<PAGE> 1
As filed with the Securities and Exchange Commission on July 2, 1998
Registration No. 33-488/811-4416
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
POST-EFFECTIVE AMENDMENT NO. 42 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 41 [X]
Armada Funds (formerly known as "NCC Funds")
(Exact Name of Registrant as Specified in Charter)
Oaks, Pennsylvania, 19456
(Address of Principal Executive Offices)
Registrant's Telephone Number:
1-800-622-FUND
W. Bruce McConnel, III, Esq.
DRINKER BIDDLE & REATH LLP
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
Copy to:
Thomas F. Harvey, Esq.
National City Bank
National City Center
P.O. Box 5756
Cleveland, Ohio 44101-0756
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (b)
[X] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(iii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
==================
The Title of Securities Being Registered . . . . Class BB Shares of beneficial
interest
<PAGE> 2
The purpose of this post-effective amendment is to register
Institutional and Retail Shares of the Ohio Municipal Money Market Fund.
<PAGE> 3
CROSS REFERENCE SHEET
---------------------
Ohio Municipal Money Market Fund
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<C> <C>
1. Cover Page....................................... Cover Page
2. Synopsis......................................... Expense Table
3. Condensed Financial
Information...................................... Yield and Performance Information
4. General Description of
Registrant....................................... Investment Objective and Policies; Investment
Limitations; Description of the Trust and Its Shares
5. Management of the Trust.......................... Management of the Trust; Custodian and Transfer Agent
6. Capital Stock and Other
Securities....................................... How to Purchase and Redeem Shares; Dividends and
Distributions; Taxes; Description of the Trust and
Its Shares; Miscellaneous
7. Purchase of Securities
Being Offered.................................... Pricing of Shares; How to Purchase and Redeem
Shares; Distribution and Servicing Arrangements
8. Redemption Repurchase............................ How to Purchase and Redeem Shares
9. Pending Legal Proceedings........................ Inapplicable
</TABLE>
<PAGE> 4
CROSS REFERENCE SHEET
---------------------
Balanced Allocation Fund
<TABLE>
<CAPTION>
................................................................... Statement of Additional
Form N-1A Part B Item Information Caption
- --------------------- -------------------
<C> <C>
1. Cover Page......................................................... Cover Page
2. Table of Contents.................................................. Table of Contents
3. General Information and History.................................... Statement of Additional Information
4. Investment Objectives and Policies................................. Investment Objective and Policies
5. Management of Registrant........................................... Trustees and Officers
6. Control Persons and Principal
Holders of Securities.............................................. Description of Shares
7. Investment Advisory and Other
Services........................................................... Advisory, Administration,
Distribution, Custodian Services and
Transfer Agency Agreements
8. Brokerage Allocation and Other
Practices.......................................................... Investment Objectives and
Policies
9. Capital Stock and Other Securities................................. Additional Purchase and
Redemption Information
10. Purchase, Redemption and Pricing
of Securities Being Offered........................................ Additional Purchase and Redemption
Information
11. Tax Status......................................................... Additional Information Concerning
Taxes
12. Underwriters....................................................... Not Applicable
13. Calculation of Performance Data.................................... Yield and Performance
Information
14. Financial Statements............................................... Financial Statements
</TABLE>
<PAGE> 5
ARMADA FUNDS
PROSPECTUS
September __, 1998
Money Market Fund
Government Money Market Fund
Treasury Money Market Fund
Tax Exempt Money Market Fund
Pennsylvania Tax Exempt Money Market Fund
Ohio Municipal Money Market Fund
<PAGE> 6
- --------------------------------------------------------------------------------
- - SHARES OF ARMADA FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY BANK, ITS PARENT COMPANY OR
ANY OF ITS AFFILIATES OR ANY BANK.
- - SHARES OF ARMADA FUNDS ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
FDIC, OR ANY GOVERNMENTAL AGENCY OR STATE.
- - AN INVESTMENT IN ARMADA FUNDS INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
National City Bank receives an investment advisory fee as investment
adviser to Armada Funds. Past performance is not indicative of future
performance, and the investment return will fluctuate, so that you may have a
gain or loss when you sell your shares.
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Trust
or its Distributor. This Prospectus does not constitute an offering by the Trust
or by the Distributor in any jurisdiction in which such offering may not
lawfully be made.
-2-
<PAGE> 7
TABLE OF CONTENTS
PAGE
INTRODUCTION........................................................... 6
EXPENSE TABLE.......................................................... 7
INVESTMENT OBJECTIVES AND POLICIES..................................... 19
INVESTMENT LIMITATIONS................................................. 33
YIELD AND PERFORMANCE INFORMATION...................................... 35
PRICING OF SHARES...................................................... 36
HOW TO PURCHASE AND REDEEM SHARES...................................... 37
DISTRIBUTION AND SERVICING ARRANGEMENTS................................ 50
DIVIDENDS AND DISTRIBUTIONS............................................ 51
TAXES.................................................................. 52
MANAGEMENT OF THE TRUST................................................ 56
DESCRIPTION OF THE TRUST AND ITS SHARES................................ 58
CUSTODIAN AND TRANSFER AGENT........................................... 62
EXPENSES............................................................... 62
MISCELLANEOUS.......................................................... 62
APPENDIX A............................................................. A-1
-3-
<PAGE> 8
ARMADA FUNDS
- --------------------------------------------------------------------------------
Oaks, Pennsylvania 19456 If you purchased your shares
through NatCity Investments, Inc.,
please call your Financial
Consultant for information.
For current performance, fund
information, account redemption
information, and to purchase
shares, please call 1-800-622-
FUND(3863).
This Prospectus describes shares in the following five
investment funds (the "Funds") of Armada Funds (the "Trust"), each having its
own investment objective and policies:
MONEY MARKET FUND'S investment objective is to seek as high a
level of current income as is consistent with liquidity and stability of
principal. The Fund invests in "money market" instruments such as bank
certificates of deposit, bankers' acceptances, and commercial paper (including
variable and floating rate notes) in addition to obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
repurchase agreements relating to such obligations.
GOVERNMENT MONEY MARKET FUND'S investment objective is to seek
as high a level of current income as is consistent with liquidity and stability
of principal. The Fund invests in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities and repurchase agreements relating
to such obligations.
TREASURY MONEY MARKET FUND'S investment objective is to seek
as high a level of current income as is consistent with liquidity and stability
of principal. The Fund invests in U.S. Treasury bills and notes and other direct
obligations of the U.S. Treasury.
TAX EXEMPT MONEY MARKET FUND'S investment objective is to
provide as high a level of current interest income exempt from federal income
tax as is consistent with liquidity and stability of principal.
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND'S investment
objective is to provide current income exempt from regular federal income and
Pennsylvania personal income taxes, consistent with stability of principal. The
Fund invests primarily in high quality debt obligations issued by or on behalf
of the Commonwealth of Pennsylvania and its political subdivisions and financing
authorities.
-4-
<PAGE> 9
OHIO MUNICIPAL MONEY MARKET FUND'S investment objective is to
provide current income exempt from regular federal income tax and Ohio personal
income tax, consistent with stability of principal.
All securities or instruments in which the Funds invest have
remaining maturities of 397 calendar days or less, except variable and floating
rate instruments and securities underlying certain repurchase agreements which
may bear longer maturities.
National City Bank ("National City" or the "Adviser") serves
as investment adviser to the Money Market, Government Money Market, Treasury
Money Market, Tax Exempt Money Market, Pennsylvania Tax Exempt Money Market and
Ohio Municipal Money Market Funds.
SEI Investments Distribution Co. (the "Distributor") serves
as the Trust's sponsor and distributor. Each Fund pays a fee to the
Distributor for distributing its shares. See "Distribution
Agreement."
This Prospectus sets forth concisely the information about the
Funds that a prospective investor should consider before investing. Investors
should carefully read this Prospectus and retain it for future reference.
Additional information about the Funds, contained in a Statement of Additional
Information, has been filed with the Securities and Exchange Commission ("SEC")
and is available upon request without charge by contacting the Trust at its
telephone number or address shown above. The Statement of Additional Information
bears the same date as this Prospectus and is incorporated by reference in its
entirety into this Prospectus.
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, NATIONAL CITY BANK, ITS
PARENT COMPANY OR ANY OF ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY
GOVERNMENTAL AGENCY OR STATE. INVESTMENT IN THE TRUST INVOLVES RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
September __, 1998
-5-
<PAGE> 10
INTRODUCTION
The Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). Each Fund consists of a separate pool of assets with separate investment
objectives and policies as described below under "Investment Objectives and
Policies." Each Fund is classified as a diversified investment company under the
1940 Act.
Shares of each Fund have been classified into two separate
classes -- Retail shares and Institutional shares, with the exception of the
Money Market and Tax Exempt Money Market Funds, which have been classified into
three separate classes - - Retail shares, B shares and Institutional shares.
ALTHOUGH B SHARES ARE NOT CURRENTLY BEING OFFERED FOR THE TAX EXEMPT MONEY
MARKET FUND, THEY MAY BE OFFERED IN THE FUTURE. Retail shares, B shares and
Institutional shares represent equal pro rata interests in the investments held
in a Fund and are identical in all respects, except that shares of each class
bear separate distribution and/or shareholder administrative servicing fees and
enjoy certain exclusive voting rights on matters relating to these fees. See
"Distribution and Servicing Arrangements," "Dividends and Distributions" and
"Description of the Trust and Its Shares." Except as provided below, Retail
shares are sold through selected broker-dealers and other financial
intermediaries to individual or institutional customers. Retail shares are sold
subject to a front-end sales charge. B shares are sold with a contingent
deferred sales charge (back-end charge) imposed on a sliding schedule when such
shares are redeemed. B shares of the Money Market and Tax Exempt Money Market
Funds are available only to holders of another Fund's B shares who wish to
exchange them for B shares of the Money Market and/or Tax Exempt Money Market
Fund.
-6-
<PAGE> 11
EXPENSE TABLE
<TABLE>
<CAPTION>
Treasury
Money Money Money Government Government Money
Market Market Market Money Market Money Market Market
Retail B Institutional Retail Institutional Retail
Shares(1) Shares(1,2) Shares Shares(1) Shares Shares(1)
-------- ----------- ------------ ------------ ------------- ---------
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C> <C> <C>
Sales Charge Imposed on Purchases.................. None None None None None None
Sales Charge Imposed on Reinvested Dividends....... None None None None None None
Deferred Sales Charge(3)........................... None 5.00% None None None None
Exchange Fee....................................... None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees (after fee waivers)(4)............. .25% .25% .25% .25% .25% .25%
12b-1 Fees(4,5).................................... .06% .75% .06% .06% .06% .06%
Other Expenses..................................... .22% .22% .07% .24% .09% .24%
---- --- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES (after fee
waivers)(4)....................................... .53% 1.22% .38% .55% .40% .55%
==== ==== ==== ==== ==== ====
</TABLE>
-7-
<PAGE> 12
<TABLE>
<CAPTION>
Pennsylvania Pennsylvania Ohio Ohio
Treasury Tax Exempt Tax Exempt Tax Exempt Tax Exempt Tax Exempt Municipal Municipal
Money Market Money Market Money Market Money Market Money Market Money Market Money Market Money Market
Institutional Retail B Institutional Retail Institutional Retail Institutional
Shares Shares(1) Shares(1,2) Shares Shares(1) Shares Shares(1,6) Shares(6)
------------- ------------ ------------- ------------- ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES
Sales Charge None None None None None None None None
Imposed on
Purchases..........
Sales Charge None None None None None None None None
Imposed on
Reinvested
Dividends......
Deferred Sales None None 5.00% None None None None None
Charge(3)..........
Exchange Fee..... None None None None None None None None
ANNUAL FUND
OPERATING EXPENSES
(as a percentage
of average daily
net
assets)
Management Fees .25% .15% .15% .15% .15% .15% .15% .15%
(after fee
waivers)(4)........
12b-1 Fees(4,5).. .06% .06% .75% .06% .06% .06% .04% .04%
Other Expenses... .09% .24% .24% .09% .28% .13% .37% .22%
---- ---- ---- ---- ---- ---- ----- ----
TOTAL FUND .40% .45% 1.14% .30% .49% .34% .56%(6) .41%(6)
==== ==== ===== ==== ==== ==== ==== ====
OPERATING EXPENSES
(after
fee waivers)(4).
<FN>
- ---------------------------
ALTHOUGH B SHARES ARE NOT CURRENTLY BEING OFFERED FOR THE TAX EXEMPT MONEY
MARKET FUND, THEY MAY BE OFFERED IN THE FUTURE.
</TABLE>
-8-
<PAGE> 13
1 The Trust has implemented plans imposing shareholder servicing fees
with respect to Retail shares in each of the Funds and B shares of the
Money Market and Tax Exempt Money Market Funds. Pursuant to such plans,
the Trust enters into shareholder servicing agreements with certain
financial institutions under which they agree to provide shareholder
administrative services to their customers who beneficially own Retail
shares or B shares in consideration for the payment of up to .15% (on
an annualized basis) of the net asset value of such Retail shares or B
shares, respectively, of the Money Market or Tax Exempt Money Market
Funds. For further information concerning these plans, see
"Distribution and Servicing Arrangements."
2 As of the date of this Prospectus, the Tax Exempt Money Market Fund's B
share classes has not commenced operations, and therefore, "Other
Expenses" for such classes are estimates only.
3 This amount applies to redemptions during the first year. The deferred
sales charge decreases to 4.0%, 3.0% and 2.0% for redemptions made
during the second through fifth years, respectively. No deferred sales
charge is charged after the fifth year. For more information, see "How
to Purchase and Redeem Shares Sales Charges Applicable to Purchase of B
Shares."
4 The expense information in the table relating to each Fund has been
restated to reflect current fees. For the current fiscal year, the
Adviser will voluntarily waive fees in the amount of .10% of the
average daily net assets of the Money Market and Government Money
Market Funds, .05% of the average daily net assets of the Treasury
Money Market Fund, .20% of the average daily net assets of the Tax
Exempt Money Market Fund, .25% of the average daily net assets of the
Pennsylvania Tax Exempt Money Market Fund and .20% of the average daily
net assets of the Ohio Municipal Money Market Fund (the Adviser is
entitled to receive an advisory fee, computed daily and payable
monthly, at the annual rate of .35% of the average daily net assets of
each of the Money Market, Government Money Market, Tax Exempt Money
Market and Ohio Municipal Money Market Funds, .30% of the average daily
net assets of the Treasury Money Market Fund and .40% of the average
daily net assets of the Pennsylvania Tax Exempt Money Market Fund
pursuant to its Advisory Agreement with the Trust). Without such fee
waivers, Total Fund Operating Expenses would be .63%, 1.32% and .48%
for the Retail, B and Institutional shares of the Money Market Fund,
respectively, .65% and .50% for the Retail and Institutional shares of
the Government Money Market Fund, respectively, .60% and .45% for the
Retail and Institutional Shares of the Treasury Money Market Fund,
respectively, .65%, 1.34% and .50% for the Retail, B and Institutional
shares of the Tax Exempt Money Market Fund, respectively, .74% and .59%
for the Retail and Institutional shares of the Pennsylvania Tax Exempt
Money Market Fund, respectively, and .76% and .61% for the Retail and
Institutional shares of the Ohio Municipal Money Market Fund,
respectively. Additionally, if the maximum distribution fee permitted
under the 12b-1 Plan were imposed, Total Fund Operating Expenses would
be .67%, 1.32% and .52%, .69% and .54%, .64% and .49%, .69%, 1.34% and
.54%, .78% and .63% and .82% and .67% for the Retail, B and
Institutional shares of the Money Market Fund, Government Money Market
Fund, Treasury Money Market Fund, Tax Exempt Money Market Fund,
Pennsylvania Tax Exempt Money Market Fund and Ohio Municipal Money
Market Fund, respectively.
5 The Funds have in effect a 12b-1 Plan for the Retail and Institutional
classes of shares pursuant to which each Fund's Retail and
Institutional shares may bear fees in an amount of up to .10% per annum
of such classes' average net assets. A separate 12b-1 Plan exists with
respect to the Money Market and Tax Exempt Money Market Funds' B class
of shares, pursuant to which each class of B shares may bear fees in an
amount of up to .75% of average daily net assets. As a result of the
payment of 12b-1 fees, long-term shareholders may pay more than the
economic equivalent of the maximum sales charges permitted by the
National Association of Securities Dealers, Inc. ("NASD"). The NASD has
adopted rules which generally limit the aggregate payments under the
Trust's 12b-1 Plans to a certain percentage of total new gross share
sales, plus interest. The Trust would stop accruing 12b-1 and related
fees if, to the extent, and for as long as, such limit would otherwise
be exceeded.
6 As of the date of this Prospectus, the Ohio Municipal Money Market Fund
had not commenced investment operations, and therefore, the other
expenses for this Fund are estimates only.
-9-
<PAGE> 14
EXAMPLE
For example, you would pay the following expenses on a hypothetical $1,000
investment, assuming: (1) a 5% annual return (a hypothetical return required by
SEC regulations); and (2) the redemption of your investment at the end of the
following time periods (None of the Funds charges a redemption fee):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Retail Shares................... $ 5 $ 17 $ 30 $ 66
Money Market B Shares(1)..................... $ 62 $ 79 $ 87 $ 129(2)
Money Market Institutional Shares............ $ 4 $ 12 $ 21 $ 48
Government Money Market Retail Shares........ $ 6 $ 18 $ 31 $ 69
Government Money Market Institutional Shares. $ 4 $ 13 $ 22 $ 51
Treasury Money Market Retail Shares.......... $ 6 $ 18 $ 31 $ 69
Treasury Money Market Institutional Shares... $ 4 $ 13 $ 22 $ 51
Tax Exempt Money Market Retail Shares........ $ 5 $ 14 $ 25 $ 57
Tax Exempt Money Market B Shares(1).......... $ 62 $ 76 $ 83 $ 119(2)
Tax Exempt Money Market Institutional Shares. $ 3 $ 10 $ 17 $ 38
Pennsylvania Tax Exempt Money Market
Retail Shares.............................. $ 5 $ 16 $ 27 $ 62
Pennsylvania Tax Exempt Money Market
Institutional Shares....................... $ 3 $ 11 $ 19 $ 43
Ohio Municipal Money Market Retail Shares.... $ 6 $ 18 $ 31 $ 70
Ohio Municipal Money Market Institutional Shares $ 4 $ 13 23 52
- --------------------------
<FN>
1 Assumes deduction of maximum applicable contingent deferred sales charge.
2 Based on conversion of B shares to Retail shares after eight years.
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER
OR LESS THAN THOSE SHOWN.
The purpose of this Expense Table is to assist an investor in
understanding the various costs and expenses that an investor in the Trust will
bear directly or indirectly. For more complete descriptions of these costs and
expenses, see "Financial Highlights," "Management of the Trust" and
"Distribution and Servicing Arrangements" in this Prospectus and the financial
statements and related notes incorporated by reference into the Statement of
Additional Information for the Money Market, Government Money Market, Treasury
Money Market, Tax Exempt Money Market and Pennsylvania Tax Exempt Money Market
Funds. THE INFORMATION INCLUDED IN THE TABLES AND HYPOTHETICAL EXAMPLE ABOVE IS
BASED ON THE OHIO MUNICIPAL MONEY MARKET FUND'S ESTIMATED FEES AND EXPENSES FOR
THE CURRENT FISCAL YEAR AND SHOULD NOT BE
-10-
<PAGE> 15
CONSIDERED AS REPRESENTATIVE OF PAST OR FUTURE EXPENSES. Any fees that are
charged by affiliates of the Adviser or other institutions directly to their
customer accounts for services related to an investment in shares of any of the
Funds are in addition to and are not reflected in the fees and expenses
described above.
-11-
<PAGE> 16
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout each period)
MONEY MARKET FUND
The following information has been derived from financial statements
audited by Ernst & Young LLP, independent auditors, whose report is incorporated
by reference in the Statement of Additional Information. It should be read in
conjunction with the financial statements and related notes which are
incorporated by reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-------------------------------------------------------------------------------------------
1997 1996 1995
--------------------- ------------------------ ----------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income... 0.05 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from Net
Investment Income...... (0.05) (0.05) (0.05) (0.05) (0.05) (0.05)
------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN.............. 5.19% 5.09% 5.45% 5.35% 5.11% 5.01%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in 000s). . . . $1,943,021 $346,172 $1,344,414 $343,087 $1,083,243 $175,192
Ratio of Expenses to
Average Net Assets..... 0.37%(4) 0.47%(5) 0.37%(4) 0.47%(5) 0.37%(4) 0.47%(5)
Ratio of Net Investment
Income to Average
Net Assets............. 5.07%(4) 4.97%(5) 5.30%(4) 5.18%(5) 5.07%(4) 5.12%(5)
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-------------------------------------------------------------------------------------------
1994 1993 1992 1991(1)
--------------------- --------------------- -------------------- -----------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- -----
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income... 0.03 0.03 0.03 0.03 0.05 0.04 0.07 0.01
LESS DISTRIBUTIONS
Dividends from Net
Investment Income...... (0.03) (0.03) (0.03) (0.03) (0.05) (0.04) (0.07) (0.01)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN.............. 2.91% 2.81% 2.93% 2.82% 4.59% 4.50% 7.34% 5.64%(2)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in 000s). . . . $743,377 $67,229 $399,191 $57,710 $352,578 $28,497 $322,943 $22,658
Ratio of Expenses to
Average Net Assets..... 0.43%(4) 0.53%(5) 0.43% 0.53% 0.43% 0.53% 0.42% 0.52%(2)
Ratio of Net Investment
Income to Average
Net Assets............. 2.94%(4) 2.78%(3) 2.89% 2.79% 4.51% 4.41% 7.52% 6.03%(2)
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------
1990 1989 1988
---- ---- ----
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $1.00 $1.00 $1.00
----- ----- -----
INCOME FROM
INVESTMENT OPERATIONS
Net Investment Income... 0.08 0.08 0.07
LESS DISTRIBUTIONS
Dividends from Net
Investment Income...... (0.08) (0.08) (0.07)
------ ------ ------
Net Asset Value,
End of Period.......... $1.00 $1.00 $1.00
===== ===== =====
TOTAL RETURN.............. 8.69% 8.66% 6.87%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in 000s). . . . $365,468 $387,631 $370,064
Ratio of Expenses to
Average Net Assets..... 0.42% 0.44% 0.44%(3)
Ratio of Net Investment
Income to Average
Net Assets............. 8.37% 8.35% 6.69%(3)
<FN>
- ----------
1 Retail class commenced operations on April 1, 1991.
2 Annualized.
3 The operating expense ratio and net investment income ratio before fee
waivers by the Advisers for the year ended May 31, 1988 were .45% and
6.68%, respectively.
4 The operating expense ratio and net investment income ratio before fee
waivers by the Advisers for the Institutional class for the year ended May
31, 1997 would have been 0.47% and 4.97%, respectively. The operating
expense ratio and net investment income ratio before fee waivers by the
Advisers and custodian for the Institutional class for the years ended May
31, 1996 and 1995 would have been .48% and 5.19% and .48% and 4.96%,
respectively. The operating expense ratio and net investment income ratio
before fee waivers by the Advisers for the Institutional class for the year
ended May 31, 1994 would have been .45% and 2.92%, respectively.
5 The operating expense ratio and net investment income ratio before fee
waivers by the Advisers for the Retail class for the year ended May 31,
1997 would have been 0.57% and 4.87%, respectively. The operating expense
ratio and net investment income ratio before fee waivers by the Advisers
and custodian for the Retail class for the years ended May 31, 1996 and
1995 would have been .58% and 5.07% and .58% and 5.01%, respectively. The
operating expense ratio and net investment income ratio before fee waivers
by the Advisers for the Retail class for the year ended May 31, 1994 would
have been .55% and 2.76%, respectively.
</TABLE>
-12-
<PAGE> 17
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout each period)
GOVERNMENT MONEY MARKET FUND
(Formerly, the Government Fund)
The following information has been derived from financial statements
audited by Ernst & Young LLP, independent auditors, whose report is incorporated
by reference in the Statement of Additional Information. It should be read in
conjunction with the financial statements and related notes which are
incorporated by reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
-------------------------------------------------------------------------------
1997 1996 1995
----------------------- ------------------------ ----------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income . 0.05 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS
Dividends from Net
Investment Income .... (0.05) (0.05) (0.05) (0.05) (0.05) (0.05)
----- ----- ----- ----- ----- -----
Net Asset Value,
End of Period ........ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN ............ 5.15% 5.04% 5.41% 5.31% 4.97% 4.87%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in 000s) ..... $811,662 $159,129 $741,894 $131,194 $618,058 $19,174 $
Ratio of Expenses to
Average Net Assets ... 0.36%(3) 0.47%(4) 0.36%(3) 0.46%(4) 0.39%(3) 0.51%(4)
Ratio of Net Investment
Income to Average
Net Assets ........... 5.03%(3) 4.93%(4) 5.27%(3) 5.13%(4) 4.83%(3) 5.01%(4)
<CAPTION>
FOR THE YEAR ENDED MAY 31,
----------------------------------------------------------------------------
1994 1993 1992
---------------------- ------------------------- ----------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income . 0.03 0.03 0.03 0.03 0.05 0.04
LESS DISTRIBUTIONS
Dividends from Net
Investment Income .... (0.03) (0.03) (0.03) (0.03) (0.05) (0.04)
----- ----- ----- ----- ----- -----
Net Asset Value,
End of Period ........ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN ............ 2.91% 2.80% 2.91% 2.81% 4.65% 4.55%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in 000s) ..... $768,337 $6,945 $272,809 $11,050 $148,389 $2,234
Ratio of Expenses to
Average Net Assets ... 0.42%(3) 0.52%(4) 0.45%(3) 0.55%(4) 0.45%(3) 0.55%(4)
Ratio of Net Investment
Income to Average
Net Assets ........... 2.92%(3) 2.75%(4) 2.84%(3) 2.74%(4) 4.49%(3) 4.39%(4)
<CAPTION>
FOR THE YEAR ENDED MAY 31,
---------------------------------------------------------------
1991(1) 1990 1989 1988
------------------------ ---- ---- ----
INSTITUTIONAL RETAIL(1)
------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ... $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income . 0.07 0.01 0.08 0.08 0.06
LESS DISTRIBUTIONS
Dividends from Net
Investment Income .... (0.07) (0.01) (0.08) (0.08) (0.06)
Net Asset Value,
End of Period ........ $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN ............ 7.17% 5.63%(2) 8.53% 8.38% 6.59%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in 000s) ..... $136,376 $3,671 $110,675 $74,684 $62,963
Ratio of Expenses to
Average Net Assets ... 0.45%(3) 0.55%(2,4) 0.45%(3) 0.45%(3) 0.41%(3)
Ratio of Net Investment
Income to Average
Net Assets ........... 6.81%(3) 5.47%(2,4) 8.16%(3) 8.20%(3) 6.42%(3)
<FN>
- --------------
1 Retail class commenced operations on April 1, 1991.
2 Annualized.
3 The operating expense ratio and net investment income ratio before fee
waivers by the Advisers for the Institutional class for the year ended May
31, 1997 would have been .46% and 4.93%, respectively. The operating
expense ratio and net investment income ratio before fee waivers by the
Advisers and custodian for the Institutional class for the years ended May
31, 1996 and 1995 would have been .47% and 5.16% and .50% and 4.72%,
respectively. The operating expense ratio and net investment income ratio
before fee waivers by the Advisers for the Institutional class for the
years ended May 31, 1994, 1993, 1992, 1991, 1990, 1989, and 1988 would have
been .44% and 2.90%, .46% and 2.82%, .46% and 4.48%, .47% and 6.79%, .46%
and 8.15%, .48% and 8.17% and .55% and 6.28%, respectively.
4 The operating expense ratio and net investment income ratio before fee
waivers by the Advisers for the Retail class for the year ended May 31,
1997 would have been .57% and 4.83%, respectively. The operating expense
ratio and net investment income ratio before fee waivers by the Advisers
and custodian for the Retail class for the years ended May 31, 1996 and
1995 would have been .57% and 5.02% and .63% and 4.90%, respectively. The
operating expense ratio and net investment income ratio before fee waivers
by the Advisers for the Retail class for the years ended May 31, 1994, 1993
and 1992 would have been .54% and 2.73%, .56% and 2.72%, .56% and 4.38%,
and .56% and 5.46%, respectively.
</TABLE>
-13-
<PAGE> 18
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout the period)
TREASURY MONEY MARKET FUND
(Formerly, the Treasury Fund)
The following information has been derived from financial
statements audited by Ernst & Young LLP, independent auditors, whose report is
incorporated by reference in the Statement of Additional Information. It should
be read in conjunction with the financial statements and related notes which are
incorporated by reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE PERIOD ENDED
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995
------------ ------------ ------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL(3) RETAIL(4)
------------- ------ ------------- ------ ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.05 0.05 0.05 0.05 0.05 0.02
LESS DISTRIBUTIONS
Dividends from Net Investment
Income............................ (0.05) (0.05) (0.05) (0.05) (0.05) (0.02)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period........ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN.......................... 4.89% 4.79% 5.07% 4.97% 4.86%(5) 5.41%(5)
RATIO/SUPPLEMENTAL DATA
Net Assets, End of Period (in
000's)............................ $276,327 $5,680 $312,255 $4,355 $142,877 $366
Ratio of Expenses to Average Net
Assets............................ 0.37%(1) 0.47%(2) 0.41%(1) 0.52%(2) 0.43%(1,5) 0.56%(2,5)
Ratio of Net Investment Income to
Average Net Assets................ 4.79%(1) 4.68%(2) 4.88%(1) 4.77%(2) 4.78%(1,5) 5.35%(2,5)
<FN>
- ---------------------------
1 The operating expense ratio and net investment income ratio before fee
waivers by the Advisers for the Institutional class for the year ended May
31, 1997 would have been .42% and 4.74%, respectively. The operating
expense ratio and net investment income ratio before fee waivers by the
Advisers and custodian for the Institutional class for the year ended May
31, 1996 and for the period ended May 31, 1995 would have been .47% and
4.82%, and .49% and 4.72%, respectively.
2 The operating expense ratio and net investment income ratio before fee
waivers by the Advisers for the Retail class for the year ended May 31,
1997 would have been .52% and 4.63%, respectively. The operating expense
ratio and net investment income ratio before fee waivers by the Advisers
and custodian for the Retail class for the year ended May 31, 1996 and for
the period ended May 31, 1995 would have been .58% and 4.71%, and .63% and
5.28%, respectively.
3 Institutional class commenced operations on June 16, 1994.
4 Retail class commenced operations on December 22, 1994.
5 Annualized.
</TABLE>
-14-
<PAGE> 19
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout each period)
TAX EXEMPT MONEY MARKET FUND
(Formerly, the Tax Exempt Fund)
The following information has been derived from financial statements
audited by Ernst & Young LLP, independent auditors, whose report is incorporated
by reference in the Statement of Additional Information. It should be read in
conjunction with the financial statements and related notes which are
incorporated by reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, MAY 31,
1997 1996 1995
-------------------------- ------------------------- ------------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income .. 0.03 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS
Dividends from Net
Investment Income ..... (0.03) (0.03) (0.03) (0.03) (0.03) (0.03)
----- ----- ----- ----- ----- -----
Net Asset Value,
End of Period ......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN ............. 3.23% 3.12% 3.40% 3.29% 3.14% 3.04%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in 000s) ...... $370,679 $71,917 $261,808 $85,928 $172,643 $51,916
Ratio of Expenses to
Average Net Assets .... 0.29%(4) 0.39%(5) 0.30%(4) 0.40%(5) 0.35%(4) 0.46%(5)
Ratio of Net Investment)
Income to Average
Net Assets ............ 3.18%(4) 3.08%(5) 3.33%(4) 3.23%(5) 3.15%(4) 3.17%(5)
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, MAY 31,
1994 1993 1992
------------------------- -------------------------- ------------------------
INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL INSTITUTIONAL RETAIL
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income .. 0.02 0.02 0.02 0.02 0.04 0.03
LESS DISTRIBUTIONS
Dividends from Net
Investment Income ..... (0.02) (0.02) (0.02) (0.02) (0.04) (0.03)
----- ----- ----- ----- ----- -----
Net Asset Value,
End of Period ......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN ............. 2.06% 1.96% 2.18% 2.07% 3.57% 3.47%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in 000s) ...... $139,015 $17,819 $58,928 $17,791 $60,079 $10,745
Ratio of Expenses to
Average Net Assets .... 0.33%(4) 0.43%(5) 0.36%(4) 0.46%(5) 0.28%(4) 0.38%(5)
Ratio of Net Investment)
Income to Average
Net Assets ............ 2.05%(4) 1.94%(5) 2.16%(4) 2.06%(5) 3.45%(4) 3.35%(5)
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, MAY 31, MAY 31,
1991 1990 1989(1)
-------------------------
INSTITUTIONAL RETAIL(2)
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period .... $1.00 $1.00 $1.00 $1.00
----- ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income .. 0.05 0.01 0.06 0.05
LESS DISTRIBUTIONS
Dividends from Net
Investment Income ..... (0.05) (0.01) (0.06) (0.05)
----- ----- ----- -----
Net Asset Value,
End of Period ......... $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
TOTAL RETURN ............. 5.29% 4.24%(3) 5.96% 6.03%(3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in 000s) ...... $63,559 $4,922 $73,265 $87,770
Ratio of Expenses to
Average Net Assets .... 0.20%(4) 0.28%(3,5) 0.21%(4) 0.31%(3,4)
Ratio of Net Investment)
Income to Average
Net Assets ............ 5.14%(4) 4.15%(3,5) 5.82%(4) 5.93%(3,4)
<FN>
- ------------
1 The Tax Exempt Money Market Fund commenced operations on July 20, 1988.
2 Retail class commenced operations on April 1, 1991.
3 Annualized.
4 The operating expense ratio and net investment income ratio before fee
waivers by the Advisers for the Institutional class for the year ended May
31, 1997 would have been .49% and 2.98%, respectively. The operating
expense ratio and net investment income ratio before fee waivers by the
Advisers and Custodian for the Institutional class for the years ended May
31, 1996 and 1995 would have been .51% and 3.12%, and .56% and 2.94%,
respectively. The operating expense ratio and net investment income ratio
before fee waivers by the Advisers for the Institutional class for the
years ended May 31, 1994, 1993, 1992, 1991, 1990, and the period ended May
31, 1989 would have been .53% and 1.85%, .56% and 1.96%, .54% and 3.20%,
.55% and 4.79%, .27% and 5.76%, and .51% and 5.73%, respectively.
5 The operating expense ratio and net investment income ratio before fee
waivers by the Advisers for the Retail class for the year ended May 31,
1997 would have been .59% and 2.88%, respectively. The operating expense
ratio and net investment income ratio before fee waivers by the Advisers
and Custodian for the Retail class for the years ended May 31, 1996 and
1995 would have been .61% and 3.02% and
</TABLE>
-15-
<PAGE> 20
.67% and 2.96%, respectively. The operating expense ratio and net
investment income ratio before fee waivers by the Advisers for the Retail
class for the years ended May 31, 1994, 1993, 1992, and for the period
ended May 31, 1991 would have been .63% and 1.74%, .66% and 1.86%, .64% and
3.10%, and .63% and 3.80%, respectively.
-16-
<PAGE> 21
FINANCIAL HIGHLIGHTS
(For a Fund share outstanding throughout the period)
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
(Formerly, the Pennsylvania Tax Exempt Fund)
The Fund commenced operations on August 8, 1994 as a separate
investment portfolio (the "Predecessor Fund") of Inventor Funds, Inc., which was
organized as a Maryland corporation. On September 9, 1996, the Fund was
reorganized as a new portfolio of the Trust. Prior to the reorganization, the
Predecessor Fund offered and sold Retail shares that were similar to the Fund's
Retail shares.
The financial highlights presented below set forth certain
information concerning the investment results of the Predecessor Fund's Retail
shares (the series that is similar to the Retail shares of the Pennsylvania Tax
Exempt Money Market Fund) for the fiscal period from May 1, 1996 to May 31,
1996, the fiscal year ended April 30, 1996 and the fiscal period ended April 30,
1995. As part of the reorganization, the fiscal year of the Predecessor Fund was
changed to coincide with the Trust's May 31 fiscal year. A one-month financial
report representing the Predecessor Fund's operations from May 1, 1996 through
May 31, 1996 is being presented. The information was derived from financial
statements audited by Coopers & Lybrand L.L.P., independent accountants for the
Predecessor Fund, whose reports thereon are contained in Inventor Funds' Annual
Reports to Shareholders for the fiscal year ended April 30, 1996 and the period
ended May 31, 1996. Such financial highlights should be read in conjunction with
the financial statements and notes thereto contained in Inventor Funds' Annual
Reports to Shareholders and incorporated by reference into the Statement of
Additional Information relating to the Pennsylvania Tax Exempt Money Market
Fund.
