<PAGE> 1
As filed with the Securities and Exchange Commission on January 22, 1998
Registration No. 33-488/811-4416
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
POST-EFFECTIVE AMENDMENT NO. 39 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 38 [x]
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Armada Funds (formerly known as "NCC Funds")
(Exact Name of Registrant as Specified in Charter)
Oaks, Pennsylvania 19456
(Address of Principal Executive Offices)
Registrant's Telephone Number:
1-800-622-FUND
W. Bruce McConnel, III, Esq.
DRINKER BIDDLE & REATH LLP
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
Copy to:
Thomas F. Harvey, Esq.
National City Bank
National City Center
P.O. Box 5756
Cleveland, Ohio 44101-0756
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (b)
[X] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(iii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
==============================
The Title of Securities Being Registered . . . . Shares of beneficial interest
<PAGE> 2
The purpose of this post-effective amendment is to register
Institutional, Retail and B shares of the Tax Managed Equity Fund.
<PAGE> 3
CROSS REFERENCE SHEET
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Tax Managed Equity Fund
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Form N-1A Part A Item Prospectus Caption
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<S> <C> <C>
1. Cover Page.............................. Cover Page
2. Synopsis................................ Expense Table
3. Condensed Financial
Information............................. Yield and Performance
Information
4. General Description of
Registrant.............................. Investment Objectives and
Policies; Investment
Limitations; Description of the
Trust and Its Shares
5. Management of the Trust................. Management of the Trust;
Custodian and Transfer Agent
6. Capital Stock and Other
Securities.............................. How to Purchase and Redeem
Shares; Dividends and
Distributions; Taxes;
Description of the Trust and Its
Shares; Miscellaneous
7. Purchase of Securities
Being Offered........................... Pricing of Shares; How to
Purchase and Redeem Shares;
Distribution and Servicing
Agreements
8. Redemption Repurchase................... How to Purchase and Redeem
Shares
9. Pending Legal Proceedings............... Inapplicable
</TABLE>
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Tax Managed Equity Fund
<PAGE> 5
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o Shares of Armada Funds are not bank deposits or
obligations of, or guaranteed or endorsed or otherwise
supported by, National City Bank, National Asset Management
Corporation, their parent company or any of their affiliates
or any bank.
o Shares of Armada Funds are not insured or guaranteed by
the U.S. government, FDIC, or any governmental agency or
state.
o An investment in Armada Funds involves investment risks,
including the possible loss of principal amount invested.
National City Bank and National Asset Management
Corporation serve as investment advisers to Armada Funds for
which they receive an investment advisory fee. Past
performance is not indicative of future performance, and the
investment return will fluctuate, so that you may have a
gain or loss when you sell your shares.
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No person has been authorized to give any information or to
make any representations not contained in this Prospectus in
connection with the offering made by this Prospectus and, if
given or made, such information or representations must not
be relied upon as having been authorized by the Trust or its
Distributor. This Prospectus does not constitute an offering
by the Trust or by the Distributor in any jurisdiction in
which such offering may not lawfully be made.
<PAGE> 6
<TABLE>
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TABLE OF CONTENTS
Page
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INTRODUCTION..........................................................................................................- 2 -
EXPENSE TABLE.........................................................................................................- 3 -
INVESTMENT OBJECTIVES AND POLICIES....................................................................................- 5 -
INVESTMENT LIMITATIONS...............................................................................................- 13 -
YIELD AND PERFORMANCE INFORMATION....................................................................................- 14 -
PRICING OF SHARES....................................................................................................- 16 -
HOW TO PURCHASE AND REDEEM SHARES....................................................................................- 16 -
DISTRIBUTION AND SERVICING ARRANGEMENTS..............................................................................- 31 -
DIVIDENDS AND DISTRIBUTIONS..........................................................................................- 32 -
TAXES................................................................................................................- 33 -
MANAGEMENT OF THE TRUST..............................................................................................- 35 -
DESCRIPTION OF THE TRUST AND ITS SHARES..............................................................................- 37 -
CUSTODIAN AND TRANSFER AGENT.........................................................................................- 40 -
EXPENSES.............................................................................................................- 40 -
MISCELLANEOUS........................................................................................................- 41 -
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<PAGE> 7
Subject to completion - Dated January 22, 1998
Information contained herein pertaining to the Armada Tax Managed Equity Fund is
subject to completion or amendment. A post-effective amendment to the
registration statement relating to shares of the Armada Tax Managed Equity Fund
has been filed with the Securities and Exchange Commission. Shares of the
Armada Tax Managed Equity Fund may not be sold nor may offers to buy shares of
this Fund be accepted prior to the time the post-effective amendment to the
registration statement becomes effective. This prospectus shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall there be any
sale of shares of the Armada Tax Managed Equity Fund in any State in which such
offer, solicitation or sale would be unlawful prior to the registration or
qualification under the securities law of any such State.
ARMADA FUNDS
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Oaks, Pennsylvania 19456 If you purchased your shares through
NatCity Investments, Inc., please call
your Financial Consultant for
information.
For current performance, fund
information, account redemption
information, and to purchase shares,
please call 1-800-622- FUND(3863).
</TABLE>
This Prospectus describes shares of the Tax Managed Equity Fund (the
"Fund") of Armada Funds (the "Trust").
TAX MANAGED EQUITY FUND'S investment objective is to seek a high level
of return arising out of capital appreciation while minimizing the impact of
taxes on shareholders' returns. The Fund invests primarily in common stocks.
The Fund is not a tax-exempt fund, and it expects to distribute taxable
divends and capital gains to its shareholders from time to time. The net asset
value per share of the Fund will fluctuate as the value of its investment
portfolio changes in response to changing market prices and other factors.
National City Bank ("National City" or the "Adviser") serves as
investment adviser to the Fund.
SEI Investments Distribution Co. (the "Distributor") serves as
the Trust's sponsor and distributor. The Fund pays a fee to the
Distributor for distributing its shares. See "Distribution
Agreement."
This Prospectus sets forth concisely the information about the Fund
that a prospective investor should consider before investing. Investors should
carefully read this Prospectus and retain it for future reference. Additional
information about the Fund, contained in a Statement of Additional Information,
has been filed with the Securities and Exchange Commission ("SEC") and is
available upon request without charge by contacting the Trust at its telephone
number or address shown above. The Statement of Additional Information bears the
same date as this Prospectus and is incorporated by reference in its entirety
into this Prospectus.
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY BANK, ITS PARENT
COMPANY OR ANY OF ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY GOVERNMENTAL
AGENCY OR STATE.
INVESTMENT IN THE TRUST INVOLVES RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
___________, 1998
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INTRODUCTION
The Trust is an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
consists of a pool of assets with investment objectives and policies as
described below under "Investment Objectives and Policies." The Fund is
classified as a diversified investment fund under the 1940 Act.
Shares of the Fund have been classified into three separate classes --
Retail shares, B shares and Institutional shares. Retail shares, B shares and
Institutional shares represent equal pro rata interests in the investments held
in the Fund and are identical in all respects, except that shares of each class
bear separate distribution and/or shareholder administrative servicing fees and
enjoy certain exclusive voting rights on matters relating to these fees. See
"Distribution and Servicing Arrangements," "Dividends and Distributions" and
"Description of the Trust and Its Shares." Except as provided below, Retail
shares and B shares are sold through selected broker-dealers and other financial
intermediaries to individual or institutional customers and are sold subject to
a front-end sales charge. B shares are sold with a contingent deferred sales
charge (back-end charge) imposed on a sliding schedule when such shares are
redeemed.
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<PAGE> 9
EXPENSE TABLE
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TAX MANAGED EQUITY TAX MANAGED EQUITY
RETAIL TAX MANAGED EQUITY INSTITUTIONAL
SHARES(1) B SHARES(1) SHARES
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge
Imposed on Purchases(2)............ 5.50% None None
Sales Charge Imposed
on Reinvested Dividends............ None None None
Deferred Sales Charge(3)............. None 5.00% None
Redemption Fee....................... None None None
Exchange Fee......................... None None None
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ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management Fees...................... .75% .75% .75%
12b-1 Fees(5,6)...................... .06% .75% .06%
Other Expenses(4).................... .48% .48% .23%
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TOTAL FUND OPERATING
EXPENSES (after fee waivers)(4,6).... 1.29% 1.98% 1.04%
==== ===== ====
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<FN>
1 The Trust has implemented plans imposing shareholder servicing fees with respect to Retail shares and B shares of the Fund.
Pursuant to such plans, the Trust enters into shareholder servicing agreements with certain financial institutions under
which they agree to provide shareholder administrative services to their customers who beneficially own Retail shares or B
shares in consideration for the payment of up to .25% (on an annualized basis) of the net asset value of such Retail shares
or and B shares of the Fund. For further information concerning these plans, see "Distribution and Servicing Arrangements".
2 A reduced sales charge may be available. See "How to Purchase and Redeem Shares - Reduced Sales Charges Applicable to
Purchases of Retail Shares."
3 This amount applies to redemptions during the first year. The deferred sales charge decreases to 4.0%, 4.0%, 3.0%, 2.0% and
1.0% for redemptions made during the second through sixth years, respectively. No deferred sales charge is charged after the
sixth year. For more information, see "How to Purchase and Redeem Shares - Sales Charges Applicable to Purchases of B
Shares."
4 As of the date of this Prospectus, the Fund had not commenced investment operations, and therefore the other expenses for
this Fund are estimates only.
5 The Funds have in effect a 12b-1 Plan for the Retail and Institutional classes of shares pursuant to which the Fund's Retail
and Institutional shares may bear fees in an amount of up to .10% per annum of such classes' average net assets. A separate
12b-1 Plan exists with respect to the Fund's B class of shares, pursuant to which the Fund's B shares may bear fees in an
amount of up to .75% of average daily net assets. As a result of the payment of sales charges and 12b-1 fees, long-term
shareholders may pay more than the economic equivalent of the maximum sales charges permitted by the National Association of
Securities Dealers, Inc. ("NASD"). The NASD has adopted rules which generally limit the aggregate sales charges and payments
under the Trust's 12b-1 Plans to a certain percentage of total new gross share sales, plus interest. The Trust would stop
accruing 12b-1 and related fees if, to the extent, and for as long as, such limit would otherwise be exceeded.
6 If the maximum distribution fee permitted under the Retail and Institutional 12b-1 Plan were imposed, Total Fund Operating
Expenses would be 1.33% and 1.08% for the Fund's Retail and Institutional shares, respectively.
</TABLE>
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EXAMPLE
For example, you would pay the following expenses on a hypothetical $1,000
investment, assuming: (1) a 5% annual return (a hypothetical return required by
SEC regulations); and (2) the redemption of your investment at the end of the
following time periods:
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1 YEAR 3 YEARS
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Tax Managed Equity Retail Shares(1)................ $ 67 $ 94
Tax Managed Equity B Shares(2)..................... $ 70 $102
Tax Managed Equity Institutional Shares............ $ 11 $ 33
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<FN>
1 Assumes deduction at time of purchase of maximum applicable front-end sales
charge.
2 Assumes deduction of maximum applicable contingent deferred sales charge.
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER
OR LESS THAN THOSE SHOWN.
The purpose of this Expense Table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. For more complete descriptions of these costs and
expenses, see "Management of the Trust" and "Distribution Agreement" in this
Prospectus. Any fees that are charged by affiliates of the advisers or other
institutions directly to their customer accounts for services related to
investments in shares of the Fund are in addition to and not reflected in the
fees and expenses described above.
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<PAGE> 11
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective may be changed without a vote
of shareholders, although the Board of Trustees would only change the Fund's
objective upon 30 days' notice to shareholders. There can be no assurance that
the Fund will achieve its objective. See "Investment Objectives and Policies" in
the Statement of Additional Information for further information on the
investments in which the Fund may invest.
TAX MANAGED EQUITY FUND
The investment objective of the Fund is to seek a high level
of return arising out of capital appreciation while minimizing the impact of
taxes on shareholders' returns. The Fund invests primarily in common stocks.
The Fund will use several methods to reduce the impact of federal and state
income taxes on investment income and realized capital gains distributed by
the Fund.
The Fund will seek to distribute relatively low levels of
taxable investment income by investing in stocks with low dividend yields.
The Fund will endeavor to hold taxes on realized capital
gains to a minimum by investing primarily in companies with sufficient
predictability and stability that their shares may be acquired with the
expectation of being held for several years. The Fund will generally seek to
avoid realizing short-term capital gains, and expects to have a relatively low
overall portfolio turnover rate. When the Fund sells appreciated securities,
it will attempt to select the share lots with the highest cost basis in order
to hold realized capital gains to a minimum. The Fund may, when consistent
with its overall investment approach, sell depreciated securities to offset
realized capital gains.
Although the Fund expects to use some or all of the foregoing
methods in seeking to reduce the impact of federal and state income taxes on
the Fund's dividends and distributions, portfolio management decisions will
also be based on non-tax considerations when appropriate. Certain equity and
other securities held by the Fund will produce ordinary taxable income on a
regular basis. The Fund may also sell a particular security, even though it
may realize a short-term capital gain, if the value of that security is
believed to have reached its peak or is expected to decline before the Fund
would have held it for the long-term holding period. The Fund may also be
required to sell securities inorder to generate cash to pay expenses or satisfy
shareholder redemptions.
Accordingly, while the Fund seeks to minimize the effect of
taxes on its dividends and distributions, the Fund is not a tax-exempt fund,
and may be expected to distribute taxable income and realize capital gains from
time to time.
Under normal conditions, at least 80% of the Fund's total
assets will be invested in common stocks and other equity securities. The
Fund's adviser selects common stocks based on a number of factors, including
historical and projected long-term earnings growth, earnings quality and
liquidity, each in relation to the market price of the stock. Stocks purchased
for the Fund generally will be listed on a national securities exchange or will
be unlisted securities with an established over-the-counter market.
The Fund's long term investment horizon is reflected in its
low portfolio turnover investment approach. The portfolio turnover rate reflects
the frequency with which securities are purchased and sold within the Fund's
portfolio. The Fund's annual portfolio turnover is not expected to exceed 25%
under normal market conditions. (A rate of turnover of 100% could occur, for
example, if all the securities held by the Fund are replaced within a period of
one year.) When a Fund sells securities realizing gains, tax laws require that
such gains be distributed to investors every year. As a result, such investors
are taxed on their pro-rata shares of the gains. By attempting to minimize
portfolio turnover, the Fund will generally have a low turnover rate. It is
impossible to predict the impact of such a strategy on the realization of gains
or losses for the Fund. For example, the Fund may forego the opportunity to
realize gains or reduce losses as a result of this policy.
The Fund may be appropriate for investors who seek capital
appreciation and whose tax status under federal and state regulations increase
the importance of such strategies.
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<PAGE> 12
OTHER INVESTMENT POLICIES OF THE FUND
Other Investments with Equity Characteristics
The Fund may hold other instruments with equity
characteristics, such as preferred stocks, securities convertible into common
stock, rights, and warrants.
Futures Contracts and Related Options
The Fund may invest in stock index futures contracts and
options on futures contracts in attempting to hedge against changes in the value
of securities that it holds or intends to purchase or to maintain liquidity.
Futures contracts obligate the Fund, at maturity, to take or
make delivery of certain securities or the cash value of a securities index. The
Fund may sell a futures contract in order to offset a decrease in the market
value of its portfolio securities that might otherwise result from a market
decline. The Fund may do so either to hedge the value of its portfolios of
securities as a whole or to protect against declines occurring prior to sales of
securities in the value of the securities to be sold. Conversely, the Fund may
purchase a futures contract in anticipation of purchases of securities. In
addition, the Fund may utilize futures contracts in anticipation of changes in
the composition of their holdings.
The Fund may purchase and sell call and put options on futures
contracts traded on an exchange or board of trade. When the Fund purchases an
option on a futures contract, it has the right to assume a position as a
purchaser or seller of a futures contract at a specified exercise price at any
time during the option period. When the Fund sells an option on a futures
contract, it becomes obligated to purchase or sell a futures contract if the
option is exercised. In anticipation of a market advance, the Fund may purchase
call options on futures contracts as a substitute for the purchase of futures
contracts to hedge against a possible increase in the price of securities which
the Fund intends to purchase. Similarly, if the value of the Fund's securities
is expected to decline, the Fund might purchase put options or sell call options
on futures contracts rather than sell futures contracts.
The Fund intends to comply with the regulations of the
Commodity Futures Trading Commission ("CFTC") exempting it from registration as
a "commodity pool operator." The Fund's commodities transactions must constitute
bona fide hedging or other permissible transactions pursuant to such
regulations. In addition, the Fund may not engage in such transactions if the
sum of the amount of initial margin deposits and premiums paid for unexpired
commodity options, other than for bona fide hedging
-6-
<PAGE> 13
transactions, would exceed 5% of the liquidation value of their assets, after
taking into account unrealized profits and unrealized losses on such contracts
they have entered into; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the percentage limitation. In connection with the Fund's position in
a futures contract or option thereon, it will create a segregated account of
liquid assets, such as cash, U.S. government securities or other liquid high
grade debt obligations, or will otherwise cover its position in accordance with
applicable requirements of the SEC.
The primary risks associated with the use of futures contracts
and options are:
(i) an imperfect correlation between the change in market
value of the securities held by the Fund and the price of the futures contracts
and options;
(ii) possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures contract when desired;
(iii) losses greater than the amount of the principal invested
as initial margin due to unanticipated market movements which are potentially
unlimited; and
(iv) the adviser's ability to predict correctly the direction
of securities prices, interest rates and other economic factors.
Options
The Fund may write covered call options, buy put options, buy
call options and sell or "write" secured put options on a national securities
exchange and issued by the Options Clearing Corporation for hedging purposes.
Such transactions may be effected on a principal basis with primary reporting
dealers in U.S. government securities in an amount not exceeding 5% of the
Fund's net assets. Such options may relate to particular securities, stock or
bond indices, financial instruments or foreign currencies. Purchasing options is
a specialized investment technique which entails a substantial risk of a
complete loss of the amounts paid as premiums to the writer of the option.
A call option for a particular security gives the purchaser of
the option the right to buy, and a writer the obligation to sell, the underlying
security at the stated exercise price at any time prior to the expiration of the
option, regardless of the market price of the security. The premium paid to the
writer is the consideration for undertaking the
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<PAGE> 14
obligations under the option contract. A put option for a particular security
gives the purchaser the right to sell the underlying security at the stated
exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. In contrast to an option on a
particular security, an option on a securities index provides the holder with
the right to make or receive a cash settlement upon exercise of the option.
The Fund may purchase and sell put options on portfolio
securities at or about the same time that it purchases the underlying security
or at a later time. By buying a put, the Fund limits its risk of loss from a
decline in the market value of the security until the put expires. Any
appreciation in the value of and yield otherwise available from the underlying
security, however, will be partially offset by the amount of the premium paid
for the put option and any related transaction costs. Call options may be
purchased by the Fund in order to acquire the underlying security at a later
date at a price that avoids any additional cost that would result from an
increase in the market value of the security. The Fund may also purchase call
options to increase its return to investors at a time when the call is expected
to increase in value due to anticipated appreciation of the underlying security.
Prior to its expiration, a purchased put or call option may be sold in a closing
sale transaction (a sale by the Fund, prior to the exercise of an option that it
has purchased, of an option of the same series), and profit or loss from the
sale will depend on whether the amount received is more or less than the premium
paid for the option plus the related transaction costs.
In addition, the Fund may write covered call and secured put
options. A covered call option means that the Fund owns or has the right to
acquire the underlying security subject to call at all times during the option
period. A secured put option means that the Fund maintains in a segregated
account with its custodian cash or U.S. government securities in an amount not
less than the exercise price of the option at all times during the option
period. Such options will be listed on a national securities exchange and issued
by the Options Clearing Corporation and may be effected on a principal basis
with primary reporting dealers in the U.S.
The aggregate value of the securities subject to options
written by the Fund will not exceed 25% of the value of its net assets. In order
to close out an option position prior to maturity, the Fund may enter into a
"closing purchase transaction" by purchasing a call or put option (depending
upon the position being closed out) on the same security with the same exercise
price and expiration date as the option which it previously wrote.
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<PAGE> 15
Options trading is a highly specialized activity and carries
greater than ordinary investment risk. Purchasing options may result in the
complete loss of the amounts paid as premiums to the writer of the option. In
writing a covered call option, the Fund gives up the opportunity to profit from
an increase in the market price of the underlying security above the exercise
price (except to the extent the premium represents such a profit). Moreover, it
will not be able to sell the underlying security until the covered call option
expires or is exercised or the Fund closes out the option. In writing a secured
put option, the Fund assumes the risk that the market value of the security will
decline below the exercise price of the option. The use of covered call and
secured put options will not be a primary investment technique of the Fund.
Foreign Securities
The Fund may invest up to 20% of its total assets at the time
of purchase in securities issued by foreign entities and ADRs, EDRs and GDRs
(defined below). See "Special Risk Factors Foreign Securities and Currencies"
above.
American, Standard & Poor's, MidCap Standard & Poor's,
European and Global Depository Receipts
The Fund may invest in American Depository Receipts ("ADRs")
and Standard & Poor's Depository Receipts ("SPDRs"). ADRs are receipts issued in
registered form by a U.S. bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer. ADRs may be listed on a
national securities exchange or may be traded in the over-the-counter markets.
ADR prices are denominated in U.S. dollars although the underlying securities
may be denominated in a foreign currency. SPDRs are receipts designed to
replicate the performance of the S&P 500. MidCap SPDRs represent ownership in
the MidCap SPDR Trust, a unit investment trust which holds a portfolio of common
stocks that closely tracks the price performance and dividend yield of the S&P
MidCap 400 Index. EDRs, which are sometimes referred to as Continental
Depository Receipts, are receipts issued in Europe typically by non-U.S. banks
or trust companies and foreign branches of U.S. banks that evidence ownership of
foreign or U.S. securities. EDRs are designed for use in European exchange and
over-the-counter markets. GDRs are receipts structured similarly to EDRs and are
marketed globally. GDRs are designed for trading in non-U.S. securities markets.
Investments in ADRs, EDRs and GDRs involve risks similar to those accompanying
direct investments in foreign securities, but those that are traded in the
over-the-counter market which do not have an active or substantial secondary
market will be considered illiquid and, therefore, will be subject to the Fund's
limitation with respect to illiquid securities.
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<PAGE> 16
The principal difference between sponsored and unsponsored
ADR, EDR and GDR programs is that unsponsored ones are organized independently
and without the cooperation of the issuer of the underlying securities.
Consequently, available information concerning the issuer may not be as current
as for sponsored ADRs, EDRs and GDRs, and the prices of unsponsored ADRs, EDRs
and GDRs may be more volatile.
When-Issued Securities
The Fund may purchase securities on a "when-issued" or delayed
delivery basis. These transactions are arrangements in which the Fund purchases
securities with payment and delivery scheduled for a future time. The Fund
expects that commitments to purchase when-issued securities will not exceed 25%
of the value of its total assets under normal market conditions. The Fund does
not intend to purchase when-issued securities for speculative purposes but only
for the purpose of acquiring portfolio securities. In when-issued and delayed
delivery transactions, the Fund relies on the seller to complete the
transaction; its failure to do so may cause the Fund to miss a price or yield
considered to be attractive.
Short-Term Obligations
The Fund may hold temporary cash balances which may be
invested in various short-term obligations (with maturities of 18 months or
less) such as domestic and foreign commercial paper, bankers' acceptances,
certificates of deposit and demand and time deposits of domestic and foreign
branches of U.S. banks and foreign banks, U.S. government securities, repurchase
agreements, reverse repurchase agreements and guaranteed investment contracts
("GICs"). During temporary defensive periods, the Fund may hold up to 100% of
its total assets in these types of obligations.
In the case of repurchase agreements, default or bankruptcy of
the seller may expose the Fund to possible loss because of adverse market action
or delays connected with the disposition of the underlying obligations. Further,
it is uncertain whether the Fund would be entitled, as against a claim by such
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities. Reverse repurchase agreements involve the risk that the market value
of the securities held by the Fund may decline below the price of the securities
it is obligated to repurchase.
