<PAGE> 1
ANNUAL REPORT
MAY 31, 1996
Armada Mid Cap Regional Fund
Armada Equity Fund
Armada Equity Income Fund
ARMADA
FUNDS
EQUITY
SERIES
[ARMADA FUNDS]
<PAGE> 2
LOGO
ARMADA FUNDS
EQUITY SERIES
ANNUAL REPORT - MAY 31, 1996
<TABLE>
<S> <C>
ARMADA TABLE OF CONTENTS
MID CAP
REGIONAL Chairman's Message .......................................... 1
FUND
ARMADA Equity Series Overview ...................................... 3
EQUITY
FUND
ARMADA FUND OVERVIEWS
EQUITY INCOME
FUND Armada Mid Cap Regional Fund ................................ 6
Armada Equity Fund .......................................... 9
Armada Equity Income Fund ...................................12
PORTFOLIOS OF INVESTMENTS AND FINANCIAL STATEMENTS
Armada Mid Cap Regional Fund ................................14
Armada Equity Fund ..........................................20
Armada Equity Income Fund ...................................26
NOTES TO FINANCIAL STATEMENTS ...............................32
REPORT OF INDEPENDENT AUDITORS ..............................37
</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., 4400 Computer Drive,
Westborough, MA 01581-5108. 440 Financial Distributors, Inc. is not affiliated
with National City Bank and is not a bank.
<PAGE> 3
LOGO
ARMADA FUNDS ANNUAL REPORT
CHAIRMAN'S MESSAGE
DEAR ARMADA FUNDS SHAREHOLDERS:
During the past year, Armada Funds has experienced
many exciting changes which will further enhance the
investment options offered to our shareholders. We
believe these enhancements will better help you meet
today's investment challenges and achieve your
financial goals.
ARMADA MONEY MARKET FUNDS RECOGNIZED FOR QUALITY
We are proud to announce the Government and
Treasury Funds, two of the four money market funds
offered by Armada Funds, have received the highest
quality ratings from Standard & Poor's, a national
ratings service. Armada Government Fund was recently
rated "AAAm". Armada Treasury Fund has maintained
its rating of "AAAm-G" since October 1995. These
ratings signify that safety of invested principal is
excellent and that the management team's capacity to
maintain a net asset value of $1 per share and limit
exposure to loss is superior. Standard & Poor's
bases its ratings on an analysis of each Fund's
credit quality, investment policies, management and
market price exposure.
CONSOLIDATION WILL CREATE BROADER, STRONGER ARMADA
FUNDS FAMILY
The merger between National City Corporation and
Integra Financial Corporation in early May has
created an opportunity for the Armada Funds family
to expand its current selection of investment
products. On May 2, 1996, National City's Asset
Management Group assumed the investment advisory
responsibilities for Inventor Funds, Integra's
mutual fund family of seven funds with assets of
$800 million.
We are now in the process of integrating Inventor
Funds into Armada Funds. In the first phase of the
integration, we have already moved more than $450
million into the Armada money market funds from
Inventor Funds. With the transfer of these funds and
as a result of the favorable market conditions
during the past year, total assets in Armada Funds
have grown to $4.12 billion -- a 36% increase during
the year. During the second phase of the
integration, we anticipate adding new funds to the
Armada Funds family to provide you with a broader
array of investment options.
1
<PAGE> 4
LOGO
ARMADA FUNDS ANNUAL REPORT
CHAIRMAN'S MESSAGE
PERFORMANCE OVERVIEW
The Armada Funds Equity Series experienced strong
capital appreciation during the past year as the
equity market performed at favorable levels. As we
look forward, the one goal shared by the entire team
is to continue to provide shareholders with the best
long-term performance results possible, based on
knowledge, experience and consistent investment
policies.
Although the first quarter of 1996 was a difficult
one for the fixed income markets as interest rates
increased, the Armada Funds Income Series generated
positive total returns. The asset managers of the
Armada Funds Income Series remain committed to
maintaining quality, while seeking varying levels of
current income using distinctive management and
maturity policies. That, we believe, is the key to
investment success.
The report that follows details the major economic
and market events of the 12 months ending May 31,
1996, as well as information about each fund's
specific holdings, assets and operating costs. The
report also reviews investment strategies used by
the Armada Funds investment advisers to take
advantage of this environment and looks at market
conditions that lie ahead. Armada Funds continues
its commitment to providing our shareholders with
quality investment products and services. To receive
more information about your investment or any of the
Armada Funds, please call 1-800-622-FUND (3863).
Sincerely,
/S/RICHARD B. TULLIS
Richard B. Tullis
Chairman
Armada Funds Board of Trustees
2
<PAGE> 5
LOGO ARMADA FUNDS ANNUAL REPORT
EQUITY SERIES OVERVIEW
"TWO FACTORS THAT HELPED THE
STOCK MARKET WERE THAT
SHORTER TERM INTEREST RATES
HAVE SCARCELY BUDGED AND THAT
EARNINGS HAVE NOT BADLY
DISAPPOINTED
INVESTORS. . ." The Armada Funds fiscal year ended May 31, 1996 was
an excellent period to be invested in equities, as
the Standard & Poor's 500 Stock Index returned
28.57%. The return was fairly evenly split between
the first half and second half of the year, despite
the deterioration in the drivers of this market
advance. Six months ago, we pointed out that the
primary catalysts for the strong market move were
falling interest rates, better than expected
corporate earnings growth and strong cash flows into
stocks from both individual investors and
corporations.
During the most recent six months, interest rates
(particularly for longer maturity bonds) moved
sharply higher and the growth of earnings slowed
markedly. Two factors that helped the stock market
were that shorter term interest rates have scarcely
budged and that earnings have not badly disappointed
investors so far. The greatest positive continues to
be the immense, record-setting flows into equity
mutual funds and the fact that corporate stock
repurchases and mergers continue to dwarf the new
supply of stock generated by initial public
offerings and secondary offerings.
The top performing index for the fiscal year was
the NASDAQ Industrials at 43.8% -- about 1 1/2 times
the S&P 500 return! Smaller stocks as represented by
the Russell 2000 also outperformed with a 35.92%
return. The Standard & Poor's MidCap 400 Stock Index
closely matched the S&P 500 return at 28.46%. Growth
stocks outperformed value, as the S&P/BARRA Growth
Index ("SPB Growth," the performance benchmark for
Armada Equity Fund) was 30.51% versus the S&P/BARRA
Value Index ("SPB Value," the Armada Equity Income
Fund benchmark) at 26.35%.
The top economic sector was healthcare, as solid
earnings gains drove the pharmaceutical and HMO
stocks higher. The consumer staples area, led by the
soft drink and tobacco stocks, also did very well.
In both cases, the second half was weaker than the
first, as investors became more optimistic regarding
the economy and rotated toward companies with
stronger earnings momentum. That resulted in the
consumer cyclical area -- notably retail, autos and
leisure stocks -- performing well in the second
half. Capital goods (mainly electrical equipment
companies like General Electric) had good gains as
well. The laggards for the year were the utilities,
energy and basic materials sectors. The latter areas
are heavily represented in SPB Value and were a
primary reason for its underperformance in Fiscal
1995.
3
<PAGE> 6
LOGO ARMADA FUNDS ANNUAL REPORT
EQUITY SERIES OVERVIEW
"THE PERVERSE NATURE OF BULL
MARKETS IS THAT THEY KEEP
INVESTORS CONSTANTLY OFF
BALANCE AND THIS ONE IS NO
EXCEPTION." During Fiscal 1995, we introduced additional
"style" benchmarks for Armada Equity Fund and Armada
Equity Income Fund. Style benchmarks are useful for
making comparisons of 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, 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 as the benchmark for the
Equity Income Fund. Data as of May 31, 1996, 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.
EARNINGS PER PRICE/ RETURN
SHARE EARNINGS DIVIDEND ON
GROWTH RATIO YIELD EQUITY BETA
------------ -------- -------- ------ ----
<S> <C> <C> <C> <C> <C>
S & P 500......... +8% 17x 2.1% 17% 1.00x
SPBGrowth......... +15% 20x 1.6% 25% 1.05x
SPBValue.......... +10% 14x 2.8% 15% 0.95x
</TABLE>
INVESTMENT OUTLOOK
The perverse nature of major bull markets is that
they keep investors constantly off balance and this
one is no exception. That is what is meant when
market commentators say that bull markets "climb a
wall of worry." The current turmoil in the commodity
and financial markets is reminiscent of 1994. Then,
commodity prices rose sharply and inflation fears
pushed the long bond yield up two full percentage
points to 8%. However, inflation never did come on
strong and the bond market ended up recouping all of
its losses in 1995. A big difference between then
and now is that the commodities that rose in 1994
were the industrial commodities, while food and
energy were quiet. This time the opposite occurred.
