[PHOTO OF ANTIQUE STORE OMITTED]
ANNUAL REPORT
MAY 31, 1998
ARMADA INTERNATIONAL EQUITY FUND
ARMADA SMALL CAP GROWTH FUND
ARMADA SMALL CAP VALUE FUND
ARMADA EQUITY GROWTH FUND
ARMADA TAX MANAGED EQUITY FUND
ARMADA CORE EQUITY FUND
ARMADA EQUITY INCOME FUND
ARMADA
FUNDS
EQUITY
SERIES
[LOGO OMITTED]
FINANCIAL POWER CLOSE AT HAND
<PAGE>
ARMADA FUNDS
EQUITY SERIES
ANNUAL REPORT -- MAY 31, 1998
ARMADA
INTERNATIONAL
EQUITY FUND
ARMADA SMALL
CAP GROWTH FUND
ARMADA SMALL
CAP VALUE FUND
ARMADA EQUITY GROWTH FUND
ARMADA TAX
MANAGED EQUITY
FUND
ARMADA CORE
EQUITY FUND
ARMADA EQUITY INCOME FUND
TABLE OF CONTENTS
Chairman's Message ..................................................... 1
Market Overviews ....................................................... 3
FUND OVERVIEWS
Armada International Equity Fund .................................... 5
Armada Small Cap Growth Fund ........................................ 8
Armada Small Cap Value Fund ......................................... 11
Armada Equity Growth Fund ........................................... 14
Armada Tax Managed Equity Fund ...................................... 17
Armada Core Equity Fund ............................................. 19
Armada Equity Income Fund ........................................... 22
STATEMENT OF NET ASSETS AND FINANCIAL HIGHLIGHTS
Armada International Equity Fund .................................... 25
Armada Small Cap Growth Fund ........................................ 29
Armada Small Cap Value Fund ......................................... 32
Armada Equity Growth Fund ........................................... 36
Armada Tax Managed Equity Fund ...................................... 40
Armada Core Equity Fund ............................................. 43
Armada Equity Income Fund ........................................... 47
FINANCIAL STATEMENTS
Statement of Operations ............................................. 51
Statement of Changes in Net Assets .................................. 53
NOTES TO FINANCIAL STATEMENTS .......................................... 55
REPORT OF INDEPENDENT AUDITORS ......................................... 62
RESULTS OF PROXY VOTING ................................................ 63
- --------------------------------------------------------------------------------
[BULLET] SHARES OF ARMADA FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY NATIONAL CITY BANK,
THEIR AFFILIATES OR ANY BANK.
[BULLET] 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.
[BULLET] PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE, AND THE
INVESTMENT RETURN WILL FLUCTUATE.
National City Bank and certain of its affiliates serve as investment advisers to
Armada Funds for which they receive an investment advisory fee. For more
complete information about Armada Funds, including charges and expenses, please
contact your investment specialist or call 1-800-622-FUND (3863) for a
prospectus. Read it carefully before you invest or send money. Armada Funds are
distributed by SEI Investments Distribution Co. (SIDC), Oaks, PA 19456. SIDC is
not affiliated with National City Bank and is not a bank.
- --------------------------------------------------------------------------------
<PAGE>
CHAIRMAN'S MESSAGE
DEAR ARMADA FUNDS SHAREHOLDER:
We are pleased to report that the year ended May 31, 1998, was a good
one for both the economy and financial markets as well as for Armada Funds. With
our economy's solid growth and low inflationary pressures, stocks posted
dramatic increases and the fixed income markets gained ground as well. Despite
volatility in the financial markets, enthusiasm for investing continued
unabated. Many investors chose to invest in Armada Funds with the result that
our assets rose by 37%, increasing from $5.4 billion at the start of the year,
to $7.4 billion on May 31, 1998.
On March 31, 1998, the merger of National City Corporation and First of
America Bank Corporation was successfully completed. As a direct
result of the merger our funds will be advised and managed by a larger team of
investment professionals. The depth and breadth of expertise and experience this
team brings to our funds will enhance our ability to meet our clients'
objectives.
NEW PRODUCT OFFERINGS
In the Spring we added two new funds--the Armada National Tax Exempt Fund and
the Armada Tax Managed Equity Fund. These new funds, plus three additional
equity funds added during the first half of the year, further enhance the range
of investment opportunities within the Armada Family of Funds.
We also have launched the Armada Plus 401(k) program--a comprehensive plan
designed to provide employees of smaller companies with the complete range of
benefits traditionally only enjoyed by the larger tax deferred 401(k) plan
sponsors. The program is a turnkey package--offering employers a solid plan that
combines Armada Funds with comprehensive, affordable plan administration and
recordkeeping.
1
<PAGE>
CHAIRMAN'S MESSAGE
If you would like more information about our newest offerings, the Armada
National Tax Exempt and Tax Managed Equity funds or the Armada Plus 401(k)
program, or a prospectus for any of the Armada Funds, please call your account
representative or 1-800-622-FUND (3863). You also can find us on the WorldWide
Web at WWW.NATIONAL-city.com. Click Invest It! for Armada Funds information.
Finally, we would like to thank you for your continued confidence in us.
We look forward to providing you with superior investment management and service
to meet your investment needs now and in the future.
Sincerely,
/s/ signature omitted
Robert D. Neary
Chairman
Armada Funds
2
<PAGE>
EQUITY MARKET OVERVIEW
REMARKS FROM THE ADVISERS
"LOOKING OUT LONGER TERM, WE ARE EXTREMELY OPTIMISTIC REGARDING THE MARKETS --
OUR ECONOMY HAS NEVER BEEN STRONGER, OUR CORPORATIONS HAVE NEVER BEEN LEANER,
AND THE POTENTIAL HAS NEVER BEEN AS BRIGHT."
Benign inflation, low interest rates, an economy growing steadily -- as Alan
Greenspan recently noted, domestically economic conditions have never been more
positive. In its eighth year of expansion, our economy is moving along briskly
- -- and there are few indications that a significant change in this environment
is in the offing. But is this really the case? Very simply, the answer is yes,
and no.
FLU SYMPTOMS
While personal consumption and investment in the U.S. remain extremely
strong, economies abroad are considerably weaker -- and as a result of the
situation in Asian markets and the sheer strength of the dollar, may grow even
weaker. Consequently, U.S. exports are slowing, and our trade deficit is
exploding. In fact, the deficit is now estimated to have subtracted a full 2.6%
from growth in the first quarter alone -- and will likely dampen growth
additionally over the next several quarters as a wave of imports from distressed
Asian manufacturers reach our shores.
Of course, a slower rate of growth, as the Federal Reserve has preached for
several years, is not necessarily a negative. In fact, minutes from the March
meeting of the Federal Open Market Committee showed that the Fed changed its
bias from a neutral stance to one of tightening. Given the economy's pace of
growth and the tightness of the labor markets, the Fed believed that tightening
likely would be needed at some point to head off imbalances that might undermine
economic growth. But the markets then -- and now -- clearly did not agree, and
to date, the prices of fixed income securities do not reflect the view that a
tightening is around the corner.
And, looking ahead we don't believe the Fed will tighten rates anytime soon
either. With the continued decline in goods prices, the strength of the dollar
and an extremely competitive pricing environment, growth should slow to a rate
of 2.5-3.0% in the second half and inflation should remain subdued. What then is
the reason for concern?
THE BIGGER PICTURE...
In short, after eight years of uninterrupted expansion and increasing
productivity, our economy and some of our corporations are now facing some new
and very real pressures at home and abroad. In markets around the world, the
strength of the dollar is making U.S. goods prohibitively expensive for
potential consumers. At home, with imports from markets with devalued currencies
entering the marketplace at record levels, corporations have very
3
<PAGE>
EQUITY MARKET OVERVIEW
REMARKS FROM THE ADVISERS
little if any pricing power. This, coupled with increasing wage pressures
from a tight domestic labor market, is beginning to squeeze profit margins --
and should soon impact the rate of growth in corporate profits.
Previously in the expansion, increases in productivity have more or less
offset much of these pressures. At this point, however, productivity is no
longer increasing as rapidly. Consequently, after years of simply fantastic
performance, we do expect to see corporate profit growth slow to lower, albeit
very respectable by historic norms, levels. Thus, earnings estimates appear
overly optimistic -- even while stocks are valued at peak multiples of inflated
profit expectations.
...AND WHAT IT SHOWS.
Consequently, now is the time to approach the markets cautiously. Looking out
longer term, we are extremely optimistic regarding the markets -- our economy
has never been stronger, our corporations have never been leaner, and the
potential has never been as bright. Over the short-term, however, upside
potential is somewhat limited, and downside risks are increasing.
In short, many of the trends that have fueled our advance over the past
several years seem to be running out of steam now. Consequently, rather than
another year of double digit gains in stock prices, we would not be surprised --
when all has been said and done -- to see the market return to its historic norm
of 9% or so.
4
<PAGE>
ARMADA INTERNATIONAL EQUITY FUND
OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
INTERNATIONAL EQUITY TEAM,
NATIONAL CITY'S
ASSET MANAGEMENT GROUP
FUND'S DATE OF INCEPTION:
AUGUST 1, 1997 (INSTITUTIONAL SHARES)
AUGUST 1, 1997 (RETAIL SHARES)
JANUARY 6, 1998 (CLASS B SHARES)
ASSETS:
$135,942,111 (INSTITUTIONAL SHARES)
$ 275,859 (RETAIL SHARES)
$ 1,217 (CLASS B SHARES)
INVESTMENT OBJECTIVE:
SEEK CAPITAL GROWTH CONSISTENT WITH INVESTMENT RISK. THE FUND WILL NORMALLY
INVEST AT LEAST 80% OF ITS TOTAL ASSETS IN EQUITY SECURITIES OF FOREIGN ISSUERS.
RECENT PERFORMANCE
Designed for investors seeking to capitalize on the long-term growth
potential of high quality growth companies in markets outside the U.S., the Fund
was introduced on August 1, 1997. For more information or a prospectus, please
call us at 1-800-622-FUND (3863).
On an absolute basis, the period was an extraordinarily turbulent one for
international investors in general. On a relative basis, however, we are very
pleased to report that the Fund's first ten months in operation were strong
ones. Over the period, the portfolio produced a total return of 8.76% and 8.28%
(before sales charges) for its Institutional and Retail investors, respectively,
beating both its benchmarks. Over the same ten months, the EAFE Index produced a
total return of 3.63%: the Lipper International Equity Fund Index, 5.94%. We
find the fund's initial results encouraging. Our view of what drives returns in
the long term matched up well with the investment environment over this period.
Significant risks identified at the country level drove the Fund's allocations
away from markets whose vulnerability was ultimately exposed in the period.
FUND STRATEGIES
The Fund's strong performance was due primarily to the fact that both
Japanese and Southeast Asian stocks were de-emphasized from inception (both
markets are well-represented in industry averages). As a result, the Fund was
less impacted by events in Asian markets, and the continuing declines in the
Japanese economy.
Instead, the Fund was heavily-weighted in Continental European, Scandinavian,
and U.K. securities. Throughout the period, low inflation, low interest rates
and modest economic growth created a very favorable environment in these
regions. Moreover, many of the companies here are only initiating the cycle of
downsizing and restricting that swept the U.S. in the late eighties and early
nineties. As a result, profit margins are beginning to show significant
improvement. Consequently, holdings in these regions made a solid contribution
to performance.
5
<PAGE>
ARMADA INTERNATIONAL EQUITY FUND
OVERVIEW
COMMENTS FROM THE MANAGER
"IN PARTICULAR, WE CONTINUE TO BELIEVE EUROPE'S MARKETS ARE ATTRACTIVE DUE TO
ECONOMIC GROWTH, CORPORATE RESTRUCTURING, AND A BENIGN INTEREST RATE OUTLOOK."
FUND STRUCTURE
As the period drew to a close, the Fund's assets remained invested primarily
in Continental Europe, the U.K. and Scandinavia. Due to the deteriorating
situation in Southeast Asia and Japan, the Fund remains de-emphasized in these
markets. After months of turmoil, these markets appear to be cheap -- and many
investors are flocking back into the marketplace. We, however, feel there is
very real reason for caution. Even as equity prices have contracted in these
regions, the dollar value of companies' debt has ballooned. With debt factored
in, few of these stocks are cheap. Ultimately, significant dilution of equity is
expected as companies swap debt for new equity. Consequently, unless the
environment and fundamentals change dramatically, we do not expect to increase
the Fund's allocation to the Pacific Rim region significantly in the foreseeable
future.
LOOKING AHEAD
Going forward, the environment for equities worldwide is uncertain as
repercussions of events in Asia are felt around the globe. However, we believe
selected markets are priced to perform well. In particular, we continue to
believe Europe's markets are attractive due to economic growth, corporate
restructuring, and a benign interest rate outlook. Although share prices have
risen, valuation is not problematic relative to world equity averages or bond
yields. Consequently, we believe this region offers investors very real
opportunity in the coming months and year.
In particular, we are looking closely at the service sector of the European
market. Such companies have little need to invest in or upgrade equipment -- and
having restructured, many are now generating very strong cash flows. We are
invested in a number of service sector stocks today, and we expect to continue
seeking out attractive situations in this sector. These cash flows can be used
to invest in growth, or to rationalize capital via share repurchase or debt
retirement.
6
<PAGE>
ARMADA INTERNATIONAL EQUITY
FUND OVERVIEW
COMMENTS FROM THE MANAGER
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TOTAL RETURNS as of 05/31/98
- --------------------------------------------------------------------------------
Cumulative Inception
to Date2
- --------------------------------------------------------------------------------
Armada International Equity Fund
Institutional Shares1 8.76%
- --------------------------------------------------------------------------------
Armada International Equity Fund
Retail Shares With Sales Charge4 2.34%
Without Sales Charge 8.28%
- --------------------------------------------------------------------------------
Armada International Equity Fund
Class B Shares With Sales Charge5 11.45%
Without Sales Charge 16.45%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[Line Graph Omitted] Plot points to follow.
<TABLE>
<CAPTION>
Armada International Armada International Armada International Morgan Stanley
Equity Fund Equity Fund (Retail Equity Fund MSCI EAFE
(Institutional Shares)1 Shares with charge)4 (Class B Shares)5,6 Index
<S> <C> <C> <C> <C>
Aug-1997 $10,000 $ 9,450 $10,000 $10,000
May-1998 11,770 11,073 11,229 11,197
<FN>
1 INSTITUTIONAL SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH
ARE AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NATIONAL ASSET
MANAGEMENT CORPORATION ("NAM"). CERTAIN ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA INTERNATIONAL EQUITY FUND'S DATE OF INCEPTION WAS AUGUST 1, 1997,
FOR BOTH INSTITUTIONAL AND RETAIL SHARES AND JANUARY 6, 1998, FOR CLASS B
SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.0%.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
RETAIL CLASS FROM DATE OF INCEPTION.
</FN>
</TABLE>
7
<PAGE>
ARMADA SMALL CAP GROWTH FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
EQUITY GROWTH TEAM,
NATIONAL CITY'S
ASSET MANAGEMENT GROUP
FUND'S DATE OF INCEPTION:
AUGUST 1, 1997 (INSTITUTIONAL SHARES)
AUGUST 1, 1997 (RETAIL SHARES)
JANUARY 6, 1998 (CLASS B SHARES)
ASSETS:
$54,475,943 (INSTITUTIONAL SHARES)
$ 330,681 (RETAIL SHARES)
$ 1,069 (CLASS B SHARES)
INVESTMENT OBJECTIVE:
SEEK LONG-TERM CAPITAL APPRECIATION. THE FUND WILL NORMALLY INVEST AT LEAST 80%
OF ITS TOTAL ASSETS IN SECURITIES OF COMPANIES WITH STOCK MARKET CAPITALIZATIONS
OF UNDER $1.5 BILLION AT THE TIME OF PURCHASE.
RECENT PERFORMANCE
Launched on August 1, 1997, the Fund seeks to provide investors with
long-term capital appreciation by capitalizing on opportunities in smaller
capitalization companies. For more information or a prospectus, please call us
at 1-800-622-FUND (3863).
We're very pleased to report that the Fund's returns since its inception
outpaced the Russell 2000 Growth benchmark. Producing an annualized total return
of 21.26% for the Institutional Class for the ten months ended May 31, 1998, the
Fund also outperformed the broader Russell 2000 Index and the Russell 2500 for
the same period. A mutual fund, however, is a long-term investment -- with such
a short track record, it is far too early to make any definitive judgment
regarding the Fund's performance. Nonetheless, we find its initial results are
very encouraging.
FUND STRATEGIES
The Fund's strong performance was due primarily to its focus on more
established growth companies in the small cap universe -- and security selection
was the key to our success. In the technology sector, for instance, the Fund
held software and service stocks. As turmoil in the technology sector was
concentrated in the computer and networking stocks during the period, the Fund
did not suffer.
Moreover, performance benefited as several of our holdings were acquired by
larger companies at premium prices during the period. During any 12 month period
it is not surprising to have a few holdings acquired since they are often
leaders in attractive market niches that larger companies desire to enter, but
to have so many takeovers in such a short period is very rare. It would
therefore be unwise to project this performance enhancing trend into future
quarters.
FUND STRUCTURE
In recent months, we have added several new names to the Fund's portfolio --
all stocks that represent good growth potential at reasonable valuations. Among
them are exposures in specialty retailers with strong franchises like West
Marine, Petco Animal Supply, and Landry's Seafood, a restaurant chain. At the
period's end, the Fund's portfolio held some 53 individual companies. In the
months ahead, we do not anticipate adding additional names to the portfolio.
Cash reserves will be used to build positions in holdings recently added.
8
<PAGE>
ARMADA SMALL CAP GROWTH FUND OVERVIEW
COMMENTS FROM THE MANAGER
"THE FUND'S STRONG PERFORMANCE WAS DUE PRIMARILY TO ITS FOCUS ON MORE
ESTABLISHED GROWTH COMPANIES IN THE SMALL CAP UNIVERSE -- AND SECURITY SELECTION
WAS THE KEY TO OUR SUCCESS."
LOOKING AHEAD
Very simply, the continued and persistent underperformance of smaller
companies is confounding. Clearly, the uptick in acquisition activity, which
benefited the portfolio in the year just ended, is a strong sign that larger
companies see the depressed valuations of smaller companies, but, as yet, this
realization has not spread to investors more generally. We believe it will, but
timing is problematic. With smaller companies showing better earnings growth
than larger companies, the valuations at a discount to their larger cap
counterparts and with acquisition activity heating up, one should expect to see
a change in sentiment toward smaller companies as the year progresses. While
this is our expectation, our continued focus will be on individual sector and
security selection. As in the past, our success there will determine long-term
returns whatever the background market trends.
9
<PAGE>
ARMADA SMALL CAP GROWTH FUND OVERVIEW
COMMENTS FROM THE MANAGER
- --------------------------------------------------------------------------------
TOTAL RETURNS as of 05/31/98
- --------------------------------------------------------------------------------
Cumulative Inception to Date2
- --------------------------------------------------------------------------------
Armada Small Cap Growth Fund
Institutional Shares1 17.35%
- --------------------------------------------------------------------------------
Armada Small Cap Growth Fund
Retail Shares With Sales Charge4 10.76%
Without Sales Charge 17.18%
- --------------------------------------------------------------------------------
Armada Small Cap Growth Fund
Class B Shares With Sales Charge5 4.59%
Without Sales Charge 9.59%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[Line Graph Omitted] Plot points to follow.