Lending Portfolio Securities
In order to generate additional income, the Fund may, from
time to time, lend its portfolio securities to broker-dealers, banks or other
institutional borrowers. The Fund must receive 100% collateral in the form of
cash or U.S. government
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<PAGE> 17
securities. This collateral must be valued daily by the Fund's adviser and the
borrower will be required to provide additional collateral should the market
value of the loaned securities increase. During the time portfolio securities
are on loan, the borrower pays the Fund involved any dividends or interest paid
on such securities. Loans are subject to termination by the Fund or the borrower
at any time. While the Fund does not have the right to vote securities on loan,
it intends to terminate the loan and regain the right to vote if this is
considered important with respect to the investment. The Fund will only enter
into loan arrangements with broker-dealers, banks or other institutions which
its adviser has determined are creditworthy under guidelines established by the
Trust's Board of Trustees.
Securities of Other Investment Companies
Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, the Fund may invest in securities issued by other investment
companies (including other investment companies advised by the advisers) which
invest in high quality, short-term debt securities and which determine their net
asset value per share based on the amortized cost or penny-rounding method.
As a shareholder of another investment company, the Fund would
bear, along with other shareholders, its pro rata portion of that company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with its
own operations. Investment companies in which the Fund may invest may also
impose a sales or distribution charge in connection with the purchase or
redemption of their shares and other types of commissions or charges. Such
charges will be payable by the Fund and, therefore, will be borne indirectly by
its shareholders.
Illiquid Securities
The Fund will not invest more than 15% of its respective net
assets in securities that are illiquid. Illiquid securities would generally
include repurchase agreements and GICs with notice/termination dates in excess
of seven days and certain securities which are subject to trading restrictions
because they are not registered under the Securities Act of 1933, as amended
(the "1933 Act").
The Fund may purchase securities which are not registered
under the 1933 Act but which can be sold to "qualified institutional buyers" in
accordance with Rule 144A under the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by the Board of Trustees or the
Fund's adviser, acting under guidelines approved and monitored by the Board,
that an adequate trading market exists for that security.
-11-
<PAGE> 18
This investment practice could have the effect of increasing the level of
illiquidity in the Fund during any period that qualified institutional buyers
become uninterested in purchasing these restricted securities. The ability to
sell to qualified institutional buyers under Rule 144A is a recent development,
and it is not possible to predict how this market will develop.
Special Risk Factors Associated with Derivative Instruments
The Fund may purchase certain "derivative" instruments.
Derivative instruments are instruments that derive value from the performance of
underlying securities, interest or currency exchange rates, or indices, and
include (but are not limited to) futures contracts.
Like all investments, derivative instruments involve several
basic types of risks which must be managed in order to meet investment
objectives. The specific risks presented by derivatives include, to varying
degrees, market risk in the form of underperformance of the underlying
securities, exchange rates or indices; credit risk that the dealer or other
counterparty to the transaction will fail to pay its obligations; volatility and
leveraging risk that, if interest or exchange rates change adversely, the value
of the derivative instrument will decline more than the securities, rates or
indices on which it is based; liquidity risk that the Fund will be unable to
sell a derivative instrument when it wants because of lack of market depth or
market disruption; pricing risk that the value of a derivative instrument (such
as an option) will not correlate exactly to the value of the underlying
securities, rates or indices on which it is based; extension risk that the
expected duration of an instrument may increase or decrease; and operations risk
that loss will occur as a result of inadequate systems and controls, human error
or otherwise. Some derivative instruments are more complex than others, and for
those instruments that have been developed recently, data are lacking regarding
their actual performance over complete market cycles.
The risk to the Fund due to the use of derivatives will be
limited to 10% of the total value of the Fund's assets at the time of the
derivatives transaction. The Adviser will evaluate the risks presented by the
derivative instruments purchased by the Fund, and will determine, in connection
with their day-to-day management of the Fund, how they will be used in
furtherance of the Fund's investment objectives.
-12-
<PAGE> 19
INVESTMENT LIMITATIONS
The Fund is subject to a number of investment limitations. The
following investment limitations are matters of fundamental policy and may not
be changed with respect to the Fund without the affirmative vote of the Fund's
outstanding shares (as defined under "Miscellaneous"). (Other fundamental
investment limitations, as well as non-fundamental investment limitations, are
contained in the Statement of Additional Information under "Investment
Objectives and Policies.")
The Fund may not:
1. Purchase any securities which would cause 25% or more of
the value of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that:
(a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, (any state, territory
or possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions) and
repurchase agreements secured by such obligations;
(b) wholly-owned finance companies will be
considered to be in the industries of their parents if their
activities are primarily related to financing the activities of
the parents;
(c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a separate
industry; and
(d) personal credit and business credit
businesses will be considered separate industries.
-13-
<PAGE> 20
2. Purchase securities of any one issuer, other than
securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities if, immediately after such purchase, more than 5% of the value
of the Fund's total assets would be invested in such issuer or the Fund would
hold more than 10% of any class of securities of the issuer or more than 10% of
the outstanding voting securities of the issuer, except that up to 25% of the
value of the Fund's total assets may be invested without regard to such
limitations.
3. Make loans, except that the Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an amount
not exceeding one-third of its total assets.
4. Borrow money, issue senior securities or mortgage, pledge
or hypothecate its assets except to the extent permitted under the 1940 Act.
For purposes of the above investment limitations, the Fund
treats all supranational organizations as a single industry and each foreign
government (and all of its agencies) as a separate industry. In addition, a
security is considered to be issued by the government entity (or entities) whose
assets and revenues back the security.
Generally, if a percentage limitation is satisfied at the time
of investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's portfolio securities will not constitute a
violation of such limitation for purposes of the 1940 Act.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Trust may quote in advertisements or in
reports to shareholders the Fund's total return data for its Retail shares, B
shares and Institutional shares. The Fund calculates the total returns for each
class of shares on an "average annual total return" basis for various periods
from the date they commenced investment operations and for other periods as
permitted under the rules of the SEC. Average annual total return reflects the
average annual percentage change in value of an investment in the class over the
measuring period. Total returns for each class of shares may also be calculated
on an "aggregate total return" basis for various periods. Aggregate total return
reflects the total percentage change in value over the measuring period.
Both methods of calculating total return reflect changes in
the price of the shares and assume that any dividends
-14-
<PAGE> 21
and capital gain distributions made by the Fund with respect to a class during
the period are reinvested in shares of that class. When considering average
total return figures for periods longer than one year, it is important to note
that the annual total return of a class for any one year in the period might
have been greater or less than the average for the entire period. The Fund may
also advertise, from time to time, the total returns of one or more classes of
shares on a year-by-year or other basis for various specified periods by means
of quotations, charts, graphs or schedules.
Investors may compare the performance of each class of shares
of the Fund to the performance of other mutual funds with comparable investment
objectives, to various mutual fund or market indices, such as the S&P 500, and
to data or rankings prepared by independent services such as Lipper Analytical
Services, Inc. or other financial or industry publications that monitor the
performance of mutual funds. Comparisons may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The New
York Times, Business Week, U.S.A. Today, CDA/Weisenberger, The American Banker,
Morningstar, Incorporated and other publications of a local, regional or
financial industry nature.
The performance of each class of shares of the Fund is based
on historical earnings and will fluctuate and is not intended to indicate future
performance. The investment return and principal value of an investment in a
class will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Performance data may not provide a basis
for comparison with bank deposits and other investments which provide a fixed
yield for a stated period of time. Changes in net asset value of a class should
be considered in ascertaining the total return to shareholders for a given
period. Total return data should also be considered in light of the risks
associated with the Fund's composition, quality, maturity, operating expenses
and market conditions. Any fees charged by financial institutions (as described
in "How to Purchase and Redeem Shares") are not included in the computation of
performance data but will reduce a shareholder's net return on an investment in
the Fund.
Shareholders should note that the yields and total returns of
Retail shares and B shares will be lower than those of the Institutional shares
of the Fund because of the different distribution and/or servicing fees. The
total returns of the B shares will be lower than those of the Retail shares of
the Fund due to the different distribution fees of the classes. See
"Distribution and Servicing Arrangements."
Further information about the performance of the Fund
is available in the annual and semi-annual reports to
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<PAGE> 22
shareholders. Shareholders may obtain these materials from the Trust free of
charge by calling 1-800-622-FUND(3863).
The Fund is a successor to a common trust fund, previously managed by
National City Bank. Substantially all of the assets of the common trust fund in
question was transferred to the Fund (as indicated below) on ________________.
Set forth below are certain performance data for the predecessor common trust
fund of the Fund. This performance information is deemed relevant because the
common trust fund was managed using the same investment objective, policies and
restrictions, and portfolio manager as those being used by the Fund. However,
these performance data are not necessarily indicative of the future performance
of the Fund.
TAX MANAGED EQUITY FUND
PREDECESSOR
COMMON TRUST FUND
AVERAGE TOTAL RETURNS FOR
VARIOUS PERIODS
(UNAUDITED)
<TABLE>
<CAPTION>
Predecessor to the Predecessor to the Predecessor to the
Tax Managed Equity Fund Tax Managed Equity Fund Tax managed Equity Fund
Retail Shares Retail Shares B Shares
(assuming no sales (assuming sales (without deferred sales
charges)(1) charges)(2) charges)(3)
<S> <C> <C> <C>
PERIOD ENDED _________
Six Months.......... _____% _____% _____%
PERIODS ENDED ________
One Year............ _____% _____% _____%
Three Years......... _____% _____% _____%
Five Years.......... _____% _____% _____%
<CAPTION>
Predecessor to the
Tax Managed Equity Fund
B Shares Predecessor to the
(with maximum deferred Tax Managed Equity Fund
sales charges)(4) Institutional Shares(5)
<S> <C> <C>
PERIOD ENDED _________
Six Months.......... _____% _____%
PERIODS ENDED ________
One Year............ _____% _____%
Three Years......... _____% _____%
Five Years.......... _____% _____%
<FN>
1 The predecessor common trust fund is the Equity Fund #2 for Personal
Trusts of National City Bank. The above information is the
average total return for the periods indicated assuming
reinvestment of all net investment income after taking into account
expenses of ___% of assets and assuming full waiver of the maximum
front-end sales charge.
2 The predecessor common trust fund is the Equity Fund #2 for Personal
Trusts of National City Bank. The above information is the average
total return for the periods indicated assuming reinvestment of all net
investment income after taking into account expenses of ___% of assets
and assuming the maximum front-end sales charge of 5.50%.
3 The predecessor common trust fund is the Equity Fund #2 for Personal
Trusts of National City Bank. The above information is the average
total return for the periods indicated assuming reinvestment of all
net investment income after taking into account expenses of ___% of
assets and assuming a full waiver of the maximum contingent deferred
sales charge.
4 The predecessor common trust fund is the Equity Fund #2 for Personal
Trusts of National City Bank. The above information is the average
total return for the periods indicated assuming reinvestment of all
net investment income after taking into account expenses of ___% of
assets and assuming the maximum contingent deferred sales charge.
5 The predecessor common trust fund is the Equity Fund #2 for Personal
Trusts of National City Bank. The above information is the average
total return for the periods indicated assuming reinvestment of all net
investment income after taking into account expenses of ___% of assets.
Institutional shares are sold without a sales charge.
</TABLE>
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<PAGE> 23
PRICING OF SHARES
For processing purchase and redemption orders, the net asset
value per share of the Fund is calculated on each business day as of the close
of trading of the New York Stock Exchange (the "Exchange"), generally 4:00 p.m.
Eastern time. Net asset value per share is determined on each business day,
except those holidays which the Exchange observes (currently New Year's Day, Dr.
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day) ("Business
Day").
Net asset value per share is calculated by dividing the value
of all securities and other assets allocable to a particular class, less
liabilities charged to that class, by the number of outstanding shares of the
respective class.
With respect to the Fund, investments in securities traded on
an exchange are valued at the last quoted sale price for a given day, or if a
sale is not reported for that day, at the mean between the most recent quoted
bid and asked prices. Unlisted securities and securities traded on a national
securities market for which market quotations are readily available are valued
at the mean between the most recent bid and asked prices. Securities and other
assets for which no quotations are readily available are valued at their fair
value under procedures approved by the Board of Trustees. Absent unusual
circumstances, short-term investments having maturities of 60 days or less are
valued on the basis of amortized cost unless the Trust's Board of Trustees
determines that this does not represent fair value. The net asset value per
share of each class of shares of the Fund will fluctuate as the value of its
portfolio changes.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Fund are sold on a continuous basis by the
Trust's sponsor and distributor. The Distributor is a registered broker/dealer
with principal offices located in Oaks, Pennsylvania 19456.
The Distributor, adviser and/or their affiliates, at their own
expense, may provide compensation to dealers in connection with the sale and/or
servicing of shares of the Fund of the Trust. Compensation may include financial
assistance to dealers in connection with conferences, sales or training programs
for their employees, seminars for the public, advertising campaigns regarding
one or more Funds of the Trust, and/or other dealer-sponsored special events. In
some instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell a significant amount of
such shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to exotic locations within or
outside of the United States for meetings or seminars of a business nature.
Compensation may also include the following types of non-cash items offered
through sales contests: (1) vacation trips, including travel arrangements and
lodging at resorts; (2) tickets for entertainment events (such as concerts,
cruises and sporting events); and (3) merchandise (such as clothing, trophies,
clocks and pens). The Distributor, at its expense, currently conducts sales
contests for dealers in connection with their sales of shares of the Fund.
Dealers may not use sales of the Fund's shares to qualify for this compensation
to the extent such may be prohibited by the laws of any state or any
self-regulatory agency, such as the National Association of Securities Dealers,
Inc.
PURCHASE OF RETAIL SHARES AND B SHARES
Retail shares of the Fund are sold subject to a front-end
sales charge. B shares of the Fund are sold subject to a back-end sales charge.
This back-end sales charge declines over time and is known as a "contingent
deferred sales charge." Before choosing between Retail shares and B shares of
the Fund, investors should read "Characteristics of Retail Shares and B Shares"
and "Factors to Consider When Selecting Retail Shares or B Shares" below.
Retail shares and B shares are sold to the public
("Investors") primarily through financial institutions such as banks, brokers
and dealers. Investors may purchase Retail or B shares directly in accordance
with the procedures set forth below or through procedures established by their
financial institutions in connection with the requirements of their accounts.
Investors purchasing shares of the Fund must specify at the time of investment
whether they are purchasing Retail shares or B shares.
Financial institutions may charge certain account fees
depending on the type of account the Investor has established with the
institution. Investors may be charged a fee if they effect transactions in fund
shares through a broker or agent. (For information on such fees, the Investor
should review his agreement with the institution or contact it directly.) For
direct purchases of shares, Investors should call 1-800-622-FUND(3863) or to
speak with a NatCity Investments professional, call 1-888-4NATCTY (462-8289).
-17-
<PAGE> 24
Shares may be purchased in conjunction with an individual
retirement account ("IRA") and rollover IRAs where a designated custodian acts
as custodian. Investors should contact NatCity Investments, Inc., the
Distributor or their financial institutions for information as to applications
and annual fees. Investors should also consult their tax advisers to determine
whether the benefits of an IRA are available or appropriate.
The minimum investment is $500 for the initial purchase of
Retail shares or B shares in the Fund. All subsequent investments for Retail
shares and B shares are subject to a minimum investment of $250. All purchases
made by check should be in U.S. dollars. Please make the check payable to Armada
Funds (fund name), or, in the case of a retirement account, the custodian or
trustee for the account. We will not accept third-party checks under any
circumstance. Investments made in Retail shares or B shares through the Planned
Investment Program ("PIP"), a monthly savings program described below, are not
subject to the minimum initial and subsequent investment requirements or any
minimum account balance requirements described under "Other Redemption
Information." Purchases for an IRA through the PIP will be considered as
contributions for the year in which the purchases are made.
Under a PIP, Investors may add to their investment in Retail
shares or B shares of the Fund, in a consistent manner each month, with a
minimum amount of $50. Monies may be automatically withdrawn from a
shareholder's checking or savings account available through an Investor's
financial institution and invested in additional Retail shares at the Public
Offering Price or B shares at the net asset value next determined after an order
is received by the Trust. An Investor may apply for participation in a PIP by
completing an application obtained through a financial institution, such as
banks, brokers, or dealers selling Retail shares or B shares of the Fund, or by
calling 1-800-622-FUND(3863). The program may be modified or terminated by an
Investor on 30 days written notice or by the Trust at any time.
All shareholders of record will receive confirmations of share
purchases and redemptions. Financial institutions will be responsible for
transmitting purchase and redemption orders to the Trust's transfer agent, State
Street Bank and Trust Company (the "Transfer Agent"), on a timely basis.
The Trust reserves the right to reject any purchase order.
SALES CHARGES APPLICABLE TO PURCHASES OF RETAIL SHARES
The Public Offering Price for Retail shares of the Fund is the
sum of the net asset value of the shares being purchased plus any applicable
sales charge per account, which is assessed as follows:
<TABLE>
<CAPTION>
AS A % AS A % DEALERS'
OF OFFERING OF NET REALLOWANCE
PRICE PER ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION SHARE PER SHARE OFFERING PRICE
<S> <C> <C> <C>
Less than $25,000................... 5.50 5.80 5.25
$25,000 but less
than $50,000...................... 5.25 5.50 5.00
$50,000 but less
than $100,000..................... 4.75 5.00 4.50
$100,000 but less
than $250,000..................... 3.75 3.90 3.50
$250,000 but less
than $500,000...................... 3.00 3.10 2.75
$500,000 but less
than $1,000,000................... 2.00 2.00 1.75
$1,000,000 or more.................. 0.00 0.00 0.00
</TABLE>
With respect to purchases of $1,000,000 or more of the Fund, the adviser may pay
from its own funds a fee of 1.00% of the amount invested to the financial
institution placing the purchase order.
-18-
<PAGE> 25
Under the 1933 Act, the term "underwriter" includes persons
who offer or sell for an issuer in connection with the distribution of a
security or have a direct or indirect participation in such undertaking, but
excludes persons whose interest is limited to a commission from an underwriter
or dealer not in excess of the usual and customary distributors' or sellers'
commission. The Staff of the SEC has expressed the view that persons who receive
90% or more of a sales load may be deemed to be underwriters within the meaning
of this definition. The Dealers' Reallowance may be changed from time to time.
No sales charge will be assessed on purchases of Retail shares
made by:
(a) trustees and officers of the Trust;
(b) directors, employees and participants in employee
benefit/retirement plans (annuitants) of National City
Corporation or any of its affiliates;
(c) the spouses, children, grandchildren, and parents
of individuals referred to in clauses (a) and (b) above;
(d) individuals investing in the Fund by way of a direct
transfer or a rollover from a qualified plan distribution where affiliates of
National City Corporation are serving as a trustee or agent, or certain
institutions having relationships with affiliates of National City Corporation;
(e) investors purchasing Fund shares through a payroll
deduction plan;
(f) investors investing in the Armada Plus account
through National City's Retirement Plan Services; and
(g) investors purchasing fund shares through "one-stop"
mutual fund networks.
REDUCED SALES CHARGES APPLICABLE TO PURCHASES OF RETAIL SHARES
The applicable sales charge may be reduced on purchases of
Retail shares of the Fund made under the Right of Accumulation or Letter of
Intent, as described below. To qualify for a reduced sales charge, Investors
must so notify their financial institutions or the Trust directly by calling
1-800-622-FUND(3863) at the time of purchase. Reduced sales charges may be
modified or terminated at any time and are subject to confirmation of an
Investor's holdings.
-19-
<PAGE> 26
Right of Accumulation
Investors may use their aggregate investments in Retail shares
in determining the applicable sales charge. An Investor's aggregate investment
in Retail shares is the total value (based on the higher of current net asset
value or any Public Offering Price originally paid) of:
(a) current purchases
(b) Retail shares that are already beneficially owned by
the Investor for which a sales charge has been paid
(c) Retail shares that are already beneficially owned by
the Investor which were purchased prior to July 22, 1990
(d) Retail shares purchased by dividends or capital
gains that are reinvested
If, for example, an Investor beneficially owns Retail shares
of the Fund with an aggregate current value of $90,000 and subsequently
purchases Retail shares of that Fund having a current value of $10,000, the
sales charge applicable to the subsequent purchase would be reduced to 2.75% of
the Public Offering Price.
Letter of Intent
An Investor may qualify for a reduced sales charge immediately
upon signing a nonbinding Letter of Intent stating the Investor's intention to
invest during the next 13 months a specified amount which, if made at one time,
would qualify for a reduced sales charge. The Letter of Intent option is
included on the account application which may be obtained from the Investor's
financial institution or directly from the Trust by calling
1-800-622-FUND(3863). If an Investor so elects, the 13 month period may begin up
to 30 days prior to the Investor's signing the Letter of Intent. The initial
investment under the Letter of Intent must be equal to at least 4.0% of the
amount indicated in the Letter of Intent. During the term of a Letter of Intent,
the Transfer Agent will hold Retail shares representing 4.0% of the amount
indicated in the Letter of Intent in escrow for payment of a higher sales charge
if the entire amount is not purchased.
Upon completing the purchase of the entire amount indicated in
the Letter of Intent, the escrowed shares will be released. If the entire amount
is not purchased within the 13 month period or is redeemed within one year from
the time of fulfillment, the Investor will be required to pay an amount equal to
the difference in the dollar amount of sales charge actually paid and the amount
of sales charge the Investor would have had
-20-
<PAGE> 27
to pay on the aggregate purchases if the total of such purchases
had been made at a single time.
SALES CHARGES APPLICABLE TO PURCHASES OF B SHARES
B shares of the Fund are sold at their net asset value next
determined after a purchase order is received in good form by the Trust's
Distributor. Although Investors pay no front-end sales charge on purchases of B
shares, such shares are subject to a deferred sales charge at the rates set
forth in the chart below if they are redeemed within six years of purchase.
Broker- dealers and other organizations selling B shares to Investors will
receive commissions from the Distributor in connection with sales of B shares.
These commissions may be different than the reallowances or placement fees, if
any, paid to dealers in connection with sales of Retail shares.
The deferred sales charge on B shares is based on the lesser
of the net asset value of the shares on the redemption date or the original cost
of the shares being redeemed. As a result, no sales charge is charged on any
increase in the principal value of an Investor's shares. In addition, a
contingent deferred sales charge will not be assessed on B shares purchased
through reinvestment of dividends or capital gain distributions.
The amount of any contingent deferred sales charge an Investor
must pay on B shares depends on the number of years that elapse between the
purchase date and the date such B shares are redeemed. Solely for purposes of
determining the number of years from the time of payment for an Investor's share
purchase, all payments during a month will be aggregated and deemed to have been
made on the first day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
NUMBER OF YEARS PERCENTAGE OF DOLLAR AMOUNT
ELAPSED SINCE PURCHASE SUBJECT TO THE CHARGE)
<S> <C>
Less than one.............................................. 5.0%
More than one, but less
than two................................................. 4.0%
More than two, but less
than three............................................... 4.0%
More than three, but less
than four................................................ 3.0%
More than four, but less
than five................................................ 2.0%
More than five, but less
than six................................................. 1.0%
After six years........................................... None
</TABLE>
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<PAGE> 28
When an Investor redeems his B shares, the redemption order is
processed to minimize the amount of the contingent deferred sales charge that
will be charged. B shares are redeemed first from those B shares that are not
subject to the deferred sales load (i.e., B shares that were acquired through
reinvestment of dividends or capital gain distributions) and thereafter, unless
otherwise designated by the shareholder, from the B shares that have been held
the longest.
For example, assume an Investor purchased 100 B shares at $10
a share (for a total cost of $1,000), three years later the shares have a net
asset value of $12 per share and during that time the investor acquired 10
additional shares through dividend reinvestment. If the Investor then makes one
redemption of 50 shares (resulting in proceeds of $600, 50 shares x $12 per
share), the first 10 shares redeemed will not be subject to the contingent
deferred sales charge because they were acquired through reinvestment of
dividends. With respect to the remaining 40 shares redeemed, the contingent
deferred sales charge is charged at $10 per share (because the original purchase
price of $10 per share is lower than the current net asset value of $12 per
share). Therefore, only $400 of the $600 such Investor received from selling his
shares will be subject to the contingent deferred sales charge, at a rate of
4.0% (the applicable rate in the third year after purchase). The proceeds from
the contingent deferred sales charge that the Investor may pay upon redemption
go to the Distributor, which may use such amounts to defray the expenses
associated with the distribution- related services involved in selling B shares.
