
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................................. $ 697,437 $ 878,326
Net realized gain/(loss) on investments sold...................... 1,403,399 (93,238)
Net change in unrealized appreciation on investments.............. 2,058,692 2,757,270
------------ ------------
Net increase in net assets resulting from operations.............. 4,159,528 3,542,358
Distributions to shareholders from net investment income.............. (662,322) (646,035)
Increase in net assets derived from capital share transactions........ 8,822,399 33,421,933
------------ ------------
Total increase in net assets.......................................... 12,319,605 36,318,256
------------ ------------
NET ASSETS:
Beginning of period............................................... 36,318,256 0
------------ ------------
End of period..................................................... $ 48,637,861 $ 36,318,256
============ ============
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, 1995 MAY 31, 1995
----------------- ------------
<S> <C> <C>
UNDISTRIBUTED NET INVESTMENT INCOME AS OF............................. $ 267,406 $ 232,291
============ ============
</TABLE>
See Accompanying Notes
28
<PAGE> 30
[ARROW LOGO]
FINANCIAL HIGHLIGHTS
ARMADA EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE PERIOD ENDED
NOVEMBER 30, 1995 MAY 31, 1995
------------------------- ---------------------------
(UNAUDITED)
INSTITUTIONAL RETAIL INSTITUTIONAL(3) RETAIL(3)
------------- ------ ---------------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $11.01 $11.01 $10.00 $10.26
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income......................................... .18 .17 .34 .26
Net gains on securities (realized and unrealized)............. .91 .91 .94 .75
------- ------- ------- -------
Total from investment operations............................ 1.09 1.08 1.28 1.01
------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income.......................... (.18) (.17) (.27) (.26)
------- ------- ------- -------
Total distributions......................................... (.18) (.17) (.27) (.26)
------- ------- ------- -------
Net asset value, end of period.................................. $11.92 $11.92 $11.01 $11.01
======= ======= ======= =======
TOTAL RETURN.................................................... 20.93%(4) 20.68%(4,5) 14.34%(4) 13.18%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's).......................... $48,425 $213 $36,194 $125
Ratio of expenses to average net assets....................... 1.08%(1,4) 1.33%(2,4) .99%(1,4) 1.41%(2,4)
Ratio of net investment income to average net assets.......... 3.29%(1,4) 3.06%(2,4) 3.87%(1,4) .45%(2,4)
Portfolio turnover rate....................................... 34% 34% 12% 12%
</TABLE>
(1) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Institutional class for the period ended
November 30, 1995 would have been 1.11% and 3.26%, respectively. The
operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, Administrator, and Custodian for the
Institutional class for the period ended May 31, 1995 would have been 1.21%
and 3.66%, respectively.
(2) The operating expense ratio and net investment income ratio before fee
waivers by the Custodian for the Retail class for the period ended
November 30, 1995 would have been 1.35% and 3.04%, respectively. The
operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers, dministrator, and Custodian for
Retail class for the period ended May 31, 1995 would have been
% and 3.40%, respectively.
(3) Institutional and Retail classes commenced operations on July 1, 1994
and August 22, 1994, respectively.
(4) Annualized.
(5) Total return excludes sales load.
See Accompanying Notes
29
<PAGE> 31
[ARROW LOGO]
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Armada Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. Effective May
22, 1995, the Trust changed its name from NCC Funds to Armada Funds. The Trust
was organized as a Massachusetts business trust on January 28, 1986. The Trust
is a series fund which is authorized to issue twenty-four classes of shares of
beneficial interest, each of which evidences an interest in one of twelve
investment funds:
Money Market Fund (Class A "Institutional" shares and Class A-Special Series 1
"Retail" shares),
Government Fund (Class B "Institutional" shares and Class B-Special Series 1
"Retail" shares),
Treasury Fund (Class C "Institutional" shares and Class C-Special Series 1
"Retail" shares),
Tax Exempt Fund (Class D "Institutional" shares and Class D-Special Series 1
"Retail" shares),
Equity Fund (Class H "Institutional" shares and Class H-Special Series 1
"Retail" shares),
Fixed Income Fund, (Class I "Institutional" shares and Class I-Special Series
1 "Retail" shares),
Ohio Tax Exempt Fund (Class K "Institutional" shares and Class K-Special
Series 1 "Retail" shares),
National Tax Exempt Fund (Class L "Institutional" shares and Class L-Special
Series 1 "Retail" shares),
Equity Income Fund (Class M "Institutional" shares and Class M-Special Series
1 "Retail" Shares),
Mid Cap Regional Fund (Class N "Institutional" shares and Class N-Special
Series 1 "Retail" shares),
Enhanced Income Fund (Class O "Institutional" shares and Class O-Special
Series 1 "Retail" shares), and
Total Return Advantage Fund (Class P "Institutional" shares and Class
P-Special Series 1 "Retail" shares).
As of the date of this report, the National Tax Exempt Fund has not commenced
operations.
The following is a summary of significant accounting policies followed by the
Equity, Equity Income, and Mid Cap Regional Funds (the "Funds") in preparation
of their financial statements.
PORTFOLIO VALUATION: Investments in securities traded on an exchange are
valued at the last quoted sale price for a given day, or if a sale is not
reported for that day, at the mean between the most recent quoted bid and asked
prices. Unlisted securities for which market quotations are readily available
are valued at the mean between the most recent bid and asked prices. Securities
for which no quotations are readily available are valued at the fair value
determined in good faith pursuant to Board of Trustees guidelines.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on the trade date. Realized gains and losses on investments sold are
recorded on the identified cost basis. Interest income is accrued on a daily
basis. Dividends are recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment
income of the Equity and Equity Income Funds are declared and paid quarterly;
dividends from the net investment income of the Mid Cap Regional Fund are
declared and paid annually. With respect to each Fund, net income for dividend
purposes consists of dividends, interest income, and discount earned (including
both original issue and market discount), less amortization of any market
premium and accrued expenses. Any net realized capital gains will be distributed
at least annually.
31
<PAGE> 32
[ARROW LOGO] NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
FEDERAL INCOME TAXES: Each of the Funds is classified as a separate taxable
entity for Federal income tax purposes. Each of the Funds intends to qualify as
a separate "regulated investment company" under the Internal Revenue Code and
makes the requisite distributions to its shareholders that will be sufficient to
relieve it from Federal income tax and Federal excise tax. Therefore, no Federal
tax provision is required. To the extent distributions from net investment
income and realized net capital gains exceed amounts reported in the financial
statements, such amounts are reported separately.
As of May 31, 1995, the Equity and Equity Income Funds had available capital
loss carryforwards amounting to $117,954 and $93,238, respectively. If not
utilized such amounts will expire by the year 2002.
ORGANIZATIONAL COSTS: The Trust bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
shares for distribution under Federal and state securities regulations. All
organization expenses are being amortized on the straight-line method over a
period of five years from the date of commencement of operations.
2. INVESTMENT ADVISERS, DISTRIBUTION FEE AND OTHER RELATED PARTY TRANSACTIONS
Fees paid by the Trust pursuant to the Advisory Agreements with National City
Bank, National City Bank, Columbus and National City Bank, Kentucky
(collectively, the "Adviser" or "Advisers"), wholly-owned subsidiaries of
National City Corporation, are payable monthly based on the annual rate of .75%
of each Fund's average daily net assets. For the period ended November 30, 1995,
the Advisers have earned fees as follows:
<TABLE>
<S> <C>
Mid Cap Regional Fund........................ $252,610
Equity Fund.................................. 517,967
Equity Income Fund........................... 159,043
</TABLE>
At November 30, 1995, advisory fees accrued and unpaid amounted to:
<TABLE>
<S> <C>
Mid Cap Regional Fund......................... $45,571
Equity Fund................................... 89,168
Equity Income Fund............................ 58,168
</TABLE>
Fees paid by the Trust, under a Shareholder Servicing Plan (the "Plan") to
NatCity Investments, Inc. and National City Investments Corporation, both
wholly-owned subsidiaries of National City Corporation, are payable monthly,
based on an aggregate annual rate of up to .25% of the average daily net assets
of the Retail class of the Mid Cap Regional, Equity, and Equity Income Funds.
NatCity Investments, Inc. and National City Investments Corporation earned fees
for the period ended November 30, 1995 in the following amounts:
<TABLE>
<CAPTION>
NATCITY NATIONAL CITY
INVESTMENTS, INC. INVESTMENTS CORPORATION
----------------- -----------------------
<S> <C> <C>
Mid Cap Regional
Fund $261 $4,829
Equity Fund 190 7,093
Equity Income
Fund 2 188
</TABLE>
National City Bank, a wholly-owned subsidiary of National City Corporation,
serves as the Funds' Custodian. For the period ended November 30, 1995, National
City Bank has earned and waived custodian fees representing $8,520, $17,266, and
$5,328, for the Mid Cap Regional, Equity, and the Equity Income Funds,
respectively.
440 Financial Distributors, Inc., a wholly-owned subsidiary of The Shareholder
Services Group, Inc., and an indirect wholly-owned subsidiary of First
31
<PAGE> 33
[ARROW LOGO] NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Data Corp. ("Distributor"), serves as the Trust's Distributor. Under the Trust's
Distribution Agreement and related Distribution Plan adopted pursuant to Rule
12b-1 of the Investment Company Act of 1940, each Fund reimburses the
Distributor monthly for the direct and indirect expenses incurred by the
Distributor in providing Fund advertising, marketing, prospectus printing and
other distribution services up to a maximum of .10% per annum of the average
daily net assets of each Fund, inclusive of an annual distribution fee of
$250,000 which is payable monthly and accrued daily among the investment funds
with respect to which the Distributor is distributing shares.
Each Trustee receives an annual fee of $6,000 plus $2,000 for each Board
meeting attended and reimbursement of out-of-pocket expenses. The Chairman of
the Board receives an additional $2,000 per annum for services in such capacity.
Such fees are paid for services rendered to all of the Funds and are allocated
accordingly. No person who is an officer, director, trustee, or employee of the
Investment Advisers, Administrator, Distributor, or of any parent or subsidiary
thereof, who serves as an officer, trustee, or employee of the Trust receives
any compensation from the Trust.
Expenses for the period ended November 30, 1995 include legal fees paid to
Drinker Biddle & Reath. A partner of that firm is Secretary of the Trust.
3. PURCHASES AND SALES OF SECURITIES
During the period ended November 30, 1995, purchases and sales of securities,
other than short-term investments or U.S. Government obligations, aggregated:
<TABLE>
<CAPTION>
PURCHASES SALES
---------- ----------
<S> <C> <C>
Mid Cap Regional Fund $59,798,993 $39,944,877
Equity Fund 59,734,407 50,512,049
Equity Income Fund 23,492,602 14,267,587
</TABLE>
4. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Board of Trustees to issue an
unlimited number of shares of beneficial interest and to classify or reclassify
any unissued shares of the Trust into one or more additional classes of shares
and to classify or reclassify any class of shares into one or more series of
shares. Transactions in capital shares are summarized on the following page for
the Mid Cap Regional, Equity, and Equity Income Funds.
32
<PAGE> 34
[ARROW LOGO]
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1995
--------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
--------------- ----------
SHARES VALUE SHARES VALUE
--------- ----------- -------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
MID CAP REGIONAL FUND
Shares sold.................................................... 1,497,787 $17,743,564 95,122 $1,107,974
Shares reinvested.............................................. 0 0 0 0
Shares repurchased............................................. (210,433) (2,508,957) (40,900) (482,460)
--------- ----------- -------- ----------
Net increase................................................... 1,287,354 $15,234,607 54,222 $ 625,514
========= =========== ======== ==========
EQUITY FUND
Shares sold.................................................... 729,814 $11,539,882 7,836 $ 124,268
Shares reinvested.............................................. 23,396 366,984 1,738 27,283
Shares repurchased............................................. (345,807) (5,483,649) (60,461) (947,447)
--------- ----------- -------- ----------
Net increase (decrease)........................................ 407,403 $ 6,423,217 (50,887) $ (795,896)
========= =========== ======== ==========
EQUITY INCOME FUND
Shares sold.................................................... 849,652 $ 9,619,081 8,597 $ 97,766
Shares reinvested.............................................. 34,834 393,877 200 2,263
Shares repurchased............................................. (109,990) (1,265,402) (2,226) (25,186)
--------- ----------- -------- ----------
Net increase................................................... 774,496 $ 8,747,556 6,571 $ 74,843
========= =========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1995
----------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
--------------------------- -------------------------
SHARES VALUE SHARES VALUE
--------- ------------ -------- -----------
<S> <C> <C> <C> <C>
MID CAP REGIONAL FUND
Shares sold.................................................. 4,561,720 $ 47,581,271 365,213 $ 3,858,435
Shares reinvested............................................ 14,908 158,322 1,456 15,289
Shares repurchased........................................... (97,553) (1,057,490) (49,929) (530,437)
--------- ------------ -------- -----------
Net increase................................................. 4,479,075 $ 46,682,103 316,740 $ 3,343,287
========= ============ ======== ===========
EQUITY FUND
Shares sold.................................................. 2,204,373 $ 30,453,279 29,328 $ 408,345
Shares reinvested............................................ 95,010 1,289,744 9,835 133,458
Shares repurchased........................................... (818,100) (11,561,697) (184,733) (2,543,339)
--------- ------------ -------- -----------
Net increase (decrease)...................................... 1,481,283 $ 20,181,326 (145,570) $(2,001,536)
========= ============ ======== ===========
EQUITY INCOME FUND
Shares sold.................................................. 3,319,667 $ 33,658,233 11,161 $ 114,046
Shares reinvested............................................ 55,277 562,440 187 1,933
Shares repurchased........................................... (88,575) (914,369) (34) (350)
--------- ------------ -------- -----------
Net increase................................................. 3,286,369 $ 33,306,304 11,314 $ 115,629
========= ============ ======== ===========
</TABLE>
33
<PAGE> 35
[ARROW LOGO]
ARMADA FUNDS
BOARD OF TRUSTEES Richard B. Tullis
Chairman of the Board, President and Treasurer
Chairman Emeritus, Harris
Corporation
Director, NACCO Materials
Handling Group, Inc.
Director, Hamilton Beach/Proctor-
Silex, Inc.
Director, Waste-Quip, Inc.
Thomas R. Benua, Jr.
Trustee
President, EBCO Manufacturing Company
and Subsidiaries
Leigh Carter
Trustee
Retired President and Chief
Operating Officer,
B.F. Goodrich Company
John F. Durkott
Trustee
President and Chief
Operating Officer, Kittle's Home
Furnishings Center, Inc.
Richard W. Furst, Dean
Trustee
Professor of Finance and Dean,
College of Business and Economics,
University of Kentucky
J. William Pullen
Trustee
President and Chief Executive Officer,
Whayne Supply Company
<PAGE> 36
[ARROW LOGO]
NOTES
<PAGE> 37
[ARROW LOGO]
NOTES
<PAGE> 38
[ARROW LOGO]
NOTES
<PAGE> 1
EXHIBIT 17(j)
[INVENTOR FUNDS LOGO]
1995
ANNUAL
REPORT TO
SHAREHOLDERS
April 30, 1995
<PAGE> 2
TABLE OF CONTENTS INVENTOR FUNDS
Letter to Shareholders ................................................ 1
Economic Outlook ...................................................... 3
Advisers' Review ...................................................... 3
Statements of Net Assets .............................................. 11
Schedules of Investments .............................................. 23
Statements of Assets and Liabilities .................................. 27
Statements of Operations .............................................. 28
Statements of Changes in Net Assets ................................... 30
Financial Highlights .................................................. 32
Notes to Financial Statements ......................................... 34
Report of Independent Accountants ..................................... 37
- --------------------------------------------------------------------------------
April 30, 1995
<PAGE> 3
LETTER TO SHAREHOLDERS INVENTOR FUNDS
DEAR INVENTOR FUNDS SHAREHOLDER:
It is a pleasure to be writing to you, our shareholders, at the completion
of our first fiscal year of operations for the Inventor Funds, Inc. This first
year saw some volatility in the markets and for the mutual fund industry, as
well as the Inventor Funds. Considering 1994 was one of the worst markets in
years and 1995 has started to establish record-breaking highs, we feel the
Inventor Funds are in a position to perform well into the future for the
long-term investor.
[Photo of Douglas W. Sherratt]
When we introduced the funds, we chose the name to symbolize the vision and
determination of inventors everywhere, who over time have made a difference in
the way people live today and in the dreams they have for tomorrow. Beyond
symbolization, it is our underlying goal for the Inventor Funds to make a
difference in helping the way our investors live today and in fulfilling the
dreams that they hold for their future...through long-term investment
performance and providing current and future financial security.
We believe that the performance of the Inventor Funds through our first
fiscal year is showing that we are achieving this goal and those of our
shareholders. However, the road was not always easy.
At the beginning of last August, when the Inventor Funds were introduced, we
were in the midst of one of the worst market downturns in years -- in both the
bond and stock markets. Much of this precipitated from a series of actions taken
by the Federal Reserve to increase interest rates due to fears that an
overheated economy would lead to increased inflation rates.
This rising rate environment produced an immediate impact on the funds. The
fixed income and equity funds were faced with declining net asset values, which
took until late January to regain their August levels. Conversely, rising
interest rates were welcomed by the money market fund investor as yields
continuously climbed, leading to the first major influx of dollars into money
market funds in recent years.
Obviously, the Inventor Funds were not alone. Most funds experienced sharp
declines in net asset value which created an investor exodus from the mutual
funds market, with many investors taking losses. Those long-term investors who
did not panic and stayed the course started to see the benefits beginning early
this year.
- --------------------------------------------------------------------------------
April 30, 1995
<PAGE> 4
LETTER TO SHAREHOLDERS Continued INVENTOR FUNDS
In late January when it appeared that the Federal Reserve was going to bring
the economy in for a "soft landing," both the bond and stock markets began a
substantial rally which has continued through this writing.
Along with many mutual funds, the Inventor Funds have performed very well
through this rally. We are quite pleased with our performance results which are
shared with you in this report. This performance is largely based on our
philosophy of using sub-advisers to manage the funds. Each of these managers
were selected based on their area of expertise, investment style and the
long-term performance of other mutual funds and investment portfolios which they
have managed. Each of the fund managers will report on the specific results of
the fund(s) which he or she manages.
It is unlikely that the market performance we have witnessed thus far in
1995 will continue to ride along uninterrupted. It would also be naive for us to
believe that our investments in the Inventor Funds will not hit an occasional
bump in the road too, as 1994 demonstrated. However, for those investors
committed to a long-term strategy, we believe that we can fulfill our mutual
goals, just like those of inventors, to make a difference in the way we live
today and the dreams we have for tomorrow.
Sincerely,
/s/ Douglas W. Sherratt
------------------------
Douglas W. Sherratt
Executive Vice President
Integra Trust Company
Investment Adviser
- --------------------------------------------------------------------------------
2 April 30, 1995
<PAGE> 5
ADVISERS' REVIEW INVENTOR FUNDS
ECONOMIC OUTLOOK
The Inventor Funds commenced operations in August 1994. Since that time, the
financial markets have seen two very different economic environments.
The second half of 1994 was an environment where most observers of economic
growth, primarily the Federal Reserve Board, were concerned the economy was
growing too fast. The strength of the economy in the second half of 1994 was
verified when fourth quarter Gross Domestic Product (GDP) increased 5.1%,
signaling robust growth. This strength led the Federal Reserve to continue
increasing the Fed Funds rate through the end of 1994, and into early 1995. This
was an attempt by the Fed to slow growth and engineer a "soft landing" for the
economy. A target GDP rate for a "soft landing" would be 2%-2.5% growth in the
economy.
In hindsight, the first half of 1995 validated the Federal Reserve's
strategy as increases to the Fed Funds rate have definitely slowed the economy.
The concern is that now they may have gone too far and the economy may not just
be slowing down but headed into recession. In fact, as we get into the second
half of 1995, we may see the Federal Reserve lower the Fed Funds rate well
before the serious threat of recession.
U.S. Treasury securities with two year maturities are already trading below
the Fed Funds rate, therefore, an easing in rates is already priced into the
market. Fed officials will most likely want more data on this slowdown before
they react with a rate cut. Given the traditional summer slowdown in the
financial markets, we would not expect any Fed action before their August 22
meeting.
For the long-term equity investor, the stock market has been strong during
the first half of 1995. A combination of lower rates and stronger corporate
earnings made stocks look very attractive. The stock market through April has
been up almost 3% every month, as measured by the Standard & Poor's 500 Index. A
lower interest rate environment, such as the one we're currently in, could
continue to benefit stocks.
For the fixed-income investor, the bond market in 1995 has also been very
rewarding from a total return point of view. As interest rates have continued to
fall the principal value of most bonds has risen. Although many mutual funds are
paying slightly lower rates, the value of the funds has risen. If rates were to
increase this should provide some good news to income oriented investors, but
could hurt bonds from a total return on investment viewpoint.
We hope the Inventor Funds continue to meet your financial needs for the
second half of 1995, and well into the future.
- --------------------------------------------------------------------------------
EQUITY GROWTH FUND
Sub-adviser: Sun Bank Capital
Management, N.A.
Portfolio Manager: Anthony Gray
INVESTMENT OBJECTIVE
The Equity Growth Fund seeks capital appreciation by investing in common stocks
and securities convertible into common stocks of U.S. and foreign issuers. A
bottom-up fundamental analysis is used, concentrating on relative price/earnings
- --------------------------------------------------------------------------------
April 30, 1995 3
<PAGE> 6
ADVISERS' REVIEW INVENTOR FUNDS
Equity Growth Fund (continued)
ratios to determine buy/sell points. Top-down analysis is used to confirm and
enhance the bottom-up fundamental process.
INVESTMENT REVIEW
The investment strategy for the Equity Growth Fund emphasizes a bottom-up
approach focusing on securities with double-digit growth rates in the past and
have shown indications for sustaining this growth rate in the future. In a
slowing economy, we are looking for companies that offer between 10% and 15% in
earnings growth potential. Most of these companies have a multinational approach
to business and the Fund reflects these types of companies in its holdings.
Since the inception of this Fund in August of 1994, little has changed in the
basic strategy and philosophy used to manage the Fund.
What has changed, however, is the attractiveness of certain industries and
issues, which is common in the challenging investment environment which we now
face. The market indices are performing so well that most managers are lagging
behind them. This is an environment which has not been faced frequently over the
past fifteen years. The economic cycle over the past two to three years has
favored those companies which are value-oriented since the economy was growing
at a relatively fast pace. This has left growth stocks behind as value-oriented
companies became more attractive. This was due to these companies atypically
producing annual earnings growth of 20% or more. The slowing economy is causing
a shift back towards traditional growth stocks and will be of benefit to this
Fund.
CUMULATIVE INCEPTION TO DATE(1)
<TABLE>
<S> <C>
Equity Growth without load 8.33%
Equity Growth with load 3.96%
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE INVENTOR
EQUITY GROWTH FUND, VERSUS THE S&P 500 COMPOSITE INDEX.
<TABLE>
<CAPTION>
Inventor Equity Growth Fund S&P 500 Composite Index
<S> <C> <C>
"8/31/94" 9.6 10
"4/30/95" 10.065 11.017
</TABLE>
<TABLE>
<CAPTION>
Dollars
(000's)
-------
<S> <C>
Inventor Equity Growth Fund $10,065
S&P 500 Composite Index $11,017
</TABLE>
(1) For the period ended April 30, 1995. Past performance of the Fund is not
predictive of future performance. The Equity Growth Fund commenced
operations on August 10, 1994.
Looking at performance, the Equity Growth Fund has returned 4.85% for the
period August 31, 1994 through April 30, 1995 compared to 10.17% for the
Standard & Poor's 500 Index and 6.21% for the Lipper Growth Funds Index average
as reported by Lipper Analytical Services for the same period. The Equity Growth
Fund has had a total return of 10.05% from December 31, 1994 through April 30,
1995.
We have increased our holdings in the consumer staples, health care, and
financial sectors while decreasing our exposure in the technology, business
spending, and utilities sectors. In looking for double digit growth rates, we
have moved out of the HMO sector of health care by decreasing our position in
stocks like US Healthcare and increasing our position in drug stocks like
SmithKline, Merck & Company, and Warner Lambert. The hit to the HMO's earlier in
the year was unexpected and changed our approach to this sector of the market.
- --------------------------------------------------------------------------------
4 April 30, 1995
<PAGE> 7
ADVISERS' REVIEW INVENTOR FUNDS
Equity Growth Fund (continued)
Looking ahead, we feel that we have positioned ourselves well to take
advantage of the appreciation in `classic' growth stocks, not only for 1995 but
also 1996. It is with this premise that we continue to actively manage this
style in the same manner that has proven successful in similar climates such as
the one we face today.
EQUITY GROWTH FUND
TEN LARGEST HOLDINGS AS OF 4/30/95
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Percentage
Security Description of Net Assets
- -----------------------------------------------------------------------
<S> <C>
AT&T ................................................. 3.9%
Home Depot ........................................... 3.2
Philip Morris ........................................ 3.2
Motorola ............................................. 3.1
General Electric ..................................... 2.6
Carnival Cruise Lines, CI A .......................... 2.1
Procter & Gamble ..................................... 1.9
AMP .................................................. 1.8
McDonalds ............................................ 1.8
Merck ................................................ 1.8
</TABLE>
- --------------------------------------------------------------------------------
INTERMEDIATE GOVERNMENT
SECURITIES FUND
Sub-adviser: Wellington Management
Company
Portfolio Manager: Thomas L. Pappas
INVESTMENT OBJECTIVE
The Intermediate Government Securities Fund seeks to preserve capital and
maintain a high degree of liquidity while providing current income. The Fund
currently invests in U.S. Treasury obligations, and may invest in futures on
U.S. Treasury obligations and obligations guaranteed as to principal and
interest by the agencies and instrumentalities of the U.S. Government.