Armada Small Armada Small Armada Small Frank
Cap Growth) Cap Growth Fund Cap Growth Growth Russell
Fund (Institutional (Retail Shares Fund (Class 2000
Shares)1 with sales charge)4 B shares)5,6 Index
7/31/97 $10,000
8/1/97 $10,000 $9,450 $10,000 10,000
May-1998 11,735 11,073 11,197 11,108
1 INSTITUTIONAL SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH
ARE AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NAM. CERTAIN
ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA SMALL CAP GROWTH FUND'S DATE OF INCEPTION WAS AUGUST 1, 1997, FOR
BOTH INSTITUTIONAL AND RETAIL SHARES AND JANUARY 6, 1998, FOR CLASS B
SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.0%.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
RETAIL CLASS FROM DATE OF INCEPTION.
10
<PAGE>
ARMADA SMALL CAP VALUE FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
LAWRENCE E. BAUMGARTNER,
PRESIDENT
BROAD STREET
ASSET MANAGEMENT
FUND'S DATE OF INCEPTION:
JULY 26,1994 (INSTITUTIONAL SHARES)
AUGUST 15, 1994 (RETAIL SHARES)
JANUARY 6, 1998 (CLASS B SHARES)
ASSETS:
$284,294,560 (INSTITUTIONAL SHARES)
$ 10,634,266 (RETAIL SHARES)
$ 61,388 (CLASS B SHARES)
INVESTMENT OBJECTIVE:
SEEK CAPITAL APPRECIATION BY INVESTING IN A DIVERSIFIED
PORTFOLIO OF PUBLICLY TRADED EQUITY SECURITIES.
RECENT PERFORMANCE
Relatively speaking, the year ended May 31, 1998 was another disappointing
one as small cap stocks, in both the growth and value sectors, continued to
trail the large cap stocks. On an absolute basis, however, small cap stocks did
produce strong returns -- as measured by the Russell 2000, the sector gained
21.20% over the course of the period. The Fund fell slightly short of the
benchmark and produced a total return of 19.82% (Institutional Class) over the
same period, while showing a compounded return of 22.01% over the past three
years.
This, however, was not surprising, given the Fund's focus on value stocks.
After being battered the first calendar quarter of 1997, the small cap growth
sector offered investors opportunities that were simply too attractive to ignore
as the year progressed -- and value stocks slowed down in comparison. Moreover,
throughout the year, the Fund was heavily weighted in financial stocks -- and
after advancing impressively and making a substantial contributions to
performance in the first half, our positions here simply took a breather and
slowed in the second.
FUND STRATEGIES
While the small cap marketplace was very volatile during the year, the Fund
did not experience the rather dramatic ups and downs that many others did due
primarily to its focus on more established and seasoned value stocks. After
keeping pace with the sharply advancing market in the first half of the fiscal
year, the Fund fell back slightly as many of its holdings simply plateaued.
Moreover, true to form, the Fund held its value during the October correction
and rolled along steadily in the ensuing months. Much of this was due to strong
security selection. Throughout the year, emphasis was placed on seeking out
stocks with low price/earnings, price/book and price/cash flow ratios --
critical factors, we believe, to long-term performance.
11
<PAGE>
ARMADA SMALL CAP VALUE FUND OVERVIEW
COMMENTS FROM THE MANAGER
"WHILE THE SMALL CAP MARKETPLACE WAS VERY VOLATILE DURING THE YEAR, THE FUND
DID NOT EXPERIENCE THE RATHER DRAMATIC UPS AND DOWNS THAT MANY OTHERS DID..."
FUND STRUCTURE
Currently, the Fund is heavily weighted in financial stocks, (primarily
insurance companies), and basic product sector (steel processors and
manufacturing companies). We have also recently begun to increase exposures in
the energy sector. As oil and natural gas prices have fallen, stock prices have
also declined -- and many of these stocks are now at extremely attractive
levels.
LOOKING AHEAD
After lagging the large cap sector for over four years, small cap stocks
offer investors very real opportunity -- yet, predicting when market sentiment
will shift is problematic, particularly in the case of small cap value stocks.
Value stocks tend to act in a more cyclical manner than growth stocks. Earnings,
in the past, have slowed with a slowing economy. Already, earnings
disappointments are beginning to crop up across a broad spectrum of economically
sensitive sectors.
Consequently, as our economy slows further in the coming months and the
environment grows more competitive due to an increase in Asian imports, value
stocks may come under some pressure. Nonetheless, looking past this valley, we
believe, the long-term prospects for the Fund's holdings -- all good companies
acquired at very good prices -- are very bright.
12
<PAGE>
ARMADA SMALL CAP VALUE FUND OVERVIEW
COMMENTS FROM THE MANAGER
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
TOTAL RETURNS as of 05/31/98
- ---------------------------------------------------------------------------------
One Annualized Annualized Cumulative
Year 3-Year Inception to Inception to
Return Return Date2 Date2
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Armada Small Cap Value Fund
Institutional Shares1 19.82% 22.01% 21.00% 108.21%
- ---------------------------------------------------------------------------------
Armada Small Cap Value Fund
Retail Shares With Sales Charge4 12.93% 19.38% 18.41% 89.79%
Without Sales Charge 19.51% 21.67% 20.18% 100.80%
- ---------------------------------------------------------------------------------
Armada Small Cap Value Fund
Class B Shares With Sales Charge5 14.12% 20.63% (9.96)% (4.08)%
Without Sales Charge 19.12% 21.54% 2.32% 0.92%
- ---------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[Line Graph Omitted] Plot points to follow.
1 INSTITUTIONAL SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH
ARE AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS NAM. CERTAIN
ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA SMALL CAP VALUE FUND'S DATE OF INCEPTION WAS JULY 26, 1994, FOR
INSTITUTIONAL SHARES, AUGUST 15, 1994, FOR RETAIL SHARES AND JANUARY 6,
1998, FOR CLASS B SHARES. THE ONE YEAR AND ANNUALIZED 3-YEAR RETURNS OF THE
CLASS B SHARES INCLUDES INFORMATION FROM COMMENCEMENT OF OPERATIONS OF THE
RETAIL SHARES, RATHER THAN THE DATE CLASS B SHARES WERE INTRODUCED.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.0%.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
RETAIL CLASS FROM DATE OF INCEPTION.
13
<PAGE>
ARMADA EQUITY GROWTH FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
EQUITY GROWTH TEAM,
NATIONAL CITY'S
ASSET MANAGEMENT GROUP
FUND'S DATE OF INCEPTION:
DECEMBER 20, 1989 (INSTITUTIONAL SHARES)
APRIL 15, 1991 (RETAIL SHARES)
JANUARY 6, 1998 (CLASS B SHARES)
ASSETS:
$352,413,681 (INSTITUTIONAL SHARES)
$ 12,379,654 (RETAIL SHARES)
$ 23,840 (CLASS B SHARES)
INVESTMENT OBJECTIVE:
SEEK A HIGH LEVEL OF TOTAL RETURN ARISING PRIMARILY OUT OF CAPITAL APPRECIATION.
THE FUND INVESTS IN COMMON STOCKS AND SECURITIES CONVERTIBLE INTO COMMON STOCKS.
RECENT PERFORMANCE
As the Asian market unraveled over the course of the year ended May 31, 1998,
investors grew more and more concerned with liquidity. As a result, large
capitalization stocks led the market to ever-higher highs throughout the period.
While the Fund was not focused exclusively on these stocks, it held a number of
them, and benefited from their climb. For the year ended May 31, 1998, the Fund
(Institutional Class) posted a total return of 28.65% beating other funds of
this type as measured by the Lipper Equity Growth Index which posted a return of
27.55%.
FUND STRATEGIES
The Fund's strong performance was due primarily to smart sector and security
selection. In the latter half of 1997, the Fund was heavily weighted in the
energy sector, and our holdings there made strong gains. The Fund was also
overweighted in consumer cyclicals and airlines throughout much of the period
and they, too, turned in solid performances. While the technology sector had
some bumpy moments, the portfolio's exposures in the sector also gained ground.
Of course, all stocks did not participate in the market's climb. After making a
substantial contribution in the first half of the period, the oil and oil
services sectors weakened dramatically. Given the strong performance of holdings
in other industries, however, the underperformance of these exposures did not
hamper the Fund's performance significantly.
FUND STRUCTURE
Clearly, at some point, U.S. companies will feel the impact of the cheapening
of currencies around the world. In addition, the strength of the dollar is
dampening enthusiasm for U.S. exports considerably. Domestically, wage pressures
are increasing and the pricing power of even the largest corporations is weak --
and this is particularly true where larger capitalization growth companies are
concerned. With this in mind, we have shifted our equity positions accordingly.
At the same time, however, the Fund remains overweighted in consumer cyclicals.
With the economy moving along briskly and consumers still very confident, these
companies should do very well in the months ahead. The portfolio also holds
sizable positions in technology -- while the short term ride for these stocks
may be rocky at times, we feel the long-term prospects are still simply
outstanding.
14
<PAGE>
ARMADA EQUITY GROWTH FUND OVERVIEW
COMMENTS FROM THE MANAGER
LOOKING AHEAD
While we are optimistic about the prospects for the stock market in the
months ahead, we do expect they will be interesting ones for investors.
Valuations of large cap growth stocks are at levels that can only be described
as lofty -- and at some point, sentiment will shift. And, at that point, a
correction would not be surprising. At the very least, we could see a very
choppy market. As a result, we expect to approach the market cautiously and
maintain our highly disciplined, earnings growth approach to investing in
large-cap securities.
15
<PAGE>
ARMADA EQUITY GROWTH FUND OVERVIEW
COMMENTS FROM THE MANAGER
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
TOTAL RETURNS as of 05/31/98
- --------------------------------------------------------------------------------------------
One Annualized Annualized Annualized Cumulative
Year 3-Year 5-Year Inception to Inception to
Return Return Return Date2 Date2
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Armada Equity Growth Fund
Institutional Shares1 28.65% 27.60% 18.44% 15.93% 248.28%
- --------------------------------------------------------------------------------------------
Armada Equity Growth Fund
Retail Shares With Sales Charge4 21.24% 24.91% 16.82% 14.26% 158.64%
Without Sales Charge 28.32% 27.28% 18.14% 15.17% 173.66%
- --------------------------------------------------------------------------------------------
Armada Equity Growth Fund
Class B Shares With Sales Charge5 22.90% 26.31% 17.85% 11.62% 4.47%
Without Sales Charge 27.90% 27.14% 18.06% 25.56% 9.47%
- --------------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[Line Graph Omitted] Plot points to follow.
Armada Equity Armada Equity Armada Equity S&P 500/
Growth Fund Growth Fund Growth Fund S&P BARRA
(Institutional (Retail Shares (Class B 500 Growth
Shares)1 with sales charge)4 shares)5,6 Index Index
Dec-1989 $10,000 $9,450 $10,000 $10,000 $10,000
May-1990 10,460 9,884 10,458 10,380 10,599
May-1991 12,349 11,669 12,351 11,600 12,088
May-1992 13,445 12,657 13,399 12,746 13,388
May-1993 14,409 13,540 14,337 14,224 14,318
May-1994 14,614 13,693 14,497 14,825 14,467
May-1995 16,167 15,112 15,998 17,812 17,826
May-1996 20,148 18,790 19,892 22,875 23,265
May-1997 26,105 24,284 25,708 29,600 31,012
May-1998 33,584 31,161 32,881 38,678 41,026
1 INSTITUTIONAL SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH
ARE AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NAM. CERTAIN
ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA EQUITY GROWTH FUND'S DATE OF INCEPTION WAS DECEMBER 20, 1989, FOR
INSTITUTIONAL SHARES, APRIL 15, 1991, FOR RETAIL SHARES AND JANUARY 6, 1998,
FOR CLASS B SHARES. THE ONE YEAR, ANNUALIZED 3-YEAR AND ANNUALIZED 5-YEAR
RETURNS OF THE CLASS B SHARES INCLUDE INFORMATION FROM COMMENCEMENT OF
OPERATIONS OF THE INSTITUTIONAL SHARES, RATHER THAN THE DATE CLASS B SHARES
WERE INTRODUCED.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.0%.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
RETAIL CLASS FROM DATE OF INCEPTION.
16
<PAGE>
ARMADA TAX MANAGED EQUITY FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
EQUITY GROWTH TEAM,
NATIONAL CITY'S
ASSET MANAGEMENT GROUP
FUND'S DATE OF INCEPTION:
APRIL 9, 1998 (INSTITUTIONAL SHARES)
MAY 11, 1998 (RETAIL SHARES)
MAY 4, 1998 (CLASS B SHARES)
ASSETS:
$158,866,859 (INSTITUTIONAL SHARES)
$ 10,375 (RETAIL SHARES)
$ 85,405 (CLASS B SHARES)
INVESTMENT OBJECTIVE:
SEEK A HIGH LEVEL OF RETURN ARISING OUT OF CAPITAL APPRECIATION WHILE MINIMIZING
THE IMPACT OF TAXES ON SHAREHOLDERS' RETURNS.
FUND OBJECTIVE AND STRUCTURE
Opened to retail investors on April 9, 1998, the Fund seeks a high level of
return from capital appreciation while minimizing the impact of taxes on that
return. To this end, the fund invests at least 80% of its total assets in common
stocks and other equity securities. In an effort to minimize state and federal
taxes, the turnover of the portfolio's holdings is held below 25% under normal
market conditions. Moreover, while the Fund does distribute capital gains from
time to time, every effort is made to minimize the tax consequences of these
events.
RECENT PERFORMANCE
Prior to its allowing retail investment, the Fund was in operation and known
as the National City Equity Fund for Personal Trust #2. Over the course of the
year ended May 31, 1998, it produced a total return of 33.92%, outpacing the S&P
500 which gained 30.68% over the same period. Since its inception on April 9,
1998, it has produced an average annualized total return of 17.30%.
FUND STRATEGY
In keeping with the Fund's objective, over the course of the period, assets
were invested in strong companies and those with low dividend yields with the
expectation of holding them for several years. Turnover in the portfolio was
maintained at a low level. (Also, whenever shares were sold, those with the
highest cost basis were selected).
Concentrated in larger capitalization issues, the Fund benefited as these
securities led the market throughout the year. Holdings in Pfizer, General
Electric, Bristol-Myers Squibb and many others made substantial contributions to
performance throughout the year ended May 31, 1998, and in recent weeks.
LOOKING AHEAD
The months ahead could be very interesting ones for the stock market.
Currently, valuations of larger cap issues are very high -- and at some point,
we could see a correction. Nonetheless, given the Fund's long-term orientation
and objectives, we are optimistic about its prospects. Looking past the next
several months, the outlook for the portfolio's holdings is very bright.
Moreover, we have recently added positions in Microsoft and Lucent Technology --
two companies with very strong long-term potential.
17
<PAGE>
ARMADA TAX MANAGED EQUITY OVERVIEW
COMMENTS FROM THE MANAGER
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
TOTAL RETURNS as of 05/31/98
- -------------------------------------------------------------------------------------------------------
One Annualized Annualized Annualized Annualized Cumulative
Year 3-Year 5-Year 10-Year Inception to Inception to
Return Return Return Return Date2 Date2
- -------------------------------------------------------------------------------------------------------
Armada Tax Managed Equity Fund
<S> <C> <C> <C> <C> <C> <C>
Institutional Shares1 33.92% 29.44% 19.74% 17.13% 17.30% 821.42%
- -------------------------------------------------------------------------------------------------------
Armada Tax Managed Equity Fund
Retail Shares With Sales Charge4 26.50% 27.03% 18.39% 16.48% 16.83% 771.16%
Without Sales Charge 33.92% 29.44% 19.74% 17.13% 17.30% 821.42%
- -------------------------------------------------------------------------------------------------------
Armada Tax Managed Equity Fund
Class B Shares With Sales Charge5 28.92% 28.64% 19.55% 17.13% 17.30% 821.42%
Without Sales Charge 33.92% 29.44% 19.74% 17.13% 17.30% 821.42%
- -------------------------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[Line Graph Omitted] Plot points to follow.
Armada Tax Armada Tax Armada Tax Managed S&P
Managed Equity Managed Equity Managed Equity 500
(Institutional (Retail Shares (Class B Composite
Shares)1 with sales charge)4 Shares)5,6 Index
May-1988 $10,000 $9,450 $10,000 $10,000
May-1989 12,590 11,898 12,590 12,616
May-1990 14,529 13,730 14,529 14,776
May-1991 16,697 15,778 16,697 16,514
May-1992 18,204 17,203 18,204 18,145
May-1993 19,743 18,657 19,743 20,248
May-1994 20,005 18,905 20,005 21,105
May-1995 22,408 21,175 22,408 25,357
May-1996 28,205 26,653 28,205 32,564
May-1997 36,291 34,295 36,291 42,137
May-1998 48,601 45,928 48,601 55,061
1 INSTITUTIONAL SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH
ARE AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NAM. CERTAIN
ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA TAX MANAGED EQUITY FUND'S DATE OF INCEPTION WAS APRIL 9, 1998,
FOR INSTITUTIONAL SHARES, MAY,11 1998 FOR RETAIL SHARES AND MAY 4, 1998, FOR
CLASS B SHARES. THE PERFORMANCE OF INSTITUTIONAL, RETAIL AND CLASS B SHARES
INCLUDES PERFORMANCE OF A PREDECESSOR COMMON TRUST FUND WHICH COMMENCED
OPERATIONS ON JULY 31, 1984.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.0%.
18
<PAGE>
ARMADA CORE EQUITY FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
INVESTMENT MANAGEMENT
GROUP, NATIONAL ASSET
MANAGEMENT CORPORATION
FUND'S DATE OF INCEPTION:
AUGUST 1, 1997 (INSTITUTIONAL SHARES)
AUGUST 1, 1997 (RETAIL SHARES)
JANUARY 6, 1998 (CLASS B SHARES)
ASSETS:
$110,503,886 (INSTITUTIONAL SHARES)
$ 407,574 (RETAIL SHARES)
$ 2,310 (CLASS B SHARES)
INVESTMENT OBJECTIVE:
SEEK A TOTAL RATE OF RETURN, BEFORE FUND EXPENSES, GREATER THAN THAT OF THE
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX (THE "S&P 500"). THE FUND
INVESTS IN A DIVERSIFIED PORTFOLIO OF DOMESTIC COMMON STOCKS OF ISSUERS WITH
LARGE CAPITALIZATIONS.
RECENT PERFORMANCE
Intended for investors seeking long-term growth potential, the Fund was
launched on August 1, 1997. The Fund invests primarily in the stocks of U.S.
based, high quality, larger capitalization companies. For more information or a
prospectus, please call us at 1-800-622-FUND (3863).
We're pleased to report that the Fund got off to a very strong start. Over
the course of its first ten months in operation, the Fund (Institutional Class)
produced an annualized total return of 18.13% versus a return of 13.11% for its
benchmark, the S&P 500, over the same period. A mutual fund, however, is a
long-term investment -- and with such a short track record, it is far too early
to make any definitive judgement regarding the Fund's performance. Nonetheless,
we find its initial results are very encouraging.
FUND STRUCTURE
Investors' key concern during the ten months ended May 31, 1998, was
liquidity -- and as a result, large capitalization stocks led the market to
ever-higher highs throughout the period. Concentrated on stocks in this sector,
the Fund performed strongly. Holdings in the pharmaceutical, financial and
consumer staples sectors did particularly well and made solid contributions to
performance. The Fund, however, was overweighted in technology stocks which
stumbled over the course of the period due to concerns over the impact of events
in Asia. As a result, the Fund's performance over the short-term was hampered
slightly.
