[PHOTO OF HISTORICAL SOCIETY OMITTED]
ANNUAL REPORT
MAY 31, 1998
ARMADA TOTAL RETURN ADVANTAGE FUND
ARMADA INTERMEDIATE BOND FUND
ARMADA ENHANCED INCOME FUND
ARMADA GNMA FUND
ARMADA BOND FUND
ARMADA FUNDS INCOME SERIES
[ARMADA FUNDS LOGO OMITTED]
FINANCIAL POWER CLOSE AT HAND
<PAGE>
ARMADA FUNDS INCOME
SERIES ANNUAL REPORT -- MAY 31, 1998
ARMADA TOTAL RETURN ADVANTAGE FUND
ARMADA INTERMEDIATE BOND FUND
ARMADA ENHANCED INCOME FUND
ARMADA GNMA FUND
ARMADA BOND FUND
TABLE OF CONTENTS
Chairman's Message ........................................................ 1
Income Market Overview .................................................... 3
FUND OVERVIEWS
Armada Total Return Advantage Fund ..................................... 5
Armada Intermediate Bond Fund .......................................... 8
Armada Enhanced Income Fund ............................................ 11
Armada GNMA Fund ....................................................... 14
Armada Bond Fund ....................................................... 16
STATEMENT OF NET ASSETS/PORTFOLIO OF INVESTMENTS AND FINANCIAL HIGHLIGHTS
Armada Total Return Advantage Fund ..................................... 19
Armada Intermediate Bond Fund .......................................... 24
Armada Enhanced Income Fund ............................................ 27
Armada GNMA Fund ....................................................... 30
Armada Bond Fund ....................................................... 34
FINANCIAL STATEMENTS
Statement of Assets and Liabilities .................................... 39
Statement of Operations ................................................ 40
Statement of Changes in Net Assets ..................................... 42
NOTES TO FINANCIAL STATEMENTS ............................................. 44
REPORT OF INDEPENDENT AUDITORS ............................................ 50
RESULTS OF PROXY VOTING ................................................... 51
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[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.
[BULLET] 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.
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<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
Robert D. Neary
Chairman
Armada Funds
2
<PAGE>
INCOME MARKET OVERVIEW
REMARKS FROM THE ADVISERS
In short, the year ended May 31, 1998, was a good one for the majority of
fixed income investors. Solid growth, subdued inflation, a neutral Federal
Reserve and the expectation of the first government budget surplus since the
sixties put downward pressure on interest rates in the first half of the year.
In the second half, events in Asia prompted investors to seek quality and safety
- -- and many found it in the U.S. fixed income markets. As a result, throughout
much of the second half, rates traded up and down in a relatively narrow range
and the yield curve flattened dramatically.
MARKET SENTIMENT RULES
Despite the brisk pace of our economy's growth, there are still few signs of
impending inflationary pressures in the real economy. Currently, the Consumer
Price Index and the Producer Price Index are continuing to run at secular lows,
a broad range of commodity prices are declining, and the U.S. dollar continues
to display strength. At the same time, however, unemployment is also at a 27
year low -- and hourly wages are growing at an elevated rate of 4.4% year over
year.
Historically, unemployment and wage pressure at these levels have triggered
inflationary pressure -- which, along with the continued strength of our
economy's expansion, prompted the Federal Reserve to change its bias from
neutral to one of tightening at its March meeting. But the markets then -- and
now -- clearly did not agree, and to date, the prices of fixed income securities
do not reflect that a tightening is around the corner. Very simply, signs of
moderating growth, continued low inflation, decreasing Treasury supply, dollar
strength and flight to quality buying more than offset investors worries of a
Fed tightening. And market sentiment, in this case, may be right.
FLU SYMPTOMS
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
the same time, at home, with imports from markets with devalued currencies
entering the marketplace at record levels, corporations have very little if any
pricing power. This, coupled with increasing wage pressures from a tight
domestic labor market, is beginning to squeeze profit margins -- and
3
<PAGE>
INCOME MARKET OVERVIEW
REMARKS FROM THE ADVISERS
should soon impact corporate profits and economic growth.
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.
HIGHER OR LOWER RATES?
As a result, we expect to see the pace of economy's growth slow in the second
half of the year. Given the extremely competitive pricing environment and the
strength of the dollar, the prices of goods should continue to decline -- and
keep inflation well within check. As a result, we believe the Fed will remain on
hold through -- at least -- the summer. Accordingly, we remain relatively
optimistic about long-term interest rates, though we believe the recent 5.75%-6%
range will continue to hold for the next few months. Longer term, while strong
cases can be made both for higher and lower interest rates, we continue to think
the ultimate move will be lower.
4
<PAGE>
ARMADA TOTAL RETURN
ADVANTAGE FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
INVESTMENT MANAGEMENT
GROUP, NATIONAL ASSET
MANAGEMENT CORPORATION
FUND'S DATE OF INCEPTION:
JULY 7, 1994 (INSTITUTIONAL SHARES)
SEPTEMBER 6, 1994 (RETAIL SHARES)
ASSETS:
$296,075,450 (INSTITUTIONAL SHARES)
$ 639,550 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
PROVIDE A TOTAL RATE OF RETURN, INCOME AND PRICE APPRECIATION GREATER THAN THAT
OF POPULAR MARKET INDICES WITH SIMILAR MATURITY AND QUALITY CHARACTERISTICS.
UNDER NORMAL MARKET CONDITIONS, THE FUND MAINTAINS AN AVERAGE DOLLAR-WEIGHTED
PORTFOLIO MATURITY OF TWO YEARS ABOVE OR BELOW THE AVERAGE MATURITY OF THE
LEHMAN GOVERNMENT/CORPORATE BOND INDEX.
KEY INVESTMENT CONCEPTS
The Fund seeks to provide its shareholders with a total rate of return,
income and price appreciation greater than that of popular market indices with
similar maturity and quality characteristics. To this end, the Fund's assets are
allocated among different market sectors based on their return potential. Also,
the maturity structure of the Fund is adjusted according to our perceptions of
intermediate and long-term trends in interest rates. Under normal market
conditions, the Fund maintains average dollar-weighted portfolio maturity of two
years above or below the average maturity of the Lehman Government/Corporate
Bond Index. Finally, within sectors, securities are chosen for investment based
on their track records and the attractiveness of other securities with similar
characteristics.
RECENT PERFORMANCE
Hampered by exposure to Southeast Asian Yankee bonds, the Fund underperformed
the bond markets for the year ended May 31, 1998. For the period, the Fund's
Institutional Shares and Retail Shares produced total returns of 10.35% and
10.08% (before sales charges) respectively, versus a return of 12.14% on the
Lehman Government/Corporate Bond Index ("the Index").
FUND STRATEGIES
Throughout much of the year, consistent with our expectation that rates would
continue to trend downward, the average duration of the Fund was maintained in a
range approximately 0.2 - 0.50 years longer than that of the Index. And rates
did fall over the course of the year, but the ride was a bumpy one at times.
News of turmoil in Asia in the late summer and throughout the fall sparked
enthusiasm for Treasury securities. Non-Treasury securities weakened and in some
sectors, weakened significantly as 1997 drew to a close. Southeast Asian Yankee
bonds were particularly hard hit -- and due to its overweightings in these
securities, the Fund's performance suffered.
5
<PAGE>
ARMADA TOTAL RETURN
ADVANTAGE FUND OVERVIEW
COMMENTS FROM THE MANAGER
"...IN THE MONTHS AHEAD, WE EXPECT THAT THE REAL CONSEQUENCES OF EVENTS IN ASIA
WILL BECOME APPARENT GRADUALLY. WHILE IT IS CLEAR THAT OUR ECONOMY AND
CORPORATIONS WILL EXPERIENCE SOME FALLOUT, WE ARE UNLIKELY TO SEE THE MAJOR
DISRUPTIONS..."
FUND STRUCTURE
As 1998 opened, investor concern over events in Asian markets -- and the
possibility that their impact would be immediate and dramatic -- lessened.
Consequently, after hurting performance in the first half of the period, the
Fund's exposures in non-Treasury securities began to bounce back. Currently,
approximately 36.2% of the Fund's assets are invested in Treasuries and
Agencies, 36.1% in corporates, 6.9% in mortgage-backed securities, and 13.9% in
asset-backed securities. The average duration of the portfolio was approximately
5.9 years, versus the Index benchmark of 5.4 years.
LOOKING AHEAD
We expect to see the economy slow in the months ahead, further subduing any
inflationary pressure and increasing downward pressure on interest rates. As a
result, we expect to maintain the Fund's average duration at a point modestly
longer than the Index benchmark for the foreseeable future. Moreover, in the
months ahead, we expect that the real consequences of events in Asia will become
apparent gradually. While it is clear that our economy and corporations will
experience some fallout, we are unlikely to see the major disruptions in the
marketplace originally predicted by pundits. Consequently, we believe the
environment overall in the months ahead will be a very positive one for
non-Treasury securities. With this in mind, we expect to maintain the Fund's
heavy weighting in non-Treasuries for the foreseeable futures. Moreover, in
recent months, exposures in the mortgage-backed sector have been increased
significantly.
6
<PAGE>
ARMADA TOTAL RETURN
ADVANTAGE 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 Return4 Date Date2
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Armada Total Return Advantage Fund
Institutional Shares1 10.35% 7.66% 8.74% 38.63%
- ---------------------------------------------------------------------------------
Armada Total Return Advantage Fund
Retail Shares With Sales Charge4 4.88% 5.61% 6.96% 28.55%
Without Sales Charge 10.08% 7.35% 8.38% 35.01%
- ---------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[LINE GRAPH OMITTED]
PLOT POINTS FOLLOW:
Armada Total Return Armada Total Return Lehman/Government
Advantage Fund Advantage Fund (Retail Corporate
(Institutional Shares)1 Shares with sales charge)4 Bond Index
Jun-1994 $10,000
Jul-1994 $10,000
Sep-1994 $9,525
May-1995 11,113 10,396 11,187
May-1996 11,579 10,782 11,645
May-1997 12,565 11,683 12,565
May-1998 13,865 12,680 14,008
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 TOTAL RETURN ADVANTAGE FUND'S DATE OF INCEPTION WAS JULY 7, 1994
FOR INSTITUTIONAL SHARES AND SEPTEMBER 6, 1994 FOR RETAIL SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1998 OF 4.75%.
7
<PAGE>
ARMADA INTERMEDIATE BOND FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
FIXED INCOME 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:
$166,709,894 (INSTITUTIONAL SHARES)
$ 3,287,953 (RETAIL SHARES)
$ 2,153 (CLASS B SHARES)
INVESTMENT OBJECTIVE:
PROVIDE AS HIGH A LEVEL OF CURRENT INCOME AS IS CONSISTENT WITH PRUDENT
INVESTMENT RISK. THE FUND INVESTS IN INVESTMENT GRADE FIXED INCOME SECURITIES.
UNDER NORMAL MARKET CONDITIONS, THE FUND MAINTAINS AN AVERAGE DOLLAR-WEIGHTED
PORTFOLIO MATURITY OF TEN YEARS OF LESS. THE FUND'S BENCHMARK IN TERMS OF ITS
PERFORMANCE IS THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX.
KEY INVESTMENT CONCEPTS
The Fund seeks to provide as high a level of income as is consistent with
prudent investment risk. To accomplish this, the Fund is actively managed with
assets allocated to sectors that offer the best income and return potential. The
portfolio's sensitivity to interest rates is also monitored closely --
sensitivity is increased on expectations of lower rates, lowered when our
outlook calls for higher rates. Finally, the Fund invests in only securities
consistent with its stated objectives, attractive on a relative basis and high
quality. Performance is measured against the Lehman Intermediate
Government/Corporate Bond Index.
RECENT PERFORMANCE
For the year ended May 31, 1998, the Armada Intermediate Bond Fund produced a
total return of 8.09% for Institutional investors and 7.71% (before sales
charges) for Retail investors. Over the same period, the industry benchmark, the
Lehman Intermediate Government/Corporate Bond Index, posted a total return of
12.14%. As of May 31, 1998, the Fund offered SEC 30-day yields of 5.57% and
5.07% for Institutional and Retail shares respectively.
RECENT STRATEGY
Economic turmoil in Asia, the strength of the dollar and competitive pricing
pressures kept inflation in check during the year ended May 31, 1998. As a
result, while there were moments when the environment was somewhat volatile, the
marketplace was relatively calm throughout much of the year and rates drifted
downward. Throughout much of the period, the Fund's duration was some 5% longer
than its benchmark which had a positive impact on performance.
The Fund also benefited from its overweighting in discount mortgages. Backed
by homeowners with lower rate mortgages who are unlikely to refinance unless
rates drop dramatically lower than current levels, these securities did not
experience prepayments that other mortgage securities did as rates fell.
FUND STRUCTURE
As of May 31, 1998, the Fund remained overweighted in asset-backed and
mortgage-backed securities, with approximately 31.0% of its assets invested in
these sectors, 28.1% was invested in corporate bonds, and the remainder was held
in cash and U.S. Treasury Obligations. The average duration of the Fund's
holdings was 3.4 years; the average credit quality was (AAA).
8
<PAGE>
ARMADA INTERMEDIATE BOND FUND OVERVIEW
COMMENTS FROM THE MANAGER
"ALREADY DROPPING OFF ITS TORRID PACE IN THE FIRST QUARTER OF THE YEAR, THE
ECONOMY SHOULD SLOW FURTHER IN THE COMING MONTHS..."
LOOKING AHEAD
Already dropping off its torrid pace in the first quarter of the year, the
economy should slow further in the coming months as U.S. corporations and our
economy begin to feel the first significant effects of the turmoil in Asia.
Consequently, we believe that if and when the Federal Reserve does adjust
interest rates again, it will loosen, rather than tighten, them. Of course,
lower rates could possibly trigger yet another round of refinancings.
Significantly overweighted in discount mortgages, however, the portfolio is
well-positioned for such a turn of events. As a result, we are optimistic about
the Fund's prospects in the months ahead.