4
<PAGE> 7
LOGO ARMADA FUNDS ANNUAL REPORT
EQUITY SERIES OVERVIEW
"IN-DEPTH, FUNDAMENTAL
ANALYSIS OF ALL STOCK
HOLDINGS IS CRUCIAL AT
THIS POINT, GIVEN THE LARGE
GAINS RECORDED BY THE STOCK
MARKET AND THE AGE OF THIS
ECONOMIC EXPANSION." We think this episode will have the same end result
as the last one, because the critical inflation
indicator is behaving very well, just as it did two
years ago. That indicator is called unit labor cost
inflation, which basically represents wage inflation
and productivity. Given the predominance of consumer
spending in the US economy, a widespread inflation
is virtually impossible without significant
increases in consumer incomes to support it. The
only other way to spend more is to borrow more, and
with the Federal Reserve always ready to ratchet up
interest rates and choke off loan demand, that just
does not seem likely. So, unless the Fed overreacts
(as it often has in the past), we think the current
"growth scare" will be short-lived. Before the
summer is over, we expect to see the economy settle
back into a low inflation, modest growth scenario.
For now, however, we do admit that the economy is
stronger than we anticipated it would be and have
gradually shifted our Funds toward somewhat more
cyclical companies. This is particularly true in the
Armada Mid Cap Regional Fund. However, it is clear
that there is no strong pent-up demand for either
consumer or capital goods, so there is not likely to
be a "rising tide to lift all ships." In-depth,
fundamental analysis of all stock holdings is
crucial at this point given the large gains recorded
by the stock market and the age of this economic
expansion. We continue to focus on a combination of
strong financials, solid valuations and visible
earnings power in the Armada Funds.
5
<PAGE> 8
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:
$99,294,432 (INSTITUTIONAL
SHARES)
$ 4,701,642 (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 continued to move
forward during the second half of this fiscal year,
following the general advance of the entire stock
market. Over this time-frame, mid cap stocks as
measured by the S&P Midcap 400 advanced 10.23%, with
the small cap Russell 2000 Index advancing 18.12%.
The Armada Mid Cap Regional Fund had a total return
of 13.94% (Institutional) and 13.79% (Retail before
sales charge) for the six months ending May 31,
1996. The most interesting part of the past six
months has been the stock market's continued ability
to shake-off the significant difficulties
experienced in the fixed income market. Yields on
the benchmark 30-year treasury bond increased from
6.15% to 6.99% over this time-frame and subsequently
to over 7.1%. The significance of this is that as
yields increase, bonds become increasingly
attractive investment vehicles when compared with
stocks. Valuation on the stock market overall is
stretched by nearly every yardstick known to
investors, but participants don't seem inclined to
move assets to fixed income securities. It appears
that the loss of value in the 1994 bond market
sell-off is still fresh in investors' minds.
Looking at market internals, after a brief flurry
of activity and appreciation early in the calendar
year, cyclical stocks have taken a back seat once
again to the growth and emerging growth areas of the
smaller company sector. Technology, biotechnology,
and the InterNet are the themes being aggressively
pursued, as mutual fund cash flows are increasingly
being targeted at the highest risk end of the equity
spectrum. The IPO market continues on its torrid
pace with a whopping $60.7 billion of new offerings
hitting the market on a calendar year-to-date
basis. This compares to a healthy $27 billion flow
last year. Interestingly, over 50% of all IPOs
hitting the market this year are in companies which
have yet to earn a profit (and some without any
revenue!). While the game is fun while it lasts,
history shows us that most of these IPOs turn out
to be very poor investments.
6
<PAGE> 9
LOGO FUND OVERVIEW
ARMADA MID CAP REGIONAL FUND
Pacing the performance of the Armada Mid Cap
Regional Fund has been the Midwest-based steel
processing group of stocks. We owned six stocks in
this group, with all showing gains of at least 25%.
The largest advances came from Cleveland, Ohio-based
Olympic Steel (+177%), and Louisville,
Kentucky-based Steel Technologies (+59%). Also,
during the period, we saw a sharp move in the stock
of Dayton, Ohio-based Nord Resources (+177%), and
Cleveland, Ohio companies Standard Products (+50%)
and O.M. Group (+35%). Holding back performance of
the Fund was an underweighting in the technology
group compared to the S&P Midcap 400 and the Russell
2000, as well as an overweight in several cyclical
areas in which the stocks appear to be still
bottoming out.
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT(3)
Measurement Period Retail Shares S&P Midcap
(Fiscal Year Covered) Institutional w/sales load Russell 2000 400
<S> <C> <C> <C> <C>
5-94 10000 10000 10000
11-94 10490 9839 10056 9969
5-95 11462 10736 11230 11372
11-95 12338 11537 12892 13209
5-96 14057 13128 15234 14608
</TABLE>
Past performance is not predictive of future performance.
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> 10
LOGO FUND OVERVIEW
ARMADA MID CAP REGIONAL FUND
"THE TRADEMARK OF A GOOD
VALUE-ORIENTED FUND IS ITS
ABILITY TO MINIMIZE THE
EFFECT OF SHAKEOUTS WHICH
EVENTUALLY AND SYSTEMATICALLY
RECUR IN THE STOCK MARKET."
Portfolio structure has remained relatively
constant, although we have reduced our emphasis in
the basic product sector with the reduction in our
steel processor holdings. We remain overweighted in
the interest sensitive areas, with an emphasis on
the insurance group. We have increased our
technology weighting slightly to 7% of the Fund, but
still find it difficult to extract much value in
that area.
Looking forward, we believe the Fund is well
positioned to continue on its steady course of
appreciation. As we mentioned earlier, while the
market as a whole shows signs of significant
overvaluation, holdings in the Armada Mid Cap
Regional Fund are quite modestly valued in
comparison. With an average Price to Earnings ratio
of 10X 1997 earnings and 1.4X book value ratio, we
are relatively undaunted by the possibility of a
market correction. The trademark of a good
value-oriented fund is its ability to minimize the
effect of shakeouts which eventually and
systematically recur in the stock market. As usual,
we continue to focus on solid, inexpensively valued,
Midwestern companies. According to Merrill Lynch,
small company stocks in the Great Lakes Region have
shown annual appreciation of 16.24% over the
1974-1995 time frame, well in excess of the 13.24%
return of the S&P 500. We remain optimistic toward
both this region and each stock in this fund.
8
<PAGE> 11
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:
$166,670,841 (INSTITUTIONAL
SHARES)
$ 6,012,523 (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") recorded a
strong 24.61% return for Institutional shareholders
and 24.34% (before sales load) for Retail
shareholders for the fiscal year ended May 31, 1996.
Our benchmarks did even better, as the Standard &
Poor's 500 Stock Index (the "S&P 500") was up 28.57%
and our new benchmark adopted in January 1996, the
Standard & Poor's/BARRA Growth Index (the "BARRA
Growth") appreciated 30.51%.
Last autumn, we concluded that a stronger focus on
our large capitalization growth stock portfolio
management style should lead to improved performance
over the longer term. Within that context, we
introduced the BARRA Growth as a more suitable
benchmark for the Fund. While the Fund had always
been managed as a large cap growth fund, the former
stock methodology emphasized diversification and de-
emphasized higher price/earnings ratio, high
quality, longer term growth companies. This approach
negatively impacted Fiscal 1995 returns, as that
type of company performed well in the stock market.
Another impact was the cost of restructuring the
Fund, which was carried out during the winter.
A partial listing of stocks that were sold gives a
better perspective on the transformed structure of
the Fund. We sold slow growth oil companies (Amoco,
Exxon), a real estate investment trust (Avalon
Properties), some small cap stocks (Planar Systems,
Chesapeake, Qualcomm), and some companies that have
had erratic earnings patterns (Browning-Ferris,
KMart, Sensormatic, Singer, WMX Technologies).
In their place, our purchases included Coca-Cola,
Eli Lilly, Gap Stores, Gillette, Hewlett-Packard,
General Electric, McDonald's, Microsoft and
Walgreen. The growth characteristics of the Fund
have been significantly enhanced, as the weighted
average forecasted earnings per share increases for
1996, 1997 and the next five years are now +18%,
+16% and +15%, respectively. Expectations for the
S&P 500 are in the mid single digits for all three
periods. The Fund's investment portfolio average
1996 and 1997 price/earnings ratios are 21.1x and
16.5x, respectively, versus 17.7x and 15.7x, for the
S&P 500. The Fund's investment portfolio weighted
average market capitalization is now $40 billion,
which clearly puts it in the realm of large
companies.
9
<PAGE> 12
LOGO FUND OVERVIEW
ARMADA EQUITY FUND
"THE MAJORITY OF THE FUND
WILL CONSIST OF HIGH-QUALITY
COMPANIES WITH LONGER TERM
GROWTH RATES PROJECTED AT
WELL ABOVE THE S&P GROWTH
RATE. . ." LOOKING FORWARD
The Armada Equity Fund is a large cap growth stock
fund. Our objective is to seek a high level of total
return from capital appreciation and income. The
majority of the Fund will consist of high-quality
companies with longer term growth rates projected at
well above the S&P 500 growth rate, but we will also
own cyclical growth companies that appear to be in
the "sweet spot" of their earnings cycle.