INVESTMENT REVIEW
Since August 31, 1994, the Intermediate Government Securities Fund had a total
return of 4.0%, marginally underperforming the unmanaged Merrill Lynch 3-5 year
Treasury Index which returned 4.5% over the same period. The industry average
total return as calculated by Lipper Analytical Services in the Lipper
Intermediate U.S. Government Funds Index was 4.2%.
- --------------------------------------------------------------------------------
April 30, 1995 5
<PAGE> 8
ADVISERS' REVIEW INVENTOR FUNDS
Intermediate Government Securities Fund (continued)
CUMULATIVE INCEPTION TO DATE(1)
<TABLE>
<S> <C>
Intermediate Government Securities without Load 4.75%
Intermediate government Securities with Load 0.53%
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE INVENTOR
INTERMEDIATE GOVERNMENT SECURITIES FUND, VERSUS THE MERRILL LYNCY 3-5 YEAR
TREASURY INDEX.
<TABLE>
<CAPTION>
Inventor Intermediate Merrill Lynch 3-5
Gov't Securities Fund Year Treasury Index
<S> <C> <C>
"8/31/94" 9.6 10
"4/30/95" 9.984 10.446
</TABLE>
<TABLE>
<CAPTION>
Dollars
(000's)
-------
<S> <C>
Inventor Intermediate Gov't Securities Fund $ 9,984
Merrill Lynch 3-5 Year Treasury Index $10,446
</TABLE>
(1) For the period ended April 30, 1995. Past performance of the Fund is not
predictive of future performance. The Intermediate Government Securities
Fund commenced operations on August 10, 1994.
The Fund has maintained a modestly barbelled maturity structure in the
portfolio since the beginning. A barbelled maturity structure is owning a
combination of shorter and longer maturity securities to arrive at the desired
average maturity. This has had a positive effect for the Fund while the yield
curve flattened during late 1994. More recently, this maturity structure has had
a negative effect on the Fund's yield. In addition, the allocation to U.S.
agency backed mortgages, while appropriate from a longer-term total return basis
and consistent with providing a competitive yield, has been a drag on
performance during 1995's rally. The allocation to mortgages has ranged from
between 30% and 50% since December 1994. The Fund is now at 44% with the
majority of securities in this area being seasoned pass-throughs or stable CMOs
(Collateralized Mortgage Obligations). The two CMO classes which have the most
stable structures are PACs (Planned Amortization Class) and VADMs (Very
Accurately Defined Maturity), and we have roughly 20% of the portfolio invested
in these CMOs, with no other CMO exposure. Seasoned pass-throughs tend to have
relatively predictable and stable prepayment profiles.
INTERMEDIATE GOVERNMENT SECURITIES FUND
PORTFOLIO STRUCTURE
<TABLE>
<CAPTION>
4/30/95
- --------------------------------------------------------------------------
Merrill Lynch
3-5 Year
Portfolio Treasury Index
- --------------------------------------------------------------------------
<S> <C> <C>
Weighted Average Maturity ................. 5.0 4.0
Weighted Average Coupon ................... 7.7 6.7
Weighted Average Quality .................. AAA AAA
</TABLE>
- --------------------------------------------------------------------------------
GNMA SECURITIES FUND
Sub-adviser: Wellington Management
Company
Portfolio Manager: Thomas L. Pappas
INVESTMENT OBJECTIVE
The GNMA Securities Fund seeks to preserve capital and maintain a high degree of
liquidity while providing as high a level of current income. The Fund invests
primarily (at least 65% of its assets) in mortgage pass-through securities
guaranteed by the Government National Mortgage Association.
- --------------------------------------------------------------------------------
6 April 30, 1995
<PAGE> 9
ADVISERS' REVIEW INVENTOR FUNDS
GNMA Securities Fund (continued)
CUMULATIVE INCEPTION TO DATE(1)
<TABLE>
<S> <C>
GNMA Securities without load 6.61%
GNMA Securities with load 2.31%
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE INVENTOR GNMA
SECURITIES FUND, VERSUS THE LEHMAN BROTHERS GNMA INDEX.
<TABLE>
<CAPTION>
Inventor GNMA Lehman Brothers
Securities Fund GNMA Index
<S> <C> <C>
"8/31/94" 9.6 10
"4/30/95" 10.127 10.603
</TABLE>
<TABLE>
<CAPTION>
Dollars
(000's)
-------
<S> <C>
Inventor GNMA Securities Fund $10,127
Lehman Brothers GNMA Index $10,603
</TABLE>
(1) For the period ended April 30, 1995. Past performance of the Fund is not
predictive of future performance. The GNMA Securities Fund commenced
operations on August 10, 1994.
INVESTMENT REVIEW
Since August 31, 1994, the GNMA Securities Fund had a total return of 5.5%,
marginally underperforming the Lehman GNMA Index which had a total return of
6.0% over the same period. The industry average total return as calculated by
Lipper Analytical Services in the Lipper GNMA Funds Index was 5.1%.
In the GNMA Securities Fund, we have actively traded between securities at
various coupon levels and have found and purchased GNMA pass-throughs at
meaningful discounts. GNMA pass-throughs represent participation in mortgage
pools whose timely payment of principal and interest is guaranteed by the
Government National Mortgage Association, an agency of the U.S. government.
These securities have had a positive impact on performance. The allocation to
U.S. Treasury securities and barbelled maturity structure have worked against
the Fund, despite our marginally bullish duration stance. A barbelled maturity
structure is owning a combination of shorter and longer maturity securities to
arrive at the desired average maturity. Also, it can be effective to hold some
U.S. Treasury securities in this type of mutual fund to meet cash flows. Given
the relatively expensive deep discount coupon GNMAs, we have chosen to retain
between 10% and 15% of the portfolio in U.S. Treasury securities having
maturities between 10 and 30 years. Due to the Fund's bias towards holding
current coupon GNMAs, it could not fully benefit from the relatively superior
performance of lower coupon GNMAs. Also, these longer U.S. Treasury securities
have biased the portfolio towards a barbelled maturity structure, which benefits
from a flatter yield curve. That helped investment returns in 1994 as the yield
curve flattened but has hampered returns in 1995.
GNMA SECURITIES FUND
PORTFOLIO STRUCTURE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
4/30/95
- ----------------------------------------------------------------------------
Lehman
GNMA
Portfolio Index
- ----------------------------------------------------------------------------
<S> <C> <C>
Weighted Average Maturity ......................... 8.9 9.5
Weighted Average Coupon ........................... 8.7 8.0
Weighted Average Quality .......................... AAA AAA
</TABLE>
- --------------------------------------------------------------------------------
April 30, 1995 7
<PAGE> 10
ADVISERS' REVIEW INVENTOR FUNDS
PENNSYLVANIA MUNICIPAL
BOND FUND
Sub-adviser: Weiss, Peck & Greer
Portfolio Manager: S. Blake Miller
INVESTMENT OBJECTIVE
The Pennsylvania Municipal Bond Fund seeks to provide current income exempt from
both regular federal income and Pennsylvania personal income tax while
preserving capital.
INVESTMENT REVIEW
The past eight month period has been one of heightened volatility for fixed
income investors. A relatively weak fourth quarter of 1994 was followed by one
of the strongest quarters in recent memory. Against this general backdrop,
municipal securities continued to benefit from a lack of new issuance and steady
demand. This supply/demand imbalance caused municipal yields to drop at an
accelerated rate versus other fixed income alternatives.
The national economy continued to show impressive growth, although first
quarter 1995 numbers indicate that growth may be waning. The Pennsylvania
economy continues to lag the nation in terms of employment levels as several
large industrial concerns restructure and in some cases leave the state.
During this period, the Fund maintained an average maturity of approximately
five years. Positioning the Fund slightly shorter than the seven year average
maturity permitted by the prospectus dampened the effects of interest rate
volatility experienced by the Fund. This meant that investor capital was
protected during the downturn experienced in 1994, but did not fully participate
in the upward move which occurred during the first quarter of 1995.
CUMULATIVE INCEPTION TO DATE(1)
<TABLE>
<S> <C>
Pennsylvania Municipal Bond without load 3.38%
Pennsylvania Municipal Bond with load -0.79%
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE INVENTOR
PENNSYLVANIA MUNICIPAL BOND FUND, VERSUS THE LEHMAN 5 YEAR PENNSYLVANIA
MUNICIPAL INDEX.
<TABLE>
<CAPTION>
Inventor Pennsylvania Lehman 5 Year
Municipal Bond Pennsylvania
Fund Municipal Index
<S> <C> <C>
"8/31/94" 9.6 10
"4/30/95" 9.875 10.352
</TABLE>
<TABLE>
<CAPTION>
Dollars
(000's)
-------
<S> <C>
Inventor Pennsylvania Municipal Bond Fund $ 9,875
Lehman 5 Year Pennsylvania Municipal Index $10,352
</TABLE>
(1) For the period ended April 30, 1995. Past performance of the Fund is not
predictive of future performance. The Pennsylvania Municipal Bond Fund
commenced operations on August 10, 1994.
For the eight month period ended April 30, 1995, the Pennsylvania Municipal
Bond Fund had a total return of 2.87% versus a total return of 3.52% for the
Lehman Brothers 5 Year Pennsylvania Index and a total return of 2.79% for the
average Pennsylvania Intermediate Term Fund as reported by Lipper Analytical
Services. The underperformance versus the unmanaged Lehman Brothers Index was
attributable to the defensive nature of the Fund's investments during the strong
first quarter.
- --------------------------------------------------------------------------------
8 April 30, 1995
<PAGE> 11
ADVISERS' REVIEW INVENTOR FUNDS
PRIME OBLIGATIONS
MONEY MARKET FUND
Sub-adviser: Wellington Management
Company
Portfolio Manager: John Keogh
INVESTMENT OBJECTIVE
The Prime Obligations Money Market Fund seeks to preserve principal value and
maintain a high degree of liquidity while providing current income.
INVESTMENT REVIEW
The Prime Obligations Money Market Fund remained positioned defensively for most
of 1994 as the Federal Reserve continued to raise interest rates. The average
maturity of the portfolio was lengthened at the beginning of 1995 in
anticipation of the Federal Reserve's most recent rate hike at the end of
January. With signs of slowing economic activity and negligible inflation
pressures keeping the Federal Reserve's policy unchanged since late January, the
average maturity of the portfolio has remained in the 35 to 50 day range. This
was done in order to lock in yields above the 6.00% Federal Funds target. High
quality commercial paper represents the largest portion of the portfolio's
holdings.
[PIECHART OF PORTFOLIO HOLDINGS]
<TABLE>
<CAPTION>
COMMERCIAL U.S. GOVERNMENT CERTIFICATES FLOATING RATE
PAPER AGENCY OBLIGATIONS OF DEPOSIT INSTRUMENT
<S> <C> <C> <C> <C>
as of 4/30/95 80% 14% 5% 1%
</TABLE>
- --------------------------------------------------------------------------------
TREASURY SECURITIES
MONEY MARKET FUND
Sub-adviser: Wellington Management
Company
Portfolio Manager: John Keogh
INVESTMENT OBJECTIVE
The Treasury Securities Money Market Fund seeks to preserve principal value and
maintain a high degree of liquidity while providing current income. The Fund
invests exclusively in U.S. Treasury obli-
- --------------------------------------------------------------------------------
April 30, 1995 9
<PAGE> 12
ADVISERS' REVIEW INVENTOR FUNDS
Treasury Securities Money Market Fund (continued)
gations and repurchase agreements (repos) involving such obligations.
INVESTMENT REVIEW
The Treasury Securities Money Market Fund, which is AAA rated by Standard and
Poor's Corporation, remained positioned defensively during the rising interest
rate environment of 1994. The average maturity was lengthened at the beginning
of 1995 as the market anticipated the Federal Reserve tightening rates at the
end of January. With the Federal Reserve policy on hold since late January, the
average maturity of the portfolio has been maintained in the 30 to 50 day range
in order to lock in yields above the 6.00% Federal Funds target. The portfolio
remains split between holdings of repos and U.S. Treasury securities.
[PIECHART OF SPLIT BETWEEN HOLDINGS OF REPOS AND U.S. TREASURY SECURITIES]
<TABLE>
<CAPTION>
REPURCHASE U.S. TREASURY
AGREEMENTS OBLIGATIONS
<S> <C> <C>
as of 4/30/95 59% 41%
</TABLE>
- --------------------------------------------------------------------------------
PENNSYLVANIA TAX EXEMPT
MONEY MARKET FUND
Sub-adviser: Weiss, Peck & Greer
Portfolio Manager: Janet A. Fiorenza
INVESTMENT OBJECTIVE
The Pennsylvania Tax Exempt Money Market Fund seeks to provide current income
exempt from regular federal income and Pennsylvania personal income taxes,
consistent with the stability of principal by investing in high quality debt
obligations issued by or on behalf of the Commonwealth of Pennsylvania and its
political subdivisions and financing authorities.
All securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations or be of comparable quality as determined by
the adviser.
INVESTMENT REVIEW
Throughout the first three months of 1995, the average weighted maturity of the
Pennsylvania Tax Exempt Money Market Fund was approximately 48 days. During the
month of April, however, the average weighted maturity was reduced to
approximately 39 days in anticipation of redemptions for the April 15 tax
payment date. As of April 30, 1995, approximately 60% of the Fund's assets were
invested in variable rate demand obligations which have daily and weekly put
options and rate resets. The remainder of the Fund's assets were invested in
longer-term securities maturing within 397 days.
- --------------------------------------------------------------------------------
10 April 30, 1995
<PAGE> 13
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCK (89.3%)
- -------------------------------------------------------------------------------
<S> <C> <C>
AEROSPACE (4.6%)
Allied Signal ..................................... 12,300 $ 487
Boeing ............................................ 3,000 165
General Dynamics .................................. 16,900 784
Textron ........................................... 4,000 228
United Technologies ............................... 6,500 475
- -------------------------------------------------------------------------------
Total Aerospace ............................... 2,139
---------
AIR COURIER SERVICES (0.4%)
Federal Express* .................................. 3,000 204
- -------------------------------------------------------------------------------
Total Air Courier Services .................... 204
---------
AUTOMOTIVE (1.2%)
Goodyear Tire & Rubber ............................ 14,900 566
- -------------------------------------------------------------------------------
Total Automotive .............................. 566
---------
BANKS (2.7%)
Bank of New York .................................. 1,500 49
Chemical Banking .................................. 18,000 752
First Chicago ..................................... 4,600 254
Midlantic ......................................... 5,400 197
- -------------------------------------------------------------------------------
Total Banks ................................... 1,252
---------
CHEMICALS (3.0%)
Air Products & Chemical ........................... 2,200 111
Dow Chemical ...................................... 1,000 70
E.I. Du Pont de Nemours ........................... 5,800 382
Eastman Chemical .................................. 9,500 538
Ethyl ............................................. 11,900 128
Witco ............................................. 6,000 172
- -------------------------------------------------------------------------------
Total Chemicals ............................... 1,401
---------
ENERGY (3.6%)
Amoco ............................................. 6,000 394
Chevron ........................................... 6,300 298
Mobil ............................................. 2,500 237
Royal Dutch Petroleum ADR ......................... 4,200 520
Unocal ............................................ 6,000 173
YPF Sociedad Anonima ADR .......................... 2,800 57
- -------------------------------------------------------------------------------
Total Energy .................................. 1,679
---------
ENVIRONMENTAL SERVICES (2.0%)
Molton Metal Technology* .......................... 14,000 243
Wheelabrator Technologies ......................... 23,000 334
WMX Technologies .................................. 13,500 368
- -------------------------------------------------------------------------------
Total Environmental
Services .................................... 945
---------
FINANCIAL SERVICES (2.7%)
Dean Witter Discover .............................. 5,900 250
Federal Home Loan
Mortgage Corporation ............................ 7,000 457
Providian ......................................... 16,200 553
- -------------------------------------------------------------------------------
Total Financial Services ...................... 1,260
---------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD (8.5%)
Archer Daniels Midland ............................ 5,150 94
Coca Cola ......................................... 6,000 349
Conagra ........................................... 8,000 266
Duracell International ............................ 6,700 295
Newell ............................................ 5,600 132
Philip Morris ..................................... 22,000 1,491
Premark International ............................. 2,600 125
RJR Nabisco Holdings* ............................. 20,560 563
Sysco ............................................. 12,300 344
UST ............................................... 10,000 281
- -------------------------------------------------------------------------------
Total Food, Beverage,
Tobacco & Household ......................... 3,940
---------
HOUSEHOLD PRODUCTS (5.1%)
Colgate Palmolive ................................. 6,000 422
Illinois Tool Works ............................... 10,000 501
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
April 30, 1995 11
<PAGE> 14
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (CONT'D) SHARES (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Libbey ............................................ 15,000 $ 291
Procter & Gamble .................................. 13,000 908
Sunbeam-Oster ..................................... 11,600 251
- -------------------------------------------------------------------------------
Total Household Products ...................... 2,373
---------
INSURANCE (3.2%)
American International Group ...................... 3,200 342
Chubb ............................................. 5,000 400
MGIC Investment ................................... 6,000 254
Travelers ......................................... 12,300 509
- -------------------------------------------------------------------------------
Total Insurance ............................... 1,505
---------
LEISURE (4.0%)
Autotote, Cl A* ................................... 27,000 118
Carnival Cruise Lines, Cl A ....................... 38,600 960
Circus Circus Enterprises* ........................ 5,300 176
Disney ............................................ 5,000 277
Mattel ............................................ 15,000 356
- -------------------------------------------------------------------------------
Total Leisure ................................. 1,887
---------
MACHINERY (5.6%)
Emerson Electric .................................. 5,300 356
Foster Wheeler .................................... 15,000 555
General Electric .................................. 21,800 1,221
General Signal .................................... 10,000 371
Tyco International ................................ 2,000 105
- -------------------------------------------------------------------------------
Total Machinery ............................... 2,608
---------
MEDIA (4.5%)
American Greetings, Cl A .......................... 15,000 409
British Sky
Broadcasting Group* ............................. 1,000 24
Capital Cities ABC ................................ 5,000 423
Scripps E.W. ...................................... 13,000 372
Tele-Communications, Cl A* ........................ 41,100 785
Viacom, Cl B Non-Voting* .......................... 1,300 60
- -------------------------------------------------------------------------------
Total Media ................................... 2,073
---------
MEDICAL PRODUCTS & SERVICES (9.2%)
Allergan .......................................... 18,900 513
Beverly Enterprises* .............................. 10,000 144
Boston Scientific* ................................ 12,977 354
Bristol Myers Squibb .............................. 4,000 261
Columbia/HCA Healthcare ........................... 14,620 614
Fisher Scientific ................................. 11,400 355
Humana* ........................................... 5,600 109
Merck ............................................. 19,100 817
Schering Plough ................................... 3,800 286
Smith Kline Beecham PLC ........................... 16,400 638
United Healthcare ................................. 1,900 69
Warner Lambert .................................... 1,700 136
- -------------------------------------------------------------------------------
Total Medical Products
& Services .................................. 4,296
---------
MISCELLANEOUS (1.1%)
ITT ............................................... 4,900 512
- -------------------------------------------------------------------------------
Total Miscellaneous ........................... 512
---------
PAPER (0.9%)
Fort Howard* ...................................... 10,000 128
International Paper ............................... 700 54
Union Camp ........................................ 5,000 250
- -------------------------------------------------------------------------------
Total Paper ................................... 432
---------
RETAIL (9.0%)
Albertsons ........................................ 4,200 133
American Stores ................................... 6,600 169
Barnes & Noble* ................................... 4,300 123
Federated Department
Stores* ......................................... 13,500 285
Home Depot ........................................ 36,100 1,507
Limited ........................................... 8,000 171
McDonalds ......................................... 23,500 823
Wal-Mart Stores ................................... 26,900 639
Wendy's International ............................. 21,000 357
- -------------------------------------------------------------------------------
Total Retail .................................. 4,207
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
12 April 30, 1995
<PAGE> 15
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (CONT'D) SHARES (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
STEEL & STEEL WORKS (0.5%)
Nucor ............................................. 4,900 $ 235
- ------------------------------------------------------------------------------
Total Steel & Steel Works ..................... 235
---------
TECHNOLOGY (12.9%)
AMP ............................................... 20,000 855
Automatic Data Processing ......................... 3,900 251
Avnet ............................................. 5,400 240
Eastman Kodak ..................................... 1,000 58
General Motors, Cl E .............................. 1,500 65
Intel ............................................. 5,000 512
Microsoft* ........................................ 3,700 303
Motorola .......................................... 25,300 1,437
Oracle Systems* ................................... 9,200 281
Scientific-Atlanta ................................ 32,500 739
Sensormatic Electors .............................. 10,000 298
Texas Instruments ................................. 2,100 223
Xerox ............................................. 6,000 739
- ------------------------------------------------------------------------------
Total Technology .............................. 6,001
---------
TELEPHONES & TELECOMMUNICATION (4.6%)
Alltel ............................................ 7,300 181
AT&T .............................................. 35,500 1,801
LDDS Communication* ............................... 6,400 154
- ------------------------------------------------------------------------------
Total Telephones
& Telecommunication ......................... 2,136
---------
- ------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $38,903) .................................... 41,651
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT (11.8%)
- ------------------------------------------------------------------------------
Paine Webber
5.93%, dated 4/28/95,
matures 5/1/95,
repurchase price $5,549,608
(collateralized by FNMA REMIC,
par value $20,670,000, matures
11/25/19, market value
$5,535,348 FNMA REMIC,
par value $5,345,000, matures
2/25/17, market value
$178,031) ....................................... 5,526
- ------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $5,526) ..................................... 5,526
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.1%)
(Cost $44,429) .................................... 47,177
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-1.1%) ............ (520)
- ------------------------------------------------------------------------------
NET ASSETS:
Portfolio Shares of Class A
($.00001 par value --
2 billion authorized) based on
4,363,371 outstanding shares
of beneficial interest ............................ 43,438
Accumulated Net Realized Gain
on Investments .................................... 471
Net Unrealized Appreciation
on Investments .................................... 2,748
- ------------------------------------------------------------------------------
TOTAL NET ASSETS: (100.0%) ........................... $ 46,657
- ------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A ......................... $ 10.69
Maximum Sales Charge of 4.00% ........................ 0.45
---------
OFFERING PRICE PER SHARE - CLASS A+ .................. $ 11.14
=========
</TABLE>
- ----------------
* Non-income producing securities.