9
<PAGE>
ARMADA INTERMEDIATE BOND FUND OVERVIEW
COMMENTS FROM THE MANAGER
<TABLE>
<CAPTION>
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TOTAL RETURNS as of 05/31/98
- ---------------------------------------------------------------------------------------------
One Annualized Annualized Annualized Cumulative
Year 3-Year 5-Year Inception to Inception to
Return Return Return Date Date2
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Armada Intermediate Bond Fund
Institutional Shares1 8.09% 6.16% 5.56% 7.64% 86.14%
- ---------------------------------------------------------------------------------------------
Armada Intermediate Bond Fund
Retail Shares With Sales Charge4 2.59% 4.12% 4.23% 6.28% 54.33%
Without Sales Charge 7.71% 5.82% 5.26% 7.01% 62.10%
- ---------------------------------------------------------------------------------------------
Armada Intermediate Bond Fund
Class B Shares With Sales Charge5 2.39% 4.51% 4.87% (9.11%) (3.72%)
Without Sales Charge 7.39% 5.72% 5.19% 3.16% 1.24%
- ---------------------------------------------------------------------------------------------
</TABLE>
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[LINE GRAPH OMITTED]
PLOT POINTS FOLLOW:
<TABLE>
<CAPTION>
Armada Intermediate Armada Intermediate Armada Intermediate Lehman Intermediate
Bond Fund Bond Fund (Retail Bond Fund Government/
(Institutional Shares with (Class B Corporate
Shares)1 sales charge)2,4 Shares)5,6 Index
<S> <C> <C> <C> <C>
11/30/89 $10,000
12/20/89 $10,000 $ 9,525 $10,000 10,000
May-1990 10,098 9,619 10,098 10,197
May-1991 11,332 10,791 11,330 11,414
May-1992 12,761 12,154 12,761 12,737
May-1993 14,205 13,425 14,168 14,061
May-1994 14,205 13,396 14,135 14,244
May-1995 15,561 14,636 15,444 15,617
May-1996 16,151 15,140 15,975 16,334
May-1997 17,222 16,103 16,991 17,539
May-1998 18,615 17,344 18,247 19,086
</TABLE>
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 INTERMEDIATE BOND 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, 3-YEAR AND 5-YEAR RETURNS OF THE
CLASS B SHARES INCLUDE INFORMATION FROM THE COMMENCEMENT OF OPERATIONS OF
THE INSTITUTIONAL SHARES, RATHER THAN THE DATE CLASS B SHARES WERE
INTRODUCED. THE PERFORMANCE OF THE CLASS B SHARES PRIOR TO THEIR
INTRODUCTION DATE DOES NOT REFLECT SHAREHOLDER SERVICING FEES, WHICH, IF
REFLECTED, WOULD REDUCE THE PERFORMANCE QUOTED FOR SUCH PERIODS.
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 4.75%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1998 OF 5.00%.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
RETAIL CLASS FROM DATE OF INCEPTION.
10
<PAGE>
ARMADA ENHANCED INCOME FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
INVESTMENT MANAGEMENT GROUP, NATIONAL ASSET
MANAGEMENT CORPORATION
FUND'S DATE OF INCEPTION:
JULY 7, 1994 (INSTITUTIONAL SHARES)
SEPTEMBER 9, 1994 (RETAIL SHARES)
ASSETS:
$71,887,977 (INSTITUTIONAL SHARES)
$ 559,023 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
SEEK A TOTAL RATE OF RETURN GREATER THAN THAT OF THE MERRILL LYNCH 1-3 YEAR
TREASURY INDEX. THE FUND WILL NORMALLY INVEST AT LEAST 80% OF THE VALUE OF ITS
TOTAL ASSETS IN INVESTMENT GRADE DEBT SECURITIES OF ALL TYPES. HOWEVER, UP TO
20% OF THE VALUE OF ITS TOTAL ASSETS MAY BE INVESTED IN PREFERRED STOCKS AND
OTHER INVESTMENTS. UNDER NORMAL MARKET CONDITIONS, THE FUND INTENDS TO MAINTAIN
AN AVERAGE DOLLAR-WEIGHTED PORTFOLIO MATURITY FOR ITS DEBT SECURITIES OF 1 1/2
TO 4 YEARS.
KEY CONCEPTS
The Fund seeks to provide its shareholders with a return greater than of the
Merrill Lynch 1-3 year Treasury Index. To accomplish this, the Fund's assets are
allocated among different market sectors based on the return potential. Also,
the maturity structure of the Fund is adjusted according to our perceptions of
intermediate and long-term trends in interest rates. Finally, individual
securities are chosen for investment based on their attractiveness versus other
securities with similar characteristics.
RECENT PERFORMANCE
For the year ended May 31, 1998, the Fund performed in line with its
benchmark. Over the course of the period, it produced total returns of 6.68% for
Institutional shares and 6.68% for Retail shares (before sales charges) versus
6.98% for the Merrill Lynch 1-3 year Treasury Index.
FUND STRATEGIES
Throughout much of the period, the average duration of the Fund was longer
than that of the Index. This was consistent with our belief that the longer term
trend toward lower rates remained intact. And, while there were some volatile
moments when rates spiked upward on news of events in Asia and elsewhere, over
the course of the year, rates moved lower. In this environment, however,
opportunities for price appreciation were relatively limited. Consequently,
throughout the period, our efforts were focused on yield advantage.
FUND STRUCTURE
As the marketplace realized that whatever impact the situation in Asia would
have on U.S. corporations would become clear gradually rather than immediately,
market sentiment shifted and corporate securities rallied. Consequently, a drag
on performance in the first half of the year ended May 31, 1998, the Fund's
heavy-weighting in non-Treasury sectors performed well in the second half of the
period. Currently, approximately 49.6% of the Fund's assets are invested in
Treasuries and Agencies, 12.7% in corporates and asset-backed securities 11.2%
in mortgage-backed securities and 21.5% in asset-backed securities. The average
duration of the portfolio is approximately 1.75 years, versus the industry
benchmark of 1.6 years.
11
<PAGE>
ARMADA ENHANCED INCOME FUND OVERVIEW
COMMENTS FROM THE MANAGER
"IN THE MONTHS AHEAD, WE EXPECT TO SEE THE ECONOMY SLOW, INFLATION TO REMAIN
SUBDUED AND INTEREST RATES CONTINUE TO MOVE DOWNWARD."
LOOKING AHEAD
In the months ahead, we expect to see the economy slow, inflation to remain
subdued and interest rates continue to move downward. Consequently, we expect to
maintain the Fund's average duration at a point somewhat longer than the
industry benchmark for the foreseeable future. In addition, as the real, rather
than anticipated, impact of events in Asia on our economy and corporations
becomes apparent, we expect to see non-Treasury securities strengthen.
Heavily-weighted in corporate and asset-backed securities, the Fund is
well-positioned for such a rebound. As a result, we're optimistic about the
Fund's prospects in the months ahead.
12
<PAGE>
ARMADA ENHANCED 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 Return Date Date2
- --------------------------------------------------------------------------------
Armada Enhanced Income Fund
Institutional Shares1 6.68% 6.01% 6.11% 26.01%
- --------------------------------------------------------------------------------
Armada Enhanced Income Fund
Retail Shares With Sales Charge4 3.77% 4.91% 5.29% 21.14%
Without Sales Charge 6.68% 5.90% 6.09% 24.62%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[LINE GRAPH OMITTED]
PLOT POINTS FOLLOW:
Armada Enchanced Armada Enhanced Merrill 1-3
Income Fund Income Fund (Retail Year U.S. Treasury
(Institutional Shares) Shares with sales charge)4 Bill Index
6/30/94 $10,000
7/7/94 $10,000 10,000
9/9/94 10,000 $ 9,700 10,000
May-1995 10,577 10,205 10,714
May-1996 11,142 10,727 11,276
May-1997 11,812 11,361 12,020
May-1998 12,601 12,120 12,859
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 ENHANCED INCOME FUND'S DATE OF INCEPTION WAS JULY 7, 1994 FOR
INSTITUTIONAL SHARES AND SEPTEMBER 9, 1994 FOR RETAIL SHARES.
3 THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4 PERFORMANCE CALCULATED BASED ON THE MAXIMUM FRONT-END SALES CHARGE IN EFFECT
AT MAY 31, 1998 OF 4.75%.
13
<PAGE>
ARMADA GNMA FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
FIXED INCOME TEAM,
NATIONAL CITY'S
ASSET MANAGEMENT GROUP
FUND'S DATE OF INCEPTION:
AUGUST 10, 1994 (INSTITUTIONAL SHARES)
SEPTEMBER 11, 1996 (RETAIL SHARES)
ASSETS:
$83,623,715 (INSTITUTIONAL SHARES)
$ 548,847 (RETAIL SHARES)
INVESTMENT OBJECTIVE:
SEEK THE HIGHEST LEVEL OF CURRENT INCOME CONSISTENT WITH PRESERVATION OF CAPITAL
AND A HIGH DEGREE OF LIQUIDITY BY INVESTING PRIMARILY IN MORTGAGE PASS-THROUGH
SECURITIES GUARANTEED BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION. THE
FUND'S BENCHMARK IN TERMS OF ITS PERFORMANCE IS THE LEHMAN GNMA INDEX.
KEY INVESTMENT CONCEPTS
The Armada GNMA Fund seeks to maximize total return by investing primarily
in mortgage-backed securities guaranteed by GNMA. To accomplish this, the
managers search out and capitalize on attractive opportunities with the
mortgage-backed securities market. Performance is measured against the Lehman
Brothers GNMA Index (the "Index").
PERFORMANCE
For the year ended May 31, 1998, the Fund produced a total return of 9.17%
for Institutional investors and 8.90% (before sales charges) for Retail
investors. For the same period, the Index posted a total return of 9.61%. As of
May 31, 1998, the Fund had SEC 30-day yields of 5.46% and 4.93% for the
institutional and retail shares, respectively.
FUND STRATEGY
Throughout the period, the Fund's duration was some 5% longer than its
benchmark -- as a result, the portfolio performed well as interest rates fell.
Moreover, the decline in rates triggered a wave of prepayments. The Fund,
however, was less affected than the market due to an underweighting in high
coupon securities. These high coupon securities are more prepayment sensitive
than low coupons.
In addition, earlier in the year, we moved quickly to capture opportunities
in the TBA (To Be Announced) or newly issued sector of the mortgage-backed
marketplace that offered investors value. Throughout the course of the year,
these new issues outperformed more seasoned issues as the seasoned issues
prepaid faster than expected.
LOOKING AHEAD
The prospect of a government budget surplus, turmoil in Asia markets, and
slowing economy should keep inflation subdued in the coming year. Interest rates
could drift lower. At this point, it is extremely difficult to predict just how
far they could fall -- but even minor changes may impact the mortgage-backed
markets. In short, technology -- and the speed with which refinancings can now
be done -- is changing the marketplace and increasing competition among lenders.
Consequently, while we are optimistic about the Fund's prospects in the
months ahead, we are cautious. The Fund's duration remains longer than its
benchmark and its holdings overweighted in sectors less sensitive to
fluctuations in interest rates.
14
<PAGE>
ARMADA GNMA 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 Return2 Date2 Date2
- --------------------------------------------------------------------------------
Armada GNMA Fund
Institutional Shares1 9.17% 7.62% 8.55% 36.66%
- --------------------------------------------------------------------------------
Armada GNMA Fund
Retail Shares With Sales Charge4 3.70% 5.73% 6.30% 11.06%
Without Sales Charge 8.90% 7.47% 9.35% 16.60%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[LINE GRAPH OMITTED]
PLOT POINTS FOLLOW:
Armada GNMA Fund Armada GNMA Fund (Retail Lehman GNMA
(Institutional Shares) Shares with sales charge) Index
7/31/94 $10,000
8/10/94 $10,000 $9,525 10,000
May-1995 10,962 10,442 10,960
May-1996 11,469 10,924 11,547
May-1997 12,516 11,901 12,643
May-1998 13,663 12,960 13,857
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 GNMA FUND'S DATE OF INCEPTION WAS AUGUST 10, 1994 FOR
INSTITUTIONAL SHARES AND SEPTEMBER 11, 1996 FOR RETAIL SHARES. THE
ANNUALIZED 3-YEAR RETURN OF THE RETAIL SHARES INCLUDES INFORMATION FROM THE
COMMENCEMENT OF OPERATIONS OF THE INSTITUTIONAL SHARES, RATHER THAN THE DATE
RETAIL SHARES WERE INTRODUCED. THE PERFORMANCE OF THE RETAIL SHARES PRIOR TO
THEIR INTRODUCTION DATE DOES NOT REFLECT SHAREHOLDER SERVICING FEES, WHICH,
IF REFLECTED, WOULD REDUCE THE PERFORMANCE QUOTED FOR SUCH PERIODS.
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 4.75%.
15
<PAGE>
ARMADA BOND FUND OVERVIEW
COMMENTS FROM THE MANAGER
PORTFOLIO MANAGER:
FIXED INCOME TEAM,
NATIONAL CITY'S
ASSET MANAGEMENT GROUP
FUND'S DATE OF INCEPTION:
AUGUST 10, 1994 (INSTITUTIONAL SHARES)
SEPTEMBER 11, 1996 (RETAIL SHARES)
JANUARY 6, 1998 (CLASS B SHARES)
ASSETS:
$132,619,503 (INSTITUTIONAL SHARES)
$ 160,689 (RETAIL SHARES)
$ 1,047 (CLASS B SHARES)
INVESTMENT OBJECTIVE:
SEEK PRESERVATION OF CAPITAL AND A HIGH DEGREE OF LIQUIDITY WHILE PROVIDING
CURRENT INCOME. THE FUND INVESTS IN A BROAD ARRAY OF FIXED INCOME SECURITIES,
INCLUDING GOVERNMENT AND CORPORATE BONDS AND MORTGAGE AND ASSET-BACKED
SECURITIES. THE FUND'S BENCHMARK IN TERMS OF ITS PERFORMANCE IS THE LEHMAN
AGGREGATE BOND INDEX.
KEY INVESTMENT CONCEPTS
The Armada Bond Fund seeks preservation of capital and a high degree of
liquidity while providing income. The Fund invests in a broad array of fixed
income securities, including government and corporate bonds and mortgage and
asset-backed securities. The performance of the Fund is measured against the
Lehman Aggregate Bond Index. The Fund seeks to add value through sector rotation
and individual security selection.
PERFORMANCE
For the year ended May 31, 1998, the Fund produced a total return of 8.55%
for Institutional investors and 8.29% (before sales charges) for Retail
investors. For the same period, the Index posted a total return of 10.92%. As of
May 31, 1998, the Fund had SEC 30-day yields of 5.67% and 5.24% for
Institutional and Retail shares, respectively.
FUND STRATEGY
With the Fund's interest rate sensitivity, or duration, pegged 5% greater
than its benchmark throughout much the year, the Fund benefited as interest
rates slipped. In addition, while the portfolio did hold a number of
mortgage-backed securities, they were well-structured against prepayment risk --
which produced solid yields over the course of the year. As a result, the Fund's
exposures in this sector, as well as those in the asset-backed sector, made a
positive contribution to performance.
