<PAGE> 1
Annual Report Armada
May 31, 1996 Ohio
Tax
Exempt
Fund
Armada Ohio Tax Exempt Fund
[ARMADA FUNDS GRAPHIC]
<PAGE> 2
LOGO
ARMADA FUNDS
ARMADA OHIO TAX EXEMPT FUND
ANNUAL REPORT - MAY 31, 1996
<TABLE>
<S> <C>
ARMADA TABLE OF CONTENTS
OHIO TAX
EXEMPT FUND Chairman's Message ......................................... 1
Tax Exempt Series Overview .................................. 3
FUND OVERVIEW .............................................. 4
PORTFOLIO OF INVESTMENTS .......................................6
FINANCIAL STATEMENTS .........................................10
NOTES TO FINANCIAL STATEMENTS .................................13
REPORT OF INDEPENDENT AUDITORS ................................16
</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 the Ohio Tax
Exempt 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
TAX EXEMPT SERIES OVERVIEW
AS THE TAX REFORM DEBATE
EBBED, GROWTH IN THE ECONOMY
LED TO A MARKET CORRECTION
WHICH IS CONTINUING.
The fiscal year ended May 31, 1996 began with the
fear of tax reform dominating the municipal market.
The effect of the "flat tax" was to cause the
tax-exempt market to lag the performance of the
overall bond market through the rally that ended in
February. As the tax reform debate ebbed, growth in
the economy led to a market correction which is
continuing. Interest rates are back to the levels of
last spring as the earlier forecast of further
Federal Reserve easing has reversed and a tightening
is now expected probably before Labor Day.
Unlike last year, the municipal market has
out-performed the taxable market, albeit in less
price depreciation during a declining market. For
the past six months the U.S. Treasury Bellwether Ten
Year had a total return of (6.39)% while the Lehman
Ten Year Municipal (8-12 year maturities) recorded a
total return of (.69)%. Much of this difference in
performance can be attributed to renewed interest in
tax exempts especially as yields have approached 6%
for the ten year and longer maturities. Last summer,
longer tax exempts traded at 85% or higher of their
corresponding Treasuries. That ratio has declined to
75% today and is even lower for shorter maturities.
In the wake of the Orange County, California bond
debacle, perception of the credit safety of the
municipal market was challenged. The Standard and
Poor's bond rating agency reported only a modest
decline in public finance ratings during the past
five years and most of those were in the health care
and housing sections. Over 84% of rated municipals
are "A" or higher while corporate issues are only
22% of the "A" or better investment sphere. Only a
small percentage of issues receive rating changes
and the general obligations sector, over 55% of
municipal debt, generates a low 2.1% rating changes
to rated issues. Upgrades slightly led downgrades
during the last five years. This certainly enhances
the overall stability that has been a hallmark of
the municipal market for many years.
3
<PAGE> 6
LOGO FUND OVERVIEW
ARMADA OHIO TAX EXEMPT FUND
ASSET MANAGER:
STEPHEN P. CARPENTER
VICE PRESIDENT
NATIONAL CITY
FUND'S DATE OF INCEPTION:
JANUARY 5, 1990
(INSTITUTIONAL SHARES)
APRIL 15, 1991 (RETAIL
SHARES)
ASSETS:
$82,885,560 (INSTITUTIONAL
SHARES)
$ 2,869,078 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
PROVIDE AS HIGH A LEVEL OF
INTEREST INCOME EXEMPT FROM
FEDERAL INCOME TAX AND, TO THE
EXTENT POSSIBLE, FROM OHIO
INCOME TAX, AS IS CONSISTENT
WITH CONSERVATION OF CAPITAL.
THE FUND NORMALLY INVESTS IN
TAX-EXEMPT OBLIGATIONS HAVING
AVERAGE REMAINING MATURITIES OF
TWO TO TEN YEARS.
The Armada Ohio Tax Exempt Fund declined 0.27% for
the past six months and recorded a total return of
4.36% (Institutional Shares) and 4.35% Retail Shares
(before Sales load) for the fiscal year ended May
31, 1996. This compared to the Lehman Seven Year
Municipal Bond Index returns of -0.16% for the past
six months and 4.64% for the fiscal year.