FUND STRATEGY
Taking a long-term approach to the marketplace, the Fund focused on high
quality, large capitalization growth stocks. As of May 31, 1998, the Fund
remained overweighted in technology which we believe offers investors strong
long-term growth potential. At the same time, over the past several months, the
Fund has increased its exposure to companies whose earnings have historically
correlated to strength in the economy, e.g. cyclical stocks. We have also added
positions in companies that tend to grow earnings in any environment, such as
Proctor & Gamble, Home Depot, Merck and Bristol Myers.
19
<PAGE>
ARMADA CORE EQUITY FUND OVERVIEW
COMMENTS FROM THE MANAGER
LOOKING AHEAD
While the months ahead could be choppy ones in the marketplace due to the
extremely high valuations of "Nifty Fifty" stocks, we believe the Fund is
well-positioned to weather any short-term storms with its overweighting in
consumer cyclicals and stable companies. Having been beaten down by investors'
concerns over the situation in Asia, consumer cyclicals are now at very
attractive -- more reasonable -- valuations. Stable growth companies,
historically, have produced relatively stable returns whatever the environment.
The Fund remains overweighted in technology stocks, which may be somewhat
volatile in the months ahead. Nonetheless, we continue to feel that these stocks
offer investors exceptional growth potential over the long-term.
20
<PAGE>
ARMADA CORE EQUITY FUND OVERVIEW
COMMENTS FROM THE MANAGER
- --------------------------------------------------------------------------------
TOTAL RETURNS as of 05/31/98
- --------------------------------------------------------------------------------
Cumulative Inception to Date2
- --------------------------------------------------------------------------------
Armada Core Equity Fund
Institutional Shares1 14.03%
- --------------------------------------------------------------------------------
Armada Core Equity Fund
Retail Shares With Sales Charge4 7.61%
Without Sales Charge 13.85%
- --------------------------------------------------------------------------------
Armada Core Equity Fund
Class B Shares With Sales Charge5 5.54%
Without Sales Charge 10.54%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT 3
[Line Graph Omitted] Plot points to follow.
<TABLE>
<CAPTION>
Armada Core Armanda Core Armada Core S&P 500
Equity Fund Equity Fund (Retail Equity Fund Composite
(Institutional Shares)1 Shares with sales charge)4 (Class B shares)5,6 Index
<S> <C> <C> <C> <C>
7/31/97 $10,000
8/1/97 $10,000 $9,450 $10,000 10,005
May-1998 11,404 10,758 10,864 11,585
</TABLE>
1 INSTITUTIONAL SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH
ARE AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NAM. CERTAIN
ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA CORE EQUITY FUND'S DATE OF INCEPTION WAS AUGUST 1, 1997, FOR BOTH
INSTITUTIONAL AND RETAIL SHARES AND JANUARY 6, 1998 FOR CLASS B SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1998 OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1998 OF 5.0%.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
RETAIL CLASS FROM DATE OF INCEPTION.
21
<PAGE>
ARMADA EQUITY INCOME FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
EQUITY VALUE TEAM,
NATIONAL CITY'S
ASSET MANAGEMENT GROUP
FUND'S DATE OF INCEPTION:
JULY 1, 1994 (INSTITUTIONAL SHARES)
AUGUST 22,1994 (RETAIL SHARES)
JANUARY 6, 1998 (CLASS B SHARES)
ASSETS:
$193,923,637 (INSTITUTIONAL SHARES)
$ 2,150,578 (RETAIL SHARES)
$ 2,602 (CLASS B SHARES)
INVESTMENT OBJECTIVE:
SEEK A COMPETITIVE TOTAL RATE OF RETURN THROUGH INVESTMENTS IN EQUITY AND EQUITY
EQUIVALENT SECURITIES WHICH, IN THE AGGREGATE, PROVIDE A PREMIUM CURRENT YIELD.
RECENT PERFORMANCE
While larger capitalization stocks led the market higher throughout the year
ended May 31, 1998, market sentiment favored large cap growth companies, rather
than low risk, low multiple, income producing stocks. Heavily weighted in such
companies, the Fund fell just short of its benchmark, the S&P/BARRA Value Index
which gained 27.87% over the period. Over the course of the year, the Fund
produced a total return of 25.69% for its Institutional shareholders and a
25.41% return (before sales charges) for Retail shareholders -- outperforming
other funds of its kind as measured by the Lipper Equity Income Fund Average
which gained 24.65% over the same period.
Much of the Fund's strong performance was due to the strength of its holdings
in the consumer cyclical sector. Exposures in retail and autos did particularly
well. Over the course of the year, Ford Motor Company gained some 115%
(including the value of Associates First Capital, a spin-off completed during
the period). Chrysler rose approximately 66% aided by the news of its merger
with Daimler-Benz, and Maytag gained some 92% over the twelve months. Moreover,
while the portfolio was underweighted in the two sectors investors favored most
- -- consumer staples and technology -- what positions it did have in these
sectors, did well. For instance, over the course of the year, Xerox rose 54%.
FUND STRUCTURE
In line with its emphasis on stocks with higher yields, lower risk and lower
price/book ratios than the benchmark, the Fund is currently overweighted in
basic materials, capital goods, interest-sensitive, utilities and consumer
cyclical stocks. In recent months, the Fund has increased and added positions in
higher yielding, "medium-large" capitalization issues -- i.e., companies smaller
than the very largest or "mega cap" companies. Many of these companies were
simply overlooked during the past year as investors moved en masse to large cap
growth companies. As a result, many of these "smaller" issues are now valued
very attractively.
22
<PAGE>
ARMADA EQUITY INCOME FUND OVERVIEW
COMMENTS FROM THE MANAGER
"OUR FOCUS ON OVERLOOKED, INCOME-PRODUCING STOCKS SHOULD CUSHION THE BLOW
OF ANY SELL-OFF."
FUND STRATEGIES
Designed to protect assets in down drafts and provide growth potential in
rising markets, the Fund is well-positioned for either turn of events. Our focus
on overlooked, income-producing stocks should cushion the blow of any sell-off.
Should the market's sentiment turn to stocks beyond the golden circle of the
Nifty Fifty, the Fund is widely diversified with holdings across the market in
solid dividend payers.
LOOKING AHEAD
We expect the months ahead to be interesting ones for stock investors.
With valuations so high, particularly among large cap growth stocks, a
correction would not be all that surprising. With this in mind, we expect to
maintain the fund's defensive, income-oriented discipline going forward. In the
event of a correction, or choppy, volatile market environment, we believe the
Fund, with its higher yield, lower risk investments, is well-positioned to
outperform higher risk profile portfolios.
23
<PAGE>
ARMADA EQUITY INCOME FUND OVERVIEW
COMMENTS FROM THE MANAGER
- --------------------------------------------------------------------------------
TOTAL RETURNS as of 05/31/98
- --------------------------------------------------------------------------------
One Annualized Annualized Cumulative
Year 3-Year Inception to Inception to
Return Return4 Date2 Date2
- --------------------------------------------------------------------------------
Armada Equity Income Fund
Institutional Shares1 25.69% 23.32% 21.17% 112.07%
- --------------------------------------------------------------------------------
Armada Equity Income Fund
Retail Shares With Sales Charge4 18.55% 20.71% 19.13% 93.55%
Without Sales Charge 25.41% 23.01% 20.94% 104.87%
- --------------------------------------------------------------------------------
Armada Equity Income Fund
Class B Shares With Sales Charge5 20.58% 22.17% 11.43% 4.39%
Without Sales Charge 25.58% 23.06% 25.35% 9.39%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
<TABLE>
<CAPTION>
[Line Graph Omitted] Plot points to follow.
Armada Equity Armada Equity Armada Equity S&P S&P 500/
Income Fund Income Fund (Retail Income Fund (Class 500 BARRA
(Institutional Class)1 Shares with sales charge)4 B Shares)5,6 Index Value Index
<S> <C> <C> <C> <C> <C>
Jun-1994 $10,000 $9,450 $10,000 $10,000 $10,000
May-1995 11,309 10,452 11,059 12,316 12,041
May-1996 13,540 12,475 13,200 15,816 15,213
May-1997 16,872 15,511 16,411 20,466 19,087
May-1998 21,206 19,452 20,309 26,744 24,607
</TABLE>
1 INSTITUTIONAL SHARES ARE SOLD PRIMARILY TO BANKS AND TRUST COMPANIES WHICH
ARE AFFILIATED WITH NATIONAL CITY CORPORATION AND CLIENTS OF NAM. CERTAIN
ACCOUNT LEVEL CHARGES MAY APPLY.
2 THE ARMADA EQUITY INCOME FUND'S DATE OF INCEPTION WAS JULY 1, 1994, FOR
INSTITUTIONAL SHARES, AUGUST 22, 1994, FOR RETAIL SHARES AND JANUARY 6,
1998, FOR CLASS B SHARES. THE ONE YEAR AND ANNUALIZED 3-YEAR RETURNS OF THE
CLASS B SHARES INCLUDES INFORMATION FROM COMMENCEMENT OF OPERATIONS OF THE
RETAIL SHARES, RATHER THAN THE DATE CLASS B SHARES WERE INTRODUCED.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.50%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1998, OF 5.0%.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
RETAIL CLASS FROM DATE OF INCEPTION.
24
<PAGE>
STATEMENT OF NET ASSETS
ARMADA INTERNATIONAL EQUITY FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- 95.0%
ARGENTINA -- 0.9%
YPF ADR ................... 38,000 $ 1,180
-------
AUSTRALIA -- 2.7%
National Australia Bank
ADR ...................... 27,700 1,910
News Limited ADR .......... 43,200 1,064
Santos .................... 198,200 651
-------
3,625
-------
AUSTRIA -- 2.6%
Mayr-Melnhof Karton AG .... 26,500 1,940
Bank Austria .............. 17,500 1,577
-------
3,517
-------
BELGIUM -- 1.1%
Fortis .................... 5,200 1,485
-------
BERMUDA -- 0.9%
Exel Limited ADR .......... 17,000 1,279
-------
BRAZIL -- 0.8%
Telebras ADR .............. 10,700 1,142
-------
DENMARK -- 1.0%
Unidanmark, Class A ....... 17,500 1,413
-------
FINLAND -- 2.8%
Cultor Oy 1 ............... 8,400 143
Cultor Oy 2 ............... 58,350 1,006
Nokia ADR ................. 40,200 2,611
-------
3,760
-------
FRANCE -- 8.4%
Alcatel Alsthom ADR ....... 42,300 1,830
Cie Generale
de Geophysique ........... 4,000 671
L'Oreal ................... 1,250 621
Lvmh Moet Hennesey ADR .... 18,700 792
Lyonnaise Des Eaux ........ 9,600 1,638
Pinault Printemps ......... 1,550 1,276
Rhone Poulenc Limited
ADR ...................... 27,300 1,502
Societe Generale .......... 5,550 1,099
Total Petroleum of
North America ADR ........ 22,900 1,427
Valeo ..................... 6,450 608
-------
11,464
-------
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- CONTINUED
GERMANY -- 7.2%
Allianz ................... 4,000 $ 1,264
BASF ...................... 17,800 825
Buderus ................... 2,000 986
Deutsche Bank ............. 19,900 1,713
Mannesmann ................ 2,050 2,005
Siemens ................... 12,250 791
Veba ...................... 20,350 1,337
Volkswagen ................ 1,100 892
-------
9,813
-------
HONG KONG -- 2.5%
Cheung Kong ............... 229,000 1,238
Citic Pacific ............. 299,000 727
Hong Kong & China Gas ..... 481,800 631
Hong Kong China &
Gas Warrants ............. 21,900 --
Hutchison Whampoa ......... 152,000 795
-------
3,391
-------
IRELAND -- 1.4%
Bank of Ireland ........... 65,000 1,221
CBT Group PLC ADR ......... 14,300 711
-------
1,932
-------
ITALY -- 2.9%
Istituto Mobiliare ........ 115,800 1,982
Telecom Italia Spa ADR .... 26,200 1,965
-------
3,947
-------
JAPAN -- 13.9%
Advantest ................. 17,400 1,075
Bank of Tokyo Mitsubishi
ADR ...................... 79,900 839
Bridgestone ............... 88,000 2,007
Canon ..................... 41,000 977
Daiwa House ............... 144,000 1,122
Fuji Photo ................ 30,000 1,016
Honda Motor ............... 4,000 136
Honda Motor ADR ........... 16,000 1,064
Ito Yokado ................ 17,000 847
Kyocera ................... 19,000 927
See Accompanying Notes
25
<PAGE>
STATEMENT OF NET ASSETS
ARMADA INTERNATIONAL EQUITY FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- CONTINUED
JAPAN -- CONTINUED
NEC ........................ 51,000 $ 519
Nintendo ................... 9,500 888
NTT ........................ 126 1,037
NTT Data ................... 23 923
Promise .................... 11,000 463
SMC ........................ 11,000 889
Sony ....................... 14,900 1,258
Takeda Chemical ............ 43,000 1,111
Tokio Marine & Fire
Insurance ................. 89,000 843
Toppan Forms ............... 40,000 515
Yahoo Japan ................ 15 498
-------
18,954
-------
NETHERLANDS -- 9.4%
Aegon ADR .................. 30,400 2,411
AKZO ADR ................... 6,300 659
Asm Lithography ............ 24,800 1,016
Core Laboratories NV ....... 25,000 661
ING Groep .................. 17,900 1,229
Knonklijke PTT Nederland ... 14,700 822
Koninklijke Ahold ADR ...... 28,200 895
Nutreco Holding ............ 17,000 600
Philips Electronics ADR .... 14,700 1,398
Royal Dutch Petroleum ...... 23,200 1,301
Unilever ADR ............... 22,200 1,752
-------
12,744
-------
NORWAY -- 1.0%
Norsk Hydro ................ 16,800 763
Petroleum GEO Services ADR . 10,000 655
-------
1,418
-------
SPAIN -- 4.3%
Banco Bilbao Vizcaya ADR ... 43,900 2,228
Endesa ADR ................. 51,300 1,231
Telefonica De Espania
ADR ....................... 11,100 1,493
Telepizza .................. 84,260 848
-------
5,800
-------
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- CONTINUED
SWEDEN -- 3.2%
Ericsson Telephone ADR ..... 53,600 $ 1,494
Fastighets AB Balder Units . 18,200 18
Pharmacia Upjohn ........... 31,400 1,388
Svenska Cellulosa, Class A . 26,000 708
Svenska Handlesbanken,
Class A ................... 18,200 766
-------
4,374
-------
SWITZERLAND -- 7.3%
Credit Suisse .............. 8,900 1,958
Nestle ..................... 900 1,927
Novartis ................... 650 1,100
Roche Holding .............. 140 1,440
Swiss Reinsurance .......... 900 2,073
UBS ........................ 873 1,467
-------
9,965
-------
UNITED KINGDOM -- 20.7%
Abbey National ............. 109,100 1,947
BOC Group .................. 42,800 678
BAT Industries ADR ......... 68,700 1,271
British Petroleum ADR ...... 21,300 1,888
Cable & Wireless ........... 76,000 860
Compass Group .............. 134,000 2,624
Diageo PLC ADR ............. 31,116 1,408
General Electric ........... 172,000 1,410
Glaxo Wellcome ADR ......... 37,200 2,007
Logica ..................... 60,000 1,770
Marks & Spencer ............ 116,700 1,040
National Grid Group ........ 186,690 1,149
Pearson .................... 59,800 1,096
Reuters Group .............. 54,666 627
Royal & Sun Alliance ....... 149,700 1,587
Siebe ...................... 64,300 1,611
SmithKline Beecham ADR ..... 33,100 1,781
Tesco ...................... 159,800 1,403
Tomkins ADR ................ 86,700 2,009
-------
28,166
-------
See Accompanying Notes
26
<PAGE>
STATEMENT OF NET ASSETS
ARMADA INTERNATIONAL EQUITY FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
----------- -----
TOTAL COMMON STOCK
(Cost $116,152) ........... $129,369
--------
PREFERRED STOCK -- 0.9%
GERMANY -- 0.9%
SAP ........................ 2,200 1,221
--------
TOTAL PREFERRED STOCK
(Cost $766) ............... 1,221
--------
INVESTMENT COMPANIES -- 0.8%
European Warrant Fund ...... 14,000 310
Webs Malaysia Index Fund ... 80,000 365
Webs Singapore Index Fund .. 80,200 411
--------
TOTAL INVESTMENT COMPANIES
(Cost $1,377) ............. 1,086
--------
CASH EQUIVALENT -- 2.8%
Goldman Sachs Financial
Square Premium
Money Market Fund
5.490% .................. 3,891 3,891
--------
TOTAL CASH EQUIVALENT
(Cost $3,891) ............. 3,891
--------
TOTAL INVESTMENTS -- 99.5%
(Cost $122,186) ........... $135,567
========
OTHER ASSETS AND LIABILITIES,
NET-- 0.5% ................ 652
--------
NET ASSETS:
Portfolio shares of the Institutional Class
(unlimited authorization -- no par
value) based on 12,523,682 outstanding
shares of beneficial interest ..... 125,741
Portfolio shares of the Retail Class
(unlimited authorization -- no par
value) based on 25,486 outstanding
shares of beneficial interest ..... 264
VALUE
(000)
-----
NET ASSETS -- CONTINUED
Portfolio shares of Class B
(unlimited authorization -- no par value)
based on 112 outstanding shares
of beneficial interest .... $ 1
Undistributed net investment income 849
Accumulated net realized loss
on investments ............ (3,943)
Net unrealized appreciation
on investments ............ 13,381
Net realized loss from foreign
currency transactions ..... (52)
Net unrealized depreciation
foreign currency and translation of
other assets and liabilities in foreign
currency investments ...... (22)
--------
TOTAL NET ASSETS-- 100.0% .... $136,219
========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class ....... $10.86
========
Net Asset Value, Offering Price
and Redemption Price Per
Share -- Retail Class ..... $10.82
========
Maximum Offering Price Per
Share -- Retail Class
($10.82 / 94.5%) .......... $11.45
========
Net Asset Value and Offering Price
Per Share -- Class B ...... $10.83
========
- ------------------------------------------------
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR
FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
---------
GROSS APPRECIATION .................... $20,381
GROSS DEPRECIATION .................... (7,000)
---------
$13,381
=========
ADR -- AMERICAN DEPOSITORY RECEIPT
See Accompanying Notes
27
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA INTERNATIONAL EQUITY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1998
--------------------------------
INSTITUTIONAL5 RETAIL5 CLASS B6
-------------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of period .................... $ 10.00 $10.00 $ 9.30
-------- ------ -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ................................. 0.08 0.04 0.05
Net gain on securities (realized and unrealized) ...... 0.79 0.79 1.48
-------- ------ -------
Total from investment operations ................... 0.87 0.83 1.53
-------- ------ -------
LESS DISTRIBUTIONS
Dividends from net investment income .................. (0.01) (0.01) --
-------- ------ -------
Total distributions ................................ (0.01) (0.01) (0.00)
-------- ------ -------
Net asset value, end of period .......................... $ 10.86 $10.82 $ 10.83
======== ====== =======
TOTAL RETURN ............................................ 8.76%7 8.28%4,7 16.45%4,7
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) .................. $135,942 $ 276 $ 1
Ratio of expenses to average net assets ............... 1.09%1,8 1.39%2,8 2.08%3,8
Ratio of net investment income to average net assets .. 1.19%1,8 1.49%2,8 0.59%3,8
Portfolio turnover rate ............................... 28% 28% 28%
<FN>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISER AND ADMINISTRATOR FOR THE INSTITUTIONAL
CLASS FOR THE YEAR ENDED MAY 31, 1998 WOULD HAVE BEEN 1.24% AND 1.04%,
RESPECTIVELY.
2 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISER AND ADMINISTRATOR FOR THE RETAIL CLASS FOR
THE YEAR ENDED MAY 31, 1998 WOULD HAVE BEEN 1.47% AND 1.41%, RESPECTIVELY.