The contingent deferred sales charge, along with ongoing distribution fees paid
with respect to B shares, enables those shares to be purchased without the
imposition of a front-end sales charge.
Exemptions From Contingent Deferred Sales Charge
The following types of redemptions qualify for an exemption
from the contingent deferred sales charge:
(a) exchanges described under "Exchange Privilege
Applicable to Retail Shares and B Shares" below
(b) redemptions in connection with required (or, in some
cases, discretionary) distributions to participants or beneficiaries of an
employee pension, profit-sharing or other trust or qualified retirement or Keogh
plan, individual retirement account or custodial account maintained pursuant to
Section 403(b)(7) of the Internal Revenue Code due to death, disability or the
attainment of a specified age
-22-
<PAGE> 29
(c) redemptions effected pursuant to the Fund's right to
liquidate a shareholder's account if the aggregate net asset value of shares
held in the account is less than the minimum account size
(d) redemptions in connection with the death or
disability of a shareholder
(e) redemptions by a settlor of a living trust
(f) redemptions resulting from a tax-free return of an
excess contribution pursuant to Section 408(d)(4) or (5) of the Internal
Revenue Code.
CHARACTERISTICS OF RETAIL SHARES AND B SHARES
The primary difference between Retail shares and B shares lies
in their sales charge structures and distribution arrangements. An Investor
should understand that the purpose and function of the sales charge structures
and distribution arrangements for both Retail shares and B shares are the same.
Retail shares are sold at their net asset value plus a
front-end sales charge. This front-end sales charge may be reduced or waived in
some cases. Retail and Institutional shares are subject to ongoing distribution
fees at an annual rate of up to 0.10% of the Fund's average daily net assets
attributable to its Retail and Institutional shares.
B shares are sold at net asset value without an initial sales
charge. Normally, however, a deferred sales charge is paid if the shares are
redeemed within six years of investment. B shares are subject to ongoing
distribution fees at an annual rate of up to .75% of the Fund's average daily
net assets attributable to its B shares. These ongoing fees, which are higher
than those charged on Retail shares, will cause B shares to have a higher
expense ratio and pay lower dividends than Retail shares.
B shares which have been outstanding for eight years after the
end of the month in which the shares were initially purchased will automatically
convert to Retail shares. The purpose of the conversion is to relieve a holder
of B shares of the higher ongoing expenses charged to those shares, after enough
time has passed to allow the Distributor to recover approximately the amount it
would have received if a front-end sales charge had been charged. The conversion
from B shares to Retail shares takes place at net asset value, as a result of
which an Investor
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receives dollar-for-dollar the same value of Retail shares as he had of B
shares. As a result of the conversion, the converted shares are relieved of the
distribution and service fees borne by B shares, although they are subject to
the distribution and service fees borne by Retail shares.
B shares acquired through a reinvestment of dividends or
distributions are also converted at the earlier of two dates eight years after
the beginning of the calendar month in which the reinvestment occurred or the
date of conversion of the most recently purchased B shares that were not
acquired through reinvestment of dividends or distributions. For example, if an
Investor makes a one-time purchase of B shares of the Fund, and subsequently
acquires additional B shares of the Fund only through reinvestment of dividends
and/or distributions, all of such Investor's B shares in the Fund, including
those acquired through reinvestment, will convert to Retail shares of the Fund
on the same date.
FACTORS TO CONSIDER WHEN SELECTING RETAIL SHARES OR B SHARES
Before purchasing Shares of the Fund, Investors should
consider whether, during the anticipated life of their investment in the Fund,
the accumulated distribution fees and potential contingent deferred sales
charges on B shares prior to conversion would be less than the initial sales
charge and accumulated distribution fees on Retail shares purchased at the same
time, and to what extent such differential would be offset by the higher yield
of Retail shares. In this regard, to the extent that the sales charge for Retail
shares is waived or reduced by one of the methods described above, investments
in Retail shares become more desirable. The Trust will refuse all purchase
orders for B shares of over $250,000.
Although Retail shares are subject to a distribution fee, they
are not subject to the higher distribution fee applicable to B shares. For this
reason, Retail shares can be expected to pay correspondingly higher dividends
per share. However, because initial sales charges are deducted at the time of
purchase, purchasers of Retail shares that do not qualify for waivers of or
reductions in the initial sales charge would have less of their purchase price
initially invested in the Fund than purchasers of B shares of the Fund.
As described above, purchasers of B shares will have more of
their initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by B shares. Because the Fund's future returns cannot be
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predicted, there can be no assurance that this will be the case. Holders of B
shares would, however, own shares that are subject to higher annual expenses
and, for a six-year period, such shares would be subject to a contingent
deferred sales charge of up to 5.00% upon redemption, depending upon the year of
redemption. Investors expecting to redeem during this six-year period should
compare the cost of the contingent deferred sales charge plus the aggregate
annual B shares' distribution fees to the cost of the initial sales charge and
distribution fees on the Retail shares. Over time, the expense of the annual
distribution fees on the B shares may equal or exceed the initial sales charge,
if any, and annual distribution fees applicable to Retail shares. For example,
if net asset value remains constant, the aggregate distribution fees with
respect to B shares of the Fund would equal or exceed the initial sales charge
and aggregate distribution fees of Retail shares of the Fund approximately eight
years after the purchase. In order to reduce such fees of Investors that hold B
shares for more than eight years, B shares will be automatically converted to
Retail shares as described above at the end of such eight-year period.
PURCHASE OF INSTITUTIONAL SHARES
Institutional shares are sold primarily to banks and trust
companies which are affiliated with National City Corporation (the "Banks"),
customers that are large institutions, and investment advisers and financial
planners affiliated with National City ("RIAs") who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients ("Customers"). Institutional shares are sold
without a sales charge imposed by the Trust or the Distributor. However,
depending on the terms governing the particular account, the Banks or RIAs may
impose account charges such as account maintenance fees, compensating balance
requirements or other charges based upon account transactions, assets or income
which will have the effect of reducing the shareholder's net return on his
investment in the Fund. There is no minimum investment.
It is the responsibility of the Banks, NAM and RIAs to
transmit their Customers' purchase orders to the Transfer Agent and to deliver
required funds on a timely basis, in accordance with the procedures stated
above. Institutional shares will normally be held of record by the Banks or
RIAs. Confirmations of share purchases and redemptions will be sent to the Banks
and RIAs. Beneficial ownership of Institutional shares will be recorded by the
Banks or RIAs and reflected in the account statements provided by them to their
Customers.
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The Trust reserves the right to reject any purchase order.
EFFECTIVE TIME OF PURCHASES
Purchase orders for shares of the Fund which are received by
the Transfer Agent prior to 4:00 p.m. (Eastern Time) on any business day are
priced according to the net asset value per share next determined after receipt
of the order plus any applicable sales charge (the "Public Offering Price").
Immediately available funds must be received by the Trust's custodian prior to
2:00 p.m. (Eastern Time) on the third business day following the receipt of such
order, at which time the order will be executed. If funds are not received by
such date, the order will not be accepted and notice thereof will be given to
the Bank or financial institution placing the order. Purchase orders for which
payment has not been received or accepted will be returned after prompt inquiry
to the sending Bank or institution.
REDEMPTION OF RETAIL SHARES AND B SHARES
Redemption orders are effected at the Fund's net asset value
per share next determined after receipt of the order by the Fund. Proceeds from
the redemptions of B shares will be reduced by the amount of any applicable
contingent deferred sales charge. Redemption orders must be placed in writing or
by telephone to the same financial institution that placed the original purchase
order. It is the responsibility of the financial institutions to transmit
redemption orders to the Transfer Agent. Investors who purchased shares directly
from the Trust may redeem shares in any amount by calling 1-800-622-FUND(3863).
Redemption proceeds are paid by check or credited to the Investor's account with
his financial institution.
REDEMPTION OF INSTITUTIONAL SHARES
Customers may redeem all or part of their Institutional shares
in accordance with instructions and limitations pertaining to their accounts at
the Banks or RIAs. It is the responsibility of the Banks or RIAs to transmit
redemption orders to the Transfer Agent and credit their Customers' accounts
with the redemption proceeds on a timely basis. Redemption orders are effected
at the net asset value per share next determined after receipt of the order by
the Transfer Agent. No charge for wiring redemption payments is imposed by the
Trust, although the Banks or RIAs may charge their Customers' accounts for
services. Information relating to such services and charges, if any, is
available from the Banks or RIAs.
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If a Customer has agreed with a particular Bank to maintain a
minimum balance in his account at the Bank and the balance in such account falls
below that minimum, the Customer may be obliged to redeem all or part of his
Institutional shares to the extent necessary to maintain the required minimum
balance. Customers who have instructed that automatic purchases and redemptions
be made for their accounts receive monthly confirmations of share transactions.
WRITTEN REDEMPTION PROCEDURES
A shareholder who purchased shares directly from the Trust may
redeem shares in any amount by sending a written request to Armada Funds, P.O.
Box 8421, Boston, Massachusetts 02266-8421. Redemption requests must be signed
by each shareholder, including each joint owner on redemption requests for joint
accounts, in the exact manner as the Fund account is registered, and must state
the number of shares or the amount to be redeemed and identify the shareholder
account number and tax identification number. For a redemption amount of $10,000
or more, each signature on the written request must be guaranteed by a
commercial bank or trust company which is a member of the Federal Reserve System
or FDIC, a member firm of a national securities exchange or a savings and loan
association. A signature guaranteed by a savings bank or notarized by a notary
public is not acceptable. For a redemption amount less than $10,000, no
signature guarantee is needed. The Trust may require additional supporting
documents for redemptions made by corporations, fiduciaries, executors,
administrators, trustees, guardians and institutional investors.
TELEPHONE REDEMPTION PROCEDURES
A shareholder who purchased shares directly from the Trust may
redeem shares in any amount by calling 1-800-622-FUND(3863) provided the
appropriate election was made on the shareholder's account application.
During periods of unusual economic or market changes,
telephone redemptions may be difficult to implement. In such event, shareholders
should mail their redemption requests to their financial institutions or Armada
Funds at the address shown above. Neither the Trust nor its Transfer Agent will
be responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Trust and its Transfer Agent will use such
procedures as are considered reasonable, including recording those instructions
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and requesting information as to account registration (such as the name in which
an account is registered, the account number and recent transactions in the
account). To the extent that the Trust and its Transfer Agent fail to use
reasonable procedures to verify the genuineness of telephone instructions, they
may be liable for such instructions that prove to be fraudulent and
unauthorized. In all other cases, shareholders will bear the risk of loss for
fraudulent telephone transactions. The Trust reserves the right to refuse a
telephone redemption if it believes it is advisable to do so. Procedures for
redeeming Retail shares or B shares by telephone may be modified or terminated
at any time by the Trust or the Transfer Agent.
OPTION TO MAKE SYSTEMATIC WITHDRAWALS
The Trust has available a Systematic Withdrawal Plan (the
"Plan") for a shareholder who owns shares of the Fund held on the Transfer
Agent's system. The Plan allows the shareholder to have a fixed minimum sum of
$250 distributed at regular intervals. The shareholder's account must have a
minimum value of $5,000 to be eligible for the Plan. Withdrawals will be reduced
by any applicable contingent deferred sales charge. Additional information
regarding this service may be obtained from an Investor's financial institution
or the Transfer Agent at 1-800-622-FUND(3863). Because automatic withdrawals of
B shares will be subject to the contingent deferred sales charge, it may not be
in the best interest of B shares shareholders to make systematic withdrawals.
OTHER REDEMPTION INFORMATION
WHEN REDEEMING SHARES IN THE FUND, SHAREHOLDERS SHOULD
INDICATE WHETHER THEY ARE REDEEMING RETAIL SHARES OR B SHARES. In the event a
redeeming shareholder owns both Retail shares and B shares in the Fund, the
Retail shares will be redeemed first unless the shareholder indicates otherwise.
Due to the relatively high cost of maintaining small accounts, the Trust
reserves the right to redeem, at net asset value, any account maintained by a
shareholder that has a value of less than $500 due to redemptions where the
shareholder does not increase the amount in the account to at least $500 upon 60
days notice.
If any portion of the shares to be redeemed represents an
investment made by personal check, the Trust reserves the right to delay payment
of the redemption proceeds until the Transfer Agent is reasonably satisfied that
the check has been collected, which could take up to 15 calendar days from the
date of purchase. A shareholder who anticipates the need for more
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<PAGE> 35
immediate access to his investment should purchase shares by Federal funds, bank
wire, certified or cashier's check. Financial institutions normally impose a
charge in connection with the use of bank wires, as well as certified checks,
cashier's checks and Federal funds.
Payment to Shareholders for shares redeemed will be made
within seven days after receipt of the request for redemption.
EXCHANGE PRIVILEGE APPLICABLE TO RETAIL SHARES AND B SHARES
The Trust offers an exchange program whereby Investors who
have paid a sales charge to purchase Retail shares of the Fund (a "load Fund")
may exchange those Retail shares for Retail shares of another load Fund, or
another investment fund offered by the Trust without the imposition of a sales
charge (each a "no load Fund") at the net asset value per share on the date of
exchange. As a result, no additional sales charge will be incurred with respect
to such an exchange. Shareholders may also exchange Retail shares of a no load
Fund for Retail shares of another no load Fund at the net asset value per share
without payment of a sales load. In addition, shareholders of a no load Fund may
exchange Retail shares for Retail shares of a load Fund subject to payment of
the applicable sales load. However, shareholders exchanging Retail shares of a
no load Fund which were received in a previous exchange transaction involving
Retail shares of a load Fund will not be required to pay an additional sales
charge upon notification of the reinvestment of the equivalent amount into the
Retail shares of a load Fund.
Shareholders who have purchased B shares of the Fund
(including shares acquired through reinvestment of dividends or distributions on
such shares) may exchange those shares for B shares of another Fund without the
payment of any contingent deferred sales charge at the time the exchange is
made. In determining the holding period for calculating the contingent deferred
sales charge payable on redemptions of B shares, the holding period of the B
shares originally held will be added to the holding period of the B shares
acquired through the exchange.
No exchange fee is imposed by the Trust. Shareholders
contemplating an exchange should carefully review the Prospectus of the Fund
into which the exchange is being considered. An Armada Funds Prospectus may be
obtained from NatCity Investments, Inc., an Investor's financial institution or
by calling 1-800-622-FUND(3863).
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<PAGE> 36
Any Retail shares or B shares exchanged must have a value at
least equal to the minimum initial investment required by the particular
investment fund into which the exchange is being made. Investors should make
their exchange requests in writing or by telephone to the financial institutions
through which they purchased their original Retail shares or B shares. It is the
responsibility of financial institutions to transmit exchange requests to the
Transfer Agent. Investors who purchased shares directly from the Trust should
transmit exchange requests directly to the Transfer Agent. Exchange requests
received by the Transfer Agent prior to 4:00 p.m. (Eastern Time) will be
processed as of the close of business on the day of receipt; requests received
by the Transfer Agent after 4:00 p.m. (Eastern Time) will be processed on the
next Business Day. The Trust reserves the right to reject any exchange request.
During periods of unusual economic or market changes, telephone exchanges may be
difficult to implement. In such event, an Investor should mail the exchange
request to his financial institution, and an Investor who directly purchased
shares from the Trust should mail the exchange request to the Transfer Agent.
The exchange privilege may be modified or terminated at any time upon 60 days'
notice to shareholders.
SYSTEMATIC EXCHANGE PROGRAM APPLICABLE TO RETAIL SHARES AND B
SHARES
Shares of the Fund may also be purchased through automatic
monthly deductions from a shareholder's account from any Armada money market
fund. Under a systematic exchange program, a shareholder enters an agreement to
purchase shares of one or more specified funds over a specified period of time,
and initially purchases shares of one Armada money market fund in an amount
equal to the total amount of the investment. On a monthly basis, a specified
dollar amount of shares of the Armada money market fund is exchanged for shares
of the Fund specified.
The systematic exchange program of investing a fixed dollar
amount at regular intervals over time has the effect of reducing the average
cost per share of the Fund. This effect also can be achieved through the
systematic investment program described previously in this Prospectus. Because
purchases of Retail shares are subject to an initial sales charge, it may be
beneficial for an investor to execute a Letter of Intent in indicating an intent
to purchase Retail shares in connection with the systematic exchange program. A
shareholder may apply for participation in this program through his financial
institution or by calling 1-800-622-FUND(3863).
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DISTRIBUTION AND SERVICING ARRANGEMENTS
Pursuant to the Trust's Distribution Agreement, as amended,
and Rule 12b-1 under the 1940 Act, the Trust adopted a Service and Distribution
Plan relating to the Institutional and Retail classes of shares ("Institutional
and Retail Plan") and a separate B Shares Distribution and Servicing Plan
relating to the B classes of shares ("B Shares Plan"). Under the Institutional
and Retail Plan, the Trust pays the following compensation to the Distributor
for services provided and expenses assumed in providing the Trust advertising,
marketing, prospectus printing and other distribution services: (i) an annual
base fee of $1,250,000, plus (ii) incentive fees related to asset growth. Such
compensation is payable monthly and accrued daily among the Institutional and
Retail classes of the Trust's investment funds with respect to which the
Distributor is distributing shares. In the case of the Fund, such compensation
shall not exceed .10% per annum of the average aggregate net assets of its
Institutional and Retail classes. Under the B Shares Plan, the Trust pays the
Distributor up to .75% annually of the average daily net assets of each fund's B
shares for the same types of services provided and expenses assumed as in the
Institutional and Retail Plan. Such compensation is payable monthly and accrued
daily by the Fund's B shares only.
Although B shares are sold without an initial sales charge,
the Distributor pays a sales commission equal to 4.25% of the amount invested
(including a prepaid service fee of 0.25% of the amount invested) to dealers who
sell B shares. These commissions are not paid on exchanges from other Armada
funds or on sales to investors exempt from the contingent deferred sales charge.
Under the Shareholder Services Plan relating to the Fund's
Retail shares and the B Shares Plan, the Trust enters into shareholder servicing
agreements with certain financial institutions. Pursuant to these agreements,
the institutions agree to render shareholder administrative services to their
customers who are the beneficial owners of Retail or B shares in consideration
for the payment of up to .25% (on an annualized basis) of the average daily net
asset value of such shares. Persons entitled to receive compensation for
servicing Retail or B shares may receive different compensation with respect to
those shares than with respect to Institutional shares in the same Fund.
Shareholder administrative services may include aggregating and processing
purchase and redemption orders, processing dividend payments from the Fund on
behalf of customers, providing information periodically to customers showing
their position in Retail or B shares, and providing sub- transfer agent services
or the information necessary for sub-
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transfer agent services, with respect to Retail or B shares beneficially owned
by customers. Since financial institutions may charge their customers fees
depending on the type of customer account the Investor has established,
beneficial owners of Retail or B shares should read this Prospectus in light of
the terms and fees governing their accounts with financial institutions.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the net investment income of the Fund are
declared and paid quarterly. With respect to the Fund, net income for dividend
purposes consists of dividends, distributions and other income on the Fund's
assets, less the accrued expenses of the Fund. Any net realized capital gains
will be distributed at least annually. Dividends and distributions will reduce
the Fund's net asset value per share by the per share amount thereof.
Shareholders of the Fund may elect to have their dividends
reinvested in additional full and fractional Fund shares of the same class of
any Armada Funds at the net asset value of such shares on the ex-dividend date.
Shareholders must make such election, or any revocation thereof, in writing to
their Banks or financial institutions. The election will become effective with
respect to dividends and distributions paid after its receipt.
TAXES
The Fund intends to qualify as a separate "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Such qualification generally relieves the Fund of liability for federal
income taxes to the extent its earnings are distributed in accordance with the
Code.
Qualification as a regulated investment company under the Code
for a taxable year requires, among other things, that the Fund distribute to its
shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its net tax-exempt interest income, if any,
for such year. In general, the Fund's investment company taxable income will be
the sum of its net investment income and the excess of any net short-term
capital gain for the taxable year over the net long-term capital loss, if any,
for such year. The Fund intends to distribute substantially all of its
investment company taxable income and net tax-exempt income each taxable year.
Such distributions by the Fund will be taxable as ordinary income to
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their respective shareholders who are not currently exempt from federal income
taxes, whether such income is received in cash or reinvested in additional
shares. (Federal income taxes for distributions to an IRA or to a qualified
retirement plan are deferred under the Code.) For corporate shareholders, the
dividends received deduction will apply to such distributions to the extent of
the gross amount of qualifying dividends received by the distributing Fund from
domestic corporations for the taxable year.
Substantially all of the Fund's net realized long-term capital
gains, if any, will be distributed at least annually to Fund shareholders. The
Fund will generally have no tax liability with respect to such gains and the
distributions will be taxable to Fund shareholders who are not currently exempt
from federal income taxes as long-term capital gains, regardless of how long the
shareholders have held Fund shares and whether such gains are received in cash
or reinvested in additional shares.
Dividends declared in October, November or December of any
year payable to shareholders of record on a specified date before the end of the
year will be deemed to have been received by shareholders and paid by the Fund
on December 31 of such year in the event such dividends are actually paid during
January of the following year.
Prior to purchasing Fund shares, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after a purchase of shares prior to the record date will have the effect
of reducing the per share net asset value by the per share amount of the
dividend or distribution. All or a portion of such dividend or distribution,
although in effect a return of capital, may be subject to tax.
A taxable gain or loss may be realized by a shareholder upon
his redemption, transfer or exchange of Fund shares depending upon the tax basis
of such shares and their price at the time of redemption, transfer or exchange.
If a shareholder has held shares for six months or less and during that time
received a distribution taxable as a long-term capital gain, then any loss the
shareholder might realize on the sale of those shares will be treated as a
long-term loss to the extent of the earlier capital gain distribution.
Generally, a shareholder may include sales charges incurred upon the purchase of
Fund shares in his tax basis for such shares for the purpose of determining gain
or loss on a redemption, transfer or exchange of such shares. However, if the
shareholder effects an exchange of such shares for shares of another Fund within
90 days of the purchase
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and is able to reduce the sales charge applicable to the new shares (by virtue
of the Trust's exchange privilege), the amount equal to such reduction may not
be included in the tax basis of the shareholder's exchanged shares but may be
included (subject to this limitation) in the tax basis of the new shares.
Shareholders of the Fund will be advised at least annually as
to the federal income tax consequences of distributions made to them each year.
Shareholders are advised to consult their tax advisers concerning the
application of state and local taxes which may differ from federal tax
consequences described above.
The foregoing discussion is based on tax laws and regulations
which were in effect as of the date of this Prospectus; such laws and
regulations may be changed by legislative or administrative actions. The
foregoing summarizes some of the important tax considerations generally
affecting the Fund and its shareholders and is not intended as a substitute for
careful tax planning. Accordingly, potential investors should consult their tax
advisers with specific reference to their own tax situation.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the
direction of the Trust's Board of Trustees. The trustees of the Trust, their
addresses, principal occupations during the past five years, other affiliations,
and the compensation paid by the Trust and the fees and reimbursed expenses they
receive in connection with each meeting of the Board of Trustees they attend are
included in the Statement of Additional Information.
INVESTMENT ADVISER
National City serves as the investment adviser to the Fund.
National City provides trust and banking services to individuals, corporations,
and institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking. National City is a member bank
of the Federal Reserve System and the Federal Deposit Insurance Corporation.
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On December 31, 1997, the Trust Department of National City
had approximately $11.5 billion in assets under management, and approximately
$23.3 billion in total trust assets. The principal office of the investment
adviser is as follows:
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
Subject to the general supervision of the Trust's Board of
Trustees and in accordance with the Fund's investment policies, the advisers
have agreed to manage the Fund, make decisions with respect to and place orders
for all purchases and sales of such Fund's securities, and maintain such Fund's
records relating to such purchases and sales.
The Fund is managed by the Equity Growth Style Team of
National City's Asset Management Group. Members of the team are as follows:
o Eric S. Fuchs is the person primarily responsible for
the day-to-day management of the Equity Growth Fund.