The Ohio market experienced the same market
conditions of "tax reform" and interest rate
scenario that affected the overall bond market. The
economy in Ohio remains one of the strongest in the
nation, and overall credit quality continues to be
stable. The supply of new issues in Ohio remains
manageable, and in fact, the Ohio market could
probably absorb even more. As existing debt is
called or retired, the supply of municipal bonds
continues to shrink.
The fund has an average maturity of 6.8 years and
a duration of 5.45 years just slightly below the
Lehman Seven Year Index. The average yield to
maturity is 4.9% and the overall credit quality is
AA average. General obligations account for over
half the Fund and the remainder are revenue issues
such as higher education, sewer and water. Hospital
obligations which are rated AA or higher, make up
5.7% of the Fund's holdings.
4
<PAGE> 7
LOGO FUND OVERVIEW
ARMADA OHIO TAX EXEMPT FUND
<TABLE>
<CAPTION>
Lehman
Brothers Armada Ohio Armada Ohio
Seven-Year Tax Exem pt Tax Exempt
Municipal Fund (Insti- Fund (Retail
Measurement Period Bond Index as tutional Shares with
(Fiscal Year Covered) of 1/2/90 Shares) sales load)
<S> <C> <C> <C>
Nov-1989 10000 9700 10000
May-1990 10188 9719 10020
Nov-1990 10710 10111 10424
May-1991 11208 10438 10762
Nov-1991 11743 10741 11074
May-1992 12215 11088 11430
Nov-1992 12854 11594 11962
May-1993 13497 12228 12614
Nov-1993 14053 12701 13101
May-1994 13944 12508 12902
Nov-1994 13709 12234 12609
May-1995 15076 13338 13755
Nov-1995 15799 13958 14393
May-1996 15775 13918 14355
<FN>
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 Ohio Tax Exempt Fund's date of
inception was January 5, 1990 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.
</TABLE>
5
<PAGE> 8
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 OHIO TAX EXEMPT FUND
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
------- ----- ----
<S> <C> <C> <C>
OHIO - 99.3%
Akron General Obligation
4.50%.............. 12/01/05 $ 500 $ 462,500
Akron Waterworks Revenue
5.15%.............. 03/01/01 500 503,750
4.90%.............. 03/01/08 500 469,375
Allen County General
Obligation
4.95%.............. 12/01/04 500 494,375
Avon Lake Water Revenues
4.80%.............. 10/01/03 345 338,962
Beavercreek Local School
District
5.25%.............. 12/01/07 1,130 1,122,937
Brown County General
Obligation
5.20%.............. 12/01/04 455 457,275
Butler County Sewer System
Revenue
6.00%.............. 12/01/04 500 521,875
Cincinnati City School
District RANS
5.60%.............. 06/15/97 500 508,375
Cincinnati General Obligation
5.25%.............. 12/01/97 400 407,500
5.375%............. 12/01/97 250 255,000
5.25%.............. 12/01/98 250 255,625
5.375%............. 12/01/99 250 257,500
4.50%.............. 12/01/01 1,000 987,500
Clermont County Waterworks
Revenue
5.30%.............. 12/01/05 500 505,000
Cleveland Heights General
Obligation
5.40%.............. 12/01/00 900 925,875
Cleveland Waterworks
5.40%.............. 01/01/06 500 506,250
PAR
MATURITY (000) VALUE
------- ----- ----
Columbus General Obligation
5.45%.............. 01/01/98 $ 900 $ 916,875
5.25%.............. 05/01/02 1,000 1,026,250
5.30%.............. 05/01/03 1,000 1,026,250
5.70%.............. 07/01/04 300 315,000
Columbus Sewer Revenue
6.20%.............. 06/01/04 1,500 1,608,750
Columbus Water System Revenue
5.15%.............. 11/01/96 375 376,855
5.80%.............. 02/15/01 500 523,125
6.00%.............. 11/01/02 330 352,275
Cuyahoga County General
Obligation
4.50%.............. 10/01/00 500 495,625
5.00%.............. 10/01/05 1,610 1,571,762
Cuyahoga County Hospital
Revenues (Cleveland Clinic)
6.00%.............. 11/15/03 890 942,287
6.125%............. 11/15/04 840 898,800
Cuyahoga County Hospital
University Series A
5.25%.............. 01/15/08 1,500 1,470,000
Delaware County General
Obligation
5.25%.............. 12/01/06 500 491,250
Franklin County General
Obligation
4.85%.............. 12/01/03 1,500 1,494,374
6.00%.............. 12/01/03 500 537,500
5.05%.............. 12/01/05 2,000 2,002,500
6.375%............. 12/01/17 500 546,875
Franklin County Hospital
Revenue (Grant Medical
Center)
6.25%.............. 12/01/97 500 513,750
Gahanna-Jefferson City School
District General Obligation
5.40%.............. 12/01/04 280 281,400
</TABLE>
See Accompanying Notes
6
<PAGE> 9
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 OHIO TAX EXEMPT FUND
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
------- ----- ----
<S> <C> <C> <C>
OHIO (CONT'D.)