3 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISER AND ADMINISTRATOR FOR THE CLASS B FOR THE
PERIOD ENDED MAY 31, 1998 WOULD HAVE BEEN 2.14 % AND 0.53%, RESPECTIVELY.
4 TOTAL RETURN EXCLUDES SALES CHARGE.
5 INSTITUTIONAL AND RETAIL CLASSES BOTH COMMENCED OPERATIONS ON AUGUST 1,
1997.
6 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
7 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
8 ANNUALIZED
</FN>
</TABLE>
See Accompanying Notes
28
<PAGE>
STATEMENT OF NET ASSETS
ARMADA SMALL CAP GROWTH FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- 87.2%
ADVERTISING -- 1.1%
ADVO* ....................... 24,900 $ 624
-------
BANKS -- 4.3%
Associated Banc ............. 17,000 844
Mercantile Bankshares ....... 16,000 567
Wilmington Trust ............ 16,000 971
-------
2,382
-------
BEVERAGES -- 1.4%
Beringer Wine Estates* ...... 18,000 765
-------
BUSINESS SERVICES -- 21.0%
American Management
Systems .................... 35,000 948
Cognos* ..................... 60,000 1,553
Dames & Moore ............... 55,000 712
DST Systems* ................ 14,000 740
G. & K. Services ............ 45,000 1,747
Shared Medical Systems ...... 19,700 1,433
Sterling Software* .......... 50,000 1,359
Synopsys* ................... 27,000 1,160
Systems & Computer
Technology* ................ 39,200 1,001
Tetra Technologies* ......... 40,250 880
-------
11,533
-------
COMPUTERS -- 5.3%
Black Box* .................. 27,000 1,077
Policy Management
Systems* ................... 22,000 1,815
-------
2,892
-------
ELECTRICAL EQUIPMENT -- 4.2%
Dallas Semiconductor ........ 37,000 1,246
Littelfuse* ................. 47,400 1,081
-------
2,327
-------
ENTERTAINMENT -- 2.2%
Speedway Motorsports* ....... 45,000 1,178
-------
HOME FURNISHINGS & HOUSEWARES-- 1.1%
Ethan Allen Interiors ....... 12,000 604
-------
INSURANCE - LIFE -- 2.0%
Reinsurance Group
of America ................. 21,750 1,085
-------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
INSURANCE - PROPERTY AND CASUALTY -- 2.5%
Frontier Insurance Group .... 56,000 $ 1,372
-------
MACHINERY & HEAVY EQUIPMENT-- 3.7%
Nordson ..................... 15,000 684
Ritchie Brothers
Auctioneers* ............... 50,600 1,373
-------
2,057
-------
MACHINERY & MANUFACTURING-- 0.8%
Paxar* ...................... 36,000 446
-------
MACHINERY (ELECTRIC) -- 3.3%
Donaldson ................... 30,000 654
Ionics* ..................... 26,000 1,164
-------
1,818
-------
MEDICAL & MEDICAL SERVICES -- 4.9%
Covance* .................... 71,000 1,504
Life Technologies ........... 34,000 1,159
-------
2,663
-------
MEDICAL INSTITUTION SUPPLIES-- 0.5%
Biomet* ..................... 10,000 289
-------
OIL & GAS -- 0.8%
Barrett Resources* .......... 12,700 442
-------
PHARMACEUTICAL -- 1.1%
Genzyme* .................... 22,000 602
-------
RESIDENTIAL CONSTRUCTION -- 2.7%
U.S. Rentals* ............... 46,000 1,492
-------
RESTAURANTS -- 1.7%
Landry's Seafood
Restaurants* ............... 42,000 952
-------
RETAIL STORES -- 10.4%
Barnes & Noble* ............. 30,000 1,016
Barnett* .................... 59,000 1,069
OfficeMax* .................. 50,000 822
Petco Animal Supplies* ...... 52,000 1,014
Stein Mart* ................. 54,000 854
West Marine* ................ 47,000 900
-------
5,675
-------
See Accompanying Notes
29
<PAGE>
STATEMENT OF NET ASSETS
ARMADA SMALL CAP GROWTH FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
SPECIALTY CHEMICALS -- 4.5%
Bush Boake Allen* .......... 27,000 $ 797
Minerals Technologies ...... 31,000 1,641
---------
2,438
---------
TRANSPORTATION -- 5.6%
Air Express International .. 42,000 1,082
CH Robinson Worldwide ...... 37,000 851
Mesaba Holdings* ........... 51,000 1,106
---------
3,039
---------
TRUCKING -- 2.1%
Werner Enterprises ......... 59,500 1,138
---------
TOTAL COMMON STOCK
(Cost $43,648) ..................... 47,813
---------
REPURCHASE AGREEMENT -- 12.1%
Paribus Corporation
5.50% dated 05/31/98, matures
06/01/98, repurchase price
$6,638,069 (collaterized by
U.S. Treasury Note par value
$6,600,000, 6.25%,
05/31/99; market value
$6,732,100)
(Cost $6,635) ........... 6,635 6,635
---------
TOTAL INVESTMENTS -- 99.3%
(Cost $50,283) .......... $ 54,448
=========
OTHER ASSETS AND LIABILITIES,
NET-- 0.7% .............. 360
---------
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 4,659,766 outstanding
shares of beneficial interest ........ $ 49,564
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 28,324 outstanding shares
of beneficial interest ............... 338
Portfolio Shares of Class B
(unlimited authorization -- no
par value) based on 98 outstanding
shares of beneficial interest ........ 1
Accumulated net realized gain
on investments ....................... 740
Net unrealized appreciation
on investments ....................... 4,165
---------
TOTAL NET ASSETS-- 100.0% ............... $ 54,808
=========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class .................. $11.69
=========
Net Asset Value and Redemption
Price Per Share-- Retail Class ....... $11.68
=========
Maximum Offering Price Per
Share -- Retail Class
($11.68 / 94.5%) ..................... $12.36
=========
Net Asset Value and Offering
Price Per Share-- Class B ............ $11.66
=========
- -------------------------------
* NON-INCOME PRODUCING SECURITIES
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR
FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
---------
GROSS APPRECIATION ................... $5,616
GROSS DEPRECIATION ................... (1,451)
---------
$4,165
=========
See Accompanying Notes
30
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1998
----------------------------------
INSTITUTIONAL6 RETAIL6 CLASS B7
-------------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $ 10.00 $10.00 $10.64
---------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .................................. 0.01 0.01 (0.01)
Net gain/(loss) on securities (realized and unrealized) 1.72 1.71 1.03
---------- ------ ------
Total from investment operations .................... 1.73 1.72 1.02
---------- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income ................... (0.01) (0.01) (0.00)
Distributions from net realized capital gains .......... (0.03) (0.03) (0.00)
---------- ------ ------
Total distributions ................................. (0.04) (0.04) (0.00)
---------- ------ ------
Net asset value, end of period ........................... $ 11.69 $11.68 $11.664,5
========== ====== ======
TOTAL RETURN ............................................. 17.35%5 17.18%4,5 9.59%4,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ................... $54,476 $ 331 $ 1
Ratio of expenses to average net assets ................ 0.98%1,8 1.23%2,8 1.92%3,8
Ratio of net investment income/(loss) to average net assets 0.14%1,8 (0.32)%2,8 (0.87)%3,8
Portfolio turnover rate ................................ 31% 31% 31%
</TABLE>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE ADMINISTRATOR FOR THE INSTITUTIONAL CLASS FOR THE PERIOD
ENDED MAY 31, 1998 WOULD HAVE BEEN 1.09% AND 0.03%, RESPECTIVELY.
2 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME/(LOSS) RATIO
BEFORE FEE WAIVERS BY THE ADMINISTRATOR FOR THE RETAIL CLASS FOR THE PERIOD
ENDED MAY 31, 1998 WOULD HAVE BEEN 1.34% AND (0.43)%, RESPECTIVELY.
3 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE ADMINISTRATOR FOR THE CLASS B FOR THE PERIOD ENDED MAY 31,
1998 WOULD HAVE BEEN 3.06% AND (2.01)%, RESPECTIVELY.
4 TOTAL RETURN EXCLUDES SALES CHARGE.
5 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
6 INSTITUTIONAL AND RETAIL CLASSES BOTH COMMENCED OPERATIONS ON AUGUST 1,
1997.
7 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
8 ANNUALIZED
See Accompanying Notes
31
<PAGE>
STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- 96.4%
AUTOMOTIVE PARTS-EQUIPMENT-- 5.2%
Amcast Industrial ........... 35,800 $ 772
Exide ....................... 200,000 3,613
Simpson Industries .......... 145,000 2,025
Spartan Motors .............. 293,000 2,170
Standard Products ........... 90,000 2,644
TBC* ........................ 247,500 2,034
Transpro .................... 221,400 1,910
--------
15,168
--------
BANKING -- 4.2%
First Virginia Banks ........ 77,500 4,049
Pacific Century Financial ... 100,000 2,506
UnionBanCal ................. 59,700 5,852
--------
12,407
--------
BUILDING & BUILDING SUPPLIES -- 0.7%
Patrick Industries .......... 125,000 1,977
--------
BUSINESS SERVICES -- 0.6%
Franklin Covey* ............. 89,100 1,786
--------
CHEMICALS -- 2.9%
American Pacific* ........... 100,000 1,072
Geon ........................ 200,000 4,325
High Plains* ................ 324,600 852
Wellman ..................... 100,400 2,416
--------
8,665
--------
COMPUTERS -- 2.1%
Exabyte* .................... 120,000 1,178
Komag* ...................... 150,000 1,477
Wang Labs* .................. 145,000 3,475
--------
6,130
--------
DRUGS & HEALTH CARE -- 1.4%
Bindley Western Industries .. 115,600 4,104
--------
ELECTRONICS -- 4.5%
Bell Industries* ............ 283,500 3,578
Bell Micro Products* ........ 324,100 2,400
Cypress Semiconductor* ...... 200,000 1,713
Jaco Electronics* ........... 190,000 1,188
Marshall Industries* ........ 65,000 2,011
Silicon Valley Group* ....... 135,000 2,460
--------
13,350
--------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
ENTERTAINMENT -- 0.7%
King World Productions* ..... 80,000 $ 2,040
--------
FINANCIAL SERVICES -- 5.2%
ARM Financial Group, Class A 220,000 4,496
Eaton Vance ................. 26,200 1,177
Liberty Financial Companies . 151,750 5,302
Phoenix Investment Partners . 478,800 4,489
--------
15,464
--------
FOODS -- 3.2%
Chiquita Brands International 150,000 2,016
John B. Sanfillippo* ....... 114,000 741
Ralcorp Holdings* .......... 75,000 1,598
Thorn Apple Valley* ........ 293,100 4,616
WLR Foods .................. 86,448 616
--------
9,587
--------
INSURANCE - BROKERAGE -- 1.2%
Willis Corroon Group PLC ADR 265,000 3,428
--------
INSURANCE - LIFE -- 1.4%
Kansas City Life Insurance Co. 30,200 2,590
Liberty ..................... 29,000 1,459
--------
4,049
--------
INSURANCE - PROPERTY AND CASUALTY-- 10.0%
Berkley (W.R.) .............. 87,500 4,122
Commerce Group .............. 63,900 2,280
Farm Family Holdings* ....... 51,000 2,088
Harleysville Group .......... 191,400 4,624
Horace Mann Educators ....... 130,000 4,290
PXRE ........................ 171,000 5,387
Selective Insurance Group ... 108,600 2,844
TIG Holdings ................ 155,900 3,859
--------
29,494
--------
MANUFACTURING -- 1.0%
Paragon Trade Brands* ....... 235,900 1,121
Park Ohio Industries* ....... 107,100 2,021
--------
3,142
--------
See Accompanying Notes
32
<PAGE>
STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
MATERIAL SERVICES -- 0.1%
Electroglas* ................ 30,000 $ 409
--------
MEDICAL & MEDICAL SERVICES-- 9.3%
Imation* .................... 100,000 1,819
John Alden Financial ........ 682,300 15,096
Maxicare Health Plans* ...... 294,500 2,798
Rightchoice Managed Care,
Class A* ................... 109,200 1,262
Spacelabs Medical* .......... 100,000 1,656
West ........................ 155,000 4,573
--------
27,204
--------
METALS & MINING -- 3.0%
Cleveland Cliffs ............ 105,900 5,606
Nord Resources* ............. 511,400 1,119
Southern Peru Copper ........ 165,000 2,227
--------
8,952
--------
OIL & GAS -- 3.3%
Cornerstone Propane Partners 21,200 468
Miller Exploration* ......... 150,000 1,200
Noble Affiliates ............ 50,000 1,953
Patina Oil & Gas ............ 145,000 1,042
Seagull Energy* ............. 315,000 5,217
--------
9,880
--------
PAPER & FOREST PRODUCTS -- 1.4%
Rayonier .................... 26,500 1,244
Rock Tennessee .............. 195,100 2,866
--------
4,110
--------
PETROLEUM REFINING -- 1.4%
Sun ......................... 99,732 4,239
--------
RAILROADS -- 0.6%
Railtex* .................... 109,000 1,686
--------
REAL ESTATE -- 3.2%
Capstead Mortgage ........... 185,000 3,376
Great Lakes REIT ............ 187,500 3,422
Thornburg Mortgage Asset .... 175,000 2,461
--------
9,259
--------
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- CONTINUED
RESIDENTIAL CONSTRUCTION -- 2.5%
Cavalier Homes, Inc. ....... 382,000 $ 4,273
Southern Energy Homes* ..... 310,700 3,088
--------
7,361
--------
RESTAURANTS -- 2.8%
Buffets* ................... 200,000 3,263
Lone Star Steakhouse
& Saloon* ................. 45,000 760
Piccadilly Cafeterias ...... 125,000 1,609
Rare Hospitality* .......... 205,000 2,556
--------
8,188
--------
RETAIL MERCHANDISING -- 0.5%
Bon Ton Stores* ............ 100,000 1,688
--------
SAVINGS & LOAN ASSOCIATIONS -- 1.2%
Washington Federal ......... 125,000 3,469
--------
SPECIALTY CHEMICALS -- 0.7%
Schulman ................... 100,000 2,000
--------
STEEL -- 9.0%
Huntco ..................... 184,000 2,323
Inland Steel Industries .... 260,000 7,444
Insteel Industries ......... 341,400 2,454
Novamerican Steel* ......... 230,000 2,659
Olympic Steel* ............. 337,500 4,757
Ryerson Tull, Class A* ..... 199,900 4,198
Steel Technologies ......... 248,800 2,799
--------
26,634
--------
TECHNOLOGY -- 5.3%
Eagle Point Software* ...... 70,000 487
Information Storage Devices* 120,000 705
Mapinfo* ................... 157,000 1,864
Material Sciences* ......... 150,000 1,509
MicroAge* .................. 114,300 1,539
Opti* ...................... 341,400 2,230
Optical Coating Laboratory . 114,700 1,928
Vishay Intertechnology* .... 147,000 3,280
Wall Data* ................. 165,000 2,140
--------
15,682
--------
See Accompanying Notes
33
<PAGE>
STATEMENT OF NET ASSETS
ARMADA SMALL CAP VALUE FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES/PAR (000)
------------- -----
COMMON STOCK -- CONTINUED
TIRE & RUBBER -- 1.6%
Cooper Tire & Rubber ........ 200,000 $ 4,738
--------
TOBACCO -- 2.1%
DIMON ....................... 326,000 4,401
Universal ................... 47,000 1,765
--------
6,166
--------
TRANSPORTATION -- 1.3%
Amerco* ..................... 100,000 3,275
Pittstion Burlington Group .. 28,100 494
--------
3,769
--------
TRUCKING -- 2.8%
Frozen Food Express Industries 22,500 221
MTL* ........................ 58,700 2,311
Roadway Express ............. 120,000 2,250
Yellow Freight Systems* ..... 180,000 3,386
--------
8,168
--------
TOTAL COMMON STOCK
(Cost $264,778) .................... 284,393
--------
PREFERRED STOCK -- 0.7%
FINANCE -- 0.7%
Thornburg Mortgage Asset ......75,000 1,973
--------
TOTAL PREFERRED STOCK
(Cost $1,987) ...................... 1,973
--------
CASH EQUIVALENT -- 1.7%
Fidelity Domestic Money
Market Fund
(Cost $4,974) .............. 4,974 4,974
--------
TOTAL INVESTMENTS -- 98.8%
(Cost $271,739) ................... $291,340
========
OTHER ASSETS AND LIABILITIES,
NET-- 1.2% ........................ 3,650
--------
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 18,086,915 outstanding
shares of beneficial interest ......... $241,701
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 687,309 outstanding shares
of beneficial interest ................ 9,310
Portfolio Shares of Class B
(unlimited authorization -- no
par value) based on
3,981 outstanding shares
of beneficial interest ................ 54
Undistributed net investment income .... 423
Accumulated net realized gain
on investments ........................ 23,817
Accumulated net realized gain
on futures ............................ 84
Net unrealized appreciation
on investments ........................ 19,601
--------
TOTAL NET ASSETS-- 100.0% ................ $294,990
========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class ................... $15.72
========
Net Asset Value and Redemption
Price Per Share-- Retail Class ........ $15.47
========
Maximum Offering Price
Per Share -- Retail Class
($15.47 / 94.5%) ...................... $16.37
========
Net Asset Value and Offering
Price Per Share-- Class B ............. $15.42
========
- ------------------------------------------------
* NON-INCOME PRODUCING SECURITIES
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR
FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
--------
GROSS APPRECIATION ................... $35,712
GROSS DEPRECIATION ................... (16,111)
--------
$19,601
========
ADR -- AMERICAN DEPOSITORY RECEIPT
REIT -- REAL ESTATE INVESTMENT TRUST
See Accompanying Notes
34
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA SMALL CAP VALUE FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, FOR THE PERIOD
------------------------------------------------------------------------- ENDED MAY 31,
1998 1997 1996 1995
----------------------------- -------------------- -------------------- ----------------------
INSTITUTIONAL RETAIL CLASS B6 INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL3 RETAIL3
------------- ------ -------- ------------- ------ ------------- ------ -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .............. $ 15.15 $ 14.95 $15.28 $ 13.10 $12.94 $ 11.38 $ 11.26 $ 10.00 $10.16
-------- ------- ------ -------- ------ ------- ------ ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ..... 0.06 0.01 0.00 0.09 0.08 0.08 0.06 0.10 0.07
Net gain/(loss) on securities
(realized and unrealized) 2.87 2.84 0.14 2.90 2.83 2.41 2.37 1.36 1.11
-------- ------- ------ -------- ------ ------- ------ ------- ------
Total from investment
operations .......... 2.93 2.85 0.14 2.99 2.91 2.49 2.43 1.46 1.18
-------- ------- ------ -------- ------ ------- ------ ------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income ........ (0.07) (0.04) (0.00) (0.09) (0.05) (0.08) (0.06) (0.04) (0.04)
Dividends in excess of net
investment income ........ (0.00) (0.00) (0.00) (0.00) (0.00) (0.02) (0.02) (0.00) (0.00)
Distributions from net realized
capital gains ............ (2.29) (2.29) (0.00) (0.85) (0.85) (0.67) (0.67) (0.04) (0.04)
-------- ------- ------ -------- ------ ------- ------ ------- ------
Total distributions .... (2.36) (2.33) (0.00) (0.94) (0.90) (0.77) (0.75) (0.08) (0.08)
-------- ------- ------ -------- ------ ------- ------ ------- ------
Net asset value, end of period $ 15.72 $ 15.47 $15.42 $ 15.15 $14.95 $ 13.10 $12.94 $ 11.38 $11.26
======== ======= ====== ======== ====== ======= ====== ======= ======
TOTAL RETURN ................ 19.82% 19.51%5 19.12%4,5 23.61% 23.26%5 22.64% 22.28%5 17.42%4 14.80%4,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) ............. $284,295 $10,634 $ 61 $199,311 $4,929 $99,294 $4,702 $50,993 $3,567
Ratio of expenses to
average net assets ....... 0.98% 1.23% 1.92%4 0.97% 1.22% 1.05%1 1.30%2 1.01%1,4 1.34%2,4
Ratio of net investment
income/(loss) to average
net assets ............... 0.43% 0.19% (0.48)%4 0.83% 0.57% 0.83%1 0.58%2 1.31%1,4 1.09%2,4
Portfolio turnover rate ... 89% 89% 89% 64% 64% 106% 106% 69% 69%
</TABLE>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE CUSTODIAN FOR THE INSTITUTIONAL CLASS FOR THE YEAR ENDED
MAY 31, 1996, WOULD HAVE BEEN 1.06% AND .82%, RESPECTIVELY. THE OPERATING
EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE WAIVERS BY
THE INVESTMENT ADVISER, ADMINISTRATOR AND CUSTODIAN FOR THE INSTITUTIONAL
CLASS FOR THE PERIOD ENDED MAY 31, 1995, WOULD HAVE BEEN 1.15% AND 1.17%,
RESPECTIVELY.