+ The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
ADR American Depository Receipt
FNMA Federal National Mortgage Association
PLC Public Limited Corporation
REMIC Real Estate Mortgage Investment Conduit
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
April 30, 1995 13
<PAGE> 16
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (000) (000)
- -------------------------------------------------------------------------------
MUNICIPAL BONDS (99.0%)
- -------------------------------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA (99.0%)
Dauphin County, Pennsylvania
General Authority
Health Center, RB
5.150%, 01/01/97 ............................. $ 1,000 $ 998
Delaware Valley, Pennsylvania
Regional Finance Authority
Local Government, Ser D, RB
4.700%, 05/07/95 (A) (B) ..................... 900 900
Elizabeth Forward, Pennsylvania
School District, MBIA, GO,
Prerefunded 05/01/96 at 100
8.000%, 05/01/02 ............................. 1,000 1,034
Erie County, Pennsylvania Prison
Authority, MBIA, RB,
Prerefunded 11/01/01 at 100
6.600%, 11/01/02 ............................. 1,000 1,085
Hampton Township, Pennsylvania
School District, Ser A, FGIC,
GO, Prerefunded
02/15/01 at 100
6.900%, 02/15/10 ............................. 1,000 1,091
Langhorne, Pennsylvania Saint
Mary's Hospital Authority
Franciscan Health Systems,
Ser C, RB
5.150%, 05/07/95 (A) (B) ..................... 400 400
Lehigh County, Pennsylvania,
Ser A, AMBAC, GO,
Prerefunded 10/15/99 at 100
6.000%, 10/15/11 ............................. 1,250 1,302
Monroeville, Pennsylvania Hospital
Authority East Suburban Health
Center Project, RB, Prerefunded
07/01/04 at 100
7.600%, 07/01/08 ............................. 325 366
Montgomery County, Pennsylvania
Higher Educational & Health
Authority Hospital Revenue,
AMBAC, RB
4.500%, 05/07/95 (A) ......................... 500 500
Mount Lebanon, Pennsylvania
Hospital Authority, FGIC, RB,
Prerefunded 01/01/96
at 102
9.125%, 07/01/06 ............................. 1,400 1,470
Northampton County, Pennsylvania
Higher Education Authority
Lehigh University Project, RB
5.500%, 09/01/98 ............................. 1,030 1,043
Pennsylvania Infrastructure
Investment Authority Pennvest,
Subser B, RB
6.450%, 09/01/04 ............................. 1,500 1,613
Pennsylvania Intergovernmental
Co-op Authority Special Tax
City of Philadelphia Funding
Project, RB, Prerefunded
06/15/02 at 100
6.800%, 06/15/22 ............................. 1,500 1,647
Pennsylvania State Higher
Educational Facilities Authority
University of Pennsylvania
Project, Ser A, RB
6.500%, 09/01/04 ............................. 250 271
5.550%, 09/01/09 ............................. 1,300 1,263
Pennsylvania State Turnpike
Commission, FGIC, RB,
Escrowed to Maturity
6.700%, 12/01/97 ............................. 1,100 1,159
Pennsylvania State Turnpike
Commission, Ser K, RB,
Escrowed to Maturity
7.250%, 12/01/99 ............................. 1,230 1,347
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
14 April 30, 1995
<PAGE> 17
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (CONT'D) (000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Pennsylvania State Turnpike
Commission, Ser O, FGIC, RB
5.250%, 12/01/01 ............................. $ 1,010 $ 1,014
Pennsylvania State, Ser 1, GO
6.200%, 09/15/04 ............................. 900 954
Pennsylvania State, Ser 2, GO
4.750%, 06/15/98 ............................. 565 559
Pennsylvania State, Ser 3, GO,
Prerefunded 10/15/95 at 102
8.700%, 04/15/05 ............................. 1,000 1,039
Philadelphia, Pennsylvania Gas
Works, Ser 13, RB, Prerefunded
06/15/01 at 102
7.700%, 06/15/11 ............................. 460 530
Philadelphia, Pennsylvania
Hospital & Higher Educational
Facilities Authority Children's
Hospital Project, Ser A, RB,
Prerefunded 07/01/97 at 100
7.000%, 07/01/15 ............................. 1,000 1,049
Philadelphia, Pennsylvania School
District, GO, TRAN
4.750%, 06/30/95 ............................. 1,400 1,400
Philadelphia, Pennsylvania Water
& Waste Authority, MBIA, RB
5.500%, 06/15/07 ............................. 1,500 1,485
Pittsburgh & Allegheny County,
Pennsylvania Auditorium
Authority, RB
6.400%, 12/01/01 ............................. 700 720
Pittsburgh, Pennsylvania Water &
Sewer Authority, Ser A, FGIC,
Escrowed to Maturity
6.000%, 09/01/97 ............................. 1,000 1,030
Pittsburgh, Pennsylvania,
Ser A, MBIA, GO
5.500%, 09/01/06 ............................. 955 944
Schuylkill County, Pennsylvania
Industrial Development
Authority Northeastern
Power Project, RB
5.100%, 05/07/95 (A) (B) ..................... 500 500
Scranton-Lackawanna,
Pennsylvania Health &
Welfare Authority, RB,
Escrowed to Maturity
6.625%, 07/01/09 ............................. 595 652
Seneca Valley, Pennsylvania
School District, Ser A,
FGIC, GO
5.700%, 07/01/06 ............................. 1,000 1,000
Southeastern Pennsylvania
Transportation Authority
Lease Project, RB
5.750%, 12/01/04 ............................. 775 776
Swarthmore Borough, Pennsylvania
College Authority, RB
6.000%, 09/15/06 ............................. 855 880
Tyrone, Pennsylvania School
District, MBIA, GO
5.700%, 09/15/08 ............................. 1,250 1,228
Union City, Pennsylvania Higher
Educational Facilities
Financing Authority Bucknell
University Project, MBIA, RB
6.200%, 04/01/06 ............................. 1,000 1,053
- ------------------------------------------------------------------------------
Total Pennsylvania ......................... 34,302
---------
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $34,098) ................................. 34,302
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
April 30, 1995 15
<PAGE> 18
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
PENNSYLVANIA VALUE
MUNICIPAL BOND FUND (CONT'D) (000)
- ------------------------------------------------------------------------------
<S> <C>
TOTAL INVESTMENTS (99.0%)
(Cost $34,098) ................................. $ 34,302
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (1.0%) .......... 336
- ------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value --
2 billion authorized) based on
3,451,068 outstanding shares
of beneficial interest ......................... 34,434
Net Unrealized Appreciation
on Investments ................................. 204
- ------------------------------------------------------------------------------
TOTAL NET ASSETS: (100.0%) ........................ $ 34,638
- ------------------------------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A ...................... $ 10.04
Maximum Sales Charge of 4.00% ..................... 0.42
---------
OFFERING PRICE PER SHARE - CLASS A+ ............... $ 10.46
=========
- ------------------------------------------------------------------------------
</TABLE>
- ----------------
+ The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
(A) Floating Rate Instrument with Demand Features. Rate reflected on the
Statement of Net Assets is the rate in effect on April 30, 1995. The
date shown is the longer of the reset date or the demand date.
(B) Security is backed by a letter of credit.
AMBAC American Municipal Bond Assurance Company
FGIC Financial Guaranty Insurance Company
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
TRAN Tax and Revenue Anticipation Note
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ------------------------------------------------------------------------------
COMMERCIAL PAPER (80.5%)
- ------------------------------------------------------------------------------
<S> <C> <C>
American Express Credit
6.030%, 07/17/95 ............................... $ 4,000 $ 3,948
6.100%, 07/21/95 ............................... 5,000 4,931
American General Finance
6.200%, 05/26/95 ............................... 5,000 4,978
American Home Products
6.050%, 06/12/95 ............................... 5,000 4,965
Associates Corporation of
North America
6.030%, 05/24/95 ............................... 5,000 4,981
Bear Stearns
6.070%, 05/08/95 ............................... 6,000 5,993
6.030%, 05/12/95 ............................... 3,000 2,994
Beneficial
6.150%, 05/15/95 ............................... 4,000 3,990
Chrysler Financial
6.080%, 05/08/95 ............................... 3,000 2,996
CIESCO
6.030%, 06/20/95 ............................... 9,000 8,925
CIT Group Holdings
6.030%, 05/25/95 ............................... 3,000 2,988
6.100%, 07/05/95 ............................... 5,000 4,945
Coca-Cola Enterprises
6.010%, 06/13/95 (B) ........................... 3,000 2,978
Commercial Credit
6.020%, 05/16/95 ............................... 3,000 2,992
Corporate Asset Funding
6.000%, 05/25/95 ............................... 7,000 6,972
Corporate Receivable
6.050%, 05/15/95 ............................... 7,000 6,984
6.000%, 06/08/95 ............................... 3,000 2,981
CSW Credit
6.020%, 06/02/95 ............................... 5,000 4,973
6.000%, 06/14/95 ............................... 5,000 4,963
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
16 April 30, 1995
<PAGE> 19
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (CONT'D) (000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
Dean Witter Discover
6.020%, 06/01/95 ............................... $ 9,000 $ 8,954
Falcon Asset Securitization
6.000%, 06/20/95 (B) ........................... 6,500 6,446
General Electric Capital
6.150%, 05/10/95 ............................... 3,000 2,995
6.170%, 05/17/95 ............................... 2,000 1,995
General Motors Acceptance
6.300%, 05/01/95 ............................... 4,000 4,000
6.180%, 06/21/95 ............................... 5,000 4,956
Household Finance
6.050%, 06/12/95 ............................... 5,000 4,965
6.000%, 06/19/95 ............................... 3,000 2,976
IBM Credit
6.000%, 07/26/95 ............................... 8,000 7,885
International Lease Finance
6.000%, 05/08/95 ............................... 4,000 3,995
6.020%, 05/30/95 ............................... 5,000 4,976
Matterhorn Capital
6.000%, 05/12/95 ............................... 3,919 3,912
McKenna Triangle
6.020%, 06/05/95 (B) ........................... 2,836 2,819
6.030%, 07/13/95 (B) ........................... 6,000 5,927
Merrill Lynch
6.070%, 05/08/95 ............................... 7,000 6,992
Norwest Corporation
6.150%, 05/01/95 ............................... 5,000 5,000
6.000%, 07/24/95 ............................... 5,000 4,930
Pepsico
6.150%, 05/18/95 ............................... 7,000 6,980
Philip Morris
6.020%, 06/06/95 ............................... 5,000 4,970
Preferred Receivables
6.000%, 05/03/95 ............................... 1,750 1,749
6.020%, 06/13/95 ............................... 3,000 2,978
Prudential Funding
6.250%, 05/18/95 ............................... 3,000 2,991
6.020%, 05/30/95 ............................... 5,000 4,976
Puerto Rico Development Bank
6.020%, 07/19/95 ............................... 5,000 4,934
Riverwood Funding
6.020%, 06/01/95 ............................... 7,000 6,964
Sears Roebuck Acceptance
6.020%, 05/22/95 ............................... 4,000 3,986
6.030%, 07/24/95 ............................... 5,000 4,930
Transamerica Finance
6.100%, 07/10/95 ............................... 7,000 6,917
Whirlpool Corporation
6.050%, 06/08/95 ............................... 5,000 4,968
6.030%, 06/09/95 ............................... 3,100 3,080
- ------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $233,623) 233,623
- ------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (13.4%)
- ------------------------------------------------------------------------------
FHLMC
6.185%, 06/21/95 ............................... 6,000 5,949
6.235%, 07/07/95 ............................... 7,000 6,921
FNMA
6.282%, 05/03/95 ............................... 8,000 7,998
6.438%, 06/12/95 ............................... 4,000 3,971
6.673%, 07/25/95 ............................... 3,825 3,767
6.706%, 07/26/95 ............................... 5,500 5,416
6.098%, 08/02/95 ............................... 5,000 4,924
- ------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (Cost $38,946) ..................... 38,946
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
April 30, 1995 17
<PAGE> 20
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (CONT'D) (000) (000)
- ------------------------------------------------------------------------------
<S> <C> <C>
CERTIFICATES OF DEPOSIT (5.2%)
- ------------------------------------------------------------------------------
First Alabama Bank
6.120%, 07/21/95 ............................... $ 6,000 $ 6,000
West One Bank
6.050%, 05/11/95 ............................... 5,000 5,000
6.100%, 06/13/95 ............................... 4,000 4,000
- ------------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $15,000) ................................. 15,000
- ------------------------------------------------------------------------------
FLOATING RATE INSTRUMENT (1.0%)
- ------------------------------------------------------------------------------
Corestates Capital
6.080%, 05/10/95 (A) ........................... 3,000 3,000
- -------------------------------------------------------------------------------
TOTAL FLOATING RATE INSTRUMENT
(Cost $3,000) .................................. 3,000
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT (0.4%)
- -------------------------------------------------------------------------------
Aubrey G. Lanston
5.90%, dated 4/28/95, matures
05/01/95, repurchase price
$1,020,502 (collateralized by
U.S. Treasury Note, par value
$1,035,000, 6.875%, matures
02/28/97, market value $1,051,098) ............. 1,020
- ------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,020) .................................. 1,020
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.5%)
(Cost $291,589) ................................ 291,589
- ------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.5%) ......... (1,531)
- ------------------------------------------------------------------------------
<CAPTION>
MARKET
VALUE
(000)
<S> <C>
NET ASSETS:
Portfolio shares of Class A
($.00001 par value--2 billion
authorized) based on
290,057,695 outstanding shares
of beneficial interest ......................... $ 290,058
- ------------------------------------------------------------------------------
TOTAL NET ASSETS: (100.0%) ........................ $ 290,058
- ------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - CLASS A ...................... $ 1.00
- ------------------------------------------------------------------------------
</TABLE>
(A) Floating Rate Instrument with Demand Features. The rate reflected on the
Statement of Net Assets is the rate in effect on April 30, 1995. The date
shown is the longer of the reset date or the demand date.
(B) Securities sold within the terms of a private placement memorandum, exempt
from registration under Section 4(2) or 144A of the Securities Act of
1933, as amended, and may be sold only to dealers in that program or other
"accredited investors."
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
<TABLE>
<CAPTION>
FACE
TREASURY SECURITIES AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (41.4%)
- -------------------------------------------------------------------------------
<S> <C> <C>
United States Treasury Bills
6.380%, 08/10/95 ............................... $12,000 $ 11,794
5.870%, 09/14/95 ............................... 3,000 2,933
6.133%, 09/14/95 ............................... 5,000 4,889
5.750%, 10/05/95 ............................... 3,000 2,925
6.068%, 10/26/95 ............................... 6,000 5,828
United States Treasury Note
4.125%, 05/31/95 ............................... 5,000 4,992
- -------------------------------------------------------------------------------
TOTAL U. S. TREASURY OBLIGATIONS
(Cost $33,361) ................................. 33,361
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
18 April 30, 1995
<PAGE> 21
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
TREASURY SECURITIES VALUE
MONEY MARKET FUND (CONT'D) (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (58.9%)
- --------------------------------------------------------------------------------
<S> <C>
Aubrey G. Lanston
5.90%, dated 04/28/95, matures
05/01/95, repurchase price
$12,005,900 (collateralized by
U.S. Treasury Note, par value
$12,210,000, 6.625%, matures
03/31/97, market value $12,271,903) ............ $ 12,000
Donaldson, Lufkin & Jenrette Securities
5.875%, dated 04/28/95, matures
05/01/95, repurchase price
$10,004,886 (collateralized by
U.S. Treasury Note, par value
$10,508,000, 5.875%, matures
03/31/99, market value $10,213,815) ............ 10,000
J.P. Morgan
5.90%, dated 04/28/95, matures
05/01/95, repurchase price
$13,397,584 (collateralized by
U.S. Treasury Note, par value
$10,755,000, 11.125%, matures
08/15/03, market value $13,668,408) ............ 13,391
Lehman Brothers
5.92%, dated 04/28/95, matures
05/01/95, repurchase price
$12,005,920 (collateralized by
U.S. Treasury Note, par value
$11,825,000, 7.875%, matures
07/31/96, market value $12,244,653) ............ 12,000
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $47,391) ................................. 47,391
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.3%)
(Cost $80,752) ................................. 80,752
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-0.3%) ......... (261)
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001
par value--2 billion authorized)
based on 80,476,836 outstanding
shares of beneficial interest .................. $ 80,477
Accumulated Net Realized Gain
on Investments ................................. 14
- --------------------------------------------------------------------------------
TOTAL NET ASSETS: (100.0%) ........................ $ 80,491
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - CLASS A ...................... $ 1.00
- --------------------------------------------------------------------------------
<CAPTION>
PENNSYLVANIA FACE
TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (99.5%)
- --------------------------------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA (94.7%)
Allegheny County, Pennsylvania
Higher Education Building
Authority University of Pittsburgh
Project, Ser 85B, RB
4.600%, 05/07/95 (A) (C) ....................... $ 600 $ 600
Allegheny County, Pennsylvania
Higher Education Building
Authority University of Pittsburgh
Project, Ser D, RB
4.600%, 05/07/95 (A) (C) ....................... 570 570
Allentown, Pennsylvania Water
Authority, RB, Prerefunded at 100
8.875%, 05/15/95 (B) ........................... 250 250
Beaver County, Pennsylvania
Industrial Development Authority
Beaver Valley Project, TECP
3.850%, 05/12/95 (C) ........................... 1,500 1,500
Berks County, Pennsylvania Industrial
Development Authority Elf
Aquitaine, RB
4.825%, 05/07/95 (A) (C) ....................... 1,800 1,800
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
April 30, 1995 19
<PAGE> 22
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
PENNSYLVANIA FACE
TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (CONT'D) (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Bethlehem, Pennsylvania School District
6.150%, 11/01/95 ............................... $ 355 $ 357
Bucks County, Pennsylvania Industrial
Development Authority CPC
International Project, Ser 85, RB
4.410%, 05/07/95 (A) ........................... 2,000 2,000
Bucks County, Pennsylvania Industrial
Development Authority Edge Comb
Metals Project
4.825%, 05/07/95 (A) (C) ....................... 1,830 1,830
Chartiers Valley, Pennsylvania
Industrial Development Authority
Sycamore Creek Project, RB
4.550%, 09/01/95 (A) (C) ....................... 1,830 1,830
Delaware County, Pennsylvania
Industrial Development Authority
Airport Facilities Revenue United
Parcel Services Project, RB
5.150%, 05/01/95 (A) ........................... 1,900 1,900
Delaware County, Pennsylvania
Industrial Development Authority
BP Exploration & Oil Project, RB
4.850%, 05/01/95 (A) ........................... 800 800
Delaware County, Pennsylvania
Industrial Development Authority
Henderson Radnor Joint
Venture Project, RB
5.075%, 05/07/95 (A) (C) ....................... 550 550
Delaware County, Pennsylvania
Industrial Development Authority
Philadelphia Electric Project,
FGIC, Ser B, RB, TECP
4.250%, 08/25/95 ............................... 500 500
Delaware County, Pennsylvania
Industrial Development Authority
Philadelphia Electric Project, TECP
4.050%, 05/05/95 ............................... 700 700
Delaware Valley, Pennsylvania
Regional Finance Authority
4.700%, 05/07/95 (A) (C) ....................... 1,200 1,200
Delaware Valley, Pennsylvania
Regional Finance Authority Local
Government, Ser C, RB
4.700%, 05/07/95 (A) (C) ....................... 1,000 1,000
Erie County, Pennsylvania Hospital
Authority Union City Memorial
Hospital Project, RB
5.050%, 05/07/95 (A) (C) ....................... 1,200 1,200
Lancaster, Pennsylvania Higher
Education Authority Franklin &
Marshall Project, RB
4.625%, 05/07/95 (A) ........................... 1,650 1,650
Lehigh County, Pennsylvania General
Purpose Hospital Authority, TECP
4.250%, 07/14/95 (A) (C) ....................... 500 500
Lehigh County, Pennsylvania Sewer
Authority, Ser B, RB
4.500%, 05/07/95 (A) (C) ....................... 480 480
Lehigh County, Pennsylvania Water
Authority, RB
4.500%, 05/07/95 (A) (C) ....................... 885 885
Montgomery County, Pennsylvania
Higher Education & Health
Authority Hospital Revenue, RB
4.500%, 05/07/95 (A) (C) ....................... 200 200
Montgomery County, Pennsylvania
Higher Education & Health
Authority United Hospitals Project,
Ser A, Prerefunded at 102
10.000%, 11/01/95 (B) .......................... 600 628
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
20 April 30, 1995
<PAGE> 23
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
PENNSYLVANIA FACE
TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (CONT'D) (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Montgomery County, Pennsylvania
Higher Education & Health
Authority United Hospitals Project,
Ser B, RB, Prerefunded at 102
9.750%, 11/01/95 (B) ............................ $ 230 $ 241
Montgomery County, Pennsylvania
Industrial Development Authority
Ikea Property Project, RB
4.750%, 05/07/95 (A) (C) ........................ 1,500 1,500
Montgomery County, Pennsylvania
Industrial Development Authority
Merck & Company, RB
5.200%, 05/07/95 (A) ............................ 1,000 1,000
Montgomery County, Pennsylvania
Industrial Development Authority
Valley Square Project, RB
4.600%, 05/07/95 (A) (C) ........................ 600 600
Montgomery County, Pennsylvania
Industrial Development Authority
Valley Square Project, Ser A
4.400%, 05/07/95 (A) ............................ 1,800 1,800
Moon Township, Pennsylvania
Industrial Development Authority
Executive Office Project, RB
4.750%, 05/07/95 (A) (C) ........................ 1,500 1,500
Northumberland County, Pennsylvania
Industrial Development Authority
Atlas Development Project
4.850%, 05/07/95 (A) (C) ........................ 900 900
Pennsbury, Pennsylvania School
District, FGIC, GO
4.400%, 08/15/95 ................................ 500 500
Pennsylvania Intergovernmental Co-op
Authority Special Tax Revenue City
of Philadelphia Funding Project, RB
9.000%, 06/15/95 ................................ 2,000 2,011
Pennsylvania State Higher Education
College & University Revenue,
Ser A, RB, Prerefunded at 100
9.125%, 06/01/95 (B) ............................ $1,800 $1,807
Pennsylvania State Higher
Education Facility Authority
Temple University Project, RB
4.850%, 05/01/95 (A) (C) ........................ 2,200 2,201
Pennsylvania State Higher
Education, Ser D, MBIA, RB
6.600%, 06/15/95 ................................ 420 421
Pennsylvania State University
Project, Ser A
5.500%, 12/21/95 ................................ 1,800 1,804
Pennsylvania State, TAN
4.750%, 06/30/95 ................................ 1,500 1,502
Philadelphia, Pennsylvania Hospital
& Higher Education Facilities
Authority, Ser B, RB
4.750%, 05/07/95 (A) (C) ........................ 1,800 1,800
Philadelphia, Pennsylvania
Industrial Development Authority
Multi-Family Housing Harbor
View Towers Project, RB
5.150%, 05/07/95 (A) (C) ........................ 1,500 1,500
Philadelphia, Pennsylvania School
District, GO, TRAN
4.750%, 06/30/95 ................................ 2,000 2,002
Philadelphia, Pennsylvania Updates,
GO, TECP
4.200%, 05/31/95 (A) (C) ........................ 1,800 1,800
Philadelphia, Pennsylvania, Ser E,
TRAN, GO
4.750%, 06/15/95 (C) ............................ 500 500
Quakertown, Pennsylvania Hospital
Authority Group Pooled Financing, RB
4.550%, 05/07/95 (A) (C) ........................ 1,800 1,800
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
April 30, 1995 21
<PAGE> 24
STATEMENT OF NET ASSETS INVENTOR FUNDS
<TABLE>
<CAPTION>
PENNSYLVANIA FACE
TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (CONT'D) (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
Sayre, Pennsylvania Health Care
Facilities Authority Capital
Financing Project, Ser F,
AMBAC, RB
4.750%, 05/07/95 (A) ............................ $1,300 $1,300
Sayre, Pennsylvania Health Care
Facilities Authority Capital
Financing Project, Ser I,
AMBAC, RB
4.750%, 05/07/95 (A) ............................ 700 700
Schuylkill County, Pennsylvania
Industrial Development Authority
Westwood Energy Project, RB
5.200%, 05/01/95 (A) (C) ........................ 1,240 1,240
Woodland Hills, Pennsylvania
School District, FGIC, GO
8.100%, 08/15/95 ................................ 300 303
- --------------------------------------------------------------------------------
Total Pennsylvania .......................... 53,662
------
PUERTO RICO (4.8%)
Puerto Rico Commonwealth Public
Improvement Bonds, FGIC, GO
6.400%, 07/01/95 ................................ 290 291
Puerto Rico Commonwealth, GO,
Prerefunded at 104
9.375%, 07/01/95 (B) ............................ 330 346
Puerto Rico Electric Power
Authority, Ser J, RB,
Prerefunded at 103
9.000%, 07/01/95 (B) ............................ 1,500 1,557
Puerto Rico Public Finance, Ser 85B
6.350%, 07/01/95 ................................ 510 512
- --------------------------------------------------------------------------------
Total Puerto Rico ........................... 2,706
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $56,368) ............................................. 56,368
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.5%)
(Cost $56,368) ............................................. 56,368
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (0.5%) ...................... 300
- --------------------------------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value--
2 billion authorized) based on
56,668,207 outstanding shares
of beneficial interest ..................................... 56,668
- --------------------------------------------------------------------------------
Total Net Assets: (100.0%) .................................... $56,668
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE - CLASS A .................................. $ 1.00
- --------------------------------------------------------------------------------
</TABLE>
- ----------
(A) Floating Rate Instrument with Demand Features. The rate reflected on
the Statement of Net Assets is the rate in effect on April 30, 1995.
The date shown is the longer of the reset date or the demand date.
(B) Prerefunded Security - the maturity date shown is the prerefunded date.
(C) Security is backed by a letter of credit.