Granville Local School
District General Obligation
4.65%.............. 12/01/05 $ 500 $ 476,875
Greene County Water Works
Systems Revenue
5.30%.............. 12/01/05 500 496,875
Hamilton County General
Obligation
5.75%.............. 12/01/01 250 260,938
5.00%.............. 12/01/08 675 641,250
Hamilton County Sewer Revenue
6.20%.............. 12/01/00 1,000 1,065,000
5.30%.............. 12/01/06 1,000 1,002,500
Hilliard City Schools General
Obligation
5.30%.............. 12/01/99 250 256,562
5.90%.............. 12/01/04 1,000 1,041,250
Hudson Local School District
General Obligation
5.00%.............. 12/15/02 500 503,750
Kenston Local School District
General Obligation
5.55%.............. 12/01/03 500 505,625
Kent State University General
Receipts
6.15%.............. 05/01/04 250 264,688
Kettering General Obligation
5.15%.............. 12/01/05 550 545,875
Lake County General Obligation
5.30%.............. 12/01/98 250 255,625
Lebanon City Schools General
Obligation
4.65%.............. 12/01/99 750 760,312
Loveland City School District
General Obligation
6.00%.............. 12/01/00 250 259,688
PAR
MATURITY (000) VALUE
------- ----- ----
Marysville Exempted Local
School District General
Obligation
5.10%.............. 12/01/04 $ 500 $ 495,625
Miami University General
Receipts
5.40%.............. 12/01/05 1,000 1,005,000
Miamisburg Sewer System
Revenue
5.00%.............. 11/15/08 500 474,375
Montgomery County Solid Waste
Revenue
5.125%............. 11/01/08 500 481,250
Newark General Obligation
5.45%.............. 12/01/02 1,000 1,022,500
North Canton City School
District General Obligation
5.25%.............. 12/01/01 500 508,750
Northeast Ohio Regional Sewer
Revenue
6.40%.............. 11/15/03 250 272,812
6.50%.............. 11/15/16 500 548,125
Ohio Higher Education Facility
(University of Dayton)
5.875%............. 12/01/04 250 261,250
Ohio Public Facilities (Mental
Health)
5.00%.............. 12/01/02 1,000 1,003,750
Ohio State Building Authority
5.20%.............. 10/01/04 500 498,750
Ohio State Capital Facilities
General Obligation Series A
5.40%.............. 10/01/07 1,000 1,007,500
</TABLE>
See Accompanying Notes
7
<PAGE> 10
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 OHIO TAX EXEMPT FUND
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
------- ----- ----
<S> <C> <C> <C>
OHIO (CONT'D.)