The information presented below relating to the fiscal year
ended May 31, 1997 has been derived from financial statements audited by Ernst &
Young, LLP, independent auditors for the Pennsylvania Tax Exempt Money Market
Fund, whose report is incorporated by reference in the Statement of Additional
Information. It should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Statement of Additional
Information.
-17-
<PAGE> 22
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1997(5)
--------------- PERIOD ENDED YEAR ENDED PERIOD ENDED
INSTITUTIONAL RETAIL(6) MAY 31, 1996(5) APRIL 30, 1996(5) APRIL 30, 1995(5)
------------- -------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................... 0.03 0.02 0.00 0.03 0.02
LESS DISTRIBUTIONS
Distributions from Net Investment Income.. (0.03) (0.02) 0.00 (0.03) (0.02)
----- ----- ---- ----- -----
Net Asset Value, End of Period.............. $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN................................ 3.26% 3.18% 0.28%4 3.36% 2.32%4
RATIO/SUPPLEMENTAL DATA
Net Assets, End of Period (in 000's)...... $60,876 $20,830 $68,472 $70,422 $56,668
Ratio of Expenses to Average
Net Assets.............................. 0.41%1 0.46%(2,3) 0.55%(1,3) 0.55%(1) 0.55%(1,3)
Ratio of Net Investment Income to
Average Net Assets...................... 3.20%1 3.27%(2,3) 3.24%(1,3) 3.29%(1) 3.21%(1,3)
- ---------------
1 The operating expense ratio and net investment income ratio before fee
waivers by the Adviser and other affiliates for the Institutional class
for the periods ending May 31, 1997, May 31, 1996, April 30, 1996, and
April 30, 1995 would have been .74% and 2.87%, .97% and 2.82%, .96% and
2.88%, and 1.04% and 2.72%, respectively.
2 The operating expense ratio and net investment income ratio before fee
waivers by the Adviser and other affiliates for the Retail class for
the period ended May 31, 1997 would have been .71% and 3.02%,
respectively.
3 Annualized.
4 Not annualized.
5 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.
6 Retail class commenced operations on September 11, 1996.
</TABLE>
-18-
<PAGE> 23
INVESTMENT OBJECTIVES AND POLICIES
A Fund's investment objective may be changed without a vote of
shareholders, although the Board of Trustees would only change a Fund's
objective upon 30 days' notice to shareholders. There can be no assurance that a
Fund will achieve its objective.
Each Fund will only purchase "eligible securities" that
present minimal credit risks as determined by the Adviser pursuant to guidelines
established by the Trust's Board of Trustees. Eligible securities generally
include (i) U.S. government obligations, (ii) securities that are rated (at the
time of purchase) by nationally recognized statistical rating organizations
("Rating Agencies") in the two highest rating categories for such securities,
and (iii) certain securities that are not so rated but are of comparable quality
to rated eligible securities as determined by the Adviser. See "Investment
Objectives and Policies" in the Statement of Additional Information for a more
complete description of eligible securities. A description of ratings is also
contained in the Statement of Additional Information.
Each Fund's assets have remaining maturities of 397 calendar
days or less (except for certain variable and floating rate instruments and
securities underlying certain repurchase agreements) as defined by the SEC and
each Fund's dollar-weighted average portfolio maturity may not exceed 90 days.
MONEY MARKET FUND
The investment objective of the Money Market Fund is to seek
as high a level of current income as is consistent with liquidity and stability
of principal. The Fund seeks to achieve its objective by investing in "money
market" instruments such as certificates of deposit and other obligations issued
by domestic and foreign banks, and commercial paper (including variable and
floating rate instruments) rated high quality by an unaffiliated Rating Agency,
or determined to be of comparable quality by the Adviser. The Money Market Fund
may also invest in obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities, and repurchase agreements issued by financial
institutions such as banks and broker-dealers.
GOVERNMENT MONEY MARKET FUND
-19-
<PAGE> 24
The investment objective of the Government Money Market Fund
is to seek as high a level of current income as is consistent with liquidity and
stability of principal. The Fund seeks to achieve its objective by investing in
obligations issued or guaranteed as to payment of principal and interest by the
U.S. government, its agencies or instrumentalities, and repurchase agreements
issued by financial institutions such as banks and
broker-dealers. The Fund is currently rated by Standard & Poor's
Ratings Services ("Standard & Poor's").
TREASURY MONEY MARKET FUND
The investment objective of the Treasury Money Market Fund is
to seek as high a level of current income as is consistent with liquidity and
stability of principal. The Fund seeks to achieve its objective by investing
exclusively in direct obligations of the U.S. Treasury, such as Treasury bills
and notes, and investment companies that invest exclusively in such obligations.
The Fund is currently rated by Standard & Poor's.
TAX EXEMPT MONEY MARKET FUND
The investment objective of the Tax Exempt Money Market Fund
is to provide as high a level of current interest income exempt from federal
income tax as is consistent with liquidity and stability of principal. The Fund
seeks to achieve its objective by investing substantially all of its assets in a
diversified fund of obligations issued by or on behalf of states, territories
and possessions of the United States, the District of Columbia and their
political subdivisions, agencies, instrumentalities and authorities, the income
from which, in the opinion of bond counsel, is exempt from regular federal
income tax ("Municipal Securities").
Under normal market conditions, at least 80% of the value of
the Tax Exempt Money Market Fund's total assets will be invested in Municipal
Securities. This policy is fundamental and may not be changed without the
affirmative vote of the holders of a majority of the Fund's outstanding shares
(as defined under "Miscellaneous").
-20-
<PAGE> 25
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
The investment objective of the Pennsylvania Tax Exempt Money
Market Fund is to provide current income exempt from regular federal income tax
and Pennsylvania personal income taxes, consistent with stability of principal.
The Fund seeks to achieve its objective by investing substantially all of its
assets in Municipal Securities issued by or on behalf of the Commonwealth of
Pennsylvania and its political subdivisions and financing authorities, and
obligations of the United States, including territories and possessions of the
United States, the income from which, in the opinion of bond counsel, is exempt
from regular federal income tax and Pennsylvania state income tax imposed upon
non-corporate taxpayers ("Pennsylvania Municipal Securities").
As a matter of fundamental policy, the Fund invests its assets
so that at least 80% of its annual interest income is not only exempt from
regular federal income tax and Pennsylvania personal income taxes, but is not
considered a preference item for purposes of the federal alternative minimum
tax. However, the Fund may invest up to 100% of its assets in non-Pennsylvania
Municipal Securities and in taxable securities, during temporary defensive
periods when, in the opinion of the Adviser, Pennsylvania Municipal Securities
of sufficient quality are unavailable.
The Pennsylvania Tax Exempt Money Market Fund is concentrated
in securities issued by the Commonwealth of Pennsylvania or entities within the
Commonwealth of Pennsylvania, and therefore, investment in the Fund may be
riskier than an investment in other types of money market funds.
-21-
<PAGE> 26
SPECIAL RISK CONSIDERATIONS -- PENNSYLVANIA TAX EXEMPT MONEY
MARKET FUND
Pennsylvania's economy historically has been dependent upon
heavy industry, but has diversified recently into various services, particularly
into medical and health services, education and financial services. Agricultural
industries continue to be an important part of the economy, including not only
the production of diversified food and livestock products, but substantial
economic activity in agribusiness and food- related industries. Service
industries currently employ the greatest share of non-agricultural workers,
followed by the categories of trade and manufacturing. Future economic
difficulties in any of these industries could have an adverse impact on the
finances of the Commonwealth or its municipalities, and could adversely affect
the ability of the respective obligors to make payments of interest and
principal due on the obligations held by the Fund, and the market values of
these obligations. Rising unemployment, a relatively high proportion of persons
65 and older in the Commonwealth of Pennsylvania and court ordered increases in
healthcare reimbursement rates place increased pressures on the tax resources of
the Commonwealth and its municipalities. The Commonwealth has sold a substantial
amount of bonds over the past several years, but the debt burden remains
moderate. The recession in the early 1990s affected Pennsylvania's economic
base, with income and job growth at levels below national averages. Employment
growth has shifted to the trade and service sectors, with losses in more
high-paid manufacturing positions. A new governor took office in January 1995,
but the Commonwealth has continued to show fiscal restraint.
OHIO MUNICIPAL MONEY MARKET FUND
The investment objective of the Ohio Municipal Money Market
Fund is to provide current income exempt from regular federal income tax and
Ohio personal income tax, consistent with stability of principal. The Fund seeks
to achieve its objective by investing substantially all of its assets in
Municipal Securities of the State of Ohio and its political subdivisions, as
well as of certain other governmental issuers in Ohio ("Ohio Municipal
Securities").
-22-
<PAGE> 27
Under normal market conditions, at least 80% of the value of
the Fund's total assets will be invested in Ohio Municipal Securities. This
policy is fundamental and may not be changed without the affirmative vote of the
holders of a majority of the Fund's outstanding shares (as defined under
"Miscellaneous"). Dividends paid by the Fund which are derived from interest
properly attributable to Ohio Municipal Securities will be exempt from regular
federal income tax and Ohio personal income tax. Dividends derived from interest
on Municipal Securities of other governmental issuers will be exempt from
regular federal income tax but may be subject to Ohio personal income tax. The
Fund may invest up to 100% of its assets in Municipal Securities known as
private activity bonds (described below) the interest on which is an item of tax
preference for purposes of the federal alternative minimum tax ("AMT Paper").
The Fund may also invest up to 100% of its assets in non-Ohio Municipal
Securities and in taxable securities, during temporary defensive periods when,
in the opinion of the Adviser, Ohio Municipal Securities of sufficient quality
are unavailable.
The Ohio Municipal Money Market Fund is concentrated in
securities issued by the State of Ohio or entities within the State of Ohio, and
therefore, investment in the Fund may be riskier than an investment in other
types of money market funds.
SPECIAL RISK CONSIDERATIONS -- OHIO MUNICIPAL MONEY MARKET
FUND
While diversifying more into the service and other non-
manufacturing areas, the Ohio economy continues to rely in part on durable goods
manufacturing largely concentrated in motor vehicles and equipment, steel,
rubber products and household appliances. As a result, general economic
activity, as in many other industrially-developed states, tends to be more
cyclical than in some other states and in the nation as a whole. Agriculture is
an important segment of the economy, with over half the State's area devoted to
farming and approximately 16% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was
commonly somewhat higher than the national figure. For example, the reported
1990 average monthly State rate was 5.7%, compared to the 5.5% national figure.
However, for the last seven years, the State rates were below the national rates
(4.6% versus 4.9% in 1997).
There can be no assurance that future national, regional or
state-wide economic difficulties, and the resulting impact on State or local
government finances generally, will not adversely affect the market value of
Ohio Municipal Securities held in the Fund or the ability of particular obligors
to make
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timely payments of debt service on (or lease payments relating to) those
securities. A more detailed summary of the more significant conditions affecting
the financial situation in Ohio is contained in the Statement of Additional
Information.
SPECIAL RISK CONSIDERATIONS -- TAX EXEMPT MONEY MARKET, PENNSYLVANIA
TAX EXEMPT MONEY MARKET AND OHIO MUNICIPAL MONEY MARKET FUNDS
Although the Tax Exempt Money Market Fund may invest 25% or
more of its net assets in Municipal Securities whose issuers are in the same
state and the Tax Exempt Money Market, Pennsylvania Tax Exempt Money Market and
Ohio Municipal Money Market Funds may invest 25% or more of their respective net
assets in Municipal Securities the interest on which is paid solely from
revenues of similar projects, the Funds do not presently intend to do so unless
in the opinion of the Adviser the investment is warranted. In addition, although
the Tax Exempt Money Market and Pennsylvania Tax Exempt Money Market Funds may
invest up to 20% of their respective total assets in private activity bonds
(described below) and taxable investments, these Funds do not currently intend
to do so unless in the opinion of the Adviser the investment is warranted. The
Ohio Municipal Money Market Fund may invest up to 100% of its assets in private
activity bonds. To the extent that a Fund's assets are invested in Municipal
Securities that are payable from the revenues of similar projects or are issued
by issuers located in the same state or are invested in private activity bonds,
the Fund will be subject to the peculiar risks presented by the laws and
economic conditions relating to such states, projects and bonds to a greater
extent than it would be if its assets were not so invested.
COMMON INVESTMENT POLICIES OF THE FUNDS
Illiquid Securities
The Funds will not knowingly invest more than 10% of the value
of their respective net assets in securities that are illiquid. Each Fund may
purchase securities which are not registered under the Securities Act of 1933,
as amended (the "1933 Act") but which can be sold to "qualified institutional
buyers" in accordance with Rule 144A under the 1933 Act. Any such security will
not be considered illiquid so long as it is determined by the Board of Trustees
or the Adviser acting under guidelines approved and monitored by the Board, that
an adequate trading market exists for that security. This investment
practice could have the effect of increasing the level of illiquidity in a Fund
during any period that qualified institutional buyers become uninterested in
purchasing these restricted securities.
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Risk Factors Associated with Derivative Instruments
The Funds are managed with emphasis on safety and high credit
quality. This requires that liquidity risk and market risk or interest rate
risk, as well as credit risk, be held to minimal levels. The Adviser has
determined that many types of floating rate and variable rate instruments,
commonly referred to as "derivatives," are considered to be potentially
volatile. These derivative instruments are structured in a way that may not
allow them to reset to par at an interest rate adjustment date. Accordingly, the
Adviser has adopted the following policies on behalf of the Funds.
The following types of derivative instruments ARE NOT
permitted investments for the Funds:
- - leveraged or deleveraged floaters (whose interest rate reset
provisions are based on a formula that magnifies the effect of changes
in interest rates);
- - range floaters (which do not pay interest if market interest
rates move outside of a specified range);
- - dual index floaters (whose interest rate reset provisions are tied to
more than one index so that a change in the relationship between these
indices may result in the value of the instrument falling below face
value);
- - inverse floaters (which reset in the opposite direction of
their index); and
- - any other structured instruments having cash flow characteristics
that can create potential market volatility similar to the instruments
listed above.
Additionally, the Funds may not invest in instruments indexed
to longer than one-year rates, or in instruments whose interest rate reset
provisions are tied to an index that materially lags short-term interest rates,
such as "COFI floaters."
At the present time, the only derivative investments that have
been determined to be suitable for investment by the Funds are:
- - securities based on short-term, fixed-rate contracts; and
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- - floating-rate or variable-rate securities whose interest rates reset
based on changes in standard money market rate indices such as U.S.
government Treasury bills, London Interbank Offered Rate, published
commercial paper rates, or federal funds rates.
The risk to the Funds due to the use of derivatives will be
limited to the principal invested in such instruments. The Adviser will evaluate
the risks presented by the derivative instruments purchased by the Funds, and
will determine, in connection with their day-to-day management of the Funds, how
they will be used in furtherance of the Funds' investment objectives.
Repurchase and Reverse Repurchase Agreements
The Money Market, Government Money Market, Pennsylvania Tax
Exempt Money Market and Ohio Municipal Money Market Funds may agree to purchase
portfolio securities subject to the seller's agreement to repurchase them at a
mutually agreed-upon date and price ("repurchase agreements"). These Funds may
enter into repurchase agreements only with financial institutions such as banks
and broker-dealers which are deemed to be creditworthy by the Adviser, pursuant
to guidelines approved by the Trust's Board of Trustees. None of the Funds may
enter into repurchase agreements with the Adviser, Distributor, or any of their
affiliates. Although the securities subject to repurchase agreements may bear
maturities exceeding 397 days, the Funds presently intend to enter only into
repurchase agreements which terminate within seven days after notice by the
Funds. If a Fund were to enter into repurchase agreements which provide for a
notice period greater than seven days in the future, the Fund would do so only
if such investment, together with other illiquid securities, did not exceed 10%
of the Fund's net assets.
The seller under a repurchase agreement will be required to
maintain the value of the securities which a Fund holds subject to the agreement
at not less than the repurchase price, marked to market daily, by providing
additional securities or other collateral to the Fund if necessary. If the
seller defaulted on its repurchase obligation, the Fund holding such obligation
would suffer a loss to the extent that the proceeds from a sale of the
underlying securities (including accrued interest) were less than the repurchase
price (including accrued interest) under the agreement. In the event that such a
defaulting seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. Further, it is
uncertain whether the Trust would be entitled, as against a claim by such seller
or its
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receiver or trustee in bankruptcy, to retain the underlying securities.
The Money Market and Government Money Market Funds may also
borrow funds for temporary purposes by entering into reverse repurchase
agreements. Pursuant to such agreements the Funds will sell portfolio securities
to financial institutions such as banks and broker-dealers and agree to
repurchase them at a particular date and price. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the price of the securities it is obligated to repurchase.
Lending Portfolio Securities
In order to generate additional income, the Money Market,
Government Money Market and Treasury Money Market Funds may, from time to time,
lend their portfolio securities to broker-dealers, banks or other institutional
borrowers. A Fund must receive 100% collateral in the form of cash or U.S.
government securities. This collateral must be valued daily by the Adviser, and
the borrower will be required to provide additional collateral should the market
value of the loaned securities increase. During the time portfolio securities
are on loan, the borrower pays the Fund involved any dividends or interest paid
on such securities. Loans are subject to termination by the Funds or the
borrower at any time. While a Fund does not have the right to vote securities on
loan, it intends to terminate the loan and regain the right to vote if this is
considered important with respect to the investment. A Fund will only enter into
loan arrangements with broker-dealers, banks or other institutions which the
Adviser has determined are creditworthy under guidelines established by the
Trust's Board of Trustees.
Variable and Floating Rate Obligations
The Money Market, Government Money Market, Tax Exempt Money
Market, Pennsylvania Tax Exempt Money Market and Ohio Municipal Money Market
Funds may purchase variable and floating rate demand obligations (including
variable amount master demand notes) which are unsecured instruments that permit
the indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. A Fund, however, may invest in such obligations which have a
stated maturity in excess of 397 days only if the Fund may demand repayment at
intervals in accordance with guidelines established by the Board of Trustees.
Because variable and floating rate obligations are direct lending arrangements
between the purchasing Fund and the issuer, they are not normally traded.
Although there may be no active secondary market in such
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instruments, a Fund may demand payment of principal and accrued interest at a
time specified in the instrument or may resell them to a third party. Such
obligations may be backed by bank letters of credit or guarantees issued by
banks, other financial institutions or the U.S. government, its agencies or
instrumentalities. The quality of any letter of credit or guarantee will be
rated high quality or, if unrated, will be determined to be of comparable
quality by the adviser. Variable and floating rate obligations entered into by
the Government Money Market Fund, such as Student Loan Marketing Association
variable rate obligations, may have a more active secondary market because they
are issued or guaranteed by the U.S. government or its agencies or
instrumentalities. In the event an issuer of a variable or floating rate
obligation defaulted on its payment obligation, a Fund might be unable to
dispose of the instrument because of the absence of a secondary market and
could, for this or other reasons, suffer a loss to the extent of the default.
Money Market Instruments
The Money Market Fund may invest in "money market"
instruments, including bank obligations and commercial paper. The Pennsylvania
Tax Exempt Money Market and Ohio Municipal Money Market Funds may also invest,
from time to time, a portion of their assets for temporary defensive or other
purposes in such
taxable money market instruments.
Bank obligations include bankers' acceptances, negotiable
certificates of deposit, and non-negotiable time deposits issued for a definite
period of time and earning a specified return by a U.S. bank which is a member
of the Federal Reserve System. Bank obligations also include U.S. dollar
denominated bankers' acceptances, certificates of deposit and time deposits
issued by foreign branches of U.S. banks or foreign banks. Investment in bank
obligations is limited to the obligations of financial institutions having more
than $1 billion in total assets at the time of purchase. The Money Market Fund
may also make interest bearing savings deposits in commercial and savings banks
not in excess of 5% of its total assets. Investment in non-negotiable time
deposits is limited to no more than 5% of the Fund's total assets at the time of
purchase.
Investments in commercial paper and other short-term
promissory notes issued by corporations (including variable and floating rate
instruments) must be rated at the time of purchase "A-2" or better by Standard &
Poor's Ratings Group ("S&P"), "Prime-2" or better by Moody's Investors Service,
Inc. ("Moody's"), "F-2" or better by Fitch Investors Service, L.P. ("Fitch"),
"Duff 2" or better by Duff & Phelps Credit Rating Co. ("Duff"), or "A2" or
better by IBCA, Inc. or, if not rated,
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determined by the Adviser to be of comparable quality pursuant to guidelines
approved by the Trust's Board of Trustees. Investments may also include
corporate notes. In addition, the Money Market Fund may invest in Canadian
Commercial Paper ("CCP"), which is U.S. dollar denominated commercial paper
issued by a Canadian corporation or a Canadian counterpart of a U.S.
corporation, and in Europaper, which is U.S. dollar denominated commercial paper
of a foreign issuer. The Money Market Fund may acquire zero coupon obligations,
which have greater price volatility than coupon obligations and which will not
result in the payment of interest until maturity.
Investments in the obligations of foreign branches of U.S.
banks, foreign banks and other foreign issuers may subject the Money Market Fund
to additional investment risks, including future political and economic
developments, the possible imposition of withholding taxes on interest income,
possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. In addition, foreign branches of U.S. banks
and foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks. The Money Market Fund will
invest in the obligations of foreign banks or foreign branches of U.S. banks
only when the Adviser believes that the credit risk with respect to the
instrument is minimal.
The Money Market Fund may also make limited investments in
guaranteed investment contracts ("GICs") issued by U.S. insurance companies. The
Fund will purchase a GIC only when the Adviser has determined, under guidelines
established by the Board of Trustees, that the GIC presents minimal credit risks
to the Fund and is of comparable quality to instruments that are rated high
quality by certain nationally recognized statistical rating organizations.
Government Obligations
The Treasury Money Market Fund may only invest in direct
obligations of the U.S. Treasury and investment companies that invest only in
such obligations. The other Funds may invest in these obligations and other
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of the
U.S. government, such as the Government National Mortgage Association, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Export-Import Bank of the United States, are supported by the right
of the issuer to borrow from
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the Treasury; others, such as those of the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. government
to purchase the agency's obligations; still others, such as those of the Student
Loan Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. government would
provide financial support to U.S. Government- sponsored instrumentalities if it
is not obligated to do so by law. Some of these investments may be variable or
floating rate instruments. See "Variable and Floating Rate Obligations."
Types of Municipal Securities
The two principal classifications of municipal bonds are
"general obligation" bonds and "revenue" bonds. General obligation securities
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue or "special obligation"
securities are payable only from the revenues derived from a particular facility
or class of facilities or, in some cases, from the proceeds of a specific excise
tax or other specific revenue source such as the user of the facility being
financed. "Private activity" bonds are revenue securities normally issued by
industrial development authorities to finance privately-owned facilities and are
backed by private entities. Any private activity bonds (including industrial
development bonds) held by a Fund are not payable from revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate or other user of the facility
involved. Private activity bonds are included in the term "Municipal Securities"
with respect to the Tax Exempt Money Market and Pennsylvania Tax Exempt Money
Market Funds only if the interest paid thereon is exempt from regular federal
income tax and not treated as a specific tax preference item under the federal
alternative minimum tax. See "Taxes."
The Tax Exempt Money Market Fund, Pennsylvania Tax Exempt
Money Market Fund and Ohio Municipal Money Market Fund may also invest in "moral
obligation" bonds, which are ordinarily issued by special purpose public
authorities. If the issuer of moral obligation bonds is unable to meet its debt
service obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.
In addition, the Tax Exempt Money Market Fund, Pennsylvania
Tax Exempt Money Market Fund and Ohio Municipal Money Market Fund may purchase
short-term Tax Anticipation Notes, Bond Anticipation Notes, Revenue Anticipation
Notes, and other forms of short-term loans. Such notes are issued with a
short-term maturity in anticipation of the receipt of tax or other
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funds, the proceeds of bonds or other revenues. Municipal Securities purchased
by these Funds may include variable and floating rate instruments (described
above). These Funds may also acquire zero coupon obligations, which have greater
price volatility than coupon obligations and which will not result in the
payment of interest until maturity.
Certain municipal obligations may be accompanied by a
guaranty, letter of credit or insurance. The Tax Exempt Money Market and
Pennsylvania Tax Exempt Money Market and Ohio Municipal Money Market Funds
typically evaluate the credit quality and ratings of such "credit enhanced"
securities based upon the financial condition and ratings of the party providing
the credit enhancement (the "credit enhancer"), in addition to the issuer. The
bankruptcy, receivership or default of the credit enhancer will adversely affect
the quality and marketability of the underlying security.
Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate in any of the above. Municipal lease obligations
typically are not backed by the municipality's credit, and their interest may
become taxable if the lease is assigned. Under guidelines established by the
Board of Trustees, the credit quality of municipal leases will be determined on
an ongoing basis, including an assessment of the likelihood that a lease will be
canceled.
Participation interests are interests in Municipal Securities
from financial institutions such as commercial and investment banks, savings and
loan associations and insurance companies. These interests may take the form of
participations, beneficial interests in a trust, partnership interests or any
other form of indirect ownership that allows the Tax Exempt Money Market,
Pennsylvania Tax Exempt Money Market and Ohio Municipal Money Market Funds to
treat the income from the investment as exempt from federal income tax. These
Funds invest in these participation interests in order to obtain credit
enhancement or demand features that would not be available through direct
ownership of the underlying Municipal Securities.
A participation interest may be in the form of "certificates
of participation" which represents undivided proportional interests in lease
payments by a governmental or nonprofit entity. The municipal leases underlying
the
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<PAGE> 36
certificates of participation in which the Tax Exempt Money Market,
Pennsylvania Tax Exempt Money Market and Ohio Municipal Money Market Funds
invest will be subject to the same quality rating standards applicable to
Municipal Securities.
Stand-by Commitments
The Tax Exempt Money Market, Pennsylvania Tax Exempt Money
Market and Ohio Municipal Money Market Funds may acquire stand-by commitments
with respect to Municipal Securities. Under a stand-by commitment, a dealer
agrees to purchase at the Fund's option specified Municipal Securities at a
specified price. Stand-by commitments must be of high quality as determined by
any Rating Agency, or, if not rated, must be deemed to be of comparable quality.
The Funds acquire stand-by commitments solely to facilitate fund liquidity and
do not intend to exercise their rights thereunder for trading purposes.
Tax-Exempt Derivatives and Other Municipal Securities
The Tax Exempt Money Market, Pennsylvania Tax Exempt Money
Market and Ohio Municipal Money Market Funds may invest in tax-exempt derivative
securities relating to Municipal Securities, including tender option bonds,
participations, beneficial interests in trusts and partnership interests. (See
generally "Risk Factors Associated with Derivative Instruments" above.)
Opinions relating to the validity of Municipal Securities and
to the exemption of interest thereon from federal income tax are rendered by
bond counsel to the respective issuers at the time of issuance, and opinions
relating to the validity of and the tax-exempt status of payments received by
the Tax Exempt Money Market Fund, Pennsylvania Tax Exempt Money Market Fund and
Ohio Municipal Money Market Fund from tax-exempt derivative securities are
rendered by counsel to the respective sponsors of such securities. The Funds and
the Adviser will rely on such opinions and will not review independently the
underlying proceedings relating to the issuance of Municipal Securities, the
creation of any tax-exempt derivative securities, or the bases for such
opinions.
When-Issued Securities
The Tax Exempt Money Market, Pennsylvania Tax Exempt Money
Market and Ohio Municipal Money Market Funds may purchase securities on a
"when-issued" or delayed delivery basis. These transactions are arrangements in
which a Fund purchases securities with payment and delivery scheduled for a
future time. These transactions involve the risk that the price or yield
obtained may be less favorable than the price or yield available
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when delivery takes place. The Funds expect that commitments to purchase
when-issued securities will not exceed 25% of the value of their respective
total assets under normal market conditions. The Funds do not intend to purchase
when-issued securities for speculative purposes but only for the purpose of
acquiring portfolio securities. In when-issued and delayed delivery
transactions, each Fund relies on the seller to complete the transaction; its
failure to do so may cause the Fund to miss a price or yield considered to be
attractive. For further information, see "Risk Factors, Investment Objectives,
and Policies" in the Statement of Additional Information.
Securities of Other Investment Companies
Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, each Fund other than the Treasury Money Market Fund may invest in
securities issued by other investment companies which invest in high-quality,
short-term debt securities and which determine their net asset value per share
based on the amortized cost or penny-rounding method and the Treasury Money
Market Fund may invest in securities issued by other investment companies which
invest exclusively in direct obligations of the U.S. Treasury and which
determine their net asset value per share based on the amortized cost or penny-
rounding method. As a shareholder of another investment company, a Fund would
bear, along with other shareholders, its pro rata portion of that company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with its
own operations. Investment companies in which the Funds may invest may also
impose a sales or distribution charge in connection with the purchase or
redemption of their shares and other types of commissions or charges. Such
charges will be payable by the Fund and, therefore, will be borne indirectly by
its shareholders.
Miscellaneous
Each Fund may hold up to 100% of its assets in uninvested cash
reserves pending investment, during temporary defensive periods or if, in the
opinion of the Adviser, desirable tax-exempt obligations are unavailable to the
Tax Exempt Money Market, Pennsylvania Tax Exempt Money Market or Ohio Municipal
Money Market Funds. Uninvested cash reserves will not earn income.
INVESTMENT LIMITATIONS
Each Fund is subject to a number of investment limitations.
The following investment limitations are matters of
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fundamental policy and may not be changed with respect to a particular Fund
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares (as defined under "Miscellaneous"). (Other fundamental
investment limitations that also cannot be changed without a vote of
shareholders are contained in the Statement of Additional Information under
"Investment Objectives and Policies.")
No Fund may:
1. Purchase any securities which would cause 25% or more of
the value of its total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business activities
in the same industry, provided that:
(a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state,
territory or possession of the United States, the District of Columbia
or any of their authorities, agencies, instrumentalities or political
subdivisions, and repurchase agreements secured by such instruments, or
domestic bank obligations and repurchase agreements secured by such
obligations;
(b) wholly-owned finance companies will be considered
to be in the industries of their parents if their activities are
primarily related to financing the activities of the parents;
(c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas,
electric, and telephone will each be considered a separate industry;
and
(d) personal credit and business credit businesses
will be considered separate industries.
2. Make loans, except that the Fund may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an amount
not exceeding one-third of its total assets.
3. Borrow money, issue senior securities or mortgage, pledge
or hypothecate its assets except to the extent permitted under the 1940 Act.
For purposes of the above investment limitations, the Funds
treat all supranational organizations as a single industry and each foreign
government (and all of its agencies) as a
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separate industry. In addition, a security is considered to be issued by the
government entity (or entities) whose assets and revenues back the security.
Except for the Funds' policy on illiquid securities, if a
percentage limitation is satisfied at the time of investment, a later increase
or decrease in such percentage resulting from a change in the value of a Fund's
portfolio securities will not constitute a violation of such limitation for
purposes of the 1940 Act.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Trust may quote in advertisements or in
reports to shareholders each Fund's "yield" and "effective yield" and the Tax
Exempt Money Market, Pennsylvania Tax Exempt Money Market and Ohio Municipal
Money Market Funds' "tax-equivalent yield" for each class of shares. The "yield"
quoted in advertisements refers to the income generated by an investment in a
class of shares of a Fund over a seven-day period identified in the
advertisement. This income is then "annualized." The amount of income so
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" for a class of shares is calculated similarly but, when
annualized, the income earned by an investment in the class is assumed to be
reinvested. An effective yield for a class of shares will be slightly higher
than its yield because of the compounding effect of the assumed reinvestment.
The Tax Exempt Money Market, Pennsylvania Tax Exempt Money Market and Ohio
Municipal Money Market Funds' "tax- equivalent yield" for a class of shares,
which shows the level of taxable yield necessary to produce an after-tax
equivalent to the tax-free yield for that class, may also be quoted from time to
time. It is calculated by increasing the yield (calculated as above) for a class
of shares by the amount necessary to reflect the payment of federal income tax
and state income tax at stated tax rates. The tax-equivalent yield for a class
of shares will always be higher than its yield.
Investors may compare the performance of each class of shares
of a Fund to the performance of other mutual funds with comparable investment
objectives, to various mutual fund or market indices, and to data or rankings
prepared by independent services such as Lipper Analytical Services, Inc. or
other financial or industry publications that monitor the performance of mutual
funds. Comparisons may also be made to indices or data published in IBC's Money
Fund Report, a nationally recognized money market fund reporting service, Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times,
Business
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Week, U.S.A. Today, CDA/Weisenberger, The American Banker, Morningstar,
Incorporated and other publications of a local, regional or financial industry
nature.
The performance of each class of shares of the Funds is based
on historical earnings and will fluctuate and is not intended to indicate future
performance. Performance data may not provide a basis for comparison with bank
deposits and other investments which provide a fixed yield for a stated period
of time. Yield will be affected by fund quality, composition, maturity, market
conditions and the level of operating expenses for the class of shares. From
time to time, the Adviser may voluntarily waive its investment advisory fees in
order to reduce such operating expenses, which will have the effect of enhancing
the yield. Any fees charged by financial institutions (as described in "How to
Purchase and Redeem Shares") are not included in the computation of performance
data but will reduce a shareholder's net return on an investment in a Fund.
Shareholders should note that the yields, effective yields and
tax-equivalent yields of Retail shares and B shares will be lower than those of
the Institutional shares of a Fund because of the different distribution and/or
servicing fees. The yields, effective yields and tax-equivalent yields of the B
shares will be lower than those of the Retail shares of a Fund due to the
different distribution fees of the classes. See "Distribution and Servicing
Arrangements."
Further information about the performance of the Funds is
available in the annual and semi-annual reports to shareholders. Shareholders
may obtain copies from the Trust free of charge by calling 1-800-622-FUND(3863).
PRICING OF SHARES
For processing purchase and redemption orders, the net asset
values per share of the Money Market and Government Money Market Funds are
calculated on each business day first at 3:00 p.m. Eastern time, then as of the
close of trading of the New York Stock Exchange (the "Exchange"). The net asset
values per share of the Treasury Money Market, Tax Exempt Money Market,
Pennsylvania Tax Exempt Money Market and Ohio Municipal Money Market Funds are
calculated on each business day first at 1:00 p.m. Eastern time then as of the
close of trading of the Exchange, generally 4:00 p.m. Eastern time. Net asset
value per share is determined on each business day, except those holidays which
the Exchange, or banks and trust companies which are affiliated with National
City Corporation (the "Banks"), observe (currently New Year's Day, Dr. Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
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Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day) ("Business Day").
Net asset value per share is calculated by dividing the value
of all securities and other assets allocable to a particular class, less
liabilities charged to that class, by the number of outstanding shares of the
respective class.
The assets in all of the Funds are valued based upon the
amortized cost method, which has been determined by the Trust's Board of
Trustees to represent the fair value of the Funds' investments. Amortized cost
valuation involves valuing an instrument at its cost initially and, thereafter,
assuming a constant amortization to maturity of any discount or premium.
Although the Trust seeks to maintain the net asset value per share of the Funds
at $1.00, there can be no assurance that the net asset value will not vary.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Funds are sold on a continuous basis by the
Trust's sponsor and distributor. The Distributor is a registered broker/dealer
with principal offices located at Oaks, Pennsylvania 19456.
The Distributor, Adviser and/or their affiliates, at their own
expense, may provide compensation to dealers in connection with the sale and/or
servicing of shares of the Funds of the Trust. Compensation may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding one or more Funds of the Trust, and/or other
dealer-sponsored special events. In some instances, this compensation may be
made available only to certain dealers whose representatives have sold or are
expected to sell a significant amount of such shares. Compensation may include
payment for travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and members of their families
to exotic locations within or outside of the United States for meetings or
seminars of a business nature. Compensation may also include the following types
of non-cash items offered through sales contests: (1) vacation trips, including
travel arrangements and lodging at resorts; (2) tickets for entertainment events
(such as concerts, cruises and sporting events); and (3) merchandise (such as
clothing, trophies, clocks and pens). The Distributor, at its expense, currently
conducts sales contests for dealers in connection with their sales of
-37-
<PAGE> 42
shares of the Funds. Dealers may not use sales of a Fund's shares to qualify for
this compensation to the extent such may be prohibited by the laws of any state
or any self-regulatory agency, such as the National Association of Securities
Dealers, Inc.
PURCHASE OF RETAIL SHARES AND B SHARES
Retail shares of the Funds are sold without a front-end sales
charge. B shares of the Funds are sold subject to a back-end sales charge. This
back-end sales charge declines over time and is known as a "contingent deferred
sales charge." B shares of the Money Market Fund and Tax Exempt Money Market
Fund are not available to investors for initial purchases, but only for exchange
from B shares of other investment funds offered by the Trust.
Retail shares and B shares are sold to the public
("Investors") primarily through financial institutions such as banks, brokers
and dealers. Investors may purchase Retail shares directly in accordance with
the procedures set forth below or through procedures established by their
financial institutions in connection with the requirements of their accounts. B
shares of the Money Market and Tax Exempt Money Market Funds are available only
to the holders of B shares of another fund who wish to exchange those B shares
for B shares of the Money Market and/or Tax Exempt Money Market Fund.