GROWTH OF A $10,000 INVESTMENT (3)
<TABLE>
<CAPTION>
Retail Shares
Measurement Period Institutional with sales BARRA Growth
(Fiscal Year Covered) Shares load S&P 500 Index
<S> <C> <C> <C> <C>
Nov-1989 10000 9625 10000 10000
May-1990 10846 10439 10402 10599
Nov-1990 10074 9696 9427 9711
May-1991 12810 12329 11605 12089
Nov-1991 12579 12071 11346 12152
May-1992 13950 13374 12746 13388
Nov-1992 15164 14519 13438 14472
May-1993 14955 14311 14223 14318
Nov-1993 14912 14246 14793 14709
May-1994 15166 14471 14829 14468
Nov-1994 14987 14287 14950 15016
May-1995 16777 15969 17823 17828
Nov-1995 18942 18005 20478 20863
May-1996 20905 19855 22899 23267
</TABLE>
Past performance is not predictive of future performance.
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.
10
<PAGE> 13
LOGO FUND OVERVIEW
ARMADA EQUITY FUND
"THE "GREAT COMPANIES" CORE
GIVES THE FUND A HEAVY
EXPOSURE TO THE HIGHEST
GROWTH SECTORS OF
THE ECONOMY: HEALTHCARE,
TECHNOLOGY AND CONSUMER BRAND
NAMES." We believe that companies that demonstrate
superior earnings growth, superior profitability and
defendable market leadership positions represent a
great opportunity for investors with a longer term
time horizon to realize total returns in excess of
the broad market indexes. Thus, the core of the Fund
is comprised of a list of America's greatest
companies. The top ten holdings at fiscal year end
were Coca-Cola, Pfizer, Philip Morris, Home Depot,
PepsiCo, Merck, American Home Products, Microsoft,
Eli Lilly and General Electric.
The "great companies" core gives the Fund a heavy
exposure to the highest growth sectors of the
economy: healthcare, technology and consumer brand
names. These sectors equate to 60% of the Fund,
versus only 35% of the S&P 500. However, we do not
plan to ignore companies that appear to be entering
the sweet spot of their earnings cycle. Some of
these companies have the potential to develop into
the next generation of stocks that outperform for
years, while others are more mature companies.
Utilizing our strong internal research staff, as
well as selected Wall Street and other sources, we
will purchase these stocks when we think the time is
ripe.
We believe that the fund restructuring that was
undertaken late last year and into the first quarter
has positioned the Armada Equity Fund to take
advantage of these disciplines. As these new
purchases "mature" over the coming quarters, we
anticipate favorable results for the Fund.
11
<PAGE> 14
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:
$61,977,902 (INSTITUTIONAL
SHARES)
$ 263,139 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
SEEK A COMPETITIVE TOTAL RATE
OF RETURN THROUGH INVESTMENTS IN
EQUITY AND EQUITY EQUIVALENT
SECURITIES WHICH CARRY
PREMIUM CURRENT YIELDS.
The economy has grown at an unexpectedly strong
rate after a sluggish 1995. Employment gains have
averaged 270,000 in the last three months, fueling
increased consumer confidence and spending. In spite
of a 1% increase in long-term interest rates, new
home sales and other durables purchases remain
strong. Manufacturers have satisfied this demand
surge partly out of excess inventory. However,
inventories today are low by historical standards
for a number of items. Thus, if the consumer's
appetite for spending remains at the current level
or accelerates, manufacturers will need to ramp up
production levels. The Fund has been reducing its
weight in the consumer staples and health care
sectors and increasing its weight in consumer
cyclicals, energy, and capital goods over the period
to adjust to this environment.
For the six months ended May 31, 1996, Armada
Equity Income Fund return was 8.84% for
Institutional shareholders and 8.63% (before sales
load) for Retail shareholders versus 12.12% for the
S&P/Barra Value Index (SPBValue). For the year
ending May 31, 1996, the Fund posted returns of
19.72% (Institutional Shares) and 19.37% (Retail
Shares), before sales load. The SPBValue had total
returns of 26.35% for the same period. Due to its
emphasis on income, the Fund's investment portfolio
is concentrated in higher yield, larger
capitalization, and lower beta stocks. Stocks with
lower yields and smaller market capitalizations
performed well during the period. The 30-day SEC
yield as of May 31, 1996 for the Fund's
Institutional and Retail shares were 2.71% and
1.14%, respectively. As of that date, the Fund's
investment portfolio average market capitalization
was $27.2 billion and its beta was .91.
The Fund is currently overweighted in capital
goods and basic materials relative to SPBValue. We
continue to emphasize consumer staples, but have
pared our exposure over time. We are underweighted
in interest-sensitive and technology stocks. These
sector weights in aggregate reflect our view that
the economy will continue to accelerate near term
before settling back to more normal growth by year
end.
Despite the recent run in higher risk profile
stocks, the Fund's defensive income-equity
discipline will be maintained going forward. In the
event of a correction, we believe the Fund is well
positioned to outperform these higher risk profile
investments.
12
<PAGE> 15
LOGO FUND OVERVIEW
ARMADA EQUITY INCOME FUND
<TABLE>
<CAPTION>
GROWTH OF A $10,000 INVESTMENT
Measurement Period
(Fiscal Year Covered) Institutional Retail Shares S&P 500 BARRA
<S> <C> <C> <C> <C>
5-94 6-94 7-94 10000 10000
11-94 9959.6 9336.9 10334.72 10055.3
5-95 11309.1 10594.8 12320.94 12040.4
11-95 12439.8 11641.8 14156.58 13568.5
5-96 13539.6 12646.5 15829.25 15212.61
</TABLE>
Past performance is not predictive of future performance.
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.
13
<PAGE> 16
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 ARMADA MID CAP REGIONAL FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCK - 96.7%
AEROSPACE -- 0.4%
ECC International Corp. +... 45,000 $ 405,000
------------
AUTOMOTIVE PARTS -- EQUIPMENT -- 4.9%
Amcast Industrial Corp...... 40,000 775,000
Borg-Warner Automotive,
Inc........................ 45,000 1,777,500
Douglas & Lomason Co........ 54,000 722,250
Excel Industries, Inc....... 50,000 750,000
Spartan Motors, Inc......... 20,000 159,375
Standard Products Co........ 19,700 536,825
Treadco, Inc................ 50,000 353,125
------------
5,074,075
------------
BANKING -- 2.3%
First Virginia Banks,
Inc........................ 30,800 1,232,000
Huntington Bancshares,
Inc........................ 46,750 1,162,906
------------
2,394,906
------------
BUILDING & BUILDING SUPPLIES -- 4.2%
Interface, Inc.............. 50,000 709,375
Pulte Corp.................. 40,000 1,120,000
Ryland Group, Inc........... 90,000 1,473,750
Standard-Pacific Corp....... 50,000 362,500
Wolohan Lumber Co........... 65,000 702,813
------------
4,368,438
------------
BUSINESS SERVICES -- 1.6%
Flightsafety International,
Inc........................ 15,000 826,875
Information Resources, Inc.
+.......................... 65,000 812,500
------------
1,639,375
------------
CHEMICALS -- 2.8%
Geon Co..................... 60,000 1,627,500
Wellman, Inc................ 55,000 1,244,375
------------
2,871,875
------------
DRUGS & HEALTH CARE -- 3.3%
Amerisource Health Corp.
+.......................... 30,000 1,012,500
Bergen Brunswig Corp., Class
A.......................... 32,000 852,000
Bindley Western Industries,
Inc........................ 87,000 1,489,875
------------
3,354,375
------------
FINANCIAL SERVICES -- 2.4%
Countrywide Credit
Industries, Inc. DE........ 30,000 682,500
U.S. Trust Corp............. 32,800 1,767,100
------------
2,449,600
------------
FOODS -- 1.9%
Thorn Apple Valley, Inc..... 96,100 1,333,388
WLR Foods, Inc.............. 46,100 596,419
------------
1,929,807
------------
FREIGHT & SHIPPING -- 2.5%
Airborne Freight Corp....... 103,200 2,605,800
------------
HOTEL/RESTAURANTS -- 1.5%
Red Roof Inns, Inc. +....... 105,000 1,548,750
------------
INSURANCE -- 18.7%
Acordia, Inc................ 40,000 1,270,000
Capitol American Financial
Corp....................... 50,000 1,237,500
First Colony Corp........... 50,000 1,312,500
Gallagher (Arthur J.) &
Co......................... 40,000 1,285,000
Harleysville Group, Inc..... 74,400 1,980,900
Horace Mann Educators
Corp....................... 237,800 7,579,875
Kansas City Life Insurance
Co......................... 20,000 1,110,000
PXRE Corp., Class A......... 54,500 1,338,656
Pioneer Financial Services,
Inc........................ 75,000 1,218,750
Washington National Corp.... 35,000 927,500
------------
19,260,681
------------
</TABLE>
See Accompanying Notes
14
<PAGE> 17
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 ARMADA MID CAP REGIONAL FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ------------
<S> <C> <C>
MEDICAL & MEDICAL SERVICES -- 6.2%
John Alden Financial
Corp....................... 202,900 $ 4,539,887
Rightchoice Managed Care,
Inc., Class A +............ 53,000 907,625
West, Inc................... 40,000 995,000
------------
6,442,512
------------
METALS & MINING -- 2.9%
Brush Wellman, Inc.......... 31,400 588,750
Carbide Graphite Group, Inc.