Mr. Fuchs, a Vice President at National City, has 21
years of equity investment experience encompassing
research and money management. After co-managing
several equity mutual funds at Twentieth Century
Investors, he managed pension accounts at Waddell &
Reed Asset Management. He earned an MBA from the
University of Chicago Graduate School of Business.
o Eugene C. March, a Chartered Financial Analyst and Vice
President, joined the Equity Growth Style team in January
1997. He has been with National City for 18 years previously
holding positions in equity research and as Associate Director
of Research.
o Alex L. Vallecillo, Assistant Vice President and CFA
candidate, joined National City in 1996. He traded corporate
structured securities for Merrill Lynch in 1993, an was
associated with EDS from September 1990 through July 1992.
For the services provided and expenses assumed pursuant to the
Advisory Agreement relating to the Fund, the adviser is entitled to receive an
advisory fee, computed daily and payable monthly, at the annual rate of .75% of
the average net assets of Fund. Shareholders should note that these fees are
higher than
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<PAGE> 42
those payable by other investment companies. However, the Trust believes that
the fees are within the range of fees payable by investment funds with
comparable investment objectives and policies. The adviser may from time to time
waive all or a portion of their advisory fees to increase the net income of the
Fund available for distribution as dividends.
ADMINISTRATOR
PFPC Inc. ("PFPC"), located at 400 Bellevue Parkway,
Wilmington, Delaware 19809, serves as the administrator to the Funds. PFPC is an
indirect, wholly-owned subsidiary of PNC Bank Corp., a multi-bank holding
company.
Under its Administration and Accounting Services Agreement
with the Trust, PFPC has agreed to provide the following services with respect
to the Fund: statistical data, data processing services and accounting and
bookkeeping services; prepare tax returns and certain reports filed with the
SEC; assist in the preparation of reports to shareholders and the preparation of
the Trust's registration statement; maintain the required fidelity bond
coverage; calculate the Fund's net asset value per share, net income, and
realized capital gains (losses); and generally assist the Fund with respect to
all aspects of its administration and operation. PFPC is entitled to receive
with respect to the Fund an administrative fee, computed daily and paid monthly,
at the annual rate of .10% of the first $200,000,000 of its net assets, .075% of
the next $200,000,000 of its net assets, .045% of the next $200,000,000 of its
net assets and .02% of its net assets over $600,000,000 and is entitled to be
reimbursed for its out-of-pocket expenses incurred on behalf of the Fund.
DESCRIPTION OF THE TRUST AND ITS SHARES
The Trust was organized as a Massachusetts business trust on
January 28, 1986. The Trust is a series fund authorized to issue 61 separate
classes or series of shares of beneficial interest ("shares"). Three of these
classes or series, which represent interests in the Tax Managed Equity Fund
(Class Z, Class Z - Special Series 1 and Class Z - Special Series 2). Class Z
shares constitute the Institutional class or series of shares; Class Z - Special
Series 1 shares constitute the Retail class or series of shares; and Class Z -
Special Series 2 shares constitute the B class or series of shares. The other
Funds of the Trust are:
Money Market Fund
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<PAGE> 43
(Class A, Class A - Special Series 1 and Class A
Special Series 2)
Government Money Market Fund
(Class B and Class B - Special Series 1)
Treasury Money Market Fund
(Class C and Class C - Special Series 1)
Tax Exempt Money Market Fund
(Class D, Class D - Special Series 1 and Class D
Special Series 2)
Intermediate Bond Fund
(Class I, Class I - Special Series 1 and Class I
Special Series 2)
Ohio Tax Exempt Fund
(Class K, Class K - Special Series 1 and Class K
Special Series 2)
National Tax Exempt Fund
(Class L, Class L - Special Series 1 and Class L
Special Series 2)
Equity Growth Fund
(Class H, Class H - Special Series 1 and Class H
Special Series 2)
Equity Income Fund
(Class M, Class M - Special Series 1 and Class M
Special Series 2)
Small Cap Value Fund
(Class N, Class N - Special Series 1 and Class N
Special Series 2)
Enhanced Income Fund
(Class O, Class O - Special Series 1 and Class O
Special Series 2)
Total Return Advantage Fund
(Class P, Class P - Special Series 1 and Class P
Special Series 2)
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<PAGE> 44
Pennsylvania Tax Exempt Money Market Fund (Class Q
and Class Q - Special Series 1)
Bond Fund
(Class R, Class R - Special Series 1 and Class R
Special Series 2)
GNMA Fund
(Class S, Class S - Special Series 1 and Class S
Special Series 2)
Pennsylvania Municipal Fund
(Class T, Class T - Special Series 1 and Class T
Special Series 2)
International Equity Fund
(Class U, Class U - Special Series 1 and Class U
Special Series 2)
Equity Index Fund
(Class V and Class V - Special Series 1)
Core Equity Fund
(Class W, Class W - Special Series 1 and Class W
Special Series 2)
Small Cap Growth Fund
(Class X, Class X - Special Series 1 and Class X
Special Series 2)
Real Return Advantage Fund (Class Y and Class Y -
Special Series 1)
Each share has no par value, represents an equal proportionate
interest in the investment fund with other shares of the same class or series
outstanding, and is entitled to such dividends and distributions out of the
income earned on the assets belonging to such Fund as are declared in the
discretion of the Trust's Board of Trustees. The Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any unissued shares
into any number of additional classes of shares and to classify or reclassify
any class of shares into one or more series of shares.
-38-
<PAGE> 45
Shareholders are entitled to one vote for each full share
held, and a proportionate fractional vote for each fractional share held.
Shareholders will vote in the aggregate and not by investment fund, except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular investment fund. The Statement of Additional Information gives
examples of situations in which the law requires voting by investment fund. In
addition, shareholders of each of the investment Funds will vote in the
aggregate and not by class or series, except as otherwise expressly required by
law or when the Board of Trustees determines the matter to be voted on affects
only the interests of the holders of a particular class or series of shares.
Under the Shareholder Services Plan and B Shares Plan, only the holders of
Retail or B shares in an investment fund are, or would be entitled to vote on
matters submitted to a vote of shareholders (if any) concerning their respective
plans. Voting rights are not cumulative, and accordingly, the holders of more
than 50% of the aggregate shares of the Trust may elect all of the trustees
irrespective of the vote of the other shareholders.
As stated above, the Trust is organized as a trust under the
laws of Massachusetts. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Declaration of Trust of the Trust provides for
indemnification out of the trust property for any shareholder held personally
liable solely by reason of his being or having been a shareholder and not
because of his acts or omissions or some other reason.
The Trust does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Trust's Code of Regulations provides that special meetings of shareholders shall
be called at the written request of shareholders entitled to cast at least 10%
of the votes entitled to be cast at such meeting. Such meeting may be called by
shareholders to consider the removal of one or more trustees. Shareholders will
receive shareholder communication assistance with respect to such matter as
required by the 1940 Act.
-39-
<PAGE> 46
CUSTODIAN AND TRANSFER AGENT
National City Bank serves as the custodian of the Trust's
assets. State Street Bank and Trust Company serves as the Trust's transfer and
dividend disbursing agent. Communications to the Transfer Agent should be
directed to P.O. Box 8421, Boston, Massachusetts 02266-8421. The fees payable by
the Trust for these services are described in the Statement of Additional
Information.
EXPENSES
Except as noted below, the Adviser bears all expenses in
connection with the performance of its services. The Fund bears its own expenses
incurred in its operations including: taxes; interest; fees (including fees paid
to its trustees and officers); SEC fees; state securities qualification fees;
costs of preparing and printing prospectuses for regulatory purposes and for
distribution to existing shareholders; expenses related to the distribution and
servicing plans; advisory fees; administration fees and expenses; charges of the
custodian and Transfer Agent; certain insurance premiums; outside auditing and
legal expenses; costs of shareholders' reports and shareholder meetings; and any
extraordinary expenses. The Fund also pays for brokerage fees and commissions in
connection with the purchase of its portfolio securities.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and
annual financial statements audited by independent accountants.
Pursuant to Rule 17f-2, as National City Bank serves the Trust
as both the custodian and an investment adviser, a procedure has been
established requiring three annual verifications, two of which are to be
unannounced, of all investments held pursuant to the Custodian Services
Agreement, to be conducted by the Trust's independent auditors.
-40-
<PAGE> 47
As used in this Prospectus, a "vote of the holders of a
majority of the outstanding shares" of the Trust or a particular investment fund
means, with respect to the approval of an investment advisory agreement, a
distribution plan or a change in a fundamental investment policy, the
affirmative vote of the lesser of (a) 50% or more of the outstanding shares of
the Trust or such fund or (b) 67% or more of the shares of the Trust or such
fund present at a meeting if more than 50% of the outstanding shares of the
Trust or such fund are represented at the meeting in person or by proxy.
The portfolio managers of the Fund and other investment
professionals may from time to time discuss in advertising, sales literature or
other material, including periodic publications, various topics of interest to
shareholders and prospective investors. The topics may include, but are not
limited to, the advantages and disadvantages of investing in tax-deferred and
taxable investments; Fund performance and how such performance may compare to
various market indices; shareholder profiles and hypothetical investor
scenarios; the economy; the financial and capital markets; investment strategies
and techniques; investment products and tax, retirement and investment planning.
Inquiries regarding the Trust or any of its investment funds
may be directed to 1-800-622-FUND(3863).
-41-
<PAGE> 48
Armada Funds
<TABLE>
<CAPTION>
BOARD OF TRUSTEES
<S> <C>
ROBERT D. NEARY ROBERT J. FARLING
Chairman Retired Chairman, President and Chief
Retired Co-Chairman, Ernst & Young Executive Officer, Centerior Energy
Director: Director:
Cold Metal Products, Inc. Republic Engineered Steels
Zurn Industries, Inc.
HERBERT R. MARTENS, JR. RICHARD W. FURST, DEAN
President Professor of Finance and Dean
Executive Vice President, Carol Martin Gatton College of Business
National City Corporation and Economics, University of Kentucky
Chairman, President and Director:
Chief Executive Officer, Foam Design, Inc.
Officer, NatCity The Seed Corporation
Investments, Inc.
LEIGH CARTER GERALD L. GHERLEIN
Retired President and Executive Vice President and General
Chief Operating Officer Counsel, Eaton Corporation
B.F. Goodrich Company Trustee:
Director: Meridia Health System
Acromed Corporation WVIZ Educational Television
Kirtland Capital Corporation
Morrison Products
JOHN F. DURKOTT J. WILLIAM PULLEN
President and Chief President and Chief Executive Officer,
Operating Officer, Whayne Supply Company
Kittle's Home Furnishing's
Center, Inc.
</TABLE>
-42-
<PAGE> 49
ARMADA FUNDS
Investment Adviser
Affiliate of National
City Corporation
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
<PAGE> 50
CROSS REFERENCE SHEET
---------------------
Tax Managed Equity Fund
<TABLE>
<CAPTION>
Statement of Additional
Form N-1A Part B Item Information Caption
- --------------------- -----------------------
<S> <C> <C>
1. Cover Page..................................... Cover Page
2. Table of Contents.............................. Table of Contents
3. General Information and History................ Statement of Additional
Information
4. Investment Objectives and Policies............. Investment Objectives
and Policies
5. Management of Registrant....................... Trustees and Officers
6. Control Persons and Principal
Holders of Securities.......................... Description of Shares
7. Investment Advisory and Other
Services....................................... Advisory,
Administration,
Distribution, Custodian
Services and Transfer
Agency Agreements
8. Brokerage Allocation and Other
Practices...................................... Investment
Objectives and Policies
9. Capital Stock and Other Securities............. Additional Purchase and
Redemption Information
10. Purchase, Redemption and Pricing
of Securities Being Offered.................... Additional Purchase and
Redemption Information
11. Tax Status..................................... Additional Information
Concerning Taxes
12. Underwriters................................... Not Applicable
13. Calculation of Performance Data................ Yield and Performance
Information
14. Financial Statements........................... Financial Statements
</TABLE>
<PAGE> 51
Subject to Completion - Dated January 22, 1998
Information contained herein pertaining to shares of the Armada Tax Managed
Equity Fund is subject to completion or amendment. A post-effective amendment
to the registration statement relating to shares of the Armada Tax Managed
Equity Fund has been filed with the Securities and Exchange Commission. Shares
of the Armada Tax Managed Equity Fund may not be sold nor may offers to buy
shares of this Fund be accepted prior to the time the post-effective amendment
to the registration statement becomes effective. This Statement of Additional
Information does not constitute a prospectus.
ARMADA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
___________, 1998
TAX MANAGED EQUITY FUND
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current Prospectus for the above Fund of Armada Funds
(the "Trust"), dated ___________, 1998 (the "Prospectus"). A copy of the
Prospectus may be obtained by calling or writing the Trust at
1-800-622-FUND(3863), Oaks, Pennsylvania 19456.
<PAGE> 52
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION.................................................................... 1
INVESTMENT OBJECTIVES AND POLICIES..................................................................... 5
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION......................................................... 9
DESCRIPTION OF SHARES.................................................................................. 12
ADDITIONAL INFORMATION CONCERNING TAXES................................................................ 14
TRUSTEES AND OFFICERS.................................................................................. 16
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS ............................................................. 21
SHAREHOLDER SERVICES PLANS............................................................................. 24
PORTFOLIO TRANSACTIONS................................................................................. 25
AUDITORS............................................................................................... 26
COUNSEL................................................................................................ 26
PERFORMANCE INFORMATION................................................................................ 27
MISCELLANEOUS.......................................................................................... 29
APPENDIX A........................................................................................... A-1
APPENDIX B........................................................................................... B-1
</TABLE>
-i-
<PAGE> 53
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
This Statement of Additional Information should be read in
conjunction with the Prospectus of Armada Funds (the "Trust") that describes the
Tax Managed Equity Fund (the "Fund"). The information contained in this
Statement of Additional Information expands upon matters discussed in the
Prospectus. No investment in shares of the Fund should be made without first
reading the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
----------------------------------
ADDITIONAL INFORMATION ON FUND MANAGEMENT
- -----------------------------------------
Further information on the adviser's investment management
strategies, techniques, policies and related matters may be included from time
to time in advertisements, sales literature, communications to shareholders and
other materials. See also, "Performance Information" below.
Attached to this Statement of Additional Information is
Appendix A which contains descriptions of the rating symbols used by S&P, Fitch,
Duff, IBCA and Moody's for securities which may be held by the Fund.
CONVERTIBLE SECURITIES
- ----------------------
Convertible securities entitle the holder to receive interest
paid or accrued on debt or the dividend paid on preferred stock until the
securities mature or are redeemed, converted or exchanged. Prior to conversion,
convertible securities have characteristics similar to ordinary debt securities
in that they normally provide a stable stream of income with generally higher
yields than those of common stock of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure and
therefore generally entail less risk than the corporation's common stock. The
value of the convertibility feature depends in large measure upon the degree to
which the convertible security sells above its value as a fixed income security.
In selecting convertible securities, the adviser will
consider, among other factors, the creditworthiness of the issuers of the
securities; the interest or dividend income generated by the securities; the
potential for capital appreciation of the securities and the underlying common
stocks; the prices of the securities relative to other comparable securities and
to the underlying common stocks; whether the securities are entitled to the
benefits of sinking funds or other protective conditions; diversification of the
Fund's portfolio as to issuers; and the ratings of the securities. Since credit
rating agencies may fail
-1-
<PAGE> 54
to timely change the credit ratings of securities to reflect subsequent events,
the adviser will consider whether such issuers will have sufficient cash flow
and profits to meet required principal and interest payments. The Fund may
retain a portfolio security whose rating has been changed if the adviser deems
that retention of such security is warranted.
WARRANTS
- --------
Warrants enable the owner to subscribe to and purchase a
specified number of shares of the issuing corporation at a specified price
during a specified period of time. The prices of warrants do not necessarily
correlate with the prices of the underlying securities. The purchase of warrants
involves the risk that the purchaser could lose the purchase value of the
warrant if the right to subscribe to additional shares is not exercised prior to
the warrant's expiration. Also, the purchase of warrants involves the risk that
the effective price paid for the warrant added to the subscription price of the
related security may exceed the value of the subscribed security's market price
such as when there is no movement in the level of the underlying security.
FUTURES CONTRACTS AND RELATED OPTIONS
- -------------------------------------
The Fund may invest in futures contracts and related options.
For a detailed description of these investments and related risks, see Appendix
B attached to this Statement of Additional Information.
"COVERED CALL" OPTIONS
- ----------------------
As described in the Prospectus, the Fund may write covered
call options. The Fund will write call options only if they are "covered." The
option is "covered" if the Fund owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, liquid assets
of equal value are held in a segregated account by its custodian) upon
conversion or exchange of other securities held by it. For a call option on an
index, the option is covered if the Fund maintains with its custodian a
portfolio of securities substantially replicating the movement of the index, or
liquid assets equal to the contract value. A call option is also covered if the
Fund holds a call on the same security or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written, or (ii) greater than the exercise price of the call written
provided the difference is maintained by the Fund in liquid assets in a
segregated account with its custodian.
The Fund's obligation to sell a security subject to a covered
call option written by it may be terminated prior to the
-2-
<PAGE> 55
expiration date of the option by the Fund's execution of a closing purchase
transaction, which is effected by purchasing on an exchange an option of the
same series (i.e., same underlying security, exercise price and expiration date)
as the option previously written. Such a purchase does not result in the
ownership of an option. A closing purchase transaction will ordinarily be
effected to realize a profit on an outstanding option, to prevent an underlying
security from being called, to permit the sale of the underlying security or to
permit the writing of a new option containing different terms on such underlying
security. The cost of such a liquidation purchase plus transaction costs may be
greater than the premium received upon the original option, in which event the
Fund will have incurred a loss on the transaction. There is no assurance that a
liquid secondary market will exist for any particular option. An option writer,
unable to effect a closing purchase transaction, will not be able to sell the
underlying security until the option expires or the optioned security is
delivered upon exercise with the result that the writer in such circumstances
will be subject to the risk of market decline or appreciation in the security
during such period.
When the Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of this deferred credit will be subsequently
marked-to-market to reflect the current value of the option written. The current
value of the traded option is the last sale price or, in the absence of a sale,
the current bid price. If an option written by the Fund expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. If an option written
by the Fund is exercised, the proceeds of the sale will be increased by the net
premium originally received and the Fund will realize a gain or loss.
There are several risks associated with transactions in
certain options. For example, there are significant differences between the
securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. In addition, a liquid secondary market for particular options,
whether traded over-the-counter or on a securities exchange may be absent for
reasons which include the following: there may be insufficient trading interest
in certain options; restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; trading halts, suspensions or
other restrictions may be imposed with respect to particular classes or series
of options or underlying securities or currencies; unusual or unforeseen
circumstances may interrupt normal operations on an exchange; the facilities of
an
-3-
<PAGE> 56
exchange or the Options Clearing Corporation may not at all times be adequate to
handle current trading value; or one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options that had been issued by the
Options Clearing Corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms.
WHEN-ISSUED SECURITIES
- ----------------------
The Fund may purchase securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). When the Fund agrees to purchase when-issued securities, the custodian
sets aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the separate
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment, marked to market daily. It is likely that the
Fund's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. Because the Fund will set aside cash or liquid assets to satisfy its
purchase commitments in the manner described, the Fund's liquidity and ability
to manage its portfolio might be affected in the event its commitments to
purchase when-issued securities ever exceeded 25% of the value of its total
assets.
When the Fund engages in when-issued transactions, it relies
on the seller to consummate the trade. Failure of the seller to do so may result
in the Fund's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
SHORT-TERM OBLIGATIONS
- ----------------------
The Fund may invest in various short-term obligations
including those described below.
Investments include commercial paper and other short-term
promissory notes issued by corporations (including variable and floating rate
instruments). In addition, the Fund may invest in Canadian Commercial Paper
("CCP"), which is commercial paper issued by a Canadian corporation or a
Canadian counterpart of a U.S. corporation, and in Europaper, which is U.S.
dollar denominated commercial paper of a foreign issuer. The Fund may also
acquire zero coupon obligations, which have greater price volatility than
-4-
<PAGE> 57
coupon obligations and which will not result in the payment of
interest until maturity.
Bank obligations include bankers' acceptances, negotiable
certificates of deposit, and non-negotiable demand and time deposits issued for
a definite period of time and earning a specified return by a U.S. bank which is
a member of the Federal Reserve System. Bank obligations also include U.S.
dollar denominated bankers' acceptances, certificates of deposit and time
deposits issued by foreign branches of U.S. banks or foreign banks. Investment
in bank obligations is limited to the obligations of financial institutions
having more than $1 billion in total assets at the time of purchase. The Fund
may also make interest bearing savings deposits in commercial and savings banks
not in excess of 5% of its total assets. Investment in non-negotiable time
deposits is limited to no more than 5% of the Fund's total assets at the time of
purchase.
The Fund may also make limited investments in "GICs" issued by
U.S. insurance companies. When investing in GICs, the Fund makes cash
contributions to a deposit fund or an insurance company's general account. The
insurance company then credits to the Fund monthly a guaranteed minimum interest
which is based on an index. The insurance company may assess periodic charges
against a GIC for expense and service costs allocable to it, and the charges
will be deducted from the value of the deposit fund. The Fund will purchase a
GIC only when its adviser has determined, under guidelines established by the
Board of Trustees, that the GIC presents minimal credit risks to the Fund and is
of comparable quality to instruments that are rated high quality by one or more
rating agencies.
REPURCHASE AGREEMENTS
- ---------------------
Securities held by the Fund may be subject to repurchase
agreements. Under the terms of a repurchase agreement, the Fund purchases
securities from financial institutions such as banks and broker-dealers which
the Fund's adviser deems creditworthy under guidelines approved by the Board of
Trustees, subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price generally equals the
price paid by the Fund plus interest negotiated on the basis of current short
term rates, which may be more or less than the rate on the underlying portfolio
securities. The seller under a repurchase agreement will be required to maintain
the value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest). If the seller were to default on
its repurchase obligation or become insolvent, the Fund holding such obligation
would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
were
-5-
<PAGE> 58
delayed pending court action. Although there is no controlling legal precedent
confirming that the Fund would be entitled, as against a claim by such seller or
its receiver or trustee in bankruptcy, to retain the underlying securities, the
Board of Trustees of the Trust believes that, under the regular procedures
normally in effect for custody of a Fund's securities subject to repurchase
agreements and under federal laws, a court of competent jurisdiction would rule
in favor of the Trust if presented with the question. Securities subject to
repurchase agreements will be held by the Trust's custodian or another qualified
custodian or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered to be loans by the Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS
- -----------------------------
The Fund may borrow funds for temporary purposes by entering
into reverse repurchase agreements in accordance with its investment
restrictions. Pursuant to such agreements, the Fund would sell portfolio
securities to financial institutions such as banks and broker-dealers, and agree
to repurchase them at a mutually agreed-upon date and price. The Fund intends to
enter into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the time
the Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account assets such as U.S. Government securities or other
liquid, high grade debt securities consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Fund may decline below the
price at which it is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings by the Fund under the Investment
Company Act of 1940.
U.S. GOVERNMENT OBLIGATIONS
- ---------------------------
The Fund may purchase obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. Some of these obligations
are supported by the full faith and credit of the U.S. Treasury, such as
obligations issued by the Government National Mortgage Association. Others, such
as those of the Export-Import Bank of the United States, are supported by the
right of the issuer to borrow from the U.S. Treasury; others, such as those of
the Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and still
others, such as those of the Student Loan Marketing Association, are supported
only by the credit of the agency or instrumentality issuing the obligation. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored agencies or
-6-
<PAGE> 59
instrumentalities if it is not obligated to do so by law. The Fund will invest
in the obligations of such agencies or instrumentalities only when the adviser
believes that the credit risk with respect thereto is minimal.
VARIABLE AND FLOATING RATE OBLIGATIONS
- --------------------------------------
The Fund may purchase variable and floating rate obligations
(including variable amount master demand notes) which are unsecured instruments
that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate. Because variable and floating rate obligations
are direct lending arrangements between the Fund and the issuer, they are not
normally traded although certain variable and floating rate obligations, such as
Student Loan Marketing Association variable rate obligations, may have a more
active secondary market because they are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. Even though there may be no
active secondary market in such instruments, the Fund may demand payment of
principal and accrued interest at a time specified in the instrument or may
resell them to a third party. Such obligations may be backed by bank letters of
credit or guarantees issued by banks, other financial institutions or the U.S.