FUND STRUCTURE
As of May 31, 1998, approximately 26.6% of the Fund's holdings were invested
in corporate bonds, 30.2% in mortgage-backed and asset-backed securities, and
37.8% in government agency securities and U.S. Treasury Obligations. The
remainder was held in cash and cash equivalents. The average duration of the
Fund's holdings was 7.4 years; the average credit quality was (AAA).
16
<PAGE>
ARMADA BOND FUND OVERVIEW
COMMENTS FROM THE MANAGER
"THE GROWING BUDGET SURPLUS IN WASHINGTON, RATHER THAN EVENTS IN SOUTHEAST ASIA,
MAY PROVE TO BE THE GREATER TAILWIND FOR THE MARKETS IN THE MONTHS AHEAD."
LOOKING AHEAD
The growing budget surplus in Washington, rather than events in Southeast
Asia, may prove to be the greater tailwind for the markets in the months ahead.
Regardless of which proves to be the stronger force, the combination is expected
to keep inflation firmly in check -- and prompt interest rates to drift lower
yet. Consequently, we expect to maintain the Fund's current maturity structure.
Of course, lower rates could trigger another round of prepayments in the
asset-backed and mortgage-backed sectors. But, here, holding seasoned
securities, we do not anticipate the Fund would be significantly impacted.
Finally, corporate securities are beginning to show weakness -- due more to
investors' anticipation of Asian problems than solid evidence of it. As a
result, in the months ahead, as attractive opportunities arise in this sector,
exposures in the sector may be increased.
17
<PAGE>
ARMADA BOND FUND OVERVIEW
COMMENTS FROM THE MANAGER
- --------------------------------------------------------------------------------
TOTAL RETURNS as of 05/31/98
- --------------------------------------------------------------------------------
One Annualized Annualized Cumulative
Year 3-Year Inception Inception
Return Return2 to Date2 to Date2
- --------------------------------------------------------------------------------
Armada Bond Fund
Institutional Shares1 8.55% 6.61% 7.25% 30.53%
- --------------------------------------------------------------------------------
Armada Bond Fund
Retail Shares With Sales Charge4 3.14% 4.75% 5.03% 8.79%
Without Sales Charge 8.29% 6.46% 8.06% 14.24%
- --------------------------------------------------------------------------------
Armada Bond Fund
Class B Shares With Sales Charge5 3.36% 5.30% (8.47%) (3.45%)
Without Sales Charge 8.36% 6.49% 3.83% 1.50%
- --------------------------------------------------------------------------------
Past performance is not predictive of future performance.
GROWTH OF A $10,000 INVESTMENT3
[LINE GRAPH OMITTED]
PLOT POINTS FOLLOW:
<TABLE>
<CAPTION>
Armada Bond Fund Armada Bond Armada Bond Lehman Intermediate
(Institutional Fund (Retail Shares Fund (Class Intermediate
Shares)1 with sales charge)4 B Shares)5,6 Government Index
<S> <C> <C> <C> <C>
7/31/94 $10,000
8/10/94 $10,000 $ 9,525 $10,000 10,000
May-1995 10,773 10,261 10,773 10,765
May-1996 11,195 10,663 11,195 11,253
May-1997 12,024 11,433 12,003 12,053
Mqy-1998 13,053 12,381 12,707 13,087
</TABLE>
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 BOND FUND'S DATE OF INCEPTION WAS AUGUST 10, 1994, FOR
INSTITUTIONAL SHARES, SEPTEMBER 11, 1996, FOR RETAIL SHARES AND JANUARY 6,
1998, FOR CLASS B SHARES. THE ANNUALIZED 3-YEAR RETURN OF THE RETAIL SHARES
AND THE ONE YEAR AND ANNUALIZED 3-YEAR RETURNS OF THE CLASS B SHARES INCLUDE
INFORMATION FROM THE COMMENCEMENT OF OPERATIONS OF THE INSTITUTIONAL SHARES,
RATHER THAN THE DATE RETAIL OR CLASS B SHARES WERE INTRODUCED. THE
PERFORMANCE OF THE RETAIL OR CLASS B SHARES PRIOR TO THEIR INTRODUCTION DATE
DOES NOT REFLECT SHAREHOLDER SERVICING FEES, WHICH, IF REFLECTED, WOULD
REDUCE THE PERFORMANCE QUOTED FOR SUCH PERIODS.
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 4.75%.
5 PERFORMANCE CALCULATED BASED ON THE MAXIMUM DEFERRED SALES CHARGE IN EFFECT
AT MAY 31, 1998 OF 5.00%.
6 THE PERFORMANCE CHART FOR THE CLASS B SHARES INCLUDES PERFORMANCE OF THE
RETAIL CLASS FROM DATE OF INCEPTION.
18
<PAGE>
PORTFOLIO OF INVESTMENTS
ARMADA TOTAL RETURN ADVANTAGE FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
ASSET BACKED SECURITIES -- 20.5%
AUTO -- 5.3%
AESOP Funding II,
Series 1997-1, Class A1
6.220% ........10/20/01 $3,255 $ 3,278
GMAC Series 97-A, Class A
6.500% ........04/15/02 108 109
Onyx Acceptance Grantor Trust,
Series 1996-3, Class A
6.450% ........12/15/02 1,718 1,724
6.350% ........10/15/03 1,647 1,663
WOLS, Series 1998-1,
Class A3
5.962% ........08/14/01 8,539 8,554
----------
15,328
----------
CREDIT CARDS -- 5.4%
Citibank Credit Card Master Trust I,
Series 1996-1, Class A
0.000% ........02/07/03 2,415 2,063
Discover Card Master Trust I,
Series 1998-4, Class A
5.750% ........10/16/03 5,825 5,798
Metris Master Trust,
Series 1997-1, Class A
6.870% ........10/20/05 3,440 3,531
Sears Credit Account Master Trust,
Series 1996-4, Class A
6.450% ........10/16/06 3,980 4,029
----------
15,421
----------
HOME EQUITY -- 1.0%
Merrill Lynch Mortgage Investors, Inc.,
Series 1998-G1, Class A1
7.110% ........06/25/02 2,821 2,834
----------
MANUFACTURED HOUSING -- 2.4%
Green Tree Financial,
Series 1995-1, Class A5
8.400% ........05/31/00 1,035 1,074
Series 1997-5, Class A5
6.620% ........09/15/04 3,495 3,547
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
ASSET BACKED SECURITIES -- CONTINUED
MANUFACTURED HOUSING -- CONTINUED
Series 1997-B, Class A1
6.550% ........07/15/00 $2,248 $ 2,265
----------
6,886
----------
MISCELLANEOUS -- 6.4%
Fleetwood Credit Corp. Grantor
Trust Series 1997-B, Class A
6.400% ........07/15/02 4,555 4,594
Franchise Funding Credit
Association, Series 1997-1,
Class AA
7.020% ........07/15/02 1,033 1,062
Merrill Lynch Mortgage
Investors, Inc.
Series 1996-C2, Class A2
6.820% ........05/15/04 1,335 1,379
Metlife Capital Equipment Loan
Trust, Series 1997-A, Class A
6.850% ........05/20/08 1,080 1,110
PNC Student Loan Trust I,
Series 1997-2, Class A4
6.446% ........01/25/02 3,765 3,804
Series 1997-2, Class A6
6.572% ........01/25/04 2,250 2,300
Railcar Leasing, Series 1997-1,
Class A2
7.125% ........01/15/13 3,925 4,141
----------
18,390
----------
TOTAL ASSET BACKED SECURITIES
(Cost $57,933) ..................... 58,859
----------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 2.8%
Collateralized Mortgage Obligation
Trust Series 13, Class A
6.188% ........01/20/03 61 61
See Accompanying Notes
19
<PAGE>
PORTFOLIO OF INVESTMENTS
ARMADA TOTAL RETURN ADVANTAGE FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
Trust Series 56, Class A
9.000% ........05/01/14 $ 40 $ 41
MDC Asset Investors
Trust Series V, Class 2
9.325% ........12/01/17 28 29
Ryland Acceptance Corp.
Series 54, Class A
9.850% ........02/01/19 101 103
Vende Mortgage Trust
Series 1994-2, Class 3K
6.500% ........11/15/13 7,575 7,658
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $7,998) ...................... 7,892
----------
MORTGAGE PASS THROUGH
OBLIGATIONS -- 13.3%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 11.0%
Pool# 2055
6.500% ........02/15/28 10,400 10,333
Pool# 2043
6.500% ........04/15/28 2,840 2,829
Pool# 2068
6.500% ........06/15/28 4,040 4,017
Pool# G00702
7.500% ........05/01/27 13,806 14,204
Pool# 160045
8.750% ........05/01/08 5 5
Pool# 181063
7.500% ........12/01/10 123 129
----------
31,517
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 2.1%
Pool# 63471
6.500% ........08/01/03 95 96
Pool# 36000
6.547% ........12/01/05 6,005 6,061
----------
6,157
----------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MORTGAGE PASS THROUGH
OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 0.0%
Pool# 132781
10.500% ........11/15/00 $17 $ 18
----------
THIRTY-SEVENTH FHA INSURANCE PROJECT -- 0.2%
7.430% ........05/01/22 450 459
----------
TOTAL MORTGAGE PASS THROUGH
OBLIGATIONS
(Cost $37,919) ..................... 38,151
----------
CORPORATE BONDS -- 35.4%
AGRICULTURE -- 1.0%
Cargill
6.150% ........02/25/08 3,100 3,078
----------
BANKING -- 4.3%
BankAmerica
7.875% ........12/01/02 3,300 3,519
Citicorp
7.125% ........09/01/05 4,000 4,200
First Union National Bank
7.125% ........10/15/06 4,400 4,653
----------
12,372
----------
DEFENSE -- 0.9%
Raytheon
6.150% ........03/15/01 2,500 2,497
----------
EDUCATION -- 1.0%
Harvard University
8.125% ........04/15/07 2,400 2,760
----------
FOREIGN -- 5.5%
Bank Austria 144A
7.250% ........02/15/17 2,950 3,141
See Accompanying Notes
20
<PAGE>
PORTFOLIO OF INVESTMENTS
ARMADA TOTAL RETURN ADVANTAGE FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- CONTINUED
FOREIGN -- CONTINUED
British Telecom, PLC
7.000% ........05/23/07 $1,875 $ 1,998
City of Naples
7.520% ........07/15/06 3,230 3,389
Transgas de Occidente SA
9.790% ........11/01/10 2,826 2,862
Quebec Province
8.625% ........01/19/05 3,875 4,379
----------
15,769
----------
INSURANCE -- 5.8%
Metropolitan Life Insurance
7.000% ........11/01/05 5,900 6,092
Nationwide Capital Surplus Notes
9.875% ........02/15/25 4,000 4,706
Prudential Insurance
8.100% ........07/15/15 2,595 2,899
Safeco Capital Trust I
Series 144A
8.072% ........07/15/37 2,950 3,153
----------
16,850
----------
LEISURE & ENTERTAINMENT -- 3.6%
News America Holdings
7.375% ........10/17/08 6,150 6,434
Time Warner Entertainment
10.150% ........05/01/12 2,900 3,793
----------
10,227
----------
RETAIL STORES -- 1.2%
May Department Stores
8.300% ........07/15/26 2,975 3,301
----------
SPECIALTY CHEMICALS -- 2.2%
Engelhard
7.000% ........08/01/01 6,200 6,386
----------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- CONTINUED
TECHNOLOGY -- 2.7%
CSC Enterprises
6.500% ........11/15/01 $3,365 $ 3,391
International Business Machines
6.500% ........01/15/28 4,450 4,433
----------
7,824
----------
TELECOMMUNICATIONS -- 3.2%
Bellsouth Communications
6.300% ........12/15/15 3,046 3,115
Worldcom
7.750% ........04/01/07 5,500 5,954
----------
9,069
----------
UTILITIES-ELECTRIC -- 4.0%
Consolidated Edison
6.450% ........12/01/07 3,250 3,315
Consumers Energy
6.875% ........03/01/18 1,450 1,454
KN Energy
6.450% ........03/01/03 3,100 3,114
Pennsylvania Power and Light
6.125% ........05/01/01 3,550 3,568
----------
11,451
----------
TOTAL CORPORATE BONDS
(Cost $97,518) .................... 101,584
----------
U.S. AGENCY OBLIGATIONS -- 5.5%
FNMA
5.750% ........02/15/08 15,875 15,713
----------
TOTAL U.S. AGENCY OBLIGATIONS
(Cost $15,669) .................... 15,713
----------
U.S. TREASURY OBLIGATIONS -- 18.9%
U.S. TREASURY BONDS -- 11.5%
7.500% ........11/15/16 10,835 12,795
8.125% ........08/15/21 15,610 19,967
----------
32,762
----------
See Accompanying Notes
21
<PAGE>
PORTFOLIO OF INVESTMENTS
ARMADA TOTAL RETURN ADVANTAGE FUND
MAY 31, 1998
PAR/SHARES VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. TREASURY OBLIGATIONS -- CONTINUED
U.S. TREASURY NOTES -- 6.0%
5.875% ........11/30/01 $2,145 $ 2,164
6.250% ........02/15/03 260 267
7.250% ........05/15/04 4,500 4,871
6.500% ........05/15/05 3,000 3,150
6.500% ........10/15/06 6,465 6,818
----------
17,270
----------
U.S. TREASURY STRIPS -- 1.4%
0.000% ........11/15/01 5,000 4,135
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $53,616) ..................... 54,167
----------
CASH EQUIVALENT -- 3.6%
Fidelity Domestic Money
Market Fund ............... 10,562 10,562
----------
TOTAL CASH EQUIVALENT
(Cost $10,562) ..................... 10,562
----------
TOTAL INVESTMENTS -- 100.0%
(Cost $281,215) .................... 286,928
==========
- -----------------------------------
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL
INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
------------
GROSS APPRECIATION ................ $5,865
GROSS DEPRECIATION ................ (152)
------------
$5,713
------------
PLC -- PUBLIC LIMITED COMPANY
STRIPS -- SEPARATELY TRADED INTEREST AND PRINCIPAL SECURITIES
See Accompanying Notes
22
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA TOTAL RETURN ADVANTAGE FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-------------------------------------------------------------------
1998 1997 1996
--------------------- --------------------- ---------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ------ ------------- ------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period . $ 9.89 $ 9.89 $ 9.88 $ 9.87 $ 10.55 $10.54
---------- ------ -------- ------ -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .............. 0.64 0.61 0.67 0.64 0.707 0.627
Net gain/ (loss) on securities
(realized and unrealized) ....... 0.36 0.36 0.15 0.16 (0.24) (0.22)
---------- ------ -------- ------ -------- ------
Total from investment operations . 1.00 0.97 0.82 0.80 0.46 0.40
---------- ------ -------- ------ -------- ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.64) (0.61) (0.67) (0.64) (0.70) (0.62)
Dividends in excess of net
investment income ............... (0.00) (0.00) (0.00) (0.00) (0.12) (0.14)
Distributions from net realized
capital gains ................... (0.00) (0.00) (0.00) (0.00) (0.31) (0.31)
Distributions in excess of net
realized capital gains .......... (0.00) (0.00) (0.14) (0.14) (0.00) (0.00)
---------- ------ -------- ------ -------- ------
Total distributions .............. (0.64) (0.61) (0.81) (0.78) (1.13) (1.07)
---------- ------ -------- ------ -------- ------
Net asset value, end of period ....... $ 10.25 $10.25 $ 9.89 $ 9.89 $ 9.88 $ 9.87
---------- ------ -------- ------ -------- ------
TOTAL RETURN ......................... 10.35% 10.08%5 8.51% 8.35%5 4.22% 3.74%5
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $ 296,075 $ 640 $259,228 $2,186 $280,401 $2,040
Ratio of expenses to average net assets 0.31%1 0.54%2 0.16%1 0.41%2 0.13%1 0.36%2
Ratio of net investment income to
average net assets .............. 6.29%1 6.14%2 6.70%1 6.46%2 6.67%1 6.12%2
Portfolio turnover rate 170% 170% 169% 169% 268% 268%
FOR THE PERIOD
ENDED MAY 31, 1995
------------------------
INSTITUTIONAL3 RETAIL3
-------------- -------
Net asset value, beginning of period . $ 10.00 $ 10.16
-------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .............. 0.657 0.497
Net gain/ (loss) on securities
(realized and unrealized) ....... 0.43 0.40
-------- -------
Total from investment operations . 1.08 0.89
-------- -------
LESS DISTRIBUTIONS
Dividends from net investment income (0.53) (0.49)
Dividends in excess of net
investment income ............... (0.00) (0.02)
Distributions from net realized
capital gains ................... (0.00) (0.00)
Distributions in excess of net
realized capital gains .......... (0.00) (0.00)
-------- -------
Total distributions .............. (0.53) (0.51)
-------- -------
Net asset value, end of period ....... $ 10.55 $ 10.54
-------- -------
TOTAL RETURN ......................... 12.52%4,6 12.65%4,5,6
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $261,403 $ 106
Ratio of expenses to average net assets 0.18%1,4 0.31%2,4
Ratio of net investment income to
average net assets .............. 7.23%1,4 6.92%2,4
Portfolio turnover rate 166% 166%
<FN>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISERS FOR THE INSTITUTIONAL CLASS FOR THE YEARS
ENDED MAY 31, 1998 AND MAY 31, 1997 WOULD HAVE BEEN 0.72% AND 5.88% AND
0.71% AND 6.15%, RESPECTIVELY. THE OPERATING EXPENSE RATIO AND NET
INVESTMENT INCOME RATIO BEFORE FEE WAIVERS BY THE INVESTMENT ADVISER AND
CUSTODIAN FOR THE INSTITUTIONAL CLASS FOR THE YEARS ENDED MAY 31, 1996 WOULD
HAVE BEEN .69% AND 6.11%, 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 .77% AND 6.64%, RESPECTIVELY.