+.......................... 56,000 1,071,000
Commonwealth Aluminum
Corp....................... 80,000 1,365,000
------------
3,024,750
------------
NATURAL RESOURCES -- 3.3%
Florida Rock Industries,
Inc........................ 50,000 1,275,000
Nord Resources Corp. +...... 355,600 2,133,600
------------
3,408,600
------------
OIL & GAS -- 1.8%
Belden & Blake Corp. +...... 65,400 1,267,125
Sun Company, Inc............ 20,000 612,500
------------
1,879,625
------------
PAPER & FOREST PRODUCTS -- 5.4%
Caraustar Industries........ 40,000 1,050,000
Chesapeake Corp............. 50,000 1,331,250
Mead Corp................... 25,000 1,343,750
Mosinee Paper Corp.......... 21,866 582,182
Pope & Talbot, Inc.......... 75,000 1,256,250
------------
5,563,432
------------
RETAIL MERCHANDISING -- 1.0%
Brown Group, Inc............ 45,000 765,000
Shoe Carnival, Inc. +....... 50,000 234,375
Sun T.V. & Appliances,
Inc........................ 10,000 50,000
------------
1,049,375
------------
SPECIALTY CHEMICALS -- 5.6%
ADCO Technologies, Inc...... 81,500 779,344
Ferro Corp.................. 64,100 1,746,725
Fuller (H.B.) Co............ 52,300 1,784,737
O.M. Group, Inc............. 20,000 805,000
Schulman (A.), Inc.......... 24,100 623,588
------------
5,739,394
------------
STEEL -- 7.4%
Cold Metal Products, Inc.
+.......................... 24,000 159,000
Huntco, Inc................. 42,800 813,200
Insteel Industries, Inc..... 240,400 1,652,750
National Steel Corp., Class
B +........................ 55,000 728,750
Olympic Steel, Inc. +....... 60,500 1,107,906
Reliance Steel & Aluminum
Co......................... 15,000 562,500
Rouge Steel Co.............. 20,000 445,000
Shiloh Industries, Inc. +... 21,200 335,225
Steel Technologies, Inc..... 125,700 1,822,650
------------
7,626,981
------------
TECHNOLOGY -- 6.9%
Adobe Systems, Inc.......... 20,000 741,250
Exar Corp. +................ 90,000 1,440,000
Information Storage Devices,
Inc. +..................... 90,000 928,125
Opti, Inc. +................ 145,000 1,069,375
Sequent Computer Systems,
Inc. +..................... 105,000 1,384,687
Stratus Computer, Inc. +.... 52,300 1,542,850
------------
7,106,287
------------
TEXTILES -- 0.5%
Oneita Industries, Inc. +... 115,000 474,375
------------
TOBACCO -- 3.4%
Dimon, Inc.................. 101,000 1,818,000
Universal Corp.............. 68,300 1,733,113
------------
3,551,113
------------
</TABLE>
See Accompanying Notes
15
<PAGE> 18
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 ARMADA MID CAP REGIONAL FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- ------------
<S> <C> <C>
TRUCKING -- 5.8%
M.S. Carriers, Inc. +....... 148,400 $ 2,856,700
MTL, Inc. +................. 58,700 1,005,237
USFreightways Corp.......... 98,600 2,156,875
------------
6,018,812
------------
TOTAL COMMON STOCK
(Cost $88,764,585).......... 99,787,938
------------
TEMPORARY INVESTMENT - 3.3%
Fidelity Domestic
Market Portfolio........... 3,423,651 3,423,651
------------
(Cost $3,423,651)
TOTAL INVESTMENTS - 100.0% $103,211,589
(Cost $92,188,235*)
* Cost for Federal income tax purposes - $92,233,371.
+ Non-income producing.
The gross unrealized appreciation (depreciation)
for Federal income tax purposes is as follows:
Gross appreciation................... $12,516,175
Gross depreciation................... (1,537,957)
-----------
$10,978,218
-----------
</TABLE>
See Accompanying Notes
16
<PAGE> 19
LOGO FINANCIAL STATEMENTS
ARMADA MID CAP REGIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $92,188,235)................ $103,211,589
Interest and dividends receivable... 118,416
Receivable for Fund shares sold..... 127,512
Receivable for investments sold..... 1,097,543
Prepaid expenses.................... 16,263
-----------
TOTAL ASSETS............... 104,571,323
- ------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed.... 256,622
Payable for investments purchased... 199,682
Accrued expenses.................... 118,945
-----------
TOTAL LIABILITIES.......... 575,249
- ------------------------------------------------------
NET ASSETS (based on
7,942,410 shares of
beneficial interest
having no par value)....... $103,996,074
==========================================
NET ASSETS CONSIST OF:
Paid-in capital............ $ 88,129,235
Undistributed net
investment income.......... 251,505
Undistributed net realized
gain on investments sold... 4,591,980
Net unrealized appreciation
on investments............. 11,023,354
-----------
$103,996,074
==========================================
NET ASSET VALUE,
OFFERING PRICE AND
REDEMPTION PRICE PER
SHARE -- Institutional
class
($99,294,432 / 7,579,155
shares of beneficial
interest).................. $ 13.10
==========================================
NET ASSET VALUE AND
REDEMPTION PRICE
PER SHARE -- Retail class
($4,701,642 / 363,255 shares
of beneficial interest).... $ 12.94
==========================================
MAXIMUM OFFERING
PRICE PER RETAIL SHARE
($12.94 / .9625)........... $ 13.44
==========================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................ $ 1,438,918
----------
EXPENSES:
Investment Advisory fees............. 571,860
Administration fees.................. 76,026
12b-1 fees........................... 57,285
Transfer Agent fees.................. 34,760
Registration and filing fees......... 17,880
Custodian fees....................... 15,419
Printing and shareholder reports..... 11,805
Shareholder servicing fees - Retail
class only......................... 10,990
Legal fees........................... 9,475
Miscellaneous........................ 6,289
Distribution fees.................... 4,935
Amortization of organization costs... 3,704
Audit fees........................... 2,596
Trustees' fees....................... 1,521
Insurance............................ 882
Fees waived by Custodian............. (10,796)
----------
Total expenses.............. 814,631
- ------------------------------------------------------
NET INVESTMENT INCOME................... 624,287
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments sold............ 6,946,356
Net change in unrealized
appreciation on
investments................. 8,581,960
----------
Net gain on investments..... 15,528,316
- ------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS............. $16,152,603
==========================================
</TABLE>
See Accompanying Notes
17
<PAGE> 20
LOGO FINANCIAL STATEMENTS
ARMADA MID CAP REGIONAL FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
MAY 31, 1996 MAY 31, 1995
----------------- --------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income.............................................. $ 624,287 $ 367,124
Net realized gain on investments sold.............................. 6,946,356 1,936,082
Net change in unrealized appreciation on investments............... 8,581,960 2,441,394
------------ ------------
Net increase in net assets resulting from operations............... 16,152,603 4,744,600
Distribution to shareholders from net investment income................ (624,287) (110,644)
Distribution to shareholders in excess of net investment income........ (4,975) 0
Distribution to shareholders from net realized capital gains........... (4,190,871) (99,587)
Increase in net assets derived from capital share transactions......... 38,103,845 50,025,390
------------ ------------
Total increase in net assets........................................... 49,436,315 54,559,759
------------ ------------
NET ASSETS:
Beginning of period................................................ 54,559,759 0
------------ ------------
End of period...................................................... $ 103,996,074 $ 54,559,759
============ ============
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1996 MAY 31, 1995
----------------- --------------------
<S> <C> <C>
UNDISTRIBUTED NET INVESTMENT INCOME AS OF.............................. $ 251,505 $ 256,480
=========== ===========