2 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE CUSTODIAN FOR THE RETAIL CLASS FOR THE YEAR ENDED MAY 31,
1996 WOULD HAVE BEEN 1.32% AND .56%, RESPECTIVELY. THE OPERATING EXPENSE
RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE WAIVERS BY THE
INVESTMENT ADVISER, ADMINISTRATOR AND CUSTODIAN FOR THE RETAIL CLASS FOR THE
PERIOD ENDED MAY 31, 1996 WOULD HAVE BEEN 1.38% AND 1.05%, RESPECTIVELY.
3 INSTITUTIONAL AND RETAIL CLASSES BOTH COMMENCED OPERATIONS ON JULY 26, 1994,
AND AUGUST 15, 1994, RESPECTIVELY.
4 ANNUALIZED.
5 TOTAL RETURN EXCLUDES SALES CHARGE.
6 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
See Accompanying Notes
35
<PAGE>
STATEMENT OF NET ASSETS
ARMADA EQUITY GROWTH FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- 96.5%
AIRLINES -- 4.0%
AMR* ........................ 16,100 $ 2,478
Southwest Airlines .......... 455,000 12,143
-------
14,621
-------
BANKING -- 1.6%
Golden State Bancorp* ....... 35,000 1,341
MBNA ........................ 140,000 4,436
-------
5,777
-------
BANKS -- 1.8%
Mellon Bank ................. 40,000 2,698
State Street ................ 53,600 3,695
-------
6,393
-------
BEVERAGES -- 0.6%
Coca-Cola ................... 30,000 2,351
-------
BROADCASTING & PUBLISHING-- 1.2%
Time Warner ................. 58,000 4,513
-------
CHEMICALS -- 1.6%
Crompton & Knowles .......... 46,400 1,250
E.I. duPont de Nemours ...... 22,800 1,756
Monsanto .................... 50,000 2,769
-------
5,775
-------
COMMUNICATIONS EQUIPMENT -- 2.2%
Cisco Systems* .............. 92,000 6,949
Scientific-Atlanta .......... 40,000 883
-------
7,832
-------
COMPUTERS -- 6.5%
Apple Computer* ............. 165,000 4,388
Cadence Design Systems* ..... 160,000 5,640
CBT Group PLC ADR* .......... 60,000 2,993
Dell Computer* .............. 45,000 3,708
EMC* ........................ 25,000 1,036
Gateway 2000* ............... 50,000 2,253
Hewlett Packard ............. 15,000 932
International Business
Machines ................... 25,000 2,934
-------
23,884
-------
CONSUMER NON-DURABLES -- 2.8%
Gillette .................... 45,600 5,341
Procter & Gamble ............ 56,000 4,701
-------
10,042
-------
COSMETICS-TOILETRY -- 0.6%
Avon Products ............... 25,000 2,045
-------
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- CONTINUED
DIVERSIFIED MANUFACTURING -- 4.8%
General Electric ............ 80,000 $ 6,670
Sundstrand .................. 20,000 1,240
Tyco International .......... 107,900 5,975
United Technologies ......... 38,800 3,647
-------
17,532
-------
DRUGS & HEALTH CARE -- 0.4%
Watson Pharmaceuticals* ..... 30,000 1,313
-------
ELECTRONICS -- 1.4%
Honeywell ................... 62,000 5,204
-------
FINANCIAL SERVICES -- 1.6%
American Express ............ 10,000 1,026
Freddie Mac ................. 30,000 1,365
Golden West Financial ....... 20,000 2,160
Norwest ..................... 36,600 1,423
-------
5,974
-------
INSURANCE -- 3.4%
American International
Group ...................... 34,000 4,210
MGIC Investment ............. 25,000 1,498
SunAmerica .................. 80,000 3,890
United Healthcare ........... 45,000 2,880
-------
12,478
-------
MEDICAL & MEDICAL SERVICES -- 0.6%
Health Management Associates,
Class A* ................... 30,000 894
Healthsouth* ................ 50,000 1,419
-------
2,313
-------
MISCELLANEOUS -- 1.8%
Harley-Davidson ............. 70,000 2,502
Omnicom Group ............... 90,000 4,212
-------
6,714
-------
OFFICE & BUSINESS EQUIPMENT -- 1.4%
Xerox ....................... 50,000 5,138
-------
OFFICE PERSONNEL -- 0.5%
Robert Half International* .. 37,500 1,898
-------
OIL & GAS -- 10.3%
Diamond Offshore Drilling ... 20,000 956
Dresser Industries .......... 90,000 4,191
See Accompanying Notes
36
<PAGE>
STATEMENT OF NET ASSETS
ARMADA EQUITY GROWTH FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
Evi Weatherford* ........... 19,000 $ 961
Halliburton ................ 227,000 10,754
Schlumberger ............... 195,000 15,222
Transocean Offshore ........ 45,000 2,219
Varco International* ....... 115,000 2,997
--------
37,300
--------
PAPER & PAPER PRODUCTS -- 0.1%
Fort James ................. 10,000 478
--------
PHARMACEUTICAL -- 7.8%
Abbott Laboratories ........ 50,860 3,773
American Home Products ..... 20,000 966
Bristol-Myers Squibb ....... 51,600 5,547
Eli Lilly .................. 30,000 1,843
Mylan Laboratories ......... 92,000 2,760
Pfizer ..................... 15,000 1,572
Schering- Plough ........... 50,000 4,184
Warner-Lambert ............. 120,000 7,658
--------
28,303
--------
RESTAURANTS -- 1.9%
Brinker International* ..... 182,600 3,972
Outback Steakhouse* ........ 80,000 2,947
--------
6,919
--------
RETAIL FOOD CHAINS -- 3.4%
Kroger* .................... 80,000 3,435
Safeway* ................... 250,000 9,109
--------
12,544
--------
RETAIL MERCHANDISING -- 0.2%
TJX Companies .............. 12,000 561
--------
RETAIL STORES -- 13.2%
Costco Companies* .......... 150,000 8,677
CVS ........................ 60,000 4,211
Dayton Hudson .............. 120,000 5,565
Federated Department
Stores* ................... 50,000 2,591
Gap ........................ 110,000 5,940
General Nutrition* ......... 50,000 1,577
Home Depot ................. 45,000 3,535
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
Kohls* ..................... 50,000 $ 2,378
Starbucks* ................. 27,000 1,294
Tandy ...................... 127,400 5,637
Wal-Mart Stores ............ 105,000 5,795
Walgreen ................... 30,000 1,056
--------
48,256
--------
SAVINGS & LOAN ASSOCIATIONS -- 1.1%
Dime Bancorp ............... 100,000 2,918
GreenPoint Financial ....... 30,000 1,236
--------
4,154
--------
SEMI-CONDUCTORS/INSTRUMENTS-- 0.3%
Analog Devices* ............ 40,000 988
--------
SOFTWARE -- 4.2%
BMC Software* .............. 185,000 8,516
Computer Associates
International ............. 52,500 2,756
Microsoft* ................. 48,000 4,073
--------
15,345
--------
TECHNOLOGY -- 2.9%
Ceridian* .................. 20,000 1,080
HBO & Co. .................. 155,000 8,946
Symbol Technologies, Inc. .. 12,000 422
--------
10,448
--------
TELECOMMUNICATIONS -- 3.5%
Ericsson, (L.M.) Telephone
ADR ....................... 70,000 1,953
Linear Technology .......... 32,000 2,240
Lucent Technologies ........ 8,000 568
Tele-Communications,
Class A* .................. 130,000 4,461
Tellabs* ................... 50,000 3,436
--------
12,658
--------
TOYS -- 4.5%
Mattel ..................... 430,000 16,286
--------
TRANSPORTATION -- 0.3%
Kansas City Southern
Industries ................ 30,000 1,271
--------
See Accompanying Notes
37
<PAGE>
STATEMENT OF NET ASSETS
ARMADA EQUITY GROWTH FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
TRAVEL -- 0.9%
Carnival, Class A ........... 50,000 $ 3,388
--------
UTILITIES-TELEPHONE -- 0.8%
Airtouch Communications* .... 65,000 3,096
--------
WASTE COLLECTION & DISPOSAL -- 2.3%
USA Waste Services* ......... 180,000 8,494
--------
TOTAL COMMON STOCK
(Cost $297,003) .................... 352,286
--------
CASH EQUIVALENT -- 2.9%
Fidelity Domestic Money
Market Fund
(Cost $10,519) ............. 10,519 10,519
--------
TOTAL INVESTMENTS -- 99.4%
(Cost $307,522) .................... $362,805
========
OTHER ASSETS AND LIABILITIES,
NET-- 0.6% ......................... 2,012
--------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 16,506,141 outstanding
shares of beneficial interest 245,349
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 579,917 outstanding shares
of beneficial interest 8,748
Portfolio Shares of Class B (unlimited
authorization -- no par value) based on
1,120 outstanding shares of beneficial
interest 21
Distribution in excess of
net investment income .............. (61)
Accumulated net realized gain
on investments ..................... 55,208
VALUE
(000)
-----
NET ASSETS -- CONTINUED
Accumulated net realized gain
on futures .......................... $ 269
Net unrealized appreciation
on investments ...................... 55,283
--------
TOTAL NET ASSETS-- 100.0% .............. $364,817
========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class ................. $21.35
========
Net Asset Value and Redemption
Price Per Share --
Retail Class ........................ $21.35
========
Maximum Offering Price
Per Share -- Retail Class
($21.35 / 94.5%) .................... $22.59
========
Net Asset Value and Offering
Price Per Share-- Class B ........... $21.28
========
- ----------------------
* NON INCOME PRODUCING SECURITIES
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX
PURPOSES IS AS FOLLOWS:
(000)
---------
GROSS APPRECIATION ................. $63,040
GROSS DEPRECIATION ................. (7,757)
--------
$55,283
========
ADR -- AMERICAN DEPOSITORY RECEIPT
See Accompanying Notes
38
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA EQUITY GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-----------------------------------------------------------------------------------------------
1998 1997 1996 1995
----------------------------- -------------------- -------------------- --------------------
INSTITUTIONAL RETAIL CLASS B5 INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ------ -------- ------------- ------ ------------- ------ ------------- ------
Net asset value, beginning
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
of period .............. $ 18.63 $18.67 $19.44 $ 18.02 $18.05 $ 14.77 $14.79 $ 13.66 $13.68
------- ------ ------ ------- ------ ------- ------ -------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income/(loss) 0.00 (0.04) (0.24) 0.09 0.05 0.14 0.10 0.21 0.18
Net gain on securities
(realized and unrealized) 5.00 4.99 2.08 4.66 4.66 3.46 3.47 1.21 1.21
------- ------ ------ ------- ------ ------- ------ -------- ------
Total from investment
operations ........ 5.00 4.95 1.84 4.75 4.71 3.60 3.57 1.42 1.39
------- ------ ------ ------- ------ ------- ------ -------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income ...... (0.01) (0.00) (0.00) (0.09) (0.05) (0.14) (0.10) (0.20) (0.17)
Dividends in excess of net
investment income ...... (0.00) (0.00) (0.00) (0.02) (0.01) (0.02) (0.02) (0.00) (0.00)
Distributions from net realized
capital gains .......... (2.27) (2.27) (0.00) (4.03) (4.03) (0.19) (0.19) (0.00) (0.00)
Distributions in excess of net
realized capital gains . (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.11) (0.11)
------- ------ ------ ------- ------ ------- ------ -------- ------
Total distributions .. (2.28) (2.27) (0.00) (4.14) (4.09) (0.35) (0.31) (0.31) (0.28)
------- ------ ------ ------- ------ ------- ------ -------- ------
Net asset value, end of period $ 21.35 $21.35 $21.28 $ 18.63 $18.67 $ 18.02 $18.05 $ 14.77 $14.79
======= ====== ====== ======= ====== ======= ====== ======== ======
TOTAL RETURN .............. 28.65% 28.32%3 27.90%3,4 29.57% 29.24%3 24.61% 24.34%3 10.62% 10.35%3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) .............. $352,413 $12,380 $24 $255,594 $6,931 $166,671 $6,013 $119,634 $5,974
Ratio of expenses to
average net assets ..... 0.98% 1.23% 1.92%4 0.97% 1.22% 1.01% 11.26%2 1.01%1 1.27%2
Ratio of net investment
income/(loss) to average
net assets ............. (0.01)% (0.26)%(0.92)%4 0.49% 0.25% 0.85% 10.60%2 1.53%1 1.23%2
Portfolio turnover rate . 260% 260% 260% 197% 197% 74% 74% 17% 17%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
--------------------
1994
--------------------
INSTITUTIONAL RETAIL
------------- ------
Net asset value, beginning
<S> <C> <C>
of period .............. $ 13.78 $13.80
------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income/(loss) 0.18 0.15
Net gain on securities
(realized and unrealized) 0.01 0.00
------- ------
Total from investment
operations ........ 0.19 0.15
------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income ...... (0.18) (0.15)
Dividends in excess of net
investment income ...... (0.01) (0.00)
Distributions from net realized
capital gains .......... (0.11) (0.11)
Distributions in excess of net
realized capital gains . (0.01) (0.01)
------- ------
Total distributions .. (0.31) (0.27)
------- ------
Net asset value, end of period $ 13.66 $13.68
======= ======
TOTAL RETURN .............. 1.41% 1.12%3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) .............. $90,446 $7,521
Ratio of expenses to
average net assets ..... 1.07% 1.32%
Ratio of net investment
income/(loss) to average
net assets ............. 1.33% 1.08%
Portfolio turnover rate . 15% 15%
<FN>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE CUSTODIAN FOR THE INSTITUTIONAL CLASS FOR THE YEARS ENDED MAY
31, 1996, AND 1995 WOULD HAVE BEEN 1.03% AND .83%, AND 1.02%, AND 1.51%,
RESPECTIVELY. THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME
RATIO BEFORE FEE WAIVERS BY THE INVESTMENT ADVISERS FOR THE INSTITUTIONAL
CLASS FOR THE YEAR MAY 31, 1993, WOULD HAVE BEEN 1.01% AND 1.46%,
RESPECTIVELY.
2 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE CUSTODIAN FOR THE RETAIL CLASS FOR THE YEARS ENDED MAY 31,
1996, AND 1995 WOULD HAVE BEEN 1.28% AND .58%, AND 1.28%, AND 1.22%,
RESPECTIVELY. THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME
RATIO BEFORE FEE WAIVERS BY THE INVESTMENT ADVISERS FOR THE RETAIL CLASS FOR
THE YEAR MAY 31, 1993 WOULD HAVE BEEN 1.26% AND 1.21%, RESPECTIVELY.
3 TOTAL RETURN EXCLUDES SALES CHARGE.
4 ANNUALIZED.
5 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
</FN>
</TABLE>
See Accompanying Notes
39
<PAGE>
STATEMENT OF NET ASSETS
ARMADA TAX MANAGED EQUITY FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- 99.3%
BANKS -- 9.2%
Norwest .................... 80,000 $ 3,110
State Street ............... 89,000 6,135
Wachovia ................... 35,600 2,850
Wells Fargo ................ 6,800 2,458
--------
14,553
--------
CONSUMER NON DURABLES -- 2.7%
Gillette ................... 8,000 937
Procter & Gamble ........... 40,000 3,357
--------
4,294
--------
COMMUNICATIONS EQUIPMENT -- 0.6%
Lucent Technologies ........ 14,000 993
--------
COMPUTERS & SOFTWARE -- 4.0%
Microsoft* ................. 24,000 2,036
Hewlett Packard ............ 70,000 4,349
--------
6,385
--------
DIVERSIFIED MANUFACTURING -- 0.8%
Minnesota Mining &
Manufacturing ............. 13,600 1,260
--------
DRUGS & HEALTH CARE -- 19.0%
Bristol-Myers Squibb ....... 73,240 7,873
Merck ...................... 44,000 5,151
Pfizer ..................... 85,000 8,909
Schering- Plough ........... 99,400 8,319
--------
30,252
--------
ENTERTAINMENT -- 2.6%
Walt Disney ................ 36,000 4,072
--------
FOOD & BEVERAGE -- 6.4%
Coca-Cola .................. 28,000 2,195
PepsiCo .................... 195,500 7,979
--------
10,174
--------
NUMBER VALUE
OF SHARES (000)
----------- -----
COMMON STOCK -- CONTINUED
INSURANCE -- 8.3%
American International
Group ..................... 63,225 $ 7,828
General RE ................. 14,000 3,078
The Chubb Corporation ...... 30,000 2,387
--------
13,293
--------
LEASING & RENTING -- 4.5%
Pitney Bowes ............... 153,000 7,191
--------
MACHINERY -- 6.5%
Emerson Electric ........... 64,200 3,900
General Electric ........... 78,000 6,503
--------
10,403
--------
MISCELLANEOUS BUSINESS SERVICES-- 3.8%
Automatic Data Processing .. 94,000 5,981
--------
MOTORCYCLE & MOTOR SCOOTER -- 2.2%
Harley-Davidson ............ 97,600 3,489
--------
OIL MACHINERY & EQUIPMENT-- 2.2%
Schlumberger, LTD .......... 45,000 3,513
--------
PETROLEUM REFINING -- 5.9%
Amoco ...................... 66,400 2,776
Exxon ...................... 52,000 3,666
Royal Dutch Petroleum ...... 52,400 2,938
--------
9,380
--------
PHARMACUTICAL & HOSPITAL SUPPLY -- 5.1%
Abbott Laboratories ........ 91,000 6,751
Johnson & Johnson .......... 20,000 1,381
--------
8,132
--------
RETAIL -- 6.8%
Home Depot ................. 90,000 7,071
McDonald's ................. 32,000 2,100
Wal-Mart Stores ............ 28,500 1,573
--------
10,744
--------
SEMI-CONDUCTORS/INSTRUMENTS -- 3.6%
Intel ...................... 80,000 5,713
--------
See Accompanying Notes
40
<PAGE>
STATEMENT OF NET ASSETS
ARMADA TAX MANAGED EQUITY FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
TELEPHONES & TELECOMMUNICATION -- 5.1%
Ameritech ................... 27,200 $ 1,154
BellSouth ................... 44,500 2,870
Motorola .................... 34,000 1,800
SBC Communications .......... 24,000 933
US West ..................... 24,800 1,259
--------
8,016
--------
TOTAL COMMON STOCK
(Cost $29,536) ..................... 157,838
--------
CASH EQUIVALENTS -- 0.6%
Fidelity Domestic Money
Market Fund (Cost $1,006) .... 1,006 1,006
--------
TOTAL INVESTMENTS -- 99.9%
(Cost $30,542) .............. $158,844
========
OTHER ASSETS AND LIABILITIES,
NET-- 0.1% .................. 118
--------
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 15,999,177 outstanding
shares of beneficial interest ....... $ 30,293
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 1,045 outstanding shares of
beneficial interest ................. 10
Portfolio Shares of Class B
(unlimited authorization -- no par
value) based on 8,601 outstanding shares
of beneficial interest .............. 88
Undistributed net investment income .. 214
Accumulated net realized gain
on investments .............. ....... 55
Net unrealized appreciation
on investments .............. ....... 128,302
--------
TOTAL NET ASSETS-- 100.0% ...... $158,962
========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class ......... $9.93
========
Net Asset Value and Redemption
Price Per Share --
Retail Class ................ $9.93
========
Maximum Offering Price Per
Share -- Retail Class
($9.93 / 94.5%) ............. $10.51
========
Net Asset Value and Offering
Price Per Share-- Class B ... $9.93
========
- ----------------------------
* NON-INCOME PRODUCING SECURITIES
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR
FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
--------
GROSS APPRECIATION .................. $128,302
GROSS DEPRECIATION .................. --
--------
$128,302
========
See Accompanying Notes
41
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA TAX MANAGED EQUITY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1998
----------------------------------
INSTITUTIONAL5 RETAIL6 CLASS B7
-------------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of period .................. $ 10.00 $10.10 $10.21
-------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ............................... 0.00 0.00 0.00
Net loss on securities (realized and unrealized) .... (0.07) (0.17) (0.28)
-------- ------ ------
Total from investment operations ................. (0.07) (0.17) (0.28)
-------- ------ ------
LESS DISTRIBUTIONS
Net investment income ............................ (0.00) (0.00) (0.00)
Total distributions .............................. (0.00) (0.00) (0.00)
-------- ------ ------
Net asset value, end of period ........................ $ 9.93 $ 9.93 $ 9.93
======== ====== ======
TOTAL RETURN .......................................... (4.81%)8 (23.63%)8 (32.24%)8
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ................ $158,867 $10 $85
Ratio of expenses to average net assets ............. 0.29%1,8 0.54%2,8 1.23%3,8
Ratio of net investment income to average net assets 0.91%1,8 0.63%2,8 0.43%3,8
Portfolio turnover rate ............................. 0% 0% 0%
<FN>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISER FOR THE INSTITUTIONAL CLASS FOR THE PERIOD
ENDED MAY 31, 1998 WOULD HAVE BEEN 1.02% AND 0.18%, RESPECTIVELY.