AMBAC American Municipal Bond Assurance Company
FGIC Financial Guaranty Insurance Company
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
TAN Tax Anticipation Note
TECP Tax Exempt Commercial Paper
TRAN Tax and Revenue Anticipation Note
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
22 April 30, 1995
<PAGE> 25
SCHEDULE OF INVESTMENTS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
INTERMEDIATE GOVERNMENT AMOUNT VALUE
SECURITIES FUND (000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (62.1%)
- --------------------------------------------------------------------------------
<S> <C> <C>
FHLMC
5.200%, 11/15/99 ................................ $ 500 $ 491
8.000%, 11/15/99 ................................ 2,000 2,043
5.250%, 09/15/06 ................................ 874 831
7.500%, 08/01/07 ................................ 10 10
6.000%, 05/15/21 ................................ 1,000 912
9.250%, 06/01/23 ................................ 169 173
FHLMC REMIC
5.200%, 09/15/05 ................................ 500 471
FNMA
5.390%, 08/05/98 ................................ 3,000 2,856
7.000%, 01/25/99 ................................ 1,250 1,243
7.000%, 12/17/06 ................................ 1,000 996
6.000%, 03/25/07 ................................ 1,000 924
6.500%, 05/25/15 ................................ 945 921
7.350%, 08/17/15 ................................ 2,000 2,004
7.464%, 11/01/17 ................................ 660 678
9.500%, 05/01/18 ................................ 215 225
GNMA
8.000%, 04/15/04 ................................ 281 281
8.000%, 08/15/06 ................................ 138 138
8.000%, 09/15/06 ................................ 37 37
8.000%, 12/15/06 ................................ 14 14
8.000%, 11/15/07 ................................ 148 148
8.000%, 12/15/07 ................................ 224 224
8.000%, 02/15/08 ................................ 141 141
8.000%, 05/15/08 ................................ 198 198
6.500%, 06/15/08 ................................ 309 297
6.500%, 08/15/08 ................................ 371 356
6.500%, 09/15/08 ................................ 699 671
6.500%, 10/15/08 ................................ 545 523
6.500%, 11/15/08 ................................ 970 931
6.500%, 12/15/08 ................................ 1,586 1,522
6.500%, 02/15/09 ................................ 507 486
6.500%, 03/15/09 ................................ 420 403
6.500%, 05/15/09 ................................ 72 69
6.500%, 06/15/09 ................................ 383 367
9.500%, 06/15/09 ................................ 88 92
9.500%, 07/15/09 ................................ 65 68
9.500%, 08/15/09 ................................ 12 13
9.500%, 09/15/09 ................................ 39 41
9.500%, 10/15/09 ................................ 173 181
9.500%, 06/15/19 ................................ 498 524
8.000%, 02/15/22 ................................ 99 99
8.000%, 07/15/22 ................................ 1,033 1,033
8.500%, 07/15/22 ................................ 386 395
7.500%, 08/15/22 ................................ 25 24
8.000%, 11/15/22 ................................ 356 356
8.500%, 08/15/23 ................................ 60 61
7.000%, 09/15/23 ................................ 471 447
7.000%, 04/15/24 ................................ 655 620
7.000%, 05/15/24 ................................ 513 486
9.000%, 11/01/24 (TBA) .......................... 5,350 5,555
8.000%, 01/01/25 (TBA) .......................... 1,520 1,524
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $32,788) ................................ 33,103
- --------------------------------------------------------------------------------
U. S. TREASURY OBLIGATIONS (46.5%)
- --------------------------------------------------------------------------------
United States Treasury Bond
12.000%, 08/15/13 ................................ 3,000 4,174
United States Treasury Notes
6.500%, 05/15/97 ................................ 1,500 1,497
8.500%, 07/15/97 ................................ 1,850 1,919
6.500%, 08/15/97 ................................ 7,500 7,477
8.875%, 11/15/97 ................................ 6,200 6,508
5.125%, 06/30/98 ................................ 1,000 954
5.125%, 11/30/98 ................................ 1,800 1,704
6.375%, 08/15/02 ................................ 600 579
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
April 30, 1995 23
<PAGE> 26
SCHEDULE OF INVESTMENTS INVENTOR FUNDS
<TABLE>
<CAPTION>
MARKET
INTERMEDIATE GOVERNMENT VALUE
SECURITIES FUND (cont'd) (000)
- --------------------------------------------------------------------------------
<S> <C>
TOTAL U. S. TREASURY OBLIGATIONS
(Cost $24,520) ............................................. $24,812
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.8%)
- --------------------------------------------------------------------------------
Aubrey G. Lanston
5.90%, dated 04/28/95,
matures 05/01/95,
repurchase price $1,472,724
(collateralized by U.S. Treasury
Note, par value $1,525,000,
5.50%, matures 07/31/97,
market value $1,499,496) ................................... 1,472
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,472) .............................................. 1,472
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (111.4% OF NET ASSETS)
(Cost $58,780) ............................................. $59,387
- --------------------------------------------------------------------------------
</TABLE>
- ----------
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
REMIC Real Estate Mortgage Investment Conduit
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (000) (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (116.7%)
- --------------------------------------------------------------------------------
<S> <C> <C>
FHLMC
7.500%, 04/01/00 ................................ $ 349 $ 351
7.500%, 10/01/01 ................................ 79 80
FNMA
7.350%, 08/17/15 ................................ 2,000 2,004
GNMA
8.000%, 01/15/06 ................................ 174 174
8.000%, 06/15/06 ................................ 129 129
8.000%, 07/15/06 ................................ 64 64
8.000%, 08/15/06 ................................ 601 601
8.000%, 12/15/06 ................................ 159 159
8.000%, 01/15/08 ................................ 59 59
8.000%, 02/15/08 ................................ 29 29
7.000%, 01/15/09 ................................ 25 24
6.500%, 02/15/09 ................................ 392 376
7.000%, 02/15/09 ................................ 184 180
6.500%, 03/15/09 ................................ 226 217
6.500%, 04/15/09 ................................ 367 352
9.000%, 05/15/09 ................................ 1,089 1,124
6.500%, 06/15/09 ................................ 465 446
9.000%, 06/15/09 ................................ 111 115
9.500%, 06/15/09 ................................ 64 68
9.500%, 07/15/09 ................................ 389 408
9.500%, 08/15/09 ................................ 687 721
9.500%, 09/15/09 ................................ 177 186
9.500%, 10/15/09 ................................ 149 157
9.500%, 11/15/09 ................................ 112 117
10.000%, 11/15/09 ................................ 478 512
10.000%, 12/15/09 ................................ 33 35
10.000%, 10/15/10 ................................ 97 104
11.500%, 01/15/13 ................................ 35 39
11.500%, 02/15/13 ................................ 72 80
11.500%, 03/15/13 ................................ 29 33
11.500%, 05/15/13 ................................ 99 111
7.500%, 06/15/13 ................................ 353 345
11.500%, 06/15/13 ................................ 106 118
11.500%, 07/15/13 ................................ 23 26
11.500%, 08/15/13 ................................ 12 13
11.500%, 06/15/15 ................................ 58 65
11.250%, 08/15/15 ................................ 266 291
11.500%, 10/15/15 ................................ 44 50
9.500%, 12/15/15 ................................ 12 13
11.500%, 01/15/16 ................................ 25 28
9.500%, 03/15/16 ................................ 198 209
9.000%, 06/15/16 ................................ 2,515 2,612
8.500%, 07/15/16 ................................ 19 19
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
24 April 30, 1995
<PAGE> 27
SCHEDULE OF INVESTMENTS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
9.000%, 07/15/16 ................................ $ 20 $ 21
9.500%, 07/15/16 ................................ 7 8
9.000%, 08/15/16 ................................ 22 22
9.500%, 08/15/16 ................................ 184 194
10.250%, 08/20/16 ................................ 44 47
8.500%, 09/15/16 ................................ 29 29
9.000%, 09/15/16 ................................ 21 22
9.500%, 09/15/16 ................................ 23 24
8.500%, 10/15/16 ................................ 69 70
9.500%, 10/15/16 ................................ 19 20
9.500%, 11/15/16 ................................ 87 92
9.000%, 12/15/16 ................................ 77 80
8.500%, 01/15/17 ................................ 301 308
9.500%, 01/15/17 ................................ 19 20
8.500%, 02/15/17 ................................ 501 511
9.000%, 02/15/17 ................................ 20 21
8.000%, 03/15/17 ................................ 17 17
8.500%, 03/15/17 ................................ 466 476
8.000%, 04/15/17 ................................ 126 126
8.000%, 05/15/17 ................................ 88 88
8.500%, 05/15/17 ................................ 224 229
9.500%, 05/15/17 ................................ 30 32
8.500%, 06/15/17 ................................ 262 267
9.000%, 06/15/17 ................................ 513 533
8.000%, 07/15/17 ................................ 107 107
8.500%, 07/15/17 ................................ 188 192
9.500%, 07/15/17 ................................ 63 67
8.500%, 08/15/17 ................................ 47 48
9.000%, 08/15/17 ................................ 382 397
9.500%, 08/15/17 ................................ 186 196
8.500%, 09/15/17 ................................ 72 73
9.500%, 09/15/17 ................................ 142 150
8.500%, 10/15/17 ................................ 19 19
9.500%, 10/15/17 ................................ 303 319
8.500%, 11/15/17 ................................ 69 71
8.500%, 12/15/17 ................................ 44 44
9.500%, 12/15/17 ................................ 31 33
9.500%, 03/15/18 ................................ 36 38
10.250%, 03/20/18 ................................ 162 171
9.500%, 04/15/18 ................................ 39 42
9.500%, 06/15/18 ................................ 98 103
9.500%, 07/15/18 ................................ 27 28
9.500%, 08/15/18 ................................ 48 50
9.500%, 09/15/18 ................................ 13 14
10.250%, 09/20/18 ................................ 192 203
9.500%, 10/15/18 ................................ 22 23
9.500%, 11/15/18 ................................ 17 18
8.500%, 12/15/18 ................................ 39 40
9.500%, 12/15/18 ................................ 100 106
9.500%, 01/15/19 ................................ 45 47
9.500%, 03/15/19 ................................ 12 13
9.500%, 05/15/19 ................................ 37 39
9.500%, 07/15/19 ................................ 12 13
9.500%, 09/15/19 ................................ 35 37
9.500%, 10/15/19 ................................ 44 46
9.500%, 12/15/19 ................................ 29 30
9.500%, 06/15/20 ................................ 23 24
9.000%, 07/15/20 ................................ 330 343
9.500%, 07/15/20 ................................ 33 34
9.500%, 08/15/20 ................................ 48 50
9.500%, 10/15/20 ................................ 64 67
9.500%, 11/15/20 ................................ 110 116
9.500%, 12/15/20 ................................ 166 175
9.500%, 07/15/21 ................................ 45 47
8.000%, 11/15/21 ................................ 27 27
8.000%, 02/15/22 ................................ 737 737
8.000%, 05/15/22 ................................ 97 97
8.000%, 06/15/22 ................................ 459 459
7.000%, 11/15/22 ................................ 497 470
7.000%, 01/15/23 ................................ 447 423
7.000%, 04/15/23 ................................ 22 21
7.500%, 04/15/23 ................................ 35 34
7.500%, 06/15/23 ................................ 84 82
8.000%, 06/15/23 ................................ 536 536
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
April 30, 1995 25
<PAGE> 28
SCHEDULE OF INVESTMENTS INVENTOR FUNDS
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
7.000%, 07/15/23 ................................ $ 947 $ 896
7.000%, 08/15/23 ................................ 945 895
7.000%, 09/15/23 ................................ 413 391
7.500%, 09/15/23 ................................ 33 32
7.500%, 10/15/23 ................................ 49 48
7.000%, 12/15/23 ................................ 1,698 1,608
7.000%, 01/15/24 ................................ 2,152 2,039
7.000%, 02/15/24 ................................ 1,801 1,705
7.000%, 03/15/24 ................................ 1,075 1,018
7.000%, 04/15/24 ................................ 846 801
7.000%, 05/15/24 ................................ 1,046 992
8.000%, 05/15/24 ................................ 104 104
7.000%, 06/15/24 ................................ 25 23
8.000%, 06/15/24 ................................ 396 396
8.000%, 08/15/24 ................................ 922 922
8.000%, 09/15/24 ................................ 406 406
9.000%, 11/01/24 (TBA) .......................... 1,320 1,371
8.000%, 11/15/24 ................................ 102 104
9.000%, 11/15/24 ................................ 379 394
8.000%, 01/01/25 (TBA) .......................... 10,640 10,666
9.000%, 01/15/25 ................................ 37 38
8.000%, 03/15/25 ................................ 485 486
9.000%, 03/15/25 ................................ 489 508
9.000%, 04/15/25 ................................ 768 798
- --------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED BONDS
(Cost $48,814) .................................. 49,261
- --------------------------------------------------------------------------------
U. S. TREASURY OBLIGATIONS (8.7%)
- --------------------------------------------------------------------------------
United States Treasury Bonds
12.000%, 08/15/13 ................................ $1,950 $2,714
9.250%, 02/15/16 ................................ 800 950
- --------------------------------------------------------------------------------
Total U. S. Treasury Obligations
(Cost $3,515) ................................... 3,664
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (2.0%)
- --------------------------------------------------------------------------------
Aubrey G. Lanston 5.90%, dated
04/28/95, matures 05/01/95,
repurchase price $855,422,
(collateralized by U.S. Treasury
Note, par value $610,000,
11.75%, matures 11/15/14,
market value $874,290) .......................... 855
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $855) ..................................... 855
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (127.4% OF NET ASSETS)
(Cost $53,182) .................................. $53,780
- --------------------------------------------------------------------------------
</TABLE>
- ----------
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
26 April 30, 1995
<PAGE> 29
STATEMENTS OF ASSETS AND LIABILITIES INVENTOR FUNDS
As of April 30, 1995
<TABLE>
<CAPTION>
INTERMEDIATE GNMA
GOVERNMENT SECURITIES
SECURITIES FUND(1) FUND(1)
(000) (000)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments at market value (cost of $58,780
and $53,182, respectively) ....................................... $ 59,387 $53,780
Receivable for investment securities sold ........................... 7,706 12,521
Other assets ........................................................ 785 336
-------- -------
Total assets ..................................................... 67,878 66,637
-------- -------
LIABILITIES:
Payable for investment securities purchased ......................... 7,135 12,159
TBA sale commitment at value (proceeds receivable of $7,087
and $12,049, respectively) (See Note 2) .......................... 7,041 11,971
Other liabilities ................................................... 386 295
-------- -------
Total liabilities ................................................ 14,562 24,425
-------- -------
NET ASSETS:
Portfolio shares of Class A ($.00001 par value--2 billion authorized)
based on 5,319,466 and 4,154,215 outstanding shares
of beneficial interest, respectively ............................. 53,046 41,494
Accumulated net realized gain (loss) on investments ................. (362) 80
Net unrealized appreciation on investments and TBA sale commitments . 632 638
-------- -------
TOTAL NET ASSETS ....................................................... $ 53,316 $42,212
======== =======
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE - CLASS A ............... $ 10.02 $ 10.16
Maximum Sales Charge of 4.00% .......................................... 0.42 0.42
-------- -------
OFFERING PRICE PER SHARE - CLASS A+..................................... $ 10.44 $ 10.58
======== =======
</TABLE>
+ The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%
(1) Commenced operations on August 10, 1994.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
April 30, 1995 27
<PAGE> 30
STATEMENTS OF OPERATIONS
For the period ended April 30, 1995
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE
GROWTH GOVERNMENT
FUND(1) SECURITIES FUND(1)
(000) (000)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends .......................................... $ 549 $ --
Interest ........................................... 275 2,561
------- -------
Total investment income ......................... 824 2,561
------- -------
EXPENSES:
Investment advisory fees ........................... 278 255
12b-1 fees ......................................... 82 91
Administrative fees ................................ 59 66
Transfer agent fees & expenses ..................... 16 17
Registration & filing fees ......................... 15 18
Custody fees ....................................... 13 14
Trustee fees ....................................... 1 1
Miscellaneous fees ................................. 21 23
------- -------
Total expenses .................................. 485 485
Less: Expenses waived ........................... (174) (175)
------- -------
Total net expenses .............................. 311 310
------- -------
NET INVESTMENT INCOME ................................. 513 2,251
------- -------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gain (loss) on investments ............ 556 (362)
Net change in unrealized appreciation of investments 2,748 632
------- -------
Net realized and unrealized gain on investments . 3,304 270
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $ 3,817 $ 2,521
======= =======
</TABLE>
- ----------
(1) Commenced operations on August 10, 1994.
(2) Commenced operations on August 8, 1994.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
28 April 30, 1995
<PAGE> 31
INVESTOR FUNDS
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
GNMA PENNSYLVANIA OBLIGATIONS SECURITIES TAX-EXEMPT
SECURITIES MUNICIPAL BOND MONEY MARKET MONEY MARKET MONEY MARKET
FUND(1) FUND(1) FUND(2) FUND(2) FUND(2)
(000) (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends .......................................... $ -- $ -- $ -- $ -- $ --
Interest ........................................... 2,203 1,176 9,538 2,388 1,341
------- ------- ------- ------- -------
Total investment income ......................... 2,203 1,176 9,538 2,388 1,341
------- ------- ------- ------- -------
EXPENSES:
Investment advisory fees ........................... 205 168 752 194 161
12b-1 fees ......................................... 73 60 418 108 89
Administrative fees ................................ 53 43 251 65 54
Transfer agent fees & expenses ..................... 15 17 36 17 17
Registration & filing fees ......................... 14 12 105 25 20
Custody fees ....................................... 29 5 19 21 4
Trustee fees ....................................... 1 1 5 1 1
Miscellaneous fees ................................. 19 20 107 22 23
------- ------- ------- ------- -------
Total expenses .................................. 409 326 1,693 453 369
Less: Expenses waived ........................... (160) (122) (774) (216) (173)
------- ------- ------- ------- -------
Total net expenses .............................. 249 204 919 237 196
------- ------- ------- ------- -------
NET INVESTMENT INCOME ................................. 1,954 972 8,619 2,151 1,145
------- ------- ------- ------- -------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gain (loss) on investments ............ 80 -- -- 14 --
Net change in unrealized appreciation of investments 638 204 -- -- --
------- ------- ------- ------- -------
Net realized and unrealized gain on investments . 718 204 -- 14 --
------- ------- ------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $ 2,672 $ 1,176 $ 8,619 $ 2,165 $ 1,145
======= ======= ======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
April 30, 1995 29
<PAGE> 32
STATEMENTS OF CHANGES IN NET ASSETS
For the period ended April 30, 1995
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE
GROWTH GOVERNMENT
FUND SECURITIES FUND
8/10/94(1) 8/10/94(1)
to 4/30/95 to 4/30/95
(000) (000)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 513 $ 2,251
Net realized gain (loss) on investments ......................... 556 (362)
Net change in unrealized appreciation on investments ............ 2,748 632
-------- --------
Net increase resulting from operations ....................... 3,817 2,521
-------- --------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ........................................... (513) (2,251)
Net realized gains .............................................. (85) --
-------- --------
Total dividends distributed .................................. (598) (2,251)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ..................................... 55,864 66,686
Shares issued in lieu of cash distributions ..................... 1 2
Cost of shares repurchased ...................................... (12,427) (13,642)
-------- --------
Increase in net assets derived from capital share transactions 43,438 53,046
-------- --------
Net increase in net assets ......................................... 46,657 53,316
-------- --------
NET ASSETS:
Beginning of period ............................................. -- --
-------- --------
End of period ................................................... $ 46,657 $ 53,316
======== ========
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period .................. -- --
Shares issued ................................................... 5,577 6,685
Shares issued in lieu of cash distributions ..................... -- --
Shares repurchased .............................................. (1,214) (1,366)
-------- --------
Increase derived from capital share transactions ............. 4,363 5,319
-------- --------
Capital shares outstanding at end of period ........................ 4,363 5,319
======== ========
</TABLE>
- -------------
(1) Commenced operations on August 10, 1994.
(2) Commenced operations on August 8, 1994.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
30 April 30, 1995
<PAGE> 33
INVENTOR FUNDS
<TABLE>
<CAPTION>
PRIME
GNMA PENNSYLVANIA OBLIGATIONS
SECURITIES MUNICIPAL BOND MONEY MARKET
FUND FUND FUND
8/10/94(1) 8/10/94(1) 8/8/94(2)
TO 4/30/95 TO 4/30/95 TO 4/30/95
(000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 1,954 $ 972 $ 8,619
Net realized gain (loss) on investments ......................... 80 -- --
Net change in unrealized appreciation on investments ............ 638 204 --
-------- -------- ---------
Net increase resulting from operations ....................... 2,672 1,176 8,619
-------- -------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ........................................... (1,954) (972) (8,619)
Net realized gains .............................................. -- -- --
-------- -------- ---------
Total dividends distributed .................................. (1,954) (972) (8,619)
-------- -------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ..................................... 48,509 38,051 647,086
Shares issued in lieu of cash distributions ..................... 1 -- 52
Cost of shares repurchased ...................................... (7,016) (3,617) (357,179)
-------- -------- ---------
Increase in net assets derived from capital share transactions 41,494 34,434 289,959
-------- -------- ---------
Net increase in net assets ......................................... 42,212 34,638 289,959
-------- -------- ---------
NET ASSETS:
Beginning of period ............................................. -- -- 99
-------- -------- ---------
End of period ................................................... $ 42,212 $ 34,638 $ 290,058
======== ======== =========
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period .................. -- -- 99
Shares issued ................................................... 4,855 3,816 647,086
Shares issued in lieu of cash distributions ..................... -- -- 52
Shares repurchased .............................................. (701) (365) (357,179)
-------- -------- ---------
Increase derived from capital share transactions ............. 4,154 3,451 289,959
-------- -------- ---------
Capital shares outstanding at end of period ........................ 4,154 3,451 290,058
======== ======== =========
<CAPTION>
TREASURY PENNSYLVANIA
SECURITIES TAX-EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
8/8/94(2) 8/8/94(2)
TO 4/30/95 TO 4/30/95
(000) (000)
- -------------------------------------------------------------------- -------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income ........................................... $ 2,151 $ 1,145
Net realized gain (loss) on investments ......................... 14 --
Net change in unrealized appreciation on investments ............ -- --
--------- ---------
Net increase resulting from operations ....................... 2,165 1,145
--------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ........................................... (2,151) (1,145)
Net realized gains .............................................. -- --
--------- ---------
Total dividends distributed .................................. (2,151) (1,145)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ..................................... 330,496 119,764
Shares issued in lieu of cash distributions ..................... 71 11
Cost of shares repurchased ...................................... (250,090) (63,107)
--------- ---------
Increase in net assets derived from capital share transactions 80,477 56,668
--------- ---------
Net increase in net assets ......................................... 80,491 56,668
--------- ---------
NET ASSETS:
Beginning of period ............................................. -- --
--------- ---------
End of period ................................................... $ 80,491 $ 56,668
========= =========
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period .................. -- --
Shares issued ................................................... 330,496 119,764
Shares issued in lieu of cash distributions ..................... 71 11
Shares repurchased .............................................. (250,090) (63,107)
--------- ---------
Increase derived from capital share transactions ............. 80,477 56,668
--------- ---------
Capital shares outstanding at end of period ........................ 80,477 56,668
========= =========
</TABLE>
- --------------------------------------------------------------------------------
April 30, 1995 31
--
<PAGE> 34
FINANCIAL HIGHLIGHTS
For the period ended April 30, 1995
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
NET ASSET AND DISTRIBUTIONS FROM NET ASSET
VALUE NET UNREALIZED FROM NET REALIZED VALUE
BEGINNING INVESTMENT GAINS INVESTMENT CAPITAL END
OF PERIOD INCOME ON SECURITIES INCOME GAINS OF PERIOD
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------
EQUITY GROWTH
- -------------
Class A
1995(1)(3) ...................... $10.00 $0.12 $0.71 $(0.12) $(0.02) $10.69
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A
1995(1)(3) ...................... 10.00 0.44 0.02 (0.44) -- 10.02
- ---------------
GNMA SECURITIES
- ---------------
Class A
1995(1)(3) ...................... 10.00 0.48 0.16 (0.48) -- 10.16
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A
1995(1)(3) ...................... 10.00 0.29 0.04 (0.29) -- 10.04
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1995(2) ......................... 1.00 0.04 -- (0.04) -- 1.00
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1995(2) ......................... 1.00 0.04 -- (0.04) -- 1.00
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1995(2) ......................... 1.00 0.02 -- (0.02) -- 1.00
</TABLE>
- ------------------
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on August 10, 1994. All ratios for the period have
been annualized.
(2) Commenced operations on August 8, 1994. All ratios for the period have been
annualized.
(3) Total Return does not reflect the sales charge.
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
32 April 30, 1995
<PAGE> 35
INVENTOR FUNDS
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
RATIO OF NET EXPENSES INCOME
NET ASSETS RATIO OF INVESTMENT TO AVERAGE TO AVERAGE
END EXPENSES INCOME NET ASSETS NET ASSETS PORTFOLIO
TOTAL OF PERIOD TO AVERAGE TO AVERAGE (EXCLUDING (EXCLUDING TURNOVER
RETURN (000) NET ASSETS NET ASSETS WAIVERS) WAIVERS) RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------
EQUITY GROWTH
- -------------
Class A
1995(1)(3) ...................... 8.33%+ $ 46,657 0.95% 1.57% 1.48% 1.04% 110%
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A
1995(1)(3) ...................... 4.75+ 53,316 0.85 6.17 1.33 5.69 172
- ---------------
GNMA SECURITIES
- ---------------
Class A
1995(1)(3) ...................... 6.61+ 42,212 0.85 6.68 1.40 6.13 226
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A
1995(1)(3) ...................... 3.38+ 34,638 0.85 4.05 1.36 3.54 4
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1995(2) ......................... 3.76+ 290,058 0.55 5.16 1.01 4.70 --
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1995(2) ......................... 3.60+ 80,491 0.55 5.00 1.05 4.50 --
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1995(2) ......................... 2.32+ 56,668 0.55 3.21 1.04 2.72 --
</TABLE>
- --------------------------------------------------------------------------------
April 30, 1995 33
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS INVENTOR FUNDS
1. ORGANIZATION
Inventor Funds, Inc. (the "Corporation") was organized as a Maryland
corporation under Articles of Incorporation dated April 22, 1994. The
Corporation is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company with seven funds:
Equity Growth Fund, Intermediate Government Securities Fund, GNMA Securities
Fund, Pennsylvania Municipal Bond Fund, Prime Obligations Money Market Fund,
Treasury Securities Money Market Fund, and Pennsylvania Tax-Exempt Money Market
Fund (referred to as a "Fund," or collectively as the "Funds"). The assets of
each Fund are segregated, and a shareholder's interest is limited to the Fund in
which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds.
Security Valuation -- Investment securities of the Prime Obligations Money
Market Fund, Treasury Securities Money Market Fund and the Pennsylvania
Tax-Exempt Money Market Fund (the "Money Market Funds") are stated at amortized
cost which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income. Investment securities of the Equity Growth Fund,
Intermediate Government Securities Fund, GNMA Securities Fund and the
Pennsylvania Municipal Bond Fund (the "Non-Money Market Funds") which are listed
on a securities exchange for which market quotations are available are valued by
an independent pricing service at the last quoted sales price for such
securities on each business day. If there is no such reported sale, these
securities and unlisted securities for which market quotations are readily
available are valued at the most recent quoted bid price.
Security Transactions and Investment Income -- Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains on the sale of securities are those of
the specific securities sold, adjusted for the accretion and amortization of
purchase discounts or premiums during the respective holding period which is
calculated using the effective interest method. Interest income is recorded on
the accrual basis. Dividend income is recorded on ex-dividend date. Gains and
losses from pay-downs of mortgage-backed securities are included in net
investment income.
Repurchase Agreements -- Securities pledged as collateral for Repurchase
Agreements are held by the custodian bank until maturity of the Repurchase
Agreements. Provisions of the Agreements and procedures adopted by Integra Trust
Company (the "Adviser") ensure that the market value of the collateral,
including interest thereon, is sufficient in the event of default by the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization of
the collateral by the Fund may be delayed or limited.
TBA Purchase Commitments -- The Intermediate Government Securities Fund and
the GNMA Securities Fund may enter into "TBA" (to be announced) purchase
commitments to purchase securities for a fixed price at a future date beyond
customary settlement time. TBA purchase commitments may be considered securities
in themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date, which risk is in addition to the
risk of decline in the value of the fund's other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying securities,
generally according to the procedures described under "Security Valuation"
above.