</TABLE>
See Accompanying Notes
18
<PAGE> 21
LOGO FINANCIAL HIGHLIGHTS
ARMADA MID CAP REGIONAL FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1996 MAY 31, 1995
------------------------- -----------------------------
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......................................... .08 .06 .10 .07
Net gain on securities (realized and unrealized).............. 2.41 2.37 1.36 1.11
------- ------ ------- ------
Total from investment operations............................ 2.49 2.43 1.46 1.18
------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net investment income.......................... (.08) (.06) (.04) (.04)
Dividends in excess of net investment income.................. (.02) (.02) (.00) (.00)
Dividends from net realized capital gains..................... (.67) (.67) (.04) (.04)
------- ------ ------- ------
Total distributions......................................... (.77) (.75) (.08) (.08)
------- ------ ------- ------
Net asset value, end of period.................................. $ 13.10 $12.94 $ 11.38 $11.26
======= ====== ======= ======
TOTAL RETURN.................................................... 22.64% 22.28%(5) 17.42%(4) 14.80%(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's).......................... $99,294 $4,702 $ 50,993 $3,567
Ratio of expenses to average net assets....................... 1.05%(1) 1.30%(2) 1.01%(1,4) 1.34%(2,4)
Ratio of net investment income to average net assets.......... .83%(1) .58%(2) 1.31%(1,4) 1.09%(2,4)
Portfolio turnover rate....................................... 106% 106% 69% 69%
Average commission rate....................................... $ 0.06 $ 0.06 -- --
</TABLE>
1 The operating expense ratio and the net investment income ratio before fee
waivers by the Custodian for the Institutional class for year ended May 31,
1996 would have been 1.06% and .82%, respectively. 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 Custodian for the Retail class for the year ended May 31,
1996 would have been 1.32% and .56%, respectively. 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
19
<PAGE> 22
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 ARMADA EQUITY FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK -- 97.2%
AEROSPACE -- 1.0%
Boeing Co.................... 21,000 $ 1,790,250
------------
ADVERTISING -- 1.2%
Interpublic Group, Inc....... 44,310 2,054,876
------------
BANKING -- 2.6%
Norwest Corp................. 46,000 1,604,250
Wells Fargo & Company........ 12,000 2,892,000
------------
4,496,250
------------
BEVERAGES -- 7.2%
Anheuser-Busch Companies,
Inc......................... 15,000 1,068,750
Coca-Cola Co................. 136,000 6,256,000
Pepsico, Inc................. 155,800 5,180,350
------------
12,505,100
------------
BUSINESS SERVICES -- 4.5%
Automatic Data Processing.... 71,760 2,753,790
General Motors Corp., Class
E........................... 51,540 2,905,568
Reuters Holdings PLC, ADS.... 29,400 2,050,650
------------
7,710,008
------------
CHEMICALS -- 3.3%
Air Products & Chemicals,
Inc......................... 35,000 2,082,500
Hercules, Inc................ 27,000 1,532,250
Monsanto Co.................. 7,800 1,184,625
Sigma-Aldrich Corp........... 15,100 841,825
------------
5,641,200
------------
COMPUTERS -- 11.0%
Cisco Systems, Inc. +........ 27,000 1,476,563
Hewlett Packard Co........... 35,600 3,800,300
Intel Corp................... 50,000 3,771,875
International Business
Machines.................... 17,600 1,878,800
Microsoft Corp. +............ 37,000 4,391,438
Oracle Systems Corp. +....... 43,500 1,438,219
Sun Microsystems, Inc. +..... 35,000 2,189,688
------------
18,946,883
------------
CONSUMER NON-DURABLES -- 4.7%
Gillette Co.................. 45,400 2,684,275
Procter & Gamble Co.......... 44,520 3,912,195
Sara Lee Corp................ 45,000 1,501,875
------------
8,098,345
------------
DIVERSIFIED -- 0.9%
Minnesota Mining &
Manufacturing Co............ 23,370 1,595,003
------------
DRUGS & HEALTHCARE -- 17.7%
Abbott Laboratories.......... 50,860 2,193,338
Amgen, Inc. +................ 23,000 1,367,062
American Home Products
Corp........................ 41,240 2,206,340
Bristol Myers Squibb Co...... 29,950 2,556,981
Eli Lilly & Co............... 68,000 4,369,000
Johnson & Johnson............ 36,500 3,554,188
Merck & Company, Inc......... 79,000 5,105,375
Pfizer, Inc.................. 82,620 5,845,365
Schering-Plough Corp......... 56,304 3,300,822
------------
30,498,471
------------
ELECTRICAL EQUIPMENT -- 4.8%
AMP, Inc..................... 38,000 1,600,750
Emerson Electric Co.......... 27,200 2,329,000
General Electric Co.......... 52,000 4,303,000
------------
8,232,750
------------
ELECTRONICS -- 3.3%
Diebold, Inc................. 19,950 760,594
Honeywell, Inc............... 30,000 1,522,500
MEMC Electronic Materials
+........................... 38,100 1,885,950
Perkin Elmer Corp............ 30,000 1,590,000
------------
5,759,044
------------
ENGINEERING & CONSTRUCTION -- 1.0%
Fluor Corp................... 25,200 1,644,300
------------
ENTERTAINMENT -- 1.0%
Walt Disney Co............... 28,055 1,704,341
------------
</TABLE>
See Accompanying Notes
20
<PAGE> 23
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 ARMADA EQUITY FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FINANCIAL SERVICES -- 1.8%
Federal National Mortgage
Association................. 38,920 $ 1,201,655
State Street Boston Corp..... 36,000 1,876,500
------------
3,078,155
------------
HOUSEWARES -- 1.0%
Newell Co.................... 60,000 1,800,000
------------
INSURANCE -- 2.2%
American International
Group....................... 40,400 3,807,700
------------
MACHINERY & HEAVY EQUIPMENT -- 0.9%
Deere & Co................... 38,000 1,581,750
------------
MANUFACTURING -- 2.0%
Allied Signal, Inc........... 18,800 1,029,300
Eastman Kodak Co............. 21,700 1,613,938
Wolverine Tube, Inc. +....... 20,000 730,000
------------
3,373,238
------------
MEDICAL & MEDICAL SERVICES -- 1.9%
Columbia Healthcare Corp..... 27,700 1,492,337
Medtronic, Inc............... 32,000 1,800,000
------------
3,292,337
------------
OFFICE & BUSINESS EQUIPMENT -- 0.8%
Pitney Bowes, Inc............ 28,800 1,429,200
------------
OIL EQUIPMENT & SERVICES -- 2.3%
Schlumberger Limited......... 48,495 4,043,270
------------
PAPER & FOREST PRODUCTS -- 2.1%
Fort Howard Corp. +.......... 172,500 3,557,812
------------
RETAIL FOOD CHAINS -- 1.5%
Albertson's, Inc............. 64,500 $ 2,571,937
------------
RETAIL STORES -- 5.8%
Federated Department Stores,
Inc. +...................... 24,600 851,774
Gap, Inc..................... 28,000 941,500
Home Depot, Inc.............. 102,366 5,233,462
May Department Stores Co..... 16,500 781,688
Payless Shoesource +......... 2,640 74,250
Walgreen Co.................. 70,000 2,231,250
------------
10,113,924
------------
RESTAURANTS -- 1.2%
McDonald's Corp.............. 43,000 2,069,375
------------
TELECOMMUNICATIONS -- 3.7%
AT&T Corp.................... 60,260 3,758,717
MCI Communications Corp...... 90,000 2,615,625
------------
6,374,342
------------
TOBACCO -- 3.2%
Philip Morris Companies,
Inc......................... 55,500 5,515,312
------------
UTILITIES -- TELEPHONE -- 2.6%
Ameritech Corp............... 24,500 1,384,250
BellSouth Corp............... 43,300 1,759,063
GTE Corp..................... 32,300 1,380,825
------------
4,524,138
------------
TOTAL COMMON STOCK........... 167,809,311
------------
(Cost $130,847,329)
</TABLE>
See Accompanying Notes
21
<PAGE> 24
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 ARMADA EQUITY FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
TEMPORARY INVESTMENT -- 2.8%
Fidelity Domestic Market
Portfolio................... 4,762,698 $ 4,762,698
------------
(Cost $4,762,698)
TOTAL INVESTMENTS -- 100.0% $172,572,009
============
(Cost $135,610,027*)
* Cost for Federal income tax purposes --
$135,822,302.
+ Non-income producing.