2 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISERS FOR THE RETAIL CLASS FOR THE YEARS ENDED
MAY 31, 1998 AND MAY 31, 1997 WOULD HAVE BEEN 0.97% AND 5.71% AND 0.96% AND
5.91%, RESPECTIVELY. THE OPERATING EXPENSE RATIO AND NET INVESTMENT INCOME
RATIO BEFORE FEE WAIVERS BY THE INVESTMENT ADVISERS AND CUSTODIAN FOR THE
RETAIL CLASS FOR THE YEAR ENDED MAY 31, 1996 WOULD HAVE BEEN .89% AND 5.59%,
RESPECTIVELY. THE OPERATING EXPENSE RATIO AND NET INVESTMENT INCOME RATIO
BEFORE FEE WAIVERS BY THE INVESTMENT ADVISER, ADMINISTRATOR AND CUSTODIAN
FOR THE RETAIL CLASS FOR THE PERIOD ENDED MAY 31, 1995 WOULD HAVE BEEN .87%
AND 6.36%, RESPECTIVELY.
3 INSTITUTIONAL AND RETAIL CLASSES COMMENCED OPERATIONS ON JULY 7, 1994 AND
SEPTEMBER 6, 1994, RESPECTIVELY.
4 ANNUALIZED.
5 TOTAL RETURN EXCLUDES SALES CHARGE.
6 TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM EACH CLASS'
COMMENCEMENT DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF THE
INSTITUTIONAL AND RETAIL CLASSES FOR THE PERIOD WERE 11.22% AND 9.14%,
RESPECTIVELY.
7 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
</FN>
</TABLE>
See Accompanying Notes
23
<PAGE>
STATEMENT OF NET ASSETS
ARMADA INTERMEDIATE BOND FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- 28.1%
BANKING -- 2.5% Key Bank N.A.
6.500% ........04/15/08 $4,210 $ 4,256
----------
CHEMICALS -- 0.6%
Dow Chemical
9.350% ........03/15/02 1,000 1,052
----------
FINANCIAL SERVICES -- 17.1%
Equity Residential
6.550% ........11/15/01 3,650 3,691
Ford Motor Credit
7.500% ........01/15/03 2,780 2,933
General Motors Acceptance
7.125% ........05/01/03 5,000 5,181
Ikon Capital
6.730% ........06/15/01 5,000 5,075
Prime Property Funding,
Series II 144A
6.800% ........08/15/02 5,000 5,094
Salomon Brothers Mortgage
Securities, Series 1998
6.740% ........06/25/28 7,150 7,149
----------
29,123
----------
INSURANCE -- 4.4%
Lincoln National
6.500% ........03/15/08 2,050 2,058
Prudential Insurance
7.650% ........07/01/07 5,000 5,394
----------
7,452
----------
RETAIL -- 1.6%
Wal-Mart Stores
8.625% ........04/01/01 2,500 2,678
----------
SPECIAL PURPOSE -- 1.9%
EOP Operating
6.625% ........02/15/05 3,190 3,230
----------
TOTAL CORPORATE BONDS
(Cost $47,075) 47,791
----------
MORTGAGE-BACKED SECURITIES -- 29.9%
Aames Mortgage Trust
7.315% ........11/15/27 4,000 4,060
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MORTGAGE-BACKED SECURITIES -- CONTINUED
Champion Home Equity
Loan Trust
6.490% ........01/25/13 $7,858 $ 7,905
Chase Commercial Mortgage
Securities Corporation,
Series 1996-2
6.700% ........11/19/28 3,386 3,446
First Plus Home Loan Trust
6.320% ........11/10/13 5,520 5,544
Series 1997-4, Class A4
6.570% ........04/10/13 4,385 4,429
Series 1997-2, Class M1
7.600% ........04/10/23 5,000 5,170
GE Capital Mortgage Services
6.590% ........12/25/12 2,780 2,803
Series 1993-16, Class A9
5.730% ........12/25/23 3,000 2,914
Housing Securities, Series 1994-I,
Class A15
7.500% ........03/25/09 4,954 5,039
Premier Auto Trust, Series 1998-3,
Class A4
5.960% ........10/08/02 5,000 5,000
Prudential Home Mortgage
Securities, Series 1996-7,
Class A4
6.750% ........06/25/11 2,500 2,544
WFS Financial Owner Trust,
Series 1996-A, Class A3
6.050% ........06/01/00 2,002 2,002
----------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $50,339) ..................... 50,856
----------
GOVERNMENT AGENCY BACKED
OBLIGATION -- 1.1%
FHLMC, Pool# 1587-EZ
5.750% ........05/15/07 1,932 1,929
----------
TOTAL GOVERNMENT AGENCY BACKED OBLIGATION
(Cost $1,925) 1,929
..................................... ----------
See Accompanying Notes
24
<PAGE>
STATEMENT OF NET ASSETS
ARMADA INTERMEDIATE BOND FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. TREASURY OBLIGATIONS -- 36.0%
U.S. TREASURY NOTES -- 36.0%
6.375% ........07/15/99 $ 9,000 $ 9,082
5.500% ........04/15/00 18,070 18,062
6.250% ........08/31/02 14,390 14,732
6.500% ........10/15/06 18,355 19,358
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $61,233) ..................... 61,234
----------
IOETTES -- 2.5%
JP Morgan Commercial Mortgage
Finance, Series 1997-C5 (A)
0.993% ........09/15/29 46,657 4,254
----------
TOTAL IOETTES
(Cost $4,135) ...................... 4,254
----------
CERTIFICATES OF DEPOSIT -- 3.0%
American Express Credit+
5.560% ........06/02/98 4,999 4,999
----------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $4,999) ...................... 4,999
----------
CASH EQUIVALENT -- 1.6%
Fidelity Domestic Money
Market Fund ............. 2,696 2,696
----------
TOTAL CASH EQUIVALENT
(Cost $2,696) ...................... 2,696
----------
TOTAL INVESTMENTS -- 102.2%
(Cost $172,402) .................... 173,759
==========
OTHER ASSETS AND LIABILITIES,
NET-- (2.2%) ....................... (3,759)
----------
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 15,749,468 outstanding
shares of beneficial interest ...... 165,328
VALUE
(000)
-----
NET ASSETS -- CONTINUED
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 309,011 outstanding
shares of beneficial interest ....... $ 3,505
Portfolio Shares of Class B (unlimited
authorization-- no par value) based
on 169 outstanding shares of
beneficial interest ................. 2
Undistributed net investment income 24
Accumulated net realized loss
on investments ...................... (216)
Net unrealized depreciation
on investments ...................... 1,357
--------
TOTAL NET ASSETS-- 100.0% .............. $170,000
========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class ................. $10.59
========
Net Asset Value and Redemption Price
Per Share -- Retail Class ........... $10.63
========
Maximum Offering Price Per Share --
Retail Class ($10.63 / 95.25%) ...... $11.16
========
Net Asset Value and Offering Price
Per Share -- Class B ................ $10.63
========
- --------------------------
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL
INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
----------
GROSS APPRECIATION ................. $1,426
GROSS DEPRECIATION ................. (69)
----------
$1,357
----------
- ----------------
+ EFFECTIVE YIELD
(A) VARIABLE RATE SECURITIES -- THE RATE REFLECTED ON THE STATEMENT OF NET
ASSETS IS THE RATE IN EFFECT ON MAY 31, 1998
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
See Accompanying Notes
25
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA INTERMEDIATE BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-------------------------------------------------------------------------------
1998 1997 1996
-------------------------------- -------------------- --------------------
INSTITUTIONAL RETAIL CLASS B6 INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
------------- ------ -------- ------------- ------ ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.37 $10.42 $ 10.70 $ 10.30 $10.35 $ 10.54 $10.60
-------- ------ -------- -------- ------ -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........... 0.60 0.58 0.20 0.60 0.57 0.61 0.59
Net gain/ (loss) on securities (realized
and unrealized) ................ 0.22 0.21 (0.07) 0.07 0.07 (0.22) (0.23)
-------- ------ -------- -------- ------ -------- ------
Total from investment operations 0.82 0.79 0.13 0.67 0.64 0.39 0.36
-------- ------ -------- -------- ------ -------- ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.60) (0.58) (0.20) (0.60) (0.57) (0.61) (0.59)
Dividends in excess of net investment
income ......................... (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions from net realized
capital gains ................ (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Distributions in excess of net realized
capital gains .................. (0.00) (0.00) (0.00) (0.00) (0.00) (0.02) (0.02)
-------- ------ -------- -------- ------ -------- ------
Total distributions ........... (0.60) (0.58) (0.20) (0.60) (0.57) (0.63) (0.61)
-------- ------ -------- -------- ------ -------- ------
Net asset value, end of period .. $ 10.59 $10.63 $ 10.63 $ 10.37 $10.42 $ 10.30 $10.35
======== ====== ======== ======== ====== ======== ======
TOTAL RETURN ...................... 8.09% 7.71%4 7.39%4,5 6.63% 6.36%3 3.79% 3.44%3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $166,710 $3,288 $ 2 $121,271 $3,720 $111,240 $6,216
Ratio of expenses to average net assets 0.65% 10.91%2 1.60%3,5 0.70% 10.96%2 0.80%1 1.04%2
Ratio of net investment income to
average net assets ............. 5.71%1 5.48%2 3.38%3,5 5.76%1 5.52%2 5.78%1 5.50%2
Portfolio turnover rate ......... 160% 160% 160% 217% 217% 45% 45%
FOR THE YEAR ENDED MAY 31,
----------------------------
1994
----------------------------
INSTITINSTITUTIONAL RETAIL
------------------- ------
Net asset value, beginning of period $ 10.93 $10.98
------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........... 0.61 0.58
Net gain/ (loss) on securities (realized
and unrealized) ................ (0.59) (0.58)
------- ------
Total from investment operations 0.02 0.00
------- ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.61) (0.58)
Dividends in excess of net investment
income ......................... (0.05) (0.05)
Distributions from net realized
capital gains ................ (0.03) (0.03)
Distributions in excess of net realized
capital gains .................. (0.02) (0.02)
------- ------
Total distributions ........... (0.71) (0.68)
------- ------
Net asset value, end of period .. $ 10.24 $10.30
======= ======
TOTAL RETURN ...................... 0.00% (.23)%3
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $95,907 $5,480
Ratio of expenses to average net assets 0.83% 1.08%
Ratio of net investment income to
average net assets ............. 5.59% 5.34%
Portfolio turnover rate ......... 34% 34%
<FN>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISERS FOR THE INSTITUTIONAL CLASS FOR THE YEARS
ENDED MAY 31, 1998 AND MAY 31, 1997 WOULD HAVE BEEN 0.80% AND 5.56% AND
0.79% AND 5.66%, RESPECTIVELY. THE OPERATING EXPENSE RATIO AND NET
INVESTMENT INCOME RATIO BEFORE FEE WAIVERS BY THE CUSTODIAN FOR THE
INSTITUTIONAL CLASS FOR THE YEARS ENDED MAY 31, 1996 AND 1995 WOULD HAVE
BEEN .82% AND 5.76% AND .86% AND 6.23%, RESPECTIVELY.
2 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISERS FOR THE RETAIL CLASS FOR THE YEARS ENDED
MAY 31, 1998 AND MAY 31, 1997 WOULD HAVE BEEN 1.06% AND 5.33% AND 1.05% AND
5.44%, RESPECTIVELY. THE OPERATING EXPENSE RATIO AND NET INVESTMENT INCOME
RATIO BEFORE FEE WAIVERS BY THE CUSTODIAN FOR THE RETAIL CLASS FOR THE YEARS
ENDED MAY 31, 1996 AND 1995 WOULD HAVE BEEN 1.06% AND 5.48% AND 1.10% AND
5.94%, RESPECTIVELY.