TBA Sale Commitments -- The Intermediate Government Securities Fund and the
GNMA Securities Fund may enter into sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
arrangements. Proceeds of TBA sale commitments are not received until the
contract settlement date. Unsettled TBA sale commitments are valued at the
current market value of the underlying securities, generally according to the
procedures described under "Security Valuation" above. The contract is "marked
to market" daily and the change in value is recorded by the fund as unrealized
gain or loss. If the TBA sale commitment is closed through the acquisition of an
offsetting purchase commitment the fund realizes a gain or loss without
- --------------------------------------------------------------------------------
34 April 30, 1995
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS CONTINUED INVENTOR FUNDS
regard to any unrealized gain or loss on the underlying security. If securities
are delivered under the commitment, the fund realizes a gain or loss from the
sale of the securities based upon the unit price established at the date the
commitment was entered into.
Expenses -- Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Funds are
prorated to the Funds on the basis of relative net assets.
Distributions to Shareholders -- The Equity Growth Fund declares and pays
dividends from net investment income on a monthly basis. The Intermediate
Government Securities Fund, GNMA Securities Fund, Pennsylvania Municipal Bond
Fund, Prime Obligations Money Market Fund, Treasury Securities Money Market
Fund, and Pennsylvania Tax-Exempt Money Market Fund distributions from net
investment income are declared on a daily basis and are payable monthly. Any net
realized capital gains on sales of securities are distributed to its
shareholders at least annually.
Federal Income Taxes -- It is each Fund's intention to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for Federal income taxes is required.
Organizational Costs -- Organizational costs have been capitalized by the
Funds and are being amortized over sixty months commencing with operations. In
the event any of the initial shares of the Funds are redeemed by any holder
thereof during the period that the Funds are amortizing its organizational
costs, the redemption proceeds payable to the holder thereof by the Funds will
be reduced by the unamortized organizational costs in the same ratio as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of redemption. These costs include legal fees of
approximately $53,415 for organizational work performed by a law firm of which
an officer and trustee of the Funds is a partner.
Other -- Certain officers of the Funds are also officers of the Administrator
and/or Distributor. Such officers are paid no fees by the Funds for serving as
officers of the Corporation.
3. FEES AND EXPENSES
The Funds and the Adviser have entered into an investment advisory agreement,
dated August 1, 1994, under which the Adviser will receive an annual fee equal
to 0.85% of the average daily net assets of the Equity Growth Fund; 0.70% of the
average daily net assets of the Intermediate Government Securities, GNMA
Securities and Pennsylvania Municipal Bond Funds; and 0.45% of the average daily
net assets of the Prime Obligations Money Market, Treasury Securities Money
Market and Pennsylvania Tax-Exempt Money Market Funds.
Sub-Advisory services are provided to the Adviser for the Equity Growth Fund
by Sun Bank Capital Management, N.A.; for the Intermediate Government
Securities, GNMA Securities, Prime Obligations Money Market and Treasury
Securities Money Market Funds by Wellington Management Company; and for the
Pennsylvania Municipal Bond and Pennsylvania Tax-Exempt Money Market Funds by
Weiss, Peck & Greer (the "Sub-Advisers") pursuant to sub-advisory agreements
dated August 1, 1994. Under the terms of such agreements, the Sub-Advisers are
entitled to receive such a fee from the Adviser. Such fee is computed daily and
paid monthly. The Adviser is responsible for the supervision of, and payment of
fees to, the Sub-Advisers in connection with their services.
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary
of SEI Corporation ("SEI"), became the Fund's Distributor pursuant to an
agreement dated August 1, 1994. The Class A shares of the Funds have a Rule
12b-1 Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to 0.25%
of their average daily net assets.
Pursuant to an administration agreement dated August 1, 1994, SEI Financial
Management Company (the "Administrator"), a wholly-owned subsidiary of SEI, acts
as the Fund's Administrator. Under the terms of the administration agreement,
the Administrator will receive an annual fee which is calculated daily and paid
monthly at a maximum annual rate of 0.18% of the average daily net assets of the
Equity Growth, Intermediate Government Securities, GNMA Securities, and
Pennsylvania Municipal Bond Funds, and 0.15% of the average daily net assets of
the Prime Obligations Money Market, Treasury Securities Money Market and
Pennsylvania Tax-Exempt Money Market Funds.
- --------------------------------------------------------------------------------
April 30, 1995 35
<PAGE> 38
NOTES TO FINANCIAL STATEMENTS CONCLUDED INVENTOR FUNDS
During the period ended April 30, 1995, the Adviser and other parties waived
a portion of their contractual fees in order to assist the Funds in maintaining
competitive expense ratios. Expenses were waived as follows (in thousands):
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
OBLIGATIONS SECURITIES TAX-EXEMPT
EQUITY INTERMEDIATE GNMA PENNSYLVANIA MONEY MONEY MONEY
GROWTH GOVERNMENT SECURITIES MUNICIPAL MARKET MARKET MARKET
FUND SECURITIES FUND FUND BOND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Waiver of investment
advisory fees ............... $ 85 $ 77 $ 72 $ 40 $356 $108 $ 84
Waiver of administrative fee.... -- -- -- 19 -- -- --
Waiver of 12b-1 fees............ 82 91 73 60 418 108 89
Waiver of custodian fees........ 7 7 15 3 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total Waivers.............. $174 $175 $160 $122 $774 $216 $173
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period ended April 30, 1995, purchases of securities and proceeds
from sales of securities, other than temporary investments in short-term
securities, were as follows (000):
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE GNMA PENNSYLVANIA
GROWTH GOVERNMENT SECURITIES MUNICIPAL
FUND SECURITIES FUND FUND BOND FUND
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASES
U.S. Government.... $ -- $132,818 $130,969 $ --
Other.............. 82,220 -- -- 31,638
SALES
U.S. Government.... $ -- $82,887 $90,719 $ --
Other.............. 43,879 -- -- 1,043
</TABLE>
At April 30, 1995, the total cost of securities and net realized gains or
losses on securities sold for federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held at April 30,
1995 is as follows (000):
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE GNMA PENNSYLVANIA
GROWTH GOVERNMENT SECURITIES MUNICIPAL
FUND SECURITIES FUND FUND BOND FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation............. $3,690 $660 $663 $246
Aggregate gross unrealized depreciation............. (942) (28) (25) (42)
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation......................... $2,748 $632 $638 $204
- ------------------------------------------------------------------------------------------------------------
</TABLE>
At April 30, 1995, the Intermediate Government Securities Fund had available
$198,912 in realized capital losses to offset future net capital gains through
the fiscal year ended 2003.
- --------------------------------------------------------------------------------
36 April 30, 1995
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS INVENTOR FUNDS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF THE INVENTOR FUNDS, INC.
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Intermediate Government Securities and GNMA
Securities Funds of the Inventor Funds, Inc. and the statements of net assets of
the Equity Growth, Pennsylvania Municipal Bond, Prime Obligations Money Market,
Treasury Securities Money Market and Pennsylvania Tax-Exempt Money Market Funds
of the Inventor Funds, Inc. as of April 30, 1995, and the related statements of
operations, changes in net assets and the financial highlights for each of the
respective periods then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of April 30, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of the
Inventor Funds, Inc. (Equity Growth, Intermediate Government Securities, GNMA
Securities, Pennsylvania Municipal Bond, Prime Obligations Money Market,
Treasury Securities Money Market and Pennsylvania Tax-Exempt Money Market Funds)
as of April 30, 1995, and the results of their operations, the changes in their
net assets and their financial highlights for each of the respective periods
then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
June 9, 1995
- --------------------------------------------------------------------------------
April 30, 1995 37
<PAGE> 40
[This page intentionally left blank.]
<PAGE> 41
[This page intentionally left blank.]
<PAGE> 42
[This page intentionally left blank.]
<PAGE> 43
- -------------------------------------------------------------
NOT MUTUAL FUNDS & OTHER [INVENTOR FUNDS LOGO]
INVESTMENT PRODUCTS ARE:
- NOT INSURED BY THE FDIC 1995
FDIC - NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANNUAL
INTEGRA BANK OR ANY OF ITS AFFILIATES REPORT TO
- SUBJECT TO INVESTMENT RISK, INCLUDING POSSIBLE SHAREHOLDERS
INSURED LOSS OF THE PRINCIPAL INVESTED April 30, 1995
- -------------------------------------------------------------
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the corporation and must be preceded
or accompanied by a current prospectus for the fund described.
SEI Financial Services Company, the distributor, is not affiliated with Integra
Trust Company.
INVENTOR FUNDS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Integra Trust Company
SUB ADVISERS
Wellington Management Company
Weiss, Peck & Greer
SunBank Capital Management, N.A.
ADMINISTRATOR
SEI Financial Management Corporation
TRANSFER AGENT
DST Systems Inc.
DISTRIBUTOR
SEI Financial Services Company
COUNSEL
Morgan, Lewis & Bockius
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
<PAGE> 1
EXHIBIT 17(k)
[INVENTOR FUNDS LOGO]
1995
SEMI-ANNUAL
REP0RT TO
SHAREHOLDERS
October 31, 1995
[GRAPHIC 1]
<PAGE> 2
TABLE OF CONTENTS INVENTOR FUNDS
================================================================================
<TABLE>
<S> <C>
Letter to Shareholders .................................................... 1
Advisers' Review .......................................................... 3
Statements of Net Assets .................................................. 11
Statements of Operations .................................................. 30
Statements of Changes in Net Assets ....................................... 32
Financial Highlights ...................................................... 36
Notes to Financial Statements ............................................. 38
</TABLE>
================================================================================
October 31, 1995
<PAGE> 3
LETTER TO SHAREHOLDERS INVENTOR FUNDS
================================================================================
DEAR INVENTOR FUNDS SHAREHOLDER,
What a difference a year makes! Last October, not only were we in the midst
of a significant market downturn, we saw one of the worst bond markets in
history. And both those events happened in the face of several interest rate
increases the Federal Reserve made as it feared that the economy was overheating
with the potential of creating unwanted inflation.
[PHOTO]
As we said in our last letter to you in April, it seems the Fed has brought
the economy in for a "soft landing". The past six months has accentuated this as
the markets continue to rally under what appears to be modest economic growth,
subdued inflation fears and continued strong corporate earnings. We do not see
this abating in the near future, particularly if the balanced budget bill comes
to fruition and doesn't become watered down during the compromise process.
In fact, this may add some steam to the momentum of the markets' rallies into
1996.
Since April, the stock market has continued its upward trend, although not as
dramatically as from mid-December through the end of April. Although there were
a few bumps along the way, the market grew by about 13%, as measured by the
Standard & Poor's 500, over the six month period. The bond market continued to
rise which pushed interest rates lower by about 1% across the board on
intermediate and long-term Treasury Securities. Shorter maturity issues
compressed and began to flatten between three months and two years, as evidenced
by money market fund rates which declined by only 35 basis points. Although this
market rally has hindered income, or yield performance, it had a tremendous
impact on total return by pushing up the prices of securities -- and in our
case, share prices -- significantly.
Overall we've been pleased with the funds' performances. The fund managers
have progressed through the early start-up stages, trailing the benchmarks by
only modest amounts. Benefiting from asset growth and having time to better
position the portfolios we feel we are now in place to have better future
performance. We saw some evidence of this already during the last quarter, as
the relative performance of several funds displayed improvements within the
funds' objective. The fund managers share their own assessment of performance
and how they have positioned the portfolios later in this report.
================================================================================
October 31, 1995 1
<PAGE> 4
LETTER TO SHAREHOLDERS INVENTOR FUNDS
================================================================================
In July, the Adviser met with the fund manager of the Pennsylvania Municipal
Bond Fund to determine means of increasing yield, while maintaining the
conservative parameters defined by the Fund's investment objective. The
resulting decisions have paid off as the relative performance of the fund
continues to improve and yield has come more in line with that of similar funds.
In August, the Adviser received permission from Standard & Poor's to extend
the maximum average weighted maturity of the Treasury Securities Money Market
Fund from 50 to 55 days while maintaining the fund's triple-A rating. Since
then, the fund manager has been gradually extending the average maturity to take
advantage of higher yielding securities.
On August 28, Integra Financial Corporation, the parent company of the
Adviser, entered into a definitive agreement to be acquired by National City
Corporation of Cleveland, Ohio. We will keep shareholders informed of any impact
the pending merger may have on your investment with the Inventor Funds.
I hope that you find this report useful and informative. And in closing I
want to thank you for investing in the Inventor Funds and wish you a prosperous
New Year.
Sincerely,
/s/ DOUGLAS W. SHERRATT
------------------------
Douglas W. Sherratt
Executive Vice President
Integra Trust Company
Investment Adviser
================================================================================
2 October 31, 1995
<PAGE> 5
ADVISERS' REVIEW INVENTOR FUNDS
================================================================================
ECONOMIC OUTLOOK
Since our last report in April, the financial markets have continued to perform
strongly. Stocks have continued their rally and bond rates are lower, both of
which have provided excellent returns to investors, with lower rates meaning
lower funding and borrowing costs to all sectors.
The U.S. economy, though uneven, is growing and forecasted to continue at a
pace of 2.5% annually. The first estimate of the third quarter Gross Domestic
Product (GDP) was unexpectedly high, 4.2%. We believe the economy will grow at a
more moderate pace through the remainder of the year and into early 1996.
Unemployment remains low at 5.6%, despite the headline grabbing announcements
of major corporate layoffs. Initial employment claims moved lower during
September in keeping with the moderate strength in the labor market. Surveys of
employers and hiring managers indicate many companies are maintaining
respectable hiring plans for the remainder of 1995 and 1996. Business spending
for capital goods and facilities appears to have peaked in the second quarter.
However, it nonetheless continues to run consistently at a historically high
level.
Growth in real disposable income for consumers is likely to finish the year
4% higher than in 1994, and measures of consumer confidence continue to be high.
The ABC/Money Market Magazine Comfort Index, for example, was its highest since
the start of 1990. The second quarter's 3.4% rate of growth in consumer spending
is expected to carry over into the third and fourth quarters. But retailers are
bracing for a disappointing Christmas. Reason? Consumers are being more
realistic about the debt they've piled up. Expect a practical Christmas present
this year.
Near-term, the outlook could be unsteady. That's because the U.S. economy is
in better shape than widely perceived. Signs of strength (third quarter GDP of
4.2%, low unemployment, etc.) could make the bond market react with higher rates
in the months ahead as it could be perceived that inflationary fears may return.
Long-term, though, the outlook for the U.S. financial markets remains
positive. Federal Reserve Chairman Greenspan described the domestic economy as
improving, "in part because the strong increases in financial market values this
year are likely to provide substantial support to household and business
spending."
Subdued inflation over the next several years points to lower interest rates
and creates a solid foundation for stocks and bonds. And with the odds of a
federal budget deal looking more realistic simply makes the outlook that much
more favorable.
================================================================================
October 31, 1995 3
<PAGE> 6
ADVISERS' REVIEW INVENTOR FUNDS
================================================================================
EQUITY GROWTH FUND
Sub-adviser: STI Capital
Management, N.A.
Portfolio Manager: Anthony Gray
INVESTMENT OBJECTIVE
The Equity Growth Fund seeks capital appreciation by investing primarily in
common stocks and securities convertible into common stocks of U.S. and foreign
issuers. A bottom-up fundamental analysis is used, concentrating on relative
price/earnings ratios to determine buy/sell points. Top-down analysis is used to
confirm and enhance the bottom-up fundamental process.
INVESTMENT REVIEW
Stocks continued their strong 1995 advance through October 31. While returns
were somewhat less than the previous two quarters, the overall returns remained
robust and healthy. The NASDAQ Composite, with its heavy technology weighting,
continued to lead the broader market indexes and has had the best performance
this year.
Recently, we have seen many cross-currents in the stock market including
profit taking, nervousness in the technology sector, and the continuing decline
of profit expectations. While this may prove to increase stock market volatility
in the short-term, the long-term secular trend for stocks still appears
positive.
The Fund is over weighted in the leisure sector and continues to be under
weighted in utilities as compared to the index. The Fund has increased its
holdings in the health care and financial sectors during the past six months.
The major decreases are in the utilities, and the food, beverage and tobacco
sectors. Through much of the year, the larger cap classic growth stocks have
been overshadowed by the rapid cyclical growth of small tech stocks, basic
industry and merger-related issues. As overall market growth has slowed, the
prospects for out performance by our classic growth stocks has increased
substantially.
<TABLE>
<CAPTION>
EQUITY GROWTH FUND
Ten Largest Holdings as of 10/31/95
- --------------------------------------------------------------------------------
Percentage
Security Description of Net Assets
- --------------------------------------------------------------------------------
<S> <C>
Philip Morris Companies ......................................... 2.3%
Columbia/HCA Healthcare ......................................... 2.0
AT&T ............................................................ 1.9
Motorola ........................................................ 1.9
Smith Kline Beecham PLC ......................................... 1.9
Home Depot ...................................................... 1.9
General Electric ................................................ 1.8
ITT ............................................................. 1.8
Merck ........................................................... 1.6
E.I. du Pont de Nemours ......................................... 1.6
</TABLE>
================================================================================
4 October 31, 1995
<PAGE> 7
ADVISERS' REVIEW INVENTOR FUNDS
================================================================================
INTERMEDIATE GOVERNMENT
SECURITIES FUND
Sub-adviser: Wellington Management Company
Portfolio Manager: Thomas L. Pappas
INVESTMENT OBJECTIVE
The Intermediate Government Securities Fund seeks to preserve capital and
maintain a high degree of liquidity while providing current income consistent
with the standards prescribed for the Fund. The Fund invests in U.S. Treasury
obligations, and may invest in futures on U.S. Treasury obligations and
obligations guaranteed as to principal and interest by the agencies and
instrumentalities of the U.S. Government.
INVESTMENT REVIEW
Over the past six months, the Fund's duration and maturity structure has not
been altered significantly. The Fund has kept a mortgage position in the 40-50%
range. We continue to believe that the Federal Reserve will ease further with
continued low inflation and weaker economic news. Despite our outlook for short
term rates, we do not expect a buying frenzy to drive intermediate and longer
term interest rates much lower, leading to a narrow trading range market.
Therefore, we are positioning the fund with approximately a half-year longer
duration and using the mortgage position to provide a higher yield to add
incremental income. This profile gives the Fund a good opportunity to add value
without undertaking substantial risk. Investments in U.S. agency mortgage-backed
securities helped the Fund yield more than the Treasury benchmark.
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT SECURITIES FUND
PORTFOLIO STRUCTURE
- --------------------------------------------------------------------------------
10/31/95
- --------------------------------------------------------------------------------
Merrill Lynch
3-5 Year
Portfolio Treasury Index
- --------------------------------------------------------------------------------
<S> <C> <C>
Weighted Average Maturity ..................... 6.0 3.9
Weighted Average Coupon ....................... 7.9 6.9
Weighted Average Quality ...................... AAA+ AAA+
</TABLE>
================================================================================
October 31, 1995 5
<PAGE> 8
ADVISERS' REVIEW INVENTOR FUNDS
================================================================================
GNMA Securities Fund
Sub-adviser: Wellington Management Company
Portfolio Manager: Thomas L. Pappas
INVESTMENT OBJECTIVE
The GNMA Securities Fund seeks to preserve capital and maintain a high degree of
liquidity while providing current income consistent with the standards
prescribed for the fund. The Fund invests primarily (at least 65% of its assets)
in mortgage pass-through securities guaranteed by the Government National
Mortgage Association.
INVESTMENT REVIEW
An economic environment having stable growth and low inflation should lead to a
bond market with little volatility and a narrow trading range. This in turn
should benefit mortgages. In such an environment, we will maintain a portfolio
structure relatively neutral to the bond market with a slight bias towards
longer term securities. This will permit us to capture additional return should
the Federal Reserve ease, as we expect they will. We favor pass-through
mortgages with slight discount coupons (6.5% to 7.5%) and "seasoned" premium
coupon pass-through securities (8.5% to 9.5%) that have already experienced the
1992-1993 low in rates and are therefore not as sensitive to new refinancing
opportunities. The Fund continues to maintain an 11% position in long Treasury
securities. The duration and maturity characteristics of the Fund are
essentially market-like (when including the income component) while it has a
higher yield with less prepayment risk than the mortgage market as a whole.
<TABLE>
<CAPTION>
GNMA SECURITIES FUND
PORTFOLIO STRUCTURE
- --------------------------------------------------------------------------------
10/31/95
- --------------------------------------------------------------------------------
Lehman
GNMA
Portfolio Index
- --------------------------------------------------------------------------------
<S> <C> <C>
Weighted Average Maturity .................... 8.1 7.5
Weighted Average Coupon ...................... 8.4 8.0
Weighted Average Quality ..................... AAA+ AAA+
</TABLE>
================================================================================
6 October 31, 1995
<PAGE> 9
ADVISERS' REVIEW INVENTOR FUNDS
================================================================================
PENNSYLVANIA MUNICIPAL
BOND FUND
Sub-adviser: Weiss, Peck & Greer L.L.C.
Portfolio Manager: S. Blake Miller
INVESTMENT OBJECTIVE
The Pennsylvania Municipal Bond Fund seeks to provide current income exempt from
both regular federal income and Pennsylvania personal income taxes while
preserving capital.
INVESTMENT REVIEW
Over the past six months, the Fund has maintained an average maturity of between
5-1/2 and 6 years or greater than 80% of its maximum range. This stance has
enhanced the total return of the Fund during a very strong period for municipal
securities. Having an over weighting toward pre-refunded securities was a drag
on performance during the third quarter as this sector under performed the
market as a whole. We view this under performance as a short-lived anomaly, and
expect the pre-refunded section to make a strong contribution to the total
return of the Fund in the months ahead.
================================================================================
October 31, 1995 7
<PAGE> 10
ADVISERS' REVIEW INVENTOR FUNDS
================================================================================
PRIME OBLIGATIONS
MONEY MARKET FUND
Sub-adviser: Wellington Management Company
Portfolio Manager: John Keogh
INVESTMENT OBJECTIVE
The Prime Obligations Money Market Fund seeks to preserve principal
value and maintain a high degree of liquidity while providing current income.
INVESTMENT REVIEW
We expect that the Federal Reserve will lower short term interest rates over the
next few months as fiscal policy remains restrictive, inflation remains benign,
the consumer feels fully leveraged and over taxed, and capital spending is
expected to moderate. The Fund's holdings remain concentrated in commercial
paper and we are maintaining a longer average maturity in the 50 to 60 day range
in order to lock in prevailing yields. The Fund has purchased appropriate
floating rate securities with a current weighting of 7% in this area. The Fund
also has invested in Callable Certificates of Deposit as these short duration
securities offer incremental yield versus traditional CD instruments and
commercial paper while demonstrating the low price volatility desired.
<TABLE>
<S> <C>
CERTIFICATES OF DEPOSIT 3%
FLOATING RATE INSTRUMENT 7%
REPURCHASE AGREEMENT 3%
COMMERCIAL PAPER 80%
BANKERS NOTES 4%
BANKERS ACCEPTANCES 3%
</TABLE>
as of 10/31/95
================================================================================
8 October 31, 1995
<PAGE> 11
ADVISERS' REVIEW INVENTOR FUNDS
================================================================================
TREASURY SECURITIES
MONEY MARKET FUND
Sub-adviser: Wellington Management Company
Portfolio Manager: John Keogh
INVESTMENT OBJECTIVE
The Treasury Securities Money Market Fund seeks to preserve principal value and
maintain a high degree of liquidity while providing current income. The Fund
invests exclusively in U.S. Treasury obligations and repurchase agreements
(repos) involving such obligations.
INVESTMENT REVIEW
We expect that the Federal Reserve will lower short term interest rates over the
next few months as fiscal policy remains restrictive, inflation remains benign,
the consumer feels fully leveraged and over taxed, and capital spending is
expected to moderate. In this environment, we are maintaining a longer average
maturity in the 40 to 55 day range in order to lock in prevailing yields. We
have added longer maturity (out to a maximum of 397 days) Treasury securities
when opportunities arose in order to extend the Fund's maturity. In order to add
incremental yield, we have used Term Repos when the rates offered have been
competitive.
<TABLE>
<S> <C>
U.S. TREASURY OBLIGATIONS 18%
REPURCHASE AGREEMENTS 82%
</TABLE>
as of 10/31/95
================================================================================
October 31, 1995 9
<PAGE> 12
ADVISERS' REVIEW INVENTOR FUNDS
================================================================================
PENNSYLVANIA TAX EXEMPT
MONEY MARKET FUND
Sub-adviser: Weiss, Peck & Greer
Portfolio Manager: Janet A. Fiorenza
INVESTMENT OBJECTIVE
The Pennsylvania Tax Exempt Money Market Fund seeks to provide current income
exempt from regular federal income and Pennsylvania personal income taxes,
consistent with stability of principal as prescribed by the standards set for
the Fund.
INVESTMENT REVIEW
As it became apparent that the economy was slowing and that inflation was
contained, the average weighted maturity of the Fund was extended to
approximately 55 days. At the end of October, over 60% of the Fund was invested
in variable rate demand obligations that have either a daily, weekly, or monthly
rate reset and can be redeemed at par either daily or weekly. In addition, 25%
of the Fund was invested in securities which mature within six months while the
remaining 15% was invested in securities which mature within 397 days. The Fund
continues to be managed with four key objectives in mind: safety, liquidity,
compliance, and performance.