The gross unrealized appreciation (depreciation)
for Federal income tax purposes is as follows:
Gross appreciation.................. $ 37,906,746
Gross depreciation.................. (1,157,039)
------------
$ 36,749,707
============
</TABLE>
See Accompanying Notes
22
<PAGE> 25
LOGO FINANCIAL STATEMENTS
ARMADA EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $135,610,027)............... $172,572,009
Interest and dividends receivable... 304,229
Receivable for investments sold..... 17,775
Prepaid expenses.................... 3,965
-----------
TOTAL ASSETS............... 172,897,978
- ------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed.... 20,664
Accrued expenses.................... 193,950
-----------
TOTAL LIABILITIES.......... 214,614
- ------------------------------------------------------
NET ASSETS (based on
9,582,780 shares of
beneficial interest
having no par value)..... $172,683,364
==========================================
NET ASSETS CONSIST OF:
Paid-in capital............ $119,624,085
Undistributed net
investment income.......... 189,107
Undistributed net realized
gain on investments sold... 15,908,190
Net unrealized appreciation
on investments............. 36,961,982
------------
$172,683,364
==========================================
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
PER SHARE - Institutional
class ($166,670,841 /
9,249,651 shares of
beneficial interest)....... $ 18.02
==========================================
NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE
- Retail class ($6,012,523
/ 333,129 shares of
beneficial interest)....... $ 18.05
==========================================
MAXIMUM OFFERING PRICE PER
RETAIL SHARE ($18.05 /
.9625)..................... $ 18.75
==========================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................ $ 2,530,133
Interest............................. 248,280
Less foreign taxes withheld.......... (10,399)
----------
Total investment income.............. 2,768,014
----------
EXPENSES:
Investment Advisory fees............. 1,114,914
Administration fees.................. 148,244
12b-1 fees........................... 97,847
Transfer Agent fees.................. 64,528
Custodian fees....................... 28,747
Registration and filing fees......... 18,375
Printing and shareholder reports..... 17,389
Shareholder servicing fees - Retail
class only......................... 14,991
Legal fees........................... 10,002
Distribution fees.................... 8,212
Miscellaneous........................ 7,989
Audit fees........................... 4,239
Trustees' fees....................... 3,045
Insurance............................ 2,414
Fees waived by Custodian............. (22,003)
----------
Total expenses.............. 1,518,933
- ------------------------------------------------------
NET INVESTMENT INCOME................... 1,249,081
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments sold............ 18,678,577
Net change in unrealized
appreciation on
investments................. 12,169,917
----------
Net gain on investments..... 30,848,494
- ------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $32,097,575
==========================================
</TABLE>
See Accompanying Notes
23
<PAGE> 26
LOGO FINANCIAL STATEMENTS
ARMADA EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
MAY 31, 1996 MAY 31, 1995
----------------- ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income...................................................... $ 1,249,081 $ 1,640,942
Net realized gain/(loss) on investments sold............................... 18,678,577 (117,954)
Net change in unrealized appreciation on investments....................... 12,169,917 10,348,115
------------ ------------
Net increase in net assets resulting from operations....................... 32,097,575 11,871,103
Distributions to shareholders from net investment income....................... (1,249,081) (1,520,691)
Distributions to shareholders in excess of net investment income............... (169,648) 0
Distributions to shareholders from net realized capital gains.................. (1,688,639) 0
Distributions to shareholders in excess of net realized capital gains.......... 0 (888,715)
Increase in net assets derived from capital share transactions................. 18,085,295 18,179,790
------------ ------------
Total increase in net assets................................................... 47,075,502 27,641,487
------------ ------------
NET ASSETS:
Beginning of period........................................................ 125,607,862 97,966,375
------------ ------------
End of period.............................................................. $ 172,683,364 $125,607,862
============ ============
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1996 MAY 31, 1995
--------------- ------------
<S> <C> <C>
UNDISTRIBUTED NET INVESTMENT INCOME AS OF...................................... $ 189,107 $ 358,755
=============== =============
</TABLE>
See Accompanying Notes
24
<PAGE> 27
LOGO FINANCIAL HIGHLIGHTS
ARMADA EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MAY 31
----------------------------------------------------------------------------------------------
1996 1995 1994 1993
----------------------- ----------------------- ----------------------- -------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL
------------- ------- ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 14.77 $ 14.79 $ 13.66 $ 13.68 $ 13.78 $ 13.80 $ 13.13
----------- ------- ----------- ------- --------- ------- ---------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income...... .14 .10 .21 .18 .18 .15 .27
Net gain on securities
(realized and
unrealized).............. 3.46 3.47 1.21 1.21 .01 .00 .67
----------- ------- ----------- ------- --------- ------- ---------
Total from investment
operations........... 3.60 3.57 1.42 1.39 .19 .15 .94
----------- ------- ----------- ------- --------- ------- ---------
LESS DISTRIBUTIONS
Dividends from net
investment income.......... (.14) (.10) (.20) (.17) (.18) (.15) (.27)
Dividends in excess of net
investment income.......... (.02) (.02) (.00) (.00) (.01) (.00) (.02)
Dividends from net realized
capital gains.............. (.19) (.19) (.00) (.00) (.11) (.11) (.00)
Dividends in excess of net
realized capital gains..... (.00) (.00) (.11) (.11) (.01) (.01) (.00)
----------- ------- ----------- ------- --------- ------- ---------
Total distributions.... (.35) (.31) (.31) (.28) (.31) (.27) (.29)
----------- ------- ----------- ------- --------- ------- ---------
Net asset value, end of
period..................... $ 18.02 $ 18.05 $ 14.77 $ 14.79 $ 13.66 $ 13.68 $ 13.78
========== ======== ========== ======== ========== ======== ==========
TOTAL RETURN................ 24.61% 24.34%(3) 10.62% 10.35%(3) 1.41% 1.12%(3) 7.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)................. $ 166,671 $ 6,013 $ 119,634 $ 5,974 $ 90,446 $ 7,521 $ 85,256
Ratio of expenses to average
net assets................. 1.01%(1) 1.26%(2) 1.01%(1) 1.27%(2) 1.07% 1.32% .34%(1)
Ratio of net investment
income to average net
assets..................... 0.85%(1) .60%(2) 1.53%(1) 1.23%(2) 1.33% 1.08% 2.13%(1)
Portfolio turnover rate..... 74% 74% 17% 17% 15% 15% 15%
Average commission rate..... $ 0.06 $ 0.06 -- -- -- -- --
<CAPTION>
1992
-----------------------
RETAIL INSTITUTIONAL RETAIL
------- ------------- -------
<S> <<C> <C> <C>
Net asset value, beginning
of period.................. $ 13.13 $ 12.35 $ 12.35
------- ------------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income...... .23 .30 .25
Net gain on securities
(realized and
unrealized).............. .68 .78 .78
------- ------------- -------
Total from investment
operations........... .91 1.08 1.03
------- ------------- -------
LESS DISTRIBUTIONS
Dividends from net
investment income.......... (.23) (.30) (.25)
Dividends in excess of net
investment income.......... (.01) (.00) (.00)
Dividends from net realized
capital gains.............. (.00) (.00) (.00)
Dividends in excess of net
realized capital gains..... (.00) (.00) (.00)
------- ------------- -------
Total distributions.... (.24) (.30) (.25)
------- ------------- -------
Net asset value, end of
period..................... $ 13.80 $ 13.13 $ 13.13
======== ============ ========
TOTAL RETURN................ 7.00%(3) 8.90% 8.48%(3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)................. $ 7,707 $ 48,673 $ 2,767
Ratio of expenses to average
net assets................. .59%(2) .26%(1) .51%(2)
Ratio of net investment
income to average net
assets..................... 1.88%(2) 2.36%(1) 2.15%(2)
Portfolio turnover rate..... 15% 9% 9%
Average commission rate..... -- -- --
</TABLE>
1 The operating expense ratio and net investment income ratio before fee waivers
by the Custodian for the Institutional class for the years ended May 31, 1996
and 1995 would have been 1.03% and .83%, 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 and 1992 would have been 1.01% and 1.46%, and 1.01% and
1.61%, respectively.
2 The operating expense ratio and net investment income ratio before fee waivers
by the Custodian for the Retail class for the years ended May 31, 1996 and
1995 would have been 1.28% and .58%, 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 would have been 1.26% and 1.21%, and 1.27% and 1.40%,
respectively.