2 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISER FOR THE RETAIL CLASS FOR THE PERIOD ENDED
MAY 31, 1998 WOULD HAVE BEEN 1.24% AND (0.07)%, RESPECTIVELY.
3 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISER FOR CLASS B FOR THE PERIOD ENDED MAY 31,
1998 WOULD HAVE BEEN 1.98% AND 1.18%, RESPECTIVELY.
4 TOTAL RETURN EXCLUDES SALES CHARGE.
5 INSTITUTIONAL CLASS COMMENCED OPERATIONS ON APRIL 9, 1998.
6 RETAIL CLASS COMMENCED OPERATIONS ON MAY 11, 1998
7 CLASS B COMMENCED OPERATIONS ON MAY 4, 1998
8 ANNUALIZED
</FN>
</TABLE>
See Accompanying Notes
42
<PAGE>
STATEMENT OF NET ASSETS
ARMADA CORE EQUITY FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- 96.1%
ADVERTISING -- 1.8%
Interpublic Group of Companies 33,785 $ 2,004
-------
BANKING -- 6.2%
Banc One .................... 22,110 1,219
Chase Manhattan ............. 11,730 1,595
Citicorp .................... 12,180 1,816
Commerce Bancshares ......... 34,667 1,686
First Union ................. 10,970 607
-------
6,923
-------
BUILDING & BUILDING SUPPLIES -- 1.2%
Sherwin Williams ............ 40,810 1,357
-------
BUSINESS SERVICES -- 6.1%
Automatic Data Processing ... 24,760 1,575
Cintas ...................... 36,600 1,671
Computer Sciences* .......... 35,600 1,849
Manpower .................... 38,190 1,640
-------
6,735
-------
CHEMICALS -- 5.4%
Dow Chemical ................ 14,500 1,405
E.I. DuPont de Nemours ...... 19,750 1,521
Eastman Chemical ............ 19,760 1,324
Praxair ..................... 34,440 1,698
-------
5,948
-------
COMPUTERS -- 2.1%
International Business Machines19,750 2,318
-------
CONSUMER NON-DURABLES -- 1.4%
Procter & Gamble ............ 19,080 1,602
-------
DIVERSIFIED -- 2.5%
General Electric ............ 33,030 2,754
-------
ELECTRIC POWER -- 1.0%
Allegheny Energy ............ 38,050 1,068
-------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
ELECTRICAL EQUIPMENT -- 2.9%
Emerson Electric ............ 29,692 $ 1,804
Hubbell ..................... 30,696 1,445
-------
3,249
-------
FINANCIAL SERVICES -- 1.4%
FNMA ........................ 25,710 1,539
-------
FOOD & BEVERAGE -- 0.4%
Archer-Daniels-Midland ...... 25,150 476
-------
FOODS -- 1.5%
Conagra ..................... 56,540 1,654
-------
HEALTH CARE -- 1.5%
Tenet Healthcare* ........... 47,320 1,654
-------
HOME FURNISHINGS & HOUSEWARES -- 2.0%
Newell ...................... 44,870 2,165
-------
INSURANCE -- 12.0%
Aflac ....................... 28,060 1,794
American General ............ 26,050 1,749
American International Group 25,330 3,136
MBIA ........................ 5,580 417
PMI Group ................... 29,460 2,215
The Chubb Corporation ....... 25,640 2,040
Travelers Group ............. 31,210 1,904
-------
13,255
-------
METALS & MINING -- 1.2%
Aluminum Company
of America ................. 19,610 1,360
-------
OFFICE EQUIPMENT -- 1.0%
Pitney Bowes ................ 23,700 1,114
-------
OIL & GAS -- 9.2%
Amoco ....................... 27,840 1,164
Exxon ....................... 39,960 2,817
Mobil ....................... 35,520 2,770
See Accompanying Notes
43
<PAGE>
STATEMENT OF NET ASSETS
ARMADA CORE EQUITY FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
OIL & GAS -- CONTINUED
Texaco ..................... 33,420 $ 1,930
USX Marathon Group ......... 42,290 1,480
-------
10,161
-------
PAPER & FOREST PRODUCTS -- 3.4%
Champion International ..... 25,240 1,212
Georgia Pacific ............ 17,920 1,150
Georgia Pacific
Timber Group .............. 17,800 419
Willamette Industries ...... 29,490 1,012
-------
3,793
-------
PETROLEUM & FUEL PRODUCTS-- 1.4%
Schlumberger, LTD .......... 20,620 1,610
-------
PHARMACEUTICAL -- 9.5%
Abbott Laboratories ........ 24,910 1,848
American Home Products ..... 23,480 1,134
Bristol-Myers Squibb ....... 23,900 2,569
Merck ...................... 25,630 3,000
Schering-Plough ............ 24,500 2,050
-------
10,601
-------
RESIDENTIAL CONSTRUCTION -- 0.2%
Centex ..................... 5,130 183
-------
RETAIL MERCHANDISING -- 1.5%
Home Depot ................. 1,190 93
Wal-Mart Stores ............ 27,880 1,539
-------
1,632
-------
SEMI-CONDUCTORS/INSTRUMENTS -- 1.4%
Xilinx* .................... 40,440 1,538
-------
SPECIALTY CHEMICALS -- 1.9%
Sigma Aldrich .............. 58,690 2,146
-------
NUMBER VALUE
OF SHARES (000)
----------- -----
TECHNOLOGY -- 11.8%
3Com* ...................... 31,120 $ 790
Altera* .................... 41,760 1,405
Applied Materials* ......... 29,320 941
Cisco Systems* ............. 23,035 1,740
Intel ...................... 23,440 1,674
Lam Research* .............. 28,470 677
Linear Technology .......... 16,370 1,147
Maxim Integrated Products* . 33,550 1,122
Microsoft* ................. 28,200 2,393
Teradyne* .................. 37,920 1,166
-------
13,055
-------
TELECOMMUNICATIONS -- 1.3%
BellSouth .................. 19,720 1,272
Lucent Technologies ........ 3,068 218
-------
1,490
-------
TOBACCO -- 1.9%
Philip Morris .............. 57,220 2,139
-------
TRANSPORTATION -- 1.0%
CSX ........................ 23,420 1,115
-------
TOTAL COMMON STOCK
(Cost $98,411) ..................... 106,638
-------
CORPORATE OBLIGATION -- 1.9%
Home Depot
3,25%, 10/01/01
(Cost $2,079) .............1,200,000 2,079
-------
CONVERTIBLE BOND -- 1.4%
Automatic Data Processing
0.000%, 02/20/12
(Cost $1,253) ............. 1,910 1,583
-------
CASH EQUIVALENT -- 0.6%
Financial Square Premium
Money Market Fund (Cost $634) 634 634
-------
See Accompanying Notes
44
<PAGE>
STATEMENT OF NET ASSETS
ARMADA CORE EQUITY FUND
MAY 31, 1998
VALUE
(000)
-----
TOTAL INVESTMENTS -- 100.0%
(Cost $102,377) ..................... $110,934
========
OTHER ASSETS AND LIABILITIES,
NET-- 0.0% .......................... (20)
--------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 9,735,597 outstanding
shares of beneficial interest ....... 97,026
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 35,955 outstanding shares of
beneficial interest ................. 397
Portfolio Shares of Class B
(unlimited authorization -- no
par value) based on
204 outstanding shares of
beneficial interest ................. 2
Undistributed net investment income .. 26
Accumulated net realized gain
on investments ...................... 4,906
Net unrealized appreciation
on investments ...................... 8,557
--------
TOTAL NET ASSETS-- 100.0% ............ $110,914
========
VALUE
(000)
-----
Net Asset Value, Offering
and Redemption
Price Per Share --
Institutional Class ................. $11.35
========
Net Asset Value and
Redemption Price Per
Share -- Retail Class ............... $11.34
========
Maximum Offering Price
Per Share -- Retail Class
($11.34 / 94.5%) .................... $12.00
========
Net Asset Value and Offering
Price Per Share-- Class B ........... $11.33
========
- ------------------------
* NON-INCOME PRODUCING SECURITIES
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR
FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
--------
GROSS APPRECIATION ................. $13,158
GROSS DEPRECIATION ................. (4,601)
--------
$ 8,557
========
See Accompanying Notes
45
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA CORE EQUITY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED MAY 31, 1998
--------------------------------
INSTITUTIONAL6 RETAIL6 CLASS B7
-------------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $ 10.00 $10.00 $10.25
-------- ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ................................... 0.05 0.04 0.00
Net gain on securities (realized and unrealized) ........ 1.35 1.34 1.08
-------- ------ ------
Total from investment operations ..................... 1.40 1.38 1.08
-------- ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income .................... (0.05) (0.04) (0.00)
-------- ------ ------
Total distributions .................................. (0.05) (0.04) (0.00)
-------- ------ ------
Net asset value, end of period ............................ $ 11.35 $11.34 $11.33
======== ====== ======
TOTAL RETURN .............................................. 14.03%5 13.85%4,5 10.54%4,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) .................... $110,504 $ 408 $ 2
Ratio of expenses to average net assets ................. 0.89%1,8 1.14%2,8 1.83%3,8
Ratio of net investment income/(loss) to average net assets 0.61%1,8 0.14%2,8 (0.51)%3,8
Portfolio turnover rate ................................. 60% 60% 60%
<FN>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISER AND ADMINISTRATOR FOR THE INSTITUTIONAL
CLASS FOR THE PERIOD ENDED MAY 31, 1998, WOULD HAVE BEEN 1.06% AND 0.44%,
RESPECTIVELY.
2 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISER AND ADMINISTRATOR FOR THE RETAIL CLASS FOR
THE PERIOD ENDED MAY 31, 1998, WOULD HAVE BEEN 1.30% AND 0.04%,
RESPECTIVELY.
3 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME/(LOSS) RATIO
BEFORE FEE WAIVERS BY THE INVESTMENT ADVISER AND ADMINISTRATOR FOR CLASS B
FOR THE PERIOD ENDED MAY 31, 1998, WOULD HAVE BEEN 2.00% AND (0.50)%,
RESPECTIVELY.
4 TOTAL RETURN EXCLUDES SALES CHARGE.
5 RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED.
6 INSTITUTIONAL AND RETAIL CLASSES BOTH COMMENCED OPERATIONS ON AUGUST 1,
1997.
7 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
8 ANNUALIZED.
</FN>
</TABLE>
See Accompanying Notes
46
<PAGE>
STATEMENT OF NET ASSETS
ARMADA EQUITY INCOME FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- 93.6%
AEROSPACE -- 3.3%
General Dynamics ............ 59,600 $ 2,648
Northrop Grumman ............ 26,100 2,798
United Technologies ......... 11,400 1,072
-------
6,518
-------
AUTO-TRUCKS -- 3.0%
Chrysler .................... 44,300 2,464
Ford Motor .................. 67,600 3,507
-------
5,971
-------
AUTOMOTIVE PARTS-EQUIPMENT -- 1.1%
Genuine Parts ............... 63,300 2,148
-------
BANKING -- 15.6%
Banc One .................... 58,430 3,220
Bank of Boston .............. 21,300 2,244
Bankers Trust New York ...... 22,200 2,742
First Union ................. 62,500 3,457
Fleet Financial Group ....... 42,600 3,493
J.P. Morgan ................. 21,200 2,633
Mellon Bank ................. 48,500 3,271
Norwest ..................... 81,100 3,153
PNC Bank .................... 47,300 2,732
Wachovia .................... 46,100 3,691
-------
30,636
-------
BUILDING & BUILDING SUPPLIES -- 2.7%
Armstrong World Industries .. 19,200 1,616
Masco ....................... 67,900 3,819
-------
5,435
-------
BUSINESS SERVICES -- 0.8%
Dun & Bradstreet ............ 49,900 1,684
-------
CHEMICALS -- 5.1%
BetzDearborn ................ 53,200 2,620
Dow Chemical ................ 16,900 1,637
E.I. DuPont de Nemours ...... 35,500 2,734
RPM ......................... 179,000 3,043
-------
10,034
-------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
DIVERSIFIED -- 3.5%
Fluor ....................... 39,000 $ 1,860
General Electric ............ 14,200 1,184
Minnesota Mining &
Manufacturing .............. 30,900 2,862
Textron ..................... 12,100 898
-------
6,804
-------
DRUGS & HEALTH CARE -- 1.7%
Bristol-Myers Squibb ........ 30,300 3,257
-------
ELECTRICAL EQUIPMENT -- 3.9%
Cooper Industries ........... 29,400 1,892
Hubbell ..................... 44,900 2,113
Rockwell International ...... 18,000 990
Thomas & Betts .............. 48,800 2,608
-------
7,603
-------
FINANCIAL SERVICES -- 1.9%
Beneficial .................. 6,100 817
FNMA ........................ 49,100 2,940
-------
3,757
-------
FOOD & BEVERAGE -- 1.2%
General Mills ............... 35,800 2,443
-------
HOME APPLIANCES -- 1.0%
Maytag ...................... 38,900 1,962
-------
INSURANCE -- 3.8%
Cigna ....................... 27,000 1,850
Marsh & McLennan ............ 37,600 3,292
The Chubb Corporation ....... 11,702 931
UNUM ........................ 25,000 1,389
-------
7,462
-------
MACHINERY & HEAVY EQUIPMENT-- 0.5%
Caterpillar ................. 16,500 906
-------
METALS & MINING -- 1.7%
Aluminum Company of America . 25,700 1,783
USX-U.S. Steel Group ........ 43,800 1,571
-------
3,354
-------
See Accompanying Notes
47
<PAGE>
STATEMENT OF NET ASSETS
ARMADA EQUITY INCOME FUND
MAY 31, 1998
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
NATURAL GAS -- 1.8%
Consolidated Natural Gas .... 63,185 $ 3,574
-------
OFFICE & BUSINESS EQUIPMENT-- 2.4%
Pitney Bowes ................ 53,300 2,505
Xerox ....................... 22,300 2,291
-------
4,796
-------
OIL & GAS -- 13.5%
Atlantic Richfield .......... 41,700 3,289
Chevron ..................... 61,000 4,872
Exxon ....................... 51,600 3,638
Mobil ....................... 55,700 4,345
Royal Dutch Petroleum ....... 68,500 3,840
Texaco ...................... 82,600 4,770
Ultramar Diamond Shamrock ... 51,000 1,629
-------
26,383
-------
PAPER & FOREST PRODUCTS -- 0.8%
Weyerhaeuser ................ 30,100 1,529
-------
RAILROADS -- 0.8%
Union Pacific ............... 32,600 1,577
-------
REAL ESTATE -- 4.1%
Arden Realty Group .......... 77,500 2,126
Duke Realty Investments ..... 133,600 3,023
Mack-Cali Realty ............ 33,000 1,188
Sun Communities ............. 50,000 1,697
-------
8,034
-------
RETAIL MERCHANDISING -- 4.1%
Intimate Brands ............. 59,700 1,713
May Department Stores ....... 42,400 2,727
Penney, J.C. ................ 49,700 3,569
-------
8,009
-------
TELECOMMUNICATIONS -- 1.0%
AT&T ........................ 31,000 1,887
-------
TOBACCO -- 2.1%
Fortune Brands .............. 74,900 2,879
UST ......................... 42,200 1,124
-------
4,003
-------
NUMBER VALUE
OF SHARES (000)
--------- -----
COMMON STOCK -- CONTINUED
UTILITIES-ELECTRIC -- 4.7%
American Water Works ........ 50,900 $ 1,495
Consolidated Edison Company
of New York ................ 73,500 3,147
Dominion Resources .......... 44,300 1,758
Florida Progress ............ 23,600 974
Wisconsin Energy ............ 62,200 1,835
-------
9,209
-------
UTILITIES-GAS & ELECTRIC -- 0.7%
LG&E Energy ................. 51,800 1,376
-------
UTILITIES-TELEPHONE -- 5.6%
Ameritech ................... 75,700 3,213
Bell Atlantic ............... 19,364 1,774
BellSouth ................... 42,300 2,728
GTE ......................... 56,900 3,318
-------
11,033
-------
WASTE COLLECTION & DISPOSAL -- 1.2%
Browning-Ferris Industries .. 37,400 1,330
Ogden ....................... 34,300 980
-------
2,310
-------
TOTAL COMMON STOCK
(Cost $137,465) ..................... 183,694
-------
PREFERRED STOCK -- 2.6%
INSURANCE -- 1.0%
American General Delaware ... 22,500 1,953
-------
METALS & MINING -- 0.7%
Cyprus AMAX Minerals ........ 27,800 1,334
-------
PAPER & FOREST PRODUCTS -- 0.9%
International Paper ......... 34,600 1,752
-------
TOTAL PREFERRED STOCK
(Cost $4,459) ..................... 5,039
-------
CASH EQUIVALENT -- 3.1%
Fidelity Domestic Money
Market Fund
(Cost $5,965) .............. 5,965 5,965
-------
See Accompanying Notes
48
<PAGE>
STATEMENT OF NET ASSETS
ARMADA EQUITY INCOME FUND
MAY 31, 1998
VALUE
(000)
-----
TOTAL INVESTMENTS -- 99.3%
(Cost $147,889) ................... $ 194,698
=========
OTHER ASSETS AND LIABILITIES,
NET-- 0.7% ........................ 1,379
---------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 11,062,059 outstanding
shares of beneficial interest ..... 143,952
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 122,810 outstanding shares of
beneficial interest ............... 1,955
Portfolio Shares of Class B
(unlimited authorization -- no par value)
based on 148 outstanding shares of
beneficial interest ............... 1
Undistributed net investment income 664
Accumulated net realized gain
on investments .................... 2,696
Net unrealized appreciation
on investments .................... 46,809
---------
TOTAL NET ASSETS-- 100.0% $ 196,077
=========
VALUE
-----
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class ............... $17.53
=========
Net Asset Value and
Redemption Price Per
Share -- Retail Class ............. $17.51
=========
Maximum Offering Price
Per Share -- Retail Class
($17.51 / 94.5%) .................. $18.53
=========
Net Asset Value and Offering
Price Per Share-- Class B ......... $17.54
=========
- ------------------------------------------------
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL INCOME TAX PURPOSES
IS AS FOLLOWS:
(000)
-------
GROSS APPRECIATION ................... $48,193
GROSS DEPRECIATION ................... (1,384)
-------
$46,809
=======
See Accompanying Notes
49
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA EQUITY INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, FOR THE PERIOD
------------------------------------------------------------------------- ENDED MAY 31,
1998 1997 1996 1995
----------------------------- -------------------- -------------------- ----------------------
INSTITUTIONAL RETAIL CLASS B6 INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL3 RETAIL3
------------- ------ -------- ------------- ------ ------------- ------ -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .............. $ 14.87 $ 14.86 $16.28 $ 12.66 $12.65 $ 11.01 $11.01 $ 10.00 $10.26
-------- ------- ------ -------- ------ ------- ------ -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(loss) 0.27 0.26 0.46 0.30 0.31 0.34 0.33 0.34 0.26
Net gain on securities
(realized and unrealized) 3.44 3.41 0.86 2.73 2.68 1.79 1.77 0.94 0.75
-------- ------- ------ -------- ------ ------- ------ -------- ------
Total from investment
operations .......... 3.71 3.67 1.32 3.03 2.99 2.13 2.10 1.28 1.01
-------- ------- ------ -------- ------ ------- ------ -------- ------
LESS DISTRIBUTIONS
Dividends from net
investment income ........ (0.32) (0.29) (0.06) (0.31) (0.27) (0.34) (0.32) (0.27) (0.26)
Distributions from net realized
capital gains ............ (0.73) (0.73) (0.00) (0.51) (0.51) (0.14) (0.14) (0.00) (0.00)
-------- ------- ------ -------- ------ ------- ------ -------- ------
Total distributions .... (1.05) (1.02) (0.06) (0.82) (0.78) (0.48) (0.46) (0.27) (0.26)
-------- ------- ------ -------- ------ ------- ------ -------- ------
Net asset value, end of period $ 17.53 $ 17.51 $17.54 $ 14.87 $14.86 $ 12.66 $12.65 $ 11.01 $11.01
-------- ------- ------ -------- ------ ------- ------ -------- ------
TOTAL RETURN ................ 25.69% 25.41%5 25.58%4,5 24.62% 24.33%5 19.72% 19.37%5 14.34%4 13.18%4,5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's) ............. $193,923 $ 2,151 $ 3 $127,130 $ 410 $61,978 $ 263 $ 36,194 $ 125
Ratio of expenses to
average net assets ....... 0.92% 1.17% 1.86% 1.01% 1.26% 1.06%1 1.31%2 99%1,4 1.41%2,4
Ratio of net investment
income to average
net assets ............... 1.80% 1.62% 0.68% 2.44% 2.17% 3.02%1 2.75%2 3.87%1,4 3.45%2,4
Portfolio turnover rate ... 18% 18% 18% 35% 35% 53% 53% 12% 12%
<FN>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE CUSTODIAN FOR THE INSTITUTIONAL CLASS FOR THE YEAR ENDED MAY
31, 1996, WOULD HAVE BEEN 1.08% AND 3.00%, RESPECTIVELY. THE OPERATING
EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE WAIVERS BY THE
INVESTMENT ADVISERS, ADMINISTRATOR AND CUSTODIAN FOR THE INSTITUTIONAL CLASS
FOR THE PERIOD ENDED MAY 31, 1995, WOULD HAVE BEEN 1.21% AND 3.66%,
RESPECTIVELY.