================================================================================
10 October 31, 1995
<PAGE> 13
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND SHARES (000)
======================================================
<S> <C> <C>
COMMON STOCK (91.4%)
- ------------------------------------------------------
AEROSPACE (3.7%)
Allied Signal 20,900 $ 888
Boeing 3,700 243
Textron 3,800 261
United Technologies 7,400 657
---------------------------------------------------
Total Aerospace 2,049
-------
AUTOMOTIVE (1.3%)
General Motors 10,900 477
Goodyear Tire & Rubber 6,000 228
---------------------------------------------------
Total Automotive 705
-------
BANKS (3.9%)
Bank of Boston 4,000 178
BankAmerica 1,700 98
Chemical Banking 12,300 700
Mellon Bank 14,400 722
Midlantic 5,800 307
Summit Bancorporation
of New Jersey 5,000 142
---------------------------------------------------
Total Banks 2,147
-------
BUILDING (0.8%)
American Standard* 5,700 152
Foster Wheeler 8,100 304
---------------------------------------------------
Total Building 456
-------
CHEMICALS (2.7%)
Air Products & Chemical 8,200 423
E.I. Du Pont de Nemours 14,600 911
Praxair 6,000 162
---------------------------------------------------
Total Chemicals 1,496
-------
ELECTRICAL EQUIPMENT (4.2%)
Emerson Electric 10,900 777
General Electric 16,000 1,011
General Signal 17,500 558
---------------------------------------------------
Total Electrical Equipment 2,346
-------
ENERGY (5.6%)
Amoco 11,700 748
Atlantic Richfield 2,900 310
Chevron 6,400 299
Duracell International 1,300 68
Halliburton 4,800 199
Mobil 5,400 544
Schlumberger 4,600 286
Sonat 900 26
Union Texas Petroleum 11,000 198
Unocal 15,500 407
---------------------------------------------------
Total Energy 3,085
-------
ENVIRONMENTAL SERVICES (3.2%)
Browning Ferris Industries 9,600 280
Molton Metal Technology* 14,000 539
Wheelabrator Technologies 23,000 331
WMX Technologies 21,600 607
---------------------------------------------------
Total Environmental Services 1,757
-------
FINANCIAL SERVICES (1.1%)
Federal Home Loan Mortgage 9,100 630
---------------------------------------------------
Total Financial Services 630
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 11
<PAGE> 14
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (cont'd) SHARES (000)
======================================================
<S> <C> <C>
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS (9.9%)
Bush Boake Allen* 5,500 $ 151
Coca Cola 7,300 525
CPC International 4,200 279
Gillette 5,700 276
Kellogg 4,100 296
PepsiCo 5,500 290
Philip Morris Companies 14,900 1,257
Procter & Gamble 9,000 729
RJR Nabisco Holdings 5,160 159
Sara Lee 18,200 535
Sunbeam-Oster 15,200 228
Sysco 12,800 389
UST 11,500 345
---------------------------------------------------
Total Food, Beverage,
Tobacco & Household Products 5,459
-------
INSURANCE (5.4%)
American General 7,000 230
American International Group 7,350 620
Chubb 6,800 611
General Re 4,900 710
Travelers 16,000 808
---------------------------------------------------
Total Insurance 2,979
-------
LEISURE (3.3%)
Autotote, Cl A* 16,600 50
Carnival Cruise Lines, Cl A 31,600 734
Disney 6,100 352
Marriott International 6,500 240
Mattel 15,000 431
---------------------------------------------------
Total Leisure 1,807
-------
MEDIA (3.9%)
American Greetings, Cl A 5,000 158
Capital Cities ABC 5,600 664
Tele-Communications, Cl A* 41,100 699
Viacom, Cl B Non-Voting* 13,300 665
---------------------------------------------------
Total Media 2,186
-------
MEDICAL PRODUCTS & SERVICES (12.2%)
Abbott Laboratories 16,400 652
American Home Products 2,000 177
Amgen* 4,100 197
Bristol Myers Squibb 4,700 358
Columbia/HCA Healthcare 22,620 1,111
Fisher Scientific 4,400 138
Healthsouth Rehabilitation* 10,000 261
Johnson & Johnson 7,400 603
Merck 15,900 914
Pfizer 8,500 488
Pharmacia AB ADR 2,400 84
Schering Plough 6,600 354
Smith Kline Beecham PLC 20,000 1,038
Tenet Healthcare* 18,500 331
Warner Lambert 900 77
---------------------------------------------------
Total Medical Products & Services 6,783
-------
METALS & MINING (0.5%)
Alumax* 600 18
Worthington Industries 15,000 249
---------------------------------------------------
Total Metals & Mining 267
-------
MISCELLANEOUS (3.3%)
ITT 8,000 980
Tyco International 13,800 838
---------------------------------------------------
Total Miscellaneous 1,818
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
12 October 31, 1995
<PAGE> 15
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (cont'd) SHARES (000)
======================================================
<S> <C> <C>
PAPER & FOREST PRODUCTS (0.9%)
Georgia Pacific 5,900 $ 487
---------------------------------------------------
Total Paper & Forest Products 487
-------
PAPER & PAPER PRODUCTS (0.5%)
Willamette Industries 4,500 261
---------------------------------------------------
Total Paper & Paper Products 261
-------
RAILROADS (1.0%)
Union Pacific 8,800 575
---------------------------------------------------
Total Railroads 575
-------
RETAIL (8.5%)
Albertson's 6,500 216
American Stores 8,000 239
Federated Department Stores* 29,800 756
Home Depot 27,700 1,032
Intimate Brands, Cl A* 10,500 176
McDonalds 17,500 718
Newell 8,300 200
Office Depot* 12,800 366
Wal-Mart Stores 30,900 668
Wendy's International 18,000 358
---------------------------------------------------
Total Retail 4,729
-------
TECHNOLOGY (13.6%)
AMP 16,800 659
Arrow Electronics* 6,200 315
Bell Howell* 4,500 113
DSC Communications* 900 33
Eastman Kodak 9,700 607
General Motors, Cl E 11,600 547
Intel 12,200 852
International Business Machines 8,400 817
Microsoft* 8,200 820
Motorola 16,400 1,076
</TABLE>
<TABLE>
<CAPTION>
SHARES/ MARKET
FACE AMOUNT VALUE
(000) (000)
======================================================
<S> <C> <C>
Oracle Systems* 14,500 $ 633
Scientific-Atlanta 32,500 402
Xerox 4,900 636
---------------------------------------------------
Total Technology 7,510
--------
TELEPHONES &
TELECOMMUNICATION (1.9%)
AT&T 16,700 1,069
---------------------------------------------------
Total Telephones &
Telecommunication 1,069
--------
- ------------------------------------------------------
TOTAL COMMON STOCK
(Cost $46,003) 50,601
- ------------------------------------------------------
PREFERRED STOCKS (0.3%)
- ------------------------------------------------------
PRINTING & PUBLISHING (0.3%)
Time Warner Financing,
Convertible to 1.0 Shares
of Hasbro 6,000 192
---------------------------------------------------
Total Printing & Publishing 192
--------
- ------------------------------------------------------
TOTAL PREFERRED STOCK
(Cost $186) 192
- ------------------------------------------------------
REPURCHASE AGREEMENT (11.1%)
- ------------------------------------------------------
Paine Webber
5.88%, dated 10/31/95,
matures 11/01/95,
repurchase price $6,163,504
(collateralized by various U.S.
Government mortgage-backed
securities, total par value
$17,930,362, 0.00% - 7.00%:
total market value $6,347,496) 6,162 6,162
- ------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $6,162) 6,162
- ------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 13
<PAGE> 16
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
VALUE
EQUITY GROWTH FUND (cont'd) (000)
======================================================
<S> <C>
TOTAL INVESTMENTS (102.8%)
(Cost $52,351) $ 56,955
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (-2.8%) (1,534)
- ------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A ($.00001
par value - 2 billion authorized)
based on 4,612,149 outstanding
shares of beneficial interest 46,368
Accumulated net realized gain
on investments 4,449
Net unrealized appreciation on investments 4,604
- ------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $ 55,421
- ------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $ 12.02
Maximum Sales Charge of 4.00% 0.50
--------
OFFERING PRICE PER SHARE - CLASS A(+) $ 12.52
========
- ------------------------------------------------------
</TABLE>
- ----------
* Non-income producing security
+ The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
ADR American Depository Receipt
PLC Public Limited Corporation
<TABLE>
<CAPTION>
INTERMEDIATE FACE MARKET
GOVERNMENT AMOUNT VALUE
SECURITIES FUND (000) (000)
- ------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (47.0%)
- ------------------------------------------------------
<S> <C> <C>
FHLMC
5.200%, 11/15/99 $ 500 $ 497
5.250%, 09/15/06 798 782
5.750%, 05/15/07 2,243 2,120
7.500%, 08/01/07 10 10
6.000%, 08/15/07 400 391
6.500%, 12/01/09 TBA 1,000 992
9.000%, 07/15/20 108 110
6.000%, 05/15/21 1,000 972
9.250%, 06/01/23 162 169
7.000%, 05/01/24 1,272 1,263
7.000%, 07/01/25 1,984 1,969
6.500%, 09/01/25 696 677
7.000%, 09/01/25 3,977 3,949
7.000%, 10/01/25 1,990 1,976
FHLMC REMIC
8.000%, 11/15/99 2,000 2,089
5.200%, 09/15/05 500 489
8.000%, 01/15/06 500 518
4.750%, 07/25/11 500 489
6.000%, 06/15/19 500 489
8.700%, 02/15/20 500 515
8.500%, 10/15/20 2,000 2,062
FNMA
6.500%, 03/01/14 455 442
7.567%, 11/01/17 ARM 623 640
9.500%, 05/01/18 211 223
FNMA REMIC
7.000%, 01/25/99 1,250 1,266
6.000%, 03/25/07 1,000 977
7.500%, 08/25/07 1,000 1,054
6.500%, 05/25/15 945 949
6.000%, 11/25/17 400 393
6.000%, 11/25/19 500 495
8.125%, 01/25/20 1,086 1,108
8.250%, 10/25/20 168 170
GNMA
6.500%, 11/15/08 187 186
9.500%, 06/15/09 64 68
9.500%, 07/15/09 64 68
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
14 October 31, 1995
<PAGE> 17
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
INTERMEDIATE FACE MARKET
GOVERNMENT AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- ------------------------------------------------------
<S> <C> <C>
9.500%, 08/15/09 $ 10 $ 11
9.500%, 09/15/09 34 36
9.500%, 10/15/09 137 146
9.000%, 07/15/16 119 125
9.000%, 08/15/16 559 587
9.000%, 10/15/16 207 217
9.000%, 11/15/16 594 625
9.000%, 12/15/16 534 562
9.000%, 03/15/17 694 729
8.000%, 05/15/17 923 951
9.000%, 11/15/17 201 213
9.500%, 06/15/19 425 455
8.500%, 09/15/21 45 47
8.500%, 11/15/21 1,455 1,516
8.500%, 07/15/22 1,323 1,378
7.500%, 08/15/22 25 25
8.500%, 08/15/22 202 210
7.500%, 04/15/23 503 510
7.500%, 05/15/23 493 500
7.000%, 07/20/25 ARM 1,487 1,520
7.500%, 08/15/25 709 719
7.500%, 09/15/25 273 277
7.500%, 10/15/25 995 1,009
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS
(Cost $42,379) 42,935
- ------------------------------------------------------
U.S. TREASURY OBLIGATIONS (43.7%)
- ------------------------------------------------------
United States Treasury Bond
12.000%, 08/15/13 6,000 8,995
United States Treasury Notes
8.500%, 07/15/97 1,000 1,046
6.500%, 08/15/97 4,200 4,261
8.875%, 11/15/97 6,200 6,580
5.625%, 01/31/98 5,000 4,996
5.125%, 11/30/98 1,800 1,771
7.000%, 04/15/99 2,000 2,076
10.750%, 02/15/03 8,000 10,242
- ------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $38,780) 39,967
- ------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS (6.4%)
- ------------------------------------------------------
FNMA
5.200%, 04/30/98 3,000 2,944
5.390%, 08/05/98 3,000 2,953
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $5,752) 5,897
- ------------------------------------------------------
REPURCHASE AGREEMENT (3.8%)
- ------------------------------------------------------
J.P. Morgan
5.87%, dated 10/31/95,
matures 11/01/95,
repurchase price $3,449,562
(collateralized by U.S. Treasury Note,
par value $3,387,000,
8.50%, matures 11/15/95:
market value $3,520,161) 3,449 3,449
- ------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $3,449) 3,449
- ------------------------------------------------------
TOTAL INVESTMENTS (100.9%)
(Cost $90,360) 92,248
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES,
NET (-0.9%) (819)
- ------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value - 2 billion
authorized) based on 8,865,082
outstanding shares of
beneficial interest 89,133
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 15
<PAGE> 18
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
INTERMEDIATE MARKET
GOVERNMENT VALUE
SECURITIES FUND (cont'd) (000)
- ------------------------------------------------------
<S> <C>
Accumulated net realized gain on
investments $ 408
Net unrealized appreciation on
investments 1,888
- ------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $ 91,429
- ------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $ 10.31
Maximum Sales Charge of 4.00% 0.43
--------
Offering Price per Share - Class A(+) $ 10.74
========
- ------------------------------------------------------
</TABLE>
- ----------
+ The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
ARM Adjustable Rate Mortgage
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
REMIC Real Estate Mortgage Investment Conduit
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (000) (000)
- ------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED BONDS (87.8%)
- ------------------------------------------------------
<S> <C> <C>
FHLMC
7.500%, 04/01/00 $ 257 $ 263
7.500%, 10/01/01 79 80
8.000%, 01/15/06 500 518
7.000%, 12/01/09 TBA 1,200 1,210
7.000%, 06/01/23 440 437
7.000%, 03/01/24 223 221
7.000%, 07/01/25 329 327
7.000%, 09/01/25 502 499
FNMA IO
7.000%, 09/25/19 2,444 347
GNMA
7.000%, 10/15/07 339 343
7.000%, 05/15/08 324 328
7.000%, 01/15/09 24 24
7.000%, 02/15/09 171 174
7.000%, 03/15/09 281 284
9.000%, 05/15/09 GPM 982 1,026
6.500%, 06/15/09 49 49
9.000%, 06/15/09 GPM 108 113
9.500%, 07/15/09 206 219
9.500%, 08/15/09 518 550
9.500%, 09/15/09 33 35
9.500%, 10/15/09 6 7
6.500%, 11/01/09 TBA 1,000 997
9.500%, 11/15/09 54 58
10.000%, 11/15/09 383 416
10.000%, 12/15/09 32 35
11.500%, 01/15/13 35 39
11.500%, 02/15/13 71 81
11.500%, 03/15/13 29 33
11.500%, 05/15/13 90 102
7.500%, 06/15/13 314 319
11.500%, 06/15/13 92 104
11.500%, 07/15/13 23 26
11.500%, 08/15/13 12 13
11.500%, 06/15/15 58 65
11.250%, 08/15/15 257 282
11.500%, 10/15/15 44 50
9.500%, 12/15/15 12 13
11.500%, 01/15/16 18 21
9.500%, 03/15/16 172 184
9.000%, 06/15/16 2,336 2,455
9.000%, 07/15/16 18 19
9.500%, 07/15/16 7 7
9.000%, 08/15/16 19 20
9.500%, 08/15/16 171 182
9.000%, 08/20/16 2,300 2,394
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
16 October 31, 1995
<PAGE> 19
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- ------------------------------------------------------
<S> <C> <C>
10.250%, 08/20/16 GPM $ 31 $ 33
9.000%, 09/15/16 19 20
9.500%, 09/15/16 23 25
9.500%, 10/15/16 19 20
9.500%, 11/15/16 78 84
9.000%, 12/15/16 66 70
8.500%, 01/15/17 166 172
9.500%, 01/15/17 19 20
8.500%, 02/15/17 230 240
9.000%, 02/15/17 16 17
8.000%, 03/15/17 17 17
8.500%, 03/15/17 244 254
8.000%, 04/15/17 118 122
8.500%, 04/15/17 177 184
8.000%, 05/15/17 84 87
8.500%, 05/15/17 175 182
9.500%, 05/15/17 28 30
9.000%, 06/15/17 489 514
8.000%, 07/15/17 106 109
9.500%, 07/15/17 60 64
9.000%, 08/15/17 332 349
9.500%, 08/15/17 183 195
9.500%, 09/15/17 136 145
9.500%, 10/15/17 258 276
8.500%, 11/15/17 633 662
9.500%, 12/15/17 28 30
9.500%, 03/15/18 36 38
10.250%, 03/20/18 GPM 157 168
9.500%, 04/15/18 36 39
9.500%, 06/15/18 88 94
9.500%, 07/15/18 15 16
9.500%, 08/15/18 42 45
9.500%, 09/15/18 12 13
10.250%, 09/20/18 GPM 191 205
9.500%, 10/15/18 22 23
9.500%, 11/15/18 15 16
9.500%, 12/15/18 89 95
9.500%, 01/15/19 40 43
9.500%, 03/15/19 10 11
9.500%, 05/15/19 37 39
9.500%, 07/15/19 12 13
9.500%, 09/15/19 25 27
9.500%, 10/15/19 40 43
9.500%, 12/15/19 29 31
9.500%, 06/15/20 21 22
9.000%, 07/15/20 262 275
9.500%, 07/15/20 32 35
9.500%, 08/15/20 333 356
9.500%, 10/15/20 58 62
9.500%, 11/15/20 271 290
9.500%, 12/15/20 131 140
8.500%, 04/15/21 441 459
8.500%, 05/15/21 43 44
8.500%, 06/15/21 431 449
9.000%, 06/15/21 476 500
8.500%, 07/15/21 77 80
9.500%, 07/15/21 465 497
8.500%, 09/15/21 725 755
8.500%, 10/15/21 96 100
8.500%, 11/15/21 796 829
8.500%, 12/15/21 1,095 1,141
8.500%, 02/15/22 376 392
8.500%, 03/01/22 190 198
8.500%, 03/15/22 264 275
8.500%, 05/15/22 357 372
8.500%, 08/15/22 390 407
8.500%, 09/15/22 539 562
7.000%, 10/15/22 26 26
7.000%, 11/15/22 GPM 469 467
8.500%, 11/15/22 312 325
7.500%, 02/15/23 394 400
7.000%, 04/15/23 29 29
7.500%, 04/15/23 34 34
7.500%, 06/15/23 473 479
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 17
<PAGE> 20
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
GNMA AMOUNT VALUE
SECURITIES FUND (cont'd) (000) (000)
- ------------------------------------------------------
<S> <C> <C>
7.000%, 07/15/23 $ 497 $ 494
7.500%, 07/15/23 989 1,003
7.000%, 08/15/23 926 921
7.500%, 08/15/23 206 209
6.500%, 09/15/23 147 143
7.000%, 09/15/23 333 331
7.500%, 09/15/23 117 119
6.500%, 10/15/23 409 397
7.000%, 10/15/23 949 944
7.500%, 10/15/23 1,878 1,905
7.000%, 11/15/23 87 87
6.000%, 12/20/23 455 428
7.000%, 01/15/24 695 691
7.500%, 01/15/24 135 137
7.000%, 02/15/24 1,472 1,463
7.000%, 03/15/24 41 41
7.500%, 03/15/24 319 324
7.000%, 05/15/24 660 657
7.500%, 05/15/24 384 389
7.000%, 08/15/25 44 44
7.000%, 09/15/25 1,706 1,696
7.500%, 09/15/25 2,469 2,504
7.500%, 10/15/25 2,713 2,752
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED BONDS 47,528
(Cost $46,953)
- ------------------------------------------------------
U.S. TREASURY OBLIGATION (10.5%)
- ------------------------------------------------------
United States Treasury Bond
12.000%, 08/15/13 3,800 5,697
- ------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATION
(Cost $5,263) 5,697
- ------------------------------------------------------
REPURCHASE AGREEMENT (3.2%)
- ------------------------------------------------------
Aubrey G. Lanston
5.875%, dated 10/31/95,
matures 11/01/95,
repurchase price $1,739,284
(collateralized by U.S.
Treasury Bill, par value
$1,870,000, matures 10/17/96,
market value $1,773,275) 1,739 1,739
- ------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,739) 1,739
- ------------------------------------------------------
TOTAL INVESTMENTS (101.5%)
(Cost $53,955) 54,964
- ------------------------------------------------------
OTHER ASSETS AND LIABILITIES,
NET (-1.5%) (834)
- ------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value - 2 billion
authorized) based on 5,175,228
outstanding shares of
beneficial interest 52,052
Accumulated net realized
gain on investments 1,074
Net unrealized appreciation
on investments 1,009
Distributions in excess of net
investment income (5)
- ------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $54,130
- ------------------------------------------------------
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE - CLASS A $ 10.46
Maximum Sales Charge of 4.00% 0.44
----
OFFERING PRICE PER SHARE - CLASS A(+) $ 10.90
-------
- ------------------------------------------------------
</TABLE>
- ----------
+ The offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
FHLMC Federal Home Loan Mortgage Association
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
GPM Graduated Payment Mortgage
IO Interest Only
TBA "To Be Announced" Mortgage Backed Security (See Note 2)
The accompanying notes are an integral part of the financial statements.
================================================================================
18 October 31, 1995
<PAGE> 21
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (000) (000)
========================================================
MUNICIPAL BONDS (99.0%)
- --------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA (99.0%)
Allegheny County, Pennsylvania
Children's Hospital of Pittsburgh,
Ser 85B, MBIA, RB
3.900%, 11/07/95 (A) $ 200 $ 200
Allegheny County, Pennsylvania
Hospital Development Authority
Magee Woman's Hospital
Project, Ser O, RB
10.125%, 10/01/02 125 153
Bradford, Pennsylvania
School District, FGIC, GO
5.250%, 10/01/07 1,000 1,006
Bucks County, Pennsylvania
Middletown Township Special
Obligation, Escrowed to Maturity
6.100%, 10/01/00 385 411
Butler County, Pennsylvania
Sewer Authority, RB,
Prerefunded 01/01/04 at 100
7.250%, 07/01/12 100 111
Danville, Pennsylvania
School District, MBIA, GO
6.650%, 05/01/04 100 101
Dauphin County, Pennsylvania
General Authority Health
Center, RB
5.150%, 01/01/97 1,000 1,005
Delaware County, Pennsylvania
Industrial Development Authority
Airport Facilities United Parcel
Services Project, Ser 85, RB
3.800%, 11/07/95 (A) 300 300
Delaware County, Pennsylvania
Industrial Development Authority
BP Exploration & Oil Project, RB
4.000%, 11/07/95 (A) 100 100
Delaware County, Pennsylvania, GO
4.500%, 10/01/01 500 504
Delaware River, Pennsylvania
Port Authority PA & NJ
bridges, AMBAC, RB
7.375%, 01/01/07 1,500 1,665
Elizabeth Forward, Pennsylvania
School District, MBIA, GO,
Prerefunded 05/01/96 at 100
8.000%, 05/01/02 1,000 1,020
Erie County, Pennsylvania
Prison Authority, MBIA, RB,
Prerefunded 11/01/01 at 100
6.600%, 11/01/02 1,000 1,106
Hampton Township, Pennsylvania
School District, Ser A, FGIC, GO,
Prerefunded 02/15/01 at 100
6.900%, 02/15/10 1,000 1,109
Langhorne, Pennsylvania
Saint Mary's Hospital Authority
Franciscan Health Systems,
Ser C, RB
3.800%, 11/07/95 (A) (B) 800 800
Lehigh County, Pennsylvania,
Ser A, AMBAC, GO,
Prerefunded 10/15/99 at 100
6.000%, 10/15/11 1,250 1,323
Monroeville, Pennsylvania Hospital
Authority East Suburban
Health Center Project, RB,
Prerefunded 07/01/04 at 100
7.600%, 07/01/08 780 902
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 19
<PAGE> 22
STAEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (cont'd) (000) (000)
========================================================
<S> <C> <C>
Montgomery County, Pennsylvania
Hospital Authority Suburban
General Hospital Project, RB
7.750%, 05/01/02 $ 100 $ 112
Mount Lebanon, Pennsylvania
Hospital Authority, FGIC, RB,
Prerefunded 01/01/96 at 102
9.125%, 07/01/06 1,500 1,542
Northampton County, Pennsylvania
Higher Education Authority
Lehigh University Project, RB
5.500%, 09/01/98 1,030 1,063
Pennsylvania Infrastructure
Investment Authority Pennvest,
Ser 94, RB
3.900%, 11/07/95 (A) (B) 100 100
Pennsylvania Infrastructure
Investment Authority Pennvest,
Subser B, RB
6.450%, 09/01/04 1,500 1,665
Pennsylvania State Certificates
of Participation
4.000%, 12/01/95 450 450
Pennsylvania State Higher
Educational Facilities Authority
University of Pennsylvania Project,
Ser A, RB
6.500%, 09/01/04 250 281
5.550%, 09/01/09 1,300 1,326
Pennsylvania State Intergovern-
mental Co-op Authority
Special Tax City of Philadelphia
Funding Project, RB,
Prerefunded 06/15/02 at 100
6.800%, 06/15/22 1,500 1,684
Pennsylvania State Turnpike
Commission, Ser D, FGIC, RB,
Escrowed to Maturity
6.700%, 12/01/97 1,100 1,165
Pennsylvania State Turnpike
Commission, Ser K, RB,
Escrowed to Maturity
7.250%, 12/01/99 1,230 1,362
Pennsylvania State Turnpike
Commission, Ser O, FGIC, RB
5.250%, 12/01/01 1,010 1,049
Pennsylvania State, Ser 1, GO
6.200%, 09/15/04 900 974
Pennsylvania State, Ser 2, GO
4.750%, 06/15/98 565 571
Philadelphia, Pennsylvania Gas
Works, Ser 13, RB,
Prerefunded 06/15/01 at 102
7.700%, 06/15/11 460 538
Philadelphia, Pennsylvania Gas
Works, Ser 14, RB
6.250%, 07/01/08 300 319
Philadelphia, Pennsylvania
Graduate Hospital Project, RB
7.000%, 07/01/10 290 324
Philadelphia, Pennsylvania
Hospital & Higher Educational
Facilities Authority Children's
Hospital Project, Ser A, RB,
Prerefunded 07/01/97 at 100
7.000%, 07/01/15 1,000 1,046
Philadelphia, Pennsylvania
Hospital & Higher Educational
Facilities Authority Children's
Hospital Project, Ser A, RB,
Prerefunded 02/15/02 at 102
6.500%, 02/15/21 200 223
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
20 October 31, 1995
<PAGE> 23
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE MARKET
PENNSYLVANIA AMOUNT VALUE
MUNICIPAL BOND FUND (cont'd) (000) (000)
=========================================================
<S> <C> <C>
Philadelphia, Pennsylvania Water
& Waste Authority, MBIA, RB
5.500%, 06/15/07 $ 1,500 $ 1,556
Pittsburgh & Allegheny County,
Pennsylvania Auditorium
Authority, RB
6.400%, 12/01/01 800 801
Pittsburgh, Pennsylvania Water
& Sewer Authority, Ser A,
FGIC, RB, Escrowed to Maturity
6.000%, 09/01/97 1,000 1,036
Pittsburgh, Pennsylvania,
Ser A, MBIA, GO
5.500%, 09/01/06 955 991
Schuylkill County, Pennsylvania
Industrial Development Authority
Northeastern Power Project, RB
4.000%, 11/07/95 (A) (B) 300 300
Schuylkill County, Pennsylvania
Industrial Development Authority
Westwood Energy Project, RB
4.200%, 11/07/95 (A) (B) 200 200
Scranton-Lackawanna, Pennsylvania
Health & Welfare Authority, RB,
Escrowed to Maturity
6.625%, 07/01/09 570 630
Seneca Valley, Pennsylvania School
District, Ser A, FGIC, GO
5.700%, 07/01/06 1,000 1,038
Southeastern Pennsylvania
Transportation Authority Lease
Project, RB
5.750%, 12/01/04 775 776
Swarthmore Borough, Pennsylvania
College Authority, RB
6.000%, 09/15/06 855 917
Tyrone, Pennsylvania School
District, MBIA, GO
5.700%, 09/15/08 1,250 1,269
Union City, Pennsylvania Higher
Educational Facilities Financing
Authority Bucknell University
Project, MBIA, RB
6.200%, 04/01/06 1,000 1,061
- ---------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $37,226) 38,185
- ---------------------------------------------------------
TOTAL INVESTMENTS (99.0%)
(Cost $37,226) 38,185
- ---------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET (1.0%) 371
- ---------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value -- 2 billion
authorized) based on 3,762,329
outstanding shares of beneficial
interest 37,596
Net unrealized appreciation
on investments 959
Undistributed net
investment income 1
- ---------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $38,556
- ---------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 21
<PAGE> 24
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
MARKET
PENNSYLVANIA VALUE
MUNICIPAL BOND FUND (cont'd) (000)
======================================================
<S> <C>
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE -- CLASS A $10.25
Maximum Sales Charge of 4.00% 0.43
------
OFFERING PRICE PER SHARE -- CLASS A(+) $10.68
- ------------------------------------------------------
</TABLE>
- ----------------
+ This offering price is calculated by dividing the net asset value by 1 minus
the maximum sales charge of 4.00%.