3 Total return excludes sales load.
See Accompanying Notes
25
<PAGE> 28
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 ARMADA EQUITY INCOME FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK -- 96.3%
AEROSPACE -- 2.6%
Boeing Co.................... 6,500 $ 554,125
United Technologies Corp..... 9,900 1,082,813
------------
1,636,938
------------
AUTO -- TRUCKS -- 3.8%
Ford Motor Co................ 52,000 1,898,000
General Motors Corp.......... 8,500 468,562
------------
2,366,562
------------
AUTOMOTIVE PARTS -- EQUIPMENT -- 1.4%
Genuine Parts Co............. 19,000 864,500
------------
BANKING -- 9.7%
Banc One Corp................ 16,500 610,500
Bankers Trust New York
Corp........................ 15,300 1,149,412
Fleet Financial Group,
Inc......................... 18,700 825,137
Mellon Bank Corp............. 17,100 976,838
Morgan (J.P.) & Co., Inc..... 10,200 886,125
PNC Bank Corp................ 25,800 783,675
Wachovia Corp................ 18,600 797,475
------------
6,029,162
------------
BEVERAGES -- 0.5%
Anheuser-Busch Companies,
Inc......................... 4,000 285,000
------------
BUILDING & BUILDING SUPPLIES -- 1.6%
Armstrong World Industries,
Inc......................... 4,000 235,500
Masco Corp................... 25,000 781,250
------------
1,016,750
------------
BUSINESS SERVICES -- 2.1%
Dun & Bradstreet Corp........ 13,900 887,862
H.& R. Block, Inc............ 12,000 418,500
------------
1,306,362
------------
CHEMICALS -- 5.4%
Betz Laboratories, Inc....... 19,000 871,625
Dow Chemical Co.............. 7,000 585,375
E.I. duPont de Nemours &
Co.......................... 11,700 933,075
RPM, Inc. OH................. 30,800 508,200
WD-40 Co..................... 9,500 452,438
------------
3,350,713
------------
COMPUTERS -- 2.2%
International Business
Machines Corp............... 13,000 1,387,750
------------
CONSUMER NON-DURABLES -- 1.9%
Clorox Co.................... 5,500 468,187
Tambrands, Inc............... 15,800 728,775
------------
1,196,962
------------
DIVERSIFIED -- 1.7%
Minnesota Mining &
Manufacturing Co............ 14,700 1,003,275
------------
DRUGS & HEALTH CARE -- 1.4%
American Home Products
Corp........................ 4,800 256,800
Bristol Myers Squibb Co...... 7,500 640,312
------------
897,112
------------
ELECTRICAL EQUIPMENT -- 1.1%
General Electric Co.......... 8,000 662,000
------------
FINANCIAL SERVICES -- 4.7%
Federal National Mortgage
Association................. 53,400 1,648,725
Norwest Corp................. 36,000 1,255,500
------------
2,904,225
------------
FOOD & BEVERAGE -- 1.5%
General Mills, Inc........... 8,200 470,475
Heinz (H.J.) Co.............. 13,950 463,837
------------
934,312
------------
</TABLE>
See Accompanying Notes
26
<PAGE> 29
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 ARMADA EQUITY INCOME FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
INSURANCE -- 3.2%
American General Corp........ 21,000 $ 745,500
Lincoln National Corp........ 9,000 423,000
Marsh & McLennan Cos., Inc... 8,900 833,263
------------
2,001,763
------------
MACHINERY & HEAVY EQUIPMENT -- 2.8%
Caterpillar, Inc............. 12,000 787,500
Cooper Industries, Inc....... 22,500 959,062
------------
1,746,562
------------
METALS & MINING -- 1.5%
Aluminum Company of America.. 11,000 677,875
USX-US Steel Group, Inc...... 8,000 248,000
------------
925,875
------------
NATURAL GAS -- 1.5%
Consolidated Natural Gas
Co.......................... 19,400 938,475
------------
OFFICE & BUSINESS EQUIPMENT -- 1.9%
Pitney Bowes, Inc............ 8,500 421,813
Xerox Corp................... 4,700 739,663
------------
1,161,476
------------
OIL & GAS -- 14.1%
Amoco Corp................... 18,400 1,334,000
Atlantic Richfield Co........ 6,900 825,412
Chevron Corp................. 15,300 914,175
Exxon Corp................... 28,700 2,432,325
Mobil Corp................... 19,900 2,246,213
Royal Dutch Petroleum Co..... 6,300 945,000
------------
8,697,125
------------
OIL EQUIPMENT &
SERVICES -- 1.0%
Schlumberger Ltd., Curacao... 7,300 608,638
------------
PAPER & FOREST PRODUCTS -- 2.4%
International Paper Co....... 18,000 717,750
Weyerhaeuser Co.............. 17,000 771,375
------------
1,489,125
------------
REAL ESTATE -- 2.6%
Duke Realty Investments,
Inc......................... 17,500 527,187
Kimco Realty Corp............ 20,700 566,663
Sun Communities, Inc......... 19,000 508,250
------------
1,602,100
------------
RETAIL MERCHANDISING -- 3.9%
May Department Stores Co..... 29,100 1,378,613
Penney (J.C.) Co., Inc....... 10,300 534,313
Sears Roebuck & Co........... 10,000 508,750
------------
2,421,676
------------
RETAIL STORES -- 0.1%
Payless Shoesource, Inc. +... 2,640 74,250
------------
TELECOMMUNICATIONS -- 1.2%
American Telephone and
Telegraph Co................ 11,500 717,312
------------
TOBACCO -- 2.6%
American Brands, Inc......... 19,500 853,125
Philip Morris Companies,
Inc......................... 4,900 486,938
UST, Inc..................... 9,100 300,300
------------
1,640,363
------------
TRANSPORTATION -- 1.8%
Norfolk Southern Corp........ 12,700 1,095,375
------------
UTILITIES -- GAS &
ELECTRIC -- 0.9%
LG&E Energy Corp............. 25,000 528,125
------------
UTILITIES -- ELECTRIC -- 4.4%
Consolidated Edison Co. of
New York, Inc............... 30,300 844,612
Dominion Resources, Inc.
(VA)........................ 24,000 909,000
Florida Progress Corp........ 6,000 198,000
Kansas City Power & Light
Co.......................... 10,000 261,250
Wisconsin Energy Corp........ 19,000 532,000
------------
2,744,862
------------
</TABLE>
See Accompanying Notes
27
<PAGE> 30
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 ARMADA EQUITY INCOME FUND
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
UTILITIES -- TELEPHONE -- 6.1%
Ameritech Corp............... 22,600 $ 1,276,900
Bell South Corp.............. 19,400 788,125
GTE Corp..................... 28,800 1,231,200
Nynex Corp................... 10,700 493,538
------------
3,789,763
------------
UTILITIES -- WATER -- 0.5%
American Water Works Co.,
Inc......................... 8,000 285,000
------------
WASTE COLLECTION & DISPOSAL -- 1.5%
Browning-Ferris Industries,
Inc......................... 31,400 957,700
------------
MISCELLANEOUS -- 0.7%
Ogden Corp................... 22,000 426,250
------------
TOTAL COMMON STOCK 59,693,438
------------
(Cost $52,777,319)
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000)
-------- ------
<S> <C> <C> <C>
CORPORATE BONDS -- 0.7%
INSURANCE -- 0.7%
Chubb Corp.
6.00%.................. 05/15/98 $ 400 456,500
------------
(Cost $407,122)
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ------------
<S> <C> <C>
TEMPORARY INVESTMENT -- 3.0%
Fidelity Domestic Market
Portfolio.................... 1,826,066 $ 1,826,066
-----------
(Cost $1,826,066)
TOTAL INVESTMENTS - 100.0% $61,976,004
===========
(Cost $55,010,507*)
+ 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..................... $7,426,689
Gross depreciation..................... (461,192)
-----------
$6,965,497
-----------
</TABLE>
See Accompanying Notes
28
<PAGE> 31
LOGO FINANCIAL STATEMENTS
ARMADA EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $55,010,507)................. $61,976,004
Interest and dividends receivable.... 307,219
Receivable for Fund shares sold...... 21,224
Prepaid expenses..................... 17,241
----------
TOTAL ASSETS................ 62,321,688
- ------------------------------------------------------
LIABILITIES
Payable for Fund shares redeemed..... 9,504
Accrued expenses..................... 71,143
----------
TOTAL LIABILITIES........... 80,647
- ------------------------------------------------------
NET ASSETS (based on
4,915,824 shares of
beneficial interest
having no par value)...... $62,241,041
===========
NET ASSETS CONSIST OF:
Paid-in capital............. $52,591,724
Undistributed net
investment income........... 341,643
Undistributed net realized
gain on investments sold.... 2,342,177
Net unrealized appreciation
on investments.............. 6,965,497
----------
$62,241,041
===========
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
PER SHARE - Institutional
class
($61,977,902 / 4,895,028
shares of beneficial
interest)................... $ 12.66
===========
NET ASSET VALUE AND
REDEMPTION PRICE PER
SHARE - Retail class
($263,139 / 20,796 shares of
beneficial interest)........ $ 12.65
===========
MAXIMUM OFFERING
PRICE PER RETAIL SHARE
($12.65 / .9625)............ $ 13.14
===========
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends............................ $ 1,894,021
Interest............................. 132,688
Less foreign taxes withheld.......... (9,234)
----------
Total investment income.............. 2,017,475
----------
EXPENSES:
Investment Advisory fees............. 370,633
Administration fees.................. 49,418
Transfer Agent fees.................. 48,765
12b-1 fees........................... 19,767
Registration and filing fees......... 13,068
Custodian fees....................... 9,930
Legal fees........................... 6,357
Amortization of organization costs... 4,458
Printing and shareholder reports..... 3,780
Distribution fees.................... 3,483
Audit fees........................... 1,439
Trustees' fees....................... 987
Miscellaneous........................ 914
Insurance............................ 651
Shareholder servicing fees - Retail
class only......................... 504
Fees waived by Custodian............. (6,888)
----------
Total expenses.............. 527,266
- ------------------------------------------------------
NET INVESTMENT INCOME................... 1,490,209
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on
investments sold............ 3,007,247
Net change in unrealized
appreciation on
investments................. 4,208,227
----------
Net gain on investments
sold........................ 7,215,474
- ------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING
FROM OPERATIONS............. $ 8,705,683
===========
</TABLE>
See Accompanying Notes
29
<PAGE> 32
LOGO FINANCIAL STATEMENTS
ARMADA EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
MAY 31, 1996 MAY 31, 1995
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income............................................................ $ 1,490,209 $ 878,326
Net realized gain/(loss) on investments sold..................................... 3,007,247 (93,238)
Net change in unrealized appreciation on investments............................. 4,208,227 2,757,270
------------ ------------
Net increase in net assets resulting from operations............................. 8,705,683 3,542,358
Distributions to shareholders from net investment income............................. (1,380,857) (646,035)
Distributions to shareholders from net realized capital gains........................ (571,832) 0
Increase in net assets derived from capital share transactions....................... 19,169,791 33,421,933
------------ ------------
Total increase in net assets......................................................... 25,922,785 36,318,256
------------ ------------
NET ASSETS:
Beginning of period.............................................................. 36,318,256 0
------------ ------------
End of period.................................................................... $62,241,041 $36,318,256
============ ============
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1996 MAY 31, 1995
------------ ------------
<S> <C> <C>
UNDISTRIBUTED NET INVESTMENT INCOME AS OF............................................ $ 341,643 $ 232,291
============ ============
</TABLE>
See Accompanying Notes
30
<PAGE> 33
LOGO FINANCIAL HIGHLIGHTS
ARMADA EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1996 MAY 31, 1995
------------------------ ----------------------
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.............................................. .34 .33 .34 .26
Net gain on securities (realized and unrealized)................... 1.79 1.77 .94 .75
------- ------- ------- -------
Total from investment operations................................. 2.13 2.10 1.28 1.01
------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income............................... (.34) (.32) (.27) (.26)
Dividends from net realized capital gains.......................... (.14) (.14) (.00) (.00)
------- ------- ------- -------
Total distributions.............................................. (.48) (.46) (.27) (.26)
------- ------- ------- -------
Net asset value, end of period....................................... $12.66 $12.65 $11.01 $ 11.01
======== ======== ======== =======
TOTAL RETURN......................................................... 19.72% 19.37%(5) 14.34%(4) 13.18 %(4,5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)............................... $61,978 $ 263 $36,194 $ 125
Ratio of expenses to average net assets............................ 1.06%(1) 1.31%(2) .99%(1,4) 1.41 %(2,4)
Ratio of net investment income to average net assets............... 3.02%(1) 2.75%(2) 3.87%(1,4) 3.45 %(2,4)
Portfolio turnover rate............................................ 53% 53% 12% 12 %
Average commission rate............................................ $ 0.07 $ 0.07 -- --
</TABLE>
1 The operating expense ratio and net investment income ratio before fee waivers
by the Custodian for the Institutional class for the year ended May 31, 1996
would have been 1.08% and 3.00%, 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 year ended May 31, 1996 would
have been 1.32% and 2.74%, 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 1.45% 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
31
<PAGE> 34
LOGO NOTES TO FINANCIAL STATEMENTS
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. 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 preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
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.