Ohio State Public Facilities
(Higher Education)
4.25%.............. 12/01/96 $ 750 $ 752,700
4.625%............. 12/01/98 500 501,875
4.60%.............. 06/01/99 500 501,250
5.50%.............. 12/01/00 500 515,000
4.625%............. 12/01/01 500 496,875
4.80%.............. 05/01/02 530 520,063
5.20%.............. 05/01/06 500 500,625
5.20%.............. 05/01/07 1,000 985,000
4.25%.............. 12/01/07 1,000 897,500
4.50%.............. 11/01/08 1,000 908,750
Ohio State University General
Receipts
5.15%.............. 12/01/00 250 254,375
4.55%.............. 12/01/96 500 501,070
5.40%.............. 12/01/02 1,500 1,535,625
4.70%.............. 12/01/05 1,000 942,500
Ohio State Water Development
Authority
5.00%.............. 12/01/98 1,500 1,524,375
5.90%.............. 06/01/00 500 519,375
4.35%.............. 12/01/00 1,000 987,500
5.50%.............. 12/01/01 1,000 1,035,000
5.90%.............. 12/01/02 320 335,200
5.55%.............. 06/01/04 1,000 1,031,250
5.75%.............. 12/01/05 500 520,000
5.60%.............. 06/01/07 1,500 1,530,000
5.00%.............. 12/01/07 1,000 952,500
Ohio State Water Development
Authority Pollution Control
Facilities
5.05%.............. 06/01/07 500 487,500
Perry Local School District
General Obligation
4.35%.............. 06/01/99 750 739,688
PAR
MATURITY (000) VALUE
------- ----- ----
Portage County General
Obligation
6.00%.............. 12/01/03 $ 915 $ 939,019
Richland County General
Obligation
5.20%.............. 12/01/08 515 493,756
Solon General Obligation
5.30%.............. 12/01/03 210 212,888
5.50%.............. 12/01/04 220 224,400
Springfield Local School
District General Obligation
6.10%.............. 12/01/03 250 264,063
State of Ohio General
Obligation
5.10%.............. 08/01/96 500 501,185
5.00%.............. 05/15/97 500 506,005
5.70%.............. 05/15/98 500 513,125
5.00%.............. 05/15/99 1,000 1,015,000
4.50%.............. 05/15/00 1,000 996,250
5.00%.............. 08/01/00 500 507,500
4.60%.............. 05/15/01 500 498,750
5.15%.............. 09/01/01 500 508,750
4.70%.............. 05/15/02 2,000 1,995,000
4.70%.............. 08/01/03 1,000 986,250
State of Ohio Highways General
Obligation
4.80%.............. 05/15/99 3,000 3,026,250
University of Cincinnati
General Receipts
5.70%.............. 06/01/03 250 257,188
4.75%.............. 06/01/04 500 482,500
5.80%.............. 06/01/04 200 206,500
5.70%.............. 06/01/12 1,240 1,221,400
Upper Arlington City School
District General Obligation
6.00%.............. 12/01/05 670 709,363
</TABLE>
See Accompanying Notes
8
<PAGE> 11
LOGO PORTFOLIO OF INVESTMENTS
MAY 31, 1996 OHIO TAX EXEMPT FUND
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
------- ----- ----
<S> <C> <C> <C>
OHIO (CONT'D.)
Upper Arlington General
Obligation
6.20%.............. 12/01/01 $ 270 $ 288,563
West Clermont Local School
District
5.65%.............. 12/01/08 1,030 1,044,163
Westerville General Obligation
5.60%.............. 12/01/01 325 338,000
Westlake General Obligation
5.30%.............. 12/01/03 500 505,625
Worthington City School
District General Obligation
5.80%.............. 12/01/01 1,200 1,249,500
5.85%.............. 12/01/02 500 524,375
Wright State University
General Receipts
4.90%.............. 05/01/05 500 490,000
Youngstown Public Housing
Authority (U.S. Government
Backed)
5.25%.............. 07/01/98 670 678,374
Youngstown City School
District Revenue
5.40%.............. 06/15/98 1,000 1,008,000
----------
TOTAL MUNICIPAL BONDS......... 83,955,015
----------
(Cost $83,909,217)
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF SHARES
--------
<S> <C> <C> <C>
TEMPORARY INVESTMENT - 0.7%
Federated Ohio Municipal
Cash Trust................... 574,582 $ 574,582
-----------
(Cost $574,582)
TOTAL INVESTMENTS - 100.0%...... $84,529,597
==========
(Cost $84,483,799*)
* Also cost for Federal income tax purposes.