2 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE CUSTODIAN FOR THE RETAIL CLASS FOR THE YEAR ENDED MAY 31,
1996, WOULD HAVE BEEN 1.32% AND 2.74%, RESPECTIVELY. THE OPERATING EXPENSE
RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE WAIVERS BY THE
INVESTMENT ADVISERS, ADMINISTRATOR, AND CUSTODIAN FOR THE RETAIL CLASS FOR
THE PERIOD ENDED MAY 31, 1995, WOULD HAVE BEEN 1.45% AND 3.40%,
RESPECTIVELY.
3 INSTITUTIONAL AND RETAIL CLASSES COMMENCED OPERATIONS ON JULY 1, 1994, AND
AUGUST 22, 1994, RESPECTIVELY.
4 ANNUALIZED.
5 TOTAL RETURN EXCLUDES SALES CHARGE.
6 CLASS B COMMENCED OPERATIONS ON JANUARY 6, 1998.
</FN>
</TABLE>
See Accompanying Notes
50
<PAGE>
FINANCIAL STATEMENTS
ARMADA FUNDS EQUITY SERIES
STATEMENT OF OPERATIONS (000)
FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
ARMADA ARMADA ARMADA ARMADA
INTERNATIONAL SMALL CAP SMALL CAP EQUITY
EQUITY FUND1 GROWTH FUND1 VALUE FUND GROWTH FUND
--------------- --------------- ------------- -------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends .................................... $ 1,937 $ 166 $ 3,645 $ 2,267
Interest ..................................... 196 176 34 811
Less foreign taxes withheld .................. (247) -- (3) (9)
-------- ------- -------- --------
Total investment income ...................... 1,886 342 3,676 3,069
-------- ------- -------- --------
EXPENSES:
Investment Advisory fees ..................... 621 226 1,989 2,396
Administration fees .......................... 80 30 244 285
12b-1 fees ................................... 29 7 97 116
Transfer Agent fees .......................... 25 33 57 94
Distribution fees ............................ 21 8 61 44
Custodian fees ............................... 172 6 38 45
Professional fees ............................ 21 11 31 41
Printing and shareholder reports ............. 2 1 8 14
Registration and filing fees ................. 47 25 34 43
Trustees' fees ............................... 1 1 6 7
Miscellaneous ................................ 8 -- 18 76
Amortization of deferred organizational costs -- -- 4 --
Fees waived by Administrator ................. (72) (28) -- --
Fees waived by Investment Adviser ............ (51) (18) -- --
Shareholder servicing fees-- Retail Class only -- -- 16 20
-------- ------- -------- --------
Total expenses ............................ 904 302 2,603 3,181
-------- ------- -------- --------
NET INVESTMENT INCOME/(LOSS) .................... 982 40 1,073 (112)
-------- ------- -------- --------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain/(loss) on investments sold . (3,943) 833 49,850 71,356
Net realized loss from foreign
currency transactions ..................... (52) -- -- --
Net realized gain/(loss) from futures ........ -- -- 84 269
Net change in unrealized appreciation/
(depreciation) on futures ................. -- -- (75) --
Net change in unrealized (depreciation) on
foreign currency and translation of other
assets and liabilities in foreign currencies (22) -- -- --
Net change in unrealized appreciation/
(depreciation) on investments ............. 13,381 4,165 (9,288) 4,112
-------- ------- -------- --------
Net gain on investments ...................... 9,364 4,998 40,571 75,737
-------- ------- -------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .............................. $ 10,346 $ 5,038 $ 41,644 $ 75,625
======== ======= ======== ========
<FN>
1 FUND COMMENCED OPERATIONS ON AUGUST 1, 1997.
</FN>
</TABLE>
See Accompanying Notes
51
<PAGE>
FINANCIAL STATEMENTS
ARMADA FUNDS EQUITY SERIES
STATEMENT OF OPERATIONS (000)
FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
ARMADA ARMADA ARMADA
TAX MANAGED CORE EQUITY
EQUITY FUND2 EQUITY FUND1 INCOME FUND
--------------- --------------- ---------------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends .................................................. $ 281 $ 1,307 $ 4,881
Interest ................................................... -- 28 120
Less foreign taxes withheld ................................ -- -- (12)
--------- ------- --------
Total investment income ................................. 281 1,335 4,989
--------- ------- --------
EXPENSES:
Investment Advisory fees ................................... 174 673 1,237
Administration fees ........................................ 16 87 160
12b-1 fees ................................................. -- 32 59
Transfer Agent fees ........................................ 9 33 70
Distribution fees .......................................... 14 23 36
Custodian fees ............................................. 5 17 27
Professional fees .......................................... 4 26 28
Printing and shareholder reports ........................... 1 2 9
Registration and filing fees ............................... 17 52 28
Trustees' fees ............................................. 1 2 3
Miscellaneous .............................................. -- 11 25
Amortization of organization costs ......................... -- -- 4
Fees waived by Administrator ............................... -- (89) --
Fees waived by Investment Adviser .......................... (174) (65) --
Shareholder servicing fees-- Retail Class only ............. -- -- 2
--------- ------- --------
Total expenses .......................................... 67 804 1,688
--------- ------- --------
NET INVESTMENT INCOME ......................................... 214 531 3,301
--------- ------- --------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments sold ...................... 55 4,906 6,437
Net change in unrealized appreciation (depreciation)
on investments ............................................. (1,407) 8,557 25,959
--------- ------- --------
Net gain on investments .................................... (1,352) 13,463 32,396
--------- ------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................................. $ (1,138) $13,994 $35,697
========= ======= ========
<FN>
1 FUND COMMENCED OPERATIONS ON AUGUST 1, 1997.
2 FUND COMMENCED OPERATIONS ON APRIL 9, 1998.
</FN>
</TABLE>
See Accompanying Notes
52
<PAGE>
FINANCIAL STATEMENTS
ARMADA FUNDS EQUITY SERIES
STATEMENT OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND SMALL CAP GROWTH FUND SMALL CAP VALUE FUND
------------------- ------------------- ------------------ ------------------
FOR THE PERIOD FOR THE PERIOD FOR THE YEAR FOR THE YEAR
ENDED MAY 31, 19981 ENDED MAY 31, 19981 ENDED MAY 31, 1998 ENDED MAY 31, 1997
------------------- ------------------- ------------------ ------------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net investment income ...................... $ 982 $ 40 $ 1,073 $ 1,082
Net realized gain/(loss) on investments sold and
foreign currency transactions ........... (3,995) 833 49,850 12,634
Net realized gain/(loss) from futures ...... -- -- 84 154
Net change in unrealized appreciation
/(depreciation) on futures .............. -- -- (75) 75
Net unrealized appreciation/(depreciation) of
investment securities and foreign
currency transactions ................... 13,359 4,165 (9,288) 17,865
-------- ------- -------- --------
Net increase in net assets resulting
from operations ......................... 10,346 5,038 41,644 31,810
-------- ------- -------- --------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income:
Institutional ........................... (133) (44) (1,145) (803)
Retail .................................. -- -- (19) (16)
Class B ................................. -- -- -- --
Realized Capital Gains
Institutional ........................... -- (93) (34,475) (7,676)
Retail .................................. -- -- (1,000) (262)
Class B ................................. -- -- -- --
-------- ------- -------- --------
Total Distributions ........................ (133) (137) (36,639) (8,757)
-------- ------- -------- --------
Share transactions:
Institutional
Proceeds from shares issued ............. 127,644 51,438 108,947 83,858
Reinvestment of cash distributions ...... 3 79 15,365 3,565
Cost of shares redeemed ................. (1,906) (1,949) (44,464) (9,823)
-------- ------- -------- --------
Net institutional share transactions .. 125,741 49,568 79,848 77,600
-------- ------- -------- --------
Retail
Proceeds from shares issued ............. 308 364 6,063 777
Reinvestment of cash distributions ...... -- -- 915 252
Cost of shares redeemed ................. (44) (26) (1,135) (1,438)
-------- ------- -------- --------
Net retail share transactions ......... 264 338 5,843 (409)
-------- ------- -------- --------
Class B
Proceeds from shares issued ............. 2 22 544 --
Reinvestment of cash distributions ...... -- -- -- --
Cost of shares redeemed ................. (1) (21) (490) --
-------- ------- -------- --------
Net Class B share transactions ........ 1 1 54 --
-------- ------- -------- --------
Increase in net assets from share transactions 126,006 49,907 85,745 77,191
-------- ------- -------- --------
Total increase in net assets ............... 136,219 54,808 90,750 100,244
-------- ------- -------- --------
NET ASSETS:
Beginning of period ........................ -- -- 204,240 103,996
-------- ------- -------- --------
End of period .............................. $136,219 $54,808 $294,990 $204,240
======== ======= ======== ========
<FN>
1 FUND COMMENCED OPERATIONS ON AUGUST 1, 1997.
</FN>
</TABLE>
See Accompanying Notes
53
<PAGE>
FINANCIAL STATEMENTS
ARMADA FUNDS EQUITY SERIES
STATEMENT OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
EQUITY TAX MANAGED CORE EQUITY
GROWTH FUND EQUITY FUND EQUITY FUND INCOME FUND
--------------------------- ------------- ------------- --------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 19982 MAY 31, 19981 MAY 31, 1998 MAY 31, 1997
------------- ------------ ------------- ------------- ------------ ------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net investment income/(loss) ....... $ (112) $ 1,039 $ 214 $ 531 $ 3,301 $ 2,177
Net realized gain on investments sold 71,356 47,980 55 4,906 6,437 4,439
Net investment gain on futures sold 269 -- -- -- -- --
Net unrealized appreciation of
investment securities ........... 4,112 14,209 (1,407) 8,557 25,959 13,885
-------- -------- -------- -------- -------- --------
Net increase in net assets resulting
from operations ................. 75,625 63,228 (1,138) 13,994 35,697 20,501
-------- -------- -------- -------- -------- --------
DISTRIBUTION TO SHAREHOLDERS:
Net investment income:
Institutional ................... (77) (1,191) -- (505) (3,144) (1,991)
Retail .......................... -- (21) -- -- (14) (6)
Class B ......................... -- -- -- -- -- --
Realized Capital Gains
Institutional ................... (32,643) (45,654) -- -- (7,211) (3,267)
Retail .......................... (875) (1,330) -- -- (34) (11)
Class B ......................... -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions ................ (33,595) (48,196) -- (505) (10,403) (5,275)
-------- -------- -------- -------- -------- --------
Share transactions:
Institutional
Proceeds from shares issued ..... 112,234 124,275 1,477 106,584 70,486 60,027
Proceeds from Common Fund (note 6) -- -- 163,615 -- -- --
Shares issued in reorganization . -- 47,518 -- -- -- --
Reinvestment of cash distributions 15,580 15,464 -- 503 5,680 2,708
Cost of shares redeemed ......... (72,440) (113,036) (5,090) (10,061) (34,560) (12,754)
-------- -------- -------- -------- -------- --------
Net institutional share transactions 55,374 74,221 160,002 97,026 41,606 49,981
-------- -------- -------- -------- -------- --------
Retail
Proceeds from shares issued ..... 4,854 770 10 399 1,955 96
Reinvestment of cash distributions 816 1,216 -- -- 34 17
Cost of shares redeemed ......... (1,269) (1,397) -- (2) (353) (21)
-------- -------- -------- -------- -------- --------
Net retail share transactions . 4,401 589 10 397 1,636 92
-------- -------- -------- -------- -------- --------
Class B
Proceeds from shares issued ..... 308 -- 88 2 45 --
Reinvestment of cash distributions -- -- -- -- -- --
Cost of shares redeemed ......... (287) -- -- -- (44) --
-------- -------- -------- -------- -------- --------
Net Class B share transactions 21 -- 88 2 1 --
-------- -------- -------- -------- -------- --------
Increase in net assets from share
transactions .................. 59,796 74,810 160,100 97,425 43,243 50,073
-------- -------- -------- -------- -------- --------
Contribution of capital from
affiliate (note 3) ............ 466 -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total increase in net assets ....... 102,292 89,842 158,962 110,914 68,537 65,299
-------- -------- -------- -------- -------- --------
NET ASSETS:
Beginning of period ................ 262,525 172,683 -- -- 127,540 62,241
-------- -------- -------- -------- -------- --------
End of period ...................... $364,817 $262,525 $158,962 $110,914 $196,077 $127,540
======== ======== ======== ======== ======== ========
<FN>
1 FUND COMMENCED OPERATIONS ON AUGUST 1, 1997.
2 FUND COMMENCED OPERATIONS ON APRIL 9, 1998.
</FN>
</TABLE>
See Accompanying Notes
54
<PAGE>
FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
1. FUND ORGANIZATION
Armada Funds (the "Trust") is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company.
The Trust was organized as a Massachusetts business trust on January 28, 1986.
The Trust is a series of twenty-three funds each of which is authorized to issue
two classes of shares designated as Institutional and Retail Shares. Effective
January 1, 1998 the Equity Growth, Equity Income, Small Cap Value, Small Cap
Growth, Core Equity, International Equity, Intermediate Bond, Bond and Money
Market Funds additionally began offering a third class of shares designated as B
shares. Each share class represents an interest in the same portfolio of
investments of the respective Fund and is substantially the same in all
respects, except that the classes are subject to different distribution and/or
shareholder serving fees and investment minimums. In addition, Retail shares are
subject to a front-end sales charge, which may be reduced or waived under
certain circumstances. B shares are sold with a contingent deferred sales charge
which may be reduced or waived under certain circumstances.
The Trust currently has four Series that consist of the following Funds:
Money Market Series
Money Market Fund, Government Money Market Fund, Treasury Money Market Fund, Tax
Exempt Money Market Fund and Pennsylvania Tax Exempt Money Market Fund;
Equity Series
International Equity Fund, Small Cap Growth Fund, Small Cap Value Fund, Equity
Growth Fund, Tax Managed Equity Fund, Core Equity Fund, Equity Income Fund,
Equity Index Fund and
Tax Exempt Series
Ohio Tax Exempt Fund, Pennsylvania Municipal Fund, and National Tax Exempt Fund;
Income Series
Total Return Advantage Fund, Intermediate Bond Fund, Enhanced Income Fund, GNMA
Fund, Bond Fund, Balanced Allocation Fund and Real Return Advantage Fund.
As of the date of this report, the Equity Index, Balanced Allocation and Real
Return Advantage Funds had not commenced operations.
Effective November 19, 1997, the name of the Armada Mid Cap Regional Fund was
changed to the Armada Small Cap Value Fund.
The International Equity, Small Cap Growth and Core Equity Funds each
commenced operations on August 1, 1997. Accordingly, the Statements of
Operations, Changes in Net Assets and Financial Highlights for each of the Funds
is presented as of May 31, 1998, and for the period then ended.
FUND REORGANIZATION: On May 3, 1996, Integra Financial Corporation ("Integra
Financial") merged into National City Corporation ("National City"). Integra
Trust Company, an affiliate of Integra Financial, served as Investment Adviser
to Inventor Funds, Inc. ("Inventor").