3 THE OPERATING EXPENSE RATIO AND NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISERS FOR CLASS B FOR THE PERIOD ENDED MAY 31,
1998 WOULD HAVE BEEN 1.49% AND 3.49%, RESPECTIVELY.
4 TOTAL RETURN EXCLUDES SALES CHARGE.
5 ANNUALIZED.
6 CLASS B SHARES COMMENCED OPERATIONS JANUARY 6, 1998.
</FN>
</TABLE>
See Accompanying Notes
26
<PAGE>
PORTFOLIO OF INVESTMENTS
ARMADA ENHANCED INCOME FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
ASSET-BACKED SECURITIES -- 26.8%
AUTO -- 5.3%
AESOP Funding 1997-1, Class A1
6.220% ........10/20/01 $2,785 $ 2,805
Nafco Auto Trust 3
6.500% ........06/20/02 494 492
Onyx Acceptance Grantor Trust,
Series 1997-2, Class A
6.350% ........10/15/03 449 454
--------
3,751
--------
CREDIT CARDS -- 5.1%
Citibank Credit Card Master Trust I,
Series 1996-1, Class A
0.000% ........02/07/03 2,245 1,918
Metris Master Trust Series
1997-1 , Class A
6.870% ........10/20/05 1,625 1,668
--------
3,586
--------
OTHER -- 16.4%
DCMT Series 1998-4A
5.750% ........10/16/03 1,645 1,637
Greentree Recreational Equipment &
Consumer Trust, Series 1997-B
6.550% ........07/15/28 1,249 1,259
Met Life Equity Trust
6.850% ........05/20/08 2,985 3,067
Navstar B, Class A4
6.300% ........08/15/04 1,810 1,816
PNC Student Loan Trust I,
Series 1997-2, Class A4
6.446% ........01/25/02 705 712
Small Business Administration Pool
3.501% ........04/25/09 422 468
WOLS, Series 1998-1, Class A3
5.962% ........08/14/01 2,585 2,590
--------
11,549
--------
TOTAL ASSET-BACKED SECURITIES
(Cost $18,686) ..................... 18,886
--------
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- 17.8%
BANKING -- 3.9%
First Union Corp.
8.125% ........06/24/02 $1,400 $ 1,496
NationsBank
5.750% ........03/15/01 1,250 1,244
--------
2,740
--------
EURO BOND -- 2.6%
Hydro Quebec
5.688% ........07/31/02 1,850 1,823
--------
FINANCE -- 1.4%
Ford Motor Credit Corp.
6.550% ........09/10/02 1,000 1,019
--------
FOREIGN -- 1.2%
City of Naples
7.520% ........07/15/06 811 852
--------
HOME EQUITY -- 1.2%
MLMI, Series 1998, Class G1
7.110% ........08/25/27 821 825
--------
INDUSTRIAL -- 4.8%
CSC Enterprises
6.500% ........11/15/01 1,100 1,108
Monsanto
7.090% ........12/15/00 1,140 1,156
Raytheon
5.950% ........03/15/01 1,100 1,099
--------
3,363
--------
INSURANCE -- 1.2%
Allstate
5.875% ........06/15/98 875 875
--------
RETAIL STORES -- 1.5%
Sears
9.750% ........03/21/00 1,000 1,065
--------
TOTAL CORPORATE BONDS
(Cost $12,522) ..................... 12,562
--------
See Accompanying Notes
27
<PAGE>
PORTFOLIO OF INVESTMENTS
ARMADA ENHANCED INCOME FUND
MAY 31, 1998
PAR VALUE
(000) (000)
----- -----
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 2.1%
Evans Withycombe Finance Trust
7.980% ........08/01/01 $1,395 $ 1,460
--------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $1,465) ..................... 1,460
--------
U.S. TREASURY NOTES -- 47.7%
4.750% ........10/31/98 6,145 6,128
5.875% ........10/31/98 4,500 4,508
5.625% ........10/31/99 8,000 8,008
6.875% ........03/31/00 8,500 8,694
6.125% ........07/31/00 5,655 5,721
5.875% ........11/30/01 500 504
--------
TOTAL U.S. TREASURY NOTES
(Cost $33,502) .................... 33,563
--------
U.S. GOVERNMENT OBLIGATIONS -- 3.4%
FHLMC
7.500% ........05/01/03 17 19
FNMA, Pool #426798
7.500% ........07/01/08 2,324 2,376
--------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $2,411) ...................... 2,395
--------
SHARES VALUE
(000) (000)
----- -----
CASH EQUIVALENT -- 2.2%
Financial Square Government
Money Market Fund .......... 1,572 $ 1,572
--------
TOTAL CASH EQUIVALENT
(Cost $1,572) ...................... 1,572
--------
TOTAL INVESTMENTS -- 100.0%
(Cost $70,158) ..................... $ 70,438
========
- -------------------------------
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR FEDERAL
INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
---------
GROSS APPRECIATION .................... $311
GROSS DEPRECIATION .................... (31)
---------
$280
---------
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
See Accompanying Notes
28
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA ENHANCED INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------------- FOR THE PERIOD
1998 1997 1996 ENDED MAY 31, 1995
--------------------- --------------------- -------------------- ----------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL3 RETAIL3
------------- ------ ------------- ------ ------------- ------ -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.99 $10.00 $ 10.01 $10.02 $ 10.16 $10.18 $10.00 $10.10
------- ------ ------- ------ ------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........ 0.57 0.57 0.58 0.57 0.58 0.56 0.517 0.437
Net gain/(loss) on securities
(realized and unrealized) . 0.08 0.09 0.01 0.01 (0.05) (0.05) 0.06 0.06
------- ------ ------- ------ ------- ------ ------ ------
Total from investment operations 0.65 0.66 0.59 0.58 0.53 0.51 0.57 0.49
------- ------ ------- ------ ------- ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.57) (0.57) (0.58) (0.57) (0.58) (0.56) (0.41) (0.41)
Dividends in excess of net
investment income ......... (0.00) (0.00) (0.00) (0.00) (0.10) (0.11) (0.00) (0.00)
Distributions of net realized
capital gains ............. (0.01) (0.01) (0.03) (0.03) (0.00) (0.00) (0.00) (0.00)
------- ------ ------- ------ ------- ------ ------ ------
Total distributions ......... (0.58) (0.58) (0.61) (0.60) (0.68) (0.67) (0.41) (0.41)
------- ------ ------- ------ ------- ------ ------ ------
Net asset value, end of period . $ 10.06 $10.08 $ 9.99 $10.00 $ 10.01 $10.02 $10.16 $10.18
======= ====== ======= ====== ======= ====== ====== ======
TOTAL RETURN ................... 6.68% 6.68%5 6.02% 5.91%5 5.36% 5.13%5 6.54%4,6 6.84%4,5,6
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $71,888 $ 559 $61,031 $2,051 $66,918 $1,718 $60,467 $ 2,547
Ratio of expenses to average
net assets ................ 0.33%1 0.41%2 0.21%1 0.31%2 0.23%1 0.33%2 0.21%1,4 0.32%2,4
Ratio of net investment income
to average net assets ..... 5.69%1 5.65%2 5.74%1 5.63%2 5.72%1 5.55%2 5.70%1,4 5.89%2,4
Portfolio turnover rate ...... 135% 135% 225% 225% 98% 98% 36% 36%
<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 YEARS
ENDED MAY 31, 1998 AND MAY 31, 1997 WOULD HAVE BEEN .69% AND 5.33% AND .66%
AND 5.29%, RESPECTIVELY. THE OPERATING EXPENSE RATIO AND NET INVESTMENT
INCOME RATIO BEFORE FEE WAIVERS BY THE INVESTMENT ADVISER AND CUSTODIAN FOR
THE INSTITUTIONAL CLASS FOR THE YEAR ENDED MAY 31, 1996 WOULD HAVE BEEN .70%
AND 5.25%, 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 .71% AND 5.20%, 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 YEARS ENDED
MAY 31, 1998 AND MAY 31, 1997 WOULD HAVE BEEN .80% AND 5.26% AND 0.75% AND
5.18%, RESPECTIVELY. THE OPERATING EXPENSE RATIO AND NET INVESTMENT INCOME
RATIO BEFORE FEE WAIVERS BY THE INVESTMENT ADVISER AND CUSTODIAN FOR THE
RETAIL CLASS FOR THE YEAR ENDED MAY 31, 1996 WOULD HAVE BEEN .80% AND 5.08%,
RESPECTIVELY. THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME
RATIO BEFORE FEE WAIVERS BY THE INVESTMENT ADVISER, ADMINISTRATOR, AND
CUSTODIAN FOR THE RETAIL CLASS FOR THE PERIOD ENDED MAY 31, 1995 WOULD HAVE
BEEN .79% AND 5.42%, RESPECTIVELY.
3 INSTITUTIONAL AND RETAIL CLASS COMMENCED OPERATIONS ON JULY 7, 1994 AND
SEPTEMBER 9, 1994, RESPECTIVELY.
4 ANNUALIZED.
5 TOTAL RETURN EXCLUDES SALES CHARGE.
6 TOTAL RETURNS HAVE BEEN ANNUALIZED BASED UPON THE PERIOD FROM EACH CLASS'
COMMENCEMENT DATE THROUGH MAY 31, 1995. GROSS TOTAL RETURNS OF THE
INSTITUTIONAL AND RETAIL CLASSES FOR THE PERIOD WERE 5.87% AND 4.92%,
RESPECTIVELY.
7 CALCULATED BASED UPON AVERAGE SHARES OUTSTANDING.
</FN>
</TABLE>
See Accompanying Notes
29
<PAGE>
STATEMENT OF NET ASSETS
ARMADA GNMA FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 108.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 4.5%
5.520% ........06/15/98 $ 2,500 $ 2,495
7.000% ........06/01/99 1,295 1,315
--------
3,810
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 26.9%
5.524% ........06/17/98 14,000 13,966
5.420% ........06/18/98 6,000 5,985
7.000% ........11/01/10 733 751
6.500% ........12/01/12 1,920 1,933
--------
22,635
--------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 77.5%
Pool# TBA
6.500% ........06/18/28 9,000 8,966
Pool# TBA
7.000% ........06/18/28 10,000 10,163
Pool# 162246
9.000% ........06/15/16 28 31
Pool# 183426
8.500% ........02/15/17 74 80
Pool# 199649
8.000% ........05/15/17 40 42
Pool# 200669
8.500% ........01/15/17 131 141
Pool# 412663
8.000% ........09/15/26 4,155 4,332
Pool# 202671
8.000% ........05/15/17 24 26
Pool# 202955
8.500% ........04/15/17 83 90
Pool# 203154
8.500% ........03/15/17 77 83
Pool# 206979
8.500% ........02/15/17 72 78
Pool# 208540
8.000% ........04/15/17 78 83
Pool# 209632
9.000% ........05/15/17 93 102
Pool# 210565
8.000% ........03/15/17 15 16
Pool# 212306
8.500% ........03/15/17 71 77
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
Pool# 213458
8.000% ........07/15/17 $ 77 $ 82
Pool# 216632
8.500% ........05/15/17 41 44
Pool# 220950
9.000% ........06/15/17 385 420
Pool# 228869
8.500% ........04/15/17 1,145 1,227
Pool# 231935
9.000% ........08/15/17 181 198
Pool# 248132
8.500% ........06/15/21 253 272
Pool# 266878
7.500% ........07/15/23 429 445
Pool# 289354
9.000% ........07/15/20 203 221
Pool# 300698
9.000% ........06/15/21 329 359
Pool# 301286
8.500% ........04/15/21 309 332
Pool# 302597
8.500% ........05/15/21 25 27
Pool# 303772
8.500% ........02/15/22 201 215
Pool# 312919
8.500% ........11/15/21 381 408
Pool# 314292
8.500% ........11/15/21 210 225
Pool# 316989
8.500% ........12/15/21 84 90
Pool# 320229
7.500% ........12/12/22 286 297
Pool# 327085
7.500% ........05/15/22 35 37
Pool# 32767
9.000% ........11/15/24 2,511 2,734
Pool# 329620
7.500% ........04/15/23 3,056 3,169
Pool# 333977
7.500% ........09/15/22 73 76
Pool# 334116
7.500% ........10/15/22 257 268
Pool# 336541
7.500% ........10/15/22 101 106
See Accompanying Notes
30
<PAGE>
STATEMENT OF NET ASSETS
ARMADA GNMA FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
Pool# 338766
7.500% ........06/15/23 $ 290 $ 301
Pool# 340307
7.500% ........02/15/23 293 304
Pool# 340792
7.500% ........05/15/23 25 27
Pool# 348356
7.500% ........06/15/13 200 208
Pool# 348778
7.500% ........04/15/23 368 382
Pool# 352143
7.500% ........07/15/23 26 27
Pool# 352144
7.500% ........07/15/23 350 364
Pool# 352189
7.500% ........04/15/23 23 24
Pool# 352217
7.500% ........04/15/23 5,798 6,014
Pool# 352724
7.500% ........08/15/23 154 160
Pool# 353023
7.500% ........06/15/24 290 301
Pool# 353185
7.500% ........07/15/23 3,581 3,694
Pool# 354106
7.500% ........05/15/23 46 49
Pool# 357235
7.500% ........10/15/23 625 649
Pool# 358308
7.500% ........01/15/24 310 321
Pool# 358845
7.500% ........10/15/23 190 197
Pool# 359600
7.500% ........07/15/23 75 79
Pool# 362619
7.500% ........10/15/23 381 395
Pool# 364258
7.500% ........07/15/23 232 241
Pool# 369696
7.500% ........02/15/24 218 227
Pool# 370019
7.500% ........10/15/23 155 162
Pool# 371816
7.500% ........06/15/24 136 142
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT AGENCY
OBLIGATIONS -- CONTINUED
Pool# 374876
7.500% ........01/15/24 $ 318 $ 330
Pool# 384077
8.000% ........04/15/24 588 615
Pool# 385654
8.000% ........04/15/24 822 860
Pool# 388741
7.500% ........04/15/24 257 266
Pool# 412760
8.750% ........06/15/25 415 445
Pool# 419305
7.000% ........12/15/10 1,727 1,776
Pool# 4280
8.500% ........02/15/23 2,719 2,895
Pool# 428443
7.500% ........05/15/26 2,928 3,031
Pool# 5147
7.250% ........11/15/04 149 155
Pool# 60456
11.500% ........01/15/13 31 36
Pool# 608
9.000% ........08/20/16 1,320 1,429
Pool# 780048
8.500% ........11/15/17 380 404
Pool# 780618
8.000% ........02/01/26 2,415 2,521
Pool# 90069
9.000% ........05/15/09 68 74
Pool# 90223
9.000% ........05/15/09 65 71
Pool# 90250
9.000% ........05/15/09 87 94
Pool# 90332
9.000% ........05/15/09 47 51
Pool# 90337
9.000% ........06/15/09 75 82
Pool# 90626
9.000% ........05/15/09 84 91
Pool# 90923
9.000% ........05/15/09 140 151
--------
65,207
--------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost $90,418) ..................... 91,652
--------
See Accompanying Notes
31
<PAGE>
STATEMENT OF NET ASSETS
ARMADA GNMA FUND
MAY 31, 1998
PAR/SHARES VALUE
MATURITY (000) (000)
-------- ----- -----
PRIVATE LABEL MORTGAGE-BACKED SECURITIES -- 7.7%
Residential Funding Mortgage
Securities I, Series 1995-S21,
Class A6
7.500% ........12/25/25 $2,930 $ 3,041
The Money Store Trust,
Series 1998-A
5.863% ........06/15/29 3,428 3,441
--------
TOTAL PRIVATE LABEL MORTGAGE-
BACKED SECURITIES
(Cost $6,392) ...................... 6,482
--------
U.S. TREASURY OBLIGATION -- 0.7%
U.S. TREASURY NOTE -- 0.7%
5.500% ........04/15/00 600 600
--------
TOTAL U.S. TREASURY OBLIGATION
(Cost $600) 600
--------
IOETTES -- 2.8%
JP Morgan Commercial Mortgage
Finance, Series 1997-C5
0.993% ........09/15/29 25,810 2,353
--------
TOTAL IOETTES
(Cost $2,353) 2,353
--------
CASH EQUIVALENT -- 1.8%
Financial Square Government
Money Market Fund ............ 1,514 1,514
---------
TOTAL CASH EQUIVALENT
(Cost $1,514) ...................... 1,514
--------
TOTAL INVESTMENTS -- 121.9%
(Cost $101,277) .................... 102,601
========
OTHER ASSETS AND LIABILITIES,
NET-- (21.9%) ...................... (18,428)
--------
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization-- no par
value) based on 8,074,947 outstanding
shares of beneficial interest ...... $ 82,013
Portfolio Shares of Retail Class
(unlimited authorization -- no par value)
based on 52,986 outstanding shares of