The gross unrealized appreciation (depreciation)
for Federal income tax purposes is as follows:
Gross appreciation.................... $ 974,702
Gross depreciation.................... (928,904)
---------
$ 45,798
=========
</TABLE>
RAN -- Revenue Anticipation Note
See Accompanying Notes
9
<PAGE> 12
LOGO FINANCIAL STATEMENTS
OHIO TAX EXEMPT FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments at value
(Cost $84,483,799)................... $84,529,597
Interest receivable.................. 1,588,620
Prepaid expenses..................... 2,328
----------
TOTAL ASSETS................ 86,120,545
------------------------------------------
LIABILITIES
Dividends payable - Institutional
class.............................. 321,418
Dividends payable-Retail class....... 216
Accrued expenses..................... 44,273
----------
TOTAL LIABILITIES........... 365,907
------------------------------------------
NET ASSETS (based on
8,018,984 shares of
beneficial interest having
no par value)............... $85,754,638
==========================================
NET ASSETS CONSIST OF:
Paid-in capital............. $85,716,547
Accumulated net realized
loss on investments sold.... (7,707)
Net unrealized appreciation
on investments.............. 45,798
----------
$85,754,638
==========================================
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
PER SHARE - Institutional
class
($82,885,560 / 7,749,732
shares
of beneficial interest)..... $ 10.70
==========================================
NET ASSET VALUE AND
REDEMPTION PRICE PER
SHARE - Retail class
($2,869,078 / 269,252 shares
of beneficial interest)..... $ 10.66
==========================================
MAXIMUM OFFERING PRICE PER
RETAIL SHARE
($10.66 / .9700)............ $ 10.99
==========================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.............................. $3,997,963
---------
EXPENSES:
Investment Advisory fees.............. 443,670
Administration fees................... 81,680
12b-1 fees............................ 32,672
Miscellaneous......................... 26,899
Transfer Agent fees................... 24,012
Custodian fees........................ 16,374
Printing and shareholder reports...... 13,701
Legal fees............................ 9,558
Registration and filing fees.......... 6,003
Distribution fees..................... 5,682
Audit fees............................ 2,804
Trustees' fees........................ 2,173
Insurance............................. 1,466
Fees waived by Investment Advisers.... (443,670)
Fees waived by Custodian.............. (11,984)
---------
Total expenses............... 211,040
------------------------------------------
NET INVESTMENT INCOME.................... 3,786,923
- ------------------------------------------------------
REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
Net realized gain on
investments sold............. $ 82,782
Net change in unrealized
depreciation on
investments.................. (647,617)
---------
Net loss on investments...... (564,835)
------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING
FROM OPERATIONS.............. $3,222,088
==========================================
</TABLE>
See Accompanying Notes
10
<PAGE> 13
LOGO FINANCIAL STATEMENTS
OHIO TAX EXEMPT 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...................................................... $ 3,786,923 $ 3,416,458
Net realized gain/(loss) on investments sold............................... 82,782 (85,521 )
Net change in unrealized appreciation/(depreciation) on investments........ (647,617) 1,365,823
------------- -----------
Net increase in net assets resulting from operations....................... 3,222,088 4,696,760
Distributions to shareholders from net investment income....................... (3,786,923) (3,416,458 )
Increase in net assets derived from capital share transactions................. 11,155,681 8,026,080
------------- -----------
Total increase in net assets................................................... 10,590,846 9,306,382
------------- -----------
NET ASSETS:
Beginning of period........................................................ 75,163,792 65,857,410
------------- -----------
End of period.............................................................. $85,754,638 $75,163,792
============= ===========
</TABLE>
See Accompanying Notes
11
<PAGE> 14
LOGO FINANCIAL HIGHLIGHTS
OHIO TAX EXEMPT FUND
FINANCIAL HIGHLIGHTS