Government, its agencies or instrumentalities. The quality of any letter of
credit or guarantee will be rated high quality or, if unrated, will be
determined to be of comparable quality by the adviser. In the event an issuer of
a variable or floating rate obligation defaulted on its payment obligation, the
Fund might be unable to dispose of the instrument because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default.
SECURITIES OF OTHER INVESTMENT COMPANIES
- ----------------------------------------
The Fund currently intends to limit its investments in
securities issued by other investment companies so that, as determined
immediately after a purchase of such securities is made: (i) not more than 5% of
the value of the Fund's total assets will be invested in the securities of any
one investment company; (ii) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of investment companies as a
group; and (iii) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund or by the Trust as a whole.
SHORT SALES
- -----------
The Fund may engage in short sales of its securities.
Selling securities short involves selling securities the seller does not own
(but has borrowed) in anticipation of a decline in the market price of such
securities. To deliver the securities to the buyer, the seller must arrange
through a broker to borrow the securities and, in so doing, the seller becomes
obligated to replace the securities borrowed at their market price at the time
of replacement. In a short sale, the proceeds the seller receives from the sale
are retained by a broker until the seller replaces the borrowed securities.
The seller may have to pay a premium to borrow the securities and must pay any
dividends or interest payable on the securities until they are replaced.
The Fund may only sell securities short "against the box." A
short sale is "against the box" if, at all times during which the short
position is open, the Fund owns at least an equal amount of the securities or
securities convertible into, or exchangeable without further consideration for,
securities of the same issuer as the securities that are sold short.
PORTFOLIO TURNOVER
- ------------------
Notwithstanding the Fund's objective, the Fund reserves the
right to sell securities without regard to how long the Fund has owned them.
Portfolio turnover could rise during periods of economic turbulence and
decline during periods of stable growth.
-7-
<PAGE> 60
The portfolio turnover rate for the Fund is calculated by dividing the lesser
of purchases or sales of portfolio securities for the year by the monthly
average value of the portfolio securities. The calculation excludes U.S.
Government securities and all securities whose maturities at the time of
acquisition were one year or less. Portfolio turnover may vary from year
to year as well as within a particular year, and may also be affected by cash
requirements for redemptions of shares and by requirements which enable the
Fund to receive certain favorable tax treatment.
ADDITIONAL INVESTMENT LIMITATIONS
- ---------------------------------
In addition to the investment limitations disclosed in the
Prospectus, the Fund is subject to the following investment limitations which
may be changed with respect to the Fund only by a vote of the holders of a
majority of the Fund's outstanding shares (as defined under "Miscellaneous" in
the Prospectus).
The Fund may not:
1. Purchase or sell real estate, except that the Fund may
purchase securities of issuers which deal in real estate and may purchase
securities which are secured by interests in real estate.
2. Invest in commodities, except that as consistent with its
investment objective and policies the Fund may: (a) purchase and sell options,
forward contracts, futures contracts, including without limitation those
relating to indices; (b) purchase and sell options on futures contracts or
indices; and (c) purchase publicly traded securities of companies engaging in
whole or in part in such activities.
3. Act as an underwriter of securities within the meaning of
the Securities Act of 1933 except insofar as the Fund might be deemed to be an
underwriter upon the disposition of portfolio securities acquired within the
limitation on purchases of illiquid securities and except to the extent that the
purchase of obligations directly from the issuer thereof in accordance with its
investment objective, policies and limitations may be deemed to be underwriting.
In addition, the Fund is subject to the following non-
fundamental limitations, which may be changed without the vote of shareholders:
The Fund may not:
1. Acquire any other investment company or investment
company security except in connection with a merger, consolidation,
-8-
<PAGE> 61
reorganization or acquisition of assets or where otherwise permitted under the
1940 Act.
2. Write or sell put options, call options, straddles,
spreads, or any combination thereof, except as consistent with the Fund's
investment objective and policies for transactions in options on securities or
indices of securities, futures contracts and options on futures contracts and in
similar investments.
3. Purchase securities on margin, make short sales of
securities or maintain a short position, except that, as consistent with the
Fund's investment objective and policies, (a) this investment limitation shall
not apply to the Fund's transactions in futures contracts and related options,
options on securities or indices of securities and similar instruments, (b)
the Fund may obtain short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities, and (c) the Fund may sell
securities short "against the box."
4. Purchase securities of companies for the purpose of
exercising control.
5. Invest more than 15% of its net assets in illiquid
securities.
The Fund does not intend to purchase securities while its
outstanding borrowings (including reverse repurchase agreements) are in excess
of 5% of its total assets. Securities held in escrow or in separate accounts in
connection with the Fund's investment practices are not deemed to be pledged for
purposes of this limitation.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
----------------------------------------------
Shares in the Trust are sold on a continuous basis by SEI
Investments Distribution Co. (the "Distributor"), which has agreed to use
appropriate efforts to solicit all purchase orders. The issuance of shares is
recorded on the books of the Trust. To change the commercial bank or account
designated to receive redemption proceeds, a written request must be sent to an
investor's financial institution at its principal office. Such requests must be
signed by each shareholder, with each signature guaranteed by a U.S. commercial
bank or trust company or by a member firm of a national securities exchange.
Guarantees must be signed by an authorized signatory and "Signature Guaranteed"
must appear with the signature. An investor's financial institution may request
further documentation from corporations, executors, administrators, trustees or
guardians, and will accept other suitable verification arrangements from foreign
investors, such as consular verification.
The Trust may suspend the right of redemption or postpone the
date of payment for shares for more than seven days during any
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<PAGE> 62
period when (a) trading on the Exchange is restricted by applicable rules and
regulations of the SEC; (b) the Exchange is closed for other than customary
weekend and holiday closings; (c) the SEC has by order permitted such
suspension; or (d) an emergency exists as determined by the SEC.
As described in the Prospectus, Institutional shares of the
Fund are sold to certain qualified investors at their net asset value without a
sales charge. Retail shares of the Fund are sold to public investors at the
public offering price based on the Fund's net asset value plus a front-end load
or sales charge as described in the Prospectus. B shares of the Fund are sold to
public investors at net asset value but are subject to a contingent deferred
sales charge which is payable upon redemption of such shares as described in the
Prospectus. There is no sales load or contingent deferred sales charge imposed
for shares acquired through the reinvestment of dividends or distributions on
such shares.
Automatic investment programs such as the monthly savings
program ("Program") described in the Prospectus offered by the Fund permit an
investor to use "dollar cost averaging" in making investments. Under this
Program, an agreed upon fixed dollar amount is invested in Fund shares at
predetermined intervals. This may help investors to reduce their average cost
per share because the Program results in more shares being purchased during
periods of lower share prices and fewer shares during periods of higher share
prices. In order to be effective, dollar cost averaging should usually be
followed on a sustained, consistent basis. Investors should be aware, however,
that dollar cost averaging results in purchases of shares regardless of their
price on the day of investment or market trends and does not ensure a profit,
protect against losses in a declining market, or prevent a loss if an investor
ultimately redeems his shares at a price which is lower than their purchase
price. An investor may want to consider his financial ability to continue
purchases through periods of low price levels. From time to time, in
advertisements, sales literature, communications to shareholders and other
materials ("Materials"), the Trust may illustrate the effects of dollar cost
averaging through use of or comparison to an index such as the S&P 500 Index.
OFFERING PRICE PER RETAIL SHARE OF THE FUND
- -------------------------------------------
An illustration of the computation of the offering price per
Retail share of the Fund, based on the estimated value of the Fund's net assets
and number of outstanding shares on its commencement date, are as follows:
-10-
<PAGE> 63
TAX MANAGED EQUITY FUND*
------------------------
<TABLE>
<CAPTION>
<S> <C>
Net Assets of Retail Shares .......................................... $10,000,000
Outstanding Retail Shares ............................................ 1,000,000
Net Asset Value Per Share
($10,000,000 / 1,000,000) ............................................ $ 10.00
Sales Charge, 5.50% of
offering price (5.80% of
net asset value per share) ........................................... $ .58
Offering to Public ................................................... $ 10.58
<FN>
* Amounts are estimated as the Fund has not commenced
operations.
</TABLE>
-11-
<PAGE> 64
EXCHANGE PRIVILEGE
- ------------------
Investors may exchange all or part of their Retail or B shares
as described in the Prospectus. Any rights an Investor may have (or have waived)
to reduce the sales load applicable to an exchange, as may be provided in a Fund
Prospectus, will apply in connection with any such exchange. The exchange
privilege may be modified or terminated at any time upon 60 days' notice to
shareholders.
By use of the exchange privilege, the Investor authorizes the
Transfer Agent's financial institution to act on telephonic or written
instructions from any person representing himself or herself to be the
shareholder and believed by the Transfer Agent or the financial institution to
be genuine. The Investor or his financial institution must notify the Transfer
Agent of his prior ownership of Retail shares and account number. The Transfer
Agent's records of such instructions are binding.
DESCRIPTION OF SHARES
---------------------
The Trust is a Massachusetts business trust. The Trust's
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of shares of beneficial interest and to classify or reclassify any
unissued shares of the Trust into one or more additional classes or series by
setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. Pursuant to
such authority, the Board of Trustees has authorized the issuance of 61 classes
or series of shares. Three of these classes or series, which represent interests
in the Tax Managed Equity Fund (Class Z, Class Z - Special Series 1 and Class Z
- - Special Series 2) are described in this Statement of Additional Information
and the related Prospectus.
Shares have no preemptive rights and only such conversion or
exchange rights as the Board of Trustees may grant in its discretion. When
issued for payment as described in the Prospectus, the Trust's shares will be
fully paid and non-assessable. In the event of a liquidation or dissolution of
the Trust or an individual Fund, shareholders of a Fund are entitled to receive
the assets available for distribution belonging to the particular Fund, and a
proportionate distribution, based upon the relative asset values of the
respective Funds, of any general assets of the Trust not belonging to any
particular Fund which are available for distribution.
-12-
<PAGE> 65
Rule 18f-2 under the 1940 Act provides that any matter
required by the 1940 Act, applicable state law, or otherwise, to be submitted to
the holders of the outstanding voting securities of an investment company such
as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each
investment fund affected by such matter. Rule 18f-2 further provides that an
investment fund is affected by a matter unless the interests of each fund in the
matter are substantially identical or the matter does not affect any interest of
the fund. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment fund only if approved by a majority of the
outstanding shares of such fund. However, the Rule also provides that the
ratification of the appointment of independent public accountants, the approval
of principal underwriting contracts, and the election of trustees may be
effectively acted upon by shareholders of the Trust voting together in the
aggregate without regard to a particular fund. In addition, shareholders of each
class in a particular investment fund have equal voting rights except that only
Institutional and Retail shares of an investment fund will be entitled to vote
on matters submitted to a vote of shareholders (if any) relating to a
distribution plan for such shares, and only B shares of a Fund will be entitled
to vote on matters relating to a distribution plan with respect to B shares.
Although the following types of transactions are normally
subject to shareholder approval, the Board of Trustees may, under certain
limited circumstances, (a) sell and convey the assets of an investment fund to
another management investment company for consideration which may include
securities issued by the purchaser and, in connection therewith, to cause all
outstanding shares of such fund involved to be redeemed at a price which is
equal to their net asset value and which may be paid in cash or by distribution
of the securities or other consideration received from the sale and conveyance;
(b) sell and convert an investment fund's assets into money and, in connection
therewith, to cause all outstanding shares of such fund involved to be redeemed
at their net asset value; or (c) combine the assets belonging to an investment
fund with the assets belonging to another investment fund of the Trust, if the
Board of Trustees reasonably determines that such combination will not have a
material adverse effect on shareholders of any fund participating in such
combination, and, in connection therewith, to cause all outstanding shares of
any fund to be redeemed at their net asset value or converted into shares of
another class of the Trust shares at net asset value. In the event that shares
are redeemed in cash at their net asset value, a shareholder may receive in
payment for such shares an amount that is more or less than his original
investment due to changes in the market prices of the fund's securities. The
exercise of such authority by the Board of Trustees will be subject to the
provisions of the 1940 Act, and the Board of Trustees will not take
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<PAGE> 66
any action described in this paragraph unless the proposed action has been
disclosed in writing to the fund's shareholders at least 30 days prior thereto.
ADDITIONAL INFORMATION CONCERNING TAXES
---------------------------------------
The following summarizes certain additional tax considerations
generally affecting the Trust and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Trust or its shareholders or possible legislative changes, and
the discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situation.
The Fund will be treated as a separate corporate entity under
the Code and intends to qualify as a regulated investment company. In order to
qualify for tax treatment as a regulated investment company under the Code, the
Fund must satisfy, in addition to the distribution requirement described in the
Prospectus, certain requirements with respect to the source of its income during
a taxable year. At least 90% of the gross income of the Fund must be derived
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stocks, securities or foreign currencies, and
other income (including but not limited to gains from options, futures, or
forward contracts) derived with respect to the Fund's business of investing in
such stock, securities or currencies. The Treasury Department may by regulation
exclude from qualifying income foreign currency gains which are not directly
related to the Fund's principal business of investing in stock or securities, or
options and futures with respect to stock or securities. Any income derived by
the Fund from a partnership or trust is treated as derived with respect to the
Fund's business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income which would have been
qualifying income if realized by the Fund in the same manner as by the
partnership or trust.
Some investments held by the Fund may be subject to special
rules which govern the federal income tax treatment of certain transactions
denominated in terms of a currency other than the U.S. dollar or determined by
reference to the value of one or more currencies other than the U.S. dollar. The
types of transactions covered by the special rules include the following: (1)
the acquisition of, or becoming the obligor under, a bond or other debt
instrument (including, to the extent provided in Treasury regulations, preferred
stock); (2) the accruing of certain trade receivables and payables; and (3) the
entering into or acquisition of any forward contract, futures contract, option
and
-14-
<PAGE> 67
similar financial instrument. The disposition of a currency other than the U.S.
dollar by a U.S. taxpayer is also treated as a transaction subject to the
special currency rules. With respect to transactions covered by the special
rules, foreign currency gain or loss is calculated separately from any gain or
loss on the underlying transaction and is normally taxable as ordinary gain or
loss. The Treasury Department has issued regulations under which certain
transactions subject to the special currency rules that are part of a "section
988 hedging transaction" are not subject to the mark-to-market or loss deferral
rules under the Code. Gain or loss attributable to the foreign currency
component of transactions engaged in by the Fund which are not subject to the
special currency rules (such as foreign equity investments other than certain
preferred stocks) will be treated as capital gain or loss and will not be
segregated from the gain or loss on the underlying transaction.
The Trust will designate any distribution of long-term capital
gains of the Fund as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the Trust's taxable year.
Shareholders should note that, upon the sale or exchange of Fund shares, if the
shareholder has not held such shares for at least six months, any loss on the
sale or exchange of those shares will be treated as long-term capital loss to
the extent of the capital gain dividends received with respect to the shares.
A 4% non-deductible excise tax is imposed on regulated
investment companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). The Fund intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and capital gain net income each calendar year to avoid liability for this
excise tax.
If for any taxable year the Fund does not qualify for federal
tax treatment as a regulated investment company, all of the Fund's taxable
income will be subject to federal income tax at regular corporate rates without
any deduction for distributions to its shareholders. In such event, dividend
distributions (including amounts derived from interest on Municipal Bonds) would
be taxable as ordinary income to the Fund's shareholders to the extent of the
Fund's current and accumulated earnings and profits, and would be eligible for
the dividends received deduction for corporations.
The Fund may be required in certain cases to withhold and
remit to the U.S. Treasury 31% of taxable dividends or gross proceeds realized
upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, or who are subject to withholding
by the Internal Revenue Service for failure to properly include on their return
payments of taxable
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<PAGE> 68
interest or dividends, or who have failed to certify to the Fund that they are
not subject to backup withholding when required to do so or that they are
"exempt recipients."
TRUSTEES AND OFFICERS
---------------------
The trustees and executive officers of the Trust, their
addresses, principal occupations during the past five years, and other
affiliations are as follows:
-16-
<PAGE> 69
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------- ----------------------
<S> <C> <C>
Robert D. Neary Chairman of the Board Retired Co-Chairman of
32980 Creekside Drive and Trustee Ernst & Young, April 1984-
Pepper Pike, OH 44124 September 1993; Director,
Age 64 Cold Metal Products, Inc.,
since March 1994;
Director, Zurn Industries,
Inc. (building products
and construction
services), since June
1995.
Herbert R. Martens, Jr.* President and Trustee Executive Vice President,
c/o NatCity Investments, Inc. National City Corporation
1965 East Sixth Street (bank holding company),
Cleveland, OH 44114 since July 1997; Chairman,
Age 45 President and Chief
Executive Officer, NatCity
Investments, Inc., since July 1995
(investment banking); President and
Chief Executive Officer,
Raffensberger, Hughes & Co. from
1993 until 1995 (broker-dealer);
President, Reserve Capital Group,
from 1990 until 1993.
Leigh Carter* Trustee Retired President and
13901 Shaker Blvd., #6B Chief Operating Officer,
Cleveland, OH 44120 B.F. Goodrich Company,
Age 72 August 1986 to September
1990; Director, Adams Express
Company (closed-end investment
company), April 1982 to December
1997; Director, Acromed
Corporation; (producer of spinal
implants), since June 1992;
Director, Petroleum & Resources
Corp., April 1987 to December 1997;
Director, Morrison Products
(manufacturer of blower fans and
air moving equipment), since April
1983; Director, Kirtland Capital
Corp. (privately funded investment
group), since January 1992.
</TABLE>
-17-
<PAGE> 70
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------- ----------------------
<S> <C> <C>
John F. Durkott Trustee President and Chief
8600 Allisonville Road Operating Officer,
Indianapolis, IN 46250 Kittle's Home Furnishings
Age 53 Center, Inc., since
January 1982; partner, Kittles
Bloomington Property Company, since
January 1981; partner, KK&D
(Affiliated Real Estate Companies
of Kittle's Home Furnishings
Center), since January 1989.
Robert J. Farling Trustee Retired Chairman,
1608 Balmoral Way President and Chief
Westlake, OH 44145 Executive Officer,
Age 62 Centerior Energy (electric
utility), March 1992 to October
1997; Director, National City
Corporation (bank holding company)
until October 1997; Director,
Republic Engineered Steels, since
October 1997.
Richard W. Furst, Dean Trustee Professor of Finance and
600 Autumn Lane Dean, Carol Martin Gatton
Lexington, KY 40502 College of Business and
Age 59 Economics, University of
Kentucky, since 1981; Director, The
Seed Corporation (restaurant
group), since 1990; Director; Foam
Design, Inc., (manufacturer of
industrial and commercial foam
products), since 1993.
Gerald L. Gherlein Trustee Executive Vice-President
3679 Greenwood Drive and General Counsel, Eaton
Pepper Pike, OH 44124 Corporation, since 1991
Age 59 (global manufacturing);
Trustee, Meridia Health System
(four hospital health system);
Trustee, WVIZ Educational
Television (public television).
</TABLE>
-18-
<PAGE> 71
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ---------------- ------------- ----------------------
<S> <C> <C>
J. William Pullen Trustee President and Chief
Whayne Supply Company Executive Officer, Whayne
1400 Cecil Avenue Supply Co. (engine and
P.O. Box 35900 heavy equipment
Louisville, KY 40232-5900 distribution), since 1986;
Age 58 President and Chief
Executive Officer, American
Contractors Rentals & Sales (rental
subsidiary of Whayne Supply Co.),
since 1988.
W. Bruce McConnel, III Secretary Partner of the law firm
Philadelphia National Drinker Biddle & Reath
Bank Building LLP, Philadelphia,
1345 Chestnut Street Pennsylvania.
Suite 1100
Philadelphia, PA 19107
Age 54
Neal J. Andrews Treasurer Vice President and
PFPC Inc. Director of Investment
400 Bellevue Parkway Accounting, PFPC Inc.,
Wilmington, DE 19809 since 1992; prior thereto,
Age 32 Senior Auditor, Price
Waterhouse, LLP.
- --------------------
<FN>
* Messrs. Carter and Martens are considered by the Trust to be "interested
persons" of the Trust as defined in the 1940 Act.
</TABLE>
W. Bruce McConnel, III, Esq., Secretary of the Trust, is a
partner of the law firm Drinker Biddle & Reath LLP, which receives fees as
counsel to the Trust. Neal J. Andrews, Treasurer of the Trust, is employed by
PFPC Inc., which receives fees as Administrator to the Trust.
Each trustee receives an annual fee of $7,500 plus $2,500 for
each Board meeting attended and reimbursement of expenses incurred in attending
meetings. The Chairman of the Board is entitled to receive an additional $2,500
per annum for services in such capacity. For the year ended May 31, 1997, the
Trust's trustees and officers as a group received aggregate fees of $125,000.
The trustees and officers of the Trust own less than 1% of the shares of the
Trust.
-19-
<PAGE> 72
The following table summarizes the compensation for each of
the Trustees of the Trust for the fiscal year ended May 31, 1997:
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Accrued Total
Aggregate as Part of Estimated Compensation
Name of Compensation the Trust's Approval Benefits from the
Person, Position from the Trust Expenses Upon Retirement Trust
---------------- -------------- -------- --------------- -----
<S> <C> <C> <C> <C>
Robert D. Neary, $18,750 $0 $0 $18,750
Chairman and Trustee
Thomas R. Benua, Jr., $17,500 $0 $0 $17,500
Trustee*
Leigh Carter, Trustee $17,500 $0 $0 $17,500
John F. Durkott, Trustee $17,500 $0 $0 $17,500
Robert J. Farling, Trustee ** ** ** **
Richard W. Furst, Trustee $17,500 $0 $0 $17,500
Gerald L. Gherlein, Trustee ** ** ** **
Herbert R. Martens, Jr., ** ** ** **
President and Trustee
J. William Pullen, Trustee $17,500 $0 $0 $17,500
Richard B. Tullis, Trustee* $18,750 $0 $0 $18,750
</TABLE>
SHAREHOLDER AND TRUSTEE LIABILITY
- ---------------------------------
Under Massachusetts law, shareholders of a business trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. However, the Trust's Declaration of Trust provides
that shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust, and that every note, bond, contract, order, or other
undertaking made by the Trust shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of any shareholder held
personally liable solely by reason of his being or having been a shareholder and
not because of
- --------
* Mr. Benua resigned as trustee as of July 17, 1997. Mr. Tullis resigned
as trustee as of November 19, 1997.
* Messrs. Farling, Gherlein and Martens were not Trustees of the Trust
during the fiscal year ended May 31, 1997.
-20-
<PAGE> 73
his acts or omissions or some other reason. The Declaration of Trust also
provides that the Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust, and shall
satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations.
The Declaration of Trust states further that no trustee,
officer, or agent of the Trust shall be personally liable for or on account of
any contract, debt, tort, claim, damage, judgment or decree arising out of or
connected with the administration or preservation of the trust estate or the
conduct of any business of the Trust; nor shall any trustee be personally liable
to any person for any action or failure to act except by reason of his own bad
faith, willful misfeasance, gross negligence, or reckless disregard of his
duties as trustee. The Declaration of Trust also provides that all persons
having any claim against the trustees or the Trust shall look solely to the
trust property for payment. With the exceptions stated, the Declaration of Trust
provides that a trustee is entitled to be indemnified against all liabilities
and expense, reasonably incurred by him in connection with the defense or
disposition of any proceeding in which he may be involved or with which he may
be threatened by reason of his being or having been a trustee, and that the
trustees, have the power, but not the duty, to indemnify officers and employees
of the Trust unless any such person would not be entitled to indemnification had
he been a trustee.
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS
-------------------------------------------------
ADVISORY AGREEMENTS
- -------------------
National City serves as investment adviser to the Fund. The
adviser is an affiliate of National City Corporation, a bank holding company
with $52 billion in assets, and headquarters in Cleveland, Ohio and nearly 900
branch offices in four states. Through its subsidiaries, National City
Corporation has been managing investments for individuals, pension and
profit-sharing plans and other institutional investors for over 75 years and
currently manages over $41 billion in assets. From time to time, the advisers
may voluntarily waive fees or reimburse the Trust for expenses.