Financial institutions may charge certain account fees
depending on the type of account the Investor has established with the
institution. Investors may be charged a fee if they effect transactions in fund
shares through a broker or agent. (For information on such fees, the Investor
should review his agreement with the institution or contact it directly.) In
addition, certain financial institutions may enter into shareholder servicing
agreements with the Trust whereby a financial institution would perform various
administrative support services for its customers who are the beneficial owners
of Retail shares and would receive fees from the Funds for such services of up
to .15% (on an annualized basis). See "Distribution and Servicing Arrangements."
For direct purchases of shares, Investors should call 1-800-622-FUND(3863) or to
speak with a NatCity Investments professional, call 1-888-4NATCTY (462- 8289).
With respect to the Money Market, Government Money Market and
Treasury Money Market Funds, shares may be purchased in conjunction with an
individual retirement account ("IRA") and rollover IRAs where a designated
custodian acts as custodian. Investors should contact NatCity Investments, Inc.,
the Distributor, or their financial institutions for information as
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<PAGE> 43
to applications and annual fees. Investors should also consult their tax
advisers to determine whether the benefits of an IRA are available or
appropriate.
The minimum investment is $500 for the initial purchase of
Retail shares in a Fund. All subsequent investments for Retail shares and IRAs
are subject to a minimum investment of $250. All purchases made by check should
be in U.S. dollars. Please make the check payable to Armada Funds (fund name),
or, in the case of a retirement account, the custodian or trustee for the
account. The Trust will not accept third-party checks under any circumstance.
Investments made in Retail shares by a sweep program described below or through
the Planned Investment Program ("PIP"), a monthly savings program described
below, are not subject to the minimum initial and subsequent investment
requirements or any minimum account balance requirements described under "Other
Redemption Information". Purchases for an IRA through the PIP will be considered
as contributions for the year in which the purchases are made.
Customers of Banks may purchase Retail shares through
procedures established by the Banks or their financial institutions in
connection with the requirements of their customer accounts. These procedures
may include instructions under which a Bank or financial institution may
automatically "sweep" a customer account and invest amounts agreed to by the
Bank or financial institution and the customer in additional Retail shares of a
Fund. Customers may obtain information relating to the requirements of such
accounts from their Banks or financial institutions.
Under a PIP, Investors may add to their investment in the
Retail shares of a Fund, in a consistent manner each month, with a minimum
amount of $50. Monies may be automatically withdrawn from a shareholder's
checking or savings account available through an Investor's financial
institution and invested in additional Retail shares at the Public Offering
Price next determined after an order is received by the Trust. An Investor may
apply for participation in a monthly program by completing an application
obtained through a financial institution, such as banks, brokers, or dealers
selling Retail shares of the Funds, or by calling 1-800-622-FUND(3863). The
program may be modified or terminated by an Investor on 30 days written notice
or by the Trust at any time.
All shareholders of record will receive confirmations of share
purchases and redemptions. Financial institutions will be responsible for
transmitting purchase and redemption orders to the Trust's transfer agent, State
Street Bank and Trust Company (the "Transfer Agent"), on a timely basis.
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<PAGE> 44
The Trust reserves the right to reject any purchase order.
SALES CHARGES APPLICABLE TO PURCHASES OF B SHARES
B shares of the Money Market and Tax Exempt Money Market Funds
are sold at their net asset value next determined after an order to exchange B
shares of another Fund is received in good form by the Trust's Distributor.
Although Investors pay no front-end sales charge on exchanges into B shares,
such shares are subject to a deferred sales charge at the rates set forth in the
chart below if they are redeemed within five years of purchase of the B shares
of the original Fund.
The deferred sales charge on B shares is based on the lesser
of the net asset value of the shares on the redemption date or the original cost
of the shares being redeemed. As a result, no sales charge is charged on any
increase in the principal value of an Investor's shares. In addition, a
contingent deferred sales charge will not be assessed on B shares purchased
through reinvestment of dividends or capital gain distributions.
The amount of any contingent deferred sales charge an Investor
must pay on B shares depends on the number of years that elapse between the
purchase date of the B shares of the original Fund and the date such B shares
are redeemed. Solely for purposes of determining the number of years from the
time of payment for an Investor's share purchase, all payments during a month
will be aggregated and deemed to have been made on the first day of the month.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
NUMBER OF YEARS PERCENTAGE OF DOLLAR AMOUNT
ELAPSED SINCE PURCHASE SUBJECT TO THE CHARGE)
---------------------- ----------------------
<S> <C>
Less than one.............................................. 5.0%
More than one, but less
than two................................................. 5.0%
More than two, but less
than three............................................... 4.0%
More than three, but less
than four................................................ 3.0%
More than four, but less
than five................................................ 2.0%
After five years........................................... None
</TABLE>
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<PAGE> 45
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
NUMBER OF YEARS PERCENTAGE OF DOLLAR AMOUNT
ELAPSED SINCE PURCHASE SUBJECT TO THE CHARGE)
---------------------- ----------------------
<S> <C>
After eight years.......................................... *
- -----------
<FN>
* Conversion to Retail shares
</TABLE>
When an Investor redeems his B shares, the redemption order is
processed to minimize the amount of the contingent deferred sales charge that
will be charged. B shares are redeemed first from those B shares that are not
subject to the deferred sales load (i.e., B shares that were acquired through
reinvestment of dividends or capital gain distributions) and thereafter, unless
otherwise designated by the shareholder, from the B shares that have been held
the longest.
Exemptions From Contingent Deferred Sales Charge
The following types of redemptions qualify for an exemption
from the contingent deferred sales charge:
(a) exchanges described under "Exchange Privilege Applicable
to Retail shares and B Shares" below
(b) redemptions in connection with required (or, in some
cases, discretionary) distributions to participants or beneficiaries of an
employee pension, profit-sharing or other trust or qualified retirement or Keogh
plan, individual retirement account or custodial account maintained pursuant to
Section 403(b)(7) of the Internal Revenue Code due to death, disability or the
attainment of a specified age
(c) redemptions effected pursuant to a Fund's right to
liquidate a shareholder's account if the aggregate net asset value of shares
held in the account is less than the minimum account size
(d) redemptions in connection with the death or disability of
a shareholder
(e) redemptions by a settlor of a living trust
(f) redemptions resulting from a tax-free return of an excess
contribution pursuant to Section 408(d)(4) or (5) of the Internal Revenue Code.
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<PAGE> 46
CHARACTERISTICS OF RETAIL SHARES AND B SHARES
B shares which have been outstanding for eight years after the
end of the month in which the shares were initially purchased will automatically
convert to Retail shares. The purpose of the conversion is to relieve a holder
of B shares of the higher ongoing expenses charged to those shares, after enough
time has passed to allow the Distributor to recover approximately the amount it
would have received if a front-end sales charge had been charged. The conversion
from B shares to Retail shares takes place at net asset value, as a result of
which an Investor receives dollar-for-dollar the same value of Retail shares as
he had of B shares. As a result of the conversion, the converted shares are
relieved of the distribution and service fees borne by B shares, although they
are subject to the distribution and service fees borne by Retail shares.
B shares acquired through a reinvestment of dividends or
distributions are also converted at the earlier of two dates eight years after
the beginning of the calendar month in which the reinvestment occurred or the
date of conversion of the most recently purchased B shares that were not
acquired through reinvestment of dividends or distributions. For example, if an
Investor makes a one-time purchase of B shares of the Fund, and subsequently
acquires additional B shares of the Fund only through reinvestment of dividends
and/or distributions, all of such Investor's B shares in the Fund, including
those acquired through reinvestment, will convert to Retail shares of the Fund
on the same date.
PURCHASE OF INSTITUTIONAL SHARES
Institutional shares are sold primarily to Banks, National
Asset Management Corporation ("NAM") customers that are large institutions, and
investment advisers and financial planners affiliated with National City
("Financial Advisers") who charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their clients
("Customers"). Depending on the terms governing the particular account, the
Banks, NAM or Financial Advisers may impose account charges such as account
maintenance fees, compensating balance requirements or other charges based upon
account transactions, assets or income which will have the effect of reducing
the shareholder's net return on his investment in a Fund. There is no minimum
investment.
Customers may purchase Institutional shares through procedures
established by the Banks, NAM or Financial
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<PAGE> 47
Advisers in connection with the requirements of their Customer accounts. These
procedures may include instructions under which a Bank, NAM or Financial
Advisers may automatically "sweep" a Customer's account not less frequently than
weekly and invest amounts in excess of a minimum balance agreed to by the Bank,
NAM or Financial Advisers and the Customer in additional Institutional shares of
a Fund. Customers should obtain information relating to the requirements of such
accounts from their Banks, NAM or Financial Advisers.
It is the responsibility of the Banks, NAM and Financial
Advisers to transmit their Customers' purchase orders to the Transfer Agent and
to deliver required funds on a timely basis, in accordance with the procedures
stated above. Institutional shares will normally be held of record by the Banks,
NAM or Financial Advisers. Confirmations of share purchases and redemptions will
be sent to the Banks, NAM and Financial Advisers. Beneficial ownership of
Institutional shares will be recorded by the Banks, NAM or Financial Advisers or
the Transfer Agent and reflected in the account statements provided by them to
their Customers.
The Trust reserves the right to reject any purchase order.
EFFECTIVE TIME OF PURCHASES
Purchase orders for shares of the Money Market and Government
Money Market Funds which are received by the Transfer Agent by 3:00 pm Eastern
time are processed that day. Similarly, purchase orders for shares of the
Treasury Money Market, Tax Exempt Money Market, Pennsylvania Tax Exempt Money
Market and Ohio Municipal Money Market Funds which are received by the Transfer
Agent by 1:00 pm Eastern time are also processed that day. Purchase orders
received after the above listed times are processed the following business day.
Purchase orders are processed at the net asset value per share
next determined after an order is received by the Transfer Agent.
Purchases will be effected only when federal funds or other
funds are immediately available to the Trust's custodian to make the purchase on
the day the Transfer Agent receives the purchase order. Orders for which funds
have not been received by the Transfer Agent by the prescribed deadline on a
given day will not be accepted and notice thereof will be given promptly to the
Bank or financial institution. In accordance
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<PAGE> 48
with this policy, purchase orders which are accompanied by a check will be
executed on the second Business Day following receipt of the order at the
previous day's net asset value per share.
REDEMPTION OF RETAIL SHARES AND B SHARES
Redemption orders are effected at a Fund's net asset value per
share next determined after receipt of the order by the Fund. Proceeds from the
redemptions of B shares will be reduced by the amount of any applicable
contingent deferred sales charge. Redemption orders must be placed in writing or
by telephone to the same financial institution that placed the original purchase
order. It is the responsibility of the financial institutions to transmit
redemption orders to the Transfer Agent. Investors who purchased shares directly
from the Trust may redeem shares in any amount by calling 1-800-622-FUND(3863).
Redemption proceeds are paid by check or credited to the Investor's account with
his financial institution.
REDEMPTION OF INSTITUTIONAL SHARES
Customers may redeem all or part of their Institutional shares
in accordance with instructions and limitations pertaining to their accounts at
the Banks, NAM or Financial Advisers. It is the responsibility of the Banks, NAM
or Financial Advisers to transmit redemption orders to the Transfer Agent and
credit their Customers' accounts with the redemption proceeds on a timely basis.
Redemption orders are effected at the net asset value per share next determined
after receipt of the order by the Transfer Agent. No charge for wiring
redemption payments is imposed by the Trust, although the Banks, NAM or
Financial Advisers may charge their Customers' accounts for services.
Information relating to such services and charges, if any, is available from the
Banks, NAM or Financial Advisers.
If a Customer has agreed with a particular Bank, NAM or a
Financial Adviser to maintain a minimum balance in his account and the balance
in such account falls below that minimum, the Customer may be obliged to redeem
all or part of his Institutional shares to the extent necessary to maintain the
required minimum balance. Customers who have instructed that automatic purchases
and redemptions be made for their accounts receive monthly confirmations of
share transactions.
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<PAGE> 49
WRITTEN REDEMPTION PROCEDURES
A shareholder who purchased shares directly from the Trust may
redeem shares in any amount by sending a written request to Armada Funds, P.O.
Box 8421, Boston, Massachusetts 02266-8421. Redemption requests must be signed
by each shareholder, including each joint owner on redemption requests for joint
accounts, in the exact manner as the Fund account is registered, and must state
the number of shares or the amount to be redeemed and identify the shareholder
account number and tax identification number. For a redemption amount of $10,000
or more, each signature on the written request must be guaranteed by a
commercial bank or trust company which is a member of the Federal Reserve System
or FDIC, a member firm of a national securities exchange or a savings and loan
association. A signature guaranteed by a savings bank or notarized by a notary
public is not acceptable. For a redemption amount less than $10,000, no
signature guarantee is needed. The Trust may require additional supporting
documents for redemptions made by corporations, fiduciaries, executors,
administrators, trustees, guardians and institutional investors.
TELEPHONE REDEMPTION PROCEDURES
A shareholder who purchased shares directly from the Trust may
redeem shares in any amount by calling 1-800-622- FUND(3863) provided the
appropriate election was made on the shareholder's account application.
During periods of unusual economic or market changes,
telephone redemptions may be difficult to implement. In such event, shareholders
should mail their redemption requests to their financial institutions or Armada
Funds at the address shown above. Neither the Trust nor its Transfer Agent will
be responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Trust and its Transfer Agent will use such
procedures as are considered reasonable, including recording those instructions
and requesting information as to account registration (such as the name in which
an account is registered, the account number and recent transactions in the
account). To the extent that the Trust and its Transfer Agent fail to use
reasonable procedures to verify the genuineness of telephone instructions, they
may be liable for such instructions that prove to be fraudulent and
unauthorized. In all other cases, shareholders will bear the risk of loss for
fraudulent telephone transactions. The Trust reserves the right to refuse a
telephone redemption if it believes it is advisable to do so. Procedures for
redeeming
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<PAGE> 50
Retail shares or B shares by telephone may be modified or terminated
at any time by the Trust or the Transfer Agent.
OPTION TO MAKE SYSTEMATIC WITHDRAWALS
The Trust has available a Systematic Withdrawal Plan (the
"Plan") for a shareholder who owns shares of any Fund held on the Transfer
Agent's system. The Plan allows the shareholder to have a fixed minimum sum of
$250 distributed at regular intervals. The shareholder's account must have a
minimum value of $5,000 to be eligible for the Plan. Withdrawals will be reduced
by any applicable contingent deferred sales charge. Additional information
regarding this service may be obtained from an Investor's financial institution
or the Transfer Agent at 1-800-622-FUND(3863). Because automatic withdrawals of
B shares will be subject to the contingent deferred sales charge, it may not be
in the best interest of B shares shareholders to make systematic withdrawals.
CHECKWRITING APPLICABLE TO RETAIL SHARES
Checkwriting is available from certain institutions with
respect to Retail shares of the Funds. No charge for the use of the checkwriting
privilege is currently imposed by the Trust, although a charge may be imposed in
the future. With this service, a shareholder may write a check in an amount of
$250 or more. To obtain checks, a shareholder must complete the signature card
that accompanies the account application. To establish this checkwriting service
after opening an account in one or more of the Funds, the shareholder must
contact the Trust by calling 1-800-622-FUND(3863) or by sending a written
request to the Armada Funds, P.O. Box 8421, Boston, Massachusetts 02266-8421 to
obtain an application. A signature guarantee may be required. A shareholder will
receive daily dividends declared on the shares to be redeemed up to the day that
a check is presented to the Custodian for payment. Upon 30 days written notice
to shareholders, the checkwriting privilege may be modified or terminated. An
investor cannot close an account in a Fund by writing a check.
OTHER REDEMPTION INFORMATION
Payment for redemption orders received by the Transfer Agent
before 3:00 pm Eastern time for the Money Market and Government Money Market
Funds and received before 1:00 pm Eastern time for the Treasury Money Market,
Tax Exempt Money Market and Pennsylvania Tax Exempt Money Market Funds will be
wired the same day to the Bank or financial institution placing the order.
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<PAGE> 51
Payment for redemption orders received after such times will normally be wired
the next business day. The Trust reserves the right to wire redemption proceeds
within seven days after receiving the redemption orders if, in the judgement of
the Adviser, an earlier payment could adversely affect the Trust.
Redemption orders are processed at the net asset value per
share next determined after receipt of the order by the Transfer Agent.
WHEN REDEEMING SHARES IN A FUND, SHAREHOLDERS SHOULD INDICATE
WHETHER THEY ARE REDEEMING RETAIL SHARES OR B SHARES. In the event a redeeming
shareholder owns both Retail shares and B shares in a Fund, the Retail shares
will be redeemed first unless the shareholder indicates otherwise. Due to the
relatively high cost of maintaining small accounts, the Trust reserves the right
to redeem, at net asset value, any account maintained by a shareholder that has
a value of less than $500 due to redemptions (including exchanges as described
below) where the shareholder does not increase the amount in the account to at
least $500 upon 60 days notice.
If any portion of the shares to be redeemed represents an
investment made by personal check, the Trust reserves the right to delay payment
of the redemption proceeds until the Transfer Agent is reasonably satisfied that
the check has been collected, which could take up to 15 calendar days from the
date of purchase. A shareholder who anticipates the need for more immediate
access to his investment should purchase shares by federal funds, bank wire,
certified or cashier's check. Financial institutions normally impose a charge in
connection with the use of bank wires, as well as certified checks, cashier's
checks and federal funds.
The Trust may also redeem shares involuntarily or make payment
for redemption in securities if it appears appropriate to do so in light of the
Trust's responsibilities under the 1940 Act. See "Net Asset Value" in the
Statement of Additional Information.
Payment to shareholders for shares redeemed will be made
within seven days after receipt of the request for redemption.
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<PAGE> 52
EXCHANGE PRIVILEGE APPLICABLE TO RETAIL SHARES AND B SHARES
The Trust offers an exchange program whereby Investors who own
Retail shares of the Funds (each a "no load Fund") may exchange those Retail
shares for Retail shares of an investment fund offered by the Trust which is
sold with a sales charge (each a "load Fund") subject to payment of the
applicable sales charge. (However, shareholders exchanging Retail shares of a no
load Fund which were received in a previous exchange transaction involving
Retail shares of a load Fund will not be required to pay an additional sales
charge upon the reinvestment of the equivalent amount into the Retail shares of
a load Fund.)
Shareholders who have exchanged their B shares of another Fund
for B shares of the Money Market Fund or Tax Exempt Money Market Fund (including
shares acquired through reinvestment of dividends or distributions on such
shares) may exchange those shares for B shares of another Fund without the
payment of any contingent deferred sales charge at the time the exchange is
made. In determining the holding period for calculating the contingent deferred
sales charge payable on redemptions of B shares, the holding period of the B
shares originally held will be added to the holding period of the B shares
acquired through the exchange.
Shareholders may also exchange Retail shares of a no load Fund
for Retail shares of another no load Fund at the net asset value per share
without payment of a sales charge.
No exchange fee is imposed by the Trust. Shareholders
contemplating an exchange should carefully review the Prospectus of the Fund
into which the exchange is being considered. An Armada Funds Prospectus may be
obtained from NatCity Investments, Inc., an Investor's financial institution or
by calling 1-800- 622-FUND(3863).
Any Retail shares or B shares exchanged must have a value at
least equal to the minimum initial investment required by the particular
investment fund into which the exchange is being made. Investors should make
their exchange requests in writing or by telephone to the financial institutions
through which they purchased their original Retail shares or B shares. It is the
responsibility of financial institutions to transmit exchange requests to the
Transfer Agent. Investors who purchased shares directly from the Trust should
transmit exchange requests directly to the Transfer Agent. Exchange requests
received by the Transfer Agent before 3:00 pm Eastern time for the Money Market
and Government Money Market Funds and before 1:00 pm Eastern time for the
Treasury Money Market, Tax Exempt Money
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<PAGE> 53
Market, Pennsylvania Tax Exempt Money Market and Ohio Municipal Money Market
Funds will be processed as of the close of business on the day of receipt.
Requests received by the Transfer Agent after the above listed times will be
processed on the next business day. The Trust reserves the right to reject any
exchange request. During periods of unusual economic or market changes,
telephone exchanges may be difficult to implement. In such event, an Investor
should mail the exchange request to his financial institution, and an Investor
who directly purchased shares from the Trust should mail the exchange request to
the Transfer Agent. The exchange privilege may be modified or terminated at any
time upon 60 days' notice to shareholders.
SYSTEMATIC EXCHANGE PROGRAM APPLICABLE TO RETAIL SHARES AND B
SHARES
Shares of a Fund may also be purchased through automatic
monthly deductions from a shareholder's account from any Armada money market
fund. Under a systematic exchange program, a shareholder enters an agreement to
purchase shares of one or more specified funds over a specified period of time,
and initially purchases shares of one Armada money market fund in an amount
equal to the total amount of the investment. On a monthly basis, a specified
dollar amount of shares of the Armada money market fund is exchanged for shares
of the Funds specified.
The systematic exchange program of investing a fixed dollar
amount at regular intervals over time has the effect of reducing the average
cost per share of the Funds. This effect also can be achieved through the
systematic investment program described previously in this Prospectus. Because
purchases of Retail shares are subject to an initial sales charge, it may be
beneficial for an investor to execute a Letter of Intent indicating an intent to
purchase Retail shares in connection with the systematic exchange program. An
Investor may also arrange to purchase B shares through the systematic exchange
program. Upon exchange into another Fund, such shares will convert to B shares
of that Fund, and, while the Investor will not pay a front-end sales load for
such purchase, the shares will bear the regular expenses borne by B shares of
such Fund. A shareholder may apply for participation in this program through his
financial institution or by calling 1-800-622-FUND(3863).
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<PAGE> 54
DISTRIBUTION AND SERVICING ARRANGEMENTS
Pursuant to the Trust's Distribution Agreement, as amended and
Rule 12b-1 under the 1940 Act, the Trust adopted a Service and Distribution Plan
for Retail and Institutional Share Classes ("Retail and Institutional Plan") and
a separate B Shares Distribution and Servicing Plan ("B Shares Plan"). Under the
Retail and Institutional Plan, the Trust reimburses the Distributor for direct
and indirect costs and expenses incurred in connection with advertising and
marketing of the Retail and Institutional shares of each of the Trust's
investment funds and in preparing and distributing such shares' prospectus. In
the case of each such fund, such reimbursement shall not exceed .10% per annum
of the average aggregate net assets of its Retail and Institutional shares.
Under the B Shares Plan, the Trust pays the Distributor up to .75% annually of
the average daily net assets of each fund's B shares for the same types of
services provided and expenses assumed as in the Retail and Institutional Plan.
Such compensation is payable monthly and accrued daily by each fund's B shares
only.
Under the Shareholder Services Plan relating to each Fund's
Retail shares and the B Shares Plan, the Trust enters into shareholder servicing
agreements with certain financial institutions. Pursuant to these agreements,
the institutions agree to render shareholder administrative services to their
customers who are the beneficial owners of Retail shares or B shares in
consideration for the payment of up to .15% (on an annualized basis) of the
average daily net asset value of such shares. Persons entitled to receive
compensation for servicing Retail or B shares may receive different compensation
with respect to those shares than with respect to Institutional shares
in the same Fund. Shareholder administrative services may include aggregating
and processing purchase and redemption orders, processing dividend payments from
the Funds on behalf of customers, providing information periodically to
customers showing their position in Retail shares or B shares, and providing
sub-transfer agent services or the information necessary for sub-transfer agent
services, with respect to Retail shares or B shares beneficially owned by
customers. Since financial institutions may charge their customers fees
depending
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<PAGE> 55
on the type of customer account the Investor has established, beneficial owners
of Retail shares or B shares should read this Prospectus in light of the terms
and fees governing their accounts with financial institutions.
DIVIDENDS AND DISTRIBUTIONS
On each day that the net asset values per share of the Funds
are determined, each Fund declares a dividend from net investment income as of
the close of business on the day of declaration. Net investment income for the
Money Market, Government Money Market and Treasury Money Market Funds consists
of (a) interest accrued and discount earned (including both original issue and
market discount) on the Fund's assets, (b) less amortization of market premium
on such assets, and the accrued expenses of the Fund. Net investment income of
the Tax Exempt Money Market, Pennsylvania Tax Exempt Money Market and Ohio
Municipal Money Market Funds consists of interest accrued, original issue
discount earned, less amortization of any market premium and accrued expenses.
Fund shares begin earning dividends on the day the purchase order is executed
and continue earning dividends through and including the day before the
redemption order for the shares is executed.
Dividends are paid monthly by check, or by wire transfer if
requested in writing by the shareholder to his Bank or financial institution,
within five Business Days after the end of each calendar month or within five
Business Days after a shareholder's complete redemption of his shares in a Fund.
Shareholders of the Funds may elect to have their dividends
reinvested in additional full and fractional Fund shares of the same class of
any Armada Funds at the net asset value of such shares on the payment date.
Shareholders must make such election, or any revocation thereof, in writing to
their Banks or financial institutions. The election will become effective with
respect to dividends and distributions paid after its receipt.
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<PAGE> 56
TAXES
IN GENERAL
The Money Market, Government Money Market and Treasury Money
Market Funds intend to distribute substantially all of their respective
investment company taxable income and net tax-exempt interest income each year.
Such dividends will generally be taxable as ordinary income to each Fund's
shareholders who are not currently exempt from federal income taxes, whether
such income is received in cash or reinvested in additional shares. (Federal
income taxes for distributions to an IRA or to a qualified retirement plan are
deferred under the Internal Revenue Code of 1986, as amended (the "Code.")
The Tax Exempt Money Market and Pennsylvania Tax Exempt Money
Market Funds intend to distribute substantially all of their respective net
tax-exempt income (such distributions are known as "exempt-interest dividends")
and investment company taxable income (if any) each taxable year.
Exempt-interest dividends may be treated by shareholders as items of interest
excludable from their gross income under Section 103(a) of the Code unless under
the circumstances applicable to the particular shareholder the exclusion would
be disallowed. See the Statement of Additional Information under "Additional
Information Concerning Taxes." To the extent, if any, dividends paid to each
Fund's shareholders are derived from taxable income or from net long-term
capital gains, such dividends will not be exempt from federal income tax and may
also be subject to state and local
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taxes. The Funds do not intend to earn any investment company taxable income or
net long-term capital gains.
If the Tax Exempt Money Market, Pennsylvania Tax Exempt Money
Market and Ohio Municipal Money Market Funds hold certain private activity
bonds, shareholders must include as an item of tax preference for purposes of
the federal alternative minimum tax that portion of dividends paid by these
Funds derived from interest received on such bonds. Shareholders receiving
Social Security or railroad retirement payments should note that all
exempt-interest dividends will be taken into account in determining the
taxability of such benefits.
Interest on indebtedness incurred by a shareholder to purchase
or carry shares of the Tax Exempt Money Market, Pennsylvania Tax Exempt Money
Market or Ohio Municipal Money Market Funds generally will not be deductible for
federal income tax purposes.
PENNSYLVANIA TAXES
Under current Pennsylvania law, shareholders will not be
subject to Pennsylvania Personal Income Tax on distributions from the
Pennsylvania Tax Exempt Money Market Fund attributable to interest income from
obligations of the Commonwealth of Pennsylvania or its political subdivisions,
the United States, its territories or certain of its agencies and
instrumentalities ("Exempt Securities"). However, Pennsylvania Personal Income
Tax will apply to distributions from the Pennsylvania Tax Exempt Money Market
Fund attributable to gain realized on the disposition of any investment,
including Exempt Securities, or to interest income from investments other than
Exempt Securities.
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Shareholders also will be subject to the Pennsylvania Personal Income Tax in the
unlikely event that they realize any gain on the disposition of shares in the
Fund.
Distributions attributable to interest from Exempt Securities
are not subject to the Philadelphia School District Net Income Tax. However,
distributions attributable to gain from the disposition of Exempt Securities are
subject to the Philadelphia School District Net Income Tax, except that
distributions attributable to gain on any investment held for more than six
months are exempt.
OHIO TAXES
Under current Ohio law, individuals and estates that are
subject to the Ohio personal income tax, or municipal or school district income
taxes in Ohio will not be subject to such taxes on distributions with respect to
shares of the Ohio Municipal Money Market Fund ("Distributions") to the extent
that the Distributions are properly attributable to interest on obligations of
the State of Ohio or its political subdivisions ("Ohio Obligations").
Corporations that are subject to the Ohio corporation franchise tax will not be
required to include Distributions in their tax base for purposes of calculating
the Ohio corporation franchise tax on the net income basis to the extent that
such Distributions either represent exempt-interest dividends for federal income
tax purposes or are properly attributable to interest on Ohio Obligations.
However, shares of the Fund will be included in a corporation's tax base for
purposes of calculating the Ohio corporation franchise tax on the net worth
basis.
Distributions that consist of interest on obligations of the
United States or its territories or possessions or of any authority, commission,
or instrumentality of the United States ("Territorial Obligations") the interest
on which is exempt from state income taxes under the laws of the United States
are exempt from the Ohio personal income tax, and municipal and school district
income taxes in Ohio, and, provided, in the case of Territorial Obligations,
such interest is excluded from gross income for federal income tax purposes, are
excluded from the net income base of the Ohio corporation franchise tax.
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Distributions properly attributable to gain on the sale,
exchange or other disposition of Ohio Obligations will not be subject to the
Ohio personal income tax, or municipal or school district income taxes in Ohio,
and will not be included in the net income base of the Ohio corporation
franchise tax. Distributions attributable to other sources generally will not be
exempt from the Ohio personal income tax, municipal or school district income
taxes in Ohio, or the net income base of the Ohio corporation franchise tax.
It is assumed for purposes of this discussion of Ohio state
and local taxes that the Fund will continue to qualify as a regulated investment
company under the Code and that at all times at least 50% of the value of the
total assets of the Fund consists of Ohio Obligations or similar obligations of
other states or their subdivisions.
MISCELLANEOUS
Shareholders of the Funds will be advised at least annually as
to the federal income tax consequences and, in the case of the Pennsylvania Tax
Exempt Money Market Fund and Ohio Municipal Money Market Fund, Pennsylvania
income tax consequences and Ohio income tax consequences, respectively, of
distributions made to them each year. Shareholders are advised to consult their
tax advisers concerning the application of state and local taxes, other than
Pennsylvania and Ohio taxes, which may differ from federal tax consequences
described above.
The foregoing discussion is based on tax laws and regulations
which were in effect as of the date of this Prospectus; such laws and
regulations may be changed by legislative or administrative actions. The
foregoing summarizes some of the important tax considerations generally
affecting the Funds and their shareholders and is not intended as a substitute
for careful tax planning. Accordingly, potential investors should consult their
tax advisers with specific reference to their own tax situation.
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The business and affairs of the Trust are managed under the
direction of the Trust's Board of Trustees. The trustees of the Trust, their
addresses, principal occupations during the past five years, other affiliations,
and the compensation paid by the Trust and the fees and reimbursed expenses they
receive in connection with each meeting of the Board of Trustees they attend are
included in the Statement of Additional Information.
INVESTMENT ADVISER
National City serves as the investment adviser to the Funds.
The Adviser is a wholly owned subsidiary of National City Corporation. The
Adviser provides trust and banking services to individuals, corporations, and
institutions, both nationally and internationally, including investment
management, estate and trust administration, financial planning, corporate trust
and agency, and personal and corporate banking. National City is a member bank
of the Federal Reserve System and the Federal Deposit Insurance Corporation.
On April 30, 1998, the Trust Department of National City had
approximately $18.3 billion in assets under management, and had approximately
$25.5 billion in total trust assets. The principal office of the investment
adviser is as follows:
National City Bank
1900 East Ninth Street
Cleveland, OH 44114
Subject to the general supervision of the Trust's Board of
Trustees and in accordance with each Fund's investment policies, the Adviser has
agreed to manage the Funds, make decisions with respect to and place orders for
all purchases and sales of the Funds' securities, and maintain the Trust's
records relating to such purchases and sales. For the services provided and
expenses assumed pursuant to the Advisory Agreement, the Adviser is entitled to
receive an advisory fee, computed daily and payable monthly, at the annual rate
of .35% of the average net assets of the Money Market Fund, .35% of the average
net assets of the Government Money Market Fund, .30% of the average net assets
of the Treasury Money Market Fund, .35% of
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the average net assets of the Tax Exempt Money Market Fund, .40% of the average
net assets of the Pennsylvania Tax Exempt Money Market Fund and .35% of the
average net assets of the Ohio Municipal Money Market Fund. The Adviser may from
time to time waive all or a portion of the advisory fee payable by one or more
of the Funds.
YEAR 2000 RISKS
Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Adviser and the Fund's other
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Adviser is taking steps to address the Year 2000 Problem with
respect to the computer systems that it uses and to obtain assurance that
comparable steps are being taken by the Fund's other major service providers. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Funds or their shareholders as a
result of the Year 2000 Problem.
ADMINISTRATOR AND SUB-ADMINISTRATOR
SEI Fund Resources (the "Administrator"), located at One
Freedom Valley Drive, Oaks, Pennsylvania 19456, serves as the administrator to
the Funds. SEI Fund Resources is an indirect, wholly-owned subsidiary of SEI
Investments Company ("SEI").
Under its Administration Agreement with the Trust relating to
the Funds, SEI provides the Funds with administrative services, including fund
accounting, regulatory reporting, necessary office space, equipment, personnel
and facilities. The Administrator also acts as shareholder servicing agent of
the Funds. SEI is entitled to receive with respect to the Funds
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an administrative fee, computed daily and paid monthly, at the annual rate of
.07% of the aggregate average daily net assets of all of the investment funds of
Armada up to the first $ 18 billion, and .06% of the aggregate average daily net
assets over $ 18 billion, and is entitled to be reimbursed for its out-of-pocket
expenses incurred on behalf of the Funds.
National City Bank serves as sub-administrator for each Fund
and provides certain services as may be requested by the Administrator from time
to time. For its services as Sub-Administrator, National City Bank receives,
from the Administrator, pursuant to its Sub-Administration Agreement with the
Administrator, a fee, computed daily and paid monthly, at the annual rate of
.01% of the aggregate average daily net assets of all of the investment funds of
Armada up to the first $ 15 billion, and .015% of the aggregate average daily
net assets over $15 billion.
DESCRIPTION OF THE TRUST AND ITS SHARES
The Trust was organized as a Massachusetts business trust on
January 28, 1986. The Trust is a series fund authorized to issue 66 separate
classes or series of shares of beneficial interest ("shares"). Fourteen of these
classes or series, which represent interests in the Money Market Fund (Class A,
Class A-Special Series 1 and Class A-Special Series 2), Government Money Market
Fund (Class B and Class B-Special Series 1), Treasury Money Market Fund (Class C
and Class C-Special Series 1), Tax Exempt Money Market Fund (Class D, Class
D-Special Series 1 and Class D-Special Series 2), Pennsylvania Tax Exempt Money
Market Fund (Class Q and Class Q-Special Series 1) and Ohio Municipal Money
Market Fund (Class BB and Class BB-Special Series 1), are described in this
Prospectus. Class A, Class B, Class C, Class D, Class Q and Class BB shares
constitute the Institutional class or series of shares; and Class A-Special
Series 1, Class B-Special Series 1, Class C-Special Series 1, Class D-Special
Series 1, Class Q-Special Series 1 and Class BB-Special Series 1 shares
constitute the Retail class or series of shares, and Class A-Special Series 2
and Class D-Special Series 2 constitute the B class or series of shares. The
other Funds of the Trust are:
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Equity Growth Fund
(Class H, Class H - Special Series 1 and Class H Special Series 2)
Intermediate Bond Fund
(Class I, Class I - Special Series 1 and Class I Special Series 2)
Ohio Tax Exempt Fund
(Class K, Class K - Special Series 1 and Class K Special Series 2)
National Tax Exempt Fund (Class L, Class L - Special Series 1 and Class L -
Special Series 2)
Equity Income Fund
(Class M, Class M - Special Series 1 and Class M Special Series 2)
Small Cap Value Fund
(Class N, Class N - Special Series 1 and Class N Special Series 2)
Enhanced Income Fund
(Class O, Class O - Special Series 1 and Class O - Special Series 2)
Total Return Advantage Fund (Class P, Class P - Special Series 1 and Class P -
Special Series 2)
Bond Fund (Class R, Class R - Special Series 1 and Class R - Special Series 2)
GNMA Fund
(Class S, Class S - Special Series 1 and Class S - Special Series 2)
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Pennsylvania Municipal Fund (Class T, Class T - Special Series 1 and Class T -
Special Series 2).