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MAY 31
-----------------------------------------------------------------------------
1996 1995 1994
----------------------- ----------------------- -----------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ------ ------------- ------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 10.74 $10.70 $ 10.57 $10.53 $ 10.84 $10.80
----- ------ ----- ------ ----- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income....................... .50 .50 .50 .50 .52 .52
Net gains (losses) on securities (realized
and unrealized)........................... (.04) (.04) .17 .17 (.26) (.26)
----- ------ ----- ------ ----- ------
Total from investment operations......... .46 .46 .67 .67 .26 .26
----- ------ ----- ------ ----- ------
LESS DISTRIBUTIONS
Dividends from net investment income........ (.50) (.50) (.50) (.50) (.52) (.52)
Dividends in excess of net investment
income.................................... (.00) (.00) (.00) (.00) (.00) (.00)
Dividends in excess of net realized capital
gains..................................... (.00) (.00) (.00) (.00) (.01) (.01)
----- ------ ----- ------ ----- ------
Total distributions...................... (.50) (.50) (.50) (.50) (.53) (.53)
----- ------ ----- ------ ----- ------
Net asset value, end of period............... $ 10.70 $10.66 $ 10.74 $10.70 $ 10.57 $10.53
============ ====== ============ ====== ============ ======
TOTAL RETURN............................. 4.36% 4.35%5 6.61% 6.64%5 2.28% 2.29%5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)........ $82,886 $2,869 $71,996 $3,168 $63,133 $2,725
Ratio of expenses to average net assets..... .26%1 .26%2 .24%1 .24%2 .33%1 .33%2
Ratio of net investment income to average
net assets................................ 4.68%1 4.68%2 4.82%1 4.82%2 4.54%1 4.54%2
Portfolio turnover rate..................... 10% 10% 3% 3% 2% 2%
</TABLE>
<TABLE>
1993 1992
----------------------- ------------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL3
------------- ------ ------------- -------
<S> <C><C> <C> <C> <C>
Net asset value, beginning of period......... $ 10.33 $10.30 $ 10.14 $10.14
----- ------ ----- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income....................... .51 .51 .19 .46
Net gains (losses) on securities (realized
and unrealized)........................... .56 .54 .15 .16
----- ------ ----- -------
Total from investment operations......... 1.07 1.05 .34 .62
----- ------ ----- -------
LESS DISTRIBUTIONS
Dividends from net investment income........ (.51) (.51) (.15) (.46)
Dividends in excess of net investment
income.................................... (.05) (.04) (.00) (.00)
Dividends in excess of net realized capital
gains..................................... (.00) (.00) (.00) (.00)
----- ------ ----- -------
Total distributions...................... (.56) (.55) (.15) (.46)
----- ------ ----- -------
Net asset value, end of period............... $ 10.84 $10.80 $ 10.33 $10.30
============ ====== ============ =======
TOTAL RETURN............................. 10.36% 10.27%5 8.23% 6.22%4,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's)........ $40,080 $1,466 $10,453 $437
Ratio of expenses to average net assets..... .09%1 .09%2 .73%1 .93%2,4
Ratio of net investment income to average
net assets................................ 5.00%1 5.00%2 4.56%1 4.49%2,4
Portfolio turnover rate..................... 11% 11% 1% 1%
<FN>
1 The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers and Custodian for the Institutional class
for the years ended May 31, 1996 and 1995 would have been .83% and 4.11% and
.80% and 4.26%, 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, 1994, 1993 and 1992 would have
been .88% and 3.99%, .64% and 4.45%, and 1.28% and 4.01%, respectively.
2 The operating expense ratio and the net investment income ratio before fee
waivers by the Investment Advisers and Custodian for the Retail class for the
years ended May 31, 1996 and 1995 would have been .83% and 4.11% and .78% and
4.27%, 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, 1994, 1993 and for the period ended May 31, 1992 would
have been .88% and 3.99%, .64% and 4.45%, and 1.48% and 3.94%, respectively.
3 Retail class commenced operations on April 15, 1991.
4 Annualized.
5 Total Return excludes sales load.
</TABLE>
See Accompanying Notes
12
<PAGE> 15
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 Ohio Tax Exempt Fund (the "Fund") in preparation of its financial
statements.