The Advisory Agreement provides that the adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the performance of the Advisory Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or
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<PAGE> 74
gross negligence on the part of the adviser in the performance of their duties
or from reckless disregard by them of their duties and obligations thereunder.
In addition, National City has undertaken in the Advisory Agreement to maintain
its policy and practice of conducting its Trust Department independently of its
Commercial Departments.
The Advisory Agreement with National City was approved by the
sole shareholder of the Fund on the date it commenced operations. Unless sooner
terminated, the Advisory Agreement will continue in effect with respect to the
Fund until September 30, 1998 and from year to year thereafter, subject to
annual approval by the Trust's Board of Trustees, or by a vote of a majority of
the outstanding shares of the Fund (as defined in the Fund's Prospectus) and a
majority of the trustees who are not parties to the Agreement or interested
persons (as defined in the 1940 Act) of any party by votes cast in person at a
meeting called for such purpose. The Advisory Agreement may be terminated by the
Trust or the advisers on 60 days written notice, and will terminate immediately
in the event of its assignment.
ADMINISTRATION AND ACCOUNTING SERVICE AGREEMENT
- -----------------------------------------------
PFPC serves as the administrator and accounting agent to the
Trust. The services provided as administrator and accounting agent and current
fees are described in the Prospectus.
DISTRIBUTION PLANS AND RELATED AGREEMENT
- ----------------------------------------
The Distributor acts as distributor of the Fund's shares
pursuant to its Distribution Agreement with the Trust as described in the
Prospectus. Shares are sold on a continuous basis.
Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted
a Service and Distribution Plan for Retail and Institutional shares (the "Retail
and Institutional Shares Plan") and a B Shares Distribution and Servicing Plan
("B Shares Plan," and, collectively, the "Distribution Plans") which permit the
Trust to bear certain expenses in connection with the distribution of
Institutional and Retail shares, or B shares, respectively. As required by Rule
12b-1, the Trust's Distribution Plans and related Distribution Agreements have
been approved, and are subject to annual approval by, a majority of the Trust's
Board of Trustees, and by a majority of the trustees who are not interested
persons of the Trust and have no direct or indirect interest in the operation of
the Distribution Plans or any agreement relating to the Distribution Plans, by
vote cast in person at a meeting called for the purpose of voting on the
Distribution Plans and related agreements. In compliance with the Rule, the
trustees requested and evaluated information they thought necessary to an
informed determination of whether the Distribution Plans and related agreements
should be implemented, and concluded, in the exercise of
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<PAGE> 75
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that the Distribution Plans and related agreements
will benefit the Trust and its shareholders.
Rule 12b-1 also requires that persons authorized to direct the
disposition of monies payable by a fund (in the Trust's case, the Distributor)
provide for the trustees' review of quarterly reports on the amounts expended
and the purposes for the expenditures.
Any change in either Distribution Plan that would materially
increase the distribution expenses of a class would require approval by the
shareholders of such class, but otherwise, such Distribution Plan may be amended
by the trustees, including a majority of the disinterested trustees who do not
have any direct or indirect financial interest in the particular Plan or related
agreement. The Distribution Plans and related agreement may be terminated as to
the Fund or class by a vote of the Trust's disinterested trustees or by vote of
the shareholders of the Fund or class in question, on not more than 60 days
written notice. The selection and nomination of disinterested trustees has been
committed to the discretion of such disinterested trustees as required by the
Rule.
The Retail and Institutional Shares Plan provides that each
fund will compensate the Distributor for distribution expenses related to the
distribution of Institutional and Retail shares in an amount not to exceed .10%
per annum of the average aggregate net assets of such shares. The Retail and
Institutional Plan provides that the Trust will pay the Distributor an annual
base fee of $1,250,000 plus incentive fees based upon asset growth payable
monthly and accrued daily by all of the Trusts's investment funds with respect
to the Institutional and Retail shares. The B Shares Plan provides that each B
share class will compensate the Distributor for distribution of B shares in an
amount not to exceed .75% of such class's average net assets. Distribution
expenses payable by the Distributor pursuant to each Distribution Plan include
direct and indirect costs and expenses incurred in connection with advertising
and marketing a fund's shares, and direct and indirect costs and expenses of
preparing, printing and distribution of its prospectuses to other than current
shareholders.
The Distribution Plans have been approved by the Board of
Trustees, and will continue in effect for successive one year periods provided
that such continuance is specifically approved by (1) the vote of a majority of
the trustees who are not parties to either Plan or interested persons of any
such party and who have no direct or indirect financial interest in either Plan
and (2) the vote of a majority of the entire Board of Trustees.
-23-
<PAGE> 76
CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS
- -------------------------------------------------
National City Bank serves as the Trust's custodian with
respect to the Fund. Under its Custodian Services Agreement, National City Bank
has agreed to: (i) maintain a separate account or accounts in the name of the
Fund; (ii) hold and disburse portfolio securities on account of the Fund; (iii)
collect and make disbursements of money on behalf of the Fund; (iv) collect and
receive all income and other payments and distributions on account of the Fund's
portfolio securities; (v) respond to correspondence by security brokers and
others relating to its duties; and (vi) make periodic reports to the Board of
Trustees concerning the Fund's operations. National City Bank is authorized to
select one or more banks or trust companies to serve as sub-custodian on behalf
of the Fund, provided that it shall remain responsible for the performance of
all of its duties under the Custodian Services Agreement and shall hold the Fund
harmless from the acts and omissions of any bank or trust company serving as
sub-custodian. The Fund reimburses National City Bank for its direct and
indirect costs and expenses incurred in rendering custodial services, except
that the costs and expenses borne by the Fund in any year may not exceed $.225
for each $1,000 of average gross assets of the Fund.
State Street Bank and Trust Company (the "Transfer Agent")
serves as the Trust's transfer agent and dividend disbursing agent with respect
to the Fund. Under its Transfer Agency Agreement, it has agreed to: (i) issue
and redeem shares of the Fund; (ii) transmit all communications by the Fund to
its shareholders of record, including reports to shareholders, dividend and
distribution notices and proxy materials for meetings of shareholders; (iii)
respond to correspondence by security brokers and others relating to its duties;
(iv) maintain shareholder accounts; and (v) make periodic reports to the Board
of Trustees concerning the Fund's operations. The Transfer Agent sends each
shareholder of record a monthly statement showing the total number of shares
owned as of the last business day of the month (as well as the dividends paid
during the current month and year), and provides each shareholder of record with
a daily transaction report for each day on which a transaction occurs in the
shareholder's account with the Fund.
SHAREHOLDER SERVICES PLANS
--------------------------
As stated in the Prospectus, the Trust has implemented the
Shareholder Services Plan for Retail shares and the B Shares Plan for the Fund's
shares. Pursuant to these plans, the Trust may enter into agreements with
financial institutions pertaining to the provision of administrative services to
their customers who are the beneficial owners of Retail shares or B shares in
consideration for the payment of up to .25% (on an annualized basis), of the net
asset value of such shares. Such services may include: (i)
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<PAGE> 77
aggregating and processing purchase and redemption requests from customers; (ii)
providing customers with a service that invests the assets of their accounts in
Retail or B shares; (iii) processing dividend payments from the Fund; (iv)
providing information periodically to customers showing their position in Retail
or B shares; (v) arranging for bank wires; (vi) responding to customer inquiries
relating to the services performed with respect to Retail or B shares
beneficially owned by customers; (vii) forwarding shareholder communications;
and (viii) other similar services requested by the Trust. Agreements between the
Trust and financial institutions will be terminable at any time by the Trust
without penalty.
PORTFOLIO TRANSACTIONS
----------------------
Pursuant to its Advisory Agreement with the Trust, National
City is responsible for making decisions with respect to and placing orders for
all purchases and sales of portfolio securities for the Fund. The adviser
purchases portfolio securities either directly from the issuer or from an
underwriter or dealer making a market in the securities involved. Purchases from
an underwriter of portfolio securities include a commission or concession paid
by the issuer to the underwriter and purchases from dealers serving as market
makers may include the spread between the bid and asked price. Transactions on
stock exchanges involve the payment of negotiated brokerage commissions. There
is generally no stated commission in the case of securities traded in the
over-the-counter market, but the price includes an undisclosed commission or
mark-up.
While the advisers generally seek competitive spreads or
commissions, they may not necessarily allocate each transaction to the
underwriter or dealer charging the lowest spread or commission available on the
transaction. Allocation of transactions, including their frequency, to various
dealers is determined by the advisers in their best judgment and in a manner
deemed fair and reasonable to shareholders. Under the current Advisory
Agreement, pursuant to Section 28(e) of the Securities Exchange Act of 1934, as
amended, the adviser is authorized to negotiate and pay higher brokerage
commissions in exchange for research services rendered by broker-dealers.
Subject to this consideration, broker-dealers who provide supplemental
investment research to the adviser may receive orders for transactions by the
Fund. Information so received is in addition to and not in lieu of services
required to be performed by the adviser and does not reduce the fees payable to
the adviser by the Fund. Such information may be useful to the adviser in
serving both the Trust and other clients, and, similarly, supplemental
information obtained by the placement of business of other clients may be useful
to the adviser in carrying out its obligations to the Trust.
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<PAGE> 78
Portfolio securities will not be purchased from or sold to the
Trust's adviser, Distributor, or any "affiliated person" (as such term is
defined under the 1940 Act) of any of them acting as principal, except to the
extent permitted by the SEC. In addition, the Fund will not give preference to
its adviser's correspondents with respect to such transactions, securities,
savings deposits, repurchase agreements and reverse repurchase agreements.
While serving as advisers to the Fund, National City has
agreed to maintain its policy and practice of conducting its Trust Department
independently of their Commercial Department. In making investment
recommendations for the Trust, Trust Department personnel will not inquire or
take into consideration whether the issuer of securities proposed for purchase
or sale for the Trust's account are customers of the Commercial Department. In
dealing with commercial customers, the Commercial Department will not inquire or
take into consideration whether securities of those customers are held by the
Trust.
Investment decisions for the Fund are made independently from
those for the other Funds and for other investment companies and accounts
advised or managed by the adviser. Such other Funds, investment companies and
accounts may also invest in the same securities as the Fund. When a purchase or
sale of the same security is made at substantially the same time on behalf of
the Fund and another investment company or account, the transaction will be
averaged as to price, and available investments allocated as to amount, in a
manner which the adviser believes to be equitable to the Fund and such other
investment company or account. In some instances, this investment procedure may
adversely affect the price paid or received by the Fund or the size of the
position obtained or sold by the Fund. In connection therewith, and to the
extent permitted by law and by the current Advisory Agreement, the adviser may
aggregate the securities to be sold or purchased for the Fund with those to be
sold or purchased for other investment companies or advisory clients.
AUDITORS
--------
Ernst & Young LLP, independent auditors, with offices at Two
Commerce Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania
19103, serve as independent auditors of the Trust.
COUNSEL
-------
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary
of the Trust, is a partner), with offices at 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107, are counsel to the Trust and will pass upon the legality of
the shares offered
hereby.
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<PAGE> 79
PERFORMANCE INFORMATION
-----------------------
The Fund computes its "average annual total return" by
determining the average annual compounded rate of return during specified
periods that would equate the initial amount invested to the ending redeemable
value of such investment by dividing the ending redeemable value of a
hypothetical $1,000 initial payment by $1,000 and raising the quotient to a
power equal to one divided by the number of years (or fractional portion
thereof) covered by the computation and subtracting one from the result. This
calculation can be expressed as follows:
ERV 1/n
T = [(-----) - 1]
P
Where: T = average annual total return
ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period
P = hypothetical initial payment of $1,000
n = period covered by the computation, expressed
in terms of years
The Fund computes its aggregate total returns by determining
the aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
ERV
T = (---) - 1
P
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period and include all
recurring fees charged to all shareholder accounts, assuming an account size
equal to the Fund's mean (or median) account size for any fees that vary with
the size of the account. The maximum sales load and other charges deducted from
payments are deducted from the initial $1,000 payment (variable "P" in the
formula). The ending redeemable value (variable "ERV" in the formula) is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all contingent
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<PAGE> 80
deferred sales charges and other nonrecurring charges at the end of the
measuring period covered by the computation.
The Fund may also from time to time include in Materials a
total return figure that is not calculated according to the formulas set forth
above in order to compare more accurately a Fund's performance with other
measures of investment return. For example, in comparing the Fund's total return
with data published by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc. or Weisenberger Investment Company Service, or with the
performance of an index, the Fund may calculate its aggregate total return for
the period of time specified in the advertisement or communication by assuming
the investment of $10,000 in shares and assuming the reinvestment of each
dividend or other distribution at net asset value on the reinvestment date.
Percentage increases are determined by subtracting the initial value of the
investment from the ending value and by dividing the remainder by the beginning
value. The Fund does not, for these purposes, deduct from the initial value
invested or the ending value redeemed any amount representing sales charges. The
Fund will, however, disclose the maximum sales charge and will also disclose
that the performance data do not reflect sales charges and that inclusion of
sale charges would reduce the performance quoted.
The Fund may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on the Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of the Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the Fund may also include in Materials
discussions and/or illustrations of the potential investment goals of a
prospective investor, investment management strategies, techniques, policies or
investment suitability of the Fund, high-quality investments, economic
conditions, the relationship between sectors of the economy and the economy as a
whole, various securities markets, the effects of inflation and historical
performance of various asset classes, including but not limited to, stocks,
bonds and Treasury securities. From time to time, Materials may summarize the
substance of information contained in shareholder reports (including the
investment composition of the Fund), as well as the views of the adviser as to
current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to the Fund. The Fund may also include in Materials
charts, graphs or drawings which compare the investment objective, return
potential, relative stability and/or
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<PAGE> 81
growth possibilities of the Fund and/or other mutual funds, or illustrate the
potential risks and rewards of investment in various investment vehicles,
including but not limited to, stocks, bonds, Treasury securities and shares of
the Fund and/or other mutual funds. Materials may include a discussion of
certain attributes or benefits to be derived by an investment in the Fund and/or
other mutual funds (such as value investing, market timing, dollar cost
averaging, asset allocation, constant ratio transfer, automatic accounting
rebalancing, the advantages and disadvantages of investing in tax-deferred and
taxable investments), shareholder profiles and hypothetical investor scenarios,
timely information on financial management, tax and retirement planning and
investment alternatives to certificates of deposit and other financial
instruments. Such Materials may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.
MISCELLANEOUS
-------------
The Trust bears all costs in connection with its organization,
including the fees and expenses of registering and qualifying its shares for
distribution under federal and state securities regulations. All organization
expenses are being amortized on the straight-line method over a period of five
years from the date of commencement of operations.
As used in the Prospectus, "assets belonging to the Fund"
means the consideration received by the Trust upon the issuance of shares in
that Fund, together with all income, earnings, profits, and proceeds derived
from the investment thereof, including any proceeds from the sale of such
investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Trust not belonging to the
Fund. In determining the Fund's net asset value, assets belonging to the Fund
are charged with the liabilities in respect of that Fund.
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<PAGE> 82
APPENDIX A
----------
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
- ----------------------------------------------
The following summarizes the ratings used by Standard & Poor's
for corporate and municipal debt:
"AAA" - This designation represents the highest rating
assigned by Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - Debt is less vulnerable to non-payment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
"B" - Debt is more vulnerable to non-payment than obligations
rated "BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic conditions
will likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
"CCC" - Debt is currently vulnerable to non-payment, and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or
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<PAGE> 83
economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation.
"CC" - An obligation rated "CCC" is currently highly
vulnerable to non-payment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. This
rating is used when payments on an obligation are not made on the date due, even
if the applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition or the taking of similar action if payments on
an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high volatility
or high variability in expected returns due to non-credit risks. Examples of
such obligations are: securities whose principal or interest return is indexed
to equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
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<PAGE> 84
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.
(P)... - When applied to forward delivery bonds, indicates
that the rating is provisional pending delivery of the bonds. The rating may be
revised prior to delivery if changes occur in the legal documents or the
underlying credit quality of the bonds.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated by
the symbols, Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
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<PAGE> 85
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below-average protection factors but
such protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when due.
Debt rated "B" possesses the risk that obligations will not be met when due.
Debt rated "CCC" is well below investment grade and has considerable uncertainty
as to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch for
corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest
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<PAGE> 86
and repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an adverse impact
on these bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
"BB" - Bonds considered to be speculative. The obligor's
ability to pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified, which could assist the obligor in satisfying its debt service
requirements.
"B" - Bonds are considered highly speculative. While
securities in this class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business and
economic activity throughout the life of the issue.
"CCC" - Bonds have certain identifiable characteristics that,
if not remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.
"CC" - Bonds are minimally protected. Default in payments of
interest and/or principal seems probable over time.
"C" - Bonds are in imminent default in payment of
interest or principal.
"DDD," "DD" and "D" - Bonds are in default on interest and/or
principal payments. Such securities are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. "DDD" represents the highest potential for
recovery on these securities, and "D" represents the lowest potential for
recovery.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "C" may be modified by the addition of
a plus (+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest
expectation of investment risk. Capacity for timely repayment of
principal and interest is substantial, such that adverse changes in
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<PAGE> 87
business, economic or financial conditions are unlikely to increase
investment risk substantially.
"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very significantly.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment risk than
for obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree of
speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
below "AAA" to denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity of long term debt
and preferred stock which are issued by United States commercial banks, thrifts
and non-bank banks; non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and indicates that the ability
to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
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<PAGE> 88
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt
is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a
current assessment of the likelihood of timely payment of debt having an
original maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - The highest category indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
"A-2" - Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated "A-1."
"A-3" - Issues carrying this designation have adequate
capacity for timely payment. They are, however, more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
"B" - Issues are regarded as having only a speculative
capacity for timely payment.
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<PAGE> 89
"C" - This rating is assigned to short-term debt obligations
with a doubtful capacity for payment.
"D" - Issues are in payment default. The "D" rating category
is used when interest payments of principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P believes
such payments will be made during such grace period.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an
acceptable ability for repayment of senior short-term debt obligations. The
effects of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps for
investment grade commercial paper and short-term debt are "D-1,"
"D-2" and "D-3." Duff & Phelps employs three designations, "D-1+,"
"D-1" and "D-1-," within the highest rating category. The
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<PAGE> 90
following summarizes the rating categories used by Duff & Phelps for commercial
paper:
"D-1+" - Debt possesses highest certainty of timely
payment. Short-term liquidity, including internal operating
factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
"D-3" - Debt possesses satisfactory liquidity and other
protection factors qualify issues as investment grade. Risk
factors are larger and subject to more variation. Nevertheless,
timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years.
The following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for
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timely payment, but the margin of safety is not as great as the "F-
1+" and "F-1" ratings.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes in
financial and economic conditions.
"D" - Securities are in actual or imminent payment
default.
"LOC" - The symbol "LOC" indicates that the rating is based on
a letter of credit issued by a commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of
an untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest category and indicates a very high likelihood that principal and
interest will be paid on a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson BankWatch's
lowest investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson BankWatch's
lowest rating category and indicates that the obligation is regarded as
non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt
with an original maturity of less than one year which is issued by
bank holding companies and their principal bank subsidiaries. The
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following summarizes the rating categories used by IBCA for short-term debt
ratings:
"A1" - Obligations are supported by the highest capacity for
timely repayment. Where issues possess a particularly strong credit feature, a
rating of "A1+" is assigned.
"A2" - Obligations are supported by a satisfactory capacity
for timely repayment although such capacity may be susceptible to adverse
changes in business, economic or financial conditions.
"A3" - Obligations are supported by an adequate capacity for
timely repayment such capacity is more susceptible to adverse changes in
business, economic, or financial conditions than for obligations in higher
categories.
"B" - Obligations for which the capacity for timely repayment
is susceptible to adverse changes in business, economic, or financial
conditions.
"C" - Obligations for which there is a high risk of default or
which are currently in default.
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APPENDIX B
----------
As stated in the Prospectus, the Tax Managed Equity Fund (the
"Fund") may enter into certain futures transactions and options for hedging
purposes. Such transactions are described in this Appendix.
I. Index Futures Contracts
-----------------------
GENERAL. A stock index assigns relative values to the stocks
included in the index and the index fluctuates with changes in the market values
of the stocks included. Some stock index futures contracts are based on broad
market indexes, such as the Standard & Poor's Ratings Group 500 or the New York
Stock Exchange Composite Index. In contrast, certain exchanges offer futures
contracts on narrower market indexes or indexes based on an industry or market
segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated
by the Commodity Futures Trading Commission. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees the performance of the
parties to each contract.
The Fund may sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that might otherwise result
from a market decline. The Fund may do so either to hedge the value of the Fund
as a whole, or to protect against declines, occurring prior to sales of
securities, in the value of the securities to be sold. Conversely, the Fund will
purchase index futures contracts in anticipation of purchases of securities. A
long futures position may be terminated without a corresponding purchase of
securities.
In addition, the Fund may utilize index futures contracts in
anticipation of changes in the composition of its Fund holdings. For example, in
the event that the Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. The
Fund may also sell futures contracts in connection with this strategy, in order
to protect against the possibility that the value of the securities to be sold
as part of the restructuring of the Fund will decline prior to the time of sale.
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II. Margin Payments
---------------
Unlike purchases or sales of portfolio securities, no price is
paid or received by the Fund upon the purchase or sale of a futures contract.
Initially, the Fund will be required to deposit with the broker or in a
segregated account with the Custodian an amount of cash or cash equivalents,
known as initial margin, based on the value of the contract. The nature of
initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For example, when the Fund has purchased
a futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Fund has purchased a
futures contract and the price of the futures contract has declined in response
to a decrease in the underlying instruments, the position would be less valuable
and the Fund would be required to make a variation margin payment to the broker.
At any time prior to expiration of the futures contract, the adviser may elect
to close the position by taking an opposite position, subject to the
availability of a secondary market, which will operate to terminate the Fund's
position in the futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released to the Fund,
and the Fund realizes a loss or gain.
III. Risks of Transactions in Futures Contracts
------------------------------------------
There are several risks in connection with the use of futures
by the Fund as a hedging device. One risk arises because of the imperfect
correlation between movements in the price of the futures and movements in the
price of the instruments which are the subject of the hedge. The price of the
future may move more than or less than the price of the instruments being
hedged. If the price of the futures moves less than the price of the instruments
which are the subject of the hedge, the hedge will not be fully effective but,
if the price of the instruments being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had not hedged at
all. If the price of the instruments being hedged has moved in a favorable
direction, this advantage will be partially offset by the loss on the futures.
If
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the price of the futures moves more than the price of the hedged instruments,
the Fund involved will experience either a loss or gain on the futures which
will not be completely offset by movements in the price of the instruments which
are the subject of the hedge. To compensate for the imperfect correlation of
movements in the price of instruments being hedged and movements in the price of
futures contracts, the Fund may buy or sell futures contracts in a greater
dollar amount than the dollar amount of instruments being hedged if the
volatility over a particular time period of the prices of such instruments has
been greater than the volatility over such time period of the futures, or if
otherwise deemed to be appropriate by the adviser. Conversely, the Fund may buy
or sell fewer futures contracts if the volatility over a particular time period
of the prices of the instruments being hedged is less than the volatility over
such time period of the futures contract being used, or if otherwise deemed to
be appropriate by the adviser. It is also possible that, where a Fund has sold
futures to hedge its Fund against a decline in the market, the market may
advance and the value of instruments held in the Fund may decline. If this
occurred, the Fund would lose money on the futures and also experience a decline
in value in its portfolio securities.
When futures are purchased to hedge against a possible
increase in the price of securities before the Fund is able to invest its cash
(or cash equivalents) in an orderly fashion, it is possible that the market may
decline instead; if the Fund then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Fund will realize a loss on the futures contract that is not offset by a
reduction in the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between
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<PAGE> 96
the movements in the cash market and movements in the price of futures, a
correct forecast of general market trends or interest rate movements by the
adviser may still not result in a successful hedging transaction over a short
time frame.
Positions in futures may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. Although the
Fund intends to purchase or sell futures only on exchanges or boards of trade
where there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Fund will continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio securities, such securities will not be sold until the
futures contract can be terminated. In such circumstances, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract. However, as described above, there is no guarantee that
the price of the securities will in fact correlate with the price movements in
the futures contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary
market in a futures contract may be adversely affected by "daily price
fluctuation limits" established by commodity exchanges which limit the amount of
fluctuation in a futures contract price during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into at a
price beyond the limit, thus preventing the liquidation of open futures
positions. The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Fund is also subject to the
adviser's ability to predict correctly movements in the direction of the market.