International Equity Fund
(Class U, Class U - Special Series 1 and Class U - Special Series 2)
Equity Index Fund
(Class V and Class V - Special Series 1)
Core Equity Fund
(Class W, Class W - Special Series 1 and Class W - Special Series 2)
Small Cap Growth Fund
(Class X, Class X - Special Series 1 and Class X - Special Series 2)
Real Return Advantage Fund (Class Y and Class Y - Special Series 1)
Tax Managed Equity Fund
(Class Z, Class Z - Special Series 1 and Class Z - Special Series 2)
Balanced Allocation Fund
(Class AA, Class AA - Special Series 1 and Class AA - Special Series 2)
Each share has no par value, represents an equal proportionate
interest in the investment fund with other shares of the same class or series
outstanding, and is entitled to such dividends and distributions out of the
income earned on the assets belonging to such Fund as are declared in the
discretion of the Trust's Board of Trustees. The Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any unissued shares
into any number of additional classes of shares and to classify or reclassify
any class of shares into one or more series of shares.
Shareholders are entitled to one vote for each full share
held, and a proportionate fractional vote for each
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fractional share held. Shareholders will vote in the aggregate and not by
investment fund, except as otherwise expressly required by law or when the Board
of Trustees determines that the matter to be voted on affects only the interests
of shareholders of a particular investment fund. The Statement of Additional
Information gives examples of situations in which the law requires voting by
investment fund. In addition, shareholders of each of the investment funds will
vote in the aggregate and not by class or series, except as otherwise expressly
required by law or when the Board of Trustees determines the matter to be voted
on affects only the interests of the holders of a particular class or series of
shares. Under the Shareholder Services Plan and B Shares Plan, only the holders
of Retail or B shares in an investment fund are, or would be, entitled to vote
on matters submitted to a vote of shareholders (if any) concerning their
respective plans. Voting rights are not cumulative, and accordingly, the holders
of more than 50% of the aggregate shares of the Trust may elect all of the
trustees irrespective of the vote of the other shareholders.
As stated above, the Trust is organized as a trust under the
laws of Massachusetts. Shareholders of such a trust may, under certain
circumstances, be held personally liable (as if they were partners) for the
obligations of the trust. The Declaration of Trust of the Trust provides for
indemnification out of the trust property for any shareholder held personally
liable solely by reason of his being or having been a shareholder and not
because of his acts or omissions or some other reason.
The Trust does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Trust's Code of Regulations provides that special meetings of shareholders shall
be called at the written request of shareholders entitled to cast at least 10%
of the votes entitled to be cast at such meeting. Such meeting may be called by
shareholders to consider the removal of one or more trustees. Shareholders will
receive shareholder communication assistance with respect to such matter as
required by the 1940 Act.
As of June 19, 1998, nine bank subsidiaries of National City
Corporation held beneficially or of record approximately 94.24%, 97.42%, 99.59%
and 100.00% of the outstanding Institutional shares of the Money Market,
Government Money Market, Treasury Money Market and Tax Exempt Money Market
Funds, respectively, and five bank subsidiaries of National City Corporation
held of record approximately 99.93% of the outstanding Institutional shares of
the Pennsylvania Tax Exempt Money Market Fund.
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National City does not have any economic interest in such shares which are held
solely for the benefit of its customers, but may be deemed to be a controlling
person of the Funds within the meaning of the 1940 Act by reason of its record
ownership of such shares. The names of beneficial owners and record owners who
are controlling shareholders under the 1940 Act may be found in the Statement of
Additional Information.
CUSTODIAN AND TRANSFER AGENT
National City Bank serves as the custodian of the Trust's
assets. State Street Bank and Trust Company serves as the Trust's transfer and
dividend disbursing agent. Communications to the Transfer Agent should be
directed to P.O. Box 8421, Boston, Massachusetts 02266-8421. The fees payable by
the Trust for these services are described in the Statement of Additional
Information.
EXPENSES
Except as noted below, the Adviser bears all expenses in
connection with the performance of its services. Each Fund of the Trust bears
its own expenses incurred in its operations including: taxes; interest; fees
(including fees paid to its trustees and officers); SEC fees; state securities
qualification fees; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; expenses related to the
distribution and servicing plans; advisory fees; administration fees and
expenses; charges of the custodian and Transfer Agent; certain insurance
premiums; outside auditing and legal expenses; costs of shareholders' reports
and shareholder meetings; and any extraordinary expenses. Each Fund also pays
for brokerage fees and commissions (if any) in connection with
the purchase of its portfolio securities.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and
annual financial statements audited by independent accountants.
Pursuant to Rule 17f-2, as National City Bank serves the Trust
as both the custodian and an investment adviser, a
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procedure has been established requiring three annual verifications, two of
which are to be unannounced, of all investments held pursuant to the Custodian
Services Agreement, to be conducted by the Trust's independent auditors.
As used in this Prospectus, a "vote of the holders of a
majority of the outstanding shares" of the Trust or a particular investment fund
means, with respect to the approval of an investment advisory agreement, a
distribution plan or a change in a fundamental investment policy, the
affirmative vote of the lesser of (a) 50% or more of the outstanding shares of
the Trust or such fund or (b) 67% or more of the shares of the Trust or such
fund present at a meeting if more than 50% of the outstanding shares of the
Trust or such fund are represented at the meeting in person or by proxy.
The portfolio managers of the Funds and other investment
professionals may from time to time discuss in advertising, sales literature or
other material, including periodic publications, various topics of interest to
shareholders and prospective investors. The topics may include, but are not
limited to, the advantages and disadvantages of investing in tax-deferred and
taxable investments; Fund performance and how such performance may compare to
various market indices; shareholder profiles and hypothetical investor
scenarios; the economy; the financial and capital markets; investment strategies
and techniques; investment products and tax, retirement and investment planning.
Inquiries regarding the Trust or any of its investment funds
may be directed to 1-800-622-FUND(3863).
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ARMADA FUNDS
BOARD OF TRUSTEES
ROBERT D. NEARY
Chairman
Retired Co-Chairman, Ernst &
Young
Director:
Cold Metal Products, Inc.
HERBERT R. MARTENS, JR.
President
Executive Vice President,
National City Corporation
Chairman, President and
Chief Executive Officer,
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 Furnishing's
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,
Wayne Supply Company
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<PAGE> 69
ARMADA FUNDS
Investment Adviser
An Affiliate of National
City Corporation
National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
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<PAGE> 70
ARMADA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER __, 1998
MONEY MARKET FUND
GOVERNMENT MONEY MARKET FUND
TREASURY MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
PENNSYLVANIA TAX EXEMPT MONEY MARKET FUND
OHIO MUNICIPAL MONEY MARKET FUND
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current Prospectus for the above Funds of Armada Funds
(the "Trust"), dated September __, 1998 (the "Prospectus"). A copy of the
Prospectus may be obtained by calling or writing the Trust at 1-800-622-FUND
(3863), Oaks, Pennsylvania 19456.
<PAGE> 71
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
STATEMENT OF ADDITIONAL INFORMATION.................................................................... 1
INVESTMENT OBJECTIVES AND POLICIES..................................................................... 1
NET ASSET VALUE........................................................................................ 20
DIVIDENDS.............................................................................................. 21
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION......................................................... 21
DESCRIPTION OF SHARES.................................................................................. 23
ADDITIONAL INFORMATION CONCERNING TAXES................................................................ 24
TRUSTEES AND OFFICERS.................................................................................. 28
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS................................. 34
SHAREHOLDER SERVICES PLANS............................................................................. 42
PORTFOLIO TRANSACTIONS................................................................................. 42
AUDITORS............................................................................................... 44
COUNSEL................................................................................................ 45
STANDARDIZED YIELD QUOTATIONS.......................................................................... 45
MISCELLANEOUS.......................................................................................... 47
FINANCIAL STATEMENTS................................................................................... 52
APPENDIX A............................................................................................ A-1
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read in conjunction
with the Prospectus of Armada Funds (the "Trust") that describes the Money
Market Fund, Government Money Market Fund (the "Government Fund"), Treasury
Money Market Fund (the "Treasury Fund"), Tax Exempt Money Market Fund (the "Tax
Exempt Fund"), Pennsylvania Tax Exempt Money Market Fund (the "Pennsylvania Tax
Exempt Fund") and Ohio Municipal Money Market Fund (the "Ohio Municipal Fund").
The information contained in this Statement of Additional Information expands
upon matters discussed in the Prospectus. No investment in shares of a Fund
should be made without first reading the Prospectus.
The Pennsylvania Tax Exempt Fund commenced operations on August 8, 1994
as a separate investment portfolio (the "Predecessor Fund") of Inventor Funds,
Inc, which was organized as a Maryland corporation. On September 9, 1996, the
Predecessor Fund was reorganized as a new portfolio of the Trust. Prior to the
reorganization, the Predecessor Fund offered and sold shares of stock that were
similar to the Trust's Retail Shares of beneficial interest.
INVESTMENT OBJECTIVES AND POLICIES
ADDITIONAL INFORMATION ON FUND MANAGEMENT
Further information on the Adviser's investment management strategies,
techniques, policies and related matters may be included from time to time in
advertisements, sales literature, communications to shareholders and other
materials. See also, "Standardized Yield Quotations" below.
Attached to this Statement of Additional Information is Appendix A
which contains descriptions of the rating symbols used by S&P, Fitch, Duff, IBCA
and Moody's for municipal bonds, short term notes and other securities which may
be held by the Funds.
ELIGIBLE SECURITIES
The Funds may purchase "eligible securities" that present minimal
credit risks as determined by the Adviser pursuant to guidelines established by
the Trust's Board of Trustees. Eligible securities generally include: (1)
securities that are rated by two or more Rating Agencies (or the only Rating
Agency which has issued a rating) in one of the two highest rating categories
for short term debt securities; (2) securities that have no short term rating,
if the issuer has other outstanding short term obligations that are comparable
in priority and security as determined by the Adviser ("Comparable Obligations")
and
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that have been rated in accordance with (1) above; (3) securities that have no
short term rating, but are determined to be of comparable quality to a security
satisfying (1) or (2) above, and the issuer does not have Comparable Obligations
rated by a Rating Agency; and (4) securities with credit supports that meet
specified rating criteria similar to the foregoing and other criteria in
accordance with applicable Securities and Exchange Commission ("SEC")
regulations. Securities issued by a money market fund and securities issued by
the U.S. Government may constitute eligible securities if permitted under
applicable SEC regulations and Trust procedures. The Board of Trustees will
approve or ratify any purchases by the Money Market, Government, Treasury, Tax
Exempt, Pennsylvania Tax Exempt and Ohio Municipal Funds of securities that are
rated by only one Rating Agency or that qualify under (3) above as long as
required by applicable regulations or Trust procedures.
VARIABLE AND FLOATING RATE INSTRUMENTS
The Funds may purchase variable rate and floating rate obligations as
described in the Prospectus. The Adviser will consider the earning power, cash
flows and other liquidity ratios of the issuers and guarantors of such notes and
will continuously monitor their financial status to meet payment on demand. In
determining average weighted portfolio maturity, a variable or floating rate
instrument issued or guaranteed by the U.S. government or an agency or
instrumentality thereof will be deemed to have a maturity equal to the period
remaining until the obligation's next interest rate adjustment. Other variable
and floating rate obligations will be deemed to have a maturity equal to the
longer or shorter of the periods remaining to the next interest rate adjustment
or the demand notice period in accordance with applicable regulations or Trust
procedures.
Variable and floating rate obligations held by a Fund may have
maturities of more than 397 days, provided: (a) (i) the Fund is entitled to
payment of principal and accrued interest upon not more than 30 days' notice or
at specified intervals not exceeding one year (upon not more than 30 days'
notice) and (ii) the rate of interest on such instrument is adjusted
automatically at periodic intervals which normally will not exceed 31 days, but
may extend up to one year, or (b) if the obligation is an asset-backed security,
and if permitted under Trust procedures and applicable regulations, the security
has a feature permitting the holder unconditionally to receive principal and
interest within 13 months of making demand.
GUARANTEED INVESTMENT CONTRACTS
As stated in the Prospectus, the Money Market Fund may invest in GICs
issued by insurance companies. Pursuant to such contracts, the Fund makes cash
contributions to a deposit fund of
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the insurance company's general account. The insurance company then credits to
the Fund on a monthly basis guaranteed interest which is based on an index. The
GICs provide that this guaranteed interest will not be less than a certain
minimum rate. The insurance company may assess periodic charges against a GIC
for expense and service costs allocable to it, and the charges will be deducted
from the value of the deposit fund. The Fund will only purchase a GIC when the
Adviser has determined, under guidelines established by the Board of Trustees,
that the GIC presents minimal credit risks to the Fund and is of comparable
quality to instruments that are rated high quality by Rating Agencies. The
Fund's investments in GICs will not exceed 10% of the Fund's net assets. In
addition, because the Fund may not receive the principal amount of a GIC from
the insurance company on seven days' notice or less, the GIC is considered an
illiquid investment, and, together with other instruments in the Fund which are
not readily marketable, will not exceed 10% of the Fund's net assets. The term
of a GIC will be one year or less. In determining average weighted portfolio
maturity, a GIC will be deemed to have a maturity equal to the period of time
remaining until the next readjustment of the guaranteed interest rate.
BANK OBLIGATIONS AND COMMERCIAL PAPER
The Money Market, Pennsylvania Tax Exempt and Ohio Municipal Funds may
invest in bank obligations. Bank obligations include bankers' acceptances
generally having a maturity of six months or less and negotiable certificates of
deposit. Bank obligations also include U.S. dollar denominated bankers'
acceptances and certificates of deposit. Investment in bank obligations is
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase. For purposes of the Money Market Fund's
investment policy with respect to bank obligations, the assets of a bank or
savings institution will be deemed to include the assets of its domestic and
foreign branches.
Investments by the Pennsylvania Tax Exempt Fund and Ohio Municipal Fund
include commercial paper and other short term promissory notes issued by
corporations, municipalities and other entities (including variable and floating
rate instruments).
REPURCHASE AGREEMENTS; REVERSE REPURCHASE AGREEMENTS;
LENDING OF PORTFOLIO SECURITIES
Securities held by the Money Market, Government, Pennsylvania Tax
Exempt and Ohio Municipal Funds may be subject to repurchase agreements. Under
the terms of a repurchase agreement, the Funds purchase securities from
financial institutions such as banks and broker-dealers which the Adviser deems
creditworthy under guidelines approved by the Board of Trustees,
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subject to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price generally equals the price paid
by the Fund plus interest negotiated on the basis of current short term rates,
which may be more or less than the rate on the underlying portfolio securities.
The seller under a repurchase agreement will be required to maintain the value
of collateral held pursuant to the agreement at not less than the repurchase
price (including accrued interest). If the seller were to default on its
repurchase obligation or become insolvent, the Fund holding such obligation
would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
were delayed pending court action. Although there is no controlling legal
precedent confirming that a Fund would be entitled, as against a claim by such
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, the Board of Trustees of the Trust believes that, under the regular
procedures normally in effect for custody of a Fund's securities subject to
repurchase agreements and under federal laws, a court of competent jurisdiction
would rule in favor of the Trust if presented with the question. Securities
subject to repurchase agreements will be held by the Trust's custodian or
another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by a Fund under the
1940 Act.
Reverse repurchase agreements are considered to be borrowings by the
Funds under the 1940 Act. Whenever a Fund enters into a reverse repurchase
agreement as described in the Prospectus, it will place in a segregated
custodial account liquid assets at least equal to the repurchase price marked to
market daily (including accrued interest) and will subsequently monitor the
account to ensure such equivalent value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Portfolio may decline below the price of the securities it is obligated to
repurchase.
With respect to loans by the Money Market, Government or Treasury Fund
of its portfolio securities as described in the Prospectus, the Fund would
continue to accrue interest on loaned securities and would also earn income on
loans. Any cash collateral received by the Funds in connection with such loans
would be invested in short-term U.S. Government obligations.
GOVERNMENT SECURITIES
Examples of the types of U.S. government obligations that may be held
by the Money Market, Government, Pennsylvania Tax Exempt and Ohio Municipal
Funds include, in addition to Treasury Bills, the obligations of Federal Home
Loan Banks, Federal
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Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association,
General Services Administration, Student Loan Marketing Association, Central
Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks and Maritime Administration. Some of these obligations
are supported by the full faith and credit of the U.S. Treasury, such as
obligations issued by the Government National Mortgage Association. Others, such
as those of the Export-Import Bank of the United States, are supported by the
right of the issuer to borrow from the U.S. Treasury; others, such as those of
the Federal National Mortgage Association, are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and still
others, such as those of the Student Loan Marketing Association, are supported
only by the credit of the agency or instrumentality issuing the obligation. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored agencies or instrumentalities if it is not
obligated to do so by law. The Money Market, Government and Tax Exempt Funds
will invest in the obligations of such agencies or instrumentalities only when
the Adviser believes that their credit risk with respect thereto is minimal.
SECURITIES OF OTHER INVESTMENT COMPANIES
Each Fund may invest in securities issued by other investment companies
as described in the Prospectus. Each Fund currently intends to limit such
investments so that, as determined immediately after a securities purchase is
made: (a) not more than 5% of the value of its total assets will be invested in
the securities of any one investment company; (b) not more than 10% of the value
of its total assets will be invested in the aggregate in securities of
investment companies as a group; (c) not more than 3% of the outstanding voting
stock of any one investment company will be owned by the Fund; and (d) not more
than 10% of the outstanding voting stock of any one investment company will be
owned in the aggregate by the Fund and other investment companies advised by the
Adviser. As a shareholder of another investment company, a Fund would bear,
along with other shareholders, its pro rata portion of that company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
Investment companies in which a Fund may invest may also impose a sales or
distribution charge in connection with the purchase or redemption of their
shares and other types of commissions or charges. Such
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charges will be payable by the Fund and, therefore, will be borne indirectly by
its shareholders.
MUNICIPAL SECURITIES
As described in the Prospectus, the Tax Exempt, Pennsylvania Tax Exempt
and Ohio Municipal Funds may purchase Municipal Securities. The two principal
classifications of Municipal Securities consist of "general obligation" and
"revenue" issues. The Funds also may invest in "moral obligation" issues, which
are normally issued by special purpose authorities. Municipal Securities include
debt obligations issued by governmental entities to obtain funds for various
public purposes, including the construction of a wide range of public
facilities, the refunding of outstanding obligations, the payment of general
operating expenses and the extension of loans to public institutions and
facilities. Private activity bonds may be purchased if the interest paid is
excludable from federal income tax. Private activity bonds are issued by or on
behalf of states or political subdivisions thereof to finance privately owned or
operated facilities for business and manufacturing, housing, sports, and
pollution control and to finance activities of and facilities for charitable
institutions. Private activity bonds are also used to finance public facilities
such as airports, mass transit systems, ports, parking and low income housing.
The payment of the principal and interest on private activity bonds is dependent
solely on the ability of the facility's user to meet its financial obligations
and may be secured by a pledge of real and personal property so financed.
Pennsylvania Municipal Securities which are payable only from the
revenues derived from a particular facility may be adversely affected by
Pennsylvania laws or regulations which make it more difficult for the particular
facility to generate revenues sufficient to pay such interest and principal,
including, among others, laws and regulations which limit the amount of fees,
rates or other charges which may be imposed for use of the facility or which
increase competition among facilities of that type or which limit or otherwise
have the effect of reducing the use of such facilities generally, thereby
reducing the revenues generated by the particular facility. Pennsylvania
Municipal Securities, the payment of interest and principal on which is insured
in whole or in part by a Pennsylvania governmentally created fund, may be
adversely affected by Pennsylvania laws or regulations which restrict the
aggregate proceeds available for payment of principal and interest in the event
of a default on such municipal securities. Similarly, Pennsylvania Municipal
Securities, the payment of interest and principal on which is secured, in whole
or in part, by an interest in real property may be adversely affected by
Pennsylvania laws which limit the availability of remedies or the scope of
remedies available in the event of a default on such
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municipal securities. Because of the diverse nature of such laws and regulations
and the impossibility of either predicting in which specific Pennsylvania
Municipal Securities the Pennsylvania Tax Exempt Fund will invest from time to
time or predicting the nature or extent of future changes in existing laws or
regulations or the future enactment or adoption of additional laws or
regulations, it is not presently possible to determine the impact of such laws
and regulations on the securities in which the Pennsylvania Tax Exempt Fund may
invest and, therefore, on the shares of that Fund.
There are, of course, variations in the quality of Municipal Securities
both within a particular classification and between classifications, and the
yields on Municipal Securities depend upon a variety of factors, including the
financial condition of the issuer, general conditions of the municipal bond
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The ratings of Rating Agencies represent their opinions
as to the quality of Municipal Securities. It should be emphasized, however,
that ratings are general and are not absolute standards of quality, and
Municipal Securities with the same maturity, interest rate and rating may have
different yields while Municipal Securities of the same maturity and interest
rate with different ratings may have the same yield. Subsequent to its purchase
by the Tax Exempt Fund, Pennsylvania Tax Exempt Fund or Ohio Municipal Fund, an
issue of Municipal Securities may cease to be rated or its rating may be reduced
below the minimum rating required for purchase by such Funds. The Adviser will
consider such an event in determining whether it should continue to hold the
obligation.
The payment of principal and interest on most Municipal Securities
purchased by the Tax Exempt, Pennsylvania Tax Exempt and Ohio Municipal Funds
will depend upon the ability of the issuers to meet their obligations. An
issuer's obligations under its Municipal Securities are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code, and laws, if any,
which may be enacted by federal or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its obligations for the payment
of interest on and principal of its Municipal Securities may be materially
adversely affected by litigation or other conditions.
Certain Municipal Securities held by the Tax Exempt, Pennsylvania Tax
Exempt or Ohio Municipal Funds may be insured at the time of issuance as to the
timely payment of principal and interest. The insurance policies will usually be
obtained by the issuer of the Municipal Bond at the time of its original
issuance.
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In the event that the issuer defaults on interest or principal payments, the
insurer of the bond is required to make payment to the bondholders upon proper
notification. There is, however, no guarantee that the insurer will meet its
obligations. In addition, such insurance will not protect against market
fluctuations caused by changes in interest rates and other factors.
Municipal notes in which the Tax Exempt, Pennsylvania Tax Exempt and
Ohio Municipal Funds may invest include, but are not limited to, general
obligation notes, tax anticipation notes (notes sold to finance working capital
needs of the issuer in anticipation of receiving taxes on a future date),
revenue anticipation notes (notes sold to provide needed cash prior to receipt
of expected non-tax revenues from a specific source), bond anticipation notes,
certificates of indebtedness, demand notes and construction loan notes.
OTHER TAX-EXEMPT INSTRUMENTS
Tax-exempt commercial paper will be limited to investments in
obligations which are rated at least A-2 or SP-2 by S&P, F-2 by Fitch or
Prime-2, MIG-2 or VMIG-2 by Moody's at the time of investment or which are of
equivalent quality as determined by the Adviser. Investments in floating rate
instruments will normally involve industrial development or revenue bonds which
provide that the investing Fund can demand payment of the obligation at all
times or at stipulated dates on short notice (not to exceed 30 days) at par plus
accrued interest. A Fund must use the shorter of the period required before it
is entitled to prepayment under such obligations or the period remaining until
the next interest rate adjustment date for purposes of determining the maturity.
Such obligations are frequently secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying credit or
of the bank, as the case may be, must, in the opinion of the Adviser be
equivalent to the commercial paper ratings stated above. The Adviser will
monitor the earning power, cash flow and liquidity ratios of the issuers of such
instruments and the ability of an issuer of a demand instrument to pay principal
and interest on demand. Other types of tax-exempt instruments may also be
purchased as long as they are of a quality equivalent to the bond or commercial
paper ratings stated above.
STAND-BY COMMITMENTS
The Tax Exempt, Pennsylvania Tax Exempt and Ohio Municipal Funds may
acquire stand-by commitments (also known as put options) with respect to
Municipal Securities held in their portfolios. These Funds expect that stand-by
commitments will generally be available without the payment of any direct or
indirect consideration.
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However, if necessary or advisable, the Funds may pay for a stand-by commitment
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). The Funds will not
acquire stand-by commitments unless immediately after the acquisition, not more
than 5% of their respective total assets will be invested in instruments subject
to a demand feature, or in stand-by commitments, with the same institution.
The Tax Exempt, Pennsylvania Tax Exempt, and Ohio Municipal Funds'
right to exercise stand-by commitments will be unconditional and unqualified. A
stand-by commitment will be transferable only with the underlying Municipal
Securities which may be sold to a third party at any time. Until a Fund
exercises its stand-by commitment, it owns the securities in its portfolio which
are subject to the commitment.
The amount payable to the Tax Exempt, Pennsylvania Tax Exempt or Ohio
Municipal Fund upon its exercise of a stand-by commitment will normally be (i)
the Fund's acquisition cost of the Municipal Securities (excluding any accrued
interest which the Fund paid on its acquisition), less any amortized market
premium or plus any amortized market or original issue discount during the
period the Fund owned the securities, plus (ii) all interest accrued on the
securities since the last interest payment date during that period. Under normal
market conditions, in determining net asset value the Funds value the underlying
Municipal Securities on an amortized cost basis. Accordingly, the amount payable
by a dealer upon exercise of a stand-by commitment will normally be
substantially the same as the portfolio value of the underlying Municipal
Securities.
The Tax Exempt, Pennsylvania Tax Exempt and Ohio Municipal Funds intend
to enter into stand-by commitments only with dealers, banks and broker-dealers
which, in the Adviser's opinion, present minimal credit risks. The Funds'
reliance upon the credit of these dealers, banks and broker-dealers will be
secured by the value of the underlying Municipal Securities subject to the
commitment. Thus, the risk of loss to the Funds in connection with a stand-by
commitment will not be qualitatively different from the risk of loss faced by a
person that is holding securities pending settlement after having agreed to sell
the securities in the ordinary course of business.
WHEN-ISSUED SECURITIES
The Tax Exempt, Pennsylvania Tax Exempt and Ohio Municipal Funds may
purchase Municipal Securities on a "when-
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issued" basis (i.e., for delivery beyond the normal settlement date at a stated
price and yield). When a Fund agrees to purchase when-issued securities, the
custodian sets aside cash or liquid portfolio securities equal to the amount of
the commitment in a separate account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the separate
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment, marked to market daily. It is likely that a
Fund's net assets will fluctuate to a greater degree when it sets aside
portfolio securities to cover such purchase commitments than when it sets aside
cash. Because the Funds will set aside cash or liquid assets to satisfy the
Funds' purchase commitments in the manner described, their liquidity and ability
to manage their portfolios might be affected in the event the Funds' commitments
to purchase when-issued securities ever exceeded 25% of the value of their
respective total assets.
When the Funds engage in when-issued transactions, they rely on the
seller to consummate the trade. Failure of the seller to do so may result in a
Fund incurring a loss or missing an opportunity to obtain a price considered to
be advantageous.
ADDITIONAL INVESTMENT LIMITATIONS
In addition to the investment limitations disclosed in the Prospectus,
the Funds are subject to the following investment limitations which may be
changed with respect to a particular Fund only by a vote of the holders of a
majority of such Fund's outstanding shares (as defined under "Miscellaneous" in
the Prospectus).
No Fund may:
1. Purchase or sell real estate, except that the Fund may purchase
securities of issuers which deal in real estate and may purchase securities
which are secured by interests in real estate.
2. Invest in commodities, except that as consistent with its investment
objective and policies a Fund may: (a) purchase and sell options, forward
contracts, futures contracts, including without limitation those relating to
indices; (b) purchase and sell options on futures contracts or indices; and (c)
purchase publicly traded securities of companies engaging in whole or in part in
such activities. For purposes of this investment limitation, "commodities"
includes commodity contracts.
3. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as the Fund
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might be deemed to be an underwriter upon the disposition of portfolio
securities acquired within the limitation on purchases of illiquid securities
and except to the extent that the purchase of obligations directly from the
issuer thereof in accordance with its investment objective, policies and
limitations may be deemed to be underwriting.
In addition, the Funds are subject to the following non-fundamental
limitations, which may be changed without the vote of shareholders.
No Fund may:
1. Acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization or acquisition
of assets or where otherwise permitted under the 1940 Act.
2. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except, as consistent with the Fund's investment objective
and policies for transactions in options on securities or indices of securities,
futures contracts and options on futures contracts and in similar investments.
3. Purchase securities on margin, make short sales of securities or
maintain a short position, except that, as consistent with a Fund's investment
objective and policies, (a) this investment limitation shall not apply to the
Fund's transactions in futures contracts and related options, options on
securities or indices of securities and similar instruments, and (b) it may
obtain short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities.
4. Purchase securities of companies for the purpose of exercising
control.
5. Invest more than 10% of its net assets in illiquid securities.
The Funds do not intend to purchase securities while their outstanding
borrowings (including reverse repurchase agreements) are in excess of 5% of
their respective total assets. Securities held in escrow or separate accounts in
connection with a Fund's investment practices are not deemed to be pledged for
purposes of this limitation.
SPECIAL RISK CONSIDERATIONS REGARDING INVESTMENT IN PENNSYLVANIA BONDS
Potential shareholders should consider the fact that the Pennsylvania
Tax Exempt Fund's portfolio consists primarily of
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securities issued by the Commonwealth of Pennsylvania (the "Commonwealth"), its
municipalities and authorities and should realize that such Fund's performance
is closely tied to general economic conditions within the Commonwealth as a
whole and to economic conditions within particular industries and geographic
areas located within the Commonwealth.
Although the General Fund of the Commonwealth (the principal operating
fund of the Commonwealth) experienced deficits in fiscal 1990 and 1991, tax
increases and spending deceases have resulted in surpluses the last four years;
as of June 30, 1996, the General Fund had a surplus of $635.2 million.
Pennsylvania's economy historically has been dependent upon heavy
industry, but has diversified recently into various services, particularly into
medical and health services, education and financial services. Agricultural
industries continue to be an important part of the economy, including not only
the production of diversified food and livestock products, but substantial
economic activity in agribusiness and food-related industries. Service
industries currently employ the greatest share of non-agricultural
workers, followed by the categories of trade and manufacturing.
Future economic difficulties in any of these industries could have
an adverse impact on the finances of the Commonwealth or its
municipalities, and could adversely affect the market value of the
Bonds in the Pennsylvania Trust or the ability of the respective
obligors to make payments of interest and principal due on such
Bonds.
Certain litigation is pending against the Commonwealth that could
adversely affect the ability of the Commonwealth to pay debt service on its
obligations including suit relating to the following matters: (i) the American
Civil Liberties Union ("ACLU") filed suit in federal court demanding additional
funding for child welfare services; the Commonwealth settled a similar suit in
the Commonwealth Court of Pennsylvania and is seeking the dismissal of the
federal suit, among other things, because of that settlement. After its earlier
denial of class certification was reversed by the Third Circuit Court of
Appeals, the district court granted class certification to the ACLU and the
parties are proceeding with discovery; (ii) in 1987, the Supreme Court of
Pennsylvania held the statutory scheme for country funding of the judicial
system to be in conflict with the constitution of the Commonwealth, but it
stayed judgment pending enactment by the legislature of funding consistent with
the opinion, and the legislature has yet to consider legislation implementing
the judgment. In 1992, a new action in mandamus was filed seeking to compel the
Commonwealth to comply with the original decision. The Court issued a writ in
mandamus and appointed a special master in 1996 to submit a plan for
implementation, which it intended to require by January 1, 1998. In January
1997, the Court established a committee,
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consisting of the special master and representatives of the Executive and
Legislative branches, to develop an implementation plan; (iii) litigation was
filed in both state and federal court by an association of rural and small
schools and several individual school districts and parents challenging the
constitutionality of the Commonwealth's system for funding local school
districts -- the federal case has been stayed pending the resolution of the
state case; a trial in the state case commenced in January 1997 and has
recessed; no briefing schedule or date for oral argument has yet been set; (iv)
Envirotest/Synterra Partners ("Envirotest") filed suit against the Commonwealth
asserting that it sustained damages in excess of $350 million, as a result of
investments it made in reliance on a contract to conduct emissions testing
before the emission testing program was suspended. Envirotest entered into a
Standstill Agreement with the Commonwealth pursuant to which the parties will
attempt to resolve Envirotest will receive $145 million, with interest at 6
percent per annum; and (v) in 1995, the Commonwealth, the Governor of
Pennsylvania, the City of Philadelphia and the Mayor of Philadelphia were joined
as additional respondents in an enforcement action commenced in Commonwealth
Court in 1973 by the Pennsylvania Human Relations Commission against the School
District of Philadelphia pursuant to the Pennsylvania Human Relations Act. The
Commonwealth and the City were joined to determine their liability, if any, to
pay additional costs necessary to remedy segregation-related conditions found to
exist in Philadelphia public schools. In January 1997, the Pennsylvania Supreme
Court ordered the parties to brief certain issues, but no decision by the
Supreme Court has been issued.
A disaster emergency was declared by the Governor and a federal major
disaster declaration was made by the President of the United States for certain
counties in the Commonwealth for a blizzard and subsequent flooding in January
1996. The General Assembly authorized $123 million to provide for the
Commonwealth's share of the required match for federal public assistance and
disaster mitigation funds.
Although there can be no assurance that such conditions will continue,
the Commonwealth's general obligation bonds are currently rated AA- by S&P and
A1 by Moody's and Philadelphia's and Pittsburgh's general obligation bonds are
currently rated BBB- and BBB+, respectively, by S&P and Baa and Baa1,
respectively, by Moody's.
The City of Philadelphia (the "City") experienced a series of General
Fund deficits for fiscal years 1988 through 1992 and, while its general
financial situation has improved, the City is still seeking a long-term solution
for its economic difficulties. The audited balance of the City's General Fund as
of June 30, 1996 was a surplus of $118.5 million.
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In recent years, an authority of the Commonwealth, the Pennsylvania
Intergovernmental Cooperation Authority ("PICA"), has issued approximately $1.76
billion of Special Revenue Bonds on behalf of the City to cover budget
shortfalls, to eliminate projected deficits and to fund capital spending. As one
of the conditions of issuing bonds on behalf of the City, PICA exercises
oversight of the City's finances. The City is currently operating under a five
year plan approved by PICA in 1995. PICA's power to issue further bonds to
finance capital projects expired on December 31, 1994. PICA's authority to issue
bonds to finance cash flow deficits expired on December 31, 1996, but its
authority to refund existing debt will not expire.
SPECIAL RISK CONSIDERATIONS REGARDING INVESTMENT IN OHIO MUNICIPAL
SECURITIES
As described in the Prospectus, the Ohio Municipal Fund will invest
most of its net assets in securities issued by or on behalf of (or in
certificates of participation in lease purchase obligations of) the State of
Ohio, political subdivisions of the State, or agencies or instrumentalities of
the State or its political subdivisions ("Ohio Obligations"). The Fund is
therefore susceptible to general or particular economic, political or regulatory
factors that may affect issuers of Ohio Obligations. The following information
constitutes only a brief summary of some of the many complex factors that may
have an effect. The information does not apply to "conduit" obligations on which
the public issuer itself has no financial responsibility. This information is
derived from official statements of certain Ohio issuers published in connection
with their issuance of securities and from other publicly available information,
and is believed to be accurate. No independent verification has been made of any
of the following information.
Generally, the creditworthiness of Ohio Obligations of local issuers is
unrelated to that of obligations of the State itself, and the State has no
responsibility to make payments on those local obligations.
There may be specific factors that at particular times apply in
connection with investment in particular Ohio Obligations or in those
obligations of particular Ohio issuers. It is possible that the investment may
be in particular Ohio Obligations, or in those of particular issuers, as to
which those factors apply. However, the information below is intended only as a
general summary, and is not intended as a discussion of any specific factors
that may affect any particular obligation or issuer.
The timely payment of principal of and interest on Ohio Obligations has
been guaranteed by bond insurance purchased by the issuers, the Fund or other
parties. Those Ohio Obligations may not
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be subject to the factors referred to in this section of the Prospectus.
Ohio is the seventh most populous state; the 1990 Census count of
10,847,000 indicated a 0.5% population increase from 1980. The Census estimate
for 1996 is 11,173,000.
While diversifying more into the service and other non-manufacturing
areas, the Ohio economy continues to rely in part on durable goods manufacturing
largely concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, general economic activity, as in many other
industrially-developed states, tends to be more cyclical than in some other
states and in the nation as a whole. Agriculture is an important segment of the
economy, with over half the State's area devoted to farming and approximately
15% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly
somewhat higher than the national figure. For example, the reported 1990 average
monthly State rate was 5.7%, compared to the 5.5% national figure. However, for
the last seven years the State rates were below the national rates (4.6% versus
4.9% in 1997). The unemployment rate and its effects vary among geographic areas
of the State.
There can be no assurance that future national, regional or state-wide
economic difficulties, and the resulting impact on State or local government
finances generally, will not adversely affect the market value of Ohio
Obligations held in the Fund or the ability of particular obligors to make
timely payments of debt service on (or lease payments relating to) those
Obligations.
The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its July 1
to June 30 fiscal year (FY) or fiscal biennium in a deficit position. Most State
operations are financed through the General Revenue Fund (GRF), for which the
personal income and sales-use taxes are the major sources. Growth and depletion
of GRF ending fund balances show a consistent pattern related to national
economic conditions, with the ending FY balance reduced during less favorable
and increased during more favorable economic periods. The State has
well-established procedures for, and has timely taken, necessary actions to
ensure resource/expenditure balances during less favorable economic periods.