(A) Floating Rate Instrument with Demand Features. Rate reflected on the
Statement of Net Assets is the rate in effect on October 31, 1995. The
date shown is the longer of the reset date or the demand date.
(B) Security is backed by a letter of credit.
AMBAC American Municipal Bond Assurance Company
FGIC Financial Guaranty Insurance Company
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- ------------------------------------------------------
COMMERCIAL PAPER (80.7%)
- ------------------------------------------------------
<S> <C> <C>
American Express Credit
5.700%, 12/11/95 $5,000 $4,968
5.640%, 03/13/96 5,000 4,896
American General Finance
5.690%, 01/30/96 3,000 2,957
5.650%, 02/09/96 5,000 4,922
American Home Products
5.740%, 11/09/95 3,000 2,996
5.720%, 01/30/96 5,000 4,929
5.720%, 02/09/96 1,000 984
Associates Corporation
of North America
5.710%, 11/15/95 4,000 3,991
5.680%, 02/12/96 5,000 4,919
Avco Financial Services
5.730%, 11/16/95 5,000 4,988
5.750%, 01/25/96 4,000 3,946
Bear Stearns Companies
5.700%, 11/13/95 3,000 2,994
5.720%, 11/20/95 5,000 4,985
Beneficial
5.650%, 12/12/95 8,000 7,949
Chase Manhattan
5.720%, 11/17/95 8,000 7,980
CIESCO
5.650%, 11/22/95 6,450 6,429
5.630%, 02/29/96 4,000 3,925
CIT Group Holdings
5.680%, 12/06/95 4,000 3,978
5.650%, 02/12/96 2,000 1,968
Clipper Receivables
5.750%, 11/06/95 5,000 4,996
Coca-Cola Enterprises
5.900%, 11/03/95 3,500 3,499
5.750%, 12/13/95 4,000 3,973
CSW Credit
5.710%, 11/15/95 3,000 2,993
Delaware Funding
5.660%, 11/20/95 5,056 5,041
Ford Motor Credit
5.700%, 11/20/95 8,000 7,976
5.680%, 02/09/96 2,000 1,968
General Electric Capital
5.590%, 03/01/96 4,000 3,925
General Motors Acceptance
5.760%, 01/23/96 5,000 4,934
5.750%, 02/16/96 4,000 3,932
Household Finance
5.700%, 01/31/96 8,000 7,885
ITT Hartford Group
5.660%, 12/06/95 2,699 2,684
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
22 October 31, 1995
<PAGE> 25
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- ------------------------------------------------------
<S> <C> <C>
John Deere Capital
5.680%, 11/21/95 $8,000 $ 7,975
Merrill Lynch
5.700%, 11/16/95 8,000 7,979
National Fuel Gas
5.770%, 01/22/96 5,000 4,934
Nationsbanc
5.635%, 04/03/96 4,000 3,904
New Center Asset Trust
5.780%, 11/30/95 4,000 3,981
Norwest Corporation
5.660%, 11/20/95 5,000 4,985
5.690%, 11/30/95 2,000 1,991
Philip Morris
5.730%, 11/09/95 5,000 4,994
PNC Funding
5.770%, 02/05/96 8,000 7,877
Preferred Receivables Funding
5.750%, 11/29/95 2,815 2,802
5.730%, 01/25/96 5,000 4,932
Prudential Funding
5.720%, 11/14/95 3,000 2,994
5.680%, 11/15/95 5,000 4,989
Puerto Rico Government
Development Bank
5.700%, 11/16/95 5,000 4,988
Riverwood Funding
5.730%, 11/07/95 5,000 4,995
5.730%, 11/14/95 3,495 3,488
Sears Roebuck Acceptance
5.720%, 11/10/95 4,000 3,994
5.700%, 02/13/96 2,000 1,967
Warner-Lambert
5.670%, 12/07/95 3,500 3,480
- ------------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $225,759) 225,759
- ------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATION (0.2%)
- ------------------------------------------------------
FNMA
5.945%, 11/13/95 665 664
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATION (Cost $664) 664
- ------------------------------------------------------
FLOATING RATE INSTRUMENTS (7.5%)
- ------------------------------------------------------
Corestates Capital
5.850%, 01/05/96 (A) 3,000 3,000
First Bank of South Dakota
5.855%, 05/06/96 (A) 6,000 5,999
SMM Trust, 1995-I
5.856%, 05/29/96 (A) 9,000 8,999
South Trust Bank of Alabama
5.855%, 04/19/96 (A) 3,000 3,000
- ------------------------------------------------------
TOTAL FLOATING RATE INSTRUMENTS
(Cost $20,998) 20,998
- ------------------------------------------------------
BANK NOTES (3.6%)
- ------------------------------------------------------
First National Bank, Chicago
6.150%, 08/26/96 5,000 5,000
Nationsbank of Texas
6.150%, 08/28/96 5,000 5,000
- ------------------------------------------------------
TOTAL BANK NOTES
(Cost $10,000) 10,000
- ------------------------------------------------------
CERTIFICATES OF DEPOSIT (2.7%)
- ------------------------------------------------------
Chase Manhattan
5.770%, 04/15/96 2,000 2,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 23
<PAGE> 26
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PRIME OBLIGATIONS AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
<S> <C> <C>
First National Bank, Maryland
5.740%, 02/05/96 $3,000 $ 3,000
Society National Bank
6.000%, 04/25/96 2,500 2,502
- -------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $7,502) 7,502
- -------------------------------------------------------
BANKERS ACCEPTANCES (2.5%)
- -------------------------------------------------------
Corestates Bank
5.560%, 03/04/96 2,000 1,962
State Street Bank
5.680%, 11/17/95 5,147 5,134
- -------------------------------------------------------
TOTAL BANKERS ACCEPTANCES
(Cost $7,096) 7,096
- -------------------------------------------------------
REPURCHASE AGREEMENT (3.2%)
- -------------------------------------------------------
Lehman Brothers
5.860%, dated 10/31/95,
matures 11/01/95,
repurchase price $8,879,445
(collateralized by U.S.
Treasury Note, par value
$8,885,000, 6.625%,
matures 03/31/97:
market value $9,050,084) 8,878 8,878
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $8,878) 8,878
- -------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost $280,897) 280,897
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES,
NET(-0.4%) (1,201)
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value -- 2
billion authorized) based
on 279,698,405 outstanding
shares of beneficial
interest 279,698
Accumulated net realized
loss on investments (2)
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $279,696
- -------------------------------------------------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER
SHARE -- CLASS A $ 1.00
- -------------------------------------------------------
</TABLE>
- ------------
(A) Floating Rate Instrument. The rate reflected on the Statement of Net
Assets is the rate in effect on October 31, 1995. The date shown is the
longer of the reset date or the demand date.
FNMA Federal National Mortgage Association
<TABLE>
<CAPTION>
FACE
TREASURY SECURITIES AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS (17.6%)
- -------------------------------------------------------
<S> <C> <C>
United States Treasury Bills
5.876%, 05/30/96 $ 7,000 $ 6,773
5.877%, 05/30/96 12,000 11,610
United States Treasury Note
4.375%, 08/15/96 5,000 4,947
- -------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $23,330) 23,330
- -------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
24 October 31, 1995
<PAGE> 27
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
TREASURY SECURITIES AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- -------------------------------------------------------
REPURCHASE AGREEMENTS (82.8%)
- -------------------------------------------------------
<S> <C> <C>
Aubrey G. Lanston
5.875%, dated 10/31/95,
matures 11/01/95, repurchase
price $11,554,885
(collateralized by U.S.
Treasury Bill, par value
$12,420,000, matures
10/17/96: market
value $11,783,654) $11,553 $ 11,553
Donaldson, Lufkin & Jenrette
Securities 5.890%, dated
10/31/95, matures 11/01/95,
repurchase price $25,004,090
(collateralized by U.S.
Treasury Note, par value
$25,186,000, 6.50%, matures
04/30/97: market
value $25,500,825) (A) 25,000 25,000
J.P. Morgan
5.870%, dated 10/31/95,
matures 11/01/95, repurchase
price $11,501,875
(collateralized by U.S
Treasury Note, par value
$7,946,000, 12.00%, matures
05/15/05: market value
$11,741,079) 11,500 11,500
Lehman Brothers
5.860%, dated 10/31/95,
matures 11/01/95, repurchase
price $11,501,872
(collateralized by various
U.S. Treasury Notes, total
par value $11,400,000, 7.875%
- 8.50%, 11/15/95 - 02/15/96:
total market value $11,730,088) 11,500 11,500
Nomura Securities
5.900%, dated 10/31/95,
matures 11/01/95, repurchase
price $25,004,097
(collateralized by U.S.
Treasury Note, par value
$25,028,000, 6.125%, matures
07/31/96: market value
$25,500,931) (A) 25,000 25,000
Union Bank of Switzerland
5.900%, dated 10/31/95,
matures 11/01/95, repurchase
price $25,004,097
(collateralized by U.S.
Treasury pNote, ar value
$24,825,000, 6.875%, matures
02/28/97: market value
$25,500,612) (A) 25,000 25,000
- -------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $109,553) 109,553
- -------------------------------------------------------
TOTAL INVESTMENTS (100.4%)
(Cost $132,883) 132,883
- -------------------------------------------------------
OTHER ASSETS AND
LIABILITIES, NET (-0.4%) (540)
- -------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value - 2
billion authorized) based on
132,326,052 outstanding
shares of beneficial
interest 132,326
Accumulated net realized gain
on investments 17
- -------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $132,343
- -------------------------------------------------------
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SHARE - CLASS A $ 1.00
- -------------------------------------------------------
</TABLE>
- -----------
(A) Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 25
<PAGE> 28
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (000) (000)
- --------------------------------------------------------
MUNICIPAL BONDS (100.2%)
- --------------------------------------------------------
<S> <C> <C>
PENNSYLVANIA (100.2%)
Allegheny County, Pennsylvania
Higher Education Building
Authority University of
Pittsburgh Project, Ser 85B,
RB 3.850%, 11/07/95 (A) (C) $ 650 $ 650
Allegheny County, Pennsylvania
Hospital Development Authority
Children's Hospital Project,
Ser B, MBIA, RB
3.900%, 11/07/95 (A) 1,300 1,300
Allegheny County, Pennsylvania,
Ser C-41, GO
3.850%, 11/07/95 (A) (C) 900 900
Allegheny County, Pennsylvania,
Ser C-44, FGIC, GO
4.000%, 06/01/96 685 685
Beaver County, Pennsylvania
Industrial Development
Authority Duquesne Light &
Power Project, TECP
3.700%, 12/08/95 (C) 1,500 1,500
Beaver County, Pennsylvania
Industrial Development
Authority Duquesne Light
Project, Ser C, TECP
3.750%, 12/14/95 (C) 1,500 1,500
Berks County, Pennsylvania
Industrial Development
Authority Elf Aquitaine, RB
4.075%, 11/07/95 (A) (C) 2,400 2,400
Bethlehem, Pennsylvania School
District, RB
6.150%, 11/01/95 (B) 355 355
Bucks County, Pennsylvania
Industrial Development
Authority CPC International
Project, Ser 85, RB
4.550%, 11/07/95 (A) 2,000 2,000
Bucks County, Pennsylvania
Industrial Development
Authority Edge Comb Metals
Project, RB
4.075%, 11/07/95 (A) (C) 1,830 1,830
Bucks County, Pennsylvania Water
& Sewer Authority Neshaminy
Interceptor Sewer System
Project, RB, Prerefunded at
100 7.700%, 12/01/95 (B) 400 401
Bucks County, Pennsylvania Water
& Sewer Authority Neshaminy
Sewer System Project, RB,
Prerefunded at 100
7.600%, 12/01/95 (B) 500 501
Chartiers Valley, Pennsylvania
Industrial Development
Authority Sycamore Creek
Project, RB
3.900%, 03/01/96 (A) (C) 1,805 1,805
Cumberland County, Pennsylvania
United Methodist Homes
Project, RB
3.950%, 07/01/96 (C) 500 500
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
26 October 31, 1995
<PAGE> 29
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- --------------------------------------------------------
<S> <C> <C>
Delaware County, Pennsylvania
Industrial Development
Authority Airport Facilities
United Parcel Services
Project, Ser 85, RB
3.800%, 11/01/95 (A) $1,300 $1,300
Delaware County, Pennsylvania
Industrial Development
Authority Henderson Radner
Joint Venture Project, RB
4.200%, 11/07/95 (C) 1,150 1,150
Delaware County, Pennsylvania
Philadelphia Industrial
Development Authority Electric
Company Project, FGIC, TECP
3.600%, 11/29/95 (C) 700 700
Delaware Valley, Pennsylvania
Regional Finance Authority
4.050%, 11/07/95 (A) (C) 2,200 2,200
Delaware Valley, Pennsylvania
Regional Finance Authority
Local Government, Ser D, RB
4.050%, 11/07/95 (A) (C) 800 800
Erie County, Pennsylvania Hospital
Authority Union City Memorial
Hospital Project, RB
4.150%, 11/07/95 (A) (C) 1,100 1,100
Lancaster, Pennsylvania Higher
Education Authority Franklin
& Marshall Project, RB
3.950%, 11/07/95 (A) 1,650 1,650
Langhorne, Pennsylvania Saint
Mary's Hospital Authority
Franciscan Health Systems,
Ser C, RB 3.800%,
11/07/95 (A) (C) 1,200 1,200
Lehigh County, Pennsylvania Sewer
Authority, Ser B, FGIC, RB
3.850%, 11/07/95 (A) 480 480
Montgomery County, Pennsylvania
Higher Education & Health
Authority Hospital Revenue,
AMBAC, RB 3.850%, 11/07/95 (A) 2,200 2,200
Montgomery County, Pennsylvania
Higher Education & Health
Authority United Hospitals
Project, Ser A, RB,
Prerefunded at 102
10.000%, 11/01/95 (B) 990 1,010
Montgomery County, Pennsylvania
Higher Education & Health
Authority United Hospitals
Project, Ser B, RB,
Prerefunded at 102
9.750%, 11/01/95 (B) 230 235
Montgomery County, Pennsylvania
Hospital Authority Abington
Memorial Hospital, RB,
Prerefunded at 103
8.000%, 06/01/96 (B) 2,300 2,418
Montgomery County, Pennsylvania
Industrial Development
Authority Ikea Property
Project, RB 4.000%,
11/07/95 (A) (C) 1,500 1,500
Montgomery County, Pennsylvania
Industrial Development
Authority Merck & Company, RB
4.450%, 11/07/95 (A) 1,000 1,000
Montgomery County Pennsylvania
Industrial Development
Authority Valley Square
Project, RB 3.950%,
11/07/95 (C) 1,400 1,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 27
<PAGE> 30
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- --------------------------------------------------------
<S> <C> <C>
Montgomery County, Pennsylvania
Philadelphia Electric Company
Project, TECP
3.750%, 11/21/95 (C) $ 500 $ 500
Moon Township, Pennsylvania
Industrial Development
Authority Executive Office
Project, RB
4.000%, 11/07/95 (A) (C) 1,500 1,500
Northumberland County,
Pennsylvania Industrial
Development Authority Atlas
Development Project, RB
4.000%, 11/07/95 (A) (C) 840 840
Pennsylvania Infrastructure
Investment Authority Pennvest,
Ser 94, RB
3.900%, 11/07/95 (A) (C) 600 600
Pennsylvania Intergovernmental
Co-op Authority Special Tax
Revenue City of Philadelphia
Funding Project, FGIC, RB
5.200%, 06/15/96 300 302
Pennsylvania State Higher
Education Facilities Authority
Thomas Jefferson University
Project, RB
3.900%, 02/26/96 (A) (C) 1,500 1,500
Pennsylvania State Public School
Building Authority Hazleton
Area School District Project,
RB 5.250%, 03/01/96 1,000 1,005
Pennsylvania State University
Project, Ser A
5.500%, 12/21/95 1,800 1,801
Pennsylvania State, Ser 2, GO,
Prerefunded at 101.50
7.250%, 05/01/96 (B) 250 257
Philadelphia, Pennsylvania Hospital
& Higher Educational
Facilities Authority, RB,
Prerefunded at 102
8.625%, 08/01/96 (B) 1,500 1,581
Philadelphia, Pennsylvania
Industrial Development
Authority Multi-Family Housing
Harbor View Towers Project, RB
4.000%, 11/07/95 (A) (C) 1,900 1,900
Philadelphia, Pennsylvania
Redevelopment Authority Penn
School for the Deaf Project,
RB 3.900%, 11/07/95 (C) 2,405 2,405
Philadelphia, Pennsylvania School
District, GO, TRAN
4.500%, 06/28/96 2,000 2,007
Philadelphia, Pennsylvania School
District, MBIA, GO,
Prerefunded at 100.50
7.400%, 11/01/95 (B) 150 151
Philadelphia, Pennsylvania
Updates, GO ,TECP
3.800%, 11/21/95 (C) 1,800 1,800
Philadelphia, Pennsylvania Water
& Sewer Authority, Ser 12,
MBIA, RB, Prerefunded at 101
7.250%, 07/01/96 (B) 200 206
Philadelphia, Pennsylvania Water
And Sewer Authority, Ser 11,
RB, Prerefunded at 102
8.800%, 12/01/95 (B) 110 113
Philadelphia, Pennsylvania,
Ser A, GO, TRAN
4.500%, 06/27/96 1,000 1,003
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
28 October 31, 1995
<PAGE> 31
STATEMENT OF NET ASSETS UNAUDITED INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
FACE
PENNSYLVANIA TAX-EXEMPT AMOUNT VALUE
MONEY MARKET FUND (cont'd) (000) (000)
- --------------------------------------------------------
<S> <C> <C>
Pittsburgh, Pennsylvania
Equipment Leasing Authority,
AMBAC, RB
5.950%, 07/01/96 $ 300 $ 304
Pittsburgh, Pennsylvania Public
Parking Authority, RB,
Prerefunded at 102
9.500%, 12/01/95 (B) 150 154
Quakertown, Pennsylvania
Hospital Authority Group
Pooled Financing, RB
3.750%, 11/07/95 (A) (C) 1,800 1,800
Rose Tree Media, Pennsylvania
School District, Ser A, FGIC,
GO 5.150%, 03/15/96 500 503
Sayre, Pennsylvania Health Care
Facilities Authority Capital
Financing Project, Ser F,
AMBAC, RB
3.850%, 11/07/95 (A) 1,300 1,300
Schuylkill County, Pennsylvania
Industrial Development
Authority Gilberton Power
Project, RB
4.000%, 11/07/95 (A) (C) 1,000 1,000
Schuylkill County, Pennsylvania
Industrial Development
Authority Westwood Energy
Project, RB
4.200%, 11/01/95 (A) (C) 91 91
Wyoming Valley, Pennsylvania
Sanitation Authority, Ser 85,
RB, Prerefunded at 101
9.200%, 11/15/95 (B) 150 152
York County, Pennsylvania
Industrial Development
Authority Edgecomb Corporate
Project, Ser 84, RB
4.075%, 11/07/95 (A) (C) 850 850
- --------------------------------------------------------
TOTAL MUNICIPAL BONDS
(Cost $62,295) 62,295
- --------------------------------------------------------
TOTAL INVESTMENTS (100.2%)
(Cost $62,295) 62,295
- --------------------------------------------------------
OTHER ASSETS AND
LIABILITIES, NET (-0.2%) (138)
- --------------------------------------------------------
NET ASSETS:
Portfolio shares of Class A
($.00001 par value - 2 billion
authorized) based on
62,157,108 outstanding shares
of beneficial interest 62,157
- --------------------------------------------------------
TOTAL NET ASSETS: (100.0%) $62,157
- --------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE -- CLASS A $ 1.00
- --------------------------------------------------------
</TABLE>
- -----------
(A) Floating Rate Instrument with Demand Features. The rate reflected on
the Statement of Net Assets is the rate in effect on October 31, 1995.
The date shown is the longer of the reset date or the demand date.
(B) Prerefunded Security - the maturity date shown is the prerefunded date.
(C) Security is backed by a letter of credit.