For example, if the Fund has hedged against the possibility of a decline in the
market adversely affecting securities held by it and securities prices increase
instead, the Fund will lose part or all of the benefit to the increased value of
its securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has insufficient
cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. The Fund may
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<PAGE> 97
have to sell securities at a time when it may be disadvantageous to
do so.
IV. Options on Futures Contracts
----------------------------
The Fund may purchase and write options on the futures
contracts described above. A futures option gives the holder, in return for the
premium paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the period of
the option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer, of
an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. The Fund will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. Net option
premiums received will be included as initial margin deposits.
Investments in futures options involve some of the same
considerations that are involved in connection with investments in futures
contracts (for example, the existence of a liquid secondary market). In
addition, the purchase or sale of an option also entails the risk that changes
in the value of the underlying futures contract will not correspond to changes
in the value of the option purchased. Depending on the pricing of the option
compared to either the futures contract upon which it is based, or upon the
price of the securities being hedged, an option may or may not be less risky
than ownership of the futures contract or such securities. In general, the
market prices of options can be expected to be more volatile than the market
prices on the underlying futures contract. Compared to the purchase or sale of
futures contracts, however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to the Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). The writing of an option on a futures contract involves risks similar to
those risks relating to the sale of futures contracts.
V. Other Matters
-------------
Accounting for futures contracts will be in accordance with
generally accepted accounting principles.
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FORM N-1A
---------
Part C - Other Information
--------------------------
Item 24. Financial Statements and Exhibits
(A) Financial Statements
--------------------
(1) Included in Parts A of the Registration Statement:
None
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(2) Incorporated by reference in Parts B of the Registration Statement:
None.
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<PAGE> 100
(B) Exhibits
--------
(1) Declaration of Trust dated January 28, 1986 is incorporated
herein by reference to Exhibit 1 to Post- Effective Amendment No.
1 to Registrant's Registration Statement filed on December 16,
1986 ("PEA No. 1").
(a) Amendment No. 1 to Declaration of Trust is incorporated
herein by reference to Exhibit 1(a) to Post-Effective Amendment No.
6 to Registrant's Registration Statement filed on August 1, 1989
("PEA No. 6").
(b) Amendment No. 2 to Declaration of Trust is incorporated
herein by reference to Exhibit 1(b) to Post-Effective Amendment No.
23 to Registrant's Registration Statement filed on May 11, 1995
("PEA No. 23").
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<PAGE> 101
(c) Certificate of Classification of Shares reflecting the
creation of the Tax Exempt Portfolio (Trust) as filed with the
Office of Secretary of State of Massachusetts on October 16, 1989 is
incorporated herein by reference to Exhibit 1(c) to Post-Effective
Amendment No. 26 to Registrant's Registration Statement filed on May
15, 1996 ("PEA No. 26").
(d) Certificate of Classification of Shares reflecting the
creation of Special Series 1 in the Money Market, Government,
Treasury, Tax Exempt, Equity, Bond and Ohio Tax Exempt Portfolios as
filed with the Office of Secretary of State of Massachusetts on
December 11, 1989 is incorporated herein by reference to Exhibit
1(d) to PEA No. 26.
(e) Certificate of Classification of Shares reflecting the
creation of Special Series 1 in the Money Market, Government,
Treasury, Tax Exempt, Equity, Bond and Ohio Tax Exempt Portfolios as
filed with the Office of the Secretary of State of Massachusetts on
September 12, 1990 is incorporated herein by reference to Exhibit
1(e) to PEA No. 26.
(f) Certificate of Classification of Shares reflecting the
creation of Class L and Class L-Special Series 1 shares, Class M and
Class M-Special Series 1, Class N and Class N-Special Series 1,
Class O and Class O-Special Series 1, and Class P and Class
P-Special Series 1 representing interests in the National Tax Exempt
Portfolio, Equity Income Portfolio, Mid Cap Regional Equity
Portfolio, Enhanced Income Fund and Total Return Advantage Fund,
respectively, as filed with the Office of Secretary of State of
Massachusetts on June 30, 1994 is incorporated herein by reference
to Exhibit 1(e) to PEA No. 26.
(g) Certificate of Classification of Shares reflecting the
creation of Class Q and Class Q-Special Series 1 shares, Class R and
Class R-Special Series 1, Class S and Class S-Special Series 1
shares, and Class T and Class T-Special Series 1 shares representing
interests in the Pennsylvania Tax Exempt, Intermediate Government,
GNMA and Pennsylvania Municipal Funds, respectively, as filed with
the Office of the Secretary of State of Massachusetts on September
10, 1996 is incorporated herein by reference to Exhibit 1(g) to
Post-Effective Amendment No. 33 to Registrant's Registration
Statement filed on April 11, 1997 ("PEA No. 33").
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<PAGE> 102
(h) Certificate of Classification of Shares reflecting the
creation of Class U and Class U-Special Series 1 shares, Class V and
Class V-Special Series 1 shares and Class W and Class W-Special
Series 1 shares representing interests in the International Equity,
Equity Index and Core Equity Funds, respectively, as filed with the
Office of the Secretary of State of Massachusetts on June 27, 1997
is incorporated herein by reference to Exhibit 1(h) to
Post-Effective Amendment No. 35 to Registrant's Registration
Statement filed on July 22, 1997 ("PEA No. 35").
(i) Certificate of Classification of Shares reflecting the
creation of Class X and Class X-Special Series 1 shares and Class Y
and Class Y-Special Series 1 shares representing interests in the
Small Cap Growth Fund and Real Return Advantage Funds, respectively,
as filed with the Office of the Secretary of State of Massachusetts
on June 27, 1997 is incorporated herein by reference to Exhibit 1(i)
to PEA No. 35.
(j) Certificate of Classification of Shares reflecting the
creation of Special Series 2 Shares representing interests in the
Money Market, Government Money Market, Treasury Money Market,
Tax-Exempt Money Market, Equity Growth, Equity Income, Small Cap
Value (formerly, the Mid Cap Regional), Enhanced Income, Total
Return Advantage, Intermediate Bond (formerly, the Fixed Income),
Ohio Tax-Exempt, National Tax- Exempt, Pennsylvania Tax-Exempt, Bond
(formerly, the "Intermediate Government Fund"), GNMA, Pennsylvania
Municipal, International Equity, Equity Index, Core Equity, Small
Cap Growth and Real Return Advantage Funds is incorporated herein by
reference to Exhibit 1(j) to Post-Effective Amendment No. 38 to
Registrant's Registration Statement filed on December 18, 1997 ("PEA
No 38").
(2) Code of Regulations as approved and adopted by Registrant's
Board of Trustees on January 28, 1986 is incorporated herein by
reference to Exhibit 2 to Pre- Effective Amendment No. 2 to
Registrant's Registration Statement filed on January 30, 1986
("Pre-Effective Amendment No. 2").
(a) Amendment No. 1 to Code of Regulations is incorporated
herein by reference to Exhibit 2(a) to PEA No. 6.
(b) Amendment No. 2 to Code of Regulations as approved and
adopted by Registrant's Board of Trustees
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<PAGE> 103
on July 17, 1997 is incorporated herein by reference to Exhibit 2(b)
to PEA No. 35.
(3) None.
(4) (a) Specimen copy of share certificate for Class A units of
beneficial interest is incorporated herein by reference to Exhibit
4(a) to Pre-Effective Amendment No. 2.
(b) Specimen copy of share certificate for Class A - Special
Series 1 units of beneficial interest is incorporated herein by
reference to Exhibit 4(b) to Post-Effective Amendment No. 13 to the
Registrant's Registration Statement filed on July 27, 1990 ("PEA No.
13").
(c) Specimen copy of share certificate for Class B units of
beneficial interest is incorporated herein by reference to Exhibit
4(b) to Pre-Effective Amendment No. 2.
(d) Specimen copy of share certificate for Class B - Special
Series 1 units of beneficial interest is incorporated herein by
reference to Exhibit 4(d) to PEA No. 13.
(e) Specimen copy of share certificate for Class C units of
beneficial interest is incorporated herein by reference to Exhibit
4(c) to Pre-Effective Amendment No. 2.
(f) Specimen copy of share certificate for Class C - Special
Series 1 units of beneficial interest is incorporated herein by
reference to Exhibit 4(f) to PEA No. 13.
(g) Specimen copy of share certificates for Class D units of
beneficial interest is incorporated herein by reference to Exhibit
4(d) to Pre-Effective Amendment No. 2.
(h) Specimen copy of share certificate for Class D - Special
Series 1 units of beneficial interest is incorporated hereby by
reference to Exhibit 4(h) to PEA No. 13.
(i) Specimen copy of share certificate for Class H units of
beneficial interest is incorporated herein by reference to Exhibit
4(i) to Post-Effective Amendment No. 10 to Registrant's Registration
Statement filed on April 17, 1990 ("PEA No. 10").
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<PAGE> 104
(j) Specimen copy of share certificate for Class H - Special
Series 1 units of beneficial interest is incorporated herein by
reference to Exhibit 4(j) to PEA No. 10.
(k) Specimen copy of share certificate for Class I units of
beneficial interest is incorporated herein by reference to Exhibit
4(k) to PEA No. 10.
(l) Specimen copy of share certificate for Class I - Special
Series 1 units of beneficial interest is incorporated herein by
reference to Exhibit 4(l) to PEA No. 10.
(m) Specimen copy of share certificate for Class K units of
beneficial interest is incorporated herein by reference to Exhibit
4(m) to PEA No. 10.
(n) Specimen copy of share certificate for Class K - Special
Series 1 units of beneficial interest is incorporated herein by
reference to Exhibit 4(n) to PEA No. 10.
(5) (a) Investment Advisory Agreement for the Money Market
Portfolio, Government Portfolio, Treasury Portfolio, Tax Exempt
Portfolio, Equity Portfolio, Bond Portfolio and Ohio Tax Exempt
Portfolio among Registrant, National City Bank, BancOhio National
Bank and First National Bank of Louisville dated September 26, 1990
is incorporated herein by reference to Exhibit 5(f) to
Post-Effective Amendment No. 14 to Registrant's Registration
Statement filed on September 5, 1990 ("PEA No. 14").
(b) Investment Advisory Agreement for the Money Market
Portfolio (Trust), Government Portfolio (Trust), Treasury Portfolio
(Trust) and Tax Exempt Portfolio (Trust) among Registrant, National
City Bank, BancOhio National Bank and First National Bank of
Louisville dated September 26, 1990 is incorporated herein by
reference to Exhibit 5(g) to PEA No. 14.
(c) Investment Advisory Agreement for the Enhanced Income Fund
and the Total Return Advantage Fund between Registrant and National
Asset Management Corporation dated July 5, 1994, is incorporated
herein by reference to Exhibit 5(h) to Post-Effective Amendment No.
21 to Registrant's Registration Statement filed on August 31, 1994
("PEA No. 21").
(d) Investment Advisory Agreement for the Equity Income
Portfolio among Registrant, National City Bank,
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<PAGE> 105
National City Bank, Columbus and National City Bank, Kentucky dated
June 30, 1994, is incorporated herein by reference to Exhibit 5(i)
to PEA No. 21.
(e) Investment Advisory Agreement for the Mid Cap Regional
Equity Portfolio between Registrant and National City Bank dated
July 25, 1994, is incorporated herein by reference to Exhibit 5(j)
to PEA No. 21.
(f) Investment Advisory Agreement for the National Tax Exempt
Portfolio among Registrant, National City Bank, National City Bank,
Columbus, National City Bank, Kentucky and National City Bank,
Indiana is incorporated herein by reference to Exhibit 5(l) to
Post-Effective Amendment No. 20 to Registrant's Registration
Statement filed on February 11, 1994 ("PEA No. 20").
(g) Investment Advisory Agreement for the Pennsylvania Tax
Exempt, Intermediate Government, GNMA and Pennsylvania Municipal
Funds between Registrant and National City Bank dated September 9,
1996, is incorporated herein by reference to Exhibit 5(g) to PEA No.
33.
(h) Investment Advisory Agreement for the Core Equity Fund
between Registrant and National Asset Management Corporation dated
July 31, 1997 is incorporated herein by reference to Exhibit 5(i) to
Post-Effective Amendment No. 36 to Registrant's Registration
Statement filed on September 30, 1997 ("PEA No. 36").
(i) Investment Advisory Agreement for the Small Cap Growth,
Equity Index, Real Return Advantage and International Equity Funds
between Registrant and National City Bank dated July 31, 1997 is
incorporated herein by reference to Exhibit 5(j) to PEA No. 36.
(j) Sub-Advisory Agreement between National City Bank and
Wellington Management Company, LLP with respect to the Small Cap
Growth Fund dated July 31, 1997 is incorporated herein by reference
to Exhibit 5(k) to PEA No. 36.
(k) Advisory Agreement for the Money Market, Treasury,
Government, Tax Exempt, Pennsylvania Tax Exempt, National Tax
Exempt, Fixed Income, GNMA, Intermediate Government, Equity Growth,
Equity Income, Mid Cap Regional, Ohio Tax Exempt and Pennsylvania
Municipal Funds between Registrant and National City
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<PAGE> 106
Bank is incorporated herein by reference to Exhibit 5(k) to PEA
No. 38.
(l) Advisory Agreement for the Enhanced Income and Total
Return Advantage Funds between Registrant and National Asset
Management Corporation is incorporated herein by reference to
Exhibit 5(l) to PEA No. 38.
(6) (a) Distribution Agreement between Registrant and SEI Financial
Services Company dated March 8, 1997, is incorporated herein by
reference to Exhibit 6 to PEA No. 33.
(b) Addendum to the Distribution Agreement between Registrant
and SEI Financial Services Company, dated November 19, 1997, is
incorporated herein by reference to Exhibit 6(b) to PEA No. 38.
(7) None.
(8) (a) Custodian Services Agreement between Registrant and
National City Bank, dated November 7, 1994, is incorporated herein
by reference to Exhibit 8(a) to Post-Effective Amendment No. 22 to
Registrant's Registration Statement filed on December 30, 1994 ("PEA
No. 22").
(b) Sub-Custodian Agreement between National City Bank and The
Bank of California, National Association, dated November 7, 1994, is
incorporated herein by reference to Exhibit 8(a) to PEA No. 22.
(c) Exhibit A to the Custodian Services Agreement between
Registrant and National City Bank dated July 31, 1997 is
incorporated herein by reference to Exhibit 8(c) to PEA No. 36.
(9) (a) Administration and Accounting Services Agreement between
Registrant and PFPC Inc., dated March 1, 1993 is incorporated by
reference to Exhibit 9(l) to Post-Effective Amendment No. 16 to
Registrant's Registration Statement filed on March 1, 1993 ("PEA No.
16").
(b) Exhibit A to the Administration and Accounting Services
Agreement dated March 1, 1993 between Registrant and PFPC Inc.,
dated July 31, 1997, is incorporated herein by reference to Exhibit
9(b) to PEA No. 36.
(c) Transfer Agency and Service Agreement (the "Transfer
Agency Agreement") between Registrant and
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<PAGE> 107
State Street Bank and Trust Company, dated March 1, 1997, is
incorporated herein by reference to Exhibit 9(d) to PEA No. 33.
(d) Revised Shareholder Services Plan and Servicing Agreement
adopted by the Board of Trustees on February 15, 1997, is
incorporated herein by reference to Exhibit 9(e) to PEA No. 33.
(e) Blue Sky Services Agreement between the Registrant and SEI
Fund Resources, dated December 2, 1996, is incorporated herein by
reference to Exhibit 9(f) to PEA No. 33.
(10)(1) Opinion and consent of counsel.
(11) Consent of Drinker Biddle & Reath LLP.
(12) Inapplicable.
(13) Purchase Agreements between Registrant and McDonald & Company
Securities, Inc. are incorporated herein by reference to Exhibit 13
to PEA No. 1.
(a) Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Tax Exempt Portfolio
dated July 19, 1988 is incorporated by reference to Exhibit 13(a) to
Post- Effective Amendment No. 5 to Registrant's Registration
Statement filed on January 19, 1989 ("PEA No. 5").
(b) Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Tax Exempt Portfolio
(Trust), dated October 17, 1989, is incorporated herein by reference
to Exhibit 13(b) to PEA No. 13.
(c) Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Equity Portfolio and
Bond Portfolio, dated December 20, 1989, is incorporated herein by
reference to Exhibit 13(c) to PEA No. 13.
- --------
1 To be filed under Rule 24f-2 as part of Registrant's Rule 24f-2 Notice.
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<PAGE> 108
(d) Purchase Agreement between Registrant and McDonald &
Company Securities, Inc. with respect to the Ohio Tax Exempt
Portfolio, dated January 5, 1990, is incorporated herein by
reference to Exhibit 13(d) to PEA No. 13.
(e) Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Enhanced Income Fund, dated
July 5, 1994, is incorporated herein by reference to Exhibit 13(e)
to PEA No. 21.
(f) Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Equity Income Portfolio, dated
June 30, 1994, is incorporated herein by reference to Exhibit 13(g)
to PEA No. 21.
(g) Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Mid Cap Regional Equity
Portfolio, dated July 25, 1994, is incorporated herein by reference
to Exhibit 13(h) to PEA No. 21.
(h) Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Total Return Advantage Fund,
dated July 5, 1994, is incorporated herein by reference to Exhibit
13(f) to PEA No. 21.
(i) Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the National Tax Exempt Portfolio
is incorporated herein by reference to Exhibit 13(e) to PEA No. 20.
(j) Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the Pennsylvania Tax Exempt Money
Market Fund, dated September 6, 1996, is incorporated herein by
reference to Exhibit 13(j) to PEA No. 33.
(k) Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the Intermediate Government Money
Market Fund, dated September 6, 1996, is incorporated herein by
reference to Exhibit 13(k) to PEA No. 33.
(l) Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the GNMA Fund, dated September 6,
1996, is incorporated herein by reference to Exhibit 13(l) to PEA
No. 33.
C-11
<PAGE> 109
(m) Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the Pennsylvania Municipal Fund,
dated September 6, 1996, is incorporated herein by reference to
Exhibit 13(m) to PEA No. 33.
(n) Purchase Agreement between Registrant and SEI Investments
Distribution Co., ("SIDC") with respect to the Core Equity Fund is
incorporated herein by reference to Exhibit 13(n) to PEA No. 36.
(o) Purchase Agreement between Registrant and SIDC with
respect to the International Equity Fund is incorporated herein by
reference to Exhibit 9(o) to PEA No. 36.
(p) Form of Purchase Agreement between Registrant and SEI with
respect to the Equity Index Fund is incorporated herein by reference
to Exhibit 13(p) to PEA No. 33.
(q) Form of Purchase Agreement between Registrant and SEI with
respect to the Real Return Advantage Fund is incorporated herein by
reference to Exhibit 13(q) to PEA No. 33.
(r) Purchase Agreement between Registrant and SEI with respect
to the Small Cap Growth Fund is incorporated herein by reference to
Exhibit 13(r) to PEA No. 36.
(s) Form of Purchase Agreement between Registrant and SEI
Investments Distribution Co. with respect to Special Series 2 shares
for each Fund is incorporated herein by reference to Exhibit 13(s)
to PEA No. 38.
(14) None.
(15) (a) Service and Distribution Plan for Retail and Institutional
Share Classes is incorporated herein by reference to Exhibit 15(a)
to PEA No. 38.
(b) B shares distribution and servicing plan is incorporated
herein by reference to Exhibit 15(b) to PEA No. 38.
(16) (a) Schedules for Computation of Performance Quotations are
incorporated herein by reference to Exhibit 16 to Post-Effective
Amendment No. 15 to Registrant's Registration Statement filed on
September 18, 1992 ("PEA No. 15").
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<PAGE> 110
(b) Schedules for Computation of Performance Quotations for
the Treasury, Mid Cap Regional, Equity Growth and Equity Income
Portfolios and the Enhanced Income and Total Return Advantage Funds
and the Pennsylvania Tax Exempt, the Pennsylvania Municipal, the
Intermediate Government and the GNMA Funds are incorporated herein
by reference to Exhibit 16 to PEA No. 22.
(17) (a) None.
(18) Revised Plan Pursuant to Rule 18f-3 for Operation of a
Dual-Class System, is incorporated herein by reference to Exhibit
18 to PEA No. 38.
Item 25. Persons Controlled By or Under
Common Control with Registrant
------------------------------
Registrant is controlled by its Board of Trustees.
McDonald & Company Securities, Inc. ("McDonald"), the former
distributor of Registrant, provided its initial capitalization.
Item 26. NUMBER OF HOLDERS OF SECURITIES. The following
information is as of October 31, 1997:
<TABLE>
<CAPTION>
Total
Number of Record
Title of Class Holders Institutional Retail
-------------- ---------------- ------------- ------
<S> <C> <C> <C>
Class A units of 42,575 19,569 23,006
beneficial interest
(Money Market
Fund)
Class B units of 4,770 2,716 2,054
beneficial interest
(Government Money
Market Fund)
Class C units of 2,576 2,343 233
beneficial interest
(Treasury Money Market
Fund)
Class D units of 2,970 2,105 865
beneficial interest
(Tax Exempt Money
Market Fund)
Class H units of 6,254 5,702 552
beneficial interest
(Equity Growth Fund)
</TABLE>
C-13
<PAGE> 111
<TABLE>
<CAPTION>
Total
Number of Record
Title of Class Holders Institutional Retail
-------------- ---------------- ------------- ------
<S> <C> <C> <C>
Class I units of 2,700 2,562 138
beneficial interest
(Intermediate Bond
Fund)
Class K units of 942 840 102
beneficial interest
(Ohio Tax Exempt
Fund)
Class M units of 3,808 3,727 81
beneficial interest
(Equity Income
Fund)
Class N units of 5,054 4,389 665
beneficial interest
(Small Cap Value
Fund)
Class O units of 511 485 26
beneficial interest
(Enhanced Income
Fund)
Class P units of 1,096 1,079 17
beneficial interest
(Total Return
Advantage Fund)
Class Q units of 799 682 117
beneficial interest
(Pennsylvania Tax Exempt
Money Market Fund)
Class R units of 2,818 2,810 8
beneficial interest
(Bond Fund)
Class S units of 2,920 2,901 19
beneficial interest
(GNMA Fund)
Class T units of 393 384 9
beneficial interest
(Pennsylvania
Municipal Fund)
Class U units of 331 324 7
beneficial interest
(International Equity
Fund)
Class V units of 0 0 0
beneficial interest
(Equity Index Fund)
</TABLE>
C-14
<PAGE> 112
<TABLE>
<CAPTION>
Total
Number of Record
Title of Class Holders Institutional Retail
-------------- ---------------- ------------- ------
<S> <C> <C> <C>
Class W units of 35 26 9
beneficial interest
(Core Equity Fund)
Class X units of 358 351 7
beneficial interest
(Small Cap Growth
Fund)
Class Y units of 0 0 0
beneficial interest
(Real Return Advantage
Fund)
</TABLE>
Item 27. Indemnification
---------------
Indemnification of Registrant's principal underwriter, custodian and
transfer agent against certain losses is provided for, respectively, in Article
6 of the Distribution Agreement, incorporated by reference as Exhibit (6)
hereto, and Sections 12 and 6, respectively, of the Custodian Services and
Transfer Agency Agreements, incorporated by reference as Exhibits (8)(a) and
(9)(h) hereto. In Article 6 of the Distribution Agreement, the Trust agrees to
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages or expense and reasonable counsel
fees and disbursements incurred in connection therewith), arising by reason of
any person acquiring any Shares, based upon the ground that the registration
statement, prospectus, Shareholder reports or other information filed or made
public by the Trust (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements made not misleading. However, the
Trust does not agree to indemnify the Distributor or hold it harmless to the
extent that the statements or omission was made in reliance upon, and in
conformity with, information furnished to the Trust by or on behalf of the
Distributor.