beneficial interest ................ 545
Overdistributed net investment income (59)
Accumulated net realized gain
on investments ..................... 350
Net unrealized appreciation
on investments ..................... 1,324
--------
TOTAL NET ASSETS-- 100.0% ............. $ 84,173
========
Net Asset Value, Offering and
Redemption Price Per Share --
Institutional Class ................ $10.36
========
Net Asset Value and Redemption Price
Per Share -- Retail Class .......... $10.36
========
Maximum Offering Price Per Share --
Retail Class ($10.36 / 95.25%) ..... $10.88
========
- -------------------------------------
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION) FOR
FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
---------
GROSS APPRECIATION .................. $1,325
GROSS DEPRECIATION .................. (1)
---------
$1,324
---------
See Accompanying Notes
32
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA GNMA FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
------------------------------------------
1998 19974 FOR THE FOR THE FOR THE
------------------------------------------ PERIOD ENDED YEAR ENDED PERIOD ENDED
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL MAY 31, 19964 APRIL 30, 19964 APRIL 30, 19954
------------- ------ ------------- ------ ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ... $ 10.15 $ 10.15 $ 10.03 $ 10.025 $ 10.12 $ 10.16 $ 10.00
------- ------- ------- ------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ................ 0.61 0.58 0.65 0.45 0.05 0.66 0.48
Net gain/(loss) on securities
(realized and unrealized) .......... 0.31 0.31 0.22 0.23 (0.09) 0.14 0.16
------- ------- ------- ------- -------- -------- --------
Total from investment operations ... 0.92 0.89 0.87 0.68 (0.04) 0.80 0.64
------- ------- ------- ------- -------- -------- --------
LESS DISTRIBUTIONS
Dividends from net investment income (0.61) (0.58) (0.65) (0.45) (0.05) (0.66) (0.48)
Dividends from net realized capital gains (0.10) (0.10) (0.01) (0.01) (0.00) (0.18) (0.00)
Distributions in excess of net
realized capital gains ........... (0.00) (0.00) (0.09) (0.09) (0.00) (0.00) (0.00)
------- ------- ------- ------- -------- -------- --------
Total distributions ................ (0.71) (0.68) (0.75) (0.55) (0.05) (0.84) (0.48)
------- ------- ------- ------- -------- -------- --------
Net asset value, end of period ........ $ 10.36 $ 10.36 $ 10.15 $ 10.15 $ 10.03 $ 10.12 $ 10.16
======= ======= ======= ======= ======== ======== ========
TOTAL RETURN .......................... 9.17% 8.90%6 9.03% 8.83%6 (0.35)%3,6 7.97%6 6.61%3,6
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $83,624 $ 549 $64,501 $ 128 $60,532 $62,161 $42,212
Ratio of expenses to average net assets 0.84% 1.09% 0.86%1 1.12%2 0.85%1,2 0.85%1 0.85%1,2
Ratio of net investment income to average
net assets ......................... 5.83% 5.54% 6.45%1 6.17%2 6.33%1,2 6.30%1 6.68%1,2
Portfolio turnover rate ............. 291% 291% 57% 57% 1% 149% 226%
<FN>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS FOR THE INSTITUTIONAL CLASS AND THE PREDECESSOR FUND FOR THE YEAR
ENDED MAY 31, 1997, FOR THE PERIOD ENDED MAY 31, 1996, FOR THE YEAR ENDED
APRIL 30, 1996 AND THE PERIOD ENDED APRIL 30, 1995 WOULD HAVE BEEN 1.01% AND
6.30%, 1.28% AND 5.90%, 1.29% AND 5.86%, AND 1.40% AND 6.13%, RESPECTIVELY.
2 ANNUALIZED.
3 NOT ANNUALIZED.
4 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL
YEAR-END FROM APRIL 30 TO MAY 31.
5 RETAIL CLASS COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
6 TOTAL RETURN EXCLUDES SALES CHARGE.
</FN>
</TABLE>
See Accompanying Notes
33
<PAGE>
STATEMENT OF NET ASSETS
ARMADA BOND FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT OBLIGATIONS -- 14.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 6.5%
FHLMC Series 1587, Class Ez
5.750% ........05/15/07 $4,712 $ 4,704
Pool# E20204
6.500% ........11/01/10 745 754
Pool# E20206
7.500% ........11/01/10 249 258
Pool# 141138
7.500% ........05/01/17 496 519
Pool# 219329
9.250% ........06/01/23 97 102
Pool# 294315
8.500% ........06/01/17 14 16
Pool# 450074
8.500% ........06/01/17 176 188
Pool# 280417
8.500% ........09/01/16 10 11
Pool# E60894
7.500% ........07/01/10 51 53
Pool# E61277
7.500% ........09/01/10 139 144
Pool# E64179
7.500% ........05/01/11 580 600
Pool# E64198
7.500% ........05/01/11 197 204
Pool# E64229
7.500% ........05/01/11 22 23
Pool# E64248
7.500% ........05/01/11 970 1,004
---------
8,580
---------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 3.4%
Pool# TBA
7.000% ........06/15/28 4,000 4,061
Pool# 210452
9.500% ........05/01/18 124 133
Pool# 31592
7.500% ........03/01/08 164 171
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT OBLIGATIONS -- CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool# 77831
7.500% ........12/01/07 $ 179 $ 186
---------
4,551
---------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 4.5%
Pool# 1388
9.000% ........02/20/19 353 382
Pool# 164775
9.500% ........06/15/19 250 273
Pool# 303442
8.500% ........11/15/21 47 51
Pool# 304732
7.500% ........12/15/22 1,063 1,104
Pool# 310780
8.500% ........09/15/21 31 33
Pool# 314586
8.500% ........11/15/21 359 384
Pool# 315728
8.500% ........11/15/21 313 335
Pool# 319999
8.500% ........07/15/22 190 203
Pool# 321563
8.500% ........08/15/22 100 107
Pool# 321786
8.500% ........07/15/22 266 285
Pool# 325399
7.500% ........08/15/22 16 17
Pool# 331869
7.500% ........06/15/23 427 444
Pool# 332285
8.500% ........07/15/22 256 274
Pool# 337049
7.500% ........04/15/23 605 628
Pool# 337062
7.500% ........05/15/23 361 375
Pool# 348665
7.500% ........04/15/23 349 362
See Accompanying Notes
34
<PAGE>
STATEMENT OF NET ASSETS
ARMADA BOND FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. GOVERNMENT OBLIGATIONS -- CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
Pool# 36473
8.500% ........11/15/21 $ 168 $ 180
Pool# 371437
7.000% ........11/15/23 244 250
Pool# 9244
8.250% ........04/20/17 103 109
Pool# 9279
8.250% ........07/20/17 135 143
---------
5,939
---------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Cost $18,640) ..................... 19,070
---------
CORPORATE BONDS -- 26.6%
APPLIANCES -- 5.5%
Equity Office
6.375% ........02/15/03 1,500 1,500
Residential Funding Mortgage
Securities I,
Series 1998-512, Class A
6.750% ........05/25/08 1,260 1,239
Series 1995-S21, Class A6
7.500% ........12/25/25 4,399 4,565
---------
7,304
---------
ELECTRICAL SERVICES -- 3.1%
Central Power & Light
6.625% ........07/01/05 920 941
Eastern Energy
6.750% ........12/01/06 3,000 3,097
---------
4,038
---------
FINANCIAL SERVICES -- 9.9%
Equity Residential
6.550% ........11/15/01 2,650 2,680
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
CORPORATE BONDS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
Ford Motor Credit
6.000% ........01/14/03 $2,280 $ 2,274
G.E. Capital
6.590% ........12/25/12 2,020 2,037
Lehman Brothers Holdings
7.375% ........05/15/07 4,000 4,260
Santander Financial Issuances
6.375% ........02/15/11 2,000 1,963
---------
13,214
---------
FOOD & BEVERAGE -- 2.1%
Archer Daniels Midland
Industrial
7.500% ........03/15/27 2,500 2,816
---------
INSURANCE -- 2.4%
Cigna
7.400% ........05/15/07 3,000 3,202
---------
MACHINERY -- 1.8%
Ingersoll Rand
6.443% ........11/15/27 2,260 2,326
---------
SPECIAL PURPOSE -- 1.8%
EOP Operating Limited Partnership
6.625% ........02/15/05 2,400 2,430
---------
TOTAL CORPORATE BONDS
(Cost $34,877) ..................... 35,330
---------
MORTGAGE-BACKED SECURITIES -- 28.8%
Chase Commercial Mortgage
Securities Corporation,
Series 1996-2
6.700% ........11/19/28 1,702 1,733
Emergent Series 1997-3
7.290% ........10/20/28 3,395 3,398
See Accompanying Notes
35
<PAGE>
STATEMENT OF NET ASSETS
ARMADA BOND FUND
MAY 31, 1998
PAR VALUE
MATURITY (000) (000)
-------- ----- -----
MORTGAGE-BACKED SECURITIES -- CONTINUED
Equicredit Series 1996-4,
Class A9
6.890% ........01/15/28 $3,370 $ 3,445
GE Capital Mortgage Services
6.565% ........09/25/12 2,520 2,532
Series 1993-16 Class A9
5.730% ........12/25/23 4,000 3,885
GMAC Commercial Mortgage
Securities, Series 1997-C1,
Class X
1.581% ........07/15/27 18,879 1,850
Lincoln National
6.500% ........03/15/08 60 60
Midland Realty Acceptance
7.020% ........01/25/29 3,501 3,599
Prudential Home Mortgage
Securities, Series 1996-7,
Class A4
6.750% ........06/25/11 1,500 1,527
Residential Asset Securitization
Trust,
Series 1996-A2, Class A7
7.500% ........06/25/26 2,000 2,032
Series 1996-A4, Class A10
7.500% ........09/25/26 2,000 2,024
Series 1998- A4, Class A7
6.750% ........05/25/28 2,500 2,484
Structured Asset Sales,
Series 1994-5, Class A
7.000% ........07/25/24 3,349 3,388
The Money Store,
Series 1998-A (A)
5.863% ........06/15/29 3,969 3,983
The Money Store
6.485% ........12/15/38 2,250 2,260
---------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $37,703) ..................... 38,200
---------
PAR/SHARES VALUE
MATURITY (000) (000)
-------- ----- -----
U.S. TREASURY OBLIGATIONS -- 23.4%
U.S. Treasury Notes
5.500% ........04/15/00 $8,150 $ 8,146
6.250% ........08/31/02 6,370 6,522
6.500% ........10/15/06 8,215 8,664
7.250% ........08/15/22 6,600 7,740
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $30,955) ..................... 31,072
---------
IOETTES -- 1.4%
JP Morgan Commercial Mortgage
Finance, Series 1997-C5
0.993% ........09/15/29 20,869 1,903
---------
TOTAL IOETTES
(Cost $1,891) ...................... 1,903
---------
CERTIFICATE OF DEPOSIT -- 4.0%
Bank Boston
7.000% ........09/15/07 5,100 5,323
---------
TOTAL CERTIFICATE OF DEPOSIT
(Cost $5,250) ...................... 5,323
---------
CASH EQUIVALENT -- 1.9%
Financial Square Government
Money Market Fund ........... 2,497 2,497
---------
TOTAL CASH EQUIVALENT
(Cost $2,497) 2,497
---------
TOTAL INVESTMENTS -- 100.5%
(Cost $131,813) .................... 133,395
=========
OTHER ASSETS AND LIABILITIES,
NET-- (0.5%) ........................ (613)
---------
See Accompanying Notes
36
<PAGE>
STATEMENT OF NET ASSETS
ARMADA BOND FUND
MAY 31, 1998
VALUE
(000)
-----
NET ASSETS:
Portfolio Shares of Institutional Class
(unlimited authorization -- no par
value) based on 12,910,577 outstanding
shares of beneficial interest ......... $130,559
Portfolio Shares of Retail Class
(unlimited authorization -- no par
value) based on 15,599 outstanding
shares of beneficial interest ......... 160
Portfolio Shares of Class B
(unlimited authorization -- no par
value) based on 102 outstanding
shares of beneficial interest ......... 1
Overdistributed net investment income .. (19)
Accumulated net realized gain
on investments ........................ 499
Net unrealized appreciation
on investments ........................ 1,582
---------
TOTAL NET ASSETS-- 100.0% $132,782
=========
VALUE
-----
NET ASSETS -- CONTINUED
Net Asset Value, Offering and
Redemption Price Per
Share -- Institutional Class ......... $10.27
=========
Net Asset Value and Redemption Price
Per Share -- Retail Class ............ $10.27
=========
Maximum Offering Price Per Share --
Retail Class ($10.27 / 95.25%) ....... $10.78
=========
Net Asset Value and Offering Price
Per Share -- Class B ................. $10.26
=========
- -------------------------------
THE GROSS UNREALIZED APPRECIATION (DEPRECIATION)
FOR FEDERAL INCOME TAX PURPOSES IS AS FOLLOWS:
(000)
------------
GROSS APPRECIATION .................. $1,645
GROSS DEPRECIATION .................. (63)
------------
$1,582
------------
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
See Accompanying Notes
37
<PAGE>
FINANCIAL HIGHLIGHTS
ARMADA BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------
1998 19974 FOR THE FOR THE
----------------------------- --------------------- PERIOD ENDED YEAR ENDED
INSTITUTIONAL RETAIL CLASS B7 INSTITUTIONAL RETAIL5 MAY 31, 19964 APRIL 30, 19964
------------- ------ -------- ------------- ------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.02 $10.02 $10.35 $ 9.97 $ 9.97 $ 10.04 $ 10.02
-------- ------ ------ ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........... 0.59 0.56 0.47 0.59 0.41 0.05 0.64
Net gain/(loss) on securities
(realized and unrealized) .... 0.25 0.25 (0.09) 0.13 0.13 (0.07) 0.07
-------- ------ ------ ------- ------- ------- -------
Total from investment operations 0.84 0.81 0.38 0.72 0.54 (0.02) 0.71
-------- ------ ------ ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income (0.59) (0.56) (0.47) (0.59) (0.41) (0.05) (0.64)
Dividends from net realized
capital gains ................ (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.05)
Distributions in excess of net
realized capital gains ....... (0.00) (0.00) (0.00) (0.08) (0.08) (0.00) (0.00)
-------- ------ ------ ------- ------- ------- -------
Total distributions ............ (0.59) (0.56) (0.47) (0.67) (0.49) (0.05) (0.69)
-------- ------ ------ ------- ------- ------- -------
Net asset value, end of period .... $ 10.27 $10.27 $10.26 $ 10.02 $ 10.02 $ 9.97 $ 10.04
======== ====== ====== ======= ======= ======= =======
TOTAL RETURN 8.55% 8.29%6 8.36%2,6 7.41% 7.22%6 (0.19)%3,6 7.09%6
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $132,620 $ 161 $ 1 $91,161 $ 23 $88,829 $89,901
Ratio of expenses to average net assets 0.80% 1.05% 1.74% 0.83%1 1.07%2 0.85%1,2 0.85%1
Ratio of net investment income to average
net assets ..................... 5.72% 5.52% 2.71% 5.83%1 5.64%2 5.88%1,2 6.20%1
Portfolio turnover rate ......... 220% 220% 220% 96% 96% 2% 94%
</TABLE>
<TABLE>
<CAPTION>
FOR THE
PERIOD ENDED
APRIL 30, 19954
---------------
<S> <C> <C>