As part of the Reorganization, on September 9, 1996, the Inventor Equity
Growth Fund transferred all of its assets and liabilities with an approximate
value of $47,517,535 (including $3,942,382 of net unrealized gain on
investments) in exchange for shares of the former Armada Equity Fund. The
Reorganization was executed as a tax-free reorganization in accordance with
Section 368(a)(1)(C) of the Internal Revenue Code of 1986 as amended (the
"Internal Revenue Code").
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
International Equity, Small Cap Growth, Small Cap Value, Equity Growth, Core
Equity, Equity Income and Tax Managed Equity Funds (the "Funds") in preparation
of their financial statements.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATION: Investments in securities traded on an exchange are
valued at the last quoted sale price for a given day, or if a sale is not
reported for that day, at the mean between the most recent quoted bid and asked
prices. Unlisted securities 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. Short-term investments having
maturities of 60 days or less are generally valued on the basis of amortized
cost.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on the trade date. Realized gains and losses on investments sold are
recorded on the identified cost basis. Interest income is accrued on a daily
basis. Dividends are recorded on the ex-dividend date. Expenses common to all of
the Funds in the Trust are allocated among the Funds based on relative net
assets.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from the net
investment income of the Equity Growth, Core Equity, Equity Income and Tax
Managed Equity Funds are declared and paid quarterly; dividends from the net
investment income of the International Equity, Small Cap Growth and Small Cap
Value Funds are declared and paid annually. With respect to each Fund, net
income for dividend purposes consists of dividends, interest income, and
discount earned (including both original issue and market discount), less
amortization of any market premium and accrued expenses. Any net realized
capital gains will be distributed at least annually.
FEDERAL INCOME TAXES: Each of the Funds is
classified as a separate taxable entity for Federal income tax purposes. Each of
the Funds intends to qualify as a separate "regulated investment company" under
the Internal Revenue Code and make the requisite distributions to its
shareholders that will be sufficient to relieve it from Federal income tax and
Federal excise tax. Therefore, no Federal tax provision is required. To the
extent that distributions from net investment income and realized net capital
gains exceed amounts reported in the financial statements, such amounts are
reported separately. At May 31, 1998, the total cost of securities and the net
realized gains or losses on securities sold for Federal income tax purposes was
not materially different from amounts reported for financial reporting purposes.
The International Equity Fund had capital loss carryforwards at May 31, 1998 of
$1,196,117 expiring in 2007. It is the intention of the International Equity
Fund to pass through foreign tax credits of $247,000.
ORGANIZATIONAL COSTS: The Trust bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
shares for distribution under Federal and state securities regulations. All
organization expenses incurred through June 30, 1998, are being amortized on a
straight-line basis over a period of five years from the date of commencement of
operations. In accordance with AICPA Statement of Position 98-5, "Reporting on
the Costs of Start-up Activities," any organization expenses incurred subsequent
to June 30, 1998, will be expensed as incurred.
FOREIGN CURRENCY TRANSLATION: The books and records of the International
Equity Fund are maintained in U.S. dollars as follows: (1) the foreign currency
mar-
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ket values of investment securities and other assets and liabilities stated in
foreign currencies are translated at the exchange rates prevailing at the end of
the period; and (2) purchases, sales and income are translated at the rates of
exchange prevailing on the respective dates of such transactions. The resulting
exchange gains and losses are included in the Statement of Operations. The Fund
does not isolate the portion of gains and losses on investments which is due to
fluctuations in foreign exchange rates from that which is due to fluctuations in
the market prices of investments.
FORWARD FOREIGN CURRENCY CONTRACTS: The International Equity Fund enters into
forward foreign currency contracts as hedges against either specific
transactions or portfolio positions. All commitments are "marked-to-market"
daily at the applicable foreign exchange rate and any resulting unrealized gains
or losses are recorded currently. The funds realize gains or losses at the time
forward contracts are extinguished.
FUTURES CONTRACTS: During the period, the Equity Growth Fund bought and sold
financial futures contracts for the purpose of hedging the portfolio against
adverse effects of anticipated movements in the market or to maintain liquidity.
When investing in futures contracts, the Fund bears the market risk that arises
from changes in the value of these financial instruments. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund as
unrealized gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the time it was closed.
REPURCHASE AGREEMENTS: Repurchase agreements are considered loans under the
1940 Act. In connection therewith, the Trust's Custodian receives and holds
collateral of not less than 102% of the repurchase price plus accrued interest.
If the value of the collateral falls below this amount, the Trust will require
the seller to deposit additional collateral by the next business day. If the
request for additional collateral is not met or the seller defaults on its
repurchase obligation, the Trust maintains the right to sell the underlying
securities at market value and may claim any resulting loss against the seller.
3. INVESTMENT ADVISERS, DISTRIBUTION FEE AND OTHER RELATED PARTY TRANSACTIONS
Fees paid by the Trust pursuant to the Advisory Agreements with National City
Bank and National Asset Management Corporation, (collectively, the "Adviser" or
"Advisers"), wholly-owned subsidiaries of National City Corporation, are payable
monthly based on the annual rate of .75% of each Fund's average daily net
assets. The Advisers may from time to time waive their fees payable by the
Funds. For the year ended May 31, 1998, the Advisers have earned and waived the
following fees:
EARNED WAIVED
(000) (000)
---------- -------
International Equity Fund........ $621 $51
Small Cap Growth Fund............ 226 18
Small Cap Value Fund............. 1,989 --
Equity Growth Fund............... 2,396 --
Tax Managed Equity Fund.......... 174 174
Core Equity Fund................. 673 65
Equity Income Fund............... 1,237 --
At May 31, 1998, advisory fees accrued and unpaid amounted to:
(000)
-------
International Equity Fund................... $165
Small Cap Growth Fund...................... 34
Small Cap Value Fund........................ 191
Equity Growth Fund.......................... 235
Tax Managed Equity Fund..................... --
Core Equity Fund............................ 73
Equity Income Fund.......................... 125
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS
During the fiscal year ended May 31, 1998, the Adviser contributed $466,000
to the Equity Growth Fund to offset the Fund's realized loss incurred on the
sale of a Standard & Poor's Depository Receipt, "SPDR".
Wellington Management Company, LLP (the "Sub Adviser") serves as the
investment sub-adviser to the Small Cap Growth Fund and is entitled to earn a
fee pursuant to such agreement. No such fees are paid to the Sub-Adviser
directly from the Trust.
The Trust maintains a Shareholder Services Plan (the "Services Plan") with
respect to the Retail and Class B shares in the Funds. Pursuant to the Services
Plan, the Trust enters into shareholder servicing agreements with certain
financial institutions under which they agree to provide shareholder
administrative services to their customers who beneficially own Retail or B
shares in consideration for the payment of up to .25% on an annualized basis of
the net asset value of the Retail or B shares of the International Equity, Small
Cap Growth, Small Cap Value, Equity Growth, Tax Managed Equity, Core Equity and
Equity Income Funds. For the year ended May 31, 1998, fees paid under the
Services Plan to NatCity Investments, Inc., a wholly-owned subsidiary of
National City Corporation, amounted to:
(000)
-------
International Equity Fund.................... --
Small Cap Growth Fund........................ --
Small Cap Value Fund......................... $16
Equity Growth Fund........................... 20
Core Equity Fund............................. --
Equity Income Fund........................... 2
Tax Managed Equity Fund...................... --
National City Bank serves as the Funds' Custodian. For the year ended May 31,
1998, National City Bank has earned custodian fees as follows:
(000)
-------
International Equity Fund.................... $172
Small Cap Growth Fund........................ 6
Small Cap Value Fund......................... 38
Equity Growth Fund........................... 45
Core Equity Fund............................. 17
Equity Income Fund........................... 27
Tax Managed Equity Fund...................... 5
The Trust and SEI Investments Distribution Co., a wholly-owned subsidiary of
SEI Investments Company ("SEI" or "Distributor") are parties to a distribution
agreement dated May 1, 1998. The Distributor receives no fees for its
distribution services under this agreement.
Each Trustee receives an annual fee of $15,000 plus $3,000 for each Board
meeting attended and reimbursement of out-of-pocket expenses. The Chairman of
the Board receives an additional $5,000 per annum for services in such capacity.
Such fees are paid for services rendered to all of the Funds and are allocated
accordingly. No person who s an officer, director, trustee, or employee of the
Investment Advisers, Distributor, or of any parent or subsidiary thereof, who
serves as an officer, trustee, or employee of the Trust receives any
compensation from the Trust.
Expenses for the year ended May 31, 1998, include legal fees paid to Drinker
Biddle & Reath LLP. A partner of that firm is Secretary of the Trust.
The Trust and SEI Fund Resources (the "Administrator") are parties to an
Administration Agreement dated May 1, 1998, under which the Administrator
provides administrative services for an annual fee of .07% of the aggregate
average daily net assets of the Portfolios up to the first eighteen billion and
.06% of the aggregate average daily net assets of the Portfolios over eighteen
billion. Prior to May 2, 1998 PFPC Inc. ("PFPC") served as Administrator and
Accounting Agent to the Trust. As compensation for services performed, each Fund
paid PFPC an asset-based fee plus reimbursement of reasonable out-of-pocket
expenses.
58
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. PURCHASES AND SALES OF SECURITIES
During the year ended May 31, 1998, purchases and sales of securities, other
than short-term investments or U.S. government obligations, aggregated:
PURCHASES SALES
---------- -------------
International Equity Fund.....$157,967,484 $ 36,243,654
Small Cap Growth Fund......... 52,822,515 9,547,401
Small Cap Value Fund.......... 278,605,911 228,024,472
Equity Growth Fund........... 806,787,785 778,096,177
Tax Managed Equity Fund....... -- 2,863,183
Core Equity Fund.............. 150,667,875 53,770,446
Equity Income Fund............ 62,079,889 28,020,903
There were no purchases or sales of U.S. Government securities during the
period for any of the Funds.
5. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Board of Trustees to issue an
unlimited number of shares of beneficial interest and to classify or reclassify
any unissued shares of the Trust into one or more additional classes of shares
and to classify or reclassify any class of shares into one or more series of
shares. Transactions in capital shares are summarized below for the Funds.
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1998 (000)
-------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS CLASS B
-------------------- ---------------- ---------------
SHARES VALUE SHARES VALUE SHARES VALUE
------ -------- ------ ------ ------ ------
INTERNATIONAL EQUITY FUND*
<S> <C> <C> <C> <C> <C>
Shares sold ......................................... 12,708 $127,644 30 $ 308 -- $ 2
Shares reinvested ................................... -- 3 -- -- -- --
Shares repurchased .................................. (185) (1,906) (4) (44) -- (1)
------ -------- ---- ------ ---- ------
Net increase ........................................ 12,523 $125,741 26 $ 264 -- $ 1
====== ======== ==== ====== ==== ======
SMALL CAP GROWTH FUND*
Shares sold ......................................... 4,822 $ 51,438 30 $ 364 2 $ 22
Shares reinvested ................................... 8 79 -- -- -- --
Shares repurchased .................................. (170) (1,949) (2) (26) (2) (21)
------ -------- ---- ------ ---- ------
Net increase ........................................ 4,660 $ 49,568 28 $ 338 -- $ 1
====== ======== ==== ====== ==== ======
SMALL CAP VALUE FUND
Shares sold ......................................... 6,633 $108,947 367 $6,063 35 $ 544
Shares reinvested ................................... 1,006 15,365 61 915 -- --
Shares repurchased .................................. (2,710) (44,464) (71) (1,135) (31) (490)
------ -------- ---- ------ ---- ------
Net increase ........................................ 4,929 $ 79,848 357 $5,843 4 $ 54
====== ======== ==== ====== ==== ======
<FN>
- --------------
*FUND COMMENCED OPERATIONS ON AUGUST 1, 1997.
</FN>
</TABLE>
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1998 (000)
-------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS CLASS B
-------------------- ---------------- ---------------
SHARES VALUE SHARES VALUE SHARES VALUE
------ -------- ------ ------ ------ ------
EQUITY GROWTH FUND
<S> <C> <C> <C> <C> <C> <C>
Shares sold ....................................... 5,311 $112,234 225 $4,854 14 $ 308
Shares reinvested ................................. 839 15,580 44 816 -- --
Shares repurchased ................................ (3,367) (72,440) (60) (1,269) (13) (287)
------ -------- ---- ------ ---- ------
Net increase ...................................... 2,783 $ 55,374 209 $4,401 1 $ 21
====== ======== ==== ====== ==== ======
TAX MANAGED EQUITY FUND**
Shares sold ....................................... 145 $ 1,477 1 $ 10 9 $ 88
Shares sold from Common Fund (note 6) ............. 16,361 163,615 -- -- -- --
Shares reinvested ................................. -- -- -- -- -- --
Shares repurchased ................................ (507) (5,090) -- -- -- --
------ -------- ---- ------ ---- ------
Net increase ...................................... 15,999 $160,002 1 $ 10 9 $ 88
====== ======== ==== ====== ==== ======
CORE EQUITY FUND*
Shares sold ....................................... 10,639 $106,584 36 $ 399 -- $ 2
Shares reinvested ................................. 49 503 -- -- -- --
Shares repurchased ................................ (952) (10,061) -- (2) -- --
------ -------- ---- ------ ---- ------
Net increase ...................................... 9,736 $ 97,026 36 $ 397 -- $ 2
====== ======== ==== ====== ==== ======
EQUITY INCOME FUND
Shares sold ....................................... 4,192 $ 70,486 114 $1,955 3 $ 45
Shares reinvested ................................. 353 5,680 2 34 -- --
Shares repurchased ................................ (2,031) (34,560) (21) (353) (3) (44)
------ -------- ---- ------ ---- ------
Net increase ...................................... 2,514 $ 41,606 95 $1,636 -- $ 1
====== ======== ==== ====== ==== ======
<FN>
- ----------------
* FUND COMMENCED OPERATIONS ON AUGUST 1, 1997.
** FUND COMMENCED OPERATIONS ON APRIL 9, 1998.
</FN>
</TABLE>
60
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED MAY 31, 1997 (000)
-------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
------------------------- -------------------------
SHARES VALUE SHARES VALUE
-------- ----------- ------ ---------
SMALL CAP VALUE FUND
<S> <C> <C> <C> <C>
Shares sold ........................................... 6,042 $ 83,858 58 $ 777
Shares reinvested ..................................... 262 3,565 18 252
Shares repurchased .................................... (725) (9,823) (110) (1,438)
-------- ---------- ------ --------
Net increase (decrease) ............................... 5,579 $ 77,600 (34) $ (409)
-------- ---------- ------ --------
EQUITY GROWTH FUND
Shares sold ........................................... 7,181 $ 124,275 42 $ 770
Shares issued in Reorganization ....................... 2,631 47,518 -- --
Shares reinvested ..................................... 944 15,464 74 1,216
Shares repurchased .................................... (6,283) (113,036) (78) (1,397)
-------- ---------- ------ --------
Net increase .......................................... 4,473 $ 74,221 38 $ 589
-------- ---------- ------ --------
EQUITY INCOME FUND
Shares sold ........................................... 4,394 $ 60,027 7 $ 96
Shares reinvested ..................................... 200 2,708 1 17
Shares repurchased .................................... (941) (12,754) (1) (21)
-------- ---------- ------ --------
Net increase .......................................... 3,653 $ 49,981 7 $ 92
-------- ---------- ------ --------
</TABLE>
6. COMMON TRUST FUND CONVERSION
On April 9, 1998, a predecessor common fund was converted into the Tax Managed
Equity Fund. The assets, which consisted of securities and related receivables,
were converted on a tax-free basis. At the time of conversion, 16,361,494 of
Institutional Class shares of the Tax Managed Equity Fund were issued. The net
assets of the Common Fund immediately before the conversion were $163,614,941
which included unrealized appreciation of $129,709,103.
7. SUBSEQUENT EVENT
A special meeting of shareholders of the International Equity, Small Cap
Value and Small Cap Growth Funds is scheduled to be held on or about August 13,
1998, in order to approve a new Investment Advisory Agreement. The new Advisory
Agreement provides for an increase in compensation payable for investment
advisory services and enhanced flexibility to negotiate portfolio brokerage
commissions.
61
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and
Shareholders of Armada Funds
We have audited the accompanying statements of net assets of the Armada
International Equity Fund, Armada Small Cap Growth Fund, Armada Small Cap Value
Fund, Armada Equity Growth Fund, Armada Tax Managed Equity Fund, Armada Core
Equity Fund, and Armada Equity Income Fund (the "Funds") as of May 31, 1998, and
the related statements of operations, changes in net assets and financial
highlights for each of the periods presented herein. These financial statements
and financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification by
examination of securities held by the custodian, as of May 31, 1998, and
confirmation of securities not held by the custodian, by correspondence with
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds at May 31, 1998, and the results of their operations,
changes in their net assets, and financial highlights for each of the periods
presented herein, in conformity with generally accepted accounting principles.
/s/ [signature omitted]
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
July 20, 1998
62
<PAGE>
RESULTS OF PROXY VOTING (UNAUDITED)
JUNE 29, 1998 SHAREHOLDER MEETING
A special meeting of the Shareholders of the Enhanced Income, Total Return
Advantage and Core Equity Funds was held on June 29, 1998. Shareholders approved
the following proposals:
PROPOSAL 1.
To approve an interim advisory agreement between the Trust and NAM.
At least 83.11% of shareholders in each Fund voted to approve the proposal.
No more than .16% in each Fund voted against the proposal.
PROPOSAL 2.
To approve a new advisory agreement between the Trust and National City.
At least 83.11% of shareholders in each Fund voted to approve the proposal.
No more than .16% in each Fund voted against the proposal.
PROPOSAL 3.
To approve a new sub-advisory agreement between National City and NAM for the
Total Return Advantage and Core Equity Funds.
At least 83.11% of shareholders in each Fund voted to approve the proposal.
No more than .16% in each Fund voted against the proposal.
63
<PAGE>
NOTES
64
<PAGE>
ARMADA FUNDS
BOARD OF TRUSTEES
ROBERT D. NEARY
CHAIRMAN
Retired Co-Chairman, Ernst & Young
Director:
Cold Metal Products, Inc.
Zurn Industries, Inc.
HERBERT R. MARTENS, JR.
PRESIDENT
Executive Vice President,
National City Corporation
Chairman, President and Chief Executive
Officer, NatCity Investments,Inc.
LEIGH CARTER
Retired President and Chief Operating
Officer, B.F. Goodrich Company
Director:
Kirtland Capital Corporation
Morrison Products
JOHN F. DURKOTT
President and Chief Operating Officer,
Kittle's Home Furnishings Center, Inc.
ROBERT J. FARLING
Retired Chairman, President and
Chief Executive Officer, Centerior Energy
Director:
Republic Engineered Steels
RICHARD W. FURST, DEAN
Professor of Finance and Dean
Carol Martin Gatton College of Business
and Economics, University of Kentucky
Director:
Foam Design, Inc.
The Seed Corporation
GERALD L. GHERLEIN
Executive Vice President and General
Counsel, Eaton Corporation
Trustee:
WVIZ Educational Television
J. WILLIAM PULLEN
President and Chief Executive Officer,
Whayne Supply Company
<PAGE>
---------------
BULK RATE
U.S. POSTAGE
PAID
CLEVELAND, OH
PERMIT NO. 1535
---------------
[Armada Funds Logo Omitted]
Oaks, Pennsylvania 19456
Marlborough, Massachusetts 01752
INVESTMENT ADVISERS
AFFILIATES OF
NATIONAL CITY
CORPORATION
National Asset Management
Corporation
101 South Fifth Street
Louisville, KY 40202
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
AF-800 (7/98)