Those procedures included general and selected reductions in appropriations
spending.
The 1992-93 biennium presented significant challenges to State
finances, successfully addressed. To allow time to resolve certain budget
differences an interim appropriations act was enacted effective July 1, 1991; it
included GRF debt service and lease rental appropriations for the entire
biennium, while
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continuing most other appropriations for a month. Pursuant to the general
appropriations act for the entire biennium, passed on July 11, 1991, $200
million was transferred from the Budget Stabilization Fund (BSF, a cash and
budgetary management fund) to the GRF in FY 1992.
Based on updated results and forecasts in the course of that FY, both
in light of a continuing uncertain nationwide economic situation, there was
projected, and then timely addressed, an FY 1992 imbalance in GRF resources and
expenditures. In response, the Governor ordered most State agencies to reduce
GRF spending in the last six months of FY 1992 by a total of approximately $184
million; the $100.4 million BSF balance and additional amounts from certain
other funds were transferred late in the FY to the GRF; and adjustments were
made in the timing of certain tax payments.
A significant GRF shortfall (approximately $520 million) was then
projected for FY 1993. It was addressed by appropriate legislative and
administrative actions, including the Governor's ordering $300 million in
selected GRF spending reductions and subsequent executive and legislative action
(a combination of tax revisions and additional spending reductions). The June
30, 1993 ending GRF fund balance was approximately $111 million, of which, as a
first step to BSF replenishment, $21 million was deposited in the BSF.
None of the spending reductions were applied to appropriations needed
for debt service on or lease rentals relating to any State obligations.
The 1994-95 biennium presented a more affirmative financial picture.
Based on June 30, 1994 balances, an additional $260 million was deposited in the
BSF. The biennium ended June 30, 1995 with a GRF ending fund balance of $928
million, of which $535.2 million was transferred into the BSF. The significant
GRF fund balance, after leaving in the GRF an unreserved and undesignated
balance of $70 million, was transferred to the BSF and other funds including
school assistance funds and, in anticipation of possible federal program
changes, a human services stabilization fund.
From a higher than forecast 1996-97 mid-biennium GRF fund balance, $100
million was transferred for elementary and secondary school computer network
purposes and $30 million to a new State transportation infrastructure fund.
Approximately $400.8 million served as a basis for temporary 1996 personal
income tax reductions aggregating that amount. The 1996-97 biennium-ending GRF
fund balance was $834.9 million. Of that, $250 million went to school building
construction and renovation, $94 million to the school computer network, $44.2
million for school textbooks and
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instructional materials and a distance learning program, and $34 million to the
BSF (which had a May 9, 1998 balance of $862.7 million), and the $263 million
balance to a State income tax reduction.
The GRF appropriations act for the 1997-98 biennium was passed on June
25, 1997 and promptly signed (after selective vetoes) by the Governor. All
necessary GRF appropriations for State debt service and lease rental payments
then projected for the biennium were included in that act. Subsequent
legislation increased the fiscal year 1999 GRF appropriation level for
elementary and secondary education, with the increase to be funded in part by
mandated small percentage reductions in State appropriations for various State
agencies and institutions. Expressly exempt from those reductions are all
appropriations for debt service, including lease rental payments.
The State's incurrence or assumption of debt without a vote of the
people is, with limited exceptions, prohibited by current State constitutional
provisions. The State may incur debt, limited in amount to $750,000, to cover
casual deficits or failures in revenues or to meet expenses not otherwise
provided for. The Constitution expressly precludes the State from assuming the
debts of any local government or corporation. (An exception is made in both
cases for any debt incurred to repel invasion, suppress insurrection or defend
the State in war.)
By 14 constitutional amendments, approved from 1921 to date (the latest
adopted in 1995) Ohio voters authorized the incurrence of State debt and the
pledge of taxes or excises to its payment. At June 26, 1998, $1.06 billion
(excluding certain highway bonds payable primarily from highway use receipts) of
this debt was outstanding or awaiting delivery. The only such State debt at that
date still authorized to be incurred were portions of the highway bonds, and the
following: (a) up to $100 million of obligations for coal research and
development may be outstanding at any one time ($28.2 million outstanding); (b)
$240 million of obligations authorized for local infrastructure improvements, no
more than $120 million of which may be issued in any calendar year ($945.5
million outstanding); and (c) up to $200 million in general obligation bonds for
parks, recreation and natural resources purposes which may be outstanding at any
one time ($88.6 million outstanding, with no more than $50 million to be issued
in any one year).
The electors in 1995 approved a constitutional amendment extending the
local infrastructure bond program (authorizing an additional $1.2 billion of
State full faith and credit obligations to be issued over 10 years for the
purpose), and authorizing additional highway bonds (expected to be payable
primarily from highway use receipts). The latter supersedes the prior $500
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million outstanding authorization, and authorizes not more that $1.2 billion to
be outstanding at any time and not more than $220 million to be issued in a
fiscal year.
The Constitution also authorizes the issuance of State obligations for
certain purposes, the owners of which do not have the right to have excises or
taxes levied to pay debt service. Those special obligations include obligations
issued by the Ohio Public Facilities Commission and the Ohio Building Authority,
and certain obligations issued by the State Treasurer, over $5 billion of which
were outstanding at June 26, 1998.
The State estimates aggregate FY 1998 rental payments under various
capital lease and lease purchase agreements (as of June 26, 1998) to be
approximately $9.1 million. In recent years, State agencies have also
participated in transportation and office building projects that may have some
local as well as State use and benefit, in connection with which the State
enters into lease purchase agreements with terms ranging from 7 to 20 years.
Certificates of participation, or special obligation bonds of the State or a
local agency, are issued that represent fractionalized interests in or are
payable from the State's anticipated payments. The State estimates highest
future FY payments under those agreements (as of June 26, 1998) to be
approximately $30.7 million (of which $27.2 million is payable from sources
other than the GRF, such as federal highway money distributions). State payments
under all those agreements are subject to biennial appropriations, with the
lease terms being two years subject to renewal if appropriations are made.
A 1990 constitutional amendment authorizes greater State and political
subdivision participation (including financing) in the provision of housing. The
General Assembly may for that purpose authorize the issuance of State
obligations secured by a pledge of all or such portion as it authorizes of State
revenues or receipts (but not by a pledge of the State's full faith and credit).
A 1994 constitutional amendment pledges the full faith and credit and
taxing power of the State to meeting certain guarantees under the State's
tuition credit program which provides for purchase of tuition credits, for the
benefit of State residents, guaranteed to cover a specified amount when applied
to the cost of higher education tuition. (A 1965 constitutional provision that
authorized student loan guarantees payable from available State moneys has never
been implemented, apart from a "guarantee fund" approach funded essentially from
program revenues.)
State and local agencies issue obligations that are payable from
revenues from or relating to certain facilities (but
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not from taxes). By judicial interpretation, these obligations are not "debt"
within constitutional provisions. In general, payment obligations under
lease-purchase agreements of Ohio public agencies (in which certificates of
participation may be issued) are limited in duration to the agency's fiscal
period, and are renewable only upon appropriations being made available for the
subsequent fiscal period.
Local school districts in Ohio receive a major portion (state-wide
aggregate approximately 44% in recent years) of their operating moneys from
State subsidies, but are dependent on local property taxes, and in 119 districts
(as of June 26, 1998) from voter-authorized income taxes, for significant
portions of their budgets. Litigation, similar to that in other states, has been
pending questioning the constitutionality of Ohio's system of school funding.
The Ohio Supreme Court has concluded that aspects of the system (including basic
operating assistance and the loan program described below) are unconstitutional,
and ordered the State to provide for and fund a system complying with the Ohio
Constitution, staying its order for a year (to March 24, 1998) to permit time
for responsive corrective actions. A small number of the State's 612 local
school districts have in any year required special assistance to avoid year-end
deficits. A program has provided for school district cash need borrowing
directly from commercial lenders, with diversion of State subsidy distributions
to repayment if needed. Recent borrowings under this program totalled $41.1
million for 28 districts in FY 1994, $71.1 million for 29 districts in FY 1995
(including $29.5 million for one), and $87.2 million for 20 districts in FY 1996
(including $42.1 million for one), and $113.2 million for 12 districts in 1997
(including $90 million for restructuring prior loans to one).
Ohio's 943 incorporated cities and villages rely primarily on property
and municipal income taxes for their operations. With other subdivisions, they
also receive local government support and property tax relief moneys distributed
by the State.
For those few municipalities and school districts that on occasion have
faced significant financial problems, there are statutory procedures for a joint
State/local commission to monitor the fiscal affairs and for development of a
financial plan to eliminate deficits and cure any defaults. (Similar procedures
have recently been extended to counties and townships.) Since inception for
municipalities in 1979, these "fiscal emergency" procedures have been applied to
24 cities and villages; for 18 of them the fiscal situation was resolved and the
procedures terminated (one village and two cities are in preliminary "fiscal
watch" status). As of June 26, 1998, the 1996 school district "fiscal emergency"
provision was applied to six districts, and ten districts were on preliminary
"fiscal watch" status.
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At present the State itself does not levy ad valorem taxes on real or
tangible personal property. Those taxes are levied by political subdivisions and
other local taxing districts. The Constitution has since 1934 limited to 1% of
true value in money the amount of the aggregate levy (including a levy for
unvoted general obligations) of property taxes by all overlapping subdivisions,
without a vote of the electors or a municipal charter provision, and statutes
limit the amount of that aggregate levy to 10 mills per $1 of assessed valuation
(commonly referred to as the "ten-mill limitation"). Voted general obligations
of subdivisions are payable from property taxes that are unlimited as to amount
or rate.
NET ASSET VALUE
The Trust uses the amortized cost method to value shares in the Funds.
Pursuant to this method, a security is valued at its cost initially and
thereafter a constant amortization to maturity of any discount or premium is
assumed, regardless of the impact of fluctuating interest rates on the market
value of the security. Where it is not appropriate to value a security by the
amortized cost method, the security will be valued either by market quotations,
or by fair value as determined by the Board of Trustees. While this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price each respective
Fund would receive if it sold the security. The value of the portfolio
securities held by each respective Fund will vary inversely to changes in
prevailing interest rates. Thus, if interest rates have increased from the time
a security was purchased, such security, if sold, might be sold at a price less
than its cost. Similarly, if interest rates have declined from the time a
security was purchased, such security, if sold, might be sold at a price greater
than its purchase cost. In either instance, if the security is held to maturity,
no gain or loss will be realized.
Each Fund invests only in high-quality instruments and maintains a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per share, provided that a Fund will
neither purchase any security deemed to have a remaining maturity of more than
397 calendar days within the meaning of the 1940 Act nor maintain a
dollar-weighted average portfolio maturity which exceeds 90 days. The Trust's
Board of Trustees has established procedures pursuant to rules promulgated by
the SEC, that are intended to help stabilize the net asset value per share of
each Fund for purposes of sales and redemptions at $1.00. These procedures
include review by the Board of Trustees, at such intervals as it deems
appropriate, to determine the extent, if any, to which the net asset value per
share of each Fund
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calculated by using available market quotations deviates from $1.00 per share.
In the event such deviation exceeds one-half of one percent, the Board of
Trustees will promptly consider what action, if any, should be initiated. If the
Board of Trustees believes that the extent of any deviation from a Fund's $1.00
amortized cost price per share may result in material dilution or other unfair
results to investors or existing shareholders, it has agreed to take such steps
as it considers appropriate to eliminate or reduce, to the extent reasonably
practicable, any such dilution or unfair results. These steps may include
selling portfolio instruments prior to maturity; shortening the average
portfolio maturity; withholding or reducing dividends; redeeming shares in kind;
reducing the number of a Fund's outstanding shares without monetary
consideration; or utilizing a net asset value per share determined by using
available market quotations.
DIVIDENDS
As stated, the Trust uses its best efforts to maintain the net asset
value per share of the Funds at $1.00. As a result of a significant expense or
realized or unrealized loss incurred by the Funds, it is possible that a Fund's
net asset value per share may fall below $1.00. Should the Trust incur or
anticipate any unusual or unexpected significant expense or loss which would
affect disproportionately the income of a Fund for a particular period, the
Board of Trustees would at that time consider whether to adhere to the present
dividend policy with respect to the Funds or to revise it in order to ameliorate
to the extent possible the disproportionate effect of such expense or loss on
the income of the Fund experiencing such effect. Such expense or loss may result
in a shareholder's receiving no dividends for the period in which he holds
shares of a Fund and/or in his receiving upon redemption a price per share lower
than the price he paid.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares in the Trust are sold on a continuous basis by SEI Investments
Distribution Co. (the "Distributor"), which has agreed to use appropriate
efforts to solicit all purchase orders. The issuance of shares is recorded on
the books of the Trust. To change the commercial bank or account designated to
receive redemption proceeds, a written request must be sent to an investor's
financial institution at its principal office. Such requests must be signed by
each shareholder, with each signature guaranteed by a U.S. commercial bank or
trust company or by a member firm of a national securities exchange. Guarantees
must be signed by an authorized signatory and "Signature Guaranteed" must appear
with the signature. An investor's financial institution may request further
documentation from corporations, executors,
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administrators, trustees or guardians, and will accept other suitable
verification arrangements from foreign investors, such as consular verification.
The B Shares class for each of the Money Market and Tax Exempt Funds is
expected to commence operations on or about January 1, 1998.
The Trust may suspend the right of redemption or postpone the date of
payment for shares for more than seven days during any period when (a) trading
on the Exchange is restricted by applicable rules and regulations of the SEC;
(b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC.
As described in the Prospectus, Institutional shares of the Funds are
sold to certain qualified investors at their net asset value without a sales
charge. Retail shares of the Funds are sold to public investors at the public
offering price based on the Fund's net asset value, without a front-end load or
sales charge, as described in the Prospectus. B shares of the Money Market and
Tax Exempt Funds are available only to the holders of B shares of another Fund
who wish to exchange their B shares of such other Fund for B shares of the Money
Market and/or Tax Exempt Funds. B shares of the Funds are sold to public
investors at net asset value but are subject to a contingent deferred sales
charge which is payable upon redemption of such shares as described in the
Prospectus. There is no sales load or contingent deferred sales charge imposed
for shares acquired through the reinvestment of dividends or distributions on
such shares.
EXCHANGE PRIVILEGE
Investors may exchange all or part of their Retail or B shares as
described in the Prospectus. Any rights an Investor may have (or have waived) to
reduce the sales load applicable to an exchange, as may be provided in a Fund
Prospectus, will apply in connection with any such exchange. The exchange
privilege may be modified or terminated at any time upon 60 days' notice to
shareholders.
By use of the exchange privilege, the Investor authorizes the Trust's
Transfer Agent or his financial institution to act on telephonic or written
instructions from any person representing himself to be the shareholder and
believed by the Transfer Agent or the financial institution to be genuine. The
Investor or his financial institution must notify the Transfer Agent of his
prior ownership of Retail or B shares and account
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number. The Transfer Agent's records of such instructions are binding.
DESCRIPTION OF SHARES
The Trust is a Massachusetts business trust. The Trust's Declaration of
Trust authorizes the Board of Trustees to issue an unlimited number of shares of
beneficial interest and to classify or reclassify any unissued shares of the
Trust into one or more additional classes or series by setting or changing in
any one or more respects their respective preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption. Pursuant to such
authority, the Board of Trustees has authorized the issuance of 66 classes of
shares. Fourteen of these classes, which represent interests in the Money Market
Fund (Class A, Class A - Special Series 1 and Class A - Special Series 2),
Government Fund (Class B and Class B - Special Series 1), Treasury Fund (Class C
and Class C - Special Series 1), Tax Exempt Fund (Class D, Class D - Special
Series 1 and Class D - Special Series 2), Pennsylvania Tax Exempt Fund (Class Q
and Class Q - Special Series 1) and Ohio Municipal Fund (Class BB and Class BB -
Special Series 1) are described in this Statement of Additional Information and
the related Prospectus.
Shares have no preemptive rights and only such conversion or exchange
rights as the Board of Trustees may grant in its discretion. When issued for
payment as described in the Prospectus, the Trust's shares will be fully paid
and non-assessable. In the event of a liquidation or dissolution of the Trust
or an individual Fund, shareholders of a Fund are entitled to receive the assets
available for distribution belonging to the particular Fund, and a proportionate
distribution, based upon the relative asset values of the respective Funds, of
any general assets of the Trust not belonging to any particular Fund which are
available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter required by the
1940 Act, applicable state law, or otherwise, to be submitted to the holders of
the outstanding voting securities of an investment company such as the Trust
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each investment fund affected
by such matter. Rule 18f-2 further provides that an investment fund is affected
by a matter unless the interests of each fund in the matter are substantially
identical or the matter does not affect any interest of the fund. Under the
Rule, the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with respect to an
investment fund only if approved by a majority of the
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outstanding shares of such fund. However, the Rule also provides that the
ratification of the appointment of independent public accountants, the approval
of principal underwriting contracts, and the election of trustees may be
effectively acted upon by shareholders of the Trust voting together in the
aggregate without regard to a particular fund. In addition, shareholders of each
class in a particular investment fund have equal voting rights except that only
Institutional and Retail shares of an investment fund will be entitled to vote
on matters submitted to a vote of shareholders (if any) relating to a
distribution plan for such shares, and only B shares of a fund will be entitled
to vote on matters relating to a distribution plan with respect to B shares.
Although the following types of transactions are normally subject to
shareholder approval, the Board of Trustees may, under certain limited
circumstances, (a) sell and convey the assets of an investment fund to another
management investment company for consideration which may include securities
issued by the purchaser and, in connection therewith, to cause all outstanding
shares of such fund involved to be redeemed at a price which is equal to their
net asset value and which may be paid in cash or by distribution of the
securities or other consideration received from the sale and conveyance; (b)
sell and convert an investment fund's assets into money and, in connection
therewith, to cause all outstanding shares of such fund involved to be redeemed
at their net asset value; or (c) combine the assets belonging to an investment
fund with the assets belonging to another investment fund of the Trust, if the
Board of Trustees reasonably determines that such combination will not have a
material adverse effect on shareholders of any fund participating in such
combination, and, in connection therewith, to cause all outstanding shares of
any fund to be redeemed at their net asset value or converted into shares of
another class of the Trust shares at net asset value. In the event that shares
are redeemed in cash at their net asset value, a shareholder may receive in
payment for such shares an amount that is more or less than his original
investment due to changes in the market prices of the fund's securities. The
exercise of such authority by the Board of Trustees will be subject to the
provisions of the 1940 Act, and the Board of Trustees will not take any action
described in this paragraph unless the proposed action has been disclosed in
writing to the fund's shareholders at least 30 days prior thereto.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations
generally affecting the Trust and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Trust or its shareholders or possible legislative changes, and
the
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<PAGE> 96
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax adviser with
specific reference to their own tax situation.
GENERAL
Each Fund of the Trust will be treated as a separate corporate entity
under the Code and intends to qualify as a regulated investment company.
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<PAGE> 97
A 4% non-deductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each Fund intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any capital gain net
income each calendar year to avoid liability for this excise tax.
If for any taxable year a Fund does not qualify for federal tax treatment as a
regulated investment company, all of such Fund's taxable income will be subject
to federal income tax at regular corporate rates without any deduction for
distributions to its shareholders. In such event, dividend distributions
(including amounts derived from interest on Municipal Securities with respect to
the Tax Exempt, Pennsylvania Tax Exempt and Ohio Municipal Funds) would be
taxable as ordinary income to the Fund's shareholders to the extent of the
Fund's current and accumulated earnings and profits, and would be eligible for
the dividends received deduction for corporations.
Each Fund may be required in certain cases to withhold and remit to the
U.S. Treasury 31% of taxable dividends or gross proceeds realized upon sale paid
to shareholders who have failed to provide a correct tax identification number
in the manner required, or who are subject to withholding by the Internal
Revenue Service for failure to properly include on their return payments of
taxable interest or dividends, or who have failed to certify to the Fund that
they are not subject to backup withholding when required to do so or that they
are "exempt recipients."
Depending upon the extent of a Fund's activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located or in which it is otherwise deemed to be
conducting business, such Fund may be subject to the tax laws of such states or
localities. In addition, in those states and localities which have income tax
laws, the treatment of a Fund and its shareholders under such laws may differ
from their treatment under federal income tax laws. Under state or local law,
distributions of net investment income may be taxable to shareholders as
dividend income even though a substantial portion of such distributions may be
derived from interest on U.S. Government obligations which, if realized
directly, would be exempt from such income taxes. Shareholders are advised to
consult their tax advisers concerning the application of state and local taxes.
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TAX EXEMPT FUND, PENNSYLVANIA TAX EXEMPT FUND AND OHIO MUNICIPAL FUND
As described above and in the Prospectus, the Tax Exempt, Pennsylvania
Tax Exempt and Ohio Municipal Funds are designed to provide investors with
tax-exempt interest income. The Funds are not intended to constitute a balanced
investment program and are not designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Funds would not be suitable for tax-exempt institutions
and may not be suitable for retirement plans qualified under Section 401 of the
Code, H.R. 10 plans and IRAs since such plans and accounts are generally
tax-exempt and, therefore, would not gain any additional benefit from the Funds'
dividends being tax-exempt.
The policy of the Tax Exempt, Pennsylvania Tax Exempt and Ohio
Municipal Funds is to pay each year as federal exempt-interest dividends
substantially all the Funds' Municipal Securities interest income net of certain
deductions. In order for the Funds to pay federal exempt-interest dividends with
respect to any taxable year, at the close of each taxable quarter at least 50%
of the aggregate value of their respective portfolios must consist of tax-exempt
obligations. An exempt-interest dividend is any dividend or part thereof (other
than a capital gain dividend) paid by a Fund and designated as an
exempt-interest dividend in a written notice mailed to shareholders not later
than 60 days after the close of the Fund's taxable year. However, the aggregate
amount of dividends so designated by the Funds cannot exceed the excess of the
amount of interest exempt from tax under Section 103 of the Code received by the
Funds during the taxable year over any amounts disallowed as deductions under
Sections 265 and 171(a)(2) of the Code. The percentage of total dividends paid
by the Funds with respect to any taxable year which qualifies as federal exempt-
interest dividends will be the same for all shareholders receiving dividends
from the Funds with respect to such year.
The Tax Exempt, Pennsylvania Tax Exempt and Ohio Municipal Funds do not
expect to realize long-term capital gains and, therefore, do not expect to
distribute any capital gain dividends.
Shareholders are advised to consult their tax advisers with respect to
whether exempt-interest dividends would retain the exclusion under Section
103(a) if the shareholder would be treated as a "substantial user" or a "related
person" to such user with respect to facilities financed through any of the
tax-exempt obligations held by the Tax Exempt, Pennsylvania Tax Exempt and Ohio
Municipal Funds. A "substantial user" is defined under U.S. Treasury Regulations
to include a non-exempt person who regularly uses a part of such facilities in
his trade or business and whose
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gross revenues derived with respect to the facilities financed by the issuance
of bonds are more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. A "related person" includes certain related natural
persons, affiliated corporations, partners and partnerships, and S corporations
and their shareholders.
Interest on indebtedness incurred by a shareholder to purchase or carry
Tax Exempt, Pennsylvania Tax Exempt and Ohio Municipal Fund shares is not
deductible for federal income tax purposes if the Funds distribute
exempt-interest dividends during the shareholder's taxable year. In addition, if
a shareholder holds Fund shares for six months or less, any loss on the sale or
exchange of those shares will be disallowed to the extent of the amount of
exempt-interest dividends received with respect to the shares. The Treasury
Department, however, is authorized to issue regulations reducing the six months
holding requirement to a period of not less than the greater of 31 days or the
period between regular dividend distributions where the investment company
regularly distributes at least 90% of its net tax-exempt interest. No such
regulations had been issued as of the date of this Statement of Additional
Information.
TRUSTEES AND OFFICERS
The trustees and executive officers of the Trust, their addresses,
principal occupations during the past five years, and other affiliations are as
follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert D. Neary Chairman of the Board Retired Co-Chairman of
32980 Creekside Drive and Trustee Ernst & Young, April 1984
Pepper Pike, OH 44124 to September 1993;
Age 64 Director, Cold Metal
Products, Inc., since
March 1994; Director, Zurn
Industries, Inc. (building
products and construction
services), June 1995 to
June 1998.
</TABLE>
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<PAGE> 100
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Herbert R. Martens, Jr.* President and Trustee Executive Vice President,
c/o NatCity Investments, Inc. National City Corporation
1965 East Sixth Street (bank holding company),
Cleveland, OH 44114 since July 1997; Chairman,
Age 45 President and Chief
Executive Officer, NatCity
Investments, Inc.
(investment banking),
since July 1995; President
and Chief Executive
Officer, Raffensberger,
Hughes & Co. (broker-
dealer), from 1993 until
1995; President, Reserve
Capital Group, from 1990
until 1993.
Leigh Carter* Trustee Retired President and
13901 Shaker Blvd., #6B Chief Operating Officer,
Cleveland, OH 44120 B.F. Goodrich Company,
Age 72 August 1986 to September
1990; Director, Adams
Express Company (closed-
end investment company),
April 1982 to December
1997; Director, Acromed
Corporation (producer of
spinal implants), June
1992 to March 1998;
Director, Petroleum &
Resources Corp., April
1987 to December 1997;
Director, Morrison
Products (manufacturer of
blower fans and air moving
equipment), since April
1983; Director, Kirtland
Capital Corp. (privately
funded investment group),
since January 1992.
John F. Durkott Trustee President and Chief
8600 Allisonville Road Operating Officer,
Indianapolis, IN 46250 Kittle's Home Furnishings
Age 54 Center, Inc., since
January 1982; partner,
Kittles Bloomington
Property Company, since
January 1981; partner,
KK&D (Affiliated Real
Estate Companies of
Kittle's Home Furnishings
Center), since January
1989.
</TABLE>
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<PAGE> 101
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert J. Farling Trustee Retired Chairman,
1608 Balmoral Way President and Chief
Westlake, OH 44145 Executive Officer,
Age 61 Centerior Energy (electric
utility), March 1992 to
October 1997; Director,
National City Bank, until
October 1997; Director,
Republic Engineered
Steels, since October
1997.
Richard W. Furst, Dean Trustee Professor of Finance and
600 Autumn Lane Dean, Carol Martin Gatton
Lexington, KY 40502 College of Business and
Age 59 Economics, University of
Kentucky, since 1981;
Director, The Seed
Corporation (restaurant
group), since 1990;
Director, Foam Design,
Inc. (manufacturer of
industrial and commercial
foam products), since
1993.
Gerald L. Gherlein Trustee Executive Vice-President
3679 Greenwood Drive and General Counsel, Eaton
Pepper Pike, OH 44124 Corporation, since 1991
Age 60 (global manufacturing);
Trustee, Meridia Health
System (four hospital
health system); Trustee,
WVIZ Educational
Television (public
television).
J. William Pullen Trustee President and Chief
Whayne Supply Company Executive Officer, Whayne
1400 Cecil Avenue Supply Co. (engine and
P.O. Box 35900 heavy equipment
Louisville, KY 40232-5900 distribution), since 1986;
Age 59 President and Chief
Executive Officer,
American Contractors
Rentals & Sales (rental
subsidiary of Whayne
Supply Co.), since 1988.
</TABLE>
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<PAGE> 102
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
POSITION WITH DURING PAST 5 YEARS
NAME AND ADDRESS THE TRUST AND OTHER AFFILIATIONS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
W. Bruce McConnel, III Secretary Partner of the law firm
Philadelphia National Drinker Biddle & Reath
Bank Building LLP, Philadelphia,
1345 Chestnut Street Pennsylvania
Suite 1100
Philadelphia, PA 19107
Age 55
Carol L. Rooney Treasurer Director of SEI Fund
c/o SEI Fund Resources Resources since 1992.
One Freedom Valley Road
Oaks, PA 19456
Age 34
Kathryn L. Stanton Assistant Treasurer Vice President and
c/o SEI Fund Resources Assistant Secretary of SEI
One Freedom Valley Road Fund Resources and SEI
Oaks, PA 19456 Investments Distribution
Age 39 Co. since 1994; Associate,
Morgan Lewis & Bockius LLP
(law firm).
</TABLE>
- --------------------
* Messrs. Carter and Martens are considered by the Trust to be "interested
persons" of the Trust as defined in the 1940 Act.
Herbert R. Martens, Jr. is employed by National City Corporation, the
parent corporation to National City Bank, which receives fees as investment
adviser to the Trust. Mmes. Rooney and Stanton are employed by SEI Fund
Resources, which receives fees as Administrator to the Trust. Ms. Stanton is
also employed by SEI Investments Distribution Co., which receives fees as
Distributor to the Trust. Mr. McConnel is a partner of the law firm, Drinker
Biddle & Reath LLP, which receives fees as counsel to the Trust.
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<PAGE> 103
Each trustee receives an annual fee of $12,500 plus $3,000 for each
Board meeting attended and reimbursement of expenses incurred in attending
meetings. The Chairman of the Board is entitled to receive an additional $5,000
per annum for services in such capacity. For the year ended May 31, 1997, the
Trust's trustees and officers as a group received aggregate fees of $125,000.
The trustees and officers of the Trust own less than 1% of the shares of the
Trust.
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<PAGE> 104
The following table summarizes the compensation for each of the
Trustees of the Trust for the fiscal year ended May 31, 1997:
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Accrued Compensation
Aggregate as Part of Estimated from the Trust
Name of Compensation the Trust's Approval Benefits and Fund
Person, Position from the Trust Expenses Upon Retirement Complex*
<S> <C> <C> <C> <C>
Robert D. Neary, $18,750 $0 $0 $18,750(3)****
Chairman and Trustee
Thomas R. Benua, Jr., $17,500 $0 $0 $17,500(3)****
Trustee**
Leigh Carter, Trustee $17,500 $0 $0 $17,500(3)****
John F. Durkott, Trustee $17,500 $0 $0 $17,500(3)****
Robert J. Farling, Trustee *** *** *** ***
Richard W. Furst, Trustee $17,500 $0 $0 $17,500(3)****
Gerald L. Gherlein, Trustee *** *** *** ***
Herbert R. Martens, Jr., *** *** *** ***
President and Trustee
J. William Pullen, Trustee $17,500 $0 $0 $17,500(3)****
Richard B. Tullis, Trustee** $18,750 $0 $0 $18,750(3)****
</TABLE>
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a business trust may,
under certain circumstances, be held personally liable as partners for
the obligations of the trust. However, the Trust's Declaration of Trust
provides that shareholders shall not be subject to any personal
liability for the acts or obligations of the Trust, and that every note,
- --------
* The "Fund Complex" consists of Armada Funds, The Parkstone Group of
Funds and The Parkstone Advantage Funds.
** Messrs. Benua and Tullis resigned as Trustees effective July 17,
1997 and November 19, 1997, respectively.
*** Messrs. Farling, Gherlein and Martens were not Trustees of the Trust
during the fiscal year ended May 31, 1997.
**** Number of investment companies in the Fund Complex for which trustee
served as trustee.
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<PAGE> 105
bond, contract, order, or other undertaking made by the Trust shall contain a
provision to the effect that the shareholders are not personally liable
thereunder. The Declaration of Trust provides for indemnification out of the
trust property of any shareholder held personally liable solely by reason of his
being or having been a shareholder and not because of his acts or omissions or
some other reason. The Declaration of Trust also provides that the Trust shall,
upon request, assume the defense of any claim made against any shareholder for
any act or obligation of the Trust, and shall satisfy any judgment thereon.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations.
The Declaration of Trust states further that no trustee, officer, or
agent of the Trust shall be personally liable for or on account of any contract,
debt, tort, claim, damage, judgment or decree arising out of or connected with
the administration or preservation of the trust estate or the conduct of any
business of the Trust; nor shall any trustee be personally liable to any person
for any action or failure to act except by reason of his own bad faith, willful
misfeasance, gross negligence, or reckless disregard of his duties as trustee.
The Declaration of Trust also provides that all persons having any claim against
the trustees or the Trust shall look solely to the trust property for payment.
With the exceptions stated, the Declaration of Trust provides that a trustee is
entitled to be indemnified against all liabilities and expense, reasonably
incurred by him in connection with the defense or disposition of any proceeding
in which he may be involved or with which he may be threatened by reason of his
being or having been a trustee, and that the trustees, have the power, but not
the duty, to indemnify officers and employees of the Trust unless any such
person would not be entitled to indemnification had he been a trustee.
ADVISORY, ADMINISTRATION, DISTRIBUTION, CUSTODIAN
SERVICES AND TRANSFER AGENCY AGREEMENTS
ADVISORY AGREEMENTS
National City serves as investment adviser to the Funds. Prior to
November 19, 1997, National City, National City Bank of Columbus and National
City Bank of Kentucky served as investment adviser to the Money Market,
Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt Funds (together,
the "three Advisers"). The three Advisers are affiliates of National City
Corporation, a bank holding company with over $75 billion in assets, and
headquarters in Cleveland, Ohio and over 1,000 branch offices in six states.
Through its subsidiaries, National City Corporation has been managing
investments for individuals, pension
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and profit-sharing plans and other institutional investors for over 75 years and
currently manages over $45 billion in assets. From time to time, the Adviser may
voluntarily waive fees or reimburse the Trust for expenses.
Pursuant to the Trust's then current advisory agreement, the Trust
incurred advisory fees in the following amounts for the fiscal years ended May
31, 1997, 1996 and 1995: (i) $5,067,456 (after waivers of $2,026,982),
$3,686,919 (after waivers of $1,473,398) and $2,827,383 (after waivers of
$1,128,026), respectively, for the Money Market Fund; (ii) $2,415,282 (after
waivers of $966,112), $1,654,730 (after waivers of $661,292) and $1,766,159
(after waivers of $706,463), respectively, for the Government Fund, and (iii)
$573,529 (after waivers of $764,704), $444,402 (after waivers of $592,531) and
$307,159 (after waivers of $410,198), respectively, for the Tax Exempt Fund.
Advisory fees in the amounts of $794,834 (after waivers of $158,966), $527,698
(after waivers of $105,510) and $313,967 (after waivers of $62,648) were
incurred for the fiscal year ended May 31, 1997, 1996 and for the period from
June 16, 1994 (commencement of operations) through May 31, 1995 with respect to
the Treasury Fund.
For the period from September 9, 1996 (date of reorganization of the
Predecessor Fund) until May 31, 1997, National City, the Adviser of the
Pennsylvania Tax Exempt Fund, earned advisory fees of $224,379 and waived fees
in the amount of $140,237 with respect to that Fund. For the period from June 1,
1996 until September 9, 1996, for the one- month period ended May 31, 1996, for
the fiscal year ended April 30, 1996 and for the period from August 8, 1994
(commencement of operations) through April 30, 1995, Integra Trust Company
("Integra"), the investment adviser to the Predecessor Fund, earned advisory
fees of $85,768, $26,907, $310,912 and $76,582, respectively, and Integra waived
fees in the amount of $51,068, $9,868, $110,272 and $84,075, respectively.
National City serves as investment adviser to the Money Market,
Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt Funds under an
Advisory Agreement dated November 19, 1997 and as investment adviser to the Ohio
Municipal Fund pursuant to an Advisory Agreement dated April 9, 1998. Each of
the Advisory Agreements provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of the Advisory Agreements, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Adviser in the performance of its
duties or from reckless disregard by them of their duties and obligations
thereunder. In addition, National City has undertaken in the Advisory Agreements
to maintain its policy and practice of conducting its Trust Department
independently of its Commercial Departments.
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<PAGE> 107
The Advisory Agreement relating to the Money Market, Government,
Treasury, Tax Exempt and Pennsylvania Tax Exempt Funds was approved by the
shareholders of each Fund on November 19, 1997. The Advisory Agreement with
National City relating to the Ohio Municipal Fund was approved by the sole
shareholder of the Fund as of the day prior to the day it commenced operations.
Unless sooner terminated, the Advisory Agreement relating to the Money Market,
Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt Funds will continue
in effect with respect to a particular Fund to which it relates until September
30, 1998, and the Advisory Agreement with National City relating to the Ohio
Municipal Fund will continue in effect with respect to the Ohio Municipal Fund
until September 30, 1999, and from year to year thereafter, subject to annual
approval by the Trust's Board of Trustees, or by a vote of a majority of the
outstanding shares of such Fund (as defined in the Funds' Prospectus) and a
majority of the trustees who are not parties to the Agreement or interested
persons (as defined in the 1940 Act) of any party by votes cast in person at a
meeting called for such purpose. The Advisory Agreements may be terminated by
the Trust or the Adviser on 60 days written notice, and will terminate
immediately in the event of
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<PAGE> 108
their assignment.
ADMINISTRATION AGREEMENT AND SUB-ADMINISTRATION
The Trust and SEI Fund Resources (the "Administrator") have entered
into an administration agreement (the "Administration Agreement") effective May
1, 1998.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Trust in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or negligence on the part of the Administrator in the performance of its duties
or from reckless disregard by it of its duties and obligations thereunder.