Net asset value, beginning of period $ 10.00
-------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ........... 0.44
Net gain/(loss) on securities
(realized and unrealized) .... 0.02
-------
Total from investment operations 0.46
-------
LESS DISTRIBUTIONS
Dividends from net investment income (0.44)
Dividends from net realized
capital gains ................ (0.00)
Distributions in excess of net
realized capital gains ....... (0.00)
-------
Total distributions ............ (0.44)
-------
Net asset value, end of period .... $ 10.02
=======
TOTAL RETURN 4.75%3,6
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $53,316
Ratio of expenses to average net assets 0.85%1,2
Ratio of net investment income to average
net assets ..................... 6.17%1,2
Portfolio turnover rate ......... 172%
<FN>
1 THE OPERATING EXPENSE RATIO AND THE NET INVESTMENT INCOME RATIO BEFORE FEE
WAIVERS BY THE INVESTMENT ADVISERS AND OTHER SERVICE PROVIDERS FOR THE
INSTITUTIONAL CLASS AND THE PREDECESSOR FUND FOR THE YEARS ENDED MAY 31,
1997, MAY 31, 1996, APRIL 30, 1996, AND APRIL 30, 1995 WOULD HAVE BEEN 0.96%
AND 5.71%, 1.25% AND 5.48%, 1.25% AND 5.80%, 1.33% AND 5.69%, RESPECTIVELY.
2 ANNUALIZED.
3 NOT ANNUALIZED.
4 ACTIVITY FOR THE PERIOD PRESENTED INCLUDES THAT OF THE PREDECESSOR FUND
THROUGH SEPTEMBER 6, 1996. THE PREDECESSOR FUND COMMENCED OPERATIONS ON
AUGUST 10, 1994. DURING 1996, THE PREDECESSOR FUND CHANGED ITS FISCAL
YEAR-END FROM APRIL 30 TO MAY 31.
5 RETAIL CLASS COMMENCED OPERATIONS ON SEPTEMBER 11, 1996.
6 TOTAL RETURN EXCLUDES SALES CHARGE.
7 CLASS B SHARES COMMENCED OPERATIONS JANUARY 6, 1998.
</FN>
</TABLE>
See Accompanying Notes
38
<PAGE>
FINANCIAL STATEMENTS
ARMADA FUNDS INCOME SERIES
MAY 31, 1998
STATEMENT OF ASSETS AND LIABILITIES (000)
<TABLE>
<CAPTION>
TOTAL RETURN ENHANCED
ADVANTAGE INCOME
FUND FUND
------------ --------
ASSETS
<S> <C> <C>
Investments at value (Cost $281,215 and $70,158, respectively) ...................... $286,928 $70,438
Cash ................................................................................ 3,006 851
Interest and dividends receivable ................................................... 3,203 751
Receivable for investments sold ..................................................... 15,463 3,308
Capital shares sold ................................................................. 528 --
Prepaid expenses .................................................................... 31 19
-------- -------
TOTAL ASSETS ........................................................................ 309,159 75,367
-------- -------
LIABILITIES
Dividends payable-- Institutional Class ............................................. 520 139
Dividends payable-- Retail Class .................................................... 1 2
Capital shares redeemed ............................................................. 141 123
Payable for investments purchased ................................................... 11,341 2,514
Accrued expenses .................................................................... 307 67
Other payable ....................................................................... 134 75
-------- -------
TOTAL LIABILITIES ................................................................... 12,444 2,920
-------- -------
NET ASSETS .......................................................................... $296,715 $72,447
======== =======
NET ASSETS CONSIST OF:
Portfolio Shares of Institutional Class (unlimited authorization -- no par
value) based on 28,877,866 and 7,144,720 outstanding shares of
beneficial interest, respectively ................................................ $290,947 $71,546
Portfolio Shares of Retail Class (unlimited authorization-- no par value)
based on 62,833 and 55,477 outstanding shares of beneficial
interest, respectively ........................................................... 584 565
Undistributed net investment income ............................................... 10 3
Accumulated net realized gain/loss on investments ................................. (539) 53
Net unrealized appreciation on investments ........................................ 5,713 280
-------- -------
TOTAL NET ASSETS-- 100.0% ........................................................... $296,715 $72,447
======== =======
Net Asset Value, Offering and Redemption Price Per Share-- Institutional Class ...... $10.25 $10.06
======== =======
Net Asset Value and Redemption Price Per Share-- Retail Class ....................... $10.25 $10.08
======== =======
Maximum Offering Price Per Share -- Retail Class ($10.25 / 95.25% and
$10.08 / 97.25%, respectively) ................................................... $10.76 $10.37
======== =======
</TABLE>
See Accompanying Notes
39
<PAGE>
FINANCIAL STATEMENTS
ARMADA FUNDS INCOME SERIES
STATEMENT OF OPERATIONS (000)
FOR THE YEAR ENDED MAY 31, 1998
<TABLE>
<CAPTION>
TOTAL RETURN INTERMEDIATE ENHANCED
ADVANTAGE BOND INCOME GNMA BOND
FUND FUND FUND FUND FUND
------------ ------------ --------- --------- --------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Interest .......................... $ 18,646 $ 9,456 $ 4,426 $ 4,800 $ 6,836
-------- -------- ------- ------- -------
EXPENSES:
Investment Advisory fees .......... 1,538 816 331 396 574
Administration fees ............... 255 145 72 70 102
Distribution fees ................. 60 35 11 11 23
Custodian fees .................... 40 26 16 17 21
Transfer Agent fees ............... 29 63 34 28 36
Professional fees ................. 25 13 12 15 16
Printing and shareholder reports .. 11 4 2 -- 3
Trustees' fees .................... 7 3 2 1 2
Registration and filing fees ...... 13 25 15 10 7
Shareholder servicing fees-- Retail
Class only ................... 5 8 2 1 --
Amortization of organization costs 4 -- 4 3 --
12b-1 fees ........................ -- 52 -- 26 38
Miscellaneous fees ................ 20 11 10 27 20
Fees waived by Investment Adviser . (1,133) (222) (265) -- --
-------- -------- ------- ------- -------
Total expenses .................... 874 979 246 605 842
-------- -------- ------- ------- -------
NET INVESTMENT INCOME ................ 17,772 8,477 4,180 4,195 5,994
-------- -------- ------- ------- -------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on
investments sold ............... 2,672 1,330 143 922 901
Net change in unrealized
appreciation on investments .... 7,028 1,379 411 1,152 1,479
-------- -------- ------- ------- -------
Net gain on investments ........... 9,700 2,709 554 2,074 2,380
-------- -------- ------- ------- -------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS ....................... $ 27,472 $ 11,186 $ 4,734 $ 6,269 $ 8,374
======== ======== ======= ======= =======
</TABLE>
See Accompanying Notes
40
<PAGE>
This page intentionally left blank.
41
<PAGE>
FINANCIAL STATEMENTS
ARMADA FUNDS INCOME SERIES (000)
STATEMENT OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
TOTAL RETURN ADVANTAGE FUND INTERMEDIATE BOND FUND
--------------------------- ---------------------------
FOR THE YEAR ENDED MAY 31, FOR THE YEAR ENDED MAY 31,
1998 1997 1998 1997
---------- ------------- ------------ ----------
INCREASE/(DECREASE)
IN NET ASSETS:
Operations:
<S> <C> <C> <C> <C>
Net investment income ....................... $ 17,772 $ 18,657 $ 8,477 $ 6,988
Net realized gain/(loss) on securities sold 2,672 (2,904) 1,330 392
Net unrealized appreciation
of investments securities ................ 7,028 7,850 1,379 716
--------- ---------- ---------- ----------
Net increase in net assets
resulting from operations ................ 27,472 23,603 11,186 8,096
--------- ---------- ---------- ----------
Distributions to shareholders:
Net investment income
Institutional ......................... (17,637) (18,521) (8,255) (6,747)
Retail ................................ (125) (136) (198) (241)
Class B ............................... -- -- -- --
Realized capital gains
Institutional ......................... -- (3,864) -- --
Retail ................................ -- (30) -- --
Class B ............................... -- -- -- --
--------- ---------- ---------- ----------
Total distributions ........................ (17,762) (22,551) (8,453) (6,988)
--------- ---------- ---------- ----------
Share Transactions:
Institutional
Proceeds from shares issued ........... 83,718 65,364 111,103 80,231
Reinvestment of cash distributions .... 9,472 13,218 1,878 578
Cost of shares redeemed ............... (65,987) (100,805) (70,201) (71,840)
--------- ---------- ---------- ----------
Net Institutional Share Transactions 27,203 (22,223) 42,780 8,969
--------- ---------- ---------- ----------
Retail
Proceeds from shares issued ........... 651 8 1,204 10
Reinvestment of cash distributions .... 111 166 173 230
Cost of shares redeemed ............... (2,374) (30) (1,883) (2,782)
--------- ---------- ---------- ----------
Net Retail Share Transactions ....... (1,612) 144 (506) (2,542)
--------- ---------- ---------- ----------
Class B
Proceeds from shares issued ........... -- -- 79 --
Reinvestment of cash distributions .... -- -- -- --
Cost of shares redeemed ............... -- -- (77) --
--------- ---------- ---------- ----------
Net Class B Share Transactions ...... -- -- 2 --
--------- ---------- ---------- ----------
Increase (decrease) in net assets
from share transactions .................. 25,591 (22,079) 42,276 6,427
--------- ---------- ---------- ----------
Total increase/(decrease) in net assets .... 35,301 (21,027) 45,009 7,535
--------- ---------- ---------- ----------
NETASSETS:
Beginning of period ........................ 261,414 282,441 124,991 117,456
--------- ---------- ---------- ----------
End of period .............................. $ 296,715 $ 261,414 $ 170,000 $ 124,991
========= ========== ========== ==========
ENHANCED INCOME FUND GNMA FUND BOND FUND
-------------------------- -------------------------- --------------------------
FOR THE YEAR ENDED MAY 31, FOR THE YEAR ENDED MAY 31, FOR THE YEAR ENDED MAY 31,
1998 1997 1998 19971 1998 19971
---------- ---------- --------- ----------- ---------- ---------
INCREASE/(DECREASE)
IN NET ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income ....................... $ 4,180 $ 3,776 $ 4,195 $ 4,090 $ 5,994 $ 5,334
Net realized gain/(loss) on securities sold 143 (14) 922 78 901 (383)
Net unrealized appreciation
of investments securities ................ 411 105 1,152 1,306 1,479 1,587
-------- --------- --------- --------- --------- ---------
Net increase in net assets
resulting from operations ................ 4,734 3,867 6,269 5,474 8,374 6,538
-------- --------- --------- --------- --------- ---------
Distributions to shareholders:
Net investment income
Institutional ......................... (4,063) (3,661) (4,242) (4,083) (6,010) (5,328)
Retail ................................ (114) (115) (12) (6) (3) (1)
Class B ............................... -- -- -- -- -- --
Realized capital gains
Institutional ......................... (73) (178) (650) (637) -- (750)
Retail ................................ (2) (7) (1) (1) -- (1)
Class B ............................... -- -- -- -- -- --
-------- --------- --------- --------- --------- ---------
Total distributions ........................ (4,252) (3,961) (4,905) (4,727) (6,013) (6,080)
-------- --------- --------- --------- --------- ---------
Share Transactions:
Institutional
Proceeds from shares issued ........... 61,441 59,246 28,426 15,943 54,481 19,050
Reinvestment of cash distributions .... 2,282 2,285 148 114 86 106
Cost of shares redeemed ............... (53,330) (67,329) (10,811) (12,834) (15,500) (17,282)
-------- --------- --------- --------- --------- ---------
Net Institutional Share Transactions 10,393 (5,798) 17,763 3,223 39,067 1,874
-------- --------- --------- --------- --------- ---------
Retail
Proceeds from shares issued ........... 1,961 2,429 526 168 274 45
Reinvestment of cash distributions .... 108 121 9 6 1 1
Cost of shares redeemed ............... (3,579) (2,212) (119) (47) (107) (22)
-------- --------- --------- --------- --------- ---------
Net Retail Share Transactions ....... (1,510) 338 416 127 168 24
-------- --------- --------- --------- --------- ---------
Class B
Proceeds from shares issued ........... -- -- -- -- 39 --
Reinvestment of cash distributions .... -- -- -- -- -- --
Cost of shares redeemed ............... -- -- -- -- (38) --
-------- --------- --------- --------- --------- ---------
Net Class B Share Transactions ...... -- -- -- -- 1 --
-------- --------- --------- --------- --------- ---------
Increase (decrease) in net assets
from share transactions .................. 8,883 (5,460) 18,179 3,350 39,236 1,898
-------- --------- --------- --------- --------- ---------
Total increase/(decrease) in net assets .... 9,365 (5,554) 19,543 4,097 41,597 2,356
-------- --------- --------- --------- --------- ---------
NET ASSETS:
Beginning of period ........................ 63,082 68,636 64,630 60,533 91,185 88,829
-------- --------- --------- --------- --------- ---------
End of period .............................. $ 72,447 $ 63,082 $ 84,173 $ 64,630 $ 132,782 $ 91,185
======== ========= ========= ========= ========= =========
</TABLE>
See Accompanying Notes
42 & 43
<PAGE>
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 service 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, Core Equity Fund, Equity Income Fund, Equity Index Fund and
Tax Managed Equity Fund;
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, Real Return Advantage Fund and Balanced Allocation Fund.