PORTFOLIO VALUATION: Securities for which market quotations are readily
available are valued at their market values determined on the basis of the mean
between their current available bid and asked prices in the principal market
(closing sales prices if the principal market is an exchange) in which such
securities are normally traded. Securities and other assets for which quotations
are not readily available are valued at their fair market value under procedures
approved by the Board of Trustees. Short-term investments having maturities of
60 days or less are generally valued on the basis of amortized cost.
The Ohio Tax Exempt Fund follows an investment policy of investing primarily
in municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Fund.
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 AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to
declare dividends daily from
13
<PAGE> 16
LOGO NOTES TO FINANCIAL STATEMENTS
net investment income and to pay such dividends no later than five business days
after the end of the month. Net investment income of the Fund consists of
interest accrued and original issue discount earned, less amortization of any
market premium and accrued expenses.
FEDERAL INCOME TAXES: The Fund is classified as a separate taxable entity
for Federal income tax purposes. The Fund 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 that distributions from net investment
income and realized net capital gains exceed amounts reported in the financial
statements, such amounts are reported separately.
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 an annual rate of .55%
of the average daily net assets of the Fund. The Advisers have earned fees from
the Fund in the amount of $443,670 for the year ended May 31, 1996. The Advisers
may from time to time waive their fees payable by the Fund. For the year ended
May 31, 1996, the Advisers have waived $443,670 with respect to the Fund.
National City Bank, a wholly owned subsidiary of National City Corporation,
serves as the Fund's Custodian. National City Bank has earned custodian fees for
the year ended May 31, 1996 totaling $16,374 for the Fund and has waived
Custodian fees totaling $11,984 for the year ended May 31, 1996.
440 Financial Distributors, Inc., a wholly-owned subsidiary of The
Shareholder Services Group, Inc., and an indirect wholly-owned subsidiary of
First Data Corp. (the "Distributor"), serves as the Trust's Distributor. Under
the Trust's Distribution Agreement and related Distribution Plan adopted under
Rule 12b-1 of the Investment Company Act of 1940, the Trust 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 the Trust, 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 investment 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
$20,982,244 and $7,613,394, respectively, for the Ohio Tax Exempt Fund.
14
<PAGE> 17
LOGO NOTES TO FINANCIAL STATEMENTS
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 below for the
Ohio Tax Exempt Fund.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1996
--------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
--------------------------- -----------------------
SHARES VALUE SHARES VALUE
---------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Shares sold.................................................... 2,191,806 $23,827,182 76,941 $ 836,692
Shares reinvested.............................................. 9,411 102,340 13,782 149,184
Shares repurchased............................................. (1,151,939) (12,499,876) (117,369) (1,259,841)
---------- ----------- -------- ---------
Net increase/(decrease)........................................ 1,049,278 $11,429,646 (26,646) $(273,965)
========== =========== ======== =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1995
-------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
--------------------------- ----------------------
SHARES VALUE SHARES VALUE
---------- ----------- ------- ---------
<S> <C> <C> <C> <C>
Shares sold..................................................... 1,965,695 $20,520,160 70,940 $ 742,119
Shares reinvested............................................... 8,271 86,343 12,897 134,092
Shares repurchased.............................................. (1,246,336) (12,973,045) (46,646) (483,589)
---------- ----------- ------- ---------
Net increase.................................................... 727,630 $ 7,633,458 37,191 $ 392,622
========== =========== ======= =========
</TABLE>
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.
15
<PAGE> 18
LOGO REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and
Shareholders of Armada Funds:
We have audited the accompanying statement of
assets and liabilities, including the portfolio of
investments, of the Armada Ohio Tax Exempt Fund (the
"Fund") as of May 31, 1996, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the
two years then ended, and the financial highlights
for each of the periods presented herein. These
financial statements and financial highlights are
the responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the audit
to obtain reasonable assurance about whether the
financial statements and financial highlights are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements
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 statement and
financial highlights referred to above present
fairly, in all material respects, the financial
position of the Armada Ohio Tax Exempt Fund at May
31, 1996, the results of its operations for the year
then ended, the change in its net assets for each of
the two years then ended, and the financial
highlights for each of the periods presented herein,
in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
July 2, 1996
16
<PAGE> 19
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 Gatton 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> 20
[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
NC-141 (6/96)