The Administrator, a Delaware business trust, has its principal
business offices at Oaks, Pennsylvania 19456. SEI Investments Management
Corporation ("SIMC"), a wholly-owned subsidiary of SEI Investments Company ("SEI
Investments"), is the owner of all beneficial interests in the Administrator.
SEI Investments and its affiliates, including the Administrator, are leading
providers of funds evaluation services, trust accounting systems, and brokerage
and information services to financial institutions, institutional investors, and
money managers. The Administrator and its affiliates also serve as administrator
or sub-administrator to the following other mutual funds: The Achievement Funds
Trust, The Advisors' Inner Circle Fund, The Arbor Fund, ARK Funds, Bishop Street
Funds, Boy 1784 Funds(R), CoreFunds, Inc., CUFUND, The Expedition Funds, FMB
Funds, Inc., First American Funds, Inc., First American Investment Funds, Inc.,
First American Strategy Funds, Inc., HighMark Funds, Marquis Funds(R), Monitor
Funds, Morgan Grenfell Investment Trust, Oak Associates Funds, The PBHG Funds,
Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds, Santa Barbara Group of
Mutual Funds, Inc., SEI Asset Allocation Trust, SEI Daily Income Trust, SEI
Index Funds, SEI Institutional Investments Trust, SEI Institutional Managed
Trust, SEI International Trust, SEI Liquid Asset
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<PAGE> 109
Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, TIP
Funds and TIP Institutional Funds.
The Administrator is entitled to receive with respect to the Funds, an
administrative fee, computed daily and paid monthly, at an annual rate of .07%
of the aggregate average daily net assets of all of the investment funds of
Armada up to the first eighteen (18) billion dollars in assets, and .06% of the
aggregate average daily net assets of over eighteen (18) billion dollars in
assets, and is entitled to be reimbursed for its out-of-pocket expenses incurred
on behalf of the Funds.
Prior to May 1, 1998, PFPC served as the administrator and accounting
agent to the Funds. Pursuant to the Administration and Accounting Services
Agreement, the Trust incurred the following fees to PFPC for the fiscal years
ended May 31, 1997, 1996 and 1995: (i) $502,464, $421,493, $322,722,
respectively, for the Money Market Fund; (ii) $239,708, $187,373 and $210,983,
respectively, for the Government Fund; and (iii) $170,489, $145,303 and
$102,395, respectively, for the Tax Exempt Fund. Administration fees in the
amounts of $79,005, $37,703 and $59,255 were incurred for the fiscal years ended
May 31, 1997, 1996 and for the period from June 16, 1994 (commencement of
operations) through May 31, 1995 with respect to the Treasury Fund.
For the period from September 9, 1996 (date of reorganization of the
Predecessor Fund) until May 31, 1997, PFPC earned administration fees of $24,530
with respect to the Pennsylvania Tax Exempt Fund. For the period from June 1,
1996 until September 9, 1996, for the one-month period ended May 31, 1996, for
the fiscal year ended April 30, 1996 and for the period from August 8, 1994
(commencement of operations) through April 30, 1995, SEI Financial Management
Corporation, a wholly-owned subsidiary of SEI Corporation, served as
administrator to the Predecessor Fund and earned the following fees: $28,589;
$8,969; $103,634; and $53,552, respectively.
National City Bank serves as sub-administrator for each Fund and
provides certain services as may be requested by the Administrator from time to
time. For its services as Sub-Administrator, National City Bank receives, from
the Administrator, pursuant to its Sub-Administration Agreement with the
Administrator, a fee, computed daily and paid monthly, at the annual rate of
.01% of the aggregate average daily net assets of all of the investment funds of
Armada up to the first $ 15 billion, and .015% of the aggregate average daily
net assets over $15 billion.
DISTRIBUTION PLANS AND RELATED AGREEMENT
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<PAGE> 110
The Distributor acts as distributor of the Funds' shares pursuant to
its Distribution Agreements with the Trust as described in the Prospectus.
Shares are sold on a continuous basis.
Pursuant to Rule 12b-1 of the 1940 Act, the Trust has adopted a Service
and Distribution Plan for Retail and Institutional shares (the "Retail and
Institutional Shares Plan") and a B Shares Distribution and Servicing Plan ("B
Shares Plan," and, collectively, the "Distribution Plans") which permit the
Trust to bear certain expenses in connection with the distribution of
Institutional and Retail shares, or B shares, respectively. As required by Rule
12b-1, the Trust's Distribution Plans and the related Distribution Agreements
have been approved, and are subject to annual approval by a majority of the
Trust's Board of Trustees, and by a majority of the trustees who are not
interested persons of the Trust and have no direct or indirect interest in the
operation of the Distribution Plans or any agreement relating to the
Distribution Plans, by vote cast in person at a meeting called for the purpose
of voting on the Distribution Plans and related agreements. In compliance with
the Rule, the trustees requested and evaluated information they thought
necessary to an informed determination of whether the Distribution Plans and
related agreements should be implemented, and concluded, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that the Distribution Plans and related agreements
will benefit the Trust and its shareholders.
Rule 12b-1 also requires that persons authorized to direct the
disposition of monies payable by a fund (in the Trust's case, the
Distributor) provide for the trustees' review of quarterly reports on
the amounts expended and the purposes for the expenditures.
Any change in a Distribution Plan that would materially increase the
distribution expenses of a class would require approval by the shareholders of
such class, but otherwise, such Distribution Plan may be amended by the
trustees, including a majority of the disinterested trustees who do not have any
direct or indirect financial interest in the particular Plan or related
agreement. The Distribution Plans and related agreement may be terminated as to
a particular Fund or class by a vote of the Trust's disinterested trustees or by
vote of the shareholders of the Fund or class in question, on not more than 60
days written notice. The selection and nomination of disinterested trustees has
been committed to the discretion of such disinterested trustees as required by
the Rule.
The Retail and Institutional Shares Plan provides that each fund will
reimburse the Distributor for distribution expenses related to the distribution
of Retail and Institutional shares in an amount not to exceed .10% per annum of
the average aggregate net assets of such shares. The Retail and Institutional
Plan
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provides that the Trust will pay the Distributor an annual base fee of
$__________ plus incentive fees based upon asset growth payable monthly and
accrued daily by all of the Trust's investment funds with respect to the
Institutional and Retail shares. The B Shares Plan provides that each B share
class will compensate the Distributor for distribution of B shares in an amount
not to exceed .75% of the average net assets of such class. Distribution
expenses reimbursable by the Distributor pursuant to each Distribution Plan
include direct and indirect costs and expenses incurred in connection with
advertising and marketing a fund's shares, and direct and indirect costs and
expenses of preparing, printing and distribution of its prospectuses to other
than current shareholders.
The Distribution Plans have been approved by the Board of Trustees, and
will continue in effect for successive one year periods provided that such
continuance is specifically approved by (1) the vote of a majority of the
trustees who are not parties to either Plan or interested persons of any such
party and who have no direct or indirect financial interest in either Plan and
(2) the vote of a majority of the entire Board of Trustees.
For the period from March 10, 1997 to May 31, 1997, the Trust paid the
Distributor $121,188 with respect to the Money Market Fund, $51,393 with respect
to the Government Fund, $14,929 with respect to the Treasury Fund, and $23,431
with respect to the Tax Exempt Fund under the Retail and Institutional Shares
Plan. Of the aggregate amounts paid to the Distributor by the Trust with respect
to the Money Market Fund, $36,356 was attributable to distribution services and
$84,832 was attributable to marketing/consultation. Of the aggregate amount paid
to the Distributor by the Trust with respect to the Government Fund, $15,418 was
attributable to distribution services and $35,975 was attributable to
marketing/consultation. Of the aggregate amounts paid to the Distributor by the
Trust with respect to the Treasury Fund, $4,479 was attributable to distribution
services and $10,450 was attributable to marketing/consultation. Of the
aggregate amounts paid to the Distributor by the Trust with respect to the
Tax-Exempt Fund, $7,030 was attributable to distribution services and $16,401
was attributable to marketing/consultation. Distribution services include
broker/dealer and investor support, voice response development, wholesaling
services, legal review and NASD filings and transfer agency management.
Marketing/Consultation includes planning and development, market and industry
research and analysis and marketing strategy and planning.
For the period from June 1, 1996 through March 7, 1997, the Trust paid
440 Financial Distributors, Inc. ("440 Financial") $545,381 with respect to the
Money Market Fund, $265,479 with respect to the Government Fund, $97,651 with
respect to the Treasury Fund, and $103,376 with respect to the Tax Exempt Fund
under the Retail and Institutional Shares Plan.
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<PAGE> 112
For the period from March 10, 1997 to May 31, 1997, the Trust paid the
Distributor $4,325 with respect to the Pennsylvania Tax Exempt Fund under the
Retail and Institutional Shares Plan. Of the aggregate amounts paid to the
Distributor by the Trust with respect to the Pennsylvania Tax Exempt Fund,
$1,297 was attributable to distribution services and $3,028 was attributable to
marketing/consultation. Distribution services include broker/dealer and investor
support voice response development, wholesaling services, legal review and NASD
filings and transfer agency management. Marketing/Consultation includes planning
and development, market and industry research and analysis and marketing
strategy and planning. For the period from September 9, 1996 (date of
reorganization of the Predecessor Fund) through March 7, 1997, the Trust paid
440 Financial $11,576 with respect to the Pennsylvania Tax Exempt Fund under the
Retail and Institutional Shares Plan.
Class A Shares of the Predecessor Fund were subject to a Plan adopted
pursuant to rule 12b-1 under the 1940 Act (the "Plan"). The Plan provided for
reimbursement to the Predecessor Fund's distributor, SEI Investments
Distribution Co., of the Predecessor Fund's distribution expenses, including (1)
the cost of prospectuses, reports to shareholders, sales literature and other
materials for potential investors; (2) advertising; (3) expenses incurred in
connection with the promotion and sale of Inventor's shares including the
distributor's expenses for travel, communication, compensation and benefits for
sales personnel; and (4) any other expenses reasonably incurred in connection
with the distribution and marketing of Class A shares subject to approval by a
majority of disinterested directors of Inventor. For the period from June 1,
1996 until September 9, 1996, the distributor of the Predecessor Fund received
$0 from the fund (after waivers of $47,649).
CUSTODIAN SERVICES AND TRANSFER AGENCY AGREEMENTS
National City Bank serves as the Trust's custodian with respect to the
Funds. Under its Custodian Services Agreement, National City Bank has agreed to:
(i) maintain a separate account or accounts in the name of each Fund; (ii) hold
and disburse portfolio securities on account of each Fund; (iii) collect and
make disbursements of money on behalf of each Fund; (iv) collect and receive all
income and other payments and distributions on account of each Fund's portfolio
securities; (v) respond to correspondence by security brokers and others
relating to its duties; and (vi) make periodic reports to the Board of Trustees
concerning the Funds' operations. National City Bank is authorized to select one
or more banks or trust companies to serve as sub-custodian on behalf of the
Funds, provided that it shall remain responsible for the performance of all of
its duties under the Custodian Services Agreement and shall hold the Funds
harmless from the acts and omissions of any bank or trust company serving as
sub-custodian. The Funds reimburse National City Bank for its direct and
indirect costs and expenses incurred in rendering custodial services, except
that the costs and expenses borne by each Fund in any year may not exceed $.225
for each $1,000 of average gross assets of such Fund.
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<PAGE> 113
State Street Bank and Trust Company (the "Transfer Agent") serves as
the Trust's transfer agent and dividend disbursing agent with respect to the
Funds. Under its Transfer Agency Agreement, it has agreed to: (i) issue and
redeem shares of each Fund; (ii) transmit all communications by each Fund to its
shareholders of record, including reports to shareholders, dividend and
distribution notices and proxy materials for meetings of shareholders; (iii)
respond to correspondence by security brokers and others relating to its duties;
(iv) maintain shareholder accounts; and (v) make periodic reports to the Board
of Trustees concerning the Funds' operations. The Transfer Agent sends each
shareholder of record a monthly statement showing the total number of shares
owned as of the last business day of the month (as well as the dividends paid
during the current month and year), and provides each shareholder of record with
a daily transaction report for each day on which a transaction occurs in the
shareholder's account with each Fund.
SHAREHOLDER SERVICES PLANS
As stated in the Prospectus, the Trust has implemented the Shareholder
Services Plan for each Fund's Retail shares and the B Shares Plan for each Fund
offering B shares. Pursuant to these plans, the Trust may enter into agreements
with financial institutions pertaining to the provision of administrative
services to their customers who are the beneficial owners of Retail shares or B
shares in consideration for the payment of up to .15% (on an annualized basis)
of the net asset value of such shares. Such services may include: (i)
aggregating and processing purchase and redemption requests from customers; (ii)
providing customers with a service that invests the assets of their accounts in
Retail or B shares; (iii) processing dividend payments from the Fund; (iv)
providing information periodically to customers showing their position in Retail
or B shares; (v) arranging for bank wires; (vi) responding to customer inquiries
relating to the services performed with respect to Retail or B shares
beneficially owned by customers; (vii) forwarding shareholder communications;
and (viii) other similar services requested by the Trust. Agreements between the
Trust and financial institutions will be terminable at any time by the Trust
without penalty.
PORTFOLIO TRANSACTIONS
Pursuant to its Advisory Agreements with the Trust, National City is
responsible for making decisions with respect to and placing orders for all
purchases and sales of portfolio securities for the Funds. The Adviser purchases
portfolio securities either directly from the issuer or from an underwriter or
dealer making a market in the securities involved. Purchases from an underwriter
of portfolio securities include a commission or concession paid by the issuer to
the underwriter and purchases from dealers serving as market makers may include
the spread
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<PAGE> 114
between the bid and asked price. Transactions on stock exchanges involve the
payment of negotiated brokerage commissions. There is generally no stated
commission in the case of securities traded in the over-the-counter market, but
the price includes an undisclosed commission or mark-up.
While the Adviser generally seeks competitive spreads or commissions,
it may not necessarily allocate each transaction to the underwriter or dealer
charging the lowest spread or commission available on the transaction.
Allocation of transactions, including their frequency, to various dealers is
determined by the Adviser in its best judgment and in a manner deemed fair and
reasonable to shareholders. Under the current Advisory Agreements, pursuant to
Section 28(e) of the Securities Exchange Act of 1934, as amended, the Adviser is
authorized to negotiate and pay higher brokerage commissions in exchange for
research services rendered by broker-dealers. Subject to this consideration,
broker-dealers who provide supplemental investment research to the Adviser may
receive orders for transactions by a Fund. Information so received is in
addition to and not in lieu of services required to be performed by the Adviser
and does not reduce the fees payable to the Adviser by the Funds. Such
information may be useful to the Adviser in serving both the Trust and other
clients, and, similarly, supplemental information obtained by the placement of
business of other clients may be useful to the Adviser in carrying out its
obligations to the Trust.
Portfolio securities will not be purchased from or sold to the Trust's
adviser, Distributor, or any "affiliated person" (as such term is defined under
the 1940 Act) of any of them acting as principal, except to the extent permitted
by the SEC. In addition, the Funds will not give preference to the Adviser's
correspondents, with respect to such transactions, securities, savings deposits,
repurchase agreements and reverse repurchase agreements.
While serving as Adviser to the Funds, National City has agreed to
maintain its policy and practice of conducting its Trust Department
independently of its Commercial Department. In making investment recommendations
for the Trust, Trust Department personnel will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale for
the Trust's account are customers of the Commercial Department. In dealing with
commercial customers, the Commercial Department will not inquire or take into
consideration whether securities of those customers are held by the Trust.
Portfolio securities will not be purchased from or sold to the Trust's
Adviser, the Distributor, or any "affiliated person" (as such term is defined
under the 1940 Act) of any of them acting as principal, except to the extent
permitted by the SEC. In addition, the Trust will not give preference to its
Adviser's
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correspondents with respect to such transactions, securities, savings
deposits, repurchase agreements and reverse repurchase agreements. Under certain
circumstances, the Trust may be at a disadvantage because of these limitations
compared with the portfolios of other investment companies with similar
objectives that are not subject to such limitations.
The Trust is required to identify any securities of its "regular
brokers or dealers" that it has acquired during its most recent fiscal year. At
May 31, 1997, (a) the Money Market Fund had entered into repurchase transactions
with: First Boston in the amount of $90,000,000 to be repurchased on June 2,
1997 at $90,042,150 and with Prudential-Bache Securities in the amount of
$45,000,000 to be repurchased on June 2, 1997 at $45,020,963; (b) the Government
Fund had entered into repurchase transactions with First Boston in the amount of
$159,000,000 to be repurchased on June 2, 1997 at $159,074,465.
Investment decisions for each Fund are made independently from those
for the other Funds and for other investment companies and accounts advised or
managed by the Adviser. Such other Funds, investment companies and accounts may
also invest in the same securities as such Fund. When a purchase or sale of the
same security is made at substantially the same time on behalf of a Fund and
another investment company or account, the transaction will be averaged as to
price, and available investments allocated as to amount, in a manner which the
Adviser believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by a Fund or the size of the position obtained or
sold by such Fund. In connection therewith, and to the extent permitted by law
and by the current Advisory Agreement, the Adviser may aggregate the securities
to be sold or purchased for a Fund with those to be sold or purchased for other
investment companies or advisory clients.
AUDITORS
Ernst & Young LLP, independent auditors, with offices at Two Commerce
Square, 2001 Market Street, Suite 4000, Philadelphia, Pennsylvania 19103, serve
as independent auditors of the Trust. The financial statements, as of and for
the period ended May 31, 1997, for the Money Market, Government, Treasury, Tax
Exempt and Pennsylvania Tax Exempt Funds, which are incorporated by reference in
this Statement of Additional Information, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report referred to under
"Financial Statements," and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
The financial statements for periods or years prior to May 31, 1997
with respect to the Predecessor Fund, which are incorporated by
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reference in this Statement of Additional Information, were audited by Coopers &
Lybrand, L.L.P., independent accountants for the Predecessor Fund, whose report
dated July 26, 1996, expressed an unqualified opinion on such financial
statements, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
COUNSEL
Drinker Biddle & Reath LLP (of which Mr. McConnel, Secretary of the
Trust, is a partner), with offices at 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107, are counsel to the Trust and will pass upon the legality of
the shares offered hereby.
STANDARDIZED YIELD QUOTATIONS
"Yields," as described in the Prospectus, are calculated according to
formulas prescribed by the SEC. The standardized seven-day yield for a class of
Fund shares is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account in the class having
a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from shareholder accounts, dividing
the difference by the value of the account at the beginning of the base period
to obtain the base period return, and then multiplying the base period return by
(365/7). The net change in the value of an account in a class includes the value
of additional shares purchased with dividends from the original share, and
dividends declared on both the original share and any such additional shares,
net of all fees, other than nonrecurring account or sales charges, that are
charged to all shareholder accounts in proportion to the length of the base
period and the class' mean or median account size. The capital changes to be
excluded from the calculation of the net change in account value are realized
gains and losses from the sale of securities and unrealized appreciation and
depreciation. The "effective yield" for a class of Fund shares is computed by
compounding the unannualized base period return (calculated as above) by adding
1 to the base period return, raising the sum to a power equal to 365 divided by
7, and subtracting 1 from the result.
The Tax Exempt, Pennsylvania Tax Exempt and Ohio Municipal Funds'
"tax-equivalent yields" are computed by dividing the portion of those Funds'
yields (calculated as above) that is exempt from federal income tax by one minus
a stated federal income tax rate (using 39.6% tax bracket) and adding that
figure to that portion, if any, of the respective Fund's yield that is not
exempt from federal income tax.
For the seven-day period ended May 31, 1997, the yields of the Retail
and Institutional shares of the Money Market Fund, Government Fund, Treasury
Fund, Tax Exempt Fund and Pennsylvania Tax Exempt Fund
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<PAGE> 117
were 5.14% and 5.24%, 5.08% and 5.18%, 4.79% and 4.89%, 3.39% and 3.49%, and
3.48% and 3.58%, respectively, and their respective effective yields were 5.27%
and 5.38%, 5.21% and 5.31%, 4.91% and 5.01%, 3.44% and 3.55%, and 3.54% and
3.65%, respectively.
For the Tax Exempt and Pennsylvania Tax Exempt Funds, the tax-
equivalent effective yields (assuming a 39.6% federal tax rate in the case of
both Funds and a 2.8% Pennsylvania tax rate in the case of the Pennsylvania Tax
Exempt Fund) for their Retail and Institutional shares for the seven-day period
ended May 31, 1997 were 5.70% and 5.88%, and 6.03% and 6.22%, respectively.
The current yield for each class of shares in a Fund may be obtained by
calling the Trust at the telephone number provided on the cover page. Quoted
yields are not indicative of future yields. Yields will depend upon factors such
as fund maturity, the Fund's expenses and the types of instruments held by the
Fund.
The Funds may also from time to time include discussions or
illustrations of the effects of compounding in Materials. "Compounding" refers
to the fact that, if dividends or other distributions on a Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of a Fund would increase the value, not only of the original Fund
investment, but also of the additional Fund shares received through
reinvestment. As a result, the value of the Fund investment would increase more
quickly than if dividends or other distributions had been paid in cash.
In addition, the Funds may also include in Materials discussions and/or
illustrations of the potential investment goals of a prospective investor,
investment management strategies, techniques, policies or investment suitability
of a Fund, high- quality investments, economic conditions, the relationship
between sectors of the economy and the economy as a whole, various securities
markets, the effects of inflation and historical performance of various asset
classes, including but not limited to, stocks, bonds and Treasury securities.
From time to time, Materials may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund), as well as the views of the Adviser as to current market, economic, trade
and interest rate trends, legislative, regulatory and monetary developments,
investment strategies and related matters believed to be of relevance to a Fund.
The Funds may also include in Materials charts, graphs or drawings which compare
the investment objective, return potential, relative stability and/or growth
possibilities of the Funds and/or other mutual funds, or illustrate the
potential risks and rewards of investment in various investment vehicles,
including but not limited to, stocks, bonds, Treasury securities and shares of a
Fund and/or other mutual funds. Materials may include a discussion of certain
attributes or benefits to be derived by an investment in a Fund and/or other
mutual funds (such as value investing, market timing, dollar cost averaging,
asset allocation, constant ratio transfer, automatic accounting
-46-
<PAGE> 118
rebalancing, the advantages and disadvantages of investing in tax-deferred and
taxable investments), shareholder profiles and hypothetical investor scenarios,
timely information on financial management, tax and retirement planning and
investment alternatives to certificates of deposit and other financial
instruments. Such Materials may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.
MISCELLANEOUS
The Trust bears all costs in connection with its organization,
including the fees and expenses of registering and qualifying its shares for
distribution under federal and state securities regulations. With respect to the
Money Market, Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt
Funds, all organization expenses are or were being amortized on the
straight-line method over a period of five years from the date of commencement
of operations.
As used in the Prospectus, "assets belonging to a Fund" means the
consideration received by the Trust upon the issuance of shares in that
particular Fund, together with all income, earnings, profits, and proceeds
derived from the investment thereof, including any proceeds from the sale of
such investments, any funds or payments derived from any reinvestment of such
proceeds, and a portion of any general assets of the Trust not belonging to a
particular Fund. In determining a Fund's net asset value, assets belonging to a
particular Fund are charged with the liabilities in respect of that Fund.
As of June 19, 1998, the following bank subsidiaries of National City
Corporation held of record 5% or more of the outstanding Institutional shares of
the Money Market, Government, Treasury, Tax Exempt and Pennsylvania Tax Exempt
Funds acting as agent or custodian for their customers, but did not own such
shares beneficially:
-47-
<PAGE> 119
Percentage of Outstanding
Institutional Shares
<TABLE>
<CAPTION>
Government Treasury Pennsylvania
Money Money Money Tax Tax
Market Market Market Exempt Exempt
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
National City Bank, 4.32% 1.36% 15.31% 3.93% 0.23%
Northeast
One Cascade Plaza
Akron, OH 44308
National City Bank of 3.10% 1.72% 6.31% 12.80% 0%
Dayton
Gem Plaza, 6 N. Main
Dayton, OH 45412
National City Bank 39.64% 30.14% 11.69% 32.12% 0.61%
1900 East Ninth Street
Cleveland, OH 44114-3484
National City Bank of 3.74% 9.26% 13.33% 24.33% 0.05%
Columbus
155 East Broad Street
Columbus, OH 43251
National City Bank of 13.15% 43.23% 1.24% 11.59% 0.01%
Kentucky
National City Tower
101 South Fifth Street
Louisville, KY 40202
National City Bank of 8.26% 3.31% 31.21% 9.84% 0%
Indiana
101 W. Washington Street
Indianapolis, IN 46255
National City Bank, 5.71% 0.03% 4.10% 1.82% 0%
Northwest
405 Madison Avenue
Toledo, OH 43603
National City Bank of 16.01% 7.74% 16.18% 0.99% 99.02%
Pennsylvania
400 Fourth Avenue
Pittsburgh, PA 15222
National City Trust Co. 0.31% 0.63% 0.22% 2.78% 0%
1401 Forum Way, Suite 503
West Palm Beach, FL 33401
</TABLE>
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<PAGE> 120
As of June 23, 1998, the following persons owned as of record 5 percent
or more of the shares of the Funds of the Trust:
<TABLE>
<S> <C> <C>
ARMADA Government Money Market Fund (Institutional)
- ---------------------------------------------------
# OF OUTSTANDING SHARES % OF OUTSTANDING SHARES
----------------------- -----------------------
National City Corporation 254,953,825.960 25.72%
Noreen Wasserbauer
Corporate 14th fl. - M.O. #2145
1900 E. 9th Street
Cleveland OH 44114
ARMADA Tax Exempt Money Market Fund (Institutional)
- ---------------------------------------------------
# OF OUTSTANDING SHARES % OF OUTSTANDING SHARES
----------------------- -----------------------
American Electric Power Service Corp. 54,838,724.870 13.13%
Joseph H. Shepard, Jr.
One Riverside Plaza
Columbus, OH 43215
Richard H. Schaefer 672,645.740 7.26%
78 Lochinvar Ct.
Xenia, OH 45385-9398
ARMADA Treasury Money Market Fund (Institutional)
- -------------------------------------------------
# OF OUTSTANDING SHARES % OF OUTSTANDING SHARES
----------------------- -----------------------
Federal North Business Trust 46,265,888.8102 13.60%
c/o Wilmington Trust Co.
Attn. Corporate Trust Admin.
1100 North Market Street
Wilmington, DE 19890
ARMADA Pennsylvania Tax Exempt Money Market Fund (Institutional)
- ----------------------------------------------------------------
# OF OUTSTANDING SHARES % OF OUTSTANDING SHARES
----------------------- -----------------------
Banbury Associates 5,000,000.000 7.24%
c/o National City Bank of Pennsylvania
400 Fourth Avenue
Pittsburgh, PA 15222
</TABLE>
<PAGE> 121
<TABLE>
<S> <C> <C>
ARMADA Treasury Money Market Fund (Retail)
- ------------------------------------------
# OF OUTSTANDING SHARES % OF OUTSTANDING SHARES
----------------------- -----------------------
Triple S Plastics Georgetown 2,931,931.03 22.21%
Const Fund
Attn: John Crandle, Commercial Loans
108 E. Michigan Avenue
Kalamazoo, MI 49007-3966
AFSCME Benefit Trust 1,317,127.35 9.98%
P. O. Box 845
Springfield, IL 62705-0845
Warner Theatre Preservation 1,096,475.990 8.41%
Trust Corp.
P. O. Box 1645
Erie, PA 16507-0645
ARMADA Tax Exempt Money Market Fund (Retail)
- --------------------------------------------
# OF OUTSTANDING SHARES % OF OUTSTANDING SHARES
----------------------- -----------------------
Samtec Inc. 9,377,263.82 6.65%
Attn: Terry Whitworth
P. O. Box 1147
New Albany, IN 47151-1147
ARMADA Money Market Fund (B)
- ----------------------------
# OF OUTSTANDING SHARES % OF OUTSTANDING SHARES
----------------------- -----------------------
Donald G. Wolf 3,758.570 78.20%
22675 Coleta Drive
Salinas, Ca 93908-1101
SEI Investments Co. 1,002.990 20.87%
Attn: Rob Silvestri
One Freedom Valley Drive
Oaks, PA 19456
</TABLE>
<PAGE> 122
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment is strong. Within this
category, certain obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
rated "A-1". However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are
dependent on favorable business, financial, and economic conditions for the
obligor to meet its financial obligation.
"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The "D" rating will also be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
A-1
<PAGE> 123
Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually senior debt obligations not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
A-2
<PAGE> 124
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This designation
indicates the strongest capacity for timely payment of financial commitments and
may have an added "+" to denote any exceptionally strong credit feature.
"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of securities rated
"F1".
"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
"B" - Securities possess speculative credit quality. this designation
indicates minimal capacity for timely payment of
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<PAGE> 125
financial commitments, plus vulnerability to near-term adverse changes in
financial and economic conditions.
"C" - Securities possess high default risk. This designation indicates
that the capacity for meeting financial commitments is solely reliant upon a
sustained, favorable business and economic environment.
"D" - Securities are in actual or imminent payment default.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation represents Thomson BankWatch's lowest rating
category and indicates that the obligation is regarded as non-investment grade
and therefore speculative.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
A-4
<PAGE> 126
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded as having significant
speculative characteristics. "BB" indicates the least degree of speculation and
"C" the highest. While such obligations will likely have some quality and
protective characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
"BB" - Debt is less vulnerable to non-payment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
"B" - Debt is more vulnerable to non-payment than obligations rated
"BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic conditions
will likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
"CCC" - Debt is currently vulnerable to non-payment, and is dependent
upon favorable business, financial and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
non-payment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
A-5
<PAGE> 127
"D" - An obligation rated "D" is in payment default. This rating is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition or the taking of similar action if payments on
an obligation are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.
"A" - Bonds possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
"Baa" - Bonds are considered as medium-grade obligations, (i.e., they
are neither highly protected nor poorly secured).
A-6
<PAGE> 128
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for
A-7
<PAGE> 129
prudent investment. Considerable variability in risk is present during economic
cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt rated "DD" is
a defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of investment risk
and are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is very unlikely to be adversely
affected by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of investment risk and
indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of investment risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to adverse changes in circumstances or in
economic conditions than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
A-8
<PAGE> 130
good credit quality. These ratings denote that there is currently a low
expectation of investment risk. The capacity for timely payment of financial
commitments is adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this category.
"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.
"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
"CCC", "CC", "C" - Bonds have high default risk. Capacity for meeting
financial commitments is reliant upon sustained, favorable business or economic
developments. "CC" ratings indicate that default of some kind appears probable,
and "C" ratings signal imminent default.
"DDD," "DD" and "D" - Bonds are in default. Securities are not meeting
obligations and are extremely speculative. "DDD"
A-9
<PAGE> 131
designates the highest potential for recovery on these securities, and "D"
represents the lowest potential for recovery.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
A-10
<PAGE> 132
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that
A-11
<PAGE> 133
the ability to repay principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may include
a plus or minus sign designation which indicates where within the respective
category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit a strong capacity
to pay principal and interest. Those issues determined to possess very strong
characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
A-12
<PAGE> 134
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality, enjoying
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality, with margins
of protection ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" - This designation denotes adequate quality, carrying
specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.
"SG" - This designation denotes speculative quality and lack of margins
of protection.
Fitch IBCA and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
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<PAGE> 135
FORM N-1A
Part C - Other Information
Item 24. Financial Statements and Exhibits
---------------------------------
A. Financial Statements
1. Included in Part A of the Registration Statement:
None.
2. Incorporated by reference in Part B of the
Registration Statement:
The audited financial statements and related notes
thereto for the Money Market, Government, Treasury,
Tax Exempt and Pennsylvania Tax Exempt Funds as
contained in Registrant's May 31, 1997 Annual Report
to Shareholders, a copy of which has been filed with
the Commission.
B. EXHIBITS
1. Declaration of Trust dated January 28, 1986 is
incorporated herein by reference to Exhibit 1 to
Post-Effective Amendment No. 1 to Registrant's
Registration Statement filed on December 16, 1986
("PEA No. 1").
a. Amendment No. 1 to Declaration of Trust is
incorporated herein by reference to Exhibit
1(a) to Post-Effective Amendment No. 6 to
Registrant's Registration Statement filed on
August 1, 1989 ("PEA No. 6").
b. Amendment No. 2 to Declaration of Trust is
incorporated herein by reference to Exhibit
1(b) to Post-Effective Amendment No. 23 to
Registrant's Registration Statement filed on
May 11, 1995 ("PEA No. 23").
c. Certificate of Classification of Shares
reflecting the creation of the Tax Exempt
Portfolio (Trust) as filed with the Office
of Secretary of State of Massachusetts on
October 16, 1989 is incorporated herein by
reference to Exhibit 1(c) to Post-Effective
Amendment No. 26 to Registrant's
Registration Statement filed on May 15, 1996
("PEA No. 26").
d. Certificate of Classification of Shares
reflecting the creation of Special Series 1
in the Money Market, Government, Treasury,
Tax Exempt, Equity, Bond and Ohio Tax Exempt
Portfolios as filed with the Office of
Secretary of State of
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<PAGE> 136
Massachusetts on December 11, 1989 is
incorporated herein by reference to
Exhibit 1(d) to PEA No. 26.
e. Certificate of Classification of Shares
reflecting the creation of Special Series 1
in the Money Market, Government, Treasury,
Tax Exempt, Equity, Bond and Ohio Tax Exempt
Portfolios as filed with the Office of the
Secretary of State of Massachusetts on
September 12, 1990 is incorporated herein by
reference to Exhibit 1(e) to PEA No. 26.
f. Certificate of Classification of Shares
reflecting the creation of Class L and Class
L-Special Series 1 shares, Class M and Class
M-Special Series 1, Class N and Class
N-Special Series 1, Class O and Class
O-Special Series 1, and Class P and Class
P-Special Series 1 representing interests in
the National Tax Exempt Portfolio, Equity
Income Portfolio, Mid Cap Regional Equity
Portfolio, Enhanced Income Fund and Total
Return Advantage Fund, respectively, as
filed with the Office of Secretary of State
of Massachusetts on June 30, 1994 is
incorporated herein by reference to Exhibit
1(e) to PEA No. 26.
g. Certificate of Classification of Shares
reflecting the creation of Class Q and Class
Q-Special Series 1 shares, Class R and Class
R-Special Series 1, Class S and Class
S-Special Series 1 shares, and Class T and
Class T-Special Series 1 shares representing
interests in the Pennsylvania Tax Exempt,
Intermediate Government, GNMA and
Pennsylvania Municipal Funds, respectively,
as filed with the Office of the Secretary of
State of Massachusetts on September 10, 1996
is incorporated herein by reference to
Exhibit 1(g) to Post-Effective Amendment No.
33 to Registrant's Registration Statement
filed on April 11, 1997 ("PEA No. 33").
h. Certificate of Classification of Shares
reflecting the creation of Class U and Class
U-Special Series 1 shares, Class V and Class
V-Special Series 1 shares and Class W and
Class W-Special Series 1 shares representing
interests in the International Equity,
Equity Index and Core Equity Funds,
respectively, as filed with the Office of
the Secretary of State of Massachusetts on
June 27, 1997 is incorporated herein by
reference to Exhibit 1(h) to Post-Effective
Amendment No. 35 to Registrant's
Registration Statement filed on July 22,
1997 ("PEA No. 35").
i. Certificate of Classification of Shares
reflecting the creation of Class X and Class
X-Special Series 1 shares and Class Y and
Class Y-Special Series 1 shares representing
interests in the Small Cap Growth Fund and
Real Return Advantage Funds, respectively,
as filed with the Office of the Secretary of
State of Massachusetts on June 27, 1997 is
incorporated herein by reference to Exhibit
1(i) to PEA No. 35.
j. Certificate of Classification of Shares
reflecting the creation of Special Series 2
Shares representing interests in the Money
Market, Government Money Market,
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Treasury Money Market, Tax-Exempt Money
Market, Equity Growth, Equity Income,
Small Cap Value (formerly, the Mid Cap
Regional), Enhanced Income, Total Return
Advantage, Intermediate Bond (formerly, the
Fixed Income), Ohio Tax-Exempt, National
Tax-Exempt, Pennsylvania Tax-Exempt, Bond
(formerly, the "Intermediate Government
Fund"), GNMA, Pennsylvania Municipal,
International Equity, Equity Index, Core
Equity, Small Cap Growth and Real Return
Advantage Funds is incorporated herein by
reference to Exhibit 1(j) to Post-Effective
Amendment No. 38 to Registrant's
Registration Statement filed on December 18,
1997 ("PEA No 38").
k. Form of Certificate of Classification of
Shares reflecting the creation of shares in
the Tax Managed Equity, Aggressive
Allocation, Balanced Allocation and
Conservative Allocation Funds IS
INCORPORATED HEREIN BY REFERENCE TO EXHIBIT
1(K) TO POST-EFFECTIVE AMENDMENT NO. 41 TO
REGISTRANT'S REGISTRATION STATEMENT FILED ON
FEBRUARY 23, 1998 ("PEA NO. 41").
l. FORM OF CERTIFICATE OF CLASSIFICATION OF
SHARES REFLECTING THE CREATION OF SHARES IN
THE OHIO MUNICIPAL MONEY MARKET FUND.