32
<PAGE> 35
LOGO NOTES TO FINANCIAL STATEMENTS
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 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.
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 of Columbus and National City Bank of 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 year ended May 31, 1996, the
Advisers have earned fees as follows:
<TABLE>
<S> <C>
Mid Cap Regional Fund $ 571,860
Equity Fund 1,114,914
Equity Income Fund 370,633
</TABLE>
At May 31, 1996, advisory fees accrued and unpaid amounted to:
<TABLE>
<S> <C>
Mid Cap Regional Fund $ 63,596
Equity Fund 115,214
Equity Income Fund 39,270
</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 year ended May 31, 1996 in the following amounts:
<TABLE>
<CAPTION>
NATIONAL CITY
NATCITY INVESTMENTS
INVESTMENTS INC. CORPORATION
---------------- -------------
<S> <C> <C>
Mid Cap Regional Fund $551 $10,059
Equity Fund 388 14,276
Equity Income Fund 7 470
</TABLE>
National City Bank, a wholly-owned subsidiary of National City Corporation,
serves as the Funds' Custodian. For the year ended May 31, 1996, National City
Bank has earned and waived custodian fees as follows:
<TABLE>
<CAPTION>
EARNED WAIVED
------- -------
<S> <C> <C>
Mid Cap Regional Fund $15,419 $10,796
Equity Fund 28,747 22,003
Equity Income Fund 9,930 6,888
</TABLE>
33
<PAGE> 36
LOGO NOTES TO FINANCIAL STATEMENTS
440 Financial Distributors, Inc., a wholly-owned subsidiary of The Shareholder
Services Group, Inc., and an indirect wholly-owned subsidiary of First 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 $7,500 plus $2,500 for each Board
meeting attended and reimbursement of out-of-pocket expenses. The Chairman of
the Board receives an additional $2,500 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, 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, 1996 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 year ended May 31, 1996, 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...... $110,532,286 $ 77,647,881
Equity Fund................ 117,994,426 107,019,723
Equity Income Fund......... 42,844,101 25,315,511
</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.
34
<PAGE> 37
LOGO NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1996
---------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
MID CAP REGIONAL FUND
Shares sold............................................... 3,553,432 $ 43,074,191 132,190 $ 1,555,313
Shares reinvested......................................... 164,496 1,952,570 23,802 279,433
Shares repurchased........................................ (617,848) (7,454,369) (109,477) (1,303,293)
--------- ------------ -------- -----------
Net increase.............................................. 3,100,080 $ 37,572,392 46,515 $ 531,453
========= ============ ======== ===========
EQUITY FUND
Shares sold............................................... 2,422,785 $ 40,752,444 24,434 $ 410,314
Shares reinvested......................................... 85,415 1,411,255 6,672 110,500
Shares repurchased........................................ (1,360,891) (22,930,435) (102,003) (1,668,783)
--------- ------------ -------- -----------
Net increase (decrease)................................... 1,147,309 $ 19,233,264 (70,897) $ (1,147,969)
========= ============ ======== ===========
EQUITY INCOME FUND
Shares sold............................................... 1,795,994 $ 21,331,893 15,409 $ 182,565
Shares reinvested......................................... 91,943 1,090,733 646 7,713
Shares repurchased........................................ (279,278) (3,363,743) (6,573) (79,370)
--------- ------------ -------- -----------
Net increase.............................................. 1,608,659 $ 19,058,883 9,482 $ 110,908
========= ============ ======== ===========
</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>
35
<PAGE> 38
LOGO NOTES TO FINANCIAL STATEMENTS
5. SUBSEQUENT EVENT AND FUND REORGANIZATION
On May 2, 1996, Integra Financial Corporation ("Integra Financial") merged
into National City Corporation ("National City"). Since Integra Trust Company,
an affiliate of Integra Financial, served as the Investment Adviser to Inventor
Funds, Inc., the merger of Integra Financial into National City required
approval of a new investment advisory agreement between the Inventor Funds, Inc.
and National City Bank. That approval was received from shareholders of Inventor
Funds, Inc. on May 2, 1996.
National City Bank has now begun the process of reorganizing the Armada Funds
and Inventor Funds, Inc. On February 15, 1996, the Board of Trustees of Armada
Funds and on March 18, 1996, the Board of Trustees of Inventor Funds each
approved the Agreement and Plan of Reorganization between Armada Funds and
Inventor Funds, Inc. (the "Plan"), which is subject to shareholder approval. The
Plan provides that, to the extent not borne by their respective Investment
Advisers, Armada and Inventor will each be responsible for the payments of its
own expenses incurred in connection with the Reorganization. Armada estimates
that it will bear approximately $200,000 of the total costs of the
Reorganization. Inventor does not expect to bear any of such costs. The
reorganization is intended to be effected on a tax-free basis, so that none of
the Funds' shareholders will recognize taxable gains or losses as a result of
the reorganization.
A proxy statement/prospectus describing the reorganization and the reasons
therefore has been sent to Inventor shareholders for their approval.
36
<PAGE> 39
LOGO 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, 1996, and the related statements of operations for the year then ended, and
the statements of changes in net assets and 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 and financial highlights. Our procedures included verification by
examination of securities held by the custodian, as of May 31, 1996, and
confirmation of securities not held by the custodian, by correspondence with
others. 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, 1996, the results of their operations for the year then
ended, the changes in their net assets and financial highlights for each of the
periods presented herein, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
July 2, 1996
37
<PAGE> 40
LOGO ARMADA FUNDS
BOARD OF TRUSTEES Richard B. Tullis
Chairman of the Board
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
Chairman, EBCO Manufacturing Company
and Subsidiaries
Leigh Carter
Trustee, President and Treasurer
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,
Carol Martin Gatten College of Business
and Economics, University of Kentucky
Robert D. Neary
Trustee
Retired Co-Chairman, Ernst & Young LLP
J. William Pullen
Trustee
President and Chief Executive Officer,
Whayne Supply Company
<PAGE> 41
LOGO NOTES
<PAGE> 42
LOGO NOTES
<PAGE> 43
LOGO NOTES
<PAGE> 44
[ARMADA FUNDS] BULK RATE
4400 Computer Drive U.S. POSTAGE
Westborough, Massachusetts 01581 PAID
BOSTON, MA
INVESTMENT ADVISERS PERMIT NO. 54201
AFFILIATES OF
NATIONAL CITY
CORPORATION
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
National City Bank of Columbus
155 East Broad Street
Columbus, Ohio 43251
National City Bank of Kentucky
101 South Fifth Street
Louisville, Kentucky 40202