In addition, Section 9.3 of Registrant's Declaration of Trust dated
January 28, 1986, incorporated by reference as Exhibit (1) hereto, provides as
follows:
9.3 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES AND EMPLOYEES. The
Trust shall indemnify each of its Trustees against all liabilities
and expenses
C-15
<PAGE> 113
(including amounts paid in satisfaction of judgments, in compromise,
as fines and penalties, and as counsel fees) reasonably incurred by
him in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, in which he may
be involved or with which he may be threatened, while as a Trustee
or thereafter, by reason of his being or having been such a Trustee
EXCEPT with respect to any matter as to which he shall have been
adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties, PROVIDED that as to
any matter disposed of by a compromise payment by such person,
pursuant to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided unless
the Trust shall have received a written opinion from independent
legal counsel approved by the Trustees to the effect that if either
the matter of willful misfeasance, gross negligence or reckless
disregard of duty, or the matter of bad faith had been adjudicated,
it would in the opinion of such counsel have been adjudicated in
favor of such person. The rights accruing to any person under these
provisions shall not exclude any other right to which he may be
lawfully entitled, PROVIDED that no person may satisfy any right of
indemnity or reimbursement hereunder except out of the property of
the Trust. The Trustees may make advance payments in connection with
the indemnification under this Section 9.3, PROVIDED that the
indemnified person shall have provided a secured written undertaking
to reimburse the Trust in the event it is subsequently determined
that he is not entitled to such indemnification.
The Trustees shall indemnify representatives and employees of the
Trust to the same extent that Trustees are entitled to
indemnification pursuant to this Section 9.3.
Section 12 of Registrant's Custodian Services Agreement provides as
follows:
12. INDEMNIFICATION. The Trust, on behalf of each of the Funds,
agrees to indemnify and hold harmless the Custodian and its nominees
from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising
under the 1933 Act, the 1934 Act, the 1940 Act, the CEA, and any
state and foreign securities and blue sky laws, and amendments
thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements, arising directly or indirectly
from any
C-16
<PAGE> 114
action which the Custodian takes or does not take (i) at the request
or on the direction of or in reliance on the advice of the Fund or
(ii) upon Oral or Written Instructions. Neither the Custodian, nor
any of its nominees, shall be indemnified against any liability to
the Trust or to its shareholders (or any expenses incident to such
liability) arising out of the Custodian's or its nominees' own
willful misfeasance, bad faith, negligence or reckless disregard of
its duties and obligations under this Agreement.
In the event of any advance of cash for any purpose made by the
Custodian resulting from Oral or Written Instructions of the Trust,
or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in respect of the Trust or any Fund in connection with
the performance of this Agreement, except such as may arise from its
or its nominee's own negligent action, negligent failure to act or
willful misconduct, any Property at any time held for the account of
the relevant Fund or the Trust shall be security therefor.
Section 6 of Registrant's Transfer Agency Agreement provides as
follows:
6 Indemnification
---------------
6.1 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the Bank
harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability
arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement,
provided that such actions are taken in good faith and
without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or
services which (i) are received by the Bank or its
agents or subcontractors, and (ii) have been prepared,
C-17
<PAGE> 115
maintained or performed by the Fund or any other person
or firm on behalf of the Fund including but not limited
to any previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests
of the Fund on behalf of the applicable Portfolio.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or
regulations or the securities laws or regulations of any
state that such Shares be registered in such state or in
violation of any stop order or other determination or
ruling by any federal agency or any state with respect
to the offer or sale of such Shares in such state.
(f) The negotiations and processing of checks made payable
to prospective or existing Shareholders tendered to the
Bank for the purchase of Shares, such checks are
commonly known as "third party checks."
6.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect
to any matter arising in connection with the services to be
performed by the Bank tinder this Agreement, and the Bank and
its agents or subcontractors shall not be liable and shall be
indemnified by the Fund oil behalf of the applicable Portfolio
for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel (provided
such counsel is reasonably satisfactory to the Fund). The
Bank, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document, reasonably
believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data,
records or documents provided the Bank or its agents or
subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Fund, and shall
not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Fund.
The Bank, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates
which are reasonably believed to bear the proper
C-18
<PAGE> 116
manual or facsimile signatures of the officers of the Fund,
and the proper countersignature of any former transfer agent
or former registrar, or of a co-transfer agent or
co-registrar.
6.3 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably
beyond its control, such party shall not be liable for damages
to the other for any damages resulting from such failure to
perform or otherwise from such causes.
6.4 In order that the indemnification provisions contained in this
Section 6 shall apply, upon the assertion of a claim for which
the Fund may be required to indemnify the Bank, the Bank shall
promptly notify the Fund of such assertion, and shall keep the
Fund advised with respect to all developments concerning such
claim. The Fund shall have the option to participate with the
Bank in the defense of such claim or to defend against said
claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in
any case in which the Fund may be required to indemnify the
Bank except with the Fund's prior written consent.
Registrant has obtained from a major insurance carrier a directors'
and officers' liability policy covering certain types of errors and omissions.
In no event will Registrant indemnify any of its trustees, officers, employees
or agents against any liability to which such person would otherwise be subject
by reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties, or by reason of his reckless disregard of the duties
involved in the conduct of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act of 1933 and
Release No. 11330 under the Investment Company Act of 1940 in connection with
any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee,
C-19
<PAGE> 117
officer, or controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections
of Investment Advisers
------------------------------
(a) Investment Adviser: National City Bank
National City Bank performs investment advisory services for
Registrant and certain other investment advisory customers. National City Bank
has been in the business of managing the investments of fiduciary and other
accounts throughout Ohio since October 1919. In addition to its trust business,
National City Bank provides commercial banking services.
To the knowledge of Registrant, none of the directors or officers of
National City Bank, except those set forth below, is or has been, at any time
during the past two calendar years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain directors
and officers also hold various positions with, and engage in business for,
National City Corporation, which owns all the outstanding stock of National City
Bank, or other subsidiaries of National City Corporation. Set forth below are
the names and principal businesses of the directors and certain of the senior
executive officers of National City Bank who are engaged in any other business,
profession, vocation or employment of a substantial nature.
C-20
<PAGE> 118
NATIONAL CITY BANK
<TABLE>
<CAPTION>
POSITION OTHER
WITH NATIONAL BUSINESS TYPE OF
NAME CITY BANK CONNECTIONS BUSINESS
- ---- ------------- --------------- -------------
<S> <C> <C> <C>
George R. Berlin Director President and Chief
Executive Officer,
Berco, Inc.
Thomas G. Breitenbach Director President and Chief Health Care
Executive Officer,
MedAmerica Health
Systems
Steve D. Bullock Director Chief Executive Non-Profit
Officer and Chapter Organization
Manager, American
Red Cross
David A. Daberko Director Chairman and Chief Bank holding company
Executive Officer,
National City
Corporation
Director, National Bank
City Bank of
Columbus
Director, National Bank
City Bank of Dayton
Director, National Bank
City Bank of Indiana
Director, National Bank
City Bank of
Kentucky
Officer and Tractor sales
Director, Hudson
Tractor Sales, Inc.
Director, Student
Loan Marketing
Association
Vincent A. DiGirolamo Director Vice Chairman, Bank holding company
National City
Corporation
Daniel W. Duval Director President and Chief
Executive Officer,
Robbins & Myers,
Inc.
Thomas J. Fitzpatrick Director Chairman and Chief
Executive Officer,
Elford, Inc.
</TABLE>
C-21
<PAGE> 119
<TABLE>
<CAPTION>
POSITION OTHER
WITH NATIONAL BUSINESS TYPE OF
NAME CITY BANK CONNECTIONS BUSINESS
- ---- ------------- --------------- -------------
<S> <C> <C> <C>
Gary A. Glaser Director Chairman, National Bank
City Bank of
Columbus
Gordon D. Harnett Director President, Chairman Manufacturer of
and Chief Executive engineering material
Officer, Brush
Wellman, Inc.
Donald V. Kellermeyer Director President,
Kellermeyer Co.
William G. Kelley Director Chairman and Chief
Executive Officer,
Consolidated Stores
Corporation
J. Peter Kelly Director President and Chief Manufacturer of
Operating Officer, steel
LTV Corp.
Wiliam E. President, Chief Executive Vice Bank holding company
MacDonald III Executive Officer President, National
and Director City Corporation
William P. Madar Director Vice Chairman and Manufacturer of
Chief Executive machinery
Officer, Nordson
Corporation
Paul A. Ormond Director Chairman, President
and Chief Executive
Officer, Health Care
& Retirement Corp.
William F. Patient Director Chairman, President PVC manufacturer
and Chief Executive
Officer, The Geon
Company
Shelley B. Roth Director President, Pierre's Ice cream
French Ice Cream
Company
Dr. K. Wayne Smith Director President and Chief
Executive Officer,
OCLC Online Computer
Library, Inc.
Thomas C. Sullivan Director Chairman of the Manufacturer of
Board and Chief protective coatings,
Executive Officer, roofing material and
RPM, Inc. paint
Jerry Sue Thornton, Director President, Cuyahoga Education
Ph.D. Community College
</TABLE>
C-22
<PAGE> 120
<TABLE>
<CAPTION>
POSITION OTHER
WITH NATIONAL BUSINESS TYPE OF
NAME CITY BANK CONNECTIONS BUSINESS
- ---- ------------- --------------- -------------
<S> <C> <C> <C>
John R. Werren Director Partner, Day, Law firm
Ketterer, Raley,
Wright & Rybollt
W. Douglas Bannerman Senior Executive Senior Vice Bank holding company
Vice President, President, National
Corporate Banking City Corporation
Jeffery M. Biggar Executive Vice Senior Vice Bank holding company
President, President, National
Private Client City Corporation
Group
Jane Grebenc Executive Vice None
President, Retail
Banking
Robert K. Healey, Jr. Executive Vice None
President
Thomas R. Hollern Area President, None
Northeast Region
Katherine B. Executive Vice None
Hollingsworth President/
Southwest
Dorothy M. Horvath Executive Vice None
President/Central
James Hughes Executive Vice None
President/
Northcoast
Jeffrey D. Kelly Executive Vice Executive Vice Bank holding company
President, President, National
Investments City Corporation
Kenneth R. Knutson Area President, None
Northeast Region
Stephen McLane Executive Vice None
President/Central
Bruce T. Muddell Executive Vice None
President, Credit
Administration
Richard A. Ray Executive Vice None
President/Central
Philip L. Rice Executive Vice None
President/
Northcoast
David W. Ridenour Executive Vice None
President/
Northwest
</TABLE>
C-23
<PAGE> 121
<TABLE>
<CAPTION>
POSITION OTHER
WITH NATIONAL BUSINESS TYPE OF
NAME CITY BANK CONNECTIONS BUSINESS
- ---- ------------- --------------- -------------
<S> <C> <C> <C>
Robert A. Robinson Executive Vice None
President/
Northwest
Jeffrey T. Siler Executive Vice None
President/
Southwest
William F. Smith Executive Vice None
President/Central
Harold E. Todd, Jr. Executive Vice Executive Vice Bank holding company
President, President, National
Institutional City Corporation
Trust and Asset
Management
Gregory L. Tunis Senior Executive
Vice President
</TABLE>
(b) Investment Adviser: National Asset Management Corporation
("National Asset Management")
To the knowledge of Registrant, none of the directors or
officers of National Asset Management, except those set forth below, is or has
been at any time during the past two calendar years engaged in any other
business, profession, vocation or employment of a substantial nature, except
that certain directors and officers of National Asset Management also hold
positions with National City Corporation or its subsidiaries. Set forth below
are the names and principal business of the directors and certain of the senior
executive officers of National Asset Management who are engaged in any other
business, profession, vocation, or employment of a substantial nature.
NATIONAL ASSET MANAGEMENT
<TABLE>
<CAPTION>
Position with Other
National Asset Business Type of
Name Management Connections Business
- ---- ---------- ----------- --------
<S> <C> <C> <C>
James R. Bell, III Director Director, President Bank
and Chief
Executive Officer,
National City Bank of
Kentucky
Executive Vice Bank holding
President, company
National City
Corporation
</TABLE>
C-24
<PAGE> 122
<TABLE>
<CAPTION>
Position with Other
National Asset Business Type of
Name Management Connections Business
- ---- ---------- ----------- --------
<S> <C> <C> <C>
William F. Director, None
Chandler, Jr. Managing Director
and Principal
</TABLE>
C-25
<PAGE> 123
<TABLE>
<CAPTION>
Position with Other
National Asset Business Type of
Name Management Connections Business
- ---- ---------- ----------- --------
<S> <C> <C> <C>
Carl W. Hafele Director, None
Managing Director
and Principal
Leonard V. Hardin Director Director and Bank
Chairman of the
Board, National City
Bank of Kentucky
Robert Siefers Director Chief Financial Bank holding
Officer, National company
City Corporation
Harold B. Todd, Jr. Director Executive Vice Presi- Bank holding
dent, National City company
Corporation
Executive Vice Presi- Bank
dent, Institutional
Trust and Asset Manage-
ment, National City Bank
Michael C. Heyman Principal None
David B. Hiller Managing None
Director
and Principal
Stephen G. Mullins Principal None
Larry J. Walker Principal None
John W. Ferreby Principal None
Catherine R. Senior None
Stodghill Investment Manager
Erik N. Evans Investment None
Manager
Brent A. Bell Investment None
Manager
Randall T. Zipfel Manager, None
Information Systems
</TABLE>
(c) Sub-Investment Adviser: Wellington Management
Corporation, LLP ("Wellington").
Wellington performs sub-investment advisory services for the
Registrant's Small Cap Growth Fund.
Wellington is an investment adviser registered under the Investment
Advisers Act of 1940 (the "Advisers Act").
C-26
<PAGE> 124
The list required by this Item 28 of the partners of Wellington,
together with information as to any business profession, vocation or employment
of substantial nature engaged in by such partners during the past two years, is
incorporated herein by references to Schedule A and D of Form ADV filed by
Wellington pursuant to the Advisers Act (SEC File No. 801-15908).
Item 29. Principal Underwriter
---------------------
(a) Furnish the name of each investment company
(other than the Registrant) for which each principal
underwriter currently distributing securities of the
Registrant also acts as a principal underwriter, distributor
or investment advisor.
Registrant's distributor, SEI Investments
Distribution Co. ("SIDC"), acts as distributor for:
<TABLE>
<CAPTION>
<S> <C> <C>
SEI Daily Income Trust July 14, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds(R) June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis Funds(R) August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 30, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Expedition Funds June 9, 1997
</TABLE>
SIDC provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments.
These services include portfolio evaluation, performance
measurement and consulting services ("Funds Evaluation") and
automated execution, clearing and settlement of securities
transactions ("MarketLink").
C-27
<PAGE> 125
(b) Furnish the information required by the following
table with respect to each director, officer or partner of
each principal underwriter named in the answer to Item 21 of
Part B. Unless otherwise noted, the principal business address
of each director or officer is Oaks, PA 19456.
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ------------------- ---------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & --
Chief Executive Officer
Henry H. Greer Director, President & --
Chief Operating Officer
Carmen V. Romeo Director, Executive --
Vice President,
President-Investment
Advisory Group
Gilbert L. Beebower Executive Vice --
President
Richard B. Lieb Executive Vice --
President, President-
Investment Services
Division
Dennis J. McGonigle Executive Vice --
President
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
David G. Lee Senior Vice President --
Jack May Senior Vice President --
A. Keith McDowell Senior Vice President --
Hartland J. McKeon Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President, --
General Counsel &
Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Marc H. Cahn Vice President & --
Assistant Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & --
Assistant Secretary
Robert Crudup Vice President & --
Managing Director
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Vic Galef Vice President & --
Managing Director
Kathy Heillig Vice President & --
Treasurer
Michael Kantor Vice President --
Samuel King Vice President --
Kim Kirk Vice President & --
Managing Director
</TABLE>
C-28
<PAGE> 126
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- ------------------- ---------------------
<S> <C> <C>
John Krzeminski Vice President & --
Managing Director
Carolyn McLaurin Vice President & --
Managing Director
W. Kelso Morrill Vice President --
Barbara A. Nugent Vice President & --
Assistant Secretary
Sandra K. Orlow Vice President & --
Assistant Secretary
Cynthia M. Parrish Vice President &
Assistant Secretary
Donald Pepin Vice President & --
Managing Director
Kim Rainey Vice President --
Mark Samuels Vice President & --
Managing Director
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & --
Assistant Secretary
Wayne M. Withrow Vice President & --
Managing Director
James Dougherty Director of Brokerage --
Services
</TABLE>
Item 30. Location of Accounts and Records
--------------------------------
(1) National City Bank, 1900 East Ninth Street, Cleveland, Ohio,
44114-3484, and National City Bank, Trust Operations, 4100 West
150th Street, Cleveland, Ohio 44135, (records relating to their
functions as investment advisers and custodian); and National Asset
Management Corporation, 101 South Fifth Street, Louisville, KY
40202.
(2) SEI Investments Distribution Co., 1 Freedom Valley Road, Oaks,
Pennsylvania 19456 (records relating to its function as
distributor).
(3) 440 Financial Distributors, Inc., 290 Donald Lynch Boulevard,
Marlboro, Massachusetts 01752 (records relating to its former
functions as distributor).
(4) Allmerica Investments, Inc., 440 Lincoln Street, Worcester,
Massachusetts 01653 (records relating to its former functions as
distributor).
(5) Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107-3496 (Registrant's
C-29
<PAGE> 127
Declaration of Trust, Code of Regulations, and Minute Books).
(6) PNC Bank, National Association, 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103 (records relating to its former
functions as custodian).
(7) PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809
(records relating to its functions as accounting agent and
administrator).
(8) State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110 (records relating to its function as
transfer agent).
(9) First Data Investor Services Group, Inc., 4400 Computer Drive,
Westboro, Massachusetts 02109 (records relating to its former
functions as transfer agent).
(10) First Data Investor Services Group (formerly The Shareholder
Services Group, Inc. d/b/a 440 Financial) 4400 Computer Drive,
Westboro, Massachusetts 02109 (records relating to its former
functions as transfer agent).
(11) Weiss, Peck & Greer, LLC, One New York Plaza, New York, New
York 10004 (records relating its former functions as sub-adviser).
(12) Wellington Management Company, LLP, 75 State Street, Boston,
Massachusetts 02109 (records relating to its functions as
sub-adviser).
Item 31. Management Services
-------------------
Inapplicable.
Item 32. Undertakings
------------
(a) Registrant undertakes to furnish each person to whom a
prospectus is delivered a copy of the Registrant's most recent annual report to
shareholders, upon request and without charge.
(b) Registrant undertakes to file a post-effective amendment, using
unaudited financial statements for the Registrant's Tax Managed Equity Fund
which need not be certified, within four to six months from the effective date
of this Post-Effective Amendment No. 39.
C-30
<PAGE> 128
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly caused
this Post-Effective Amendment No. 39 to its Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Philadelphia, Commonwealth of Pennsylvania, on the 22nd day of January, 1998.
ARMADA FUNDS
Registrant
/s/ W. Bruce McConnel, III
--------------------------
Secretary
W. Bruce McConnel, III
Pursuant to the requirements of the Securities Act of 1933, this Post- Effective
Amendment No. 39 to Registrant's Registration Statement has been signed below
by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Neal Andrews Treasurer January 22, 1998
- ----------------------
Neal J. Andrews
*Leigh Carter Trustee January 22, 1998
- ----------------------
Leigh Carter
*John F. Durkott Trustee January 22, 1998
- ----------------------
John F. Durkott
*Robert J. Farling Trustee January 22, 1998
- ----------------------
Robert J. Farling
*Richard W. Furst Trustee January 22, 1998
- ----------------------
Richard W. Furst
*Gerald Gherlein Trustee January 22, 1998
- ----------------------
Gerald Gherlein
*Herbert Martens Trustee and President January 22, 1998
- ----------------------
Herbert Martens
*Robert D. Neary Trustee and Chairman January 22, 1998
- ---------------------- of the Board
Robert D. Neary
*J. William Pullen Trustee January 22, 1998
- ----------------------
J. William Pullen
*By: /s/ W. Bruce McConnel, III
--------------------------
W. Bruce McConnel, III
Attorney-in-Fact
</TABLE>
C-31
<PAGE> 129
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert
D. Neary, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
------------
/s/ Robert D. Neary
- -----------------------------
Robert D. Neary
<PAGE> 130
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Leigh
Carter, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
------------
/s/ Leigh Carter
- ---------------------------
Leigh Carter
<PAGE> 131
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, John F.
Durkott, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
-------------
/s/ John F. Durkott
- -----------------------------
John F. Durkott
<PAGE> 132
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Richard
W. Furst, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
---------------
/s/Richard W. Furst
- -------------------------
Richard W. Furst
<PAGE> 133
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, J.
William Pullen, hereby constitutes and appoints Herbert R. Martens, Jr. and W.
Bruce McConnel, III, his true and lawful attorneys, to execute in his name,
place, and stead, in his capacity as Trustee or officer, or both, of Armada
Funds, the Registration Statement and any amendments thereto and all instruments
necessary or incidental in connection therewith, and to file the same with the
Securities and Exchange Commission; and said attorneys shall have full power and
authority to do and perform in his name and on his behalf, in any and all
capacities, every act whatsoever requisite or necessary to be done in the
premises, as fully and to all intents and purposes as he might or could do in
person, said acts of said attorneys being hereby ratified and approved.
DATED: September 17, 1997
-------------
/s/ J. William Pullen
- -----------------------------
J. William Pullen
<PAGE> 134
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Herbert
R. Martens, Jr., hereby constitutes and appoints W. Bruce McConnel, III, his
true and lawful attorney, to execute in his name, place, and stead, in his
capacity as Trustee or officer, or both, of Armada Funds, the Registration
Statement and any amendments thereto and all instruments necessary or incidental
in connection therewith, and to file the same with the Securities and Exchange
Commission; and said attorney shall have full power and authority to do and
perform in his name and on his behalf, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as he might or could do in person, said acts of said
attorney being hereby ratified and approved.
DATED: September 17, 1997
-------------
/s/ Herbert R. Martens, Jr.
- -----------------------------
Herbert R. Martens, Jr.
<PAGE> 135
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Gerald
L. Gherlein, hereby constitutes and appoints Herbert R. Martens, Jr. and W.
Bruce McConnel, III, his true and lawful attorneys, to execute in his name,
place, and stead, in his capacity as Trustee or officer, or both, of Armada
Funds, the Registration Statement and any amendments thereto and all instruments
necessary or incidental in connection therewith, and to file the same with the
Securities and Exchange Commission; and said attorneys shall have full power and
authority to do and perform in his name and on his behalf, in any and all
capacities, every act whatsoever requisite or necessary to be done in the
premises, as fully and to all intents and purposes as he might or could do in
person, said acts of said attorneys being hereby ratified and approved.
DATED: September 17, 1997
-------------
/s/ Gerald L. Gherlein
- --------------------------
Gerald L. Gherlein
<PAGE> 136
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Gerald
L. Gherlein, hereby constitutes and appoints Herbert R. Martens, Jr. and W.
Bruce McConnel, III, his true and lawful attorneys, to execute in his name,
place, and stead, in his capacity as Trustee or officer, or both, of Armada
Funds, the Registration Statement and any amendments thereto and all instruments
necessary or incidental in connection therewith, and to file the same with the
Securities and Exchange Commission; and said attorneys shall have full power and
authority to do and perform in his name and on his behalf, in any and all
capacities, every act whatsoever requisite or necessary to be done in the
premises, as fully and to all intents and purposes as he might or could do in
person, said acts of said attorneys being hereby ratified and approved.
DATED: September 17, 1997
-------------
/s/ Gerald L. Gherlein
- --------------------------
Gerald L. Gherlein
<PAGE> 137
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
(11) Consent of Drinker Biddle & Reath LLP
<PAGE> 1
CONSENT OF COUNSEL
------------------
We hereby consent to the use of our name and to the reference
to our Firm under the caption "Counsel" in the Statements of Additional
Information that are included in Post- Effective Amendment No. 39 to the
Registration Statement on Form N-1A under the Investment Company Act of 1940, as
amended, of Armada Funds. This consent does not constitute a consent under
Section 7 of the Securities Act of 1933, and in consenting to the use of our
name and the references to our Firm under such caption we have not certified any
part of the Registration Statement and do not otherwise come within the
categories of persons whose consent is required under Section 7 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/DRINKER BIDDLE & REATH LLP
-------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
January 21, 1998