AMBAC American Municipal Bond Assurance Company
FGIC Financial Guaranty Insurance Company
GO General Obligation
MBIA Municipal Bond Insurance Association
RB Revenue Bond
TECP Tax Exempt Commercial Paper
TRAN Tax And Revenue Anticipation Note
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 29
<PAGE> 32
STATEMENTS OF OPERATIONS INVENTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE
GROWTH GOVERNMENT
FUND SECURITIES FUND
(000) (000)
================================================================================================
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................................... $ 448 $ --
Interest ..................................................... 143 2,968
------- -------
Total investment income ................................... 591 2,968
------- -------
EXPENSES:
Investment advisory fees ..................................... 220 295
12b-1 fees ................................................... 65 105
Administrative fees .......................................... 46 76
Transfer agent fees & expenses ............................... 12 14
Registration & filing fees ................................... 1 12
Custody fees ................................................. 12 9
Trustee fees ................................................. 1 2
Miscellaneous fees ........................................... 12 20
------- -------
Total expenses ............................................ 369 533
Less: Expenses waived ..................................... (124) (175)
------- -------
Total net expenses ........................................ 245 358
------- -------
NET INVESTMENT INCOME ........................................... 346 2,610
------- -------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gain (loss) on investments ......................... 3,978 770
Net change in unrealized appreciation of investments ............ 1,856 1,256
------- -------
Net realized and unrealized gain (loss) on investments .... 5,834 2,026
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $ 6,180 $ 4,636
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
30 October 31, 1995
<PAGE> 33
STATEMENTS OF OPERATIONS INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
GNMA PENNSYLVANIA OBLIGATIONS SECURITIES TAX-EXEMPT
SECURITIES MUNICIPAL BOND MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000)
==========================================================================================================================
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends ........................ $ -- $ -- $ -- $ -- $ --
Interest ......................... 1,844 911 8,435 3,344 1,249
------ ------ ------ ------ ------
Total investment income ....... 1,844 911 8,435 3,344 1,249
------ ------ ------ ------ ------
EXPENSES:
Investment advisory fees ......... 176 129 633 253 141
12b-1 fees ....................... 63 46 351 141 78
Administrative fees .............. 45 34 211 85 47
Transfer agent fees & expenses ... 12 9 30 17 12
Registration & filing fees ....... 3 1 -- 12 1
Custody fees ..................... 18 3 14 15 4
Trustee fees ..................... 1 1 7 2 1
Miscellaneous fees ............... 12 8 48 32 14
------ ------ ------ ------ ------
Total expenses ................ 330 231 1,294 557 298
Less: Expenses waived ......... (116) (74) (520) (247) (126)
------ ------ ------ ------ ------
Total net expenses ............ 214 157 774 310 172
------ ------ ------ ------ ------
NET INVESTMENT INCOME ............... 1,630 754 7,661 3,034 1,077
------ ------ ------ ------ ------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Net realized gain (loss) on
investments ...................... 994 -- (2) 3 --
Net change in unrealized appreciation
of investments ................... 371 755 -- -- --
------ ------ ------ ------ ------
Net realized and unrealized
gain (loss) on investments .. 1,365 755 (2) 3 --
------ ------ ------ ------ ------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........ $2,995 $1,509 $7,659 $3,037 $1,077
====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 31
<PAGE> 34
STATEMENTS OF CHANGES IN NET ASSETS INVENTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
EQUITY GROWTH FUND
5/1/95 8/10/94(1)
TO 10/31/95 TO 4/30/95
(000) (000)
=======================================================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income ................................................ $ 346 $ 513
Net realized gain (loss) on investments .............................. 3,978 556
Net change in unrealized appreciation on investments ................. 1,856 2,748
------- -------
Net increase resulting from operations ............................ 6,180 3,817
------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ................................................ (346) (513)
Net realized gains ................................................... -- (85)
------- -------
Total dividends distributed ....................................... (346) (598)
------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued .......................................... 5,166 55,864
Shares issued in lieu of cash distributions .......................... 9 1
Cost of shares repurchased ........................................... (2,245) (12,427)
------- -------
Increase in net assets derived from capital share transactions .... 2,930 43,438
------- -------
Net increase in net assets .............................................. 8,764 46,657
------- -------
NET ASSETS:
Beginning of period .................................................. 46,657 --
------- -------
End of period ........................................................ $55,421 $46,657
======= =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning of period ....................... 4,363 --
Shares issued ..................................................... 447 5,577
Shares issued in lieu of cash distributions ....................... 1 --
Shares repurchased ................................................ (199) (1,214)
------- -------
Increase derived from capital share transactions .................. 249 4,363
------- -------
Capital shares outstanding at end of period ............................. 4,612 4,363
======= =======
</TABLE>
- ----------------------------
(1) Commenced operations on August 10, 1994.
The accompanying notes are an integral part of the financial statements.
================================================================================
32 October 31, 1995
<PAGE> 35
STATEMENTS OF CHANGES IN NET ASSETS INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT PENNSYLVANIA MUNICIPAL
SECURITIES FUND GNMA SECURITIES FUND BOND FUND
5/1/95 8/10/94(1) 5/1/95 8/10/94(1) 5/1/95 8/10/94(1)
TO 10/31/95 TO 4/30/95 TO 10/31/95 TO 4/30/95 TO 10/31/95 TO 4/30/95
(000) (000) (000) (000) (000) (000)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ....................... $ 2,610 $ 2,251 $ 1,630 $ 1,954 $ 754 $ 972
Net realized gain (loss) on investments ..... 770 (362) 994 80 -- --
Net change in unrealized appreciation
on investments ........................... 1,256 632 371 638 755 204
------- -------- ------- ------- ------- -------
Net increase resulting from operations ... 4,636 2,521 2,995 2,672 1,509 1,176
------- -------- ------- ------- ------- -------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ....................... (2,610) (2,251) (1,635) (1,954) (753) (972)
Net realized gains .......................... -- -- -- -- -- --
------- -------- ------- ------- ------- -------
Total dividends distributed .............. (2,610) (2,251) (1,635) (1,954) (753) (972)
------- -------- ------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued ................. 37,543 66,686 11,427 48,509 4,131 38,051
Shares issued in lieu of cash
distributions ............................ 22 2 24 1 1 --
Cost of shares repurchased .................. (1,478) (13,642) (893) (7,016) (970) (3,617)
------- -------- ------- ------- ------- -------
Increase in net assets derived from
capital share transactions ............. 36,087 53,046 10,558 41,494 3,162 34,434
------- -------- ------- ------- ------- -------
Net increase in net assets ..................... 38,113 53,316 11,918 42,212 3,918 34,638
------- -------- ------- ------- ------- -------
NET ASSETS:
Beginning of period ......................... 53,316 -- 42,212 -- 34,638 --
------- -------- ------- ------- ------- -------
End of period ............................... $91,429 $ 53,316 $54,130 $42,212 $38,556 $34,638
======= ======== ======= ======= ======= =======
CAPITAL SHARE TRANSACTIONS:
Capital shares outstanding at beginning
of period ................................... 5,319 -- 4,154 -- 3,451 --
Shares issued ............................ 3,688 6,685 1,105 4,855 406 3,816
Shares issued in lieu of cash
distributions .......................... 2 -- 2 -- -- --
Shares repurchased ....................... (144) (1,366) (86) (701) (95) (365)
------- -------- ------- ------- ------- -------
Increase derived from capital share
transactions ............................ 3,546 5,319 1,021 4,154 311 3,451
------- -------- ------- ------- ------- -------
Capital shares outstanding at end of period .... 8,865 5,319 5,175 4,154 3,762 3,451
======= ======== ======= ======= ======= =======
</TABLE>
- ----------------------------
(1) Commenced operations on August 10, 1994.
The accompanying notes are an integral part of the financial statements.
================================================================================
October 31, 1995 33
<PAGE> 36
STATEMENTS OF CHANGES IN NET ASSETS INVESTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
PRIME OBLIGATIONS
MONEY MARKET FUND
5/1/95 8/8/94(1)
to 10/31/95 to 4/30/95
(000) (000)
==================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income ........................... $ 7,661 $ 8,619
Net realized gain (loss) on investments ......... (2) --
--------- ---------
Net increase resulting from operations ....... 7,659 8,619
--------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ........................... (7,661) (8,619)
Net realized gains .............................. -- --
--------- ---------
Total dividends distributed .................. (7,661) 8,619
--------- ---------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Proceeds from shares issued ..................... 323,658 647,086
Shares issued in lieu of cash distributions ..... 198 52
Cost of shares repurchased ...................... (334,216) (357,179)
--------- ---------
Increase (decrease) in net assets derived
from capital share transactions ........... (10,360) 289,959
--------- ---------
Net increase (decrease) in net assets .............. (10,362) 289,959
--------- ---------
NET ASSETS:
Beginning of period ............................. 290,058 99
--------- ---------
End of period ................................... $ 279,696 $ 290,058
========= =========
</TABLE>
- ----------------------------
(1) Commenced operations on August 8, 1994.
The accompanying notes are an integral part of the financial statements.
================================================================================
34 October 31, 1995
<PAGE> 37
STATEMENTS OF CHANGES IN NET ASSETS INVENTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
TREASURY SECURITIES PENNSYLVANIA TAX-EXEMPT
MONEY MARKET FUND MONEY MARKET FUND
5/1/95 8/8/94(1) 5/1/95 8/8/94(1)
to 10/31/95 to 4/30/95 to 10/31/95 to 4/30/95
(000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........................... $ 3,034 $ 2,151 $ 1,077 $ 1,145
Net realized gain (loss) on investments ......... 3 14 -- --
--------- --------- --------- ---------
Net increase resulting from operations ....... 3,037 2,165 1,077 1,145
--------- --------- --------- ---------
DIVIDENDS DISTRIBUTED FROM:
Net investment income ........................... (3,034) (2,151) (1,077) (1,145)
Net realized gains .............................. -- -- -- --
--------- --------- --------- ---------
Total dividends distributed .................. (3,034) (2,151) (1,077) (1,145)
--------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS (ALL AT $1.00 PER SHARE):
Proceeds from shares issued ..................... 361,008 330,496 69,001 119,764
Shares issued in lieu of cash distributions ..... 83 71 29 11
Cost of shares repurchased ...................... (309,242) (250,090) (63,541) (63,107)
--------- --------- --------- ---------
Increase (decrease) in net assets derived
from capital share transactions ........... 51,849 80,477 5,489 56,668
--------- --------- --------- ---------
Net increase (decrease) in net assets .............. 51,852 80,491 5,489 56,668
--------- --------- --------- ---------
NET ASSETS:
Beginning of period ............................. 80,491 -- 56,668 --
--------- --------- --------- ---------
End of period ................................... $ 132,343 $ 80,491 $ 62,157 $ 56,668
========= ========= ========= =========
</TABLE>
- ----------
(1) Commenced operations on August 8, 1994.
The accompanying notes are on integral part of the financial statements.
================================================================================
October 31, 1995 35
<PAGE> 38
FINANCIAL HIGHLIGHTS INVENTOR FUNDS
================================================================================
For the period ended October 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS
NET ASSET AND DISTRIBUTIONS FROM
VALUE NET UNREALIZED FROM NET REALIZED
BEGINNING INVESTMENT GAINS INVESTMENT CAPITAL
For a Share Outstanding Throughout the Period OF PERIOD INCOME ON SECURITIES INCOME GAINS
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
EQUITY GROWTH
- -------------
Class A(3)
1996*.................................... $10.69 $0.08 $1.33 $(0.08) $ --
1995(1).................................. 10.00 0.12 0.71 (0.12) (0.02)
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A(3)
1996*.................................... 10.02 0.32 0.29 (0.32) --
1995(1).................................. 10.00 0.44 0.02 (0.44) --
- ---------------
GNMA SECURITIES
- ---------------
Class A(3)
1996*.................................... 10.16 0.34 0.30 (0.34) --
1995(1).................................. 10.00 0.48 0.16 (0.48) --
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A(3)
1996*.................................... 10.04 0.21 0.21 (0.21) --
1995(1).................................. 10.00 0.29 0.04 (0.29) --
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1996*.................................... 1.00 0.03 -- (0.03) --
1995(2).................................. 1.00 0.04 -- (0.04) --
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1996*.................................... 1.00 0.03 -- (0.03) --
1995(2).................................. 1.00 0.04 -- (0.04) --
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1996*.................................... 1.00 0.02 -- (0.02) --
1995(2).................................. 1.00 0.02 -- (0.02) --
</TABLE>
- ----------
* All ratios for the semi-annual period ended October 31, 1995 (unaudited)
have been annualized.
+ Returns are for the period indicated and have not been annualized.
(1) Commenced operations on August 10, 1994. All ratios for the period have
been annualized.
(2) Commenced operations on August 8, 1994. All ratios for the period have been
annualized.
(3) Total Return does not reflect the sales charge.
The accompanying notes are an integral part of the financial statements.
================================================================================
36 October 31, 1995
<PAGE> 39
FINANCIAL HIGHLIGHTS INVENTOR FUNDS
================================================================================
<TABLE>
<CAPTION>
RATIO OF NET
NET ASSET NET ASSETS RATIO OF INVESTMENT
VALUE END EXPENSES INCOME TO
END TOTAL OF PERIOD TO AVERAGE AVERAGE
For a Share Outstanding Throughout the Period OF PERIOD RETURN (000) NET ASSETS NET ASSETS
===========================================================================================================
<S> <C> <C> <C> <C> <C>
EQUITY GROWTH
- -------------
Class A(3)
1996*................................... $12.02 13.20%+ $55,421 0.95% 1.34%
1995(1)................................. 10.69 8.33+ 46,657 0.95 1.57
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A(3)
1996*................................... 10.31 6.15+ 91,429 0.85 6.20
1995(1)................................. 10.02 4.75+ 53,316 0.85 6.17
- ---------------
GNMA SECURITIES
- ---------------
Class A(3)
1996*................................... 10.46 6.36+ 54,130 0.85 6.47
1995(1)................................. 10.16 6.61+ 42,212 0.85 6.68
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A(3)
1996*................................... 10.25 4.21+ 38,556 0.85 4.08
1995(1)................................. 10.04 3.38+ 34,638 0.85 4.05
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1996*................................... 1.00 2.78+ 279,696 0.55 5.45
1995(2)................................. 1.00 3.76+ 290,058 0.55 5.16
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1996*................................... 1.00 2.75+ 132,343 0.55 5.39
1995(2)................................. 1.00 3.60+ 80,491 0.55 5.00
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1996*................................... 1.00 1.75+ 62,157 0.55 3.44
1995(2)................................. 1.00 2.32+ 56,668 0.55 3.21
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
EXPENSES INCOME TO
TO AVERAGE AVERAGE
NET ASSETS NET ASSETS PORTFOLIO
(EXCLUDING (EXCLUDING TURNOVER
For a Share Outstanding Throughout the Period WAIVERS) WAIVERS) RATE
=====================================================================================
<S> <C> <C> <C>
EQUITY GROWTH
- -------------
Class A(3)
1996*................................... 1.43% 0.86% 85%
1995(1)................................. 1.48 1.04 110
- ----------------------------------
INTERMEDIATE GOVERNMENT SECURITIES
- ----------------------------------
Class A(3)
1996*................................... 1.27 5.78 53
1995(1)................................. 1.33 5.69 172
- ---------------
GNMA SECURITIES
- ---------------
Class A(3)
1996*................................... 1.31 6.01 103
1995(1)................................. 1.40 6.13 226
- ---------------------------
PENNSYLVANIA MUNICIPAL BOND
- ---------------------------
Class A(3)
1996*................................... 1.25 3.68 4
1995(1)................................. 1.36 3.54 4
- ------------------------------
PRIME OBLIGATIONS MONEY MARKET
- ------------------------------
Class A
1996*................................... 0.92 5.08 --
1995(2)................................. 1.01 4.70 --
- --------------------------------
TREASURY SECURITIES MONEY MARKET
- --------------------------------
Class A
1996*................................... 0.99 4.95 --
1995(2)................................. 1.05 4.50 --
- -----------------------
PENNSYLVANIA TAX-EXEMPT
MONEY MARKET
- -----------------------
Class A
1996*................................... 0.95 3.04 --
1995(2)................................. 1.04 2.72 --
</TABLE>
- ----------------------------
(*) All ratios for the semi-annual period ended October 31, 1995 (unaudited)
have been annualized.
(+) Returns are for the period indicated and have not been annualized.
(1) Commenced operations on August 10, 1994. All ratios for the period have
been annualized.
(2) Commenced operations on August 8, 1994. All ratios for the period have
been annualized.
(3) Total Return does not reflect the sales charge.
================================================================================
October 31, 1995 37
<PAGE> 40
NOTES TO FINANCIAL STATEMENTS INVENTOR FUNDS
================================================================================
October 31, 1995 (Unaudited)
1. ORGANIZATION
Inventor Funds, Inc. (the "Corporation") was organized as a Maryland
corporation under Articles of Incorporation dated April 22, 1994. The
Corporation is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company with seven funds:
Equity Growth Fund, Intermediate Government Securities Fund, GNMA Securities
Fund, Pennsylvania Municipal Bond Fund, Prime Obligations Money Market Fund,
Treasury Securities Money Market Fund, and Pennsylvania Tax-Exempt Money Market
Fund (referred to as a "Fund" or collectively as the "Funds"). The assets of
each Fund are segregated, and a shareholder's interest is limited to the Fund in
which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds.
Security Valuation -- Investment securities of the Prime Obligations Money
Market Fund, Treasury Securities Money Market Fund and the Pennsylvania
Tax-Exempt Money Market Fund (the "Money Market Funds") are stated at amortized
cost which approximates market value. Under this valuation method, purchase
discounts and premiums are accreted and amortized ratably to maturity and are
included in interest income. Investment securities of the Equity Growth Fund,
Intermediate Government Securities Fund, GNMA Securities Fund and the
Pennsylvania Municipal Bond Fund (the "Non-Money Market Funds") which are listed
on a securities exchange for which market quotations are available are valued by
an independent pricing service at the last quoted sales price for such
securities on each business day. If there is no such reported sale, these
securities and unlisted securities for which market quotations are readily
available are valued at the most recent quoted bid price.
Security Transactions and Investment Income -- Security transactions are
accounted for on the trade date of the security purchase or sale. Cost used in
determining net realized capital gains and losses on the sale of securities are
those of the specific securities sold, adjusted for the accretion and
amortization of purchase discounts or premiums during the respective holding
period which is calculated using the effective interest method. Interest income
is recorded on the accrual basis. Dividend income is recorded on ex- dividend
date. Gains and losses from pay-downs of mortgage-backed securities are included
in net investment income.
Repurchase Agreements -- Securities pledged as collateral for Repurchase
Agreements are held by the custodian bank until maturity of the Repurchase
Agreements. Provisions of the Agreements and procedures adopted by Integra Trust
Company (the "Adviser") ensure that the market value of the collateral,
including interest thereon, is sufficient in the event of default by the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization of
the collateral by the Fund may be delayed or limited.
TBA Purchase Commitments -- The Intermediate Government Securities Fund and
the GNMA Securities Fund may enter into "TBA" (to be announced) purchase
commitments to purchase securities for a fixed price at a future date beyond
customary settlement time. TBA purchase commitments may be considered securities
in themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date, which risk is in addition to the
risk of decline in the value of the funds' other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying securities,
generally according to the procedures described under "Security Valuation"
above.
TBA Sale Commitments -- The Intermediate Government Securities Fund and the
GNMA Securities Fund may enter into sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
agreements. Proceeds of TBA sale commitments are not received until the contract
settlement date. Unsettled TBA sale commitments are valued at the current market
value of the underlying securities, generally according to the procedures
described under "Security
================================================================================
38 October 31, 1995
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS CONTINUED INVENTOR FUNDS
================================================================================
Valuation" above. The contract is "marked to market" daily and the change in
value is recorded by the fund as unrealized gain or loss. If the TBA sale
commitment is closed through the acquisition of an offsetting purchase
commitment the fund realizes a gain or loss without regard to any unrealized
gain or loss on the underlying security. If securities are delivered under the
commitment, the fund realizes a gain or loss from the sale of the securities
based upon the unit price at the date the commitment was entered into.
Expenses -- Expenses that are directly related to one of the Funds are
charged directly to that Fund. Other operating expenses of the Funds are
prorated to the Funds on the basis of relative net assets.
Distributions to Shareholders -- The Equity Growth Fund declares and pays
dividends from net investment income on a monthly basis. The Intermediate
Government Securities Fund, GNMA Securities Fund, Pennsylvania Municipal Bond
Fund, Prime Obligations Money Market Fund, Treasury Securities Money Market
Fund, and Pennsylvania Tax-Exempt Money Market Fund distributions from net
investment income are declared on a daily basis and are payable monthly. Any net
realized capital gains on sales of securities are distributed to shareholders at
least annually.
Federal Income Taxes -- It is each Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required.
Organization Costs -- Organizational costs have been capitalized by the Funds
and are being amortized over sixty months commencing with operations. In the
event any of the initial shares of the Funds are redeemed by any holder thereof
during the period that the Funds are amortizing their organizational costs, the
redemption proceeds payable to the holder thereof by the Funds will be reduced
by the unamortized organizational costs in the same ratio as the number of
initial shares being redeemed bears to the number of initial shares outstanding
at the time of redemption. These costs include legal fees of approximately
$53,415 for organizational work performed by a law firm of which an officer and
trustee of the Funds is a partner.
Other -- Certain officers of the Funds are also officers of the Administrator
and/or Distributor. Such officers are paid no fees by the Funds for serving as
officers of the Corporation.
3. FEES AND EXPENSES
The Funds and the Adviser have entered into an investment advisory agreement,
dated August 1, 1994, under which the Adviser will receive an annual fee equal
to 0.85% of the average daily net assets of the Equity Growth Fund; 0.70% of the
average daily net assets of the Intermediate Government Securities, GNMA
Securities and Pennsylvania Municipal Bond Funds; and 0.45% of the average daily
net assets of the Prime Obligations Money Market, Treasury Securities Money
Market and Pennsylvania Tax-Exempt Money Market Funds.
Sub-Advisory services are provided to the Adviser for the Equity Growth Fund
by STI Capital Management, N.A. (formerly Sun Bank Capital Management, N.A.);
for the Intermediate Government Securities, GNMA Securities, Prime Obligations
Money Market and Treasury Securities Money Market Funds by Wellington Management
Company; and for the Pennsylvania Municipal Bond and Pennsylvania Tax-Exempt
Money Market Funds by Weiss, Peck & Greer L.L.C. (the "Sub-Advisers") pursuant
to sub-advisory agreements dated August 1, 1994. Under the terms of such
agreements, the Sub-Advisers are entitled to receive a fee from the Adviser.
Such a fee is computed daily and paid monthly. The Adviser is responsible for
the supervision of, and payment of fees to, the Sub-Advisers in connection with
their services.
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary
of SEI Corporation ("SEI"), became the Fund's Distributor pursuant to an
agreement dated August 1, 1994. The Class A shares of the Funds have a Rule
12b-1 Distribution Plan (the "Class A Plan"), under which such shares bear
distribution expenses and related service fees at the annual rate of up to 0.25%
of their average daily net assets.
================================================================================
October 31, 1995 39
<PAGE> 42
NOTES TO FINANCIAL STATEMENTS CONTINUED INVENTOR FUNDS
================================================================================
October 31, 1995 (Unaudited)
Pursuant to an administration agreement dated August 1, 1994, SEI Financial
Management Company (the "Administrator"), a wholly-owned subsidiary of SEI, acts
as the Fund's Administrator. Under the terms of the administration agreement,
the Administrator will receive an annual fee which is calculated daily and paid
monthly at a maximum annual rate of 0.18% of the average daily net assets of the
Equity Growth, Intermediate Government Securities, GNMA Securities, and
Pennsylvania Municipal Bond Funds, and 0.15% of the average daily net assets of
the Prime Obligations Money Market, Treasury Securities Money Market and
Pennsylvania Tax-Exempt Money Market Funds.
During the period ended October 31, 1995, the Adviser and other parties
waived a portion of their contractual fees in order to assist the Funds in
maintaining a competitive expense ratio. Expenses were waived as follows (in
thousands):
<TABLE>
<CAPTION>
PRIME TREASURY PENNSYLVANIA
OBLIGATIONS SECURITIES TAX-EXEMPT
EQUITY INTERMEDIATE GNMA PENNSYLVANIA MONEY MONEY MONEY
GROWTH GOVERNMENT SECURITIES MUNICIPAL MARKET MARKET MARKET
FUND SECURITIES FUND FUND BOND FUND FUND FUND FUND
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Waiver of investment
advisory fees ............... $ 59 $ 70 $ 53 $18 $169 $106 $ 48
Waiver of administrative fee ... -- -- -- 10 -- -- --
Waiver of 12b-1 fees ........... 65 105 63 46 351 141 78
============================================================================================================================
Total Waivers ............. $124 $175 $116 $74 $520 $247 $126
============================================================================================================================
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period ended October 31, 1995, purchases of securities and
proceeds from sales of securities, other than temporary investments in
short-term securities, were as follows (000):
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE GNMA PENNSYLVANIA
GROWTH GOVERNMENT SECURITIES MUNICIPAL
FUND SECURITIES FUND FUND BOND FUND
=====================================================================================
<S> <C> <C> <C> <C>
PURCHASES
U.S. Government .... $ -- $71,045 $61,811 $ --
Other .............. 42,674 -- -- 5,284
SALES
U.S. Government .... $ -- $39,464 $49,044 $ --
Other .............. 39,367 -- -- 1,045
</TABLE>
At October 31, 1995, the total cost of securities and net realized gains or
losses on securities sold for federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation for securities held at October
31, 1995 is as follows (000):
<TABLE>
<CAPTION>
EQUITY INTERMEDIATE GNMA PENNSYLVANIA
GROWTH GOVERNMENT SECURITIES MUNICIPAL
FUND SECURITIES FUND FUND BOND FUND
==============================================================================================================
<S> <C> <C> <C> <C>
Aggregate gross unrealized appreciation ..... $ 5,997 $ 1,948 $ 1,050 $959
Aggregate gross unrealized depreciation ..... (1,393) (60) (41) --
- --------------------------------------------------------------------------------------------------------------
Net unrealized appreciation ................. $ 4,604 $ 1,888 $ 1,009 $959
==============================================================================================================
</TABLE>
================================================================================
40 October 31, 1995
<PAGE> 43
NOTES
================================================================================
<PAGE> 44
NOT FDIC INSURED [INVENTOR FUNDS LOGO]
- ------------------------------------
MUTUAL FUNDS & OTHER 1995
INVESTMENT PRODUCTS ARE: SEMI-ANNUAL
- ------------------------------------ REPORT TO
- - NOT INSURED BY THE FDIC SHAREHOLDERS
- - NOT DEPOSITS OR OBLIGATIONS OF, OR OCTOBER 31, 1995
GUARANTEED BY, INTEGRA BANK OR ANY
OF ITS AFFILIATES
- - SUBJECT TO INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL INVESTED
- ------------------------------------
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the corporation and must be preceded
or accompanied by a current prospectus for the fund described.
SEI Financial Services Company, the distributor, is not affiliated with Integra
Trust Company.
INVENTOR FUNDS
- ------------------------------------
INVESTMENT ADVISER
Integra Trust Company
SUB ADVISERS
Wellington Management Company
Weiss, Peck & Greer L.L.C.
STI Capital Management, N.A.
ADMINISTRATOR
SEI Financial Management Corporation
TRANSFER AGENT
DST Systems, Inc.
DISTRIBUTOR
SEI Financial Services Company
COUNSEL
Morgan, Lewis & Bockius
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
[GRAPHIC 1]
19294 INT-F-296-01
================================================================================