2. Code of Regulations as approved and adopted by
Registrant's Board of Trustees on January 28, 1986 is
incorporated herein by reference to Exhibit 2 to
Pre-Effective Amendment No. 2 to Registrant's
Registration Statement filed on January 30, 1986
("Pre-Effective Amendment No. 2").
a. Amendment No. 1 to Code of Regulations is
incorporated herein by reference to Exhibit
2(a) to PEA No. 6.
b. Amendment No. 2 to Code of Regulations as
approved and adopted by Registrant's Board
of Trustees on July 17, 1997 is incorporated
herein by reference to Exhibit 2(b) to PEA
No. 35.
3. None.
4. a. Specimen copy of share certificate for Class A
units of beneficial interest is incorporated herein
by reference to Exhibit 4(a) to Pre-Effective
Amendment No. 2.
b. Specimen copy of share certificate for Class A -
Special Series 1 units of beneficial interest is
incorporated herein by reference to Exhibit 4(b) to
Post-Effective Amendment No. 13 to the Registrant's
Registration Statement filed on July 27, 1990 ("PEA
No. 13").
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c. Specimen copy of share certificate for Class B units
of beneficial interest is incorporated herein by
reference to Exhibit 4(b) to Pre-Effective Amendment
No. 2.
d. Specimen copy of share certificate for Class B -
Special Series 1 units of beneficial interest is
incorporated herein by reference to Exhibit 4(d) to
PEA No. 13.
e. Specimen copy of share certificate for Class C units
of beneficial interest is incorporated herein by
reference to Exhibit 4(c) to Pre-Effective Amendment
No. 2.
f. Specimen copy of share certificate for Class C -
Special Series 1 units of beneficial interest is
incorporated herein by reference to Exhibit 4(f) to
PEA No. 13.
g. Specimen copy of share certificates for Class D units
of beneficial interest is incorporated herein by
reference to Exhibit 4(d) to Pre-Effective Amendment
No. 2.
h. Specimen copy of share certificate for Class D -
Special Series 1 units of beneficial interest is
incorporated hereby by reference to Exhibit 4(h) to
PEA No. 13.
i. Specimen copy of share certificate for Class H units
of beneficial interest is incorporated herein by
reference to Exhibit 4(i) to Post-Effective Amendment
No. 10 to Registrant's Registration Statement filed
on April 17, 1990 ("PEA No. 10").
j. Specimen copy of share certificate for Class H -
Special Series 1 units of beneficial interest is
incorporated herein by reference to Exhibit 4(j) to
PEA No. 10.
k. Specimen copy of share certificate for Class I units
of beneficial interest is incorporated herein by
reference to Exhibit 4(k) to PEA No. 10.
l. Specimen copy of share certificate for Class I -
Special Series 1 units of beneficial interest is
incorporated herein by reference to Exhibit 4(l) to
PEA No. 10.
m. Specimen copy of share certificate for Class K units
of beneficial interest is incorporated herein by
reference to Exhibit 4(m) to PEA No. 10.
n. Specimen copy of share certificate for Class K -
Special Series 1 units of beneficial interest is
incorporated herein by reference to Exhibit 4(n) to
PEA No. 10.
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5. (a) INVESTMENT ADVISORY AGREEMENT FOR THE MONEY MARKET
PORTFOLIO,
Government Portfolio, Treasury Portfolio, Tax Exempt
Portfolio, Equity Portfolio, Bond Portfolio and Ohio
Tax Exempt Portfolio among Registrant, National City
Bank, BancOhio National Bank and First National Bank
of Louisville dated September 26, 1990 is
incorporated herein by reference to Exhibit 5(f) to
Post-Effective Amendment No. 14 to Registrant's
Registration Statement filed on September 5, 1990
("PEA No. 14").
b. Investment Advisory Agreement for the Money Market
Portfolio (Trust), Government Portfolio (Trust),
Treasury Portfolio (Trust) and Tax Exempt Portfolio
(Trust) among Registrant, National City Bank,
BancOhio National Bank and First National Bank of
Louisville dated September 26, 1990 is incorporated
herein by reference to Exhibit 5(g) to PEA No. 14.
c. Investment Advisory Agreement for the Enhanced Income
Fund and the Total Return Advantage Fund between
Registrant and National Asset Management Corporation
dated July 5, 1994, is incorporated herein by
reference to Exhibit 5(h) to Post-Effective Amendment
No. 21 to Registrant's Registration Statement filed
on August 31, 1994 ("PEA No. 21").
d. Investment Advisory Agreement for the Equity Income
Portfolio among Registrant, National City Bank,
National City Bank, Columbus and National City Bank,
Kentucky dated June 30, 1994, is incorporated herein
by reference to Exhibit 5(i) to PEA No. 21.
e. Investment Advisory Agreement for the Mid Cap
Regional Equity Portfolio between Registrant and
National City Bank dated July 25, 1994, is
incorporated herein by reference to Exhibit 5(j) to
PEA No. 21.
f. Investment Advisory Agreement for the National Tax
Exempt Portfolio among Registrant, National City
Bank, National City Bank, Columbus, National City
Bank, Kentucky and National City Bank, Indiana is
incorporated herein by reference to Exhibit 5(l) to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement filed on February 11, 1994
("PEA No. 20").
g. Investment Advisory Agreement for the Pennsylvania
Tax Exempt, Intermediate Government, GNMA and
Pennsylvania Municipal Funds between Registrant and
National City Bank dated September 9, 1996, is
incorporated herein by reference to Exhibit 5(g) to
PEA No. 33.
h. Investment Advisory Agreement for the Core Equity
Fund between Registrant and National Asset Management
Corporation dated July 31, 1997 is incorporated
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<PAGE> 140
herein by reference to Exhibit 5(i) to Post-Effective
Amendment No. 36 to Registrant's Registration
Statement filed on September 30, 1997 ("PEA No. 36").
i. Investment Advisory Agreement for the Small Cap
Growth, Equity Index, Real Return Advantage and
International Equity Funds between Registrant and
National City Bank dated July 31, 1997 is
incorporated herein by reference to Exhibit 5(j) to
PEA No. 36.
j. Sub-Advisory Agreement between National City Bank and
Wellington Management Company, LLP with respect to
the Small Cap Growth Fund dated July 31, 1997 is
incorporated herein by reference to Exhibit 5(k) to
PEA No. 36.
k. Advisory Agreement for the Money Market, Treasury,
Government, Tax Exempt, Pennsylvania Tax Exempt,
National Tax Exempt, Fixed Income, GNMA, Intermediate
Government, Equity Growth, Equity Income, Mid Cap
Regional, Ohio Tax Exempt and Pennsylvania Municipal
Funds between Registrant and National City Bank is
incorporated herein by reference to Exhibit 5(k) to
PEA No. 38.
l. Advisory Agreement for the Enhanced Income and Total
Return Advantage Funds between Registrant and
National Asset Management Corporation is incorporated
herein by reference to Exhibit 5(l) to PEA No. 38.
m. Form of Advisory Agreement for the Tax Managed
Equity, Aggressive Allocation, Balanced Allocation,
Conservative Allocation, Emerging Markets, Mid Cap
Growth, Michigan Municipal Bond and Treasury II Funds
between Registrant and National City Bank IS
INCORPORATED HEREIN BY REFERENCE TO EXHIBIT 5(M) TO
PEA NO. 41.
n. Form of Advisory Agreement for the International
Equity, Small Cap Value, Small Cap Growth, Equity
Index, Real Return Advantage, Tax Managed Equity,
Balanced Allocation and Ohio Municipal Money Market
Funds Between Registrant and National City Bank.
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6. (a) Distribution Agreement between Registrant and SEI Financial
Services Company dated March 8, 1997, is incorporated herein
by reference to Exhibit 6 to PEA No. 33.
b. Addendum to the Distribution Agreement between Registrant and
SEI Financial Services Company, dated November 19, 1997, is
incorporated herein by reference to Exhibit 6(b) to PEA No.
38.
7. None.
8. (a) Custodian Services Agreement between Registrant and
National City Bank, dated November 7, 1994, is incorporated
herein by reference to Exhibit 8(a) to Post-Effective
Amendment No. 22 to Registrant's Registration Statement filed
on December 30, 1994 ("PEA No. 22").
b. Sub-Custodian Agreement between National City Bank and The
Bank of California, National Association, dated November 7,
1994, is incorporated herein by reference to Exhibit 8(a) to
PEA No. 22.
c. Exhibit A to the Custodian Services Agreement between
Registrant and National City Bank dated July 31, 1997 is
incorporated herein by reference to Exhibit 8(c) to PEA No.
36.
d. Form of Amended Exhibit A to the Custodian Services Agreement
between Registrant and National City Bank IS INCORPORATED
HEREIN BY REFERENCE TO EXHIBIT 8(D) TO PEA NO. 41.
9. (a) Administration and Accounting Services Agreement between
Registrant and PFPC Inc., dated March 1, 1993 is incorporated
by reference to Exhibit 9(l) to Post-Effective Amendment No.
16 to Registrant's Registration Statement filed on March 1,
1993 ("PEA No. 16").
b. Exhibit A to the Administration and Accounting Services
Agreement dated March 1, 1993 between Registrant and PFPC
Inc., dated July 31, 1997, is incorporated herein by reference
to Exhibit 9(b) to PEA No. 36.
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<PAGE> 142
c. Transfer Agency and Service Agreement (the "Transfer Agency
Agreement") between Registrant and State Street Bank and Trust
Company, dated March 1, 1997, is incorporated herein by
reference to Exhibit 9(d) to PEA No. 33.
d. Form of Addendum No. 1 to Amended and Restated Transfer Agency
and Dividend Disbursement Agreement between Registrant and
State Street Bank and Trust Company IS INCORPORATED HEREIN BY
REFERENCE TO EXHIBIT 9(D) TO PEA NO. 41.
e. Revised Shareholder Services Plan and Servicing Agreement
adopted by the Board of Trustees on February 15, 1997, is
incorporated herein by reference to Exhibit 9(e) to PEA No.
33.
f. Form of Administration and Shareholder Services Agreement
between Registrant and State Street Bank and Trust Company.
g. Blue Sky Services Agreement between the Registrant and SEI
Fund Resources, dated December 2, 1996, is incorporated herein
by reference to Exhibit 9(f) to PEA No. 33.
10.(a) Opinion and consent of counsel. (1)
(b) Opinion of Squire, Sanders & Dempsey L.L.P.
11.(a) Consent of Drinker Biddle & Reath LLP.
(b) Consent of Squire, Sanders & Dempsey L.L.P.
(c) Consent of Ernst & Young L.L.P.
(d) Consent of Coopers & Lybrand L.L.P.
12. Inapplicable.
13. Purchase Agreements between Registrant and McDonald & Company
Securities, Inc. are incorporated herein by reference to Exhibit 13 to
PEA No. 1.
a. Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. with respect to the Tax Exempt Portfolio
dated July 19, 1988 is incorporated
______________
(1) To be filed under Rule 24f-2 as part of Registrant's
Rule 24f-2 Notice.
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<PAGE> 143
by reference to Exhibit 13(a) to Post-Effective Amendment No.
5 to Registrant's Registration Statement filed on January 19,
1989 ("PEA No. 5").
b. Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. with respect to the Tax Exempt Portfolio
(Trust), dated October 17, 1989, is incorporated herein by
reference to Exhibit 13(b) to PEA No. 13.
c. Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. with respect to the Equity Portfolio and Bond
Portfolio, dated December 20, 1989, is incorporated herein by
reference to Exhibit 13(c) to PEA No. 13.
d. Purchase Agreement between Registrant and McDonald & Company
Securities, Inc. with respect to the Ohio Tax Exempt
Portfolio, dated January 5, 1990, is incorporated herein by
reference to Exhibit 13(d) to PEA No. 13.
e. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Enhanced Income Fund,
dated July 5, 1994, is incorporated herein by reference to
Exhibit 13(e) to PEA No. 21.
f. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Equity Income Portfolio,
dated June 30, 1994, is incorporated herein by reference to
Exhibit 13(g) to PEA No. 21.
g. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Mid Cap Regional Equity
Portfolio, dated July 25, 1994, is incorporated herein by
reference to Exhibit 13(h) to PEA No. 21.
h. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the Total Return Advantage
Fund, dated July 5, 1994, is incorporated herein by reference
to Exhibit 13(f) to PEA No. 21.
i. Purchase Agreement between Registrant and Allmerica
Investments, Inc. with respect to the National Tax Exempt
Portfolio is incorporated herein by reference to Exhibit 13(e)
to PEA No. 20.
j. Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the Pennsylvania Tax Exempt
Money Market Fund, dated September 6, 1996, is incorporated
herein by reference to Exhibit 13(j) to PEA No. 33.
k. Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the Intermediate Government
Money Market Fund, dated September 6, 1996, is incorporated
herein by reference to Exhibit 13(k) to PEA No. 33.
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<PAGE> 144
l. Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the GNMA Fund, dated
September 6, 1996, is incorporated herein by reference to
Exhibit 13(l) to PEA No. 33.
m. Purchase Agreement between Registrant and 440 Financial
Distributors, Inc. with respect to the Pennsylvania Municipal
Fund, dated September 6, 1996, is incorporated herein by
reference to Exhibit 13(m) to PEA No. 33.
n. Purchase Agreement between Registrant and SEI Investments
Distribution Co., ("SIDC") with respect to the Core Equity
Fund is incorporated herein by reference to Exhibit 13(n) to
PEA No. 36.
o. Purchase Agreement between Registrant and SIDC with respect to
the International Equity Fund is incorporated herein by
reference to Exhibit 9(o) to PEA No. 36.
p. Form of Purchase Agreement between Registrant and SEI with
respect to the Equity Index Fund is incorporated herein by
reference to Exhibit 13(p) to PEA No. 33.
q. Form of Purchase Agreement between Registrant and SEI with
respect to the Real Return Advantage Fund is incorporated
herein by reference to Exhibit 13(q) to PEA No. 33.
r. Purchase Agreement between Registrant and SEI with respect to
the Small Cap Growth Fund is incorporated herein by reference
to Exhibit 13(r) to PEA No. 36.
s. Form of Purchase Agreement between Registrant and SEI
Investments Distribution Co. with respect to Special Series 2
shares for each Fund is incorporated herein by reference to
Exhibit 13(s) to PEA No. 38.
t. Form of Purchase Agreement between Registrant and SEI
Investments Distribution Co. with respect to the Aggressive
Allocation, Balanced Allocation and Conservative Allocation
Funds is incorporated herein by reference to Exhibit 13(t) to
PEA No. 41.
u. Form of Purchase Agreement between Registrant and SEI
Investments Distribution Co. with respect to the Ohio
Municipal Money Market Fund.
14. NONE.
15.
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<PAGE> 145
a. Service and Distribution Plan for Retail and Institutional
Share Classes is incorporated herein by reference to Exhibit
15(a) to PEA No. 38.
b. B shares distribution and servicing plan is incorporated
herein by reference to Exhibit 15(b) to PEA No. 38.
16. a. Schedules for Computation of Performance Quotations are
incorporated herein by reference to Exhibit 16 to
Post-Effective Amendment No. 15 to Registrant's Registration
Statement filed on September 18, 1992 ("PEA No. 15").
b. Schedules for Computation of Performance Quotations for the
Treasury, Mid Cap Regional, Equity Growth and Equity Income
Portfolios and the Enhanced Income and Total Return Advantage
Funds and the Pennsylvania Tax Exempt, the Pennsylvania
Municipal, the Intermediate Government and the GNMA Funds are
incorporated herein by reference to Exhibit 16 to PEA No. 22.
17. None.
18. Revised Plan Pursuant to Rule 18f-3 for Operation of a
Triple-Class System is incorporated herein by reference to
Exhibit 18 to PEA No. 41.
Item 25. Persons Controlled By or Under
COMMON CONTROL WITH REGISTRANT
Registrant is controlled by its Board of Trustees.
McDonald & Company Securities, Inc. ("McDonald"), the former
distributor of Registrant, provided its initial capitalization.
Item 26. NUMBER OF HOLDERS OF SECURITIES. The following information is as of
MAY 31, 1998:
<TABLE>
<CAPTION>
TOTAL
NUMBER OF RECORD
Title of Class HOLDERS Institutional Retail B Shares
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A units of beneficial interest 62,365 19,139 43,222 4
(Money Market Fund)
</TABLE>
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<PAGE> 146
<TABLE>
<CAPTION>
TOTAL
NUMBER OF RECORD
Title of Class HOLDERS Institutional Retail B Shares
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B units of beneficial interest 8,862 2,632 6,230
(Government Money Market Fund)
Class C units of beneficial interest 2,549 2,318 231
(Treasury Money Market Fund)
Class D units of beneficial interest 4,773 2,157 2,616
(Tax Exempt Money Market Fund)
Class H units of beneficial interest 7,182 5,984 1,164 34
(Equity Growth Fund)
Class I units of beneficial interest 3,125 2,799 319 7
(Intermediate Bond Fund)
Class K units of beneficial interest 1,242 1,147 95
(Ohio Tax Exempt Fund)
CLASS L UNITS OF BENEFICIAL INTEREST 748 746 1 1
(NATIONAL TAX EXEMPT FUND)
CLASS M UNITS OF beneficial interest 4,527 4,000 510 17
(Equity Income Fund)
Class N units of beneficial interest 6,093 4,748 1,264 81
(Small Cap Value Fund)
Class O units of beneficial interest 476 445 31
(Enhanced Income Fund)
Class P units of beneficial interest 1,348 1,235 113
(Total Return Advantage Fund)
</TABLE>
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<PAGE> 147
<TABLE>
<CAPTION>
TOTAL
NUMBER OF RECORD
Title of Class HOLDERS Institutional Retail B Shares
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS Q UNITS OF BENEFICIAL INTEREST 817 665 152
(PennsyLVANIA TAX EXEMPT MONEY MARKET
Fund)
Class R units of beneficial interest 2,821 2,785 32 4
(Bond Fund)
Class S units of beneficial interest 3,146 2,873 273
(GNMA Fund)
Class T units of beneficial interest 397 386 11
(Pennsylvania Municipal Fund)
Class U units of beneficial interest 698 511 183 4
(International Equity Fund)
Class V units of beneficial interest 0 0 0
(Equity Index Fund)
Class W units of beneficial interest 104 69 32 3
(Core Equity Fund)
Class X units of beneficial interest 663 505 150 8
(Small Cap Growth Fund)
Class Y units of beneficial interest 0 0 0
(Real Return Advantage Fund)
CLASS Z UNITS OF BENEFICIAL INTEREST 694 692 1 1
(TAX MANAGED EQUITY FUND)
CLASS AA UNITS OF BENEFICIAL INTEREST 0 0 0
(BALANCED ALLOCATION FUND)
</TABLE>
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<PAGE> 148
Item 27. Indemnification
Indemnification of Registrant's principal underwriter, custodian and
transfer agent against certain losses is provided for, respectively, in Article
6 of the Distribution Agreement, incorporated by reference as Exhibit (6)
hereto, and Sections 12 and 6, respectively, of the Custodian Services and
Transfer Agency Agreements, incorporated by reference as Exhibits (8)(a) and
(9)(h) hereto. In Article 6 of the Distribution Agreement, the Trust agrees to
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within the
meaning of Section 15 of the 1933 Act against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages or expense and reasonable counsel
fees and disbursements incurred in connection therewith), arising by reason of
any person acquiring any Shares, based upon the ground that the registration
statement, prospectus, Shareholder reports or other information filed or made
public by the Trust (as from time to time amended) included an untrue statement
of a material fact or omitted to state a material fact required to be stated or
necessary in order to make the statements made not misleading. However, the
Trust does not agree to indemnify the Distributor or hold it harmless to the
extent that the statements or omission was made in reliance upon, and in
conformity with, information furnished to the Trust by or on behalf of the
Distributor.
In addition, Section 9.3 of Registrant's Declaration of Trust dated
January 28, 1986, incorporated by reference as Exhibit (1) hereto, provides as
follows:
9.3 INDEMNIFICATION OF TRUSTEES, REPRESENTATIVES AND EMPLOYEES. The
Trust shall indemnify each of its Trustees against all liabilities and expenses
(including amounts paid in satisfaction of judgments, in compromise, as fines
and penalties, and as counsel fees) reasonably incurred by him in connection
with the defense or disposition of any action, suit or other proceeding, whether
civil or criminal, in which he may be involved or with which he may be
threatened, while as a Trustee or thereafter, by reason of his being or having
been such a Trustee EXCEPT with respect to any matter as to which he shall have
been adjudicated to have acted in bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties, PROVIDED that as to any matter
disposed of by a compromise payment by such person, pursuant to a consent decree
or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the effect
that if either the matter of willful misfeasance, gross negligence or reckless
disregard of duty, or the matter of bad faith had been adjudicated, it would in
the opinion of such counsel have been adjudicated in favor of such person. The
rights accruing to any person under these provisions shall not exclude any other
right to which he may be lawfully entitled, PROVIDED that no person may satisfy
any right of indemnity or reimbursement hereunder except out of the property of
the Trust. The Trustees may make advance payments in connection with the
indemnification under this Section 9.3, PROVIDED that the indemnified person
shall have provided a secured written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled to such
indemnification.
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<PAGE> 149
The Trustees shall indemnify representatives and employees of the Trust
to the same extent that Trustees are entitled to indemnification
pursuant to this Section 9.3.
Section 12 of Registrant's Custodian Services Agreement provides as
follows:
12. INDEMNIFICATION. The Trust, on behalf of each of the Funds, agrees
to indemnify and hold harmless the Custodian and its nominees from all
taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the 1933 Act,
the 1934 Act, the 1940 Act, the CEA, and any state and foreign
securities and blue sky laws, and amendments thereto), and expenses,
including (without limitation) reasonable attorneys' fees and
disbursements, arising directly or indirectly from any action which the
Custodian takes or does not take (i) at the request or on the direction
of or in reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither the Custodian, nor any of its nominees,
shall be indemnified against any liability to the Trust or to its
shareholders (or any expenses incident to such liability) arising out
of the Custodian's or its nominees' own willful misfeasance, bad faith,
negligence or reckless disregard of its duties and obligations under
this Agreement.
In the event of any advance of cash for any purpose made by the
Custodian resulting from Oral or Written Instructions of the Trust, or
in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or
liabilities in respect of the Trust or any Fund in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any Property at any time held for the account of the
relevant Fund or the Trust shall be security therefor.
Section 6 of Registrant's Transfer Agency Agreement provides as
follows:
6 INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio indemnify and hold the Bank
harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability
arising out of or attributable to:
(a) All actions of the Bank or its agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in
good faith and without negligence or willful
misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or
services which (i) are received by the
C-15
<PAGE> 150
Bank or its agents or subcontractors, and (ii) have
been prepared, maintained or performed by the Fund or
any other person or firm on behalf of the Fund
including but not limited to any previous transfer
agent or registrar.
(d) The reliance on, or the carrying out by the Bank or
its agents or subcontractors of any instructions or
requests of the Fund on behalf of the applicable
Portfolio.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or
regulations or the securities laws or regulations of
any state that such Shares be registered in such
state or in violation of any stop order or other
determination or ruling by any federal agency or any
state with respect to the offer or sale of such
Shares in such state.
(f) The negotiations and processing of checks made
payable to prospective or existing Shareholders
tendered to the Bank for the purchase of Shares, such
checks are commonly known as "third party checks."
6.2 At any time the Bank may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect
to any matter arising in connection with the services to be
performed by the Bank tinder this Agreement, and the Bank and
its agents or subcontractors shall not be liable and shall be
indemnified by the Fund oil behalf of the applicable Portfolio
for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel (provided
such counsel is reasonably satisfactory to the Fund). The
Bank, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document, reasonably
believed to be genuine and to have been signed by the proper
person or persons, or upon any instruction, information, data,
records or documents provided the Bank or its agents or
subcontractors by machine readable input, telex, CRT data
entry or other similar means authorized by the Fund, and shall
not be held to have notice of any change of authority of any
person, until receipt of written notice thereof from the Fund.
The Bank, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates
which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or former
registrar, or of a co-transfer agent or co-registrar.
6.3 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God,
strikes, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably
beyond its control, such party shall not be liable for damages
to the other for any damages resulting from such failure to
perform or otherwise from such causes.
C-16
<PAGE> 151
6.4 In order that the indemnification provisions contained in this
Section 6 shall apply, upon the assertion of a claim for which
the Fund may be required to indemnify the Bank, the Bank shall
promptly notify the Fund of such assertion, and shall keep the
Fund advised with respect to all developments concerning such
claim. The Fund shall have the option to participate with the
Bank in the defense of such claim or to defend against said
claim in its own name or in the name of the Bank. The Bank
shall in no case confess any claim or make any compromise in
any case in which the Fund may be required to indemnify the
Bank except with the Fund's prior written consent.
Registrant has obtained from a major insurance carrier a directors' and
officers' liability policy covering certain types of errors and omissions. In no
event will Registrant indemnify any of its trustees, officers, employees or
agents against any liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties, or by reason of his reckless disregard of the duties
involved in the conduct of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act of 1933 and
Release No. 11330 under the Investment Company Act of 1940 in connection with
any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections
of Investment Advisers
(a) Investment Adviser: National City Bank
National City Bank performs investment advisory services for Registrant
and certain other investment advisory customers. National City Bank has been in
the business of managing the investments of fiduciary and other accounts
throughout Ohio since October 1919. In addition to its trust business, National
City Bank provides commercial banking services.
To the knowledge of Registrant, none of the directors or officers of
National City Bank, except those set forth below, is or has been, at any time
during the past two calendar years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain directors
and officers also hold various positions with, and engage in business for,
National City
C-17
<PAGE> 152
Corporation, which owns all the outstanding stock of National City
Bank, or other subsidiaries of National City Corporation. Set forth below are
the names and principal businesses of the directors and certain of the senior
executive officers of National City Bank who are engaged in any other business,
profession, vocation or employment of a substantial nature.
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<PAGE> 153
NATIONAL CITY BANK
<TABLE>
<CAPTION>
Position with
National Other Business Type of
Name City Bank Connections Business
- ---- --------- ----------- --------
<S> <C> <C> <C>
George R. Berlin Director President and Chief
Executive Officer, Berco,
Inc.
Thomas G. Breitenbach Director President and Chief Health care
Executive Officer, Premier
Health Partners
Steve D. Bullock Director Chief Executive Officer Non-Profit organization
and Chapter Manager,
American Red Cross
David A. Daberko Director Chairman and Chief Bank holding company
Executive Officer,
National City Corporation
Director: National City Banks
Bank of Indiana
National City Bank of
Kentucky
National City Bank of
Pennsylvania
</TABLE>
C-19
<PAGE> 154
<TABLE>
<CAPTION>
Position with
National Other Business Type of
Name City Bank Connections Business
- ---- --------- ----------- --------
<S> <C> <C> <C>
First of America
Bank N.A.
Federal Reserve
Bank of Cleveland
Trustee: Civic organizations
Cleveland
Tomorrow
Greater Cleveland
Council of the Boy
Case Western Reserve
University
Hawken School Neighborhood
Progress
Ohio Foundation of
Independent Colleges
University Circle
Incorporated
University Hospitals
Health System
Board Member, Greater Civic organization
Cleveland Growth
Association
</TABLE>
C-20
<PAGE> 155
<TABLE>
<CAPTION>
Position with
National Other Business Type of
Name City Bank Connections Business
- ---- --------- ----------- --------
<S> <C> <C> <C>
Member, The Bankers,
Roundtable
</TABLE>
C-21
<PAGE> 156
<TABLE>
<CAPTION>
Position with
National Other Business Type of
Name City Bank Connections Business
- ---- --------- ----------- --------
<S> <C> <C> <C>
Vincent A. DiGirolamo Director Vice Chairman, National Bank holding company
City Corporation
Daniel W. Duval Director President and Chief
Executive Officer, Robbins
& Myers, Inc.
Thomas J. Fitzpatrick Director Chairman and Chief
Executive Officer, Elford,
Inc.
Gary A. Glaser Chairman Executive Vice President Bank holding company
National City Corporation
Gordon D. Harnett Director President, Chairman and Manufacturer of
Chief Executive Officer, engineering material
Brush Wellman, Inc.
Donald V. Kellermeyer Director President, Kellermeyer Co.
William G. Kelley Director Chairman and Chief
Executive Officer,
Consolidated Stores
Corporation
J. Peter Kelly Director President and Chief Manufacturer of steel
Operating Officer, LTV
Corp.
William E. MacDonald III President, Chief Executive Vice President, Bank holding company
Executive Officer and National City Corporation
Director
William P. Madar Director Chairman, Nordson Manufacturer of machinery
Corporation
</TABLE>
C-22
<PAGE> 157
<TABLE>
<CAPTION>
Position with
National Other Business Type of
Name City Bank Connections Business
- ---- --------- ----------- --------
<S> <C> <C> <C>
Paul A. Ormond Director Chairman, President and
Chief Executive Officer,
Health Care & Retirement
Corp.
William F. Patient Director Chairman, President and PVC manufacturer
Chief Executive Officer,
The Geon Company
Shelley B. Roth Director President, Pierre's French Ice cream
Ice Cream Company
Dr. K. Wayne Smith Director President and Chief
Executive Officer, OCLC
Online Computer Library,
Inc.
Thomas C. Sullivan Director Chairman of the Board and Manufacturer of
Chief Executive Officer, protective coatings,
RPM, Inc. roofing material and paint
Dr. Jerry S. Thornton Director President, Cuyahoga Education
Community College
John R. Werren, Esq. Director Partner, Day, Ketterer, Law firm
Raley, Wright & Rybollt
W. Douglas Bannerman Senior Executive Vice Senior Vice President, Bank holding company
President, Corporate National City Corporation
Banking
Jeffrey M. Biggar Executive Vice Senior Vice President, Bank holding company
President, Private National City Corporation
Client Group
</TABLE>
C-23
<PAGE> 158
<TABLE>
<CAPTION>
Position with
National Other Business Type of
Name City Bank Connections Business
- ---- --------- ----------- --------
<S> <C> <C> <C>
Timothy R. Fitzwater President and Chief None
Executive Officer,
Northeast Region
Salvatore F. Gianino President and Chief None
Executive Officer,
Northwest Region
James H. Gilmore Executive Vice None
President, NCCS Group
Kenneth M. Goetz Executive Vice None
President, Corporate
Banking
Jane Grebenc Executive Vice None
President, Retail
Banking
Robert K. Healey, Jr. Executive Vice None
President, Retail
Banking
Katherine B. Hollingsworth Executive Vice None
President, Southwest
Region
</TABLE>
C-24
<PAGE> 159
<TABLE>
<CAPTION>
Position with
National Other Business Type of
Name City Bank Connections Business
- ---- --------- ----------- --------
<S> <C> <C> <C>
Dorothy M. Horvath Executive Vice None
President, Central
Region
James Hughes Executive Vice Senior Vice President, Bank holding company
President, Northcoast National City Corporation
Region
Jeffrey D. Kelly Executive Vice Executive Vice President, Bank holding company
President, Bank National City Corporation
Investment Group
Timothy J. Lathe Executive Vice None
President,
Multi-national
Stephen McLane Executive Vice None
President, Central
Region
Bruce T. Muddell Executive Vice None
President, Credit
Administration
Richard A. Ray Executive Vice None
President, Central
Region
</TABLE>
C-25
<PAGE> 160
<TABLE>
<CAPTION>
Position with
National Other Business Type of
Name City Bank Connections Business
- ---- --------- ----------- --------
<S> <C> <C> <C>
Philip L. Rice Executive Vice None
President,
Northcoast Region
David W. Ridenour Executive Vice None
President,
Northwest Region
Robert A. Robinson Executive Vice None
President,
Northwest Region
Frederick W. Schantz President and Chief None
Executive Officer,
Southwest Region
Jeffrey T. Siler Executive Vice None
President,
Southwest Region
William F. Smith Executive Vice None
President, Central
Region
Harold B. Todd, Jr. Executive Vice Executive Vice President, Bank holding company
President, National City Corporation
Institutional Trust
and Asset Management
</TABLE>
C-26
<PAGE> 161
<TABLE>
<CAPTION>
Position with
National Other Business Type of
Name City Bank Connections Business
- ---- --------- ----------- --------
<S> <C> <C> <C>
Gregory L. Tunis Senior Executive Vice None
President, Retail
Banking
</TABLE>
C-27
<PAGE> 162
(c) Sub-Investment Adviser: Wellington Management Corporation, LLP
("Wellington").
Wellington performs sub-investment advisory services for the
Registrant's Small Cap Growth Fund.
Wellington is an investment adviser registered under the Investment
Advisers Act of 1940 (the "Advisers Act").
The list required by this Item 28 of the partners of Wellington,
together with information as to any business profession, vocation or employment
of substantial nature engaged in by such partners during the past two years, is
incorporated herein by references to Schedule A and D of Form ADV filed by
Wellington pursuant to the Advisers Act (SEC File No. 801-15908).
Item 29. Principal Underwriter
(a) Furnish the name of each investment company (other than
the Registrant) for which each principal underwriter currently
distributing securities of the Registrant also acts as a principal
underwriter, distributor or investment advisor.
Registrant's distributor, SEI Investments Distribution Co.
("SIDC"), acts as distributor for:
C-28
<PAGE> 163
<TABLE>
<CAPTION>
<S> <C>
SEI Daily Income Trust July 14, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds(R) June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis Funds(R) August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 30, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Expedition Funds June 9, 1997
</TABLE>
SIDC provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments.
These services include portfolio evaluation, performance
measurement and consulting services ("Funds Evaluation") and
automated execution, clearing and settlement of securities
transactions ("MarketLink").
(b) Furnish the information required by the following
table with respect to each director, officer or partner of
each principal underwriter named in the answer to Item 21 of
Part B. Unless otherwise noted, the principal business address
of each director or officer is Oaks, PA 19456.
C-29
<PAGE> 164
<TABLE>
<CAPTION>
Positions and Offices with
Name Position and Office with Underwriter Registrant
- ---- ------------------------------------- --------------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive --
Officer
Henry H. Greer Director, President & Chief Operating --
Officer
Carmen V. Romeo Director, Executive Vice President, --
President-Investment Advisory Group
Gilbert L. Beebower Executive Vice President --
Richard B. Lieb Executive Vice President, --
President-Investment Services Division
Dennis J. McGonigle Executive Vice President --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Larry Hutchison Senior Vice President --
David G. Lee Senior Vice President --
Jack May Senior Vice President --
A. Keith McDowell Senior Vice President --
Hartland J. McKeon Senior Vice President --
Barbara J. Moore Senior Vice President --
Kevin P. Robins Senior Vice President, General Counsel & --
Secretary
Robert Wagner Senior Vice President --
Patrick K. Walsh Senior Vice President --
Robert Aller Vice President --
Marc H. Cahn Vice President & Assistant Secretary --
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
Vic Galef Vice President & Managing Director --
Kathy Heillig Vice President & --
Treasurer
Michael Kantor Vice President --
</TABLE>
C-30
<PAGE> 165
<TABLE>
<CAPTION>
Positions and Offices with
Name Position and Office with Underwriter Registrant
- ---- ------------------------------------ --------------------------
<S> <C> <C>
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill Vice President --
Barbara A. Nugent Vice President & Assistant Secretary --
Sandra K. Orlow Vice President & Assistant Secretary --
Cynthia M. Parrish Vice President & Assistant Secretary
Donald Pepin Vice President & Managing Director --
Kim Rainey Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Wayne M. Withrow Vice President & Managing Director --
James Dougherty Director of Brokerage Services --
</TABLE>
Item 30. Location of Accounts and Records
1. National City Bank, 1900 East Ninth Street, Cleveland, Ohio,
44114-3484, and National City Bank, Trust Operations, 4100
West 150th Street, Cleveland, Ohio 44135, (records relating to
their functions as investment advisers and custodian); and
National Asset Management Corporation, 101 South Fifth Street,
Louisville, KY 40202.
C-31
<PAGE> 166
2. SEI Investments Distribution Co., 1 Freedom Valley Road, Oaks,
Pennsylvania 19456 (records relating to its function as
distributor, accounting agent and administrator).
3. 440 Financial Distributors, Inc., 290 Donald Lynch Boulevard,
Marlboro, Massachusetts 01752 (records relating to its former
functions as distributor).
4. Allmerica Investments, Inc., 440 Lincoln Street, Worcester,
Massachusetts 01653 (records relating to its former functions
as distributor).
5. Drinker Biddle & Reath LLP, 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107-3496 (Registrant's
Declaration of Trust, Code of Regulations, and Minute Books).
6. PNC Bank, National Association, 17th and Chestnut Streets,
Philadelphia, Pennsylvania 19103 (records relating to its
former functions as custodian).
7. PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809
(records relating to its FORMER functions as accounting agent
and administrator).
8. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110 (records relating to its function
as transfer agent).
9. First Data Investor Services Group, Inc., 4400 Computer Drive,
Westboro, Massachusetts 02109 (records relating to its former
functions as transfer agent).
10. First Data Investor Services Group (formerly The Shareholder
Services Group, Inc. d/b/a 440 Financial) 4400 Computer Drive,
Westboro, Massachusetts 02109 (records relating to its former
functions as transfer agent).
11. Weiss, Peck & Greer, LLC, One New York Plaza, New York, New
York 10004 (records relating its former functions as
sub-adviser).
12. Wellington Management Company, LLP, 75 State Street, Boston,
Massachusetts 02109 (records relating to its functions as
sub-adviser).
C-32
<PAGE> 167
Item 31. MANAGEMENT SERVICES
Inapplicable.
Item 32. UNDERTAKINGS
Registrant undertakes to furnish each person to whom a prospectus is
delivered a copy of the Registrant's most recent annual report to shareholders,
upon request and without charge.
C-33
<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly caused
this Post-Effective Amendment No. 42 to its Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of
Philadelphia, Commonwealth of Pennsylvania, on the 2nd day of July, 1998.
ARMADA FUNDS
Registrant
*Robert D. Neary
-----------------------------------
Trustee and Chairman of the Board
Robert D. Neary
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 42 to Registrant's Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Treasurer June 2, 1998
- ----------------------
*Leigh Carter Trustee July 2, 1998
- ----------------------
Leigh Carter
*John F. Durkott Trustee July 2, 1998
- ----------------------
John F. Durkott
*Robert J. Farling Trustee July 2, 1998
- ----------------------
Robert J. Farling
*Richard W. Furst Trustee July 2, 1998
- ----------------------
Richard W. Furst
*Gerald Gherlein Trustee July 2, 1998
- ----------------------
Gerald Gherlein
*Herbert Martens President and Trustee July 2, 1998
- ----------------------
Herbert Martens
*Robert D. Neary Trustee and Chairman July 2, 1998
- ---------------------- of the Board
Robert D. Neary
*J. William Pullen Trustee July 2, 1998
- ----------------------
J. William Pullen
</TABLE>
C-34
<PAGE> 169
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert
D. Neary, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
------------
/s/ Robert D. Neary
- --------------------
Robert D. Neary
<PAGE> 170
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Leigh
Carter, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
-------------
/s/ Leigh Carter
- ------------------
Leigh Carter
<PAGE> 171
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, John F.
Durkott, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
-------------
/s/ John F. Durkott
- -------------------
John F. Durkott
<PAGE> 172
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Richard
W. Furst, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
-------------
/s/Richard W. Furst
- --------------------
Richard W. Furst
<PAGE> 173
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert
J. Farling, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: September 17, 1997
------------
/s/ Robert J. Farling
- ---------------------
Robert J. Farling
<PAGE> 174
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, J.
William Pullen, hereby constitutes and appoints Herbert R. Martens, Jr. and W.
Bruce McConnel, III, his true and lawful attorneys, to execute in his name,
place, and stead, in his capacity as Trustee or officer, or both, of Armada
Funds, the Registration Statement and any amendments thereto and all instruments
necessary or incidental in connection therewith, and to file the same with the
Securities and Exchange Commission; and said attorneys shall have full power and
authority to do and perform in his name and on his behalf, in any and all
capacities, every act whatsoever requisite or necessary to be done in the
premises, as fully and to all intents and purposes as he might or could do in
person, said acts of said attorneys being hereby ratified and approved.
DATED: September 17, 1997
-------------
/s/ J. William Pullen
- ---------------------
J. William Pullen
<PAGE> 175
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Herbert
R. Martens, Jr. , hereby constitutes and appoints W. Bruce McConnel, III, his
true and lawful attorney, to execute in his name, place, and stead, in his
capacity as Trustee or officer, or both, of Armada Funds, the Registration
Statement and any amendments thereto and all instruments necessary or incidental
in connection therewith, and to file the same with the Securities and Exchange
Commission; and said attorney shall have full power and authority to do and
perform in his name and on his behalf, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as he might or could do in person, said acts of said
attorney being hereby ratified and approved.
DATED: September 17, 1997
------------
/s/ Herbert R. Martens, Jr.
- ---------------------------
Herbert R. Martens, Jr.
<PAGE> 176
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Gerald
L. Gherlein, hereby constitutes and appoints Herbert R. Martens, Jr. and W.
Bruce McConnel, III, his true and lawful attorneys, to execute in his name,
place, and stead, in his capacity as Trustee or officer, or both, of Armada
Funds, the Registration Statement and any amendments thereto and all instruments
necessary or incidental in connection therewith, and to file the same with the
Securities and Exchange Commission; and said attorneys shall have full power and
authority to do and perform in his name and on his behalf, in any and all
capacities, every act whatsoever requisite or necessary to be done in the
premises, as fully and to all intents and purposes as he might or could do in
person, said acts of said attorneys being hereby ratified and approved.
DATED: September 17, 1997
---------------
/s/ Gerald L. Gherlein
- ----------------------
Gerald L. Gherlein
<PAGE> 177
ARMADA FUNDS
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert
J. Farling, hereby constitutes and appoints Herbert R. Martens, Jr. and W. Bruce
McConnel, III, his true and lawful attorneys, to execute in his name, place, and
stead, in his capacity as Trustee or officer, or both, of Armada Funds, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: November 19, 1997
/s/ Robert J. Farling
- ------------------------
Robert J. Farling
<PAGE> 178
EXHIBIT INDEX
(1)(1) Form of Certificate of Classification of Shares reflecting the
creation of shares in the Ohio municipal Money Market Fund
(5)(n) Form of Advisory Agreement for the International Equity, Small
Cap Value, Small Cap Growth, Equity Index, Real Return
Advantage, Tax Managed Equity, Balanced Allocation and Ohio
Municipal Money Market Funds between the Registrant and
National City Bank
(10)(b) Opinion of Squire, Sanders & Dempsey L.L.P.
(11)(a) Consent of Drinker Biddle & Reath LLP.
(11)(b) Consent of Squire, Sanders & Dempsey L.L.P.
(11)(c) Consent of Ernst & Young L.L.P.
(11)(d) Consent of Coopers & Lybrand L.L.P.
(13)(u) Form of Purchase Agreement between Registrant and SEI
Investments Distribution Co. with respect to the Ohio Municipal
money Market Fund
<PAGE> 1
Exhibit(1)(l)
ARMADA FUNDS ("ARMADA")
(A MASSACHUSETTS BUSINESS TRUST)
CERTIFICATE OF CLASSIFICATION OF SHARES
I, W. Bruce McConnel, III, do hereby certify as follows:
(1) That I am the duly elected Secretary of Armada Funds
("Armada");
(2) That in such capacity I have examined the records of
actions taken by the Board of Trustees of Armada;
(3) That the Board of Trustees of Armada duly adopted the
following resolutions at the Regular Meeting of the Board of Trustees held on
May 29, 1998:
CREATION OF NEW SERIES OF SHARES
1. CREATION OF CLASS BB AND CLASS BB-SPECIAL SERIES 1 SHARES
REPRESENTING INTERESTS IN THE OHIO MUNICIPAL MONEY MARKET
FUND.
RESOLVED, that pursuant to Section 5.1 of Armada's
Declaration of Trust, an unlimited number of authorized,
unissued and unclassified shares of beneficial interest in
Armada (no par value) be, and hereby are, classified and
designated as Class BB shares of beneficial interest;
FURTHER RESOLVED, that pursuant to Section 5.1 of
Armada's Declaration of Trust, an unlimited number of
authorized, unissued and unclassified shares of beneficial
interest in Armada (no par value) be, and hereby are,
classified and designated as Class BB-Special Series 1 shares;
FURTHER RESOLVED, that all consideration received by
Armada for the issue or sale of Class BB shares and Class
BB-Special Series 1 shares shall be invested and reinvested
with the consideration received by Armada for the issue and
sale of Class BB shares and Class BB-Special Series 1 shares
and any other shares of beneficial interest in Armada
hereafter designated as Class BB shares (irrespective of
whether said shares have been designated as part of a series
of said class and, if so designated, irrespective of the
particular series designation), together with all income,
earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, any
funds or payments derived from any
<PAGE> 2
reinvestment of such proceeds in whatever form the same may
be, and any general assets of Armada allocated to Class BB
shares and Class BB-Special Series 1 shares or such other
shares by the Board of Trustees in accordance with Armada's
Declaration of Trust, and each Class BB share and Class
BB-Special Series 1 share shall share in proportion to their
respective net asset values with each such other share in such
consideration and other assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation thereof, and any assets derived
from any reinvestment of such proceeds in whatever form;
FURTHER RESOLVED, that each Class BB share and each
Class BB-Special Series 1 share shall be charged in proportion
to their respective net asset values with each other share of
beneficial interest in Armada now or hereafter designated as a
Class BB share of beneficial interest (irrespective of whether
said share has been designated as part of a series of said
class and, if so designated as part of a series, irrespective
of the series designation) with the expenses and liabilities
of Armada in respect of Class B shares and Class B-Special
Series 1 shares or such other shares and in respect of any
general expenses and liabilities of Armada allocated to Class
BB shares and Class BB-Special Series 1 shares or such other
shares by the Board of Trustees in accordance with the
Declaration of Trust, except that to the extent permitted by
rule or order of the Securities and Exchange Commission and as
may be from time to time determined by the Board of Trustees:
(a) only the Class BB shares shall bear: (i) the expenses and
liabilities arising from transfer agency services that are
directly attributable to Class BB shares; and (ii) other such
expenses and liabilities as the Board of Trustees may from
time to time determine are directly attributable to such
shares and which should therefore be borne solely by Class BB
shares;
(b) only the Class BB-Special Series 1 shares shall bear: (i)
the expenses and liabilities of payments to institutions under
any agreements entered into by or on behalf of Armada which
provide for services by the institutions exclusively for their
customers who beneficially own such shares; (ii) the expenses
and liabilities arising from transfer agency services that are
directly attributable to Class B-Special Series 1 shares; and
(iii) such other expenses and liabilities
- 2 -
<PAGE> 3
as the Board of Trustees may from time to time determine are
directly attributable to such shares and which should
therefore be borne solely by Class BB-Special Series 1 shares;
(c) no Class BB shares shall bear the expenses and liabilities
described in clause (b) and clause (c) above;
(d) no Class BB-Special Series 1 shares shall bear the
expenses and liabilities described in clause (a) and clause
(c) above;
(e) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause (a)
above (or to any plan or other document adopted by Armada
relating to said agreements, arrangements, expenses or
liabilities) and that is submitted to a vote of shareholders
of Armada, only Class BB shares shall be entitled to vote,
except that: (i) if said matter affects shares of beneficial
interest in Armada other than Class BB shares, such other
affected shares in Armada shall also be entitled to vote and,
in such case, Class BB shares shall be voted in the aggregate
together with such other affected shares and not by class or
series, except where otherwise required by law or permitted by
the Board of Trustees of Armada; and (ii) if said matter does
not affect Class BB shares, said shares shall not be entitled
to vote (except where otherwise required by law or permitted
by the Board of Trustees) even though the matter is submitted
to a vote of the holders of shares of beneficial interest in
Armada other than Class BB shares;
(f) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause (b)
above (or to any plan or other document adopted by Armada
relating to said agreements, arrangements, expenses or
liabilities) and that is submitted to a vote of shareholders
of Armada, only Class BB-Special Series 1 shares shall be
entitled to vote, except that: (i) if said matter affects
shares of beneficial interest in Armada other than Class BB-
Special Series 1 shares, such other affected shares in Armada
shall also be entitled to vote and, in such case, Class
BB-Special Series 1 shares shall be voted in the aggregate
together with such other affected shares and not by class or
series, except where otherwise required by law or permitted by
the Board of Trustees of Armada; and (ii) if said matter does
not
- 3 -
<PAGE> 4
affect Class BB-Special Series 1 shares, said shares shall not
be entitled to vote (except where otherwise required by law or
permitted by the Board of Trustees) even though the matter is
submitted to a vote of the holders of shares of beneficial
interest in Armada other than Class BB-Special Series 1
shares;
(g) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause (b)
or clause (c) above (or to any plan or other document adopted
by Armada relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Armada, Class BB shares shall not be entitled
to vote, except where otherwise required by law or permitted
by the Board of Trustees of Armada, and except that if said
matter affects Class BB shares, such shares shall be entitled
to vote and, in such case, Class BB shares shall be voted in
the aggregate together with all other shares of beneficial
interest in Armada voting on the matter and not by class or
series, except where otherwise required by law or permitted by
the Board of Trustees;
(h) on any matter that pertains to the agreements,
arrangements, expenses or liabilities described in clause (a)
or clause (c) above (or to any plan or other document adopted
by Armada relating to said agreements, arrangements, expenses
or liabilities) and that is submitted to a vote of
shareholders of Armada, Class BB-Special Series 1 shares shall
not be entitled to vote, except where otherwise required by
law or permitted by the Board of Trustees of Armada, and
except that if said matter affects Class BB-Special Series 1
shares, such shares shall be entitled to vote and, in such
case, Class BB-Special Series 1 shares shall be voted in the
aggregate together with all other shares of beneficial
interest in Armada voting on the matter and not by class or
series, except where otherwise required by law or permitted by
the Board of Trustees; and
IDENTIFICATION OF SHARES WITH FUND.
RESOLVED, that Armada's classes or series of shares shall
represent interests in the investment funds of Armada as follows:
<TABLE>
<CAPTION>
Class of Shares Investment Fund
--------------- ---------------
<S> <C>
Class BB Ohio Municipal Money Market Fund
Market Fund
</TABLE>
- 4 -
<PAGE> 5
Class BB-Special Series 1
AUTHORIZATION OF ISSUANCE OF SHARES TO INVESTORS.
RESOLVED, that the appropriate officers of Armada be, and each of
them hereby is, authorized, at any time after the effective date and
time of Post-Effective Amendment No. __ to Armada's Registration
Statement relating to the Ohio Municipal Money Market Fund to issue and
redeem from time to time Class BB shares and Class BB-Special Series 1
shares representing interests in the Ohio Municipal Money Market Fund,
in accordance with the Registration Statement under the Securities Act
of 1933, as the same may from time to time be amended, and the
requirements of Armada's Declaration of Trust and applicable law, and
that such shares, when issued for the consideration described in such
amended Registration Statement, shall be validly issued, fully paid and
non-assessable by Armada.
IMPLEMENTATION OF RESOLUTIONS.
RESOLVED, that the officers of Armada be, and each of them
hereby is, authorized and empowered to execute, seal, and deliver any
and all documents, instruments, papers and writings, including but not
limited to, any instrument to be filed with the State Secretary of the
Commonwealth of Massachusetts or the Boston City Clerk, and to do any
and all other acts, including but not limited to, changing the
foregoing resolutions upon advice of Counsel prior to filing said any
and all documents, instruments, papers, and writings, in the name of
Armada and on its behalf, as may be necessary or desirable in
connection with or in furtherance of the foregoing resolutions, such
determination to be conclusively evidenced by said officers taking any
such actions.
(4) That the foregoing resolutions remain in full force and
effect as of the date hereof.
----------------------
W. Bruce McConnel, III
Dated: May __, 1998
Subscribed and sworn to before me this
__ day of May, 1998
- ----------------------------------
Notary Public
My Commission Expires _________________ , 199_
- 5 -
<PAGE> 1
Exhibit(5)(n)
ARMADA FUNDS
ADVISORY AGREEMENT
AGREEMENT made as of April 9, 1998 between ARMADA FUNDS, a
Massachusetts business trust, located in Oaks, Pennsylvania (the "Trust") and
NATIONAL CITY BANK, located in Cleveland, Ohio (the "Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Adviser as investment adviser
to the International Equity, Small Cap Value, Small Cap Growth, Equity Index,
Real Return Advantage, Tax Managed Equity, Balanced Allocation, and Ohio
Municipal Money Market Funds (individually, a "Fund" and collectively, the
"Funds");
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed among the parties hereto as follows:
1. DELIVERY OF DOCUMENTS. The Adviser acknowledges that it has
received copies of each of the following:
(a) The Trust's Declaration of Trust, as filed with the
State Secretary of the Commonwealth of Massachusetts
on January 29, 1986 and all amendments thereto (such
Declaration of Trust, as presently in effect and as
it shall from time to time be amended, is herein
called the "Declaration of Trust");
(b) The Trust's Code of Regulations, and amendments
thereto (such Code of Regulations, as presently in
effect and as it shall from time to time be amended,
is herein called the "Code of Regulations");
(c) Resolutions of the Trust's Board of Trustees
authorizing the appointment of the Adviser and
approving this Agreement;
(d) The Trust's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and
Exchange Commission ("SEC") on September 26, 1985 and
all amendments thereto;
1
<PAGE> 2
(e) The Trust's Registration Statement on Form N-1A under
the Securities Act of 1933, as amended ("1933 Act")
(File No. 33-488) and under the 1940 Act as filed
with the SEC on September 26, 1985 and all amendments
thereto; and
(f) The Trust's most recent prospectuses and statements
of additional information with respect to the Funds
(such prospectuses and statements of additional
information, as presently in effect and all
amendments and supplements thereto are herein called
individually, a "Prospectus", and collectively, the
"Prospectuses").
The Trust will furnish the Adviser from time to time with
execution copies of all amendments of or supplements to the foregoing.
2. SERVICES. The Trust hereby appoints the Adviser to act as investment
adviser to the Funds for the period and on the terms set forth in this
Agreement. Intending to be legally bound, the Adviser accepts such
appointment and agrees to furnish the services required herein to the
Funds for the compensation hereinafter provided.
Subject to the supervision of the Trust's Board of Trustees,
the Adviser will provide a continuous investment program for each Fund,
including investment research and management with respect to all
securities and investments and cash equivalents in each Fund. The
Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by each Fund. The
Adviser will provide the services under this Agreement in accordance
with each Fund's investment objective, policies, and restrictions as
stated in the Prospectus and resolutions of the Trust's Board of
Trustees applicable to such Fund.
3. SUBCONTRACTORS. It is understood that the Adviser may from time to
time employ or associate with itself such person or persons as the
Adviser may believe to be particularly fitted to assist in the
performance of this Agreement; provided, however, that the compensation
of such person or persons shall be paid by the Adviser and that the
Adviser shall be as fully responsible to the Trust for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
Without limiting the generality or the foregoing, it is agreed that
investment advisory service to any Fund may be provided by a
subcontractor agreeable to the Adviser and approved in accordance with
the provision of the 1940 Act. Any such sub-advisers are hereinafter
referred to
2
<PAGE> 3
as the "Sub-Advisers." In the event that any Sub-Adviser appointed
hereunder is terminated, the Adviser may provide investment advisory
services pursuant to this Agreement to the Fund without further
shareholder approval. Notwithstanding the employment of any
Sub-Adviser, the Adviser shall in all events: (a) establish and monitor
general investment criteria and policies for the Fund; (b) review
investments in each Fund on a periodic basis for compliance with its
investment objective, policies and restrictions as stated in the
Prospectus; (c) review periodically any Sub-Adviser's policies with
respect to the placement of orders for the purchase and sale of
portfolio securities; (d) review, monitor, analyze and report to the
Board of Trustees on the performance of any Sub-Adviser; (e) furnish to
the Board of Trustees or any Sub-Adviser, reports, statistics and
economic information as may be reasonably requested; and (f) recommend,
either in its sole discretion or in conjunction with any Sub-Adviser,
potential changes in investment policy. Pursuant to this paragraph, on
the date hereof, the Adviser has entered into a Sub-Advisory Agreement
with Wellington Management Company, LLP with respect to the Small Cap
Growth Fund.
4. COVENANTS BY ADVISER. The Adviser agrees with respect to the
services provided to each Fund that it:
(a) will comply with all applicable Rules and Regulations
of the SEC and will in addition conduct its
activities under this Agreement in accordance with
other applicable law;
(b) will use the same skill and care in providing such
services as it uses in providing services to similar
fiduciary accounts for which it has investment
responsibilities;
(c) will not make loans to any person to purchase or
carry shares in the Funds, or make interest-bearing
loans to the Trust or the Funds;
(d) will maintain a policy and practice of conducting its
investment management activities independently of the
Commercial Departments of all banking affiliates. In
making investment recommendations for the Funds,
personnel will not inquire or take into consideration
whether the issuers (or related supporting
institutions) of securities proposed for purchase or
sale for the Funds' accounts are customers of the
Commercial Department. In dealing with commercial
customers, the Commercial Department will not inquire
or take into
3
<PAGE> 4
consideration whether securities of those customers
are held by the Funds;
(e) will place orders pursuant to its investment
determinations for the Funds either directly with the
issuer or with any broker or dealer. In selecting
brokers or dealers for executing portfolio
transactions, the Adviser will use its best efforts
to seek on behalf of the Trust and each Fund the best
overall terms available. In assessing the best
overall terms available for any transaction the
Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security,
the price of the security, the financial condition
and execution capability of the broker or dealer, and
the reasonableness of the commission, if any, both
for the specific transaction and on a continuing
basis. In evaluating the best overall terms
available, and in selecting the broker or dealer to
execute a particular transaction, the Adviser may
also consider the brokerage and research services (as
those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided
to any Fund and/or other accounts over which the
Adviser or any affiliate of the Adviser exercises
investment discretion. The Adviser is authorized,
subject to the prior approval of the Board, to
negotiate and pay to a broker or dealer who provides
such brokerage and research services a commission for
executing a portfolio transaction for any Fund which
is in excess of the amount of commission another
broker or dealer would have charged for effecting
that transaction if, but only if, the Adviser
determines in good faith that such commission was
reasonable in relation to the value of the brokerage
and research services provided by such broker or
dealer viewed in terms of that particular transaction
or in terms of the overall responsibilities of the
Adviser with respect to the accounts as to which it
exercises investment discretion. In no instance will
fund securities be purchased from or sold to the
Adviser, any Sub-Adviser, SEI Investments
Distribution Co. ("SEI") (or any other principal
underwriter to the Trust) or an affiliated person of
either the Trust, the Adviser, Sub-Adviser, or SEI
(or such other principal underwriter) unless
permitted by an order of the SEC or applicable rules.
In executing portfolio transactions for any Fund, the
Adviser may, but shall not be
4
<PAGE> 5
obligated to, to the extent permitted by applicable
laws and regulations, aggregate the securities to be
sold or purchased with those of other Funds and its
other clients where such aggregation is not
inconsistent with the policies set forth in the
Trust's registration statement. In such event, the
Adviser will allocate the securities so purchased or
sold, and the expenses incurred in the transaction,
in the manner it considers to be the most equitable
and consistent with its fiduciary obligations to the
Funds and such other clients;
(f) will maintain all books and records with respect to
the securities transactions for the Funds and furnish
the Trust's Board of Trustees such periodic and
special reports as the Board may request; and
(g) will treat confidentially and as proprietary
information of the Trust all records and other
information relative to the Funds and prior, present
or potential shareholders, and will not use such
records and information for any purpose other than
performance of its responsibilities and duties
hereunder (except after prior notification to and
approval in writing by the Trust, which approval
shall not be unreasonably withheld and may not be
withheld and will be deemed granted where the Adviser
may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to
divulge such information by duly constituted
authorities, or when so requested by the Trust).
5. SERVICES NOT EXCLUSIVE. The services furnished by the Adviser
hereunder are deemed not to be exclusive, and the Adviser shall be free
to furnish similar services to others so long as its services under
this Agreement are not impaired thereby.
6. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Adviser hereby agrees that all records which it
maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the
Trust's request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
5
<PAGE> 6
7. EXPENSES. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds.
8. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, the Trust will pay the Adviser from the
assets belonging to the Funds and the Adviser will accept as full
compensation therefor fees, computed daily and paid monthly, at the
following annual rates: 1.15% of the average daily net assets of the
International Equity Fund; 1.00% of the average daily net assets of the
Small Cap Value Fund; 1.00% of the average daily net assets of the
Small Cap Growth Fund; .35% of the average daily net assets of the
Equity Index Fund; .35% of the average daily net assets of the Real
Return Advantage Fund; and .35% of the average daily net assets of the
Ohio Municipal Money Market Fund.
The fee attributable to each Fund shall be the several (and
not joint or joint and several) obligation of each Fund.
9. LIMITATION OF LIABILITY. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the performance of this Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser
in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement.
10. DURATION AND TERMINATION. This Agreement will become effective with
respect to each Fund upon approval of this Agreement by vote of a
majority of the outstanding voting securities of each such Fund, and,
unless sooner terminated as provided herein, shall continue in effect
until September 30, 1999. Thereafter, if not terminated, this Agreement
shall continue in effect with respect to a particular Fund for
successive twelve month periods ending on September 30, PROVIDED such
continuance is specifically approved at least annually (a) by the vote
of a majority of those members of the Trust's Board of Trustees who are
not interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b)
by the Trust's Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund. Notwithstanding the
foregoing, this Agreement may be
6
<PAGE> 7
terminated as to any Fund at any time, without the payment of any
penalty, by the Trust (by the Trust's Board of Trustees or by vote of a
majority of the outstanding voting securities of the particular Fund),
or by the Adviser on 60 days' written notice. This Agreement will
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meaning of
such terms in the 1940 Act.)
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought. No amendment of
this Agreement shall be effective with respect to a Fund until approved
by vote of a majority of the outstanding voting securities of that
Fund.
12. MISCELLANEOUS. The Adviser expressly agrees that notwithstanding
the termination of or failure to continue this Agreement with respect
to a particular Fund, the Adviser shall continue to be legally bound to
provide the services required herein for the other Funds for the period
and on the terms set forth in this Agreement. The captions in this
Agreement are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect
their construction or effect. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall
be governed by Delaware law.
7
<PAGE> 8
13. NAMES. The names "ARMADA FUNDS" and "Trustees of ARMADA FUNDS"
refer respectively to the Trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under a
Declaration of Trust dated January 28, 1986 which is hereby referred to
and a copy of which is on file at the office of the State Secretary of
the Commonwealth of Massachusetts and the principal office of the
Trust. The obligations of "ARMADA FUNDS" entered into in the name or on
behalf thereof by any of the Trustees, representatives or agents are
made not individually, but in such capacities, and are not binding upon
any of the Trustees, shareholders, or representatives of the Trust
personally, but bind only the Trust property, and all persons dealing
with any class of shares of the Trust must look solely to the Trust
property belonging to such class for the enforcement of any claims
against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
ARMADA FUNDS
By:
----------------------------
Title:
-------------------------
NATIONAL CITY BANK
By:
----------------------------
Title:
-------------------------
8
<PAGE> 1
SQUIRE, SANDERS & DEMPSEY
L.L.P.
COUNSELLORS AT LAW
4900 KEY TOWER TELEPHONE (216) 479-8500
127 PUBLIC SQUARE TELECOPIER (216) 479-8780
CLEVELAND, OHIO 44114-1304
JULY 1, 1998
Exhibit (10)(b)
Armada Funds
4400 Computer Drive
Westborough, MA 01581
Re: Armada Funds (Ohio Tax Exempt Fund)
----------------------------------
Gentlemen:
You have requested our opinion as to the Ohio tax aspects of the Ohio
Tax Exempt Fund, which is part of the Armada Funds (the "Trust"). The Trust is
an open-end management company organized as a business trust under the laws of
Massachusetts. The Trust's Declaration of Trust (i) authorizes the Board of
Trustees to issue different classes of shares of beneficial interest ("Shares"),
two of which are designated Class K and Class K - Special Series 1 representing
interests in the Ohio Tax Exempt Fund, consisting of an unlimited number of
Shares having no par value; and (ii) provides that all consideration received by
the Trust from the issue or sale of Shares of a particular class, together with
all assets in which such consideration is invested or reinvested, and all
income, earnings and profits thereon, shall irrevocably belong to such class,
subject only to the liabilities of that class and except as may otherwise be
required by applicable tax laws.
The Ohio Tax Exempt Fund will invest primarily in interest-bearing
obligations issued by or on behalf of the State of Ohio, political subdivisions
thereof and agencies and instrumentalities of the State or its political
subdivisions ("Ohio Obligations"), and by the governments of Puerto Rico, the
Virgin Islands and Guam and their authorities or municipalities ("Territorial
Obligations"). You have advised us that interest on each issue of Ohio
Obligations and Territorial Obligations will, in the opinion of bond counsel
with respect to each issue, rendered on the date of issuance, be excluded from
gross income for federal income tax purposes under Section 103(a) of the
Internal Revenue Code of 1980, as amended (the "Code"), or other provisions of
federal law, provided that, with respect to certain Ohio Obligations and
Territorial Obligation, certain continuing covenants of the issuer or other
borrowers are satisfied.
Bratislava - Brussels - Budapest - Columbus - Jacksonville - ????? - London
Miami - Moscow - New York - Phoenix - Prague - Washington
<PAGE> 2
SQUIRE, SANDERS & DEMPSEY
LLP
Armada Funds
July 1, 1998
Page 2
The net investment income of the Ohio Tax Exempt fund will be declared
daily and paid monthly, either by reinvestment in additional Shares of the Ohio
Tax Exempt Fund on behalf of the shareholders of the Ohio Tax Exempt Fund
("Shareholders") or, at each Shareholder's option, paid in cash to such
Shareholder.
You have advised us that the Ohio Tax Exempt Fund intends to qualify as
a "regulated investment company" within the meaning of Section 851 of the Code
and will take all other action required to ensure that no federal income taxes
will be payable by it and that it will pay "exempt-interest dividends" within
the meaning of Section 852(b)(5) of the Code, i.e., dividends that will be
excluded from gross income for federal income tax purposes in the hands of the
Shareholders. We have assumed for the purposes of this opinion that the Ohio Tax
Exempt Fund will continue to qualify as a regulated investment company within
the meaning of Section 851 of the Code and that at all times at least 50 percent
of the value of the total assets of the Ohio Tax Exempt Fund will consist of
Ohio Obligations, or similar obligations of other states or their subdivisions.
Based upon the foregoing and upon an examination of such documents and
an investigation of such other matters of law as we have deemed necessary, we
are of the opinion that under existing law:
1. The Ohio Tax Exempt Fund is not subject to the Ohio personal income
tax or school district or municipal income taxes in Ohio. The Ohio Tax-Exempt
Fund is not subject to the Ohio corporation franchise tax or the Ohio dealers in
intangibles tax, provided that, if there is a sufficient nexus between the State
of Ohio and such entity that would enable the State to tax such entity, the
Trust timely files the annual report required by Section 5733.09 of the Ohio
Revised Code. The Ohio Tax Commissioner has waived this annual filing
requirement for every tax year since 1990, the first year to which such
requirement applied.
2. Shareholders otherwise subject to the Ohio personal income tax, or
municipal or school district income taxes in Ohio imposed on individuals and
estates will not be subject to such taxes on distributions with respect to
Shares of the Ohio Tax Exempt Fund ("Distributions" to the extent that such
Distributions are properly attributable to interest on or gain from the sale of
Ohio Obligations.
3. Shareholders otherwise subject to the Ohio corporation franchise tax
will not be required to include Distributions in their tax base for purposes of
calculating the Ohio corporation franchise tax on the net income basis to the
extent that such Distributions either (a) are properly attributable to interest
on or gain from the sale of Ohio Obligations, (b) represents "exempt-interest
dividends" for federal income tax purposes or (c) are described in both (a) and
(b). Shares of the Ohio Tax Exempt Fund will be included in a Shareholder's tax
base for purposes of computing the Ohio corporation franchise tax on the net
worth basis.
<PAGE> 3
SQUIRE, SANDERS & DEMPSEY
L.L.P.
Armada Funds
July 1, 1998
Page 3
4. Distributions that consist of interest on obligations of the United
States or its territories or possessions or of any authority, commission, or
instrumentality of the United States the interest on which is exempt from
state income taxes under the laws of the United States (including Territorial
Obligations) are exempt from the Ohio personal income tax, and municipal and
school district income taxes in Ohio, and, provided, in the case of Territorial
Obligations, such interest is excluded from gross income for federal income tax
purposes, are excluded from the net income base of the Ohio corporation
franchise tax.
5. Distributions that are properly attributable to proceeds of
insurance paid to the Ohio Tax Exempt Fund that represent maturing or matured
interest on defaulted obligations held by the Ohio Tax Exempt Fund and that are
excluded from gross income for federal income tax purposes are exempt from the
Ohio personal income tax, and school district and municipal income taxes in
Ohio, and are excluded from the net income base of the Ohio corporation
franchise tax.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Shares referred to above and to the
reference to our Firm as special Ohio tax counsel in said Registration
Statement and in the Statement of Additional Information contained therein.
Respectfully submitted,
/s/ Squire, Sanders & Dempsey L.L.P.
--------------------------------------
Squire, Sanders & Dempsey L.L.P.
<PAGE> 1
Exhibit(11)(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference
to our Firm under the caption "Counsel" in the Statements of Additional
Information that are included in Post-Effective Amendment No. 42 to the
Registration Statement on Form N-1A under the Investment Company Act of 1940, as
amended, of Armada Funds. This consent does not constitute a consent under
Section 7 of the Securities Act of 1933, and in consenting to the use of our
name and the references to our Firm under such caption we have not certified any
part of the Registration Statement and do not otherwise come within the
categories of persons whose consent is required under Section 7 or the rules and
regulations of the Securities and Exchange Commission thereunder.
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
July 1, 1998
<PAGE> 1
SQUIRE, SANDERS & DEMPSEY
L.L.P.
Counsellors at Law Telephone (216) 479-8500
4900 Key Tower Telecopier (216) 470-8780
127 Public Square
Cleveland, Ohio 44114-1304
June 30, 1998
Exhibit (11)(b)
Armada Funds
4400 Computer Drive
Westborough, MA 01581
Re: Armada Funds (Ohio Tax Exempt Fund)
Post-Effective Amendment No. 42 -- Consent of Counsel
-----------------------------------------------------
We hereby consent to use of our name and to the reference to our Firm
under caption "Counsel" in the Statement of Additional Information included
in Post-Effective Amendment No. 42 to the Registration Statement (No. 33-488)
on Form N-1A under the Securities Act of 1933, as amended, of Armada Funds.
Squire, Sanders & Dempsey L.L.P.
Bratislava - Brussels - Budapest - Columbus - Jacksonville - Kyiv - London
Miami - Moscow - New York - Phoenix - Prague - Washington
<PAGE> 1
Exhibit (11)(c)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Statements" in the Prospectus and "Auditors" in the Statement of Additional
Information and to the incorporation by reference in Post Effective Amendment
No. 42 to the Registration Statement (Form A-1A No. 33-488/811-416) of Armada
Funds of our report dated July 3, 1997, included in the May 31, 1997 Annual
Report to Shareholders of the Armada Funds Money Market Series of the Armada
Funds.
/s/ Ernst & Young LLP
Ernst & Young LLP
Philadelphia, Pennsylvania
June 26, 1998
<PAGE> 1
Exhibit (11)(d)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No. 42
to the Registration Statement of Armada Funds on Form N-1A (File No. 33-488)
of our report dated July 26, 1996, on our audits of the financial statements
and financial highlights of the Inventor Funds, Inc., comprising respectively,
Intermediate Government Securities, GNMA Securities, Pennsylvania Municipal
Bond and Pennsylvania Tax-Exempt Money Market Funds (collectively the
"Predecessor Funds"), which report is included in the Annual Report to
Shareholders for the year ended April 30, 1996 and the period ended May 31,
1996 which is incorporated by reference in the Post-Effective Amendment to the
Registration Statement. We also consent to the reference to our Firm under the
caption "Financial Highlights" in the Prospectus and "Auditors" in the
Statements of Additional Information.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
June 26, 1998
<PAGE> 1
EXHIBIT (13)(u)
PURCHASE AGREEMENT
AGREEMENT dated this ____ day of ______, 1998, by and between Armada
Funds (the "Trust"), a Massachusetts business trust, and SEI Investments
Distribution Co. ("SEI"), a Massachusetts corporation.
1. The Trust hereby offers SEI and SEI hereby purchases one each of
Class BB and Class BB Special Series 1 shares of beneficial interest (no par
value per share) representing interests in the Trust's Ohio Municipal Money
Market Fund at a price of $1 per share (collectively known as "Shares").
2. SEI hereby acknowledges receipt of one Share each of Class BB and
Class BB - Special Series 1. The Trust hereby acknowledges receipt from SEI of
funds in the amount of $1 for each such Share.
3. SEI represents and warrants to the Trust that the Shares are being
acquired for investment purposes and not with a view to the distribution
thereof.
4. The names "Armada Funds" and "Trustees of Armada Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated as of January 28, 1986 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of
"Armada Funds" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ___ day of _____, 1998.
ARMADA FUNDS
Attest:
___________________________ By:_________________________________
W. Bruce McConnel, III
Secretary and Assistant Treasurer
SEI INVESTMENTS DISTRIBUTION CO.
Attest:
___________________________ By:_________________________________
Title:______________________________
(Please Print or Type)