As of the date of this report, the Equity Index, Balanced Allocation and Real
Return Advantage Funds have not commenced operations.
Effective November 19, 1997, the names of the Armada Fixed Income and
Intermediate Government Funds were changed to the Armada Intermediate Bond and
Bond Funds, respectively.
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, Inventor GNMA Securities
Fund and Inventor Intermediate Government Securities Fund (the "Predecessor
Funds") transferred all of their assets and liabilities with approximate values
of $63,566,229 and $92,883,276, respectively, in exchange for shares of Armada
GNMA Fund and Armada Bond Fund, respectively. Net unrealized depreciation on
investment securities included in the above amounts were $1,064,753 and
$1,459,226 for the Inventor GNMA Securities and Inventor Intermediate Government
Securities Funds, respectively. The Reorganizations of the Armada GNMA and
Intermediate Government Funds were executed as tax-free reorganizations in
accordance with Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"). The results of operations, changes in net
assets and financial highlights of the Armada GNMA and Bond Funds for the year
ended May 31, 1997, include those of the respective Predecessor Funds.
44
<PAGE>
NOTES TO FINANCIAL STATEMENTS
In accordance with provisions of the Reorganization Agreement, the Trust and
Inventor were each responsible for the payment of their own expenses incurred in
connection with the Reorganization to the extent not borne by their respective
Investment Advisers. Accordingly, the Trust recognized approximately $200,000 in
costs connected with the Reorganization, which has been allocated among the
various funds in the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Total Return Advantage, Intermediate Bond, Enhanced Income, GNMA and Bond 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: With respect to each Fund, investment securities are
valued at their closing sales price if the principal market is an exchange.
Other securities, and temporary cash investments acquired more than 60 days from
maturity, are valued at the mean between quoted bid and asked prices. Such
valuations are provided by one or more independent pricing services when such
valuations are believed to reflect fair market value. When valuing securities,
pricing services consider institutional size trading in similar groups of
securities and any developments related to specific issues, among other things.
Short-term investments with maturities of 60 days or less are generally valued
on the basis of amortized cost, unless the Trust's Board of Trustees determines
that this does not represent fair value.
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
the Funds in the Trust are allocated among them.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from the net
investment income of the Funds are declared daily and paid no later than five
business days after the end of the month. With respect to each Fund, net income
for dividend purposes consists of dividends and interest income, 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 reports for financial reporting purposes.
ORGANIZATION 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 subse-
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS
quent to June 30, 1998, will be expensed as incurred.
MORTGAGE DOLLAR ROLLS: For the purpose of enhancing the Fund's yield, the
GNMA Fund may enter into mortgage dollar rolls (principally in TBA's) in which
the Fund sells mortgage securities for delivery in the current month and
simultaneously contracts to repurchase similar, but not identical, securities at
an agreed-upon price on a fixed date. The Fund accounts for such dollar rolls as
purchases and sales and maintains liquid high grade securities in an amount at
least equal to its commitment to repurchase.
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, wholly-owned subsidiaries of
National City Corporation, (collectively, the "Adviser" or "Advisers"), are
payable monthly based on an annual rate of .55%, .55%, .45%, .55% and .55% of
the average daily net assets of the Total Return Advantage, Intermediate Bond,
Enhanced Income, GNMA, and Bond Funds, respectively. 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 fees as follows:
EARNED WAIVED
(000) (000)
---------- -------
Total Return Advantage Fund.... $1,538 $1,133
Intermediate Bond Fund......... 816 222
Enhanced Income Fund........... 331 265
GNMA Fund...................... 396 --
Bond Fund...................... 574 --
At May 31, 1998, advisory fees accrued and unpaid amounted to (000):
Total Return Advantage Fund................. $233
Intermediate Bond Fund...................... 107
Enhanced Income Fund........................ 37
GNMA Fund................................... 74
Bond Fund................................... 103
The Trust maintains a Shareholder Services Plan (the "Services Plan") with
respect to the Retail shares and 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 shares or
B shares in consideration for the payment of up to .25% on an annualized basis
of net asset value of Retail shares or B shares of the Total Return Advantage,
Intermediate Bond, GNMA and Bond Funds and .10% on an annualized basis of the
net asset value of Retail shares or B shares of the Enhanced Income Fund. 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):
Total Return Advantage Fund................. $ 5
Intermediate Bond Fund...................... 8
Enhanced Income Fund........................ 2
GNMA Fund................................... 1
Bond Fund................................... --
National City Bank also serves as the Funds' Custodian. For the year ended
May 31, 1998, National City Bank has earned Custodian fees as follows (000):
Total Return Advantage Fund................. $40
Intermediate Bond Fund...................... 26
Enhanced Income Fund........................ 16
GNMA Fund................................... 17
Bond Fund................................... 21
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.
440 Financial Distributors, Inc., ("440"), a wholly-owned subsidiary of The
Shareholder Services Group, Inc., and an indirect wholly-owned subsidiary of
First Data Corp., served as the Trust's distributor until
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 7, 1997. Each Fund reimbursed 440 for direct and indirect expenses
incurred in performing distribution services, up to a maximum of .10% per annum
of the average net assets of each Fund, inclusive of an annual fee of $250,000,
which was allocated among the investment funds for which 440 was distributing
shares.
SEI served as distributor to the GNMA and Bond Funds prior to the
Reorganization. Under a Rule 12b-1 Distribution Plan, SEI earned and waived Fees
at an annual rate of up to .25% of the average daily net assets of the
Predecessor Funds' Class A shares.
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 is an officer, director, trustee, or employee of the
Investment Advisers, Distributor, or of any parent or subsidiary thereof, who
serves as an officer, trustee, or employee of the Trust receives any
compensation from the Trust.
Expenses for the year ended May 31, 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.
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
---------- -------
Total Return
Advantage Fund.......... $224,559,558 $189,732,924
Intermediate Bond
Fund.................... 131,201,879 68,918,429
Enhanced Income
Fund.................... 41,595,323 43,301,501
GNMA Fund................. 6,509,004 44,665
Bond Fund................. 77,330,400 19,193,039
Purchases and sales of long-term U.S. government obligations were:
PURCHASES SALES
---------- -------
Total Return
Advantage Fund.......... $265,521,296 $275,387,627
Intermediate Bond
Fund.................... 152,047,599 155,717,371
Enhanced Income
Fund.................... 61,600,990 51,869,252
GNMA Fund................. 196,639,108 175,994,201
Bond Fund................. 198,935,868 204,922,420
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 on the following pages for
the Funds.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1998 (000)
--------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS CLASS B
------------------- ------------ -------
SHARES VALUE SHARES VALUE SHARES VALUE
------ --------- ------ ------- ------ -----
TOTAL RETURN ADVANTAGE FUND
<S> <C> <C> <C> <C>
Shares sold .................................... 8,225 $ 83,718 63 $ 651 -- --
Shares reinvested .............................. 930 9,472 12 111 -- --
Shares repurchased ............................. (6,481) (65,987) (232) (2,374) -- --
------ -------- ----- ------- ----- -----
Net increase/(decrease) ........................ 2,674 $ 27,203 (157) $(1,612) -- --
====== ======== ===== ======= ===== =====
INTERMEDIATE BOND FUND
Shares sold .................................... 10,533 $111,103 113 $ 1,204 7 $ 79
Shares reinvested .............................. 178 1,878 17 173 -- --
Shares repurchased ............................. (6,658) (70,201) (178) (1,883) (7) (77)
------ -------- ----- ------- ----- -----
Net increase/(decrease) ........................ 4,053 $ 42,780 (48) $ (506) -- $ 2
====== ======== ===== ======= ===== =====
ENHANCED INCOME FUND
Shares sold .................................... 6,108 $ 61,441 195 $ 1,961 -- --
Shares reinvested .............................. 227 2,282 12 108 -- --
Shares repurchased ............................. (5,302) (53,330) (356) (3,579) -- --
------ -------- ----- ------- ----- -----
Net increase/(decrease) ........................ 1,033 $ 10,393 (149) $(1,510) -- --
====== ======== ===== ======= ===== =====
GNMA FUND
Shares sold .................................... 2,751 $ 28,426 51 $ 526 -- --
Shares reinvested .............................. 15 148 1 9 -- --
Shares repurchased ............................. (1,046) (10,811) (12) (119) -- --
------ -------- ----- ------- ----- -----
Net increase ................................... 1,720 $ 17,763 40 $ 416 -- --
====== ======== ===== ======= ===== =====
BOND FUND
Shares sold .................................... 5,321 $ 54,488 24 $ 274 4 $ 39
Shares reinvested .............................. 11 112 -- 1 -- --
Shares repurchased ............................. (1,520) (15,500) (10) (107) (4) (38)
------ -------- ----- ------- ----- -----
Net increase ................................... 3,812 $ 34,100 14 $ 168 -- $ 1
====== ======== ===== ======= ===== =====
</TABLE>
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31, 1997 (000)
-------------------------------------------------------------------
INSTITUTIONAL CLASS RETAIL CLASS
------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
-------------- -------------- -------------- --------------
TOTAL RETURN ADVANTAGE FUND
<S> <C> <C> <C> <C>
Shares sold ....................................... 6,547 $ 65,364 1 $ 8
Shares reinvested ................................. 1,323 13,218 17 166
Shares repurchased ................................ (10,060) (100,805) (3) (30)
-------- --------- ----- -------
Net increase/(decrease) ........................... (2,190) $ (22,223) 15 $ 144
======== ========= ===== =======
INTERMEDIATE BOND FUND
Shares sold ....................................... 7,749 $ 80,231 1 $ 10
Shares reinvested ................................. 56 578 22 230
Shares repurchased ................................ (6,911) (71,840) (267) (2,782)
-------- --------- ----- -------
Net increase/(decrease) ........................... 894 $ 8,969 (244) $(2,542)
======== ========= ===== =======
ENHANCED INCOME FUND
Shares sold ....................................... 5,918 $ 59,246 242 $ 2,429
Shares reinvested ................................. 228 2,285 12 121
Shares repurchased ................................ (6,722) (67,329) (220) (2,212)
-------- --------- ----- -------
Net increase/(decrease) ........................... (576) $ (5,798) 34 $ 338
======== ========= ===== =======
GNMA FUND
Shares sold ....................................... 1,574 $ 15,943 17 $ 168
Shares reinvested ................................. 11 114 1 6
Shares repurchased ................................ (1,263) (12,834) (5) (47)
-------- --------- ----- -------
Net increase ...................................... 322 $ 3,223 13 $ 127
======== ========= ===== =======
BOND FUND
Shares sold ....................................... 1,897 $ 19,050 4 $ 44
Shares reinvested ................................. 11 106 -- 1
Shares repurchased ................................ (1,718) (17,282) (2) (22)
-------- --------- ----- -------
Net increase ...................................... 190 $ 1,874 2 $ 23
======== ========= ===== =======
</TABLE>
49
<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
Intermediate Bond Fund, Armada GNMA Fund, and Armada Bond Fund, and the
statements of assets and liabilities, including the portfolios of investments,
of the Armada Total Return Advantage Fund and Armada Enhanced Income Fund (the
"Funds") as of May 31, 1998, and the related statements of operations and
statements of changes in net assets for the periods presented herein. We have
also audited the financial highlights for each of the periods presented herein
for the Armada Total Return Advantage Fund, Armada Intermediate Bond Fund, and
Armada Enhanced Income Fund, and for the years ended May 31, 1998 and May 31,
1997 presented herein for the Armada GNMA Fund and Armada Bond Fund. 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. The financial
highlights for the periods ended April 30, 1995 through May 31, 1996 for the
GNMA Fund and Armada Intermediate Government Fund were audited by other auditors
whose report dated July 26, 1996 expressed an unqualified opinion on those
financial highlights.
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 1998 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 and changes in their net assets for the periods presented herein and
for the Armada Total Return Advantage Fund, Armada Intermediate Bond Fund, and
Armada Enhanced Income Fund, the financial highlights for each of the periods
presented herein, and for the Armada GNMA Fund and the Armada Bond Fund, the
financial highlights for the years ended May 31, 1998 and May 31, 1997 presented
herein, in conformity with generally accepted accounting principles.
/S/ SIGNATURE
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
July 20, 1998
50
<PAGE>
RESULTS OF PROXY VOTING
SPECIAL MEETING OF THE SHAREHOLDERS HELD ON JUNE 29, 1998.
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.
51
<PAGE>
NOTES
52
<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>
[ARMADA FUNDS LOGO OMITTED]
Oaks, Pennsylvania 19456
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-801 (7/98)
---------------
BULK RATE
U.S. POSTAGE
PAID
CLEVELAND, OH
PERMIT NO. 1535
---------------
